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TMI Blog2013 (11) TMI 1486X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) is justified in deleting the addition of Rs.2,75,000/- which has been estimated on account of boarding, lodging, local travelling and entertainment etc – The ld. CIT(A) was not justified to estimate a sum of Rs.25,000/- per trip aggregating to Rs.75,000/- as undisclosed income of the assessee on account of foreign traveling particularly when no evidence is placed on record and the said estimation is made arbitrarily and not on any cogent material on record – Partly allowed in favour of assessee. Calculation mistake – Held that:- The bills were prepared for less quantity and the actual delivery was higher and the total difference was only 300 ltrs – The AO applied rate of Rs. 12.10/- per litre sales for the said excess comes to Rs.3,630/- but the addition as such made by AO is Rs.36,000 - Assessee has asked for relief by taking the correct figures and without disputing the rate and the quantity as considered by the authorities – Decided in favour of assessee. Gold and diamond jewellery found in search – Mismatch with wealth tax return – Held that:- Total weight and value of the jewellery found during the course of search and disclosed in the Wealth Tax returns and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing grounds of appeal are without prejudice to each other: On the facts and in the circumstances of the case - 1. The order passed u/s 158BC is bad in law and ab initio void. 2. The order passed is bad in law for lack of natural justice and for want of rationale in not considering the facts of the case properly while sustaining the order of the AO on various grounds. He erred in computing the total undisclosed income at Rs.5,04,800.00. 3. (a) The learned CIT(A) erred in sustaining the following additions as undisclosed income: Assessment Year Amount (Rs) 1989-90 55,750.00 1994-95 1,21,205.00 1995-96 1,21,205.00 (b) Learned CIT(A) failed in not appreciating that the additions made by the AO and sustained by him was without evidence of record justifying such additions. He ought to have appreciated that the AO had not brought anything on record to show that the appellant earned such income. He ought to have further appreciated that what was taxable under law as real income and not any figure worked out on surmises, suspicions and estimates based on them. 4. The learned CIT(A) erred in sustaining ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee." 4. Firstly, we take up the appeal of the assessee being I.T(SS).A. No.494/Mum/2004. 5. At the time of hearing, ld. AR submitted that Ground No.1 of the appeal is not pressed for and Ground No.2 of the appeal is general in nature and no specific adjudication is required. In view of above, these grounds are dismissed. 6. To enable to adjudicate Ground No.3 of appeal, we consider it necessary to state the relevant facts. The assessee is the wife of Shri Mayur M Thakkar, son of Shri Manoj M.Thakkar, who is one of the pioneers of chemical trade and dealing in chemicals. There was a search and seizure operation u/s 132 in Thakkar Group of cases on 21.1.1999. The search operation covered both, the business premises as well as residential premises of the members of Thakkar family. The Thakkar family is engaged in the business of manufacturing as well as trading in various chemicals. During the relevant years the assessee was associated with following business concerns of Thakkar Group: Name of the firm/concerns Nature of business Designation 1.Jalaram Petrochem Trader in Petrochemicals Partner 2.Usha Exports Export of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income earned by her during previous years relevant for A.Ys. 1989-90, 1994-95 1995-96. The appellant has also not been able to prove that she had income below taxable limit in any of these assessment years. As per the sub section (3) of section l58BB, it is specifically laid down that "the burden of proving to the satisfaction of the assessing officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee". Thus. the burden of proof has been clearly cast upon the appellant. In the case of the appellant, such burden of proof has not been discharged at all. The appellant's attitude in this regard has been of total recalcitrance. If the appellant feel that the income estimated by the assessing officer is not correct then she was free to put correct facts and figures before the assessing officer regarding her income earned by her during these previous years. She could have done this even at the stage of first appeal. However, nothing such has been done. It is a settled law that in the appropriate circumstances, the assessing officer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier assessment years and not on the basis of subsequent assessment years. Ld. AR also referred the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Dr. M.K.E. Menon (248 ITR 310) and submitted that the Hon'ble Jurisdictional High Court has held that the AO cannot estimate undisclosed income on an arbitrary basis and accordingly confirmed the order of Tribunal in which the Tribunal deleted the addition made by AO. 11. On the other hand, ld. DR relied on the orders of authorities below. He submitted that no documents have been placed by the assessee that the assessee had income below taxable limit in respect of assessment years viz 1989-90, 1994-95 and 1995-96. He submitted that as per section 158BB(3), the burden is on the assessee to prove that any undisclosed income had already been disclosed in any return of income filed by assessee before commencement of search. Since assessee has not placed any document on record, the AO has rightly adopted the formula of estimating the income considering other assessment years of the assessee particularly when the AO has stated that the source of income of the assessee were constant. He submitted that the order of ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses of Rs.1,00,000/- for the foreign visits during the previous year relevant to assessment year 1993-94 and Rs.2,50,000/- for two times foreign visits during the previous year relevant to assessment year 1994-95. The assessee disputed the above said addition before the ld. CIT(A). 15. On behalf of the assessee, it was contended that assessee is the wife of Shri Mayur M.Thakkar. He was in Dubai and was non resident during the aforesaid period. Shri Mayur spent on visits of his wife, the assessee. It was also contended that the tickets had also come from Dubai, Therefore, it was not reasonable and logic to assume that the assessee had spent out of her undisclosed income on her visits to Dubai and her husband did not spend for her living thereat. It was also contended that the husband of the assessee had declared Rs.70,00,000/- as undisclosed income for the block period and paid taxes thereon. Therefore, estimation of undisclosed income on the travel of assessee to Dubai is uncalled for. Her passport does not contain any such evidence that she had taken any exchange with her. 16. Ld. CIT(A) after considering the submissions of the assessee has held vide para 5.3 that no inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d taxes thereon. The department has stated that the assessee has not furnished any evidence to support her explanation that during her visits to Dubai she stayed with her husband and her husband born the expenses of boarding, lodging, local traveling etc on her behalf. We are of the view that onus is on the department to prove that the said expenses were not incurred by husband of the assessee but were born by the assessee from undisclosed income. The department is asking to prove something that does not exist. There is no dispute that no material/document or evidence was found during the course of search and /or inquiries made following search that the assessee had incurred the expenditure on her visits to Dubai and not her husband. We observe that ld. CIT(A) has stated that no incriminating evidence was found during the course of search regarding undisclosed income attributable to foreign travelling of the assessee. Considering the said facts, we are of the considered view that the ld. CIT(A) is justified in deleting the addition of Rs.2,75,000/- which has been estimated on account of boarding, lodging, local travelling and entertainment etc. Further, we are of the considered vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in the market on cash premium and has raised bills against the parties whose names are. Appearing on the page. As elaborately discussed in the assessment orders of other members of the Thakkar group, such kind of chemicals wee sold at a cash premium of 10% on the actual sale shown in the bills. Page 171 shows the rats of MTO which is approximately Rs.11 per 1 ltr. Therefore, the cash premium on sale of 2880 ltrs MTO will be Rs.3680/- 3.5.2 Regarding 3rd and 4th entries, the assessing officer has held that 300 ltrs of MTO was sold without reflecting the same in the concerned bills. Therefore, unrecorded sales will be Rs.300/- x Rs.12.10 = Rs.36,000/- approximately. The total of the above sales proceeds of Rs.39,680/-is treated as undisclosed income pertaining to the period relevant to A.Y. 1999-2000. 3.6 Last item of undisclosed income is Rs.91,960/-. It is based on pg.no173 of Annexure A- I cited supra. It pertains to cash sales of MTO to various parties without raising bills. Contents of page no.173 are as under: "15/6/98 Sunrise Paint 2000 26/6/98 R.S. Paint 400 28/6/98 Laxmi Paint 1400 6/7/98 Sunrise Paints 2200 14/7/98 R.S.Ind. 1000 27/7/98 Standard Drug Bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... last week of July 98. There is no evidence available with the appellant assessee to prove that the sale of the aforesaid 300 ltrs was recorded in the books of account in the regular course. In such circumstances, addition of Rs.36,000/- made by the assessing officer is confirmed. 5.5.1 Now coming to page No.173. The contents of the documents show that these are details of cash sales of MTO to various parties without raising bill. This find given by the assessing officer has not been controverted or contradicted, in any manner, the appellant assessee. The quantity involved is 7600 ltr. The transaction pertains to a period running from 15.6.98 to 26.7.98. The appellant has mainly challenged the rate of Rs.12.10 per ltr applied by the assessing officer. Here also the appellant has failed to furnish any evidence to prove that rate adopted by the assessing officer is excessive. Considering these aspects, the addition of Rs.91,960/- made by the assessing office is confirmed. 5.5.2 On the basis of discussion made above, addition to the extent of Rs.1,27,960/- is confirmed and relief allowed is of Rs.3,680/-". Hence, this appeal before the Tribunal. 22. At the time of hearing, ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.21,731/- remained unexplained and added u/s 69B r.w.s.158BB(2) of the Act as undisclosed income of the assessee for financial year 1998-99. Being aggrieved, assessee filed appeal before the First Appellate Authority. 26. The ld. CIT(A) has deleted the said addition after observing as under : "During the search operations, gold and diamond jewellery valued Rs.7,58,507/- were found at the premises. Ownership is not in dispute. They belong to the appellant. The appellant was a regular assessee and has filed WT returns. She also had disclosed such jewellery in her VDS returns under VDIS 1997. They were before the AO. The inventory and the particulars filed in the returns were reconciled. Value disclosed in returns and VDIS are not in dispute. Specifications of 4 items of jewelleries did not tally (Page 7 of the AO). It was explained that there was no difference in the total weight and value of item. The difference in specifications were due to making and remaking of those jewellery items. It could be possible that at the time of VDIS exact specifications were not written. It could be an inadvertence also. Against the value of Rs.7,58,507/- items valued Rs.21,731/- did not tally) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the accounts. The gross profit was shown at 0.81 % of the total turnover of Rs.1,71,75,298/-. The assessing officer has held, that the gross profit declared is far less as compared, to the gross profit of the old firm of Thakkar family with the same name i.e. Sunil Chemical Industries. Old firm had declared gross profit @2.97%. The assessing officer, therefore, estimated the gross profit of the proprietary concern at 2.97%. Further, the assessing officer has held that in the profit and loss account, an expenditure of Rs.1,19,992/- is debited on account of interest on overdraft. However, the balance amount of overdraft outstanding as on 31/7/1998 is of Rs.5,30,506/-. The assessing officer observed that considering the quantum of balance overdraft, it is to be mentioned that this interest is claimed here on proportionate basis i.e. for four months period. Considering all these force, the claim of interest on overdraft is restricted to 15% of the balance appearing in the overdraft balance sheet. Such interest expense is worked out at Rs.79,576/-. The excess of Rs.40,416/- is disallowed and treated as undisclosed income of the appellant." 30. The assessee filed appeal before the Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual working on the basis of the utilized overdraft facility on day to day basis and over the time frame under consideration. There is substance in the submission made by the counsel that after considering the discount received, the gross profit works out at 3.08% as against 2.90% estimated by the assessing officer. The assessing officer should have seen the total gross profit generated by the appellant. Discount received by the appellant is linked with the transactions of purchase and sale. Therefore, it should be considered for the purpose of ascertaining the gross profit. In view of the discussion made above, in my opinion, no addition of any undisclosed income can be made on account of the recorded business transactions of the proprietary concern of the appellant concern. It is, therefore, deleted." Hence, department is in appeal before the Tribunal. 31. At the time of hearing, ld DR relied on the order of AO and whereas the ld. AR relied on the order of ld. CIT(A). 32. Considering the reasoning given by ld. CIT(A) and in the absence of any contrary material brought on record by ld. DR and /or disputing the contents of the facts as stated by assessee before ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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