Shri Dwarka Das, Ambala V. Addl. CIT, Ambala

ITA 367/CHANDI/2011

• Counselvise Citation: 36721514 RSA 2011
• Duration Of Justice: 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A K JINDAL
• Keywords: Gross profit estimation; Unexplained investment; Unexplained expenditure; Business income; Income from undisclosed sources; Salary income; Deemed to accrue or arise in india
• Section: 69C; 143(3); 133A; 28

Judgement Text

IN THE INCOME TAX APPELLATE T77RIBUNAL: A BENCH: CHANDIGARH (BEFORE SHRI H.L.KARWA, VP AND SHRI D.K.SRIVASTAVA, AM) ITA NO. 367/CHD/2011 ASSESSMENT YEAR: 2006-07 SHRI DWARKA DASS, V. ADDL CIT, AMBALA RANGE, PROP. M/S KHUBI RAM DWARKA DASS AMBALA AMBALA PAN NO. ABPKO0213F APPELLANT BY: SHRI A.K.JINDAL RESPONDENT BY: SHRI AKHILESH GUPTA DATE OF HEARING: 21.11.2011 DATE OF PRONOUNCEMENT: 04.01.2012 ORDER D.K.SRIVASTAVA: THE APPEAL FIELD BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 27.1.2011 . THE APPEAL RELATES TO ASSESSMENT YEAR 2006-07. THE ASSESSEE FI LED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL ON 27.1 0.2006 RETURNING HIS TOTAL INCOME AT RS.17,04,700/-. AFTER PROCESSIN G, THE RETURN WAS SELECTED FOR SCRUTINY. THE ASSESSEE IS PROPRIETOR O F M/S KHUBI RAM DWARKA DASS AND IS ENGAGED IN THE BUSINESS OF DEALI NG IN FOODGRAINS, ATTA, MAIDA ETC. HE IS ALSO A PARTNER IN M/S MITTAL TRADING COMPANY. SURVEY OPERATION U/S 133A OF THE INCOME-TAX ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 31.12.2005 DURING WHICH HE SURRENDERED A SUM OF RS. 35 LAKHS ON ACCOUNT OF (I) DIFFERENCE IN CASH, (II) UNEXPLAINED INVESTMENT IN EXCESS STOCK FOUND A T THE TIME OF SURVEY, AND (III) UNEXPLAINED ADVANCES TO AGRICULTU RISTS. OUT OF THE SURRENDERED AMOUNT OF RS. 35 LAKHS, A SUM OF RS.25 LAKHS WAS SURRENDERED FOR THE ASSESSMENT YEAR UNDER APPEAL, I .E., 2006-07 AND THE REMAINING SUM OF RS.10 LAKHS WAS SURRENDERED FO R AY 2005-06. ASSESSMENT U/S 143(3) WAS COMPLETED ON 26.12.2008 A SSESSING THE TOTAL INCOME AT RS.20,97,440/- AFTER INCLUDING THE SURRENDERED AMOUNT OF RS.25 LAKHS. 2. ON APPEAL, THE CIT(A) HAS CONFIRMED MAJOR PORTIO N OF THE ADDITIONS MADE BY THE AO. AGGRIEVED BY THE ORDER PA SSED BY THE CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS T RIBUNAL. 3. GROUND NO.1 TAKEN BY THE ASSESSEE READS AS UNDER :- 1. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDI NG THE ACTION OF A.A IN TREATING THE AMOUNT SURRENDERE D 2 DURING SURVEY AS DEEMED INCOME U/S 69-A BY IGNORING THE FACT THAT THE SURRENDER WAS MADE ON ACCOUNT OF DISCREPANCIES FOUND IN THE BOOKS/CASH AND ALSO CONSIDERING THAT ENTIRE SALES/PURCHASES AR E NOT RECORDED IN THE BOOKS. 4. FACTS OF THE CASE GIVING RISE TO THE AFORESAID G ROUND OF APPEAL ARE THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED ON THE DATE OF SURVEY, I.E., 30.12.2005, IN WHICH HE SURRENDERED A SUM OF RS.35 LAKHS AS ADDITIONAL INCOME OUT OF WHICH RS.10 LAKHS WAS S URRENDERED FOR AY 2005-06 AND THE REMAINING SUM OF RS.25 LAKHS FOR TH E ASSESSMENT YEAR UNDER APPEAL, I.E., AY 2006-07. PERUSAL OF HIS STATEMENT DATED 30.12.2005 RECORDED AT THE TIME OF SURVEY SHOWS THA T THE AFORESAID SUM WAS SURRENDERED AS ADDITIONAL INCOME ON ACCOUNT OF UNEXPLAINED CASH (RS.3,33,340/-), UNEXPLAINED INVESTMENT IN STO CK (RS.76,430/-) AND UNEXPLAINED INVESTMENT BY WAY OF ADVANCES (RS.3 0 LAKHS). THE ASSESSEE ALSO SUBMITTED LETTER DATED 30.12.2005 BEF ORE THE AO IN WHICH HE STATED THAT THE IMPUGNED SUMS SURRENDERED BY HIM REPRESENTED UNEXPLAINED CASH AND ADVANCES TO AGRICU LTURISTS, ETC. THE AO TREATED THE SURRENDERED AMOUNT (RS.25 LAKHS) AS UNEXPLAINED INVESTMENT AND ACCORDINGLY TAXED THE SAME. ON APPEA L, THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE AO IN TREATING THE SURRENDERED AMOUNT AS UNEXPLAINED INVESTMENT FOLLOWING THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN FAKIR MOHMED HAJI HASAN, 247 ITR 290 (GUJ). PERUSAL OF THE APPELLATE ORDER PASSED BY THE CIT(A) SHOWS THAT THE ASSESSEE COULD NOT EXPLAIN AS TO HOW THE IMPUGNED S UM SURRENDERED BY HIM WAS HIS BUSINESS INCOME. THE OPERATIVE PART OF THE APPELLATE ORDER PASSED BY THE CIT(A) READS AS UNDER:- 3.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE APPELLANT. IT IS SEEN THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD DURING THE SURVEY OPERATION, ASSESSMENT PROCEEDINGS AND DURING THE APPELLATE PROCEEDINGS RE GARDING THE SOURCE OF MONEY ADVANCED AT RS.25 LAKHS. FURTHE R, THE ASSESSEE HAS NOT BEEN ABLE TO GIVE ANY EVIDENCE TO SAY THAT THE ADVANCES MADE WERE OUT OF UNACCOUNTED MONEY GENERATED OUT OF BUSINESS. ALL THAT THE ASSESSEE HA S STATED IS THAT THE ADVANCES ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. IT DOES NOT AUTOMATICALLY MEAN THAT IT IS UNACCOUNTED INCOME OF THE BUSINESS BEING CARRIED ON BY THE ASSESSEE UNLESS IT IS PROVED SO. MORE SO, WHEN THE ASSESSEE 3 WAS GIVEN AN OPPORTUNITY TO EXPLAIN ITS POSITION. T HE HON'BLE GUJARAT HIGH COURT IN FAKIR MOHMED HAZI HAS SAN V. CIT ON WHICH THE AO HAS RELIED HAS HELD AS UNDER:- THE SCHEME OF SECTIONS 69, 69A, 69B AND 69C OF THE INCOME-TAX ACT, 1961 WOULD SHOW THAT IN CASES WHERE THE NATURE AND SOURCES OF INVESTMENTS MADE BY THE ASSESSEE OR THE NATURE AND SOURCES OF ACQUISITION O F MONEY, BULLION, ETC., OWNED BY THE ASSESSEE OR THE SOURCE OF EXPENDITURE INCURRED BY THE ASSESSEE ARE NOT EXPLAINED AT ALL, OR NOT SATISFACTORILY EXPLAIN ED, THEN, THE VALUE OF SUCH INVESTMENTS AND MONEY OR TH E VALUE OF ARTICLES NOT RECORDED IN THE BOOKS OF ACCO UNT OR THE UNEXPLAINED EXPENDITURE MAY BE DEEMED TO BE THE INCOME OF SUCH ASSESSEE. IT FOLLOWS THAT THE MOMENT A SATISFACTORY EXPLANATION IS GIVEN ABOUT SU CH NATURE AND SOURCE BY THE ASSESSEE, THEN THE SOURCE WOULD STAND DISCLOSED AND WILL, THEREFORE BE KNOWN AND THE INCOME WOULD BE TREATED UNDER THE APPROPRIATE HEAD OF INCOME FOR ASSESSMENT AS PER TH E PROVISIONS OF THE ACT. HOWEVER, WHEN THESE PROVISIO NS APPLY BECAUSE NO SOURCE IS DISCLOSED AT ALL ON THE BASIS OF WHICH THE INCOME CAN BE CLASSIFIED UNDER O NE OF THE HEADS OF INCOME U/S 14 OF THE ACT, IT WOULD NOT BE POSSIBLE TO CLASSIFY SUCH DEEMED INCOME UNDER AN Y OF THESE HEADS INCLUDING INCOME FROM OTHER SOURCES WHICH HAVE TO BE SOURCES KNOWN OR EXPLAINED. WHEN THE INCOME CANNOT BE SO CLASSIFIED UNDER ANY ONE OF THE HEADS OF INCOME U/S 14, IT FOLLOWS THAT THE QUESTION OF GIVING ANY DEDUCTIONS UNDER THE PROVISI ONS WHICH CORRESPOND TO SUCH HEADS OF INCOME WILL NOT ARISE. IF IT IS POSSIBLE TO PEG THE INCOME UNDER AN Y ONE OF THOSE HEADS BY VIRTUE OF A SATISFACTORY EXPLANATION BEING GIVEN, THEN THESE PROVISIONS OF SECTION 69, 69A, 69B AND 69C WILL NOT APPLY, IN WHI CH EVENT, THE PROVISIONS REGARDING DEDUCTIONS ETC., APPLICABLE TO THE RELEVANT HEAD OF INCOME UNDER WHI CH SUCH INCOME FALLS WILL AUTOMATICALLY BE ATTRACTED. THE OPENING WORDS OF SECTION 14 SAVE AS OTHERWISE PROVIDED BY THIS ACT CLEARLY LEAVE SCOPE FOR DEEM ED 4 INCOME OF THE NATURE COVERED UNDER THE SCHEME OF SECTIONS 69, 69A, 69B AND 69C BEING TREATED SEPARATELY, BECAUSE SUCH DEEMED INCOME IS NOT INCOME FROM SALARY, HOUSE PROPERTY, PROFITS AND GAI NS OF BUSINESS OR PROFESSION, OR CAPITAL GAINS, NOR IS IT INCOME FROM OTHER SOURCES BECAUSE THE PROVISIONS OF SECTION 69, 69A, 69B AND 69C TREAT UNEXPLAINED INVESTMENTS, UNEXPLAINED MONEY, BULLION, ETC., AND UNEXPLAINED EXPENDITURE AS DEEMED INCOME WHERE THE NATURE AND SOURCE OF INVESTMENT, ACQUISITION OR EXPENDITURE, AS THE CASE MAY BE, HAVE NOT BEEN EXPLAINED OR SATISFACTORILY EXPLAINED. THEREFORE, I N THESE CASES, THE SOURCE NOT BEING KNOWN, SUCH DEEMED INCOME WILL NOT FALL EVEN UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE, THE CORRESPONDING DEDUCTIONS WHICH ARE APPLICABLE TO TH E INCOMES UNDER ANY OF THESE VARIOUS HEADS, WILL NOT BE ATTRACTED IN THE CASE OF DEEMED INCOMES WHICH ARE COVERED UNDER THE PROVISIONS OF SECTION 69, 69A, 69 B AND 69C OF THE ACT IN VIEW OF THE SCHEME OF THOSE PROVISIONS. IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION/EVID ENCE REGARDING THE SOURCES OF THE ADDITIONAL INCOME DECL ARED BY THE APPELLANT DURING SURVEY ON ACCOUNT OF ADVANCES MADE TO VARIOUS LANDLORDS AND APPLYING THE RATIO OF HON'BLE GUJARAT HIGH COURT, THE AOS ACTION IN TREATING THE ADDITIO NAL INCOME RS. 25 LAKHS AS DEEMED INCOME U/S 69A IS UPHELD. 3.4 RELIANCE IN THIS REGARD IS ALSO PLACED ON HON'B LE CHANDIGARH BENCH DECISION IN THE CASE OF M/S KIM PH ARMA PVT LTD. IN ITA NO. 189/CHD/2010 DATED 30.4.2010 WH ERE IN ON SIMILAR FACTS, THE HON'BLE BENCH HAS UPHELD THE ACTION OF THE AO OBSERVING AS UNDER:- IN THE ABSENCE OF THE EXPLANATION/EVIDENCE REGARDI NG THE SOURCES OF THE ADDITIONAL INCOME BEING SATISFACTORILY EXPLAINED BY THE ASSESSEE AND APPLYI NG THE RATIO OF THE HON'BLE GUJARAT HIGH COURT IN FAKI R MOHMED HAZI HASSAN V. CIT (SUPRA), WE HOLD THAT THE ADDITIONAL INCOME OFFERED IS DEEMED INCOME ASSESSABLE U/S 69A OF THE ACT AND NO DEDUCTION IS 5 ALLOWABLE AGAINST SUCH DEEMED INCOME ASSESSED U/S 69A OF THE ACT IN THE HANDS OF THE ASSESSEE. FOLLOW ING THE RATIO LAID DOWN BY THE GUJARAT HIGH COURT IN FA KIR MOHMED HAJI HASSAN V. CIT (SUPRA), ONCE THE ASSESSEE HAS FAILED TO EXPLAINED THE NATURE AND SOU RCE OF CASH FOUND AVAILABLE WITH IT AND THE SAME IS ASSESSED AS DEEMED INCOME U/S 69A OF THE ACT. THEREFORE, THE CORRESPONDING DEDUCTIONS UNDER THE HEAD PROFITS AND GAINS ARE NOT AVAILABLE TO THE ASSESSEE. THE ADDITIONAL GROUND OF APPEAL IS THUS DISMISSED. 5. AGGRIEVED BY THE ORDER PASSED BY THE CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. HE SUBMITTED TH AT THE ONLY SOURCE OF INCOME OF THE ASSESSEE WAS HIS BUSINESS AND THER EFORE THE AMOUNT SURRENDERED BY HIM SHOULD ALSO BE TREATED AS BUSINE SS INCOME. 6. IN REPLY, THE LD. DR SUPPORTED THE ORDER PASSED BY THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. PERUSAL OF THE STATEMENT OF THE ASSESS EE AS RECORDED AT THE TIME OF SURVEY AND THE LETTER OF SURRENDER DATE D 30.12.2005 SUBMITTED BY THE ASSESSEE BEFORE THE AO SHOWS THAT THE IMPUGNED SUM WAS SURRENDERED TOWARDS UNEXPLAINED CASH, UNEXP LAINED STOCK, AND UNEXPLAINED ADVANCES TO AGRICULTURISTS. THE LD. CIT(A) HAS ALSO RECORDED A CATEGORICAL FINDING THAT THE ASSESSEE CO ULD NOT ESTABLISH THAT THE SURRENDERED AMOUNT WAS HIS BUSINESS INCOME . PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AMOUNT SURRENDERED BY THE ASSESSEE HAS BEEN TAXED AS UNEXPLAINED MONEY AND UNEXPLAINED INVESTMENTS. UNEXPLAINED MONEY AND UNEXPLAINED INVESTMENTS ARE T AXED UNDER THE DEEMING PROVISIONS OF SECTIONS 69, 69A AND 69B OF T HE INCOME-TAX ACT WHICH FALL UNDER CHAPTER VI OF THE INCOME-TAX ACT. CHAPTER VI OF THE INCOME-TAX ACT DEALS WITH AGGREGATION OF INCOME AND SET OFF OF LOSSES WHILE COMPUTATION OF TOTAL INCOME UNDER VARIOUS HEA DS OF INCOME INCLUDING PROFITS AND GAINS OF BUSINESS OR PROFESS ION IS DEALT WITH UNDER CHAPTER IV OF THE INCOME-TAX ACT. UNEXPLAINED INVESTMENT AND UNEXPLAINED MONEY ARE DEEMED TO BE THE INCOME ONLY FOR THE REASON THAT ASSESSEE FAILS TO SATISFACTORILY EXPLAIN THE N ATURE AND SOURCE OF SUCH INVESTMENT OR MONEY. FAILURE OF THE ASSESSEE T O OFFER ANY SATISFACTORY EXPLANATION AS REGARDS THE NATURE AND SOURCE OF INVESTMENT, MONEY ETC., DOES NOT IPSO FACTO MEAN TH AT IT REPRESENTS 6 THE INCOME OF THE ASSESSEE FROM A KNOWN SOURCE, NAM ELY, PROFITS AND GAINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHE R SOURCES. THE LD. CIT(A) HAS CORRECTLY RELIED UPON THE JUDGMENT OF TH E HON'BLE GUJARAT HIGH COURT IN FAKIR MOHAMED HAJI HASAN, 247 ITR 290 (GUJ) AND THE DECISION OF THIS TRIBUNAL IN M/S KIM PHARMA PVT. LT D, ITA NO.189/CHD/2010 IN SUPPORT OF HER ORDER IN THIS BEH ALF. HER ORDER IS REASONABLE ON THE FACTS OF THE CASE AND ALSO IN CON FORMITY WITH LAW. WE, THEREFORE, CONFIRM HER ORDER. SHE HAS RIGHTLY C ONFIRMED THE ACTION OF THE AO IN TREATING THE SURRENDERED AMOUNT AS UNE XPLAINED INVESTMENT UNDER CHAPTER VI OF THE I-T ACT AND NOT AS HIS BUSINESS INCOME U/S 28 AS CLAIMED BY THE ASSESSEE. GROUND NO .1 IS DISMISSED. 8. GROUND NO.2 READS AS UNDER;- 2. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE AO HAS ERRED IN ALLOWING THE SET OFF OF BUSINESS LOSS AGAINST THE SURRENDERED INCOME AS BUSINESS LOSS CANNOT BE SET OFF AGAINST DEEMED INCOME ASSESSED U/S 69 OF THE INCOME-TAX ACT, 1961. 9. WE HAVE HEARD THE PARTIES. SET OFF OF LOSS FROM ONE SOURCE AGAINST THE INCOME FROM ANOTHER SOURCE UNDER THE SA ME HEAD OF INCOME IS PERMISSIBLE UNDER SECTION 70 WHILE SET OF F OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER HEAD IS PERMISSIBL E UNDER SECTION 71. BOTH THE AFORESAID SECTIONS PERMIT SET OFF OF L OSS EITHER UNDER THE SAME HEAD OR AGAINST THE INCOME FROM ANOTHER HEAD. THE ISSUE BEFORE US IS WHETHER UNEXPLAINED INVESTMENT ASSESSED AS DE EMED INCOME U/S 69/69A/69B AS A RESULT OF THE FAILURE ON THE PART O F THE ASSESSEE TO SATISFACTORILY EXPLAIN ITS NATURE AND SOURCE CAN AT ALL BE LINKED TO A SOURCE/HEAD SO AS TO QUALIFY FOR SET-OFF AGAINST TH E LOSS UNDER THE SAME OR ANOTHER HEAD OF INCOME. LD. CIT(A) HAS RIGH TLY RELIED UPON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN F AKIR MOHMED HAJI HASAN 247 ITR 290 (GUJ) AND THE ORDER OF THIS TRIBU NAL IN KIM PHARMA PVT LTD IN ITA NO.189/CHD/2010. WE FIND NO INFIRMIT Y IN HER ORDER. GROUND NO.2 IS DISMISSED. 10. GROUND NO.3 TAKEN BY THE ASSESSEE READS AS UNDE R:- 3. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDI NG THE ADDITION OF RS. 53,379/- ON ACCOUNT OF DIFFEREN CE IN STOCK UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 7 11. DISCREPANCY IN THE STOCK AS PER THE BOOKS OF AC COUNT VIS-A-VIS STOCK PHYSICALLY FOUND AT THE TIME OF SURVEY WAS DE TECTED BY THE SURVEY TEAM. THE ACTUAL STOCK AS PER THE INVENTORY PREPARED BY THE SURVEY TEAM WORKED OUT TO RS.7,89,986/- WHILE THE S TOCK AS PER THE BOOKS OF ACCOUNT WORKED OUT TO RS. 8,31,081/-. ON B EING QUESTIONED ABOUT THE DIFFERENCE IN STOCK, THE ASSESSEE STATED THAT THE VALUE OF STOCK AS ON THE DAY OF SURVEY WAS RS.7,36,607/ AS P ER THE BOOKS OF ACCOUNT. SINCE THE STOCK AS PHYSICALLY FOUND AT THE TIME OF SURVEY WAS HIGHER BY RS.53,379/- THAN THE STOCK WORKED OUT BY THE ASSESSEE AS PER THE BOOKS OF ACCOUNT, THE ASSESSEE WAS CALLED U PON TO EXPLAIN AS TO WHY THE DIFFERENCE IN STOCK SHOULD NOT BE TREATE D AS UNDISCLOSED INVESTMENT IN STOCK U/S 69B. AFTER HEARING THE ASSE SSEE, THE ASSESSING OFFICER TREATED THE SAID DIFFERENCE AS UNEXPLAINED INVESTMENT AND ACCORDING TAXED THE SAME. 12. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE ACT ION OF THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS:- I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND FIND NO MERIT IN THE SAME. THE APPELL ANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD EXP LAINED THE LESS STOCK FOUND AT THE TIME OF SURVEY DUE TO T HE MISTAKES IN POSTING FROM CASH BOOK TO LEDGER. THE APPELLANTS EXPLANATION AND THE REVISED TRADING ACC OUNT SUBMITTED WAS DULY ACCEPTED AFTER VERIFICATION BY T HE ASSESSING OFFICER. THEREFORE, AS FAR AS THE VALUE O F STOCK AS PER BOOKS OF ACCOUNT IS CONCERNED, THE SAME HAS BEE N ADOPTED AS SHOWN BY THE APPELLANT HIMSELF. THE APPE LLANT DURING THE COURSE OF APPELLATE PROCEEDINGS HAS CHAL LENGED THE VALUATION OF STOCK/INVENTORY BY THE SURVEY TEAM . THE APPELLANTS EXPLANATION/OBJECTION WITH REGARD TO IN VENTORY WEIGHTMENT AND VALUATION ARE NOT ACCEPTABLE IN THE ABSENCE OF SPECIFIC INSTANCES POINTED OUT BY THE APPELLANT WITH REGARD TO DIFFERENCE IN THE VALUE ADOPTED BY THE SU RVEY TEAM AND AS PER ACTUAL RATE. THEREFORE, THE CONTENT ION OF THE APPELLANT WITH REGARD TO THE DEFECT IN THE INVE NTORY PREPARED BY THE SURVEY TEAM IS REJECTED BEING UNSUBSTANTIATED. THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. THIS GROUND OF APPEAL IS DISM ISSED. 8 13. IN SUPPORT OF APPEAL, THE LD. AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD ALREADY SU RRENDERED A SUM OF RS. 76,430/- AS UNEXPLAINED INVESTMENT IN STOCK AND, THEREFORE, THE IMPUGNED ADDITION WAS LIABLE TO BE DELETED. IN THIS CONNECTION, HE RELIED UPON THE STATEMENT RECORDED AT THE TIME OF S URVEY. 14. IN REPLY, THE LD. DEPARTMENTAL REPRESENTATIVE I NVITED OUR ATTENTION TO THE LETTER OF SURRENDER DATED 30.12.20 05 BY WHICH THE ASSESSEE HAD SURRENDERED A SUM OF RS. 35 LACS ON AC COUNT OF UNEXPLAINED CASH AND UNEXPLAINED ADVANCES TO AGRICU LTURISTS. HE SUBMITTED THAT THE ASSESSEE HAS NOT SURRENDERED ANY SUM TOWARDS UNEXPLAINED STOCK. HIS SECOND SUBMISSION WAS THAT S UCH A PLEA WAS NOT TAKEN BEFORE THE LD. CIT(A) AND HENCE THE ASSES SEE SHOULD NOT BE ALLOWED TO TAKE SUCH A PLEA AT THIS STAGE. 15. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE H AS SURRENDERED A SUM OF RS.35 LAKHS OUT OF WHICH RS 25 LAKHS RELAT ES TO THE YEAR UNDER APPEAL AND THE REMAINING SUM RELATES TO ASSES SMENT YEAR 2005- 06. PERUSAL OF THE STATEMENT RECORDED AT THE TIME O F SURVEY SHOWS THAT THE AMOUNTS SURRENDERED BY THE ASSESSEE INCLUD E THE ELEMENT OF UNEXPLAINED INVESTMENT IN THE STOCK. EVEN IN THE LE TTER OF SURRENDER DATED 30.12.2005, THE ASSESSEE HAS SPECIFICALLY STA TED THAT THE AMOUNT WAS BEING SURRENDERED ON ACCOUNT OF UNEXPLAINED CAS H, UNEXPLAINED ADVANCES TO AGRICULTURISTS, ETC. THE USE OF WORD E TC. IN THE LETTER OF SURRENDER DOES NOT EXCLUDE THE POSSIBILITY OF AMOUN T BEING SURRENDERED ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE STOCK. EVEN THE LETTER OF SURRENDER DATED 31.12.2005 READ ALONG WITH THE STATEMENT RECORDED AT THE TIME OF SURVEY MAKES IT Q UITE CLEAR THAT THE AMOUNT SURRENDERED BY THE ASSESSEE ALSO INCLUDED UN EXPLAINED INVESTMENT IN THE STOCK. IN THIS VIEW OF THE MATTER , ADDITION OF RS.53,379/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE STOCK IS FULLY COVERED BY THE AMOUNT SURRENDERED BY THE ASSESSEE A S UNEXPLAINED INVESTMENTS. THE IMPUGNED ADDITION IS, THEREFORE, D ELETED. GROUND NO.3 IS ALLOWED. 16. GROUND NO. 4 READS AS UNDER:- 4. A) THAT THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE A.AS ACTION OF REJECTING THE BOOKS O F ACCOUNT WITHOUT POINTING OUT ANY DEFECTS IN THE SAM E AND THUS RESORTING TO BE PROVISIONS OF SECTION 145( 3) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 9 B) THAT THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING AN ADDITION OF RS. 3,26,556/- ON ACCOUNT OF LOW GP UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E. C) ALTERNATIVELY, THE LD. CIT(A) IS NOT JUSTIFIED IN NOT ALLOWING THE ADJUSTMENT OF ADDITION MADE ON ACCOUNT OF LOW GP AGAINST THE AMOUNT SURRENDERED DURING SURVEY AS THE SURRENDER WAS MADE TO COVER UP THE DISCREPANCIES IN CASH AND STOCKS. 5. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITION , DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON O R BEFORE THE DISPOSAL OF THE SAME. 17. WE HAVE HEARD BOTH THE PARTIES. PERUSAL OF GROU ND NO.1 AS TAKEN BY THE ASSESSEE BEFORE US SHOWS THAT THE ASSESSEE H IMSELF ACCEPTS THAT SALES, PURCHASES, STOCK HAVE NOT BEEN TRULY/CO MPLETELY RECORDED BY HIM IN HIS BOOKS OF ACCOUNT. THE VERY FACT THAT THE ASSESSEE HAS SURRENDERED A SUM OF RS.25 LAKHS ON ACCOUNT OF UNEX PLAINED TRANSACTIONS ALSO SHOWS THAT THE BOOKS OF ACCOUNT M AINTAINED BY THE ASSESSEE ARE NEITHER COMPLETE NOR CORRECT NOR RELIA BLE. IN THIS VIEW OF THE MATTER, THE ORDER PASSED BY THE CIT(A) REJECTIN G THE BOOKS OF ACCOUNT IS CONFIRMED. GROUND NO. 4(A) IS DISMISSED. 18. APROPOS GROUND NO.4(B)/(C), THE AO, AFTER REJEC TING THE BOOKS OF ACCOUNT, HAS ADDED A SUM OF RS.3,26,556/- ON ACCOUN T OF LOW RATE OF GROSS PROFIT SHOWN BY THE ASSESSEE. ON APPEAL, THE CIT(A) HAS CONFIRMED THE IMPUGNED ADDITION WITH THE FOLLOWING OBSERVATIONS:- 5.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE APPELLANT AND FIND NO MERIT IN THE SAME. IT IS NOTICED FROM THE ASSESSMENT ORDER THAT THE APPELLANT HIMSEL F ACCEPTED THAT THERE WERE CERTAIN POSTING MISTAKES F ROM CASH BOOK TO LEDGER DUE TO WHICH THE DIFFERENCE IN STOCK AS PER BOOKS OF ACCOUNT HAS A RISEN. THE APPELLANT HAS ALS O SURRENDERED A SUM OF RS. 25 LAKHS DURING THE YEAR U NDER APPEAL AS SOME OF THE ADVANCES MADE TO THE LANDLORD S ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE, TH E AO IS PERFECTLY JUSTIFIED IN REJECTING THE BOOKS OF ACCOU NT. THE APPELLANTS CONTENTION IN THIS REGARD IS REJECTED. NOW COMING TO REJECTION OF GP RATE SHOWN BY THE APPELLA NT, THE APPELLANT HAS NOT GIVEN ANY DETAILS/DOCUMENTS TO JU STIFY HIS 10 CONTENTION THAT FALL IN GP RATE IS ATTRIBUTABLE TO THE FLUCTUATIONS IN RATE. THEREFORE, THIS EXPLANATION O F THE APPELLANT IS REJECTED BEING UNSUBSTANTIATED. AS REG ARDS APPLICATION OF GP RATE OF THE PREVIOUS YEAR, THERE CANNOT BE ANY BETTER YARDSTICK THEN APPELLANT OWN TRADING RES ULTS IN THE PRECEDING YEARS FOR WORKING OUT THE GROSS PROFI T OF THE APPELLANT. IT IS SEEN THAT THE AO HAS APPLIED THE P REVIOUS YEAR GP AS DECLARED BY THE APPELLANT WHICH IS HELD TO BE JUST AND FAIR. THE ADDITION OF RS. 3,26,556/- MADE BY THE AO IS UPHELD. THIS GROUND OF APPEAL IS DISMISSED. 19. IN SUPPORT OF APPEAL, THE LD. AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT NET PROFIT RATE DECLARED BY THE ASSESSEE IN THE YEAR UNDER APPEAL WAS HIGHER THAN THE PRECEDING AND SUCCEEDING YEAR AND THEREFORE THE IMPUGNED ADDITION SHOULD BE DELETED. HE ALSO RELIED UPON THE DECISION OF THE TRIBUNAL IN TILAK R AJ ASHOK KUMAR V ADDL CIT, ITA NO.616/CHD/2009. HIS ALTERNATIVE SUBM ISSION WAS THAT THE IMPUGNED ADDITION WAS COVERED BY THE AMOUNT SUR RENDERED BY THE ASSESSEE AND THEREFORE IT SHOULD BE DELETED 20. IN REPLY, THE LD. DR SUPPORTED THE ORDER OF CIT (A). 21. WE HAVE HEARD BOTH THE PARTIES. THE CIT(A) HAS RECORDED A CATEGORICAL FINDING THAT THE GROSS PROFIT RATE DECL ARED BY THE ASSESSEE IN THE YEAR UNDER APPEAL IS LOW AS COMPARED TO THE GROSS PROFIT RATE DECLARED BY HIM IN THE PRECEDING YEAR. IT IS IN THI S BACKGROUND THAT THE CIT(A) HAS CONFIRMED THE IMPUGNED ADDITION. THE SUBMISSION OF THE ASSESSEE THAT NET PROFIT RATE IS HIGHER IN THE YEAR UNDER APPEAL THAN THE PRECEDING YEAR IS COMPLETELY MISPLACED FOR THE REASON THAT THE ASSESSEE HAS INCLUDED SURRENDERED AMOUNT IN THE PROFIT AND LOSS ACCOUNT AND IT IS FOR THIS REASON THAT THE NET PROF IT RATE IN THE YEAR UNDER APPEAL IS HIGHER. THE GROSS PROFIT RATE REPRE SENTING OPERATIONAL PROFITS AS DECLARED BY THE ASSESSEE IN THE YEAR UND ER APPEAL IS LOW AS COMPARED TO THE PRECEDING YEAR. 22. THE SUBMISSION OF THE ASSESSEE THAT THE ADDITIO N MADE BY THE AO ON ACCOUNT OF LOW GROSS PROFIT RATE IS COVERED B Y THE AMOUNT SURRENDERED BY THE ASSESSEE DURING SURVEY, IS COMPL ETELY MISPLACED FOR THE REASON THAT THERE IS NO MATERIAL ON RECORD TO HOLD THAT THE ASSESSEE HAS SURRENDERED ANY AMOUNT TO COVER THE AD DITIONS MADE ON ACCOUNT OF LOW RATE OF GROSS PROFIT. IN FACT, THE A SSESSEE COULD NOT HAVE FORESEEN AT THE TIME OF SURVEY IN DECEMBER 200 5 THAT THE GROSS 11 PROFIT RATE FOR THE YEAR TO END ON 31 ST MARCH 2006 WOULD BE LOW. BE THAT AS IT MAY, THE AMOUNT SURRENDERED BY THE ASSES SEE WAS ON ACCOUNT OF UNEXPLAINED INVESTMENT AND NOT ON ACCOUN T OF LOW RATE OF GROSS PROFIT IN THE YEAR UNDER APPEAL. IN THIS VIEW OF THE MATTER, GROUND NO.4(B)/(C) TAKEN BY THE ASSESSEE IS ALSO DI SMISSED. 23. THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED ON 4 TH JANUARY 2012 SD/- SD/- (H.L. KARWA) (D.K.SRIVA STAVA) VICE PRESIDENT ACCOUNTANT MEM BER DATED: 4 TH JANUARY 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR