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TMI Blog2013 (8) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... five crores – Appeal allowed – Decided in favor of Assessee. Disallowance of telephone, car expenses etc – Held that:- No incriminating material was found in respect of such expenses which could enable the Assessing Officer to disallow a part of it during proceedings u/s 153A – Thus, relying upon the judgment in the case of Jai Steels India vs. CIT in [2013 (6) TMI 161 - RAJASTHAN HIGH COURT], it was held that in case of assessment u/s 153A, the completed assessment can be tinkered only on the basis of incriminating material found during search - Without any incriminating material Assessing Officer was not justified in making disallowance – Decided in favor of Assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... he case in directing the Assessing Officer to allow telescopic adjustment to the addition for Rs.88,140/- made by the Assessing Officer on account of unaccounted cash sales against the disclosure for Rs.38,28,352/- made by the assessee on account of "others", without appreciating that the bifurcation of disclosure under the head "others", does not include the surrender of income on account of unaccounted cash sales for Rs.88,140/-. 2. The Ld. CIT (A) has erred both in law and on the facts of the case in directing the Assessing Officer to allow telescopic adjustment to the addition for Rs.3,89,759/- made by the Assessing Officer on account of unaccounted petty sales of scrap against the disclosure for Rs.38,28,352/- made by the assessee on account of "others", without appreciating that the bifurcation of disclosure under the head "others", does not include the surrender of income on account of unaccounted petty sales of scrap for Rs.3,89,759/-. 3. The Ld. CIT (A) has erred both in law and on the facts of the case in directing the Assessing Officer to allow telescopic adjustment to the addition for Rs.5,72,167/- made by the Assessing Officer on account of shortage of stock detect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a surrender of Rs.35 lacs during assessment year 2005-06 on account of unaccounted purchase of scrap from the assessee. Therefore, the Assessing Officer held that sale of scrap amounting of Rs.31,10,000/- related to assessment year 2005-06 and remaining amount of Rs.53,10,000/- related to assessment year 2007-08. Therefore, he made an addition of Rs.31,10,000/- in the assessment year 2005-06. He further observed that assessee had claimed an expenditure on telephone, car running, maintenance, depreciation and considering the element of personal use by partners disallowed a sum of Rs.3,16,300/- being 1/8th of these expenses. In assessment year 2007-08, the Assessing Officer made the following additions: a) Rs.88,140/- on account of unaccounted cash sales. b) Rs.3,89,759/- on account of petty sale of sundry scrap. c) Rs.5,72,160/- on account of difference in stock. 4. The Assessing Officer in respect of first addition had observed that there was document which showed cheque and cash payment received by assessee and, therefore, the assessee was confronted to furnish explanation. In reply the assessee submitted that the receipt represented part of Rs.84.20 lacs as scrap sales m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the premises of M/s Rachna Trading Co. in which entire amount of cash purchases made from the assessee firm has been declared during the F. Y. 2004-05 as expenditure outside regular books of accounts. The Assessing Officer noticed that entries in envelopes pertain to two financial year, i. e., 2004-05 relevant to the A. Y. 2005-06 and financial year 2006-07 relevant to the assessment year 2007- 08. The cash in the envelopes was found during the search and the amount receivable was mentioned in circles as "84=20" which means 84,20,000/-. Sh. Navin Sood admitted that these debtors were outstanding on 15.01.2007 and were outside regular books of accounts. Accordingly, the assessee disclosed an amount of Rs.84,20,000/- which was stated to be included in the total disclosure of Rs.5 crores. In the course of assessment proceedings, the Assessing Officer however bifurcated the disclosure of Rs.84,20,000/- in two assessmsent years depending upon the period to which the amount of Rs.84,20,000/- pertained. The Assessing Officer noticed that amount of Rs.31,10,000/- pertained to F. Y.2004-05 relevant to the A. Y.2005-06. Accordingly, the Assessing Officer made the addition of Rs.31,10,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes disclosure of Rs.38,28,352/- on account of "others" does not include the aforesaid three additions. In view of the above of the above, all three additions are sustained on merits and the Assessing Officer is directed to allow telescopic adjustments of the same against the additional income of the assessee disclosed in the course of search." 11. Aggrieved, with the orders of CIT (A) the assessee is in appeal before us for both years, whereas Revenue is in appeal for assessment year 2007-08. Though Ld. CIT (A) directed the Assessing Officer to give telescopic adjustments with respect to the additions but sustained the additions on merits therefore both parties are under appeal in A. Y. 2007- 08. At the outset, the Ld. AR arguing for assessment year 2005-06 submitted that assessee had made a total surrender of Rs.84.20 lacs in the assessment year 2007-08. In view of seized documents and Ld. Assessing Officer has wrongly splitted the same in two years which was without any basis. It was further submitted that entire amount of Rs.84.20 lacs representing outstanding debtors as on 16/01/2007 outside books of accounts was made to buy peace of mind. It was further submitted that al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the order of Assessing Officer. 14. We have heard the rival parties and have gone through the material placed on record. We find that assessee had surrendered an amount of Rs.2,47,50,000/- which included an amount of Rs.84.20 lacs on account of scrap sale which is apparent from paper book page 5. The total amount of surrender was included in the income of assessee in its computation of income placed at paper book page 2. The amount of Rs. 84.20 lacs is on account of outstanding debtors not recorded in the books of accounts as on 16.01.2007, which is apparent from paper book pages 1 to 7. The amount of sundry debtors as on 10.01.2007 were Rs.75.50 lacs as is evident from paper page 7. After recording the total sales and receipts out of daily sales the amount of sundry debtors became Rs.78.50 lacs on 11.01.2007 and then on 12.01.2007 it became 79.50 lacs and on 13.01.2007 it became Rs.82.20 lacs and which ultimately on 15.01.2007 became Rs.84.20 lacs. Therefore, it can be said that Rs.84.20 lacs represented the total outstanding amount of sundry debtors not recorded in the books of accounts and it cannot be ascertained as to how much amount belonged to which year. The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating material Assessing Officer was not justified in making disallowance. Therefore, ground no.2 is also allowed. 16. Ground no.3 is regarding charging of interest u/s 234(A). Which is consequential and do not require adjudication. In view of the above, appeal of the assessee for assessment year 2005-06 is partly allowed. 17. As regards appeals for assessment year 2007-08 filed by assessee as well as Revenue, we find that Ld. CIT (A) has directed the Assessing Officer to allow telescope adjustments against three additions. However, he had sustained the additions on merits. 18. The Revenue is in appeal against the directions of Ld. CIT (A), whereas the assessee is in appeal on merits. We find that the assessee had surrendered an amount of Rs.38,28,352/- on account of other items and which was meant for any sundry discrepancies, Which may creep up from seized material therefore, Assessing Officer was not justified in making further additions. Moreover, the Assessing Officer did not point out anything which had covered the amount of Rs.38,28,352/- as additions and in view of the above, we do not see any infirmity in the order of Ld. CIT (A) with regard to directions for telescopic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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