Income Tax Appellate Tribunal - Indore
Shri Yogesh Hotwani, Mandsaur vs The Dcit Central, Indore on 17 January, 2017
आयकर अपील य अ धकरण, इ दौर यायपीठ, इ दौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE ी डी.ट .गरा सया, या यक सद य तथा ी ओ.पी.मीना, लेखा सद य के सम% BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER आ.अ.सं./ I.T.(SS)A.Nos. 91 to 94/Ind/2016 and I.T.A.No. 674/Ind/2016 नधा रण वष /A.Ys.:2008-09 to 2012-13 ACIT, Shri Yogesh Kumar (Central)-2, Vs. Hotwani, In front of Porwal Indore.
Dharmsala,
Pipliya Mandi,
Mandsaur
था.ले.सं./PAN: ABTPH1138G
अपीलाथ /Appellant यथ /Respondent
आ.अ.सं./ I.T.(SS)A.Nos. 117 to
120/Ind/2016 and I.T.A.No.
680/Ind/2016
नधा रण वष /A.Ys.:2008-09 to 2012-13 Shri Yogesh Kumar Dy. CIT, Hotwani, Vs. (Central), In front of Porwal Indore.
Dharmsala, Pipliya Mandi, Mandsaur था.ले.सं./PAN: ABTPH1138G अपीलाथ /Appellant यथ /Respondent
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 2 of 72 वभाग क ओर से/ Department by Shri Lal Chand, CIT DR नधा रती क ओर से/Assessee by Shri Girish Agrawal, C. A. सुनवाई क तार$ख 22.12.2016 Date of hearing उ'घोषणा क तार$ख 17.1.2017 Date of pronouncement आदे श /O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR.
These five cross appeals by the Revenue and assessee are directed against the consolidated order of CIT(A)-III, Indore dated 18.03.2016.
2. The Revenue has taken following grounds of appeal :-
I.T.(SS)A.Nos. 91/Ind/2016 - A.Y. 2008-09:
On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition made by AO of Rs. 5,88,15,870/- on account of unrecorded and unexplained transactions appeared in LPS-14 to LPS-21 without appreciating the facts and evidences brought into light by the AO during assessment proceedings.
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 3 of 72 I.T.(SS)A.Nos.92/Ind/2016 - A.Y. 2009-10: On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition made by AO of Rs. 69,500/- on account of unrecorded and unexplained transactions appeared in LPS-14 to LPS-21 without appreciating the facts and evidences brought into light by the AO during assessment proceedings.
I.T.(SS)A.Nos. 93/Ind/2016 - A.Y. 2010-11: On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition made by AO of Rs. 81,76,821/- on account of unrecorded and unexplained transactions appeared in LPS-14 to LPS-21 without appreciating the facts and evidences brought into light by the AO during assessment proceedings.
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 4 of 72 I.T.(SS)A.Nos. 94/Ind/2016 - A.Y. 2011-12: On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition made by AO of Rs. 3,97,87,559/- on account of unrecorded and unexplained transactions appeared in LPS-14 to LPS-21 without appreciating the facts and evidences brought into light by the AO during assessment proceedings.
I.T.A.No. 674/Ind/2016 - A.Y. 2012-13 : On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition made by AO of Rs. 2,95,66,927/- on account of unrecorded and unexplained transactions appeared in LPS-14 to LPS-21 without appreciating the facts and evidences brought into light by the AO during assessment proceedings.
3. The assessee has taken following grounds of appeal :-
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 5 of 72 I.T.(SS)A.Nos. 117/Ind/2016 - A.Y. 2008-09 :
On the facts and in the circumstances of the case, the ld. CIT(A)-3, Indore, erred :-
1. in holding that highest of the adjusted NP ratio which comes to 4.76 % out of the five assessment years under consideration, rounded to 5.00 % be applied at uniform rate on the Total Receipts for each of the assessment years from assessment year 2008-09 to 2012-13, resulting into addition of Rs. 32,37,469/- towards net profit element for the impugned year.
2. in holding that there is no justification seen in application of NP ratio as per the audited accounts on the unaccounted Total Receipts applied by the assessee while offering additional income in the return for each of the assessment years from AY 2008-09 to 2012-13 towards net profit element, more particularly when trading in I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 6 of 72 agri-products (garlic & onion) is the only source of income for the assessee.
I.T.(SS)A.Nos. 118/Ind/2016 - A.Y. 2009-10 :
On the facts and in the circumstances of the case, the ld. CIT(A)-3, Indore, erred :-
1. in holding that highest of the adjusted NP ratio which comes to 4.76 % out of the five assessment years under consideration, rounded to 5.00 % be applied at uniform rate on the Total Receipts for each of the assessment years from assessment year 2008-09 to 2012-13, resulting into addition of Rs. 3,500/- towards net profit element for the impugned year.
2. in holding that there is no justification seen in application of NP ratio as per the audited accounts on the unaccounted Total Receipts applied by the assessee while offering additional income in the return for each of the assessment years from AY 2008-09 to 2012-13 towards net I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 7 of 72 profit element, more particularly when trading in agri-products (garlic & onion) is the only source of income for the assessee.
I.T.(SS)A.Nos. 119/Ind/2016 - A.Y. 2010-11 :
On the facts and in the circumstances of the case, the ld. CIT(A)-3, Indore, erred :-
1. in holding that highest of the adjusted NP ratio which comes to 4.76 % out of the five assessment years under consideration, rounded to 5.00 % be applied at uniform rate on the Total Receipts for each of the assessment years from assessment year 2008-09 to 2012-13, resulting into addition of Rs. 4,09,891/- towards net profit element for the impugned year.
2. in holding that there is no justification seen in application of NP ratio as per the audited accounts on the unaccounted Total Receipts applied by the assessee while offering additional income in the return for each of the assessment I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 8 of 72 years from AY 2008-09 to 2012-13 towards net profit element, more particularly when trading in agri-products (garlic & onion) is the only source of income for the assessee.
I.T.(SS)A.Nos. 120/Ind/2016 - A.Y. 2011-12 :
On the facts and in the circumstances of the case, the ld. CIT(A)-3, Indore, erred :-
1. in holding that highest of the adjusted NP ratio which comes to 4.76 % out of the five assessment years under consideration, rounded to 5.00 % be applied at uniform rate on the Total Receipts for each of the assessment years from assessment year 2008-09 to 2012-13, resulting into addition of Rs. 17,58,452/- towards net profit element for the impugned year.
2. in holding that there is no justification seen in application of NP ratio as per the audited accounts on the unaccounted Total Receipts applied by the assessee while offering additional I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 9 of 72 income in the return for each of the assessment years from AY 2008-09 to 2012-13 towards net profit element, more particularly when trading in agri-products (garlic & onion) is the only source of income for the assessee.
I.T.(SS)A.Nos. 680/Ind/2016 - A.Y. 2012-13 :
On the facts and in the circumstances of the case, the ld. CIT(A)-3, Indore, erred :-
1. in holding that highest of the adjusted NP ratio which comes to 4.76 % out of the five assessment years under consideration, rounded to 5.00 % be applied at uniform rate on the Total Receipts for each of the assessment years from assessment year 2008- 09 to 2012-13, resulting into addition of Rs.
14,67,762/- towards net profit element for the impugned year.
2. in holding that there is no justification seen in application of NP ratio as per the audited I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 10 of 72 accounts on the unaccounted Total Receipts applied by the assessee while offering additional income in the return for each of the assessment years from AY 2008-09 to 2012-13 towards net profit element, more particularly when trading in agri-products (garlic & onion) is the only source of income for the assessee.
4. Since the above grounds of appeal in cross appeal of Revenue and assessee for the assessment years 2008-09 to 2012-13 relate to, deletion of additions for assessment year 2008-09 to assessment year 2012-13 made on account of unrecorded and unexplained transactions appeared in LPS-14 to LPS-21 without appreciating facts except figures for various assessment years as mentioned in respective assessment years and grounds of assessee relate to holding of highest of adjusted net profit ratio which comes to 4.76 % rounded to 5 % applied uniformly for all assessment years 2008-09 to 2012- 13 resulting in confirmation of additions for the above assessment years, without appreciating that the assessee has offered additional income on the basis of net profit rate of respective years on the basis of audited accounts, resulting in addition of different amounts for respective assessment years. Whereas the assessee challenged the application of NP rate of I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 11 of 72 5% instead respective NP rate on the basis of audited accounts. Therefore, these grounds of appeal of Revenue and assessee are being discussed in consolidated manner and being disposed by this common order for the sake of brevity and convenience.
5. Briefly stated, the facts of the case are that the assessee is individual and belongs to Hotwani family of Mandsaur having source of income from business of agricultural commodities, share and profit in partnership firm, who also deal in agricultural activities and interest. The assessee is carrying on its business in the name of proprietory concern named and style as M/s. Ambika Trading Co. A search and seizure operation u/s 132 of the Act was carried out on 19.01.2012 at the business as well as residential premises of the assessee group. During the course of search, Shri Shiv Kumar Hotwani, father of the assessee being one of the senior members of the extended family has made an ad hoc surrender of Rs. 3 crores in the name of the assessee and out of overall ad hoc surrender of Rs. 14 crores for the group at his place of residence on behalf of his family. A search and I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 12 of 72 seizure warrant u/s 132 was also issued in the name of the assessee. Therefore, notice u/s 153A of the Act was issued for the assessment year 2006-07 to 2011-12, in response to which the assessee has filed the returns of income which included additional income computed as detailed below :-
Particulars A.Y. A.Y. A.Y. A.Y. A.Y. A.Y. A.Y. TOTAL.
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Total of - - 64,749,380 70,000 8,197,821 35,169,030 29,355,236 137,541,467 Receipts from LPS 14 to LPS 21 Total of - - 64,905,87 37,522 5,019,785 44,993,759 29,566,927 144,523,863 payments from LPS14 to LPS 21 Turnover as - - 169,394,597 92,017,993 188,291,006 307,639,671 239,997,166 per audited accounts for each year N.P. Ratio as - - 0.24% 0.48% 0.25% 0.35% 0.37% per Tax Audit Report for each year Return on - - 2.57% 2.97% 2.03% 3.00% 4.33% investment (RoI) Ratio based on Tax Audit Report Investment - - 5,938,000 17,000 1,000,000 4,160,000 2,500,000 required based on RoI mentioned above Incremental - - 5,938,000 - - - -
Investment for each year Offered in - - 152,000 500 21,000 125,000 - 298,500 153A returns for profit element based on NP ratio above Offered in - - 5,938,000 - - - - 5,938,000 153A return for initial peak investment Offered in - 600,000 732,000 - - - - 1,332,000 153A returns towards other discrepancies noticed post search Total amount - 600,000 6,822,000 500 21,000 125,000 - 7,568,500 offered in I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 13 of 72 153A return Total amount - - - - - - 225,000 225,000 offered in regular return u/s139 Total amount - - - - - - - 7,793,500 offered by the assessee Income 1,28,770 3,07,130 2,98,230 3,92,190 4,60,850 9,90,210 10,30,920 shown in regular return before search
6. The assessee has offered an additional income and the return for assessment year 2012-13 was filed on 31.03.2013 declaring total income of Rs. 10,30,920/-, which includes an income of Rs. 2,25,000/- as voluntarily offered by the assessee. The AO noted that during the course of search, various loose papers as LPS-14 to LPS-21 were found and seized from the residential premises of the assessee, which are writing pads containing various details of sales and purchases of garlic and onion. Therefore, the assessee was asked to explain the transaction appearing on the loose papers. In compliance thereof, the assessee filed his reply vide letter dated 17.02.2014, which has been reproduced by the AO at para 12.1 of his order. However, the explanation offered by the I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 14 of 72 assessee was not found acceptable by the AO for the reasons that gross profit and peak theory can be applied where the assessee is able to substantiate all the receipts recorded in loose papers and papers were only in the nature of sales/turnover, are as elaborately discussed in para 12.2 of the assessment order. Briefly, the reasons for rejection of reply can be summarized, as the net profit rate applied on unaccounted receipts by the assessee was not found acceptable and also the assessee's theory of peak application and benefit of telescoping was not found acceptable as the same was according to the AO was not supported by proper documents. The AO also noted that the assessee has taken the credit of undisclosed income offered in earlier years (telescoping) without specifying the detailed working and have been in the nature and component of income offered in earlier years. Therefore, the AO was of the view that peak theory applied by the assessee is not correct and the total undisclosed income offered by the assessee does not cover this amount. Accordingly, the AO considered the higher figure for I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 15 of 72 making additions out of unrecorded receipts and recorded payments as unexplained receipts or unexplained payments as the case may be. Accordingly, the AO has made the addition as per chart given at para 12.3, which is as under :-
Particulars A.Y.2008 A.Y.2009- A.Y.2010-11 A.Y.2011- A.Y.2012- 10 12 13 Total 64749380 70000 8197821 35169030 29355236 Receipts from LPS 14 to LPS 21 Total of 64905870 37522 5019785 44993759 29566927 payments from LPS 14 to LPS 21 Higher of 64905870 70000 8197821 44993759 29566927 the above Less: 6090000 500 21000 125000 0 Already offered by the assessee on the above account` Difference 58815870 69500 8176821 44868759 29566927 to be added
7. The AO further noted that during the course of search proceedings, Shri Shiv Kumar Hotwani has made a disclosure of income of Rs. 3 crores in the name of Yogesh Kumar i.e. the assessee, Shiv Kumar Hotwani and M/s. Sambodhi Foods and Dehydrates and Rs. 7 crores in the name of Kamlesh Kumar Hotwani and Rs. 4 crores in the name of Prakash Chand Hotwani aggregating to Rs. 14 crores. However, on perusal of return of income filed in response to I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 16 of 72 Section 153A, it was found that the assessee has offered Rs. 77,93,500/- as additional income in his return of income for the assessment year 2008-09 to 2012-13 as against undisclosed income of Rs. 3 crores admitted by Shri Shiv Kumar Hotwani on behalf of the assessee. It was explained to the AO vide letter dated 17.02.2014 that the assessee has disclosed the sum of Rs. 77,93,500/- and retracted balance surrender of Rs. 2,22,06,500/-( 3,00,00,000 (-) 77,93,500 ). However, the AO did not accept this retraction but observed that the addition on account of undisclosed/unexplained income is being made of Rs. 14,14,97,877/-on account of said material (as per discussion in para 12.3) which is more than the voluntarily disclosed amount by Shri Shiv Kumar Hotwani on behalf of the assessee u/s 132(4) i.e. Rs. 3,00,00,000/-. No further addition is being made on this account. Aggrieved with the order, the assessee has filed the appeal before the CIT(A).
8. Before the ld. CIT(A), detailed submission was made by the assessee in respect of aforesaid year by taking various grounds of appeal, which have been reproduced by the ld. I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 17 of 72 CIT(A) in the appellate order from para 4 - page nos. 5 to 15. The ld. CIT(A) has also reproduced the findings of the AO for not accepting the assessee's explanation at para 4.1 - page 15 to 16. The ld. CIT(A) noted that during the course of assessment proceedings, the assessee after going through each and every entry recorded in seized documents LPS-14 to LPS-21 worked out the total receipts and payment for every year which has been taken as the basis for making the addition of Rs. 5,88,15,870/- for assessment year 2008-09, Rs. 69,500/- for assessment year 2009-10, Rs. 81,76,821/- for assessment year 2010-11, Rs. 4,48,68,759/- for assessment year 2011-12 and Rs. 2,95,66,927/- for assessment year 2012-13 to the total income. In para 12 of the assessment order, the AO stated that LPS-14 to 21 are writing pad containing various details of sales and purchase of garlic and onion. To understand the entries recorded in the seized loose papers as appearing in paper book page 262 volume -01, the ld. CIT(A) noted that this page is a writing pad dated I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 18 of 72 02.10.2010 on the right hand top. The observations made by CIT(A) in para 4.5.7 are reproduced as under :-
" 4.5.7 In the third column on PB 262, the amounts of 450/ - to Maruti, 800/- to Nahru and 1470/- to Ghanshyam are the payments made to labour. Against amount of 50000/-, Mandi is written which is the amount paid for the purchases made. Amount of 1591/- is the freight paid for Neemuch. Amount of 12000/- is the motor freight paid for vehicle no. MP 44 HA 0997. Amount of 50/- is paid for 'Kanta' i.e. weighing charges. Amount of 850/- is paid for Hammali, i.e. cartage for loading/unloading of the agri-goods. Amount of 1000/- is paid for diesel for the tractor which the appellant uses. Amount of 30665/ - is paid to labour, details of which are written for each individual labour on the next two pages at PB 263 & 264. The labour is paid for sorting, grading, I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 19 of 72 cleaning, shifting of the agri-goods before the sale is made.
4.5.8 After all the payment entries, amount of 98876/- is written as 'Total' which is the total amount paid on 02/10/10. From the total of receipt side amounting to 252620/-, the balance figure of 153744/- is arrived at and written as closing cash balance for the day which is then carried forward to the next date. This carry forward balance can again be verified from the page of next date at PB 265, where on the top left side, this amount of 153744/- is written. 4.5.9 From the details of amounts paid which are self-explanatory, it is evident that expenses relating to purchase/sale of agri-goods dealt by the assessee are recorded, viz. labour, mandi, hammali, kanta, diesel etc. The nature of transactions from the entries recorded directly relate to the sale/purchase (trading) business of I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 20 of 72 garlic and onion of the assessee which remained to be accounted in the regular books of accounts. 4.5.10 From the above narrative of the seized papers as a sample, the contention of the assessee is evidently demonstrated which had been submitted before the Assessing Officer also. Few more samples from the seized papers are narrated below for clear understanding of the mater. 4.5.11 PB 222 (Vol. 01), is a page of one of the seized writing pads, dated 14/12/10 on the right hand top. There are four columns appearing on the page which divides the page into two parts. First two columns from the left side of the paper contain entries recorded for the brought forward balance of cash from the immediately preceding date and cash received during the day first column contains amounts written in figures and second column, a brief description for the nature of amounts received. Last two columns of the paper contain entries I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 21 of 72 recorded for various payments made during the day and the closing cash balance to be carried forward to the next date - column third contains amounts written in figures and fourth column contains a brief description for the nature of amounts paid. Both the columns for amounts, viz. first and third columns, at their bottom have totals made which equals for the purpose of reconciliation of transactions at the end of the date. 4.5.12 The typed English version of the above referred paper available is as under :-
14.12.2010 Amount Description for Amount Description for Receipts Payments 124039 Cash 1000 Expenses 1000 SFD 1500 Yogi 3500 Total 120539 Total 124039 Total 15/12/10 120539 Cash 50 Expenses 75000 NEPL 780 Sundry 195539 Total 500 Nahru 1200 Rathi Transport 300 Bano Bee I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 22 of 72 500 Anisa 300 Aabida 500 Ruksana 600 Ruksana 400 Shakira 1780 Gulam 500 Laxman 75000 Mandi 82550 Total 112989 Cash 195539 Total 120539 is the closing balance of cash in hand on 14/12/10 which is carried forward to 15/12/10.
Likewise, 112989 is the closing balance of cash in hand on 15/12/10 which is carried forward to the next day.
4.5.13 The typed English version of the paper available at PB 223 is as under-
16/12/10
Amount Description for Amount Description for
Receipts Payments
112989 Cash 1400 Neemuch Motor
Freight
112989 Total 80 Hammali
20 Kanta
2000 Gulabchand
1000 Safari Diesel
1100 Yogesh
32085 Labour
560 Raju
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 23 of 72 690 Kailash 1310 Bhawna Bill (refreshment) 87 Labour 16 Labour 550 Aslam 910 Labour 190 Labour 700 Labour 280 Shankar 1670 Banshi 680 Painter 49925 Total 1000 Nepal Singh 4000 Mandi 54925 Total 58064 Cash 112989 Total 4.5.14 PB 224 contains entries for payments made to each individual labour on 16/12/10, totaling Rs. 32085/- which is reflected in the above table. The same is also reproduced in typed English version -
Break up of labour paid for Amount
Rs. 32085 above -
Labour 1010
Yasmi 830
Rabiya 920
Salma 920
Shabnam 155
Mobin 415
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 24 of 72 Jambu 905 Ramkanya 1075 Sheela 1140 Manju 980 Guddi 925 Vishnu 1110 Sugan 565 Kamla 555 Lila 70 Dhapu 560 Geeta 950 Lal 450 Kamla 980 Hussain 880 Rusar 820 Sunil 670 Rusar 50 Jarina 380 Ruksana 110 Saeed 860 Kamla 510 Saeed 140 Bheru 1180 Amjad 1380 Jayda 700 Rani 630 Sita 1245 Chanda 1155 Shanu 690 Anil 1330 Attarsingh 1540 Krishna 1060 Nepal Singh 1030 Shanu 300 Total 32085 4.5.15 Referring to another paper PB 153 (Vol. I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 25 of 72
01), it is a page of one of the seized writing pads, dated 09/07/10 on the right hand top. 4.5.16 The typed English version of the above referred paper available at PB 153 is as under-
09/07/10
Amount Description for Amount Description for
Receipts Payments
15565 Cash 550000 Mandi
550000 ATC 120 Hammali Delhi
565565 Total 115 Shyam
700 Petrol
595 Nahru
5
551535 Total
14030 Cash
565565 Total
4.5.17 On the payment side, 550000/- is paid
for Mandi purchase and the same is realized as sale in the name of ATC (Ambika Trading Company). Amount of 120/ - has been paid for hammali (cartage). Amount of 115/ - & 595/- to labour - Shyam & Nahru. Amount of 700/- paid for petrol expenses. Total of I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 26 of 72 payments made in the day is written at 551535/- and the closing balance of 14030/- is arrived at after considering the brought forward balance of cash of 15565/ - and sale proceeds receipt in the name of ATC. This closing balance of 14030/- is carried forward to the next date. Both the figures of brought forward cash balance of 15565/- and carry forward balance amount of 14030/- are verifiable from the pending and the next page of the seized documents at PB 152 and PB
154. "
"5. Seized records on the basis of which additional income was offered by the assessee are voluminous which are inventorized as LPS 14 to LPS 21. The same are on record in the paper books filed. For the purpose of computing additional income offered in the returns, the assessee had I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 27 of 72 analyzed and split the transactions and entries recorded on the seized papers on the basis of dates mentioned on these seized papers. The assessee had offered additional income (after telescoping benefits) on the basis of seized papers in the returns which included income towards -
(i) Peak investment
(ii) Profit element
(iii) Other miscellaneous discrepancies."
"6.1 Assessing Officer resorted to higher of the two figures viz. higher of Total Receipts and Total Payments in each assessment year to make the additions as either unexplained receipts or unexplained payments. As tabled in para 12.3 of his order, additions were made by Assessing Officer of the higher figure as aforesaid after reducing income already offered by the assessee."
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 28 of 72
9. In the light of the above analysis, the ld. CIT(A) noted that the assessee has offered additional income after telescoping benefits on the basis of seized papers in the returns, which included income towards peak investment, profit element and other misc. discrepancies, whereas the AO has considered higher of the two figures viz. higher of total receipts and total payments in each assessment year to make the addition as either unexplained receipts or unexplained payments as tabled in para 12.3 of assessment order. The ld. CIT(A) observed that she did not find any force in the approach of the AO for adding the entire receipts side or payment side of the seized papers by taking the higher of the two figures. Since recording of these unaccounted transaction is on day to day basis, containing date wise entries for payments of various expenses recorded against entries for receipts, with brought down and carry forward cash balance from the preceding day to the next day and each day balance recorded on seized papers matching. The CIT(A) has held that there is no I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 29 of 72 justification and merit for the AO to add the entire receipts side or the entire payment side of the seized papers by taking the higher figure out of the two for each assessment year. The ld. CIT(A) further noted that the assessee has offered net profit element in the returns by applying the net profit ratio as per the audited accounts on the total receipts for the respective years, but according to the CIT(A), there is no justification in application of net profit ratio as per audited accounts on the unaccounted total receipts as the expenses like salary, insurance, telephone, electricity, office, various taxes, audit fee, bank charges, legal and license fee, interest and depreciation would not form part of the payment of expenses incurred in the unaccounted business of trading in onion and garlic. When these expenses are excluded from the audited profit and loss account for each of the assessment year, this adjusted net profit ratio indicates profit which the assessee could have earned on the unaccounted transaction recorded in the seized papers. Therefore, the CIT(A) concluded that the real motivation for the assessee to undertake such I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 30 of 72 unaccounted transaction would be to earn profits at this adjusted rates of net profit ratio. Accordingly, the ld. CIT(A) has worked out the adjusted net profit ratio after considering the adjustment of audited and profit and loss account as nil, as per the findings which have been reproduced hereunder :-
"7.2 To arrive at the adjusted NP Ratio, audited Profit & Loss account figures for all the five assessment years are consolidated and adjusted for the receipts and expenses which would not form part of the unaccounted business. The various items which have been considered for adjustment from the audited P&L been marked as Nil in the table below. The details are tabulated as under for ready reference - Particulars AY 2012-13 AY 2011-12 AY 2010-11 AY 2009-10 AY 2008-09 Sales Turnover 239,997,166 307,639,672 188,291,006 92,017,994 169,394,598 Closing Stock 4,628,604 29,257,913 14,098,289 8,430,840 1,006,266 Total 244,625,770 336,897,585 202,389,295 100,448,834 170,400,864 Opening Stock 29,257,913 14,098,289 8,430,840 1,006,266 3,022,609 Purchases 193,853,283 302,444,275 177,486,500 84,875,813 156,479,895 Gross Profit 21,514,574 20,355,020 16,471,955 14,566,755 10,898,360 G P Ratio 8.96% 6.62% 8.75% 15.83% 6.43% Gross Profit 21,514,574 20,355,020 16,471,955 14,566,755 10,898,360 Other Income:
- Interest Nil Nil Nil Nil Nil
Received
- Discount & Nil Nil Nil Nil Nil
Claim received
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 31 of 72 Total of Credit 21,514,574 20,355,020 16,471,955 14,566,755 10,898,360 side of P & L a/c Freight 5,477,229 6,794,953 4,174,072 4,412,056 1,829,294 Warehouse & 550,198 474,265 310,245 318,343 205,404 cold storage charges, rent, etc. Harnrnali, 3,731,721 2,508,763 2,302,546 2,128,225 1,417,146 Labour & Grading , Charges Salary Nil Nil Nil Nil Nil Insurance Nil Nil Nil Nil Nil Commission & 1,403,594 1,140,299 1,305,923 587,706 1,320,472 Brokerage Travelling 14,204 100,012 12,900 57,068 53,215 expenses Telephone Nil Nil Nil Nil Nil expenses Other Taxes Nil Nil Nil Nil Nil (rnandi, profession, .
entry, etc)
Audit fees Nil Nil Nil Nil Nil ,
Bank Charges Nil Nil Nil Nil Nil
Discount 803,991 167,470 473,250 235,193 24,049
Electricity Nil Nil Nil Nil Nil
Job work 325,400 81,280 205,025 127,630
Legal fees Nil Nil Nil Nil Nil
Mandi Licence Nil Nil Nil Nil Nil
& Other
Licence
Office expenses Nil Nil Nil Nil Nil
Packing - 1,257,704 1,471,373 1,997,765 889,795
Expenses
(Bardan etc)
Postage 8,900 6,578 7,723 1,989 3,119
Stationery 11,725 14,973 12,999 20,229 49,887
Vehicle 113,608 115,936 79,415 109,386 106,876
running and
maintenance
Tulai 113,458 59,776 85,659 115,658 50,345
(weighing)
expenses
Interest to Nil Nil Nil Nil Nil
Bank
Interest to Nil Nil Nil Nil Nil
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 32 of 72 Others Interest on late Nil Nil Nil Nil Nil TDS, VAT, CST, Mandi tax Depreciation Nil Nil Nil Nil Nil Total 12,554,028 12,640,728 10,317,385 10,188,642 6,077,232 Expenses Adjusted Net 8,960,546 7,714,292 6,154,570 4,378,113 4,821,128 Profit Adjusted N P 3.73% 2.51% 3.27% 4.76% 2.85% Ratio 7.3 From the above table it is seen that Assessment Year 2009-10 has the highest NP Ratio of 4.76% and Assessment Year 2011-12 has the lowest at 2.51 %. The average NP Ratio for all the five years comes to 3.42 %. Considering the facts and detailed workings tabulated above, I hold that highest of the adjusted NP Ratio which comes to 4.76% out of the five assessment years under consideration, rounded to 5.00% be applied on the total receipts for each of the assessment years. Accordingly, adjusted NP Ratio @ 5.00% is applied on the Total Receipts of each of the assessment years from AYs 2008-09 to 2012-13. Credit is I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 33 of 72 given for the income already offered by the assessee in the respective returns for these assessment years. "
10. The ld. CIT(A) after considering the net profit @ 5% has also noted that the additional income by the assessee for assessment year 2008-09 included towards peak investment required for making this unaccounted transactions at Rs. 6 lakhs for assessment year 2007-08 and Rs. 59,38,000/- and Rs. 7,32,000/- for assessment year 2008-09 for which the assessee has claimed credit in the subsequent years on the premises that the said undisclosed income of the assessee had borne incidence of tax and, therefore, would constitute his funds even though concealed, from which he may draw subsequently for meeting expenditure or introducing amounts in his books of accounts. The ld. CIT(A) after considering the daily cash balance, highest figure was taken as peak investment for the purpose of making addition towards unexplained expenditure, based on credit balance recorded in seized papers worked out peak credit as under :-
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 34 of 72 Particulars A.Y.2008-09 A.Y.2009-10 A.Y.2010-11 A.Y. 2011-12 A.Y.2012-13 Date of peak 19.10.2007 01.04.2008 29.09.2009 30.11.2010 20.07.2011 credit for each year Peak credit 6,61,708 1,56,490 2,24,012 72,40,388 71,53,418 during the year on the date mentioned above 8.3 From the table above, it is evidently clear that for the assessment year 2008-09, the initial peak credit of Rs. 6,661,708/- is to be added as unexplained expenditure after allowing credit of Rs. 6,61,708/- for assessment year 2008-09.
9. It is undisputed that the Assessing Officer also has given credit for the additional income already offered by the assessee while making additions to the total income. The claim of assessee for credit in subsequent years of additional income offered in preceding years is accepted as it has been claimed by the assessee and also allowed by the Assessing Officer on the premise that the said undisclosed income of the assessee had borne the incidence I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 35 of 72 of tax and therefore, would constitute his fund, even though concealed, from which he may draw subsequently for meeting expenditure or introducing amounts in his books of accounts.
Reliance is placed on the decision of jurisdictional High Court of Madhya Pradesh in the case of Dharamdas Agarwal [1983] 144 ITR 143 (MP) where in following the decision of Hon'ble Supreme Court it has been held as under:-
"In Anantharam Veerasinghaiah & Co. v. CIT [1980J 123 ITR 457(SC), it was held that secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books.
In the instant case, the Tribunal had pointed out I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 36 of 72 that the additions made in previous years represented income from business outside the account books which the assessee was carrying on in the name of some benamidar as also income from undisclosed sources. The assessee had also made an application to the ITO wherein he had confessed to having done so and had expressed his willingness to be assessed therefor in his own hands. The Tribunal had, in the circumstances, come to the conclusion that the impugned cash credits came out of income earned in the earlier years which had already borne tax. The finding so reached by the Tribunal was a finding of fact and could not be interfered with.
Accordingly, the Tribunal was Justified."
11. The ld. CIT(A) noted that the assessee himself has offered Rs. 6 lakhs in 2007-08 and Rs. 7,32,000/-in assessment year 2008-09 in the 153A returns towards other discrepancies noticed of post search. The credit for this amount was I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 37 of 72 considered for set off towards the undisclosed income being calculated on the basis of Net profit element and the peak investment. Considering these facts, the ld. CIT(A) has made the computation of addition for each assessment year under appeal towards net profit element on the total receipts as undisclosed income and peak credit as unexplained expenditure as tabulated as per para 10 of her order, which is as under :-
Particulars Line Item AY 2008- AY 2009-10 AY 2010- AY 2011- AY 2012- No. 09 11 12 13 Total of Receipts from A 6,47,49,380 70,000 81,97,821 3,51,69,030 2,93,55,236 seized documents Date of peak credit for B 19.10.2007 01.04.2008 29.09.2009 30.11.2010 20.07.2011 each year Peak credit during the C 6,61,708 1,56,490 2,24,012 72,40,388 71,53,418 year on the date mentioned above Less: Initial payments D 1,39,787 - - - - recorded on the seized documents without any cash in hand or receipts (5th & 6th June 2007) Less: Peak credit for E - - - 6,61,708 - preceding years already considered for addition ,..
Addition for Peak Credit F = C-D-E 5,21,921 - - 65,78,680 - Addition for Initial D 1,39,787 - - - - payments recorded on the seized documents without any cash balance in hand or cash receipts (5th & 6th June 2007) Addition for Profit G=5% of 32,37,469 3,500 4,09,891 17,58,452 14,67,762 A element on Total Receipts per adjusted NP Ratio @ 5% discussed above I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 38 of 72 Total Additions H= F+D+G 38,99,177 3,500 4,09,891 83,37,132 14,67,762 Income already offered in I 68,22,000 500 21,000 1,25,000 2,25,000 the relevant year under consideration Income already offered in J 6,00,000 35,22,823 35,19,823 31,30,932 50,81,200 the preceding year / available as credit from preceding year Total of above K =I + J 74,22,000 35,23,323 35,40,823 32,55,932 53,06,200 Credit balance of income L=K-H 35,22,823 35,19,823 31,30,932 (50,81,200) 38,38,438 offered available for set off in subsequent years Addition sustained / M
- - - 50,81,200 -
added in appeal
12. The ld. CIT(A) has also explained and discussed elaborately, the conclusion arrived at in respect of above table at para 12.1 to 17.2, which read as under :-
13.
"12.1 The regular income disclosed in the return is Rs. 2,98,230. In the return filed u/s 153A additional income of Rs. 59,38,000/- has been offered on account of initial peak investment, Rs. 7,32,000/ - on account of discrepancies noticed post search and Rs. 1,52,000/- for profit element based on NP ratio. Thus total income offered in the return ix] s 153A is Rs. 71,20,230. 12.2 The total receipts for the year is Rs. I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 39 of 72 6,47,49,380 on which assessee has offered net profit of Rs. 1,52,000 considering NP Ratio of 0.24% as per the audited P&L for A.Y. 2008-09. Since these receipts are not recorded in the regular books of account, a higher percentage of adjusted net profit ratio of 5% for all the five assessment years is considered for the reasons discussed in detail above. Thus, by applying adjusted NP ratio of 5.00% on the total receipts of Rs. 6,47,49,380, the net profit comes to Rs. 32,37,469. The assessee had offered Rs. 1,52,000 towards net profit in the return for which credit is given and the balance is considered for addition.
12.3 On perusal of seized records relevant to AY 2008-09, it is seen that payment entries have been recorded for the dates mentioned as 05/06/2007 and 06/06/2007, totaling to Rs. 1,39,787. On the same pages, there are no I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 40 of 72 entries recorded for balance of cash available or of any receipts for these two dates. Accordingly, payments of Rs. 1,39,787 made on these two dates as the initial payments without the availability of cash receipts are considered for addition as unexplained expenditure. 12.4 Further, for the relevant assessment year, on 19/10/2007, the amount of peak credit is Rs. 6,61,708 which is considered for addition as unexplained expenditure. Out of this peak credit, Rs. 1,39,787 is already considered for addition towards initial payments without the availability of cash. Accordingly, the balance of Rs. 5,21,921 (6,61,708-1,39,787) is considered for addition towards peak credit as unexplained expenditure.
12.5 In the assessment year 2007-08, assessee I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 41 of 72 has offered Rs. 6,00,000 in the return is] s 153A on account of discrepancies noticed post search. The total additional income offered -by the assessee in the returns filed u/s 153A for AY 2007-08 and 2008-09 is Rs. 74,22,000 (6,00,000+59,38,000+1,52,000+7,32,000) which constitutes his fund available with him, from which the assessee may draw subsequently for meeting the expenditure or introducing amounts in his account books. Accordingly, set off of Rs. 38,99,177 (1,39,787 + 5,21,921 + 32,37,469) is given out of the income of Rs. 74,22,000 already offered by the assessee resulting in Rs. 35,22,823 (74,22,000- 38,99,177) as credit balance available to the assessee for set off in the subsequent years. 12.6 Though income of Rs. 38,99,177 is sustained on account of entries in the seized documents LPS-14 to LPS-21 nothing gets I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 42 of 72 added to the total returned income after giving credit from the additional income already offered by and available to the assessee. 12.7 In summary, for the assessment year 2008-09, the following amounts are considered for additions to the total income of the assessee
-
Initial payments on Rs. 1,39,787
05/06/2007 & 06/06/2007
as unexplained expenditure
Peak credit on 19.10.2007 Rs. 5,21,921
after considering initial
payments as above
Net profit @ 5.00% Rs.32,37,469
Total Rs. 38,99,177
Less: Credit from income Rs. 38,99,177
already offered
Addition sustained Nil
Addition made by the AO Rs. 5,88,15,870
Addition sustained Nil
Relief given to the assessee Rs. 5,88,15,870
12.8 Ground Nos. 2 (a) to 2 (f) are therefore allowed.
13. Assessment Year 2009-10 13.1 The income disclosed in the regular return I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 43 of 72 of income is Rs. 3,92,190. Additional income of Rs. 500 is offered in the return filed u/ s 153A on account of profit element based on NP ratio. Thus the total income offered in the return u/s 153A is Rs. 3,92,690.
13.2 The assessee has offered profit element of Rs. 500 on total receipts of Rs. 70,000 by adopting the NP ratio. of 0.48% taken from the Tax Audit. Report for the year. As discussed above, by considering the adjusted N, Ratio @ 5% on total receipts of Rs. 70,000, the net profit comes to Rs. 3,500. The assessee had offered Rs. 500 towards net profit in the return for which credit is given and the balance is considered for addition.
13.3 For the relevant assessment year, on 01/04/2008, the amount of peak credit is Rs.1,56,490 which gets covered by the peak credit of Rs. 6,61,708 considered in the I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 44 of 72 preceding assessment year. Accordingly, no addition is made on account of peak credit in AY 2009-10.
13.4 The assessee already has a credit balance of Rs. 35,22,823 from AY 2008-09 available for set off. For the 'impugned Assessment Year 2009-10, the addition of Rs. 3,500 is considered towards undisclosed income on account of net profit. Accordingly, total of Rs.35,19,823 (35,22,823 + 500 - 3,500) becomes available with the assessee as his funds from which he may draw subsequently for meeting expenditure or introducing amounts in his account books in subsequent years.
13.5 Though, income of Rs. 3,500 is sustained for the purpose of addition, nothing gets added to the total returned income after giving credit I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 45 of 72 from the additional income already offered by and available to the assessee.
13.6 In summary, for the assessment year 2009-10, as stated above, following amount is considered for addition to the total income of the assessee -
Net profit @5.00 % Rs. 3,500
Less: Credit from income Rs. 3,500
already offered
Addition sustained Nil
Addition made by the AO Rs. 69,500
Addition sustained Nil
Relief given to the assessee Rs. 69,500
13.7 Ground Nos. 2 (a) to 2 (f) are therefore allowed.
14. Assessment Year 2010-11
14.1 The income disclosed in the regular return of income filed is Rs. 4,60,850. Additional income of Rs. 21,000/- is offered on account of I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 46 of 72 profit element based on NP ratio in the return filed u/s 153A. Thus total income offered in the return u/s 153A is Rs. 4,81,850.
14.2 Total receipts for the year are Rs. 81,97,821 on which the assessee has offered net profit of Rs. 21,000 considering NP Ratio of 0.25% as per the audited P&L account for the year. As discussed above, considering the adjusted NP Ratio @ 5% on total receipts of Rs. 81,97,821, the net profit comes to Rs. 4,09,891. The assessee has already offered Rs. 21,000 towards net profit in the return for which credit is given and the balance is considered for addition.
14.3 For the relevant assessment year, on 29/09/2009, the amount of peak credit is Rs. 2,24,012 which gets covered by the peak credit of Rs. 6,61,708 considered in the preceding A.Y. 2008-09. Accordingly, no addition is made on I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 47 of 72 account of peak credit in A.Y. 2010-1l. 14.4 For the impugned Assessment Year 2010- 11, the addition of Rs. 4,09,891 is considered towards undisclosed income on account of net profit which also becomes available to the assessee in the subsequent years. Accordingly, total of Rs. 31,30,932 (35,19,823 + 21,000 - 4,09,891) is available with the assessee as his funds from which he may draw subsequently for meeting expenditure or introducing amounts in his account books in subsequent years. 14.5 Though, income of Rs. 4,09,891 is sustained for the purpose of addition, nothing gets added to the total returned income after giving credit from the additional income already offered by and available to the assessee. 14.6 In summary, for assessment year 2010-11 following amount IS considered for addition to I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 48 of 72 the total income of the assessee -
Net profit @ 5.00 % Rs. 4,09,891
Less: Credit from income Rs. 4,09,891
already offered
Addition sustained Nil
Addition made by the AO Rs. 81,76,821
Addition sustained Nil
Relief given to the assessee Rs. 81,76,8921
14.7 Ground Nos. 2 (a) to 2 (f) are therefore allowed.
15. Assessment Year 2011-12 15.1 The income disclosed in the regular return of income is Rs. 9,90,210. Additional income of Rs. 1,25,000/- is offered on account of profit element based on NP ratio in the return filed u/s 153A. Thus total income offered in the return u/s 153A is Rs. 11,15,210.
15.2 Total receipts for the year are Rs. 3,51,69,030 on which assessee has offered net I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 49 of 72 profit of Rs. 1,25,000 considering the NP Ratio of 0.35% as per the audited P&L account for the year. As discussed above, considering the adjusted NP Ratio @ 5% on total receipts of Rs. 3,51,69,030, the net profit comes to Rs. 17,58,452. The assessee has offered Rs. 1,25,000 towards net profit in the return for which credit is given and the balance is considered for addition.
15.3 For the relevant assessment year, on 30/11/2010, the amount of peak credit is Rs. 72,40,388 which is considered for addition. However, in AY 2008-09, the amount of Rs. 6,61,708 has already been considered towards peak credit addition. Accordingly, credit is given for Rs. 6,61,708 and balance of Rs. 65,78,680 (72,40,388-6,61,708) is sustained as addition for peak credit in AY 2011-12 as unexplained expenditure.
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 50 of 72 15.4 For the impugned Assessment Year 2011- 12, the addition of Rs. 17,58,452 is considered towards undisclosed income on account of net profit and Rs. 65,78,680 towards peak credit as unexplained expenditure, totalling to Rs. 83,37,132.
15.5 The assessee already has a balance of Rs. 31,30,932 brought forward from AY 2010-11 and Rs. 1,25,000 has been offered in the current year in the return xx] s 153A towards profit element. Accordingly, after giving credit of Rs. 32,55,932 (31,30,932+1,25,000), the balance of Rs. 50,81,200 (83,37,132-32,55,932) is considered for addition in A.Y. 2011-12. 15.6 In summary, for the assessment year 2011-12 following amounts are considered for addition to the total income of the assessee- I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 51 of 72 Net profit @5.00 % Rs. 17,58,452 Peak credit on 30.11.2010 Rs. 65,78,680 considering credit already offered Total Rs. 83,37,132 Less: Net profit already offered Rs. 1,25,000 by the assessee in return Less: Funds available as Rs. 31,30,932 discussed in Para 14.4 Addition sustained Rs. 50,81,200 Addition made by the AO Rs. 4,48,68,759 Addition sustained Rs. 50,81,200 Relief given to the assessee Rs. 3,97,87,559 15.7 Ground Nos. 2 (a) to 2 (1) are therefore partly allowed.
16. Assessment Year 2012-13 16.1 The income disclosed in the regular return of income is Rs. 8,05,920. Additional income offered in the regular return of income is Rs. 2,25,000. Thus total income offered in the return is Rs. 10,30,920.
I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 52 of 72 16.2 The total receipts for the year are Rs. 2,93,55,236. As discussed above, considering the adjusted NP Ratio @ 5% on total receipts of Rs. 2,93,55,236, the net profit comes to Rs. 14,67,762. The assessee has offered Rs. 2,25,000 as additional income in the return for which credit is given and the balance is considered for addition.
16.3 For the relevant assessment year, on 20/07/2011, the amount of peak credit is Rs. 71,53,418 which gets covered by the peak credit of Rs. 72,40,388 considered in the preceding A.Y. 2011-12. Accordingly, no addition is made on account of peak credit in AY 2012-13. 16.4 In A.Y. 2011-12, addition of Rs. 50,81,200 has been sustained as addition and Rs.
2,25,000 has already been offered in the current year towards as additional income, totaling to Rs. 53,06,200 which constitutes the fund I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 53 of 72 available, from which the assessee may draw for meeting expenditure or introducing amounts in. his account books.
16.5 Though, income of Rs. 14,67,762 is sustained for the purpose of addition. Nothing gets added to the total returned income after giving credit from the amount of Rs. 53,06,200 as discussed above.
16.6 In summary, for the assessment year 2012-13 following amounts are considered for additions to the total income of the assessee. 16.7 Ground Nos. 2 (a) to 2 (f) are therefore allowed.
17. The Assessing Officer has also stated that expenses are liable to be added u] s 69C as the source of expenditure could not be explained by the assessee and hence the purchases are 'unexplained expenditure' and clearly hit by provisions of section 69C. I do not find any merit I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 54 of 72 and justification in the stand taken by the Assessing Officer since it is evident from the descriptive narratives dealt above for certain representative seized loose papers that cash balance for each day is carried forward to the next date and is available for payment transactions. The process of carry forward of cash is continuous and on day-to-day basis. 17.1 Accordingly, balance of cash from the preceding day and the cash received during the day were available as source for meeting the payments each day. Thus the source of expenditure incurred is available on the same page of the seized paper where the said expenditures/payments are recorded. 17.2 Also, the Assessing Officer has arrived at the amount of addition by taking higher of the Total Receipts and Total Payments. Where the 'Total Payments' have been considered for I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 55 of 72 making addition as Unexplained Expenditure by the Assessing Officer, their source is self- explained from the 'Total Receipts' which the Assessing Officer did not consider. Accordingly, the ground no. 2(g) taken by the assessee on application of Section 69C is allowed in favour of the assessee for assessment years 2008-09 to 2012-13."
14. Aggrieved with the findings of the ld. CIT(A), the Revenue as well as assessee has filed these appeals.
15. Before the Tribunal, the grievance of the Revenue is that the ld. CIT(A) erred in deleting the additions made by the AO on account of unrecorded and unexplained transactions appeared in LPS-14 to LPS 21without appreciating the facts whereas the grievance of the assessee is that the ld. CIT(A) is not justified in considering the net profit ratio which comes to 4.76 % and rounding the same to 5% at uniform rate on total receipts for each of the assessment year from assessment year I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 56 of 72 2008-09 to 2012-13 resulting into addition towards net profit element for the impugned years.
16. The ld. CIT DR relying on the assessment order submitted that the ld. CIT(A) is not justified in deleting the addition which has been made on the basis of seized loose papers as per LPS-14 to LPS-21. The ld. CIT DR further submitted that the assessee's father Shri Shiv Kumar Hotwani has made a surrender of Rs. 3 crores on behalf of the assessee u/s 132(4) in his statement recorded on 20.1.2012, which was not reflected in the returns of income filed. Therefore, it was urged that the retraction from the surrender during search should not have been allowed by the ld. CIT(A). The ld. CIT DR has also cited number of case laws in support of his proposition on the point of retraction of surrender by the assessee. The ld. CIT DR also submitted that since the addition of Rs. 14 crores was made on the basis of seized material. Therefore, the AO did not make separate addition on account of surrender of Rs. 3 crores made during the course of I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 57 of 72 search. The ld. CIT(A) has also cited some decisions in support of his view.
17. On the other hand, the Ld. Counsel for the assessee submitted that a detailed and exhaustive submission was made before the AO vide letter dated 23.12.2013 and replies to specific queries were submitted. During the course of assessment proceedings in para 12, the AO noted vital fact which goes to the root of the matter. In fact, the LPS-14 to LPS 21 are writing pads containing various details of sales and purchases of Garlic and Onion. On the basis of entries recorded of unaccounted transactions in the loose papers, the assessee has offered additional income after telescoping benefits in the returns of income, which were, inter alia, included peak investment arising from impugned loose papers, profit element and other misc. discrepancies noticed. For arriving at profit element, the net profit ratio as per tax audit report for the respective years were used since the assessee dealt in the same agricultural commodity i.e. Garlic and Onion for both accounted transaction dealt in audited accounts and I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 58 of 72 those not accounted dealt in seized papers. However, the AO proceeded solely on the basis of details furnished by the assessee to make addition of 'higher figure out of the unrecorded receipts or unexplained payments. The Ld. Counsel for the assessee contended that the highest of the adjusted net profit ratio of 4.76 % rounded to 5% and not considering the net profit ratio as per audited profit and loss account not correct when the assessee is trading in agricultural products and same is only source of income of the assessee. The ld. CIT(A) after calling the remand report from the AO and perusing the voluminous seized material as well as submissions made before the AO, computed the adjusted NP ratio by taking a view that certain expenses are not incurred in the conduct of business transactions which are not accounted in regular books of account, whereas the assessee has offered net profit element in the returns by applying net profit ratio as per audited accounts in the total receipts for the respective years. The ld. Authorized Representative of the assessee submitted that highest percentage came out in the assessment I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 59 of 72 year 2009-10, whereas the average net profit ratio for all the five years was also computed by the Ld. CIT(A) which is stated to be 3.42%. Therefore, the ld. Authorized Representative of the assessee contended that the application of 5 % net profit ratio is not correct, particularly when the assessee is following regular trading business of same agricultural products, which is reflected in the audited profit and loss account for each of the assessment year. Therefore, it was urged that the net profit ratio applied by the assessee on the basis of audited accounts for each year should be accepted. In support of his proposition, the ld. Authorized Representative of the assessee has also placed reliance in the case of Dharambir Hansraj Agarwal [1987] 23 ITD 589 (BOM.) and P.D. Abraham [2014] 48 taxmann.com 352 (Kerala). Without prejudice to the above, the Ld. Counsel for the assessee further submitted that as an alternate, the adjusted net profit Ratio which has been worked out by the Ld. CIT(A) for each of the assessment year may be retained and applied for that respective year instead of applying a uniform rate of 5% for all the five years. Since each I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 60 of 72 year is an independent year and ought to be considered separately, the adjusted net profit ratio for that particular year may be retained and applied for that year. The Ld. CIT(A) has worked out the adjusted NP Ratio for each of the impugned year and the same ought to have been applied for the respective year instead of taking the highest net profit ratio and applying it uniformly to all the years. The Ld. Authorized Representative of the assessee also relied on the decision of Hon'ble Gujarat High Court in the case of Tirupati Construction Company, [2015] 55 taxmann.com 308 has upheld the decision of Hon'ble ITAT Ahmedabad Bench in the case of Tirupati Construction Company IT(SS) 73 to 75/Ahd/2010 order dated 13.11.2013, wherein it was held that "the only peak of debit and credit entries of the seized papers/diary could be assessed as undisclosed income in the hands of the assessee, and there was no justification for adding the entire receipt side of the seized papers and, accordingly, there is no merit in the grounds of the appeal of the Revenue with regard to this issue and ,accordingly, I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 61 of 72 dismissed." The Ld. Authorized Representative of the assessee further cited decision in the case of Nem Chand Daga [2005] 1 SOT 515 (Delhi Trib.), wherein it was held that "whether when a material seized has to be relied upon, entire content appearing on it should be considered and department cannot ignore some of entries which do not suit it and accept other". Further, reliance was also placed in the case of Ishwardass Mutha [2004] 141 Taxman 555 (Raj), "where the Assessing Officer made an addition to income of assessee on account of unexplained investment in money lending business - Said addition was made by Assessing Officer by taking into account debit side only - On appeal, Tribunal reduced amount of addition sustaining only to extent of peak credit only - Whether, in view of above facts, no referable question arose from order of Tribunal for consideration - Held, yes."
18. We have considered the facts, rival submissions and perused the material available on record. We find that Shri Shiv Kumar Hotwani, father of the assessee had made a disclosure of Rs. 14 crores u/s 132(4) of the Act on behalf of I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 62 of 72 his family and group, which, inter alia, included disclosure of Rs. 3 crores on behalf of the assessee, Sheri Shiv Kumar Hotwani and M/s. Sambodhi Foods and Dehydrates. However, while filing the return in response to Section 153A, the assessee has offered undisclosed income of Rs. 77,93,500/-, thereby retracting the balance surrender of Rs. 2,22,06,500/-. This undisclosed income of Rs. 77,93,500/- shown in the return of income by the assessee was on the basis of unrecorded transaction reflected in the seized loose papers LPS-14 to LPS-21. On perusal of the assessment order, we find that the AO has discussed in the assessment order that retraction is not acceptable, but no addition on account of surrender made u/s 132(4) of the Act was made. We find that the AO proceeded to make addition on the basis of seized loose papers LPS-14 to LPS-21. The AO considered the higher figure either of the total receipts or total expenses/payments and, accordingly, made addition of Rs. 14,14,97,877/- for all the assessment years under appeal as undisclosed income of the assessee, without allowing the carried forward balances, set off I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 63 of 72 of peak. The perusal of para 12 of the assessment order shows that as per findings of the AO LPS-14 to LPS-21 are writing pads containing various details of sale and purchase of garlic and onion and expenses. We find that the ld. CIT(A) has given a finding regarding disclosure u/s 132(4) in para 18.3 of the appellate order, wherein she has observed that disclosure made by Shri Shiv Kumar Hotwani, father of the assessee has not been linked to any incriminating documents or head of income. She further observed that after search Shri Roop Chand Hotwani, Shri Arjun Das Hotwani and Shri Shiv Kumar Hotwani on behalf of their family made various requests by letters dated 27.01.2012, 25.07.2012, 06.08.2012, 08.08.2012, 24.01.2013 and 29.08.2013 to provide the details of incriminating documents. Therefore, the observation of the AO that at no point of time prior to 10.12.2013, Shri Shiv Kumar or any family members disputed the genuineness of the disclosure, is incorrect. We also find that disclosure was not made by the assessee hence it is not binding on him. We also rely on the decision in the case of CIT vs. Chandra Kumar I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 64 of 72 Jethmal Kochar, 230 Taxman 78 (Guj), Kunwarjeet Finance Limited, (2015) 61 Taxmann.com 52 (Ahm.Tri), Jagdish Narayan Ratan Kumar, (2015) 61 taxmann.com 173 (Raj), wherein it was held that when addition of disclosure made by the assessee in statement recorded u/s 132(4), it cannot be sustained despite retraction, when Revenue could not furnish any positive evidence in support of such addition. Therefore, we are unable to uphold the findings of the AO and inclined to agree with ld. CIT(A). Further, the Hon'ble Rajasthan High Court in the case of Jagdish Narayan Ratan Kumar (supra) has held that statement made during search must be correlated with records, which are found and if there is no ambiguity, explanation given by the assessee should be taken into consideration before making assessment. Thus, based on these decisions, we are of the opinion that the addition made by merely based on statement u/s 132(4) without linking to the seized books of accounts, other documents, money, bullion, jewellery, other valuable articles or things is not sustainable in law. We also find that the ld. CIT(A) has held I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 65 of 72 that the assessee has surrendered Rs. 75,68,500/- + Rs. 2,25,000/- as an additional income and further addition of Rs. 50,81,200/- is confirmed, hence, further addition is made on the basis of disclosure. From these findings of the AO as well as CIT(A), we find that the ld. CIT(A) has also sustained the addition based on the seized material. We further find that the Revenue has not taken any specific ground on the findings given by the ld. CIT(A) on retraction of disclosure nor the AO has made any addition on account of disclosure/surrender made by Shri Shiv Kumar, father of the assessee on behalf of the assessee. Therefore, the contention of the ld. CIT DR that the ld. CIT(A) should have accepted the disclosure made u/s 132(4) is not acceptable, particularly, when there is no specific ground taken by the AO before the Tribunal nor the AO made any addition based on disclosure of the assessee. Now, we turn to the deletion of addition made on the seized papers LPS-14 to LPS-21. We find from the findings of the AO as well as ld. CIT(A) that loose papers LPS-14 to LPS-21 are the writing pads on which transaction relating to sale/purchase I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 66 of 72 (trading business) of garlic and onion of the assessee is recorded. We find that the assessee has worked out total receipts and total payments of each assessment year to offer additional income in returns filed u/s 153A. which has not been disputed by the AO. However, the AO did not consider the credits brought down and carried forward cash balances, peak theory and cash balance brought down and merely proceeded to make addition of higher of the total receipts or payments of each assessment year. We find that the ld. CIT(A) has elaborately analyzed the seized loose papers of each assessment year as reproduced above in this order. She also worked out adjusted net profit rate by excluding certain expenses from the audited accounts in the chart given by her in the finding as reproduced above and applied net profit rate @ 4.76 % rounding to 5% uniformally for assessment years on higher of the amount of unrecorded total receipts/payments seized and after allowing peak, set off of carried forward cash balances brought forward and sustained the total addition of around Rs. 50,81,200/-, besides, additional income of Rs. I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 67 of 72 77.93 lakhs offered by the assessee in his return of income u/s 153A of the Act. We find that this approach of the ld. CIT(A) has been as per the norms of accounting principle. Therefore, the approach of the AO for allowing set off and peak of the expenses, is justified. Therefore, the AO was not justified in making the addition of the entire receipts/payments whichever is higher without allowing peak and set-off.. We are of the considered opinion that when entire entries of seized documents are to be considered, it cannot be taken in part or peace-meal and whole document should be considered as a whole. We find that the seized material, documents were found during the course of search, therefore, the entries recorded thereon whether it is a receipt or expenditure, has to be accepted as genuine. Therefore, for taxing, the real income is required to be taxed and not the receipts when document contains receipts and expenditure. Therefore, we are of the considered view that the peak of the debit and credit entries of the seized documents is to be considered and set off of carried forward, disclosure or income being taxed either being I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 68 of 72 accounted or unaccounted income is to be allowed. Therefore, to this extent, we find that the findings given by the ld. CIT(A) is justified. We find support from the decision of the Hon'ble High Court of Gujarat in the case of Tirupati Construction, (2015) 55 Taxmann.com 308 (Guj), relied upon by the ld. Authorized Representative of the assessee, wherein it was held that only peak of debit and credit entries of the seized papers/diaries could be assessed in the hands of the assessee and there was no justification for adding the entire receipts side of the seized papers and, accordingly, there is no merit in the grounds of appeal of the Revenue with regard to this issue and, accordingly, dismissed. In the light of these facts, all the grounds of the Revenue are treated as dismissed for all the assessment years under appeal.
19. Coming to the assessee's appeals, we find that the ld. CIT(A) has applied uniform net profit rate of 5% for all the assessment years under appeal, which, in our view, is not correct approach as each assessment year is a separate assessment year and net profit rate of the same can be varied I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 69 of 72 for assessment year to assessment year. We also find that ld. CIT(A) has worked out adjusted N.P. rate by excluding audited accounts, at 2.85%, 4.76%, 3.27%, 2.51% and 3.73% for assessment years 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13, respectively. We find from the alternative submission from the ld. Authorized Representative of the assessee that adjusted net profit rate for each assessment year should be adopted. We note that net profit ratio @ 5% for adjusted profit and loss account for each of the assessment year cannot be applied while considering net profit rate of on unaccounted sales and expenses resulting into unaccounted transaction. Therefore, the net profit rate for the relevant assessment years under appeal as worked out by the ld. CIT(A) after analyzing transaction from each year would be most appropriate to apply for working out net profit on account of unaccounted sales for the respective assessment years. Therefore, we are of the considered opinion that adjusted net profit rate pertaining to concerned assessment years as worked out by the ld. CIT(A) for each assessment year under appeal would be reasonable to I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 70 of 72 apply while calculating unrecorded profit. Accordingly, the sustainable addition would be worked out after allowing the peak, set off of brought forward balances as allowed by the ld. CIT(A). In view of that matter, we direct the AO to apply the adjusted net profit ratio as computed as under :-
Particulars Line Item AY 2008- AY 2009-10 AY 2010- AY 2011- AY 2012- No. 09 11 12 13 Total of Receipts from A 6,47,49,380 70,000 81,97,821 3,51,69,030 2,93,55,236 seized documents Date of peak credit for B 19.10.2007 01.04.2008 29.09.2009 30.11.2010 20.07.2011 each year Peak credit during the C 6,61,708 1,56,490 2,24,012 72,40,388 71,53,418 year on the date mentioned above Less: Initial payments D 1,39,787 - - - - recorded on the seized documents without any cash in hand or receipts (5th & 6th June 2007) Less: Peak credit for E - - - 6,61,708 - preceding years already considered for addition ,..
Addition for Peak Credit F = C-D-E 5,21,921 - - 65,78,680 - Addition for Initial D 1,39,787 - - - - payments recorded on the seized documents without any cash balance in hand or cash receipts (5th & 6th June 2007) Adjusted net profit rate as 3.73 % 2.85 % 4.76% 3.27 % 2.51% Worked out by the ld. CIT(A) Addition for Profit element on Total Receipts 18,45,357 3,332 2,68,069 8,82,743 10,94,950 as per adjusted NP Ratio- G given in above column discussed above Total Additions H= F+D+G 25,07,065 3,332 2,68,068 74,61,423 10,94,950 I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 71 of 72 Income already offered in I 68,22,000 500 21,000 1,25,000 2,25,000 the relevant year under consideration Income already offered in J 6,00,000 49,14,935 49,12,103 46,65,035 26,71,388 the preceding year / available as credit from preceding year Total of above K =I + J 74,22,000 49,15,435 49,33,103 47,90,035 28,96,388 Credit balance of income L=K-H 49,14,935 49,12,103 46,65,035 (26,71,388) 18,01,438 offered available for set off in subsequent years In the light of above working, the total addition based on seized material is worked out as below and same is reduced to Rs.26,71,388/- by allowing relief of Rs. 24,09,812/-
[50,81,200 (-) 26,71,388]) :-
2008-09 2009-10 2010-11 2011-12 2012-13 Initial payment on 1,39,787 05.06.2007 & 06.06.2007 as unexplained expenditure Peak credit on 5,21,921 65,78,680 19.10.2007.
Adjusted N.P. on 18,45,357 3,332 2,68,068 8,82,743 10,94,950 unaccounted income as per seized papers sustained as per above table TOTAL 25,07,065 3,332 2,68,068 74,61,423 10,94,950 Less: K (I+J) as 74,22,000 49,15,435 49,33,103 47,90,035 28,96,388 per above working table Now, addition to NIL NIL NIL Rs.26,71,388 NIL be sustained I.T.(SS)A.Nos. 91 - 94 & I.T.A.No. 274/Ind/2016 and 117 to 120 and I.T.A.No. 680/Ind/2016 - ACIT v. Yogesh Hotwani and Yogesh Hotwani Vs. DCIT page 72 of 72
20. Accordingly, the AO is directed to compute the total income of the assessee as computed above. Accordingly, assessee's grounds of appeal are partly allowed.
21. In the result, the appeal of the assessee is partly allowed and Revenue's appeal is dismissed for all the above assessment years.
The order has been pronounced in open court on 17.1.2017.
Sd/- Sd/-
(डी.ट .गरा सया) (ओ.पी.मीना)
या यक सद य लेखा सद य
(D.T.GARASIA) (O.P.MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
*दनांक /Dated : 17.1.2017.
CPU*