The ITO, Ward-5(3), Surat V. Shri Murarilal C.Gupta, Surat

ITA 2418/AHD/2009

• Counselvise Citation: 241820514 RSA 2009
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 17-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B K
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Income from undisclosed sources; Loose papers; Peak credit; Retraction; Documents seized
• Section: 153A; 69; 28

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER APPEAL(S) BY SL. NO(S). ITA NO(S) ASSESSMENT YEAR(S) APPELLANT(S) RESPONDENT(S) 1. 2418/AHD/09 2001-02 INCOME-TAX OFFICER WARD-5(3) SURAT SHRI MURARILAL CHHAVIRAM GUPTA A-13, D.K.PARK SOCIETY BHARAR ROAD SURAT PAN:AGWPG9088L 2. 2419/AHD/09 2002-03 REVENUE ASSESSEE 3. 2420/AHD/09 2003-04 REVENUE ASSESSEE 4. 2421/AHD/09 2004-05 REVENUE ASSESSEE 5. 2422/AHD/09 2005-06 REVENUE ASSESSEE 6. 2423/AHD/09 2006-07 REVENUE ASSESSEE 7. 1569/AHD/09 2001-02 ASSESSEE REVENUE 8. 1570/AHD/09 2002-03 ASSESSEE REVENUE 9. 1571/AHD/09 2003-04 ASSESSEE REVENUE 10. 1572/AHD/09 2004-05 ASSESSEE REVENUE 11. 1573/AHD/09 2005-06 ASSESSEE REVENUE 12. 1574/AHD/09 2006-07 ASSESSEE REVENUE REVENUE BY : SHRI B.K.S.PANDYA, CIT-D.R. ASSESSEE BY : SHRI J.P.SHAH %& ' #/ // / DATE OF HEARING : 22/3/2012 )*+ ' # / DATE OF PRONOUNCEMENT : 31/5/12 ',/ O R D E R PER BENCH:- IN ALL TWELVE CROSS-APPEALS ARE BEFORE US FILED BY THE REVENUE AS ALSO BY THE ASSESSEE PERTAINING TO AYS 2001-02 TO 2 006-07. LD.CIT(A)- II, AHMEDABAD HAS PASSED A CONSOLIDATED ORDER DATED 16/03/2009. FROM BOTH THE SIDES THE GROUNDS RAISED ARE CONNECTED WI TH EACH OTHER SINCE ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 2 - BOTH THE PARTIES ARE AGGRIEVED BY THE PART RELIEF G RANTED BY THE LD.CIT(A). DUE TO THIS REASON, GROUNDS RAISED BY BOTH THE SIDE S ARE REPRODUCED BELOW, COPIED FROM THE LEAD ASSESSMENT YEAR, I.E. A Y 2001-02. [A] ASSESSEES GROUNDS OF APPEAL : 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS GROSSLY ERRED IN NOT APPRECIATING (I) THAT IN CASE OF UNACCOUNTED SALES, PEAK CREDIT CANN OT BE TAXED BUT ONLY PERCENTAGE OF SALES CAN BE BROUGHT TO TAX, WHEN THE APPELLANT IS ABLE TO PROVE THAT HE WAS MAKING PAYMENTS FOR CREDIT PURCHASES, FROM REALIZATION OF THE UNACCOUNTED SALES. (II) THAT NET PROFIT RATE OF 3% ON THE BASIS OF THE REGULAR BOOKS OF ACCOUNTS OF THE APPELLANT, HAS TO BE APPLI ED TO THE UNACCOUNTED SALES AND NOT THE AD-HOC NET PRO FIT RATE OF 5%. (III) THAT ADDITION CANNOT BE MADE FOR BOTH, PEAK CREDIT AND SUPPRESSED PROFIT OVER THE PERIOD OF 6 YEARS, BY ADOPTING DIFFERENT BASIS OF DETERMINING INCOME, IN RESPECT OF THE SAME BANK ACCOUNTS RUNNING IN DIFFER ENT YEARS. (IV) THAT THE APPELLANT HAS RIGHTLY COMPUTED HIS INCOME ON THE BASIS OF ESTIMATED INCOME METHOD OR ASSET FOUND METHOD, WHICHEVER IS HIGHER. HENCE, IT IS MOST HUMBLY SUBMITTED THAT THE ADDITIO N OF RS.3,11,261/- (I.E. INCREMENTAL PEAK RS.2,92,716 + RS.18,545) AS MADE BY THE LEARNED AO AND RESTRICTE D BY THE LEARNED CIT(A) TO RS.2,92,716/- (I.E. INCREMENTAL P EAK RS.1,42,494 + N.P. RS.1,50,222), MAY KINDLY BE DELE TED AS BEING ERRONEOUS AND BAD-IN-LAW AND THE INCOME MAY K INDLY BE COMPUTED BY APPLYING THE N.P. RATE OF 3% AS PER THE REGULAR BOOKS OF ACCOUNTS TO THE UNACCOUNTED TURNOV ER. ALL THE AFORESAID SUB-GROUNDS OF APPEALS ARE WITHOU T PREJUDICE AND INDEPENDENT TO EACH OTHER. ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 3 - [B] REVENUES GROUNDS OF APPEAL : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A)-II, AHMEDABAD HAS ERRED IN RESTRICTING THE ADDITION OF RS.18,46,671/- AGAINST RS.35,95,174/- (RS.35,95,174 RS.17,49,703) APPLYING GP RATE ON A FLAT RATE OF 5% AS AGAINST THE ADDITION MADE BY THE AO APPLYING DIFFERENT GP RATE ON PARTICULAR YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-II, AHMEDABAD OUGHT TO HAVE UPH ELD THE ORDER OF THE ASSESSING OFFICER. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDERS PASSED U/S.143(3) R.W.S. 153A OF THE IT ACT ALL IDENTICALLY DATED 31/10/2007 ARE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS SUBJECTED TO A SEARCH OPERATION U/S.132 DATED 14/12/2005 AT HIS RE SIDENTIAL PREMISES AND SIMULTANEOUSLY SUBJECTED TO A SURVEY ACTION U/S .133A AT HIS BUSINESS PREMISES. THE AO HAS NOTED THAT THE ASSESSEE IS THE KEY PER SON OF THE GROUP COMPRISING FAMILY MEMBERS ENGAGED IN THE BUSINESS OF TRADING IN SAREES. THE ALLEGATION OF THE AO IS THAT THE MODES OPERAN DI OF THE GROUP WAS TO OPERATE THE SAID TRADING ACTIVI TY THROUGH VARIOUS UNDISCLOSED CONCERN AND TO CONCEAL THE PROFIT ARISI NG FROM THESE CONCERNS SO AS TO EVADE THE TAX. ON THE BASIS OF THE MATERI AL GATHERED A SHOW- CAUSE NOTICE WAS ISSUED BY THE AO, WHEREIN IT WAS I NFORMED THAT THERE WERE 52 CONCERNS. OUT OF WHICH 33 CONCERN WERE STA TED TO BE ADMITTED AND 19 WERE INITIALLY UNADMITTED BY THE ASSESSEE. THERE WAS A MENTION THAT THE ASSESSEE HAS ALSO MAINTAINING SEVERAL BANK ACCOUNTS. IT WAS ESTABLISHED THAT 52 BANK ACCOUNTS WERE PERTAINING T O THE SAID BUSINESS ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 4 - ACTIVITIES. ON THAT BASIS, AO HAS INFORMED THAT TH E PEAK CREDIT BALANCE OF THOSE BANK ACCOUNTS HAD REFLECTED THE INVESTMENT MA DE THEREIN FOR THE PURPOSE OF THE BUSINESS. FURTHER, IT HAS ALSO BEEN INFORMED THAT THE GROSS PROFIT WAS EARNED IN RESPECT OF THE ALLEGED BUSINES S TRANSACTION AND THAT GROSS PROFIT WAS STATED TO BE OVER AND ABOVE THE PE AK AMOUNTS OF SEVERAL BANK ACCOUNTS. A SHOW-CAUSE WAS THUS ISSUED THAT W HY THE GROSS PROFIT SHOULD NOT BE DETERMINED BY TAKING THE AVERAGE GROS S PROFIT OF THE GROUP. THE GROSS PROFIT RATE OF THE GROUP WAS MENTIONED BY THE AO IN A TABULATION FORM AND THE RELEVANT EXTRACT IS AS UNDE R:- DETERMINATION OF GROUP G.P. MURARILAL C.GUPTA , RADHARANI M.GUPTA AND MANISH M .GUPTA(THE GROUP) F.YS 2005-06 2004-05 2003-04 2002-03 2001-02 2000-0 1 (I) TURNOVER (II) GROSS PROFIT (III) GROSS PROFIT RATE 12839824 685101 5.14 17537843 1284607 7.12 11016916 737603 6.7 7970564 751475 9.43 7293563 688589 9.44 8376918 867440 10.36 2.1. THEREAFTER, THE AO HAS ALSO COMPUTED THE PEAK CREDIT BALANCE OF THE BANK ACCOUNTS IN THE TABULAR FORM, HOWEVER, FOR THE SAKE OF BREVITY NOT REPRODUCED, THROUGH WHICH THE PEAK CREDIT BALAN CE WAS WORKED OUT AT RS.2,08,75,320/-. THE AOS ALLEGATION WAS THAT THE SAID AMOUNT HAS REFLECTED THE INVESTMENT MADE BY THE ASSESSEE FOR T HE PURPOSE OF THE BUSINESS. FOR A.Y. 2001-02, THE INCREMENTAL PEAK A MOUNT WAS COMPUTED AT RS.2,92,716/- AND FOR THIS ASSESSMENT YEAR THE U NDISCLOSED GROSS PROFIT WAS COMPUTED AT RS.18,545/-. AS AGAINST THA T, THE ASSESSEE HAS FURNISHED 3% RATE OF PROFIT ARISING FROM THE UNACC OUNTED TURNOVER. THE ASSESSEE HAS CONTESTED THAT ONLY 33 BANK ACCOUNTS W ERE FOUND FROM THE ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 5 - OFFICE PREMISES, THEREFORE, HE HAS TO GIVE THE EXPL ANATION IN RESPECT OF THOSE 33 BANK ACCOUNTS ALLEGED TO BE PERTAINING TO THE BUSINESS OF SALE OF SAREES. IN RESPECT OF THE TOTAL TURNOVER FOUND IN THOSE 33 BANK ACCOUNTS, THE ASSESSEE HAS OFFERED AN INCOME BY APPLYING THE PROFIT RATE AT 3%. IN RESPECT OF REST OF THE 19 ACCOUNTS, THE ASSESSEE HA S CONTESTED THAT THOSE DID NOT PERTAIN TO THE ASSESSEE, HENCE SHOULD NOT B E CONSIDERED IN HIS HAND. IT WAS ALSO EXPLAINED THAT FROM THE ENTRIE S OF THE BANK ACCOUNTS IT WAS APPARENT THAT AS SOON AS THE SALE COLLECTION WAS DEPOSITED IN THE BANK, THEREAFTER WITHDRAWALS HAVE BEEN MADE TO MAKE THE PAYMENT FOR PURCHASES. THEREFORE IT WAS PLEADED THAT THE PEAK AMOUNT WH ICH WAS PROPOSED TO BE ADDED BY THE AO DID NOT REFLECT THE INVESTMENT BUT THE PEAK AMOUNT, IN FACT, REPRESENTED THE LIABILITY OF THE ASSESSEE TOWARDS PURCHASES, HENCE DID NOT REPRESENT ANY ASSET THUS N OT TO BE TAXED U/S.69 OF IT ACT. IT WAS ALSO CONTESTED THAT WHILE DEALI NG WITH THE ISSUE OF UNACCOUNTED SALES, VARIOUS COURTS HAVE HELD THAT ON LY A PERCENTAGE OF PROFIT ON THE SALES SHOULD BE CONSIDERED AS UNDISCL OSED INCOME AND NOT THE PEAK OF THE UNACCOUNTED SALES. IT HAS ALSO B EEN CONTESTED THAT ONCE A PERCENTAGE OF PROFIT HAS ALREADY BEEN OFFERED ON T HE SALES OF A PARTICULAR YEAR, THEREFORE THE PEAK GOT EMBEDDED THEREIN, HENC E THERE SHOULD NOT BE A SEPARATE ADDITION FOR INCREMENTAL PEAK. RATHER IT WAS CONTESTED THAT BOTH, INCREMENTAL PEAK, AND PROFIT FOR EACH YEAR SH OULD NOT BE TAXED. THE ASSESSEE HAS THEN EXPLAINED THAT TO DETERMINE A N UNACCOUNTED INCOME ONLY TWO BASIS COULD HAVE BEEN ADOPTED, NAME LY, (A) NET ASSET METHOD OR (B) ESTIMATED INCOME METHOD. 2.2. THEREFORE, IT WAS PLEADED THAT FOR DETERMINAT ION OF UNACCOUNTED INCOME ONLY ONE OF THE METHOD SHOULD HAVE BEEN ADOP TED BY THE AO AND ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 6 - FOR THIS REASON THE ASSETS WHICH WERE FOUND DURING THE OPERATION WAS STATED TO BE AS UNDER:- SR.NO. PARTICULARS AMOUNT (RS.) 1 CASH 186000 2 STOCK 1500000 3 UNEXPLAINED EXPENDITURE ON HOUSE REPAIRS 63000 4 UNEXPLAINED EXPENDITURE 25031 5 UNEXPLAINED COMMISSION EXPENSES 54030 TOTAL INCOME AS PER NET ASSET METHOD 18,28,061 2.3. THEREFORE THE ASSESSEE HAS OFFERED AN INCOME O F RS.62,73,575/- U/S.153A BY APPLYING THE PROFIT RATE AT 3% ON THE T OTAL TURNOVER OF ALL THE BANK ACCOUNTS. AS PER ASSESSEE, THE TOTAL INCOME ES TIMATED WAS AT RS.62,73,575/- WHICH WAS MUCH HIGHER IN COMPARISON TO THE UNDISCLOSED INCOME BASED UPON NET ASSET METHOD OF RS.18,28,061/ -. THE ASSESSEE HAS THOROUGHLY LISTED THE NAMES OF THE ALLEGED BENA MI 52 CONCERNS AND THE NAMES OF THE BANKS WHICH WERE INVOLVED IN THE T RANSACTION. IN ALL 52 UNACCOUNTED CONCERNS WERE FOUND AND THEIR ACCOUNTS WERE MAINTAINED IN FOUR BANKS, NAMES MENTIONED IN THE ASSESSMENT ORDER . DURING THE COURSE OF SURVEY AT THE BUSINESS PREMISES A STATEMENT OF ONE SHRI ASHISH MURARILAL GUPTA WHO IS RUNNING A BUSINESS IN THE NAME AND STYLE OF M/S.GUPTA TEX WAS RECORDED. HE HAS STATED THAT 33 CONCERNS ARE MANAGED BY THE FAMILY MEMBERS OF SHRI MURARILAL GUP TA AND SINCE THOSE CONCERNS REMAINED UNACCOUNTED, THEREFORE NO INCOME- TAX WAS PAID ON THE INVESTMENT. HE HAS AGREED THAT THE ACCOUNTS WERE B ENAMI IN NATURE. ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 7 - ACCORDING TO HIM, NO REGULAR BOOKS OF ACCOUNTS HAV E BEEN PREPARED FOR THOSE 33 CONCERNS. AN IMPORTANT FACT WAS NARRATE D IN REPLY TO QUESTION NO.8 OF A SERVICE STATEMENT THAT THE, QUOTE SALE PROCEEDS OF FINISHED GOODS ARE RECEIVED BY CHEQUES AND THE SAME ARE CRED ITED TO RESPECTIVE CONCERNS BANK ACCOUNTS UNQUOTE. MR.ASHISH KUMAR HAS CATEGORICALLY DENIED THAT 19 CONCERNS DID NOT BELONG TO THE GROUP . ON THE OTHER HAND, AO HAS REPEATED THAT ALTHOUGH 19 CONCERNS WERE NOT ADMITTED BUT THE FACT REMAINED UNDISPUTED THAT THOSE ACCOUNTS WERE ALSO F OUND FROM THE SAME BUSINESS PREMISES FROM WHERE 33 ADMITTED CONCERNS W ERE RECOVERED. THE AO HAS HELD THAT THE ASSESSEE HAD THE CONSTRUCT IVE CONTROL OVER ALL THE CONCERNS. THE AO HAS HELD THAT REST OF THE 19 CONCERNS WERE ALSO THE BENAMI CONCERNS OF THE ASSESSEE-GROUP. BY REFERRIN G THE PROVISIONS OF SECTION 292C OF IT ACT , THE AO HAS NOTED THAT WHERE ANY BOOKS OF ACCOUNTS OR ANY OTHER DOCUMENTS WERE FOUND IN THE P OSSESSION OR CONTROL OF ANY PERSON IN THE COURSE OF SEARCH U/S.132 OF TH E ACT, THEN IT CASTED A PRESUMPTION THAT SUCH BOOKS OF ACCOUNTS, ETC. BELON GED TO THAT PERSON AND THE CONTENTS THEREIN ARE TRUE. THE AO HAS ALSO R EFERRED SECTION 132(4A) OF IT ACT AND IN RESPECT OF THE BENAMI STATUS HE H AS CITED HEIRS OF VRAJLAL J. GANATRA VS. HEIRS OF PARSHOTTAM S.SHAH ( 1997) 137 CTR (SC) 103. AN ANOTHER FACT HAS ALSO BEEN NOTED BY THE AO THAT DURING THE COURSE OF SURVEY OPERATION AN UNACCOUNTED INCOME OF RS.2 CRORES WAS OFFERED, HOWEVER THE SAME WAS RETRACTED WHILE FILIN G THE RETURN OF INCOME AFTER A SPAN OF 18 MONTHS. ACCORDING TO HIM, ALL T HE 52 ACCOUNTS RELATED TO THE BENAMI CONCERNS BEING RUN IN THE NAMES OF TH E RELATIVE AND RELATED BANK ACCOUNTS WERE INTRODUCED BY THE RELATIVES OF T HE ASSESSEE. ON THAT BASIS, ACCORDING TO AO, IT WAS CONCLUSIVELY ESTABLI SHED THAT ALL THE 52 ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 8 - CONCERNS DID BELONG TO THE ASSESSEE. AS PER THE RE TURN FILED IN RESPONSE U/S.153A THE YEAR-WISE RETURN WAS AS UNDER:- A.Y. INCOME ORIGINALLY RETURNED ACTUAL INCOME DECLARED VIDE RETURNS IN RESPONSE TO NOTICE U/S.153A 2000-01 48,795 NIL 2001-02 49,647 NIL 2002-03 52,882 NIL 2003-04 64,818 NIL 2004-05 62,785 24,50,600 2005-06 1,05,875 22,81,186 2006-07 16.02,737 15,41,789 TOTAL - 62,73,575 2.4. THE AO HAS THEREAFTER PROCEEDED TO COMPUTE THE ADDITION BOTH ON ACCOUNT OF UNEXPLAINED INVESTMENT AS WELL AS UNACCO UNTED PROFITS DERIVED FROM THE SAID 52 UNACCOUNTED CONCERNS. ACCORDING T O AO, FOLLOWING TWO COMPONENTS WERE REQUIRED TO BE CONSIDERED, REPRODUC ED BELOW:- 1. UNACCOUNTED INVESTMENT : CONSOLIDATED PEAK CREDIT OF THE ACCOUNTS REFLECTING THE UNEXPLAINED INVESTMENTS DEE MED TO BE THE INCOME OF THE ASSESSEE U/SECTION 69 OF THE INCOME T AX ACT, 1961; 2. UNACCOUNTED INCOME : GROSS PROFIT BEING THE PROFITS AND GAINS DERIVED FROM BUSINESS CARRIED ON BY THE ASSES SEE IN NAME AND STYLE OF THE IMPUGNED 33 UNACCOUNTED CONCERNS, TREATED AS INCOME U/SECTION 28 OF THE INCOME TAX ACT, 1961. 2.5. ACCORDING TO AO, UNACCOUNTED INCOME GENERATED FORM THE UNACCOUNTED BUSINESS HAD EVENTUALLY COME BACK INTO THE BANK ACCOUNTS IN THE FORM OF INVESTMENTS. ALTHOUGH HE HAS ACCEPTED THAT CHEQUES ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 9 - WERE REALISED FROM SALES AND FOUND CREDITED IN THE BANK ACCOUNTS. THE ASSESSEE HAS REITERATED THAT IN ORDER TO BUY TH E PIECE OF MIND AND TO AVOID PROTRACTED LITIGATION HE HAS OFFERED AN INCOM E AT THE RATE OF 3% OF THE TOTAL TURNOVER. IT WAS ALSO MENTIONED THAT TH E TRANSACTIONS IN BANK ACCOUNTS WERE SUCH THAT THE SALES COLLECTION WERE DEPOSITED IN THOSE RESPECTIVE BANK ACCOUNTS. THE PAYMENT FOR PURCHASES WERE ALSO MADE THROUGH BANK ACCOUNT. IT WAS PLEADED THAT THE PEAK AS PROPOSED TO BE ADDED WAS NOTHING BUT A BALANCE FIGURE AVAILA BLE FOR A DAY OR TWO AND DID NOT REPRESENT ANY ASSET IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HAS ALSO GIVEN TWO COMPARABLE INSTANCES OF MARUTI NANDAN TEXTILES WHO HAS GIVEN THE PROFIT RATIO AT 2.16% AN D M/S.POOJA ENTERPRISES WHO HAS DISCLOSED 2.95% AS GROSS PROFI T RATIO. THE AO HAS ALSO REBUTTED THE SAID ARGUMENT IN THE FOLLOWING MA NNER:- 5. THE ASSESSEE HAS ARGUED THAT ONCE THE PROFIT HA S BEEN OFFERED AS A PERCENTAGE OF SALES FOR A PARTICULAR Y EAR, THE PEAK WOULD GET EMBEDDED THEREIN AND THERE CANNOT BE SEPA RATE ADDITION FOR BOTH I.E. INCREMENTAL PEAK AND PROFIT IN EACH O F THE YEAR, EXCEPT FOR THE FIRST YEAR, WHERE INITIAL INVESTMENT IN BUS INESS CAN AT THE MOST BE BROUGHT TO TAX IN THE FORM OF PEAK INVESTME NT. THIS ARGUMENT IS INCORRECT. THE INCREMENTAL PEAK COMPRI SES OF A SUM WHICH IS THE INVESTMENT MADE IN THE UNACCOUNTED BUS INESS BY THE ASSESSEE. THIS INVESTMENT IS SEPARATE AND INDEPEND ENT FROM THE G.P. EARNED ON TOTAL TURN-OVER OF THE CONCERN AS RE PRESENTED BY THE BANK ACCOUNT. THE G.P. HAS BEEN DETERMINED ON THE BASIS OF AVERAGE G.P. RATE OF THE GROUP. THE ASSESSEE DOES NOT DISPUTE THE INCOME DETERMINATION BASED ON G.P. IN VIEW OF THE FACT THAT THE PEAK CREDIT IS INVESTMENT OUTSIDE THE BOOKS OF ACCO UNTS, THERE HAVE TO BE TWO SEPARATE ADDITIONS FOR PEAK CREDIT AND G. P. ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 10 - 2.6. THE AO HAS THUS PROCEEDED ON THE BASIS OF THE YEAR-WISE INCREMENTAL PEAK AS WELL AS SUPPRESSED GP ADDITION AND COMPUTED AS UNDER:- F.Y. 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 TOTAL TOTAL TURNOVER OF THE UNACCOUANTED CONCERNS 75966624 82533147 54074721 1535632 484743 3004452 GROUP G.P. AS PER REGULAR RETURN 5.14 7.12 6.7 9.43 9.44 10.36 DETERMINED G.P. 3904684 5876360 3623006 144810 4576 0 31261 13905882 ABSOLUTE PEAK 14372475 14222063 11029696 524964 426 188 292716 INCREMENTAL PEAK 150412 3192367 10504732 98776 133472 292716 14372475 DATE OF PEAK 02-07- 05 TO 6/7/2005 22-05-04 TO 24-05-04 30-12- 2003 18-06-02 TO 23-06-02 06-10-01 TO 8/10/2002 14-11-00 TO 15-11-00 HIGHER OF INCREMENTAL PEAK OR G.P. G.P. G.P. INC.PEAK G.P. INC.PEAK G.P. ADDITION ON ACCOUNT OF INCREMENTAL PEAK 150412 3192367 10504732 98776 133472 292716 1437247 5 ADDITION ON ACCOUNT OF G.P. 3754272 2683993 0 46034 0 18545 6502845 TOTAL 3904684 5876360 10504732 144810 133472 311261 20875320 2.7. SINCE WE ARE PASSING A CONSOLIDATED ORDER FOR ALL THE YEARS, THEREFORE THE YEAR-WISE SUMMARY OF THE ADDITION IS AS FOLLOWS:- PARTICULARS 2001-02 2002-03 2003-04 2004-05 200 5-06 2006-07 1 . INCOME DISCLOSED 49,647 52,882 64,818 25,13,385 23,75,060 16,02,737 2 . EXCESS INVESTMENT NOT RECORDED IN THE BOOKS 2,92,716 1,33,472 46,034 80,54,132 31,92,367 1,50,4 12 3 . SUPPRESSED PROFIT 18,545 3,11,261 NIL 1,33,472 98776 1,44,810 NIL 80,54,132 4,02,807 35,95,174 22,12,483 23,62,895 ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 11 - 4.TOTAL INCOME 3,60,908 1,86,350 2,09,628 1,06,67,5 20 59,70,234 39,65,630 2.8. THE MATTER WAS CARRIED BEFORE THE FIRST APPELL ATE AUTHORITY. 3. HAVING HEARD THE SUBMISSION OF THE ASSESSEE, LD. CIT(A) HAS OPINED THAT ALL THE 52 BANK ACCOUNTS AND THE RESPECTIVE CO NCERNS WERE RIGHTLY CONSIDERED BY THE AO FOR DETERMINING THE UNDISCLOS ED INCOME. HE HAS ALSO OPINED THAT IN A SITUATION WHEN THE ENTIRE BOO KS OF ACCOUNTS HAVE BEEN REJECTED AND THE TOTAL TURNOVER WAS CALCULATED ON THE BASIS OF THE UNDISCLOSED BANK ACCOUNT, THEN THE INCOME HAS TO BE CALCULATED BY APPLYING NET PROFIT RATE TO THE TURNOVER. FOR THIS LEGAL PROPOSITION, LD.CIT(A) HAS PLACED RELIANCE ON CIT VS. PRESIDENT INDUSTRIES 158 ITR 654. LD.CIT(A) HAS ALSO CONSIDERED THE ARGUMENT OF THE ASSESSEE THAT ONLY 3% NET PROFIT RATE BE APPLIED, BUT THE SAME W AS NOT ACCEPTED AND HE HAS ADOPTED THE NET PROFIT RATE AT 5% ON THE TOTAL UNACCOUNTED TURNOVER IN THE FOLLOWING MANNER:- 5.4. HOWEVER, THE APPELLANTS CONTENTION THAT NET PROFIT RATE OF 3% ONLY SHOULD BE APPLIED IS NOT ACCEPTABLE. THE N ET PROFIT RATE IN THE CASE OF SHRI MURARILAL GUPTA FOR A.Y. 2001-02 TO 2006-07 VARIES FROM 2.14% TO 6.09% AND AVERAGE COMES TO 3.43%. SIMILARLY, NET PROFIT RATE FOR RADHARANI GUPTA VARI ES FROM 2.18% TO 7.28% AND AVERAGE COMES TO 4.12%. THE AVERAGE N .P. RATE FOR MANISH GUPTA COMES TO 1.98%. IN THE UNACCOUNTED BU SINESS, THE NET PROFIT RATE IS MORE THAN THE ACCOUNTED BUSINESS . HENCE, IN MY VIEW, IT IS REASONABLE TO APPLY THE NET PROFIT RATE OF 5% TO UNACCOUNTED TURNOVER. A.Y. 01-02 02-03 03-04 04-05 05-06 06-07 TOTAL UNACCOUNTED TURNOVER 3004452 484743 1535632 54074721 82533147 75966624 PROFIT @ 5% 150222 24237 76781 2703736 4126657 3798 331 10879964 ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 12 - 4. AS FAR AS THE APPELLANTS CONTENTION THAT THERE SHOULD NOT BE ANY FURTHER ADDITION IN RESPECT OF THE PEAK AMOUNT OF T HE BANK PASSBOOK AND THAT ONLY NP SHOULD BE ADDED, LD.CIT(A) HAS HELD TH AT THE APPELLANT HAD NOT PROVED THAT THE PURCHASES WERE MADE ON CREDITS. THE PEAK AMOUNT APPEARING IN THE BANK PASSBOOK ON ANY PARTICULAR DA Y HAD REFLECTED THE ASSET OF THE ASSESSEE ON THAT DAY. ACCORDING TO L D.CIT(A) IT WAS AN UNEXPLAINED INVESTMENT WHICH REPRESENTED UNACCOUNTE D INCOME INTRODUCED IN THE BUSINESS. THE ASSESSEES RELIANC E ON INDIA SEED HOUSE VS. ACIT (2000) 69 TTJ 241 (DEL)(TM) WAS ALSO REJ ECTED. LD.CIT(A) HAS GIVEN AN YEAR-WISE WORKING OF THE ADDITION SUST AINED BY HIM. BECAUSE OF THE PART RELIEF, BOTH THE SIDES ARE NOW IN APPEALS. 5. FROM THE SIDE OF THE APPELLANT LD.AR MR.J.P.SHA H APPEARED AND ARGUED THAT THOUGH ON SEARCH AND SURVEY OPERATIONS, CERTAIN CONCERNS WERE DETECTED AND ALSO CERTAIN UNACCOUNTED BANK ACC OUNTS WERE FOUND AND THAT FACT CANNOT BE DENIED THAT THE ASSESSEE WA S ENGAGED IN UNACCOUNTED BUSINESS OF SAREES TRADING BUT AT PRE SENT WE HAVE TO EXAMINE ONLY ONE ASPECT THAT HOW TO CORRECTLY COMPU TE THE UNDISCLOSED PROFIT OF THE SAREES TRADING ACTIVITY OF THE ASS ESSEE. THE ASSESSEE HAS ADOPTED A VERY REASONABLE METHOD OF APPLYING 3% NET PROFIT ON THE SALES. LD.AR HAS CONTESTED THAT THE ADMITTED FACTUAL POSIT ION WAS THAT THE SALES WERE FOUND CREDITED IN THE BANK ACCOUNTS. THE SAL ES FIGURE CANNOT BE THE PROFIT OF THE ASSESSEE. THE PROFIT OF THE ASSESSEE CAN ONLY BE COMPUTED AFTER REDUCING THE COST OF PURCHASE AND OTHER RELAT ED EXPENDITURE TO ARRIVE AT THE NET PROFIT OF THE ASSESSEE. IN SUPPORT OF THE ASSESSEES ADOPTION OF ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 13 - NET PROFIT ONLY, HE HAS PLACED RELIANCE ON CIT VS. BALCHAND AJITKUMAR 263 ITR 610, PRESIDENT INDUSTRIES 258 ITR 654, K.C.K.A. GUPTA VS. ACIT 90 TTJ 555 (HYD. ) AND EAGLE SEEDS & BIOTECH LTD. VS. ASST.CIT (2006) 102 TTJ 1065 (IND). IN RESPECT OF THE PEAK CREDIT IN THE BANK ACCOUNT CONSIDERED AS THE UNACCOUNTED INVE STMENT, HE HAS ARGUED THAT THE SAME IN FACT REPRESENTED THE PROFIT AS ALREADY WORKED OUT AS WELL AS THE LIABILITY OF TRADE CREDITORS TOWARDS PURCHASES. IT WAS WRONG ON THE PART OF THE REVENUE AUTHORITIES TO CON SIDER THE PEAK CREDIT AS UNEXPLAINED INVESTMENT U/S.69C OF IT ACT. FOR THIS LEGAL PROPOSITION, LD.AR HAS PLACED RELIANCE ON ASHOK KUMAR RASTOGI VS . CIT REPORTED AT 100 CTR 204(ALLA.) AND CIT VS. RURUBACHHAN SINGH J. JUNEJA REPORTED AT 302 ITR 63 (GUJ.). LD.AR HAS ALSO ARGUED THAT EX CEPT UNACCOUNTED 52 CONCERNS AND CONNECTED BANK ACCOUNTS NOTHING SUBSTA NTIAL IN THE FORM OF ASSETS WAS RECOVERED IN POSSESSION FROM THE ASSESSE E. IT IS NOT THE CASE OF THE REVENUE THAT ON SEARCH AND SURVEY OPERATION A HUGE UNACCOUNTED MONEY OR BULLION OR ASSETS OF ANY KIND WERE UNEARTH ED. BARRING THE PRESENCE OF 52 CONCERNS AND THE ENTRIES IN THE BANK ACCOUNT NOTHING SUBSTANTIAL WAS FOUND EXCEPT THE CASH AND STOCK THA T TOO ONLY TOTALLING TO RS.18,28,061/-, ALREADY LISTED HEREINABOVE. HE HAS VEHEMENTLY CONTESTED THAT THE PEAK INVESTMENT THEORY WAS INCORRECTLY APP LIED BECAUSE AT THE TIME OF SEARCH CHEQUE ISSUED FOR THE PURCHASE OF TH E FABRIC AND PAY-IN- SLIP OF THE BANK REPRESENTING THE DEPOSIT OF CHEQUE S AGAINST SALE OF FABRICS WERE FOUND FROM THE BUSINESS PREMISES WHICH MEANS T HAT THE ENTIRE TEXTILE TRADING TURNOVER WAS REFLECTED IN THE BANK ACCOUNTS. ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 14 - 6. FROM THE SIDE OF THE REVENUE, LD.DR MR.B.K.S.PAN DYA APPEARED. HE HAS OPENED HIS ARGUMENT BY NARRATING THE FACTS T HAT UNDISPUTEDLY SEVERAL UNACCOUNTED BANK ACCOUNTS WERE RECOVERED CO NSEQUENT UPON SEARCH/SURVEY. THE ASSESSEE HAS OWNED UP THE BANK ACCOUNTS. AT THE TIME OF SURVEY, AN AMOUNT OF RS.2 CRORES WAS SURREN DERED AND WITHOUT ANY COGENT EVIDENCE THE SAME WAS RETRACTED. THE RE TRACTION WAS NOT PROPER, HENCE THE INCOME DECLARED AS PER THE RETURN FILED IN CONSEQUENCE OF THE NOTICE U/S.153A OF THE ACT, DESERVES TO BE I GNORED. LD.DR HAS ALSO INFORMED THAT THE SAID AMOUNT OF RS.2 CRORES W AS LATER ON ADMITTED BY THE ASSESSEE THROUGH A LETTER, AS WELL AS VIDE A STATEMENT RECORDED U/S.132(4) OF THE IT ACT, THEREFORE THAT AMOUNT OF RS.2 CRORES SHOULD BE THE OVERALL UNACCOUNTED INCOME EARNED BY THE ASSESS EE FROM UNDISCLOSED TRADING ACTIVITY. LD.DR HAS THEREFORE SUPPORTED TH E OVERALL ADDITION AS MADE BY THE AO IN RESPECT OF THE YEARS INVOLVED THA T TOO HAS REACHED TO THE FIGURE OF RS.2,08,75,320. LD.DR HAS FURTHER AR GUED THAT THE ASSESSEE HAS NOT JUSTIFIED THE BASIS FOR APPLYING 3% RATE OF PROFIT ON THE TURNOVER. LD.DR HAS PLACED RELIANCE ON THE ADMISSION AS MADE BY THE ASSESSEE AND IN SUPPORT OF VALIDITY OF THE ADMISSION PLACED RELI ANCE ON THE DECISION OF HM ESUFALLI HM ABDUL ALI 90 ITR 271(SC). HE HAS SU PPORTED THE ACTION OF THE AO FOR THE REASON THAT CONSIDERING TH E NATURE OF BUSINESS AND THE UNACCOUNTED ACTIVITY OF THE ASSESSEE THE AO HAS JUDICIOUSLY ESTIMATED THE PROFIT ON THE TURNOVER AND THAT ACTIO N OF THE AO WAS BASED UPON THE GROSS PROFIT AS DISCLOSED YEAR-WISE IN THE REGULAR RETURN OF THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE BEST JUDGEME NT OF THE AO SHOULD BE APPROVED . IT WAS FURTHER CONTESTED THAT THE DEC LARATION WAS VOLUNTARY AND NOT ALLEGED TO HAVE BEEN OBTAINED UNDER THREAT, THEREFORE THE ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 15 - DECLARATION WAS CORRECT, RELIANCE PLACED ON ACIT VS . RATAN INDUSTRIES 143 TTJ 24 (131 ITD 195). HE HAS ALSO PLACED RELIA NCE ON AN ORDER OF CARPENTERS CLASSIC 108 ITD 142(BANG.) FOR THE PROPO SITION THAT THERE WAS NO ONUS ON THE REVENUE TO ESTABLISH THAT UNDISCLOSE D INCOME WAS WITH REFERENCE TO UNDISCLOSED ASSETS. THE RETRACTION OF THE ASSESSEE WAS BASELESS AND CARRIED NO WEIGHT BECAUSE THERE WAS NO EXPLANATION AS TO WHY IT WAS NOT FILED AT ANY EARLIER POINT OF TIME, RELIANCE PLACED ON COUNCIL OF INSTITUTE OF CHARTERED ACCOUNTANTS VS. M UKESH R.SHAH 186 CTR 579 (GUJ.). HE HAS PLEADED THAT THE STATEMEN T WHICH WAS RECORDED WAS CORROBORATED BY THE EVIDENCES COLLECTED AT THE TIME OF SEARCH, HENCE THAT STATEMENT HAS TO BE RELIED UPON, RELIANCE PLAC ED ON RAVINDRA D.TRIVEDI 215 CTR 313(RAJ.). IN RESPECT OF BOGU S PURCHASES TO BE TREATED AS ASSESSEES INCOME FROM UNDISCLOSED SOURC ES RELIANCE WAS PLACED ON CIT VS. LA MEDICA 250 ITR 575 (DEL.). 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. W E HAVE ALSO CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BE LOW IN THE LIGHT OF THE COMPILATION FILED AND CASE LAWS CITED FROM BOTH THE SIDES. A SEARCH AS WELL AS A SURVEY OPERATION WAS CARRIED OUT. DURING SUCH OPERATION BY THE REVENUE DEPARTMENT, UNDISPUTEDLY THE UNACCOUNTED TR ADING ACTIVITIES OF SAREES WAS DETECTED. IT WAS FOUND THAT 52 BOGUS CO NCERNS IN BENAMI NAMES WERE FLOATED BY THE ASSESSEE. ON ONE HAND, THE ASSESSEE HAS FURNISHED THE RETURN BY ADOPTING 3% NET PROFIT RATE ON THE TOTAL TURNOVER, AS AGAINST THAT, ON THE OTHER HAND THE AO HAS WORKE D OUT THE GROSS PROFIT ON THE TOTAL TURNOVER. THE AO HAS ALSO ASSESSED THE PEAK CREDIT WHICH WAS FOUND IN THOSE BANK ACCOUNTS. WHEN THE MATTER W AS CARRIED BEFORE ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 16 - THE FIRST APPELLATE AUTHORITY INSTEAD OF 3% AS DISC LOSED BY THE ASSESSEE, IT WAS DECIDED BY LD.CIT(A) TO ESTIMATE THE NET PROFIT AT 5%. HOWEVER, LD.CIT(A) HAS WORKED OUT THE INCOME IN THE SAME MAN NER AS IT WAS COMPUTED BY THE AO, I.E. HIGHER OF THE NET PROFIT O R INCREMENTAL PEAK WHICHEVER WAS FOUND MORE FOR EACH YEAR, WAS TAXED. 8. ONE OF THE CONTENTIONS AS RAISED FROM BOTH THE S IDES REVOLVE AROUND THE STATEMENT RECORDED U/S.132(4) OF IT ACT. THE SAID STATEMENT WAS RECORDED ON 15.2.2006. IN THE SAID STATEMENT, VIDE QUESTION NO.4 MR. MURARILAL GUPTA HAS ANSWERED THE QUESTION AS FO LLOWS:- Q.4 DO YOU WANT TO SAY ANYTHING OTHER THAN THIS? A.4 YES, MY BOOKS OF ACCOUNTS ARE YET TO BE VERIFIE D BY ME. IN SUCH CIRCUMSTANCES, IN ACCORDANCE WITH MY LETTER OF 13.01.2006 I MAKE A PRELIMINARY VOLUNTARY DECLARATI ON OF RS.2 CRORES WHICH IS SUBJECT TO CHANGE AFTER VERIFI CATION OF LOOSE PAPERS, BANK ACCOUNT, BOOKS OF ACCOUNTS AND O THER RECORDS. I AM MAKING THE ABOVE DECLARATION TO COVER THE INCO ME OF MYSELF, MY FAMILY MEMBERS AND MY GROUP CONCERN AND I WILL PAY BEFORE THE END OF MARCH 2006 WHATEVER INCOME TA X IS PAYABLE ON THE ABOVE INCOME. 8.1. THIS STATEMENT HAS NUMBER OF QUESTIONS WHICH R EVOLVE AROUND THE GOLD WHICH WAS FOUND AT THE TIME OF SEARCH AND ALSO THE CONTENTS OF THE LOCKERS HAVING CASH AVAILABLE AND THE BUSINESS INCO ME OF THE ASSESSEE. A LAST QUESTION WAS THAT WHETHER THE ASSESSEE WANTED TO SAY ANY OTHER THING AND IN COMPLIANCE OF THE LAST QUESTION A DECLARATIO N OF RS.2 CRORES WAS MADE. IT APPEARS TO BE A STRANGE PHENOMENA. THERE SHOULD BE SOME REASON FOR THE DECLARATION OF RS.2 CRORES, SUCH AS, THE PRESENCE OF ANY ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 17 - INCRIMINATING MATERIAL OR UNDISCLOSED ASSET. ON TH E DATE OF SEARCH, UNDISPUTEDLY THERE WERE SEVERAL BANK ACCOUNTS BUT T HOSE BANK ACCOUNTS COULD APPARENTLY BE NOT THE REASON FOR SUCH A HUGE DECLARATION. HOW AND WHY THE ASSESSEE HAS ARRIVED AT THE FIGURE OF RS.2 CRORES IS STILL NOT CLEAR. FROM THE SIDE OF THE REVENUE, IT IS PLEADED THAT TH ERE WAS NO PRESSURE OR ALLEGATION OF COERCION, HENCE THAT STATEMENT SHOULD BE HELD AS SACROSANCT. A STATEMENT HAS ITS VALUE IF THAT STATEMENT HAS SUP PORTING EVIDENCE, OTHERWISE IT IS PURELY A BALD STATEMENT. FROM THE C ONTENTS OF THE STATEMENT, IT APPEARS THAT THERE WAS NO OCCASION TO COME FORWARD AND MAKE A STATEMENT BY A DEPONENT THAT HE HAD EARNED R S.2 CRORES. EVEN THERE WAS NO SUGGESTION ON THE PART OF THE REVENUE DEPARTMENT THAT DURING THE COURSE OF SEARCH THEY HAVE FOUND ASSETS OR INCRIMINATING EVIDENCE HAVING VALUE TO THE TUNE OF RS.2 CRORES AN D CONSEQUENT THEREUPON IT WAS ASKED THAT WHETHER THE ASSESSEE WA NTED TO MAKE ANY STATEMENT IN THAT REGARD. HOWEVER, IT WAS NOT SO. THERE WAS NO SUCH REFERENCE OF ANY INCRIMINATING MATERIAL. ALTHOUGH IT IS NOT IN DISPUTE THAT A STATEMENT RECORDED U/S.132(4) HAS GREAT EVID ENTIARY VALUE AND IT IS BINDING ON THE DEPONENT BUT THAT ALONE IS NEVER HEL D THE ONLY BASIS FOR A SUBSTANTIAL ADDITION, UNLESS AND UNTIL SUPPORTED BY SOME COGENT EVIDENCE AS ALSO SOME SURROUNDING CIRCUMSTANCES. ONCE THE R EVENUE DEPARTMENT HAS TAKEN AN EXTREME ACTION OF SEARCH, THEN IT IS E XPECTED TO GATHER ALL POSSIBLE EVIDENCES. RATHER THE ACCEPTED LEGAL POSI TION IS THAT WHATEVER MAXIMUM EVIDENCES WAS GATHERED WERE THE ONLY EVIDEN CES WHICH WERE IN POSSESSION OF THE ASSESSEE. IT IS QUITE A STRAN GE SITUATION IN THE PRESENT CASE THAT OVERALL ASSETS, INCLUDING CASH AND STOCK, IN TOTAL ONLY RS.18,28,061/- WAS RECOVERED AT THE TIME OF SEARCH, AS PER THE LIST ALREADY ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 18 - REPRODUCED SUPRA. THEREFORE THE LEGISLATURE IS AWAR E THAT MERE ADMISSION IS NOT CONCLUSIVE ONE UNLESS AND UNTIL BEING SUPPOR TED BY SOME MATERIAL EVIDENCE. THE SANCTITY OF SUCH AN ADMISSION IS NO T IN DISPUTE BUT IT IS ALWAYS OPEN FOR DEPONENT TO RETRACT SUCH AN ADMISSI ON IF CIRCUMSTANCES ARE SUCH WARRANTED. OTHERWISE ALSO, EVEN IF A STATE MENT HAS BEEN RETRACTED, THE AO COULD HAVE INDEPENDENTLY COME TO A CONCLUSION THAT THERE WAS UNDISCLOSED INCOME SUBJECT TO TAX UNDER I T ACT. THE MERE FACT THAT A STATEMENT HAS BEEN RETRACTED DO NOT IPSO FACTO DEBAR THE AO NOT TO ASSESS UNDISCLOSED INCOME. THEREFORE THE EMPHASIS GIVEN BY LD.DR ON THE SAID STATEMENT IS NOT VERY MEANINGFUL AND AS FA R AS THE PRESENT CASE IS CONCERNED, DO NOT HELP TO DRAW A JUSTIFIABLE CONCLU SION ON THE BASIS OF THAT STATEMENT ALONE. THE RELIANCE PLACED ON HIRAL AL MANGALAL & SONS VS. DCIT 96 ITD 113(SUPRA) BY LD.DR CAN BE SAID TO BE NOT APPLICABLE ON THE PRESENT SET OF CIRCUMSTANCES. LIKEWISE, THE REL IANCE PLACED ON BHOGILAL MULCHAND KANDOI 96 ITD 344(AHD.)(SUPRA) IS ON THE POINT WHEN THE LOOSE-PAPERS FOUND AT THE TIME OF SEARCH H AVE CORROBORATED THE CORRECTNESS OF THE STATEMENT. RATHER IN THAT CASE, RETRACTION WAS FOUND TO BE UNSUBSTANTIATED. THE STATEMENT WAS MADE ONLY WHE N IT WAS CONFRONTED THAT THERE WERE EVIDENCES OF UNRECORDED SALES AND T HAT THERE WAS EVIDENCE OF SUPPRESSION OF SALES AND IT WAS EXPLAINED TO THE ASSESSEE THAT SALES MADE OUTSIDE THE BOOKS WERE DISCOVERED AND THAT THE SAID ASSESSEE WAS EATING PAN-MASALA OF RS.25/- PER DAY, HENCE THE ASS ESSEE WAS PROMPTED TO ADMIT RS.24 LACS AS ADMITTED INCOME. EVEN IN THE C ASE OF RAVINDRA D.TRIVEDI 215 CTR 313 (RAJ.) THERE WAS AN ADMITTED POSITION OF DIFFERENCE IN THE STOCK OF RS.3 LACS, HENCE THE ASS ESSEE MADE THE OFFER U/S.132(4) OF THE ACT AND THAT STATEMENT WAS CORROB ORATED BY AN ANOTHER ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 19 - STATEMENT OF HIS SON. ON THE CONTRARY, THE STATEMEN T OF THE ASSESSEE WHICH IS PLACED BEFORE US FOR OUR PERUSAL DO NOT SUGGEST OR INDICATE THAT THERE WAS ANY MATERIAL GATHERED DURING SEARCH TO THE EXTE NT OF HAVING VALUE OF RS.2 CRORES AND, THEREFORE, THE ASSESSEE WAS PROMPT ED TO COME FORWARD AND MAKE A DISCLOSURE OF THAT AMOUNT. SUCH A BASEL ESS ADMISSION, THOUGH HAVING EVIDENTIARY VALUE, BUT FOR WANT OF PROPER CO RROBORATION IS NOT CONCLUSIVE THUS, DESERVES TO BE DISCARDED BECAUSE O F THE FUNDAMENTAL REASON THAT THE AO STILL HAS ENOUGH POWERS TO ASSES S A CORRECT INCOME BASED UPON SEVERAL OTHER EVIDENCES, SUCH AS, BANK A CCOUNTS TO ARRIVE AT A FIGURE OF UNACCOUNTED INCOME. OUR VIEW GETS SUPPO RT FOR A CASE-LAW VIZ. INDIA SEED HOUSE VS. ASST.CIT 69 TTJ 241 (DEL.)[TM] . 9. THE NEXT ISSUE BEFORE US IS IN RESPECT OF THE ES TIMATION OF INCOME AS MADE BY THE AO. IN THIS CONTEXT, FROM THE SIDE OF THE REVENUE, LD.DR HAS ARGUED THE IMPORTANCE OF ESTIMATION SPECIALLY U NDER THE CIRCUMSTANCES WHEN THE AO HAS NO OTHER OPTION BUT T O ESTIMATE AN INCOME. IN SUPPORT, LD.DR HAS PLACED RELIANCE ON HM ESUFALLI HM ABDUL ALI 90 ITR 271(SC) [SUPRA]. IN THAT CASE, FACTS HAVE REVEALED THAT IT WAS NOT POSSIBLE FOR THE S.T.O. TO FIND OUT PRECISELY THE TURNOVER SUPPRESSED. BECAUSE OF THAT REASON, IT WAS FOUND T HAT THE STO COULD ONLY MAKE AN ESTIMATE ON THE SUPPRESSED TURNOVER. THE HONBLE COURT HAS GIVEN A VERY EFFECTIVE AN IMPORTANT FINDING THAT SO LONG AS THE ESTIMATE MADE BY HIM WAS NOT ARBITRARY AND THAT THE ESTIMATE HAD THE NEXUS WITH THE FACTS DISCOVERED, UNDER THOSE CIRCUMSTANCE S SUCH AN ESTIMATE COULD NOT BE QUESTIONED. THE EMPHASIS WAS GIVEN ON THE TERMINOLOGY BEST JUDGEMENT AND IT WAS OBSERVED THAT NEITHER IT OUGHT ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 20 - TO BE AN OVER ESTIMATE NOR UNDER ESTIMATE. ON THE OTHER HAND, IN THE PRESENT CONTEXT, CONSIDERING THE EVIDENCES ON R ECORD, WE HAVE TO ADJUDGE WHETHER THE AO WAS JUSTIFIED IN APPLYING TH E GROSS PROFIT RATE ON THE TURNOVER THAT TOO ON ESTIMATE BASIS. A BEST JUDGEMENT SHOULD BE AN HONEST AND FAIR ESTIMATION. THAT ESTIMATION MUST N OT BE AN ARBITRARY ESTIMATION. IF AN ESTIMATION IS MERELY A GUESS WO RK, THEN SUCH AN ESTIMATION DESERVES TO BE REJECTED. THE BASIC QUE STION IS THAT WHAT WAS THE EVIDENCE WHICH WAS DISCOVERED BY THE REVENUE DE PARTMENT? THE MOST IMPORTANT EVIDENCE WAS THE PRESENCE OF SEVERAL BANK ACCOUNTS OF THOSE CONCERNS. ON PERUSAL OF THE ORDERS AND THE E VIDENCES ON RECORD, TIME AND AGAIN, IT WAS FOUND THAT THE SALES OF UNACCOUNTED TRADING OF SAREES WAS RECORDED IN THOSE BANK ACCOUNTS. RATHER, IT WAS VEHEMENTLY STATED BEFORE THE REVENUE AUTHORITIES T HAT THE SALES WERE MADE THROUGH BANKING CHANNEL AND THAT THE ASSESSEE HAS CREDITED CHEQUES PERTAINING TO THE SALES. IF IT WAS SO, RATHER IT W AS NOT CONTRADICTED, THAT THE CREDIT ENTRIES IN THOSE SEVERAL BANK ACCOUNTS R EPRESENTED NOTHING BUT SALES, THEN WHAT SHOULD BE THE CORRECT METHOD TO AR RIVE AT THE NET FIGURE OF INCOME? NATURALLY, INCOME WHICH IS SUBJECT TO TAX IS THE NET INCOME AND NOT THE GROSS INCOME. IN OTHER WORDS, ONLY NET PRO FIT CAN BE SUBJECT TO TAX AND NOT THE GROSS PROFIT. THIS IS ONE OF THE BASIC REASON FOR OUR INTERVENTION IN THE METHOD OF COMPUTATION OF UNDISC LOSED INCOME AS ADOPTED BY THE AO. THE AO HAS COMPUTED THE UNACCO UNTED GROSS PROFIT FOR THE RESPECTIVE YEARS AT 10.36%, 9.44%, 94.43%, 6.74%, 7.12% AND 5.14% RESPECTIVELY WHICH WAS BASED UPON THE GROSS P ROFIT DISCLOSED BY THE GROUP IN THE REGULAR RETURNS FILED. THEN THE AO HAS COMPARED THE SAID GP WITH THE PEAK BALANCES AND THEN WHICHEVER W AS FOUND HIGHER ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 21 - WAS ADOPTED FOR COMPUTATION OF UNDISCLOSED INCOME A ND IF ANY BALANCE WAS LEFT, THE SAME WAS MADE AS AN ADDITION ON ACCOU NT OF UNDISCLOSED GROSS PROFIT. THEREFORE, RIGHT NOW WE ARE ON THE I SSUE THAT WHETHER THERE WAS A POSSIBILITY ON THE PART OF THE AO TO APPLY TH E NET PROFIT ON THE TURNOVER INSTEAD APPLYING THE GROSS PROFIT. TO PR OBE INTO THIS POSSIBILITY, WE HAVE EXAMINED FEW CASE LAWS AS CITED BY LD.AR MR .SHAH. IN THE CASE OF EAGLE SEEDS AND BIOTECH LTD. VS. ACIT 100 ITD 301 (IND.), A SEARCH WAS CONDUCTED AND FOR THE PURPOSE OF COMPUTA TION OF UNDISCLOSED INCOME, IT WAS ALLEGED THAT THE SAID ASSESSEE HAD M ADE UNACCOUNTED PURCHASES. DOCUMENTS SEIZED DURING THE SEARCH HAV E PROVED PAYMENTS MADE BY THE ASSESSEE AND THE AO TREATED THE PAYMENT S AS UNACCOUNTED PURCHASES AND MADE THE ADDITION. THE RESPECTED COO RDINATE BENCH WAS OF THE VIEW THAT THE UNACCOUNTED INCOME REPRESENT THE NET PROFIT EARNED AND NOT THE GROSS PROFIT. IT WAS OPINED THAT THE ASSESSEE HAS SUPPLIED THE GOODS AFTER INCURRING CERTAIN COST AND , THEREFORE, THE PURCHASES OR THE SALES DO NOT REPRESENT THE NET INC OME. THE APPLICATION OF NET PROFIT FOR DETERMINING THE UNDISCLOSED INCOM E WAS THUS HELD A REASONABLE AND APPROPRIATE METHOD. RATHER AN ANOTH ER IMPORTANT APPROACH WAS ADOPTED BY THE TRIBUNAL THAT IF THE NE T INCOME SO COMPUTED IS WITHIN THE AMOUNT ALREADY DISCLOSED AS UNDISCLOS ED INCOME IN THE RETURN OF INCOME, THEN THE SAID UNDISCLOSED INCOME BEING AVAILABLE TO THE ASSESSEE FOR THE PURPOSE OF EXPLAINING OTHER INCOME OR INVESTMENT, THEN DESERVES TO BE SET OFF FOR THE PURPOSE OF COMPUTATI ON OF TAXABLE UNDISCLOSED INCOME. FOR THIS LEGAL PROPOSITION, SE VERAL CASE LAWS HAVE ALSO BEEN CITED. EVEN IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR 263 ITR 610(M.P.)(SUPRA), THERE WAS SEARCH CONDUCTED AND IT WAS FOUND THAT ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 22 - THERE WERE CREDIT SALES NOT RECORDED IN THE BOOKS O F ACCOUNTS. THE AO HAS ADDED A SUM WHICH WAS HELD AS SALES PROFIT OF THE ASSESSEE. THE FIRST APPELLATE AUTHORITY HAD COME TO THE CONCLUSIO N THAT THE ENTIRE CREDIT SALES COULD NOT HAVE BEEN INCLUDED IN THE TOTAL INC OME AND FOLLOWED THE METHOD OF ADDING NET PROFIT RATE. THE TRIBUNAL HEL D THAT THE REASONABLE METHOD WAS THE NET PROFIT RATE ON SALES AND NOT THE ENTIRE SALES COULD BE REGARDED AS THE PROFIT OF THE ASSESSEE. WHEN THE MA TTER REACHED BEFORE THE HONBLE HIGH COURT, IT WAS AFFIRMED THAT THE TOTAL SALES COULD NOT BE REGARDED AS THE PROFIT OF THE ASSESSEE. IT WAS HELD THAT NET PROFIT RATE HAD TO BE ADOPTED AND ONCE IT WAS ADOPTED, IT COULD NOT BE SAID THAT THERE WAS PERVERSITY OF APPROACH. IT WAS CONCLUDED THAT WHETHER THE RATE WAS LOW OR HIGH, WOULD DEPEND UPON THE FACTS O F EACH CASE. A FERVENT RELIANCE WAS PLACED ON A DECISION OF HONBL E JURISDICTIONAL HIGH COURT PRONOUNCED IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES 258 ITR 654 (GUJ.)[SUPRA] AND THEREIN ALSO A CONCLUSION WAS MADE THAT ON ACCOUNT OF SURVEY CONDUCTED AT THE PREMISES OF THE ASSESSEE UNDISCLOSED SALES WERE FOUND AND THE AO HAD MADE ADDITION OF EN TIRE SALE-PROCEEDS AS UNDISCLOSED INCOME. THE CIT(APPEALS) AFFIRMED T HE ADDITION BUT THE APPELLATE TRIBUNAL FOUND THAT THERE WAS NO MATERIAL TO INDICATE THAT THE ASSESSEE HAD MADE INVESTMENTS OUTSIDE THE BOOKS OF ACCOUNTS TO MAKE THE ALLEGED SALES AND, THEREFORE, HELD THAT THE ENTIRE SALE-PROCEEDS COULD NOT HAVE BEEN ADDED AS UNDISCLOSED INCOME. IT WAS HELD THAT THE ADDITION COULD ONLY BE OF THE PROFITS EMBEDDED IN THE SALES. THE HONBLE COURT HAS OPINED THAT THE SALES ONLY REPRESENTED THE PRIC E RECEIVED BY THE SELLER OF THE GOODS. THE HONBLE COURT HAS DEFINED THE PROFIT, I.E. ONLY THE REALISATION OF THE EXCESS OVER THE COST INCURRE D COULD FORM PART OF ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 23 - THE PROFIT INCLUDED IN THE CONSIDERATION FOR THE SA LES . ACCORDING TO THE HONBLE COURT SINCE THERE WAS NO FINDING TO THE EFFECT THAT INVESTMENT WAS BY WAY OF INCURRING THE COST IN ACQUIRING THE G OODS WHICH WERE SOLD BY THE ASSESSEE, THEN ONLY THE EXCESS OVER THE COST INCURRED COULD BE TREATED AS PROFIT. A CONCLUSION THEREFORE CAN BE D RAWN THAT THE ENTIRE SALES SHOULD NOT BE ADDED AS UNDISCLOSED INCOME BUT UNACCOUNTED INCOME CAN ONLY BE TO THE EXTENT OF THE ESTIMATED PROFIT W HICH IS EMBEDDED IN THE SALES AND THEREFORE ONLY NET PROFIT RATE IS TO BE APPLIED TO COMPUTE THE SUPPRESSED UNACCOUNTED INCOME. WE HEREBY HOLD SO. 10. THE LAST QUESTION WHICH IS YET TO BE AD DRESSED IS THAT WHETHER THE LD.CIT(A) WAS RIGHT IN DIRECTING THE AO TO TAX HIGHER OF THE TWO FIGURES, I.E. THE PEAK INVESTMENT OR THE NET PROFIT . AS FAR AS THE PEAK INVESTMENT IS CONCERNED, THE ASSESSEES STRONG OBJE CTION WAS THAT THE SAME DID NOT REPRESENT ANY INVESTMENT. THE BALANCE REMAINED IN ANY OF THE BANK ACCOUNT WAS NOTHING BUT THE LIABILITY OF T HE TRADE CREDITORS. IT WAS EXPLAINED THAT IN A RUNNING BUSINESS, IT IS NEV ER POSSIBLE THAT ON A PARTICULAR DATE ALL THE LIABILITIES OF THE TRADE CR EDITORS CAN GET SQUARED UP AND THE BALANCE ON A PARTICULAR DATE AVAILABLE IN T HE ACCOUNTS, MAY BE A BANK ACCOUNT, IS THE ASSET OF THE ASSESSEE REFLECTI NG THE ACCUMULATION OF PROFIT. SUCH A PRESUMPTION IS INCORRECT. ALMOST O N IDENTICAL SITUATION IN THE CASE OF INDIA SEED HOUSE 69 TTJ 241(SUPRA) AO H AD MADE THE ADDITION OF PEAK INVESTMENT ON UNACCOUNTED SALES ON THE BASIS OF A STATEMENT OF THE PARTNER. HOWEVER, ON THE BASIS OF THE SEIZED MATERIAL, THE ASSESSEE WAS ABLE TO PROVE THAT PURCHASES WERE MADE ON CREDITS. THE PAYMENTS WERE MADE FROM REALIZATION OF SALES. ON T HAT GROUND, IT WAS HELD THAT THERE WAS NO MATERIAL WITH THE AO TO ARRI VE AT THE FIGURE OF PEAK ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 24 - INVESTMENT. NOW REFERRING THE FACTS OF THIS CASE, IT IS CONTESTED THAT THE STOCK ONLY TO THE EXTENT OF RS.15 LACS AND CASH OF RS.1,86,000/- WAS PHYSICALLY FOUND AS UNDISCLOSED ASSETS AT THE TIME OF SURVEY. IT HAS ALSO BEEN CONTESTED THAT ON A PARTICULAR DATE IN A BANK ACCOUNT AN OUTSTANDING BALANCE MIGHT HAVE GONE HIGH BUT THE OUTSTANDING BA LANCE ALWAYS REMAINED FLUCTUATING, AS A RESULT SOMETIMES IT WAS AT THE LOWEST LEVEL. HAD THE BALANCES IN THE ACCOUNTS WAS ASSESSEES OWN SAVINGS REPRESENTING ACCUMULATED PROFIT, THEN THE OUTSTANDI NG BALANCES EITHER AT THE CLOSE OF THE EACH ACCOUNTING PERIOD OR CONTINUO USLY FOR ALL THE INVOLVED SIX YEARS SHOULD HAVE RECURRED OR PERSIST ED CONSTANTLY AT THAT HIGH AMOUNT ALLEGED TO BE INCREMENTING PEAK, E.G. F OR F.Y. 2003-04 AT RS.1,10,29,696/- OR FOR F.Y. 2004-05 AT RS.1,42,22, 063/- OR FOR THE F.Y.05-06 1,43,72,475/-. BUT THE FACT AS EVIDENT F ROM THE IMPUGNED BANK ACCOUNTS IS THAT THE SAID PEAK BALANCE WAS AVAILABL E ONLY FOR A DAY OR TWO. THAT BALANCE HAS NOT LASTED EVEN FOR A REASONABLE P ERIOD OF ONE COMPLETE FINANCIAL YEAR. THE BANK BALANCES THUS KEPT ON FLUC TUATING THROUGH OUT THE YEAR DEPENDING UPON THE BUSINESS REQUIREMENT IN THE CONTEXT OF SQUARING UP OF TRADE LIABILITY. AS A CONSEQUENCE IT WAS PLACED ON RECORD THAT IT WAS WRONG ON THE PART OF LD.CIT(A) TO ADOPT A HIGHER FIGURE OF THE TWO FIGURES FOR COMPUTING THE UNDISCLOSED INCOME OF THE ASSESSEE. ON THE BASIS OF THE REASONS ASSIGNED HEREINABOVE, WE A RE NOT IN AGREEMENT WITH THE SAID VIEW TAKEN BY LD.CIT(A). HENCE, DIS MISS THE SAME. 11. AS FAR AS THE QUESTION OF ADOPTION OF NET PROFIT ON THE SALES IS CONCERNED, THE ASSESSEE HAS ADOPTED PROFIT RATE AT 3% NP, BUT CIT(A) HAS ADOPTED NP @ 5%. EVEN IN THE CASE OF K.C.K.A. GUPTA VS. ACIT ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 25 - 90 TTJ 555 (HYD.)[SUPRA] THE VIEW TAKEN WAS THAT IN THE CASE OF UNACCOUNTED SALES ONLY A PERCENTAGE OF SALES SHOULD BE CONSIDERED AS UNDISCLOSED INCOME. PRESENTLY, THE ASSESSEE HAS F URNISHED A CHART THROUGH WHICH IT WAS DEMONSTRATED THAT AS FAR AS TH E WORKING OF THE NET PROFIT OF THE GROUP IN GENERAL AND THE WORKING OF T HE NET PROFIT OF THE ASSESSEE IN PARTICULAR, IN THE PAST AS PER THE REG ULAR RETURNS, IS CONCERNED, IN THIS LINE OF BUSINESS, THE SAME HAD VARIED FROM 4.27% , 4.65%, 5.62%, 6.09% 2.14%, AND 2.75%, RESPECTIVELY FROM F.Y. 200 0-01 TO F.Y. 2005- 06. AS PER THE SAID CHART, THROUGH WHICH COMPUTE D THE AVERAGE NET PROFIT IN LAST SIX YEARS EARNED BY THIS ASSESSEE, NAMELY, MURARILAL GUPTA WAS THUS ARRIVED AT THE FIGURE OF 3.43%. THE REQUISITE CHART THROUGH WHICH THE NET PROFIT IN THE PAST SIX YEARS WAS EARN ED BY THE ASSESSEE IS REPRODUCED BELOW: CALCULATION OF GROUP N.P. PARTICULARS / F.YS 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 TOT AL MURARILAL C.GUPTA TURNOVER (RS.) N P (RS.) N P RATE (RS.) 1162976 49647 4.27% 792413 36882 4.65% 412860 23218 5.62% 1102398 67125 6.09% 3519270 75211 2.14% 1880644 51765 2.75% 8870561 303848 3.43% 11.1. ON THE BASIS OF ABOVE CHART AND CONSIDERING T HE FACTS AND CIRCUMSTANCE OF THE CASE, SINCE THIS IS THE ONLY RE ASONABLE DATA AVAILABLE ON RECORD THROUGH WHICH A JUSTIFIABLE RATE OF NET P ROFIT CAN BE ARRIVED AT, WE HEREBY DIRECT THE REVENUE AUTHORITIES TO COMPUTE THE UNDISCLOSED INCOME OF THE ASSESSEE BY APPLYING THE NET RATE OF PROFIT AT 3.43% ON THE ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 26 - UNDISCLOSED AND UNEARTHED TURNOVER OF THE ASSESSEE. BEFORE WE CONCLUDE, WE ARE ALSO CONSCIOUS ABOUT AN EQUALLY IMPORTANT AS PECT THAT AT THE START OF THE BUSINESS THERE OUGHT TO BE SOME INVESTMENT M ADE BY THE ASSESSEE AND BECAUSE IT WAS AN ACCEPTED FACT THAT THE BUSINE SS IN QUESTION ADMITTEDLY WAS AN UNACCOUNTED AND UNDISCLOSED ACTIV ITY, THEREFORE THE INITIAL INVESTMENT SHOULD BE TAXED AS UNACCOUNTED A S WELL AS UNDISCLOSED INVESTMENT. THEREFORE FOR THE FIRST YEAR OF THE YE ARS IN QUESTION, WE HEREBY DIRECT THAT THE SAID UNACCOUNTED INVESTMENT HAS TO BE BROUGHT TO TAX AND THE SAID AMOUNT CAN BE THE PEAK CREDIT IN T HE BANK OF RS.2,92,716/- AS DETECTED BY THE AO. FOR THAT YEA R, I.E. A.Y. 2001-02 THE AO IS HEREBY DIRECTED TO TAX THE IMPUGNED UNACC OUNTED INITIAL INVESTMENT OF RS.2,92,716/- PLUS THE NET PROFIT AS DIRECTED BY US. FOR REST OF THE YEARS, AS ALREADY HELD, THE OTHER DIRECTIONS SHALL REMAIN IN FORCE. IN THIS MANNER, THE ASSESSEE IS ENTITLED FOR THE PA RT RELIEF ONLY. 12. IN THE RESULT, ASSESSEES APPEALS AS ALSO REVENUES APPEALS ARE PARTLY ALLOWED. SD/- SD/- ( .. ) ( ) '# ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 31 / 5 /2012 ..%, .%../ T.C. NAIR, SR. PS ITA NOS.2418 TO 2423/AHD/09 (BY REVENUE) AND ITA NOS.1569 TO 1574/AHD/09 (BY ASSESSEE) ITO VS. SH.MURARILAL CHHAVIRAM GUPTA ASST.YEARS 2001-02 TO 2006-07 - 27 - ', ' -. /'.+ ', ' -. /'.+ ', ' -. /'.+ ', ' -. /'.+/ COPY OF THE ORDER FORWARDED TO : 1. 01 / THE APPELLANT 2. -201 / THE RESPONDENT. 3. 3 / CONCERNED CIT 4. 3() / THE CIT(A)-II, AHMEDABAD 5. .67 -% , , / LEARNED DEPARTMENTAL REPRESENTATIVE, ITAT, AHMEDABAD 6. 78 9& / GUARD FILE. ',% ',% ',% ',% / BY ORDER, 2. - //TRUE COPY// : :: :/ // / ; ; ; ; ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DIRECT DICTATION ON COMPUTER . 26.5.12/29. 5.12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30.5.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S31.5.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.5.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER