Satishchand Samirmal Gothi HUF, Itarsi V. The ACIT 1(1), Bhopal

ITSSA 377/IND/2012

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9169 (ITAT-INDORE)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 24-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Business income; Search and seizure; Loose papers; Document seized; Additional evidence; Reasonable cause; Validity of assessment; Documents seized
• Section: 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAAHG6186K I.T(SS).A.NO.377/IND/2012 BLOCK PERIOD : 1.4.1996 TO 22.10.2002 SATISHCHAND SAMIRMAL GOTHI HUF, SARAFA BAZAR, ACIT, 1(1), BHOPAL ITARSI VS APPELLANT RESPONDENT APPELLANT BY : SHRI S. S. DESHPANDE, C. A. RESPONDENT BY : SHRI R. A. VERMA, SR. DR DATE OF HEARING : 09 . 0 4 .201 3 DATE OF PRONOUNCEMENT : . 0 5 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE CIT(A) DATED 27/6/2012 , FOR THE BLOC K PERIOD 01.04.1996 TO 22.10.2002 IN THE MATTER OF ORDER PAS SED U/S 158BD READ WITH SECTION 158BC OF THE INCOME-TAX ACT , 1961. -: 2: - 2 2. FACTS IN BRIEF ARE THAT SEARCH WAS CONDUCTED AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE O N 23.10.2002. THE ASSESSING OFFICER ISSUED NOTICE U/S 158BD. IN RESPONSE TO THE SAME, THE ASSESSEE FILED RETURN DECLARING UNDISCLOSED INCOME AT NIL. DURING THE COURSE OF SEA RCH, PHYSICAL STOCK WAS FOUND LESS THAN THE STOCK AS PER THE BOOKS OF ACCOUNT. CERTAIN LOOSE PAPERS WERE ALSO FOUND ON THE BASIS OF WHICH PROFIT WAS ESTIMATED BY ASSESSING OFFICER. THE ADDITION WAS ALSO MADE ON ACCOUNT OF CAPITAL REQUIR ED FOR PURCHASE OF GOODS. THE LD. CIT(A) ENHANCED THE INCO ME OF THE ASSESSEE BY RS. 5,23,585/- BEING THE PURCHASE OUTSI DE THE BOOKS OF ACCOUNT AT RS. 11,63,985/-. 3. VIDE GROUND NOS. 1 & 2 , THE ASSESSEE HAS CHALLENGE D THE LEGALITY OF ASSESSMENT FRAMED U/S 158BD. HOWEVE R, DURING THE COURSE OF HEARING, THE LEGAL GROUNDS SO RAISED WERE NOT PRESSED BY THE LD. AUTHORIZED REPRESENTATIVE , ACCO RDINGLY, GROUND NOS. 1 & 2 ARE DISMISSED AS NOT PRESSED. 4. ON MERIT OF ADDITION, FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE, WHICH READ AS UNDER :- -: 3: - 3 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, BHOPAL ERRED IN LAW IN CONFIRMING ADDITION OF RS. 33,200/- MADE IN EACH OF THE ASSESSMENT YEAR 1997-98 AND 1998-99, IN ALL OF RS. 66,400/- WITHOUT ANY REASONABLE FINDINGS ON RECORD. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, BHOPAL ERRED IN LAW IN CONFIRMING ADDITION OF RS. 34,731/- AS UNDISCLOSED INCOME FROM OTHER SOURCES INTEREST ON FDR AND ON NSC ETC., WHEREAS TOTAL INCOME WAS BELOW TAXABLE LIMIT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, BHOPAL ERRED IN LAW IN CONFIRMING ADDITION OF RS. 1,83,207/- BY WRONGLY APPLYING PROFIT RATE @ 12 %. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, BHOPAL ERRED IN LAW IN CONFIRMING ALLEGED UNACCOUNTED SALES AND -: 4: - 4 PURCHASES OF RS. 11,63,985/-, WHICH IS BAD IN LAW. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, BHOPAL ERRED IN LAW IN CONFIRMING ADDITION OF RS.4,00,000/- CONSIDERED AS INVESTMENTS ON ESTIMATE BASIS, IS BAD IN LAW. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, BHOPAL ERRED IN LAW IN NOT ALLOWING THE RELIEF TELESCOPIC RELIEF OF UNDISCLOSED INCOME, DECLARED AT RS. 3,00,000/-, IN FIRM CASE. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, BHOPAL ERRED IN LAW IN MAKING ENHANCEMENT OF RS. 5,23,985/- IS BAD IN LAW. 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, BHOPAL ERRED IN LAW IN CONFIRMING ADDITION OF RS. 50,000/-EACH IN -: 5: - 5 THE NAME OF VIMALCHAND AND INDERCHAND JAIN BOTH RESIDENT OF HYDERABAD, IN ALL OF RS. 1,00,000/- AS UNEXPLAINED DEPOSITS ARE BAD IN LAW. 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, BHOPAL ERRED IN LAW IN CONFIRMING ADDITION OF RS. 3,85,000/- MADE ON ACCOUNT OF UNEXPLAINED AGRICULTURAL INCOME OF THE BLOCK PERIOD, WITHOUT ANY REASONABLE BASIS ON RECORD, IS BAD IN LAW. 5. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FROM THE RECORD, WE FOUND THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN TRADING OF AGRICULTURAL MACHI NERY, LIKE ELECTRIC POLES, DIESEL ENGINE AND SPARE PARTS IN TH E NAME OF GOTHI BROTHERS. THE BUSINESS OF GOTHI BROTHERS WAS BEING CARRIED OUT IN PARTNERSHIP SINCE LONG. HOWEVER, FRO M 1.4.2001, THE FIRM WAS DISSOLVED AND WAS TAKEN OVER BY THE AS SESSEE, WHO WAS ONE OF THE PARTNERS IN THE SAID FIRM. DURIN G COURSE OF SEARCH, ON 23.10.2002, STOCKS WERE FOUND AT RS. 9,4 6,945/- AS -: 6: - 6 AGAINST STOCK AS PER BOOKS, WHICH WAS CALCULATED AT RS. 14,69,779/-. THUS, THERE WAS A SHORTAGE OF STOCK AM OUNTING TO RS. 4,72,834/- (RS. 14,69,779/- (-) RS. 9,46,94 5/- ). WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER MADE ADDITION OF RS. 56,740/- ON THE GROUND THAT THE STOCK WAS FO UND LESS AT RS. 4,72,834/-, WHICH IS ON ACCOUNT OF SALES MADE O UTSIDE THE BOOKS OF ACCOUNT. HE ESTIMATED GROSS PROFIT AT 12 % OF THE ALLEGED SALES OUTSIDE THE BOOKS OF ACCOUNT. ON THE BASIS OF LOOSE PAPERS, THE ASSESSING OFFICER REJECTED THE BO OKS OF ACCOUNT AND ESTIMATED SALES OUTSIDE THE BOOKS OF AC COUNT AT RS. 20 LAKHS. BY APPLYING GROSS PROFIT RATE AT 12 % , AN ADDITION OF RS. 2,40,000/- WAS MADE. THE ASSESSING OFFICER M ADE FURTHER ADDITION OF RS. 4 LAKHS ON ACCOUNT OF INVES TMENT ON CAPITAL REQUIRED FOR THE PURPOSE OF PURCHASE OUTSID E THE BOOKS OF ACCOUNT. BEFORE THE CIT(A), THE ASSESSEE CHALLEN GED ADDITION OF RS. 2,40,000/- AND ALSO ADDITION OF RS. 4 LAKHS BEING THE CAPITAL REQUIREMENT. HOWEVER, THE CIT(A) ENHANCED T HE INCOME OF ASSESSEE BY RS. 5,23,585/- BEING THE PURCHASE OU TSIDE THE BOOKS AT RS. 11,63,985/-. CONTENTION OF THE LD. AUT HORIZED -: 7: - 7 REPRESENTATIVE WAS THAT NO PAPER OR DOCUMENTS OR E VIDENCE WAS FOUND DURING COURSE OF SEARCH ABOUT THE PURCHAS E MADE OUTSIDE THE BOOKS OF ACCOUNT. AS PER LD. AUTHORIZED REPRESENTATIVE, THE PAPERS SO FOUND WERE TOTALLY RE LATED TO THE SALES. FURTHER CONTENTION OF THE LD. AUTHORIZED REP RESENTATIVE WAS AS UNDER :- IT IS HUMBLY SUBMITTED THAT THE WHOLE INCOME OF M/S. GOTHI BROS. ( FIRM) WAS ASSESSED ON THE BASIS OF LOOSE PAPERS SHOWING THE UNRECORDED SALES UP TO 25.10.2002. THE INCOME WAS ESTIMATED IN THE HANDS OF THE FIRM BY MENTIONING ALL THE FIGURES ABOUT THE DIFFERENCE IN THE STOCK AND THE SALES MADE ON THE LOOSE PAPERS. THE TOTAL INCOME WAS ADDED IN THE HANDS OF THE FIRM WITH AN ASSUMPTION THAT THE UNRECORDED SALES WERE MADE BY THE ERSTWHILE FIRM. THE LD. CIT(A) WHILE DEALING WITH THE APPEAL OF THE FIRM HAS EVEN ESTIMATED THE SALES AFTER 1.4.2001 AN D ESTIMATED THE INCOME AT 10 % OF THE SALES ( PAGE 36 OF THE PAPER BOOK ). THE HON'BLE TRIBUNAL HAS UPHEL D -: 8: - 8 THE SAID ADDITIONS IN ITS ORDER DATED 18.8.2011 VID E PAGES 50 TO 56 OF THE PAPER BOOK. THUS, IT IS HUMBL Y SUBMITTED THAT ONCE THE INCOME IS TAXED IN THE HAND S OF THE ERSTWHILE FIRM, THE SAME CANNOT BE ASSESSED AS AN INCOME OF THE ASSESSEE. ALTERNATIVELY, IT IS SUBMITTED THAT M/S. GOTHI BR OTHERS ( FIRM ) HAD ALREADY THE CAPITAL OF RS. 5,00,000/- AS PER THE ESTIMATE MADE BY THE LD. ASSESSING OFFICER AND CIT(A). UNDER THESE CIRCUMSTANCES, NO ADDITIONA L CAPITAL CAN BE ADDED AS UNDISCLOSED INCOME. 6. THE LD. AUTHORIZED REPRESENTATIVE ALSO PLACED O N RECORD THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF GOTHI BROTHERS DATED 18.08.2011 AND IT WAS CONTENDED AS U NDER :- IN THE CASE OF THE FIRM, M/S. GOTHI BROTHERS, THE ASSESSMENT HAD BEEN FRAMED ON THE BASIS OF THIS SEARCH FOR THE PERIOD FROM 1.4.1996 TO 25.10.2002 ( PAGE 20-24 OF P.B.). THE TOTAL SALES WERE ESTIMATED AT RS. 7.5 CRORES AND AFTER DEDUCTING THE GROSS PRO FIT UP TO ASSESSMENT YEAR 2001-02, THE ADDITION WAS -: 9: - 9 MADE AT RS. 50,50,212/-. IN THE CASE OF THE FIRM TH E MATTER WAS TAKEN BEFORE THE LD. CIT(A) WHO DETERMINED THE SALES SHOWN IN THE LOOSE PAPERS FOR DIFFERENT YEARS AND APPLIED THE GROSS PROFIT OF 10 %. THE LD. CIT(A) ALSO ESTIMATED THE SALES FOR THE ASSESSMENT YEAR 2002-03 AND FORM 1.4.2002 TO 25.10.2002 AT RS. 5 LAKHS EACH AND APPLIED THE GROSS PROFIT OF 10 % AND MADE THE ADDITION OF RS. 50,000/- FOR EACH YEAR TOTALING TO RS. 1,00,000/- ( PAGE 35 AND 26 OF THE PAPER BOOK ). THE LD. CIT(A) MAINTAINED THE ADDITION OF RS. 6,36,451/-, BEING 10 % OF THE SALE SHOWN IN THE LOOSE PAPERS. THE MATTER WAS TAKEN UP BEFORE THE HON'BLE TRIBUNAL BY THE DEPARTMENT IN I.T(SS).A.NOS. 92/2005 AND BY THE ASSESSEE IN C.O. 113/05. THE DEPARTMENT CHALLENGED THE DELETION F RS. 44,13,761/- ( RS. 50,50,212/- RS. 6,36,451/- ) AND IN C.O. THE ASSESSEE CHALLENGED THE ADDITIONS MAINTAINED AT RS. 6,36,451/-. THE HON'BLE TRIBUNAL AFTER -: 10: - 10 DISCUSSING THE ARGUMENTS ADVANCED BEFORE IT AND AFTER CONSIDERING THE FACTS, DISMISSED THE DEPARTMENTAL APPEAL AS WELL AS ASSESSEES C.O. THUS, IT WOULD BE SEEN THAT THE ADDITION FOR THE ASSESSMENT YEAR 2002-03 AND PART OF 2003-04 WERE CONFIRMED BY THE HON'BLE TRIBUNAL, BEING THE 10 % ON THE ESTIMATED SALES RECORDED IN THE LOOSE PAPERS. 7. IN VIEW OF THE ABOVE DECISION OF COORDINATE BENCH IN THE CASE OF M/S. GOTHI BROTHERS, IT WAS CONTENDED B Y LD. AUTHORIZED REPRESENTATIVE THAT EVEN IF ANY ADDITIO N IS TO BE MADE, THE SAME SHOULD BE RESTRICTED TO 10 % OF PROF IT ON ESTIMATED SALES RECORDED IN LOOSE PAPERS. 8. ON THE OTHER HAND, THE LD. SENIOR DR RELIED ON THE ORDERS OF LOWER AUTHORITIES AND CONTENDED THAT THE ASSESSING OFFICER HAS MADE ADDITION BY ESTIMATING PROFIT AS W ELL AS ESTIMATING INVESTMENT MADE IN UNACCOUNTED PURCHASES UTILIZED FOR MAKING THE ALLEGED SALES OUTSIDE THE B OOKS OF ACCOUNT. -: 11: - 11 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS REMAND REPORT FILED BY THE ASSESSING OFFICER AND RE JOINDER FILED BY ASSESSEE. FROM THE RECORD, WE FOUND THAT THE ASS ESSEE IS HUF AND IN THIS CASE, A SEARCH AND SEIZURE ACTION U /S 132(1) OF THE INCOME-TAX ACT, 1961, WAS CARRIED OUT ON 23. 10.2002 AND 24.10.2002 AND BUSINESS PREMISES AT SARAFA BAZA R, ITARSI. THE ASSESSEE STATED TO HAVE FILED ITS RETURN OF INC OME IN REPLY TO THE NOTICE U/S 158BD, ON 01.09.2003 SHOWING TOTA L INCOME OF RS. NIL FOR THE BLOCK PERIOD. THE NOTICE U/S 143 (2) OF THE INCOME-TAX ACT, 1961, WAS ISSUED ON 28.05.2004 AND SERVED UPON THE ASSESSEE ON 04.06.2004. THE ASSESSEE IS HU F HAVING SHRI SATISH CHAND GOTHI, SMT. PUSHPA GOTHI, SHRI SA NDEEP GOTHI, SHRI SANJEEV GOTHI AND SHRI SACHIN GOTHI AS MEMBERS. THE HUF IS HAVING SOURCE OF INCOME FROM M/S. GOTHI BROS. DURING THE COURSE OF SEARCH, SHORTAGE IN STOCK WAS FOUND ON WHICH ASSESSING OFFICER HAS ESTIMATED GROSS PROFIT OF 12 %, ACCORDINGLY, ADDITION OF RS. 56,00,740/- WAS MADE. BY THE IMPUGNED ORDER, THE LD. CIT(A) DIRECTED THE ASSESSI NG OFFICER TO -: 12: - 12 APPLY NET PROFIT RATE INSTEAD OF GROSS PROFIT. WE F OUND THAT AFTER CONSIDERING THE DECISION OF JURISDICTIONAL HIGH COU RT REPORTED AT 263 ITR 610 AS WELL AS HON'BLE GUJARAT HIGH COUR T REPORTED IN 158 CTR 372, THE LD. CIT(A) HAS CORRECTLY DIRECT ED THE ASSESSING OFFICER TO, SUSTAIN ADDITION BY APPLYING NET PROFIT RATE INSTEAD OF GROSS PROFIT RATE. THE PRECISE OBSE RVATION OF CIT(A) WAS AS UNDER :- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATIONS OF THE ASSESSING OFFICER IN ASSESSMENT ORDER. IT MAY BE NOTED THAT THERE IS NO DISPUTE AS REGARDS THE SHORTAGE OF STOCK AMOUNTING TO RS. 4,72,834/- AS ALSO THAT SUCH STOCK MAY HAVE BEEN SOLD IN UNACCOUNTED MANNER. THERE IS ALSO NO DISPUTE ON THE G.P. RATE AT 12% BEING DECLARED BY THE APPELLANT. THE ONLY DISPUTE OF THE APPELLANT IS THAT WHILE DETERMINING THE PROFIT N.P.RATE SHOULD HAVE BEEN APPLIED AND NOT THE GROSS PROFIT. THE APPELLANT HAS PLACED -: 13: - 13 RELIANCE ON THE DECISION OF HON'BLE HIGH COURT MADHYA PRADESH IN THE CASE OF BALKISHAN AJITKUMAR VS. CIT 263 ITR 610. IT MAY BE NOTED THAT IN THE CASE OF M/S BALKISHAN AJITKUMAR, THE HON'BLE COURT HAS OBSERVED THAT THE TOTAL SALE CANNOT BE PROFIT AND THAT THE SALES COMPRISES THE COST OF PURCHASES, OTHER EXPENSES AND THE PROFIT INVOLVED IN SUCH SALES. THE HON'BLE COURT HAS ALSO REFERRED AND RELIED ON THE DECISION OF HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES REPORTED IN (2000) 158 CTR 372. IN THIS CASE, THE HON'BLE GUJARAT HIGH COURT HAS ALSO HELD THAT THE SALES ONLY REPRESENTED PRICE RECEIVED BY THE SELLER OF THE GOODS AND FOR ACQUISITION OF WHICH THE SELLER HAS ALREADY INCURRED THE COST INCLUDING PURCHASE PRICE AND OTHER EXPENSES. THE HON'BLE COURT HAS FURTHER OBSERVED THAT UNLESS THERE IS A FINDING TO THE AFFECT THAT THE PURCHASE PRICE FOR -: 14: - 14 AFFECTING SUCH SALES AND OTHER EXPENSES WERE ALSO NOT SHOWN IN THE BOOKS OF ACCOUNT THE TOTAL SALES VALUE CANNOT BE ADDED. ON CAREFUL CONSIDERATION OF THE CASE LAWS REFERRED TO AND DISCUSSED ABOVE, IT IS GATHERED THAT THE HON'BLE COURT HAVE ONLY HELD THAT THE TOTAL AMOUNT OF SALES CANNOT BE THE INCOME UNLESS THE EXPENDITURE INCLUDING PURCHASES AND OTHERS RELATED TO SUCH SALES ARE ALSO FOUND TO BE OF UNACCOUNTED NATURE. THE HON'BLE JURISDICTIONAL HIGH COURT HAS ACCORDINGLY, HELD THAT IN SUCH CIRCUMSTANCES, ONLY NET PROFIT CAN BE ESTIMATED AND TAXED AS INCOME AND NOT THE GROSS PROFIT. IT MAY BE STATED THAT THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IS BINDING ON THE REVENUE AUTHORITIES AND IN VIEW OF VERY SPECIFIC DECISION IN THE ABOVE MENTIONED CASE, IT IS HELD THAT NET PROFIT RATE SHOULD BE APPLIED ON SUCH TOTAL SALES AND NOT THE GROSS PROFIT. -: 15: - 15 THE ASSESSING OFFICER IS ACCORDINGLY, DIRECTED TO APPLY NET PROFIT RATE SHOWN BY THE APPELLANT IN THE RELEVANT ASSESSMENT YEAR TO DETERMINE THE QUANTUM OF TAXABLE INCOME. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT THE PHYSICAL STOCK FOUND DURING TH E COURSE OF SEARCH WAS SHORT BY RS. 4,72,834/- AS COMPARED TO T HE STOCK AS PER BOOKS OF ACCOUNT. THE SHORTAGE IN STOCK IS T O BE TREATED AS SALES MADE BY THE ASSESSEE OUT OF BOOKS OF ACCOU NT, ACCORDINGLY, THE CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO APPLY NET PROFIT RATE ON SUCH UNACCOUNTE D SALES AND TO RETAIN ADDITION TO THAT EXTENT, THE DECISION OF CIT(A) WAS ARRIVED AT AFTER CONSIDERING THE PROPOSITION OF LAW LAID DOWN BY JURISDICTIONAL HIGH COURT AS REPORTED IN 268 ITR 610, ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THIS P ART OF THE ORDER OF THE CIT(A) FOR DIRECTING THE ASSESSING OFF ICER TO UPHOLD ADDITION TO THE EXTENT OF NET PROFIT RATE ON THE SA ID SHORTAGE OF STOCK. -: 16: - 16 11. NOW COMING TO THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED SALES FOUND AS PE R B.S-1 TO BS-6 AND BS-11, BS-13 AT RS. 20,13,928/-. OUT OF TH IS UNACCOUNTED SALES, SALES OF M/S. GOTHI BROTHERS WAS DETERMINED AT RS. 11,63,985/-. HOWEVER, BY REJECTIN G BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS ESTIMATED UNACCO UNTED SALES AT RS. 20 LAKHS IN PLACE OF ACTUAL SALE OF RS . 11,63,985/-, AFTER APPLYING GROSS PROFIT RATE OF 12 % AND ADDITI ON OF RS. 2,40,000/- WAS MADE. THE ASSESSING OFFICER ALSO MAD E ADDITION OF RS. 4 LAKHS ON ACCOUNT OF UNACCOUNTED P URCHASES. THUS, THE TOTAL ADDITION MADE AT RS. 6,40,000/- ( R S. 4 LAKHS + RS. 2.40 LAKHS), THE LD. CIT(A) ENHANCED THE ADDITI ON TO RS. 11,63,985/-. THE PLEA OF CIT(A) WAS THAT SALES AMOU NTING TO RS. 11,63,985/- WAS VERY MUCH EVIDENCED FROM THE SE IZED DOCUMENTS. AGAINST THIS ORDER OF CIT(A), THE ASSESS EE IS IN FURTHER APPEAL BEFORE US 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS REMAND REPORT FILED BY THE ASSESSING OFFICER AND TH E REJOINDER -: 17: - 17 FILED BY THE ASSESSEE. FROM THE RECORD, WE FOUND TH AT THE TOTAL UNRECORDED SALES OF RS. 20,13,928/- PERTAINING TO T WO CONCERNS, NAMELY, M/S. GOTHI BROTHERS AND M/S. ASEE M AGENCIES WERE FOUND AS PER SEIZED DOCUMENTS BS-1 TO BS-6 AND BS-11 TO BS-24. ON THE BASIS OF TOTAL UNRECORDE D SALES OF RS. 11,63,985/- UP TO A SPECIFIC PERIOD, THE ASSESS ING OFFICER ESTIMATED TOTAL UNACCOUNTED SALES AT RS. 20 LAKHS O N WHICH GROSS PROFIT AT 12 % WAS ESTIMATED. ACCORDINGLY, PR OFIT WAS DETERMINED AT RS. 2,40,000/-. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS. 4 LAKHS ON ACCOUNT OF UNACCOUNTED P URCHASES, TOTAL OF SUCH ADDITION WAS ENHANCED BY THE LD.CIT(A ) TO RS. 11,63,985/-. ON THE BASIS OF DOCUMENTS PLACED ON RE CORD, WE FOUND THAT SEIZED DOCUMENTS BS-1 TO BS-6, BS-11 TO BS-23 INDICATE ONLY UNACCOUNTED SALES. NONE OF THE LOWER AUTHORITIES HAS REFERRED TO ANY DOCUMENT FOUND DURING COURSE OF SEARCH TO INDICATE THAT THE ASSESSEE HAS ALSO MADE INVESTMENT ON ACCOUNT OF UNACCOUNTED PURCHASES. SINCE NO DOCUMENT WAS FOUND INDICATING ANY INVESTMENT HAVING BEEN MADE BY THE ASSESSEE FOR PURCHASES OF SUCH STOCK, THERE IS NO J USTIFICATION -: 18: - 18 ON THE PART OF LOWER AUTHORITIES FOR ADDING ENTIRE AMOUNT AS INVESTMENT IN UNACCOUNTED PURCHASES. SINCE THE DOCU MENT SO FOUND DURING THE COURSE OF SEARCH ONLY INDICATED UN ACCOUNTED SALES, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION BY COMPUTING 12 % GROSS PROFIT ON THE UNRECORDED SALES OF RS. 11,63,985/- AS FOUND DURING COURSE OF SEARCH, WHICH WORKS OUT TO BE RS. 1,39,678/-. HOWEVER, THE ASSESSING OF FICER HIMSELF HAS ALLOWED SET-OFF OF RS. 56,740/-, BEING PROFIT ADDED IN RESPECT OF SHORTAGE OF STOCK OF RS. 4,72,834/-. THUS, WE DIRECT THE ASSESSING OFFICER TO RETAIN ADDITION OF RS. 82,938/- ( RS. 1,39,678/- (-) 56,740/-). NOW COMING TO ADDITIO N MADE ON ACCOUNT OF INVESTMENT IN ESTIMATED PURCHASES MADE F OR EFFECTING SALES OF RS. 11,63,985/-. IT IS NOT THE C ASE OF REVENUE THAT ENTIRE SALES OF RS. 11,63,985/- WAS EFFECTED B Y SINGLE SALE TRANSACTION. ON THE CONTRARY, THERE WERE NUMEROUS TRANSACTIONS OF SALES SPREADING OVER THE ENTIRE PER IOD OF 19 MONTHS. AT THE MOST, IT CAN BE SAID THAT AT A TIME ASSESSEE WAS KEEPING STOCK OF ONE MONTH SALES. FROM THE RECO RD, WE FOUND THAT SALES OF RS. 11,63,985/- WAS FOUND IN RE SPECT OF -: 19: - 19 PERIOD 1 ST APRIL, 2001 TO 25 TH OCTOBER, 2002. THUS, IT WAS SALES OF 19 MONTHS. AVERAGE MONTHLY SALES WORKS OUT TO BE RS. 61,262/-, AFTER REDUCING 12 % PROFIT, WHICH WORKS O UT TO BE RS. 7351/-, THE NET AMOUNT OF COST OF PURCHASES REM AINS TO BE RS. 53,911/-. THUS, THE MAXIMUM ADDITION WHICH CAN BE MADE ON ACCOUNT OF INVESTMENT IN UNACCOUNTED PURCHA SE SHOULD BE TO THE TUNE OF RS. 53,911/-. TOTAL ADDITI ON ON ACCOUNT OF PROFIT ON UNACCOUNTED SALES AND INVESTME NT IN PURCHASES WORKS OUT TO BE RS. 1,36,849/- ( RS. 82,9 38/- + RS. 53,911/-). ACCORDINGLY, THE ORDERS OF BOTH THE LOWE R AUTHORITIES BE MODIFIED AND TOTAL ADDITION OF RS. 11,63,985/- I S RESTRICTED TO RS. 1,36,849/-. 13. IN GROUND NO. 3, THE ASSESSEE HAS AGGRIEVED FOR ADDITION OF RS. 66,400/- ON ACCOUNT OF INCOME FROM HOUSE PROPERTY. 14. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THIS ISSUE IS DISCUSSED BY THE ASSESSING O FFICER IN PARA 5 AT PAGE 4 OF THE ASSESSMENT ORDER. AS PER TH E ASSESSING OFFICER THE RETURN FOR A.Y. 1997-98 & 1998-99 WAS N OT FILED -: 20: - 20 U/S 139 OF THE IT ACT. IN THE RETURN OF INCOME FILE D FOR A.Y. 1999-00 THE ASSESSEE HAS SHOWN HOUSE PROPERTY INCOM E OF RS. 31125/- FROM ITS HALF SHARE IN HOUSE AT BHOPAL AND FULL SHARE IN HOUSE AT ITARSI. THE ASSESSING OFFICER HAS ALSO MENTIONED THAT IN THE NOTE REGARDING HOUSE PROPERTY, THE ASSE SSEE HAS MENTIONED THAT SUCH INCOME WAS EARNED SINCE PAST SE VERAL YEARS. THE ASSESSING OFFICER ACCORDINGLY, HELD THAT AS PER THE ASSESSEES OWN ADMISSION IT DERIVED INCOME FROM HOU SE PROPERTY IN A.Y. 1997-98 & 1998-99 AS PER COMPUTATI ON BELOW:- 15. THUS, THE ASSESSING OFFICER HAS COMPUTED INCOME FRO M HOUSE PROPERTY AT RS. 33,200/- FOR THE ASSESSMENT Y EAR 1997- ALV OF BHOPAL HOUSE LESS:1/5 TH DEDUCTION FOR REPAIRS & COLLECTION RS.33,000/- RS. 5,000/- RS.28,000/- HALF SHARE OF PROPERTY RS.14,000/- ALV OF ITARSI HOUSE LESS: 1/5 TH DEDUCTION FOR REPAIRS & COLLECTION RS.24,000/- RS. 4,800/- NET INCOME FROM HOUSE PROPERTY TOTAL INCOME FROM HOUSE PROPERTY RS.19,200/- RS.33,200/- -: 21: - 21 98 AND 1998-99 AND THE SAME WAS HELD TO BE UNDISCLO SED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CAREFULLY CONSIDERED THE OBSERVATION OF THE ASSESSING OFFICER AS ALSO THE SUBMISSION OF THE APPELLANT. IT IS NOTED THAT THE APPELLANT HAS NOT DISPUTED THE TAXABILITY OF INCOME UNDER THE HEAD HOUSE PROPERTY AND ONLY CLAIM FOR DEDUCTION U/S 23(1) FOR RS. 3,600/- PER ANNUM HAS ONLY BEEN MADE. IT MAY BE STATED THAT SUCH CLAIM IS ALLOWABLE ONLY WHEN THE HOUSE PROPERTY IS CONSTRUCTED PRIOR TO PERIOD 31.03.1992. IN THIS CONTEXT IT IS NOTED THAT THE APPELLANT HAS NOT MADE SUCH CLAIM DURING THE ASSESSMENT PROCEEDINGS NOR HAS FILED ANY EVIDENCE TO PROVE THAT THE HOUSE PROPERTY WAS COMPLETED BY THE STIPULATED TIME. IN ABSENCE OF THE SAME, THE DEDUCTION CLAIMED BY THE APPELLANT CANNOT BE -: 22: - 22 ALLOWED. THE ADDITION MADE BY THE ASSESSING OFFICER IS ACCORDINGLY CONFIRMED. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT IN THE BLOCK RETURN, THE ASSESSEE HAS MENTIONED THAT SUCH INCOME FORM HOUSE PROPERTY WAS EARNED SINCE PAST SEVERAL YEARS. AS THE ASSESSMENT YEARS 1 997-98 AND 1998-99 WAS FALLING IN THE BLOCK PERIOD, THE ASSESS ING OFFICER WAS JUSTIFIED IN MAKING ADDITION OF RS. 33,200/- FO R EACH OF THE YEAR. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR UPHOLDING THE ADDITION MADE ON ACCOUNT O F HOUSE PROPERTY. 17. IN GROUND NO.4, THE ASSESSEE IS AGGRIEVED FOR ADDIT ION OF RS. 34,731/- ON ACCOUNT OF INTEREST ON FDR AND N SC. IN THIS REGARD, WE FOUND THAT THE ASSESSEE HAS SHOWN I NTEREST ON NSC ON ACCRUAL BASIS AND THE ACCRUED INTEREST IN VA RIOUS ASSESSMENT YEARS IS ESTIMATED AT RS. 30,728/-. THE INTEREST SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME WAS F OUND AT RS.13,106/- AND THEREFORE, THE UNACCOUNTED INTEREST WAS ARRIVED AT RS. 17,622/- (RS. 30728 RS. 13106). TH E -: 23: - 23 ASSESSING OFFICER FURTHER OBSERVED THAT IN THE RETU RN OF INCOME FOR A.Y. 1999-00 THE ASSESSEE HAS SHOWN ESTIMATED A CCRUED INTEREST OF RS.15,000/- ON AN FDR OF RS. 120,000/-. AS THE ASSESSEE HELD SUCH FDRS IN A.Y. 1997-98 AND 1998-99 , THEREFORE, THE ASSESSING OFFICER ESTIMATED ACCRUED INTEREST ON FDRS AT RS. 15,000/- EACH TOTAL FOR RS. 30,000/-. T HE ASSESSING OFFICER HAS ALSO DETERMINED INCOME ON ACC OUNT OF DIVIDEND, SAVING BANK INTEREST ETC. AND THE TOTAL Y EAR WISE COMPUTATION OF INCOME FROM OTHER SOURCES WAS DETERM INED AT RS. 34,731/-. 18. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ADDITION AFTER OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION WITH REGARD TO NOT DECLARING OF INT EREST AND DIVIDEND INCOME IN ITS RETURN. EVEN DURING THE COUR SE OF HEARING BEFORE US, NOTHING WAS BROUGHT TO OUR NOTIC E BY LD. AUTHORIZED REPRESENTATIVE SO AS TO PERSUADE US TO DEVIATE FROM THE FINDING RECORDED BY THE LOWER AUTHORITIES. ACCORDINGLY, WE CONFIRM THE ACTION OF THE LOWER AUT HORITIES FOR MAKING ADDITION OF RS. 34,731/- ON ACCOUNT OF INTER EST AND -: 24: - 24 DIVIDEND INCOME SO EARNED BY THE ASSESSEE DURING TH E BLOCK PERIOD 1997-98 TO 2002-03. 19. IN GROUND NO.10, THE ASSESSEE IS AGGRIEVED BY THE ACTION OF CIT(A) FOR CONFIRMING THE ADDITION OF RS. 50,000/- IN THE NAME OF VIMALCHAND AND INDERCHAND JAIN BOTH RES IDENT OF HYDERABAD. 20. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. DURING THE ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER HAS NOTICED FOLLOWING CREDITS/ DEPOSITS IN THE BANK STATEMENT OF THE ASSESSEE A/C. NO. 1438 P.N.B., ITA RSI. DATE AMOUNT ASSESSEES EXPLANATION 14.10.96 50000 BY DD RECEIVED FROM VIMAL CHAND JAIN 06.11.96 50000 BY DD RECEIVED FROM INDER CHAND JAIN TOTAL 100000 21. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS FA ILED TO DISCHARGE ITS BURDEN OF EXPLAINING THE SOURCE OF ABOVE DEPOSIT IN THE BANK. THE ADDITION OF RS. 1 LAKH WAS MADE. 22. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE FILED APPLICATION UNDER RULE 46A AND ADDIT IONAL EVIDENCE IN SUPPORT OF CREDIT LOAN AMOUNTING TO RS. 1 LAKH AND -: 25: - 25 IT WAS STATED THAT COPY OF ACCOUNT OF ABOVE CREDITO R WAS RECEIVED AFTER COMPLETION OF ASSESSMENT PROCEEDINGS . THE LD. CIT(A) SENT THESE DOCUMENTS TO THE ASSESSING OFFICE R FOR HIS COMMENTS. VIDE LETTER DATED 11.9.2008, THE ASSESSIN G OFFICER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE ASSESSEE HAS FAILED TO EXPLAIN SOURCE AND NATUR E OF DEPOSIT. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONF IRMED THE ACTION OF THE ASSESSING OFFICER AGAINST WHICH THE A SSESSEE IS IN FURTHER APPEAL BEFORE US. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D THE DOCUMENTS FILED BY THE ASSESSEE BEFORE THE LOWER AU THORITIES AS WELL AS DOCUMENTS FILED UNDER RULE 46A. WE FOUND TH AT BOTH AMOUNT OF LOAN WAS GIVEN BY ACCOUNT PAYEE DEMAND DR AFT. THE ASSESSEE HAS ALSO FILED AUDITED FINANCIAL STATEMENT , PROFIT AND LOSS ACCOUNT, BALANCE SHEET AND COPIES OF BANK ACCO UNT OF SHRI VIMALCHAND JAIN AND SHRI INDERCHAND JAIN AND A LSO CONFIRMATION OF SUCH PERSONS DURING APPELLATE PROCE EDINGS. ALL THESE DOCUMENTS NOT ONLY ESTABLISH IDENTITY OF THE LOAN -: 26: - 26 CREDITOR BUT ALSO GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF LOAN CREDITOR IN SO FAR AS AMOU NT WAS GIVEN BY ACCOUNT PAYEE DRAFT AND SAME WERE DULY REFLECTED IN THE AUDITED BALANCE SHEET OF LOAN CREDITOR AS WELL AS A SSESSEE. THUS, THE ASSESSEE HAS DISCHARGED ITS INITIAL ONUS CASTED ON IT AS PER PROVISIONS OF SECTION 68. ACCORDINGLY, NO AD DITION IS WARRANTED. THE ASSESSING OFFICER IS DIRECTED TO DEL ETE THE SAME. 24. THE ASSESSEE IS ALSO AGGRIEVED FOR ADDITION OF RS. 3,85,000/- OFFERED AS AGRICULTURAL INCOME. 25. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FROM THE RECORD, WE FOUND THAT THE ASSESSE E HUF HELD 18 ACRES OF IRRIGATED LAND AT HOSHANGABAD DIST RICT. THE ASSESSEE HAS FURNISHED COPIES OF KHASRA OF SUCH LOA N AND CLAIMED THAT HE WAS GROWING MINIMUM TWO CROPS EVERY YEARS. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT ASSESS EE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT OR REGISTER IN RESP ECT OF AGRICULTURAL ACTIVITIES, NOR MENTIONED YEAR-WISE DE TAILS REGARDING YIELDS DERIVED FROM VARIOUS KINDS OF CROP . -: 27: - 27 ACCORDINGLY, AGRICULTURAL INCOME WAS TREATED AS IN COME FROM UNDISCLOSED SOURCE AND ADDITION WAS MADE. DURING TH E APPELLATE PROCEEDINGS, VIDE APPLICATION DATED 25.8. 2008, THE ASSESSEE HAS FILED AN APPLICATION UNDER RULE 46A, A ND EVIDENCE RELATING TO HOLDING OF AGRICULTURAL LAND A ND CERTIFICATE OF STATE OF REVENUE AUTHORITIES REGARDING THE PRODU CTION OF AGRICULTURAL PRODUCE WERE FILED. IT WAS STATED THAT THE ASSESSING OFFICER HAS NOT ALLOWED REASONABLE AND SU FFICIENT OPPORTUNITY FOR FURNISHING THESE EVIDENCES AND THAT THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE, PARTICU LARLY, DUE TO THE FACT THAT THE PATWARI AND TAHSILDAR AT THE T IME OF ASSESSMENT PROCEEDINGS WERE BUSY AND COULD NOT ISSU E THE KHASRA AND CERTIFICATE OF YIELD AND AGRICULTURAL PR ODUCE. THE LD. CIT(A) FORWARDED ALL THESE DOCUMENTS TO THE ASS ESSING OFFICER VIDE HIS LETTER DATED 28.2.2008 AND THE ASS ESSING OFFICER WAS REQUESTED TO GO THROUGH SUBMISSION INCL UDING THE FRESH EVIDENCE AND SUBMIT HIS REPORT THEREON. VIDE LETTER DATED 11.8.2008, THE ASSESSING OFFICER STATED THAT THE AS SESSEE HAS FURNISHED P-2 & P-3 KHASRA FORMS FROM PATWARI. HOWE VER, -: 28: - 28 THERE WAS VARIATION IN THE STATEMENT OF ASSESSEE IN AS MUCH AS DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITT ED REGARDING DIFFERENT CROPS. BY THE IMPUGNED ORDER, T HE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER BY OBSERVING THAT EVEN THE ADDITIONAL EVIDENCE FILED BY THE ASSE SSEE DURING THE ASSESSMENT PROCEEDINGS ONLY INDICATED THE AVERA GE YIELD OF A PARTICULAR CROP IN THE AVERAGE AREA OF THE ASSESS EE, WHICH DID NOT INDICATE OR PROVE THAT SUCH CROP WAS GROWN AND OBTAINED FROM THE PARTICULAR LAND. 26. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. WE FOUND THAT THE ASSESSEE HAS NOT ONLY FU RNISHED DOCUMENTARY EVIDENCE REGARDING OWNING OF AGRICULTUR AL LAND, BUT ALSO CERTIFICATE ISSUED BY THE PATWARI IN THE F ORMS P-2 AND P-3. MERELY BY POINTING OUT SOME DISCREPANCY IN THE CROP, THE ASSESSING OFFICER HAS DECLINED ASSESSEES CLAIM OF AGRICULTURAL INCOME. KEEPING IN VIEW THE LAND HOLDING AND THE CE RTIFICATE OF REVENUE OF STATE AUTHORITY REGARDING PRODUCTION OF AGRICULTURAL PRODUCE, WE DO NOT FIND ANY MERIT IN A CTION OF THE LOWER AUTHORITIES FOR DECLINE OF ASSESSEES CLAIM O F AGRICULTURAL -: 29: - 29 INCOME OF RS. 20,000/- IN ASSESSMENT YEAR 1997-98, RS. 75,000/- IN ASSESSMENT YEAR 1999-2000, RS. 75,000/- IN ASSESSMENT YEAR 2000-01, RS. 80,000/- IN ASSESSMENT YEAR 2001-02, RS. 85000/- IN ASSESSMENT YEAR 2002-03 AND RS. 50,000/- TILL 22.10.2002. ACCORDINGLY, WE HOLD THAT THE ASSESSEE HAS DERIVED TOTAL INCOME OF RS. 3,85,000/- ON ACCOUNT OF AGRICULTURAL INCOME. 27. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART IN TERMS INDICATED HEREINABOVE THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 13 TH MAY, 2013. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDIC IAL MEMBER ACCOUNTANT MEMBER DATED : 13 TH MAY, 2013. CPU* 6.8.5