Sh Vikas Gutgutia, New Delhi V. DCIT, New Delhi

ITA 1012/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3019 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 20-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Search and seizure; Opportunity of being heard; Additional evidence
• Section: 153A; 234B; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : D NEW DELHI BEFORE SHRI R.K.PANDA , ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 862 /DEL/201 4 A.Y.: 2006 - 07 ACIT CENTRAL CIRCLE 10 NEW DELHI VS . SH. VIKAS GUTGUTIA J 238, SAINIK FARMS NEW DELHI 110 062 PAN: AAJPG0517B & ITA NO. 1012 /DEL/201 4 A.Y.: 2006 - 07 SH. VIKAS GUTGUTIA J 238, SAINIK FARMS NEW DELHI 110 062 PAN: AAJPG0517B VS . ACIT CENTRAL CIRCLE 10 NEW DELHI (APPELLANT) (RESPONDENT) A SSESSEE BY SH. RAJESH JAIN, C.A. DEPT. BY SH. VIJAY VERMA, CIT, DR DATE OF HEARING 10 .01. 2018 DATE OF PRONOUNCEMENT 23.03.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER THE PRESENT CROSS APPEALS HAVE BEEN FILED BY REVENUE AS WELL AS ASSESSEE AGAINST ORDER DATED 28/11/13 PASSED BY LD. CIT (A) - 32 FOR ASSESSMENT YEAR 2006 - 07 ON THE FOLLOWING GROUNDS OF APPEAL: ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 2 ITA NO. 862/ D EL/2014(DEPARTMENT S APPEAL) 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ADMITTING ADDITIONAL EVID ENCES UNDER RULE 46A. 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS. 2,14,87,850/ - ON ACCOUNT OF UNPROVED PURCHASES. 3. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW A ND ON FACTS OF THE CASE IN D ELETING THE ADDITION OF RS. 11,60,659/ - ON ACCOUNT OF UNPROVED LIABILITIES. 4. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS. 62,13,865/ - ON ACCOUNT OF INCO ME FROM UNDISCLOSED SOURCES UNDER SECTION 68 OF THE I. T. ACT, 1961. 5. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS. 50,30,610/ - IGNORING THE FACTS THAT ADDITION WAS MADE ON THE BASIS OF SEIZED MATERIAL ANNEXURE A - 5 (PAGES 53 & 58). 6. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN NOT INVOKING PROVISIONS OF SECTION 250(4), WHICH EMPOWERS LD. CIT(A) TO MAKE F UR THER ENQUIRIES. 7.(A)THE ORDER OF T HE CIT(APPEALS) IS ERRONEOUS AND NOT TENABLE IN LAW AND ON FACTS. (B) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY / ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 3 ITA NO. 1012/ D EL/2014 (ASSESSEE S APPEAL) GROUNDS OF APPEAL 1.THAT THE LEARNED CIT (APPEAL) ERRED IN DIRECTING THE ASSESSING OFFICER FOR ADOPTING GROSS PROFIT RATE OF 15% AGAINST 12.69% DECLARED BY THE APPELLANT ON SALES IN VIEW OF THE ALLEGED UNVERIFIED PURCHASES OF FLOWERS FROM LOCAL MANDI AR BITRARILY. 2. THAT THE LEARNED CIT (APPEAL) ERRED IN UPHOLDING THE ADDITION OF RS.30,34,485/ - (WRONGLY MADE AT RS. 79,65,515/ - BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER), BEING THE DIFFERENC E OF SURRENDER OF INCOME OF RS. 1,10,00,000/ - ON THE BASIS OF STATEMENT OF EMPLOYEE OF THE GROUP U/S 132(4) OF THE ACT AND ACTUAL AMOUNT OF RS. 79,65,515/ - OFFERED FOR TAXATION IN THE PROFIT & LOSS ACCOUNT. THAT THE LOWER AUTHORITIES DID NOT APPRECIATE THAT THERE WAS NO MATERIAL FOUND AND SEIZED FROM THE PREMISES OF THE APPELLANT FOR UPHOLDING THE ADDITION OF RS.30,34,485/ - . THE ADDITION SUSTAINED IS ONLY ON THE BASIS OF STATEMENT RECORDED U / S 132(4) OF THE ACT. 3. THAT THE LD.CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS.1,50,000/ - MADE BY AO ON ACCOUNT OF UNEXPL AINED CASH U/S 68 WITHOUT CONSIDERING THE SUBMISSIONS FILED BY THE APPELLANT, WHEREIN IT WAS SUBMITTED THAT THE APPELLANT WAS HAVING SUFFICIENT CASH IN HAND AFTER OFFERING INCOME OF RS.79,65,515/ - IN THE PROFIT AND LOSS A/C, OUT OF INCOME SURRENDERED U/S 132(4)OF THE ACT. THE ADDITION SUSTAINED BY LD.CIT(A) IS TOTALLY ARBITRARY AND HAS NO BASIS. 4. THAT THE LEARNED DCIT ERRED IN CHARGING INTEREST U/S 234B OF THE ACT FROM THE 1ST DAY OF THE ASSESSMENT YEAR IN PLACE OF THE DATE OF INTIMATION ORDER IN TERM S OF THE PROVISIONS OF SECTION - 234B(3) OF THE ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 4 ACT. THIS RATIO HAS BEEN LAID DOWN BY THE VARIOUS BENCHES OF ITAT, I.E., BABY MARINE EXPORTS VS. AC.I.T. 103 TT J 696 (COCHIN BENCH). 5 . THAT THE ORDERS OF THE ASSESSING OFFICER & CIT(A) ARE NOT BASED ON THE F ACTS OF THE CASE & AS PER LAW AND HENCE ADDITIONS SUSTAINED BY THE CIT(A) ARE TOTALLY ILLEGAL AND NOT BASED ON BINDING JUDICIAL PRECEDENTS. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : ASSESSEE IS ENGAGED IN THE WHOLESALE TRADING OF FRESH FLOWERS IN THE STYLE AND NAME OF M/S FERN N PETALS MARKETING. A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT WAS CONDUCTED ON 23/12/05 ON THE GROUP , AND ASSESSEE BEING PART OF GROUP WAS ALSO SEARCHED. THE LD.AO CALLED FOR DETAILS OF PERSONS WITH THEIR COMPLET E ADDRESS, FROM WHOM ASSESSEE MADE PURCHASES IN EXCESS OF RS.3LACS. AS ASSESSEE WAS UNABLE TO PROVIDE THE DETAILS, LD.AO ADDED A SUM OF RS.2,28,11,359/ - AS UNPROVED PURCHASES. LD.AO MADE FURTHER ADDITIONS ON ACCOUNT OF UNPROVED LIABILITY, INCOME FROM UNDISC LOSED SOURCES UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 (THE ACT), ADDITION OF UNEXPLAINED CASH UNDER SECTION 68 AND ADDITION ON ACCOUNT OF UNEXPLAINED OPENING CAPITAL. 2.1. AGGRIEVED BY THE ADDITIONS MADE BY LD.AO, ASSESSEE PREFERRED APPEAL BEFORE LD .CIT (A). BEFORE LD.CIT (A) ASSESSEE FILED VARIOUS DETAILS IN RESPECT OF ADDITIONS BY WAY OF ADDITIONAL EVIDENCE, WHICH WAS SENT TO LD.AO FOR A REPORT. A SSESSEE FILED COPIES OF THE LEDGER ACCOUNTS OF PERSONS SHOWN AS SUNDRY CREDITORS, IN RESPECT OF ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 5 UNPRO VED LIABILITIES AS ADDITIONAL EVIDENCE . LD.AO REJECTED ADDITIONAL EVIDENCE BY HOLDING IT W AS AN AFTERTHOUGHT AS THESE ARE SUBMITTED POST DATE OF SEARCH. 2.2. LD. CIT (A) AFTER CONSIDERING THE SUBMISSIONS MADE BY LD.AO IN THE REMAND REPORT AS WELL AS THAT OF ASSESSEE, DECIDED THE ISSUE AS UNDER: 11.1. I HAVE CONSIDERED THE WRITTEN SUBMISSIONS OF THE APPELLANT, ADDITIONAL EVIDENCES, AND REPORT OF THE ASSESSING OFFICER AND THE REJOINDER OF THE APPELLANT. ON PERUSAL OF SAME I FIND THAT EVEN NOW THE APPELLANT DID NOT FURNISH THE ADDRESSES OF THE VENDORS FOR T HE REASONS ALREADY DISCUSSED ABOVE NAMELY THAT THESE ARE CASUAL VENDORS AND THEY DID NOT HAVE A PROPER OR PERMANENT ADDRESS. THE APPELLANT IS INTO THE BUSINESS OF PURC HASE AND SALE OF FLOWERS AND IN THE PROCESS PU RCHASED FLOWERS FROM THE MANDI. DURING THE YEAR UNDER REFERENCE THE TOTAL PURCHASES DECLARED WERE TO THE TUNE OF 5,23,89,343/ - AND THE SALES HAVE BEEN SHOWN AT RS.5,72,94,749/ - GIVING A GP RATE OF 2.69%. IN THE COURSE OF THE APPEAL PROCEEDINGS, THE APPELLANT FURNISHED A CHART SHOWING THE EFFECT OF GROSS PROFIT RATE AFTER DISALLOWING THE PURCHASES WHERE FROM IT IS SEEN THAT THE GROSS PROFIT RATE HAS GONE UP TO 52.50% AS AGAINST 12.69% DECLARED BY APPELLANT. THE AO ACCEPTED THE TRADING RESULTS FOR THE ASSESSMENT YEAR 2001 - 02 WHEN THE APPELLANT DECLARED TURNOVER OF RS.23,75,191/ - AND GROSS PROFIT RATE 11.57%. THE APPELLANT ALSO COMPARED THIS GROSS PROFIT RATE WITH THE OTHER CONCERNS IN SIMILAR LINE OF TR ADE, AND ALSO THE GP RATE DECLARED BY THE SAME GROUP OF CONCERNS I.E. M / S FERNS N PETALS (INDIA) PVT. LTD. AND ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 6 STATED THAT ASSESSING THE G.P. AT 56% WAS, THEREFORE , UNJUSTIFIED. THERE IS NO EVIDENCE OF ANY INCRIMINATING MATERIAL FOUND DURI N G THE COURSE OF SEARCH PROCEEDINGS TO ESTABLISH THAT THE PURCHASES MADE WERE NOT GEN UINE . IT IS ALSO SEEN THAT THE A.O. HAS NOT MADE ANY INVESTIGATION OR ENQUIRY TO DISPROVE THE CLAIM OF THE APPELLANT IN THIS REGARD BY CONDUCTING INQUIRIES FROM THE SO - CALLED VENDORS IN THE M ANDI . IN THE ABSENCE OF ANY SUCH EVIDENCE BEING BROUGHT ON RECORD BY THE AO . I AM UNABLE TO AGREE WIT H THE FINDING OF THE AO . THAT THE SO - CALLED PUR CHASES ARE UNPROVED ESPECIALLY AS THE ADDITION RESULTED IN A PROFIT RATE OF 52.50% AS AGAINST 11.57% ACCEPTED BY THE AO. IN THE ASSESSMENT YEAR 2001 - 02, WHICH IS NOT POSSIBLE IN THIS KIND OF BUSINESS . EVEN THE ASSESSING OFFICER DID NOT BRING OR REFER TO ANY COMPARABLE CASES HAVING THE GROSS PROFIT RATE AS ASSESSED BY HIM. THEREFORE , CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, AND THE G.P. RATE DECLARED AND ACCEPTED BY THE DEPARTMENT IN THE ASSESSM ENT YEAR 2001 - 02, IN MY VIEW IT WOULD BE APPROPRIATE TO APPLY A G.P. RATE OF 15% AS AGAINST 12.69% DECLARED BY THE APPELLANT TO COVER THE LEAKAGE OF PROFIT ON THE POSSIBILITY OF UNVERIFIED PURCHASES . THE ASSESSING OFFICER IS THEREFORE, DIRECTED TO APPLY THE G. P . RATE OF 15% ON THE DECLARED SALES AND WORK OUT THE GROSS PROFIT OF THE YEAR UNDER CONSIDERATION AND ACCORDINGLY MOD I FY THE ADDITION. ' 15. I HAVE CONSIDERED THE WRITTEN SUBMISSIONS, ADDITIONAL EVIDENCE FILED, REMAND REPORT OF THE ASSESSING OFF ICER AND REJOINDER OF THE APPELLANT ETC. AS IN THE PAST THE APPELLANT IS ENGAGED IN THE BUSINESS OF WHOLE SALE TRADING AND SUPPLY OF FRESH FLOWERS THROUGH HIS PROPRIETORSHIP CONCERN M/S. PLUS MARKETING. IT WAS SUBMITTED THAT ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 7 DURING THE YEAR UNDER CONSIDERA TION THE APPELLANT PURCHASED FLOWERS F ROM THE PARTIES NAMELY. A) M/S. NATURES MANIA B) M / S I. K. ENTERPRISES IN SUPPORT OF THE ABOVE SAID PURCHASES THE APPELLANT FILED COPY OF CONFIRMATION AND LEDGER ACCOUNT OF M/S NATURES MANIA AND I. K. ENTERPRISES IN THE BOOKS OF M/S FNP MARKETING ALONG WITH THE COPY OF INVOICES CUM DELIVERY CHALLANS OF THE ABOVE PARTIES. HOWEVER, THE ASSESSING OFFICER REFUSED TO APPRECIATE THE EVIDENCE FILED BY THE APPELLANT UNDER RULE 46A. WHILE DOING SO, THE ASSESSING OFFICER DID NOT APPRECIATE THAT THE APPELLANT COULD NOT FURNISH THESE EVIDENCES DURING THE COURSE OF ASSESSMENT PROCEEDIN G S DUE TO PAUCITY OF TIME. SINCE THE APPELLANT HAS NOW FURNISHED THE EVIDENCES IN RESPECT OF THE ABOVE LIABILITIES WHICH HAVE BEEN ADMITTED BY ME, THERE. THEREFORE, I DO NOT SEE ANY REASON TO SUSTAIN TO THE ADDITION IN QUESTION FORE, CONSIDERING THESE EVIDENCES I HOLD THE THAT THE LIABILITIES IN QUESTION ARE GENUINE. ACCORDINGLY, THE ADDITION OF RS.11,60,659/ - MADE BY THE AO ON ACCOUNT OF UNPROVED L IABILITY IS DELETED. 2.3. LD.CIT(A) DELETED ADDITION MADE ON UNEXPLAINED CASH DEPOSITS AND OPENING CREDIT BUT CONFIRMED ADDITION OF INCOME FROM UNDISCLOSED SOURCES. 2.4. AGAINST THE ORDER OF LD.CIT(A), BOTH REVENUE AS WELL AS ASSESSEE ARE IN APPEAL BEF ORE US NOW. ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 8 3. WE SHALL FIRST TAKE UP APPEAL FILED BY REVENUE IN ITA NO. 862/ D EL/2014 . 3.1. GROUND NO. 1 RAISED BY REVENUE IS IN RESPECT OF ADDITIONAL EVIDENCES BEING ADMITTED BY LD.CIT(A). 3.2. LD.CIT , DR PLACED RELIANCE UPON DECISION IN CASE OF RANJIT KUMAR CHAUDHARY REPORTED IN 288 ITR 179 AND SARDARNI UTTAM KAUR EDUCATION SOCIETY, REPORTED IN 220 CTR 601. HE SUBMITTED THAT LD.CIT(A) HAS NOT MADE OUT UNDER WHAT CIRCUMSTANCE OF RULE 46A(1) , WHILE ADMI TTING ADDITIONAL EVIDENCES FILED BY ASSESSEE. 3.3. ON THE CONTRARY LD.AR SUBMITTED THAT THIS TRIBUNAL FOR ASSESSMENT YEARS 2002 - 03 TO 2005 - 06 IN ASSESSEE S OWN CASE VIDE ORDER DATED 25/10/16 HAS ADMITTED THE ADDITIONAL EVIDENCE BY OBSERVING THAT HAS LD. CIT (A) WHILE ADJUDICATING THE GROUNDS HAD CALLED FOR REMAND REPORT FROM LD. AO ON THE ADDITIONAL EVIDENCES FILED, THERE SHOULD NOT HAVE BEEN ANY GRIEVANCE ON THE PART OF REVENUE IN ADMITTING THE ADDITIONAL EVIDENCE BY LD. CIT (A). 3.4. WE HAVE PERUSED T HE NECESSARY SUBMISSIONS ADVANCED BY BOTH THE SIDES AS WELL AS THE ORDER RELIED UPON BY LD.AR IN ASSESSEE S OWN CASE FOR A SSESSMENT Y EARS 2002 - 03 TO 2005 - 06. 3.5. IN THE PRESENT CASE ALSO IT IS OBSERVED THAT LD. CIT (A) CALLED FOR REMAND REPORT IN TERMS O F THE ADDITIONAL EVIDENCES FILED BY ASSESSEE. IT WAS AFTER DUE CONSIDERATION OF THE REMAND REPORT, LD. CIT (A) ADJUDICATED THE GROUNDS RAISED BY ASSESSEE. UNDER SUCH CIRCUMSTANCES WE DO NOT FIND ANY INFIRMITY IN THE ADDITIONAL EVIDENCE BEING ADMITTED BY LD.CIT(A). ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 9 3.6. RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR A SSESSMENT Y EARS 2002 - 03 TO 2005 - 06 THIS GROUND RAISED BY REVENUE STANDS DISMISSED. 4. GROUND NO. 2 HAS BEEN RAISED BY REVENUE AGAINST THE ADDITION THAT HAS B EEN DELETED ON ACCOUNT OF ALLEGED UNPROVED PURCHASES AMOUNTING TO RS.2,28,11,359/ - . LD.CIT,DR SUBMITS THAT LD. CIT (A) DIRECTED TO APPLY GP RATE AT 15% AS LD. AO HAS NOT MADE ANY ENQUIRY REGARDING GENUINENESS OF THE PURCHASES MADE. 4.1. ON THE CONTRARY L D.AR PLACED RELIANCE UPON THE FINDINGS OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2002 - 03 TO 2005 - 06 WHERE A SIMILAR ACTION OF LD. CIT (A) HAS BEEN UPHELD. 4.2. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF TH E RECORDS PLACED BEFORE US AS WELL AS THE FINDINGS OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR A SSESSMENT Y EAR 2002 - 03 TO 2005 - 06. THIS TRIBUNAL DECIDED THIS ISSUE AS UNDER: 11. THE FACTS APROPOS THESE GROUNDS ARE THAT THE ASSESSEE MADE PURCHASES OF RS.95,26,568/ - FROM MANDI VENDORS. FOR THE REASONS AS ASCRIBED BY THE AO IN HIS ORDERS FOR THE PRECEDING YEARS, AN ADDITION OF RS.95.26 LAC WAS MADE. FOLLOWING HIS VIEW TAKEN FOR THE EARLIER YEARS, GP RATE OF 15% WHICH WOULD HAVE RISEN TO 38.5%, IF THE ADDITION MADE BY THE AO HAD BEEN SUSTAINED. BOTH THE SIDES ARE IN APPEAL BEFORE US IN SUPPORT OF THEIR RESPECTIVE STANDS. 12. THE VIEW CANVASSED BY US IN DELETING THE SIMILAR ADDITIO NS MADE F OR THE AYS 2002 - 03 TO 2004 - 05 ON THE GROUND THAT NO INCRIMINATING MATERIAL WAS FOUND AT THE TIME OF SEARCH, CANNOT BE APPLIED TO THE FACTS FOR THIS YEAR BECAUSE THE RETURN WAS FILED ON ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 10 31.10.2005 AND THE TIME LIMIT FOR ISSUE OF NOTICE U/S 143(2) W AS AVAILABLE UP TO 31.10.2006. AS AGAINST THAT, A SEARCH WAS UNDERTAKEN ON 23.12.2005 WHICH SHOWS THAT THE REVENUE HAD THE TIME AVAILABLE WITH IT FOR PASSING OF THE ASSESSMENT ORDER OR FOR ISSUING NOTICE U/S 143(2). AS SUCH, THE ASSESSMENT FOR THE AY 20 05 - 06 FALLS IN THE CATEGORY OF NON - COMPLETED OR PENDING ASSESSMENT , WHICH GIVES THE POWER TO THE AO FOR MAKING ADDITIONS IN THE ASSESSMENT U/S 153A BASED NOT ONLY ON THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH, BUR OTHERWISE ALSO. 13. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE ASSESSEE ADMITTEDLY DID NOT PRODUCE ANY BOOKS OF ACCOUNT AND THE SUPPORTING VOUCHERS / BILLS. THE CONTENTION OF THE L D. AR THAT THE BOOKS WERE AVAILABLE IN THE COMPUTER, WHICH WAS AVAILABLE WITH T HE DEPARTMENT, CANNOT BE ACCEPTED BECAUSE EVEN IF SOFT COPY OF SUCH BOOKS WAS AVAILABLE, BUT THERE WERE NO SUPPORTING BILLS/VOUCHERS, WHICH COULD HAVE BEEN VERIFIED BY THE AO. THE ASSESSEE DID NOT FURNISH ANY EVIDENCE OR DETAILS DURING THE COURSE OF ASSESS MENT PROCEEDINGS. IN SUCH A SITUATION, THE ARGUMENT OF THE L D. AR THAT SINCE THE BOOKS OF ACCOUNT WERE NOT REJECTED, HENCE, NO ADDITION COULD HAVE BEEN MADE BY ESTIMATING THE PROFIT RATE, IS JETTISONED AS WITHOUT ANY SUBSTANCE. WHEN THE BOOKS AND THE RELE VANT VOUCHERS / BILLS WERE NOT PRODUCED BEFORE THE AO, IT WAS, BUT, NATURAL TO MAKE THE ASSESSMENT ON THE BASIS OF SOME ESTIMATE. AS AGAINST THE A O DISALLOWING ALL THE PURCHASES, WE FIND THAT THE L D, CIT(A) WAS JUSTIFIED IN APPROVING THE APPLICATION OF GP RA TE OF 15% ON THE DECLARED SALES TO COVER THE LEAKAGE OF PROFIT ON THE POSSIBILITY OF ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 11 UNVERIFIED PURCHASES. THE IMPUGNED ORDER IS, THEREFORE, UPHEL D ON THIS ISSUE AND BOTH THE GROUNDS ARE DISMIS SED. 4.3. IT IS OBSERVED THAT SIMILAR HAS BEEN THE FACTUAL POSITION PREVAILING FOR THE YEAR UNDER CONSIDERATION, THEREFORE, RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE ACTION OF LD. CIT (A) IN DIRECTING THE ASSESSING OFFICER TO APPLY GP RATE OF 15% ON THE DECLARED SALES TO WORKOUT GROSS PROFIT FOR THE YEAR UND ER CONSIDERATION. 4.4. ACCORDINGLY THIS GROUND RAISED BY THE REVENUE STANDS DISMISSED. 5. GROUND NO. 3 . T HIS GROUND HAS BEEN RAISED BY REVENUE AGAINST THE ADDITION BEING DELETED ON ACCOUNT OF ALLEGED UNPROVED LIABILITY AMOUNTING TO RS.11,60,659/ - . 5.1. LD. CIT DR SUBMITTED THAT THIS TRIBUNAL VIDE ORDER DATED 25/10/16 PASSED FOR ASSESSMENT YEAR 2002 - 03 TO 2005 - 06 HAS RESTORED THE ISSUE BACK TO LD. AO FOR VERIFICATION. 5.2. LD. AR ALSO SUPPORTED THE ORDER OF THIS TRIBUNAL FOR EARLIER ASSESSMENT YEARS. 5.3. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 5.4. IT IS OBSERVED THAT ASSESSEE HAD DECLARED THE FOLLOWING CREDITORS TOTALLING TO RS.11,60,659/ - . SL.NO. NAME AMOUNT RS. 1. M/S NATURES MENIA 1 0,77,242/ - 2. M/S I.K. ENTERPRISES 83,417/ - TOTAL 11,60,659/ - ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 12 5.5. FURTHER AS RELIED UPON BY BOTH THE SIDES, THIS TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF LD. AO TO DECIDE THE ISSUE AFRESH BY OBSERVING AS UNDER: 22. .. WHEN THE TRADE CREDITORS WERE APPEARING IN THE BOOKS, IT WAS OBLIGATORY ON THE PART OF ASSESSEE TO PROVE GENUINENESS BY FURNISHING NECESSARY INVOICES AND ALSO PRODUCING THEM, IF REQUIRED BY THE AO. HERE IS A CASE IN WHICH APART FROM FILING CONFIRMATION FROM THE THIRD P ARTY, ASSESSEE HAS NOT EVEN FURNISHED INVOICES, WHAT TO TALK OF PROVING THE GENUINENESS OF THESE CREDITORS. AS SUCH LD. CIT (A) CANNOT BE HELD AS JUSTIFIED IN DELETING THIS ADDITION. IN OUR CONSIDERED OPINION, THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF AO. 5.6. LD. CIT (A) DELETED THE ADDITION IN THE FACTS OF THE PRESENT CASE FOR THE YEAR UNDER CONSIDERATION WITHOUT THE GENUINENESS OF THE TRADE CREDITORS BEING ESTAB LISHED. 5.7. RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL FOR THE PRECEDING ASSESSMENT YEARS, WE SET ASIDE THIS ISSUE BACK TO LD. AO TO DECIDE THE ISSUE AFRESH AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. 5.8. ACCORDINGLY TH IS GROUND RAISED BY REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 13 6. GROUND NO. 4 T HIS GROUND HAS BEEN RAISED BY REVENUE AGAINST THE DELETION OF ADDITION ON ACCOUNT OF CASH DEPOSITS IN CORPORATION BANK AMOUNTING TO RS.62,13,865/ - . 6.1. LD. CIT DR SUBMITTED THAT CASH CREDITS WERE FOUND TO HAVE BEEN DEPOSITED IN VARIOUS BANKS. HE SUBMITTED THAT LD.CIT (A) DELETED THE ADDITION AS ASSESSING OFFICER HAS NOT CONDUCTED ANY INTERNAL EXERCISE TO VERIFY THE SAID ENTRIES FROM THE RECORD SUBM ITTED BY ASSESSEE. HE SUBMITTED THAT NON - VERIFICATION OF THE ENTRIES RESULTS INTO GROSS VIOLATION OF SECTION 68 OF THE ACT. 6.2. ON THE CONTRARY LD.AR PLACED RELIANCE UPON THE DECISION OF LD. CIT (A). 6.3. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. ON PERUSAL OF THE ORDER PASSED BY THIS TRIBUNAL FOR THE PRECEDING ASSESSMENT YEARS, IT IS OBSERVED THAT SIMILAR CASH CREDITS WERE THERE IN THE REGULAR BOOKS OF ACCOUNTS OF ASSESSEE. THIS TRIBUNAL OBSERVED THEREIN THAT AS TURNOVER WAS MUCH MORE THAN THE CASH DEPOSITS, VIEWPOINT EXPRESSED BY REVENUE CANNOT BE CONSIDERED AS THERE WAS NO MATERIAL TO SUBSTANTIATE THE SAME. THIS TRIBUNAL ACCORDINGLY DELETED ADDITION THEREIN , WHICH WAS MADE ON ACCO UNT OF UNEXPLAINED CASH CREDITS UNDER SECTION 68. 6.4. IN THE FACTS OF THE PRESENT CASE LD.CIT (A) RECORDED THAT DURING THE REMAND PROCEEDINGS ASSESSEE PRODUCED BOOKS OF ACCOUNTS WHICH WERE NOT EXAMINED BY LD.AO AS THE SAME WERE NOT PRODUCED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. IT IS OBSERVED THAT ASSESSEE PRODUCED, COPY OF CASH BOOK SHOWING THE CASH ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 14 AVAILABILITY, DEPOSITED INTO THE BANK ACCOUNTS AND THE CONFIRMATION OF VARIOUS MAJOR PARTIES IN RESPECT OF THE CASH RECEIVED FROM THEM AGAINST THE SALES MADE TO THEM BY ASSESSEE. 6.5. FURTHER EVEN LD.CIT (A) FAILED TO CONDUCT ANY SUCH ENQUIRY ON THE BASIS OF THE INFORMATION MADE AVAILABLE BY ASSESSEE. 6.6. IN THE INTEREST OF JUSTICE WE ARE THEREFORE INCLINED TO SET ASIDE THIS ISSUE BACK TO LD. AO FOR DUE VERIFICATION OF THE CASH BOOK SHOWING THE CASH AVAILABILITY DEPOSITED IN BANK ACCOUNTS, CONFIRMATION OF THE MAJOR PARTIES PROVIDED BY ASSESSEE TO WHOM SALES WERE MADE BY ASSESSEE, THE CASH BOOK OF ACCOUNTS SUBMITTED BY ASSESSEE VIS - A - VIS THE SEIZE D BOOK OBTAINED FROM THE COMPUTER DURING THE SEARCH PROCEEDINGS. LD. AO SHALL GIVE PROPER OPPORTUNITY TO ASSESSEE TO REPRESENT ITS CASE AND ASSESSING OFFICER SHALL CONDUCT ALL NECESSARY ENQUIRIES DEEM FIT AND PROPER IN ORDER TO ARRIVE AT A CORRECT DECISION AS PER LAW. 6.7. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO. 5 THIS GROUND HAS BEEN RAISED BY THE REVENUE AGAINST THE ADDITION THAT HAS BEEN DELETED ON ACCOUNT OF OPENING CREDIT AMOUNTING TO RS.50, 30,610/ - . 7.1. LD. CIT DR SUBMITTED THAT IMPUGNED ADDITION WAS MADE ON ACCOUNT OF UNEXPLAINED OPENING CAPITAL, CURRENT LIABILITIES AND OTHER AMOUNTS PAYABLE. LD.AO HAD OBSERVED THAT ASSESSEE IN ITS NOTES TO ACCOUNTS ON DISCLOSURE DATED 24/03/06 HAD CLAI MED THAT HE STARTED NEW BUSINESS DURING THE YEAR UNDER CONSIDERATION UNDER ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 15 THE NAME AND STYLE OF M/S. HANDICRAFT AND HAD DISCLOSED AN INCOME OF RS. 96 LA KHS FROM THIS CONCERN IN HIS NOTES ON DISCLOSURE . AS ASSESSEE FAILED TO OFFER ANY EXPLANATION IN RESPECT OF THE OPENING CAPITAL AMOUNTING TO RS.27,59,910/ - , CURRENT LIABILITIES OF RS.20,09,759/ - , AND OTHER AMOUNTS PAYABLE AMOUNTING TO RS.2,60,941/ - , THE SAME WERE TREATED AS UNEXPLAINED INCOME OF THE APPELLANT AND ADDITION WAS MADE IN THE HANDS OF ASSE SSEE. 7.2. LD. CIT DR FURTHER SUBMITTED THAT ASSESSEE VIDE HIS NOTE S ON DISCLOSURE SURRENDERED A SUM OF RS.1,10,00,000/ - IN THE NEW BUSINESS BEING M/S. HANDICRAFT, AT THE TIME OF SEARCH. HE SUBMITTED THAT WHILE FILING THE RETURN OF INCOME ASSESSEE CAM E OUT WITH THE SURRENDERED INCOME TO BE RS.79,65,515/ - . HE SUBMITTED THAT THERE HAS BEEN NO DISCLOSURE THAT WAS FILED BY ASSESSEE IN THE DUE COURSE JUSTIFYING THE REDUCTION IN THE SURRENDERED INCOME. LD. CIT DR FURTHER SUBMITTED THAT ASSESSEE WAS TO DECLA RE RS.1,50,000/ - OUT OF THE CASH SEIZED DURING THE COURSE OF SEARCH. 7.3. LD.AR SUBMITTED THAT ASSESSEE HAS ALREADY SURRENDERED UNDER SECTION 132(4) OF THE ACT A SUM OF RS.79,65,515/ - ON ACCOUNT OF HANDICRAFT BUSINESS WHICH IS MORE THAN THE ADDITION MADE BY LD.AO ON THIS ACCOUNT. LD.AR SUBMITTED THAT THE SUM OF RS.50,30,610 / - HAS BEEN SUBSUMED IN THE SURRENDERED INCOME OF RS.79,65,515/ - AND THEREFORE THE ADDITION MADE BY LD.AO AMOUNTING TO RS.50,30,610/ - ONCE AGAIN WOULD AMOUNT TO DOUBLE ADDITION . HE PLACED RELIANCE UPON THE OBSERVATIONS OF LD. CIT (A). 7.4. WE HAVE PERUSED T HE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 16 7.5. IT IS OBSERVED THAT IN THE NOTES ON SURRENDER PLACED AT PAGE 442 OF THE PAPER BOOK , ASSESSEE HAS DISCLOSED RS. 96 LAKHS AS INCOME OF M/S HANDICRAFTS. THE REASON FOR SURRENDER IS STATED TO BE NEGLIGENCE OF STAFF IN THE NEW ACTIVITY CARRIED ON IN THE NAME AND STYLE OF M/S HANDICRAFTS WHICH WAS NOT DECIPHERABLE. DURING THE YEAR HE HAS SUBMIT TED THAT ONLY RS. 5 TO 6 LAKHS OF AMOUNT IS UNACCOUNTABLE INCOME. H OWEVER, WHILE FILING THE RETURN OF INCOME ASSESSEE SURRENDERED IN THE PROFIT AND LOSS ACCOUNT ONLY A SUM OF RS.79,65,515/ - . FURTHER IN LETTER DATED 23/11/07 AT SERIAL NO. 16, ASSESSEE STATED THAT AT THE TIME OF DISCLOSURE RS. 1.10 CRORES WERE SURRENDERED TO BUY PEACE OF MIND. TAKING INTO ACCOUNT THE INCOME O F HANDICRAFT DIVISION, WRITING OF F CERTAIN SUNDRY CREDITORS IN THE INCOME WAS STATED TO BE RS.79,65,515/ - . IT HAS BEEN STATED THAT THOUGH NO DOCUMENTS WERE SEIZED DURING THE TIME OF SEARCH, LD. A.O. HA S MADE AN ADDITION OF RS.50,30,610/ - , THE BREAKUP OF WHICH IS AS UNDER: CAPITAL ACCOUNT BALANCE BEING RS.27,59,910/ - , CURRENT LIABILITY BEING RS.2,00,95 5/ - ; AND OTHER S : A SUM OF RS.2,60,941/ - ASSESSEE HAS STATED THAT THESE DO NOT BELONG TO HIM WHICH IS ACCEPTABLE AS THESE FIGURES PERTAIN TO THE TRIAL BALANCE OF FERN N PETAL MARKETING DIVISION CARRIED ON BY ASSESSEE. T HIS VIEW IS SUPPORTED BY THE PROVISIONS OF SECTION 132 (4A) AND 292C OF THE ACT , FURTHER THERE WAS NO DISCLOSURE IN THE YEAR PRIOR TO F INANCIAL YEAR 2005 - 06 WHEREIN THE ABOVE ENTRIES BEING THE ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 17 OPENING BALANCE WHICH COULD HAVE BEEN COVERED UNDER THE NORMAL DISCLOSURES OF RS.79,65,515/ - . ASSESSEE HAS FAILED TO EXPLAIN THE CONTENTS OF THESE ENTRIES, DURING THE COURSE OF SEARCH OR IN THE R ETURN OF INCOME, OR IN THE DISCLOSURE MADE AS PER NOTES TO SURRENDER , OR BEFORE THE AUTHORITIES BELOW OR EVEN BEFORE US. BY MERELY STATING THAT THESE AMOUNTS WERE OPENING BALANCES IS NOT ACCEPTABLE AS THE SAME DOES NOT STAND ESTABLISH ED FROM THE PROFIT AND LOSS ACCOUNTS FILED BY ASSESSEE IN THE PAPER BOOK. 7.6. LD. CIT (A) HAS NOT GONE INTO THESE DETAILS AND HAS SIMPLY ALLOWED THE CLAIM OF ASSESSEE WITHOUT ANY BASIS. WE THEREFORE REVERSE THE OBSERVATIONS OF LD. CIT (A) AND CONFIRM THE F INDINGS OF LD. AO. 7.7. ACCORDINGLY THI S GROUND RAISED BY THE REVENUE STANDS ALLOWED. 7.8. ACCORDINGLY APPEAL FILED BY REVENUE STANDS PARTLY ALLOWED. 8. ITA NO. 1012/ D EL/2014 (ASSESSEE S APPEAL) 8.1. GROUND NO. 1 RAISED BY THE ASSESSEE IS AGAINST DIRECTION OF LD. CIT (A) IN ADOPTING GROSS PROFIT RATE OF 15% AS AGAINST 12.69%. 8.2. WE HAVE ALREADY DECIDED THIS ISSUE IN GROUND NO. 2 RAISED IN REVENUE S APPEAL WHEREIN WE HAVE UPHELD THE FINDINGS OF LD. CIT (A). ACCO RDINGLY THIS GROUND RAISED BY ASSESSEE STANDS DISMISSED. 9. GROUND NO. 2 AND 3 ARE IN RESPECT OF THE DIFFERENCE IN THE SURRENDER OF INCOME AND THE DIFFERENCE IN UNEXPLAINED CASH IN HAND UNDER SECTION 68, WHICH HAS BEEN CONFIRMED BY LD.CIT (A). ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 18 9.1 . WE H AVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 9.2 . IT IS OBSERVED THAT ASSESSEE HAD DECLARED IN THE NOTES TO DISCLOSURE PLACED AT PAGE 442 OF PAPER BOOK , RS. 1.10 CRORES ON ACCOUNT OF PROFIT S EARNE D FROM NEW BUSINESS ACTIVITY OF M/S. H ANDICRAFT. HOWEVER IN THE PROFIT AND L OSS ACCOUNT FILED SUBSEQUENT TO SEARCH ALONG WITH THE RETURN OF INCOME , ONLY RS.79,65, 515/ - WAS DECLARED. LD.AO ADDED THE DIFFERENCE BEING RS.13,34,485/ - IN THE HANDS OF THE ASSESSEE . LD.AO HAS ALSO OBSERVED THAT CASH OF RS.1,50,000/ - DECLARED IN THE HANDS OF ASSESSEE OUT OF TOTAL CASH SEIZED AMOUNTING TO RS.14,50,000/ - HAS ALSO NOT BEEN INCLUDED IN THE RETURN OF INCOME. IT IS OBSERVED THAT ASSESSEE HAS NOT ESTABLISHED BY WAY OF EVIDENC E NEITHER BEFORE THE AUTHORITIES BELOW NO R BEFORE US REGARDING THE SUNDRY CREDITORS BEING GENUINE. ASSESSEE HAS THUS FAILED TO ESTABLISH THE 3 IMPORTANT INGREDIENTS BEING IDENTITY, CREDITWORTHINESS AND MOST IMPORTANTLY GENUINENESS OF THE TRANSACTION AS P ER SECTION 68 OF THE A CT. 9.3 . WE ACCORDINGLY DO NOT FIND ANY INFIRMITY IN THE OBSERVATIONS OF LD. CIT (A) AND THE SAME IS UPHELD. 9.4. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS DISMISSED. 10. IN THE RESULT, APPEAL FILED BY ASSESSEE STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 2 3 R D MARCH, 2018. S D / - S D / - (R.K.PANDA) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 2 3 R D MARCH, 2018. *MV ITA 862/DEL/2014 A.Y.2006 - 07 ACIT V S. VIKAS GUTGUTIA ITA 1012/DEL/2014 A.Y. 2006 - 07 VIKAS GUTGUTIA PROP. FNP MARKETING VS. DCIT 19 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI