The ACIT, 4(1), Indore V. Shri Ashok Agrawal, Indore

ITA 494/IND/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53880 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 16-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L L CHOUBEY
• Keywords: Unexplained investment; Business income; Loose papers; Retraction
• Section: 143(3); 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI R.C. SHARMA , AM ITA NOS.493 & 494/IND/2010 AY: 2004-05 ACIT-4(1), INDORE APPELLANT VS. 1. OMPRAKASH AGRAWAL, INDORE PAN ABTPA 2336 H 2. ASHOK AGRAWAL, INDORE PAN ABTPA 2337 G RESPONDENTS DEPARTMENT BY : SHRI L.L. CHOUBEY, SR. DR ASSESSEE BY : SHRI MANOJ GUPTA, CA DATE OF HEARING : 26.07.2011 DATE OF PRONOUNCEMENT : 19.09.2011 ORDER PER R.C. SHARMA, ACCOUNTANT MEMBER THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE COMMON ORDER OF LD. CIT(A)-II, INDORE, DATED 31.3.2010 FOR THE AY 2004-05 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE I.T. A CT, 1961. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUS ED . 2 4. BOTH THE APPEALS INVOLVE COMMON FACTS AND ISSUES AN D ARISING OUT OF ASSESSMENT ORDERS PASSED SIMULTANEOUSLY BY A O IN THE CASE OF FATHER SHRI OM PRAKASH AGARWAL AND SON SHRI ASHO K AGARWAL WHO OWNED COMMON BUSINESS PREMISES, WHERE SURVEY U/ S 133A WAS CARRIED OUT TOGETHER ON 6.2.2004. THE ASSESSEE, MR. OM PRAKASH AGARWAL DERIVES INCOME FROM WHOLESALE TRADI NG IN P. P. FILMS. A SURVEY U/S 133A OF THE INCOME-TAX ACT, 196 1, WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 6.2 .2004. DURING THE COURSE OF SURVEY, THE ASSESSEE HAD SURRENDERED TOTAL AMOUNT OF RS. 22,98,655/- AS ADDITIONAL INCOME FOR THE ASSESS MENT YEAR 2004-05 AS UNDER :- 1. ON PHYSICAL VERIFICATION CASH AMOUNTING TO RS. 512099/- WAS FOUND BUT AS PER THE CASH BOOK THE CASH BALANCE, AS ON 6.2..2004 WAS RS. 261384/-. THUS, EXCESS CASH FOUND AT THE TIME OF SURVEY WAS R S. 250715/- AND THIS AMOUNT WAS SURRENDERED AS ADDITIONAL INCOME FOR THE YEAR. 2. DURING THE COURSE OF SURVEY A COMPUTERIZED MONTHLY SALES REGISTER WAS FOUND. ON VERIFICATION OF THIS REGISTER, IT WAS FOUND THAT THERE WAS DIFFERENCE 3 BETWEEN SALES SHOWN IN THE COMPUTERIZED MONTHLY SALES REGISTER AND SALES SHOWN IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED MANUALLY. IT WAS OBSERVED THAT THERE WAS CERTAIN PARTIES TO WHOM HUGE SALES WERE SHOWN IN THE COMPUTERIZED SALES REGISTER BUT THESE SALES WERE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE. AT THE TIME OF SURVEY UNRECORDED SALES WORKED OUT TO RS. 1,01,98,517/-. ACCORDINGLY, THE ASSESSEE HAD ACCEPTED THAT THESE SALES WERE MADE OUT OF THE BOOKS. ON SUCH UNRECORDE D SALES GROSS PROFIT RATE OF 4 % WAS APPLIED ON THE B ASIS OF GROSS PROFIT SHOWN BY THE ASSESSEE IN THE PAST Y EAR. THUS GROSS PROFIT WORKED OUT TO RS. 4,07,940/- WHIC H WAS SURRENDERED BY THE ASSESSEE AS ADDITIONAL INCOM E FOR THIS YEAR. 3. AS STATED ABOVE, THE SALES TO THE TUNE OF RS. 1,01,98,517/- HAS BEEN EFFECTED OUT OF BOOKS FOR WH ICH THE INVESTMENT PART WAS ENQUIRED DURING THE COURSE OF SURVEY U/S 133A. IT WAS DEPOSED IN RESPONSE THAT TH E TOTAL INVESTMENT IN UNACCOUNTED TRANSACTION WAS TO 4 THE EXTENT OF RS. 10,40,000/- WHICH WAS ALSO SURRENDERED AS ADDITIONAL INCOME FOR THIS YEAR. 4. ON PHYSICAL VERIFICATION, STOCK OF RS. 13,85,052/- ( AS PER PAGE NO. 16,17 AND 18 OF STOCK INVENTORY) WAS FOUND BUT AS PER BOOKS/TRADING A/C PREPARED AT THE TIME OF SURVEY, THE STOCK WAS SHOWN AT RS. 12,86,329/-. THUS, THERE WAS EXCESS STOCK OF RS. 98,723/-. THE ASSESSEE ACCEPTED THE EXCESS STOCK FOUND BUT HE EXPLAINED THAT THIS STOCK BE TREATED A S PART OF THE INVESTMENT OF RS. 10,40,000/- FROM WHIC H UNRECORDED TRANSACTION/TURNOVER WAS MADE. THEREFORE, NO SEPARATE SURRENDER WAS MADE ON THIS ACCOUNT. 5. DURING THE COURSE OF SURVEY LARGE NUMBER OF LOOSE PAPERS WAS FOUND AT THE BUSINESS PREMISES OF THE ASSESSEE. THESE LOOSE PAPERS RELATED TO UNEXPLAINAB LE TRANSACTION, WHICH WERE NOT RECORDED IN REGULAR BOO KS OF ACCOUNT. CONSIDERING THESE TRANSACTIONS THE ASSESSEE HAD DECLARED RS. 6 LACS AS UNDISCLOSED INCOME. 5 6. HOWEVER, WHILE FILING THE RETURN OF INCOME THE ASSESSEE OFFERED RS. 11,18,756/- ONLY FOR TAXATION AS ADDITIONAL INCOME AND RETRACTED THE BALANCE AMOUNT OF RS. 11,79,899/-. THE ASSESSEE HAS ANNEXED A NOTE WITH THE RETURN OF INCOME IN WHICH HE HAD MENTIONED THE REASONS FOR RETRACTION WHICH IS REPRODUCED BELO W :- NOTE ON THE INCOME SURRENDERED AT THE TIME OF SURV EY PROCEEDINGS : INCOME TAX DEPARTMENT HAD CONDUCTED SURVEY PROCEEDI NGS U/S 133A OF THE INCOME-TAX ACT, 1961, AT THE BUSINE SS PREMISES OF THE ASSESSEE ON 6.2.2004. AS PER THE ST ATEMENT RECORDED BY THE INCOME TAX DEPARTMENT, AT THE TIME OF THE SURVEY PROCEEDINGS, THE FOLLOWING DISCREPANCIES WER E FOUND IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE SAME ARE SUMMARIZED :- A) SALES OUT OF BOOKS OF ACCOUNT TO THE TUNE OF RS. 10198517/- AND THE INCOME TAX DEPARTMENT HAS ESTIMATED THE GROSS PROFIT RATE @ 4% WHICH COMES TO RS. 407940/-. 6 B) EXCESS PHYSICAL CASH IN HAND FOUND RS. 250715/- AND THE SAME IS CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE. C) THE AMOUNT OF RS. 1040000/- CONSIDERED AS A WORKING CAPITAL INVOLVED FOR PERFORMING THE UNDISCLOSED SAL E AS FOUND IN THE ITEM NO. A) ABOVE. D) ON ACCOUNT OF LOOSE PAPERS FOUND AT THE TIME OF SU RVEY PROCEEDINGS, THE AMOUNT OF RS. 600000/-HAS BEEN OFF ERED AS INCOME. ON THE BASIS OF THE STATEMENT RECORDED BY THE INCOM E TAX DEPARTMENT, THE TOTAL AMOUNT OF UNDISCLOSED INC OME COMES TO RS. 2298655/-. HOWEVER, THE ASSESSEE HAS PASSED THE NECESSARY ENTRIES IN THE BOOKS OF ACCOUN T FOR A SUM OF RS. 11,18,756/- AS AGAINST THE SUM OF RS. 2298655/-. THE ASSESSEE HAS ACCEPTED THE UNDISCLOSED INCOME UN DER THE FOLLOWING ONLY AND THE DETAILS OF SUCH INCOME A RE AS UNDER:- A) INCOME ON ACCOUNT OF GROSS PROFIT ON UNDISCLOSED SALE AT RS. 4,07,940/- 7 B) EXCESS PHYSICAL CASH IN HAND FOUND RS. 250715/- ; C) THE ASSESSEE HAS NOT PASSED ANY ENTRY ON ACCOUNT OF WORKING CAPITAL INVOLVED OF RS. 10,40,000/- STATED IN THE STATEMENT RECORDED AT TIME OF SURVEY PROCEEDINGS. AS THE DEPARTMENT HAS CONSIDERED THE INVOLVEMENT OF AMOUNT AT VERY HIGHER SIDE AND THE ASSESSEE IS MAINTAINING THE CASH BOOK OF UNDISCLOSED TRANSACTIONS ON COMPUTER. THE SAID TRANSACTIONS ARE ALREADY COVERED IN THE INCOME TAX RETURN OF ASSESSEES SON SHRI ASHOK AGRAWAL AND THE SON HAS ALREADY SURRENDERED THE AMOUNT OF WORKING CAPITAL INVOLVED IN HIS RETURN OF INCOME AS BOTH THE SURVEYS WERE CONDUCTED ON THE SAME DATE. THEREFORE, NO SURRENDER HAS BEEN MADE IN THE RETURN OF INCOME ON ACCOUNT OF WORKING CAPITAL. D) REGARDING THE LOOSE PAPERS THE ASSESSEE HAS PASSED THE ENTRY FOR A SUM OF RS. 1,50,000/- AS AGAINST TH E SUM OF RS. 6,00,000/- ; 8 E) THE ASSESSEE HAS ALSO OFFERED AN INCOME OF RS. 3,10,101/- UNDER THE HEAD EXCESS PHYSICAL STOCK FOUND AT THE TIME OF SURVEY PROCEEDING; ON THE BASIS OF THE ABOVE WORKING THE ASSESSEE HAS OFFERED A UNDISCLOSED INCOME UNDER VARIOUS HEAD TO THE TUNE OF RS. 11,18,756/- AND NECESSARY ENTRY HAS BEEN PASSED IN THE BOOKS OF ACCOUNT FOR THE SAID FIRM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS REQUIRED TO EXPLAIN THE REASON AND JUS TIFICATION FOR RETRACTION FROM THE SURRENDERED AMOUNT. THE ASSESSE E WAS ALSO REQUESTED TO PRODUCE EVIDENCE IN SUPPORT OF HIS CON TENTIONS FOR RETRACTION AS MENTIONED IN THE NOTE APPENDED TO THE RETURN OF INCOME. IN RESPONSE TO ABOVE THE ASSESSEE HAS FILED A WRITTEN SUBMISSION ON 11.12.2006, WHICH IS PLACED ON RECORD . THE RELEVANT PORTION OF THE WRITTEN SUBMISSION IS REPRODUCED BEL OW :- DURING THE COURSE OF PROCEEDING U/S 133A, THE ASSE SSEE HAS SURRENDERED THE INCOME OF RS. 22,98,655/- UNDER THE FOLLOWING HEADS AND WHEREAS OFFERED INCOME OF RS. 1118756/- O NLY AS UNDER :- 9 S.NO. PARTICULARS INCOME SURRENDERED (RS.) RETRACTED DISCLOSED IN SURVEY DISCLOSED IN INCOME TAX RETURN 1. GROSS PROFIT @ 4% ON SALE OF RS. 10198517/- 407940 407940 0 2. EXCESS CASH FOUND 250715 250715 0 3. LOOSE PAPERS 600000 150000 450000 4. WORKING CAPITAL/STOCK 1040000 310101 729899 TOTAL 2298655 1118756 1179899 SIMILARLY, IN CASE OF ASHOK AGRAWAL, THE DETAILS OF INCOME DISCLOSED DURING SURVEY AND THE INCOME DISCLOSED IN THE RETUR N OF INCOME WAS AS UNDER :- S.NO. PARTICULARS INCOME SURRENDERED (RS.) RETRACTED DISCLOSED IN SURVEY DISCLOSED IN INCOME TAX RETURN 1. GROSS PROFIT @ 6.70 % ON SALE OF RS. 9414016/- 631680 631680 0 2. EXCESS CASH FOUND 364288 364288 0 10 3. LOOSE PAPERS 1050000 500000 550000 4. WORKING CAPITAL/STOCK 960000 335942 624058 TOTAL 3005968 1831910 1174058 HOWEVER, THE AO DID NOT AGREE WITH THE RETRACTION, THEREFORE, ADDED THE AMOUNT DISCLOSED DURING SURVEY IN ADDITION TO M INOR ADDITION ON ACCOUNT OF GROSS PROFIT IN VIEW OF THE RATE OF G ROSS PROFIT DISCLOSED IN THE RETURN OF INCOME. AGAINST THE ABOVE ORDER, T HE ASSESSEE APPROACHED TO THE CIT(A). WHO DELETED THE ADDITION AFTER HAVING FOLLOWING OBSERVATIONS :- THERE IS SUFFICIENT MERIT AND FORCE IN THE CONTENT IONS OF THE APPELLANT TO THE EFFECT THAT IN COURSE OF SURVE Y PROCEEDINGS, THE APPELLANT WAS MADE TO OFFER ADDITI ONAL INCOME ON MULTIPLE COUNTS WHICH OVERLAPPED EACH OTH ER. ONCE EXCESS STOCK AND EXCESS CASH FOUND IS SURRENDE RED FOR TAXATION, THEN THE SAID AMOUNT USUALLY TAKES CA RE OF THE GROSS PROFIT OR NET PROFIT EARNED ON UNRECORDE D TRANSACTIONS TILL THE DATE OF SURVEY UNLESS THERE A RE EVIDENCES OF OTHER INVESTMENT IN THE FORM OF DEBTOR S OR 11 OTHERWISE OR EXPENSES INCURRED ON PERSONAL PURPOSES . HERE, NO SUCH DETAILS OF OTHER INVESTMENT ARE EMERG ING EITHER FROM THE STATEMENT RECORDED OR HAS BEEN BROU GHT ON RECORD IN COURSE OF ASSESSMENT PROCEEDINGS BY TH E ASSESSING OFFICER. THE AO APART FROM HARPING ON THE QUANTUM OF INCOME SURRENDERED IN COURSE OF SURVEY PROCEEDINGS HAS DONE PRECIOUS LITTLE TO JUSTIFY THE ADDITION MADE TO THE RETURNED INCOME. IN NORMAL CIRCUMSTANCES, THE ONUS WOULD BE HEAVY ON THE APPEL LANT TO SUBSTANTIATE THE RETRACTION OF ADDITIONAL INCOME OFFERED BUT IN THE FACTS OF THE CASE AS HAS BEEN DISCUSSED ABOVE, IT CLEARLY EMERGES THAT THE ADDITIONAL INCOME OFFER ED IN SURVEY BY THE APPELLANT WAS NOT SO DECLARED AFTER APPRECIATING THE ENTIRE FACTS SURROUNDING SUCH UNRECORDED TRANSACTIONS AND SUCH STATEMENT SO RECOR DED ACCORDINGLY CANNOT BE HELD TO BE A VALID BASIS FOR TAXATION OF INCOME SURRENDERED ON MULTIPLE COUNTS WHICH PRIM A FACIE OVERLAPPED EACH OTHER. THUS, IN THE FACTS OF THE CASE, THE AR HAS RIGHTLY EMPHASIZED THAT EVEN THE ADDITIONAL INCOME OFFERED ON ACCOUNT OF GROSS PROFI T OVER 12 AND ABOVE THE INCOME OFFERED FOR CASH AND STOCK WAS RATHER DUPLICATE IN NATURE. THUS, THERE IS NO CASE LEFT FOR SUSTAINING ANY FURTHER ADDITIONS FOR UNEXPLAINED INVESTMENT IF ANY IN CARRYING OUT SUCH TRANSACTIONS . ACCORDINGLY, ADDITION MADE IN BOTH THE CASES AT RS. 7,29,899/- AND RS. 6,24,058 ARE DIRECTED TO BE DELE TED. 5.6 NOW COMING TO THE AD HOC ADDITIONAL INCOME OFFERED FOR TAXATION ON THE BASIS OF LOOSE PAPERS, THE FACT S AS NOTICED ABOVE CLEARLY REVEAL THE FACT THAT THESE LOOSE PAPERS BROADLY CONTAIN THE TRANSACTIONS RELATING TO UNRECORDED SALES AND PURCHASES AND RECEIPT AND PAYMENT THERETO AND NOTHING EMERGES FROM THE STATEMENT RECORDED OR FROM THE FINDINGS RECORDED IN ASSESSMENT ORDER THAT THESE LOOSE PAPERS CONTAINED DETAILS OF ANY OTHER INVESTMENT OR PAPERS CONTAINED DETAILED INFORMATION AND PARTICULARS ABOUT UNRECORDED INVESTMENT/TRANSACTIONS APART FROM TRADING TRACTIONS, IT WAS IMPERATIVE FOR THE SURVEY TEAM TO HAVE IDENTIFIED AT LEAST SIGNIFICANT AND MAJOR 13 AMOUNTS/PARTICULARS IN THE STATEMENT ITSELF SO AS T O ELIMINATE ANY CHANCES OF RETRACTION AS WELL AS TO PROVIDE DEFINITE BASIS FOR ADDITIONS BY AO, IF SUCH SURRENDER WAS NOT HONOURED, BUT THAT HAS NOT BEEN DONE. IN ANY CASE, NOTHING HAS BEEN BROUGHT ON RECORD BY AO FROM THE TRANSACTION RECORDED IN SUCH LOOSE PAPERS, ANY AMOUNT HIGHER THAN THE AMOUNT OFFERED FOR TAXATION IS REQUIRED TO BE BROUGHT TO T AX. IN FACT, AO HAS MADE NO ATTEMPTS WHATSOEVER TO ANALYSE THE TRANSACTIONS RECORDED ON THE LOOSE PAPERS TO SUPPORT HIS FINDINGS OF TAXATION OF THE INCOME SURRENDERED IN SURVEY. AT THE COST OF REPETITION. IT HAS TO BE AGAIN STATED THAT ADMISSIO N ALONE CANNOT BE MADE THE BASIS FOR TAXATION OF INCOME UNLESS SOME CORROBORATIVE MATERIAL ARE AVAILABLE AND BROUGHT ON RECORD IN COURSE OF ASSESSMENT PROCEEDINGS. THUS, THE ADDITION MADE BY AO IN BOTH THE CASES OVER THE AMOUNT OFFERED FOR TAXATION FOR TRANSACTION IN LOOSE PAPERS AT RS. 14 4,50,000/- AND RS. 5,50,000/- ARE DIRECTED TO BE DELETED. 5.7 FURTHER IN BOTH THE APPEALS, THE ADDITION HAS BEEN MADE BY AO FOR GROSS PROFIT BASED ON THE GROSS PROFIT RATES DISCLOSED IN ACCOUNT VIS--VIS, THE GR OSS PROFIT RATE APPLIED ON UNRECORDED SALES TRANSACTION S AND THE AMOUNT STANDS AT RS. 57,112/- IN THE CASE OF SHRI OMPRAKASH AGRAWAL AND RS. 25,418/- IN THE CASE OF SHRI ASHOK AGRAWAL. SINCE THE APPELLANT THEMSELVES OFFERED FOR ADDITIONAL INCOME FOR TAXATION ON UNRECORDED TRANSACTIONS BASED ON GROSS PROFIT RATE, NO INTERFERENCE IS CONSIDERED NECESSARY IN SUCH FINDINGS OF AO BRINGING TO TAX ADDITIONAL AMOUNT OF GROSS PROFIT ON SUCH UNRECORDED TRANSACTIONS BASED ON THE GROSS PROFIT RATE DISCLOSED ON THE RECORDED TRANSACTIONS. THUS, IN BOTH THE CASES, GROUND NO.3 IS ACCORDINGLY REJECTED. 15 5. AGAINST THIS ORDER OF CIT(A), THE REVENUE IS IN FUR THER APPEAL BEFORE US. FOLLOWING GROUNDS HAVE BEEN RAISED :- 6. IN ITA NO.493/IND/2010 (AY: 2004-05) , THE REVENUE HAS RAISED THE FOLLOWING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD.CIT(A)-II, INDORE, IS CONTRARY TO THE FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A)-II, INDORE ERRED IN LAW AND AS WELL AS IN FACTS IN DELETING ADDITION OF RS. 4,50,000/- MADE ON ACCOUNT OF LOOSE PAPERS AND RS. 7,29,899/- MADE ON ACCOUNT OF INVESTMENT IN UNRECORDED SALES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THERE AS A CONTRADICTION, IN THE ORDER OF LD.CIT(A)-II, INDORE REGARDING RETRACTION FROM STATEMENT MADE DURING THE COURSE OF SURVEY. WHEN THE LD.CIT(A)-II, INDORE HIMSELF IN HIS ORDER DATED 31.03.2010 (PARA NO. 4(II), SINCE THE APPELLANT THEMSELVES OFFERED FOR ADDITIONAL INCOME FOR TAXATION ON UNRECORDED TRANSACTION BASED ON G.P. RATE NO INTERFERENCE IS CONSIDERED NECESSARY IN SUCH FINDINGS OF AO BRINGING TO TAX, ADDITIONAL AMOUNT OF G.P. ON 16 SUCH UNRECORDED TRANSACTIONS. 7. IN ITA NO.494/IND/2010 (AY: 2004-05) , THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD.CIT(A)-II, INDORE, IS CONTRARY TO THE FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A)-II, INDORE ERRED IN LAW AND AS WELL AS IN FACTS IN DELETING ADDITION OF RS.5,50,000/- MADE ON ACCOUNT OF LOOSE PAPERS AND RS.6,24,058/- MADE ON ACCOUNT OF INVESTMENT IN UNRECORDED SALES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THERE AS A CONTRADICTION, IN THE ORDER OF LD.CIT(A)-II, INDORE REGARDING RETRACTION FROM STATEMENT MADE DURING THE COURSE OF SURVEY. WHEN THE LD.CIT(A)-II, INDORE HIMSELF IN HIS ORDER DATED 31.03.2010 (PARA NO. 4(II), SINCE THE APPELLANT THEMSELVES OFFERED FOR ADDITIONAL INCOME FOR TAXATION ON UNRECORDED TRANSACTION BASED ON G.P. RATE NO INTERFERENCE IS CONSIDERED NECESSARY IN SUCH FINDINGS OF AO 17 BRINGING TO TAX, ADDITIONAL AMOUNT OF G.P. ON SUCH UNRECORDED TRANSACTIONS. 8. IT WAS ARGUED BY THE LD. SENIOR D.R. THAT THE ASSES SEE HIMSELF HAS SURRENDERED VARIOUS INCOME ON ACCOUNT OF EXCESS CASH, PROFIT ON UNACCOUNTED SALES AND INVESTMENT IN SUCH GOODS A ND THE INCRIMINATING DOCUMENTS FOUND DURING SURVEY, THERE WAS NO COGENT REASON FOR RETRACTION OF THE SAME AND THE LD. CIT(A ) WAS NOT JUSTIFIED IN DELETING THE ADDITION, WHICH THE ASSESSEE HIMSEL F HAS OFFERED IN VIEW OF INCRIMINATING DOCUMENTS FOUND DURING SURVEY RECORDING VARIOUS INCOME AND ALSO CAPITAL EMPLOYED BY THE ASS ESSEE WITH RESPECT TO THE UNACCOUNTED SALES FOUND DURING COURS E OF SURVEY. 9. ON THE OTHER HAND, IT WAS VEHEMENTLY ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE THAT AT THE FIRST OCCASIO N, THE ASSESSEE HAS FILED DETAILED NOTE ALONGWITH RETURN OF INCOME EXPLAINING THE ADDITIONAL INCOME OFFERED VIS--VIS THE AMOUNT SURR ENDERED IN SURVEY. AS PER LD. AUTHORIZED REPRESENTATIVE INITIA LLY THE ASSESSEE HAD SURRENDERED RS. 600000/- ON ACCOUNT OF LOOSE PA PERS FOUND. THE ASSESSEE UNDER THE WRONG NOTIONS AND UNDER A GE NUINE BELIEF THAT ALL THE SALES ARE TAXABLE AS INCOME HAD SURREN DERED THIS 18 AMOUNT. HOWEVER, NOW AFTER SCRUTINIZING THE COMPLET E DETAILS, IT IS FOUND THAT THE TOTAL SALES DO NOT EXCEED A SUM OF R S. 1,01,98,517/-. THE ASSESSEE HAS A FAST TURNOVER DOES NOT REQUIRE A NY WORKING CAPITAL. FROM THE BOOKS OF ACCOUNT, IT CAN BE SEEN THAT THE ASSESSEE HAS SURRENDERED A SUM OF RS. 4,07,940/- AS GROSS PR OFIT AND ALSO RS.2,50,715/- AS EXCESS CASH FOUND. HE FURTHER CONT ENDED THAT SINCE THESE INCOME ARE ALREADY SURRENDERED AND ALL THE LOOSE PAPERS MOSTLY CONTAINED THE DETAILS ABOUT THE SALES MADE O UTSIDE THE BOOKS OF ACCOUNT. THE INCOME EARNED ON ACCOUNT OF T HESE PAPERS IS ALREADY COVERED IN DECLARATION OF GROSS PROFIT AND THE EXCESS CASH FOUND. THE ASSESSEE HAS ALREADY OFFERED THE INCOME TWICE, FIRST ON THE BASIS OF DISCLOSURE OF PROFIT ON SALE AND SECON D ON ACCOUNT OF EXCESS CASH FOUND. THUS, IT MAY BE NOTED THAT THE I NCOME IS ALSO OFFERED AND INVESTMENT IS ALSO OFFERED AS INCOME. U NDER THESE CIRCUMSTANCES, ENTRIES IN LOOSE PAPERS ARE ALREADY COVERED IN THE ABOVE DISCLOSURES. HE FURTHER SUBMITTED THAT ASSESS EE HAD EXPLAINED EACH AND EVERY LOOSE PAPERS ON THE BASIS OF THAT THE TOTAL OF THE SALES/DELIVERY OF GOODS AMOUNT TO RS. 1,01,9 8,517/-. LD. AUTHORIZED REPRESENTATIVE RELIED ON THE JUDGEMENT O F M.P. HIGH COURT IN THE CASE OF BALCHAND AJIT KUMAR & SONS, 26 3 ITR PAGE 19 NO.610, WHEREIN IT WAS HELD THAT TOTAL SALES CANNO T BE REGARDED AS THE PROFIT OF THE ASSESSEE. THE NET PROFIT RATE HA S TO BE ADOPTED AND ONCE A NET PROFIT RATE IS ADOPTED, IT CANNOT BE SAI D THAT THERE IS PERVERSITY OF APPROACH. IN VIEW OF THESE SUBMISSION S, HE CONTENDED THAT LD. CIT(A) WAS PERFECTLY JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF INCOME DISCLOSED DURING SUR VEY, WHICH WAS NOT OFFERED FOR TAX IN THE RETURN OF INCOME. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, REMAND REPORT CALLED BY THE LD. CIT(A) AND ALSO THE STATEMENT RECORDED DURI NG THE COURSE OF SURVEY WITH RESPECT TO DIFFERENT INCOME OFFERED ON ACCOUNT OF LOOSE PAPERS, UNACCOUNTED SALES AND EXCESS CASH FOUND DUR ING SURVEY AND ALSO INCOME COMPUTED WITH RESPECT TO INVESTMENT MADE IN THE UNACCOUNTED SALES FOUND DURING COURSE OF SURVEY. FR OM THE RECORD, WE FOUND THAT DURING COURSE OF SURVEY, THE ASSESSEE OM PRAKASH AGARWAL HAS OFFERED ON ACCOUNT OF UNACCOUNTED SALES OF RS. 1.01 CRORE AND EXCESS CASH FOUND DURING COURSE OF SURVEY . IN RESPECT OF UNACCOUNTED SALES OF RS. 1.01 CRORES IN THE CASE OF OM PRAKASH AGARWAL, UNDISCLOSED INVESTMENT WAS COMPUTED AT RS . 10.40 LAKHS, WHICH WAS SURRENDERED AS ADDITIONAL INCOME. IN RES PECT OF LOOSE 20 PAPERS UNDISCLOSED INCOME WAS COMPUTED AT RS. 6.00 LAKHS AND THE ASSESSEE HAS SURRENDERED INCOME OF RS. 6 LAKHS. HOW EVER, IN THE RETURN OF INCOME, THE ASSESSEE HAS OFFERED FULL AMO UNT OF PROFIT SURRENDERED ON ACCOUNT OF UNACCOUNTED SALES AS WELL AS EXCESS CASH. IN RESPECT OF LOOSE PAPERS, THE ASSESSEE HAS RETURNED INCOME OF RS. 1.50 LAKHS IN PLACE OF RS. 6 LAKHS OFFERED D URING SURVEY. SIMILARLY IN RESPECT OF UNEXPLAINED INVESTMENT WORK ED OUT ON UNACCOUNTED SALES, ASSESSEE HAS OFFERED ONLY RS. 3. 10 LACS AS AGAINST THE AMOUNT COMPUTED AT RS. 10.40 LACS. CONT ENTION OF THE ASSESSEE WAS THAT INCOME HAS ALREADY BEEN OFFERED O N ACCOUNT OF EXCESS CASH FOUND AND UNRECORDED TRANSACTIONS OF SA LES AND PURCHASE, THEREFORE, THERE IS NO NEED FOR FURTHER E STIMATING ANY INCOME ON ACCOUNT OF NOTINGS IN THE LOOSE PAPERS. H OWEVER, HE OFFERED INCOME OF RS. 1.50 LAKHS IN PLACE OF RS. 6 LAKHS COMPUTED IN RESPECT OF LOOSE PAPERS SO FOUND. THUS, RETRACTED F OR INCOME OF RS. 4.50 LAKHS. SIMILARLY, WITH REGARD TO THE WORKING O F UNDISCLOSED INVESTMENT IN UNACCOUNTED SALES, THE ASSESSEE HAS O FFERED RS. 3.10 LAKHS IN PLACE OF RS. 10.40 LAKHS SURRENDERED DURIN G SURVEY, THUS, RETRACTED FOR RS. 7.29 LAKHS. WITH REGARD TO UNACCO UNTED INVESTMENT IN THE WORKING CAPITAL INVOLVED IN UNACC OUNTED SALES, WE 21 FOUND THAT IN THE CASE OF SHRI OM PRAKASH AGARWAL, TOTAL SALES OF RS. 92,83,818/- WAS OFFERED IN THE AUDITED ACCOUNTS DURING THE ENTIRE YEAR UNDER CONSIDERATION, WHEREAS UNACCOUNTE D SALES FOR 10 MONTHS,( I.E. FROM 1.4.2003 TO 6.2.2004) WAS FOUND TO THE TUNE OF RS. 1,01,98,517. EVEN ASSUMING THAT TURNOVER PERIOD OF ASSESSEE WAS 12 IN A YEAR, THE MONTHLY TURN OVER ON ACCOUNT OF UNACCOUNTED SALES FOR 10 MONTHS WORKS OUT TO BE RS. 10.19 LAKHS . ACCORDINGLY, THE AMOUNT OF UNEXPLAINED INVESTMENT WORKED OUT ON SUCH UNACCOUNTED PURCHASES WAS REASONABLE. HOWEVER, THE CIT(A) HAS DELETED THE ADDITION OF RS. 7,29,899/- BY STATING T HAT ASSESSEE HAD OFFERED INCOME ON ACCOUNT OF EXCESS STOCK AND ON MU LTIPLE COUNTS, THEREFORE, AO WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 7,29,899/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN WORKING CAP ITAL. NO COGENT MATERIAL WAS REFERRED BY CIT(A) FOR SUCH DELETION. OBSERVATION OF CIT(A) THAT ASSESSEE HAD OFFERED INCOME ON ACCOUNT OF EXCESS STOCK IS FACTUALLY INCORRECT. NEITHER ANY INCOME WAS OFFE RED BY ASSESSEE ON ACCOUNT OF EXCESS STOCK NOR ANY ADDITION WAS MAD E BY AO ON THIS COUNT. ON THE CONTRARY, SHORTAGE IN STOCK WAS FOUND DURING SURVEY BUT NO ADDITION WAS SEPARATELY MADE FOR IT. WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS PART OF CIT(A)S ACTION. HOWEVER, AT THE 22 VERY SAME TIME SINCE THE ASSESSEE HAS OFFERED PROFI T ON UNACCOUNTED SALES AT RS. 4,07,940/-, THE SAME WAS A VAILABLE WITH THE ASSESSEE FOR RE-INVESTMENT, THEREFORE, INCOME O FFERED ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASES REQUIRES TO BE REDUCED BY RS. 4,07,940/-. THUS, AS PER OUR CONSIDERED VIEW, O UT OF ADDITION OF RS. 7,29,899/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN WORKING CAPITAL, ASSESSEE DESERVES RELIEF OF RS. 4,07,940/- . ACCORDINGLY, WE MODIFY BOTH THE ORDERS OF THE AO AND CIT(A) AND DIR ECT THE AO TO ASSESS WORKING CAPITAL IN UNACCOUNTED SALES TO THE TUNE OF RS. 3,21,959/-( RS. 7,29,899 - 4,07,940 ). 11. HOWEVER, IN RESPECT OF LOOSE PAPERS, THE ASSESSEE H IMSELF HAS OFFERED INCOME OF RS. 1.50 LAKHS IN PLACE OF RS. 6 LAKHS SURRENDERED DURING COURSE OF SURVEY. AS THE AO HAS NOT POINTED OUT TRANSACTIONS TO WHICH SUCH ENTRIES PERTAINS, IT IS, THEREFORE, REASONABLE TO PRESUME THAT ENTRIES IN LOOSE PAPERS WERE PERTAINING TO THE VERY SAME TRANSACTION OF UNACCOUNTED SALES, FOR WHICH SEPARATE ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER. THEREFORE, INCOME OF RS. 1.50 LAKHS OFFERED BY THE ASSESSEE IN THE RETURN IN PLACE OF INCOME OF RS. 6 LAKHS SURRENDERE D DURING COURSE OF SURVEY APPEARS TO BE REASONABLE. 23 12. SIMILARLY, IN THE CASE OF ASHOK AGARWAL, OUT OF INC OME OF RS. 9.60 LAKHS SURRENDERED DURING COURSE OF SURVEY ON A CCOUNT OF WORKING CAPITAL EMPLOYED IN UNACCOUNTED SALES, THE ASSESSEE HAS OFFERED ONLY RS. 3,35,942/- IN THE RETURN OF INCOME . ADDITION OF RS. 6,24,058/- MADE BY THE ASSESSING OFFICER WAS DELETE D BY CIT(A). FINDING OF CIT(A) IS CONTRARY TO THE MATERIAL ON RE CORD TO THE EFFECT THAT THE ASSESSEE HAS SURRENDERED INCOME ON ACCOUNT OF EXCESS STOCK. HOWEVER, AS PER SURVEY PARTY EXCESS STOCK OF RS. 5,47,321/- WAS FOUND AND ASSESSEE ALSO ACCEPTED THE SAME. BUT NO SEPARATE INCOME WAS SURRENDERED ON THIS COUNT NOR ANY ADDITI ON WAS MADE BY AO ON THE PLEA THAT ASSESSEE HAD SURRENDERED INV ESTMENT OF RS. 9.60 LAKHS ON ACCOUNT OF UNACCOUNTED SALES. FOR THE REASONS DISCUSSED ABOVE IN CASE OF OM PRAKASH AGARWAL, WE D O NOT FIND ANY MERIT IN THE ACTION OF CIT(A) FOR DELETING THE SAME WITHOUT GIVING ANY COGENT REASON. AS DISCUSSED ABOVE, WE ARE INCLI NED TO GIVE CREDIT FOR THE PROFIT SURRENDERED BY THE ASSESSEE O N UNACCOUNTED SALES AMOUNTING TO RS. 6,31,680/-. AFTER GIVING CRE DIT OF RS. 6,31,680/-, NO SEPARATE ADDITION IS WARRANTED ON TH IS COUNT. WE DIRECT ACCORDINGLY. 24 13. HOWEVER, WITH RESPECT TO THE LOOSE PAPERS, THE ASSE SSEE HAS SURRENDERED INCOME OF RS. 10.50 LAKHS DURING SURVEY , WHEREAS IN THE RETURN, HE HAS OFFERED ONLY RS. 5 LAKHS. AO HAS NOT POINTED OUT AS TO WHICH TRANSACTIONS THESE ENTRIES PERTAIN. IT IS REASONABLE TO PRESUME THAT ENTRIES IN THESE LOOSE PAPERS WERE PER TAINING TO THE UNACCOUNTED TRANSACTIONS OF PURCHASE AND SALES FOR WHICH ASSESSEE HAS SEPARATELY SURRENDERED INCOME BY WAY OF PROFIT ON SUCH UNACCOUNTED SALES AS WELL AS INVESTMENT IN SUCH PUR CHASES. THEREFORE, KEEPING IN VIEW THE TOTALITY OF FACTS AN D CIRCUMSTANCES OF THE CASE, NO ADDITION WAS CALLED FOR WITH RESPECT T O ENTRIES IN THE LOOSE PAPERS. 14. IN THE RESULT, APPEAL OF THE REVENUE IN I.T.A.NO. 4 93/IND/2010 IS ALLOWED IN PART IN TERMS INDICATED HEREIN ABOVE, WHEREAS I.T.A.NO. 494/IND/2010 IS DISPOSED IN TERMS INDICATED HEREINA BOVE. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER, 2011. SD/- SD/- (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19 TH SEPTEMBER, 2011 25 CPU* 1219