I.T.O.-2(1), Gwalior V. M/s Bhatnagar Opticals, Gwalior

ITA 475/AGR/2012

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0552 (ITAT-AGRA)
• Duration Of Justice: 6 year(s) 7 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-03-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 10-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Assessee Lawyers: MAHESH AGARWAL
• Keywords: Unexplained investment; Business income; Income from undisclosed sources; Document seized; Retraction; Documents seized
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 475/AGRA/2012 ASSTT. YEAR : 2009-10 INCOME-TAX OFFICER, VS. M/S. BHATNAGAR OPTICALS, WARD 2(1), GWALIOR. SANJAY COMPLEX, JAYENDRA GANJ, LASHKAR, GWALIOR. (PAN:AAGFB 0508 C) ITA NO. 488/AGRA/2012 ASSTT. YEAR : 2009-10 M/S. BHATNAGAR OPTICALS, VS. INCOME-TAX OFFICER, SANJAY COMPLEX, WARD 2(1), GWALIOR. JAYENDRA GANJ, LASHKAR, GWALIOR. (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI K.K. MISHRA, JR. D.R. ASSESSEE BY : SHRI MAHESH AGARWAL, C.A. DATE OF HEARING : 18.03.2013 DATE OF PRONOUNCEMENT OF ORDER : 22.03.2013 ORDER PER BHAVNESH SAINI, J.M.: BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE OR DER OF LD. CIT(A), GWALIOR DATED 06.07.2012 FOR THE ASSESSMENT YEAR 2009-10. ITA NO. 475 & 488/AGRA/2012 2 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FIRM HAS TWO PARTNERS AND THE BUSINESS OF THE ASSESSEE IS SALE OF SPECS AND C ONTACT LENSES ALONG WITH FEES RECEIVED FOR TESTING THE EYES. SURVEY U/S. 133A WAS CONDUCTED IN THE BUSINESS PREMISES OF ASSESSEE ON 18.12.2008. DURING THE COUR SE OF SURVEY PROCEEDINGS, SHRI ANURAG BHATNAGAR WAS FOUND PRESENT IN THE PREMISES AND IN HIS PRESENCE, SURVEY PROCEEDINGS WERE CONDUCTED AND IT WAS FOUND THAT TH E ASSESSEE FIRM DID NOT MAINTAIN ANY BOOKS OF ACCOUNT OF BUSINESS AS WERE N OT FOUND IN SURVEY. NO STOCK REGISTER OR LIST OF STOCK IS PREPARED. CASH OF RS.1 650/- WAS FOUND. STOCK FOUND IN THE PREMISES WAS VALUED IN A SUM OF RS.7,23,819/-. MACHINERY USED FOR BUSINESS AND A.C. WERE ALSO VALUED. STATEMENT OF SHRI ANURAG BHATNAGR WAS ALSO RECORDED. STATEMENT OF ACCOUNTANT SHRI KAILASH CHANDRA JAIN W AS ALSO RECORDED. CASE WAS SELECTED FOR SCRUTINY AND TIME TO TIME STATUTORY NO TICES WERE ISSUED BUT NONE WERE COMPLIED AND EVEN NO RETURN WAS FILED. ON THE REQUE ST OF THE ASSESSEE, THE MATERIAL COLLECTED DURING THE COURSE OF SURVEY WAS SUPPLIED TO THE ASSESSEE WITH THE DIRECTION TO FILE THE RETURN OF INCOME WITHIN 15 DA YS FROM THE RECEIPT OF THE SEIZED MATERIAL. THE SEIZED MATERIAL WAS SUPPLIED TO THE A SSESSEE ON 16.06.2011, BUT THE ASSESSEE DID NOT FILE RETURN OF INCOME AND NO STATU TORY NOTICES WERE COMPLIED WITH. THE ASSESSEE LATER ON FILED RETURN OF INCOME BELATE DLY ON 09.11.2011 FOR THE ASSESSMENT YEAR UNDER APPEAL DISCLOSING LOSS OF RS. (-) 5,19,136/-. THE AO ACCORDINGLY FOUND THAT SINCE RETURN U/S. 139(1) WAS NOT FILED WITHIN THE PRESCRIBED ITA NO. 475 & 488/AGRA/2012 3 TIME, THEREFORE, RETURN OF INCOME FILED BELATEDLY B Y THE ASSESSEE WAS NOT CONSIDERED AS VALID. FURTHER TIME TO TIME STATUTORY NOTICES WE RE ISSUED AND EXPLANATION OF THE ASSESSEE WAS CALLED FOR AND MATERIAL FOUND DURING T HE COURSE OF SURVEY WAS ALSO EXAMINED WITH REFERENCE TO THE STATEMENTS OF THE PA RTNER. THE ASSESSEE IN REPLY TO THE STATUTORY NOTICES ALSO EXPLAINED THAT ON 17.04. 2009, THE PARTNER HAS RETRACTED FROM HIS STATEMENT MADE DURING THE COURSE OF SURVEY VIDE SPEED POST LETTER DATED 22.04.2009. IT WAS STATED THAT SINCE EARLIER STATEM ENT WAS MADE UNDER TENSION AND MENTAL BALANCE OF THE PARTNER WAS NOT PROPER, THERE FORE, HIS STATEMENT CANNOT BE READ AS CORRECT. HOWEVER, THE AO REJECTED THE RETRA CTION OF STATEMENT OF PARTNER BECAUSE DURING THE COURSE OF SURVEY, STATEMENT WAS PROPERLY RECORDED WHICH THE PARTNER UNDERSTOOD THE SAME AND SIGNED THE SAME WIT HOUT PRESSURE AFTER CAREFULLY READING THE SAME. THE STATEMENT WAS RECORDED IN QUE STION AND ANSWER FORM WITH REFERENCE TO THE MATERIAL FOUND ON SURVEY AND THE P ARTNERS AFTER VERIFYING THE SAME MADE THE STATEMENT. THEREFORE, RETRACTION MADE AFTE R ABOUT FOUR MONTHS FROM RECORDING OF THE STATEMENT WAS NOT ACCEPTED BY THE AO. THE ASSESSEE COULD NOT EXPLAIN THE QUERIES OF THE AO WITH REGARD TO THE MA TERIAL FOUND DURING THE COURSE OF SURVEY AND EVEN NO BOOKS OF ACCOUNT WERE MAINTAI NED BY THE ASSESSEE WHICH IS ALSO SUPPORTED BY THE STATEMENT OF ACCOUNTANT SHRI KAILASH CHANDRA JAIN WHO HAS STATED IN HIS STATEMENT THAT HE DID NOT HAVE ANY BO OKS OF ACCOUNT WITH HIM AND HE DID NOT RECORD ANY BOOKS OF ACCOUNT. IN THE STATEM ENT RECORDED AT THE TIME OF ITA NO. 475 & 488/AGRA/2012 4 SURVEY, IT WAS ADMITTED THAT ENTIRE STOCK WAS KEPT IN THE PREMISES. THE ASSESSEE CLAIMED LESSER STOCK, BUT WHEN INVENTORY OF STOCK W AS PREPARED, THE ENTIRE STOCK WAS FOUND TO HAVE VALUE OF RS.7,23,819/- AND THE AS SESSEES PARTNER IN THE ABSENCE OF ANY EXPLANATION TO THE STOCK FOUND ON SURVEY AGR EED TO SURRENDER THE VALUE OF UNACCOUNTED STOCK IN A SUM OF RS.7,24,000/-. THE AO , THEREFORE, FOUND THAT THE EXPLANATION OF THE ASSESSEE AS PER PROFIT AND LOSS ACCOUNT GIVEN IN THE OPENING AND CLOSING STOCK IS INCORRECT, AS THE STOCK FOUND DURI NG THE COURSE OF SURVEY WAS FOUND UNACCOUNTED, OF WHICH NO BOOKS OF ACCOUNT HAVE BEEN WRITTEN AND NO BILLS AND VOUCHERS OF THE STOCK WERE FOUND. THE ADDITION OF R S.7,24,000/- WAS ACCORDINGLY MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK. THE AO FURTHER FOUND THAT DURING THE COURSE OF SURVEY, ACTUAL CASH OF RS.1650 /- WAS FOUND, BUT CLOSING BALANCE WAS SHOWN ON THE DATE OF SURVEY AT RS.10,35 ,685/- AND SINCE SHORTAGE OF CASH WAS NOT EXPLAINED, THEREFORE, ADDITION OF RS.1 0,34,035/- WAS MADE ON ACCOUNT OF UNVERIFIABLE CASH. SINCE, NO BOOKS WERE MAINTAIN ED AND THE SEIZED MATERIAL WAS NOT EXPLAINED AND NOTHING WAS PRODUCED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS,, THEREFORE, IT WAS FOUND THAT WHATEVER FINAL ACCOUNTS HAVE BEEN PREPARED BY THE ASSESSEE ARE NOT SUPPORTED BY ANY M ATERIAL OR DOCUMENT AND THE ASSESSEE HAS SUPPRESSED THE PURCHASES AND SALES. IN THE YEAR UNDER APPEAL, THE ASSESSEE HAS DISCLOSED G.P. RATE OF 1.24% AND IN PR ECEDING ASSESSMENT YEARS 2007- 08 AND 2008-09, THE ASSESSEE HAS DISCLOSED G.P. RAT E OF 17.75% AND 17.69%. ITA NO. 475 & 488/AGRA/2012 5 THEREFORE, THE AO ESTIMATED THE TURNOVER BY APPLYIN G MULTIPLIER OF FIVE AS AGAINST DISCLOSED SALES OF THE ASSESSEE AND ESTIMATED THE S ALES AT RS.60,98,900/- AND APPLIED PROFIT RATE OF 17.72% AND MADE THE ADDITION OF RS.10,60,725/-. THE AO IN THE COMPUTATION OF INCOME ALSO NOTED THAT SINCE RET URN IS NOT FILED AS PER SECTION 139(1). THEREFORE, THE LOSS DECLARED IN THE RETURN WAS TAKEN AT NIL. ALL THESE ADDITIONS WERE CHALLENGED BEFORE THE LD. CIT(A) AND THE APPEAL OF THE ASSESSEE HAS BEEN PARTLY ALLOWED AGAINST WHICH BOTH THE REVENUE AND THE ASSESSEE ARE IN APPEAL. 3. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF AUTHORITIES BELOW AND CONSIDERED THE MA TERIAL AVAILABLE ON RECORD. 4. ON GROUND NO. 1, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.10,36,035/- ON ACCOUNT OF UNEXPLAINED CASH DIFFE RENCE AS PER PHYSICAL INVENTORY AND AS PER BOOKS OF ACCOUNT WRITTEN THEREAFTER. THE AO MADE ADDITION ON ACCOUNT OF UNVERIFIABLE CASH (CASH CREDIT) BECAUSE ACTUAL C ASH WAS FOUND LESSER AS COMPARED TO THE CASH SHOWN AS PER RETURN OF INCOME AND DETAILS GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE EXPL AINED BEFORE THE LD. CIT(A) THAT IT IS RUNNING SMALL SHOP. THEREFORE, FOR SECUR ITY AND SAFETY PURPOSE, IT IS NOT POSSIBLE TO KEEP ENTIRE CASH AT THE BUSINESS PREMIS ES. THE CASH IS RETAINED AT THE HOUSE OF THE PARTNER FOR SAFETY PURPOSE AND AT THE TIME OF SURVEY, THE PARTNER, MR. ITA NO. 475 & 488/AGRA/2012 6 RACHIT BHATNAGAR WAS NOT AVAILABLE WHO WAS KEEPING THE CASH WITH HIM. THEREFORE, THIS FACT COULD NOT BE EXPLAINED. SINCE THE PARTNER ANURAG BHATNAGAR WAS NOT DEALING WITH THE CASH, THEREFORE, THIS FACT COULD N OT BE EXPLAINED. IT WAS ALSO STATED THAT FOR LESSER CASH FOUND DURING THE COURSE OF SUR VEY, ADDITION COULD NOT BE MADE. THE LD. CIT(A), CONSIDERING THE EXPLANATION OF THE ASSESSEE ACCEPTED THE CONTENTION OF THE ASSESSEE BECAUSE THE CASH WAS KEP T BY OTHER PARTNER FOR SAFETY PURPOSES AND FURTHER, ON ACCOUNT OF SHORTAGE OF CAS H NO ADDITION COULD BE MADE BELIEVING EARNING OF UNACCOUNTED INCOME. THE ADDITI ON WAS ACCORDINGLY, DELETED. 5. ON CONSIDERATION OF THE SUBMISSIONS OF BOTH THE PARTIES, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. IT I S ADMITTED FACT THAT LESSER CASH WAS FOUND DURING THE COURSE OF SURVEY AS COMPARED T O THE DETAILS FOUND ON SURVEY. AT THE MOST, IT MAY BE BELIEVED THAT THE ASSESSEE S PENT OR EXPENDED THE REMAINING AMOUNT OF CASH SOMEWHERE, BUT IT CANNOT BE BELIEVED THAT THERE WAS ANY UNVERIFIABLE CASH. FOR EXCESS CASH FOUND DURING THE COURSE OF SURVEY, FOR WHICH NO EXPLANATION BY THE ASSESSEE WAS GIVEN, MAY BE TREAT ED AS UNACCOUNTED CASH NOT RECORDED IN THE BOOKS OF ACCOUNT AND ADDITION MAY B E JUSTIFIED TO THE INCOME OF THE ASSESSEE BUT ON ACCOUNT OF SHORTAGE OF CASH, NO PRO VISION HAS BEEN BROUGHT TO OUR NOTICE UNDER THE IT ACT FOR MAKING SUCH ADDITION. A SSESSEES EXPLANATION IS ACCEPTABLE THAT FOR SECURITY AND SAFETY PURPOSE WHE N CASH IS KEPT AT THE RESIDENCE ITA NO. 475 & 488/AGRA/2012 7 OF OTHER PARTNER, THERE IS NOTHING WRONG IN THE EXP LANATION OF THE ASSESSEE. CONSIDERING THE ABOVE DISCUSSION IN THE LIGHT OF FI NDINGS OF LD. CIT(A), WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVE NUE. THE SAME IS, ACCORDINGLY DISMISSED. 5.1 THE REVENUE ON SAME GROUND NO. 1 ALSO CHALLENGE D THE ESTIMATION OF SALES AT RS.20,000/- BY THE LD. CIT(A).THE ASSESSEE DID N OT MAINTAIN ANY BOOKS OF ACCOUNT AND NO BILLS OR VOUCHERS WERE PRODUCED. WHA TEVER FINAL ACCOUNTS WERE PREPARED BY THE ASSESSEE, WERE FOUND NOT CORRECT. T HE AO, THEREFORE, NOTED THAT THE ASSESSEE HAS NOT ONLY SUPPRESSED THE PURCHASES, BUT ALSO THE SALES. THE AO APPLIED MULTIPLIER OF FIVE AGAINST THE DISCLOSED SALES OF T HE ASSESSEE AND ESTIMATED TOTAL SALES AT RS.60,98,900/- BY REJECTING THE BOOK RESUL TS OF THE ASSESSEE. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THERE WAS NO M ATERIAL AVAILABLE WITH THE AO TO COMPUTE SUCH AN EXCESSIVE SALES AND THAT WHATEVER S TATEMENT WAS MADE WAS RETRACTED BY THE ASSESSEE. THEREFORE, THE ESTIMATIO N OF SALES IS UNJUSTIFIED. THE LD. CIT(A) FOUND THAT IT IS NOT A DENYING FACT THAT NO BOOKS OF ACCOUNTS WERE FOUND DURING THE COURSE OF SURVEY AND EVEN THE ACCOUNTANT DENIED MAINTENANCE OF BOOKS OF ACCOUNT OR LOOKING INTO ASSESSEES BOOKS OF ACCO UNT FOR LAST FIVE YEARS. THEREFORE, FOR NON-MAINTENANCE OF BOOKS OF ACCOUNT, PROVISIONS OF SECTION 145(3) HAVE CORRECTLY BEEN APPLIED IN THIS CASE. THE LD. C IT(A) FOUND THAT THE ASSESSEE HAS ITA NO. 475 & 488/AGRA/2012 8 DECLARED SALES OF RS.18,76,470/- ON WHICH GROSS PRO FIT OF RS.19,999/-, I.E., @ 1.06% HAS BEEN DISCLOSED SHOWING LOSS OF RS.3,31,44 9/-. ON THE BASIS OF THESE FACTS, THE LD. CIT(A) FOUND THAT ESTIMATION OF SALE S @ 20% OF THE STOCK IS WITHOUT ANY BASIS AND EVEN THE SAME IS NOT COMPARABLE WITH ANY OTHER CASE OR PAST HISTORY OF THE ASSESSEE. THE LD. CIT(A) ACCORDINGLY TOOK TH E SALES AT RS.20,00,000/- FOR THE PURPOSE OF ESTIMATING THE PROFIT. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN ESTIM ATING THE SALES OF ASSESSEE AT RS.20,00,000/- AS AGAINST RS.60,98,900/- COMPUTED B Y THE AO. THE ASSESSEE IS A SMALL DEALER AND DURING THE COURSE OF SURVEY UNACCO UNTED STOCK OF RS.7,23,819/- WAS FOUND. CASH WAS FOUND LESSER. THE ASSESSEE HAS DECLARED LOSS IN THE PROFIT AND LOSS ACCOUNT PREPARED AFTER THE SURVEY. THEREFORE, CONSIDERING THE FACTS OF THE CASE, IT WAS INAPPROPRIATE ON THE PART OF THE AO TO ESTIM ATE THE TURNOVER OF THE ASSESSEE BY APPLYING MULTIPLIER OF 5 AGAINST CLOSING STOCK. THE BASIS OF THE AO WAS UNJUST AND WITHOUT SUPPORTED BY ANY EVIDENCE OR MATERIAL F OUND DURING THE COURSE OF SURVEY. EVEN IF THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT, REASONABLE PROFIT OF THE ASSESSEE SHALL HAVE TO BE ASSESSED CONSIDERING THE FACTS OF THE CASE OR COMPARABLE CASE, BUT IN THE CASE OF THE ASSESSEE EV EN NO COMPARABLE CASE HAS BEEN CITED BY THE AO. CONSIDERING THE FACTS OF THE CASE, THE LD. CIT(A) RIGHTLY ESTIMATED ITA NO. 475 & 488/AGRA/2012 9 THE DECLARED TURNOVER OF ASSESSEE AT RS.20,00,000/- .THIS GROUND OF APPEAL OF THE REVENUE IS ALSO DISMISSED. IN THE RESULT, THE DEPAR TMENTAL APPEAL IS DISMISSED. 7. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE. GROU NDS NO. 1 & 5 OF APPEAL OF THE ASSESSEE ARE GENERAL IN NATURE. THE LD. COUNSEL FOR THE ASSESSEE ALSO DID NOT MAKE ANY SUBMISSIONS THEREON. GROUNDS NO. 1 & 5 OF APPEAL OF THE ASSESSEE ARE ACCORDINGLY DISMISSED. 8. ON GROUND NO. 2, THE ASSESSEE CHALLENGED THE ORD ER OF THE LD. CIT(A) IN NOT ALLOWING RETURNED LOSS OF RS.5,19,136/-. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THE AGGREGATE FIGURE IS RS.4,49,136/-. GR OUND NO. 4 IS CONNECTED WITH THIS ISSUE IN WHICH THE ASSESSEE CHALLENGED THE ORDER OF THE LD. CIT(A) IN RESTRICTING THE ADDITION TO RS.3,40,000/- ON ACCOUNT OF ESTIMATE OF PROFIT. BOTH ARE, THEREFORE, DECIDED TOGETHER. 9. THE LD. CIT(A) ESTIMATED THE TURNOVER OF THE ASS ESSEE AT RS.20,00,000/- AS AGAINST ESTIMATED BY THE AO AT RS.60,98,900/-. THE LD. CIT(A) APPLIED THE G.P. RATE OF 17% AS WAS APPLIED BY THE ASSESSEE IN EARLI ER TWO YEARS AND COMPUTED THE GROSS PROFIT OF THE ASSESSEE AT RS.3,40,000/- IN PL ACE OF RS.20,000/- DECLARED BY THE ASSESSEE AND RS.10,60,725/- ESTIMATED BY THE AO. TH E LD. COUNSEL FOR THE ASSESSEE ITA NO. 475 & 488/AGRA/2012 10 SUBMITTED THAT THE ASSESSEE ASKED FOR THE MATERIAL SEIZED DURING THE COURSE OF SURVEY FOR THE PURPOSE OF COMPUTING BUSINESS INCOME AND FOR FILING THE RETURN OF INCOME. SUCH COPIES OF SEIZED DOCUMENTS WERE SUPPLI ED TO THE ASSESSEE ONLY ON 16.06.2011 AND THEREAFTER, THE ASSESSEE FILED RETUR N OF INCOME ON 09.11.2011. THEREFORE, THE DELAY HAS OCCURRED DUE TO LATE SUPPL Y OF SEIZED DOCUMENTS. THEREFORE, THE LOSS DISCLOSED BY THE ASSESSEE IN TH E RETURN OF INCOME AT RS.5,19,136/- SHOULD HAVE BEEN ALLOWED SET OFF. HE HAS SUBMITTED THAT THE ASSESSEE CLAIMED SET OFF OF LOSS U/S. 70 OF THE IT ACT BEING THE LOSS OF THE CURRENT YEAR AND HAS NOT MADE ANY CLAIM OF SET OFF OF CARRY FORWARD AND SET OFF OF LOSS U/S. 80 OF THE IT ACT. HE HAS FURTHER REFERRED TO PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSEE, COPY OF WHICH IS FILED AT PAGE 57 OF THE PAPER BOOK TO SAY THAT EVEN IF GROSS PROFIT RATE IS APPLIED, THE EXPENSES CLAIMED BY THE ASSESS EE FOR DEDUCTION SHOULD HAVE BEEN ALLOWED AND IN ALTERNATE CONTENTION, HE HAS SU BMITTED THAT IN CASE REASONABLE NET PROFIT RATE IS APPLIED, THERE WOULD NOT BE ANY NEED TO CLAIM DEDUCTION OF THE EXPENSES. 10. ON THE OTHER HAND, THE LD. DR RELIED UPON THE O RDER OF THE LD. CIT(A) AND SUBMITTED THAT BOOK RESULTS HAVE BEEN CORRECTLY REJ ECTED BECAUSE THE ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNT AND G.P. RATE IS APPLIED AS PER PAST HISTORY OF THE ASSESSEE. SINCE THE RETURN OF INCOME WAS NOT FI LED WITHIN THE TIME SPECIFIED IN ITA NO. 475 & 488/AGRA/2012 11 THE IT ACT, THEREFORE, THE LOSS HAS BEEN RIGHTLY IG NORED BY THE AO. THE LD. DR FURTHER SUBMITTED THAT WHEN PROFIT IS ESTIMATED BY THE AO, NO SET OFF OF LOSS IS PERMISSIBLE. HE HAS RELIED UPON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF S.N. NAMA SHIVAI CHETTIAR VS. CIT 38 ITR 579. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNT, BILLS AND VOUCHERS ETC. THEREFORE, THE BOOK RESULTS WERE CORRECTLY REJECTED IN THIS CASE AND WHILE DECIDING THE DEPARTMENTAL APPEAL, WE HAVE CONFIRMED THE ORDER OF THE LD. CIT(A) IN ESTIMATING THE SALES OF ASSESSEE AT RS.20,00,000/- FOR THE PURPOSE OF COMPUTING BUSINESS INCOME OF ASSESSEE. CONSIDERI NG VERY LESSER TURNOVER OF THE ASSESSEE AND THE NATURE OF BUSINESS OF ASSESSEE ALO NG WITH PROFIT DISCLOSED BY THE ASSESSEE AT RS.20,000/- IN THE PROFIT AND LOSS ACCO UNT OF THE ASSESSEE, WOULD CLEARLY SUPPORT THE CONTENTION OF THE LD. COUNSEL FOR THE A SSESSEE THAT PROFIT RATE APPLIED AT 17% IN THIS CASE IS EXCESSIVE AND UNREASONABLE FOR THE PURPOSE OF ESTIMATING THE BUSINESS INCOME OF THE ASSESSEE. THE ASSESSEE CAN B E CONSIDERED AS RETAILER CONSIDERING THE LESSER TURNOVER. FURTHER, THE ASSES SEE THOUGH CLAIMED EXPENSES IN THE PROFIT AND LOSS ACCOUNT, BUT NO EVIDENCES WERE PRODUCED BEFORE THE AUTHORITIES BELOW TO SUPPORT THE CLAIM OF DEDUCTION OF THE EXPE NDITURE EVEN IF G.P. RATE IS APPLIED BY THE LD. CIT(A). HOWEVER, IT IS NOT A DEN YING FACT THAT WHILE DOING ITA NO. 475 & 488/AGRA/2012 12 BUSINESS ACTIVITIES, THE ASSESSEE SHALL HAVE TO INC UR CERTAIN EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THE ABS ENCE OF ANY SPECIFIC QUANTIFICATION OF DEDUCTION OF EXPENDITURE AND CONS IDERING THE HISTORY OF THE ASSESSEE, IT WOULD BE REASONABLE TO COMPUTE THE BUS INESS INCOME OF THE ASSESSEE BY APPLYING REASONABLE NET PROFIT RATE AGAINST ESTIMAT ED TURNOVER OF RS.20,00,000/-. FURTHER, WHEN THE ASSESSEE DID NOT FILE RETURN OF I NCOME WITHIN TIME ALLOWED BY THE AO AFTER SUPPLY OF THE COPIES OF SEIZED PAPERS, THE RETURN WAS RIGHTLY HELD TO BE BELATED RETURN AND THE LOSS DECLARED THEREIN CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPUTING BUSINESS INCOME OF THE ASSESSEE. CONSIDER ING THE FACT THAT ASSESSEE HAS DECLARED GROSS PROFIT OF RS.20,000/- WHICH DISCLOSE D THE PROFIT MARGIN OF 1.06% AS PER CIT(A)S ORDER, IT WOULD BE REASONABLE AND PROP ER TO APPLY NET PROFIT RATE OF 5% AGAINST THE ESTIMATED TURNOVER FOR THE PURPOSE O F ESTIMATING THE BUSINESS PROFIT OF THE ASSESSEE AND IN THAT EVENT, IT WOULD TAKE CA RE OF THE EXPENSES INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. WHEN NET PROF IT RATE OF 5% IS APPLIED AGAINST THE TURNOVER OF RS.20,00000/- AS COMPUTED BY THE LD . CIT(A), THE BUSINESS INCOME OF THE ASSESSEE WOULD BE ESTIMATED AT RS.1,00,000/- .. THE ORDERS OF THE AUTHORITIES BELOW TO THAT EXTENT ARE MODIFIED AND THE AO IS DIR ECTED TO COMPUTE THE BUSINESS INCOME OF ASSESSEE AT RS.1,00,000/- AS AGAINST COMP UTED BY THE LD. CIT(A) AT RS.3,40,000/-. GROUND NO. 4 OF APPEAL OF THE ASSESS EE IS, ACCORDINGLY, PARTLY ALLOWED. SINCE THE RETURN WAS FILED BELATEDLY AGAIN ST THE TIME ALLOWED BY THE ACT, ITA NO. 475 & 488/AGRA/2012 13 THEREFORE, THE AO RIGHTLY TOOK THE LOSS FIGURE AS P ER RETURN AT NIL INCOME WHICH SHALL BE SUBSTITUTED BY POSITIVE INCOME OF RS.1,00, 000/- AS HELD ABOVE. THEREFORE, THERE IS NO QUESTION OF ALLOWING ANY SET OFF OF CUR RENT LOSS OR OF EARLIER YEARS AS IS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE. THE CLA IM OF ASSESSEE ON GROUND NO. 2, THUS, CANNOT BE ALLOWED. IN THE RESULT, GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED. 12. ON GROUND NO.3, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.7,24,000/- ON ACCOUNT OF INVESTMENT IN STOCK. DURING THE COURSE O F SURVEY, NO BOOKS OF ACCOUNT WERE FOUND OR MAINTAINED BY THE ASSESSEE. THE ACCOU NTANT DENIED MAINTENANCE OF ANY BOOKS OF ACCOUNT OR KEEPING ANY BOOKS OF ACCOUN T. THE STATEMENT OF ONE OF THE PARTNERS, SHRI ANURAG BHATNAGAR WAS RECORDED IN WHI CH HE HAS ACCEPTED THE VALUATION OF THE STOCK AT RS.7,23,819/- BY THE SURV EY PARTY AND WHEN HIS EXPLANATION WAS CALLED FOR TO EXPLAIN THE INVESTMEN T IN THE STOCK, HE HAS ACCEPTED THE VALUATION DONE BY THE SURVEY PARTY TO BE CORREC T AND HE HAS ALSO EXPLAINED THAT HE IS UNABLE TO PROVE ANY INVESTMENT IN STOCK. HE A LSO DID NOT PRODUCE ANY EVIDENCE ABOUT THE INVESTMENT IN THE STOCK AND, THE REFORE, HE HAS STATED IN THE STATEMENT RECORDED DURING THE COURSE OF SURVEY THAT FIRM HAS MADE UNACCOUNTED INVESTMENT IN THE STOCK IN A SUM OF RS.7,24,000/-. THE AO DID NOT ACCEPT THE RETRACTION OF STATEMENT RECORDED DURING THE COURSE OF SURVEY AND ACCORDINGLY ITA NO. 475 & 488/AGRA/2012 14 TREATED UNDISCLOSED INVESTMENT IN STOCK AND MADE AD DITION OF RS.7,24,000/-. THE ASSESSEE REITERATED THE SAME FACTS BEFORE THE LD. C IT(A) THAT THE ASSESSEE FIRM IS AN OLD FIRM AND MAINTAINED PROPER RECORDS AND THAT THE ASSESSEE RETRACTED FROM HIS EARLIER STATEMENT BY FILING LETTER DATED 17.04.2009 . THEREFORE, THE ADDITION SHOULD NOT BE MADE. THE LD. CIT(A), HOWEVER, FOUND ON EXAM INATION OF THE SURVEY FOLDER THAT PHYSICAL STOCK VALUATION WAS DONE AS PER INVEN TORY, ON WHICH SHRI ANURAG BHATNAGAR, PARTNER OF THE FIRM AGREED AND SIGNED AT VARIOUS PAGES. STATEMENT OF ACCOUNTANT WAS ALSO RECORDED IN WHICH HE DENIED MAI NTENANCE OF ANY BOOKS OF ACCOUNT AND KEEPING OF ANY RECORD WITH HIM. THIS FA CT WAS CONFRONTED TO SHRI ANURAG BHATNAGAR IN HIS STATEMENT, BUT HE COULD NOT EXPLAIN THE SAME. THE LD. CIT(A) FOUND THAT VOLUNTARY STATEMENT OF SHRI ANURA G BHATNAGAR WAS RECORDED, WHICH HE HAD SIGNED VOLUNTARILY WITHOUT ANY COERCIO N OR PRESSURE, THEREFORE, RETRACTION AFTER FOUR MONTHS WITHOUT ANY BASIS WAS NOT PROPER BECAUSE NO BILLS AND DETAILS OR ANY KIND OF MATERIAL WAS PRODUCED TO SHO W THAT THE STATEMENT OF PARTNER WAS RECORDED IN ANY PRESSURE OR COERCION. THE ADDIT ION WAS ACCORDINGLY CONFIRMED. 13. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT OPENING STOCK IS AVAILABLE TO THE ASSESSEE TO EXPLAIN THE INVESTMENT IN STOCK AND ASSESSEE RETRAC TED FROM THE EARLIER STATEMENT. THEREFORE, ADDITION COULD NOT BE MADE MERELY ON THE BASIS OF STATEMENT OF THE ITA NO. 475 & 488/AGRA/2012 15 PARTNER. HE HAS SUBMITTED THAT ONCE G.P. RATE IS AP PLIED, NO FURTHER ADDITION SHOULD BE MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT IN THE STOCK AND RELIED UPON 19 DTR 305 (RAJ.). ON THE OTHER HAND, THE LD. DR RELIE D UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT SHRI ANURAG BH ATNAGAR MADE VOLUNTARY STATEMENT, WHICH WAS NOT RETRACTED IMMEDIATELY AND NO MATERIAL WAS PRODUCED AS TO HOW STATEMENT WAS INCORRECT OR WAS GIVEN WITHOUT ANY BASIS. NO EVIDENCE OF ANY SORT OF COERCION OR PRESSURE HAS BEEN PRODUCED, THE REFORE, THE ADDITION MADE ON THE BASIS OF STATEMENT OF ONE OF THE PARTNERS ON HIS AD MISSION IS JUSTIFIED AND RELIED UPON THE DECISION OF HONBLE HIMANCHAL PRADESH HIGH COURT IN THE CASE OF HIRA SINGH & CO. VS. CIT, 230 ITR 791. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BEL OW IN MAKING AND CONFIRMING THE ADDITION OF RS.7,24,000/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN THE STOCK FOUND DURING THE COURSE OF SURVEY. HONBLE HIMANCHAL PRAD ESH HIGH COURT IN THE CASE OF HIRA SINGH & CO. (SUPRA) HELD - INCOME FROM UNDISCLOSED SOURCES ADDITIONS MADE ON THE BASIS OF ADMISSION BY THE ASSESSEE JU STIFIED. HONBLE CHHATTISGARH HIGH COURT IN THE CASE OF ACIT VS. HUKUM CHAND JAIN , 337 ITR 238 HELD HELD, ALLOWING THE APPEAL, THAT THE ASSESSING OFFICER HAD ASSIGNED COGENT REASONS FOR NOT ACCEPTING THE RETRA CTION OF THE STATEMENT UNDER SECTION 132(4) BY THE ASSESSEE. WIT HOUT MEETING THE REASONING OF THE ASSESSING OFFICER FOR NOT ACCEPTIN G THE EXPLANATION OF ITA NO. 475 & 488/AGRA/2012 16 THE ASSESSEE THE ORDER WAS REVERSED AND THE EXPLANA TION WAS ACCEPTED ON A GROUND WHICH WAS NEVER AGITATED BY THE ASSESSE E BEFORE ANY OF THE FORUMS. THUS, THE ASSESSEE HAD FAILED TO DISCHA RGE THE ONUS OF PROVING THAT THE CONFESSION MADE BY HIM UNDER SECTI ON 132(4) WAS AS A RESULT OF INTIMATION, DURESS AND COERCION OR THAT IT WAS MADE AS A RESULT OF MISTAKEN BELIEF OF LAW OR FACTS. HONBLE RAJASTHAN HIGH COURT IN THE CASE OF HUKUM C HAND JAIN VS. ITO, 334 ITR 197 HELD AS UNDER : HELD, DISMISSING THE APPEAL, THAT ADMISSION DESPITE BEING AN IMPORTANT PIECE OF EVIDENCE WAS NOT CONCLUSIVE AND IT WAS OPEN TO THE ASSESSEE TO SHOW THAT IT WAS NOT CORRECT. BUT IN TH IS CASE, NO SUCH EFFORT WAS MADE BY THE ASSESSEE AND NO SUCH MATERIA L WAS PRODUCED BY HIM. THE ASSESSEE COULD NOT PRODUCE ANY OTHER EV IDENCE TO THE CONTRARY TO SHOW THAT INVESTMENTS WERE ACTUALLY MAD E IN DIFFERENT YEARS THAN THIS. THE ASSESSMENT WAS VALID. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF A BOVE DECISIONS, IT IS CLEAR THAT THE ASSESSEE FAILED TO EXPLAIN UNDISCLOSED INVESTMENT I N THE STOCK. DURING THE COURSE OF SURVEY, PHYSICAL STOCK INVENTORY WAS PREPARED TO WH ICH SHRI ANURAG BHATNAGAR, PARTNER OF THE FIRM AGREED AND VALUATION OF STOCK W AS TAKEN AT RS.7,24,000/-. IT IS ADMITTED FACT THAT THE VALUATION OF STOCK WAS TAKEN WITH CONSENT AND VALUATION DISCLOSED BY THE PARTNER OF THE ASSESSEE-FIRM. THE ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNT AND VOUCHERS AND NO MATERIAL WAS P RODUCED AS TO WHEN THE ASSESSEE PURCHASED SUCH STOCK. SINCE NO BOOKS WERE MAINTAINED OR FOUND DURING THE SURVEY, THEREFORE, NO EVIDENCE OF OPENING STOCK AVAILABLE TO THE ASSESSEE WAS PROVED. THE STATEMENT OF SHRI ANURAG BHATNAGAR WAS RECORDED COPY OF WHICH IS ITA NO. 475 & 488/AGRA/2012 17 FILED IN THE PAPER BOOK, WHICH IS A DETAILED STATEM ENT, IN WHICH 63 QUESTIONS WERE PUT TO HIM AND TO EACH AND EVERY QUESTION, HE HAS A NSWERED COHERENTLY AND INTELLIGENTLY. HE HAS EXPLAINED EACH AND EVERY QUES TION, BUT THE RECOVERY OF INCRIMINATING MATERIAL DURING THE COURSE OF SURVEY COULD NOT BE EXPLAINED WITH REFERENCE TO THE KNOWN SOURCE OF INCOME AND WHEN NO EVIDENCE OF UNACCOUNTED STOCK WAS PRODUCED, HE HAS ACCEPTED THAT ENTIRE STO CK FOUND DURING THE COURSE OF SURVEY WAS UNACCOUNTED INVESTMENT IN THE STOCK. HE HAS SIGNED THE STATEMENT VOLUNTARILY WITHOUT ANY PRESSURE OR COERCION. SHRI ANURAG BHATNAGAR REMAINED SILENT FOR SEVERAL MONTHS AFTER MAKING THE STATEMEN T AND LATER ON AFTER FOUR MONTHS VIDE LETTER TO THE AO HE RETRACTED THE STATEMENT DI SPUTING THE CORRECTNESS OF STATEMENT, BUT NO EVIDENCE WAS PRODUCED AS TO WHAT IS THE BASIS TO DISPUTE HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY. IT IS, THEREFORE, NOT A CASE WHERE ADDITION IS MADE MERELY ON THE BASIS OF ADMISSION O F UNEXPLAINED INVESTMENT IN STOCK, BUT ACTUAL PHYSICAL UNACCOUNTED STOCK FOUND ON SURVEY COULD NOT BE EXPLAINED BY THE ASSESSEE. THE ASSESSEE DID NOT PRO DUCE ANY EVIDENCE TO PROVE ANY COERCION OR UNDUE PRESSURE ETC. AT THE TIME OF RECO RDING THE STATEMENT. THUS, THE AUTHORITIES BELOW HAVE RIGHTLY CONFIRMED THE ADDITI ON OF RS.7,24,000/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK. THE AUTHORITIES BELOW WERE, THEREFORE, JUSTIFIED IN RELYING UPON THE STOCK INVENTORY PREPARED AT THE INSTANCE OF PARTNER OF ASSESSEE FIRM AND HIS INABILITY TO EXPLAIN UNACCOUNTED STOCK . THEREFORE, THE ADDITION IS ITA NO. 475 & 488/AGRA/2012 18 WHOLLY JUSTIFIED IN THE MATTER. SINCE ENTIRE STOCK WAS FOUND UNDISCLOSED, THEREFORE, SEPARATE ADDITION SHALL HAVE TO BE MAINTAINED EVEN IF PROFIT IS ESTIMATED AGAINST THE ASSESSEE. CONSIDERING THE FACTS AND CIRCUMSTANCES O F THE CASE IN THE LIGHT OF ABOVE DECISIONS, WE DO NOT FIND ANY JUSTIFICATION TO INTE RFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. GROUND NO. 3 OF APPEAL OF ASSESS EE IS, ACCORDINGLY, DISMISSED. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. NO OTHER POINT IS ARGUED OR PRESSED. 15. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY