TaxTMI 
TaxTMI 
2016 (5) TMI 526
X X X X Extracts X X X X
X X X X Extracts X X X X
....18,00,000/- on account of unaccounted investment in purchase of cranes. 4. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 14,83,789/- made by the A.O. in respect of unaccounted investment in stock. 5. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 72,00,000/- made by the A.O. on account of unaccounted expenditure of salary and wages. 6. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 9,05,074/- made by the A.O. on account of unaccounted expenditure. 3. The first issue is with regard to the addition of Rs. 2,72,78,269/- made by the Assessing Officer in respect of unaccounted profit. The Assessing Officer made this addition as undisclosed net profit with the following observations:- "10(a). During the course of survey, copy of trial balance/profit and loss account for the period of 1/4/2008 to 31/03/2009 was found reflecting the net profit of Rs. 2,88,20,686/- by the assessee firm. In said paper the correction/modification of figure of net profit is worke....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ling income to the extent of Rs. 2,72,78,269/- (Rs.2,88,20,686 - Rs. 15,42,417/-. From the findings in the assessment order, apart from this provisional copy of P&L account, the Assessing Officer has not brought any evidence to substantiate such huge addition. It is undisputed fact that the provisional P&L A/c was only for the period 01.04.2008 to 31.08.2008 and not for the period 01.04.2008 to 31.03.2009 as observed by the Assessing Officer. 3.3 The stand of the assessee has been that the said copy of the provisional P&L A/c was taken out for estimating the advance tax liability which was payable on 15.09.2008 (two days after the date of survey; thus, the pencil working in the paper was for the corresponding period of the earlier year. The CIT(A) has also perused the comparative statement of gross profit ratio supplied by the assessee for the current year and previous year and the substantive portion of the submissions made by the assessee is reproduced below for the sake of clarity:- "i) The appellant worked out Advance tax Liability three days earlier to the date of survey. That Balance sheet relied by the learned Assessing Officer to make high pitch addition was not....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of information made an adhoc addition which is bad in law. vi) Further, the ld. AR contended that the partner whose statement was recorded u/s 133A of the Act was unaware of how these figure arrived at and hence he stated that he would give explanation the next day. However, no such explanation was sought by the Department on the next day which could be explained later only during the course of scrutiny proceedings which the Learned Assessing Officer failed to appreciate. vii) In addition, we are also providing the GP ratio for the past two years as assessed to tax under section 143(3) of the Act and accepted by the Learned Assessing Officer, which establishes that during the year also these were no rejection of any purchase or expenses. viii) Further be noted that the Assessment is made on business profits Rs. 87,10,030 for the whole year accepting the sales at Rs. 12,15,05,030/- and considering various expenses. If the accounts for the period 01.04.2008 to 16.09.2008 are considered once and thereafter the accounts are accepted for whole period 01.04.2008 to 31.03.2009 engulfing the above referred period, it amounts to double taxation and hence otherwis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9 lakhs have been paid through cheque and balance amount of Rs. 21 lakhs have been paid in cash out of the book of the assessee-firm. The same issue was requested to explain vide para No.5.3 of the final show cause dated 20/12/2011 there is no satisfactory explanation offered by the assessee firm. In the reply dated 12/12/2011 also there is no mention either acceptance or a denial on the issue of having paid Rs. 2l lakhs in cash out of the hooks for the purchase of plot of land. As there is no satisfactory reply/explanation offered on this issue, the confession of the partner of the assessee in the answer of question No.19 of the statement dated 16/9/2008 has become final, as there is no dispute, by the assessee firm as described above, the unaccounted cash payment of Rs. 21 lakh is unaccounted income of the assessee firm which is paid for the purchase of plot of land and the same is not shown in the books of the assessee firm and also in the return of income. In view of this, Rs. 21,00,000/- paid in cash by the assessee firm for the purchase of plot of land is added to the income of the assessee firm u/s 69 of the I.T. Act. 8.1 The appellant contended that the Assessing O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come tax to cover all income of all the persons for all the years to assess in one breath. The learned Assessing Officer failed to peacefully go through the documents in his possession and in a fit of urgency made all and sundry additions in sweeping effect. He did not find it suitable to analyse the statements / weapons in his hands as to its relevance to the assessee or to the year under which assessment is to he made. For the sake of convenience and at the cost of repetition we reproduce the answer to question no. 19 of the statement recorded under section 133A of the Act. "I have purchased plot of land for Aditya Engineering during FY 2005-06, i.e. AY 2006-07 for Rs. 70 lacs, out of which Rs. 49 lacs have been paid through cheque and-balance amount oj'Rs. 21 lacs have been paid in cash out of books.". 8.5 Without going to the veracities of the amounts mentioned therein which will be logically explained as and when called for, we wish to furnish that the learned Assessing Officer failed to appreciate that the plot of land is belonging to other assessee other than whom scrutiny assessment he is doing and falls in other assessment year other than which he is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h cheques and the balance amount of Rs. 21 lakhs was paid in cash out of the books of the assessee firm. However, at the same time, CIT(A) observed that the land was acquired by a different entity other than the assessee-firm. He also observed that the statement of the Partner was not categorical that the assessee-firm had paid on behalf of the purchaser from unaccounted source; however, the statement recorded under section 131(1) of the Act referred to a figure of Rs. 70 lacs as affirmed by the Partner of the assessee-firm as the consideration and the books of account recorded a sum of Rs. 60.62 lacs. This was the basis for addition to the differential amount in the appropriate hand. Thus, CIT(A) observed that, considering the factum of the case, the addition made in the hands of the assessee-firm was not justifiable and, if at all any addition should be made, it could be to the extent of the unexplained and not beyond. Further, he rightly held that the addition made in the A.Y.2009-10 was not the relevant year considering the transactions which pertained to the A.Y. 2006- 07. It was found possible such overlapping in case where the Managing Partners manages affairs of various ent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le evidence is either with the assessee or with any other person which can rebut the confession made on oath by the partner of the assessee firm. In this way, an amount of Rs. 18,00,000/- paid for purchase of two second hand cranes are investment made by the assessee firm not reflected in the books of accounts during the course of survey and not included in the return of income which is added back to the income herewith as unaccounted investment u/s 69 of the I.T. Act." 5.1 Matter was carried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee and having considered the same, the CIT(A) granted relief to the assessee which has been opposed on behalf of the Revenue inter alia submitting that the CIT(A) has erred in deleting the addition of Rs. 18,00,000/- on account of unaccounted investment in purchase of cranes. On the other hand, ld. Authorized Representative supported the order of the CIT(A). 5.2 After going through the rival contentions and material on record, we find that the assessee placed on record the audited accounts of Pragati Crane Centre for FY 2005-06 and 2006-07 alongwith summary of crane purchases made during t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the CIT(A) rightly held that there were no documentary evidence on the basis of which the addition can sustain. Considering these peculiar facts of the case, we are also of the opinion that this addition cannot sustain as there was no addition of cranes in the hands of the assessee during the relevant assessment year. In view of these facts, the CIT(A) is justified in deleting the addition in question made by Assessing Officer on account of cash payment made for purchase of second-hand cranes. Thus, the order of the CIT(A) in this regard is upheld and Ground No.3 raised by the Revenue is accordingly dismissed. 6. Next issue is with regard to restricting the addition to the extent of Rs. 63,597/- as against the total addition of Rs. 14,83,789/- on account of unaccounted investment in stock. The Assessing Officer made this addition by observing as under:- "10(d) During the course of survey, the inventory of stock was taken which were worked out and the value of stock on the date of survey was of Rs. 22,38,770/-. This inventory of the stock was prepared and value of the stock was calculated in the presence of partner of the firm and which is duly acknowledged by the partne....
X X X X Extracts X X X X
X X X X Extracts X X X X
....submitting that the CIT(A) has erred in restricting the addition to the extent of Rs. 63,597/- on account of unaccounted investment in stock. On the other hand, ld. Authorized Representative supported the order of the CIT(A). 6.2 After going through the rival contentions and material on record, we find that the stock valued by the survey team was at Rs. 22,38,770/-. The Assessing Officer considered the opening stock as Rs. 7,54,972/- on the basis of one of the copies of the profit and loss account found in the impounded documents. The assessee placed on record the last audited balance sheet showing the closing balance at Rs. 11,71,729/-. It was found that between the date of survey and the commencement of the financial year, there exists transactions of purchases, consumption and sale of the stock items which need to be taken into record while working out the stock level as on the date of survey. The Assessing Officer was not justified in neglecting the transactions in between the period and he even did not consider the difference between the stock found and opening stock as. unexplained investment in stock. The CIT(A) rightly observed that when the audited accounts were availab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee is not acceptable for this reason. The assessee has not furnished any explanation evidence even while production of books which shows the inclusion of cash payment of the salary and wages paid and included in the books of accounts. In view of this, an addition of Rs. 72,00,000/- is made to the total income treating the same as unaccounted expenditure spent from undisclosed income of the assessee firm." 7.1 Matter was carried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee and having considered the same, the CIT(A) granted relief to the assessee which has been opposed on behalf of the Revenue inter alia submitting that the CIT(A) has erred in deleting the addition of Rs. 72,00,000/- made by the Assessing Officer on account of unaccounted expenditure of salary and wages. On the other hand, ld. Authorized Representative supported the order of the CIT(A). 7.2 We have heard the rival contentions and perused the material on record. In this case, the Assessing Officer observed that, as per the authorized officer for conducting the survey, the assessee had been paying salary and wages of Rs. 6.00 lakhs every month out....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessing Officer obviously has not rightly appreciated the submissions made by the assessee in this regard. As rightly observed by the CIT(A), the Assessing Officer completely ignored the basic records and audited books of accounts of the assessee submitted before him. His reliance on the statement has been the sole basis for such addition. In this circumstances, the Assessing Officer was not justified in making such addition and the same has been rightly deleted by the CIT(A). Therefore, the order of the CIT(A) in this regard does not require any interference from our side. We uphold the same. 8. Next issue is with regard to the deletion of addition of Rs. 9,05,074/- as unexplained expenditure holding that out of three parties whose total outstanding amounted to Rs. 45,61,074/- appearing in the trial balance drawn as on 16.09.2008, only Rs. 36,56,000/- written back and shown as income. 8.1 Matter was carried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee and having considered the same, the CIT(A) granted relief to the assessee, which has been challenged on behalf of the Revenue inter alia submitting that the CIT(A) has e....