TaxTMI 
TaxTMI 
2012 (2) TMI 677
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....4.11.2007 vide Ack. No 9148811141107 declaring total income at loss of Rs. 1,42,84,106/-. The Assessing Officer observed that at the time of search in the case of Anant Steels, the assessee has agreed to surrendered an amount of Rs. 89,61,911/- under the following heads of income :- S.No. Description of Head Anant Steels P.Ltd. 1. Excess Stock 37,94,670 2. Loose papers found 42,67,241 3. Payment made out of book 9,00,000 4. At the time of search in case of Shivangi Estates, the assessee has agreed to surrender an amount of Rs. 57,23,421/- under the following heads of income :- S.No. Description of Head Shivangi Estates Limited 1. Excess stock 2490662 2. Loose papers found 32,32,759 3. Payment made out of book Nil 57,23,421 5. With regard to the amount surrendered during search, the Assessing Officer observed that the assessee has offered an amount of Rs. l,46,85,332/- in both these companies, break up of the same are given above, consisting of Excess Stock of Rs. 62,85,332/-, Loose Papers of Rs. 75,00,000/- and unrecorded payment of Rs. 9,00,000/-. On screening of the au....
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....principle that in search proceeding one can be taxed in respect of the difference of the amount of assets found and that was disclosed by the assessee. 2.4.2] That payment made out of books towards purchase of goods duly considered in the amount of excess stock found. Hence, no separate addition is justified. The assessee has not claimed credit of unpaid stock. Hence, no separate addition is justified on account of payment made out of book. For this reason only the said amount of Rs. 9,00,000/- was not offered by the assessee separately in its return of total income. 2.5.1] That as regard additional income of Rs. 75 Lacs declared on the basis of loose papers are concerned. On perusal of the loose papers, we find that the crux of loose papers has already been included in form of Excess stock found. Hence, there is no reason for declaring additional income on account loose papers. 2.5.2] The assessee in its return of total income though declared additional income of Rs. 25,00,000/- on account of loose papers separately. However, by way of notes annexed with the return of total income it was claimed that the said amount of additional income as declared on ac....
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.... been accounted for by the assessee company, as separate invoice of same numbers has been issued to other party which was accounted for in the books of account. This means up to 18/11/2006 or in the 223 days the company had issued 1399 invoices which did not enter in the sales of the assessee company. From this inference can be drawn that the assessee company issued parallel invoices up to 1399 and by taking average weight of 21.000 M.Tons by considering the rate of Rs. 19,840/-, unrecorded sales up to issuance of 1399 invoices works out to Rs. 58,28,79,360/- (21 M.Tons * 1399= 29379 @ Rs. 19,840/-), for 340 days it will be Rs. 88,86,94,988/- (582879360/223X340) in the hands of Shivangi Estates Ltd. The Assessing Officer further stated that the receipt method and from parallel bills method there are no major difference in the amount of un-recorded total turnover. Receipt methods were considered by Assessing Officer for calculating total turnover of the assessee company. Since the average receipts are not identifiable as to which are of Anant Steels Pvt. Ltd. and which are of Shivangi Estates Ltd. Assessing Officer divided the same in the ratio of turnover of these companies as show....
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....nbsp; 6,75,000 On account of interest on advances 35,00,000 On account of Investment in the house 3 Anant Steels P Limited 69,09,754 On account of Excess stock found 25,00,000 On account loose papers 4 Slrivangi Estate Limited 77,93,467 On account of Excess stock-found 5,51,88,221 5] That in view of the above, it was submitted that the assessee company and other persons related to the group on the basis of assets found declared income in their respective hands. Hence, there is no justification for the assessing officer to calculate the income on notional basis. 6] That in view of the above it is submitted that addition made on account of income earned on unaccounted sales be deleted in full. Without prejudice to, above, following was the further submissions of assessee before the CIT(A) :- 7.1] That your honour at the time of last hearing asked from the assessee to submit the calculation based on actual sale in respect of Sale bill issued till Sale Bill No 1399 7.2] That till sale Bill No 13 99 issued till the date of search includes....
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....se papers found from the residential premises of Dr. R.K. Bansal, Director of the company did not bear the name of any of the two companies, and have no link with the business transactions of the appellant companies and Dr. Bansal himself has declared additional income of Rs. 1.80 crore , Thirdly, it was emphasized that in both the cases, the AO has not estimated such unaccounted turnover till the date of search but till the end of the F.Y. ignoring the basic fact that there was no evidences or basis whatsoever to draw any inference that such parallel invoicing continued even after search & seizure operation when the assessee was pre-occupied with sorting out the issues arising from the search & seizure operation carried out by the Department. It was emphasized that the AO in working out the total turnover has also included the bills issued for factory consumption which were subsequently verified and accepted in remand proceedings. It was also emphasized that average quantity per bill and the average rate of goods sold were also adopted at much higher figures than actual as under, which has been accepted in course of remand proceedings. Name of assessee Quantity Average ra....
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....per having been found from the residential premises of the Director were required to be ignored. It has also been contended that these were rough workings and various judicial decisions to support such contentions were cited before the AO. The AO based on the aforesaid working and also referring to other instances of transactions recorded in LPS-2 on page no. 91,92,98,99 & 100 has drawn inferences that average and unaccounted receipts for assessee for both concerns were taken at Rs. 48.36 lakhs and that has been multiplied by 340 days in estimating unrecorded sales of both companies at Rs. 164.44 cr. The AO has finally adopted such higher figure compared to the figure arrived on the basis of other approach i.e. parallel duplicate billing. 4.3 In course of appeal hearing it was emphasized that the document relied upon by the AO for estimating unaccounted sales were for all purpose dumb documents because two of such documents were totally undated and in one document though the date was mentioned as 16.10, the year was not mentioned and hence could not have been relied upon by AO in making any valid estimation of unaccounted sales. It was further emphasized that the very tenu....
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.... and unconnected loose papers and without corelating each such loose papers with transactions recorded in other papers. It may further be observed that such loose papers prima-facie indicate that appellants were engaged in unrecorded transactions and there is not much merit in the appellant's contention that such papers have nothing to do with the company's affairs. This is again admitted position that the appellant has owned up huge unaccounted excess stock and has other income to the extent of Rs. 1.47 crores in the hands of these two companies besides further amount of Rs. 3.65 crores in the hands of the Directors." 4.4 The broad undisputed position, which emerges after considering the contention advanced by the appellant in course of appeal proceedings and factual position verified by the AO are taken into consideration, quantity of unrecorded sales to the date of search would be as per working given in para 7.2 of the written submissions dated 22.11.09 as under: "That till sale Bill no.1399 issued till date of search includes 1081 sale bill related to the actual sale and balance 318 sale bill issued for Factory consumption. If the said sale bill multi....
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....ade for other years. There is further merit in assessee's contention that the assessee having been facing problems arising out of search and seizure operation carried out by the Department, as per normal human behaviour would not muster up courage to simultaneously continue with parallel unaccounted sales still during the course of further investigation and inquiries. Thus to sum up, the unaccounted sales for both the written submissions taken together can at best be estimated at Rs. 45.25 crores even going by AO's approach in the matter of estimating sales on the basis of parallel unaccounted billing and totally ignoring appellant's contention in this behalf. 4.5 The next question arises is what should be appropriate rate of GP or NP to apply on such unaccounted sales. The Hon'ble M.P.- High Court in the case of CIT v. Balchand Ajitkumar, 263 ITR 610 (MP) and further in the case of Manmohan Sadani v. CIT, 304 ITR 52 (MP) has clearly held that only NP is to be estimated on unaccounted sales. In that view of the matter, there is some merit in appellant's contention that AO should not have resorted to further estimation of GP ignoring the GP worked out by him....
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....n excess and certain loose papers were also found. Documents were also found to indicate that payment was made out of books. Accordingly, the assessee agreed to surrender an amount of Rs. 89,69,911/- in the case of Anant Steels under the following heads :- S.No. Description of Head Anant Steels P.Ltd. 1. Excess Stock 37,94,670 2. Loose papers found 42,67,241 3. Payment made out of book 9,00,000 14. After the search was over, the Assessing Officer issued notices u/s 153A on 5.10.2007 in replies to which the assessee has filed return of income on 14.11.2007. In the return of income so filed, the assessee has surrendered additional income of Rs. 94,09,754/- on account of excess stock and loose papers, as against incomes surrendered at the time of search at Rs. 89,61,911/-. Similarly, in case of Shivangi Estates Limited surrender was made on account of excess stock amounting to Rs. 24.90 lakhs, loose papers Rs. 32.33 lakhs, which works out to be Rs. 57.23 lakhs. As against the surrender of income of Rs. 57.23 lakhs during course of search, the assessee has offered income of Rs. 77,93,467/- in the return of income on account of excess stock. Howeve....
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.... the basis of four loose papers out of which two papers even does not bear the date, the Assessing Officer estimated amount of turnover of the assessee for both the companies. Thus, the Assessing Officer has also hypothetically calculated the turnover of both the companies on the basis of papers found from the residence of Dr. R.K. Bansal. Thus, separate additions were made by the Assessing Officer in case of both the concerns on account of estimated profit assumed to be earned on such estimated sales. The ld. CIT(A) deleted the addition after calling for remand report on the submission given by the assessee with regard to the actual sale bill and bills related to factory consumption, and the bills found at the premises of Sardar Steels and loose papers found at the premises of the Director of the Company. After considering the remand report and the assessee's reply thereon, the CIT(A) found that there was no merit in the Assessing Officer's estimate of sale based on certain loose papers, which were clearly numbering 10 including other papers referred by the Assessing Officer. It was found that the transactions recorded in such loose papers were in the nature of summary of transact....
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....t unless there is definite material, estimation on the basis of some loose papers for unaccounted transaction found pertaining to a particular day/days cannot be made basis for estimation of sale of other years. 16. From the record, we found that to verify and ascertain the correct unaccounted sales on the basis of duplicate bills issued by the assessee, the CIT(A) called for a remand report vide its letter dated 25.11.2009 and directed the Assessing Officer to verify total sale bills issued by both the concerns, Bills issued for factory consumption, bills issued for actual sales, quantity related to goods sold in respect of each of the two concerns. The Assessing Officer vide its letter dated 17.12.2009 sent its remand report, which is also forming part of the CIT(A)'s order as per Annexure 'A', wherein Assessing Officer has duly verified and confirmed the total sales bills issued by each of the concern for the purpose of factory consumption and the bills actually issued for sales in respect of each of the concern i.e. M/s. Anant Steels Private Limited and M/s. Shivangi Estates Limited. In the remand report, the Assessing Officer has also duly incorporated quantity related to t....