Sales of entire year could not be estimated based on cash found during survey.

Sales of entire year could not be estimated based on cash found during survey. By no means it could be considered as sale of day

ABCAUS Case Law Citation:
ABCAUS 3237 (2020) (01) ITAT

In this case the appeal was filed at the behest of the assessee against the order passed by the CIT(Appeals) arising out of the order under section 143(3) of the Income Tax Act ( ‘the Act’) passed by the Assessing Officer (AO).

The assessee had challenged inter alia the addition upon estimation of income on the turnover as assessed by the Revenue.

The assessee was having a business of sweets, The return of the assessee was processed under section 143(1) of the Act. Pursuant to the authorization issued by the Joint Commissioner of Income Tax, a survey was operated under the provision of Section 133A of the Act at the business premises of the assessee and, therefore, the case was selected for compulsory scrutiny Relevant notices under section 143(2) was also issued.

In appeal the said addition was confirmed by the CIT(A).

During the course of assessment proceeding upon perusal of the return of income filed for the A.Y. the assessee was directed to furnish the details of the sale, sale register, details of material purchased etc. In the absence of the details produced by the assessee the AO estimated the turnover as well as the profit thereon on the average day sale of sweets/confectioneries for the whole year on the basis of the following facts:-

(i) Cash found during the survey from the business premises of the assessee.

(ii) The statement given by the Proprietor to the effect that he gave the money of per day sale to his father 

(iii) amount deposited in four bank accounts on daily basis.

(iv) Value of the perishable stock containing sweets/confectioneries

On the above basis of the one day sale the AO worked out the sale of the entire year and estimated profit for the year under consideration at percentage of the total turnover.

Sales of entire year could not be estimated based on cash found in survey

The Tribunal observed the fact that the business of the assessee was of sale of sweet/confectioneries which was also depending upon the festive season which varies time to time. The sale varied during the period of marriage ceremony and this fact could not also be brushed aside.

The Tribunal opined that the object found at the time of survey, by no means could not be considered as sale of day neither sales of the entire year could not be estimated on that basis as done by the AO.

Hence, the Tribunal held that on the basis of assumption, estimation of turnover and profit thereon had no leg to stand upon. Accordingly, the addition was deleted.  

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