The ITO, Ward 4(2), Ahmedabad v. Nanikram S Jhamtani, Ahmedabad

ITA 897/AHD/2009 | 2005-2006
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 89720514 RSA 2009
Assessee PAN RSAND2804P
Bench Ahmedabad
Appeal Number ITA 897/AHD/2009
Duration Of Justice 1 year(s) 9 month(s) 28 day(s)
Appellant The ITO, Ward 4(2), Ahmedabad
Respondent Nanikram S Jhamtani, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 21-01-2011
Date Of Final Hearing 17-01-2011
Next Hearing Date 17-01-2011
Assessment Year 2005-2006
Appeal Filed On 23-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI BHAVNESH SAINI JUDICIAL MEMBER AND D.C. AGRAWAL ACCOUNTANT MEMBER) ITA NO.897/AHD/2009 WITH CO NO.72/AHD/2009 [ASSTT. YEAR : 2005-2006] DICTATED ON: 17-01-2011 ITO WARD-4(2) AHMEDABAD. VS. NANIKRAM S. JHAMTANI PROP. OF K.P. RAKESHKUMAR 178-179 SINDHI MARKET REVDI BAZAR KALUPUR AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : MS.ANURAG SHARMA ASSESSEE BY : SHRI SANJAY R. SHAH O R D E R PER BHAVNESH SAINI JUDICIAL MEMBER : THE REVENUES APPEAL AS WELL AS THE CO BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)- VIII AHMEDABAD DATED 19.12.2008 FOR ASSESSMENT YEA R 2005-2006. THE AO MADE ADDITION OF RS.27 04 785/- ON ACCOUNT OF SALE OUTSIDE THE BOOKS OF ACCOUNTS. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL RUNNING A PROPRIETARY CONCERN IN THE NAME AND STYLE OF M/S.K. P.RAKESHKUMAR WHICH IS ENGAGED IN TRADING OF DRESS MATERIALS JOB WORK OF STITCHING AND EMBROIDERY WORK. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE RELEVANT PERIOD DECLARING TOTAL INCOME AT RS.14 88 490/- WHEREIN THE ASSESSEE DISCLOSED GP AT RS.43 88 67/- I.E. 8.58% ON THE TOTAL SALES OF RS.5 11 35 918/- AGAINST GP OF RS.35 97 743/- I.E. 8.69% ON THE TOTAL SALES OF RS. 4 13 77 381/- DISCLOSED IN THE IMMEDIATELY PRECEDING YEAR. THE AO COMPLETED THE A SSESSMENT UNDER SECTION 143(3) OF THE ACT. ON 24-11-2004 A SURVEY UNDER SECTION 133A WAS UNDERTAKEN AT THE BUSINESS PREMISES OF THE ASSESSEE . DURING THE COURSE OF SURVEY IT WAS NOTED BY THE AO THAT THE BUSINESS OF TWO CONCERNS VIZ. K.P. TRAKESHKUMAR PROP. NANIKARAM S. JHAMTANI AND K.P. RAKESHKUMAR CLOTH ITA NO.897/AHD/2009 WITH CO NO.72/AHD/2009 -2- PVT. LTD. WERE CARRYING OUT THEIR BUSINESS FROM SHO P NO.178/179 SINDHI MARKET REVDI BAZAR KALUPUR AHMEDABAD. AN INVENTO RY OF STOCK LYING AT THE SHOP OF BOTH THE CONCERNS WAS PREPARED AND ON THE B ASIS OF SUCH INVENTORY THE VALUE OF STOCK WAS WORKED OUT AT RS.72 62 556/-. I N A STATEMENT RECORDED DURING THE SURVEY SHRI NANIKRAM S. JHAMTANI DISCLO SED THE STOCK OF RS.99.09 905/- IN THE BOOKS OF K.P. RAKESHKUMAR AND THE STOCK OF RS.16 71 283/- IN THE BOOKS OF K.P.RAKESHKUMAR CLOT H PVT. LTD. THE AO FOUND A DEFICIT OF RS.43 18 632/- IN THE STOCK MAINTAINED IN THE BOOKS OF ACCOUNT OF ABOVE TWO CONCERNS. THE ASSESSEE EXPLAINED THAT TH E SURVEY TEAM WHILE WORKING OUT THE STOCK POSITION ON THE DATE OF SURVE Y DID NOT CONSIDER THE QUANTITY OF CLOTH OF 312583.50 METERS AND 2804 PIEC ES GIVEN TO THE WORKERS FOR STITCHING ETC. FOR JOB WORK BEFORE THE SURVEY WHICH WERE NOT RECEIVED BACK TILL THE DATE OF SURVEY. THE ASSESSEE WORKED OUT THE AM OUNT OF SUCH CLOTH AT RS.16 66 222/- AND CLAIMED THAT THE SAME WAS NOT CO NSIDERED WHILE PREPARING THE INVENTORY OF THE GOODS. THEREAFTER THE ASSESSE E RETRACTED HIS STATEMENT IN AN AFFIDAVIT AND PLEADED THAT THERE WAS NO DISCREPANCY IN HIS STOCK FOR WHICH THE ADDITION WAS CALLED FOR. THE AO HOWEVER REJECTED THE CONTENTION OF THE ASSESSEE AND TREATED THE AMOUNT OF RS.99 09 905/- A S THE ACTUAL STOCK FIGURE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE ON THE DATE OF SURVEY ON THE BASIS OF STATEMENT OF SHRI JHAMTANI AND ADDED A SUM OF RS.27 04 785/- AS SALES OUTSIDE THE BOOKS OF ACCOUNT. 3. IN THE FIRST APPELLATE PROCEEDINGS THE IMPUGNED ADDITION MADE BY THE AO WAS AGITATED BY THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE WAS ASKED TO GIVE STOCK DETAILS AT 12 CLOCK NIGHT I.E. AT ODD H OURS AND SINCE THE STOCKS OF BOTH THE CONCERNS GOT MERGED INTO EACH OTHER IT WA S NOT POSSIBLE TO BIFURCATE AND PROVIDE POSITION OF THE STOCK AS PER BOOKS INST ANTLY. THE ESTIMATED FIGURE OF RS.99.09 905/- AND RS.16 71 283/- OF BOTH THE CO NCERNS GIVEN BY THE ASSESSEE AT THE TIME OF SURVEY WAS ONLY LUMP-SUM FI GURE AND COULD NOT GIVE BREAK UP ON VARIETY OR ITEM WISE AS THE ASSESSEE W AS EXHAUSTED AFTER SEVEN TO ITA NO.897/AHD/2009 WITH CO NO.72/AHD/2009 -3- EIGHT HOURS INQUIRY BY THE SURVEY TEAM. IT WAS FUR THER SUBMITTED THAT THE ASSESSEE ALSO GAVE THE ESTIMATE OF INVENTORY GIVEN TO THE LABOURERS FOR THE DESIGN WORK AND OTHER JOB WORK TO BE DONE ON THE CL OTHS WHILE WORKING OUT STOCK AT RS.16 66 223/-. THUS THE TOTAL STOCK IN TERMS OF PHYSICAL QUANTITY WAS WORKED OUT BY THE SURVEY TEAM AT RS.89 28 779/- (RS .72 62 556 PLUS RS.16 66 223) AND THAT THE AO HAS NOT DISPUTED THE STOCK LYING WITH LABOURERS AMOUNTING TO RS.16 66 223/-. THE AO DID NOT ACCEPT THE FIGURE OF RS.72 25 436/- WORKED OUT BY THE ASSESSEE ON THE BA SIS OF THE AUDITED BOOKS OF ACCOUNTS AND RELIED ON THE FIGURE OF RS.99 09 905/- ESTIMATED BY THE ASSESSEE AT THE TIME OF SURVEY. THE AO THEREAFTER WORKED OUT T HE DIFFERENCE OF RS.99 09 905/- BEING THEORETICAL STOCK AND RS.72 05 120/- (THE PHYSICAL STOCK OF RS.72 62 556/- WHICH LATER ON REVISED TO RS.72 05 1 20/- BEING THE PHYSICAL STOCK CALCULATED BY HIM AS PER INVENTORY TAKEN ON T HE DATE OF SURVEY AND CONSIDERED THE DIFFERENCE OF RS.27 04 785/- AS THE AMOUNT WHICH MUST HAVE BEEN UNACCOUNTED SALES OF THE ASSESSEE AND ADDED TH E SAME AS UNACCOUNTED SALES TO THE RETURNED INCOME OF THE ASSESSEE. THE A SSESSEE FURTHER CONTENDED BEFORE THE LEARNED CIT(A) THAT THE STATEMENT RECORD ED DURING THE SURVEY AT ODD HOURS WAS LATER ON RETRACTED IN AN AFFIDAVIT BY GIV ING PROPER EXPLANATION. THEREFORE WITHOUT LOOKING TO THE FACTS AND CIRCUMS TANCES OF THE CASE THE ADDITION OF RS.27 04 785/- MADE BY THE AO AS UNACCO UNTED SALES IS NOT SUSTAINABLE IN LAW. IT WAS EXPLAINED THAT THE ASSE SSEE FILED AFFIDAVIT TO RETRACT FROM EARLIER STATEMENT. THE ASSESSEE PLACED RELIANC E ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF KAILASHBE N MANOHARLAL CHOKSI 174 TAXMAN 466 WHEREIN IT WAS HELD THAT STATEMENT RECOR DED U/S.132(4) AT MIDNIGHT CANNOT BE RELIED UPON AS THE PERSON MAY NOT BE IN A POSITION TO MAKE ANY CORRECT OR CONSCIOUS DISCLOSURE IF SUCH STATEMENT I S RECORDED AT SUCH ODD HOURS MORE PARTICULARLY IF SUCH STATEMENT IS THEREAFTER RETRACTED WITHIN A REASONABLE TIME. IT WAS FURTHER CONTENDED THAT SMALL TIME BUS INESSMEN OR TRADERS DO NOT KEEP UPTO-DATE DAILY STOCK REGISTER ON THE BASIS OF THEIR BOOKS OF ACCOUNT AND THEREFORE SUCH FIGURE OF STOCK ON THE DATE OF SURVE Y WAS ONLY ON THE BASIS OF ITA NO.897/AHD/2009 WITH CO NO.72/AHD/2009 -4- SUM GUESSWORK AND WITHOUT ANY BASIS MADE BY THE AS SESSEE AT THE ODD HOURS. THEREFORE SUCH STATEMENT CANNOT BE RELIED UPON WIT HOUT HAVING ANY CORROBORATIVE DATA AS TO HOW THE SAME WAS WORKED OU T. IT WAS EXPLAINED BY THE ASSESSEE THAT WHEN IT WAS FOUND THAT HE HAD GIVEN T HESE FIGURES WITHOUT ANY BASIS AND THAT THERE WERE ALSO SOME SALES BILLS WHI CH WERE TO BE ACCOUNTED ON THE DATE OF SURVEY AS A RESULT OF WHICH THE ABOVE F IGURE OF STOCK GIVEN BY HIM COULD NOT BE CONSIDERED TO BE A CORRECT FIGURE THE ASSESSEE RETRACTED BY FILING AFFIDAVIT ON 14-12-2004 I.E. WITHIN 20 DAYS FROM TH E DATE OF SURVEY POINTING OUT AS TO WHY RETRACTION WAS BEING MADE. IT WAS FURTHE R ARGUED THAT THE GP FOR CURRENT YEAR IS 8.58% AS AGAINST 8.69% IN THE IMMED IATELY PRECEDING YEAR WHICH SHOWED THAT THE GP WAS ALMOST SAME IN BOTH TH E YEARS. 4. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE REJECTED BOOK RESULTS OF THE ASSESSEE AND DIRECTED TO ESTIMA TE THE INCOME BY APPLYING 9% OF THE TOTAL SALES AND RESTRICTED THE ADDITION T O RS.2 15 562/-. THE FINDINGS OF THE CIT(A) ARE AS UNDER: 4.12 I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE LD.A.R. CAREFULLY. THERE IS NO DISPUTE ABOUT THE FA CT THAT DURING THE COURSE OF SURVEY CARRIED OUT AT THE BUSINESS PREMISES OF T HE APPELLANT THE STOCK TO THE TUNE OF RS.72 62 556/- WAS FOUND AS PER THE INV ENTORY PREPARED BY THE AUTHORISED OFFICER. THIS INCLUDED THE STOCK BELONGI NG TO K.P.RAKESHKUMAR CLOTH PVT. LTD AMOUNTING TO RS.17 23 658/-. THEREFO RE AS SUCH THE APPELLANT'S STOCK AT THE TIME OF SURVEY WAS AT RS.5 5 38 898/- (RS.72 62 556 RS.17 23 658). THE APPELLANT HAD GIVEN CLOTHES ET C WORTH RS.16 66 223/- TO KARIGARS. THEREFORE AFTER TAKEN INTO ACCOUNT TH E SAME THE PHYSICAL STOCK OF THE APPELLANT AT THE TIME OF WAS AT RS.72 05 121 /(RS.55 38 898 + 16 66 223). THE STOCK AS PER BOOKS DISCLOSED BY THE APPELLANT WAS AT RS.99 09 905/-. THEREFORE THE A.O. TREATED THE SHOR TAGE I.E.RS.27 04 785/- (RS.99 09 905- RS.72 05 121) AS SALES OUTSIDE THE H OOKS OF ACCOUNT AND ADDED THE SAME. 4.13 THE REAL DISPUTE IS REGARDING THE VALUE OF STO CK AS PER THE BOOKS OF ACCOUNT OF THE APPELLANT ON THE DATE OF SURVEY. THE A.O. WHILE ARRIVING AT THE DISCREPANCY OF THE IMPUGNED AMOUNT HAS RELIED O N THE FIGURE OF THE STOCK WHICH WAS GIVEN BY THE APPELLANT ON ESTIMATE BASIS AT THE TIME OF SURVEY. THE A.O. WHILE ARRIVING AT THE DIFFERENCE H AS NOT CONSIDERED THE ITA NO.897/AHD/2009 WITH CO NO.72/AHD/2009 -5- SUBMISSIONS MADE BEFORE HER DURING THE ASSESSMENT P ROCEEDINGS BY THE APPELLANT. 4.14 IT IS ON RECORD THAT THE APPELLANT RETRACTED HIS STATEMENTS BY FILING AN AFFIDAVIT ON 14.12.2004. THEREFORE AFTER HIS R ETRACTION THE STATEMENT RECORDED AT THE TIME OF SURVEY HAD LOST ITS EVIDENT IARY VALUE. IT WAS INCUMBENT UPON THE A.O. TO BRING NECESSARY FACTS ON RECORD TO SUPPORT HIS FINDINGS WITH REGARD TO DISCREPANCY IN STOCK ON THE BASIS OF WHICH IMPUGNED ADDITION HAS BEEN MADE. HOWEVER IT IS SEEN FROM TH E ASSESSMENT ORDER NO SUCH EFFORT WAS MADE EVEN THOUGH THE APPELLANT FILE D THE DETAILS OF STOCK WORKED AS PER BOOKS OF ACCOUNT AFTER CONSIDERING SA LES MADE BETWEEN 25TH TO 30TH NOVEMBER AND SUBTRACTING THE PURCHASES BETW EEN 25TH TO 30TH NOVEMBER. THE APPELLANT FILED THE STOCK POSITION ON THE BASIS OF BOOKS OF ACCOUNTS AS ON THE DATE OF SURVEY WHEREIN THE STOCK WAS SHOWN AT RS.72 25 436/-. THE APPELLANT'S SUBMISSIONS IN THIS REGARD HAVE BEEN REPRODUCED BY THE A.O. AT PAGE 5 AND 6 OF THE ASSES SMENT ORDER. THE A.O. WITHOUT BRINGING ANY MATERIAL ON RECORD REJECTED TH E APPELLANT'S EXPLANATION AND THE STOCK POSITION AS ON THE DATE O F SURVEY AS PER HIS BOOKS OF ACCOUNT WITHOUT ANALYZING THE SAME. IT IS FURTH ER NOTED THAT THE A.O. WORKED OUT THE DIFFERENCE ON THE BASIS OF ORAL STAT EMENT MADE BY THE APPELLANT AT THE TIME OF SURVEY WHICH WAS NOT SUPPO RTED BY ACTUAL FIGURES OF STOCK AVAILABLE IN THE BOOKS OF ACCOUNT. THEREFORE IN THE GIVEN CIRCUMSTANCES THE A.O. WAS REQUIRED TO CONSIDER THE STOCK OF THE APPELLANT AT RS.72 25 436/- AS AGAINST RS.99 09 905/- DECLARE D ORALLY AT THE TIME OF SURVEY. THE A.O. WHILE STICKING TO THE FIGURE OF RS .99 09 085/- HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO CONTROVERT THE CL AIM OF THE APPELLANT. HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KH ADER KHAN SON 300 ITR 157 HAS HELD THAT A STATEMENT RECORDED DURING T HE COURSE OF SURVEY OPERATIONS A/S.133A OF THE ACT IS NOT A CONCLUSIVE PIECE OF EVIDENCE. THE HON'BLE COURT FURTHER HELD THAT A STATEMENT BY PART NER IN SURVEY OPERATION REGARDING UNDISCLOSED INCOME OF A FIRM RETRACTED BY FIRM SUBSEQUENTLY CAN NOT BE USED FOR ASSESSING THE INCOME OF THE FIRM. T HE HON'BLE COURT WHILE DECIDING SO OBSERVED THAT THE WORD 'MAY' USED IN SE CTION 133A(3)(III) OF THE ACT VIZ. 'RECORD THE STATEMENT OF ANY PERSON WHICH MAY BE USEFUL FOR OR RELEVANT TO ANY PROCEEDINGS UNDER THIS ACT' MAKES IT CLEAR THAT THE MATERIALS COLLECTED AND THE STATEMENTS RECORDED DUR ING THE SURVEY U/S. 133A ARE NOT CONCLUSIVE PIECE OF EVIDENCE BY ITSELF. 4.15 THEREFORE IN VIEW OF THE ABOVE DISCUSSION TH E APPELLANT'S STOCK AS PER BOOKS OF ACCOUNT ON THE DATE OF SURVEY CAN NOT BE T AKEN AT RS.99 09 905/- BECAUSE THE A.O. HAS NOT BROUGHT ON CORROBORATIVE M ATERIAL TO SUPPORT THE SAME. ON THE OTHER END THE APPELLANT IS ABLE TO PRO VE THAT HIS STOCK AS PER BOOKS OF ACCOUNT ON THE DATE OF SURVEY WAS AT RS.72 25 436/-. THEREFORE ITA NO.897/AHD/2009 WITH CO NO.72/AHD/2009 -6- SAME IS REQUIRED TO BE CONSIDERED FOR WORKING OUT T HE PROFIT OF THE APPELLANT FOR THE RELEVANT PERIOD. 4.16 NOTWITHSTANDING THE DISCUSSION AS REFERRED TO ABOVE IT IS SEEN THAT EVEN AFTER CONSIDERING THE APPELLANT'S CLAIM FOR ST OCK POSITION AS PER BOOKS OF ACCOUNT ON DATE OF SURVEY AT RS.72 25 436/- THE RE STILL REMAINS A DIFFERENCE OF RS.20 315/-IN THE STOCK PHYSICALLY FO UND ON THE DATE OF SURVEY. THIS IS ALSO ON RECORD THAT AT THE TIME OF SURVEY THE ENTIRE STOCK OF THE APPELLANT AND THE K.P.RAKESHKUMAR PVT. LTD WAS FOUND MIXED UP. THE APPELLANT WAS NOT ABLE TO SEGREGATE THE STOCK PROPE RLY AND PROVIDED A FIGURE WHICH WAS RETRACTED BY HIM BY FILING AN AFFI DAVIT. FURTHER HE ACCEPTED IN HIS STATEMENT RECORDED AT THE TIME OF S URVEY THAT HE DID NOT MAINTAIN A STOCK REGISTER AND WAS WORKING OUT THE C LOSING STOCK ON THE CLOSE OF FINANCIAL YEAR ON ESTIMATE BASIS ONLY. 4.17 THEREFORE (A) THE AFORESAID FACTORS: (B) THE DISCREPANCY IN STOCK AND (C) A FALL IN G.P. OVER THE PRECEDING YEAR PROVIDE AMPLE GROUNDS TO CONCLUDE THAT THE BOOKS OF ACCOUNTS OF THE APPELLAN T ARE NOT RELIABLE. 4.18 THE A.O. HAS NOT REJECTED THE BOOKS OF ACCOUNT HOWEVER THE UNDERSIGNED HAS THE POWER UNDER THE PROVISIONS OF S EC.251 OF THE ACT IN THIS REGARD. THEREFORE THE BOOKS OF ACCOUNTS ARE R EQUIRED TO BE REJECTED BY INVOKING THE PROVISIONS OF SEC.145(3) OF THE ACT. H ON'BLE SUPREME COURT IN THE CASE OF CIT VS. MACMILLAN & CO. 33 ITR 182 (SC) HAS HELD THAT : 'IF THE ASSESSING OFFICER HAS FAILED TO APPLY HIS M IND TO THE FIRST PROVISO TO SECTION 145(1) OR HAS COME TO A WRONG DETERMINAT ION FOR OR AGAINST THE ASSESSEE IN THE COMPUTATION OF THE INCOME THE FIRST APPELLATE AUTHORITY CAN CORRECT THAT ERROR WHEN IT HAS SEIZIN OF THE ASSESSMENT ON AN APPEAL FILED BY THE ASSESSEE. THE FIRST APPELLAT E AUTHORITY HAS THE POWER TO CORRECT THE ERROR IN THE WAY MOST SUITABLE IN THE CIRCUMSTANCES OF THE CASE. THERE IS NOTHING IN THE LANGUAGE OF SE CTION 251 WHICH IMPOSES ANY RESTRICTION ON THE POWERS OF THE FIRST APPELLATE AUTHORITY SO AS TO PREVENT IT EXERCISING THE POWER UNDER THE FIR ST PROVISO TO SECTION 145(1). IT IS THEREFORE OPEN TO THAT AUTHORITY ON A N APPEAL PREFERRED BY THE ASSESSEE TO REJECT FOR THE FIRST TIME THE METH OD OF ACCOUNTING ADOPTED BY THE ASSESSEE PROVIDED THE REQUISITE COND ITIONS EXIST.' [PAGE 5007 OF INCOME TAX LAW 5'H EDITION BY CHATUR VEDI & PITHISARIA REFERS) 4.19 THEREFORE IN VIEW OF THE DISCUSSION IN PRECED ING PARAGRAPH THE APPELLANTS BOOKS OF ACCOUNTS ARE REJECTED AND HIS GP IS ESTIMATED AT 9% OF THE TOTAL SALES OF RS.5 11 35 918/- (I.E. RS.46 02 232) MADE BY HIM. THE APPELLANT HIMSELF HAS DISCLOSED GP AT RS.43 86 670/- THEREFORE THE ITA NO.897/AHD/2009 WITH CO NO.72/AHD/2009 -7- ADDITION OF RS.2 15 562/- IS HEREBY CONFIRMED. THE APPELLANT WILL GET RELIEF OF RS.24 89 223/- ACCORDINGLY. 5. REVENUE IS IN APPEAL CHALLENGING THE RESTRICTION OF THE ADDITION TO RS.2 15 562/- AS AGAINST THE ADDITION OF RS.27 04 7 85/-. THE ASSESSEE IS IN CROSS-OBJECTION CHALLENGING THE ADDITION OF RS.2 15 572/-. 6. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT THE ASSESSEE MADE THE STATEMENT DURING THE COURSE OF SU RVEY ADMITTING UNACCOUNTED SALES AND THEREFORE THE ADDITION WAS RIGHTLY MADE BY THE AO. THE LEARNED DR HOWEVER ADMITTED THAT DURING THE SURVEY DEFICIT/SH ORT FALL IN THE STOCK WAS FOUND. ON THE OTHER HAND LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT SINCE LESSER STOCK WAS FOUND DURING THE SURVEY THEREFORE THE L EARNED CIT(A) IS JUSTIFIED IN REJECTING THE BOOK RESULTS AND RIGHTLY ESTIMATED TH E INCOME BY APPLYING THE GP RATE. HE HAS SUBMITTED THAT THE LAW IS WELL SETTLE D THAT THE ENTIRE SALES MADE OUTSIDE THE BOOKS CANNOT BE TREATED AS PROFIT OF TH E ASSESSEE. HE HAS SUBMITTED THAT THE LEARNED CIT(A) RIGHTLY RESTRICTED PART ADD ITION THEREFORE HE WOULD NOT BE PRESSING THE CO. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L AVAILABLE ON RECORD. THE FACTS RECORDED BY THE LEARNED CIT(A) IN THE IMP UGNED ORDER HAVE NOT BEEN DISPUTED BY THE PARTIES. IT IS ALSO NOT IN DISPUTE THAT DURING THE COURSE OF SURVEY STOCK POSITION WAS TAKEN ON ESTIMATE BASIS AND THE STOCK WAS FOUND DEFICIT/SHORT FALL AS COMPARED WITH THE STOCK NOTED IN THE BOOKS OF ACCOUNTS. THE AO AFTER CONSIDERING THE EXPLANATION OF THE ASS ESSEE CONSIDERED THE DEFICIT/SHORT FALL STOCK AS UNACCOUNTED SALES OF TH E ASSESSEE AND MADE ADDITION OF RS.27 04 785/-. HONBLE MADHYA PRADESH HIGH COU RT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS BALCHAND AJIT KUMAR 263 ITR 610 HELD THAT THE TOTAL SALES CANNOT BE REGARDED AS THE PROFIT OF THE ASSESSEE. THE NET PROFIT RATE HAS TO BE ADOPTED AND ONCE THE NET PROFIT IS A DOPTED IT CANNOT BE SAID THAT ITA NO.897/AHD/2009 WITH CO NO.72/AHD/2009 -8- THERE IS A PERVERSITY OF APPROACH. THE HONBLE GUJ ARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES 258 ITR 654 HELD DISMISSING THE APPLICATION FOR REFERENCE THAT THE AMOUNT OF SALES COULD NOT R EPRESENT THE INCOME OF THE ASSESSEE WHO HAD NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENTED THE PRICE RECEIVED BY THE SELLER OF THE GOODS ; ONLY THE REAL ISATION OF THE EXCESS OVER THE COST INCURRED COULD FORM PART OF THE PROFIT INCLUDE D IN THE CONSIDERATION FOR THE SALES. SINCE THERE WAS NO FINDING TO THE EFFECT THA T INVESTMENT BY WAY OF INCURRING THE COST IN ACQUIRING THE GOODS WHICH WER E SOLD HAD BEEN MADE BY THE ASSESSEE AND THAT THAT INVESTMENT WAS ALSO NOT DISC LOSED ONLY THE EXCESS OVER THE COST INCURRED COULD BE TREATED AS PROFIT. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S.M. OMER 201 ITR 608 HELD THAT SECTION 69 OF THE INCOME-TAX ACT 1961 WAS NOT APPLICABLE IN THE INS TANT CASE. THE ASSESSEE SUPPLIED THE GOODS AFTER INCURRING CERTAIN COST AND AFTER MANUFACTURING THE GOODS AND THE AMOUNT THAT WAS RECEIVED FROM THE DEF ENSE DEPARTMENT COULD NOT REPRESENT THE NET INCOME BUT IT WAS THE SUM REC EIVED INCLUDING THE PROFIT AND EXPENDITURE. THE TRIBUNAL WAS JUSTIFIED IN UPHO LDING THE DELETION. 8. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISION IT IS CLEAR THAT THE AO MADE ADDITION BY TREATING THE UNA CCOUNTED SALES AS PROFIT. THUS THE APPROACH OF THE AO WAS NOT IN ACCORDANCE WITH THE LAW. THE ENTIRE AMOUNT OF THE SALES WOULD NOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAS NOT DISCLOSED THE SALES. IT IS ADMITTED FACT THAT THE STOCK DURING THE COURSE OF SURVEY WAS FOUND DEFICIT/SHORT FALL. THEREFORE IT COULD BE PRESUMED THAT THE DEFICIT STOCK WAS SOLD OUTSIDE THE BOOKS OF ACCOUNTS. THE SALES THEREFORE REPRESENT THE PRICE RECEIVED BY THE SELLER OF THE GOODS. ONLY TH E REALISATION OF THE EXCESS OVER THE COST INCURRED COULD FORM PART OF THE PROFI T INCLUDED IN THE CONSIDERATION FOR THE SALES. NO MATERIAL IS BROUGH T ON RECORD TO THE EFFECT THAT THE INVESTMENTS BY WAY OF INCURRING COST IN ACQUIRI NG THE GOODS WHICH WERE SOLD HAD BEEN MADE BY THE ASSESSEE AND THAT THE INV ESTMENT WAS ALSO NOT DISCLOSED. THE LD. CIT(A) NOTED THAT DIFFERENCE IN STOCK WAS WORKED OUT ON ITA NO.897/AHD/2009 WITH CO NO.72/AHD/2009 -9- ORAL STATEMENT OF ASSESSEE WHICH WAS NOT CORROBORAT ED BY ACTUAL FIGURE. EARLIER STATEMENT WAS ALSO RETRACTED. IT IS ALSO A MATTER OF RECORD THAT STOCKS OF BOTH THE CONCERNS WERE MIXED UP AT SURVEY. SO NO ACTUAL COU NTING COULD TAKE PLACE. THE LEARNED CIT(A) ON FURTHER EXAMINATION OF THE CA SE OF THE ASSESSEE FOUND THAT THERE IS DIFFERENCE IN STOCK OF RS.20 315/- WH ICH IS NOT RECONCILED AT ANY STAGE. THEREFORE REJECTION OF BOOK RESULTS IS JUS TIFIED. THE LEARNED CIT(A) ON PROPER APPRECIATION OF THE MATERIALS ON RECORD RIG HTLY REJECTED THE BOOK RESULTS OF THE ASSESSEE AND ESTIMATED THE INCOME OF THE ASS ESSEE BY APPLYING GP RATE. EVEN IF HIGHER GP RATE IS APPLIED AGAINST UNACCOUNT ED SALES AS MADE BY THE AO THE ADDITION WOULD BE MORE OR LESS THE SAME AS IS CONSIDERED BY THE CIT(A). WE THEREFORE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) IN SUSTAINING PART ADDITION ON THE MATTER IN ISSUE. WE CONFIRM HIS FINDING AND DISMISS THE REVENUES APPEAL. THE CO IS ALSO ACCOR DINGLY DISMISSED WHICH IS ALSO NOT PRESSED BY THE LEARNED COUNSEL OF THE ASSE SSEE. 9. IN RESULT THE REVENUES APPEAL AND THE ASSESSEE S CO ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21 ST JANUARY 2011 SD/- SD/- (D.C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 21-01-2011 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : DEPARTMENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD