TaxTMI 
TaxTMI 
2014 (8) TMI 1013
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....153A of Income Tax Act, 1961 (in short 'the Act'). 2. The sister concern of the assessee M/s Aggarwal Wood Industries has filed an appeal against the order of the Commissioner of Income Tax(Appeals)(Central), Gurgaon dated 31.1.2014 relating to assessment year 2007-08 against the order passed under section 153A r.w.s. 143(3) of Income Tax Act, 1961. 3. All the appeals relating to the two assessees on similar issue were heard together and are being disposed off by this consolidated order for the sake of convenience. 4. The learned A.R. for the assessee has pointed out that there are two main issues arising in all the appeals, first is in relation to the addition on account of un-explained expenditure booked under the head 'wages' and the second issue is on account of the income of Meena Garg being added as income of the assessee on substantive basis from year to year. We proceed to decide these two issues and thereafter consider the grounds of appeal raised in the respective assessment years. 5. The assessee in ITA No.300/Chd/2014 has raised following grounds of appeal: "1. That the learned CITA has erred in law and facts in confirming an addition of Rs. 2,67,44....
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....he workers of the factories gathered at one place. The Assessing Officer thereafter pointed out that the list of workers prepared on the date of survey was confronted to the partners Shri Naresh Garg, who in turn had signed the said list and it was never pointed out by him that the list contained the names of the workers working in the factory of M/s Aggarwal Wood Industries also. It is the finding of the Assessing Officer that both the concerns are sister concerns and the premises of both the concerns were independent gates. It was further pointed out by the Assessing Officer that during the assessment proceedings, the assessee had not furnished any documentary evidence that the list contained the names of the workers working in M/s Aggarwal Wood Industries. In view thereof, the addition of Rs. 2,67,443/- was made in the hands of the assessee on account of unexplained expenditure. 7. The CIT (Appeals) upheld the addition made by the Assessing Officer. 8. The plea of the assessee before us was that the list of the workers were drawn on the date of survey and the sad list comprised of two concerns i.e. M/s Punjab Plywood Industries and M/s Aggarwal Wood Industries. Further the....
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....or assessment year 2001- 02 at Rs. 4,50,241/- and made an addition of Rs. 2,67,443/-. Similar addition has been made in assessment years 2002-03 to 2006-07. 12. The plea of the assessee before us was two folds that first of all the discrepancy, if any, in the number of workers detected under survey at the premises of the assessee on 9.9.2004 could not be utilized for computing unexplained expenditure on account of wages while completing the assessment under section 143 (3) r.w.s. 153A of the Act pursuant to search carried out at the premises of the assessee on 20.3.2007. The second plea raised by the learned A.R. for the assessee before us was that the list of the workers prepared by the survey team comprised of the workers of sister concerns and merely because the assessee had not pointed out the said fact during the course of survey, does not change the fact situation. We find merit in the plea of the assessee in this regard. First of all, the assessment in the case has been completed under section 143 (3) r.w.s. 153A of the Act vide order dated 30.12.2008. The said assessment was made pursuant to the search operation carried out at the premises of the assessee on 20.3.2007....
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....The assessee in ITA No.301/Chd/2014 has raised following grounds of appeal: "1. That learned CITA has erred in law and facts in con firming an addition of Rs. 1,82,867/- on account of unexplained expenditure under the head "wages". (para 4 page 2-4 of Assessment order) (para 6.1 page 5 of CIT(A) order) l(a) That authorities below has erred in law and facts in making additions on account of unexplained expenditure under the head "wages" without rejecting the books of accounts. 2. That learned CITA has erred in law and facts in confirming an addition of Rs. 1,44,210/- being income of Meena Garg Prop Punjab Timber Trading Co. as Income of appellant on substantive basis. (para 5 page 5-8 of Assessment order) (para 6.1 page 5 of CIT(A) order) 3. That appellant craves leave to add, alter, amend or to substitute the above grounds of appeal either before or at the time of hearing of case." 14. The assessee in ITA No.301/Chd/2014 has raised two issues. The ground No.1 raised by the assessee is against the addition made on account of unexplained expenditure under the head 'wages'. The facts and circumstances of the present issue are identical to the facts and....
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.... That learned CITA has erred in law and facts in confirming an addition of Rs. 1,41,060/- being income of Meena Garg Prop Punjab Timber Trading Co. as Income of appellant on substantive basis. (para 5 page 5-8 of Assessment order) (para 7.1 page 8 of CIT(A) order) 3. That appellant craves leave to add, alter, amend or to substitute the above grounds of appeal either before or at the time of hearing of case." 20. The assessee in ITA No.302/Chd/2014 vide ground No.1 has raised the issue against the addition on account of unexplained expenditure under he head 'wages'. The facts and circumstances of the present issue are identical to the facts and circumstances in the issue raised in assessment year 2001-02. Following the same parity of reasoning we allow the claim of the assessee and delete the addition of Rs. 3,20,921/- made by the Assessing Officer. The ground of appeal No.1 raised by the assessee is thus allowed. 21. The issue in ground No.2 raised by the assessee on account of addition of Rs. 1,41,060/- being income of Smt.Meena Garg, proprietary of M/s Punjab Timber Trading Company. The facts, circumstances and issue raised vide ground No.2 is identical to the grou....
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....dition of Rs. 4,69,176/- on account of unexplained expenditure under the head "wages". (para 4 page 2-4 of Assessment order) (para 9.1 page 9 of CIT(A) order) l(a) That authorities below has erred in law and facts in making additions on account of unexplained expenditure under the head "wages" without rejecting the books of accounts. 2. That learned CITA has erred in law and facts in confirming an addition of Rs. 2,99,680/- being income of Meena Garg Prop Punjab Timber Trading Co. as Income of appellant on substantive basis. (para 5 page 5-8 of Assessment order) (para 9.1 page 9 of CIT(A) order) 3. That appellant craves leave to add, alter, amend or to substitute the above grounds of appeal either before or at the time of hearing of case." 26. The assessee in ITA No.304/Chd/2014 vide ground No.1 has raised the issue against the addition on account of unexplained expenditure under he head 'wages'. The facts and circumstances of the present issue are identical to the facts and circumstances in the issue raised in assessment year 2001-02. Following the same parity of reasoning we allow the claim of the assessee and delete the addition of Rs. 4,69,176/- made by the....
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.... assessee is thus allowed. 30. The issue in ground No.2 raised by the assessee on account of addition of Rs. 3,57,316/- being income of Smt.Meena Garg, proprietary of M/s Punjab Timber Trading Company. The facts, circumstances and issue raised vide ground No.2 is identical to the ground No.2 raised in assessment year 2002-03 and following the same parity of reasoning we find no merit in the said addition. We direct the Assessing Officer to delete the addition of Rs. 3,57,316/-. The ground of appeal No.2 raised by the assessee is thus allowed. 31. Another issue raised by the assessee vide ground No.3 is on account of addition of Rs. 13,840/-. The learned A.R. for the assessee pointed out that the said addition had been made in the hands of the assessee on account of valuation of particular stock. However, the search team had counted the stock of falli, one of the byproduct of wood as stock of fatti, which is another byproduct and costs less. The case of the assessee before us is that because of the similarity in names, there was a discrepancy in counting stock and hence the addition. 32. The learned D.R. for the Revenue placed reliance on the orders of the authorities below....
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....umstances of the present issue are identical to the facts and circumstances in the issue raised in assessment year 2001-02. Following the same parity of reasoning we allow the claim of the assessee and delete the addition of Rs. 23,63,243/- made by the Assessing Officer. The ground of appeal No.1 raised by the assessee is thus allowed. 36. The issue in ground No.2 raised by the assessee on account of addition of Rs. 3,35,405/- being income of Smt.Meena Garg, proprietary of M/s Punjab Timber Trading Company. The facts, circumstances and issue raised vide ground No.2 is identical to the ground No.2 raised in assessment year 2002-03 and following the same parity of reasoning we find no merit in the said addition. We direct the Assessing Officer to delete the addition of Rs. 3,35,405/-. The ground of appeal No.2 raised by the assessee is thus allowed. 37. The issue in ground No.4 raised by the assessee is against the addition made on account of difference in valuation of building on the basis of report of the Valuation Officer. 38. The learned A.R. for the assessee at the outset pointed out that the books of account of the assessee were not rejected and consequently no additio....
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....Tax proceeding because what is being questioned is that on the date of search on 20.3.2007 (almost 4 months before) the Income Tax Department had taken account of stock of the assessee and had found a shortage of stock worth Rs. 82,57,226/-. b) The stock taking was done in the presence of the Supervisor/ employees of the assessee through his partner Sh. Kewal Garg along with the witnesses. However, when he was confronted to the fact that as per the above stock inventory, the value of the stock found is short by Rs. 82,57,226/- with the book stock as on the date of the search, he was not able to furnish any explanation for the same. c) The assessee at no point of the post search proceedings filed any objection/valuation of the stock. In view of the above GP on Rs. 82,57,226/- @ 13.3% is 10,98,211/-as discussed above is being added back to the income of the assessee." 44. Before the CIT (Appeals) the assessee contended that the search was carried out on 20.3.2007 and after the search on 23.3.2007 the assessee requisitioned DDIT (Investigation), Ambala to give the copy of stock inventory prepared on the date of search. The DDIT issued letter to the assessee pointi....
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....er dated 23.3.2007 placed at page 184 of the Paper Book and thereafter on 2.4.2007 the said inventory of stock was supplied to the assessee as per communication placed at page 185 of the Paper Book alongwith stock list. The assessee further pointed out that the difference in stock was also pointed out during the search itself i.e. at the time of signing of the inventory as per notings at page 109 of the Paper Book. The learned A.R. for the assessee pointed out that another letter was addressed to the DDIT(Investigation) on 12.4.2007 pointing out that the stock valuation was not done properly by the search party. 47. The learned D.R. for the Revenue pointed out that no explanation was furnished before the search team and the stock was counted in the presence of the assessee and hence there was no merit in the claim made by the assessee in this regard. 48. The learned A.R. for the assessee pointed out that Ground No.3 raised by the assessee is linked to ground No.5 under which the addition on account of falli was proposed to be made by the Assessing Officer as per the documents seized which are placed at pages 106 to 113 of the Paper Book. Notional sales of the said item were c....
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.... the assessee was not accepted by the Assessing Officer as the Excise Department had visited on later date and were separate proceedings. Further the stock taking was done in the presence of the supervisor of the assessee and also the partner Shri Kewal Garg and when he was confronted with the fact that there was discrepancy in the stock, no explanation was furnished by him. However,, we find that the partner had made an endorsement on stock list itself, prepared at the time of search, which is available on record. The Assessing Officer also observed that in post search proceedings no objection/valuation of the stock was filed by the assessee and consequently the GP on the difference in the stock of Rs. 82,57,226/-@ 13.3% i.e. Rs. 10,98,211/- was added as income of the assessee. 52. The assessee before the CIT (Appeals) has pointed out the consequences of post search proceedings and has refuted the claim of the Assessing Officer that the assessee at no point in post search proceedings had filed any objection to the valuation of stock. The facts as narrated by the assessee are reproduced at pages 28 and 29 of the appellate order, which read as under: a) Physical'stoc....
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....r 2006-07 is Rs. 75774365/- and sales as per our books in financial year 2006-07 is also Rs. 75774365/-. As such assumption of sales out of books is without any facts on record. Moreover no such document was seized during the course of survey. Copy of sale tax order is being enclosed. h) That during the course of assessment proceedings assessee has filed detailed reply before assessing officer vide our letter dated 22.12.2008 during the course of assessment proceedings alongwith annexures. Copy of letter is being enclosed. i] The kind attention of your honor is invited to the fact that learned AO has accepted value of closing stock as on 31.03.2007 and the said stock was arrived at after making adjustment of purchases and sales between 20.03.2007 to 31.03.2007. Once she accepted our stock position as on 31.03.2007, there is no scope of disbelieving that stock as on 20.03.2007. In fact the stand of revenue is for convenience to make additions to the returned Income. Rejection of Books of Accounts It is to bring to your kind notice that as per the provisions of Income Tax Act it is open to AO to reject the books of accounts if he is not satisfied with correctness or complete....
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....ms of stock available with the assessee. The assessee had also contended that the difference in valuation of stock was on account of the GP rate applied while preparing trading account. The assessee during the year under consideration had declared GP rate of 13.33% which had been accepted by the Assessing Officer as no books of account had been rejected by the Assessing Officer and no trading addition had been made except on account of the difference in stock and the sales outside the books of account. 57. In the totality of the facts and circumstances where the GP rate declared by the assessee has been accepted by the Assessing Officer, we find merit in the plea of the assessee that the same rate should be applied while preparing trading account as on the date of search. During the year under consideration, the assessee had shown fall in GP rate and the explanation of the assessee was that due to huge increase in the turnover there was marginal fall in GP rate, which undoubtedly has been accepted by the Assessing Officer in toto. In view of the totality of the facts and circumstances where we have already upheld the addition of Rs. 4,41,345/- on account of sale depicted in the ....
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....he product being manufactured during the given date. The assessee did not maintain any stock register and the Assessing Officer thus was of the view that half of the core could be considered as used for plyboard manufacturing and half for ply manufacturing. Therefore, out of the total core of 309138 sq.mtr. 154569 sq.mtr. was allegedly used for manufacturing of plyboard and similar measurement for manufacturing of ply. The Assessing Officer thereafter as per paras 7.4 and 7.5 of the assessment order computed that the plyboard and ply manufactured from core would be approximately 90,000 sq.mtr., as against which as per RG-1 register, the production was approximately 31248.60 sq.mtr. The Assessing Officer thus worked out the alleged suppression in the manufacturing of ply and plyboard and as per para 7.8 of the assessment order show caused the assessee as to why addition of Rs. 60 lacs should not be made. The assessee refuted the allegations of the Assessing Officer. However, the Assessing Officer in view of the seized documents computed the addition in the hands of the assessee of Rs. 39,90,000/- by adopting GP rate of 13.3% on production worth Rs. 3 crores. 61. Before the CIT (A....
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....ue is that the assessee does not maintain any quantitative records. RG-1 contains only the daily total production without any bifurcation of the two products. So the veracity of the claim of the assessee cannot be cross checked. Furthermore, core veneer received on job work is apparently also not accounted for. On the other hand, 1 find that the AO has given the benefit of considering only one Press as used for manufacturing during the year, wastage of 10% as claimed was allowed and the core dried on basis of the seized papers at 309138 sq mt as against the higher amount of 414614 sq mt worked out by the assessee. The RG-1 showed the production at 31,248.6 sq mt only for the given 52 days from both the Presses. So, 1 am inclined to hold that more than adequate leverage has been afforded to the assessee. The AO calculated the minimum production at 90,000 sq mt for the 52 days ie for period 27.10.2006 to 19.1.2007 as against the disclosed production in RG-l of 31,248 sq mt. In other words there is suppression of production of at least l/3rd viz. 60,000 sq mt. On applying the average sale price of Rs. 82/- sq mt the value comes to Rs. 48,00,000/-approx. and extrapolating it for the....