The ITO, Ward-2, Navsari V. Smt. Komal Urveshkumar Shah, Navsari

ITA 1104/AHD/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8917 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-02-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RICHA RASTOGI
• Keywords: Unexplained cash credit; Unexplained investment; Loose papers; Period of limitation; Source of fund; Deemed to accrue or arise in india; Tax effect
• Section: 143(3); 133A; 133(6); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD I BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE ITO, WARD - 2, NAVSARI (APPELLANT) VS SMT. KOMAL URVESHKUMAR SHAH, PROP. OF YASH MARBLE, NEAR KALAPOOL, SAMROLI, CHIKHLI - BILIMORA ROAD, TAL. CHIKHLI, NAVSARI PAN: AJXPS4748M (RESPONDENT) SMT. KOMAL URVESHKUMAR SHAH, PROP. OF YASH MARBLE, NEAR KALAPOOL, SAMROLI, CHIKHLI - BILIMORA ROAD, TAL. CHIKHLI, NAVSARI PAN: AJXPS4748M (APPELLANT) VS THE ITO, WARD - 2, NAVSARI (RESPONDENT) REVENUE BY : S H RI RICHA RASTOGI , SR. D . R. ASSESSEE BY: S H RI TUSHAR P. HEMANI , A.R. I T A NO . 1104 / A HD/20 11 A S SESSMENT YEAR 200 7 - 08 ITA NO. 1361 /AHD/20 11 ASSESSMENT YEAR 200 7 - 08 I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 2 DATE OF HEARING : 02 - 02 - 2 017 DATE OF PRONOUNCEMENT : 20 - 03 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS CROSS APPEAL FILED BY REVENUE AND ASSESSEE FOR A.Y. 2007 - 08 , AR ISE FROM ORDER OF THE CIT(A), VALSAD DATED 29 - 12 - 2010 IN APPEAL NO. CIT(A)/VLS/309/09 - 10 , IN PROCEEDINGS UNDER SECTION 143(3) OF T HE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSAD, WITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING TH E ADDITION OF RS.44,700/ - IN RESPECT OF UNEXPLAINED MONEY WHICH WAS MADE BY THE AO U/S 69A OF THE ACT ON THE BASE OF IMPOUNDED DEFECTIVE AND INCOMPLETE CASH BOOK. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSA D, WITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING THE ADDITION OF RS.90,000/ - IN RESPECT OF UNACCOUNTED MONEY WHICH WAS MADE BY THE AO ON THE BASE OF IMPOUNDED DEFECTIVE AND INCOMPLETE CASH BOOK. 3) ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSAD, WITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING THE ADDITION OF RS.5,00,000/ - IN RESPECT OF SUPPRESSED SALE OUT OF ADDITION OF RS. 10,00,000/ - WHICH WAS MADE BY THE AO AFTER UNEARTHING THE MODUS OPE RAND OF THE ASSESSEE OF SUPPRESSING THE SALE FOR WHICH THE CIT(A) ALSO AGREED UPON AND CONFIRMED 50% OF THE ADDITION. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSAD, WITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING THE ADDITION OF RS.4,36,267/ - IN RESPECT OF UNSECURED LOAN I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 3 MADE BY THE AO TREATING THE SAME AS BOGUS ONE ON THE BASIS OF FALSE ENTRY IN BALANCE SHEET. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSAD, W ITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING THE DISALLOWANCES OF RS.19,632/ - IN RESPECT OF VARIOUS EXPENDITURES OUT OF DISALLOWANCES OF RS.25,632/ - WHICH WAS DISALLOWED BY THE AO AFTER UNEARTHING THE MODUS OPERANDI OF THE ASSESSEE OF INFLATING THE EXPENDITURES FOR WHICH THE CIT(A) ALSO AGREED UPON AND CONFIRMED RS.6,000/ - OF THE DISALLOWANCES. 6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSAD, WITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING THE ADDIT ION OF RS.6,85,624/ - IN RESPECT OF INVESTMENT IN ASSETS WHICH WAS MADE BY THE AO WHICH WAS NOT RECORDED IN THE BOOKS. 7) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSAD, WITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING THE ADDITION OF RS.15,00,163/ - IN RESPECT OF UNVERIFIABLE PURCHASES OF RS.54,079/ - AND UNVERIFIABLE CREDITORS OF RS.14,46,083/ - MADE BY THE AO ON THE BASIS OF NON - CONFIRMATION OF CREDITORS. 8) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSAD, WITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING THE ADDITION OF RS.2,92,616/ - IN RESPECT OF CREDITORS OF MORE THAN 3 YEARS OLD MADE BY THE AO TREATING THE SAME AS CESSATION OF LIABILITY. 9) ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSAD, WITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING THE ADDITION OF RS.1,32,784/ - IN RESPECT OF UNEXPLAINED MONEY MADE BY THE AO ON THE BASIS OF LOOSE PAPERS 1 TO 65 CONTAINED IN IMPOUND ED FILE BF/ 16 . 3. THE ASSSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1) THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS, IN CONFIRMING ADDITION MADE BY THE ASSESSING OFFICER OF RS.78,438/ - TOWARDS ALLEGED UNACCOUNTED STOCK IN THE B OOKS. I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 4 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT (APPEALS) HAS ERRED IN PARTLY CONFIRMING ADDITION OF RS.5,00,000/ - OUT OF TOTAL ADDITION OF RS. 10,00,000/ - MADE FOR ALLEGED SUPPRESSION OF SALES. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING ADDITION OF RS. 1,37,221/ - MADE BY THE AO BY INVOKING PROVISIONS OS SEC.68 ON ACCOUNT OF ALLEGED EXCESS CREDIT BALANCE IN LOAN ACCOU NT OF MR. URVESH M. SHAH. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT (APPEALS) HAS ERRED IN THE CONFIRMING THE ACTION OF THE AO IN REJECTING THE BOOK RESULTS BY INVOKING SEC. 145(3) OF THE INCOME TAX ACT , 1961. 4. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 3,77,730/ - WAS FILED ON 31 ST OCTOBER, 2007. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT BY ISSUING NOTICE U/S. 143(2) OF THE ACT ON 9 TH MAY, 2008. IN THIS CASE, SURVEY U /S. 133A OF THE ACT WAS CARRIED OUT ON 14 TH FEB, 2007. IT WAS STATED BY THE ASSESSING OFFICER THAT DU RING THE COURSE OF SURVEY, SEVERAL DEF ICIENCIES IN THE BOOKS OF ACCOUNTS AS WELL AS UNACCOUNTED STOCK, CASH AND PROPERTY WERE FO UND BY THE SURVEY PARTIES . STATEMENTS OF SMT. KOMALBEN U. SHAH PROPRIETOR AND SHRI URVESHBHAI M. SHAH HER HUSBAND WERE RECORDED DURI NG THE COURSE OF SURVEY ACTION . T HE ASSESSING OFFICER STATED THAT I N S PITE OF EXCESS CASH, EXCESS STOCK AND UNACCOUNTED INVESTMENT FOUND DURING TH E COURSE OF SURVEY , NO ADDITIONAL INCOME WAS DECLARED BY THE ASSESSEE. D URING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER VERIFIED THE IMPOUNDED BOOKS OF ACCOUNTS AND OTHER DETAILS FURNISHED BY THE ASSESSEE. AFTER VERIFICATION OF THE B OOKS OF ACCOUNTS AND DETAILS THE FOLLOWING DEFECTS HAVE BEEN FOUND BY THE ASSESSING OFFICER: - I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 5 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IMPOUNDED BOOKS OF ACCOUNTS AS WELL AS THOSE PRODUCED BY THE ASSESSEE AND DETAILS SUBMITTED WERE VERIFIED. AFTE R VERIFICATION OF THE BOOKS OF ACCOUNTS AND DETAILS, THE FOLLOWING DEFECTS IN THE BOOKS HAVE BEEN FOUND: - 1. THE LEDGER BF/6 AND BF/7 IMPOUND ED BOOKS ARE FOUND TO BE SAME. THERE ARE SAME ENTRIES IN BOTH THE LEDGERS. HENCE, ONE IS DUPLICATE AND ONE IS GENUIN E, BUT WHICH ONE IS GENUINE ONE IS NOT ASCERTAINED. 2. ON 03 - 04 - 2006, AN AMOUNT OF RS. 19,000/ - WAS DEPOSITED IN THE DENA BANK WHEREAS THE OPENING BALANCE WAS ONLY RS. 6,111/ - . THUS RS. 90,000/ - REPRESENTS THE UNACCOUNTED MONEY. 3. IN CASH BOOK, NO OPENING CASH BALANCE IS SHOWN AS BROUGHT FORWARD (B/F) AND NO DAY TO DAY CLOSING BALANCE OF CASH ARE BEING ABSTRACTED AS CARRIED FORWARD. THIS REVEALS THAT THE CASH BOOK FOR THE YEAR WAS OPEN THROUGHOUT THE YEAR FOR ADJUSTING ENTRIES INTO IT AT HER OWN SWEET WILL AS R EQUIRED. 4. BOOKS OF ACCOUNTS WERE WRITTEN UP TO 31 - 12 - 2006 ONLY AS ON DATE OF SURVEY I.E. 14 - 02 - 2007. 5. B/F9 IS A PURCHASE REGISTER OF CEMENT. IN THIS REGISTER, THE ENTRIES ARE NOT DATE WISE. IN THE MONTH OF APRIL, 2006, THE ENTRIES FOR 24 - 04 - 2006 AND 27 - 04 - 2006 WERE RECORDED BEFORE THAN TH E E N TRY DATED 02 - 04 - 2006 AND 03 - 04 - 2006 AND EVEN THE WRITING AND INK BALL POINT WERE DIFFERENT. THESE ARE NOTHING BUT ADJUSTMENT. 6. THERE ARE DIFFERENT INK AND DIFFERENT HAND WRITING IN EACH DAY S ENTRIES IN THE CASH BOOKS. THIS REVEALS THAT CASH BOOK WAS NOT PREPARED ON DAY TO DAY BASIS BUT ENTRIES WERE RECORDED IN IT S AS PER THE ASSESSEE S REQUIREMENT AND T HAT IS WHY IT WAS KEPT OPENED WHOLE YEAR. 7. IN BF/11, SALE BILL NO. 36 DATED 16 - 05 - 2006 TOTAL AMOUNT IS RS. 37,320/ - . BUT IN SALE REGISTER, IT WRITTEN AS RS. 16,320/ - . AT THE SAME TIME SALE BILL NO. 34 REPRESENTING TOTAL AMOUNT OF RS. 17,280/ - . BUT IN SALE REGISTER, IT IS WRITTEN AS RS. 6,720/ - . 8. SALE BILLS ARE PREPARED FROM THE APPROVAL MEMO WHEREIN THE ORDERS ARE RECOR DED, BUT AFTER PREPARING T HE SALE BILL FROM APPROVAL MEMO, THE APPROVAL ARE DESTROYED SINCE THE APPROVAL MEMOS ARE PART OF BOOKS OF ACCOUNTS AS THE SALE I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 6 BILL ARE PREPARED FROM THEM. THEY MUST BE PRESERVED AS A PART OF BOOKS. 9. THE ENTRIES REGARDING PURCHASE OF FURNITURE, SAMROLI LAND AND MACHINERY DURING THE YEAR WERE NOT RECORDED IN THE BOOKS. THE SAID CONSTRUCTION WORTH RS. 85,581/ - WAS ALSO NOT IN THE BOOKS. 10. EXCESS STOCK AND CASH WERE FOUND TO THE TUNE OF RS. 78,438/ - AND RS. 71,150/ - RESPECTIVELY. 11. M/S. YASH MARBLE & SANITARY S CREDIT BALANCE IS RS. 4,70,389/ - IN ASSESSEE S BOOKS BUT IN YASH MARBLE AND SANITARY S ACCOUNT, IT IS SHOWN AT RS. 3,33,165/ - ON ASSET SIDE. 12. THERE IS A LOAN OF RS. 4,36,267/ - SHOWN IN THE ASSESSEE S BOOKS FROM URVESHBHAI M. SHAH ( PROP. YASH MARBLE & SANITARY) BUT IN URVESH SHAH S ACCOUNT, IT HAS NOT BEEN SHOWN. HENCE, THIS REVEALS THAT HUSBAND AND WIFE ACCOUNTS ARE NOT MATCHING TO THEIR RESPECTIVE ENTRY IN EACH OTHER S BOOKS. 13. THE ASSESSEE DOES NOT MAINTAIN QUANTITATIVE DETAILS. T HERE IS NO BASE OF VALUATION OF CLOSING STOCK SHOWN OF RS. 18,96,092/ - AFTER OBSERVING THE ABOVE STATED DEFECTS THE ASSESSING OFFICER HAS ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE PROPOSING CERTAIN ADDITIONS AND DISALLOWANCE. THEREAFTER, CONSIDERING TH E EXPLANATION OF THE ASSESSEE AND THE DEFICIENCIES FOUND IN THE BOOKS OF ACCOUNTS THE ASSESSING OFFICER HAS REJECTED THE BOOKS RESULT U/S 145(3) OF THE ACT . T HE FOLLOWING DISALLOWANCES AND ADDITIONS TO THE TOTAL INCOME OF THE ASSESSEE WERE MADE BY THE AS SESSING OFFICER : - 12. CONSIDERING THE ABOVE DEFICIENCIES / DEFECTS, I AM REJECTING THE BOOKS RESULTS U/S 145(3) OF THE ACT AND SUBJECT TO THE ABOVE REMARKS AND FROM THE DATA MADE AVAILABLE, TOTAL INCOME OF THE ASSESSEE COMPANY IS DETERMINED AS UNDER : - T OTAL INCOME AS RETURNED BY THE ASSESSEE RS. 3,77,730 / - ADD : ADDITIONS / DISALLOWANCES AS DISCUSSED ABOVE (1) ON A/C OF EXCESS STOCK RS. 78,438 (2) ON A/C OF UNEXPLAINED MONEY RS. 44,700 I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 7 (3) ON A/C OF UNACCOUNTED MONEY RS. 90,000 (4) ON A/C OF SUPPRESSED SALE RS. 10,00,000 (5) ON A'/C OF EXCESS CREDIT BALANCE RS. 1,37,221 (6) ON A/C OF UNSECURED LOAN RS. 4,36,267 (7) ON A/C OF VARIOUS EXPENDITURE RS. 25,632 @ 20% OF RS.128161 (8) ON A/C OF INVESTMENT IN ASSETS RS. 6,85,624 (9) ON A/C OF UNVERIFIABLE PURCHASE RS. 54,079 & CREDITORS - PURCHASES : RS.270399 @ 20% RS. 14,46,083 UNVERIFIABLE CREDITORS (10) ON A/C OF CREDITOR S MORE THAN 3 YEARS RS. 2,92,616 (11) ON A/C OF UNEXPLAINED MONEY RS. 1,32,784 RS. 44,23,444 --------------------- TOTAL INCOME RS.48,01,174 I.E. RS.48,01,170 THE ASSESSING OFFICER HAS COMPLETED THE SCRUTINY ASSESSMENT 14 3(3) OF THE ACT ON 30 TH DECEMBER, 2009 AND DETERMIN ED THE TOTAL INCOME OF THE ASSESSEE AT RS. 48 , 01 , 170/ - . ITA NO. 1104 /AHD/2011 (REVENUE S APPEAL) THE ISSUES RAISED IN THE GROUNDS OF APPEAL ARE DISCUSSED AS UNDER: - GROUND NO. 1 ( UNEXPLAINED MONEY O F RS. 44 , 700/ - ) 5. DURING THE COURSE OF SURVEY PROCEEDINGS CARRIED OUT ON 14.02.2007 , EXCESS CASH OF RS. 44 , 700/ - WAS FOUND WHICH WAS NOT EXPLAINED BY THE ASSESSEE DUE TO INCOMPLETE BOOKS OF ACCOUNTS . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE EXPLAINED THAT CASH BALANCE ON THAT DAY WAS RS.71,150 OUT OF WHICH RS.44,700 WAS KEPT AT OFFICE AND BALANCE OF RS.26,450 WAS TAKEN I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 8 HOME FOR SAFETY PURPOSES. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESEE AND TREATED THE CASH AM OUNT AS UNEXPLAINED. HOWEVER, LD. CIT(A) DELETED THE SAID AMOUNT BY OBSERVING AS UNDER: - DECISION : - I HAVE CONSIDERED THE ARGUMENTS OF THE AR OF THE APPELLANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. I FIND FORCE IN THE AGUMENTS OF THE APPELLANT THAT THE AO HAS ERRED IN ARRIVING AT A CONCLUSION THAT CASH BALANCE AVAILABLE AS PER CASH BOOK, ON THE DATE OF SURVEY WAS NIL AS AGAINST RS.44,700/ - FOUND FROM THE PREMISES. SINCE THE AO HAS NOT PIN - POINTED ANY SPECIFIC DEFECT IN THE CASH BO OK PRODUCED BEFORE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS, L AM INCLINED TO AGREE WITH THE VIEW THAT CASH BALANCE POSITION REFLECTED IN THE CASH BOOK ON THE DATE OF SURVEY IS FINAL. EVEN IF THE CASH BALANCE POSITION AS PER CASH BOOK IS CONSIDERED TO BE FINAL, THEN THE CASH FOUND FROM THE PREMISES WAS SHORT BY RS.26,450/ - AND NO ADDITION OF CASH FOUND SHORT CAN BE MADE. I FIND NO REASON TO DISBELIEVE THE CASH BALANCE POSITION AS PER CASH BOOK AS IN THE ASSESSMENT ORDER, THE AO HAS NOT POINTED OUT AN Y DEFECTS IN THE CASH BOOK MAINTAINED BY THE APPELLANT. THE ADDITION OF RS.44,700/ - IS THEREFORE, DELETED. THE APPELLANT'S GROUND NO.2 IS ALLOWED. 6. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE CONTENDED THA T THE EXCESS CASH OF RS. 44 , 700/ - WAS FOUND IN EXCESS FOR WHICH NO EXPLANATION WAS OFFERED DURING THE SURVEY PROCEEDINGS CARRIED OUT IN THE CASE OF ASSESSEE ON 14 TH FEBRUARY, 2007. SHE FURTHER CONTENDED THAT EXPLANATION GIVEN BY THE ASSESSEE WAS AFTERT HOUGHT AND THE CASH FOUND WAS RIGHTLY TREATED AS UNEXPLAINED INCOME BY THE ASSESSING OFFICER U/S. 69 OF THE ACT. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE FURNISHED PAPER BOOK CONTAINING INFORMATION PERTAIN IN G TO SUBMISSION MADE BEFORE THE ASSESS ING OFFICER AND CIT(A), COPY OF TAX AUDIT REPORT, EXTRACT OF I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 9 RELEVANT CASH BOOK BREAK - UP OF INCOME DISCLOSED DURING SURVEY, SUMMARY OF SALE REGISTER, AND PURCHASE REGISTER, COPY OF RELEVANT LEDGER. HE ALSO PLACED RELIANCE UPON THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE OBSERVED THAT THE ENTRI ES IN THE CASH BOOK WAS INCOMPLETE ON THE DATE OF SURVEY AND THAT WOULD NOT INDICATE THAT THERE WAS NO CASH AVAILABLE ON THAT PARTICULAR DAY IN THE BOOKS. WE FIND THAT ASSESSING OFFICER HAS NOT DETECTED ANY DEFECT IN THE CASH BOOK PRODUCED BEFORE HIM FOR VERIFICATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH WAS FOUND TO BE INCOMPLETE AT THE TIME OF SURVE Y ACTION. THE ASSESSING OFFICER FAILED TO SUPPORT HIS FINDINGS WITH CONCRETE MATERIAL TO SUBSTANTIATE THAT CASH FOUND AS STATED ABOVE WAS UNEXPLAINED, THEREFORE WE DISINCLINED TO INTERFERE IN THE FINDINGS OF THE LD. CIT(A). GROUND NO. 2 ( UNACCOUNTED MONEY OF RS. 90,000/ - ) 8. THE ASSESSING OFFICER HAD MADE ADDITION OF RS. 90,000/ - AS UNACCOUNTED MONEY ON THE BASIS OF IMPOUNDED CASH BOOK D URING THE COURSE OF SURVEY . T HE ASSESSING OFFICER STATED THAT ON 02 - 04 - 2006 OPENING CASH BALANCE WAS RS. 6 , 11 1/ - AND THERE WAS NO CASH TRANSACTION SO ON 3 RD APRIL, 2006 . T HE CASH BALANCE SHOULD HAVE BEEN RS. 611 1/ - BUT ON 3 RD APRIL, 2003 IT WAS FOUND THAT ASSESSEE HAD DEPOS IT ED RS. 90,000/ - IN DENA BANK. HOWEVER, T HE ASSESSEE ADMITTED OF THIS DEPOSIT INCLUD ING IN THE ADDITIONAL INCOME OF I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 10 RS.1,50,000/ DECLARED AND SHOW N IN THE CASH BOOK STATING CREDIT PERTAIN TO THE PERIOD 3/4/2006 . THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLA NATION OF THE ASSESSEE AND ADDED THE SAME AS UNEXPLAINED INCOME OF THE ASSESSEE. THE LD. CIT(A) HAD DELETED THE ADDITION MADE BY THE ASSESSI NG OFFICER BY OBSERVING AS UNDER: - 7.3 DECISION : - I HAVE CONSIDERED THE ARGUMENTS OF THE AR OF THE APPELLANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. THERE IS NO PLAUSIBLE REASON TO DISAGREE WITH THE CONTENTION OF THE APPELLANT AS IT IS APPARENT THAT THE AO HAS IGNORED THE ENTRIES IN THE CASH BOOK PRODUCED BEFORE HIM AND HE PLACED HIS SOLE RELIANCE ON THE ROUGH AND INCOMPLETE CASH BOOK IMPOUNDED ON THE DATE OF SURVEY. EVEN ON PAGE NUMBER 19 OF THE ASSESSMENT ORDER, THE AO HIMSELF HAS MENTIONED THAT THE CASH BOOK IMPOUNDED WAS INCOMPLETE AS THE SAME WAS WRITTEN UP TO 31.12.2006 AND THEREFORE, THE AO HIMSELF WAS AWARE OF THE FACT THAT NO FAIR CONCLUSION CAN BE DERIVED BASED ON INCOMPLETE RECORDS. I ALSO FIND MERIT IN THE CONTENTION OF TH E AR THAT NO SPECIFIC DEFECT IN THE CASH BOOK MAINTAINED BY THE APPELLANT HAS BEEN POINTED OUT BY THE AO A ND THEREFORE, I AM INCLINED TO DELETE THE ADDITION OF RS.90,000 / - MADE BY THE AO. THE APPELLANT'S GROUND NO.3 IS ALLOWED. 9. DURING THE COURSE OF AP PELLATE PROCEEDINGS BEFORE US, THE LEARNED COUNSEL SUBMITTED PAPER BOOK CONTAINING INFORMATION, SUBMISSION MADE BEFORE THE ASSESSING OFFICER AND CIT(A), COPY OF TAX AUDIT REPORT, EXTRACT OF RELEVANT CASH BOOK BREAK - UP OF INCOME DISCLOSED DURING SURVEY, SUM MARY OF SALE REGISTER, AND PURCHASE REGISTER, COPY OF RELEVANT LEDGER AND HE ALSO CONTENDED THAT ASSESSING OFFICER HAS IGNORED THE CASH BOOK PRODUCED BEFORE HIM WHICH REFLECT S THAT THERE WAS AN ADEQUATE CASH BALANCE AS PER CASH BOOK. ON THE OTHER HAND, L D. DR RELIED ON THE ORDER OF ASSESSING OFFICER AND CONTENDED THAT ON THE DAY WHEN TH E ASSESSEE HAD DEPOSITED R S. 90,000/ - IN THE DENA BANK , THE CASH BALANCE IN THE I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 11 CASH BOOK WAS ONLY 6 , 111/ - AND HOW THE ASSESSEE HAD DEPOSITED RS. 90,000/ - WITHOUT HAVING S UFFICIENT BALANCE IN THE CASH BOOK. 10. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE NOTICED THAT ASSESSEE STATED THAT THIS CASH DEPOSIT WAS MADE IN THE BANK A/C OUT OF THE ADDITIONAL INCOME OF RS.1,50,000/ DECLARED WHICH HE H AD SHOWN IN THE CASH BOOK. IN THIS CONNECTION WE FIND THAT EXCESS CASH OF RS. 44,700/ - WAS FOUND DURING THE COURSE OF SURVEY WHICH WAS NOT EXPLAINED BY THE ASSESSEE AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE EXPLAINED THAT CASH BALANCE ON THAT DAY WAS RS.71,150 OUT OF WHICH RS.44,700 WAS KEPT AT OFFICE AND BALANCE OF RS.26,450 WAS TAKEN HOME FOR SAFETY PURPOSES. THESE FACTS INDICATE THAT THE DATE OF DEPOSIT OF CASH OF RS.90000/ - IN THE DENA BANK WAS 03 - 04 - 2006 WHEREAS THE SURVEY WAS COND UCTED IN THE CASE OF THE ASSESSEE ON 14 - 02 - 2007 AND THE CASH WAS DEPOSITED IN TO THE BANK ALMOST ONE YEAR BEFORE THE DATE OF SURVEY. WE CONSIDERED THAT LOOKING TO THE ABOVE FACTS THE A SSESSEE FAILED TO PROVE THE GENUIN EN ES S O F THIS CASH TRANSACTION WITH CONCRETE EVIDENCE S , THERE FORE WE SUSTAIN THIS ADDITION MADE BY THE ASSESSING OFFICER. GROUND NO. 3 (SUPPRESSED SALE OF RS. 10 LACS) AND GROUND NO. 2 OF THE ASSESSEE. 11. DURING THE COURSE OF SURVEY A FEW COPIES OF APPROVAL MEMO SALES LIST PAPER WERE FOUND WHEREIN SALES DETAILS LIKE NAME OF I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 12 CUSTOMER, DESCRIPTION OF GOODS SOLD, QUANTITY WERE WRITTEN AND THE SALE BILLS WERE PREPARED FROM APPROVAL MEMO/NOTES. A FTER PREPARATION OF THE SALE BILLS, THE APPROVAL MEMO WERE USED TO BE DESTROYED. THE ASSESSING OFFICER STATED THAT THESE WERE COMPARED WITH BOOKS AND IT WAS FOUND THAT SALES VALUE WERE NOT MENTIONED IN THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER OBSERVED THAT THESE FACTS ESTABLISHED THAT THE ASSESSEE WAS FOUND TO BE INDULGED IN THE SUPPRESSION OF SALES. THE ASSESSING OFFI CER ALSO POINTED OUT THAT THE SURVEY PARTY COULD NOT COMPARE THE SALE BILLS PRIOR TO 31 - 12 - 2006 WITH THE APPROVAL MEMO BECAUSE THE APPROVAL MEMO WERE DESTROYED BY THE A SSESSEE. THE ASSESSING OFFICER ALSO STATED THAT THE GROSS PROFIT DECLINED ABNORMALLY AND THE VALUATION OF CLOSING STOCK WAS NOT MADE AS PER THE METHOD OF VALUATION. HE ALSO POINTED OUT THAT THE CASH BOOK WAS NOT WRITTEN ON DAY TO DAY BASIS AND IT WAS WRITTEN AS PER NEED AND SWEET WILL OF THE ASSESSEE. THEREFORE , THE ASSESSING OFFICER HA D MADE ADDITION OF RS. 10 LACS ON ACCOUNT OF SUPPRESSED SALE. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAD DELETED THE ADDITION TO THE EXTENT OF RS. 5 LACS AFTER OBSERVING AS UN DER : - I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF THE AR OF THE APPELLANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. THE AO CONTENDED THAT THE SURVEY ACTION UNEARTHED THAT THE SALE BILLS ARE PREPARED FROM THE APPROVAL MEMO/NOTES. THERE AFTER, THOSE APPROVAL MEMOS ARE DESTROYED AS ADMITTED BY THE APPELLANT. THE AO OBSERVED THAT DURING THE SURVEY FEW COPIES OF APPROVAL MEMO AS WELL AS LOOSE PAPERS WERE FOUND WHEREIN NAME OF THE CUSTOMER, DESCRIPTION OF THE GOODS SOLD, QUANTITY OF GOODS ETC . WERE WRITTEN. FURTHER THE SURVEY PARTY ALSO NOTICED CERTAIN DISCREPANCIES IN THE SETS OF SALE MEMO FROM WHICH THE SALE IS RECORDED IN THE BOOKS OF A/C. FURTHER, THEY GAVE A FINDING ON THE BASIS OF MATERIAL I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 13 EVIDENCES COLLECTED DURING THE SURVEY WAS THAT T HE APPELLANT HAS BEEN RESORTING TO SALES SUPPRESSION. THIS FINDING HAS MERITS BECAUSE THE TRADE INVOLVED CASH TRANSACTIONS AND HAS SCOPE FOR SAVING SALES TAX AS WELL. THE SURVEY PARTY COULD NOT VERIFY THE TRUTHFULNESS OF THE ENTRY MADE IN THE BOOKS OF A/C. VIS - A - VIS IN THE SALES MEMO BECAUSE THE A/C UPTO 31.12.2006 WAS INCOMPLETE AND THE SALE MEMO WERE NOT AVAILABLE AT THAT TIME. THE AO HAD ALSO NOTICED THAT THERE WAS A DOWN FALL IN GP, THEREFORE, HE CONCLUDED THAT THE ACTUAL SALES WERE NOT RECORDED IN THE BOOKS BUT RECORDED AT THE SWEET WILL OF THE APPELLANT. THE ID. AR CONTENDED THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AUDITED AS PER PROVISIONS OF SEC.44AB AND DULY SUPPORTED BY BILLS AND VOUCHERS AND NO SPECIFIC DEFECT IN THE BOOKS HAVE BEEN PIN - POI NTED BY THE AO AS WELL AS THE AUDITORS. THE ID. AR ALSO RELIED ON CERTAIN JUDICIAL PRECEDENCE TO SUPPORT HIS ARGUMENT. I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE ID. AR AND THE FINDING OF THE AO. THE DISCREPANCY NOTICED BY THE SURVEY PARTY IS BASED ON FACTS AND THE AO MADE ADDITIONS ON SUCH FACTS CANNOT BE BRUSH ASIDE. THE APPELLANT FAILED TO DEMONSTRATE BEFORE THE AO THAT THE DETAILS IN SALES MEMO WERE TRULY AND CORRECTLY ENTERED IN THE REGULAR BOOKS OF A/C. THUS. I AM OF THE VIEW THAT THERE MIGHT HAVE BEEN SALES SUPPRESSIONS PARTICULARLY IN THIS TYPE OF TRADE SUCH THINGS ARE COMMON. HOWEVER, THE ESTIMATE HAS TO BE FAIR AND REASONABLE. THUS, I SCALE DOWN THE ADDITION TO 5 LAKHS. ACCORDINGLY THE AO IS DIRECTED TO ADOPT THE SUPPRESSED SALE AT RS. 5 LA KHS. THE APPELLANT'S GROUND NO.4 IS PARTLY ALLOWED. 12. DURING THE APPELLATE PROCEEDINGS BEFORE US, THE LD. DR CONTENDED THAT DURING THE COURSE OF SURVEY IT WAS UNEARTHED BY THE SURVEY PARTY THAT THE SALE BILLS WERE PREPARED FROM THE APPROVAL MEMO /NOTES. THE APPROVAL MEMO CO NTAINS COMPLETE DETAILS OF SALES TO THE CUSTOMERS AND AFTER PREPARATION OF THE SALE BILLS THE APPROVAL MEMO S W ERE DESTROYED. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE CONTENDED THAT ASSESSEE HAS ACCOUNTED S ALE IN RESPECT OF EAC H APPROVAL MEMO FOUND FROM THE PREMISES DURING THE COURSE OF SURVEY AND ASSESSING OFFICER HAS NO T FOUND OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED AND THE ADDITION OF RS. I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 14 10 LACS WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF PRESUMPTI ON AND CONTENDED THAT THIS ALLEGED UNACCOUNTED SALE, ADDITION DESERVES TO BE DELETED. 13. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE MATERIAL ON RECORD. WE HAVE PERUSED THE FINDINGS OF THE ASSESSING OFFICER STAT ING THAT DURING THE SURVEY A FEW C OPIES OF APPROVAL MEMO AS WELL AS LOOSE PAPERS WERE FOUND WHEREIN NAME OF THE CUSTOMER, DESCRIPTION OF THE GOODS SOLD, QUANTITY OF GOODS ETC. WERE WRITTEN AND THE SALE BILLS WERE PREPARED FROM THE APPROVAL MEMO/NOTES AND T HEREAFTER, THOSE APPROVAL MEMOS W ERE DESTROYED BY THE A SSESSEE. THE ASSESSING OFFICER HAD ALSO NOTICED THAT THERE WAS A DOWN FALL IN GP, THEREFORE, HE CONCLUDED THAT THE ACTUAL SALES WERE NOT RECORDED IN THE BOOKS BUT RECORDED AT THE SWEET WILL OF THE A SSESSEE . THE LD.CIT(A) ON THE GROUN D OF FAIR AND REASONABLE NESS SCALE D DOWN THE ADDITION TO 5 LAKHS. WE FURTHER NOTICED THAT T HE TOTAL TURNOVER IN THE CASE OF THE ASSESSEE PERTAINING TO THE YEAR UNDER CONSIDERATION AND IN THE PRECEDING YEARS WAS GIVEN BELOW AS MENTIONED IN PARAGRAPH FOUR O F THE ASSESSMENT ORDER . PARTICUALRS A.Y. TURNOVER GROSS PROFIT G.P. RATIO MARBLE GRANITE 2007 - 08 1953027 276881 14.17 2006 - 07 1236569 269045 21.75 CEMENT 2007 - 08 1781312 33603 1. 88 2006 - 07 2180316 42393 1.94 I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 15 W E FIND THAT T HE TOTAL TURNOVER FOR THE ASSESSMENT YEAR 2007 08 OF BOTH THE ITEM (MARBLE GRANITE AND CEMENT) WAS RS.3 7 , 34 , 339 AND IN THE PRECEDING YEAR THE TOTAL TURNOVER OF BOTH THE ITEM WAS RS.3 4 , 16 , 885. WE HAVE SEEN THAT COMPARED TO PRECEDING YEARS THERE WAS A SH ARP DECLINE IN THE GROSS PROFIT SHOWN BY THE ASSESSEE IN THE CASE OF SALE MADE FROM MARBLE GRANITE . IT IN THE YEAR UNDER CONSIDERATION THE GROSS PROFIT WAS 1 4 .17% AS COMPARED TO GROSS PROFIT OF 2 1.75% IN THE PRECEDING ASSESSMENT YEAR . HOWEVER IN THE CASE OF SALE OF CEMENT WE HAVE SEEN THAT THE GROSS PROFIT IN THE YEA R UNDER CONSIDERATION WAS 1.88% AS COMPARED 1.94% SHOWN IN THE PRECEDING ASSESSMENT YEARS. WE FIND THAT ANY REASONABLE BASIS HAS NOT BEEN PROVIDED BY THE ASSESSING OFFICER FOR ESTIMATING THE S UPPRESSED SALE TO THE AMOUNT OF RS.10 LAKH AND FURTHER ITS SCALE DOWN TO RS.5 LAKH BY THE LD. CIT(A ) . WE HAVE CONSIDE RE D ALL THE FACTS THAT THE ADDITION WAS MADE ON THE GROUND OF SUPPRESSED SALE, AND NO SEPARATE ADDITION WAS MADE ON ACCOUNT OF LOW GROSS PR OFIT . IN THIS CONNECTION WE NOTICED THAT THE SURVEY PARTY HAS NOTICED CERTAIN DISCREPANCIES IN THE SETS OF SALES MEMO FROM WHICH THE SALE WAS RECORDED IN THE BOOKS OF ACCOUNT WHICH POINTED OUT THAT ASSESSEE WAS RESORTED TO SUPPRESSION OF SALES AND THE ASSE SSING OFFICER ESTIMATED THE SUPPRESSED SALE TO THE AMO UNT OF RS.10 LAKH WHICH WAS FURTHER SCALE DOWN TO RS.5 LAKH BY THE LD.CIT(A) . HOWEVER, WE CONSIDERED THAT THIS ADDITION WAS MADE ON ESTIMATED BASIS WITHOUT SPECIFICALLY DETERMINING THE BASIS OF ES TIMATION, THEREFORE, AS PER OUR CONSIDERED OPINION IT WOULD BE I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 16 APPROPRIATE AND REASONABLE TO RESTRICT THE ADDITION TO THE EXTENT OF RS.3 LAKH . GROUND NO. 4 (UNSECURED LOAN OF RS. 4 , 36 , 2 67 / - ) 14. THE ASSESSING OFFICER HAS MADE ADDITION U/S. 68 OF THE ACT STATING THAT THERE WAS A CASH CREDIT OF RS. 4 , 36 ,26 7/ - RECEIVED FROM THE HUSBAND OF THE ASSESSEE NAMELY SHRI URVESHBHAI M. SHAH . HOWEVER, THE SAME WAS NOT REFLECTED IN THE BALANCE SHEET OF THE LENDER. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD.CIT(A).T HE LD. CIT(A) DELETED THE SAME STATING THAT THERE WAS NO CREDIT ENTRY IN THE BOOKS OF THE CURRENT YEAR UNDER REVIEW AS THE BORROWING WAS NOT MADE IN THE CURRENT YEAR. THE FINDING OF THE CIT(A) IS REPROD UCED AS UNDER: - DECISION : - I HAVE CONSIDERED THE CONTENTION OF THE APPELLANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. I FIND THAT THE ADDITION OF RS. 1,37,221/ - MADE BY THE AO IS SUSTAINABLE AS THE UNEXPLAINED AMOUNT OR DIFFERENCE IN THE CREDITORS LEDGER IS TAXABLE AS UNEXPLAINED CASH CREDIT. I THEREFORE CONFIRM THE ADDITION OF RS. 1,37,221/ - MADE BY THE AO. HOWEVER THERE IS A SUBSTANCE IN THE 'ARGUMENTS OF THE APPELLANT THAT IN THE UNSECURED LOAN ACCOUNT OF URVESH M. SHAH, THERE IS N O FRESH OR NEW CREDIT AND THE ENTIRE BALANCE OF RS.4,36,267/ - IS OPENING BALANCE OF THE UNSECURED LOAN BORROWED IN PRECEDING YEARS. THE AO IS NOT JUSTIFIED IN MAKING ADDITION OF RS.4,36,267/ - BY INVOKING SEC. 68 OF THE ACT AS THERE IS NO CREDIT ENTRY IN TH E BOOKS OF THE CURRENT - YEAR UNDER REVIEW AS THE BORROWING IS NOT FRESH BORROWING OF THE CURRENT YEAR. THE LAW ON THE SUBJECT IS SETTLED BY THE DECISION IN CASE OF RAGHUBAR D JEEVANRAM V/S. ITO REPORTED IN 45 TTJ 463 (DEL). I THEREFORE DELETE THE ADDITION O F RS . 4,36,267/ - MADE BY THE AO. THE APPELLANT'S GROUND NO.5 IS PARTLY ALLOWED. I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 17 15. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STATED THAT LD. CIT(A) HAS DELETED THE ADDITION WITHOUT ANY PROPER REASONING BY JUST STATING THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 4 , 36 , 2 67 / - . ON THE OTHER HAND, LD . AUTHORIZED REPRESENTATIVE SUBMITTED PAPER BOOK CONTAINING VARIOUS DETAILS IN SUPPORT OF DECISION OF THE LD. CIT(A). 16. WE HAVE HEARD BOTH THE S IDES AND GONE THROUGH THE MATERIAL ON RECORD AND WE FIND THAT THERE WAS NO FRESH ENTRY OR NEW CREDIT AND ENTIRE BALANCE OF 4 ,3 6 ,267/ - WAS AN OUTSTANDING BALANCE OF THE UNSECURED LOAN BORROWED IN THE PRECEDING YEARS BY THE ASSESSEE. I N THE UNSECURED LOAN ACCOUNT OF URVESH M. SHAH, THERE WAS NO FRESH OR NEW CREDIT AND THE ENTIRE BALANCE OF RS.4,36,267/ - WAS OPENING BALANCE OF THE UNSECURED LOAN BORROWED IN PRECEDING YEARS. IN VIEW OF ABOVE FACTS AND FINDINGS, WE CONSIDERED THAT THE ASSESSING OFFICER WAS N OT JUSTIFIED IN MAKING ADDITION OF RS.4,36,267/ - BY INVOKING SEC. 68 OF THE ACT AS THERE WAS NO CREDIT ENTRY IN THE BOOKS OF THE CURR ENT - YEAR AND THE BORROWING WAS NOT FRESH BORROWING OF THE CURRENT YEAR . T HEREFO RE, WE JUSTIFY THE DECISION OF T HE LD. CIT(A) THAT ONLY THE ADDITION OF RS. 1,37,221/ - MADE BY THE AO WAS SUSTAINABLE AS THE UNEXPLAINED AMOUNT OR DIFFERENCE IN THE CREDITORS LEDGER WAS TAXABLE AS UNEXPLAINED CASH CREDIT . GROUND NO. 5 (VARIOUS EXPENDITURES @ 20% OF RS. 1 , 28 , 161/ - , RS. 25 , 632 / - ). I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 18 17. DURING THE COURSE OF APPELLATE PROCEEDINGS, OUT OF VARIOUS EXPENDITURE OF RS. 1 , 28 , 161/ - , AN AMOUNT OF RS. 25,632/ - ) WAS DISALLOWED BE ING 20% ON ACCOUNT OF THE SAME W AS INCURRED IN CAS H ON THE BASIS OF SELF PREPARED VOU CHERS . THE LD. CIT(A) DELETED THE ADD ITION TO THE EXTENT OF RS. 19,36 2/ - BY OBSERVING AS UNDER: - 10.3. CONCLUSION : - I HAVE CONSIDERED THE ARGUMENTS OF THE AR OF THE APPELLANT AS WELL' AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. I AM OF THE OPINION THAT PARTIAL DIS ALLOWANCE MADE BY THE AO CAN NOT BE SUSTAINED. HOWEVER I FIND SUBSTANCE IN THE OBSERVATION THAT THE OVERHEAD EXPENDITURE INCURRED IN CASH AND THE SUPPORTINGS ARE ALL SELF - MADE VOUCHERS AND THEREFORE THERE IS NO COMPLETE CHECK ON SUCH EXPENSES. LOOKING TO THESE GLARING FACTS, I AM OF THE CONSIDERED OPINION THAT LUMP - SUM DISALLOWANCE OF RS.6,OOO/ - WOULD MEET THE END OF JUSTICE. THE APPELLANT GETS RELIEF OF RS.19,3627 - . THE APPELLANT'S GROUND NO.6 IS PARTLY ALLOWED. 18. DURING THE COURSE OF APPELLATE PROCEE DINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE CONTENDED THAT ON VERIFICATION OF BOOKS AND OTHER DETAILS IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE CLAIMED VARIOUS EXPENDITURES IN THE PROFIT AND LOSS A/C SIMILARLY TO THE EXPENDITURE CLAIME D IN THE CASE OF URVESHBHAI M. SHAH WHO WAS ALSO RUNNING ANOTHER CONCERN. ON THE OTHER HAND THE LD. COUNSEL SUPPORTED THE ORDER OF THE LD. CIT(A). 19. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSING OFFIC ER HA D MADE ESTIMATED ADDITION OF RS.25,632 BEING 20% OF THE EXPENDITURE OF RS.1,28,161 STATING THAT PAYMENTS WERE MADE IN CASH AND THE GENUINENESS OF THE SAME WAS NOT PROVED .T HE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE A MOUNT OF RS. 6 , 000/ - . AFTER CONSIDERING THE FACTS THAT ALL THE I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 19 VOUCHERS OF EXPENSES WERE SELF - PREPARED AND PAYMENTS THEREOF WERE MADE IN CASH THEREOF THE GENUINENESS OF THE SAME WAS NOT PROVED , THEREFORE, WE CONSIDER IT APPROPRIATE TO MAKE THE DISALLOWANCE AT 10% TO THE AMOUNT OF RS. 1 2,816 / - . . GROUND NO. 6 (INVESTMENTS IN ASSETS OF RS. 6,85,624/) 20. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS STATED THAT UNACCOUNTED INVESTMENT OF RS. 1 , 15 , 043/ - IN MACHINERY AND RS. 4,50 ,000/ - IN SIMROLI LA ND WERE TREATED AS UNACCOUNTED INVESTMENT U/S. 69 OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE LD. CIT(A) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: - 11.3. DECISION : - 1 HAVE CONSIDERED THE ARGUMENTS OF THE AR OF THE APPELLANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. THE FACT REMAINS THAT THE AO HIMSELF HAS OBSERVED IN LAST FOUR LINES OF THE RELEVANT PARA ON PAGE NO.27 OF THE ASSESSMENT ORDER THAT SINCE THE APPELLANT HAS COVERED IN HER BOOKS I NVESTMENT IN FURNI TURE RS.40,000 / - AN D SHED CONSTRUCTION OF RS.80,581 / - , THE SAME IS NOT INCLUDED AGAIN WHILE MAKING THE CAPTIONED ADDITION UNDER THE HEAD UNACCOUNTED INVESTMENT IN ASSETS BUT INADVERTENTLY WHILE RE - COMPUTING THE INCOME IN THE BODY OF THE ASSESSMENT ORDER, T HE AO H AS MADE ADDITION OF RS.6,85,624/ - WHICH INCLUDED ADDITI ON ON ACCOUNT OF FURNITURE RS.40,000 / - AN D SHED CONSTRUCTION OF RS.8O,581 / - . THUS, THE AO IS DIRECTED TO DELETE THE ADDITION O N ACCOUNT OF FURNITURE RS.40,000 / - AND SHED CONSTRUCTION OF RS.80,58 1 / - . WITH REGARDS TO THE INVESTMENT MADE IN MACHINERY AND LAND AT SAMROLI, THE APPELLANT STATED THAT THE MACHINERY WAS BOUGHT THROUGH TERM LOAN OBTAINED FROM DEENA BANK WHICH IN MY VIEW THE SOURCE IS EXPLAINED. SIMILARLY, THE APPELLANT HAD 50% SHARE IN THE LAND AT SAMROLI AND THE INVESTMENT HAS BEEN REFLECTED IN THE BALANCE SHEET OF THE APPELLANT. IN THIS CIRCUMSTANCES, MAKING ADDITIONS IN THE HAND OF THE APPELLANT AS UNDISCLOSED HOLD NO WATER. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITION MADE IN TH IS I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 20 GROUND OF APPEAL. ACCORDINGLY, THIS GROUND IS ALLOWED IN FAVOUR OF THE APPELLANT. 21. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE STATED THAT THE ADDITION WAS MADE BECAUSE DURING THE SURVEY IT WAS OBSERVED THAT THE SAID INVESTMENT S WERE NOT RECORDED IN THE BOOKS OF THE ASSESSEE. HE FURTHER STATED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF FUND FROM WHERE FUND WAS INVESTED IN T H E PROPERTIES AS STATED ABOVE . LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF THE LD. CIT(A) AND ALSO STATED THAT THE ADDITION WAS MADE WITHOUT APPLICATION OF MIND. HE STATED THAT THE MACHINERY HAS BEEN PURCHASED OUT OF SOURCES OF EXPENDITURE BEING BORROWED IN THE FORM OF PREM IUM LOAN FROM DENA BANK AND TH E INVESTMENT IN PLOT AT SIMROLI WAS MADE DURING THE PREVIOUS YEAR UNDER REFERENCE WAS ALSO EXPLAINED IN THE BOOKS OF ACCOUNTS. HE FURTHER STATED THAT ASSESSING OFFICER HAS NOT CONSIDERED THAT AS PER THE SALE DEED, THE ASSESS EE HAS ACQUIRED ONLY 50% COST IN THE PLOT OF LAND AND THE COST OF 50% INTEREST IN THE PLOT AT RS. 2 , 46 , 250/ - WAS REFLECTED IN THE BOOKS OF ACCOUNTS AS WELL AS BALANCE SHEET OF THE ASSESSSEE. 22. AFTER HE ARING BOTH THE SIDES AND P ERUSAL OF MATERIAL ON R ECORD , WE FIND THAT THE ASSESSEE HAS EXPLAINED THAT HE ACQUIRED ONLY 50% INTEREST IN THE LAND FOR RS. 2,46,250 WHICH WAS REFLECTED IN THE BOOKS AS WELL AS IN THE BALANCE SHEET OF THE ASSESSEE. REGARDING INVESTMENT IN FURNITURE RS.40 , 000/ AND CONSTRUCTI ON RS.80 , 58 , W E UPHOLD THE FINDINGS OF THE LD.CIT(A) SINCE THE ASSESSING OFFICER HAS I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 21 ALSO CONCLUDED AT PAGE 27 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAD COVERED THESE IN THE AD DITIONAL INCOME OF RS.2,70,581/ - GROUND NO. 7 ( ON ACCOUNT OF UNVERIFIABLE PURCHA SES OF RS. 2 , 70 , 399/ - AND UNVERIFIABLE CREDITORS OF RS. 14 , 46 ,083/ - .) 23 . DURING THE COURSE OF APPELLATE PROCEEDINGS, THE CREDITORS BALANCE TO THE EXTENT OF RS. 14 , 46 , 083/ - WAS NOT PROVED , THEREFORE, THE SAME WAS TREATED BY THE ASS ESSING OFFICER AS UNVERI FIABLE AND UNPROVED TO THE CREDITORS. THE ASSESSING OFFICER HAS ALSO MADE ADDITION OF RS. 54, 080 / - ON ACCOUNT OF UNVERIFIABLE PURCHASES. THE LD. CIT(A) HAD DELETED THE ENTIRE ADDITION OF RS. 15 , 0 , 0163/ - AFTER OBSERVING AS UNDER: - 12.3 DECISION : - I HA VE CAREFULLY CONSIDERED THE ARGUMENTS OF THE AR OF THE APPELLANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. I FIND THAT THERE IS A SUBSTANCE IN THE ARGUMENTS OF THE AR THAT THE PURCHASES ARE SUPPORTED BY BILLS, LORRY RECEIPTS AND TRANSIT PASS AND MAJORITY OF THE PAYMENTS ARE MADE BY CHEQUE AND HENCE NO DISALLOWANCE SHOULD HAVE BEEN MADE. THE ARGUMENT OF THE APPELLANT THAT THE CLOSING BALANCE OF THE 12 CREDITORS CAN NOT BE ADDED IS ALSO QUITE CONVINCING AS ALL THESE CREDITORS HAVE GIVEN TH EIR CONFIRMATION. FROM THE LEDGER ACCOUNT OF THE APPELLANT THE CONFIRMED BALANCES ARE CROSS VERIFIABLE. IT IS ALSO NOT A CASE OF REMISSION OR CESSATION OF LIABILITY AND HENCE THE CLOSING BALANCE OF CREDITORS ACCOUNT CANNOT BE ADDED ON THE BASIS OF THE CRED ITORS DID NOT RESPOND TO THE DIRECTIVES ISSUED BY THE AO. I AM THEREFORE, INCLINED TO DIRECT THE AO TO DELETE THE ADDITION OF RS.15,00,163/ - . THE APPELLANT'S GROUND NO.8 IS ALLOWED. 24 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPART MENTAL REPRESENTATIVE CONTENDED THAT ADDITION TO UNVERIFIABLE PURCHASES WERE MADE ON THE BASIS THAT THE ASSESSE HAS NOT I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 22 FURNISHED SUPPORTING DOCUMENTS. SHE FURTHER STATED THAT OUT OF 12 CREDITOR S ONLY 3 CREDITORS HAVE COMPLIED TO THE NOTICE ISSUED U/S. 133(6) BY THE ASSESSING OFFICER AND NO INFORMATION O N CONFIRMATION WAS RECEIVED FROM THE CREDITORS TO THE EXTENT OF RS. 14 , 46 , 083/ - . ON THE OTHER HAND, LEARNED COUNSEL STATED THAT PURCHASES WERE SUPPORTED BY BILLS, LORRY RECEIPT AND TRANSIT PASS AND MAJORITY OF THE PAYMENTS WERE BY CHEQUE AND HENCE NO DISALLOWANCE SHOULD BE MADE BY THE ASSESSING OFFICER. REGARDING DISALLOWANCE MADE FOR UNVERIFIABLE CHARACTER, HE STATED THAT THE CLOSING BALANCE IN RESPECT OF 12 CREDITORS CANNOT BE ADDED AS ALL THESE CHARACTERS HA VE GIVEN THEIR CONFIRMATIONS OF THEIR RESPECTIVE LETTER HEADS AND THE COPIES OF THE LEDGER ACCOUNT OF THE ASSSESSEE FROM THEIR BOOKS FOR CROSS VERIFICATION. 25 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE PURCHASES WERE SUPPORTED BY BILLS, LORRY RECEIPT AND TRANSIT PASS ES AND PAYMENTS WERE MADE BY CHEQUE AND ALSO FIND THAT THE 12 CREDITORS HAVE GIVEN THEIR CONFIRMATIONS AND LEDGER ACCOUNT STANDING IN THEIR ACCOUNT IN THE CASE OF THE ASSESSEE WHICH CAN BE CROSS VERI FIED. WE ALSO FIND THAT THIS IS NOT A CASE OF REMISSION OR CESSION OF LIABILITY, THEREFORE, WE UPHOLD THE DECISION OF THE LD. CIT(A). GROUND NO. 8 (CREDITORS MORE THAN 3 YEARS OLD RS. 2 , 9 2, 616/ - ) I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 23 26 . THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 2 , 92 ,616 / - TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF CESSATION OF LIABILITY U/S. 41(1) OF THE ACT. LD. CIT(A) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: - 13.3 DECISION : - I HAVE CONSIDERED THE FACTS OF THE CASE CAREFULLY. ALSO CAREFULLY - CON SIDERED THE FINDING OF THE AO IN ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE ID. AR. THE AO MADE THE ADDITION BECAUSE THE CREDIT BALANCES ARE SHOWN IN THE ACCOUNTS FOR MORE THAN 3 YEARS AND THEREFORE LIABLE TO BE TREATED AS DEEMED INCOME U/S 41(1) OF I.T. ACT. NO OTHER FINDINGS WERE GIVEN BY THE AO. ON THE OTHER HAND THE ID. AR MADE THE ELABORATE SUBMISSIONS WITH CERTAIN CASE LAWS IN SUPPORT OF HIS ARGUMENTS. WHAT IS THE MANDATE OF PROVISIONS U/S.41(1) OF THE ACT? SEC.41(1) IS A MACHINERY - SECTION AND NOT A CHARGING PROVISION AND HENCE NOT REQUIRED TO CONSTRUED STRICTLY BUT IN SUCH A MANNER AS TO MAKE THE LEVY OF TAX EFFECTIVE AND TO MAKE THE MACHINERY OF ASSESSMENT WORKABLE AS HELD BY HON'BLE GUJARAT HC IN THE CASE OF MOTILAL AMBIDAS VS. CIT 108 ITR 13 6 (GUJ.). SEC. 41(1) CAN BE INVOKED ONLY IF THE CONCERNED LIABILITY OF THE ASSESSEE HAS CEASED FINALLY AND THERE IS NO POSSIBILITY OF ITS REVIVAL IN FUTURE. THE CESSATION OF LIABILITY ARISES ONLY WHEN SUCH LIABILITY CEASES TO EXIST IN THE EYE OF LAW FOR AL L INTENTS AND PURPOSES. IN THE CASE OF TAMILNADU WARE HOUSING CORPORATION VS. CIT 292 ITR 310 (MAD.) THE HON'BLE HC HELD THAT 'AN AMOUNT REPRESENTING AS LIABILITY WAS BEING SHOWN FOR YEARS AFTER YEAR. UNLESS AND UNTIL THERE IS CESSATION OF THE SAID LIABILI TY SEC.41(1) WAS NOT APPLICABLE. SINCE THERE WAS NO EVIDENCE OF CESSATION OF LIABILITY, AMOUNT WAS HELD NOT ASSESSABLE AS INCOME U/S. 41(1) OF THE ACT.' FURTHER IN THE CASE OF SUGAULI SUGAR WORKS VS. CIT 236 ITR 518 (SC), THE HON'BLE SC HELD THAT ' THE QUE STION WHETHER THE LIABILITY IS ACTUALLY BARRED BY LIMITATION IS NOT A MATTER WHICH CAN BE DECIDED BY CONSIDERING ASSESSEE'S CASE ALONE BUT IT IS A MATTER WHICH HAS TO BE DECIDED ONLY IF THE CREDITORS IS BEFORE THE CONCERNED AUTHORITY. IN THE ABSENCE OF THE CREDITORS IT IS NOT POSSIBLE FOR THE AUTHORITY TO COME TO THE CONCLUSION THAT THE DEBTS IS BARRED AND HAS BECOME UNENFORCEABLE. THERE MAY BE CIRCUMSTANCES, WHICH MAY ENABLE THE CREDITORS TO COME WITH A PROCEEDING FOR ENFORCEMENT OF THE DEBTS EVEN AFTER EX PIRY OF THE NORMAL PERIOD OF LIMITATION AS PROVIDED BY THE LIMITATION ACT.' IN THE INSTANT CASE THE AO HAS NOT BROUGHT ON RECORD ANY FURTHER EVIDENCE FOR COMING TO THE CONCLUSION I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 24 THAT THE LIABILITY IS RIPE FOR CESSATION. ON THE OTHER HAND THE ID. AR HAD NA RRATED THE GENESIS AND THE REASONS FOR SUCH OUTSTANDING. SOMETIMES FAMILY DISPUTES DIVISION OF ASSETS TAKES MANY YEARS. IN THIS CIRCUMSTANCES AND CONSIDERING THE JUDICIAL PRONOUNCEMENTS FAVORING THE APPELLANT, I DIRECT THE AO TO DELETE THE ADDITIONS BECAUS E SUCH ADDITION CANNOT SUSTAIN IN THE EYE OF LAW. THESE GROUNDS OF APPEAL ARE ALLOWED. 27 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE DECISION OF THE CIT(A) WAS NOT CORRECT BECAUSE THERE WERE CREDITORS WHOSE OUTSTANDING BALANCE HAD BEEN RUNNING FOR MORE TH AN 3 YEARS AND THE ASSESSEE HAS NOT BEEN DOING ANY BUSINESS WITH SIX PARTIES FOR MORE THAN THREE YEARS . ON THE OTHER HAND, LD. COUNSEL SUPPORTED THE ORDER OF T HE CIT(A) AND ALSO CONTENDED THAT THE CREDITORS HAV E CONFIRMED THE SAME AS IN THEIR CONFIRMATION S LETTER. 28 . WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE MATERIAL ON RECORD. WE FIND THAT THE CESSATION OF LIABILITY ARISES ONLY WHEN SUCH LIABILITY CEASES TO EXIST IN THE EYES O F LAW. WE ALSO FIND THAT ALL THE SIX CREDITORS HAVE CONFIRMED THE OUTSTANDING LIABILITY IN THEIR CONFIRMATION LETTER S . WE HAVE ALSO OBSERVED THAT LD. CIT(A) HAS GIVEN THE DETAILED FINDING IN HIS ORDER THAT ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE FOR COMING TO THE CONCLUSION THAT THE LIABILITY IS RIPE FOR CESSION OF LIABILITY. WE HAVE ALSO GONE THROUGH THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE STATING THAT THE AMOUNT OF OUTSTANDING LOAN FOR LONG TIME COULD NOT LEAD TO THE CESSATI ON OF LIABILITY ONLY ON THE GROUND THAT CREDITORS HAS NOT TAKEN STEPS TO I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 25 RECOVER THE AMOUNT DUE TO THEM. THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A). GROUND NO . 9 ( UNEXPLA INED MONEY OF RS. 1 , 32 , 7 8 4/ - ) 29 . O N THE BASIS OF IMPOUNDED PAPERS FOUND DURING SURVEY, THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 1 , 32 ,784 / - AS UNEXPLAINED MONEY U/S. 69A OF THE ACT. HE SAID THAT ASSESSEE HAS NOT SATISFACTORILY EXPLAINED THE ENTRY AND GENUINENESS OF 16 CASH SALE BILLS DURING THE COURSE OF APPELLATE PROCEE DINGS. THE LD. CIT(A) HAS DELETED THE ENTIRE ADDITION OF RS. 1,32,784/ - BY OBSERVING AS UNDER: - 14.3 DECISION : - I HAVE CONSIDERED THE ARGUMENTS OF THE AR OF THE APPELLANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. I FIND FROM THE SA LES REGISTER THAT TOTAL OF CASH SALES MADE IN 16 INVOICES FOR THE PERIOD 15.01.2007 TO 31.01.2007 PRECISELY AGGREGATES TO RS. 1,32,784/ - AND THEREFORE, THE ISSUE STOOD EXPLAINED. HENCE, THE AO IS DIRECTED TO DELETE THE SAID ADDITION OF RS.1,32,784/ - . THE A PPELLANT'S GROUND NO.IO IS ALLOWED. 30 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSIN G OFFICER. ON THE OTHER HAND, LEARNED COUNSEL SUPPORTED THE ORDER OF THE CIT(A). 31 . W E HAVE HEARD BOTH THE SIDES AND PERUS ED THE MATERIAL ON RECORD . W E NOTICED THAT ASSESSEE HAS FURNISHED TH E DETAIL AS PER SALE REGISTER THAT TOTAL OF CASH SALES MADE IN 16 INVOICES FOR THE PERIOD 15.01.2007 TO 31.01.2007 COMES TO RS.1 , 32 , 784 AND THE I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 26 ASSESSI NG OFFICER COULD NOT DISPROVE THE SAME ,THEREFORE WE UPHOLD THE DECISION OF LD.CIT(A) ON THIS ISSUE. APPEAL OF ASSESSEE ITA NO . 136 1 /AHD/2011 GROUND NO. 1.( ADDITION MADE OF RS. 78 , 438/ - ON UNACCOUNTED STOCK. ) 32 . THE ASSESSING OFFICER STATED THAT DURIN G THE COURSE OF SURVEY PROCEEDINGS CARRIED OUT ON 14 TH FEBRUARY, 2007 PHYSICAL STOCK OF MARBLE, GRANITE, AND CEMENT WAS TAKEN AND FOUND THAT THE STOCK WAS ACTUALLY EXCESSIV E OF R S. 78,438/ - THEN FROM THE BOOKS OF ACCOUNTS. THEREFORE, THE ASSESSING OFFICER STATED THAT THE EXCESS STOCK FOUND OF RS. 78,438/ - NOTHING BUT UNACCOUNTED INVESTMENT OF THE ASSESSEE IN THE STOCK. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE DECISION OF THE LD. CIT(A) IS REPR ODUCED AS UNDER: - 5.3 DECISION : - I HAVE CONSIDERED CAREFULLY THE ARGUMENTS OF THE AR OF THE APPELLANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. THERE IS NO DISPUTE THAT SEVERAL DISCREPANCIES IN BOOKS OF ACCOUNT AS WELL AS STOCK, CASH BALANCE AND PROPERTIES WERE NOTICED DURING THE SURVEY ACTION ON 14.2.2007. THE AO IMPOUNDED BOOKS OF A/C AND EXAMINED THEM WHICH REVEALED MANY - DISCREPANCIES AS ENUMERATED BY THE AO IN THE ASSESSMENT ORDER. THE AO ALSO ISSUED AN EXHAUSTIVE QUESTIONNAIRE' D ETAILING THE PROPOSED ADDITIONS DUE TO THE DISCREPANCIES NOTICED TO THE APPELLANT FOR HER EXPLANATIONS. FROM THE PROFIT AND LOSS ACCOUNT AND RELEVANT ABSTRACT OF THE JOURNAL ENTRY REFLECTING ADDITIONAL INCOME OF RS.2,70,581/ - , ONE CAN MAKE OUT THAT THERE I S NO MENTION OF ANY DECLARATION ON ACCOUNT OF EXCESS STOCK OF RS.78,438/ - WHICH WAS I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 27 FOUND ON THE DATE OF SURVEY AND HENCE, I AGREE WITH THE CONTENTION OF THE AO THAT THE AMOUNT OF RS.78,438/ - REMAINED TO BE TAXED. I AM THEREFORE, INCLINED TO CONFIRM THE AD DITION OF RS.78,438/ - MADE BY THE AO. THE APPELLANT'S APPEAL IN THIS GROUND IS DISMISSED. 33 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LEARNED COUNSEL STATED THAT SINCE THE ADDITIONAL INCOME IN RESPECT OF EXCESSIVE STOCK OF RS. 78 , 438/ - FOUN D WAS ALREADY C REDITED TO PROFIT AND LOSS A/C. SO THERE WAS NO NECESSITY TO MAKE ANY ADDITION OF THE SAME AGAIN AS THE SAME TANTAMOUNT TO DOUBLE ADDITION OF THE SAME INCOME. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE C IT(A). 34 . AFTER HEARING BOTH THE SIDES AND PERUSAL OF THE MATERIAL ON RECORD, WE FIND THAT IN SPITE OF SPECIFIC DETAIL S OF EXCESSIVE STOCK FOUND DURING THE SURVEY , THE ASSESSEE HAS NOT MENTIONED ANY DECLARATION ON ACCOU NT OF EXCESSIVE STOCK OF RS. 78, 438/ - . WE FIND FROM THE PROFIT AND LOSS ACCOUNT AND RELEVANT ABSTRACT OF THE JOURNAL ENTRY REFLECTING ADDITIONAL INCOME OF RS.2,70,581/ - THAT THERE WAS NO MENTION OF ANY DECLARATION ON ACCOUNT OF EXCESS STOCK OF RS.78,438/ - WHICH WAS FOUND ON THE DATE OF SURVEY THEREFOR E , WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LD.CIT(A) ON THIS ISSUE. GROUND NO. 2 (SUPPRESSED SALE OF RS. 10 LACS) 35 . REGARDING CONFIRMING OF ADDITION OF RS. 5 LACS OUT OF TOTAL ADDITION OF RS. 10 LACS , THIS GROUND HAS ALREADY BEEN ADJUDICATED AT I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 28 PARA 16 OF REVENUE S APPEAL. THIS GROUND HAS BEEN DECIDED AS PER GROUND NO.3 OF THE REVENUE. GROUND NO. 3 ( ADDITION OF RS. 1 , 37 , 221/ - U/S. 68 ) 36 . THIS GROUND OF APPEAL HAS BEEN DECIDED A S PER GROUND 4 OF THE REVENUE IN THIS ORDER. GROUND NO. 4 THAT AO HAS ERRED IN REJECTING THE BOOKS RESULTS U/S 145(3) OF THE ACT. THE ASSESSEE HAS POINTED THAT ASSESSING OFFICER HAS NOT POINTED ANY SPECIFIC DEFECTS IN BOOKS OF ACCOUNT THEREFORE THE ASSESSING OFFICER HAS ERRED IN INVOK ING THE PROVISION OF SEC . 145(3) OF THE ACT. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS POINTED OUT THE FOLLOWINGS DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE.: - 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IMPOUNDED BOO KS OF ACCOUNTS AS WELL AS THOSE PRODUCED BY THE ASSESSEE AND DETAILS SUBMITTED WERE VERIFIED. AFTER VERIFICATION OF THE BOOKS OF ACCOUNTS AND DETAILS, THE FOLLOWING DEFECTS IN THE BOOKS HAVE BEEN FOUND: - 14. THE LEDGER BF/6 AND BF/7 IMPOUNDED BOOKS ARE FOUND TO BE SAME. THERE ARE SAME ENTRIES IN BOTH THE LEDGERS. HENCE, ONE IS DUPLICATE AND ONE IS GENUINE, BUT WHICH ONE IS GENUINE ONE IS NOT ASCERTAINED. 15. ON 03 - 04 - 2006, AN AMOUNT OF RS. 19,000/ - WAS DEPOSITED IN THE DENA BANK WHEREAS THE OPENING BALANCE WAS O NLY RS. 6,111/ - . THUS RS. 90,000/ - REPRESENTS THE UNACCOUNTED MONEY. I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 29 16. IN CASH BOOK, NO OPENING CASH BALANCE IS SHOWN AS BROUGHT FORWARD (B/F) AND NO DAY TO DAY CLOSING BALANCE OF CASH ARE BEING ABSTRACTED AS CARRIED FORWARD. THIS REVEALS THAT THE CASH BOOK FOR THE YEAR WAS OPEN THROUGHOUT THE YEAR FOR ADJUSTING ENTRIES INTO IT AT HER OWN SWEET WILL AS REQUIRED. 17. BOOKS OF ACCOUNTS WERE WRITTEN UP TO 31 - 12 - 2006 ONLY AS ON DATE OF SURVEY I.E. 14 - 02 - 2007. 18. B/F9 IS A PURCHASE REGISTER OF CEMENT. IN THIS REGISTER , THE ENTRIES ARE NOT DATE WISE. IN THE MONTH OF APRIL, 2006, THE ENTRIES FOR 24 - 04 - 2006 AND 27 - 04 - 2006 WERE RECORDED BEFORE THAN THE ENTRY DATED 02 - 04 - 2006 AND 03 - 04 - 2006 AND EVEN THE WRITING AND INK BALL POINT WERE DIFFERENT. THESE ARE NOTHING BUT ADJU STMENT. 19. THERE ARE DIFFERENT INK AND DIFFERENT HAND WRITING IN EACH DAY S ENTRIES IN THE CASH BOOKS. THIS REVEALS THAT CASH BOOK WAS NOT PREPARED ON DAY TO DAY BASIS BUT ENTRIES WERE RECORDED IN ITS AS PER THE ASSESSEE S REQUIREMENT AND THAT IS WHY IT WAS KEPT OPENED WHOLE YEAR. 20. IN BF/11, SALE BILL NO. 36 DATED 16 - 05 - 2006 TOTAL AMOUNT IS RS. 37,320/ - . BUT IN SALE REGISTER, IT WRITTEN AS RS. 16,320/ - . AT THE SAME TIME SALE BILL NO. 34 REPRESENTING TOTAL AMOUNT OF RS. 17,280/ - . BUT IN SALE REGISTER, IT IS WRITTEN AS RS. 6,720/ - . 21. SALE BILLS ARE PREPARED FROM THE APPROVAL MEMO WHEREIN THE ORDERS ARE RECORDED, BUT AFTER PREPARING THE SALE BILL FROM APPROVAL MEMO, THE APPROVAL ARE DESTROYED SINCE THE APPROVAL MEMOS ARE PART OF BOOKS OF ACCOUNTS AS THE SALE BILL ARE PREPARED FROM THEM. THEY MUST BE PRESERVED AS A PART OF BOOKS. 22. THE ENTRIES REGARDING PURCHASE OF FURNITURE, SAMROLI LAND AND MACHINERY DURING THE YEAR WERE NOT RECORDED IN THE BOOKS. THE SAID CONSTRUCTION WORTH RS. 85,581/ - WAS ALSO NOT IN THE BOOKS . 23. EXCESS STOCK AND CASH WERE FOUND TO THE TUNE OF RS. 78,438/ - AND RS. 71,150/ - RESPECTIVELY. 24. M/S. YASH MARBLE & SANITARY S CREDIT BALANCE IS RS. 4,70,389/ - IN ASSESSEE S BOOKS BUT IN YASH MARBLE AND SANITARY S ACCOUNT, IT IS SHOWN AT RS. 3,33,165/ - ON ASS ET SIDE. 25. THERE IS A LOAN OF RS. 4,36,267/ - SHOWN IN THE ASSESSEE S BOOKS FROM URVESHBHAI M. SHAH (PROP. YASH I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 30 MARBLE & SANITARY) BUT IN URVESH SHAH S ACCOUNT, IT HAS NOT BEEN SHOWN. HENCE, THIS REVEALS THAT HUSBAND AND WIFE ACCOUNTS ARE NOT MATCHING TO TH EIR RESPECTIVE ENTRY IN EACH OTHER S BOOKS. 26. THE ASSESSEE DOES NOT MAINTAIN QUANTITATIVE DETAILS. THERE IS NO BASE OF VALUATION OF CLOSING STOCK SHOWN OF RS. 18,96,092/ - THE LD. CIT(A) HAS REJECTED THE GROUND OF APPEAL OF THE ASSESSEE ON THIS ISSUE BY OB SERVING AS UNDER: - 15.3 C ONCLUSION : - I HAVE CAREFULLY CONSIDERED T HE ARGUMENTS OF THE AR OF THE A PPELLANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. EACH I SSUE INCLUDED IN THIS APPEAL HAVE BEEN DEALT ON MERIT INDIVIDUALLY. THE REJECTI ON OF ACCOUNT AND THE COMPUTATION OF INCOME ON THE BASIS OF REJECTION OF ACCOUNT HAS BEEN SUFFICIENTLY DILUTED. IN MY VIEW, THIS GROUND HAS BECOME REDUNDANT AND HAS NO CONSEQUENCE IN THE COMPUTATION OF INCOME OF THE APPELLANT. THEREFORE, THIS GROUND IS DI SMISSED AS INFRACTUOUS. 37. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE OBSERVED THAT A NUMBER OF DISCREPANCIES WERE NOTICED REGARDING MAINTENANCE OF BOOKS OF ACCOUNTS DURING THE COURSE OF SURVEY CONDUCTED IN THE CASE OF THE ASSESSEE. EVEN DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE ASSESS EE COULD NOT FURNISH ANY EXPLANATION FOR EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. SIMILARLY , THERE WAS TRE ME N DOUS FALL IN THE GROSS PROFIT WAS NOTICED WHICH THE ASSESSEE COULD NOT EXP L A I N. WE OBSERVED THAT THESES DEFECTS INDICATE THAT THE ASSESSING OFFICER WAS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE FOR WHICH HE ATTRACTED THE PROVISION OF SECTION 145(3) IN THE CAS E OF THE I.T.A NO S . 1104 & 1361 /AHD/20 11 A.Y. 20 0708 PAGE NO ITO VS. SMT. KOMAL URVESHKUMAR SHAH PROP. OF YASH MARBLE 31 ASSESSEE, THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS REJECTED. 3 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE AND REVENUE ARE PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 20 - 0 3 - 201 7 SD/ - SD/ - ( S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 20 /03 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,