TaxTMI 
TaxTMI 
2014 (9) TMI 1070
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....s in ITA No. 1634/Del/2010 and ITA No.1537/Del/ 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 i....
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....in law in not considering the relevant material on record and has made 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-....
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.... the sale bills, purchase bill to substantiate the declared results. According to the AO, confirmation 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, ....
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.... Khari Baoli Delhi-6 and at this premise only survey u/s 133A has taken place. 15. The ld CIT(A) forwarded the said submissions 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 disclos....
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....ting material being unearthed during search and in order to buttress the said submission reliance was placed on the case of Al Cargo 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 ....
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....prietorship concern of the assessee has been searched. In any case the assessee was the proprietor of the concern on which the search was carried 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 ....
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.... We and our family firms namely M/s Assam Supari Traders and M/s Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and 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 t....
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....id statement too the surrender was reiterated. The aforesaid surrender no doubt was not acted upon by the assessee, but the said fact cannot lead us from the irresistible conclusion that incriminating material was unearthed 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 d....
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.... found during the search and at the same time in paragraph 10 deal with the merits of the additions based on the document recovered during the search which allegedly contain the loan transaction with Mohini Sharma. Therefore, 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 fo....
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....s.,1,00,469/- was upheld and balance of Rs. 11,68,570/- was deleted. Thus both the assessee and revenue are in appeal before us. 29. The ld Counsel reiterated the contentions of the assessee before the lower authorities and the revenue 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 ....
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.... 15% 23,47,630 2003-04 79,72,200 9.47% 2 crores 15% 22,44,884 2004-05 60,65,498 10.73% 2 crores 15% 23,49,012 30. Since the AO for subsequent Assessment Year's has estimated GP rate of 15%, we do not find any reason as to uphold the GP 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 t....
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....g as under:- "11.5.3. I fully agree with the appellant. It is not the case of AO of diverting interest bearing fund towards loan or advances for non interest bearing purposes or for other than business consideration. Just because interest has not been charged from some debtors majority of whom are business debtors who are incidentally 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....
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....ola at Narela. The AO based on enquires has observed that assessee has not purchased agricultural land but she has purchased a farm house. He has observed that such farm house has a huge built up area and a swimming pool. He also conducted enquired from the seller, Smt Priya who confirmed that she has sold the farm house for Rs. 15 lakhs. The AO however was not satisfied with the claim of the assessee and proceeded to estimate the investment in the property as under:- "Cost of land@20 lakhs 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." 4....
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.... the deposition of the seller corroborates the claim of the assessee. The Hon'ble Delhi High Court in the case of CIT Vs. Sakuntla Devi 316 ITR 46, held that where department has failed to collect any information or material to show that any consideration above and beyond the stated consideration has changed hands then it would be legally impermissible to draw adverse interference against the assessee. Following the above position, we sustain the addition of Rs. 6,65,000/- out of total investment estimated by the AO of Rs. 91,65,000/-. 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 cas....
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....lf prove that there is an income which has not been declared. This is more so when a search has taken place and no evidence contrary to the returned income has been found. In view of the above facts, the AO is directed to delete the addition of Rs. 75,000/- made on this account." 56. Having considered the submission, we are in agreement with the conclusion of the ld CIT(A) that in absence of any material, estimated addition is incorrect and as such ground raised by the Revenue is rejected. 57. Ground No. 9 of the assessee's appeal in the case of 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 deposit....
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....ouse hold expenses. 62. In this case the AO had made an addition of Rs. 1,37,224/- which was restricted by the ld CIT(A) to Rs. 78,000/- by holding as under:- "3.3 I have considered the facts of the case. I agree with the argument of the ld AR of the appellant that the AO has not brought out any material on record except mentioning that appellant's family consists of four members. He has not considered the fact which he is fully aware and himself has mentioned n the assessment order in the case of Smt. Dayawanti for Assessment Year 2001-02 that the entire family resides jointly in a 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/- ....
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....ng the year new credit is only for Rs. 2,00,000/-. Therefore on the ground of non furnishing of confirmation addition during the year can be made u/s 68 of only for Rs. 2 lakhs. Thus the addition of Rs. 2 lakh is upheld. The appellant gets relief of Rs. 3,48,000/- on this ground. 65. Having heard both the sides and after perusal of the records we find no infirmity in the conclusion made by the ld CIT(A) to the extent that even the ld counsel in the course of hearing could not demonstrate that the credit was confirmed by the creditor namely Mrs. Alka Bansal who claimed to be the proprietor of M/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 t....
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....nt which started from 01.05.1999. Though AO has mentioned that this proprietary concern was there from 01.05.1999 to 25.11.2000 but in the same sentence he is saying that it is continued thereafter also. It has been clarified by the ld AR that the business of the manufacturing in this concern was closed on 25.11.2000 but after that hire charges etc has been shown in this concern. A search has been conducted in this group including the appellant. No material, more specifically any incriminating material has been found about this concern. No evidence of suppression of turnover, inflation of purchases or inflation 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 presum....
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.... disclosed net profit of Rs. 2,03,795/- in Assessment Year 2000-01 and net profit of Rs. 2,13,905/- in Assessment Year 2001-02. The AO had noted that in this case as a result of search material was found against the entire group whereby it was admitted by the assessee that they were engaged in unaccounted transactions as stated in Dayawanti's case (supra) for Assessment Year 2000-01, which are not repeated for the sake of brevity. In the said circumstances, AO is right in estimating the income when nothing has been produced to support the declared results. However on a perusal of the AO's order we find no exercise what so ever has been conducted by the AO to arrive at the estimated income. Therefore we set-aside the impugned order of ld CIT(A) and remit the matter back to the file of AO, to estimate afresh the income of the assessee, after giving adequate opportunity to the assessee. The grounds of revenue for the both the years are allowed for statistical purposes. 73. Ground No. 2 of the Revenue's appeal for 2001-02 in Ajay Gupta's case related to protective addition on account of unexplained investment in farm house. 74. On this issue, we have already upheld the substantiv....