Income Tax Appellate Tribunal - Indore
The Acit, 3(1), vs Shri Harishchandra Chabdiay, on 11 January, 2019
[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004]
[SHRI HARISH CHAND CHABARIA, BHOPAL]
आयकर अपील य अ धकरण, इ दौर यायपीठ, इ दौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
IT(SS)A No.2/Ind/2004
Block Period: 1.4.1990 to 16.5.2000
ACIT-3(1) Vijay Kumar Chabaria
Bhopal बनाम/ Prop. Ashok Agency Jumerati,
Bhopal
Vs.
(Appellant) (Revenue )
P.A. No.AANPC1899A
C.O. No.17/Ind/2004
(Arising out of IT(SS)A No.2/Ind/2004)
Block Period: 1.4.1990 to 16.5.2000
Vijay Kumar Chabaria ACIT-3(1)
Prop. Ashok Agency Jumerati, बनाम/ Bhopal
Bhopal
Vs.
(Appellant) (Revenue )
[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004]
[SHRI HARISH CHAND CHABARIA, BHOPAL]
IT(SS)A No.15/Ind/2004
Block Period: 1991-92 to 2000-01 &
1.4.2000 to 16.5.2000
Harish Chandra Chabaria ACIT-3(1)
Prop. M/s. Bhagwandas बनाम/ Bhopal
Harishchandra
Vs.
51,Jumerati, Bhopal
(Appellant) (Revenue )
P.A. No.AANPC1898B
IT(SS)A No.19/Ind/2004
Block Period: 1991-92 to 2000-01 &
1.4.2000 to 16.5.2000
ACIT-3(1) Harish Chandra Chabaria
Bhopal बनाम/ Prop. M/s. Bhagwandas
Harishchandra
Vs.
51,Jumerati, Bhopal
(Appellant) (Revenue )
Appellant by Smt. Ashima Gupta, DR
Respondent by Shri S.S. Deshpande, A.R.
Date of Hearing: 29.11.2018
Date of Pronouncement: 11.01.2019
2
[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004]
[SHRI HARISH CHAND CHABARIA, BHOPAL]
आदे श / O R D E R
PER KUL BHARAT, J.M:
This bunch of cross appeals by revenue and two different assessees in IT(SS)A 2/Ind/2004, IT(SS)A 15/Ind/2004 & IT(SS)A 19/Ind/2004 and cross objection by the assessee in CO No.17/Ind/2004 against IT(SS)A 2/Ind/2004 pertaining to the block period from 1.4.1990 to 16.5.2000, A.Y. 1991-92 to 2000-01 and block period 1.4.2000 to 16.5.2000. All these appeals were taken up together and are being disposed of by way of a consolidated for the sake of convenience and brevity.
2. First we take up the cross appeals of the assessee and revenue in IT(SS)A No.15/Ind/2004 and IT(SS)A No.19/Ind/2004. The assessee has raised following grounds of appeal:
1. On the facts and in the circumstances of the assessee's case the Ld. CIT(A) has erred in holding that valid search warrant was issued, and search conducted was legal and valid.3
[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL]
2. On the facts and in the circumstances of the assessee's case the Ld. CIT(A) has erred in holding that notice u/s 158 BC and assessment order there after was legal and valid.
3. On the facts and in circumstances of the assessee's case the Ld. CIT(A) has erred in holding that the assessee has made undeclared purchase and sale of Rs.81,43,956/- and Rs.27,92,521/- respectively.
4. On the facts and in circumstances of the assessee's case the Ld. CIT(A) has erred in holding Gross profit rate @ 5.5%
5. On the facts and in circumstances of the assessee case the Ld. CIT(A) has erred in confirming addition of Rs.13,040/- towards unrecorded expenses.
6. On the facts and in circumstances of the assessee's case the Ld. CIT(A) has erred in holding that the assessee has made investment of Rs.8,15,000/- in unrecorded transaction.
3. At the time of hearing, Ld. Counsel for the assessee submitted that he does not wish to press ground Nos.1&2.
Accordingly, ground Nos.1 & 2 were dismissed as not pressed.
4. The facts giving rise to the present appeal are that search operations were carried out at the shop and residential premises of the assessee. Simultaneously, search operations were also carried out at the business premises and residential premises of Shri Bhagwandas Chabaria and their sons and at the factory premises of 4 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] M/s. Krishna Enterprises. In course of search & seizure operation, a large number of loose papers, books of accounts, note books were found and seized from shop as well as residential premises of the assessee. A notice u/s 158 BC of the Income Tax Act, 1961 (hereinafter called as 'the Act') was issued and served on the assessee requiring the assessee to furnish its return of income for the block period. After giving some time, the final return was filed on 4.3.2002 disclosing a total undisclosed income for the block period at Rs.4,50,000/- and the assessee requested for the adjustment of tax payable at Rs.2,73,000/- out of the cash seized from his residence. During the course of assessment special audit was directed by the concerned assessing officer with the prior approval of the concerned Commissioner of Income Tax, Bhopal. In pursuance of this direction, audit of the accounts of the assessee was carried out and an audit report u/s 142(2A) of the Act was filed on 5 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] 15.11.2002. The A.O. observed that the auditor had observed various discrepancies. It was reported in the audit report as recorded by the A.O. that on the basis of loose papers contained in LPS-1,2,3,4,5,7,15,16,18,19,20, LPS-1-1, LPS-1-2, LPS-1-4, LPS-6(Annex), LPS-7(Annex), LPS-8(Annex), LPS-9(Annex) and Annexure BS-17(KE), reported unrecorded transactions of purchases of Rs.1,79,09,701/-, sales Rs.30,92,675/- and expenses Rs.5,60,186/- was reported. The assessee was asked to explain these discrepancies during the course of assessment proceedings. The A.O. adopted the difference of Rs.5,47,367/- in the stock as unrecorded investment in purchase of stock and assessed u/s 69 of the Act for the block period 1.4.2000 to 16.5.2000. Further, the assessing officer treated Rs.4 lakhs as availability of cash on the date of search. After considering the entire material and submissions of the assessee, the A.O. computed income of 6 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] block period at Rs.1,45,29,908/- in para-13 of the assessment order i.e. block period from 1.4.1996 to 31.3.1997 of assessment year 1997-98. In respect of block assessment year 1.4.1995 to 31.3.1996, he assessed the income at Rs.26,27,388/-. Further, assessment year 1998-99 was assessed at Rs.1,18,296/- income of assessment year 1999-2000 was assessed at Rs.1,80,39,793/-. Income of assessment year 2000-01 was assessed at Rs.5,04,65,116/- and for the period 1.4.2000 to 16.5.2000 of Rs.33,02,390/-. Thus, he assessed total undisclosed income for block period at Rs.8,90,77,861/-.
Against this order, the assessee preferred an appeal before Ld. CIT(A) who after considering the submissions partly allowed the appeal. Thereby he reduced the income assessed by the A.O. However, he sustained various additions after considering the material available on records, more particularly, report by the special Auditor.
7[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] Aggrieved by this both revenue and assessee have filed appeal against deletion and confirmation of additions respectively.
5. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. The Ld. Counsel has filed consolidated written submissions in respect of cross appeals. The submissions of the assessee are as under:
May it please your honours, The consolidated submissions and certain facts are stated hereunder.
1. The assessee is an individual deriving income from sale and purchase of pan masala, gutka, supari, cigarettes etc on whole sale and retail basis.
The business is done in the name of M/s Bhagwandas Harishchand.
2. A search was conducted u/s 132 of I.T Act at the residential and business premises on 16.05.2000. Loose papers and books of accounts were seized. The books were written upto 11.05.2000. Jewellery of Rs. 1,95,408/- and cash of Rs.4,80,000/- were seized during the course of such search. In response to notice u/s 158BC, the return of income was filed declaring undisclosed income of Rs.4,50,000/-.
3. During the course of the assessment proceedings a reference was made u/s 142(2A) for special audit. The auditors have given the report and the audited profit and loss account without incorporating the effect of unrecorded transaction. The balance sheets and P&L Account have been 8 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] placed from pages 61 to 183 of PB-II. The auditor also gave the complete list of loose papers and treated the same as unrecorded transactions which are placed at pages 34 to 61 of the PB-II. The auditors have reported at page 34 that the unrecorded purchases are to the tune of Rs. 1,79,09,701/- and the sales at Rs. 30,92,675/- and the expenses of Rs.5,60,186/-.
The learned A.O at page 16 of the assessment order has remarked that there is no difference in the figures of the balance sheet filed along with the income tax return and certified by the special auditors.
The Ld. AO at page 4 of the assessment order also remarked that it is presumed that the assessee should have objected to the auditors for any discrepancy before forwarding the audit report to the department. At page 5 he remarked that it is presumed that the auditor report u/s 142(2A) was prepared with the consent of the assessee.
It is submitted that the assessee has filed detailed objections before the Ld. AO vide letter dated 12.12.2002, against the audit report for including the various figure mentioned in the audit report under the head purchases or sales and treating them as unrecorded transactions. The letter of objection is placed on page 89-99 of PB-I. The assessee requested the AO to provide the opportunity to confront the auditors with the discrepancies reported in the audit report. The date for such confrontation was fixed but the learned auditor expressed his inability to attend the office and stated that the audit comments and reports are prepared on the basis of the papers and he has nothing more to say in the matter. (Pg. 5-7 of the assessment order).
4. The learned AO then made additions on the basis of loose papers from page 17 onwards and has added all alleged purchases, alleged sales, alleged investments and alleged expenses as income of the assessee. The Ld. AO of his own has modified the figures with the allegation that they are in lakhs instead of hundred and has framed the assessment at Rs.8,90,77,861/-.
9[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL]
5. The complete details of the objections were filed before the learned CIT (A) and the assessee challenged the figures arrived at by the learned auditors. The learned CIT (A) has reproduced the same at page 16 onwards of the order. It would be seen from such details that the learned auditors have totalled all the figures on each paper without noticing that the carry forward balances were taken from earlier pages (page 10-15 of PB-III). At many places the same copies have been added doubly, see page 14-18 and 34 of PB-III. At page 11 the cash balance mentioned on rough paper at Rs.12,70,400/- has been treated as the purchases. At one page the figure of Rs.18,687/- has been taken at Rs.18,68,715/- (page 24- 26 PB-III). At some pages irrelevant figures have been added and reported as unrecorded purchase (page 39 & 30 of PB-III). The currency note numbers and the telephone numbers written on rough papers have been treated as purchases.
6. The complete detail of the transactions which were objected and not objected to were filed before the learned CIT (A) (page 25-28 PB-II). The item wise objections were also raised which are placed in PB-II from Pg.1 to 24. The memorandum cash book showing the credit purchase mentioned in the bill and the other purchases was also filed with the learned CIT(A) presuming the realisation after 5 days (pages 12-25 of PB-I). The details of peak credit was also filed (page 8 of PB-I) reproduced that page 32 of the appeal order. The details of the cash availability was also filed which is reproduced in page 32 of the appeal order. After due consideration of all the figures the learned CIT (A) concluded the unrecorded purchases are Rs.81,43,956/-, and the sales are Rs. 27,92,521/- (page 29 of the appeal order). The learned CIT (A) deleted all the additions in respect of purchase and sales and upheld the additions towards investment at Rs.8,15,000/- being 10% of the total unrecorded purchases as calculated by him. The learned CIT also further upheld an addition of Rs.4,74,093/- being gross profit on sales calculated on the basis of unrecorded purchases.
10[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] GROUND WISE SUBMISSIONS AGAINST DEPARTMENTAL APPEAL Ground No 1 AO - Pg.7 CIT - Pg. 5 The Ld. AO made the addition of Rs.5,47,267/- on the ground that the statement of stock was prepared by the accountant during the course of the search calculating the stock at Rs.58,66,653/- as against the stock of Rs.64,15,200/- found during search. It was submitted that as per the trading account the stock comes to Rs.63,22,370/-. The difference is because of damaged goods and valuation. The Ld. AO merely took the stock calculated on the date of search at Rs.58,66,653/- and added difference Rs.5,47,367/- as unrecorded income.
The Ld. CIT(A) deleted the addition stating that assessee has explained the availability of stock. The auditors while giving the audited balance sheet have shown the stock on the date of search at Rs.63,78,621/-. Thus, there is a very little difference. It was not proper to make addition of such stock when appearing in the balance sheet which was duly certified by the special auditor. (Pg. 65 of PB-II) Ground No. 2 AO - Pg. 8 CIT - Pg. 9-10 The total cash found was Rs.4,63,891/-. The AO remarked at Pg. 10 that the opening cash balance on 01.04.2000 is a negative cash balance. He completely lost sight of the fact that the bank overdraft is also shown in the cash and bank balances. The Ld. AO remarked that merely mentioning the balance without supporting evidence cannot be accepted. The assessee has failed to prove availability of Rs.4,00,000/- hence treated as unproved cash.
The Ld. CIT(A) deleted the addition stating that cash balance of Rs.4,63,891/- was appearing in the balance sheet duly certified by the special auditor appointed by the IT Department and without finding any deficiency in the books maintained no addition can be made.(Pg. 65 of PB-II) Ground No. 3 AO - Pg. 10 CIT - Pg.10 The AO made the addition stating that the assessee has not disclosed the interest of SBI bonds. The balance sheet also does not contain investment 11 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] in shares. Hence, added Rs.20,000/- being investment in SBI bonds from undisclosed income.
The Ld. CIT(A) deleted the addition stating that the investment of Rs.20,000/- in SBI bond is appearing in the balance sheets as certified by the special auditor appointed by the IT Department from the year 1993-94 onwards. (Pg 138, 127, 86, 75, 65) Ground No. 4 AO - Pg.12 CIT - Pg.10-13 The AO has made addition of Rs.1,90,000/- for 505 grams of gold as undisclosed investment, on the ground that no evidence to prove the contention that part of the jewellery belongs to the daughter-in-law was produced either in the course of search operation or at the stage of assessment.
The Ld. CIT(A) deleted the addition of stating that there is no dispute that the total gold found during the course of the search is less than the gold declared in the wealth tax returns of the family members.
Ground No. 5 AO - Pg.13 CIT - Pg.13-14 The AO made the addition of Rs.2,40,000/- on the ground that 4 four wheelers are found during the course of the search. However, the accounts are proving acquisition of only 3 four wheelers. In absence of any evidence of ownership, the investment in one car is considered as investment from undisclosed sources. The prevailing market value was taken at Rs.2,40,000/- and added to the income.
The CIT(A) deleted the addition on the ground that according to statement of vehicles prepared by assessee and on the basis of certified balance sheet by the auditors, the assessee is having 4 four wheelers. The total vehicles found during the course of search are in conformity with number of vehicles found recorded in the books of accounts.
Ground No. 6, 7 AO - Pg.15-29 CIT- Pg.16-35, 36 The AO made the addition of Rs.97,65,745/-, Rs.3,00,154/- and Rs.5,47,146/- stating that on the loose papers there are huge transactions 12 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] of unrecorded purchases and unrecorded sales which were found and seized in the course of search operation. The loose papers contain the figures but actually the transactions are either in hundreds, thousands or lakhs. At some places the auditors mentioned that we are unable to comment. On this assumption he made addition in respect of all loose papers considering them as either purchases or sales. The figures mentioned in hundreds have been converted into lakhs and various additions have been made. The auditors have considered the figures on the loose papers and arrived at the undisclosed purchases and sales on Pg. 34 of the PB-II. The same has been mentioned by the Ld. AO at Pg.15 of the assessment order. The Ld. AO prepared the year wise chart at Pg.15. However, there is a minor difference in the auditors report and the year wise figures arrived by the Ld. AO. The chart is reproduced as under.
Undeclared
AY Purchases Sales Expenses
(Rs.)
2001-02(upto 117620 1207107 10661
16.5.00)
2000-01 14127892 1599397 159119
1999-00 3679446 - 43850
1998-99 30924 - -
1997-98 - - 19550
1996-97 - - 5290
TOTAL 17955882/- 3092675/- 238470/-
The Ld. AO however on the basis of the loose papers made his own calculations, converted the figure of hundred into lakhs and made the addition on that basis. He remarked that there are unaccounted purchases which are covered with the sales. The sales made were certainly out of unaccounted purchases made in the relevant block period. All the purchases and sales are unrecorded, the expenses incurred on purchases were also unrecorded. The loose papers revealed that there was parallel uncounted business. Hence, he made addition according to his calculation 13 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] for unaccounted purchases and unaccounted sales as undisclosed income. In certain cases he made the addition of the excise duty, the sales tax etc. Complete paper wise details and explanation for each of the loose paper was furnished before the Ld. CIT(A) (page 25-28 PB-II). These have been reproduced by the Ld. CIT(A) at Pg. 16-27 of appellate order. It was submitted before the Ld. CIT(A) that the learned auditors have totalled all the figures on each paper without noticing that the carry forward balances were taken from earlier pages (page 10-15 of PB-III). At many places the same copies have been added doubly, see page 14-18 and 34 of PB-III. At page 11 the cash balance mentioned on rough paper at Rs.12,70,400/- has been treated as the purchases. At one page the figure of Rs.18,687/- has been taken at Rs.18,68,715/- (page 24-26 PB- III). On some pages irrelevant figures have been added and reported as unrecorded purchase (page 39 & 30 of PB-III), on which the currency note numbers and the telephone numbers are written on rough papers.
The item wise objections were also raised before the Ld. CIT(A) which are placed in PB-II from Pg.1 to 24. The memorandum cash book showing the credit purchase mentioned in the bill and the other purchases was also filed with the learned CIT(A) presuming the realisation after 5 days (pages 12-25 of PB-I). After due consideration of all the figures the learned CIT (A) at Pg. 29 para 11.1 and at Pg.31 para 11.7 observed that all the figures are checked and verified by him. The Ld. CIT (A) at Pg. 29 concluded that the unrecorded purchases are to the tune of Rs.81,43,956/-, and the sales are Rs.27,92,521/- (page 29 of the appeal order). The Ld. CIT(A) observed that in the absence of any evidence regarding investment in purchases, the addition is on presumption. The entire unrecorded purchases can not be treated as unexplained investment and expenses because the sales are made and the sale proceeds are again utilised for purchases and so on. Further, there is no reason to believe that assessee has earned better profit. The learned CIT (A) deleted all the additions in respect of purchase and sales and upheld the additions towards investment at Rs.8,15,000/- being 10% of the total unrecorded purchases as calculated by him. The learned CIT(A) further upheld an addition of Rs.4,74,093/- being gross profit @ 5.5% on sales calculated on the basis of unrecorded purchases. The Department has taken a wrong figure in this ground about deletion of the addition of Rs. 97,65,745/- as unrecorded purchases. The Ld. CIT(A) has arrived at the figure of 14 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] unrecorded purchases at Rs.83,41,956/- instead of Rs.1,79,09,701/-. He estimated the profit of 5.5% and upheld the addition in respect of unrecorded purchases and sales and deleted all other additions made by the Ld. AO.
Assessee's appeal ; It is humbly submitted that the Lf. CIT(A) has erred in estimating the capital investment of 10% of the total purchases. Thus the addition of Rs.8,15,000/- is unwarranted for. It would be further seen that the gross profit in this line of business is hardly 0.3% to 0.5 % as certified by the auditors. It is thus submitted that the estimate of profit at 5.5% is on a very excessive figure.
Ground No.8- AO - Pg.17-18 CIT Pg. 36-37 The Ld. AO made the addition of Rs. 12,000/- and Rs. 57,080/- on the basis of loose paper found during the search. For 3 bills for purchase of Supari from Kesar Brothers in the name of Sh. Bhagwamndas Harishchandra.
The CIT(A) deleted the addition stating that Bilty of dispatch of goods sent by some Vijay Kirana to Vijay Kirana Store. This paper did not relate to the assessee's handwriting nor under his signature. This paper does not indicate anything regarding undeclared sale. Further, the bills of Supari are duly recorded in the books of account of M/s Karishma Enterprises and there was no reason to disbelieve the explanation of the assessee.
Ground no. 9 AO - Pg.17-18 CIT Pg. 36-37 The AO made the addition of Rs.52,027/-, Rs.3,422/-, Rs.7,752/- stating that these additions towards unrecorded purchases are made on the basis of LPS which are cash memos from Laxmi Agencies, Bhopal for the purchase of Nirma products.
The CIT(A) deleted the addition stating that all the purchases are duly entered in the regular books of accounts. All the transactions are shown as declared in the auditors report.
Ground No. 10 AO - Pg.19 CIT Pg. 38-39 The AO made the addition of Rs.98,935/- on the basis of seized documents BS -17, sale bill of M/s Karishma Enterprises which are included in the undeclared purchase reported by the auditor. The auditor has pointed out 15 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] that purchases amounting to Rs. 98,935/- has been made by the assessee from M/s Karishma Enterprises. The assessee has not given any explanation as to where these purchases have been accounted for in his books.
The CIT(A) deleted the addition stating that said transaction has already been considered by the special auditor as undeclared purchases in audit report, no separate addition has to be called for.
Ground No.11 AO - Pg.21, 27& 29 CIT Pg. 39-40 The Ld. AO made the addition stating that the assessee has advanced a hundi loan of Rs. 1,00,000/-, 75,000/-, 70,000/- in cash and have earned interest of Rs. 5100/-, Rs.3,037/- and Rs.981/- thereon which is not recorded in books.
The Ld. CIT (A) deleted the addition stating that one of the transaction is found to be duly recorded and appearing in the balance sheet certified by the auditors. (Pg. 89 of PB-II). The other two transactions are the renewals in the name of Mahesh Chandra and are recorded in his bank statement.
Ground No.12 AO - Pg.21, 22 &23 CIT Pg. 41-44 The Ld. AO made the additions of Rs.2,42,45,114/- and Rs.1,04,72,579/- as unaccounted sales. In para 8.6 the Ld. AO referred to eleven different loose papers wherein figures ranging between 100 and 500 have been mentioned with the names of different persons like Dilip, Bhagchand, Satram, DD, etc. He further stated that on some loose papers paisas are also referred which is outdated. The Ld. AO inferred that the mention of DD is a transaction through demand draft. He therefore concluded that the figures of 100, 200 etc. are in lakhs and made the above huge additions on the ground that these transactions are sales made by the assessee.
The Ld. CIT(A) deleted the additions stating that the DD appearing in the loose papers has been wrongly read by the AO as demand draft. The order in which the word DD appear in the said paper clearly indicates that DD is the name of some person (Dwarka Das) and cannot be read as 16 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] demand draft. The entire addition is made on purely presumption and assumption by the AO.
Ground No. 13 AO - Pg.23 CIT Pg. 44-46 The Ld. AO made the addition of Rs. 27,76,157/- and Rs. 37,33,313/-on the basis of loose papers. The Ld. AO stated that the transaction noted are in hundred of rupee rather than full numeric value written. This is established from entry in page 22 dated 13.04.1999 for 2 bora Belgum @ 169.4*300kg.=50820/-. After including freight the assessee has written 508.96.
The CIT(A) deleted the addition stating that the product of the figures mentioned in the seized documents do not squarely add up to the figure noted in the paper. The AO has presumed the difference on a/c of freight. The said documents does not indicate payment of any freight mentioned in front of such product. The product of the figure are not reconcilable as such addition is made purely on presumptions.
Ground No.14 AO - Pg.23 CIT Pg. 46 The Ld. AO made the addition of Rs.21,31,900/- on the basis of loose paper no.31. On this paper, the entry is written as DD which represents receipt of payment through demand drafts ranging from Rs.435/- to Rs.1,133/-. The transaction are in hundred and not in the numeric value written. These transactions noted are related to the uncounted purchases, the amount of Rs.21,31,900/- is added as income by the Ld. AO.
The Ld. CIT(A) deleted the addition stating that figures of LPS -31 has been copied on LPS - 67 (Pg.174 of PB-III) & figures of LPS - 67 has been considered separately by the Ld. AO (Ground No.17) as unaccounted sales. Since, both the papers are same no addition can be made for figures appearing on LPS - 31 on presumption.
Ground No. 15 AO - Pg.25 CIT Pg. 47-48 The Ld. AO made the addition stating that real transactions were in lakhs but transactions noted are in tens. It works out at Rs. 61,36,000/- as against figure noted Rs.61.36. The auditor has recognised the loose papers belonging to the transactions of M/s Bhagwandas Harishchandra. The transaction of these loose papers are not finding place in the regular 17 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] books of account. As such the actual value of the transactions noted in these pages Rs.61,36,000/- treated as unaccounted sales representing undisclosed income of the assessee.
The CIT(A) deleted the addition stating that loose papers seems to be scribbling on the rough paper and do not contain any mention of year. In absence of this, it can not be related to the block period. It does not contain any indication whether the figures mentioned relate to sales or purchases.
Ground No. 16 AO-Pg. 25 CIT-Pg. 48 The Ld. AO made the addition on the basis of seized loose documents LPS
-1/24. The figures of 100+250+360 are mentioned, the account represents the sales of the costly item dealt by the assessee. The amount is treated as unrecorded purchases. This documents indicates nothing regarding sales or purchases of Rs.3,60,000/- or the year of transaction.
The Ld. CIT(A) deleted the addition stating that the said papers does not contain indication of any year and in absence of which it can not be related to the block period. The paper does not indicate any thing based on which calculation can be made.
Ground No. 17 AO Pg. 26 CIT Pg. 49 The Ld. AO made the addition of Rs.54,260/- and Rs.35,000/- as unaccounted sales stating that page 67&68 are the sheets on Ratna Chhap Jafrani Patti letter head containing transaction from 19.04.99 to 24.08.99. This is a paper containing receipts out of the sale made from some party.
The Ld. CIT(A) deleted the addition stating that seized documents seem to be a rough scrabbling pad. The undeclared purchases and sales have already been confirmed hence no separate addition is required to be made.
Ground No. 18 AO - Pg. 26 CIT Pg. 49-50 The Ld. AO made the said addition of Rs.55,280/- holding that the assessee has not explained how and where the receipt of sale of 200 shares has been accounted for and the source of acquisition of shares. It 18 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] is treated as the unexplained investment forming part of undisclosed income and added.
The Ld. CIT(A) deleted the addition stating that investment in shares is found to have been declared in regular books of accounts and there being no taxable capital gains, no addition called for.
Ground No. 19 AO Pg. 30 CIT Pg. 50-53 These additions are made on the basis of the LPS-2,3,4 & 5 which are daily baitha rough book. The entries on this book have been made in the regular books of accounts.
The Ld. AO made the addition of Rs.1,45,05,358/- and Rs.26,22,098/-on the basis of LPS -2,3,4 and 5 treating them as unexplained purchases. The AO remarked that the auditors have mentioned that it is possible that purchase is accounted for earlier and payment made later. The auditors have further observed that it is not possible to verify the same from each page. There is no correlation between date wise purchases and date wise payments made against the purchases. The assessee failed to discharge the primary onus. Hence treated the purchases as unrecorded investment u/s 69.
The Ld. CIT (A) observed that I have considered the submissions of the AR and the copies of the loose papers and assessment order. The total purchases recorded in the seized paper are Rs.1,71,27,456/- against which total purchases recorded in regular books are found to be 1,74,42,927/-. The special auditors appointed by the Department have elaborately commented for the reasons as to why the figures cannot be reconciled paisa to paisa and entry to entry. On test check basis the entries appearing on these loose sheets are traceable to the regular books of accounts. The special auditor has also not suggested any addition on account of entries recorded on the basis of loose papers. On these grounds the Ld. CIT(A) has deleted the addition.
Ground No. 20 CIT Pg. 53-56 Charging of surcharge
The Ld.CIT(A) allowed this ground of assessee stating that the liability to pay tax does not depend on assessment order, hence dated of assessment 19 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] in the case of assessee is of no relevance. As the provision of levy surcharge was introduced in 01.06.02, they are not applicable in the case of the assessee.
6. On the contrary, Ld. D.R. opposed the submissions and supported order of the Ld. CIT(A).
7. We have heard the rival submissions and perused the material available on records. Apropos to ground Nos.3 of the assessee's appeal, Ld. CIT(A) has given finding on fact as under in para Nos.10.4 & 11 of his order:
20[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL]
8. The above finding of fact is not controverted by placing any contrary material. The Ld. CIT(A) has considered the material placed before him in right perspective. No perversity or infirmity is pointed out by the Ld. A.R. for the assessee. We therefore confirm the finding of the Ld. CIT(A). Ground No.3 of the assessee's appeal is dismissed.
9. Ground No.4 is against adopting the gross profit rate at 5.5%. Ld. Counsel for the assessee reiterated the 21 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] submissions as made in the written submissions. It is contended that Ld. CIT(A) erred in estimating the capital investment of 10% of the total purchases. Thus, the addition of Rs.8,15,000/- is unwarranted for. It would be further seen that gross profit in this line of business is hardly 0.3% to 0.5% as certified by the auditors. It was contended that the estimate of profit at 5.5% is on a very excessive figure.
10. Ld. D.R. has supported the order of the Ld. CIT(A).
11. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The assessee has merely made a bald assertion that in this line of business lower gross profit is made. The submission is not based upon any evidence. We therefore do not see any reason to interfere with the finding of the Ld. CIT(A) and the same is hereby affirmed. Ground No.4 of the assessee's appeal is rejected.
22[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL]
12. Ground No.5 is in respect of confirming addition of Rs.13,040/-. Ld. Counsel for the assessee submitted that he does not wish to press this ground being smallness of the addition. The ground is dismissed as not pressed.
13. Ground No.6 is against holding that assessee made investment of Rs.8,15,000/- in the unrecorded transaction. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions.
14. Ld. D.R. opposed these submissions.
15. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The assessee has not placed any material to suggest that the finding of the Ld. CIT(A) is incorrect. Under these facts, we do not see any infirmity in the order of the Ld. CIT(A) and the same is hereby affirmed. The ground raised by the assessee is dismissed. Appeal of the assessee is dismissed.
16. Now coming to the appeal of the revenue, the revenue has raised 20 grounds in respect of additions deleted by the Ld. CIT(A).
23[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL]
17. Ld. D.R. has supported the order of the A.O. in respect of these additions. Ld. Counsel for the assessee reiterated the submissions as made in the chart. The chart so submitted is reproduced as under:
24[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] 25 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] 26 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL]
18. After going through the orders of the Ld. CIT(A), we find that the Ld. CIT(A) has considered all the facts placed before him and has given finding of fact. The revenue has not brought any material on record suggesting that the finding of the Ld. CIT(A) is incorrect or perverse.
We do not find any infirmity into findings, same are in accordance to the records. Therefore, all these grounds raised by the revenue are devoid of merit. Appeal of the revenue is dismissed.
IT(SS)A No.2/Ind/2014 & CO No.17/Ind/2004:
19. Now we take up appeal by the revenue and cross objection by the assessee. The revenue has raised following grounds of appeal:
27[IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] 28 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL]
20. Apropos to Ground Nos.1 to 15, Ld. D.R. supported the order of the A.O. and submitted that Ld. CIT(A) was not justified in deleting the additions. He submitted that the addition as made by the A.O. ought to have confirmed.
21. On the contrary, Ld. A.R. submitted that revenue has not brought any material contrary to the finding of the Ld. CIT(A).
22. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. We find that Ld. CIT(A) has given finding after considering the remand report filed by the A.O. and the finding of the special auditor appointed by the revenue. The Ld. CIT(A) has deleted additions purely on the basis of the report of the auditor. The revenue has not brought any material controverting the finding of the Ld. 29 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] CIT(A). Therefore, we do not find any merit in all these grounds of the appeal and the same is hereby dismissed.
23. Now coming to the cross objection, the assessee has raised following grounds of cross objections:
1. On the fact and in the circumstances of the case, the Hon'ble CIT(A) was not justified in holding that the search warrant/notice u/s 158BC issued and completion of assessment in the appellant case was valid and legal.
2. On the fact and in the circumstances of the case, the Hon'ble CIT(A) was not justified in holding that the referring of assessee's case to the special audit is legal.
3. On the fact and in the circumstances of the case, the Hon'ble CIT(A) was not justified in confirming of undeclared purchase & sale of Rs.1,28,72,462.00 & Rs.42,76,034.00 respectively.
4. On the fact and in the circumstances of the case, the Hon'ble CIT(A) was not justified in holding that the initiation of proceedings u/s 158BFA is legal.
24. Apropos to ground Nos.1, 2 & 4, Ld. Counsel for the assessee did not make any submissions as to how the special audit and the initiation of proceedings was illegal.
Therefore, ground Nos. 1, 2 & 4 are rejected.
25. Ground No.3 is against confirming the undeclared purchase and sale of Rs.1,28,72,462/- and Rs.42,76,034/-
We have considered the rival submissions and find that Ld. 30 [IT(SS)A 2, 15 & 19/IND/2004 & CO 17/IND/2004] [SHRI HARISH CHAND CHABARIA, BHOPAL] CIT(A) has given finding on fact in his order at para Nos.10.5 to 10.20. This finding of fact is not controverted by the assessee. Therefore, we do not see any reason to interfere with the finding of the Ld. CIT(A) and the same is hereby affirmed. Cross objection of the assessee is dismissed.
26. In the result, the appeals of the revenue and appeal and cross objections of the assessee are dismissed.
Order was pronounced in the open court on 11.01.2019.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIALMEMBER Indore; दनांक Dated : 11/01/2019 VG/SPS
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file.
By order Assistant Registrar, Indore 31