TaxTMI 
TaxTMI 
2017 (1) TMI 514
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....sclosed profit on the basis of material seized from residence of Sh. J.P. Aggarwal, one of the Director of the assessee company upto the F.Y. 89-90; (ii) Of Rs. 7,49,459/- made by A.O. on account of unaccounted purchase made from M/s GarwarePlyster Ltd. when the assessee itself had admitted the same; (iii) Of Rs. 33,725/- made by the A.O. on account of profit on sale of material purchased out of books from M/s GarwarePolyster Ltd. when assessee itself had admitted the unaccounted purchase?" 2. The brief facts are that search and seizures proceedings were conducted in the assessee's premises on 20.03.1996. Notice under Section 158BC(c) was issued to the assessee on 13.06.1996. However, the assessee filed its return for the block period 01.04.1985 till 20.03.1996, much later on 10.03.1997. It declared undisclosed income of Rs. 6,05,320. This was based upon a computation of the total undisclosed/assessed income. The details thereof found in a tabular chart in the AO's order are extracted below:- Asstt. Year Total Income including Undisclosed Income computed u/s 158BB Total Income returned or assessed on the date of search 1986-87 Rs. 56,960/- Rs. 56,960/- 1987-....
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....during this period was shown to be 19,959.40 kgs valued on average sale price at Rs. 32,45,398. The excess of purchase over sales worked up to Rs. 1,10,75,352. Added together with the initial unexplained total investment, it accounted for Rs. 1,44,17,441. The assessee had not disclosed the value of these raw materials so purchased nor did it mention the cost price in the return filed. Subsequently, it filed a letter on 25.03.1997 stating that the undisclosed income in the return of the block period was not correct. The assessee's explanation was that Annexure A1 to A7 of the panchnama prepared in one of its premises- G-150 Badarpur, were the books of accounts maintained in the normal cause of business before the date of search and that the income therefore determined should be considered as accounted/disclosed income in view of provisions of Section 158BB(1)(d). In view of this understanding, it withdrew the surrender of Rs. 6,05,320. 6. The AO noticed further that the assessee had valued the unaccounted purchases at Rs. 154.75 per kg and unaccounted sales at Rs. 162.80 per kg. In its later letter of 25.03.97, the assessee however explained that these unaccounted purchases were of....
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.... during the block period. The AO rejected these explanations observing that that the unaccounted purchases of Rs. 7,49,459 had to be treated as unexplained investment of the assessee and on applying the average gross profit disclosed by the assessee i.e. at 4.5%, the profit on sales on account of these transactions worked out to Rs. 33,725. 8. The ITAT accepted the AO's findings with respect to the quantum of the raw materials purchased which were not part of the regular books of account. However, the ITAT rejected the AO's approach stating that the assessee's explanation with respect to the value i.e. Rs. 43.70 per kg, on the ground that it was sourced from M/s Associated Plastics was reasonable. It was held that "in the absence of any evidence that any such investment was made, in our opinion, it could not be regarded as undisclosed income for the purpose of Chapter XIV B of the I.T. Act. We also find force int he alternative submission of the appellant that there is no basis for the allegation that the assessee had made purchases @ Rs. 154.75 per kg. We accept the same and hold that the figures of sale and purchase from M/s VenlonPolyster was submitted at the instance of the ....
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.... books of account was discovered and could be inferred as a result of the search, the onus lay upon the assessee to furnish full particulars as to the cost of that raw material or the average cost. Its explanation by relying upon a letter of 1996 produced more than a year later, was by an afterthought really speaking. Its creditability, was in our opinion correctly doubted and entirely rejected by the AO who adopted a safer method for discerning the cost of the raw material which was not reflected in the regular books of account.In these circumstances, the ITAT's reasoning cannot be sustained. It is plainly contrary to the facts on the record and contrary to any reasonable approach that could have been adopted under the circumstances of the case. 11. Likewise in respect of the same issue-vis-a-vis the stocks relating to M/s Garware Polysters, theassessee's explanation was in fact no explanation at all. It stated that since the reconciliation could not be made on account of bunching of documents (for which the AO was not responsible at least), some leeway or concession ought to be given. The ITAT merely accepted that explanation which in our opinion was correctly rejected by the AO....
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....by the ITAT in respect of the Rs. 33,725/- by the AO, on a pure appreciation of the facts, merely because it differed from the view of the AO, was not justified. In the case of Question b (iii) as well, when the assessee had admitted Rs. 7,49,459/- made by A.O. on account of unaccounted purchase made from M/s GarwarePlyster Ltd the deletion directed by the ITAT was not justified. This question is answered against the assessee and in favour of the revenue. Re Question No. b (i) 15. This pertiains to the addition made by the AO on the basis of Mr. J.P. Agarwal's statement, recorded during the course of search proceedings. It was found that the documents contained detailed working out of profits, with specifics and particulars relating to the quantities of goods, raw materials etc. The assessee made two fold submissions in relation to this addition: first, that the statement recorded was unreliable because of a family dispute, which motivated Mr. Agarwal, one of the co-directors of the assessee to speak against it and secondly, that opportunity to cross examine Mr. Agarwal was not given. The ITAT felt that a singular statement could not be the basis of an addition. 16. This court n....