The DCITAnand Circle, Anand V. Gujarat Farm Seeds Pvt.Ltd., Anand

ITA 626/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60448 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-04-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 25-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: S N DIVATIA
• Keywords: Rejection of books of accounts; Business income; Income from undisclosed sources
• Section: 133A; 234B; 131; 145

Judgement Text

ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENC H, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T.A. NO. 626/AHD/2009 (ASSESSMENT YEAR: 2004 - 05) DEPUTY COMMISSIONER OF INCOME TAX, ANAND CIRCLE, 3 RD FLOOR, S.P. COMPLEX, MAY FAIR ROAD, NEAR OLD C.K. HALL, ANAND. (APPELLANT) VS. GUJARAT FARM SEEDS PVT. LTD., 101 JEMSONS HOUSE, NEAR KLAXMI CINEMA, ANAND. (RESPONDENT) I.T.A. NO. 707/AHD/2009 (ASSESSMENT YEAR: 2004 - 05) GUJARAT FARM SEEDS PVT. LTD., 101 JEMSONS HOUSE, NEAR KLAXMI CINEMA, ANAND. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME TAX, ANAND CIRCLE, 3 RD FLOOR, S.P. COMPLEX, MAY FAIR ROAD, NEAR OLD C.K. HALL, ANAND. (RESPONDENT) PAN: AAACG 7271J BY REVENUE : SHRI, B.L. YADAV, SR. D.R. BY ASSESSEE : SHRI S.N. DIVATIA. ( )/ ORDER DATE OF HEARING : 2-4-2012 DATE OF PRONOUNCEMENT :25-5-2012 ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 2 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THESE ARE THE TWO CROSS APPEALS ONE FILED BY THE REVENUE AND THE OTHER FILED BY THE ASSESSEE AGAINST THE ORDER O F LD. CIT (A)-IV, BARODA DATED 29-12-2008 FOR THE ASSESSMENT YEAR 200 4-05. 2. THE REVENUES GROUND OF APPEAL READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN SCALING DOWN THE ADDITION FROM 12.39% TO 9% AND ALLOWING RELIEF OF RS.16,38,667/- OVERLOOKING THE FACT THAT BOOK RESULTS WERE REJECTED DURING THE ASSESSMENT PROCEEDINGS ON THE A.OS FINDING THAT REPAYMENTS WE RE NOT COMPLETELY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. 3. THE ASSESSEES CONCISE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE LD. CIT (A) HAS ERRED IN LAW AND/OR ON LAW IN CONFIRMING THE ACTION OF THE A.O. IN ASSESSING THE INCOME OF T HE APPELLANT AT RS.90,00,378/-. 2. WITHOUT PREJUDICE TO THE ABOVE AND IN ALTERNAT IVE, THE APPELLANT BEGS TO SUBMIT THAT THE LD. CIT (A) HAS E RRED IN NOT ALLOWING THE BENEFIT OF SET OFF OF CASH AVAILABLE A S PER THE BOOKS AMOUNTING TO RS.28,44,815/- OUT OF INCOME DISCLOSED DURING THE COURSE OF SURVEY. ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 3 3. WITHOUT PREJUDICE TO THE ABOVE AND IN ALTERNATIV E, THE APPELLANT BEGS TO SUBMIT THAT THE LD. CIT (A) HAS E RRED IN MAKING ADDITION OF RS.14,01,186/- ON ACCOUNT OF EXCESS STO CK. 4. THE LD. CIT (A) HAS ERRED IN LAW AND OR ON FACTS IN ESTIMATING THE GP @ 9% AND THEREBY CONFIRMING THE A DDITION TO THE EXTENT OF RS.13,48,592/-. 5. THE LD. CIT (A) HAS ERRED IN LAW AND/ OR ON FACT S IN CONFIRMING THE ACTION OF THE A.O. IN CHARGING INTER EST U/S. 234B OF THE ACT. 6. THE LD. CIT (A) HAS ERRED IN LAW AND /OR IN FACT S IN INITIATING THE PENALTY U/S. 271(1)(C) OF THE ACT. 4. SINCE THE FACTS AND ISSUES INVOLVED IN BOTH TH E APPEALS ARE CONNECTED THE APPEALS HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A SINGLE ORDER FOR THE SAKE OF CONVE NIENCE. 5. THE ASSESSEE IS A PRIVATE LIMITED COMPANY EN GAGED IN THE BUSINESS OF PROCESSING OF RAW SEEDS OF VEGETABLE. T HE ASSESSEE FILED ITS RETURN OF INCOME ON 1.11.2004 DECLARING TOTAL I NCOME OF RS 14,76,550/-. A SURVEY U/S 133A WAS CARRIED OUT AT I TS BUSINESS PREMISES ON 30.1.2004. A DIARY CONTAINING RECORD OF PAYMENTS OF RS 75,99,192/- WAS FOUND. STATEMENTS OF SHRI SHARADBHA I SHAH AND SHRI DHARMESH SHAH, THE DIRECTORS OF THE COMPANY WERE RE CORDED ON 30.1.2004 U/S 131 OF THE IT ACT. IN REPLY TO THE QU ESTION WITH RESPECT TO THE DIARY IT WAS STATED THAT THE PAYMENTS OF RS 75, 99,192/- WERE TO THE CREDITORS OF THE ASSESSEE AND THESE PAYMENTS MADE I N CASH WERE OUT ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 4 OF THE INCOME OF THE CURRENT YEAR, EVEN THOUGH THE LEDGER ACCOUNT OF THE CREDITORS SHOWED IT TO BE UNPAID. FURTHER, THE VALUE OF STOCK AS PER PHYSICAL VERIFICATION WAS FOUND TO BE OF RS 81, 48,226/- AS AGAINST THE VALUE OF STOCK AS PER BOOKS OF ACCOUNTS AT RS 6 7,47,040/-. THE DIRECTORS THUS DECLARED TOTAL AMOUNT OF RS 90,00,37 8/- COMPRISING EXCESS STOCK OF RS 14,01,186/- (RS 81,48,226 LESS R S. 67,47,040) AND PAYMENT OF RS 75,99,192/- AS PER THE DIARY AS UNACC OUNTED INCOME. IN THE RETURN OF INCOME THE ADDITIONAL INCOME ATTRIBUT ABLE TO SURVEY DECLARATION WAS SHOWN AT RS 51,44,583/-. THE A.O. T HUS OBSERVED THAT THE DISCLOSURE MADE DURING THE COURSE OF SURVEY WAS NOT FULLY SHOWN IN THE RETURN OF INCOME AND EXPENSES HAD ALSO BEEN ADJUSTED AGAINST THE DISCLOSURE. THE AO HELD THAT AS NO PROPER EXPLA NATION WAS FURNISHED BY THE ASSESSEE WITH RESPECT TO THE PAYME NTS OF RS 75,99,192/- FOUND IN THE DIARY DURING THE COURSE OF SURVEY, THE SAME WAS ADDED TO THE TOTAL INCOME. AGGRIEVED BY THE ACT ION OF AO IN CONSIDERING THE ENTIRE AMOUNT AS INCOME THE ASSESSE E PREFERRED APPEAL BEFORE CIT (A). 6. BEFORE CIT (A) IT WAS SUBMITTED BY THE ASSESSEE THAT THE REASONS FOR DISCLOSURE OF RS 51,44,583/- WERE MADE BEFORE THE AO BUT THE SAME WERE IGNORED. THE ASSESSEE FURTHER STATED THAT THE CASH BALANCE AVAILABLE AS PER THE COMPUTERISED BOOKS OF ACCOUNTS ON THE DATE OF SURVEY WAS RS. 29,39,815/- OUT OF WHICH RS 28,44,815/- WAS UTILISED FOR MAKING PAYMENT TO THE CREDITORS NOTED IN THE DIARY FOUND AT THE TIME OF SURVEY. THE ASSESSEE THUS SUBMITTED THAT INSTEAD OF RS 75,99,192/- ADMITTED TO HAVE BEEN PAID TO THE CREDI TORS OUTSIDE THE ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 5 BOOKS, ONLY RS 51,44,583/- WAS ACTUALLY PAID OUT OF THE UNACCOUNTED INCOME AND THE BALANCE WAS PAID OUT OF THE CASH AVA ILABLE IN THE BOOKS. 7. CIT (A) OBSERVED THAT THE ASSESSEE HAD FILED A L ETTER ON 6.12.2006 DURING THE ASSESSMENT PROCEEDINGS WHEREIN IT WAS SU BMITTED THAT THE DISCLOSURE MADE AT THE TIME OF SURVEY FOR THE CASH PAYMENTS RECORDED IN THE DIARY ALSO INCLUDED PAYMENT OF RS. 28,44,815 /- OUT OF THE CASH IN HAND AS PER THE BOOKS OF ACCOUNTS. THE SAME WAS REC ORDED IN ROUGH CASH BOOK BUT THE ENTRY IN COMPUTERISED BOOKS REMAI NED TO BE MADE. IT WAS OBSERVED BY CIT (A) THAT THE AO HAD NOT DISC USSED THIS SUBMISSION IN THE ASSESSMENT ORDER. CIT (A) OBSERVE D THAT ON THE DATE OF SURVEY NO CLAIM OR MENTION REGARDING PART O F THE PAYMENT BEING OUT OF CASH ON HAND IN THE BOOKS WAS MADE. EV EN AFTER THE SURVEY AND BEFORE FILING THE RETURN OF INCOME I.E. IN A DURATION OF MORE THAN 8-9 MONTHS, NO SUCH INTIMATION WAS GIVEN TO TH E DEPARTMENT OR THE AO. THE EXPLANATION THAT THE PAYMENT WAS OUT OF CASH ON HAND IN THE BOOKS WAS NOT ACCEPTABLE AS IT WAS CONSIDERED T O BE AN AFTERTHOUGHT AND LACKING CREDIBILITY BY CIT (A). AP ART FROM THIS IT WAS OBSERVED BY CIT (A) THAT THE ENTRIES IN THE DIARY A ND THE LEDGER ACCOUNTS OF THE PARTIES AS PER BOOKS, FILED BY THE ASSESSEE DID NOT MATCH. HE OBSERVED THAT THE PAYMENT DATES AS PER TH E DIARY WERE COMPLETELY DIFFERENT FROM THE PAYMENT DATES IN THE LEDGER ACCOUNTS. EVEN IN RESPECT OF AMOUNTS CLAIMED TO HAVE BEEN PAI D OUT OF CASH IN HAND. A FEW INSTANCE OF SUCH NATURE WERE POINTED OU T BY CIT (A) IN THE ORDER. HE ACCORDINGLY HELD THAT THE EXPLANATION OF THE ASSESSEE WAS ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 6 NOT FOUND TO BE ACCEPTABLE. HE THEREFORE HELD THAT THE UNACCOUNTED INCOME AS PER THE DIARY FOUND DURING THE SURVEY IS TO BE TAKEN AT RS 75,99,192/- AS BUSINESS INCOME INSTEAD OF RS 51,44, 583/- DECLARED IN THE RETURN OF INCOME. AGGRIEVED BY THE ORDER OF CIT (A) IN NOT ALLOWING THE BENEFIT OF SET OFF TO THE EXTENT OF RS.28,44,81 5/- , THE ASSESSEE IS NOW IN APPEAL BEFORE US. 8. THE LD. A.R. SUBMITTED BEFORE US THAT THE ADDITI ON UPHELD BY CIT (A) WAS NOT JUSTIFIED FOR THE REASON THAT THE DIREC TORS WHOSE STATEMENT WERE RECORDED BY THE SURVEY PARTY WERE TECHNICAL DI RECTORS AND UNAWARE ABOUT THE FINANCIAL MATTERS. THE EXPLANATIO N WITH RESPECT TO THE CASH COULD NOT BE FURNISHED AFTER THE SURVEY AC TION AS ACCORDING TO THE A. R. NO OPPORTUNITY WAS ALLOWED BY THE SURV EY PARTY NOR ANY FURTHER STATEMENTS WERE RECORDED BY THEM. THE A.R. THEREFORE URGED THAT THE ADDITION MADE BY A.O. BE DELETED. IN THE ALTERNATIVE, IT WAS SUBMITTED THAT INSTEAD OF MAKING THE FULL ADDITION OF RS. 75,99,192, THE SAME SHOULD BE RESTRICTED TO THE PEAK AMOUNT. 9. ON THE OTHER HAND THE LEARNED D.R. SUBMITTED THA T THE AO WAS RIGHT IN TREATING THE ENTIRE AMOUNT AS UNDISCLOSED INCOME. IT WAS SUBMITTED THAT IN THE STATEMENT OF THE DIRECTORS WH ICH WAS TAKEN ON OATH, THE DIRECTORS HAD ADMITTED THAT THE PAYMENTS WERE MADE TO THE CREDITORS IN CASH OUT OF THE INCOME OF THE CURRENT YEAR. IT WAS ALSO STATED THAT THE STATEMENT THAT THE AMOUNT WAS PAID OUT OF THE CASH IN HAND AS PER THE BOOKS OF ACCOUNTS IS AN AFTER THOUG HT AS NOTHING WAS STATED AFTER THE SURVEY AND BEFORE FILING THE RETUR N OF INCOME. ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 7 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE STATEM ENT OF DIRECTORS NAMELY SHRI SHARADBHAI SHAH AND SHRI DHARMESH SHAH WERE RECORDED U/S 131 ON THE DATE OF SURVEY. FROM THE COPY OF THE ENGLISH TRANSLATION OF THE STATEMENT RECORDED AND PLACED AT PAGE 47 ON THE PAPER BOOK, IT CAN BE SEEN THAT SHRI SHARAD SHAH IS THE MANAGING DIRECTOR OF THE COMPANY AND SHRI DHARMESH SHAH IS T HE DIRECTOR HANDLING THE PRODUCTION, PROCESSING AND ACCOUNTS WO RK. IT IS A FACT THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY. AS PER THE COMMENTARY OF THE COMPANIES ACT, 1956, MANAGING DIR ECTOR IS DEFINED U/S. 2(26) IS A PERSON WHO IS A DIRECTOR WI TH POWER OF MANAGEMENT ENTRUSTED TO HIM BY VIRTUE OF AN AGREEME NT WITH THE COMPANY OR OF A RESOLUTION PASSED BY THE SHAREHOLDE RS AT THE GENERAL MEETING OR BY THE BOARD. THE DAY TO DAY MAN AGEMENT IS ENTRUSTED TO THE MANAGING DIRECTOR WHO CAN EXERCISE POWERS OF MANAGEMENT WITHOUT REFERRING TO THE BOARD. A MANAGI NG DIRECTOR CAN NOT BE EQUATED WITH AN ORDINARY DIRECTOR. AS SEEN F ROM THE RECORDED STATEMENT IT IS STATED THAT SHRI SHARAD SHAH IS A M ANAGING DIRECTOR AND SHRI DHARMESH SHAH (DIRECTOR), LOOKS AFTER THE ACCOUNTS WORK. IN LIGHT OF THESE FACTS, THE EXPLANATIONS MADE BEFORE US THAT THE DIRECTORS WERE TECHNICAL DIRECTORS AND WERE NOT AWA RE ABOUT THE FINANCIAL MATTERS DOES NOT INSPIRE CONFIDENCE. THE DIRECTORS IN REPLY TO THE QUESTION POSED HAD STATED THAT THE AMOUNT WA S PAID IN CASH TO THE CREDITORS OUT OF UNACCOUNTED INCOME OF THE CURR ENT YEAR. NO CLAIM WAS MADE DURING THE COURSE OF SURVEY OR EVEN 8-9 MO NTHS FROM THE END OF SURVEY THAT THE PAYMENTS HAVE BEEN MADE OUT OF THE CASH ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 8 BALANCE AVAILABLE AS PER BOOKS OF ACCOUNTS. THIS CL AIM WAS MADE FIRST TIME DURING THE COURSE OF ASSESSMENT PROCEEDINGS VI DE LETTER DATED 6.12.2006. THE LD. CIT (A) OPINED THAT THE EXPLANAT ION OF THE ASSESSEE WAS AN AFTER THOUGHT AND LACKED CREDIBILITY. HE HAS GIVEN A FINDING THAT THE ENTRIES IN THE DIARY AND THE LEDGER ACCOUN TS OF THE PARTIES AS PER BOOKS OF ACCOUNTS FILED BY THE ASSESSEE DO NOT MATCH. THE PAYMENT DATES AS PER DIARY ARE COMPLETELY DIFFERENT FROM THE PAYMENT DATES IN THE LEDGER ACCOUNTS EVEN IN RESPECT OF THE AMOUNTS CLAIMED TO HAVE BEEN PAID OUT OF CASH IN HAND. CIT (A) HAS POINTED OUT IN DETAIL THE DISCREPANCY NOTICED IN ONE CASE AND HAS FURTHER STATED THAT SIMILAR DISCREPANCIES EXIST IN OTHER ACCOUNTS AS WE LL. THESE FINDINGS OF THE CIT (A) HAS NEITHER CONTROVERTED BY THE A.R. NOR HAS HE PLACED ANY MATERIAL TO CONTROVERT THE AFORESAID FINDINGS. IN VIEW OF THE TOTALITY OF THE AFORESAID FACTS, WE ARE OF THE CONS IDERED VIEW THAT NO INFIRMITY LIES IN THE ORDER OF CIT (A) AND THEREFOR E NO INTERFERENCE IS CALLED FOR. IN THE RESULT THIS GROUND OF THE ASSESS EE IS DISMISSED. 11. THE NEXT GROUND IS WITH RESPECT TO ADDITION OF RS 14,01,186/- ON ACCOUNT OF EXCESS STOCK: 12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE FILED A LETTER WHEREIN IT WAS SUBMITTED THAT THE ST OCK OF GOODS INCLUDED GOODS WORTH RS 9,98,400/- RECEIVED FROM PR AGNESHKUMAR MAFATBHAI PATEL ON APPROVAL BASIS AND WERE LYING WI TH IT WHEN THE SURVEY WAS CARRIED OUT. IT WAS THEREFORE CONTENDED THAT THE SAME SHOULD BE EXCLUDED FROM THE TOTAL INCOME. THE AO DI D NOT DISCUSS THE ASSESSEES CLAIM. THE CIT (A) ALSO REJECTED THE CLA IM OF THE ASSESSEE ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 9 FOR THE REASON THAT NO MENTION OF IT WAS MADE BY TH E DIRECTORS IN THE STATEMENT GIVEN AT THE TIME OF SURVEY. CIT(A) WAS O F THE VIEW THAT THE CLAIM OF THE KIND MADE BY THE ASSESSEE LACKS AUTHEN TICITY AND IT IS VERY EASY TO OBTAIN AN ACCOMMODATION ENTRY LATER FR OM AN AGRICULTURIST. AGGRIEVED BY THE DECISION OF CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 13. THE LD. A.R. SUBMITTED THAT THE TRANSLATION OF THE CONFIRMATION RECEIVED FROM PRAGNESHKUMAR PATEL IS FILED ON PAGE 57 OF THE PAPER BOOK ALONGWITH THE LIST OF FARMERS FROM WHOM THE GO ODS WERE RECEIVED. IT WAS SUBMITTED THAT IN THE ABSENCE OF A NY EVIDENCE THAT THE EXPLANATION OF THE ASSESSEE IS WRONG, THE EXPLA NATION OF THE ASSESSEE SHOULD BE ACCEPTED. 14. ON THE OTHER HAND THE LEARNED D.R. SUBMITTED TH AT THE AO WAS RIGHT IN TREATING THE ENTIRE AMOUNT AS UNDISCLOSED INCOME. IT WAS SUBMITTED THAT IN THE STATEMENT OF THE DIRECTORS WH ICH WAS TAKEN ON OATH NO MENTION HAS BEEN MADE ABOUT THE GOODS RECEI VED ON APPROVAL BASIS. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE SURVEY PA RTY DID NOT DISTINGUISH BETWEEN THE EXCESS STOCK FOUND AND THE STOCK AS PER THE BOOKS OF ACCOUNTS AS THE ENTIRE STOCK FORMED A COMM ON POOL FOUND AT THE BUSINESS PREMISES OF THE ASSESSEE. IT IS ALS O A FACT THAT THE ASSESSEE HAD FURNISHED THE DETAILS TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT THE SAME WAS IGNORED BY THE AO. ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 10 FURTHER, THOUGH CIT(A) ACCEPTED THAT THE DETAILS FU RNISHED BY THE ASSESSEE BEFORE AO WAS NOT CONSIDERED BY HIM, HE NE ITHER EXAMINED IT AT HIS END NOR DID HE ASKED THE AO TO FURNISH HI S COMMENTS. IN VIEW OF THE FACTS, WE REMAND THIS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO ALLOW THE CREDIT FOR THE SAME IF THE C ONTENTION OF THE ASSESSEE IS FOUND CORRECT. THIS GROUND OF THE ASSES SEE IS THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 16. THE NEXT GROUND IS WITH RESPECT TO ESTIMATING G ROSS PROFIT AT 9% AND THEREBY CONFIRMING THE ADDITION TO THE EXTENT O F RS 13,48,592/-: 17. THE AO NOTED THAT AGAINST THE TOTAL SALES OF RS 483.38 LACS GROSS PROFIT FOR THE YEAR WAS RS 30.01 LACS WORKING OUT TO BE 6.21% AS AGAINST A GROSS PROFIT OF 12.39% SHOWN IN PRECEDING YEAR ON THE SALES OF RS 446.84 LACS. THE AO REJECTED THE BOOKS OF ACC OUNTS FOR THE FOLLOWING REASONS: I. ASSESSEE HAS NOT SHOWN PROPERLY AND TRULY THE DI SCLOSURE MADE DURING THE COURSE OF SURVEY PROCEEDINGS. II. EXCESS STOCK OF RS 14,01,186/- REVEALED DURING THE SURVEY INDICATES THAT THE ASSESSEE WAS NOT MAINTAINING PRO PER STOCK RECORDS. III. ASSESSEE HAD SHOWN LESS DISCLOSURE IN ON MONEY WHICH WAS REPAID TO ITS DEPOSITORS. ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 11 18. AO THEREFORE REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED GROSS PROFIT AT 12.39% AS PER THE EARLIER YEAR AND THEREBY MADE ADDITION OF RS 29,87,259/-. AGGRIEVED BY THE DECISI ON OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE CIT (A). CIT (A) H ELD GP TO BE AT 9% FOR THE FOLLOWING REASON: 3.3. I HAVE CONSIDERED THE SUBMISSIONS. REASON S FOR REJECTING THE BOOKS OF ACCOUNTS AND MAKING ADDITION ON ACCOUN T OF G.P. ARE AS PER PARA-14 OF ASSESSMENT ORDER, ALSO MENTIO NED IN THIS ORDER IN PARA-3 ABOVE. SHOWING OF ADDITIONAL INCOME DISCLOSED DURING SURVEY UNDER A PARTICULAR HEAD IN THE RETURN OF INCOME IS NOT A VALID REASON TO REJECT THE BOOKS OF ACCOUNTS. THAT THERE WAS DIFFERENCE BETWEEN THE ACTUAL STOCK FOUND DURING TH E SURVEY AND THE STOCK WORKED OUT ON THE BASIS OF BOOKS IS ALSO NOT A VALID REASON TO REJECT THE BOOKS OF ACCOUNTS. HOWEVER, RE CORDING OF LESSER AMOUNT OF MONEY REPAID TO THE DEPOSITORS IN THE BOOKS OF ACCOUNTS, AS COMPARED TO THE ACTUALS DOES REFLECT O N THE ASPECT OF PROPER MAINTENANCE, COMPLETENESS AND CORRECTNESS OF THE BOOKS OF ACCOUNTS. THUS, TO A CERTAIN EXTENT CONDIT IONS FOR INVOCATION OF SECTION 145 (3) I.E. THE ACCOUNTS BEI NG INCORRECT EXISTED. DUE TO THE DIARY FOUND DURING THE SURVEY, APPELLANT HAD TO DECLARE ADDITIONAL INCOME. ASSESSING OFFICERS O BSERVATION IS THAT NORMAL TRADING PROFITS WERE THEREFORE UNDERSTA TED TO OFFSET SUCH ADDITIONAL INCOME. FOR COMPARING G.P., ADDITIO NAL INCOME DISCLOSED DURING THE SURVEY CANNOT BE CONSIDERED, S INCE IT IS A SINGLE YEAR PHENOMENON DISTINGUISHABLE FROM REGULAR TREADING RESULTS. AFTER EXCLUDING SURVEY DISCLOSURES, G.P. I N A.Y. 2004-05IS LOWER, I.E. 6.39% I.E. LOWER THAN G.P. RATIO IN ANY OF THE YEARS SINCE A.Y. 2000-01 AND ALSO A.T. 2005-06. THE APPELLANT D ID SUBMIT DETAILED EXPLANATION REGARDING FALL IN G.P. WITH LE TTER DATED 26-12- 2006, WHICH WAS NOT EXAMINED BY THE A.O. ON MERITS. AT REMAND REPORT STAGE ALSO, DESPITE SPECIFICALLY ASKING THE A.O. TO EXAMINE THE SUBMISSION ON MERITS, IT HAS NOT BEEN DONE. BOO KS OF ACCOUNTS WERE REJECTED BY A.O. ON THE GROUND THAT P AYMENT TO CREDITORS WERE PARTLY OUTSIDE THE BOOKS OF ACCOUNTS OR THERE WAS EXCESS STOCK FOUND ON THE DATE OF SURVEY. HOWEVER, REJECTION OF ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 12 BOOKS OF ACCOUNTS ON SUCH GROUNDS DOES NOT JUSTIFY COMPLETE IGNORING OF SPECIFIC EVIDENCES FILED, I.E. PARTICUL AR ACCOUNTS SUCH AS RADISH RED, ONION BUNCH ETC. SHOWING THE RATES O F PURCHASE AND SALE OF SEEDS, NAMES AND ADDRESSES OF PARTIES T O EXPLAIN FALL IN G.P. IN THE STATEMENT FILED ON 26-12-2006, LOSS OF RS.10.9 LAKH IS EXPLAINED IN THE PARTICULAR SEED ACCOUNTS NAMELY RE D RADISH, ONION, TUAR AND CATTLE FEED. THESE ACCOUNTS CONTAIN ED ALL DETAILS SUCH AS RATES, NAMES OF PARTIES ETC. DETAILS SUPPLI ED BY APPELLANT WERE THUS SUFFICIENT FOR MAKING FURTHER VERIFICATIO N. IF THE A.O. DID NOT MAKE FURTHER VERIFICATION, THE SAME CANNOT BE H ELD AGAINST APPELLANT. THUS, LOSS TO THE EXTENT OF RS.10.9 LAKH , WHICH CONTRIBUTED TO THE TOTAL G.P. FALL STOOD EXPLAINED AND IS ACCEPTED. HOWEVER, NO EVIDENCE REGARDING OLD STOCK LOSS OF RS .8.05 LAKH WAS FILED EITHER AT ASSESSMENT STAGE OR AT THE APPE LLATE STAGE. THE SAME CANNOT THEREFORE BE ACCEPTED. SIMILAR, FUL L JUSTIFICATION FOR INCREASE IN DIRECT EXPENSES BY RS.6.04 LAKH HAS NOT BEEN PROVIDED. AFTER CONSIDERING THESE ASPECTS AND G/P. RATIO OF OTHER YEARS, IT WOULD BE FAIR TO ADOPT G.P. @ 9% FOR A.Y. 2004-05.THE SAME WORKS OUT AT RS.43,50,445/- AS AGAINST RS. 30, 01,853/- SHOWN BY THE APPELLANT ON TURNOVER OF RS.4,83,38,27 3/-. THUS, OUT OF ADDITION OF RS.29,87,259/-, ADDITION OF RS.13,48 ,592/- IS SUSTAINED AND THE BALANCE, I.E. RS.16,38,.667/- IS DELETED. 19. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF CI T (A) TO HOLD THE GP AT 9% AND THE REVENUE IS AGGRIEVED BY THE DECISI ON OF REDUCTION IN GP. 20. BEFORE US THE LD. A.R. SUBMITTED THAT THE SUBMI SSIONS MADE BY THE ASSESSEE FOR REASON FOR REDUCTION IN GP SHOULD HAVE BEEN ACCEPTED IN ENTIRETY BY CIT (A) AS THE REASONS WERE FULLY SUPPORTED BY THE NECESSARY DETAILS. IT WAS SUBMITTED THAT THE AS SESSEE IS IN AGRO BASED BUSINESS WHERE THE FLUCTUATIONS ARE NORMAL IN THE TYPE OF BUSINESS WHICH THE ASSESSEE IS INTO AND THEREFORE T HE RATE OF GROSS ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 13 PROFIT COULD NOT THEREFORE BE THE SAME AS IN PAST. HE THEREFORE URGED THAT THE TOTAL ADDITION BE DELETED. 21. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THA T SINCE THE ASSESSEE HAS FAILED TO FURNISH ANY VERIFIABLE EVIDE NCE REGARDING LOWERING OF GP, ADDITION MADE ON THIS ACCOUNT BY TH E AO BE SUSTAINED. 22. WE HAVE HEARD RIVAL CONTENTIONS AND PERUS ED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE SUBMITTED TO AO THE DETAILED EXPLANATION WITH RESPECT TO FALL IN GP. HO WEVER THE SAME WAS NOT EXAMINED BY THE AO. BASED ON THE DETAILS FURNIS HED BY THE ASSESSEE BEFORE CIT (A), CIT (A) WAS SATISFIED WITH THE EXPLANATION OF LOSS TO THE EXTENT OF RS 10.9 LACS THAT CONTRIBUTED TO THE FALL IN GP. THE ASSESSEE HOWEVER DID NOT PROVIDED SATISFACTORY EXPL ANATION FOR INCREASE IN DIRECT EXPENSES NEITHER BEFORE CIT(A) N OR BEFORE US. IN VIEW OF THE TOTALITY OF THE FACTS, WE ARE IN AGREEM ENT WITH THE CONCLUSION REACHED BY THE CIT (A) AND FEEL THAT THE RE IS NO NEED TO INTERFERE WITH HIS DECISION. IN THE RESULT THIS GRO UND OF APPEAL OF THE ASSESSEE AND THE REVENUE ARE DISMISSED. 23. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE AND THE APPEAL OF THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 25-5 - 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. ITA NO.6 26 & 707/AHD/2009 ASSESSME NT YEAR 2004- 05 . 14 S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) IV, BARODA. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 14 - 5 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 15 /5 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 17 -5 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25 - 5 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 25 - 5 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 8 - 5 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..