Sh. Saryan Singh Prop.M/s. Gagan Traders, Jammu V. The Income-tax Officer, Jammu

ITA 165/ASR/2013

• Counselvise Citation: 16520914 RSA 2013
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Business income; Income from undisclosed sources; Additional evidence; Initiation of penalty proceedings
• Section: 142(1); 133(6); 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.165(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :BHTPS1532A SHRI SARYAN SINGH, VS. INCOME TAX OFFICER, PROP. M/S. GAGAN TRADERS, WARD 1(3), BPO KOTLISHAH DULLAH JAMMU. NEAR KHOTIAN, R.S.PURA, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.JOGINDER SINGH, CA RESPONDENT BY:SH.MAHAVIR SINGH, DR DATE OF HEARING: 26/03/2014 DATE OF PRONOUNCEMENT:31/03/2014 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JAMMU DATED 12.02.2013 FOR THE ASSESSMENT YEAR 20 09-10 .THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: ITA NO.165(ASR)/2013 2 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE LD. CIT(A) JAMMU HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS.57,19,604/- M ADE BY THE A/O ON A/C OF UNEXPLAINED CASH DEPOSITS IN THE ASSE SSEES SAVING BANK A/C TREATED AS INCOME FROM UNDISCLOSED SOURCES. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE LD. CIT(A) JAMMU HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS.2,15,400/- MA DE BY THE A/O ON A/C OF UNSECURED LOANS ACCEPTED BY THE ASSE SSEE WITHOUT APPRECIATING THAT THE ASSESSEE PRODUCED DOC UMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE LD. CIT(A) JAMMU HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS.6,26,306/- MA DE BY THE A/O ON A/C OF UNVERIFIED CREDITORS. 4. THAT THE APPELLANT CRAVES TO LEAVE TO ADD, AMEND , MODIFY, DELETE ANY OF THE GROUND OF APPEAL BEFORE OR AT THE TIME O F HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 2. THE BRIEF FACTS OF THE CASE AS PER AOS ORDER AR E REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF PADDY AND WHEAT. IN REPLY TO QUESTIONNAIRE, THE COUNSEL OF TH E ASSESSEE SUBMITTED THAT THE RETURN HAS BEEN FILED U/S 44AF OF THE ACT. THE RETURN OF INCOME IS ACCOMPANIED BY THE BALANCE SHEET, P & L A /C, LIST OF SUNDRY CREDITOR AND UNSECURED LOANS. THE ASSESSES FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING AND THEE IS NO CHANGE IN METHO D OF ACCOUNTING IN THE PREVIOUS YEAR RELEVANT TO ASSTT. YEAR UNDER CONSIDERATION. NO UNSECURED LOANS WERE RAISED. NO INVESTMENTS HAS BEE N MADE, NO ADVANCES HAVE BEEN GIVEN TO ANY SUPPLIER NOR ANY AD VANCES HAVE BEEN TAKEN DURING THE YEARS. THE BANK STATEMENT OF BANK ACCOUNT NO.11358796897 MAINTAINED WITH THE STATE BANK OF IN DIA IS ENCLOSED WITH THE REPLY. DURING THE COURSE OF ASSESSMENT PRO CEEDING, THE COUNSEL OF THE ASSESSEE WAS ASKED TO PRODUCE THE BO OKS OF ACCOUNT. ITA NO.165(ASR)/2013 3 THE COUNSEL PRODUCED PRINT OUT OF CASH BOOK, LEDGER AND BANK BOOK PREPARED ON COMPUTER. THE ASSESSEE STATED THAT HE HAD NOT MAINTAINED THE REGULAR BOOKS OF ACCOUNT AS HIS TURN OVER WAS LESS THAN THE PRESCRIBED LIMITS AND WHEN REQUIRED DURING THE ASSESSMENT PROCEEDINGS, HE GOT THE BOOKS PREPARED ON COMPUTER ON THE BASIS OF BANK ACCOUNT AND SALES BILL BOOK. ON BEING ASKED AS TO WHY ALL TRANSACTIONS WERE MADE IN CASH. IT WAS STATED THAT FOOD GRAINS WERE PURCHASED FROM THE FARMERS WHICH HAD TO BE DONE IN CASH AND AS PAYMENTS WERE TO BE RECEIVED FROM RETAIL KARYNA MER CHANTS, THESE WERE DEPOSITED IN HIS CURRENT ACCOUNT. HE WAS FURTH ER REQUESTED TO FURNISHED THE INFORMATION AS REQUIRED VIDE QUESTI ONNAIRE AND ALSO GIVE DETAILS OF BANK ACCOUNTS AND THEIR STATEMENTS. THE COUNSEL OF THE ASSESSEE VIDE LETTER DATED 1.9.2011 SUBMITTED THAT THE ASSESSEE IS MAINTAINING ONLY ONE BANK A/C NO.11358796897 WHICH HAS BEEN ENCLOSED WITH THE REPLY. VIDE ORDER SHEET ENTRY DAT ED 11.11.11 WAS AGAIN REQUESTED TO GIVE THE DETAILS OF BANK ACCOUNT ALONGWITH THEIR STATEMENTS. HE STATED THAT THE ASSESSEE IS MAINTAIN ING ONLY ONE BANK ACCOUNT WITH SBI, R.S.PURA, JAMMU, BANK STATEMENT O F WHICH HAD BEEN ALREADY SUPPLIED. NO OTHER BANK A/C IS MAINTAI NED BY THE COUNSEL. THE COUNSEL OF THE ASSESSEE SOUGHT ADJOURN MENT AND CASE WAS ADJOURNED FOR 21.11.2011. ON 21.11.2011 SH. C HETAN SHARMA, CA COUNSEL OF THE ASSESSEE APPEARED AND STATED THAT THE ACCOUNTANT OF THE ASSESSEE, SH. KULDEEP RAJ WAS NOT AVAILABLE AS HE HAD GONE HIS HOME IN CONNECTION WITH MARRIAGE OF HIS SISTER. CAS E WAS ADJOURNED TO 5.12.2011. ON 5.12.2011 SH. CHETAN SHARMA CA COU NSEL OF THE ASSESSEE ATTENDED THE PROCEEDINGS ALONG WITH SH. KU LDEEP RAJ ACCOUNTANT OF THE ASSESSEE AND PRODUCED BILL BOOKS. OUT OF WHICH BILLS SR. NO. 1 TO 37 WERE USED. IT WAS STATED BY T HE ACCOUNTANT THAT THE TOTAL BILLS WERE ISSUED FROM SR. NO.1 TO 37 ONL Y DURING THE YEAR. HE WAS ASKED TO EXPLAIN THE TOTAL SALES MADE DURING THE YEAR. HE STATED THAT THE TOTAL SALES HAVE BEEN MADE AS PER T HE SALE BILLS ISSUED, BUSINESS TRANSACTIONS HAD BEEN MADE THROUGH BANK A/ C AND TOTAL TRANSACTIONS APPEARING IN THE BANK STATEMENTS HAS BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT. THE TRANSACTIONS HAVE BEE N MADE THROUGH BANK ACCOUNT WITH THE STATE BANK OF INDIA . THE ASS ESSEE HAS NO OTHER BANK ACCOUNT AND NO BUSINESS HAS BEEN CARRIED OUT E XCEPT THE BUSINESS AS SHOWN IN THE BANK ACCOUNT AND AS PER TH E SALE BILLS ISSUED. AS PER BILLS BOOK, THE TOTAL TRANSACTIONS HAVE BEEN MADE AT RS.38,89,799/-, THE DETAIL OF WHICH IS GIVEN AT PAG E 2 & 3 OF ASSESSMENT ORDER. ITA NO.165(ASR)/2013 4 3.2. MEANWHILE, INFORMATION AS CALLED FOR FROM S.B. I. JAMMU WAS RECEIVED WHICH HAS BEEN PLACED ON RECORD. IT HAS BE EN NOTICED THAT THE ASSESSEE HAS BEEN MAINTAINING THREE BANK ACCOUNT, D ETAILS OF WHICH IS AS UNDER: S.NO. NAME OLF BANK BANK A/C NO. NATURE OF A/C TOTAL TRANSACTIONS 1. SBI R.S.PURA, JAMMU 1138795897 C/A RS.33,50,000 2. -DO- 11358797946 SB RS.57,19,604 3. -DO- 130351980019 KCC RS.2,75,000 3.3. VIDE THIS OFFICE LETTER NO.7.12.2011, THE ASSE SSEE WAS REQUESTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AN D AS PER REPLY FILED BY HIM, IT WAS STATED THAT HE WAS MAINTAININ G ONLY ONE BANK ACCOUNT NO..1135876897 WITH THE STATE BANK OF INDI A, JAMMU. NO OTHER BANK ACCOUNT IS MAINTAINED BY THE ASSESSEE. ON RECEIPT OF INFORMATION FROM THE S.B.I. JAMMU, IT HAS COME TO N OTICE THAT HE HAS BEEN MAINTAINING THREE BANK A/C AS MENTIONED ABOVE. HE IS HAVING TWO OTHER BANK A/C. NOW MENTIONED AT SR.NO.2 & 3 AB OVE IN THE SAME BRANCH.THESE BANK ACCOUNTS HAVE NOT BEEN DISCLOSED IN THE BALANCE SHEET NOR THE TRANSACTIONS HAVE BEEN TAKEN INTO PR OFIT & LOSS A/C . IN THIS CONNECTION, HE WAS REQUESTED TO PLEASE TO PLE ASE EXPLAIN AS TO WHY THESE BANK ACCOUNTS HAVE NOT BEEN DISCLOSED TO THE DEPARTMENT AND THE TRANSACTION OF RS.57,19,604/- APPEARING IN A/C NO.11358797948 MAY NOT BE TREATED AS INCOME EARNED FROM UNDISCLOSED SOURCES, AS THE SAME HAS NOT BEEN DISCL OSED IN THE BOOKS OF ACCOUNT. 3.4. HE WAS FURTHER REQUESTED TO EXPLAIN THAT SINC E THE TOTAL RECEIPTS OF BOTH THESE ACCOUNTS EXCEEDED RS.90,69,604/- TO T HE MANDATORY LIMIT OF RS. 40 LACS, FOR GETTING OF ACCOUNTS AUDITED U/S 44AB OF THE ACT, HE WAS LIABLE TO GET HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT BUT HE HAD NOT GOT HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT, W HY PENALTY U/S 271B MAY NOT BE INITIATED. 3.5. HE WAS ALSO REQUESTED TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF SUNDRY CREDITORS AD UNSECURED L OANS AS APPEARING IN THE BALANCE SHEET ENCLOSED WITH THE RETURN OF IN COME. ITA NO.165(ASR)/2013 5 VIDE ORDER SHEET ENTRY DATED 5.12.11 AND VIDE LETTE R DATED 7.12.2011, THE COUNSEL OF THE ASSESSEE WAS REQUESTED TO FILE T HE EXPLANATION WITH REGARD TO THE ABOVE SAID OBJECTS ON 12.12.11 AND 14 .12.11 BUT NEITHER THE COUNSEL OF THE ASSESSEE TURN UP NOR THE ASSESSE E ATTENDED THE PROCEEDINGS NOR ANY WRITTEN SUBMISSION WAS FILED. I T APPEARS THAT THE ASSESSEE DOES NOT HAVE ANY EXPLANATION TO SUBMIT. S INCE THIS IS TIME BARRING ASSESSMENT, PROCEEDINGS CAN NOT BE EXTENDED FOR LONG TIME. MOREOVER, THE PROCEEDINGS WERE INITIATED ON 19.7.20 11 WHEN NOTICE U/S 142(1) AND QUESTIONNAIRE WERE ISSUED. TILL NOW, THE ASSESSEE HAS AVAILED SUFFICIENT TIME, IF HE HAD ANY EXPLANATION HE WOULD HAVE FILED. UNDER THESE CIRCUMSTANCES, I PROCEED TO COMPLETE TH E ASSESSMENTS AS PER THE INFORMATION AND MATERIALS ON RECORD. THE NARRATION OF THE BALANCE SHEET, PROFIT & LOSS A CCOUNT AND SUNDRY DEBTORS AND UNSECURED LOANS ARE DISCUSSED AS UNDER: BALANCE SHEET: THE BALANCE SHEET, A COPY OF WHICH W AS FURNISHED BY THE ASSESSEE, THE LIABILITY SIDE SHOWED RS.942885/- , RS.215400/- AND RS.626306/- AS CAPITAL ACCOUNT. UNSECURED LOAN AND SUNDRY CREDITORS AND ON THE ASSETS SIDE OF THE BALANCE SHE ET THE ASSESSEE HAS SHOWN FURNITURE & FIXTURE RS.20205, CLOSING STOCK R S.11,14,261/-, CASH IN HAND RS.34250/- AND STATE BANK OF INDIA C /A RS.615,875/- RESPECTIVELY. INFORMATION U/S 133(6) OF THE INCOME TAX ACT, 1961 WAS CALLED FOR FROM THE BANK WHICH HAS BEEN PLACED ON R ECORD, ON GOING THROUGH, THE S/B A/C NO.11378797948, STATEMENT OF A CCOUNT OF THE ASSESSEE MAINTAINED WITH STATE BANK OF INDIA, R.S.P URA BRANCH, JAMMU, IT WAS OBSERVED THAT THERE WAS A TOTAL CRED IT OF RS.57,19,604/-. THE ASSESSEE DID NOT DISCLOSE THIS ACCOUNT IN ITS BOOKS OF ACCOUNT. THE ASSESSEE HAS DISCLOSED ONLY C/A IN ITS BOOKS OF ACCOUNT OF WHICH CREDIT BALANCE IS SHOWN RS.615875/ -. AS SUCH THE ASSESSEE HAS NOT DISCLOSED AFORESAID ACCOUNTS IN T HE BALANCE SHEET AND HAD CONCEALED FROM THE DEPARTMENT DELIVERATELY. SO THAT THE TRANSACTIONS MADE THROUGH THE ACCOUNTS COULD NOT B E TAKEN INTO PROFIT AND LOSS ACCOUNT, MERELY TO SUPPRESS THE INCOME. BOOKS OF ACCOUNT: THE ASSESSEE PRODUCED PRINT OUT O F SO CALLED LEDGER AND CASH BOOK. THE LEDGER SHOWN THE ACCOUNTS IN RES PECT OF CAPITAL ACCOUNT, BANK ACCOUNT , COPY OF ACCOUNT OF THE PART IES, STAFF WELFARE ACCOUNT IS REFLECTED IN THE BALANCE SHEET AND PROF IT AND LOSS ACCOUNT. ITA NO.165(ASR)/2013 6 IN THIS ACCOUNT, ONLY THE PARTIES ACCOUNT HAS BEEN MAINTAINED WHICH SHOWS CREDIT AND DEBITS BALANCES . ALL THE DEBITS A ND CREDIT ENTRIES ARE SHOWN IN CASH. THIS ONLY SHOWS THAT THE BOOKS OF A CCOUNT PRODUCED BEFORE THE UNDERSIGNED ARE NOT THE ONES WHICH ASSES SEE SUPPOSED TO PREPARE DURING THE COURSE OF HIS BUSINESS. FURTHER, THE ASSESSEE DID NOT PRODUCE THE PURCHASE VOUCHERS AND OTHER BUSINES S RELATED VOUCHERS ON THE BASIS OF WHICH BOOKS OF ACCOUNT HAV E BEEN PREPARED. HE WAS FURTHER ASKED AS TO WHY BOOKS OF ACCOUNT MA Y NOT BE REJECTED UNDER THE PROVISIONS OF SECTION 145(3) OF THE ACT, AS THESE HAVE NOT BEEN MAINTAINED DURING THE REGULAR COURSE OF BUSINE SS AND DOES NOT GIVE THE CORRECT AND COMPLETE INFORMATION OF THE AC COUNTS ON THE BASIS OF WHICH THE CORRECT INCOME CAN BE DETERMINED. THE COUNSEL OF THE ASSESSEE DID NOT GIVE ANY REPLY. THEREFORE, THE UND ERSIGNED IS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNT FOR THE REASONS DISCUSSED ABOVE ARE ACCORDI NGLY REJECTED AS PROVIDED U/S 145(3) OF THE ACT. SUNDRY CREDITOR AND UNSECURED LOANS. : THE ASSESSEE WAS ASKED TO GIVE THE COMPLETE ADDRESSES OF THE CREDITORS AND PE RSONS FROM WHOM UNSECURED LOANS HAVE BEEN RAISED. AS STATED BY THE ASSESSEE THAT PURCHASES WERE MADE MAINLY FROM THE FARMERS. THE FA RMER WHO CAME TO SELL THE FOOD GRAINS (WHEAT AND PADDY), HE MADE PURCHASES FROM THEM. THE GOODS PURCHASED FROM FARMERS, IT IS NATU RAL TO HAVE THE DETAILS OF PERSONS TO WHOM THE PAYMENTS ARE REQUIR ED TO BE MADE. BUT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS OF CREDI TORS AND THE PERSONS FROM WHOM UNSECURED LOANS HAVE BEEN RAISED. THE LED GER DOES NOT SHOW ANY ACCOUNTS OF THE PERSONS FROM WHOM THE PURC HASES ARE CLAIMED TO HAVE BEEN MADE. NO BILLS IN RESPECT OF P URCHASES HAVE BEEN PRODUCED. SINCE THE ASSESSEE DOES NOT PROVE TH E GENUINENESS OF SUNDRY CREDITOR AND THE PERSONS FROM WHOM UNSECURE D LOANS RAISED, THE AMOUNT OF RS.626306/- AND RS.215400/- IS ADDED TO THE INCOME OF THE ASSESSEE AS PER PROVISIONS OF SECTION 68 OF THE ACT. 3. BEFORE THE LD. CIT(A), THE ASSESSEE PRODUCED THE ADDITIONAL EVIDENCE, WHICH WERE SENT TO THE AO, WHO SUBMITTED THAT THERE WAS NO RELEVANCE TO PRODUCE SUCH ADDITIONAL EVIDENCE AT THIS JUNCTURE O F TIME AND THEREFORE, THE ITA NO.165(ASR)/2013 7 ADDITION MADE BY THE AO SHOULD BE DECIDED ON MERITS AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 4. THE LD. CIT(A) AGREED TO THE REPORT OF THE A.O. AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND OBSERVED THAT THE AOS OBJECTION TO ADMIT THE ADDITIONAL EVIDENCE HAS SOME FORCE. 5. THE LD. COUNSEL FOR THE ASSESSEE, MR. JOGINDER S INGH, CA SUBMITTED THE WRITTEN SUBMISSIONS, WHICH ARE REPRODUCED AS UN DER: THE AO MADE ADDITIONS OF RS.57,19,604/- ON A/C OF UNEXPLAINED CASH DEPOSITS IN THE SAVING BANK ACCOUNT WHICH IS FURTHE R CONFIRMED BY THE CIT(A). IT WAS SUBMITTED BEFORE THE AO AS WELL AS B EFORE THE LD. CIT(A) THAT ONE OF THE ACCOUNTS OF THE BUSINESS HAS BEEN LEFT OUT DUE TO OVERSIGHT OF ACCOUNTANT AND ALL THE RECEIPTS IN THE SAID ACCOUNT PERTAINS TO HIS BUSINESS. THE BOOKS OF ACCOUNTS IN RESPECT OF THE BUSINESS RECEIPTS IN THE SAID BANK ACCOUNT WAS PROD UCED BEFORE CIT(A) FOR VERIFICATION WHICH WERE FORWARDED TO AO IN REMAND PROCEEDINGS. THE AO IN THE REMAND REPORT HAS NOT M ADE ANY ADVERSE COMMENT ON THE SAID ACCOUNTS PRODUCED BEFORE HIM. H OWEVER, THE AO MAINTAINED THAT THE BOOKS OF ACCOUNT WERE REJECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND A NUMBER OF OPPORTUNI TIES WERE PROVIDED TO THE ASSESSEE DURING THE ASSESSMENT PROC EEDINGS. IT IS ALSO IMPORTANT TO POINT THAT THE AO BOTH AT THE TIME OF ASSESSMENT PROCEEDINGS AND REMAND PROCEEDINGS HAS MENTIONED TH AT THE ASSESSEE HAS EXCEEDED THE MONETARY LIMIT OF RS. 40 LAKHS FOR GETTING THE ACCOUNTS AUDITED U/S 4AB OF THE ACT AND FAILED TO G ET HIS ACCOUNTS AUDITED AND INITIATED PENALTY U/S 271B OF THE ACT. THE INITIATION OF PENALTY PROCEEDINGS U/S 271B OF THE ACT CLEARLY SHO WS THAT THE AO HAD ACCEPTED THAT THE CREDITS IN THE SAVING BANK ACCOUN T WHICH HAD LEFT TO BE DISCLOSED DUE TO OVERSIGHT REPRESENTS THE BUSINE SS RECEIPTS AND ACCORDINGLY THE AO CONSIDERED THOSE RECEIPTS FOR CA LCULATION OF BUSINESS TURNOVER TO DETERMINE WHETHER THE PROVISIO NS OF SEC. 44AB ARE APPLICABLE OR NOT. ITA NO.165(ASR)/2013 8 IT IS TO SUBMIT THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED U/S 145(3) OF THE ACT, IT IS THE DUTY OF THE AO TO MAKE THE BE ST JUDGMENT ASSESSMENT OF INCOME OF THE ASSESSEE WHICH IS REAS ONABLE BASED ON THE MATERIAL ON RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING PADDY WHERE THE MARGINS ARE NORMALLY NOT MO RE THAN 4% TO 5% WHEREAS THE ASSESSEE HIMSELF HAS PRODUCED THE BO OKS OF ACCOUNTS IN RESPECT OF RECEIPTS IN S.B. A/C NOT DISCLOSED I N THE RETURN WHICH DISCLOSED A PROFIT OF RS.676,365/- I.E. 12.36% WHIC H IS QUITE HIGHER THAN THE PROFIT RATE OF THE BUSINESS AND REFLECT T HE TRUE PROFIT ASSESSED AS PER BOOKS OF ACCOUNT. IT IS, THEREFORE, REQUEST ED TO YOUR GOODSELF TO KINDLY REDUCE THE ADDITION MADE BY THE AO IN RES PECT OF CREDITS IS S.B. ACCOUNTS OF THE ASSESSEE TO RS.676,365/- WHICH IS THE TRUE PROFIT OF THE ASSESSEE IN RESPECT OF TRANSACTIONS ROUTED T HROUGH THE SAID ACCOUNT. COPY OF SUBMISSION OF THE ASSESSEE ALONG W ITH THE FINANCIAL STATEMENTS OF THE ASSESSEE PRODUCED BEFORE CIT(A) A RE ENCLOSED HEREWITH ON PAGE NO. 1 TO 7 ENCLOSURES. GROUND NO.2: THE AO HAS MADE AN ADDITION ON A/C OF UNEXPLAINED UNSECURED LOANS. DURING THE COURSE OF APPELLATE PRO CEEDINGS, THE DETAILS OF PARTIES FROM WHOM UNSECURED LOANS HAVE B EEN RAISED ALONG WITH THEIR AFFIDAVITS HAVE BEEN PRODUCED BEFORE THE LD. CIT(A) WHICH WERE FORWARDED TO THE AO FOR VERIFICATION. THE AO HAD NOT MADE ANY VERIFICATION IN RESPECT OF THESE AFFIDAVITS AND REP ORTED THAT THESE WERE NOT PRODUCED DURING THE COURSE OF ASSESSMENT. THE ASSESSEE HAS DISCHARGED ITS ONUS BY PROVIDING THE DETAILS OF PAR TIES FROM WHOM PETTY LOANS WERE RAISED ALONG WITH THEIR CONFIRMAT ION. THEREFORE, IT IS REQUESTED THAT THE ADDITION ON ACCOUNT OF UNEXPLAIN ED UNSECURED LOANS MAY KINDLY BE DELETED. GROUND NO.3 : THE AO HAS MADE AN ADDITION OF RS.6,2 6,306/- ON A/C OF UNEXPLAINED SUNDRY CREDITOR SHOWN IN THE FINANCI AL STATEMENTS PRODUCED DURING THE COURSE OF ASSESSMENT IN RESPECT OF BUSINESS TRANSACTIONS DISCLOSED IN THE RETURN OF INCOME. DUR ING THE COURSE OF APPELLATE PROCEEDINGS, THE DETAILS OF CREDITORS ALO NGWITH THEIR CONFIRMATION WERE PRODUCED WHICH WERE FORWARDED TO THE AO FOR VERIFICATION. THE AO HAS NOT MADE ANY VERIFICATION FROM THESE PARTIES NOR MADE ANY ENQUIRY FROM THE ASSESSEE IN RESPECT O F THESE CREDITORS. THE ASSESSEE HAS DISCHARGED ITS ONUS BY PROVIDING T HE DETAILS OF ITA NO.165(ASR)/2013 9 CREDITORS AND THEIR CONFIRMATION. THEREFORE, IT IS REQUESTED THAT THE ADDITION ON A/C OF UNEXPLAINED UNSECURED LOANS MAY KINDLY BE DELETED. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION, IT IS AL SO PERTINENT TO MENTION HERE THAT THE BOOKS OF ACCOUNT IN WHICH THE SE CREDITORS WERE REFLECTED WERE REJECTED U/S 145(3) OF THE ACT DURIN G THE COURSE OF ASSESSMENT. ONCE THE BOOKS OF ACCOUNT ARE REJECTED U/S 145(3) AND RATE OF PROFIT IS APPLIED, NO SEPARATE ADDITION COU LD BE MADE. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS: (I) CIT VS. AGGARWAL ENGINEERING CO. (2006) 302 ITR 646 (P&H) WHERE THE COURT HAS CONCLUDED THAT NO SEPARATE AD DITION ON ACCOUNT OF CASH CREDIT AND ON ACCOUNT OF EXPLAINED PAYMENTS FOR PURCHASES MADE OUTSIDE THE BOOKS OF ACCOUNTS CAN BE MADE ONCE THE NET PROFIT RATE IS APPLIED ON CONTRACT RECEIPT OF AN ASSESSEE FOR ESTIMATING HIS INCOME FROM CONTRACT WORK. (II) CIT VS. GK CONTRACTOR (2009) 19 DTR (RAJ) 305 IN WHICH IT HAS BEEN HELD THAT AO HAVING ESTIMATED THE PROFIT BY APPLYING A HIGHER NET PROFIT RATE TO TOTAL CONTRACT RECEIPTS AFTER RE JECTING BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SEC. 145(3), NO SEPARATE ADDITION CAN BE MADE ON ACCOUNT OF CASH CREDIT U/S 68 EVEN THOUGH THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS OF PROOF IN EXPLAINING THE AMOUNT SHOWN IN THE BOOKS OF ACCOUNTS AS MARKET OUT STANDING. (III) JURISDICTIONAL ITAT AMRITSAR BENCH IN THE CAS E OF RESHI CONSTRUCTION CO. SRINAGAR IN ITA NO. 462(ASR)/2008 FOR THE A.Y. 2005-06. THE ISSUE INVOLVED IN THE SAID CASE WAS TH AT ONCE THE INCOME OF THE ASSESSEE IS ESTIMATED ON NET PROFIT BASIS, N O FURTHER ADDITION CAN BE MADE. THE FINDING OF THE BENCH ARE AS UNDER: AS REGARDS TO SECOND GROUND REGARDING THE ADDITION OF RS.15,00,000/- ON ACCOUNT OF UNEXPLAINED CREDITS. THE A.O. NOTICED THE SUNDRY CREDITORS FOR SUPPLIES AND SERVICES UNDE R THE HEAD CURRENT LIABILITIES TO THE TUNE OF RS.66,47,821/- . ON ASKING BY THE A.O., THE ASSESSEE COULD NOT FURNISH THE ADDRESS OF THE CREDITORS AND SO LUMPSUM ADDITION OF RS.15 LACS WAS MADE ON ACCOU NT OF UNEXPLAINED CREDITS. AS PER THE CONTENTION OF THE ASSESSEE THAT THE A.O. HAS NOT GIVEN ANY BASIS FOR MAKING ANY ADDITIO N AND NO ADHOC ADDITION COULD BE MADE ONCE THE NET PROFIT RATE WAS BEING APPLIED. IN ITA NO.165(ASR)/2013 10 SUPPORT OF HIS CONTENTION, THE ASSESSEE CITED THE J UDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT REPORTED IN 206 C TR 648 IN THE CASE OF CIT VS. AGGARWAL ENGG. CO. (SUPRA). THE LE ARNED CIT(A) CALLED FOR THE REMAND REPORT FROM THE A.O. AND DELE TED THE ADDITION BY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONA L HIGH COURT(SUPRA). AFTER GOING THROUGH THE RELEVANT REC ORD AVAILABLE WITH US AND THE DECISION RENDERED BY THE HONBLE JURISDI CTIONAL HIGH COURT (SUPRA), WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS DELETED THE ADDITION IN DISPUTE BY FOLLOWING THE ORDER OF THE J URISDICTIONAL HIGH COURT (SUPRA). NO INTERFERENCE IS CALLED FOR. THE REFORE, THE SECOND GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED . IN VIEW OF THE ABOVE FACTS AND LEGAL POSITION, IT I S REQUESTED TO YOUR HONOUR TO KINDLY DELETE THE ADDITIONS MADE TO THE I NCOME OF THE ASSESSEE. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE D ID NOT INCLUDE TWO BANK ACCOUNTS AS MENTIONED HEREINABOVE. THE ASSESSEE HAS SUBMITTED THE EXPLANATION AND THE SAME WERE NOT INCLUDED DUE TO OVER-SIGHT OF THE ACCOUNTANT BUT AT THE SAME TIME, ALL THE RECEIPTS O F THE SAID BANK ACCOUNTS PERTAIN TO THE ASSESSEE. THE ASSESSEE HAS PREPARED THE BOOKS OF ACCOUNT INCLUDING THE SAID BANK ACCOUNTS, WHICH WERE ORIGIN ALLY NOT ACCOUNTED FOR AND PRODUCED BEFORE THE A.O. IN THE REMAND PROCEEDI NGS. THE AO HAS NOT MADE ANY ADVERSE COMMENTS ON THE SAID ACCOUNTS PROD UCED BEFORE HIM. IT IS ITA NO.165(ASR)/2013 11 ALSO TRUE THAT THE BOOKS OF ACCOUNT ORIGINALLY MAI NTAINED BY THE ASSESSEE WERE NOT FOUND CORRECT BECAUSE THE ASSESSEE HAS NO T INCLUDED THE TWO BANK ACCOUNTS AND THEREFORE, THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ACTION OF THE A.O. FOR REJECTION OF BOOKS OF ACCOUNT U/S 145 (3) OF THE ACT. 7.1. AS REGARDS THE ESTIMATION OF INCOME, ONCE THE BOOKS OF ACCOUNT ARE REJECTED, ESTIMATION OF INCOME HAS TO BE MADE. THE LD. COUNSEL FOR THE ASSESSEE FOR ESTIMATION OF ACCURATE INCOME, PREPARE D THE BOOKS OF ACCOUNT AND SUBMITTED THAT NORMALLY MARGIN IN SUCH BUSINESS IS 4% TO 5%, WHICH CAN BE VERIFIED IN SUCH TRADE. THE ASSESSEE DISCLOSED A NET PROFIT OF RS.6,76,365/- WHICH IS 12.36% ON THE TURNOVER NOT DISCLOSED. THE ASSESSEE HIMSELF HAS COOPERATED IN THE APPELLATE PROCEEDINGS AND ASSESSMENT PROCEEDINGS AND THE LD. CIT(A) SHOULD HAVE ADMITT ED THE ADDITIONAL EVIDENCES. IN OUR VIEW, THE ASSESSEE HAS RIGHTLY ESTIMATED NET PROFIT OF RS.6,76,365/- ON THE UNDISCLOSED ACCOUNTS AND THE A O WAS NOT JUSTIFIED IN TREATING TOTAL CREDITS IN THE SAID BANK ACCOUNTS AS INCOME. IT IS ONLY THE NET PROFIT, WHICH CAN BE ADDED TO THE INCOME OF THE ASS ESSEE WHICH IS A SETTLED LAW. IN THE FACTS AND CIRCUMSTANCES, THE AO IS DIR ECTED TO REDUCE THE ADDITION TO RS.6,76,365/- FROM THE ADDITION OF RS.5 7,19,604/-. THE ORDER OF ITA NO.165(ASR)/2013 12 THE LD. CIT(A) IS ACCORDINGLY MODIFIED. THUS, GROUN D NO.1 OF THE ASSESSEE IS PARTLY ALLOWED. 8. AS REGARDS GROUND NO.2, THE ASSESSEE HAS SUBMITT ED THE AFFIDAVITS FROM THE PERSONS FROM WHOM LOANS HAVE BEEN RAISED A ND IN THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) AND THE A.O. IN THE R EMAND PROCEEDINGS WERE NOT JUSTIFIED TO REJECT THE SAME WITHOUT GIVING AN Y REASONS. IN THE FACTS AND CIRCUMSTANCES, THE ADDITION SO SUSTAINED IS DIRECTE D TO BE DELETED. 9. AS REGARDS GROUND NO.3 WITH REGARD TO ADDITION O F RS.6,26,306/-, THE ASSESSEE HAS SUBMITTED CONFIRMATION OF CREDITORS A ND THE SAME WERE AVAILABLE BEFORE THE LD. CIT(A) AS WELL AS BEFORE T HE A.O. BUT THE LD. CIT(A) AND THE A.O. IN THE REMAND PROCEEDINGS REJE CTED THE SAME WITHOUT ANY VALID REASON. SINCE THE CREDITORS RELATED TO TH E PURCHASES MADE AND THE ASSESSEE HAS ALREADY COMPUTED NET PROFIT OF RS.6,76 ,365/-, THEREFORE, NO FURTHER ADDITION CAN BE MADE ON ACCOUNT OF PURCHASE S SO MADE, WHICH TANTAMOUNT TO DOUBLE ADDITION. ACCORDINGLY, THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE SAID ADDITION MADE BY THE AO. ACCORD INGLY, THE ADDITIONS SO MADE ARE DIRECTED TO BE DELETED. ITA NO.165(ASR)/2013 13 10. GROUND NO.4 IS GENERAL IN NATURE AND THEREFORE, REQUIRES NO ADJUDICATION. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.165(ASR)/2013 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MARCH, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31ST MARCH, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH. SARYAN SINGH JAMMU 2. THE ITO WARD 1(3), JAMMU 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR