TaxTMI 
TaxTMI 
2010 (8) TMI 1078
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....o 2006-07 relates to adoption of unaccounted sale at Rs. 3,13,29,137/- more and above the unaccounted sale admitted by the appellant at Rs. 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 Rs. 76,16,558/-. In the returns filed u/s 153A the appellant offered income at 5 % on the above turnover of Rs. 76,16,558/-. 7. The income offered in respect of the one d....
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....f the cheques related to our concerns is about Rs. 76 lakhs and there is no connection between the remaining cheques and our concern." 8. The ld. Counsel further submitted that the one day clearing agents were subjected to search and on the basis of some records relating to the one day clearing agents the Assessing Officer had noticed certain "abbreviations'' 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 Rs. 3,13,29,137/- re....
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....for imposing extra burden of Income Tax on the assessee when the original accounts were missing and could not be verified and when the assessee denied the entries therein." He also placed reliance on the following decisions L.H. SUGAR FACTORY AND OIL MILLS (P) LTD. Vs. CIT, U.P 125 ITR 293 (SC) DR. P.R. GUPTA Vs. Dy. CIT 02 TTJ 845 (JP) JAGADAMBA 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....
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.... - We purchase yarn for all our concerns from the mill through bills. The said purchases are on the credit basis. We dye the said yarn. The said dyed yarn is given to weaver's loom on remuneration for the production as towels and lungis and receive the same. The same is sold to the party through bills after getting order from the party. 90 % of our sales are through cheque transactions and the remaining 10 % 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....
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....retire partner Sri. P. Anbalagan who was also subjected to search and to that fact the findings in the assessment order are perverse. Further the retirement took place in August 2000 whereas the Assessing Office has invoked the provisions of Sec 69C for the assessment year 2006-07 in this regard. Moreover no statements recorded from the appellant during the course of search, post search and during the assessment proceedings, regarding the alleged payment on retirement of the partners Sri. P. Anbalagan 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 Rs. 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 Rs. 32,760/- in respect of purchases of chemi....
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....in the absence of specific details in his possession (vide para 5.3.1 page no. 6 of the assessment order). The Assessing Officer never exercised any thing to establish the fact, from the one day clearing agent or from the available data supplied by the ADIT. This goes to establish the fact that the Assessing Officer has simply used the abbreviations found in the record of the one day clearing agent to quantify the unaccounted sales at Rs. 3,13,29,137/- more and above the unaccounted sales quantified by the appellant Rs. 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 Rs. 3,13,29,137/- by the Assessing Officer to more and above Rs. 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 Rs. 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 ....