TaxTMI 
TaxTMI 
2008 (4) TMI 341
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....te that there was dispute going on between the partners and there were claims and counter claims leading to exaggerated workings done for making undue claims by the partners inter se. 3. That the learned Assessing Officer and the learned Commissioner (Appeals) failed to appreciate that there was neither any books of account nor any supporting bills, vouchers, etc. or assets to support and substantiate the claim of the department that appellant firm earned unaccounted income of Rs. 2,50,97,550 during the year. 4. That further the learned Commissioner (Appeals) even failed to appreciate that the accounts in the seized documents have been prepared without considering the opening stock of the respective year, whereas closing stock has been considered for arriving at the G.P. and hence his reliance on these rough papers for calculating net profit of the assessee is arbitrary, baseless and unwarranted and thereby confirming assessing officers order. 5. That the order of the learned Commissioner (Appeals) has further erred in confirming arbitrary unwarranted and based on irrelevant material order of assessing officer the said should be quashed and your appellant....
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....ged to such person. Therefore, as per the above presumption under Section 292C, the document can be considered as belonging to Sri Arun Kumar Goenka and not the assessee, which is a partnership firm. The assessee-firm has a separate place of business where its books of account and documents are kept. Any books of account and documents found from the business premises of the assessee can only be considered as books of account and documents belonging to the assessee, NC. (ii) Even if it is held that the presumption under Section 292C is applicable and the papers are to be considered in the hands of the assessee, the presumption under Section 292C is a rebuttable presumption. If the entirety of the facts of the assessees case is considered, it will lead to the conclusion that the assessee does not have any undisclosed income. Such facts are- (a) The assessee has maintained regular books of account, which are duly audited. (b) Its entire sales and purchases are vouched and verifiable. (c) Search has taken place at the business premises of the assessee and no unaccounted stock, cash or debtors were found. It is impossible to carry on any business outs....
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....as to which item is related to kuccha and which is relating to books of account. 2. Closing cash balance as on 31-3-2000 as per page AKG-24 is Rs. 1,57,39,874 against it is mentioned "NF". It is to be noted that the cash balance is an excessively high and very abnormal and absurd inasmuch as that the cash balance is exceeding the amount of profit for the year of Rs. 69,59,298 shown in page AKG-23. 3. On page AKG-24, there is an item "Share Investment" amounting to Rs. 6,99,000 against which "NF" is mentioned. The said item on page AKG-22 increases to Rs. 21,99,000 whereas no such shares were found during the search, neither in the Demat Accounts nor in Physical form. It is to be noted that there are no investments in shares as per the audited accounts of the assessee in any of the financial years concerned. 4. On analyzing the bifurcated "NF" accounts from pages AKG-23 & AKG-24 one would observe that against purchase cost of Rs. 1,45,52,862,there is a sale of Rs. 1,56,20,143 and stock of Rs. 1,40,07,083 leaving a gross profit of Rs. 1,50,74,364 which happens to be 96.50 per cent of the turnover, which is totally absurd. 5. On page AKG-25 there is....
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....oans and creditors for goods, etc. are paid of to the tune of Rs. 2,25,14,604, however there are cash inflows to justify the payments. Calculations of the figures are given hereunder: Payments to Amount Nirmal Prints 1,371,030 Loans repaid 3,960,578 Paid for purchases (Net purchases - Creditors outstanding) 17,182,996 Total 22,514,604 Again the net increase in debtors "NF" from financial years 2000-01 to 2001 -02 is Rs. 2,01,45,306 whereas the sales "NF" is Rs. 82,02,754 suggests that the entire sales are made on credit and a huge amount is paid to the debtors by the assessee. 11. On analyzing the bifurcated "NC" accounts from page AKG-29 it can be realized that against a purchase of Rs. 6,75,06,024 there is a closing stock of Rs. 4,16,73,891 and Rs. 2,24,90,335 is gross loss which means a GP margin of (-) 673 per cent. How and why one should continue such business. 12. On page AKG-30 there is an item on assets side "NC Collection" against which it is mentioned "Books", however no such figure is traceable in the audited statements of accounts. 13. On page AKG-30 of NC (Nirmal Collections) Balance Sheet for financial ....
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....d out that no addition can be sustained on the basis of the bunch of loose papers marked as AKG/3. (v) In support of his contention, the learned Counsel relied upon the following decisions: (a) S.P. Goyal vs. Dy. CIT (2002) 77 TTJ (Mumbai)(TM) 1 : (2002) 82 ITD 85 (Mumbai)(TM); (b) S.K. Gupta vs. Dy. CIT (1998) 62 TTJ (Del) 666; (c) Satnam Singh Chhabra vs. Dy. CIT (2002) 74 TTJ (Lucknow) 976; (d) Chander Mohan Mehta vs. Asstt. CIT (Inv.) (1999) 65 TTJ (Pune) 327 : (1999) 71 ITD 245 (Pune); (e) Atul Kumar Jain vs. Dy. CIT (1999) 64 TTJ (Del) 786; (f) Asstt. CIT vs. Sri Radheshyam Poddar (1992) 41 ITD 449 (Cal); (g) Asstt. CIT vs. Kences Foundation (P) Ltd. (2006) 203 CTR (Mad) 249 : (2007) 289 ITR 509 (Mad); (h) Bimal Kumar Singhania vs. Dy. CIT (2006) 100 TTJ (Kol) 790 : (2007) 15 SOT 2 (Kol)(URO). 5. The learned departmental Representative, on the other hand, relied upon the orders of the authorities below. He stated that the documents were found from the bedroom of Sri Arun Kumar Goenka, who is husband of Smt. Asha Goenka, who is partner in the firm NC. Thus, the document was effectively found fr....
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....sed this contention before the Settlement Commission. However, the learned departmental Representative stated that the assessing officer has al-ready dealt with this contention and has mentioned that when in the loose papers the opening stock has not been shown, the only inference can be that the opening stock is already adjusted in the purchases. In view of the above, the learned departmental Representative submitted that the order of the assessing officer, which is sustained by the Commissioner (Appeals) should be upheld. 6. In the rejoinder, it is stated by the learned Counsel that before the Settlement Commission the assessee never admitted that these documents belonged to the assessee. On the other hand, the specific argument of the assessees counsel before the Settlement Commission was that these documents cannot be relied upon. The learned Counsel referred to page-7 of the order of the Settlement Commission passed under Section 245D(1) of the Income Tax Act. He also submitted that the income disclosed at Rs. 3 crores by Sri Santosh Kumar Goenka during the course of search and subsequently was the consolidated income on behalf of the entire Nirmal Group searched by the rev....
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.... NC & NFPL. We are unable to agree with this contention of the learned Counsel. Section 292C reads as under: 292C. Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under Section 132, it may, in any proceeding under this Act, be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of any particular person, are in that persons handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. From the above it is evident that Section 292C is a presumptive provisi....
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.... the respective years. The learned Counsel for the assessee has pointed out several inconsistencies/mistakes in the above presumption of the assessing officer which are summarized by us in para-4(iii) above. The learned Departmental Representative was unable to reconcile the above inconsistency in the presumption of the assessing officer as pointed out by the learned Counsel. Apart from above specific inconsistency, it was pointed out by the learned Counsel that all the items of Profit and Loss Account and Balance Sheet prepared on the basis of assessees books of account do not found place in the documents marked as AKG/3. If the presumption of the assessing officer that the document AKG/3 is the consolidated result of the Profit and Loss Account and Balance Sheet of the assessees business which is carried out as per books of account as well as outside the books of account, then necessarily all the Items in the assessees Profit and Loss Account and Balance Sheet prepared on the basis of books of account must found place in the documents marked as AKG/3. Another more significant thing pointed out by the learned Counsel is that in some of the years the closing stock in the assessees ....
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.... remained in stock was Rs. 1,40,07,083. The rate of G.P. is 96.5 per cent. The assessee is carrying on the cloth business. A G.P. rate of 96.5 per cent on the sale means a cloth which is purchased for Rs. 350 is sold by the assessee for Rs. 100. Perhaps no argument or comment would be required to show that such a presumption of the assessing officer is not only improbable but impossible. The learned Counsel for the assessee has given a long list of such discrepancies which have already been mentioned by us while considering the assesses contention, It is not necessary to discuss in detail each and every discrepancy of such nature. A few examples given by us above are good enough to draw the inference that the presumption made by the assessing officer while determining the undisclosed income is not correct. Moreover, as we have already mentioned, the presumption under Section 292C is a rebuttable presumption and all the facts are to be considered before drawing an inference of undisclosed income on the basis of loose papers. As per the presumption of the assessing officer, the assessee is carrying on the business of purchase and sale of saree outside the books on large scale which h....