TaxTMI 
TaxTMI 
TaxTMI 
2014 (7) TMI 1273
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....ion 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/- Rs. 650 3. Nails (Per Kg) Rs. 40/- Rs. 32/- Rs. 40/- Rs. 45/- 4. Cutter blades Rs. 5....
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....d 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 respect of the list detailed in the reply to the questionnaire stands found and as such no adverse inference can be made that the 32.3% of the entire purchases were deflated. It is further submitted that the calculation made by you in table 2 in total aggregating to 1,45,50,243/- is absolutely hypothetical based on no pro....
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....as 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 fact being assessee resorts to under-billing to avoid payments of VAT etc. The AO also noted that despite admitting to sales/purchases made outside the books, assessee has not offered any additional income in the returns of income filed. The surrender made u/s 132(4) was therefore not honored by the assessee. On one side, the contention....
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....he 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 by the Commissioner of Income Tax (Appeals). 9. It is a matter of common knowledge that the investment is not required for every sale and purchase made by a trader. A limited capital is rotated time and again to earn profit. This is more than demonstrated from the disclosed sales shown at Rs. 19,23,648/- with admitted capital of partners at Rs. 1,2....
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....n 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 No.4, which is as under;- Asst. Year Total sales made during the year (in Rs.)- Sales made outside books (in Rs.)-Sales shown in the books / (100- 25.55) x 25.55 Gross profit rate adopted by the assessee Gross profit on sales made outside books (in Rs.) (1) (2) (3) 2005-06 40,35,255 13,84,832 9.00% 1,24,635 2006-07 29,36,804 10,07,862 9.....
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....er) 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 have considered the rival submissions carefully. We have already discussed in detail the aspect relating to unrecorded purchases and sales and practically deleted whole of that addition except for the sum of Rs. 3 lakhs which was required as investment in the form of inventory. It was also observed that at best only profit could be estimated on such undisclosed sales. The undisclosed sales was clearly admitted during the survey/search operation by the assessee himself and therefore, the same ca....
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....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 Shimla for Rs. 7 lakhs in 2008 which was sold for Rs. 11 Lakhs is not in dispute. What is in dispute is the calculation of Short term capital gain on the sale. It is AO's case that in the year under consideration the assessee sold the said property for a sum of Rs. 11,00,000/- and had shown short term capital gain in the revised return u/s 153 A, after including a sum of Rs. 3,00,000/- to the cost of acquisition. As the assessee had not filed the evidence with regard to cost of improvement of Rs. 3,00,000/- claimed as deduction, the short term capit....
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....he 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 Rs. 1 lakhs is estimated towards cost of improvement, then the same would meet the ends of justice. Accordingly, we set aside the order of Ld. CIT(A) and direct the Assessing Officer to allow a sum of Rs. 1 lakh towards cost of improvement. 31. In the result, assessee's appeal is partly allowed. ITA No. 95/Chd/2014:- 32. In this appeal assessee has raised the following grounds:- " 1. That in the facts and circumstances of the case the Ld. Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs. 177552/- on account of alleged....
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....t 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 seizure has explained in the books shall stands duly reconciled. It is further submitted that the serial No. 87 in respect of the stock found at the basement the same has been valued at Rs. 14,580/-. Whereas the same amount to Rs. 3,780/- aggregating to a difference of Rs. 10,800/- in the valuation. If all the factors are taken into consideration there is no discrepancy in the stock. That being the case no addition under Section 69B is called for." 36. After considering this explanation, he observed that inventory was prepared in the presence of the assessee. Further, assessee was provided opportunity to reconcile the stock. Moreov....
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....ate, 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 confirmation shall be Filed in due course Rs. 1,50,000.00 Rs. 21,66,731.84" The Assessing Officer noted that during survey operation it was clearly stated that since the books of account are not complete, therefore the assessee could not explain the source of cash. The Assessing Officer has also extracted relevant questions and answers which are as under: "Q. 13 Please state how much cash is lying at the premises & what is the cash available as per your books. Ans. As stated earlier I am not able to state the current position of cash-in-hand as per books. However, as per physical verification made by you, cash amounting to Rs. 60,200/- has been found, the same....
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....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 were not complete and therefore no credit could be given. Merely passing of entries in the books of account are not sufficient to explain the source of cash. No documentary evidence has been given in respect of cash of Rs. 3.00 lakhs belonging to Smt. Jyoti Khajuria and Rs. 1.5 lakh belonging to Vijay Kishan Sharma. 42 In the above background it was further observed that cash amounting to Rs. 1345645/- belonging to Hemant Popli would be considered in his books and therefore balance cash of Rs. 800503/- was added to the income of the assessee. 43 On appeal the submissions made before the Assessing Officer were reiterated. 44 The Ld. CIT(A) after considering the submissions did not find force in the same and confirmed the addition of Rs....
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.... 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 Vijay Kishan Sharma. To sum up a credit for Rs. 1,60,000/- (i.e. Rs. 1 lakh for cash belonging to Smt. Jyoti Khajuria and Rs. 60,000/- belonging to the business should be given and balance addition is confirmed). Therefore we set aside the order of the CIT(A) and allow this ground partly. 48 Ground No. 4 - After hearing both the parties we find that during search jewellery valued at Rs. 1085530/- was found from the possession of the assessee at Locker No. 12, Punjab National Bank, New Shimla. The detail of jewellery is as under: Gold Items [ Gross weight ] : 735.030 gms : Rs. 9,98,600/- Diamond Items [Gross weight : 4.16 ct including 24.62 gm (g.w) of gold] : Rs. 65150/- Silver [Gross weight : 1 Kg 234 gm] : Rs. 21,780/- Rs. 10,85,53....
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....d. 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 assessee in this flat jointly with his brother was 50%. This flat was purchased on 1.2.2010 for a sum of Rs. 16,50,000/-. The assessee had returned capital gain as under: Sale consideration (50% share) Rs. 15,00,000 Less: Cost of acquisitioj (50% Share) Rs. 8,25,000 Cost of improvement Rs. 3,50,000 Rs. 11,75,000 Rs. 3,25,000 During assessment proceedings no evidence was filed for cost of improvement, therefore capital gain was recomputed after ignoring the cost of improvement and a sum of Rs. 3,50,000/- was added to the income of the assessee. 54 On appeal it was mainly submitted that various expenses for sale and expenditure was duly incorporated in the cash flow statement. The Ld. CIT(A) did not find force in the submissions because no evidence was filed for....