Bengali Sweet Centre, New Delhi v. ACIT, New Delhi

ITA 1026/DEL/2010 | 2000-2001
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 102620114 RSA 2010
Assessee PAN AABFB3097R
Bench Delhi
Appeal Number ITA 1026/DEL/2010
Duration Of Justice 10 month(s) 13 day(s)
Appellant Bengali Sweet Centre, New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 21-01-2011
Date Of Final Hearing 19-01-2011
Next Hearing Date 19-01-2011
Assessment Year 2000-2001
Appeal Filed On 09-03-2010
Judgment Text
ITA NOS. 1026-1032 & 1134-1140/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NOS. 1026 1027 1028 1029 1030 1031 & 103 2/DEL/2010 A.YRS. : 2000-01 2001-02 2002-03 2003-04 2004-0 5 2005-06 & 2006-07 BENGALI SWEET CENTRE G-19 SOUTH EXTENSION PART-I NEW DELHI (PAN : AABFB3097R) VS. ACIT CENTRAL CIRCLE - 12 JHANDEWALA EXTENSION NEW DELHI AND I.T.A. NOS. 1134 1135 1136 1137 1138 1139 & 114 0/DEL/2010 A.YRS. : 2000-01 2001-02 2002-03 2003-04 2004-0 5 2005-06 & 2006-07 ACIT CENTRAL CIRCLE - 12 ROOM NO. 330 ARA CENTRE JHANDEWALA EXTENSION NEW DELHI VS. BENGALI SWEET CENTRE G-19 SOUTH EXTENSION PART-I NEW DELHI (PAN : AABFB3097R) (APPELLANTS ) (APPELLANTS ) (APPELLANTS ) (APPELLANTS ) (RESPONDENTS ) (RESPONDENTS ) (RESPONDENTS ) (RESPONDENTS ) ASSEESSEE BY : SH. M.P. RASTOGI ADVOCATE AND CA PN SHASTRI DEPARTMENT BY : SH. ASHOK PANDEY C.I.T. (D.R.) ORDER ORDER ORDER ORDER PER BENCH PER BENCH PER BENCH PER BENCH THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E EMANATE OUT OF RESPECTIVE ORDERS OF LD. COMMISSIONER OF INCO ME TAX (APPEALS). 2. SINCE THE ISSUES ARE COMMON AND RELATED AND THE A PPEALS WERE HEARD TOGETHER THESE ARE BEING CONSOLIDATED AND DI SPOSED OF TOGETHER BY WAY OF A COMMON ORDER. ITA NOS. 1026-1032 & 1134-1140/DEL/2010 2 ASSESSES APPEAL (ITA NO. ASSESSES APPEAL (ITA NO. ASSESSES APPEAL (ITA NO. ASSESSES APPEAL (ITA NO. 1032) 1032) 1032) 1032) 3. THIS APPEAL BY THE ASSESSEE. THE FOLLOWING EFF ECTIVE GROUNDS HAVE BEEN RAISED:- (I) LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRE D IN NOT DIRECTING COMPLETE DELETION OF THE ADDITION OF ` 200 LAKHS ON ACCOUNT OF ALLEGED UNRECORDED SALES WHILE AGREEING THAT THE ADDITION BY THE ASSESSING OFFICER IS WITHOUT ANY MA TERIALS. (II) LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN SUSTAINING THE ADDITION OF ` 15 LAKHS AGREED TO BE ADMITTED AS INCOME ON ACCOUNT OF DELIVERY NOTES/CHALLANS PEND ING TO BE RECORDED AS SALES AS OF 10.11.2005 DESPITE THE F ACT THAT THEY WERE RECORDED AT ` 13.22 LAKHS BEFORE 31.3.200 6 IN BOOKS AS SALES. REVENUES APPEAL (ITA NO. 1140) REVENUES APPEAL (ITA NO. 1140) REVENUES APPEAL (ITA NO. 1140) REVENUES APPEAL (ITA NO. 1140) 4. THIS CROSS APPEAL BY THE REVENUE. THE ISSUES RAI SED READ AS UNDER:- (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS WRONG IN ERR ED IN FAILING TO APPRECIATE THE SCOPE OF ASSESSMENT U/S 153A/153C OF THE IT ACT 1961 AND OMITTING TO CONS IDER THE IMPLICATION OF PROVISO OF SECTION 153A. ITA NOS. 1026-1032 & 1134-1140/DEL/2010 3 (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD . COMMISSIONER OF INCOME TAX (APPEALS) IS WRONG IN RESTRICTING THE ADDITION TO ` 16 LAKHS. 5. IN THIS CASE SEARCH AND SEIZURE OPERATION U/S 13 2 OF THE IT ACT WAS CARRIED OUT ON 10.11.2005 AT THE RESIDENTIAL PR EMISES AT H-78 SOUTH EXTENSION PART-I NEW DELHI OF SHRI RAVINDER KUMAR JAIN SHRI RAJESH JAIN AND SH. RAJKUMAR JAIN ALL ARE PARTNERS OF M/S BENGALI SWEET CENTRE G-19 SOUTH EXTENSION PART-I NEW DE LHI AND SURVEY U/S 133A OF THE IT ACT WAS CONDUCTED AT THE BUSINESS P REMISES OF M/S BENGALI SWEET CENTRE H-82 SOUTH EXTENSION PART-I NEW DELHI AND G- 19 SOUTH EXTENSION PART-I NEW DELHI. DURING THESE SEARCH AND SEIZURE OPERATION AND SURVEY THE ASSESSING OFFICER NOTED CERTAIN BOOKS OF ACCOUNTS WERE FOUND AND WERE SEIZED WHICH WERE USED SCRUTINIZED AND EXAMINED. THE ASSESSEE FILED RETU RN OF INCOME ON 31.10.2006 DECLARING INCOME OF 18 05 818/-. THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF SWEE T TRADING OF MILK AND EATABLE PRODUCTS. THE ASSESSEE ATTACHED A NOT E WITH THE RETURN OF INCOME REGARDING ADDITIONAL INCOME OF ` 16 LAKHS OFFERED FOR TAXATION IN THE HANDS OF M/S BENGALI CENTRE AS UNDER :- THERE WERE SURVEY OPERATIONS U/S 133A OF THE INCO ME TAX ACT 1961 ON BENGALI SWEET CENTRE AND SEARCH OPERATION O N THE ITA NOS. 1026-1032 & 1134-1140/DEL/2010 4 PARTNERS OF BENGALI SWEET CENTRE U/S 132 OF THE IN COME TAX ACT 1961 ON 10 TH NOVEMBER 2005. THE PARTNERS IN ORDER TO BUY PEACE AND TO AVOID PRO TRACTED LITIGATION HAD ADMITTED ADDITIONAL INCOME OF ` 200 LAKHS (DETAILS GIVEN BELOW) ON THE CONDITION NO ACTION WOULD BE TA KEN AGAINST ANY OF THEM BY WAY OF PENALTIES AND OTHER HARSH MEA SURES. FURTHER THAT THE CASH OF ` 57.50 LAKHS SEIZED BY THE DEPARTMENT WILL BE ADJUSTED AS ADVANCE TAX TOWARDS THE ADDITIO NAL INCOME ADMITTED. ACCORDINGLY THE FOLLOWING INCOME HAS BEEN ADMITTED IN THE HANDS OF BENGALI SWEET CENTRE : ` IN LACS 1(A) SALES ON ACCOUNT OF CHALLANS ISSUED BEFORE 15.00 10.11.2005 PENDING ACCOUNTING IN BOOKS. (B) SOME SMALL PIECES OF SUPPORTING PAPERS AND 1.00 VOUCHERS FOR PURCHASE AND EXPENSES GOT DETACHED FROM VOUCHERS AND THUS DIFFICULT TO LINK IN ORDER TO AVOID TEDIOUS WORK OF LINKING AND AVOID LITIGATIO N ETC. 6. ASSESSING OFFICER SENT NOTICES U/S 143(2) AND 1 42(1) ALONGWITH QUESTIONNAIRE BUT THE NOTICES REMAINED UN-COMPLIED WITH. IN THE ABSENCE OF INFORMATION AND NON-ATTENDANCE ON THE P ART OF THE ITA NOS. 1026-1032 & 1134-1140/DEL/2010 5 ASSESSEE ASSESSING OFFICER PROCEEDED TO MAKE THE ASSESSMENT EXPARTE U/S 144 OF THE IT ACT ON THE BASIS OF MATERI AL AVAILABLE ON RECORD CITING SEVERAL LACUNAE IN THE BOOKS OF ACCO UNT. ON THE BASIS OF DOCUMENTS FOUND DURING SEARCH AND SEIZURE AS WELL AS DURING THE SURVEY OPERATION THE ASSESSING OFFICER CONCLUDED THAT IN VIEW OF THE DEFECTS IN ACCOUNTING PRACTICE OF THE ASSESSEE HE REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE ON THE BASIS OF WHI CH RETURN WAS PREPARED AND PROCEEDED TO MAKE AN ESTIMATED OF THE I NCOME OF THE ASSESSEE. HE PROCEEDED TO MAKE AN ESTIMATE ADDITION OF ` 200 LAKHS MADE IN RESPECT OF THE UNRECORDED SALES AND UNEXPLAI NED VOUCHERS ETC. ASSESSING OFFICER FURTHER NOTED THAT DURING THE SEARCH AND SEIZURE OPERATION ON THE RESIDENTIAL PREMISES CAS H OF ` 51 21 500/- WAS FOUND AND OUT OF WHICH CASH OF ` 50 000/- WAS S EIZED BY THE DEPARTMENT. ASSESSEE DID NOT FURNISH ANY EXPLAN ATION REGARDING THIS CASH. HENCE ASSESSING OFFICER ADDED THIS AMO UNT ALSO MAKING ADDITION OF ` 51 21 500/-. 7. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE SUBMITTED VARIOUS ADDITIONAL DOCUMENTS ALSO. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ALSO OBTAINED A REMAND REPORT FROM THE ASSESSING OFFICER. REGARDING THE ADDITION OF ` 200 LAKHS ASSESSEE ITA NOS. 1026-1032 & 1134-1140/DEL/2010 6 SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AS UNDER:- IT WAS SUBMITTED WITHOUT PREJUDICE TO THE FOREGOING THAT THERE ARE NO UNACCOUNTED SALES AND THE SEIZED BILLS HAVE EITHER BEEN ALREADY ACCOUNTED FOR IN THE BOOKS BEFORE 10.11.200 5 OR THE FEW DELIVERY CHALLANS RELATING TO THE DEWALI FESTIVAL P ERIOD WHICH WERE PENDING BILLING A COMMON PRACTICE OF THE TRAD E HAVE BEEN BILLED AND ACCOUNTED FOR DURING THE YEAR ENDED ON 31.3.2006 THAT FOR PASSING AN ORDER BEST JUDGEMEN T AFTER REJECTION OF BOOKS THE GP RATES OF EITHER THE ASS ESSEE IN THE EARLIER YEARS OR THE GP RATE OF A COMPARABLE BUSINES S IS TO BE ADOPTED. IT CANNOT BE AN UNREASONABLE ONE AND WITHO UT ANY SCIENTIFIC BASIS. IT IS SETTLED LAW THAT THE ACCEPTED PRINCIPLES OF P ASSING BEST JUDGEMENT ORDER ARE AS UNDER:- THE ASSESSING OFFICER MUST PASS A BEST JUDGEMENT OR DER AND NOT ACT ARBITRARILY ON SURMISES AND CONJECTURE S AND WITH A VINDICTIVE VIEW TO PUNISH NON-COMPLIANCE. IT MUST BE BASED ON RESULTS OF THE ASSESSEE OR COMPA RABLE BUSINESS IN HIS KNOWLEDGE. ITA NOS. 1026-1032 & 1134-1140/DEL/2010 7 THE RESULTS ESTIMATED ARE GIVING ABSURD RESULTS WHI CH CAN BE JUDGED FROM THE FOLLOWING COMPARABLE CASES: PARTICULARS BENGALI BIKANER BHIKRAMS SWEET CENTRE (` LACS) (` LACS) (` LACS) SALES ESCL SALES TAX 398.87 LESS SALES TAX 31.02 SALES EXCL SALES TAX 367.85 229.88 25.41 GROSS PROFIT 80.15 44.27 4.66 GP RATE 21.79% 19.26% 18.35% ADDITION TO INCOME 251.21 SALES AS ASSESSED 567.85 GROSS PROFIT AS ASSESSED 331.36 GP RATE 58.35 IT WILL BE OBSERVED THAT THE GP RATE SHOWN BY THE AS SESSEE IN ITS ACCOUNTS COMPARES WELL WITH TWO OTHER SIMILAR BUSINES S. THE GP RATE WORKED OUT BY THE ASSESSING OFFICER RES ULT IN ABSURD RESULTS REFLECTING A GP RATE OF 59% WHICH TO THE BES T OF OUR KNOWLEDGE IS NOT THERE IN THIS LINE OF BUSINESS AS SESSEE ENCLOSED PROFIT AND LOSS ACCOUNTS OF TWO CONCERNS ENGAGED IN SIMILAR LINE OF BUSINESS AS THAT OF THE ASSESSEE. ITA NOS. 1026-1032 & 1134-1140/DEL/2010 8 APPELLANT ENCLOSED A COMPARATIVE CHART SHOWING THE SALES GP AND NP AND THEIR RATES FOR THE YEAR 2000-01 TO 2005- 06 AND THE TWO COMPARATIVE BUSINESSES. IT SHOWS THE RESULTS ON THE BASIS OF GROSS SALES INCLUSIVE OF SALES TAX IN THE UPPER PO RTION. IT SHOWS THE RESULTS ON THE BASIS OF NET GROSS SALES AFTER E XCLUDING THE SALE TAX IN THE LOWER PORTION. IT WILL BE OBSERVED FROM IT THAT : THE GP BEING REFLE CTED IS IN LINE WITH OTHERS IN THE SAME LINE OF BUSINESS. THE GP O F 59% BEING ARRIVED AT BY THE ASSESSING OFFICER IS ABNORMALLY HIGH AND THE ASSESSING OFFICER HAS NOT GIVEN ANY MATERIAL TO SUP PORT IT. THEREFORE IT WAS PRAYED THAT THE ADDITION OF ` 200 LAKHS MAY BE DELETED ON THIS COUNT ALSO. 7.1 LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDER ED THE SUBMISSIONS AND OPINED THAT ADDITION MADE BY THE ASS ESSING OFFICER IS NOT BASED ON REASONABLE BASIS. HE OBSERVED THAT ASSESSING OFFICERS OBSERVATION THAT ASSESSEE HAD DECLARED ONLY 34.76% OF THE SALES IN REGULAR BOOKS WAS NOT FOUND TO BE CORRECT. DURING THE SURVEY OPERATION THE DEPARTMENT HAD FOUND 13.22 LAKHS O F CHALLANS AND SOME SMALL PIECES OF PAPERS / VOUCHERS NOT RECORDED IN REGULAR BOOKS. ITA NOS. 1026-1032 & 1134-1140/DEL/2010 9 ON THE BASIS OF THESE PAPERS THE ASSESSEE HAD DECL ARED ` 16 LAKHS AS UNDISCLOSED INCOME AS UNDER:- ` IN LACS 1(A) SALES ON ACCOUNT OF CHALLANS ISSUED BEFORE 15.00 10.11.2005. (B) SOME SMALL PIECES OF SUPPORTING PAPERS AND 1.00 VOUCHERS TOTAL TOTAL TOTAL TOTAL 16 LACS 16 LACS 16 LACS 16 LACS 7.2 LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED TH AT SINCE THE ASSESSEE HAD ALREADY DEBITED ALL EXPENSES RELATED TO THESE SALES THE NET TOTAL ADDITION TO THE INCOME OF THE ASSESSEE DUR ING THE YEAR SHOULD BE ` 16 LAKHS. OVER AND ABOVE THE INCOME DECLARED ON THE BASIS OF RECORDED BOOK PROFIT. LD. COMMISSIONER OF INCOME T AX (APPEALS) FURTHER OBSERVED THAT THE DEPARTMENT HAD ALSO NO T FOUND ANY OTHER MATERIAL WHICH COULD DIRECTLY OR INDIRECTLY INDICAT E THAT THE ASSESSEE HAD MADE UNDISCLOSED INCOME OTHER THAN ` 16 LAKHS DISCUSSED ABOVE. HE NOTED THAT IT IS EVIDENT FROM THE COMPUTATION OF THE TAXABLE INCOME ON RECORD THAT ASSESSEE HAD ADDED ` 1 LAKH I N COMPUTATION ON ACCOUNT OF MISC. SMALL PAPERS AND VOUCHERS TO THE PRO FIT OF ` 1705518/- HE NOTED THAT THE ASSESSMENT ORDER HAS TAKEN THE INCOME RETURNED ITA NOS. 1026-1032 & 1134-1140/DEL/2010 10 AT ` 18 05 518/- INCLUSIVE OF THIS ` 1 LAKHS. THER EFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRANTED RELIEF OF ` 1 LAKH ON THIS ACCOUNT. 7.3 AS REGARDS ADDITION OF ` 51 21 500/- REGARDING CASH FOUND THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ELABORATELY CONSIDERED THE SUBMISSIONS. THE MAIN CONTENTION OF THE ASSESSEE WA S THAT THE SURVEY OPERATION U/S 132 WAS TAKEN AT THE RESIDENTIAL PRE MISES OF PARTNERS WHO ALSO LIVE IN THE SAME PREMISES ALONG WITH THEIR S POUSES AND PARENTS. AFTER ELABORATE CONSIDERING THE SUBMISSIO NS REGARDING CASH AVAILABLE LD. COMMISSIONER OF INCOME TAX (APPEALS) CO NCLUDED AS UNDER:- THE CASH EXPLAINED IN THE GIST ABOVE IS ADJUSTED FO R REASONS GIVEN THERETO WILL BE AS UNDER:- AMOUNT ` CASH IN HAND IN BENGALI SWEET CENTER AS ON 9.11.2005 13 60 374 CASH OF MR. RAJ KUMAR JAIN TOKEN MONEYS ON ACCOUNT OF DHOJ LAND SALE SCRIBLING OF DHOJ LAND ADMITTED AS INCOME NORMAL CASH IN HAND 15 50 000 14 00 000 12 000 ITA NOS. 1026-1032 & 1134-1140/DEL/2010 11 FROM DRAWINGS TOTAL 29 62 000 LESS CASH IN HAND IS REDUCED TO THE EXTENT OF 75% ON ACCOUNT OF EXPENSES 9 000 29 53 000 NORMAL CASH IN HAND FROM DRAWINGS MR. RAVINDER KUMAR JAIN 12 000 LESS CASH IN HAND IS REDUCED TO THE EXTENT OF 75% ON ACCOUNT OF EXPENSES 9 000 3 000 NORMAL CASH IN HAND FROM DRAWINGS FROM RAJESH KUMAR JAIN 12 000 LESS CASH IN HAND IS REDUCED TO THE EXTENT OF 75% ON ACCOUNT OF EXPENSES 9 000 3 000 CASH OF MRS. ALPANA JAIN 6 82 091 LESS REDUCTION ON ACCOUNT OF DRAWINGS ` 21000 FOR 7 MONTHS BEING LOW DOUBLED 21 000 6 61 091 CASH OF MRS. VANITA JAIN 7 87 087 LESS REDUCTION ON ACCOUNT OF DRAWINGS ` 21 000 FOR 7 MONTHS BEING LOW DOUBLED 21 000 7 66 087 CASH OF MRS. SEEMA JAIN 95 539 LESS REDUCTION ON ACCOUNT OF DRAWINGS OF ` 21 000 FOR 7 MONTHS BEING LOW DOUBLED 21 000 74 539 TOTAL CASH AVAILABLE 58 21 091 ITA NOS. 1026-1032 & 1134-1140/DEL/2010 12 ADDITIONAL INCOME ADMITTED BY MR. RAJ KUMAR RAVINDER KUMAR AND RAJESH KUMAR IN THEIR PERSONAL RETURNS TO COVER THE DIFFERENCE @ ` 2 19 000 EACH PLEASE SEE COMPUTATION OF TAXABLE INCOMES AT PAGES 4 (RAVINDER KUMAR) 12 (RAJ KUMAR) & 20 (RAJESH KUMAR) 6 57 000 RESULTANT EXPLAINABLE CASH AVAILABLE 64 78 091 TOTAL CASH FOUND FROM THE FIRM ITS PARTNERS AND THEIR SPOUSES AS PER PANCHNAMAS 62 99 100 IT IS OBSERVED FROM THE ABOVE THAT THE GROUP OF ASS ESSEES LIVING JOINTLY AT THE SAME PREMISES HAVE EXPLAINABLE CASH OF ` 64 78 091 [AFTER INCLUDING THE ADDITIONAL INCOME OF ` 657 000 ADMITTED BY THE GROUP ON ACCOUNT OF DEFICIENCY IN CA SH] IS SUFFICIENT TO COVER THE TOTAL CASH OF ` 62 99 1000 FOUND DURING THE SEARCH OPERATIONS ON 10.11.2005. FURTHER THE ALTERNATE CONTENTION OF THE ASSESSEE THA T EVEN IF THE ADDITIONS TO INCOMES MADE BY THE ASSESSING OFFICER F OR THESE ITA NOS. 1026-1032 & 1134-1140/DEL/2010 13 YEARS IF CONSIDERED WILL ALSO COVER THE CASH FOUN D TO SOME EXTENT HAS SOME FORCE IN IT. IN FACT IN THIS YEAR IT SELF THE UNACCOUNTED INCOME ADDED BY THE ASSESSING OFFICER EVEN AFTER GRANT OF RELIEF IN APPEAL IS ` 17 LAKHS. THEREFORE I HAVE NO HESITATION IN DELETING THE ADD ITION OF ` 51 21 500 FOUND AS PER ANNEXURE-3. 8. AGAINST THIS ORDER THE REVENUE AND ASSESSEE ARE IN CROSS APPEALS AS ABOVE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE FIND THAT ASSESSING OFFICER HAD MADE THE ADDITIO N OF ` 200 LAKHS ON ESTIMATE BASIS WITHOUT ANY COGENT REASONING. ON T HE OTHER HAND LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ANALYSED TH E ENTIRE FACTS OF THE CASE AND CONSIDERABLE COMPARABLES ALSO AND HAS C OME TO THE CONCLUSION THAT GP RATE SHOWN BY THE ASSESSEE WAS QU ITE COMPARABLE AND NO INTERFERENCE IS CALLED FOR IN THAT REGARD. HE ONLY UPHELD THE ADDITION OF ` 16 LACS ON ACCOUNT OF CHALLANS FOUND UN-ENTERED AND SOME DEFICIENCY IN VOUCHERS. IN OUR OPINION LD. COMMISS IONER OF INCOME TAX (APPEALS) HAS PASSED A REASONABLE ORDER WHICH D OES NOT NEED ANY INTERFERENCE ON OUR PART. HENCE WE UPHELD THE SAME. 9.1 IN THE RESULT CROSS APPEALS BY ASSESSEE AND RE VENUE STAND DISMISSED. ITA NOS. 1026-1032 & 1134-1140/DEL/2010 14 OTHER ASSESSES AND REVENUES APPEALS OTHER ASSESSES AND REVENUES APPEALS OTHER ASSESSES AND REVENUES APPEALS OTHER ASSESSES AND REVENUES APPEALS : :: :- -- - 10. THE COMMON GROUND RAISED BY THE REVENUE IN ALL THESE YEARS IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN RESTRICTING THE ADDITION TO 1% OF SALES ADOPTED BY THE ASSESSING OFFICER. THE COMMON ISSUE RAISED IN THE ASSESSEES CROSS APPEALS IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN UPHOLDING THAT VALIDITY U/S 153C OF THE IT ACT. THE LD. COM MISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT DIRECTING THE COMPLET E DELETION OF ADDITION MADE. 11. ASSESSING OFFICER IN THIS CASES NOTED THAT PUR SUANT TO THE SEARCH AND SEIZURE AS MENTIONED IN THE EARLIER PART OF OUR ORDER. ASSESSEES CASES WERE ASSESSED U/S 153C OF THE IT ACT FOR THE PAST SIX ASSESSMENT YEARS. FINDING VARIOUS LACUNAE IN THE ASS ESSEE METHOD OF ACCOUNTING ASSESSING OFFICER REJECTED THE BOOKS O F ACCOUNTS OF THE ASSESSEE AND ESTIMATED THE INCOME OF THE ASSESSEE AS 10% OF OVERALL SALES. 12. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE VALIDITY NOTICE U/S 153C. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ELABORATELY CONSIDERED THE SUB MISSIONS IN THIS ITA NOS. 1026-1032 & 1134-1140/DEL/2010 15 REGARD. FOLLOWING PORTION OF THE SUBMISSIONS MAD E BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS AS UNDER:- THE LD. ASSESSING OFFICER HIMSELF OBSERVES IN HIS ORDER THAT THE GP IS IMPROVING AND HAS GIVEN SUCH FIGURES IN HIS ORD ER ITSELF WHICH IS AS UNDER:- S.NO. ASSESSMENT YEAR SALES GP% RATE NP% RATE 1 2000-01 24684051 22.66 2.16 2 2001-02 27675846 23.13 1.96 3 2002-03 28241900 23.57 2.34 4 2003-04 31574267 23.60 2.50 5 2004-05 32849316 25.00 2.45 6 2005-06 36283133 25.00 2.26 THE ASSESSEE HAS SUBMITTED THAT ASSESSING OFFICER TAKEN FIGURES OF SALES INCLUSIVE OF SALES TAX OF COMPARISON THOUGH SALES TAX DOES NOT HAVE ANY ELEMENT OF PROFIT. SIMILARLY THA T HE HAS TAKEN NET PROFIT RETURNED AFTER DEDUCTION OF SALARIES TO PARTNERS U/S 40[V](2) WHERE AS HE SHOULD HAVE TAKEN IT BEFORE THE ALLOWANCE OF SALARIES TO WORKING PARTNERS. THEY HAVE PROVIDED IN TABLE A COMPLETE WORKING AND ALSO ACCOUNTS OF TWO SIMILARLY P LACED BUSINESSES. THE SUMMARIZED VERSION IS GIVEN HEREU NDER:- S.NO. ASSESSMENT YEAR SALES EXCLUDING SALES TAX GP% RATE NP% RATE BEFORE SALARY TO PARTNER 1 2000-01 23790042 19.76 3.75 ITA NOS. 1026-1032 & 1134-1140/DEL/2010 16 2 2001-02 265175958 19.78 3.41 3 2002-03 27029253 20.14 3.78 4 2003-04 30068923 19.78 3.82 5 2004-05 30666236 19.67 3.80 6 2005-06 33954680 20.58 3.54 THE ASSESSEE HAS ALSO SUBMITTED ACCOUNTS OF TWO COMPA RABLE CASES THE RESULTS OF WHICH ARE AS UNDER:- PARTICULARS BIKANER BHIKRAMS (` LACS) (` LACS) SALES ESCL SALES TAX 229.88 25.41 GROSS PROFIT 44.27 4.66 GP RATE 19.26% 18.35% NP RATE 5.19% 2.25% 13. CONSIDERING THE ABOVE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE A ND THE OBSERVATION OF THE ASSESSING OFFICER. THE ASSESSIN G OFFICER HAS NOT MADE REFERENCE TO ANY SPECIFIC SEIZED MATERIAL P ERTAINING TO THE YEAR UNDER CONSIDERATION IN HIS ORDER. HE HAS RELIED ONLY ON THE FACT THAT THERE WERE CERTAIN CHALLANS AND VOUC HERS FOUND ON 10.11.2005 PERTAINING MAINLY TO THE PERIOD 20.10.200 5 TO 1.11.2005 WHICH WERE NOT BILLED AND ACCOUNTED FOR. SINCE THE ASSESSEE HAD NOT FURNISHED ANY INFORMATION HE MADE A N ADDITION TO ON AN ASSUMED NP RATE OF 10% OF THE VERY SALES D ISCLOSED BY ITA NOS. 1026-1032 & 1134-1140/DEL/2010 17 THE ASSESSEE. NO ANY COMPARATIVE DATA OF THE ASSES SEE OR ANY OTHER ASSESSEE IN SIMILAR LINE OF BUSINESS HAS BEEN COMPARED. THE ASSESSEE HAS ON THE OTHER HAND SHOWED THAT HE I S HAVING A CONTINUOUSLY INCREASING SALES AND BETTERMENT OF GP RATE. IT HAS ALSO GIVEN COMPARATIVE CASES WHERE THE GP RATE IS S IMILAR TO HIS. THE NP RATE IN ONE CASE IS LOWER WHILE IT IS HIGHER IN ANOTHER. THEREFORE I AM INCLINED TO AGREE THAT THE NP RATE OF 10% ADOPTED IS WITHOUT ANY BASIS. THERE IS ALSO NO BASIS GIVEN BY THE ASSESSING OFFICER FOR ADOPTING A HIGHER GP OF 10%. THE ASSESSEE HAS ALSO CITED A DECISION OF ON 153A /153C WHERE IN IT HAS BEEN HELD THAT NO ADDITION CAN BE MADE TO AN ASSESSED INCOME U/S 143(3) OR 143(1) UNLESS SOME INCRIMINATI NG MATERIAL RELATED TO THE YEAR IS UNEARTHED DURING SEARCH. TH E ASSESSING OFFICER HAS NOT SHOWN IT IN ANY OF THE SIX YEARS I NVOLVED U/S 153C. THEREFORE I FIND SOME FORCE IN THE ARGUMENT OF THE APPELLANT. HOWEVER THE FACT REMAINS THAT THE ASSESSEE HAS NOT COOPERATED WITH THE ASSESSING OFFICER IN MAKING THE ASSESSMEN T. ITA NOS. 1026-1032 & 1134-1140/DEL/2010 18 IT IS ALSO CORRECT THAT THE GP/NP RATE HAS TO BE IN RELATION TO SALES WITHOUT INCLUDING SALES TAX AS IT DOES NOT HAVE ANY ELEMENT OF PROFIT. IN ORDER TO COVER THE POSSIBLE UNVOUCHED EXPENSES D EBITED IN ACCOUNTS AND ALSO TO COVER FOR THE BLANK WAGES VOUC HERS OBTAINED BY THE ASSESSEE I WILL RETAIN AN ADDITION OF 1% OF THE SALES EXCLUSIVE OF SALES TAX TO INCOME AND DIRECT DELETION OF THE REMAINING ADDITION. THE RESULT OF THIS WILL BE AN ADDITION OF ` 2 27 90 0 (BEING 1% OF SALES) TO THE RETURNED INCOME-AFTER DEDUCTION OF S ALARIES TO THE PARTNER. 14. AGAINST THE ABOVE ORDER THE ASSESSEE AND REVEN UE ARE IN CROSS APPEALS. 15. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. LD. COUNSEL OF THE ASSESSEE HAS URGED THAT THERE WAS NO SATISFACTI ON RECORDED IN THIS CASE IN INITIATING ACTION U/S 153C. HOWEVER HE F AIRLY AGREED THAT THIS GROUND WAS NEVER RAISED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND HE DID NOT PRESS THIS GROUND REGARDIN G ASSESSMENT ON JURISDICTION OF ASSESSMENT U/S 153C. THE LD. COUN SEL OF THE ASSESSEE ITA NOS. 1026-1032 & 1134-1140/DEL/2010 19 ALSO CONCEDED THAT ASSESSEE HAS NOT AGITATED THE IS SUE OF REJECTION OF BOOKS BY THE ASSESSING OFFICER. 15.1 AS REGARDS THE ADDITION MADE WE FIND THAT ASSE SSING OFFICER ON GUESS WORK MADE ADDITION ON TOTALLY ADHOC BASIS WI THOUT ANY COGENT REASONING OR COMPARABLES. ON THE OTHER HAND WE FIN D THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS CONSIDERED THE COMPARABLES AND HAS RIGHTLY CAME TO THE CONCLUSION TH AT ADDITION IS LIABLE ONLY FOR 1% OF THE SALES. UNDER THE CIRCUMST ANCES ON THE FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN RE STRICTING THE 1% OF THE SALES ADOPTED BY THE ASSESSING OFFICER. 16. IN THE RESULT ALL THE APPEALS FILED BY THE REVENUE AND ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/01/2011. SD/- SD/- [R [R[R [R.P. TOLANI .P. TOLANI .P. TOLANI .P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 21/01/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES