17 November 2013
Here is a case where the regular books of accounts maintained by an asssessee are rejected under section 145(1) of the act for all the past years and assessments are completed adopting an ahoc rate of 7% of the turnover as the net income.. For the financial year relevant to assessment year 2012-13, in a survey a note book was found containing monthly figures of 4 months of sales aggregating to a crore and also some expenditure. The Assessing Officer proposes to add the turnover found in the note book i.e.1 crore as addition to the income returned. The Assessee contends that only the profit on such sales of 1 crore at 7% could be added, as the A.O. was doing for the past years. Is the A.O. correct? Can the assessee defend his argument? Are there any decided cases..
However, the position may change if such findings (the entries found in the notebook) can be covered by Section 69, 69A, 69B, or 69C. In such a scenario, having held that the books are not reliable, AO may very well include the whole of such income under "income from other sources" and tax it accordingly.
You may refer http://indiankanoon.org/doc/37176085/
However, if you are able to convince that such transactions are part of your "income from business or profession" you might be able to get an agreement at 7%.
18 November 2013
If there is no proof that assessee made investment for alleged unaccounted sales. Entire amount can not be taxed. Only G.P. on sales can be added.
302 ITR 63 Gujarat CIT V/S. Gurubachhan Singh J. Juneja
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