Omprakash Maghraj vs. Income Tax Officer

Parties Involved

Facts Summary

The assessee, Omprakash Maghraj, is the proprietor of M/s. Ashish Electronic Corporation, engaged in the wholesale and retail trade of electronic spare parts in Vijayawada. The assessee filed his return of income for the Assessment Year (AY) 2014-15 on 11/12/2014, declaring a total income of Rs. 2,31,900/-. A search and seizure operation was conducted on M/s. Laxmi Remote Group (LRIPL), Delhi, from whom the assessee purchased goods on credit. Based on the information available, the Assessing Officer (AO) observed that the assessee's firm had purchased goods worth Rs. 24,09,126/- in cash during the Financial Year (FY) 2013-14, which was not accounted for and thus escaped assessment. The AO issued a notice under Section 148 of the Income Tax Act, 1961, and subsequently, the assessee filed a return of income on 14/04/2021. The AO issued further notices under Sections 143(2) and 142(1) of the Act, to which the assessee responded on 06/01/2022. The AO observed that the assessee had not factored in the cash purchases amounting to Rs. 24,09,126/- and issued a show cause notice on 22/03/2022. The assessee submitted that the purchases were credit purchases and all were duly accounted for. The AO concluded that the assessee had not provided documentary evidence to justify the cash sales and made an addition as unexplained expenditure under Section 69C of the Act. The AO determined the total income of the assessee at Rs. 26,41,026/- and passed the assessment order under Section 147 r.w.…

Legal Issues

• 1. Whether the entire unrecorded purchases can be treated as undisclosed income or only the profit element should be considered as income for the purpose of computing the tax on sales?
• 2. Whether the Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (CIT(A)-NFAC) erred in enhancing the unrecorded purchases without providing an opportunity to the assessee of being heard?

Judgment Outcome

Decided in favour of Assessee.

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