Shri Narendra N. Pala, RAJKOT-GUJARAT V. The Assistant Commissioner of Income Tax, Circle-2, RAJKOT-GUJARAT

ITA 29/RJT/2014

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5506 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 08-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MJ RANPURA
• Keywords: Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Peak credit; Source of fund; Question of law; Corroborative evidences; Procedural lapse; Documents seized; Set aside
• Section: 271(1)(c); 69C; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT LOZJH LOZJH LOZJH LOZJH EGKOHJ EGKOHJ EGKOHJ EGKOHJ IZLKN] U; IZLKN] U; IZLKN] U; IZLKN] U;KF KFKF KF;D LNL; , ;D LNL; , ;D LNL; , ;D LNL; ,OA OAOA OA OLHE OLHE OLHE OLHE VGEN] YS[KK LNL; DS LE{KA VGEN] YS[KK LNL; DS LE{KA VGEN] YS[KK LNL; DS LE{KA VGEN] YS[KK LNL; DS LE{KA BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ I.T.A. NO.29/RJT/2014 ( / ASSESSMENT YEAR : 2009-10) SHRI NARENDRA NATVARLAL PALA, POP. J. N. JEWELLERS MANDVI CHOWK, SONI BAZAR, RAJKOT. / VS. ACIT, CENTRAL CIRCLE 2, RAJKOT. ./ ./ PAN/GIR NO. : ACGPP 7914 A ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI M. J. RANPURA, A.R. / RESPONDENT BY : SHRI JITENDRA KUMAR, CIT-D.R. / DATE OF HEARING 25/09/2018 !'# / DATE OF PRONOUNCEMENT 01/11/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, AHMEDABAD, VIDE APPEAL NO.CIT(A)-IV/221R/CC-2/10-11 DATED. 27.11.2013 FOR THE ASSESSMENT YEAR (AY) 2009-10. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL: 1.0 THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER: ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 2 - 2.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) - IV, AHMADABAD [CIT(A)] ERRED ON FACTS AS ALSO IN LAW IN ALLEGING THAT THE APPELLANT HAS MADE UNACCOUNTED INVESTMENT IN THE BEGINNING OF THE YEAR IN HIS UNACCOUNTED BUSINESS O F GOLD TRADING. 3.0 THE LEARNED CIT(A) ALSO ERRED IN ESTIMATING INITIAL INVESTMENT AT 1/3 RD OF COST OF UNACCOUNTED SALES AND MAKING ADDITION O F RS.21,30,096/-. THE ADDITION MADE IN TOTAL DISREGAR DS TO THE FACTS ON RECORD MAY KINDLY BE DELETED. 4.0 YOUR HONOR'S APPELLANT CRAVES LEAVE TO ADD, A MEND, ALTER, OR WITHDRAW ANY OR MORE GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF APPEAL. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IS THAT LD CIT(A) ERRED IN MAKING THE ADDITION OF RS. 21,30,096/- ON ACCOUNT O F INITIAL INVESTMENT IN THE UNACCOUNTED BUSINESS OF GOLD TRADING. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF BULLION MERCHANT AND MAN UFACTURING IN GOLD ORNAMENTS. 4.1 THE SEARCH OPERATION U/S 132 OF THE ACT WAS CAR RIED OUT AT THE PREMISES OF THE ASSESSEE DATED 12.01.2009. DURING T HE SEARCH, CERTAIN DOCUMENTS RELATED TO UNACCOUNTED SALE BILLS WERE FO UND AND SEIZED. AS PER THESE SEIZED BILLS, AN AMOUNT OF UNACCOUNTED SA LE WAS DETERMINED AT RS. 1,59,90,288/- AGAINST THE SALE OF 10,826 GRAMS OF JEWELLERY. THE ASSESSEE AGAINST SUCH UNACCOUNTED SALE ADMITTED AN INCOME OF RS. 24,00,000/- AND RS.11,00,000/-. THE INCOME OF RS.11 ,00,000/- WAS ADMITTED BY THE ASSESSEE TO COVER UP OTHER INCOME O N AD-HOC BASIS WHICH ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 3 - MAY ARISES DURING THE COURSE OF HEARING. THUS, THE ASSESSEE DECLARED ADDITIONAL INCOME OF RS. 35,00,000/- IN TOTAL AS A RESULT OF SEARCH U/S 132 OF THE ACT. HOWEVER, THE AO DURING THE ASSESSMENT PROCEEDINGS O BSERVED THAT THE ASSESSEE HAS DECLARED GP @37% IN ITS DISCLOSED BUSI NESS. ACCORDINGLY, THE AO WORKED OUT THE PROFIT AS UNDISCLOSED INCOME OF RS. 59,16,406/- (37% OF RS.1,59,90,288). THE AO AGAINST SUCH GROSS PROFIT FURTHER REDUCED A SUM OF RS. 8,04,710/- ON ACCOUNT OF MANUF ACTURING EXPENSES INCURRED BY THE ASSESSEE ON SUCH UNDISCLOSED SALE O F JEWELLERY. THUS, THE AO DETERMINED THE EFFECTIVE UNDISCLOSED PROFIT OF R S. 51,11,696/- (59,16,406 8,04,710) AGAINST THE UNDISCLOSED SALE OF ASSESSEE AS DISCUSSED ABOVE. 4.2 THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS A LREADY DISCLOSED AN INCOME OF RS. 35,00,000/- AGAINST THE SALE OF SUCH UNDISCLOSED INCOME. ACCORDINGLY, THE AO TREATED THE DIFFERENCE OF RS. 1 6,11,696/- (59,16,406 35,00,000) AS UNDISCLOSED INCOME WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A) WHO DELETED THE ADDITION MADE BY THE AO. ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 4 - HOWEVER, THE LD CIT(A) WAS OF THE VIEW THAT THE ASS ESSEE CANNOT INDULGE IN UNACCOUNTED BUSINESS WITHOUT MAKING THE INITIAL INVESTMENT. THEREFORE, THE LD CIT(A) ISSUED AN ENHANCEMENT NOTI CE TO THE ASSESSEE DATED 18.11.2013. THE DETAIL OF THE NOTICE IS EXTRA CTED AS UNDER: 'DURING THE COURSE OF SURVEY AT YOUR BUSINESS PREMI SE, UNACCOUNTED TURNOVER OF RS.1,59,90,288/- WAS DISCOVERED ON THE BASIS OF DOCUMENTS / BILL BOOKS FOUND DURING COURSE OF SURVEY. IT IS A C OMMON KNOWLEDGE THAT FOR RUNNING PARALLEL UNACCOUNTED BUSINESS OF PURCHA SE AND SALE OF GOODS, CERTAIN INITIAL INVESTMENT IS DEFINITELY REQ UIRED TO BE MADE OUT OF THE UNEXPLAINED SOURCES. THIS ISSUE WAS ALSO DISCUS SED WITH YOUR AUTHORIZED REPRESENTATIVE DURING THE EARLIER HEARIN GS. YOU HAVE SHOWN GROSS PROFIT OF 15% ON THE ACCOUNTED TURNOVER. THER EFORE, THE COST PRICE OF UNRECORDED SALES COMES TO APPROXIMATELY RS.1.35 CRORES (RS.1.59 CRORES - GP @ 15% RS.0.24 CRORES). PLEASE EXPLAIN W HY APPROXIMATELY L/3 RD OF THIS COST OF UNRECORDED SALES OF RS.1.35 CRORES SHOULD NOT BE TREATED AS INITIAL INVESTMENT IN THE UNACCOUNTED BU SINESS OF SALE OF GOLD ORNAMENTS WHICH WAS FUNDED BY YOU OUT OF UNDISCLOSE D SOURCES.' 5.1 THE ASSESSEE IN COMPLIANCE TO IT SUBMITTED THAT HE HAS ALREADY ADMITTED THE UNDISCLOSED PROFIT OF RS. 35,00,000/- AGAINST SUCH UNACCOUNTED SALES OF RS.1,59,90,288/- WHICH IS REPR ESENTING APPROXIMATELY GP RATIO @22% OF SALES. THE ASSESSEE ALSO CLAIMED THAT IN CASE OF UNACCOUNTED SALES ONLY REASONABLE PROFIT CA N BE TAXED WHICH HAS ALREADY BEEN OFFERED TO TAX BY HIM IN HIS INCOME TA X RETURN. 5.2 THE ASSESSEE WITHOUT PREJUDICE TO THE ABOVE FUR THER SUBMITTED THAT HE HAS BEEN PURCHASING AND SELLING THE GOODS ON REG ULAR BASIS. HE PURCHASED THE GOODS AND MAKES SALE OF THOSE GOODS I N SMALL QUANTITY AND ON PIECEMEAL BASIS THROUGHOUT THE YEAR. THE ASSESSE E ALSO SUBMITTED THAT ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 5 - THIS FACT CAN BE VERIFIED FROM THE SALES BILL IMPOU NDED DURING SEARCH PROCEEDINGS. THE ASSESSEE ALSO SUBMITTED THAT THE R EGULAR PURCHASES AND SALES CAN ALSO BE VERIFIED FROM THE FINANCIAL ASSES SMENT YEARS PERTAINING TO 2006-07 & 2007-08. THEREFORE, THERE CANNOT BE AN Y SITUATION OF MAKING INITIAL INVESTMENT IN THE UNDISCLOSED BUSINE SS EQUIVALENT TO 1/3 RD OF THE TOTAL COST OF UN-RECORD SALES. 5.3 THE ASSESSEE ALSO SUBMITTED THAT HE HAS BEEN MA KING UNACCOUNTED SALES OUT OF THE PURCHASES/STOCKS WHICH WERE DISCLO SED IN THE INCOME TAX RETURN. AS SUCH THE ASSESSEE USED TO MAKE INTENDED SALE OUT OF DISCLOSED PURCHASES/STOCKS AND SUBSEQUENTLY HE USED TO MAKE P URCHASES FROM THE SALE PROCEEDS OF THE EQUIVALENT AMOUNT WHICH WERE A LREADY DISCLOSED IN THE BOOKS OF ACCOUNTS. THEREFORE THERE WAS NO REQUI REMENT TO THE ASSESSEE FOR HAVING ANY INITIAL INVESTMENT FOR THE UNACCOUNTED SALES AS DISCUSSED ABOVE. HOWEVER, THE LD CIT(A) DISREGARDED THE CONTENTION O F THE ASSESSEE AND MADE THE ADDITION ON ACCOUNT OF INITIAL INVESTMENT IN THE BUSINESS BY OBSERVING AS UNDER: 8.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E BY THE APPELLANT. 8.2.1 THE CONTENTIONS RAISED BY THE APPELLANT IN T HIS SUBMISSION CANNOT BE ACCEPTED. THE CLAIM THAT UNACCOUNTED TURNOVER WA S CARRIED OUT BY USING THE ACCOUNTED STOCK CANNOT BE ACCEPTED AS IN SUCH CASE IN ORDER TO MATCH THE CLOSING STOCK, THE APPELLANT IS REQUIR ED TO MAKE UNRECORDED PURCHASES WHICH WOULD OTHERWISE ATTRACT PROVISIONS OF SECTION 69C OF ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 6 - THE ACT. APPELLANT HAS NOT BEEN ABLE TO PROVE THIS PLEA AS NO DAY TO DAY STOCK REGISTER REFLECTING SUCH MOVEMENT HAS BEEN MA INTAINED AND PRODUCED. THE CLAIM THAT NO EXCESS STOCK WAS FOUND AT THE TIME OF SURVEY MEANS THAT ACCOUNTED STOCK WAS USED FOR MAKI NG UNACCOUNTED SALES CANNOT BE ACCEPTED WITHOUT ANY CORROBORATIVE EVIDENCES IN THIS REGARD. 8.2.2 THE CLAIM OF THE APPELLANT THAT IN F.YS. 200 6-07 AND 2007-08 APPELLANT HAS MADE PURCHASES MORE OR LESS EQUAL TO THE QUANTITY OF SALES ON MONTHLY BASIS IS OF NO RELEVANCE. THESE AR E THE FIGURES OF THE ACCOUNTED TURNOVER OF THE APPELLANT WHICH HAVE NOTH ING TO DO WITH THE UNACCOUNTED BUSINESS OF SALE OF GOLD ORNAMENTS CARR IED OUT BY THE APPELLANT. FURTHER, THE FIGURES OF MONTHLY PURCHASE S ARE NOT SIMILAR TO THAT OF MONTHLY SALES AS CLAIMED BY THE APPELLANT. FOR E.G. IN THE MONTH OF AUGUST 2007, THERE WERE PURCHASES OF 1383.44 GRA MS AS AGAINST THE SALES OF 875.98 GRAMS. SIMILARLY, THERE WERE NO PUR CHASES IN THE MONTHS OF OCTOBER & DECEMBER, 2007 & JANUARY, 2008 WHEREAS IN THESE MONTHS THERE ARE SUBSTANTIAL SALES BY THE APPELLANT . THEREFORE, THE CLAIM OF THE APPELLANT IS NEITHER CORRECT NOR RELEVANT TO THE ISSUE. 8.2.3 THE VIEW THAT SOME INITIAL INVESTMENT IS ALW AYS REQUIRED FOR CARRYING OUT PARALLEL UNACCOUNTED BUSINESS TRANSACT IONS HAS BEEN UPHELD BY THE HON'BLE HIGH COURT OF DELHI IN A RECE NT JUDGEMENT DATED 24-07-2013 IN THE CASE OF CIT VS. AJAY KAPOOR. THE FACTS OF THIS CASE AND RELEVANT PORTION OF JUDGEMENT ARE AS BELOW: 'THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATE D 28TH NOVEMBER. 2003 MADE SEVERAL ADDITIONS AND ASSESSED THE TOTAL INCOME OF THE RESPONDENT- ASSESSEE AT RS.9,91,63,790/-. THE AFORE SAID ADDITION INCLUDED ADDITIONS ON THE BASIS OF A DOCUMENT MENTI ONING UNDISCLOSED SALES OF RS.9,73,63,789/- BETWEEN THE PERIOD 1ST AP RIL. 2001 TO 6TH NOVEMBER. 2001. THIS DOCUMENT WAS ACCEPTED BY THE R ESPONDENT- ASSESSEE IN THEIR LETTER DATED 6TH JUNE, 2000 AS A RECORD OF THEIR UNACCOUNTED SALES. THE ASSESSING OFFICER MADE ADDIT ION ON ACCOUNT OF UNRECORDED PURCHASES OF RS.4,50,17,616/- ON THE BAS IS OF THE SAID PAPER. THE ASSESSING OFFICER HELD THAT THE DIFFEREN CE BETWEEN UNRECORDED PURCHASES (RS.4,50,17,616/-) AND UNRECOR DED SALES FIGURES (RS.9,73,63,789/-) I.E. RS.5,23,46,173/- SHOULD BE TREATED AS UNDECLARED ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 7 - PROFIT EARNED DURING THE BLOCK PERIOD. THUS TWO ADD ITIONS OF RS.4,50,17,616/- AND RS.5,23,46,173/-WERE MADE. CIT (APPEALS) ALSO DELETED THE ENTIRE ADDITION OF R S.4,50,17,616/- ON ACCOUNT OF INVESTMENT IN UNACCOUNTED PURCHASES OBSE RVING THAT THE ASSESSEE HAD BEEN MAKING UNRECORDED SALES OUT OF TH E ACCOUNTED STOCK KEPT BY THE ASSESSEE FOR HIS REGULAR BUSINESS. THE ASSESSEE USED TO REPLENISH THE STOCK BY MAKING UNRECORDED PURCHASES TO MAKE GOOD THE SHORT FALL IN THE ACCOUNTED STOCK. HOWEVER, ON THE NEXT ISSUE WHETHER ANY ADDITION SHO ULD HAVE BEEN MADE ON ACCOUNT OF UNACCOUNTED INVESTMENT, WE ARE U NABLE TO COMPREHEND THE REASONING AND LOGIC GIVEN BY THE TRI BUNAL. THEY HAVE RECORDED THAT THE RESPONDENT-ASSESSEE DID NOT MAINT AIN DAY-TO-DAY STOCK RECORD/REGISTER AND, THEREFORE, IT CANNOT BE SAID THAT UNRECORDED SALES COULD NOT HAVE BEEN OF ACCOUNTED STOCK, WHICH WAS LATER ON REPLENISHED FROM THE SALE PROCEEDS OF UNRECORDED SA LES. THUS, THE RESPONDENT-ASSESSEE HAD NOT MADE ANY INVESTMENT FOR THE UNRECORDED TRANSACTIONS. IT IS HELD THAT NO EVIDENCE OF UNACCO UNTED INVESTMENT WAS FOUND AT THE TIME OF SEARCH. ONCE THE STOCK REGISTE R WAS NOT THERE AS RECORDED BY THE TRIBUNAL IN ITS ORDER, THE SAID FIN DING ITSELF APPARENTLY IS CONTRADICTORY. THE FINDING THAT NO INCRIMINATING DO CUMENT REGARDING INVESTMENT WAS FOUND IS CONTRADICTORY BECAUSE THE T RIBUNAL HAS ACCEPTED AND ADMITTED THAT THE ASSESSEE HAD HIMSELF CONFIRMED THAT HE HAD MADE SALES OF RS.9.73 CRORES OUTSIDE THE BOOKS OF ACCOUNTS. THESE WERE UNACCOUNTED SALES. THEREAFTER, IT WAS FOR THE ASSESSEE TO EXPLAIN AND STATE THE SOURCE/FUNDS FOR CONDUCTING AND ENTER ING INTO THE SAID TRANSACTION, HI OTHER WORDS, THE ASSESSEE HAD UNACC OUNTED TURNOVER OF APPROXIMATELY RS.5 LACS PER DAY DURING THE PERIOD 1 ST APRIL TO 6TH NOVEMBER, 2001. TRANSACTIONS OF SUCH VALUE DO REQUI RE INVESTMENT. PLEA OF THE ASSESSEE THAT EXISTING OR AVAILABLE INV ESTMENT IN THE BOOKS WAS SUFFICIENT HAS TO BE MADE GOOD WITH MATERIAL AN D PROOF BY THE ASSESSEE. THE ASSESSEE HAD TO EXPLAIN THAT PURCHASE S RECORDED IN THE BOOKS WERE SUFFICIENT AFTER ADJUSTMENT OF THE RECOR DED SALES. IN CASES OF UNACCOUNTED SALES AND PURCHASES ALL DOCUMENTS MAY N OT BE AVAILABLE AND CERTAIN AMOUNT OF GUESS WORK IS ALWAYS REQUIRED AS NOTICED EARLIER BUT A REALISTIC AND COMMON SENSE APPROACH IS REQUIR ED. TO SAY THAT THERE WAS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAD MADE UNEXPLAINED INVESTMENT WOULD BE TO WRITE OFF AND ERASE THE EARL IER FINDING OF THE ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 8 - TRIBUNAL THAT THE ASSESSEE HAD MADE UNACCOUNTED SAL ES OF RS.9.73 CRORES. UNRECORDED PURCHASES AS MENTIONED IN THE SE IZED DOCUMENT WERE MORE THAN RS.4.50 CRORES. WE ALSO DO NOT AGREE WITH THE FINDING RECORDED BY THE TRIBUNAL THAT PROOF OF UNACCOUNTED PURCHASES DID NOT PRIMA FACIE INDICATE OR SHOW THAT UNACCOUNTED INVES TMENT WAS MADE, AS THERE WAS OTHER APPARENT EVIDENCE TO THE CONTRARY. ONUS, IN SUCH CASES, IS ON THE ASSESSEE TO SHOW THAT UNACCO UNTED INVESTMENT WAS MADE OUT OF ACCOUNTED STOCK. THERE CANNOT BE ANY AS SUMPTION OR PRESUMPTION THAT UNACCOUNTED SALES MUST BE FROM ACC OUNTED PURCHASES. UNACCOUNTED SALES MAY RESULT AND CAN CONTRIBUTE TOW ARDS THE INVESTMENT, BUT THERE HAS TO BE INITIAL INVESTMENT. PROFITS AND INCOME EARNED ARE ALSO USED FOR PERSONAL NEEDS AND ARE TAK EN OUT OF BUSINESS. ON THE QUESTION WHETHER THE PEAK CREDIT SHOULD BE A DDED AND BROUGHT TO TAX, TRIBUNAL HAS HELD AS UNDER;- '6.1 COINING T O THE ALTERNATIVE SUBMISSION THAT AT LEAST PEAK OF UNACCOUNTED INVEST MENT, WORKED OUT ON THE BASIS OF UNRECORDED PURCHASES SHOULD HAVE BEEN BROUGHT TO TAX, WE HAVE ONLY TO MENTION THAT THE SAME COULD BE TAXED O NLY IF THERE IS SOME EVIDENCE ON RECORD REGARDING UNDISCLOSED INCOME IN THE SEIZED MATERIAL OR OTHERWISE. THERE IS NO SUCH EVIDENCE AND, THEREF ORE, IN VIEW OF ARGUMENTS IN PARAGRAPH 6 (SUPRA), THE STAND OF THE LEARNED DR CANNOT BE ACCEPTED. NOTWITHSTANDING THIS ARGUMENT, THE WOR KING OF PEAK SUBMITTED BY THE LD. DR AT RS.17,03,546/- IS LOWER THAN THE UNACCOUNTED INCOME BROUGHT TO TAX BY THE ID. CIT(APPEALS) AT RS .21.90,685/-. THE ID. DR HAS NOT BEEN ABLE TO SHOW THAT THE PEAK EXCEEDED THE UNACCOUNTED PROFIT IN ANY YEAR. THEREFORE, IT IS HELD THAT THE ASSESSEE WAS IN POSSESSION OF MONEY BY WAY OF PROFIT ON UNRECORDED SALES, WHICH COULD HAVE BEEN USED FOR FUNDING THE PURCHASES.' FIRST PART OF THE REASONING HAS BEEN DEALT WITH ABO VE AND IT HAS BEEN RECORDED THAT ONUS HAS BEEN WRONGLY PLACED ON THE R EVENUE. ONCE UNACCOUNTED FOR TURNOVER OF RS.9.73 CRORES IS ACCEP TED, THEN THE ASSESSEE MUST EXPLAIN THE SOURCE OF INVESTMENT. THE TRUE FACTS WERE IN HIS KNOWLEDGE. WE DO NOT AGREE WITH THE TRIBUNAL TH AT AS UNACCOUNTED INCOME OF RS. 21,90,685/- HAS BEEN BROUGHT TO TAX, NO ADDITION ON ACCOUNT OF PEAK INVESTMENT OF RS. 17,03,546/- IS JU STIFIED. THIS FIGURE OF RS. 21,90,685/- REPRESENTS THE GROSS PROFITS EARNED IN THE BLOCK PERIOD. FURTHER, THE PROFIT EARNED FROM UNACCOUNTED TRANSAC TIONS CAN BE AND ARE USED AND CONSUMED BY THE ASSESSEE FOR THEIR OWN PERSONAL USES. WE DO NOT THINK THAT THE TRIBUNAL DEALT WITH THE SECON D ISSUE IN RIGHT ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 9 - PERSPECTIVE BY PLACING THE ONUS ON THE REVENUE TO E XPLAIN THE SOURCE OF INVESTMENT MADE BY THE ASSESSEE THOUGH THERE WERE U NACCOUNTED SALE TRANSACTIONS. IT HAS IGNORED RELEVANT AND MATERIAL FACTS AND HAS GONE ON A TANGENT WITHOUT EXAMINING THE REAL ISSUE AND THE CONTROVERSY, I.E. HAS THE ASSESSEE EXPLAINED THE SOURCE OF FUNDS REQUIRED FOR MAKING INVESTMENT TO HAVE TURNOVER OF RS.9.73 CRORES. WE A RE, THEREFORE, CONSTRAINED TO HOLD THAT THIS PART OF THE ORDER IS PERVERSE AND CANNOT BE ACCEPTED. PERVERSITY, IN THE PRESENT CASE, IS OCCASIONED DUE TO TWO REASONS: FIRSTLY, BY WRONGLY PLACING ONUS ON THE REVENUE THOUGH THE F ACTS WERE IN PERSONAL KNOWLEDGE OF THE ASSESSEE, AND SECONDLY, B Y IGNORING THE ADMISSION OF THE RESPONDENT THAT THEY HAD INDULGED IN UNACCOUNTED SALES OF RS 9.7 CRORES. IN SPITE OF ADMISSION AND T HE SEIZED DOCUMENT, IT HAS BEEN OBSERVED THAT THERE WAS NO MATERIAL WITH T HE REVENUE TO PRIMA FACIE JUSTIFY ANY ADDITION TOWARDS UNRECORDED INVES TMENT IN STOCK. ALLEGATIONS, IN THE PRESENT CASE, ARE NOT BASED UPO N WEIGHING OF EVIDENCE BUT FOR ALTOGETHER A WRONG DECISION. THE D ECISION SUFFERS FROM VICE OF IRRATIONALITY, RENDERING IT INFIRM IN LAW. IN MUNICIPAL COMMITTEE. HOSHIARPUR V. PUNJAB SEB (2010) 13 SCC 216 IT HAS B EEN HELD THAT: IF A FINDING OF FACT IS ARRIVED AT BY IGNORING OR EXCLUD ING RELEVANT MATERIAL OR BY TAKING INTO CONSIDERATION IRRELEVANT MATERIAL OR IF THE FINDING SO OUTRAGEOUSLY DEFIES LOGIC AS TO SUFFER FROM THE VIC E OF IRRATIONALITY INCURRING THE BLAME OF BEING PERVERSE, THEN THE FIN DING IS RENDERED INFIRM IN THE EVE OF THE LAW. IF THE FINDINGS OF TH E COURT ARE BASED ON NO EVIDENCE OR EVIDENCE WHICH IS THOROUGHLY UNRELIABLE OR EVIDENCE THAT SUFFERS FROM THE VICE OF PROCEDURAL IRREGULARITY OR THE FINDINGS ARE SUCH THAT NO REASONABLE PERSON WOULD HAVE ARRIVED AT THO SE FINDINGS, THEN THE FINDINGS MAY BE SAID TO BE PERVERSE. FURTHER IF THE FINDINGS ARE EITHER IPSE DIXIT OF THE COURT OR BASED ON CONJECTU RE AND SURMISES, THE JUDGMENT SUFFERS FROM THE ADDITIONAL INFIRMITY OF N ON-APPLICATION OF MIND AND THUS, STANDS VITIATED. (VIDE BHARATHA MAMA V. R. VIIAVA RENGANATHAN F(2010) 11 SCC 483 : AIR 2010 SC 26851 .V 15. EARLIER IN DHIRAILAL GIRDHARILAL V. CIT (1954) 26 ITR 736 ( SC) IT WAS OBSERVED:- '...IF THE COURT OF FACT, WHOSE DECISION ON A QUEST ION OF FACT IS FINAL, ARRIVES AT THIS DECISION BY CONSIDERING MATERIAL WH ICH IS IRRELEVANT TO THE ENQUIRY OR BY CONSIDERING MATERIAL WHICH IS PAR TLY RELEVANT AND ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 10 - PARTLY IRRELEVANT, OR BASES ITS DECISION PARTLY ON CONJECTURES, SURMISES AND SUSPICIONS, AND PARTLY ON EVIDENCE, THEN IN SUC H A SITUATION CLEARLY AN ISSUE OF LAW ARISE.... ...IT IS WELL ESTABLISHED THAT WHEN A COURT OF FACT ACTS ON MATERIAL, PARTLY RELEVANT AND PARTLY IRRELEVANT, IT IS IMPOSSIBLE TO SAY TO WHAT EXTENT THE MIND OF THE COURT WAS AFFECTED BY THE IRRELEVANT MA TERIAL USED BY IT IN ARRIVING AT ITS FINDING. SUCH A FINDING IS VITIATED BECAUSE OF THE USE OF INADMISSIBLE MATERIAL AND THEREBY AN ISSUE OF LAW A RISES.' IN CIT V. DAULAT RAM RAWAT MULL (1973) 87 ITR 349 I T HAS BEEN HELD THAT ONUS OF PROVING WHAT IS APPARENT IS NOT REAL I S ON THE PARTY WHO CLAIMS IT TO BE SO. THERE SHOULD BE DIRECT NEXUS BE TWEEN THE CONCLUSIONS OF FACT ARRIVED AT, OR INFERRED, AND THE PRIMARY FA CTS UPON WHICH THE CONCLUSION IS BASED. WHEN IRRELEVANT CONSIDERATION AND EXTRANEOUS MATERIALS FORM THE SUBSTRATUM OF AN ORDER, OR THE A UTHORITY HAS PROCEEDED IN A WRONG PRESUMPTION WHICH IS ERRONEOUS IN LAW, AS IN THE PRESENT CASE, QUESTION OF LAW ARISES AND WHEN THE S AID CONTENTION IS FOUND TO BE CORRECT, THEN THE ORDER IS PERVERSE. A FACTUAL DECISION IS PERVERSE WHEN IT IS WITHOUT ANY EVIDENCE OR WHEN TH E FACTUAL DECISION, IN VIEW OF THE FACT ON RECORD, CANNOT BE REASONABLY ENTERTAINED. FINDING BASED UPON SURMISES, CONJECTURES OR SUSPICION OR WH EN THEY ARE NOT RATIONALLY POSSIBLE HAVE TO BE STRUCK DOWN. IN CIT V. S.P. JAIN (1973) 87 ITR 370 (SC) IT HAS BEEN OBSERVED THAT A FACTUAL CO NCLUSION IS REGARDED AS PERVERSE WHEN NO PERSON DULY INSTRUCTED OR ACTIN G JUDICIALLY COULD UPON THE RECORD BEFORE HIM, HAVE REACHED THE CONCLU SION ARRIVED AT BY THE TRIBUNAL/ AUTHORITY. IN VIEW OF THE AFORESAID POSITION, WE PARTLY ANSWER THE QUESTION OF LAW MENTIONED ABOVE IN AFFIRMATIVE I.E. IN FAVOUR OF TH E APPELLANT AND AGAINST THE RESPONDENT.' 8.2.4 SIMILAR VIEW HAS BEEN UPHELD BY THE HON'BLE 1TAT, AHMEDABAD ALSO IN THE CASE OF KANDOI BHOGILAL MULCHAND IN ITS JUDGEMENT DATED 14-05-2010. THE RELEVANT PORTION OF THE JUDGEMENT IS AS BELOW : ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 11 - 'THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 158BC(C) OF THE ACT, WHEREIN HE COMPUTED THE TOTAL UNDISCLOS ED INCOME OF THE ASSESSEE AT RS.45,73,320/-. THIS INCOME, INTER ALIA , INCLUDES ADDITION OF RS.42,32,037/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF UNRECORDED PROFIT (SALES) OF RS.42,32,037/-, WHICH COMPRISES O F RS.7,23,933/- AT SATELLITE SHOP AND RS.35,08,104/- IN OTHERS. THE EN TIRE SALES AT SATELLITE SHOP AMOUNTING TO RS.7,23,933/- DECLARED BY THE ASS ESSEE AS UNDISCLOSED INCOME OF THE BLOCK PERIOD. IN RESPECT OF OTHER SALES, THE ASSESSEE HAS DECLARED GROSS PROFIT @ 28%. THE RELEVANT DISCUSSION IS CONTAINED IN PARA 4 OF T HE ORDER OF THE TRIBUNAL DATED 06.03.2009 AND THE SAME READS AS UND ER :- '4. HAVING HEARD BOTH PARTIES, WE HAVE CAREFULLY P ERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. BEFORE US , THE LEARNED DR CONTENDED THAT UNRECORDED SALES WAS RS.42320387/- W HICH COMPRISES OF RS.723933 AT THE SATELLITE SHOP AND RS.35,08,104/- IN OTHERS. THE ENTIRE SALES AT SATELLITE SHOP AMOUNTING TO RS.723933 HAS BEEN DECLARED BY THE ASSESSEE AS UNDISCLOSED INCOME OF THE BLOCK PERIOD. HOWEVER, IN RESPECT OF OTHER SALES, HE HAS ONLY DECLARED GP @28%. THE F ACTS OF BOTH THE UNRECORDED SALES ARE IDENTICAL. THEREFORE, THE ASSE SSING OFFICER IS LEGALLY AND FACTUALLY CORRECT IN TAXING THE ENTIRE UNRECORDED SALES AMOUNTING TO RS.35,08,104/-. ON THE OTHER HAND, THE ID. AR OF THE ASSESSEE POINTED OUT THAT IN RESPECT OF SATELLITE S HOP, ENTIRE COST OF RAW MATERIALS OF THE SALES MADE OUTSIDE THE BOOKS OF AC COUNT WAS RECORDED IN THE BOOKS OF ACCOUNT, WHEREAS IN RESPECT OF OTHE R SALES AMOUNTING TO RS.35,08,104/-, THE COST OF RAW MATERIALS WERE MADE FROM THE SALES OUTSIDE THE BOOKS OF ACCOUNT ITSELF. HE ACCORDINGLY SUGGESTED THAT AT THE MOST UNRECORDED INITIAL INVESTMENT IN RAW MATERIALS CAN BE TREATED AS UNDISCLOSED INCOME WHICH ACCORDING TO HIM WORKS OUT TO RS.151 LAKHS TO A QUERY FROM THE BENCH THAT IN RESPECT OF UNRECO RDED SALES THE INITIAL INVESTMENT SHOULD BE MINIMUM 10% OF THE SALES, THE LEARNED AR OF THE ASSESSEE POINTED OUT THAT IN ORDER TO BUY PEACE HE HAS NO OBJECTION IF ADDITION OF RS.3 LAKHS IS MADE ON THIS COUNT. IN VI EW OF SUCH CONCESSION, WE DIRECT THE ASSESSING OFFICER TO FURTHER ADD UNAC COUNTED INVESTMENT AT RS.3 LAKHS OVER AND ABOVE THE ADDITION SUSTAINED BY THE LEARNED CIT(A.) AND RECOMPUTE THE TOTAL INCOME OF THE ASSES SEE ACCORDINGLY'.' 8.2.5 IN VIEW OF THE ABOVE, IT IS HELD THAT APPELLA NT HAS MADE UNACCOUNTED INVESTMENT IN THE BEGINNING OF THE YEAR IN ITS UNACCOUNTED ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 12 - BUSINESS OF GOLD TRADING. NOW THE QUESTION COMES OF ESTIMATING THE AMOUNT OF INITIAL UNACCOUNTED INVESTMENT MADE BY TH E APPELLANT. IN THE ENHANCEMENT SHOW CAUSE NOTICE, IT WAS PROPOSED TO T AKE 173 RD OF THE UNACCOUNTED TURNOVER AS INITIAL UNACCOUNTED INVESTM ENT MADE BY THE APPELLANT. HOWEVER, AS EXPLAINED BY THE APPELLANT, THE APPELLANT HAS EARNED GROSS PROFIT @ 15% ON UNACCOUNTED TURNOVER. THE TOTAL UNACCOUNTED TURNOVER CARRIED OUT BY THE APPELLANT W AS RS.1,59,90,288/- AFTER REDUCING 15% GROSS PROFIT FROM THIS UNACCOUNT ED TURNOVER THE COST OF UNRECORDED SALES COMES TO RS.1,35,91,745/- (1,59 ,90,288 - 23,98,543). IT IS RELEVANT TO MENTION HERE THAT THO UGH APPELLANT HAS DISCLOSED TOTAL RS.35 LAKHS IN RETURN OF INCOME BUT OUT OF THIS, ONLY RS.24,00,0007-WERE DISCLOSED AS PROFIT EARNED ON UN RECORDED SALES. THE BALANCE AMOUNT OF RS.11,00,0007- WAS DISCLOSED TO C OVER OTHER DISCREPANCIES. THE ENTRIES IN THE P & L A/C AS PER RETURN OF INCOME ARE AS BELOW : INCOME ADMITTED RS.11,00,000/- PROFIT FROM UNACCOUNTED SALES RS.24,0 0,000/ - TOTAL DISCLOSURE RS.35,00,000/ - THUS ONLY RS.24,00,000/- CAN BE TAKEN AS PROFIT EAR NED BY THE ASSESSEE ON UNACCOUNTED TURNOVER @15%. 8.2.6 NOW, 1/3 RD OF THIS COST OF UNRECORDED SALE IS REQUIRED TO BE TAKEN AS INITIAL INVESTMENT MADE BY THE APPELLANT IN ITS UNACCOUNTED BUSINESS. HOWEVER, IT IS ALSO AN ADMITTED AND ACCEPTED FACT T HAT APPELLANT HAS ALREADY DISCLOSED PROFIT OF RS.24,00,000/- IN RETUR N OF INCOME WHICH WAS EARNED ON UNACCOUNTED TURNOVER. OBVIOUSLY, THIS AMO UNT OF RS.24,00,000/- WAS AVAILABLE WITH THE APPELLANT FOR USING IN MAKING INVESTMENT IN ITS UNACCOUNTED BUSINESS. THUS, APPEL LANT IS ENTITLED FOR SET OFF OF THIS AMOUNT. ACCORDINGLY, THE NET UNACCO UNTED INITIAL INVESTMENT MADE BY THE ASSESSEE IS CALCULATED AS BE LOW: 1) UNRECORDED SALES AS PER SEIZED MATERIAL 1,5 9,90,28800 2) GROSS PROFIT ON ABOVE SALES @ 15% (ALREADY DISCL OSED) 24,00,000.00 3) COST OF UNRECORDED SALES (1 - 2) 1,35,90,2 88.00 4) INVESTMENT REQUIRED FOR EFFECTING ABOVE SALES (APPROX. 1/3 RD OF COST OF UNRECORDED SALES) 45,30,096.00 5) LESS : PROFIT ON UNRECORDED SALES PLOUGHED BACK 24,00,000.00 ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 13 - 6) NET UNACCOUNTED INITIAL INVESTMENT (4 - 5) 21,30,096.00 THEREFORE, RS.21,30,096/- IS TREATED AS INITIAL UNA CCOUNTED INVESTMENT MADE BY THE APPELLANT IN ITS UNACCOUNTED BUSINESS O F PURCHASE OF SALE OF GOLD ORNAMENTS. THUS APPELLANT HAS MADE UNACCOUNTED INVESTMENT OF RS.21,30,096/- THE SOURCES OF WHICH REMAINED UNEXPL AINED, THUS, IT IS HELD THAT TO THIS EXTENT APPELLANT HAS CONCEALED IT S INCOME AND FURNISHED INACCURATE PARTICULARS OF ITS INCOME. ACCORDINGLY, PENALTY U/S 271(1)(C) IS HEREBY INITIATED IN RESPECT OF THIS ADDITION. AS A RESULT, THE INCOME OF THE APPELLANT IS ENHANCED BY RS.21,30,096/-. 8.2.7 WITHOUT PREJUDICE TO ABOVE, IF THE CONTENTIO N OF THE APPELLANT THAT UNACCOUNTED SALES WERE MADE FROM ACCOUNTED STOCK IS CORRECT, IN THAT CASE, APPELLANT IS REQUIRED TO MAKE UNACCOUNTED PUR CHASES TO REPLENISH THE STOCK. THIS WOULD ATTRACT PROVISIONS OF SECTION 69C OF THE ACT WHICH READS AS BELOW: '69C. WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRE D ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE [ASSESSING] OFFICER, SAT ISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FI NANCIAL YEAR :] [PROVIDED THAT, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTH ER PROVISION OF THIS ACT, SUCH UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE SHALL NOT BE ALLOWED AS A DEDUCTION UNDER ANY HEAD OF INCOME.]' IN VIEW OF ABOVE PROVISIONS, IT IS CLEAR THAT ANY U NACCOUNTED PURCHASE MADE BY THE APPELLANT CANNOT BE ALLOWED AS DEDUCTIO N FROM BUSINESS PROFITS. THEREFORE, THE ADDITION IS REQUIRED TO BE MADE TO THE INCOME OF THE APPELLANT AS UNACCOUNTED PURCHASES U/S 69C ALSO . HOWEVER, AS ADDITION HAS ALREADY BEEN MADE OF INITIAL UNACCOUNT ED INVESTMENT, A SEPARATE ADDITION IS NOT BEING MADE U/S 69C OF THE ACT AS IT WOULD AMOUNT TO DOUBLE TAXATION. ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 14 - BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1-74 AND REITERATED THE SUBMISSIONS AS MADE BEFORE THE L D. CIT(A). 6.1 THE LD. AR ALSO SUBMITTED THAT THERE WAS NO ADM ISSION BY THE ASSESSEE IN THE STATEMENT RECORDED U/S 132(4) OF TH E ACT WHICH WAS TAKEN DURING THE SEARCH PROCEEDINGS. THE QUESTION WAS RAI SED BY THE SEARCH TEAM RELATING TO THE UNACCOUNTED SALE MADE BY THE A SSESSEE AND THERE WAS NO QUESTION RAISED TO HIM FOR THE INVESTMENT IN THE UNDISCLOSED BUSINESS. 7. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE ASSESSEE HAS BEEN DOING THE BUSINESS OF UNACCOUNTED SALE FOR THE LAST SEVERAL YEARS AND IN NONE OF THE YEAR THE ADDITION ON ACCOUNT OF INITIAL INVESTMENT WAS MADE. THEREFORE, THE LD. DR CLAIMED THAT THE UNACCOUNTED BUSINESS OF THE ASSESSEE CANNOT BE RUN WITHOUT INVESTMENT IN SUCH B USINESS. THE LD DR IN SUPPORT OF HIS CLAIM RELIED ON THE ORDER OF CIT VS. AGGARWAL ENGINEERING COMPANY, PUNJAB AND HARYANA HIGH COURT REPORTED IN 308 ITR 246. 7.1 THE LD DR ALSO RELIED ON THE ORDER THE ITAT RAI PUR BENCH IN THE CASE OF AMIT AGARWAL VS. ITO REPORTED IN 58 TAXMANN .COM 322. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED TH E ORDER OF LOWER LD. CIT-A. ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 15 - 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSES SEE WAS CARRYING ON ITS BUSINESS OF SALE AND PURCHASE WITHOUT RECORDING THE SAME IN THE REGULAR BOOKS OF ACCOUNT. THE ASSESSEE ADMITTED THIS FACT D URING SEARCH AND ACCORDINGLY OFFERED INCOME OF RS.35,00,000/- AGAINS T SUCH UNDISCLOSED SALE. 8.1 THE LD CIT(A) DURING THE APPELLATE PROCEEDINGS ENHANCED THE INCOME OF THE ASSESSEE BY RS. 21,30,096/- ON ACCOUN T OF INITIAL INVESTMENT IN THE UNDISCLOSED BUSINESS. 8.2 THERE IS NO AMBIGUITY THAT THE ASSESSEE WAS ENG AGED IN THE BUSINESS OF PURCHASE AND SALES WHICH WAS CARRIED OU T OUTSIDE THE BOOKS OF ACCOUNTS. THIS FACT WAS ESTABLISHED ON THE BASIS OF DOCUMENTS SEIZED DURING THE SEARCH OPERATION. HOWEVER, THERE WAS NO DOCUMENTARY EVIDENCE FOUND DURING THE SEARCH SUGGESTING THAT TH E ASSESSEE HAS MADE INITIAL INVESTMENT IN ITS BUSINESS OF UNACCOUNTED S ALES. THEREFORE, IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE OF THE INVESTME NT IN THE UNDISCLOSED INCOME WE ARE INCLINED NOT TO CONFIRM T HE ORDER OF THE LD. CIT(A). IN THIS REGARD WE PLACE OUR RELIANCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRESIDENT INDUSTRIES REPORTED IN 258 ITR 654 WHEREIN IT WAS HELD AS UNDER: THE AMOUNT OF SALES BY ITSELF CANNOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAS NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENT THE PRICE RECEIVED BY THE SELLER OF THE GOODS FOR THE A CQUISITION OF WHICH IT HAS ALREADY INCURRED THE COST. IT IS THE REALISATIO N OF EXCESS OVER THE COST ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 16 - INCURRED THAT ONLY FORMS PART OF THE PROFIT INCLUDE D IN THE CONSIDERATION OF SALES. THEREFORE, UNLESS THERE IS A FINDING TO T HE EFFECT THAT THE INVESTMENT BY WAY OF INCURRING COST IN ACQUIRING GO ODS WHICH HAVE BEEN SOLD HAS BEEN MADE BY THE ASSESSEE AND THAT HAS ALS O NOT BEEN DISCLOSED, THE QUESTION WHETHER ENTIRE SUM OF UNDIS CLOSED SALES PROCEEDS CAN BE TREATED AS INCOME, ANSWERS BY ITSEL F IN THE NEGATIVE. 8.3 BESIDES THE ABOVE, WE ALSO NOTE THAT THE ASSESS EE BEFORE THE LOWER AUTHORITIES JUSTIFY THAT THE UNACCOUNTED SALE WAS M ADE OUT OF THE DISCLOSED PURCHASES/STOCK IN HAND. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS SHOWN OPENING STOCK AND CLOSING STOCK FOR THE Y EAR UNDER CONSIDERATION AT RS.1CRORE AND RS.1.10 CRORES RESPE CTIVELY. AS PER THE ASSESSEE, HE USED TO MAKE UNACCOUNTED SALES OUT OF SUCH DISCLOSED OPENING STOCK AND THEREAFTER HE USED TO MAKE UNACCO UNTED PURCHASES TO KEEP ITS STOCK IN THE BOOKS OF ACCOUNTS AS WELL AS IN PHYSICAL FORM. THE SUBMISSION OF THE ASSESSEE HAS NOT BEEN CHALLENGED/ DOUBTED BY ANY OF THE AUTHORITY BELOW. THE LD DR HAS ALSO NOT BROUGHT ANYTHING ON RECORD CONTRARY TO THE ARGUMENT ADVANCED BY THE LD AR. THE REFORE, WE HAVE NO ALTERNATE EXCEPT TO CONFIRM THE SUBMISSIONS OF THE ASSESSEE. IN VIEW OF ABOVE, WE HOLD THAT THERE WAS NO UNDISCL OSED INVESTMENT IN THE UNDISCLOSED BUSINESS OF THE ASSESSEE. THE FACTS OF THE CASE RELIED BY THE LD. DR AS DISCUSSED ABOVE ARE DIFFERENT FROM TH E PRESENT CASE, THEREFORE, WE ARE RELUCTANT TO PLACE OUR RELIANCE O N THOSE JUDGMENTS. THEREFORE, WE SET ASIDE THE ORDER OF LD CIT AND DIR ECT THE AO TO DELETE THE ADDITION. HENCE, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED. ITA NO.29 /RJT/ 2014 SHRI NARENDRA NATWARLAL PALA VS. ACIT ASST.YEAR 2009-10 - 17 - 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 01/11/2018 SD/- SD/- EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LNL; YKS[KK LNL; YKS[KK LNL; YKS[KK LNL; (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 01/11/2018 PRITI YADAV, SR.PS !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) ( ) / THE CIT(A)- IV, AHMEDABAD. 5. *+, --'( , '(# , !. /DR,ITAT, RAJKOT 6. ,/0 1 / GUARD FILE. & ' / BY ORDER, * - //TRUE COPY// ( / ') * ( DY./ASSTT.REGISTRAR) , !. / ITAT, RAJKOT 1. DATE OF DICTATION 17/09/2018 (DICTATION PAGES 6 ) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 31/10/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER