Shri Jayesh Chandubhai Patel, Mehsana v. The DY.CIT., Cent.Circle-1(2),, Ahmedabad

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH JM AND D.C.AGRAWAL AM JAYESH CHANDUBHAI PATEL PRAMUKH THIRTH C/O VIMAL ELECTRIC CO. MEHSANA. V/S . DY CIT CEN. CIR.1(2) AHMEDABAD. AND DY CIT CEN. CIR.1(2) AHMEDABAD. V/S . JAYESH CHANDUBHAI PATEL PRAMUKH THIRTH C/O VIMAL ELECTRIC CO. MEHSANA. ASSESSEE BY :- SHRI S. N. SOPARKAR & P. M. MEHTA ARS RESPONDENT BY:- SHRI RAJEEV AGARWAL CIT DR ITA NO. ASST. YEAR 2151/AHD/2007 1999-2000 2152/AHD/2007 2000-01 2153/AHD/2007 2001-02 2154/AHD/2007 2002-03 2155/AHD/2007 2003-04 2156/AHD/2007 2004-05 ITA NO. ASST. YEAR 2494/AHD/2007 1999-2000 2495/AHD/2007 2000-01 2496/AHD/2007 2001-02 2497/AHD/2007 2002-03 2498/AHD/2007 2003-04 2499/AHD/2007 2004-05 2 O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . ABOVE SIX APPEALS ARE FILED BY THE ASSESSEE AND SI X CROSS APPEALS ARE FILED BY THE REVENUE FOR ASST. YEARS 1999-2000 TO 2004-05. THEY ARE ARISING OUT OF THE ORDERS OF LD. CIT(A) PASSED ON 2 8.03.2007. SINCE A COMMON ISSUE IS INVOLVED IN RESPECT OF THESE APPEAL S THEY ARE TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. 2. THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZ URE OPERATION UNDER SECTION 132 WAS CARRIED OUT ON 20.8.2004 AT THE BUS INESS AND RESIDENTIAL PREMISES OF THE ASSESSEE AND HIS COMPANIES CALLED VIMAL GROUP. DURING THE COURSE OF SEARCH AT THE PREMISES OF ASSE SSEE THE AUTHORISED OFFICERS FOUND COMPUTER DATA IN THE FILE NAME ACME COMPANY. ON VERIFICATION OF THESE DATA THE AO NOTICED VARIOUS R ECEIPTS AND PAYMENTS WHICH RELATED TO MAINLY OIL AND DAIRY PRODUCTS. THE AO NOTICED THAT THESE RECEIPTS AND PAYMENTS ARE NOT DISCLOSED BY THE ASSE SSEE; WHO ACCORDING TO THE AO IS THE MAIN PERSON IN THE GROUP. HE IS THE MANAGING DIRECTOR IN TWO COMPANIES NAMELY VIMAL DAIRY LTD. AND VIMAL OIL & FOOD LTD. THE DATA WAS FOUND FROM THE LAPTOP AT THE RESIDENCE OF THE ASSESSEE. THE AUTHORISED OFFICER SOUGHT EXPLANATION OF THE ASSESS EE UNDER SECTION 132(4) BUT NO EXPLANATION WAS FURNISHED BEFORE HIM. THEREF ORE THE AO INFERRED THAT THE DATA RELATES TO UNACCOUNTED SALES AND PURC HASES IN BUSINESS OF DAIRY AND OIL PRODUCTS CARRIED ON BY THE ASSESSEE. THE AO FOUND A TOTAL AMOUNT OF RS.5 36 37 283/- AS RECEIPT UNDER VARIOUS HEADS AND SIMILAR AMOUNT SHOWN AS DEBITS UNDER OTHER HEADS. HOWEVER NO DETAILS REGARDING NATURE OF EXPENDITURE WHETHER REVENUE OR CAPITAL O R INVESTMENT OR EXPENSES OR BUSINESS OR OF PERSONAL NATURE WERE SUB MITTED BY ASSESSEE OR 3 WAS FOUND FROM THE SEIZED MATERIAL. ACCORDINGLY TH E AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ON 29.7.2006 ASKING H IM TO RECONCILE THE ENTRIES IN THE ACME FILE WITH THE REGULAR BOOKS O F ACCOUNT AND ALSO BIFURCATE THE EXPENSES WHETHER OF REVENUE NATURE O R OF INVESTMENT WITH SUPPORTING MATERIAL. IN RESPONSE TO THIS THE ASSES SEE FURNISHED FOLLOWING REPLY :- (I) ON VERIFICATION OF THE SEIZED DATA IT IS CLEA R THAT TOTAL RECEIPT FROM SALE OF ACID OIL BARDAN BUTTTER GHEE OIL T EDIBLE OIL SMP ETC. WHICH ARE THE PRODUCTS OF THE COMPANIES VIMAL OIL & FOODS LIMITED AND VIMAL DAIRY LIMITED WHEREIN ASSESSES IS MANAGING DIRECTOR . FROM THE ABOVE IT CAN BE SAFELY CONCLUDED THAT THIS IS NOTHING BUT UN ACCOUNTED SALE OF VARIOUS PRODUCTS .OF VIMAL GROUP & OTHERS -WHICH WA S -TRANSFERRED TO ASSESSES BEING MAIN PERSON OF COMPANY. (II) IN THE LEDGER ACCOUNT OF VERNAL MARKETING MAINTAINED IN ACME COMPANY CURTAIN AMOUNT ARE SHOWN TO HAVE BEEN PAID TO VIMAL MARKETING AND IN THE REGULAR BOOKS OF ACCOUNTS OF V IMAL MARRKETING THE SAID PAYMENTS ARE SHOWN TO HAVE BEEN DEPOSITED IN T HE BANK ACCOUNT. THE AMOUNT SHOWN IN THE ACME ARE CONVERTED INTO 00 HUNDREDS IN THE REGULAR BOOKS OF ACCOUNT OF VIMAL MARKETING. IT IS ALSO ESTABLISHED THAT VARIOUS ENTRIES NOTED IN THE SEIZED DATA FILE ACME COMPANY ARE GENUINE AND IN HUNDREDS. (III) WHILE ANSWERING QUESTION NO. 4 OF THE STA TEMENT RECORDED U/S I32(1A) ASSESSEE 'AT QUESTION NO. 4 HAS ADMITTED T HAT TRANSACTIONS NOTED IN THE DATA FLIES ARE MISCELLANEOUS SALE RECEIPTS F IND EXPENDITURE AS WELL AS PAYMENTS. (IV) THE CREDIT ENTRIES APPEARING IN THE. LEDGER ACCOUNT REPRESENT THE RECEIPT OF SALE OF VARIOUS ITEMS. (V) IT IS NOTICED FROM THE SEIZED DATA AND CASE RECORDS OF VIMAL MARKETING & VIMAL DAIRY LIMITED THAT THE ASSESSEE H AS PURCHASED VARIOUS ITEMS OF RS. 2 65 47 225 FROM VIMAL MARKETI NG AND 32 44 758 FROM VIMAL DAIRY LIMITED WHICH WERE DULY REFLECTED IN THE BOOKS OF RESPECTIVE CONCERNS AS CASH SALES WHICH AGAIN PROVE THE GENUINENESS OF TRANSACTIONS IN THE SEIZED FILE AND ENTRIES ARE NOT ED IN HUNDRED. 4 (VI) THE ASSESSEE HAS NOT DISCHARGED ITS ONUS T HAT HE IS NOT OWNER BENEFICIARY OF THE TRANSACTIONS NOTED IN THE DATA F ILE. (VIII) THE RECEIPTS LIKE OIL BUTTER ETC. ARE THE PRODUCTS OR BY PRODUCTS OF OIL AND DAIRY PRODUCTS PURCHASED FROM VIMAL MARKETI NG VIMAL DAIRY LIMITED & OTHERS WHICH CAN BE TALLIED BY ONE TO ONE BASIS. REGARDING OTHER EXPENSES RELATING TO PURCHASE AND OTHER EXPEN SES ASSESSEE HAS NOT FINISHED ANY DETAIL ACCORDINGLY GP & NP DERIVED FR OM UNDISCLOSED SALE IS LIABLE TO BE ESTIMATED; (IX) THERE ARE CERTAIN EXPENSES NOTED IN THE NA ME OF ASSESSEE HIMSELF AND HIS FAMILY MEMBERS WHICH ARE DEFINITELY PERSON A! IN NATURE WHICH AGAIN PROVE {HAT TOTAL EXPENDITURE SHOWN IN THE DAT A FILE ARE INCLUSIVE OF PERSONAL IN NATURE AND INVESTMENTS ALSO THEREFORE C REDIT OF EXPENSES AS PER DATA/LIE CANNOT BE GIVEN. (X) AS ACME COMPANY BEING SEPARATE ENTITY IN T HE EYES OF LAW BY WHICH SALES AND PURCHASES ARE MADE AND THEREFORE IT CANNOT BE SAID THAT PROFIT OFFERED BY VIMAL DAIRY LIMITED AND VIMAL MAR KETING SHOULD HE SET OFF AGAINST THE PROFIT EARNED BY THE ASSESSEE. (XI) IT IS CONCLUDED THAT ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 5 35 70 463 BY WAY OF UNACCOUNTED SALE OF DAIRY AND OIL PRODUCTS AND BY PRODUCTS PURCHASED FROM VIMAL MARKETING & VIMAL DAI RY LIMITED.& OTHERS FOR WHICH ASSESSEE HAS INCURRED CERTAIN EXPE NSES. AS ASSESSES HAS NOT FURNISHED THE COMPLETE DETAILS REGARDING NATURE OF EXPENSES CREDIT FOR SAME CANNOT HE GIVEN IT/?. 37(1) OF THE ACT. IN ADDITION TO THAT ASSESSES HAS DENIED TO OWN UP THE ENTRIES NOTED IN THE SEIZED DATA FILE DESPITE IT TALLIED WITH THE TRANSACTIONS NOTES IN T HE NAME OF VIMAL MARKETING AND VIMAL DAIRY LEAVES NC OPTION BUT TO E STIMATE THE NET PROFIT DERIVED FROM UNACCOUNTED SATE OF RS. 5 35 70 463 (XII) IT IS PERTINENT TO NOTE THAT ON VERIFICATION OF VARIOUS EXPENSES NOTED IN THE SEIZED DATA FIFE AND AFTER COMPARING THE SAM E WITH THE ACCOUNT OJ VIMAL MARKETING AND VIMAL DAIRY LIMITED IT IS NOTI CED THAT MORE THAN 65% OF THE EXPENSES AS MENTIONED IN DATA FILE ARE D ULY MATCHED AND CONSIDERED AS GENUINE. REGARDING OTHER EXPENSES AS SESSEE HAS NOT FILED ANY SUBMISSION. HOWEVER WHILE ESTIMATING THE NET P ROFIT DERIVES FROM TOTAL SALE OF RS. 5 35 70 463 SAME HAS BEEN CONSIDE RED. SIMILARLY CONTENTION OF THE ASSESSES THAT PURCHASES FROM VIMA L MARKETING IS OF MILK ONLY WHEREIN NO VALUE ADDITION IS MADE AND THEREFOR E PROFIT -DERIVED ON THAT WILL BE LESSER IS ALSO CONSIDERED WHILE ESTIMA TING THE NET PROFIT 5 DERIVED THE TOTAL SALE. CONSIDERED ABOVE MENTIONED FACTS ANT CIRCUMSTANCES AND LOOKING TO THE FACTS IN TOTALITY AND ALSO TO COVER ; ALL DISCREPANCIES MENTIONED ABOVE NET PROFIT DERIVED F ROM UNDISCLOSED SALE OF RS 5 35 70 463 IS ESTIMATED @ 10% OF TOTAL UNAC COUNTED SALE WHICH IS MOST REASONABLE CONSIDERING ALL FACTS. IN NUT SHEET THE ASSESSEES ARGUMENTS WERE AS UNDER :- 1) ENTRIES APPEARED IN SEIZED DATA ARE NOT RELATED TO THE ASSESSEE. 2) AMOUNT MENTIONED IN THE LEDGER ACCOUNT ARE NOT IN 00. 3) SEIZED DATA IS NOT BELONGING TO THE ASSESSEE. 4) ENTRIES APPEARED IN SEIZED DATA ARE JUST NOTINGS/JO TTINGS ONLY. 5) ENTRIES ARE NOT MADE BY THE ASSESSEE. THE AO HOWEVER REJECTED ALL THESE CONTENTIONS AND HELD THAT ENTRIES IN ACME FILE BELONGED TO THE ASSESSEE AND ARE NOT RE CORDED IN THE REGULAR BOOKS OF ACCOUNT. THE AO ACCORDINGLY TREATED THE SU M OF RS.5 35 70 463/- AS ASSESSEES SALES OUTSIDE THE BO OKS OF ACCOUNTS AND APPLIED A NET PROFIT RATE OF 10% THEREOF AND TAXED A SUM OF RS.53 57 063/- AS ASSESSEES UNDISCLOSED INCOME OVER AND ABOVE WHA T WAS SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. 3. WHEN THE MATTER WENT BEFORE LD. CIT(A) THE ASSE SSEE MADE FOLLOWING SUBMISSIONS AGAINST REJECTING THE EXPLAN ATION FURNISHED BY HIM BEFORE THE AO AND TAXING 10% OF TOTAL RECEIPTS AS H IS INCOME. SAME SUBMISSIONS WERE LARGELY MADE BEFORE US:- 1. ADDITION ON ACCOUNT OF UNDISCLOSED INCOME FOR R S.53 57 063/- 1.1 THE AO HAS OBSERVED THAT APPELLANT HAS RECEIVED AN AMOUNT OF RS.5 35 70 463/- BY WAY OF ALLEGED UNACCOUNTED SALE OF DAIRY AND 6 OIL PRODUCTS AND BY PRODUCTS PURCHASED FROM VIMAL M ARKETING & VIMAL DAIRY LTD. WHICH HAS BEEN NOTED IN SOFT DATA FOUND IN ACME COMPANY. THE AO HAS ESTIMATED NET PROFIT @ 10% ON A FORESAID UNACCOUNTED SALE AND ADDITION OF RS.53 57 063/- BEI NG 10% OF AFORESAID ALLEGED UNACCOUNTED SALE IS MADE; 1.2 THE APPELLANT VEHEMENTLY OBJECTS THE AFORESAID ADDI TION MADE BY ASSESSING OFFICER IN VIEW OF WHAT IS STATED HEREUND ER; 1.3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS APPELL ANT HAS OBJECTED THAT SOFT DATA FOUND IN FILE NAME ACME COM PANY IS NOT PERTAINING OR BELONGING TO HIM AND IN THIS REGARDS THE APPELLANT VIDE LETTER DATED 24/12/06 HAS MADE SUBMISSION WHI CH IS REPRODUCED HEREIN UNDER :- 1. IN RESPONSE TO THE NOTICE SO ISSUED I WOULD LIKE T O STATE THAT THE SAID ENTRIES ARE NOT MADE AT THE INSTANCE OR NO T RELATED TO ME AT ALL. IN SPITE OF ALL THIS IT APPEARS THAT TH E AUTHORISED OFFICERWAS OF THE VIEW THAT THE SAID ENTRIES ARE BE LONGING TO ME. I VEHEMENTLY OBJECT TO THE SAME. I CATEGORICALL Y DENY AND STATE THAT I HAVE NEVER INSTRUCTED ANY PERSON TO EN TER THE INFORMATION CONTAINED IN THE FLOPPY UNDER THE HEAD ACME. 2. THE INFORMATION IS ALSO NOT IN THE NATURE OF ANY BO OKS OF ACCOUNT AND SEEMS TO BE JUST NOTINGS/JOTTINGS ONLY. JUST BECAUSE CERTAIN JOTTINGS ARE ENTERED INTO THE PROGR AMME WHICH GIVES A DOUBLE EFFECT IN TERMS OF ACCOUNTING AND THEREFORE THE AUTHORISED OFFICER HAS TAKEN A VIEW THAT THE SAID JOTTINGS ARE CONTAINING THE FULL DETAILS. 3. THE ASSESSEE SUBMITS AS UNDER THAT THE SAID DIGITAL JOTTINGS ARE (I) NOT RELATED TO ANY INCOME OF OR ANY TRANSACTIONS OF THE ASSESSEE. (II) NOT REFLECTED IN OR ACCOUNTED IN ANY MANNER THAT CA N GIVE ANY BASIS OF ANY INCOME (III) JUST NOTINGS OR JOTTINGS AND ARE NOT MADE EITHER BY THE ASSESSEE OR UNDER ANY DIRECTIONS OF OR INSTRUCTION OF ASSESSEE. 7 AND (A) NO BALANCE SHEET OR PROFIT & LOSS ACCOUNT AS REQUIR ED CAN BE DRAWN OR INFERRED HENCE NO INTERFERENCE IS POSSIBL E. (B) THE FACT THAT IT HAS BEEN REPEATEDLY TOLD AND EXPLA INED THAT THE ASSESSEE IS NOT IN THE KNOWLEDGE OF TRANSACTIONS OR NOTINGS IS NOT CONSIDERED BY AUTHORISED OFFICER. 4. AT THIS OUTSET I MAY STATE THAT VIMAL GROUP AS A W HOLE IS A GROUP CONSISTING OF VARIOUS PROFESSIONALS AND PERSO NS INVOLVING MANY PROMOTERS. IT IS NOT LIMITED TO ANY SINGLE PRODUCT BUT THE GROUP HAS THE FOLLOWING FIRMS/ORGANIZATIONS/ENTITIES DEALING IN VARIETY OF PRODUCTS. A. VIMAL CABLES LTD. B. VIMAL FLEXSOL LIMITED. C. VIMAL PUMPS PRIVATE LTD. D. VIMAL DAIRY LIMITED. E. VIMAL OIL & FOODS LTD. F. VIMAL MARKET G. VIMAL COMPUTERS PRIVATE LTD. H. VIMAL PUMPS PRIVATE LTD. I. VIMAL SALES & SERVICE CENTRE J. VIMAL ENGINEERING CO. 5. THERE ARE FACTS OF TRANSACTIONS UNDER THIS GROUP AN D IT IS NOT NECESSARY THAT IF SOMETHING FOUND FROM THE COMPUTER WHICH IS COMMONLY USED BY THE STAFF AND EASILY ACCESSIBLE IS BELONGING TO ME. THE AUTHORISED OFFICER HAS ALSO GR OSSLY OVERLOOKED THE FACT THAT THE LAP TOP WAS NOT FROM M Y POSSESSION BUT WAS AT THE RESIDENTIAL PREMISES BELO NGING TO VIMAL GROUP OF COMPANIES. 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE TOOK THE VIEW THAT ENTIRE RECEIPTS RECORDE D IN ACME FILE REPRESENTED SALES MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT BUT DIRECTED TO APPLY A NET PROFIT RATE OF 2% IN PLACE OF 10% APPLIED BY THE AO. IN THIS REGARD WE REFER TO THE FINDINGS OF LD. CIT(A) AS UNDER :- 4.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND THE ABOVE SUBMISSIONS. ON PERUSAL OF THE SAME I FIND THAT TH E FIRST CLAIM OF THE APPELLANT THAT THIS ACME DATA FILE COULD NOT BE CON SIDERED IN THE 8 APPELLANTS HAND CANNOT BE ACCEPTED. THIS IS FOR TH E REASON THAT THE DATA FILE HAS BEEN FOUND FROM THE APPELLANT AND THAT IT REPRESENTS RECORD OF PURCHASES AND SALE AND EVEN A PROFIT & LOSS ACCOUNT ARE PREPARED. HENCE PRESUMPTION U/S 132(4A) OF I.T. ACT GOES AGA INST THE APPELLANT. HENCE THE APPELLANT IS NOT CORRECT TO CLAIM THAT TH IS DATA FILE IS NOT KNOWN TO HIM. AS THE DATA FILE INCLUDES DETAILS OF PURCHA SE SALE ETC. THE REASONABLE INCOME FROM SUCH DATA IS TO BE WORKED OU T AND IT HAS TO BE CONSIDERED FOR THE PURPOSE OF TAXATION IN THE HANDS OF THE APPELLANT. THE AO WAS THEREFORE JUSTIFIED IN WORKING OUT THE INC OME IN THE HANDS OF THE APPELLANT ON THE BASIS OF THIS DATA. HOWEVER AT TH E SAME TIME 1 NOTICED THAT IN THE DATA. FILE WORKING OF PROFIT IS GIVEN B Y WAY OF PROFIT & LOSS ACCOUNT GIVING DETAILS OF SALES AND PURCHASES. THE METHOD OF MAINTAINING DATA OF SALES AND PURCHASES HAS BEEN DISCUSSED EVEN IN THE STATEMENT OF THE APPELLANT RECORDED AT THE TIME OF SEARCH WHICH IS REPRODUCED IN THE ASSESSMENT ORDER AT THE TIME OF SEARCH ITSELF IN TH E SAID STATEMENT THE APPELLANT HAD EXPLAINED THAT THE FIGURES MENTIONED AGAINST CERTAIN PERSONAL NAMES REPRESENT PAYMENT FOR EXPENSES. REFE RENCE IS MADE TO QUESTION NO.10 11 12 18 ETC. ALL THESE DATA SHOW THAT THE EXPENSES RECORDED AGAINST THE PERSONAL NAMES REPRESENT EXPEN SES RELATING TO THE SAME BUSINESS FOR WHICH CREDITS ATE NOTED IN THE DA TA FILE. THIS EXPLANATION IS ACCEPTED BY THE A.O. THE A.O HAS AL SO ACCEPTED THAT THE PURCHASES AND SALES ARE IN RESPECT OF THE SAME DIAR Y PRODUCTS IN WHICH VIMAL MARKETING AND VIMAL DIARY ARE DEALING WITH. T HUS THIS DATA CAN AT THE MOST BE CONSIDERED AS IN RESPECT OF TRADING OF SUCH ITEMS. THIS IS ALSO NOTICED BY THE A.O- IN PARA 2.10 OF THE ASSESSMENT ORDER WHEREIN IT IS CONCLUDED BY HIM THAT THE APPELLANT RECEIVED RS 53 5 70 LAKH BY WAY OF UNACCOUNTED SALES OF DAIRY PRODUCTS AND OIL PRODUCT S PURCHASED FROM VIMAL MARKETING AND VIMAL DAIRY AND FOR THAT THE AP PELLANT HAS ALSO INCURRED EXPENSES FOR PURCHASE AND OTHER OVERHEADS. IN THE CIRCUMSTANCES A REASONABLE INCOME CAN BE WORKED OU T ONLY BY ESTIMATE. THIS IS BECAUSE THE DATA IS NOT COMPLETE. FOR THIS PURPOSE ONE HAS TO TAKE INTO CONSIDERATION RESULTS OF OTHER PERSONS ENGAGED IN THE SAME BUSINESS OF TRADING IN DIARY PRODUCTS. IN THE CASE OF VIMAL MARKETING FROM WHICH PURCHASES ARE RECORDED IN THE ACME DATA FILE THE A SSESSMENT HAS BEEN MADE BY THE SAME A.O. AND IT IS NOTICED THAT IN THE SAID CASE AS PER BOOKS THE GROSS PROFIT RATIO FOR DIFFERENT YEARS AS UNDER ; FINANCIAL YEAR GROSS PROFIT RATIO 2000-2001 1.59 2001-2002 0.06 2002-2003 L20 2003-2004 0.26 2004-2005 0.52 9 KEEPING IN VIEW THE ABOVE POSITION THE PROFIT RATE OF VIMAL MARKETING HAS TO BE CONSIDERED FOR FINDING OUT THE REASONABLE INC OME IN THE HANDS OF THE APPELLANT. IN THE CASE OF VIMAL MARKETING THE GROSS PROFIT RATE VARIES FROM 0.06% TO 1.59%. HOWEVER I APPRECIATE THE AOS OBSERVATION THAT THE PURCHASES AS PER THIS DATA FILE ARE CASH PURCHA SES AND THEREFORE THE ASSESSEE MUST HAVE SAVED SALES TAX AND OTHER TAXES AND THE APPELLANT MUST BE HAVING SOME HIGHER INCOME. IN THAT CASE THE NET PROFIT IS TO BE ESTIMATED. HAVING REGARD TO THE GROSS PROFIT .RATE OF VIMAL MARKETING AND HAVING REGARD TO THE FACT THAT THE TRADING OF THE A PPELLANT IS ALSO IN THE SIMILAR PRODUCTS I.E. DIARY PRODUCTS THE NET PROFI T ESTIMATE CANNOT BE AS HIGH AS 10% AS ESTIMATED BY THE A.O. CONSIDERING TH E ABOVE ASPECT AND CONSIDERING THE; GROSS PROFIT RATE OF VIMAL MARKETI NG WHICH IS ACCEPTED BY THE DEPARTMENT IN THE ASSESSMENT PROCEEDINGS OF THAT CASE IT WOULD BE REASONABLE IF THE NET PROFIT IS ESTIMATED AT 2% OF THE SALES RECORDED AS PER THE ACME DATA FILE AFTER CONSIDERING EXPENSES ON DI STRIBUTION PURCHASE AND OTHER RELEVANT EXPENSES FOR THE YEAR UNDER CONS IDERATION WHICH WOULD COVER THE DISCREPANCIES AND THE APPLICABILITY OF SECTION 40A(3) OF I.T.ACT. THE ADDITION OF RS 53 57 063/- ON ACCOUNT OF NET PROFIT ESTIMATED BY THE A Q. IS THEREFORE REDUCED TO RS 11 71 408/- (SAY RS.11 71500/-). THE APPELLANT THUS GETS RELIEF OF RS.41 85 635/-. 5. AGAINST THE ORDER OF LD. CIT(A) THE ASSESSEE IS IN APPEAL FOR SUSTAINING AN ADDITION OF RS.11 71 408/- WHEREAS RE VENUE IS IN APPEAL AGAINST RELIEF OF RS.41 81 635/- ALLOWED BY THE LD. CIT(A). THE RESPECTIVE GROUNDS MOSTLY ARGUMENTATIVE ARE CONTAINED IN THEI R APPEALS MEMOS. 6.1 BEFORE US LD. AR FOR THE ASSESSEE SUBMITTED TH AT IT IS INCORRECT TO ATTRIBUTE ENTIRE RECEIPTS AND PAYMENTS TO ASSESSEE. THE ASSESSEE IS AN INDIVIDUAL WHEREAS DATA CLEARLY PERTAINED TO THE CO MPANIES. EVEN THOUGH THE ASSESSEE IS THE MANAGING DIRECTOR OF THE TWO CO MPANIES BUT ASSESSEE HIMSELF IS NOT CARRYING OUT ANY BUSINESS IN THE PRO DUCT DEALT WITH BY THE TWO COMPANIES. THEREFORE IT IS INCORRECT TO HOLD T HAT ENTIRE RECEIPTS WOULD BE THE SALES MADE BY THE ASSESSEE AS AN INDIV IDUAL AND TO TAX HIM ON PROFIT THEREFROM. BUSINESS IN DAIRY PRODUCTS AND OIL PRODUCTS 10 PERTAINED TO THE COMPANIES AND THEREFORE DATA CLE ARLY BELONGED TO THOSE COMPANIES WHICH ALONE OUGHT TO HAVE BEEN SUBJECTED TO TAX IF AT ALL REQUIRED. IN RESPECT OF THESE ENTRIES LD. AR REFER RED TO VARIOUS ARGUMENTS AND FINDING MADE BY THE AO IN THE ASSESSMENT ORDER WHEREVER HE POINTED OUT THAT OVER 65% OF ENTRIES MATCHED WITH THE ENTRI ES RECORDED IN THE REGULAR BOOKS OF EITHER VIMAL MARKETING OR OTHER CO MPANIES. HE DREW OUR ATTENTION TO PAGE 4 OF THE ASSESSMENT ORDER WHEREIN ENTRIES IN ACME DATA TALLIED WITH ENTRIES IN THE BOOKS OF VIMAL MA RKETING. THE RELEVANT PORTION OF THE ORDER OF AO AS REFERRED TO BY THE LD . AR IS AS UNDER :- C) IN ADDITION TO THAT ON PERUSAL OF THE NARRATIO N OF LEDGER ACCOUNT OF VIMAL MARKETING APPEARED IN THE SEIZED DATA ACME AC COUNT AND BANK BOOK OF VIMAL MARKETING PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF VIMAL MARKETING FOR THE ASST. YEAR 98-99 FOLLOWING ENTRIES ARE NOTICED: AS PER ACME COMPANY DATA AS PER BANK BOOK OF VIMAL MARKETING 08.01 PAYMT. 3 000.00 08.01.98 DEBIT 3 00 000 13.01 235.00 13.01.98 23 500 13.01 4 752.00 13.01.98 4 75 000 19.01 6 092.75 19.01.98 6 09 275 19.01 4 235.00 19.01.98 4 23 500 28.01 5 155.00 28.01.98 5 15 500 18.02 3800.00 18.02.98 3 80 000 IN VIEW OF THE ABOVE IT IS ESTABLISHED THAT THE ENT RIES MADE IN SEIZED DATA ACME COMPANY ARE IN HUNDREDS ( 00). IN ADDITION TO THAT IT IS ALSO ESTABLISHED FROM THE DATE-WISE CROSS-EXAMINATION AB OVE THAT ENTRIES APPEARED IN SEIZED DATA ACME COMPANY ARE GENUINE AND NOT MERE NOTINGS AND JOTTINGS AS CLAIMED BY YOU. 6.2. HE THEN REFERRED TO (IV) OF PAGE 6 OF THE ORDE R POINTING OUT AS TO HOW THE ENTRIES IN ACME DATA TALLIED WITH VIMAL MAR KETING. THE AOS OBSERVATION IN THIS REGARD ARE AS UNDER :- 11 (IV) IN THE LEDGER ACCOUNT OF VIMAL MARKETI NG MAINTAINED IN ACME COMPANY FOR THE A.Y.2004-05 IT IS NOTICED THAT CERT AIN AMOUNTS ARE SHOWN TO HAVE BEEN PAID TO VIMAL MARKETING ON 5/4/ 2003 18/4/2003 21/4/2003 24/4/2003 1/5/2003 6/5/2003 14/5/2003 21/5/2003 24/5/3003 27/5/2003 30/5/2003 2/4/2003 20/6/200 3 23/6/2003 25/6/3003 AND 27/6/2003. IN THE REGULAR BOOKS OF A CCOUNTS OF VIMAL MARKETING THE SAID PAYMENTS ARE SHOWN TO HAVE BEEN DEPOSITED IN THE BONK ACCOUNT MAINTAINED WITH THE MEHSANA URBAN CO. OP. BONK LTD. MEHSANA THE AMOUNTS SHOWN IN THE ACME COMPANY ARE C ONVERTED INTO '00' (HUNDRED?:) IN THE REGULAR BOOKS OF ACCOU NTS OF VIMAL MARKETING. IT IS ALSO ESTABLISHED FROM THAT IN THE ACME COMPANY THE DATA IS ENTERED IN '00' (HUNDREDS) I.E. IF RS.1000 .00 IS WRITTEN IT MEANS RS L 00 000/-. SIMILARLY ALMOST EACH AND EVERY ENT RY NOTED IN THE LEDGER ACCOUNT OF VIMAL MARKETING & DAIRY MAINTAINED IN DA TA FILE I.E. ACME COMPANY ARE EXACTLY TALLIED WITH THE ENTRIES NOTED IN THE VIMAL DAIRY LTD. & VIMAL MARKETING CO AFTER CONVERTING THE SAM E INTO HUNDRED (00). FROM THE ABOVE IT IS CRYSTAL CLEAR THAT THE VARIOU S ENTRIES NOTED IN THE SEIZED DATA FILE ACME COMPANY ARE GENUINE AND IN H UNDREDS. SINCE SAID TRANSACTIONS ARE NOT RECORDED IN THE BOOKS OF ASSES SEE SAME IS LIABLE TO BE CONSIDERED AS UNACCOUNTED SALE AND PURCHASES/EXPENS ES/INVESTMENT. 6.3 THE LD. AR THEN REFERRED TO (VI) (VII) & (X) A T PAGES 10 AND 11 OF THE ASSESSMENT ORDER OF AO WHEREIN MATCHING IN ENTR IES WITH ACME DATA WITH VIMAL MARKETING ARE HIGHLIGHTED:- (VI) ON GOING THROUGH THE LEDGER ACCOUNT OF THE VI MAL MARKETING APPEARED M THE DATA FILE ACME COMPANY IT IS NOTICED THAT ON 03.13.1996 A PAYMENT OF RS 3 OOGA SHOWN TO HOVE MADE TO VILNAL MARKETING. THE NARRATION MADE TO THE SAID ENTRY CLEARLY SUGGEST TH AT THE PAYMENT WAS MADE ON 03 12.1998. FURTHER ON VERIFICATION OF THE BANK ACCOUNT OF VIMAL MARKETING MAINTAINED WITH THE MEHSANA URBAN C O-OP. BONK LTD. MEHSANA IT IS NOTICED THAT ON AMOUNT OF RS.3 00 00 0/- HAVE BEEN DEPOSITED IN CASH. SIMILARLY ON 18 1?.1998 FT PAYM ENT OF RS R 3Z36.85 IS SHOWN TO HAVE BEEN MADE TO VIMAL MARKETING AND IN T HE BANK ACCOUNT OF VIMAL MARKETING MAINTAINED WITH THE MEHSANA URBAN C -OP. BANK AHMPDABATJ COSH OF RS.323685/- HAS BEEN DEPOSITED O N IB.12.1998 FURTHER AN GOING TROUGH THE VARIOUS LEDGER ACCOUNT S I.E. AMITBHAI ARVIND MEHTA SALARY AHMEDABAD SALARY MEHSANA COMMISSION ETC. IT IS CLEAR THAT ENTRIES MADE IN THE DATA FILE ARE M H UNDRED (00. (VI) THERE IS AN ACCOUNT MAINTAINED IN THE NAME OF JITU WHICH IS NICK NAME OF JITENDRA PATEL AND WHO IS THE ACCOUNTANT OF VIMAL DAIRY & 12 VIMAL OIL & FOODS LTD. THIS FACST AGAIN CORROBORATE THE FACT THAT THE VARIOUS ENTRIES SHOWN IN THE DATA FILE ARE GENUINE. THERE IS LEDGER ACCOUNT IN THE NAME OF JAYESH C. PA TEL M.D. OF VIMAL OIL FOODS LTD. AND VIMAL DAIRY LTD. HERE IT IS PERTINEN T TO NOTE THAT THERE ARE CERTAIN AMOUNTS SHOWN TO HAVE BEEN RECEIVED BY HIM AND ALSO PAID BY HIM CLEARLY SUGGESTS THAT BEING MAIN PERSON OF THE GROUP HE HAS MADE VARIOUS TRANSACTIONS NOTED THEREIN WHICH ALSO INCL UDES THE CERTAIN EXPENSES IN PERSONAL IN NATURE. SIMILARLY CERTAIN PAYMENTS ARE SHOWN TO HAVE BEEN MADE TO C.I. PATEL I.E. CHANDUBHAI I. PA TEL AND PRADIP C. PATEL ETC. WHICH ARE DEFINITELY PERSONAL IN NATURE AND THEREFORE CANNOT BE ALLOWED AS EXPENDITURE U/S 37(1) OF THE ACT. 6.4 LD. AR THEN REFERRED TO PARA 2.11 FROM THE ORDE R OF THE AO WHEREIN AO OBSERVED THAT 65% OF THE DATA TALLIED WI TH THE REGULAR DATA IN BOOKS OF VIMAL MARKETING AND VIMAL DAIRY LTD. FOR T HE SAKE OF CONVENIENCE WE REFER TO THE RELEVANT PORTION AS UND ER :- 2.11 ON VERIFICATION OF THE SEIZED DATA FILE AND INQUIRY CONDUCTED AFTER SEARCH IT IS NOTICED THAT MOST OF THE TRANSACTIONS WERE MODE M CASH ONLY THEREFORE SECTION 40A(3) WILL ALSO COME INTO THE P ICTURE. MOREOVER PURCHASES AND SALES WERE MADE OUTSIDE THE BOOKS OF ACCOUNTS WHICH MEANS THE ASSESSEE HAS ALSO AVOIDED TO PAY SALES T AX & OTHER TAXES LEVIABLE ON THE PRODUCTS THEREFORE NET PROFIT DERI VED FROM THE UNACCOUNTED SALES MUST BE HIGHER THAN THE ACCOUNTED SALES. FURTHER THERE ARE CERTAIN EXPENSES WHICH ARE IN THE NAME OF ASSES SEE HIMSELF AND HIS FAMILY MEMBERS C.I. PATEL (FATHER) & PRADIP C. PAT EL (BROTHER) ARE DEFINITELY PERSONAL IN NATURE. HERE IT IS PERTINENT TO NOTE THAT ON VERIFICATION OF VARIOUS EXPENSES NOTED IN SEIZED DA TA FILE AND AFTER COMPARING THE SAME WITH THE ACCOUNT OF VIMAL MARKET ING AND VIMAL DAIRY LTD. IT IS NOTICED THAT MORE THAN 65% OF THE EXPENSES AS MENTIONED IN THE DATA FILE (FOR TH A.Y..I998-99 TO 2004-05) IN THE NAME OF VIMAL MARKETING & VIMAL DAIRY LTD. ARE DULY MATCHED AND A CCORDINGLY CONSIDERED AS GENUINE. REGARDING OTHER EXPENSES ASS ESSEE HAS RIOT FILED ANY SUBMISSION/EXPLANATION. 7. ON THE ABOVE BASIS LD. AR POINTED OUT THAT 65% OF THE DATA WOULD MATCH WITH THE ENTRIES IN THE REGULAR BOOKS OF EITH ER VIMAL MARKETING OR 13 OF VIMAL DAIRY LTD. AND ONLY BALANCE MAY ALONE BE C ONSIDERED IN THE HANDS OF THE ASSESSEE. HE THEN SUBMITTED THAT ASSES SEE HAS SUFFERED THE LOSS AND THAT LOSS SHOULD BE ADJUSTED AGAINST ESTIM ATION OF INCOME IF ANY. 8.1 AGAINST THE ABOVE THE LD. DR SUBMITTED THAT IT IS INCORRECT TO SAY THAT THERE IS MATCHING OF THE DATA IN ACME FILE W ITH THE DATA IN THE BOOKS OF VIMAL MARKETING OR VIMAL DAIRY LTD. IN FAC T THERE IS NO NARRATION AND THEREFORE IT CANNOT BE SAID THAT EN TRIES RECORDED IN THE BOOKS OF VIMAL MARKETING OR VIMAL DAIRY LTD. ARE OF THE SAME NATURE AS FOUND IN ACME FILE. IN FACT ONLY THE PART OF THE TO TAL RECEIPTS MADE BY THE ASSESSEE ON ACCOUNT OF UNACCOUNTED SALES HAVE BEEN TAKEN INTO REGULAR BOOKS OF VIMAL MARKETING OR VIMAL DAILY LTD. AND AS SESSEE HAS NOT MADE CLEAR WHETHER IT HAS BEEN TAKEN ON THE REVENUE SIDE OR ON THE CAPITAL SIDE. UNLESS IT IS SHOWN BY THE ASSESSEE THAT EACH AND EV ERY ENTRY ALLEGEDLY MATCHED IS TAKEN INTO ACCOUNT ON REVENUE SIDE IN TH E BOOKS OF VIMAL MARKETING OR VIMAL DAIRY LTD. NO DISCOUNT SHOULD BE GIVEN AND SUCH ENTRY SHOULD NOT BE REMOVED FROM THE TOTAL RECEIPTS WORKED OUT BY THE AO. THE LD. DR SUBMITTED THAT THERE IS NO DISPUTE S O FAR AS DECIPHERING OF ENTRIES IN ACME FILE ARE CONCERNED. IT HAS BEEN P ROVED BEYOND DOUBT THAT ENTRIES IN ACME FILE HAVE BEEN RECORDED BY R EMOVING 00 (TWO ZEROES). THUS FOR MATCHING WITH THE REGULAR BOOKS T HE FIGURES OF ACME FILE ARE ADDED WITH TWO ZEROES (00). IN OTHER WO RDS LD. DR SUBMITTED THAT ENTRIES IN ACME FILE ARE GENUINE AND REAL AN D CANNOT BE IGNORED. HE SUBMITTED THAT ALL THE ENTRIES CANNOT BE PUT TO DISPUTE BECAUSE THEY WERE FOUND FROM THE PERSONAL COMPUTER OF THE ASSESS EE. THIS FACT IS NOT DISPUTED BY THE ASSESSEE. THE NATURE OF TRANSACTION IN ACME FILE IS ALSO CLEAR AND IT IS UNDISPUTED THAT THEY RELATE TO RECE IPTS AND PAYMENTS OF MONEY. THE PERIOD IN WHICH TRANSACTIONS ARE CARRIED OUT IS ALSO CLEAR AS DATES ARE MENTIONED AGAINST EACH ENTRY IN THE ACME FILE. LD. DR 14 SUBMITTED THAT ONLY BY ESTIMATE AO MENTIONED THAT O NLY 65% AND ABOVE ENTRIES MATCH WITH THE ENTRIES IN REGULAR BOOKS OF VIMAL MARKETING AND VIMAL DAIRY LTD. IN FACT EVERY ENTRY HAS TO BE TALL IED AND ONLY THOSE ENTRIES IN ACME FILE FOUND RECORDED IN THE REGULA R BOOKS OF ANY OTHER ENTITIES ON THE REVENUE SIDE ALONE CAN BE EXCLUDED. THE ASSESSEE HAS NOT CO-OPERATED WITH THE DEPARTMENT. THEREFORE THE AO HAD TO RESORT TO ESTIMATION. IN FACT THERE IS NO MATCHING DONE BY AS SESSEE AND THEREFORE HE SHOULD NOT GET ANY BENEFIT. THE LD. DR SUBMITTED THAT ENTIRE RECEIPTS SHOULD BE TAXED AND NOT MERELY PROFIT THEREON. 8.2 THE LD. DR SUBMITTED THAT ASSESSEE SHOULD BE DE EMED TO HAVE MADE PURCHASES FROM VIMAL MARKETING AND VIMAL DAIRY LTD. AND SOLD THEM TO OTHER PARTIES. WHATEVER IS SHOWN AS RETURNED OR CRE DITED IN THE BOOKS OF VIMAL MARKETING OR VIMAL DAIRY LTD. IS THE SALE MAD E BY THESE TWO COMPANIES TO THE ASSESSEE IN RESPECT OF WHICH MONEY WAS SUBSEQUENTLY RETURNED TO THESE TWO COMPANIES BY THE ASSESSEE. TH EREFORE WHATEVER MATCHES WITH VIMAL DAIRY LTD. OR VIMAL MARKETING IS IN FACT SALES BY THOSE COMPANIES TO THE ASSESSEE. THUS WHEREVER ASSE SSEE HAS IN ACME FILE DEBITED THOSE COMPANIES IS MONEY RETURNED TO THOSE COMPANIES TO BE ADJUSTED AGAINST SALES MADE BY THEM TO THE ASSES SEE. THUS THE ASSESSEE IS RUNNING SEPARATE ENTERPRISE IN THE PRODUCTS OF T WO COMPANIES AND THEREFORE ENTIRE SUM OF RS.5 36 37 283/- SHOULD BE TREATED AS SALES MADE BY THE ASSESSEE ON ITS OWN BEHALF AND WHATEVER DEBI T IS MADE AGAINST VIMAL GROUP COMPANIES IT SHOULD BE TREATED AS RETUR NING OF MONEY TO THEM AGAINST PURCHASES MADE FROM THEM. IN VIEW OF T HIS MATTER AO WAS JUSTIFIED IN APPLYING NET PROFIT RATE OF 10% ON ENT IRE CREDIT APPEARING IN THE ACME FILE. LD. DR THEN SUBMITTED THAT ASSESSE E HAS HIMSELF ACCEPTED 3% TO 5% PROFIT MARGIN (PAGE 18 PARA 2.9 (E) OF ASSESSMENT ORDER FOR ASST. YEAR 1999-2000. 15 9. IN REJOINDER LD. AR SUBMITTED THAT SCOPE OF ADD ITION CANNOT BE ENHANCED BY THE TRIBUNAL MORE THAN WHAT IS DONE BY THE AO. IF THE AO HAS TREATED NET PROFIT RATE ON THE TOTAL RECEIPTS T HEN THE TRIBUNAL HAS ONLY TO CONSIDER THE NET PROFIT RATE APPLIED BY THE AO A ND DECIDE WHETHER THE NET PROFIT RATE APPLIED BY THE LD. CIT(A) IS PROPER OR NOT. IT CANNOT TREAT THE ENTIRE RECEIPTS SHOWN IN ACME FILE AS INCOME OF THE ASSESSEE. THE LD. AR SUBMITTED THAT THERE IS NO BASIS FOR AO TO APPLY ENHANCED PROFIT RATE OF 10% WHEN THE COMPANY OF THE ASSESSEE ARE SHOWING PROFITS LESS THAN 1%. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW OWNERSHIP OF AC ME FILE AND DATA CONTAINED THEREIN CANNOT BE DISPUTED NOW THAT IT BE LONG TO THE ASSESSEE. IT IS BECAUSE IT WAS FOUND IN THE PERSONAL LAPTOP OF A SSESSEE FROM HIS RESIDENCE AND ASSESSEE FAILED TO EXPLAIN OR ANSWER ANY QUESTION OR FURNISH ANY EXPLANATION UNDER SECTION 132(4). ONCE HAVING N OT CO-OPERATED WITH THE AO OR AUTHORISED OFFICER IN FURNISHING THE EXPL ANATION ASSESSEE LOSES HIS RIGHT TO CHALLENGE THE OWNERSHIP AT A LATER STA GE. IN OUR CONSIDERED VIEW THE ISSUE OF OWNERSHIP CANNOT BE SAID TO BE A MATTER OF SUBSEQUENT ARGUMENT BY THE ASSESSEE AS IT WOULD BE IN HIS PERS ONAL KNOWLEDGE EVEN AT THE TIME OF SEARCH AND IF HE CHOOSES NOT TO EXPL AIN AT THAT TIME IT WILL LEAD TO INFERENCE THAT IT DID BELONG TO THE ASSESSE E AND ASSESSEE DID NOT INTEND TO DISCHARGE ONUS LAY ON HIM. EVEN OTHERWISE THERE IS NO MATERIAL FURNISHED AT ANY STAGE BY THE ASSESSEE TO SHOW THAT DATA IN ACME FILE DID NOT BELONG TO HIM. THIS PART OF THE ARGUMENT AND GR OUND RAISED BY THE ASSESSEE ARE THEREFORE REJECTED. 16 11. FURTHER THE NATURE OF THE TRANSACTIONS CANNOT BE DISPUTED NOW. THEY REPRESENT RECEIPTS AND PAYMENTS AS CREDIT ENTR IES TALLIED WITH DEBIT ENTRIES. ON CREDIT SIDE SOME ENTRIES TALLIED WITH SALES RECORDED IN REGULAR BOOKS OF SOME COMPANIES LEADING TO THE INFERENCE TH AT OTHER ENTRIES ON CREDIT SIDE OF ACME FILE ARE OF REVENUE NATURE. I F OTHER ENTRIES NOT MATCHING ARE NOT EXPLAINED TO THE AO THEN ADVERSE I NFERENCE HAS TO BE DRAWN AND IF AO HAS DRAWN SUCH ADVERSE INFERENCE HE WOULD BE JUSTIFIED. THUS WE HOLD THAT ENTRIES FOUND RECORDED IN ACME F ILE PERTAINED TO THE BUSINESS TRANSACTIONS SHOWING RECEIPTS AND PAYMENTS OF REVENUE NATURE. WE MAY ADD THAT NO MATERIAL CONTRARY TO THIS FINDIN G IS SUBMITTED BY THE ASSESSEE. 12. WE ALSO REJECT THE ARGUMENT OF LD. AR THAT ENTR IES ARE NOT IN MULTIPLE OF 100. THE AO HAS AMPLY DEMONSTRATED THAT DATA ENTERED IN ACME FILE HAS BEEN MADE BY REMOVING TWO ZEROES ( 00). THUS FOR ARRIVING AT EXACT FIGURE THE ENTRIES IN ACME FILE ARE REQUIRED TO BE MULTIPLIED BY 100. WE ALSO REJECT THIS ARGUMENT OF LD. AR THAT ENTRIES APPEARING IN SEIZED DATA ARE JUST NOTING OR JOTTING S AND NOT THE ACTUAL TRANSACTIONS. AS OBSERVED ABOVE ONCE PART OF THE D ATA MATCHES WITH THE DATA RECORDED IN THE REGULAR BOOKS THEN OTHER PART WHICH DOES NOT MATCH OR TALLY IS PRESUMED TO CARRY SAME NATURE AS OTHER DATA UNLESS PROVED OTHERWISE BY THE ASSESSEE. THE DATA NOT FOUND RECOR DED IN THE REGULAR BOOKS IS IN EXCLUSIVE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR HIM TO EXPLAIN THE NATURE AND SOURCE THEREOF AND ON FAILUR E OF THE ASSESSEE TO DO SO THE AO CAN DRAW A REASONABLE INFERENCE WHICH HA S BEEN RIGHTLY DRAWN.. 13. WE ALSO AGREE WITH THE LD. DR THAT AO HAS NOT M ATCHED ENTRY TO ENTRY WITH REGULAR BOOKS OF VIMAL MARKETING OR VIMA L DAIRY LTD. OR 17 OTHER REGULAR BOOKS. IT IS A CASE OF NON-CO-OPERATI ON EXTENDED BY THE ASSESSEE AT THE AOS STAGE. 14. WE HOWEVER DO NOT AGREE WITH THE LD. DR THAT ALL THE RECEIPTS FOUND RECORDED IN ACME FILE AND NOT MATCHING WITH A NY REGULAR BOOKS OF ACCOUNT OF ANY OTHER COMPANY WOULD ENTIRELY CARRY I NCOME CHARACTER AND ENTIRE SUM THEREOF HAS TO BE TAXED AS ASSESSEES IN COME. IT IS BECAUSE THOSE ENTRIES WHICH MATCHED CARRY REVENUE CHARACTE R AND THE AO CONSIDERED ONLY TO TAX THEM ON NET PROFIT BASIS. TH EREFORE THERE IS NO REASON WHY UNMATCHED ENTRIES SHOULD NOT BE SUBJECTE D TO TAX ON NET PROFIT BASIS. WE ARE OF THE CONSIDERED VIEW THAT THE UNMAT CHED ENTRIES ARE RELATED TO UNACCOUNTED BUSINESS CARRIED OUT IN ANY OF THE GROUP COMPANIES BUT IN ABSENCE OF ANY CO-RELATION WITH AND IN ABSEN CE OF ANY MATERIAL FURNISHED BY THE ASSESSEE OWNERSHIP THEREOF COULD NOT BE ATTRIBUTED TO ANY SPECIFIC COMPANY. THE ONUS IS ON THE ASSESSEE T O SHOW AS TO WHICH COMPANY A PARTICULAR ENTRY OF ACME FILE RELATES A ND THEN EITHER TO SHOW THAT THEY ARE RECORDED IN THE REGULAR BOOKS OF ACCO UNT OF ANY COMPANY OR IF NOT THEN PAY TAX THEREON IN THAT COMPANY. IN AB SENCE OF EITHER OF THESE TWO OPTIONS EXERCISED BY THE ASSESSEE TO GET THE PA RTICULAR ENTRY TREATED AS EXPLAINED WE HOLD THAT ENTRIES NOT MATCHED REMAINE D UNEXPLAINED. 15. WE ALSO REJECT THE ARGUMENT OF LD. DR THAT CRE DIT SIDE IN ACME FILE REPRESENTED SALES MADE BY THE ASSESSEE ALONE AND DEBIT REPRESENTED PURCHASES MADE BY HIM FROM VIMAL GROUP COMPANIES AN D THUS ASSESSEE IS DEALING IN TRADING ACTIVITIES AT ITS OWN. THE REASO NS ARE THAT NO SUCH EVIDENCE OF INDIVIDUAL SALE AND PURCHASE MADE BY TH E ASSESSEE ON HIS BEHALF ARE FOUND. THERE ARE NO SALE BILLS ISSUED BY THE ASSESSEE HIMSELF AGAINST SALE OF THE PRODUCTS AND FURTHER NONE OF TH E VIMAL GROUP COMPANIES ARE FOUND TO HAVE MADE ANY SALES TO THE A SSESSEE IN INDIVIDUAL 18 CAPACITY. NO SEIZED MATERIAL IS FOUND DURING THE SE ARCH INDICATING THAT WHATEVER IS FOUND IN ACME FILE WAS IN FACT SALES AND PURCHASES MADE BY THE ASSESSEE ON HIS OWN BEHALF. NO POST SEARCH INVE STIGATION HAS BEEN CARRIED OUT BY THE REVENUE OFFICERS TO SHOW THAT AS SESSEE WAS CARRYING OUT ANY SALE AND PURCHASE ON HIS OWN BEHALF. ON THE OTHER HAND THERE ARE ENOUGH REASONS TO BELIEVE THAT ASSESSEE WAS DOING T HIS UNACCOUNTED BUSINESS ON BEHALF OF VIMAL GROUP COMPANIES AND SIP HONING OF THE PROFITS TO HIMSELF. THE CREDIT IN ACME FILE IN RESPECT OF ENTRIES MATCHED REPRESENTED SALES MADE PARTLY ON BEHALF OF VIMAL GR OUP COMPANIES AND MATCHING DEBIT ENTRIES IN ACME FILE REPRESENTED P AYMENTS MADE TO VIMAL GROUP COMPANIES. THEREFORE PROFITS RELATING TO SUCH SALES SHOULD BE CONSIDERED ONLY IN THE HANDS OF CONCERNED COMPAN IES. WHATEVER ASSESSEE IS NOT ABLE TO MATCH ALONE WOULD BE CONSID ERED AS ENTRIES UNEXPLAINED AND ACCORDINGLY TAXED AT CERTAIN PERCEN TAGE. 16. WE ALSO REJECT THE ARGUMENTS OF LD. AR THAT ELE CTRONIC RECORD SHOULD BE TREATED OUT OF PURVIEW OF SECTION 132(4A) . IT IS BECAUSE DOCUMENT BOOKS OF ACCOUNTS ETC. AS MENTIONED IN TH AT SECTION WOULD REPRESENT ELECTRONIC DATA AS WELL. NO SUCH DISTINCT ION AS SOUGHT BY LD. AR CAN BE MADE. EVEN SECTION 132(1)(II) INTRODUCED BY FINANCE ACT 2002 W.E.F. 1.6.2002 PROVIDES THE INSPECTION OF ELECTRON IC RECORD AS DEFINED IN CLAUSE (T) OF SUB-SEC.(1) OF SECTION 2 OF INFORMATI ON TECHNOLOGY ACT 2002(21 OF 2002). THOUGH CLAUSE (2)(B) HAS BEEN INS ERTED W.E.F. 1.6.2002 BUT PRESUMPTION RAISED IN SUB-SECTION (4A) ABOUT TR UTHFULNESS OF DOCUMENTS OR ABOUT THEIR OWNERSHIP OR ABOUT SIGNATU RE OR CONTENTS THEREOF WOULD BE APPLICABLE IN RESPECT OF ELECTRONIC DOCUME NTS AS SUB-SECTION (4A) DOES NOT SPECIFY THAT DOCUMENT SHOULD BE ONLY ON PAPER MADE OF WOOD AND PULP. IN FACT A DOCUMENT CONTAINING EVENTS OF RECORD ON CONVENTIONAL PAPER OR MADE IN ANY OTHER FORM WOULD BE A DOCUMENT. 19 ONCE SECTION ITSELF DOES NOT SPECIFY THE BASE CONST ITUENT OF THE DOCUMENT THEN TO SAY THAT THE DOCUMENT SHOULD BE NECESSARILY IN CONVENTIONAL PAPER FORM WOULD BE EQUIVALENT TO INSERTING A CONDITION I N THE SECTION. IT WOULD THEN AMOUNT TO LEGISLATION AND HENCE WILL NOT BE PE RMISSIBLE. THUS THE WORD DOCUMENT MENTIONED IN SUB-SECTION (4A) COULD BE EITHER IN THE PAPER FORM OR IN ANY OTHER FORM BUT IT SHOULD CONTA IN THE RECORDS OF EVENTS OR TRANSACTION WHICH IS RELEVANT FOR THE PUR POSE OF INCOME-TAX ACT. FOR THAT MATTER TRANSACTIONS RECORDED ON A PIECE OF CLOTH OR LEAF OR ON METAL OR IN ELECTRONIC FORM WOULD ALSO BE COVERED W ITHIN THE DEFINITION OF DOCUMENT AS MENTIONED IN SUB-SECTION (4A) OF SECT ION 132 PROVIDED OTHER CONDITIONS FOR DECIPHERING THE DOCUMENT ARE S ATISFIED AND FURTHER PROVIDED THAT IT IS NOT A DUMB DOCUMENT. THUS PRESU MPTION LAID DOWN U/S 132(4A) CAN BE INVOKED IN RESPECT OF SUCH DOCUMENTS ALSO. 17. THE AO HAD APPLIED NET PROFIT RATE OF 10% TREAT ING THE ENTIRE RECEIPTS IN ACME FILE AS UNDISCLOSED SALES BUT HE N OT GIVEN ANY BASIS AS TO HOW HE HAS ARRIVED AT THIS FIGURE. IT IS APPAREN TLY ON HIGHER SIDE. THE LD. CIT(A) HAS ADOPTED NET PROFIT RATE OF 2% ONLY BY TA KING THE DATA OF GP RATE OF VIMAL MARKETING. HE HAS NOT CONSIDERED THE OTHER COMPANIES OF THE GROUP AS DATA IN ACME FILE IS MIXED AND RELATE TO MORE THAN ONE COMPANY. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AND MATERIAL AVAILABLE BEFORE US WE DIRECT THE AO TO A PPLY NET PROFIT RATE OF 5% ON THE FIGURES OF RECEIPTS NOT FOUND MATCHING WI TH ANY OF THE REGULAR BOOKS OF THE ASSESSEE GROUP. 18. AS A RESULT WE GIVE FOLLOWING DIRECTIONS TO TH E AO - 20 (1) HE WILL PROVIDE COPIES OF DATA OF ACME FILE TO THE ASSESSEE AND ASK HIM TO MATCH EACH ENTRY WITH THE REGULAR BOOKS OF ANY OF THE GROUP COMPANY; (2) IF THE ENTY FOUND RECORDED IN ACME FILE TALLIES WITH OR MATCHES WITH ANY ENTRY OF THE REGULAR BOOKS OF THE GROUP CO MPANY THEN THAT ENTRY WILL BE EXCLUDED. OTHER ENTRIES IN ACME FILE NOT MA TCHING WITH THE REGULAR BOOKS OF ANY OTHER GROUP COMPANY WILL BE CO MPILED AND TOTALLED. (3) A NET PROFIT RATE OF 5% WOULD BE APPLIED ON SUC H TOTAL OF THE ENTRIES ON THE RECEIPT SIDE FOUND NOT MATCHING WITH ANY REG ULAR BOOKS OF ANY GROUP COMPANY. THIS AMOUNT WILL BE TREATED AS UNDIS CLOSED INCOME OF THE ASSESSEE. 19. AS A RESULT APPEAL FILED BY THE ASSESSEE AND TH AT OF REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ASST. YEAR 2000-01 20. IN THIS YEAR TOTAL AMOUNT OF RECEIPTS FOUND REC ORDED IN ACME FILE ARE RS.3 09 24 707/-. THE LD. CIT(A) SUSTAINED AN A DDITION OF RS.6 18 500/- AND ALLOWED RELIEF OF RS.24 73 970/-. 21. SIMILAR GROUNDS ARE RAISED BY THE ASSESSEE AS W ELL AS THE REVENUE IN THEIR RESPECTIVE APPEALS IN ASST. YEAR 1999-2000 . FOLLOWING OUR REASONINGS GIVEN BY ASST. YEAR 1999-2000 WE RESTOR E THESE TWO APPEALS TO THE AO AND DIRECT HIM TO MATCH ENTRIES IN ACME F ILE WITH ENTRIES IN REGULAR BOOKS OF ANY GROUP COMPANY AND APPLY A NET PROFIT RATE OF 5% ON THE ENTRIES OF RECEIPTS NOT MATCHING. 21 ASST. YEAR 2001-02 22. IN THIS YEAR TOTAL AMOUNT OF RECEIPTS FOUND REC ORDED IN ACME FILE ARE RS.4 08 90 482/-. THE LD. CIT(A) SUSTAINED AN A DDITION OF RS.8 18 000/- AND ALLOWED RELIEF OF RS.32 71 048/-. 23. SIMILAR GROUNDS ARE RAISED BY THE ASSESSEE AS W ELL AS THE REVENUE IN THEIR RESPECTIVE APPEALS IN ASST. YEAR 1999-2000 . FOLLOWING OUR REASONINGS GIVEN BY ASST. YEAR 1999-2000 WE RESTOR E THESE TWO APPEALS TO THE AO AND DIRECT HIM TO MATCH ENTRIES IN ACME F ILE WITH ENTRIES IN REGULAR BOOKS OF ANY GROUP COMPANY AND APPLY A NET PROFIT RATE OF 5% ON THE ENTRIES OF RECEIPTS NOT MATCHING. ASST. YEAR 2002-03 24. IN THIS YEAR TOTAL AMOUNT OF RECEIPTS FOUND REC ORDED IN ACME FILE ARE RS.5 85 17 006/-. THE LD. CIT(A) SUSTAINED AN A DDITION OF RS.11 70 500/- AND ALLOWED RELIEF OF RS.46 81 200/- . 25. SIMILAR GROUNDS ARE RAISED BY THE ASSESSEE AS W ELL AS THE REVENUE IN THEIR RESPECTIVE APPEALS IN ASST. YEAR 1999-2000 . FOLLOWING OUR REASONINGS GIVEN BY ASST. YEAR 1999-2000 WE RESTOR E THESE TWO APPEALS TO THE AO AND DIRECT HIM TO MATCH ENTRIES IN ACME F ILE WITH ENTRIES IN REGULAR BOOKS OF ANY GROUP COMPANY AND APPLY A NET PROFIT RATE OF 5% ON THE ENTRIES OF RECEIPTS NOT MATCHING. 22 ASST. YEAR 2003-04 26. IN THIS YEAR TOTAL AMOUNT OF RECEIPTS FOUND REC ORDED IN ACME FILE ARE RS.4 64 78 577/-. THE LD. CIT(A) SUSTAINED AN A DDITION OF RS.9 30 000/- AND ALLOWED RELIEF OF RS.37 17 857/-. 27. SIMILAR GROUNDS ARE RAISED BY THE ASSESSEE AS W ELL AS THE REVENUE IN THEIR RESPECTIVE APPEALS IN ASST. YEAR 1999-2000 . FOLLOWING OUR REASONINGS GIVEN BY ASST. YEAR 1999-2000 WE RESTOR E THESE TWO APPEALS TO THE AO AND DIRECT HIM TO MATCH ENTRIES IN ACME F ILE WITH ENTRIES IN REGULAR BOOKS OF ANY GROUP COMPANY AND APPLY A NET PROFIT RATE OF 5% ON THE ENTRIES OF RECEIPTS NOT MATCHING. ASST. YEAR 2004-05 28. IN THIS YEAR TOTAL AMOUNT OF RECEIPTS FOUND REC ORDED IN ACME FILE ARE RS.2 37 21 671/-. THE LD. CIT(A) SUSTAINED AN A DDITION OF RS.4 74 433/- AND ALLOWED RELIEF OF RS.18 97 734/-. 29. SIMILAR GROUNDS ARE RAISED BY THE ASSESSEE AS W ELL AS THE REVENUE IN THEIR RESPECTIVE APPEALS IN ASST. YEAR 1999-2000 . FOLLOWING OUR REASONINGS GIVEN BY ASST. YEAR 1999-2000 WE RESTOR E THESE TWO APPEALS TO THE AO AND DIRECT HIM TO MATCH ENTRIES IN ACME F ILE WITH ENTRIES IN REGULAR BOOKS OF ANY GROUP COMPANY AND APPLY A NET PROFIT RATE OF 5% ON THE ENTRIES OF RECEIPTS NOT MATCHING. 23 30. IN THE RESULT ALL THE APPEALS FILED BY THE ASS ESSEE AND THOSE OF REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (MAHAVIR SINGH) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 14/5/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ORDER PRONOUNCED IN OPEN COURT ON 14/5/2010