TaxTMI 
TaxTMI 
2010 (8) TMI 1078
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.... sale at ₹ 3,13,29,137/- more and above the unaccounted sale admitted by the appellant at ₹ 76,16,558/-. During the course of the search the appellant was found to have carried on parallel business in textile outside the books of the accounts. These was done by encashing the sale proceeds through "One day clearing agent" who help to encash third party cheques through various bank accounts. For carrying out these operations, the one day clearing agents have floated various partnership firms and proprietary concerns. These Agents were also subjected to search u/s 132 of the Act. It was also stated that these one day clearing agents normally avoid keeping details about the third parties (Like appellant) who encash cheques or DDs through them. 6. During the course of search, certain details were collected regarding the one day clearing transactions. On being confronted with these details at the time of search the appellant owned up the transactions to the extent of ₹ 76,16,558/-. In the returns filed u/s 153A the appellant offered income at 5 % on the above turnover of ₹ 76,16,558/-. 7. The income offered in respect of the one day clearing transactions, by the....
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....ions'' of which related to various parties like appellant, to that of the names of appellant's group concerns and arrived at the quantum of undisclosed sales. It is also submitted that the Assessing Officer had not found any specific details which can be observed as per the findings in the assessment order, vide Para No. 5..3.1 in Page No. 6 of his order, which is as under : - "However the One day Clearing Agents do not keep any specific record regarding the actual parties, and Sri. V. Ramalingam (whose Proprietory concerns have assisted the assessee in clearing many such Cheques and DDs and whose search assessments are also in progress in this office) has expressed inability to identify the third parties in the absence of specific details in his possession. In view of the above an aggregate amount of ₹ 3,13,29,137/- representing the parallel transaction carried out through One-day clearing agents is treated as Undisclosed Turn Over in the hands of the assessee." 9. The ld. Counsel submitted that the ADIT supplied copies of cheques and Demand Drafts obtained from various banks to the tune of ₹ 6.50 crores, to the appellant for identification and the appellant identif....
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.... RICE MILLS Vs. ACIT, 67 TTJ 838 (CHD) . V.V.S ALLOYS LTD., Vs ACIT, 68 TTJ 516 (ALL) 11. The ld. Counsel submitted that, in these circumstances, the addition made by the Assessing Officer and sustenance of the same by the ld. CIT(A) are based without any cogent, evidence and material, and based on purely suspicion, surmises, conjectures and imagination and prayed for the deletion of the same. 12. The ld. DR submitted that the Assessing Officer was justified in adopting the undisclosed sales based on the details collected by the search party duly recorded in appraisal report to Assessing Officer. 13. The next common issue for the assessement years 2000-01 to 2006-07 relate to estimation of Gross Profit on the above unaccounted sales by the average rate of 7.24 % instead of 5 % by the appellant. 14. The ld. Counsel submitted that the appellant in the answer to Question No. 12 of the statement recorded on 28.03.2006 vide Page No. 31 of the paper book. He stated that the Gross Profit on the unaccounted sales would be at 5 % and therefore adoption of G.P. at 7.24 % at average rate is not sustainable. The ld. Counsel has also pointed out the Assessing Officer had not given allowan....
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....0 % is by cash. We have properly recorded all our income and expenditure transactions in the account books. Question No. 13. You have stated that the cost price of the yarn is paid from the sales of the cloth. If so, state where from you got the capital for the purchase of yarn. Answer : - With reference to the sales in the manner as stated above, we use to purchase yarn for the above sales on credit basis and without accounting, settle the credit transaction in piece meal from the amount received from the one day clearing." 18. He also placed reliance on the following decisions: INDIA SEED HOUSE Vs ACIT, 69 TTJ 241 (DEL) (TM). CIT Vs PRESIDENT INDUSTRIES 258 ITR 654 (GUJ) TARA CHAND SHANTILAL Vs. ITO, 28 TTJ 128 (JP) CIT Vs AGARWAL ENGG CO. 302 ITR 246 (P & H) CIT Vs GURU BACHHAN SINGH J. JUNEJA 302 ITR 63 (GUJ) 19. The ld. Counsel argued that, the addition made by the Assessing Officer and sustenance of the same and based without any cogent, evidence and material, and based on purely suspicion, surmises, conjectures and imagination and prayed for the deletion of the same. 20. The next issue for the assessment tear 2006-07 relates to addition of ₹ 40,00,00....
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....n and Sri. P. Eswaran which goes to establish that there was no proper material or proper recording of statements in these regard to substantiate the action of Assessing Officer in making the addition of ₹ 40,00,000/-. 26. The ld. Counsel argued that, the addition made by the Assessing Officer and sustenance of the same and based without any cogent, evidence and material, and based on purely suspicion, surmises, conjectures and imagination and prayed for the deletion of the same. 27. The ld.DR on the other hand supported the orders of the authorities below. 28. One more issue for the assessement year 2006-07 relates to addition of ₹ 32,760/- in respect of purchases of chemicals with regard to dyeing job work done by the appellant. The ld. counsel referred to Para 5.10 in page no. 12 of the asst order which reads as under: - " The income in respect of the Job Works is already estimated and offered @ 10 % on the Turnover. However, the asessee further explains that the purchases evidenced by the Seized Materials are also unaccounted. On verification of Bills seized, a sum of ₹ 32,760/- bone out of the 11 Bills in August 2005 is brought to assessment in 2006-07 t....
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....s quantified by the appellant ₹ 76,16,558/- . This act of the Assessing Officer was only on surmises and conjectures, and only a guesswork. We therefore hereby hold that the adoption of the unaccounted sale of ₹ 3,13,29,137/- by the Assessing Officer to more and above ₹ 76,16,558/- admitted by the appellant is erroneous and we therefore direct the addition made by estimating income at 7.24 % on the alleged unaccounted sale of ₹ 3,13,29,137/- for the assessment years 2000-01 to 2006-07, to be deleted. 30. We have carefully considered the submission of the both parties and have also seen the case laws relied upon by the ld. Counsel. We feel that the submissions made by the ld. counsel have force. As per our earlier discussion since the adoption of unaccounted sales at ₹ 3,13,29,137/- itself was not sustainable the additions towards unaccounted purchases in respect of the same is also not sustainable. As per the submission of the ld. counsel and case laws relied upon, we feel that even addition towards unaccounted purchases in respect of ₹ 76,16,558/- is not sustainable. We therefore hold that the addition of ₹ 7,59,920/- and ₹ 38,73,88....