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2014 (7) TMI 1273
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.... confirmed this position. The relevant question No. 5 and answer thereto reads as under:- "Q.5. Please state if you book purchase and sales out of books. Ans. Yes, we book purchase & sales out of books. The purchase of sale of paints in accounts for and the purchase are made from high reputed companies. However, in case of hardware items we book the purchase from parties in Delhi. The purchase are under valued in bills to avoid VAT payments and the actual value-purchase bill in paid out of books. For example polishing stone is being purchased from Delhi. The actual cost price is Rs. 55 but the purchase bill sis made for Rs. 42/- only. Rs. 13/- is them paid out of books which comes to around 20-25/-. We thus while making sales made the sale voucher for Rs. 54/- but in actual sale it for Rs. 65/- to Rs. 70/-. The difference of sale is not accounted. Some of the items where this modus operandi is followed in tabulated below : Description of item Actual Value Purchase bill value Sale bill Value Actual sale price 1. Machines Cutter Rs. 900/- Rs. 700/- Rs. 850/- Rs. 1050/- 2. Machine- Drill Rs. 500/- Rs. 350/- Rs. 500/-....
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....155 2010-11 59,92,660 28,59,127 2011-12 49,91,977 23,81,601 Total 3,04,96,949 1,45,50,243 A show cause notice was issued why these under reported purchases should not be added as his unexplained investment in stock etc. under section 69. In response, the assessee replied vide letter dated 1.2.2013 as under:- " The perusal of the table chart in response of para 5 reproduced by you would go to reveal that though the assessee admits variation in the purchase price as well as sale price but the profit on the most items remain the same leading to no effect in the profitability. If the profitability is computed on higher sales figure the same shall decrease in percentage terms. That most of sale and purchase of the assessee are in respect of the products of Multi National Company of which admittedly even under the statement recorded within the meaning of Section 132(4) of the Income Tax Act, 1961. The assessee has categorically mentioned that the same are billed on the actual selling price and so are the purchase made. The copy of the inventory prepared during the course of survey would also go to reveal that apart from 2,3 items in respec....
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....was further explained that in any case the similar items have been sold and at best reasonable profit could have been estimated on such unrecorded sales. The Ld. CIT(A) adjudicated this issue vide para 5.3 which is as under;- "5.3 I have considered the submissions of the assessee and the impugned order. The assessee has admitted, as evident from Qs. 2,5,9 and 10 of the statement recorded on 08.10.2010, copy of which was furnished in the Paper-book, that over 50% of the sales were of Paints; purchases and sales are booked out of books; purchases undervalued in bills to avoid VAT payments and the actual value-purchases bill paid out of books; seized documents A1 and A2 are entries of sales (pertaining to AY 2010-11) not recorded in the books. Books are also admittedly not written upto-date. It is however not clear from the statement whether only the hardware terms from Delhi are under billed. It is also not clear that purchases of Paints other than from reputed companies have not been undervalued. It is seen that the AO had specifically asked the assessee to prove if purchase price or sale price of any of the other items have not been undervalued. The undisputed fac....
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....has under recorded certain purchases and sales in the books of account i.e. full price of purchase and sales have not been recorded. However, the moot question is whether separate additions can be made for such unrecorded purchases and sales. No doubt whatever has been purchased have been sold also and assessee was trying only to underreport the purchases and sales. This would mean that purchases and sales have been conducted outside the books of account. The Chandigarh Bench of the Tribunal in the case of ITO Vs. Ajit Boot House, in ITA No. 850/Chd/1996 (supra) has observed at para 8 & 9 as under:- "8. We have given careful thought to rival submissions of the parties. There is no dispute that the assessee made purchases and sales outside the books of accounts and its income for relvant period has been computed by taking sales at Rs. 25.00 lacs against Rs. 19,23,648/- disclosed in the books. Thus unaccounted for sales and purchases have been taken into account in the estimated income. The question that now arises is - whether separate addition on account of un-explained investment was justified or not ? On the facts of the case we are inclined to agree with the view taken ....
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....ear 2011-12 in ITA No. 85/Chd/2014 Revenue has raised the similar issue. As observed earlier only the initial addition of Rs. 3 lakhs would be sufficient to cover the inventory and sundry debtors of unrecorded purchases and, therefore, no addition is required to be made in these years. Therefore, we direct the Assessing Officer to make addition of Rs. 3 lakhs in assessment year 2005-06 and no addition is required to be made in assessment year 2006-07 to 2011-12. 12. In the result appeal of the Revenue in ITA No. 77/Chd/2014 is partly allowed and in ITA Nos. 78 to 81/Chd/2014 and 84/Chd/2014 to 85/Chd/2014 are dismissed. Cross Objections No. 13/Chd/2014 13. In this Cross Objection the assessee has raised the following ground:- " That in the facts and circumstances of the case the Ld. CIT(A)is not justified in sustaining the addition of Rs. 124635/- made on account of alleged profit earned on alleged unaccounted sales." 14. After hearing both the parties we find that during assessment proceedings the Assessing Officer after determining the under recorded purchases and sales went on to work out the profit on unrecorded sales. A computation has been done in table N....
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....to also consider the fact that the purchases and sales if taken together would become neutral. This has been articulated by the assessee himself. Thus I am conscious that they both cannot be taken together as unaccounted. However the assessee cannot escape the eligibility of taxation, which has also been accepted by him in the statement recorded vis-à-vis unaccounted purchases and unaccounted sales. It would be thus scientific to take the percentage of unaccounted sales (turnover) as the unaccounted income of the assessee. In the disclosed profit and loss account, the percentage works out between 9.03 to 8.52% as pointed out by the AO. In fact I find that the AO has worked out the undisclosed profit on sales made outside the books in Table-IV of the impugned order for all the assessment years involved. Thus the gross profit on sales made outside the books as given in column 5 of Table - IV for AY 2005-06 to AY 2011-12 would be the additions that can be sustained." 17. Before us submissions made before Assessing Officer and CIT(A) were reiterated by the Ld. counsel for the assessee. 18. On the other hand, the Ld. DR strongly supported the order of CIT(A). 19. We h....
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....d that during assessment proceedings the Assessing Officer noticed that assessee sold a flat at A-147, Sector III, New Shimla. The assessee has shown capital gain of Rs. 11 lakhs as per following details:- Sale consideration Rs. 11,00,000/- Less: Cost of acquisition Rs. 7,00,000/- Cost of improvement Rs. 3,00,000/- Rs. 10,00,000/- Rs. 1,00,000/- 26. The assessee failed to file any documentary evidence with regard to the cost of improvement, therefore, the Assessing Officer did not allow the same and computed the capital gain after reducing only the cost of acquisition. In this background a sum of Rs. 3 lakhs was added to the income of the assessee. 27. Before Ld. CIT(A), copy of the cash flow statement was filed and it was submitted that cost of improvement is duly shown in the cash flow statement. The Ld. CIT(A) did not find force in the same and decided the issue against the issue vide para 5.1, which is as under:- " I have considered the submissions of the assessee and the impugned order, the relevant para which the assessee has reproduced in his submissions. The issue of purchase and sale of the flat A-147, Sec- III, New S....
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.... towards purchase of wood etc. These items clearly show that assessee has incurred expenditure in improvement. 29. On the other hand, the Ld. DR while strongly supported the order of CIT(A) and submitted that assessee has not filed any documentary evidence to show that development expenditure was incurred for the said property because the assessee was holding many properties and, therefore, it cannot be said that transfer charges etc. related to this particular property. 30. After considering the rival submissions we find some force in the contention of the Ld. counsel for the assessee. During the year a sum of Rs. 1,60,000/- has been shown towards construction and further a sum of Rs. 44,333/- is shown for transfer charges and Rs. 28,550/- for purchase of wood etc. Therefore, it can be said that assessee has incurred some expenditure for cost of improvement. However, at the same time no documentary evidence has been placed and since admittedly the assessee is holding many properties, therefore, it cannot be said that all the expenses have been incurred for improvement of this property. In these circumstances, in the interest of justice we are of the opinion that if a sum of ....
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...., it is not possible to prepare a inventory as per the books of account. In this background the Assessing Officer issued a show cause notice that why a sum of Rs. 24,32,554/- should not be added to the income of the assessee. In response, the assessee vide letter dated 1.2.2013 replied as under;- " In response to para 9 it is submitted that the trading account as on the date of survey is being appended hereto for you kind perusal and ready reference. The total stock as on the date of survey as per the books of account amounts to Rs. 18,47,600/-. The stock has been valued by the survey team as 24,32,554/- in which the paint items have been valued at MRP and the other items have been valued at the selling price. MRP all the paints items is at least 18% to 20% above the selling price. These goods are sold at dealer price. The perusal of the sale bills which are lying seized in your custody would go to reveal that the paint has been sold at much lesser price than the MRP. That stock is to be valued at the cost price are not the MRP. The difference between the cost and the MRP amount to Rs. 5,84,954/- and if the same taken into consideration the stock found at the search and se....
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....Rs. 3 lakhs should be added towards inventory and sundry debtors. Considering this fact and the fact that some of the items have been valued at retail price we are of the opinion that addition of Rs. 5 lakhs towards cost would meet the ends of justice. Accordingly, we set aside the order of Ld. CIT(A) and direct to make addition of Rs. 5 lakhs towards undisclosed stock. 41 Ground No. 3 - After hearing both the parties we find that during search / survey operation cash amounting to Rs. 21,46,150/- was found as per following details: Sl. No. Details of premises Amount of cash found (in Rs. ) 1 Residence of Hemant Lodge Murrary Field Estate, Navbhar 20,85,950/- 2 Business Premises of M/s. New Shimla Hardware & Welding Works 60,200/- Total 21,46,150/- During the course of assessment proceedings cash was explained as under: "a) Cash as per the books of Sh. Rajesh Popli, Prop. M/s. New Shimla Hardware Rs. 3,71,084.77 b) Cash as per the books of Hemant Popli Rs. 13,45,647.07 c) Cash of the daughter of the assessee Jyoti Khajuira Rs. 3,00,000.00 d) Cash of Sh. Vijay Kishan Sharma pending Payment for which....
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....d is placed on record for you kind perusal and ready reference. That the cash of the assessee is further corroborated by the fact that in the brief case of the assessee a sum of Rs. 3,59,950/- was found. That being the case the version given by the assessee is corroborated. Once the books of accounts were not complete and the statement in respect of the same had already been given which abstract of books were taken is not known. It is absolutely wrong to state that there is not parity in the submission earlier made and the abstract of the cash book filed. As the cash has been duly explained with the help of documentary evidence on question of making any addition arises in the instant case at all. That being the case it is most respectfully submitted that no addition in respect of the cash can be made treating the same is unexplained moreover it is submitted that the cash only amounting to Rs. 371,084,77/- belonged to the assessee and he can not be made accountable for the entire families cash." The Assessing Officer considered the above submissions and observed that the onus was on the assessee to explain the cash found during search. Further books of account w....
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....of the assessee and therefore presumption should be that this cash belongs to the assessee's business and in our opinion, a credit of Rs. 60,000/- should be given. As far as cash belonging to Smt. Jyoti Khajuria is concerned, in the certificate filed at pg 84 it has been simply stated that she is a lawyer and her husband is working with a Export House but no PAN and no copies of the bank account from where cash has been withdrawn, have been furnished therefore entire cash cannot be treated as explained. At the same time a married women coming to her parents house may bring cash and considering the overall circumstances we are of the opinion that a credit for Rs. 1 lakh can be given for cash belonging to Smt. Jyoti Khajuria. As far as cash belonging to Shri Vijay Kishan Sharma is concerned, no credit can be given, firstly a father-in-law normally would not keep his cash in the house of son-in-law. Secondly there was no such occasion to keep the cash with the son-in-law. In any case this cash was withdrawn from Vijay Bank on 19.8.2010 and why that cash was withdrawn and kept at son-in-law's house, has not been explained. Therefore we decline to give any credit for the cash to Shri Vi....
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....(A). 52 After considering the rival submissions we find some force in the submissions of the Ld. Counsel for the assessee. Most of the Benches of the Tribunal had been holding that atleast benefit of the instructions issued by CBDT in Instruction No. F.286/63/93-IT(inv)-11 dated 11.5.1994 should be allowed for jewellery. As per these instructions jewellery to the extent of 500 gms in case of a married lady and 100 gms in case of a married male should be accepted, therefore out of jewellery of 735.20 gms, jewellery of 600 gms should be accepted. Similarly diamond items had been valued at Rs. 65150/- and silver items had been valued at Rs. 21780/-. These are small amounts and considering the overall status of the family, in our opinion, these amounts should be accepted as explained. Therefore we set aside the order of the CIT(A) and direct the Assessing Officer to make addition of jewellery for 135.20 gms. This ground is partly allowed. 53 Ground No. 5 - After hearing both the parties we find that during assessment proceedings the AO noticed that the assessee had sold a Flat no. 3, Block No. 6, Type D, HIMUDA, Sector-V, Phase III, New Shimla for Rs. 30 lakhs. The share of the a....