Sh. Sunit Shah, New Delhi V. ITO, New Delhi

ITA 986/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81700 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 29-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 18-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Keywords: Unexplained investment; Unexplained expenditure; Gift; Business income; Depreciation; Opportunity of being heard; Difference of opinion
• Section: 69C; 133A; 68; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G, NEW DELHI) BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER I.T.A. NOS.170 /DEL/2013 ASSESSMENT YEAR : 2007-08 ITO, WARD 36(2), VS. M/S. SUNIT SHAH & SONS,(HUF) NEW DELHI. 188, GOPAL PARK CHANDER NAGAR, DELHI GIR / PAN: AAAHS5533A I.T.A.NO. 986 & 987/DEL/2013 (ASSESSMENT YEARS 2007-08 & 2008-09) M/S. SUNIT SHAH & SONS, VS. ITO, WARD 36(2), 188, GOPAL PARK NEW DELHI CHANDER NAGAR, DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT JAIN, SHRI NARENDER CHIL LAR, ADV. & SHRI ROHIT GARG, CA RESPONDENT BY : SHRI S N BHATIA, SR. DR ORDER PER T.S. KAPOOR, AM: THESE ARE THREE APPEALS FILED AGAINST CIT(A)S ORD ER ALL DATED 26.10.2012. I.T.A.NO. 170/DEL/2013 IS FILED BY THE REVENUE WHER EAS I.T.A.NOS. 986 & 987/DEL/2013 HAS BEEN FILED BY THE ASSESSEE. ALL T HESE APPEAL WERE HEARD TOGETHER AND THEREFORE, ARE BEING DISPOSED OF THROUGH A COMMON A ND CONSOLIDATED ORDER. 2. IN I.T.A.NO. 986, THE ASSESSEE HAS TAKEN FOLLOWI NG GROUNDS: ITA NO.170,986,987/DEL/2013 2 1. THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN LAW I N CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY WAY OF ADDING RS.14,92,250 ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE INCOME TAX ACT ,(THE ACT') ON THE BASIS OF NOTING ON ANNEXURE A-56, WITHOUT APPRECIATING THE FACT THA T THE SAID NOTED EXPENDITURE WAS RELATED TO WAGES AND SALARIES OF TWO BUSINESS CONCE RNS NAMELY (L) SUNIT SHAH, PROP. SHAH NAMKEEN & (2) SUNIT SHAH AND SONS (HUF) AND A SMALL AMOUNT OF RS.65,746 WAS THE SAVING OF THE WORKERS KEPT WITH HIM AS THEY WERE NOT MAINTAINING ANY BANK ACCOUNTS. 1.1 THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN L AW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY WAY OF ADDING RS.14,92,250 WIT HOUT APPRECIATING THE EXPLANATION AND EVIDENCES PROVIDED AND PLACED ON RECORD WHICH I S SUFFICIENT TO JUSTIFY THE CLAIM OF THE APPELLANT. 2 THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN LA W IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER WHILE RESTRICTING THE ADDITION OF RS.50,81 0 ON ACCOUNT OF UNEXPLAINED EXPENDITURE FOR PURCHASE OF VARIOUS ITE MS UNDER SECTION 69C OF THE ACT ON THE BASIS OF NOTING ON ANNEXURE A-58, WITHOUT APPRE CIATING THE FACT THAT THE SAID NOTING WAS RELATED TO INDEPENDENT BUSINESS (MANUFAC TURE AND SALE OF EGG-LESS CAKES) OF HIS SON SH. ANKIT SHAH AND BY IGNORING THE EXPLA NATION AND EVIDENCES PROVIDED AND PLACED ON RECORD WHICH IS SUFFICIENT TO JUSTIFY THE CLAIM. 3 THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN LA W IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY UPHOLDING THE ADDITION TO RS.3 8,87,917 ON ACCOUNT OF UNEXPLAINED EXPENDITURE FOR THE ACCOUNTED PURCHASES / EXPENSES UNDER SECTION 69C OF THE ACT ON THE BASIS OF NOTING ON ANNEXURE A-62, WI THOUT APPRECIATING THE FACT THAT SAID PURCHASES, PETROL AND CAR MAINTENANCE EXPENSES WERE ALREADY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND BY IGNORING THE EXPLANATI ON AND EVIDENCES PROVIDED AND PLACED ON RECORD TO JUSTIFY THE CLAIM OF THE APPELL ANT. 4. THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN LA W IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY ADDING RS.7,22,177/- ON ACCOUN T OF GIFTS RECEIVED FROM TWO CLOSE RELATIVES, UNDER SECTION 68 OF THE ACT WITHOUT APPR ECIATING THE EXPLANATION AND EVIDENCES PROVIDED AND PLACED ON RECORD TO JUSTIFY THE CLAIM. 5 THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN LA W IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER ADDING RS.1,75,000/- ON ACCOUNT O F UNSECURED LOANS RECEIVED FROM HIS WIFE SMT. SAVITRI SHAH, UNDER SECTION 68 OF THE ACT ALLEGING THAT THE CAPACITY TO ITA NO.170,986,987/DEL/2013 3 ADVANCE LOAN HAS NOT BEEN ESTABLISHED, WITHOUT APPR ECIATING THE EXPLANATION AND EVIDENCES PROVIDED AND PLACED ON RECORD TO JUSTIFY THE CLAIM. 6 THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN LA W IN CONFIRMING THE ADDITION OF RS.75,149 (20% OF THE TOTAL EXPENDITURE) ON ACCOUNT OF PERSONAL ELEMENTS INVOLVED IN THE FOLLOWING EXPENSES:- PARTICULARS TOTAL 20% OF TOTAL REMARKS EXPENDITURE EXPENDITURE ELECTRICITY EXPENSES 86,366 17,723 - TELEPHONE EXPENSES 81,141 16,428 - HOUSE TAX 73,831 14,766 CIT(A) GRANTED RELIEF OF RSA,677 ACCORDING TO THE SELF ASSESSMENT PROPERTY TAX RETURN FOR THE ASSESSMENT YEAR 2006-07 CAR RUNNING AND 85,600 17,120 - MAINTENANCE DEPRECIATION ON CAR 71,197 14,239 - -------- TOTAL 79,826 --------------------------------------------------- ----------------------------------------- 3. IN I.T.A.NO. 987/DEL/2013 (ASSESSMENT YEAR 2008- 09), THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN LA W IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY WAY OF ADDING RS.67,43,125 ON ACCOUNT OF VALUATION OF CLOSING STOCK AS PER REPORT OF SURVEY PARTY WITHOUT APPRECI ATING THE FACT THAT THERE WERE NUMEROUS MISTAKES IN THE SAID REPORT AND BY IGNORIN G THE EXPLANATION AND EVIDENCES PROVIDED AND PLACED ON RECORD WHICH IS SUFFICIENT T O JUSTIFY THE CLAIM OF THE APPELLANT. 2. THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN L AW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY WAY OF ADDING RS.14,50,950 ON ACCOUNT OF UNEXPLAINED ITA NO.170,986,987/DEL/2013 4 EXPENDITURE UNDER SECTION 69C OF THE INCOME TAX ACT , 1961 ('THE ACT') ON THE BASIS OF NOTING ON ANNEXURE A-56 & A- 57, WITHOUT APPRECIATI NG THE FACT THAT THE SAID NOTED EXPENDITURE WAS RELATED TO WAGES AND SALARIES OF TW O BUSINESS CONCERNS NAMELY (1) SUNIT SHAH, PROP. SHAH NAMKEEN & (2) SUNIT SHAH AND SONS (HUF). 2.1 THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN L AW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY WAY OF ADDING RS.14,50,950 WIT HOUT APPRECIATING THE EXPLANATION AND EVIDENCES PROVIDED AND PLACED ON RECORD WHICH I S SUFFICIENT TO JUSTIFY THE CLAIM OF THE APPELLANT. 3. THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN LA W IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER WHILE RESTRICTING THE ADDITION OF RS.1,49,38,385 ON ACCOUNT OF ALLEGED UNRECORDED SALES WITHOUT APPRECIATING THE E XPLANATION AND EVIDENCES PROVIDED AND PLACED ON RECORD TO JUSTIFY THE CLAIM OF THE AP PELLANT. 4. THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN L AW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY WAY OF ADDING RS.3 7,21,034 ON ACCOUNT OF ALLEGED UNRECORDED EXPORT SALES ON THE BASIS OF NOTING ON ANNEXURE A-5 9, WITHOUT APPRECIATING THE FACT THAT THE SAID NOTED EXPORT SALES WERE ALREADY ACCOU NTED FOR IN THE BOOKS OF ACCOUNTS AND BY IGNORING THE EXPLANATION AND EVIDENCES PROVI DED AND PLACED ON RECORD TO JUSTIFY THE CLAIM OF THE APPELLANT. 5. THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN LA W IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY ADDING RS.8,75,362 ON ACCOUNT OF GIFTS RECEIVED FROM TWO CLOSE RELATIVES, UNDER SECTION 68 OF THE ACT WITHOUT APPR ECIATING THE EXPLANATION AND EVIDENCES PROVIDED AND PLACED ON RECORD TO JUSTIFY THE CLAIM. 6. THAT THE CIT(A) HAS ERRED ON THE FACTS AND IN L AW IN CONFIRMING THE ADDITION OF RS.1,11,725 (20% OF THE TOTAL EXPENDITURE) ON ACCOU NT OF PERSONAL ELEMENTS INVOLVED IN THE FOLLOWING EXPENSES:- PARTICULARS TOTAL 20% OF TOTAL REMARKS EXPENDITURE EXPENDITURE ELECTRICITY EXPENSES 66,049 13,218 TELEPHONE EXPENSES 79,953 15,990 HOUSE TAX 72,465 14,493 CAR RUNNING AND 2,34,686 46,937 MAINTENANCE DEPRECIATION ON CAR 71,197 14,239 TOTAL 1,11,725 ITA NO.170,986,987/DEL/2013 5 4. IN I.T.A.NO. 170/DEL/2013, THE REVENUE IS AGGRI EVED WITH THE ACTION OF LD. CIT(A) WHEREBY HE HAD DELETED THE ADDITION MADE BY THE ASSESSING OFFICER IN THE HANDS OF HUF ON PROTECTIVE BASIS. 4A. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING & SALE OF NAMKEEN AND BISCUITS. A SU RVEY OPERATION U/S 133A OF THE ACT WAS CARRIED OUT IN VARIOUS PREMISES OF THE ASSE SSEE ON 20.03.2008 AND VARIOUS INCRIMINATING DOCUMENTS AND MATERIAL WERE FOUND AND WAS IMPOUNDED. THE MATERIAL SO IMPOUNDED WAS RELEVANT FOR THE ASSESSMENT YEARS 2007-08 & 2008-09. THE DOCUMENTS SO IMPOUNDED WERE MARKED AS ANNEXURE A-56 , A-58, A-62, A-59 FOR THEIR IDENTIFICATION AND ENTRIES NOTED ON THESE DOCUMENTS WERE USED BY ASSESSING OFFICER TO MAKE VARIOUS ADDITIONS. STOCK INVENTORY WAS ALSO G OT PREPARED AT THE TIME OF SURVEY AT VARIOUS PREMISES OF THE ASSESSEE. THE ASSESSING OF FICER AFTER CONFRONTING THE ASSESSEE WITH THE MATERIAL IMPOUNDED DURING SURVEY, MADE VAR IOUS ADDITIONS IN THE TWO YEARS, WHICH ARE DETAILED AS UNDER: ASSESSMENT YEAR 2007-08: 4.1 ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE: RS .14,92,250/-: THE ASSESSING OFFICER HAD OBSERVED THAT IN THE DIAR Y IDENTIFIED AS ANNEXURE A-56, THERE WERE CERTAIN NOTINGS INDICATING VARIOUS PAYME NTS, WHICH WERE NOT REFLECTED IN THE P & L ACCOUNT AND BALANCE SHEET OF THE ASSESSEE AND , THEREFORE, HE HELD THAT SUCH EXPENDITURE INCURRED BY THE ASSESSEE WAS OUTSIDE TH E BOOKS OF ACCOUNT AND, THEREFORE, HE MADE ADDITION AS UNACCOUNTED EXPENDITURE U/S 69C OF THE ACT. 4.2 ADDITION ON ACCOUNT OF UNEXPLAINED PURCHASES - RS. 38,87,917/-: THE ASSESSING OFFICER HAD OBSERVED THAT AS PER ANNE XUREA-62 IMPOUNDED DURING THE SURVEY, THE ASSESSEE HAD MADE PURCHASES FROM CERTAI N SUPPLIERS WHICH WERE NOT ITA NO.170,986,987/DEL/2013 6 RECORDED IN THE BOOKS OF ACCOUNT AND THEREFORE, HE MADE THE ADDITION OF THE SAME U/S 69C OF THE ACT. 4.3 ADDITION ON ACCOUNT OF UNEXPLAINED PURCHASES- RS.5 0, 810/-: THE ASSESSING OFFICER HAD NOTED FROM A DOCUMENT IDE NTIFIED AS ANNEXURE A-58 THAT THE ASSESSEE HAD MADE UNACCOUNTED PURCHASES OF RS.7 ,00,000/-, THEREFORE, AFTER CONFRONTING THE ASSESSEE, HE MADE ADDITION THEREOF. HOWEVER, ON APPEAL BEFORE LD. CIT(A) REDUCED THE ADDITION TO RS.50,810/- AGAINST WHICH AGAIN ASSESSEE HAS FILED APPEAL BEFORE US. 4.4 ADDITION ON ACCOUNT OF GIFTS RS.7,22,177/-: THE ASSESSING OFFICER FURTHER OBSERVED THAT AS PER ANNEXURE A-65, FOUND DURING THE SURVEY BLANK GIFT DEEDS WERE FOUND AND THE ASSESSEE HAD DECLARED THE SAME AS GIFTS AND CREDITED THE SAME TO HIS CAPITAL ACCOUNT. THESE G IFTS WERE CLAIMED TO HAVE BEEN RECEIVED FROM SUNIL KUMAR; RS.5 LACS AND FROM NEELA M PATEL RS.2,22,177/-. THE ASSESSEE WAS CONFRONTED TO PROVE THE GENUINENESS OF THE GIFTS WHICH THE ASSESSEE HAD TRIED TO EXPLAIN BY STATING AS UNDER: 6.2 THE ASSESSEE VIDE HIS LETTER DATED 23.09.2009 FURNISHED THE REPLY AS REPRODUCED HEREUNDER: 'IT WAS STATED IN THE COURSE OF ASSESSMENT YEAR 200 6-07 THAT THE ASSESSEE HAS BEEN THE YOUNGEST CHILD OF HIS PARENTS AND THAT HE HAS GOT EIGHT ELDER SISTERS, TWO OF WHOM ARE WELL SETTLED IN USA. SMT NEELAM PAT EL HAS BEEN MARRIED TO SHRI VINOD BHAI PATEL, WHO WAS PREVIOUSLY PROJECT M ANAGER OF NASA WASHIGNTON DC. SMT. NEELAM PATEL HAD BEEN ENGAGED I N RUNNING A RESTAURANT. BOTH OF THEM ON ACCOUNT OF ADVANCED AGES HAVE NOW R ETIRED. THEY HAVE GOT TWO CHILDREN WHO ARE ALSO WELL SETTLED IN USA. BOTH OF THEM HAVE BEEN COMING OCCASIONALLY TO INDIA AND HAVE BEEN STAYING WITH TH E ASSESSEE. IN VIEW OF THE FILIAL CONSIDERATION AND THE ASSESSEE BEING THE YOU NGEST CHILD, SMT. NEELAM PATEL HAD MADE GIFT OF US$ 5,5001-, EQUIVALENT TO I NDIAN RS.2,22,177/- IN THIS YEAR. THE SAID GIFT HAD BEEN REMITTED IN FOREIGN EX CHANGE THROUGH BANKING CHANNEL. SHE HAD CONFIRMED THE SAID GIFT. THE CONFI RMATION OF THIS ACCOUNT HAS ITA NO.170,986,987/DEL/2013 7 BEEN IN THE CUSTODY OF THE DEPARTMENT. IT IS SUBMIT TED THAT SHRI SUNIL KUMAR HAS BEEN THE ELDER BROTHER OF ASSESSEE'S WIFE SMT. SAVI TRI SHAH. SHRI SUNIL KUMAR HAS BEEN REGULARLY ASSESSED TO INCOME-TAX AS PER PA N: ACXPK7457N. DSIDC HAD ALLOTTED PLOT NO. 2700, SECTOR-B. DSIDC, NETELE , GPAL SALE DEED IS ENCLOSED OUT OF LOVE AND AFFECTION, HAD MADE GIFT O F RS.5,00,000/- OUT OF THE SALE PROCEEDS OF THE SAID PLOT TO THE ASSESSEE IN THIS Y EAR BY MEANS OF ACCOUNT PAYEE CHEQUE. THE SAID GIFT WOULD BE FOUND TO BE BONA-FI DE. 4.5 HOWEVER, THE ASSESSING OFFICER DID NOT FIND THE REPLY OF THE ASSESSEE SATISFACTORY AS IN HIS OPINION, THE ASSESSEE HAD FA ILED TO PROVE THE CAPACITY OF THE DONORS TO MAKE SUCH GIFTS. IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT GIFT DEEDS WERE NOT SIGNED BY THE DONEES AND, THEREFORE, HE INFERRED THAT DONEES HAD NOT ACCEPTED SUCH GIFTS AND IN ABSENCE OF ANY SATISFACT ORY EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER MADE THE ADDITION U/S 68 OF THE A CT. 4.6 ADDITION ON ACCOUNT OF UNSECURED LOANS RS.1,75,00 0/-: THE ASSESSING OFFICER FURTHER MADE ADDITION OF RS.1 ,75,000/- U/S 68 OF THE ACT IN VIEW OF THE FACT HAT THE ASSESSEE WAS NOT ABLE TO EXPLAI N THE INCREASE IN UNSECURED LOAN AS COMPARED TO THE AMOUNT OF UNSECURED LOANS OUTSTANDI NG IN EARLIER YEAR. 4.7 ADDITION ON ACCOUNT OF DISALLOWANCE OF PERSONAL EXP ENSES RS.79,826/-: THE ASSESSING OFFICER FURTHER DISALLOWED AN AMOUNT OF RS.79,826/- ON ACCOUNT OF ELECTRICITY, TELEPHONE, HOUSE TAX CAR RUNNING EXPEN SES @ 20% OF THE EXPENSES CLAIMED ON ACCOUNT OF ELEMENT OF PERSONAL USE. 5. DURING ASSESSMENT YEAR 2008-09, THE ASSESSING OF FICER HAS MADE THE FOLLOWING ADDITIONS: I) ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK: THE ASSESSING OFFICER ON THE BASIS OF STOCK INVENTORY MADE BY SURVEY TEAM ON 19.03.2008 ARRIVED AT VALUATION OF CLOSING STOCK AS ON 31.03.2008 BY ADDING PURCHAS ES MADE AFTER THE DATE OF SURVEY ITA NO.170,986,987/DEL/2013 8 AND SUBTRACTING THEREFROM FIGURE OF SALES. THE ASS ESSING OFFICER OBSERVED THAT THE VALUE OF SUCH STOCK AS ON 31.03.2008 CAME TO RS.1,0 7,80,363/- WHEREAS THE ASSESSEE HAD DECLARED THE VALUE OF CLOSING STOCK AS ON 31.03 .2008 AT RS.40,37,238/-. THEREFORE, ASSESSEE WAS CONFRONTED TO EXPLAIN THE DIFFERENCE. THE ASSESSEE VIDE LETTER DATED 29.12.2010 SUBMITTED THE FOLLOWING REPLY: 2. IT HAS BEEN CLAIMED IN THE QUESTIONNAIRE THAT TH E VALUE OF THE STOCK AS ON 31.03.2008 WORKS OUT TO RS.1,07,80,363/-, WHICH IS MUCH HIGHER A AGAINST THE VALUE OF THE STOCK, WHICH HAS BEEN SHOWN AT RS.40,3 7,238/- BY THE ASSESSEE IN THE TRADING ACCOUNT FOR THE PREVIOUS YEAR ENDING ON 31.03.2008. IT IS SUBMITTED THAT THERE ARE PALPABLE MISTAKES IN THE ESTIMATED V ALUE OF THE STOCK OF RS.1,07,80,363/- WHICH ARE BEING MENTIONED THERE IN BELOW. 3. THE DIFFICULTIES IN THE LISTING OF THE STOCK HAV E BEEN MENTIONED IN THE ASSESSEES PREVIOUS LETTER AND THE SAME DO NOT REQU IRE TO BE REPEATED AGAIN. IT IS SUBMITTED THAT THE VALUE OF THE FINISHED STOCK H AS BEEN WORKED OUT ON THE BASIS OF MRP (MAXIMUM RETAIL PRICE) WHICH WAS MUCH HIGHER AS AGAINST THE COST OF THE FINISHED GOODS. FOR INSTANCE, THE VALU E OF THE FINISHED STOCK WAS SHOWN AT THE RATE RANGING FROM RS.70, RS.100 AND RS .120 PER KG. WHEREAS THE SAME USED TO BE SOLD AT THE RATES RANGING FROM RS.5 0, RS.70 AND RS.80 PER KG. RESPECTIVELY. FURTHER THE COST HAD TO BE WORKED OU T AFTER TAKING INTO ACCOUNT THE GROSS PROFIT RATE. THIS SUBMISSION IS SUPPORTE D BY THE COPIES OF THE SALE BILLS WHICH ARE BEING PRODUCED EVEN WHEN THE SAME HAD BEE N IMPOUNDED AT THE TIME OF SURVEY ON 19.3.2008. THUS IT WOULD BE SEEN THAT THE VALUE OF THE FINISHED STOCK IS HIGHLY INFLATED AS AGAINST THE ACTUAL SALE RATES WHICH ARE VERIFIABLE FROM THE COPIES OF THE SALE BILLS WHICH ARE BEING PRODUCED R EADILY EVENT WHEN THE SAME HAVE BEEN IN YOUR CUSTODY. 4. IT IS SUBMITTED THAT THE VALUE OF THE RAW MATERI ALS HAS BEEN ESTIMATED AT THE MUCH HIGHER RATES AS AGAINST THE ACTUAL PURCHAS E RATES AS PER THE COPIES OF THE PURCHASE BILLS. FOR INSTANCE, THE VALUE OF 'HEE NG' WAS ESTIMATED AT THE RATE OF RS.25,000 PER KG WHERE AS THE 'HEENG' ACTUALLY H AD BEEN PURCHASED THE OF RS. 5,000 PER KG. THE COPY OF PURCHASED BILL AT THE RAT E OF RS.500 PER KG IS BEING PRODUCED. IN FACT SIMILAR BILLS WHICH HAVE BEEN IN YOUR CUSTODY WOULD BE FOUND TO THE SAME EFFECT. ITA NO.170,986,987/DEL/2013 9 5. IT IS SUBMITTED THAT THE ASSESSEE HAD PURCHASED 80 PRINTED PACKING ROLLS AT THE AVERAGE RATE OF RS.2,000 PER ROLL, THUS THE VAL UE OF THE 80 PRINTED PACKING ROLLS WAS RS. 1,14,291 AS PER THE BILL, WHICH IS BE ING PRODUCED AND HAS BEEN IN YOUR CUSTODY. BUT THROUGH INADVERTENCE, IT WAS ASSU MED THAT IT IS ONLY 800 PRINTED PACKING ROLLS INSTEAD OF 80 PRINTED PACKING ROLLS. THE CORRECT POSITION WOULD BE SEEN FROM THE SAID BILL. ON ACCOUNT OF THI S MISTAKE, THE VALUE OF. 80 PRINTED PACKING ROLLS HAD, BEEN ESTIMATED AT RS. 16 1AKH AS AGAINST THE CORRECT PURCHASE VALUE OF RS. 1,14,291/-. 6. THE VALUE OF THE 'MASAIAS' HAD BEEN ESTIMATED AT RS. 200 PER KG. CONSISTING OF 'CHAT MASALA' END RED CHILLIES WHEREA S 'CHAT MASALA' HAD BEEN PURCHASED B THE ASSESSEE AT THE RATE OF RS. 52 PER KG. WHILE THE RED CHILLIES HAD BEEN PURCHASED AT THE RATE OF RF. 30 P,ER KG. 7. THE ASSESSEE HAD PURCHASED 'KISHMISH' AT THE RA TE OF RS. 45 PER KG WHEREAS IS RATE WAS ESTIMATED AT RS. 80 PER KG. BY THE SURVEY PARTY. THE RELEVANT BILLS ARE BEING PRODUCED. 8. THE ASSESSEE PURCHASED CESHEW NUTS AT THE RATE O F RS.250 PER KG WHERE THE SURVEY PARTY HAD ESTIMATED THE VALUE AT THE RAT E OF RS .. 300 PER KG. 9. THE ASSESSEE HAD PURCHASED 'CHIRWA' AT- THE RATE OF RS. 13 PER KG WHERE THE SURVEY PARTY HAD ESTIMATED AT TILE RATE OF RS. 50 PER KG. 10. THE ASSESSEE HAD PURCHASED MASTER LINE OIL AT T HE RATE OF RS.907/- PER KG AND WHEREAS THE SURVEY PARTY HAD ESTIMATED ITS VALU E ATRS.1250/- PERTAIN. THE BILLS IN SUPPORT OF THE ABOVE SUBMISSIONS HAVE BEEN IN YOUR CUSTODY AND ARE BEING PRODUCED FOR NECESSARY VERIFICATION. AFTER MA KING THE AMENDMENTS ON THIS ACCOUNT, THE REDUCTION IN THE VALUE OF THE STOCK CO MES TO RS. 34,39,026. 11. IT IS SUBMITTED THAT THE VALUE TO THE STOCK WHI CH WERE NOT EVALUATED BY THE SURVEY PARTY AND ITS VALUE HAS BEEN ESTIMATED AT RS . 17,50,000, WHEREAS ITS COMES TO RS. 2,05,697 AS PER THE DETAILS SHOWN HERE IN. 12. IT IS SUBMITTED THAT THE BUSINESS OF THE HUF IN THE NAME OF SUNIT SHAH & SONS.PROP: SHAH DAL AND BESAN MILL IS BEING CARRIED ON AT 283, BLOCK-4, INDUSTRIAL ESTATE, PATPARGANJ, DELHI. THE BUSINESS OF THE HUF IS BEING SEPARATELY ASSESSED AND WAS ASSESSED BY YOU UNDER S ECTION 143(1) FOR THE ASSESSMENT YEAR 2007-2008. THE ASSESSEE IS ENCLOSIN G THE TRADING AND PROFIT AND LOSS ACCOUNT OF THE HUF FOR THE PREVIOUS YEAR E NDING ON 31.03.2008. THE ITA NO.170,986,987/DEL/2013 10 VALUE OF THE STOCK HAS BEEN SHOWN AT RS. 14,21,810. THE VALUE OF THE STOCK OF HUF HAS ALSO BEEN TAKEN INTO ACCOUNT BY THE SURVEY PARTY WITHOUT APPRECIATING THAT THE VALUE OF THE, STOCK OF THE HUF SHOULD NOT BE TAKEN INTO ACCOUNT IN THE' STOCK OF THE ASSESSEE. 13. IT IS SUBMITTED THAT THE VALUE OF THE STOCK OF THE FINISHED GOODS AFTER TAKING INTO ACCOUNT THE ACTUAL SALE RATES AND THE ESTIMATE D G.P. RATE OF ABOUT 16.5%, THE VALUE OF THE FINISHED STOCK COMES TO RS. 22,39 ,758 WHEREAS THE VALUE OF THE FINISHED STOCK HAS BEEN SHOWN AT RS. 44,70,572. 14. IN VIEW OF THE ABOVE MISTAKES, THE VALUE OF THE STOCK OF RS. 1,07,80,363 CLAIMED BY YOU IS APPARENTLY WRONG. HENCE THE VALUE OF TILE STOCK OF RS. 40,37,238 SHOWN BY THE ASSESSEE WOULD BE FOUND TO B E CORRECT ACCORDING TO WHICH THE G.P. RATE COMES TO 16.8% FOR THIS YEAR, W HICH WOULD BE FOUND TO BE FAIR LOOKING TO THE WHOLESALE NATURE OF THE BUSINES S OF THE ASSESSEE. IN FACT THE G.P. RATES OF 17.93% AND 17.02% ACCEPTED IN THE SCR UTINY ASSESSMENTS FOR THE ASSESSMENT YEAR 20062007 AND 2008 RESPECTIVELY. 6. THE ASSESSING OFFICER DID NOT FIND THE REPLY FIL ED BY THE ASSESSEE SATISFACTORY AND HE MADE ADDITION OF RS.67,43,125/- BY HOLDING A S UNDER: THE ABOVE REPLY OF THE ASSESSEE WAS CONSIDERED AND EXAMINED. THE ASSESSEE HAS ARBITRARILY SUBMITTED THE PRICE OF FEW ITEMS AS TO 'HEENG' 'KISMIS' ETC. THE VALUATION OF STOCK FOUND DURING T HE COURSE OF SURVEY WAS DONE BY THE SURVEY PARTY BASED ON MATERIAL ON RECORDS, W HICH WAS COUNTERSIGNED AND' ACCEPTED BY THE ASSESSEE THROUGH HIS SON AS ASSESSE E KEPT HIMSELF ABSENT DURING THE ENTIRE SURVEY PROCEEDING ASSESSEE IS MERELY MAK ING GENERAL SUBMISSIONS THAT RATE OF FEW ITEMS ARE VARYING. THE SOLITARY BI LL FILED IN SUPPORT OF FEW ITEMS CANNOT BE MADE BASIS FOR THE ENTIRE ITEMS INCLUDES IN SUCH STOCKS. AS A MATTER OF FACT, SAID ITEMS BEING OF SUCH NATURE COMPRISING SPICES AND DRY FRUITS ETC. WHEREIN RATE MAY VARY DUE TO QUALITY OR OTHER VARIE TY OF REASONS. ASSESSEE MERELY FURNISHED SUCH SOLITARY BILLS WITH REGARD TO FEW ITEMS BUT HAS NOT DIVULGED NECESSARY DESCRIPTION OF THE SAME VIS-A-VI S ITEMS INCLUDED IN SUCH STOCKS SUBMITTED BY THE ASSESSEE. THE SAID SOLITARY BILLS WITH REGARD TO FEW ITEMS THEREFORE NEITHER BE TREATED AS SACROSANCT AND ULTI MATE WITH REGARD TO THE SAME NOR THE SAME CAN BE MADE BASIS FOR THE ENTIRE ITEMS INVOLVED IN SUCH STOCKS AND ITA NO.170,986,987/DEL/2013 11 INVENTORIES. E.G. THE ASSESSEE HAS SUBMITTED SOLITA RY BILL FOR THE 'KISMIS' @ RS. 45/- PER KG 'HEENQ- @ RS. 450/- PER KG, WHICH ARE N OT REALISTIC RATES. FURTHERMORE ASSESSEE HAS HIMSELF SUBMITTED THAT HE PURCHASED THE HEENG @ RS. 5000 PER KG BUT SUBMITTED BILL IS FOR RS. 450/- PER KG. HENCE THE SOLITARY BILLS SUBMITTED BY THE ASSESSEE DOES NOT SOUND ANY BASIS. 7. ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE: THE ASSESSING OFFICER HAS NOTED FROM ANNEXURE A-56 CERTAIN PAYMENTS WERE FOUND TO HAVE BEEN MADE ON ACCOUNT OF WAGES AND SALARIES WH ICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THEREFORE, AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE SAME, MADE ADDITION OF RS.14,50,950/ -. 8. ADDITION ON ACCOUNT OF UNRECORDED SALES: THE ASSESSING OFFICER FURTHER OBSERVED THAT AS PER THE ANNEXURE A-41, A-55, A-67 AND A-69 IMPOUNDED DURING THE SURVEY, THERE WERE CE RTAIN ENTRIES OF SALES MADE OF VARIOUS ITEMS TO VARIOUS PARTIES. THE ASSESSEE WAS CONFRONTED TO EXPLAIN THE SAME. THE ASSESSEE IN RESPECT OF ALLEGATION OF PAYMENT OF UNRECORDED WAGES AND UNRECORDED SALES VIDE REPLY DATED 29.12.2010 SUBMITTED AS UNDE R: IT IS SUBMITTED THAT THE WAGES AND SALARIES OF TH E TWO BUSINESS UNITS FOR THIS YEAR WORKED OUT TO RS.14,50,000 WHEREAS THE PAYMENT S MARKED IN THE DIARY WORKED OUT TO RS.13,29,500 AS AGAINST THE INCORRECT FIGURE OF RS.14,50,950 CLAIMED BY YOU. IT WOULD BE APPRECIATED THAT THE DI ARY WAS A ROUGH MEMORANDUM RECORDING THE PAYMENTS WHICH WERE BEING MADE TO THE WORKERS AND THE EMPLOYEES ON THEIR QUESTS FROM TIME TO TIME . THE SAID PAYMENTS HAD BEEN MADE ON ACCOUNT OF WAGES AND SALARIES OF THE T WO BUSINESS UNITS. IT IS SUBMITTED THAT IT CANNOT BE CLAIMED THAT THE PAYMEN TS OF RS. 14,50,950 SHOWN IN THE DIARY HAVE NO CONCERN WITH THE WAGES AND SALARI ES WHICH HAD BEEN PAID TO THE WORKERS AND THE EMPLOYEES OF THE TWO BUSINESS U NITS. IN THESE CIRCUMSTANCES, IT CANNOT BE MADE OUT THAT THE SAID PAYMENTS AS PER THE DIARY WERE EXCLUSIVE OF THE WAGES AND SALARIES WHICH HAD BEEN PAID IN RESPE CT OF THE TWO BUSINESS UNITS. APART FROM THIS, IS IN THE ALTERNATIVE THE SAID PAY MENTS CAN BE CO-RELATED WITH THE SALE PROCEEDS ON THE BASIS OF THE, KACHI BILL B OOKS TOTALING RS. 14,10,500, ITA NO.170,986,987/DEL/2013 12 THIS PROPOSITION IS SUPPORTED BY THE JUDGMENT OF TH E SUPREME COURT OF INDIA IN THE CASE OF AENTHEREM VEERASINGGHAIAH & CO VS CIT ( 1980) 123 ITR 457 (SC) WHEREIN THE SUPREME COURT HAD OBSERVED THAT WHEN AN INTANGIBLE ADDITION IS MADE TO THE BOOK PROFITS DURING AN ASSESSMENT PROCE EDING, IT IS ON THE BASIS THAT THE AMOUNT REPRESENTED BY THAT ADDITION CONSTITUTES THE UNDISCLOSED INCOME OF THE ASSESSEE. THAT INCOME, ALTHOUGH COMMONLY DESCRI BED AS INTANGIBLE, IS AS MUCH A PART OF HIS REAL INCOME THAT DISCLOSED BY HI S ACCOUNT BOOKS. IT HAS THE SAME CONCRETE EXISTENCE. IT WOULD BE AVAILABLE TO T HE, ASSESSEE AS THE BOOK PROFITS COULD BE. THE JUDGMENT OF THE ANDHRA PRADES H IN THE CASE OF LAGADAOATI SUBBA RAMAIAH VS CIT (1956) 30 ITR 593 AND THE JUDG MENT OF THE MADRAS HIGH COURT HAD OBSERVED THAT WHERE INCOME TAX AUTHO RITIES MAKE ADDITION T(( THE INCOME OF THE ASSESSEE OVER AND ABOVE THE INCOM E AS DISCLOSED BY THE ASSESSEE, ON AN ESTIMATE BASIS, THE AMOUNTS SO ADDE D MUST BE TREATED AS REAL INCOME OF THE ASSESSEE. IT IS NOT OPEN THE AUTHORIT IES TO TAKE THE VIEW THAT THE ADDITION WAS ONLY FOR PURPOSES OF TAXATION AND THAT IT SHOULD NOT BE REGARDED AS THE TRUE INCOME OF THE ASSESSEE. IN THE LIGHT OF TH E JUDGMENT, THE SALE PROCEEDS ON THE BASIS OF THE KACHI BILL BOOKS CAN BE TAKEN I NTO ACCOUNT IN RESPECT OF THE PAYMENTS WHICH HAD BEEN MADE AS PER ANNEXURES A-56 AND A57. 9. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE AND THEREFORE, HE MADE ADDITION OF RS.1,63,89,335/- ON ACCOUNT OF UNACCOUNTED SALES BY HOLDING AS UNDER: 4.2 THE ABOVE REPLY OF THE ASSESSEE WAS CONSIDERE D AND EXAMINED. AS MAY BE SEEN FROM THE ABOVE REPLY OF THE ASSESSEE, THE ASSE SSEE MERELY EXPLAINED THE RULINGS OF VARIOUS HON'BLE COURTS OF LAW THAT IF BA SED ON THE MATERIAL FOUND FOR A PART OF THE PERIOD, THE INCOME IS ESTIMATED BY TH E REVENUE FOR THE REMAINING PERIOD, THE SAME SHOULD BE REAL INCOME OF THE ASSES SEE. THE ASSESSEE HAS NOT ANSWERED THE CORE QUESTION THAT IT IS FOUND THAT TH E SALES RECORDED AS PER SUCH 'KACCHI BILL BOOKS' ARE NOWHERE RECORDED BY THE ASS ESSEE IN HIS BOOKS 'OF ACCOUNTS NOR THE SAME HAVE BEEN OFFERED FOR TAX OTH ERWISE. AS A MATTER OF FACT, THE ASSESSEE THROUGH HIS SON (BECAUSE THE ASSESSEE KEPT HIMSELF-ABSENT DURING THE ENTIRE COURSE OF SURVEY PROCEEDINGS) HAS DIVULG ED THE FACT THAT IT HAD UNACCOUNTED SALES/ CONCEALED INCOME AND THEREFORE W AS READY TO SURRENDER A SUM OF RS. 1 CRORE AS UNDISCLOSED INCOME AS DULY EV IDENT FROM SURVEY RECORDS. THE ASSESSEE LATER ON RETRACTED FRO THE SAME AND RA ISED OBJECTIONS THAT THE SAME WAS DON~\ DUE TO UNDUE INFLUENCE AND PRESSURE OF SU RVEY PARTY. ITA NO.170,986,987/DEL/2013 13 4.3 THE FACT REMAINS ON RECORDS THAT CERTAIN 'KACC HI BILL BOOKS' WERE FOUND FROM THE BUSINESS PREMISES OF THE ASSESSEE, WHEREIN SALES HAVE BEEN SHOWN SALES IN BOOKS OF ACCOUNTS NOR OFFERED THE SAME FOR TAX. THE SAID FACT WAS SPECIFICALLY CONFRONTED T THE ASSESSEE AND ALL DETA ILS WERE PROVIDED TO HIM, BUT THE ASSESSEE HAS NEITHER EXPLAINED THE CORE QUESTIO N AS TO WHY IT HAS NOT ACCOUNTED FOR THE SAID SALES IN RECORDS NOR HAS FUR NISHED ANY IOTA OF DOCUMENTS TO PROVE ON RECORDS THAT THE SAID SALES RECORDED IN KACHI BILL BOOKS ARE ACCOUNTED FOR AND INCLUDED IN SALES FIGURE DECLARED IN PROFIT LOSS ACCOUNT FOR THE YEAR UNDER ASSESSMENT. THE FACTS WERE FURTHER E XAMINED FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE TO ENSURE WHETHER OR NOT S UCH SALES ARE ACCOUNTED FOR BY THE ASSESSEE IN BOOKS, IT WAS FOUND THAT THE LED GER OF CASH SALES SHOWN BY THE ASSESSEE IN BOOKS DOES NOT CONTAIN ANY OF THE C ASH MEMO NUMBERS OF SUCH 'KACCHI BILL BOOKS'. THE CASH MEMO NUMBERS NARRATED IN SUCH LEDGER OF CASH SALES ARE ENTIRELY DIFFERENT AND DISTINCT. THE ASSE SSEE FAILED TO ESTABLISH AND PROVE ON RECORDS THAT THE SALES REPRESENTED BY AND RECORDED IN, SUCH 'KACCHI BILL BOOKS' ARE ACTUALLY ACCOUNTED FOR BY THE ASSES SEE IN HIS BOOKS OF ACCOUNTS OR THAT THE SAME ARE OFFERED FOR TAX. 10. ADDITION ON ACCOUNT OF GIFTS: THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESS EE HAD RECEIVED A GIFT OF RS.8,75,362/- FROM MRS. SUVEENA AND MS. NEELAM PATE L. THE ASSESSEE WAS CONFRONTED TO EXPLAIN THE SAME, WHICH THE ASSESSEE VIDE LETTER DATED 20.11.2010 SUBMITTED AS UNDER: DURING THE PREVIOUS YEAR THE ASSESSEE RECEIVED TWO GIFTS EACH OF THE VALUE OF 8,500 U.S. DOLLARS IN THE MONTH OF JANUARY, 2008 FROM HIS ELDER SISTER) SMT. NEELAM PATEL. THE SAID GIFTS ARE SUPPORTED BY THE G IFT DEEDS, WHICH HAVE BEEN IN YOUR CUSTODY. THE COPIES OF THE SAID GIFTS DEEDS ARE BEING ENCLOSED. IT WOU1D BE SEEN THAT THE SAID GIFTS HAD BEEN RECEIVED THROU GH FOREIGN EXCHANGE AND THE INDIAN RUPEES HAD BEEN CONVERTED BY THE BANK ACCORD INGLY. IT IS SUBMITTED THAT THE ASSESSEE HAD RECEIVED ANOT HER GIFT OF 5500 U.S. DOLLARS FROM HIS SECOND ELDER SISTER SMT. SUNVEENA, RESIDENT OF USA. THE PROCEEDS OF THE SAID GIFT CHEQUE HAD BEEN CONVERTED IN INDIAN RUPEES BY THE BANK. THE PROCEEDS OF THESE GIFTS WOULD BE FOUND T O BE CREDITED IN THE BANK ITA NO.170,986,987/DEL/2013 14 ACCOUNT OF THE ASSESSEE. THE SAID GIFT DEEDS HAVE B EEN IN THE CUSTODY OF THE DEPARTMENT. IT HAS ALREADY BEEN STATED THAT THE ASSESSEE HAS B EEN THE YOUNGEST CHILD AND HE HAS GOT ELDER SISTERS. OUT OF WHOM TWO HAVE BEEN WELL SETTLED IN USA. IT HAS BEEN STATED THAT SMT. NEELAM PATEL WAS RUNNING A RESTAURANT. HER HUSBAND WAS A SENIOR OFFICER IN NASA. BOTH OF THEM HAVE NO W RETIRED. THEY HAVE BEEN VISITING THE ASSESSEE AND HAVE BEEN STAYING WITH HI M FOR SOME DAYS. IT IS OUT OF THEIR AFFECTION THAT THEY MADE THE TOKEN GIFTS TO T HE ASSESSEE. THE SAME WOULD BE FOUND TO BE BONA FIDE. SIMILARLY, THE SECOND ELDER SISTER HAD MADE A TOKEN GIFT OF US$5500 TO THE ASSESSEE THROUGH THE BANKING CHAN NELS. THE SAME WOULD BE FOUND TO BE IN ORDER. 11. THE ASSESSING OFFICER WAS NOT SATISFIED WITH TH E REPLY OF THE ASSESSEE AND HE MADE THE ADDITION OF THE AMOUNT BY HOLDING AS UNDER : 6.3 THE ABOVE REPLY OF THE ASSESSEE WAS PERUSED AN D CONSIDERED. IT IS NOTICED THAT THE ASSESSEE DID NOT FURNISH ANY DOCUMENTS TO ESTABLISH AND PROVE THE SOURCE OF THE SAID GIFTS. THE ASSESSEE THUS DID NOT FURNISH ANY DOCUMENTARY EVIDENCE TO PROVE THE CAPACITY OF THE DONOR TO MAKE THE SAID GIFT. APART FROM ABOVE, THE ASSESSEE ALSO DID NOT FURNISH ANY DOCUME NTS TO PROVE THAT THE DONORS WERE THE RELATIVE OF THE ASSESSEE WITHIN THE MEANIN G OF SECTION 56 OF THE INCOME TAX ACT, 1961. 6.3 THE ABOVE REPLY WERE FOUND UNSATISFACTORY AND INCOM PLETE AN THE ASSESSEE HAS' NOT ESTABLISHED THE RELATIONSHIP OF T HE ASSESSEE WIT THE DONOR AND THE CREDIT WORTHINESS BEING THE CAPACITY OF THE DON OR TO MAKE THE SAID GIFTS TO THE ASSESSEE. 6.4 THE ASSESSEE THOUGH FURNISHED THE COPY OF GIFT DEED BUT, IN SPITE OF GIVEN SPECIFIC AND AMPLE OPPORTUNITY, ASSESSEE FAILED TO FURNISH THE RELEVANT DOCUMENTS TO PROVE THE NECESSARY INGREDIENT OF SUCH TRANSACTIONS BEING THE CAPACITY OF THE DONOR TO MAKE SUCH GIFTS TO THE ASS ESSEE. THE ASSESSEE FAILED TO FURNISH, EVEN THE COPIES OF BANK PASS BOOKS THE DON ORS OR ANY OTHER DOCUMENTS PROVING THE CREDITWORTHINESS/ CAPACITY OF THE DONOR S. FURTHER, IN VIEW OF THE PERTINENT FACTS ON RECORDS, AS DISCUSSED SUPRA, THA T BLANK GIFT DEEDS WERE FOUND FROM THE PREMISES OF THE ASSESSEE DURING, THE COURS E OF SURVEY OPERATION ON 20.03.2008; WHICH WERE NOT ASSIGNED BY THE ASSESSEE AS A DONEE MEANING THEREBY THAT THE ASSESSEE NEITHER ACCEPTED NOR SIGN ED THE SAID GIFT DEEDS' AS DONEE HAS ALSO EVIDENCED FROM THE BLANK GIFT DEEDS FOUND FROM THE POSSESSION OF THE ASSESSEE ON.20.03.2008. IN TILE, LIGHT OF SUCH PERTINENT FACTS ON RECORD THE ITA NO.170,986,987/DEL/2013 15 GIFT DEEDS FURNISHED BY THE ASSESSEE ARE CLEARLY UN RELIABLE DOCUMENTS. FURTHER, THE SAID GIFT DEEDS ARE ON PLAIN PAPERS WITHOUT SIG NATURE OF WITNESSES OR DONEE. 6.5 IN ANY CASE, THE ASSESSEE FAILED TO PROVE THE CAPAC ITY /CREDIT WORTHINESS OF THE PERSONS CLAIMED TO BE DONORS. ASSESSEE ALS O FAILED TO FURNISH ANY DOCUMENT TO PROVE THEIR RELATION WITH THE ASSESSEE PURSUANT, TO THE PROVISIONS OF SECTION 56 OF THE INCOME TAX ACT, 1961 AS WELL ALL THE OCCASION/ CIRCUMSTANCES UNDER WHICH THE GIFTS WERE MADE. 6.7 IT IS BY NOW WELL SETTLED LAW THAT MERELY IDEN TIFICATION OF DONOR AND SHOWING MOVEMENT OF GIFTS IS NOT SUFFICIENT TO DISC HARGE BURDEN ON THE PART ON THE PART OF THE ASSESSEE RELATING TO CREDIT ENTRIES IN BOOKS CLAIMED TO BE ON ACCOUNT OF GIFTS. 12. ADDITION ON ACCOUNT OF UNRECORDED EXPORT SALES: THE ASSESSING OFFICER FURTHER OBSERVED THAT DURING SURVEY PROCEEDINGS, VARIOUS BILLS AGGREGATING RS.37,21,034/- WERE FOUND / IMPOUNDED D URING THE COURSE OF SURVEY WHICH WERE NOT FOUND ENTERED IN THE BOOKS AND THE A SSESSEE WAS REQUIRED TO EXPLAIN THE NATURE OF SUCH BILLS AND TO ESTABLISH THAT SUCH EXPORT SALES ARE ACCOUNTED FOR IN BOOKS. 13. THE ASSESSEE VIDE LETTER DATED 20.11.2010 SUBMI TTED THAT BILLS AS PER ANNEXURE A-59 HAVE BEEN ACCOUNTED FOR IN ACCOUNTS BOOKS OF T HE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT THE REPLY SUBMITTED BY THE AS SESSEE WAS GENERAL IN NATURE AND, THEREFORE, WAS GIVEN ONE MORE OPPORTUNITY TO EXPLAI N THE SAME. THE ASSESSEE VIDE LETTER DATED 13.12.2010 SUBMITTED AS UNDER: A-59: PAGES 27-31 COPY OF INVOICES, BILLS OF LADIN G ETC. RECEIVED FROM EXPORTERS TO WHOM GOODS WERE SOLD AS RECORDED IN TH E BOOKS. THE SAID DOCUMENTS ARE REQUIRED TO GET H FORM FROM SALES TAX /DVAT DEPARTMENT FOR CLAIMING EXEMPTION OF SALE TAX ON INDIRECT EXPORT S ALE. THE ASSESSING OFFICER HOWEVER, WAS NOT SATISFIED WITH THE REPLY AND HE MA DE ADDITION OF THE SAME. 14. ADDITION ON ACCOUNT OF PERSONAL EXPENSES: ITA NO.170,986,987/DEL/2013 16 THE ASSESSING OFFICER FURTHER DISALLOWED AN AMOUNT OF RS.1,11,725/- ON ACCOUNT OF DISALLOWANCE OF 20% OF ELECTRICITY EXPENSES, TELEPH ONE EXPENSES, HOUSE TAX AND CAR RUNNING EXPENSES ON ACCOUNT OF ELEMENT OF PERSONAL NATURE. 14.1 AGGRIEVED, WITH THE ACTION OF ADDITION THE ASS ESSEE FILED APPEAL BEFORE LD. CIT(A). LD. CIT(A) HAS DEALT WITH VARIOUS ADDITION S BY HOLDING AS UNDER: ASSESSMENT YEAR 2007-08: 15. ADDITION ON ACCOUNT OF UNEXPLAINED WAGE AND SALARIE S: 8. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE AO. IN THE ASSESSMENT ORDE R AND FACTS OF THE CASE. ADMITTEDLY, THE TRANSACTIONS IN ANNEXURE A-56 ARE W ITH REGARD TO PAYMENT MADE TO VARIOUS WORKERS ON ACCOUNT OF WAGES AND SALARIES . THE APPELLANT HAS NOT BEEN ABLE TO FILE ANY EVIDENCE TO SHOW THAT SUCH PA YMENTS HAVE BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS. WITH REGARD TO THE APPELLANT'S EXPLANATION THAT THE ENTRIES IN THE DIARY PERTAINED TO HIS TWO BUSINESS UNITS, I.E., HIS PROPRIETARY CONCERN AND PROPRIETARY CONCERN OF HIS HUF IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE ON RECORD. AS THE DIARY WA S FOUND FROM THE APPELLANT'S BUSINESS PREMISED THE TRANSACTIONS REGA RDING THE PAYMENTS OF WAGES AND SALARIES TO VARIOUS WORKERS ARE ALSO WITH REGAR D' TO THE APPELLANT'S PROPRIETARY BUSINESS AND NO PART OF THESE TRANSACTI ON CAN BE ATTRIBUTED TO ANY OTHER BUSINESS IN THE ABSENCE OF SUPPORTING EVIDENC E. THE EXPLANATION 'OF THE APPELLANT WITH REGARD TO THE SAVINGS OF THE WORKERS LYING WITH HIM IS ALSO NOT SUPPORTED BY THE ENTRIES THEMSELVES. THERE ARE NO E NTRIES OF ACCEPTANCE OF LOAN FROM ANY WORKERS OR DEPOSITS OF THEIR SAVINGS WITH THE APPELLANT. THE ONLY ENTRIES MADE IN THE DIARY ARE WITH RESPECT TO PAYME NTS MADE TO VARIOUS WORKERS. THEREFORE, THE APPELLANT'S EXPLANATION REGARDING SA VINGS OF SOME OF THE WORKERS LYING WITH HIM AND PAID TO WORKERS AT THE TIME OF T HEIR GOING TO THEIR HOMES CANNOT BE ACCEPTED. AS FAR AS, THE AFFIDAVITS FROM THE THREE PERSONS FILED BY THE APPELLANT IN THE IMMEDIATELY PRECEDING YEAR I.E. A Y 2006-07 ARE CONCERNED, THE A.O. HAS THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, I.E., A.Y. 2006-07, THE THEN CIT(A) AFTER CONSIDERING THE SIMILAR FACTS OF THE C ASE IN DETAIL HAD CONFIRMED ADDITION OF PAYMENT OF WAGES AND SALARIES RECORDED IN THE DIARY PERTAINING TO THAT ASSESSMENT YEAR. IN VIEW OF THE FACTS OF THE C ASE AS DISCUSSED IN DETAIL AS ITA NO.170,986,987/DEL/2013 17 ABOVE, THE ADDITION OF RS. 14,92,250/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT IS THERE FORE, CONFIRMED. 15.1 ADDITION OF RS.7 LACS U/S 69C OF THE ACT ON ACCOUNT OF UNEXPLAINED EXPENDITURE: 12. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORD ER, REMAND REPORT AND FACTS OF THE CASE. THE VARIOUS ENTRIES MADE IN ANNE XURE A-58 ARE IN THE NATURE OF DESCRIPTION OF VARIOUS TYPES OF EGGLESS CAKES LIKE PINEAPPLE, STRAWBERRY, BLACK FOREST ETC. AND VARIOUS TYPES OF RAW MATERIALS REQU IRED FOR THE SAME LIKE PINEAPPLE SLICES GOLDEN BROWN, CHERRY, KISAN SAUCE, GEL, CADBURY SLAB ETC. VARIOUS AMOUNTS HAVE BEEN MENTIONED AGAINST THE DES CRIPTION OF ITEMS. WHERE EVER THE AMOUNTS HAVE BEEN MENTIONED, THE TOTAL OF THE SAME HAS BEEN WORKED OUT BY THE APPELLANT AT RS. 17,350/-. HOWEVER, ON S OME OF THE PAGES AMOUNTS WERE NOT MENTIONED AND ONLY DESCRIPTION AND WEIGHT OF SOME OF THE ITEMS IS GIVEN LIKE PAGE 36-37 OF THE ANNEXURE WHERE FRESH C REAM WEIGHING 10 KG, 12 KG AND 24 KG ON VARIOUS DATES FROM 19.1 0.2006, 21.10. 2006, 21.02.2007 IS MENTIONED. AS THE APPELLANT FAILED TO FILE ANY EXPL ANATION WITH REGARD TO THESE ENTRIES BEFORE THE A.O. DURING THE COURSE OF THE AS SESSMENT PROCEEDINGS, THE A.O. RIGHTLY ADDED VARIOUS AMOUNTS MENTIONED IN THE REGISTER TO HIS INCOME. THE EXPLANATION OF THE APPELLANT REGARDING THE NEW BUSI NESS SET UP BY HIS SON SH. ANKIT SHAH IS ENTIRELY BASELESS AND IT NOT SUPPORTE D BY ANY DOCUMENTARY EVIDENCE ON RECORD. HOWEVER, HOW THE A.O. ARRIVED A T THE FIGURE OF RS.7,00,000/- HAS NOT BEEN MENTIONED IN THE ASSESSM ENT ORDER. AS OBSERVED ABOVE THE TOTAL OF VARIOUS AMOUNTS MENTIONED THE RE GISTER IS RS.27,350/- TILL PAGE 34 OF THE ANNEXURE AND PAGE 36-37 ARE IN RESPE CT OF PURCHASE OF FRESH CREAM AMOUNTING- TO RS.23,460/- APPROXIMATELY. THER EFORE, THE ADDITION ON ACCOUNT 'OF UNEXPLAINED EXPENDITURE MADE BY THE APP ELLANT IN PURCHASE OF VARIOUS ITEMS RECORDED IN ANNEXURE A-58 IS RESTRICT ED TO RS.50,810/-. THE A.O. IS DIRECTED ACCORDINGLY. 16. ADDITION OF RS.38,89,427/- ON ACCOUNT OF UNEXPLAINE D EXPENDITURE U/S 69C OF THE ACT: 13. DURING THE COURSE OF SURVEY CERTAIN LOOSE PAPE RS WERE FOUND AND IMPOUNDED MARKED AS ANNEXURE A-62. THESE LOOSE PAPE RS WERE BILLS OF EXPENSES PURCHASES AGGREGATING RS.38,89,247/- ISSUED BY DIFF ERENT SUPPLIES IN THE NAME ITA NO.170,986,987/DEL/2013 18 OF M/S SHAH NAMKIN. THE APPELLANT WAS ASKED TO EXPL AIN THE NATURE AND ACCOUNTING TREATMENT OF THESE ENTRIES IN RESPONSE T O WHICH THE APPELLANT SUBMITTED BEFORE THE A.O. AS UNDER 'IT IS SUBMITTED THAT ANNEXURE A-62 CONTAINS DOCUME NTS WHICH PERTAIN TO SH. P K CHOPRA AND THAT HE HAS NO CONCERN WITH THE PAPERS . 14. THE ABOVE REPLY OF THE APPELLANT WAS NOT ACCEP TED BY THE A.O. ON THE GROUND THAT NO EVIDENCE WAS FILED BY THE APPELLANT IN SUPPORT OF HIS CONTENTION. THE APPELLANT HAD FAILED TO FURNISH ANY DETAILS REG ARDING THE IDENTITY OF SH. P K CHOPRA, HIS RELATIONSHIP WITH THE APPELLANT AND HOW THE TRANSACTIONS PERTAINED TO SH. P K CHOPRA WHEN THE NAME MENTIONED ON THE BI LLS WAS THAT OF THE APPELLANT I.E. M/S SHAH NAMKIN. THE A.O. FURTHER OB SERVED THAT THE DOCUMENTS FOUND FROM THE APPELLANT'S BUSINESS PREMISES HAD TO BE PRESUMED TO BE PERTAINING TO THE APPELLANT UNTIL AND UNLESS CONTRA RY WAS PROVED BY THE APPELLANT. AS THE APPELLANT HAD NOT BEEN ABLE TO DO SO, THE A.O. MADE AN ADDITION OF RS. 38,89,247/- TO THE APPELLANT'S INCO ME ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. 15. IN RESPONSE TO THIS ADDITION THE APPELLANT HAS SUBMITTED AS UNDER - 'PHOTOCOPY OF ANNEXURE A-62, ACCORDING-TO WHICH THE APPELLANT HAD MADE PURCHASES OF RS. 28,36,640/- AND RS. 8,83,300/- FOR TWO YEARS 2007-08 AND 2008- 09 RESPECTIVELY BESIDES MOTOR CAR PETROL EXPE NSES OF RS.6,250/- FOR THE ASSESSMENT YEAR 2008-09. THE SAID PURCHASES WERE FU LLY ACCOUNTED FOR IN THE ACCOUNT BOOKS OF THE APPELLANT. THE A. O. HAD, THER EFORE, ERRED IN TREATING RS.38,89,247/- ON ACCOUNT OF THE SAID PURCHASES AND MOTOR CAR PETROL EXPENSES EVEN WHEN THE SAID PURCHASES AND PETROL EXPENSES AG GREGATED RS.37,26,190/- AS AGAINST THE TOTAL OF RS.38,89,247/- WRONGLY MADE BY THE A.O. WHICH HE TREATED AS BEING THE UNDISCLOSED INCOME OF THE APPELLANT FO R THIS YEAR. 16. THE A.O. IN HIS REMAND REPORT IN ADDITION TO R EITERATION OF THE OBSERVATIONS ITA NO.170,986,987/DEL/2013 19 ALREADY MADE, IN THE ASSESSMENT ORDER, SUBMITTED TH AT THE APPELLANT HAD NOT FILED ANY EVIDENCE TO SHOW THAT THE PURCHASE TRANSA CTION RECORDED IN THE ANNEXURE HAD BEEN ACCOUNTED FOR IN THE APPELLANT'S BOOKS OF ACCOUNT. FURTHER THE EXPLANATION FURNISHED BY THE APPELLANT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS AND NOW DURING THE APPELLATE PROCEEDING S IS ENTIRELY DIFFERENT AND UNSUBSTANTIATED. DETERMINATION 17. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORD ER AND THE FACTS OF THE CASE. THE LOOSE DOCUMENTS PUT TOGETHER AS ANNEXURE A-62 ARE IN THE NATURE OF PURCHASE BILLS /BILLS FOR EXPENSES ISSUED BY VARIOU S PARTIES IN THE NAME OF M/S SHAH NAMKEEN. WHILE EXPLAINING THE NATURE AND ACCOU NTING TREATMENT OF THESE ENTRIES THE APPELLANT HAD TAKEN A PLEA BEFORE THE A .O. THAT THESE DOCUMENTS DID NOT BELONG TO HIM BUT RATHER BELONGED TO SOME SH, P K CHOPRA. NOW DURING THE COURSE OF PRESENT PROCEEDINGS, IT HAS BEEN SUBMITTE D THAT ALL THESE BILLS HAVE DULY BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. HOWEVER, NO DOCUMENTARY EVIDENCE HAS BEEN FILED BY THE APPELLAN T TO SHOW THAT THE PURCHASES BILLS AS PER ANNEXURE A-62 HAVE BEEN RECO RDED IN HIS REGULAR BOOKS OF ACCOUNT. THE CONTENTION OF THE APPELLANT THAT PU RCHASES AMOUNTING TO RS. 28,36,640/- ONLY PERTAINED TO A.Y. 2007-08 AND BALA NCE AMOUNT OF RS. 8,83,300/- PERTAINED TO A.Y. 2008-09 HAS NOT BEEN F OUND TO BE CORRECT. ALL THE EXPENSES PERTAINED TO THE YEAR UNDER CONSIDERATION WHEREAS THE PETROL BILLS AMOUNTING TO RS. 1,330/- ONLY DATED 16.8.2008 PLACE D ON PAGE NO. 180 OF THE PAPER BOOK PERTAINED TO A.Y. 2008-09. THEREFORE, IN VIEW OF THE FACTS OF THE CASE AS DISCUSSED ABOVE AND LACK OF EXPLANATION WITH DOC UMENTARY EVIDENCE FROM THE APPELLANT, THE ADDITION OF RS. 38,87,917/- (38,89,2 47/- - 1,330/-) ON ACCOUNT OF UNEXPLAINED EXPENDITURE IN THESE ACCOUNTED PURCHASE S EXPENSES IS CONFIRMED. THE A.O. IS DIRECTED ACCORDINGLY. 17. ADDITION OF RS.7,22,177/- U/S68 OF THE ACT ON ACCOU NT OF INCOME FROM UNEXPLAINED SOURCES: 24. IN RESPONSE TO THIS ADDITION' THE APPELLANT RE ITERATED HIS SUBMISSIONS FILED BEFORE THE A.O. AND FILED A COPY OF THE GIFT DEEDS FOUND DURING THE COURSE OF SURVEY AND COPY OF SALE DEED OF PLOT NO. 2700, SECT OR-20, DSIDC, NARELA WHICH ITA NO.170,986,987/DEL/2013 20 HAD BEEN ALLOTTED TO SH. SUNIL KUMAR BY DSIDC FOR E XPLAINING THE SOURCE OF GIFT OF RS. 5,00,000/- MADE BY SH. SUNIL KUMAR TO THE AP PELLANT. 25. THE A.O. IN HIS REMAND REPORT AGAIN REITERATED THAT COPY OF BANK ACCOUNT OR ITR OF THE DONORS WAS NOT FILED BY THE APPELLANT TO ESTABLISH THEIR CAPACITY TO MAKE THE GIFT. FURTHER, IN RESPECT OF SH. SUNIL KUM AR THE SOURCE OF GIFT OF RS. 5,00,000/- HAS BEEN EXPLAINED BY THE APPELLANT BEIN G OUT OF SALE PROCEEDS OF PLOT ALLOTTED TO HIM BY DSIDC. IN THIS REGARD IT WA S NOTICED THAT THE SALE PROCEEDS OF THE SAID PLOT AMOUNTING TO RS.7,00,000/ - WERE CREDITED ON 6.9.2006 VIDE TWO CHEQUES OF RS.3,50,000/- EACH WHICH WERE U TILIZED BY SH. SUNIL KUMAR ON 9.9.2006 ITSELF AND THE BALANCE IN THE BANK ACCO UNT OF SH. SUNIL KUMAR AS ON 09.09.2006 WAS MERELY RS.1,814/-, WHEREAS HE MADE G IFT OF RS.5,00,000/- TO THE APPELLANT ON 26.09.2006. IN RESPONSE TO THIS OBSERV ATION OF THE A.O., THE APPELLANT REITERATED HIS SUBMISSIONS MADE BEFORE TH E A.O. THE CASES LAWS RELIED UPON BY THE A.O. WERE STATED TO BE NOT APPLICABLE T O THE APPELLANT'S CASE. DETERMINATION 26. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORD ER, REMAND REPORT AND FACTS OF THE CASE. IN THE CASE OF MRS. NEELAM PATEL FROM WHOM THE APPELLANT HAS-RECEIVED A GIFT OF RS. 2,22,177/- IT IS SEEN TH AT THE APPELLANT HAS NOT FILED ANY DOCUMENTARY EVIDENCE TO ESTABLISH HER IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. IT HAS MERELY BEEN STATED BY THE APPELLANT THAT SHE IS HIS SISTER. NOTHING HAS BEEN BROUGHT ON RECO RD TO ESTABLISH THE RELATIONSHIP OF THE DONOR WITH THE APPELLANT. NO CO PY OF BANK ACCOUNT OR ITR HAS BEEN FILED BY THE APPELLANT IN RESPECT OF MRS. NEELAM PATEL TO ESTABLISH HER CAPACITY TO MAKE THE GIFT TO THE APPELLANT. IN THE CASE OF SH. SUNIL KUMAR, IT HAS BEEN SUBMITTED THAT GIFT OF RS.5,00,000/- HAS BEEN MADE BY HIM TO THE APPELLANT OUT OF SALE PROCEEDS OF PLOT ALLOTTED TO HIM BY DSI DC. AS ALREADY OBSERVED BY THE A.O. IN HIS REMAND REPORT AND MENTIONED ABOVE, SH. SUNIL KUMAR HAD SOLD HIS PLOT FOR RS.7,00,000/- AND HAD RECEIVED SALE PR OCEEDS IN HIS BANK ACCOUNT ON 6.9.2006. HE HAD WITHDRAWN THIS AMOUNT OF RS.7,00,0 00/- FROM HIS BANK ACCOUNT ON 9.09.2006 ITSELF. THUS HE UTILIZED THE ENTIRE SA LE PROCEEDS OF THE PLOT ON 9.9.2006 ITSELF ON WHICH DATE THE BALANCE IN HIS BA NK ACCOUNT WAS , RS.1,814/- ITA NO.170,986,987/DEL/2013 21 WHEREAS HE MADE GIFT OF RS.5,00,000/- TO THE APPELL ANT ON 26.09.2006. THE SOURCE OF CREDIT ENTRY IMMEDIATELY BEFORE THE GIFT OF RS.5,00,000/- MADE TO THE APPELLANT HAS NOT BEEN BROUGHT ON RECORD. THE APPEL LANT IN HIS REJOINDER HAS CHOSEN TO REMAIN SILENT ON THIS OBSERVATION OF THE A.O. THUS, THE MERE AVAILABILITY GIFT DEED AT THE BUSINESS PREMISES OF THE APPELLANT DURING THE COURSE OF SURVEY CANNOT EXPLAIN GENUINENESS OF THE GIFT RE CEIVED BY THE APPELLANT FROM THESE TWO PERSONS. IN VIEW OF THESE FACTS THE ADDIT ION OF RS.7,22,177/- MADE BY THE A.O. ON THIS ACCOUNT U/S 68 OF THE ACT IS CONFI RMED. 18. ADDITION OF RS.1,75,000/- ON ACCOUNT OF UNSECURED L OANS U/S 68 OF THE ACT: DETERMINATION 32. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORD ER AND THE FACTS OF THE CASE. THE APPELLANT ADMITTED THAT THE STATEMENT MAD E BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THERE WERE NO FRESH UNSECURED LOAN RAISED DURING THE YEAR, WAS WRONG. UNSECURED LOAN AMOUNTI NG TO RS.1,75,000/~ HAD BEEN RAISED DURING THE YEAR UNDER CONSIDERATION FRO M HIS WIFE THROUGH ACCOUNT PAYEE CHEQUE FROM HER SAVINGS BANK ACCOUNT. SHE WAS A REGULAR INCOME TAX ASSESSEE IN WARD-36(2). A PERUSAL OF THE BANK ACCOU NT OF MRS. SAVITRI SHAH REVEALS THAT THERE ARE VARIOUS CASH DEPOSITS IN HER BANK ACCOUNT BEFORE AND AFTER SHE HAD ADVANCED AN AMOUNT OF RS. 1,75,000/- TO THE APPELLANT. NOTHING HAS BEEN STATED WITH REGARD TO THE SOURCE OF THIS C ASH AMOUNT. THERE IS DEPOSITS OF RS. 25,000/- BY CASH ON 15.09.2006, RS. 25,000/- ON 21.09.2006, RS. 30,000/- ON 4.4.2006, RS. 30,000/- ON 18.4.2006, RS. 25,000/ - ON 12.12.2006 AND RS. 1,10,000/- BY CASH AFTER THE DATE OF ADVANCING THE SUM OF RS.1,75,000/- TO THE APPELLANT. NO EXPLANATION HAS BEEN FILED BY THE APP ELLANT WITH REGARD TO THE SOURCE OF THESE CASH DEPOSITS NOR HAS A COPY OF THE CREDITOR'S ITR BEEN FILED. IN VIEW OF THESE FACTS, THE CAPACITY OF THE CREDITOR T O ADVANCE THIS UNSECURED LOAN TO THE APPELLANT HAS NOT BEEN ESTABLISHED. THEREFO RE, THE ADDITION OF AN AMOUNT OFRS.1,75,000/- ON THIS ACCOUNT IS CONFIRMED. 19. DISALLOWANCE OUT OF EXPENSES: 35. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORD ER AND THE FACTS OF THE CASE. ADMITTEDLY, THE APPELLANT IS RESIDING IN THE FIRST FLOOR OF THE SAME BUILDING FROM WHERE HIS BUSINESS IS CARRIED OUT. NO SEPARATE ACCO UNT HAS BEEN MAINTAINED IN ITA NO.170,986,987/DEL/2013 22 RESPECT OF ELECTRICITY EXPENSES INCURRED FOR THE BU SINESS PURPOSES AND IN RESPECT OF THE FIRST FLOOR I.E. THERE ARE NO SEPARATE METER S IN RESPECT OF THESE TWO PORTIONS OF THE PROPERTY. SIMILARLY, IN RESPECT OF THE TELEPHONE AND CAR RUNNING AND MAINTENANCE EXPENSES NO CALL REGISTER OR LOG BO OK WAS MAINTAINED BY THE APPELLANT TO SHOW THEIR USE FOR BUSINESS PURPOSES O F THE APPELLANT. HOWEVER, AS FAR AS HOUSE TAX EXPENSES ARE CONCERNED THE APPELLA NT HAS FILED A COPY OF THE SELF ASSESSMENT PROPERTY TAX RETURN FOR THE YEAR 20 06-07 ACCORDING TO WHICH, WITH RESPECT TO FIRST FLOOR, AN AMOUNT OF RS. 4677/ - HAS BEEN PAID VIDE CHEQUE DATED 26.06.2006. THEREFORE, DISALLOWANCE ON ACCOUN T OF HOUSE TAX IS RESTRICTED TO RS. 4677/- ONLY AND DISALLOWANCE OUT OF THE OTHER EXPENSES MENTIONED ABOVE @ 20% IS HELD TO BE REASONABLE AND IS CONFIRMED. ASSESSMENT YEAR 2008-09: 20. ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK: DETERMINATION 10. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORD ER AND THE REMAND REPORT AND THE FACTS OF THE CASE. THE VALUATION OF THE CLO SING STOCK WAS ARRIVED AT RS. 1,07,80,363/- ON THE BASIS OF PHYSICAL STOCK TAKING ON THE DATE OF SURVEY AND AFTER MAKING ADJUSTMENTS FOR PURCHASES AND SALES FO R THE PERIOD 20.03.2008 TO 31.03.2008. AGAINST THIS STOCK, THE APPELLANT HAD S HOWN VALUE OF CLOSING STOCK IN THE BOOKS OF ACCOUNT AT RS. 40,37,238/-. THE APP ELLANT IN HIS EXPLANATION FOR THE DIFFERENCE IN THE VALUATION OF CLOSING STOCK HA S SUBMITTED THAT RATE OF CERTAIN ITEMS WAS ADOPTED AT A MUCH HIGHER VALUE THAN THE A CTUAL PURCHASE PRICE AS PER BILLS. HOWEVER IN SUPPORT OF HIS CONTENTION, THE AP PELLANT HAS NOT FILED COMPLETE DOCUMENTARY EVIDENCE. RATHER ONLY A SINGLE PURCHASE BILL IN RESPECT OF VARIOUS ITEMS HAS BEEN FILED LIKE KISHMISH, HEENG ETC. EVEN THESE SOLITARY PURCHASE BILLS FILED BY THE APPELLANT DID NOT MENTION ANY QUALITY OF THE GOODS. RATES OF THE GOODS PURCHASED BY THE MOREOVER, WHOLE OF THE QUANT ITY OF AN ITEM CANNOT BE VALUED ON THE BASIS OF A SOLITARY PURCHASE BILL. AS FAR AS, THE QUANTITY OF PACKING ROLLS AT 800 ROLLS IS CONCERNED, IT HAS BEEN POINTE D OUT BY THE A.O. THAT THE SAME WAS RECORDED ON THE BASIS OF PHYSICAL QUANTITY FOUN D DURING THE COURSE OF THE SURVEY PROCEEDINGS AND WAS DULY ACKNOWLEDGED AND AC CEPTED BY THE APPELLANT'S SON. JUST BECAUSE THE APPELLANT HAS FILED A COPY OF ONE PURCHASE BILL OF PACKING ROLLS IN WHICH THE QUANTITY OF PACKING ROLLS WAS ME NTIONED AT 80 DOES NOT MEAN ITA NO.170,986,987/DEL/2013 23 THAT THE PHYSICAL QUANTITY OF THE PACKING ROLLS FOU ND AND RECORDED IN THE INVENTORY WERE INCORRECT. WITH REGARD TO THE APPELL ANT'S SUBMISSION THAT SOME OF THE STOCK BELONG TO THE HUF M/S SUNIT SHAH & SONS W AS COUNTED IN THE APPELLANT'S STOCK INVENTORY, IT IS SEEN THAT THE AP PELLANT HAS NOT BEEN ABLE TO FILE ANY EVIDENCE IN SUPPORT OF HIS CONTENTION. THE VALU ATION OF THE CLOSING STOCK ARRIVED AT WAS DULY ACCEPTED AND ACKNOWLEDGED BY TH E APPELLANT'S SON WHO WAS PRESENT DURING THE COURSE OF SURVEY PROCEEDINGS. TH EREFORE, THE VARIOUS CONTENTIONS OF THE APPELLANT HAVE RIGHTLY BEEN REJE CTED BY THE A.O. AND THE ADDITION OF RS. 67,43,125/- MADE ON THIS ACCOUNT IS , THEREFORE, CONFIRMED. 21. ADDITION ON ACCOUNT OF WAGES AND SALARY PAID OUTSID E THE BOOKS OF ACCOUNT: 14. THE A.O. IN HIS REMAND REPORT SUBMITTED THAT THE C ONTENTION OF THE APPELLANT THAT HE HAD NOT BEEN GIVEN ADEQUATE TIME TO MAKE REQUISITE SUBMISSION WAS FALSE AND MISLEADING BECAUSE THE APP ELLANT HAD FOR THE FIRST TIME SUBMITTED VIDE LETTER DATED 20.11.2010 THAT THE PAY MENTS WERE MADE BY HIM TO THE WORKERS AND WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS. THE APPELLANT WAS AGAIN REQUESTED TO FILE DOCUMENTARY EVIDENCE VIDE L ETTER/ ORDER SHEET ENTRY DATED 7.12.2010 AND 13.12.2010 AND 24.12.2010 IN RE SPONSE TO WHICH THE APPELLANT FILED HIS REPLY VIDE HIS LETTER DATED 29. 12.2010. 15. I HAVE CAREFULLY CONSIDERED [THE SUBMISSIONS O F THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORD ER AND THE REMAND REPORT AND THE FACTS OF THE CASE. IN HIS REPLIES FILED BEF ORE THE A.O. AS WELL THE SUBMISSION MADE DURING THE COURSE OF PRESENT PROCEE DINGS, IT HAS BEEN ADMITTED BY THE APPELLANT THAT AMOUNTS RECORDED IN ANNEXURE A-56 & A-57 WERE IN RESPECT OF WAGES AND SALARIES PAID TO VARIOUS WORKE RS AND EMPLOYEES. IT HAS FURTHER BEEN SUBMITTED THAT SUCH PAYMENT DO NOT MAT CH WITH SALARIES AND WAGES RECORDED IN THE BOOKS OF ACCOUNTS. NO EVIDENCE HAS BEEN FILED TO SHOW THAT THE ENTRIES MADE IN ANNEXURE A-56 & A-57 HAVE BEEN INCO RPORATED IN THE BOOKS OF ACCOUNTS. THE CONTENTION OF THE APPELLANT THAT THE EXPENDITURE RECORDED IN THESE ANNEXURE PERTAINED TO TWO BUSINESS UNITS I.E. HIS P ROPRIETARY CONCERN AND THE PROPRIETARY CONCERN OF HIS HUF HAS NOT BEEN SUBSTAN TIATED WITH ANY DOCUMENTARY EVIDENCE. NOR ANY BREAKUP OF EXPENDITUR E PERTAINING TO HIS TWO DIFFERENT BUSINESS UNITS HAS BEEN FILED. NO EVIDENC E OF ANY IDENTIFICATION OF THE ENTRIES PERTAINING TO THE TWO BUSINESS UNITS HAVE B EEN FILED. REPEATED REFERENCE HAS BEEN MADE TO THE APPELLANT'S REPLY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2006-07. IN ASSESSM ENT YEAR 2006-07, THE THEN ITA NO.170,986,987/DEL/2013 24 CIT(A) ON SIMILAR FACTS AND ON THE BASIS OF ENTRIES RECORDED IN THESE TWO ANNEXURES, HAS CONFIRMED THE ADDITION OF 9,26,438/- U/S 69C OF THE ACT ON ACCOUNT OF UNEXPLAINED EXPENDITURE INCURRED BY THE APPELLANT. KEEPING IN VIEW OF THE FACTS OF THE CASE AS DISCUSSED IN DETAIL AS ABOVE, IT IS HELD THAT THE ADDITION MADE BY THE AO. AMOUNTING TO RS.14,50,950/ - ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT HAS RIGH TLY BEEN MADE AND IS CONFIRMED. 22. ADDITION ON ACCOUNT OF UNACCOUNTED SALES: 21. THE A.O. IN HIS REMAND REPORT HAS OBSERVED TH AT THE APPELLANT HAS NOT FILED ANY EXPLANATION TO SHOW THAT SALES RECORDED I N THESE ANNEXURES HAD BEEN ACCOUNTED FOR BY THE APPELLANT IN HIS BOOKS OF ACCO UNT. IN FACT THE APPELLANT HAS ADMITTED THAT THESE WERE UNACCOUNTED SALES. THE APP ELLANT'S RELIANCE ON THE DECISION IN THE CASE M/S MOET'S BAR- BE-QUE IT WAS SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE DIFFERENT FROM THE AP PELLANT'S CASE, I.E., PROCEEDINGS INITIATED OWING TO ACTION UNDER DIFFERE NT SECTION OF THE ACT. IN THE CASE OF AANTHARAM VEERASINGHAIAH & CO. VS. CIT (198 0) 123 ITR 457 (SC), DECISION OF THE APEX COURT WAS CONCERNING THE SCOPE OF SECTION 271 (1 )( C) OF THE ACT. 22. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORD ER, REMAND REPORT AND FACTS OF THE CASE. THE FACT OF CERTAIN SALES RECORD ED IN THESE ANNEXURES HAS NOT BEEN DENIED BY THE APPELLANT AND THESE SALES ADMITT EDLY WERE NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS. THE APPELLANT HAS CONTESTED THE FIGURE AS WORKED OUT BY THE A.O. AT RS. 1,63,89,335/- WHEREAS ACCORDING TO THE APPELLANT THE SAME SHOULD HAVE BEEN RS. 1,24,86,786/-. IT IS SEEN THAT THE APPELLANT HAS NOT SUBSTANTIATED HIS CONTENTION WITH ANY DOCUMENTA RY EVIDENCE. HE HAS NOT POINTED OUT ANY DISCREPANCY IN THE WORKING OF THE F IGURE BY THE A.O. FURTHER, THE APPELLANT'S CONTENTION THAT THE ONLY NET PROFIT RATE SHOULD HAVE BEEN APPLIED ON THE UNRECORDED SALES ALSO CANNOT BE ACCEPTED, BE CAUSE THE FIGURE OF SALES COMPRISES OF THREE ELEMENTARY COST OF PURCHASES, EX PENSES AND THE PROFIT EARNED BY THE ASSESSEE. IN THIS CASE, NOTHING HAS BEEN BRO UGHT ON RECORD BY THE APPELLANT TO SHOW THAT IT IS ONLY THE PROFIT ELEMEN T THAT WAS THE UNACCOUNTED. THE A.O. IN THIS REGARD HAS ALREADY POINTED OUT THA T CERTAIN PURCHASES AS PER ANNEXURE A-61 TO A-67 WERE FOUND DURING THE COURSE OF SURVEY WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. HOWEVER, NO SEPAR ATE ADDITION WAS MADE BY ITA NO.170,986,987/DEL/2013 25 THE A.O. AS TOTAL AMOUNT OF SALES HAD ALREADY BEEN ADDED BY HIM TO THE APPELLANT'S INCOME. 23. HOWEVER, IT IS SEEN THAT THE A.O. ALSO MADE AN ADDITION RS. 14,50,950/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE ON ACCOUNT OF WAGES AND SALARIES PAID AS PER ANNEXURE A-56 & A-57 DISCUSSED AND CONFIRMED AS ABOVE. AS ALREADY DISCUSSED ABOVE THE FIGURE OF SALE IS COMPRISED OF THREE COMPONENTS I.E. COST OF PURCHASES, EXPENDITURE AND PROFIT ELEMENT. AS THE W HOLE OF THE AMOUNT OF SALE HAS ALREADY BEEN ADDED BY THE A.O. TO THE APPELLANT 'S INCOME, THE EXPENDITURE INCURRED OUTSIDE THE BOOKS OF ACCOUNT ON WAGES ETC. AT RS. 14,50,950/- SHOULD NOT HAVE BEEN ADDED SEPARATELY TO THE APPELLANT'S I NCOME AS THAT WOULD AMOUNT TO DOUBLE ADDITION. THEREFORE, THE ADDITION ON ACCO UNT OF UNRECORDED SALES IS CONFIRMED AND RESTRICTED TO RS. 1,49,38,385/-. (1,6 3,89,335/- - 14,50,950/-). GROUND NO.6 - ADDITION OF RS. 37,21,034/- 24. DURING THE COURSE OF SURVEY THE FOLLOWING BILL S AMOUNTING TO RS. 37,21,362/- WERE FOUND AND IMPOUNDED. PAGE NO. DATE DESCRIPTION QUANTITY 28 15.09.2007 GOODS SOLD TO RIGHT CHOICE PRODUCTS , CANADA 7450 KGS. 29 26.09.2007 GOODS SOLD TO RIGHT CHOICE PRODUCTS , CANADA 7186 KGS. 30 17.10.2007 GOODS SOLD TO JKL TRADING LTD. CANA DA 17500 KGS 31 27.09.2007 GOODS SOLD TO JKL TRADING LTD. CANA DA 16063 KGS 25. THESE BILLS WERE IN RESPECT OF SALES MADE TO C ANADA AND THE APPELLANT WAS ASKED TO SHOW WHERE THESE BILLS HAD BEEN ACCOUN TED FOR IN HIS BOOKS OF ACCOUNTS. THE APPELLANT VIDE HIS REPLY DATED 20.11. 2010 SUBMITTED AS UNDER - 'IT IS SUBMITTED THAT THE BILLS AS PER ANNEXURE A-5 9 HAVE BEEN ACCOUNTED FOR IN THE BOOKS OF THE ASSESSEE. 26. AS THE APPELLANT DID NOT FILE ANY SPECIFIC REP LY, ANOTHER OPPORTUNITY WAS GIVEN TO HIM WHO VIDE HIS LETTER DATED 13.12.2010 S UBMITTED AS UNDER - 'A-59 PAGES 27-31 - COPY OF INVOICES, BILLS OF LADING ETC . RECEIVED FROM EXPORTERS TO WHOM GOODS WERE SOLD AS RECORDED IN BOOKS OF ACCOUN TS. THE SAID DOCUMENTS ARE REQUIRED TO GET 'H' FORM FROM SALE-TAX / D VAT DEPARTMENT FOR CLAIMING EXEMPTION OF SALE TAX ON INDIRECT EXPORT. ' ITA NO.170,986,987/DEL/2013 26 27. FROM THE ABOVE MENTIONED TWO REPLIES OF THE AP PELLANT, THE A.O. OBSERVED THAT THE APPELLANT HAD NOT BEEN ABLE TO ESTABLISH T HAT THESE SALES HAD BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE A.O., THEREFO RE, ADDED AN AMOUNT OF RS. 37,21,034/- TO THE APPELLANT'S INCOME ON ACCOUNT OF UNRECORDED SALES AS PER THESE PAGES. 28. DURING THE COURSE OF THE PRESENT PROCEEDINGS, THE APPELLANT IN RESPONSE TO THIS ADDITION SUBMITTED AS UNDER - 'IT IS SUBMITTED THAT THE APPELLANT HAD SOLD FINISH ED GOODS OF THE VALUE OF RS. 3,10,870/- AND RS. 75,456/- TO M/S SHUBH IMPEX AND RAM SWARUP SUNIL KUMAR RICE MILL RESPECTIVELY, WHICH IN TURN IT HAD EXPORTED NOT ONLY THE PRODUCTS OF THE , APPELLANT COMPANY BUT OF OTHER MA NUFACTURES. SINCE, THE SAID GOODS HAD BEEN EXPORTED BY THE SAID EXPORTER INCLUD ING THE GOODS WHICH THEY HAD PURCHASED FR0'F.!B~BPPELLANT, THE APPELLANT HAD TO FILE THE PRESCRIBED PROFORMA TO CLAIM THE EXEMPTION FROM SALES TAX IN R ESPECT OF ITS SALES TO THE SAID EXPORTER. THUS, THE REFERENCE TO THE SAID PRESCRIBE D PROFORMA DID NOT MEAN THAT THE APPELLANT HAD SOLD GOODS FOR RS. 37,21,034/- IN THIS YEAR. THE APPELLANT HAD ACCOUNTED FOR THE SALES OF ITS GOODS TO THE SAID EX PORTERS IN ITS ACCOUNT BOOKS. THE A.O. HAD ERRED IN ASSUMING THAT THE EXPORTS OF THE SAID EXPORTER REPRESENTED THE ALLEGED UNACCOUNTED SALES OF RS. 37 ,21,034/- AS BEING THE ALLEGED INCOME OF THE APPELLANT FOR THIS YEAR. THE COPIES OF THE SAID BILLS HAVE BEEN IN THE CUSTODY OF THE A.O. THE COPY OF THE SAI D PRESCRIBED PROFORMA IS BEING ENCLOSED. SINCE THE APPELLANT HAD ACCOUNTED F OR THE SALES MADE TO THE SAID EXPORTER, THE QUESTION OF THE SALE OF THE EXPORTER DID NOT REPRESENT THE SALE OF THE EXPORTER, AS BEING THE ALLEGED UNDISCLOSED INCOME O F THE APPELLANT FOR THIS YEAR. THE A.O. HAD, THEREFORE, ERRED IN TREATING THE EXPO RTS OF THE VALUE OF THE SAID EXPORTER OF RS. 37,21,034/- AS BEING THE ALLEGED U NDISCLOSED INCOME OF THE APPELLANT FOR THIS YEAR. DETERMINATION 29. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORD ER AND FACTS OF THE CASE. THE TWO REPLIES SUBMITTED BY THE APPELLANT BEFORE T HE A.O. HAVE BEEN REPRODUCED ABOVE. DURING THE COURSE OF THE PRESENT PROCEEDINGS THE APPELLANT HAS CHANGED HIS SUBMISSIONS ALTOGETHER AND HAS BROU GHT INTO PICTURE NAMES OF TWO PERSONS TO WHOM HE SUPPOSEDLY MADE SOME SALES. NEITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOR DURING THE COURSE OF PRESENT PROCEEDINGS, THE ITA NO.170,986,987/DEL/2013 27 APPELLANT FILED ANY DOCUMENTARY EVIDENCE TO SHOW TH AT THE SALES REPRESENTED IN THE ABOVE MENTIONED BILLS, FOUND DURING THE COURSE OF SURVEY, WERE RECORDED IN THE BOOKS OF ACCOUNT. IN THE ABSENCE OF THIS EXPLAN ATION, THE ADDITION MADE BY THE A.O. AMOUNTING TO RS.37,21,034/- ON ACCOUNT OF UNRECORDED EXPORT SALES IS CONFIRMED. 23. ADDITION ON ACCOUNT OF UNEXPLAINED GIFTS: 32. AFTER CONSIDERING THE ABOVE REPLY OF THE APPE LLANT, THE A.O. OBSERVED THAT THE APPELLANT HAD NOT BEEN ABLE TO ESTABLISH THE CA PACITY OF THE DONOR TO MAKE THE SAID GIFT NOR ANY RELATIONSHIP HAD BEEN ESTABLI SHED BETWEEN THE DONOR AND THE APPELLANT. EVEN A COPY OF THE BANK PASS BOOK WA S NOT FILED. THE COPIES OF THE GIFT DEEDS FOUND DURING THE COURSE OF SURVEY WERE N OT SIGNED BY THE APPELLANT WHICH MEANS HE HAD NOT ACCEPTED THE GIFTS AS DONEE. IN ANY CASE THE APPELLANT HAS FAILED TO ESTABLISH THE CAPACITY OF THE DONOR A ND, THEREFORE, THE A.O. MADE AN ADDITION OF RS. 8,75,362/- TO THE APPELLANT'S IN COME U/S 68 OF THE ACT AFTER RELYING ON THE FOLLOWING DECISIONS - IN THE CASE OF YASH PAL GOD VS. CIT(A)(2009) 310 ITR 75 (P&H). IN THE SAID CASE, TH E HON'BLE HIGH COURT HELD THAT 'A SIMPLE IDENTIFICATION OF THE DONOR AND SHOW ING THE MOVEMENT OF THE GIFT AMOUNT THROUGH BANKING CHANNEL IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE GIFT. SINCE THE CLAIM OF GIFT IS MADE BY THE AS SESSEE, THE ONUS LIES ON HIM NOT ONLY TO ESTABLISH THE IDENTITY OF PERSON MAKING THE GIFT BUT ALSO HIS CAPACITY TO MAKE A GIFT AND THAT IT HAS ACTUALLY BEEN RECEIVED AS A GIFT FROM THE DONOR. IN CASE BY THE HON'BLE JURISDICTIONAL INCOME TAX APPEL LATE TRIBUNAL (IT AT) - DELHI BENCH, NEW DELHI, IN THE CASE OF RAJINDER KUM AR MITTAL VS. ACIT, IN ITA NO. 1109/DELHI/2007 DATED 7.9.2009, THE HON'BLE ITA T HELD THAT 'IT IS THE BURDEN OF THE ASSESSEE TO SHOW AND DEMONSTRATE WHAT KIND OF RELATIONSHIP OR WHAT KIND OF LOVE AND AFFECTION THE DONOR HAS WITH THE ASSESSEE, AND TO EXPLAIN CIRCUMSTANCES IN WHICH GIFTS ARE MADE. 24. ADDITION ON ACCOUNT OF EXPENSES: 40. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORD ER AND THE FACTS OF THE CASE. ADMITTEDLY, THE APPELLANT IS RESIDING IN THE FIRST FLOOR OF THE SAME BUILDING FROM WHERE HIS BUSINESS IS CARRIED OUT. NO SEPARATE ACCOUNT HAS BEEN ITA NO.170,986,987/DEL/2013 28 MAINTAINED IN RESPECT OF ELECTRICITY EXPENSES INCUR RED FOR THE BUSINESS PURPOSES AND IN RESPECT OF THE FIRST FLOOR I.E. THERE ARE NO SEPARATE METERS IN RESPECT OF THESE TWO PORTIONS OF THE PROPERTY. SIMILARLY, IN R ESPECT OF THE TELEPHONE AND CAR RUNNING AND MAINTENANCE EXPENSES NO CALL REGISTER O R LOG BOOK HAS BEEN MAINTAINED BY THE APPELLANT TO SHOW THEIR USE FOR B USINESS PURPOSES. WITH RESPECT PROPERTY SELF ASSESSMENT TAX FORMS ACCORDIN G TO WHICH APPELLANT WAS REQUIRED TO PAY PROPERTY TAX AMOUNT OF RS. 600 IN R ESPECT OF THE FIRST FLOOR. NO SUCH COPY OF THE SELF ASSESSMENT FORM WAS HOWEVER, FILED FOR THE YEAR UNDER CONSIDERATION. THEREFORE, DISALLOWANCE OUT OF VARIO US EXPENSES MENTIONED ABOVE @ 20% IS HELD TO BE REASONABLE AND IS CONFIRM ED. 25. AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE US ON ALL THE ADDITIONS CONFIRMED BY LD. CIT(A). THE LD. A.R. FIRST TOOK US TO APPEAL FOR ASSESSMENT YEAR 2007-08. ARGUING THE FIRST GROUND REGARDING ADDITION ON ACCOUNT OF SALARY AND WAGES RECORDED OUTSIDE THE BOOKS, HE SUB MITTED THAT THE PAYMENTS WERE DULY RECORDED IN THE BOOKS OF ACCOUNT AND IN THIS R ESPECT, OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 74-82 WHEREIN COPY OF ACCOUNTS OF V ARIOUS WORKERS WERE PLACED. IT WAS SUBMITTED THAT THESE ENTRIES AS APPEARING IN TH E DOCUMENTS IMPOUNDED DURING SURVEY AND AS PER ACCOUNTS BOOKS OF THE ASSESSEE, A RE THE SAME AND TO STRENGTHEN HIS ARGUMENT, WE WERE TAKEN TO PAPER BOOK PAGE 125 WHER E PART OF DOCUMENTS IDENTIFIED ASA-56 WAS PLACED. OUR ATTENTION WAS INVITED TO TH E ACCOUNTS OF BECHALAL TO WHOM IN THE ACCOUNTS BOOKS, PAYMENTS OF RS.32,500/- WAS MAD E ON VARIOUS DATES. LD. A.R. INVITED OUR ATTENTION TO ENTRY NOTED AT PAGE 125 FO R 23.04.2006 INDICATING PAYMENT OF RS.10,000/-. THE LD. A.R. SUBMITTED THAT THE SAME AMOUNT WAS RECORDED IN THE ACTUAL BOOKS OF ACCOUNT ON THE SAME DATE. SIMILARLY, OTHE R ENTRIES APPEARING ON 25.04.2006, 23.06.2006, 15.07.2006, 23.08.2006 AND 24.09.2006 W ERE EXPLAINED. LD. A.R. SUBMITTED THAT SIMILAR PAYMENTS WERE MADE TO OTHER WORKERS WHICH WERE RECORDED IN THE BOOKS OF ACCOUNT AS FOUND IN ANNEXURE A-56 AND IN THIS RESPECT HE TOOK US TO A CHART PLACED IN PAPER BOOK PAGE 55 & 56 SHOWING REC ONCILIATION OF PAYMENTS NOTED ON ANNEXURE A-56 AND THOSE RECORDED IN BOOKS OF ACCOUN TS. OUR SPECIFIC ATTENTION WAS INVITED TO PAPER BOOK PAGE 74-80 WHICH CONTAINED AC COUNT OF WORKERS AND THEIR ITA NO.170,986,987/DEL/2013 29 CORRESPONDING ENTRIES ASPER ANNEXURE A-56 PLACED AT VARIOUS PAGES OF PAPER BOOK 208, 209, 220, 168 AND 123 ETC. IN VIEW OF THE ABO VE, IT WAS SUBMITTED THAT ALL THE PAYMENTS REFLECTED IN ANNEXURE A-56 WERE RECORDED I N THE BOOKS OF ACCOUNTS AND, THEREFORE, THE SAME CANNOT BE SAID TO HAVE BEEN PAI D OUTSIDE THE BOOKS OF ACCOUNT. 26. ARGUING OVER THE SECOND ADDITION CONFIRMED BY L D. CIT(A) OF RS.50,810/-, THE LD. A.R. SUBMITTED THAT THE DOCUMENTS RELATED TO AN OTHER FIRM OWNED BY SON OF THE ASSESSEE AND IT WAS SUBMITTED THAT THE DOCUMENTS IM POUNDED RELATE TO MANUFACTURE AND SALE OF EGG LESS CAKES WHICH WAS NOT THE BUSINE SS OF THE ASSESSEE BUT THE BUSINESS OF THE ASSESSEES SON. THEREFORE, IT WAS SUBMITTED THAT LD. CIT(A) HAD WRONGLY CONFIRMED THE ADDITION. 27. AS REGARDS THE 3 RD ADDITION FOR UNACCOUNTED PURCHASES AMOUNTING TO RS.38,87,917/-, LD. A.R. SUBMITTED THAT IN FACT THE ENTIRE PURCHASES WERE RELATED TO TWO YEARS I.E. ASSESSMENT YEAR 2007-08 AND 2008-09. TH E ASSESSING OFFICER HAD MADE TOTAL ADDITIONS IN ASSESSMENT YEAR 2007-08. IN THI S RESPECT, OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 57 WHEREIN THE ENTRIES AS ANNEXURE A-62 WERE SEGREGATED IN TWO ASSESSMENT YEARS DEPENDING UPON DATE OF PURCHASE BI LLS. WITHOUT PREJUDICE TO THE ABOVE, IT WAS SUBMITTED THAT THE ENTRIES FOUND RECO RDED IN ANNEXURE A-62 IN FACT RELATE TO VARIOUS PURCHASES MADE BY THE ASSESSEE THE PAYME NT OF WHICH WERE MADE BY A/C PAYEE CHEQUES AND WHICH WAS DULY RECORDED IN BOOKS OF ACCOUNTS. TO STRENGTHEN HIS ARGUMENT, OUR ATTENTION WAS INVITED TO PAPER BOOK P AGE 243-308 WHEREIN COPIES OF PURCHASE BILLS RELATING TO VARIOUS ENTRIES AS PER A NNEXURE A-62 WERE PLACED. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT THE ENTRIES NOT ED IN ANNEXURE A-62 WERE RECORDED IN THE REGULAR BOOKS OF ACCOUNTS AND PAYMENTS WERE ALSO MADE THROUGH A/C PAYEE CHEQUES. IN VIEW OF THE ABOVE, IT WAS SUBMITTED TH AT LD. CIT(A) HAD WRONGLY CONFIRMED THE ADDITION WITHOUT VERIFYING THE FACTS. 28. ARGUING ABOUT THE ADDITION ON ACCOUNT OF GIFTS RECEIVED FROM TWO CLOSE RELATIVES, THE LD. A.R. SUBMITTED THAT THE GIFTS WE RE RECEIVED THROUGH THE BANKING ITA NO.170,986,987/DEL/2013 30 CHANNELS AND THESE WERE RECEIVED FROM CLOSE RELATIV ES ONE OF WHICH HAPPEN TO BE ELDER SISTER OF THE ASSESSEE. IT WAS FURTHER SUBMITTED T HAT THE DONOR HAD CONFIRMED THE PAYMENT OF GIFT AND, THEREFORE, THERE WAS NO REASON AS TO WHY LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. OUR ATTENTI ON WAS INVITED TO PAPER BOOK PAGE 313 WHERE A COPY OF GIFT DEED EXECUTED BY ELDER SIS TER OF THE ASSESSEE WAS PLACED. IT WAS SUBMITTED THAT THE SAID GIFT WAS IN FOREIGN EXC HANGE WHICH WAS SENT FROM OUTSIDE INDIA AND THE DONOR HAD STATED THAT SHE IS REAL SIS TER OF THE ASSESSEE. 29. REGARDING OTHER GIFT OF RS.5 LACS MADE BY MR. S UNIL KUMAR, THE LD. A.R. SUBMITTED THAT THE DONOR WAS THE REAL BROTHER-IN-LA W OF THE DONEE AND HE HAD MADE THE GIFT OUT OF SALE PROCEEDS WHICH HE HAD GOT FROM SAL E OF A PLOT. TO STRENGTHEN HIS ARGUMENT, OUR ATTENTION WAS INVITED TO PAPER BOOK P AGE 324 WHERE A COPY OF GIFT DEED WAS PLACED AND WHEREIN THE DONOR HAD CONFIRMED THAT HE WAS BROTHER IN LAW OF THE DONEE AND HAD MADE THE GIFT OF AN AMOUNT OF RS.5 LA CS BY CHEQUE. LD. A.R. ALSO TOOK US TO PAPER BOOK PAGE 326 TO 331 WHERE A COPY OF BA NK ACCOUNT OF THE DONOR WAS PLACED WHEREIN THE RECEIPT ON ACCOUNT OF SALE OF PL OT WAS FOUND CREDITED. THE LD. A.R. SUBMITTED THAT THE FINDING OF THE ASSESSING OF FICER THAT RS.7 LACS RECEIVED BY THE ASSESSEE ON ACCOUNT OF SALE OF PLOT WAS ALREADY UTI LIZED ID PARTLY CORRECT AS THE ASSESSEE HAD USED THE AMOUNT WHICH AGAIN HE REDEPOSITED ON 2 1.09.2006 AND OUT OF THIS CHEQUE, THE AMOUNT OF GIFT WAS PAID ON 26.09.2006. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT BOTH THE GIFTS WERE EXPLAINED AND THE SAME WERE FRO M CLOSE RELATIVES AS DONORS HAVE CONFIRMED IN THEIR RESPECTIVE AFFIDAVITS AND, THERE FORE, LD. CIT(A) HAS WRONGLY CONFIRMED THE ADDITION. 30. IN RESPECT OF THE ADDITION OF RS.1.75 LACS ON A CCOUNT OF UNSECURED LOANS RECEIVED FROM WIFE OF THE ASSESSEE, IT WAS ARGUED THAT THE A MOUNT WAS RECEIVED BY THE ASSESSEE FROM THE ACCOUNT OF HIS WIFE THROUGH ACCOUNT PAYEE CHEQUE AND IN THIS RESPECT, WE WERE TAKEN TO PAPER BOOK PAGE 332-335 WHERE A COPY OF PASS BOOK OF WIFE OF ASSESSEE WAS PLACED. ITA NO.170,986,987/DEL/2013 31 31. LD. A.R. SUBMITTED THAT BEFORE GIVING UNSECURED LOAN TO THE ASSESSEE,. HIS WIFE HAD RECEIVED VARIOUS PAYMENTS THROUGH BANK TRANSFER OR CHEQUES AND ONLY RS.25,000/- WAS DEPOSITED IN CASH ON 12.12.2006 AND, THEREFORE, THE AMOUNT OF UNSECURED LOAN WAS DULY EXPLAINED. 32. AS REGARDS THE ADDITION ON ACCOUNT OF ELEMENT O F PERSONAL USE, THE LD. A.R. SUBMITTED THAT THIS ADDITION IS COVERED AGAINST THE ASSESSEE AS IN THE EARLIER YEAR ALSO, SIMILAR ADDITION WAS CONFIRMED. 33. ARGUING VARIOUS GROUNDS OF APPEAL IN ASSESSMENT YEAR 2008-09, THE LD. A.R. SUBMITTED AS UNDER:- IN RESPECT OF 1 ST ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK LD. A.R. SUBMITTED THAT THE PHYSICAL INVENTORY MADE ON THE DATE OF SURVEY WAS NOT CORRECT AS FULL VALUATION OF FINISHED GOODS WAS DON E ON MRP INSTEAD OF COST PRICE AND IN THIS RESPECT, WE WERE TAKEN TO PAGE 132-144 WHER EIN COMPARATIVE STATEMENT OF VALUATION AS DONE BY SURVEY TEAM AND ASSESSEE WAS P LACED. LD. A.R. INVITED OUR ATTENTION TO VALUATION OF FINISHED GOODS AS PLACED IN PAPER BOOK PAGE 133 AND SUBMITTED THAT THE DEPARTMENT HAD VALUED THE INVENT ORY OF FINISHED GOODS AT RS.44,70,572/- ON THE BASIS OF MRP OF FINISHED GOOD S WHEREAS THE DEPARTMENT SHOULD HAVE TAKEN THE VALUE OF FINISHED GOODS AT RS.22,39, 758/- AFTER REDUCING THE DIFFERENCE BETWEEN MRP AND ACTUAL SALE VALUE WHICH IS AROUND 4 0% AND FURTHER GROSS PROFIT @ 16.5% SHOULD HAVE BEEN REDUCED. IN SUPPORT OF HIS ARGUMENTS WE WERE TAKEN TO PAPER BOOK PAGES 90,91,94-101,104 AND 105 WHEREIN THE PHY SICAL INVENTORY OF FINISHED GOODS WAS PLACED. LD. A.R. SUBMITTED THAT THE RATE S TAKEN AT THE TIME OF SURVEY WERE MRP PRICES AND THE SAME WERE TAKEN FROM THE POUCHES WHEREIN THE MATERIAL WERE PACKED. IN RESPECT OF RAW MATERIAL, LD. A.R. SUBMI TTED THAT IN RESPECT OF PRINTED PACKING ROLLS, INSTEAD OF 80 ROLLS THE SURVEY TEAM HAD RECORDED 800 ROLLS WHEREAS THE FACT REMAINS THAT THE ASSESSEE HAD PURCHASED ONLY 8 0 ROLLS AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAGE 125 OF THE PAPER BOOK WHERE A BILL FOR PACKING ROLLS OF 80 ROWS WAS PLACED. SIMILARLY, IT WAS SUBMITTED THAT THE DEPARTMENT HAD VALUED HEENG @ RS.25000/- PER KG. WHEREAS THE ACTUAL RATE WAS RS.4 50 PER KG. AND IN THIS RESPECT OUR ITA NO.170,986,987/DEL/2013 32 ATTENTION WAS INVITED TO PAPER BOOK PAGE 126 WHERE A COPY OF BILL OF HEENG INDICATING PRICE @ RS.450/- PER KG WAS PLACED. SIMILARLY, IT WAS SUBMITTED THAT ALL THE ITEMS OF RAW MATERIAL INCLUDING MASALA WERE WRONGLY VALUED. IT WAS FURTHER SUBMITTED THAT THE DEPARTMENT HAD TAKEN THE VALUE OF INVENTORY AMOUNTI NG TO RS.14,21,810/- WHICH DID NOT BELONG TO THE ASSESSEE AND RATHER IT RELATED TO SUNIT SHAH (HUF) WHICH WAS A DIFFERENT ASSESSEE. LD. A.R. INVITED OUR ATTENTION TO ANNEXURE ATTACHED WITH ASSESSMENT ORDER AND SUBMITTED THAT INVENTORY LAYIN G AT PREMISES C-13, WAS NOT VALUED AT ALL AT THE TIME OF SURVEY AND ASSESSING OFFICER HAS ESTIMATED THE SAME AT EXORBITANT VALUE AS COMPARED TO ITS ACTUAL VALUE AND IN THIS R ESPECT WE WERE TAKEN TO PAPER BOOK PAGE 114 TO 124 WHERE VALUATION OF SUCH INVENTORY A T MARKET PRICES AMOUNTING TO RS.3,51,920/- WAS PLACED. IN VIEW OF THESE SUBMISS IONS, IT WAS SUBMITTED THAT THE ASSESSEE HAD CORRECTLY VALUED CLOSING STOCK AS ON 3 1.03.2008 WHICH IS GIVING GP RATIO OF 16.5% WHICH IS IN LINE WITH THE EARLIER ASSESSME NT YEARS. 34. AS REGARDS GROUND NO.2, THE LD. A.R. SUBMITTED THAT THE ADDITION WAS MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE ON ACCOUNT OF PA YMENT OF SALARY AND WAGES AS PER ANNEXURE A-56 AND A-57. IT WAS SUBMITTED THAT THE SAME WERE RECORDED IN THE BOOKS OF ACCOUNT AND IN THIS RESPECT OUR ATTENTION WAS IN VITED TO PAPER BOOK PAGE 147-161, WHERE COPIES OF LEDGER ACCOUNT OF VARIOUS WORKERS W ERE PLACED. IT WAS SUBMITTED THAT AS IN EARLIER ASSESSMENT YEARS, THESE WERE RECORDED IN THE ACTUAL BOOKS OF ACCOUNTS AND WHICH MATCHED WITH THE ENTRIES RECORDED IN ANNEXURE S A-56 AND A-57 AND, THEREFORE, ADDITION CONFIRMED BY LD. CIT(A) IS NOT SUSTAINABLE . 35. AS REGARDS THE ADDITION ON ACCOUNT OF UNRECORDE D SALES, THE LD. A.R. SUBMITTED THAT THE TOTAL SALE CANNOT BE ADDED TO THE INCOME O F THE ASSESSEE AND ONLY THE NET PROFIT SHOULD HAVE BEEN ADDED. TO STRENGTHEN HIS ARGUMENT S, LD. A.R. RELIED UPON A NUMBER OF CASE LAWS WHICH INCLUDED THE FOLLOWING: I) 302 ITR 63 (GUJ.) CIT VS GURBACHAN SINGH J. JUNE JA II) 304 ITR 52 (MP) MANMOHAN SADAN VS CIT ITA NO.170,986,987/DEL/2013 33 III) 258 ITR 655 (GUJ.) CIT VS BALCHAND AJIT KUMAR IV) I.T.A.NO. 8028/2010 (GUJ.) CIT VS B R TEXTILES V) 201 ITR 608 CIT VS S. M. OMER (CAL.) 36. LD. A.R. SUBMITTED THAT IN THE ABOVE CASE LAWS VARIOUS HIGH COURTS HAS HELD THAT ONLY GROSS PROFIT OR NET PROFIT CAN BE ADDED T O THE INCOME OF THE ASSESSEE IN RESPECT OF UNRECORDED SALES. THEREFORE THE TOTAL ADDITION OF SALES WAS NOT WARRANTED. IT WAS FURTHER ARGUED THAT THE TOTAL SALES AS CALCULATED B Y THE DEPARTMENT WAS WRONG AS THE ACTUAL AMOUNT WAS RS.1,24,86,786/-. IN VIEW OF THE ABOVE, IT WAS ARGUED THAT THE ADDITION BE RESTRICTED TO NET PROFIT ON THE CORRECT UNACCOUNTED SALES. 37. ARGUING UPON THE ADDITION ON ACCOUNT OF EXPORT SALES, THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAD NOT MADE ANY EXPORT SALES AND IN FACT THE ASSESSEE HAD MADE CERTAIN SALES TO EXPORTERS WHO HAD EXPORTED THE GOO DS OF ASSESSEE ALONG-WITH OTHER GOODS. THE COPIES OF THE INVOICES RAISED BY THOSE EXPORTERS WERE IN THE POSSESSION OF THE ASSESSEE AS THESE WERE TO BE SUBMITTED TO THE S ALES TAX AUTHORITIES FOR CLAIMING EXEMPTION FROM SALES TAX ON ACCOUNT OF INDIRECT EXP ORT. TO STRENGTHEN HIS ARGUMENT, THE LD. A.R. TOOK US O PAGE 268-271 WHERE COPIES OF INVOICES RAISED BY M/S. SHUBH IMPEX, M/S. RAM SWAROOP SUNIL KUMAR RICE MILLS WERE PLACED. IT WAS SUBMITTED THAT THESE BILLS WERE RAISED BY DIFFERENT PARTIES AS IS APPARENT FROM THE COPIES OF INVOICES AND THEY WERE IN THE POSSESSION OF THE ASSESSEE ONL Y FOR THE PURPOSE OF CLAIMING SALES TAX EXEMPTION ON ACCOUNT OF BEING OF INDIRECT EXPOR T. THEREFORE, IT WAS SUBMITTED THAT THE ADDITION ON ACCOUNT OF EXPORT SALES WAS NOT WAR RANTED. 38. AS REGARDS ADDITION ON ACCOUNT OF GIFTS RECEIVE D FROM TWO CLOSE RELATIVES, THE LD. A.R. SUBMITTED THAT THE GIFTS WERE RECEIVED FRO M THE REAL SISTERS OF THE ASSESSEE AND WHICH WAS RECEIVED FROM ABROAD IN US DOLLARS CONVER TED INTO INDIAN RUPEES. IT WAS FURTHER SUBMITTED THAT DONOR WERE REAL SISTERS OF T HE ASSESSEE WHO HAD BEEN LIVING IN USA FOR THE LAST SO MANY YEARS AND DONORS HAD FILED NECESSARY CONFIRMATIONS IN THE ITA NO.170,986,987/DEL/2013 34 FORM OF GIFT DEEDS AND OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 232A AND 232B. WITHOUT PREJUDICE TO THE ABOVE, IT WAS SUBMITTED TH AT IN CASE GIFTS ARE NOT CONSIDERED AS GENUINE GIFTS, THE ASSESSEE SHOULD BE PROVIDED B ENEFIT OF TELESCOPING AS VARIOUS ADDITIONS WERE MADE BY ASSESSING OFFICER ON ACCOUNT OF UNRECORDED SALES AND EXPENSES AND IN THIS RESPECT, RELIANCE WAS PLACED O N THE FOLLOWING CASE LAWS: I) ANANTHARAM VEERASINGHAIAH & CO. VS CIT 123 ITR 4 57 II) CIT VS TYARYAMAL BALCHAND 165 ITR 453 III) CIT VS K.S.M. GURUSWAMY NADARAND SONS 149 ITR 127 39. LD. D.R. ON THE OTHER HAND, IN RESPECT OF UNACC OUNTED PAYMENT ON ACCOUNT OF SALARY AND WAGES SUBMITTED THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE PAYMENTS RECORDED IN THE IMPOUNDED DOCUMETNS WITH THE BOOKS OF ACCOUNT EVEN DURING REMAND PROCEEDINGS AND, THEREFORE, LD. CIT(A) HAS RIGHTLY UPHELD THE ADDITION. IN RESPECT OF GROUND NO.2 IN ASSESSMENT YEAR 2007-08, LD. D.R. SU BMITTED THAT THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE FOR VARIOUS ITEM S ARE MADE ON THE BASIS OF ENTRIES NOTED IN IMPOUNDED DOCUMENTS AND THE ASSESSEE CANNO T TAKE THE GROUND THAT THE ENTRIES NOTED IN ANNEXURE A-58 BELONGED TO SOME OTH ER ASSESSEE AS THE DOCUMENTS WERE IMPOUNDED FROM THE PREMISES OF ASSESSEE. IN R ESPECT OF UNACCOUNTED PURCHASES AS RECORDED IN ANNEXURE A-62, THE LD. D.R. HEAVILY RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND ARGUED THAT ASSESSEE COULD NO T CORRELATED ENTRIES RECORDED IN ANNEXURE A-62 WITH ENTRIES IN THE BOOKS OF ACCOUNTS . WITH REGARD TO GIFTS RECEIVED BY THE ASSESSEE, THE LD. D.R. SUBMITTED THAT THE GENUI NENESS AND CREDITWORTHINESS OF THE GIFT WAS NOT PROVED. SIMILARLY, WITH RESPECT TO AD DITION ON ACCOUNT OF UNSECURED LOANS, THE LD. D.R. SUBMITTED THAT THERE WERE ENTRIES OF C ASH DEPOSITED IN THE ACCOUNT OF SMT. SAVITRI SHAH, WIFE OF THE ASSESSEE, WHICH WERE NOT EXPLAINED AND THEREFORE, ADDITION WAS RIGHTLY UPHELD BY LD. CIT(A). REPLYING TO ADDI TION ON ACCOUNT OF DISALLOWANCE OF EXPENSES ON ACCOUNT OF PERSONAL USE, LD. D.R. SUBMI TTED THAT THE NATURE OF EXPENSES ITA NO.170,986,987/DEL/2013 35 ITSELF SHOWS THAT THERE MUST HAVE BEEN SOME ELEMENT OF PERSONAL NATURE AND THE ASSESSING OFFICER HAD DISALLOWED A REASONABLE AMOUN T FOR PERSONAL USE. 40. ARGUING IN RESPECT OF ASSESSMENT YEAR 2008-09 L D. D.R. SUBMITTED THAT ADDITION ON ACCOUNT OF DIFFERENCE IN CLOSING STOCK, WAS MADE ON THE BASIS OF PHYSICAL STOCK TAKING AND RATES WERE APPLIED IN CONSULTATION WITH THE REPRESENTATIVES OF THE ASSESSEE AND THEREFORE, ASSESSEE CANNOT RAISE THE PLEA THAT MRP RATES WERE APPLIED. 40.1 IT WAS SUBMITTED THAT AT THIS STAGE ASSESSEE C ANNOT RAISE A PLEA THAT A PART OF STOCK INVENTORY BELONGED TO ANOTHER GROUP FIRM. HE FURTHER ARGUED THAT A PART OF STOCK INVENTORY WAS ESTIMATED AS ASSESSEE HAD NOT PROVIDE D NECESSARY DETAILS. AS REGARDS THE ADDITION ON ACCOUNT OF UNRECORDED SALES, LD. D.R. S UBMITTED THAT THE ASSESSEE HIMSELF HAD AGREED THAT THERE WERE UNRECORDED SALES AND, TH EREFORE, THE ASSESSING OFFICER HAD RIGHTLY MADE THE ADDITION. THE ARGUMENT OF LD. A.R. THAT ONLY GROSS PROFIT SHOULD BE APPLIED IS NOT CORRECT AS THE ENTIRE SALES WERE FOU ND TO BE UNRECORDED. AS REGARDS THE ADDITION ON ACCOUNT OF EXPORT TURNOVER, LD. D.R. HE AVILY RELIED UPON THE ORDERS OF AUTHORITIES BELOW. SIMILARLY, IN RESPECT OF ADDITI ON ON ACCOUNT OF GIFTS, THE LD. D.R. SUBMITTED THAT GENUINENESS AND CREDITWORTHINESS OF THE DONORS WAS NOT PROVED. 41. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL P[LACED ON RECORD. WE FIRST TAKE UP ASSESSMENT YEAR 2007-08: GROUNDS NO.1 & 1.1 OF THE APPEAL RELATE TO ADDITION ON ACCOUNT OF UNEXPLAINED EXPEND ITURE RECORDED IN ANNEXURE A-56. LD. A.R. HAD TRIED TO EXPLAIN THAT THE ENTRIES RECO RDED IN THE ANNEXURE A-56 WERE ALSO RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AN D FOR THIS PURPOSE, HE HAD TAKEN US TO PAPER BOOK PAGE 74-80 TO HIGHLIGHT THE ACCOUNT O F WORKERS WHERE SUCH PAYMENTS WERE RECORDED. WE HAVE GONE THROUGH THE SUNDRY DEB TORS ACCOUNT IN THE ACCOUNT BOOKS OF THE ASSESSEE AND EXAMINED THEM WITH REFERE NCE TO ENTRIES RECORDED IN ANNEXURE A-56 AND FIND THAT A NUMBER OF ENTRIES AS RECORDED IN ANNEXURE A-56 WERE FOUND RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSES SEE. IN THIS RESPECT, PAPER BOOK PAGE 55 IS RELEVANT WHERE LD. A.R. HAD CORRELATED T HE ENTRIES NOTED IN THE ANNEXURE A- ITA NO.170,986,987/DEL/2013 36 56 AND IN THE BOOKS OF ACCOUNT. IN OUR OPINION, TH E FINDING ON THIS GROUND REQUIRE RE- EXAMINATION ON THE PART OF THE ASSESSING OFFICER WH O SHOULD GO THROUGH THE ENTRIES RECORDED IN THE ANNEXURE A-56 ALONG WITH THOSE RECO RDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND IF THE ENTRIES RECORDED IN THE DIA RY MATCH WITH THE ENTRIES RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THEN HE SHOUL D DELETE THE SAME. IN VIEW OF THE ABOVE, GROUND NO.1 IS REMANDED BACK TO THE OFFICE O F THE ASSESSING OFFICER FOR READJUDICATION WHO ON THE BASIS OF ENTRIES RECORDED IN THE DIARY AND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WILL DECIDE THE ISSUE AFRES H AS PER LAW. NEEDLESS TO SAY THAT NECESSARY OPPORTUNITY WILL BE PROVIDED TO THE ASSES SEE OF BEING HEARD. 42. GROUND NO.2 RELATES TO ADDITION OF RS.50,810/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE FOR PURCHASE OF VARIOUS ITEMS AS PER NO TING ON ANNEXURE A-58. THE ARGUMENT OF LD. A.R. THAT THE ENTRIES BELONG TO ANO THER BUSINESS OWNED BY MR. ANKIT SHAH, SON OF THE ASSESSEE HAS NO FORCE AS NO EVIDEN CE WAS FILED AS TO WHETHER SEPARATE BUSINESS WAS BEING RUN BY THE SON OF THE ASSESSEE F ROM THE SAME PREMISES,, THEREFORE, GROUND NO.2 IS DISMISSED. 43. IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED THE UPHOLDING OF ADDITION OF RS.38,87,917/- ON ACCOUNT OF UNEXPLAINED EXPENDITUR E / PURCHASES ON THE BASIS OF NOTING ON ANNEXURE A-62. LD. A.R. HAS ARGUED THAT THESE PURCHASES WERE DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF THE AS SESSEE AND RATHER PAYMENTS WERE ALSO MADE THROUGH CHEQUES AND IN THIS RESPECT, WE W ERE TAKEN TO PAPER BOOK PAGE 276 WHERE INVOICE OF RS.48,862/- WAS PLACED. OUR ATTEN TION WAS ALSO INVITED TO A NOTINGS ON THE PURCHASE BILL WHERE IT WAS MENTIONED THAT PA YMENT WAS MADE THROUGH CHEQUE. SIMILARLY, WE WERE TAKEN TO PAPER BOOK PAGES 277, 2 80, 281 TO 308 WHERE VARIOUS BILLS WERE PLACED AND LD. A.R. CLAIMED THAT THE PAYMENTS FOR THESE BILLS WERE MADE BY CHEQUES AND THE SAME WERE DULY RECORDED IN THE BOOK S OF ACCOUNT AND, THEREFORE, ADDITION ON ACCOUNT OF HAVING BEEN FOUND IN DIARY S HOULD NOT HAVE BEEN MADE AS THE SAME WERE ALSO RECORDED IN THE BOOKS OF ACCOUNTS. OUR ATTENTION WAS INVITED TO PAPER BOOK PAGES 243-275 WHERE COPIES OF MORE INVOICES WE RE ALSO PLACED AND IT WAS ARGUED ITA NO.170,986,987/DEL/2013 37 BY LD. A.R. THAT PAYMENTS OF THESE INVOICES WERE MA DE BY CHEQUES AND THEREFORE, THESE WERE RECORDED IN THE BOOKS OF ACCOUNTS. WITH OUT PREJUDICE TO THE ABOVE, LD. A.R. HAS ARGUED THAT A PART OF TOTAL AMOUNT ADDED B Y THE ASSESSING OFFICER RELATES TO ASSESSMENT YEAR 2008-09 WHICH CANNOT BE ADDED IN AS SESSMENT YEAR 2007-08 AND IN THIS RESPECT, OUR ATTENTION IS INVITED TO PAPER BOO K PAGE 57 WHEREIN ENTRIES RELATING TO TWO YEARS WAS FOUND PLACED. WE FIND THAT THERE IS A MENTION OF PAYMENT OF THESE BILLS BY CHEQUE, THEREFORE, THIS ASPECT NEEDS TO BE READJ UDICATED BY THE ASSESSING OFFICER WHO ON THE BASIS OF ENTRIES RECORDED IN THE REGULAR BOOKS OF ACCOUNT SHOULD COMPARE THE ENTRIES AS NOTED IN ANNEXURE A-62 WITH THE BOOK S OF ACCOUNTS AND SHOULD DELETE THE AMOUNT OF ENTRIES FOUND RECORDED IN THE BOOKS O F ACCOUNTS OF THE ASSESSEE. THE ASSESSING OFFICER SHOULD ALSO DELETE THE ADDITION F OR ENTRIES RELATING TO ASSESSMENT YEAR 2008-09. NEEDLESS TO SAY THAT ASSESSEE WILL B E PROVIDED A REASONABLE OPPORTUNITY OF BEING HEARD. IN VIEW OF THE ABOVE, GROUND NO.3 ALLOWED FOR STATISTICAL PURPOSES. 44. GROUND NO.4 RELATES TO ADDITION ON ACCOUNT OF G IFTS RECEIVED FROM TWO RELATIVES. WE FIND THAT AN AMOUNT OF RS.2,22,177/- WAS RECEIVE D BY THE ASSESSEE ON ACCOUNT OF GIFT OF US$5,000 FROM SISTER OF THE ASSESSEE. THE DONOR HAD MADE GIFT DEED WHICH IS PLACED AT PAPER BOOK PAGE 313 AND WHICH WAS FOUND A ND IMPOUNDED DURING SURVEY PROCEEDINGS. THE AMOUNT OF THE SAID GIFT WAS RECEI VED THROUGH BANKING CHANNELS AND EXISTENCE OF NATURAL LOVE AND AFFECTION BETWEEN BRO THER AND SISTER CANNOT BE DENIED. LD. CIT(A) HAS CONFIRMED THE ADDITION BY HOLDING TH AT THE ASSESSEE WAS NOT ABLE TO ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUIN ENESS OF TRANSACTION AS THE ASSESSEE HAD NOT FILED COPY OF BANK ACCOUNTS AND INCOME TAX RETURN OF HIS SISTER. HOWEVER, WE FIND THAT AS GIFT WAS RECEIVED IN FOREIGN EXCHANGE THROUGH BANKING CHANNEL AND IN THE GIFT DEED, MRS. NEELAM PATEL, THE DONOR HAD STATED THAT SHE IS REAL SISTER OF THE DONEE THE ADDITION ON THIS ACCOUNT IS NOT JUSTIFIED. MOR EOVER, THE GIFT DEED WAS IMPOUNDED DURING SURVEY AND THEREFORE CANNOT BE SAID TO BE AF TERTHOUGHT. THEREFORE, WE HOLD THAT THE ACTION OF LD. CIT(A) IS NOT CORRECT AND WE DIRE CT THE ASSESSING OFFICER TO DELETE THE ADDITION ON THIS ACCOUNT. ITA NO.170,986,987/DEL/2013 38 45. AS REGARDS GIFT BY MR. SUNIL KUMAR, WE FIND THA T HE HAD SOLD ONE PLOT FOR RS.7 LACS AND HAD MADE THE GIFT OUT OF SUCH PROCEEDS. L D. CIT(A) HAS HELD THAT SALE PROCEEDS WERE CREDITED IN HIS BANK ACCOUNT ON 06.09 .2006 AND HE HAD WITHDRAWN THE AMOUNT OF RS.7 LACS ON 09.09.2006 ITSELF, THEREFORE , GIFT OF RS.5 LACS MADE ON 26.09.2006 CANNOT BE RELATED TO SALE PROCEEDS. HOW EVER, WE FIND FROM THE COPY OF BANK ACCOUNT OF SHRI SUNIL KUMAR, PLACED AT PAGE 32 8, THAT LD. CIT(A) IS CORRECT TO THE EXTENT THAT ON 09.09.2006, THE AMOUNT OF RS.7 L ACS WAS WITHDRAWN BY MR. SUNIL KUMAR IN THE FORM OF A LOOSE CHEQUE. HOWEVER, WE F IND THAT ON 21.09.2006, RS.7 LACS WAS AGAIN CREDITED TO THE ACCOUNT AND ON 28.09.2006 , THE GIFT OF RS.5 LACS WAS MADE, THEREFORE WE FIND THAT THE GIFT OF RS.5 LACS IS ALS O PROVED AND THEREFORE, ASSESSING OFFICER IS DIRECTED TO DELETE THIS ADDITION ALSO. IN VIEW OF THE ABOVE, GROUND NO.4 IS ALLOWED. 46. GROUND NO.5 RELATES TO ADDITION ON ACCOUNT OF U NSECURED LOAN OF RS.1,75,000/- RECEIVED FROM WIFE OF THE ASSESSEE. IN THIS SREGARD , LD. CIT(A) HAD CONFIRMED THE ADDITION BY HOLDING THAT THERE WERE CERTAIN DEPOSIT S OF CASH ON 15,09.2006, 21.09.2006, 04.04.2006, 18.04.2006 AND 12.12.2006. FROM THE COPY OF BANK ACCOUNT OF SMT. SAVTRI SHAH PLACED AT PAPER BOOK PAGES 332- 335 WE FIND THAT BEFORE ISSUING THE CHEQUE TO ASSESSEE ON 28.02.2007, THE ACCOUNT O F THE ASSESSEE WAS CREDITED WITH THE AMOUNT OF RS.25,000/- AND RS.1.50 LACS OUT OF W HICH RS.25000 WAS ONLY IN CASH AND RS.1.50 LACS WAS ON ACCOUNT OF DEPOSITS OTHER T HAN CASH. THUS ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF UNSECURED LOAN S RECEIVED THROUGH BANKING CHANNEL FROM WIFE OF THE ASSESSEE IS NOT JUSTIFIED ESPECIALLY KEEPING IN VIEW THE FACT THAT BEFORE ISSUING OF CHEQUE TO ASSESSEE, SUBSTANT IAL AMOUNT WAS CREDITED IN THE ACCOUNT OF HIS WIFE BY CHEQUE AND NOT BY CASH. IN VIEW OF THE ABOVE UNSECURED LOAN IS DULY EXPLAINED AND, THEREFORE, GROUND NO.5 IS ALLOW ED. 47. AS REGARDS VALUATION OF FINISHED GOODS, THE ARG UMENT OF LD. A.R. IS FOUR FOLD ONE OF WHICH BEING THAT A PART OF STOCK DID NOT BEL ONG TO ASSESSEE ITSELF AND SECONDLY STOCK WAS VALUED BY SURVEY TEAM AT MRP PRICES AND T HIRDLY A PART OF STOCK LYING AT C- ITA NO.170,986,987/DEL/2013 39 13, INDRA PARK WAS NOT VALUED AT THE TIME OF SURVEY AND ASSESSING OFFICER HAS ESTIMATED THE SAME WITHOUT ANY BASIS AND ON THE BAS IS OF ASSUMPTIONS ONLY. FOURTHLY, LD. A.R. HAD ARGUED THAT PART OF RAW MATERIAL WAS V ALUED AT EXORBITANT RATES AS COMPARED TO ACTUAL RATES AND FURTHER 800 PACKING RO LLS WERE TAKEN INSTEAD OF 80 ROLLS. WITH RESPECTS TO FIRST ARGUMENT AT THIS STAGE OF PR OCEEDINGS, THE ARGUMENT OF LD. A.R. THAT PART OF STOCK BELONGED TO ANOTHER FIRM, CANNOT BE SUBSTANTIATED AS THE STOCK WAS PHYSICALLY AT THE PREMISES OF THE ASSESSEE THEREFOR E, THIS PAT OF CONTENTION OF LD. A.R. IS REJECTED. AS REGARDS THE VALUATION OF STOCK OF MARKET PRICES WE FIND THAT VALUATION OF FINISHED GOODS WAS DONE AT MARKET PRICES AS IS E VIDENT FROM PARA 10 OF THE REMAND REPORT OF THE ASSESSING OFFICER PLACED AT PAPER BOO K PAGE 12 ONWARDS. FOR THE SAKE OF CONVENIENCE, PARA 10 OF THE REMAND REPORT IS REPROD UCED BELOW: AS FAR AS VALUATION OF FINISHED GOODS IS CONCERNED , THE SURVEY PARTY RESORTED THE VALUE OF FINISHED GOODS AT MRP WHEREVER AVAILAB LE BUT THE ASSESSEE FAILED TO FURNISH THE COST /MARKET PRICE OF THE SAID STOCK. IT IS WORTH TO MENTION THAT WHILE PASSING THE ASSESSMENT ORDER IN ORDER TO MEET BOTH THE ENDS OF JUSTICE, THE VALUE OF SUCH STOCK HAS BEEN FURTHER ADJUSTED SO AS TO AR RIVE AT THE VALUE OF THE SAME AS ON 31.03.2008. THEREFORE, THE CONTENTION OF THE ASSESSEE DESERVES TO BE EVALUATED IN THE LIGHT OF OVER ALL FACTS AND CIRCUM STANCES OF THE CASE AND PERUSAL OF MATERIAL AVAILABLE ON RECORD. 48. FROM THE ABOVE PARA, WE UNDERSTAND THAT THE ASS ESSING OFFICER ADMITTED THAT THE VALUE OF THE FINISHED GOODS WAS DONE AT MRP PRICES, THEREFORE, THE SAME NEEDS TO BE BROUGHT DOWN TO COST PRICE. WE FIND THAT THE ASSES SEE HAD DECLARED GP @ 16.50%, THEREFORE, WE ARE OF THE OPINION THAT AN AMOUNT EQU IVALENT TO 16.50% OF FINISHED GOODS NEEDS TO BE REDUCED FROM THE STOCK OF FINISHED GOOD S. THE THIRD PART OF ARGUMENT THAT STOCK LYING AT C-13, INDRA PARK WAS NOT VALUED AT T HE TIME OF SURVEY, WE FIND MERIT IN THE ARGUMENT OF LD. A.R. AS THIS FACT IS CLEAR FROM THE ASSESSMENT ORDER WHERE ASSESSING OFFICER HAS MENTIONED THIS FACT ON THE AN NEXURE FORMING PART OF ASSESSMENT ORDER. THE ASSESSING OFFICER HAS MENTIONED THAT VA LUATION WAS NOT PROVIDED BY ITA NO.170,986,987/DEL/2013 40 ASSESSEE THEREFORE, HE HAD ESTIMATED THE SAME. HOW EVER FORM PAPER BOOK PAGES 114 TO 124, WE FIND THAT ASSESSEE HAS PROVIDED VALUATIO N OF STOCK AT MRP PRICES AT RS.3,51,920/- WHEREAS ASSESSING OFFICER HAS ESTIMAT ED THE SAME AT RS.17,50,000/-. DURING REMAND PROCEEDINGS, THE ASSESSING OFFICER HA D NOT ACCEPTED THIS ARGUMENT OF ASSESSEE BY HOLDING HIS OBSERVATIONS AS PER PARA 12 OF REMAND REPORT WHICH IS REPRODUCED BELOW: THE SUBMISSION OF THE ASSESSEE IS FAR FROM A TRUE AND PROPER APPRECIATION OF THE PRICING OF THE STOCK FOUND AT C-13, CHANDER NAG AR, DELHI. IT IS TRUE THAT THE SURVEY TEAM HAD NOT MENTIONED THE GROSS AMOUNT OF A PARTICULAR PRODUCT BUT THE ASSESSEE HAS TRIED TO MISLEAD THE APPELLATE AUTHORI TY BY MULTIPLYING WITH THE MRP OF A PARTICULAR ITEM WITH THE SAID 'QUANTITY'. THE ACTUAL FACT THAT THE SAID NOTED 'QUANTITY' WAS NOT OF INDIVIDUAL POUCHES; RAT HER THAT OF THAT OF THE PACKAGED BOXES CONTAINING 10 TO 20 PACKINGS OF THE INDIVIDUAL POUCHES. THERE COULD NOT HAVE BEEN SUCH AN EXTENSIVE AND LENGTHY . EXERCISE TO COUNT LOOSE POUCHES NUMBERING ONE TO HUNDREDS OF HUNDREDS OF VA RIETY. THEREFORE THE ASSESSEE'S VALUATION IS FOR NUMBER OF POUCHES INSTE AD OF BOXES. THE ASSESSEE HAS GIVEN A PRICING OF RS. 2,05,697/-, FOR POUCH-COUNT WHEREAS THE FIGURE OF THE COSTING OF THE ACTUAL STOCK COMES TO RS. 20,56,970/ - EVEN IF THE ASSESSEE'S VALUATION IS CONSIDERED AND; IN AN HYPOTHETICAL SIT UATION IT IS ADMITTED THAT THERE WERE NOT MORE THAN 10 POUCHES IN A CARTOON. THEREFO RE, THE ESTIMATION OF THE STOCK AT RS. 17,50,000/- WAS NEITHER ARBITRARY NOR AGAINST THE ASSESSEE. THE CONTENTION OF THE ASSESSEE IS THEREFORE, LIABLE TO BE REJECTED. 48.1 FROM THE ABOVE OBSERVATIONS WE FIND THAT ASSES SING OFFICER HAS CLAIMED THAT STOCK VALUATION AS DONE BY ASSESSEE WAS FOR INDIVID UAL ITEMS BUT IN FACT, THE INVENTORY INCLUDED PACKINGS WHEREIN 10 TO 20 PACKINGS WERE FO UND. HOWEVER, FROM THE STOCK INVENTORY PLACED AT THE PAPER BOOK PAGE 114-124, WE FIND THAT QUANTITY OF EACH ITEM ALONG WITH PACKING WAS SPECIFIED, THEREFORE, CONTEN TION OF LD. A.R. HAS FORCE. HOWEVER, THE OBSERVATION OF ASSESSING OFFICER IS TH AT THESE ITEMS LISTED AT PAGE 114 TO 124 WERE PACKINGS CONTAINING 10 TO 20 PACKINGS IN E ACH. FROM STOCK INVENTORY PLACED AT PAPER BOOK PAGE 114 TO 124, THE POSITON C LAIMED BY ASSESSING OFFICER DOES ITA NO.170,986,987/DEL/2013 41 NOT SEEM TO BE CORRECT HOWEVER THE VERIFICATION OF PHYSICAL STOCK TO ARRIVE AT THE TRUTH IS NOT POSSIBLE AT THIS STAGE THEREFORE, TO GIVE JU STICE TO BOTH PARTIES, WE ARE OF THE OPINION THAT AVERAGE OF TWO VALUES BE TAKEN TO ARRI VE AT THE VALUE OF STOCK AT MRP PRICES LYING AT C-13, CHANDER NAGAR, DELHI. THE AV ERAGE OF THESE VALUES COMES OUT AT RS.10,50,960/-. 48.2 THE OTHER MAJOR ITEM OF DISPUTE IS IN VALUATIO N OF PRINTED PACKING ROLL WHICH THE REVENUE HAS VALUED AT RS.16 LACS AND ASSESSEE HAS V ALUED AT RS.1,14,291/- BASED UPON A BILL OF 80 ROLLS. THE CONTENTION OF LD. A.R. THA T SINCE BILL WAS FOR 80 ROLLS ONLY THERE CANNOT BE 800 ROLLS, IS NOT ACCEPTABLE AS THE STOCK PURCHASED OUT OF BOOKS AND FOUND PHYSICALLY AT THE TIME OF SURVEY CANNOT BE SAID TO BE FORMING PART OF BILL AND THEREFORE, WE REJECT THE CONTENTION OF LD. A.R. TO VALUE THE P ACKING ROLLS AT 80 ONLY INSTEAD OF 800 AND MOREOVER THE REPRESENTATIVE OF ASSESSEE HAD SIGNED FOR 800 ROLLS. THEREFORE, WE TAKE THE QUANTITY AT 800 ROLLS AND VALUE THE SAM E AT RS.,11,42,910/- ON THE BASIS OF BILL OF 80 ROLLS. THEREFORE, INSTEAD OF RS.16 LACS ADOPTED BY REVENUE THE VALUE IS TO BE TAKEN AT RS.11,42,9210/-. 48.3 AS REGARDS DISPUTE WITH RESPECT TO OTHER MATER IALS, WE FIND THAT REVENUE HAD VALUED HEENG @ RS.25,000/- PER KG. WHEREAS ASSESSEE HAD VALUED THE SAME AT THE RATE OF RS.450/- PER KG. PLUS TAXES ON THE BASIS OF ACTUAL PURCHASE BILL PLACED AT PAPER BOOK PAGE 126. THE PRICE ASSUMED BY DEPARTMENT IS EXORBITANT AND CANNOT BE ACCEPTED. MOREOVER, SINCE THE ASSESSEE HAD RECORDE D IN HIS BOOKS. THE PURCHASE OF HEENG @ RS.450/- PER KG. ONLY, THE CLOSING STOCK WI LL HAVE TO BE VALUED AT COST PRICE. THE ASSESSE HAS HOWEVER VALUED AT RS.500/- PER KG. SIMILARLY, WE OBSERVE THAT DEPARTMENT HAS VALUED MASALA AT THE RATE OF RS.200 PER KG AS IS APPARENT FROM PAPER BOOK PAGE 105 WHEREAS, THE COST PRICE OF ASSESSEE R ANGED FROM RS.30/- TO RS.52/- PER KG PLUS TAXES AS IS APPARENT FROM PAPER BOOK PAGES 128 & 129, THEREFORE, AT BEST THIS ITEM CAN BE VALUED AT AVERAGE PRICE WHICH COMES OUT AT RS.45/- PER KG. . THEREFORE, IN VIEW OF THE ABOVE DISCUSSIONS, THE ADDITION ON ACCO UNT OF DIFFERENCE IN STOCK IS TO BE ITA NO.170,986,987/DEL/2013 42 REDUCED BY RS.28,55,280/- BY REDUCING THE VALUATION DONE BY REVENUE AS PER DETAILS BELOW: A) FOR GROSS PROFIT ELEMENT INCLUDED IN FINISHED GOO DS; OUT OF FINISHED GOODS RS.44,70,572/- OUT OF FINISHED GOODS CLAIMED TO BE BELONGING TO ANOTHER FIRM RS.14,21,810/- AVERAGE OF ESTIMATED STOCK OF FINISHED GOODS (17,50,000+3,51,920) RS.10,50,960/ - RS.69,43,342/- ASSESSEE TO GET RELIEF AT THE RATE OF 16.50% G.P. ON ABOVE RS.11,45,651/- B) FOR DIFFERENCE ON ACCOUNT OF ESTIMATED STOCK (17,50,000 10,50,960) RS.06,99,040/- C) FOR DIFFERENCE IN PRICE PACKING ROLL (16,00,000 11,42,910) RS.04,57,090/- D) FOR DIFFERENCE IN VALUATION OF HEENG 15 KG. @ (RS.25,000/--450) RS.03,67,500/- E) FOR DIFFERENCE IN VALUATION OF MASALA 1200 KG. @ (200-42) RS.01,86,000/- TOTAL RS.28,55,281/- 48.4 THE TOTAL ADDITION CONFIRMED BY LD. CIT(A) ON ACCOUNT OF DIFFERENCE IN STOCK WAS RS.67,43,125/- THEREFORE, AFTER CONSIDERING ABO VE RELIEF THE ADDITION ON ACCOUNT OF DIFFERENCE IN STOCK IS CONFIRMED FOR RS.38,87,845/- . IN VIEW OF THE ABOVE GROUND NO.1 IS PARTLY ALLOWED. 49. GROUND NO.2 RELATES TO ADDITION ON ACCOUNT OF U NEXPLAINED EXPENDITURE WHICH IS SIMILAR TO GROUND NO.1 IN ASSESSMENT YEAR 2007-08. SINCE, WE HAVE RESTORED THE ABOVE ISSUE TO THE ASSESSING OFFICER IN ASSESSMENT YEAR 2 007-08, THE SAME IN THIS YEAR ALSO NEEDS TO BE READJUDICATED BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. 50. GROUND NO.3 RELATES TO ADDITION ON ACCOUNT OF U NRECORDED SALES. THE ASSESSING OFFICER HAD ORIGINALLY MADE ADDITION OF RS.1,63,89 ,335/- WHEREAS LD. CIT(A) HAD CONFIRMED THE ADDITION FOR AN AMOUNT OF RS.1,49,38, 385/- IN VIEW OF THE UNEXPLAINED ITA NO.170,986,987/DEL/2013 43 EXPENDITURE OF RS.14,50,950/- WHICH THE LD. CIT(A) HAD REDUCED FROM TURNOVER AS HE HAD CONFIRMED THE ADDITION ON ACCOUNT OF EXPENSES S EPARATELY. LD. A.R. RELIED UPON A NUMBER OF CASE LAW FOR THE PROPOSITION THAT ENTIRE SALES CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE AND ONLY NET PROFIT OR GROSS PROFIT AS THE CASE MAY BE, CAN BE ADDED. WE AGREE WITH THE PROPOSITION OF THE LD. A.R. AS TH E SAME HAS BEEN HELD IN VARIOUS CASE LAWS, DECIDED BY VARIOUS HON'BLE HIGH COURTS A ND IN THIS RESPECT, THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS PRESIDENT INDUSTRIES, 258 ITR 655 HAS HELD AS UNDER: HAVING PERUSED THE ASSESSMENT ORDER MADE BY THE AS SESSING OFFICER, THE ORDER MADE BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AN D THE INCOME-TAX APPELLATE TRIBUNAL, WE ARE SATISFIED THAT THE TRIB UNAL WAS JUSTIFIED IN REJECTING THE APPLICATION U/S 256(1). IT CANNOT BE MATTER OF AN ARGUMENT THAT THE AMOUNT OF SALES BY ITSELF CANNOT REPRESENT THE INCOME OF T HE ASSESSEE WHO HAS NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENTED TH E PRICE RECEIVED BY THE SELLER OF THE GOODS FOR THE ACQUISITION OF WHICH IT HAS AL READY INCURRED THE COST. IT IS THE REALIZATION OF EXCESS OVER THE COST INCURRED TH ATS ONLY FORMS PART OF THE PROFIT INCLUDED IN THE CONSIDERATION OF SALES. THE REFORE, UNLESS THERE IS A FINDING TO THE EFFECT THAT INVESTMENT BY WAY OF INCURRING T HE COST IN ACQUIRING THE GOODS WHICH HAVE BEEN SOLD HAS BEEN MADE BY THE ASSESSEE AND THAT HAS ALSO NOT BEEN DISCLOSED IN THE ABSENCE OF SUCH FINDING OF FACT TH E QUESTION WHETHER THE ENTIRE SUM OF UNDISCLOSED SALE PROCEEDS CAN BE TREATED AS INCOME OF THE RELEVANT ASSESSMENT YEAR ANSWERS BY ITSELF IN THE NEGATIVE. THE RECORD GOES TO SHOW THAT THERE IS NO FINDING NOR ANY MATERIAL HAS BEEN REFER RED ABOUT THE SUPPRESSION OF INVESTMENT IN ACQUIRING THE GOODS WHICH HAVE BEEN F OUND SUBJECTS TO UNDISCLOSED SALES. 51. SIMILARLY, HON'BLE GUJARAT HIGH COURT IN THE CA SE OF CIT VS GURBACHAN SINGH J JUNEJA 302 ITR 63, HAS HELD AS UNDER: THE REVENUE BEING AGGRIEVED WITH THE ORDER OR COMM ISSIONER (APPEALS) CARRIED THE MATTER BEFORE HT TRIBUNAL. AT THE TIME OF HEARING THERE WAS A DIFFERENCE OF OPINION BETWEEN THE TWO MEMBERS OF TH E TRIBUNAL. ULTIMATELY, THE MATTER WAS REFERRED TO A THIRD MEMBER OF THE TRIBUN AL, WHO AGREED WITH THE ITA NO.170,986,987/DEL/2013 44 VIEW ADOPTED BY THE ACCOUNTANT MEMBER. THE TRIBUNA L HELD THATS THE ASSESSEE COULD NOT BE TAXED ON THE ENTIRE AMOUNT OF RS.10,85 ,003/-, BUT WAS LIABLE TO BE TAXED ONLY ON THE GROSS PROFIT EARNED ON THE SAID S ALES. THE BASIS OF THIS FINDING IS THE FACT THAT ALL THE PURCHASE ARE FROM REPUTED COMPANIES AND/OR THEIR DEALERS AND SUCH PURCHASES ARE FULLY VOUCHED. HEARD MR. B B NAIK, LEARNED STANDING COUNSEL FOR T HE APPLICANT. REVENUE AND MR. M.J. SHAH, LEARNED ADVOCATE FOR THE RESPONDENT- ASSESSEE. MR. NAIK HAS NOT BEEN ABLE TO DISLODGE THE FINDINGS RECORDED BY THE TRIBUNAL THAT THE REVENUE HAD NOT PROVED, BY BRINGING ANY MA TERIAL ON RECORD, THAT THE ASSESSEE HAD MADE ANY INVESTMENT TO MAKE THE ALLEGE D UNACCOUNTED SALES. HENCE, IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THAT THERE WAS ANY UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE WHI CH WAS REFLECTED BY THE ALLEGED UNACCOUNTED SALES THE FINDING OF THE TRIBU NAL THAT ONLY THE GROSS PROFIT ON THE SAID AMOUNT CAN BE BROUGHT TO TAX DOES NOT C ALL FOR ANY INTERFERENCE. THE TRIBUNAL WAS, THEREFORE, JUSTIFIED IN DELETING THE ADDITION OF RS.10,85,003/- MADE ON ACCOUNT OF UNACCOUNTED CASH SALES. THE QUESTION REFERRED FOR THE OPINION IS, THEREFOR E, ANSWERED IN THE AFFIRMATIVE, I.E. IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. 52. KEEPING IN VIEW THE ABOVE JUDICIAL PRONOUNCEMEN TS, WE HOLD THAT THE ENTIRE UNRECORDED SALES OF THE ASSESSEE CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE AND ONLY THE GROSS PROFIT EMBEDDED IN THE AMOUNT OF SAL ES CAN BE TAXED. THE ASSESSEE HAD DISCLOSED THE GP RATE AT 16.5%. HOWEVER, THERE ARE CERTAIN DISCREPANCIES IN THE VALUATION OF THE STOCK, THEREFORE, INSTEAD OF DECLA RED GP 16.5%, WE HOLD THAT GP RATE OF 20% BE APPLIED TO THE UNRECORDED TURNOVER OF THE ASSESSEE TO ARRIVE AT THE AMOUNT OF INCOME. THE UNRECORDED TURNOVER OF THE ASSESSEE IS RS.1,63,89,335. THE GP @ 20% WORKS OUT TO BE RS.32,77,867/- THEREFORE, WE CONFIR M THE ADDITION TO THE EXTENT OF RS.32,77,867/- ON ACCOUNT OF UNRECORDED SALES TURNO VER. 53. IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED THE ADDITION ON ACCOUNT OF UNRECORDED EXPORT SALES TO THE EXTENT OF RS.37,21,0 34/-. WE FIND FROM PAPER BOOK ITA NO.170,986,987/DEL/2013 45 PAGE 268-269 THAT THE EXPORTS WERE MADE BY M/S. SUB H IMPEX AND SIMILARLY FROM PAPER BOOK PAGE 270, WE FIND THAT THE EXPORT SALES WAS MADE BY M/S. RAM SWAROOP SUNIL KUMAR RICE MILLS AND THE ASSESSING OFFICER HA D MADE THE ADDITION ON ACCOUNT OF COPY OF BILLS FOUND IN POSSESSION OF THE ASSESS EE WHEREAS, THE CLAIM OF THE ASSESSEE IS THAT THOSE WERE IN THE POSSESSION OF THE ASSESSE E AS ITS HAD MADE SALES TO THESE PARTIES AND THEREFORE, IT HAD TO CLAIM EXEMPTION FR OM SALES TAX DEPARTMENT. THIS ASPECT NEEDS VERIFICATION ON THE PART OF THE ASSESS ING OFFICER WHO ON THE BASIS OF APPROPRIATE INVESTIGATIONS WILL ARRIVE AT THE CONCL USION AS TO WHETHER THE EXPORT SALES RELATED TO THE ASSESSEE OR NOT. IN VIEW OF THE ABO VE, GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. 54. GROUND NO.5 RELATES TO ADDITION ON ACCOUNT OF G IFTS FROM THE CLOSE RELATIVES; WHICH HAPPENS TO BE MRS. NEELAM PATEL AND MS. SURVE EN BOTH REAL SISTERS OF THE ASSESSEE AND SETTLED IN USA LD. CIT(A) HAD CONFIRM ED THE ADDITION ON ACCOUNT OF THE FACT THAT COPY OF BANK ACCOUNT OF THE DONORS AND RE TURN OF INCOME OF THE DONORS WAS NOT FILED AND THE RELATIONSHIP WITH THE DONOR WAS N OT ESTABLISHED BY THE ASSESSEE. FROM PAPER BOOK PAGE 232A AND 232B, WE FIND THAT CO PIES OF GIFT DEEDS ARE PLACED AND DONORS HAVE CONFIRMED THE ADDITION AND AMOUNTS WERE RECEIVED IN FOREIGN EXCHANGE THROUGH BANKING CHANNELS. THE DONOR IN TH E GIFT DEED HAS STATED ON OATH THAT SHE IS REAL SISTER OF ASSESSEE AND EXISTENCE OF NAT URAL LOVE AND AFFECTION BETWEEN A BROTHER AND SISTER CANTO BE DENIED. MOREOVER, THES E GIFT DEEDS WERE FOUND AND IMPOUNDED DURING SURVEY, THEREFORE, THESE CANNOT BE SAID TO BE AN ACTS OF AFTERTHOUGHT. THEREFORE, WE DELETE THE ADDITION ON ACCOUNT OF GIF TS. IN VIEW OF THE ABOVE, GROUND NO.5 IS ALLOWED. 55. AS REGARDS GROUND NO.6, WE FIND THAT ADDITION I S ON ACCOUNT OF DISALLOWANCE OF EXPENSES DUE TO ELEMENT OF PERSONAL NATURE FOR WHIC H ASSESSING OFFICER HAD MADE A REASONABLE DISALLOWANCE, THEREFORE, WE UPHOLD THE A DDITION. IN VIEW OF THE ABOVE GROUND NO.6 IS DISMISSED. ITA NO.170,986,987/DEL/2013 46 56. NOW, COMING TO REVENUES APPEAL IN ITA NO. 170, WE FIND THAT SINCE WE HAVE ALREADY REMITTED BACK THE SUBSTANTIAL ADDITION FOR READJUDICATION, THEREFORE, APPEAL FILED BY THE REVENUE AGAINST DELETION OF PROTECTIVE ADDITION HAS BECOME INFRUCTUOUS AND HENCE, DISMISSED. 57. IN A NUTSHELL, THE ASSESSEES APPEALS IN I.T.A. NO.986 & 987/DEL/2013ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS REVENUES APPEAL IN I.T.A. NO.170/DEL/2013 IS DISMISSED AS INFRUCTUOUS. SD./- SD./- (A. T. VARKEY ) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 19 TH SEP., 2014 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING DATE OF DICTATION DATE OF TYPING DATE OF ORDER SIGNED BY BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED.