Shri Dwarka Prasad Tayal , Sendhwa V. The ITO , Khargon

ITA 284/Ind/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5043 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: S N AGRAWAL
• Keywords: Unexplained investment; Search and seizure; Peak credit; Revised return; Documents seized; Set aside
• Section: 80C; 143(3); 133(6); 195; 143(2); 142(2A); 43; 13; 153; 145(3); 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE KUL BHARAT, JUDICIAL MEMBER AND HONBLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.284/IND/2018 ASSESSMENT YEAR 2011-12 SHRI DWARKA PRASAD TAYAL, 4, JAWAHAR GANJ, SENDHWA (M.P) PAN : AAOPT4070B : APPELLANT V/S INCOME TAX OFFICER SENDHWA (M.P) : RESPONDENT ITA NO.334/IND/2018 ASSESSMENT YEAR 2011-12 INCOME TAX OFFICER SENDHWA (M.P) : REVENUE V/S SHRI DWARKA PRASAD TAYAL, 4, JAWAHAR GANJ, SENDHWA (M.P) PAN : AAOPT4070B : RESPONDEN T REVENUE BY S MT. ASHIMA GUPTA ASSESSEE BY SHRI S.N. AGRAWAL, CA DATE OF HEARING 09.09 .2020 DATE OF PRONOUNCEMENT 13 . 1 0 . 2020 DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 2 O R D E R PER BENCH THE ABOVE CAPTIONED APPEALS FILED AT THE INSTANCES OF THE ASSESSEE AND REVENUE PERTAINING TO ASSESSMENT YEAR 2011-12 ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME TAX (APPEALS)-II (IN SHORT LD.CIT(A)], INDORE DATED 1 5.01.2018 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME T AX ACT 1961(IN SHORT THE ACT) DATED 07.07.2014 FRAMED BY ITO, KH ARGONE. 2. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF COTTON TRADIN G AND GINNING AND RUNNING TWO PROPRIETORSHIP CONCERNS NAMELY M/S MONIKA TRADING CO & M/S WHITE GOLD ENTERPRISES. RETURN OF INCOME WAS FILED ON 20.09.2011 FOR ASSESSMENT YEAR 2011-12 DEC LARING INCOME OF RS.5,80,310/-. THE RETURN WAS PROCESSED U/S 143( 1). THIS CASE WAS MANUALLY SELECTED FOR SCRUTINY AND NOTICE U/S 1 43(2) DATED 24.09.2012 WAS SERVED UPON THE ASSESSEE FOLLOWED BY QUESTIONNAIRE U/S 142(1)(II) DATED 15.1.2013. THE APPELLANT ASSESSEE MAINTAINED 19 [NINETEEN] BANK ACCOUNTS, OUT OF THAT 14 [FOURTEEN] BANK ACCOUNTS WERE INCORPORATED IN THE R EGULAR BOOKS OF ACCOUNT. HOWEVER, FOLLOWING FIVE BANK ACCO UNTS DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 3 REMAINS TO BE INCORPORATED IN THE REGULAR BOOKS OF ACCOUNT:- S.NO NAME THE TYPE OF A/ C IN THE NAME OF A/C NUMBER BANK A/C 1 HDFC BANK CURRENT M/S WHITE GOLD ENTERPRISES 2572560004723 2 UNION BANK OF CURRENT M/S WHITE GOLD ENTERPRISES 582601010050069 INDIA 3 UNION BANK OF CURRENT M/S MONICA TRADING CO 582601010050068 INDIA 4 BULDHANA URBAN LOAN SHRI DWARKA PD TAYAL 181/ 2005 TO 1210 CO - OP BANK LTD A/C 5 BULDHANA URBAN CIA SHRI DWARKA PD TAYAL 21/180 CO - OP BANK LTD 3. THE APPELLANT ASSESSEE OFFERED ADDITIONAL INCOME TO THE TUNE OF RS 27,32,000/- [1.33% OF RS 20,53,98,366/-] BEFORE THE INVESTIGATION WING ON THE TOTAL UNRECORDED TURN OVER OF RS 20,53,98,366/- AS EXECUTED THROUGH THE ABOVE BAN K ACCOUNTS. THAT DISCLOSED/UNDISCLOSED TURNOVER AS EX ECUTED THROUGH ALL THE BANK ACCOUNTS OF THE ASSESSEE FIRM ARE AS UNDER:- DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 4 S. NO NAME OF THE FIRM DISCLOSED (RS) UNDISCLOSED (RS) TOTAL TURNOVER (RS.) 1 M/S MONIKA TRADING CO 5,77,24,480 5,44,64,764 11,21,89,244 2 M/S WHITE GOLD 17,24,13,447 15,09,34,202 32,33,47,649 ENTERPRISES 23,01,37,927 20,53,98 ,966 43,55,36,893 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSE E FURNISHED COPY OF ADDITIONAL PROFIT & LOSS ACCOUNT AND BALANCE SHEET OF BOTH THE SOLE PROPRIETORSHIP CONCE RNS AND FURNISHED REVISED COMPUTATION OF INCOME SHOWING INC OME AT RS.33,08,911/- (ORIGINAL INCOME RS.5,80,301 + IN COME OF RS.27,28,601/- OFFERED ON UNDISCLOSED TURNOVER O F RS. 20,53,98,366/- @ 1.33%) 5. THE ASSESSING OFFICER WHILE PASSING THE ASSESSME NT ORDER COMPUED THE FOLLOWING AMOUNT AS THE TOTAL INC OME OF THE ASSESSEE:- S .NO PARTICULARS AMOUNT (RS.) 1 NET PROFIT AS ESTIMATED ON TOTAL TURNOVER @5% ON RS.43,55,36,893/- 2,17,76,845 2 ADDITION ON ACCOUNT OF INVESTMENT @12.50% OF UNRECORDED TURNOVER OF RS.20,53,98,966/- 2,56,74,870 DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 5 GROSS TOTAL INCOME 4,74,51,715 LESS: DED UCTION U/S 80C 1,00,000 TOTAL TAXABLE INCOME 4,73,51,715 6. THE APPELLANT ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) VIDE HIS ORDE R DATED 15.01.2018 HAS ALLOWED THE FOLLOWING RELIEFS:- S.NO PARTICULARS INCOME AS RETURNED (RS.) ADDITION MADE BY AO (RS.) RELIEF ALLOWED BY THE CIT(A) ADDITION AS MAINTAINED (RS.) INCOME FINALLY ASSESSED (RS.). 1 NET PROFIT 33.08.911 1,94,67,934 1,84,21,477 10,4 6,457 43,55,368 2 ON ACCOUNT OF INVESTMENT IN UNDISCLOSED BUSINESS 2,56,74,870 2,05,08,966 51,65,904 51,65,904 33,08,911 4,51,42,804 3,89,30,443 62,12,361 95,21 ,272 7. THE APPELLANT ASSESSEE AND DEPARTMENT BOTH HAVE PREFERRED AN APPEAL BEFORE THE HON'BLE BENCH. THE GROUNDS OF APPEAL AS TAKEN BY THE APPELLANT ASSESSE E AND ALSO BY THE DEPARTMENT ARE AS UNDER:- [A] GROUNDS OF APPEAL AS TAKEN BY THE APPELLANT ASSESSEE 1.1] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT[A] ERRED IN APPROVING THE REFERENCE TO THE S PECIAL AUDIT AS CORRECT WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSION MADE BEFORE HIM. DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 6 1.2] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD ASSESSING OFFICER FAILED TO BRING ON RECORDS ANY COMPLEXITY IN THE BOOKS OF ACCOUNT OF THE APPELLANT PRIOR TO REFE RENCE TO THE SPECIAL AUDIT U / S 142 [2A] OF THE ACT. 1.3] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT[A] ERRED IN APPROVING THE ASSESSMENT ORDER A S PASSED DURING THE EXTENDED TIME PERIOD AS ALLOWED AS PER P ROVISO TO SECTION 142[2C] OF THE ACT AS VALID. 2] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD CIT[A] ERRED IN ESTIMATING THE NET PROFIT OF THE AP PELLANT AT RS 43,55,368/ - AS AGAINST NET PROFIT AS DECLARED BY T HE APPELLANT WAS OF RS 34,08,911/-. 3] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD CIT[A] ERRED IN MAINTAINING THE ADDITION ON ACCOUNT OF INVESTMENT IN UNRECORDED BUSINESS TO THE TUNE OF RS 51,65,904/- EVEN WHEN SUFFICIENT AMOUNT OF STOCK AN D CASH WAS LYING IN THE REGULAR BOOKS OF ACCOUNT OF THE APPELLANT. (B) GROUNDS OF APPEAL AS TAKEN BY THE DEPARTMENT 1] THE LD CIT(A) HAS ERRED IN DIRECTING THE AO TO E STIMATE THE PROFIT OF BUSINESS @1% OF TOTAL TURNOVER AS AGAINST 5% OF TOTAL TURNO VER APPLIED BY THE AO. IN VIEW OF THE HONBLE ITAT, INDORE BENCH DECISION IN THE CASE OF M/S AMAR AGRAWAL ( ITA NO 611/IND/ 2012 ) WHEREIN THE HON'BLE ITAT DIRECTED TO APPLY NET PROFIT @5% O F TOTAL TURNOVER IN SUCH CASE. DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 7 2] THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDI TION OF RS.2,56,74,870/- MADE ON ACCOUNT OF PROFIT OF TURNO VER SHOWN IN UNDISCLOSED BANK ACCOUNTS TO RS.51,65,904/- BEING T HE PEAK UNRECORDED TURNOVER, GROSSLY IGNORING THE FOLLOWING PECULIAR FACTS:- A. PURCHASES MADE FROM M/S RAGHU COTTON CORPORATION , SUTALA AND ANAND PRASAD DALIYA, WARANGAL WERE ITSELF TOTAL LING TO RS. 1.07 CR. (PAGE 7 PARA (C) & (D) OF CIT(A) ORDER . B. COTTON PURCHASE IS A SEASONAL ACTIVITY AND CANNO T BE SPREAD OVER 300 DAYS AS TAKEN BY LD. CIT(A). C. THE FACT OF DOING UNACCOUNTED BUSINESS WAS ACCEP TED BY ASSESSEE IN THE INQUIRY PROCEEDINGS. D. SET OFF OF FUNDS & STOCKS IN THE BOOKS CANNOT BE GIVEN WHILE DETERMINING UNACCOUNTED INVESTMENT OUTSIDE BOOKS OF ACCOUNTS. 8. APROPOS GROUND NO.1 RAISED IN ASSESSEES APPEAL NO.284/1/2018 THROUGH WHICH THE ASSESSEES GRIEVANC E IS THAT THE LD. CIT(A) ERRED IN APPROVING THE ASSESSME NT ORDER PASSED DURING THE EXTENDED TIME PERIOD AS ALLOWED A S PER PROVISO TO SECTION 142(2C) OF THE ACT. IN SUPPORT O F THIS GROUND LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE FOLLOWING WRITTEN SUBMISSION:- B. DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 8 3] GROUND NO1 OF THE APPELLANT ASSESSEE : 3.1] THE APPELLANT ASSESSEE IN THIS GROUND OF APPEA L HAS CHALLENGED THE REFERENCE TO THE SPECIAL AUDIT U/S 142[2A] OF THE I NCOME TAX ACT AND ALSO CHALLENGED THAT THE ASSESSMENT ORDER AS PASSED BY T HE ASSESSING OFFICER WAS BARRED BY LIMITATION OF TIME. 3.2]THE DATE OF EVENTS IN THE CASE OF THE ABOVE ASS ESSEE IS AS UNDER:- S.NO PARTICULARS DATE/ EVENTS 1 DATE OF FILING OF THE RETURN OF TOTAL INCOME 20 - 09 - 2011 2 NOTICE U/S 143[2] OF THE ACT WAS ISSUED ON 24 - 09 - 2012 3 TIME TILL W HICH THE ASSESSMENT ORDER CAN BE P[ASSED U/S 153 OF THE ACT 31 - 03 - 2014 4.1 LETTER DT 23 - 12 - 2013 BEING PROPOSAL FOR SPECIAL AUDIT U/S 142[2A] SERVED ON THE COUNSEL OF THE ASSESSEE 23 - 12 - 2013 4.2 PROPOSAL SENT TO GET APPROVAL FOR SPECIAL AUDIT FRO M THE HO NBLE CHIEF COMMISSIONER OF INCOME TAX , INDORE 06 - 01 - 2014 4.3 THE ASSESSING OFFICER HAS FILED HIS OBJECTION FOR INVOKING THE PROVISION OF SECTION 142[2A] OF THE INCOME TAX ACT TAKEN ON RECORD ON 16 - 01 - 2014 4.4 AFTER VERIFYING THE BOOKS , FINAL REPORT WAS SENT TO THE HONBLE CCIT, INDORE RECOMMENDING THE CASE OF THE ASSESSEE FOR SPECIAL AUDIT U/S 142[2A] OF THE ACT 28 - 01 - 2014 4.5 APPROVAL WAS RECEIVED FROM THE HONBLE COMMISSIONER OF INCOME TAX -2, INDORE VIDE LETTER NO CIT -2/INDORE/ TECH/ SPL. AUDIT/ 13-14/ 6088 DT 18/02/2014 & 20/02/2014 21 - 02 - 2014 DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 9 4.6.1 THE ASSESSEE AGAIN OBJECTED THE REFERENCE TO THE SPECIAL AUDIT ON 4.6.2 THE OBJECTION AS RAISED BY THE ASSESSEE WAS REJECTE D BY THE ASSESSING OFFICER VIDE LETTER F.NO ITO/ KGN/2013 -14/ 4238 DT 26-02-2014 26 - 02 - 2014 4.7 THE ASSESSING OFFICER DIRECTED THE ASSESSEE TO GET HIS ACCOUNTS AUDITED FROM M/S MAHESH C SOLANKI & CO, CHARTERED ACCOUNTANTS VIDE LETTER F.NO ITO/ KGN/2013 -14/4252 DT 26-02-2014 DT. 26 - 02 - 2014 4.8 THE TIME ALLOWED TO THE APECIAL AUDITOR TO SUBMIT HIS REPORT BY 15 - 04 - 2014 4.9 THE SPECIAL AUDITOR REQUESTED TO EXTEND TIME FOR COMPLETING THE SPECIAL AUDIT LETTER IS RECEIVED BY THE ASSESSING OFFICER ON 23 - 04 - 2014 4.10 ON THE REQUEST OF THE SPECIAL AUDITOR, THE TIME FOR COMPLETING THE SPECIAL AUDIT WAS EXTENDED UPTO 15 - 05 - 2014 4.11 THE SPEICAL AUDIT REPORT DT 15 - 05 - 2014 BUT THE SAME WAS SUBMITTED BY THE SPECIAL AUDITOR ON 23 - 05 - 2014 4.12 THE ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER ON 07 - 07 - 2014 3.3] COPY OF ORDER SHEET ENTRY AS NOTED BY THE ASSE SSING OFFICER ARE ATTACHED ON PAGE NOS 187 TO 195 OF THE COMPILATION. ON PERUSAL OF THE SAME, IT IS EVIDENT THAT, TIME ALLOWED TO SUBMIT TH E REPORT WAS TILL 15-04- 2014. THE EXTENSION WAS SOUGHT BY THE AUDITOR ON 23 -04-2014 WHICH WAS NOT CORRECT. SINCE, THE EXTENSION IN ANY CASE B E SOUGHT ON OR BEFORE 15-04-2014. AFTER EXPIRY OF THE TIME AS ALLOWED TO FURNIHS THE REPOERT, EXTENSION CANNOT BE GRANTED. 3.4] THE EXTENSION OF TIME AS ALLOWED ON 23-04-2014 TO TILL 15-05-2014 WAS NOT CORRECT. SINCE, THE DUE DATE FOR FILING OF THE REPORT EXPIRED ON 15- DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 10 04-2014. THUS, LIMITATION FOR THE PASSING OF THE AS SESSMENT ORDER START FROM 15-04-2014 WHICH WAS EXPIRED ON 14-06-2014 BUT THE ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER ON 07-07- 2014 WHICH WAS BARRED BY LIMITATION OF TIME. THE ORDER SO PASSED O N 07-07-2014 THEREFORE REQURIES TO BE QUASHED AS BARRED BY LIMIT AITON OF TIME. 9. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED AND RELIED TO THE FOLLOWING FINDING OF LD. C IT(A:-. 4.1] IN GROUND NOS 1 AND 3 OF THE APPEAL, THE APPE LLANT HAS CHALLENGED THAT THE ASSESSMENT ORDER AS PASSED WAS BARRED BY LIMITATION OF TIME. THE APPELLANT HAD FILED HIS RE TURN OF TOTAL INCOME ON 20.09.2011, NOTICE U/S 143(2) WAS ISSUED ON 24.09.2012 AND THEREFORE THE ASSESSMENT ORDER WAS T O BE PASSED BY THE ASSESSING OFFICER TILL 31-03-20 14. T HE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDING PRODUCED REVISED BOOKS OF ACCOUNT AFTER INCORPORATING THE BANK ACCOU NTS WHICH REMAINED TO BE INCLUDED AT THE TIME OF FILING OF TH E ORIGINAL RETURN OF TOTAL INCOME. CONSIDERING THE COMPLEXITY IN THE ACCOUNTS AS PREPARED BY THE APPELLANT AND PRODUCED DURING THE C OURSE OF ASSESSMENT PROCEEDING, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE FOR SPECIAL AUDIT AND OBJECTION FROM THE ASS ESSEE WAS ALSO OBTAINED, AND AFTER CONSIDERING THE OBJECTION OF TH E ASSESSEE PROPOSAL WAS SEND TO THE PR CLT-2, LNDORE AND APPRO VAL WAS OBTAINED ON 21-02- 2014. ON RECEIPT OF THE APPROVAL FROM THE PR CIT-2, LNDORE M/S MAHESH C SOLANKI & CO, CHARTERED ACCOUNTANTS OF INDORE WAS APPOINTED FOR CONDUCTING OF THE SPECIAL AUDIT AND TIME TO FURNISHING OF AUDIT REPOR T WAS ALLOWED TILL 26-02-2014. HOWEVER, ON RECEIPT OF REQUEST FOR MORE TIME FOR CONDUCTING OF SPECIAL AUDIT, THE SAME WAS EXTENDED FROM TIME TO TIME TO TILL 15-05-2014 AND ASSESSMENT ORDER WAS PA SSED ON 07- DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 11 07-2014 I.E. WITHIN SIXTY DAYS FROM THE DATE OF REC EIPT OF THE AUDIT REPORT FROM THE SPECIAL AUDITOR. THUS, THE OR DER AS PASSED BY THE ASSESSING OFFICER WAS WITHIN THE TIME AS ALL OWED U IS 153 OF THE INCOME TAX ACT. THUS, THESE GROUNDS OF APPEA L AS TAKEN BY THE APPELLANT ARE HEREBY DISMISSED . 4.2] IN GROUND NO 4 OF THE APPEAL, THE APPELLANT HAS CHALLENGED THE REJECTION OF THE BOOKS OF ACCOUNT BY INVOKING T HE PROVISION OF SECTION 145[3] OF THE ACT. IT IS AN UNDISPUTED FACT THAT OUT OF 19 [NINETEEN] BANK ACCOUNTS OF THE APPELLANT, ONLY 14 [ FOURTEEN] BANK ACCOUNTS WERE INCORPORATED IN THE BOOKS OF ACC OUNT AND FIVE BANK ACCOUNTS REMAINS TO BE INCORPORATED. THE APPELLANT HIMSELF DURING THE COURSE OF ASSESSMENT PROCEEDING PRODUCED REVISED BOOKS OF ACCOUNTS WHEREIN ALL OTHER BANK AC COUNTS WERE DULY INCORPORATED, THE BOOKS OF ACCOUNT SO PRODUCED WERE ALSO REFERRED FOR SPECIAL AUDIT, HENCE, BOOKS OF ACCOUNT AS PREPARED AT THE TIME OF FILING OF THE RETURN OF TOTAL INCOME WE RE NOT RELIABLE AND THE BOOKS OF ACCOUNT AS PRODUCED DURING THE COU RSE OF ASSESSMENT PROCEEDING WERE ALSO NOT RELIABLE. THE A SSESSING OFFICER WAS THEREFORE JUSTIFIED IN REJECTING THE BO OKS OF ACCOUNT BY INVOKING THE PROVISION OF SECTION 145[3] OF THE INC OME TAX ACT. THUS, THIS GROUND OF APPEAL IS ALSO DISMISSED. 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE FIN DINGS OF LD. CIT(A) AS WELL AS WRITTEN SUBMISSION FILED BY THE A SSESSEE. THROUGH GROUND NO.1 ASSESSEE HAS CHALLENGED THE FINDING OF LD. CIT(A) APPROVING THE REFERENCE TO SPECIAL AUDIT U/S 142(2A ) OF THE ACT AND DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 12 ALSO APPROVING THE ASSESSMENT ORDER PASSED DURING T HE EXTENDED TIME PERIOD AS ALLOWED AS PER PROVISO TO SECTION 14 2(4C) OF THE ACT. 11. WE OBSERVE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. A.O LOOKING TO THE COMPLEXITIES OF THE CASE COU PLED WITH UNACCOUNTED ENTRIES APPEARING IN 5 UNDISCLOSED BANK ACCOUNTS SUBMITTED A PROPOSAL TO THE LD. CCIT, INDORE FOR GR ANTING PERMISSION FOR REFERRING THE ASSESSEES BOOKS OF AC COUNTS AND UNACCOUNTED BANK ACCOUNTS FOR SPECIAL AUDIT U/S 142 (2A) OF THE ACT. NECESSARY APPROVAL WAS RECEIVED ON 21.2.2014. OBJECTIONS OF THE ASSESSEE WERE PLACED ON RECORD AND WERE REJECTE D ON 26.02.2014 AND ON THE SAME DATE LD. A.O DIRECTED TH E ASSESSEE TO GET HIS ACCOUNTS AUDITED FROM THE AUDITOR NAMELY M /S MAHESH C SOLANKI & CO, CHARTERED ACCOUNTANT. AS PER THE ORD ER OF THE LD. A.O SPECIAL AUDITOR WAS TO SUBMIT THE REPORT LATEST BY 15.04.2014. FROM THIS POINT ONWARDS THE CONTROVERSY BEGAN. REC ORDS SHOWS THAT ON 23.04.2014 REQUEST WAS MADE BY THE SPECIAL AUDITOR TO LD. A.O FOR EXTENDING TIME LIMIT WHICH WAS ACCEPTED AND TIME WAS EXTENDED TO 15.05.2014. THROUGH A LETTER DATED 15. 05.2014 ALONG WITH THE AUDIT REPORT U/S 142(2A) OF THE ACT DATED 15.05.2014 WAS DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 13 SUBMITTED WITH THE INCOME TAX DEPARTMENT. THE RECE IPT BY THE DEPARTMENT IS SHOWN AS 23.05.2014, COPY OF THE RECE IPT IS PLACED AT PAGE 97 OF THE PAPER BOOK. THE ASSESSMENT U/S 143( 3) OF THE ACT WAS COMPLETED ON 07.07.2014. IN THE LIGHT OF ABOVE FACTS LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT FIRSTLY THE SPECIAL AUDITOR DID NOT APPLY FOR EXTENTION OF TIME FOR SUB MITTING THE REPORT BEFORE 15.4.2014. SECONDLY THE TIME WAS EXTENDED T O 15.05.2014 AND REPORT WAS SUBMITTED ON 23.05.2014 WHICH WAS DE LAYED. MAJOR EMPHASIS OF THE LD. COUNSEL FOR THE ASSESSEE WAS TH AT FIRST DUE DATE ALLOWED BY LD. A.O TO THE SPECIAL AUDITOR I.E. 15.0 4.2014 WAS IMPORTANT. SINCE TILL THIS DATE NO EXTENSION WAS A PPLIED THE ASSESSMENT OUGHT TO HAVE BEEN COMPLETED LATEST BY 1 4.06.2014 I.E. WITHIN TWO MONTHS FROM 15.04.2014. SINCE THE LIMIT ATION FOR PASSING THE ORDER WAS EXPIRED ON 14.06.2014 THE IMP UGNED ASSESSMENT ORDER DATED 07.07.2014 IS BARRED BY LIMI TATION. 12. FOR EXAMINING THIS ASPECT WE WILL FIRST GO THRO UGH THE RELEVANT PROVISIONS WHICH IN THIS CASE ARE SECTION 142(2A), 142(2C) AND PROVISO TO SECTION 142(2C) AND THE SAME ARE REPRODU CED BELOW:- DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 14 SECTION 142(2A) IF, AT ANY STAGE OF THE PROCEEDINGS BEFORE HIM, THE ASSESSING OFFICER, HAVING REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE AND THE INTERESTS OF THE REVENUE, I S OF THE OPINION THAT IT IS NECESSARY SO TO DO, HE MAY, WITH THE PRE VIOUS APPROVAL OF THE CHIEF COMMISSIONER OR COMMISSIONER], DIRECT THE AS SESSEE TO GET THE ACCOUNTS AUDITED BY AN ACCOUNTANT AS DEFINE D IN THE EXPLANATION BELOW SUB- SECTION (2) OF SECTION 288, NOMINATED BY THE CHIEF COMMISSIONER OR COMMISSIONER] IN THIS BEHALF AND TO FURNISH A REPORT OF SUCH AUDIT IN THE PRESCRIBED FO RM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED AND SUCH OTHER PARTICULARS AS THE ASSESSING] OFFICER MAY REQUIRE. SECTION 142(2C) EVERY REPORT UNDER SUB- SECTION (2A) SHALL BE FURNI SHED BY THE ASSESSEE TO THE ASSESSING OFFICER WITHIN SUCH PERIOD AS MAY BE SPECIFIED BY THE ASSESSING OFFICER: PROVIDED THAT THE ASSESSING OFFICER MAY, ON AN APPLICATION MADE IN THIS BEHALF BY THE ASSESSEE AND FOR ANY GOOD AND SUFFICIENT REASON, EXTEND THE SAID PERIOD BY SUCH FURTHER PERI OD OR PERIODS AS HE THINKS FIT; SO, HOWEVER, THAT THE AGGREGATE OF T HE PERIOD ORIGINALLY FIXED AND THE PERIOD OR PERIODS SO EXTENDED SHALL N OT, IN ANY CASE, EXCEED ONE HUNDRED AND EIGHTY DAYS FROM THE DATE ON WHICH THE DIRECTION UNDER SUB- SECTION (2A) IS RECEIVED BY TH E ASSESSEE. DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 15 13. NOW AFTER GOING THROUGH THE ABOVE SECTION, AS F AR AS SECTION 142(2A) IS CONCERNED THERE IS NO DISPUTE AT THE END OF LD. COUNSEL FOR THE ASSESSEE. THE ISSUE IS CONFINED TO THE PRO VISION OF PROVISO OF SECTION 142(2C) OF THE ACT WHICH REFERS TO THE SUBM ISSION OF REPORT WITHIN SUCH PERIOD AS MAY SPECIFIED BY THE LD. A.O. ON GOING THROUGH THE PROVISO OF SECTION 142(2C) OF THE ACT W E OBSERVE THAT THE TIME FOR FURNISHING THE REPORT COULD BE EXTENDED NO T EXCEEDING 180 DAYS FROM THE DATE ON WHICH THE DIRECTIONS U/S 142( 2A) OF THE ACT IS RECEIVED BY THE ASSESSEE. EXTENSION CAN BE EITHER SUO-MOTO BY THE LD. A.O OR ON AN APPLICATION MADE IN THIS BEHALF BY THE ASSESSEE QUOTING GOOD AND SUFFICIENT REASONS. IN THE PROVISO THERE IS NO MENTION THAT WHETHER THE SPECIAL AUDITOR CAN APPROA CH FOR EXTENSION OF TIME LIMIT TO SUBMIT THE REPORT. IN O UR VIEW THE POWER IS VESTED WITH THE LD. A.O WHICH EITHER ON THE APPLICA TION OF THE ASSESSEE OR SUO-MOTO (EMPHASIS APPLIED) CAN EXTEND THE TIME PERIOD UP TO 180 DAYS. IN THE INSTANT CASE THE ASSESSEE H AS NOT APPROACHED FOR EXTENSION OF TIME PERIOD. IT WAS ON LY BETWEEN THE LD. A.O AND THE SPECIAL AUDITOR THAT THERE WAS A COMMUN ICATION OF EXTENSION OF TIME PERIOD. IN OUR CONSIDERED VIEW LD . A.O WHO IS HAVING SUFFICIENT POWERS UNDER PROVISO TO SECTION 1 42(2C) OF THE ACT DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 16 TO SUO-MOTO EXTEND THE PERIOD NOT EXCEEDING 180 DAYS FROM THE DATE OF ISSUE OF ORDER U/S 142(2A) OF THE ACT. LD. A.O H AS ACTED WELL WITHIN HIS POWER AND EXTENDED THE TIME PERIOD AND S UBSEQUENTLY ACCEPTED THE SPECIAL AUDIT REPORT DATED 23.05.2014 AND FURTHER COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT WITH IN TWO MONTHS FROM THE DATE OF RECEIPT OF SPECIAL AUDIT REPORT. WE THEREFORE FIND NO REASON TO INTERFERE IN THE FINDINGS OF LD. CIT( A) AND FIND NO MERIT IN GROUND NO.1 RAISED BY THE ASSESSEE. ACCORDINGLY GROUND NO.1 OF ASSESSEES APPEAL IS DISMISSED. 14. NOW WE TAKE UP GROUND NO.2 RAISED BY THE ASSESS EE AND GROUND NO.1 RAISED BY THE REVENUE. 15. THE ASSESSEE HAS CHALLENGED THE FINDING OF LD. CIT(A) WHO HAS ESTIMATED THE NET PROFIT OF THE ASSESSEE AT RS.43,5 5,368/- AS AGAINST RS.34,08,911/- DECLARED BY THE ASSESSEE. ON THE OTHER HAND REVENUE HAS CHALLENGED THE RELIEF GIVEN BY LD. CIT(A) OF HAVING APPLIED 1% OF NET PROFIT RATE AS AGAINST 5% NET PROFIT RATE APPLIED BY LD. A.O ON TOTAL TURNOVER. WITH REGARD TO THIS ISSUE OF APPLICATION OF NET PROFIT RATE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE FOLLOWING WRITTEN SUBMISSIONS:- DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 17 1.1] THE APPELLANT HAD FILED HIS ORIGINAL RETURN OF TOTAL INCOME ON 20-09- 2011 DECLARING TOTAL INCOME AT RS 5,80,310/-. 1.2] THE NET PROFIT AS DECLARED BY THE APPELLANT AS SESSEE IN HIS BOTH THE FIRMS ARE AS UNDER:- S.NO PARTICULARS MONIKA TRADIN G CO [RS] WHITE GOLD ENTERPRISES [RS] 1 SALES 5,77,24,480 17,24,13,447 2.1 NET PROFIT 1,66,660 5,13,645 2.2 % OF NET PROFIT 0.29% 0.29% 1.3] THE APPELLANT ASSESSEE DECLARED NET PROFIT ON THE AMOUNT OF UNRECORDED TOTAL TURNOVER BY APPLYING THE NET PROFI T RATE AT 1.33%. THE SAME IS CALCULATED AS UNDER:- S.NO. PARTICULARS MONIKA TRADING CO [RS] WHITE GOLD ENTERPRISES[RS TOTAL [RS] 1 SALES AS DISCLOSED 5,77,24,480 17,24,13,447 23,01,37,297 2 NET PROFIT AS DISCLOSED IN THE REGULAR BOOKS OF ACCOUNT 1,66,660 5,13,645 680,305 ADD INTEREST AS DEBITED IN THE P & L A/C PAID TO BANK 27,157 3,72,485 3,99,642 OTHERS 1,52,720 18,22,806 [80% OF RS 19,75,526 DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 18 2278508/ - ] % OF NET PROFIT 1.33% % OF NET PROFIT APPLIED 1.33% 1.4] THE APPELLANT ASSESSEE HIMSELF NOT CLAIMED DED UCTION IN RESPECT OF INTEREST PAID TO BANK AND PART DEDUCITON IN RESPECT OF INTEREST PAID TO OTHERS WHILE CALCULATING THE NET PROFIT IN RESPECT OF UNRECORDED SALES AS EXECUTED WITH BANK ACCOUNTS WHICH REMAINS TO BE INC ORPORATED IN THE REGULAR BOOKS OF ACCOUNT. 1.5] THE NET PROFIT AS SHOWN BY THE APPELLANT ASSES SEE IN RESPECT OF DISCLOSED AND UNDISCLOSED SOURCE IS AS UNDER:- S.NO. PARTICULARS MONIKA TRADING CO (RS.) WHITE GOLD ENTERPRISES (RS.) TOTAL DISCLOSED UNDISCLOSED DISCLOSED UNDISCLOSED 1 SALES 5,77,24,480 5,44,64,764 17,24,13,447 150934202 435536893 2.1 NET PROFIT 1,66,660 7,24,381 5,13,645 20,04,225 34,08,911 2.2 % OF NET PROFIT 0.29% 1.33% 0.79% 3.1 CONSOLIDATE TOTAL TURNOVER 11,21,89,244 32,33,47,649 3.1 CONSOLIDATE TOTAL TURNOVER 3.2 % OF CONSOLIDATED NET PROFIT 0.79% 3.2 % OF CONSOLIDATED NET PROFIT 0.79% 1.6] THE ASSESSING OFFICER APPLIED THE RATE OF NET PROFIT AT 5% ON THE AMOUNT OF TOTAL TURNOVER WHICH INCLUDES BOTH DISCLOSED AND UN DISCLOSED TURNOVER. HOWEVER, THE LD CIT(A) WHILE DECIDING THE APPEAL RE STRICTED THE RATE OF NET PROFIT RATE AT 1% AS AGAINST 5% AS APPLIED BY THE A SSESSING OFFICER AND 0.79% AS DISCLOSED ON THE AMOUNT OF CONSOLODIATED T OTAL TURNOVER BY THE APPELLANT ASSESSEE. DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 19 1.7.1] THE ASSESSING OFFICER ON THE BASIS OF DISCRE PANCIES AS POINTED OUT FROM THE UNDISCLOSED BANK ACCOUNT REJECTED THE BOOK S OF ACCOUNT AS MAINTAINED BY THE APPELLANT ASSESSEE. 1.7.2] THE ASSESSING OFFICER HAS NOT DESCRIBED ANY GENUINE REASON FOR REJECTION OF THE REGULAR BOOKS OF ACCOUNT AS MAINTA INED BY THE APPELLANT ASSESSEE. 16. LD. A.O ESTIMATED NET PROFIT RATE @5% PLACING R ELIANCE ON THE DECIDION OF HONBLE ITAT, INDORE BENCH IN THE CASE OF ACIT V/S AMAR AGRAWAL ITA NO.611/IND/2012. LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE CASE OF THE ASSESSEE IS CLEARLY DISTINGUISHABLE FROM THAT IN THE CASE OF SHRI AMAR AGRAWAL (SUPRA) ON ACCOUNT OF FOLLOWING REASONS:- (A) THE CASE OF SHRI AMAR AGRAWAL (SUPRA) PERTAINS TO ASSESSMENT YEAR 2007-08 AND HONBLE TRIBUNAL REFERRED TO THE PROVISIONS OF SECTION 44AF WHEREAS THE ASSESSEES CASE PERTAINS T O ASSESSMENT YEAR 2011-12 AND PROVISION OF SECTION 44 AF ARE NOT APPLICABLE. (B) IN THE CASE OF SHRI AMAR AGRAWAL (SUPRA) THE CASE INVOLVED THE APPLICATION OF MANDI TAX RULES, PAYMENT TO FARMERS ON PURCHASE AND THE ASSESSEE HAVING NO RECORD OF PAYMENTS MADE TO THE FARMERS ON THE DATE OF PURCHASE WHEREAS IN THE CASE OF ASSESSEE, DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 20 IN THE INSTANT CASE THERE IS NO SUCH ISSUE RAISED B Y THE LD. A.O THAT PAYMENTS WERE MADE BY THE APPELLANT FROM THE U NDISCLOSED SOURCES. (C) IN THE CASE OF SHRI AMAR AGRAWAL (SUPRA) THE ISSUE WAS WITH REGARD TO THE PAYMENT MADE TO THE FARMERS FROM UNDI SCLOSED SOURCES ON A PARTICULAR DATE WHICH WERE SHOWN AS OU TSTANDING IN THE BOOKS WHEREIN IN THE CASE OF ASSESSEE IN THE INSTANT CASE THE ISSUE RELATES TO UNACCOUNTED TURNOVER CARRIED O UT THROUGH FIVE UNDISCLOSED BANK ACCOUNTS. 16(A) FURTHER LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THE ISSUE OF NET PROFIT RATE RAISED IN THIS APPEAL IS SQUAREL Y COVERED BY THE DECISION OF HONBLE INDORE BENCH OF ITAT IN THE CAS E OF SHRI SITARM AGRAWAL ITA NO.925/IND/2018 ORDER DATED 20.08.2020 . 16(B). LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE ASSESSMENT OF SUCEEDING YEAR I.E. ASSESSMENT YEAR 2012-13 WHEREIN THE PERCENTAGE OF NET PROFIT DECLARED BY THE ASSESSEE WAS DULY AC CEPTED AND THE SAME IS CALCULATED AS UNDER:- S.NO PARTICULARS MONIKA TRADING CO WHITE GOLD ENTERPRISES TOTAL [ RS] 1 SALES 1,12,73,581 9,50,94,395 10,63, 67,976 DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 21 2.1 NET PROFIT 1,60,220 4,45,282 6,05,502 2.2 % OF NET PROFIT 1.42% 0.47% 0.57% 17. THE ASSESSEE HAS ALSO COLLECTED SOME OF THE AU DITED FINAL ACCOUNT OF THE FOLLOWING FIRMS WHICH ARE ALSO REGUL ARLY ASSESSED TO TAX WITH THE INCOME TAX DEPARTMENT FOR THE ASST YEAR 20 11-12 AND PERCENTAGE OF NET PROFIT AS DECLARED BY THEM IS AS UNDER:- S.NO PARTICULARS MITTAL INDUSTRIES PAWAN COTTON IND NAVIN GINNING FACTORY 1 PAN NO AACFM0427D AAJFP0999G AAOPT4069Q 2 SALES 40,80,89,647 46,56,19, 435 42,19,25,011 3.1 NET PROFIT 9,10,601 6,42,047 28,12,927 3.2 % OF NET PROFIT 0.22% 0.14% 0.67% 18. RELIANCE ALSO PLACED ON THE FOLLOWING DECISIONS :- (I) HON'BLE JURISDICITONAL HIGH COURT IN THE CASE O F CIT VS BAL CHAND AJIT KUMAR ( 263 ITR 0610). (II) HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS PRESIDENT INDUSTRIES (258 ITR 0654) (III) HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAN MOHAN SADANI VS CIT ( 304 ITR 0052) (IV) HONBLE ITAT, INDORE BENCH IN THE CASE OF SHRI SITARAM AGRAWAL [ PROP OF M/S SMO INDUSTRIES ] ( APPEAL NO ITA NO 925/IND/ 2018 DT 20-08-2020 ] 19. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHE MENTLY ARGUED SUPPORTING THE ORDER OF LD. A.O. DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 22 20. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DECISIONS REFERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. THE ISSUE RAI SED IN GROUND NO.2 BY THE ASSESSEE AND GROUND NO.1 RAISED BY THE REVEN UE RELATES TO ESTIMATION OF NET PROFIT RATE. WE OBSERVE THAT THE ASSESSEE CARRIED OUT VARIOUS TRANSACTIONS OF PURCHASES AND SALE THROUGH 5 UNDISCLOSED BANK ACCOUNTS. THE UNDISPUTED FIGURE OF UNDISCLOSE D TURNOVER IN THE CASE OF M/S MONIKA TRADING CO AND M/S WHITE GOLD EN TERPRISES IS RS.5,44,64,764/- AND RS.15,09,34,202/- RESPECTIVELY . THE ASSESSEE HAS OFFERED 1.33% OF NET PROFIT ON THE UNDISCLOSED TURNOVER IN THE REVISED COMPUTATION OF TOTAL INCOME FILED DURING TH E COURSE OF ASSESSMENT PROCEEDINGS. LD. A.O AFTER RELYING ON TH E DECISION OF AMAR AGRAWAL (SUPRA) APPLIED THE NET POROFIT OF 5% ON THE TOTAL TURNOV ER (DISCLOSED + UNDISCLOSED) THEREBY COMPUTING NET PRO FIT OF RS.2,17,76,845/-. 21. WHEN THE MATTER CAME UP BEFORE LD. CIT(A) SUBST ANTIAL RELIEF WAS GRANTED BY LD. CIT(A) OBSERVING AS FOLLOWS :- 4.4.1] IN GROUND NOS 2 & 6 OF THE APPEAL, THE APPELLANT HAS CHALLENGED THE, ESTIMATION OF INCOME OF RS 2,17,76, 845/ - FROM BUSINESS BY ADOPTING THE RATE OF' PROFIT AT 5 ON TH E GROSS TURNOVER DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 23 OF RS 43,55,36,893/-. THE APPELLANT WHILE FILING HI S RETURN OF TOTAL INCOME DECLARED TOTAL TURNOVER OF HIS BOTH THE PROP RIETORSHIP CONCERN IS AS UNDER: - S.NO. NAME OF THE PROPRIETORSHIP CONCERN AMOUNT (RS .) 1 M/S MONIKA TRADING CO 5,77,24,480 2 M/S WHITE GOLD ENTERPRISES 17,24,13,447 23,01,37,927 4.4.2] THE AMOUNT OF TOTAL TURNOVER AFTER INCORPORA TING ALL THE BANK ACCOUNTS WAS INCREASED FROM RS 23,01,37,927 TO RS 43,55,36,893/-, THE SAME IS CALCULATED AS UNDER:- S.NO. NAME OF THE PROPRIETORSHIP CONCERN ORIGINAL ADDITIONAL IN REVISED ADDITIONAL IN REVISED 1 M/S MONIKA TRADING CO 57724480 54464764 112189244 2 M/S WHITE GOLD ENTERPRISES 172413447 150934202 323347649 435536893 4.4.3 THE APPELLANT ON THE AMOUNT OF TOTAL TURNOVER AS DECLARED AT THE TIME OF FILING OF THE ORIGINAL RETURN OF TOT AL INCOME AND ALSO AFTER INCORPORATING THE REVISED TURNOVER CALCULATED AS UNDER:- S.NO PARTICULARS MONIKA TRADING CO WHITE GOLD ENTERPRISES DISCLOSED UNDISCLOSED DISCLOSED UNDISCLOSED 1 SALES 57724480 54464764 172413447 150934202 2.1 NET PROFIT 166660 724381 513645 2004225 2.2 % OF NET PROFIT 0.20% 1.33% 0.29% 1.33 3.1 CONSOLIDATE TOTAL TURNOVER 11,21,89,244 32,33,47,649 3.1 CONSOLI D ATE NET PROFIT 8,91,041 25,17,870 3.2 % OF CONSOLIDATED NET PROFIT 0.79% 0.79% 4.4.4] ON PERUSAL OF THE ABOVE TABLE IT IS EVIDENT THAT THE APPELLANT HAS SHOWN NET PROFIT AT 0.29 ONLY IN BOTH HIS DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 24 PROPRIETORSHIP CONCERN BUT THE PERCENTAGE OF NET PR OFIT INCREASED FROM 0.29 TO 1.33 ON THE AMOUNT OF TURNOVER AS NOT RECORDED IN HIS BOOKS OF ACCOUNT. THE CASE OF THE APPELLANT FOR THE ASST YEAR 2012-13 WAS ALSO SELECTED IN SCRUTINY AND BOOK RESU LT AS DECLARED BY THE APPELLANT WAS DULY ACCEPTED, THE AP PELLANT IN THAT YEAR DECLARED NET PROFIT AT 1.42% IN HIS PROPR IETORSHIP CONCERN M/S MONIKA TRADING CO AND 0.47% IN THE PROP RIETORSHIP CONCERN M/S WHITE GOLD ENTERPRISES, THE SAME IS SUM MARISED AS UNDER:- S .NO PARTICULARS MONIKA TRADING CO WHITE GOLD ENTERPRISES 1 SALES 1,12,73,581 9,50,94,395 2.1 NET PROFIT 1,60,220 4,45,282 2.2 % OF NET PROFIT 1.42% 0.47% 3.1 CONSOLIDATED TURNOVER 10,63,67,976 3.2 CONSOLIDATED NET PRO FIT 0.57% 4.4.5] ON PERUSAL OF BOTH THE TABLE LE. AS PROVIDED IN PARAS 4.4.3 & 4.4.4, IT IS EVIDENT THAT OF CONSOLIDATED PROFIT A S DECLARED BY THE APPELLANT ON THE AMOUNT OF DISCLOSED OR UNDISCLOSED TURNOVER IN THE YEAR UNDER APPEAL WAS AT 0.79 AND CONSOLIDATED PROFIT AS DECLARED IN THE ASST YEAR 2012-13 WHICH WAS DULY AC CEPTED BY THE ASSESSING OFFICER WAS 0.57 . THE MARGIN OF THE APPELLANT IN LARGE VOLUME IS SIGNIFICANTLY LOWER THAN THE RATE A S PROVIDED U / S 44AF /44AD OF THE ACT. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER APPLIED THE RATE OF NET PROFIT AT 5 BASED ON THE DECISION THE CASE OF SHRI AMAR AGRAWAL [ APPEAL NO ITA NO 611/ IND/ 2012]. THE APPELLANT DEALS IN AGRO PRODUCT AND THE PRICE OF THE PRODUCT VARIES DUE TO THE QUALITY OF RAINS AND SOIL, AVAILABILITY AND SUPPLY OF THE MATERIAL. HENCE, NET PROFIT RATE OF ONE ASSESSEE CANNOT BE APPLIED IN THE CASE OF OTHER ASSESSEE. TH E APPELLANT DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 25 DURING THE COURSE OF HEARING ALSO PROVIDED RATE OF NET PROFIT OF FEW MORE CONCERNS IN THE SAME ASSESSMENT YEAR, THE SAME IS REPRODUCED AS UNDER:- S.NO PARTICULARS MITTAL INDUSTRIES PAWAN COTTON IND NAVING GINNING FACTORY 1 PAN NO AACFM0427D AAJFP0999G AAOPT4069Q 2 SALES 408089647 465619435 421925011 3.1 NET PROFIT 910601 642047 2812927 3.2 % OF NET PROFIT 0.22% 0.14% 0.67% 4.4.6 ON PERUSAL OF THE ABOVE, IT IS CLEAR THAT THE PERCENTAGE OF NET PROFIT OF ALL THE CONCERNS VARIES FROM 0.22 TO 0.67 BUT THE APPELLANT HIMSELF IN HIS CASE ACCEPTED CONSO1ODATED NET PROFIT RATE AT 0.79 IN THE YEAR UNDER APPEAL AND 0.57 IN THE SUCCEEDING ASSESSMENT YEAR I.E. IN THE ASST YEAR 2012-13. HON'BLE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT VS BAL CHAND AJIT KURNAR A S REPORTED IN 263 ITR 0610 AND IN THE CASE OF MAN MOHAN SADANI VS CIT AS REPORTED IN 3'04 ITR 0052 HAS HELD THAT ONLY NET PR OFIT RATE IS TO BE APPLIED IN CASE OF UNRECORDED SALES. IN THE PRES ENT CASE, THOUGH THE BOOKS OF ACCOUNT OF THE APPELLANT WAS RE JECTED AND RIGHTLY SO BUT THE RATE OF NET PROFIT CAN BE APPLIE D ON THE BASIS OF NET PROFIT AS DECLARED BY THE APPELLANT HIMSELF IN HIS OWN CASE AND ALSO CONSIDERING THE OTHER COMPARABLE CASES AS AVAILABLE. THE APPELLANT IN HIS OWN CASE IN THE YEAR UNDER APP EAL HAD DECLARED CONSOLIDATED NET PROFIT AT 0.79 AND 0.57 I N THE ASST YEAR 2012-13 BUT IN ALL THE OTHER SIMILAR CASES WHERE TU RNOVER IS MORE OR LESS SIMILAR TO THE REVISED TURNOVER OF THE APPE LLANT THE PERCENTAGE OF NET PROFIT VARIES BETWEEN 0.22 TO 0.6 7. HENCE, TO MEET THE END OF JUSTICE, NET PROFIT RATE IN THE CAS E OF THE APPELLANT APPLIED AT 1% ON TOTAL TURNOVER OF RS 43,55,36,893/ - WHICH DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 26 CALCULATED COMES TO RS 43,55,368/- AS AGAINST NET P ROFIT AS DECLARED BY THE APPELLANT IN HIS REVISED PROFIT & LOSS ACCOUNT WAS OF RS 34,08,911/-. I HEREBY DIRECT THE ASSESSING OF FICER TO CONSIDERED THE NET PROFIT OF RS 43,55,368/- IN PLAC E OF RS 2,17,76,845/_. THE APPELLANT ACCORDINGLY GET RELIEF OF RS 1,74,21,447/-. 22. NOW BEFORE US THE ASSESSEE HAS CHALLENGED THE A DDITION CONFIRMED BY LD. CIT(A) AND THE REVENUE HAS CHALLEN GED THE RELIEF GRANTED BY LD. CIT(A). AS SUBMITTED BY LD. COUNSEL FOR THE ASSESSEE THAT SIMILAR FACTS AND ISSUE CAME UP BEFORE THIS CO -ORDINATE BENCH IN THE CASE OF SHRI SITARAM AGRAWAL (SUPRA ). ON GOING THROUGH THIS DECISION WE FIND THAT IN THE CASE OF SHRI SITARAM AGRAWAL (SUPRA) ALSO THERE WERE UNDISCLOSED BANK ACCOUNTS WHICH HAD UNDI SCLOSED TURNOVER. ASSESSEE ACCEPTED THE UNDISCLOSED TURNOV ER AND OFFERED NET PROFIT ON SUCH UNDISCLOSED TURNOVER. NET PROFIT RA TE ADOPTED BY THE ASSESSEE NAMELY SHRI SITARAM AGRAWAL (SUPRA) WAS THE AVERAGE NET PROFIT RATE ACCEPTED BY THE DEPARTMENT IN THE EARLI ER YEARS AND THE PERCENTAGE OF FINANCIAL EXPENSES (BANK INTEREST, OT HER FINANCE CHARGES) ALREADY INCORPORATED IN THE REGULAR BOOKS. IN THESE GIVEN FACTS THE TRIBUNAL CONFIRMED THE FINDING OF LD. CIT (A) AND ACCEPTED THE NET PROFIT RATE OFFERED BY THE ASSESSEE OBSERVI NG AS FOLLOWS:- DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 27 26. FROM PERUSAL OF THE DETAILED FINDING OF FACT B Y LD. CIT(A) AND THE FACTUAL ASPECT WE OBSERVE THAT THE LD. A.O HAS ONLY TAKEN THE BASIS OF UNDISCLOSED BANK ACCOUNT FOR REJECTING THE BOOKS OF ACCOUNTS. NOWHERE IN THE ASSESSMENT ORDER HE HAS POINTED OUT ANY OTHER I RREGULARITY IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSE E WHICH ARE DULY AUDITED. LD. DEPARTMENTAL REPRESENTATIVE HAS FAILED TO BRING ON RECORD ANY SUCH OBSERVATION OF THE LD. A.O. IT IS WELL EVIDENT THAT THE FACT OF UNDISCLOSED BANK ACCOUNT HAS DULY BEEN ADMITTED BY THE ASSESSEE IN THE REVISED RETURN OF INCOME AND HAS OFFERED THE NET PR OFIT @2.5% ON THE TOTAL TRANSACTIONS OF THE UNDISCLOSED BANK ACCOUNT TREATI NG IT AS UNDISCLOSED SALES ATRS.18,82,79,709/- ON WHICH NET PROFIT OF RS .47,06,993/- HAS BEEN OFFERED. APART FROM THIS FACT DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. A.O WHILE EXAMINING THE STOCK RECORDS AND BOOKS OF ACCOUNTS HAS NOT COME ACROSS ANY MISTAKE OR IRREGULARITY WHICH COULD PROVE THAT THE BOOKS OF ACCOUNTS REGULARLY MAINTAINED BY THE ASSESSEE AN D BOOK RESULTS ARE QUESTIONABLE. IN THESE GIVEN FACTS AND CIRCUMSTANCE S OF THE CASE WE ARE OF THE VIEW THAT THE ACTION OF THE LD.A.O REJECTING TH E BOOK RESULTS THEREBY INVOKING PROVISIONS OF SECTION145(3) OF THE ACT WAS NOT JUSTIFIED AND SO WAS ALSO NOT JUSTIFIED IN ESTIMATING THE NET PROFIT ON THE REGULAR TURNOVER IN THE BOOKS OF ACCOUNTS @2.5% AS AGAINST 0.73% OFFERE D BY THE ASSESSEE. REVENUE HAS ALSO FAILED TO REBUT THE FACT THAT LD. A.O HAS NOT POINTED OUT ANY MISTAKE IN THE SUBMISSIONS OF THE ASSESSEE WHER EIN IT WAS MENTIONED THAT NET PROFIT RATE OF 2.5% APPLIED ON THE UNDISCL OSED TURNOVER WAS ON THE BASIS OF CALCULATION AS PER WHICH THE INTEREST AND BANK CHARGES WERE CLAIMED IN THE REGULAR BOOKS WHICH IN PERCENTAGE TE RMS WERE AROUND 1.82% OF THE TOTAL DISCLOSED TURNOVER AND SINCE THE Y HAVE ALREADY BEEN CLAIMED SO THE PERCENTAGE OF INTEREST AND BANK CHAR GES WERE ADDED TO THE NET PROFIT OFFERED IN THE BOOKS OF ACCOUNTS AND FAI R NET PROFIT @2.5% WAS APPLIED. THIS APPLICATION OF 2.5% ON UNDISCLOSED TU RNOVER CANNOT BE EQUATED TO BE APPLIED ON THE REGULAR TURNOVER DISCL OSED BY THE ASSESSEE. IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2013-14 A SSESSEE HAS OFFERED DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 28 0.91% AS NET PROFIT RATE WHICH HAS BEEN ACCEPTED BY THE REVENUE. IN THESE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE WE HEREBY FIND NO REASON TO INTERFERE IN THE FINDING OF LD. CIT(A) DELETING THE ADDITION OF RS.67,76,734/- AND WE ALSO FIND NO JUSTIFICATION IN THE ACTION OF THE LD. A.O REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. WE ACCORDI NGLY DISMISS GROUND NO.2 OF THE REVENUES APPEAL. 23. EXAMINING THE FACTS OF THE INSTANT CASE WITH TH E CASE OF SHRI SITARAM AGRAWAL (SUPRA) , WE ARE SATISFIED THAT THE ISSUE AND THE FACTS ARE VERBATIM SIMILAR. IN THE CASE OF THE ASSESSEE NET PROFIT RATE @ 0.29% IS DECLARED ON THE TURNOVER DISCLOSED IN THE REGULAR BOOKS. LD. A.O HAS NOT POINTED OUT ANY MISTAKE IN THE REGULAR BOOKS MAINTAINED BY THE ASSESSEE. JUST BECAUSE THAT THE ASSESSEE IS HAVING 5 BANK ACCOUNTS AND NOT SHOWN IN THE REGULAR BOOKS CANNOT BE THE SOLE BASIS TO REJECT THE REGULAR BOOKS OF ACCOUNTS. ON THE UN DISCLOSED TURNOVER THE ASSESSEE HAS ALREADY OPTED AND DULY OFFERED THE NET PROFIT SEPERATELY BUT ON THE DISCLOSED TURNOVER UNLESS THE LD. A.O POINTS OUTS SPECIFIC MISTAKE OR DOUBT ABOUT THE GENUINENES S OF THE PURCHASE/SALE AND EXPENSES TRANSACTIONS, THE BOOK R ESULTS CANNOT BE DOUBTED. THIS IS ALSO A FACT THAT THE ASSESSEE HAS MAINTAINED QUANTITATIVE DETAILS AND BOOKS ARE DULY AUDITED. S O FAR AS THE BOOK RESULTS I.E. NET PROFIT SHOWN IN THE REGULAR BOOKS @0.29% ON THE DISCLOSED TURNOVER OF RS.23,01,37,927/- IS CONCERNE D, WE ARE OF THE DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 29 VIEW THAT THE SAME SHOULD BE ACCEPTED AND ESTIMATIO N OF LD. A.O APPLYING @5% OF NET PROFIT AND LD. CIT(A) @1% OF NE T PROFIT ON THE DISCLOSED TURNOVER IS DEVOID OF ANY MERITS. 24. NOW AS FAR AS THE UNDISCLOSED TURNOVER IS CONC ERNED THE ASSESSEE HAS OFFERED NET PROFIT OF 1.33%. THIS NET PROFIT RATE HAS BEEN CALCULATED BY ADDING INTEREST COST @1.03% WHICH HAS BEEN CALCULATED BY DIVIDING THE TOTAL FINANCE CHARGES OF RS.23,75,1 68/- DIVIDED BY THE DISCLOSED TURNOVER OF RS.23,01,37,927/-. THE ASSESS EE SUO-MOTO ACCEPTED THAT THE BANK CHARGES HAVE ALREADY BEEN CH ARGED IN THE REGULAR BOOKS AND THEREFORE NET PROFIT RATE BEFORE CLAIMING OF FINANCE CHARGES SHOULD BE ADOPTED AS NET PROFIT ON THE UND ISCLOSED TURNOVER. ASSESSEE HAS ACCORDINGLY ADDED 1.04% OF FINANCE COS T TO 0.29% OF THE NET PROFIT OFFERED IN THE REGULAR BOOKS AND THE TOT AL I.E. 1.33% IS ADOPTED AS NET PROFIT RATE AND ACCORDINGLY OFFERED NET PROFIT OF RS.27,28,606/- ON THE UNDISCLOSED TURNOVER OF RS.2 0,53,98,966/-. WE ARE THUS SATISFIED WITH THE NET PROFIT OFFERED B Y THE ASSESSEE IN THE INCOME TAX RETURN ON THE DISCLOSED TURNOVER AND NET PROFIT OF 1.33% OFFERED ON UNDISCLOSED TURNOVER DURING ASSESSMENT P ROCEEDINGS AND THUS APPLYING THE RATIO OF THE DECISION IN THE CASE OF SHRI SITARAM AGRAWAL (SUPRA) WHICH IS SQUARELY APPLICABLE IN THE INSTANT CASE, WE DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 30 ALLOW GROUND NO.2 OF THE ASSESSEES APPEAL AND DISM ISS GROUND NO.1 OF THE REVENUES APPEAL. 25. NOW WE TAKE GROUND NO.3 RAISED BY THE ASSESSEE AND GROUND NO.2 RAISED BY THE REVENUE. THE COMMON ISSUE RAISE D BY BOTH THE ASSESSEE AND REVENUE IN THIS GROUNDS RELATES TO ADD ITION MADE ON ACCOUNT OF PEAK BALANCE IN UNDISCLOSED BANK ACCOUNT S. 26. DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHE N THE LD. A.O WAS SATISFIED THAT THE BOOKS OF ACCOUNTS NEEDS TO B E REJECTED SINCE VARIOUS TRANSACTIONS OF SALES WERE NOT RECORDED IN THE REGULAR BOOKS. THE LD. A.O APART FROM ESTIMATING HIGHER NET PROFIT ON TOTAL TURNOVER ALSO MADE ADDITION FOR UNDISCLOSED INVESTMENT IN TH E UNRECORDED TURNOVER. FOR MAKING THE ALLEGED ADDITION ON ACCOUN T OF INVESTMENT IN UNRECORDED TURNOVER LD. A.O EXAMINED THE BALANCE SH EET OF BOTH THE PROPRIETORSHIP CONCERNS OF THE ASSESSEE AND OBSERVE D THAT THE ASSESSEE HAS EMPLOYED FUNDS AT RS. 2.88 CRORES AND THE DISCLOSED TURNOVER IS RS. 23.01 CRORES. TAKING THIS BASIS OF THE RATIO OF FUND EMPLOYED TO TOTAL ACCOUNTED TURNOVER LD. A.O APPLIE D THE SAME TO THE UNACCOUNTED TURNOVER AND COMPUTED THE UNACCOUNTED I NVESTMENT AT RS.2,56,74,870/- AND ADDED THE SAME TO THE INCOME O F THE ASSESSEE. WHEN THE MATTER CAME BEFORE LD. CIT(A) HE GRANTED PARTIAL RELIEF BY DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 31 SUSTAINING THE ADDITION OF RS.51,65,904/- TAKING TH E BASIS OF PEAK BANK BALANCE OF THE TOTAL 5 UNACCOUNTED BANK ACCOUN TS. 27. NOW BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. ASSESSEE HAS CHALLENGED THE ADDITION CON FIRMED BY LD. CIT(A) AND REVENUE IS AGGRIEVED WITH THE RELIEF GRA NTED BY LD. CIT(A). 28. LD. COUNSEL FOR THE ASSESSEE REFERRED TO FOLLOW ING WRITTEN SUBMISSIONS:- 2.1] THE ASSESSING OFFICER QWHILE PASSING THE ASSES SMENT ORDER ESTIMATED THE NET INVESTMENT AT 12.5% OF THE UNRECORDED SALES AS EXECUTED BY THE APPELLANT ASSESSEE. 2.2] THE APPELLANT ASSESSEE HAVING TOTAL TURNOVER O F RS 23,01,37,927/- IN HIS PROPRIETORSHIP CONCERNS, THE AMOUNT OF TOTAL TU RNOVER , CASH AND STOCK IN THESE UNITS ARE AS PER AUDITED FINAL ACCOUNT ARE AS UNDER:- S.NO NAME OF THE FIRM TOTAL TURNOVER [RS] CASH & BANK [ RS] STOCK [ RS] 1 M/S MONIKA TRADING CO 5,77,24,480 7,11,867 NIL 2 M/S WHITE GOLD ENTERPRISES 17,24,13,447 9,61,814 2,80,89,197 23,01,37,927 16,73,681 2,80,89,197 2.3] THE ASSESSING OFFICER WHILE PASSING THE ASSESS MENT ORDER ESTIMATED THE AMOUNT OF INVESTMENT IN THE UNRECORDED SALES OF RS 2,56,74,870/- I.E 12.5% OF TOTAL UNRECORDED TURNOVER OF RS 20,53,98,9 66/-. 2.4.1] THE ASSESSING IN THE ASSESSMENT ORDER FURTHE R OBSERVED THAT THE APPELLANT ASSESSEE HAD SHOWN PURHCASES FROM M/S RAG HO COTTON CORPORATION , SUTALA IN HIS PROPRIETORSHIP CONCERN M/S MONIKA TRADING COMPANY TO THE TUNE OF RS 81,81,365/- DURING THE PE RIOD FROM 13-08-2010 DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 32 TO 01-12-2010 AND PAYMENT TO THE SAID PARTY WAS MAD E ON 03-02-2011 AND 09-02-2011. IT WAS ALSO STATED BY THE ASSESSING OFF ICER THAT THE INSPECTOR IN HIS REPORT HAS SUBMITTED THAT THE SAID PARTY IS NOT AVAILABLE IN THE ADDRESSES AS PROVIDED. SIMILARLY IN THE CASE OF SHR I ANAND PRASAD DALIYA, WARANGAL PURHCASES WAS SHOWN IN THE BOOK OF M/S MON IKA TRADING COMPANYDURING THE PERIOD FROM 04-10-2010 TO 09-10-2 010 TO THE TUNE OF RS 25,20,120/-. IN THIS CASE A LETTER WAS ISSUED UN DER SECTION 133(6) OF THE ACT WHICH WAS ALSO RETURN UNSERVED. 2.4.2] THE PAYMENT MADE TO BOTH THESE PARTIES FROM THE BANK ACCOUNT OF THE APPELLANT ASSESSEE WAS DULY REFLECTED. PLEASE R EFER PAGE NO 276 OF THE COMPILATION, WHEREIN THE AMOUNT PAID TO THESE PARTI ES WERE DULY HIGHLIGHTED. 2.4.3] IT IS PERTINENT TO NOTE THAT APPELLANT ASSES SEE WHILE CALCULATING THE PEAK, CREDIT OF PURHCASES AS MADE FROM BOTH THESE P ARTIES HAVE NOT TAKEN INTO ACCOUNT. HOWEVER, THE CASH BALANCE AND STOCK A S LYING IN THE REGULAR BOOKS OF ACCOUNT ONLY WAS CONSIDERED BY THE APPELLA NT ASSESSEE FOR WORKING OF PEAK. 2.5] THE APPELLANT ASSESSEE BEFORE THE ASSESSING OF FICER AND ALSO BEFORE THE LD CIT(A) CLAIMED THAT THE AMOUNT OF CASH AND STOCK AS LYING IN HIS REGULAR BOOKS OF ACCOUNT IS SUFFICIENT AS TO EXECUTED TOTAL TURNOVER THROUGH THESE FIVE BANK ACCOUNTS WHICH REMAINED TO BE INCORPORATE D IN THE REGULAR BOOKS OF ACCOUNT. 2.6] THE APPELLANT ASSESSEE DURING THE COURSE OF AS SESSMENT PROCEEDING OBTGAINED REVISED AUDITED FINAL ACCOUNTS AFTER INCO RPORATING ENTRIE TRANSACTIONS AS EXECUTED THROUGH THESE FIVE BANK AC COUNTS WHICH REMAINED TO BE INCLUDED IN THE REGULAR BOOKS OF ACCOUNT. THE AUDIT REPORT AS OBTAINED ON THE BASIS OF REVISED BOOKS HAS ALSO BEEN FILED B EFORE THE ASSESSING OFFICER. ON PERUSAL OF THE SAME IT WAS CLEARLY EVID ENT THAT STOCK AND CASH AS DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 33 PER REGULAR BOOKS OF ACCOUNT DULY JUSTIFIED ALL THE TRANSACTIONS AS EXECUTED THROUGH THESE FIVE BANK ACCOUNTS. 2.7] THE AMOUNT OF CASH IN HAND AND STOCK AS LYING IN THE REGULAR BOOKS OF ACCOUNT OF THE APPELLANT ASSESSEE AS SUMMARIZED ARE ATTACHED HEREWITH. THE SAID DETAIL WAS PREPARED ON THE BASIS OF BOOKS OF ACCOUNT WHICH WAS BEFORE THE ASSESSING OFFICER AND ALSO REFERRED FOR SPECIAL AUDIT. FEW DATES AS SUMMARIZED IS AS UNDER:- DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 34 2.8] THAT IN VIEW OF THE ABOVE, THERE WAS NO NEGATI VE BALANCE OF CASH AND STOCK EVEN AFTER CONSIDERING THE CLOSING BANK BALAN CES OF ALL THE FIVE BANK ACCOUNTS WHICH REMAINS TO BE INCORPORATED IN THE RE GULAR BOOKS OF ACCOUNT. 2.9.1] THE APPELLANT WHILE CALCULATING THE PEAK HAS CONSIDERED THE FOLLOWING COMPONENTS: S.NO PARTICULARS 1 CASH A S PER REGULAR BOOKS OF ACCOUNT AND AS AVAILABLE WIT H THE ASSESSEE FOR HIS BUSINESS 2 STOCK OF GOODS AS PER BOOKS OF ACCOUNT AND AS AVAIL ABLE FOR SALE OUT OF BOOK PROCEED OF WHICH WAS DEPOSITED IN THE BANK ACC OUNTS WHICH WAS NOT INCORPORATED IN THE REGULAR BOOKS OF ACCOUNT 2.9.2] THE APPELLANT ASSESSEE ALSO DECLARED ADDITIO NAL INCOME OF RS 27,28,601/- ON THE AMOUNT OF TOTAL UNRECORDED TURNO VER. THE SAID AMOUNT IS ALSO AVAILABLE WITH THE APPELLANT ASSESSEE AGAIN ST THE PEAK CREDIT IF ANY CALCULATED. HOWEVER, IN THE PRESENT CASE, THE CASH BALANCE AND STOCK AS PER REGULAR BOOKS OF ACCOUNT WAS MUCH HIGHER THAN THE B ANK BALANCE AS REFLECTED IN ALL FIVE BANK ACCOUNTS. HENCE, THERE W AS NO REASON FOR MAKING ANY ADDITION TO THE TOTAL INCOME OF THE APPELLANT A SSESSEE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE UNRECORDED TOTAL TURN OVER. 29. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE RAISED IN THIS GROUND ISALSO SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF SHRI SITARAM AGRAWAL (SUPRA) SO MUCH SO THAT IN THE CASE OF ASSESSEE ALSO THE TOTAL OF CASH IN H AND AND STOCK IN HAND IN THE REGULAR BOOKS OF ACCOUNTS WAS ALWAYS MO RE THAN THE PEAK BALANCE OF THE UNDISCLOSED 5 BANK ACCOUNTS AND THUS THE ASSESSEE WAS HAVING SUFFICIENT FUND AVAILABLE IN TH E REGULAR BOOKS DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 35 TO CARRY OUT TRANSACTIONS OF UNDISCLOSED TURNOVER A ND TO COVER THE PEAK BALANCE. RELIANCE WAS ALSO PLACED ON FOLLOWIN G DECISIONS:- (I) HONBLE JODHPUR BENCH OF ITAT IN THE CASE OF AC IT VS KASHMIR TRADING COMPANY AS REPORTED IN 20 TAXMANN.COM 337. (II) HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS FERTILIZER TRADERS AS REPORTED IN 42 TAXMANN.COM 47 6 (III) HONBLE GUJARAT HIGH COURT IN THE CASE OF CI T VS TIRUPATI CONSTRUCTION CO AS REPORTED IN 55 TAXMANN.COM 308. (IV) HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CAS E OF CIT VS AGGARWAL ENGG CO ( JAL) (302 ITR 0246). (V) HONBLE ITAT, INDORE BENCH IN THE CASE OF SHRI SITARAM AGRAWAL [ PROP OF M/S SMO INDUSTRIES ] ( APPEAL NO ITA NO 925/IND/ 2018 DT 20-08-2020] 30. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHE MENTLY ARGUED SUPPORTING THE ORDER OF LD. A.O. 31. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THROUGH GROUND NO.3 IN THE ASSESS EES APPEAL AND GROUND NO.2 OF REVENUES APPEAL, THE ISSUE RAIS ED RELATES TO PEAK CREDIT/INVESTMENT UNRECORDED TURNOVER. WE OBS ERVE THAT THE ASSESSEE IN ADDITION TO THE REGULAR TRANSACTIONS OF SALES RECORDED IN REGULAR BOOKS ALSO CARRIED OUT UNACCOUNTED TRANSACT IONS OF SALES THROUGH 5 BANK ACCOUNTS. THE ASSESSEE HAS ADMITTED THAT THE SALES DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 36 CARRIED OUT IN THE 5 BANK ACCOUNTS MENTIONED IN THE IMPUGNED ASSESSMENT ORDER WERE CARRIED OUT BY HIM BUT THERE IS NO RECORD IN THE BOOKS OF ACCOUNTS. AFTER ADMITTING THE SAME AS SESSEE HAD OFFERED NET PROFIT ON THE UNRECORDED SALES TURNOVER . DURING THE ASSESSMENT PROCEEDINGS LD. A.O ALSO EXAMINED THE AS PECT OF INVESTMENT CARRIED OUT IN THE UNACCOUNTED SALES TUR NOVER. LD. A.O TOOK THE BASIS OF REGULAR BOOKS OF ACCOUNTS AND AFT ER EXAMINING THE BALANCE SHEET IN THE CASE OF THE ASSESSEE THAT THE ASSESSEE HAD EMPLOYED FUNDS TO THE TUNE OF RS. 2.88 CRORES AND S HOWN A TURNOVER OF RS. 23.30 CRORES APPLIED THE SAME RATIO AND COMPUTED THE UNACCOUNTED INVESTMENT OF RS. 2.57 CRORES FOR C ARRYING OUT THE UNACCOUNTED TURNOVER OF RS. 20.54 CRORES. LD. CIT( A) WHILE ADJUDICATING THIS ISSUE SUBSTAINED THE ADDITION TO THE EXTENT OF PEAK BALANCE AVAILABLE IN THE 5 BANK ACCOUNTS ON A PARTI CULAR DATE WHICH IN THIS CASE WAS 27.10.2010 AND ADOPTED THE PEAK BA LANCE AS RS.51,65,904/-. LD. CIT(A) CONFIRMED THIS ADDITION OF PEAK CREDIT OBSERVING AS FOLLOWS:- 4.5.1] IN GROUND NOS 2 & 7 OF THE APPEAL, THE APPELLANT HAS CHALLENGED THE ADDITION OF RS 2,56,74,870/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT. THE ASSESSING OFFICER WHILE PASSING THE DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 37 ASSESSMENT ORDER ADDED 1/8TH OF TOTAL UNRECORDED TU RNOVER OF RS 20,53,98,966/- WHICH CALCULATED COMES TO RS 2,56,74 ,870/- WAS ADDED TO THE TOTAL INCOME OF THE APPELLANT ON ACCOU NT OF UNEXPLAINED INVESTMENT IN THE BUSINESS OF THE APPEL LANT. THE APPELLANT DURING THE COURSE OF HEARING WITH THE TAB LE TRIED TO EXPLAIN THAT TOTAL UNRECORDED TURNOVER IN HIS BOTH THE PROPRIETORSHIP CONCERN WAS OF RS 23,01,37,927/- BRE AKUP OF THE SAME WAS AS UNDER:- SN NAME OF THE FIRM TOTAL TURNOVER [ RS] CASH & BANK [RS] STOCK [RS] 1 M/S MONIKA TRADING CO 5,77,24,480 7,11,867 NIL 2 M/ S WHITE GOLD ENTERPRISES 17,24,13,447 9,61,814 2,80,89,197 23,01,37,927 16,73,681 2,80,89,197 4.5.2 THE APPELLANT FURTHER CLAIMED THAT EVEN IF THE AMOU NT OF TOTAL UNRECORDED TURNOVER IS CONSIDERED FOR 300 DAY S IN THAT CASE ALSO, THE TOTAL UNRECORDED TURNOVER CALCULATED COMES TO RS 6,84,663/ - PER DAYS. THE APPELLANT FURTHER CLAIMED THAT HE HAD SUFFICIENT AMOUNT OF CASH AND' ALSO STOCK IN HIS RE GULAR BOOKS OF ACCOUNT AND THEREFORE NO ADDITION ON ACCOUNT OF UNE XPLAINED INVESTMENT WAS JUSTIFIED IN THE CASE OF THE APPELLA NT. THE APPELLANT FURTHER RELIED ON THE DECISION OF THE :- HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS AGRAWAL ENGG CO (JAL) AS REPORTED IN 302 ITR 0246 WHEREIN IT WAS HELD THAT THAT NO SEPARATE ADDITION ON ACCOUNT OF CASH CREDIT AND ON ACCOUNT OF UNEXPLAINE D PAYMENTS FOR PURCHASES MADE OUTSIDE THE BOOKS CAN B E MADE ONCE THE NET PROFIT RATE IS APPLIED ON CONTRAC T RECEIPTS OF AN ASSESSEE FOR ESTIMATING HIS INCOME F ROM CONTRACT WORK. DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 38 HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS PR ESIDENT INDUSTRIES AS REPORTED IN 258 ITR 0654 HAS HELD THAT:- 2] THE TRIBUNAL ALSO FOUND THAT THERE IS NO MATERIA L ON THE RECORD TO SUGGEST THAT THE ASSESSEE MADE ANY INVESTMENT OUTSIDE BOOKS OF ACCOUNTS TO MAKE ALLEGED UNACCOUNTED SALES IN RESPECT OF THE AFORESAID APPELLATE ORDER. THE APPLIC ANT MADE AN APPLICATION UNDER S. 256(1) FOR REFERRING THE AFORESAID TWO QUESTIONS SAID TO BE ARISING OUT OF TRIBUNAL)S ORDER. HON'BLE ALLAHBAD HIGH COURT IN THE CASE OF CIT VS B ANWARILAI BANSHIDH AR AS REPORTED IN 229 ITR 0229 HAS HELD THAT:- WHERE INCOME IS ASSESSED AT G.? RATE BY REJECTING THE BOOKS OF ASSESSEE UNDER S. 145(1), PROVISO, NO DISALLOWANCE CAN BE MADE SEPARATELY UNDER S. 40A(3). THAT HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF AS HOK KUMAR RASTOGI VS CIT AS REPORTED IN 100 CTR 204 HAS HELD THAT [ REFER PREAMBLE] 'FOR RECALLING ITS FINDING, THE APPELLATE TRIBUNAL HAS NOT RELIED UPON OR REFERRED TO ANY DOCUMENT AND ADDITION OF RS. 50,000 AS UNEXPLAINED INVESTMENT HAS BEEN MADE MERELY ON THE BASIS OF THE SALE TRANSACTIONS AMOUNTING TO RS. 4,24,396 ESTIMATED ON THE BASIS OF DOCUMENTS SEIZED IN RAID. EVEN THE ITO AND THE CIT(A) HAVE GIVEN THE SAME REASON FOR ADDING THE AF ORESAID RS. 50,000 AS UNEXPLAINED INVESTMENT. THOUGH THE ITO IS NOT BOUND THE TECHNICAL RULES OF EVIDENCE AND PLEADINGS AND IS ENTITLED TO CONSIDER ANY MATERIAL WHICH MAY NOT BE TECHNICALLY ACCEPTED AS EVIDENCE IN A CIVIL COURT, BUT HE CANNOT MAKE TH E ASSESSMENT ON A PURE GUESS WITHOUT REFERENCE TO ANY EVIDENCE O R MATERIAL. DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 39 NO EVIDENCE OR MATERIAL HAS BEEN REFERRED TO ANY EV IDENCE OR MATERIAL. NO EVIDENCE OR MATERIAL HAS BEEN REFERRED TO ANY RELIED UPON FOR ,TREATING THE AFORESAID SUM OF RS. 50,000 AS UNEXPLAINED INVESTMENT AND THE ONLY CIRCUMSTANCE WHICH HAS BEEN REFERRED IN THIS CONNECTION IS THE ESTIMATED SALE OF RS. 4,24,396. FROM THE ESTIMATED SALE IT CANNOT NECESSARILY BE INFERRED THAT THE ASSESSEE HAS INVESTED RS. 50,000 IN SOME UNEXPLAINED BUSINESS. IT BEING NOT A NECESSARY INFERENCE IS A PURE GUESS AND THE FINDING SEEM TO BE BASED ON SURMISES AND CONJECTURES. THUS, THERE WAS NO MATERIAL FOR THE TR IBUNAL TO HOLD THAT THE ASSESSEE HAD MADE AN UNEXPLAINED INVESTMENT OF RS. 50,000 OUTSIDE THE ACCOUNT BOOKS.-DHAKESWARI COTTON LTD. VS. CIT (1954) 26 ITR 775 (SQ RELIED ON.' HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS GU RUBACHHAN SINGH J JUNEJA REPORTED IN 302 ITR 63 HAS HELD THAT [ REFER FROM PREMABLE] :- 'IN ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THAT THERE WAS ANY UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE WHICH WAS REFLECTED BY THE ALLEGED UNACCOUNTED SA LES) THE FINDING OF THE TRIBUNAL THAT ONLY THE GP ON THE SA ID AMOUNT CAN BE BROUGHT TO TAX DOES NOT CALL FOR ANY INTERFEREN CE.' 4.5.2] THUS, AS SUCH ALTHOUGH THE APPELLANT WAS HAVING SUF FICIENT CASH AND STOCK IN HIS REGULAR BOOKS OF ACCOUNT AND MORE SO WHEN THE BOOKS OF ACCOUNT WAS REJECTED AND NET PROFIT RA TE WAS APPLIED THERE WAS NO JUSTIFICATION FOR MAKING ADDITION OF RS 2,56,74,870/- TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF UNEXPLAINED INVESTMENT FOR UNRECORDED TOTAL TURNOVE R; HOWEVER, THE APPELLANT HAS NOT BEEN ABLE TO CORROBORATE THE FACT THAT THE CASH AND STOCK IN HAND OF THE BUSINESS WAS USED FOR MAKING THE DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 40 INITIAL INVESTMENT IN THE OUT OF BOOKS SALES. THUS, IT CANNOT BE DENIED THAT THE APPELLANT MUST HAVE MADE SOME INITI AL INVESTMENT FOR DOING BUSINESS OUTSIDE THE BOOKS OF ACCOUNT. BUT THIS ADDITION ON ACCOUNT OF INITIAL UNEXPLAINED INV ESTMENT FOR DOING BUSINESS OUTSIDE BOOKS OF ACCOUNT CAN NOT EXC EED THE PEAK OF THE UNRECORDED TURNOVER IN THE BOOKS OF ACCOUNT. THIS PEAK WORKS OUT TO RS 51,65,904/- AS ON 27.10.10 WHICH IS ON PAGE 276-'OR~THE PAPER BOOK OF THE APPELLANT. ' 4.5.3 THUS, 1 FEEL THAT IT WOULD SERVE THE ENDS OF THE JU STICE AND IT WOULD BE FAIR AND REASONABLE TO RESTRICT THIS AD DITION TO RS 51,65,904/- ON ACCOUNT OF UNEXPLAINED INVESTMENT FO R UNRECORDED TURNOVER. HENCE, 1 THEREFORE DIRECT THE ASSESSING OFFICER TO RESTRICT THIS ADDITION TO RS 51,65,904/ - MADE TO THE TOTAL INCOME OF THE APPELLANT. THE APPELLANT ACCORD INGLY GETS PART RELIEF. 5.0 AS A RESULT, THIS APPEAL IS PARTLY ALLOWED. 32. BEFORE US WHEN THE MATTER WAS BEING HEARD LD. C OUNSEL FOR THE ASSESSEE REFERRED TO THE DECISION OF HONBLE IT AT INDORE BENCH IN THE CASE OF SITARAM AGRAWAL (SUPRA) WHICH WAS ALSO AUTHORED BY US. IN THIS CASE OF SITARAM AGRAWAL (SUPRA) SIMILAR ISSUE OF UNACCOUNTED TURNOVER THROUGH UNDISCLOSED BANK ACCOU NT WAS THERE. THE LD. A.O COMPUTED THE PEAK BALANCE OF TH E UNACCOUNTED BANK ACCOUNTS. WE HOWEVER CONFIRMED THE FINDING OF LD. CIT(A) THAT THE ADDITION FOR PEAK BALANCE CAN BE MADE ONLY IF IT IS MORE THAN THE CASH OR STOCK IN HAND AVAILABLE IN THE REG ULAR BOOKS AND DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 41 PROFIT OFFERED AS UNACCOUNTED TURNOVER OF PRECEEDIN G YEAR OR YEARS. OUR RELEVANT FINDINGS IN THE CASE OF SITARAM AGRAWAL (SUPRA) ADJUDICATING THIS ISSUE READS AS UNDER:- IN OUR CONSIDERED VIEW ASSESSEE HAD CARRIED OUT THE TRANSACTIONS OF SALES AND PURCHASES WITH THE REGULAR PARTIES OF WHICH SOM E HAVE BEEN RECORDED IN THE REGULAR BOOKS AND SOME HAVE NOT BEEN RECORDE D WHICH ARE ROUTED THROUGH THE ICICI BANK. THIS FACTS STRONGLY SUPPORT S THE SUBMISSION OF THE ASSESSEE THAT THE PHYSICAL STOCK AND CASH IN HAND I N THE REGULAR BOOKS HAVE BEEN UTILISED FOR MAKING UNACCOUNTED SALES. IT IS NOTEWORTHY THAT THE ASSESSEE IS CARRYING OUT OF BOOKS SALES TRANSACTION S IN THE PAST ALSO AND TILL THE DATE OF PEAK BANK BALANCE ON 28.2.2014 THE PROFITS EARNED ON UNRECORDED SALES HAVE BEEN OFFERED TO TAX AND THEY FORM PART OF THE PEAK BANK BALANCE. SO IN NUTSHELL AGAINST PEAK BALANCE F OUND IN THE BANK ACCOUNT NOT DISCLOSED IN THE REGULAR BOOKS IN THE I NSTANT CASE THREE THINGS HAVE TO BE CONSIDERED, FIRSTLY STOCK IN HAND AVAILA BLE WITH THE ASSESSEE, SECONDLY CASH IN HAND AVAILABLE IN REGULAR BOOKS AN D THIRDLY THE UNDISCLOSED PROFIT EARNED ON THE UNACCOUNTED SALES TILL THE DATE OF PEAK BALANCE WHICH HAVE BEEN OFFERED TO TAX. TAKING THES E FACTORS TOGETHER, IN THE INSTANT CASE THE PEAK BALANCE IN THE UNDISCLOSE D ICICI BANK ACCOUNT IS MUCH LESS THAN THE TOTAL OF STOCK IN HAND, CASH IN HAND AND UNACCOUNTED PROFITS OFFERED TO TAX. WE THEREFORE IN THE GIVEN F ACTS AND CIRCUMSTANCES OF THE CASE AND CONSIDERING JUDICIAL PRECEDENCE FIND N O INCONSISTENCY IN THE FINDING OF LD. CIT(A) DELETING THE PEAK CREDIT ADDI TION OF RS.1,25,33,136/-. WE ACCORDINGLY DISMISS REVENUES GROUND NO.1. 33. NOW EXAMINING THE INSTANT CASE AND IN THE LIG HT OF OUR ABOVE DECISION WE OBSERVE THAT ON 27.10.2010 THE TOTAL PE AK BANK BALANCE DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 42 AS PER UNDISCLOSED BANK ACCOUNTS IS RS. 75,80,285/- ( WHICH HOWEVER HAS BEEN WRONGLY TAKEN BY LD. CIT(A) AT RS . 51,65,904/- AS HE IGNORED THE BANK BALANCE OF UNION BANK AT RS. 24,14,381/-). AGAINST THIS PEAK BALANCE OF RS. 75,80,285/- IF WE LOOK AT THE BOOK RESULTS WE FIND THAT ON THE VERY SAME DATE I.E. 27. 10.2010 CASH BALANCE AVAILABLE IN M/S. MONIKA TRADING COMPANY AN D M/S. WHITE GOLD ENTERPRISES IS RS. 3,26,957/- AND RS.3,74,978/ - TOTALLING TO RS. 40,76,737/-. APART FROM CASH THE ASSESSEE ALSO HAS STOCK IN HAND AND THE SAME IN THE CASE OF M/S. MONIKA TRADI NG COMPANY AND M/S. WHITE GOLD ENTERPRISES IS RS. 56,25,609/- AND RS. 25,59,663/- RESPECTIVELY TOTALING TO RS.81,85,272/- . SO AS ON 27.10.2010 TOTAL OF CASH AND STOCK IN HAND AVAILABL E IN THE REGULAR BOOKS OF THE TWO PROPRIETORSHIP CONCERNS RUN BY THE ASSESSEE TOTALS TO RS. 1,22,62,009/- AND THIS FIGURE IS MUCH MORE T HAN THAN THE PEAK BALANCE OF UNACCOUNTED BANK ACCOUNTS AT RS. 75 ,80,285/-. SO THERE IS NO NEGATIVE BALANCE OF CASH AND STOCK AFTE R CONSIDERING THE TOTAL CLOSING BALANCE OF ALL THE 5 BANK ACCOUNTS. WE THUS APPLYING OUR OWN FINDING IN THE CASE OF SITARAM AGRAWAL (SUPRA) ARE OF THE CONSIDERED VIEW THAT IN THE INSTANT CASE LD. A.O AS WELL AS LD. CIT(A) ERRED IN MAKING THE ADDITION OF UNACCOUNTED INVESTMENT/ DWARKA PRASAD TAYAL ITA NOS. 284 & 334/IND/2018 43 PEAK BALANCE OF UNDISCLOSED 5 BANK ACCOUNTS. WE TH EREFORE SET ASIDE THE FINDING OF LD. CIT(A) AND DELETE THE ADDI TION OF RS.51,65,904/- SUSTAINED BY LD. CIT(A). THUS GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED AND GROUND NO.2 RAISED B Y THE REVENUE IS DISMISSED. 34. IN THE RESULT APPEAL OF THE ASSESSEE ITA NO.284 /IND/2018 IS PARTLY ALLOWED AND THAT OF THE REVENUE ITA NO.334/I ND/2018 IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 13.10.20 20. SD/- SD/- ( KUL BHARAT) (MANI SH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 13 TH OCTOBER, 2020 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE