K.K. INDUSTRIES, Jaipur V. ITO, Kota

ITA 446/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2099 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 30-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L CHANDEL CIT ITA NO
• Keywords: Rejection of books of accounts; Unexplained investment; Business income; Depreciation; Search and seizure; Question of law
• Section: 69C; 133A; 145

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 DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 446/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2011-12 M/S K.K. INDUSTRIES A-515, ROAD NO. 7, INDRAPARSTHA INDUSTRIAL AREA, KOTA CUKE VS. ITO WARD 1(1), KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAFFK8415L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPO NDENT VK;DJ VIHY LA- @ ITA NO. 447/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2011-12 SHRI SURENDRA KUMAR PROP. M/S KANHAIYALAL RADHAVALLABH, BHAMASHAH MANDI, KOTA CUKE VS. ACIT, CIRCLE-2 KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACRPK7336G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 448/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2011-12 SHRI SHYAM KUMAR PROP. M/S KISHORILAL RADHAVALLABH, BHAMASHAH MANDI, KOTA CUKE VS. ACIT, CIRCLE-2 KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACLPK0561F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI S. L. CHANDEL (ADDL. CIT) ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 2 LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 17/08/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23/08/2017 VKNS'K@ ORDER PER: SHRI VIKRAM SINGH YADAV, A.M. THESE ARE APPEALS FILED BY THE RESPECTIVE ASSESSEES AND DIRECTED AGAINST THE ORDERS PASSED BY LD. CIT(A), KOTA DATED 09.03.2017 FOR A.Y. 2011-12, DATED 07.03.2017 FOR A.Y. 2011-12, AND DAT ED 14.03.2017 FOR A.Y. 2011-12 RESPECTIVELY. GIVEN THE SIMILARITY OF FACTS AND COMMON GROUNDS OF APPEAL INVOLVED IN ALL THESE CASES, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C ONSOLIDATED ORDER. ASSESSEES GROUNDS OF APPEAL (ITA NO. 446/JP/17) THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE AS UNDER: 1. THE LD. CIT(A) HAS ERRED ON FACT AND IN LAW IN CONFIRMING THE REJECTION OF BOOKS OF THE ACCOUNTS U/S 145(3) OF TH E INCOME TAX ACT, 1961. 2. THE LD. AO HAS ERRED ON FACTS AND IN LAW IN ESTI MATING THE NET PROFIT FROM BUSINESS AT RS. 1,44,483/- AND THE LD. CIT(A) HAS ERRED IN ESTIMATING THE NET PROFIT AT RS. 50,000/- INSTEAD O F ACCEPTING THE RESULTS DECLARED BY THE ASSESSEE. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OUT OF THE CLAIM OF DEPRECIATION AT RS . 1,95,261/-. 4. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 14,337/- BY INCORRECTLY HOLDING THA T THE COMMISSION INCOME SO RECEIVED BELONGS TO THE ASSESSEE. 2. IN RESPECT OF GROUND NO. 1 & 2 OF THE ASSSESSEE S APPEAL, BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PA RTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING OF GRADED DHANIA . IT FILED ITS RETURN OF INCOME ON 27.09.2011 DECLARING TOTAL INCOME OF R S. 8,46,918/. A ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 3 SURVEY U/S 133A WAS CARRIED ON 07.03.2011. DURING S URVEY, SHRI RAM KARAN POKRA, PARTNER OF THE FIRM, SURRENDERED UNDIS CLOSED INCOME OF RS. 22,60,000/- ON ACCOUNT OF CONSTRUCTION OF GODOWN IN THE BUSINESS PREMISES. THE FIRM INCLUDED THE SAME IN THE INCOME FOR THE YEAR UNDER CONSIDERATION AND CREDITED THE SAME IN ITS PROFIT/L OSS ACCOUNT. THE AO REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) BY HOLDIN G THAT WHEN THE ASSESSEE HIMSELF HAS OFFERED FOR TAXATION UNDISCLOS ED INCOME, THEN IT MEANS THAT THE BOOKS OF ACCOUNTS ARE NOT RELIABLE A ND NOT AS PER THE REQUIREMENT OF INCOME TAX ACT, 1961. HE THEREAFTER HELD THAT INCOME OF RS. 22,60,000/- WHICH IS INCLUDED IN THE PROFIT AND LOSS ACCOUNT BY THE ASSESSEE IS A NON-OPERATIVE INCOME. IF THIS IS NOT TAKEN INTO ACCOUNT THEN THERE IS A LOSS OF RS. 16,89,875/- WHEREAS IN THE PREVIOUS YEAR, THERE WAS A PROFIT OF RS.1,89,769/-. THEREFORE, THE RE IS A DIFFERENCE OF RS. 18,34,358/- WHICH IS UNEXPLAINED. ACCORDINGLY, BY APPLYING THE NET PROFIT RATE OF THE PREVIOUS YEAR OF 0.324% ON THE D ECLARED TURNOVER OF RS. 4,45,93,545/- FOR THE YEAR, HE ESTIMATED THE NE T PROFIT AT RS. 1,44,483/- THEREBY RESULTING INTO AN ADDITION OF RS . 18,34,358/-. 3. ON APPEAL, THE LD. CIT(A) HELD THAT THE VERY FAC T THAT THERE WAS A SURVEY IS SUFFICIENT GROUND TO REJECT THE BOOKS OF ACCOUNTS. HOWEVER, WITH REGARDS TO THE NET PROFIT, HE HELD THAT THE ES TIMATION OF THE AO IS BASED ON THE PYS NET PROFIT RATE IS NOT REASONABLE CONSIDERING THE FACT THAT THE TURNOVER FOR THE YEAR HAS REDUCED SUBSTANT IALLY BY ALMOST RS. 1.4 CRORES. THUS, HE RESTRICTED THE ADDITION OF NET PROFIT AT RS. 50,000/- RESULTING INTO AN ADDITION OF RS. 17,39,875/-. THE RELEVANT FINDING OF THE LD CIT(A) IS REPRODUCED AS UNDER:- ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 4 AS REGARDS GROUND OF APPEAL NO. 1 & 2, IT IS SEEN THAT THE A.O. RAISED OBJECTION REGARDING COMPARATIVE NOTIONAL LOS S OF RS. 16,89,875/- IF INCOME DISCLOSED IN SURVEY AMOUNTING TO RS. 22,60,000/- WERE REMOVED FROM THE BUSINESS TURNOVER . ADDED TO THAT HE HAS TAKEN THE PROFIT OF THE PREVIOUS YEAR & WORKED OUT A DIFFERENCE OF 18,34,358/- BASED ON WHICH HE HAS REJ ECTED THE BOOKS OF ACCOUNTS AND ESTIMATED NET PROFIT@ 0.324% (AS PER AUDIT REPORT OF A.Y. 2010-11). THE A.OS WORKING OF THIS ESTIMATION IS ON THE PREM ISE THAT SINCE THE ASSESSEE HAD EXTRA INCOME BEYOND THE ESTABLISHE D ROUTINE TURNOVER; HE SHOULD HAVE AT LEAST OFFERED EQUIVALEN T N.P ON THE TURNOVER AS PER EARLIER YEARS BESIDES THE INCOME OF FERED DURING SURVEY. THE VERY FACT THAT THERE WAS A SURVEY WAS SUFFICIEN T GROUND TO REJECT THE BOOKS OF ACCOUNTS IN THE CASE. THIS VIEW HAS BEEN HELD BY MY PREDECESSOR CIT(A) IN THE CASE OF SMT. RAJESH JAIN PROP. CHAMATKAR PROPERTIES VIDE APPEAL ORDER NO. 227/10-1 1 VIDE ORDER DATED 25.01.2012. CONFORMING TO THE SAME VIEW, I AM OF THE OPINION TH AT THE REJECTION OF BOOKS IS TO BE UPHELD U/S 145 (3). NOW COMING TO THE ESTIMATION OF INCOME, IT IS WELL KNOWN THAT IN THE CASE OF BEST JUDGMENT WHERE RESORT IS TAKEN TO SECTION 144, THE ASSESSING OFFICER EXERCISING HIS JURISDICTION C ANNOT ACT ARBITRARILY OR CAPRICIOUSLY. THE ASSESSMENT MUST PR OCEED ON JUDICIAL CONSIDERATION IN THE LIGHT OF RELEVANT MAT ERIAL THAT MAY BE ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 5 BROUGHT ON RECORD. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V/S. SURJEETSINGH MAHESHKUMAR (1994) 210 ITR 83 HAS HELD THAT IN EVERY CASE OF BEST JUDGMENT, THE ELEME NT OF GUESS WORK CANNOT BE ELIMINATED SO LONG AS BEST JUDGMENT HAS A NEXUS WITH MATERIAL ON RECORD AND DISCRETION IN THAT BEHA LF HAS NOT BEEN EXERCISED ARBITRARILY OR CAPRICIOUSLY. THE A.O HAS PROCEEDED ON NOTION THAT THE REASONS FO R SHOWING LESSER INCOME WAS BECAUSE THE ASSESSEE HAD SURRENDE RED CERTAIN INCOME DURING SURVEY AND HE WANTED TO SET IT OFF AG AINST SOME REGULAR INCOME TO REDUCE THE TAXABILITY. HOWEVER, T HE ESTIMATION BASED ON PREVIOUS YEARS N.P WHEN THE TURNOVER HAS REDUCED SUBSTANTIALLY BY ALMOST 1.4 CRORES IS NOT A FAIR ES TIMATION IN MY OPINION. THE ADDITION TO N.P IS ACCORDINGLY RESTRIC TED TO A FIGURE OF RS. 50,000/-. THIS AMOUNT OF ADDITION IS ACCORDINGL Y CONFIRMED. THE BALANCE ADDITION OF RS. 94,483/- IS DIRECTED TO BE DELETED. THUS WHILE GROUND NO. 1 IS PARTLY ALLOWED, GROUND N O. 2 IS TREATED DISMISSED. 4. DURING THE COURSE OF HEARING, LD. AR SUBMITTED T HAT THE ASSESSEE HAS MAINTAINED DAY TO DAY BOOKS OF ACCOUNTS INCLUDI NG THE STOCK RECORDS. THESE ACCOUNTS ARE DULY AUDITED. NEITHER I N THE ASSESSMENT PROCEEDINGS NOR IN THE SURVEY PROCEEDINGS ANY SPECI FIC DEFECT WAS FOUND IN THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. IN FACT ASSESSEE HAS DEALT IN ONLY ONE IT EM I.E., DHANIYA. THE COMPLETE QUANTITY TALLY OF THIS ITEM TRADED BY THE ASSESSEE IS AS PER THE TRADING ACCOUNT AVAILABLE AT PB 7. ALL THE ENTRIES IN THE TRADING ACCOUNT I.E., OPENING STOCK, PURCHASES, SALES AND CLOSING S TOCK IS FULLY SUPPORTED ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 6 BY THE QUANTITY AND PURCHASE AND SALES INVOICE. NO DEFECT IS FOUND IN THESE ENTRIES. THE FINDING OF LD. CIT(A) THAT THE C ONDUCT OF SURVEY IS A SUFFICIENT GROUND TO REJECT BOOKS OF ACCOUNTS IS TH EREFORE INCORRECT, ERRONEOUS AND FRIVOLOUS. IN FACT, HIS FINDING IS CO NTRADICTORY IN AS MUCH AS AT PAGE 17 OF HIS ORDER HE HAS STATED THAT THERE IS NO REASON TO INTERFERE WITH THE BUSINESS RESULTS AS SHOWN BY THE ASSESSEE. THEREFORE, SURRENDER ON ACCOUNT OF UNEXPLAINED INVESTMENT IN C ONSTRUCTION CANNOT BE A REASON FOR REJECTION OF THE BOOKS OF ACCOUNTS. 4.1 THE AO HAS INCORRECTLY STATED THAT IF THE NON-OPERA TIVE INCOME IS EXCLUDED, THEN THERE IS A LOSS OF RS. 16,89,875/-. IT IS SUBMITTED THAT THE NET PROFIT OF THE ASSESSEE BEFORE SALARY TO THE PARTNERS IS RS. 25,20,016/- (14,51,000 + 10,69,016). IF NON-OPERATI VE INCOME COMPRISING OF RENT AND INCOME SURRENDERED IN SURVEY , AGGREGATING TO RS. 27,58,891/- (4,98,891 + 22,60,000) IS EXCLUDED, THE NET LOSS WOULD BE RS. 2,38,875/- AND NOT RS. 16,89,875/- AS CALCUL ATED BY THE AO. 4.2 THE AO HAS OBSERVED THAT THE NP RATE FOR LAST YEAR WAS 0.324%. AS AGAINST THIS, NP RATE FOR THE YEAR IS 2.397%. CO NSIDERING THE SAME, AO MADE THE ADDITION BY APPLYING NP RATE OF 0.324% BUT THE SAME IS RESTRICTED TO RS. 50,000/- BY THE LD. CIT(A) AS THE TURNOVER HAS SUBSTANTIALLY DECLINED. IT MAY BE NOTED THAT THE AS SESSEE IS ENGAGED IN THE TRADING OF FOOD GRAIN ITEMS WHERE THE RATE FLUC TUATES ON DAY TO DAY BASIS. NO DEFECT IS FOUND BY THE LOWER AUTHORITIES IN THE TRADING ACCOUNT MAINTAINED BY THE ASSESSEE. THE GROSS PROFIT RATE D URING THE YEAR AT 12.43% (55,40,929 / 4,45,93,545) IS BETTER THAN THE GROSS PROFIT RATE OF 8.88% (51,85,893 / 5,84,19,529) OF THE PREVIOUS YEA R. FURTHER, THE ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 7 LOWER AUTHORITIES HAVE NOT FOUND ANY UNVERIFIABLE E XPENSES IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, THERE IS NO REASON TO INTERFERE WITH THE BOOK RESULTS DECLARED BY THE ASSESSEE. 4.3 RELIANCE IN THIS CONNECTION IS PLACED ON FOLLOWING CASES: MALANI RAMJIVAN JAGANNATH VS. ACIT 316 ITR 120 (RAJ .) IT WAS HELD THAT IN EACH TRADING ACCOUNT, ONLY FOUR ENTRIES WERE THERE OF OPENING STOCK AND PURCHASES ON DEBIT SIDE, SALES AN D CLOSING STOCK ON CREDIT SIDE. THE QUANTUM AND VALUE OF PURCHASES AND SALES HAD NOT BEEN IN DISPUTE IN AS MUCH AS THEY WERE HELD TO BE FULLY VOUCHED. VALUE OF OPENING STOCK ALSO CANNOT BE DISPUTED AS IT CAME FROM CLOSING STOCK OF PREVIOUS YEAR. THE INVENTORIES OF CLOSING STOCK WERE ALSO NOT FOUND TO BE INCORRECT. THAT IS TO SAY ACTUAL STOCK POSITION WAS NOT IN DISPUTE. THE PREVIOUS YEARS BOOKS OF ACCOUNTS WERE NOT FOUND TO BE INCORRECT. IN THE FACE OF THESE UNDISPUTED FACTS AND CIRCUMSTANCES, T HE TRIBUNAL COULD NOT HAVE INTERFERED WITH THE ORDER OF CIT(A). IN DO ING SO, IT HAD IGNORED ALL ADMITTED FACTS IN THE FACE OF WHICH THERE WAS N O OCCASION FOR THE AO TO HAVE RESORTED TO ESTIMATE METHOD. THERE BEING NO DISPUTE ABOUT THE SALES AND PURCHASES, NON MAINTENANCE OF STOCK REGIS TER LOST ITS SIGNIFICANCE SO FAR AS ARRIVING AT GP RATE IS CONCE RNED. THEREFORE, THE CIT(A) WAS RIGHT IN HIS REASONING ABOUT ADMITTED ST ATE OF AFFAIRS. RESORTING TO ESTIMATE OF GP RATE WAS FOUNDED ON NO MATERIALITY. MERE DEVIATION IN GP RATE CANNOT BE A GROUND FOR REJECTI NG BOOKS OF ACCOUNTS AND ENTERING REALM OF ESTIMATE AND GUESSWORK. LOWER GP RATE SHOWN IN THE BOOKS OF ACCOUNTS DURING CURRENT YEAR AND FALL IN GP RATE WAS JUSTIFIED AND ALSO ADMITTED BY THE AO AS WELL AS CI T(A) AS WELL AS THE TRIBUNAL. THEREFORE FALL IN GP RATE LOST ITS SIGNIF ICANCE. HAVING ACCEPTED ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 8 THE REASON FOR FALL IN GP RATE NAMELY STIFF COMPETI TION IN MARKET AND ALSO THAT HUGE LOSS CAUSED IN PARTICULAR TRANSACTION, NE ITHER THE REJECTION OF BOOKS OF ACCOUNTS WAS JUSTIFIED NOR RESORTS TO SUBS TITUTION OF ESTIMATE GP BY RULE OF THUMB MERELY FOR MAKING CERTAIN ADDIT IONS. THEREFORE, THE FINDINGS ARRIVED AT BY THE TRIBUNALS SUFFERS FROM B ASIC DEFECT OF NOT APPLYING HIS MIND TO THE EXISTING MATERIAL WHICH WE RE RELEVANT AND WENT TO THE ROOT OF THE MATTER. WHEN ALL THE DATA AND EN TRIES MADE IN THE TRADING ACCOUNT WERE NOT FOUND TO BE INCORRECT IN A NY MANNER, THERE COULD NOT HAVE BEEN ANY OTHER RESULT EXCEPT WHAT HA S BEEN SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. THEREFORE, T HE ORDER OF THE TRIBUNAL CANNOT BE SUSTAINED. ASHOKE REFRACTORIES P. LIMITED VS. CIT 279 ITR 457 (CAL.) IT WAS HELD THAT WHERE THERE WAS NO FINDING THAT IN THE OPINION OF THE ASSESSING OFFICER, THE METHODS APPLIED WERE SUCH TH AT THE INCOME COULD NOT BE DEDUCED FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE OR THAT THE ACCOUNTS WERE NOT CORRECT OR COMPLETE, THE BOOKS OF ACCOUNT COULD NOT BE REJECTED ONLY IN THE ABSENCE OF STOCK REGISTER OR THE ITEM- WISE STOCKS WERE NOT MAINTAINED IN THE STOCK REGIST ER. CIT VS. SMT. POONAM RANI 41 DTR 194 (DEL.) (2010) IF THE RATE OF GROSS PROFIT DECLARED BY THE ASSESSE E IN A PARTICULAR PERIOD IS LOWER AS COMPARED TO THE GROSS PROFIT DECLARED B Y HIM IN THE PRECEDING YEAR, THAT MAY ALERT THE ASSESSING OFFICE R AND SERVE AS A WARNING TO HIM, TO LOOK INTO THE ACCOUNTS MORE CARE FULLY AND TO LOOK FOR SOME MATERIAL WHICH COULD LEAD TO THE CONCLUSION TH AT THE ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT CORRECT. BUT, A LOW RATE OF GROSS ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 9 PROFIT, IN THE ABSENCE OF ANY MATERIAL POINTING TOW ARDS FALSEHOOD OF THE ACCOUNTS BOOKS, CANNOT BY ITSELF BE A GROUND TO REJ ECT THE ACCOUNT BOOKS UNDER SEC. 145(3) OF THE ACT. CIT VS. OM OVERSEAS 315 ITR 185 (PUNJ. & HAR.) IN THIS CASE ASSESSEE DECLARED G.P. RATE OF 25.38% AS AGAINST 29.5% DECLARED IN THE IMMEDIATELY PRECEDING ASSESSMENT YE AR. ASSESSEE FAILED TO PRODUCE THE QUANTITATIVE DETAILS OF THE RAW MATE RIAL AND FINISHED PRODUCT. AO REJECTED THE BOOKS OF ACCOUNTS AND APPL IED G.P. RATE OF 27%. THE TRIBUNAL HELD THAT SINCE NO DEFECT HAS BEE N POINTED OUT IN THE BOOKS OF ACCOUNTS, THE AO WAS NOT JUSTIFIED IN MAKI NG ADDITION BY REJECTING THE BOOK RESULT OF THE ASSESSEE. ON APPEA L FILED BY THE DEPARTMENT, HIGH COURT UPHELD THE ORDER OF THE ITAT BY HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE ORDER O F THE TRIBUNAL. CIT VS. GOTAN LIME KHANIZ UDYOG 256 ITR 243(RAJ) THE HONBLE HIGH COURT HAS HELD THAT MERE REJECTION OF BOOKS OF ACCOUNTS BY RESORTING TO SECTION 145 DID NOT NECESS ARILY LEAD TO THE ADDITION TO THE RETURNED INCOME OR A DIFFERENT FIGU RE OF INCOME. HENCE SIMPLY BECAUSE SECTION 145 IS APPLICABLE SHOULD NOT BE A CRITERIA FOR MAKING TRADING ADDITION MORE PARTICULARLY WHEN PURC HASES AND SALES ARE FULLY VOUCHED AND NO DISCREPANCIES AS SUCH WAS FOUN D IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. IN THE PRESENT CASE EVEN THE PROVISION OF SECTION 145 IS NOT APPLICABLE. THEREFO RE THE ADDITION MADE BY THE ASSESSING OFFICER IS WITHOUT ANY BASIS AND D IRECTED TO BE DELETED. ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 10 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE SURVEY WAS CARRIED OUT AT THE ASSESSEES PREMISES ON 7.3.2011 BEFORE THE CLOSE OF THE FINANC IAL YEAR AND THEREAFTER, THE ASSESSEE FINALIZED ITS BOOKS OF ACC OUNTS, GOT THEM AUDITED BY THE STATUTORY AUDITORS AND THE FINANCIAL STATEMENTS WERE AUTHENTICATED BY THE AUDITORS ON 20.09.2011. BASIS SUCH AUDITED FINANCIAL STATEMENTS, THE ASSESSEE FILED ITS RETURN OF INCOME ON 27.09.2011. WHERE ANY SPECIFC DEFECTS IN THE BOOKS OF ACCOUNTS WERE NOTICED BY THE REVENUE AUTHORITIES DURING THE COURS E OF SURVEY, THE SEQUENCE OF EVENTS IS RELEVANT IN ORDER TO EXAMINE HOW THE ASSESSEE HAS RESPONDED TO THE SAME BEFORE FINALIZING ITS ANN UAL ACCOUNTS AND SUBMISSION OF ITS RETURN OF INCOME. IT IS NOTED T HAT PURSUANT TO SURVEY PROCEEDINGS, THE ASSESSEE SURRENDERED UNDISCLOSED I NCOME OF RS 22,60,000 WHICH HAS BEEN SPENT ON CONSTRUCTION OF G ODOWN. OTHER THAN THIS UNDISCLOSED INCOME, THERE IS NOTHING ON R ECORD TO SUGGEST ANY OTHER SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS RELA TING TO THE BUSINESS RESULTS WHICH HAVE BEEN POINTED OUT BY THE REVENUE DURING THE COURSE OF SURVEY PROCEEDINGS. THEREFORE, AS ON 7.3.2011, OTHER THAN UNDISCLOSED INCOME OF RS 22,60,000 WHICH HAS BEEN S PENT ON CONSTRUCTION OF GODOWN, THE REVENUE HAS NOT FOUND A NY DEFECTS WHICH IMPACTS THE BUSINESS RESULTS OR THE PROFIT/LOSS ACC OUNT OF THE ASSESSEE COMPANY. WHILE FINALIZING THE ANNUAL ACCOUNTS, THE ASSESSEE WENT AHEAD AND ACCOUNTED FOR THE SAID UNDISCLOSED INCOME OF RS 22,60,000 IN ITS PROFIT/LOSS ACCOUNT. SO, EVEN THIS DEFECT W AS REMOVED AND DULY ACCOUNTED FOR IN THE FINANCIAL STATEMENTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO TOOK THIS GROUND OF SURRENDER OF UNDISCLOSED INCOME AS THE VERY BASIS FOR REJECTION OF BOOKS OF ACCOUNTS. ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 11 BUT THE FACT REMAINS THAT SUCH DEFECT IN THE BOOKS OF ACCOUNTS BY WAY OF NOT DISCLOSING THE INVESTMENT IN CONSTRUCTION OF GODOWN WAS CURED BY PASSING APPROPRIATE ENTRIES IN THE BOOKS OF ACCO UNTS FINALIZED SUBSEQUENTLY AND WHICH WAS DULY OFFERED TO TAX. FU RTHER, THERE IS NO OTHER SPECIFIC DEFECT IN THE TRADING RESULTS OR IN THE OVERALL DETERMINATION OF BUSINESS RESULTS WHICH HAS BEEN HI GHLIGHTED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AS FAR AS SETTING OFF OF UNDISCLOSED INCOME OF RS 22,60,000 IS CONCERNED AGA INST THE REGULAR BUSINESS LOSS IS CONCERNED, THE LD CIT(A) HAS GIVEN A FINDING THAT SUCH UNDISCLOSED INCOME HAVE TO BE TAXED UNDER THE HEAD OF BUSINESS INCOME AND NOT TO BE TAXED SEPARATELY, A FINDING W HICH HAS BEEN ACCEPTED BY THE REVENUE AND IS NOT UNDER CHALLENGE BEFORE US. IN LIGHT OF ABOVE, WE ARE OF THE VIEW THAT THERE WAS NO BASI S WITH THE AO FOR REJECTION OF BOOKS OF ACCOUNTS IN THE INSTANT CASE AS CONTEMPLATED UNDER SECTION 145(3) OF THE ACT. IN THE RESULT, GR OUND NO. 1 OF THE ASSESSEES APPEAL IS ALLOWED. IN VIEW OF THE SAME, GROUND NO. 2 RELATING TO ESTIMATING OF PROFITS BECOMES INFRUCTIO US AND IS HEREBY DISMISSED. 6. IN RESPECT OF GROUND NO. 3 OF THE ASSESSEES APP EAL, BRIEFLY THE FACTS OF THE CASE ARE THAT AO OBSERVED THAT THE ASS ESSEE HAD CLAIMED DEPRECIATION OF RS. 8,88,439/- ON THE GODOWN BUILD ING. ON PERUSAL OF SCHEDULE D OF THE BALANCE SHEET, HE OBSERVED THAT T HE OPENING WDV IS RS. 7,27,839/-, ADDITION OF RS. 7,27,839/- MADE BEF ORE 30.09.2010, ADDITION OF RS. 24,49,569/- MADE AFTER 30.09.2010 A ND DEPRECIATION CLAIMED IS RS.8,88,439/-. THUS, TOTAL VALUE OF THE BUILDING BEFORE DEPRECIATION IS RS. 1,04,48,613/-. AS THE BUILDING WAS PUT TO USE AFTER ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 12 30.09.2010, HE HELD THAT DEPRECIATION IS ALLOWED @ 5% ON RS. 1,04,48,613/- I.E., RS. 5,22,430/-. THEREFORE, HE D ISALLOWED RS. 3,66,009/- (8,88,439 5,22,430) ON ACCOUNT OF EXCE SS CLAIM OF DEPRECIATION. 7. ON APPEAL, THE LD. CIT(A) HELD THAT THE ARGUMENT OF THE AO IS CONTRADICTORY AS ON ONE HAND THE AO IS NOT DISPUTIN G THE OPENING WDV BUT ON THE OTHER HAND THE AO HAS CALCULATED THE DEP RECIATION @ 5% ON THE OPENING WDV AND THE INVESTMENT MADE DURING THE YEAR. THEREFORE, AS THERE IS NO EVIDENCE OF THE ASSET BECOMING FUNCT IONAL FOR USE, HE HELD THAT THE AO SHOULD HAVE DISALLOWED THE DEPRECI ATION CLAIMED ON THE INVESTMENT MADE DURING THE YEAR I.E., RS. 1,95, 261/- (7,27,839*10% + 24,49,569*5%). THE RELEVANT FINDING OF THE LD CIT(A) IS REPRODUCED AS UNDER:- AS REGARDS GROUND OF APPEAL NO 5, THE ARGUMENT OF THE A.O APPEARS TO BE CONTRADICTORY. ON THE ONE HAND HE IS TAKING THE WDV FOR THE ENTIRE BUILDING AND ALLOWING DEPRECIATI ON @5%, AT THE SAME TIME, HE IS ARGUING THAT THE BUILDING IS N OT PUT TO USE. SINCE THERE IS NO DISPUTE REGARDING THE OPENING WDV , THE BEST THE A.O SHOULD HAVE DONE IS TO DISALLOW THE DEPRECI ATION FOR THE WHOLE YEARS INVESTMENT CLAIMED WHICH IS 10% ON 727 839/- AND 5% ON 24,49,569/- AS THERE IS NO EVIDENCE OF SUCH I NVESTMENT IN THE ASSET HAVING BECOME FUNCTIONAL FOR USE. THE DIS ALLOWANCE COMES TO RS. 72,783/- + RS. 1,22,478/- I.E. RS. 1,9 5,261/-. THIS AMOUNT OF THE DISALLOWANCE IS CONFIRMED. THE B ALANCE DISALLOWANCE OF RS. 1,70,747/- IS DIRECTED TO BE DE LETED. ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 13 THE APPELLANTS GROUND NO. 5 IS PARTLY ALLOWED. 8. IT WAS SUBMITTED THAT THE CONSTRUCTION OF THE GO DOWN WAS COMPLETED IN JANUARY, 2011. THIS IS EVIDENT FROM THE STATEMEN T OF SHRI RAMKARAN POKRA, PARTNER WHERE IN REPLY TO QUESTION NO. 2, HE STATED THAT RENTAL INCOME IN THE FIRM HAS STARTED IN LAST 2-3 MONTHS. IN REPLY TO QUESTION NO. 6, HE STATED THAT CONSTRUCTION OF THE GOWDOWN W AS COMPLETED IN JANUARY, 2011 (WRONGLY WRITTEN AS JUNE, 2011 ) . IN FACT, THE ENTRY OF SURRENDER OF RS. 22,60,000/- (1,04,48,614 81,88,6 14) WAS PASSED BY THE ASSESSEE ON 14.03.2011. IN THE NEXT YEAR, NO EX PENDITURE ON ACCOUNT OF CONSTRUCTION IS DEBITED. THUS, ASSESSEE IS ELIGIBLE TO DEPRECIATION @ 5% ON THE INVESTMENT OF RS. 32,37,60 9/- (7,27,839 + 24,49,569) I.E., RS. 1,61,870/- AS AGAINST THE DISA LLOWANCE OF RS. 1,95,261/- DISALLOWED BY THE LD. CIT(A). IN VIEW OF ABOVE, THE AO BE DIRECTED TO ALLOW THE CLAIM OF DEPRECIATION ACCORDI NGLY. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE DEPRECIATION ON ADDITION OF RS 32,37,609 TOWARDS CONSTRUCTION OF GODOWN WAS DISALLOWED BY TH E LD CIT(A) HOLDING THAT NO EVIDENCE OF ASSET BEING PUT TO USE WAS SUBMITTED. THE LD AR HAS CONTENDED THAT RENTAL INCOME FROM THE GOD OWN HAS BEEN RECEIVED DURING THE LAST 2-3 MONTHS OF THE FINANCIA L YEAR AND THE CONSTRUCTION WAS ALSO COMPLETED IN JANUARY 2011 WHI CH PROVES THAT GODOWN WAS ACTUALLY PUT TO USE DURING THE YEAR. WE PRIMA FACIE FOUND FORCE IN THE ARGUMENT OF THE LD AR THAT WHERE RENTA L INCOME HAS STARTED ACCRUING TO THE ASSESSEE, THE SAME DEMONSTRATE THAT THE ASSET WAS ACTUALLY PUT TO USE. HOWEVER, THERE IS NO FINDING OF THE LOWER ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 14 AUTHORITIES IN THIS REGARD. WE ARE ACCORDINGLY SET TING ASIDE THE MATTER TO THE FILE OF THE AO TO EXAMINE THE ABOVE SAID CON TENTION OF THE LD AR AND WHERE THE SAME IS FOUND TO BE IN ORDER, ALLOW T HE DEPRECIATION AS PER LAW. IN THE RESULT, THE GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN RESPECT OF GROUND NO. 4 OF THE ASSESSEES AP PEAL, BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO ON PERUSAL OF FORM 26AS OBSERVED THAT COMMISSION ON BROKERAGE OF RS.14,337/- RECEIVED FR OM SHRI KAMLESH DHAMANI HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOU NTS. HE THUS, MADE AN ADDITION OF RS. 14,337/-. 11. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED A N AFFIDAVIT STATING THAT THE COMMISSION OF RS. 14,337/- REFLECTED IN FO RM 26AS DOES NOT BELONG TO THE ASSESSEE. HOWEVER, THE LD. CIT(A) HEL D THAT AS NO COGENT EVIDENCE WAS PRODUCED BY THE ASSESSEE TO ASSERT ITS CLAIM REGARDING THE COMMISSION AND THEREFORE, HE CONFIRMED THE ADDITION . THE RELEVANT FINDING OF THE LD CIT(A) IS REPRODUCED AS UNDER:- AS REGARDS GROUND OF APPEAL NO 6, THE APPELLANT COU LD NOT PRODUCE ANY COGENT EVIDENCE TO ASSERT HIS CLAIMT HA T IT DID NOT RECEIVE ANY COMMISSION INCOME FROM SH. KAMLESH DHAM ANI AS REFLECTED IN ITS FORM NO. 26A. A SELF SERVING AFFID AVIT DOES NOT CONSTITUTE VERIFIABLE EVIDENCE IN SUPPORT OF THE GR OUND RAISED. THE ADDITION OF RS. 14,337/- IS HELD TO BE RIGHTLY MADE. THIS GROUND OF APPEAL IS DISMISSED. 12. DURING THE COURSE OF HEARING, IT WAS SUBMITTED THAT SHRI KAMLESH DHAMANI HAD INCORRECTLY QUOTED PAN OF THE ASSESSEE WHILE UPLOADING ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 15 FORM 26Q IN RESPECT OF TAX DEDUCTED AT SOURCE FOR P AYMENT MADE FOR COMMISSION ON BROKERAGE. THE SAME HAS BEEN CORRECTE D BY THE DEDUCTOR ON 22.06.2017. THUS, IT IS NOW EVIDENT THA T THIS INCOME DOES NOT BELONG TO THE ASSESSEE. IN VIEW OF ABOVE, THE A O BE DIRECTED TO DELETE THE ADDITION OF RS. 14,337/. 13. AFTER HEARING BOTH THE PARTIES, WE ARE SETTING ASIDE THE MATTER TO THE FILE OF THE AO TO EXAMINE THE ABOVE SAID CONTEN TION OF THE LD AR AND WHERE THE SAME IS FOUND TO BE IN ORDER, ALLOW THE N ECESSARY RELIEF TO THE ASSESSEE. ASSESSEES GROUNDS OF APPEAL (ITA NO. 447/JP/17) 1. THE LD. CIT(A) HAS ERRED ON FACT AND IN LAW IN C ONFIRMING THE REJECTION OF BOOKS OF THE ACCOUNT U/S 145(3) OF THE INCOME TAX ACT, 1961. 2. THE LD. AO HAS ERRED ON FACT AND IN LAW IN ESTIMATI NG THE PROFIT FROM BUSINESS AT RS. 5,76,700/- AND THE LD. CIT(A) HAS E RRED IN CONFIRMING THE SAME AT RS. 4,00,000/- INSTEAD OF ACCEPTING THE RESULTS DECLARED BY THE ASSESSEE. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 86,300/- MADE ON ACCOUNT OF LOW HOU SEHOLD WITHDRAWALS. 14. IN GROUND NO. 1 & 2 OF THE ASSSESSEES APPEAL, BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE IS THE PROPRIETOR OF M/S KISHORILAL RADHAVALLABH. HE FILED THE RETURN OF INCOME ON 27.0 9.2011 DECLARING TOTAL INCOME OF RS. 21,42,306/-. A SURVEY U/S 133A WAS CARRIED ON 07.03.2011. THE ASSESSEE OFFERED FOR TAX UNACCOUNTE D CASH OF RS. 7,49,201/- AND UNACCOUNTED DEBTORS OF RS. 18,05,000 /- I.E., RS. 25,54,201/- AND INCLUDED THE SAME IN HIS INCOME FOR THE YEAR UNDER CONSIDERATION. THE AO REJECTED THE BOOKS OF ACCOUNT S U/S 145(3) BY ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 16 HOLDING THAT WHEN THE ASSESSEE HIMSELF HAS OFFERED FOR TAXATION UNDISCLOSED INCOME, THEN IT MEANS THAT THE BOOKS OF ACCOUNTS ARE NOT UPTO DATE, DEFECTIVE AND NOT AS PER THE REQUIREMENT OF INCOME TAX ACT, 1961. HE THEREAFTER HELD THAT INCOME OF RS. 25,54,2 01/- WHICH IS INCLUDED IN THE PROFIT AND LOSS ACCOUNT BY THE ASSE SSEE IS A NON- OPERATIVE INCOME. IF THIS INCOME IS NOT TAKEN INTO ACCOUNT THEN THERE IS A LOSS OF RS. 3,11,749/- WHEREAS IN THE PREVIOUS YE AR THERE WAS A PROFIT OF RS.3,00,093/-. THEREFORE, THERE IS A DIFFERENCE OF RS. 6,11,842/- WHICH IS UNEXPLAINED. ACCORDINGLY, BY APPLYING THE NET PROFIT RATE OF THE PREVIOUS YEAR OF 0.144% ON THE DECLARED TURNOVER OF RS. 40,04,86,073/- FOR THE YEAR, HE ESTIMATED THE NET PROFIT AT RS. 5, 76,700/- THEREBY RESULTING INTO AN ADDITION OF RS. 8,88,449/-. 15. THE LD. CIT(A) HELD THAT THE VERY FACT THAT THE RE WAS A SURVEY IS SUFFICIENT GROUND TO REJECT THE BOOKS OF ACCOUNTS. HOWEVER, WITH REGARDS TO THE NET PROFIT, HE HELD THAT THE ESTIMAT ION OF THE AO IS BASED ON THE PYS NET PROFIT RATE IS NOT REASONABLE CONSI DERING THE FACT THAT THE TURNOVER FOR THE YEAR IS DOUBLE OF THE LAST YEA R. HE THUS APPLIED NET PROFIT OF 0.1% ON THE DECLARED TURNOVER AND THUS ES TIMATED THE NET PROFIT AT RS. 4 LAKHS RESULTING INTO AN ADDITION OF RS. 7,11,749/-. THE RELEVANT FINDING OF THE LD CIT(A) WHICH IS REPRODUC ED AS UNDER:- AS REGARDS GROUNDS OF APPEAL NO. 1 & 2, IT IS SEEN THAT THE A.O. RAISED OBJECTION REGARDING COMPARATIVE NOTIONAL LOS S OF RS. 3,11,749/- IF INCOME DISCLOSED IN SURVEY AMOUNTING TO RS. 25,54,055/- WERE REMOVED FROM THE BUSINESS TURNOVER . ADDED TO THAT HE HAS TAKEN THE PROFIT OF THE PREVIOUS YEAR & WORKED OUT A DIFFERENCE OF 6,11,842/- BASED ON WHICH HE HAS REJE CTED THE ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 17 BOOKS OF ACCOUNTS AND ESTIMATED NET PROFIT @0.144% (AS PER AUDIT REPORT OF A.Y. 2010-11). THE A.OS WORKING OF THIS ESTIMATION IS ON THE PREM ISE THAT SINCE THE ASSESSEE HAD EXTRA INCOME BEYOND THE ESTABLISHE D ROUTINE TURNOVER; HE SHOULD HAVE AT LEAST OFFERED EQUIVALEN T N.P ON THE TURNOVER AS PER EARLIER YEARS BESIDES THE INCOME OF FERED DURING SURVEY. THE VERY FACT THAT THERE WAS A SURVEY WAS SUFFICIEN T GROUND OF REJECT THE BOOKS OF ACCOUNTS IN THE CASE. THIS VIEW HAS BEEN HELD BY MY PREDECESSOR CIT(A) IN THE CASE OF SMT. RAJESH JAIN PROP. CHAMATKAR PROPERTIES VIDE APPEAL ORDER NO. 227/10-1 1 VIDE ORDER DATED 25.01.2012. CONFORMING TO THE SAME VIEW, I AM OF THE OPINION TH AT THE REJECTION OF BOOKS IS TO BE UPHELD U/S 145(3). NOW COMING TO THE ESTIMATION OF INCOME, IT IS WELL KNOWN THAT IN THE CASE OF BEST JUDGMENT WHERE RESORT IS TAKEN TO SECTION 144, THE ASSESSING OFFICER EXERCISING HIS JURISDICTION C ANNOT ACT ARBITRARILY OR CAPRICIOUSLY. THE ASSESSMENT MUST PR OCEED ON JUDICIAL CONSIDERATIONS IN THE LIGHT OF RELEVANT MA TERIAL THAT MAY BE BROUGHT ON RECORD. THE HONBLE ALLAHABAD HIGH CO URT IN THE CASE OF CIT V/S. SURJEETSINGH MAHESHKUMAR (1994) 21 0 ITR 83 HAS HELD THAT IN EVERY CASE OF BEST JUDGMENT, THE E LEMENT OF GUESS WORK CANNOT BE ELIMINATED SO LONG AS BEST JUD GMENT HAS A NEXUS WITH MATERIAL ON RECORD AND DISCRETION IN THA T BEHALF HAS NOT BEEN EXERCISED ARBITRARILY OR CAPRACIOUSLY. ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 18 THE A.O HAS PROCEEDED ON NOTION THAT THE REASONS FO R SHOWING LESSER INCOME WAS BECAUSE THE ASSESSEE HAD SURRENDE RED CERTAIN INCOME DURING SURVEY AND HE WANTED TO SET IT OFF AG AINST SOME REGULAR INCOME TO REDUCE THE TAXABILITY. HOWEVER, T HE ESTIMATION BASED ON PREVIOUS YEARS N.P. WHEN THE TURNOVER HAS ALMOST DOUBLED IS NOT A FAIR ESTIMATION IN MY OPINION. THE N.P IS ACCORDINGLY RESTRICTED TO 0.1% WHICH GIVES A ROUGH FIGURE OF AROUND RS. 4,00,000/-. THIS AMOUNT OF ADDITION IS A CCORDINGLY CONFIRMED. THE BALANCE ADDITION OF RS. 1,76,700/- I S DIRECTED TO BE DELETED. 16. DURING THE COURSE OF HEARING, LD. AR SUBMITTED THAT THE ASSESSEE HAS MAINTAINED DAY TO DAY BOOKS OF ACCOUNTS INCLUDI NG THE STOCK RECORDS. THESE ACCOUNTS ARE DULY AUDITED. NEITHER I N THE ASSESSMENT PROCEEDINGS NOR IN THE SURVEY PROCEEDINGS ANY SPECI FIC DEFECT WAS FOUND IN THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. IN FACT ASSESSEE HAS DEALT IN FOUR ITEMS I.E., PADDY, SARSO, SOYABEAN AND WHEAT. THE COMPLETE QUANTITY TALLY OF THESE ITEMS TRADED BY THE ASSESSEE IS AT PB 6. FROM THE SAME IT CAN BE NOTED THAT THERE IS NO CLOSING STOCK OF PADDY, SOYABEAN AND WHEAT AS AL L THE GOODS PURCHASED DURING THE YEAR ARE SOLD. ONLY IN SARSO, THERE IS A CLOSING STOCK. ALL THE ENTRIES IN THE TRADING ACCOUNT I.E., OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK IS FULLY SUPPORT ED BY THE QUANTITY AND PURCHASE AND SALES INVOICE. NO DEFECT IS FOUND IN T HESE ENTRIES. THE FINDING OF LD. CIT(A) THAT THE CONDUCT OF SURVEY IS A SUFFICIENT GROUND TO REJECT BOOKS OF ACCOUNTS IS THEREFORE INCORRECT, ER RONEOUS AND FRIVOLOUS. IN FACT, HIS FINDING IS CONTRADICTORY IN AS MUCH AS AT PAGE 15 OF HIS ORDER ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 19 HE HAS STATED THAT THERE IS NO REASON TO INTERFERE WITH THE BUSINESS RESULTS AS SHOWN BY THE ASSESSEE. THEREFORE, SURREN DER ON ACCOUNT OF EXCESS CASH/ADVANCES CANNOT BE A REASON FOR REJECTI ON OF THE BOOKS OF ACCOUNTS. 16.1 THE AO HAS OBSERVED THAT THE NP RATE FOR LAST YEAR WAS 0.144%. AS AGAINST THIS, AFTER EXCLUDING THE NON-OPERATIVE INCOME FOR THE YEAR, THERE IS LOSS. CONSIDERING THE SAME, AO MADE THE AD DITION BY APPLYING NP RATE OF 0.144% BUT THE SAME IS RESTRICTED TO 0.1 % BY THE LD. CIT(A). IT MAY BE NOTED THAT THE ASSESSEE IS ENGAGED IN THE TRADING OF FOOD GRAIN ITEMS WHERE THE RATE FLUCTUATES ON DAY TO DAY BASIS. NO DEFECT IS FOUND BY THE LOWER AUTHORITIES IN THE TRADING ACCOU NT MAINTAINED BY THE ASSESSEE. FURTHER, THE LOWER AUTHORITIES HAVE NOT F OUND ANY UNVERIFIABLE EXPENSES IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, THERE IS NO REASON TO INTERFERE WITH THE BOOK RESULTS DECLARED BY THE ASS ESSEE. 16.2 RELIANCE IN THIS CONNECTION IS PLACED ON FOLLOWING CASES: MALANI RAMJIVAN JAGANNATH VS. ACIT 316 ITR 120 (RAJ .) ASHOKE REFRACTORIES P. LIMITED VS. CIT 279 ITR 457 (CAL.) CIT VS. SMT. POONAM RANI 41 DTR 194 (DEL.) (2010) CIT VS. OM OVERSEAS 315 ITR 185 (PUNJ. & HAR.) CIT VS. GOTAN LIME KHANIZ UDYOG 256 ITR 243(RAJ) IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CAS E, THE NET PROFIT ADDITION CONFIRMED BY THE LD. CIT(A) BE DIRECTED TO BE DELETED. ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 20 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. IN ITA NO. 446/JP/17, UNDER I DENTICAL FACTS AND CIRCUMSTANCES OF THE CASE, THE BOOKS OF ACCOUNTS WE RE REJECTED AND ESTIMATION OF NET PROFIT WAS MADE BY THE AO. OUR F INDINGS AND DIRECTIONS CONTAINED IN ITA NO. 446/JP/17 SHALL APP LY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. 18. IN RESPECT OF GROUND NO. 3 OF THE ASSESSEES AP PEAL, BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO OBSERVED THAT THE ASSESSEE HAS WITHDRAWN RS. 63,700/- (WRONGLY MENTIONED AS RS. 42 ,700/-) TO MEET HIS HOUSEHOLD EXPENSES. HE REJECTED THE CONTENTION OF THE ASSESSEE BY HOLDING THAT CONSIDERING THE SOCIAL & ECONOMIC STAT US, THE SIZE OF THE FAMILY, THE STANDARD OF LIVING ENJOYED BY THE ASSES SEE AND SCHOOL FEES OF RS. 4,000/- PER MONTH, THE WITHDRAWAL IS INSUFFI CIENT TO MEET THE EXPENSES. THUS, HE ESTIMATED THE HOUSEHOLD WITHDRAW ALS TO BE RS. 1,50,000/- AND MADE ADDITION OF RS. 86,300/-. 19. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITIO N BY HOLDING THAT THE ESTIMATION OF MONTHLY HOUSEHOLD EXPENSES AT RS. 12,500/- BY THE AO IS IN NO WAY UNJUSTIFIED AND UNREASONABLE CONSID ERING THE ASSESSSEES BACKGROUND. THE RELEVANT FINDING OF THE LD CIT(A) WHICH IS REPRODUCED AS UNDER:- AS REGARDS GROUND OF APPEAL NO. 4, RELATED TO INCR EASE IN THE HOUSEHOLD EXPENSES, THE A.O HAS DETAILED REASONS FO R HIS ESTIMATION AND NON ACCEPTANCE OF THE ASSESSEES EXP ENSE DETAILS. ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 21 AS PER THE A.OS ESTIMATION IN THE FAMILY OF 4, THE MONTHLY EXPENSES COMING TO RS. 12,500/- IS IN NO WAY UNJUST IFIED OR UNREASONABLE CONSIDERING THE BACKGROUND THAT THE AP PELLANT HAS. I AM THEREFORE NOT INCLINED TO INTERFERE WITH THE A DDITION OF RS. 86,300/- MADE BY THE A.O ON THIS GROUND TO THE HOUS EHOLD EXPENSES. THIS GROUND OF APPEAL IS TREATED AS DISMI SSED. 20. IT WAS SUBMITTED THAT THE FAMILY OF THE ASSESSE E COMPRISES OF ASSESSEE HIMSELF, HIS WIFE AND 2 CHILDREN. HE RESID ES WITH HIS PARENTS. THE ASSESSEE HAS WITHDRAWN RS. 63,700/- TOWARDS HOU SEHOLD EXPENSES. HIS FATHER, SHRI RADHABALLABH HAS ALSO WITHDRAWN RS . 37,100/- FROM M/S RAM KARAN RADHE SHYAM WHERE HE IS A PARTNER AND MOT HER, SMT. LEELA DEVI HAS WITHDRAWN RS. 24,400/- FROM M/S KISHORI LA L KANHAIYA LAL WHERE SHE IS A PARTNER. THUS, THE TOTAL WITHDRAWAL OF THE FAMILY IS RS. 1,25,200/-. SO FAR AS THE EXPENDITURE ON SCHOOL FEE S ESTIMATED BY THE AO AT RS. 4,000/- PER MONTH IS CONCERNED, THERE IS NO BASIS FOR THE SAME. 20.1 SECTION 69C STATES THAT WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLA NATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITUR E OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. THUS, FROM THE PLAIN READ ING OF THE SECTION, IT ITS EVIDENT THAT NO ADDITION CAN BE MADE UNTIL AND UNLESS THE AO FIRST DISCHARGES HIS ONUS AND PROVE THAT THE ASSESSEE HAS INCURRED THE ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 22 EXPENDITURE, ONCE THE AO DISCHARGES THE ONUS, THE O NUS GETS SHIFTED ON THE ASSESSEE TO OFFER AN EXPLANATION ABOUT THE SOUR CE OF SUCH EXPENDITURE AS IS APPARENT FROM THE AO. RELIANCE IN THIS CONNECTION IS PLACED ON THE FOLLOWING CASES: ATUL D. PAWAR VS. DCIT (2013) 35 CCH 0162 (BOM.) (T RIB.) SEARCH AND SEIZUREASSESSMENT IN CASE OF SEARCH OR REQUISITION HOUSEHOLD EXPENSESADDITIONVALIDITYASSESSEE HAD F ILED RETURN OF INCOME AND HAD SHOWN WITHDRAWAL OF AN AMOUNT AS HOUSEHOLD EXPENSESPURSUANT TO SEARCH PROCEEDING S ASSESSMENTS WERE REOPENED BY ISSUING NOTICE U/S 153AADHOC ADDI TION WAS MADE BY AOCIT(A) HAD CONFIRMED ADDITION AT 30 PERCENT M ADE BY AO ON ACCOUNT OF ALLEGED LOW HOUSEHOLD EXPENSESHELD, ADD ITIONS MADE BY AO AND CIT(A) WERE ON MERE ESTIMATED BASISBURDEN W AS UPON REVENUE TO PROVE THAT ASSESSEE HAD IN FACT INCURRED SOME EXPENDITURE OVER AND ABOVE WHAT WAS DECLARED BY HIMREVENUE FAI LED TO BRING ON RECORD ANY MATERIAL TO SHOW THAT ASSESSEE MIGHT HAV E INCURRED HOUSEHOLD EXPENDITURE MORE THAN THAT DECLA RED BY HIM ADDITIONS MADE BY AO AND CIT(A) DELETEDASSESSEES APPEAL ALLOWED ITO VS. BALBIR SINGH SEKHON (2012) 143 TTJ 0017 (UO ) (CHD.) (TRIB.) WHERE THE AO HAD MADE ADDITION TOWARDS HOUSEHOLD EX PENSES WITHOUT ASSIGNING ANY REASONS OR MATERIAL TO SHOW WHY THE W ITHDRAWALS SHOWN BY THE ASSESSEE COULD NOT BE ACCEPTED, THE ADDITION WAS RIGHTLY DELETED BY CIT(A). ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 23 KIRITSINH VAKHATSINH GOHIL VS. ITO (OSD) (AHM.) (TR IB.) ITA NO. 1340 & 1341/AHD/2009 WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS, PE RUSED THE MATERIAL ON RECORD. WE NOTED THAT THE ADDITION OF RS. 60,000 /- HAS BEEN MADE BY OBSERVING (ASSESSMENT YEAR 2004-05) THAT THE ASS ESSEE HAS NOT SHOWN WITHDRAWAL FOR A HOUSE HOLD EXPENSES. THEREFO RE, CONSIDERING THE SIZE OF THE FAMILY AND STANDARD OF LEAVING, THE ASSESSING OFFICER MADE THE ADDITION FOR HOUSE HOLD EXPENSES, ON ESTIM ATE BASIS WITHOUT POINT OUT THE SPECIFIC SIZE OF THE FAMILY AND THE V ARIOUS EXPENSES INCURRED BY THE ASSESSEE. THIS IS A FACT FROM RECOR D THAT THE SON OF THE KARTA, WHO STAYS WITH THE KARTA, HAS ALSO SHOWN THE WITHDRAWAL AT RS. 60,000/-. IN OUR OPINION UNDER SECTION 69C, NO ADDI TION CAN BE MADE UNTIL AND UNLESS THE ASSESSING OFFICER FIRST DISCHA RGES HIS ONUS AND PROVE THAT THE ASSESSEE HAS INCURRED THE EXPENDITUR E, ONCE THE ASSESSING OFFICER DISCHARGES THE ONUS, THE ONUS GET S SHIFTED ON THE ASSESSEE TO OFFER AN EXPLANATION ABOUT THE SOURCE O F SUCH EXPENDITURE AS IS APPARENT FROM THE ASSESSING OFFICER, THE ASSE SSING OFFICER HAS NOT DISCHARGED THE ONUS AS IS EXPECTED FROM HIM AND LAI D DOWN UNDER SECTION 69C. UNDER THESE CIRCUMSTANCES WE DID NOT HAVE ANY OTHER ALTERNATE EXCEPT TO DELETE THE ADDITION. THUS , GROUND NO. 2 IS ALLOWED. PRADIP C. PATEL VS. DY. CIT (AHM.) (TRIB) 58 TTJ (A HD) 409 'IN ORDER TO INVOKE THE PROVISIONS OF S. 69C, THE A O HAS TO ESTABLISH THE CONDITION PRECEDENT AS TO THE EXISTENCE OF EXPENDIT URE OR UNDERSTATEMENT OF THAT EXPENDITURE BY EVIDENCE AND/ OR MATERIAL ON RECORD TO JUSTIFY THE ADDITION. IF THE AO CANNOT, O R FAILS TO PROVE THE ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 24 EXISTENCE OF MATERIAL INDICATING THE UNEXPLAINED EX PENDITURE OR UNDERSTATEMENT OF EXPENDITURE, THE ASSESSEE CANNOT BE TAXED. MERE IPSE DIXIT OF THE AO ABOUT THE PERSONAL EXPENDITURE IS NOT ENOUGH TO SUSTAIN AN ADDITION AND THERE MUST BE MATERIAL TO S UPPORT THE ADDITION.' SHRI. NAGINBHAI C. PATEL VS. ACIT, CC-2, BARODA (AH M.) (TRIB.) 'IN OUR CONSIDERED VIEW, THE OBSERVATION OF THE ASS ESSING OFFICER, NO DOUBT CREATES A SUSPICION, BUT SUSPICION ALONE IS N OT SUFFICIENT IN MAKING THE ADDITION TO THE INCOME OF THE ASSESSEE. THE AO SHOULD HAVE INVESTIGATED THE MATTER FURTHER AND SHOULD HAVE BRO UGHT ON RECORD CLINCHING EVIDENCE TO SHOW THAT THE DRAWINGS SHOWN BY THE ASSESSEE FOR HOUSEHOLD EXPENSE WAS NOT SUFFICIENT TO MEET THE HO USEHOLD EXPENSES. IN ABSENCE OF ANY SUCH EVIDENCE, IN OUR CONSIDERED OPINION, THE ADDITIONS MADE CANNOT BE SUSTAINED IN LAW.' IN VIEW OF ABOVE, THE AO BE DIRECTED TO DELETE THE ADDITION MADE BY HIM ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS. 21. THE LD DR HAS VEHEMENTLY ARGUED THE MATTER AND RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. THE ADDITION ON ACCOUNT OF LO W HOUSEHOLD WITHDRAWLS HAVE BEEN MADE BY THE AO WITHOUT BRINGIN G ON RECORD ANY DEMONSTRABLE EVIDENCE THAT THE ASSESSEE HAS IN FACT INCURRED EXPENDITURE MORE THAT THE MONEY WHICH HAS BEEN WITH DRAWN BY THE ASSESSEE FROM HIS BANK ACCOUNT. IN TERMS OF SECTIO N 69C, THE INITIAL ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 25 ONUS IS ON THE ASSESSING OFFICER TO PROVE THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE. ONCE THE ASSESSING OFFICER DISCHA RGES THE ONUS, THE ONUS GETS SHIFTED ON THE ASSESSEE TO OFFER AN EXPLA NATION ABOUT THE SOURCE OF SUCH EXPENDITURE. IN THE INSTANT CASE, T HE ASSESSING OFFICER, HAS NOT DISCHARGED THE INITIAL ONUS PLACED ON HIM. IN LIGHT OF THE SAME, WE ARE SETTING ASIDE THE ORDER OF THE AO AND DELETE THE SUBJECT ADDITION. IN THE RESULT, GROUND OF APPEAL IS ALLOW ED. ASSESSEES GROUNDS OF APPEAL (ITA NO. 448/JP/17) 1. THE LD. CIT(A) HAS ERRED ON FACT AND IN LAW IN C ONFIRMING THE REJECTION OF BOOKS OF THE ACCOUNT U/S 145(3) OF THE INCOME TAX ACT, 1961. 2. THE LD. AO HAS ERRED ON FACT AND IN LAW IN ESTIMATI NG THE PROFIT FROM BUSINESS AT RS. 8,10,178/- AND THE LD. CIT(A) HAS E RRED IN CONFIRMING THE SAME AT RS. 4,00,0000/- INSTEAD OF ACCEPTING TH E RESULTS DECLARED BY THE ASSESSEE. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 1,07,300/- MADE ON ACCOUNT OF LOW H OUSEHOLD WITHDRAWALS. 23. IN GROUND NO. 1 & 2 OF THE ASSSESSEES APPEAL, BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS THE PROPRIETOR OF M/S KISHORILAL RADHAVALLABH. HE FILED THE RETURN OF INCOME ON 27.0 9.2011 DECLARING TOTAL INCOME OF RS. 22,08,304/-. A SURVEY U/S 133A WAS CARRIED ON 07.03.2011. THE ASSESSEE OFFERED FOR TAX UNACCOUNTE D CASH OF RS. 9,06,400/- AND UNACCOUNTED DEBTORS OF RS. 19,63,000 /- I.E., RS. 28,69,400/- AND INCLUDED THE SAME IN HIS INCOME FOR THE YEAR UNDER CONSIDERATION. THE AO REJECTED THE BOOKS OF ACCOUNT S U/S 145(3) BY HOLDING THAT WHEN THE ASSESSEE HIMSELF HAS OFFERED FOR TAXATION ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 26 UNDISCLOSED INCOME, THEN IT MEANS THAT THE BOOKS OF ACCOUNTS ARE NOT UP TO DATE, DEFECTIVE AND NOT AS PER THE REQUIREMEN T OF INCOME TAX ACT, 1961. HE THEREAFTER HELD THAT INCOME OF RS. 28 ,69,400/- WHICH IS INCLUDED IN THE PROFIT AND LOSS ACCOUNT BY THE ASSE SSEE IS A NON- OPERATIVE INCOME. IF THIS IS NOT TAKEN INTO ACCOUNT THEN THE THERE IS A LOSS OF RS. 5,61,096/- WHEREAS IN THE PY THERE WAS A PROFIT OF RS.3,00,533/-. THEREFORE, THERE IS A DIFFERENCE OF RS. 8,61,629/- WHICH IS UNEXPLAINED. ACCORDINGLY, BY APPLYING THE NET PR OFIT RATE OF THE PY OF 0.205% ON THE DECLARED TURNOVER OF RS. 39,52,08,803 /- FOR THE YEAR, HE ESTIMATED THE NET PROFIT AT RS. 8,10,178/- THEREBY RESULTING INTO AN ADDITION OF RS. 13,71,274/-. 24. ON APPEAL, THE LD. CIT(A) HELD THAT THE VERY FA CT THAT THERE WAS A SURVEY IS SUFFICIENT GROUND TO REJECT THE BOOKS OF ACCOUNTS. HOWEVER, WITH REGARDS TO THE NET PROFIT, HE HELD THAT THE ES TIMATION OF THE AO IS BASED ON THE PYS NET PROFIT RATE IS NOT REASONABLE CONSIDERING THE FACT THAT THE TURNOVER FOR THE YEAR IS DOUBLE OF THE LAS T YEAR. HE THUS APPLIED NET PROFIT OF 0.1% ON THE DECLARED TURNOVER AND THU S ESTIMATED THE NET PROFIT AT RS. 4 LAKHS RESULTING INTO AN ADDITION OF RS. 9,61,096/-. THE RELEVANT FINDING OF THE LD CIT(A) WHICH IS REPRODUC ED AS UNDER:- AS REGARDS GROUNDS OF APPEAL NO. 1 & 2, IT IS SEEN THAT THE A.O. RAISED OBJECTION REGARDING COMPARATIVE NOTIONAL LOS S OF RS. 5,61,096/- IF INCOME DISCLOSED IN SURVEY AMOUNTING TO RS. 28,69,400/- WERE REMOVED FROM THE BUSINESS TURNOVER . ADDED TO THAT HE HAS TAKEN THE PROFIT OF THE PREVIOUS YEAR & WORKED OUT A DIFFERENCE OF 8,61,628/- BASED ON WHICH HE HAS REJE CTED THE ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 27 BOOKS OF ACCOUNTS AND ESTIMATED NET PROFIT @0.205%( AS PER AUDIT REPORT OF A.Y 2010-11). THE A.OS WORKING OF THIS ESTIMATION IS ON THE PREM ISE THAT SINCE THE ASSESSEE HAD EXTRA INCOME BEYOND THE ESTABLISHE D ROUTINE TURNOVER; HE SHOULD HAVE AT LEAST OFFERED EQUIVALEN T N.P ON THE TURNOVER AS PER EARLIER YEARS BESIDES THE INCOME OF FERED DURING SURVEY. THE VERY FACT THAT THERE WAS A SURVEY WAS SUFFICIEN T GROUND TO REJECT THE BOOKS OF ACCOUNTS IN THE CASE. THIS VIEW HAS BEEN HELD BY MY PREDECESSOR CIT(A) IN THE CASE OF SMT. RAJESH JAIN PROP. CHAMATKAR PROPERTIES VIDE APPEAL ORDER NO. 227/10-1 1 VIDE ORDER DATED 25.01.2012. CONFORMING TO THE SAME VIEW, I AM OF THE OPINION TH AT THE REJECTION OF BOOKS IS TO BE UPHELD U/S 145 (3). NOW COMING TO THE ESTIMATION OF INCOME, IT IS WELL KNOWN THAT IN THE CASE OF BEST JUDGMENT WHERE RESORT IS TAKEN TO SECTION 144, THE ASSESSING OFFICER EXERCISING HIS JURISDICTION C ANNOT ACT ARBITRARILY OR CAPRICIOUSLY. THE ASSESSMENT MUST PR OCEED ON JUDICIAL CONSIDERATIONS IN THE LIGHT OF RELEVANT MA TERIAL THAT MAY BE BROUGHT ON RECORD. THE HONBLE ALLAHABAD HIGH CO URT IN THE CASE OF CIT V/S. SURJEETSINGH MAHESKUMAR (1994) 210 ITR 83 HAS HELD THAT IN EVERY CASE OF BEST JUDGMENT, THE ELEME NT OF GUESS WORK CANNOT BE ELIMINATED SO LONG AS BEST JUDGMENT HAS A NEXUS WITH MATERIAL ON RECORD AND DISCRETION IN THAT BEHA LF HAS NOT BEEN EXERCISED ARBITRARILY OR CAPRACIOUSLY. ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 28 THE A.O HAS PROCEEDED ON NOTION THAT THE REASONS FO R SHOWING LESSER INCOME WAS BECAUSE THE ASSESSEE HAD SURRENDE RED CERTAIN INCOME DURING SURVEY AND HE WANTED TO SET IT OFF AG AINST SOME REGULAR INCOME TO REDUCE THE TAXABILITY. HOWEVER, T HE ESTIMATION BASED ON PREVIOUS YEARS N.P WHEN THE TURNOVER HAS ALMOST TREBLED IS NOT A FAIR ESTIMATION IN MY OPINION. THE N.P IS ACCORDINGLY RESTRICTED TO 0.1% WHICH GIVES A ROUGH FIGURE OF AROUND RS. 4,00,000/-. THIS AMOUNT OF ADDITION IS A CCORDINGLY CONFIRMED. THE BALANCE ADDITION OF RS. 4,10,178/- I S DIRECTED TO BE DELETED. THUS WHILE GROUND NO. 1 IS PARTLY ALLOWED, GROUND N O. 2 IS TREATED AS DISMISSED. 25. DURING THE COURSE OF HEARING, LD. AR SUBMITTED THAT IT IS SUBMITTED THAT THE ASSESSEE HAS MAINTAINED DAY TO DAY BOOKS O F ACCOUNTS INCLUDING THE STOCK RECORDS. THESE ACCOUNTS ARE DUL Y AUDITED. NEITHER IN THE ASSESSMENT PROCEEDINGS NOR IN THE SURVEY PROCEE DINGS ANY SPECIFIC DEFECT WAS FOUND IN THE ENTRIES MADE IN THE BOOKS O F ACCOUNTS MAINTAINED BY THE ASSESSEE. IN FACT ASSESSEE HAS DE ALT IN FIVE ITEMS I.E., DHANIYA, SARSO, SOYABEAN, TILLI AND WHEAT. THE COMP LETE QUANTITY TALLY OF THESE ITEMS TRADED BY THE ASSESSEE IS AT PB 8. F ROM THE SAME IT CAN BE NOTED THAT THERE IS NO CLOSING STOCK AS ALL THE GOODS PURCHASED DURING THE YEAR ARE SOLD. ALL THE ENTRIES IN THE TR ADING ACCOUNT I.E., OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK I S FULLY SUPPORTED BY THE QUANTITY AND PURCHASE AND SALES INVOICE. NO DEF ECT IS FOUND IN THESE ENTRIES. THE FINDING OF LD. CIT(A) THAT THE CONDUCT OF SURVEY IS A SUFFICIENT GROUND TO REJECT BOOKS OF ACCOUNTS IS TH EREFORE INCORRECT, ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 29 ERRONEOUS AND FRIVOLOUS. IN FACT, HIS FINDING IS CO NTRADICTORY IN AS MUCH AS AT PAGE 16 OF HIS ORDER HE HAS STATED THAT THERE IS NO REASON TO INTERFERE WITH THE BUSINESS RESULTS AS SHOWN BY THE ASSESSEE. THEREFORE, SURRENDER ON ACCOUNT OF EXCESS CASH/ADVANCES CANNOT BE A REASON FOR REJECTION OF THE BOOKS OF ACCOUNTS. 25.1 THE AO HAS OBSERVED THAT THE NP RATE FOR LAST YEAR WAS 0.205%. AS AGAINST THIS, AFTER EXCLUDING THE NON-OPERATIVE INCOME FOR THE YEAR, THERE IS LOSS. CONSIDERING THE SAME, AO MADE THE AD DITION BY APPLYING NP RATE OF 0.205% BUT THE SAME IS RESTRICTED TO 0.1 % BY THE LD. CIT(A). IT MAY BE NOTED THAT THE ASSESSEE IS ENGAGED IN THE TRADING OF FOOD GRAIN ITEMS WHERE THE RATE FLUCTUATES ON DAY TO DAY BASIS. NO DEFECT IS FOUND BY THE LOWER AUTHORITIES IN THE TRADING ACCOU NT MAINTAINED BY THE ASSESSEE. FURTHER, THE LOWER AUTHORITIES HAVE NOT F OUND ANY UNVERIFIABLE EXPENSES IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, THERE IS NO REASON TO INTERFERE WITH THE BOOK RESULTS DECLARED BY THE ASS ESSEE. 25.2 RELIANCE IN THIS CONNECTION IS PLACED ON FOLLOWING CASES: MALANI RAMJIVAN JAGANNATH VS. ACIT 316 ITR 120 (RAJ .) ASHOKE REFRACTORIES P. LIMITED VS. CIT 279 ITR 457 (CAL.) CIT VS. SMT. POONAM RANI 41 DTR 194 (DEL.) (2010) CIT VS. OM OVERSEAS 315 ITR 185 (PUNJ. & HAR.) CIT VS. GOTAN LIME KHANIZ UDYOG 256 ITR 243(RAJ) 26. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. IN ITA NO. 446/JP/2017, UNDER IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE, THE BOOKS OF ACCOUNTS WE RE REJECTED AND ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 30 ESTIMATION OF NET PROFIT WAS MADE BY THE AO. OUR F INDINGS AND DIRECTIONS CONTAINED IN ITA NO. 446/JP/16 SHALL APP LY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. 27. IN RESPECT OF GROUND NO. 3 OF THE ASSSESSEES A PPEAL, BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO OBSERVED THAT THE ASSESSEE HAS WITHDRAWN RS. 42,700/- TO MEET HIS HOUSEHOLD EXPENS ES. HE REJECTED THE CONTENTION OF THE ASSESSEE BY HOLDING THAT CONS IDERING THE SOCIAL & ECONOMIC STATUS, THE SIZE OF THE FAMILY, THE STANDA RD OF LIVING ENJOYED BY THE ASSESSEE AND SCHOOL FEES OF RS. 4,000/- PER MONTH, THE WITHDRAWAL IS INSUFFICIENT TO MEET THE EXPENSES. TH US, HE ESTIMATED THE HOUSEHOLD WITHDRAWALS TO BE RS. 1,50,000/- AND MADE ADDITION OF RS. 1,07,300/-. 28. THE LD. CIT(A) CONFIRMED THE ADDITION BY HOLDIN G THAT THE ESTIMATION OF MONTHLY HOUSEHOLD EXPENSES AT RS. 12, 500/- BY THE AO IS IN NO WAY UNJUSTIFIED AND UNREASONABLE CONSIDERING THE ASSESSSEES BACKGROUND. THE RELEVANT FINDING OF THE LD CIT(A) W HICH IS REPRODUCED AS UNDER:- AS REGARDS GROUND OF APPEAL NO 4, RELATED TO INCRE ASE IN THE HOUSEHOLD EXPENSES, THE A.O HAS DETAILED REASONS FO R HIS ESTIMATION AND NON ACCEPTANCE OF THE ASSESSEES EXP ENSE DETAILS. AS PER THE A.OS ESTIMATION IN THE FAMILY OF 4, THE MONTHLY EXPENSES COMING TO RS. 12,500/- IS IN NO WAY UNJUST IFIED OR UNREASONABLE CONSIDERING THE BACKGROUND THAT THE AP PELLANT HAS. I AM THEREFORE NOT INCLINED TO INTERFERE WITH THE A DDITION OF RS. ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 31 1,07,300/- MADE BY THE A.O ON THIS GROUND TO THE HO USEHOLD EXPENSES. THIS GROUND OF APPEAL IS TREATED AS DISMISSED. 29. IT WAS SUBMITTED THAT THE FAMILY OF THE ASSESSE E COMPRISES OF ASSESSEE HIMSELF, HIS WIFE AND 2 CHILDREN. HE RESID ES WITH HIS PARENTS. THE ASSESSEE HAS WITHDRAWN RS. 42,700/- TOWARDS HOU SEHOLD EXPENSES. HIS FATHER, SHRI RAM KARAN HAS ALSO WITHDRAWN RS. 4 5,100/- FROM M/S RAM KARAN RADHE SHYAM WHERE HE IS A PARTNER AND MOT HER, SMT. PUSHPA DEVI HAS WITHDRAWN RS. 24,400/- FROM M/S KIS HORI LAL KANHAIYA LAL WHERE SHE IS A PARTNER. THUS, THE TOTAL WITHDRA WAL OF THE FAMILY IS RS. 1,12,200/-. IN THE STATEMENT ASSESSEE IN REPLY TO QUESTION NO. 11, HAS STATED THAT HIS HOUSEHOLD EXPENSES IS RS. 5,000 /- PER MONTH. SO FAR AS THE EXPENDITURE ON SCHOOL FEES ESTIMATED BY THE AO AT RS. 4,000/- PER MONTH IS CONCERNED, THERE IS NO BASIS FOR THE S AME. MORE PARTICULARLY WHEN THE SON OF THE ASSESSEE IS AGED 1 8 YEARS AND IS STUDYING IN COLLEGE AND IN NOT IN SCHOOL. 29.1 SECTION 69C STATES THAT WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLA NATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITUR E OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. THUS, FROM THE PLAIN READ ING OF THE SECTION, IT ITS EVIDENT THAT NO ADDITION CAN BE MADE UNTIL AND UNLESS THE AO FIRST DISCHARGES HIS ONUS AND PROVE THAT THE ASSESSEE HAS INCURRED THE ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 32 EXPENDITURE, ONCE THE AO DISCHARGES THE ONUS, THE O NUS GETS SHIFTED ON THE ASSESSEE TO OFFER AN EXPLANATION ABOUT THE SOUR CE OF SUCH EXPENDITURE AS IS APPARENT FROM THE AO. RELIANCE IN THIS CONNECTION IS PLACED ON THE FOLLOWING CASES: ATUL D. PAWAR VS. DCIT (2013) 35 CCH 0162 (BOM.) (T RIB.) ITO VS. BALBIR SINGH SEKHON (2012) 143 TTJ 0017 (UO ) (CHD.) (TRIB.) KIRITSINH VAKHATSINH GOHIL VS. ITO (OSD) (AHM.) (TR IB.) ITA NO. 1340 & 1341/AHD/2009 PRADIP C. PATEL VS. DY. CIT (AHM.) (TRIB) 58 TTJ (A HD) 409 SHRI. NAGINBHAI C. PATEL VS. ACIT, CC-2, BARODA (AH M.) (TRIB.) 30. THE LD DR HAS VEHEMENTLY ARGUED THE MATTER AND RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. 31. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. IN ITA NO. 447/JP/17, UNDER I DENTICAL FACTS AND CIRCUMSTANCES OF THE CASE, ADDITIONS ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS WERE MADE BY THE AO. OUR FINDINGS AND DIRECTIONS CONTAINED IN ITA NO. 447/JP/17 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. WITH THE ABOVE DIRECTIONS, RESPECTIVE APPEALS ARE D ISPOSED OFF. ORDER PRONOUNCED IN THE OPEN COURT ON 23/08/2017. ITA NO. 446, 447 & 448/JP/2017 M/S K.K. INDUSTRIES, KOTA VS. ITO, KOTA. 33 SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/08/2017. * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S K. K. INDUSTRIES, KOTA, SHRI SUR ENDRA KUMAR, KOTA & SHRI SHYAM KUMAR, KOTA 2. IZR;FKHZ@ THE RESPONDENT- ITO/ACIT, KOTA. 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. 446, 447 & 448/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR