TaxTMI 
TaxTMI 
2011 (6) TMI 906
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....by simply stating "for statistical purpose, the ground taken is treated as dismissed" without giving any reasons of the same. 3. The learning CIT(A) erred in law and on the facts in enhancing undisclosed income to the extent of Rs. 10,00,000/- on account of alleged initial investment for making unaccounted sales." 2. We have heard and considered the arguments advanced by the parties in view of the orders of the lower authorities, material available on record and the decisions relied upon. 3. Ground No.1 Regarding Ground no.1 facts in brief are that the assessee was subjected to search action wherein on physical verification shortage of silver, diamonds and silver articles were found as per the quantity recorded in the books. The A.O. treated the shortage as articles sold by the assessee outside the books of accounts. He accordingly taxed the profit on sale of the quantity outside the books. An addition of Rs. 4,74,798/- was made on account of shortage of silver, Rs. 27,580/- on account of Diamonds and Rs. 21,190/- on account of shortage of Silver articles. The Learned CIT(A) has confirmed these additions with these observations that there was a shortage in the phy....
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....ied when the assessee's returned profits being much higher than profits determined by the Special Auditor /A.O. is sufficient to cover the above addition of Rs. 5,23,568/-. We thus find that there was no justification in making and sustaining the addition by the authorities below. The said addition of Rs. 5,23,568/- made on account of shortage of silver, diamonds and silver articles is accordingly directed to be deleted. Ground no.1 is thus allowed. 7. Ground No.2 In this ground the addition of Rs. 1,22,96,185 on account of the transactions with Shri. H.Kumar Gems International has been questioned by the assessee. The Learned AR contended that the Learned CIT(A) inadvertently has not given any reasoning either in support or against the addition. He referred page no. 69 of the first appellate order, wherein the Learned CIT(A) has only stated that this point is dismissed for stastical purposes. The Learned AR submitted that excess amount of gold was found in the stock during the course of search. H. Kumar Gems International and Company confirmed the sales of the gold to the assessee. The A.O. however treated the purchase bill as an afterthought and made addition on account of e....
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....Financial Year 1996-97. The learned CIT(A) held that there must be some initial seed capital invested by the assessee for carrying out the undisclosed business. He held that for first three years, the turnover has been estimated at Rs. 50 lakhs, Rs. 75 lakhs, and Rs. 1 Crore. The Learned CIT(A) accordingly considered the turnover as estimated initial investment of Rs. 10,00,000/- as reasonable for the above estimated turnover for F.Y. 1996-97 and has added the amount in the income of the assessee. 11. The contention of the learned AR remained that the addition made at Rs. 10 lakh is not justified. He submitted that for the first year of business, the turnover is estimated at Rs. 50 lakhs. Generally, initial investment is needed for around the first 7 to 15 days purchases. On the basis of estimation, the monthly turnover could be Rs. 4 lakhs and the initial investment could be maximum Rs. 1 lakh to Rs. 2 lakhs. Therefore, estimation of Rs. 10 lakhs is on very high side. 12. The learned DR on the other hand tried to justify the first appellate order on the issue, he also pointed out that the additional ground in this regard has been raise by the revenue in its cross appeal for ....
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....learned AR submitted that the initial investment should have been estimated by Learned CIT(A) at hardly Rs. 2 lakhs. He submitted that even for the period from 02/11/1999 onwards assessee has given analysis in " Jama Kharcha Panas" for the first 7 days 02/11/99 to 08/11/1999, whereby it is shown that sales were more than purchases. The assessee has been receiving advances from the customers which took care of the purchases and the requirements of cash was also very little. It is reflected from the low opening cash balances on this these days. 16. Regarding the investment of higher amount as contended by the learned DR, the submission of Ld. AR remained that it is totally incorrect for the simple reason that in the course of search, the department would have found the higher amount of the unaccounted stock. But the fact shows that considering the purchase bills of H. Kumar Gems International and Company there was no excessive stock at all. Hence, the contention of the Learned DR is not borne out by the facts of the case. 17. Considering the above submissions especially the turnover of Rs. 50 lakhs estimated in the initial F.Y. 1996-97 on the basis of loose paper found for the ....
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....f documents/ assets seized on the basis of which addition of Rs. 2,55,32,035/- was made is not yet finally settled. The Ld.CIT (A) ought to have followed the ration of the judgment delivered by the Hon'ble Kerala High Court in the case of T.S. Sujatha reported in 238 ITR 599." 20. Besides the above an additional ground has been raised with request to allow the same wherein the issue is as to whether learned CIT(A) should have made higher addition instead of Rs. 10 lakh made on account of initial investment in the business. Since the issue raised in this additional ground was connected to the issue raised in ground no.3 of the appeal hereinabove preferred by the assessee, we have already dealt with the issue raised in the additional ground while adjudicating ground no.3 in the above said appeal. The additional ground therein has been rejected. 21. Ground No.1 Regarding Ground no.1 the relevant facts are that the addition of Rs. 41,07,662/- on account of certain purchases made by the A.O. has been deleted by the Learned CIT(A). In the course of search, "Jama Kharcha Panas" papers were found for A.Ys. 2000-01 to 2003-04. These papers indicated the cash transaction of purch....
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....papers were records of the unrecorded purchases and sales made by the assessee. The assessee submitted that even in respect of notings of sales, complete details are not available still the A.O. considered the same as sales. The purchases amounting to Rs. 99 Crores approximately were also allowed as deduction because the profit on the sales was to the extent of Rs. 2.02 Crores on the sales of little over Rs. 100 Crores. When the A.O. has allowed all other purchases which were also not proved but which were noted on these papers, there was no reason to disallow only a few purchases of Rs. 41.07 Lakhs by pick and choose method. The Learned AR submitted that the assessee has also clarified that the special auditor in his report has not disallowed the above purchases and hence there is no reason for the A.O. to make the addition. He submitted that when the notings are made on the seized papers, as per presumption u/s.132 (4A) the same has to be considered as genuine and correct. When similar notings pertaining to other purchases and entire sales have been accepted, the A.O. was not justified in disallowing the part of purchases on the basis that the assessee did not submitted the compl....
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....s rightly deleted the addition at Rs. 41,07,662/- made on account of certain purchases. Since the first appellate order is comprehensive and reasoned one on the issue, we are not inclined to interfere therewith. The ground no.1 is accordingly rejected. 27. Ground No.2 The relevant facts are that during the course of search on 25.10.2002 "Jama Kharcha Panas" were found for the period of 02/11/1999 to 17/09/2002. Since the evidence was not found for the period 01/04/1999 to 01/11/1999 and from 18/09/2002 to 24/10/2002, the income for these two periods was estimated on the basis of per day income generated by the assessee for the period for which the "Jama Kharcha Panas" were found. The A.O. worked out the undisclosed income for the period of 02/11/1999 to 17/09/2002 at Rs. 2,43,89,868/- ( after making the above addition of Rs. 41,07,662/- mentioned in Ground no.1 ) . Thus, per day income was worked out at Rs. 27,070/-. This amount was considered by the A.O. for working out the disclosed income for the period 01/04/1999 to 01/11/1999 and from 18/09/2002 to 24/10/2002 ( period for which the Jama Kharcha Panas were not found) and the total undisclosed income was arrived at Rs. ....
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....ed CIT(A) has been upheld, we don't find infirmity in the first appellate order in reducing the addition of Rs. 57,11,770/- to Rs. 4,7,49,772/- on the basis of said deletion. The first appellate order in this regard is thus affirmed. The ground no.2 is accordingly rejected. 30. Ground No.3 The relevant facts are that the assessee firm engaged in jewellery business and following average cost method for valuing the stock in the books i.e. it takes average of opening stock and purchases during the year and values the closing stock at that rate. This method was being followed regularly and the same was being accepted by the department in the past. During the course of assessment proceedings, the A.O. held that the average cost method followed by the assessee is not correct and the assessee should have followed the FIFO method for valuing the stock. The A.O. was thus of the view that the closing stock should be valued as per the closing purchase rate in the month of March by adopting the FIFO method. Accordingly he held that there was under value of stock as per books by Rs. 22,06,664/-. Accepting the main submission of the assessee that addition is made beyond the scope of block ....
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....-43 belonged to it on the basis of these bundles, the undisclosed income was offered to tax. These were the "Jama Kharcha Panas" on the basis of which income was assessed by the A.O. The dispute was regarding ownership of document seized as per bundle nos. A-1 to A-6, A-10, A- 11 and A-35. Shri Prakash Salunke stated that these bundles belong to Ranka group. Assessee has denied that papers in these bundles belonged to it. The A.O. after verification of various seized papers came to the conclusion that disputed bundles belonged to Shri Prakash Salunke and on that basis addition of Rs. 2,53,32,635/- was made on substantive in the hands of the Shri Prakash Salunke. The details of the heads constituting the above amount are in the nature of shares, PPF balances, Insurance premium paid, FDs etc. etc. of Shri Prakash Salunke and his family members. The A.O. with a view to protect the interest of the revenue also made same addition on protective basis in the hands of the assessee firm. The Learned CIT(A) after considering the submissions of the assessee and view of the A.O. has deleted the protective addition made in the hands of the assessee. 34. In support of the ground, Learned DR h....
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....t the documents pertain to him only. He submitted that it is also worth noting that the documents admitted by the assessee that these are pertaining to it, were kept separately in the sports bag and these documents were not in the handwriting of Shri Prakash Salunke. The Learned AR further submitted that the assessee firm had cross-examined Shri Prakash Salunke and his those statement had been made available at page nos. 115 to 150 of the paperbook. The important point which are to be considered are given on page no. 206 to 212 of the paperbook. The Learned AR submitted that Shri Prakash Salunke is not employee or Karagir of Ranka Jewellers. He engaged in the business of refining of gold and Ranka Jewellers was giving refining of gold job to him. On few occasions there are some purchase /sales transactions of the assessee with him. The seized documents that "Jama Kharcha Panas" for the period from 02/11/99 to 17/09/11 does not have any noting that cash has been given by Ranka Jewellers to Shri Salunke and given loans as claimed by Shri Salunke. The notings of the seized papers which were owned by the Ranka Jewellers are in the handwriting of partners and employees of the Ranka Jewe....
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....Ranka is appearing. In these documents, there is no mention that any investment for the asset is made by the assessee or any return from these assets has been made to the assessee. We are thus of the view that there was no reason before the A.O. to assess the income on the basis of such documents even protectively in the hands of the assessee. Considering these materials aspects of the issue, we are of the view that Learned CIT(A) has rightly come to the conclusion that the addition of Rs. 2,53,32,635/- made on the protective basis in the hands of the assessee is not justified and he has thus rightly denied the addition. We thus find no reason to interfere with the first appellate order in this regard. The same is upheld, the ground no.4 is rejected. 37. In the result the appeal dismissed. ITA No. 894/PN/2006 (Block Asstt. Year 1/4/1996 to 24/10/2002) 38. The assessee has questioned the first appellate order on the following ground no. 1 to 3. "1. The Learned Assessing Authorities below had erred in assessing the income of the assessee at Rs. 2,59,50,620/- by treating the same as "undisclosed income" in place of Rs. 43,88,583/-. The reasons assigned for making ....
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.... Jewellers and it was their money. The incriminating documents and valuables which were kept in a sports bags found during the course of search at assessee's premises were accepted by M/s. Ranka Jewellers as belong to them. So far remaining annexures and the valuable attached to them are concern the A.O. did not accept the plea of the assessee that those did not belong to him since the assessee through out the assessment proceedings could not produce any evidence to establish that those were only Benami and not belong to the assessee. Since the assessee could not improve his case even before the CIT(A) the learned CIT(A) upheld the addition made by the A.O. in this regard. 41. The Learned AR while reiterating the submissions before the authorities below contended that assessee is a small person and the assessee had discharged its burden against the addition made under presumption u/s. 132 (A) of the Act against him. The addition made on the basis of seized documents specially page 8 on annexure A-1 is not justified as transactions mentioned therein do not pertain to assessee. Hence, the additions made to the return of income be deleted. The Learned AR submitted that the reasons ....
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....rtain to them. These incriminating documents were kept in the sports bags by M/s. Ranka Jewellers and these documents were not written by the present assessee i.e. Shri Prakash Salunke while incriminating documents for which the ownership is in doubt are admittedly in the handwriting of Shri Prakash Salunke. It is also worth noting that the assessing officer has noted contradiction in the statements given by Shri Prakash Salunke. The assessing officer has summarized these statements to show that Shri Prakash Salunke has been shifting his stand on the incriminating documents seized from his place for which ownership was disputed by him. Though these documents have been written by Shri Prakash Salunke but initially it was stated by him that they were written as per the instructions given by Shri Anil Ranka. However, undisputedly neither the name of Shri Anil Ranka or any other person of Ranka family appears in the seized documents for which ownership was in dispute. It is also an admitted fact that Shri Prakash Salunke was dealing with share broker for sale and purchase of the shares and the demat account was in his name. Shri Prakash Salunke also failed to disclose the identity of t....