Shri Narendra Sharma, Kanpur V. Dy. Commissioner of Income Tax-6, Kanpur

ITA 449/LKW/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83340 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NIGAM
• Assessee Lawyers: S K GUPTA
• Keywords: Unexplained investment; Business income; Income from undisclosed sources; Document seized; Revised return; Documents seized
• Section: 133A; 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO S . 449&4 51/LKW/2013 ASSESSMENT YEAR S : 2007 - 08 & 2008 - 09 SHRI. NARENDRA SHARMA PROP. MAA KAMAKHYA DARBAR FRAGRANCES 129/9 - L, 40, SHOP,KIDWAI NAGAR KANPUR V. DY. CIT - VI, KANPUR PAN: AIWPS6695R (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. RAKESH GARG, ADVOCATE AND SHRI. S. K.GUPTA, ADVOCATE RESPONDENT BY: SHRI. A. K. NIGAM, CIT (DR) DA TE OF HEARING: 22 08 2014 DATE OF PRONOUNCEMENT: 29 0 9 2014 O R D E R PER SUNIL KUMAR YADAV: THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A), INTER ALIA, ON VARIOUS GROUNDS WHICH ARE AS UNDER: - GROUNDS IN I. T.A. NO.449/LKW/2013: 1 . BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT (A ) HAS ERRED IN ENHANCING THE ASSESSM ENT BY ENHANCING ADDITION OF RS. 32 , 48 ,571.00 TO RS. 6 , 93 , 14 , 587.00 INSTEAD OF ALLOWING APPEAL FILED BEFORE HIM. 2 . BECAUSE ON FACTS AND IN CI RCUMSTANCES OF THE CASE, LD. CIT ( A ) HAS ERRED IN ENHANCIN G THE ESCAPED TURNOVER FROM RS. 1 , 19 , 44 ,809.00 TO RS. 6 , 93 , 14 , 587.00. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : 3 . BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT ( A ), K ANPUR HAS ERRED IN HOLDING THAT ENTIRE SALES IS ASSESSABLE AS INC OME, WHICH IS NEITHER PRACTICAL NOR ACCEPTABLE FROM ACCOUNTING PRINCIPLES. 4 . BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT (A ) HAS ERRED IN GOING INTO IRRELEVANT CONSIDERATIONS IN ENHANCING ADDITIONS AND HIS OBSERVATIONS/CONCLUSIONS ARE NOT BASE D ON SOUND R E ASONING AND DESERVES TO BE STRUCK DOWN AND ENTIRE CLAIMS OF THE ASSESSEE IS TO BE ALLOWED. 5 . BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER AS WELL AS OBSERVATIONS OF LD. A .O AS WELL AS OF LD. CIT ( A ) ARE NOT CORRECT BOT H LEGALLY AS WELL AS FACTUALLY. IN FACT, OBSERVATION OF LD. CIT (A ) IS AGAINST THE PRINCIPALS OF ACCOUNTING AS WELL AS LAW. 6 . THAT THE ADDITIONS AS WELL AS ASSESSMENT ORDER AS WELL AS ENHANCEMENT IN 1ST APPEAL IS BAD IN LAW AS WELL AS ON FACTS AND APPROPRIAT E RELIEF DESERVES TO BE ALLOWED. GROUNDS IN I.T.A. NO.4 51 /LKW/2013: 1 . BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT ( A ) HAS ERRED IN HOLDING THAT APPEAL AS FILED IN TIME WHICH WAS FILED LATE. 2 . THAT THE L D. CIT ( A ) HAS ERRED IN NOT A LL OWING THE A PPEA L TO BE WITHDRAW N WITHOUT ANY REASON WHEN SP ECIFIC REQUEST HAS BEEN FIL ED. 3 . THAT LD. CIT ( A ) HAS ERRED IN HO L DING THAT T HE ORDER PASSED BY ED. CIT II, K ANPUR U/S 264 DATED 30.05.2011 AS NON JURISDICTION AL . 4 . THAT LD. CIT ( A ) HAS ERRED I N CONFIRMING THE AD DITION OF RS.10420567.00 M ADE ON ACCOUNT OF DIFFERENCE BETWEEN THE CLOSING CASH IN HAND AS PER BOOKS OF ACCOUNT OF LAST YEAR AND PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : OPENING CASH IN HAND AS PER BOOKS OF ACCOUNT. 5 . THAT LD. CIT ( A ) HAS ERRED IN CONFIRMING THE ENTIRE SALES AS INCOME WITHOUT ALLOW ING FOR PURCHASES AND OTHER EXPENSES, WHICH ACTION WAS WITHOUT ANY BASIS AND UNREASONABLE, AGAINST LAW AS WELL AS ACCOUNTING PRINCIPLES. 6 . BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, L D. CIT ( A ) HAS ERRED IN BUSHING ASIDE THE SUBMISSIONS OF THE ASSESS EE AND EVIDENCES PL ACED ON RECORD. 7 . THAT L D. CIT ( A ) HAS ERRED IN HO L DING THAT CORRESPONDING PURCHASES OF SUPPRESSED SALES OF RS. 25330983.00 HAS ALREADY BEEN BOOKED IN BOOKS. 8 . BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, L D. CIT ( A), K ANPUR HAS ERRED I N HO L DING THAT ENTIRE SA L ES IS ASSESSABLE AS INCOME, WHICH IS NEITHER PRACTICA L NOR ACC EPTABLE FROM ACCOUNTING PRINCIPL ES. 9 . BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT ( A ) HAS ERRED IN GOING INTO IRRELEVANT CONSIDERATIONS IN ENHANCING ADDITIO NS AND HIS OBSERVATIONS/CONCLUSIONS ARE NOT BASED ON SOUND R E ASONING AND DESERVES TO BE STRUCK DOWN AND ENTIRE CLAIMS OF THE ASSESSEE IS TO BE A LL OWED. 10 . BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER AS WELL AS OBSERVATIONS OF LD. A .O AS WELL AS OF LD. CIT ( A ) ARE NOT CORRECT BOTH LEGALLY AS WELL AS FACTUALLY. IN FACT, OBSERVATION OF LD. CIT ( A ) IS AGAINST THE PRINCIPALS OF ACCOUNTING AS WELL AS LAW. 11 . THAT THE ADDITIONS AS WELL AS ASSESSMENT ORDER AS WELL AS ENHANCEMENT IN 1 ST APPEAL IS BAD IN LAW AS WELL AS ON FACTS AND APPROPRIATE RELIEF DESERVES TO BE ALLOWED. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : 2 . SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 3 . THE COMMON GROUNDS RAISED IN THESE APP EALS RELATES TO THE ADDITION MADE ON ACCOUNT OF SUPPRESSED SALES. IN I.T.A. NO.451/LKW/2013, ONE MORE GROUND WAS ALSO RAISED WITH REGARD TO THE ADDITION MADE ON ACCOUNT OF DIFFERENCE BETWEEN CLOSING CASH IN HAND NOT AS ON 31.3.2007 AND OPENING CASH IN HAN D NOT AS ON 1.4.2007 AS PER BOOKS OF ACCOUNT AMOUNTING TO RS.1,04,20,567/ - . 4 . THE BRIEF FACTS BORNE OUT FROM THE RECORD WITH REGARD TO THE ADDITION MADE ON ACCOUNT OF SUPPRESSED SALES ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRAD ING OF TIRANGA AGARBATTI AND OTHER PRODUCTS LIKE MEHANDI, DHUP, ETC. AND HAS FILED HIS RETURN OF INCOME ON 31.10.2007 FOR ASSESSMENT YEAR 2007 - 08 DECLARING INCOME OF RS.10,44,720/ - AND RETURN OF INCOME FOR ASSESSMENT YEAR 2008 - 09 WAS FILED ON 30.9.2008 DEC LARING INCOME OF RS.14,25,590/ - . 5 . A SURVEY ACTION UNDER SECTION 133A OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') HAS BEEN CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 2.11.2007 AND THE RELEVANT DOCUMENTS RELATED TO UNACCOUNTED SALE S WERE IMPOUNDED. THE SURVEY ACTION ALSO INCLUDED UNACCOUNTED INCOME OF THE ASSESSEE FOR ASSESSMENT YEAR 2008 - 09 FOR WHICH REVISED RETURN OF INCOME HAS BEEN FILED BY THE ASSESSEE ON 18.1.2010 SHOWING THE SURRENDERED INCOME OF RS.1,16,20,000/ - . DURING THE COURSE OF SURVEY ACTION, ASSESSEE HAD SURRENDERED NET INCOME OF RS.1.50 CRORES BUT HAS FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2008 - 09 SHOWING HIS SURRENDERED INCOME ONLY AT RS.1,16,20,000/ - AND FOR ASSESSMENT YEAR 2007 - 08 SURRENDERED INCOME HAS NOT BE EN OFFERED. THE CASH OF RS.1,03,43,877/ - HAS BEEN CONSIDERED IN ASSESSMENT YEAR 2008 - 09. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : 6 . THE IMPOUNDED MATERIALS WERE EXAMINED AND ANALYSED BY THE ASSESSING OFFICER FOR THE PURPOSE OF COMPUTATION OF UNACCOUNTED INCOME OF THE ASSESSEE. THE ASSESSING OFFIC ER HAS COMPUTED THE UNACCOUNTED SALES AT RS.1,19,44,809/ - AFTER REJECTION OF THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT ON ACCOUNT OF INCOMPLETENESS AND INCORRECTNESS AS DISCUSSED IN PARA 9 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS COMP UTED THE TOTAL SALES OF THE ASSESSEE DURING THE ASSESSMENT YEAR 2007 - 08 AT RS.1,19,44,809/ - AND HAS COMPUTED THE GROSS PROFIT AT 15% IN PLACE OF GROSS PROFIT SHOWN BY THE ASSESSEE AT 14.10% ON SUPPRESSED RATE AT RS.5,73,69,778/ - , RESULTING INTO AN ADDITION OF RS.32,48,571/ - . 7 . DURING THE ASSESSMENT YEAR 2008 - 09, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.2,53,30,983/ - ON ACCOUNT OF SUPPRESSED SALES AND RS.1,03,43,833/ - ON ACCOUNT OF CASH DIFFERENCE. IN ASSESSMENT YEAR 2008 - 09, THE ASSESSING OFFICER HAS ALSO MADE ADDITION OF TOTAL SUPPRESSED SALES INSTEAD OF ESTIMATING THE GROSS PROFIT SHOWN BY THE ASSESSEE. 8 . AGGRIEVED, THE ASSESSEE HAD CHALLENGED THE ASSESSMENT ORDER S BEFORE THE LD. CIT(A) AND THE LD. CIT(A) RE - EXAMINED THE ISSUE IN THE LIGHT OF THE IMPO UNDED MATERIAL AND HE WAS OF THE VIEW THAT IN ASSESSMENT YEAR 2007 - 08 THE ADDITION SHOULD HAVE BEEN MADE OF THE UNACCOUNTED SUPPRESSED SALES AND NOT GROSS PROFIT COMPUTED AT 15% BY THE ASSESSING OFFICER. THE LD. CIT(A) ACCORDINGLY ISSUED NOTICE OF ENHANCE MENT IN ASSESSMENT YEAR 2007 - 08 AND MADE ADDITION OF THE TOTAL SUPPRESSED SALES OF RS.5,73,69,778/ - , THE DIFFERENCE BETWEEN THE TOTAL SALES DECLARED BY THE ASSESSEE AND COMPUTED BY THE LD. CIT(A) ON THE BASIS OF THE IMPOUNDED MATERIALS (RS.21,88,28,854 R S.16,14,09,076/ - ). THE LD. CIT(A) FURTHER ADDED UNACCOUNTED SALES ESTIMATED BY THE ASSESSING OFFICER AFTER REJECTING THE BOOKS OF ACCOUNT OF RS.1,19,44,809/ - AND ENHANCED THE RETURN OF INCOME SHOWN BY THE ASSESSEE BY RS.6,93,14,587/ - . PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : 9 . IN ASSESSMENT YEAR 2 008 - 09, THE LD. CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. BESIDES, HE HAS ALSO MADE AN ADDITION OF RS.1,03,43,877/ - BEING THE DIFFERENCE IN CLOSING STOCK AS ON 31.3.2007 AND OPENING STOCK AS ON 1.4.2007 AS PER THE BOOKS OF ACCOUNT M AINTAINED BY THE ASSESSEE IN HIS COMPUTER. 10 . AGGRIEVED, THE ASSESSEE HAS PREFERRED APPEALS BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION THAT DURING THE COURSE OF SURVEY OPERATION, NO BOOKS OF ACCOUNT WERE FOUND BY THE DEPA RTMENT AND THEY HAVE TAKEN THE FIGURES FROM THE COMPUTER, IN WHICH ACCOUNTS WERE MAINTAINED BY HIS ACCOUNTANT. DUE TO CERTAIN GLI TCHES IN THE COMPUTER, DIFFERENCE IN FIGURE WERE SHOWN IN THE CLOSING CASH BALANCE AS ON 31.3.2007 AND OPENING CASH BALANCE AS ON 1.4.2007. THE CLOSING CASH BALANCE WAS SHOWN AS ON 31.3.2007 AT RS.76,690 / - AND THE OPENING CASH BALANCE AS ON 1.4.2007 WAS AT RS.1,04,20,567 - . THE HIGHER FIGURE OF OPENING BALANCE WAS ON ACCOUNT OF GLITCHES IN THE COMPUTER AND THE SURVEY TEAM DID NO T MAKE ANY EFFORT TO VERIFY FROM BOOKS OF ACCOUNT OF SUCCEEDING YEARS AS TO WHETHER THIS OPENING BALANCE WAS FURTHER CARRIED FORWARD ON SUBSEQUENT DATES. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THE ASSESSING OFFICER HAS MADE THE ADDITI ON ON ACCOUNT OF DIFFERENCE IN CASH BALANCE WITHOUT MAKING ANY FURTHER VERIFICATION OF THE RECORD. THUS, IT IS NOT SUSTAINABLE IN THE EYES OF LAW. 11 . SO FAR AS ADDITION ON ACCOUNT OF SUPPRESSED SALES IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTEND ED THAT NO ADDITION ON ACCOUNT OF SUPPRESSED SALES CAN BE MADE. IF THE ADDITION IS TO BE MADE , THAT CAN ONLY BE MADE AT NET PROFIT RATE SHOWN BY THE ASSESSEE IN EARLIER YEARS OR THE RELEVANT ASSESSMENT YEAR. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE FOLLOWING JUDGMENTS: - ( 1 ) CIT VS. PRESIDENT INDUSTRIES, 258 ITR 654 (GUJ). PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 7 - : ( 2 ) MAN MOHAN SADANI VS. CIT, 304 ITR 52 (MP). ( 3 ) CIT VS. GURUBACHHAN SINGH J JUNEJA, 302 ITR 63 (GUJ). ( 4 ) K.C.K.A. GUPTA VS. ACIT, 90 TTJ (HYD.) 555 . 12 . THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT IF ANY ADDITION ON ACCOUNT OF DIFFERENCE IN CASH BALANCE IS TO BE MADE, CREDIT OF THE PROFIT GENERATED ON ACCOUNT OF SUPPRESSED SALES MAY BE GIVEN AND ADDITION OF NET AMOUNT IS ONLY CALLED FOR. 13 . THE LD. D.R., ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A) BESIDES CONTENDING THAT THE ADDITIONS WERE MADE ON THE BASIS OF MATERIAL/DOCUMENTS IMPOUNDED DURING THE COURSE OF SURVEY OPERATION AT THE ASSESSEES PREMISES. WHEN THE ASSESSEE COULD NOT EXPLAIN THE DETAILS OF SUPPRESSED SALES NOTED BY THE SURVEY TEAM FROM THE STATEMENT FOUND IN THE COMPUTER, THE REVENUE HAS RIGHTLY MADE THE ADDITION ON ACCOUNT OF SUPPRESSED SALES. THE LD. D.R. HAS FURTHER CONTENDED THAT SINCE THE EXPEN DITURE RELATING TO SUPPRESSED SALES HAS ALREADY BEEN BOOKED BY THE ASSESSEE, THE ENTIRE ADDITION OF THE SUPPRESSED SALES IS CALLED FOR AND NOT OF THE NET PROFIT. 14 . SO FAR AS THE DIFFERENCE IN OPENING AND CLOSING CASH BALANCE IS CONCERNED, THE LD. D.R. HAS CO NTENDED THAT THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT; WHATEVER BOOKS OF ACCOUNT ARE MAINTAINED IT WAS ONLY IN THE COMPUTER AND FROM THE COMPUTER , TWO DIFFERENT CASH BALANCE S W ERE NOTICED BY THE SURVEY TEAM. WHEN THE DIFFERENCE IN OPENING CASH BALANCE AND CLOSING CASH BALANCE WAS CONFRONTED TO THE ASSESSEE, HE COULD NOT FURNISH ANY SATISFACTORY REPLY, THEREFORE, THE REVENUE HAS RIGHTLY MADE ADDITION OF THE DIFFERENCE IN THE CASH BALANCE IN ASSESSMENT YEAR 2008 - 09. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 8 - : 15 . HAVING GIVEN A THOUGHTFUL CONS IDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AND THE DOCUMENTS PLACED ON RECORD, WE FIND THAT DURING THE COURSE OF SURVEY OPERATION, NO HARD COPY OF THE BOOKS OF ACCOUNT WERE FOUND. THE ASSESSEE HAS MAINTAINED THE ACCOUNTS IN THE COMPUTER AND FROM THE COMPUTER, THE SURVEY TEAM HAS OBTAINED DETAILS OF SALES AND OPENING & CLOSING CASH BALANCE. THE LD. CIT(A) HAS ALSO EXTRACTED THE DETAILS OF TOTAL SALES IN HIS ORDER AT PAGE NOS.4 TO 9 , ACCORDING TO WHI CH THE TOTAL SALES AS PER THE DETAILS WAS AT RS. 21,88,28,854 / - IN ASSESSMENT YEAR 2007 - 08. UNDISPUTEDLY , THE ASSESSEE HAS SHOWN TOTAL SALES OF THE YEAR AT RS.16,14,59,076 / - . THE DIFFERENCE OF RS.5,73,69,778 / - WAS CONSIDERED TO BE THE SUPPRESSED SALES BY THE LD. CIT(A) IN PARA 6 OF HIS ORDER. THE LD. CIT(A) HAS FURTHER ADDED THE SUPPRESSED SALES COMPUTED BY THE ASSESSING OFFICER AT RS.1,19,44,809 / - AFTER REJECTING THE BOOKS OF ACCOUNT UNDER SECTION 14 5 (3) OF THE ACT. WHEN THE LD. CIT(A) HAS WORKED OUT TH E TOTAL SALES FROM THE DETAILS FOUND IN THE COMPUTER OF THE ASSESSEE AND AFTER GIVING A CREDIT OF THE SALES DECLARED BY THE ASSESSEE DURING THE YEAR, THE DIFFERENCE WAS CONSIDERED TO BE SUPPRESSED SALES BY THE LD. CIT(A) , W E DO NOT FIND ANY JUSTIFICATION I N ENHANCING THE SUPPRESSED SALES BY THE LD. CIT(A) BY MAKING ADDITION OF THE SUPPRESSED SALES ESTIMATED BY THE ASSESSING OFFICER WITHOUT ANY BASIS AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT DURING THE ASSESSME NT YEAR 2007 - 08, THE TOTAL SUPPRESSED SALES WOULD ONLY BE OF RS.5,73,69,778/ - . 16 . SIMILARLY, IN ASSESSMENT YEAR 2008 - 09, THE SUPPRESSED SALE WAS CONSIDERED TO BE AT RS.2,53,30,983/ - AS PER DETAILS FOUND FROM THE COMPUTER. WHEREVER THE DETAILS ARE AVAILABLE F ROM THE COMPUTER, THERE IS NO JUSTIFICATION IN ESTIMATING THE SUPPRESSED SALES BY THE ASSESSING OFFICER AFTER REJECTING THE BOOKS OF ACCOUNT. THEREFORE, THE MODE OF COMPUTATION PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 9 - : OF SUPPRESSED SALES ON THE BASIS OF THE MATERIAL IMPOUNDED DURING THE COURSE O F SURVEY OPERATION IS PROPER/ CORRECT. 17 . NOW THE QUESTION ARISES WHETHER THE ADDITION OF ENTIRE SUPPRESSED SALES IS CALLED FOR OR THE PROFIT IS TO BE WORKED ON THE SUPPRESSED SALES. THOUGH THE LD. D.R. HAS CONTENDED THAT THE EXPENDITURE RELATING TO THE SUPPR ESSED SALES HAS ALREADY BEEN BOOKED BY THE ASSESSEE, BUT WE DO NOT FIND FORCE THEREIN INASMUCH AS THE SUPPRESSED SALES INCLUDES THE COMPONENT OF PURCHASES COST AND OTHER DIRECT COSTS ALSO. THEREFORE, THE ENTIRE ADDITION OF SUPPRESSED SALES WOULD BE UNREAS ONABLE. 18 . IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES (SUPRA), THE HON'BLE GUJARAT HIGH COURT HAS HELD THAT THE AMOUNT OF SALES COULD NOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAD NO T DISCLOSED THE SALE. THE SALES ONLY REPRESENTED THE PRICE RECEIVED BY T HE SELLER OF THE GOODS; ONLY THE REALIZATION OF THE EXCESS OVER THE COST INCURRED COULD FORM PART OF THE PROFIT INCLUDED IN THE CONSIDERATION FOR THE SALES. SINCE THERE WAS NO FINDING TO THE EFFECT THAT INVESTMENT BY WAY OF INCURRING THE COST IN ACQUIRING THE GOODS WHICH WERE SOLD HAD BEEN MADE BY THE ASSESSEE AND THAT INVESTMENT WAS ALSO NOT DISCLOSED, ONLY THE EXCESS OVER THE COST INCURRED COULD BE TREATED AS PROFIT. 19 . AGAIN IN THE CASE OF CIT VS. GURUBACHHAN SINGH J JUNEJA (SUPRA), THE HON'BLE GUJARAT HIG H COURT HAS AGAIN REITERATED THE SAME FINDINGS BY HOLDING THAT WHERE THE REVENUE HAD NOT PROVED BY BRINGING ANY MATERIAL ON RECORD THAT THE ASSESSEE HAD MADE ANY INVESTMENT TO MAKE THE ALLEGED UNACCOUNTED SALES, THE ENTIRE AMOUNT CANNOT BE TAXED; ONLY THE GROSS PROFIT EARNED ON SALES CAN BE TAXED. 20 . IN THE CASE OF K.C.K.A. GUPTA VS. ACIT (SUPRA) , THE HYDERABAD BENCH OF THE TRIBUNAL, FOLLOWING THE AFORESAID JUDGMENT, HAS ALSO HELD THAT EVEN THOUGH IT IS ESTABLISHED FROM THE SEIZED DOCUMENTS THAT THE ASSESSEE W AS PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 10 - : RECEIVING PREMIUM/ON - MONEY ON BOOKING OF FLATS BELONGING TO THIRD PARTIES, ENTIRE RECEIPTS OF ON - MONEY/PREMIUM CANNOT BE TREATED AS UNDISCLOSED INCOME OF ASSESSEE; ONLY NET PROFIT RATE CAN BE APPLIED ON UNACCOUNTED SALES/RECEIPTS FOR MAKING ADDITION. 21 . IN THE INSTANT CASE ALSO NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE WITH REGARD TO THE UNEXPLAINED INVESTMENT IN THE PURCHASE. THEREFORE, ADDITION OF THE ENTIRE SUPPRESSED SALES IS NOT CALLED FOR; ONLY GROSS PROFIT WORKED ON THE SALES IS REQUIRED TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 22 . NOW THE QUESTION ARISES WHETHER THE GROSS PROFIT IS TO BE ESTIMATED OR NET PROFIT IS TO BE WORKED OUT FOR MAKING THE ADDITION, AS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE. IN THIS REGARD, WE ARE OF THE VI EW THAT THE INITIAL GROSS PROFIT IS TO BE WORKED OUT; THEREAFTER THE OTHER INDIRECT EXPENSES ARE TO BE REDUCED TO WORK OUT THE NET PROFIT. 23 . IN THE INSTANT CASE, THE OTHER INDIRECT EXPENSES HAVE ALREADY BEEN BOOKED WHILE COMPUTING THE NORMAL INCOME OF THE AS SESSEE AS PER BOOKS OF ACCOUNT. THEREFORE , THE GROSS PROFIT RATE IS TO BE APPLIED. THE LD. COUNSEL FOR THE ASSESSEE HAS FILED A COMPARATIVE CHART OF THE GROSS PROFIT RATE , ON WHICH THE TOTAL INCOME WAS SHOWN BY THE ASSESSEE AND FROM THIS CHART IT IS NOTI CED THAT THE ASSESSEE HAS DECLARED GROSS PROFIT RATE AT 14.10% IN ASSESSMENT YEAR 2007 - 08 AND 12.02% IN ASSESSMENT YEAR 2008 - 09. IN OTHER ASSESSMENT YEARS, THE GROSS PROFIT RATE WAS DECLARED BETWEEN 10.82% AND 13.99%. SINCE IN OTHER YEARS, THE GROSS PROF IT WAS DECLARED AT LESSER RATE , THE GROSS PROFIT DECLARED BY THE ASSESSEE DURING THE RELEVANT YEAR IS TO BE ADOPTED TO COMPUTE THE INCOME FROM SUPPRESSED SALES. ACCORDINGLY, WE ARE OF THE VIEW THAT IN ASSESSMENT YEAR 2007 - 08 , THE GROSS PROFIT RATE AT 14.1 0% IS TO BE APPLIED ON THE SUPPRESSED SALES IN ORDER TO COMPUTE THE TOTAL INCOME FROM SALES OUTSIDE THE BOOKS OF ACCOUNT. SIMILARLY, IN ASSESSMENT YEAR 2008 - 09, THE GROSS PROFIT RATE IS TO BE APPLIED PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 11 - : AT 12.02% AS DISCLOSED BY THE ASSESSEE TO THE SUPPRESSE D SALES IN ORDER TO COMPUTE THE INCOME FROM SALES MADE OUTSIDE THE BOOKS OF ACCOUNT. ACCORDINGLY, THE ADDITION OF THE GROSS PROFIT WORKED OUT IN TERMS INDICATED ABOVE IS REQUIRED TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 24 . SO FAR AS THE ADDITION ON A CCOUNT OF DIFFERENCE IN CLOSING CASH BALANCE AS ON 31.3.2007 AND OPENING CASH BALANCE AS ON 1.4.2007 IS CONCERNED, WE FIND THAT THE SURVEY TEAM HAS OBTAINED SHEETS OF CASH BOOK MAINTAINED IN THE COMPUTER, WHEREFROM DIFFERENT FIGURES WERE NOTED AS ON 31.3.2 007 AND 1.4.2007. THOUGH THE ASSESSEE HAS CONTENDED THAT IT WAS ON ACCOUNT OF GLITCHES IN THE COMPUTER, BUT THE ONUS IS SQUARELY UPON HIM TO EXPLAIN HOW SUCH SUBSTANTIAL AMOUNT OF OPENING CASH BALANCE WAS TAKEN ON 1.4.2007. IT IS FOR THE ASSESSEE TO EXPL AIN AS TO HOW CASH BALANCE MOVES FURTHER AND HOW MUCH CASH BALANCE WAS SHOWN IN SUCCEEDING DATES. IN THE ABSENCE OF PROPER EXPLANATION OF THE ASSESSEE, WE ARE OF THE VIEW THAT DIFFERENCE IN OPENING AND CLOSING CASH BALANCE IS REQUIRED TO BE ADDED UNDER SE CTION 68 OF THE ACT AND THIS ADDITION IS POSSIBLE ONLY IN ASSESSMENT YEAR 2008 - 09. BUT WE FIND FORCE IN THE CONTENTION OF THE ASSESSEE THAT IF ADDITION OF THE DIFFERENCE IN OPENING AND CLOSING BALANCE IS CALLED FOR, THE CREDIT OF THE INCOME GENERATED ON S UPPRESSED SALES IS TO BE GIVEN THEREFROM AND THE NET AMOUNT IS TO BE ADDED ON ACCOUNT OF DIFFERENCE IN CLOSING AND OPENING CASH BALANCE, BECAUSE THE INCOME GENERATED FROM SUPPRESSED SALES HAS TO BE TAKEN INTO ACCOUNT WHILE COMPUTING THE OPENING CASH BALANC E AS ON 1.4.2007. WE, THEREFORE, HOLD THAT PROFIT/INCOME GENERATED ON SUPPRESSED SALES BY APPLYING THE GROSS PROFIT RATE BE REDUCED FROM THE DIFFERENCE IN CLOSING BALANCE AS ON 31.3.2007 I.E. RS.1,03,43,833 - AND TO MAKE ADDITION OF THE BALANCE AMOUNT ON A CCOUNT OF DIFFERENCE IN CLOSING BALANCE AND OPENING BALANCE. ACCORDINGLY, THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO RE - COMPUTE THE TOTAL INCOME OF THE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 12 - : ASSESSEE IN TERMS INDICATED ABOVE AFTER SETTING ASIDE THE ORDER OF THE LD. CIT(A) O N BOTH COUNTS. 25 . IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENT I ONED ON THE CAPTION PAGE. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH SEPTEMBER , 2014 JJ: 2509 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )