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TMI Blog2012 (3) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... rists. Out of the surrendered amount of Rs. 35 lakhs, a sum of Rs.25 lakhs was surrendered for the assessment year under appeal , i .e. , 2006-07 and the remaining sum of Rs.10 lakhs was surrendered for AY 2005-06. Assessment u/s 143(3) was completed on 26.12.2008 assessing the total income at Rs.20,97,440/- after including the surrendered amount of Rs.25 lakhs. 2. On appeal , the CIT(A) has confirmed major portion of the additions made by the AO. Aggrieved by the order passed by the CIT(A), the assessee is now in appeal before this Tribunal . 3. Ground No.1 taken by the assessee reads as under:- "1. That the ld. CIT(A) is not justified in upholding the action of A.A in treating the amount surrendered during survey as deemed income u/s 69-A by ignoring the fact that the surrender was made on account of discrepancies found in the books/cash and also considering that entire sales/purchases are not recorded in the books." 4. Facts of the case giving rise to the aforesaid ground of appeal are that the statement of the assessee was recorded on the date of survey, i.e. , 30.12.2005, in which he surrendered a sum of Rs.35 lakhs as additional income out of which Rs.10 lakhs was surrende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the value of such investments and money or the value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of such assessee. It follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will , therefore be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act . However, when these provisions apply because no source is disclosed at al l on the basis of which the income can be classified under one of the heads of income u/s 14 of the Act, i t would not be possible to classify such deemed income under any of these heads including income from "other sources" which have to be sources known or explained. When the income cannot be so classified under any one of the heads of income u/s 14, it follows that the quest ion of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any one of those heads by virtue of a satisfactory explanation being given, then these provisions of section 69, 69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat High Court in Fakir Mohmed Haji Hassan v. CIT (supra), once the assessee has failed to explained the nature and source of cash found available with it and the same is assessed as deemed income u/s 69A of the Act. Therefore, the corresponding deductions under the head profits and gains are not available to the assessee." The additional ground of appeal is thus dismissed." 5. Aggrieved by the order passed by the CIT(A), the assessee is now in appeal before this Tribunal . He submit ted that the only source of income of the assessee was his business and therefore the amount surrendered by him should also be treated as business income. 6. In reply, the ld. DR supported the order passed by the CIT(A). 7. We have heard both the parties and carefully considered their submissions. Perusal of the statement of the assessee as recorded at the time of survey and the letter of surrender dated 30.12.2005 submitted by the assessee before the AO shows that the impugned sum was surrendered towards unexplained cash, unexplained stock, and unexplained advances to agriculturists. The ld. CIT(A) has also recorded a categorical finding that the assessee could not establish that the surrende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The issue before us is whether unexplained investment assessed as deemed income u/s 69/69A/69B as a result of the failure on the part of the assessee to satisfactorily explain its nature and source can at al l be l inked to a source/head so as to qualify for set-off against the loss under the same or another head of income. Ld. CIT(A) has right lyrelied upon the judgment of the Hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan 247 ITR 290 (Guj) and the order of this Tribunal in Kim Pharma Pvt Ltd in ITA No.189/Chd/2010. We find no infirmity in her order. Ground No.2 is dismissed. 10. Ground No.3 taken by the assessee reads as under:- "3. That the ld. CIT(A) is not justified in upholding the addition of Rs. 53,379/- on account of difference in stock under the facts and circumstances of the case." 11. Discrepancy in the stock as per the books of account vis-a-vis stock physically found at the time of survey was detected by the survey team. The actual stock as per the inventory prepared by the survey team worked out to Rs.7,89,986/- while the stock as per the books of account worked out to Rs. 8,31,081/-. On being questioned about the difference in stock, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urists. He submitted that the assessee has not surrendered any sum towards unexplained stock. His second submission was that such a plea was not taken before the ld. CIT(A) and hence the assessee should not be allowed to take such a plea at this stage. 15. We have heard both the parties. The assessee has surrendered a sum of Rs.35 lakhs out of which Rs 25 lakhs relates to the year under appeal and the remaining sum relates to assessment year 2005- 06. Perusal of the statement recorded at the time of survey shows that the amounts surrendered by the assessee include the element of unexplained investment in the stock. Even in the letter of surrender dated 30.12.2005, the assessee has specifically stated that the amount was being surrendered on account of unexplained cash, unexplained advances to agriculturists, etc. The use of word 'etc. ' in the letter of surrender does not exclude the possibility of amount being surrendered on account of unexplained investment in the stock. Even the letter of surrender dated 31.12.2005 read along with the statement recorded at the time of survey makes it quite clear that the amount surrendered by the assessee also included unexplained investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e landlords are not recorded in the books of account . Therefore, the AO is perfectly justified in rejecting the books of account. The appellant 's contention in this regard is rejected. Now coming to reject ion of GP rate shown by the appellant, the appellant has not given any details/documents to justify his contention that fall in GP rate is attributable to the fluctuations in rate. Therefore, this explanation of the appellant is rejected being unsubstantiated. As regards application of GP rate of the previous year, there cannot be any better yardstick then appellant own trading results in the preceding years for working out the gross prof it of the appellant . It is seen that the AO has applied the previous year GP as declared by the appellant which is held to be just and fair. The addition of Rs. 3,26,556/- made by the AO is upheld. This ground of appeal is dismissed." 19. In support of appeal , the ld. authorized representative for the assessee submit ted that "net" profit rate declared by the assessee in the year under appeal was higher than the preceding and succeeding year and therefore the impugned addition should be deleted. He also relied upon the decision of the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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