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TMI Blog2006 (2) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... e difference between Hexane products and Petroleum ether, the same was being sold to petroleum bunks for adulteration i.e. mixing it with petrol. Taking advantage of the explosive licence and certification from Industries Department as regards storage capacity which the assessee had, the assessee used to purchase the solvent oil from oil companies, lift the stocks and sell the same in open market for profit by the clandestine activity. The oil companies, which are public sector undertakings, in order to control adulteration, had stopped bulk sale of this product and were instead supplying to individual purchasers. Since the purchase of the said chemical could be made in small quantities, that too by making payment by means of demand draft only, a bank account was opened in the individual name of the assessee exclusively for this activity. A search and seizure operation was conducted under section 132 on 23-11-2000. During the search, a bank account held by the assessee was seized. The transactions recorded in the bank account did not form part of regular books of account maintained by the assessee. In a statement under section 132(4), the assessee agreed that the said bank accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held as cash generated from undisclosed business and not brought to tax separately. 5. The learned counsel for the assessee reiterated his submissions made before the first appellate authority. He filed a paper book running into 38 pages in the case of Vijay Raj Sethiya and 33 pages in the case of Uttam Chand Sethiya. The main contentions of the assessee can be summarised as follows: (1)The Assessing Officer erred in estimating the sales at cost price plus 5% and in turn estimating a further 15% on the sales so determined for bringing to tax, as the same is an arbitrary method without any basis. (2)As authentic sale figures are not available, working out of profit at 5% of purchases, which is adopted by the assessee, should have been upheld. (3)Comparable cases are cited to justify profit being disclosed at 5%. (4)The CIT(A) was wrong in taking the case of Shri P. Koteswara Rao as a comparable case, for the reason that in the case of Shri Koteswara Rao, the product in question, i.e. N-Hexane, was sold under a changed name as Petroleum Ether and this might have resulted in a higher profit. A sister concern of the assessee, viz., Sayar Chemical Industries, disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centage of profit derived by the assessee, who is in the business of trading in his product, would be much higher, especially when he has also paid certain commission to Shri Koteswara Rao. She submitted that the Assessing Officer had adopted a fair method in this case. As the assessee did not have any account of sales, the only basis available was to take the purchases as per bank account and estimate sales at cost plus 5% and thereafter determine the profit at 15% on such sales. She strongly submitted that the CIT(A) has wrongly given relief to the assessees and that the orders of the CIT(A) to that extent have to be vacated and the orders of the Assessing Officer restored. 9. On the issue of telescoping, the learned departmental representative submitted that in all the case laws cited by the learned counsel for the assessee, a nexus, between the undisclosed income and the assets purchased had been shown, whereas in this case the entire amounts were in the bank account, in the sense that the receipts from unaccounted sales were deposited in the bank account for the purpose of obtaining DDs in favour of public sector oil companies. She contended that unless some drawings are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer was not only considerate but also conservative in estimating the profit only at 15% of an underestimated figure of turnover, the assessee should not have had any grievance on the same. 13. Coming to the reliance placed on the case of Shri P. Koteswara Rao, we hold that fundamentally a profit rate adopted in the case of Shri Koteswara Rao cannot be a bench-mark, particularly in this illegal trade. Whatever might be the reason for accepting the percentage of profit in the case of Shri Koteswara Rao, to our mind, his case does not come to the rescue of the assessee. Though the same Assessing Officer has passed the orders in both the cases, the basis for accepting gross profit of 8.25% in the case of Shri Koteswara Rao has not been explained or substantiated in that assessment order. Thus, we do not consider it fit, on the facts and circumstances of the case, to treat the assessment order in the case of Shri P. Koteswara Rao as a bench-mark or a comparable instance. It might have been a case of under-estimation of income of Shri Koteswara Rao, with which we are not concerned. Suffice it to say, the Assessing Officer s order estimating the income at 15% of the turnover determin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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