TaxTMI 
TaxTMI 
2006 (5) TMI 111
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....t considering the fact that the assessee had to provide to customers peripheral services such as preparing of floor and counter top with tile, electrical wiring and switches, plumbing, piping and fixing, light fitting, painting of wall and ceiling, supplying and fixing of granite etc., etc. (iv) Both the Assessing Officer and CIT(A) erred in not accepting the average gross profit ratio of 30 per cent and net profit ratio of 9 per cent in respect of undisclosed turnover of the assessee. (v) Both the Assessing Officer and CIT(A) erred in holding that statement under section 132(4) is always binding which is recorded under mental stress, without the help of accounts relating to 3 assessment years in the block period [vide Addl. ITO v. T. Mudduveerappa & Sons [1993] 45 ITD 12 (Bang.)]. (vi) The CIT(A) erred in enhancing the undisclosed income to Rs. 7,06,088/- as the Assessing Officer himself had after considering all the material on record had estimated undisclosed income at Rs. 1 crore only. (vii) Both the Assessing Officer and CIT(A) erred in holding that the assessee had disclosed unaccounted "income" at half the turnover of Rs. 2,14,12,715/- as unaccounted income. The asse....
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....completed. Before the Investigating Officer, it was contended that cash expenses are also incurred in respect of work completed for which amounts have been received in cash. The assessee is having no vouchers or details in support of such expenses. Verification with some of the premises, where the kitchens have been installed revealed that the assessee had in fact carried out certain civil works. The Managing Director of the company vide letter dated 22-1-1999 declared Rs. 107 lakhs as undisclosed income for the assessment years 1996-97 to 1998-99. However, in the return of income, the assessee admitted undisclosed income as under:- Assessment year 1997-98 Rs. 8,43,598 Assessment year 1998-99 Rs. 60,08,098 Before the Assessing Officer, it was submitted that the declaration made before the Investigating Officer was not correct and that it was made to buy peace with the department. It was submitted that the contract works for which they received cash payments was of the nature of electrical work, plumbing, civil work, tiling etc. In such work, margin of profit cannot be 50 per cent. Vide letter dated 12-12-2000, the assessee made following submissions:- "(a) The investigation ....
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....96/- as undisclosed income which we believe is reasonable. In this context we would like to inform you that the seized cash of Rs. 3,25,000/- is also part of the declared undisclosed income in our return." Vide letter dated 25-12-2000, the assessee explained that cash receipts were only for the following purposes :- (a) Preparing of floor and counter top with tile (b) Electrical wiring and switches (c) Plumbing, piping and fixing (d) Light fitting (e) Painting of wall and ceiling (f) Supplying and fixing of granite It was submitted that statement of expenses incurred for the peripheral jobs was submitted to the customers. It was argued that profit generally is 10 per cent to 12 per cent in respect of such peripheral jobs executed while the assessee has declared undisclosed income of Rs. 68,51,696/-. The Assessing Officer after considering the submissions relied on the declaration made by assessee before the investigation wing. It was pointed out that declaration was made on 22-1-1999 i.e., more than a month after the commencement of search proceedings i.e., 18-12-1998. The declaration was made after considering the contract work which was not accounted in the books o....
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....of the view that undisclosed income to be assessed should be Rs. 1,07,06,088/- and hence issued notice for enhancement of income. In response to this notice, the assessee submitted as under:- (a) Statement under section 132(4) is for collecting information and cannot be the basis for assessment. Pushkar Narain Sarraf v. CIT [1990] 183 ITR 388 (All.) Addl. ITO v. T. Mudduveerappa & Sons [1993] 45 ITD 12 (Bang.) (b) Provisions of section 145 to be applied for estimating the net income of assessee. (c) Commissioner (Appeals) cannot enhance income relating to an item which has not been considered by the Assessing Officer. The learned CIT(A) relied on the decision of jurisdictional High Court in the case of CIT v. P.R. Metrani (HUF) [2001] 251 ITR 244 (Kar.) in which it is held that presumption under section 132(4A) is not restricted to section 132(5). On the basis of declaration, the learned CIT(A) held that undisclosed income is Rs. 1,07,06,088/- as against Rs. 1 crore determined by Assessing Officer. Income was thus enhanced by Rs. 7,06,088/-. 3. During the course of proceedings before us, learned AR drew our attention to letter dated 22-1-1999 filed before the Assessing ....
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....losed income on the basis of gross profit. Hence, the Assessing Officer was not supposed to make estimation. No basis has been provided by Assessing Officer. The learned AR strongly argued that cash payments have been received for additional work. Looking to the nature of additional work executed, no prudent man will believe that such additional work will fetch a net profit of 50 per cent. Hence, it was argued that income disclosed vide letter be ignored and the undisclosed income as shown in the return be accepted. 4. On the other hand, the learned DR drew our attention to page 18 of the paper book filed. In answer to question No. 18, it was replied that cash receipts were not intended to be entered in the books of account. Thereafter, the learned DR drew our attention to question Nos. 21 and 22 appearing at page 19 of the paper book. Cash receipts were admitted to be not reflected. It was argued that the assessee has not established that entire cash receipts are in respect of additional work only. It was pointed out that the assessee himself vide letter dated 22-1-1999 admitted undisclosed income. The assessee has no evidence or vouchers to support the claim of expenses. The ex....
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....20 : So you mean to state that the account was settled to the extent indicated by pencil writing in the sheet under reference? Ans. : Yes. Q.No. 21 : Do you acknowledge that neither in books of account nor in any record of your office the cash receipts have been shown (indicated under the sheet)? Ans. : Yes, I acknowledge that these cash receipts are not shown in the books of account or any other record of this office. Q.No. 22 : In how many cases such transactions outside the book have taken place? Ans. : On an average of 30 per cent of the cases, this has taken place as the clients insist on paying by cash outside the books constraining us to incur some expenditure outside the book. A computer printout was taken and that showed the cash payments. Some of the cash payments were accounted. In respect of cash payments not accounted, the Managing Director of the company in answer to question No.8 in statement dated 29-12-1998 stated that they have to incur cash expenses outside the books of account in respect of site preparation, electrical work inside the kitchen, plumbing, some civil work like flooring and false ceiling. Such expenses may be to the tune of 50 percent to ....
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.... amount of sale in respect of an item then the entire unrecorded sales turnover is income as corresponding purchases are debited. However, if sales are made outside the books of account by making purchases outside the books of account, then profit earned from such turnover is to be added as income. In the case of the assessee, there is no material to show that unaccounted cash receipts were only in respect of additional work executed. During the course of search, certain papers in tom condition represented the cash receipts. It was admitted that these receipts are not available in any record. There are entries up to Sl. No. 257 in the computer printout. The assessee vide letter dated 11-1-1999 gave details of 302 entries. The receipts in respect of Kalpana Brijunath found in the paper recorded from dustbin is not available in printout taken from computer. The assessee vide letter dated 11-1-1999 has included the same as billed in financial year 1998-99 and entered this name at Sl. No. 289 of the list with letter dated 11-1-1999. During the course of search, it was admitted that this is not recorded. The cash receipts as found in printout from computer is only for financial years 1....
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....It is also mentioned that margin of profit in executing additional work is generally 8 to 10 per cent. The Managing Director of the company was fully aware of the facts at the time of filing declaration. It cannot be said that declaration was under any misconception of facts. The appellant-company has failed to discharge the onus that declaration was under any misconception of facts. The learned Calcutta High Court in the case of Mriganka Mohan Sur v. CIT [1979] 120 ITR 529 had an occasion to consider the applicability of strict rules of evidence in IT proceedings. In this case, the Assessing Officer found that proprietor of Oriental Traders was having a bank account and such account was operated by the person having the same name as assessee. The assessee denied that he had no connection with Oriental Traders. In view of denial by assessee, the first appellate authority held that the Assessing Officer had no positive material or conclusive evidence to hold that business of Oriental Traders was carried on by the assessee. The Tribunal held that mere denial by the assessee was not sufficient to rebut the following circumstantial evidences to hold that business of Oriental Traders d....
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....sment proceedings on the basis of voluntary statement of partner recorded under section 132(4) of the Income-tax Act. In this case, the managing partner of the firm made the statement to the following effect: "He was not keeping day-to-day inventories and due to this, stock entered in the accounts are much less than the actual stock. The value of the difference in stock will come to Rs. 3 lakhs and that he is willing to have this amount being brought to tax one half during the assessment year 1980-81 and the other half during the assessment year 1981-82." The learned High Court observed at page 241 : "The authorized officer had the power to record statements on oath on all matters pertaining to the suppressed income. The statement cannot be confined only to the books of account. If a partner of the firm came forward to disclose about nonentry of the excess stock in the registers during the course of search, there is no reason why the ITO shall not make use of it even though there is no actual verification of the stock." In Ramesh Chandra & Co. v. CIT [1987] 168 ITR 375, the Bombay High Court observed that where an assessee has made a statement of facts, he can have no grievan....