M/s. Rameshwar Textile Mills Ltd., Surat V. The Jt.CIT.,Range-4, Surat

ITA 1568/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85552 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 15-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 12-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: RASESH B SHAH
• Keywords: Unexplained expenditure; Business expenditure; Income from undisclosed sources; Principle of natural justice; Source of fund
• Section: 133A; 131

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD 0 0 , 0 0 , BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI N.S. SAINI , ACCOUN TANT MEMBER ./ ITA NO . 1568 /AHD/ 2010 [ [ / ASSESSMENT YEAR: 2007 - 08 M/S. RAMESHWAR TEXTILE MILLS LTD, 5101, B WING, RAGHU KAL MARKET, RING ROAD, SURAT PAN : AAACR 2714 D VS JCIT, RANGE - 4, SURAT ./ ITA NO. 1937 /AHD/ 201 0 [ [ / ASSESSMENT YEAR: 2007 - 08 ACIT, CIRCLE - 4, SURAT VS M/S. RAMESHWAR TEXTILE MILLS LTD, RING ROAD, SURAT / (APPELLANT) / (RESPONDENT) ASSESSEE(S) BY : SHRI RASESH B. SHAH, AR REVENUE BY : SHRI B.L. YADAV, SR. DR. / DATE OF HEARING : 17 / 12 /2014 / DATE OF PRONOUNCEMENT: 09 / 01 /201 5 / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE THE CROSS APPEALS FILED BY THE A SSESSEE AND THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) - IV , SURAT DATED 23 .0 3 .201 0 FOR ASSESSMENT YEAR 200 7 - 0 8 . ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 2 - 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARN ED CIT(APPEALS) HAS PARTLY ERRED IN PARTLY CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY SUSTAINING THE ADDITION TO THE EXTENT OF RS.42,07,379/ - OUT OF TOTAL ADDITION OF RS.4,20,73,792/ - BY ESTIMATING G.P. OF 10% ON NET ADDITIONAL TURNOVER OF RS.4,20,7 3,972/ - TO THE TOTAL INCOME OF ASSESSEE COMPANY. 3. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - IV, SURAT HAS ERRED IN RESTRICTING THE ADDITION @ 10% I.E. RS.42,07,397/ - INSTEAD OF ADDITION OF RS.4,20,73,972/ - MADE BY THE AO ON ACCOUNT OF UNDISCLOSED INCOME FROM JOB RECEIPTS OUT SIDE BOOKS. 4. THE BRIEF FACTS OF THE CASE, AS STATED BY THE ASSESSING OFFICER , ARE AS UNDER: - 8. THE ASSESSEE HAS A PROPRIETORSHIP CONCERN IN THE NAME OF M/S KIRTIDA SILK MILLS. BOTH M/S RAMESHWAR TEXTILE MILLS LTD. & KIRTIDA SILK MILLS HAVE ONE COMMON PAN AND INTEGRATED BOOKS OF ACCOUNTS. AT THE TIME OF SURVEY, THE LAPTOP OF ONE OF THE DIRECTORS SHRI SANJAY KUMAR SUDHRANIA WAS EXAMINED AND THE USB HARD DRIVE OF THE SAME WAS IMPOUNDED. THIS LAPTOP CONTAINED VARIOUS ACCOUNTS IN TALLY FORMAT VIZ. 'PROCESS CHARGES ACCOUNT', 'SANJAY 06 - 07 ACCOUNT', ETC. THESE ACCOUNTS PERTAIN TO THE 'PROCESS CHARGES RECEIVED' BY THE ASSESSEE COMPANY AS ENTERED RE GULARLY BY SHRI SUDHRANIA. A COPY OF THE MONTHLY PROCESS CHARGES AS ENTERED IN THIS LAPTOP IS ANNEXED AS ANNEXURE 'A' OF THIS ORDER. A CURSORY PERUSAL OF THIS MONTHLY SUMMARY SHEET INDICATES THAT THE TOTAL RECEIPTS OF THE ASSESSEE COMPANY ON ACCOUNT OF PRO CESS CHARGES IS RS. 18,72,52,318/ - ( PAGE NO.191 OF 'B - 64' IMPOUNDED). HOWEVER, ON FURTHER EXAMINATION OF THE PROCESS CHARGES RECEIVED, AS EVIDENCED THROUGH 'SANJAY 06 - 07 ACCOUNT' IT I S SEEN THAT A SUM OF RS.2,11,56,014/ - HAS BEEN CARRIED OVER AS ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 3 - 'OLD LOAN' BALANCE FROM LAST YEAR AND NOT PROCESS CHARGES RECEIVED DURING THIS YEAR PER - SE (PAGE NO.190 OF 'B - 64' IMPOUNDED). IT IS ALSO OBSERVED THAT DISCOUNTS IN ALL THE TWELVE MONTHS OF THE YEAR HAS BEEN GIVEN BY THE ASSESSEE COMPANY WHICH AGGREGATES TO RS.1,80,5 2,601/ - . THE RELEVANT EXT RACTS OF 'SANJAY 06 - 07 ACCOUNT' IS ENCLOSED AS ANNEXURE B OF THIS ORDER. 9. THE PROFIT AND LOSS ACCOUNT AS MAINTAINED IN SANJAY'S LAPTOP HARD DRIVE REVEALS THAT TOTAL PROCESS CHARGES AFTER EXTENDING DISCOUNTS RECEIVED BY THE ASS ESSEE COMPANY AMOUNTS TO RS. 14,80,23,313/ - . HOWEVER, AS PER THE AUDITED ACCOUNTS AS FURNISHED WITH THE RETURN OF INCOME OF THE RELEVANT YEAR, TOTAL PROCESS CHARGES IS SHOWN AT A FIGURE OF RS. 1 3,79,95,696/ - .THUS THE ACCOUNTS AS REVEALED IN MR. SUDHRANIA'S L APTOP WHEN JUXTAPOSED WITH THE AUDITED ACCOUNTS OF THE ASSESSEE COMPANY AS FURNISHED WITH THE RETURN OF INCOME, PROCE SS CHARGES TO THE EXTENT OF RS. 1,00,27,617/ - HAS BEEN SUPPRESSED. 10. THEREFORE, IT CLEARLY EMERGES THAT THE BOOKS OF ACCOUNTS BASED ON WH ICH ASSESSEE COMPANY HAS DERIVED ITS TOTAL INCOME IS IN CORRECT, SHAM, DOCTORED AND CAN NOT LEAD THE ASSESSING OFFICER TO DETERMINE THE CORRECT INCOME REPRESENTING TRUE STATE OF AFFAIRS OF THE ASSE S SEE. HENCE, THE BOOKS OF THE ASSESSEE COMPANY IS TO BE REJEC TED AND TOTAL INCOME OF THE ASSESSEE COMPANY IS TO BE DETERMINED TAKING INTO ACCOUNT THE VARIOUS FACTORS THAT WERE DETECTED DURING THE SURVEY AND THE ASSESSMENT PROCEEDINGS. 11. AS HAS BEEN PRESENTED IN THE EARLIER PARAS, THE ASSESSEE COMPANY WAS IN THE H ABIT OF TRANSACTING CASH, CHEQUE, BENAMI CHEQUES, BEARER CHEQUE SALES AND DISCOUNTING THE CHEQUES THROUGH A SHROFF SHRI JAIKUMAR PERIWAL. DURING THE RELEVANT YEAR AN AMOUNT OF RS.4,72,05,175/ - HAS BEEN DISCOUNTED BY THE ASSESSEE FROM THE SHROFF AS REVEALED FROM THE ACCOUNT OF JAIKUMAR IN MR. SUDHRANIA'S LAPTOP ( PAGE NO.213 & 231 OF B - 63' IMPOUNDED) (ANNEXURE C & D OF THIS ORDER) . 11.1 A STATEMENT U/S 131 OF SHRI JAIKUMAR PERIWAL, SHROFF, R/O 401, FORUM SREE APPTT. , N R. GOKULAM DAIRY, ADARSH SOCIETY, SURAT WAS RECORDED ON 14/05/2008. IN REPLY TO QUESTION NO 11 OF HIS STATEMENT, HE STATED THAT HE HAS DISCOUNTED CHEQUES FOR SHRI SANJAY SUDHRANIA. IN REPLY TO QUESTION NO.12 HE HAS STATED THAT HE DISCOUNTED CHEQUES OF RS.6 TO 7 LACS PER WEEK FOR SHRI SANJ AY SUDHRANIA FROM HIS OWN ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 4 - FIRM AND OTHER FIRMS MANAGED BY SHRI JAIKUMAR. IN REPLY TO QUESTION NO. 13, HE STATED THAT HE WAS DISCOUNTING CHEQUES FOR SHRI . SANJAYBHAI SUDHRANIA OF KIRTIDA SILK MILLS AND RAMESHWAR SILK MILLS LTD FOR THE LAST TWO YEARS. IN REP LY TO QUESTION NO 1, HE STATED THAT ONE PERSON NAMED SHRI NAVRATAN WAS COMING ON BEHALF OF SHRI SANJAYBHAI SUDHRANIA. THE NAME OF OTHER PERSON ATTENDING ON BEHALF OF SHRI SANJAYBHAI IS NOT KNOWN TO HIM BUT HE CAN RECOGNIZE THAT PERSON. 11.2 DURING THE STA TEMENT, SHRI JAIKUMAR WAS GIVEN AN OPPORTUNITY TO GO THROUGH THE BOOKS OF ACCOUNTS IMPOUNDED FROM THE PREMISES OF M/S RAMESHWAR SILK MILLS AND KIRTIDA SILK MILLS CONTAINED IN ANNEXURE B - 53 TO B - 55 AND B - 57 TO B - 61, IN WHICH HIS NAME 'JAIKUMAR' APPEARED WIT H FIGURES. REGARDING THIS, A DETAILED QUESTION WAS ASKED VIDE QUESTION NO. 15. IN HIS ANSWER, SHRI JAIKUMAR PERIWAL ADMITTED THAT THOSE ENTRIES APPEARING IN THE IMPOUNDED BOOKS BELONG TO HIM AND THE NAME APPEARING IS HIS OWN NAME. HOWEVER, HE ADDED THAT SI NCE HE DOES NOT MAINTAIN ANY RECORD OF THE PE RSONS GIVING THE CHEQUES HE CAN NOT CONFIRM THE FIGURES. SHRI JAIKUMAR WAS SHOWN PAGE NO. 103 OF THE LOOSE PAPER FILE B - 64, WHICH SHOWS AN ACCOUNT IN THE NAME OF JAIKUMAR . EXPLAINING THE SAME, IN HIS ANSWER TO QU ESTION NO.16, HE AGREED THAT THE ACCOUNT BELONGS TO HIM AND SHOWS THE AMOUNT OF CHEQUE DISCOUNTED THROUGH HIM. SIMILARLY, IN ANSWER TO QUESTION NO. 17, SHRI JAIKUMAR, AFTER OBSERVING MONTHLY SUMMARY STATEMENT ON PAGE NO. 231 OF THE LOOSE PAPER FILE B - 63, A CCEPTED THAT HE DISCOUNTED CHEQUES WORTH RS.4,30,38,524/ - DURING THE PERIOD 01/04/2006 TO 31/03/2007. 11.3 THUS, SHRI JAIKUMAR VIDE HIS STATEMENT DATED 14/05/2008 HAS CONFIRMED SUCH DISCOUNTING EVEN THOUGH HE HAS NOT MAINTAINED ANY ACCOUNTS WITH RESPECT TO THE DISCOUNTING DONE BY HIM REGARDING VARIOUS PARTIES. THE EMPLOYEES OF THE ASSESSEE COMPANY HAVE ALSO CONFIRMED VIDE THEIR RESPECTIVE STATEMENTS DURING SURVEY THAT THEY HAVE GIVEN THE CHEQUES TO SHRI JAIKUMAR AND RECEIVED CASH IN TURN AND RETURNED THE SAME TO SHRI SUDHRANIA. 12. AS THE SUPPRE SSED JOB CHARGES RECEIPT OF RS. 1,00,26,617/ - AS PER SANJAY'S ACCOUNT, AS DERIVED IN PARA NO. 9 , IS A SMALLER SUM IT CAN BE SAFELY ASSUMED THAT IT IS ALREADY CONTAINED OR SUBSUMED IN THE CASH RECEIVED FROM SHRI JA IKUMAR. IT CAN ALSO BE MENTIONED THAT SANJAY'S ACCOUNT IN HIS LAPTOP CARRIES BOTH REGULAR BOOK ENTRIES AND UNACCOUNTED ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 5 - ENTRIES. IT IS ALSO SEEN FROM THE CASH BOOK' AND 'JAIKUMAR'S ACCOUNT' AS FOUND IN SANAY 06 - 07' THAT ONLY PART OF THE CASH RECEIPT FROM SHRI JAIKUMAR HAS GONE TO 'JOB CHARGES ACCOUNT' ( ANNEXURE - E & F ' OF THIS ORDER), THE REMAINING BEING DIRECTLY CARRIED TO CASH BOOK' FROM WHERE IT IS EITHER USED FOR EXPENDITURE OR INVESTMENT OR FOR APPLICATION OF THE AMOUNT RECEIVED. IN THE LIGHT OF TH IS AND IN THE ABSENCE OF ANY THING TO THE CONTRARY, THE ENTIRE CASH RECEIVED FROM SHRI JAIKUMAR CAN BE TREATED AS THE UNACCOUNTED RECEIPT ON ACCOUNT OF THE JOB CHARGES. 13.. 14. BRIEFLY STATED, THE REPLY TO THE SHOW CAUSE OF THE ASSESSEE MENTIONS THAT IT HAS MAINTAINED ITS ACCOUNTS PROPERLY, THAT IT SHOULD BE ALLOWED CORRESPONDING EXPENSES CLAIMED AGAINST THE ADDITIONAL TURNOVER IF IT IS INCLUDED IN THE RECEIPTS AND THAT THE VARIOUS STATEMENTS GIVEN BY THE DIRECTOR AND OTHERS HAVE NO EVIDENTIARY VALUE. THE ASSESSEE HAS QUOTED CERTAIN CASE LAWS IN SUPPORT OF THE LATER. 15. THE ASSESSEE'S REPLY IS NOT ACCEPTABLE AND SELF CONTRADICTORY AS BASED ON THE FACT OF THE ACCOUNTS FOUND IN SHRI SUDHRANIA'S LAPTOP AND THE SWORN STATEMENT OF VARIOUS PERSONS INCLUDING SHRI SUDHRANIA HIMSELF, IT IS PROVED BEYOND DOUBT THAT ASSESSEE HAS INDULGED IN CASH SALES OUT SIDE THE BOOKS AND THE BOOKS THEREFORE ARE SHAM, DOCTORED AND DO NOT REPRESENT THE TRUE STATE OF AFFAIRS OF THE COMPANY. 15.1 AS REGARDS THE EVIDENTIARY VALUE OF VARIOUS STATEMENTS IT IS PERTINENT TO MENTION THAT ALL THE STATEMENTS GIVEN UNDER OATH WERE U/S 131 ( 1 )(B) OF THE I. T. ACT. HENCE, THE ASSESSEE'S REPLY CONTAINING CASE LAWS RELATING TO SURVEY STATEMENT IS OF NO AVAIL. 15.2 THUS IT IS CONCLUDED THAT A SSESSEE'S BOOKS ARE REJ ECTED AND THE ENTIRE SUM OF RS. 4,72,05,175/ - IS TO BE TREATED AS ASSESSEE'S ADDITIONAL RECEIPT NOT ACCOUNTED FOR IN ITS REGULAR BOOKS AS DETAILED IN PARAS SUPRA. 16 . WITH RESPECT TO DISCOUNTS IT IS OBSERVED THAT THE SAME CLAIMED IN THE REGULAR BOOKS PERTAIN TO THE ACCOUNTED PROCESS CHARGES (SALES) ONLY. THE EXTENT OF NET DISCOUNT GIVEN CAN BE GAUGED FROM THE, AMOUNT OF DISCOUNT VERSUS THE PROCESS CHARGES RECEIVED AS HAS BEEN ENTERED BY SHRI SANJAY IN HIS ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 6 - ACCOUNT 'SANJAY 06 - 07' . THE RATIO OF SUCH DISCOUNT : PROCESS CHARGES IS RS.1,80,52,601/ - : RS. 16,60,75,914 / - I.E. 10.87:100. THUS A FAIR ESTIMATE OF ASSESSEE'S TOTAL RECEIPT ON ACCOUNT OF UNACCOUNTED JOB CHARGES CAN BE ARRIVED AT AFTER ALLOWING PROPORTIONATE DISCOUNT IN THE SAME RAT IO AS ARRIVED ABOVE. THUS AT THE RATE OF 10 . 87%, THE TOTAL DISCOUNT THAT IS LIKELY TO HAVE CEDED BY THE ASSESSEE COMES TO RS. 51,31,203/ - . THEREFORE, THE NET UNACCOUNTED RECEIPT AFTER ANY DISCOUNT IS RS.4,20,73,972/ - . 17.1 DURING THE ASSESSMENT PROC EEDINGS THE ASSESSEE HAS CLAIMED ADDITIONAL SUM OF RS.3,41,36,466/ - AS THE ACTUAL EXPENSES ON COUNT OF SALARY AS INCURRED FROM THE CASH BOOK. THIS APPEARS EXCESSIVE AND FROM THE VOLU MINOUS SALARY SLIPS SUBMITTED, IT IS NOT CLEAR AS WHETHER THE SLIPS REPRESENT ACCOUNTED WAGES OR UNACCOUNTED WAGES. IN VIEW OF THIS, IT IS LOGICAL TO INFER THAT ASSESSEE HAS ALREADY CLAIMED ALL THE EXPENSES IN THIS REGARD. 17.2 AS REGARDS ASSESSEE'S CLAIM OF EXPENSES ON OTHER COUNTS, IT IS SEEN THAT ALL THESE EXPENSES HA VE ALREADY BEEN CLAIMED IN ASSESSEE'S BOOKS. THIS IS FURTHER SUBSTANTIATED BY THE FACT THAT THESE EXPENSES ON OTHER COUNTS IN THE AUDITED BOOKS ARE IN SUBSTANTIAL EXCESS OF WHAT IS REFLECTED IN SANJAY 06 - 07 ACCOUNTS' (ANNEXURE - G). THUS, IT CAN SAFELY BE A SSUMED THAT THE SAME HAS ALREADY BEEN CLAIMED IN REGULAR BOOKS AND THEREFORE, NO FURTHER EXPENSES CAN BE ALLOWED. MOREOVER THE EXPENSES, IF AT ALL ANY, CANNOT BE ALLOWED AS IT IS OUTSIDE BOOKS AND UNACCOUNTED FOR. 18. THUS THE BOOK RESULTS OF THE ASSESSE E IS DETERMINED BY INCREASING THE PROFIT BY AN AMOUNT OF RS.4,20,73,972/ - . 19. IN VIEW OF THE DETAIL DISCUSSIONS ABOVE THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY ARE REJECTED. THE TOTAL INCOME IS DETERMINED BY ADDING A SUM OF RS.4,20,73,972/ - , AS DE TERMINED AS PER PARA 18 OF THIS ORDER, TO THE PROFIT AS SHOWN BY THE ASSESSEE COMPANY IN ITS RETURN OF INCOME. THE BOOK PROFIT ALSO, THEREWITH, INCREASES BY AN IDENTICAL SUM. ' 5. ON APPEAL, THE CIT(A) HELD AS UNDER: - I HAVE GONE THROUGH THE ASSESSMENT ORDER ALONG WITH VARIOUS SEIZED MATERIAL ANNEXED WITH IT AND ALSO THE SUBMISSIONS MADE ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 7 - BY THE ARS. ALL THE GROUNDS RAISED BY THE APPELLANT REVOLVE AROUND A COMMON ISSUE OF ADDITION OF RS. 4,20,73,972. THE AO WHILE FINALIZING THE ORDER CONCLUDED THAT THE AD DITIONAL TURNOVER OF THE APPELLANT WAS RS. 4,72,05,175 BUT SINCE THE EVI DENCES RELATED TO DISCOUNT GRANTED WERE FOUND RECORDED, HE GRANTED RS. 51,31,203 ON ESTIMATED BASIS AND DETERMIN ED THE NET TURNOVER AT RS. 4,20,73,972 AND STATED THAT THE CLAIM OF ADD ITI ONAL SALARY AND WAGES OF RS. 3,41,36,466 APPEARED TO BE EXCESSIVE AND FROM THE VOLUMINOUS SALARY SLIPS SUBMITTED, IT WAS NOT CLEAR AS TO WHETHER THE SLIPS REPRESENTED ACCOUNTED WAGES OR UNACCOUNTED WAGES AND HENCE HE DREW THE INFERENCE THAT THE APPELLANT HA D ALREADY CLAIMED ALL THE EXPENSES IN THIS REGARD AND FURTHER ASSUMED THAT THE APPELLANT HAD CLAIMED ALL OTHER EXPENSES IN REGULAR BOOKS AND THEREFORE, DID NOT ALLOW THE SAME. IT IS OBSERVED FROM THE ASSESSMENT ORDER AS WELL AS THE MATERIALS ON RECORD THAT THERE IS NO DIRECT EVIDENCE AVAILABLE WITH THE AO TO ESTABLISH THE PRECISE AMOUNT OF ADDITIONAL TURNOVER. THE AO HIM SELF HAS OBSERVED IN PARA 9 OF THE ASSESSMENT ORDER THAT THE AC COUNTS AS REVEALED IN MR. SUDHRANIA'S LAPTOP WHEN JUXTAPOSED WITH THE AUDITED ACCOUNTS OF THE ASSESSEE COMPANY, AS FURNISHED WITH THE RETURN OF INCOME, THE PROCE SS CHARGES TO THE EXTENT OF RS. 1,00,27,617 HAD BEEN SUPPRESSED. THE APPELLANT ON THE OTHER HAND TRIED TO ESTABLISH THAT THE ADDITIONAL TURNOVER WAS OF RS. 78,91,963 ONLY. SI MILARLY, IF THE CONFESSIONAL STATEMENT OF SHRI JAYKUMAR SHROFF IS TAKEN AS AN EVIDENCE, THEN ALSO IT CAN BE SEEN FROM PARA 11.2 OF THE ASSESSMENT ORDER THAT THE SAID PERSON HAD NOT CATEGORICALLY ADMITTED THAT THE TOTAL AMOUNT OF CHEQUES DISC OUNTED WAS TO T HE EXTENT OF RS. 4,72,05,175. HE HAD STATED THAT HE WAS NOT MAINTAINING ANY RECORDS OF THE PERSONS WHO HAD GIVEN CHEQUES FOR DISCOUNTING AND HE HAD ACCEPTED THAT CHEQUES WORTH R S. 4,30,38,524 WERE DISCOUNTED THROUGH HIM. THEREFORE, THE VOLUME OF ADDITIONAL T URNOVER OF RS. 4,72,05,175 STILL REMAINED UNCONFIRMED. AT THE SAME TIME, A COPY OF JOB ACCOUNT AS REFLECTED IN SANJAY 06 - 07 FILE OF LAPTOP, (ANNEXURE 'B' OF ASSESSMENT ORDER) IT CAN BE SEEN THAT THE APPELLANT HAD RAISED THE BILLS FOR J OB CHARGES TO THE EXT ENT OF RS. 18,72,00,523. SIMILARLY THE ENTRIES OF DISCOUNT GRANTED AS REFLECTED IN THAT ACCOUNT SHOWED AN AMOUNT OF RS. 2,01,47,795. THEREFORE, IT IS QUITE CLEAR THAT THE DIFFERENT FIGURES REFLECTED IN THE IMPOUNDED MATERIALS SHOWED CONTRADICTORY PICTURE AND IF THE FIGURE OF TOTAL TURNOVER OF RS. 18,72,00,523 IS ADOPTED, THEN THE DISCOUNT OF RS. 2,01,47,795 HAS ALSO TO BE ACCEPTED. IN VIEW OF THESE FACTS, IT IS QUITE CLEAR THAT IT IS NOT PRECISELY POSSIBLE TO ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 8 - DETERMINE THE QUANTUM OF SUPPRESSED ADDITIONAL TURNO VER FROM THE EVIDENCES ON RECORD. THEREFORE, CONSIDERING THE DETAILED SUBMISSIONS MADE BY THE ARS ALONGWITH VARIOUS EVIDENCES AND ALSO ON PERUSAL OF THE SEIZED MATERIALS ON RECORDS AND MORE PARTICULARLY THE TRANSACTIONS AS RECORDED AND REFLECTED IN THE LA PTOP, UNDER MENTIONED FOUR POSSIBILITIES EMERGE OUT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. ENTIRE TURNOVER LESS DISCOUNT GRANTED BY THE AO TO BE TREATED AS INCOME. OR THE NET INCOME AFTER GRANTING EXPENDITURE AS CLAIMED BY THE APPELLANT ON THE B ASIS OF CO EXISTENCE OF EVIDENCES OF UNACCOUNTED INCOME AND EXPENDITURE TO BE TREATED AS INCOME. OR THE SEIZED RECORDS AND TRANSACTIONS CONTAINED IN LAPTOP AND USB DRIVE REFLECTS THE COMBINED PICTURE OF ACCOUNTED AND UNACCOUNTED TRANSACTIONS OF INCOME A ND EXPENDITURE AND THE NET LOSS AS REFLECTED IN THE TRANSACTIONS IN LAPTOP BE ACCEPTED OR TO ESTIMATE THE GROSS PROFIT BAS ED ON PAST TREND AS WELL AS THE PREVAILING RATE OF NET PROFIT IN CASE OF SIMILAR OTHER INDUSTRIES. THE MOST PECULIAR FEATURE OF TH E CASE WAS THAT DURING THE COURSE OF SURVEY, THE EVIDENCES FOUND AND IMPOUNDED WERE RELATED TO BOTH ACCOUNTED AND UNACCOUNTED TRANSACTIONS AND THE SAME WERE RECORDED SYSTEMATICALLY IN FORM OF BOOKS OF ACCOUNTS MAINTAINED ON LAPTOP AND THEREFORE, IT IS UNJU STIFIABLE IF THE SAME IS TOTALLY IGNORED. IN VIEW OF THIS, ALL THE POSSIBILITIES ARE REQUIRED TO BE EXAMINED ON THE BASIS OF THE AVAILABLE RECORDS AND THE FACTS AND CIRCUMSTANCES OF THE CASE. THE AO TREATED THE EN TIRE ADDITIONAL TURNOVER OF RS. 4,72,05,175 AS NET INCOME OF THE APPELLANT AND GRANTED DEDUCTION ON ESTIMATED BASIS FOR DISCOUNT GRANTED BY THE APPELLANT FOR THE REASON THAT THE ENTRIES FOR DISCOUNT WERE REFLECTED IN JOB CHARGES RECEIPTS. HOWEVER, AT THE SAME TIME, THE ENTRIES OF ALL ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 9 - OTHER EXPENSES AS CLAIMED TO BE UNACCOUNTED WERE ALSO REFLECTED IN THE ACCOUNTS MAINTAINED BY A DIRECTOR ON HIS LAPTOP FOR ALL UNACCOUNTED TRANSACTIONS. THE APPELLANT HAD, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SUBMITTED DETAILS OF SUCH UNACCOUNTED EXPENDITURE IN SUPPORT OF VARIOUS ENTRIES FOUND IN THE LAPTOP ALONGWITH VARIOUS EVIDENCES AND THEREBY THE EXISTENCE OF SUCH EXPENDITURE WERE PROVED BY THE APPELLANT AND THEREFORE, IT IS UNJUSTIFIABLE TO ALLOW SOME OF THE EX PENDITURES, SAY DISCOUNT OF RS. 51,31,203 ON ESTI MATE BASIS AND TO IGNORE THE CLAIM OF OTHER EXPENDITURES IN THE INTEREST OF NATURAL JUSTICE. NOW COMING TO THE ANOTHER ALTERNATIVE OF GRANTING THE ENTIRE CLAIM OF UNACCOUNTED EXPENDITURE ON THE BASIS OF CO - EXISTENCE OF ENTRIES RELATED TO ACCOUNTED AND UNA CCOUNTED TRANSACTIONS IN THE LAPTOP. THE APPELLANT HAD CLAIMED TH AT IT HAD INCURRED A SUM OF RS. 3,41,36,466 TOWARDS WAGES FROM UNACCOUNTED INCOME. THE AO STATED THAT ON THE BASIS OF VOLUMINOUS SALARY SLIP SUBMITTED AND OTHER EVIDENCES ON RECORD, IT CANNOT BE PROVED CATEGORICALLY AS TO WHETHER ALL SUCH EXPENSE WERE ACCOUNTED FOR OR NOT AND THEREFORE HE ASSUMED THAT THE SAME MUST HAVE ALREADY BEEN CLAIMED IN REGULAR BOOKS OF ACCOUNTS. HOWEVER, THE RECORDS AND EVIDENCES SUBMITTED BY THE APPELLANT AND EXISTENCE OF VARIOUS ENTRIES IN THE LAPTOP, I N WHICH COMBINED ACCOUNTS WERE MAINTAINED, IT CLEARLY SUGGESTS THAT VARIOUS EXPENSES WERE I NCURRED BY THE APPELLANT BUT NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS. DURING ASSESSMENT PROCEEDINGS, THE APPELLANT HAD SUBMITTED THE EVIDENCES OF UNRECORDED WAGES AND SALARY EXPENDITURE INCURRED OUT OF UNACCOUNTED ADDITIONAL INCOME. ALSO AT THE TIME OF SURVEY PROCEEDINGS, THE APPELLANT HAD CLARIFIED THAT CERTAIN EXPENSES AND MORE PARTICULARLY WAGES WERE NOT ACCOUNTED FOR OUT OF COMPULSION IN VIEW OF CERTAIN RESTRICTIONS OF OTHER LAWS AND THE EXISTENCE OF COMPULSIVE UNACCOUNTED SALES AS A TREND IN THE MARKET WHICH PAVED WAY FOR THE APPELLANT TO INCUR CERTAIN BUSINESS EXPENDITURE FROM SUCH UNACCOUNTED RECEIPTS. I FOUND FORCE IN THE ARGUMENTS OF ARS THAT THE CO - EXISTENCE OF EVIDENCES OF UNACCOUNTED INCOME AND UNACCOUNTED EXPENDITURE CANNOT BE IGNORED IN TOTO AS THE DEPARTMENT CANNOT APPROBATE AND REPROBATE THE SAME DOCUMENT AT THE SAME TIME. HOWEVER, IT IS ALSO NOTICED THAT TH E APPELLANT HAD ALSO FAILED TO PROVE CATEGORICALLY THAT THE IMPUGNED UNACCOUNTED TRANSACTIONS AS REFLECTED IN COMBINED BOOKS OF ACCOUNTS MAINTAINED ON THE LAPTOP WERE NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS. AT THE SAME TIME, THE AO ALSO ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 10 - COULD N OT ESTABLISH WITH EVIDENCE THAT THE APPELLANT'S CLAIM WAS INCORRECT AND ALL THE TRANSACTIONS OF UNACCOUNTED EXPENDITURE WERE INCORPORATED IN THE REGULAR BOOKS OF ACCOUNTS. THEREFORE, I AM OF THE VIEW THAT IF ON ONE HAND IT IS NOT JUSTIFIABLE TO REJECT THE CLAIM OF UNACCOUNTED EXPENDITURE IN TOTO BUT AT THE SAME TIME, IT IS ALSO NOT JUSTIFIABLE TO GRANT THE DEDUCTION OF ALL THE EXPENDITURE AS CLAIMED BY THE APPELLANT. NOW THE THIRD ALTERNATIVE ABOUT ACCEPTING THE LOSS OF RS. 21,68,893 AS PER LAPTOP IS CONSID ERED (ANNEXU RE 'G' OF THE ASSESSMENT ORDER) , IT IS NOTICED THAT THE BOOKS OF ACCOUNTS AS MAINTAINED IN THE LAPTOP DO NOT APPEAR TO BE THE COMPLETE RECORDS AS THE SURVEY ACTION WAS CARRIED OUT IN THE MONTH OF MARCH AND THEREFORE, IT IS NOT PROPER TO FULLY R ELY ON SUCH RECORDS. THERE ARE CHANCES THAT SOME TRANSACTIONS MIGHT NOT HAVE BEEN INCORPORATED IN THE LAPTOP WHICH MIGHT BE ACCOUNTED OR UNACCOUNTED TRANSACTION AND THEREFORE THE PICTURE ACTUALLY REFLECTED ON THE BOOKS OF ACCOUNTS IN THE LAPTOP COULD NOT B E THE CORRECT AND REAL PICTURE OF THE STATE OF AFFAIRS OF THE COMPANY. MOREOVER, THE TRANSACTIONS IN THE LAPTOP ACCOUNTS SHOWED A LOSS OF RS. 21.68 LACS BUT IT DID NOT REFLECT THE SOURCE OF FUNDS FROM WHICH THE SAID LOSS WAS MET AND THEREFORE, WHEN THE SOU RCES ARE NOT AVAILABLE, THE SAME HAS TO BE TREATED AS THE UNEXPLAINED INCOME OF THE APPELLANT. THUS, THERE ARE CERTAIN ISSUES WHICH REMAINED UNANSWERED IN THE COMBINED BOOKS OF ACCOUNTS ALSO. THEREFORE, I DO NOT FIND ANY JUSTIFICATION IN ADOPTING THE ALTER NATIVE CONTENTION OF ACCEPTING THE BOOK RESULTS AS REFLECTED IN THE LAPTOP AND ALLOW THE CLAIM OF LOSS. THEREFORE, THERE IS NO ALTERNATIVE BUT TO RESORT TO ESTIMATION OF GROSS PROFIT ON THE BASIS OF THE AVAILABLE RECORDS AND PAST TREND AS WELL AS PREVAILI NG RATE OF NET PROFIT IN CASE OF SIMILAR INDUSTRIES AS THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT WERE NOT CORRECTLY REFLECTING THE PROFIT OF THE APPELLANT AND WERE RIGHTLY REJECTED U/S. 145(3) OF THE ACT. ON PERUSAL OF COMPARATIVE GROSS PROFIT STAT EMENT, SUBMITTED BY THE ARS, IT IS OBSERVED THAT THE APPELLANT COMPANY HAD INCURRED GROSS LOSS IN THE A.Y. 2005 - 06 WHEREAS THE GROSS PROFIT IN THE A.Y. 2006 - 07 WAS 5.22%. IN THE YEAR UNDER APPEAL, THE APPELLANT HAD SHOWN GROSS PROFIT AT THE RATE OF 4.85%. THE COMPARATIVE INSTANCES AS QUOTED BY THE ARS SHOWED THE GROSS PROFIT MARGIN AT 8.81% AN D 11.32%. IN VIEW OF THIS TREND, I AGREE WITH THE CONTENTION OF THE ARS THAT IF THE ENTIRE ADDITION IS CONFIRMED, THE GROSS PROFIT RATIO WOULD GO UP TO ABOUT 23% WHICH IS DEFINITELY A DISTORTED RESULT LOOKING TO THE PRESENT PROFITABILITY OF THE ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 11 - APPELLANT CONCERN. CONSIDERING THE PAST TREND OF LOSS, THE MARGIN OF PROFIT IN THE EARLIER YEAR AND THE LARGE VOLUME OF TURNOVER, AND ALSO THE POSSIBILITY THAT SOME EXPENSES MIGH T HAVE BEEN INCORPORATED IN THE REGULAR BOOKS OF ACCOUNTS, THE PROFIT MARGIN FROM THE UNACCOUNTED ADDITIONAL TURNOVER SHOULD BE ON HIGHER SIDE AS COMPARED TO THE MARGIN SHOWN IN THE REGULAR BOOKS OF ACCOUNTS AND HENCE IT CAN BE SAFELY ASSUMED THAT THE APPE LLANT MUST HAVE EARNED AT LEAST 10% OF GROSS MARGIN ON THE ADDITIONAL TURNOVER WHICH IS ALMOST DOUBLE THE NORMAL GROSS MARGIN AS REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS. THE AO CONCLUDED THAT THE NET TURNOVER AFTER GR ANTING A TRADE DISCOUNT WAS RS. 4,20, 73,972. I THEREFORE, DIRECT THE AO TO ES TIMATE THE INCOME AT 10% OF RS. 4,20,73,972 AND SUSTAIN TH E ADDITION TO THE EXTENT OF RS. 42,07,397 AS AGAINST THE ADDITION OF RS. 4,20,73,972 MADE BY HIM. 6. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF TH E ASSESSING OFFICER, WHEREAS THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. THE UND ISPUTED FACTS OF THE CASE ARE THAT DURING THE COURSE OF SURVEY U/S 133A OF THE ACT CONDUCTED ON 03.03.2008, IT WAS FOUND FROM THE LAPTOP OF ONE OF THE DIRECTORS, SHRI SANJAY KUMAR SUDHRANIA , THAT IT CONTAINED ACCOUNTS OF PROCESS CHARGES ACCOUNT AND SANJ AY 06 - 07 ACCOUNT, ETC. FROM THE ACCOUNT OF PROCESS CHARGES OBTAINED FROM THE LAPTOP, THE ASSESSING OFFICER FOUND THAT THE TOTAL RECEIPT WAS 18,72,52,318/ - . FURTHER, ON EXAMINATION OF THE PROCESS CHARGES RECEIVED IN THE ACCOUNT SANJAY 06 - 07 ACCOUNT, I T WAS FOUND THAT A SUM OF RS.2,11,56,014/ - WAS CARRIED OVER AS OLD LOAN BALANCE FROM LAST YEAR AND NOT PROCESS CHARGES RECEIVED DURING THE YEAR. THE ASSESSING OFFICER ALSO OBSERVED THAT DISCOUNTS IN ALL THE TWELVE MONTHS OF THE YEAR HAD BEEN GIVEN BY THE ASSESSEE - COMPANY AT AN AGGREGATE AMOUNT OF RS.1,80,52,601/ - . THE ASSESSING OFFICER NOTED ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 12 - THAT THE PROFIT AND LOSS ACCOUNT MAINTAINED IN SHRI SANJAYS LAPTOP SHOWED TOTAL PROCESS CHARGES AFTER EXTENDING DISCOUNTS RECEIVED BY THE ASSESSEE - COMPANY AT RS.14,8 0,23,313/ - . HE ALSO NOTED THAT AS PER THE AUDITED ACCOUNTS FILED WITH THE RETURN OF INCOME OF THE RELEVANT YEAR SHOWED THE TOTAL PROCESS CHARGES AT RS.13,79,95,696/ - . THUS, THE ASSESSING OFFICER FOUND THAT PROCESS CHARGES TO THE EXTENT OF RS.1,00,27,617/ - HAS BEEN SUPPRESSED. HENCE, HE CONCLUDED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE - COMPANY WAS INCORRECT AND CANNOT LEAD THE ASSESSING OFFICER TO DETERMINE THE CORRECT INCOME REPRESENTING TRUE STATE OF AFFAIRS OF THE ASSESSEE. THEREFORE, THE BOOKS OF ACC OUNTS OF THE ASSESSEE - COMPANY WERE REJECTED. FURTHER, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE WAS TRANSACTING CASH, CHEQUE, BENAMI CHEQUES, BEARER CHEQUE SALES AND DISCOUNTING THE CHEQUES THROUGH A SHROFF SHRI JAIKUMAR PERIWAL AND DURING THE YEAR AN AMOUNT OF RS.4,72,05,175/ - WAS DISCOUNTED BY THE ASSESSEE FROM THE SHROFF AS REVEALED FROM THE ACCOUNT OF JAIKUMAR IN SHRI SANJAY KUMAR SUDHRANIA S LAPTOP. THE ASSESSING OFFICER FURTHER NOTED THAT SANJAYS ACCOUNT IN HIS LAPTOP CARRIED BOTH REGULAR BOOK E NTRIES AND UNACCOUNTED ENTRIES AND HE FOUND FROM THE CASH BOOK AND JAIKUMARS ACCOUNT AS FOUND IN SANJAY 06 - 07 THAT ONLY PART OF THE CASH RECEIPT FROM SHRI JAIKUMAR HAD GONE TO JOB CHARGES ACCOUNT AND REMAINING WAS DIRECTLY CARRIED TO CASH BOOK F ROM WHERE IT WAS EITHER USED FOR EXPENDITURE OR INVESTMENT OR FOR APPLICATION OF THE AMOUNT RECEIVED. THEREFORE, THE ASSESSING OFFICER HELD THAT THE ENTIRE CASH RECEIVED FROM SHRI JAIKUMAR CAN BE TREATED AS THE UNACCOUNTED RECEIPT ON ACCOUNT OF THE JOB CHA RGES. HE FURTHER OBSERVED THAT THE NET DISCOUNT GIVEN CAN BE FOUND FROM THE AMOUNT OF DISCOUNT VERSUS THE PROCESS CHARGES RECEIVED AS ENTERED BY SHRI SANJAY KUMAR SUDHRANIA IN HIS ACCOUNT SANJAY 06 - 07. THE RATIO OF SUCH DISCOUNT : PROCESS CHARGES WAS R S.1,80,52,601/ - : ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 13 - RS.16 ,60,75,914/ - , I.E. 10.87 : 100. THUS, IN ORDER TO MAKE A FAIR ESTIMATE OF THE ASSESSEES TOTAL RECEIPT ON ACCOUNT OF UNACCOUNTED JOB CHARGES, HE ALLOWED PROPORTIONATE DISCOUNT IN THE SAME RATIO AND WORKED OUT THE TOTAL DISCOUNT AT R S.51,31,203/ - AND THEREAFTER ARRIVED AT THE NET UN ACC OUNTED RECEIPT AT RS.4,20,73,972/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED ADDITIONAL SUM OF RS.3,41,36,466/ - AS ACTUAL EXPENSES ON ACCOUNT OF SALARY AS INCURRED FROM THE CASH BOOK. THE ASSESSING OFFICER REJECTED THE SAME ON THE GROUND THAT IT APPEARED EXCESSIVE AND FROM THE VOLUMINOUS SLIPS SUBMITTED, IT WAS NOT CLEAR WHETHER IT REPRESENTED ACCOUNTED WAGES OR UNACCOUNTED WAGES. IN VIEW OF THIS, HE HELD THAT IT WAS LOGICAL TO I NFER THAT THE ASSESSEE HAS ALREADY CLAIMED ALL THE EXPENSES IN THIS REGARD. FURTHER, HE DETERMINED THE INCOME OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION BY INCREASING THE PROFIT AS SHOWN BY THE ASSESSEE BY AN AMOUNT OF RS.4,20,73,972/ - . 8. ON AP PEAL, THE CIT(A) HELD THAT O N PERUSAL OF COMPARATIVE GROSS PROFIT STATEMENT SUBMITTED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE , IT IS OBSERVED THAT THE ASSESSEE - COMPANY HAD INCURRED GROSS LOSS IN THE ASSESSMENT YEAR 2005 - 06 , WHEREAS THE GROSS PROF IT EARNED IN THE ASSESSMENT YEAR 2006 - 07 WAS 5.22%. HE OBSERVED THAT I N THE YEAR UNDER APPEAL, THE ASSESSEE HAD SHOWN GROSS PROFIT OF 4.85%. HE OBSERVED THAT HE WAS IN AGREEMENT WITH THE CONTENTION OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT IF THE ENTIRE ADDITION OF RS. 4,20,73,972/ - WAS CONFIRMED, THEN THE GROSS PROFIT RATIO WOULD WORK OUT TO 23% WHICH WILL GIVE DISTORTED RESULT TO THE CURRENT PROFITABILITY OF THE ASSESSEE - CONCERN. HE ALSO POINTED OUT THAT C ONSIDERING THE PAST TREND OF LOSS, TH E MARGIN OF PROFIT IN THE EARLIER YEAR AND THE LARGE VOLUME OF TURNOVER, AND ALSO THE POSSIBILITY THAT SOME EXPENSES MIGHT HAVE BEEN INCORPORATED IN THE REGULAR BOOKS OF ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 14 - ACCOUNTS, THE PROFIT MARGIN FROM THE UNACCOUNTED ADDITIONAL PROCESSING CHARGES SHOULD BE ON HIGHER SIDE AS COMPARED TO THE MARGIN SHOWN IN THE REGULAR BOOKS OF ACCOUNTS AND THEREFORE, HE ESTIMATED GROSS PROFIT ON UNACCOUNTED PROCESSING CHARGES AT 10% AND RESTRICTED THE ADDITION TO RS. 42,07,397 / - IN PLACE OF THE ADDITION OF RS.4,20,73,972 MA DE BY THE ASSESSING OFFICER. 9. BEING AGGRIEVED BY THIS ORDER OF THE CIT(A), BOTH REVENUE AND ASSESSEE ARE IN APPEAL BEFORE US. 10. THE REVENUE IS IN APPEAL ON THE GROUND THAT THE CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION TO RS.42,07,397/ - I N PLACE OF RS.4,20,73,972/ - MADE BY THE ASSESSING OFFICER AND THE ASSESSEE IS IN APPEAL ON THE GROUND THAT THE ADDITION SUSTAINED BY THE CIT(A) BY ESTIMATING THE GROSS PROFIT OF THE ASSESSEE AT 10% IS ON A HIGHER SIDE KEEPING IN VIEW THE FACT THAT THE GROS S PROFIT EARNED BY THE ASSESSEE IN ASSESSMENT YEAR 2006 - 07, WHICH IS THE HIGHEST, WAS AT 5.22%, AND THEREFORE, THE GROSS PROFIT OF THE ASSESSEE IN THE PRESENT YEAR ON UNACCOUNTED PROCESSING CHARGES SHOULD BE ESTIMATED AT 5.22% AND NOT AT 10% AS HELD BY THE CIT(A). 11. THE DEPARTMENTAL REPRESENTATIVE CONTENDED BEFORE US THAT THE ASSESSING OFFICER WAS JUSTIFIED IN ADDING ENTIRE RS.4,20,73,972/ - AS IT WAS FOUND THAT THE SAID AMOUNT WAS THE SUPPRESSED PROCESSING CHARGES RECEIPT OF THE ASSESSEE. 12. WE FIND T HAT IN THIS REGARD THE CIT(A) HAS OBSERVED THAT ON ADDING ENTIRE SUPPRESSED RECEIPT THE GROSS PROFIT WORKS OUT TO 23% WHICH WHEN COMPARED TO THE GROSS PROFIT ACCEPTED IN THE CASE OF THE ASSESSEE IN PAST SHOWS THAT THE SAME IS NOT LIKELY TO BE CORRECT. THE ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 15 - DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY MATERIAL BEFORE US TO POINT OUT ANY ERROR IN THIS OBSERVATION OF THE CIT(A). 13. WE FIND THAT THE ASSESSING OFFICER HAS ACCEPTED THE EXPENSES SHOWN IN REGULAR BOOKS AS CORRECT AND ONLY TAKEN RECEIPT FROM THE DATA FOUND IN THE LAPTOP. THE ASSESSING OFFICER HAS GIVEN ABSOLUTELY NO REASON AS TO WHY ONLY RECEIPT WAS TAKEN FROM THE LAPTOP DATA AND WHY EXPENSES APPEARING IN LAPTOP DATA WERE NOT TAKEN INTO CONSIDERATION. IT IS NOT THE CASE OF THE REVENUE THAT THE DA TA FOUND IN THE LAPTOP SHOWS THAT THE ACTUAL NET INCOME OF THE ASSESSEE WAS MORE BY RS.4,20,73,972/ - FROM THE INCOME DISCLOSED IN THE RETURN OF INCOME. IT IS AN ESTABLISHED POSITION OF LAW THAT EVEN WHEN THE UNDISCLOSED SALE OR RECEIPT IS FOUND, THEN ALSO ONLY THE INCOME EMBEDDED IN SUCH UNDISCLOSED RECEIPT CAN ONLY BE BROUGHT TO TAX. ABOVE VIEW FINDS SUPPORT FROM THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SAMIR SYNTHETICS MILL, (2010) 326 ITR 410 (GUJ.) , WHEREIN IT WAS HELD THAT INCOME FROM SUPPRESSED SALE SHOULD BE DETERMINED BY ESTIMATING THE GROSS PROFIT OF THE ASSESSEE. FURTHER, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES, (2002) 258 ITR 654 (GUJ.), HELD THAT THE ENTIRE SALES COULD NOT BE ADDED AS INCOME OF THE ASSESSEE BUT ADDITION COULD BE MADE ONLY TO THE EXTENT OF ESTIMATED PROFITS EMBEDDED IN SALES. IN THE ABOVE CIRCUMSTANCES, WE DO NOT FIND ANY FORCE IN THE APPEAL OF THE REVENUE AND ACCORDINGLY, THE SAME IS DISMISSED. 1 4 . WITH REGARD TO THE ASSESSEES APPEAL, THE ONLY ARGUMENT OF THE AUTHORI ZED REPRESENTATIVE OF THE ASSESSEE IS THAT THE RATE OF GROSS PROFIT ESTIMATED AT 10% BY THE CIT(A) WAS ON A HIGHER SIDE AND THAT THE HIGHER RATE OF GROSS PROFIT SHOWN BY THE ASSESSEE IN ASSESSMENT ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 16 - YEAR 2006 - 07 AND ACCEPTED BY THE DEPARTMENT AT 5.22% SHOULD BE CONSIDERED AS A REASONABLE ESTIMATE OF GROSS PROFIT FOR DETERMINING THE INCOME OF THE ASSESSEE FROM UNACCOUNTED PROCESS ING CHARGES OF THE ASSESSEE. WE FIND THAT THE CIT(A) WHILE ESTIMATING THE GROS S PROFIT AT 10% HAS NOT GIVEN ANY BASIS FOR THE SAME, THOUGH HE HAS REFERRED TO THE GROSS PROFIT RATE OF THE ASSESSEE AT 5.22% IN ASSESSMENT YEAR 2006 - 07 AND 4.85% IN THE PRESENT ASSESSMENT YEAR. IN OUR CONSIDERED VIEW, THE HIGHEST RATE OF GROSS PROFIT SHO WN BY THE ASSESSEE IN ASSESSMENT YEAR 2006 - 07 AND ACCEPTED BY THE DEPARTMENT IS 5.22% AND IN OUR CONSIDERED VIEW, KEEPING IN VIEW THE GROSS PROFIT RATE DISCLOSED IN RESPECT OF RECORDED RECEIPT AT 4.85% WHICH IS LOWER THAN NOW ADMITTED GROSS PROFIT RATE OF 5.22% TO TAKE CARE OF THIS IT WILL BE JUST AND FAIR TO ESTIMATE THE GROSS PROFIT OF THE UNRECORDED RECEIPT @ 6.50%. WE, THEREFORE, MODIFY THE ORDER OF THE CIT(A) TO THIS EXTENT AND DIRECT THE ASSESSING OFFICER TO ACCEPT THE GROSS PROFIT RATE OF THE SUPPRE SSED RECEIPT OF RS.4,20,73,972/ - @ 6.50%. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS STATED ABOVE. 1 5 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY , THE 9 TH OF J ANUARY , 201 5 AT AHMEDABAD. SD/ - SD/ - ( G.C. GUPTA ) VICE PRESIDENT ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 09 / 01 /201 5 * BIJU T , PS ITA NOS. 1568 & 1937 /AHD/20 1 0 (ASSESSEE & REVENUE) M/S. RAMESHWAR TEXTILE MILLS LTD V. JCIT - AY 2007 - 08 - 17 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - IV, SURAT 5. , , / DR, ITAT, AHMEDABAD 6. [ / GUARD FILE . / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD