The ITO, Ward-2(1), Surat V. M/s. Gayatri Traders, Surat

ITA 3572/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9056 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-09-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 10-12-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Keywords: Recovery proceedings; Income from undisclosed sources; Question of law; Initiation of penalty proceedings; Bad and doubtful debts; Set aside
• Section: 143(3); 142(1); 133A; 12

Judgement Text

IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI H.L.KARWA AND SHRI N.S.SAINI ITA NO.3572/AHD/2004 (ASSESSMENT YEAR : 2001-02) THE INCOME-TAX OFFICER WARD-2(1), SURAT. VS. M/S GAYATRI TRADERS, SHOP NO.4, GAYATRI CINEMA COMPOUND, ROAD NO.12, UDHNA, SURAT. (APPELLANT) (RESPONDENT) C.O. NO.34/AHD/2005 ITA NO.3572/AHD/2004 (ASSESSMENT YEAR : 2001-02) M/S GAYATRI TRADERS, SHOP NO.4, GAYATRI CINEMA COMPOUND, ROAD NO.12, UDHNA, SURAT. VS. THE INCOME-TAX OFFICER WARD-2(1), SURAT. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.C.PANDIT, SR. D.R. RESPONDENT BY : MS. URVASHI SHODHAN, A.R. ( (( ( )/ )/)/ )/ ORDER PER KARWA, JM: THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY T HE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-II, SU RAT DATED 21.9.2004 RELATING TO ASSESSMENT YEAR 2001-02. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS)-II, SURAT H AS ERRED IN ALLOWING CLAIM FOR BAD DEBT AMOUNTING TO R S.8,22,855/- AND OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE AS SESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN GAIN. FOR THE AS SESSMENT YEAR 2001-02, THE ASSESSEE FILED THE RETURN ON 21.10.2001 DE CLARING TOTAL INCOME AT RS.2,04,997/-. THE ASSESSING OFFICER COMPLETED TH E ASSESSMENT U/S 143(3) OF THE I.T.ACT, 1961 (IN SHORT THE ACT) ON 18.2.2004 DETERMINING THE TOTAL INCOME AT RS.25,42,7 15/-.A SURVEY OPERATION U/S 133A OF THE ACT WAS CONDUCTED IN THIS CASE ON 21.9.2000. DURING THE COURSE OF SURVEY OPERATION, THE FOLLOWING D ISCREPANCIES WERE FOUND: (I) DIFFERENCE IN STOCK AS ON DATE OF SURVEY - RS. 5, 32,580. ON PHYSICAL VERIFICATION OF STOCK, THE FOLLOWING DISCREPANCIES WERE NOTICED. (I) EXCESS STCOK . RS. 39,300. (IL) LESS STOCK RS.4,93,280 . RS. 5,32,580. (II) DIFFERENCE IN CLOSING/OPENING STOCK AS ON 31.3.00/1.4.2.00 - RS. 6,42,900. ON VERIFICATION, DISCREPANCY IN STOCK REGISTER WERE NOTI CED. (III) AMOUNT RECEIVABLE - RS. 12,37,775. DURING THE COURSE OF VERIFICATION OF BOOKS OF ACCOUNTS, A LIST OF RECEIVABLES AMOUNTING TO RS. 12,37,775. FROM 23 PARTIES WAS FOUND AND IT WAS NOTICED THAT THE TRANSACTIO NS MENTIONED IN THE LIST ARE NOT RECORDED IN REGULAR BO OKS OF, ACCOUNTS. 4. THE ASSESSING OFFICER OBSERVED THAT ON ACCOUNT OF ABOVE MENTIONED DISCREPANCIES, THE ASSESSEE FIRM HAS DISCLOSED ADDITIONAL INCOM E AMOUNTING TO RS.24.13 LACS FOR THE FINANCIAL YEAR 2000- 01 RELEVANT TO ASSESSMENT YEAR 2001-02. THE ASSESSING OFFICER HAS STATED TH AT ON VERIFICATION OF THE RETURN OF INCOME FOR ASSESSMENT YEAR 2001-02, IT WAS NOTIED THAT THE ASSESSEE HAD SHOWN TOTAL INCOME AT RS.2, 04,997/- ONLY. 3 HE FURTHER FOUND THAT BY MAKING FOLLOWING ABNORMAL A DJUSTMENT, THE ASSESSEE HAS NULLIFIED THE EFFECT OF DISCLOSURE MADE IN THE SURVEY, WHICH ARE AS UNDER: (1) DIFFERENCE IN STOCK. THE ASSESSEE HAS INCREASED THE OPENING STOCK BY RS.6,42,900/- (DIFFERENCE FOUND IN STOCK REGISTER IN SUR VEY) BUT THE FIRM HAS NOT MADE ANY CREDIT ENTRY IN THE CRED IT SIDE EITHER IN SALES/CLOSING STOCK OF RS. 5,32,580/- (DIFFERE NCE IN STOCK AS ON DATE OF SURVEY). (2) BAD DEBTS CLAIMED. THE ASSESSEE HAS SHOWN THE ADDITIONAL INCOME OF RS. 18,80,675/- ON ACCOUNT OF THESE TWO HEADS (RS. 12,37,77S /- RECEIVABLES AND RS. 6,42,900/- DIFFERENT IN STOCK REGIS TER IN SURVEY ITS RETURN OF INCOME. BUT, BY CLAIMING OF BAD DE BTS AMOUNTING TO RS-. 11.90 LAKHI THE EFFECT HAS BEEN TRYE D TO NULLIFIED. THEREFORE, THE ASSESSEE WAS ASKED AS PER NOTICE U/S. 142(1) OF THE I.T. ACT DATED 16/10/2003 THAT PLEASE G IVE DETAILED EXPLANATION REGARDING UNACCOUNTED INCOME OF RS. 24,13 LAKHS DISCLOSED DURING THE COURSE OF SURVEY U/S. 133A OF THE I.T. ACT ON 21.9.2000 AND WHAT TREATMENT GIVE N BY YOU IN YOUR BOOKS OF ACCOUNTS AND RETURN OF INCOME AND THE ASSESSEE WAS ALSO ASKED AS PER OFFICE ORDER SHEET ENTRY DATED 15/12/03 THAT WHY SHOULD YOU HAVE NOT PROPERLY SHOWN YOUR DISCLOSED INCOME IN TOTAL INCOME. THE ASSESSEE WAS ALSO ASKED THAT DURING THE COURSE OF SURVEY, IN REPLY OF THE QUESTION T NO. 16 OF THE STATEMENT RECORDED ON OATH OF SHRI PURUSHBTTAM G. KANSARIA, PARTNER OF THE FIRMSTATED THA T THE FIRM WILL PAY THE DUE TAX ON ADDITIONAL INCOME (EXCLU DING THE REGULAR INCOME) DISCLOSED. IN THIS CONTEXT, EXPLANATION WITH EVIDENCE IN THIS REGARD OF RS. 24.13 LAKHS WAS CALLED FOR . IN RESPONSE TO ABOVE, THE ASSESSEE SUBMITTED A DETAILED WR ITTEN SUBMISSION VIDE ITS LETTER DATED 09.1.2004, WHICH READS A S UNDER: (I) THE DIFFERENCE OF STOCK OF RS.5,32,580/- WHICH WE HAVE DECLARED DURING THE COURSE OF SURVEY, IT IS IN OUR CALCUL ATION THAT THE DIFFERENCE IS NOT GENUINE. BUT WE HEREBY DECL ARE BY ABOVE INCOME FOR NOT FURTHER LITIGATION AND PEACE OF MIND. (II) MOREOVER, THE ADDITION MADE IN OUR OPENING STOCK OF RS.6,42,900/-, IT IS BY OVER MISTAKE AND WRONG 4 UNDERSTANDING. (III) WE HEREBY WITHDRAW THE CLAIM OF BAD DEBTS OF RS.11,90, 725/- . EVEN THOUGH OUR CLAIM IS GENUINE AND ALL THE PROOF S GIVEN TO YOUR HONOUR. WE WITHDRAW ONLY FOR OUR MENTAL PEACE, CALM SLEEP AND NO LITIGATION WITH THE DEPARTMENT SUBJECT TO NON- INITIATION OF PENALTY PROCEEDINGS. 5. AFTER CONSIDERING THE ABOVE REPLY OF THE ASSESSEE, TH E ASSESSING OFFICER TOOK THE VIEW THAT THE DISCLOSURE OF THE ADDIT IONAL INCOME MADE BY THE ASSESSEE AT THE TIME OF SURVEY PROVES THAT THE ACCOUNT S OF THE ASSESSEE WERE NOT MADE PROPERLY AND, THEREFORE, PROVISIO NS OF SEC. 145(3) OF THE ACT WERE APPLICABLE. HAVING HELD SO, THE ASSESSING OFFICER MADE ADDITION OF RS.22,95,792/- WHICH APPEARS TO BE DI FFERENCE IN THE INCOME DISCLOSED AND THE DISCLOSURE MADE BY THE ASSESSEE AT THE TIME OF SURVEY. 6. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SUBMISSIONS, WHICH READ AS UNDER: (B) DURING THE YEAR UNDER CONSIDERATION THE APPELLA NT HAD WRITTEN OFF AN AMOUNT OF RS.11,90,7257- IN THE ACCOUNTS OF VARI OUS PERSONS AS IT WAS FOUND AMOUNTS WERE NOT LIKELY TO BE REALIZED . ALL SUCH ACCOUNTS RELATED TO BUSINESS TRANSACTIONS. (C) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WA S OBSERVED THAT THE AO WAS UNHAPPY ABOUT THE CLAIM OF BA D DEBTS AS HE SUSPECTED THAT CLAIM WAS MADE IN THE BACKGROUND OF I NCOME OF RS. 18,80,675/- OFFERED FOR TAX AS A RESULT OF SURVEY. THE A.O WAS APPRISED OF THE FACT THAT THE CLAIM OF BAD DEBTS HAD NOTHING TO DO WITH THE INCOME DISCLOSED IN AS MUCH AS THE APPELLANT HAD BEEN PURSUING RECOVERY PROCEEDINGS AND ON BEING SATISFIED THAT RECOVERIES NOT POSSIBLE FROM THE PERSONS AS PER LIST ATTACH ED, IT WAS THOUGHT FIT TO WRITE OFF THE SAME AS BAD DEBTS. IN TH IS CONNECTION, THE APPELLANT HAS ATTACHED ENVELOPES CONTAINING NOTICES SENT TO DEBTORS BY THE ADVOCATE OF THE APPELLANT, WHICH BEEN R ECEIVED BACK UNSERVED. IN OTHER CASES THOUGH NOTICES WERE SERVED WAS NO 5 RESPONSE FROM THE DEBTORS. IN THE CIRCUMSTANCES, THERE WAS NO ALTERNATIVE BUT TO WRITE OFF THE AMOUNTS AS BAD DEBTS AS IT WAS NO GOOD TO MONEY TO SPEND AFTER BAD MONEY. AS REGARD S, MERITS OF CLAIM OF BAD DEBT, AS SUBMITTED ABOVE, A COPY OF BAD DE BT ACCOUNT IS ATTACHED AT PAGE 14 ONWARDS OF THE PAPER BOOK. IT I S FURTHER SUBMITTED THAT: (I) IN THE ACCOUNT OF SHRI RAM PROVISION STORE, AN A MOUNT OF RS.73,5 OFF AS BAD DEBT. COPIES OF ITS ACCOUNTS FOR FINANC IAL YEARS 1999-2000 & 2000-01 ARE ATTACHED AT PAGES 15 T O 20. IT MAY BE SEEN THAT THERE ARE NO TRANSACTIONS AFT ER 21-06-2001. A NOTICE SENT THROUGH ADVOCATE IS RECEIVED BACK (PROOF ATTACHED AT PAGE 17) THUS THERE WAS NO HOPE OF RECOVERY, AMOUNT IS OFF. (II) IN THE ACCOUNT OF ARIHANT GENERAL STORES, AN AMOUNT O F RS.7,66( OUTSTANDING SINCE TWO YEARS. COPIES OF ITS ACCOUNTS FOR FINANCIAL YEARS 199 & 2000-01 ARE ATTACHED A T PAGE 21 TO 25. NOTICE WAS SENT THROUGH ADVOCATE ON30-12 - 2000. THERE WAS NO RESPONSE AND WAS NO HOPE OF RECOVERY, AMOUNT IS WRITTEN OFF AS BAD DEBT. (III) IN THE ACCOUNT OF BHERUNATH KIRANA STORE, AN AMOUNT O F RS. 10,515/- WAS OUTSTANDING FOR TWO YEARS AS CAN BE SEEN FROM COPIES OF ACCOUNT ATTACHED AT PAGE 26 TO 30. NOTICE SENT THROUGH ADVOCATE WAS RECEIVED BACK. THEREFORE, AMOUNT IS WRITTEN OFF AS BAD DEBT. (IV) COPIES OF ACCOUNT OF MAMA KIRANA STORES FOR FINANCIAL YEAR 1999-2000 AND 2000-01 ARE ATTACHED AT PAGE 31 TO 35 FROM WHICH IT MAY BE SEEN THAT THERE ARE NO TRANSACTION S FROM 24-02-2000. A NOTICE WAS SENT THROUGH ADVOCATE ON 30-12-2000. THERE WAS NO RESPONSE. AS THERE WAS NO HOPE OF RECOVERY, AMOUNT OF RS. 11,913/- WAS WRITTEN OFF AS BAD DEBT. (V) AN AMOUNT OF RS.80,1117- WAS OUTSTANDING FROM NA VGHAN SAHU KIRANA STORE FROM F.Y 1998-99. COPIES OF ACCOUNTS FOR FINANCIAL YEARS 1998-99, 1999-000 AND 2000-01 AR E ATTACHED AT PAGE 36 TO 41. THERE WAS NO TRANSACTION AF TER 27-10-1998. NOTICE SENT THROUGH ADVOCATE WAS RECEIVED BACK AND NECESSARY PROOF IS ATTACHED AT PAGE 149 TO 150. THE AMOUNT WAS FOUND TO BE UNRECOVERABLE AND HENCE WRITTEN OFF. 6 (VI) COPIES OF ACCOUNT OF RAJENDRA KIRANA STORES FOR F INANCIAL YEARS 1998-99, 1999-2000 AND 2000-01 ARE ATTACHED AT PATGE 42 TO 47. T HERE ARE NO TRANSACTIONS AFTER 30-08 - 1999. A NOTICE WAS SENT THROUGH ADVOCATE ON 30-12-2000 ( PROOF ATTACHED AT PAGE 141 TO ). THERE WAS NO RESP ONSE. AMOUNT IS, THEREFORE, WRITTEN OFF AS BAD DEBT. (VII) IN THE CASE OF RANJIT KIRANA STORES RS.49,03 07- WERE OUTSTANDING FROM 15-3-2000 AS MAY BE SEEN FROM COPIES OF ACCOUNT FOR FINANCIAL YEAR 1999-2000 AND 2000-01 ATTACHED AT PAGE 48 TO 52. NOTICE SENT BY ADVOCATE ON 30-12-2000 ( IF ATTACHED AT PAGE 151 TO 152). THERE WAS NO RESPONSE. AS THE AMOUNT FOUND TO BE NON RECOVERABL E, THE SAME WAS WRITTEN OFF AS BAD DEBT. (VIII) IN ACCOUNT OF JAI JAGNNATH KIRANA STORES RS.2,17,624/- WERE OUTSTANDING FROM 31-08-1999 AS MAY BE SEEN FROM COPIES OF ACCOUNT FOR FINANCIAL YEAR 1999-2000 AND 2000- 01 ATTACHED AT PAGE 53 TO 58. NOTICE SENT BY ADVOCATE O N 30-12-2000 ( PROOF ATTACHED AT PAGE 139) THERE WAS NO RESPONSE. AS THE AMOUNT WAS FOUND TO BE NON RECOVERABLE , THE SAME WAS WRITTEN OFF AS BAD DEBT, (IX) (IX) AMOUNT OF RS.79,155/- WAS OUTSTANDING FROM SHANK AR KIRANA STORES. COPIES OF ITS ACCOUNT FOR FINANCIAL YEAR 1999-20000 AND 2000-01 ATTACHED AT PAGE 59 TO 64. THERE ARE NO TRANSACTIONS AFTER 21-04-2000. A NOTICE WA S SENT THROUGH ADVOCATE WAS RECEIVED BACK. ( PROOF ATTACHE D AT PAGE 151 TO 152). THERE BEING NO HOPE OF RECOVERY , AMOUNT WAS WRITTEN OFF AS BAD DEBT. (X) IN ACCOUNT OF PATEL KIRANA STORES, AN AMOUNT OF RS.73,712/- WAS OUTSTANDING FROM 21-03-2000 AS CAN BE SEEN FROM COPIES OF ACCOUNT FOR FINANCIAL YEAR 1999-2000 AND 2000-01 ATTACHED AT PAGE 65 TO O70. NOTICE SENT THROUGH ADVOCATE WAS RECEIVED BACK ( PROOF ATTACHED AT PAGE 147/148). THERE BEING NO HOPE OF RECOVERY, AMOU NT WAS WRITTEN OFF AS BAD DEBT. (XI) AN AMOUNT OF RS.44,627/- WAS OUTSTANDING IN ACCOUNT OF BINDRA PRASAD GUPTA FROM 11-12-1999 AS CAN BE SEEN FROM COPIES OF ACCOUNT FOR FINANCIAL YEAR 1999-2000 AND 2000- 01 ATTACHED AT PAGE 71 TO 75.. A NOTICE WAS SENT ON 30- 12-2000 THROUGH ADVOCATE. ( PROOF ATTACHED AT PAGE 13 9). 7 THERE WAS NO RESPONSE FROM THE DEBTOR. AS THERE WAS NO HOPE OF RECOVERY AMOUNT OF RS.44,627/- IS WRITTEN OFF AS BAD DEBT (XII) AN AMOUNT OF RS.1,40,634/- WAS OUTSTANDING FROM 24-04 - 2000 FROM SHUVIDHA GENERAL STORE. COPIES OF ACCOUNT FO R FINANCIAL YEAR 1999-2000 AND 2000-01 ATTACHED AT PAG E 76 TO 81. A NOTICE SENT ON 30-12-2000 THROUGH ADVOCATE WA S RECEIVED BACK UNSERVED. (PROOF ATTACHED AT PAGE 141). THERE NO POSSIBILITY OF RECOVERY, THE AMOUNT OF RS.1,40,634/- IS WRITTEN OFF AS BAD DEBT. (XIII) IN ACCOUNT OF GAYATRI KIRANA STORE, AN AMOUNT OF RS.33.244/- WAS OUTSTANDING FROM 12-12-1998. COPIES OF DEBTOR'S ACCOUNT FRO FINANCIAL YEAR 1998-99, 1999-2000 AND 2000-01 ATTACHED AT PAGE 82 TO 87. NOTICE FOR RECOVERY SENT THROUGH ADVOCATE WAS RECEIVED BACK UNSERVED. (PROOF ATTACHED AT PAGE 145/146. THERE WAS N O HOPE OF RECOVERY, THE AMOUNT OF RS.33,244/- IS WRITTEN OFF AS BAD DEBT. (XIV) IN THE ACCOUNT OF VINODKUMAR LALAN RAI, AN AMOU NT OF RS.10,412/- IS WRITTEN OFF AS BAD DEBT. COPIES OF HIS ACCOUNT FOR FINANCIAL 1998-99, 1999-2000 AND 2000-01 A RE ATTACHED AT PAGE 88 TO 93. LAST TRANSACTION WAS ON 16-06 - 1999. NOTICE FOR RECOVERY WAS SENT THROUGH ADVOCATE. ( PROOF ATTACHED PAGE 140). THERE WAS NO RESPONSE. (XV) AN AMOUNT OF RS.68,898/- WAS OUTSTANDING FROM 17 -11- 1999 IN ACCOUNT OF BAPUJI KIRANA. COPIES OF ACCOUNT FOR FINANCIAL YEAR 1998-99, 1999-2000 AND 2000-01 ATTACH ED AT PAGE 94 TO 100. LAST TRANSACTION WAS ON 17-11-1999. A NOTICE FOR RECOVERY WAS SENT THROUGH ADVOCATE ON 30-12- 1999 ( PROOF ATTACHED AT PAGE 139). THERE BEING NO RESPONSE, THE DEBT WAS CONSIDERED BAD AND WRITTEN OFF. (XVI) IN THE ACCOUNT OF CHOLARAM KIRANA STORE, RS. 10 ,5907- WERE OUTSTANDING FRO M01-03-2000. COPIES OF HIS ACCOUNT FOR FINANCIAL YEAR 1998-99,1999-2000AND 2000-01 ARE ATTACHED AT PAGE 101 TO 107. NOTICE FOR RECOVERY WAS SEN T THROUGH ADVOCATE ON 30-12-1999 ( PROOF ATTACHED AT PA GE 139). THERE BEING NO RESPONSE, THE DEBT WAS CONSIDERED BAD AND WRITTEN OFF. 8 (XVII) IN THE ACCOUNT OF VISHNU KIRANA STORE, AN AMOU NT OF RS.26,750/- WAS OUTSTANDING. COPIES OF ACCOUNT FOR FINANCIAL YEAR 1998-99, 1999-2000 AND 2000-01 ARE ATTACHED AT PAGE 108 TO 113. LAST TRANSACTION WAS ON 02- 10-1998. NOTICE FOR RECOVERY WAS SENT THROUGH ADVOCATE ON 30-12-2000. (PROOF ATTACHED AT PAGE 142). THERE W AS NO RESPONSE. HENCE AMOUNT OF RS.26,750/- WRITTEN OFF AS BAD DEBT. (XVIII) IN THE ACCOUNT OF AMBICA KIRANA, AN AMOUNT OF RS.8,776/- IS WRITTEN OFF AS &RECOVERY WAS CONSIDERED POSSIBLE. COPY OF ACCOUNT FOR FINANCIAL YEAR 2000- ATTACHED AT PAGE 11 4 TO 117. LAST TRANSACTION WAS ON 11-09-2000. NOTICE IT THROUGH ADVOCATE WAS RECEIVED BACK UNSERVED. ( PROOF ATTACHED AT PAGE 143 /144). (XIX) IN THE ACCOUNT OF CHANDRESH JAIN KIRANA STORE, AN AMOUNT OF RS. 19,1307-IS WRITTEN OFF AS BAD DEBT. COPIES OF ACCOUNT FOR 1999-2000 & 2000-01 ARE ATTACHED AT PAGE 118 TO 119. LAST TRANSACTION WAS ON 05-05-1999. NOTICE SENT THROUGH ADVOCATE WAS RECEIVED BACK UNSERVED. (PROO F ATTACHED AT PAGE 145/146). (XX) AN AMOUNT OF RS.40,700/- IS WRITTEN OFF IN ACCOUN T OF EMPIRE BAKERY. COPIES OF ACCOUNT FOR FINANCIAL YEAR 199 9- 2000 AND 2000-01 ARE ATTACHED AT PAGE 120 TO 122. LA ST TRANSACTION WAS ON 14-03-1999. NOTICE SENT THROUGH ADVOCATE BUT NO RESPONSE. (XXI) IN THE ACCOUNT OF DUBE KIRANA, AN AMOUNT OF RS. 23,800/- WAS OUTSTANDING FROM 19-06-1998. COPIES OF ACCOUNT FOR FINANCIAL YEARS 1998-99, 1999-2000 AND 2000-01 ARE ATTACHED AT PAGE 123 TO 127. NOTICE FOR RECOVERY WAS SEN T THROUGH ADVOCATE ON 30-12-2000 (PROOF ATTACHED AT PA GE 140). THERE WAS NO RESPONSE. THE DEBT WAS, THEREFORE, CONSIDERED BAD AND WRITTEN OFF. (XXII) IN THE ACCOUNT OF BANSILAL KISHANLAL, AN AMOUNT OF RS.30,547/- IS WRITTEN OFF. COPIES OF ACCOUNT FOR FINANC IAL YEARS 1999-2000 AND 2000-01 ARE ATTACHED AT PATE 128 TO 132. LAST TRANSACTION WAS ON 20-09-2000. NOTICE FOR RECOVERY WAS SENT THROUGH ADVOCATE ON 30-12-2000 ( PROOF ATTACHED AT PAGE 140). THERE WAS NO RESPONSE . (XXIII) IN THE ACCOUNT OF BHERUNATH KIRANA STORE, AN AMOUNT OF 9 RS.39,096/- IS WRITTEN OFF. COPIES OF ACCOUNT FOR FINA NCIAL YEARS 1999-2000 AND 2000-01 ARE ATTACHED AT PAGE 133 TO O138. LAST TRANSACTIONS WAS ON 28-05-1999. NOTICE OF 3VERY SENT THROUGH ADVOCATE WAS RECEIVED BACK UNSERVED. (PROOF ATTACHED AT 135). D. WITHOUT PREJUDICE, THE AO HAS COMPLETELY IGNORED THE AMENDMENT MADE LECTION 36(1)(VII) AND 36(2) AS DISCUSSED HEREUNDER AS WELL AS HAS TOTALLY DISREGARDED THE FACTS OF THE APPELLANT'S CASE. AT THE OUTSET, IT MAY NOT BE OUT OF P LACE TO MENTION HERE THAT IN ORDER TO ELIMINATE THE DISPUTE S IN THE MATTER OF DETERMINING THE YEAR IN WHICH A BAD DEBTS CAN BE ALLOWED AND ALSO TO RATIONALIZE THE PROVISIONS REGARDI NG ALLOWABILITY OF BAD DEBTS, AMENDMENTS WERE MADE TO SECTION 36(1)(VII) AND 36(2) VIDE AMENDING ACT, 1987. THE OLD PROVISIONS OF CLAUSE (VII) OF SUB-SECTION (1) READ WITH S UB- SECTION (2) OF THE SECTION 36 LAID DOWN CONDITIONS NECESSARY FOR ALLOWABILITY OF BAD DEBTS. IT WAS PROVIDED THAT THE DEBT MUST BE ESTABLISHED TO HAVE BECOME BAD IN THE PREVIOUS YEAR. THIS LED TO ENORMOUS LITIGATION ON THE QUESTION OF ALLOWABILITY OF BAD DEBT IN A PARTICULAR YEAR, BECAU SE THE BAD DEBT WAS NOT NECESSARILY ALLOWED BY THE AO IN THE YEAR IN WHICH THE SAME HAD BEEN WRITTEN OFF ON THE GROUND THA T THE DEBT WAS NOT ESTABLISHED TO HAVE BECOME BAD IN THAT Y EAR. THE AMENDING ACT, 1987, HAS AMENDED CLAUSE (VII) OF SUB - SECTION (1) AND CLAUSE (I) OF SUB-SECTION (2) OF THE SECTION 36 TO PROVIDE THAT THE CLAIM FOR BAD DEBT WILL BE ALLOW ED IN THE YEAR IN WHICH SUCH A BAD DEBT HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. RELIANCE IS PLACED ON THE DECISION OF HON'BLE ITAT, CHENNAI BENCH 'A' IN NEWDEAL FINANCE & INVESTMENT LTD. VS. DCIT 74 ITD 469. E. DURING THE ASSESSMENT PROCEEDINGS, THE ATTITUDE OF THE ASSESSING OFFICER WAS NOT COURTEOUS AND POLITE AND HE WAS THREATENING OF SEVERE CONSEQUENCES IF THE APPELLANT WAS N OT PREPARED TO OFFER THE AMOUNT OF RS.5,32,580/- ( RS.39 ,300 + RS.4,93,280) WHICH WAS NOT CONSIDERED WHILE CREDITING PRO FIT OF RS. 18,80,675/-TO THE P & L ACCOUNT AND WITHDRAWAL OF CLAIM OF BAD DEBT OF RS.11,90,000/-. THE APPELLANT TH ROUGH ITS PARTNER MORE THAN ONCE TRIED TO EXPLAIN THE REAL POSI TION AS SUBMITTED IN THE PRECEDING PARAGRAPHS AND CLARIFIED TH AT DISCLOSURE MADE BY THE APPELLANT OF RS. 18,80,675/- WAS ALSO ON THE HIGHER SIDE. A SITUATION OF TERROR WAS CREATED D URING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE PARTNER OF TH E 10 APPELLANT FIRM SHRI PARSHOTTAM G. KANSAGRA HAD NO ALTERNATIVE BUT TO SURRENDER TO THE WISHES OF THE AO A ND ACCORDINGLY AS DESIRED BY THE AO, A LETTER WAS WRITTEN WITHDRAWING THE CLAIM OF BAD DEBT AND OFFERING THE A MOUNT OF RS.5,32,580/- FOR TAX IN ADDITION TO THE DISCLOSURE OF RS. 18,80,675/- ALREADY MADE TO THE P & L ACCOUNT. IN THI S CONNECTION, AN AFFIDAVIT OF SHRI PARSHOTTAM G. KANSAGAR A SWORN ON 19-03-2004 IS ATTACHED AT PAGES 153 TO 155 IS S ELF- EXPLANATORY. THUS, THE ASSESSMENT MADE BY ADOPTING UNDU E PRESSURE AND UNDER THREATS IS HIGHLY UNJUSTIFIED AND DESERVES TO BE ANNULLED AND MAY KINDLY BE ANNULLED. F. AS REGARDS ADDITION OF RS.22,95,472/- MADE BY THE AO, AT THE OUTSET IT IS NOT KNOWN AS TO HOW THE FIGURE HAS BEEN ARRIVED AT. HOWEVER, IT APPEARS THAT THE AO WANTED TO MAKE AN ADDITION OF RS.5,32,580/- BEING THE TOTAL OF EXCESS AND DEFICIT STOCK REFERRED TO ABOVE AND CLAIM OF BAD DEBT OF RS. 11,90,0007-7 AS REGARDS THE AMOUNT OF RS.5,32,580/-, AS SUBMITTED ABOVE IN DETAIL, THERE WAS NO REASON FOR MAK ING AN ADDITION BECAUSE EVEN THE ADMITTED INCOME OF RS. 18,80,6757- WAS ON HIGHER SIDE. AS REGARDS CLAIM OF BAD DEBT OF RS.11,90,000/- IT IS SUBMITTED THAT THE LETTER OF WITHDRAWAL OF CLAIM OF BAD DEBT WAS OBTAINED BY THE AO, AS SUBMIT TED ABOVE, UNDER THREAT OF SEVERE CONSEQUENCES. A COPY OF TH E SAID LETTER OF THE APPELLANT IS ATTACHED AT PAGES 156 T O FROM WHICH IT MAY KINDLY BE SEEN THAT THE OFFER WAS SPECIFIC ALLY SUBJECT TO THE CONDITION THAT NO PENALTY PROCEEDING U/S 271(1)(C ) WILL BE TAKEN. IF THE AO WAS NOT PREPARED TO ACCEPT THE OFFER AS MADE, HE COULD NOT HAVE MADE ADDITION OF RS.11.90,000/- WITHOUT DISPROVING THE CLAIM OF THE AP PELLANT OF BAD DEBTS BY BRINGING SUFFICIENT MATERIALS ON RECORD. IN THE CIRCUMSTANCES, SIMPLY ON THE BASIS OF THE APPELLANT'S ALLE GED ADMISSION, ADDITION MADE OF RS.11,90,000/- IS UNJUSTIFI ED AND ILLEGAL AND INVALID. THE ADDITION MAY KINDLY, THERE FORE, BE DELETED. 7. THE CIT(A) ALLOWED BAD DEBT OF RS.8,22,855/- OUT OF RS.11,90,725/- OBSERVING AS UNDER: 4. 2 THE ONLY DISPUTE THAT REMAINS TO BE DECIDED IS REGA RDING THE CLAIM OF THE BAD DEBTS OF THE APPELLANT. THE AO HAS N OT ALLOWED THE CLAIM OF BAD DEBT GROUND THAT THE CLAIM HAS BEEN MADE IN ORDER TO NULLIFY THE DISCLOSURE MADE BY THE APPELLANT AT THE T IME OF SURVEY. THE AO HAS CONTENDED BEFORE ME THAT THE APPELLANT NOT ONLY MADE THE DISCLOSURE OF DISCREPANCIES FOUND AT THE SURVEY, BUT T HE 11 APPELLANT ALSO, AT THE TIME OF SURVEY, BUT THE APPELL ANT , AT THE TIME OF ASSESSMENT PROCEEDINGS, CONFIRMED THE DISCLOSURE MADE AT THE TIME OF SURVEY AND ALSO WITHDREW THE CLAIM OF BAD DEB TS, THEREFORE, THERE WAS NO GROUND FOR ALLOWANCE OF THE BAD DEBT. ON THE OTHER HAND, THE APPELLANT'S COUNSEL HAS REFERRED TO VARIOUS CASE IAWS AS BELOW FOR ALLOWANCE OF THE BAD DEBT. NEWDEAL FINANCE & INVESTMENT LTD. VS DCIT 74 ITD 469 (CHENNAI BENCH).). IN THIS CASE IT HAS BEEN HELD THAT' AS ALREADY OBSERVED BY US IT IS FOR THE ASSESSEE TO DECIDE WHETHER THE DEBT HAS BECOME BAD OR NOT AND THE NEVER INSIST ON PRODUCTION OF DEMONSTRATIVE AND INFALLIBLE PROOF THAT THE C BECOME B AD. HENCE, WE ARE VERY MUCH INCLINED TO SET ASIDE THE ORDER OF APP ELLATE AUTHORITY IN THIS REGARD AND ALLOW THE CLAIM OF THE APPELLANT.' INCOME TAX OFFICER VS ANIL H. RASTOGI 86 ITD 15 ( MUMB AI BENCH) IN THIS CASE IT WAS HELD THAT ' IF THE ASSESSEE WRITES O FF ANY DEBT AS IRRECOVERABLE IN HIS ACCOUNTS IN THE PREVIOUS YEAR, IT IS SUFFICIENT COMPLIANCE OF THE PROVISION OF AMENDED SEC. 36 (1) (VII) AND IT IS NOT OBLIGATORY FOR THE ASSESSEE TO PLACE DEMONSTRATIVE PR OOF FOR ESTABLISHING THE DEBT AS BAD. COMMISSIONER OF INCOME-TAX GIRISH BHAGWAT PRASAD 256 ITR 772 IN THIS CASE THE HON'BLE GUJRAT HIGH COURT HELD THAT NO QUESTION OF LAW AROSE FROM THE ORDER OF TRIBUNAL A LLOWING DEDUCTION OF BAD DEBT WRITTEN OFF IN THE BOOKS BY APP LYING THE AMENDED PROVISION OF SEC. 36(1)(VII). THE APPELLANT'S LEARNED COUNSEL SUBMITTED THAT, IN FACT, THE APPELLANT HAD CREDITED TO ITS INCOME ALL THE DISCREPANCI ES FOUND AT THE TIME OF SURVEY, BUT THE ASSESSING OFFICER WAS NOT HAP PY WITH THE CLAIM OF THE BAD DEBT ON THE GROUND THAT THE SAME NUL LIFIED THE DISCLOSURE MADE BY THE APPELLANT. IT HAS BEEN CONTENTED BEFORE ME THAT THE DEBT HAD REALLY BECOME BAD, THEREFORE, THE SAME WAS CLAIMED IN THE P & L ACCOUNT AND IF IT RESULTS IN TO RED UCTION OF THE DISCLOSURE MADE AT THE TIME OF SURVEY, THE APPELLANT SHO ULD NOT BE HELD RESPONSIBLE FOR IT BECAUSE THE CLAIM IS IN ACCORDANCE WITH THE PROVISIONS OF LAW. THE APPELLANT HAD WRITTEN LETTERS T O THESE DEBTORS THROUGH HIS ADVOCATE AND WHEN THE LETTERS COULD NOT BE SERVED AND THERE WAS NO RESPONSE FROM ANY OF THEM, THE APPELLANT WAS LEFT WITH NO ALTERNATIVE BUT TO WRITE OFF THE DEBTS AS BA D DEBTS. IF THE A.O WAS FAIR ENOUGH, HE WOULD HAVE APPLIED HIS MIND T O THE FACTS OF THE CASE AND WOULD HAVE ALLOWED THE CLAIM AS PER THE P ROVISIONS OF 12 THE LAW. INSTEAD OF APPLYING HIS MIND ACCORDING TO THE PROVISIONS OF LAW, THE AO FORCEFULLY OBTAINED A LETTER FROM THE A SSESSEE WITHDRAWING ITS CLAIM. AFTER CAREFUL CONSIDERATION OF T HE FACTS ON RECORD, I FIND THAT THE APPELLANT APPEARS TO HAVE WIT HDRAWN ITS CLAIM OF BAD DEBT ON CERTAIN CONDITIONS AND ALSO MENTIONING THAT THE 'CLAIM WAS GENUINE. ON THE FACTS OF THE CASE AND ALSO LO OKING TO THE AFFIDAVIT FILED BY ONE OF THE PARTNERS OF THE FIRM, I AM OF THE VIEW THAT THE WITHDRAWAL OF THE CLAIM OF BAD DEBT IS NOT V OLUNTARY. THEREFORE, THE CLAIM OF WITHDRAWAL IS NOT ACCEPTABLE. THE AO HAS MADE INQUIRY IN THIS REGARD AND HIS REPORT HAS BEEN R EPRODUCED AT PARA NO.3 PAGE-11. THE AO IN HIS REPORT HAS ALSO MENTI ONED THAT MOST OF THE PARTIES ARE NOT TRACEABLE OR THE PARTIES HAVE LEFT THE PLACE. SOME OF THE PARTIES WERE DEAD. ON PERUSAL OF T HE REPORT OF THE AO, I FIND THAT ONLY IN THE FOLLOWING CASES THE WR ITING OFF OF THE BAD DEBT DOES NOT APPEAR TO BE PROPER. BHERUMAL KIRANA STORES: NAVGHAN SHANU KIRANA STORES RANJIT KIRANA STORE JAY JAGRIATH KIRANA STORE CHOLARAM KIRANA STORE AS REGARDS BHERUMAL KIRANA STORES IT HAS BEEN REPORTED THAT NO SUCH SHOP EVER EXISTED. SIMILAR IS THE POSITION IN RESP ECT OF NAVGHAN SHANU KIRANA STORES, RANJIT KIRANA STORE. A S REGARDS JAY JAGNATH KIRANA STORES, THE PARTY HAS CONFIRMED THAT H E HAD PAID ALL THE DUES IN THE F.Y 2000. CHOLARAM KIRANA STORE HAS A LSO CONFIRMED THAT HE HAS PAID ALL THE DUES IN THE F.Y1995. IN VIEW OF THE FACT THAT SOME OF THE PARTIES NEVER EXISTED AND SOME OF THE PARTI ES HAVE CONFIRMED HAVING PAID THE DUES, THE BAD DEBTS IN RESP ECT OF THESE PARTIES CANNOT BE ALLOWED. SUCH DISALLOWABLE BAD DEBTS A MOUNT TO RS.3,67,870/-. THE REMAINING BAD DEBT OF RS.8,22,855/ - IS ALLOWED AS PER THE PROVISIONS OF LAW AND AS WRITTEN OFF BY THE APPELLANT. 8. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AT LENGTH AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD S. WE FIND THAT THE CIT(A) HAS CATEGORICALLY OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS FORCEFULLY OB TAINED A LETTER FROM THE ASSESSEE FIRM WITHDRAWING ITS CLAIM OF BA D DEBTS. THERE IS NO MATERIAL ON RECORD TO CONTROVERT THE ABOVE FINDING S OF THE CIT(A). EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD 13 WITHDRAWN ITS CLAIM OF BAD DEBTS ON CERTAIN CONDITIONS AN D ALSO MENTIONING THAT THE CLAIM WAS GENUINE. IT IS SEEN THAT DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE CIT(A), THE ASSESSEE FIRM HAS FILED AN AFFIDAVIT OF ONE OF THE PARTNERS OF THE ASSESSEE FIRM. O N THE BASIS OF THE SAID AFFIDAVIT, THE CIT(A) CAME TO THE CONCLUSION THAT T HE WITHDRAWAL OF CLAIM OF BAD DEBT WAS NOT VOLUNTARY. THUS, KEEPING IN VIEW THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HELD THAT TH E CLAIM OF WITHDRAWAL IS NOT ACCEPTABLE. FURTHERMORE, IN HIS REMAN D REPORT, THE ASSESSING OFFICER SUBMITTED THAT MOST OF THE PARTIES ARE NO T TRACEABLE OR THE PARTIES HAVE LEFT THE PLACE. THE ASSESSING OFFICER HA S ALSO MENTIONED THAT SOME OF THE PARTIES WERE NOT ALIVE. THE CIT(A) H AS MENTIONED IN THE IMPUGNED ORDER THAT SOME OF THE PARTIES NEVER EXISTED AND SOME OF THE PARTIES HAVE CONFIRMED HAVING PAID THE DUES. HE, THEREF ORE, DISALLOWED BAD DEBTS AMOUNTING TO RS.3,67,870/-. HOWEVER, THE CIT (A) HAS ALLOWED REMAINING BAD DEBTS OF RS.8,22,855/- AS PER THE PROVISI ONS OF LAW AS WRITTEN OFF BY THE ASSESSEE. WE FIND NO MATERIAL ON RECO RD TO CONTROVERT THE CATEGORICAL FINDINGS GIVEN BY THE CIT(A) ON THIS ISSU E. THUS, CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUND RAISED BY THE REVENUE. 9. GROUND NO.2 OF THE APPEAL READS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS)-II, SU RAT HAS ERRED IN DELETING ADDITION OF RS.10,50,047/- MADE ON THE BASIS OF DISCREPANCIES FOUND IN THE COURSE OF SURVEY AND OU GHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 10. THE ASSESSING OFFICER MADE AN ADDITION OF RS.22,95,79 2/- WHICH APPEARS TO BE DIFFERENCE IN THE INCOME DISCLOSED AND THE DISCLOSURE MADE BY THE ASSESSEE AT THE TIME OF SURVEY. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, IN RESPONSE TO THE ASSESSING OFFICERS QUERY TO NON-INCLUSION 14 OF INCOME OF RS.5,32,580/- (RS.39,300 +4,93,280) TO TH E PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAD CLARIFIED THAT THE DEFICIT IN STO CK OF RS.4,93,280/- WAS NOTHING BUT UNACCOUNTED SALES AND AT TH E MOST GROSS PROFIT FROM SUCH SALES COULD BE TAXED AND SINCE THE ASSESSEE HAD DISCLOSED THE INCOME OF RS.18,80,674/-, THERE WAS NO NECESSI TY OF FURTHER DISCLOSING THE INCOME OF GROSS PROFIT FROM THE UNACCOUNTED SALES. AS REGARDS ASSESSED STOCK OF RS.39,300/-, IT WAS EXPLAINED THAT THERE WERE SUFFICIENT FUNDS FOR MAKING SUCH PURCHASES OUT OF THE SALE REPRESENTED BY DEFICIT STOCK OF RS.4,93,280/-. THE ASSESSEE ALSO SUBMITTED THAT THE DISCLOSED INCOME OF RS.18,80,674/- WAS MUCH ON THE HIGHER SIDE KEEPING IN VIEW THE UNRECORDED SALES REFERRED TO ABOVE. THE ASSE SSEE ALSO SUBMITTED THAT THE DIFFERENCE IN STOCK OF RS.6,42,900/- HAS BEEN GIVEN EFFECT TO THE TRADING ACCOUNT AND ALSO HAS BEEN INCLUDED IN THE DISCLOSED INCOME OF RS.18,80,674/-. THE ASSESSING OFFICER DID NOT AC CEPT THE ABOVE EXPLANATION OF THE ASSESSEE. THE ASSESSING OFFICER MADE THE ADDITION OF RS.22,95,772/-, WHICH INCLUDED CLAIM OF BAD DEBTS OF RS. 11.90 LACS. 11. ON APPEAL, THE CIT(A) HELD AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND HAVE PERUSED THE REPORT OF THE A.O ALSO . THE ASSESSMENT HAS TO BE DONE BY THE A.O IN ACCORDANCE WITH THE PROVISIONS OF LAW AFTER MAKING PROPER INQUIRY. IN FACT THE REAL INCOME HAS TO BE TAXED IN THE HANDS OF THE APPELLANT A FTER APPRECIATION C THE FULL FACTS ON RECORD. FROM THE P & L ACCOUNT AS APPEARING ON PAGE NUMBER 12 OF THE PAPER BOOK IT IS FOUND THAT THE APPELLANT HAS INCLUDED THE SUM OF RS. 18,80,675/- IN ITS INCOME WHICH REPRESENTS UNRECORDED RECEIVABLES RS. 12,37,775 /- AND DIFFERENCE BETWEEN OPENING STOCK AS PER AUDIT REPORT AN D THE STOCK REGISTER AMOUNTING TO RS.6,42,900/-. THE ASSESSEE HAS NOT INCLUDED IN IT INCOME THE REMAINING DISCLOSURE OF THE SUM OF RS.5, 32,5807- MADE AT THE TIME C SURVEY ON THE GROUND THAT IT IS COV ERED IN THE FIGURE OF RS. 18,80,675/-. REGARDING DEFICIT IN STOCK O F CERTAIN GOODS OF RS.4,93,280/- IT HAS BEEN CONTENDED THAT TH DEFICIT IN ITS STOCK WAS NOTHING BUT UNACCOUNTED SALES AND AT THE MOST G.P FRO M SUCH SALES COULD BE TAXED AND SINCE THE APPELLANT HAD DISCLOSED AN INCOME OF RS. 18,80,674/- THERE WAS NO NECESSITY OF FURTH ER 15 DISCLOSING INCOME FROM GP C UNACCOUNTED SALES. SIMILAR LY, AS REGARDS EXCESS STOCK OF RS.39,300/- IT HAS BEEN EXPLAINED THAT THERE WERE SUFFICIENT FUNDS FOR MAKING SUCH PURCHASES OUT T HE SALES REPRESENTED BY DEFICIT IN ITS STOCK OF RS.4,93,280/-. ON THIS ISSUE, I DO NOT FULLY AGREE WITH THE CONTENTIONS OF THE APPELL ANT'S LEARNED COUNSEL. IF THERE WAS DEFICIT OF STOCK OF CERTAIN ITEMS , IT SIMPLY MEANT THAT THE STOCK HAD BEEN SOLD WITHOUT RECORDING IT S SALES IN THE BOOKS. THEREFORE, THE ADDITION ON ACCOUNT OF SUCH SAL ES HAS TO BE MADE. IN VIEW OF THIS FACT, I APPLY GP RATE ABOU T @ 3% ON SALES OF RS.4,93,280/-. THIS WILL RESULT AN ADDITION OF ABOU T RS.15,000/- TO THE TOTAL INCOME. AS REGARDS, EXCESS STOCK OF RS.39,300 /- I AM OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS TO EXPLAIN THE INVESTMENT IN THE SAME AND HAS TO ACCOUNT FOR THE SAME IN ITS STOCK. IF THE ASSESSEE WANTS ANY SET FROM THE INCOME EARNED OUT OF THE UNRECORDED SALES, IT HAS TO ESTABLISH CORRELATION BET WEEN THE TWO. THE APPELLANT'S COUNSEL HAS NOT BEEN ABLE ESTABLISH THE CORRELATION BETWEEN THE INCOME ARISING OUT OF UNACCOUNTE D SA AND THE INVESTMENT MADE IN THE UNACCOUNTED STOCK, THEREFOR E, AN ADDITION RS.39,300/- HAS TO BE MADE ON THIS GROUND TO THE TOTAL INCOME. THUS THE ADDITION ON THIS GROUND WILL AMOUNT TO ABOUT RS.55,000/- I.E. (RS.39,300 + RS.15,000). THE ASSESSING OF FICER APPEARS TO HAVE ADDED THE WHOLE OF DEFICIT IN THE STOCK WHICH IS NOT JUSTIFIED. THE ADDITION, THUS, REMAINS AT RS.55,000/- AS AGAINST RS.5,32,580/-. 12. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH THE PARTIES, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A) ON THIS ISSUE. THE CIT(A) HAS CATEGORICALLY HELD THAT THE ASSESSEE HAD INCLUDED THE SU M OF RS.18,80,675/- IN ITS INCOME WHICH REPRESENTED UNRECORDED RECEIVABLES OF RS.12,37,775/- AND DIFFERENCE BETWEEN OPENING STOCK AS PER AUDIT REPORT AND THE STOCK REGISTER AMOUNTING TO RS.6,42,900/-. THE ASSESSEE DID NOT INCLUDE IN ITS INCOME THE REMAINING DISCLOSURE OF RS.5,3 2,580/- MADE AT THE TIME OF SURVEY ON THE GROUND THAT IT WAS COVERED I N THE FIGURE OF RS.18,80,675/-. IN OUR VIEW, THE CIT(A) CORRECTLY HAS ACCEPTED THE ABOVE EXPLANATION OF THE ASSESSEE. WE DO NOT FIND ANY MATERIA L ON RECORDS TO CONTROVERT THE ABOVE FINDINGS OF THE CIT(A). REGARDIN G THE DEFICIT IN STOCK OF RS.4,93,280/-, THE CIT(A) WAS FULLY JUSTIFIED IN AP PLYING THE GROSS PROFIT RATE OF 3%. WE ALSO FIND THAT THE ASSESSEE COULD NOT EXP LAIN THE EXCESS 16 STOCK OF RS.39,300/-, THEREFORE, THE CIT(A) HAS CORRECTLY MADE THE ADDITION OF RS. !5,000 + 39,300 = RS.54,300/-. THUS, C ONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND DISMISS THE GROUND RAISED BY THE REVENUE. 13. AS REGARDS CROSS OBJECTION NO.34/AHD/2005, MS. URVASHI SHODHAN, THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR THE GROUNDS RAISED IN THE C.O. ACCORDINGLY, WE DISMISS THE C.O. AS NOT PRESSED . 14. IN THE RESULT, THE APPEAL OF THE REVENUE AND T HE CROSS OBJECTION BY THE ASSESSEE ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11.9. 2009. SD/- (N.S.SAINI) ACCOUNTANT MEMBER SD/- (H.L.KARWA) JUDICIAL MEMBER AHMEDABAD, DATED:11.9.2009 PSP* COPY TO : (1) THE ASSESSEE (2) THE ASSESSING OFFICER (3) THE CIT(A) CONCERNED, (4) THE CIT, CONCERNED, (5) THE DR, ITAT, AHMEDABAD, (6) GUARD FILE. BY ORDER ASSTT. REGISTRAR / D EPUTY REGISTRAR ITAT, AHMEDABAD BENCHES AHMEDABAD.