ANIRUDDHA BOSE,J. - (1.) The Court : Certain undisclosed bank accounts of the assessee were discovered in course of survey operation by the Income Tax Authorities under section 133A of the Income Tax Act, 1961. On that basis fresh assessments were made under sections 154/147/143(3) of the Act in respect of the assessment years 2003-04 to 2007-08. The Assessing Officer treated all the withdrawals by cheque from these undisclosed accounts as undisclosed sales and cash withdrawals were treated as undisclosed income of the assessee. Upon treating the cheque withdrawals as unaccounted sales, the Assessing Officer clubbed the sales with the turnover declared by the assessee in respect of his business concern and applied a profit rate of 8% to the total turnover. The said assessment order was contested before the First Appellate Authority, Commissioner of Income Tax (Appeals).
(2.) Main case of the appellant before the CIT(Appeals) was that there was no basis for computation in such manner. The Appellate Authority modified the Assessing Officer's finding and held:- "Though cash withdrawals does not necessarily by itself tantamount to profit, it gives an indication of being net profit since the assessee has spent it on investment and consumption at his personal level and this money has gone out of the unaccounted business circulation. The assessee thus reduced the unaccounted money available to him and a logical explanation can only be that the withdrawal are from surplus profits. Therefore, using the cash withdrawal figures as an indicator it is held that a sum of 25% of the total deposits can be safely taken to represent the assessee's unaccounted profits and or unaccounted working capital. This figure is lower than the cash withdrawals in most of the years because a concession for cash redeposited is also available to the assessee though it is not possible to state that both cash deposits and withdrawals are made by the assessee himself. Further a possibility of incurring routine cash expenses is also possible but side by side cheque investment or consumption expenditure by cheque or credit card is equally probable. Therefore, a rate of 25% is taken to represent the concealed profit on the total deposits on an average and the taxable income of the assessee is recomputed accordingly. This figure may appear slightly excessive for A.Y. 2005-06 but it is adopted for this year also in view of the above discussions. As a result the adoption of 8% profit rate on all cheque/transfer withdrawals and also on the regular turnover as made by the A.O. is rejected and the cash withdrawal addition gets modified."
(3.) As a consequence of the order of the first Appellate Authority, the tax liability stood reduced. Before the Tribunal the appellant-assessee questioned the basis of arrival by the First Appellate Autority of the profit figure at the rate of 25% of total deposit.;