ITO, Patiala V. M/s Bharat Plasto Chem (P) Ltd., Patiala

ITA 1248/CHANDI/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77191 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 29-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKARSHAN SINGH
• Keywords: Unexplained cash credit; Business income; Depreciation; Peak credit
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1248 /CHD/2012 ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, VS. M/S BHARAT PLA STO CHEM (P)LTD., WARD 2, B-9, FOCAL POINT, PATIALA. PATIALA. PAN: AABCB7415N & C.O.NO.18/CHD/2013 ARISING O UT OF ITA NO.1248/CHD/2012 ASSESSMENT YEAR : 2009-10 M/S BHARAT PLASTO CHEM (P)LTD., VS. THE INCOME TA X OFFICER, B-9, FOCAL POINT, WARD 2, PATIALA. PATIALA. PAN: AABCB7415N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV SALDI DEPARTMENT BY : SHRI AKARSHAN SINGH, DR DATE OF HEARING : 19.06.2014 DATE OF PRONOUNCEMENT : 24.07.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS), PATIALA DATED 17.09.2012 RELATING TO ASSESSMENT YEAR 2009-10 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST THE APPEALS FILED BY THE REVENUE. 2 2. THE REVENUE IN ITA NO.1248/CHD/2012 HAS RAISED F OLLOWING GROUNDS OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN DIRECTING THE AO TO WORK OUT THE PEAK BALANCE OF CR EDITS AND TO GIVE THE CREDIT OF SURRENDERED INCOME OF RS.45 LACS AFTE R MAKING TOTAL ADDITION EVEN' THOUGH THE AO HAD MADE THE ADDITION OF RS.71, 94,0007-, AFTER ALLOWING THE BENEFIT OF SURRENDERED AMOUNT, WHILE A DDING RS. 1,16,94,000/-, BEING UNEXPLAINED CREDITS. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS FURTHER ERRED IN DIRECTING THE AO TO GIVE THE CREDIT OF SUR RENDERED INCOME OF RS.45 LACS WHILE DISCUSSING THE ADDITION OF RS.23,98,2757 - MADE BY THE AO ON ACCOUNT OF SUPPRESSION OF GROSS PROFIT, EVEN WHEN T HE AO HAD ALREADY ALLOWED THE SAME WHILE MAKING THE DISALLOWANCE ON ACCOUNT O F CREDITS BEING UNEXPLAINED. 3. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET AS IDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD AND FINALLY DISPOSED OF. 3. THE ASSESSEE IN THE C.O.NO.18/CHD/2013 HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT (A) HAS ERRED IN HOLDING THA T THE BOOKS OF ACCOUNT HAVE BEEN RIGHTLY REJECTED BY THE A.O. 2. THAT THE LD. CIT (A) HAVE FURTHER ERRED IN CONF IRMING THE ADDITION OF RS. 23,98,275 ON ACCOUNT OF ALLEGED SUPPRESSION OF GROSS PROFIT. 3. THAT THE LD, CIT (A) HAVE ERRED IN SUSTAINING TH E ADDITION OF RS. 14,30,000/- ON ACCOUNT OF ALLEGED PEAK OF THE CREDIT WHEREAS IT WAS NOT A CREDIT BUT ONLY THE PAYMENTS MADE AGAINST THE PURCHASES. 4. WITHOUT PREJUDICE TO ABOVE THE LD. CIT (A) HAVE FURTHER ERRED IN NOT ALLOWING THE BENEFIT OF TELESCOPING BOTH THE ADDITIONS IN GR OUND NO. 2 & 3. 5. THAT THE APPELLANT CRAVES THE RIGHT TO ADD OR DE LETE ANY GROUND(S) OF APPEAL BEFORE OR DURING THE APPELLATE PROCEEDINGS. 4. THE APPEAL OF THE REVENUE AND THE CROSS OBJECTIO NS FILED BY THE ASSESSEE WERE TAKEN UP TOGETHER AND ARE BEING D ISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS ENGAGED IN MANUFACTURE OF FIGURE SHEETS AND TRADING OF POLY STER RESIN. FOR 3 THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD FURNI SHED RETURN OF INCOME DECLARING NIL INCOME ON 30.09.2009. THE A SSESSEE WAS UNABLE TO PRODUCE THE BOOKS OF ACCOUNT BEFORE THE A SSESSING OFFICER ON THE PLEA THAT ALL THE OFFICE RECORDS WERE DESTRO YED IN A FIRE AT THE FACTORY ON 14.12.2009. THE ASSESSEE HAD DECLARED S ALES AT RS. 1.20 CR AND HAD ALSO INCLUDED SURRENDER OF RS. 45 LACS A S PART OF ITS TOTAL RECEIPTS IN ADDITION TO JOB WORK OF RS. 791,565/- A ND SHOP RENT OF RS.90,000/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER HAD CLAIMED EXPENDITURE OF RS.1.71 CR AS AG AINST BUSINESS RECEIPTS OF RS.1.28 CR AND THE ASSESSING OFFICER WA S OF THE VIEW THAT THE SAID BOOK RESULTS WERE LOWER THAN THE RESU LTS SHOWN IN THE IMMEDIATELY PRECEDING YEAR AND THE ASSESSEE WAS SHO W CAUSED AS TO WHY IN THE ABSENCE OF BOOKS OF ACCOUNT, THE BOOK RE SULTS SHOULD NOT BE REJECTED. VARIOUS OTHER DEFECTS NOTED BY THE AS SESSING OFFICER IN THE EXPLANATION FILED BY THE ASSESSEE FROM TIME TO TIME WHICH ARE REFERRED TO UNDER PARA 2 AT PAGES 2 TO 9 OF THE ASS ESSMENT ORDER. IN VIEW OF THE SAID DEFECTS, THE ASSESSEE WAS SHOW CAU SED TO EXPLAIN AS TO WHY THE BOOKS OF ACCOUNT SHOULD NOT BE REJECTED IN VIEW OF THE PROVISIONS OF SECTION 145(3) OF THE ACT AND INCOME ESTIMATED IN THE HANDS OF THE ASSESSEE. THE REPLY OF THE ASSESSEE IS RE-PRODUCED AT PAGES 10 TO 16 OF THE ASSESSMENT ORDER. FURTHER EN QUIRIES WERE MADE IN RESPECT OF THE BANK ACCOUNT OF M/S GLASS PL ASTIC CO. OF INDIA THROUGH WHOM PURCHASES WERE MADE BY THE ASSES SEE AND IT WAS NOTED BY THE ASSESSING OFFICER THAT IMMEDIATELY AFT ER CREDIT OF EACH ENTRY IN THE SAID BANK ACCOUNT, THE ENTIRE AMOUNT W AS WITHDRAWN ON THE SAME DAY IN CASH THROUGH SELF CHEQUES. FURTHER , THE ASSESSEE HAD ALSO DEPOSITED CASH IN HIS BANK ACCOUNT BEFORE ISSUE OF CHEQUES TO THE SAID PARTY. THE DETAILS OF THE CASH TRANSACT IONS ARE TABULATED AT PAGE 18 OF THE ASSESSMENT ORDER. FURTHER ENQUIR IES WERE MADE BY 4 THE ASSESSING OFFICER FROM M/S GLASS PLASTIC CO. OF INDIA AND IT TRANSPIRED THAT ALLEGED PROPRIETOR HAD ALREADY EXPI RED ON 07.11.2011. THE STATEMENT OF HIS WIFE WAS RECORDED ON OATH AND SHE STATED THAT HER HUSBAND WAS EMPLOYED WITH THE ASSES SEE AS AN ACCOUNTANT UPTO SEPTEMBER, 2009 AND APART FROM THAT JOB, HE WAS NOT DOING ANY OTHER BUSINESS ACTIVITY. THE ASSESSING O FFICER, THUS CONCLUDED THAT NO BUSINESS OF PURCHASE/SALE OF ANY GOODS WAS EVER DONE BY M/S GLASS PLASTIC CO. OF INDIA AND THE ASSE SSEE WAS CONFRONTED TO PROVE THE SOURCE OF CASH DEPOSIT AS A LSO THE VIOLATION OF SECTION 40A(3) OF THE ACT. FURTHER QUERIES WERE RAISED BY THE ASSESSING OFFICER IN RESPECT OF ICC TRANSACTION RE PORT OBTAINED FROM THE EXCISE & TAXATION DEPARTMENT, PATIALA AND VAT RETURNS FILED BY THE ASSESSEE WHICH ARE REPRODUCED ON PAGES 20 AND 21 OF THE ASSESSMENT ORDER AND THE REPLY OF THE ASSESSEE IS REPRODUCED AT PAGES 20 TO 24 OF THE ASSESSMENT ORDER. FURTHER QU ERIES WERE RAISED BY THE ASSESSING OFFICER AND THEREAFTER THE BOOKS O F ACCOUNT WERE REJECTED. THE ASSESSEE HAD NOT MAINTAINED ANY QUAN TITATIVE DETAILS OF OPENING STOCK AND CLOSING STOCK NOR ANY STOCK RE GISTER WAS PRODUCED. IN VIEW THEREOF, IT WAS HELD BY THE ASSE SSING OFFICER THAT MANUFACTURING RESULTS COULD NOT BE RELIED UPON. TH E ASSESSEE CLAIMED THAT THE DISCREPANCIES, IF ANY IN THE BOOKS OF ACCOUNT WOULD BE COVERED BY THE SURRENDERED INCOME OF RS. 45,00,0 00/- AND NO FURTHER ADDITION WAS MERITED IN THE HANDS OF THE AS SESSEE. THIS PLEA OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFIC ER IN THE ABSENCE OF DOCUMENTARY EVIDENCE. THE ASSESSING OFFICER, TH EREAFTER COMPUTED THE INCOME OF THE ASSESSEE BY APPLYING GP RATE OF 12.93%. FURTHER ADDITION WAS MADE ON ACCOUNT OF THE CREDITS IN THE BANK ACCOUNTS OF THE ASSESSEE WITH VIJAYA BANK WHICH WAS MORE THAN THE SALES OF RS.1.20 CR DECLARED BY THE ASSESSEE. THE DIFFERENCE IN THE 5 CREDIT ENTRIES WAS TREATED AS UN-ACCOUNTED SALES AN D AN ADDITION OF RS. 23,98,275/- WAS MADE ON THIS ACCOUNT. THE ASSE SSING OFFICER FURTHER NOTED THAT THOUGH THERE WAS VIOLATION OF PR OVISIONS OF SECTION 40A(3) OF THE ACT, BUT NO SEPARATE ADDITION WAS MADE ON THIS ACCOUNT AS GROSS PROFIT WAS ESTIMATED AFTER REJECTI ON OF BOOKS OF ACCOUNT. IN RESPECT OF THE PAYMENTS TO M/S GLASS P LASTIC CO. OF INDIA TO WHOM PAYMENT OF RS. 1.16 CR WAS MADE FROM THE BANK ACCOUNT WITH VIJAYA BANK DURING THE PERIOD 30.12.20 08 TO 31.3.2009 AGAINST PURCHASES AND IN THE ABSENCE OF ANY CORROBO RATIVE EVIDENCE AND THE STATEMENT OF WIFE OF THE PROPRIETOR OF M/S GLASS PLASTIC CO. OF INDIA, SUM OF RS.1.16 CR WAS TREATED AS UNEXPLAI NED CREDIT. HOWEVER, SINCE THE ASSESSEE HAD ALREADY SURRENDERED RS. 45,00,000/- IN THE MANUFACTURING AND PROFIT & LOSS ACCOUNT, THE BENEFIT OF THE SAME WAS GIVEN AND THE REMAINING SUM OF RS. 71,94,0 00/- WAS TREATED AS ASSESSEE'S INCOME FROM UNDISCLOSED SOUR CES. FURTHER DISALLOWANCE WAS MADE ON ACCOUNT OF INTEREST DUE ON ADVANCES MADE TO ONE M/S SAASHA CONSULTANCY AND AN ADDITION OF RS . 1,54,440/- WAS MADE ON THIS ACCOUNT. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE REJECTION OF BOOKS OF ACCOUNT IN VIEW OF VARIOUS DI SCREPANCIES FOUND. WITH REGARD TO THE APPLICATION OF GP RATE O F THE EARLIER YEAR, THE COMMISSIONER OF INCOME TAX (APPEALS) WAS OF THE VIEW THAT APPROACH OF THE ASSESSING OFFICER IN THIS REGARD WA S CORRECT AND NEED NOT BE DISTURBED. HOWEVER, IN VIEW OF THE CLA IM OF THE ASSESSEE THAT THE SURRENDER OF RS. 45,00,000/- WAS MADE TO COVER UP THE DISCREPANCIES IN THE BUSINESS INCOME, THE COMMI SSIONER OF INCOME TAX (APPEALS) HELD THAT CREDIT OF THIS SURRE NDERED INCOME SHOULD BE GIVEN AFTER ARRIVING AT THE TOTAL ADDITIO NS MADE AS PER THE ASSESSMENT ORDER AND WHERE THE ADDITIONS WERE COVER ED BY THE 6 QUANTUM OF SURRENDER MADE BY THE ASSESSEE, THEN THE RE WAS NO SCOPE FOR ANY FURTHER ADDITION. THE COMMISSIONER OF INCO ME TAX (APPEALS) ALSO UPHELD THE ORDER OF ASSESSING OFFICE R IN MAKING ADDITIONS BESIDES ESTIMATING THE GP. HOWEVER, IN R ELATION TO THE ENTRIES IN THE ACCOUNT OF M/S GLASS PLASTIC CO. OF INDIA, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT WHIL E ESTIMATING THE GP AND INCREASING THE FIGURES OF SALE, THE ASSESSIN G OFFICER HAD CONSIDERED THE TRANSACTIONS IN THE BANK ACCOUNT AND HAD HELD THAT NO BUSINESS OF PURCHASE/SALE OF ANY GOODS WAS EVER DON E BY M/S GLASS PLASTIC CO. OF INDIA. HOWEVER, BECAUSE OF THE CASH WITHDRAWAL AND THEN RE-DEPOSIT OF THE CASH, THE COMMISSIONER OF IN COME TAX (APPEALS) WAS OF THE VIEW THAT THE ADDITION OF PEAK BALANCE SHOULD ONLY BE MADE IN THE HANDS OF THE ASSESSEE AND THE A SSESSING OFFICER WAS DIRECTED TO WORK OUT THE PEAK BALANCE. AS REGA RDS THE SURRENDERED AMOUNT, THE BENEFIT FOR WHICH WAS GIVEN BY THE ASSE SSING OFFICER AGAINST DEPOSITS IN THE BANK ACCOUNT, COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE CREDIT FOR THE SAME COULD O NLY BE GIVEN AFTER MAKING TOTAL ADDITIONS IN THE HANDS OF THE ASSESSEE . 7. THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER UPHELD THE DISALLOWANCE OF INTEREST RELATABLE TO THE INTEREST FREE ADVANCES MADE BY THE ASSESSEE. 8. THE REVENUE IS AGGRIEVED BY THE DIRECTIONS OF CO MMISSIONER OF INCOME TAX (APPEALS) TO WORK OUT THE PEAK BALANCE O F THE CREDITS AND ALSO TO GIVE THE CREDIT OF SURRENDERED INCOME O F RS. 45 LACS AFTER MAKING TOTAL ADDITIONS THOUGH THE ASSESSING O FFICER HAD ALREADY ALLOWED THE BENEFIT OF SURRENDERED AMOUNT W HILE MAKING ADDITION OF RS. 71,94,000/- AS AGAINST RS. 1,16,94, 000/- BEING UNEXPLAINED CREDITS. 7 9. THE ISSUE VIDE GROUND NO. 2 RAISED BY THE REVENU E IS AGAINST THE DIRECTION OF COMMISSIONER OF INCOME TAX (APPEAL S) IN GIVING CREDIT OF SURRENDERED INCOME OF RS. 45 LACS WHILE D ISMISSING THE ADDITION OF RS. 23,98,275/- ON ACCOUNT OF SUPPRESSI ON OF GROSS PROFIT, THOUGH THE ASSESSING OFFICER HAD ALLOWED TH E BENEFIT OF THE SAID RS. 45 LACS WHILE MAKING THE DISALLOWANCE ON A CCOUNT OF CREDITS BEING UNEXPLAINED. 10. THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE REJECTION OF BOOKS OF ACCOUNT AND AGAINST ADDITION OF ALLEGED SU PPRESSION OF GROSS PROFIT AT RS. 23,98,275/-. THE ASSESSEE IS ALSO AGGRIEVED BY THE ADDITION OF PEAK CREDIT ALLEGING THAT SAID PAYM ENTS WERE NOTHING BUT PAYMENTS MADE AGAINST PURCHASES. AN ALTERNATE P LEA WAS RAISED BY THE ASSESSEE VIDE GROUND NO. 4 THAT FURTHER BENE FIT OF TELESCOPING OF BOTH THE ADDITIONS SHOULD HAVE BEEN ALLOWED TO T HE ASSESSEE. 11. SHRI RAJIV SALDI APPEARED FOR THE ASSESSEE AND SHRI AAKARSHAN SINGH APPEARED FOR THE REVENUE AND PUT FORWARD THEI R RIVAL CONTENTIONS. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACC OUNT DURING THE ASSESSMENT PROCEEDINGS OR EVEN BEFORE THE COMMISSIO NER OF INCOME TAX (APPEALS) CLAIMING THAT THE SAID BOOKS OF ACCOU NT WERE DESTROYED IN A FIRE AT THE FACTORY ON 14.12.2009. THE ASSESSEE THOUGH FURNISHED VARIOUS EXPLANATIONS IN RESPECT OF ITS RECEIPTS AND ALSO THE EXPENDITURE CLAIMED BUT ASSESSING OFFICER FOUND VARIOUS DISCREPANCIES/DEFECTS WHICH ARE ELABORATELY DISCUSS ED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER BUT HAV E BEEN CONCISELY 8 POINTED OUT BY THE COMMISSIONER OF INCOME TAX (APPE ALS) AS UNDER: A) THE ASSESSEE HAS CONTENDED THAT BOOKS ARE DESTROYED IN FIRE. HOWEVER THE A.O. CLAIMED THAT THE FIRE REPORT DOES NOT SHOW DETAIL OF BOOKS OF A/C DESTROYED IN FIRE. B) THERE ARE FREQUENT DEPOSIT AND WITHDRAWALS IN THE BOOK A/C MAINTAINED WITH VIJAYA BANK AND THE SOURCE AND DEST INATION OF CASH AS WELL AS APPLICABILITY OF 40A(3) AND TDS COULD NOT B E VERIFIED IN ABSENCE OF BOOKS OF A/C. C) IN ABSENCE OF BOOKS OF ACCOUNT, SOURCE AND MODE OF PAYMENT TO SUNDRY CREDITORS COULD NOT BE VERIFIED. SIMILARLY T REATMENT OF SUBSIDY RECEIVED COULD NOT BE VERIFIED AND NEITHER THE OPEN ING & CLOSING STOCK, EXPENSE PAYABLE, PURCHASE & SALE, DEPRECIATION CLAI MED ARE VERIFIABLE. D) THE MANUFACTURING EXPENSES IN THE YEAR UNDER CONSID ERATION IS 133% OF TOTAL BUSINESS RECEIPT AGAINST 94.43% IN TH E PRECEDING YEAR. 13. IN VIEW OF THE DISCREPANCIES POINTED OUT BY T HE ASSESSING OFFICER FOR WHICH THE ASSESSEE HAS NO PLAUSIBLE EXP LANATION, WE ARE IN CONFORMITY WITH THE AUTHORITIES BELOW THAT THE B OOKS OF ACCOUNT IN THE CASE HAVE TO BE REJECTED AS THE ASSESSEE HAS FAILED TO SATISFACTORILY EXPLAIN VARIOUS DISCREPANCIES/DEFICI ENCIES POINTED OUT BY THE ASSESSING OFFICER. ONCE THE BOOKS OF ACCOUN T HAVE BEEN REJECTED, THE NEXT COURSE OF ACTION IS ESTIMATION O F PROFITS BY APPLYING SUITABLE GP RATE IN THE HANDS OF THE ASSES SEE. 14. THE FIRST ADDITION MADE IN THE HANDS OF THE ASSESSEE IS ON ACCOUNT OF SUPPRESSION OF GROSS PROFIT. THE ASSESS EE DURING THE YEAR UNDER CONSIDERATION HAD DECLARED SALES OF RS. 120,5 9,061/- AS AGAINST SALES OF RS.1.48 CR DECLARED IN THE PRECEDI NG YEAR. THE COST OF MATERIAL DEBITED BY THE ASSESSEE FOR THE YEAR UN DER CONSIDERATION WAS RS.1.49 CR AS AGAINST RS. 1.19 CR DECLARED IN T HE PRECEDING YEAR. THERE WAS SUBSTANTIAL INCREASE IN THE VALUE OF MATERIAL CONSUMED AND IN THE ABSENCE OF THE EVIDENCE FURNISH ED BY THE 9 ASSESSEE, THE ASSESSING OFFICER FOUND IT REASONABLE TO APPLY THE PERCENTAGE OF MATERIAL ASSUMED AS IN THE LAST YEAR TO WORK OUT THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERA TION. CONSEQUENTLY, GP RATE OF 12.93% WAS APPLIED FOR WOR KING OUT SUPPRESSED INCOME FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER FURTHER NOTED THAT THERE WAS TOTAL CREDIT I N THE BANK ACCOUNT WITH VIJAYA BANK WHICH WAS MORE THAN THE SALES OF R S. 1.20 CR DECLARED BY THE ASSESSEE AND ASSESSEE WAS FAILED TO EXPLAIN THE CREDIT IN THE SAID BANK ACCOUNT, THE SAME WERE ASSU MED TO BE UNACCOUNTED SALES. CONSEQUENTLY, THE ASSESSING OFF ICER ADOPTING THE COST OF MATERIAL ALSO COMPUTED THE SALES AT RS. 1.85 CR ON WHICH GP RATE OF 12.93% WAS APPLIED TO WORK OUT THE ADDIT ION OF RS. 23,98,275/-. 15. THE ASSESSEE SURRENDERED AN INCOME OF RS. 45, 00,000/- FOR THE YEAR UNDER CONSIDERATION AND THE PLEA OF THE AS SESSEE WAS THAT THE ADDITION, IF ANY MADE IN THE HANDS OF THE ASSES SEE SHOULD BE ADJUSTED FIRST AGAINST THE SURRENDERED INCOME AND N O FURTHER ADDITION SHOULD BE MADE IN THE HANDS OF THE ASSESSEE. WE UP HOLD THE APPLICATION OF THE NET PROFIT RATE OF THE PRECEDING YEAR TO DETERMINE THE GROSS PROFITS FOR THE YEAR UNDER CONSIDERATION IN THE ABSENCE OF THE ASSESSEE HAVING PRODUCED THE BOOKS OF ACCOUNT A ND ALSO ON ACCOUNT OF VARIOUS DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER IN THE MAINTENANCE OF THE SALES/RECEIPTS AN D VARIOUS EXPENSES BOOKED TO THE TRADING ACCOUNT I.E. THE DIS CREPANCY IN BOTH PURCHASES AND SALES AND ALSO FAILURE OF ASSESSEE TO EXPLAIN SOURCE OF CREDIT ENTRIES IN THE BANK ACCOUNT. ACCORDINGLY, W E UPHOLD THE ADDITION OF RS. 23,98,275/-. WE ALSO UPHOLD THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS) THAT THE CREDI T OF THE 10 SURRENDERED INCOME NEEDS TO BE GIVEN AFTER ARRIVING AT THE TOTAL ADDITIONS MADE IN THE HANDS OF THE ASSESSEE. 16. THE FIRST ADDITION MADE IN THE HANDS OF THE ASSESSEE IS ON ACCOUNT OF ESTIMATION OF GROSS PROFIT RATE AND WE U PHOLD THE SAID ADDITION. IN VIEW THEREOF, GROUND OF APPEAL NOS. 1 & 2 IN CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. SIM ILARLY, AS WE HAVE UPHELD THE ORDER OF COMMISSIONER OF INCOME TAX (APP EALS) IN GIVING THE BENEFIT OF SURRENDERED AMOUNT AFTER ARRI VING AT THE TOTAL ADDITION, WE FIND NO MERIT IN THE GROUND OF APPEAL NO. 2 RAISED BY THE REVENUE. 17. NOW THE SECOND ASPECT OF THE ISSUE RAISED I N THE PRESENT APPEAL IS ADDITION MADE ON ACCOUNT OF PURCHASES MAD E THROUGH M/S GLASS PLASTIC CO. OF INDIA. THE ASSESSEE CLAIMS TH AT IT HAD MADE PURCHASES FROM THE SAID CONCERN WHICH WAS THE PROPR IETORY CONCERN OF SHRI NAVEEN VOHRA. ON ENQUIRIES AND FURTHER EXAMIN ATION IT WAS NOTED THAT THE ASSESSEE BEFORE MAKING PAYMENTS TO T HE SAID CONCERN WAS DEPOSITING CASH IN THE BANK ACCOUNT AND THEREAF TER ISSUING CHEQUES. THE BANK ACCOUNT OF THE SAID CONCERN WAS ALSO IN THE SAME BANK AS THAT OF THE ASSESSEE IN WHICH AFTER THE CHE QUES WERE DEPOSITED, CASH WAS WITHDRAWN ON THE SAME DATE OF CHEQUE AMOUN T. FURTHER INVESTIGATION BY THE ASSESSING OFFICER REVEALED THA T THE SAID PERSON HAD ALREADY EXPIRED AND STATEMENT OF HIS WIFE WAS T AKEN WHO STATED THAT HER HUSBAND WORKED AS AN ACCOUNTANT WITH THE A SSESSEE FIRM AND WAS NEVER ENGAGED IN THE PURCHASE AND SALE OF ANY I TEMS. THE PLEA OF THE ASSESSEE THAT IT WAS PURCHASING AND SELLING ITE MS TO THE SAID CONCERN WAS THUS FOUND TO BE INCORRECT AND ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF THE SAID UNACCO UNTED CREDITS IN THE BANK ACCOUNT WITH VIJAY BANK IN WHICH THE CASH WAS DEPOSITED BEFORE ISSUE OF CHEQUES WHICH ALLEGEDLY WAS A NON-EXISTENT PARTY. 11 18. BEFORE THE COMMISSIONER OF INCOME TAX (APPEAL S), THE CLAIM OF ASSESSEE WAS THAT IT HAD MADE PURCHASES FROM THE SAID CONCERNS, WHICH WERE FOUND TO BE BOGUS AND THE ASSESSING OFFI CER HAD MADE ADDITION ON ACCOUNT OF UNEXPLAINED CREDITS OF THE B ANK ACCOUNT OF THE ASSESSEE. HOWEVER, DURING THE APPELLATE PROCEEDING S, AN ALTERNATE PLEA WAS RAISED BY THE ASSESSEE THAT EVEN IF THE DE POSIT OF CASH IN ABOUT FOUR MONTHS WAS TAKEN, THEN GOING BY THE VERS ION OF ASSESSING OFFICER, THERE WERE MINIMUM WITHDRAWALS FROM THE AC COUNT OF SHRI KAURA AND HENCE, ONLY THE MAXIMUM AMOUNT WHICH COUL D BE PRESUMED AS UNEXPLAINED WOULD NOT BE MORE THAN RS. 14,00,000 /- AS IT WAS THE SAME AMOUNT WHICH WAS ROTATED ON DAY-TO-DAY BASIS. THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE A LTERNATE PLEA OF THE ASSESSEE THAT ADDITION IF ANY, IF HAD TO BE MAD E IN THE HANDS OF THE ASSESSEE, THEN ASSESSING OFFICER SHOULD APPLY PEAK OF CREDIT BY MAKING THE ADDITION. 19. WE ARE IN CONFORMITY WITH THE ORDER OF COMMIS SIONER OF INCOME TAX (APPEALS) ESPECIALLY IN VIEW OF THE INVE STIGATION MADE BY THE ASSESSING OFFICER THAT THE CONCERN M/S GLASS PL ASTIC CO. OF INDIA WAS A BOGUS PARTY CREATED BY THE ASSESSEE THROUGH W HOM NO PURCHASES OR SALES WERE MADE AND WAS UTILIZED FOR MAKING BOGU S PAYMENTS. THE ASSESSEE WAS DEPOSITING CASH IN HIS BANK ACCOUNT FR OM WHICH CHEQUES WERE ISSUED WHICH IN-TURN WERE DEPOSITED IN THE BAN K OF M/S GLASS PLASTIC CO. OF INDIA, FROM WHICH CASH WAS WITHDRAWN OF EXACT AMOUNT OF THE CHEQUE DEPOSITED. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE EXERCISE WAS BEING CARRIED OUT FROM DAY-TO-DAY, THERE IS NO MERIT IN TREATING THE TOTAL DEPOSITS AS UNEXP LAINED AND THE THEORY OF PEAK CREDIT IS TO BE APPLIED TO WORK OUT THE ADD ITION IN THE HANDS OF THE ASSESSEE. UPHOLDING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD, WE FIND NO MERIT IN THE G ROUND OF APPEAL NO. 12 3 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS. THE ALTERNATE PLEA RAISED BY THE ASSESSEE ITSELF WAS ACCEPTED BY THE C OMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSEE CANNOT AGGRIE VED BY ACCEPTANCE OF THE ALTERNATE PLEA WHICH IS REFERRED TO BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 8.2 AT PAGE 8 OF THE APPELLATE ORDER. 19. FURTHER, THE ASSESSING OFFICER WHILE MAKING ADDITION ON ACCOUNT OF UNEXPLAINED CREDITS HAD TOTALED THE SUM TO RS. 116,94,000/- AND THE BENEFIT OF SURRENDERED INCOME OF RS. 45 LACS AND THE ADDITION OF BALANCE OF RS. 71,94,000/- WAS MADE IN THE HANDS OF THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS), HOWEVER DIRECTED THAT THE ADDITION ON ACCOUNT OF PE AK CREDITS BE MADE IN THE HANDS OF THE ASSESSEE AND THE BENEFIT O F SURRENDERED AMOUNT SHOULD BE GIVEN AFTER MAKING TOTAL ADDITIONS IN THE HANDS OF THE ASSESSEE. UPHOLDING THE SAID ORDER OF COMMISSI ONER OF INCOME TAX (APPEALS), WE FIND NO MERIT IN GROUND OF APPEAL NO. 1 RAISED BY THE REVENUE. 20. IN THE RESULT, APPEAL OF THE REVENUE AND THE CR OSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JULY, 2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 TH JULY, 2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR. ASSISTANT REGISTRAR ITAT,CHD.