ACIT, New Delhi V. Sh. Vikas Gutgutia, New Delhi

ITA 858/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6708 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 24-10-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 14-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR BALWAN CHAUHAN
• Keywords: Unexplained investment; Search and seizure; Loose papers; Opportunity of being heard; Additional evidence
• Section: 143(3); 153A; 69; 132; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : D : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NOS.858 TO 861/DEL/2014 ASSESSMENT YEARS : 2002-03 TO 2005-06 ACIT, CENTRAL CIRCLE-10, NEW DELHI. VS. VIKAS GUTGUTIA, J-238, SAINIK FARMS, NEW DELHI. PAN: AAJPG0517B ITA NOS.1008 TO 1011/DEL/2014 ASSESSMENT YEARS : 2002-03 TO 2005-06 VIKAS GUTGUTIA, J-238, SAINIK FARMS, NEW DELHI. PAN: AAJPG0517B VS. ACIT, CENTRAL CIRCLE-10, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJESH JAIN, CA DEPARTMENT BY : DR. BALWAN CHAUHAN, CIT, DR DATE OF HEARING : 24.10.2016 TO 25.10.2016 DATE OF PRONOUNCEMENT : 25.10.2016 ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 2 ORDER PER R.S. SYAL, AM: THIS BATCH OF EIGHT CROSS APPEALS FOUR BY THE A SSESSEE AND EQUAL NUMBER BY THE REVENUE - RELATES TO THE AYS 2002-03 TO 2005-06. SINCE SOME OF THE ISSUES RAISED IN THESE APPEALS ARE COMM ON, WE ARE, THEREFORE, PROCEEDING TO DISPOSE THEM BY THIS CONSOLIDATED ORD ER FOR THE SAKE OF CONVENIENCE. ASSESSMENT YEARS 2002-03 TO 2004-05 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF FLOWERS AND PETALS. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME-TAX ACT, 19 61 (HEREINAFTER CALLED AS THE ACT) WAS CONDUCTED ON 23.12.2005 IN FERNS N PETALS GROUP OF CASES. THE ASSESSEE IS A PART OF THIS GROUP. A NOT ICE U/S 153A WAS ISSUED TO THE ASSESSEE ON 20.12.2006 FOR FILING RETURN IN RELATION TO THE AY 2002-03. IN RESPONSE, THE ASSESSEE FURNISHED ITS R ETURN WHEREIN THE INCOME AMOUNTING TO RS.2,89,825/-, AS PER THE ORIGI NAL RETURN FILED ON 31.10.2010, WAS REPEATED. NO FURTHER UNDISCLOSED INCOME WAS DECLARED. ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED UPON THE ASSESSEE TO FURNISH LIST OF THE PERSONS WITH THEIR COMPLETE ADDRESSES FROM WHOM THE ASSESSEE MADE PURCHASES IN EXCESS OF RS.3 LAC. THE ASSESSEE SUBMITTED A LIST OF SIX PERSONS FROM WHOM SUCH PURC HASES TOTALING RS.35,81,946/- WERE MADE. THESE SIX PERSONS WERE C ATEGORIZED AS MANDI VENDORS. THE ASSESSEE SUBMITTED THAT HE WAS REGULARLY PURCHASING FLOWERS FROM THE VENDORS IN MANDI AT BAB A KHARAK SINGH MARG, OPPOSITE HANUMAN MANDIR, CONNAUGHT PLACE, NEW DELHI, BUT DID NOT HAVE THEIR ADDRESSES AS THEY WERE CASUAL FLOWER VENDORS. THE AO DID NOT ACCEPT THE CONTENTION PUT FORTH ON BEHALF O F THE ASSESSEE BY NOTICING THAT MAJORITY OF THESE PERSONS WERE SHOWN AS CREDITORS. THE AO FURTHER NOTICED THAT OTHER GROUP CONCERNS OF THE AS SESSEE, NAMELY, M/S FERNS `N PETALS INDIA PVT. LTD. AND M/S FERNS `N PETALS (PROPRIETOR SMT. MEETA GUTGUTIA) ALSO MADE SIMILAR PURCHASES FR OM THESE PERSONS. IN VIEW OF THE FACT THAT THE ASSESSEE DID NOT PRODU CE HIS BOOKS OF ACCOUNT AND SUPPORTING VOUCHERS/BILLS ETC., THE AO TREATED THE ABOVE PURCHASES AMOUNTING TO RS.35.81 LAC AS BOGUS AND MADE ADDITIO N FOR THE SAME. THE FACTS FOR THE AY 2003-04 ARE ALSO SIMILAR. DURING THE PREVIOUS YEAR ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 4 RELEVANT TO THIS ASSESSMENT YEAR ALSO, THE ASSESSEE MADE PURCHASES FROM SEVEN PERSONS CALLED AS MANDI VENDORS AMOUNTING TO RS.47,81,151/-. IN VIEW OF THE SIMILAR EXPLANATION GIVEN BY THE ASSESS EE, THE AO MADE ADDITION FOR THIS SUM. THE FACTS FOR THE AY 2004-0 5 ARE ALSO SIMILAR, DURING WHICH THE ASSESSEE MADE PURCHASES FROM MANDI VENDORS TO THE TUNE OF RS.1,15,81,574/-. IN THE ABSENCE OF THE AS SESSEE FURNISHING ANY ADDRESSES OF SUCH VENDORS, THE AO MADE ADDITION FO R THE SAID SUM. 3. IN APPEAL FOR THE AY 2002-03, THE LD. CIT(A) NOTICED IN PARA 12 THAT THERE WAS NO EVIDENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH TO ESTABLISH THAT THE PURCHASES WE RE NOT GENUINE. HE FURTHER OBSERVED THAT THE GROSS PROFIT RATE DECLARE D BY THE ASSESSEE WAS 11.50% AND IF THE ADDITION SO MADE BY THE AO WAS SU STAINED, THE GP RATE WOULD SHOOT UP TO 38.92%. TAKING A HOLISTIC V IEW OF THE MATTER AND TO COVER THE LEAKAGE OF PROFIT ON THE POSSIBILITY O F UNVERIFIED PURCHASES, THE LD. CIT(A) DIRECTED TO APPLY GP RATE OF 15% AS AGAINST 11.5% DECLARED BY THE ASSESSEE. SIMILARLY, FOR AY 2003- 04, THE LD. CIT(A) NOTICED THAT THE ASSESSEE DECLARED GP RATE OF 11.31 % AND IF THE ADDITION ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 5 SO MADE BY THE AO WAS SUSTAINED, THE PROFIT RATE WO ULD SHOOT UP TO 42.71%. HE RESTRICTED THE GP RATE TO 15% AS AGAIN ST 11.3% DECLARED BY THE ASSESSEE. IN THE LIKE MANNER, FOR THE AY 2004- 05, THE ASSESSEES GROSS PROFIT RATE DECLARED AT 10.45% CAME TO BE RES TRICTED AT 15% AS AGAINST 56% AS WOULD HAVE BEEN IF THE ADDITION MADE BY THE AO WOULD HAVE BEEN SUSTAINED. FOR THE ASSESSMENT YEARS 2003- 04 AND 2004-05 ALSO, THE LD. CIT(A) HAS NOTICED THAT THERE WAS NO EVIDENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH/ASSESSMENT PROCEEDINGS TO ESTABLISH THAT THE PURCHASES WERE NO T GENUINE. BOTH THE SIDES ARE IN APPEAL ON THEIR RESPECTIVE STANDS. 4. THE ASSESSEE HAS RAISED A LEGAL GROUND CHALLENG ING THE MAKING OF ADDITIONS IN THE THREE YEARS IN QUESTION ON THE PRE MISE THAT NO INCRIMINATING MATERIAL QUA THE PURCHASES FROM MANDI VENDORS WAS FOUND DURING THE COURSE OF SEARCH AND THE ASSESSMENTS FOR THESE THREE YEARS ALREADY STOOD COMPLETED BEFORE THE DATE OF SEARCH. THE FOLLOWING CHART HAS BEEN FILED DEPICTING THE STATUS OF ASSESSMENTS AS UNDER :- ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 6 EVENTS AY 2002 - 03 AY 2003 - 04 AY 2004 - 05 DATE OF FILING OF RETURN OF INCOME U/S 139 31.10.2002 19.11.2003 30.10.2004 TIME LIMIT FOR ISSUANCE OF NOTICE U/S 143(2) IN TERMS OF PROVISO TO SECTION 143(2)(II) 31.10.2003 30.11.2004 31.10.2005 WHETHER NOTICE U/S 143(2) RECEIVED PRIOR TO THE SEARCH UNDER SECTION 132 NO* NO* NO* DATE OF SEARCH 23.12.2005 23.12.2005 23.12.2005 ASSESSMENT COMPLETED U/S (BEFORE THE DATE OF SEARCH) 143(1) 143(1) 143(1) 5. IN SUPPORT OF THE PROPOSITION THAT NO ADDITION C OULD HAVE BEEN MADE IN THE GIVEN CIRCUMSTANCES IN THE ABSENCE OF A NY INCRIMINATING MATERIAL QUA THESE PURCHASES FROM THE MANDI VENDORS, THE LD. AR RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN CIT VS. KABUL CHAWLA (2016) 380 ITR 573 (DEL). IN THE OPPOSITION, THE LD. DR RELIED ON THE IMPUGNED ORDER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE HONBLE DELHI HIGH COURT I N THE CASE OF KABUL CHAWLA (SUPRA) HAS HELD THAT NO ADDITION CAN BE MADE TO THE INCOM E ALREADY ASSESSED IF NO INCRIMINATING MATERIAL IS FO UND DURING THE SEARCH. 7. AT THIS JUNCTURE, IT IS SIGNIFICANT TO NOTE THAT WHEN A SEARCH IS CONDUCTED, THERE CAN BE TWO TYPES OF ASSESSMENT YEA RS, NAMELY, THE ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 7 ASSESSMENT YEARS WITH COMPLETED ASSESSMENTS AND THE ASSESSMENT YEARS WITH NON-COMPLETED OR PENDING ASSESSMENTS. THE ASS ESSMENT YEARS WITH COMPLETED ASSESSMENTS MEAN THE ASSESSMENT YEARS FOR WHICH EITHER THE ASSESSMENTS WERE COMPLETED BY THE AO U/S 143(3) OR SECTION 144 BEFORE THE DATE OF SEARCH OR THE ASSESSMENT YEARS FOR WHIC H THE REGULAR ASSESSMENTS WERE NOT TAKEN UP AFTER THE FILING OF T HE RETURNS BY THE ASSESSEE AND FURTHER THE TIME LIMIT FOR ISSUING NOT ICE U/S 143(2) EXPIRED ON THE DATE OF SEARCH. AS PER THE SCHEME UNDER THE ACT, A RETURN FILED BY THE ASSESSEE IS FIRST PROCESSED BY THE A.O. U/S 143 (1)(A) IN WHICH TOTAL INCOME IS COMPUTED AFTER MAKING THE SPECIFIED ADJU STMENTS. AS PER CLAUSE (B), TAX AND INTEREST, IF ANY, IS COMPUTED O N THE BASIS OF THE TOTAL INCOME COMPUTED UNDER CLAUSE (A). CLAUSES (D) AND ( E) OF SECTION 143(1) PROVIDE THAT AN INTIMATION SHALL BE SENT TO THE AS SESSEE SPECIFYING THE SUM DETERMINED TO BE PAYABLE BY, OR THE AMOUNT OF R EFUND DUE TO, THE ASSESSEE AND THE AMOUNT OF REFUND DUE TO THE ASSESS EE IN PURSUANCE OF THE DETERMINATION UNDER CLAUSE (C) SHALL BE GRANTED TO THE ASSESSEE. PROCESSING OF THE RETURN U/S 143(1) AND THE CONSEQU ENTIAL ISSUING OF INTIMATION IS CONSTRUED AS PASSING OF THE ASSESSMEN T ORDER EXCEPT WHERE ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 8 A NOTICE U/S 143(2) IS ISSUED FOR A SCRUTINY ASSESS MENT U/S 143(3). IN A CASE, WHERE NOTICE U/S 143(2) IS ISSUED, THE PROCES SING OF RETURN U/S 143(1) AND THE CONSEQUENTIAL ISSUING OF INTIMATION DOES NOT AMOUNT TO PASSING OF THE ASSESSMENT ORDER BECAUSE THE ASSESSM ENT ORDER, IN SUCH CIRCUMSTANCES, IS PASSED AFTER DUE SCRUTINY U/S 143 (3) OF THE ACT. THERE CAN BE ONLY ONE ASSESSMENT ORDER FOR ONE YEAR. THE CRUX OF THE MATTER IS THAT WHERE NO NOTICE U/S 143(2) IS ISSUED WITHIN TH E PERMISSIBLE MAXIMUM TIME, THE ISSUANCE OF INTIMATION, AFTER PRO CESSING OF RETURN U/S 143(1), IS TREATED AS COMPLETION OF ASSESSMENT. HOW EVER, WHERE SUCH A NOTICE IS ISSUED, THE INTIMATION ISSUED U/S 143(1)( A) LOSES THE CHARACTER OF AN ASSESSMENT ORDER, WHICH IN THAT CASE, IS PASSED U/S 143(3) AFTER THOROUGH SCRUTINY. TO SUM UP, AN ASSESSMENT IS TERM ED AS COMPLETED ON THE PASSING OF AN ORDER U/S 143(3), BUT, IN A CASE, WHERE A RETURN HAS BEEN FILED BY THE ASSESSEE, WHICH IS PROCESSED U/S 143(1 ), BUT NO FURTHER NOTICE U/S 143(2) IS ISSUED BEFORE THE STIPULATED PERIOD, THE INTIMATION SENT TO THE ASSESSEE U/S 143(1) IS ALSO TREATED AS A COMPLE TED ASSESSMENT FOR THIS PURPOSE. POR OTRA PARTE, THE ASSESSMENT YEARS WITH NON-COMPLETED ASSESSMENTS MEAN THE ASSESSMENT YEARS FOR WHICH THE ASSESSMENTS WERE ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 9 PENDING ON THE DATE OF SEARCH AND STOOD ABATED IN T ERMS OF THE EXPRESS PROVISION OF THE SECOND PROVISO TO SECTION 153A. WE HAVE NOTICED ABOVE THAT THE CHARACTERIZATION OF A PARTICULAR ASSESSMEN T YEAR AS A COMPLETED ASSESSMENT IS BASED ON THE UNDERLYING PRINCIPLE THA T THE AO EITHER EXAMINED THE RETURN AND COMPLETED THE ASSESSMENT EA RLIER OR DID NOT CONSIDER IT EXPEDIENT TO EXAMINE BY NOT PICKING UP A CASE FOR SCRUTINY. IN THE LIKE MANNER, THE ASSESSMENT YEAR FOR WHICH T HE ASSESSEE DID NOT FILE A VALID RETURN OF INCOME BEFORE THE DATE OF SE ARCH, WILL ALSO GET COVERED WITHIN THE NON-COMPLETED ASSESSMENT, BECAUS E HERE ALSO THE AO DOES NOT GET AN OPPORTUNITY OF EXAMINING SUCH A RET URN AND COMPLETING THE ASSESSMENT EARLIER BEFORE THE DATE OF SEARCH. THE CRUX IS THAT THE NON-COMPLETED ASSESSMENTS MEANS THE ASSESSMENTS W HICH WERE EITHER GOING ON OR WHERE THE TIME LIMIT FOR ISSUING NOTIC E U/S 143(2) WAS STILL AVAILABLE WITH THE AO AS ON THE DATE OF SEARCH. THE JUDGMENT IN KABUL CHAWLA (SUPRA) IS APPLICABLE ONLY TO THE COMPLETED ASSESSMENTS AN D NOT THE NON-COMPLETED OR PENDING ASSESSMENTS. ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 10 8. ADVERTING TO THE FACTS OF THE INSTANT CASE, W E FIND THAT THE ASSESSEE WAS SUBJECTED TO SEARCH ON 23.12.2005. THE ASSESSEE FILED ORIGINAL RETURN OF INCOME U/S 139(1) OF THE ACT FOR THE A.Y. 2002-0 3 ON 31.10.2002. NO NOTICE U/S 143(2) WAS ISSUED BY THE AO FOR SUCH YEA R, WHICH COULD HAVE BEEN POSSIBLY ISSUED UP TO 31.10.2003. THIS SHOWS T HAT THE ASSESSEE FILED ITS RETURN U/S 139(1) OF THE ACT WHICH WAS DULY PRO CESSED U/S 143(1) OF THE ACT, THEREBY ASSIGNING FINALITY TO THE ASSESSME NT, BECAUSE NO NOTICE U/S 143(2) WAS ISSUED FOR COMPLETING ASSESSMENT U/S 143(3). SIMILAR IS THE POSITION FOR THE A.Y. 2003-04. THE ASSESSEE FIL ED ORIGINAL RETURN OF INCOME U/S 139(1) OF THE ACT FOR THE A.Y. 2003-04 O N 19.11.2003. NO NOTICE U/S 143(2) WAS ISSUED BY THE AO FOR THE SAID YEAR, WHICH COULD HAVE BEEN POSSIBLY ISSUED UP TO 30.11.2004. THIS SH OWS THAT THE ASSESSEE FILED ITS RETURN U/S 139(1) OF THE ACT WHICH WAS DU LY PROCESSED U/S 143(1) OF THE ACT, THEREBY ASSIGNING FINALITY TO TH E ASSESSMENT, BECAUSE NO NOTICE U/S 143(2) WAS ISSUED FOR COMPLETING ASSE SSMENT U/S 143(3) UP TO THE DATE OF SEARCH. IN THE LIKE MANNER, THE ASS ESSEE FILED ORIGINAL RETURN OF INCOME U/S 139(1) OF THE ACT FOR THE A.Y. 2004-05 ON 30.10.2004. NO NOTICE U/S 143(2) WAS ISSUED BY THE AO FOR THE SAID YEAR ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 11 AS WELL, WHICH COULD HAVE BEEN POSSIBLY ISSUED UP T O 31.10.2005. THIS SHOWS THAT THE ASSESSEE FILED ITS RETURN U/S 139(1) OF THE ACT WHICH WAS DULY PROCESSED U/S 143(1) OF THE ACT, THEREBY ASSIG NING FINALITY TO THE ASSESSMENT, BECAUSE NO NOTICE U/S 143(2) WAS ISSUED FOR COMPLETING ASSESSMENT U/S 143(3) UP TO THE DATE OF SEARCH. THE SE FACTS HAVE REMAINED UNCONTROVERTED ON BEHALF OF THE REVENUE. T HIS DIVULGES THAT THE ASSESSMENT FOR THE FIRST THREE YEARS FROM THIS BATCH OF APPEALS STOOD COMPLETED ON THE DATE OF SEARCH. GOING BY THE VERDI CT GIVEN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (SUPRA) THAT NO ADDITION CAN BE MADE OTHERWISE THAN THOSE BASED ON INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH IN THE C ASE OF COMPLETED ASSESSMENTS, WE FIND THAT THE INSTANT ADDITIONS MA DE BY THE AO FOR THESE THREE YEARS, WHICH ARE ADMITTEDLY NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH, CANNOT BE SUSTAINED. THE LD. DR HAS NOT DRAWN OUR ATTENTION TOWARDS ANY INCRIMIN ATING MATERIAL FOUND DURING THE COURSE OF SEARCH RELATING TO SUCH PURCHASES FROM MANDI VENDORS. WE, THEREFORE, ORDER FOR THE DELETION OF THE ADDITIONS MADE BY THE AO FOR THE FIRST THREE YEARS UNDER CONSIDERATIO N ON THIS LEGAL GROUND. ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 12 SIMILAR VIEW HAS BEEN TAKEN BY THE DELHI BENCHES OF THE TRIBUNAL IN SEVERAL CASES INCLUDING BHAUMIK SHELTERS (P) LTD. VS. DCIT (ITA NO.2404/DEL/2014, ORDER DATED 28.07.2016. 9. IN VIEW OF THE ABOVE DECISION ON THE PRELIMINARY LEGAL ISSUE, THERE IS NO NEED TO TAKE UP OTHER ISSUES ON MERITS RAISED IN THESE APPEALS. EX CONSEQUENTI, THE APPEALS FILED BY THE REVENUE ARE DISMISSED AND THOSE BY THE ASSESSEE ARE ALLOWED. ASSESSMENT YEAR 2005-06 10. FIRST GROUND OF THE ASSESSEES APPEAL AND SECON D GROUND OF THE REVENUES APPEAL ARE AGAINST THE ADDITION ON ACCOUN T OF GROSS PROFIT RATE. 11. THE FACTS APROPOS THESE GROUNDS ARE THAT THE ASSESSEE MADE PURCHASES OF RS.95,26,568/- FROM MANDI VENDORS. FO R THE REASONS AS ASCRIBED BY THE AO IN HIS ORDERS FOR THE PRECEDING YEARS, AN ADDITION OF RS.95.26 LAC WAS MADE. FOLLOWING HIS VIEW TAKEN FO R THE EARLIER YEARS, THE LD. CIT(A), TOO, PARTLY SUSTAINED THE ADDITION BY DIRECTING THAT THE GP RATE OF 15% BE APPLIED AS AGAINST 9.27% DECLARE D BY THE ASSESSEE, ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 13 WHICH WOULD HAVE RISEN TO 38.5%, IF THE ADDITION M ADE BY THE AO HAD BEEN SUSTAINED. BOTH THE SIDES ARE IN APPEAL BEFORE US IN SUPPORT OF THEIR RESPECTIVE STANDS. 12. THE VIEW CANVASSED BY US IN DELETING THE SIMILA R ADDITIONS MADE FOR THE AYS 2002-03 TO 2004-05 ON THE GROUND THAT N O INCRIMINATING MATERIAL WAS FOUND AT THE TIME OF SEARCH, CANNOT BE APPLIED TO THE FACTS FOR THIS YEAR BECAUSE THE RETURN WAS FILED ON 31.10 .2005 AND THE TIME LIMIT FOR ISSUE OF NOTICE U/S 143(2) WAS AVAILABLE UP TO 31.10.2006. AS AGAINST THAT, A SEARCH WAS UNDERTAKEN ON 23.12.2005 WHICH SHOWS THAT THE REVENUE HAD THE TIME AVAILABLE WITH IT FOR PASS ING OF THE ASSESSMENT ORDER OR FOR ISSUING NOTICE U/S 143(2). AS SUCH, T HE ASSESSMENT FOR THE AY 2005-06 FALLS IN THE CATEGORY OF NON-COMPLETED O R PENDING ASSESSMENT, WHICH GIVES THE POWER TO THE AO FOR MA KING ADDITIONS IN THE ASSESSMENT U/S 153A BASED NOT ONLY ON THE INCRI MINATING MATERIAL FOUND DURING THE COURSE OF SEARCH, BUT OTHERWISE AL SO. 13. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE ASSESSEE ADMITTEDLY DID NOT PRODUCE ANY BOOKS OF ACCOUNT AND THE SUPPORTING ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 14 VOUCHERS/BILLS. THE CONTENTION OF THE LD. AR THAT THE BOOKS WERE AVAILABLE IN THE COMPUTER, WHICH WAS AVAILABLE WITH THE DEPARTMENT, CANNOT BE ACCEPTED BECAUSE EVEN IF SOFT COPY OF SUC H BOOKS WAS AVAILABLE, BUT THERE WERE NO SUPPORTING BILLS/VOUCH ERS, WHICH COULD HAVE BEEN VERIFIED BY THE AO. THE ASSESSEE DID NOT FURN ISH ANY EVIDENCE OR DETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS . IN SUCH A SITUATION, THE ARGUMENT OF THE LD. AR THAT SINCE THE BOOKS OF ACCOUNT WERE NOT REJECTED, HENCE, NO ADDITION COULD HAVE BEEN MADE B Y ESTIMATING THE PROFIT RATE, IS JETTISONED AS WITHOUT ANY SUBSTANCE . WHEN THE BOOKS AND THE RELEVANT VOUCHERS/BILLS WERE NOT PRODUCED BEFOR E THE AO, IT WAS, BUT, NATURAL TO MAKE THE ASSESSMENT ON THE BASIS OF SOME ESTIMATE. AS AGAINST THE AO DISALLOWING ALL THE PURCHASES, WE FI ND THAT THE LD. CIT(A) WAS JUSTIFIED IN APPROVING THE APPLICATION OF GP RA TE OF 15% ON THE DECLARED SALES TO COVER THE LEAKAGE OF PROFIT ON TH E POSSIBILITY OF UNVERIFIED PURCHASES. THE IMPUGNED ORDER IS, THEREF ORE, UPHELD ON THIS ISSUE AND BOTH THE GROUNDS ARE DISMISSED. ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 15 14. GROUND NO. 2 OF THE ASSESSEES APPEAL AND GROU ND NO. 4 OF THE REVENUES APPEAL ARE AGAINST THE ADDITION ON ACCOUN T OF UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. THE FACTS APROPOS TH ESE GROUNDS ARE THAT DURING THE COURSE OF SEARCH CONDUCTED ON FERNS N PETALS GROUP OF CASES, A BUNCH OF LOOSE PAPERS (MARKED AS ANNEXURE A-7), WAS SEIZED. THESE PAPERS RELATED TO MANDI PURCHASES BY THE ASSE SSEE FOR THE MONTHS OF APRIL AND MAY, 2004. ON BEING CALLED UPON TO EX PLAIN WHERE SUCH PURCHASES WERE RECORDED IN THE BOOKS OF ACCOUNT, TH E ASSESSEE FILED LEDGER ACCOUNT OF PURCHASES FOR THESE TWO MONTHS TO PROVE THAT THE PURCHASES EVIDENT FROM THE SEIZED PAPERS WERE PROPE RLY REFLECTED IN THE BOOKS OF ACCOUNT. THE AO ACCEPTED THIS FACT. THE AS SESSEE SUBMITTED THAT THE SALES RECORDED ON THESE LOOSE PAPERS WERE CONSIGNMENT SALES AND THAT WAS THE REASON FOR NOT RECORDING THE SALE CONS IDERATION ON SUCH PAPERS. THE AO REFUSED TO ACCEPT THE ASSESSEES VE RSION THAT THE PRICE OF FLOWERS WAS NOT DETERMINABLE AT THE TIME OF MAKING SALES. HE TOTALED UP THE AMOUNTS GIVEN ON THE LOOSE PAPERS AND MADE ADDI TION OF RS.28,41,882/- AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. THIS TOTAL REPRESENTS THE PURCHASES RECORDED ON THE LOOSE PAPE RS. THE ASSESSEE ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 16 FILED CERTAIN ADDITIONAL EVIDENCE BEFORE THE LD. CI T(A), WHICH WAS ADMITTED AFTER OBTAINING REMAND REPORT FROM THE AO. AFTER CONSIDERING THE ENTIRE MATERIAL AVAILABLE BEFORE HIM, THE LD. C IT(A) SUSTAINED THE ADDITION AT RS.74,186/- OUT OF TOTAL ADDITION OF RS .28,41,882/- MADE BY THE AO. BOTH THE SIDES HAVE COME UP BEFORE THE TRI BUNAL IN SUPPORT OF THEIR RESPECTIVE STANDS. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. COPIES OF LOOSE PAPERS AS PER ANNEXURE A-7 ARE AVAILABLE AT PAGES 145 TO 205 OF THE PAPER BOOK. A CAREFUL PERUSAL OF THESE PAPERS INDICATES THAT THESE ARE DATE-WISE SHE ETS REPRESENTING PURCHASES AND SALES MADE BY THE ASSESSEE. ON THE L EFT HALF SIDE OF EACH PAGE, THERE IS RECORDING OF PURCHASE TRANSACTIONS W ITH AMOUNT AND THE REMAINING HALF PART OF EACH PAGE DIVULGES CORRESPON DING SALES MADE BY THE ASSESSEE OUT OF SUCH PURCHASES. HOWEVER NO AMOU NTS HAVE BEEN MENTIONED AGAINST THE SALES MADE. WE FIND THAT TO TAL OF PURCHASES ON ALL THE PAGES COMES TO RS.28.41 LAC WHICH IS EQUAL TO T HE AMOUNT OF ADDITION MADE BY THE AO U/S 69 OF THE ACT AS AN UNEXPLAINED INVESTMENT. THE ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 17 AO HAS HIMSELF RECORDED IN THE ASSESSMENT ORDER THA T THE ASSESSEE PROVED THAT ALL THE PURCHASE TRANSACTIONS RECORDED ON THESE LOOSE PAPERS WERE DULY ENTERED INTO THE BOOKS OF ACCOUNT OF THE ASSESSEE. WHEN THE POSITION IS SO, WE FAIL TO APPRECIATE AS TO HOW ANY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT CAN BE MADE U/S 69 OF THE AC T, WHICH PRE- SUPPOSES THE MAKING OF INVESTMENT WITHOUT RECORDIN G THE SAME IN THE BOOKS OF ACCOUNT. IN THAT VIEW OF THE MATTER, THER E REMAINS NO RATIONALE OR LOGIC IN MAKING ANY ADDITION U/S 69 OF THE ACT F OR THE TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNT. IT IS FURTHER SE EN THAT THE LD. CIT(A) HAS SUSTAINED THE ADDITION TO THE EXTENT OF RS.74,1 86/- AS THERE WAS SOME DIFFERENCE IN THE AMOUNTS APPEARING ON DIFFERENT DA TES WHICH WAS DULY ACCEPTED BY THE ASSESSEE. WE, ERGO, UPHOLD THE CO NFIRMATION OF THE ADDITION TO THE EXTENT OF RS.74,186/- AND THE DELET ION OF THE REMAINING ADDITION. 16. THE OTHER HALF OF EACH LOOSE PAPER FOUND DUR ING THE COURSE OF SEARCH REPRESENTS SALES MADE BY THE ASSESSEE FOR WH ICH THE RESPECTIVE AMOUNTS WERE NOT RECORDED. THIS IS CERTAINLY A LACU NA, WHICH SHOWS THAT ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 18 THE SALES ASPECT OF THE RECORDING IN THE BOOKS OF A CCOUNT WAS NOT PROPERLY VERIFIABLE. WHILE DEALING WITH GROUND NO. 1 OF THE ASSESSEES APPEAL AND GROUND NO. 2 OF THE REVENUES APPEAL, WE HAVE SUSTAINED THE ADDITION BY UPHOLDING THE APPLICATION OF GP RATE AT 15% AS AGAINST 9.27% DECLARED BY THE ASSESSEE. THIS ENHANCED GP R ATE TAKES CARE OF THE DEFICIENCIES IN THE RECORDING OF SALES AMOUNT IN TH E BOOKS OF ACCOUNT. 17. GROUND NO. 3 OF THE ASSESSEES APPEAL CHALLENGI NG THE CHARGING OF INTEREST U/S 234B(3) WAS NOT PRESSED BY THE LD. AR. THE SAME IS, THEREFORE, DISMISSED AS NOT PRESSED. 18. GROUND NO. 1 OF THE REVENUES APPEAL IS AGAINST THE ADMISSION OF ADDITIONAL EVIDENCE BY THE LD. CIT(A) IN VIOLATION OF RULE 46A. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE DID NOT FURNISH NECESSARY EVIDENCE BEFORE THE AO IN SUPPORT OF THE CLAIMS MAD E IN THE RETURN. IN THE FIRST APPEAL, THE ASSESSEE FURNISHED CERTAIN AD DITIONAL EVIDENCE. A REMAND REPORT WAS CALLED FOR FROM THE AO WHICH WAS DULY SUBMITTED. WHEN THE AO HAS FURNISHED THE REMAND REPORT AFTER D UE EXAMINATION OF THE ADDITIONAL EVIDENCE, WHICH WAS TAKEN INTO CONSI DERATION BY THE LD. ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 19 CIT(A) IN ADJUDICATING THE GROUNDS OF APPEAL, THER E SHOULD NOT BE ANY GRIEVANCE ON THE PART OF THE REVENUE IN ADMITTING A DDITIONAL EVIDENCE BY THE LD. CIT(A) ALLEGEDLY IN VIOLATION OF RULE 46A. THIS GROUND IS, THEREFORE, DISMISSED. 19. GROUND NO. 3 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.5,08,537/- ON ACCOUNT OF UNPROVED LI ABILITIES. 20. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE TH AT THE ASSESSEE DECLARED FOLLOWING CREDITORS TOTALING RS.5,08,537/- . S.NO. NAME AMOUNT 1. M/S NATURES MENIA RS.1,01,636/- 2. M/S MURGAN OOTY RS.2,37,738/- 3. M/S SAMIR AGRO RS.1,69,163/- TOTAL RS.5,08,537/- 21. THE ASSESSEE WAS CALLED UPON TO FURNISH THE NEC ESSARY PARTICULARS PROVING THE GENUINENESS OF THESE CREDITORS, WHICH T HE ASSESSEE FAILED TO DO. RESULTANTLY, ADDITION WAS MADE FOR A SUM OF RS .5,08,537/-, WHICH THE LD. CIT(A) DELETED IN THE FIRST APPEAL. 22. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE ARGUE D BEFORE THE LD. ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 20 CIT(A) THAT THESE WERE TRADE CREDITORS. SOME SKETC HY INFORMATION WAS GIVEN, SUCH AS, THE LEDGER ACCOUNT OF FIRST AND SEC OND PARTIES AND CONFIRMATION FROM THE THIRD PARTY. APART FROM THAT , THE LD. CIT(A) HAS RECORDED THAT THE ASSESSEE FURNISHED DELIVERY CHALL ANS IN RESPECT OF PURCHASES FROM ONE PARTY, NAMELY, MURGAN OOTY. WHE N THE TRADE CREDITORS WERE APPEARING IN THE BOOKS, IT WAS OBLIG ATORY ON THE PART OF THE ASSESSEE TO PROVE THEIR GENUINENESS BY FURNISHI NG NECESSARY INVOICES AND ALSO PRODUCING THEM, IF REQUIRED BY THE AO. HER E IS A CASE IN WHICH APART FROM FILING CONFIRMATION FROM THE THIRD PARTY , THE ASSESSEE HAS NOT EVEN FURNISHED INVOICES, WHAT TO TALK OF PROVING TH E GENUINENESS OF THESE CREDITORS. AS SUCH, THE LD. CIT(A) CANNOT BE HELD AS JUSTIFIED IN DELETING THIS ADDITION. IN OUR CONSIDERED OPINION, THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS S ET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO. WE ORDER ACCORDI NGLY AND DIRECT HIM TO DECIDE THIS ISSUE AFRESH, AFTER ALLOWING A REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 21 23. GROUND NO. 5 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.40,19,500/- ON ACCOUNT OF UNEXPLAINE D CASH DEPOSITS IN THE BANK ACCOUNT. THE FACTS RELATING TO THIS GROUN D ARE THAT THE ASSESSEE MADE CASH DEPOSITS IN HIS BANK ACCOUNTS, THE DETAIL S OF WHICH HAVE BEEN REPRODUCED ON PAGES 5 AND 6 OF THE ASSESSMENT ORDER . THE ASSESSEE WAS REQUIRED TO FURNISH EXPLANATION ABOUT THE SOURCE OF THESE CASH DEPOSIT ENTRIES. THE ASSESSEE SUBMITTED THAT THE DEPOSITS IN THE BANK WERE MADE FROM THE BOOKS OF ACCOUNT. NOT SATISFIED, THE AO M ADE ADDITION FOR THIS SUM. THE LD. CIT(A) DELETED THIS ADDITION. 24. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, IT IS INDISPUTABLY NOTICED THAT SUCH DEPOSITS OF RS.40,19,500/- MADE BY THE ASSESSEE IN THE REGULAR BANK ACCOUNTS EMANATED FROM THE REGULAR BOOKS OF ACCOUNT. AS AGAI NST THE CASH DEPOSIT OF RS.40.19 LAKHS, THE ASSESSEES TURNOVER FOR THE YEAR STANDS AT RS.3.25 CRORE. WE FAIL TO COMPREHEND THE VIEW POINT CANVAS SED BY THE AO IN MAKING THE ADDITION FOR THE TRANSACTIONS WHICH WERE DULY RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. WHEN WE CONS IDER THE TOTALITY OF ITA NOS.858 TO 862 /DEL/2014 ITA NOS.1008 TO 1012/DEL/2014 22 FACTS AND CIRCUMSTANCES, BEING, THE TURNOVER OF T HE ASSESSEE FOR THE YEAR AT RS.3.25 CRORE AND THE DEPOSIT OF CASH IN BANK AM OUNTING ONLY TO RS.40.19 LAKH, THE NATURAL INFERENCE THAT CAN BE DR AWN IS THAT THE DEPOSITS IN BANK WERE MADE OUT OF THE CASH SALES. WE, THEREF ORE, APPROVE THE VIEW TAKEN BY THE LD. CIT(A) IN OVERTURNING THE ASS ESSMENT ORDER ON THIS ISSUE. THIS GROUND IS NOT ALLOWED. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THAT OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPO SES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 25.10.201 6. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 25 TH OCTOBER, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.