TaxTMI 
TaxTMI 
2006 (9) TMI 240
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....CIT(A), Ranchi has erred in allowing relief of Rs. 1,06,90,852 in respect of outstanding debtors found recorded in the seized documents PKS-1 to 126 in respect of Maa Durga Service Station, a proprietorship concern of Smt. Kanchan Khullar without adjudicating the substantive addition made in the hands of Smt. Kanchan Khullar and disregarding the joint submissions made by Sri Ashok Kumar Vig and Smt. Kanchan Khullar before the investigation wing in respect of undisclosed income of the concern M/s Maa Durga Service Station. 3. For that the learned CIT(A), Ranchi has erred in deleting addition of Rs. 2,70,000 in respect of undisclosed deposits made by the assessee in the names of Sunita, Renu & Soni at the HDFC Bank, Jamshedpur ignoring the notings on the seized documents pp. 87 to 98 of PKC-32 and holding the same to be Stri Dhan of the depositors. 4. For that the learned CIT(A) has erred in deleting addition of Rs. 11,000 in respect of the difference in the amount of investment noted in the seized documents pp. 37-45 of SK-I against disclosed investment made ignoring the provisions of sub-s. (4A) of s. 132. 5. For that the learned CIT(A) has erred in deleting addition of Rs. 4....
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....ecause no trial balance and P&L a/c can be prepared from the contents of the aforesaid diary. On verification, the entries in the diary reveal that it is a party ledger book in the form of diary which contains the accounts of different parties to whom petroleum products by Bhartiya Oil Company have been supplied indicating amount of bill and datewise payment details. The AO on the basis of entries recorded found that most of the cheque payments have been cleared in the bank account of Bhartiya Oil Company and Maa Durga Service Station. The AO further found on verification of the ledger accounts filed with the return of income of the assessee, does not indicate balances of few parties. Further the seized books of account of Bhartiya Oil Company do not reveal the transactions entered in this diary. The transactions contained in this diary are over and above the transactions disclosed in the return of income. Further it was found that few accounts of the parties recorded are duly disclosed in the return of income of M/s Bhartiya Oil Company. However, the transactions entered with the following parties during the financial years 2000-01 and 2001-02 have not been disclosed in the return....
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....d from party's ledger account. The AO could have also verified from the books of account that the same had been included in the receipt as the payments were already made during the year and there was no debt. Thus, on the facts and circumstances of the case, the addition of Rs. 67,01,380 and Rs. 77,02,747 made during the asst. yr. 2001-02 and 2002-03, respectively is deleted." 8. Shri Arun Kumar, learned Departmental Representative for the Department while assailing the order of the learned CIT(A) submitted that the document marked PKC-60, on the basis of which the additions have been made by the AO, was seized from assessee's premises. The presumption raised in such cases by virtue of the provisions of s. 132(4A) of the Act are twofold: (i) As the seized document was found from assessee's possession, hence he is the owner of this document, (ii) The entries found in this seized document are true. Learned counsel further submitted that the AO confronted the assessee with this document as regards the nature of these entries. The assessee took the stand that this diary marked PKC-60 is merely rough worksheet. No reliance can be placed on such entries to determine undisclo....
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....ng the proposition that the presumption in terms of provisions of s. 132(4A) of the Act is available to the AO while making assessment under s. 143(3)/158BC of the Act, learned Authorised Representative referred to the decision of Tribunal in the case of D.K. Gupta vs. Dy. CIT (1998) 60 TTJ (Del) 587 wherein it has been held that the presumption under s. 132 (4A) is not available for the purpose of framing assessment under Chapter XIV-B of the Act. He emphasized that the employee wrote the transactions in the diary marked 'PKC-60' for his reference only. A glance of the accounts for financial year 2000-01 and 2001-02 would reveal that there are 4 parties for the first year and one more party for the later year. It further shows rate, amount, payment received and balance. However, it is obvious that for the later year, the amount is quite different in case of respective party with no indication as to how the movement has taken place. Further, the AO has noted that many cheques have been found entered in the books of either Bhartiya Oil Company or M/s Maa Durga Service Station (a sister-concern). Learned Authorised Representative further contended that the AO, while presuming....
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....names were found mentioned. Therefore, he deleted the additions. 11. Further we find that the transactions appeared in the diary marked 'PKC-60' do not reveal that they are partywise account as there is no mention of any bill having been raised against the said transactions. The amounts mentioned therein appeared to be a consolidated figure but date on which these amounts are shown as outstanding is not mentioned. In both the years there is only one instance of payment received appears but the date and mode of receipt are not mentioned. The AO has also noted that cheques received as per this diary are duly recorded in the books of account. These accounts cannot be treated as reliable and properly maintained for another reason also. The next year's accounts give no indication regarding movement of amount. The parties, appearing at 2, 3 and 4 of the chart above, show drastic reduction in the balances but how the payments were accounted for is not forthcoming from these entries. The learned Authorised Representative has invited our attention to the fact that the AO did make enquiry, which the assessee has not disputed. However, the AO has brought on record the result of s....
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.... on verification of these seized books of account marked as PBS-102, 103, 90, 88, 83, 108, 76, 67 and 2 found that these are the party ledgers of Maa Durga Service Station for different financial years which contain the details of credit, sales of petroleum products like diesel and petrol, etc. and payment received from various parties. He further found in the party ledgers filed with the return of income for the respective assessment years that the amount of sundry debtors as on 31st March, 1996, 31st March, 1997, 31st March, 1998, 31st March, 1999, 31st March, 2000 and 31st March, 2001 have not been fully disclosed in the return of income of Maa Durga Service Station. The balances of the sundry debtors as per the above referred seized books of account and the details of sundry debtors disclosed in the balance sheet along with the return of income of the respective assessment year the difference has been calculated at Rs. 3,38,97,338, on the basis of which the AO has concluded the assessment. The relevant portions of the AO's order is reproduced hereunder for the sake of convenience: "It may be noted that the seized book marked as PBS-2 which is the party ledger for the curr....
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.... of petroleum products outside the books of account. It is to be noted that the seized books of account referred hereinabove contain the actual transaction of the business and have been very systematically and methodically maintained. The modus operandi of accounting becomes clear from the statement of Sri Nagarmal Jangid, an accountant of Maa Durga Service Station whose statement on oath was recorded under s. 132(4) of the IT. Act 1961 wherein in reply to the question "How books of account of the concern are maintained", Mr. Jangid has clearly narrated the method of accounting of the current year as well as of the earlier years. He has stated that PBS-5 and PBS-10 are the registers in which cash and credit sales are written by two persons of the concern attending A' & 'B' shifts. The day's cash balance is handed over by the person attending A ' shift to his incumbent who attends 'B' shift. With the help of PBS-5 and PBS-10, PBS-48, which is the day's total cash report, is written. Further, with the help of PBS-5 and PBS-10, bills for credit sales are issued and posted in the party ledger marked as PBS-2. Over and above the cash and credit sales few ....
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....he prior years in respect of sundry debtors. 20. The additions to the total undisclosed income on account of undisclosed sundry debtors are, therefore, worked out to Rs. 1,06,90,852. Accordingly, the sundry debtors accrued to the respective assessment years totalling to Rs. 1,06,90,852 has been added back by the AO to the undisclosed income on substantive basis in the hands of Smt. Kanchan Khullar. Further after taking into consideration the submissions made by Sri Ashok Kumar Vig and Smt. Kanchan Khullar, the undisclosed sundry debtors of Maa Durga Service Station is considered protectively to be the income of Sri Ashok Kumar Vig and accordingly the same was added back. to the total income of Sri Ashok Kumar Vig on protective basis. In appeal the learned CIT(A) while deleting the addition has held as under: "The fifth ground of appeal in this case is that the AO was not right in making the addition of Rs. 1,06,90,852 on protective basis when the substantive addition has been made in the hands of Smt. Kanchan Khullar. 21. I have carefully considered the appellant's contention as well as gone through the assessment order. The AO has totally relied on the seized documents mar....
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....is further stated that the AO had miserably failed to prove as to how and on what basis he construed the notings to be sundry debtors and how the protective orders were passed in the hands of the assessee. He relied upon the case of Tribunal Bangalore Bench in Asstt. CIT vs. Late A.S. Sengoda Gounder (2002) 77 TTJ (Bang) 587 : (2002) 82 ITD 829 (Bang) wherein it has been held that "two parallel assessments, one protective and other substantive are justified when there is a doubt as to the exact assessment year to which the income relates in the case of the same assessee or when there is a doubt as regards the identity of the assessee to whom such income belongs". In this matter there is no doubt over the ownership of these documents. He, therefore pleaded that the protective assessment has been rightly deleted by the learned CIT(A). 25. We have considered the rival submissions of the parties and perused the materials available on records. We have also perused the orders of authorities below including the paper book filed by the learned counsel for the assessee. It is not in dispute that the documents relied upon to determine undisclosed income of Rs. 1,06,90,852 were found in poss....
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....000 Sonia SDCC/LD/8/216 30,000 21.9.2000 Renu SDCC/LD/8/223 30,000 21.9.2000 Renu SDCC/LD/8/224 30,000 21.9.2000 Sunita SDCC/LD/8/225 30,000 21.9.2000 Sunita SDCC/LD/8/226 30,000 21.9.2000 Sonia SDCC/LD/8/227 30,000 21.9.2000 Sonia SDCC/LD/8/228 30,000 28. When asked for, the assessee has stated that it belongs to the Stridhan. However, the contention of the assessee was rejected by the AO on the ground that the assessee failed to adduce any documentary evidences to corroborate his submission. Accordingly, the entire deposit of Rs. 2,70,000 is considered as his undisclosed income of Sri Ashok Kumar Vig and added back to his total income for the asst. yr. 2001-2002. Aggrieved by the order, the assessee respondent went in appeal before the learned CIT(A) and the learned CIT(A) deleted the addition in full observing as under: "I have carefully considered the appellant's contention as well as gone through the assessment order. It is seen from the details of investment mentioned in the order that the deposits were made Sunita, Renu and Sonia. The AO relied on the seized document marked PKC-32, pp. 87-98. The AO has himself mentioned the persons in whose....
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....curred expenses on account of corporation tax and stamp duty for Rs. 31,200. Thus, the total investment over the flats at New Delhi works out to Rs. 4,21,000. But in the return Sri Ashok Kumar Vig has shown advance in the name of Sri Chandra Prakash Gandhi for Rs. 4,10,000 only. Thus there is a difference of Rs. 11,000. Accordingly, the AO treated the difference of Rs. 11,000 as undisclosed investment of Sri Ashok Kumar Vig and added back to his total undisclosed income for the asst. yr. 2001-02. Aggrieved by the order the assessee went in appeal before the learned CIT(A) and the learned CIT(A) while deleting the addition observed as under: "I have carefully considered the appellant's contention. The appellant stated before me that Rs. 11,000 was outstanding. In my view, the AO could have confirmed the actual payment made by the appellant, as the name of the person to whom payment was made was available with the AO. However, since the quantum of undisclosed investment is of meager amount, the addition of Rs. 11,000 is deleted." 33. Before us, the learned Departmental Representative strongly relied on the order of the AO whereas the learned Authorised Representative for the a....
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....ses account at Rs. 6,07,629. An expenditure of Rs. 4,59,512 has been entered as transfer from purchase register. Thus, the total expenditure has been worked out at Rs. 10,72,141. However, in the P&L a/c filed for the respective assessment year, expenditure of Rs. 26,72,141 has been claimed. Thus, the assessee has inflated round figure of expenditure of Rs. 16,00,000 to reduce the net profit of the concern. 39. Tyre, tubes and flaps: Page 50 of the seized book contains the account of tyre, tubes and flaps expenses. As per purchase register, the total expenditure under this head has been worked out at Rs. 28,05,389. However, in the P&L a/c, an expenditure of Rs. 33,05,389 has been claimed. Thus, there is an increase of round figure of Rs. 5,00,000 in the P&L a/c. Fooding expenses: Page 8 of the seized book contains the account of fooding expenses. As per this account, total expenditure has been Worked out at Rs. 3,11,682. However, in the P&L a/c, expenses of Rs. 5,11,682 has been claimed inflating a round figure of expenditure of Rs. 2,00,000. 40. Rent, tax, insurance expenses: Page 22 of the seized book PKC containing this account reveals that total. expenditure comes to Rs. 2,71....
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.... appellant further stated that the AO did not locate any undisclosed business of the assessee even after the search and seizure operation was carried out. 43. The AO added an amount of Rs. 41 lakhs as there was a difference between the amount shown in P&L a/c and amount shown in seized document marked PKC-41 under the head Hire tanker, repair and maintenance, tyre tubes and flaps, fooding expenses, rent tax and insurance and staff salary. 44. I have carefully considered the appellant's contention as well as the observation of the AO The AO has placed reliance on the seized book PKC-41, which is the general ledger of M/s Ashok Petroleum Transport. The AO pointed out the difference under different heads of expenses claimed in the P&L a/c and the seized document as per query No. 8 entered in the order sheet dt. 16th Feb., 2004. The appellant replied that he filed his P&L a/c duly audited whereas PKC-41 is not the final account. It has also been stated before the AO that hire charges paid for the tanker directly from the control of the appellant not taken into account into this ledger and hence, it was stated that partial account cannot be relied upon. S repair and maintenance, T....