TaxTMI 
TaxTMI 
2006 (12) TMI 186
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.... being written by him at 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 worki....
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....o question No. 15 of his statement recorded on 19th April, 2002 that the sales at the time of festival was Rs. 25,000 daily on average. He also admitted in response to question No. 12 that there were 60 days of festival like Holi, Diwali, Raksha Bhandan, Dussehra, etc. in a year. Thereafter, the AO proceeded to estimate the amount of sales for calculating the undisclosed income. In this regard, it was observed that the assessee had stated to 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 (fathe....
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....5,000 and on festival days at Rs. 25,000 by making calculation as under: Rs. 25,000 X 60 days = Rs. 15 lakhs Rs. 15,000 X 300 days = Rs. 45 lakhs ------------ Rs. 60 lakhs ------------ Sales declared Rs. 18,85,739 In this way, the AO calculated the unrecorded sales at higher figure as against equal amount offered by the assessee. He further took into consideration the ratio of recorded to unrecorded expenses for the financial year 2001-02 at pp. 15 to 16 of the assessment order at 1st June, 1996. On such calculation, he applied net profit rate of 25 per cent as against 20 ....
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....count 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. It was only on 19th April, 2002 that his statement was recorded on his return. The AO has estimated the unrecorded sales and catering receipts for the block period at about twice the declared receipts on the strength of the statements of various persons, which we would deal with one by one. First, is the statement of Shri Mohan Lal Vaishnav who is the father-in-law of the assessee. Copy of the statement is available at p. 48 of the PB. In response of question No. 1, he stated himself to be a retired person, 70 years old and looking after the business of his son-in-law, Shri Suresh Vyas for 3 to 4 hours during the period when he remains out of shop. In response to question No.9, he ad....
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.... 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 festival days and in this way, total festival days in a year come between 50 to 60 days. While giving answer to question No. 14, he admitted that between Rs. 1,50,000 to Rs. 2 lakhs were catering receipts not recorded in the books of account. While giving answer to question No. 15, he finally admitted that there was sale of Rs. 10,000 on normal days and Rs. 25,000 on festival days as against Rs. 2,500 to Rs. 3,500 recorded in the books of account. It is borne out from the record that the assessee retracted from his statement by furnishing affidavit dt. 30th Sept., 2002 alleging that the statement was extracted under the threat of dire consequences. We are not inclined to accept the re....
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....sessee 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 bifurcated sales into two parts being festival days and normal days. The AO has estimated the sales for festival days at Rs. 25,000 per day as against Rs. 22,000 per day shown by the assessee and Rs. 23,000 calculated by the first appellate authority. In answer to question No. 10, the assessee stated the figure of estimated sales on festival days between Rs. 20,000 to Rs. 25,000, then in answer to question No. 15, such figure was finally given at Rs. 25,000 per day. In our considered opinion, sales for festival days are to be adopted at Rs. 25,000 per day on the ground that apart from assessee's own statement admitting sales at Rs. 25,000 per day, the actual cash found in envelopes for 6th Ap....
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.... ------------- 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 tha....
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....bsp; 42,766 42,766 59,018 --------------------------------------------------------- Total 74,11,874 1,02,28,386 --------------------------------------------------------- The assessee had shown net profit rate of 20 per cent on the undisclosed sales which the AO had enhanced to 25 per cent and the learned CIT(A) again reduced it to 20 per cent. Page 36 of the PE is the GP rate chart for several years. For the asst. yr. 2002-03, the base year under consideration, the assessee had shown GP rate of 19.98 per cent as against 16.99 per cent for the immediately preceding year. While furnishing the return for the block period, the assessee had shown net profit @ 20 per cent on the undisclosed sales which is perfectly justified and compares favourably with the GP rate of the preceding year. In our considered opinion, no interference can be made in the impugned order insofar as application of net profit rate of 20 per cent is concerned. In view....
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....dhpur. She furnished affidavit during the course of assessment proceedings by stating that the FDR was purchased out of her life long savings. Explaining further, it was stated that she received gifts from her relatives in cash. During the course of assessment proceedings her statement was recorded on 26th April, 2004 in which she replied that Rs. 50,000 were given on interest to various parties at Mumbai through her daughter about 10 years ago and she received Rs. 1,10,000 from her daughter out of which the abovesaid FDR was purchased. The AO did not accept this contention and held to have been purchased out of undisclosed income of the assessee. Resultantly, an addition of Rs. 2 lakhs was made. The learned CIT(A) in the first appeal confirmed the addition of Rs. 2 lakhs on merits but allowed benefit of telescoping out of the addition of Rs. 3,56,734 sustained by him on account of undisclosed business income of the assessee. Both the sides are in appeal against their respective stands. 7. We have heard both the sides and perused the relevant material on record. During the course of search when the statement of Shri Hemdass was recorded on 10th April, 2002, he replied to questio....
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....y her from five brothers on different occasions in the past several years which amount came at Rs. 50,000 which was sent by her to Smt. Shashi Vaishnav for investing on interest. Here again, the AO has not brought any material on record, nor conducted any enquiry form Smt. Shashi Vaishnav on this aspect and proceeded to make addition. This approach of the AO cannot be held to be valid. The learned CIT(A), in our considered opinion, was not justified in not accepting the claim of the assessee on this count. We, therefore, hold that this addition cannot be sustained on merits. Ground raised by the assessee is allowed and that by the Revenue is dismissed. 8. Ground No. 3 of the assessee's appeal is against the confirmation of addition of Rs. 2,51,069 on account of Pooja expenses. 9. Briefly stated, the facts of this case are that during the course of search one Grasim diary was seized as Annex. A-16 having been written from pp. 1 to 26 containing details of Shree Mad Bhagwat Saptah Katha Gyan Yagya from 1st May, 2001 to 7th May, 2001 at Satsang Bhawan, Sardarpura, Jodhpur. The AO, on the scrutiny of details observed that the Yagya was got conducted by Shri Hemdass father of the ....
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....f the PB, it becomes abundantly clear that expenditure was incurred by 124 Bhaktas who have been named in the said diary. On the further perusal of this diary, it is noted that it contains the details of the program minutely along with expenditure to be incurred. At every place it is mentioned that approximately this much expenditure would be incurred under the respective heads. Further, most of the figures are rounded off to Rs. 100. The details basically include the activities to be done during the entire week of Yagya and the approximate expenditure to be incurred. It is true that when the function was organized such estimate must have got translated into the actual expenditure. But, to hold that it was only Shri Hemdass who incurred the entire expenditure is wholly out of place, more specifically in the light of the fact that the very first page of this diary mentions that the event is being organized by Bhaktas and further pages of the diary contain the list of such Bhaktas who were more than 100 in numbers. No question was asked from Shri Hemdass at the time of search under s. 132(4) about this diary. It was only during the course of assessment proceedings that when his state....
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.... 13. Facts of this ground are that during the course of search a loose page was seized as Exh. 6 of Annex. A, on which a figure of Rs. 7 lakhs was written. The assessee was asked to explain the nature of this paper and the amount written on it. It was stated that except for the amount of Rs. 7 lakhs, nothing was written on this page and even the amount of Rs. 7 lakhs was not written in the handwriting of the assessee or his family members or employees, etc. The AO did not accept the assessee's contention on the ground that the said loose paper, was found at the assessee's premises on which the name of Shri Amit Yadav, assessee's salesman, was written and then struck off. He, therefore, made addition of Rs. 7 lakhs, which was deleted in the first appeal. 14. After considering the rival submissions and perusing the relevant material on record, we have examined the copy of this loose paper, which is available at p. 106 of the PB. On this page, only 7,00,000 is written and on top of this page Amit Yadav is written and struck off. Thus, the only effective mention on this page of 7,00,000 is without any detail or narration. How this loose paper can be treated as undisclosed income o....