9911796707
TMI Blog2013 (5) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. Whether on the facts and circumstances of the case, the CIT(A), Central, Jaipur has erred in deleting the addition of Rs. 12,07,000/- made on account of undisclosed debtors. 3. Whether on the facts and circumstances of the case, the CIT(A), Central, Jaipur has erred in holding that the undisclosed income for the assessment year 2000-01 had become source of funds available with the appellant for investment in undisclosed assets including debtors in subsequent assessment years even though no proof of availability of such funds was produced by the assessee.'' 3.1 Vide Ground No. 1, the grievance of the Department relates to deletion of addition of Rs. 5,14,196/- out of addition of Rs. 14,71,796/- made by the Assessing Officer on account of undisclosed profit from unaccounted sales and Ground No. 2 relates to the deletion of addition of Rs. 12.07 lacs made by the Assessing Officer on account of undisclosed debtors. Both these grounds are correlated and were also decided by the ld. CIT(A) simultaneously. Therefore, these are adjudicated together. 3.2 The facts of the case in brief are that the assessee is an individual deriving income from mining activities which are primarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m unaccounted sales. The Assessing Officer applied the G.P. Rate of 30.74% on the total sales of Rs. 52.63 lacs which included unaccounted sales of Rs. 47.88 lacs and accounted sales of Rs. 4.75 lacs and computed the gross profit at Rs. 16,17,846/- and after reducing gross profit as per books of account at Rs. 1,46,050/- he computed undisclosed profit at Rs. 14,71,796/-. The Assessing Officer also determined undisclosed debtors as per Annexure A-9 at Rs. 12.07 lacs but made addition on account of undisclosed profit because it was higher than the undisclosed debtors. The relevant finding had been given by the Assessing Officer at page 8 and 9 of the assessment order which reads as under:- ''During the course of search operations, in the statement Shri Shanti Lai Paliwal has explained in detail the process of decoding not only at one place but at many places and according to him, the decoding was to be done by mentioning three Zeros or by multiplying 1000 to the figures written in the annexure. The assessee has failed to justify his various arguments/claims by getting verified the figures written in the annexure with the figure in his books of accounts by taking actual figures of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries of which have also been found in the various annexure, the expenses are appearing in these entries related to the production of goods has not been recorded in her regular books of accounts. Some unaccounted sales/production has been found in the form of various incriminating documents found and seized as per various annexure during the course of search operation. Therefore, this argument of the assessee is also not acceptable. All these sales/receipts remains unverifiable and the same are being considered accordingly.'' 3.3 The assessee carried the matter to the ld. CIT(A) and the submissions as made in para 5.1 of the impugned order are reproduced verbatim as under- ''(a) There was no dispute regarding annexure A-9 (relevant for the assessment years 2000-01, 2001-02 and 2002-03) which represented party-wise undisclosed sales of blocks written in multiples of Rs.1,000/-. This fact was confirmed by Shri Shanti Lal Paliwal in his statement recorded u/s. 132(4) on 13.09.2005. (b) Shri Shanti Lal Paliwal categorically stated in response to Q.no.9 and Q.no. 14 of his statement recorded u/s. 132(4) on 07.09.2005 that annexures A-l,A-2, A-3, A-4, A-5, A-6, A-23 and A-25 and A- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termine correct undisclosed profit. But that ideal situation generally does not exist. When only a part of unaccounted expenses are found during search, the need to estimate undisclosed income arises. As the gross profit rate covers only trading expenses and not various overheads like administrative expenses, selling and distribution expenses, financial expenses, etc. which are also incurred by the assessee, the determination of undisclosed profit on the basis of gross profit rate is not proper. (iii) In the appellant's case, the seized material pointed towards several expenses which were not recorded in the books of account but were very relevant for determining correct undisclosed income. Such unaccounted expenses were found recorded in Annexure A-l (Page 1-10), Annexure A-4 (page 1-14), Annexure A-23 (Page 10), of Annexure A-25 (Page 60), Annexure A-26 (Page 1, 4-12, 13-14, 16-18), Annexure A-30 (Page 4, 5 and 6) and the statement of Shri Hari Shankar and Shri Mohinder recorded during search and seizure proceedings. Broadly, the these unaccounted expenses were related to salaries paid to various employees working at mines e.g. Shri Hari Shankar, Shri Mohinder Singh, Munimji, wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . rate of a particular year and inclusion of sales unaccounted for in the books of account in the unaccounted sales for the purpose of determining undisclosed income of the assessee was patently wrong and unjustified. (g) As regards taxation of higher of the undisclosed profits and undisclosed debtors as undisclosed income of the appellant, the A.R. submitted that the impugned proposition was proper in the first year when her undisclosed debtors exceeded her undisclosed profits from unaccounted sales. Therefore, in the assessment year 2000-01, the assessment of undisclosed income on the basis of undisclosed debtors was proper. But in the subsequent years, the undisclosed income so assessed was available with the appellant for investment in undisclosed assets including debtors. Therefore, in the subsequent years, the undisclosed income should have been determined on the basis of undisclosed profits alone so long as the undisclosed debtors of that year were less than the sum of undisclosed income determined in earlier years and undisclosed profit of that year.'' 3.4 The ld. CIT(A) after considering the submissions of the assessee observed that an addition of Rs. 22.33 lacs made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention to be reasonable by observing that the Assessing Officer had taken different stands while applying the G.P. Rate on unaccounted sales in different years and that in a particular assessment year in which the G.P. Rate shown by the assessee was less than the average G.P. Rate of 30.68%, he had applied the G.P. Rate of 30.68%. The ld. CIT(A) cited the example for the assessment year 2000-01 wherein the G.P. Rate shown by the assessee was 26.07% and the Assessing Officer applied the G.P. Rate of 30.68%. However, if in any assessment year, the G.P. Rate shown by the assessee was more than the G.P. Rate of 30.68%. The Assessing Officer applied that G.P. Rate e.g. in the assessment year under consideration the G.P. Rate of 30.74% was applied. According to the ld. CIT(A), the above said contrary stand taken by the Assessing Officer was not justified, accordingly , he was of the view that only the G.P. Rate of that particular assessment year has to be taken unless the Assessing Officer had evidence to justify the application of higher G.P. Rate for that assessment year. The ld. CIT(A) pointed out the contention of the assessee that undisclosed profit should have been determined o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing charges (Rs.3,000/-), bank charges (Rs. 100/-), general expenses (Rs. 2,834/-) and salary (Rs.12,000/-) had been shown. Thus it was clear that large number of expenses incurred by the assessee were not entered in the books of account. Therefore, the ld. CIT(A) was of the view that the existence of a number of unaccounted expenses clearly shows that the determination of the undisclosed profit from unaccounted sales on the basis of straightway applying the G.P. Rate was not the correct basis. He was of the view that neither the G.P. Rate of 30.74% as applied by the Assessing Officer nor net profit rate of 11.26% as claimed by the assessee could be applied on the unaccounted sales. He therefore, considered it fair and reasonable to estimate the profit rate at 20% on the unrecorded sales. Accordingly, the unaccounted profit on unrecorded sales of Rs. 47.88 lacs by applying the G.P. Rate of 20% was determined at Rs. 9,57,600/- and since the figure of undisclosed debtors at Rs. 12.07 lacs was less than the sum total of undisclosed income of Rs. 22.33 lacs upheld by the ld. CIT(A) for the preceding assessment year and unaccounted income of Rs. 9,57,600/- upheld for the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account were very meagre for the unrecorded sales. Therefore, the ld. CIT(A) was justified in observing that the G.P. Rate on the recorded sales in various years applied by the Assessing Officer and net profit rate as claimed by the assessee were not correct for determining the undisclosed profit on the unrecorded sales. In our opinion, the ld. CIT(A) was fair and reasonable while applying the G.P. Rate at 20% on the undisclosed sales. He was also justified in giving the set off to the undisclosed income of preceding year and the year under consideration for unrecorded debtors because nothing was brought on record to substantiate that undisclosed income was utilized by the assessee elsewhere other than the undisclosed / unrecorded trading activities. We therefore, do not see any merit in this appeal of the Department. 4.0 As regards other appeals for the assessment year 2002-03 and 2004-05 is concerned, it is noticed that similar grounds are raised by the Department, the only difference is in the figures and even the rival contentions were the same as were for the assessment year 2001-02. Therefore, our findings given in ITA No.373/JU/2010 for the assessment year 2001-02 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
