Income Tax Appellate Tribunal - Jaipur
Sohan Lal Jain vs Assistant Commissioner Of Income Tax on 11 May, 1999
ORDER
R.K. Gupta, J.M.
1. This is an appeal by assessee against the order of CIT(A), dt. 5th October, 1992, relating to asst. yr. 1989-90. Brief facts of the case are that a search took place at the premises of the assessee on 27th May, 1988. Certain incriminating documents were found and seized. Some of the books of accounts were also seized. Examination of seized records revealed that the assessee has failed to record all this purchases in regular books of account. It was also noticed that complete sales are also not shown in the books of accounts. On the basis of entries recorded in documents seized at Annexure E-6, E-7 and E-8 unaccounted purchases made by the assessee for various years were determined. All these workings are shown in the assessment order for asst. yr. 1988-89 which is part of the record before the Tribunal. It was admitted by the assessee that the determined figure of purchases are outside his regular books of accounts. It was also admitted that sales are also made outside books of accounts but it was prayed that sales may be estimated on the g.p. rate declared by him. In his regular books of account as no details of sales were available with the assessee. It was also requested that after making first purchase, the sales were made and for making second purchase the amount was available with the assessee which was out of sales, out of books of account. Therefore, peak amount only be considered for the purpose of addition.
2. It was also admitted by the assessee vide his statement recorded under s. 132(4) on 27th May, 1988, that he has earned income out of speculation business also. The figure was also estimated of such speculation income earned by assessee for various years. These figures are also shown in the assessment order for asst. yr. 1988-89 which is part of the record as we have already stated. During the course of search, the assessee surrendered Rs. 2,50,000. The case was fixed for completing the assessment and assessee was required to file various details and explanation. Books of accounts were test checked and it was noted by the AO that assessee has not maintained day-to-day stock register nor quantitative tally was available. Inventory of opening and closing stock was also not available being not maintained. In view of these facts and circumstances it was observed that the stock was estimated on the basis of estimation only. In view of these, provisions of s. 145 were applied and g.p. rate of 7 per cent against g.p. rate of 6.5 per cent declared by assessee was applied and an addition of Rs. 18,130 was made in trading account.
3. We have already observed in the foregoing paras that incriminating documents were found and unaccounted stocks were also found which was determined by the Department. The total unrecorded stock which was excess by Rs. 1,74,893. Further, a credit-sale of Rs. 50,191 was also found which was not recorded in the books of account. Thus a stock of Rs. 2,25,084 was found to be in excess. Yearwise, excess stock was determined which was as under :
Rs.
1983-84 10,000
1984-85 9,188
1985-86 30,267
1986-87 9,238
1987-88 31,270
1988-89 33,581
1989-90 21,692
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1,45,236
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4. In this way the profit for the year i.e. 1989-90 was determined at Rs. 21,692. As the assessee was confronted and to cover up the unrecorded and unexplained investment in purchases, profit on such sales and difference in stock and for any other income/investment which may arise on scrutiny of loose papers/slips, the assessee has surrendered a sum of Rs. 2,50,000 while recording the statement under s. 132(4) r/w Expln. 5 to s. 271(1)(c). The contention of the assessee that income of Rs. 21,692 only be considered for the purpose of taxation was not admitted by the AO. However, he reduced a sum of Rs. 1,04,356 from the amount surrendered by assessee i.e. Rs. 2,50,000 and balance of Rs. 1,45,644 was admitted to the income of the assessee on substantive basis. The income of Rs. 1,04,356 was made on protective basis by the AO. The profit from undisclosed sources was also added in the income of the assessee separately that was Rs. 21,692. The assessee preferred first appeal before the CIT(A) who confirmed the order of the AO on point of protective assessment and on account of substantive assessment.
5. However, he deleted the addition of Rs. 21,692 by holding that this includes in the surrendered amount of Rs. 2,50,000. The trading addition of Rs. 18,130 was also sustained by the CIT(A).
6. Now the assessee is in appeal here before us.
7. The lengthy arguments were put-forth by both the parties. They are considered carefully. The material on record is also perused. Various case laws relied upon by the learned counsel are also considered. The case laws which were relied upon by the learned counsel are CIT vs. V.M.R.P. Firm, Muar (1965) 56 ITR 67 (SC), CIT vs. Bharat Gen. Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del), R. B. Jessa Ram Fateh Chand vs. CIT (1971) 81 ITR 409 (All), J.K. Synthetics Ltd. vs. O. S. Bajpai, ITO & Anr. (1976) 105 ITR 864 (All), Addl. CIT vs. P. Nammalvar Naidu & Sons (1979) 116 ITR 863 (Mad), Pioneer Spring & Steel Concern (P) Ltd. vs. CIT (1983) 135 ITR 522 (Cal) and Director of Inspection of IT (Inv. & Anr. vs. Pooran Mall & Sons & Anr. (1974) 96 ITR 390 (SC).
8. After considering all the materials, we find that details of unrecorded purchases were determined yearwise. By accepting the peak theory, the yearwise profit was also determined which we have shown in the foregoing paras. The assessments upto the asst. yr. 1988-89 were completed wherein the profit determined on the basis of incriminating documents and seized material was added. The amount as determined was only added. The appeal was preferred before CIT(A) who directed the AO to add the profit as determined on the basis of incriminating documents. Against this order of CIT(A), the Department preferred appeal before the Tribunal. The Tribunal in ITA No. 788 to 790/Jp/1992 dismissed the appeal of the Department wherein it was held that the amount determined on the basis of incriminating documents have already been assessed in respective assessment years. Now the point which is left, that what income should be added for asst. yr. 1989-90. Of course, there is no doubt and there is no dispute that assessee has himself surrendered a sum of Rs. 2,50,000 at the time of search. But when accounts were prepared and the profits were determined which was on the basis of incriminating documents, the amount found was Rs. 21,692 only. If the statement is to be considered then the addition made by the AO are correct but if the true position is to be considered then only addition can be made i.e. Rs. 21,692 which was determined on the basis of incriminating documents found during the course of search. There is no any other material or there is no any other investment which was found by the Department which is not recorded in the books of account. Therefore, in the interest of natural justice the profit which is only earned and determined should be added in the income of the assessee. It is correct that the confession cannot be foundation of assessment and nor creates any estoppel. This was held by apex Court in Pooran Mal's case (supra). It is a well settled law that the cognizance should not be taken on the statement made by a person at the time of search if that statement is rebuttable or assessee on a later stage explains his position. In the present case, of course, the confession was made and a surrender of Rs. 2,50,000 was made. However, on a later stage the profits of the assessee for various years were determined and that determination was based on material found during the course of assessment.
9. The Department has accepted partly and AO himself made a protective addition of Rs. 1,04,000 and odd. It means they have partly accepted the determination of income. For the sake of completeness, the determination was made by the Department itself and not by the assessee. Therefore, in our considered view the admittance of part determination is not correct, either it should be accepted in full or it should be ignored in full.
10. It is also well settled law that an admission by a party is the best evidence of a point in issue and, though not conclusive, is decisive of the matter unless successfully withdrawn or proved erroneous. These observations were made by apex Court in case of Narayan Bhagwantrao Gosavi vs. Gopal Vinayak Gosavi, AIR 1960 (SC) 100. Such admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect and the assessee should be given proper opportunity to show that the books of account do not show the correct state of facts. These observations were made by the Supreme Court in case of Pullangode Rubber Co. Ltd. vs. State of Kerala (1973) 91 ITR 18 (SC). Likewise, we have also considered other case laws as relied upon by the learned counsel. The ratio of these decisions are also similar as we have discussed above. After considering all these materials, we are of the view that the determination which was determined by the Department on yearwise should be adopted. However, in this determination we find some discrepancies. As per trading account for the period from 1st April, 1988, to 27th May,1988, the excess stock is of Rs. 1,75,032. This is as per trading account filed by assessee, and a copy of the same is placed at p. 8 of the paper-book. There is one more discrepancy. After that period, a sale of Rs. 50,191 was found not recorded in the books of account. This is also not considered for the purpose of profit and as per assessment order of the AO at p. 3 this point is discussed by the AO. As per AO the excess stock was Rs. 1,74,893 and if this amount of Rs. 50,191 is added then the excess stock will come to Rs. 2,25,084. This, in our opinion is not considered. Therefore, we are of the view that matter should go back to the file of the AO for determination of correct figure of profit for the year under consideration. For the sake of completeness, from the figure of Rs. 2,25,000 and odd if the figure of profit determined for various years that was about Rs. 1,23,000 and odd i.e. upto asst. yr. 1988-89 is reduced then the remaining amount comes more than the figure of Rs. 21,692 which is determined by the Department for the year under consideration. Therefore, we restore the matter accordingly.
11. Regarding the sustenance of protective addition of Rs. 1,04,356, this addition has already been made in various years i.e. asst. yrs. 1985-86 to 1988-89. Therefore, this protective addition is deleted.
12. For the sake of completeness, we would like to observe here that assessee has filed a revised return declaring an income of Rs. 1,26,456. However, a note was given below the computation of income wherein it was stated that there was a search on assessee's premises on 27th May, 1988. In course of search, certain bills of purchase, sales and other papers and documents were found. These purchases were made on different dates. Therefore, the peak investment in the purchase and gross profit earned on sales is equivalent to stock and debtors. The book stock of assessee after including certain purchases for which bills were received but not journalised amount of Rs. 6,21,490 whereas physical stock was of s. 8,36,725 including certain disputed items and disputed valuations. Looking to the above and other papers seized in course of search, the assessee surrendered a sum of Rs. 2,50,000 on estimation basis to be included in the total income. Now the assessee has prepared the datewise statement of unaccounted purchases and sales. According to this statement, stock remaining out of unaccounted stock and sales amounts to Rs. 1,73,560. This stock when totalled with stock roughly tallied with the physical stock found. On the basis of this statement, the AO has worked out the unaccounted income including speculation income, profit on unaccounted sales and unrecorded investment in various years. After that the figures determined by the AO as stated in foregoing paras were mentioned and after these figures the assessee gave further note that the income of the various assessment years amounting to Rs. 1,23,544 has already been taxed in the respective assessment years. Hence, the assessee has now filed the revised return to exclude the sum of Rs. 1,23,544 from the total estimated surrender of Rs. 2,50,000 without prejudice to the right of the assessee to prefer appeal for respective assessment years." If this note is considered, then it is amply clear that assessee surrendered an estimated profit of Rs. 2,50,000 which was rebutted and the stock was determined on the basis of material found and seized. Therefore, as we have already stated that the profit should be adopted as per the documents found and determination made by the Department. With these observations we pass the order accordingly. The AO is further directed to give an opportunity to the assessee for further explanation. This covers ground No. 2 taken by the assessee in its appeal. Ground No. 1 is against the trading addition. We do not find any infirmity in the orders of the authorities below. Therefore, this addition is sustained.
13. In the result, the appeal of the assessee is partly allowed for statistical purposes.