TaxTMI 
TaxTMI 
2011 (11) TMI 708
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.... net loss of Rs. 1,22,100/- was disclosed by the assessee in respect of the sale shown by the assessee of Rs. 39,45,105/-. As per the assessment order of that year, the AO did not accept the claim of the assessee regarding the sales and he held that the sale of only Rs. 5,04,400/- is acceptable. Against the loss disclosed by the assessee of Rs. 1,22,100/-, the AO estimated the income of the assessee at Rs. 36,506/- on the basis that profit at 8% was estimated on the Labour contract receipts and rent receipts of Rs. 4,56,331.00. Apart from this, the AO made addition of Rs. 10,09,000/- under Section 68 in respect of unsecured loans and assessment was completed at a total income of Rs. 10,45,500/- as against the loss declared by the assessee in the return of income at Rs. 1,22,100/-. Being aggrieved, the assessee carried the mater in appeal before the learned CIT(A), but without success and now, the assessee is in further appeal before us in the quantum proceedings. In the meantime, the AO initiated penalty proceedings under section 271(1)(c) in respect of the addition made by him of Rs. 10,09,000/- under section 68 and he imposed penalty of Rs. 3,16,415/-. Against this penalty order ....
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.... made by the AO of Rs. 1,00,000/- on account of labour expenses. Out of the addition made by the AO of Rs. 31.59 lakhs in respect of unsecured loan and of Rs. 81 lakhs in respect of cash deposit in various bank accounts made by the AO under Section 68, relief was allowed by the learned CIT(A) to the extent of Rs. 30.09 lakhs out of addition of unsecured loan and relief was also allowed of Rs. 41,17,600/- out of addition made by the AO of Rs. 81 lakhs in respect of cash deposit in various bank under Section 68. 4. The Revenue has raised these two issues also before us in the appeal filed by it. In the appeal filed by the assessee in the quantum proceedings for A.Y.2001-02, the assessee has raised two issues i.e. regarding confirmation of the addition made by the AO of Rs. 1,50,000/- received from V.K. Chaudhry and confirmation of Rs. 39,82,4000/- being funds deposited in various banks for payment of bank loan under OTS scheme. In addition to this, the AO initiated penalty proceedings for A.Y.2001-02 in respect of two additions confirmed by the learned CIT(A) of Rs. 1,50,000/- out of unsecured loan and of Rs. 39,82,400/- out of the addition made by the AO in respect of cash dep....
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.... loan received from Shri V.K. Chaudhari. He submitted that copy of the remand report of the AO is available at page no.101 to 112 of the paper book and in particular, our attention was drawn to page no.11 of the remand report which is available at page no.111 of the paper book where the AO has stated that out of total loan of Rs. 81 lakhs, an amount of Rs. 20 lakhs has been proved and the balance amount of Rs. 61 lakhs has not been proved. He has submitted that in view of this factual position that the sale of the assessment year 2001-02 are accepted by the AO and even if the sale of A.Y.2001-02 are not accepted, it will not have any impact on the cash position in view of ignoring of the purchases and therefore, the addition made by the AO on this account is not justified. 6. Regarding the addition made by the AO in respect of unsecured loan of Rs. 10.09 lakhs in A.Y.2000-01, it was submitted that no such addition is justified because the loan in question were not received during this year and these are opening balance. In support of this contention, our attention was drawn to page no.17 of the paper book for A.Y.2001-02 in which a chart of unsecured loan is given and as per ....
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....sis because when the A.O. initiated the proceedings u/s 148 for this year on 06.09.2005, he could have initiated such proceedings for A. Y. 1999 - 2000 also but he has not done so. It is settled position of law that the opening stock of a year has to be same as the closing stock of the preceding year. Without disturbing the closing stock of A. Y. 1999 - 2000, the A. O. cannot say that the opening stock of the present year is nil when as per the P/L Account and Balance Sheet for the year ended on 31.03.1999, closing stock was shown at Rs. 34,91,710/- as per copy of Balance Sheet and P/L Account of that year available in the paper book. Moreover, even on the accepted sales of the assessee of Rs. 504,400/-, the A. O. worked out Net Loss of Rs. 73,202.27 as per revised P/L Account prepared by the A. O. on page 13 of the assessment order but ignored the loss while computing the total income on page 17 of the assessment order. This shows that the A. O. himself has not accepted and acted upon this revised P/L Account prepared by him on page 13 of the assessment order. In this P/L Account, the A. O. has accepted sales at Rs. 504,400/- and closing Stock of Rs. 782,950/- and net loss is comp....
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....sessee Revised by us Loan Liability: Capital A/C 3,42,247.63 1,58,571.36 Bank OD 75,15,983.65 75,15,983.65 Fixed Assets: Secured loan 37,151.00 37,151.00 P & M 48,442.00 48,442.00 Unsecured Loan 10,09,000.00 9,59,000.00 Vehicles 2,60,576.00 2,60,576.00 Current Liability Furniture 25,915.00 25,915.00 Provisions 22,295.00 22,295.00 Shed 1,10,510.00 1,10,510.00 Sundry Crs. 36,169.00 36,169.00 Current Assets: Profit & Loss Account: Closing Stock 46,66,407.00 46,66,407.00 of this year -1,47,170.27 36,506.00 Deposit (Asset) 1,00,520.00 1,00,520.00 Less: Transferred to Capital 1,47,170.27 -36,506.00 Loan & Adv. 30,607.20 30,607.20 S. Debtors -876000.00 0.00 Cash in Hand 38,32,596.97 30,90,273.24 Bank A/cs 28,898.85 28,898.85 TDS for 1999-2000 49,878.00 49,878.00 86,20,598.65....
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....f Rs. 10.09 Lacs. Since, this entire addition is deleted, no penalty survives. We hold accordingly. 13. In the result, the penalty appeal of the assessee for A. Y. 2000 - 01 is allowed. 14. For A. Y. 2001 - 02, we find that as against the sales of Rs. 39,55,810/- claimed by the assessee, the A. O. in the assessment order has estimated the sales of the assessee at Rs. 40 Lacs and G.P. was estimated by him at Rs. 8 lacs being 20 % of Rs. 40 Lacs. Hence, as per the assessment order for this year, the sales of the assessee are in fact increased by the A. O. and expenses are reduced because the A. O. has estimated the G.P. at a higher amount. As against this, learned CIT (A) has held that there is no sale in this year because the assessee has not maintained quantitative records and he has brushed aside the other evidences such as Sales Tax assessment order and copy of Bank Statements showing deposit of Cheques/drafts against sales. In our considered opinion, the claim of the assessee about sales in this year cannot be rejected in the light of these independent evidences being Sales Tax Assessment order and Bank Statements etc. In fact, the A. O. has estimated the sales of this yea....
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....bsp; U/S Loan 31,59,000.00 31,09,000.00 P & M 34,332.00 34,332.00 Current Liab. Vehicles 2,30,111.00 2,30,111.0 Provisions 64,365.00 64,365.00 Furniture 25,623.00 25,623.00 Sundry Crs. 2,28,621.00 2,28,621.00 Shed 82,582.00 82,582.00 Profit & Loss Account: Current Assets: of this year -2,75,774.35 59,068.65 Closing Stock 16,91,480.00 16,91,480.00 Less: Tran. To Capital 2,75,774.35 59,068.65 Deposit (Asset) 10,20,520.00 10,20,520.00 Loan & Adv. 9,34,059.00 9,34,059.00 S. Debtors -1420000.00 0.00 Cash in Hand 81,36,133.57 71,84,652.84 Bank A/cs 22,619.45 22,619.45 TDS for 1999-2000 & 2000-01 1,20,217.00 1,20,217.00 1,15,51,986.00 1,15,01,986.00 1,15,51,986.00 1,15,01,986.00 Note: 1) Advance from Customers of Rs. 14.20 Lacs is taken as Nil for want of evidence. 2) Cash in Hand is the bala....