M/s Lucky coke Manufacturer, Dhanbad v. ACIT,

ITA 14/RAN/2011 | misc
Pronouncement Date: 23-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 1425114 RSA 2011
Assessee PAN AABFL7483P
Bench Ranchi
Appeal Number ITA 14/RAN/2011
Duration Of Justice 3 month(s) 15 day(s)
Appellant M/s Lucky coke Manufacturer, Dhanbad
Respondent ACIT,
Appeal Type Income Tax Appeal
Pronouncement Date 23-02-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 23-02-2012
Assessment Year misc
Appeal Filed On 08-11-2011
Judgment Text
ITA NO.14/RANCHI/2011 M/S. LUCKY COKE MANUFACTURERS DHANBAD 1 IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI CIRCUIT BENCH RANCHI BEFORE: SHRI B.R. MITTAL JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO. 14 / RANCHI / 20 11 ASSESSMENT YEAR : 2005 - 06 M/S. LUCKY COKE MANUFACTUTER S DHANBAD VS. ACIT CENTRAL CIRCLE DHANBAD (APPELLANT) (RESPONDENT) PAN NO. AABFL 7483P APPELLANT BY: SHRI S.K. PODDAR WITH SHRI M.K. CHOUDHURY ADVOCATE RESPONDENT BY: SHRI DEEPAK ROUSHAN SR.S.C. DATE OF HEAR I NG: 1 6 .02.2012 DATE OF PRONOUNCEME NT: 23 .02.2012 ORDER PER B.R. MITTAL JUDICIAL MEMBER:- THE ASSESSEE HAS FILED THIS APPEAL FOR THE ASSESS MENT YEAR 2005-06 AGAINST THE ORDER OF THE LD. CIT(A) DATED 28.9.2011 STATING THE FOLLOWING GROUNDS: 1. FOR THAT LD. CIT(A) WAS NOT JUSTIFIED IN MAKING AN ESTIMATE OF CAPITAL EMPLOYED AT RS.13 51 276/- ON THE GROUND THAT THE U NDISCLOSED SALES REPRESENTED BY THE DEPOSITS IN BANK MUST HAVE BEEN DONE WITH CERTAIN AMOUNT OF CAPITAL FOR WHICH AN ESTIMATE WAS MADE. THE SALES CONSIDERED WERE REPRESENTED BY THE DEPOSITS WHICH W ERE BY INTER BANK TRANSFER PAYMENTS RECEIVED BY CHEQUE AGAINST REGULA R SALES ETC. HOWEVER TO HAVE PEACE OF MIND AFTER SEARCH OPERATI ON IT WAS AGREED THAT THE AMOUNT MAY BE CONSIDERED AS SALES AND A PR OFIT MAY BE ESTIMATED ON THE SAME. 2. FOR THAT THE ESTIMATED PROFIT OF RS.1 15 42 773/- W AS RETURNED AND WAS ACCEPTED. HOWEVER AN ADDITION WAS MADE ON THE GRO UND THAT THE ESTIMATE OF CAPITAL EMPLOYED AT RS.50 38 386/- SHOU LD HAVE BEEN INCLUDED IN THE RETURN SINCE ESTIMATED BY ASSESSEE HIMSELF BEFORE INVESTIGATION AUTHORITIES. IT WAS ARGUED THAT FOR THE ESTIMATED TURN OVER NO CAPITAL WAS REQUIRED AS SUCH NO ESTIMATE OF CAPITAL EMPLOYED SHOULD HAVE BEEN MADE. IT WAS FURTHER ARGUED THAT T HE ESTIMATE OF CAPITAL EMPLOYED ON THE BASIS OF SALE FOR THE ENTIR E YEAR IS ALSO ITA NO.14/RANCHI/2011 M/S. LUCKY COKE MANUFACTURERS DHANBAD 2 UNJUSTIFIED. THE APPELLANT HAS SURRENDERED A PROFI T AROUND RS.10 00 000/- PER MONTH. THIS GENERATION WAS SUFF ICIENT TO COVER THE CAPITAL IF ANY REQUIRED. 3. FOR THAT IN ANY VIEW OF THE CASE LD. CIT(A) WAS NO T JUSTIFIED IN MAKING ESTIMATE OF CAPITAL EMPLOYED SINCE THERE WAS NO NEE D OF ANY FURTHER CAPITAL EMPLOYED. FURTHER THE DEPOSITS WERE IN TH E BANK ACCOUNT DISCLOSED BEFORE THE DEPARTMENT BASED ON WHICH REGU LAR ASSESSMENT WAS MADE FOR THIS ASSESSMENT YEAR. THAT BE SO WHE RE IS THE QUESTION OF MAKING AN ESTIMATE OF CAPITAL EMPLOYED OVER AND ABOVE THE INVESTMENT ALREADY MADE BY THE PARTNERS OF THE APPE LLANT FIRM AS CAPITAL IN THE BUSINESS. 4. FOR THAT ANY VIEW OF THE CASE ESTIMATED CAPITAL EMP LOYED BY LD. CIT(A) IS HIGHLY EXCESSIVE UNJUSTIFIED AND ARBITRAR Y. 5. FOR THAT OTHER GROUNDS IN DETAIL WILL BE ARGUED AT THE TIME OF HEARING. 2. ON PERUSAL OF THE GROUNDS OF APPEAL THE ONLY IS SUE INVOLVED IS AS TO WHETHER LD. CIT(A) IN THE FACTS AND CIRCUMSTANCES O F THE CASE IS JUSTIFIED IN MAKING AN ESTIMATE OF CAPITAL EMPLOYED AT RS.13 51 276/- FOR MAKING UNDISCLOSED SALES OF RS.9 50 93 506/-. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE DERIVES INCOME FROM MANUFACTURING AND TRADING OF HARD COKE. THERE WAS A SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE INCOME-TAX ACT ON 27.2. 2009 IN THE BUSINESS AS WELL AS RESIDENTIAL PREMISES OF LUCKY GROUP OF CASE S. MR. AGGARWAL IN HIS STATEMENT U/S 132(4) OF THE ACT ADMITTED THAT TOTAL UNDISCLOSED INCOME IS OF RS.1 65 81 159/- FOR THE RELEVANT YEAR. IT IS RELE VANT TO STATE THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION MEMBERS OF THE ASSESSEE GROUP PRECISELY SHRI PRAKASH AGGARWAL ADMITTED RS.15 CROR ES (RS. FIFTEEN CRORES ONLY) AS UNDISCLOSED INCOME OF DIFFERENT YEARS BY V ARIOUS ASSESSEES OF THE GROUP. FURTHER FOR THE PERIOD FROM ASSESSMENT YEA RS 2003-04 TO 2009-10 THE TOTAL DISCLOSURE OF THE GROUP OF ADDITIONAL INC OME OFFERED IN RESPECT OF ALL THE ASSESSEES WAS RS.15 22 84 374/-. 4. PURSUANT THERE TO NOTICE U/S 153A WAS SERVED UP ON THE ASSESSEE TO SUBMIT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06. IN RESPONSE THERETO THE ASSESSEE FILED RETURN OF INCOME ON 31. 5.2010 DISCLOSING TOTAL ITA NO.14/RANCHI/2011 M/S. LUCKY COKE MANUFACTURERS DHANBAD 3 INCOME OF RS.1 17 38 210/- FOR THE RELEVANT ASSESSM ENT YEAR UNDER CONSIDERATION INCLUDING ADDITIONAL INCOME OF RS.1 1 5 42 773/-. 5. THE UNDISCLOSED SALES OF RS.9 50 93 506/- IS NOT DISPUTED BY THE ASSESSEE AS WELL AS BY THE DEPARTMENT AND THE WORKI NG FOR THE SAME HAS BEEN ARRIVED AT AS UNDER: A) TOTAL DEPOSITS IN DISCLOSED BANK ACCOUNTS AGGREG ATING RS.13 04 64 866/- AS UNDER: RS . ICICI A/C 11 07 63 458/- UCO BANK 1 97 01 408/- TOTAL: 13 04 64 866/- (B) LESS: SALES SHOWN AS PER INCOME-TAX RETURN :(-) 3 53 71 360/- -------------------- (C)THUS UNDISCLOSED SALES WHICH WAS CREDITED IN ABOVE BANK ACCOUNTS IS : 9 50 93 506/- ------------------- 6. ON THE SAID UNDISCLOSED SALES GROSS PROFIT WAS ARRIVED AT RS.1 15 42 773/- AS UNDER: SALES 3 53 71 360/ - GROSS PROFIT 42 93 496/ - G.P. RATE 12.14% CAPITAL EMPLOYED 18 74 098/ - RATIO OF SALES TO CAPITAL 18.87 UNACCOUNTED SALES AS ABOVE 9 50 93 506/ - GROSS PROFIT ON UNACCOUNTED SALES @ 12.14% 1 15 42 773/ - CAPITAL EMPLOYED ON UNACCOUNTED SALES AS PER RATIO ABOVE 50 38 386/ - THE SAID GROSS PROFIT ON AN UNACCOUNTED SALES ARRI VED AT HAS NOT BEEN DISPUTED BY THE ASSESSEE AND/OR THE DEPARTMENT AND THE SAME WAS ALSO DISCLOSED IN THE RETURN FILED BY THE ASSESSEE. 7. HOWEVER THE ASSESSING OFFICER STATED THAT THE A SSESSEE STATED THAT UNDISCLOSED INCOME FOR THE YEAR IN HIS STATEMENT AT RS.1 65 81 159/- BUT IN THE RETURN FILED THE ASSESSEE DISCLOSED UNDISCLOSE D INCOME FOR THE YEAR UNDER ITA NO.14/RANCHI/2011 M/S. LUCKY COKE MANUFACTURERS DHANBAD 4 CONSIDERATION AT RS.1 15 42 773/-. ACCORDINGLY TH E ASSESSING OFFICER CONSIDERED THE UNDISCLOSED INCOME AT RS.1 65 81 159 /- AS AGAINST INCOME OF RS.1 15 42 773/- DISCLOSED BY THE ASSESSEE IN THE R ETURN FILED WHICH RESULTED IN ADDITION OF RS.50 38 386/-. IT IS RELEVANT TO S TATE THAT THE SAID ADDITION HAS BEEN CONSIDERED UNDER THE HEAD CAPITAL EMPLOYED ON ACCOUNT OF UNACCOUNTED SALES AS MENTIONED HEREIN ABOVE AT RS.9 50 93 506/-. BE ING AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE APP ELLATE AUTHORITY. 8. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THAT THE AMOUNT OF RS.1 15 42 773/- REPRESENTED GROSS PROFIT EARNED ON THE UNDISCLOSED SALES ON THE BASIS OF DEPOSITS IN THE TWO BANK ACCOUNTS I.E. ICICI & UCO BANKS WHICH WERE DISCLOSED ACCOUNTS. IT WAS CONTENDED THAT AS A MATTER OF FACT DEPOSITS INCLUDED INTER BANK DEPOSITS AND WITHDRAWALS AND IT WAS NOT A FACT THAT ENTIRE DEPOSITS WERE SALES. HOWEVER SINCE THIS WORKING W AS SUBMITTED BY ASSESSEES REPRESENTATIVE IT WAS THAT NOT TO DISTU RB AND TO GO IN TO THE DETAILS OF THE BANK ACCOUNTS WHICH COULD HAVE CALLED FOR MA NY LITIGATIONS THEREFORE IT WAS AGREED THAT THE GROSS PROFITS ESTIMATED ON T HE ESTIMATED SALE BE TREATED AS INCOME AND RETURN WAS FILED ACCORDINGLY. IT WAS CONTENDED THAT THERE WAS ANOTHER ESTIMATE ADDITION UNDER THE HEAD CAPITAL EMPLOYED ON UNACCOUNTED SALES AT RS.50 38 386/-. THE CALCULAT ION OF THIS AMOUNT WAS BASED ON THE BASIS OF SALES AS PER ACCOUNTS OF CAPI TAL EMPLOYED AS PER BOOKS OF ACCOUNT. THE PERCENTAGE OF CAPITAL EMPLOYED TO SALE WAS 5.29% SINCE CAPITAL EMPLOYED WAS RS.18 74 098/- DIVIDED BY SALE S OF RS.3 53 71 360/- AND THE PERSON MAKING THE CALCULATION OF PROFIT FOR THE ASSESSMENT YEAR 2005-06 CALCULATED @ 5.29% ON THE UNDISCLOSED SALE OF RS.9 50 93 506/- TO ARRIVE AT RS.50 38 386/- AS CAPITAL EMPLOYED. IT WAS CONTEND ED THAT THE SAID AMOUNT WAS NOT INCLUDED AS INCOME IN THE RETURN FILED FOR THE FOLLOWING REASONS: 1. THERE WAS NO EVIDENCE TO SUGGEST THAT THERE WAS AN Y CAPITAL EMPLOYED OVER AND ABOVE THE INVESTMENT IN THE BUSIN ESS. 2. SALES WERE ESTIMATED ON THE BASIS OF DEPOSITS IN TH E BANK ACCOUNT WHICH WERE DISCLOSED IN THE BOOKS OF ACCOUNT AS SU CH THE TRANSACTIONS IN THESE BANK ACCOUNTS WERE COVERED BY THE CAPITAL EMPLOYED AND THE MONEY EMPLOYED FROM THE BUSINESS B ELONGING TO SUNDRY CREDITORS ETC. ITA NO.14/RANCHI/2011 M/S. LUCKY COKE MANUFACTURERS DHANBAD 5 3. THERE IS NO BASIS WHATSOEVER TO CONSIDER THE SALE O F THE YEAR AND TO INCLUDE THE PERCENTAGE OF INVESTMENT ON THE BASI S OF CAPITAL EMPLOYED AS PER BOOKS OF ACCOUNT. IT MAY BE POINTE D OUT THAT OUT OF CAPITAL EMPLOYED APPELLANT HAD FIXED INVESTMENT ON THE PLANT AND MANY OTHER EXPENSE LIKE SECURITY DEPOSITS ETC. AND WORKING CAPITAL FOR THE TURNOVER WAS MUCH LESS THAN THE TOT AL AMOUNT OF THE CAPITAL EMPLOYED. IT MAY FURTHER BE MENTIONED THAT MONTHLY SALE AS PE R CALCULATION OF UNACCOUNTED SALE REFERRED ABOVE WAS RS.79 24 460/-. FOR THE SAKE OF ARGUMENT EVEN IF THERE WAS SOME CAPITAL EMPLOYE D AGAINST THE SALES IT HAS TO BE INCLUDED ON THE BASIS OF SALES OF A MONTH. IF WE CONSIDER INVESTMENT IN FIXED ASSETS INSTEAD OF 5.2 9% THE CAPITAL EMPLOYED WOULD HAVE BEEN APPRX. 2.5% ONLY. HERE IT MAY BE MENTIONED THAT NORMALLY THE COAL WA S PURCHASED FROM DIFFERENT PERSONS ON CREDITS AND SALES ARE AFF ECTED BY CHEQUE WHICH WERE DEPOSITED IN THE BANK ACCOUNT. SINCE TH IS BANK ACCOUNT STANDS DISCLOSED IN THE BOOKS OF ACCOUNT THERE IS NO QUESTION OF ANY EXTRA CAPITAL EMPLOYED. IN ANY CASE AS REFERRE D ABOVE FOR A MONTHS SALE THERE MAY BE A CAPITAL EMPLOYED OF RS .2 00 000/- ON ESTIMATE TO BE MAXIMUM. 9. THE LD. CIT(A) CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER IN HIS REMAND REPORT STATED T HAT THE SAID ISSUE HAD BEEN DISCUSSED IN DETAIL. THAT THE APPELLANT HAD MADE T HE DISCLOSURE AND THERE WAS NO RETRACTION. HOWEVER THE ASSESSEE STATED BE FORE THE ASSESSING OFFICER THAT THE ABOVE BANK ACCOUNTS WERE DISCLOSED IN REGU LAR BOOKS OF ACCOUNTS AND WERE PART OF REGULAR BOOKS OF ACCOUNTS. NO ADD ITIONAL CAPITAL WAS REQUIRED FOR THE CREDIT ENTRIES IN THESE BANK ACCOU NTS. DURING THE PERIOD COKE WAS SCARCE AS SUCH BUYERS USED TO DEPOSIT THE AMOUNT AND THERE AFTER ONLY THE SALES WERE EFFECTED. 10. THE LD. CIT(A) CONSIDERED THE ABOVE SUBMISSIONS OF THE ASSESSEE AND AFTER OBSERVING THAT ALL THE CREDITS IN THE DISCLOS ED BANK ACCOUNTS HAVE BEEN TREATED AS SALES AND THERE AFTER CAPITAL EMPLOYED O N SUCH UNDISCLOSED SALES HAS BEEN WORKED OUT IN THE SAME RATIO AS THAT OF DI SCLOSED SALES TO DISCLOSED CAPITAL. SO THERE IS A PRESUMPTION THAT ALL THE CR EDITS IN DISCLOSED BANK ACCOUNTS ARE SALES. THERE IS ALSO A PRESUMPTION OF UNDISCLOSED CAPITAL ON SUCH PRESUMPTIVE SALES. THE LD. CIT(A) HAS STATED THAT WHEN ANY BUSINESS SET UP IS IN PLACE ALL THAT IS REQUIRED TO MAKE UN DISCLOSED SALES IS THE ITA NO.14/RANCHI/2011 M/S. LUCKY COKE MANUFACTURERS DHANBAD 6 CIRCULATING CAPITAL AND NO EXTRA INVESTMENT IN FIXE D ASSETS IS REQUIRED. THUS THERE IS INHERENT MISTAKE IN THIS WORKING. THE LD. CIT(A) MADE HIS OWN CALCULATION TO WORK OUT CIRCULATING CAPITAL FOR THE PURPOSE OF UNDISCLOSED SALES AND ARRIVED AT AN ESTIMATED CAPITAL EMPLOYED FOR MA KING UNDISCLOSED SALES AT RS.13 51 276/- VIDE PARAS 18 & 19 WHICH ARE AS UND ER: I HAVE GIVEN MY THOUGHTFUL CONSIDERATION TO THE ABO VE ISSUE. IT IS A FACT THAT ADMISSION BY THE APPELLANT OF ANY UNDISCL OSED INCOME CREATES A STRONG PRESUMPTION AGAINST ITSELF. HOWEVER SUCH P RESUMPTION IS NOT ABSOLUTE. IF IT CAN BE SHOWN THAT THERE ARE SOME I NHERENT MISTAKES OR APPARENT OVERESTIMATES THE PRESUMPTION CAN BE REBU TTED AND FACTS CAN BE REAPPRAISED. THE FACTS AND CIRCUMSTANCES OF THE CA SE HAVE TO BE KEPT IN MIND. IN THIS CASE A DISCLOSURE OF RS.15 CRORES W AS MADE DURING THE SEARCH AND THEREAFTER THE APPELLANT FILED WORKING OF UNDI SCLOSED INCOME TO COVER THE ABOVE SURRENDER. IT IS NOT THE CASE THAT THE UNDIS CLOSED INCOME WAS ESTIMATED FIRST AND THEREAFTER SPECIFIC SURRENDER OF SUCH ITEMS WAS MADE. IT IS THE SUBMISSION OF THE APPELLANT THAT AT TIMES E STIMATE HAS BEEN MADE UNREALISTICALLY AND FOR NON-EXISTENT ITEMS JUST TO COVER THE FIGURE OF SURRENDER. FURTHER EXCEPT IN THIS ASSESSMENT YEAR IN OTHER A SSESSMENT YEARS SURRENDERED INCOME HAS BEEN DULY INCLUDED IN THE RE TURN. SO IT IS NOT THE CASE THAT THE APPELLANT HAS RESORTED TO ANY RETRACT ION IN GENERAL. IT IS THE CLAIM OF THE APPELLANT THAT IN THIS ASSESSMENT YEAR THE ESTIMATE MADE BY THE LEGAL ADVISORS WHO PREPARED THE DISCLOSURE PETITION ON ACCOUNT OF UNDISCLOSED CAPITAL WAS SO UNREALISTIC THAT IT HAD NO OPTION BU T TO EXCLUDE THE SAME FROM THE RETURNED INCOME. AS CAN BE SEEN EVEN IN THIS ASSESSMENT YEAR INCOME RETURNED DULY INCLUDES THE ESTIMATE OF GROSS PROFIT MADE IN THE DISCLOSURE PETITION. IT IS THE ADDITION ON ACCOUNT OF UNDISCL OSED CAPITAL UNREALISTICALLY ESTIMATED AT RS.50 38 386/- WHICH IS BEING CONTESTE D. IN THIS CASE I FIND THAT ALL THE CREDIT IN THE DISCLOSED BANK ACCOUNTS HAVE BEEN TREATED AS SALES. THEREAFTER CAPITAL EMPLOYED ON SUCH UNDISCLOSED SA LES HAS BEEN WORKED OUT IN THE SAME RATIO AS THAT OF DISCLOSED SALES TO DIS CLOSED CAPITAL. SO FIRSTLY THERE IS A PRESUMPTION THAT ALL THE CREDITS IN DISC LOSED BANK ACCOUNTS ARE SALES. THEN THERE IS A PRESUMPTION OF UNDISCLOSED CAPITAL ON SUCH PRESUMPTIVE SALES. WHEN ANY BUSINESS SET UP IS IN PLACE ALL THAT IS REQUIRED TO MAKE UNDISCLOSED SALES IS THE CIRCULATING CAPITA L. NO EXTRA INVESTMENT IN FIXED ASSETS IS REQUIRED. THE ABOVE WORKING OF UND ISCLOSED CAPITAL PRESUMES THAT THE APPELLANT IS REQUIRED TO MAKE PROPORTIONAT E EXTRA INVESTMENT IN ALL FIXED ASSETS FOR MAKING SUCH UNDISCLOSED SALES WHIC H IS NOT CORRECT. THUS THERE IS INHERENT MISTAKE IN THIS WORKING. A MORE REASONABLE AND JUDICIOUS ESTIMATE WOULD BE TO WORK OUT THE CIRCULATING CAPIT AL AS UNDER: TOTAL CURRENT ASSETS AS PER BALANCE SHEET ON 31.3. 2005- RS.9 03 229/- TOTAL CURRENT LIABILITIES AS ON 31.3.2005 - RS .4 00 603/- NET CIRCULATING CAPITAL = CURRENT ASSETS(-) CURREN T LIABILITIES - RS.5 02 626/- ITA NO.14/RANCHI/2011 M/S. LUCKY COKE MANUFACTURERS DHANBAD 7 THE ABOVE CIRCULATING CAPITAL IS REQUIRED FOR MAKI NG SALES OF RS.3 53 71 361/-. THEREFORE THE ADDITIONAL CAPITA L REQUIRED FOR MAKING UNDISCLOSED SALES OF RS.9 50 93 506/- CAN BE ESTIMA TED AT RS.9 50 93 506 / 3 53 71 361 X 5 02 626 = 13 .51 276/-. 11. THUS LD. CIT(A) HAS RESTRICTED THE ADDITION TO RS.13 51 276/-. HENCE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 12. DURING THE COURSE OF HEARING LD. A.R. BESIDES MAKING HIS SUBMISSIONS ON THE LINES OF THE SUBMISSIONS MADE BEFORE THE AUT HORITIES BELOW SUBMITTED THAT DEPOSITS WERE IN THE DISCLOSED BANK ACCOUNT AN D IT CONTAINS NUMBER OF INTERNAL BANK DEPOSITS AND WITHDRAWALS AND THE ENTI RE DEPOSITS WERE NOT SALES BUT THE ASSESSEE ADMITTED THE ENTIRE DEPOSITS AS SA LES AND OFFERED THE GROSS PROFIT ON THE SAID UNACCOUNTED SALES AS INCOME OF T HE ASSESSEE TO AVOID LITIGATION AND TO BUY PEACE. HE SUBMITTED THAT NO EXTRA CAPITAL WAS EMPLOYED OVER AND ABOVE THE INVESTMENT IN THE BUSINESS FOR M AKING UNACCOUNTED SALES. HE FURTHER SUBMITTED THAT NOTHING WAS FOUND DURING THE COURSE OF SEARCH & SEIZURE OPERATION TO SUGGEST THAT ANY EXTRA CAPITAL WAS EMPLOYED FOR THE DEPOSITS IN THE DISCLOSED BANK ACCOUNTS. HE SUBMIT TED THAT THE LD. CIT(A) HAS ALSO MADE THE SAID ADDITION ON PRESUMPTIONS AND NOT BASED ON ANY MATERIAL ON RECORD. HE SUBMITTED THAT NO ADDITION ON ACCOUNT OF ESTIMATED CAPITAL EMPLOYED SHOULD BE MADE. 13. ON THE OTHER HAND LD. D.R. RELIED ON THE ORDER OF THE CIT(A). 14. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS OF THE LD. REPRESENTATIVE OF THE PA RTIES. WE OBSERVE THAT THERE WAS A TOTAL DEPOSITS IN ICICI BANK ACCOUNT AN D UCO BANK ACCOUNT OF RS.13 04 64 866/-. THE SAID DEPOSITS WERE CONSIDER ED AS DEPOSITS ON ACCOUNT OF SALES MADE BY THE ASSESSEE. HOWEVER ASSESSEE H AD SHOWN SALES AS PER INCOME TAX RETURN OF RS.3 53 71 360/- AND THE BALAN CE AMOUNT OF RS.9 50 93 506/- WAS CONSIDERED AS DEPOSITS ON ACCO UNT OF UNDISCLOSED SALES. WE OBSERVE THAT ON THE SAID UNDISCLOSED SALES THE GROSS PROFIT @ 12.14% WAS CONSIDERED I.E. AT THE SAME GROSS PROFIT RATE AS WAS ACCEPTED ON THE ITA NO.14/RANCHI/2011 M/S. LUCKY COKE MANUFACTURERS DHANBAD 8 DISCLOSED SALES AS PER INCOME TAX RETURN AND ACCORD INGLY THE GROSS PROFIT OF RS.1 15 42 773/- WAS CONSIDERED AS NET PROFIT OF TH E ASSESSEES ON ACCOUNT OF UNACCOUNTED SALES. THE SAID ADDITION OF RS.1 15 42 773/- HAS NOT BEEN DISPUTED BY THE ASSESSEE. IN THE FIRST APPEAL THE LD. CIT(A) HAS STATED THAT IT IS A FACT THAT ALL THE CREDITS IN THE DISCLOSED BAN K ACCOUNTS HAVE BEEN TREATED AS SALES THOUGH THERE ARE INTERNAL BANK DEPOSITS AN D WITHDRAWALS. THE LD. CIT(A) HAS ALSO STATED THAT THERE CANNOT BE A PRESU MPTION OF UNDISCLOSED CAPITAL ON SUCH PRESUMPTIVE SALES AND WHEN ANY BUSI NESS SET UP IS IN PLACE NO EXTRA INVESTMENT IN FIXED ASSETS IS REQUIRED. A LL THAT IS REQUIRED IS TO MAKE UNDISCLOSED SALES IS THE CIRCULATING CAPITAL. ACCO RDINGLY THE LD. CIT(A) HAS CONSIDERED THAT ADDITIONAL CAPITAL OF RS.13 51 276/ - IS REQUIRED BY THE ASSESSEE FOR MAKING UNDISCLOSED SALES OF RS.9 50 93 506/-. THE ASSESSEE HAS DISPUTED THE SAID ADDITION BEFORE US. IT IS A FACT THAT NO EVIDENCE HAS BEEN BROUGHT BY THE DEPARTMENT AS TO WHETHER ASSESSEE EM PLOYED ANY ADDITIONAL CAPITAL OVER AND ABOVE THE INVESTMENT ALREADY MADE IN THE BUSINESS. NO SUCH PRESUMPTION CAN BE MADE THAT FOR EFFECTING AGG REGATE UNDISCLOSED SALES OF RS.9 50 93 506/- OVER A PERIOD OF 12 MONTHS THE ASSESSEE MUST HAVE EMPLOYED CIRCULATING CAPITAL IN THE SAME RATIO AS M ADE FOR THE DISCLOSED SALES. WE ALSO FIND SUBSTANCE IN THE SUBMISSION OF THE LD. A.R. THAT DURING THE RELEVANT PERIOD THE COKE WAS A SCARCE COMMODITY AND IT CANNOT BE PRESUMED THAT FOR MAKING ANY SALES THE ASSESSEE MUST HAVE MA DE PRIOR PURCHASES BY MAKING THE PAYMENTS AND THERE AFTER SALES WERE MADE AND SALE PROCEEDS WERE REALIZED AND DEPOSITED IN THE BANK ACCOUNTS. THEREFORE WE CANNOT IGNORE THE SUBMISSION OF LD. A.R. IN TOTO THAT THE PURCHASER OF THE COKE MUST HAVE DEPOSITED THE AMOUNT IN ADVANCE WITH THE ASSES SEE AND THERE AFTER THE ASSESSEE WOULD HAVE SUPPLIED COKE TO ITS PURCHASERS . HOWEVER THIS COULD NOT BE THE CASE FOR ALL THE UNDISCLOSED SALES ALSO. HENCE CONSIDERING THE ABOVE FACTS IN ENTIRETY WE ARE OF THE CONSIDERED V IEW THAT IT WILL BE REASONABLE AND EQUITABLE IF WE TAKE INTO ACCOUNT TH E SALES OF A MONTH WHICH COMES TO APPROXIMATELY RS.79.25 LAKHS PER MONTH AND ALSO TAKING INTO ACCOUNT THE CAPITAL FOR EFFECTING THE SAID SALES AT 2.5% THE ADDITION TOWARDS CAPITAL EMPLOYED OF RS.2 LAKHS IS MADE AS AGAINST R S.13 51 276/- MADE BY THE LD. CIT(A). THEREFORE WE RESTRICT ADDITION OF RS.2 LAKHS TOWARDS CAPITAL ITA NO.14/RANCHI/2011 M/S. LUCKY COKE MANUFACTURERS DHANBAD 9 EMPLOYED BY ASSESSEE TO REPRESENT UNDISCLOSED SALES IN THE ASSESSMENT YEAR UNDER CONSIDERATION. HENCE GROUNDS OF APPEAL TAKE N BY THE ASSESSEE ARE ALLOWED IN PART BY RESTRICTING THE ADDITION TO RS.2 LAKHS AS AGAINST RS.13 51 276/- SUSTAINED BY LD. CIT(A). 15. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOU NCED ON 23 RD FEBRUARY 2012 SD/ - SD/ - ( SHAMIM YAH Y A ) ( B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS RANCHI DATED 23 RD FEBRUARY 2012 COPY TO 1 M/S. LUCKY COKE MANUFACTURERS RATANJ I ROAD PURANA BAZAR DHANBAD 2 ACIT CENTRAL CIRCLE DHANBAD 3 CIT DHANBAD (JHARKHAND) 4 THE CIT (A) DHANBAD (JHARKHAND) 5 THE DR ITAT DHANBAD 6 GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RANCHI/PATNA