Soni V.N. Brothers, Ahmedabad V. The Income tax Officer,Ward-2(2), Ahmedabad

ITA 232/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6110 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 21-01-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAKESH DUBEY SRDR
• Assessee Lawyers: M G PATEL
• Keywords: Rejection of books of accounts; Business income; Income from undisclosed sources; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH BEFORE SHRI G.D. AGARWAL, HONBLE VICE-PRESIDENT (AZ) AND SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER ITA NO.232/AHD/2008 ASSESSMENT YEAR:2003-04 DATE OF HEARING:9.6.11 DRAFTED:1.7.11 M/S. SONI V. N. BROTHERS 7, SHREEJI COMPLEX, 2 ND FLOOR, OPP. MIRCHIPOLE, RATANPOLE, AHMEDABAD 380 001 PAN NO.AAQFS0267H V/S . INCOME TAX OFFICER, WARD-2(2), AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M.G. PATEL, AR RESPONDENT BY:- SHRI PRAKESH DUBEY, SR-DR O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF COM MISSIONER OF INCOME-TAX (APPEALS)-VII, AHMEDABAD IN APPEAL NO. C ITAVII/WD.2(2)/20/2006- 07 FOR THE YEAR 2003-04. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-VII, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ESTIMATED SALES OF RS.60,00,000/- AS AGAINST ACTUAL SALES OF RS.36,68,754/- AS PER BOOKS AND THERE BY CONFIRMING ADDITION OF RS.6,81,220/- TO THE RETURNED INCOME. 2. YOUR APPELLANT THEREFORE, PRAYS TO DELETE ESTIMA TED SALES OF RS.60,00,000/- AS AGAINST ACTUAL SALES OF RS.36,68, 754/-. ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 2 3. THE ASSESSING OFFICER HAS DEALT WITH THE ISSUE U NDER APPEAL AS UNDER:- 3. THE ASSESSEE IS INVOLVED IN THE BUSINESS OF MANU FACTURING AND TRADING OF GOLD ORNAMENTS. IN THIS CASE A SURVEY ACTION U/S.133A WA S CONDUCTED AT THE BUSINESS PREMISES OF THE AS SITUATED AT 7-8, SHREEJI NIWAS, 2 ND FLOOR, OPP. MARCHI POLE, RATTAN POLE, AHMEDABAD AND WORKSHOP SITUATED AT 2098, KATA KIA WAD, NR. SWAMINARAYAN MANDIR, KALUPUR, AHMEDABAD ON 10-10-2002. DURING THE COURSE OF SURVEY IT WAS FOUND THAT AT TH E PREMISES SITUATED AT 2098, KATAKIA WAS, KALUPUR, AHMEDABAD ACTIVITY OF MANUFAC TURING OF GOLD ORNAMENTS WAS BEING CARRIED OUT WITH THE HELP OF ABOUT 8 TO 10 WO RKERS (KARIGARS) INSIDE THE PREMISES AND OUT OF THESE WORKERS AT THE TIME OF SU RVEY ONLY FIVE WORKERS WERE AVAILABLE. IT WAS FOUND FROM THE STATEMENT RECORDED THAT ALL WORKERS EMPLOYED THERE ARE WORKING AND MAKING GOLD ORNAMENTS OUT OF RAW GO LD ON BEHALF OF M/S. V.N. BROTHERS, AND B.N. JEWELERS WHICH IS RUN BY SHRI VA SANTBHAI NATVRLAL SONI WHO IS THE PARTNER OF THE BOTH FIRMS AND THE RAW MATERIALS FOR MANUFACTURING OF GOLD ORNAMENTS IS SUPPLIED BY SHRI VASANT N SONI ON DAY TO DAY BAS IS. 4. AT THE PREMISES SITUATED AT 7-8, SHREEJI NIWAS, OPP. MARCHI POLE, RATANPAOLE, AHMEDABAD DURING THE COURSE OF SURVEY OPERATION CAS H OFRS.39,900/- AND STOCK OF GOLD AND GOLD JEWELLERY OF RS.31,19,940/- WEIGHING 6069.760 GMS WERE FOUND. HOWEVER, AS ON 10-10-2002 AS PER THE BOOKS OF ACCOU NTS CASH AND STOCK POSITION WAS AS UNDER:- NAME OF THE FIRM CASH AS PER BOOKS GOLD AND GOLD ORNAMENTS AS PER BOOKS M/S SONI V.N. BROTHERS RS.2,00,765/- 11412.400 GRAM S. M/S. B.N. JEWELLERS RS.3,63,129/- 3658.720 GRAMS. M/S. V.N. EXPORTS RS. 2687/- 535.510 GRAMS. TABLE-1 SHRI VASANTBHAI N SHAH, WHO IS A PARTNER IN ALL THE ABOVE THREE FIRM, WAS ASKED TO EXPLAIN IN HIS STATEMENT U/S.131(1A) SPECIFICALLY T HE REASONS FOR VARIATION IN CASH ON PHYSICAL VERIFICATION AND AS PER BOOKS OF ACCOUNTS. IT WAS STATED BY SHRI VASANTBHAI THAT CASH OF ABOVE RS.3 TO RS.3.5 LAKHS WAS WITH SH RI NILESHBHAI N SONI, ANOTHER PARTNER OF THE FIRMS WHO HAS GONE ON TOUR FOR PURCH ASE OF GOODS FOR WHICH THERE IS NO ENTRY IN THE BOOKS OF ACCOUNTS AND FOR DIFFERENCE O F BALANCE AMOUNT HE HAD NO EXPLANATION. SIMILARLY, SAME QUESTION WAS ASKED IN RESPECT OF DIFFERENCE IN STOCK OF GOLD ORNAMENTS BUT HE SOUGHT SOME TIME FOR THE SAME . SHRI VASANTBHAI WAS ASKED TO GIVE DETAILS ABOUT THE MODE OF HIS BUSINESS, IT WAS STATED BY HIM THAT: (I) HE WAS DOING MANUFACTURING AND TRADING BUSINESS OF SILVER AND GOLD ORNAMENTS SINCE LAST 20 TO 25 YEARS. (II) HE WAS PURCHASING RAW GOLD FROM THE OPEN MARKE T FROM DIFFERENT PARTIES OF AHMEDABAD. (III) HE WAS GETTING THE DIFFERENT TYPES OF ORNAMEN TS PREPARED ON LABOUR CHARGES BASIS THROUGH DIFFERENT KARIGORS. (IV) THE GOLD ORNAMENTS ARE SOLD BY HIM MOSTLY IN D IFFERENT CITIES OF GUJARAT AND ALSO IN JODHPUR, PUNE AND HYDERABAD. (V) THE GOODS ARE DELIVERED IN AHMEDABAD ONLY AND P AYMENT WAS TAKEN AND GIVEN BY CHEQUES AND DRAFTS ONLY. (VI) IN RESPECT OF MODE OF MAKING ENTRIES IN THE BO OKS OF ACCOUNTS OF THE ABOVE TRANSACTIONS IT WAS STATED THAT ORDERS FOR PURCHASE OF RAW GOLD ARE GIVEN ON TELEPHONE AND ON RECEIPT OF BILL THE SAME IS ENTERE D DIRECTLY IN THE LEDGER ACCOUNTS OF THE PARTY. ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 3 (VII) NO SEPARATE PURCHASE REGISTER IS MAINTAINED B Y THEM. SIMILARLY, SALES ARE ALSO RECORDED IN THE LEDGER. (VIII) FOR RECORDING RAW GOLD AND GOLD ORNAMENTS TR ANSACTIONS WITH KARIGARS SEPARATE INWARD-OUTWARD REGISTER IS BEING MAINTAINE D IN WHICH QUANTITY OF RAW GOLD, NUMBER OF ORNAMENTS PREPARED, WEIGHT AND HOW MUCH COPPER IS TO BE MIXED WITH GOLD FOR PREPARATION OF ORNAMENTS IS NOT ED. (IX) ON RECEIPT OF GOLD ORNAMENTS FROM KARIGARS, A VOUCHER WAS BEING ISSUED TO KARIGARS SPECIFYING THE DETAILS OF ORNAMENTS RECEIV ED BACK WITH WEIGHT AND NUMBER OF ORNAMENTS. (X) THE POLISHING WORK OF GOLD WAS GOT DONE FROM DI FFERENT PLACES BY KARIGARS THEMSELVES. (XI) THE GOLD ORNAMENTS WERE PREPARED BY THE KARIGA RS AT HIS PREMISES SITUATED AT KATAKIA WAD, NR. SWAMINARAYAN MANDIR, KALUPOUR, AHMEDABAD. SOME OF THE JOB WORK WAS ALSO GOT DONE FROM RAJKOT AND MORB I. (XII) HE WAS ALSO ASKED TO CLARIFY ABOUT THE TRANSA CTIONS ENTERED DIN TWO DIARIES MARKED AS X-27 AND X-28. IT WAS STATED BY HIM THAT TRANSACTIONS RELATE TO INWARD-OUTWARD OF GOLD AND GOLD ORNAMENTS WITH KARI GARS ON DIFFERENT DATES AND RELATE TO CURRENT YEAR. (XIII) IN RESPECT OF BOOKS MARKED AS X-29 AND X-34, IT WAS STATED THAT TRANSACTIONS ENTERED THEREIN RELATE TO INWARD-OUTWARD OF GOLD AN D GOLD ORNAMENTS WITH KARIGARS. BOTH BOOKS ARE WRITTEN AND MAINTAINED BY ONE KARIGAR NAMELYH SHRI ANILBHAI GOPALDAS SONI AND HE WILL CLARIFY THE SAME . (XIV) ON 28-11-2002 VASANTBHAI N SONI ONCE AGAIN WA S ASKED TO CLARIFY ABOUT THE TRANSACTIONS ENTERED DIN BOOKS MARKED X-27, X-28, X -29, AND X-34. IT WAS STATED BY HIM THAT ANNEXURE X-27 AND X-28 CURRENT Y EARS TRANSACTIONS WERE NOTED IN RESPECT OF GOODS GIVEN TO KARIGARS FOR PRE PARING GOLD ORNAMENTS. (XV) HE WAS FURTHER ASKED VIDE Q. NO.5 WHETHER ALL ABOVE TRANSACTIONS WERE ENTERED IN REGULAR BOOKS OF ACCOUNT OR NOT, IF NOT ENTERED, THEN, HOW MUCH UNACCOUNTED TRANSACTIONS HAVE BEEN MADE DURING THE YEAR AND WAS ASKED TO QUANTIFY THE INCOME FROM SUCH UNACCOUNTED TRANSACTI ONS MADE DURING THE YEAR IT WAS REPLIED VIDE A.NO.5 BY SHRI VASANTBHAI THAT THERE MAY BE SOME UNACCOUNTED TRANSACTIONS WHICH ARE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. (XVI) HOWEVER, IT WAS NOT POSSIBLE FOR HIM TO CLARI FY AND QUANTIFY THE SAME IN ABSENCE OF BOOKS OF ACCOUNTS AS CURRENTS YEARS BOOK S OF ACCOUNTS WERE IMPOUNDED BY THE DEPARTMENT. HE AGREED TO PAY TAX O F RS.7 LAKHS ON UNACCOUNTED INCOME OF RS.20 LAKHS APPROXIMATELY FOR THE CURRENT YEAR IN TWO INSTALLMENTS OF RS.3.5 LACS EACH AS ADVANCE TAX PAY MENTS DUE ON 15-12-2002 AND 15-3-2003 IN THE FIRM OF M/S. SONI V.N. BROTHER S AS MOST OF THE UNACCOUNTED TRANSACTIONS PERTAIN TO THIS CONCERN ON LY. 5. FOR THE A.Y. 2003-04, THE ASSESSEE HAS SHOWN TOT AL TURNOVER OF RS.36,68,754/- ON WHICH THERE IS GROSS PROFIT OF RS.10,71,980/- AT TH E RATE OF 29.222%. THE DETAILS OF THE ASSESSEES BUSINESS ACTIVITY FOR THE FOUR YEARS STA RTING FROM A.Y. 2001-02 HAS BEEN DEPICTED BELOW FOR READY REFERENCE:- A.Y. 2001-02 2002-03 2003-04 2004-05 2005-06 PROFIT/LOSS OPENING STOCK 4188150 3980196 3993084 4381104 5774903 PURCHASE 8824860 6011420 3332019 6702632 6166775 TOTAL TURNOVER 9783881 6768746 3668754 6671146 9723 735 CLOSING STOCK 3980196 3993084 4381104 5774903 41916 67 GROSS PROFIT 1449644 1469092 1071980 1530866 172233 8 GP% 14.82 21.7 29.22 29.95 18.5 9% ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 4 STOCK/TURNOVER 40.68 58.99 119.42 86.57 45.24 TABLE 2 5.1 THE ABOVE CHART OF THE BUSINESS ACTIVITY OF THE ASSESSEE INDICATES CERTAIN SIGNIFICANT THINGS WHICH ARE AS UNDER: DURING THE PREVIOUS YEAR 2002-03, RELEVANT TO THE A .Y 2003-04, WHICH IS UNDER SCRUTINY THERE WAS SURVEY OPERATION U/S.133A ON 10/10/2002, THE TURNOVER IN THIS YEAR IS ALMOST HALF OF THE OTHERS YEARS; SIMILARLY THE PURCHASES ARE ALSO HALF OF THE PURCHA SES OF THE OTHER THREE YEARS. THE GP HAS SHOWN A SUDDEN JUMP TO 29.22% AS COMPARE D TO 21.7% THERE IS A WIDE VARIATION IN THE STOCK/TURNOVER RAT IO IN THE FOUR YEARS, WHICH HAS BEEN CHANGING DRASTICALLY FROM YEAR TO YEAR. TH IS SUGGESTS MANIPULATION IN THE VALUE OF CLOSING STOCK. THE STOCK/TURNOVER RATIO FOR THE A.Y 2003-04 IS 119 .42% AS COMPARED TO THAT IN THE A.Y. 2001-02, WHICH IS 58.99%. THE INCREASE IS OVER 2 TIMES THAT OF THE PREVIOUS YEAR. THERE IS A SUDDEN AND SIGNIFICANT IN CREASE IN THE STOCK/TURNOVER RATIO WHICH INDICATES A SURE SIGN OF UNDER VALUATION OF CLOSING STOCK. 6. AT THE TIME OF SURVEY CASH OF RS.39,900 WAS FOUN D BUT AS PER THE BOOKS OF THE THREE FIRMS, THE CASH WAS RS.5,66,581/-. SIMILARLY, PHYSICAL STOCK OF RS.6069.760 GRAMS WAS FOUND, WHEREAS, AS PER THE BOOKS OF THE T HREE FIRMS, THE STOCK WAS 16,52,630 GRAMS. THE ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE VIDE NOTICE U/S.143(1), THE ASSESSEE WAS ALSO ASKED TO SUBMIT D OCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIMS. THE ASSESSEE FILED A REPLY VIDE LETTER DATED 14/12/ 2005, THE RELEVANT PORTION OF THIS LETTER IS AS UNDER:- 16. STATEMENT OF RECONCILIATION OF CASH AS PER BOO KS OF ACCOUNT AND CASH FOUND ON THE DATE OF SURVEY I..10/10/2002 IS ENCLOS ED HEREWITH AS ANNEXURE- 16. ANNEXURE-16 AMOUNT AS PER BOOKS OF ACCOUNT AMT. AS PER STATEME NT 363129 363129 B.N.JEWELLERS 230765 V.N.BROTHERS 200765 2652 V.N.BROTHERS 596546 2687 566581 PHYSICAL CASH AS PER STATEMENT 566581 BALANCE 39900 CASH ON HAND 30000 SELF CHEQ. NO.319112 350000 CARRIED BY NILES HBHAI OUT-STN. FOR BUSINESS PURPOSE 28/9/02 CASH WITHDRAWN NOT CONSIDERED IN STATEMENT THROUGH OVERSIGHT 200000 AT THE RESD.OF BHUPENDRABHAII 596581 596581 FROM THE SAID STATEMENT, IT WILL BE OBSERVED THAT R S.3,50,000/- WAS WITH THE PARTNERS, SHRI NILESHBHAI, WHO TOOK THE SAME FOR EFFECTING PURCHAS ES OF GOLD/ORNAMENTS DURING TRAVEL AND AN AMOUNT OF RS.2,00,000/P WAS TAKEN BY THE PARTNER , SHRI BHUPEHNDRABHAI TO HIS RESIDENCE TO AVOID THEFT. IT MAY FURTHER BE NOTED THAT ON THE DATE OF SEARCH, SHRI BHUPENDRABHAI HAD ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 5 HEART TROUBLE AND HAD GONE DIRECTLY TO DOCTOR ALONG WITH SHRI VASANTBHAI AND BOTH OF THEM WERE NOT PRESENT AT THE TIME OF SURVEY. STATEMENT O F SHRI VASANTBHAI WAS RECORDED ONLY IN THE LATE EVENING OF 10/10/2002. TAKING INTO CONSIDE RATION THE ABOVE, DIFFERENCE IN THE CASH IS ONLY OF RS.6,681/- WHICH MIGHT BE DUE TO NON-RECORD ING OF OUTGOINGS THROUGH INADVERTENCE. 17. RECONCILIATION OF PHYSICAL STOCK IS GIVEN IN AN NEXURE-17 ENCLOSED HEREWITH. IT MAY FURTHER BE NOTED THAT THE PARTNER, SHRI NILESHBHAI HAD GONE OUT OF STATION FOR BUSINESS PURPOSE AND HAD TAKEN WITH HIM ORNAMENTS WEIGHING 6069.760 GRAM S. FURTHER GOLD OF 1889.780 GRAMS WAS LYING WITH KARIGARS AS SHOWN IN ANANEXURE-17 AN D ORNAMENTS WEIGHING 1042.080 GRAMS WERE SOLD TO MERCHANTS AS SHOWN IN ANEXURE-17 AND G OLD IN RESPECT OF THE SAME WAS OUTSTANDING TO BE COLLECTED FROM THEM. DIFFERENCE I S OF 565.060 GRAMS WHICH MAY BE DUE TO DIFFERENCE IN WEIGHMENT. ANNEXURE-17 DETAILS OF STOCKS OF THREE FIRMS AS PER BOOKS OF AC COUNT GRAMS 1. SONI V. N. BROTHERS 11412.400 2.V.N.BROTHERS 3658.720 3. V.N.EXPORTS 553.510 15624.630 DETAILS OF STOCKS OF THREE FIRMS 1 6069.760 PHYSICAL STOCK 2. STOCK CARRIED TO OUTSTATION BY SHRI 6057.950 NILESHBHAI FOR APPROVAL 3. STOCK WITH KARIGARS FOR MAKING GOLD ORNAMENTS (A) ANILBHAI G SONI 823.100 (B) JAYESBHAI G. SONI 279.600 MANORANJAN MADHUSUDAN 272.920 (D) KAMLESHBHAI SONI 110.400 (E) RENESH KANTILAL SONI 130.840 (F) VIPULBHAI D SONI 272.920 1889.780 4. STOCK WITH CUSTOMERS (A) MANOHAR JEWELLERS 844.600 (B) M NATVARLAL JEWELLLERS 193. 480 1042.080 15059.570 NOTE: DIFFERENCE IS OF 565.06 GRAMS WHICH MAYBE DUE TO DIFFERENCE IN WEIGHMENT. 6.1 AFTER PERUSING THE CONTENTS OF THE REPLY, ANOTH ER LETTER DATED 3/2/2006 WAS ISSUED TO THE ASSESSEE, WHEREIN THE ASSESSEE WAS ASK TO EXPLAIN A ND PROVIDE CERTAIN EVIDENCE AND DETAILS, THE RELEVANT PORTION OF THE LETTER IS AS U NDER:- (I) IT HAS BEEN STATED IN THE SUBMISSIONS, ONE OF THE REASONS OF SHORTAGE OF STOCK AT THE TIME OF SURVEY WAS THAT ONE OF THE PARTNERS; SH RI NILESHBIA HAD TAKEN 6069.760 GRAMS FOR APPROVAL TO VARIOUS CUSTOMERS. YOU ARE RE QUESTED TO PROVIDE SUPPORTING EVIDENCE OF THE SAME ALONG WITH NAME AND COMPLETE A DDRESS OF THESE CUSTOMERS, DATE-WISE SCHEDULE AND TRAVEL PLAN OF THE TOUR ALON G WITH EVIDENCE. (II) (III) (IV) .. ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 6 (V) PLEASE PROVIDE DOCUMENTARY EVIDENCE WITH RESPEC T TO YOUR CLAIM THAT RS.3,50,000/- WERE TAKEN BY SHRI NILESHBHAI FOR TOU R AND RS.2,00,000/- WAS AT THE RESIDENCE OF SHIR BHEPENDRABHAI, WHEREAS AT THE TIM E OF SURVEY SHRI VASANTBHAI SONI, PARTNER, HAD STATED THAT HE HAD NO EXPLANATIO N FOR SHORTAGE OF SUCH A LARGE AMOUNT OF CASH 6.2 IN RESPONSE, THE ASSESSEE SUBMITTED A REPLY VID E LETTER DATED 27/2/2006 WHICH IS AS UNDER: AS REGARDS STOCK OF 6069.760 GRAMS WITH OUR PARTN ER, SHRI NILESHBHAI AT THE TIME OF SURVEY ON 10/10/2002, WE BEG TO STATE THAT OUR PART NER SHRI NILESHBHAI HAD PROCEEDED TO SURAT ION THE AFTERNOON OF 09/10/2002 WITH OUR SALESMAN SHRI KINJALBHAI SHUKLA BY ROAD IN MARUTI ZEN CAR NO.GUJ-1-HE-9494. ALONG WITH HIM HE HAD CARRIED THE GOLD ORNAMENTS OF 6069.760 GRAMS FOR WHICH TWO APPROVAL MEMOS WERE PREPARED WHICH ARE AVAILABLE IN THE RECORDS SEIZED DURING SU RVEY ON 10/10/2002. XEROX COPIES OF THE SAID MEMOS WERE OBTAINED FROM THE DEPARTMENT ARE ENCLOSED HEREWITH BY WAY OF SUPPORTING EVIDENCE. PURPOSE OF THE VISIT TO SUR AT WAS TO SELL THE ORNAMENTS TO JEWELLERY MERCHANTS IN SURAT AS WELL AS TO BUY DIAM ONDS FROM SURAT PARTIES FOR WHICH PURPOSE, HE HAD ALSO CARRIED WITH HIM CASH OF RS.3, 50,000/-. HE REACHED SURAT AT 9.00 P.M. ON 09.10.2002. NEXT DAY HE VISITED M/S. V . NAVINCHANDRA HIRACHAND MALJ, KHAPALIA CHAKLA, GOPIPURA, SURAT FOR THE SALE OF GO LD ORNAMENTS AROUND 12.00 P.M. WHEN THE DISCUSSIONS WERE GOING ON, HE RECEIVED MES SAGE ON PHONE TO RETURN IMMEDIATELY TO AHMEDABAD AS INCOME TAX DEPARTMENT H AS INITIATED SURVEY PROCEEDINGS AGAINST THE FIRM. 6.3 AFTER PERUSING THE ABOVE REPLY OF THE ASSESSEE CERTAIN SIGNIFICANT THINGS WERE NOTICED, WHICH ARE AS UNDER:- 6.3.1 THE ASSESSEE WAS ASKED TO PRODUCE EVIDENCE I N SUPPORT OF HIS CLAIM THAT ONE OF THE PARTNER, I.E. SHRI NILESHBHAI SONI HAD VISIT ED SURAT ALONG WITH THE ORNAMENTS. THE ASSESSEE SUBMITTED STATED THAT SHRI NILESHBHAI HAD VISITED SURAT BY ROAD IN MARUTI ZEN CAR NO.GUJ-1-HE-9494 WHEREAS SHRI VASANT BHAI SONI HAS STATED IN HIS STATEMENT ON 10.10.2002 AT ANS 9, THAT HE HAS GONE IN A CAR BEARING REGISTRATION NUMBER GUJ-1-HE-4949. THE ASSESSEE HAS NOT PROVIDED ANY EVIDENCE LIKE COPY OF ANY TOLL PAID DURING THE JOURNEY TO PROVE BEYOND DO UBT THAT ACTUALLY THE JOURNEY WAS MADE NOR THE RETURN JOURNEY WHICH WAS MADE ON 10/10 /2002 ITSELF. 6.3.2 IT HAS BEEN STATED THAT SHRI NILESHBHAI SONI AND THE SALESMAN SHRI KINJALBHAI SONI STAYED AT SURAT ON THE NIGHT OF 9/10/2002, HOW EVER, THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTS LIKE HOTEL BILL, FOOD BILL, ETC. OR EVIDENCE OF STAY AT ANY OTHER PLACE. 6.3.3 THE ASSESSEE HAS STATED THAT SHRI NILESHBHAI HAD GONE AND MET SOME CUSTOMERS FOR SHOWING THE ORNAMENTS, HOWEVER, THE A SSESSEE HAS NOT SUBMITTED ANY CONFIRMATION FROM SUCH CUSTOMERS. 6.3.4 THE ASSESSEE HAS STATED THAT SHRI NILESHBHAI HAD TAKEN ALONG CASH OF RS.3,50,000 TO SURAT TO BUY DIAMONDS. HOWEVER, IN H IS STATEMENT DATED 16/10/2002, SHRI VASANTBHAI HAS STATED IN ANS B THAT THEY ARE N OT CARRYING OUT ANY WORK INVOLVING DIAMOND AND HAS ALSO STATED IN ANS 2 THAT FOR MAKIN G ORNAMENTS, THEY ONLY BUY 24 CARAT GOLD AND THAT TOO ONLY LOCALLY FROM AHMEDABAD . 6.3.5 FURTHER, IT HAS BEEN SUBMITTED BY THE ASSESSE E, THAT SHRI NILESHBHAI SONI, ON HEARING ABOUT SURVEY OPERATION, RETURNED TO AHMEDAB AD ON 10/10/202 BY EVENING, ITSELF. IT IS NOT CLEAR WHY THE ASSESSEE DID NOT DE POSIT THE SAID STOCK AND CASH BACK TO THE FIRM SINCE THE SURVEY OPERATION WAS STILL GOING . ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 7 6.4 THEREFORE, THE SUBMISSION OF THE ASSESSEE AND A RGUMENT OF SURAT IS WITHOUT ANY EVIDENCE AND CONTRARY TO THE NORMAL BUSINESS ACTIVI TY OF THE ASSESSEE AS HAS BEEN NARRATED IN STATEMENTS OF THE PARTNER SHRI VASANTBHAI SONI, AS POINTED OUT ABOVE. 7. AS REGARDS SHORTAGE OF RS.2,00,0P00/- IN A SUBMI SSION DATED 27/2/2006, IT HAS BEEN STATED IN PARA (V) THAT .. ON 09/10/2002, HE WAS AGAIN HAD A HEART PROBL EM AND SINCE HE WAS TO SEE DOCTOR SANJAY GUPTA ON 10-10-2002, HE CARRIED WITH HIM CASH OF RS.2,00,000/- IN CASE EMERGENCY ADDITION IN HOSPITAL WAS RECOMMENDED . PARTNER SHRI VASANTBHAI ACCOMPANIED HIM TO THE DOCTOR ON 10-10-2002. THAT I S WHY HE WAS NOT AVAILABLE TILL LATE NIGHT IN THE SHIP A THE TIME OF SURVEY. SHRI B HUPENDRABHAI HAD LATER ON UNDERGONE HEART BY-PASS SURGERY IN THE STERLING HOS PITAL. HIS AFFIDAVIT IN SUPPORT OF THE ABOVE FACT IS ENCLOSED HEREWITH 7.1 THE ABOVE EXPLANATION OF THE ASSESSEE IS FULL O F CONTRADICTION FIRST, WHEN SHRI VASANTBHAI SONI HAD ACCOMPANIED SHRI BHAUPENDRABHAI TO THE DOC TOR ON 10/10/2002, THE DAY OF SURVEY, WHERE ADMISSION TO HOSPITAL WAS CONTEMPLATED, THEN WHY SHRI VASANTBHAI DID NOT EXPLAIN IT AT THE TIME OF SURVEY. SECOND, IN THE SUBMISSION DA TED, 14/12/2005, IT HAS BEEN STATED IN PARA 16, THAT THE RS.2,00,000/- WAS TAKEN BY THE PA RTNER, SHRI BHUPENDRABHAI TO HIS RESIDENCE TO AVOID THEFT. THIRD, THE AFFIDAVIT OF S HRI BHUPENDRABHAI SONI, ONLY MENTIONS ABOUT HISTORY OF HEART PROBLEM MUCH BEFORE THE DATE OF SU RVEY, AND THE SUBSEQUENT TREATMENT BY SURGERY, MUCH AFTER THE DATE OF SURVEY. BUT IT DOES NOT PROVE THE NEXUS THAT AN AMOUNT OF RS.2,00,00/- WAS TAKEN ALONG TO THE DOCTOR AT THE T IME OF CONSULTANCY. THE ASSESSEE HAS NOT PROVIDED ANY EVIDENCE OF HAVING CONSULTED THE DOCTO R ON THE DAY OF SURVEY. 7.2 THEREFORE, LOOKING TO THE FACT OF VARYING STAND TAKEN BY THE ASSESSEE LACK OF EVIDENCE ALONG WITH THE AFFIDAVIT OF SHRI BHUPENDRABHAI SONI , THE ASSESSEES EXPLANATION WITH RESPECT TO OF SHORTAGE OF CASH OF RS.2,00,000/- CANNOT BE A CCEPTED. 8. THEREFORE, THE EXPLANATION OF THE ASSESSEE WITH RESPECT TO SHORTAGE OF CASH OF RS.3,50,000 AND RS.2,00,000/- IS NOT AT ALL SATISFA CTORY AS IT IS NOT SUPPORTED BY ANY DOCUMENTARY OR CIRCUMSTANTIAL EVIDENCE. THERE ARE C ERTAIN PAPERS IN THE IMPOUNDED LOOSE PAPER FILE X-37, RELATING TO RENOVATION OF GROUND, FIRST AND SECOND FLOOR OF THE PREMISES SITUATED AT 2098, KATAKIA WAR, KALUPUR, AHMEDABAD W HERE ACTIVITY OF MANUFACTURING OF GOLD ORNAMENTS IS BEING CARRIED OUT, HOWEVER, NO EXPLANA TION HAS BEEN PROVIDED REGARDING SOURCE OF SUCH EXPENDITURE. THEREFORE, IN ABSENCE O F CREDIBLE EXPLANATION REGARDING THE SHORTAGE OF CASH OF RS.5,50,000/- FOUND AT THE TIME OF SURVEY AS COMPARED TO THE BOOKS OF ACCOUNTS, IT IS HELD THAT THE ASSESSEE HAS UTILIZED THE AMOUNT OF RS.5,50,000/- IN MAKING PURCHASES OUTSIDE THE BOOKS OF ACCOUNT AND IS HEREB Y, ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY U/S.271(1) IS HEREBY INITIATED F URNISHING INACCURATE PARTICULARS OF INCOME, WITH RESPECT TO FACTS WHICH ARE MATERIAL TO THE COM PUTATION OF THE TOTAL INCOME AS THE ASSESSEE HAS OFFERED AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE. 9. AS REGARDS, THE ASSESSEES EXPLANATION REGARDING THE STOCK OF ORNAMENTS TAKEN BY THE PARTNER SHRI NILESHBHAI, THAT IT HAS BEEN RECORDED IN THE APPROVAL MEMO. IT IS NOTICED THAT THE MEMO. DOES NOT BEAR A PROPER SERIAL NUMBER, IT IS M ANUALLY PUT, WHICH LEADS TO CREATE DOUBTS OF ITS AUTHENTICITY. THERE IS NO PROPER FILING OF A PPROVAL MEMOS WHICH HAVE BEEN RECEIVED BACK WHEN THE ORNAMENTS TAKEN OUT ARE KEPT BACK INT O THE STOCK. 9.1 IT WAS ALSO NOTICED AT THE TIME OF SURVEY, THOU GH THERE WERE 5 DIFFERENT APPROVAL MEMOS. AGAINST WHICH THE SERIAL NUMBERS WERE ONLY FROM 1 T O 4. WHEN THE ASSESSEE WAS ASKED TO EXPLAIN THE DISCREPANCY, SHRI VASANTBHAI SOI, IN AN S 12 OF STATEMENT DATED 10-10-2002 ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 8 STATED THAT ONE OF THE MEMO DATED 8.10.2002. ISSUED IN THE NAME OF SHRI BIPINBHAI SONI, PARTNER FOR 1175.640 GRAMS WAS FOR LOCAL APPROVAL A ND WAS FROM DIFFERENT APPROVAL MEMO BOOK. ON BEING ASKED WHY THE COPY OF THE APPROVAL M EMO RECEIVED AFTER THE ORNAMENTS RECEIVED BACK WAS NOT IN THE FILE, SHRI VASANTBHAI SONI STATED IN ANS 14 HE CLARIFIED THAT THERE WAS SOME MISTAKE IN WRITING THE MEMO SERIAL N O, AND THE SAID MEMO APPEARS NOT TO HAVE FILED. 9.2 ON BEING ASKED TO EXPLAIN HOW THE ORNAMENTS TAK EN ON TOUR, PREVIOUSLY BY PARTNERS OR SALESMAN ARE RECORDED AND HOW IT WAS NOTED WHEN THE ORNAMENTS ARE RETURNED BACK. IN HIS STATEMENT ON 10/10/2002, SHRI VASANTBHAI SONI, PART NER HAS STATED THAT AT ANS NO 10 THAT THEY NOT MAINTAIN ANY SUCH ACCOUNT. 9.3 FROM THE ABOVE FACTS, IT EMERGES, MOVEMENT OF G OLD ORNAMENTS FOR APPROVAL IS NOT PROPERLY RECORDED, THE AUTHENTICITY OF THE APPROVAL MEMO CANNOT BE RELIED UPON, AND THE EXPLANATION WITH RESPECT TO SHORTAGE OF PHYSICAL ST OCK THAT IT WAS TAKEN ON TOUR BY THE PARTNER CANNOT BE ACCEPTED. 10. THE ASSESSEE WAS ASKED TO PROVIDE DETAILS OF MO NTH-WISE SALE AND PURCHASE DURING THE YEAR. THE ASSESSEE PROVIDED THE DETAILS VIDE LETTER DATED 14/12/2005. ON COMPARING THE MONTH-WISE DETAILS OF SALES/PURCHASE OF A.Y 2003-04 TO THAT OF EARLIER YEAR I.E. A.Y. 2002-03, IT IS NOTICED THAT THERE IS SIGNIFICANT FALL IN THE SALES AND PURCHASES IN THE PERIOD AFTER THE SURVEY. EVEN THOUGH THIS PERIOD CONSISTS OF PEAK SE ASON DUE TO DIWALI FESTIVAL AND MARRIAGE FUNCTIONS, THERE IS HUGE FALL IN SALE AND PURCHASE. IN THE A.Y. 2002-03 42.2% OF THE TOTAL SALES IS EFF ECTED IN THE PERIOD NOVEMBER TO MARCH, WHEREAS, FOR THE SAME PERIOD IN A.Y 2003-04, THERE HAS BEEN ONLY 11.75% SALE. SIMILARLY 37.37% OF THE TOTAL PURCHASES FOR A.Y. 2002-03 HAS BEEN CARRIED OUT IN THE PERIOD OF NOVEMBER TO ARCH, AS AGAINST 12.61% FOR THE A.Y. 20 03-04. THE COMPARATIVE POSITION OF THE TWO YEARS IS AS UNDER FOR READY REFERENCE. A.Y. 2003-04 A.Y.2002-03 SALES PUCH SALES PURCH APR 779860 589900 555883 788560 MAY 453889 547400 234434 758080 JUN 386571 262193 814428 508990 JUL 367882 181661 763876 286875 AUG 274493 757053 546119 310120 SEP 155441 450019 415355 328210 OCT 819485 123530 582196 762275 NOV 236445 61400 743815 667960 DEC 57550 19167 893571 609850 JAN 4893 391068 764100 FEB 198900 548668 226400 MAR 132245 140796 279333 TOTAL 3668754 3332019 6768746 6011420 10.1 LOOKING TO THE ABOVE SITUATION, THE ASSESSEE W AS ASKED TO PROVIDE THE TRADING ACCOUNT FOR THE TWO PERIODS I.E. FROM 1.4.2002 TO 10.10.200 2 I.E. THE DATE OF SURVEY AND FROM 11.10.2002 TO 31.3.2003. THE VIDE LETTER DATED 16/3 /2006 SUBMITTED SUCH WORKING IN GRAMS, HOWEVER, WHILE GIVING THE WORKING IN VALUE, THE ASS ESSEE DID NOT PROVIDE SEPARATE WORKING OF CLOSING STOCK AND G.P. THEREFORE, IT WAS WORKED OUT ON THE BASIS OF CLOSING STOCK AVAILABLE ON VARIOUS DATES AS SUBMITTED BY THE ASSESSEE. IT WAS NOTICED THAT THERE IS A WIDE VARIATION OF G. P. FOR THE TWO PERIODS. FOR THE PERIOD 1.4.2002 TO 10.10.2002, THE GP WORKS OUT TO BE 35% WHEREAS FOR THE SECOND PERIOD, THE GP ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 9 RATE WORKS OUT TO BE ONLY 14.6%. THE OVERALL GP FOR THE A.Y. 2003-04 SHOWN BY THE ASSESSEE IS 29.22%. THE TRADING ACCOUNT FOR THE TWO PERIODS ARE AS UNDER:- TRADING ACCOUNT 1-4-2002 TO 10-10-2002 OP STOCK 3993084 SALES 2542511 PURCHASES 2788226 LAB INCOME 336628 LABOUR CHARGES 47521 CLOSING STOCK 4857058 GP 907366 7736197 7736197 TRADING ACCOUNT 11-10-2002 TO 31-3-2002 OP STOCK 4857058 SALES 112624 3 PURCHASES 543793 LAB INCOME 112748 LABOUR CHARGES 54631 CLOSING STOCK 4381104 GP 164613 5620095 5620095 10.2 THE HUGE DIFFERENCE IN THE RATE OF GP FOR THE TWO PERIODS, I.E PRIOR TO THE DATE OF SURVEY AND THE PERIOD AFTER THE DATE OF SURVEY, COUPLED WI TH STARK FALL IN SALES AND PURCHASES IN THE SECOND PERIOD, DESPITE IT BEING A PEAK SEASON CONSI STING OF DIWALI AND MARRIAGES, CLEARLY INDICATES THAT THE ASSESSEES BOOKS OF ACCOUNTS CAN NOT BE RELIED UPON, AND THE SAME HAS BEEN MANIPULATED AFTER THE SURVEY TOOK PLACE AND A LARGE AMOUNT OF STOCK AND CASH WAS FOUND SHORT. 11. THE ASSESSEE VIDE LETTER DATED 15/12/2004, HAD SUBMITTED MONTH-WISE PURCHASE AND SALE OF GOLD AND ORNAMENTS IN GRAMS. ON COMPARING T HIS MONTH-WISE FIGURES TO THAT RECORDED IN THE REGISTER OF FORM NO.GS.11 DEPICTING ACCOUNT OF STANDARD/PRIMARY GOLD AND GOLD ORNAMENTS FOR MELTING, AS PER X-5 OF THE IMPOUNDE D BOOKS, IT IS NOTICED THAT THERE IS LARGE VARIATION IN ALL THE MONTHS. THIS IS A SURE INDICAT ION THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE RELIED UPON. MONTH PURCHASE AS PER REGISTER NO.G.S.11 IN (GMS.) PURCHASE AS PER MONTH- WISE DETAILS SHOWN IN SUBMISSION DIFFERENCE IN GMS. APRIL 1166.400 1166.400 0 MAY 1283.040 1049.760 -233.28 JUNE 233.280 568.370 -335.09 JULY 347.400 347.400 0 AUG 1588.580 1487.880 -200.7 SEP 1090.280 857.000 233.28 TOTAL 6292.180 5476.81 -435.79 TABLE-4 12. AFTER CAREFULLY PERUSING THE SUBMISSION MADE BY THE ASSESSEE AND CONSIDERING THE FACTS OF THE CASE, AND EXAMINING THE BOOKS OF ACCOUNTS, T RUENESS OF THE BOOKS OF ACCOUNTS CANNOT BE ACCEPTED DUE TO FOLLOWING REASONS: ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 10 (I) THE VALUATION OF CLOSING STOCK CANNOT BE RELIED UPON AS THERE IS DISCREPANCY IN RECORDING THE PURCHASE; (II) THERE IS WISE VARIATION IN THE RATE OF GP WITH OUT ANY VALID REASONS FOR THE TWO PERIODS I.E. ONE, PRIOR TO THE SURVEY AND TWO, AFTE R THE PERIOD OF SURVEY. (III) THE TOTAL PURCHASE/TURNOVER FOR THE A.Y 2003- 04 HAS BEEN REDUCED TO HALF AS COMPARED TO THREE YEARS; (IV) THE MOTH-WISE PURCHASE/SALE OF THE A.Y. 2003-0 4 HAS SHOWN AN ABNORMAL FALL FOR THE PERIOD AFTER THE SURVEY AS COMPARED TO THE PREV IOUS YEAR, THOUGH THIS PERIOD CONSISTS OF PEAK SEASON IN THE ASSESSEES LINE OF B USINESS. (V) THE ASSESSEE DOES NOT MAINTAIN PROPER RECORD OR DOCUMENTATION WITH RESPECT TO MOVEMENT OF GOLD ORNAMENTS AND CASH. 12.1 IT IS, THEREFORE, CLEAR THAT THE BOOKS OF ACCO UNTS MAINTAINED CANNOT BE RELIED UPON AND THE SAME ARE REJECTED AND THE PROFIT IS HEREBY ESTI MATED AS PER THE PROVISIONS OF SECTION 145(3). 13. HAVING REJECTED THE BOOKS OF ACCOUNT, THE TOTAL TURNOVER IS HEREBY ESTIMATED AT RS.82,36,877 LAKHS BEING THE AVERAGE TURNOVER OF TH E THREE YEARS I.E. A.Y. 2001-02, 2002- 03, 2004-05, REFER TABLE NO.2 ABOVE. GROSS PROFIT O N THIS TURNOVER IS HEREBY ESTIMATED AT 29.22%, THE GP SHOWN FOR A.Y. 2003-04. THEREFORE, O N THE ESTIMATED TOTAL TURNOVER OF RS.82,36,877/- THE GROSS PROFIT IS WORKED OUT AT RS .24,06,815/-. THE ASSESSEE HAS SHOWN G.P. OF RS.10,71,980/- IN THE RETURN OF INCOME, THE REFORE, THE BALANCE AMOUNT OF RS.13,34,835/- IS HEREBY ADDED BACK TO THE TOTAL IN COME OF THE ASSESSEE. BEFORE LD. CIT(APPEALS) FOLLOWING WRITTEN SUBMISSI ON WAS FILED ON BEHALF OF THE ASSESSEE:- 4.1 THE LEARNED ASSESSING OFFICER, DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS, REQUIRED THE APPELLANT TO E XPLAIN THE CASH BALANCE OF RS.39,900/- FOUND ON THE DATE OF SURVEY I.E. I 10/10/2002 AS AGAINST THE CASH BALANCE SHOWN IN THE BOOKS OF ACCOUNTS OF THE FOLLOWING GROUP FIRMS ON T HAT DATE: I) AS PER BOOKS OF M/S. SONI V.N.BROS. (APPELLAN T)RS.2,00,765 II) M/S.B.N.JEWELLERS RS.3,63,129 III) M/S. V.N.EXPORTS RS. 2,652 TOTAL RS.5,66,546 4.2 THE APPELLANT, BY ITS LETTERS DATED 14/12/2005 AND 27/2/2006 FULLY AND SATISFACTORILY EXPLAINED TO THE LEARNED ASSESSING OFFICER, THE POSITION OF CASH BALANCES AS PER BOOKS OF ACCOUNTS OF THE GROUP FIRMS AS STATED ABOVT AND THE ACTUAL CASH BALANCE FOUND ON 10/10/2002 DURING THE SURVEY OPERATIONS AS UNDER : (A) RECONCILIATION OF CASH AS PER BOOKS OF ACCOUNT AND CASH FOUND ON THE DATE OF SURVEY I.E. ON 10/10/2002. AMT.AS PER BOOKS OF ACCOUNT AMT. AS PER STATEMENT OF GROUP FIRMS ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 11 3,63,129 2,30,765 2,652 B. V. V. N. JEWELLERS N. BROTHERS N. EXPORTS 3,63,129 2,00,765 2,687 5,96,546 5, 66, 581 (B) PHYSICAL CASH AS PER STATEMENT 5,66,581 BALANCE 39,900 CASH ON HAND 30,000 SELF CHE.NO.319112 28/9/02 3,50,000 C ARRIED BY NILESH N. CASH WITHDRAWN NOT S ONI FOR OUT STATION CONSIDERED IN STATEMENT BUSINESS PURPOSE. THROUGH OVERSIGHT. 2,00,000 AT THE RES IDENCE OF BHUPENDRABHAI 6,681 DIFFERENCE. 5,96,581 5,96,581 4.3 THE APPELLANT HAS THUS, DULY EXPLAINED TO THE LEARN ED ASSESSING OFFICER THAT AS PER ANNEXUR@-16 ENCLOSED WITH THE LETTER DATED 14/12/2005 BY THE APPELLANT (PLEAS SEE PAGE NO, 59 OF THE PAPER BOOK), ONE OF THE PARTNERS SHIRI NILESHBHAI N, SONI HAS GONE TO SURAT FOR BUSINESS P URPOSES AND HAS TAKEN AWAY WITH HIM RS.3,50,OOO/- FOR PURCH ASING DIAMONDS. IN THIS REGARD, SHRI NILESHBHAI HAS EXECU TED AFFIDAVIT CONFIRMING ABOVESTATED FACTS AND THE AFFI DAVIT WAS SUBMITTED TO THE LEARNED ASSESSING OFFICER (PLEASE SEE PAGE NOS.65 AND 70 OF THE PAPER BOOK). MOREOVER, OTHER P ARTNER OF THE APPELLANT FIRM, SHRI VASANTBHAI N. SONI HAS ALS O, IN ANSWER TO QUESTION NO.21 OF THE STATEMENT RECORDED ON 10/10/2002, STATED THAT SHRI NILESHBHAI HAS TAKEN W ITH HIM IN TOUR FOR PURCHASES, APPROXIMATELY RS.3, 00, OOO/ - TO RS.3, 50, OOO/-(PLEASE SEE PAGE NOS. 136 AND 147 OF THE PAPER BOOK). THE APPELLANT HAS ALSO EXPLAINED TO THE LEARNED ASS ESSING OFFICER THAT, PARTNER OF THE APPELLANT FIRM VIZ. SHRI BHUPE NDRABHAI N. SONI WAS A HEART PATIENT AND EVEN ON THE DATE OF SURVEY, HE HAS SUDDENLY DEVELOPED SOME TROUBLE AND HENCE, HE ALONG WITH ANO THER PARTNER SHRI VASANTBHAI N. SONI, HAS GONE TO DOCTOR FOR MEDICAL EXAMINATION AND TREATMENT AND, THEREFORE, BOTH OF THEM WERE NOT PRESENT DURING THE SURVEY PROCEEDINGS. UNDER SUCH CIRCUMSTA NCES, SOME FAMILY MEMBER OF PARTNER SHRI BHUPENDRABHAI N. SONI .HAS WITHDRAWN RS.2,00,OOO/- AND HAS KEPT THE SAME AT HI S RESIDENCE TO MEET ANY EMERGENCY REQUIREMENTS DUE TO HIS ILLNESS. HOWEVER, STATEMENT OF SHRI VASANTBHAI WAS RECORDED AT VERY L ATE HOURS ' IN THE EVENING ON 10/10/2002 AT A TIME WHEN HE WAS IN VERY HEAVY TENSION ON ACCOUNT OF ILLNESS OF SHRI BHUPENDRABHAI AS WELL AS ON ACCOUNT OF THE MENTAL PRESSURE OF SURVEY PROCEEDING S. THEREFORE, THE DIFFERENCE IN CASH BALANCE AS PER BOOKS AND ACT UAL CASH COULD NOT BE PROPERLY EXPLAINED AT THAT TIME. IN THIS REG ARD, SHRI BHUPENDRABHAI, ALSO HAS EXECUTED AFFIDAVIT CONFIRMI NG ABOVESTATED FACTS AND HIS AFFIDAVIT ALONGWITH PAPERS REGARDING MEDICAL ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 12 TREATMENT WERE ALSO SUBMITTED TO THE LEARNED ASSESS ING OFFICER (PLEASE SEE PAGE NOS.71 TO 75 OF THE PAPER BOOK). 4.5 THE LEARNED ASSESSING OFFICER HAS, HOWEVER, SUM MARILY REJECTED THE SUBMISSIONS MADE BY THE APPELLANT AS W ELL AS THE AFFIDAVITS FILED IN THIS REGARD, WITHOUT SEEKING AN Y FURTHER EXPLANATION FROM THE APPELLANT OR MAKING ANY ENQUIR Y OR WITHOUT CROSS EXAMINING THE PARTNER WHO HAVE MADE AFFIDAVIT S. ON THE CONTRARY, THE LEARNED ASSESSING OFFICER HAS VERY HE AVILY RELIED UPON SOME INSIGNIFICANT INACCURACIES NOTICED WHILE RECORDING THE STATEMENTS OF SHRI VASANTBHAI N. SONI, SO AS TO DRA W ADVERSE INFERENCES ON THE BASIS THEREOF. THE LEARNED ASSESS ING OFFICER HAS UNDULY PLACED VERY HEAVY RELIANCE ON THE ANSWER GIVEN BY SHRI VASANTBHAI TO QUESTION NO. 8 OF THE STATEMENT RECOR DED ON 16/10/2002 (PLEASE SEE PAGE NOS.140 AND 141 OF THE PAPER BOOK), TRANSLATION OF WHICH IS REPRODUCED BELOW : 'Q.8 - STATE IF YOU ARE DOING WORK OF DIAMOND STUDD ING IN GOLD ORNAMENTS OR SEPARATE TRADING IN DIAMONDS? A.8 - NO, WE ARE NOT DOING WORK OF DIAMOND STUDDING OR ANY SEPARATE WORK OF DIAMONDS.' IT IS CLEAR FROM THE ABOVE ANSWER THAT IT HAS BEEN STATED THAT AT THE RELEVANT TIME, THE APPELLANT WAS NOT DOING ANY BUSINESS IN DIAMONDS. HOWEVER, THE LEARNE D ASSESSING OFFICER, ON THE BASIS OF ABOVE ANSWER, CA ME TO THE CONCLUSION THAT THE EXPLANATION GIVEN BY THE APPELLANT THAT SHRI NILESHBHAI CARRIED CASH OF RS.3,50,OOO/- WITH HIM FOR PURCHASE OF DIAMONDS IS NOT CONVINCING BECAUSE THE APPELLANT WAS NOT DOING ANY BUSINESS IN DIAMONDS. THE APPELLANT HAS TO SUBMIT IN THIS RE GARD THAT THE INFERENCE DRAWN BY THE LEARNED ASSESSING OFFICE R IS NOT BASED ON FACTS BUT IT IS MERELY AN ASSUMPTION. THE APPELLANT HAS AT THAT TIME INTENDED TO COMMENCE WORK OF DIAMO NDS AND IN FACT STARTED THE SAME IN THE SUBSEQUENT YEAR. AS SUCH, THE CONCLUSION DRAWN BY THE LEARNED ASSESSING OFFIC ER IS BASED ON MERE ASSUMPTIONS AND SURMISES AND NOT SUPP ORTED BY ANY MATERIAL OR DOCUMENTARY EVIDENCE. 4.6 THE LEARNED ASSESSING OFFICER HAS ALSO TRIED TO PLACE UNDULY HEAVY IMPORTANCE TO THE INADVERTENT OVERSIGHT BY SH RI VASANTBHAI IN HIS STATEMENT WHEN HE SAID THAT SHRI NILESHBHAI TRAVELED TO SURAT IN MARUTI ZEN CAR NO.4949 WHEREAS IN FACT, SH RI NILESHBHAI TRAVELED BY MARUTI ZEN CAR NO. 9494 BELONGING TO TH E APPELLANT FIRM (PLEASE SEE PAGE NOS.124 TO 126 OF THE PAPER B OOK).. 4.7 THE LEARNED ASSESSING OFFICER HAS ALSO NOT PROP ERLY APPRECIATED THE FACTS AND CIRCUMSTANCES UNDER WHICH CASH OF RS.2,00,OOO/- WAS WITHDRAWN BY SHRI BHUPENDRABHAI. THE LEARNED ASSESSING OFFICER HAS ALSO SUMMARILY REJECTED THE A FFIDAVIT FILED IN THIS REGARD WITHOUT CALLING FOR ANY EXPLANATION OR WITHOUT CARRYING ON ANY FURTHER ENQUIRY. THE APPELLANT SUBM ITS THAT SUBSEQUENTLY, SHRI BHUPENDRABHAI HAS UNDERGONE CORO NARY ANGIOGRAPHY ON 16/12/2002. ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 13 4.8 WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED TH AT SHORTAGE IN CASH BALANCE CANNOT HAVE ABSOLUTELY ANY IMPLICATION ON COMPUTATION OF INCOME. THERE IS ABSOLUTELY NO EVIDENCE OF ANY P URCHASES MADE FROM THE SAME. EVEN OTHERWISE, PURCHASES NOT RECORD ED WILL NOT HAVE ANY EFFECT ON THE INCOME. 4.9 THE APPELLANT SUBMITS THAT THE LEARNED ASSESSIN G OFFICER HAS SUMMARILY REJECTED THE EXPLANATIONS AND EVIDENCES G IVEN IN SUPPORT THEREOF. AS SUCH, THE LEARNED ASSESSING OFFICER HAS , WITHOUT BRINGING ON RECORD ANY MATERIAL OR EVIDENCES TO SUP PORT HIS CONTENTION AND MERELY ON THE BASIS OF ASSUMPTIONS A ND 'SURMISES, DRAWN CONCLUSION THAT DIFFERENCE IN CASH BALANCE OF RS.5,50,OOO/- NOTICED DURING THE SURVEY PROCEEDINGS IS ON ACCOUNT OF SAID CASH HAVING BEEN UTILIZED BY THE APPELLANT FOR MAKING PU RCHASES WHICH HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT OF T HE APPELLANT. THE LEARNED ASSESSING OFFICER HAS THEREFORE MADE AD DITION OF RS.5,50,OOO/- IN THE INCOME OF THE APPELLANT ON THA T GROUND. 4.10 THE APPELLANT SUBMITS THAT IN VIEW OF THE ABOV E, IT IS CLEAR THAT THE ADDITION MADE BY THE LEARNED ASSESSING OFF ICER IS TOTALLY UNWARRANTED AND UNJUSTIFIABLE AND REQUIRES TO BE DE LETED. 5. ADDITION OF RS . 13, 34 , 835/- ON THE BASIS O F ESTIMATED TURNOVER AND G.P. : 5.1 THE APPELLANT HAS, DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, DULY EXPLAINED TO THE LEARNED ASSESSIN G OFFICER THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE SUB JECT TO AUDIT AND REQUIRED TAX AUDIT REPORT U/S 44AB OF THE I T. ACT, 1961, WAS FILED ALONGWITH RETURN OF INCOME AND REQUIRED QUANTITATIVE DETAILS ARE ALSO AVAILABLE IN THE TAX AUDIT REPORT. FURTHER THE APPELLANT HAS FULLY AND SATISFA CTORILY EXPLAINED ALL THE ISSUES RAISED BY THE LEARNED ASSE SSING OFFICER AND HAS ALSO PRODUCED ALL THE NECESSARY REC ORDS AND EVIDENCES IN SUPPORT THEREOF. 5.2 THE APPELLANT HAS, BY LETTERS DATED 14/12/2005 AND 27/02/2006, SUBMITTED COMPLETE DETAILS, SHOWING QUANTITIES AND AMOUNTS, OF OPENING AND CLOSING STOCKS, PURCHASES, SALES AS WEL L AS ALLOY MIXING BY KARIGARS FOR MAKING ORNAMENTS (PLEASE SEE PAGE NOS.44, 45 AND 83 TO 92 OF THE PAPER BOOK) . THE APPELLANT ALSO PRODUCED BEFORE THE LEARNED ASSESSING OFFICER, REGISTERS GS -11 AND GS-12 (PLEASE SEE PAGE NOS.93 TO 120 OF THE PAPER BOOK) R EQUIRED TO BE MAINTAINED BY THE APPELLANT IN RESPECT OF PURCHASES , ISSUE AND SALES OF GOLD AS WELL AS GOLD ORNAMENTS, WHEREIN CO MPLETE QUANTITATIVE DETAILS ARE AVAILABLE. 5.3 THE APPELLANT HAS ALSO EXPLAINED THE PROCESS OF MANUFACTURING OF ORNAMENTS AND MIXING OF ALLOY BY KARIGARS. THE A PPELLANT HAS ALSO FURNISHED TO THE LEARNED ASSESSING OFFICER COM PLETE NAMES AND ADDRESSES OF THE PARTIES WITH WHOM PURCHASES AND SA LES WERE EFFECTED ALONGWITH COPIES OF THEIR ACCOUNTS, AS REQ UIRED BY THE LEARNED ASSESSING OFFICER. 5.4 HOWEVER, THE LEARNED ASSESSING OFFICER HAS NOT PROPERLY APPRECIATED THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT AS WELL AS THE SUBMISSIONS AND OTHER RECO RDS PRODUCED BY ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 14 THE APPELLANT.' THE LEARNED ASSESSING OFFICER HAS, MERELY ON THE BASIS OF ASSUMPTIONS AND SURMISES DRAWN CONCLUSION THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT ARE NOT REL IABLE AND, THEREFORE, THE SAME ARE TO BE REJECTED. HOWEVER, TH E LEARNED ': ASSESSING OFFICER HAS DRAWN SUCH CONCLUSION, WITHOU T SEEKING ANY FURTHER INFORMATION OR EXPLANATIONS FROM THE APPELL ANT AND ALSO WITHOUT BRINGING ON RECORD ANY MATERIAL OR EVIDENCE IN SUPPORT OF 1 HIS CONTENTIONS. MOREOVER, THE LEARNED ASSESSING OF FICER HAS NOT POINTED OUT ANY SPECIFIC OR MATERIAL DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT WHICH ARE ALSO DULY AUDITED. 5.5 THE APPELLANT HAS SUBMITTED, AS REQUIRED BY THE LEARNED ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, DETAILS OF MONTHLY PURCHASES AND SALES FOR A.Y.2003 -04 AND FOR A.Y.2002-03. THE LEARNED ASSESSING OFFICER HAS HOWE VER, FROM THESE FIGURES OBSERVED IN THE ASSESSMENT ORDER THAT IN EA RLIER A.Y, 2002-03 MAJOR PART OF SALES WERE EFFECTED IN PERIOD OF NOVEMBER TO MARCH BUT IN A.Y.2003-04 DURING THIS PERIOD SALES A RE OF VERY SMALL PART OF TOTAL SALE DURING THE YEAR. THE LEARN ED ASSESSING OFFICER HAS FURTHER OBSERVED THAT DURING THIS PERIO D PURCHASES IN A.Y. 2002-03 WERE SUBSTANTIAL WHICH WERE MUCH LOWER IN A.Y.2003- 04. THE LEARNED ASSESSING OFFICER HAS ALSO POINTED OUT IN THE ASSESSMENT ORDER, SOME VARIATIONS NOTICED BY HIM IN MONTHLY FIGURES OF PURCHASES SUPPLIED BY THE APPELLANT AND AS MENTIONED : IN THE STATEMENT GIVEN IN THE ASSESSMENT ORDER. THE LEARNED ASSESSING OFFICER HAS ON BASIS OF SUCH DISCREPANCIE S NOTICED BY HIM, WITHOUT SEEKING ANY FURTHER EXPLANATION OR INF ORMATION FROM THE APPELLANT IN THAT REGARD, OUTRIGHTLY HELD THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE NOT RELIABLE, 5.6 THE APPELLANT HAS TO SUBMIT IN THIS RESPECT THA T THE LEARNED ASSESSING OFFICER IS NOT CORRECT IN COMING TO CONCL USION THAT THERE ARE DEFECTS IN THE BOOKS OF ACCOUNTS OF THE A PPELLANT AS POINTED OUT IN THE ASSESSMENT ORDER. IT IS CLEAR TH AT IN THE .XX EARLIER YEAR, DURING THE PERIOD OF NOVEMBER TO MARC H WHEN THERE ARE MORE SALES THERE ARE CORRESPONDINGLY MORE PURC HASES ALSO. HOWEVER FOR THE YEAR UNDER CONSIDERATION THE SALES AS WELL AS PURCHASES BOTH ARE LOWER IN THAT PERIOD AND AS SUCH THERE IS NOTHING IRREGULAR OR UNUSUAL. IT IS FURTHER SUBMIT TED THAT MARKET TRENDS CANNOT BE CONSTANT OR SIMILAR DURING ANY PER IODS OF DIFFERENT YEARS AND AS SUCH NO COMPARISON THEREOF C AN BE MADE. AS REGARDS SOME VARIATIONS NOTICED BY THE LEARNED ASSE SSING OFFICER IN MONTHLY FIGURES OF PURCHASES SUPPLIED BY THE APP ELLANT AND AS MENTIONED IN THE STATEMENT GIVEN IN THE ASSESSMENT ORDER, THE APPELLANT HAS TO SUBMIT THAT THE LEARNED ASSESSING OFFICER HAS ERRONEOUSLY TRIED TO COMPARE FIGURES OF PURCHASES A S PER BOOKS OF ACCOUNTS WITH THE FIGURES OF PURCHASES IN THE REGIS TER GS-11. THE APPELLANT HAS TO SUBMIT THAT FIGURES OF PURCHASES A S PER BOOKS DIFFER FROM THOSE AS PER GS-11 REGISTER DUE TO FOLL OWING REASONS. I) FOR THE MONTH OF MAY'02, PURCHASES AS PER BOOKS OF ACCOUNT IS 1049.760 GRAMS. HOWEVER, AS PER GS-11, IT IS 1283.0 40 GRAMS. DIFFERENCE IS DUE TO 233.280 GRAMS GOLD RECEIVED FR OM THE CUSTOMER M/S.GHARENA FOR MAKING GOLD ORNAMENTS ON JOB WORK B ASIS AND THEREFORE, THOUGH THE SAME IS SHOWN IN GS-11 IT IS NOT INCLUDED IN OUR OWN PURCHASES AS PER BOOKS OF ACCOUNT(PLEASE SE E PAGE NOS.96 & 123 OF THE PAPER BOOK). ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 15 II) FOR JUNE'02, PURCHASES AS PER BOOKS OF ACCOUN T IS 558.370 GRAMS AND AS PER GS-11, ALSO IT IS 558.370 GRAMS. I N THIS REGARD, THE APPELLANT HAS TO SUBMIT THAT GS-11 REGISTER IMP OUNDED BY AND IN POSSESSION OF THE LEARNED ASSESSING OFFICER, FIR ST HALF OF REGISTER CONTAINS RECORDS OF PURCHASES OF 24 CARAT PURE GOLD BULLION AND SECOND HALF OF THAT REGISTER CONTAINS R ECORDS OF PURCHASES OF OLD GOLD ORNAMENTS FROM THE CUSTOMERS. HOWEVER, IN THE STATEMENT GIVEN IN THE ASSESSMENT ORDER, THE LE ARNED ASSESSING OFFICER HAS CONSIDER PURCHASES OF ONLY GOLD BULLION AS PER FIRST PART OF GS-11 OF 233.280 GRAMS BUT HAS NOT TAKEN IN TO CONSIDERATION PURCHASES OF 325.090 GRAMS OLD GOLD O RNAMENTS OF 22 CARAT SHOWN IN THE .SECOND HALF OF REGISTER. MOREOV ER, DIFFERENCE SHOWN OF 335.090 GRAMS IN THE STATEMENT IN THE ASSE SSMENT ORDER IS ALSO NOT CORRECT. IT SHOULD BE 325.090 GRAMS (PLEAS E SEE PAGE NOS.96 & 108 OF THE PAPER BOOK. III) IN AUGUST'02, PURCHASES AS PER BOOKS OF ACCOU NT IS 1497.880 GRAMS WHICH IS WRONGLY STATED AT 1487.880 IN THE STATEMENT GIVEN IN THE ASSESSMENT ORDER. PURCHASES OF GOLD AS PER FIRST HALF OF REGISTER GS-11 IS 1588.580 GRAMS. NET DIFFERENCE IS DUE TO OLD GOLD ORNAMENTS OF 90.700 GRAMS RECEIVED FROM CUSTOMER M/S. M.NATVARLAL FOR MAKING GOLD ORNAMENTS ON JOB W ORK BASIS WHICH IS SHOWN IN THE SECOND HALF OF GS-11 REGISTER BUT T HE SAME IS NOT INCLUDED IN THE BOOKS OF ACCOUNTS AS OUR OWN PURCHA SE (PLEASE SEE PAGE NOS.98 & 122 OF THE PAPER BOOK. IV) IN SEPTEMBER'02, PURCHASES AS PER BOOKS OF ACC OUNT IS 857.000 GRAMS AND AS PER FIRST HALF OF REGISTER GS- 11 IT IS 1090.280 GRAMS. NET DIFFERENCE IS DUE TO OLD GOLD O RNAMENTS OF 233.280 GRAMS RECEIVED FROM CUSTOMER M/S.GHARENA FOR MAKING GOLD ORNAMENTS ON JOB WORK BASIS WHICH IS SH OWN IN THE SECOND HALF OF GS-11 REGISTER BUT THE SAME IS N OT INCLUDED IN THE BOOKS OF ACCOUNTS AS OUR OWN PURCHA SE (PLEASE SEE PAGE NOS.100 & 121 OF THE PAPER BOOK) . THE APPELLANT SUBMITS THAT IN VIEW OF THE ABOVE, TH ERE IS ABSOLUTELY NO DISCREPANCY AS STATED IN THE ASSESSME NT ORDER AND THE DIFFERENCE NOTICED BY THE LEARNED ASSESSING OFF ICER STANDS FULLY AND SATISFACTORILY EXPLAINED. AS SUCH, THE CO NCLUSION DRAWN BY THE LEARNED ASSESSING OFFICER THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE NOT RELIABLE IS NOT AT ALL JUSTIFIABL E. 5.7 THE APPELLANT HAS ALSO, DURING THE COURSE OF AS SESSMENT PROCEEDINGS, DULY EXPLAINED TO THE LEARNED ASSESSIN G OFFICER THE POSITION OF PHYSICAL STOCK AS PER BOOKS OF ACCOUNTS OF THE GROUP FIRMS AND THE ACTUAL STOCK FOUND ON 10/10/2002 DURI NG THE SURVEY OPERATIONS AS UNDER : DETAILS OF STOCKS OF THREE FIRMS AS PER BOOKS OF AC COUNT GRAMS 1. SONI V. N. BROS. 11412.400 2. V. N. BROS. 3658.720 3. V. N. EXPORTS 553.510 15624.630 DETAILS OF STOCKS OF THREE FIRMS ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 16 1. PHYSICAL STOCK 6069.760 2. STOCK CARRIED TO OUTSTATION BY SHRI NILESHBHAI FOR APPROVAL. 6057.950 3. STOCK WITH KARIGARS FOR MAKING GOLD ORNAMENTS : (A) ANILBHAI G. SONI 823.100 (B) JAYESHBHAI G. SONI 279.600 (C) MANORANJAN MADHUSUDAR 272.920 (D) KAMLESHBHAI SONI 110.400 (E) RAJESH KANTILAL SONI 130.840 (F) VIPULBHAI D. SONI 272.920 -------- 1889 .780 4. STOCK WITH CUSTOMERS: (A) MANOHAR JEWELLERS 844.600 (B) M.NATVARLAL JEWELLERS 193.480 -------- 1042 .080 ---- ---- TOTAL GRAMS ' 1505 9.570 (NOTE: DIFFERENCE IS OF 565.060 GRAMS WHICH MAY B E DUE TO DIFFERENCE IN WEIGHMENT). 5.8 THE APPELLANT HAS TO SUBMIT THAT CONSIDERING QU ANTITY OF TOTAL TURNOVER OF SALES AS WELL AS PURCHASES OF THE GROUP FIRMS, WEIGHT DIFFERENCE OF 565.060 GRAMS AS ABOVE IS VERY MUCH I NSIGNIFICANT AND CANNOT BE CONSIDERED TO BE MATERIAL SO AS TO TREAT THE BOOKS OF ACCOUNTS AS NOT RELIABLE, 5.9 THE APPELLANT HAS ALSO SUBMITTED TO THE LEARNED ASSESSING OFFICER, STATEMENTS OF GROSS PROFITS AND NET PROFIT S FOR THREE YEARS, WHICH SHOWS THAT THE GROSS PROFIT RATE HAS G ONE UP FROM 14.82% IN A.Y. 2001-02 TO 29.221 IN A.Y, 2003-04, W HICH IS UNDER CONSIDERATION (PLEASE SEE PAGE NOS.46 TO 52 OF THE PAPER BOOK. 5.10 THE LEARNED ASSESSING OFFICER HAS HOWEVER REJECTED THE SUBMISSIONS MADE BY THE APPELLANT AND WITHOUT PROPERLY APPRECIA TING THE SAME THE LEARNED ASSESSING OFFICER REJECTED THE BOOKS OF ACC OUNTS OF THE APPELLANT AND THEREAFTER, ESTIMATED THE TURNOVER TH E APPELLANT ON THE BASIS OF AVERAGE OF THE TURNOVER) FOR A.Y. 2001-02, 2002-03, 2004-05 AND 2005-06. THE LEARNED ASSESSING OFFICER HAS ALSO ESTIMATED THE GROSS PROFIT ON SUCH ESTIMATED TURNOVER, AT THE RATE OF 2 9.22 % AS SHOWN BY THE; APPELLANT FOR A.Y.2003-04. THE LEARNED ASSESSI NG OFFICER HAS THUS| ESTIMATED THE TURNOVER OF THE APPELLANT AT RS.82,36 ,877/- AND : G.P. THEREON AT RS.24,06,815/- AS AGAINST G.P. OF RS.10, 71,980/-SHOWN BY THE APPELLANT IN ITS RETURN OF INCOME. THE LEARNED! ASS ESSING OFFICER HAS ACCORDINGLY MADE ADDITION OF RS.13,34,8357/-FOR DIF FERENCE IN G.P. 5.11 THE APPELLANT HAS TO SUBMIT THAT THE ACTION OF THE LEARNED ASSESSING OFFICER OF REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATING THE TURNOVER OF SALES IS BASED ONLY ON ASSUMPTIONS, SURMISES AND CONJECTURES WITHOUT SEEKING ANY EXPLAN ATION OR RECORD ANY EVIDENCE OR MATERIAL IN SUPPORT OF JUSTIFICATION OF SUCH ACTION AND ALSO WITHOUT PROPERLY TAKING INTO CONSIDERATION AND APPRECIATING THE EXPLANATIONS AS WELL AS SUPPOR TING EVIDENCES PRODUCED BY THE APPELLANT IN THAT REGARD. THE APPELLANT, THEREFORE, SUBMITS T HAT ADDITION MADE BY THE LEARNED ASSESSING OFFICER IN THIS REGARD SHOULD BE DELETED TOTALLY. ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 17 TAKING INTO CONSIDERATION THIS SUBMISSION LD. CIT(A PPEALS) PARTLY ALLOWED THE APPEAL OF ASSESSEE BY ESTIMATING THE SALES OF THE ASSESSEE AT RS.60 LAKH AND DIRECTED THE ASSESSING OFFICER TO APPLY GP OF 29.22% SHOWN BY TH E ASSESSEE DURING THE YEAR UNDER APPEAL. 4. AT THE TIME OF HEARING BEFORE US LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSION AS MADE BEFORE LD. CIT(APPEALS) WHI CH WE HAVE ALREADY REPRODUCED AT PARA-3 ABOVE. HE ALSO TOOK US TO THE VARIOUS PAGES OF PAP ER BOOK TO SUBSTANTIATE HIS SUBMISSION AND PRAYED THAT THE ADD ITION SUSTAINED BY LD. CIT(APPEALS) MAY ALSO BE DELETED. 5. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF LD. CIT(APPEALS) . 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRA DING OF GOLD ORNAMENTS. A SURVEY OPERATION U/S.133A OF THE INCOME-TAX ACT, 1961 WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AND DURING THE COURSE OF S URVEY, IT WAS FOUND THAT CASH WAS MUCH LESS AS COMPARED TO THE CASH SHOWN IN THE BOOKS OF ACCOUNT. APART FROM THIS, THERE WAS ALSO VARIATION IN THE PHYSICAL STOC K OF GOLD ORNAMENTS AS COMPARED TO STOCK AS PER BOOKS OF ACCOUNT. THE ASSESSEE WAS GIV EN OPPORTUNITY TO EXPLAIN THIS DISCREPANCY FOUND AT THE TIME OF SURVEY AND AFTER T AKING INTO CONSIDERATION THE EXPLANATION OFFERED BY THE ASSESSEE IN THIS RESPECT AO WAS OF THE VIEW THAT ASSESSEE HAS FAILED TO EXPLAIN THE DISCREPANCIES AN D REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED THE TURNOVER OF THE A SSESSEE BY TAKING THE AVERAGE TURNOVER OF THE THREE YEARS AND APPLIED GROSS PROFI T (GP FOR SHORT) AT 29.22% SHOWED BY THE ASSESSEE DURING THE YEAR. IN APPEAL LD. CIT( APPEALS) GAVE SOME RELIEF TO THE ASSESSEE BY REDUCING THE ESTIMATED TURNOVER OF THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS SHORTAGE OF CASH FOUND AT TH E TIME OF SURVEY WAS EXPLAINED BY THE ASSESSEE BY STATING THAT PART OF CASH WAS TA KEN BY ONE PARTNER, SHRI NILESHBHAI N SONI FOR BUSINESS PURPOSES AND SUM OF RS,2 LAKH WAS KEPT BY ANOTHER PARTNER AT HIS RESIDENCE. HOWEVER, IT WAS FOUND THA T THERE WAS A LOT OF CONTRADICTION IN THESE STATEMENTS. IT WAS EXPLAINED THAT ONE PART NER HAD TAKEN RS.2 LAKH WITH HIM BECAUSE HE WAS HAVING HEART TROUBLE AND HAD TAKEN T HE CASH BECAUSE HE HAD GONE TO THE DOCTOR AND ADMISSION TO HOSPITAL WAS CONTEMP LATED. HOWEVER, THIS EXPLANATION ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 18 WAS NOT GIVEN AT THE TIME OF SURVEY. AT THAT TIME O NLY IT WAS STATED THAT PARTNER HAD TAKEN IT TO HIS RESIDENCE TO AVOID THEFT. THUS REPL Y GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS WAS IN ENTIRE CONTRADICTION TO THE FACT STATED AT THE TIME OF SURVEY. IT WAS ALSO FOUND BY THE ASSESSING OFFICER THAT TREATMENT OF THAT PARTNER ACTUALLY TOOK PLACE MUCH LATER AND THERE WAS NO EVI DENCE TO SHOW THAT THERE WAS ANY CONSULTATION WITH THE DOCTOR ON THE DATE OF SURVEY. SIMILARLY, WE FIND THAT BEFORE AO IT WAS STATED THAT ANOTHER PARTNER HAD TAKEN CASH OF R S.3.50 LAKH TO SURAT TO BUY DIAMOND. HOWEVER, AT THE TIME OF SURVEY IN RESPONSE TO QUESTION NO.8, IT WAS CATEGORICALLY MENTIONED THAT ASSESSEE WAS NOT DEALI NG IN DIAMOND AND THEY WERE ONLY DEALING IN GOLD ORNAMENTS, FOR WHICH GOLD WAS PURCHASED LOCALLY FROM AHMEDABAD. THUS, HERE ALSO THERE WAS A CONTRADICTIO N. WE FURTHER FIND THAT CERTAIN PAPERS WERE IMPOUNDED VIDE FILE NO.X-37 WHICH RELATED TO RENOVATIONS OF GROUND, FIRST & SECOND FLOOR OF THE PREMISES AT 2098, KATAK A WAS, KALUPUR, AHMEDABAD WHERE ACTIVITY OF MANUFACTURING OF GOLD ORNAMENT WA S CARRIED OUT. SOURCE OF THIS EXPENDITURE WAS ALSO NOT EXPLAINED. APART FROM THIS , THERE WAS ALSO VARIATION IN THE PHYSICAL STOCK OF GOLD ORNAMENTS AS COMPARED TO STO CK OF BOOKS OF ACCOUNT. ASSESSEES EXPLANATION WAS THAT ONE OF THE PARTNER SHRI NILESBHAI N SONI WAS CARRYING IT TO SURAT FOR APPROVAL OF CLIENTS. HOWEV ER, IT WAS NOTED BY THE AO THAT APPROVAL MEMO. DID NOT BEAR ANY PROPER SERIAL NO. I T WAS ALSO FOUND THAT NOWHERE IN THE PAST THERE WAS ANY EVIDENCE TO SHOW THAT ANY PE RSON CARRIED SUCH LARGE AMOUNT OF JEWELLERY TO AN OUTSTATION FOR APPROVAL. AS A MA TTER OF FACT, THE ASSESSEE-FIRM STAND HAS BEEN THAT IT DID NOT MAINTAIN ANY ACCOUNT AT AL L REGARDING GOLD ORNAMENT TAKEN BY PARTNER FOR APPROVAL. THUS, THIS CLAIM THAT ORNAMEN TS WERE TAKEN BY ONE OF THE PARTNER AND THAT TOO, TO THE EXTENT OF MORE THAN 4 KG. GOLD ORNAMENTS WERE NOT AT ALL SUPPORTED BY ANY SUPPORTING EVIDENCE. WE FURTHER FI ND THAT SALES AFTER DATE OF SURVEY HAD DECLINED CONSIDERABLY AND AO HAS ALSO GIVEN A C HART IN THE ASSESSMENT ORDER SHOWING DIFFERENCE IN GRAMS, MONTH-WISE WHICH WERE NOTICED BY HIM. THE ASSESSEES EXPLANATION IN THIS REGARD WAS THAT SOME JEWELLERY WAS RECEIVED FOR JOB- WORK AND SOME JEWELLERY PURCHASED FOR CUSTOMERS BUT THERE WAS NO CONFIRMATION FROM ANY CUSTOMERS. THEREFORE THIS EXPLANATION IS A LSO NOT SUPPORTED BY ANY PLAUSIBLE EVIDENCE. IN VIEW OF THESE FACTS, WE HAVE NO HESITATION IN HOLDING THAT BOOK RESULTS OF THE ASSESSEE WERE RIGHTLY REJECTED BY TH E ASSESSING OFFICER AND LD. CIT(APPEALS) WAS ALSO JUSTIFIED IN CONFIRMING THIS ACTION OF THE ASSESSING OFFICER. NOW COMING TO THE ESTIMATION OF SALES BY THE LOWER AUTHORITIES, WE FIND THAT AO ITA NO.232/AHD/2008 A.Y. 2003-04 M/S. SONI V.N. BROTHERS V. ITO WD-2(2) ABD PAGE 19 ESTIMATED THE TOTAL TURNOVER OF THE ASSESSEE AT RS. 82,36,877/- BEING THE AVERAGE TURNOVER OF THE THREE YEARS I.E. ASSESSMENT YEARS 2 001-02, 2002-03 & 2004-05. LD. CIT(APPEALS) FOUND THIS ESTIMATION OF SALES TO BE O N HIGHER SIDE. HE ESTIMATED THE SALES ON THE BASIS OF SALES OF EARLIER YEAR AND DIR ECTED THE ASSESSING OFFICER TO ESTIMATE AT RS.60 LAKH AND GP THEREON TO BE WORKED OUT AT 29.22%. IN DOING SO, LD. CIT(APPEALS) HAS BEEN MORE THAN REASONABLE AS ASSE SSEES SALES DURING THE A.YS 2002-03 AND 2001-02 BEING RS.67,68,745/- AND RS.97, 83,884/- RESPECTIVELY AND IN OUR CONSIDERED OPINION ASSESSEE DOES NOT DESERVE AN Y FURTHER RELIEF AND THEREFORE THE GROUND RAISED IN THIS APPEAL ARE HEREBY DISMISS ED. 7. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS DAY OF 8 TH JULY, 2011 SD/- SD/- ( G.D.AGARWAL ) ( D.K. TYAGI ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 08/07/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-VII, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD