NAVIN KUMAR JAIN, INDORE V. ITO ACIT DYCIT FACELESS ASSESSMENT, INDORE

ITA 469/Ind/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6992 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-05-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 23-11-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Opportunity of being heard; Principle of natural justice; Peak credit; Tax effect; Question of law; Non compliance; Tax effect; FORM 26AS
• Section: 147; 69; 148; 271(1)(c); 144; 139; 142(1); 48

Judgement Text

ITANo.468 & 469/Ind/2023 Navin Kumar Jain 1 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.468 & 469/Ind/2023 (Assessment Years: 2013-14 & 2014-15) Navin Kumar Jain Prop. Navin Garments 147, J.S. Readymade Market Imli Bazar Indore Vs. ITO, NFAC Delhi (Appellant / Assessee) (Respondent/ Revenue) PAN: ABTPJ1442M Assessee by Shri Gagan Tiwari, AR Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 09.05.2024 Date of Pronouncement 30.05.2024 O R D E R Per Vijay Pal Rao, JM : These two appeals by assessee are directed against two separate orders of the Commissioner of Income Tax (Appeal), National Faceless Appeal Centre, Delhi both dated 28 th September 2023 for Assessment Years 2013-14 & 2014-15 respectively. The assesse has raised identical/common grounds for both assessment years, except quantum of addition. The grounds raised for A.Y.2013-14 are reproduced as under: “1.Addition of Rs. 50,17,236/- being amount deposited with Dhyanradha Multi State Credit Co-operative Society Ltd is unjustified and improper. ITANo.468 & 469/Ind/2023 Navin Kumar Jain 2 That the addition of Rs. 50,17,236/- being amount deposited with Dhyanradha Multi State Credit Co-operative Society Ltd is on the facts and in the circumstances of the case unjustified, improper, arbitrary, very excessive and bad in law. The learned AO failed to appreciate that the appellant is a manufacturer of readymade garments. Deposit of Rs. 50,17,236/- in account with Dhyanradha Society represented payment received from various parties against sale of goods. A complete party-wise details of payment received with names of parties and their addresses was filed during assessment proceedings. The learned AO was requested that necessary enquiries may be conducted from the parties for verification of sales made to these parties. All these parties are out-station parties and dealers in readymade garments. The assessee sold readymade garments to these parties and received cheques from these parties which was deposited in above account. The learned AO has erred in stating that cash was deposited with Dhyanradha Society whereas cheques were deposited by parties to whom readymade garments were sold. (Tax Effect Rs. 15,35,882/-) 1. Sales cannot be regarded as profit of the appellant That it was observed in case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 (MP) that total sale cannot be regarded as the profit of the assessee. The net profit rate has to be adopted and once a net profit rate is adopted, it cannot be said that there is perversity of approach. Whether the rate is low or high, it would depend upon the facts of each case. Similar view was held in case of CIT vs. President Industries (2000) 158 CTR (Guj) 372: (2002) 258 ITR 654 (Guj) and Man Mohan Sadani vs. CIT (2008) 304 ITR 0052 and in recent case of Dwarka Prasad Tayal and another vs. ITO and Another, (2020) 60 CCH 0589 Indore Trib, (2021) 87 ITR (Trib) 0675 (Indore). Honourable Gujarat High Court in the case of CIT vs Gurubachhan Singh J Juneja reported in 302 ITR 63 has held that in absence of any material on record to show that there was any unexplained investment made by the assessee which was reflected by the alleged unaccounted sales, the finding of the Tribunal that only the GP on the said amount can be brought to tax does not call for any interference. (Tax Effect Rs. 15,35,882/-) 2. Net Profit of Rs. 7,59,001/- was offered for tax in return filed in response to notice u/s 148 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 3 The appellant offered net profit of Rs. 759001/- on sales of Rs. 52,34,493/- in the return of income filed in response to notice u/s 148 and paid tax thereon. The learned AO has failed to appreciate these facts in the order of assessment. He erred in making huge addition of Rs. 52,34,493/- without appreciating that cash was not deposited with account with Dhyanradha Society but the parties deposited cheque in the said account on account of sales effected to them. (Tax Effect Rs. 15,35,882/-) 3. Only net profit embedded in sales can be added or peak credit in bank account can be added The CIT(Appeals) erred in law and on facts in not appreciating that considering the deposits and also withdrawals from the said bank account only profit embedded in the undisclosed turn over ought to be assessed as income. The Id CIT(Appeals) also erred in law and on facts in confirming the addition of entire gross amount of deposits in the bank account when the sources of the said deposits were explained to be unaccounted sales of garments purchased from withdrawals from the said bank account and hence only peak amount could be added as claimed by the appellant in the statement during the course of the survey. (Tax Effect Rs. 15,35,882/-) 4. Adoption of GP is justified on unrecorded trading results Both the lower authorities failed to appreciate the submissions and explanations that the deposits in the bank account were from unaccounted trading and hence there was no justification to hold that as there were no bills for sales and purchase, the adoption of only Gross profit was not to be accepted. (Tax Effect Rs. 15,35,882/-) 5. Entire deposit in bank cannot be added in absence of purchase bills The learned CIT(A) erred in confirming the above additions holding that since no proof of purchases corresponding to the undeclared sales outside the books of account is given, the amount deposited with Dhyanradha Multi State Credit Co- operative Society Ltd corresponds to the undisclosed profit on sales already declared in the return of income filed by the assessee. He failed to appreciate that if entire addition is confirmed, the GP rate would go very and gives distorted result which is unjustified as heldf in case of PCIT vs. Rameshwar Mills Ltd. (Tax Appeal no. 527 of 215) (GujHC). (Tax Effect Rs. 15,35,882/-) ITANo.468 & 469/Ind/2023 Navin Kumar Jain 4 6. Any other ground may be allowed to be raised subsequently That the appellant further craves leave to add, to alter and/or to amend any other ground of appeal as and when necessary. (Tax Effect Rs. 15,35,882/-)” 2. The assesse is a proprietor of Navin Garments and engaged in the business of manufacturing and sale of readymade garments. The assessee filed his return of income for the year under consideration on 18 th September 2023 declaring total income of Rs.21,11,637/-. The AO reopened the assessment by issuing notice u/s 148 on 31.03.2021 on the basis of the information received regarding huge cash deposit with M/s Dhyanradha Multi State Credit Co-operative Society Ltd. to the tune of Rs.50,17,236/-. The AO framed the assessment u/s 144 r.w. section 144B of the Act whereby addition of Rs.50,17,236/- was made to the total income of the assessee u/s 69 of the Act. The assesse challenged the action of the AO before the CIT(A) but could not succeed. 3. Before the Tribunal the Ld. AR of the assessee has submitted that the reasons recorded by the AO are not factually correct as there was no cash deposit in the bank account of the assessee as alleged by the AO. All the deposits in the bank account are through banking channels and most of them are through cheque as received by the assessee from various dealers of Readymade Garments to whom the assessee sold the goods. Ld. AR has submitted that assessee deals in readymade garments which were sold to the various outstation parties mostly in Maharashtra and sales proceeds were deposited by these parties through cheques and not in cash. He has further submitted that though this amount of Rs.50,17,236/- is turnover of the assessee from sales of readymade garments however, the same was not disclosed by the assessee in the original return of income. Therefore, the Ld. AR has submitted that the ITANo.468 & 469/Ind/2023 Navin Kumar Jain 5 said income was offered to tax by the assessee in the return of income filed in response to notice u/s 148 of the Act. Ld. AR has submitted that once the credit in the bank account represents turnover of the assessee and the assessee has offered the income to the tune of Rs.7,62,118/- being gross profit on the said sales then the addition made by the AO of the entire turnover is not justified and liable to be deleted. Ld. AR has submitted that the assessee has duly filed his reply to the show cause notice issued by the AO dated 16.03.2022 and also filed an affidavit of the assessee to explain the nature of deposits along with the details of the entire deposit and bank account statement of the assessee with the M/s Dhyanradha Multi State Credit Co-operative Society Ltd. The assessing officer without considering return of income in response to notice u/s 148 as well as reply of the assessee along with supporting evidences has passed the impugned order u/s 144 of the Act which is arbitrary and contrary to the facts. 3.1 He has then referred to the draft assessment order and submitted that the AO in para six of the draft assessment has proposed to make the addition for A.Y.2017-18 whereas the assessment was to be framed for A.Ys.2013-14 & 2014-15. The assessee specifically pleaded before the AO that the necessary inquiries may be conducted from the parties whose details were submitted before the AO for verification of sales made to those parties. The assessee explained that all those parties are outstation parties and dealers of readymade garments to whom the assessee sold goods and received the chques from these parties which were deposited in the said account. Thus, Ld. AR has submitted that the assessee has furnished the details of all the parties from whom the cheques were received by the assessee against sales of readymade garments and also requested the AO to verify this fact by conducting an inquiry from these ITANo.468 & 469/Ind/2023 Navin Kumar Jain 6 parties. Thus the assessee has discharged its onus to explain the nature and source of these credits made in the bank account. The AO as well as CIT(A) without considering all these details or conducting any independent inquiry from these parties has made an addition which is not justified as contrary to the facts brought on record. Thus, Ld. AR has submitted that sales cannot be regarded as profit when the assessee has already declared the income from these undisclosed sales in the return of income filed in response to notice u/s 148 of the Act. The net profit declared by the assessee is in the line of the net profit prevailing in the business of manufacturing and sale of readymade garments. Ld. AR has referred to the comparative chart of the net profit and submitted that as against the normal net profit of 4% to 6% in the business of readymade garments the assessee offered the income on this sale by declaring profit @15.19% in the return filing in response to notice u/s 148 of the Act. Ld. AR then referred to the bank account statement and submitted that all the credit entries in the bank account statement are through cheques and banking channels therefore, no cash was deposited by assessee or any party in the bank account of the assesse. The entire case of the AO is on the premises that the assessee has deposited huge cash in the bank account which is contrary to the facts as reflected form the bank account statements. 3.2 Ld. AR has thus submitted that as per details of bank account statements it is clear that the deposits are in the nature of turnover of the assessee though it is out of books of account on which the assessee has declared income in the return of income filed in response to notice u/s 148 of the Act. The assessee declared income @ 15.19 % and 16.02 % in comparison to overall net profit declared by the assessee for these two assessment years @5.63% & 5.83% respectively. These facts are also ITANo.468 & 469/Ind/2023 Navin Kumar Jain 7 acknowledged by the CIT(A) in the impugned order however, the CIT(A) did not consider and appreciate these facts and documentary evidences while passing impugned order. Ld. AR has submitted that the assessee relied upon various decisions as referred in para six of the CIT(A) however, the CIT(A) has passed the impugned order without considering those case laws. Thus, Ld. AR has submitted that the details produced by the assessee clearly reflects that the entire credit in the bank account is representing turnover of the assessee and corresponding withdrawal of cash is used by the assessee for purchase all material and goods in the manufacturing of readymade garments. He has relied upon following decisions: 1. CIT vs. Balchand Ajit Kumar 135 Taxman 180 2.CIT vs. Leo Formulations P. Ltd. 48 taxmann.com 328 3.CIT vs. Gurubachhan Singh J. Juneja 171 Taxman 406 4. Man Mohan Sadani vs. CIT 188 Taxman 277 5. Pr. CIT vs.M/s. Rameshwar Textile Mills Ltd. (Tax Appeal 629/2016 order dated 29.08.2016 4. On the other hand, Ld. DR has submitted that the assesse has not produced any evidence to show that the deposit in the bank account representing turnover of the assessee. The assesse has not furnished any purchase or sale bills therefore, in absence of any evidence to support the claim of the assessee the AO is justified in making addition of the deposit in the bank account. He has further submitted that the assessee even did not disclose bank account in question in the return of income filed u/s 139 of the Act and therefore, income offered by the assessee in the return of income filed in response to notice u/s 148 of the Act is an afterthought ITANo.468 & 469/Ind/2023 Navin Kumar Jain 8 attempt by the assessee to avoid the tax. He has relied upon the orders of the authorities below. 5. We have considered rival submissions as well as relevant material on record. The AO has reopened the assessment by recording the reasons in para 2 & 3 of the assessment order as under: “2. Credible Information in the case of the assessee was received on Insight portal of the department, uploaded by Deputy Director of Income Tax (Inv.) Unit-III, Indore. As per verification details of the information and investigation report of in the case of M/s Dhyanradha Multi State Credit Co-operative society Ltd., it was found that, huge cash has been deposited in the various account maintained in Indore Branch of Dhyanradha Multi State Co-operative Credit Society Ltd. It is seen that after the society was depositing cash in the Axis Bank Account bearing number 911010037459714, the funds were transferred to other parties by RTGS etc. The assessee is one of the beneficiaries of the cash deposits. The asseessee had deposited cash of Rs. 50,17,236/-in the account of society and the same was not disclosed in the return of income. Cash deposition in this case remained unexplained.The facts have been examined and found correct. 3. Therefore, in view of the above, it is revealed that the income to the extent of Rs 50,17,236/- has escaped from assessment for A.Y. 2013- 14 within the meaning of provisions of section 147 of the Income-Tax Act 1961 by not offering the same for tax.” 5.1 Thus the AO found that the assessee has deposited cash of Rs.50,17,236/- in his account with M/s Dhyanradha Multi State Credit Co-operative Society Ltd. which was not disclosed in the return of income filed u/s 139 of the Act and therefore, the income to the extent of Rs.50,17,236/- in the opinion of the AO has escaped assessment for A.Y.2013-14. The AO accordingly issued notice u/s 148 on 31.03.2021. The AO noted that the assessee has not filed any return of income in ITANo.468 & 469/Ind/2023 Navin Kumar Jain 9 response to notice u/s 148 nor filed any explanation on e-assessment portal in response to notice issued u/s 142(1) of the Act. The AO then issued show cause notice on 03.02.2022 asking assessee to furnish complete documents by 09.02.2022 failing which the assessment will be finalized u/s 144 of the Act. The AO further recorded that the assessee has neither filed any return of income nor filed any explanation on e- assessment portal in response to the show cause notice and consequently the AO proceeded as per the provisions of section 144 of the Act. The AO framed the assessment on best judgment basis u/s 144 whereby the addition of Rs.50,17,236/- was made to the total income of the assessee. To counter the observations of the AO the assessee has filed the acknowledgment of filing of submission in response to show cause notice dated 03.02.2022 issued by AO. This reply of the assessee as per e-processing acknowledgment was filed on 08.02.2022 therefore, the assessee has made compliance to the notices issued by the AO on 28.02.2022 then stipulated period up to 08.02.2022. The assesse also filed reply and written submissions vide acknowledgment at page no.56 & 57 which is reproduced as under: ITANo.468 & 469/Ind/2023 Navin Kumar Jain 10 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 11 5.2 Further the assesse has also filed the return of income vide acknowledgement dated 17.02.2022 placed at page no.25 to 28 of the paper book as under: ITANo.468 & 469/Ind/2023 Navin Kumar Jain 12 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 13 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 14 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 15 5.3 Thus, the assessee not only complied with notices issued by the AO and furnished the necessary details and reply along with bank statements, tax audit report, computation, form 26AS etc. but also filed the return of income in response to notice u/s 148 whereby an additional income of Rs.7,62,118/- @ 15.19% on the turnover of Rs.50,17,256/- was offered to tax. The assessee has explained the source of deposit as the sale proceeds of readymade garments to various outside station parties on which the profit @15.19% was declared and offered to tax over and above the income of Rs.21,11,637/- declared in the original return of income filed u/s 139 of the Act. The AO issued show cause notice along with draft assessment order dated 16.03.2022. The assesse also filed its reply to the draft assessment order/show cause notice dated 16.03.2022 vide acknowledgment dated 18.03.2022 placed at page no.64 of the paper book as under: ITANo.468 & 469/Ind/2023 Navin Kumar Jain 16 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 17 5.4 Thus, it is evident from the record that the assessee has responded to the notices issued by the AO including show cause notice along with draft assessment order and filed the written submission as well as affidavit. The AO has framed final assessment order dated 22.03.2022 and made addition of Rs.50,17,236/- in para 3 to 6 as under: “3. Therefore, in view of the above, it is revealed that the income to the extent of Rs 50,17,236/- has escaped from assessment for A.Y. 2013-14 within the meaning of provisions of section 147 of the Income-Tax Act 1961 by not offering the same for tax. Notice u/s 148 of IT Act, 1961 was issued on 31.03.2021 after taking the necessary approval from competent authority after recording the reasons for reopening of the assessment for the AY 2013-14 u/s 147 of IT Act, 1961. The assessee has made no compliance to the said notice. Further notices u/s 142(1) were issued on 13.11.2021 & 13.12.2021 and asked to file the return of income in response to notice issued u/s 148 of IT Act, 1961 dated 31.03.2021. In response to these notices assessee has neither filed any return of income nor filed any explanation on e-assessment portal. Thereafter, for the natural justice again the show cause notice issued on 03.02.2022 for the dated 08.02.2022 and stated the assessee 'Please note that in case of failure to furnish the complete information/documents by the stipulated date proceedings shall be finalized under the provisions of section 144 of Income Tax Act, 1961 on the basis of material and information available on record, without giving any further opportunity of being heard.' Again the assessee has neither filed any return of income nor filed any explanation on e-assessment portal in response to above said notice. The case was marked as non- responsive and a show cause notice alongwith the notices earlier ITANo.468 & 469/Ind/2023 Navin Kumar Jain 18 issued to the assessee were also sent through the DVU in accordance with the guidelines issued by the CBDT in this regard vide the SOP of intent. However, no compliance has been made to these notices also by the assessee. 4. As per provisions of Section 144(1)(b) of Income Tax Act, 1961, if the assessee fails to comply with terms of a notice issued u/s 142(1), the Assessing Officer is to gather relevant material and to make the assessment of the total income to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment. Relevant provisions are reproduced hereunder:- "Best Judgment assessment: Section 144(1): If any person- (b)) Fails to comply with all the terms of a notice issued under sub- section (1) of Section 142 (or fails to comply with a direction issued under sub-section(2A) of that section), or (c)Having made a retum, fails to comply with all the terms of a notice issued under sub-section (2) of Section 143, The Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, (shall, after giving the assessee an opportunity of being heard, make the assessment) of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment." 5.In view of the provisions of Section 144(1)(b) of the Act, and for the failure on the part of the assessee to furnish response, notice u/s 142(1) of the Act and Final Show Cause issued time to time, the Assessing Officer is proceeded with completion of 'best judgment assessment' u/s 144 of the Income Tax Act, 1961 through E- Proceedings. Hence the case is being taken up for disposal on merits and material available on records. 6.The asseessee had deposited cash of Rs. 50,17,236/-in the account of society M/s Dhyanradha Multi State Credit Co-operative society Ltd. and the same was not disclosed in the return of income. Ample opportunities allowed to the assessee to prove the genuineness of Cash deposition bur the fail to produce the supporting evidences ITANo.468 & 469/Ind/2023 Navin Kumar Jain 19 regarding source of depositing of cash in his bank account. In view of the facts of the case and material available on the record amounting of Rs. 50,17,236/- are hereby deemed to be income of the assessee of u/s 69 of IT Act, 1961 for the FY 2016-17 i.e. AY 2017-18 and added back to the income of the assessee for the year under consideration. The Income assessed u/s. 69 is taxed u/s 115 BBE of the Act, 1961 and penalty proceedings u/s 271(1)(c) of IT Act are initiated separately for furnishing the inaccurate particulars of his income. With the above observations, total income of the assessee is computed as under:- Net Income declared by the assesse : Rs. 21,11,637/- Add:- As discussed above in para 6 : Rs. 50,17,236/- Total Income : Rs. 71,28,873/- Assessed at Rs.71,28,873/-. u/s 144 r.w.s. 144B of the IT Act. Charge interst as per provision of IT Act. Issue requisite documents alongwith copy of this order. Penalty preceding u/s 271(1)(c) of IT Act, 1961 as discussed above is being initiated. Penalty preceding u/s 271(1)(b) of IT Act, 1961 for non compliance of notice issued u/s 142(1) of IT act dated 03.02.2022 is being initiated.” 5.5 It is manifest from the assessment order that the same was passed by the AO without considering the reply filed by the assessee vide acknowledgment dated 28.02.2022 as well as without considering the return of income filed by the assessee vide acknowledgment dated 17.02.2022 and reply to the show cause notice on draft assessment dated 16.03.2022 vide acknowledgment dated 18.03.2022. All these replies of the assessee as well as return of income are matter of record duly substantiated with the acknowledgment issued by the e-processing system of the department however, the AO has completely ignored all the replies filed by the assessee as well as the return of income in response to notice u/s 148 of the Act. ITANo.468 & 469/Ind/2023 Navin Kumar Jain 20 5.6 Before the CIT(A) the assessee has filed a detailed submissions along with all these documents as filed before the AO during the assessment proceedings and explained the nature of transactions of deposit in the account with credit society and source of the said deposit. The CIT(A) has reproduced the reply of the assessee at page no.5 to 27. The relevant part of the submissions of the assessee before the CIT(A) is reproduced here for ready reference as under: “1.The assessee derives income from manufacture and sale of readymade garments on whole sale basis. There are deposits of Rs. 52,34,493/- in bank account with Dnyanradha Multi State Co-operative Society Ltd. which were not disclosed in the original return. These deposits represent sales made to various parties and payment made by these outstation parties. A complete party-wise details of parties to whom sale were effected and payment thereof was received are as under :- Details of Transactions in bank account with Dnyaradha Multistate Co-op. Cr scty Ltd. From 01-04-2013 to 31-03-2014 Date Narration Debit Address Credit Balance Opening Balance 48214 04-03-13 Aaradhna Fashion Patoda 28586 76,800.00 04-03-13 Anuradha Main Road, Murud 12665 89,465.00 04-03-13 Boyz Fashion Wear Lal Mandir, Chimcholi 12067 1,01,532.00 04-04-13 By Hand 100500 1,032.00 04-04-13 P.S Brothers Near Jain Mandir, Bhum 14230 15,262.00 04-04-13 Akshay Emporium Kapda Market, Hadgaon 44979 60,241.00 04-04-13 Alias Gallery Subhash Road, Karjat 23457 83,698.00 04-08-13 Bank Charges 50 83,648.00 04-10-13 Best One Shubhash Road Vellur 14973 98,621.00 04-10-13 Tharagai Main Road Cuddalore 24633 1,23,254.00 16/4/2013 Pooja Garments Near Bus Stand Addanki 14810 1,38,064.00 16/4/2013 Rajesh Garments Main Road Siddhipeth 19350 1,57,414.00 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 21 22/4/2013 D.D. Varude Nimsod, Karad 33068 1,90,482.00 22/4/2013 By Hand 189000 1,482.00 22/4/2013 Bharat Tanga Stand Jalna 9988 11,470.00 25/4/2013 Lata Kamsala Street Raichoty 24052 35,522.00 25/4/2013 Aashirwaad Garments Sawariyan Bazaar, Karanja 30989 66,511.00 25/4/2013 Ajanta Garments M.G. Road Pollachi 24000 90,511.00 25/4/2013 New Bhargav Near Masjid Mul 9455 99,966.00 29/4/2013 Baba Girls And Boys Diamond Colony, Bhokar 45487 1,45,453.00 29/4/2013 Dream Shoppee M T H Market Rasipuram 15555 1,61,008.00 29/4/2013 Jagrati Garments Gandhi Chowk Hingoli 12036 1,73,044.00 29/4/2013 Rajasthan Bro Apmc Cotton Market Haveri 6118 1,79,162.00 29/4/2013 Vijay Textiles Main Market Bhavani 10211 1,89,373.00 05-03-13 Jamadar Near Axis Bank, Akhluj 36716 2,26,089.00 05-03-13 Gudege Near Ganesh Mandir, Lounda 40436 2,66,525.00 3/5/2013 R S Fashion P N Road Adoni 31753 2,98,278.00 05-03-13 Classic Super Market Gulbarga 15301 3,13,579.00 05-10-13 Ramesh Fashion Saroli Road Bellary 23580 3,37,159.00 05-10-13 Baby Zone Laxmi Nagar, Chakan 31369 3,68,528.00 05-10-13 Bhramdam Main Road Badvel 27999 3,96,527.00 05-11-13 Renuka Garments Govt Hospital Sillod 19370 4,15,897.00 15/5/2013 Self Cash 300000 1,15,897.00 17/5/2013 Ganesh Mens Main Road Medak 12709 1,28,606.00 20/5/2013 Ambika Stores Jawahar Marg Osmanabad 23756 1,52,362.00 20/5/2013 New Sandhya M T Market Kovilpatti 17800 1,70,162.00 20/5/2013 Shakti Reaymade Bus Stand Nirmal 24431 1,94,593.00 20/5/2013 Mens Collection Tumsar Main Road, Tumsar 43880 2,38,473.00 20/5/2013 Chandana C B Road Tadapatri 10832 2,49,305.00 20/5/2013 Apna Bazar Main Road Pamidi 18391 2,67,696.00 20/5/2013 Bhumi Fashion Andhra Bank Salur 17054 2,84,750.00 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 22 20/5/2013 Radhika Garments Near Govt Hospital Bider 24171 3,08,921.00 20/5/2013 Hellow Kids A B Road Sirpur 18732 3,27,653.00 22/5/2013 Agrawal Hosiery Main Road, Mettur 37179 3,64,832.00 22/5/2013 Ramu Readymade Gandhi Chowk Sirsilla 28152 3,92,984.00 22/5/2013 Sindhur Garments Shubhas Road Anantpur 30000 4,22,984.00 27/5/2013 Ronak Gar Veni Chowk Gadwal 30000 4,52,984.00 27/5/2013 Lucky Kids Shubhash Chowk Puttur 26334 4,79,318.00 27/5/2013 Dalmiya Railway Station Road Kavali 26204 5,05,522.00 27/5/2013 Ganesh Fashion Samta Nagar Gudur 34375 5,39,897.00 27/5/2013 Shyam Garments Ratan Giri Tonk 30000 5,69,897.00 27/5/2013 Harish Garments Ground Floor Market Mancherial 30000 5,99,897.00 27/5/2013 Ratan Garments Thirayur Road Musuri 18151 6,18,048.00 27/5/2013 Kannika Showroom Near Ganesh Mandir Kannur 38775 6,56,823.00 28/5/2013 Sindhur Garments Main Road Hoskot 14035 6,70,858.00 30/5/2013 Rajesh Readymade Canara Bank Hiriyur 1000 6,71,858.00 30/5/2013 By Hand 670000 1,858.00 31/5/2013 Sanskriti Kids Jalna Ambed Road, Ambed 14900 16,758.00 31/5/2013 Sandhya Readymade M.G. Road Tumkur 31039 47,797.00 06-01-2013 Decent C B Road Hyderabad 30182 77,979.00 06-01-2013 Ram Leela Kids Ram Ward,Khandaar 50000 1,27,979.00 06-01-2013 Parwar Station Road, Allephata 6161 1,34,140.00 06-04-2013 Apna Stores Emporium Bazar Kandukur 29141 1,63,281.00 06-05-2013 Rukmani Vijay Chowk Shrigonda 33252 1,96,533.00 06-05-2013 Shri Fashion Main Road Kovilpatti 28650 2,25,183.00 06-05-2013 Shrinath Garments Rahman Plaza Tenkansi 12978 2,38,161.00 06-05-2013 Bharat Tex Rungata Tower Ongale 30000 2,68,161.00 06-05-2013 Vamsi Readymade Near Andhra Bank Kodur 10390 2,78,551.00 06-05-2013 Parvaar Kids Pune Road, Akole 9914 2,88,465.00 06-07-2013 Tuk Tuk Fashion Gandhi Chowk Tenali 20000 3,08,465.00 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 23 06-08-2013 Pream Readymade Near Venkateshwara Temple Eluru 12526 3,20,991.00 06-08-2013 Seeta Collection Sita Bazaar,Gangakhed 49603 3,70,594.00 06-08-2013 Dream M.G. Road Nandigama 26275 3,96,869.00 06-08-2013 Subhash Kids M.G. Road, Karad 26024 4,22,893.00 13/6/2013 Chandrika Fashion Jindal Market Jalna 24786 4,47,679.00 13/6/2013 Rupali Stores Nehru Road Tenali 25000 4,72,679.00 13/6/2013 Krishna Station Road Nashik 14962 4,87,641.00 14/6/2013 Shivani Kids Wear Damodar Street,Kurla 31635 5,19,276.00 14/6/2013 Vishal Fashion Main Road Bhokar 23236 5,42,512.00 14/6/2013 Tata Kids Chandni Bazaar, Chakur 46308 5,88,820.00 19/6/2013 By Hand 587000 1,820.00 20/6/2013 Kavya Garments Patel Chowk Barsi 45718 47,538.00 27/6/2013 Padam Kanta Rajendra Ward, Vita 10447 57,985.00 28/6/2013 Lalit Garments K T Road Kasibugga 14198 72,183.00 28/6/2013 Dinesh Readymade Bus Stand Road Husur 14657 86,840.00 28/6/2013 Shubham Garments Super Market Hassan 25000 1,11,840.00 07-02-2013 K.J. Girls Gandhi Marg, Indagpur 30124 1,41,964.00 07-02-2013 Bank Chq Clg Charges 33.71 1,41,930.29 07-05-2013 Akshay Emporium Kapda Market, Hadgaon 12096 1,54,026.29 07-05-2013 Tharagai Main Road Cuddalore 21032 1,75,058.29 07-05-2013 Pream Fashion Koti Road Tuticorin 15781 1,90,839.29 07-05-2013 D.D. Varude Nimsod, Karad 20193 2,11,032.29 07-05-2013 Kannika Showroom Near Ganesh Mandir Kannur 48396 2,59,428.29 07-05-2013 P.S Brothers Near Jain Mandir, Bhum 13081 2,72,509.29 07-09-2013 Apna Bazar Main Road Pamidi 25777 2,98,286.29 07-10-2013 By Hand 297000 1,286.29 07-12-2013 Lata Kamsala Street Raichoty 48396 49,682.29 07-12-2013 Chandana C B Road Tadapatri 47471 97,153.29 07-12-2013 Kgf Fashion Near Ram Mandir,Jintur 35245 1,32,398.29 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 24 07-12-2013 Krishna Mall Parbhani Marg,Sonpet 47557 1,79,955.29 18/7/2013 Agrawal Hosiery Main Road, Mettur 35364 2,15,319.29 18/7/2013 Bharat Tanga Stand Jalna 26460 2,41,779.29 18/7/2013 Jamadar Near Axis Bank, Akhluj 6678 2,48,457.29 18/7/2013 Ganesh Mens Main Road Medak 14520 2,62,977.29 18/7/2013 Chq Return 26460 2,36,517.29 23/7/2013 New Sandhya M T Market Kovilpatti 32309 2,68,826.29 26/7/2013 Ajanta Garments M.G. Road Pollachi 25979 2,94,805.29 26/7/2013 Dream Shoppee M T H Market Rasipuram 16942 3,11,747.29 27/7/2013 Aashirwaad Garments Sawariyan Bazaar, Karanja 33946 3,45,693.29 08-03-2013 Vijay Textiles Main Market Bhavani 26460 3,72,153.29 08-03-2013 Renuka Garments Govt Hospital Sillod 26891 3,99,044.29 08-03-2013 Kapil Fashion Main Road , Mantha 9849 4,08,893.29 08-03-2013 Pooja Garments Near Bus Stand Addanki 49839 4,58,732.29 08-08-2013 By Hand Sachin Patidar 457000 1,732.29 08-10-2013 Sindhur Garments Shubhas Road Anantpur 16233 17,965.29 08-10-2013 Radhika Garments Near Govt Hospital Bider 25043 43,008.29 08-10-2013 Best One Shubhash Road Vellur 30906 73,914.29 08-10-2013 Ambika Stores Jawahar Marg Osmanabad 27030 1,00,944.29 08-10-2013 Lucky Kids Shubhash Chowk Puttur 10771 1,11,715.29 08-10-2013 New Bhargav Near Masjid Mul 11000 1,22,715.29 08-10-2013 Classic Super Market Gulbarga 8354 1,31,069.29 14/8/2013 Bank Charges 56 1,31,013.11 17/8/2013 Baba Girls And Boys Diamond Colony, Bhokar 14680 1,45,693.11 19/8/2013 Harish Garments Ground Floor Market Mancherial 25000 1,70,693.11 23/8/2013 By Hand Nikunj Jain 169000 1,693.11 26/8/2013 Bhramadam Main Road Badvel 24959 26,652.11 26/8/2013 Ramu Readymade Gandhi Chowk Sirsilla 28241 54,893.11 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 25 26/8/2013 Ganesh Fashion Samta Nagar Gudur 11383 66,276.11 26/8/2013 Bhumi Fashion Andhra Bank Salur 31220 97,496.11 26/8/2013 Hellow Kids A B Road Sirpur 18701 1,16,197.11 26/8/2013 Shakti Readymade Old Bus Stand Nirmal 28060 1,44,257.11 26/8/2013 Shyam Garments Ratan Giri Tonk 9981 1,54,238.11 09-04-2013 Ronak Gar Veni Chowk Gadwal 15139 1,69,377.11 09-04-2013 K.J. Girls Gandhi Marg, Indagpur 7083 1,76,460.11 09-04-2013 Jagrati Garments Gandhi Chowk Hingoli 19462 1,95,922.11 09-04-2013 Dalmiya Railway Station Road Kavali 22858 2,18,780.11 09-04-2013 Rajasthan Bro Apmc Cotton Market Haveri 33656 2,52,436.11 09-04-2013 Pream Fashion Koti Road Tuticorin 14367 2,66,803.11 09-04-2013 Chandana C B Road Tadapatri 31008 2,97,811.11 09-04-2013 Ratan Garments Thirayur Road Musuri 8854 3,06,665.11 09-04-2013 Rajesh Readymade Canara Bank Hiriyur 34618 3,41,283.11 09-04-2013 Tirumala Fashion Loha 12941 3,54,224.11 09-07-2013 Muskan Street Fashion Main Road Timurani 8663 3,62,887.11 09-07-2013 R S Fashion P N Road Adoni 10751 3,73,638.11 09-07-2013 Renuka Stores Temple Muthuvara Thrissur 9702 3,83,340.11 09-07-2013 Krishna Station Road Nashik 16121 3,99,461.11 09-07-2013 Tuk Tuk Fashion Gandhi Chowk Tenali 6202 4,05,663.11 09-07-2013 Sandhya Readymade M.G. Road Tumkur 17141 4,22,804.11 09-11-2013 By Hand Pajendra Patil 421500 1,304.11 13/9/2013 Ramesh Fashion Saroli Road Bellary 10966 12,270.11 13/9/2013 Rajesh Garments Main Road Siddhipeth 33356 45,626.11 13/9/2013 Decent C B Road Hyderabad 18064 63,690.11 13/9/2013 Mens Collection Tumsar Main Road, Tumsar 9863 73,553.11 19/9/2013 Rukmani Vijay Chowk Shrigonda 15308 88,861.11 19/9/2013 Pream Readymade Near Venkateshwara Temple Eluru 18775 1,07,636.11 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 26 25/9/2013 Tata Kids Chandni Bazaar, Chakur 38893 1,46,529.11 25/9/2013 Obc Commission 389 1,46,140.11 26/9/2013 By Hand Juber 100000 46,140.11 10-03-2013 Rupali Stores Nehru Road Tenali 16632 62,772.11 10-03-2013 Dinesh Readymade Bus Stand Road Husur 17876 80,648.11 10-03-2013 Tharagai Main Road Cuddalore 27316 1,07,964.11 10-03-2013 Vishal Fashion Main Road Bhokar 21343 1,29,307.11 10-03-2013 Krishna Mall Parbhani Marg,Sonpet 6869 1,36,176.11 10-07-2013 Bank Charges 50 1,36,126.11 10-12-2013 By Hand Manoj Rathore 135000 1,126.11 15/10/2013 Kavya Garments Patel Chowk Barsi 13360 14,486.11 15/10/2013 Apana Stores Emporium Bazar Kandukur 31532 46,018.11 15/10/2013 Shri Fashion Main Road Kovilpatti 15000 61,018.11 15/10/2013 Bharat Tex Rungata Tower Ongale 38480 99,498.11 17/10/2013 Renuka Stores Temple Muthuvara Thrissur 26866 1,26,364.11 22/10/2013 Vamsi Readymade Near Andhra Bank Kodur 17096 1,43,460.11 22/10/2013 Shubham Garments Super Market Hassan 16550 1,60,010.11 22/10/2013 Lalit Garments K T Road Kasibugga 8925 1,68,935.11 28/10/2013 Chandrika Fashion Jindal Market Jalna 19213 1,88,148.11 28/10/2013 Dream M.G. Road Nandigama 10128 1,98,276.11 28/10/2013 Kannika Showroom Near Ganesh Mandir Kannur 34782 2,33,058.11 30/10/2013 By Hand Nikunj Jain 232000 1,058.11 11-08-2013 Vishvas Fashion Paras Marg, Nilanga 44338 45,396.11 11-08-2013 Sindhur Garments Main Road Hoskot 40000 85,396.11 11-08-2013 Bharat Tex Rungata Tower Ongale 40000 1,25,396.11 11-08-2013 Pream Readymade Near Venkateshwara Temple Eluru 14810 1,40,206.11 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 27 16/11/2013 Pream Fashion Koti Road Tuticorin 46308 1,86,514.11 16/11/2013 Ganesh Fashion Samta Nagar Gudur 24817 2,11,331.11 16/11/2013 Shri Fashion Main Road Kovilpatti 19173 2,30,504.11 16/11/2013 Shrinath Garments Rahman Plaza Tenkansi 11444 2,41,948.11 16/11/2013 Rajesh Readymade Canara Bank Hiriyur 33175 2,75,123.11 16/11/2013 Sandhya Readymade M.G. Road Tumkur 13592 2,88,715.11 16/11/2013 Renuka Stores Temple Muthuvara Thrissur 35108 3,23,823.11 16/11/2013 Baby Zone Laxmi Nagar, Chakan 10251 3,34,074.11 16/11/2013 Ambika Stores Jawahar Marg Osmanabad 3978 3,38,052.11 16/11/2013 Vishal Fashion Main Road Bhokar 24480 3,62,532.11 19/11/2013 Tuk Tuk Fashion Gandhi Chowk Tenali 47376 4,09,908.11 19/11/2013 Boyz Fashion Wear Lal Mandir, Chimcholi 24143 4,34,051.11 19/11/2013 Jamadar Near Axis Bank, Akhluj 19105 4,53,156.11 20/11/2013 By Hand Nikunj Jain 452000 1,156.11 22/11/2013 D.D. Varude Nimsod, Karad 12964 14,120.11 22/11/2013 Shubham Garments Super Market Hassan 15050 29,170.11 22/11/2013 Kavya Garments Patel Chowk Barsi 41259 70,429.11 22/11/2013 Dream M.G. Road Nandigama 11016 81,445.11 22/11/2013 Chandrika Fashion Jindal Market Jalna 19023 1,00,468.11 22/11/2013 Rupali Stores Nehru Road Tenali 17330 1,17,798.11 22/11/2013 Shyam Garments Ratan Giri Tonk 41208 1,59,006.11 22/11/2013 Harish Garments Ground Floor Market Mancherial 42645 2,01,651.11 22/11/2013 Krishna Station Road Nashik 23000 2,24,651.11 23/11/2013 Rukmani Vijay Chowk Shrigonda 42021 2,66,672.11 23/11/2013 Lalit Garments K T Road Kasibugga 18562 2,85,234.11 23/11/2013 Apna Bazar Main Road Pamidi 36107 3,21,341.11 23/11/2013 Lucky Kids Shubhash Chowk Puttur 19640 3,40,981.11 23/11/2013 Vamsi Readymade Near Andhra Bank Kodur 12238 3,53,219.11 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 28 23/11/2013 Vijay Textiles Main Market Bhavani 43880 3,97,099.11 23/11/2013 Dinesh Readymade Bus Stand Road Husur 15504 4,12,603.11 12-02-2013 Shrinath Garments Rahman Plaza Tenkansi 15218 4,27,821.11 12-02-2013 Apana Stores Emporium Bazar Kandukur 10366 4,38,187.11 12-02-2013 Dalmiya Railway Station Road Kavali 19000 4,57,187.11 12-05-2013 Decent C B Road Hyderabad 3213 4,60,400.11 12-05-2013 Ratan Garments Thirayur Road Musuri 11291 4,71,691.11 12-05-2013 Sindhur Garments Main Road Hoskot 13015 4,84,706.11 12-05-2013 New Sandhya M T Market Kovilpatti 21522 5,06,228.11 12-05-2013 Classic Super Market Gulbarga 40000 5,46,228.11 12-05-2013 Kannika Showroom Kannur 7237 5,53,465.11 12-05-2013 Ganesh Mens Main Road Medak 17677 5,71,142.11 12-05-2013 Dream Shoppee M T H Market Rasipuram 40000 6,11,142.11 12-05-2013 Hellow Kids A B Road Sirpur 24541 6,35,683.11 12-05-2013 Bhramadam Main Road Badvel 10057 6,45,740.11 12-06-2013 Ronak Gar Veni Chowk Gadwal 30000 6,75,740.11 12-06-2013 Lata Kamsala Street Raichoty 20043 6,95,783.11 12-09-2013 By Hand Nitin 694000 1,783.11 13/12/2013 Sindhur Garments Shubhas Road Anantpur 40000 41,783.11 16/12/2013 Bhumi Fashion Andhra Bank Salur 12023 53,806.11 16/12/2013 Ajanta Garments M.G. Road Pollachi 27351 81,157.11 16/12/2013 Pooja Garments Near Bus Stand Addanki 42200 1,23,357.11 26/12/2013 Ramu Readymade Gandhi Chowk Sirsilla 13764 1,37,121.11 26/12/2013 Ambika Stores Jawahar Marg Osmanabad 30000 1,67,121.11 26/12/2013 Agrawal Hosirey Main Road, Mettur 23603 1,90,724.11 26/12/2013 Rajesh Garments Main Road Siddhipeth 33344 2,24,068.11 26/12/2013 Radhika Garments Near Govt Hospital Bider 15142 2,39,210.11 26/12/2013 Shakti Readymade Old Bus Stand Nirmal 12771 2,51,981.11 ITANo.468 & 469/Ind/2023 Navin Kumar Jain 29 26/12/2013 Chandana C B Road Tadapatri 11240 2,63,221.11 26/12/2013 Renuka Garments Govt Hospital Sillod 11138 2,74,359.11 26/12/2013 Bharat Tanga Stand Jalna 36924 3,11,283.11 01-04-2014 Bank Charges 50 3,11,233.11 01-04-2014 Bank Charges 50 3,11,183.11 01-04-2014 New Bhargav Near Masjid Mul 21021 3,32,204.11 01-04-2014 Best One Shubhash Road Vellur 31416 3,63,620.11 01-04-2014 Jagrati Garments Gandhi Chowk Hingoli 10374 3,73,994.11 01-04-2014 Rajasthan Bro Apmc Cotton Market Haveri 13356 3,87,350.11 01-04-2014 R S Fashion P N Road Adoni 28197 4,15,547.11 01-04-2014 Ramesh Fashion Saroli Road Bellary 28198 4,43,745.11 01-04-2014 Tharagai Main Road Cuddalore 7823 4,51,568.11 01-07-2014 By Hand Sachin Pahore 450000 1,568.11 Sms Charges 30 1,538.11 It may be appreciated that all the above parties are out-station parties and dealers in readymade garments. The assessee sold readymade garments to these parties and received cheques from these parties which was deposited in above account. An affidavit by the assessee to the effect that deposit in above bank represents payment received against sales made to above parties was filed during assessment proceedings. Copy thereof is enclosed herewith for kind perusal. 1. The trading results of the appellant for three years are as under :- Assessment Year Sales Gross Profit GP Rate Net Profit NP Rate Capital Employed Capital Turnover Ratio 2012-13 3,11,15,971 50,01,130 16.07 % 17,56,265 5.64 % 36,35,019 11.68 % 2013-14 3,92,07,209 59,54,088 15.19 % 22,06,831 5.63 % 50,43,363 12.86 % 2014-15 4,53,02,797 72,57,755 16.02 % 26,37,591 5.82 % 69,46,140 15.33 % 2. The appellant filed return in response to notice u/s 148 and offered income of Rs. 7,59,001/- on sales of Rs. 52,34,493/- (Rs. 52,34,493/- represents deposits with Dnyanradha Multi State Co- operative Society Ltd.). Above income offered for tax includes net profit on undisclosed sales of Rs. 52,34,493/- and element of capital employed for sales of Rs. 52,34,493/-. Considering the past history of the appellant, net profit of 5.63 % and capital employed ratio of 12.86 % may be applied on undisclosed sales of Rs. 52,34,493/-.” 5.7 Thus the assessee furnished all the relevant details of each and every credit in the said account with M/s Dhyanradha Multi State Credit Co-operative Society which shows that the deposit in the bank account were through cheques and banking channels and not in cash as alleged by the AO in the assessment order. Though the said amount as deposited in the account of the assessee was not declared by the assessee in the original of return of income filed u/s 139 of the Act however, in response to notice u/s 148 the assesse has filed the return of income and declared the said amount as sales and offered the income @15.19% amounting to Rs.7,62,118/- to tax. The entries in the said bank account with M/s Dhyanradha Multi State Credit Co-operative Society reveal that these deposits are made by different persons with whom the assessee is having business transactions of sale of readymade garments and the withdrawals were made by the assessee shown as self-cash withdrawn and therefore, there was no transactions of deposit in cash in the bank account of the assessee. The pattern of these transactions as reflected in the bank account shows that these are payments received by the assessee towards sales and therefore, represents the turnover of the assessee. The assessee has produced the relevant record to show that these are regular Page 31 of 37 deposits made by the buyers who are dealers of the readymade garments of the assessee and the AO has not brought on record any contrary fact or material to dispute correctness of the claim of the assesse. Therefore, the entries in the account and details furnished by the assessee clearly established the fact that all these credits in the account of the account of the assesse with M/s. Dhyanradha Multi State Credit Co-operative Society are receipt against sales of goods. The amount credited in the bank account of assessee represents unaccounted sales then question of production sales and purchase bills does not arise. 6. In the case of CIT vs. Balchand Ajit Kumar (supra) the Hon’ble jurisdictional High Court has held in para 5 & 6 as under: “5. On appreciating the rival submissions raised at the Bar, we have carefully perused the order passed by the Commissioner of Income-tax (Appeals) and also that of the Tribunal. It is not disputed that the undisclosed income was Rs. 2,57,000. The sole question that arises for consideration is whether the entire income has to be treated as profit or there should be adoption of a method of net profit income. In the case of President Industries (supra), the High Court of Gujarat in a similar matter came to hold as under: "Having perused the assessment order made by the Assessing Officer, the order made by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under section 256(1) It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that Page 32 of 37 only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring the cost in acquiring the goods which have been sold has been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether the entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales." (p. 655) 6. We are in respectful agreement with the aforesaid opinion inasmuch as the total sale cannot be regarded as the profit of the assessee. The net profit rate has to be adopted and once a net profit rate is adopted, it cannot be said that there is perversity of approach. Whether the rate is low or high, it would depend upon the facts of each case. In the present case net profit rate of five per cent has been applied. We do not think it appropriate that the same requires to be enhanced. We are also inclined to think that it is high. In any case, it cannot be said that there has been perversity of approach.” 6.1 Thus, the Hon’ble High Court has held that the amount of sales by itself cannot be regarded as profit of the assessee. The net profit rate has to be adopted for assessing the income from undisclosed sales. As it is apparent from the details furnished by the assessee that the assessee has offered the profit @15.19 % as against the net profit of preceding year on 5.64%. Similarly for A.Y.2014-15 the assessee has declared the income @16.02% which is the GP declared by the assessee as against the net profit of the preceding year at 5.64%. Therefore, the income offered by the assessee on undeclared sales is equivalent to the GP rate of 15.19% and 16.12% for A.Y.2013-14 & 2014-15 respectively which is Page 33 of 37 around three times more than the net profit declared by the assessee. In case of CIT vs. Leo Formultations P. Ltd. (supra) the Hon’ble Gujarat High Court has held in para 7 to 9 as under: “7. In our opinion, such exercise undertaken by CIT(Appeals) and the Tribunal on the basis of evidence on record gives no rise to the substantial question of law. This exercise is primarily in the nature of appreciation of evidence and would be based on questions of facts. Learned counsel for the Revenue, however, strenuously urged that having accepted that there was a degree of unaccounted consumption of raw materials, entire excess consumption should be added to the income since it was not shown that there was any unaccounted expenditure relatable to the production of the final goods. 8. This argument has two difficulties. Firstly, the assessing officer himself, as noted above, has recorded in the assessment order that there has been unaccounted purchases which needs to be considered against the unaccounted sales. Even in the decision of this Court in case of Commissioner of Income-tax vs. President Industries(supra) the Court was conscious of this angle when it observed as under:- " Therefore unless there is a finding to the O/TAXAP/301/2014 ORDER effect that investment by way of incurring the cost in acquiring the goods which have been sold has been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales." 9. Secondly and equally importantly, the assessing officer with somewhat confusingly equated excess consumption of raw material and unaccounted sale of finished product. It is not as if the excess consumption of raw material would automatically result into matching value of excess sale of the finished product. Unaccounted consumption of raw material would be used for manufacturing raw material which process would require, depending on the nature of the product, deployment of man power and machinery, consumption of electricity and even other ingredients. Essentially, on the basis of estimation of excess consumption of raw Page 34 of 37 material the possible profit of the assessee would have to be worked out for making actual additions. In this background, we must view the observations of CIT(Appeals), who while adopting the excess consumption of the unfinished product at 20% of the O/TAXAP/301/2014 ORDER gross sale applied the GP rate of 35% averaging three years of GP rate in the case of the assessee. Essentially, therefore, on the basis of available material on record, CIT(Appeals) had attempted to tax the income of the assessee arising out of the unaccounted consumption of raw material which would result into unaccounted sales of finished product” 6.2 Thus, the Hon’ble Gujarat High Court has upheld the finding of the CIT(A) and this tribunal to restrict the addition on unaccounted raw material from 100% to the gross profit on the corresponding unaccounted sales. Similar view has been taken by the Hon’ble Gujarat High Court in case CIT vs. Gurubachhan Singh J. Juneja (supra) in para 5 to 7 as under: “5. Heard Mr. B.B. Naik, learned standing Counsel for the applicant Revenue and Mr. M.J. Shah, learned advocate for the respondent assessee. Mr. Naik has not been able to dislodge the findings recorded by the Tribunal that the Revenue had not proved, by bringing any material on record, that the assessee had made any investment to make the alleged unaccounted sales. 6. Hence, in absence of any material on record to snow that there was any unexplained investment made by the assessee which was reflected by the alleged unaccounted sales, the finding of the Tribunal that only the GP on the said amount can be brought to tax does not call for any interference. The Tribunal was, therefore, justified in deleting the addition of Rs. 10,85,003 made on account of unaccounted cash sales. 7. The question referred for the opinion is, therefore, answered in the affirmative i.e. in favour of the assessee and against the Revenue.” 6.3 Thus, it is settled proposition of law that the assessee cannot be taxed on the entire amount of undisclosed sales out of books but only the gross profit on such sales can be brought to tax. The Page 35 of 37 Hon’ble jurisdictional High Court in case of Man Mohan Sadani vs. CIT has again considered an identical issue in para 4 to 7 as under: “4. We have carefully perused the judgment of this Court in the case of Balchand Ajit Kumar's case (supra). From a perusal of the judgment it becomes clear that the part relied upon and quoted by the Income-tax Appellate Tribunal is in fact portion of the order of the Gujarat High Court in CIT v. President Industries [2002] 258 ITR 654 as quoted by this Court and not the operative part of the judgment of this Court in Balchand Ajit Kumar's case (supra). The relevant part of the judgment in the case of Balchand Ajit Kumar's case (supra) is reproduced below for properly appreciating the contention of learned senior counsel for the appellant: "On appreciating the rival submissions raised at the Bar, we have carefully perused the order passed by the Commissioner of Income-tax (Appeals) and also that of the Tribunal. It is not disputed that the undisclosed income was Rs. 2,57,000. The sole question that arises for consideration is whether the entire income has to be treated as profit or there should be adoption of a method of net profit income. In the case of CIT v. President Industries [2002] 258 ITR 654, the High Court of Gujarat in a similar matter came to hold as under (page 655): 'Having perused the assessment order made by the Assessing Officer, the order made by the Commissioner of Income-tax (Appeals) and the Income- tax Appellate Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under section 256(1). It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring the cost in acquiring the goods which have been sold has been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether the entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales.' We are in respectful agreement with the aforesaid opinion inasmuch as the total sales cannot be regarded as the profit of the assessee. The net profit rate has to be adopted and once a net profit rate is adopted, it cannot be said that there is perversity of approach. Whether the rate is low or high, it would depend upon the facts of each case. In the present Page 36 of 37 case, the net profit rate of five per cent has been applied. We do not think it appropriate that the same requires to be enhanced. We are also inclined to think that it is high. In any case, it cannot be said that there has been perversity of approach." (p. 612) 5. From a perusal of the aforesaid dicta of this Court, it is apparent that this Court while deciding the matter has held that the total sales cannot be regarded as profit of the assessee and the net profit rate which was adopted in that case has to be adopted and if it is so adopted it cannot be said that the approach of the assessing authority is perverse. 6. Apparently, this Court in the said judgment has not held that the entire sale proceeds have to be or should be regarded as profit or treated as undisclosed income of the assessee. On the contrary, this Court has categorically held that it is the net profit rate which has to be adopted in such cases. 7. In the circumstances, we are of the considered opinion that question No. 1 framed by this Court deserves to be and is answered in favour of the assessee and against the Revenue and it is held that the entire sale proceeds of the assesse should not be added to his income and that the Tribunal has erred in doing so by misreading the judgment of this court in the case of Balchand Ajit Kumar (supra).” 6.4 Therefore, the addition made by the AO of the entire amount of credit in the bank account of the assessee is highly arbitrary and unjustified once the assessee has offered the income on undisclosed sales @15.19% and 16.02% for these two assessment years. Further the assessment order passed by the AO suffers from serious illegality of not considering the replies filed by the assessee as well as return of income in response to notice u/s 148 of the Act. Hence framing the assessment without considering the reply to the show cause notice of draft assessment renders the order of the AO null and void. Accordingly in the facts and circumstances of the case when the assessee has duly explained the nature of transactions of credits in the bank account as well as source of these credits being turnover of the assessee then the entire credit in Page 37 of 37 the bank account cannot be assessed to tax. The assessee has offered the income on such turnover for A.Y.2013-14 & 2014-15 @15.19 & 16.02% respectively which is equivalent to the GP declared by the assessee and three items to the net profit declared by the assessee during these years and in the preceding years. Hence, the addition made by the AO is deleted. Since the addition is made by the AO on account of credit in the bank account of the assessee for both years on identical facts therefore, in view of our finding for assessment year 2013-14 the addition made for A.Y.2014-15 stand deleted. 7. In the result, both appeals of the assessee are allowed. Order pronounced in the open court on 30.05.2024. Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore,_ 30 .05.2024 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore