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TMI Blog2010 (7) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... stances, unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained - in favour of assessee. Gross profit - AO had applied the rate of 10 per cent. for working out the gross profit from trading activity and allowed the deduction at the rate of 5 per cent. towards expenses - Held that:- The gross profit had been merely estimated but there was no basis for such estimation in respect of gross profit or expenses in the assessment order. As whatever income the assessee may have earned from unaccounted business, the same would be held by the assessee as an investment or would have been spent towards personal expenses. During the course of search, no material had been brought on record to prove the investment of such undisclosed amount - Keeping in view the totality of the facts the Tribunal found it appropriate that the gross profit should be adopted at the rate of 5 per cent, on the same set of facts, the Commissioner (Appeals) has worked out the gross profit at the rate of 6 per cent. whereas the Tribunal has adopted the rate of 5 per cent. Thus, the two authorities have on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax (Appeals) in restricting the addition of ₹ 3,77,498 made on account of unexplained interest payments ? (C) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income-tax (Appeals) in restricting the addition of ₹ 63,51,540 made on account of disallowance of payments by invoking the provisions of section 40A(3) of the Act ? Tax Appeal No. 662 of 2009 (A) Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the Commissioner of Income-tax (Appeals) and thereby deleting the addition of ₹ 30,17,029 made by the Assessing Officer in respect of income from adat commission ? (B) Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the Commissioner of Income-tax (Appeals) and thereby deleting the addition of ₹ 15,93,600 as income from bill discounting ? (C) Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the Commissioner of Income-tax (Appeals) and thereby deleting the addition of ₹ 11,85,000 made in respect of unexplained expenditure incurred on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search and seizure operation came to be carried out at the residence of the assessee on June 30, 1998, under section 132 of the Act. In response to notice under section 158BC of the Act, the assessee filed a return showing undisclosed income of ₹ 30 lakhs against which total undisclosed income was assessed at ₹ 1,68,79,830. 6. The assessee carried the matter in appeal before the Commissioner (Appeals), who partly allowed the appeal. Being aggrieved by the order of the Commissioner (Appeals), both the assessee as well as the Revenue preferred appeals before the Tribunal. Both the appeals came to be partly allowed. 7. In relation to proposed question (A) in both the appeals, during the course of search, jewellery to the extent of 1632.8 grams came to be seized from the residence of the assessee. The Assessing Officer treated 567 grams gold ornaments in the hands of Anjudevi, Badlidevi and Godavaridevi as explained and also accepted 227.1 grams belonging to the family members, consisting of his son and two daughters, as having been explained. The Assessing Officer accepted the lump sum gold ornaments weighing 800 grams as explained and the balance 655 grams valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llery is gifted by the relatives and friends at the time of social functions, viz., marriages, birthdays, marriage anniversary and other festivals. These gifts are customary and customs prevailing in a society cannot be ignored. Thus, although the circular had been issued for the purpose of non-seizure of jewellery during the course of search, the basis for the same recognizes customs prevailing in the Hindu society. In the circumstances, unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained. Thus, the approach adopted by the Tribunal in considering the extent of jewellery specified under the said circular to be a reasonable quantity, cannot be faulted with. In the circumstances, it is not possible to state that the Tribunal has committed any legal error so as to give rise to a question of law. 11. In relation to proposed question (B) in Tax Appeal No. 661 of 2009, on the basis of the seized paper page No. 31, the Assessing Officer noted that there was an account without name for two periods. In the first account, the total amount credited was ₹ 84,34,000 and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 95 per cent. thereof was for adat business and 5 per cent. for trading business. Thus, the adat business turnover was ₹ 60,34,05,000 on which the commission at the rate of 0.5 per cent. was worked out at ₹ 30,17,000. In respect of the trading turnover of ₹ 3,17,58,200, the gross profit was estimated at 10 per cent., i.e. ₹ 31,75,820 against which unaccounted expenditure was estimated at ₹ 15,87,910 (50 per cent.) and the net income was ₹ 15,87,910. The Assessing Officer, in respect of the trading turnover of ₹ 3,17,58,200, worked out as above, estimated the cash purchases of ₹ 3 crores and disallowed 20 per cent. thereof under section 40A(3) of the Act and, accordingly, worked out the disallowance at ₹ 63,51,540. In the assessee's appeal, the Commissioner (Appeals) deleted the addition which came to be confirmed by the Tribunal in the Revenue's appeal. 16. As can be seen from the impugned order of the Tribunal, the Tribunal has noted that it was an admitted fact that the undisclosed income had been estimated in the case of the assessee after rejecting the books of account maintained by the assessee. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of some of the manufacturers of guar, dal and gram, the gross profit rate works out to 8 per cent. to 9 per cent., but he has not given any specific instances. Keeping in view the totality of the facts and the surrounding circumstances of the case, the Tribunal found it appropriate that the gross profit should be adopted at the rate of 5 per cent. 19. Thus, on the same set of facts, the Commissioner (Appeals) has worked out the gross profit at the rate of 6 per cent. whereas the Tribunal has adopted the rate of 5 per cent. Thus, the two authorities have on the same set of facts made different estimates. Thus, on these facts, the order impugned does not give rise to a question of law so as to warrant interference because that would only be a case of replacing one estimate by another estimate. 20. In relation to the proposed questions (B) and (C) in Tax Appeal No. 662 of 2009, the Assessing Officer had noted that the assessee was engaged not only in cheque discounting, but also in bill discounting business. He noted that the assessee had shown ₹ 9,52,746 on turnover of ₹ 95,27,462 as cheque discounting income. According to the Assessing Officer, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the sum of ₹ 95,27,46,200 and since we have already confirmed the addition of ₹ 9,52,746 on account of income from the cheque discounting. Therefore, we are of the view that no separate addition can be made estimating as income from the bill discounting. Accordingly, we delete the addition of ₹ 15,93,600. Thus, ground No. 6 is partly allowed and the total addition in respect of the bill discounting/cheque discounting are sustained only to the extent of ₹ 9,52,746. 22. Thus, it is apparent that the conclusions arrived at by the Tribunal are based upon the findings of fact recorded after appreciation of evidence on record. Nothing is pointed out on behalf of the Revenue to indicate that the findings arrived at by the Tribunal are based upon irrelevant material or that relevant material has been ignored. In the circumstances, the controversy involved being based purely upon findings of fact, does not give rise to any question of law. 23. Proposed question (D) in Tax Appeal No. 662 of 2009 relates to addition of ₹ 11,85,000 in respect of expenditure incurred on renovation of the house property. The Assessing Officer noted that during the sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , hence, the Assessing Officer was bound to give credit of ₹ 3.73 lakhs out of the unexplained expenditure incurred on the renovation of house property. The Tribunal further held that since the assessee had disclosed ₹ 4.92 lakhs while submitting his return for the undisclosed income, the addition to that extent was also required to be reduced. Accordingly, the Tribunal held that the addition was required to be reduced by ₹ 8.65 lakhs and sustained the addition only to the extent of ₹ 3.2 lakhs. 25. Thus, it is apparent that the expenditure to the extent of ₹ 3.73 lakhs for renovation of the house property had been incurred by Smt. Kantadevi. The said expenditure was disclosed in the return filed by the said Smt.Kantadevi, hence, the Assessing Officer could not have disregarded the same. Besides, in so far as the expenditure of ₹ 4.92 lakhs incurred by the asses-see is concerned, the assessee had already made a disclosure of the said amount in the total disclosure of ₹ 30 lakhs. In the circumstances, no infirmity can be found in the view taken by the Tribunal in holding that the addition was required to be reduced to the said extent. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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