The ITO, Ward-1,, GANDHIDHAM v. Shri Issrani Ghanshyam Kotumal,, GANDHIDHAM

ITA 162/RJT/2008 | 2004-2005
Pronouncement Date: 23-12-2010 | Result: Dismissed

Appeal Details

RSA Number 16224914 RSA 2008
Assessee PAN AACPI8542F
Bench Rajkot
Appeal Number ITA 162/RJT/2008
Duration Of Justice 2 year(s) 8 month(s) 26 day(s)
Appellant The ITO, Ward-1,, GANDHIDHAM
Respondent Shri Issrani Ghanshyam Kotumal,, GANDHIDHAM
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 23-12-2010
Date Of Final Hearing 15-12-2010
Next Hearing Date 15-12-2010
Assessment Year 2004-2005
Appeal Filed On 27-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO.162/RJT/2008 (ASSESSMENT YEAR 2004-05) ITO WD.1 VS SHRI ISSRANI GHANSHYAM GANDHIDHAM KOTUMAL PROP OF M/S ARADHANA N 32 & N 32-A GANDHIDHAM-KKUTCH PAN : AACPI8542F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JM SAHAY RESPONDENT BY : SHRI MP SARDA O R D E R GARASIA : THIS APPEAL BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 14-12-2007 PASSED BY CIT(A)-II RAJKOT FOR TH E ASSESSMENT YEAR 2004-05. 2. THE SOLE ISSUE AGITATED IN THE APPEAL PERTAINS T O THE ACTION OF THE CIT(A) RESTRICTING THE ADDITION TO RS.1 35 062/ - AS AGAINST ADDITION OF RS.58 98 140/- MADE BY A.O. ON ACCOUNT OF UNRECO RDED SALES. 3. THE ASSESSEE IS A PROPRIETOR OF M/S ARADHANA WHI CH IS DEALING IN TRAVELING MATERIAL DOMESTIC APPLIANCES GIFT AR TICLES MOBILE INSTRUMENTS AND RECHARGE COUPONS. IN A SURVEY U/S 133A CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 05-12-2 003 THE REVENUE AUTHORITIES FOUND A NOTE BOOK INVENTORISED AS X-1 A ND THE ASSESSEE ITA NO.162/RJT/2008 2 IN HIS STATEMENT THE ASSESSEE ADMITTED THAT IT CON TAINED THE DETAILS OF DAY-TO-DAY ACTUAL CASH SALES FOR THE PERIOD 19-10-2 003 TO 05-12- 2003. THE CASH SALES RECORDED IN THE SAID NOTE BOO KS FAR EXCEEDED THE SALES RECORDED IN HIS REGULAR BOOKS OF ACCOUNT. THE ASSESSING OFFICER WORKED OUT THE DIFFERENCE OF RS.8 21 242 BE TWEEN SALES RECORDED IN THE SAID NOTE BOOK AND THE SALES RECORD ED IN THE REGULAR BOOKS OF ACCOUNTS WHICH IS TABULATED IN THE ASSESSM ENT ORDER ON PAGES 6 & 7. ON THAT BASIS THE ASSESSING OFFICER W ORKED OUT THE AVERAGE UNACCOUNTED SALE FOR A DAY AT RS.18 665 (RS .8 21 242/44 DAYS) AND PROPOSED TO CALCULATE UNACCOUNTED SALES F OR THE PERIOD FROM APRIL 2003 TO NOVEMBER 2003 (216 DAYS I.E. AFT ER EXCLUDING ONE DAY PER WEEK ON ACCOUNT OF HOLIDAY). DURING THE AS SESSING PROCEEDINGS THE ASSESSEE FURNISHED A CHART SHOWING DETAILED WORKING OF SALES AS PER THE IMPOUNDED NOTE BOOK AND AS PER BOOK OF ACCOUNT ACCORDING TO WHICH THE SALES COMES TO RS.4 55 956 AS AGAINST RS.8 21 242 WORKED OUT BY THE ASSESSING OFF ICER. THE DIFFERENCE WAS ATTRIBUTED THE FOLLOWING: THE AO HAS TREATED THE ADVANCES RECEIVED AS CASH S ALES THE AO HAS TREATED HE AMOUNTS RECEIVED ON ACCOUNT OF CREDIT SALES MADE EARLIER WHICH WAS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE SAID RECEIPTS HAVE BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE CASH TAKEN AT HOME EARLIER AND BROUGHT BACK ON SUBSEQUENT DATE HAVE BEEN ERRONEOUSLY CONSIDERED AS SALE. WE ARE ENCLOSING HEREWITH A CHART SHOWING THE CASH TAKEN AND BROUGHT BACK. ITA NO.162/RJT/2008 3 THE SALES OF RS.58 395 OF 1-12-2003 INCLUDES THE S ALE OF 30-11- 2003 ALSO WHICH IS AN ERROR. THE CORRECT FIGURE OF SALES OF 1-12- 2003 SHOULD BE RS.29 230. THE RECONCILIATION OF CO RRECT FIGURE OF SALES IS AS UNDER: PARTICULARS AMOUNT(RS) SALES AS PER DIARY (4 435 + 4.795 + 20 000) 29 230 CASH BROUGHT BACK 13 700 SALES FOR 30.11.2003 15 465 SALES FIGURE TAKEN BY THE A.O. 58 395 ON 24-10-2003 THE AO HAS WRONGLY TAKEN SALES OF R S.54 530. THE SAME IS AFTER REDUCING EXPENSES. THE CORRECT F IGURE OF SALES IS RS.57 225. ON THE ABOVE REASONS THE ASSESSEE SUBMITTED THAT A DDITION CAN ONLY BE MADE OF THE UNRECORDED SALES OF RS.4 56 956. 4. THE ABOVE EXPLANATIONS OF THE ASSESSEE WERE NOT ACCEPTABLE TO THE ASSESSING OFFICER. HE HELD THAT THE ASSESSEE F AILED TO DISCLOSE SUCH UNACCOUNTED SALES IN HIS RETURN OF INCOME AS U NDISCLOSED INCOME DISCLOSED DURING THE COURSE OF SURVEY AND TH EREFORE THE ASSESSEE HAS RETRACTED FROM HIS ADMISSION AND RELYI NG ON THE DECISION OF THE TRIBUNAL REPORTED IN 40 ITD 180 ITO VS B.D. DAL & OIL MILLS THE ASSESSING OFFICER REJECTED THE SO-CALLED RETRACTION. ITA NO.162/RJT/2008 4 5. THE EXPLANATION OF THE ASSESSEE THAT RS.11 000 S HOWN IN THE CHART WAS ADVANCE / LOAN WAS ALSO REJECTED FOR THE REASON THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS SUCH AS NAME & ADDRESS OF THE SAID CREDITORS. THE CONTENTION OF THE ASSESSEE THAT THE ADDITION ON ACCOUNT OF UNRECORDED SALES SHOULD BE RESTRICTED TO THE PRE-SURVEY PERIOD WAS ALSO REJECTED RELYING ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF H.M. ESUFALI H.M. ABDULALI (19 73) 90 ITR 271 WHEREIN IT WAS HELD THAT THE DEPARTMENT CAN ESTIMAT E INCOME FOR WHOLE YEAR ON THE BASIS OF MATERIAL FOR PART OF THE YEAR. THUS THE IMPUGNED ADDITION OF RS.59 98 140 WAS ARRIVED AT. 6. THE ASSESSEEE FILED APPEAL BEFORE THE CIT(A) AND REPEATED THE CONTENTIONS RAISED BEFORE THE ASSESSING OFFICER. I N ADDITION THE ASSESSEE SUBMITTED THAT EVEN IF IT IS ASSUMED THAT THERE WAS UNACCOUNTED SALES ESTIMATE OF THE SAME CAN BE MADE ONLY FOR PRE SURVEY PERIOD AT THE MOST AND NOT FOR THE POST SURV EY PERIOD. IN THIS REGARD RELIANCE IS PLACED ON THE DECISION OF THE DE LHI HIGH COURT IN THE CASE OF CIT VS ANAND KUMAR DEEPAK KUMAR (2007) 294 ITR 497 WHEREIN IT HAS BEEN HELD THAT MERELY BECAUSE THERE WERE SOME DISCREPANCIES IN THE PRE-SEARCH PERIOD IT COULD NO T LEAD TO ANY PRESUMPTION THAT THE DISCREPANCIES WOULD HAVE CONTI NUED IN THE POST SEARCH PERIOD PARTICULARLY WHEN THERE WAS FACTUALLY NO EVIDENCE AT ALL AS FOUND BY BOTH THE AUTHORITIES BELOW TO SUPPORT S UCH A VIEW. THE ASSESSEE SUBMITTED BEFORE CIT(A) THAT NO ESTIMATE C AN BE MADE FOR POST SURVEY PERIOD AS IT CANNOT BE ASSUMED THAT ANY SUCH PRACTICE WAS CONTINUED EVEN AFTER THE DATE OF SURVEY WITHOUT ANY CORROBORATIVE EVIDENCE TO PROVE THE SAME. THE ASSUMPTION FOR POS T SURVEY PERIOD ITA NO.162/RJT/2008 5 IS QUITE ILLOGICAL. INITIALLY THE A.O. PROPOSED T O ASSUME AND ADD UNDISCLOSED SALES UPTO THE DATE OF SURVEY AS IS EVI DENT FROM SHOW CAUSE NOTICE REPRODUCED ON PAGE 7 OF ASSESSMENT ORD ER. LATER ON THE ASSESSING OFFICER WITH A VIEW TO INFLATE THE FI GURE CHANGED HIS MIND AND ESTIMATED THE FIGURES FOR THE WHOLE YEAR. THE DECISION RELIED UPON BY THE ASSESSING OFFICER ON THE JUDGMEN T OF THE APEX COURT IN THE CASE OF CST VS HM ESUFALI H.M. ABDULAL I (SUPRA) WAS SOUGHT TO BE DISTINGUISHED AS ACCORDING TO THE ASSE SSEE THE DECISION IS IN RESPECT OF SEARCH CARRIED OUT BY THE SALES TA X DEPARTMENT AND THE ESTIMATION OF SALES TAX WAS FOR THE PURPOSE OF SALES TAX. IN THE PRESENT CASE THERE WAS A SURVEY IN THE PERIOD UNDE R CONSIDERATION. THE ESTIMATE OF SALES IN THAT CASE WAS FOR THE PERI OD PRIOR TO THE SEARCH AND NOT FOR THE SUBSEQUENT PERIOD. FURTHER RELYING ON THE JUDGMENT IN THE CASE OF PRESIDENT INDUSTRIES 258 IT R 654 (GUJ) THE ASSESSEE SUBMITTED THAT IT IS A WELL SETTLED LAW IN CASE OF UNRECORDED SALES GROSS PROFIT ON SUCH UNRECORDED SALES CAN BE ADDED AND NOT THE ENTIRE AMOUNT OF SALES. THE ASSESSEE BEFORE TH E CIT(A) RELIED UPON THE THIRD MEMBER DECISION OF THE TRIBUNAL IN T HE CASE OF ITO VS GURU BACHCHAN SINGH J JUNEJA 55 ITD 75 FOR THE PROP OSITION THAT ADDITION CAN ONLY BE MADE ON THE AMOUNT OF UNACCOUN TED SALES ADMITTED BY THE ASSESSEE AND NOT ON THE ENTIRE UNAC COUNTED SALES OF RS.10 85 003. 7. THE ASSESSEE THEREFORE PLEADED BEFORE THE CIT( A) THAT SINCE THE UNACCOUNTED SALES WORKED OUT BY THE ASSESSEE CO MES TO RS.4 55 956 THE ADDITION SHOULD BE RESTRICTION TO T HE ELEMENT OF PROFIT INVOLVED IN THIS UNDISCLOSED SALES. ITA NO.162/RJT/2008 6 8. THE LEARNED CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE IN DETAIL. VIDE A DETAILED REASONING APPE NDED IN HIS ORDER FROM PAGES 7 TO 11 THE LD.CIT(A) RESTRICTED THE AD DITION TO RS. 1 35 06 AS AGAINST ADDITION OF RS. 58 98 140 MADE B Y THE ASSESSING OFFICER BEING THE GROSS PROFIT @25% ON THE UNDISCL OSED SWALES OF RS.5 40 246 AS WORKED OUT BY HIM AS AGAINST THE UND ISCLOSED SALES OF RS. 4 55 956 OFFERED BY THE ASSESSEE. FOR THE S AKE OF CLARITY AND CONVENIENCE WE EXTRACT BELOW THE FINDINGS OF THE C IT(A): 7.2 I HAVE DULY CONSIDERED THE ABOVE. THE AR HAS PRODUCED THE COPY OF DIARY FOUND DURING THE SURVEY BEFORE ME WHICH WAS INVENTORISED AS ANNEXURE X-1. THE SAM E SHOWS CALCULATION OF CASH FROM CASH SALES. THE TRANSACTIONS MENTIONED IN DIARY ARE FOUND UNRECORDE D IN BOOKS. ON THE BASIS OF THIS DIARY THE A.O WORKED OUT UNRECORDED SALES FOR THE PERIOD 19-10-2003 TO 05-1` 2- 2003. THE APPELLANT HAS SUBMITTED VARIOUS REASONS FOR DIFFERENCE IN FIGURE OF SALES WORKED OUT BY THE A.O . ON PG. 6 & 7 OF THE ASSESSMENT ORDER AND AS WORKED OUT BY APPELLANT ON PG. 8 & 9 OF THE ASSESSMENT ORDER. TH E SAME ARE DISCUSSED IN THE FOLLOWING PARAS. 7.3 THE APPELLANT HAS SUBMITTED THAT THE A.O. HAS INCLUDED ADVANCE RECEIPTS AND RECEIPT AGAINST CREDI T SALES BOOKED IN THE ACCOUNTS IN THE FIGURE OF CASH SALES WORKED OUT BY HIM. TO THIS EXTENT THE FIGURE OF CASH SAL ES IS INFLATED. THE ADVANCE RECEIPTS AND RECEIPTS AGAINS T CREDIT SALES ARE CLEARLY APPARENT FROM THE DIARY. I HAVE C AREFULLY CONSIDERED THE CONTENTIONS OF THE APPELLANT BUT THE SAME IS NOT CONVINCING. IN RESPECT OF THE CREDIT SALES IT IS NOT VERIFIABLE AS TO AGAINST WHICH CREDIT SALES THE RE CEIPTS HAVE COME. THE NAME OF CUSTOMER IS ALSO ABSENT. I N THE ABSENCE OF POSSIBILITY OF VERIFICATION OF THESE IMP ORTANT DETAILS IT IS DIFFICULT TO ACCEPT THAT CREDIT SALE S PERTAINING ITA NO.162/RJT/2008 7 TO THESE RECEIPTS ARE RECORDED IN BOOKS OF ACCOUNTS . SIMILARLY IN RESPECT OF ADVANCE IT IS NOT VERIFIA BLE AS TO ON WHAT ACCOUNT THE ADVANCE IS RECEIVED AND WHAT IS TH E FURTHER TREATMENT OF THIS IN THE BOOKS OF ACCOUNTS. IN THE ABSENCE OF THIS ITS CORRELATION WITH THE BOOKS OF ACCOUNTS CANNOT BE ESTABLISHED. IT IS THEREFORE NOT ACCEPTA BLE THAT THESE AMOUNTS FORM PART OF BOOKS OF ACCOUNTS. THIS ARGUMENT OF THE APPELLANT THEREFORE FAILS. 7.4 THE APPELLANT HAS FURTHER SUBMITTED THAT HE A.O . HAS INCLUDED THE CASH ARISING FROM THE CASH SALES T AKEN AT HOME PREVIOUSLY AND BROUGHT BACK ON A PARTICULAR DA Y INTO THE FIGURE OF CASH SALES OF THAT DAY. THE AR OF TH E APPELLANT DREW MY ATTENTION TO SUCH INSTANCES IN TH E DIARY. IT IS PERTINENT TO NOTE THAT AGAINST THE TOTAL OF S ALES THE WORD SALE IS CLEARLY MENTIONED. THE APPELLANT HA S PREPARED ONE CHART SHOWING THE CASH TAKEN AT HOME PREVIOUSLY AND BROUGHT BACK LATER ON WHICH FURNISHE D AT PG .22 OF THE PAPER BOOK. ON VERIFICATION OF THE S AME WITH THE DIARY THE CONTENTION OF THE APPELLANT WAS FOUND TO BE CORRECT. THE TOTAL OF SUCH CASH BROUGHT BACK COMES TO RS.2 68 226/- WHICH CANNOT BE CONSIDERED AS CASH SALES. EVEN OTHERWISE ONLY THOSE ITEMS CAN BE CONSIDERED IN THE CALCULATION OF SALES WHICH IS SHO WN AS SALES IN THE DIARY. THIS IS SO BECAUSE THE IMPOUND ED MATERIAL WHICH IS THE EVIDENCE SHOULD BE RELIED IN FULL AND NOT IN PART. THEREFORE ON THE BASIS OF DIARY IF IT IS BELIEVED THAT THE FIGURE AGAINST WHICH SALE OR NAME OF THE ITEM IS MENTIONED IS CASH SALES THEN THE FIGURE AGA INST WHICH NAME OF ITEM OR SALE IS NOT WRITTEN CANNOT BE CONSIDERED AS CASH SALES. I THEREFORE HOLD THAT TH E AMOUNT OF RS.2 68 226/- CANNOT BE INCLUDED IN THE F IGURE OF CASH SALES. 7.5 THE APPELLANT SUBMITTED THAT THE SALES OF 01.12.2003 IS ERRONEOUSLY WORKED UT BY THE A.O. AT RS.58 395/- BECAUSE IT INCLUDES THE SALES OF PREVIO US DAY I.E. 30 .11.2003 OF RS.15 465/-. THE APPELLANT HAS SUBMITTED RECONCILIATION CHART FOR ACTUAL SALES AS PER THE DIARY ON 01.12.2003 AND SALES FIGURES TAKEN BY THE A.O. ITA NO.162/RJT/2008 8 THERE IS A DISCREPANCY OF RS. 15 465/- AS PREVIOUS DAYS SALES IS INCLUDED IN THE SALES OF 01.12.2003. ON VERIFICATION OF THE DIARY THE CONTENTION APPEARS T O BE TRUE. THEREFORE A FIGURE OF RS.15 465 SHOULD BE EXCLUDED FROM THE CALCULATION OF CASH SALES. 7.6 SIMILARLY ON 24.10.2003 THE APPELLANT SUBMITTE D THAT CORRECT FIGURER OF CASH SALES IS RS.57 225/- A S AGAINST RS.54 530 TAKEN BY THE AQ.O. THE A.O. HAS TAKEN TH E FIGURE OF CASH SALES AFTER REDUCING THE EXPENSES WH EREAS FIGURE BEFORE EXPENSES SHOULD BE TAKEN. THIS WILL HAVE EFFECT OF INCREASING THE FIGURE OF CASH SALES BY RS .2 695/-. 7.7 IN VIEW OF THE ABOVE CASH SALES AS PER THE DIA RY FRO THE PERIOD 19.10.2003 TO 05.12.2003 COMES TO RS.5 40 246/- (RS.8 21 242 RS.2 68 226 RS.15 46 5 + RS.2 695). 8.0 THE NEXT ISSUE IS TO DECIDE WHETHER ON THE BASI S OF UNACCOUNTED SALES FOR THE PERIOD 19.10.2003 TO 05.12.2003 ESTIMATE OF THE SALES FOR THE WHOLE YEA R CAN BE MADE OR NOT. THE APPELLANT HAS SUBMITTED THAT T HE UNRECORDED SALE IS DETERMINED ON THE BASIS OF DIARY FOUND DURING THE SURVEY AND THEREFORE THE UNRECORDED SALE SHOULD BE DETERMINED ONLY TO THE EXTENT OF WHAT IS MENTIONED IN THE DIARY. THERE IS NO EVIDENCE FOUND DURING THE COURSE OF SURVEY WHICH CAN SUGGEST THAT PRIOR T O 19.10.2003 THE SALES WAS NOT RECORDED IN THE BOOKS F ACCOUNTS. THE APPELLANT SUBMITTED THAT IT IS QUITE ILLOGICAL TO ESTIMATE THE SALES FOR POST SURVEY PERIOD. THE APPELLANT RELIED ON RECENT DECISION OF DELHI HIGH C OURT IN THE CASE OF CT VS. ANAND KUMAR DEEPAK KUMAR (294 IT R 497) WHEREIN IT IS HELD THAT MERELY ON THE PRESUMPT ION CONTINUANCE OF DISCREPANCY FOR THE POST SEARCH PERI OD CANNOT BE ASSUMED. ON THE OTHER HAND THE A.O. HAS RELIED UPON THE APEX COURT DECISION IN THE CASE OF H.M. ESUFALI H.M. ABDULALI (90 ITR 271) WHEREIN IT WAS HELD THAT DEPARTMENT CAN ESTIMATE INCOME FOR WHOLE YEAR ON THE BASIS OF MATERIAL FOR PART OF THE YEAR. THE AP PELLANT SUBMITTED THAT THE APEX COURT DECISION RELIED UPON BY THE ITA NO.162/RJT/2008 9 A.O. IS DISTINGUISHABLE ON FACTS. THAT CASE IS CON NECTED WITH THE PROCEEDINGS UNDER THE SALES TAX ACT. DURI NG THE COURSE OF SEARCH A BILL BOOK WAS FOUND AND THE ASS ESSEE DENIED THAT THE SAID BILL BOOK WAS HIS BILL BOOK AN D THE ENTRIES THEREIN RELATED TO HIS DEALING. LATER ON HE CONCEDED THAT THE BILL BOOK WAS HIS AND THE ENTRIES THEREIN RELATED TO HIS DEALINGS. THE ASSESSEE COUL D NOT ADVANCE ANY JUSTIFIABLE REASON FOR NOT ENTERING IN HIS ACCOUNTS THE DEALINGS NOTED IN THE BILL BOOK SEIZED . IN THIS FACTUAL MATRIX THE AUTHORITIES CAME TO CONCLU SION THAT THE ASSESSEE WAS MAINTAINING FALSE ACCOUNTS AND HE WAS INDULGED IN LARGE SCALE DEALINGS OUTSIDE HIS ACCOUN TS. THEREFORE ON THE BASIS OF BEST JUDGMENT ASSESSMENT THE ESTIMATE OF TURNOVER FOR THE ENTIRE YEAR WAS HELD A S VALID BY THE APEX COURT. THE AR SUBMITTED THAT FACTS IN THE APPELLANTS CASE ARE TOTALLY DIFFERENT. AT NO POIN T F TIME THE APPELLANT HAD DENIED THAT TRANSACTIONS IN THE D IARY WERE NOT HIS. A PLAUSIBLE EXPLANATION IS GIVEN AS TO WHY THE SALES IS NOT RECORDED IN THE BOOKS. THERE IS N O EVIDENCE FOUND DIRECT OR CIRCUMSTANTIAL WHICH CAN CORROBORATE THE PRESUMPTION THAT THE IMPUGNED DISCREPANCY CONTINUED FOR THE WHOLE YEAR. TO THE CO NTRARY TO THE APEX COURT DECISION WHEREIN ON THE BASIS OF PECULIAR FACTS FINDING REGARDING OUT OF BOOKS TRANS ACTION FOR THE WHOLE YEAR WAS RECORDED IN THE APPELLANTS CASE THE A.O. HAS MADE ONLY A GUESS TO INFLATE THE FIGUR E OF SALES AND TO SUPPORT HIS GUESS RELIANCE IS PLACED ON THE APEX COURT DECISION. 8.1 FURTHER THE AR SUBMITTED THAT THE CASE BEFORE THE APEX COURT SEARCH WAS CONDUCTED AFTER THE CLOSE OF THE RELEVANT YEAR FOR WHICH ESTIMATE OF TURNOVER WAS MA DE. THUS THE PERIOD FOR WHICH ESTIMATE IS MADE PRECEDE S THE DETECTION BY THE DEPARTMENT BY WAY OF SEARCH. EVEN IN THAT CASE NO ESTIMATE WAS MADE FOR THE PERIOD AFTE R THE SEARCH. THE AR SUBMITTED THAT THE DELHI HIGH COURT JUDGMENT IN CASE OF ANAND KUMAR DEEPAK KUMAR ALSO HOLD THAT IN THE ABSENCE OF ANY CORROBORATIVE MATER IAL PRESUMPTION FOR POST SEARCH PERIOD CANNOT BE MADE. THE ITA NO.162/RJT/2008 10 LOGIC AND RATIO OF THE ABOVE DECISIONS APPLY TO APP ELLANTS CASE WITH FULL FORCE. 8.2 ON CAREFUL CONSIDERATION I FIND MERITS IN THE SUBMISSIONS OF THE APPELLANT. THE ESTIMATE OF UNRE CORDED SALES SHOULD BE CONFINED TO THE EXTENT IT IS FOUND FROM THE DIARY IMPOUNDED DURING THE SURVEY. THE APPELLANTS EXPLANATIONS FOR NOT RECORDING THE SALES IN THE BOO KS CANNOT BE SIMPLY REJECTED. NO SUCH DIARY OR ANY OT HER MATERIAL IS FOUND FOR PRE SURVEY PERIOD AND THEREFO RE IT IS DIFFICULT TO HOLD THAT THE APPELLANT HAS AFFECTED U NRECORDED SALES PRIOR TO PERIOD COVERED BY THE DIARY. WHEN O NE MATERIAL FOR A SPECIFIC PERIOD IS FOUND THE DISCRE PANCY ON THE BASIS OF THAT MATERIAL SHOULD BE CONFINED TO TH AT PERIOD ONLY UNLESS THE MATERIAL ITSELF OR ANY OTHER EVIDEN CE OR THE CIRCUMSTANCES GIVING RISE TO A FINDING INDICATE DIS CREPANCY FOR THE OTHER PERIOD. THE ENLARGEMENT OF THE MATERI AL FOUND BY PRESUNMPTION AND GUESS CANNOT LEAD TO A LO GICAL CONCLUSION OF EXISTENCE OF DISCREPANCY IN OTHER PER IOD. FURTHER IT IS NOT LOGICAL TO ASSUME ANY SUCH DISCR EPANCY AFTER THE PERIOD OF SURVEY. IN NO CASE THE ESTIMA TE CAN RUN FOR POST SURVEY PERIOD. THE DELHI HIGH COURT JU DGMENT RELIED UPON THE APPELLANT ALSO LAY DOWN THE SAME PRINCIPLE. THE APEX COURT DECISION RELIED UPON BY THE A.O. IS DISTINGUISHABLE ON FACTS AND IT IS DIRECTLY NOT APPLICABLE TO APPELLANTS CASE. I THEREFORE HOLD T HAT THE UNRECORD4ED SALE SHOULD BE TAKEN AT RS.5 40 246/-. 9.0 THE NEXT ISSUE IS TO DETERMINE PROFIT ON SUCH UNRECORDED SALES. THE A.O. HAS ADDED ENTIRE SALE CONSIDERATION WHICH IS APPARENTLY INCORRECT. THE O BJECT IS TO TAX PROFIT EMBEDDED IN SUCH SALES. THE SALES BY ITSELF CANNOT REPRESENT THE INCOME BUT THE REALIZATION IN EXCESS OF COST INCURRED FOR MASKING SUCH SALES IS THE INCO ME OF THE ASSESSEE. THE JURISDICTIONAL HIGH COURT JUDGME NT IN THE CASE OF PRESIDENT INDUSTRIES RELIED UPON BY THE APPELLANT ALSO HOLDS THE SAME PRINCIPLE. IF THE EN TIRE SALE CONSIDERATION IS ADDED THE RESULT GP WOULD BE TOTA LLY UNREALISTIC FOR THE BUSINESS OF DEPARTMENTAL STORE. THEREFORE I HOLD THAT GP ON THIS UNRECORDED SALE ITA NO.162/RJT/2008 11 CONSTITUTE THE APPELLANTS INCOME. NORMALLY GP IN UNRECORDED TRANSACTIONS ARE HIGHER THAN THAT SHOWN IN CASE OF RECORDED TRANSACTIONS BECAUSE THE COMMON EXPENSES FOR RECORDED AND UNRECORDED TRANSACTIONS A RE RECORDED IN THE BOOKS. I THEREFORE HOLD THAT GP OF 25% SHOULD BE TAKEN AS IT WILL BE REASONABLE AS COMPARE D TO THE DISCLOSED GP OF AROUND 15%. ACCORDINGLY THE INCOME ON THE UNRECORDED SALES WILL COME TO RS.1 35 0- 62. THE ADDITION OF RS.1 35 0-62 IS THUS CONFIRMED . 9.1 AS FAR AS INVESTMENT FOR UNRECORDED SALES IS CONCERNED THE APPELLANT HAS RELIED UPON THE JUDGME NT OF JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF P RESIDENT INDUSTRIES STATING THAT THERE IS NO FINDING OR MATE RIAL ABOUT SUPPRESSION OF INVESTMENT IN GOODS WHICH ARE SUBJEC T OF UNDISCLOSED SALES AND THEREFORE THE SAME CANNOT BE ASSUMED. IT WAS SUBMITTED ON BEHALF OF THE APPELLA NT THAT IF THERE WAS SUCH UNRECORDED INVESTMENT EXCESS STO CK OR CASH WOULD HAVE BEEN FOUND WHEREAS DURING SURVEY IN APPELLANTS CASH NO EXCESS STOCK OR CASH IS FOUND. THE APPELLANT IS RUNNING A DEPARTMENTAL STORE WHERE MAJ OR PART OF SALES IS CASH SALES ON COUNTER RESULTING IN IMMEDIATE CASH INFLOW. THE PURCHASES ARE MOSTLY MAD E FROM DISTRIBUTORS / WHOLESALERS ON CREDIT NOT REQUI RING IMMEDIATE CASH OUTFLOW. DUE TO THIS TRADE PRACTICE IN A BUSINESS OF DEPARTMENT STORE THE UNRECORDED PURCHA SE AND SALE TRANSACTIONS DO NOT REQUIRE ANY INITIAL IN VESTMENT OR WORKING CAPITAL. ON DUE CONSIDERATION I AGREE WITH THE APPELLANT THAT THERE IS NO BASIS IN THE APPELLANTS CASE TO ASSUME UNEXPLAINED INVESTMENT AS NO SUCH MATERIAL W AS FOUND DURING THE SURVEY INDICATING ANY INVESTMENT A S HELD IN THE CASE OF PRESIDENT INDUSTRIES 258 ITR 654 AN D ALSO IN CASE OF INCOME TAX OFFICER VS. GURU BACHCHAN SIN GH J. JUNEJA [55 ITD 75 (TM)]. IN ABSENCE OF ANY MATERIA L INVESTMENT CANNOT BE ASSUMED BY MAKING QUESSES. TH E NATURE F BUSINESS AND TRADE PRACTICE ALSO SUGGEST T HAT NO SUCH ADDITIONAL INVESTMENT IS REQUIRED OVER AND ABO VE THE EXISTING INFRASTRUCTURE.. ITA NO.162/RJT/2008 12 9.2 ACCORDINGLY THIS GROUND IS PARTLY ALLOWED. TH E ADDITION TO THE EXTENT OF RS.1 35 062/- IS CONFIRME D AND THE APPELLANT GETS RELIEF OF RS.57 63 078/- OUT OF ADDITION OF RS.58 98 140/-. 9. WE HAVE HEARD SHRI JM SAHAY THE LD.DR WHO RELI ED ON THE ORDER OF THE ASSESSING OFFICER AND SHRI MP SARDA T HE LD.AR OF THE ASSESSEE WHO RELIED ON THE ORDER OF CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE CIT(A) ON THE BASIS OF MATERIAL PLACED BEFORE HIM WHICH ARE ALSO PLACED B EFORE US HAS FOUND THAT THE OBJECTION OF THE ASSESSEE THAT THE F OLLOWING AMOUNTS ARE TO BE EXCLUDED FROM THE UNDISCLOSED CASH SALES WORKED OUT BY THE ASSESSING OFFICER WAS ACCEPTABLE TO THE FOLLOWI NG EXTENT AND THEREFORE THE UNDISCLOSED SALES WORKED OUT TO RS.5 40 246 INSTEAD OF RS. 455 956 CLAIMED BY THE ASSESSEE AS AGAINST RS.8 21 242 WORKED OUT BY THE ASSESSING OFFICER FOR THE PRE SURVEY PER IOD FROM 19-10- 2003 TO 05-12-2003 I.E. FOR 44 DAYS FOR THE DETAI LED REASONS DISCUSSED BY HIM ON PAGES 7 & 8 OF HIS ORDER: (A) FOR UNVERIFIABILITY TO EXCLUDE THE CREDIT SALE S CLAIMED BY THE ASSESSEE CANNOT BE ACCEPTED; (B) AMOUNT OF RS.2 68 226 CLAIMED TO BE CASH TAKEN AT HOME EARLIER AND BROUGHT BACK ON SUBSEQUENT DATE SHOULD BE EXCLUDED WHILE WORKING OUT THE UNACCOUNTED SALES; ITA NO.162/RJT/2008 13 (C) THE SALES OF 01-12-2003 CANNOT INCLUDE AN AMOUN T OF RS.15 465 BECAUSE IT REPRESENTED THE SALES OF PREVI OUS DAY I.E. 30-11-2003; (D) THE SALES OF RS.24-11-2003 SHOULD BE INCREASED BY AN AMOUNT OF RS.2 695 AS THE ASSESSING OFFICER HAS TAK EN THE FIGURE AT RS. RS.54 530 WHICH IS NET OF THE AMO UNT OF RS.2 695 REPRESENTING EXPENSES AND THE ACTUAL FIGUR E TO BE TAKEN IS RS.57 225. 11. THE LEARNED CIT(A) THEN FOUND THAT THE AMOUNT O F RS. 5 40 246 REPRESENTED THE UNACCOUNTED SALES FOR THE PERIOD 19 -10-2003 TO 05- 12-2003 AND THE ASSESSING OFFICER APPLIED THE SAME FOR THE WHOLE YEAR UNDER CONSIDERATION WHICH IS NOT TENABLE AS PE R THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS ANAND KU MAR DEEPAK KUMAR 294 ITR 498 (DEL) AS THERE WAS NO EVIDENCE FO UND DURING THE SOURCE OF SURVEY WHICH COULD SUGGEST THAT PRIOR TO 19-10-2003 THE SALES WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. TH E CIT(A) ALSO FOUND THAT THE JUDGMENT OF THE APEX COURT IN THE CA SE OF H.M. ESUFALI H.M. ABDULALI 90 ITR 271 (SC) WAS NOT APPLICABLE TO THE PRESENT CASE AS IN THAT CASE THE SEARCH TOOK PLACE AFTER THE CLO SE OF THE RELEVANT PREVIOUS YEAR AND THEREFORE THE WHOLE YEAR OF ACCO UNTING WAS COVERED IN THE BILL BOOK FUND WHICH IS NOT THE CASE IN RESPECT OF THE ASSESSEE. IN RESPECT OF THE ASSESSEE THE DIARY FO UND WAS FOR A PERIOD OF 44 DAYS. ON THESE BASIS THE CIT(A) MAIN TAINED THAT THE UNRECORDED SALES SHOULD BE TAKEN AT RS.5 40 246 ONL Y AS WORKED OUT ABOVE. THE CIT(A) AFTER FINDING SO DEALT WITH THE ISSUE WHETHER THE ENTIRE UNRECORDED SALES ARE TO BE BROUGHT TO TAX OR ONLY THE PROFIT ITA NO.162/RJT/2008 14 ELEMENT INVOLVED IN IT TO BE BROUGHT TO TAX. HERE FINDING SUPPORT FROM THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF PRESIDENT INDUSTRIES 258 ITR 654 (GUJ) THE CIT(A) F OUND THAT THE PRINCIPLE INVOLVED IN THIS JUDGMENT IS SQUARELY APP LICABLE TO THE CASE OF THE ASSESSEE THAT IF THE ENTIRE SALE CONSIDERATI ON IS ADDED THE RESULTANT GROSS PROFIT WOULD BE TOTALLY UNREALISTIC FOR THE BUSINESS OF DEPARTMENTAL STORE. THE CIT(A) THEREFORE HELD THAT ONLY THE PROFIT ELEMENT IN THE UNRECORDED SALES COULD BE ADDED AND THE GROSS PROFIT ON THE UNRECORDED SALES BEING GENERALLY MORE COMPAR ED TO THE RECORDED TRANSACTIONS BECAUSE OF THE EXPENDITURE EL EMENT THE GROSS PROFIT ON THE UNRECORDED SALES BE ESTIMATED AT 25% OF THE SAME AS AGAINST THE DISCLOSED GROSS PROFIT OF AROUND 15% ON THE RECORDED SALES. THUS THE TOTAL ADDITION WAS WORKED OUT AT RS.1 35 062 BY THE CIT(A) AS AGAINST RS. 58 98 140. THE LD.CIT(A) ALS O CONSIDERED ANOTHER ASPECT OF THE MATTER AS TO WHETHER THE INVE STMENT IN THE UNRECORDED SALES SO WORKED OUT BY HIM AT RS .5 40 2 46 COULD BE CONSIDERED FOR ADDITION OR NOT. TO THIS DRAWING S UPPORT FROM THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF PRESIDENT INDUSTRIES SUPRA AND THE THIRD MEMBER DECISION OF T HE TRIBUNAL IN THE CASE OF ITO VS GURU BACHCHAN SINGH J JUNEJA THE CI T(A) FOUND THAT THERE WAS NO MATERIAL FOUND DURING THE COURSE OF SU RVEY THAT THE ASSESSEE HAD MADE ANY UNDISCLOSED INVESTMENT IN THE UNRECORDED SALES. 12. THE LEARNED AR BEFORE HAS RELIED UPON THE JUDGM ENT OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF ASHOK K UMAR RASTOGI VS CIT 100 CTR (ALL) 204 IN SUPPORT OF THE FINDING OF THE CIT(A) THAT IN ITA NO.162/RJT/2008 15 THE ABSENCE OF ANY CORROBORATING EVIDENCE NO ADDITI ON U/S 69 COULD BE MADE AS UNEXPLAINED INVESTMENT IN THE SALES ESTI MATED ON DISCOVERY OF CERTAIN DOCUMENTS. ANOTHER JUDGMENT R ELIED UPON BY THE LD.AR FOR THE ASSESSEE IS IN THE CASE OF ANJANEYA B RICK WORKS VS ACIT (INV) 74 TTJ (BANG) 921 FOR THE PROPOSITION TH AT MERE EXISTENCE OF EVIDENCE TO SUPPORT CONCEALMENT OF INCOME IN THE NEXT ASSESSMENT YEAR CANNOT BE MADE A BASIS TO ESTIMATE THE INCOME FOR THE CURRENT YEAR OR ANY OTHER ASSESSMENT YEAR FOR T HAT MATTER. IN NUTSHELL THIS DECISION OF THE BANGALORE BENCH OF TH E TRIBUNAL IS RELIED UPON TO SUPPORT THE ASSESSEES CONTENTION THAT ADDI TION BASED ON THE INFORMATION FOUND IN THE DIARY IMPOUNDED IN ACTION U/S 133A CANNOT BE EXTENDED TO PRE-SURVEY PERIOD OR POST SURVEY PER IOD AND THE INFORMATION FOUND IN THE DIARY COULD BE USED ONLY F OR THE PERIOD COVERED IN SUCH EVIDENCE FOUND DURING THE COURSE OF SURVEY. WE FIND THAT BOTH THE DECISIONS ARE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. 13. IN VIEW OF THE ABOVE DISCUSSION AND IN THE ABSE NCE OF ANY ADDITIONAL MATERIAL BEING ADDUCED FOR OUR CONSIDERA TION FROM THE DEPARTMENTAL SIDE AND IN THE ABSENCE OF ANY NEW FAC TS BROUGHT TO OUR NOTICE BY THE LD.DR WE ARE OF THE CONSIDERED OPINI ON THAT THE CIT(A) WAS JUSTIFIED IN HIS ACTION. IN THIS VIEW OF THE M ATTER WE UPHOLD ON ORDER. 14. THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED . ITA NO.162/RJT/2008 16 ORDER PRONOUNCED IN THE OPEN COURT ON 23-12-2010 SD/- SD/- (A.L. GEHLOT) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DT : 23 RD DECEMBER 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-II RAJKOT 4. THE CIT-I RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT