Pune ITAT allows the taxation of profit Element in Unrecorded Sales – Held that admission isn’t Always Final
The Pune ITAT, in Ashwin Rajendra Bade vs. ACIT [ITA No. 1892/PUN/2024], has reaffirmed a foundational principle-tax must be levied as per law, not merely on the basis of an assessee’s prior admission. This ruling brings much-needed clarity on the treatment of unrecorded sales inferred from stock discrepancies, especially in survey cases.
The case stemmed from a survey at the premises of a furniture manufacturer, where a shortage in stock was detected. The assessee admitted that the shortfall represented unrecorded sales and, acting on that admission, declared the entire amount (₹79.96 lakhs) as income under the head “Income from Other Sources” in his return and paid tax under Section 115BBE.
However, in appellate proceedings, the assessee contended that the amount reflected suppressed turnover, and that only the profit element in such sales should be brought to tax—consistent with established legal principles. The Revenue insisted the original admission should be binding.
But the ITAT took a more balanced view, holding that correct legal treatment must prevail over mistaken admissions.
Key Ratios from the Ruling
1. Admission is Not Conclusive
The assessee is not barred from revising an erroneous declaration, especially when the claim is legally sustainable and supported by evidence.
2. Tax Law over Admissions
Relying on Shelly Products (SC), the Tribunal reiterated that Article 265 of the Constitution mandates that no tax shall be collected except by authority of law.
3. Application of Cash Sales Matters
Importantly, the ITAT gave weight to the assessee’s claim that the cash received from unrecorded sales was used for advances to farmers (towards raw material purchases) and expansion of the showroom. Since these claims were not examined by the AO or CIT(A), the matter was restored to the CIT(A) for proper verification and consideration.
Final Thought
Voluntary declarations are not carved in stone. The law requires that only the real, taxable income-determined through facts and legal reasoning-can be assessed. In tax law, justice lies not in what was once confessed, but in what can be lawfully sustained.
The copy of the order is as under:
