TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 640
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....of Rs. 5000/- on account of disallowance of expenses and CIT(A) has erred in restricting it Rs. 5000/-. 2. In respect of ground No.1, the brief facts of the case that the AO observed that the assessee had shown sale of gold and silver ornaments at Rs. 7,73,550/- giving GP rate @ 13.11%. He alleged that the purchases made from customers, are not verifiable and the ornaments were sold by charging rate of gold itself without deducting any amount for semi precious stones. The making charges were collected separately. Finally, the AO rejected the books result u/s 145(3) and estimated the sale at Rs. 8 lacs and also applied the GP rate @20%. The difference of Rs. 56,223/- was added to the income of the assessee. 2.1 In the first appeal, the ld. CIT(A) held as under: "I have gone through the assessment order as well as submission of the assessee, it is found that during the course of survey various discrepancies were found in stock, in debtors, in sale and purchase and expenses also. Further purchases were made from the villagers, which cannot be verified in absence of complete details. The sale was hardly increased Rs. 26,450/-. The assessee had shown 13.11% GP in the return. The ass....
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.... entire additions therefore, may kindly be deleted in full. 2.4 The ld DR is heard who has relied on the order of lower authorities. 2.5 We have heard the rival contentions and perused the material available on record. The appellant has not taken any grounds before us relating to rejection of books of accounts under section 145(3) and hence, the contention of the ld AR regarding invalid application of section 145 cannot be accepted. Regarding estimation of sales at Rs. 8 lacs as against declared sales of Rs. 7.73 lacs by the assessee in its return of income, no basis or justification has been given by the AO. Further, the basis of estimation of G.P @ 20% as against declared G.P of 13.11% is also not clear from the assessment order. Inspite of the fact that the books of accounts have been rejected, the estimation of sales and G.P need to necessarily have some rational and reasonable basis which is absent in the instant case. Hence, the trading addition of Rs. 56,223 is deleted and the ground of the assessee is allowed. 3. In respect of Ground No.2, the brief facts of the case are that the AO observed that during the course of survey, a Katuria note book containing 35 pages was fo....
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....ears. The AO had verified the each and every items as assessee himself admitted and disclosed additional income on account of Udhari at Rs. 3 lac on 21.08.2001 u/s 131 of IT Act in presence of Advocate Shri A.K.Bansal. But full verification of these papers were made at the time of assessment by the AO with regular books of account as well as list of debtors disclosed by the assessee. I have also gone through the photocopy of the above loose papers and photocopy of the diary (Katuria note books) during the course of appellant proceeding which shows clearly debtors as when the assessee recovered the money from the debtors the assessee makes tick mark on it. It means the amount has been recovered and remaining entries are outstanding debtors. This matter was remanded back to the AO who has again give the opportunity to the assessee but the assessee has not contra-verted the findings of the AO. Therefore, the addition of Rs. 5,52,740/- is confirmed" 3.2 The ld. AR of the assessee submitted that firstly, he strongly rely upon the written submissions filed before the ld. CIT(A). It was further submitted that it was a case of double addition. In this regard, it was submitted that the AO....
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....eated to be an income merely on the basis of these statement in absence of any direct cogent evidence. Therefore, no adverse inference should be taken from these statements. Alternatively, it was submitted that the other part of the statements where the assessee has repeatedly submitted that the unexplained assets already disclosed at Rs. 36,13,140/- came out of the recoveries from the outstanding debtors and the income there from, as detailed in our submission dt. 11.03.2016 for other years, must have been accepted. 3.5 The ld. AR of the assessee further submitted that the ld. AO silently accepted the surrender so made and was not at all able to lay his hands on any other corroborative cogent evidence to support this alleged admission by the appellant. No inquiry of any nature from the debtors, if any, as such was made. Notably during the course of survey also no other evidence was found suggesting any payment received or recover from debtors. In support, reliance was placed on CIT v. Diplast Plastics Limited [2010] 327 ITR 399 (P & H ), CBI vs. V.C. Shukla (1998) 3 SCC 410 and ACIT v/s Om Prakash & Co.87 TTJ 183 (Bom) 3.6 The ld DR is heard who has relied on the order of lower ....
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....,000/- as personal nature. In the first appeal, the ld. CIT(A) held that "The personal element in shop expenses can not be ruled out but addition appears to higher side. Therefore, I restrict this addition Rs. 3,000/-. The assessee gets relief of Rs. 2,000/-." 4.1 The ld. AR submitted that a bare reading of the order of lower authority shall reveal that in almost all the cases, the disallowances have been made on ad hoc basis, simply on mere suspicion, surmises and conjectures. No specific instance of any nature whatsoever has been given by the AO in the impugned order to support his contention with the documentary evidence that the expenditures were incurred for non-business purposes, element of personal user was there. An allegation remains a mere allegation unless proved. Suspicion cannot take the place of reality is a settled principles as held kindly refer Dhakeshwari cotton Mills 26 ITR 775 (SC). 4.2 The ld AR further submitted that it is a settled law that a businessman is the best judge to take care of its own interest & to take decisions and the AO is not supposed to intervene therein nor he can replace the assessee. Here, whatever decisions were taken by the assessee, h....
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.... Whatever undisclosed income was generated out of the unrecorded sales was converted into cash and stock. At both the occasions, he stated the figure of the undisclosed stock of Rs. 26.05 Lacs and investment in the house at Rs. 5 Lacs and the other unexplained expenditure/asset also. Thus, the recoveries from the Outstanding debtors stood invested/converted into unexplained investment totalling to Rs. 36,13,140/- which, admittedly has already been disclosed by the assessee separately and got taxed in A.Y.2002- 03. This factual position has been admitted by the AO also in the assessment order for A.Y.2002-03 wherein at pg 2, he has reproduced the computation of income filed by the assessee showing the said disclosure made. Further, Rs. 30,13,140/- was surrendered under the head "Business Income" whereas Rs. 6 Lacs was surrendered as "Income from Other Sources". 5.3 The ld AR further submitted that the fact of availability of the recoveries made from the debtors is also evident from the confirmations from the various debtors, wherein they (customers) have stated that they got the ornaments manufactured from the assessee, mentioning the amount thereof and that the payment thereof ha....
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....by appellant in his statement recorded on 10.08.2001 (PB-22). However, we may submit that these statements were recorded during the course of survey and the possibility of the existence of tensed and surcharged atmosphere in the case of search cannot be ruled out. Kindly refer Jagdish Naraian Ratan Kumar 22 TW 209(JP). These statements therefore, are not at all reliable in view of the above submissions and factual legal & position. Hence, no addition should have been made or alternatively, the other part of the statements (as above) where the assessee has repeatedly submitted that the unexplained assets already disclosed at Rs. 36,13,140/- came out of the recoveries from the outstanding debtors and the income there from, as detailed in our submission dt. 11.03.2016 for other years, must have been accepted. 5.6 The ld AR further submitted that the allegation of the ld. CIT(A) that there is no date of payment on the confirmations and hence, are not relevant, is contrary to the facts and rather wrongly ignored. Moreover, the appellant being a retailer, it is difficult to believe that there will be no recovery at all of the outstanding sales for the years together and is against the h....
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....house was the undisclosed business income. Whatever undisclosed income was generated out of the unrecorded sales was converted into cash and stock. At both the occasions, he stated the figure of the undisclosed stock of Rs. 26.05 Lacs and investment in the house at Rs. 5 Lacs and the other unexplained expenditure/asset also. Thus, the recoveries from the Outstanding debtors stood invested/converted into unexplained investment totalling to Rs. 36,13,140/- which, admittedly has already been disclosed by the assessee separately and got taxed in A.Y.2002- 03. Further, it is noted that the fact of availability of the recoveries made from the debtors is also evident from the confirmations from the various debtors, wherein they have stated that they got the ornaments manufactured from the assessee, mentioning the amount thereof and that the payment thereof has been made within a maximum period of two months from the date of such purchase/making. The ld AR further submitted that the AO in all the years while making addition of outstanding debtors alleged that this was admitted by appellant in his statement recorded on 10.08.2001. At the same time, the other part of the statements where the....
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....icit or cash credit cannot reasonably be related to the amount covered by the intangible addition but must be regarded as pointing to the receipt of undisclosed income earned during the assessment year under consideration. It is open in to the revenue to rely on all the circumstances pointing to that conclusion." 5.12 The Hon'ble Rajasthan High in case of Tyaryamal Bal Chand (supra) has held as under: "It is clear from the law discussed above, that the ITO was within his right to tax the amount of Rs. 16,950 as income from undisclosed sources. Even though he had added the amount of Rs. 18,117 in addition to the profit shown by the respondent-firm in their account books. However, in the present case, the respondent was well within his rights to plead that this amount of Rs. 16,950 is covered from the intangible income assessed at Rs. 18,117 and added in the income of the firm and apart from this, since for the last preceding 3 years, substantial additions amounting to Rs. 32,797 have been added, the amount of Rs. 16,950 could be taken as having come out of such intangible additions. In the case of Anantharam Veerasinghaiah & Co. (supra), their Lordships of the Supreme Court have....