THE DCIT-1(1), Indore V. M/S. BABYLISS CURLS & CURVES PVT. LTD., Indore

ITA 741/IND/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2182 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 17-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARPI; LALCHAND CIT DR SHRI ANIL GARG
• Keywords: Gross profit estimation; Rejection of books of accounts; Loose papers; Reasonable cause
• Section: 143(3); 68; 145

Judgement Text

SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 1 OF 13 , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCHE, INDORE , .., BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER ITA NO.1039/IND/2016 ASSESSMENT YEAR: 2011-12 / O R D E R PER CHANDRAMOHAN GARG, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS), UJJAIN (IN SHORT CIT), ACIT - 2(1), INDORE / V S. SHRI RAJENDRA SARAF, PROP. MODERN AGRICULTURE IMPLEMENTS, INDUSTRIAL AREA, RUNIJA ROAD, BARNAGAR ( REVENUE ) ( RESPONDENT ) PAN NO.AUSPS4670G REVENUE BY SHRI LALCHAND, CIT (DR)) APPELLANT BY SHRI ANIL GARG & ARPIT GAUD, CAS (AR) DATE OF HEARING: 25.09.2017 DATE OF PRONOUNCEMENT: 28.09.2017 SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 2 OF 13 DATED 15.07.2016 FOR THE ASSESSMENT YEAR 2011-12. THE GROUND RAISED BY THE REVENUE READ AS FOLLOWS; 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN ALLOWING RELIEF OF RS.29,04,394/- OUT OF T OTAL ADDITION OF RS.39,93,496/- BY APPLYING GROSS PROFIT RATE OF 12% WITHOUT ANY BASIS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED IN ALLOWING RELIEF OF RS.5,27,7 04/- OUT OF TOTAL ADDITION OF RS.5,99,664/- ON ACCOUNT OF SHORT AGE OF CASH FOUND DURING SURVEY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED IN DELETION OF THE ADDITION MAD E BY THE AO OF RS.7,92,046/- ON ACCOUNT OF BOGUS LIABILITIES. 2. BRIEFLY STATED THE FACTS GIVING RISE TO THE APPEAL IS THAT THE ASSESSING OFFICER TOOK UP THE CASE FOR SCRUTINY AND ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (FOR S HORT ACT) WAS FRAMED BY MAKING THREE ADDITIONS I.E. ESTIMATION OF GROSS PROFIT, UN EXPLAINED CASH CREDIT U/S 68 OF THE ACT, AND DISALL OWANCE ON ACCOUNT OF BOGUS LIABILITY. THE AGGRIEVED ASSESSEE CARRIED THE MATTER BEFORE CIT(A), UJJAIN WHEREIN THE CIT(A), UJ JAIN PARTLY ALLOWED THE APPEAL OF THE ASSESSEE ON ALL 3 COUNTS. NOW THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL IN THE SE COND APPEAL WITH THE GROUNDS AS REFERRED TO HEREIN ABOVE. GROUND NO.1 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE MATERIAL PLACED ON THE RECORDS OF TRIBU NAL INTERALIA SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 3 OF 13 IMPUGNED ASSESSMENT AND FIRST APPELLATE ORDER, DOCU MENTS PLACED BY THE PARTIES ON THE RECORD OF THE TRIBUNAL AND PA PER BOOK FILED BY THE ASSESSEE SPREAD OVER 221 PAGES. 4. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTI NG THE ACTION OF THE AO SUBMITTED THAT NON MAINTENANCE OF THE STOCK REGISTER CAN JUSTIFY THE REJECTION OF ACCOUNTS AND THE ASSESSEE FAILED TO SUBMIT THE STOCK REGISTER AND DETAILS OF THE OPE NING AND CLOSING INVENTORY AND IN ABSENCE OF STOCK REGISTER QUANTITY TALLY OF THE STOCK, CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS COULD NOT BE VERIFIED AND HENCE THE AO WAS RIGHT IN REJECTING TH E BOOKS OF ACCOUNTS U/S145(3) OF THE ACT. THE LD. DR VEHEMENT LY POINTED OUT THAT THE AO WAS CORRECT IN REJECTING THE BOOKS OF A CCOUNTS AND APPLYING GP RATES AND CIT(A) ALSO CONFIRMED THE ACT ION OF AO RECORDED IN THE ASSESSMENT ORDER IN PARA 8.10 WHERE IN HE (THE A.O) HELD THAT CONSIDERING THE DEFECTS AND INCORRECTNESS AS POINTED OUT IN THE PRECEEDING PARAS THE BOOK RESULTS SHOWN BY T HE ASSESSEE ARE NOT RELIABLE AND THE SAME HAVE BEEN REJECTED. THE LD. DR SUBMITTED THAT CONSEQUENTLY, ADDITION WAS RIGHTLY MADE BY THE AO BY APPLYING GP RATE OF 16% OF TURNOVER. THE LD.DR STRENUOUSLY CONTENDED THAT THE CIT(A) WAS NOT CORRECT IN DELETI NG THE PART ADDITION WITHOUT ANY JUSTIFIED REASONING BY APPLYIN G GP RATE OF 12%, THEREFORE THE IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 5. REPLYING TO THE ABOVE, THE LD.ASSESSEE REPRESENTA TIVE (AR) STRONGLY SUPPORTED THE FIRST APPELLATE ORDER BY DRA WING OUR SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 4 OF 13 ATTENTION TOWARDS RELEVANT OPERATIVE PARA 4.1 OF TH E ORDER OF THE CIT(A) AND SUBMITTED THAT THE CIT(A) HAS RIGHTLY HE LD THAT IN THE CASE WHERE PROVISION OF 145(3)OF THE ACT ARE INVOKE D THE PROFIT SHOULD BE ESTIMATED AND DETERMINED AT REASONABLE FI GURE. THE LD. AR SUBMITTED THAT THE APPELLANT HAS SHOWN NET PROFI T, WHICH IS COMPARABLE FROM THE PRECEEDING ASSESSMENT YEAR RESU LTS, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. THE LD. AR S UBMITTED THAT APPLYING OF GP RATE OF 16% WAS NOT REASONABLE AND P ROPER AND CONSIDERING THE DECLARED GP RATE OF 10.5% ON TURNOV ER BY THE ASSESSEE THE CIT(A) AND BY TAKING A BALANCING APPRO ACH ESTIMATED, THE GP RATE OF 12% ON TURNOVER OUT OF TOTAL RECEIPT S FOR GRANTING PART RELIEF TO THE ASSESSEE AND CONFIRMED ANOTHER P ART OF ADDITION OF RS.10,89,102/-. THE LD.AR ALSO PLACED HIS RELIANCE ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SHYA M BIRI WORKS LTD (2013) 38 TAXMANN 228 (ALLAHABAD) AND DECISION OF HONBLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF SURESH CHAND TALERA (2005) 152 TAXMANN 348 (MP). 6. PLACING REJOINDER TO THE ABOVE CONTENTIONS OF THE LDR.AR, THE LD.DR SUBMITTED THAT THE ASSESSEE HAS NOT CHALLENGE D THE REJECTION OF BOOKS U/S 143(3) OF THE ACT BEFORE THE TRIBUNAL EITHER BY THE WAY OF CROSS OBJECT OR BY THE WAY OF APPEAL ANED CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY BASIS BY APPLYIN G GP RATE OF 12% THEREFORE THE ORDER OF THE AO MAY KINDLY BE UPHELD IN TOTO. 7. ON CAREFUL CONSIDERATION OF RELEVANT RECORDS AND ABOVE NOTED RIVAL SUBMISSION, FIRST OF ALL, FROM THE FIRST APPE LLATE ORDER WE SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 5 OF 13 OBSERVE THAT CIT(A) GRANTED RELIEF TO THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND CONCLUSIONS: 4.1 GROUND NO.1,2,3,4,5&6: THROUGH THESE GROUNDS O F APPEAL THE APPELLANT HAS CHALLENGED THE ADDITION OF RS.39, 93,496/- ON ACCOUNT OF LOW GP AFTER REJECTING BOOKS U/S 145 OF THE ACT AND ESTIMATION OF GROSS PROFIT. IN THE ASSESSMENT, DIS ALLOWANCE OF RS.39,93,496/- WAS MADE AFTER ADOPTING 16% OF GROSS PROFIT OF THE TOTAL TURNOVER WHICH IS VERY HIGH AND UNREASONA BLE IN THIS LINE OF BUSINESS. IT IS SUBMITTED THAT AS HELD BY VARIOUS COURTS THAT IF THE AO IS NOT SATISFIED ABOUT THE CORRECTN ESS OF THE EXPENDITURE CLAIMED BY THE APPELLANT, HE SHOULD INV OKE THE PROVISIONS OF SECTION 145 WHICH IS AS UNDER: SECTION 145(3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OF COMPLETENESS OF THE ACCOUN TS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDE D IN SUB- SECTION (I) OR ACCOUNTING STANDARDS AS NOTIFIED UND ER SUB-SECTION (2), HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESS EE, THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MAN NER PROVIDED IN SECTION 144. THUS, IT IS CLEAR THAT IF THE AO HAS ANY DOUBT ABOU T ANY EXPENDITURE CLAIMED BY THE APPELLANT, THE PROVISION S OF SECTION 145 SHOULD BE APPLIED AND PROFIT SHOULD BE DETERMIN ED AT REASONABLE FIGURE. THE APPELLANT HAS SHOWN THE NET PROFIT WHICH IS COMPARABLE FROM THE PREVIOUS YEARS TRADING RESULTS WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. IN ANY BUSINESS EARNING PROFIT MARGIN OF 16% IS UNTHINKABLE. THE A CTUAL DOCUMENT FOUND DURING THE COURSE OF SURVEY SUGGESTS THAT THE APPELLANT IS MANUFACTURING AGRICULTURE IMPLEMENTS. THE ONLY THING OBJECTED BY THE AO WAS CLAIM OF HIGHER EXPENS ES. EVEN AO WENT ON MAKING ADDITION LARGELY ON THE BASIS OF ASSUMPTION AND TO SOME EXTENT ON THE BASIS OF DELIBERATION OF FACTS GATHERED. THE AO WHILE WORKING OUT THE GROSS PROFI T ON THE SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 6 OF 13 BASIS OF LOOSE PAPERS IMPOUNDED DURING THE SURVEY, LPS- 7/PAGES-49. 50 & 51 TAKEN INTO CONSIDERATION MATERI AL AND LABOUR ONLY. HE HAS NOT INCLUDED THE COST OF ACCOU NT OF ELECTRICITY, FREIGHT, INTEREST TAX ETC. THE AO SHO LD HAVE INCLUDED ABOVE ITEMS FOR ARRIVING CORRECT GP ESTIMATE. HE C ANNOT PROCEED TO MAKE AN ARBITRARY ADDITION AND BASE HIS CONCLUSI ON PURELY ON GUESSWORK. HE OUGHT TO HAVE RELATED HIS ESTIMATE T O SOME EVIDENCE OR MATERIAL ON THE RECORD AS IT ISN NOW WE LL SETTLED THAT IF THE PROFITS SHOWN BY THE ASSESSEE IN HIS RETURN ARE NOT ACCEPTED, IT IS FOR THE TAXING AUTHORITIES TO PROVE THAT THE ASSESSEE HAS MADE MORE PROFITS THAN RETURNED. I FI ND THAT BOTH THE AO AND APPELLANT WERE NOT CORRECT IN SO FAR AS APPELLANT OFFERED INCOME OF ONLY RS.76,24,083/- FROM THE TOTA L RECEIPT OF RS.7,26,09,871/- WHICH IS ONLY 10.50% GROSS PROFIT AND ON THE OTHER HAND AO ESTIMATED A MUCH HIGHER GROSS INCOME FROM AT RS.1,16,17,579/- WHICH COMES TO WHOPPING 16% OF GRO SS PROFIT. CONSIDERING BOTH OF THE GROSS PROFIT OF APPELLANT A T 12% OF THE TOTAL RECEIPT I.E. RS.7,26,09,871/- WHICH COMES TO RS.87,13,185/-. AS A RESULT OUT OF THE TOTAL ADDI TION OF RS.10,89,102/- (RS.87,13,185/- - RS.76,24,083/-) IS SUSTAINED AND THE APPELLANT WILL GET THE RELIEF OF RS.29,04,394/- . ON THIS ISSUE RELIANCE IS PLACED ON THE DECISION IN CASE OF SHYAM BIRI WORKS LTD (2013) 38 TAXMANN 228 (ALLAHABAD) AND SUR ESH CHAND TALERA (2005) 152 TAXMANN 348 (M.P). IN CASE OF JOGINDER SINGH & CO FTAB ITAT 2013 HELD IN SIMIL AR SITUATION THAT CIT(A) WAS CORRECT IN APPLYING SUITABLE NP RAT E INSTEAD OF DISALLOWANCES OF 50% OF EXPENSES. IN CASE OF M/S. CHOUDHARY AND BROTHERS, JAIPUR, ITAT BENCH A, JAIPUR IN ITA NO.879/JP/2011 VIDE ORDER DATED 25.05.2012 HELD THA T THE AO WAS NOT JUSTIFIED IN MAKING SEPARATE ADDITIONS ON D IFFERENT HEADS, UNDER DEEMED REJECTION OF BOOKS OF A/COMMISS IONER U/S 145(3). IT IS RATHER FELT THAT HE SHOULD HAVE MADE A COMPOSITE/COMMON ADDITION TOWARDS THE LOWER NET PRO FIT SHOWN BY THE APPELLANT. THE HONBLE ITAT, INDORE WHILE D ECIDING THE SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 7 OF 13 CASE OF S.K. JAIN V. DY. CIT (2016) 27 ITJ 113 (TRI B-INDORE) IN ITAT NOS.21/IND/2013 AND 604/IND/2012 AND APPEAL NO . (2016) 28 ITJ (TRIB. INDORE) ESTIMATED THE NET PROF IT @ 6.25% IN THE CIVIL CONSTRUCTION BUSINESS. THE HONBLE ITAT, INDORE WHILE DECIDING THE ITA NO.265/IND/2014, DATED 30.09.2015 FOR THE A.Y. 2010-11 IN THE CASE OF RAJENDRA KHANDELWAL ADO PTED 8% NET PROFIT ON THE TOTAL CONTRACT RECEIPT. THEREFOR E THE ADDITION MADE BY THE AO AMOUNTING TO RS.10,89,102/- (RS.87,1 3,185/- - RS.76,24,083/-) IS CONFIRMED AND THE APPELLANT WILL GET THE RELIEF OF RS.29,04,394/-. THEREFORE, THE APPEAL ON THIS GROUND IS PARTLY ALLOWED . 8. IN VIEW OF ABOVE, AT THE VERY OUTSET, WE OBSERVE THAT THE AO HAS REJECTED BOOKS OF ACCOUNTS U/S 145(3) OF THE AC T AND THE ACTION OF AO WAS CONFIRMED BY THE CIT(A) AND NO CROSS APPE AL OR CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE CHALLENGIN G THE REJECTION OF BOOKS OF ACCOUNTS AND RESULTS HENCE, THE REJECTION OF BOOKS BY AO HAS ACCEPTED BY THE ASSESSEE WITHOUT ANY FURTHER AG ITATION. 9. HOWEVER, DISPUTE REMAINS REGARDING APPLICATION OF GP RATES ON THE TOTAL RECEIPTS/TURNOVER OF THE ASSESSEE. THE A O ESTIMATED THE GP RATE OF 16% ON TOTAL RECEIPTS WHEREAS THE CIT(A) CONSIDERED THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , GP RATE DECLARED BY THE ASSEASSEE I.E. 10.50% OF TOTAL RECEIPTS ESTI MATED THE GROSS TOTAL RECEIPTS @ 12% OF TOTAL RECEIPTS. THE COMPAR ATIVE CHART (AVAILABLE AT 189 OF APB) SHOWS TOTAL RECEIPTS AS W ELLS GP, GP RATES, NP AND NP RATE OF THE ASSESSEE FROM ASSESSMENT YEAR 2006-07 TO PRESENT ASSESSMENT YEAR 2011-12, WHICH HAS NOT BEEN CONFRONTED EITHER BY THE AO OR LD.DR DURING THE ARGUMENTS BEFO RE US. WE FURTHER OBSERVE THAT THE GP RATES OF IMMEDIATELY PR ECEEDING THREE SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 8 OF 13 ASSESSMENT YEARS WAS 10.27%, 10% AND 10.55% AND IN THE PRESENT ASSESSMENT YEAR 2011-12 GP RATE WAS 10.50%. FROM THE SAID CHART WE ALSO OBSERVED THAT THE NP ACCEPTED BY THE DEPARTMENT FOR IMMEDIATELY PRECEEDING THREE YEARS W AS 1.49%, 1.30% AND 1.29% WHEREAS IN THE PRESENT ASSESSMENT Y EAR GP RATE WAS SUBSTANTIALLY INCREASED TO 1.91%. THEREFORE THE GP RATE AND NP RATE DECLARED BY THE ASSESSEE ACCEPTED BY THE DE PARTMENT IN THE IMMEDIATELY PRECEEDING THREE YEARS IS REASONABLE AN D COMPARABLE WITH THE GP RATE AND NP RATE OF PRESENT ASSESSMENT YEAR 2011-12 WHICH IS ON THE HIGHER SIDE. 10. IN THE BACK DROP OF OUR ABOVE FACTS, WHEN WE ANALY SE THE ACTION OF AO AS WELL AS PART RELIEF GRANTED BY THE CIT(A), WE FIND THAT THE AO ESTIMATE THE GP RATE BY TAKING 16% OF T URNOVER WHEREAS THE CIT(A) AFTER CONSIDERING THE ENTIRE FAC TS AND CIRCUMSTANCES OF THE CASE AND FINANCIAL RESULTS OF IMMEDIATELY PRECEEDING YEARS ESTIMATED THE GP RATE OF 12% AS AG AINST 10.50% DECLARED BY THE ASSESSEE, THEREFORE THE CONCLUSION DRAWN BY THE CIT(A) IS QUITE CORRECT AND REASONABLE AND JUSTIFIA BLE WHICH MORE FAVOURABLE TO THE DEPARTMENT, HENCE, WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE CONCLUSION DRAWN BY THE CIT(A) IN THIS REGARD. CONSEQUENTLY, THE FIRST APPELLATE ORD ER ON THIS COUNT BY WHICH PARTIAL RELIEF WAS GRANTED TO THE ASSESSEE AND THE ADDITION OF RS.10,89,102/- WAS CONFIRMED IS HELD TO BE CORRE CT, JUSTIFIED AND SUBSTAINABLE. ACCORDINGLY, THE GROUND NO.1 OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 9 OF 13 GROUND NO.2 11. THE LD.DR SUBMITTED THAT THE AO WAS CORRECT IN MA KING ADDITION ON ACCOUNT OF CASH FOUND SHORT BY RS.9,49, 644/- AT ON THE DATE OF SURVEY BY MAKING ADDITION OF RS.5,99,664/- . THE LD. DR SUBMITTED THAT THE AO ACCEPTED THE CONTENTION OF TH E ASSESSEE THAT CASH PERTAINING TO BUSINESS AMOUNTING TO RS.3,50,00 0/- AS LYING AT HIS HOME AND THEREAFTER HE MADE THE ADDITION OF REM AINING SHORT CASH. THE LD.DR SUBMITTED THAT THE CIT(A) GRANTED R ELIEF TO THE ASSESSEE WITHOUT ANY BASIS AND BY WRONG APPLICATION OF FACTS, THEREFORE THE FIRST APPELLATE ORDER MAY KINDLY BE S ET ASIDE AND BY RESTORING THAT OF THE AO. 12. THE LD.AR REPLYING TO THE ABOVE SUBMISSIONS, CONTE NDED THAT DURING THE COURSE OF SURVEY PROCEEDINGS CASH OF RS .2,97,662/- WAS FOUND AND THE ASSESSEE FURNISHED EVIDENCES REGARDIN G CASH OF RS.3,50,000/-, WHICH WAS LYING AT THE HOME OF THE A SSESSEE AND THE AO MADE THE ADDITION ON ACCOUNT OF THE SHORTAGE IN CASH ABOUT THE REMAINING AMOUNT OF RS.5,99,664/- WHICH WAS NOT COR RECT AND JUSTIFIED. THE CIT(A) WAS RIGHT IN DELETING THE MA JOR PART OF ADDITION AND CONFIRMING 12% OF TOTAL CASH SHORT AS PER G.P R ATE ADOPTED FOR ESTIMATION OF INCOME. 13. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS ON T HE ISSUE OF DELETION OF ADDITION OF RS.5,99,664/- ON ACCOUNT OF SHORTAGE OF CASH FOUND DURING THE SURVEY FROM THE ASSESSMENT ORDER I T IS CLEAR THAT THE ASSESSING OFFICER NOTED THAT A SHORTAGE OF CASH OF RS.9,49,664/- WAS FOUND DURING THE SURVEY AND HE ACCEPTED THE EVI DENCE OF THE ASSESSEE REGARDING CASH OF RS.3,50,000/- WHICH WAS LYING AT HOME SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 10 OF 13 OF THE ASSESSEE AND THE AO MADE THE ADDITION OF RS. 5,99,664/- BY ARRIVING THE CONCLUSION THAT ACTUAL CASH SHORTAGE W AS OF SAID AMOUNT. IN THE FIRST APPELLATE ORDER, THE CIT(A) F IND IT APPROPRIATE TO ADOPT 12% OF GROSS PROFIT ON THE SHORTAGE OF CAS H AND HE CONFIRMED PART ADDITION AMOUNTING TO RS.71,960/- GR ANTING RELIEF OF RS.5,27,704/- TO THE ASSESSEE. IN OUR HUMBLE UNDER STANDING THE ENTIRE SHORT CASH CANNOT BE ADDED AS INCOME OF ASSE SSEE IN A PECULIAR SITUATION WHEN ADDITION OF RS.10,89,102/- HAS BEEN MADE AND CONFIRMED BY THE CIT(A) ON ACCOUNT OF ESTIMATI ON OF GP RATE @12%, THEREFORE THE CONCLUSION DRAWN BY THE CIT(A) ON THE ISSUE OF SHORTAGE OF CASH IS QUITE JUSTIFIED AND WELL FOUNDE D AND THUS WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH TH E SAME. ACCORDINGLY GROUND NO.2 OF THE REVENUE HAVING NO SU BSTANCE IS DISMISSED. GROUND NO.3 14 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES. T HE LD. DR SUPPORTING THE ASSESSMENT ORDER SUBMITTED THAT THE ASSESSEE HAS SHOWN BOGUS LIABILITY OF RS.7,92,046/- WHICH WAS SH OWN AS SUNDRY CREDITORS. THE LD. DR FURTHER SUBMITTED THAT OUT O F ALLEGED PARTIES 4 PARTIES WERE NOT FOUND AT THE ADDRESSES GIVEN BY THE ASSESSEE AND RETURNED THE NOTICES RECEIVED/RETURNED BACK/UNSERVE D BY THE POSTAL DEPARTMENT. THE LD.DR FURTHER SUBMITTED THA T ANOTHER TWO PARTIES I.E. MRS. HEMLATA JHANJHRI, BARNAGAR ONLY C ONFIRMED THE OUTSTANDING AMOUNT OF RS.75,000/- AS AGAINST RS.1,7 5,000/- SHOWN BY THE ASSESSEE AND ANOTHER CREDITOR M/S. MAR ATHWADA SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 11 OF 13 KRISHI UDHYOG, PARBHANI DENIED HAVING ANY OUTSTANDI NG AMOUNT AGAINST THE ASSESSEE, THEREFORE ADDITION MADE ON AC COUNT OF ABOVE FACTS WAS CORRECT AND SUSTAINABLE. THE LD. DR VEHE MENTLY, POINTED OUT THAT THE CIT(A) GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY REASONABLE CAUSE THEREFORE, THE FIRST APPELLATE ORD ER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE A.O. 15 . REPLYING TO THE ABOVE, THE LD. AR DREW OUR ATTENT ION TOWARDS RELEVANT PARA 4.3 AT PAGE 40 OF THE FIRST APPELLATE ORDER AND SUBMITTED THAT THE APPELLANT HAS FURNISHED COMPLETE DETAILS LIKE PAN NO, ADDRESSES, DETAILS OF TRANSACTION, PAYMENT RECEIVED THROUGH BANK BEFORE THE AO, WHICH WAS ALSO VERIFIAB LE FROM THE BANK STATEMENT OF THE ASSESSEE. THEREFORE, IN VIEW OF THE RATIO OF THE ORDER OF ITAT, KOLKATA IN THE CASE OF RAMSESH S INGH V/S ITO, ITA NO.2254/KOL/2013, THE AO WAS NOT JUSTIFIED IN M AKING ADDITION IN RESPECT OF OUTSTANDING BALANCE WHICH DOES NOT BE LONG TO THE YEAR UNDER CONSIDERATION AND VERIFIABLE FROM THE RECORD. THE LD.AR SUBMITTED THAT THE CIT(A) HAS DELETED THE ADDITION ON JUSTIFIED BASIS THEREFORE THE FIRST APPELLATE ORDER MAY KINDLY BE U PHELD. 16 . ON CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE ASSESSEE FURNISHED COMPLETE DETAILS L IKE PAN, ADDRESSES, DETAILS OF TRANSACTIONS, ORIGINAL PURCHA SED BILLS, EVIDENCE OF PAYMENT MADE THROUGH BANK ALONGWITH COPY OF BANK STATEMENT FOR VERIFICATION PERTAINING TO ALL 6 ALLEGED PARTIE S AND AO MADE THE ADDITION IN RESPECT OF OUTSTANDING BALANCE WHICH DO ES NOT BELONG TO THE YEAR UNDER CONSIDERATION, ASSESSMENT YEAR 2011- 12 AND THESE SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 12 OF 13 FACTS ARE ALSO VERIFIABLE FROM THE RECORD. IN THE BACKDROP OF ABOVE FACTS AND CIRCUMSTANCES, WE ARE INCLINED TO HOLD TH AT THE CIT(A) IS RIGHT IN DELETING THE ADDITION BY HOLDING RATIO OF ORDER OF ITAT, KOLKATTA IN THE CASE OF RAMSESH SINGH V/S ITO (SUPR A), WHEREIN IT WAS HELD THAT THE GENUINENESS OF CREDIT ENTRY DID N OT ARISE IN THE CURRENT YEAR WHEN THE OUTSTANDING BALANCES REFLECTE D AS PAYABLE TO THE SUNDRY CREDITORS WHERE THE OPENING BALANCES WHI CH HAD BEEN CARRIED FORWARD FROM THE PREVIOUS YEAR. ON THE BAS IS OF FORGOING DISCUSSIONS WE REACHED TO THE LOGICAL CONCLUSION TH AT WHEN THE DEPARTMENT HAS ACCEPTED THE BALANCE OUTSTANDING AT THE END OF THE PREVIOUS YEAR THEN IT WAS NOT OPEN TO THE AO TO MAK E ADDITION ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE THE GE NUINENESS OF SAID TRANSACTIONS WHICH WERE NOT UNDERTAKEN AND DO NOT BELONG TO THE YEAR UNDER CONSIDERATION. ACCORDINGLY, GROUND NO.3 OF THE REVENUE BEING DEVOID OF MERITS IS ALSO DISMISSED. 17 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED BY UPHOLDING THE ORDER OF CIT(A), WHEREIN PART RELIEF WAS GRANTE D TO THE ASSESSEE. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.9.2017 . SD/- SD/- (O.P. MEENA) (CHANDRA MOHAN GARG) /ACCOUNTANT MEMBER / JUDICIAL MEMBER INDORE; DATED : 28/09/2017 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER SHRI RAJENDRA SARAF V ACIT-2(1) ITA NO.1039/IND/201 6 ASSESSMENT YEAR 2011-12 PAGE 13 OF 13 ASSISTANT REGISTRAR, INDORE