TaxTMI 
TaxTMI 
2022 (8) TMI 1544
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.... income earned on total sales is offered separate addition of profits amounts to double taxation. It be so held now. 2. Ld. CIT(A) erred in law and on facts in making addition of estimated GP of Rs.37,81,224/- on unaccounted sales failing to consider that income of Rs.49,75,530/- offered on total sales already includes profits earned on unaccounted sales. Ld. CIT(A) ought not to have made double addition of profits. It be so held now. 3. Alternatively and without prejudice to the ground not warranting double addition ld. CIT (A) erred in law and on facts in estimating GP @ 7% in place of 6.60% derived by the appellant on trading. Ld. CIT (A) ought to have restricted addition @ 6.60% of unaccounted sales. It be so held now. 4. Ld. CIT (A) erred in law and on facts in making enhancement on account of GP of Rs. 37,81,224/- & unaccounted purchases of Rs. 2,09,23,747/-, in income u/s 69C of the Act. Ld. CIT(A) despite accepting quantitative tally of opening stock, purchases, sales and closing stock factually erred in holding that the appellant made unaccounted sale of 1843.25 tones against book stock of 1301.79 tones. Ld. CIT (A) ought not to have made addition u/s 69C of the A....
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.... AO, the assessee failed to reconcile the same. Therefore, in the absence of any reconciliation by the assessee, the AO treated the impugned amount of difference of Rs. 4,09,82,116/- as unexplained cash credit under section 68 of the Act which was added to the total income of the assessee. 5. Aggrieved, assessee preferred an appeal to the learned CIT-A. 5.1 The assessee before the learned CIT-A has furnished various additional evidences on many occasions and likewise the learned CIT-A has also forwarded the same for the remand report from the AO. Thereafter, the assessee has also filed rejoinder to the remand report on many occasions. 5.2 The core contention of the assessee was that it was earning commission income on the sales in the capacity of commission agent of M/s KIFL. The assessee to this effect has also furnished the copy of the agreement of commission agency. The assessee further submitted that the AO made addition of difference in closing balance of sundry creditor under section 68 of the Act which applies to the sum credited in the books but remained unexplained. However, in its case, the credit entry on account of purchases were not in doubt. All the purchases made ....
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....f section 68 of the Act cannot be applied. However, the ld. CIT-A made the addition of GP on unaccounted sale and also made addition for the unaccounted purchases by observing as under: "3.31. I have considered all the submissions and rejoinders of the appellant, remand reports of the A.O. and Addl.CIT and it is found that the appellant has sold the stock of goods lying with him on consignment received form KFIL and the sale proceeds thereof have not been recorded in the books of accounts. These sale proceeds have been directly utilized by purchasing the cheques from the shroffs from the payments by the debtors towards their purchases of goods from the appellant. Those cheques issued by shroffs have been credited in appellant's ledger accounts in the books of KFIL. After making the inquiries from banks by obtaining the bank statement copy, account opening forms and copies of sample cheques with regard to the bank account of M/s.Kavita Enterprises bearing account NO.CR1949 Prop. Shri Subhashbhai Thakkar and another bank account No.CR-1943 in the name of Shri P.S. Verma, Prop. M/s.P.K. Corporation both maintained in the Gujarat Mercantile Co.Op Bank Ltd. and also another bank a....
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....e unaccounted sales the appellant had made unaccounted purchases and same has not been recorded in the books of accounts. The summary of the stock position in this regard is depicted as under :- Opening Stock 178.960 Tones Add: Purchases 25339.830 Tones Total 25518.79 Tones Less: Sales 24217 Tones Closing Stock 1301.79 Tones Valued at Rs.2,93,12,514/- Unaccounted Sales 1843.25 Tones Valued at Rs.5,40,17,485/- So it is apparent from the above that the appellant has made the unaccounted sale of 1843.25 Tones as against the book stock of 1301.79 tones. Thus, it has sold the excess stock of 541.46 Tones have been purchased by the appellant out of books for which the unaccounted payments have been made and the same attracted the provisions of Section 69C of I.T. Act. 3.34. During the course of appellate proceedings, it was submitted that although the appellant has made the unaccounted sales of Rs.5,40,17,485/- including the accounted stock by making the delivery of the goods but not showing the sales in the books of accounts. But to cover-up these discrepancy, it was pleaded that the appellant has issued the fictitious sale bills for the same quantity....
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.... C is warranted. 3.36. In other words on the unrecorded sales of Rs.5,40,17,485/- the addition on account of gross profit of Rs.37,81,224/- and the unaccounted purchases u/s,69C amounting to Rs.2,09,23,747/- totaling to Rs.2,47,04,971/- is worked out as above for which an enhancement notice vide order sheet entry dtd. 05.09.2014 was given to the appellant to give submission upon the above enhancement. The appellant was asked to give his submission upon the above enhancement. The appellant was asked to give his submission upon the aforesaid show cause of enhancement on or before 15.09.2014. On the aforesaid date the A.R. of the appellant attended the office and submitted that all the written submissions on this issue has already been filed in this office and he relied upon the same. During the course of hearing, no further written submission on the aforesaid enhancement was made. In view of the aforesaid discussion, considering all the written submissions the enhancement on account of gross profit at Rs.37,81,224/- and unaccounted purchases u/s.69C at Rs.2,09,23,747/- totaling to Rs.2,47,04,971/- is made to the income of the appellant as against the addition made by the A.O. u....
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.... the assessee with respect to the item of addition which was not disturbed by the AO in the assessment order. The learned AR in support of his contention has relied on the judgment of Hon'ble Supreme Court in case of CIT vs. Shapoorji Pallonji Mistry reported in 44 ITR 891. 7.2 On the other hand, the learned DR before us filed a paper book and contended that it was the duty upon the assessee to furnish the documentary evidence that the debtors have made the payment directly to the supplier namely KIFL. Thus the AO rightly treated the amount of difference as unexplained cash credit under section 68 of the Act. 7.3 The learned DR with respect to the enhancement of income contended that there is direct nexus of the item of addition enhanced in the assessment order with the unaccounted sales of the assessee. Thus it can be inferred that the issue of relating to enhancement of income by making the addition was very much arising from the order of the AO. 7.4 Both the learned AR and DR before us vehemently supported the order of the authorities below to the extent favourable to them. 8. We have heard the rival contentions of both the parties and perused the materials available on reco....
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....sions of section 68 could not be attracted in the instant case. The view taken by the Tribunal was correct and, therefore, there was no question of, making any addition under section 68. [Para 8] 8.2 The next controversy arises whether the addition can be made on estimated basis on the amount of unaccounted sales as admitted by the assessee during the appellate proceeding and elaborated above. In this regard we note that assessee itself has admitted that sales were made outside books in order to gain some extra profit besides commission and admitted to have earned profit around 6.6% on such unaccounted sale. Thus, we find no infirmity in the order of the learned CIT-A with respect to such addition made by him (the learned CIT-A) in his appellate order. Hence, the addition made by the learned CIT-A for Rs. 37,18,224/- is hereby confirmed. 8.3 With respect to the enhancement of the addition by the learned CIT-A on account of alleged purchases made by the assessee outside the books of accounts, we note that such issue was not arising from the order of the AO. In other words there was no dispute before the AO with respect to the unaccounted purchases which can be verified from the a....
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.... result, the appeal of the assessee is partly allowed. Coming to ITA No. 3336/Ahd/2014 an appeal by the Revenue for A.Y. 2009-10 10. At the outset we note that the issue raised by the Revenue in its grounds of appeal has been adjudicated along with assessee's grounds of appeal in ITA No. 3048/Ahd/2014, where we have decided the issue vide paragraph no. 8 of this order partly in favour of the assessee and against the Revenue. For detailed discussion, please refer the aforesaid paragraph of this order. Hence the ground of appeal raised by the Revenue is hereby dismissed. 11. In the result, the appeal of the Revenue is hereby dismissed. Coming to ITA No. 126/Ahd/2019 an appeal by the assessee for A.Y. 2008-09 12. The assessee has raised following grounds of appeal: "1 Ld. CIT (A) erred in law and on facts confirming addition made by AO of Rs. 3,85, 78,246/- difference of credit balance with one of the creditor Kirloskar Ferrous Industries Ltd. as unaccounted income of the appellant. 2 Ld. CIT (A) erred in law and on facts confirming addition not appreciating that appellant due to shortage of pig iron material sold goods in cash, made payment through shroff to the creditor ....
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....ent order passed by AO being invalid, bad in law and without jurisdiction as conditions required under the provisions of sec. 147 of the Act are not fulfilled. Ld. CIT (A) ought to have quashed the order passed in absence of 'reason to believe' that income escaped assessment. 2. Ld. CIT (A) erred in law and on facts in confirming addition made by AO of Rs. 2,93, 12,514/- opening stock u/s 69C of the Act simply following appellate order of A Y 2009/10. Ld. CIT (A) ought to have deleted addition allowing opening stock as expenditure against credit of sales. 3. Ld. CIT (A) erred in law and on facts in confirming action of AO making addition of opening stock of Rs. 2,93,12,514/- without rejecting books of accounts. Ld. CIT (A) ought to have deleted addition holding stock shown by the appellant as per books of accounts duly audited as correct. 4. Ld. IT (A) erred in law and on facts in confirming action of AO invoking provisions of sec. 69C of the Act ignoring stock register, excise records & book results. Ld. CIT (A) ought to have deleted addition when appellant has maintained tally stock register for excise duty that is duly audited." 18. The first issue raised by t....
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....issions made by the appellant, I am of the view that the AO was justified in making the impugned addition and the addition of Rs.2,93,12,514/- is confirmed. Grounds of appeal Nos. 1 to 6 are dismissed." 23. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 23.1 The learned AR before us contended that the amount of closing stock was brought forward as opening stock in the year under consideration. As such, brought forward opening stock cannot be disturbed without disturbing the closing stock of the earlier year. 23.2 On the other hand learned DR vehemently supported the order of the authority below. 24. We have heard the rival contentions of both the parties and perused the materials available on record before us. Admittedly, the assessee in the books of accounts has shown opening stock of Rs. 2,93,12,514/- which is treated as NIL by the AO and the learned CIT(A). The view of the AO is based upon the finding of learned CIT (A) in the own case of the assessee for immediate previous assessment year i.e. A.Y. 2009-10 where the learned CIT(A) found that the closing stock of Rs. 2,93,12,514/- shown by the assessee was utilized for making unacco....
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....T(A) were deleted by us vide paragraph no. 14 of this order in ITA No. 126/Ahd/2019. Thus, the question of concealment of income or furnishing inaccurate particular of income does not arise and therefore the penalty cannot be sustained. Under the provisions of section 271(1)(c) of the Act, the amount of penalty has been specified which shall not be less than hundred percent of the amount of tax sought to be evaded subject to the maximum limit of 300% of such amount. Under explanation 4 to section 271(1)(c) of the Act, the manner for quantifying the amount of tax sought to be evaded has been specified which has direct nexus with the additions/ disallowances made during the quantum proceedings. Therefore, where the quantum additions/ disallowances have been deleted, then the manner of quantifying the amount of penalty under explanation 4 to section 271(1)(c) of the Act as discussed above fails. Accordingly, we are of the view that that there cannot be any penalty with respect to the quantum additions which have been deleted. Thus, the ground of the assessee's appeal is hereby allowed. 31. In the result, the appeal of the assessee is allowed. Coming to ITA No. 844/Ahd/2019, an appea....
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....ade the addition of estimated profit of Rs. 37,81,224/- on account of unaccounted sale of Rs. Rs. 5,40,17,485/-. Besides this the learned CIT(A) was also of the view that there was no sufficient inventory available in the books of the assessee to meet the unaccounted sale of Rs. 5,40,17,485/-. Accordingly the learned CIT(A) drawn inference that assessee made unaccounted purchase which was worked out at Rs. 2,09,23,747/- and in absence of source of purchase the addition of Rs. 2,09,23,747/- under section 69C of the Act was made. Thus, the learned CIT(A) made total addition of Rs. 2,47,04,971/- and initiated penalty proceeding under section 271(1)(c) of the Act for furnishing inaccurate particular of income and thereby concealing the income. 35.1 The assessee during the penalty proceeding submitted that it neither concealed income nor furnished inaccurate particular of income. As such addition of estimated GP was made on wrong assumption of submission made by it. The income generated on sales invoice issued were duly offered to tax. Therefore, no penalty under section 271(1)(c) of the Act is liable to be levied on account of addition made on estimated basis. 35.2 It was further sub....
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....being estimated profit on account of alleged unaccounted sale. In this regard we find that the quantum proceeding and the penalty proceeding are different. Any addition or disallowances under quantum proceeding do not ipso facto empower the revenue authority to levy penalty under section 271(1)(c) of the Act. Further the addition made was based on estimation and it settled position of law by the various Hon'ble High court that the no penalty under section 271(1)(c) can be sustained in case of estimated addition. At this juncture we feel pertinent to refer the judgment of Hon'ble Allahabad High Court in case of CIT v. Norton Electronics System Pvt. Ltd [2014] 41 taxamm.com 280 [Allahabad] where the Hon'ble bench observed as under: 6. Needless to mention that the quantum proceedings and penalty proceedings are the independent proceedings as per the ratio laid down in the case of Durga Kamal Rice Mills v. CIT [2004] 265 ITR 25/[2003] 130 Taxman 553 (Cal.). When the addition is made on the estimatebasis, no penalty is sustainable as per the ratio laid down in the following cases:- 1. CIT v. Raj Bans Singh [2005] 276 ITR 351 (All.) 2. CWT v. Sanghi Brothers (India) Ltd. [2008] 3....