AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 371
X X X X Extracts X X X X
X X X X Extracts X X X X
....r as against G.P. rate of 11.87% declared by the assessee on the actual turnover of Rs. 11,89,909/- and 17% applied by the A.O. resulting into trading addition of Rs. 5,37,009/- (wrongly computed at Rs. 3,14,761/-)." Grounds of assessee's appeal being ITA No. 1005/JP/2013 (A.Y. 2004-05) "1. The learned CIT(A) has erred on facts and in law in upholding the validity of trading addition made by A.O. in assessment framed U/s 153A, dehors any incriminating material found in search or otherwise gathered by him for the year under consideration. 1.1 The learned CIT(A) has erred on facts and in law in estimating the unrecorded sales, twice the recorded sales and thus estimating the total sales at Rs. 54,88,839/- (wrongly taken at Rs. 36 lacs). She has further in applying G.P. rate of 18% on such estimated turnover as against G.P. rate of 13.23% declared by the assessee on the actual turnover of Rs. 18,29,613/- and 17.25% applied by the A.O. resulting into trading addition of Rs. 7,46,006/- (wrongly computed at Rs. 4,06,015/-)." Grounds of assessee's appeal being ITA No. 1006/JP/2013 (A.Y. 2005-06) "1. The learned CIT(A) has erred on facts and in law in upholding the validity of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....) % age of G.P. 1. 2003-04 1,41,238/- 11,89,909/- 11.87% 2. 2004-05 2,41,985/- 18,29,613/- 13.23% 3. 2005-06 2,54,912/- 23,09,098/- 11.04% 4. 2006-07 3,22,211/- 26,27,528/- 12.26% It has been further observed that in absence of complete books of account, the closing stock of the firm is not verifiable resultantly the gross profit worked out also had no sanctity. Further during the course of assessment proceedings, the assessee furnished the details of unaccounted sales in A.Y. 2006-07 to 2009-10, which is reproduced as under:- A.Y. As per regular books of account Unaccounted sales Sales G.P. Ratio Sales G.P. Ratio 2003-04 11,89,909/- 11.87% 2004-05 18,29,613/- 13.23% 2005-06 23,09,098/- 11.04% 2006-07 26,27,528/- 12.26% 15,58,786/- 12.26% 2007-08 15,93,180/- 12.98% 49,40,182/- 12.98% 2008-09 20,56,885/- 13.00% 70,88,444/- 13.04% 2009-10 21,57,817/- 14.99% 70,24,060/- 13.04% The assessing has admitted this fact that it indulged into transactions which were not entered into regular books of account. These facts were also admitted by Shri ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....04, there was no unaccounted sales/purchases but which was not found acceptable to the Assessing Officer on the basis of subsequent year unaccounted sale and purchase found by him and held that modus operandi of the assessee firm was not maintaining regular books of account and all the transactions regarding purchases and sales were made in cash, which was not completely entered in regular books of account. He also presumed that the assessee might have destroyed paper relating to unaccounted sales. Shir Madan Mohan Gupta and Shri Pankaj Agarwal in his statement had admitted that all the transactions of sales and purchases were not entered into the regular books of account. Further he also referred Section 114(d) of the Indian Evidence Act for interpolation of the evidence for A.Y. 2003-04 to 2005-06. On the basis of ratio of accounted sales and unaccounted sales found during the course of search in A.Y. 2006-07 to 2009-10. He calculated total sales for A.Y. 2003-04 at Rs. 35,69,729/- in place of Rs. 11,89,909/-, in A.Y. 2004-05 at Rs. 54,88,839/- in place of Rs. 18,29,613/-, in A.Y. 2005-06 at Rs. 46,00,000/- in place of Rs. 23,09,098/-. However, in A.Y. 2006-07, the gross sales ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the turnover and G.P. by relying on comparable case of M/s Rajan Fire Works. She also analysed the percentage of unrecorded sale in A.Y. 2006-07 to 2008-09 and average also. The search year has not been taken into consideration being an exceptional year. She herself calculated the ratio of recorded sales to unrecorded sales 1:2 and estimated total turnover of Rs. 24 lacs in A.Y. 2003-04 in place of Rs. 47,59,636/-. She further considered the appellant's own case decided by the learned CIT(A) in A.Y. 2009-10 vide order dated 20/1/2012 ITA 69/10-11 wherein G.P. rate was applied @ 16% on recorded and unrecorded sales. She further observed that it is a general accepted principle that the G.P. rate increases with decline in turnover. Since the turnover is held to be of Rs. 24 lacs, the G.P. is estimated @ 19% on total turnover. Thus, the learned CIT(A) confirmed G.P. rate @ 19% on total recorded and unrecorded sales of Rs. 24 lacs and gave the set off gross profit declared at Rs. 1,41,239/- against the estimated profit of Rs. 4,56,000/-. The net addition of Rs. 3,14,761/- was confirmed by her in A.Y. 2003-04. 3.1 In A.Y. 2004-05, similar decision has been taken on proceeding U/s 15....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2007-08 to 2009-10 is without any basis. It may be noted that in A.Y. 2006-07 against recorded sales of Rs. 26.27 lacs unaccounted sales of Rs. 15.58 lacs was only found. Therefore the estimation of the unaccounted sales made by the AO is de hores any material and such estimation is not envisaged in assessment u/s 153A. The AO has applied higher g.p. rate by referring to the case of M/s Rajan Fire Works and Emporium. The application of the g.p. rate on this basis is not justified for the following reasons:- (i) The AO has not provided the financial data of M/s Rajan Fire Works and Emporium. In assessment proceedings, the result of this firm was not confronted to the assessee. (ii) The g.p. rate of this concern is not comparable with the assessee for the following reasons:- - Rajan Fire Works and Emporium is a manufacturer cum wholesaler in this business while assessee is wholesaler only. - Rajan Fire Works and Emporium is well established entity in this business since 35 years while assessee started its business from 1998. - The size of business of this firm is much larger than that of assessee. (iii) The comparative position of the gross profit rate declared by the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore, he prayed to confirm the order of the learned CIT(A). 6. We have heard the rival contentions of both the parties and perused the material on record. The case law of Jai Steel India Vs. ACIT (supra) relied upon by the learned counsel for the assessee on 153A proceeding is not squarely applicable as the Hon'ble Rajasthan High Court has decided in this case the issue of any whether deduction can be claimed U/s 153A of the Act or not. As mentioned by the learned CIT(A) in her order that the assessment was completed U/s 143(1) of the Act, which has been held by the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) that the proceeding completed U/s 143(1)(a) of the Act are not same as an assessment U/s 143(2) of the Act. Besides these cases will be applicable when no material is found during the course of search. We find merit in the contentions of ld DR that considering the statement of assessee dtd. 21-10-2008 it has been admitted that assessee was regularly engaged in unrecorded purchases and sales; no exception of any year has been claimed. Consequently the statement and the seized record for other year unambiguously become in....