M/s. Kapoor Lamp Shade Co., New Delhi V. ACIT, New Delhi

ITA 748/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77659 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 13-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 14-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N BHATIA
• Keywords: Unexplained investment; Document seized; Documents seized
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D : NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOU NTANT MEMBER ITA NO. 1126/DEL/2012 ASSESSMENT YEAR: 2008-09 ACIT, VS. M/S. KAPOOR LAMP SHADE CO. CIRCLE 31 (1), C.R. BLDG., SHOP NO. 22, LOK NAYAK BHAWAN, I.P. ESTATE, KHAN MARKET, NEW DELHI 110 017. NEW DELHI. ( PAN AAAFK6123G) (APPELLANT) (RESPONDENT) AN D ITA NO. 748/DEL/2012 ASSESSMENT YEAR: 2008-09 M/S. KAPOOR LAMP SHADE CO. VS. ACIT, SHOP NO. 22, LOK NAYAK BHAWAN, CIRCLE 31(1), C.R. BLDG., KHAN MARKET, NEW DELHI 110 017. I.P. ESTATE, NEW DELHI. (PAN AAAFK6123G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.N. BHATIA, DR RESPONDENT BY : SHR I SALIL AGARWAL, ADVOCATE AND SHAILESH GUPTA, CA ORDER PER I.C. SUDHIR, JUDICIAL MEMBER ITA NO. 1126/DEL/12 THE REVENUE HAS QUESTIONED THE FIRST APPEL LATE ORDER ON THE FOLLOWING GROUNDS :- (A) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 88,01,369 /- U/S 69 OF INCOME TAX ACT ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK O N THE BASIS OF DIFFERENCE BETWEEN THE CLOSING STOCK AS PER COMPUTE RIZED BOOKS OF ACCOUNT AND ACCOUNTS MANUALLY PREPARED? (B) WHETHER IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 22,52,2 70/- ON ACCOUNT OF UNDER STATEMENT OF GROSS PROFIT RATE? ITA NOS. 1126,748/DEL/2012 2 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW MATERIA L AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE F IRM IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF FANCY LIGHTS, CHANDELIERS, TAB LE AND PEDESTAL LAMPS, CEILING FANS AND ACCESSORIES. THE SHOP PREMISES WAS SUBJECT ED TO SURVEY U/S 131A OF THE ACT ON 28.2.2008. DURING THE COURSE OF SURVEY P ROCEEDINGS A TRADING ACCOUNT WAS PREPARED AND PHYSICAL STOCK INVENTORY LYING AT THE SHOP PREMISES WAS DRAWN. THEY ALSO RECORDED STATEMENT OF SHRI GOPINAT HAN, MANAGER OF THE ASSESSEE FIRM AS NONE OF THE PARTNERS WERE PRESENT DURING THE SURVEY. IN HIS STATEMENT SHRI GOPINATHAN COULD NOT EXPLAIN THE DIF FERENCE OF RS. 37,42,955/- FOUND DURING THE SURVEY PROCEEDINGS ALSO SHOWED HIS INABILITY TO COMMENT ON THE TRADING ACCOUNT, PROFIT AND LOSS ACCOUNT PREPARED D URING SURVEY PROCEEDINGS, WHICH WAS COMPUTERISED AND OTHER PREPARED MANUALLY. BEING NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE AO ADDED THE A MOUNT OF RS. 99,51,768/- ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE ACT . WITHOUT PREJUDICE TO THIS ADDITION THE AO NOTED THAT EVEN OTHERWISE THE DIFFE RENCE IN PHYSICAL STOCK FOUND ON THE DATE OF SURVEY WITH THE SO CALLED REGULAR BO OKS OF ASSESSEE STANDS AT RS. 11,50,399/- (RS. 25,92,553/- - RS. 14,42,154/-). TH E AO NOTED FURTHER THAT THE UNDERSTATEMENT OF GP WILL BE ON SALES EFFECTED BY THE PARTY OUTSIDE THE BOOKS AMOUNTING TO THE CLOSING STOCK AS PER THE COMPUTERI ZED ACCOUNTS VALUED TO RS. ITA NOS. 1126,748/DEL/2012 3 1,13,93,922/- MINUS THE STOCK FOUND PHYSICALLY AT T HE TIME OF SURVEY AMOUNTING TO RS. 25,92,553/- WHICH COMES TO RS. 88,01,369/-. THE LD. CIT(A) HAS DELETED THIS ADDITION OF RS. 88,01,369/- MADE BY THE AO U/S 69 OF THE ACT ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK ON THE BASIS OF DIF FERENCE BETWEEN THE CLOSING STOCK AS PER THE COMPUTERIZED BOOKS OF ACCOUNTS AN D ACCOUNTS MANUALLY PREPARED. 4. IN SUPPORT OF THE GROUND THE LD. DR HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE HAS REFERRED CONTENTS OF PARA NO. 4.6 OF THE ASSESSMENT ORDER WHEREIN DETAILS OF STOCK RECORDED IN COMPUTER AND MANUALLY RECORDED IN THE BOOKS HAVE BEEN GIVEN AND DISCUSSED. HE SUBMITT ED THAT DURING THE COURSE OF SURVEY PROCEEDINGS A COMPUTERIZED STOCK INVENTOR Y AND PHYSICAL INVENTORY WAS MADE. AS PER PHYSICAL INVENTORY THE VALUE OF TH E STOCK COMES TO RS. 51,85,107/-, WHEREAS AS PER COMPUTERIZED BOOKS OF A CCOUNTS THE VALUE OF STOCK COMES TO RS. 1,13,93,922/-. THE DIFFERENCE BETWEEN THE TWO COULD NOT BE EXPLAINED BY THE ASSESSEE. THE LD. CIT(A) WAS THUS NOT JUSTIFIED IN DELETING THE ADDITIONS MADE ON THIS ACCOUNT. 5. LD. AR ON THE OTHER HAND TRIED TO JUSTIF Y THE FIRST APPELLATE ORDER ON THE ISSUE. HE SUBMITTED THAT WHILE VALUING THE STOCK TH E DEPARTMENT HAS NOTED THE MARKED VALUE ON MRP BASIS. HE SUBMITTED THAT SALES ON COMPUTERIZED BOOKS OF ACCOUNT MAINTAINED BY SALES MANAGER WAS TAKEN TO WO RK OUT THE DIFFERENCE IN STOCK, WHEREAS SURVEY TEAM HAS WORKED OUT THE VALUE OF STOCK ON THE BASIS OF ITA NOS. 1126,748/DEL/2012 4 MANUALLY PREPARED ACCOUNT. IN THIS REGARD HE REFERR ED CONTENTS OF PAGE NO. 8 LAST BUT ONE PARA OF THE ASSESSMENT ORDER IN SUPPOR T. 6. THE LD. AR REFERRED PAGE NO. 281 TO 566 OF THE PAPER BOOK VOLUME 2 FILED ON BEHALF OF THE ASSESSEE, WHICH ARE COPIES OF STOC K LIST PREPARED BY THE DEPARTMENT ON THE DATE OF SURVEY; FIRST APPELLATE O RDERS AND ORDERS OF THE TRIBUNAL FOR PREVIOUS YEARS ; LIST OF CLOSING STOCK PASSED ON PURCHASE PRICE ON THE BASIS OF WHICH THERE IS NO DIFFERENCE IN CLOSING ST OCK; ASSESSMENT ORDER IN THE CASE OF SHRI RANJAN KAPOOR FOR ASSTT. YEAR 2008-09, WORKING SHOWING SALES FIGURE TALLYING WITH THE SALES TAX RETURNS AND THE SEIZED MATERIAL; LIST SHOWING RANDOMLY SELECTED ITEMS IN THE STOCK VIS A VIS THE BOOKING A CCOUNTS ; AND AFFIDAVIT OF SHRI GOPINATHAN. HE SUBMITTED THAT THE SALESMAN SHRI GOP INATHAN IS NOT AN ACCOUNTANT WHO HAS ADOPTED TAG PRICE OF THE GOODS H ENCE ACCOUNT MAINTAINED BY HIM CANNOT BE TREATED AS RELIABLE. THE LD. AR HA S REFERRED PAGE NO. 256 OF THE PAPER BOOK TO SUPPORT HIS CONTENTION THAT THE S URVEY OFFICIALS HAS THE STOCK BASED BY THE TAG PRICE AND THAT THE RECONCILIATION MADE BY THE ASSESSEE HAS NOT REBUTTED BY THE AO. IN SUPPORT HE REFERRED PAGE NO. 255 TO 260 OF THE PAPER BOOK WHICH IS EXPLANATION OF THE ASSESSEE TO THE AS SESSING OFFICER WITH INFORMATION REGARDING THE ACCOUNTS IN THE SEIZED MA TERIAL AND AS PREPARED BY SHRI GOPINATHAN, MANAGER SALES. HE SUBMITTED FURTHE R THAT IN THE LAST YEAR AND SUBSEQUENT YEAR THE AO HAS ACCEPTED THE CLOSING STO CK DECLARED BY THE ASSESSEE. LD. AR PLACED RELIANCE ON THE DECISION OF HONBLE REJASTHAN HIGH COURT ITA NOS. 1126,748/DEL/2012 5 IN THE CASE OF .97 DTR 194 (RAJ.) THE LD. AR AL SO REFERRED THE RELEVANT CONTENTS OF THE FIRST APPELLATE ORDER REITERATING S UBMISSIONS MADE ON BEHALF OF THE ASSESEE BEFORE THE LD. CIT(A). HE CONTENDED THA T THE LD. CIT(A) WHILE ALLOWING THE RELIEF OF RS. 8801369/- WAS NOT JUSTIF IED IN SUSTAINING THE ADDITION OF RS. 11,50,399/- OUT OF THE TOTAL ADDITION OF RS. 99 51768/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE ACT . 7. AFTER CONSIDERING THE ABOVE SUBMISSION WE FI ND THAT THE ISSUE FOR ADJUDICATION BEFORE US IS AS TO WHETHER THE AO WAS JUSTIFIED IN MAKING ADDITION U/S 69 OF THE ACT THE AMOUNT IN DIFFERENCE BETWEEN THE TRADING ACCOUNT PREPARED MANUALLY AND THAT OF THE ONE WHICH IS PREPARED ON T HE COMPUTERS. THE AO WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE THAT THE COMPUTERIZED STATEMENT WHICH WAS ALSO SEIZED DURING THE COURSE OF THE SURVEY PROCEEDINGS REFLECTING THE OPENING STOCK AND CLOSING STOCK AT RS. 72,46,905/- AND RS. 1,13,93,922/- DOES NOT REPRESENT THE TWO ACCOUNTS A S THE SAME HAS BEEN PREPARED BY THE SALESMAN FOR HIS OWN PURPOSE. THE A O ALSO BRUSHED ASIDE WITHOUT GIVING ANY REASONS, THE SUBMISSION OF THE A SSESSEE THAT SHRI GOPINATHAN SALES MANAGER HAD NO KNOWLEDGE OF ACCOUNTS AND HIS NOTINGS AND RECORD OF PURCHASE AND SALES AND STOCK ARE UNFOUNDED AND CAN NOT BE RELIED UPON BECAUSE THE SAME DOES NOT REPRESENT TWO ACCOUNTS. IT IS PER TINENT TO MENTION OVER HERE THAT THE AO WAS OF THE VIEW THAT THE ASSESSEE WAS M AINTAINING SEPARATE AND PARALLEL BOOKS OF ACCOUNTS AND FURTHER THAT THE COM PUTERISED SET OF ACCOUNTS ARE ITA NOS. 1126,748/DEL/2012 6 A TENABLE COMPLETE SET OF ACCOUNTS AND CONTAINS ALL THE DETAILS AND ELABORATE ACCOUNT OF THE WORKING OF THE ASSESSEE. THE AO HELD THE COMPUTERISED SEIZED DOCUMENTS SHOWING THE CLOSING STOCK TO BE THE ACTUA L STOCK WHICH SHOULD HAVE BEEN IN THE BOOKS OF ACCOUNTS. THE PHYSICAL INVENTO RY OF STOCK PREPARED ON THE DATE OF SURVEY AMOUNTING TO RS. 5185307/- DURING TH E COURSE OF SURVEY PROCEEDINGS A COMPUTERISED STOCK INVENTORY ALONGWIT H PHYSICAL INVENTORY WAS MADE AND AS PER THE PHYSICAL INVENTORY THE VALUE OF THE STOCK COMES TO RS. 5185107/-. WE FIND THAT ACCEPTING THE TAX AUDIT REP ORT AS PER WHICH THE METHOD OF VALUATION OF STOCK IS AT COST OR MARKET VALUE W HICHEVER IS LESS AND TO ARRIVE AT THE VALUE OF STOCK IS AT THE TIME OF SURVEY THE VAL UATION OF STOCK HAS BEEN REDUCED BY 50% AND THE ACTUAL COST HAS BEEN WORKED OUT TO RS. 25,92,553/-. THE AO HELD THAT THE NARRATION MENTIONED AT THE TIM E OF STOCK TAKING DURING SURVEY AND THE QUANTITY FOUND AVAILABLE AS PER BOO KS AT THE TIME OF SURVEY DO NOT MATCH COMPLETELY. HE THEREFORE HELD THAT SURVEY HAS NOT RESULTED INTO A TRUE AND CORRECT PICTURE OF THE ACCOUNTS OF THE ASSESSEE AND WHICH FURTHER GIVE SUPPORT TO THE VIEW THAT THE ASSESSEE IS ENGAGED IN TRADING ACTIVITIES OUTSIDE THE BOOKS OF ACCOUNTS FOR THE REASONS THAT THE INVENTOR Y FOUND DURING THE SURVEY DO NOT TALLY WITH THE BOOKS MAINTAINED BY THE ASSESSEE IN TERMS OF QUANTITY AND VALUE AND THAT THE VALUE OF INVENTORY FOUND DURING THE COURSE OF SURVEY IS OF SUBSTANTIAL LARGE VALUE AS COMPARED TO STOCK AVAILA BLE IN BOOKS WHICH CONFIRMS THAT ASSESSEE IS MAKING SALES OUTSIDE BOOKS OF ACCO UNTS. ACCORDINGLY ADDED THE ITA NOS. 1126,748/DEL/2012 7 SALE OF AMOUNT IN DIFFERENCE BETWEEN THE CLOSING ST OCK AS PER THE COMPUTERISED BOOKS OF ACCOUNTS AND MANUALLY PREPARED ACCOUNTS U/ S 69 OF THE ACT AT RS. 99,51,768/- AS AN UNEXPLAINED INVESTMENT. LD. CIT(A ) WHILE RESTRICTING THE ADDITION TO RS. 88,01,369/- HAS GIVEN THE FOLLOWIN G FINDINGS :- 6. I HAVE CONSIDERED THE FACTS OF THE CASE, FINDIN GS RECORDED BY THE ASSESSING OFFICER AND THE SUBMISSIONS MADE BY THE A R OF THE APPELLANT AND ALSO THE JUDGMENTS RELIED UPON BY HIM. I FIND T HAT THE MAIN ISSUE INVOLVED IN THIS CASE IS THE DIFFERENCE BETWEEN THE TRADING ACCOUNT PREPARED MANUALLY AND THAT OF THE ONE WHICH IS PREP ARED ON THE COMPUTER. BOTH THE ASSESSING OFFICER AND THE APPELL ANT AGREED ON ONE ISSUE THAT THE ACCOUNTS AS PER THE SEIZED COMPUTER ARE TENABLE AND REPRESENTED THE TRUE BOOKS OF ACCOUNT OF THE APPELL ANT FROM WHICH TAXABLE PROFITS OF THE APPELLANT CAN BE DEDUCED. THE ASSESS ING OFFICER HOWEVER, WAS NOT CONVINCED WITH THE EXPLANATION OF THE APPEL LANT THAT THE COMPUTERIZED STATEMENT WHICH WAS ALSO SEIZED DURING THE COURSE OF THE SURVEY PROCEEDINGS REFLECTING THE OPENING STOCK AND CLOSING STOCK AT RS. 72,46,905/- AND RS. 113,93,922/- DOES NOT REPRESENT THE TRUE ACCOUNTS AS THE SAME HAS BEEN PREPARED BY THE SALESMAN FOR HIS OWN PURPOSE. THE ASSESSING OFFICER ALSO BRUSHED ASIDE WITHOUT GIVING ANY REASONS THE SUBMISSION OF THE APPELLANT THAT SHRI GOPINATHAN, S ALES MANAGER HAD NO KNOWLEDGE OF THE ACCOUNTS AND HIS NOTINGS AND RECOR DING OF PURCHASES AND SALES AND STOCK ARE UNFOUNDED AND CANNOT BE REL IED UPON BECAUSE THE SAME DOES NOT REPRESENT THE TRUE ACCOUNTS. THE APPE LLANT HAS GIVEN THE FOLLOWING REASONS AND JUSTIFICATION IN SUPPORT OF I TS SUBMISSIONS, WHICH THE ASSESSING OFFICER HAS NOT CONSIDERED AT ALL WHICH A RE GIVEN BELOW: A) THE PROFIT AND LOSS ACCOUNT AS PREPARED BY TH E SAID SALESMAN IS INCOMPLETE AND SHOWS A GROSS PROFIT OF RS. 31,54,73 4/- AND THE SALES OF RS. 318,28,241/- WHICH IN TURN SHOWS A GROSS PROFIT MARGIN OF 9.93%. THE ASSESSEE ON THE OTHER HAND HAS BEEN SHOWING A GROSS PROFIT IN THE PAST AT AROUND 27% TO 28% AND DURING THE YEAR UNDER REFEREN CE, THE SAME HAS BEEN SHOWN AT 30%. IN CASE, THESE ACCOUNTS ARE THE REAL ACCOUNTS THE GROSS PROFIT RATIO WOULD HAVE BEEN 9.93% AND NOT 30 %. B) SIMILARLY, THE NET PROFIT IN THE PROFIT AND LO SS ACCOUNT HAS BEEN SHOWN AT 7.82 LACS WHEREAS THE ASSESSEE HAS DECLARED THE NET PROFIT OF RS. 36.01 LACS. CONSIDERING THE RATIO THEREOF IT CAN BE INFER RED THAT THE ASSESSEE HAS DECLARED A NET PROFIT OF 10.38%. ON THE BASIS OF AC COUNTS, SEIZED BY THE ITA NOS. 1126,748/DEL/2012 8 DEPARTMENT WHILE AS PER RECORDING OF MR. GOPINATHAN (SALES MANAGER) THE NET PROFIT RATIO COMES TO 2.4% ONLY. 6.1 ON PERUSAL OF THE ASSESSMENT ORDER I F IND THAT THE ASSESSING OFFICER WAS NOT CONVINCED WITH ANY EXPLANATION AND SUBMISSIONS OF THE APPELLANT AS HE TOOK A VIEW THAT THE IMPOUNDED DOCU MENTS I.E. ACCOUNTS AS PER THE SEIZED COMPUTER AND THE ACCOUNTS AS PER THE COMPUTERIZED STATEMENTS PERTAINS TO A SEPARATE AND PARALLEL BOOK S OF ACCOUNT MAINTAINED BY THE APPELLANT AND THAT THE APPELLANT HAS BEEN MAKING UNEXPLAINED INVESTMENT IN STOCK AND ALSO DOING SALE S OF THE SAME OUTSIDE THE BOOKS OF ACCOUNT. 6.2 I ALSO FIND THAT THERE ARE SEVERAL OTHER FACT ORS WHICH GO TO SHOW THAT THE STATEMENT OF ACCOUNTS PREPARED BY THE SALES MAN AGER, THOUGH PERTAINING TO THE SAME ITEM AS DISCLOSED IN THE BOO KS OF ACCOUNT, WERE NOT OF SUCH AN NATURE WHICH CAN BE CATEGORIZED AS BOOKS OF ACCOUNT MAINTAINED IN THE REGULAR COURSE OF BUSINESS. THE S TATEMENT OF ACCOUNTS PREPARED BY THE SALES MANAGER WAS ALSO INCOMPLETE A S THERE WERE SO MANY OTHER HEADS OF INCOME/EXPENDITURE WHICH WERE N OT MENTIONED IN THIS STATEMENT WHEREAS IN THE ACCOUNTS AS PER THE S EIZED COMPUTER EACH AND EVERY HAD OF INCOME/EXPENDITURE HAS BEEN MENTIO NED. 6.3 KEEPING IN VIEW ALL THE ABOVE FACTS AND ON A CONSIDERATION OF THE SUBMISSIONS OF THE AR OF THE APPELLANT AS WELL AS T HE DOCUMENTS/MATERIAL ON RECORD., I HOLD THAT THE ASSESSING OFFICER WAS N OT JUSTIFIED IN MAKING THE ADDITION OF RS. 99,51,768/-U/S 69 INCOME TAX AC T 1961 ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK ON THE BASIS OF THE DIFFERENCE BETWEEN THE CLOSING STOCK AS PER COMPUTERIZED BOOKS OF ACCO UNT AND THE ACCOUNTS MANUALLY PREPARED. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. 6.4. DURING THE SURVEY PROCEEDINGS, AFTER THE VAL UATION OF THE STOCK WAS REDUCED BY 50% THE ASSESSING OFFICER CALCULATED THE ACTUAL COST AT RS. 25,92,553/-. IN THE APPELLATE PROCEEDINGS, THE APPE LLANT HAS NOT MOVED ANY GROUND PERTAINING TO THE ABOVE. HOWEVER, AS PER THE ASSESSING OFFICER THE DIFFERENCE IN THE PHYSICAL STOCK FOUND ON THE D ATE OF SURVEY WITH THE REGULAR BOOKING ACCOUNTS STOCK WORKED OUT BY THE AS SESSING OFFICER IS TREATED AS ALES MADE BY THE APPELLANT OUTSIDE THE B OOKS AND INVESTMENT MADE U/S 69 OF THE ACT, 1961. WHILE WORKING OUT THE G.P. ALSO, THE ASSESSING OFFICER HAS TAKEN INTO ACCOUNT THE DIFFER ENCE OF RS. 11,50,399/- WHICH HE DEDUCTED FROM RS. 99,51,768/- TAKEN AS UNE XPLAINED INVESTMENT U/S 69 OF THE IT ACT. HOWEVER, IT IS SEEN THAT THE AMOUNT OF ITA NOS. 1126,748/DEL/2012 9 RS.11,50,399/- HAS BEEN INADVERTENTLY LEFT OUT FROM BEING INCLUDED AS UNEXPLAINED INVESTMENT U/S 69 OF THE I.T. ACT. THER EFORE, A SHOW CAUSE LETTER DATED 29.11.2011 WAS ISSUED TO THE AR OF THE APPELLANT WHICH REMAINED UNANSWERED. THEREFORE, AN AMOUNT OF RS. 11 ,50,399/- IS BEING ADDED UNEXPLAINED INVESTMENT U/S 69 OF THE I.T. ACT , 1961. 6.5 AS REGARDS THE ADDITION OF RS. 22,52,270/- ON ACCOUNT OF GROSS PROFIT ON SALES EFFECTED OUT OF UNEXPLAINED STOCK BY APPLY ING THE AVERAGE GP RATE OF THE LAST THREE PRECEDING YEARS IS ALSO NOT SUSTAINABLE SINCE I HAVE HELD IN THE AFORESAID PARAGRAPHS THAT THERE IS NOT UNEXPLAINED INVESTMENT IN THE STOCK. ACCORDINGLY, THIS ADDITION MADE BY T HE ASSESSING OFFICER IS ALSO DELETED. 8. WE FIND FROM THE FINDING OF LD. CIT(A) ON THE ISSUE MENTIONED ABOVE THAT HE HAS NOT TREATED THE STATEMENTS OF ACCOUNTS PREPARED BY THE SALES MANAGER AS BOOKS OF ACCOUNTS MAINTAINED IN THE REGU LAR COURSE OF BUSINESS ON THE BASIS THAT IT WAS INCOMPLETE AS THERE WAS SO MA NY HEADS INCOME / EXPENDITURE WHICH WAS NOT MENTIONED IN THAT STATEM ENT WHEREAS IN THE ACCOUNTS AS PER THE SEIZED COMPUTER EACH AND EVERY HEADS OF INCOME / EXPENDITURE WAS MENTIONED. HE HAS ALSO MENTIONED AB OUT THE REASONS AND WHICH HAS BEEN FURNISHED BY THE ASSESEE IN SUPPORT OF ITS EXPLANATION WHICH HAVE NOT BEEN CONSIDERED BY THE AO. HE HAS REPRODUCED THESE REASONS IN PARA NO. 6 ON PERUSAL OF WHICH WE FIND SUBSTANCE IN THE EXPLANATI ON OF THE ASSESSEE THAT THERE WAS NO ANY REASON TO MAKE ADDITION ON ACCOUNT OF UN EXPLAINED INVESTMENT IN STOCK ESPECIALLY WHEN THE STATEMENT OF ACCOUNTS PRE PARED BY THE SALES MANAGER WAS NOT MAINTAINED IN THE REGULAR COURSE OF BUSINES S HENCE IT WAS NOT RELIABLE AND THE BOOKS OF ACCOUNTS WERE ALSO NOT PROPERLY MA INTAINED THEN THE ONLY ITA NOS. 1126,748/DEL/2012 10 OPTION OR MAKING A JUST STATEMENT WAS TO ESTIMATE T HE PROFIT ON THE BASIS OF PAST TRADING RESULT OF THE ASSESSEE. IN THIS REGARD SUBM ISSION OF ASSESSEE HAS REPRODUCED BY THE LD. CIT(A) IN PARA NO. 6 OF THE F IRST APPELLATE ORDER IS THAT THE ASSESSEE WAS SHOWING A GROSS PROFIT IN THE PAST A T AROUND 27% TO 28% AND DURING THE YEAR UNDER REFERENCE THE SAME HAS BEEN SHOWN AT 30%. IT HAS BEEN ALSO POINTED OUT BY THE ASSESSEE THAT IN CASE PROFI T AND LOSS ACCOUNT AS PREPARED BY THE SAID SALESMAN STATED AS THE REAL ACCOUNT. GR OSS PROFIT RATE WOULD BE 9.93% AND NOT 30%. IN THE SAID ACCOUNT PREPARED BY THE SALESMAN GROSS PROFIT OF RS. 3154734/- AND SALES OF RS. 31828241/- HAVE B EEN SHOWN. SIMILARLY THE NET PROFIT IN THE PROFIT AND LOSS ACCOUNT HAS BEEN SHOW N AS RS. 7.28 LACS WHEREAS THE ASSESSEE HAS DECLARED A NET PROFIT OF RS. 36.01 LAC . THUS THE ASSESSEE HAS DECLARED A NET PROFIT OF RS. 10.38% WHEREAS ON THE BASIS OF ACCOUNTS SEIZED BY THE DEPARTMENT AS PER RECORDING OF THE SALES MANAGE R, THE NET PROFIT RECEIVED COMES TO 2.4% ONLY. THESE FACTS HAVE NOT BEEN REBUT TED BY THE DEPARTMENT BEFORE THE TRIBUNAL. UNDER THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THERE WAS NO REASON BEFORE THE AO TO MAKE ADDITION OF RS . 99,51,768/- U/S 69 OF THE ACT ON ACCOUNT OF UNEXPLAINED INVESTMENT OR SUSTAI NING THE ADDITION OF RS. 11,50,399/- BY THE LD. CIT(A) IN THAT ACCOUNT OUT O F THE ADDITION MADE BY THE AO NOR WAS THERE ANY REASON BEFORE THE AO TO MAKE A DDITION OF RS. 22,52,270/- ON ACCOUNT OF GROSS PROFIT ON SALES EFFECTED OUT OF UNEXPLAINED STOCK BY APPLYING THE AVERAGE PERIOD OF THE LAST THREE PRECEDING YEA RS, WHICH HAS RIGHTLY BEEN ITA NOS. 1126,748/DEL/2012 11 DELETED BY THE LD. CIT(A). IT IS ORDERED ACCORDINGL Y. THE GROUNDS ARE THUS REJECTED. IN THE RESULT APPEAL IS DISMISSED. ITA NO. 748/DEL/2012 9. THE ASSESSEE HAS IMPUGNED FIRST APPELLATE ORDER SOLELY ON THE GROUND THAT THE LD. CIT(A) IS UNJUSTIFIED IN SUSTAINING TH E ADDITION OF RS. 11,50,399/- ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE ACT ON THE BASIS OF CALCULATION OF THE SURVEY OFFICIALS WHO HAVE INCORRECTLY CALCUL ATED A HIGHER VALUE OF STOCK. WE HAVE ALSO DEALT WITH THIS ISSUE HEREINABOVE IN THE APPEAL PREFERRED BY THE REVENUE. IN THE CONNECTED MATTER OF VALIDITY OF ADD ITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) ON ACCOUNT OF UNEXPLAIN ED INVESTMENT U/S 69 OF THE ACT DUE TO DIFFERENCE IN STOCK FOUND DURING THE COU RSE OF SURVEY AS PER THE ACCOUNTS MAINTAINED BY THE SALES MANAGER, BOOKS OF ACCOUNTS AND PHYSICAL VERIFICATION, IN VIEW O THE DECISION TAKEN ON IDENT ICAL ISSUE IN THE ABOVE APPEAL PREFERRED BY THE REVENUE THE PRESENT GROUND IS ALLO WED. IN THE RESULT APPEAL IS ALLOWED. CONSEQUENTLY APPEAL PREFERRED BY THE REVE NUE IS DISMISSED AND THAT PREFERRED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH .APRIL, 2014. SD/- SD/- (SHAMIM YAHYA) ( I.C. SUDH IR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 11 TH APRIL, 2014 ITA NOS. 1126,748/DEL/2012 12 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSISTANT REGISTRAR, ITAT