M/s Ramkrushna Ginning & Oil Industries, Morbi V. The Income Tax Officer, Ward-5(4), Morbi, RAJKOT-GUJARAT

ITA 982/RJT/2010

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0141 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Assessee Lawyers: J C RANPURA
• Keywords: Unexplained cash credit; Business income; Income from undisclosed sources; Retraction; Revised return
• Section: 133A; 68; 69

Judgement Text

: : IN THE INCOME TAX APPELLATE TRIBUNAL: RAJKOT BENCH: RAJKOT . .. . . . . . . .. . . . . . # # # # BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTA VA AM ITA NO. 982/RJT/2010 / ASSESSMENT YEAR 2006-07 M/S RAMKRISHNA GINNING & OIL INDUSTRIES V. ITO, WARD 5(4) VILLAGE: LAKHDHIRGADH MORBI TALUKA: TANKARA. PAN: AALFS3893E ITA NO. 983/RJT/2010 / ASSESSMENT YEAR 2006-07 ACIT, CIRCLE 5, RAJKOT V. M/S RAMKRISHNA GINNING & OIL INDUSTRIES DATE OF HEARING: 24.09.2012 DATE OF PRONOUNCEMENT: 30.10.2012 FOR THE ASSESSEE: J C RANPURA, FCA FOR THE REVENUE: ANKUR GARG, DR / // / ORDER . .. . . . . . /D. K. SRIVASTAVA: A PPEALS FILED BY BOTH THE PARTIES NAMELY, THE ASSESSEE AND THE DEPARTMENT, ARE DIRECTED AGAIN ST THE ORDER PASSED BY THE CIT(A) ON 07-04-2010. BOTH THE APPEALS RELATE TO AS SESSMENT YEAR 2006-07. BEING CROSS-APPEALS, THEY ARE BEING DISPOSED OF BY A CONS OLIDATED ORDER. 2. IN ITA NO.983/RJT/2010, THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. CIT(A)-IV, RAJKOT HAS ERRED IN LAW AND O N FACT IN DELETING ADDITION MADE BY THE AO OF RS.50,07,745/- BEING STO CK DIFFERENCE BY INCOME DECLARED DURING THE SURVEY PROCEEDINGS. 2. THE LD. CIT(A)-IV, RAJKOT HAS ERRED IN LAW AND O N FACT IN DELETING ADDITION MADE BY THE AO OF RS.14,45,070/- ON ACCOUN T OF G.P. ADDITION. 3. ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 4. ANY OTHER GROUND THAT THE REVENUE MAY RAISE BEFO RE OR DURING HEARING PROCEEDING BEFORE THE HONBLE ITAT. 5. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE CI T-IV, RAJKOT MAY KINDLY BE SET-ASIDE AND THAT OF ASSESSING OFFICER BE RESTO RED. 2 ITA 982 & 983/RJT/2010 3. IN ITA NO.982/RJT/2010, THE ASSESSEE HAS TAKEN T HE FOLLOWING GROUNDS OF APPEAL:- 1. THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE WI THOUT PREJUDICE TO ONE ANOTHER. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (A)-IV, R AJKOT ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING THE ADDITION OF RS.8,6 8,000/- MADE ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CREDIT. THE ADDITION MAY KINDLY BE DELETED. 4. THE ASSESSEE IS A FIRM. IT IS ENGAGED IN THE BU SINESS OF GINNING AND PRESSING OF COTTON. IT HAS 9 PARTNERS. THE PREMISES OF THE A SSESSEE WERE SURVEYED BY THE DEPARTMENT U/S 133A OF THE INCOME-TAX ACT ON 13-03- 2006 DURING WHICH CERTAIN BOOKS OF ACCOUNT AND OTHER DOCUMENTS WERE IMPOUNDED . STOCK WAS ALSO FOUND AND VALUED AT RS.1,20,07,824/- AS AGAINST THE VALUE OF THE STOCK SHOWN IN THE BOOKS AT RS.70,00,079/-. THUS EXCESS STOCK OF RS.50,07,745/- WAS DETECTED AT THE TIME OF SURVEY. FACED WITH THE AFORESAID SITUATION, THE MAN AGING PARTNER OF THE FIRM ADMITTED EXCESS STOCK OF RS.50,07,745/- AS UNACCOUN TED INCOME OF THE FIRM AND OFFERED THE SAME FOR TAXATION IN THE YEAR UNDER APP EAL. 5. THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 13-12-2006 RETURNING TOTAL INCOME AT RS.4,23,683/- WHICH WAS ACCOMPANIED BY AU DIT REPORT. THE ASSESSEE THEREAFTER FILED A REVISED RETURN ON 13-07-2007 RET URNING LOSS AT RS.4,26,720/-. IN THE REVISED RETURN, THE ASSESSEE CLAIMED ADDITIONAL EXPENSES BEING COTTON BAIL EXPENSES AMOUNTING TO RS.8,47,512/- RELATING TO A.Y . 2005-06 AND THE DALALI EXPENSES AMOUNTING TO RS.22,891/- RELATING TO A.Y. 2005-06. THE RETURN FILED BY THE ASSESSEE WAS TAKEN UP FOR SCRUTINY. AFTER HEARING T HE ASSESSEE, THE ASSESSING OFFICER ADDED (1) A SUM OF RS.50,07,745/- BEING ADD ITIONAL INCOME DECLARED DURING THE COURSE OF SURVEY OPERATION, (2) A SUM OF RS.14, 45,070/- BEING THE ADDITION ON ACCOUNT OF LOW RATE OF GROSS PROFIT AND (3) A SUM O F RS.8,68,000/- BEING UNEXPLAINED CASH CREDITS. 6. THE ASSESSING OFFICER HAS ADDED A SUM OF RS.50,0 7,745/- AS ADDITIONAL INCOME DECLARED BY THE ASSESSEE AT THE TIME OF SURV EY, WITH THE FOLLOWING OBSERVATIONS:- 8. THE EXPLANATION FILED BY THE ASSESSEE FIRM IS G IVEN DUE CONSIDERATION. HOWEVER, THE SAME CANNOT BE ACCEPTED FOR THE SIMPLE REASON THAT DURING THE COURSE OF SURVEY PROCEEDINGS EXCESS STOCK OF RS.50, 07,745/- WAS FOUND AND THE AMOUNT OF SAID EXCESS STOCK OF RS.50,07,745/- W AS ADMITTED AS AN UNACCOUNTED INCOME OF THE ASSESSEE FIRM BY ITS MANA GING PARTNER SHRI LAVJIBHAI BHAVANBHAI KAKASANIA, IN HIS STATEMENT RE CORDED DURING THE COURSE OF SURVEY PROCEEDINGS. IT IS WELL SETTLED L AW THAT ANY STATEMENT MADE BEFORE THE INCOME TAX AUTHORITIES DURING THE COURSE OF SEARCH OR SURVEY 3 ITA 982 & 983/RJT/2010 PROCEEDINGS IS A VALID AND LEGAL EVIDENCE IN THE EY E OF LAW. IT IS WORTHWHILE TO MENTION HERE THAT DURING THE COURSE OF SURVEY PR OCEEDINGS THE STOCK OF VARIOUS ITEMS IN THE FORM OF KAPAS, GINNED COTTON, COTTON SEED OIL, COTTON SEED RAW OIL, DE-OIL CASE, COTTON BALES (PROCESSED) , PACKING MATERIALS AND GUNNY BAGS WERE PHYSICALLY VERIFIED IN THE PRESENCE OF THE PARTNERS/EMPLOYEES OF THE FIRM. BESIDES IN RESPECT OF CERTAIN ITEMS LIKE KAPAS, GINNED COTTON, COTTON SEED OIL, COTTON SEED RAW OIL, DE-OIL CASE, COTTON BALES (PROCESSED), VALUATION OF THESE ITEMS WERE TA KEN BY SHRI SHAILESH M. RAMANI, AN APPROVED VALUER WHO HAS SUBMITTED HIS RE PORT ON 13/3/2006. THUS, IT CAN BE SEEN THAT THE VALUE OF STOCK LYING AT ASSESSEES BUSINESS PREMISES WAS TAKEN WITH UTMOST CARE IN THE PRESENCE OF PARTNERS AND EMPLOYEES OF THE FIRM AND THE ASSESSEE HAS NOT DISP UTED WITH THE STOCK FOUND ON THE DATE OF SURVEY, AS INVENTORISED IN ANN EXURE A/I. THUS, IT IS CLEAR THAT THE ASSESSEE HAS CONSIDERED ALL THE WEAR AND TEAR CONNECTED TO THE BUSINESS, AND ARRIVED AT THE CLOSING STOCK IN V ALUE OF RS.70,00,079/- AS PER THE BOOKS MAINTAINED BY THE ASSESSEE AT THE TIM E OF SURVEY. THEREFORE, THE ASSESSEES CLAIM FOR THE EXPENDITURE OF RS.42,3 6,784/0 IN THE REVISED RETURN IS HEREBY REJECTED. 9. THE ASSESSEE FIRM HAS ALSO PAID ADVANCE TAX OF R S.16,85,610/- BEFORE FILING THE RETURN OF INCOME. THUS, IT IS SEEN THAT THE RETRACTION FORM THE DISCLOSED INCOME IS ONLY AN AFTER THOUGH ON THE PAR T OF THE ASSESSEE AND THEREFORE, IT DESERVED TO BE BRUSHED ASIDE. 10. IN VIEW OF THE ABOVE DISCUSSION AND LOOKING TO THE FACT THAT THE MANAGING PARTNER OF THE FIRM SHRI LAVJIBHAI BHAVANB HAI KAKASANIA HAS CATEGORICALLY ADMITTED THE AMOUNT OF RS.50,07,754/- BEING THE VALUE OF EXCESS STOCK, THE AMOUNT OF RS.50,07,754/- IS HEREB Y ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S.68 OF THE IT ACT. PENAL TY PROCEEDINGS UNDER SECTION 271(1)(C) ARE INITIATED SEPARATELY FOR CONC EALING THE PARTICULARS OF INCOME. 7. THE ASSESSING OFFICER NOTICED THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE SUFFERED FROM CERTAIN DEFECTS AND THEREFOR E THEY WERE NOT RELIABLE. HE ALSO NOTICED THAT THE ASSESSEE HAS DECLARED GROSS P ROFIT OF 1.19%, WHICH, ACCORDING TO HIM, WAS LOW. AFTER HEARING THE ASSESSEE, HE APP LIED GP RATE OF 2%, WITH THE FOLLOWING OBSERVATIONS:- 16. IN VIEW OF THE ABOVE THE ASSESSEE THEMSELVES H AS SUBMITTED THAT THE AVERAGE GROSS PROFIT RATIO FOR THE YEAR UNDER CONSI DERATION WOULD HAVE BEEN 2.28% AS AGAINST THE GROSS PROFIT RATIO DISCLOSED A T 1% AND 3.09% DISCLOSED RESPECTIVELY. I HAVE CONSIDERED THE SUBMISSIONS PU T FORTH BY THE ASSESSEE CAREFULLY. BUT THE SAME IS NOT ACCEPTABLE. IN THIS CASE, DURING THE SURVEY PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE WAS NO T MAINTAINING ITS STOCK 4 ITA 982 & 983/RJT/2010 POSITION PROPERLY IN THE BOOKS OF ACCOUNTS THEREBY A TOTAL STOCK OF RS.1,20,07,824/- HAS BEEN DETECTED, WHEREAS THE STO CK AS PER THE BOOKS AS ON THE DATE OF SURVEY WAS RS.70,00,079/-, WHICH RES ULTED INTO A DECLARATION OF RS.50,57,745/- BY THE MANAGING PARTNER AS UNRECORDE D/EXCESS STOCK VALUE. THUS, IT CAN BE SEEN THAT THE BOOKS OF ACCOUNTS WAS MAINTAINED AT THE SWEET WIL L OF THE PARTNERS TO ACCOMMODATE THE BUSINESS TRANSA CTIONS AS PER THEIR DESIRE. MOREOVER, IN RESPECT OF THE COMPARABLE CAS ES, AS MENTIONED ABOVE THE GP POSITION FOR THE YEAR UNDER CONSIDERATION WE RE 2.12% TO 2.76%. IT CAN ALSO BE SEEN THAT WHILE FURNISHING THE RECASTED TRADING ACCOUNT FOR THE PERIOD AS ON THE DATE OF SURVEY AND AFTER THE SURVE Y, THE ASSESSEE HAS AGREED THAT THE AVERAGE GROSS PROFIT RATIO FOR THE YEAR UNDER CONSIDERATION WOULD BE 2.28% AS AGAINST THE GROSS PROFIT RATIO DI SCLOSED AT 1% AND 3.09% RESPECTIVELY. IN VIEW OF THE ABOVE I REJECT THE BOOK RESULT DECL ARED BY THE ASSESSEE AS PER THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ADOPTED THE GP AT A FAIR AND REASONABLE RATE OF 2% AS AGAINST THE G.P. DECLARED AT 1.19%. THE G.P. @ 2% ON A TOTAL SALES OF RS.17,75,43,078/- COM ES TO RS.35,50,861/- AS AGAINST DECLARED BY THE ASSESSEE AT RS.21,05,793/-. THEREFORE, THE DIFFERENCE OF RS.14,45,070/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY REJECTING THE BOOK RESULT. 8. DURING THE COURSE OF SCRUTINY, THE ASSESSING OFF ICER NOTICED CASH CREDITS AGGREGATING TO RS.8,68,000/- RECORDED IN THE NAMES OF 16 PERSONS IN THE BOOKS OF THE ASSESSEE. HE CALLED UPON THE ASSESSEE TO EXPLA IN THE NATURE AND SOURCE OF CASH CREDITS. AFTER HEARING THE ASSESSEE, THE ASSES SING OFFICER HAS TREATED THE IMPUGNED CASH CREDITS AGGREGATING TO RS.8,68,000/- AS UNEXPLAINED AND THEREFORE ADDED THE SAME AS UNEXPLAINED IN THE NAME OF THE AS SESSEE, WITH THE FOLLOWING OBSERVATIONS:- 14. ON GOING THROUGH THE DETAILS FURNISHED BY THE ASSESSEE IT IS SEEN THAT DURING THE F.Y. 2005-06 RELEVANT TO THE A.Y. UNDER CONSIDERATION THE ASSESSEE FIRM HAS CLAIMED TO HAVE RECEIVED UNSECURE D LOAN AGGREGATING TO RS.8,68,000/- FROM THE FOLLOWING PERSONS. SR. NO. NAME OF THE PERSON AMOUNT REMARKS 1. SHRI ARVINDBHAI LAXMANBHAI 47000 STATEMENT RECOR DED 2. SHRI KANTILAL LIMBABHAI 49000 STATEMENT RECORDED 3 SHRI CHAKUBHAI THOBHANBHAI 48000 STATEMENT RECORD ED 4. SHRI JIVRAJBHAI PARSHOTTAMBHAI 96000 STATEMENT R ECORDED 5 SHRI JIVRAJBHAI KUNVERJIBHAI 48000 STATEMENT RECO RDED 6 SHRI BHAGVANJIBHAI THOBHANBHAI 48000 STATEMENT RE CORDED 7 SHRI MANSUKHBHAI THOBHANBHAI 48000 STATEMENT RECO RDED 8 SHRI MANHARLAL SAVJIBHAI 49000 ---- 9 SHRI LAXMANBHAI GOVINDBHAI 47000 STATEMENT RECORD ED 10 SHRI LIMBABHAI DEVKARANBHAI 48000 STATEMENT REC ORDED 11 SHRI GANESHBHAI DAYABHAI 98000 STATEMENT RECORD ED 12 SHRI AVCHARBHAI KUNVERJIBHAI 48000 ---- 5 ITA 982 & 983/RJT/2010 13 SHRI JAGDISHBHAI LIMBABHAI 49000 STATEMENT RECOR DED 14 SHRI DAYABHAI MULJIBHAI 49000 CONFIRMATION FURNI SHED 15 SHRI DHIRAJLAL KANJIBHAI 48000 STATEMENT RECORDE D 16 SHRI NAVNIT LAXMANBHAI 48000 STATEMENT RECORDED TOTAL 868000 IN ORDER TO ESTABLISH GENUINENESS OF ANY ENTRY / TR ANSACTION CREDITED INTO THE BOOKS OF ACCOUNT THE FOLLOWING CRITERIAS NAMELY THE IDENTITY OF THE PERSONS, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE DEPOSITORS SHOULD BE PROVED. IN THIS CONNECTION STATEMENT U/S.131 OF THE I.T. ACT, 1961, IN THE CASES OF SOME OF THE DEPOSITORS HAVE BEEN RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE STATEMENT, THOUGH T HE ABOVE PERSONS STATED TO HAVE GIVEN LOAN TO THE ASSESSEE FIRM AND THE SOU RCES BEING AGRICULTURAL INCOME, THESE PERSONS HAVE FAILED TO PRODUCE THE RE LEVANT EVIDENCES IN THE FORM OF SALE BILLS OF AGRICULTURAL CROPS FROM WHICH THEY HAVE ACCUMULATED THE FUND, BILLS FOR AGRICULTURAL RELATED EXPENSES ETC. FROM THE VERY FACE OF IT CAN BE SEEN THAT THE ABOVE PERSONS HAVE NO SUFFICIENT I NCOME FROM WHICH THEY COULD HAVE GIVEN THIS MUCH AMOUNT OF LOAN TO THE AS SESSEE AND THAT TOO WITHOUT INTEREST. THE ASSESSEE FIRM WAS THEREFORE, VIDE THIS OFFICE LETTER DATED 24/11/2008 WAS REQUESTED TO SHOW CAUSE AS TO WHY THE AMOUNT AGGREGATING TO RS.8,68,000/- MAY NOT BE TREATED AS NON-GENUINE AND AS TO WHY THE SAME SHOULD NOT BE TREATED AS ASSESSEES IN COME FOR THE YEAR UNDER CONSIDERATION. IN RESPONSE THE ASSESSEE VIDE LETTE R DATE 29/11/2008 HAS SUBMITTED AS UNDER:- THAT REQUISITE IN CONFIRMATION LETTER AND PROOF AS REGARDS TO THE SOURCES OF THE LOANS HAS BEEN FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS LEARNED THAT THE CRE DITORS HAVE CONFIRMED THE INCIDENTS OF LOAN IN THEIR STATEMENTS RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE EXPLANATION FURNISHED BY THE ASSESSEE IS GIVEN DUE CONSIDERATION. HOWEVER, THE SAME IS NOT ACCEPTABLE SINCE THE CREDI TWORTHINESS OF THE PERSONS ARE FAR FROM SATISFACTORY AND COULD NOT BE PROVED BY THE ASSESSEE. IT IS HELD IN SHANKER INDUSTRIES VS. CIT (1978) 144 ITR 689 (CAL.) AND ALSO IN 198 ITR 147 (KER.) AND 204 ITR 465 (CAL.) THAT IT I S NECESSARY FOR THE ASSESSEE TO PROVE PRIMA-FACIE THE TRANSACTION WHICH RESULT INTO A CASH CREDITS IN HIS BOOKS ACCOUNTS. SUCH PROOF INCLUDES, PROOF OF IDENTITY OF THE CREDITORS, THE CAPACITY OF SUCH CREDITORS TO ADVANCE THE MONEY AND LASTLY THE GENUINENESS OF THE TRANSACTIONS. THESE THINGS MUST BE PROVED PRIMA-FACIE BY THE ASSESSEE. THE HON. APEX COURT IN 34 ITR 807 (SC) HAS HELD THAT WHERE THE ASSESSEE FAILS TO PROVE SATISFACTORILY TH E SOURCES AND NATURE OF A CERTAIN AMOUNT OF CASH RECEIVED DURING THE ACCOUNTI NG YEAR, THE AO IS ENTITLED TO DRAW AN INFERENCE THAT THE RECEIPTS ARE OF AN ASSESSABLE NATURE. THUS, IN VIEW OF THE LEGAL POSITION DISCUSSED ABOVE , AND SINCE THE ASSESSEE HAS NOT DISCHARGED ITS INITIAL OBLIGATIONS TO PROVE THE GENUINENESS OF THE 6 ITA 982 & 983/RJT/2010 LOANS/DEPOSITS TAKEN DURING THE YEAR UNDER CONSIDER ATION FROM THE ABOVE NAMED PARTIES, I HEREBY TREAT THE AMOUNT OF RS.8,68 ,000/- SHOWN AS UNSECURED LOAN IN THE NAMES OF PERSONS MENTIONED AB OVE AS UNEXPLAINED CASH CREDIT WITHIN THE MEANING OF SECTION 68 OF THE I. T. ACT, 1961 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCE EDINGS U/S.274 R.W.S. 271(1) (C) ARE INITIATED SEPARATELY, FOR CONCEALMEN T OF INCOME. 9. ON APPEAL, THE LD. CIT (A) HAS DELETED ADDITION OF RS.50,07,745/- MADE BY THE AO, WITH THE FOLLOWING OBSERVATIONS:- 3.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. IT IS FOUND THAT DURING THE COURSE OF SURVEY, A TRADING ACCOUNT WAS CAST ON THE BASIS WHICH CLOSING STOCK AS PER BOOKS OF ACCOUNTS WAS CALCULATED. THE VALUE OF STOCK AS PER INVENTORY AND VALUE OF STOCK AS PER BOOKS WAS WORKE D OUT AND DIFFERENCE WAS DETERMINED AS UNDER:- VALUE OF STOCK AS PER INVENTORY 1,20,07,824 VALUE OF STOCK AS PER BOOKS 70,00,079 DIFFERENCE 50,07,345 THE VALUATION OF STOCK IS NOT UNDER DISPUTE AND THE ASSESSING OFFICER AS WELL AS THE APPELLANT HAS ACCEPTED THE VALUE OF STOCK AS PER INVENTORY AT RS.12007824/-. IT IS ALSO FOUND THAT THE APPELLANT HAS DISCLOSED ADMITTED DIFFERENCE OF STOCK OF RS.5007745/- BY CREDITING TH E SAME IN THE P & L ACCOUNTS, THEREBY THE APPELLANT HAS HONOURED THE DI SCLOSURE MADE DURING THE COURSE OF SURVEY. HOWEVER, THE APPELLANTS CLA IM WAS THAT EXPENDITURE OF RS.4236783/- WAS NOT ACCOUNTED FOR IN THE TRADING A CCOUNTS, SHOULD BE ALLOWED TO HIM NOW, AS THE BOOKS OF ACCOUNT HAS BEE N COMPLETED LATER ON. THE ABOVE CLAIM OF ALLOWING THE TRADING EXPENSES OF RS.4236783/- WAS REJECTED BY THE ASSESSING OFFICER IN A SUMMARY MANN ER. THE ASSESSING OFFICER HAS NOT VERIFIED THE NATURE OF EXPENSES AND WHETHER SAME ARE APPEARING DEBITED IN THE IMPOUNDED BOOKS OF ACCOUNT S. IT IS A MATTER OF FACT THAT IF THE ABOVE TRADING EXPENSES OF RS.4236783/- WERE RECORDED IN THE IMPOUNDED BOOKS OF ACCOUNT THEN THEY BECAME PART OF TRADING RESULTS AND CANNOT BE REJECTED SUMMARILY. THE GENUINENESS OF T HESE EXPENSES ONLY WAS IN QUESTION. THE ASSESSING OFFICER DID NOT CARRY OU T ANY EXPENSES TO ASCERTAIN THE NATURE OF EXPENSES AND ITS GENUINENES S. IT IS ALSO A VERY SURPRISING THAT THE ASSESSING OFFICER REJECTED CLAI M OF TRADING EXPENSES OF RS.4236783/- BUT INSTEAD OF ADDING THE AMOUNT OF RS .4236783/-, HE HAS ADDED THE VALUE OF STOCK OF RS.5007745/-, WHICH IS THE VALUE OF ADMITTED EXCESS STOCK, U/S.68 OF THE ACT. IT IS NOT KNOWN W HEN APPELLANT HAS ALREADY CREDITED P & L ACCOUNTS BY THE SAME AMOUNT OF RS.50 07745/-, WHY THE ASSESSING OFFICER HAS AGAIN MADE THE ADDITION OF SA ME AMOUNT. THIS AMOUNTS TO DOUBLE ADDITION AND ALSO SECTION 68 NEVE R COMES INTO PLAY. 7 ITA 982 & 983/RJT/2010 PROPER SECTION IS 69 IF AT ALL ADDITION IS REQUIRED TO BE MADE. AS FAR AS THE CLAIM OF TRADING EXPENSES OF RS.4236783/- IS CONCER NED, IT IS FOUND FROM THE PAPER-BOOK THAT MAJOR EXPENSES OF RS.2551507/- ARE ELECTRIC POWER EXPENSES. NO FACTORY OR BUSINESS CAN BE RUN WITHOU T POWER AND NATURALLY, THE PAYMENT OF ELECTRICITY EXPENSES ARE MADE TO GUJ ARAT ELECTRICITY BOARD, AND THEREFORE, THEIR GENUINENESS CANNOT BE DOUBTED. THE OTHER EXPENSES ARE ALSO OF ROUTINE NATURE, AND THEREFORE, APPEARS TO BE ALLOWABLE U/S.37 OF THE ACT. THERE IS NO CASE OF ANY BOGUS OR INFLATED EXPENSES. ALSO GROSS PROFIT SHOWN THIS YEAR IS ON HIGHER SIDE. THEREFOR E, THE CLAIM OF TRADING EXPENSES OF APPELLANT IS FOUND TO BE CORRECT AND GE NUINE AND SAME IS DIRECTED TO BE ALLOWED. ON THE OTHER HAND, AS THE APPELLANT HAS ALREADY HONOURED THE EXCESS STOCK ADMISSION BY CREDITING TH E SAME IN THE P & L ACCOUNTS, THE DOUBLE ADDITION MADE BY THE ASSESSING OFFICER OF THE SAME AMOUNT BEING RS.5007745/- IS HEREBY ORDERED TO BE D ELETED. 10. THE LD. CIT (A) HAS ALSO DELETED THE ADDITION A MOUNTING TO RS.14,45,070/- MADE BY THE AO ON ACCOUNT OF LOW RATE OF GROSS PROF ITS SHOWN BY THE ASSESSEE, WITH THE FOLLOWING OBSERVATIONS:- 4.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. THE GROSS PROFIT RESULTS FOR LAST TWO YEARS ARE AS UNDER:- ASSESSMENT YEAR TURNOVER GROSS PROFIT RATIO 2005-06 10,47,41,110 10,50,412 1.00% 2006-07 17,75,43,078 21,05,793 1.19% THE ABOVE FIGURES SHOW THAT THIS YEAR GROSS PROFIT HAS INCREASED BY 0.19%. THE MAIN REASON FOR REJECTION OF BOOKS BY THE ASSES SING OFFICER WAS DIFFERENCE IN STOCK BUT AFTER TAKING INTO ACCOUNT, THE TRADING EXPENSES OF RS.4236783/-, THERE REMAINS NO DIFFERENCE HENCE REA SON FOR REJECTION CEASE TO EXIST. THE APPELLANT HAS ALREADY HONOURED THE D ISCLOSURE OF RS.5007745/-, AND THIS HAS PARTICULARLY INCREASED THE PROFIT OF T HE APPELLANT DURING THE YEAR ALSO. THE ASSESSING OFFICER HAS QUOTED SOME COMPAR ABLE CASES, WHICH RANGES GROSS PROFIT FROM 2.12% TO 2.76% AND ASSESSI NG OFFICER HAS ADOPTED 2% GROSS PROFIT. HOWEVER, THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS HAS DISTINGUISHED ALL THE COMPARABLE CA SES AND EXPLAINED THAT GROSS PROFIT OF THE SAME CANNOT BE APPLIED TO THE A PPELLANT. THE AR OF THE APPELLANT HAS RELIED ON THE DECISION OF HONBLE ITA T RAJKOT BENCH IN THE CASE OF ITO VS. GIRISH M. MEHTA (2006) 99 TTJ (RAJK OT) 394, AND HONBLE ITAT JODHPUR BENCH IN THE CASE OF AJAY GOYAL VS. IT O (2006) 99 TTJ (JD) 164. THE APPELLANTS CLAIM REGARDING AUDITED BOOKS OF ACCOUNT U/S.44AB OF THE ACT AND ALSO THAT ASSESSING OFFICER HAS NOT DOU BTED THE SALES AND PURCHASES AND THAT NO INSTANCES OF INFLATED EXPENSE S HAS BEEN NOTICE CANNOT BE BRUSHED ASIDE. AFTER PROPERLY ANALYZING THE FAC TS I ALSO FOUND THAT THE 8 ITA 982 & 983/RJT/2010 CONTENTIONS OF THE APPELLANT ARE CORRECT, AND THAT THE GROSS PROFIT SHOWN THIS YEAR IS MORE THAN LAST YEAR AND COMPARABLE CASES AR E NOT COMPARABLE IN TERMS OF TURNOVER OR NATURE OF BUSINESS. IT IS ALS O TO BE MENTIONED THAT GROSS PROFIT @1% WAS CONSIDERED RIGHT DURING THE COURSE O F SURVEY FOR RECASTING OF TRADING A/C AND CALCULATION OF STOCK AS PER BOOKS O F ACCOUNTS. ALSO KEEPING IN VIEW THE FACT THAT APPELLANT HAS ALREADY ADMITTE D EXCESS INCOME OF RS.5007745/- AND PAID ADVANCE-TAX, NO FURTHER GROSS PROFIT ADDITION IS REQUIRED TO BE MADE BY THE ASSESSING OFFICER AMOUNT ING TO RS.1445070/- IS HEREBY ORDERED TO BE DELETED. 11. THE LD. CIT (A) HAS HOWEVER CONFIRMED THE ADDIT ION OF RS.8,68,000/- MADE BY THE AO AS UNEXPLAINED CASH CREDIT, WITH THE FOLLOWI NG OBSERVATIONS:- 5.2. I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. IT I S FOUND THAT THE ASSESSING OFFICER HAS RECORDED STATEMENTS OF FOURTEEN PERSONS OUT OF SIXTEEN CREDITORS AND REST OF TWO PARTIES CONFIRMED IN WRITING. THE ASSESSING OFFICER HAS DISBELIEVED THE CREDITWORTHINESS IN WANT OF AGRICUL TURAL SALE BILLS. THE PROOF OF HOLDING OF AGRICULTURAL LAND AND DETAILS OF RAIS ING THE CROP IN LAND REVENUE RECORDS IS NOT SUFFICIENT TO INDICATE THE CREDITWOR THINESS OF THESE CREDITORS. THE CASH CREDITS IN QUESTION ARE IN CASH AND NOT TH ROUGH BANKING CHANNEL. NO DOCUMENTARY EVIDENCE IS FILED TO SHOW TO THE EXT ENT OF INCOME EARNED BY THESE CREDITORS AND AMOUNT AVAILABLE FOR ADVANCING CASH LOANS TO THE APPELLANT. IN ABSENCE OF ANY DOCUMENTARY EVIDENCE OF EXTENT OF INCOME, THOUGH THE CREDITORS WERE EXAMINED U/S. 131, IT CAN BE HELD THAT APPELLANT HAS FAILED TO PROVE CREDITWORTHINESS OF THESE CREDI TORS, AS HELD IN SMT. IVA GOGOI VS. CIT, 254 ITR 576 (GAU.). UNDER THE CIRCU MSTANCES, WHEN THE APPELLANT HAS NOT DISCHARGED ITS INITIAL ONUS WHICH LAY UPON IT BY PROVING CREDITWORTHINESS OF THE CREDITORS, THE ADDITION OF RS.868000/- MADE BY THE ASSESSING OFFICER AS UNEXPLAINED CASH CREDITS IS HE REBY CONFIRMED. 12. BOTH THE PARTIES ARE AGGRIEVED BY THE ORDER PAS SED BY THE CIT (A). THEY ARE THEREFORE IN APPEAL BEFORE THIS TRIBUNAL. 13. IN SUPPORT OF DEPARTMENTS APPEAL, THE LD. CIT- DR SUBMITTED THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE INCOMPLE TE AND INCORRECT AS EVIDENT FROM THE RESULTS OF SURVEY OPERATION. HE FURTHER SU BMITTED THAT THE MANAGING PARTNER OF THE ASSESSEE-FIRM HIMSELF HAS OFFERED ADDITIONAL INCOME OF RS.50,07,745/- BEING DIFFERENCE IN THE VALUE OF STOCK DETECTED AT THE TI ME OF SURVEY AND THE VALUE OF STOCK RECORDED IN THE BOOKS. HE SUBMITTED THAT THE AFORES AID FACTS BY THEMSELVES ESTABLISHED BEYOND DOUBT THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE INCOMPLETE AND INCORRECT. AS REGARDS THE RATE OF GROSS PROFIT, HE SUBMITTED THAT THE ASSESSEE ITSELF HAS DECLARED GROSS PROFIT RATE OF 1.19% DURING PRE-SURVEY PERIOD (I.E., 01-04-2005 TO 13-02-2006) WHILE THE SAME ASS ESSEE HAS DECLARED NEGATIVE 9 ITA 982 & 983/RJT/2010 RATE OF GROSS PROFIT BEING 1.03% DURING POST-SURV EY PERIOD (I.E., 14-03-2006 TO 31- 03-2006). ACCORDING TO HIM, THE OVERALL RATE OF GRO SS PROFIT DECLARED BY THE ASSESSEE AT 1.19% WAS NOT ONLY LOW BUT ALSO THAT THE RATE OF GROSS PROFIT DECLARED BY THE ASSESSEE DURING PRE-SURVEY AND POST-SURVEY PERIOD W AS ALSO INCONSISTENT. HE SUBMITTED THAT THE AO WAS JUSTIFIED IN APPLYING GRO SS PROFIT RATE OF 2% AS AGAINST 1.19% SHOWN BY THE ASSESSEE FOR THE ENTIRE YEAR UND ER APPEAL. 14. IN REPLY, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER PASSED BY THE CIT (A). APROPOS ADDITION OF RS .50,07,745 BEING THE DIFFERENCE IN STOCK, HE SUBMITTED THAT THE LD. CIT(A) HAS RIGH TLY DELETED THE IMPUGNED ADDITION AS THE ASSESSEE HAD ALREADY CREDITED THE DIFFERENCE IN VALUE OF STOCK IN ITS PROFIT & LOSS ACCOUNT. APROPOS THE ISSUE OF APPLICATION OF R ATE OF GROSS PROFIT, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTE D THAT THE CASES CITED BY THE AO AS COMPARABLE CASES WERE NOT AT ALL COMPARABLE. THE RATE OF GROSS PROFITS SHOWN BY THE ASSESSEE WAS COMPARABLE WITH THE ONE S HOWN IN THE PAST AND THEREFORE THE CIT(A) WAS RIGHT IN DELETING THE IMPU GNED ADDITION. 15. AS REGARDS THE ISSUE OF UNEXPLAINED CASH CREDIT TAKEN BY THE ASSESSEE IN ITS GROUNDS OF APPEAL, THE LD. AUTHORIZED REPRESENTATIV E FOR THE ASSESSEE SUBMITTED THAT ALL THE CREDITORS WERE PRODUCED BEFORE THE AO FOR EXAMINATION DURING WHICH THEY CONFIRMED TO HAVE GIVEN IMPUGNED LOANS TO THE ASSESSEE FIRM. HE SUBMITTED THAT THE IMPUGNED SUMS WERE RECEIVED BY THE ASSESSE E FROM CREDITORS THROUGH BANKING CHANNELS. HE SUBMITTED THAT NOT ONLY THE I DENTITY OF ALL THE CASH CREDITORS WAS PROVED BEYOND DOUBT BUT THEIR CREDITWORTHINESS WAS ALSO ESTABLISHED BEFORE THE AO AND THEREFORE BOTH THE DEPARTMENTAL AUTHORITIES WERE NOT JUSTIFIED IN TREATING THE IMPUGNED CASH CREDIT AS UNEXPLAINED. 16. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE CIT (A). HE SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE CREDITWORTHINESS OF ANY OF THE CREDITORS. ACCORDIN G TO HIM, THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE IMPUGNED TRANSA CTIONS. REFERRING TO THE COPIES OF STATEMENT OF ACCOUNTS MAINTAINED BY THE ASSESSEE WITH RAJKOT DISTRICT CO OPERATIVE BANK LTD., TANKARA AND HDFC BANK, MORBI, HE SUBMITTED THAT THE IMPUGNED TRANSACTIONS WERE IMMEDIATELY PRECEDED OR FOLLOWED BY CASH WITHDRAWALS FOR WHICH THE ASSESSEE DID NOT FURNISH ANY EXPLANAT ION EITHER BEFORE THE AO OR BEFORE THE CIT(A). HE CONTENDED THAT THE CHEQUE NUM BERS THROUGH WHICH THE DEPOSITS WERE MADE BY SEVERAL CASH CREDITORS WERE I N THE SAME SEQUENCE OR SERIAL NUMBERS ALTHOUGH THE CREDITORS WERE LOCATED IN DIFF ERENT PARTS OF THE STATE. IT WAS ALSO POINTED OUT BY HIM THAT ALL THE CREDITORS CLAI MED TO BE AGRICULTURIST BUT THE DETAILS OF THEIR LAND HOLDING OR SALE OF CROPS WERE NOT FURNISHED EITHER BEFORE THE AO OR BEFORE THE CIT (A). HE FURTHER SUBMITTED THAT AL L THE CASH CREDITORS CLAIMED TO HAVE GIVEN THE MONEY THROUGH BANKING CHANNELS BUT C OPIES OF THEIR BANK ACCOUNTS IN SUPPORT THEREOF WERE NOT FILED BEFORE THE AO OR BEFORE THE CIT (A). HE CONTENDED 10 ITA 982 & 983/RJT/2010 THAT THE ASSESSEE HAS SQUARELY FAILED TO SATISFACTO RILY ESTABLISH THE NATURE AND SOURCE OF THE IMPUGNED CASH CREDITS AND THEREFORE T HE CIT (A) WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE AO IN THIS BEHALF. 17. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CO NSIDERED THEIR SUBMISSIONS AS ALSO THE MATERIALS AVAILABLE ON RECORD. FIRST IS SUE THAT ARISES FOR CONSIDERATIONS IS WHETHER THE BOOKS OF ACCOUNT REPORTEDLY MAINTAINED BY THE ASSESSEE WERE CORRECT, COMPLETE AND RELIABLE. IT IS NOT IN DISPUTE THAT DI FFERENCE IN STOCK TO THE EXTENT OF RS.50,07,745/- WAS DETECTED BY THE DEPARTMENT AND A DMITTED BY THE ASSESSEE AT THE TIME OF SURVEY CARRIED OUT AT THE PREMISES OF T HE ASSESSEE U/S.133A OF THE INCOME-TAX ACT. PERUSAL OF PARA-3.2 OF THE APPELLA TE ORDER PASSED BY THE CIT(A) SHOWS THAT THE SAID SUM OF RS.50,07,745/-, BEING DI FFERENCE IN THE VALUE OF STOCK, WAS ADMITTED BY THE MANAGING PARTNER OF THE ASSESSE E-FIRM AS REPRESENTING THE ADDITIONAL INCOME OF THE ASSESSEE AND THEREFORE, AS HELD BY THE CIT(A), WAS CREDITED BY THE ASSESSEE TO ITS PROFIT AND LOSS ACC OUNT. DETECTION OF UNDISCLOSED STOCK AND ITS ADMISSION BY THE ASSESSEE AT THE TIME OF SURVEY RENDERS THE BOOKS OF ACCOUNT REPORTEDLY MAINTAINED BY THE ASSESSEE AS IN CORRECT AND INCOMPLETE AND UNRELIABLE. PERUSAL OF PARA-3.2 OF THE APPELLATE OR DER PASSED BY THE CIT (A) SHOWS THAT IT WAS THE CLAIM OF THE ASSESSEE THAT THE EXPE NDITURE OF RS.42,36,783/-, WHICH COULD NOT BE ACCOUNTED FOR IN THE TRADING ACCOUNTS, SHOULD BE ALLOWED AS THE BOOKS OF ACCOUNT WERE COMPLETED LATER ON. THIS ALSO SHOWS THAT THE BOOKS OF ACCOUNT WERE NOT MAINTAINED IN THE DAY-TO-DAY COURSE OF THE BUSI NESS AND WERE THEREFORE NOT CONTEMPORANEOUS IN NATURE. NON-RECORDING OF EXPENDI TURE IN THE COURSE OF DAY-TO- DAY BUSINESS IN TRADING ACCOUNT AND ITS RECORDING I N THE BOOKS OF ACCOUNT COMPILED LATER ON RENDERS THE BOOKS OF ACCOUNT NOT ONLY INCO RRECT AND INCOMPLETE BUT ALSO UNRELIABLE. IN THIS VIEW OF THE MATTER, THE AO IS H ELD TO BE JUSTIFIED IN DISCARDING THE TRADING RESULTS REFLECTED IN THE BOOKS OF ACCOUNT A S THE BOOKS OF ACCOUNT WERE INCORRECT, INCOMPLETE AND UNRELIABLE. 18. APROPOS THE ADDITION OF RS.50,07,745/-, BEING G ROUND NO.1 IN THE DEPARTMENTS APPEAL, THE LD. CIT (A) HAS DELETED T HE ADDITION ON THE GROUND THAT THE ASSESSEE HAS ALREADY CREDITED THE IMPUGNED SUM, BEING THE DIFFERENCE IN VALUE OF STOCK, TO ITS PROFIT AND LOSS ACCOUNT. SINCE THE ASSESSEE-FIRM ITSELF HAS INCLUDED THE IMPUGNED SUM BY CREDITING THE SAME TO ITS PROFI T AND LOSS ACCOUNT, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE IMPUGNED ADDITION. A T THE TIME OF HEARING BEFORE US, THE LD. CIT-DR COULD NOT REBUT THE FINDING RECORDED BY THE CIT (A) IN THIS BEHALF. GROUND NO.1 TAKEN BY THE DEPARTMENT IS THEREFORE DISMISSED . 19. APROPOS THE ADDITION ON THE BASIS OF ADOPTION O F GROSS PROFIT RATE OF 2% BY THE AO, BEING GROUND NO.2 IN THE DEPARTMENTS APPEA L, IT IS OBSERVED THAT THE ASSESSEE HAS DECLARED GP RATE OF 1.49% DURING PRE-S URVEY PERIOD (I.E., 01-04-2005 TO 12-03-2006) AND NEGATIVE RATE OF GROSS PROFIT OF (-)1.31% IN POST-SURVEY PERIOD (I.E., 13-03-2006 TO 31-03-2006). THERE IS THUS WI DE VARIATION BETWEEN THE RATES OF 11 ITA 982 & 983/RJT/2010 GROSS PROFIT SHOWN BY THE ASSESSEE DURING PRE-SURVE Y PERIOD AND POST-SURVEY PERIODS. THE AO HAS APPLIED GROSS PROFIT RATE OF 2% RELYING UPON CERTAIN COMPARABLE CASES. IT IS HOWEVER CONTENDED BY THE AS SESSEE THAT THE CASES CITED BY THE AO AS COMPARABLE CASES ARE NOT COMPARABLE AT AL L. BE WHATEVER IT MAY, THERE IS A WIDE GAP BETWEEN THE RATES OF GROSS PROFIT SHO WN BY THE ASSESSEE DURING PRE- SURVEY PERIOD AND POST-SURVEY PERIOD. KEEPING IN VI EW THE UNRELIABLE, INCOMPLETE AND INCORRECT NATURE OF THE BOOKS OF ACCOUNT, THE R ATE OF GROSS PROFIT SHOWN BY THE ASSESSEE CANNOT BE ACCEPTED. 20. THE ASSESSEE HAS RECORDED CASH CREDITS AGGREGAT ING TO RS.8,68,000/- IN THE NAMES OF 16 PERSONS IN ITS BOOKS OF ACCOUNT MAINTAI NED FOR THE YEAR UNDER APPEAL. IT IS WELL SETTLED THAT THE BURDEN TO SATISFACTORIL Y EXPLAIN THE NATURE AND SOURCE OF CASH CREDITS LIES ON THE ASSESSEE WHICH, INTER ALIA , REQUIRES THE ASSESSEE TO NOT ONLY ESTABLISH THE IDENTITY OF THE CREDITORS AND THEIR C REDITWORTHINESS BUT ALSO THE GENUINENESS OF THE TRANSACTIONS. IT IS TRUE THAT TH E ASSESSEE PRODUCED CASH CREDITORS BEFORE THE AO FOR EXAMINATION DURING WHIC H THEY CONFIRMED TO HAVE GIVEN THE IMPUGNED SUMS TO THE ASSESSEE. LETTERS OF CONFI RMATION ISSUED BY THE CREDITORS WERE ALSO FILED BEFORE THE AO. THE AO WAS HOWEVER N OT SATISFIED WITH CREDITWORTHINESS OF THE CREDITORS INASMUCH AS NO EV IDENCE WAS PLACED BEFORE THE AO TO ESTABLISH THEIR CREDITWORTHINESS OR GENUINENE SS OF TRANSACTIONS. THE CIT (A) HAS DEALT WITH THE ISSUE IN PARA-5.2 OF HIS APPELLA TE ORDER. HE IS RIGHT IN OBSERVING THAT MERE PROOF OF HOLDING AGRICULTURAL LAND AND DE TAILS OF CROP WERE NOT SUFFICIENT TO INDICATE THE CREDITWORTHINESS OF THE CREDITORS OR T HE GENUINENESS OF CREDIT TRANSACTIONS. 21. AT THE TIME OF HEARING, DOCUMENTS WERE PLACED B EFORE US, WHICH SHOW THAT THE IMPUGNED SUMS WERE GIVEN BY CHEQUE. THERE IS HO WEVER NO DETAIL AVAILABLE ON RECORD AS TO WHETHER THESE CHEQUES WERE BEARER CHEQ UES OR A/C PAYEE CHEQUES. THE LD. DEPARTMENTAL REPRESENTATIVE HAS RIGHTLY SUB MITTED THAT THE CASH WITHDRAWALS WERE MADE IMMEDIATELY BEFORE OR AFTER T HE DATES ON WHICH CHEQUES WERE DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE WITH RAJKOT DISTRICT CO OPERATIVE BANK LTD., RAJKOT. THE ASSESSEE ALSO MAI NTAINS BANK ACCOUNT WITH HDFC BANK, MORBI. THE CHEQUES REPORTEDLY ISSUED BY SEVE RAL CASH CREDITORS ARE SERIALLY NUMBERED AND THEY ARE OF THE SAME DATE. THE AMOUNTS ARE SIMILAR IN MOST OF THE CASES. SUCH STRIKING SIMILARITIES IN TRANSACTIONS I NVOLVING 16 CREDITORS LOCATED AT DIFFERENT PLACES ARE AGAINST THE ORDINARY AND USUAL COURSE OF HUMAN CONDUCT. THE ASSESSEE HAS NOT PLACED THE COPIES OF THE BANK ACCO UNT OF THE CREDITORS THOUGH THE TRANSACTIONS ARE REPORTED TO HAVE TAKEN PLACE THROU GH BANKING CHANNELS. AFTER TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE CONVINCED THAT THE NATURE AND SOURCE OF IMPUGNED CASH CREDITS HAVE NOT BEEN SATISFACTORILY EXPLAINED BY THE ASSESSEE AND ALSO THAT THEY REPRES ENT THE SECRETED PROFITS FROM THE BUSINESS OF THE ASSESSEE. 12 ITA 982 & 983/RJT/2010 22. KEEPING IN VIEW THE FACT THAT CASH CREDITORS RE PRESENT SECRETED PROFITS FROM THE BUSINESS OF THE ASSESSEE AND LOOKING INTO THE I NCORRECT, INCOMPLETE AND UNRELIABLE NATURE OF THE BOOKS OF ACCOUNT, WE CONSI DER IT APPROPRIATE TO APPLY GROSS PROFIT RATE OF 1.7% ON TOTAL SALES TURNOVER OF RS.1 7,75,43,078/-, WHICH WORKS OUT TO RS.30,18,232/- AS AGAINST THE GROSS PROFIT OF RS.21 ,05,793/- DECLARED BY THE ASSESSEE. RESULTANTLY, THE AO IS DIRECTED TO RESTR ICT THE ADDITION TO RS.9,12,439/-. THE AFORESAID AMOUNT WILL TAKE CARE OF UNEXPLAINED CASH CREDITS AS WELL AS UNEXPLAINED DECLINE IN THE RATE OF GROSS PROFIT IN THE YEAR UNDER APPEAL. 23. RESULTANTLY, BOTH THE APPEALS STAND DISPOSED OF F WITH THE DIRECTIONS AS GIVEN ABOVE. FOR STATISTICAL PURPOSES, THE APPEAL FILED B Y THE ASSESSEE SHALL BE TREATED AS ALLOWED. THE APPEAL FILED BY THE DEPARTMENT IS PART LY ALLOWED. ( * 30.10.2012 ( ORDER PRONOUNCED ON 30.10-2012 SD/- SD/- ( . . / T. K. SHARMA) ( .. / D. K. SRIVASTAVA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /RAJKOT: 30-10-2012 NVA/- ( (( ( -. -. -. -. /. /. /. /. / COPY OF ORDER FORWARDED TO:- 1.2 / APPELLANT-M/S. RAMKRISHNA GINNING & OIL INDUSTRI ES, VILLAGE: LAKHDHIRGADH, TALUKA: TANKARA (MORVI) 2 -42 / RESPONDENT- THE ASSTT. COMMISSIONER OF INCOME-TA X, CIR-5, RAJKOT 3. 8 / CONCERNED CIT-III, RAJKOT 4. 8- / CIT (A)-IV, RAJKOT 5. . -, , / DR, ITAT, RAJKOT 6. / GUARD FILE / BY ORDER TRUE COPY. SENIOR PRIVATE SECRETARY, ITAT , RAJKOT