AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 1070
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....l/ 2010 cross-appeals preferred by assessee and revenue in the case of Late Smt. Dayawanti for Assessment Year 2000-01 in ITA No.1634/Del/2010. The following grounds have been raised by the assessee:- "1. That on the facts and circumstances of the case and the provision of law the ld CIT(A) II has failed to appreciate that the assessment order passed by the ld AO u/s 153A is bad in law and wrong on facts. 2. That on facts and circumstances of the case and the provision of law the ld CIT(A) II has failed to appreciate that there was no valid action u/s 132 of the IT Act consequently the assessment order passed by the ld AO u/s 153A is bad in law and wrong on facts. 3. That the assessment framed is against the scheme of the Act whereby the reassessment in such search cases is to be confined to the additions and disallowances consequent to the material found during the course of the search and the material collected/ available with the AO and relatable to such evidences and does not give power to the AO to re-apprise the already settled issues and the completed assessment. 4. That the ld CIT(A) II has failed to appreciate that impugned assessment order passed by the learned assess....
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....the addition even when no adverse material is there. 14. That on the facts and circumstances of the case the learned assessing officer has erred in initiating the Penalty proceedings u/s 271(1)(c) of the Income Tax Act 1961. 15. That on the facts and circumstances of the case the interest charged u/s 234A, 234B and 234C is excessive and has been wrongly and illegally charged." 4. And in ITA No.1537/Del/2010, the Revenue has raised the following grounds:- "1.(a) On the facts and in the circumstances of the case of ld CIT(A) has erred in giving relief of Rs. 11,68,570/- on account of trading results and by directing to adopt the GP rate at 12% on sales of Rs. 69,28,582/- instead of 20% on sales of Rs. 1 crores adopted by the Assessing Officer. 1.)b) On the facts and in the circumstances of the case of the ld CIT(A) has erred by deleting addition of Rs. 1,60,287/- on account of unexplained interest payment as no interest has been charged from various debtors. 2. The order of the ld CIT(A) is erroneous and no tenable in law and facts." 5. To appreciate the issues involved in the aforesaid cross-appeal, it would be appropriate to adumbrate the factual matrix as emanating from the....
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....onfirmation from all creditors was also not furnished. Further discrepancy in respect of cash balance as per books and financial results was also not explained. In such circumstances, the AO rejected the books of accounts u/s 145 of the Act and estimated the sales at Rs. 1 crores and adopted the G.P. Ratio of 20% and thus made an addition of Rs. 12,69,039/-. Apart from the above, AO made the following additions:- a) Addition of Rs. 23,38,032/- on account of unexplained credits out of Sundry credits and held it to be not genuine. Since confirmation from creditors was not filed. b) Addition of Rs. 90,700/- on account of loans and liabilities not treated as genuine. c) Addition of Rs. 2,24,240/- on account of loan from M/s. Manish Impo Expo held to be not genuine. d) Addition of Rs. 1,60,287/- on account of disallowance of interest. e) Addition of Rs. 20,800/- on account of disallowance of salary. f) Addition of Rs. 15,647/- on account of disallowance of expenses. g) Addition of Rs. 2,30,000/- on account of unexplained credit of Shri Rameshwar Das. 9. As such, the AO, determined the income of the assessee at Rs. 45,90,799/- as against declared income of Rs. 2,42,054/-. 10. B....
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....s to the AO to furnish the reply vide dated 23.03.2009. The ld CIT(A) also asked the comments of the legal heirs of the assessee. After considering the submissions of the legal heirs of the assessee framed by the AO ld CIT(A) observed that vide Panchnama Dated 22.03.2006 at A-2/14A Model Town-I, Delhi, namely M/s. Assam Supari Traders had clearly been mentioned. He, therefore, was of the view that the warrant had been issued in the name of M/s. Assam Supari Traders. Therefore notice u/s 153A was to issued in the name of the proprietor of M/s. Assam Supari Traders i.e. the assessee only. The ld CIT(A) accordingly held that the AO was correct in issuing notice u/s 153A of the Act. The ld CIT(A) also pointed out that as per provisions of section 132A of the Act, where the competent authority, in consequence of information in his possession, has reasons to believe that any person is in possession of money/ bullion/ jewellery or other valuable articles or thing which represents either wholly or partly income or property which has been earned but is not disclosed or will not be disclosed or is in possession of books of accounts or documents which will not be produced if called for to be ....
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....o Global Logistics Ltd. vs. DCIT, 137 ITD 287 (SB). 17. In her rival submissions the ld DR strenuously supported the order of the ld CIT(A) and stated that the AO did not consider the return filed by the assessee u/s 139(1) because no assessment was framed u/s 143(3) of the Act. She, further, submitted that the additions were made on the basis of the statement of assessee; and that assessee failed to produce the vouchers relating to the purchase and sales, so the AO, rightly rejected the books of accounts and made estimation as per law which could not be faulted since it was reasonable however the ld CIT(A) erred in passing the impugned order and so she pleads that the order of the ld CIT(A) may be set-aside and the order of the AO be restored. 18. In his rejoinder the ld counsel submitted that the statement of the Shri Abhay Gupta was not relating to this relevant assessment order which is in hand, because it was recorded after the search on 03.05.2006 while the search took place on 22.03.2006. So this statement was not u/s 132(4) of the Act. So the authorities below ought not to have taken cognizance of this statement which is not admissible evidence. It was further stated that....
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....arried out u/s 132 of the Act. It is pertinent to add here that the premises at which the search was carried out was on the basis of warrant issued in the name of the proprietorship concern of the assessee and it was also the residential premises of the assessee. Therefore we find that there was a valid search on the assessee and as such, provision u/s 153A of the Act was rightly triggered and invoked thereafter. 21. The ld counsel has further emphasized in the course of his submission that since all the addition made in the order of assessment were not based on material found as a result of search, the said additions, are against the scheme of the Act and so it is was erroneous. He submitted that the Act does not give the power to the AO to reappraise the already settled issues and the completed assessments. 22. In the instant case we find that AO had rejected the books of accounts and made additions by estimating the sales & GP rates, inter-alia on the ground that in the course of search, a statement was recorded by Shri Abhay Gupta u/s 132(4) of the Act on behalf of the assesse too. In the said statement dated 18.04.2006, a copy of which has been placed before us, in Page 89, ....
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....d sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms. Q. No. 9 What are the books of account maintained by your firms? Ans:- To the best of my knowledge, both our firms maintained cash books, ledger, sales register, bills books and other general books of accounts. Q,. No. 10- I am showing your annexure A-3 (Page 60 and 61) found I seized from your residence at A-2/14-A, Model Town-I, Delhi on 23.03.2006 during the course of search, seizure please explain the nature, contents and details of these small hand written paichies. Ans: These small handwritten on unaccounted cash purchase/ sales of various items in Supari which were made by firm M/s. Asom Supari Traders and M/s. Balaji perfumes. Also purchase dated 19.10 on page No. 60 of this annexure represented unaccounted and credited. Q. No. 11. I am showing your Annexure A-2 having page No. 1 to 29 found and seized form your residence at A-2/14-A, Model T....
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....rthed during search. No material has been placed before us to negate the aforesaid factual aspect as well as to support the claims of AR that the admission before the Revenue was not valid and hit by duress and coercion. Before we conclude this issue, we consider it appropriate to note that the ld AR, had also stated that no material Per-se was found pertaining to the year under consideration. However, this argument also does not hold any water because once Section 153A is triggered on account of unearthing of incriminating material during search, the AO is empowered to compute the total income for six assessment year prior to the year of search. There are no fetters or limitation under the statute, so as to curtail the jurisdiction of the AO. We derive support from the judgment of jurisdictional High court in the case of CIT Vs. Anil Bhatia 352 ITR 493 (Del) wherein it has been held by the Hon'ble High Court as under:- "In the light of our discussion, we find it difficult to uphold the view of the Tribunal expressed in paragraph 9.6 of its order that since the returns of income filed by the assessee for all the six years under consideration before the search took place were proce....
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....fore, both the reasons given by the Tribunal for holding that the assessments made under section 153A were bad in law do not commend themselves to us. The result is that the first substantial question of law is answered in the negative, in favour of the Revenue and against the assessee." 24. In view of the aforesaid case laws and reason stated above, we dismiss the ground no 1, 2 & 3 of the assessee. 25. Ground Nos. 4 to 10 of the assessee's appeal and ground 1(a) of revenue's appeal are inter-related and pertain to addition made on account of the rejection of trading result and adoption of estimated sales and GP rate. 26. The AO have observed that in the audited account for the year under consideration, the assessee declared sales of Rs. 69,28,582/- and Gross Profit of Rs. 7,30,961/- yielding gross profit rate of 10.55%. He has noted that the assessee produced only computerized books of account and did not produce sale-bills, purchase bills and vouchers for expenses incurred by it. He has also pointed out that the assessee has not filed confirmation from sundry creditors and debtors other than five creditors. He therefore rejected the books of account and adopted the sale at Rs....
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....ue relied upon the finding of the AO. We have heard both the parties and perused the material on record. The trading addition has been made in the instant year by the AO on the ground that book results as declared by the assessee are not verifiable, since sales bills, purchase bills and vouchers for expenses have not been produced by the appellant before him. We find that the assessee even could not produce before the ld CIT(A) the sale bills, purchase bills and vouchers for the expenses incurred by her in the relevant AY. Even before us there was no material led to assail the aforesaid factual position. In such a scenario we have no other alternate but to uphold the rejection of books of accounts as there is no material to substantiate the correctness and completeness of such books of accounts. We may mention here that thought the ld CIT(A) has correctly held at Pg. 11 in para 11.1.3.1 (supra) that in the absence of bills and vouchers, entries made in books cannot be verified, therefore book result cannot be accepted. However quite strangely he has held in Para1 11.1.3 of his order that there is no justification for rejection of books of account by observing that AO has not placed....
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.... rate of 20% for this Assessment Year. So we restrict the GP rate at 15% for this Assessment Year and direct the AO to compute the trading addition by adopting the sales at 1 crore and GP rate at 15% for this Assessment Year. We thus allow the ground raised by the revenue and reject the ground raised by the assessee on this behalf. 31. Ground No. 11 and 12 of assessee's appeals pertain to addition of Rs. 1,24,530/- u/s 41(1) of the Act. 32. The AO had made the said addition on the ground that confirmation from M/s Spices was not filed. The ld CIT(A) has confirmed the additions, on the basis that even after the expiry of limitation period confirmation has not been filed. Therefore there is cessation of liability warranting addition. After considering the submission made by the parties, since we have already upheld the rejection of books of account and estimated the income for the instant year, there is no basis to make any further addition on the basis of entries found in the books of accounts. Even otherwise we may add here that the said addition is contrary to the judgment of Apex Court in the case of Commissioner of Income-tax Vs. Sugauli Sugar Works (P.) Ltd. (1999) 236 ITR 51....
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....tally related to the appellant, entire interest payment cannot be disallowed. Therefore, following the decision of Apex Court in the case of SA Builders, 197 Taxation 1 the disallowance of interest made by the AO is directed to be deleted. Relief Rs. 1,60,287/-. 36. We dismiss this ground raised by the revenue as we have already estimated the income for the instant year and thus no separate disallowance is warranted so this Ground of revenue is dismissed. 37. In the result the appeal filed by the assessee and revenue are partly allowed for AY 2000-01. 38. Now we take up the remaining cross-appeals in the case of the assessee (Smt Dayawanti) for Assessment Year 2001-02 to 2004-05. 39. Ground Nos. 1, 2 and 3 in the appeals filed by the assessee are identical to Ground Nos. 1, 2 and 3 of the assessee's appeal for Assessment Year 2000-01 relating to validity of initiation of 153A proceeding as stated by us while disposing of the Grounds No. 1, 2 and 3 for 2000-01. So, we dismiss these grounds also of the assessee on the aforesaid reasoning. 40. Ground No.4 to 10 of the assessee's appeal in Assessment Year 2001-02 to 200405 and ground No. 1(a) of the Department's appeal are in resp....
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....hs per acre :60,00,000 Cost of house 1200 sq ft constructed :5,00,000 Cost of construction of addition of Swimming pool :20,00,000 Cost of landscaping :6,65,000 91,65,000 7.2.1.1 He apportioned this amount in four hands as four persons are co-owners of this property. Such apportioned amount is Rs. 22,91,250/-. As each members has shown only Rs. 3,75,000/- as investment against acquisition of this property, he has made addition of the difference of Rs. 19,16,250/- in the hands of the four coowners and accordingly addition of Rs. 19,16,250/- has been made in the hands of the appellant also." 44. The ld CIT(A) partly granted relief to the assessee, by reducing the investment from Rs. 91,65,000/- to Rs. 18,65,000/- on the following basis:- "i) Cost of land filing and land scaping :Rs.6,65,000/- Ii) Cost of construction of Swimming Pool :Rs.10,00,000/- iii) Cost of improvement and alteration in the existing Farm House. :Rs.2,00,000/- Total :Rs.18,65,000/-" 7.2.3.3 Thus, total investment made additionally in this Farm House can be estimated at Rs. 18,65,000/-. As none of the ....
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....65,000/-. As such addition of Rs. 1,41,250/- is sustained in the hands of the assessee and the balance addition against the assessee is deleted. This ground is partly allowed for assessee and ground of revenue is dismissed. 47. Ground Nos. 12 and 13 of assessee's appeal for Assessment Year 2001-02 and 11 to 13 for 2002-03, 2003-04 & 2004-05 relate to addition u/s 41(i) of the Act. This issue is identical to ground No.11 to 13 for Assessment Year 2000-01. For the reason stated therein, the said grounds of assessee is allowed. 48. In the result the cross appeals preferred by the assessee's and Revenue for AY 2001-02 to 2004-05 are partly allowed in the case of Smt. Dayawanti.. 49. Now we take up cross appeals in the cases of Sunita Gupta, Varun Gupta and Anoop Gupta for Assessment Year 20001-02 and cross -appeals in the case of Shri Ajay Gupta for AY 2000-01 and 2001-02. 50. Ground Nos 1 to 3 of the aforesaid appeals filed by the assessee's relate to validity of proceeding u/s 153A of the Act. 51. For the reasons stated herein before while deciding the appeal for Assessment Year 2000-01 in the case of Late Smt. Dayawati, we are inclined to reject the aforesaid ground of assessee....
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....f Sunita Gupta is against the additions of Rs. 21,000/- on account of cash deposited in Bank Account. 58. The AO while making the addition of Rs. 55,000/- has observed as under:- "During this year, the assessee has deposited following amount in cash in her Central Bank of India account. Date Amount 26.04.2000 2000 26.06.2000 2000 16.08.200 55000 20.09.2000 2000 25.09.2000 2000 20.10.2000 2000 13.11.2000 20000 19.12.2000 2000 87000 Cash in hand as on 01.04.2000 was Rs. 11,294/- only. From above chart it is clear that up to August 2000, she has deposited about Rs. 48,000/- in bank in cash other than the cash in hand available as on 01.04.2000. On any day, still petty cash remains in hand. So she has failed to substantiate the source of deposits of Rs. 55,000/- as cash in her bank account on 16.08.2000. No evidence or explanation about above deposit has been filed which remains unexplained. The same is added to returned income of the assessee as deposited out of unexplained sources." 59. The ld CIT(A) however restricted the addition to Rs. 21,000/- on the following reasons.:- "4.3. I have considered the fact of the case. T....
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.... house in Model Town, Delhi. Therefore, estimating household expenses at Rs. 15,000/- per month is high in my opinion looking to the fact that this estimation is being made not for current year but for Financial Year 1999-2000. In my opinion therefore it will be fair and reasonable to estimate the drawings in the hands of the appellant@ Rs. 10,000/- per month i.e. Rs. 1,20,000/- for the year. This will lead to an addition of Rs. 78,000/- (Rs.1,20,000Rs.42,000/- shown) on this account. Thus, the addition of Rs. 1,37,224/- is restricted to Rs. 78,000/-. The appellant thus gets relief of Rs. 59,224/- on this ground." 63. The ld CIT(A) has estimate the drawings of the assessee at Rs. 10,000/- per month. No material whatsoever has been led to assail the finding and addition sustained by the ld CIT(A). Therefore this ground of the assessee is dismissed. 64. Ground No. 5 of assessee' s appeal in the case of Ajay Gupta relates to addition of Rs. 2lakh on account of unexplained cash-credit. Facts in brief are that AO made an addition of Rs. 5,48,000/- on account of unconfirmed loan from M/s Anand Jute company, since no confirmation was received from it. During the appellate proceedings, i....
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..../s Anand Jute company. A copy of the account signed by an accountant, has been admittedly placed on record before us as well as the ld CIT(A). We note that the amount of Rs. 2 lakh has been received by Account Payee cheque and interest thereon has been paid to the creditor. Further PAN number of the creditor has also been furnished. In the said circumstances, we are of the opinion that merely because confirmation has not been filed separately from the creditor itself, would be amounting to deny the claim on hyper technical ground, when other facts are not refuted by the department even in the course of hearing. In such circumstances we feel it appropriate to allow the claim of the assessee and delete the addition of Rs. 2 lakhs. 66. Ground N0.5 of assessee's appeal in the case of Ajay Gupta for Assessment Year 2001-02 relates to addition of Rs. 28,559/- on account of un-explained creditors. 67. The ld CIT(A) has upheld the addition of Rs. 28,559/- representing the balance from the creditor observing as under:- "7.3.2 Regarding Shivangi Printers, though no confirmation has been filed, the copy of the bill has been filed which was forwarded to the AO and the AO has not doubted the....
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....of expenses debited in P&L Account, has been found during the course of search or at least it has not been brought on record by the AO either in assessment order or in the remand proceedings. Thought he assessee has failed to produce books of account and bills and vouchers to support the net profit as declared in P&L A/c and also in the return of income but at the same time it is also fact that in spite of search being conducted in this case no contrary material has been found to suggest that the income shown from this concern is suppressed. For a moment even if it is presumed that income has been offered purely on estimate basis yet AO has no evidence as far as this concern is concerned even after conducing search that the income so shown by the appellant is suppressed. The reference made by the AO of Excise evasion or unrecorded purchases etc. are related to M/s Balaji Perfurmes and M/s Assam Supari Trading Co. No reference has been made by him in the assessment order of any evidence of under reporting of income as far as this proprietary concern is concerned. The reference of AO that this group is engaged in tax evasion is not relevant for the Income-tax purposes, as the assessm....