TaxTMI 
TaxTMI 
2010 (12) TMI 1366
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....03. The cash sales recorded in the said note books far exceeded the sales recorded in his regular books of account. The assessing officer worked out the difference of Rs.8,21,242 between sales recorded in the said note book and the sales recorded in the regular books of accounts which is tabulated in the assessment order on pages 6 & 7. On that basis the assessing officer worked out the average unaccounted sale for a day at Rs.18,665 (Rs.8,21,242/44 days) and proposed to calculate unaccounted sales for the period from April 2003 to November 2003 (216 days i.e. after excluding one day per week on account of holiday). During the assessing proceedings, the assessee furnished a chart showing detailed working of sales as per the impounded note book and as per book of account, according to which the sales comes to Rs.4,55,956 as against Rs.8,21,242 worked out by the assessing officer. The difference was attributed the following: * The AO has treated the advances received as cash sales * The AO has treated he amounts received on account of credit sales made earlier which was duly accounted for in the books of account. The said receipts have been accounted for in the book....
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.... the year. Thus, the impugned addition of rs.59,98,140 was arrived at. 6. The assesseee filed appeal before the CIT(A) and repeated the contentions raised before the assessing officer. In addition, the assessee submitted that even if it is assumed that there was unaccounted sales, estimate of the same can be made only for pre survey period at the most and not for the post survey period. In this regard reliance is placed on the decision of the Delhi High Court in the case of CIT vs Anand Kumar Deepak Kumar (2007) 294 ITR 497 wherein it has been held that merely because there were some discrepancies in the pre-search period, it could not lead to any presumption that the discrepancies would have continued in the post search period particularly when there was factually no evidence at all as found by both the authorities below to support such a view. The assessee submitted before CIT(A) that no estimate can be made for post survey period as it cannot be assumed that any such practice was continued even after the date of survey without any corroborative evidence to prove the same. The assumption for post survey period is quite illogical. Initially, the A.O. proposed to assume and add ....
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....ary, the A.O worked out unrecorded sales for the period 19-10-2003 to 05-1 Rs. 2- 2003. The appellant has submitted various reasons for difference in figure of sales worked out by the A.O. on pg. 6 & 7 of the assessment order and as worked out by appellant on pg. 8 & 9 of the assessment order. The same are discussed in the following paras. 7.3 The appellant has submitted that the A.O. has included advance receipts and receipt against credit sales booked in the accounts in the figure of cash sales worked out by him. To this extent, the figure of cash sales is inflated. The advance receipts and receipts against credit sales are clearly apparent from the diary. I have carefully considered the contentions of the appellant but the same is not convincing. In respect of the credit sales, it is not verifiable as to against which credit sales, the receipts have come. The name of customer is also absent. In the absence of possibility of verification of these important details, it is difficult to accept that credit sales pertaining to these receipts are recorded in books of accounts. Similarly, in respect of advance, it is not verifiable as to on what account the advance is received ....
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....figure before expenses should be taken. This will have effect of increasing the figure of cash sales by Rs.2,695/-. 7.7 In view of the above, cash sales as per the diary fro the period 19.10.2003 to 05.12.2003 comes to Rs.5,40,246/- (Rs.8,21,242 - Rs.2,68,226 - Rs.15,465 + Rs.2,695). 8.0 The next issue is to decide whether on the basis of unaccounted sales for the period 19.10.2003 to 05.12.2003, estimate of the sales for the whole year can be made or not. The appellant has submitted that the unrecorded sale is determined on the basis of diary found during the survey and therefore the unrecorded sale should be determined only to the extent of what is mentioned in the diary. There is no evidence found during the course of survey which can suggest that prior to 19.10.2003, the sales was not recorded in the books f accounts. The appellant submitted that it is quite illogical to estimate the sales for post survey period. The appellant relied on recent decision of Delhi High Court in the case of CT vs. Anand Kumar Deepak Kumar (294 ITR 497) wherein it is held that merely on the presumption, continuance of discrepancy for the post search period cannot be assumed. On the....
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.... the above decisions apply to appellant's case with full force. 8.2 On careful consideration, I find merits in the submissions of the appellant. The estimate of unrecorded sales should be confined to the extent it is found from the diary impounded during the survey. The appellant's explanations for not recording the sales in the books cannot be simply rejected. No such diary or any other material is found for pre survey period and therefore it is difficult to hold that the appellant has affected unrecorded sales prior to period covered by the diary. When one material for a specific period is found, the discrepancy on the basis of that material should be confined to that period only unless the material itself or any other evidence or the circumstances giving rise to a finding indicate discrepancy for the other period. The enlargement of the material found by presunmption and guess cannot lead to a logical conclusion of existence of discrepancy in other period. Further, it is not logical to assume any such discrepancy after the period of survey. In no case, the estimate can run for post survey period. The Delhi High Court judgment relied upon the appellant also lay down the ....
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.... basis in the appellant's case to assume unexplained investment as no such material was found during the survey indicating any investment as held in the case of President Industries, 258 ITR 654 and also in case of Income Tax Officer vs. Guru Bachchan Singh J. Juneja [55 ITD 75 (TM)]. In absence of any material, investment cannot be assumed by making quesses. The nature f business and trade practice also suggest that no such additional investment is required over and above the existing infrastructure.. 9.2 Accordingly, this ground is partly allowed. The addition to the extent of Rs.1,35,062/- is confirmed and the appellant gets relief of Rs.57,63,078/- out of addition of Rs.58,98,140/-." 9. We have heard Shri JM Sahay, the ld.DR, who relied on the order of the assessing officer and Shri MP Sarda, the ld.AR of the assessee, who relied on the order of CIT(A). 10. We have considered the rival submissions and perused the material placed before us. We find that the CIT(A), on the basis of material placed before him, which are also placed before us, has found that the objection of the assessee that the following amounts are to be excluded from the undisclosed cash sales wo....
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.... case of President Industries 258 ITR 654 (Guj) the CIT(A) found that the principle involved in this judgment is squarely applicable to the case of the assessee that if the entire sale consideration is added, the resultant gross profit would be totally unrealistic for the business of departmental store. The CIT(A) therefore held that only the profit element in the unrecorded sales could be added and the gross profit on the unrecorded sales being generally more compared to the recorded transactions because of the expenditure element, the gross profit on the unrecorded sales be estimated at 25% of the same as against the disclosed gross profit of around 15% on the recorded sales. Thus, the total addition was worked out at Rs.1,35,062 by the CIT(A) as against Rs. 58,98,140. The ld.CIT(A) also considered another aspect of the matter as to whether the investment in the unrecorded sales so worked out by him at Rs,.5,40,246 could be considered for addition or not. To this, drawing support from the judgment of the jurisdictional High Court in the case of President Industries supra and the Third Member decision of the Tribunal in the case of ITO vs Guru Bachchan Singh J Juneja, the CIT(A) f....