THE ITO, Jhabua V. SHRI RAMESH CHANDRA AGRAWAL, Jhabua

ITA 26/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5328 (ITAT-INDORE)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 14-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED KHAN
• Assessee Lawyers: S S DESH
• Keywords: Rejection of books of accounts; Unexplained investment; Business income
• Section: 143(3); 133(6); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER INCOME-TAX OFFICER, JHABUA .. ./ PAN: AGFPA9772J VS. SHRI RAMESH CHANDRA AGRAWAL, BAMNIA, DISTT. JHABUA / APPELLANT / RESPONDENT / APPELLANT BY SHRI MOHD.JAVED KHAN, SR. DR / RESPONDENT BY SHRI S.S.DESHPANDE, CA DATE OF HEARING 08.12.2016 DATE OF PRONOUNCEMENT 21.12.2016 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS), UJJAIN, [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 29.10.2015 AND PER TAINS TO .. . / I.T.A. NO. 26/IND/2016 %' ' / ASSESSMENT YEAR: 2008-09 I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 2 OF 19 ASSESSMENT YEAR 2008-09 AS AGAINST APPEAL DECIDED I N ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT DATE D 28.03.2014 OF ITO-2, RATLAM [HEREINAFTER REFERRED T O AS THE AO]. 2. GROUND NOS. 1 & 2 RELATE TO APPLYING NET PROFIT RAT E OF 2 % AS AGAINST 8% ESTIMATED BY THE AO SPECIALLY WHE N AO HAS POINTED OUT THAT 4% VAT AND 1.2 % MANDI AND NIRASHR IT SHULK WAS NOT PAID BY THE ASSESSEE AND ALSO ESTIMATI NG THE TURNOVER AT RS. 2,27,62,708/- ONLY IN PLACE OF RS. 2.50 CRORE AS ESTIMATED BY AO, WHICH WERE SALES TO ONLY FOUR PAR TIES. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM TRAD ING OF FOOD GRAINS AND COTTON. THE ASSESSEE HAS FILED HIS RETUR N OF INCOME ON 19.04.2010 DECLARING TOTAL INCOME AT RS. 63,500/ -. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME-TA X ACT, 1961, DETERMINING TOTAL INCOME AT RS. 1,82,080/- ON 25.05.2010. THEREAFTER THE CIT, UJJAIN, VIDE ORDER U/S 263 DATED 25.03.2013 SET ASIDE THE ORDER OF THE AO. ACC ORDINGLY, THE AO COMPLETED THE ASSESSMENT U/S 143(3) READ WITH SECTION 263 ON 28.03.2004 BY MAKING THE ADDITION OF RS. I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 3 OF 19 19,42,880/- ON ACCOUNT OF NET PROFIT, RS. 74,02,280 /-ON ACCOUNT OF UNACCOUNTED INVESTMENT AND RS. 4,51,945/ - ON ACCOUNT OF GINNING CHARGES. THE AO NOTICED THAT THE ASSESSEE HAS SHOWN TOTAL SALES OF RS. 1,98,65,500/-. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS, NO DETAILS OF PURCHASE AND SALE IN THE FORM OF BILLS OR BOOKS OF ACCOUNTS WERE PROD UCED. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAS MADE PAYMENTS OF RS.1,88,52,843/- FROM HIS ICICI BANK ACCOUNT, WHICH WERE MAINLY RELATED TO PURCHASES ON WHICH SALES MADE BY T HE ASSESSEE AND AFTER CONSIDERING THE OTHER SALES, TOT AL SALES WERE DISCLOSED AT RS. 1,98,65,500/-. SIMILARLY, THE ASSE SSEE HAS MADE WITHDRAWALS FROM THE SAID BANK ACCOUNT AMOUNTING TO RS. 1,88,31,000/-, WHICH IS CLAIMED TO BE ON ACCOUNT OF PURCHASES MADE. THE ASSESSEE HAS DISCLOSED NET PROF IT AT RS. 57,120/- ON SALES OF RS. 1,98,65,500/-, WHICH GIVES THE RATE OF 0.29%. THE AO FURTHER NOTED THAT THE SALES DISCLOSE D BY THE ASSESSEE ARE NOT CORRECT, AS FURTHER INFORMATION OB TAINED U/S 133(6) OF THE ACT, IN RESPECT OF FOUR PARTIES, THE ASSESSEE HAS MADE SALES TO FOLLOWING FOUR PARTIES AMOUNTING TO RS . 2,27,62,708/- :- I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 4 OF 19 S.NO. NAME OF THE PARTY AMOUNT OF SALE (RS.) 1. M/S.AGRASEN COTTON INDIA, BAMANIA 78,07,908/- 2. M/S.PRABHAT TRADING CO., BAMANIA 18,72,618/ - 3. M/S. MAA VAISHNODEVI COTTON CO., BAMANIA 66,07,981/- 4. M/S.ANJNI COTTON CO., BAMANIA 64,74,201/- TOTAL 2,27,62,708/- 4. THE AO ALSO GATHERED INFORMATION FROM THE SALES TAX OFFICER, JHABUA, U/S 133(6) OF THE ACT, ACCORDING T O WHICH THE ASSESSEE HAS SHOWN TOTAL SALES AT RS. 52,20,041/- ON WHICH THE ASSESSEE HAS PAID SALES TAX OF RS. 27,575/-. TH EREFORE, THE AO WAS OF THE VIEW THAT THE SALES DISCLOSED BY THE AS SESSEE CANNOT BE CONSIDERED AS TRUE AND RELIABLE. THE AO F URTHER NOTED THAT THE VARIOUS PARTIES HAVE FURNISHED THE X EROX COPY OF THE SALES BILLS ISSUED BY THE ASSESSEE. ACCORDIN G TO THESE BILLS, THE ASSESSEE CHARGED 4% VAT, BUT NO EVIDENCE IN SUPPORT OF THE PAYMENT OF 4 % VAT TO GOVT. IS FILED BY THE ASSESSEE. THE AO FURTHER NOTED THAT THE ASSESSEE HA S TO PAY I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 5 OF 19 1.20 % AS MANDI AND NIRASHRIT SHULK TO KRISHI UPAJ MANDI, BUT NO EVIDENCE OF THE SAME HAS BEEN FILED. CONSIDE RING THESE FACTS, THE AO WAS OF THE VIEW THAT THE SALES DISCLOSE D BY THE ASSESSEE AT RS. 1,98,65,500/- ARE NOT RELIABLE AS N O BOOKS OF ACCOUNTS, PURCHASE AND SALE BILLS AND DOCUMENTARY E VIDENCE HAS BEEN FILED. FURTHER, THE FOUR PERSONS FROM WHOM INFORMATION WAS GATHERED HAVE SHOWN PURCHASES FROM TH E ASSESSEE AT RS. 2,27,62,708/- DURING THE YEAR UNDER CONSIDERATION . THEREFORE, THE AO HAS REJECTED THE BOOKS OF ACCOUNTS AS PER PROVISIONS OF SECTION 145(3) OF TH E ACT AND ESTIMATED THE TOTAL SALES OF THE ASSESSEE AT RS. 2, 50,00,000/- FOR THE YEAR UNDER CONSIDERATION ON WHICH THE AO AP PLIED NET PROFIT RATE @ 8% CONSIDERING 1.20% MANDI AND NIRASH RIT SHULK AND 4% VAT TAX. ACCORDINGLY, THE AO COMPUTED NET PR OFIT AT RS. 20 LAKHS AS AGAINST NET PROFIT SHOWN BY THE ASSE SSEE AT RS. 57,120/-. ACCORDINGLY, THE BALANCE AMOUNT OF RS. 19 ,42,880/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE ASSESSEE HAS PREFERRED THE APPEAL BEFORE THE LD . CIT(A). I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 6 OF 19 6. THE LD. CIT(A) OBSERVED THAT THE AO HAS ESTIMATED GROSS TURNOVER AT RS. 2.50 CRORES AS AGAINST SALES AT RS. 1.98 CRORES SHOWN BY THE ASSESSEE. THE AO REPORTED THAT I N THE ICICI BANK, RATLAM, THE ASSESSEE MADE DEPOSITS OF R S. 1,88,52,840/-. THESE DEPOSITS IN THE BANK ACCOUNT C AN BE CONSIDERED AS SALE OF THE ASSESSEE, EVEN THOUGH THE ASSESSEES SALE IS MUCH LESS THAN WHAT THE AO HAS ESTIMATED AT RS. 2,50,00,000/-. THE AO MENTIONED FOUR PURCHASERS NA MES, WHERE TOTAL PURCHASES FROM THE ASSESSEE IS AT RS. 2,27,62,708/-. THE AOS ADOPTION ON SALE AT RS. 2,5 0,00,000/- IS WITHOUT ANY BASIS. THEREFORE, IT WILL BE APPROPRIA TE TO ADOPT THE SALES AT RS. 2,27,62,708/- INSTEAD OF RS. 2,50, 00,000/- AS ADOPTED BY THE AO AND RS. 1,98,65,500/- AS SHOWN BY THE ASSESSEE. THE LD. CIT(A) FURTHER NOTED THAT THE AO HAS NOT GIVEN ANY BASIS FOR ADOPTING 8 % PROFIT RATE NOR CI TED ANY COMPARABLE CASES, WHEREAS IN THE ORIGINAL ASSESSMENT , THE AO ADOPTED NET PROFIT RATE OF 2 % AFTER REJECTING THE BOOKS OF ACCOUNTS. THE ASSESSEE HAS ALSO SHOWN 2% NET PROFIT RATE IN ASSESSMENT YEAR 2007-08. CONSIDERING THESE FACTS, T HE LD. CIT(A) HAS ADOPTED THE NET PROFIT RATE AT 2 %, ACCO RDING TO I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 7 OF 19 WHICH THE PROFIT WAS WORKED OUT AT RS. 4,55,254/- ON S ALES OF RS. 2,27,62,708/- AS AGAINST NET PROFIT OF RS. 57,1 20/- SHOWN BY THE ASSESSEE. ACCORDINGLY, ADDITION TO THE EXTEN T OF RS. 3,98,134/- WAS SUSTAINED AND BALANCE OF RS. 15,44,74 6/- WAS DELETED. 7. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 8. THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF A CCOUNTS NOR ANY PURCHASE OR SALE BILLS. THE SALES SHOWN AT R S. 1.98 CRORES ARE WITHOUT ANY BASIS, WHEREAS THE AO HAS FOUN D OUT THAT THE ASSESSEE HAS EFFECTED SALES OF RS. 2,27,62 ,708/- TO FOUR PARTIES ONLY. THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN ADOPTING THE SALES OF THE ASSESSEE AT RS. 2.27 CROR ES ONLY AS THE ASSESSEE HAS ALSO MADE SALES TO OTHER PARTIES, WHICH ACCORDING TO THE ASSESSEES OWN SUBMISSION, THE SALE S TO OTHER PARTIES WERE AROUND RS. 10 LAKHS AS THE SALES DEPOS ITS IN ICICI BANK ACCOUNT AT RS. 1.88 CRORES WHEREAS THE ASSESSEE HAS SHOWN AT RS. 1.98 CRORES. THEREFORE, THE LD. CIT(A) WAS INCORRECT IN REDUCING THE SALES ESTIMATED BY THE AO . I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 8 OF 19 9. THE LD. SR. DEPARTMENTAL REPRESENTATIVE HAS ALSO PLACED RELIANCE IN THE CASE OF CIT VS. CHETAN DAS L ACHMAN DAS IN I.T.A.NO. 2021/2010 ETC. OF HON'BLE DELHI H IGH COURT DATED 7 TH AUGUST, 2012, WHEREIN IT WAS HELD THAT THE AO CAN ESTIMATE THE SALES AT A HIGHER FIGURE ON THE BASIS OF EVIDENCE AVAILABLE WITH HIM. THE LD. SR. DEPARTMENTAL REPRESE NTATIVE HAS ALSO PLACED RELIANCE ON THE CASE OF COMMISSIONE R OF SALES TAX, M.P. VS. H.M. ESUFALI H.M.ABDULALI, (1973) 90 ITR 271 (S.C.) IN SUPPORT OF HIS PROPOSITION, WHICH ALSO SUP PORTS OUR VIEW THAT THE ESTIMATE MADE BY THE AO IS JUSTIFIED. 10. THE LD. SR. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE AO HAS CORRECTLY APPLIED NET PRO FIT RATE @ 8% CONSIDERING THE FACTS THAT THE ASSESSEE HAS PAID 4% AS VAT AND 1.2 % OF MANDI SHULK AND NIRASHRIT SHULK, WHICH MEANS THE ASSESSEE HAS EARNED 8% NET PROFIT, WHICH IS VERY MUCH REASONABLE AS ADOPTED BY THE AO. THEREFORE, IT WAS U RGED UPON US TO RESTORE THE FINDINGS OF THE AO AND SET-ASIDE THE FINDING OF THE CIT(A). 11. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADOPTION OF SALES AT RS. 2.5 CRO RES IS I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 9 OF 19 WITHOUT ANY BASIS WHEREAS THE LD. CIT(A) HAS BASED HI S FINDINGS ON THE DOCUMENTARY EVIDENCE. FURTHER, THE ADOPTION OF NET PROFIT RATE AT 8% IS HIGHLY EXCESSIVE, CONSI DERING THE FACTS THAT THE ASSESSEE HAS BEEN SHOWING NET PROFIT RATE AT 0.5% IN ASSESSMENT YEAR 2006-07, 1.5 % IN ASSESSMEN T YEAR 2007-08, WHICH WAS ADOPTED AT 2 % AFTER REJECTING THE BOOKS OF ACCOUNTS FOR THE ASSESSMENT YEAR 2007-08. THEREF ORE, PAST HISTORY SHOULD BE CONSIDERED WHILE ESTIMATING THE NE T PROFIT RATE. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CONSIDERED THE FACTS AND PERUSED THE MATERIAL AVAIL ABLE ON RECORD. WE FIND THAT THE ASSESSEE IS NOT MAINTAININ G ANY PURCHASE AND SALES VOUCHERS, BILLS NOR ANY BOOKS OF ACCOUNTS. WE ALSO NOTE THAT THE ASSESSEE HAS SHOWN SALES AT RS . 1,98,65,500/- WHICH WERE BASED ON THE DEPOSITS MADE I N ICICI BANK ACCOUNT AT RS. 1,88,52,843/-. HOWEVER, WE FIN D THAT THE AO HAS GATHERED THE INFORMATION FROM THE FOUR P URCHASERS TO WHOM THE ASSESSEE HAS EFFECTED SALES AMOUNTING TO RS. 2,27,62,708/- WHICH WERE MORE THAN THE AMOUNT OF SA LES DISCLOSED BY THE ASSESSEE AT RS. 1,98,65,500/-. WE FIND THAT I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 10 OF 19 THE LD. CIT(A) HAS ADOPTED THE SALES AT RS. 2,27,62 ,708/- ON THE BASIS OF PURCHASES MADE TO THE FOUR PARTIES AS DISCUSSED IN ABOVE PARAGRAPH, WHEREAS THE ASSESSEE HIMSELF HAS SHOWN THE SALES TO OTHER PARTIES AT RS. 10,12,657/- ( I.E . RS. 1,98,65,500/- (-) BANK DEPOSITS AT RS. 1,88,52,843/ -) MEANING THEREBY THAT THE ASSESSEE HAS ALSO MADE SALES TO OT HER THAN THE DEPOSITS MADE IN THE BANK ACCOUNT MAINTAINED WIT H ICICI BANK. THEREFORE, IT CANNOT BE PRESUMED THAT THE ASS ESSEE HAD ONLY MADE SALES WITH FOUR PARTIES. THEREFORE, THE E STIMATE CONSIDERED AT RS. 2,27,62,708/- BY THE LD. CIT(A) I S NOT ON LOGIC AND RATIONAL BASIS. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE OTHER SALES MADE TO PARTIES OTHER TH AN THE AFORESAID FOUR PARTIES, WHICH CANNOT BE LESS THAN RS . 10 LAKHS, AS THE ASSESSEE HIMSELF ESTIMATING HIGHER FIGURE, WH EREAS THE AOS ESTIMATE IS INCREASED BY RS. 23 LAKHS ONLY, WHI CH IS ONLY RS. 13 LAKHS MORE. THEREFORE, WE ARE OF THE CONSIDE RED OPINION THAT THE SALES ADOPTED BY THE AO IS REASONABLE. THI S VIEW ,OF OUR SIS ALSO SUPPORTED BY DECISION OF HON'BLE SUPRE ME COURT IN THE CASE OF COMMISSIONER OF SALES TAX, MADHYA PR ADESH VS. I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 11 OF 19 H.M. ESUFALI H.M. ABDULALI, (1973) 90 ITR 271 (S.C. ) , WHEREIN IT WAS - HELD, THAT THE REASSESSMENTS WERE VALID. FROM THE CIRCUMSTANCE THAT THE ASSESSEE HAD DEALINGS OUTSIDE THE ACCOUNTS OF THE VALUE OF RS. 31,171.28 FOR 19 DAYS, IT WAS OPEN TO THE OFFICER TO INFER THAT THE ASSESSEE HAD LARGE- SCALE DEALINGS OUTSIDE THE ACCOUNTS. IN SUCH A SITU ATION, IT WAS NOT POSSIBLE FOR THE OFFICER TO FIND OUT PRECIS ELY THE TURNOVER SUPPRESSED AND HE COULD ONLY MAKE AN ESTIM ATE OF THE SUPPRESSED TURNOVER ON THE BASIS OF THE MATE RIAL BEFORE HIM. SO LONG AS THE ESTIMATE MADE BY HIM WAS NOT ARBITRARY AND HAD A REASONABLE NEXUS WITH THE FACTS DISCOVERED, IT COULD NOT BE QUESTIONED. IT WAS WRON G TO HOLD THAT THE OFFICER MUST HAVE MATERIAL BEFORE HIM TO PROVE THE EXACT TURNOVER SUPPRESSED. IN ESTIMATING ANY ESCAPED TURNOVER, IT IS INEVITABL E THAT THERE IS SOME GUESS-WORK. THE ASSESSING AUTHORITY W HILE MAKING THE BEST JUDGMENT ASSESSMENT, NO DOUBT, SHOU LD ARRIVE AT HIS CONCLUSION WITHOUT ANY BIAS AND ON A RATIONAL BASIS. THAT AUTHORITY SHOULD NOT BE VINDICTIVE OR I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 12 OF 19 CAPRICIOUS. IF THE ESTIMATE MADE BY THE ASSESSING AUTHORITY IS A BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASIS, THE FACT THAT THERE IS NO GOOD PRO OF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE , THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUAT ION. IT IS HIS BEST JUDGMENT AND NOT ANY ONE ELSES. THE HIGH COURT CANNOT SUBSTITUTE ITS BEST JUDGMENT FOR THAT OF THE ASSESSING AUTHORITY. 13. IN VIEW OF ABOVE, WE FIND THAT THE AO IS BEST JUDGE T O MAKE ESTIMATE ON THE SURROUNDING FACTS AND CIRCUMST ANCES OF THE CASE. THEREFORE, WE ARE NOT INCLINED TO INTERFE RE WITH THE ESTIMATE OF SALES AT RS. 2.50 CRORES, AS ESTIMATED BY THE AO. THIS VIEW IS ALSO SUPPORTED BY THE DECISION IN THE CASE OF CIT VS. CHETAN DAS LACHMANDAS (SUPRA) AS RELIED ON BY T HE LD. SR. DEPARTMENTAL REPRESENTATIVE. ACCORDINGLY, SALES EST IMATED AT RS. 2,50,00,000/- IS, THEREFORE, UPHELD. 14. AS REGARDS THE NET PROFIT RATE ADOPTED AT 2 % BY TH E LD. CIT(A), WE FIND THAT THE ASSESSEE HAS CHARGED 4% AS VAT FROM THE PURCHASERS, WHICH APPEARS TO HAVE NOT BEEN DEPOS ITED WITH THE CONCERNED AUTHORITIES AS NO EVIDENCE TO SUC H DEPOSITS I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 13 OF 19 ARE FILED AS MENTIONED BY THE AO IN HIS ASSESSMENT ORDER. SIMILARLY, THE ASSESSEE HAS TO PAY 1.5 % MANDI SHUL K AND NIRASHRIT SHUKLA, WHICH IS ALSO SAVED BY THE ASSESSE E AS THE SAME DOES NOT APPEAR TO HAVE BEEN GONE TO THE MANDI AS NO EVIDENCE FOR THIS WAS ALSO FILED. FURTHER, THE ASSES SEES BOOKS OF ACCOUNTS WERE NOT FOUND RELIABLE IN THE PAST YEA RS, AS 2% RATE WAS ADOPTED IN THE ASSESSMENT YEAR 2007-08. CON SIDERING THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT 6% NET PROFIT RATE ON THE BASIS OF VAT 4% + MANDI SHULK 1.2 % + A SSESSEE 0.29 % = 5.49 % WOULD BE REASONABLE ON THE ESTIMATED SALES OF RS. 2,50,00,000/-, WHICH WORKS OUT TO RS. 15,00,000/- AS AGAINST NET PROFIT DISCLOSED AT RS. 57,120/- BY THE ASSESSEE. ACCORDINGLY, THE ADDITION OF RS. 14,44,880/- I.E. ( 15,00,000 (-) 57,120) IS UPHELD AS AGAINST ADDITION OF RS. 19,42 ,880/- AND RS. 3,98,134/- SUSTAINED BY CIT(A). ACCORDINGLY, T HIS GROUND OF APPEAL IS PARTLY ALLOWED IN FAVOUR OF THE REVENU E. 15. GROUND NOS. 3 & 4 SAY THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN GRANTING RELIEF OF RS. 74,02,280/- ON ACCOUNT OF CAPITAL INVESTMENT WITHOUT APPRECIATING THE FACTS TH AT THERE WAS OPENING BALANCE OF RS. 56,44,080/- AS ON 31.03. 2007 IN I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 14 OF 19 RESPECT OF THREE PARTIES I.E. M/S PRABHAT TRADING B AMNIYA, M/S. MAA VAISNODEVI COTTON CO., BAMANIYA AND M/S. A NJANI COTTON COMPANY, BAMNIYA, WAS ALREADY SQUARED UP DURI NG THE YEAR AND RS. 76,13,808/- REPRESENT THE BALANCE DEBTORS AT THE END OF PREVIOUS YEAR RELEVANT TO ASSESSMENT YEA R. 16. BRIEFLY STATED, THE FACTS OF THE ABOVE GROUNDS ARE THAT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS OF CAPIT AL INVESTMENT IN RESPECT OF COTTON GINNING BUSINESS. T HE ASSESSEE HAS NOT SHOWN ANY DEBTORS AND CREDITORS IN THE BALAN CE SHEET AND HAS SHOWN ONLY RS. 2,11,600/- AS AGAINST UNSECUR ED LOAN. THE AO HAS CALLED FOR INFORMATION U/S 133(6) FROM THE VARIOUS PARTIES, ACCORDING TO WHICH THE ASSESSEE HAS TO PAY FOLLOWING AMOUNTS AS ON 31.03.2008 AS UNDER :- S.NO. NAME OF THE PARTY BALANCE TO BE PAID FOR PURCHASE OF GOODS (RS.) 1. M/S.PRABHAT TRADING CO., BAMNIYA 37,52,408/ - 2. M/S. MAA VAISHNODEVI COTTON CO., BAMNIYA 6,01,022/ - 3. M/S.ANJNI COTTON CO., BAMNIYA 32,60,450/ - TOTAL RS. 76,13,880/ - I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 15 OF 19 17. THUS, THE AO NOTED THAT THE ASSESSEE HAS TO RECEIVE AN AMOUNT OF RS. 76,13,880/- FROM THE AFORESAID PARTIE S AS ON 31.03.2008. AFTER REDUCING THE UNSECURED LOAN AMOUN T AT RS. 2,11,600/-, THE BALANCE COMES TO RS. 74,02,208/-. S INCE THE ASSESSEE HAS NOT SHOWN ANY SECURED LOAN AND SUNDRY CREDITORS NOR GIVEN ANY CAPITAL INVESTMENT MADE IN THE BUSINESS. ACCORDINGLY, THE AO CONSIDERED THE CREDIT ORS AMOUNTING TO RS. 74,02,280/- AS UNEXPLAINED INVESTM ENT IN THE CAPITAL AND ADDED THE SAME TO THE TOTAL INCOME. 18. AGGRIEVED WITH THE ORDER OF THE AO, THE ASSESSEE HAS FILED THE APPEAL BEFORE THE LD. CIT(A). 19. BEFORE THE LD. CIT(A), IT WAS CLAIMED THAT THE AO HA S ESTIMATED CAPITAL INVESTMENT IN THE BUSINESS AT RS. 74,02,280/-, CONSIDERING DEBTORS OF RS. 76,13,880/- . HOWEVER, THE AO HAS NOT CONSIDERED THAT THE DEBTORS AMOUNTIN G TO RS. 90,62,901/- WERE OUTSTANDING AS ON 31.03.2007. THER EFORE, THE ACTION OF THE AO IS NOT CORRECT. THE LD. CIT(A) NOTED THAT THE ASSESSEE HAS SHOWN FOLLOWING PARTIES AS DEBTORS A S ON 31.03.2008 :- I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 16 OF 19 S.NO. NAME & ADDRESS OF THE PARTY AMOUNT (RS.) 1. M/S.PRABHAT TRADING CO., BAMNIYA 37,52,408/ - 2. M/S. MAA VAISHNODEVI COTTON CO., BAMNIYA 6,01,022/ - 3. M/S.ANJNI COTTON CO., BAMNIYA 32,60,450/ - TOTAL RS. 76,13,880/ - THE ASSESSEE HAS SHOWN DEBTORS AS ON 31.03.2007 AS U NDER :- S.NO. NAME & ADDRESS OF THE PARTY AMOUNT (RS.) 1. M/S. PRABHAT TRADING CO., BAMANIA 24,29,790/ - 2 . M/S. MAA VAISHNODEVI COTTON CO., BAMANIA, BAMANIA 11,93,041 / - 3 . M/S. ANJNEE COTTON CO., BAMNIA 20,21,249/ - 4. M/S. AGRASEN COTTON INDUSTRIES, BAMNIA 34,18,821/ - TOTAL 90,62,901 / - 20. THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT SHOWN ANY DEBTORS AND CRED ITORS IN THE BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION FILED BY THE ASSESSEE. THE AO HAS OBTAINED THE INFORMATION U/S 1 33(6) I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 17 OF 19 FROM THE AFORESAID PARTIES, WHICH WERE SHOWING THE AMO UNT OF RS. 76,13,880/- AS PAYABLE TO THE ASSESSEE AS ON 31 .03.2008. THEREFORE, THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED AS THE SAME IS NOT BACKED BY THE DOCUMENTARY EVIDE NCE BEFORE THE AO. FURTHER, IF THE CONTENTION OF THE AS SESSEE IS CONSIDERED AS TRUE THAT THERE WAS OPENING DEBTORS A S ON 31.03.2007 AMOUNTING TO RS. 56,44,080/- EVEN THEN T HE DEBTORS SHOWN AS ON 31.03.2008 FROM THESE THREE PART IES WERE AT RS. 76,13,880/-, WHICH WERE NOT REFLECTED IN THE B ALANCE SHEET FILED BY THE ASSESSEE. THEREFORE, IT WAS URGED THAT THE FINDINGS OF THE AO SHOULD BE UPHELD. 21. ON THE OTHER HAND, THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS SHOWN THAT THE DEBTORS OF THE ASSES SEE WHICH ARE OLD ONES. THEREFORE, NO ADDITION CAN BE MADE DU RING THE YEAR UNDER CONSIDERATION . THE ASSESSMENT FOR ASSES SMENT YEAR 2007-08 WAS MADE U/S 143(3). THEREFORE, THE DEB TORS SHOWN AS ON 31.03.2007 SHOULD BE TREATED AS GENUINE. 22. WE HAVE CONSIDERED THE FACTS AND MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAS NOT SHOWN ANY DEBTORS IN HIS BALANCE SHEET PRODUCED BEFORE THE AO EXCEPT ONLY I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 18 OF 19 UNSECURED LOAN AMOUNTING TO RS. 2,11,600/-. THEREFO RE, THE AO HAS NO ALTERNATIVE BUT TO TREAT THE SAME AS UNEX PLAINED CAPITAL INVESTMENT. HOWEVER, WE ALSO NOTE THAT THE ASSESSMENT OF THE ASSESSEE FOR ASSESSMENT YEAR 2007 -08 WAS MADE U/S 143(3) AND THE ASSESSEE HAS SHOWN DEBTORS I N RESPECT OF AFORESAID THREE PARTIES AS ON 31.03.2007 AT RS. 56,44,080/-. THEREFORE, WE ARE OF THE CONSIDERED OP INION THAT THE ADDITION TO THAT EXTENT IS NOT JUSTIFIED. ACCOR DINGLY, WE ALLOW THE RELIEF OF RS. 56,44,080/- OUT OF TOTAL ADD ITION OF RS. 76,13,880/- LEAVING THE BALANCE AMOUNT OF RS. 19,69 ,800/- AS UNEXPLAINED CAPITAL INVESTMENT OF THE ASSESSEE IN T HE LIGHT OF THE FACTS THAT NO EVIDENCE WHATSOEVER HAS BEEN FURNI SHED BY THE ASSESSEE BEFORE THE AO. ACCORDINGLY, THIS GROUN D OF THE REVENUE IS PARTLY ALLOWED. I.T.A.NO. 26/IND/2016 A.Y.2008-09 SHRI RAMESH CHAN DRA AGRAWA, JHABUA PAGE 19 OF 19 23. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 21 ST DECEMBER, 2016. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER * / DATED : 21 ST DECEMBER, 2016.CPU*