THE ACIT, CENT CIR .2, V. M/S MAHAVIR TRADERS,

ITSSA 348/AHD/2002

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 3091 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-08-2012
• Assessment Year: misc
• Appeal Filed On: 13-12-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KARTAR SINGH
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained expenditure; Principle of natural justice

Judgement Text

, , , , A, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + )* + )* + )* + ) ' ) ' ) ' ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) IT(SS)A NO.336 AND 339/AHD/2002 [BLOCK PERIOD A.Y.1990-91 TO A.Y.1999-2000 & UPTO 02-12-1999] M/S.MAHAVIR TIMBER MART FLAT NO.5, PLOT NO.234, MAHATMA WADI, MAHATMA INDUSTRIAL ESTATE, KHATODARA, SURAT 395 002. / VS. DCIT, CENT.CIR.2 SURAT. IT(SS)A NO.348 AND 346/AHD/2002 [BLOCK PERIOD A.Y.1990-91 TO A.Y.1999-2000] ACIT, CENT.CIR.2 SURAT. /VS. M/S.MAHAVIR TIMBER MART FLAT NO.5, PLOT NO.234, MAHATMA WADI, MAHATMA INDUSTRIAL ESTATE, KHATODARA, SURAT 395 002 ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 )/ ASSESSEE BY : SHRI J.P. SHAH + 2 3 )/ REVENUE BY : SHRI KARTAR SINGH 5 2 &(*/ DATE OF HEARING : 4 TH SEPTEMBER, 2012 678 2 &(*/ DATE OF PRONOUNCEMENT : 05-10-2012 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE FOUR APPEALS, TWO APPEALS BY THE ASSESSEE AND TWO APPEALS BY THE REVENUE FOR THE M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -2- BLOCK PERIOD ARE DIRECTED AGAINST THE ORDER OF THE CIT(A). THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. IT(SS)A.NO.336/AHD/2002 (ASSESSEES APPEAL) 2. THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS OF THE APPEAL WITH A REQUEST FOR ADMISSION THEREOF. 1. IN RESPECT OF ADDITIONS MADE ON BASIS OF MATERI AL SEIZED FROM M/S.MAHAVIR TIMBER AGENCY P. LTD., THE NECESSA RY SATISFACTION OF THE AO AS LAID DOWN BY THE SUPREME COURT IN MANISH MAHESHARI VS. CIT, 289 ITR 3412 IS NOT THERE AND THEREFORE ADDITIONS OF RS1,14,20,704/- BY AO (REDUC ED TO RS.67,22,526/- BY CIT(APPEALS), RS.1,62,010/- BY AO ., RS.64,59,436/- MADE BY AO AND RS.2,12,138/- MADE BY AO AND CIT(A) ARE ALL BAD. 2. IN FACT ALL THE ADDITIONS ARE BAD BECAUSE THEY A RE MADE WITHOUT ABIDING BY RULES OF NATURAL JUSTICE AND/OR PROPER SHOW CAUSE NOTICE AND/OR BY WRONGLY RECORDING THE FACTUM OF ADMISSION BY ASSESSEE, WHEN NONE WAS MADE BY ASSESS EE. 3. THE ASSESSMENT ORDER IS BAD BECAUSE SECTION 158B C NOTICE IS BAD BECAUSE OF ITS VAGUENESS. 3. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET HAS NOT PRESSED THESE ADDITIONAL GROUNDS OF APPEAL, AND ACC ORDINGLY THEY ARE NOT ADMITTED AND DISMISSED IN LIMINE . 4. THE GROUND NO.1 OF THE ASSESSEES APPEAL IS AS U NDER: 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONF IRMING THE ADDITION TO THE TUNE OF RS.67,22,526/- ON ACCOUNT O F PROFIT EARNED FROM ALLEGED UNDISCLOSED TRADING TURNOVER. M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -3- 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE AO HAS ARBITRARILY ADDED IMAGINARY FIGURE OF GP FROM UNACC OUNTED TURNOVER AND MADE ADDITION OF RS.1.14 CRORES AS UNDISCLOSED INCOME OF THE ASSESSEE. THE CIT(A) HAS REDUCED THE ADDITION TO R S.67,22,526/- BY APPLYING A LESSER RATE OF PROFIT AT THE RATE OF 15% . HE SUBMITTED THAT THE TRANSACTIONS OF SO-CALLED UNACCOUNTED TURNOVER WERE DULY RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS SEIZED BY THE DEPARTMENT, AND THEREFORE IN THE ABSENCE OF ANY UNDISCLOSED TURNOVE R, THE QUESTION OF ADDITION ON THIS COUNT DOES NOT ARISE. HE REFERRED TO PAGE NOS.2 TO 25 OF THE PAPER BOOK, WHICH IS WRITTEN SUBMISSIONS FIL ED BY THE ASSESSEE BEFORE THE CIT(A) IN SUPPORT OF THE CASE OF THE ASS ESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT TO THE COP IES OF VARIOUS PAGES OF THE SEIZED MATERIAL FORMING THE BASIS FOR THE IM PUGNED ADDITION, AND SUBMITTED THAT THE TURNOVER OR SALE FIGURE RECO RDED THEREIN WAS RECORDED IN THE SALE REGISTER OF THE ASSESSEE. HE REFERRED TO CERTAIN ARITHMETICAL INACCURACIES SUBMITTED BY THE AO AND S UBMITTED THAT HEAVY ADDITION WAS MADE WITHOUT PROPER APPLICATION OF THE AMOUNT IN GREAT HASTE AND IN TOTAL DENIAL OF THE PRINCIPLE OF NATURAL JUSTICE. HE SUBMITTED THAT NO OPPORTUNITY WAS GIVEN TO THE ASSE SSEE TO REBUT THE IMAGINATION OF THE DEPARTMENT BY THE AO AS SEIZED M ATERIAL WAS NEVER CONFRONTED TO THE ASSESSEE. HE SUBMITTED THAT GP R ATE OF 20% APPLIED BY THE AO AND SUSTAINED BY THE CIT(A) AT 15% IS HIG HER AS THE GP RATE OF THE ASSESSEE AS PER THE I.T. RECORDS IS 14. 07% AND THE NP RATE WOULD BE AROUND 8% ONLY. 6. THE LEARNED CIT-DR HAS OPPOSED THE SUBMISSIONS O F THE LEARNED COUNSEL OF THE ASSESSEE. HE REFERRED TO TH E RELEVANT PARAS OF THE ASSESSMENT ORDER AND APPELLATE ORDER PASSED BY THE CIT(A) IN SUPPORT OF THE CASE OF THE REVENUE. THE LEARNED CI T-DR HEAVILY M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -4- RELIED ON PARA 5.1 OF THE APPELLATE ORDER OF THE CI T(A) AND SUBMITTED THAT THE AO HAS GIVEN A FINDING THAT THE SALE FIGUR E AS PER THE SEIZED MATERIAL WERE NOT RECORDED BY THE ASSESSEE IN ITS B OOKS OF ACCOUNTS. HE RELIED ON THE ORDER OF THE AO. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE AO AND THE CIT(A) AND ALSO THE CONTEN TS OF THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE THE CIT(A) . WE FIND THAT THE CIT(A) HAS REJECTED THE GROUNDS OF THE APPEAL IN A SUMMARY MANNER AND HAS SUSTAINED AN ADDITION OF RS.67.22 LAKHS BY MERELY OBSERVING THAT THE APPELLANTS CONTENTION THAT THE ANNEXURES ARE RECORDED IN THE BOOKS OF ACCOUNT CANNOT BE ACCEPTED SINCE THE AO HA S GIVEN SUCH FINDING AFTER EXAMINATION OF THE BOOKS OF ACCOUNT A ND SEIZED DOCUMENT WHICH ARE IN THE CUSTODY OF THE I.T. DEPAR TMENT. WE FIND THAT THIS APPROACH OF THE CIT(A) IS NOT SUSTAINABLE IN LAW. THE ASSESSEE IN ITS WRITTEN SUBMISSION AT PAGE NO.2 TO 25 FILED BEFORE THE CIT(A) HAS ELABORATELY CITED THE FIGURE OF THE TURN OVER AS PER THE SEIZED MATERIAL, RECORDED IN ITS SALE REGISTER AND PAGE NUMBER OF THE SALE REGISTER ALONG WITH DATE, AMOUNT AND FULL NARR ATION HAS BEEN DETAILED THEREIN. THE CIT(A) HAS NOT EVEN REJECTED THE SAME AND HAS NOT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE MADE IN THIS BEHALF. THE ASSESSEE HAS POINTED OUT THAT THERE WERE CERTAI N ARITHMETICAL INACCURACIES ALSO AND THE SAME WERE ALSO NOT TAKEN NOTE BY THE CIT(A). THE CIT(A) HAS ALSO NOT CONSIDERED THE SUB MISSIONS OF THE ASSESSEE THAT THE GP RATE AS PER THE I.T. RECORDS C OMES TO 14.07% AND THE NP THEREIN IS ABOUT 8% ONLY. IN THESE FACTS OF THE CASE, WE ARE UNABLE TO SUSTAIN THE ADDITION MADE BY THE AO AND C ONFIRMED BY THE CIT(A). HOWEVER, WE FIND THAT AS PER THE PLEADING OF THE ASSESSEE ITSELF THERE WERE SOME ARITHMETICAL INACCURACIES IN THE CALCULATIONS OF M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -5- THE UNACCOUNTED TURNOVER OF THE ASSESSEE AND PETTY LAPSES IN THE RECORDING OF THE TURNOVER IN THE SALES REGISTER COU LD NOT BE RULED OUT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT IT HAS NO OBJECTION IN CASE SOME ADDITION IS SUSTAINED TO COVER UP SOME PETTY DISCREPANCIES BY WAY OF ESTIMATE AS THE ACCOU NTING PERIOD PERTAINED TO THE YEAR 1990-91 TO 1999-2000 WHICH WE RE VERY OLD AND THE ASSESSEE WANTS TO PUT AN END TO THE LITIGATION. IN VIEW OF THE SUBMISSIONS OF THE ASSESSEE AND IN THE FACTS OF THE CASE, WE CONSIDER THAT THE ENDS OF JUSTICE SHALL BE MET IF THE ADDITI ON ON ACCOUNT OF PROFIT EARNED BY THE ASSESSEE, WHICH MAY NOT HAVE BEEN ACC OUNTED FOR BY THE ASSESSEE, IS RESTRICTED TO RS.8 LAKHS OUT OF THE AD DITION OF RS.67.22 LAKHS CONFIRMED BY THE CIT(A) AND THE BALANCE ADDIT ION IS DELETED AND THE GROUND NO.1 OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. 8. THE GROUND NO.2 OF THE ASSESSEES APPEAL IS AS U NDER: 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.2,12,138/- MADE ON ACCOUNT OF ALLEGED ON MONEY RECEIPT ON SALE OF TIMBER 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THERE WAS NO ON MONEY WHATSOEVER ON SALE OF TIMBER, AND THE REFORE NO ADDITION SHOULD BE MADE ON ACCOUNT OF ON MONEY RE CEIPT OF THE ASSESSEE. THE LEARNED DR HAS RELIED ON THE ORDER O F THE AO AND THE CIT(A). 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE P ERUSED THE ORDER OF THE CIT(A). WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE THE CIT(A) . WE FIND THAT THE CIT(A) HAS DISMISSED THE GROUND OF THE APPEAL OF TH E ASSESSEE IN A M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -6- SUMMARY MANNER. THE REVENUE COULD NOT JUSTIFY WITH EVIDENCE TO PROVE ITS CASE REGARDING RECEIPT OF ON MONEY IN R ESPECT OF SALE OF PREMIUM TIMBER. IN VIEW OF THESE FACTS, WE DELETE THE ADDITION AND THE GROUND NO.2 OF THE ASSESSEES APPEAL IS ALLOWED. 11. THE GROUND NO.3 OF THE ASSESSEES APPEAL IS AS UNDER: 3. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONF IRMING THE ADDITION TO THE TUNE OF RS.1,14,000/- ON ACCOUNT OF ALLEGED DISCREPANCY IN STOCK ON THE DATE OF SEARCH. 12. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SHORTFALL OF STOCK OF RS.1.14 LAKHS ON THE DATE OF SEARCH IS COVERED BY THE ADDITION MADE ON ACCOUNT OF PROFIT FROM UNDISCLOSED TRADING OF TIMBER IN GROUND NO.1 OF THE ASSESSEE IN THE PRESENT APPEA L BEFORE THE TRIBUNAL. THE LEARNED DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 13. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ASSESSEE C OULD NOT ESTABLISH THE NEXUS BETWEEN THE SHORTFALL IN STOCK FOUND AT T HE TIME OF SEARCH AND ADDITION MADE BY THE AO ON ACCOUNT OF PROFIT EA RNED FROM UNDISCLOSED TRADING OF TIMBER. ACCORDINGLY, WE HOL D THAT THE GP ELEMENT AT THE RATE OF 14% ON SHORTFALL OF TIMBER O F RS.1.14 LAKHS WHICH COMES TO RS.16,000/- (IN ROUND FIGURE) BE SUS TAINED AS ADDITION OUT OF THE ADDITION OF RS.1.14 LAKHS SUSTAINED BY T HE CIT(A) AND THE BALANCE ADDITION IS DELETED AND THE GROUND NO.3 OF THE ASSESSEE IS PARTLY ALLOWED. 14. THE GROUND NO.4 OF THE ASSESSEES APPEAL IS AS UNDER: M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -7- 4. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONF IRMING THE ADDITION OF RS.64,59,436/- MADE ON ACCOUNT OF ALLEG ED UNEXPLAINED EXPENDITURE 15. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REVENUE AUTHORITIES HAVE ARBITRARILY MADE ADDITION ON ACCOU NT OF ALLEGED UNEXPLAINED EXPENDITURE. HE SUBMITTED THAT NO SHOW CAUSE NOTICE WAS SERVED ON THE ASSESSEE TO EXPLAIN ITS CASE, AND THEREFORE THE ADDITION HAS BEEN MADE AGAINST THE PRINCIPLE OF NAT URAL JUSTICE. HE REFERRED TO THE RELEVANT PORTIONS OF THE WRITTEN SU BMISSIONS FILED BY THE ASSESSEE BEFORE THE CIT(A), WHEREIN IT HAS EXPLAINE D THAT THE ALLEGED UNEXPLAINED EXPENDITURE RELATES TO OTHER PERSONS AND NOT TO THE ASSESSEE-FIRM, AND THEREFORE THE ADDITION MADE IN T HE CASE OF THE ASSESSEE-FIRM IS VOID. HE SUBMITTED THAT THE ASSES SEE NEVER ADMITTED THAT THE SEIZED MATERIAL OF UNEXPLAINED EXPENDITURE BELONGS TO THE ASSESSEE. THE LEARNED DR HAS RELIED ON THE ORDER O F THE AO AND THE CIT(A). 16. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE P ERUSED THE ORDERS OF THE AO AND THE CIT(A) AND HAS ALSO PERUSE D THE RELEVANT PORTIONS OF THE WRITTEN SUBMISSIONS FILED BY THE AS SESSEE BEFORE THE CIT(A). WE FIND THAT THE ASSESSEE HAS CLAIMED THAT VARIOUS EXPENDITURE HELD AS UNEXPLAINED EXPENDITURE IN THE HANDS OF THE ASSESSEE IN FACT BELONGED TO OTHER PERSONS AND NOT TO THE ASSESSEE-FIRM. WE FIND THAT THE ASSESSEE HAS FROM PAGE NOS.38 TO 5 9 OF ITS WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A) HAS DETAILED TH E NAMES OF DIFFERENT PERSONS WHOSE EXPENDITURE HAVE BEEN ADDED AS UNEXPLAINED EXPENDITURE IN THE HANDS OF THE ASSESSEE. THE ASSE SSEE HAS CATEGORICALLY SUBMITTED IN ITS WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A) THAT THESE PERSONS WERE NOT EVEN A PARTNER I N THE ASSESSEE-FIRM M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -8- AND THIS EXPENDITURE DOES NOT REPRESENT THE EXPENDI TURE INCURRED BY THE ASSESSEE-FIRM. WE FIND THAT NO MATERIAL HAS BE EN PLACED BEFORE US TO CONTROVERT THESE SUBMISSIONS MADE ON BEHALF OF T HE ASSESSEE. THE CIT(A) HAS NOT RECORDED ANY FINDING ON THE ISSUE AN D HAS REJECTED THE CLAIM OF THE ASSESSEE IN A SUMMARY MANNER. HOWEVER , WE FIND THAT THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IT HAS NO OBJECTION IF SOME ADDITION TO COVER UP PETTY LAPSES IN THE EXPENDITURE AS PER THE SEIZED PAPER IS SUSTAINED, AS THE ISSUE PERTAINS TO VERY OLD BLOCK PERIOD FOR WHICH NECESSARY EVIDENCES COULD NO T BE AVAILABLE WITH ASSESSEE FOR EACH ITEM OF THE PETTY EXPENDITUR E. WE FIND THAT THE CIT(A) HAS SUSTAINED THE ADDITION BY OBSERVING THAT THE AO APPEARS TO HAVE VERIFIED THE MATERIAL, AND ACCORDINGLY WORKED OUT THE AMOUNT OF EXPENDITURE. THESE OBSERVATIONS OF THE CIT(A) IS N OT SUSTAINABLE. IN VIEW OF THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE AND TO COVER UP THE POSSIBLE PETTY LAPSES AND EXPENDITURE WHICH COULD NOT HAVE BEEN ACCOUNTED FOR BY THE ASSESSEE, WE HOLD TH AT THE ENDS OF JUSTICE SHALL BE MET IF THE ADDITION OF RS.7 LAKHS IS CONFIRMED OUT OF ADDITION OF RS.64.59 LAKHS SUSTAINED BY THE CIT(A) AND THE BALANCE ADDITION IS DELETED AND THE GROUND NO.4 OF THE ASSE SSEE IS PARTLY ALLOWED. 17. THE GROUND NO.5 OF THE ASSESSEES APPEAL IS AS UNDER: 5. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONF IRMING THE ADDITION OF RS.1,81,694/- MADE ON ACCOUNT OF PROFIT EARNED FROM ALLEGED UNDISCLOSED TRADING TURNOVER. 18. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT SET FAIRLY SUBMITTED THAT THIS GROUND DOES NOT ARISE OUT OF TH E APPELLATE ORDER OF THE CIT(A) AND HENCE SHOULD BE DISMISSED. THE LEAR NED DR HAS NO OBJECTION TO THE SUBMISSIONS OF THE LEARNED COUNSEL OF THE ASSESSEE. M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -9- 19. WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE ISSU E IN THE GROUND NO.5 OF THE ASSESSEE HAS NOT ARISEN OUT OF THE CIT( A)S ORDER, AND ACCORDINGLY, THE GROUND NO.5 OF THE ASSESSEE IS DIS MISSED. IT(SS)A.NO.346/AHD/2002 (REVENUES APPEAL) 20. THE GROUND NO.1 OF THE ASSESSEES APPEAL IS AS UNDER: I. THE L D.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THAT THE AMOUNT OF UNACCOUNTED TURNOVER BE TAKEN AT RS.4,48,15,937/- AS AGAINST THE AMOUNT OF UNACCOUNT ED TURNOVER TAKEN BY THE AO AT RS.4,80,23,843/- (AFTER REMOVING THE TOTALING MISTAKES) 21. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE IN THIS GROUND OF THE REVENUES APPEAL IS COVERED WITH THE GROUND NO.1 OF THE ASSESSEES APPEAL IN IT(SS)A.NO.336/AHD/2002. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE D ISPOSING OF THE GROUND NO.1 OF THE ASSESSEES APPEAL IN IT(SS)A.NO. 336/AHD/2002 IN THE FOREGOING PARAGRAPHS OF THIS ORDER, WE HOLD THA T THERE IS NO MERIT IN THE GROUND NO.1 OF THE REVENUES APPEAL, WHICH I S ACCORDINGLY DISMISSED. 22. THE GROUND NO.2 OF THE REVENUES APPEAL READS A S UNDER: II. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DIRECTING THAT THE UNACCOUNTED PROFIT ON THE ABOVE UNACCOUNTED TURNOVER BE WORKED OUT BY APPLYING THE GROSS PROFIT RATE OF 15% THEREON AS AGAINST THE GP RATE OF 20% THEREON APPLI ED BY THE AO. 23. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE IN THIS GROUND OF THE REVENUES APPEAL IS COVERED WITH THE GROUND NO.1 OF THE ASSESSEES APPEAL IN IT(SS)A.NO.336/AHD/2002. WE HAVE CONSIDERED M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -10- RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE D ISPOSING OF THE GROUND NO.1 OF THE ASSESSEES APPEAL IN IT(SS)A.NO. 336/AHD/2002 IN THE FOREGOING PARAGRAPHS OF THIS ORDER, WE HOLD THA T THERE IS NO MERIT IN THE GROUND NO.2 OF THE REVENUES APPEAL, WHICH I S ACCORDINGLY DISMISSED. 24. THE GROUND NO.3 OF THE ASSESSEES APPEAL IS AS UNDER: III. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FA CTS IN DIRECTING THAT THE UNACCOUNTED PROFIT OF RS.1,81,69 4/- ON UNACCOUNTED TURNOVER MENTIONED IN SEIZED PAPER NO.B S-43 BE SET OFF AGAINST THE UNACCOUNTED PROFIT DETERMINED O N THE UNACCOUNTED TURNOVER. 25. THE LEARNED DR RELIED ON THE ORDER OF THE AO AN D THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). 26. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE CIT(A) HAS OBSERVED THAT FURTHER ADDITION EQUAL TO 15% OF THE SEIZED ITEMS C ONTAINED IN ANNEXURE BS-43 IS MADE, WHICH WORKS OUT TO RS.1,81, 694/- WITH THE REMARKS THAT THE SAME WILL BE SET OFF AGAINST THE A BOVE INCOME ON ACCOUNT OF UNACCOUNTED TURNOVER. WE FIND THAT SEPA RATE ADDITION ON ACCOUNT OF UNDISCLOSED TURNOVER WAS MADE BY THE REV ENUE, AND THEREFORE THE CIT(A) WAS WHOLLY JUSTIFIED IN ALLOWI NG THE SET OFF OF THIS AMOUNT OF RS.1,81,694/- AGAINST THE INCOME FRO M UNDISCLOSED TURNOVER OF THE ASSESSEE. THERE BEING NO MISTAKE I N THE ORDER OF THE CIT(A) ON THIS ISSUE, THE SAME IS CONFIRMED AND THE GROUND NO.3 OF THE REVENUE IS DISMISSED. 27. THE GROUND NO.4 OF THE REVENUES APPEAL IS AS U NDER: M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -11- IV. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION MADE OF RS.1,62,010/- ON ACCO UNT OF UNACCOUNTED INITIAL INVESTMENT. 28. THE LEARNED DR HAS RELIED ON THE ORDER OF THE A O. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE CIT(A). 27. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE CIT(A) HA S DELETED THE ADDITION OF RS.1,62,010/- BY OBSERVING THAT THE ASS ESSEE CONTENDED THAT THE TIMBER BUSINESS BEING VERY OLD AND RUNNING , THE ADDITION ON ACCOUNT OF INITIAL INVESTMENT COULD NOT BE MADE. W E FIND THAT THE ASSESSEES TIMBER BUSINESS IS VERY OLD, AND THEREFO RE THERE IS NO JUSTIFICATION FOR ADDITION ON ACCOUNT OF INITIAL IN VESTMENT IN BLOCK PERIOD, AND ACCORDINGLY THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED AND THE GROUND NO.4 OF THE REVENUE IS DIS MISSED. 28. THE GROUND NO.5 OF THE REVENUES APPEAL READS A S UNDER: V. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN DIRECTING THAT THE UNACCOUNTED PROFIT ON THE AMOUNT OF STOCK FOUND SHORT (RS.7,59,860) BE WORKED OUT BY APPLYING THE GROSS PROFIT RATE OF 15% THEREON, INSTEAD OF THE RATE OF 20%. 29. THE LEARNED DR HAS RELIED ON THE ORDER OF THE A O. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE CIT(A). 30. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE GP RATE O F THE ASSESSEE AS PER THE INCOME-TAX RECORDS COMES TO 14.07% . THIS ASPECT COULD NOT BE CONTROVERTED ON BEHALF OF THE REVENUE. IN THESE FACTS OF THE CASE, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF TH E CIT(A) IN APPLYING THE GP RATE OF 15% INSTEAD OF 20% APPLIED BY THE AO ON THE AMOUNT M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -12- OF STOCK FOUND, AND ACCORDINGLY, THE GROUND NO.5 OF THE REVENUE IS DISMISSED. IT(SS)A.NO.339/AHD/2002 (ASSESSEES APPEAL) 31. THE GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UNDER: 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS.1,17,000/- ON ACCOUNT OF ALLEGED UNE XPLAINED CASH. 32. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT A T THE TIME OF SEARCH CASH AMOUNTING TO RS.1,17,000/- WAS FOUND AT THE PREMISES OF THE ASSESSEE, AND THE AO HAS RECORDED THAT THE ASSE SSEE HAS ADMITTED DURING THE COURSE OF SEARCH PROCEEDINGS THAT THE CA SH OF RS.1,17,000/- WAS UNEXPLAINED. THE ASSESSEE LATER ON EXPLAINED T HAT SHRI KHIMJIBHAI WAS AN OUTSIDER AS FAR AS THE ASSESSEE I S CONCERNED, AND THEREFORE HIS STATEMENT COULD NOT BE APPLIED TO THE CASE OF THE ASSESSEE. THE ASSESSEE TRIED TO EXPLAIN THE CASH A S BELONGING TO THE FATHER, MOTHER, BROTHER PERSONAL ETC. WHICH HAS BEE N HELD AS AN AFTER THOUGHT BY THE AO AND THE CIT(A) WE FIND THAT THE ASSESSEE COULD NOT BRING ANY MATERIAL ON RECORD TO CONTROVERT THE FINDING OF THE REVENUE AUTHORITIES RECORDED WHILE DISPOSING OF THI S ISSUE AGAINST THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE IS CLEAR LY AN AFTER THOUGHT. IN THESE FACTS OF THE CASE, WE CONFIRM THE ADDITION OF RS.1,17,000/- MADE IN THE HANDS OF THE ASSESSEE AND THE GROUND NO .1 OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 33. THE GROUND NO.2 OF THE ASSESSEES APPEAL IS AS UNDER: M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -13- 2. THE LD.CIT(A) ERRED LAW AND ON FACTS IN CONFI RMING THE ADDITION OF RS.65,917/- ON ACCOUNT OF ALLEGED DISCR EPANCY IN STOCK ON DATE OF SEARCH. 34. WE HAVE HEARD THE PARTIES. WE FIND THAT THE AO HAS MADE ADDITION OF RS.4.39 LAKHS ON ACCOUNT OF SHORTAGE OF STOCK. THE CIT(A) HAS RESTRICTED THE ADDITION TO RS.65,917/- O NLY BY APPLYING A GP RATE OF 15% AGAINST THE STOCK OF RS.4,39,452/- A ND THE BALANCE ADDITION WAS DELETED BY THE CIT(A). THEREFORE, WE FIND NO MISTAKE IN THE ORDER OF THE CIT(A), THE SAME IS CONFIRMED AND THE GROUND NO.2 OF THE ASSESSEES APPEAL IS DISMISSED. 35. THE GROUND NO.3 OF THE ASSESSEES APPEAL IS AS UNDER: 3. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS.15,23,347/- ON ACCOUNT OF UNACCOUNTE D PROFIT ALLEGED TO HAVE BEEN EARNED FROM ALLEGED UNDISCLOSE D TRADING TURNOVER. 36. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE F ACTS OF THE CASE AND THE ISSUE IN THIS GROUND OF APPEAL IS IDENTICAL WITH THE ISSUE IN THE GROUND NO.1 OF THE ASSESSEES APPEAL IN IT(SS)336/A HD/2002. 37. WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE FACT S OF THE CASE OF THE ASSESSEE IN THIS ISSUE ARE SIMILAR TO THE FACTS OF THE CASE OF THE ASSESSEE IN GROUND NO.1 OF THE ASSESSEES APPEAL IN IT(SS).A.NO.336/AHD/2002. FOR THE REASONS RECORDED WHILE DISPOSING OF THE GROUND NO.1 OF THE ASSESSEES APPEAL FOR THE BLOCK PERIOD IN IT(SS)A.NO.336/AHD/2002 AND THE SUBMISSION OF THE L EARNED COUNSEL FOR THE ASSESSEE THAT PETTY LAPSES IN THE RECORDING OF THE TURNOVER IN THE SALES REGISTER COULD NOT BE RULED OUT AND IT HAS NO OBJECTION IN CASE SOME ADDITION IS SUSTAINED TO COVER UP PETTY DISCRE PANCIES BY WAY OF ESTIMATE, WE HOLD THAT ENDS OF THE JUSTICE SHALL BE MET IF THE ADDITION M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -14- ON ACCOUNT OF PROFIT ON UNDISCLOSED TRADING IS REST RICTED TO RS.2 LAKHS OUT OF THE TOTAL ADDITION OF RS.15,83,347/- AND THE BALANCE ADDITION IS DELETED AND THE GROUND NO.3 OF THE ASSESSEES APPEA L IS PARTLY ALLOWED. 38. THE GROUND NO.4 OF THE ASSESSEE IS AS UNDER: 4. IT IS, THEREFORE, PRAYED THAT ALL THE ABOVE AD DITIONS CONFIRMED BY THE LD. CIT(A) BE DELETED. 39. WE FIND THAT THIS GROUND OF THE APPEAL OF THE A SSESSEE IS GENERAL NATURE, AND ACCORDINGLY NEEDS NO ADJUDICATION. 40. THE GROUND NO.5 OF THE ASSESSEES APPEAL IS AS UNDER: 5. THE TOTAL OF THE ADDITIONS CONFIRMED BY THE CIT (A) WORKED OUT TO RS.17,06,264/- AS AGAINST WHICH THE L EARNED CIT(A) HAS CALCULATED THE TOTAL ADDITIONS OF RS.18, 06,264/- RESULTING IN EXCESS ADDITION TO THE TUNE OF RS.1,00 ,000/-. IT IS THEREFORE, PRAYED THAT THE TOTAL UNDISCLOSED INCOME MAY PLEASE BE REDUCED BY THAT AMOUNT. 41. WE HAVE HEARD BOTH THE PARTIES. IN VIEW OF OUR ALLOWING PART RELIEF TO THE ASSESSEE, THE AO IS DIRECTED TO RECAL CULATE THE AMOUNT OF ADDITION AS PER OUR DECISION. WE DISPOSE OF THE GR OUND NO.5 OF THE ASSESSEE, ACCORDINGLY. 42. THE GROUND NO.6, 7 AND 8 OF THE ASSESSEES APPE AL ARE AS UNDER: 6. THE ASSESSMENT ORDER IS BAD IN LAW BECAUSE THE APPROVAL GRANTED BY THE ADDITIONAL CIT IS VITIATED IN LAW AN D ILLEGAL GRANTED AND THE SAID ORDER BE QUASHED AS VOID AB-IN ITIO. 7. THE LD. AO HAS ERRED IN LAW AND ON FACTS IN INIT IATING PENALTY U/S.158BFA(2) OF THE ACT. 8. THE LD.AO HAS ERRED IN LAW AND ON FACTS IN LEVYI NG SURCHARGE ON TAX AND THE SAME MAY PLEASE BE DELETED . M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -15- 43. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THESE GROUNDS OF THE APPEAL OF THE ASSESSEE, WHICH ARE AC CORDINGLY DISMISSED. 44. THE ADDITIONAL GROUND NO.1 OF THE ASSESSEES AP PEAL IS AS UNDER: 1. RS.1,17,000/- CANNOT BE SEPARATELY ADDED AS IT WILL STAND TELESCOPED BY THE ADDITION OF RS.15,83,247/- UPHELD BY CIT(A) OR OUT OF RS.20,31,130/- MADE BY THE AO AS UNACCOUN TED PROFIT. 45. WE HAVE HEARD THE PARTIES. THE ADDITIONAL GROU ND NO.1 OF THE APPEAL AS REPRODUCED ABOVE IS ADMITTED. UNEXPLAINE D CASH OF RS.1,17,000/- IS COVERED WITH THE ADDITION SUSTAINE D WHILE DISPOSING OF GROUND NO.3 OF THIS APPEAL, AND ACCORDINGLY, THE ASSESSEE IS ENTITLED TO TELESCOPIC BENEFIT, AND THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE AO IS DIRECTED TO ALLOW TELESCOPIC BENEFIT TO THE EXTENT OF RS.1.17 LAKHS AND ACCORDINGLY THE ADDITIONAL GROUND NO.1 OF THE ASSESSEES APPEAL IS ALLOWED. 46. THE ADDITIONAL GROUND NO.2 AND 3 ARE AS UNDER: 2. THE ASSESSMENT ORDER IS BAD BECAUSE SECTION 158 BC NOTICE WAS VAGUE AND THEREFORE, BAD. 3. ALL THE ADDITIONS MADE BY AO ARE BAD BECAUSE THE Y ARE MADE WITHOUT ABIDING THE RULES OF NATURAL JUSTICE A ND/OR PROPER SHOW CAUSE NOTICE AND/OR BY WRONGLY RECORDING THE F ACTUM OF ADMISSION BY ASSESSEE. WHEN NONE WAS MADE BY ASSES SEE AND/OR BY MAKING WRONG STATEMENT OF FACTS. 47. THE LEARNED COUNSEL OF THE ASSESSEE HAVE NOT PR ESSED THESE ADDITIONAL GROUNDS NO.2 AND 3, WHICH ARE ACCORDINGL Y DISMISSED. M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -16- IT(SS)A.NO.348/AHD/2002 (REVENUES APPEAL) 48. THE GROUND NO.1 OF THE REVENUES APPEAL IS AS U NDER: I. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THAT THE ADDITION ON ACCOUNT OF THE AMOUNT OF TOCK FOUND SHORT (RS.4,39,452/-) BE MADE AT THE RATE OF GROSS PROFIT OF 15% THEREOF, I.E., RS.65,917/-, INSTEAD OF AT THE RATE OF GROSS PROFIT OF 20% THEREON (WHICH WORKS OUT TO RS.87,890/-). 49. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT T HE CIT(A) HAS PASSED A WELL REASONED SPEAKING ORDER ON THIS ISSUE AND HAS RIGHTLY APPLIED THE GP RATE OF 15% ON THE STOCK FOUND SHOWN AND DIRECTING THE ADDITION OF RS.65,917/-, AND THEREFORE IS NO JU STIFICATION FOR APPLYING HIGHER GP RATE OF 20%. ACCORDINGLY, THE G ROUND NO.1 OF THE REVENUE BEING WITHOUT ANY MERIT IS DISMISSED. 50. THE GROUND NO.2 OF THE REVENUES APPEAL IS AS U NDER: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THAT THE UNACCOUNTED PROFIT ON THE UNACCOUNTED TURN OVER OF RS.1,01,55,652/- BE WORKED OUT AT THE AVERAGE PROFI T RATE OF 15% INSTEAD OF 20% THEREOF WORKED OUT BY THE AO AND THEREBY RESTRICTING THE ADDITIONS MADE OF RS.20,31,130/- TO RS.15,83,347/- 51. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE IN THIS GROUND OF THE APPEAL OF THE REVENUE IS IDENTICAL WI TH THE ISSUE IN THE GROUND NO.1 OF THE ASSESSEES APPEAL IN IT(SS).A.NO .336/AHD/2002. 52. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSING OF THE GROUND NO.1 IN THE ASSESSEE S APPEAL IN IT(SS).A.NO.336/AHD/2002 IN THE FOREGOING PARAS OF THIS ORDER, WE DISMISS THE GROUND NO.2 OF THE REVENUE. 53. THE GROUND NO.3 OF THE ASSESSEES APPEAL IS AS UNDER: M/S.MAHAVIR TIMBER MART VS. DCIT, SURAT -17- THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION MADE OF RS.1,97,378/- ON ACCOUNT OF UNACCO UNTED INITIAL INVESTMENT. 54. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT T HE CIT(A) HAS RECORDED THAT THE ASSESSEE HAS CLAIMED THAT ITS TIM BER BUSINESS WAS VERY OLD AND RUNNING AND THEREFORE THE ADDITION ON ACCOUNT OF INITIAL INVESTMENT COULD NOT BE MADE. IT WAS ALSO PLEADED THAT THE AO HAS NOT LOCATED ANY INDEPENDENT EVIDENCE TO PROVE THAT A PARTICULAR AMOUNT OF INITIAL INVESTMENT WAS MADE FOR PURCHASES ETC. IN THESE FACTS OF THE CASE, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) ON THIS ISSUE, AND ACCORDINGLY, THE GROUND N O.3 OF THE REVENUES APPEAL IS DISMISSED. 55. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THE BOTH APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD