Naresh Dutt Sahai Prop., Sunam V. JCIT, Sangrur

ITA 277/CHANDI/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68447 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 18-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Unexplained cash credit; Business income; Income from undisclosed sources; Peak credit; Source of fund; Revised return; Revenue expenditure; Capital expenditure
• Section: 40A(3); 139(5); 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 277/CHD/2010 ASSESSMENT YEAR: 2005-06 SHRI. NARESH DUTT SAHAI VS. THE JCIT PROP. M/S ROBIN ENGINEERS SANGRUR RANGE BABA GANGA RAM COLONY SANGRUR SUNAM PAN NO. ABJPS1864J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 12/08/2013 DATE OF PRONOUNCEMENT : 02/09/2013 ORDER PER T.R.SOOD, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 12/01/2010 OF CIT (APPEALS), PATIALA. 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1) THAT THE LD. CIT(A), PATIALA HAS ERRED IN UPHOLDING ADDITION OF RS. 63,50,000/- WITH REGARD TO THE ALLEGED INVESTMENT IN STOCK FOR GOODS SOLD TO M/S JR SOLVENT INDUSTRIES PVT. LTD. 2 AS PER PARA 3.7 OF THE ORDER OF THE CIT(A) AND ALSO UPHOLDING SIMILAR ADDITION OF RS. 80,03,40/- IN RESPECT OF MANUFACTURING GOODS SOLD TO M/S. ASHOK UDYOG PVT. LTD. KUTLUPUR, AS PER PARA 3.11 OF THE ORDER OF CIT(A). 2) THAT THE LD. CIT(A), PATIALA HAS ERRED IN UPHOLDING ADDITION OF RS. 6,99,243/- AS PEAK AMOUNT OF DEPOSITS BY WAY OF DRAFTS ETC. WITH VARIOUS BANK ACCOUNTS AND TREATING THE SAME AS INCOME FROM UNDISCLOSED SOURCES AS PER PARA 4.3 OF THE ORDER. 3) NOTWITHSTANDING THE ABOVE SAID GROUND OF APPEAL, IT IS SUBMITTED THAT THE WORTHY CIT(A) HAS NOT CONSIDERED THE FACT THAT ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER WITHOUT CONSIDERING THE FACT THAT THERE WERE SUFFICIENT WITHDRAWALS FROM THE BANK ACCOUNT WHICH RELATES TO DEPOSITS MADE IN THE BANK IN RESPECT OF PAYMENT RECEIVED FROM M/S. JR SOLVENT INDUSTRIES LTD. AND OTHERS IN RESPECT OF SALES MADE TO THEM AND FOR WHICH SEPARATE ADDITION HAS BEEN MADE AND AS SUCH BENEFIT OF THE ROTATION OF FUNDS HAS NOT BEEN GIVEN WHILE SUSTAINING THE ADDITION. 4) THAT THE LEARNED CIT(A), PATIALA HAS ERRED IN UPHOLDING ADDITION MADE ON ACCOUNT OF CST COLLECTED BY THE ASSESSEE. 5) THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING ADDITION OF RS. 17,500/- IN RESPECT OF AIR CONDITIONER INSTALLED AT THE WORK SHOP BY TREATING THE SAME AS CAPITAL EXPENDITURE. 6) THAT THE LEARNED CIT(A), PATIALA HAS ERRED IN UPHOLDING THE ADDITION OF RS. 31,50,842/- AS MADE BY THE ASSESSING OFFICER BY APPLYING A GROSS PROFIT RATE OF 9.04% TO THE TOTAL SALES OF RS. 3,56,66,084/- AS PER PARA 7.1 TO 7.5 OF THE ORDER. 7) NOTWITHSTANDING THE ABOVE SAID GROUND OF APPEAL, IT IS SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN CONSIDERING THAT APPLICATION OF GROSS 3 PROFIT ON THE ESTIMATED SALES IS VERY MUCH ON THE HIGHER SIDE AND ALSO SALES HAVE WRONGLY BEEN TAKEN AT RS. 3,65,66,084/-. 8) FURTHER ALSO, NOTWITHSTANDING THE ABOVE SAID GROUND OF APPEAL, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE SUBMISSION OF THE ASSESSEE ABOUT TELESCOPE OF THE ADDITION AS MADE IN RESPECT OF GROSS PROFITS AND OTHER ADDITION AS PER DIFFERENT GROUNDS OF APPEAL TAKEN BEFORE HIM SPECIFICALLY WITH REGARD TO ALLEGED INVESTMENT IN STOCK OF ALLEGED GOODS SOLD TO M/S JR SOLVENT INDUSTRIES AND ASHOKA UDYOG PVT. LTD. 9) THAT THE LEARNED CIT(A), PATIALA HAS ERRED IN NOT CONSIDERING ADDITION OF RS. 1,11,738/- ON ACCOUNT OF DISALLOWANCE U/S 40A(3) AS DISCUSSED BY THE ASSESSING OFFICER IN PARA 16 OF HIS ORDER ON THE PLEA THAT NO SEPARATE ADDITION WAS MADE BY THE ASSESSING OFFICER BY TAKING TELESCOPE VIEW AND IN THE ABSENCE OF BOOKS OF ACCOUNT. OUT OF THE ABOVE GROUND NO. 2,3,5 AND 9 WERE NOT PR ESSED BEFORE US THEREFORE SAME ARE DISMISSED. 3. GROUND NO. 1 : AFTER HEARING BOTH THE PARTIES WE FIND THAT ORIGI NALLY ASSESSEE FILED A RETURN OF INCOME DECLARING INCOME OF RS. 93,470/- WHICH WAS LATER ON REVISED TO RS. 1,68,440/-. REASON FOR REVISING THE RETURN WAS GIVEN AS THAT BY MISTAKE SOME OF THE SALES REMAINED TO BE DECLARED. HOWEVER SINCE REVISED RETURN WAS FILED ON 06/12/200 7 WHICH WAS BEYOND THE TIME ALLOWED UNDER SECTION 139(5) OF THE ACT TH E SAME WAS TREATED AS NONEST BY THE AO. FURTHER IT WAS NOTICED BY THE AO THAT ITO SANGRUR HAD SOUGHT INFORMATION IN THE COURSE OF ASSESSMENT OF M /S JR SOLVENT INDUSTRIES WHEREIN THE SAID FIRM HAD SHOWED PURCHAS E OF NEW MACHINERY AMOUNTING TO RS. 2,42,20,000/- FROM THE ASSESSEE. T HEREFORE A NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASSESSEE BECAUS E ASSESSEE HAD NOT DECLARED FULL TURNOVER. IN RESPONSE TO THE NOTICE T HE ASSESSEE FILED ANOTHER RETURN WITH THE FOLLOWING NOTE:- 4 U/S 148 OF I.T.ACT NET INCOME FROM BUSINESS AS PER REVISED RETURN ALREADY FILED AT RECEIPT NO. 4904008288 DATED 6.12.2007 FOR A.Y 2005-06 RS.1,62,455/- INCOME FROM OTHER SOURCE NSC INTEREST ON MATURITY AT PER ORIGINAL/ REVISED RETURN RS. 43,020/- LESS: INTEREST SHOWN IN PREVIOUS YEAR ON ACCRUAL BASIS RS. 25,035/- RS. 17,985/- TOTAL INCOME RS,1,80,440/- LESS DED. U/S 80-L RS.12,000/- BAL. NET INCOME RS.1,68,440/- THIS RETURN OF INCOME FOR THE A.Y 2005-06 IS BEING SUBMITTED IN RESPONSE TO NOTICE ISSUED U/S 14 8 DATED 24.12.2007 UNDER THE I.T.ACT, 1961. THE ORIGINAL RETURN IN THIS CSE WAS SUBMITTED VIDE RECEIPT NO. 23324 DATED 31.10.2005 AND ASSESSEE FILED REVISED RETURN VOLUNTARILY VIDE RECEIPT NO. 4904008288 DATED 6.12.2007 ALONGWITH INCOME TAX AT RS. 33,500/- TO PURCHASE PEACE OF MIND. ALL THE DOCUMENTS ALONGWITH INCOME TAX RECEIPTS ARE ALREADY ATTACHED WITH ORIGINAL AS WELL AS REVISED RETURN SUBMITTED. 4. DURING ASSESSMENT PROCEEDING, BOOKS OF ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE. FOLLOWING OTHER FACTS WER E ALSO NOTICED:- B) UNACCOUNTED PURCHASES:- THE PURCHASES HAVE BEEN SHOWN IN THE TRADING ACCOUNT FILED ALONGWITH INCOME TAX RETURN AT RS. 95,93,162/- WHEREAS ACCORDING TO THE INFORMATION COLLECTED FROM VARIOUS SOURCES THE PURCHASES ARE MUCH MORE. THE DETAILS ARE DISCUSSED IN THE SUBSEQUENT PARAS. C) UNACCOUNTED SALES:- THE ASSESSEE MADE SALES OF RS. 2,42,20,000/- TO M/S J.R. SOLVENT INDUSTRIES PVT. LTD., SANGRUR BUT THE SAME HAVE NOT BEEN DISCLOSED BY THE ASSESSEE IN HIS INCOME TAX RETURN FILED ON 31.10.2005. APART 5 FROM THIS, SALES HAVE BEEN MADE TO OTHER PARTIES WHICH HAVE NOT BEEN SHOWN. D) SALES TO SOME OF THE PARTIES WERE MADE, BUT THE ASSESSEE HAS CANCELLED THOSE BILLS AS CONVENIENT TO HIM. FOR E.G., THE ASSESSEE MADE SALES OF RS. 42,49,600/- TO M/S ASHOK UDYOG LTD., VARANASI WHEREAS THE ASSESSEE HAS SHOWN SALES OF RS. 23,15,500/- IN HIS ACCOUNTS, THE BALANCE WAS SHOWN AS CANCELLED. E) INVESTMENT IN STOCKS OUTSIDE THE BOOKS OF ACCOUNTS. F) UNEXPLAINED CREDITS IN THE BANK. G) CST COLLECTED BUT NOT DEPOSITED. H) CAPITAL EXPENDITURE CLAIMED AS REVENUE EXPENDITURE I) DISCREPANCIES IN THE OPENING AND CLOSING BALANCES OF VARIOUS PARTIES. J) PAYMENTS HAVE BEEN MADE IN CONTRAVENTION TO PROVISIONS OF SECTION 40A(3) OF THE IT ACT 1961. 5. AO MADE FURTHER ENQUIRIES AND CERTAIN BILLS FOR PURCHASE BY THE ASSESSEE WERE COLLECTED FROM FEW PARTIES AS WELL A S SALES TAX OFFICE AND IT WAS NOTICED THAT PURCHASE AS PER THESE BILLS ARE RS. 1,02,05,629/-. INSTEAD OF THE PURCHASE SHOWN BY THE ASSESSEE AT RS .88,88,959/- IN THE SALES TAX RETURN WHEREAS PURCHASE WAS SHOWN IN THE INCOME TAX RETURN AT RS.95,93,162/-. SOME MORE ENQUIRIES WERE MADE REGAR DING THE SALES AND PURCHASES MADE BY THE ASSESSEE AND IT WAS NOTICED T HAT ASSESSEE HAD MADE MANY ITEMS OF SALES AND PUCHASE OUTSIDE THE BOOKS. ASSESSEE FURNISHED VARIOUS EXPLANATIONS TO JUSTIFY THE FIGURES RETURNE D BY THE ASSESSEE. AFTER THESE ENQUIRIES THE TOTAL SALE OF THE ASSESSEE WERE DETERMINED AT 6 RS.1,25,47,218/- PLUS SALES IN CASE OF J.R.SOLVENT INDUSTRIES PVT. LTD. SANGRUR, AMOUNTING TO RS. 2,42,20,000/- TOTALING TO RS. 3,67,67,218/-. 6. SINCE ASSESSEE HAD MADE SALES OUTSIDE THE BOOKS, AO WORKED OUT THE PEAK INVESTMENT REQUIRED FOR THE STOCKS FOR SUC H SALES. PEAK INVESTMENT IN CASE OF M/S J.R.SOLVENT INDUSTRIES PV T. LTD. SANGRUR, WAS WORKED OUT AT RS. 63,50,000/-.SIMILARLY IN CASE OF M/S ASHOK UDYOG PVT. LTD. KUTULPUR, THE PEAK INVESTMENT WAS CALCULATED A T RS. 8,03,400/-. FURTHER PEAK INVESTMENT WAS ALSO CALCULATED IN CASE OF SALES MADE TO M/S JITENDRA COOLING TOWER ENGINEER, NEW DELHI AND M/S SHRI OM OIL EXTRACTION FOR RS. 1,53,835/- AND RS. 1,14,400/-. I N THIS BACKGROUND AN ADDITION AMOUNTING TO RS.74,21,635/- WAS MADE TO T HE INCOME OF THE ASSESSEE. 7. ON APPEAL BEFORE CIT(A), VARIOUS SUBMISSIONS WER E MADE SINCE THE ASSESSMENT WAS FRAMED UNDER SECTION 144. THE LD. CI T(A) SENT THE SUBMISSIONS TO THE AO FOR HIS REMAND REPORT. THE AO RELIED ON THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER AND POINT ED OUT THAT THERE IS NO CLAIM BY THE ASSESSEE THAT PURCHASES WERE MADE O N CREDIT BASIS AND NO EVIDENCE IS THERE FOR THE SAME. SIMILAR OBSERVATION S WERE MADE IN CASE OF OTHER PARTIES LD. CIT(A) AFTER EXAMINING THE SUBMIS SIONS CONFIRMED THE ADDITION OF RS. 63,50,000/- AND RS. 8,03,400/- IN C ASE OF J.R.SOLVENT INDUSTRIES PVT. LTD. SANGRUR, AND M/S ASHOK UDYOG P VT. LTD. KUTULPUR VARNASI. THE ADDITION IN CASE OF M/S JITENDRA COOLI NG TOWER ENGINEER AND M/S SHRI OM OIL EXTRACTION WERE DELETED. 8. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT NO EVIDENCE WAS BROUGHT ON RECORD TO SHOW THAT ASSESSEE HAD MAD E INVESTMENT PRIOR TO THE SUPPLY OF MACHINERY PARTS TO M/S M/S J.R.SOLVEN T INDUSTRIES PVT. LTD. HE THEN REFERRED TO PAGE 60-61 OF THE PAPER BOOK AN D SUBMITTED THAT PERUSAL OF THIS ACCOUNT WOULD SHOW THAT MANY TIMES THIS PARTY HAS MADE 7 ADVANCE PAYMENT TO THE ASSESSEE. HE ALSO SUBMITTED THAT ON 29/12/2004 THE OUTSTANDING AMOUNT WAS ONLY RS. 1,59,900/- AND, THEREFORE, IT WAS WRONG TO CALCULATE PEAK VALUE ON 15/02/2005 AT RS. 63,50,000 BECAUSE WITH IN A MONTH AFTER RECEIVING THE PAYMENT FROM M/ S J.R.SOLVENT INDUSTRIES PVT. LTD., PAYMENT WERE MADE TO VARIOUS SUPPLIERS AND LABOURERS ETC. THESE ARE NORMAL BUSINESS TRANSACTIO NS AND PEAK FORMULA COULD NOT BE APPLIED. AT BEST, IT CAN BE TREATED AS THE AMOUNT ON ACCOUNT OF THE EFFORTS MADE BY THE ASSESSEE. IN ANY CASE TH ERE ARE NO OTHER SOURCES OF INCOME OF THE ASSESSEE AND THEREFORE, NO PEAK CR EDIT COULD NOT BE WORKED OUT. IN THIS REGARD HE RELIED ON THE DECISIO N OF HONBLE SUPREME COURT IN CASE OF CIT VS. P.K. NOORJAHAN 237 ITR PAG E 570. 9. IN RESPECT OF PEAK CREDIT IN CASE OF M/S ASHOK U DYOG PVT. LTD., HE REFERRED TO PAGE 13 TO 15 OF THE PAPER BOOK WHICH I S COPY OF THE LETTER FILED BEFORE AO IN WHICH IT WAS CLEARLY STATED THAT SALES TO M/S ASHOK UDYOG PVT. LTD. WERE MADE ONLY FOR RS. 23,15,000/-. EVEN ORIGINAL BILLS WERE PRODUCED BEFORE AO. IT WAS POINTED OUT TO THE AO THAT BILLS SUPPLIED BY M/S ASHOK UDYOG PVT. LTD. WERE FORGED AND THE HA NDWRITING ON THE SAME WAS NOT OF THE ASSESSEE. THE BILL NOS. 51 TO 6 0 WERE PERTAINING TO ASSESSMENT YEAR 2004-05 AND ASSESSEE HAD ISSUED ONL Y 3 BILLS NUMBERING 64,70 & 74. IT WAS ALSO POINTED OUT THAT M/S ASHOK UDYOG PVT. LTD. HAD SQUARED OFF THE ACCOUNTS OF THE ASSESSEE FOR THESE FORGED SALES BY SHOWING CASH PAYMENT WHICH WAS NOT POSSIBLE TO COLLECT IN I NSTALLMENT OF RS. 20,000/- EACH FROM A DISTANCE OF 1000 KM. FROM VARA NASI TO ASSESSEES PLACE. HE SUBMITTED THAT IN CASE AO STILL SUSPECT T HESE ORIGINAL INVOICES SHOULD BE CALLED FROM M/S ASHOK UDYOG PVT. LTD. AND OPPORTUNITY TO CROSS EXAMINE SHOULD BE APPROVED. 10. ON THE OTHER HAND LD. DR STRONGLY RELIED ON THE ORDERS OF AO & CIT(A). 8 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION CAREFUL LY. AS FAR AS THE PEAK INVESTMENT OF M/S J.R.SOLVENT INDUSTRIES PVT. LTD. IS CONCERNED, THE SAME HAS BEEN WORKED OUT BY THE AO ON THE BASIS OF THE COPY OF ACCOUNT. FOR UNDERSTANDING THE OBSERVATIONS OF THE AO, WE AR E REPRODUCING THE CALCULATION CHART AS UNDER:- S.NO. DATE OF SALE / RECEIVING PAYMENTS SALE AMOUNT AMOUNT OF PAYMENT RECEIVED THROUGH BANK CHEQUES/DRAFTS BALANCE AT THE END OF DAY 1 01.04.2004 - 2,00,000 2,00,000 2 22.07.2004 - 4,50,900 6,50,900 3 01.08.2004 13,75,000 - 7,24,100 4 03.08.2004 - 4,25,000 2,99,100 5 07.08.2004 13,65,000 - 16,64,100 6 14.08.2004 14,05,000 - 30,69,100 7 18.08.2004 - 7,00,000 23,69,100 8 26.08.2004 - 37,21,000 13,51,900 9 28.08.2004 19,50,000 - 5,98,100 10 30.08.2004 12,50,000 - 18,48,100 11 08.09.2004 17,50,000 - 35,98,100 12 13.09.2004 - 9,00,000 26,98,100 13 13.09.2004 - 8,50,000 18,48,100 14 16.09.2004 2,60,000 - 21,08,100 15 20.09.2004 - 9,00,000 12,08,100 16 20.09.2004 - 8,50,000 3,58,100 17 21.09.2004 5,50,000 - 9,08,100 18 23.09.2004 11,35,000 - 20,43,100 19 25.09.2004 - 8,00,000 12,43,100 20 25.09.2004 - 9,50,000 2,93,100 21 25.09.2004 15,70,000 - 18,63,100 9 22 29.09.2004 - 8,00,000 10,63,100 23 29.09.2004 - 9,50,000 1,13,100 24 29.09.2004 6,65,000 - 7,78,100 25 03.10.2004 11,65,000 - 19,43,100 26 07.10.2004 9,60,000 - 29,03,100 27 11.10.2004 - 9,00,000 20,03,100 28 11.10.2004 - 8,50,000 11,53,100 29 14.10.2004 6,50,000 - 18,03,100 30 25.10.2004 9,70,000 - 27,73,100 31 31.10.2004 6,35,000 - 34,08,100 32 23.11.2004 - 8,50,000 25,58,100 33 23.11.2004 - 9,00,000 16,58,100 34 29.12.2004 - 9,00,000 7,58,100 35 29.12.2004 - 9,58,000 1,59,900 36 02.02.2005 14,35,000 - 12,35,100 37 03.02.2005 19,25,000 31,60,100 38 04.02.2005 9,05,000 - 40,65,100 39 08.02.2005 11,25,000 - 51,90,000 40 09.02.2005 8,15,000 - 60,05,100 41 14.02.2005 - 15,100 59,90,000 42 15.02.2005 3,60,000 - 63,50,000 43 16.03.2005 - 20,00,000 43,50,000 44 18.03.2005 - 23,00,000 20,50,000 45 23.03.2005 - 20,50,000 - 12. ABOVE CLEARLY SHOWS THAT ON 29/12/2004 , THERE WAS A DEBIT IN ACCOUNT OF THIS PARTY AMOUNTING TO RS. 159900/- AFT ER WHICH ASSESSEE SUPPLIED SIX ( 6 NOS.) ITEMS OF MACHINERY AMOUNTING TO RS. 14,35,000/- ON 02/02/2005 RS. 19,25,000/- ON 03.02.2005 RS. 9,05,000/- ON 04.02.2005 10 RS. 11,25,000/- ON 08.02.2005 RS. 8,15,000/- ON 09.02.2005 RS. 3,60,000/- ON 15.02.2005 13. ONLY PAYMENT RECEIVED AFTER THIS SUPPLY IS RS. 15,100/-, THIS CLEARLY SHOWS THE SUPPLY OF GOODS WORTH RS. 63,50,000/-. TH E ASSESSEE HAD NOT PRODUCED ANY BOOKS OF ACCOUNTS AND HAS NOT GIVEN TH E NAME OF PARTIES FROM WHOM SUCH PURCHASE WERE MADE. IN FACT, BEFORE US IT WAS CLEARLY ADMITTED THAT ASSESSEE HAS NO EVIDENCE TO SHOW TO W HOM SUCH PAYMENT WERE PAYABLE. BEFORE US, ONE OF THE ARGUMENT WAS TH AT AT BEST IT CAN BE TREATED ON ACCOUNT OF EFFORTS MADE BY THE ASSESSEE WHO IS A TECHNICALLY QUALIFIED PERSON HAVING KNOWLEDGE OF PRODUCING THES E MACHINES. IN THAT CASE SUCH ENTRIES WOULD AMOUNT TO INCOME OF THE ASS ESSEE IN THE ABSENCE OF ANY CREDIT ENTRY THIS HAS TO BE TREATED AS UNDIS CLOSED INVESTMENT FOR THE PURCHASES. 14. WE FURTHER FIND THAT IN CASE OF CIT VS SMT. P.K . NOORJAHAN WHICH WAS HEAVILY RELIED BEFORE US IS DISTINGUISHABLE. IN THAT CASE, ASSESSEE WAS A MUSLIM LADY AGED ABOUT 20 YRS. IN 1967 SHE HAD PU RCHASED SOME LAND ON WHICH THE TOTAL INVESTMENT INCLUDING THE STAMP DUTY AND REGISTRY CHARGES WERE RS. 34,628/-. IN 1968, SHE FURTHER PURCHASED L AND ON WHICH TOTAL INVESTMENT WAS RS. 25,902/-. ON ENQUIRY REGARDING S OURCE OF INCOME, EXPLANATION OF THE ASSESSEE WAS THAT THE PURCHASE W ERE MADE OUT OF THE SAVINGS FROM INCOME FROM THE PROPERTIES WHICH WERE LEFT BY HER MOTHERS FIRST HUSBAND. AO DID NOT FOUND FORCE IN EXPLANATIO N AND HE ACCEPTED SOURCE ONLY UP TO RS. 2000/- AND MADE ADDITION OF R S.32,628/- AND RS. 25,902/- ON ACCOUNT OF INCOME FROM OTHER SOURCES IN ASSESSMENT YEAR 1968-69 AND 1969-70 RESPECTIVELY. THIS ORDER WAS CO NFIRMED BY APPELLATE ASSISTANT COMMISSIONER. HOWEVER, ON APPEAL, ITAT HE LD THAT EVEN THOUGH THE EXPLANATION ABOUT THE NATURE AND SOURCES OF THE PURCHASE WAS NOT SATISFACTORY BUT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT WAS NOT 11 POSSIBLE TO EARN THE AMOUNT INVESTED IN THE PROPERT IES AND BY NO STRETCH OF IMAGINATION THE ASSESSEE COULD HAVE EARNED SUCH INC OME OR PORTION OF THE SAME DURING THE ASSESSMENT YEAR OR EVEN FOR A DECAD E. IT WAS FURTHER HELD THAT SECTION 69 ONLY CONFERRED A DISCRETION THAT IN COME TAX OFFICER TO DEAL WITH THE INVESTMENT AS INCOME OF THE ASSESSEE AND T HE PROVISION WAS NOT OF MANDATORY NATURE. ON FURTHER APPEAL BY THE REVEN UE TO HIGH COURT IT WAS HELD BY HONBLE HIGH COURT WHILE CONSIDERING TH E AGE OF THE ASSESSEE AND THE CIRCUMSTANCES IN WHICH SHE WAS PLACED, SHE COULD NOT HAVE EARNED THIS INCOME. THIS WAS CONFIRMED BY HONBLE APEX COU RT. THUS, IT IS CLEAR FROM THE ABOVE CASE THAT ASSESSEE IN THAT CASE WAS NOT IN BUSINESS. SHE WAS AGED ONLY ABOUT 20 YEARS AND IT WAS NOT POSSIBL E TO EARN THAT INCOME BY HER. 15. MOREOVER, THE ISSUE BEFORE THE HONBLE SUPREME COURT WAS REGARDING INTERPRETATION OF SECTION 69. IN THE CASE BEFORE US, FIRST OF ALL ASSESSEE IS A BUSINESSMAN. HE HAS SUPPLIED THE GOOD S TO M/S J.R. SOLVENT INDUSTRIES PVT. LTD. AND ASSESSEE HAS MISERABLY FAI LED TO SHOW ANY SOURCE FROM WHICH SUCH STOCK WAS FINANCED. THE ADDITION HA S NOT BEEN MADE UNDER SECTION 69 BUT UNDER THE NORMAL PROVISIONS OF THE INCOME RELATING TO INCOME FROM BUSINESS AND PROFESSION. SINCE NO SOURC E OF INCOME HAS BEEN SHOWN WE ARE OF THE OPINION THAT ADDITION HAS BEEN MADE CORRECTLY. HOWEVER, SINCE THIS SUPPLY WOULD INCLUDE THE ELEMEN T OF PROFIT ALSO WHICH WE HAVE ESTIMATED AT 4% LATER ON, THEREFORE, THIS A DDITION SHOULD BE MADE AFTER REDUCING THE ELEMENT OF PROFIT AT 4%. AS FAR AS THE PEAK INVESTMENT IN CASE OF M/S ASHOK UDYOG PVT. LTD. IS CONCERNED, WE FOUND FORCE IN THE SUBMISSION OF LEARNED COUNSEL FOR THE ASSESSEE BECA USE FIRSTLY WHEN INVOICES WERE PROCURED FROM M/S ASHOK UDYOG PVT. LT D. AND CONFRONTED TO THE ASSESSEE, HE HAS RAISED OBJECTION ON THE SAM E WHICH IS CLEAR FROM THE LETTER DATED 20/12/2008, COPY OF WHICH IS AVAIL ABLE AT PAGES 13 TO 15 OF THE PAPER BOOK. IF AO HAS WORKED OUT THE PEAK IN VESTMENT IN THIS CASE HE SHOULD HAVE ALLOWED THE CROSS EXAMINATION OF THE M/S ASHOK UDYOG 12 PVT. LTD. TO THE ASSESSEE. SECONDLY, IT IS NOT POSS IBLE TO COLLECT THE CASH PAYMENT FROM A FAR OFF PLACE I.E; VARANASI BY THE A SSESSEE WHICH IS BASED IN SUNAM. THIRDLY, THE ORIGINAL BILL BOOK WERE PROD UCED BEFORE THE AO WHICH SHOWED THAT SOME OF THE BILLS WERE CANCELLED AND AO HAS NOT EXAMINED THAT EVIDENCE. THEREFORE, WE ARE OF THE OP INION THAT SALES TO M/S ASHOK UDYOG PVT. LTD. WERE TO BE ACCEPTED AT RS. 23 ,15,000/- NOT AT THE AMOUNT OF RS. 42,49,600/- AS GIVEN BY M/S ASHOK UDY OG PVT. LTD. BECAUSE BILLS SHOWN BY M/S ASHOK UDYOG PVT. LTD. SEEMS TO B E FORGED. ONCE SALE OF RS. 23,15,000/- ARE ACCEPTED THEN NO PEAK INVEST MENT IS REQUIRED TO BE WORKED OUT. IN VIEW OF THE ABOVE THIS GROUND IS PARTLY ALLOWED. 16. GROUND NO. 4 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS COLLECTED CST FROM VARIOUS PARTIES BUT THE SAME HAS NOT BEEN DEPO SITED. THE DETAILS OF THE CST COLLECTED FROM THE VARIOUS PARTIES IS AS UN DER:- SR.NO. NAME OF THE PARTY BILL NO. DATE OF THE BILL AMOUNT CHARGED IN THE BILL 1. M/S NAVSUN MARKETING PVT. LTD. KOLKATA 000061 20.05.2004 540/- 2. M/S ASHOKA UDYOG PVT. PLOT NO. 19/1 VILL KUTLUPUR, RAM NAGAR, VARANASI 000063 13.08.2004 30,900/- 3. -DO- 000064 14.08.2004 30,900/- 4. -DO- 000067 30.08.2004 20,000/- 5. SH. OM OIL EXTRACTION LTD. SIRGITTI 000069 11.09.2004 165/- 6. M/S ASHOKA UDYOG PVT. LTD. PLOT NO. 19/1 VILL KUTLUPUR, RAM NAGAR, VARANASI 000070 20.09.2004 27,300/- 7. SH. OM OIL EXTRACTION LTD. 000073 16.10.2004 17,016/- 13 SIRGITTI 8. M/S ASHOKA UDYOG PVT. LTD. PLOT NO. 19/1 VILL KUTLUPUR, RAM NAGAR, VARANASI 000074 18.10.2004 34,400/- 9. -DO- 000075 24.10.2004 25,680/- 10. JITENDRA COOLING TOWER ENGINEER, SEWA DHAM PLOT NO. 36 MELAN GARDEN, SABOLI, DELHI 000076 25.10.2004 5917/- 11 SH. OM OIL EXTRACTION LTD. SIRGITTI 000077 31.10.2004 4400/- 12 -DO- 000078 02.11.2004 2534/- 13 -DO- 000079 11.07.2004 1156/- 14. -DO- 000082 09.11.2004 138/- 15. -DO- 000086 18.11.2004 88/- TOTAL 201134/- LESS: TAX DEPOSITED WITH SALES TAX DEPARTMENT AS PER RECEIPTS SUPPLIED BY THE SALES TAX DEPARTMENT 58905/- BALANCE 142229/- IN RESPONSE TO THE QUERY IT WAS SUBMITTED THAT THE SUM OF RS. 1,14,237/- WAS PAID TO THE SALES TAX DEPT. AS FAR A S OTHER ITEMS ARE CONCERNED, IT IS ONLY A DEBIT & CREDIT ENTRY WHICH CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE AO DID NOT ACCEPT THIS SUBMISSION AND ADDED THE SUM OF RS. 142229/- ON ACCOUNT OF CST WHICH WAS NOT PAID BY THE ASSESSEE. ON APPEAL, THE ADDITION WAS CONFIRMED BY LD. CIT(A). HOWEVER, HE DELETED THE ADDITION IN RESPECT OF SALE M/S SHR I OM OIL EXTRACTION AND M/S JATINDRA COLLING TOWER. 17. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT HE WAS CHALLENGING ONLY THREE ITEMS OF CST AMOUNTING TO RS . 30,900/-, 20,000/- AND RS. 34,400/- REFERRED BY THE AO AT S.NO. 3,4 AN D 8 IN RESPECT OF SALES 14 MADE TO M/S ASHOK UDYOG PVT. LTD VIDE BILL NO. 64, 67 AND 74. HE REITERATED THE ARGUMENTS MADE WHILE ARGUING THE ISS UES REGARDING PEAK INVESTMENT IN RESPECT OF M/S ASHOK UDYOG PVT. LTD. 18. ON THE OTHER HAND LD. DR STRONGLY SUPPORTED THE ORDER OF AO. 19. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT WE HAVE ALREADY ADJUDICATED THIS ISSUE PARTLY, WHILE ADJUDI CATING THE ISSUES IN RESPECT OF GROUND NO. 1 ON ACCOUNT OF PEAK INVESTME NT IN RESPECT OF M/S ASHOK UDYOG PVT. LTD. WHERE IT WAS HELD THAT SALES ONLY TO THE EXTENT OF RS. 23,15,000/- TO M/S ASHOK UDYOG PVT. LTD ARE GEN UINE AND REST OF THE SALES HAVE BEEN FABRICATED BY M/S ASHOK UDYOG PVT. LTD. THEREFORE, NO CST CAN BE SAID TO HAVE BEEN COLLECTED BY THE ASSES EE FROM PARTY AND ACCORDINGLY NO ADDITION COULD HAVE BEEN MADE FOR TH ESE AMOUNTS. THE ISSUE REGARDING OTHER ITEMS OF CST WAS NOT PRESSED BEFORE US, THEREFORE, THERE IS NO NEED TO GO INTO THE SAME EXCEPT THAT IF THE TAX IS NOT PAID SAME IS REQUIRED TO BE ADDED UNDER SECTION 43(B) OF THE ACT. IN THESE CIRCUMSTANCES WE SET ASIDE THE ORDER OF LD. CIT(A) TO THE EXTENT OF THREE ITEMS OF CST FOR RS. 30,900/-, RS. 20,000/- AND RS. 34,400/- IN RESPECT OF SALE BILL NOS. 64,67 AND 74 AND DIRECTED TO AO TO D ELETE THESE ADDITIONS. 20. GROUND NO. 6, 7, AND 8 : AFTER HEARING BOTH THE PARTIES WE FIND THAT NO BOOKS OF ACCOUNTS WERE PRODUCED DURING THE ASSES SMENT PROCEEDINGS. IT WAS MERELY STATED THAT BOOKS ARE NOT TRACEABLE BECA USE ASSESSEE HAS SHIFTED HIS OFFICE. AO NOTED THAT EVEN IN THE REVIS ED RETURN ASSESSEE DID NOT DISCLOSE THE FULL PARTICULARS AND EVEN FULL TUR NOVER WAS DISCLOSED ONLY WHEN INFORMATION CAME FORM THE INCOME TAX OFFICER, SANGRUR IN CASE OF M/S J.R.SOLVENT INDUSTRIES PVT. LTD. THEREFORE, ACC ORDING TO HIM THE TRADING RESULTS ARE NOT ACCEPTABLE. HE FURTHER OBSE RVED THAT ASSESSEE HAS DECLARED G.P. RATE OF 1.63% AND N.P. RATE OF 1.38%. HE NOTED THAT IN COMPARABLE CASE OF SHRI. BHIM SAIN PROP. MITTAL MIL L STORE, SANGRUR, G.P 15 RATE DECLARED WAS 9.04%. IN RESPONSE TO THE QUERY R EGARDING APPLICATION OF THIS G.P. RATE, IT WAS SUBMITTED THAT M/S MITTAL MILL STORE, SANGRUR, WAS A RETAILER AND MUST HAVE SOLD GOODS TO THOUSAND S OF CUSTOMERS AND, THEREFORE, THE PROFIT CANNOT BE COMPARED. HOWEVER, SHE DID NOT ACCEPT THIS CONTENTION AND APPLIED THE G.P. RATE OF 9.04%. ON A PPEAL, THE ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT(A). 21. BEFORE US, LD. COUNSEL FOR THE ASSESSEE REITERA TED THE SUBMISSIONS MADE BEFORE AO. HE FURTHER SUBMITTED THAT ASSESSEE IS DEALING IN MACHINERY WHEREAS M/S MITTAL MILL STORE WAS A HARDW ARE STORE AND, THEREFORE THE SAME CANNOT BE COMPARED. 22. ON THE OTHER HAND LD. DR STRONGLY RELIED ON THE ORDER OF AO AND CIT(A). 23. AFTER CONSIDERING THE RIVAL SUBMISSION, WE FIND SOME FORCE IN THIS CONTENTION OF LD. COUNSEL FOR THE ASSESSEE. HOWEVER , IT HAS TO BE NOTED THAT ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS. IN ITIALLY ASSESSEE HAD DECLARED TURNOVER OF RS. 93.00 LACS ONLY. EVEN IN T HE REVISED RETURN TOTAL TURNOVER WAS SHOWN AT RS. 2,70,75,916/-. IT WAS ONL Y WHEN THE AO GOT INFORMATION FROM THE ASSESSING OFFICER OF M/S J.R.S OLVENT INDUSTRIES PVT. LTD THAT ASSESSEE FINALLY DECLARED TURN OVER OF RS. 3,36,93,666/-. THESE FACTS CLEARLY SHOWS THAT RESULTS ARE NOT RELIABLE. AT THE SAME TIME IT MAY NOT BE POSSIBLE TO COMPARE THE ASSESSES CASE WITH THE RETAIL HARDWARE STORE. 24. THEREFORE, CONSIDERING THE TOTAL FACTS OF THE C ASE, WE ARE OF THE OPINION THAT ENDS OF JUSTICE WOULD MEET IF N.P. RAT E OF 4% IS APPLIED. WE ARE CONSIDERING ONLY N.P.RATE BCAUSE WE HAVE ALSO O BSERVED THAT ASSESSEES, TRADING RESULTS AND OTHER DETAILS ARE N OT RELIABLE. HERE, WE WOULD ALSO LIKE TO CLARIFY THAT THE N.P.RATE OF 4 % SHOULD BE APPLIED ON 16 THE TOTAL TURNOVER AS REDUCED BY THE SALES WHICH HA S BEEN DELETED BY LD. CIT(A) AS WELL AS DELETION OF SALE BY US IN RESPECT OF M/S ASHOK UDYOG PVT. LTD. 25. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02/09/20 13 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 02 ND SEPTEMBER, 2013 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR ITAT, CHANDIGARH