ACIT, Jaipur V. JHANDEWALAS FOODS PVT. LTD., Jaipur

ITA 326/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1788 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 01-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHALENDRA SHARMA
• Keywords: Depreciation; Loose papers; Question of law; Tangible material; Block assessment; Retraction; Revised return
• Section: 133A; 131

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKWY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 326/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2012-13 THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-1, JAIPUR CUKE VS. M/S JHANDEWALAS FOODS PVT. LTD., 35, JOHARI BAZAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCJ7203Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ C.O. NO. 19/JP/2017 (ARISING OUT OF ITA NOS. 326/JP/2017) FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2012-13 M/S JHANDEWALAS FOODS PVT. LTD., 35, JOHARI BAZAR, JAIPUR CUKE VS. THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-1, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCJ7203Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 325/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2012-13 THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-1, JAIPUR CUKE VS. SH. BHANWAR LAL KOOLWAL, PROP. M/S HARI NARAIN GYARSI LAL, 35, JOHARI BAZAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AFDPK2327N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 2 VK;DJ VIHY LA-@ C.O. NO. 18/JP/2017 (ARISING OUT OF ITA NOS. 325/JP/2017) FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2012-13 SH. BHANWAR LAL KOOLWAL, PROP. M/S HARI NARAIN GYARSI LAL, 35, JOHARI BAZAR, JAIPUR CUKE VS. THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-1, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AFDPK2327N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI SHALENDRA SHARMA (ADDL. CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C.PARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 04/10/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 29/12/2017 VKNS'K@ ORDER PER BENCH: THESE APPEALS ARE FILED BY THE REVENUE AND CROSS O BJECTION BY THE RESPECTIVE ASSESSEES AGAINST THE ORDERS OF LD. CIT(A), JAIPUR OF EVEN DATE 10.02.2017 FOR A.Y. 2012-13 RESPECTIVELY. GIVEN THE SIMILARITY OF FACTS AND COMMON GROUNDS OF APPEAL IN VOLVED IN ALL THESE CASES, ALL THESE APPEALS WERE HEARD TOGETHER AND AR E BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. 2. FIRST, WE WILL TAKE UP THE APPEAL OF THE REVENU E AND CROSS OBJECTION OF THE ASSESSEE IN CASE OF M/S JHANDEWALA S FOODS PVT. LTD.,WHEREIN THE RESPECTIVE GROUNDS OF THE APPEALS ARE AS UNDER:- ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 3 ITA NO. 326/JP/17(REVENUES GROUNDS OF APPEAL): 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 1,80,00,000/- MADE BY THE AO HOLDING THAT THE AO WA S NOT JUSTIFIED IN MAKING ADDITION. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADD ITION TO RS. 12,78,758/- OUT OF ADDITION OF RS. 1,80,00,000/- MA DE BY THE AO BY APPLY THE GP RATE OF 3.40% ON TOTAL TURNOVER ON THE BASIS OF PREVIOUS RESULTS OF GP RATE OF ASSESSEE. 3. WHETHER THE OBSERVATION OF LD. CIT(A) THAT IT AP PEARS FROM THE ASSESSMENT ORDER THAT THE AO HAS RELIED SOLELY ON T HE BASIS OF THE ABOVE MENTIONED STATEMENT OF SHRI RAKESH B. KOOLWAL AS NOT EVEN A SINGLE INCRIMINATING DOCUMENT WAS DISCUSSED IN THE ASSESSMENT ORDER IS CORRECT ON FACTS OF THE CASE. CO NO. 19/JP/17 (ASSESSEES GROUNDS OF APPEAL): 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 12,78,757/- BY APPLYING ESTIMATED G .P RATE OF 3.40% ON TOTAL TURNOVER OF RS. 97,98,20,678/- BY NOT APPRECI ATING THE FACTS THAT WHEN IN SURVEY SHORT STOCK OF RS. 9,28,887/- IS FOU ND, THERE IS NO REASON TO MAKE THE ADDITION BY ESTIMATING THE G.P R ATE ON THE TOTAL TURNOVER OF THE ASSESSEE INSTEAD OF RESTRICTING THE ADDITION BY APPLYING G.P RATE ON SUCH SHORT STOCK. ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 4 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT A SURV EY U/S 133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSE E COMPANY ON 18.10.2011. DURING THE COURSE OF SURVEY, CERTAIN DI SCREPANCIES WERE NOTICED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE A SSESSEE COMPANY AND STATEMENT OF SHRI RAKESH KOOLWAL, ONE OF THE DI RECTORS OF THE ASSESSEE COMPANY WAS RECORDED ON OATH WHEREIN HE HA D SURRENDERED A SUM OF RS. 1.80 CRORE. SUBSEQUENTLY THE ASSESSEE FI LED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WHEREIN SAI D SURRENDER OF RS. 1.80 CRORE WAS NOT INCLUDED AND NOT OFFERED TO TAX. 4. THE ASSESSING OFFICER OBSERVED THAT NO REPRESENT ATION OR INTIMATION WAS MADE BEFORE THE DEPARTMENT BY THE AS SESSEE WHEREBY THE ASSESSEE HAS CHANGED ITS STAND AND RETRACTED FR OM WHAT HAS BEEN STA TED ON OATH IN THE STATEMENT RECORDED. THE ASSESSING OFFICER FURTHER OBSERVED THAT THIS LA PSE WAS POINTED OUT TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PRO CEEDINGS BY THE DEPARTMENT ITSELF AND ONLY THEREAFTER, THE ASSESSEE WAS CONSTRAINED TO JUSTIFY ITS RETRACTED STAND. 5. THEREAFTER, THE ASSESSEE WAS GIVEN ANOTHER OPPOR TUNITY AND STATEMENT OF SHRI RAKESH KOOLWAL, DIRECTOR OF THE A SSESSEE COMPANY WAS RECORDED ON OATH U/S 131 ON 20.02.2015 DURING T HE COURSE OF ASSESSMENT PROCEEDINGS WHEREIN THE VARIOUS DISCREPA NCIES WHICH WERE FOUND DURING THE COURSE OF SURVEY PROCEEDINGS AND D OCUMENTS REFERRED IN THE EARLIER STATEMENT RECORDED DURING THE COURSE OF SURVEY WERE CONFRONTED TO HIM. IN HIS LATTER STATEMENT, THE ASS ESSEE JUSTIFIED THE RETRACTION STATING THAT THE EARLIER SURRENDER WAS M ADE IN THE STATE OF UNCONSCIOUS MIND AND PRESSURE, AND IN VIEW OF POSSI BLE MISTAKES IN THE ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 5 BOOKS OF ACCOUNTS AND IT WAS ALSO SUBMITTED THAT TH E DEPARTMENT WAS INFORMED ABOUT THE RETRACTION THROUGH A LETTER SENT BY POST. 6. HOWEVER, THE CONTENTION SO RAISED BY THE ASSESSE E WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE CONTENTION O F THE ASSESSEE THAT THE SURRENDER WAS MADE TO COVER ANY POSSIBLE DEFECT S IN THE BOOKS OF ACCOUNT AND SUBSEQUENTLY NO DEFECTS WERE FOUND WAS NOT FOUND ACCEPTABLE AS PER ASSESSING OFFICER. IT WAS HELD BY THE AO THAT THERE WERE NUMBER OF INCONSISTENCIES IN THE BOOKS OF ACCO UNT WHICH WERE POINTED TO THE ASSESSEE DURING THE SURVEY PROCEEDIN GS AND ALSO SPECIFICALLY QUERIED IN THE STATEMENT RECORDED. THE ASSESSEE FAILED TO FURNISH THE REASONS WITH THE RESPECT TO DIFFERENCES IN THE PURCHASE ORDER AND ACTUAL PURCHASES (Q. NO. 14 OF SURVEY STA TEMENT DATED 18.10.2011) AND MISMATCH OF BOOK STOCK AND STOCK AS PER PHYSICAL VERIFICATION (Q. NO. 21 OF STATEMENT DATED 18.10.20 11). IT WAS ALSO POINTED OUT THAT DIRECTOR HAS CATEGORICALLY AGREED TO THE METHOD OF COMPUTATION OF CLOSING STOCK ADOPTED BY THE SURVEY TEAM. IT WAS FURTHER OBSERVED BY THE AO THAT IN THE INDORE PREMI SES OF THE ASSESSEE, THE STOCK REGISTER WAS NOT MAINTAINED. IT WAS ALSO HELD BY THE AO THAT EVEN IN THE STATEMENT RECORDED ON 20.02.2015 DURING COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO EXPL AIN THE INCONSISTENCIES AND NO LETTER WAS RECEIVED WITH THE REQUEST TO PROVIDE PHOTOCOPY OF THE IMPOUNDED MATERIAL DURING THE COUR SE OF SURVEY. IT WAS HELD BY THE AO THAT THE ASSESSEE ALSO FAILED TO POINT OUT WHAT CORRECTIONS OF MISTAKES WERE MADE SUBSEQUENTLY IN I TS BOOKS OF ACCOUNT. IT WAS ACCORDINGLY HELD THAT THE CONTENTIO N OF THE ASSESSEE THAT THERE WERE NO DEFECTS IN THE BOOKS OF ACCOUNT IS A SELF-SERVING ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 6 STATEMENT NOT ACCEPTABLE TO THE REVENUE ESPECIALLY IN THE LIGHT OF THE STATEMENT RECORDED OF ONE OF THE DIRECTOR OF THE AS SESSEE COMPANY. 7. REGARDING THE SUBMISSION OF THE ASSESSEE THAT DU RING THE SURVEY PROCEEDINGS, THE STATEMENT WAS MADE UNDER PRESSURE AND ABNORMAL STATE OF MIND, THE ASSESSING OFFICER OBSERVED THAT THERE WAS NO REASON FOR THE ASSESSEE TO NOT NOTIFY THE DEPARTMENT REGAR DING THIS ABERRATION IMMEDIATELY AFTER CONCLUSION OF THE SURVEY OR AS AN D WHEN IT WAS DISCOVERED THAT THE BOOKS ARE PERFECT AND WITHOUT A NY SHORTCOMINGS. 8. REGARDING FILING OF THE LETTER RETRACTING THE EA RLIER STATEMENT RECORDED DURING THE COURSE OF SURVEY, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE PRODUCED A COPY OF THE PURPORTED LETTER VIDE SUBMISSION DATED 2.3.2015 AND THE ASSESSEE ADMITTED LY FAILED TO FURNISH ANY PROOF OF RECEIPT OF THE LETTER BY THE DEPARTMEN T. 9. IT WAS ACCORDINGLY HELD BY THE AO THAT WHEN THE ASSESSEE ARRIVED AT A DIFFERENT CONCLUSION, SEPARATELY AND INDEPENDE NTLY, AFTER COMPLETION OF SURVEY, IT WAS INCUMBENT UPON HIM TO IMMEDIATELY APPRISE THE DEPARTMENT ABOUT THE SAME, AT THE EARLI EST. THE ASSESSEE HOWEVER, NEVER BOTHERED TO DO SO, AND THE SAME WAS KNOWN ONLY DURING SCRUTINY PROCEEDINGS. IT WAS ACCORDINGLY HEL D THAT THE ASSESSEE DID NOT UPHOLD THE DECLARATION MADE BY THE DIRECTOR AT THE TIME OF SURVEY NOT DID IT DISCLOSE THE REASONS OF THIS VOLT E-FACE TO THE DEPARTMENT. 10. IT WAS FINALLY BY THE AO THAT THE ASSESSEE HAS FAILED TO AVAIL THE REPEATED OPPORTUNITIES FOR FILING ANY SUBSTANTIVE E VIDENCE IN RESPECT OF ITS SUBSEQUENT CLAIM AND AS SUCH ITS CLAIM IS REDUC ED TO A MERE ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 7 STATEMENT NOR UPHELD OR REINFORCED BY ANY APPROPRIA TE PROOF WHATSOEVER. IT WAS HELD THAT THE ASSESSEE HAS MISER ABLY LAPSED IN JUSTIFYING ITS OWN CHANGED CONTENTION, WILLINGLY AL TERED BY IT POST SURVEY. IT WAS HELD THAT THE SUBSEQUENT DIGRESSION OF THE A SSESSEE IS NOTHING BUT A CALCULATED ATTEMPT TO ESCAPE TAXATION BY MANI PULATING EVIDENCES AND FACTS OF THE CASE. CONSEQUENTLY, THE ENTIRE DE CLARATION OF RS. 1.80 CRORE ON ACCOUNT OF UNDISCLOSED INCOME AND LETTER R ETRACTED BY THE ASSESSEE WITHOUT ANY RELEVANT PROOF AND WITHOUT ANY INTIMATION OF THE SAME TO THE DEPARTMENT WAS BROUGHT TO TAX IN THE HA NDS OF THE ASSESSEE COMPANY. 11. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE LD. CIT(A) WHO HAS SUSTAINED THE ADDITION TO THE EX TENT OF RS. 12,78,758/- AND BALANCE ADDITION WAS DELETED. NOW B OTH THE PARTIES ARE IN APPEAL AGAINST THE SAID FINDING OF THE LD. CIT(A ). 12. IT WOULD THEREFORE, BE RELEVANT TO REFER TO THE FINDINGS OF THE LD. CIT(A) WHICH WERE IN DISPUTE BEFORE US: (III) I HAVE DULY CONSIDERED THE SUBMISSIONS OF T HE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. DURING THE COURSE OF SURVEY, IN ITS STATEMENT, SHRI RAKESH B K OOLWAL, DIRECTOR OF THE APPELLANT COMPANY SURRENDERED A SUM OF RS. 1.8 CRORE, THE RELEVANT EXTRACT OF THE STATEMENT OF SHR I RAKESH B KOOLWAL IS BEING REPRODUCED AS UNDER:- IZ-18 ESA VKIDKS VKIDH DEIUH ESA- >.MSOKYK QWML IZK - FY- DS EKEYS ESA LOSZ{K.K DH DK;ZOKGH DS NKSJKU VKIDS DEI;WVJ LS FUDKYS X;S DQN [KKRKSA DS PRINT FN[KK JGK GWWA FTUGS ANNEXURE ,&5 IST 1 LS 24 DS :I ESA IMPOUND FD;K X;K GS] FN[KK JGK GWQA ;S ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 8 [KKRSA VKIDH DEIUH DH FU/KKZJ.K O'KZ 2010&11] 2011& 12 ,OA PKYW FOFR; O'KZ LS LECFU/KR GSA BL [KKRKSA DS VUQLKJ VKIDH DEIUH US FUEU QEKSZ LS P URCHASES FN[KKBZ GS%& 7- SHRI GOVIND SALES CORPORATION 8- SHREE BALAJI SALE CORPORATION 9- RITESH KUMAR & CO. 10- VAIBHAV TRADING CO. 11- YASH MILK PRODUCTS 12. HINDUSTAN MILK PRODUCTS LOSZ{K.K DH DK;ZOKGH DS NKSJKU GH MDR QEKSZ DS PURCHASE BILLS DH TKAP FIELD ENQUIRY ,OA CSAD [KKRKSA DH TKAP ESA ;G YXRK GS FD MDR CONCERNS /KH DK DKSBZ O;KIKJ UGHA DJRS GS ,O OKLRO ESA FLQZ FCYKSA DH YSUNSU DJRSA GS FTLLS ; G LI'V GKSRK GS FD MDR CONCERNS LS OKLRO ESA DKSBZ EKY UGH [KJHNK TKRK GSA D`I;K BL DS CKJS ESA M- ESUS ANNEXURE ,&5 IST 1 LS 24 NS[K FY;K GSA ;SA GEKJS COMPUTERS LS FUDKYS X;S PRINT OUT GSA ;G GEKJH DEIUH DH [KJHN ESA GH LECF/KR GSA MDR LKJH CONCERNS DS PROPER BILLS GEKJS IKL GS ;S LKJH CONCERNS SALES TAX DEPARTMENT ] MANDI TAX ESA REGISTERED GSA ,OA OKLRO ESA EKY [KJHNRH GS O CSPRH GSA LHKH FCYKSA ESA FUE;KUQLKJ VAT YXK;K GQVK GSA GEUS [KJHNS X;S EKY DK BUNZKT VIUH D EIUH DH STOCK ESA FD;K GSA LHKH QEKSZ DKS HKQXRKU HKH CSAFDAX EK/;E LS FD;K GS A BLDS CKOTQN FDLH HKH LEHKKFOR =QFVTKSA FD YS[KK IQLRDKSA ESA GKS LDRH GS MLDKS /; KU ESA J[KRS GQ, FOHKKX DKS LG;KSAX DJUS GSRQ ,OA EKUFLD KKAFR DS FY, ESA DEIUH ES >.MSOKY K QQML IZK- FY- ESA 18000000@& ,D DJKSM+ VLLH YK[K :I;S V/KKSFKR VK; EKURS GQ, VK;DJ GSARQ LEFIZR DJRK GSA LKFK GH BL EN ESA ESA- GFJUKJK;.K X;KJLHYKY] PROP. JH HKOJYKY DQYOKY DS EW[;RKJVKE POWER OF ATTORNEY HOLDER DH GSFL;R LS 2000000@& CHL YK[K :I;SA V/KKSFKR VK; EKURS GQ, VK;DJ DS FY, LEFIZR DJRK GW AA ;G LEI.KZ ESUS LOSPNK LS FD;K GS ,OA FOHKKX DKS IW.KZR LG;KSX ,OA EKUFLD K KAFR DS MNS; LS FD;K GSA ESJK FUOSNU GS FD ESA MIJ FDLH HKH IZDKJ DH PENALTY UK YXKBZ TK;SA LKFK GH ;G VKOKLR FN;K TK;SA FD GEKJS F[KYKQ PROSECUTION DH DK;ZOKGH UK DH TK;SA ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 9 (IV) IT APPEARS FROM THE ASSESSMENT ORDER THAT THE AO HAS RELIED SOLELY ON THE BASIS OF THE ABOVE MENTIONED S TATEMENT OF SHRI RAKESH B. KOOLWAL AS NOT EVEN A SINGLE INCRIMI NATING DOCUMENT WAS DISCUSSED IN THE ASSESSMENT ORDER. IT ALSO APPEARS THAT NO DISCREPANCY WAS FOUND BY THE AO DURING THE ASSESSMENT PROCEEDINGS EVEN IN RESPECT OF THE PARTIES AS REFER RED TO IN THE ABOVE MENTIONED STATEMENT OF SHRI RAKESH B. KOOLWAL . IT MAY BE MENTIONED THAT IN THE CASE OF CIT VS. S. KHANDER KH AN SON [2012] 25 TAXMANN.COM 413 (SC), THE HONBLE APEX CO URT HAS DISMISSED THE CIVIL APPEAL FILED BY THE INCOME TAX DEPARTMENT AND CONFIRMED THE ORDER OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. S. KHADER KHAN SON [2008] 300 ITR 157 (MAD. ) WHEREIN IT WAS HELD BY THE HONBLE HGIH COURT OF MADRAS THA T: FROM THE FOREGOING DISCUSSION, THE FOLLOWING PRINC IPLES CAN BE CULLED OUT: (I) AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVI DENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS IN CORRECT AND THAT THE ASSESSEE SHOULD BE GIVEN A PROPER OPPORTUN ITY TO SHOW THAT THE BOOKS OF ACCOUNT DO NOT CORRECTLY DISCLOSE THE CORRECT STATE OF FACTS, VIDE DECISION OF THE APEX COURT IN PULKNGODE RUBBER PRODUCE CO. LTD. V. STATE OF KERALA [1973] 9 1 ITR 18; (II) IN CONTRADISTINCTION TO THE POWER UNDER SECTION 133 A, SECTION 132(4) OF THE INCOME-TAX ACT ENABLES THE AUTHORIZED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATI ON ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 10 CAN ALSO BE USED IN EVIDENCE UNDER THE INCOME-TAX A CT. ON THE OTHER HAND, WHATEVER STATEMENT IS RECORDED UNDE R SECTION 133A OF THE INCOME-TAX ACT IS NOT GIVEN ANY EVIDENTIARY VALUE OBVIOUSLY FOR THE REASON THAT THE OFFICER IS NOT AUTHORIZED TO ADMINISTER OATH AND TO TAKE ANY S WORN STATEMENT WHICH ALONG HAS EVIDENTIARY VALUE AS CONTEMPLATED UNDER LAW, VIDE PAUL MATHEWS AND SONS V. CIT [2003] 263 ITR 101 (KER.); (III) THE EXPRESSION SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER CONTAINED IN SECTION 158BB OF THE INCOME-TAX ACT, 1961, WOULD INCLUDE TH E MATERIALS GATHERED DURING THE SURVEY OPERATION UNDE R SECTION 133A, VIDE CIT V. G.K. SENNIAPPAN [2006] 28 4 ITR 220 (MAD.); (IV) THE MATERIAL OR INFORMATION FOUND IN THE COURSE OF SURVEY PROCEEDING COULD NOT BE A BASIS FOR MAKING ANY ADDI TION IN THE BLOCK ASSESSMENT, VIDE DECISION OF THIS COURT I N T.C(A) NO. 2620 OF 2006 (BETWEEN CIT V. S. AJIT KUMAR [200 8] 300 ITR 152 (MAD.); (V) FINALLY, THE WORD MAY USED IN SECTION 133A (3)(II I) OF THE ACT, VIS., RECORD THE STATEMENT OF ANY PERSON WHICH MAY BE USEFUL FOR, OR RELEVANT TO, ANY PROCEEDING UNDER TH IS ACT, AS ALREADY EXTRACTED ABOVE, MAKES IT CLEAR THAT THE MATERIALS COLLECTED AND THE STATEMENT RECORDED DURI NG THE SURVEY UNDER SECTION 133A ARE NOT CONCLUSIVE PIECE OF EVIDENCE BY ITSELF. ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 11 FOR ALL THESE REASONS, PARTICULARLY, WHEN THE COMMI SSIONER AND THE TRIBUNAL FOLLOWED THE CIRCULAR OF THE CENTR AL BOARD OF DIRECT TAXES DATED MARCH 10, 2003, EXTRACTED ABO VE, FOR ARRIVING AT THE CONCLUSION THAT THE MATERIALS COLLE CTED AND THE STATEMENT, OBTAINED UNDER SECTION 133A WOULD NO T AUTOMATICALLY BIND UPON THE ASSESSEE WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE TRIBUNAL. (V) IT MAY BE MENTIONED THAT THE HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT V. SHRI ROSHAN LAL LODHA DBITA NO. 1 85/2014 VIDE ORDER DATED 3.11.2015 FOLLOWED THE ABOVE REFERRED D ECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. S. KADAR K HAN SON (SUPRA) AND APPROVED THE ORDER PASSED BY THE CIT(A) /ITAT ALLOWING RELIEF TO THE ASSESSEE BY HOLDING THAT WE DO NOT FIND ANY MERIT IN THE ARGUMENT ADVANCED. THE ASSESSEE FI LED AN APPEAL BEFORE THE COMMISSIONER INCOME TAX (APPEALS) , WITH SPECIFIC ASSERTION THAT THE STATEMENT MADE BY HIM W OULD HAVE NOT BEEN ACCEPTED TO MAKE ANY ADDITION AND THEREFORE HI S DENIAL IS APPARENT. IN VIEW OF IT, THE ORDER PASSED BY THE CI T(A) AND THE ITAT DO NOT SUFFER FROM ANY WRONG. (VI) THEREFORE, IN VIEW OF THE ABOVE DISCUSSION AND THE JUDICIAL PRONOUNCEMENTS, IT IS HELD THAT THERE WAS NO JUSTIF ICATION FOR THE AO TO MAKE ADDITION OF RS. 1.80 CRORE TO THE INCOME OF THE APPELLANT SOLELY ON THE BASIS OF THE STATEMENT OF S HRI RAKESH B KOOLWAL RECORDED DURING THE COURSE OF SURVEY WITHOU T BRINGING ON RECORD ANY MATERIAL TO SUPPORT SUCH ADDITION. HOWEV ER, IT MAY BE MENTIONED THAT DURING SURVEY PROCEEDINGS, THERE WAS DIFFERENCE ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 12 BETWEEN THE PHYSICAL STOCK AS WELL AS CASH AS FOUND DURING THE COURSE OF SURVEY AND AS RECORDED IN ITS BOOKS OF AC COUNTS AND AFTER RECONCILIATION, ON THE DATE OF SURVEY, STILL THERE REMAINED DIFFERENCE IN THE STOCK WHICH COULD NOT BE RECONCIL ED AS PER FOLLOWING DETAILS: M/S JHANDEWALA FO ODS (P) LTD., STOCK AS PER BOOKS AS PER PHYSICAL VERIFICATION BALANCE/DIFFERENCE STOCK AT INDORE OFFICE 64,54,766/- 29,21,819/- (-) 35,32,947/- STOCK AT A - 2 SURAJPOLE, JAIPUR 27,08,711/- 32,33,237/- 5,24,526/- STOCK AT VKI AREA, JAIPUR 99,59,454/- 1,20,38,988/- 20,79,534/- TOTAL 1,91,22,931/ - 1,81,94,044/ - ( - ) 9,28,887/ - (VII) IT APPEARS THAT THESE DISCREPANCIES WERE NOT EVEN RECONCILED DURING ASSESSMENT PROCEEDINGS. HOWEVER, IN ITS WRIT TEN SUBMISSION, IT WAS STATED BY THE APPELLANT THAT ONL Y GROSS PROFIT AMOUNTING TO RS. 30,357/- COULD BE ADDED ON ACCOUNT OF SUCH SHORTAGE IN STOCK. THUS, IT IS EVIDENT THAT THE BOO KS OF ACCOUNTS MAINTAINED BY THE APPELLANT ARE NOT RELIABLE AND TH US THESE ARE BEING HEREBY REJECTED U/S 145(3) OF THE ACT. NOW TH E QUESTION REMAINS, THE GP RATE WHICH SHOULD BE APPLIED TO DET ERMINE THE GROSS PROFIT OF THE APPELLANT. IT MAY BE MENTIONED THAT IN A NUMBER OF JUDICIAL PRONOUNCEMENTS, IT MAY BE MENTIO NED THAT IN ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 13 A NUMBER OF JUDICIAL PRONOUNCEMENTS, IT HAS BEEN HE LD BY THE HONBLE JURISDICTIONAL HIGH COURT OF RAJASTHAN THAT THE PAST TRADING RESULTS OF THE ASSESSEE OR COMPARABLE CASES ARE THE BEST GUIDE FOR ESTIMATING THE INCOME. IT WOULD BE APPROP RIATE TO REPRODUCE THE TRADING RESULTS OF THE APPELLANT AS U NDER:- A.Y TURNOVER (IN RS.) GROSS PROFIT (IN RS.) G.P. RATE 2012-13 979820678 32035146 3.27% 2011-12 883801559 27297039 3.09% 2010-11 482753645 13764603 2.85% (VIII) HENCE, CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE ESPECIALLY LOOKING TO THE FACT THAT SOME D ISCREPANCIES WERE FOUND DURING THE COURSE OF SURVEY AND THE CASE OF THE APPELLANT WAS NOT COMPLETED UNDER SCRUTINY IN EARLI ER YEARS. I THINK IT WOULD BE APPROPRIATE TO APPLY GP RATE OF 3 .40% TO THE TOTAL TURNOVER OF THE APPELLANT, WHICH GIVES GROSS PROFIT OF RS. 3,33,13,903/-. THE APPELLANT HAS DECLARED GROSS PRO FIT OF RS. 3,20,35,146/- ON TOTAL TURNOVER OF RS. 97,98,20,678 /- FOR THE YEAR UNDER CONSIDERATION, WHICH LEADS TO TRADING ADDITIO N OF RS. 12,78,757/- TO THE INCOME OF THE APPELLANT. HENCE, THE ADDITION OF RS. 1.80 CRORE MADE BY THE AO IS HEREBY RESTRICTED TO RS. 12,78,757/- ONLY. THUS THIS GROUND OF APPEAL IS PAR TLY ALLOWED. 13. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE IMPUGNED ADDITION OF RS. 1,80,00,000/- MADE BY THE AO IS SOLELY ON THE BASIS OF ADMISSION MADE BY THE DIRECTOR SH. RAKESH B. KOOLWAL IN HIS ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 14 STATEMENT RECORDED DURING SURVEY PROCEEDINGS. THE S TATEMENT RECORDED IN SURVEY HAS NO EVIDENTIARY VALUE AS HELD BY SUPRE ME COURT IN CASE OF CIT VS. S. KHADER KHAN SON 352 ITR 480 WHERE IT WAS HELD THAT SECTION 133A DOES NOT EMPOWER ANY INCOME TAX AUTHORITY TO E XAMINE ANY PERSON ON OATH AND THUS, ANY SUCH STATEMENT HAS NO EVIDENTIARY VALUE. FURTHER, RAJASTHAN HIGH COURT IN CASE OF CIT VS. SH RI ROSHAN LAL LODHA IN DBITA NO. 185/2014 VIDE ORDER DATED 3.11.201, AF TER FOLLOWING THE DECISION OF SUPREME COURT IN CASE OF CIT VS. S. KHA DER KHAN SON, APPROVED THE ORDER PASSED BY THE CIT(A)/ITAT ALLOWI NG RELIEF TO THE ASSESSEE BY HOLDING THAT WE DO NOT FIND ANY MERIT IN THE ARGUMENT ADVANCED. THE ASSESSEE FILED AN APPEAL BEFORE THE C OMMISSIONER INCOME TAX (APPEALS), WITH SPECIFIC ASSERTION THAT THE STATEMENT MADE BY HIM WOULD HAVE NOT BEEN ACCEPTED TO MAKE ANY ADD ITION AND THEREFORE HIS DENIAL IS APPARENT. IN VIEW OF IT, TH E ORDER PASSED BY THE CIT(A) AND THE ITAT DO NOT SUFFER FROM ANY WRONG. THEREFORE, ANY ADDITION MADE SOLELY ON THE BASIS OF SUCH STATEMENT IS BAD IN LAW. 13. IT WAS SUBMITTED BY THE LD AR THAT IN THE PRESE NT CASE, NEITHER IN THE STATEMENT RECORDED IN COURSE OF SURVEY NOR IN A SSESSMENT PROCEEDINGS, ANY TANGIBLE MATERIAL/EVIDENCE WAS BRO UGHT ON RECORD BY THE AO TO SUPPORT THE ADDITION OF RS. 1,80,00,000/- . IN FACT THE SURRENDER MADE IN REPLY TO Q. NO. 18 OF STATEMENT D ATED 18.10.2011 RECORDED IN COURSE OF SURVEY WAS WITH REFERENCE TO THE PURCHASES MADE FROM SIX PARTIES WHICH ACCORDING TO THE SURVEY PART Y WERE NOT GENUINE. IN REPLY TO THIS QUESTION, ASSESSEE CATEGORICALLY S TATED THAT ALL THESE PARTIES ARE GENUINE BUT STILL TO COVER ANY PROBABLE MISTAKE IN THE ACCOUNTS AND TO COOPERATE WITH THE DEPARTMENT AND T O BUY PEACE OF MIND, HE SURRENDERED RS. 1,80,00,000/-. IN COURSE O F ASSESSMENT ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 15 PROCEEDINGS, ASSESSEE FURNISHED CONFIRMATIONS OF TH ESE PARTIES. AO ALSO MADE NECESSARY ENQUIRIES. NO DISCREPANCY WAS FOUND BY THE AO WITH REFERENCE TO THESE PURCHASES AS EVIDENT FROM THE AS SESSMENT ORDER. THEREFORE, ADDITION MADE BY THE AO WITH REFERENCE T O Q.NO. 18 OF STATEMENT WITHOUT POINTING OUT ANY SPECIFIC DISCREP ANCIES IN THE BOOKS OF ACCOUNTS IS NOT SUSTAINABLE. FOR THIS PURPOSE, R ELIANCE IS PLACED ON THE DECISION OF RAJASTHAN HIGH COURT IN CASE OF CIT VS. ASHOK KUMAR JAIN (2014) 111 DTR 291/229 TAXMAN 65. IN THIS CASE , ASSESSEE DISCLOSED AMOUNT OF RS. 3 CRORE ONLY IN HIS REVISED RETURN FILED PURSUANT TO SURVEY AS AGAINST RS. 5 CRORE SURRENDERED BY HIM DURING THE COURSE OF SURVEY OPERATIONS GIVING EXPLANATION SUPPORTED B Y MATERIAL ON RECORD. AO HAS NOT CONTROVERTED THE EXPLANATION OFF ERED BY THE ASSESSEE AND NOT POINTED OUT ANY EVIDENCE OR MATERI AL IN THE LOOSE PAPERS OR DIARIES OR INCRIMINATING DOCUMENTS WHICH COULD JUSTIFY ADDITION OF MORE THAN RS. 3 CRORE. ON THESE FACTS, IT WAS HELD THAT IF THE ASSESSEE DOES NOT ADHERE TO THE SURRENDER MADE DURI NG THE COURSE OF SURVEY, THEN IT IS FOR THE AO TO BRING ON RECORD CO GENT MATERIAL AND OTHER EVIDENCES TO SUPPORT THE ADDITION RATHER THAN RELY ON STATEMENTS SIMPLICITOR. SINCE THE AO HAS NOT FOUND ANYTHING AS A RESULT OF SURVEY EXCEPT RELYING ON THE STATEMENTS RECORDED AT THE TI ME OF SURVEY, THE CONCLUSION OF THE TRIBUNAL ACCEPTING THE SURRENDER TO THE TUNE OF RS. 3 CRORE IS A FINDING OF FACT BASED ON APPRECIATION OF EVIDENCE AND THEREFORE NO SUBSTANTIAL QUESTION OF LAW ARISES. 14. IT WAS FURTHER SUBMITTED BY THE LD AR THAT ANO THER REASON GIVEN BY THE AO FOR MAKING THE ADDITION WAS WITH REFERENC E TO THE MISTAKES POINTED OUT IN THE BOOKS OF ACCOUNTS IN COURSE OF S URVEY WHICH IS STATED TO BE NOT EXPLAINED BY THE ASSESSEE IN ASSESSMENT P ROCEEDINGS. IN THIS ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 16 CONNECTION IT IS SUBMITTED THAT IN Q. NO. 14 OF THE STATEMENT DATED 18.10.2011, THE PURCHASES OF RS. 34.11 CRORES AS PE R THE PURCHASE ORDER FOR THE PERIOD 01.04.2011 TO 13.10.2011 IS WR ONGLY COMPARED WITH THE PURCHASES OF RS. 4.71 CRORES MADE BY THE I NDORE OFFICE INSTEAD OF COMPARING IT WITH THE TOTAL PURCHASES MADE BY TH E ASSESSEE AS SUCH. IN FACT THE TOTAL PURCHASES MADE BY THE ASSESSEE AR E OF RS. 96.17 CRORES OUT OF WHICH PURCHASES UP TO THE DATE OF SUR VEY WAS RS. 38.45 CRORES AT JAIPUR AND RS. 4.70 CRORES AT INDORE OFFI CE. THUS, THERE IS NO DISCREPANCIES IN PURCHASES AS ALLEGED BY THE AO/SUR VEY PARTY. FURTHER IN Q. NO. 21 OF STATEMENT DATED 18.10.2011, THE STOCK WAS FOUND SHORT BY THE SURVEY PARTY AT RS. 9,28,887/-. WITH REFERENCE TO THIS DIFFERENCE, IT WAS CLARIFIED IN THE STATEMENT THAT THE SAME MAY BE FOR THE REASON THAT SOME PURCHASE/SALES HAVE NOT BEEN INCORPORATED IN T HE BOOKS OF ACCOUNTS. IN ANY CASE, THE STOCK AS PER BOOKS TAKEN AT THE TIME OF SURVEY WAS NOT ON THE BASIS OF COMPLETE ENTRIES REC ORDED IN THE BOOKS OF ACCOUNTS AND THEREFORE, FOR SUCH MINOR VARIATION IN THE STOCK, NO ADVERSE INFERENCE WAS DRAWN BY THE SURVEY PARTY. IN ANY CASE, SINCE ASSESSEE HAS MAINTAINED COMPLETE BOOKS OF ACCOUNTS ALONG WITH THE STOCK REGISTER AND NO DISCREPANCY WAS FOUND BY THE AO THEREIN, THE ALLEGED SHORT STOCK DETERMINED AT THE TIME OF SURVE Y CANT BE A BASIS FOR MAKING ADDITION OF RS. 1,80,00,000/-. 15. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD FILED LETTER DATED 19.03.2012 RETRACTING FROM THE SURRENDER MADE IN TH E STATEMENT. COPY OF THIS LETTER WAS FILED IN COURSE OF ASSESSMENT PR OCEEDING. THE AO HAS NOT ACCEPTED THIS LETTER FOR THE REASON THAT THE EV IDENCE OF FILING OF THIS LETTER WITH THE DEPARTMENT IS NOT PROVED BY THE ASS ESSEE. EVEN IF THE PROOF OF FILING OF THE LETTER WITH THE DEPARTMENT I S NOT FILED, THE ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 17 STATEMENT ALONG CANT BE A BASIS FOR MAKING THE ADD ITION PARTICULARLY WHEN THE SAME IS NOT HONOURED WHILE FILING THE RETU RN OF INCOME. THE CBDT IN INSTRUCTION NO. 286/2/2003-IT(INV.) DATED 1 0.03.2003 HAS ALSO ACCEPTED THAT INSTANCES HAS COME TO THEIR NOTICE WH ERE ASSESSEE HAS CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE U NDISCLOSED INCOME DURING COURSE OF SEARCH AND SURVEY OPERATION. SUCH CONFESSION IS NOT BASED UPON THE RELIABLE EVIDENCES AND NOT CONSIDERE D BY THE ASSESSEE WHILE FILING THE RETURNS. IT IS THEREFORE ADVISED T HAT THE FOCUS AND CONSTRUCTION SHOULD BE ON COLLECTION OF EVIDENCE OF INCOME. FURTHER, WHILE RECORDING THE STATEMENT NO ATTEMPT SHOULD BE MADE TO OBTAIN THE CONFESSION AS TO THE UNDISCLOSED INCOME. THE SAME I S AGAIN REITERATED BY CBDT VIDE INSTRUCTION F. NO. 286/98/2013-IT(INV. II) DT. 18.12.2014. IN VARIOUS DECISIONS, IT HAS BEEN HELD THAT THOUGH AN ADMISSION IN A STATEMENT RECORDED ON OATH MAY BE AN IMPORTANT PIEC E OF EVIDENCE BUT IT IS NOT CONCLUSIVE AND IT IS OPEN FOR THE ASSESSE E TO DEMONSTRATE THAT IT IS NOT CORRECT. FOR THIS PURPOSE, RELIANCE IS PLACE D ON THE FOLLOWING CASES:- PULLANGODE RUBBER PRODUCE COMPANY LTD. V. STATE OF KERALA AND ANOTHER 91 ITR 0018 (SC): ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDEN CE BUT IT CANT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE ASSES SEE WHO MADE ADMISSION TO SHOW THAT IT IS INCORRECT AND THE ASSE SSEE SHOULD BE GIVEN PROPER OPPORTUNITY TO SHOW THE CORRECT STATE OF AFF AIRS. CIT VS. ASHOK KUMAR SONI 291 ITR 172 (RAJ.) (HC): ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 18 ADMISSIONS ARE RELEVANT & STRONG PIECE OF EVIDENCE THAT MAY BE USED AGAINST THE PERSON MAKING SUCH ADMISSION BUT THEY A RE NOT CONCLUSIVE PROOF OF THE STATEMENT CONTAINED IN THE ADMISSION A ND CAN ALWAYS BE EXPLAINED. ITO VS. VIJAY KUMAR KESAR (2010) 36 DTR 13 (CHATTIS GARH): THE CONFESSION MADE BY THE ASSESSEE DURING THE SURV EY PROCEEDINGS IS NOT CONCLUSIVE AND IT IS OPEN TO THE ASSESSEE TO ES TABLISH THAT THE SAME WAS NOT TRUE AND CORRECT BY FILING COGENT EVIDENCE. THE TRIBUNAL ACCEPTED THE EXPLANATION OF THE ASSESSEE FOR RETRAC TING HIS ADMISSION AND DELETED THE ADDITION MADE ON ACCOUNT OF EXCESS CASH AND STOCK BY ACCEPTING THE UPDATED BOOKS OF ACCOUNT PREPARED BY THE ASSESSEE SUPPORTED BY PRIMARY EVIDENCES ON RECORD. SURENDER PAL VERMA VS. ACIT 89 ITD 129 (CHD)(TM):- CONFESSIONAL STATEMENT MADE DURING SEARCH ARE OFTEN VENERABLE ON GROUND THAT PERSON GIVING SUCH STATEMENT REMAIN UND ER A GREAT MENTAL STRESS AND STRAIN AND IN THE ABSENCE OF AVAILABILIT Y OF RELEVANT DETAILS, DOCUMENTS AND BOOKS AT THE TIME OF GIVING STATEMENT , PRECISE INFORMATION AS TO UTILIZATION OF SUCH INCOME AND YE AR OF INVESTMENT CANNOT BE CORRECTLY FURNISHED. THEREFORE, ASSESSEE IS ENTITLED TO MODIFY/CLARIFY STATEMENT AFTER VERIFYING NECESSARY DETAILS FROM RELEVANT RECORDS AT A LATER POINT OF TIME. 16. IT WAS FURTHER SUBMITTED THAT THE TWO DECISIONS RELIED BY THE AO ARE IN DIFFERENT CONTEXT. IN THOSE DECISIONS, CERTAIN F ACTS WERE ADMITTED IN STATEMENT BUT NO EVIDENCE WAS FILED CONTRARY TO THE ADMITTED FACTS. IN THAT SITUATION IT WAS HELD THAT AN ADMISSION, THOUG H RETRACTED, WOULD ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 19 BIND THE ASSESSEE. HOWEVER, IN THE PRESENT CASE THE SURRENDER IS MADE FOR PROBABLE MISTAKE WHICH MAY BE THERE IN THE BOOK S OF THE ACCOUNTS. THE ASSESSEE THEREAFTER GOT THE BOOKS OF ACCOUNTS A UDITED AND PRODUCED BEFORE THE AO. AO HAS NOT FOUND ANY DISCRE PANCIES IN THESE BOOKS OF ACCOUNTS TO SUPPORT THE ADDITION OF RS. 1, 80,00,000/-. IN THESE CIRCUMSTANCES THE CASES RELIED BY THE AO ARE NOT AP PLICABLE AND THUS, THE ADDITION MADE BY THE AO IS RIGHTLY DELETED BY T HE LD. CIT(A). 17. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) HO WEVER HELD THAT DURING SURVEY PROCEEDINGS, DIFFERENCE IS FOUND BETW EEN THE PHYSICAL STOCK & PHYSICAL CASH VIS--VIS THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNTS. THE STOCK AT THE TIME OF SURVEY WAS SHORT BY RS. 9,28,887/-. THE SAME WAS EXPLAINED TO BE ON ACCOUNT OF CERTAIN BILLS OF PURCHASES/SALES LEFT TO BE INCORPORATED IN THE BOOK S AS ON THE DATE OF SURVEY THE BOOKS WERE WRITTEN UPTO 15.10.2011. THIS WAS ALSO EXPLAINED BEFORE THE AO AND THEREFORE, HE HAS NOT TAKEN ANY A DVERSE INFERENCE ON THIS ACCOUNT. SO FAR AS CASH IN HAND IS CONCERNED, THE DIFFERENCE BETWEEN THE PHYSICAL CASH AND CASH AS PER BOOKS OF ACCOUNTS WAS CLARIFIED BY THE ASSESSEE IN THE STATEMENT RECORDED IN COURSE OF SURVEY ITSELF AND THEREFORE, NO ADVERSE INFERENCE WAS DRAW N BY THE AO ON THIS ACCOUNT. THUS, WHEN THE ASSESSEE HAS EXPLAINED THE DIFFERENCE IN THE STOCK AND CASH AT THE TIME OF SURVEY ITSELF ON WHIC H NO ADVERSE INFERENCE IS DRAWN BY THE AO, THE LD. CIT(A) IS NOT JUSTIFIED IN MAKING TRADING ADDITION OF RS. 12,78,757/- BY APPLYING G.P . RATE OF 3.40% ON THE DECLARED TURNOVER OF RS. 97,98,20,678/-. IN ANY CASE, EVEN IF ANY ADDITION COULD HAVE BEEN MADE, THE SAME OUGHT TO HA VE BEEN RESTRICTED BY APPLYING A G.P. RATE ON THE SHORT STOCK INSTEAD OF APPLYING THE G.P. ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 20 RATE ON THE TOTAL TURNOVER. HENCE, THE ADDITION MAD E BY THE LD. CIT(A) BE DIRECTED TO BE DELETED. IN VIEW OF ABOVE, THE GROUND OF THE DEPARTMENT BE D ISMISSED AND CROSS OBJECTION OF THE ASSESSEE BE ALLOWED. 13. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. HE TOOK US THROUGH THE FINDINGS OF THE AO AND SUBMITTED THAT THE ADDITIONS HAVE BEEN MADE BY THE AO BASIS THE ST ATEMENT OF THE DIRECTOR OF THE ASSESSEE COMPANY AND ALSO BASED ON DISCREPANCIES POINTED OUT DURING THE COURSE OF SURVEY. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, SURVEY OPERATIO NS WERE CARRIED AT THE BUSINESS PREMISES OF THE ASSESSEE COMPANY AND STATE MENT OF SHRI RAKESH B KOOLWAL WHO IS A DIRECTOR IN THE ASSESSEE COMPANY WAS RECORDED ON 18.10.2011. DURING THE COURSE OF SURVE Y, CERTAIN SPECIFIC DISCREPENCIES WERE NOTICED BY THE SURVEY TEAM ON PE RUSAL OF ASSESSEES BOOKS OF ACCOUNTS AND POINTED QUESTIONS WERE RAISED AND EXPLANATION SOUGHT FROM THE ASSESSEE COMPANY. SPECIFICALLY, IN QUESTION NO. 18 WHICH WAS BASED ON LEDGER PRINTOUTS OF SOME SIX CON CERNS FROM WHOM THE ASSESSEE HAS SHOWN PURCHASES, IT WAS STATED BY THE SURVEY TEAM THAT BASED ON VERIFICATION OF PURCHASE BILLS, FIELD ENQUIRY AND VERIFICATION OF BANK ACCOUNTS, IT APPEARS THAT THESE CONCERNS DO NT TRADE IN GHEE AND IN REALITY, THESE CONCERNS ARE ENGAGED IN MERE ARRANGING THE BILLS AND NO ACTUAL PURCHASE HAS BEEN MADE BY THE ASSESSE E COMPANY AND NECESSARY EXPLANATION WAS SOUGHT. IN RESPONSE, THE DIRECTOR OF THE ASSESSEE COMPANY STATED THAT HE HAS SEEN THE LEDGER PRINTOUTS AND THE ASSESSEE COMPANY HAS THE PROPER BILLS ISSUED BY THE SE CONCERNS, THESE ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 21 CONCERNS ARE REGISTERED WITH SALES TAX AND MANDI TA X DEPARTMENT AND THEY ACTUALLY PURCHASE AND SELL GOODS. IT WAS FURT HER SUBMITTED THAT ALL PURCHASE BILLS CARRY VAT AND ALL THE PURCHASES HAVE BEEN RECORDED IN THEIR STOCK AND PAYMENT TO THESE CONCERNS HAVE BEEN MADE THROUGH BANKING CHANNELS. FURTHER, IN QUESTION NO. 14, CER TAIN DISCREPENCIES WERE OBSERVED BETWEEN THE PURCHASE ORDER REGISTER A ND ACTUAL PURCHASES. IN RESPONSE, HE SUBMITTED THAT AT THIS STAGE, HE IS UNABLE TO PROVIDE ANY EXPLANATION AND THE SAME WILL BE PROVID ED LATER. FURTHER, IN QUESTION NO. 21, CERTAIN MISMATCH IN THE DAILY STOC K AS PER BOOKS AND AS PER PHYSICAL VERIFICATION WERE OBSERVED AND EXPLANA TION SOUGHT. IN RESPONSE, HE SUBMITTED THAT STOCK VALUATION HAS BEE N DONE BY THE SURVEY TEAM IN PRESENCE OF COMPANYS EMPLOYEES AND FOR VARIATION IN STOCK, IT IS POSSIBLE THAT CERTAIN BILLS OF PURCHAS E AND SALE HAVE NOT BEEN ENTERED AT THIS STAGE AND FULL EXPLANATION SHALL BE SUBMITTED LATER ON. AT THE SAME TIME, TO COVER ANY PROBABLE MISTAKE IN THE BOOKS OF ACCOUNTS AND TO COOPERATE WITH THE DEPARTMENT AND T O BUY PEACE OF MIND, HE SURRENDERED AN AMOUNT OF RS 1.80 CRORES ON BEHALF OF THE ASSESSEE COMPANY AND SUCH SURRENDER STATEMENT IS ST ATED AS PART OF RESPONSE TO QUESTION NO. 18 AS NOTED ABOVE. 15. DURING THE ASSESSMENT PROCEEDINGS, THE AO OBSER VED THAT THE ASSESSEE COMPANY HAS NOT HONOURED THE SURRENDER OF INCOME SO MADE DURING THE COURSE OF SURVEY AND NOT OFFERED TO TAX WHILE FILING THE RETURN OF INCOME. THE STATEMENT OF SHRI RAKESH B KOOLWAL WAS AGAIN RECORDED ON 20.2.2015 DURING THE COURSE OF ASSESSMENT PROCEE DINGS. IN QUESTION NO. 11, REFERENCE WAS DRAWN TO ANNEXURE A- 5, PAGES 1-24 IMPOUNDED DURING THE COURSE OF SURVEY AND HE WAS AS KED TO PROVIDE ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 22 THE EXPLANATION REGARDING 6 CONCERNS FROM WHOM THE ASSESSEE HAS SHOWN PURCHASES AND AS PER FIELD ENQUIRY AND VERIFI CATION OF BANK ACCOUNTS, NO PURCHASES HAVE BEEN MADE FROM THEM. I N RESPONSE, HE SUBMITTED THAT THE ASSESSEE COMPANY HAS ACTUALLY MA DE PURCHASES FROM THESE SIX COMPANIES AND THE BOOKS OF ACCOUNTS CAN BE PRODUCED FOR NECESSARY VERIFICATION. IN SUPPORT OF PRODUCTI ON OF BOOKS OF ACCOUNTS DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE HAS SUBMITTED A COPY OF ITS LETTER DATED 10.03.2015 AND 16.03.2015 FILED BEFORE THE AO AND AVAILABLE AS PART OF PAPERB OOK FILED BEFORE US. THE ASSESSEE HAS FURTHER SUBMITTED CONFIRMATION FRO M THESE CONCERNS FROM WHOM THE PURCHASES WERE MADE VIDE ITS LETTER D ATED 5.03.2015 WHICH IS ALSO AVAILABLE ON RECORD. THERE IS NO MATE RIAL AVAILABLE ON RECORD IN TERMS OF FIELD ENQUIRY AND INVESTIGATION OF BANK ACCOUNTS AS STATED BY THE SURVEY TEAM IN RESPECT OF SUCH PURCHA SES. FURTHER, THERE IS NO INDEPENDENT ENQUIRY DONE BY THE AO TO VERIFY SUCH PURCHASES AND THERE IS NO FINDING OF THE AO AS APPARENT FROM PERU SAL OF THE ASSESSMENT ORDER DOUBTING THE PURCHASES SO MADE BY THE ASSESSEE COMPANY FROM THESE CONCERNS. 16. IN RESPECT OF QUESTION NO. 14 WHERE CERTAIN DIS CREPENCIES WERE OBSERVED DURING THE COURSE OF SURVEY BETWEEN THE PU RCHASE ORDER REGISTER AND ACTUAL PURCHASES AND WHERE HE HAS SUBM ITTED AT THE TIME OF SURVEY THAT HE IS UNABLE TO PROVIDE ANY EXPLANAT ION AND THE SAME WILL BE PROVIDED LATER. THE AO OBSERVED THAT EVEN DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY HAS FA ILED TO FURNISH THE REASONS WITH RESPECT TO DIFFERENCES IN THE PURC HASE ORDER AND ACTUAL PURCHASES. BEFORE US, THE LD AR HAS SUBMITTED THAT IN Q. NO. 14 OF THE ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 23 STATEMENT DATED 18.10.2011, THE PURCHASES OF RS. 34 .11 CRORES AS PER THE PURCHASE ORDER FOR THE PERIOD 01.04.2011 TO 13. 10.2011 IS WRONGLY COMPARED WITH THE PURCHASES OF RS. 4.71 CRORES MADE BY THE INDORE OFFICE INSTEAD OF COMPARING IT WITH THE TOTAL PURCH ASES MADE BY THE ASSESSEE AS SUCH. IN FACT THE TOTAL PURCHASES MADE BY THE ASSESSEE ARE OF RS. 96.17 CRORES OUT OF WHICH PURCHASES UP TO TH E DATE OF SURVEY WAS RS. 38.45 CRORES AT JAIPUR AND RS. 4.70 CRORES AT I NDORE OFFICE. THUS, THERE IS NO DISCREPANCIES IN PURCHASES AS ALLEGED B Y THE AO/SURVEY PARTY. WE AGREE WITH THE BROAD CONTENTION OF THE LD AR THAT THE COMPARISON SHOULD BE BETWEEN THE PURCHASES AS PER P URCHASE ORDER AT THE ENTITY LEVEL WITH THE ACTUAL PURCHASE STOCK AT THE ENTITY LEVEL AND NOT AT THE BRANCH/OFFICE LEVEL. HOWEVER, WE FIND T HAT THERE IS NO SPECIFIC FINDING GIVEN BY THE LD CIT(A) IN THIS REG ARD AND IN ABSENCE OF THE RELEVANT MATERIAL AVAILABLE ON RECORD, WE ARE U NABLE TO TAKE A VIEW IN THE MATTER AND THE SAME WOULD NEED FURTHER EXAMI NATION. 17. IN RESPECT OF QUESTION NO. 21 WHERE CERTAIN MIS MATCH AMOUNTING TO RS 9,28,887 IN THE DAILY STOCK AS PER BOOKS AND AS PER PHYSICAL VERIFICATION WERE OBSERVED BY THE SURVEY TEAM AND W HERE, IN RESPONSE, IT WAS SUBMITTED THAT IT IS POSSIBLE THAT CERTAIN B ILLS OF PURCHASE AND SALE HAVE NOT BEEN ENTERED AT THIS STAGE AND FULL EXPLAN ATION SHALL BE SUBMITTED LATER ON. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE AO OBSERVED THAT EVEN DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSEE COMPANY HAS FAILED TO FURNISH THE REAS ONS WITH RESPECT TO SUCH DIFFERENCES. BEFORE US, IT WAS SUBMITTED THAT THE STOCK AS PER BOOKS TAKEN AT THE TIME OF SURVEY WAS NOT ON THE BA SIS OF COMPLETE ENTRIES RECORDED IN THE BOOKS OF ACCOUNTS AND THERE FORE, FOR SUCH MINOR ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 24 VARIATION IN THE STOCK, NO ADVERSE INFERENCE WAS DR AWN BY THE SURVEY PARTY AND SINCE ASSESSEE HAS MAINTAINED COMPLETE BO OKS OF ACCOUNTS ALONG WITH THE STOCK REGISTER AND NO DISCREPANCY WA S FOUND BY THE AO THEREIN, THE ALLEGED SHORT STOCK DETERMINED AT THE TIME OF SURVEY CANT BE A BASIS FOR MAKING ADDITION OF RS. 1,80,00,000/- . THE LD CIT(A) HAS RETURNED A FINDING THAT SUCH DISCREPANCIES WERE NOT RECONCILED DURING THE ASSESSMENT OR EVEN APPELLATE STAGE. THE STOCK T O THE EXTENT OF RS 928,887 THEREFORE REMAIN UNRECONCILED. 18. IN LIGHT OF ABOVE DISCUSSIONS, IT IS CLEAR THA T THERE WERE PURCHASES FROM CERTAIN SPECIFIC CONCERNS AND CERTAIN OTHER DI SCREPENCIES IN THE OVERALL PURCHASES AS PER BOOKS AND AS PER PHYSICAL STOCK WHICH WERE FOUND DURING THE COURSE OF SURVEY AND BASIS THAT, T HE SURRENDER WAS MADE BY THE ASSESSEE COMPANY OF RS 1.8 CRORES DURIN G THE COURSE OF SURVEY AS ADMITTED BY THE ASSESSEE COMPANY THROUGH ITS DIRECTOR WHOSE STATEMENT WAS RECORDED AT THE TIME OF SURVEY. SUBSE QUENTLY, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS AGAIN CONFRONTED WITH SUCH DISCREPANCIES AND TO AN EXTENT, CERTAIN D ISCREPANCIES REMAIN UNRECONCILED DURING THE ASSESSMENT AND APPELLATE PR OCEEDINGS. AND IN RESPECT OF CERTAIN DISCREPENCIES, THE ASSESSEE HAS OFFERED THE NECESSARY EXPLANATION BEFORE US AND HENCE, THE SAME COULDNT HAVE BEEN EXAMINED EARLIER DURING THE ASSESSMENT AND APPELLAT E STAGE. IN LIGHT OF THE SAME, WE ARE OF THE VIEW THAT THE ADDITION HAS NOT BEEN MADE BY THE AO SOLELY BASIS THE ADMISSION MADE IN THE STATE MENT RECORDED DURING THE COURSE OF SURVEY RATHER THESE WERE BASED ON SPECIFIC DISCREPANCIES FOUNDS ON PERUSAL OF BOOKS OF ACCOUNT S. ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 25 19. BASES SUCH DISCREPANCIES, THE BOOKS OF ACCOUNT S HAVE BEEN REJECTED BY THE LD CIT(A) U/S 145(3) AND THE SAID R EJECTION OF BOOKS OF ACCOUNTS ARE NOT UNDER CHALLENGE BEFORE US. ONCE T HE BOOKS OF ACCOUNTS HAVE BEEN REJECTED, THE GROSS PROFIT HAS T O BE DETERMINED BASED ON SOME RATIONAL BASIS AND MATERIAL AVAILABLE ON RECORD AND WHICH WILL BE APPLIED ON THE WHOLE OF THE TURNOVER SO DECLARED BY THE ASSESSEE COMPANY AS ALSO ACCEPTED BY THE REVENUE. THE LD CIT(A) HAS APPLIED G.P RATE OF 3.40% AS AGAINST G.P RATE OF 3. 27% DECLARED BY THE ASSESSEE COMPANY. THE BASIS OF SUCH DETERMINATION OF 3.4% G.P RATE IS NOT CLEAR FROM PERUSAL OF THE ORDER OF THE LD CIT(A ). AS HELD BY THE COURTS, THE PAST HISTORY OF THE ASSESSEE IS THE BES T GUIDE TO ASSIST DETERMINATION OF G.P RATE IN ABSENCE OF ANY THIRD P ARTY COMPARABLE DATA. GIVEN THAT, THE MATTER IS SET ASIDE TO THE F ILE OF THE AO FOR THE LIMITED PURPOSES OF DETERMINATION OF G.P RATE BASED ON AVERAGE OF PAST RESULTS OF ATLEAST THREE YEARS WHICH HAVE EITHER AT TAINED FINALITY OR HAVE BEEN ACCEPTED BY THE REVENUE. THE AO SHALL DETERMIN E THE G.P RATE AND APPLY THE SAME ON THE ACCEPTED TURNOVER AS DECL ARED BY THE ASSESSEE COMPANY. 20. IN THE RESULT, GROUND NO. 2 OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES, GROUND NO. 3 OF REVENUES APP EAL IS ALLOWED AND SOLE GROUND IN ASSESSEES CROSS OBJECTION IS DISMIS SED. 21. NOW, COMING TO GROUND NO. 1 OF REVENUES APPEAL WHERE THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 1,80,00,000/- MADE BY THE AO HOLDIN G THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION. AT THE OUTSET, IT WAS SUBMITTED BY THE ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 26 LD DR THAT THE FIGURE OF RS 1.8 CRORES HAS BEEN INA DVERTENTLY MENTIONED IN THE GROUND OF APPEAL AND THE SAME SHOULD BE READ AS RS 40 LACS. THE LD AR DIDNT RAISE ANY OBJECTION TO THE SAME AN D HENCE, THE FIGURE OF RS 40 LACS IS READ INSTEAD OF RS 1.8 CRORES. 22. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASS ESSEE COMPANY HAS ACCEPTED DURING THE COURSE OF SURVEY THAT IT SHALL DEPOSIT ADVANCE TAX ON NET PROFIT OF RS 1 CRORE AS CALCULATED ON THE DA TE OF SURVEY IN RESPECT OF ASSESSEE COMPANY AND M/S HARINARAYAN GYARASI LAL . TH AO OBSERVED THAT THE ASSESSEE COMPANY HAS NOT COMPLIED WITH THE SAME AND HAS ALSO FAILED TO FURNISH ANY PROOF THAT SUCH PROFIT W AS INCLUDED IN THE BOOKS OF ACCOUNTS AND RS 40 LACS OUT OF RS 1 CRORE AS ALLOCATED TO THE ASSESSEE COMPANY WAS BROUGHT TO TAX IN THE HANDS OF THE ASESSEE COMPANY. 23. WE NOW REFER TO THE FINDINGS OF THE LD. CIT(A) WHICH ARE UNDER CHALLENGE BEFORE US: (I) THE BRIEF FACTS OF THE CASE ARE THAT DURING TH E COURSE OF SURVEY, SHRI RAKESH KOOLWAL ESTIMATED THE NET PROFI T OF ITS COMPANY AND OTHER CONCERN I.E. M/S HARINARAYAN GYAR ASI LAL TILL THE DATE OF SURVEY AT RS. 1 CRORE. OUT OF THIS AMOU NT OF RS. 1 CRORE, IN THE INSTANT CASE UNDER CONSIDERATION, THE AO HAS APPORTIONED A SUM OF RS. 40 LAC PERTAINING TO THE A PPELLANT COMPANY AND MADE ADDITION FOR THE SAME STATING THAT THE APPELLANT HAS FAILED TO PROVE THAT THIS PROFIT IS I NCLUDED IN ITS BOOKS OF ACCOUNTS. ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 27 (II) DURING THE APPELLATE PROCEEDINGS, IT WAS SUBMI TTED BY THE APPELLANT THAT SH. RAKESH B. KOOLWAL, IN HIS STATEM ENT HAS ESTIMATED THE NET PROFIT FOR BOTH THE CONCERNS FOR THE ENTIRE FINANCIAL YEAR AT RS. 1 CRORE AND THIS WAS AN ESTIM ATE MADE BY HIM ON THE DATE OF SURVEY I.E. 18.10.2011. THIS EST IMATE WAS MADE WITH REFERENCE TO THE PROFIT UP TO THE DATE OF SURVEY AS PER THE PRINT OUT OF THE PROFIT & LOSS ACCOUNT TAKEN FR OM REGULAR BOOKS OF ACCOUNTS. FINALLY, THE APPELLANT HAS DECLA RED PROFIT OF RS. 44,76,878/- AND ITS SISTER CONCERN M/S HARINARAYAN GYARSILAL HAS DECLARED PROFIT OF RS. 41,51,628/- AS PER THE PROFI T & LOSS ACCOUNT AGGREGATING TO RS. 86,28,506/-. THIS PROFIT IS AFTE R CONSIDERING THE INTEREST AND DEPRECIATION. THUS THE NET PROFIT AS P ER THE PROFIT & LOSS ACCOUNT IS CLOSE TO THE INCOME ESTIMATED AT TH E TIME OF SURVEY. THE AO, WITHOUT ANY BASIS, HAS HELD THAT PR OFIT OF RS. 40 LAC PERTAINED TO THE APPELLANT OUT OF RS. 1 CRORE E STIMATED BY SHRI RAKESH B. KOOLWAL AND THAT THE SAME IS OTHER T HAN WHAT IS INCLUDED IN THE BOOKS OF ACCOUNTS. (III) I HAVE DULY CONSIDERED THE SUBMISSIONS OF TH E APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT WOULD BE APPROPRIATE TO REPRODUCE HEREUNDER THE RELEVANT EXT RACT OF THE STATEMENT OF SHRI RAKESH KOOLWAL AS UNDER:- IZ-L- 19 VKT VKIDS O;KOKFJD IZFR'BKU IJ LOSZ DH D K;ZOKGH DS NKSJKU VKIDS DEI;WVJ IJ VKIDS GROUP CONCERN DS TKS REGULAR CGH[KKRS MAINTAIN FD, TKRS GS] MU CONCERNS DS PKYW FOFK; O'KZ DS 18-0-11 RD DS YKHK GKFU [KK RKSA DK PRINTOUT FY;K X;K GSA BU [KKRKSA DS FGLKC LS ESA- GFJUKJK;.K FX;KJLHY KY ESA 1-07 DJKSM+ DK KQ} YKHK VK;K GS TCFD ESA- >.MSOKYKL QWML IZK- FY- 29]75]000 @& :I;S DK KQ} YKHK FN[KK;K X;K GS BLDS CKJS ESA VKIDK D;K DGUK GSA ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 28 MKJ ESUS ANNEXURE A -&2 ,OA A &3 NS[K FY;K GSA ;G GEKJS DEI;WVJ DS PRINTOUTS GH GSA ;G GEKJH DEIUH O QEZ LS GH LECAF/KR GSA ESA ;G DGUK PKGRK GWW MDR YKHK GKFU [KKRKSA ESA DQN [KPSZ BUNZKT GKSUS LS JG X, GS TSLS FD DEPRECIATION, INTEREST, ETC TKS FD LKY DS VAR ESA GH BUNZKT GKS GSA GKS LDRK GS DQN BILLS/VOUCHER DH ENTRY HKH GKSUS LS JG XBZ GKSXHA BU LHKH DKS /;KU ESA J[KRS GQ, VIUH DEIU H O QEZ ESA PKYW FOFK; O'KZ 18-10- 2011 RD DK KQ} YKHK :I;S ,D DJKSM+ DK YKHK GKSRK GS FTL IJ ESA FU;EKUQLKJ VFXZE DJ TEK DJ NWWAXKA (IV) THUS, IT IS EVIDENT FROM THE ABOVE STATEMENT T HAT SHRI KOOLWAL ESTIMATED THE NET PROFIT OF THE PART OF THE FINANCIAL YEAR I.E. TILL 18.10.2011 FOR BOTH THE CONCERNS AT RS. 1 CRORE AT THE TIME OF SURVEY. THE APPELLANT HAS DECLARED NET PROF IT OF RS. 44,76,878/- FOR THE YEAR UNDER CONSIDERATION AND IT S SISTER CONCERN M/S HARINARAYAN GYARSILAL HAS DECLARED NET PROFIT OF RS. 41,51,628/- AS PER THE PROFIT AND LOSS ACCOUNT AGGR EGATING TO RS. 86,28,506/- AND THIS NET PROFIT IS AFTER CONSIDERIN G THE INTEREST AND DEPRECIATION. THE APPELLANT HAS PROVIDED THE WO RKING OF THE NET PROFIT OF BOTH THE CONCERNS AS REPRODUCED ABOVE IN ITS WRITTEN SUBMISSIONS AND IT IS OBSERVED THAT THE APPELLANT A LONG WITH ITS SISTER CONCERN HAS SHOWN A TOTAL NET PROFIT OF RS. 2,86,07,148/- BEFORE ALLOWANCE OF INTEREST AND DEPRECIATION I.E. THE NET PROFIT SUBJECT TO ALLOWANCE OF INTEREST AND DEPRECIATION T HEREON. IT MAY BE NOTED THAT AS PER THE STATEMENT OF SHRI RAKESH B KOOLWAL AS REPRODUCED ABOVE, THE TOTAL PROFIT TILL THE DATE OF SURVEY OF BOTH THE CONCERNS WAS RS. 1,36,75,000/- (RS. 1,07,00,000 + 29,75,000) SUBJECT TO ALLOWANCE OF INTEREST AND DEP RECIATION AND SHRI KOOLWAL HAS ESTIMATED THE NET INCOME AT RS. 1 CRORE AFTER ALLOWANCE OF INTEREST AND DEPRECIATION THEREOF. FOR THE WHOLE YEAR, THE TOTAL PROFIT OF BOTH THE CONCERNS WAS RS. 2,86,07,148/- ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 29 SUBJECT TO ALLOWANCE OF DEPRECIATION AND INTEREST. IT IS NOTED THAT AFTER CLAIM OF DEPRECIATION AND INTEREST, THE NET P ROFIT OF BOTH THE CONCERNS WAS SHOWN AT RS. 86,28,506/-. FURTHER, THI S ADDITION WAS MADE SOLELY ON THE BASIS OF STATEMENT OF SHRI R AKESH B KOOLWAL, RECORDED DURING THE COURSE OF SURVEY WITHO UT BRINGING ON RECORD ANY MATERIAL, WHICH MAY JUSTIFY THE ADDIT ION OF RS. 40 LAC TO THE INCOME OF THE APPELLANT. THE AO HAS NOT GIVEN ANY BASIS FOR APPORTIONING RS. 40 LAC TO THE APPELLANT COMPANY. (VI) THEREFORE, IN VIEW OF THE ABOVE DISCUSSION AND LOOK ING TO THE FACTUAL MATRIX OF THE CASE AND THE DECISIONS OF HONBLE APEX COURT IN THE CASE OF CIT VS. S. KADAR KHAN SON (SUP RA) AND HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHRI ROSHAN LAL LODHA (SUPRA) DISCUSSED IN EARLIER GROUND OF AP PEAL, IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 40 LAC TO THE INCOME OF THE APPELLANT, HENCE THE SAME CANNOT BE JUSTIFIED AND THUS, HEREBY DELETED. 24. WE FIND THAT THE AO HAS MADE THE ADDITION ON T HE SOLE BASIS THAT THE ASSESSEE COMPANY HAS FAILED TO FURNISH ANY EVID ENCE THAT THIS PROFIT OF RS 40 LACS WAS INCLUDED IN THE BOOKS OF ACCOUNTS . THE LD CIT(A) HAS RETURNED A FINDING THAT SUCH NET PROFIT DETERMINED AT THE TIME OF SURVEY HAS BEEN INCLUDED IN THE OVERALL NET PROFIT DETERMI NED AT THE END OF THE FINANCIAL YEAR. THE SAID FINDINGS OF THE LD CIT(A) REMAIN UNCONTROVERTED BEFORE US AND IS HEREBY CONFIRMED. IN THE RESULT, GROUND OF REVENUES APPEAL IS DISMISSED. 25. WITH THE ABOVE DIRECTIONS, REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE ASSESSEES CROSS OBJEC TION IS DISMISSED. ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 30 26. NOW, COMING TO REVENUES APPEAL IN CASE OF SHR I BHANWAR LAL KOOLWAL IN ITA NO. 325/JP/17 AND ASSESSEES CROSS O BJECTION IN CO NO.18/JP/17, BOTH THE PARTIES SUBMITTED THAT THE FA CTS AND CIRCUMSTANCES ARE EXACTLY IDENTICAL AND ARISING OUT OF SAME SURVEY PROCEEDINGS AND THE STATEMENT OF RAKESH KOOLWAL AND SIMILAR CONTENTIONS AS RAISED IN CASE OF JHANDEWALAS FOOD P VT LTD WERE MADE WHICH HAVE NOT BEEN REPRODUCED FOR THE SAKE OF BREV ITY. 27. IN THIS CASE, BASED ON SURVEY STATEMENT OF SHRI RAKESH KOOLWAL AND OTHER DISCREPANCIES NOTICED DURING THE COURSE O F SURVEY, AN ADDITION OF RS 20 LACS WAS MADE BY THE AO. THE LD. CIT(A) D ELETED THE ADDITION OF RS.20 LAKHS BY HOLDING THAT THE ADDITION WAS MAD E SOLELY ON THE BASIS OF STATEMENT OF SH. RAKESH B. KOOLWAL RECORDED DURI NG THE COURSE OF SURVEY WITHOUT BRINGING ON RECORD ANY INCRIMINATING MATERIAL TO SUPPORT SUCH ADDITION. HOWEVER, HE HELD THAT DURING SURVEY PROCEEDINGS, THERE WAS DIFFERENCE BETWEEN THE PHYSICAL STOCK AS WELL A S CASH AS FOUND DURING THE COURSE OF SURVEY PROCEEDINGS AND AS RECO RDED IN THE BOOKS OF ACCOUNTS. EVEN AFTER RECONCILIATION ON THE DATE OF SURVEY, THERE STILL REMAINS DIFFERENCE OF RS.1,20,798/- ON ACCOUNT OF E XCESS STOCK. SUCH DISCREPANCY IS NOT EVEN RECONCILED DURING ASSESSMEN T PROCEEDINGS. ACCORDINGLY, BOOKS OF ACCOUNTS WERE REJECTED U/S 14 5(3) OF THE ACT AND G.P. RATE OF 1% WAS APPLIED TO THE TOTAL TURNOVER O F RS.1,25,43,82,062/- AS AGAINST G.P. RATE OF 0.96% DECLARED BY THE ASSES SEE RESULTING INTO TRADING ADDITION OF RS.4,71,708/-. 28. WE FIND THAT SIMILAR TO THE CASE OF JHANDEWALAS FOODS WHERE NUMBER OF DISCREPANCIES WERE OBSERVED, THE DISCREPA NCIES IN THE INSTANT ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 31 CASE WERE ALSO OBSERVED AND REMAIN UNRECONCILED. BA SES SUCH DISCREPANCIES, THE BOOKS OF ACCOUNTS HAVE BEEN REJE CTED BY THE LD CIT(A) U/S 145(3) AND THE SAID REJECTION OF BOOKS O F ACCOUNTS ARE NOT UNDER CHALLENGE BEFORE US. ONCE THE BOOKS OF ACCOU NTS HAVE BEEN REJECTED, THE GROSS PROFIT HAS TO BE DETERMINED BAS ED ON SOME RATIONAL BASIS AND MATERIAL AVAILABLE ON RECORD AND WHICH WI LL BE APPLIED ON THE WHOLE OF THE TURNOVER SO DECLARED BY THE ASSESSEE C OMPANY AS ALSO ACCEPTED BY THE REVENUE. THE LD CIT(A) HAS APPLIED G.P RATE OF 1% AS AGAINST G.P RATE OF 0.96% DECLARED BY THE ASSESSEE COMPANY. THE BASIS OF SUCH DETERMINATION OF 1% G.P RATE IS NOT C LEAR FROM PERUSAL OF THE ORDER OF THE LD CIT(A). AS HELD BY THE COURTS F ROM TIME TO TIME, THE PAST HISTORY OF THE ASSESSEE IS THE BEST GUIDE TO A SSIST DETERMINATION OF G.P RATE IN ABSENCE OF ANY THIRD PARTY COMPARABLE D ATA. GIVEN THAT, THE MATTER IS SET ASIDE TO THE FILE OF THE AO FOR THE L IMITED PURPOSES OF DETERMINATION OF G.P RATE BASED ON AVERAGE OF PAST RESULTS OF ATLEAST THREE YEARS WHICH HAVE EITHER ATTAINED FINALITY OR HAVE BEEN ACCEPTED BY THE REVENUE. THE AO SHALL DETERMINE THE G.P RATE AN D APPLY THE SAME ON THE ACCEPTED TURNOVER AS DECLARED BY THE ASSESSE E COMPANY. 29. IN THE RESULT, GROUND NO. 2 OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES, GROUND NO. 3 OF REVENUES APP EAL IS ALLOWED AND SOLE GROUND IN ASSESSEES CROSS OBJECTION IS DISMIS SED. 30. SIMILARLY, GROUND NO. 1 OF THE REVENUES APPEAL IS DISMISSED FOLLOWING OUR REASONING AT PARA 24 ABOVE IN ITA NO. 326/JP/17 WHICH SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL. ITA NO. 326 & 325/JP/17 & CO NO. 19 & 18/JP/17 ACIT, JAIPUR, VS. JHANDEWALAS FOOD PVT. LTD., JAIPUR 32 31. WITH THE ABOVE DIRECTIONS, REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE ASSESSEES CROSS OBJEC TION IS DISMISSED. THE RESPECTIVE APPEALS ARE THUS DISPOSED OFF WITH A BOVE DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 29/12/2017. SD/- SD/- FOT; IKWY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29/12/2017. * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- . ACIT, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- JHANDEWALAS FOOD PVT. LTD., & SH. BHANWAR LAL KOOLWAL, JAIPU R 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 326/JP/17 , CO NO. 19/JP/17 & 325/JP/2017 & CO NO. 18/JP/17} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR