ITO, Jaipur V. SMT CHANCHAL LAKHI, Jaipur

ITA 829/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54171 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 24-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHRI
• Keywords: Unexplained cash credit; Unexplained investment; Loose papers; Additional evidence
• Section: 142(1); 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 829 JP/2010 ASSESSMENT YEAR 2006-07 PAN: AALPL 3465 F THE ITO VS. SMT. CHANCHAL LAKHI WARD 6 (1) 901, GANGA MATA KI GALI JAIPUR GOPAL JI KA RASTA, JAIPUR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI VINOD JOHRI ASSESSEE BY: SHRI P.C. PARWAL DATE OF HEARING: 17-08-2011 DATE OF PRONOUNCEMENT: 16-09-2011 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A), BIKANER (CAMP AT JAIPUR) DATED 31-03-2010 FOR THE ASSESSMENT YEAR 2006-07. 2.1 THE FIRST GROUND OF THE REVENUE IS THAT THE LD . CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 74,37,960/- MADE BY THE AO ON T HE BASIS OF LOOSE PAPERS FOUND DURING SURVEY. 2.2 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRAD ING OF PRECIOUS AND SEMI PRECIOUS STONES AT 901, IIND FLOOR, NARENDRA PLAZA, GANGA MATA STREET, GOPAL JI KA RASTA AS PROPRIETOR OF M/S KUSHBOOO JEWELLERS. THE FOLLOWING GROUP CONCERN ARE 2 ALSO ENGAGED IN THE SIMILAR BUSINESS FROM THE SAME PLACE EXCEPT M/S BIHARI LAL HOLA RAM WHICH IS AT 75, GOPAL JI KA RASTA, JOHARI BAZAR, JAIPUR:- (I) LAKHI GEMS (II) BIHARI LAL HOLARAM (III) SIDHARTH JEWELLERS (IV) ROYAL GEMS SOURCES 2.3 SURVEY U/S 133A WAS CARRIED OUT AT THE PREMISES OF ALL THESE CONCERN. IN SURVEY AFTER CONSIDERING THE PHYSICAL STOCK OF ALL THE CONCERN EXCESS STOCK WAS ARRIVED AT RS.1,79,35,023/-. THE ASSESSEE AFTER MAK ING ADJUSTMENT OF MISTAKES, OFFERED THE EXCESS STOCK IN M/S BIHARILAL HOLA RAM. THE AO HAS ALSO ASSESSED THE SAME IN THE HANDS OF BIHARI LAL HOAL RAM. THE POSIT ION OF THE ADDITION MADE BY THE AO IN VARIOUS CONCERNS IS AS UNDER:- PARTICULARS OF ADDITION LAKHI GEMS NEERAJ LAKHI BIHARI LAL HOLA RAM NARENDRA LAKHI CHANCHAL LAKHI ADDITIONS MADE :- TRADING ADDITION 1961376 444027 488290 705920 234337 DISALLOWANCE OF EXPENSES 200000 200000 100000 100000 100000 ADDITION ON THE BASIS OF LOOSE PAPERS FOR STOCK/INCOME 226810 3188738 13480435 600000 7437690 EXCESS STOCK 3603950 REFUND FROM RIICO 21000 UNEXPLAINED CASH CREDIT 2665000 TOTAL ADDITION 2343446 3853765 17672675 1405920 10487027 3 2.4 THE AO MADE THE ADDITION OF RS. 74,37,960/- ON THE BASIS OF THE LOOSE PAPERS FOUND DURING THE COURSE OF SURVEY. THE ADDIT ION MADE ON THE BASIS OF VARIOUS ANNEXURES IS AS UNDER:- S. N ANNEXURE NO AMOUNT REASON GIVEN BY AO 1. A-52 2,56,663/- AMOUNT AS PER PETTY CASH BOOK. ADDED U/S 68. 2. A-40 & 41 6,81,277/- APPROVAL MEMO CONSIDERED AS UNACCOUNTED STOCK. 3. A27-A30 50,00,000/- GOODS SENT ON APPROVAL, NOT QUANTIFIED BY ASSESSEE, HENCE ADDITION ESTIMATED. 4. A-58 4,08,816/- UNACCOUNTED CASH SALES. 5. A-56 5,00,000/- GOODS ARE SENT FOR APPROVAL BUT NOT RECORDED IN BOOKS OF ACCOUNTS. AMOUNT NOT QUANTIFIED BY ASSESSEE, HENCE ESTIMATED. 6. A-12 PAGE NO 14 & 15 1,62,962/- UNACCOUNTED CASH SALES 7. A-12 PAGE NO 5-8 81,538/- UNACCOUNTED CASH SALES 8. A-7 2,21,704/- GOODS SENT ON APPROVAL NOT RECORDED IN BOOKS. 9. A-45 PAGE NO. 62 1,25,000/- CASH SALES TO SHRI DEVE NDAR AGARWAL, VALUE ESTIMATED. 2.5 BEFORE THE LD. CIT(A), THE ASSESSEE FILED A CHA RT SHOWING THE REASONS GIVEN BY THE ASSESSEE FOR MAKING ADDITION AND EXPLANATION GIVEN BY THE ASSESSEE BEFORE THE AO. FOR READY REFERENCE, WE ARE REPRODUCING THE CHART AS UNDER:- 4 S. NO ANNEXURE NO AMOUNT REASON GIVEN BY AO EXPLANATION OF THE ASSESSEE 1. A-52 2,56,663/- THE EXPLANATION OF THE ASSESSEE THAT THIS REPRESENTS THE MOVEMENT OF THE CASH FROM RESIDENCE TO OFFICE IS NOT ACCEPTABLE. THE RECEIPTS ARE IN ROUND FIGURE BUT THE PAYMENTS ARE IN ODD FIGURE. ACCORDINGLY, HE MADE THE ADDITION FOR THE SAME U/S 68. THIS IS A MEMORANDUM CASH BOOK MAINTAINED BY THE STAFF FOR THE PERIOD 10-12-04 TO 26-06-2005. IN THIS MEMORANDUM BOOK IN THE CREDIT SIDE THE PAYMENT RECEIVED IS NOTED AND IN THE DEBIT SIDE THE PAYMENT MADE FOR THE PURCHASE/ EXPENSES ARE NOTED. THE BALANCE ON 26-06-2005 AS PER THIS BOOK IS RS.13982/-. HOW THE AO HAS MADE THE ADDITION OF RS.2,56,663/- IS NOT ASCERTAINABLE. THE CREDIT SIDE IN THIS CASH BOOK REPRESENT THE AMOUNT RECEIVED AGAINST THE GOODS SENT ON APPROVAL AS PER ANNEXURE A-28. THUS, WHEN INCOME IS SEPARATELY ESTIMATED ON THE BASIS OF ANNEXURE A-27 & A-28, ADDITION ON THE BASIS OF THE AMOUNT RECORDED IN THIS CASH BOOK CAN NOT BE AGAIN MADE SEPARATELY. OTHERWISE ALSO, AFTER CONSIDERING THE EXPENSES, THE BALANCE IS ONLY RS.13,982/- AND THEREFORE, ADDITION OF RS.2,56,663/- MADE BY THE AO IS INCORRECT. 2. A-40 & 41 6,81,277/- THIS REPRESENTS THE APPROVAL MEMO AS ADMITTED BY THE ASSESSEE. THEREFORE, THE SAME IS TREATED AS STOCK OUT OF BUSINESS PLACE/ UNRECORDED STOCK . THIS ANNEXURE CONTAINS THE SLIPS OF GOODS GIVEN ON APPROVAL. THE ASSESSEE HAS ALSO RECEIVED GOODS ON APPROVAL AS EVIDENT FROM ANNEXURE A-29 & A-30 DISCUSSED BELOW. THE GOODS HAVE BEEN SENT ON APPROVAL OUT OF THE GOODS RECEIVED ON APPROVAL. EVEN IF THESE GOODS SENT ON APPROVAL IS CONSIDERED AS SALE OF THE ASSESSEE ADDITION FOR ONLY A REASONABLE GP RATE CAN BE MADE. HENCE, THE ADDITION OF RS.6,81,277/- MADE BY THE AO IS UNJUSTIFIED AND THE SAME BE DELETED. 3. A27 TO A30 50 LACS THESE ARE THE GOODS SENT ON APPROVAL. ASSESSEE STATED THE SAME TO BE GOODS RECEIVED ON APPROVAL. THESE ARE NOT THE GOODS ANNEXURE A-27 & A-28 ARE SLIPS OF GOODS SENT ON APPROVAL WHEREAS ANNEXURE A-29 & A-30 ARE SLIPS OF GOODS RECEIVED ON APPROVAL. THIS IS EVIDENT FROM THE FACT THAT, WHEN GOODS ARE RECEIVED ON APPROVAL TWO SLIPS HAVING PRINTED SERIAL NO IS MADE. OUT OF 5 RECEIVED BUT GOODS SENT AS STATED IN THE NOTICE U/S 142(1) DATED 18-12-2008. THE AMOUNT IS NOT QUANTIFIED. ON THE BASIS OF THE VALUATION DONE BY THE VALUER, THE VALUE OF THE GOODS AS PER THESE ANNEXURE FOR THE YEAR UNDER CONSIDERATION IS ESTIMATED AT RS.50,00,000/- AND ADDED TO INCOME. WHICH ONE SLIP IS GIVEN TO THE CONCERNED PERSON AND ANOTHER SLIP IS RETAINED BY THE ASSESSEE. THEREFORE, THE SLIPS IN ANNEXURE A-29 & A-30 CONTAINED PRINTED SERIAL NO WHICH IS NOT THERE IN ANNEXURE A-27 & A-28. FURTHER, ANNEXURE A-27 & A-28 ARE IN RESPECT TO GOODS SENT ON APPROVAL IS EVIDENT FROM THE FACT THAT IN THESE ANNEXURE WHERE EVER THERE IS A RECORDING OF RECEIPT OF PAYMENT THE SAME IS FOUND ENTERED IN RECEIPT SIDE OF THE MEMORANDUM CASH BOOK AS PER ANNEXURE A-52 SUPRA. DETAIL IS AT PB 87-90. THE AMOUNT INVOLVED IN THESE ANNEXURES FOR THE YEAR UNDER CONSIDERATIONS IS AS UNDER:- ANNEXUREREMARK AMOUNT A-27 GOODS SENT ON APPROVAL 3,25,349/- A-28 GOODS SENT ON APPROVAL 10,10,992 /- TOTAL GOODS SENT ON APPROVAL 13,36, 341/- A-29 GOODS RECEIVED ON APPROVAL 26,13139/- A-30 GOODS RECEIVED ON APPROVAL 23,85,073/ - TOTAL GOODS RECEIVED ON APPROVAL 49,9 8,212/- THUS GOODS SENT ON APPROVAL AMOUNTS TO RS.13,36,341/- WHEREAS THE GOODS RECEIVED ON APPROVAL AMOUNT TO RS.49,98,212/-. THE GOODS WHICH ARE RECEIVED ON APPROVAL HAS BEEN PARTLY SENT ON APPROVAL AND PARTLY REMAINED IN STOCK. IT IS FOR THIS REASON THAT, IN COURSE OF SURVEY EXCESS STOCK WERE FOUND FOR WHICH ALREADY AN AMOUNT OF RS.1,35,61,270/- HAS BEEN ASSESSED IN CASE OF M/S BIHARI LAL HOLA RAM. HENCE, NO ADDITION ON THE BASIS OF THESE ANNEXURES CAN BE MADE IN THE HANDS OF THE ASSESSEE. OTHERWISE ALSO, WHEN THESE ARE APPROVAL MEMOS FOR GOODS RECEIVED, IN VIEW OF SECTION 292C THERE IS A PRESUMPTION THAT, CONTAINED OF SUCH PAPERS ARE TRUE. THEREFORE, ONCE IT IS ACCEPTED THAT, THESE ARE APPROVAL MEMO FOR GOODS RECEIVED NO ADDITION ON THE SAME CAN BE MADE. HENCE, THE ADDITION MADE BY THE AO, BE DELETED. 6 4. A-58 4,08,816/- THIS IS THE DETAILS OF THE CASH SALES DURING 02-07-05 TO 10-08- 05. THE ASSESSEE HAS NOT SURRENDERED ANY EXCESS STOCK AND THEREFORE THE AMOUNT OF RS.4,08,816/- IS TREATED AS UNACCOUNTED TRANSACTION AND ADDED TO THE INCOME. AO MADE THIS ADDITION ON THE BASIS OF PAGE 5 & 6 OF THIS ANNEXURE. THIS ANNEXURE ARE THE PAGES OF DIARY WRITTEN BY THE STAFF. ON PAGE 5 THE AMOUNT RECEIVED BETWEEN 2-07-05 TO 10-08-05 AMOUNTING TO RS.5,23,791/- IS NOTED AND ON PAGE 6 THE AMOUNT PAID BETWEEN 06- 07-05 TO 10-08-05 AMOUNTING TO RS.5,07,456/- IS NOTED. THESE ARE ONLY THE ROUGH NOTING MADE BY THE STAFF FROM WHICH NO INCOME CAN BE ASCERTAINED. HOW THE AO HAS WORKED OUT THE ADDITION AT RS.4,08,816/- IS NOT ASCERTAINABLE. THIS ANNEXURE NO WHERE REFLECT ANY DETAIL OF CASH SALE. FURTHER, WHEN THE ENTIRE EXCESS STOCK FOUND IN SURVEY IS ALREADY TAXED IN THE CASE OF M/S BIHARI LAL HOLA RAM NO SEPARATE ADDITION ON THE BASIS OF THIS ANNEXURE CAN BE MADE IN THE HANDS OF THE ASSESSEE. HENCE, THE ADDITION BE DELETED. 5. A-56 5,00,000/- THESE ARE SLIPS OF GOODS SENT FOR APPROVAL AND NOT THE SLIPS OF GOODS RECEIVED ON APPROVAL. NO EXCESS STOCK IS WORKED OUT IN CASE OF ASSESSEE. THE AMOUNT INVOLVED IS NOT QUANTIFIED AND, THEREFORE, TAKING INTO CONSIDERATION THE VALUATION DONE BY THE VALUER THE AMOUNT IS ESTIMATED AT RS. 5 LACS WHICH IS ADDED TO THE THESE ARE THE SLIPS OF GOODS RECEIVED ON APPROVAL AS THESE ARE ON THE PRE PRINTED APPROVAL MEMO BOOKS OF THE ASSESSED AS EXPLAINED ABOVE. FURTHER, THESE APPROVAL MEMO FOR THE PERIOD 10-01- 2004 TO 2-11-2004 WHICH DO NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. OTHER WISE ALSO WHEN THE ENTIRE EXCESS STOCK FOUND IN SURVEY IS TAXED IN CASE OF M/S BIHARI LAL HOLA RAM ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, THE ADDITION MADE BY THE AO, BE DELETED. 7 INCOME OF THE ASSESSEE. 6. A-12 PAGE NO 14 & 15 1,62,962/- (79582 + 83380) THIS IS UNACCOUNTED SALE OF THE ASSESSEE. AS NO ADDITION HAS BEEN MADE IN THE INCOME OF THE ASSESSEE ON ACCOUNT OF EXCESS STOCK THE AMOUNT OF RS.1,62,962/- IS ADDED IN THE INCOME OF THE ASSESSEE. THE PAPER IS UNDATED. IT DO NOT CONTAINED NAME OF ANY PERSON TO WHOM THE GOODS ARE ALLEGED TO BE SOLD. ON THIS PAPER AGAINST THE VARIOUS ITEMS NOTED, AGAINST THE NAME IF KUSHBOO JEWELLERS, PROPRIETARY CONCERN OF THE ASSESSEE RS.12,277/- IS NOTED. THUS ONLY AN AMOUNT OF RS.12,277/- RELATE TO THE ASSESSEE. HENCE, THE ADDITION OF RS.1,62,962/- MADE BY THE AO IS INCORRECT. EVEN IF THE SALE OF THE ASSESSEE IS CONSIDERED AS 12,277/-, ONLY THE PROFIT ON SUCH SALE CAN BE CONSIDERED IN THE INCOME OF THE ASSESSEE. BUT SINCE ALL SUCH INCOME IS INVESTED IN THE STOCK WHICH IS FOUND IN EXCESS AND ADDED IN CASE OF M/S BIHARI LAL HOLA RAM NO ADDITION IN THE HANDS OF THE ASSESSEE IS REQUIRED. 7. A-12 PAGE NO 5-8 81,538/- THIS IS THE DETAILS OF THE CASH SALES. AS NO ADDITION HAS BEEN MADE IN THE INCOME OF THE ASSESSEE ON ACCOUNT OF EXCESS STOCK THE AMOUNT OF RS.81,538/- IS ADDED IN THE INCOME OF THE ASSESSEE. THE PAPER IS UNDATED. IT DO NOT CONTAIN NAME OF ANY PERSON TO WHOM THE GOODS ARE ALLEGED TO BE SOLD. EVEN IF IT IS CONSIDERED AS SALE MADE BY THE ASSESSEE, ONLY THE PROFIT ON SUCH SALE CAN BE CONSIDERED IN THE INCOME OF THE ASSESSEE. BUT SINCE ALL SUCH INCOME IS INVESTED IN THE STOCK WHICH IS FOUND IN EXCESS AND ADDED IN CASE OF M/S BIHARI LAL HOLA RAM NO ADDITION IN THE HANDS OF THE ASSESSEE IS REQUIRED. 8. A-7 2,21,704/- THIS DOCUMENT CONTAIN THE DETAILS OF GOODS SENT ON APPROVAL. HENCE, THE SAME IS ADDED IN THE INCOME OF THE ASSESSEE. THESE ARE THE SLIPS OF GOODS SENT ON APPROVAL. THE ASSESSEE HAS ALSO RECEIVED SUBSTANTIAL GOODS ON APPROVAL AS PER ANNEXURE A-29 & A-30. HENCE NO ADDITION FOR GOODS SENT ON APPROVAL CAN BE MADE. IF THESE GOODS SENT ON APPROVAL ARE CONSIDERED AS SALE, ONLY 8 THE PROFIT ON SUCH SALE CAN BE INCLUDED IN THE INCOME. BUT SINCE ALL SUCH INCOME IS INVESTED IN THE STOCK WHICH IS FOUND IN EXCESS AND ADDED IN CASE OF M/S BIHARI LAL HOLA RAM NO ADDITION IN THE HANDS OF THE ASSESSEE IS REQUIRED 9. A-45 PAGE NO. 62 1,25,000/- THE EXPLANATION OF THE ASSESSEE THAT THE COPY OF THIS PAPER IS NOT PROVIDED TO THE ASSESSEE CANT BE ACCEPTED. THIS REPRESENTS CASH SALES. THE VALUE OF THE SAME IS THEREFORE ESTIMATED AT RS.1,25,000/- FOR WHICH ADDITION IS MADE.. PHOTO COPY OF THIS PAPER IS NOT PROVIDED EVEN AFTER THE SPECIFIC REQUEST MADE IN CASE OF M/S BIHARI LAL HOLA RAM. IN FACT THIS PAPER WAS ENQUIRED BY THE ASSESSEE IN THE SHOW CAUSE NOTICE DATED 18-12-08 ISSUED IN CASE OF M/S BIHARI LAL HOLA RAM. THIS PAPER IS NOT REFERRED IN THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE. HENCE THE ADDITION IN THE CASE OF THE ASSESSEE IS NOT JUSTIFIED, THAT TOO, WITHOUT PROVIDING THE PHOTO COPY OF THE PAPER. THE AO HAS CONSIDERED THIS PAPER AS RELATING TO THE SALE AND THEREFORE, THE SALE AMOUNT CANNOT BE ADDED BUT ONLY THE PROFIT CAN BE INCLUDED IN THE INCOME WHICH IS ALSO NOT REQUIRED AS SUCH INCOME IS INVESTED IN STOCK FOUND IN EXCESS AND ADDED IN CASE OF M/S BIHARI LAL HOLA RAM. 2.6 THE LD. AR FURTHER CONTENDED BEFORE THE LD. CIT(A) AS UNDER:- THE LD. AR FURTHER CONTENDED THAT THE AO MADE THE ABOVE ADDITION WITHOUT UNDERSTANDING THE NATURE OF THESE PAPERS. THE MAJOR PARTS I THESE ANNEXURES WER E APPROVAL MEMOS OF GOODS RECEIVED AND SENT AND PHYSI CAL INVENTORY OF THE STOCK AT A PARTICULAR DATE. THE SY STEM IN THIS TRADE WAS THAT THE GOODS ARE RECEIVED / SENT O N APPROVAL MEMOS. WHEN THE GOODS ARE APPROVED, THE SA ME WAS KEPT/ RETURNED BACK/ DELIVERED/TAKEN BACK AS TH E CASE MAY BE. NUMBERS OF SUCH APPROVAL MEMOS EVEN RELATED TO YEAR 2003 WERE FOUND. THE AO ESTIMATED THE QUANT UM INVOLVED IN THESE LOOSE PAPERS AND MADE ADDITION FO R THE 9 SAME. IT WAS CONTENDED THAT ON THE BASIS OF SUCH AP PROVAL MEMOS NO ADDITION COULD BE MADE AND EVEN IF THEY WE RE CONSIDERED AS ACTUAL PURCHASES/ SALE, THE PROFIT EA RNED ON THE BASIS OF THESE APPROVAL MEMOS GOT INVESTED IN S TOCK AND SUCH EXCESS STOCK WAS ALREADY OFFERED FOR TAX. IN THIS REGARD, THE A/R PLACED RELIANCE ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GURBACHAN SINGH J JUNEJA (302 ITR 63), THE DECISION OF M.P. HIGH COURT IN THE CASE OF MOHAN SADHANI VS. CIT (304 ITR 52) AND THE CASE OF CIT VS. BAL CHAND AJIT KUMAR (263 ITR 610), THE DECISION OF ITAT PUNE IN T HE CASE OF JANTA TILES VS. ACIT (66 TTJ 695). THE DECI SION OF ITAT JABALPUR IN THE CASE OF AGARWAL MOTORS VS. ACIT (68 ITD 407) AND THE DECISION OF ITAT , AHEMADBAD IN THE CASE OF ABHISHEK CORPORATION VS. DCIT, (63 TTJ 651). HENCE, IT WAS PLEADED THAT THE SEPARATE ADDITION MADE ON THE BASIS OF LOOSE PAPERS WERE UNCALLED FOR. 2.7 AFTER HEARING BOTH THE PARTIES, WE RECORD OUR F INDINGS IN RESPECT OF DIFFERENT ANNEXURES AS UNDER:- THE LD. CIT(A) RECORDED THE FOLLOWING FINDING ANNEXURE A-52 (FOR ADDITION OF RS. 2,56,663/-: I HAVE GONE THROUGH THE MEMORANDUM CASH BOOK. IT IS SEEN THAT T HIS CASH BOOK IS FOR THE PERIOD 10-12-2004 TO 26-06-2005. THE AO HAD ADDED THE CREDIT SIDE OF THIS CASH BOOK AS INCOME OF THE ASSE SSEE. I FIND THAT THIS CASH BOOK CONTAINS PAYMENT RECEIVED ON THE CREDIT S IDE AND PAYMENT MADE FOR THE PURCHASE/ EXPENSES ON THE DEBIT SIDE. THE BALANCE ON 26- 06-05 AS PER THIS CASH BOOK IS RS. 13,982/-. THE CA SH BOOK THUS, INDICATES THAT, UNRECORDED SALE IS UTILIZED IN PURC HASE EXPENSES. THE EXCESS STOCK FOUND IN SURVEY IS ALREADY OFFERED IN GROUP CONCERN M/S. BIHARI LAL HOLA RAM AND TAXED BY THE AO SEPARATELY. THE CREDIT SIDE IN THIS CASH BOOK REPRESENTING SALE IS VERIFIABLE F ROM ANNEXURE A-27 AND A-28 FOR WHICH SALES HAVE BEEN ESTIMATED SEPARA TELY. CONSIDERING ALL THESE FACTS, THE ADDITION MADE ON THE BASIS OF THIS INTERMEDIARY CASH 10 BOOK IS NOT WARRANTED. THE ADDITION OF RS. 2,56,663 /- MADE BY THE AO ON THE BASIS OF THIS CASH BOOK IS, THEREFORE, DELET ED. 2.8 PHOTO COPY OF THIS DOCUMENT IS AVAILABLE AT PAG ES 48 TO 63 OF THE PAPER BOOK. AT PAGE 51, THE FOLLOWING ENTRIES ARE T HERE. RS. P. RS. P. 18.1.2005 SHAMBU SALARY 200.00 20.1.2005 BALANCE 3456.6 (-50) 34086 30.1.2005 BALANCE 6248.6 (-1100) 63086 1.2.2005 BALANCE 7463.6 752.36 1.2.2005 PAID PAYMENT (9+11+12) 2090.0 2.9 THIS DOCUMENT PERHAPS DOES NOT CONTAIN THE FIGU RES IS ABSOLUTE TERMS, THE A.O. HAS ONLY ADDED A SUM OF RS. 2,56,663/- ON CREDIT SIDE. THE AO FOR COMING TO FIGURE OF RS.2,56,663/- HAS CONSIDERED TH E FIGURE MENTIONED IN THE FIRST COLOUMN WHILE THESE FIGURES ARE NOT IN ABSOLU TE TERMS IF ONE CONSIDERS THE IMPACT OF FIGURES IN OTHER COLOUMNS. EVEN IF W E CONSIDER THE EXPLANATION GIVEN BY THE ASSESSEE BEFORE LD. CIT (A ), WE FEEL THAT ADDITION OF RS. 2,56,663/- BASED ON THE DOCUMENT IS REQUIRED TO BE UPHELD AS THESE ARE CREDITS AND OUTSTANDING BALANCE ON THE LAST DAY IS ALSO MENTIONED AND THE SAME CANNOT BE INCLUDED IN THE EXCESS STOCK. 2.10 THE LD. CIT(A) RECORDED THE FOLLOWING FINDING A-40 & 41 (FOR ADDITION OF RS. 6,81,277/-): THE A O HAS STATED THAT THIS PAPER REFLECTS THE GODS SENT ON AP PROVAL. HE THEREFORE, MADE ADDITION BY TREATING IT AS UNACCOUNTED STOCK L YING OUT OF THE BUSINESS OF THE ASSESSEE. THE A/R CONTENDED THAT TH ERE IS NO EVIDENCE 11 ON RECORD THAT THE GOODS SENT AS PER THIS PAPER IS LYING WITH SOME OTHER PERSON. ONCE IT IS ACCEPTED THAT GOODS IS SENT ON A PPROVAL, IT CAN AT THE MOST BE CONSIDERED AS SALE OF THE ASSESSEE ON WHICH APPROPRIATE GROSS PROFIT IS TO BE ESTIMATED. I AGREE WITH THE CONTENT ION OF THE A/R THAT IN THE ABSENCE OF ANY MATERIAL TO HOLD THAT THESE GOOD S WERE LYING WITH THIRD PARTY, THE AMOUNT INVOLVED ON THE PAPER CANNO T BE ADDED TO THE TOTAL INCOME. THE GOODS SO SENT ON APPROVAL CAN AT THE MOST BE CONSIDERED AS UNACCOUNTED SALES OF THE ASSESSEE. ON SUCH UNACCOUNTED SALE, A REASONABLE GROSS PROFIT RATE IS TO BE APPLI ED. IN THE IMPOUNDED LOOSE PAPERS VARIOUS EVIDENCES WERE FOUND, AS DISCU SSED BELOW WHICH CLEARLY SHOWS THAT GOODS SENT ON APPROVAL REPRESENT THE UNACCOUNTED SALE OF THE ASSESSEE. HENCE, ON THE AMOUNT INVOLVED ON THIS PAPER, A REASONABLE GROSS PROFIT RATE WILL BE ESTIMATED FOR WHICH AFTER CONSIDERING THE SIMILAR SALE ON OTHER PAPERS, A SEP ARATE FINDING IS GIVEN IN THE SUBSEQUENT PARA. THEREFORE, THE ADDITI ON OF RS. 6,81,277/- IS DELETED BUT A SUITABLE ADDITION FOR PROFIT ON SU CH SALE IS BEING CONSIDERED SEPARATELY. 2.11 ANNEXURE A-40 & 41: COPIES OF THESE DOCUMENTS ARE AVAILABLE AT PAGES 64 TO 68 OF THE PAPER BOOK FILED BEFORE US. T HE A.O. HAS CONSIDERED THAT THESE PAPERS INDICATE THAT THE GOODS SENT ON A PPROVAL. NAME IS MENTIONED ON SOME LOOSE PAPER. ON ONE OF THE LOOSE PAPER, THE DETAILS ARE AS UNDER:- (NAME NOT LEGIBLE IN COPY) DATE 4.8.2005 813 6.08 CTS 2900 784 4.38 CTS 2200 540 4.41 CTS 1750 618 5.38 CT 1500 265 5.67 CT 1500 12 2.12 THIS PAPER DOES NOT INDICATE THAT GOODS HAVE B EEN SENT ON APPROVAL WITH OTHER. IF THESE WERE GIVEN ON APPROVAL THEN AT LEAST ON SOME OF THE PAPERS, THE SIGNATURE OF THE RECIPIENT MUST BE AVAI LABLE. HENCE WE CONFIRM THE FINDING OF LD. CIT (A) IN RESPECT OF THIS DOCUM ENT THAT ADDITION OF RS.6,81,277/- IS NOT TO BE MADE BUT PROFIT SHOULD B E ADDED. 2.13 THE LD. CIT(A) RECORDED THE FOLLOWING FINDING ANNEXURE 27 TO A-30 (FOR ADDITION OF RS. 50,00,00 0/-) THE AO ON THE BASIS OF THESE ANNEXURE ESTIMATED THE COST OF THE GOODS SENT FOR DISPLAY AT RS. 50,00,000/- AND M ADE THE ADDITION IN THE INCOME OF THE ASSESSEE BY THIS AMOU NT. I HAVE GONE THROUGH ALL THESE ANNEXURES. I FIND THAT A-28 & A-28 ARE SLIP OF GOODS SENT ON APPROVAL WHEREAS ANNEXURE A-2 9 & A-30 ARE SLIPS OF GOODS RECEIVED ON APPROVAL. THE AO HAS NOT BROUGHT ANY EVIDENCE TO PROVE THAT THESE GOODS TAKE ON APPROVAL MEMO ARE NOT RETURNED BACK AND LYING ELSEW HERE. IN ANNEXURE A-27 & A-28, THERE ARE TOTAL 141 MEMOS REL ATING TO GOODS SENT ON APPROVAL. OUT OF THIS, 58 MEMOS RELAT ES TO ASSESSMENT YEAR 2005-06 AND ONLY 83 MEMOS RELATE TO THE YEAR UNDER CONSIDERATION. IN ANY CASE ADDITION FOR APPRO VAL MEMOS RELATING TO EARLIER YEARS CANNOT BE MADE IN THIS YE AR. SIMILARLY, ADDITION FOR APPROVAL MEMOS RELATING TO GOODS RECEI VED ON APPROVAL IS NOT REQUIRED RATHER THIS BECOMES THE SO URCE FOR EXCESS STOCK FOUND IN SURVEY. THEREFORE, AT THE MOS T, SALES ON THE BASIS OF 63 APPROVAL MEMOS OF ANNEXURE A-27 & A -28 RELATING TO THE YEAR UNDER CONSIDERATION IS REQUIRE D TO BE CONSIDERED. THE AO ESTIMATED THE INVESTMENT ON THE BASIS OF AL THE ANNEXURES AT RS. 50,00,000/- WHICH HAS NO BASE. THE A/R ON THE BASIS OF RATE MENTIONED ON THE PAPER HAS ARR IVED AT THE VALUE OF THE GOODS GIVEN ON APPROVAL DURING THE YEA R UNDER CONSIDERATION AT RS. 13,36,341/- WHICH APPEARS TO B E REASONABLE. THIS WOULD BE CONSIDERED AS UNRECORDED SALE FOR WHICH A REASONABLE GROSS PROFIT RATE WOULD BE ESTIM ATED AS DISCUSSED SUBSEQUENTLY. THE ADDITION OF RS. 50,00,0 00/- IS THUS 13 DELETED BUT A SUITABLE ADDITION FOR PROFIT ON SALE OF RS. 13,36,341/- IS BEING CONSIDERED SEPARATELY. 2.14 ANNEXURE A 27-A 30: COPIES OF THESE ANNEXURE H AVE NOT BEEN ENCLOSED BY THE LD A/R IN THE PAPER BOOK. HOWEVER D ETAILS HAVE BEEN GIVEN IN THE CHART AVAILABLE AT PAGES 87 TO 90 OF THE PAP ER BOOK. WE ARE REPRODUCING FEW OF THE ENTRIES IN CHART. PAGE NO. DATE GOODS IN CTS RATE AMOUNT SPENT RETURN BALANCE A- 27 1 21.6.05 1435.00 1435.00 - - - 2 21.6.05 24.93 - 24.93 575 14334.75 DETAILS UPTO PAGE 48 A- 28 59 19.4.05 73.88 - 73.88 100 7388 REMARKS FOR A-28 ANNEX A-58/C-10 60 21.4.05 11.64 - 11.64 DIFFERENT RATES 2018 ANNEX A 58/C- 10 UP TO PAGE 97 TOTAL OF ANNEX A-27 325,349.34 TOTAL OF ANNEX A-28 1010992.01 GRAND TOTAL 1336341.35 14 PAGE NO. DATE GOODS IN CTS RATE AMOUNT REMAR KS SPENT RETURN BALANCE A-29 7 1.7.05 801.22 - 801.22 DIFFERENT RATES 56230.80 A.Y. 06-07 9 27.6.05 24532.0 0 - 24532.0 0 DIFFERENT RATES 382798 A.Y. 06-07 UPTO PAGES 27 AND IN REMARKS COLOUM IT IS MENTIONED AS A.Y. 2006-07 A-30 59 18.4.05 3929 - 3929 12.25 48130.25 A.Y. 06-07 60 30.4.05 928 - 928 2.70 2505.60 A.Y. 06-07 UPTO PAGE 100. IN REMARKS COLOUMN AGAINST ALL THE E NTRIES IS A.Y. 06-07 TOTAL OF ANNEXURE A-29 2613139.00 TOTAL OF ANNEXURE A-30 2385072.83 GRAND TOTAL OF A-29 & A-30 4998211.83 2.15 THE REVENUE IS AGGRIEVED AGAINST FINDING OF LD . CIT (A). NO ATTEMPT HAS BEEN MADE TO CONTROVERT THE FINDING OF LD. CIT (A) THAT APPROVAL MEMO IN ANNEXURE A-27 & A-28 ARE THOSE FOR WHICH GOODS H AVE BEEN SENT AND APPROVAL MEMOS FOR ANNEXURE A-29 & A-30 REPRESENT A PPROVAL MEMO FOR GOODS RECEIVED. APPROVAL MEMOS IN ANNEX 27 ARE FROM 21.6.2005 TO 11.8.2005 AS PER CHART FURNISHED BY THE ASSESSEE AN D CONSIDERED BY LD. CIT 15 (A). ANNEX A-28 IS FROM 19.4.2005 TO 13.8.2005 A-29 IS FROM 1.7.05 TO 5 TH AUGUST 2005 AND A-30 IS FROM 18.4.2005 TO 7.6.2005. WE DO FEEL THAT LOGICAL FINDING OF LD. CIT (A) IS IN ORDER. THE LD. CIT (A) HAS HELD THAT PROFIT ON SALE TO THE EXTENT OF RS.13,36,341/- IS TO BE CO NSIDERED. 2.16 ANNEXURE -58: COPY OF ANNEXURE A-58 IS AVAILAB LE AT PAGES 69 TO 80 OF THE PAPER BOOK. THE LD. CIT (A) HAS DELETED T HE ADDITION AFTER OBSERVING AS UNDER: A-58 (FOR ADDITION OF RS.4,08,816/-) :- I HAVE GONE THROUGH THIS ANNEXURE. THIS IS A DIARY. AO MADE THE ADDITION ON THE BASIS OF PAGE 5 & 6 OF THIS ANNEXURE. ON PAGE 5, THE AMOUNT RECEIVED BETWEEN 02.07.2005 TO 10.08.2005 AMOUNTING TO RS.5, 23,791/- IS NOTED AND ON PAGE 6, THE AMOUNT PAID BETWEEN 06. 07.2005 TO 10.8.2005 AMOUNTING TO RS.5,07,456/- IS NOTED. THES E ARE ONLY THE ROUGH NOTING MADE BY THE STAFF FROM WHICH NO IN COME CAN BE ASCERTAINED. HOW THE AO HAS WORKED OUT THE ADDIT ION AT RS.4,08,816/- IS NOT ASCERTAINABLE. THIS ANNEXURE N O WHERE REFLECTS ANY DETAIL OF CASH SALE. THIS IS SIMPLY AN INTERMEDIARY TRANSACTION. THE ACTUAL SALES ARE FOUND IN OTHER AN NEXURE, WHICH ARE SEPARATELY CONSIDERED SUPRA. CONSIDERING ALL THESE FACTS, I FIND THAT NO SEPARATE ADDITION ON THE BASI S OF THIS ANNEXURE IS CALLED FOR. ACCORDINGLY, THE ADDITION O F RS.4,08,816/- MADE BY THE AO IS DELETED. THE WORK AAYE IN HINDI IS AVAILABLE AT PAGE 5 OF ANNEXURE A-58 LATIF BHAI 12930 2.7.2005 SPHETIC KI MALA 650 5.7.2005 B.H. 30000 6.7.2005 KIMI BHIRI 1775 B.H. 25000 28.7.2005 16 B.H. 80000 29.7.2005 B.H. 100000 01.8.2005 B.H. 60000 02.8.2005 LATIF BHAI 9.635 04.8.2005 B.H. 2,00,000 10.8.2005 B.T A/C 3,800 10.8.2005 2.17 ON PAGE NO.6, THE WORK GAYEE IS MENTIONED IN HINDI. WE ARE REPRODUCING CERTAIN ENTRIES OF THOSE DATES WHERE SU BSTANTIAL AMOUNT IS MENTIONED AT PAGE 5 AS RECEIVED. LOKESH 2500 28.7.2005 AL 57065 29.7.2005 SHAROD JAIN 100000 01.8.2005 MANOJ AGGARWAL 19,955 01.8.2005 REGIV JAIN 2,00,000 10.8.2005 2.18 PAGE NO. 14 & 15 OF ANNEXURE AT PAGES 81 & 82 OF PAPER BOOK CONTAIN CERTAIN FIGURES WITH SOME DESCRIPTION. NAME OF KHUSBOO JEWELLERS IS WRITTEN. ONE TRANSACTION CONTAINING NUMBER OF ENTRI ES IS RS.83,380 AND OTHER TRANSACTION CONTAINING 4 ENTRIES AS OF RS.47,593/-. THE WORD DIAMOND IS ALSO MENTIONED. PAGE 82 CONTAIN THE NUMBER OF PIECES OF DIAMOND. 2.19 TOTAL VALUE IS RS.79,582. AMOUNT REDUCED IS CA SH RS.500 + RS.2000/- I.E. 70000 REDUCED. IT MEANS THE FIGURE 500 IS RS.5 0,000. THEN OTHER ENTRIES OF RS.25340 AND 52760 OUT OF WHICH 25,000 I.E. 340 PLUS 52760-50000 I.E. 2760. 17 2.20 ON ONE ANOTHER PAGE TRANSACTIONS OF RS.12080 P LUS 3050. NUMBER OF ITEMS INCLUDED IN THE TOTAL OF 12080 ARE MENTIONED AND THEN NO. OF PIECES ARE MENTIONED AGAIN AND DIFFERENCE IN NUMBER IS INCLUDE D IN RS.3050. FOR EXAMPLE 5 PIECES 400 PC 2000 INCLUDED IN 12080 1 X 400-400 INCLUDED IN 3050. SIMILAR ENTRIES ON OTHER THREE PAGES ARE 27850 1530 31193 2285 16415 2400 THE A.O. HAS CONSIDERED PAGES 5,6,7 & 8 OF RS.81,5 38. 2.21 IF THE FIGURES OF RS.12080 + 31193 + 16415 ARE CONSIDERED AS SALE THEN ITEMS TO THE EXTENT OF 3050 + 1530 + 2285 + 24 00 HAS BEEN RECEIVED BACK. THE A.O. HAS NOT MADE ATTEMPT TO ASCERTAIN TH E HANDWRITING OF THE PERSON. 2.22 SIMILARLY DETAILS AT PAGES NO.14&15 (79582 + 8 3,380) HAVE BEEN CONSIDERED AS SALE TO THE EXTENT OF RS.1,62,962/- B Y THE A.O. THE LD. CIT (A) HAS CONSIDERED THE SUM OF RS.81,538/- FOR SALE & PR OFIT IS TO BE ADDED AND IN RESPECT OF PAGES NO. 14 & 15, SALE TO THE EXTENT OF RS.12,277 IS TO BE CONSIDERED FOR PROFIT. 18 2.23 AFTER PERUSING THE PAPERS, WE FEEL SALE ON PAP ERS AT 5,6,7 & 8 IS 81538-9265 BUT SINCE ASSESSEE IS NOT IN APPEAL BEFO RE US HENCE PROFIT ON SALE OF RS.81538 AS CONSIDERED BY LD. CIT (A) IS UPHELD. HOWEVER ON PAGES NO. 14 & 15 TRANSACTIONS ARE OF HIGHER AMOUNT. DATES AR E NOT MENTIONED. HENCE PROFIT ARISING FROM SUCH TRANSACTIONS IS CONSIDERED TO BE INCLUDED IN EXCESS STOCK SURRENDERED BY ONE CONCERN OF THIS GROUP AND HENCE A/R HAS RIGHTLY STATED THAT NO ADDITION SHOULD BE MADE. WE DO AGREE AS THERE IS NO SURRENDER OF EXCESS STOCK IN THE CASE OF THE ASSESSEE. WE THE REFORE FEEL THAT SALES AS MENTIONED BY A.O. IN HIS ORDER ARE TO BE CONSIDERED FOR THE PURPOSE OF MAKING ADDITION OF PROFIT AND A.O. WILL COMPUTE THE ADDITION. 2.24 ANNEXURE -7 COPY OF THIS ANNEXURE IS NOT AVAIL ABLE IN PAPER BOOK. THE FINDING OF LD. CIT (A) IS AS UNDER: A-7 (FOR ADDITION OF RS.2,21,704/-) :- IT IS SEEN T HAT, THESE ARE THE SLIPS OF GOODS SENT ON APPROVAL, THEREFORE, THE AO ADDED THIS AMOUNT IN THE INCOME OF THE ASSESSEE. I HAVE C ONSIDERED THE GOODS SENT ON APPROVAL AS SALE, AND, THEREFORE, ADD ITION IN THE INCOME IS TO BE MADE BY APPLYING A REASONABLE GROSS PROFIT RATE WHICH WOULD BE ESTIMATED AS DISCUSSED SUBSEQUENTLY. THUS THE ADDITION OF RS.2,21,704/- MADE BY THE AO IS HEREBY DELETED BUT A SUITABLE ADDITION FOR PROFIT ON SUCH SALES IS BEI NG CONSIDERED SEPARATELY. 2.25 WE HAVE HEARD BOTH THE PARTIES. THE LD. CIT (A ) HAS SEEN THE SLIPS AND ARRIVED AT THE CONCLUSION. REVENUE HAS NOT BEEN ABL E TO ESTABLISH AS TO HOW 19 THE FINDING ON THE BASIS OF PERUSAL OF SLIPS IS INC ORRECT. WE, THEREFORE UPHOLD THE FINDING OF LD. CIT (A). 2.26 ANNEXURE A-45 PAGE 62 : COPY OF THIS PAGE IS N OT AVAILABLE IN THE PAPER BOOK FILED BY THE ASSESSEE. THE FINDING OF LD . CIT (A) IS AS UNDER: A-45 PAGE NO.62 (FOR ADDITION OF RS.1,25,000/-):- I T IS SEEN THAT THE AO HAS HELD THAT THIS REPRESENTS THE CASH SALES, HOWEVER HE IS MAKING ADDITION FOR THE ENTIRE AMOUNT MENTIONED ON THIS PAPER. IN THIS SITUATION ADDITION IN THE IN COME IS TO BE MADE BY APPLYING A REASONABLE GROSS PROFIT RATE, WH ICH WOULD BE ESTIMATED AS DISCUSSED SUBSEQUENTLY. THUS THE AD DITION OF RS.1,25,000/- MADE BY THE AO IS HEREBY DELETED BUT A SUITABLE ADDITION FOR PROFIT ON SUCH SALE IS BEING CONSIDERE D SEPARATELY. 2.27 FINDING OF LD. CIT (A) IS IN ORDER AND REVENUE HAS NOT PLACED ANY MATERIAL BEFORE US TO SHOW THAT FINDING OF LD. CIT (A) IS PERVERSE. WE UPHOLD FINDING OF LD. CIT (A). 3.1 THE SECOND GRIEVANCE OF THE REVENUE IS THAT LD. CIT (A) HAS NOT CONFIRMED ADDITION TO THE EXTENT OF SALE OF RS.22,5 5,437/- DETERMINED BY THE LD. CIT (A). THE FINDING OF LD. CIT (A) IS AS UNDER : AS DISCUSSED ABOVE, I HAVE HELD THAT, ON THE BASIS OF THESE PAPERS THE UNACCOUNTED SALES WORKS OUT AT RS.22,55, 437/-. IN RESPECT OF UNACCOUNTED SALES, AS HELD IN VARI8OUS C ASES INCLUDING DECISION OF MP HIGH COURT IN CASE OF MOHA N SODANI V/S CIT (304 ITR 52) ENTIRE SALE PROCEEDS CANT BE ADDED BUT ONLY PROFIT SHOULD BE CONSIDERED ON THE SAME. RESPE CTFULLY, FOLLOWING THE SAME, I ESTIMATE THE PROFIT @ 18.06% ON SUCH SALE OF RS.22,55,437/- THE GP RATE OF 18.06% IS ADOPTED CONSIDERING THE GP RATE DECLARED BY THE ASSESSEE DU RING THE 20 YEAR. ON THIS BASIS, THE PROFIT ON THE UNACCOUNTED SALES WORKS OUT TO RS.4,07,331/- WHICH IS CONFIRMED. HOWEVER, S INCE THE STOCK OF ALL THE GROUP CONCERNS WAS CONSIDERED TOGE THER AND THEREAFTER THE EXCESS STOCK WORKED OUT HAS BEEN TAX ED IN CASE OF M/S. BIHARI LAL HOLA RAM, CREDIT OF THE UNDISCLOSED PROFIT ON SUCH SALE IS REQUIRED TO BE CONSIDERED AGAINST THE EXCESS STOCK ALREADY OFFERED AT RS.1.35 CRORES IN CASE OF M/S. B IHARI LAL HOLA RAM. THEREFORE, NO SEPARATE ADDITION ON ACCOUN T OF PROFIT IN RESPECT OF UNRECORDED SALES IN THE CASE OF ASSES SEE IS CALLED FOR. IN THE RESULT, THOUGH THE INCOME IN RESPECT OF THESE LOOSE PAPERS IS ARRIVED AT RS.4,07,331/- BUT NO SEPARATE ADDITION IS REQUIRED FOR THE SAME IN THE FACTS AND CIRCUMSTANCE S OF THE CASE. THEREFORE, THE ADDITION MADE BY THE AO IN RES PECT OF THESE LOOSE PAPERS IS DIRECTED TO BE DELETED. 3.2 WE HAVE HEARD BOTH THE PARTIES. WE FEEL THAT LD . CIT (A) IS JUSTIFIED IN GIVING A FINDING AS WE HAVE HELD WHILE DECIDING THE APPEAL IN THE CASE OF BIHARI LAL HOLA RAM THAT STOCKS OF ALL THE CONCERNS OF THE GROUP ARE INTERMINGLED AND EXCESS STOCK HAS BEEN CONSIDERED IN THE HANDS OF M/S. BIHARI LAL HOLA RAM. HOWEVER ANNEXURE A-52 IS THE C ASH BOOK IS WHICH BALANCES ARE WRITTEN AND HENCE THE ADDITION OF RS.2 ,56,663 CONFIRMED BY US WILL NOT BE CONSIDERED AS COVERED BY THE EXCESS STO CK FOUND IN THE CASE OF BIHARI LAL HOLA RAM. 4.1 THE THIRD GROUND OF THE REVENUE IS THAT THE LD . CIT(A) SHOULD HAVE ESTIMATED THE UNEXPLAINED INVESTMENT IN SUCH PURCHA SES WHICH HAS RESULTED IN MAKING ABOVE SALES OF RS. 22,55,437/- 21 4.2 WHILE DISPOSING OFF THE GROUND NO. 2, WE HAD AL READY HELD THAT THE PROFIT FROM UNACCOUNTED SALES STANDS INCLUDED IN TH E EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. THE QUANTUM OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY IN THE GROUP IS SUFFICIENT TO CONS IDER THAT THE ASSESSEE HAS FUND FOR MAKING PURCHASES FOR WHICH ENTRIES OF SALE S HAVE BEEN FOUND IN THE LOOSE PAPERS. THUS NO SPECIFIC ADDITION IS REQUIRED TO BE MADE. 5.1 THE FOURTH GROUND OF THE REVENUE IS THAT THE L D. CIT(A) HAS ERRED IN DELETING THE TRADING ADDITION OF RS. 2,34,337/- WIT HOUT APPRECIATING THAT THERE WERE UNVERIFIABLE PURCHASES. 5.2 THE FIFTH GROUND OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN NOT CONFIRMING THE ADDITION TO THE EXTENT OF 25% OF UNV ERIFIABLE PURCHASES. 5.3 THE AO IN HIS ORDER AT PAGE 18 HAS MENTIONED TH AT THE SUPPLIES RECEIVED FROM 07 PARTIES ARE NOT VERIFIABLE. THE NA MES OF 07 PARTIES ARE AVAILABLE AT PAGES 18 OF THE ASSESSMENT ORDER. THE AO OBSERVED THAT INVESTIGATION WING OF THE DEPARTMENT NOTICED THAT T HE NO FIRM WAS FOUND EXISTING AT THE ADDRESSES GIVEN FOR M/S. ARMILA GEM S. THE AO HAS ALSO MENTIONED THAT THE ASSESSEE HAS BEEN SUPPLIED THE C OPY OF THE STATEMENTS OF THE PERSONS IN WHICH SUCH PERSONS HAVE CATEGORICALL Y ADMITTED OF ISSUING THE BILLS WITHOUT DELIVERY OF GOODS. THE PURCHASES FRO M M/S. LUXMI DIA GOLD JEWELLERS REMAINED UNVERIFIABLE PURCHASES LIKE PURC HASES IN RESPECT OF OTHER 22 SUPPLIERS. THE BCTT WING OF THE DEPARTMENT DURING S URVEY FOUND THAT CONCERN M/S. S.V. EXPORT WAS NOT WORKING AT THE GIV EN ADDRESS. THE AO AT PAGE 21 OF THE ASSESSMENT ORDER HAS ALSO MENTIONED THAT THERE ARE CASH PURCHASES WHICH ARE NOT SUBJECT TO VERIFICATION. TH E AO ACCORDINGLY MADE ADDITION OF RS. 2,34,337/- WHICH REPRESENTED 25% OF UNVERIFIABLE PURCHASES TO THE EXTENT OF RS. 9,37,349/-. 5.4 THE LD. CIT(A) HAS DELETED THE ADDITION. THE LD . CIT(A) NOTICED THAT THE G.P.RATE SHOWN DURING THE YEAR IS 18.06% AS AGA INST 18.07% OF THE IMMEDIATELY PRECEDING YEAR. SINCE THE TRADING RESUL TS ARE COMPARABLE WITH THE TRADING RESULTS OF THE IMMEDIATELY PRECEDING YE AR, THEREFORE, THE ADDITION HAS BEEN DELETED BY THE LD. CIT(A). 5.5 WE HAVE HEARD BOTH THE PARTIES. ITAT JAIPUR BEN CH IS CONSISTENTLY HOLDING THAT THE BOOKS OF ACCOUNT ARE TO BE REJECTE D IN CASE THERE ARE NON- VERIFIABLE PURCHASES. THE ENQUIRY MADE BY THE INVES TIGATION WING SHOWED THAT THE PARTIES WHICH WERE ISSUING BILLS WITHOUT D ELIVER OF GOODS, WERE CHARGING COMMISSION AND SUCH COMMISSION IS NOT BEIN G REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. LOOKING TO THE QU ANTUM OF NON-VERIFIABLE PURCHASES, WE FEEL THAT IT WILL BE FAIR AND REASONA BLE TO RESTRICT THE ADDITION TO RS. 20,000/-. 23 6.1 THE SIXTH AND SEVENTH GROUND OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 26.65 LAC S U/S 68 OF THE ACT AFTER ADMITTING THE ADDITIONAL EVIDENCES IN CONTRAVENTION OF RULE 46A. 6.2 THE AO NOTICED THAT THE ASSESSEE HAS SHOWN DEPO SITS OF RS. 25.00 LACS FROM M/S. BRETT PLASTICS (P) LTD. THE ASSESSEE WAS REQUIRED TO FILE THE CONFIRMATION OF CASH CREDIT. BEFORE THE AO, THE ASS ESSEE GAVE THE PAN AND ADDRESS OF CREDITOR AND IT WAS ALSO SUBMITTED THAT THE LOAN HAS BEEN ARRANGED THROUGH BROKER M/S. JAI AMARNATH ASSOCIATES. ACCORD ING TO THE AO, THE ASSESSEE HAS FAILED TO FILE THE CONFIRMATION FROM T HE CREDITOR AND THEREFORE, THE AO ADDED A SUM OF RS. 25.00 LACS PLUS INTEREST PAID OF RS. 1.65 LACS U/S 68 OF THE ACT. 6.3 BEFORE THE LD. CIT(A), THE ASSESSEE VIDE LETTE R DATED 18-02-08 FILED THE CONFIRMATION LETTER. THEREAFTER THE AO VIDE LET TER DATED 18-02- 08 REQUIRED THE ASSESSEE TO PROVIDE THE ADDRESS. THE A SSESSEE PROVIDED THE ADDRESS AND ALSO GAVE THE NAME OF THE BROKER THROUG H WHOM LOAN WAS OBTAINED. VIDE NOTICE DATED 18 TH DEC. 2008, THE ASSESSEE WAS ASKED TO PROVIDE THE ADDRESS AND THE SAME WAS GIVEN. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT IN THE BANK STATEMENT OF THE CREDIT OR, THERE WAS CREDIT BALANCE OF RS. 6,26,34,036/-. A SUM OF RS. 2.40 CRORES WAS INVESTED BY THAT CREDITOR IN THE FDR AND RS. 25.00 LACS WAS ADVANCED TO THE A SSESSEE. AFTER GIVING 24 ADVANCE, STILL THERE WAS A BALANCE OF RS. 3,61,34,0 36/-. THE ASSESSEE HAS REPAID THE LOAN ON 01-12-05. THE COPY OF THE BANK S TATEMENT WAS FORWARDED TO THE AO BY THE LD. CIT(A) VIDE LETTER DATED 23 RD MARCH 10 ASKING FOR OBJECTION, IF ANY, TO THE ADMITTANCE OF SUCH ADDITI ONAL EVIDENCE. NO REPLY WAS RECEIVED. IN ABSENCE OF ANY REPLY, THE LD. CIT( A) ADMITTED THE ADDITIONAL EVIDENCE AND DELETED THE ADDITION AFTER OBSERVING A S UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE. FROM THE PERUSAL OF DETAILS ON RE CORD, IT IS SEEN THAT THE APPELLANT HAD RECEIVED THE IMPUGNED L OAN THROUGH ACCOUNT PAYEE CHEQUE. THE INCOME TAX PARTICULARS A S WELL AS THE ADDRESS OF THE CREDITOR WERE ALSO FURNISHED. T HE IDENTITY AND CAPACITY OF THE CREDITOR AS ALSO THE GENUINENES S OF THE TRANSACTION WERE VERIFIABLE WITH REFERENCE TO THE E VIDENCES FURNISHED. THE SUBMISSION OF CONFIRMATION LETTER BY THE APPELLANT VIDE LETTER DATED 18-12-2008 WAS PERHAPS NOT CONSIDERED BY THE AO. SINCE THE APPELLANT HAD DISCH ARGED THE BASIC ONUS PLACED ON IT FOR PROVING GENUINENESS OF THE LOAN. THE ADDITION MADE BY THE AO IS HELD TO BE NOT JUSTIFIED . ONCE THE PRINCIPAL AMOUNT OF LOAN IS ACCEPTED, THE DISALLOWA NCE OF INTEREST THEREON DOES NOT APPEAR TO BE JUSTIFIED. T HE ADDITION MADE IS THEREFORE, DELETED. 6.4 WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE HA S DISCHARGED THE ONUS OF ESTABLISHING THE IDENTITY OF THE CREDITOR AND CR EDITWORTHINESS OF THE CREDITOR. THERE HAS BEEN NO CASH DEPOSIT IN THE BAN K ACCOUNT OF THE CREDITOR BEFORE GIVING DEPOSIT TO THE ASSESSEE. THERE IS SUB STANTIAL AMOUNT IN THE BANK ACCOUNT OF THE CREDITOR. HON'BLE DELHI HIGH COURT I N THE CASE OF MODE 25 CREATION (P) LTD. VS ITO 2011-TIOL-560-HC-DELHI HAD AN OCCASION TO CONSIDER THE ISSUE OF ADDITION MADE U/S 68 OF THE ACT. IN THAT CASE, THE ASSESSEE ESTABLISHED THE IDENTITY OF THE CREDITOR. THERE WAS NO CASH DEPOSITED IN THE BANK ACCOUNT OF THE CREDITOR. IN SUCH CASES, THE ONUS STANDS SHIFTED TO THE AO TO ESTABLISH THE CREDITWORTHINESS OR GENUINE NESS OF THE TRANSACTION BEING NOT RELIABLE. THE ADDITION U/S 68 OF THE ACT WAS DELETED BY HON'BLE DELHI HIGH COURT. LOOKING TO THE BANK STATEMENT AND FILING OF CONFIRMATION, WE FEEL THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETI NG THE ADDITION. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED.. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16-09 -2011 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 16/09/2011 *MISHRA 2COPY FORWARDED TO :- 1. THE ITO, WARD 6 (1), JAIPUR 2. SMT. CHANCHAL LAKHI, JAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.829/JP /10) A.R, ITAT, JAIPUR 26 27 28