The ACIT,Vapi Circle, Vapi V. M/s. Pragati Industries, Vapi

ITA 1447/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1826 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: B N RAO
• Keywords: Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Principle of natural justice; Retraction; Reason to believe
• Section: 133A; 69

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA K. YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 1447/AHD/2012 / ASSESSMENT YEAR: 2009-10 ACIT, VAPI CIRCLE, VAPI .. APPELLANT VS M/S. PRAGATI INDUSTRIES, PLOT NOO.1001/7, 3 RD PHASE, GIDC, VAPI .. RESPONDENT PAN : AAEFP 5853 C REVENUE BY : SMT. SONIA KUMAR, SR.DR ASSESSEE(S) BY : SHRI B.N. RAO, AR / DATE OF HEARING 25/02/2016 /DATE OF PRONOUNCEMENT 06/04/2016 / O R D E R PER SHAILENDRA K. YADAV, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), VALSAD DATED 30.03.2012 FOR ASSESSMENT YEAR 2009-10. 2. IN THIS APPEAL, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.2,72,78,269/- MADE BY THE A.O. IN RESPECT OF UNACCOUNTED PROFIT. ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 2 - 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.21,00,000/- MADE BY THE A.O. IN RESPECT OF UNEXPLAINED INVESTMENT IN LAND. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.18,00,000/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN PURCHASE OF CRANES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.14,83,789/- MADE BY THE A.O. IN RESPECT OF UNACCOUNTED INVESTMENT IN STOCK. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.72,00,000/- MADE BY THE A.O. ON ACCOUNT OF UNACCOUNTED EXPENDITURE OF SALARY AND WAGES. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.9,05,074/- MADE BY THE A.O. ON ACCOUNT OF UNACCOUNTED EXPENDITURE. 3. THE FIRST ISSUE IS WITH REGARD TO THE ADDITION O F RS.2,72,78,269/- MADE BY THE ASSESSING OFFICER IN R ESPECT OF UNACCOUNTED PROFIT. THE ASSESSING OFFICER MADE THI S ADDITION AS UNDISCLOSED NET PROFIT WITH THE FOLLOWING OBSERV ATIONS:- '10(A). DURING THE COURSE OF SURVEY, COPY OF TRIAL BALANCE/PROFIT AND LOSS ACCOUNT FOR THE PERIOD OF 1 /4/2008 TO 31/03/2009 WAS FOUND REFLECTING THE NET PROFIT O F RS.2,88,20,686/- BY THE ASSESSEE FIRM. IN SAID PAPE R THE CORRECTION/MODIFICATION OF FIGURE OF NET PROFIT IS WORKED OUT WHICH SHOWS THAT THERE IS A PROFIT OF THE FIRM FOR THE SAID PERIOD AMOUNTING TO RS.15.42,417/-. THIS IS CLEAR C UT CONCEALING THE INCOME OF NET PROFIT OF THE FIRM TO THE EXTENT OF RS.2,72,78,269/- FOR A PERIOD OF 5 MONTHS OF THE FINANCIAL YEAR. THIS PAPER CLEARLY SHOWS THAT THE A CTUAL ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 3 - PROFIT EARNED BY THE ASSESSEE FIRM WAS RS.288,320,6 86/- BUT THE NET PROFIT REDUCED TO RS.15,42,417/-, WHICH HAS RESULTED INTO UNACCOUNTED INCOME EARNED BY THE ASSE SSEE FIRM AND NOT ACCOUNTED IN THE BOOKS OF THE FIRM TO THE EXTENT OF RS.2,72,78,269/-. ON THIS ISSUE, THE ASSESSEE WA S SPECIFICALLY ASKED TO EXPLAIN WHY RS.2,72,78,269/- SHOULD NOT BE TREATED AS UNACCOUNTED INCOME OF THE ASSESSE S FIRM VIDE PARA NO.5.1 OF FINAL SHOW CAUSE NOTICE DATED 20/12/2011. [T IS ALSO VERIFIED FROM THE BOOKS OF A CCOUNTS WHICH WERE PRODUCED FOR EXAMINATION ON 22/12/2011 T HAT THE PORTION OF CONCEALED INCOME AS DISCUSSED IS NOT INCLUDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE F IRM AND NOT PART OF THE INCOME SHOWN IN THE RETURN OF INCOM E. THEREFORE, AN AMOUNT OF RS.2,72,78,269/- WHICH IS UNACCOUNTED INCOME FOR WHICH EVIDENCES ARE GATHERED DURING THE COURSE OF SURVEY AND REMAINED UNACCOUNTED/UNEXPLAINED TO THE SATISFACTION OF THE UNDERSIGNED FOR THE SAME REASON, IT IS TREATED UNDI SCLOSED INCOME OF THE ASSESSEE FIRM OVER AND ABOVE THE INCO ME SHOWN IN THE RETURN OF INCOME OF THE ASSESSEE. 3.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE AND THE SAME HAS BEEN OPPOSE D ON BEHALF OF THE REVENUE INTER ALIA SUBMITTING THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,72,78,269/- MADE BY T HE ASSESSING OFFICER IN RESPECT OF UNACCOUNTED PROFIT. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF THE CIT(A). 3.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT DURING THE COURSE OF SURVEY, THE ASSESSING OFFICER FOUND COPY OF TRIAL BALANCE A ND P&L A/C FOR THE PERIOD 01.04.2008 TO 31.03.2009, WHEREIN TH E NET PROFIT WAS SHOWN AS RS.2,88,20,686/-. IT WAS ALSO NOTICED THAT IN THE ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 4 - SAID PAPER THE ASSESSEE HAD DONE CORRECTION/MODIFIC ATION OF FIGURES AND ARRIVED NET PROFITS AT RS.15,42,417/-, THEREFORE, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS MANIPU LATED THE NET PROFIT BY CONCEALING INCOME TO THE EXTENT OF RS.2,72,78,269/- (RS.2,88,20,686 RS.15,42,417/-. FROM THE FINDINGS IN THE ASSESSMENT ORDER, APART FROM THIS P ROVISIONAL COPY OF P&L ACCOUNT, THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE TO SUBSTANTIATE SUCH HUGE ADDITION. IT IS UNDISPUTED FACT THAT THE PROVISIONAL P&L A/C WAS ONLY FOR THE PERIOD 01.04.2008 TO 31.08.2008 AND NOT FOR THE PERIOD 01. 04.2008 TO 31.03.2009 AS OBSERVED BY THE ASSESSING OFFICER. 3.3 THE STAND OF THE ASSESSEE HAS BEEN THAT THE SAI D COPY OF THE PROVISIONAL P&L A/C WAS TAKEN OUT FOR ESTIMATIN G THE ADVANCE TAX LIABILITY WHICH WAS PAYABLE ON 15.09.20 08 (TWO DAYS AFTER THE DATE OF SURVEY; THUS, THE PENCIL WOR KING IN THE PAPER WAS FOR THE CORRESPONDING PERIOD OF THE EARLI ER YEAR. THE CIT(A) HAS ALSO PERUSED THE COMPARATIVE STATEMENT O F GROSS PROFIT RATIO SUPPLIED BY THE ASSESSEE FOR THE CURRE NT YEAR AND PREVIOUS YEAR AND THE SUBSTANTIVE PORTION OF THE SU BMISSIONS MADE BY THE ASSESSEE IS REPRODUCED BELOW FOR THE SA KE OF CLARITY:- I) THE APPELLANT WORKED OUT ADVANCE TAX LIABILITY THREE DAYS EARLIER TO THE DATE OF SURVEY. THAT BALANCE SH EET RELIED BY THE LEARNED ASSESSING OFFICER TO MAKE HIG H PITCH ADDITION WAS NOT A FINAL AUDITED P&L A/C AND NOT FO R THE WHOLE YEAR. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF JOB WORK OF FABRICATION, ERECTION OF STRUCTURAL STE EL AT DIFFERENT CITES SPREAD ALL OVER INDIA AND THEREFORE , UPDATING THE BOOKS OF ACCOUNT TAKE 2-3 MONTHS. THE PENCIL FI GURES WERE NOTHING BUT SUCH ADJUSTMENT AS IS NEEDED IN AR RIVING ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 5 - AT PROFIT FOR THAT PERIOD TO ASCERTAIN THE ADVANCE TAX LIABILITY BY 15 TH SEPTEMBER. THE SAME HAS BEEN EXPLAINED TO THE LEARNED ASSESSING OFFICER WHICH HE CONVENIENTLY DISREGARDED AND WRONGLY HELD THAT PROFIT AS RS. 272 .78 LACS AGAINST A SALES OF RS. 582.68 LACS WHICH SHOWS A NET PROFIT RATIO OF 46.34 % TO SALES. II) LOOKING TO THE GROUND REALITIES THAT (I) THERE CANNOT BE SUCH A HIGH NET PROFIT RATIO IN ANY ENGINEERING BAS ED INDUSTRIES; (II) THE EXPENSES CANNOT BE COMPLETELY BOOKED AS UPDATED ON DAY TO DAY BASIS WHEN THE BUSINESSMAN OPERATES IN DIFFERENT SITES LOCATED IN DIFFERENT GE OGRAPHICAL REGIONS SUCH AS GANDHIDHAM, JAMNAGAR, BARODA, IN GUJARAT, SHOLAPUR AND NAVI MUMBAI IN MAHARASTRA, UT TAR KHAND AND UDUPI AND DHARWAD IN KARNATAKA AND (III) THE APPELLANT IS OPERATING IN UNORGANIZED SECTOR WHERE THERE IS NO LEGAL COMPULSION TO KEEP ITS RECORD UPDATED UNLI KE IN THE CASE OF LISTED COMPANIES WHO HAVE STATUTORY OBLIGAT ION TO DECLARE THEIR FINANCIAL RESULTS TO PUBLIC WITHIN 45 DAYS FROM THE CLOSE OF EACH QUARTER. III) SINCE THE SALES ARE BOOKED FROM CENTRAL OFFIC E, ALL SALES WERE RECORDED UPTO 13 TH SEPTEMBER, 2008 WERE RECORDED WHEREAS THE PURCHASES / EXPENSES WERE PENDING FOR BOOKING WHEN THE ACCOUNTS WERE DRAWN FROM TALLY SYS TEM. IV) THE SAID P&L A/C RELIED FOR THE PURPOSE OF REC KONING INCOME FOR THE YEAR UNDER SCRUTINY DOES NOT BEAR AN Y SIGNATURE OF THE AUTHORIZED PERSONS / PARTNERS OF T HE FIRM. THE AUDITED FIGURES WERE NOT YET REPLACED IN THE OP ENING STOCK FOR THE CURRENT YEAR IN THAT STATEMENT WHICH IMPLIES THAT THE ACCOUNT WERE DRAWN ONLY TO CONSIDER THE TRANSACTIONAL FIGURES AND TO ARRIVE AT THE PROFITAB ILITY FOR ADVANCE TAX PURPOSE ONLY AFTER MAKING THE ADJUSTMEN TS IN COMPARISON TO ITS PREVIOUS YEAR. THE PENCIL WRITTEN FIGURES ALSO CONTAIN PERCENTAGES MENTIONED WHICH ARE THE BENCHMARK, COMPARABLE RATIOS OF EARLIER YEAR. V) THE LEARNED ASSESSING OFFICER HAS, WITHOUT ANY CORROBORATIVE EVIDENCE IN HIS POSSESSION, WHICH HE CLAIMED IN THE ASSESSMENT ORDER, SIMPLY ON THE BASIS OF UNDOCUMENTED PIECE OF INFORMATION MADE AN ADHOC ADDITION WHICH IS BAD IN LAW. ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 6 - VI) FURTHER, THE LD. AR CONTENDED THAT THE PARTNER WHOSE STATEMENT WAS RECORDED U/S 133A OF THE ACT WAS UNAW ARE OF HOW THESE FIGURE ARRIVED AT AND HENCE HE STATED THAT HE WOULD GIVE EXPLANATION THE NEXT DAY. HOWEVER, NO SU CH EXPLANATION WAS SOUGHT BY THE DEPARTMENT ON THE NEX T DAY WHICH COULD BE EXPLAINED LATER ONLY DURING THE COUR SE OF SCRUTINY PROCEEDINGS WHICH THE LEARNED ASSESSING OF FICER FAILED TO APPRECIATE. VII) IN ADDITION, WE ARE ALSO PROVIDING THE GP RATI O FOR THE PAST TWO YEARS AS ASSESSED TO TAX UNDER SECTION 143 (3) OF THE ACT AND ACCEPTED BY THE LEARNED ASSESSING OFFIC ER, WHICH ESTABLISHES THAT DURING THE YEAR ALSO THESE W ERE NO REJECTION OF ANY PURCHASE OR EXPENSES. VIII) FURTHER BE NOTED THAT THE ASSESSMENT IS MADE ON BUSINESS PROFITS RS. 87,10,030 FOR THE WHOLE YEAR A CCEPTING THE SALES AT RS.12,15,05,030/- AND CONSIDERING VARI OUS EXPENSES. IF THE ACCOUNTS FOR THE PERIOD 01.04.2008 TO 16.09.2008 ARE CONSIDERED ONCE AND THEREAFTER THE ACCOUNTS ARE ACCEPTED FOR WHOLE PERIOD 01.04.20 08 TO 31.03.2009 ENGULFING THE ABOVE REFERRED PERIOD, IT AMOUNTS TO DOUBLE TAXATION AND HENCE OTHERWISE ALSO REQUIRE S LO BE DISREGARDED. ALL THE RECORDS, PRODUCED BEFORE THE L EARNED ASSESSING OFFICER ARC ACCEPTED AND VERIFIED AND HEN CE, THE ACCOUNTS FOR THE PERIOD 01.04.2008 TO 31.03.2009 RE LEVANT TO ASSESSMENT YEAR 2009-10 GETS ACCEPTED AND THUS P &L RELIED FOR THE INTERMEDIARY PERIOD NEEDS TO BE DISR EGARDED. AS A PRINCIPLE OF NATURAL JUSTICE, TO AVOID ANY DUP LICATION THE LEARNED ASSESSING OFFICER OUGHT TO HAVE DISREGA RDED THIS ROUGH STATEMENT, WHICH IS OTHERWISE PROPERLY EXPLAINED ABOVE. 3.4 FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSING OFFICER HAS RELIED ON THE PROVISIONAL P&L A/C. FOR A PART OF TH E YEAR TO MAKE SUCH LARGE ADDITION. HE HAS NOT BROUGHT ANY MATERIA LS ON RECORD TO PROVE THAT WHY THE CONTENTION OF THE ASSE SSEE WAS NOT ACCEPTABLE. HE HAS ACCEPTED THE YEAR ENDING P&L A/C AND NOT DOUBTED ANY EXPENDITURES WHATSOEVER CLAIMED BY THE ASSESSEE, ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 7 - BUT MADE SUCH HUGE ADDITION. IT DOES NOT APPEAL TO THE COMMON SENSE ABOUT SUCH HUGE NET PROFIT AT 46.43%, ESPECIALLY FOR THE TYPE OF ASSESSEES BUSINESS. TH E ASSESSING OFFICER SHOULD HAVE DRAWN THE P&L A/C AS ON THE SUR VEY DATE AFTER CONSIDERING ALL INCOME AND EXPENDITURES. IN T HIS CASE NO SUCH ATTEMPT WAS MADE BY THE ASSESSING OFFICER BEFO RE MAKING SUCH ADDITION. THEREFORE, LOOKING TO THE NATURE OF THE BUSINESS OF THE ASSESSEE, WHICH IS SPREAD OVER DIFFERENT GEO GRAPHICAL AREA, IT REQUIRES TIME TO RECORD ACCOUNTING ENTRIES AND THE ASSESSEE COULD NOT RECORD ALL THE TRANSACTIONS AS O N 13.09.2008. CONSIDERING THESE FACTS AND CIRCUMSTAN CES OF THE CASE, CIT(A) HAS RIGHTLY DELETED THE ADDITION IN QU ESTION; THEREFORE, THESE REASONED AND FACTUAL FINDINGS OF T HE CIT(A) DO NOT REQUIRE ANY INTERFERENCE FROM OUR SIDE AND THE SAME IS UPHELD. THUS, THIS GROUND OF REVENUE IS DISMISSED. 4. NEXT ISSUE IS WITH REGARD TO THE DELETION OF ADD ITION OF RS.21,00,00/- WHICH WAS MADE BY THE ASSESSING OFFIC ER ON ACCOUNT OF INVESTMENT IN PLOT OF LAND THROUGH A PRO PRIETARY CONCERN OF THE MANAGING PARTNER OF THE ASSESSEE-FIR M. THE ASSESSING OFFICER MADE THIS ADDITION WITH THE FOLLO WING OBSERVATIONS IN HIS ORDER:- REGARDING 30% OF RS.70 LAKHS I.E. RS.21 LAKHS PAI D IN CASH OUT OF THE INCOME OF THE ASSESSEE-FIRM, THE PA RTNER OF THE FIRM WAS SPECIFICALLY ASKED VIDE QUESTION NO.19 THE ANSWER GIVEN BY THE PARTNER OF THE FIRM IS VERY PUR E AND ABSOLUTE WHILE EXPLAINING THE QUESTION THAT OUT OF TOTAL PAYMENT OF PLOT OF LAND RS.49 LAKHS HAVE BEEN PAID THROUGH CHEQUE AND BALANCE AMOUNT OF RS.21 LAKHS HA VE BEEN PAID IN CASH OUT OF THE BOOK OF THE ASSESSEE-F IRM. THE SAME ISSUE WAS REQUESTED TO EXPLAIN VIDE PARA NO.5. 3 OF THE FINAL SHOW CAUSE DATED 20/12/2011 THERE IS NO ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 8 - SATISFACTORY EXPLANATION OFFERED BY THE ASSESSEE FI RM. IN THE REPLY DATED 12/12/2011 ALSO THERE IS NO MENTION EITHER ACCEPTANCE OR A DENIAL ON THE ISSUE OF HAVING PAID RS.2L LAKHS IN CASH OUT OF THE HOOKS FOR THE PURCHASE OF PLOT OF LAND. AS THERE IS NO SATISFACTORY REPLY/EXPLANATION OFFERED ON THIS ISSUE, THE CONFESSION OF THE PARTNER OF THE ASSESSEE IN THE ANSWER OF QUESTION NO.19 OF THE STATEMENT DA TED 16/9/2008 HAS BECOME FINAL, AS THERE IS NO DISPUTE, BY THE ASSESSEE FIRM AS DESCRIBED ABOVE, THE UNACCOUNTED C ASH PAYMENT OF RS.21 LAKH IS UNACCOUNTED INCOME OF THE ASSESSEE FIRM WHICH IS PAID FOR THE PURCHASE OF PLO T OF LAND AND THE SAME IS NOT SHOWN IN THE BOOKS OF THE ASSES SEE FIRM AND ALSO IN THE RETURN OF INCOME. IN VIEW OF T HIS, RS.21,00,000/- PAID IN CASH BY THE ASSESSEE FIRM FO R THE PURCHASE OF PLOT OF LAND IS ADDED TO THE INCOME OF THE ASSESSEE FIRM U/S 69 OF THE I.T. ACT. 8.1 THE APPELLANT CONTENDED THAT THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS. 21,00,000 AS UNEXPLAINE D INCOME PURELY ON THE BASIS OF STATEMENT UNDER SECTI ON 133A OF THE ACT WITHOUT HAVING ANY CORROBORATIVE EV IDENCE. THE FOLLOWING SUBMISSIONS WERE MADE BY THE APPELLAN T DURING THE COURSE OF HEARING. 8.2 IT MAY PLEASE BE NOTED THAT THE STATEMENT R ECORDED UNDER SECTION 133 OF THE ACT, WAS NOT SUPPLIED TO T HE APPELLANT. SINCE THE APPELLANT HAD NO IDEA AS TO WH AT WAS RECORDED BY THE SURVEY TEAM, HE COULD NOT RETRACT IMMEDIATELY AND HENCE RETRACTION STATEMENT WAS MADE ONLY AFTER THE PARTNER GOT THE STATEMENT ON 28.11.2 010 WITHIN REASONABLE TIME THEREAFTER REBUTTING THE CON TENTS OF THE STATEMENT. EVEN OTHERWISE STATEMENT HAS NO EVIDENTIARY VALUE AS SUPPORTED BY VARIOUS JUDGEMENT S AND HENCE THIS ADDITION NEEDS TO DELETED. WITHOUT PREJUDICE TO THE ABOVE, WE. FURNISH AS UNDE R; 8.3 WE ARE ENCLOSING HEREWITH THE LEDGER ACCOUNT I N RELATION TO PURCHASE OF ASSET BEING LAND AT RS. 60. 62 LACS. IT INVOLVED BOTH THE CASH PAYMENT AS WELLL AS PAYME NTS THROUGH CHEQUE, ALL RECORDED IN BOOKS OF ACCOUNT AN D NOTHING OUTSIDE THE BOOKS AS RECORDED IN THE STATEM ENT WHICH NOT PROVIDED TO THE APPELLANT IMMEDIATELY. ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 9 - NECESSARY PROOF IN THE FORM OF AGREEMENT, RECEIPT F OR PAYMENT OF STAMP DUTY, TRANSFER FEE AS ENCLOSED FOR YOUR KIND REFERENCE. THIS STATEMENT CONTAINS THE FIGURES AS ALLEGED BY THE LEARNED ASSESSING OFFICER RELYING ON THE STATEMENT MADE DURING SURVEY ACTION. HENCE, THE REL IANCE PLACED ON SUCH STATEMENT WITHOUT ANY CORROBORATIVE EVIDENCE NEEDS TO DISREGARDED AND NO ADDITION IS CA LLED FOR ON THIS COUNT IN ANY OF THE ENTITIES. WITHOUT PREJUDICE TO THE SUBMISSIONS MADE ABOVE, IF AT ALL ANY POSSIBLE ADDITION IS REQUIRED TO BE MADE, IT SH OULD BE IN THE HANDS OF THE OTHER ENTITY AND NOT IN THE HAN DS OF THE APPELLANT. HENCE ALSO THE ADDITION IS NOT CULLED FO R AND NEEDS TO BE DELETED. 8.4 THE LEARNED ASSESSING OFFICER HAD AN INTENTION TO BRING INTO TUX ALL THE SUNDRY FIGURES MENTIONED IN THE ST ATEMENT THOUGH THE APPELLANT FURNISHED DURING THE COURSE, O F SCRUTINY HEARING THAT IT IS LIABLE TO BE TAXED FAR ITS REAL INCOME AND THE INCOME EARNED DURING THE RELEVANT PE RIOD AND NOT FOR ALL THE PRESUMED INCOME FOR ALL THE ASS ESSEES IN THE GROUP FOR ALL THE YEARS UNDER THE BANNER OF THE BANNER OF ONE ASSESSMENT YEAR. IT SEEMS THE LEARNED ASSES SING OFFICER WRONGLY UNDERSTOOD THE PROVISIONS OF INCOME TAX TO COVER ALL INCOME OF ALL THE PERSONS FOR ALL THE YEA RS TO ASSESS IN ONE BREATH. THE LEARNED ASSESSING OFFICER FAILED TO PEACEFULLY GO THROUGH THE DOCUMENTS IN HIS POSSE SSION AND IN A FIT OF URGENCY MADE ALL AND SUNDRY ADDITIO NS IN SWEEPING EFFECT. HE DID NOT FIND IT SUITABLE TO ANA LYSE THE STATEMENTS / WEAPONS IN HIS HANDS AS TO ITS RELEVAN CE TO THE ASSESSEE OR TO THE YEAR UNDER WHICH ASSESSMENT IS TO HE MADE. FOR THE SAKE OF CONVENIENCE AND AT THE COS T OF REPETITION WE REPRODUCE THE ANSWER TO QUESTION NO. 19 OF THE STATEMENT RECORDED UNDER SECTION 133A OF THE AC T. I HAVE PURCHASED PLOT OF LAND FOR ADITYA ENGINEERI NG DURING FY 2005-06, I.E. AY 2006-07 FOR RS.70 LACS, OUT OF WHICH RS. 49 LACS HAVE BEEN PAID THROUGH CHEQUE AND-BALANCE AMOUNT OJ'RS. 21 LACS HAVE BEEN PAID IN CASH OUT OF BOOKS.'. 8.5 WITHOUT GOING TO THE VERACITIES OF THE AMOUNTS MENTIONED THEREIN WHICH WILL BE LOGICALLY EXPLAINED AS AND ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 10 - WHEN CALLED FOR, WE WISH TO FURNISH THAT THE LEARNE D ASSESSING OFFICER FAILED TO APPRECIATE THAT THE PLO T OF LAND IS BELONGING TO OTHER ASSESSEE OTHER THAN WHOM SCRU TINY ASSESSMENT HE IS DOING AND FALLS IN OTHER ASSESSMEN T YEAR OTHER THAN WHICH HE IS ASSESSING. IN A FIT OF URGEN CY, HE SWEPT EVERY FIGURE INTO INCOME OF THE APPELLANT AND OF THE YEAR OF ASSESSMENT JUST TO ARRIVE AT A FIGURE PROBA BLY A TARGET FIGURE WHICH WAS IN HIS MIND TO ASSESS THE ASSESSEE. IT MAY PLEASE BE APPRECIATED THAT ASSESSM ENT NEEDS TO BE MADE OF THE REAL INCOME AND NOT AT THE WHIMS AND FANCIES OF THE OFFICER WHO IS CONDUCTING THE ASSESSMENT. THE WHOLE EXERCISE WILL BE NOTHING BUT AN ARBITRARY ACT WHICH THE INCOME TAX ACT DOES NOT PER MIT THE OFFICER TO TRAVEL BEYOND HIS JURISDICTION. THE LEAR NED ASSESSING OFFICER CIRCUMVENTED HIS JURISDICTION TO THE EXTENT OF ASSESSING OTHERS INCOME IN THE HANDS OF THE APPE LLANT AND CIRCUMVENTED HIS JURISDICTION TO THE EXTENT OF ASSESSING INCOME NOT PERTAINING TO THE YEAR WHICH IS BEING AS SESSED BY HIM. THE LEARNED ASSESSING OFFICER HAS, WITHOUT ANY CORROBORATIVE EVIDENCE, IN HIS POSSESSION, WHICH HE CLAIMED IN THE ASSESSMENT ORDER, MADE AN ADHOC ADDITION WHI CH IS BAD IN TAW AND THE SAME NEEDS TO BE STRUCK OFF. THE LEARNED ASSESSING OFFICER OUGHT TO HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT DURING THE COURSE OF SCRUTINY HEARING REITERATING ALT THE FACTS MENTIONE D ABOVE. 8.6 THE APPELLANT PLACED ON RECORD THE LEDGER A CCOUNT OF LAND IN THE BOOKS OF ADITYA ENGINEERING, A PROPRIET ARY CONCERN OF THE MANAGING PARTNER OF THE APPELLANT FI RM SHOWING A SUM OF RS. 60,62,140/- AS INCURRED TOWARD S LAND AS ALSO THE AGREEMENT IN THE NAME OF ADITYA ENGINEERING THROUGH ITS PROPRIETOR SHRI. P B HARIDA S AND PROOF OF PAYMENT OF STAMP DUTY AND REGISTRATION CHA RGES AND THE LEDGER ACCOUNT DULY RECORDING ALL THE PAYME NTS. 4.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE WHICH HAS BEEN OPPOSED ON BE HALF OF THE REVENUE INTER ALIA SUBMITTING THAT THE CIT(A) HAS ERRED IN ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 11 - DELETING THE ADDITION OF RS.21,00,000/- MADE BY THE ASSESSING OFFICER IN RESPECT OF UNEXPLAINED INVESTMENT IN LAN D. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF THE CIT(A). 4.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER FOUND TH AT THE ANSWER GIVEN BY THE PARTNER OF THE FIRM WAS VOLUNTA RY AND WITHOUT ANY COERCION WHILE EXPLAINING THE QUESTION ON THE PAYMENT OF PLOT OF LAND THAT RS.49 LAKHS WAS PAID T HROUGH CHEQUES AND THE BALANCE AMOUNT OF RS.21 LAKHS WAS P AID IN CASH OUT OF THE BOOKS OF THE ASSESSEE FIRM. HOWEVER , AT THE SAME TIME, CIT(A) OBSERVED THAT THE LAND WAS ACQUIR ED BY A DIFFERENT ENTITY OTHER THAN THE ASSESSEE-FIRM. HE A LSO OBSERVED THAT THE STATEMENT OF THE PARTNER WAS NOT CATEGORIC AL THAT THE ASSESSEE-FIRM HAD PAID ON BEHALF OF THE PURCHASER F ROM UNACCOUNTED SOURCE; HOWEVER, THE STATEMENT RECORDED UNDER SECTION 131(1) OF THE ACT REFERRED TO A FIGURE OF R S. 70 LACS AS AFFIRMED BY THE PARTNER OF THE ASSESSEE-FIRM AS THE CONSIDERATION AND THE BOOKS OF ACCOUNT RECORDED A S UM OF RS. 60.62 LACS. THIS WAS THE BASIS FOR ADDITION TO THE DIFFERENTIAL AMOUNT IN THE APPROPRIATE HAND. THUS, CIT(A) OBSERV ED THAT, CONSIDERING THE FACTUM OF THE CASE, THE ADDITION MA DE IN THE HANDS OF THE ASSESSEE-FIRM WAS NOT JUSTIFIABLE AND, IF AT ALL ANY ADDITION SHOULD BE MADE, IT COULD BE TO THE EXTENT OF THE UNEXPLAINED AND NOT BEYOND. FURTHER, HE RIGHTLY HEL D THAT THE ADDITION MADE IN THE A.Y.2009-10 WAS NOT THE RELEVA NT YEAR CONSIDERING THE TRANSACTIONS WHICH PERTAINED TO THE A.Y. 2006- 07. IT WAS FOUND POSSIBLE SUCH OVERLAPPING IN CASE WHERE THE ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 12 - MANAGING PARTNERS MANAGES AFFAIRS OF VARIOUS ENTITI ES AND IN SUCH EASES THE ASSESSING OFFICER WAS DUTY BOUND TO TAKE APPROPRIATE ACTION SO THAT SUCH UNEXPLAINED TRANSAC TIONS DO NOT ESCAPE THE RIGOR OF TAXATION. THE CIT(A) IN THE CONCLUDING LINES RIGHTLY OBSERVED THAT THE ASSESSING OFFICER M AY TAKE CORRECTIVE MEASURES LEGALLY TO ASSESS THE ADMITTED AMOUNT OF RS.21 LACS PAID FROM OUTSIDE THE BOOKS OF ACCOUNT I N THE APPROPRIATE HAND AND IN THE RELEVANT ASSESSMENT YEA R. THESE REASONED AND FACTUAL FINDINGS OF THE CIT(A) NEED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. AC CORDINGLY, GROUND NO.2 OF THE REVENUES APPEAL IS ALSO DISMISS ED. 5. NEXT ISSUE IS WITH REGARD TO THE DELETION OF ADD ITION OF RS.18,00,000/- ON ACCOUNT OF CASH PAYMENT MADE FOR PURCHASE OF SECOND-HAND CRANE THROUGH A PROPRIETARY CONCERN OF THE MANAGING PARTNER OF THE APPELLANT-FIRM. THE ASSESS ING OFFICER MADE THIS ADDITION BY OBSERVING AS UNDER:- 10(C). THE ASSESSEE FIRM HAS PURCHASED TWO SECOND HAND CRANES DURING THE PERIOD OF 01.04.2008 TILL THE DAT E OF SURVEY AND WHILE ANSWERING TO NO.18, THE PARTNER OF THE FIRM HAS CONFESSED CATEGORICALLY THAT THERE WAS TOT AL PAYMENT OF RS.45,00,000/- FOR PURCHASING TWO SECOND HAND CRANES. THESE TWO CRANES WERE PURCHASED IN THE F.Y. 2005-06 FOR RS.45,00,000/- AND PAYMENT TO THE EXTEN T OF 40% TO BE PAID IN CASH I.E. RS.18,00,000/- WITHOUT ENTERING INTO THE BOOKS OF ACCOUNTS AS STATED BY THE PARTNER . WHILE ANSWERING/EXPLAINING TO Q.NO.18, THE PARTNER OF THE ASSESSEE FIRM HAS TRIED TO TAKE PLEA IN RESPECT OF THE LANGUAGE OF THE STATEMENT I.E. ENGLISH WHICH IS NOT MUCH CONVERSED TO THE PARTNER OF THE ASSESSEE AND NOT EX PLAINED TO THE PARTNER IN VERNACULAR LANGUAGE. THE PLEA TAK EN BY THE ASSESSEE IS NOT ACCEPTABLE IN RESPECT OF CREDIT ORS THE PARTNER OF THE FIRM WAS INTERROGATED IN THE SAME LA NGUAGE I.E. ENGLISH AND AFTER FULLY UNDERSTANDING THE ISSU E ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 13 - EXPLANATION ON THE ISSUE OF CREDITORS IS OFFERED BY THE PARTNER OF THE ASSESSEE FIRM. SO UNDERSTANDING ONE ISSUE IN ONE LANGUAGE I.E ENGLISH AND NOT UNDERSTANDING OTHE R ISSUE IN THE SAME LANGUAGE I.E. ENGLISH IS NOTHING BUT DI SOWNING OF RESPONSIBILITY REGARDING UNACCOUNTED TRANSACTION OF THE FIRM WHICH ARE PUT BEFORE THE PARTNER DURING THE CO URSE OF SURVEY. THERE IS A MENTION OF HAVING NOT PURCHASED SUCH CRANES IN F.Y. 2005-06 IS ALSO NOT BELIEVABLE BECAU SE WHEN TRANSACTIONS ARE TAKING PLACE IN CASH AND OUT OF TH E BOOKS OF THE FIRM NO CREDIBLE EVIDENCE IS EITHER WITH THE ASSESSEE OR WITH ANY OTHER PERSON WHICH CAN REBUT THE CONFES SION MADE ON OATH BY THE PARTNER OF THE ASSESSEE FIRM. I N THIS WAY, AN AMOUNT OF RS.18,00,000/- PAID FOR PURCHASE OF TWO SECOND HAND CRANES ARE INVESTMENT MADE BY THE ASSESSEE FIRM NOT REFLECTED IN THE BOOKS OF ACCOUNT S DURING THE COURSE OF SURVEY AND NOT INCLUDED IN THE RETURN OF INCOME WHICH IS ADDED BACK TO THE INCOME HEREWITH A S UNACCOUNTED INVESTMENT U/S 69 OF THE I.T. ACT. 5.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE WHICH HAS BEEN OPPOSED ON BE HALF OF THE REVENUE INTER ALIA SUBMITTING THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.18,00,000/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN PURCHASE OF CRANES. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE O RDER OF THE CIT(A). 5.2 AFTER GOING THROUGH THE RIVAL CONTENTIONS AND M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE PLACED ON RECORD THE AUDITED ACCOUNTS OF PRAGATI CRANE CENTRE FOR FY 2005-06 AND 2006-07 ALONGWITH SUMMARY OF CRANE PURCHASES MADE DURING TH E FY 2006-07, RELEVANT TO AY 2007-08. IT IS ALSO NOTICE D THAT CONFIRMATION FROM THE PARTIES WERE ALSO PLACED ON R ECORD IN ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 14 - RELATION TO THE PURCHASES. MAJORITY OF THE CRANES WERE PURCHASED ON LOAN THROUGH FINANCE COMPANY AS PER TH E RECORDS. AS PER CIT(A), FOR THE PROPRIETARY CONCER NS OF SHRI P.B. HARIDAS, I.E., M/S. ADITYA ENGINEERING AND M/S . DEEPTI ENGINEERING FOR THE FY 2005-06 WERE ALSO PROVIDED W HICH ESTABLISHED THAT THERE WERE NO PURCHASE OF CRANES I N THOSE ENTITIES. FURTHER THE RECORDS REVEALED THAT THERE W AS NO ADDITION TO CRANES IN THE ASSESSEE-FIRM FOR THE AY 2009-10. IN THIS BACKGROUND, CIT(A) EXAMINED THE BASIS OF ADDIT ION MADE BY THE ASSESSING OFFICER AND ON PERUSAL OF RECORDS, HE FOUND THAT THERE WERE NO PURCHASES OF CRANE IN THE ASSESS EES FIRM DURING THE FY 2005-06. THE QUESTION ASKED BY THE C IT(A) DURING APPELLATE PROCEEDINGS IN THIS REGARD AND ITS REPLY THERETO WAS RECORDED, WHICH READS AS UNDER:- Q 18: HOW MANY CRANES HAVE BEEN PURCHASED SECOND HAND BY YOUR PROPRIETARY CONCERNS? PLEASE GIVE THE DETAILS? A 18: IN LAST TWO YEARS, I HAVE PURCHASED 2 SECOND HAND CRANES IN FY 2005-06 FOR RS.45 LACS APPROXIMATELY. OUT OF THIS 40% HAVE BEEN PAID OUT OF BOOKS. THE CIT(A), IN THE ABSENCE OF FURTHER CLARIFICATION IN THE STATEMENT, IT WAS PRESUMED THAT THE REPLY PERTAINED TO THE PURCHASE BY THE PROPRIETARY CONCERNS. THE ASSESSEE PRODUCED RELEVANT RECORDS PERTAINING TO PURCHASE OF CRANES BY PRAGATI CRANE CENTER. THE SUMMARY PROVIDED THE FIGURE OF RS.1,09,52,313/- WHICH WAS IN VARIANCE WITH THE STA TEMENT RECORDED WHICH WAS CONSIDERED BY THE ASSESSING OFFI CER FOR ADDITION. THE ASSESSING OFFICER OUGHT TO HAVE RECON CILED THE PURCHASE OF CRANES BY VARIOUS ENTITIES AND SOURCES OF FUND FOR ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 15 - SUCH PURCHASES BEFORE COMING TO THE CONCLUSION THAT THERE WAS PAYMENT OUTSIDE THE BOOKS BY THE ASSESSEE. IN THI S CASE, THE ADDITION MADE WAS PURELY ON THE BASIS OF THE STATEM ENT RECORDED DURING THE SURVEY ACTION. ALTHOUGH THE ASS ESSING OFFICER HAD AMPLE TIME TO VERIFY AND TO RECONCILE T HE PURCHASES OF CRANE AND SOURCE THEREOF, IT WAS NOT DONE BY HIM . IT IS ALSO PERTINENT TO NOTE THAT THE CARE HAS NOT TAKEN BY TH E ASSESSING OFFICER REGARDING THE ASSESSMENT YEAR, I.E., IN WHI CH YEAR SUCH UNACCOUNTED MONEY SHOULD BE ADDED. THE SO CALLED TRANSACTIONS RELATED TO A.Y. 2007-08 AND THE ADDITI ON MADE IN THE A.Y. 2009-10. UNDER THESE FACTS AND CIRCUMSTANC ES, THE CIT(A) RIGHTLY HELD THAT THERE WERE NO DOCUMENTARY EVIDENCE ON THE BASIS OF WHICH THE ADDITION CAN SUSTAIN. CONSI DERING THESE PECULIAR FACTS OF THE CASE, WE ARE ALSO OF THE OPIN ION THAT THIS ADDITION CANNOT SUSTAIN AS THERE WAS NO ADDITION OF CRANES IN THE HANDS OF THE ASSESSEE DURING THE RELEVANT ASSES SMENT YEAR. IN VIEW OF THESE FACTS, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION IN QUESTION MADE BY ASSESSING OFFICER ON A CCOUNT OF CASH PAYMENT MADE FOR PURCHASE OF SECOND-HAND CRANE S. THUS, THE ORDER OF THE CIT(A) IN THIS REGARD IS UPHELD AN D GROUND NO.3 RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED . 6. NEXT ISSUE IS WITH REGARD TO RESTRICTING THE ADD ITION TO THE EXTENT OF RS.63,597/- AS AGAINST THE TOTAL ADDITION OF RS.14,83,789/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN STOCK. THE ASSESSING OFFICER MADE THIS ADDITION BY OBSERVING AS UNDER:- 10(D) DURING THE COURSE OF SURVEY, THE INVENTORY O F STOCK WAS TAKEN WHICH WERE WORKED OUT AND THE VALUE OF ST OCK ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 16 - ON THE DATE OF SURVEY WAS OF RS.22,38,770/-. THIS INVENTORY OF THE STOCK WAS PREPARED AND VALUE OF TH E STOCK WAS CALCULATED IN THE PRESENCE OF PARTNER OF THE FI RM AND WHICH IS DULY ACKNOWLEDGED BY THE PARTNER ON THE DA TE OF SURVEY. IT WAS ALSO NOTICED THAT THERE WAS A STOCK OF RS.754,972/- AS PER BOOKS OF ACCOUNTS AS ON THE DAT E OF SURVEY, THE SAME FACTS ARE RECORDED IN THE STATEMEN T TAKEN ON OATH. THE EXCESS STOCK OF RS.14,83,798/- WAS NOT ICED AND WHILE RECORDING THE STATEMENT THE SAME ISSUE WA S ASKED TO EXPLAINED. THE PARTNER OF THE ASSESSEE COU LD NOT EXPLAIN THE EXCESS STOCK OF RS.14,83,798/-. THE PAR TNER HAS REPLIED THAT 'I WILL EXPLAIN THE SAME TOMORROW AT YOUR OFFICE AFTER VERIFYING MY STOCK REGISTER'. HOWEVER, TILL DATE, NO STOCK REGISTER IS PRODUCED IN SUPPORT OF EXPLAIN ING THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. EVE N IN THE REPLY OF THE ASSESSEE DATED 12/12/2011 THERE IS A M ENTION OF NOT HAVING ANY RECORD ON DAY TO DAY BASIS BUT IS BEING TAKEN PERIODICALLY AT THE END OF THE YEAR ONLY. IT CONFIRMS THAT THE REPLY GIVEN BY THE PARTNER OF THE ASSESSEE FIRM IN A POSITION THAT THE EXCESS STOCK CANNOT BE EXPLAINED BY HIM IS CORRECT. A VERY BIG ASSESSEE FIRM HAVING BUSINES S AT LARGE SCALE, INVOLVING THE STOCK OF SO MANY ITEMS I N VALUE DOES NOT KEEP ANY RECORD FOR MAINTENANCE OF STOCK A ND VALUE THEREOF. AS REPLIED BY THE ASSESSEE ONLY ON T HE LAST DAY OF THE FINANCIAL YEAR STOCK IS TAKEN AND IT IS BEING INCORPORATED IN THE BOOKS OF ACCOUNTS. SO THERE IS NO DISPUTE ABOUT EXCESS STOCK FOUND ON THE DAY OF THE SURVEY AS RECORDED IN THE STATEMENT OF THE INCOME AND SUPP ORTED BY THE INVENTORY OF THE STOCK. THE RATIO TO MATERIA L TO TURNOVER AT 86% IN COMPARISON TO PREVIOUS YEAR THE PLEA TO EXPLAIN THE UNACCOUNTED STOCK IS NOT RELEVANT. OVER AND ABOVE THIS, NO EXPLANATION IS OFFERED BY THE ASSESS EE TO EXPLAIN THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY IN WHICH THE ASSESSEE FIRM MADE INVESTMENT OUT OF UNACCOUNTED INCOME AND NOT RECORDED IN THE BOOKS OF ACCOUNTS. IN VIEW OF THE FACTS DISCUSSED ABOVE, AN ADDITION OF RS.14,83,798/- IS MADE TO THE TOTAL INCOME TREAT ING THE SAME AS INVESTMENT MADE OUT OF UNDISCLOSED INCOME O F THE ASSESSEE FIRM U/S 69 OF THE I.T. ACT. 6.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 17 - ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE BY RESTRICTING THE A DDITION TO THE EXTENT OF RS.63,597 AS AGAINST THE TOTAL ADDITION O F RS.14,88,789/-. THE ORDER OF THE CIT(A) WAS CHALLE NGED ON BEHALF OF THE REVENUE INTER ALIA SUBMITTING THAT THE CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO THE EXTENT OF RS.63,597/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN STOCK. ON TH E OTHER HAND, LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE O RDER OF THE CIT(A). 6.2 AFTER GOING THROUGH THE RIVAL CONTENTIONS AND M ATERIAL ON RECORD, WE FIND THAT THE STOCK VALUED BY THE SURVEY TEAM WAS AT RS.22,38,770/-. THE ASSESSING OFFICER CONSIDERED T HE OPENING STOCK AS RS.7,54,972/- ON THE BASIS OF ONE OF THE C OPIES OF THE PROFIT AND LOSS ACCOUNT FOUND IN THE IMPOUNDED DOCU MENTS. THE ASSESSEE PLACED ON RECORD THE LAST AUDITED BALA NCE SHEET SHOWING THE CLOSING BALANCE AT RS.11,71,729/-. IT W AS FOUND THAT BETWEEN THE DATE OF SURVEY AND THE COMMENCEMEN T OF THE FINANCIAL YEAR, THERE EXISTS TRANSACTIONS OF PURCHA SES, CONSUMPTION AND SALE OF THE STOCK ITEMS WHICH NEED TO BE TAKEN INTO RECORD WHILE WORKING OUT THE STOCK LEVEL AS ON THE DATE OF SURVEY. THE ASSESSING OFFICER WAS NOT JUSTI FIED IN NEGLECTING THE TRANSACTIONS IN BETWEEN THE PERIOD A ND HE EVEN DID NOT CONSIDER THE DIFFERENCE BETWEEN THE STOCK F OUND AND OPENING STOCK AS. UNEXPLAINED INVESTMENT IN STOCK. THE CIT(A) RIGHTLY OBSERVED THAT WHEN THE AUDITED ACCOUNTS WER E AVAILABLE, THE RIGHT THING WAS TO CONSIDER THE FIGU RES AS PER AUDITED RECORDS INSTEAD OF IMPOUNDED MATERIALS. HOW EVER, AS PER THE RECONCILIATION OF STOCK STATEMENT, THE STOC K DIFFERENCE ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 18 - ARRIVED AT RS.63,597/- WHICH WAS ADMITTED BY LD. AU THORIZED REPRESENTATIVE ON BEHALF OF THE ASSESSEE. HENCE, T HE CIT(A) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO RESTR ICT THE ADDITION TO THE EXTENT OF DIFFERENTIAL AMOUNT, I.E. , RS. 63,597/- AND REST WAS DELETED. THESE REASONED AND FACTUAL FI NDINGS OF THE LD. CIT(A) DO NOT REQUIRE ANY INTERFERENCE FROM OUR SIDE WHICH IS UPHELD. ACCORDINGLY, THIS GROUND OF THE R EVENUE IS ALSO DISMISSED. 7. NEXT ISSUE IS WITH REGARD TO THE DELETION OF ADD ITION OF RS.72,00,000/- AS UNEXPLAINED SALARY AND WAGES. THE ASSESSING OFFICER MADE ADDITION IN THIS REGARD BY O BSERVING AS UNDER:- 10(E) DURING THE COURSE OF SURVEY, THE AUTHORIZED OFFICER OBSERVED THAT THE ASSESSEE FIRM IS PAYING SALARY AN D WAGES OUT OF BOOKS FROM THE MATERIAL FOUND AND IMPOUNDED DURING THE COURSE OF SURVEY. ON THIS ISSU E, QUESTION NO.16 WAS PUT AND WHILE REPLYING THE SAME, THE PARTNER OF THE ASSESSEE FIRM HAS CONFESSED THAT THE ASSESSEE FIRM HAS PAID SALARY AND WAGES MORE BUT DE BIT IN THE BOOKS OF ACCOUNTS ARE LESS AND THE DIFFERENCE I S PAID OUT OF THE BOOKS. THIS ISSUE WAS ALSO SPECIFICALLY ASKED TO EXPLAIN VIDE PARA NO.5.6 OF FINAL SHOW CAUSE THAT RS.600,000/- PER MONTH CASH PAYMENT MADE BY THE ASSESSEE FIRM EVERY MONTH AND NOT RECORDED IN THE B OOKS SHOULD NOT BE TREATED AS UNACCOUNTED EXPENDITURE OF THE FIRM. THE REPLY OF THE ASSESSEE DATED 12/12/2011 IS STATING THIS ISSUE MAY BE DECIDED IN VIEW OF DECISI ON OF CIT[A] IN THIS CASE FOR THE A.Y. 2008-09 I.E. PREVI OUS YEAR TO THE ASSESSMENT YEAR MAY BE TAKEN. IT IS PERTINENT T O NOTE THAT THE DECISION OF THE CIT[A] FOR THE A.Y. 2008-0 9 IS TAKEN ON THE BASIS OF ADDITION MADE BY THE ASSESSING OFFI CER AND FURTHER EXPLANATION/EVIDENCES PUT BEFORE THE CIT[A] . ON THE OTHER HAND, IN THE YEAR UNDER CONSIDERATION THERE W AS A SURVEY U/S 133A OF THE I.T. ACT, THE ASSESSING OFFI CER OBSERVED UNACCOUNTED EXPENDITURE OF SALARY AND WAGE S, ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 19 - STATEMENT WAS RECORDED ON OATH OF THE PARTNER OF TH E FIRM AND THERE IS A CONFESSION OF THE PARTNER HAVING PAI D UNACCOUNTED WAGES AND SALARY OF RS.600,000/- PER MO NTH (AVERAGE) TOTALING TO RS.72,00,000/- FOR 12 MONTHS PERIOD. IN THIS WAY, THE FACTS OF A.Y. 2009-10 ARE DIFFEREN T AND THE PLEA OF THE ASSESSEE IS NOT ACCEPTABLE FOR THIS REA SON. THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION EVIDENCE EVEN WHILE PRODUCTION OF BOOKS WHICH SHOWS THE INCLUSION OF CASH PAYMENT OF THE SALARY AND WAGES PAID AND INCLU DED IN THE BOOKS OF ACCOUNTS. IN VIEW OF THIS, AN ADDIT ION OF RS.72,00,000/- IS MADE TO THE TOTAL INCOME TREATING THE SAME AS UNACCOUNTED EXPENDITURE SPENT FROM UNDISCLO SED INCOME OF THE ASSESSEE FIRM. 7.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE WHICH HAS BEEN OPPOSED ON BE HALF OF THE REVENUE INTER ALIA SUBMITTING THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.72,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED EXPENDITURE OF SA LARY AND WAGES. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTA TIVE SUPPORTED THE ORDER OF THE CIT(A). 7.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSING OF FICER OBSERVED THAT, AS PER THE AUTHORIZED OFFICER FOR CONDUCTING THE SURVEY, THE ASSESSEE HAD BEEN PAYING SALARY AND WAGES OF RS .6.00 LAKHS EVERY MONTH OUTSIDE THE BOOKS OF ACCOUNT. THI S FACT WAS ACCEPTED BY THE PARTNER IN HIS STATEMENT RECORDED D URING THE SURVEY. ON THAT BASIS THE ASSESSING OFFICER MADE AD DITION OF RS.72.00 LAKHS FOR 12 MONTHS. THE ASSESSING OFFICE R HAS FAILED TO CORROBORATE THIS FINDING WITH ANY OTHER EVIDENCE EXCEPT THE ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 20 - STATEMENT BY THE PARTNER OF THE FIRM. IN THIS REGAR D, THE STAND OF THE ASSESSEE HAS BEEN THAT THE AUDITED SALARY AN D WAGES REGISTER WHICH SHOWS THAT THE AMOUNT TAKEN INTO P&L A/C WAS DULY REFLECTED IN THE SALARY & WAGES REGISTER. IT W AS FOUND BY CIT(A) THAT THAT THE ASSESSEE HAD MAINTAINED ALL RE LEVANT RECORDS TO SHOW THAT THE SALARY AND WAGES PAID WERE FAIR AND REASONABLE. THE STAND OF THE ASSESSEE HAS BEEN THAT ALTHOUGH THE IMPOUNDED MATERIALS WERE AVAILABLE WITH THE ASS ESSING OFFICER BUT ASSESSING OFFICER HAD NOT SPECIFIED WHI CH PORTION OF THOSE DOCUMENTS CORROBORATES THE FINDING OF THE ASS ESSING OFFICER IN THIS REGARD. THE ASSESSEE FURTHER CONTEN DED THAT IT IS TOO ILLOGICAL TO ASSUME THAT ANYBODY WOULD SPEND MO NEY AND NOT RECORD IN HIS BOOKS WHILE THE REVERSE IS POSSIB LE WITH A VIEW TO EVADE TAX. WHEN A PERSON CAN CLAIM THE EXPENSES IN ITS BOOKS, HE WILL NOT RESORT TO IMPRACTICAL MEANS WITH NO BENEFIT ACCRUING FROM SUCH ACTION. THE ASSESSING OFFICER ME RELY LOOK OUT THE DIFFERENCE FROM THE STATEMENT RECORDED DURI NG SURVEY U/S. 133A AND MADE THE ADDITION IN QUESTION. IN TH IS REGARD, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER MADE THIS ADDITION OF RS. 72.00 LAKHS ON THE BASIS OF SOME DI SCREPANCY NOTICED AT THE TIME OF SURVEY, WHICH WAS ACCEPTED B Y THE PARTNER IN HIS STATEMENT. HE ALSO OBSERVED THAT TH E ASSESSMENT ORDER WOULD NOT SPEAK OF WHICH IMPOUNDED DOCUMENTS/MATERIAL SHOWED THAT THE APPELLANT WAS PA YING SALARY & WAGES FROM OUTSIDE THE REGULAR BOOKS OF AC COUNT. IT DOES NOT MAKE ANY SENSE THAT WHAT BENEFITS THE ASSE SSEE DERIVED BY PAYING SALARY & WAGES FROM OUTSIDE THE B OOKS OF ACCOUNT WHEN SUCH AMOUNTS ARE LEGALLY PERMISSIBLE. THEORETICALLY, THE ASSESSEE CAN DERIVE BENEFIT WHEN THE ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 21 - CORRESPONDING SALES ARE SUPPRESSED. THE ASSESSING O FFICER HAS NOT INDICATED ANYWHERE IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAD SUPPRESSED SALES THEREBY IN THE ASSESS EE GAINED BENEFIT. THE SURVEY WAS CONDUCTED IN THE MONTH OF S EPTEMBER 2008 AND HOW CAN THE ASSESSING OFFICER ASSUME THAT AFTER SEPTEMBER 2008 THE ASSESSEE WOULD PAY SALARY & WAGE S FROM OUTSIDE THE BOOKS OF ACCOUNT. THE ASSESSING OFFICE R OBVIOUSLY HAS NOT RIGHTLY APPRECIATED THE SUBMISSIONS MADE BY THE ASSESSEE IN THIS REGARD. AS RIGHTLY OBSERVED BY TH E CIT(A), THE ASSESSING OFFICER COMPLETELY IGNORED THE BASIC RECO RDS AND AUDITED BOOKS OF ACCOUNTS OF THE ASSESSEE SUBMITTED BEFORE HIM. HIS RELIANCE ON THE STATEMENT HAS BEEN THE SOL E BASIS FOR SUCH ADDITION. IN THIS CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING SUCH ADDITION AND THE SAME HAS BEEN RIGHTLY DELETED BY THE CIT(A). THEREFORE, THE ORDE R OF THE CIT(A) IN THIS REGARD DOES NOT REQUIRE ANY INTERFERENCE FR OM OUR SIDE. WE UPHOLD THE SAME. 8. NEXT ISSUE IS WITH REGARD TO THE DELETION OF ADD ITION OF RS.9,05,074/- AS UNEXPLAINED EXPENDITURE HOLDING TH AT OUT OF THREE PARTIES WHOSE TOTAL OUTSTANDING AMOUNTED TO RS.45,61,074/- APPEARING IN THE TRIAL BALANCE DRAWN AS ON 16.09.2008, ONLY RS.36,56,000/- WRITTEN BACK AND SH OWN AS INCOME. 8.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE, WHICH HAS BEEN CHALLENGED O N BEHALF OF ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 22 - THE REVENUE INTER ALIA SUBMITTING THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.9,05,074/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED EXPENDITURE. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE O RDER OF THE CIT(A). 8.2 AFTER GOING THROUGH THE RIVAL CONTENTIONS AND M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS PLACED ON REC ORD THE LEDGER ACCOUNTS OF THE THREE PARTIES NAMELY (I) JAY GANAPATIBAPA ENGINEERING RS. I4,6O,629/- (II) CHIRA G ENGINEERING AND FABRICATION RS. 15,09,1347- AND (II I) VIDHANT ENGINEERING AND FABRICATION RS.15,91,311/- AGGREGAT ING TO RS. 45,61,074/-. THE ASSESSEE HAS ALSO FURNISHED THE L EDGER ACCOUNT OF TDS WHILE CREDITING TO THESE PARTIES AND ALSO FURNISHED PROOF OF FILING OF TDS RETURN INCORPORATI NG THESE CREDITS. ON PERUSAL OF THE SAME, THE CIT(A) INFERRE D THAT THERE WAS NO REASON TO BELIEVE THAT THE SAID TRANSACTIONS APPEARED IN TRIAL BALANCE AND THE LEDGER ACCOUNTS WERE NOT INCL USIVE OF THESE AMOUNT. UNLIKE IN THE MANUAL SYSTEM, IN A COMPUTERIZED ENVIRONMENT, IF IT IS APPEARING IN THE TALLY ACCOUNTING PACKAGE IN TRIAL BALANCE, INVARIABLY IT WILL APPEAR IN THE LEDGER ACCOUNTS ALSO. THE ASSESSEE ESTABLISHED THAT SUCH CREDITS ARE SUPPORTED BY DEDUCTING AND PAYING TAX A T SOURCE ON THOSE CREDITS/PAYMENTS. THE LEDGER ACCOUNT PLACED ON RECORD ALSO SUBSTANTIATED THE ASSESSEES STAND. THE ASSES SEE ALSO FURNISHED A LIST OF PARTIES IN WHOSE CASE THE CREDI T BALANCES WERE WRITTEN OFF AT RS.36,56,109/- WHICH WAS ENTIRE LY DIFFERENT FROM THESE THREE PARTIES. THEREFORE, UNDER THESE FA CTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER WA S NOT ITA NO. 1447/AHD/2012 ACIT VS. PRAGATI INDUSTRIES AY 2009-10 - 23 - JUSTIFIED IN MAKING THIS ADDITION IN QUESTION AND T HE SAME HAS RIGHTLY BEEN DELETED BY THE CIT(A). THEREFORE, THI S REASONED FINDING OF THE CIT(A) DOES NOT CALL FOR ANY INTERFE RENCE FROM OUR SIDE. WE UPHOLD THE SAME. THUS, THIS GROUND OF TH E REVENUE IS ALSO DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE COURT ON 6 TH OF APRIL, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (SHAILENDRA K. YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 06/04/2016 *BT / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. && ' / CONCERNED CIT 4. ' ( ) / THE CIT(A), 5. ()* $++ , , / DR, ITAT, AHMEDABAD 6. *, / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) ! ' , / ITAT, AHMEDABAD