THE ASSTT. CIT, CEN. CIR./-2, v. M/S SUNDER METALS PVT. LTD.,

ITSSA 327/AHD/2003 | misc
Pronouncement Date: 14-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 32720516 RSA 2003
Assessee PAN AADGS2997S
Bench Ahmedabad
Appeal Number ITSSA 327/AHD/2003
Duration Of Justice 6 year(s) 8 month(s) 13 day(s)
Appellant THE ASSTT. CIT, CEN. CIR./-2,
Respondent M/S SUNDER METALS PVT. LTD.,
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 14-05-2010
Date Of Final Hearing 28-04-2010
Next Hearing Date 28-04-2010
Assessment Year misc
Appeal Filed On 01-09-2003
Judgment Text
IT(SS)A.320-327 -03. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD BEFORE SHRI T.K. SHARMA AND SHRI D.C. AGRAWAL. IT (SS) A. NO.320/AHD/2003 (BLOCK PERIOD 1-4-90 TO 26-6-2000 ) M/S. SUNDER METAL PVT. LTD. 419 4 TH FLOOR CENTER POINT R.C.DUTT ROAD ALKAPURI BARODA. VS THE ASSISTANT COMMISSIONER OF INCOME TAX CENT.CIR-2 BARODA. (APPELLANT) (RESPONDENT) AND IT (SS) A.NO.327/AHD/2003 (BLOCK PERIOD 1-4-90 TO 26-6-2000 ) THE ASSISTANT COMMISSIONER OF INCOME TAX CENT.CIR-2 BARODA. VS M/S. SUNDER METAL PVT. LTD. 419 4 TH FLOOR CENTER POINT R.C. DUTT ROAD ALKAPURI BARODA. (APPELLANT) (RESPONDENT) PAN: AADGS 2997 S APPELLANT BY : SHRI SAKAR SHARMA. RESPONDENT BY : SHRI. B.S. GAHLOT CIT(DR) ( (( ( )/ )/)/ )/ ORDER PER: SHRI D.C. AGRAWAL. THESE ARE THE TWO CROSS APPEALS ONE FILED BY THE AS SESSEE AND THE OTHER FILED BY THE REVENUE AGAINST THE ORDER OF LD. C.I.T.(A) DATED 18-6-2003. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- IT(SS)A.320-327 -03. 2 1 . EXPENSES RECORDED IN THE SEIZED MATERIAL . THE LD. C.I.T.(A) HAS ERRED IN LAW AND ON THE FACTS BY NOT ALLOWING THE VARIOUS EXPENSES AS NOTED IN THE SEIZE D MATERIAL OUT OF GROSS PROFITS DETERMINED. IT IS SUBMITTED THAT IN THE COURSE OF THE APPELLATE PROCEEDINGS IT WAS SUBMITTED THAT AT THE TIME OF ESTIMATION OF GRO SS PROFIT OR SAY INCOME THE A.O. HAS NOT GRANTED THE VARIOUS EX PENSES (OTHER THAN TRANSPORT CHARGES) AS NOTED IN THE SEIZ ED MATERIAL WHICH ARE IDENTIFIED AND POINTED OUT AS UNDER:- PARTICULARS ANNEXURE PAPER BOOK PAGE..NO. AMOUNT (RS.) EXPENSES A-9 PAGE -10 13 2 79 534 SALARIES (NET) A-9 PAGE 20 14 2 84 293 TOTAL 5 63 827 AS PER THE PROVISIONS OF THE ACT IT IS REQUESTED T HAT THE ABOVE EXPENSES MAY KINDLY BE ALLOWED AND THEREAFTER THE UNDISCLOSED INCOME TO BE DETERMINED. THEREFORE IT IS PRAYED THAT THE ABOVE EXPENSES MAY KINDLY BE ALLOWED FROM INCOME SO DETERMINED. 2. ADDITION ON ACCOUNT OF SALE OF ALUMINUM ASH . THE LD. C.I.T.(A) HAS ERRED IN FACTS AND LAW BY ENH ANCING THE INCOME OF ALUMINUM ASH SALES AT RS.5 10 385/- AGAIN ST RS.82 608/- AS ESTIMATED BY THE A.O. IT IS SUBMITTED THAT THE ALUMINUM ASH SALES IS PART LY RECORDED IN THE BOOKS OF ACCOUNT HENCE THE ADDITION CAN ONLY B E MADE IN THE REGULAR ASSESSMENT AND NOT IN THE BLOCK ASSESSM ENT. IT(SS)A.320-327 -03. 3 IT IS FURTHER SUBMITTED THAT AS THE ASSESSING OFFIC ER HAS ESTIMATED GROSS PROFIT ON THE ALUMINUM ASH SALES WH ICH IS PART OF TOTAL SALES AT RS.2 00 17 359/-(ALUMINUM SALE OF INGOTS ETC. OF RS.1 95 06 974 + RS. 5 10 385 SALES OF ALUMINUM ASH = 2 00 17 359). IT IS PRAYED THAT THE GROSS PROFIT MAY KINDLY BE ES TIMATED ON ALUMINUM ASH SALE AS ESTIMATED BY THE A.O. IT IS TH EREFORE PRAYED THAT THE A.O. HAS ALREADY MADE THE ESTIMATED ADDITION THEREFORE THERE IS NO NEED TO MAKE A SEPARATE ADDI TION ON ACCOUNT OF ALUMINUM ASH SALES. THUS IT IS PRAYED T HAT THE ADDITION SO MADE MAY KINDLY BE DELETED DELETED AND MADE BY THE A.O. MAY BE UPHELD. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS :- 1. THE LD. C.I.T.(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.4 19 568/- MADE ON ACCOUNT OF G ROSS PROFIT ON UNDISCLOSED SALES. 2. THE LD. C.I.T.(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.59 77 599/- MADE UNDER SECTION 69 OF THE INCOME TAX ACT 1961 ON ACCOUNT OF UNDISCLOSED INVESTMENT. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING ARTICLES OF ALUMINUM SLUGS CIRCLES ETC. THE FACTS OF THE CASE ARE THAT ANTI EVASION WING OF CENTRAL EXCISE DEPARTMENT CARR IED OUT SEARCH AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESS EE ON 2-1-1997. DURING THE COURSE OF THE SEARCH THEY SEIZED MANY IN CRIMINATING DOCUMENTS. IT(SS)A.320-327 -03. 4 4. THE INCOME TAX DEPARTMENT REQUISITIONED THESE DO CUMENTS FROM THE CENTRAL EXCISE DEPARTMENT U/S. 132A OF THE ACT. CONSEQUENTLY NOTICE U/S. 158BC OF THE ACT WAS ISSUE D ON THE ASSESSEE ON 27-2-2000. THE RETURN OF INCOME WAS FIN ALLY FILED ON 14- 8-2000 DECLARING THEREIN UNDISCLOSED INCOME OF RS.1 47 666/-. AGAINST THIS A.O. PROPOSED A TOTAL INCOME OF RS.68 69 920/-. AFTER EXAMINING THE SEIZED DOCUMENTS A.O. ALLEGED THAT AS SESSEE IS INDULGED IN UNACCOUNTED PRODUCTION AND SALE OF ALUM INUM PRODUCTS. THE LD. A.O. OBSERVED THAT ASSESSEE RECEIVED ALUMIN UM INGOTS AND WIRE-RODS WITHOUT PAYMENT OF DUTY. DOCUMENTS OR BIL LS DID NOT RECORD RECEIPTS OF THESE ITEMS IN THE REGULAR BOOKS OF ACC OUNTS. THESE ITEMS ARE USED IN MANUFACTURING OF ALUMINUM SLUGS AND CIR CLES WHICH WERE CLEARED FROM THE FACTORY WITHOUT PAYMENT OF DUTY AN D WITHOUT RECORDING THEM IN THE BOOKS OF ACCOUNTS. THE A.O. A CCORDINGLY PROPOSED FOLLOWING ADDITIONS :- I. GROSS PROFIT ON UNDISCLOSED SALES AS DISCUSSED IN PARA -6.4 OF ASST. ORDER. RS. 8 09 708/- II. GROSS PROFIT ON UNDISCLOSED SALES AS DISCUSSED IN PARA-7.3 OF ASST. ORDER. : RS. 82 608/- III. UNDISCLOSED INVESTMENT AS DISCUSSED IN PARA 8.2 OF ASST ORDER. : RS.59 77 599/- -------------------- TOTAL UNDISCLOSED INCOME : RS.68 69 920/ - =========== IT(SS)A.320-327 -03. 5 GROSS PROFIT ADDITION OF RS.8 09 708/- 4. AFTER EXAMINING THE DOCUMENT AT ANNEXURE A7 TO A-11 WHICH WAS SEIZED FROM THE BRIEF CASE OF SHRI SYAMSUNDER G UPTA ON 2-1-99 THE A.O. WORKED OUT TOTAL SALES FOR THE F.Y. 1995-9 6 AT RS.38 23 208/- SIMILARLY FOR THE F.Y. 1996-97 THE UNDISCLOSED SAL ES WERE WORKED OUT AT RS.1 61 94 151/-. THE A.O. POINTED OUT IN PARA 6 .2 OF HIS ORDER THAT IN THE ASSESSMENT YEAR 1995-96 ASSESSEE HAD SHOWN GROSS PROFIT AT THE RATE OF 10.52% ON TOTAL SALES OF RS.2 58 42 270/-; FOR A.Y. 1996-97 G.P. RATE OF 3% WAS SHOWN ON TOTAL SALES OF 6 25 29 484/- AND IN THE A.Y. 1997-98 A G.P. RATE OF 7% WAS SHOW N ON TOTAL SALES OF RS.6 63 47 667/-. CONSIDERING THESE GROSS PROFIT RATES A.O APPLIED GROSS PROFIT RATE OF 5% ON UNDISCLOSED SALES DISCOV ERED FROM SEIZED DOCUMENTS. ACCORDINGLY FOR F.Y.1995-96 GROSS PROFIT OF RS.1 91 160/ WAS WORKED ON TOTAL SALES OF RS.38 23 208/-. HOWEVE R THE A.O. DID NOT PROPOSE ANY SEPARATE ADDITION FOR THESE AMOUNTS AS HE HELD THAT THIS WOULD BE INCLUDED IN THE STOCK AS PER BOOK ON 1-4-1996. HOWEVER THE GROSS PROFIT OF RS.8 09 708/- WAS WORK ED OUT AFTER APPLYING G.P. RATE OF 5% ON UNDECLARED SALES OF RS .1 61 94 151/- DISCOVERED FOR THE F.Y. 1996-97. IT WAS ADDED AS U NDISCLOSED INCOME IN THE BLOCK ASSESSMENT. 5. THE LD. C.I.T.(A) HELD THAT A.O. HAD APPLIED RAT E OF MANUFACTURING WHEREAS THE ASSESSEE IS DEALING IN TR ADING. IT HAS SHOWN GROSS PROFIT OF 1.22%. IN TRADING. OVER AND A BOVE THIS ASSESSEE HAD CLAIMED FURTHER EXPENSES. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES THE LD. C.I.T.(A) DIRECTED TO AP PLY G.P. RATE OF 2% IT(SS)A.320-327 -03. 6 ON THE TOTAL SALES OF RS.1 95 06 974/- FOR BOTH THE FINANCIAL YEARS 1995-96 AND 1996-97 AND ACCORDINGLY HE SUSTAINED A N ADDITION OF RS. 3 90 140/- FOR BOTH THE ASSESSMENT YEARS. 6. AGAINST THIS LD. D.R. SUBMITTED THAT LD. C.I.T.( A) HAS BASICALLY ERRED IN HOLDING THAT SEIZED DOCUMENTS RELATED ONLY TO TRADING AND NOT MANUFACTURING. THE A.O. HAD OBSERVED THAT SEIZED DO CUMENTS SHOWED THAT ASSESSEE RECEIVED ALUMINUM INGOTS WIRE -RODS IN THE FACTORY WITHOUT PAYMENT OF DUTY AND WITHOUT ANY BIL LS. THESE INGOTS AND WIRE-RODS WERE CONSUMED FOR THE MANUFACTURE OF ALUMINUM SLUGS AND CIRCLES WHICH WERE CLEARED FROM THE FACTORY WIT HOUT PAYMENT OF DUTY AND WITHOUT RECORDING IN THE BOOKS. THERE IS N O EVIDENCE TO SHOW THAT UNDISCLOSED SALES ONLY REFLECTED TRADING AND IT WAS NOT A CASE OF MANUFACTURING. THEREFORE LD. C.I.T.(A) WAS INCORRECT IN REDUCING THE G.P. RATE TO 2% FROM 5% APPLIED BY THE A.O. THE LD. D.R. FURTHER SUBMITTED THAT ENTIRE MANUFACTURING OU TSIDE BOOKS RESULTED IN SALES OUTSIDE THE BOOKS TO THE EXTENT O F RS.1 95 06 974/- FOR BOTH THE FINANCIAL YEARS. IT WOULD ALSO INVOLV E SOME UNDISCLOSED INVESTMENT AND THEREFORE SEPARATE ADDITION FOR SUC H UNDISCLOSED INVESTMENT IN RUNNING THE BUSINESS OUTSIDE THE BOOK S SHOULD BE ESTIMATED AND ADDITION BE MADE. 7. ON THE OTHER HAND LD. A.R. SUBMITTED THAT THE A. O. OUGHT TO HAVE ALLOWED FURTHER EXPENSES AMOUNTING TO RS.5 63 827/- AS FOUND RECORDED ON PAGE A-9. ACCORDING TO LD. A.R. DOCUMEN T AS A WHOLE SHOULD BE CONSIDERED AND MERELY THE SALES PART SHOU LD NOT BE PICKED UP FOR WORKING OUT GROSS PROFIT ADDITION. IT(SS)A.320-327 -03. 7 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT ASS ESSEE HAS MADE SALES OUTSIDE THE BOOKS TO THE EXTENT OF RS.1 95 06 974/- DISCOVERED FOR BOTH THE FINANCIAL YEARS 1995-96 AND 1996-97. T HE A.O. APPLIED THE GROSS PROFIT OF 5% LOOKING TO THE FACT THAT AS SESSEE HAS SHOWN HIGHER G.P. RATE IN EARLIER YEARS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE AGREE WITH LD. D.R. T HAT WHATEVER IS SOLD OUTSIDE THE BOOKS IS NOT PART OF MERELY TRADIN G BUT IN FACT PART OF MANUFACTURING. CENTRAL EXCISE AUTHORITIES WOULD NO T HAVE BROUGHT THIS INTO PICTURE UNLESS MANUFACTURING IS SHOWN BY THE ASSESSEE OUTSIDE THE BOOKS. FURTHER WHAT WAS PURCHASED WAS ALUMINUM INGOTS AND ASSESSEE SOLD WAS ALUMINUM ASH. BOTH ARE DIFFERENT ITEMS THEREFORE QUESTION OF HOLDING THAT ASSESSEE WAS IN DULGED IN TRADING DOES NOT ARISE. THEREFORE CONSIDERING THE FACT THA T ASSESSEE HAS SHOWN GROSS PROFIT ABOVE 5% IN EARLIER YEARS WE UPH OLD APPLICATION OF G.P. RATE AT 5% BY THE A.O. THERE IS NO REASON TO TAKE A VIEW THAT GROSS PROFIT RATE EARNED BY THE ASSESSEE WOULD BE L OWER AS COMPARED TO WHAT ASSESSEE IS SHOWING IN THE REGULAR BOOKS. O N THE OTHER HAND PROFIT SHOWN IN UNACCOUNTED SALES SHOULD BE HIGHER AS ASSESSEE IS SAVING TAXES AND DUTIES AND DEBITING OVER-HEADS LIK E ELECTRICITY AND LABOUR IN REGULAR BOOKS OF ACCOUNTS. NO MATERIAL HA S BEEN PLACED BEFORE US TO SHOW THAT THE OVER-HEADS EXPENSES INCU RRED ON PRODUCTION OUTSIDE THE BOOKS WERE INCURRED OUT OF U NACCOUNTED MONEY AVAILABLE WITH THE ASSESSEE OR THAT THEY WERE NOT PART OF REGULAR BOOKS OF ACCOUNTS. FURTHER CLAIM OF THE AS SESSEE THAT IT SHOULD BE ALLOWED FURTHER CLAIM OF EXPENSE OF RS.5 63 827/- OUT OF IT(SS)A.320-327 -03. 8 INCOME ESTIMATED FROM UNACCOUNTED PRODUCTION AND SA LES CANNOT BE ACCEPTED BECAUSE IT IS NOT SHOWN THAT THESE EXPENSE S WOULD BE OVER AND ABOVE COVERED IN 95% ALLOWED TO THE ASSESSEE FR OM THE UNRECORDED SALES. SINCE GROSS PROFIT ESTIMATED IS A T 5% IT IS PRESUMED THAT OTHER 95% WOULD COVER EXPENSES WHICH WOULD ALSO INCLUDE RS.5 63 827/- UNLESS IT IS SHOWN OTHERWISE. IT IS NOT THE CASE THAT COMPUTATION OF UNDISCLOSED INCOME HAS BEEN DON E ONLY ON THE BASIS OF SEIZED DOCUMENTS AND NO ESTIMATION HAS BEE N APPLIED. BUT ONCE ONLY THE FIGURES OF UNACCOUNTED SALES HAS BEEN CONSIDERED AND PROFITS ARE ESTIMATED THEN IT WILL TAKE CARE OF EXP ENSES WHETHER THEY ARE FOUND RECORDED IN THE SEIZED DOCUMENTS OR NOT. THE ONUS WAS ON THE ASSESSEE TO SHOW THAT TOTAL EXPENSE INCURRED ON UNACCOUNTED SALES WAS MORE THAN 95% JUSTIFYING ITS CLAIM FOR LE SSER GROSS PROFIT RATE. SINCE THIS HAS NOT BEEN DONE SO WE DECLINE TO ALLOW THE CLAIM FOR FURTHER EXPENDITURE AS MADE BY IT IN GROUND NO. 1. 9. AS A RESULT OF ABOVE DISCUSSION WE DISMISS GROUN D NO.1 OF THE ASSESSEE WHEREAS WE ALLOW GROUND NO.1 OF THE REVENU E. ADDITION OF RS. 82 608/- GROSS PROFIT ADDITION ON UNDISCLOSED SALES OF RS.82 608/-. 10 . THE A.O. EXAMINED ANNEXURE C OF THE SHOW CAUSE NOTI CE ISSUED BY THE CENTRAL EXCISE AUTHORITIES WHO WORKED OUT THE SUPPRESSED VALUE OF SALES OF ALUMINUM ASH AT RS. 30 53 770/-. THE A.O. HOWEVER WORKED OUT THAT SALES AMOUNT OF RS.16 52 174/- OF ALUMINUM ASH IS REQUIRED TO BE CONSIDERED FOR F.Y. 1997-98 AS OTHER PART IS ALREADY CONSIDERED WHILE ESTIMATING THE GRO SS PROFIT ADDITION IT(SS)A.320-327 -03. 9 FOR THE F.Y. 1995-96 AND 1996-97. HE APPLIED A GROS S PROFIT RATE OF 5% ON THE UNACCOUNTED SALES OF RS.16 52 174/- FOR T HE FINANCIAL YEAR 1996-97. 11. ON THE OTHER HAND IT WAS SUBMITTED BEFORE THE LD. C.I.T. (A) THAT SALES AMOUNTING TO RS.5 10 385/- WERE DECLARED IN T HE BLOCK RETURN AND IT IS ONLY THE SALES AMOUNTING TO RS. 1 95 06 9 74/- REMAINED THE UNACCOUNTED SALES FOR CONSIDERATION FOR THE FINANCI AL YEARS VIZ. 1995- 96 AND 1996-97. IN ITS SUBMISSION BEFORE THE LD. C. I.T.(A) TOTAL SALES AS PER SHOW CAUSE NOTICE OF EXCISE DEPARTMENT FOR T HE F.Y. 1995-96 AND 1996-97 WAS WORKED OUT AS UNDER :- THUS THE SALES AS PER SHOW CAUSE NOTICE OF EXCISE DEPARTMENT IS AS UNDER:- F.Y. QTY. (KG.) AMOUNT.(RS.) 1995-96 70948.300 56 73 792 1996-97 158049.200 1 38 33 182 ----------------- -- -------------- TOTAL. 228997.500 1 95 06 974 IT IS FURTHER SUBMITTED THAT IN THE BLOCK RETURN S ALES IS SHOWN OF RS.2 00 17 359/- WHICH IS BIFURCATED ON ASSUMPTION AND PRESUMPTION AS PER SHOW CAUSE NOTICE AND NO FACTUA L WORKING WAS DONE: F.Y. QTY.(KG.) AMLOUNT (RS.) 1995-96 47762.700 ` 38 23 208 1996-97 201288.600 1 61 94 151 ----------------- ------------------ TOTAL. 249051.300 2 00 17 359 IT(SS)A.320-327 -03. 10 THE A.O. HAS ESTIMATED G.P. ON THE ABOVE SALES @ 5% WHICH IS BASICALLY ESTIMATED AT RS./1 91 160/-FOR F.Y. 19 95-96 AND RS.8 09 708/-FOR F.Y. 1996-97 IN THIS REGARD IT IS SUBMITTED THAT ACTUAL SALES OF ALUMINUM SLUGS INGOTS PATTA AND C IRCLES ARE AS PER ANNEXURE-A & B I.E. OF RS. 1 95 06 974/- ABOVE WHEREAS AT THE TIME OF FILING BLOCK RETURN SALES OF ALUMINUM ASH/DUST WAS INCLUDED IN THE SALES AS PER EXCISE SHOW CAUSE. DET AILS OF ASH SALES IS AS UNDER : F.Y. AMOUNT (RS .) REFERENCE. 1995-96 30 958 -- 1996-97 4 79 427 A-9 (P.32) ------------ TOTAL. 5 10 385 IF THE ABOVE AMOUNT IS REDUCED FROM THE SALES AS SH OWN IN THE BLOCK RETURN THE ACTUAL SALES COMES TO RS.1 95 06 974/- (2 00 17 359 5 510 385) I.E. SALES AS CALCULATED BY THE EXCISE DEPARTMENT IN SHOW CAUSE NOTICE. 12. WE NOTICE THAT THE A.O. HAD ADOPTED THE SALES F IGURE OF RS.1 95 06 974/- FOR THE F.Y. 1995-96 AND 1996-97 WHILE PROPOSING ADDITION @ 5% AT RS.8 09 708/- (AND NOT RS.9 75 348 WHICH IS THE FIGURE RESULTING FROM APPLICATION OF 5% ON RS.1 95 06 974/-). IN APPEAL THE LD. C.I.T.(A) DIRECTED TO TREAT THE SUM OF RS.5 10 385/- AS UNDISCLOSED INCOME AS AGAINST GROSS PROFIT ADDITION MADE FOR THE F.Y. 1995-96 AND 1996-97 IN ADDITION TO GROSS PROFIT AD DITION ON UNACCOUNTED SALES @ 2% ON RS.1 95 06 974/-. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT CENTRAL EXCI SE AUTHORITIES HAD SEIZED DOCUMENTS OF UNACCOUNTED SALES FOR F.Y. 1995 -96 AND 1996- 97 WHICH NOW INDICATED TOTAL SALES OF RS.2 00 17 35 9/-. THE A.O. IT(SS)A.320-327 -03. 11 SEEMS TO HAVE EXCLUDED A SUM OF RS.5 10 385/- ON TH E PRESUMPTION THAT SALES TO THIS EXTENT ARE ALREADY INCLUDED IN T HE BLOCK RETURN. THE A.O. THEREFORE APPLIED GROSS PROFIT RATE OF 5% ON RS.5 10 385/- TO FURTHER MAKE THE ADDITION OF GROSS PROFIT ON SALES OF RS.5 10 385/- WHICH WAS EXCLUDED ORIGINALLY BY THE ASSESSEE. THE LD. C.I.T.(A) ON THE OTHER HAND THOUGHT THAT ENTIRE SUM OF RS.5 10 385/- SHOULD BE THE UNDISCLOSED INCOME. WE HOWEVER DO NOT AGREE. ONCE TOTAL UNDISCLOSED SALES ARE FOUND AT RS.2 00 17 359/- THE N PROFIT SHOULD BE ESTIMATED ON THESE SALES FOR THE BLOCK PERIOD. IF W E APPLY PROFIT RATE OF 5% ON RS.2 00 17 359/- IT WILL GIVE A PROFIT OF RS. 10 00 868/-. THUS CORRECT PROFIT WHICH IS TO BE TAXED FOR THE F.Y. 19 95-96 AND 1996-97 ON THE SALES OUTSIDE THE BOOKS WOULD BE RS.10 00 86 8/-. WE HAVE ALREADY UPHELD THE ADDITION OF RS.8 09 708/- THEREF ORE ONLY THE DIFFERENCE WOULD BE TAXED FURTHER. THUS FURTHER ADD ITION WHICH IS REQUIRED TO BE UPHELD IS RS.1 91 160/-. THUS IN PLA CE OF ADDITION OF RS.5 10 385/- ONLY AN ADDITION OF RS.1 91 160/- IS SUSTAINED. WE MAY MAKE IT CLEAR THAT TOTAL ADDITION IN RESPECT OF GRO SS PROFIT WOULD BE OF RS.10 00 868/-. IT WILL COVER ADDITIONS FOR GROSS P ROFIT PARTLY TAXED BY THE A.O. AND REFERRED TO IT IN GROUND NO.1 OF THE A SSESSEE AND PARTLY ENHANCED BY THE LD. C.I.T.(A) AND PARTLY COVERED IN GROUND NO.2 OF THE ASSESSEE. AS A RESULT GROUND NO.2 OF THE ASSESS EE IS PARTLY ALLOWED. IT(SS)A.320-327 -03. 12 DEPARTMENTS APPEAL IT (SS) A.NO.327/AHD/2003 . 14. GROUND NO.2 UNDISCLOSED INVESTMENT OF RS.59 77 599/ -. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A. O. NOTICED THAT TOTAL STOCK AS ON 1-4-1996 IS SHOWN AT RS.44 6 0 833/- WHEREAS THE SUNDRY CREDITORS AND SUNDRY DEBTORS AS PER THE SEIZED DOCUMENTS WERE AS UNDER :- PAGE NO . SUNDRY CREDITORS. SUNDRY DEBTORS. 1 1 34 817 2 1 68 713 4 2 84 681 5 8 78 545 6 15 42 678 14 8 81 999 16 2 48 466 28 4 .550 34 36 000 41 2 11 278 43 2 85 300 ---------------- ------------- 17 58 506 29 18 521 15. ON THIS BASIS A.O. WORKED OUT THAT ASSESSEE HAS SURPLUS INVESTMENT OF RS.56 20 848/- AS UNDER :- STOCK RS. 44 60 833/- ADD : DEBTORS. RS. 29 18 521/- ---------------------- RS. 73 79 354/- LESS: CREDITORS. RS. 17 58 506/- --------------------- NET INVESTMENT. RS. 56 20 848/- ============ IT(SS)A.320-327 -03. 13 16. THE A.O. HOWEVER RE-WORKED OUT THE VALUE OF ST OCK AT RS.48 17 584/- IN PLACE OF RS. 44 60 833/-. ACCORDI NGLY HE WORKED OUT TOTAL SUCH INVESTMENT OUTSIDE THE BOOKS AT RS.59 77 599/-. 17. BEFORE THE LD. C.I.T.(A) FOLLOWING SUBMISSIONS WERE MADE :- 1. THE SEIZED MATERIAL DOES NOT CONTAIN RECORDINGS OF PURCHASES CORRESPONDING TO SALES AS NOTED BY EXCIS E DEPT. AS EXPLAINED WITH EVIDENCES IN GROUND NO.3 PARA-4 OF T HIS SUBMISSION. 2. THE SEIZED MATERIAL IS PART AND NOT FULL RECORD OS TRANSACTION. THUS THE SAME CANNOT BE CONSIDERED AS FINAL FOR WORKING OF INVESTMENT IN STOCK AND DEBTORS AS DISCU SSED BY A.O. 3. IN ABSENCE OF FULL INFORMATION WITH REGARD TO PU RCHASES AND STOCK THE SAME WERE ESTIMATED ON ADHOC BASIS AT AVERAGE RATES ONLY THEREFORE THE DETAILS OF PURCHASES AND STOCK AS ON 01.04.96 AS SHOWN BY THE ASSESSEE IN BLOCK RETURN W AS NOT CORRECT AND BASED ON SEIZED MATERIAL OR NOTINGS IN SHOW CAUSE NOTICE OF EXCISE DEPARTMENT WHICH IS THE BASIS OF SEARCH/REQUISITION. THUS ON THE INCORRECT AND ESTIMATED INFORMATION TH E INVESTMENT IN STOCK AND DEBTORS CANNOT BE CONSIDERED UNACCOUN TED WITHOUT ANY CONCRETE EVIDENCES IN SEIZED MATERIALS. 4. THE EVIDENCES IN ANN-A-9 LEADS THAT THE PURCHAS ES ARE ON CREDIT BASIS AND THE SAME ARE PAID OUT OF SALES CONSIDERATION DIRECTOR IN STATEMENT U/S. 131 OF TH E ACT ADMITS THE SAME. 5. WHOLE OF CASE IS BASED ON SALES AND SEIZED MATER IAL ALSO CONTAINS DETAILS OF SALES THEREFORE IN ABSENCE OF SEIZED MATERIALS FOR PURCHASES AND STOCK ASSESSEES ESTIM ATIONS CANNOT BE BASED FOR ADDITIONS. 6. THE TRIAL BALANCE AS MENTIONED ON P.NO.8 OF ASSE SSMENT ORDER IS AS ON 01.10.96 AND NOT AS ON 01.04.1996 TH US THIS IS NOT RELEVANT AND BASIS OF ADDITION. IT(SS)A.320-327 -03. 14 7. IT IS FURTHER SUBMITTED THAT WHEN A.O. IS ACCEPT ING TOTAL TURNOVER AND ESTIMATING GROSS PROFITS ON THE SAME THERE IS NO POINT TO ESTIMATE UNACCOUNTED INVESTMENTS IN STOCK AND DEBTORS WHEN SEIZED MATERIALS ARE RELATED TO DIFFERENT PERI OD AND THAT TOO IS IN PART AND NOT COMPLETE IN ALL RESPECT. IN THE VIEW OF THE ABOVE IT IS SUBMITTED THAT WHERE SEIZED MATERIAL LEAD TO CONCLUSION THAT THE PURCHASES ARE ON CREDIT BASIS AND NO INVESTMENT IS MADE IN TRADE I.E. STOCK ETC. THERE IS NOT QUESTION OF MAKING ADDITION ON ACCOUNT OF INVES TMENT IN STOCK AND DEBTORS AS IT IS CONTRARY TO THE FACTS AN D EVIDENCES AVAILABLE IN SEIZED MATERIALS. 18. ON THIS BASIS IT WAS ARGUED THAT DOCUMENT NOS.1 TO 43 ON THE BASIS OF WHICH DEBTORS AND CREDITORS ARE WORKED OUT IS NOT COMPLETE DOCUMENT ITSELF AND IT DOES NOT TAKE INTO ACCOUNT D EBTORS AND CREDITORS IN THE BOOKS OF ACCOUNTS. FURTHER CREDIT ORS STANDING IN THIS TRIAL BALANCE PREPARED BY THE A.O. ARE THOSE FROM W HOM GOODS WERE PURCHASED ON CREDIT AND WHICH FORM PART IN THE STOC K. ALL THE STOCKS ARE ON CREDIT AND THEREFORE NO ADDITION COULD BE M ADE ON THAT BASIS. 19. THE LD. CIT (A) HELD THAT THE TRIAL BALANCE ON THE BASIS OF WHICH ADDITION IS MADE IS FOR 1-10-1996. THEREFORE STOCK AS ON 1-4-1996 COULD NOT BE ADDED FOR FINDING OUT TOTAL ASSETS OF THE ASSESSEE. HE ACCORDINGLY DELETED THE ADDITION. 20. AGAINST THIS LD. D.R. SUBMITTED THAT THERE IS N O MATERIAL TO SHOW THAT THE TRIAL BALANCE AS PREPARED BY THE A.O. ON T HE BASIS OF THE SEIZED DOCUMENTS PERTAINING TO 1-10-1996 AND NOT ON 1-4-1996. THE A.O. HAS CLEARLY SHOWN THAT IT PERTAINED TO 1-4-199 6 THEREFORE HE WAS JUSTIFIED IN WORKING OUT UNDISCLOSED INVESTMENT FOR WHICH IT(SS)A.320-327 -03. 15 ADDITION WAS MADE. FURTHER THERE IS NO PROOF THAT ALL THE STOCK IN THE BOOKS AT RS.44 60 833/- OR AT RS.48 17 584/- WAS PU RCHASED ON CREDIT. THE A.O. WAS ACCORDINGLY JUSTIFIED IN MAKIN G THE ADDITION. 21. AGAINST THIS LD. A.R. RELIED ON THE ORDER OF C. I.T.(A) AND SUBMITTED THAT TRIAL BALANCE PREPARED BY THE A.O. F ROM SEIZED DOCUMENT IS AS ON 1-10-96 AND THEREFORE NO INVESTM ENT BY TAKING THE STOCK AS ON 1-4-96 CAN BE WORKED OUT. 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ARGUMENT OF L D. A.R. THAT ALL THE PURCHASES RECORDED IN THE BOOKS AT RS.44 60 833/- W ERE ON CREDIT CANNOT BE ACCEPTED AS THERE IS NO MATERIAL OR ANY C ONFIRMATION TO SHOW THAT STOCK WAS PURCHASED ON CREDIT. HOWEVER M ERGING OF THE FIGURES AS FOUND FROM THE SEIZED DOCUMENTS AND THAT OF STOCK AS ON 1.4.1996 WILL NOT BE PROPER. IT IS BECAUSE ENTIRE TRIAL BALANCE AS PER BOOKS HAS TO BE FIRST PREPARED IN WHICH STOCK OF 44 60 833/- OR SAY 48 17 584/- HAS TO BE INCLUDED. IN ABSENCE OF DATA AS ON 1-4-1996 WHICH NEITHER PARTY HAS SUBMITTED WE ARE UNABLE TO APPROVE THE ENTIRE ADDITION PROPOSED BY THE A.O. HOWEVER THE F ACT REMAINS THAT AS PER TRIAL BALANCE ON THE BASIS OF DOCUMENTS FOUN D BY THE A.O. AND WHICH IS STATED TO BE AS ON 1.10.96 THERE IS A DIFF ERENCE BETWEEN SUNDRY DEBTORS AND SUNDRY CREDITORS TO THE EXTENT O F RS.11 60 015/- ( 29 80 521 17 58 506 ) ASSESSEE WAS UNABLE TO E XPLAIN THIS DIFFERENCE. HE HAS ONLY CHOSEN TO OPPOSE FORMING O F TRIAL BALANCE BY INCLUDING THE FIGURE OF STOCK WHICH WAS APPARENTLY AS ON 1-4-96. IN IT(SS)A.320-327 -03. 16 ABSENCE OF ANY EXPLANATION AND MATERIAL TO THE CONT RARY WE FIND THAT DIFFERENCE BETWEEN DEBTORS AND CREDITORS AS PER SEI ZED DOCUMENTS REMAINED UNEXPLAINED. WE THEREFORE DIRECT TO MAKE T HE ADDITION OF RS.11 60 015/- IN PLACE OF RS.59 77 599/- PROPOSED BY THE A.O. AND DELETED BY THE LD. C.I.T.(A). THIS GROUND OF THE R EVENUE IS THEREFORE PARTLY ALLOWED. 23. AS A RESULT ASSESSEES APPEAL GROUND NO.1 IS R EJECTED. GROUND NO.2 IS PARTLY ALLOWED. REVENUES APPEAL GROUND NO. 1 IS ALLOWED. AND GROUND NO.2 IS PARTLY ALLOWED. 24. AS A RESULT BOTH THE APPEALS ARE PARTLY ALLOWE D. ORDER PRONOUNCED IN OPEN COURT ON 14-05-2010. SD/- SD/- (T. K. SHARMA ) ( D.C. AGRAWAL) JUDICIALMEMBER ACCOUNT ANT MEMBER. AHMEDABAD. DATED: 14 /05 /2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD.