9911796707
TMI Blog2003 (11) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has been filing return regularly right from the asst. yr. 1992-93 showing losses year after year and the same has been assessed also as such. At the fag end of the financial year 1998-99, precisely on17th March, 1999, search operations took place in terms of warrant of authorization issued by Director of IT(Investigation),Kanpur. The said search operations not only covered the factory premises as aforesaid but also residential premises of its directors, namely, Shri Nand Kishore Goyal, Shri Rakesh Goyal (son) and Smt. Parul Goyal. The books of accounts and other records were partly found from the office of the company at village Patni and some books of accounts and other records were found at the premises of Thrill Hotel (P) Ltd. wherein also, all the 3 persons mentioned are the directors. During the course of search operations at the factory premises the authorized officer sealed a steel almirah, as the key of the said almirah could not be made available. Later on, the said almirah was opened. The contents of the said almirah were inventorised and a Panchnama was prepared in the name of the company. As per this Panchnama, various invoices, challans etc. (as found kept in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reply on behalf of the assessee and the arguments of the Asstt. CIT, Shri Y.P.B. Singh, the CIT(A) gave item-wise findings as follows: "30. As the two issues related to the addition of (a) Rs. 48,00,000 by way of profit on estimated turnover of Rs. 4 crores based on B-29, LP-18 and B-19, and (b) Rs. 28,73,759 on account of debit balances on 1st April, 1998, appearing in B-29 partly on account of closing balances in the regular books of accounts as on 31st March, 1998. are inter-related with each other, I proceed to decide these issues first. The ledger loose papers etc. marked as B-29, LP-18 & B-19 hereinafter referred as seized material, have been found and seized from the premises of Thrill Hotels (P) Ltd. The appellant tried to make out a case that the said material cannot be said to have been seized from the premises of the appellant-company and, therefore, the same could not have been treated in its block assessment during the course of proceedings, as have been taken in the case of the appellant by taking action under s. 158BC. No doubt, M/s Thrill Hotels (P) Ltd. is an altogether different entity and the block assessment order has also been passed separately in that cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aggregate of the entries in the seized material B-29 is Rs. 3,15,35,417, which is inclusive of the figures 1,05,25,168 (which are tallying with the regular books of accounts). Thus, the turnover which could not be verified from the regular books of accounts is Rs. 2,10,10,249. As far as the transactions appearing in LP-18 and B-19, the same are found recorded in B-29. The names of the parties, quantities dispatched and other particulars as appearing in LP-19 and B-19 are found to be tallying with B-29. Therefore, the determining factor for the purposes of working out undisclosed income is B-29. As discussed above, the unverified figure of sale as per B-29 is Rs. 2,10,10,249 only. 32. The computation of unverifiable turnover has to be pegged with the material during the course of search and according to such material, the figure is only Rs. 2,10,10,249 as against the figure of Rs. 4 crores taken by the AO on estimate basis. Such an estimate is not permissible in the block assessment, in view of large number of cases. To cite a few, I refer to the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Usha Tripathi (2001) 166 CTR (All) 77 : (2001) 249 ITR 4 (All). Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been determined. However, the contention of the appellant that outside the books need not result into profit cannot be accepted, there has to be a reason for making sales outside the books. 35. Over a careful consideration of the matter in its entirety, I am of the opinion that the taxable income of the appellant should be worked out by applying a net profit rate to the turnover of Rs. 2,10,10,249. Such a rate in my opinion, should most reasonably be 6.5 per cent of Rs. 2,10,10,249. I hold accordingly and the AO is directed to work out the resultant relief on this score. The contention of the appellant on this score that the reasonable NP rate generally shown in this kind of business be applied cannot be accepted as most of the direct expenses relatable to the turnover outside the books are claimed by the assessee and hence the rate of profit earned from the turnover outside the books of account cannot be at par with the declared rate of profit in similar business. 36. As regards the addition of Rs. 28,73,759 that has been made by the AO by taking the balance in B-29 as also by picking up balances in the regular books of accounts as on 31st March, 1998, I hold that the balance s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4515 with Oriental Bank of Commerce, Ambala Road, Saharanpur, standing in the name of the appellant-company itself. In this account, a large number of entries on both the sides appeared. The AO has, however, picked up the entries relating to deposits made in cash in the month of March, 1998-99 (which is the year of search); and has made the impugned addition on the short ground that the explanation for the deposit of Rs. 42,15,000 did not appear to be tenable. 46. It is an undisputed fact that during the course of search operation itself books of account of the appellant-company were found from the premises of Thrill Hotel (P) Ltd. and deposit in the above referred bank account on various dates are fully verifiable from such books of account. This bank account too is a duly disclosed bank account of the appellant-company. It contains a large volume of transactions of the appellant, whole of which are fully verifiable from the regular books of accounts and other primary records, which included excise records also. To make sales in cash is a regular feature of the appellant's trade and such sales could not have been adversely viewed in the present case, if the proposition of cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rakesh Kumar, managing director of the company. The papers found from his possession and control could have been very well taken to be the papers found from the possession and control of the appellant-company itself and, therefore, the same were liable to be considered in the case of the appellant-company. It is not without significance that the amount in question related to submission of tender and the appellant had duly owned having submitted the tender. It cannot escape the responsibility of explaining the said investment of Rs. 4 lakhs which, undisputedly, is part of the bid money of overall bid money of Rs. 73,15,000. For the reasons given above, the issue of presumption under s. 132(4A) also fails and, the papers found from the residence of Shri Naresh Goyal having been linked with the business activities of the appellant have rightly been considered in the hands of the appellant-company. 55. I also do not find much force in the alternative submission made by Shri Sanjay Gupta, FCA, that B-29 only give closing balances of debtors as on 31st March, 1998, and such amount may also be available during the year with the company in absence of any details of such investment in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and the addition which were deleted completely." 5. First issue in both the appeals is against reducing the addition of Rs. 48 lakh to Rs. 13,16,666. The counsel of the assessee stated that complete books of accounts are maintained and regular returns were filed well in time. No discrepancy whatsoever has been found in the maintenance of books of accounts and purchase and sale vouchers. Therefore, no adverse inference can be drawn against the assessee. It was further stated that few duplicate bills were found from a third premises i.e., the premises of M/s Thrill Hotels (P) Ltd. It was further stated that some bills were found from an almirah, the key of which was with one of the employees of the assessee, Shri Dinesh Kumar. Shri Dinesh Kumar has deserted the assessee-company and he was preparing duplicate bills of his own just to harass the company and to pressurize to increase his perks. The company was not agreeable with the conditions laid by his employee Mr. Dinesh Kumar, who ultimately left the service of the assessee-company. It was further stated that cash sale bills were prepared by Shri Dinesh Kumar, they were unsigned, therefore, they cannot be taken into considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the inventory was prepared and Panchnama was also prepared on the basis of material found from the almirah. From all these evidences, it cannot be said that assessee has not made any sales to the parties mentioned in these respective sale bills. 5.2. In reply on a query from the Bench, the learned Departmental Representative fairly conceded that no unaccounted purchases were found. On a further query from the Bench, the learned Departmental Representative replied that in fact, the assessee manufactured the items from raw material and approximately half of the material was sold outside the books of accounts and the sale of balance was recorded in the books of accounts. On further query from the Bench that how the quantitative tally of stock was prepared, however, no plausible reply was given by the learned Departmental Representative. 5.3. In reply, the counsel of the assessee stated that the item of the assessee is subject to excise and at no point of time any difference has been found either by the Excise Department or by the ST Department, as the quantitative tally of stock was accepted by all the authorities concerned, i.e., ST Department, Excise Department and IT Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re supplied to the respective parties. Therefore, we hold that there was no justification in making any estimate of sales on the basis of the bills found from the almirah placed at the premises of M/s Thrill Hotels (P) Ltd. This is also undisputed fact that the keys of the almirah was retained by Shri Dinesh Kumar, who was one of the employees of the assessee. The contention raised by the learned counsel of the assessee neither could be controverted by the learned Departmental Representative, nor any material was brought on record from which could establish otherwise. This is also undisputed that no addition whatsoever has been made by the AO in regard to investment in purchases for the purpose of sales. Once there is no purchase, then how the sale can be made, no reason whatsoever have been given by the AO or by CIT(A), who confirmed the addition @ 6.5 per cent on sales of Rs. 2,10,10,249 found recorded in the duplicate sale bills kept in the almirah. We have also considered various case laws relied upon by the learned authorised representative and found that they are in support of assessee's case. Therefore, in view of these facts and circumstances, we hold that no addition can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year 1997-98. However, no separate addition was made by the AO because of the figure in 'B-29' was more than Rs. 24 lakhs, which was arrived at by the AO by applying a GP rate of 12 per cent on two crore turnover estimated by the AO. We have already held while disposing the issue in regard to estimation of sales of Rs. 4 crore above, that the duplicate bills prepared by Shri Dinesh Kumar cannot be made basis for any estimation of sales. Here also we do not find any basis for sustaining the estimation of Rs. 2 crore, though this issue is not here before the Tribunal, but for the purpose of arriving at a right conclusion, we are mentioning that there was no cogent reasoning for making any estimate of sales, as the Department has not doubted the purchases shown by assessee. Therefore, any debit balances recorded in the diary maintained by Mr. Dinesh Kumar should also not be taken into consideration, as nothing supporting material was found further. Neither any enquiry was made from the parties in whose names the debit balance was shown in the diary maintained by Shri Dinesh Kumar, nor any other material was with the Department on which basis it can be held that the assessee has made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by assessee for exercising the power under s. 131. However, the AO has not summoned the person concerned. We noted that the amount in question either could have been considered in the hands of Shri Naresh Kumar, from whose possession the paper was found or could have considered in the hands of Umesh Gupta, of which the complete details were filed. Therefore, we do not find any reason that why the addition of Rs. 4 lakh has been made in the hands of the assessee. The assessee is a company and assessed to tax regularly. The amount of Rs. 4 lakh was directly made to U.P. Carbide & Chemicals by Shri Umesh Gupta. Therefore, it cannot be held that this amount was paid by the assessee in any way. Accordingly we hold that there was no justification at the end of CIT(A) to sustain this addition. Accordingly we delete the addition. 9. The alternate grounds i.e., ground Nos. 6.1 to 9 were not pressed by the counsel of the assessee. Therefore, they are dismissed as not pressed. 9.1. There is no other ground in appeal of assessee. 10. Now we will take the remaining grounds in appeal of the Department. 11. Remaining issue in appeal of the Department is against the deletion of addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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