TaxTMI 
TaxTMI 
2006 (12) TMI 186
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....an interval of about 6 to 7 days. The AO observed that the assessee had not written books of account from 1st April, 2002, upto the date of search and even for the preceding year the books had been written only upto 13th March, 2002, and the cash balance was last written on 23rd Oct., 2001. He, therefore, rejected the books of account by applying the provisions of s. 145 of the Act. During the course of search, a cash memos book running from bill Nos. 1 to 144 was found as Annex. A-1 Exh. 2 showing cash memos from 1st April, 2002. It was noted that bill Nos. 141 to 144 only mentioned the date and even the customer's copy were retained therein. No details of item sold were mentioned. From the above, the AO came to conclude that the assessee was issuing bills as per his convenience and not as per actual sale. A rough order booking pad mentioned as Exh. 3 of Annex. A-1 running from pp. 1 to 4 was found. It was noticed that the earlier pages of this pad were torn off. Similar position was there in respect of Exh. 4 and pp. 9 to 14 of Exh. 8 which represented the business conducted by the assessee outside the books of account. The statements of the Halwais working with the assessee, nam....
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.... have made actual sale of Rs. 8,000 per day on normal days against the sales reflected by him at Rs. 2,500 to Rs. 3,500 in his books of account. The AO observed that the assessee's statement was full of contradictions, as in response to question No. 15, the assessee had admitted average sales of Rs. 10,000 on normal days and Rs. 25,000 on festival days. Similarly, catering income was also admitted not have been shown properly by equal amount. The assessee, further in response to question No. 16, admitted that he had not shown sales property in his books of account for the last six years and the same basis be adopted for such earlier years. The AO further took assistance from the statements of Shri Hemdass (father), Shri Mohan Lal Vaishnav (father-in-law), Shri Prakash Vaishnav (brother-in-law), Shri Bhagwan Singh (accountant) and Halwais. The AO further noted that the Department had found clear evidence of unaccounted sales, wages, electricity, etc., which divulges that the assessee was carrying on business outside the books of account in earlier six years and such evidence compelled the assessee to disclose unaccounted sales. In the return for block period, the assessee offered eq....
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....Festival period sales for 60 days @ Rs. 23,000 per day 13,80,000 Normal day sales for 300 days @ Rs. 10,000 per day 3,00,00,000 ----------- 43,80,000 ----------- Since the assessee had shown sales in the books of account at Rs. 18,85,739, the learned CIT(A) opined that the undisclosed sales were to be taken at 1.32 times more of the recorded sales and unrecorded catering receipts were also to be estimated at the same level of 1.32 times. Both the sides are in appeal against their respective stands. 4. We have heard both the sides and perused the relevant material on record. Insofar the application of provisions of s. 145 is concerned, it is not contested that the books of account were found incomplete during the course of search. Further, the assessee had himself admitted and disclosed unrecorded sales at the same level at which such sales were recorded in the books of account. We are of the considered opinion that the learned CIT(A) was justified in upholding the rejection of books of account. Now, coming to the merit of the addition, from the narration of the above facts, it is clear that the assessee was not present when the search action was taken on 10th April, 2002....
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....siness. Then the statement of Shri Hemdass Vyas, father of the assessee, who was questioned about the receipt of envelopes containing cash for the four days prior to the date of search. Since he was not assisting the assessee in his business, so there was no question of his making any assertion about the average daily sales. Insofar as statements of two Halwais are concerned, they have only mentioned about the quantity of sweets manufactured by them on daily basis, which has not been considered by the AO because he had not moved from the production angle but has estimated the amount of sales directly. Now, comes the statement of the assessee himself, which is available at p. 41 onwards of the PB. In reply to question No. 9, he stated that his average daily sales were between Rs. 7,000 to Rs. 8,000. In the immediately next question, he stated the figure of average sales at Rs. 8,000 to Rs. 10,000 on normal days and Rs. 20,000 to Rs. 25,000 on the festival days. In reply to question No. 12, he stated the mode of calculating the festival days by explaining five days prior to Holi and ten days after Holi were festival days. Similarly, 10 days prior to Diwali and 15 days thereafter were....
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....T (2005) 97 TTJ (Mumbai) 377 : (2005) 96 ITD 113 (Mumbai). The Hon'ble Kerala High Court in the case of Vas ant Gordhandas vs. CIT (2005) 195 CTR (Ker) 415 : (2005) 142 Taxman 33 (Ker) refused to give any credence to the assessee's alleged threat by the Department and hence retraction was not allowed. Adverting to the facts of the case, we observe that the assessee had admitted in his original statement that the unrecorded sales were there which fact is corroborated by assessee's own disclosure of undisclosed sales and catering receipts at equal amount in the block return. Under these circumstances, it is not permissible to give any weightage to the subsequent affidavit filed by the assessee retracting from his original statement. Now, we come to the estimate of sales. There is no dispute about the fact that the basis of the estimated sales for the entire block period is the sales for financial year 2001-02. It is noticed that the assessee had given reply to question No. 12 in his statement that there were 50 to 60 festival days in a year, which comprised of 5 days prior and 10 days after Holi. It is only on the basis of this statement that both the assessee and the AO have bifurca....
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....sales for normal days and Rs. 25,000 per day for festival days. In our considered opinion, the estimate of sales at Rs. 10,000 sustained by the learned CIT(A) for normal days is perfectly in order. Accordingly, the sales for Financial year 2001-02 are calculated as under: 1. Festival period sales for 60 days @ Rs. 25,000 Rs. 15,00,000 per day 2. Normal day sales for 300 days @ Rs. 10,000 Rs. 30,00,000 per day ------------- Rs. 45,00,000 ------------- The assessee has shown sales in his books of account at Rs. 18,85,739, which means the undisclosed sales are at 1.38 times more than the recorded sales. Insofar as the unrecorded catering receipts are concerned, we observe that the assessee as well as both the authorities below have made their estimate on the same basis in which unrecorded sales have been considered. We, therefore, direct that the unrecorded catering receipts be also estimated at 1.38 times more than that as shown by the assessee in his books of account. In this way the undisclosed business receipts for the entire block period are determined as under: --------------------------------------------------------- Asst. yr. Disclosed Undisclosed sales [1.3....
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....Rs. 1 lakh in the name of Shri Hemdass dt. 7th Jan., 2002 purchased from SBI, Shastri Nagar, Jodhpur was explained to have been purchased out of pension which was regularly deposited by him along with a sum of Rs. 60,480 which was receipt of maturity amount of LIC. The AO treated it as also explained. However, another FDR of Rs. 1 lakh purchased by Shri Hemdass from Bank of India on 9th Jan., 2002 was not accepted, the source of which was stated to be his past savings and from the retirement benefits which were received by him in July, 1989 from Indian Air Force 13 years ago. It was stated in the statement recorded on 27th April, 2002 that at the time of retirement a sum of Rs. 1 lakh was received and a sum of Rs. 50,000 was available with him in cash. Out of that, Rs. 1 lakh was deposited with his brother-in-law who was carrying on business of sweets shop at Kota and balance amount of Rs. 50,000 was deposited in FDR. Thereafter, a sum of Rs. 60,000 was received which was given on interest to various parties at Mumbai through his daughter, Smt. Shashi Vaishnav. A sum of RS. 1,20,000 was received back from her daughter around two and a half years ago out of which FDR of Rs. 1 lakh w....
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.... given by him to his daughter, Smt. Shashi Vaishnav who had advanced this amount to some parties at interest and the entire amount was received back around two and a half years ago at Rs. 1,20,000 out of which this FDR of Rs. 1 lakh was purchased. The learned CIT(A) has not accepted the assessee's contention on the ground that another FDR of Rs. 1 lakh purchased from the SBI has been accepted by the AO which has been financed out of his retirement benefits. This version of the learned first appellate authority is erroneous on the ground that the first FDR of Rs. 1 lakh purchased from SBI was stated to have been financed out of pension and maturity amount of LIC of Rs. 60,000 and odd. The investment of retirement benefits was never stated by Shri Hemdass to have been used for purchasing the FDR from SBI. It was only in support of the source of FDR of Rs. 1 lakh purchased from Bank of India that he had submitted to have resulted from the receipt from his daughter of the amount with interest given on deposits by her to various parties in Mumbai out of his retirement benefits. The AO had not bothered to examine Smt. Shashi Vaishnav in this regard before rejecting the assessee's content....
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....d. The AO conducted enquiry from M/s Shriram Studio regarding payment made to it for photography and videography of Yagya function. That party stated that the amount of Rs. 7,377 was paid by Shri Hemdass Vyas. This was confronted to the assessee who denied any knowledge of the same. The AO held that the entire expenditure of Rs. 2,51,069 recorded in this diary was incurred by the assessee. Addition so made was confirmed in the first appeal. 10. We have heard both the sides and perused the relevant material on record. Shri Hemdass was questioned on the Grasim diary only on 27th April, 2004 in which he stated that the entire expenditure recorded in the Grasim diary was borne by Bhaktas. About the payment of Rs. 7,337 to Shree Ram Studio, he stated that he went only to make the payment and that is the reason for which that party might have accounted for the transaction in his name. In response to question No. 13, Shri Hemdass stated that he was the main organizer of the Katha and that is the reason for which the names of his family members appeared in the diary. He further explained that the said diary clearly contained a list of several persons with whose co-operation this event was....
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....e same time, it is also a fact that the assessee was the main organizer of the event and it is not possible to rule out the contribution of Shri Hemdass. In order to make a fair estimate, it is observed that the said diary contains list of 124 Bhaktas and when the name of Shri Hemdass is also included, the total number of Bhaktas come to 125, which on an average, gives average expenditure of Rs. 2,010 per person. Even going by the statement of the representative of M/s Shree Ram Studio, which is only evidence with the Department to the effect that Shri Hemdass had made payment for Rs. 7,337, the maximum amount of addition, which can be confirmed on this aspect, is roughly Rs. 10,000 (inclusive of average expenditure). While disposing of ground No. 1 of the Revenue as well as the assessee, we have upheld the addition to the tune of Rs. 4,45,677, which means that the assessee had earned income of this magnitude out of his books of account. The outgo of Rs. 10,000 on the organization of Katha by the assessee's family, as discussed above, would stand set off against the undisclosed income from the business operations. Thus, no separate addition can be sustained on this aspect. This gro....