TaxTMI 
TaxTMI 
2013 (8) TMI 672
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....Ld. CIT (A) has erred in law and on facts in upholding the action of the Ld. Assessing Officer in making an ad-hoc disallowance of Rs.3,16,300/- being 1/8th of telephone, car running and maintenance and depreciation thereon without any basis or material. 3. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in upholding the action of the Ld. Assessing Officer charging interest u/s 234A and 234B of the Income Tax Act,1961. 4. That the appellant craves the leave to add, amend, modify, delete any of the grounds of appeal before or at the time of hearing and all the above grounds are without prejudice to each other." Grounds of ITA No.2 "1. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in upholding the action of the Ld. Assessing Officer in making addition of Rs.88,140/- allegedly on account of unexplained cash sales. 2. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in upholding the action of the Ld. Assessing Officer in making addition of Rs.3,89,579....
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....e on account of shortage of stock and also that the Ld. CIT (A) has himself not accepted the contention of the assessee that shortage of stock comes to 1.5% of the total inventories of the assessee and this variation is possible. 4. The Appellate craves leave to add or amend the grounds of appeal on or before the appeal is heard and disposed off. 5. It is prayed that the order of the CIT (A) be set aside and that of the Assessing Officer be restored." 2. The brief facts of the case are that there was a search on 16.01.2007 at the business premises as well as residential premises of the firm and in consequence a notice dated 01.06.2007 u/s 153(A) was issued and in response to notices dated 01.06.2007 and dated 21.01.2008, the assessee filed return of income for Rs.3,48,08,230/- on 05.10.2007 and for Rs.6,64,45,650/- on 26.12.2007 for assessment year 2005-06and 2007-08 respectively. During search besides other things envelopes containing certain slips and money were found and the contents of such envelope and slips were encountered to Shri Naveen Sood who stated that these slips contained in envelopes reflect the sales of scrap, which was not record....
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....e, he made separate addition of Rs.88,140/-. Similarly from another document the assessee was confronted to explain the sale. In reply to which, the assessee submitted same answer as the amount is included in the surrender amount of Rs.84.20 lacks. However, Assessing Officer did not agree with the contentions and made addition of Rs.3,89,759/-. 5. The 3rd addition of Rs.5,72,160/- was made on account of difference in stock as per books of accounts and as per valuation done at the time of search. The Assessing Officer had not accepted the explanation regarding shortage of stock and, therefore, made the addition. 6. Aggrieved with both orders, the assessee filed appeals before CIT (A) and in respect of assessment year 2005-06. It was submitted that figure of Rs.84.20 lacs as on 15.01.2007 was offered to tax by assessee while filing the return of income for assessment year 2007-08 and Assessing Officer was not justified in splitting the same into two years. It was also submitted that there was no linking of running balance on the envelopes and assessee merely surrendered his amount of Rs.84.20 lacs to buy peace of mind and that statement of M/s Rachana Trading Co. was taken duri....
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....0-Rs.31,10,000) shall be added in A. Y.2007-08. The A. R. however has contended that surrendered amount was made for the current year for A. Y. 2007-08 as the amount of Rs.31,10,000/- was not received in A. Y. 2005-06. Moreover, surrender made by M/s Rachana Trading Co. is not binding on the assessee. However, AR's submissions are not acceptable. The assessee admittedly is following mercantile system of accounting. The seized documents revealed that amount of Rs.31,10,000/- pertained to the scrap that was sold in the period relevant to the assessment year 2005-06 and therefore, the Assessing Officer has rightly made an addition of Rs.31,10,000/- from the total scrap sale of Rs.84,20,000/- and made the addition of remaining amount of Rs.53,10,000/- in the A. Y. 2007-08 as the same pertained to A. Y.2007-08. In view of the above discussion, the submissions of the AR are rejected and the addition of Rs.31,10,000/- is upheld." 8. The Ld. CIT (A) also did not agree with the contention of the assessee regarding addition on account of personal use of car and telephone expenses etc. 9. For assessment year 2007-08, the assessee submitted before CIT (A) that it had made....
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...., there was no reason in splitting the surrender on account of scrap sale. Our attention was invited to paper book pages 3 to 7, wherein the break up of daily sale along with closing balances of total debtors was placed. Our attention was invited to entry dated 10.10.2007, wherein the amount of outstanding was Rs.75.50 lacs and after adding the debtors for 11.01.2007 the amount of outstanding became Rs.78.50 lacs and similarly the amount had become to Rs.79.50 lacs by adding debtors of 12.01.2007 and similar were the position up to 15.01.2007 wherein the balance had become Rs.84.20 lacs. He further took us to page 23 of paper book wherein as on 20.11.2004 an amount of Rs.31.10 lacs was written and in view of these, he argued that Rs.31.10 represented brought forward balances from previous dates and it cannot be said that the entire amount belonged to previous year 2004-05. The Ld. AR further argued that surrender of Rs.84.20 lacs was made on account of undisclosed assets in the form of outstanding debtors as on date of search & Assessing Officer was not justified in splitting the same. 12. The Ld. Departmental Representative on the other hand submitted that page 23 mentioning th....
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....ment dated 20.11.2004 placed at paper book page 23 wherein an amount of Rs.31.10 lacs was written and concluded that this amount represented turnover of A. Y. 2004-05 which finding may not be correct as the assessee might have received this amount of Rs.31.10 lacs in financial year 2004-05 and financial year 2005-06 as on an average assessee used to receive money almost regularly and amount of Rs.31.10 lacs must have exhausted within two years. From the above documents, it is clear that assessee was maintaining record of sales and debtors outside the books of accounts in such a manner that total outstanding was carried forward to next date wherein the total sales after reducing cash received was further added to the brought forward figure which represented outstanding debtors as on a particular date. During search proceedings, the assesssee had surrendered a particular amount representing various undisclosed assets including sundry debtors of Rs.84.20 lacs. When all other undisclosed assets has been accepted as income for A.Y 2007-08, the Assessing Officer was not justified in splitting this particular asset on the basis of seized material. The amount of surrender of sundry debtors....