Only Profit Element in Unaccounted Sales is Taxable [ITAT Reaffirms]:

During a search conducted on the Ratnakala Group on 22.09.2021, unaccounted sales were found. The AO added the entire sales amount as unaccounted income. However, the CIT(A) held that only a profit element may be taxed on these transactions. Accordingly, Additions were sustained only up to the GP Ratio. Appeals were filed by the department against the impugned orders passed by CIT(A). The tribunal held that:

• The entire sales cannot be added as income when purchases were not documented.
• The addition must be restricted to the profit element from the unaccounted portion.