TaxTMI 
TaxTMI 
2015 (1) TMI 508
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....at has erred in restricting the addition @ 10% i.e. Rs. 42,07,397/- instead of addition of Rs. 4,20,73,972/- made by the AO on account of undisclosed income from job receipts out side books. 4. The brief facts of the case, as stated by the Assessing Officer, are as under:- "8. The assessee has a proprietorship concern in the name of M/s Kirtida Silk Mills. Both M/s Rameshwar Textile Mills Ltd. & Kirtida Silk Mills have one common PAN and integrated books of accounts. At the time of survey, the Laptop of one of the directors Shri Sanjay Kumar Sudhrania was examined and the USB hard drive of the same was impounded. This Laptop contained various accounts in Tally format viz. 'process charges account', 'sanjay 06-07 account', etc. These accounts pertain to the 'process charges received' by the assessee company as entered regularly by Shri Sudhrania. A copy of the monthly process charges as entered in this Laptop is annexed as annexure 'A' of this order. A cursory perusal of this monthly summary sheet indicates that the total receipts of the assessee company on account of process charges is Rs. 18,72,52,318/- (Page no.191 of 'B-64' impounded). ....
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....cheques for Shri Sanjay Sudhrania. In reply to question no.12 he has stated that he discounted cheques of Rs. 6 to 7 lacs per week for Shri Sanjay Sudhrania from his own firm and other firms managed by Shri Jaikumar. In reply to question no. 13, he stated that he was discounting cheques for Shri. Sanjaybhai Sudhrania of Kirtida Silk Mills and Rameshwar Silk Mills Ltd for the last two years. In reply to question no 1, he stated that one person named Shri Navratan was coming on behalf of Shri Sanjaybhai Sudhrania. The name of other person attending on behalf of Shri Sanjaybhai is not known to him but he can recognize that person. 11.2 During the statement, Shri Jaikumar was given an opportunity to go through the books of accounts impounded from the premises of M/s Rameshwar Silk Mills and Kirtida Silk Mills contained in annexure B-53 to B-55 and B-57 to B-61, in which his name 'Jaikumar' appeared with figures. Regarding this, a detailed question was asked vide question no. 15. In his answer, Shri Jaikumar Periwal admitted that those entries appearing in the impounded books belong to him and the name appearing is his own name. However, he added that since he does not maintain....
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.... assessee's reply is not acceptable and self contradictory as based on the fact of the accounts found in Shri Sudhrania's Laptop and the sworn statement of various persons including Shri Sudhrania himself, it is proved beyond doubt that assessee has indulged in cash sales out side the books and the books therefore are sham, doctored and do not represent the true state of affairs of the company. 15.1 As regards the evidentiary value of various statements it is pertinent to mention that all the statements given under oath were u/s 131 (1)(b) of the I.T. Act. Hence, the assessee's reply containing case laws relating to survey statement is of no avail. 15.2 Thus it is concluded that assessee's books are rejected and the entire sum of Rs. 4,72,05,175/- is to be treated as assessee's additional receipt not accounted for in its regular books as detailed in paras supra. 16. With respect to discounts it is observed that the same claimed in the regular books pertain to the accounted process charges (sales) only. The extent of net discount given can be gauged from the, amount of discount versus the process charges received as has been entered by Shri Sanjay in his accou....
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....nce the evidences related to discount granted were found recorded, he granted Rs. 51,31,203 on estimated basis and determined the net turnover at Rs. 4,20,73,972 and stated that the claim of additional salary and wages of Rs. 3,41,36,466 appeared to be excessive and from the voluminous salary slips submitted, it was not clear as to whether the slips represented accounted wages or unaccounted wages and hence he drew the inference that the appellant had already claimed all the expenses in this regard and further assumed that the appellant had claimed all other expenses in regular books and therefore, did not allow the same. It is observed from the assessment order as well as the materials on record that there is no direct evidence available with the AO to establish the precise amount of additional turnover. The AO himself has observed in Para 9 of the assessment order that the accounts as revealed in Mr.Sudhrania's laptop when juxtaposed with the audited accounts of the assessee company, as furnished with the return of income, the process charges to the extent of Rs. 1,00,27,617 had been suppressed. The appellant on the other hand tried to establish that the additional turnover w....
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....nd impounded were related to both accounted and unaccounted transactions and the same were recorded systematically in form of books of accounts maintained on laptop and therefore, it is unjustifiable if the same is totally ignored. In view of this, all the possibilities are required to be examined on the basis of the available records and the facts and circumstances of the case. The AO treated the entire additional turnover of Rs. 4,72,05,175 as net income of the appellant and granted deduction on estimated basis for discount granted by the appellant for the reason that the entries for discount were reflected in job charges receipts. However, at the same time, the entries of all other expenses as claimed to be unaccounted were also reflected in the accounts maintained by a director on his laptop for all unaccounted transactions. The appellant had, during the course of assessment proceedings, submitted details of such unaccounted expenditure in support of various entries found in the laptop alongwith various evidences and thereby the existence of such expenditure were proved by the appellant and therefore, it is unjustifiable to allow some of the expenditures, say discount of Rs. 51....
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....t justifiable to grant the deduction of all the expenditure as claimed by the appellant. Now the third alternative about accepting the loss of Rs. 21,68,893 as per laptop is considered (Annexure "G" of the assessment order), it is noticed that the books of accounts as maintained in the laptop do not appear to be the complete records as the survey action was carried out in the month of March and therefore, it is not proper to fully rely on such records. There are chances that some transactions might not have been incorporated in the laptop which might be accounted or unaccounted transaction and therefore the picture actually reflected on the books of accounts in the laptop could not be the correct and real picture of the state of affairs of the company. Moreover, the transactions in the laptop accounts showed a loss of Rs. 21.68 lacs but it did not reflect the source of funds from which the said loss was met and therefore, when the sources are not available, the same has to be treated as the unexplained income of the appellant. Thus, there are certain issues which remained unanswered in the combined books of accounts also. Therefore, I do not find any justification in adopting the ....
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....ed on 03.03.2008, it was found from the laptop of one of the Directors, Shri Sanjay Kumar Sudhrania, that it contained accounts of 'process charges account' and 'sanjay 06-07 account', etc. From the account of 'process charges' obtained from the laptop, the Assessing Officer found that the total receipt was 18,72,52,318/-. Further, on examination of the process charges received in the account 'sanjay 06-07 account', it was found that a sum of Rs. 2,11,56,014/- was carried over as 'old loan' balance from last year and not process charges received during the year. The Assessing Officer also observed that discounts in all the twelve months of the year had been given by the assessee-company at an aggregate amount of Rs. 1,80,52,601/-. The Assessing Officer noted that the profit and loss account maintained in Shri Sanjay's laptop showed total process charges after extending discounts received by the assessee-company at Rs. 14,80,23,313/-. He also noted that as per the audited accounts filed with the return of income of the relevant year showed the total process charges at Rs. 13,79,95,696/-. Thus, the Assessing Officer found that process charges to the extent of Rs. 1,00,27,617/- has be....
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.... income of the assessee during the year under consideration by increasing the profit as shown by the assessee by an amount of Rs. 4,20,73,972/-. 8. On appeal, the CIT(A) held that on perusal of comparative gross profit statement submitted by the Authorized Representative of the assessee, it is observed that the assessee-company had incurred gross loss in the Assessment Year 2005-06, whereas the gross profit earned in the Assessment Year 2006-07 was 5.22%. He observed that in the year under appeal, the assessee had shown gross profit of 4.85%. He observed that he was in agreement with the contention of the Authorized Representative of the assessee that if the entire addition of Rs. 4,20,73,972/- was confirmed, then the gross profit ratio would work out to 23% which will give distorted result to the current profitability of the assessee-concern. He also pointed out that considering the past trend of loss, the margin of profit in the earlier year and the large volume of turnover, and also the possibility that some expenses might have been incorporated in the regular books of accounts, the profit margin from the unaccounted additional processing charges should be on higher side as com....