The ITO, Shajapur V. Shri Bansilal Bherulal Agrawal, Shajapur

ITA 222/IND/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99178 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 08-10-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 18-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S DESHPANDE
• Assessee Lawyers: R A VERMA
• Keywords: Reopening of assessment; Unexplained cash credit; Gift; Business income; Depreciation; Loose papers; Tangible material; Onus to prove; Reason to believe
• Section: 147; 68; 148; 144

Judgement Text

BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER ITA NOS. 210 TO 213/IND/2013 A.YS. 2003-4 TO 2006-07 BANSILAL BHERULAL AGRAWAL SHAJAPUR ::: APPELLANT VS INCOME TAX OFFICER SHAJAPUR ::: RESPONDENT ITA NOS. 222 TO 225/IND/2013 A.YS. 2003-4 TO 2006-07 INCOME TAX OFFICER SHAJAPUR ::: APPELLANT VS BANSILAL BHERULAL AGRAWAL MAKSI ::: RESPONDENT BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 2 ASSESSEE BY SHRI S.S. DESHPANDE RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 8.10.2015 DATE OF PRONOUNCEMENT 1 .1 2 .2015 O R D E R PER SHRI B.C. MEENA, AM ALL THESE APPEALS FILED BY THE ASSESSEE AND REVENUE EMANATE FROM DIFFERENT ORDERS OF THE LEARNED CIT(A), UJJAIN, DATED 21.1.2013. 2 THE ASSESSEE INDIVIDUAL IS ENGAGED IN THE BUSINESS O F MANUFACTURING, REPACKING AND TRADING OF GHEE. THE COMMERCIAL DEPTT. CARRIED OUT SURVEY OPERATION AT THE BUSINESS PREMISES OF THE ASSESSEE ON 21.10.2005 AND 26.10.2005 AND FOUND VARIOUS LOOSE PAPERS AND OTHER DOCUMENTS IN RELATION TO UNDISCLOSED SALES MADE BY THE ASSESSEE PERTAINING TO VARIOUS ASSESSMENT YEARS. ON TH E BASIS OF THIS INFORMATION, THE ASSESSING OFFICER ISSU ED NOTICES U/S 148 OF THE ACT WHICH WAS SERVED UPON THE BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 3 ASSESSEE. THE ASSESSEE DID NOT FILE RETURN OF INCOME BUT SUBMITTED THAT THE ORIGINAL RETURN FILED MAY BE TREATE D AS RETURN OF INCOME IN RESPONSE TO NOTICE U/ 148 OF TH E ACT. THE ASSESSING OFFICER MADE ORDER U/S 144 READ WITH SECTION 147 OF THE ACT AND ESTIMATED THE GP FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 @ 12.5% FOR THE ASSESSMENT YEAR 2005-06 @ 8.96% AND FOR THE ASSESSMENT YEAR 2006-07 @ 6.58%. THE ASSESSING OFFICER ALSO MADE THE ADDITION ON ACCOUNT OF INVESTMENT IN UNRECORDED PURCHASES. THE ADDITIONS WERE ALSO MADE U/S 68 OF THE A CT AND THERE WERE OTHER SMALL ADDITIONS ALSO. ITA NO. 210/IND/2013 (ASSESSMENT YEAR 2003-04) THE GROUNDS OF APPEAL OF THE ASSESSEE READ AS UNDER :- 1. THE REOPENING OF THE ASSESSMENT IS BAD IN LAW AND ILLEGAL 2. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ESTIMATES OF SALES AND APPLYING THE N.P. RATE AT 3# AND SUSTAINING THE ADDITION OF RS.15,06,696/- BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 4 (WRONGLY NUMBERED AS 1) 3. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.22,77,777/- ON ACCOUNT OF PEAK INVESTMENTS ON UNRECORDED PURCHASES. (WRONGLY NUMBERED AS 2) 4. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITIO N OF RS.6,00,000/- U/S 68 OF THE ACT . (WRONGLY NUMBERED AS 3) 5. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITI ON OF RS.1,59,163/- ON ACCOUNT OF DIFFERENCE IN BALANCES OF CREDITORS. (WRONGLY NUMBERED AS 4) 6. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.2,22,026/-. (WRONGLY NUMBERED AS 5) 7. THE ADDITION OF RS.36000/- ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS IS UNWARRANTED FOR AND HENCE BE DELETED. 3. GROUND OF APPEAL IN THE REVENUES APPEAL NO. 222/IND/2013 FOR THE ASSESSMENT YEAR 2003-04 READ AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 5 DIRECTING TO APPLY NET PROFIT RATE OF 3% ON UNRECORDED SALES INSTEAD OF GROSS PROFIT RATE APPLIED BY THE A.O. THEREBY RESTRICTING THE G.P. ADDITION TO RS.15,06,969 IN SPITE OF THE FACT THAT THE ASSESSEE WAS INDULGING IN CARRYING SALE AND PURCHASE OUTSIDE THE BOOKS OF ACCOUNTS AND THE ASSESSEE HAS NOT PUT FORTH ANY DOCUMENTARY EVIDENCE WHICH SHOWS THAT THE ASSESSEE HAS INCURRED EXPENSES OUT OF BOOKS RELATING TO PROFIT & LOSS ACCOUNT ITEMS. THE A.O. HAS MADE G.P. ADDITION OFRS.63,01,738/- ONLY WHEREAS THERE IS DIFFERENCE OF RS.90,00,000/- IN THE UNACCOUNTED PURCHASE AND SALE ESTIMATED BY THE SALES TAX DEPARTMENT. 4. IN GROUND NO. 1 THE ASSESSEE HAS CHALLENGED THE REOPENING OF THE ASSESSMENT. BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 6 5. WE HAVE HEARD BOTH THE SIDES. THE COMMERCIAL TAX DEPTT. CONDUCTED THE SURVEY OPERATION AT THE BUSINESS PREMISES OF THE ASSESSEE WHEREIN VARIOUS LOOSE PAPERS AND DOCUMENTS WERE SEIZED WHICH REFLECT THE UNRECORDED SALES. THE INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER AND AFTER RECORDING REASONS THE NOTICES U/S 148 FOR VARIOU S ASSESSMENT YEARS WERE ISSUED. THUS, THE REOPENING WAS BASED ON TANGIBLE MATERIAL WHICH WAS SUFFICIENT TO FORM REASON TO BELIEVE FOR ISSUING THE NOTICES U/S 148 OF THE ACT. THE NOTICE WAS ISSUED AFTER RECORDING PROPER REASONS. THE NOTICE WAS DULY SERVED ON THE ASSESSEE WE, THEREFORE, FIND NO MERIT IN THIS GROUND OF THE ASSESSEE AND DISMISS T HE SAME. 6. IN GROUND NO. 2 OF THE ASSESSEES APPEAL AND THE ONL Y GROUND IN THE REVENUES APPEAL REGARDING ESTIMATING THE NET PROFIT RATE OF 3% ON THE UNRECORDED SALES. THE AS SESSEE HAS CHALLENGED APPLICATION OF NP RATE OF 3% AND SUSTAINING BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 7 THE ADDITION OF RS. 15,06,696/- AND THE REVENUE HAS CHALLENGED THE DELETION OF GP ADDITION MADE BY THE ASSESSING OFFICER AT RS. 63,01,738/-. 7. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BEFORE US. THE SALE S RECORDED BY THE ASSESSEE AND THE NET PROFIT RATE DECL ARED IN THE BOOKS OF ACCOUNTS AND SUPRESSED SALES AND ESTIMATIN G THE GP BY THE ASSESSING OFFICER IS AS PER THE FOLLOW ING CHART :- SUPPRESSED SALES G.P. % G.P. ADDED 5,02,23,225 12.5% 63,01,738 3,00,00,000 12.5% 57,84,589 2,52,16,694 8.96% 29,70,692 15,51,30109 6.58% 1,0556175 BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 8 8. THE LEARNED CIT(A) HAS CONSIDERED VARIOUS CASE LAWS RELIED UPON. WE HAVE ALSO GONE THROUGH VARIOUS ASPECTS OF THE CASE. THE RELEVANT PARA OF THE ORDER OF THE LEARNED CIT(A) IS REPRODUCED HEREUNDER :- 3.3.2 I HAVE CONSIDERED THE FINDINGS OF THE A.O. AND WRITTEN SUBMISSION OF THE APPELLANT CAREFULLY. DURING THE YEAR UNDER CONSIDERATION APPELLANT HAS SHOWN SALES AS PER BOOKS OF ACCOUNT AT RS. 2,47,76,775/-. THE COMMERCIAL TAX DEPARTMENT IN SURVEY DETECTED SALES OUTSIDE BOOKS TO THE TUNE OF RS. 13,71,62,769/ -, WHICH HAVE BEEN REDUCED TO RS. 8,68,30,214/- THAT INCLUDES BOTH SALES AND PURCHASES. AFTER FURTHER VERIFICATION BY THE COMMERCIAL TAX DEPARTMENT, SHAJAPUR UNRECORDED SALES WORKED OUT TO RS. 5,00,00,000/- AND UNRECORDED PURCHASES AT RS. 4,10,00,000/-. DURING THE COURSE OF ASSESSMENT PROCEEDING, APPELLANT HAS ACCEPTED THAT SALES AND BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 9 PURCHASES HAVE BEEN MADE OUTSIDE BOOKS. HOWEVER, THE APPELLANT HAS NOT PRODUCED ANY BOOKS OF ACCOUNT, BILLS AND VOUCHERS, THEREFORE A.O. HAS APPLIED PROVISION OF SECTION 145(3) AND REJECTED BOOKS OF ACCOUNT OF THE APPELLANT. HE HAS ESTIMATED SALES OF RS. 7,50,00,000/- AND AFTER APPLYING G. P. @ 12.5% ON ESTIMATED SALES ADDITION OF RS. 63,01,738/- (RS. 93,75,000/- (-) RS. 30,73,262/-) W AS MADE IN THE TAXABLE INCOME OF THE APPELLANT ON ACCOUNT OF G.P. DIFFERENCE. THE APPELLANT HAS SHOWN G.P. OF RS. 30,73,262/-, WHEREAS A.O. HAS WORKED OUT THE G.P. AT RS. 93,75,000/-. 3.3.3 DURING THE APPELLATE PROCEEDING, APPELLANT HAS TAKEN A PLEA THAT UNRECORDED SALES ESTIMATED BY THE A.O. AND APPLIED ADHOC G. P. RATE, THEREON IS NOT CORRECT. IT IS EXPLAINED THAT FIGURES OF UNRECORDED S ALES AS DETERMINED BY THE COMMERCIAL TAX DEPARTMENT ARE BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 10 TAKEN WITHOUT ANY BASIS. THE SALES DETERMINED INITIALLY AT VERY HIGH AMOUNT WHICH IS SUBSTANTIALLY REDUCED IN THE ASSESSMENT LEVEL ITSELF AND FURTHER SUBSTANTIALLY REDUCED IN THE APPEAL. THE APPELLATE AUTHORITY OF THE COMMERCIAL TAX DEPARTMENT HAS DETERMINED UNRECORDED SALES AT RS. 5,00,00,000/- FOR THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS ACCEPTED THE ORDER OF THE APPELLATE AUTHORITY AND NOT FURTHER, CONTESTED THE ISSUE OF UNRECORDED SALES. TH E APPELLANT HAD SUBMITTED BEFORE COMMERCIAL TAX DEPARTMENT THAT EVEN IF, THE UNRECORDED SALES IS PRESUMED THE SAME WOULD NOT BE HIGHER THAN THE AMOUNT OF RS. 1,14,97,860/-. THE FIGURE IS ESTIMATED BY THE APPELLANT ON THE BASIS OF THE ACCOUNT PREPARED BY THE APPELLANT BY TAKING FIGURE FROM THE SALES AS PER LOOSE PAPERS JAPTI NO. 46. THE CONTENTION OF THE APPELLANT OF ESTIMATING THE FIGURE OF THE SALES CANNOT BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 11 BE ACCEPTED AT THIS STAGE AS THE UNRECORDED SALES WERE DETERMINED BY THE COMMERCIAL TAX AUTHORITY AFTER CONSIDERING THE SUBMISSION OF THE APPELLANT AND SALES FOUND UNRECORDED AFTER PHYSICAL VERIFICATION. 3.3.4 THE APPELLANT HAS FURTHER OBJECTED OF APPLYING ADHOC G.P. @ 12.50% RATE BY THE A.O. ON ENTIRE SALE OF RS. 7,50,00,000/- I.E. ON RECORDED SAL ES AND UNRECORDED SALES. IT IS SUBMITTED BY IT THAT AMOUNT OF INCOME ACTUALLY EARNED BY THE APPELLANT CAN BE FAIRLY ESTIMATED ONLY BY APPLYING THE NET PROFIT RATE AND NOT THE GROSS PROFIT RATE AS HAS BEEN DONE BY THE A.O. THE APPELLANT HAS PLACED RELIANCE ON THE DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF C IT VS. BALCHAND AJIT KUMAR 135 TAXMAN 180 (M.P.). HONBLE HIGH COURT HAS HELD THAT: THE TOTAL SALES CANNOT BE REGARDED AS THE PROFIT OF THE ASSESSEE. THE NET PROFIT RATE HAS BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 12 TO BE ADOPTED AND ONCE A NET PROFIT RATE IS ADOPTED, IT CANNOT BE SAID THAT THERE IS A PERVERSITY OF APPROACH. 3.3.5 FURTHER, APPELLANT HAS PLACED RELIANCE ON THE DECISION OF HONBLE ITAT, INDORE BENCH, INDORE IN THE CASE OF M/S SHREE RAM TRACTORS VS. ITO WARD 1(2), UJJAIN REPORTED IN ITA NO. 1102 TO 1105/IND/04 AND ITA NO. 63 TO 66/IND/05 DATED 30-01-2006. HONBLE ITAT, INDORE BENCH, INDORE HAS DECIDED THE SIMILAR ISSUE ON THE SAME SET OF FACTS. IN THAT CASE ALSO SURVEY CARRIED OUT BY THE COMMERCIAL TAX DEPARTMENT AND ASSESSEE WAS INDULGING IN CARRYING ON SALE PURCHASE OF TRACTORS OUT OF THE BOOKS OF ACCOUNT. CONSEQUENTLY, COMMERCIAL TAX DEPARTMENT DTERMINED THE UNDISCLOSED SALES OF THE ASSESSEE FOR THE A.Y. 1994- 95 TO1997-98. CONSEQUENT UPON THE INFORMATION BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 13 RECEIVED FROM THE COMMERCIAL TAX DEPARTMENT THAT THE ASSESSEE INDULGING IN SALE PURCHASE OUTSIDE BOOKS OF ACCOUNT AND DETAILS OF UNDISCLOSED SALES DETERMINED COMMERCIAL TAX DEPARTMENT THE A.O INITIATED PROCEEDING U/S 147 OF INCOME TAX ACT FOR ALL THESE ASSESSMENT YEARS AND CONSEQUENTLY ISSUED NOTICE U/S 148. IN RESPONSE TO NOTICE U/S 148 APPELLANT NEITHER FURNISHED ANY RETURN OF INCOME NOR ANY REPLY FOR ANY OF THOSE FOR ASSESSMENT YEAR. IN VIEW OF THE ABOVE FACTS A.O. COMPLETED THE ASSESSMENT U/S 148 R.W.S. 144 OF THE INCOME TAX ACT FOR ALL THESE ASSESSMENT YEARS, WHEREIN A.O. ADDED AND INCOME COMPUTED BY APPLYING RATE OF 9.78% ON THE UNDISCLOSED SALES DETERMINED BY THE COMMERCIAL TAX DEPARTMENT. THE ASSESSEE HAS FILED APPEAL BEFORE CIT(A). CIT(A), DIRECTED THE A.O. TO COMPUTE THE INCOME BY APPLYING NET PROFIT RATE 3% BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 14 OF TOTAL SALES RECORDED IN THE BOOKS AS WELL AS UNDISCLOSED SALES DETERMINED OF COMMERCIAL TAX DEPARTMENT AFTER RELYING ON THE DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR 135 TAXMAN 180 (M.P.). HONBLE ITAT HAS CONFIRMED THE FIDING OF THE CIT(A) FOR APPLYING NET PROFIT RATE @ 3% ON UNRECORDED SALES AND DIRECTED THE A.O. TO APPLY NET PROFIT RATE AS SHOWN BY THE APPELLANT ON RECORDED SALES. HONBLE ITAT, INDORE BENCH, INDORE ON THE OBJECTION OF THE APPELLANT FOR APPLYING HIGHER N.P. RATE HELD AS UNDER:- AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT NET PROFIT RATE SHOWN BY THE ASSESSEEE AS PER ITS BOOKS OF ACCOUNT IS OF NO RELEVANCE, BECAUSE HAD IT BEEN CORRECT AND TRUE, THEN THERE WAS NO OPPORTUNITY FOR THE COMMERCIAL BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 15 TAX DEPARTMENT TO FIND OUT AND DETERMINE THE SALE OUTSIDE BOOKS OF ACCOUNT WHICH WERE IN CRORES. THE FACT THAT ASSESSEE WAS INDULGING IN CARRYING OUT SALE/PURCHASE OUTSIDE THE BOOKS OF ACCOUNT AND THERE IS SUFFICIENT EVIDENCE TO SHOW THAT NET PROFIT RATE DEPICTED BY THE ASSESSEE IN BOOKS OF ACCOUNT WAS NOT CORRECT AND TRUE STATE OF AFFAIRS. CONSEQUENTLY THE ASSESSEE CLAIM THAT NET PROFIT RATE OF 3% APPLIED BY THE CIT(A) WAS ON HIGHER SIDE DO NOT HAVE ANY MERIT. 3.3.6 THE APPELLANT HAS ALSO PLACED RELIANCE ON THE DECISION OF HONBLE ITAT, INDORE BENCH IN THE CASE OF ABHINAV VASTRALAY VS. ITO (2010) 15 ITJ 168 IN WHICH IT IS HELD BY THE ITAT THAT: WHETHER GROSS PROFIT RATE OR NET PROFIT RATE SHALL BE APPLIED ON UNDISCLOSED SALES. IT IS HELD THAT NET PROFIT RATE SHALL BE APPLIED. BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 16 3.3.7 IN THE CASE OF DCIT VS. ASN AGRI GENETIC PVT. LTD. (2010) 15 ITJ 160 THE HONBLE ITAT, INDORE BEN CH, INDORE HAS TAKEN A SIMILAR VIEW BY PLACING RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF M.P. IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR (2007) 7 ITJ 324 (M.P.). 3.3.8 THE APPELLANT HAS SHOWN N.P. FOR THE A.Y. 2003-04 TO 2006-07 AS UNDER:- THE APPELLANT HAS SHOWN NET PROFIT 2% DURING THE YEAR UNDER CONSIDERATION. THE A.O. HAS APPLIED THE GROSS PROFIT RATE ON RECORDED AS WELL AS UNRECORDED SALES DETERMINED BY THE COMMERCIAL TAX DEPARTMENT. A. Y. SALES SHOWN IN RETURN N.P. SHOWN/ PERCENTAGE SUPPRESSED SALES AS PER ORDER OF A.O. 03 - 04 2,47,76,755 4,96,606 2.00% 5,02,23,225 04 - 05 4,11,10,937 5,03,199 1.22% 3,00,00,000 05 - 06 3,47,83,306 5,61,226 1.04% 2,52,16,694 06 - 07 3,68,53,252 3,25,279 0.88% 15,51,30,109 BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 17 HONBLE ITAT, IN THE CASE OF M/S SHREERAM TRACTORS (SUPRA.) HAS TAKEN A VIEW THAT NET PROFIT RATE AS SHOWN BY THE APPELLANT IS TO BE APPLIED ON THE RECORDED SALES. THUS, APPLYING G.P. BY THE A.O. ON RECORDED SALES OF RS. 2,47,76,755/- IS NOT JUSTIFIED AND ADDITION MADE BY THE A.O. AT RS. 30,72,317/- IS NOT SUSTAINABLE AND IT IS HEREBY DELETED. THE APPELLANT HAS ALREADY SHOWN THE NET PROFIT OF RS.4,96,606/- ON THE RECORDED SALES IN ITS RETURN FOR THE YEAR UNDER CONSIDERATION. 3.3.9 AS FAR AS, UNRECORDED SALES IS CONCERNED IT IS QUANTIFIED BY COMMERCIAL TAX DEPARTMENT AT RS. 5,00,00,000/-. THE APPELLANT HAS NOT PRODUCED BOOKS OF ACCOUNT AND BILLS AND VOUCHERS AND ASSESSMENT WAS FRAMED BY THE A.O. AFTER REJECTING BOOKS OF ACCOUNT U/S 145(3) AND ASSESSING THE INCOME OF THE APPELLANT U/S 144 R.W.S. 147 ON THE BASIS OF THE INFORMATION BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 18 AVAILABLE ON THE RECORD. THE A.O. HAS ESTIMATED THE UNRECORDED SALES OF RS. 5,02,23,225/- AS QUANTIFIED BY THE COMMERCIAL TAX DEPARTRMENT WHICH IS JUSTIFIED AS APPELLANT IS NOT MAINTAINING ANY BOOKS OF ACCOUNT, BUT A.O. IS NOT JUSTIFIED IN APPLYING GROSS PROFIT RATE I N PLACE OF NET PROFIT RATE. HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR HELD THAT: THE TOTAL SALES CANNOT BE REGARDED AS THE PROFIT O F THE ASSESSEE. THE NET PROFIT RATE HAS TO BE ADOPTED AND ONCE A NET PROFIT RATE IS ADOPTED IT CANNOT BE SAID THERE IS PERVERSITY OF APPROACH. 3.3.10 CONSIDERING, THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND TRADING RESULTS OF THE APPELLANT A.O. IS DIRECTED TO APPLY N.P. RATE OF 3% ON UNRECORDED SALES AT RS. 5,02,23,225/-, WHICH IS WORKED OUT TO RS. 15,06,696/-. HENCE, ADDITION MADE BY THE A.O. IS CONFIRMED TO THE EXTENT OF BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 19 RS.15,06,696/- AND APPELLANT WILL GET RELIEF OF RS. 47,95,042/- (RS. 63,01,738/- (-) RS. 15,06,696/-). THIS GROUND OF THE APPEAL OF THE APPELLANT IS PARTLY ALLOWED. 9. THE LEARNED DR WAS NOT ABLE TO CONTROVERT THE FINDI NGS RECORDED BY THE LEARNED CIT(A) FOR GRANTING PART RELIE F TO THE ASSESSEE. THE LD. AR HAS ALSO FAILED TO ADVANCE ANY ARGUMENT WHICH COULD JUSTIFY ANY FURTHER RELIEF TO TH E ASSESSEE. THE LEARNED CIT(A) HAS ALSO CONSIDERED VARIOUS CASE LAWS OF THE HON'BLE JURISDICTIONAL HIGH COURT WH ILE GRANTING RELIEF. ASSESSEE HAS SHOWN N.P. @ 2% ON RECO RDED SALES. THE LEARNED CIT(A) DELETED THE ADDITION RELYIN G ON THE DECISION OF M/S SHREERAM TRACTORS WHEREIN THE VIEW TAK EN BY THE ITAT THAT NET PROFIT RATE AS SHOWN BY THE ASSE SSEE TO BE APPLIED ON RECORDED SALES. IN THE CASE OF UNRECORDE D SALES, THE ASSESSEE DID NOT PRODUCE BOOKS, BILLS AND VOUCHERS AND THE ASSESSING OFFICER ESTIMATED UNCECORD ED SALES AT RS.5,02,23,225/- BY INVOKING PROVISIONS OF S ECTION BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 20 145(3) OF THE ACT AND MADE ADDITIONS BY RELYING ON TH E DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BALCHAND AJITKUMAR. IN VIEW OF THESE FACTS, WE FIND NO MERIT IN THE APPEAL OF THE REVENUE AND THE ASSE SSEE. THEREFORE, BOTH THESE GROUNDS ARE DISMISSED. 10. THE OTHER GROUND IN THE ASSESSEES APPEAL IS REGARD ING UPHOLDING THE ADDITION OF RS.22,77,777/- ON ACCOUNT O F PEAK INVESTMENT ON ACCOUNT OF UNRECORDED PURCHASES. TH E LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE BY HOLDI NG AS UNDER :- 3.4.1 I HAVE CONSIDERED THE FINDING OF THE A.O. AND WRITTEN SUBMISSION OF THE APPELLANT CAREFULLY. THE COMMERCIAL TAX DEPARTMENT HAS DETERMINED UNRECORDED PURCHASES AT RS. 4,10,00,000/- FOR THE A.Y.2003-04 AND RS. 2,22,00,000/- FOR THE A.Y. 2004-05. THE A.O. HAS DETERMINED UNDISCLOSED INVESTMENT AT RS. 34,16,666/- FOR THE BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 21 A.Y.2003-04 AND RS. 18,50,000/- FOR A.Y. 2004- 05. THE APPELLANT HAS TAKEN A PLEA THAT ABOVE ADDITION MADE BY THE A.O. ON SHEER IMAGINATION, PRESUMPTION AND SURMISES. THE FIGURE OF THE SALES AND PURCHASERS DETERMINED BY THE COMMERCIAL TAX DEPARTMENT WERE INCORRECT AND VERY EXCESSIVE. FURTHER NO SUCH INVESTMENT IS FOUND BY THE COMMERCIAL TAX DEPARTMENT AT THE TIME OF SURVEY CARRIED BY THEM AND NO PHYSICAL STOCK WAS VERIFIED. IT IS FURTHER CONTENDED THAT IT IS MAINTAINING HUGE STOCKS AS PER BOOKS OF ACCOUNT AND AS ON 31-03-2003 IT WAS RS. 68.20 LACS AND AS ON 31-03-2004 IT WAS RS. 79.45 LACS. THE SALES OUTSIDE THE BOOKS WAS MADE FROM THE SAME STOCK ONLY. IT IS FURTHER SUBMITTED BY THE APPELLANT THAT EVEN, IF SUCH ESTIMATE IS TO BE TAKEN THEN THE SAME SHOULD HAVE BEEN CONSIDERED TAKING PEAK BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 22 INVESTMENT THAT TOO AFTER ALLOWING REINVESTED PROFIT EARNED FROM SALES PRESUMED OUT OF BOOKS. 3.4.2 THE CONTENTION OF THE APPELLANT CANNOT BE ACCEPTED. IT HAS MADE HUGE PURCHASES AND SALES OUTSIDE BOOKS OF ACCOUNT. FOR MAKING PURCHASES TO THE EXTENT OF RS. 4,10,00,000/- AS QUANTIFIED BY THE COMMERCIAL TAX DEPARTMENT, CERTAIN INVESTMENT IS REQUIRED. THE A.O. HAS MADE THE ADDITION OF RS. 34,16,666/- BY TAKING ROTATION OF CAPITAL TWELVE TIMES. APPELLANT IS DEALING WITH THE FOOD ITEMS LIKE GHEE, EDIBLE OILS ETC. ALONGWITH IT S RAW MATERIAL I.E. CREAM AND BUTTER WHICH ARE PERISHABLE IN NATURE IN A SHORT PERIOD. CONSIDERING THE FACTS PEAK INVESTMENT ON UNRECORDED PURCHASES IS TAKEN AT RS. 22,77,777/- BY TAKING ROTATION OF CAPITAL AT 18 TIMES IN PLACE OF TWELVE TIME TAKEN BY THE A.O. HENCE, ADDITION MADE BY THE A.O. IS CONFIRMED TO BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 23 THE EXTENT OF RS. 22,77,777/- AND APPELLANT WILL GET RELIEF OF RS. 11,38,888/-. (RS. 34,16,666/- (-) 22,77,777/-). 11. WE HAVE HEARD BOTH THE SIDES. THE LEARNED DR WAS NOT ABLE TO CONTRADICT THE FINDINGS RECORDED BY TH E LEARNED CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE ALSO COULD NOT PUT FORTH ANY POSITIVE EVIDENCE FOR FURTHE R RELIEF. WE, THEREFORE, IN THE ABSENCE OF ANY CONTRARY MATERIAL O N RECORD AND IN THE PLEADINGS OF BOTH THE SIDES, SUSTAIN THE ORDER OF THE LEARNED CIT(A) AND DISMISS THIS GROUND. 12. THE OTHER ISSUE INVOLVED IS REGARDING CONFIRMATI ON OF ADDITION OF RS. 6 LACS MADE U/S 68 OF THE ACT. 13. THE ASSESSING OFFICER MADE THE ADDITION OF RS.21 LACS BY TREATING THE GIFTS AND LOANS AS UNEXPLAINED. THE LEARN ED CIT(A) HAS GRANTED PART RELIEF TO THE ASSESSEE. THE R ELEVANT PARA IS 3.5 OF THE ORDER OF THE LEARNED CIT(A) WHICH I S REPRODUCED HEREUNDER :- BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 24 3.5.1 I HAVE CONSIDERED THE FINDING OF THE A.O. AN D WRITTEN SUBMISSION OF THE APPELLANT CAREFULLY. THE APPELLANT HAS SHOWN ADDITION IN HIS CAPITAL ACCOUNT BY GIFT OF RS. 3,00,000/- AND CAPITAL INTRODUCED OUT O F GIFT AND LOAN RECEIVED RS. 18,00,000/-. TOTAL ADDITION O F RS. 21,00,000/- WAS SHOWN ON ACCOUNT OF LOAN AND GIFT. DURING THE COURSE OF ASSESSMENT PROCEEDING APPELLAN T HAS NOT PRODUCED THE RELEVANT DETAILS AND DOCUMENT EVIDENCE TO PROVE HIS CONTENTION. DURING THECOURSE OF APPELLATE PROCEEDING APPELLANT HAS FILED THE GIFT D EED OF THE FOLLOWING PERSONS:- 1. SHRI ANIL AGRAWAL RS. 2,50,000/- 2. SHRI MANOJ AGRAWAL RS 2,50,000/- 3. SHREI MUKESH R. BANSAL RS. 2,50,000/- 4. SHRI NITIN R. AGRAWAL RS. 2,50,000/- 5. SMT. DURGA DEVI M. AGRAWAL RS. 1,00,000/- 6. SHRI BHERULAL AGRAWAL RS. 3,00,000/-. TOTAL RS. 14,00,000/-. THE APPELLANT HAS PRODUCED THE DOCUMENTS OF RETURN, BANK ACCOUNT ETC. OF SHRI ANIL AGRAWAL ONLY AND PAN NO. BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 25 AND COPY OF BANK ACCOUNT SHRI MANOJ DAYARAM GARG. W ITH RESPECT OF OTHER DONORS HE HAS FILED GIFT DEED ONLY AND NO OTHER DETAIL BANK ACCOUNT AND COPY OF RETURN IS FUR NISHED IN SUPPORT OF HIS CONTENTION. THE APPELLANT HAS NOT SPECIFIED THE OCCASSION ON WHICH HE HAS RECEIVED TH E GIFTS FROM THE DONORS AND THEIR RELATION WITH THE DONORS. IT IS HELD HONBLE SUPREME COURT IN THE CASE OF CIT VS. P.MOHANKALA (SC)291ITR278 THAT: A BARE READING OF SECTION 68 SUGGESTS THAT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY ASSESSEES; THAT SUCH CREDIT HAS TO BE OF A SUM DURI NG THE PREVIOUS YEAR; AND THAT THE ASSESSEES OFFER NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CRE DIT FOUND IN THE BOOKS OR THE EXPLANATION OFFERED BY TH E ASSESSEES IN THE OPINION OF THE ASSESSING OFFICER I S NOT SATISFACTORY. IT IS ONLY THEN THE SUM SO CREDITED M AY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE S OF THAT PREVIOUS YEAR. THE EXPRESSION THE ASSESSEE S BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 26 OFFER NO EXPLANATION MEANS WHERE THE ASSESSEES OFF ER NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEES. IT IS TRUE THAT THE OP INION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEES AS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF T HE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIV ELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. [PARA 14] IT IS TRUE THAT EVEN AFTER REJECTING THE EXPLANATIO N GIVEN BY THE ASSESSEES, IF FOUND UNACCEPTABLE, THE CRUCIAL ASPECT, WHETHER ON THE FACTS AND CIRCUMSTAN CES OF THE CASE, IT SHOULD BE INFERRED THAT THE SUMS CREDITED IN THE BOOKS OF THE ASSESSEES CONSTITUTED BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 27 INCOME OF THE PREVIOUS YEAR, MUST RECEIVE THE CONSIDERATION OF THE AUTHORITIES, PROVIDED THAT THE ASSESSEES REBUT THE EVIDENCE AND THE INFERENCE DRAW N TO REJECT THE EXPLANATION OFFERED AS UNSATISFACTORY . SECTION 68 ITSELF PROVIDES THAT WHERE ANY SUM IS FO UND CREDITED IN THE BOOKS OF THE ASSESSEES FOR ANY PREV IOUS YEAR, THE SAME MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEES OF THE PREVIOUS YEAR, IF TH E EXPLANATION OFFERED BY THE ASSESSEES, ABOUT THE NAT URE AND SOURCE OF SUCH SUMS FOUND CREDITED IN THE BOOKS OF THE ASSESSEES, IS IN THE OPINION OF THE ASSESSIN G OFFICER NOT SATISFACTORY. SUCH OPINION FOUND ITSELF CONSTITUTES A PRIMA FACIE EVIDENCE AGAINST THE ASSESSEES, VIZ., THE RECEIPT OF MONEY, AND IF THE ASSESSEES FAIL TO REBUT THE SAID EVIDENCE, THE SAME CAN BE USED AGAINST THE ASSESSEES BY HOLDING THAT IT WA S A RECEIPT OF AN INCOME NATURE. IN THE INSTANT CASE, THE AUTHORITIES CONCURRENTLY FOUND THE EXPLANATION OFFE RED BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 28 BY THE ASSESSEES UNACCEPTABLE. THE AUTHORITIES UPHE LD THE OPINION FORMED BY THE ASSESSING OFFICER THAT TH E EXPLANATION OFFERED WAS NOT SATISFACTORY. THE ASSESSEES DID NOT TAKE THE PLEA THAT EVEN IF THE EXPLANATION WAS NOT ACCEPTABLE, THE MATERIAL AND ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD DID NOT JUSTIFY THE SUM FOUND CREDITED IN THE BOOKS TO BE TREATED AS A RECEIPT OF AN INCOME NATURE. THE BURDE N IN THIS REGARD WAS ON THE ASSESSEES. NO SUCH ATTEMPT HAD BEEN MADE BEFORE ANY AUTHORITY. [PARA 21]. 3.5.2 IT IS HELD BY HONBLE PUNJAB AND HARYANA H IGH COURT IN THE CASE TIRATH RAM GUPTA VS CIT(P&H)304ITR145 THAT BURDEN OF PROOF ON ASSESSE E TO ESTABLISH THAT DONOR HAD MEANS AND GIFT WAS GENUINE FOR NATURAL LOVE AND AFFECTION. IN THE CASE OF THAT AP PELLANT HE HAS NOT EXPLAINED THE OCCASION ON WHICH HE HAS RECE IVED THE GIFTS FROM DIFFERENT PERSONS NEITHER HE HAS EXP LAINED THE RELATION WITH THE DONORS. ONLY ON THE BASIS OF THE GIFT BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 29 DEEDS THE CREDIT COULD NOT BE TREATED AS EXPLAINED. IF THE EXPLANATION OF THE APPELLANT IS UNSATISFACTORY AMOU NT CAN BE TREATED AS APPELLANTS INCOME. SIMILAR VIEW IS H ELD BY HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL V S CIT(1995)80TAXMAN89 . CONSIDERING THE ABOVE FACTS GIFT RECEIVED BY THE APPELLANT CANNOT BE TREATED GENUINE , MORE OVER HE HAS FILED THE GIFT DEEDS IN RESPECT OF RS. 14 LACS ONLY AND NO DETAIL WAS FURNISHED FOR REMAINING 7 LA CS RECEIVED BY HIM AS GIFT AND LOAN. IT IS UNEXPLAINED INCOME OF THE APPELLANT AND AO HAS CORRECTLY MADE OF ADDIT ION OF RS. 21 LACS IN THE TAXABLE INCOME OF THE APPELLANT. 3.5.3 THE APPELLANT HAS FURTHER TAKEN A PLEA TH AT EVEN IF SUCH GIFTS FOUND TO BE UNEXPLAINED, THE BENEFIT OF TELESCOPING OF INTANGIBLE ADDITION MAKE TO THE BOOK PROFIT SHOULD HAVE BEEN GIVEN. THE APPELLANT HAS PLACED R ELIANCE ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT VS K.S.M. GURUSWAMY NADAR AND SONS (1984)149ITR127 AND DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 30 CIT VS THARYAMAL BALCHAND (1987)165 ITR 453. IT IS HELD BY THE JUDICIAL AUTHORITIES WHEN THERE ARE TWO SEPA RATE ADDITIONS, ONE ON ACCOUNT OF SUPPRESSION OF PROFITS AND ANOTHER ON ACCOUNT OF CASH CREDIT, IT IS OPEN TO AS SESSEE TO EXPLAIN THAT THE SUPPRESSED PROFITS HAD BEEN BROUGH T IN CASH CREDIT AND ONE HAS TO BE TELESCOPED INTO THE O THER RESULTING ONLY IN ONE ADDITION. 3.5.4 IN THE CASE OF THE APPELLANT ADDITION OF RS.15,06,696/- WAS CONFIRMED ON ACCOUNT OF SUPPRESS ION OF PROFIT ON UNRECORDED SALES AND IF IT TELESCOPED WITH UNEXPLAINED CASH CREDIT IN THE ACCOUNTS OF THE APPE LLANT ON ACCOUNT OF GIFTS AND LOANS THE REMAINING ADDITIO N WILL BE RS. 6 LACS AND APPELLANT WILL GET RELIEF OF RS. 15 LACS ON THIS ACCOUNT. CONSIDERING THE ADDITION OF RS.15,06, 696/- MADE ON ACCOUNT OF SUPPRESSION OF PROFITS, THE FUND S WOULD BE AVAILABLE TO THE APPELLANT TO BRING IT AS CASH CREDITS. THUS, THERE WILL BE NO DOUBLE ADDITION AND BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 31 SUPPRESSED PROFITS TELESCOPED WITH CASH CREDITS RES ULTING ONLY IN ONE ADDITION. 3.5.5 CONSIDERING THE ABOVE FACTS ADDITION OF RS . 6 LACS ON ACCOUNT OF GIFTS AND LOANS IS HEREBY CONFIRMED A ND APPELLANT WILL GET RELIEF OF RS. 15 LACS. THIS GROUND OF APPEAL OF THE APPELLANT IS PARTLY AL LOWED. 14. THE LEARNED COUNSEL FOR THE ASSESSEE HAS FAIL ED TO ESTABLISH THE GENUINENESS OF THE GIFTS/LOANS. THE PART RELIEF WAS GRANTED BY THE LEARNED CIT(A) BY TELESCOPING WITH THE ADDITION OF SUPRESSION OF PROFIT. ASSESSEE HAS ALSO FAI LED TO ESTABLISH GENUINENESS OF GIFTS OR LOANS BEFORE US ALSO . THEREFORE, IN THE ABSENCE OF ANY RELIABLE DOCUMENTS IN SUPPORT OF THESE GIFTS/LOANS, WE FIND NO FAULT IN THE ORDER OF THE LEARNED CIT(A) IN SUSTAINING PART ADDITION OF RS. 6 LACS. HENCE, WE DISMISS THIS GROUND. 15. THE OTHER GROUND RELATING TO CONFIRMATION OF ADDIT ION ON ACCOUNT OF DIFFERENCE IN BALANCE OF CREDITORS AND BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 32 DISALLOWANCE OF DEPRECIATION AND ADDITION ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS WERE NOT PRESSED AT THE TIME OF HEARING. THE SAME ARE, THEREFORE, DISMISSED. ITA NOS. 211 TO 213/IND/2013 16. IN VIEW OF OUR ORDER AT PARA 5 OF THIS ORDER, GROU ND RELATING TO REOPENING OF ASSESSMENT IN THESE APPEALS, STANDS DISMISSED. 17. IN VIEW OF PARA 9 OF ORDER ABOVE, GROUND RELATING T O N.P. RATE OF 3% IN THESE APPEALS IS DISMISSED. 18. IN ITA NO.211/IND/2013 THE GROUND RELATING TO DIFFERENCE IN BALANCES OF THE CREDITORS AND ENHANCING T HE INCOME FOR DISALLOWANCE OF DEPRECIATION WERE NOT PRESS ED. THEREFORE, THE SAME IS DISMISSED FOR NON-PROSECUTION . 19. SO FAR AS THE REVENUES APPEALS ARE CONCERNED, THE ONLY GROUND TAKEN IN THESE APPEALS ARE AGAINST THE DIRECTION OF THE LEARNED CIT(A) TO APPLY NET PROFIT R ATE OF 3% BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 33 ON UNRECORDED SALES INSTEAD OF GROSS PROFIT RATES APPLI ED BY THE ASSESSING OFFICER. AS WE HAVE SUSTAINED THE DIREC TIONS OF THE LEARNED CIT(A) TO APPLY NET PROFIT @ 3%, THERE FORE, FOR THE REASONS GIVEN ABOVE, THESE GROUNDS OF APPEAL FO R ALL THE ASSESSMENT YEARS ARE DISMISSED. 21. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE AND T HE REVENUE STAND DISMISSED. PRONOUNCED IN OPEN COURT ON IST DECEMBER, 2015 SD/- SD/- (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER IST DECEMBER, 2015 DN/- BANSILAL BHERULAL AGRAWAL ITA NOS. 210/IND/2013 & OTHERS 34