TaxTMI 
TaxTMI 
2013 (4) TMI 999
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....) has erred in law and facts in computing undisclosed income wherein he excluded receipts of Rs. 1,91,02,221/- (total in respect of three assessees) as capital receipts as called by the assessee without there being any evidence or without the assessee explaining the nature and source of such receipts." 3. Brief facts of the case are case are that a search operation u/s 132 of the Act took place on 16-11-1999 on the premises of Manek Group and associated persons including Gujrat Multi Gas Base Chemicals Pvt. Ltd, (GMGB) Manek Chemical Pvt Ltd (MPCL) and Sri Dashrathbhai V. Patel ,Proprietor Sri Ram Chemical Industries (SRCI) in response to notices u/s 158BC, return for the block period from 01-04-1984 to 16-11-1995 filed declaring nil undisclosed income. The Assessing Officer provided copies of the seized documents and served notices u/s 143(2)/142(1) along with questionnaires. The replies of the assessees were received. Assessing officer reproduced partly the contents of his show cause notices and submissions of the assessee in his orders. The assessing officer has also referred to the statements of Sri Dashrathbhai Patel, Proprietor of SCRI and director of GMGB and MCPL and of ....
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....nt Years 1990-91 to 2000-01, on the basis of unaccounted transactions in cash as reflected in the aforementioned seized annexures. This was detailed/summarized by the A.O. in his relevant show cause notices partly reproduced in his assessment orders. 5. The reply of these assessees which have also been partly reproduced by the A.O. in his assessment order it was submitted that the referred seized books of account contained the consolidated picture of the unaccounted transactions of the three group concerns namely the three appellants. The entries in these books were in the nature of credits and debits. The credit entries reflected receipts, both on revenue and capital account, while the debit entries reflected business expenses and other outgoings and it was the cumulative total effect of these debit/credit entries that was required to be considered for determining the undisclosed income and not the gross total of the entire receipts as had been proposed by the A.O. The entire receipts could not be considered as concealed income, since the unaccounted receipts were not fully in the nature of trading receipts and the same included several items in the nature of capital receipts n....
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....0,721/- 25,84,728/- 1,34,41,119/- 98-99 1,04,01,242/- 23,92,213/- 53,01,957/- 1,80,95,412/- 99-2000 81,65,324/- 14,44,841/- 83,15,906/- 1,79,26,071/- 2000-01 35,81,207/- 11,58,813/- 43,70,149/- 91,10,169/- 6,19,99,307/- 1,46,50,246/- 2,16,09,554/- 9,82,59,107/- Consequently, the A.O, determined the undisclosed income of the aforementioned assessees as under: Gujarat Multi Gas Base Chemicals Pvt. Ltd. Rs. 6,19,99,310/- Manek Chemicals Pvt Ltd Rs. 2,16,09,550/- Shree Ram Chemical Industries Rs. 1,46,50,250/- 8. Aggrieved by the above determination of the undisclosed income, all the three group concerns GMGB, MCPL and SRCI went in appeal before first appellate authority. Before Ld. CIT(A), it was submitted that the A.O. had mechanically totaled the entire receipts appearing on the credit side (in the seized documents) and treated the same as undisclosed income, which he divided in the three concerns proportionately, on the basis of their year-wise sales, as per their regular books of account. The action of the A.O. in treating the entire credits as being the undisclosed income of the appel....
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....56,882/- Total Payments 8,89,48,819/- Less: Payments on Capital Account (not in the nature of deductible expenditure as per Sr. No. 7 of Paper Book) 3,01,16,524/- Balance being Business Revenue Expenditure 5,88,32,295/- NET UNDISCLOSESD INCOME OF THE THREE CONCERNS FOR THE BLOCK PERIOD 2,03,24,587/- PERCETNAGE OF UNDISCLOSED INCOME TO UNDISCLOSESD SALES 25.68 % 9. It was further submitted that considering the above profit percentage of 25.65% of undisclosed income to undisclosed sales, as worked out on the basis of a logical comprehension of the receipts and payments, appearing in the seized records, the net undisclosed income totals Rs. 2.03 crores against the undisclosed sales of Rs. 7.91 crores was fair and reasonable, in view the facts of the assessee's cases and the ratio as laid down by the decisions of S. M Omer and President Industries (supra) relied by the assessees. 10. These submissions of the assessees along with 40 pages filed in support of their contention was forwarded by Ld. CIT(A) to AO for verification. After receiving the report of the A.O. the same was given to assessees for th....
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.... Annexure A-6. Despite the abbreviations used, there was no inconsistency or variation in the amounts or the effective treatment given in the charts appearing in the paper book. (b) It was pointed out that the total receipts of Rs. 9.82 crores were not in dispute. The total of the amounts mentioned in Col, B and Col. D had also been found by the A.O. as tallied. The entry against the narration "AO BHI" referred to capital receipts in the nature of finance received from Bhimani through Ahmedabad Office. There was no employee by the name of Bhimani and the said amounts did not represent any unaccounted sales as alleged by the A.O, Moreover, there were similar other entries with abbreviations, which were not doubted by the A.O. In any case, the basic contention that these receipts on the capital account to the tune of Rs. 1.91 crores should not be treated as part of the undisclosed income, stood duly substantiated. (c) The observation of the A.O. that the undisclosed sales of Rs. 7.91 crores (Col. C) was subject to variation was irrelevant, since the veracity of the figures Under Col. A and Col. B of the chart was itself established. (d) It was explained tha....
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.... Rokada Jama (in Gujrati) i.e. Cash Received Loan Return (A/6-64 Rs. 1,25,029, A/6-65 Rs. 1,54,935, A/6-70 Rs. 73,435 & Rs. 67,954 and A/6- 71 Rs. 93,532) Total Rs. 5,14,885 have been mentioned in Summary Sheet has Loan return for FY 1993-94. These entries represent cash received from various persons as mentioned in the respective pages, which have been aggregated and shown as Loan Return in the Summary Sheet A/18. Nature of Transaction is specified in Summary Sheet, while individual names of payees are specified in the respective pages A/6 20 A/6 54 to 60 Rokada Jama (in Gujrati) i.e. Received on A/c of AO/BH AO/BHI These entries represent amount of cash received via Ahmedabad Office from Bhimani being Finance transactions. 20 A/6 57,64 Cash Deposited in Banks Cash in bank These entries appearing in Capital Outgoing represent cash deposited in various bank account. 20 A/6 54 Purchase in ground nut oil, given to Kiritbhai M.DVP This entry appearing in Capital Outgoing relates to payment made to Kirtibhai for household expenses of DV Patel and hence the same is shown as payment to Mehsana- D.V. Patel. 20 A/6 54, 57....
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..... 70,000 which represents return of finance given earlier and hence shown as receipt on capital account. In the summary Sheet Annexure A/18, the same is referred to GAL return. The other amount of Rs. 5,000 is a separate entry relating to Kanaiya Electrical. However, the same have been totaled up at Rs. 75000 by the AO against GAL return. 21 A/6 12 Not found Rs. 50,000/- donation This payment appearing in Capital Outgoing is reflected on page 72 (and not on page 12 as inadvertently mentioned) of Annexure A/6. Since it is paid to Kotharia Annakshetra, it has been described as Donation in Summary Sheet Annexure A/18 21 A/6 68 to 86 It seems to be total of various entries not verifiable Rs. 52,800/- O.ADV This is the total of amounts appearing in Capital Outgoing representing small advances to various employees as advance against salary. Since this amount is treated as payment on capital account the same has not been claimed as allowable business expenditure 21 A/6 55 Send to Janta Soap through Somabhai Angadia KA/R Rs. 1,00,000/- This amount appearing in Capital Outgoing was sent through Somabhai Angadia to Usha Chemicals an....
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....cises Ld. CIT(A) while giving relief to the assessees has observed as under:- "13. I have carefully considered the contentions of both, the A.O and the A.R. It is seen that the total of the unaccounted receipts as per the seized documents, i.e.. Rs. 9,82,59,103/- is not in dispute. The appellant has claimed that receipts of Rs. 1.91 crores out of the same were capital receipts on account of loans, etc. from various persons as indicated from the narration against the relevant entries and further cross verified by entries in the summary sheet i.e. Annexure A-18. The doubts of the A. O., as expressed in his Report about the nature of these receipts being capital or otherwise, are only in relation to the brevity of the narration. The A.O also expressed his reservation in regard to the entry appearing in the name of 'AO BHI'. I find that these doubts and reservation of the A.O. have been satisfactorily explained by the appellant in its response. Thus the net figure of the undisclosed sales (after deducting the amount of receipts on capital account from the total receipts) as appearing in Col. C at Rs. 7,91,56,882/- as per the appellant's contention is accepted. 13.....
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....salary difference etc. The A.O. in his report has also confirmed that the yearly total of such payments under different heads are found in seized Annexure A-18, but according to him there is no further break up of the daily figures on the basis of which the yearly totals have been made up. I find force in the appellant's contention that what matters for the computation of the total undisclosed income is the overall total of yearly payments and classification of expenditure as allowable or disallowable being in the nature of revenue or capital, and the verification of the break up of daily figures of such expenses is not relevant for this purpose. 13.4 Even in the assessment order finalized u/s. 158BC (under Para 14-1)., the A.O. has treated the entire receipts as undisclosed income, mainly on the count that "to claim the relevant expenditure pertaining to undisclosed income, the onus lies on the assessee to provide basic details such as bifurcation of the nature of expenditure as basis of expenditure, personal expenditure, capital expenditure etc. and that the assessee has not produced the necessary working of the expenditure incurred for earning the unaccounted income....
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.... 0 0 0 0 1990-91 4,26,750 2,03,605 0 6,30,355 1991-92 7,87,189 5,43,871 0 13,31,060 1992-93 5,35,351 1,39,575 0 6,74,926 1993-94 10,00513 3,48,979 0 13,49,492 1994-95 14,05,380 2,90,505 0 16,95,885 1995-96 15,14,910 2,29,775 11,25,860 28,70,545 1996-97 5,77,582 74,169 9,29,478 15,81,230 1997-98 27,28,443 8,48,904 14,84,516 50,61,863 1998-99 19,65,806 3,47,996 9,15,571 32,29,373 199-2000 10,97,118 4,70,641 3,32,099 18,99,858 1,20,39,042 34,98,020 47,87,525 2,03,24,587 15. Aggrieved by this order of Ld. CIT(A), the Revenue is in appeal before us. At the time of hearing ld. CIT-DR relied on the order of A.O. and took us to the relevant portion of his order to argue vehemently that the order passed by him may kindly be restored back and the order passed by ld. CIT(A) may kindly be set aside while A.R. of the assessee relied on the order of Ld. CIT(A) and took us to the relevant pages of Paper Book filed by him as to show how Ld. CIT(A) was justified in giving relief to the assessees. 16. After hearing....
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....es 258 ITR 654 (Guj) of jurisdictional High courts wherein it was held that entire undisclosed sales could not be added as income of the assessee in as much as for earning this income the assessee had made certain expenditure and additions could be made only to the extent of estimated profits embedded in sales. We further find that during the pendency of appeals before Ld. CIT(A), these assessees moved applications before Settlement Commission offering total undisclosed income for the block period as under:- Name of the appellant Undisclosed income Gujarat Multi Gas Base Chemicals Pvt Ltd Rs. 83,93,670/- Shree Ram Chemicals Industries Rs. 27,39,188/- Manek Chemical Pvt. Ltd. Rs. 23,76,115/- Total Undisclosed Income Rs. 1,35,08,973/- 17. The applications of the assessees were admitted by Settlement Commission u/s 245D of the Act and consequently the appeals filed before Ld. CIT(A) sought to be withdrawn and were dismissed. Further since the order u/s 245D(4) were not passed by the Settlement Commission within the specified time until 31^st March, 2008, in view of the provisions of Section 245 HA(1)(i)(iv) the proceedings before Settlement Commission ....