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TMI Blog2015 (1) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... , the same is dismissed. - Decided against revenue. CIT(A) while estimating the gross profit at 10% has not given any basis for the same, though he has referred to the gross profit rate of the assessee at 5.22% in Assessment Year 2006-07 and 4.85% in the present assessment year. Thus the highest rate of gross profit shown by the assessee in Assessment Year 2006-07 and accepted by the Department is 5.22% and in our considered view, keeping in view the gross profit rate disclosed in respect of recorded receipt at 4.85% which is lower than now admitted gross profit rate of 5.22% to take care of this it will be just and fair to estimate the gross profit of the unrecorded receipt @ 6.50%. Therefore, modify the order of the CIT(A) to this extent and direct the Assessing Officer to accept the gross profit rate of the suppressed receipt of ₹ 4,20,73,972/- @ 6.50%. - Decided partly in favour of assessee. - ITA No. 1568/Ahd/2010, ITA No. 1937/Ahd/2010 - - - Dated:- 9-1-2015 - Shri G. C. Gupta And Shri N. S. Saini,JJ. For the Petitioner : Shri Rasesh B. Shah, AR For the Respondent : Shri B.L. Yadav, Sr. DR. ORDER Per Shri N. S. Saini, Accountant Member: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve months of the year has been given by the assessee company which aggregates to ₹ 1,80,52,601/-. The relevant extracts of 'Sanjay 06-07 account' is enclosed as Annexure B of this order. 9. The profit and loss account as maintained in Sanjay's Laptop hard drive reveals that total process charges after extending discounts received by the assessee company amounts to ₹ 14,80,23,313/-. However, as per the audited accounts as furnished with the return of income of the relevant year, total process charges is shown at a figure of ₹ 13,79,95,696/-.Thus the accounts as revealed in Mr. Sudhrania's Laptop when juxtaposed with the Audited accounts of the assessee company as furnished with the return of income, process charges to the extent of ₹ 1,00,27,617/- has been suppressed. 10. Therefore, it clearly emerges that the books of accounts based on which assessee company has derived its total income is incorrect, sham, doctored and cannot lead the assessing officer to determine the correct income representing true state of affairs of the assessee. Hence, the books of the assessee company is to be rejected and total income of the assessee company is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milarly, in answer to question no. 17, Shri Jaikumar, after observing monthly summary statement on page no. 231 of the loose paper file B-63, accepted that he discounted cheques worth ₹ 4,30,38,524/- during the period 01/04/2006 to 31/03/2007. 11.3 Thus, Shri Jaikumar vide his statement dated 14/05/2008 has confirmed such discounting even though he has not maintained any accounts with respect to the discounting done by him regarding various parties. The employees of the assessee company have also confirmed vide their respective statements during survey that they have given the cheques to Shri Jaikumar and received cash in turn and returned the same to Shri Sudhrania. 12. As the suppressed job charges receipt of ₹ 1,00,26,617/- as per Sanjay's account, as derived in para no. 9 , is a smaller sum it can be safely assumed that it is already contained or subsumed in the cash received from Shri Jaikumar. It can also be mentioned that Sanjay's account in his laptop carries both regular book entries and unaccounted entries. It is also seen from the cash book' and 'Jaikumar's account' as found in Sanay 06-07' that only part of the cash receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Thus at the rate of 10.87%, the total discount that is likely to have ceded by the assessee comes to ₹ 51,31,203/-. Therefore, the net unaccounted receipt after any discount is ₹ 4,20,73,972/-. 17.1 During the assessment proceedings the assessee has claimed additional sum of ₹ 3,41,36,466/- as the actual expenses on count of salary as incurred from the cash book. This appears excessive and from the voluminous salary slips submitted, it is not clear as whether the slips represent accounted wages or unaccounted wages. In view of this, it is logical to infer that assessee has already claimed all the expenses in this regard. 17.2 As regards assessee's claim of expenses on other counts, it is seen that all these expenses have already been claimed in assessee's books. This is further substantiated by the fact that these expenses on other counts in the audited books are in substantial excess of what is reflected in Sanjay 06-07 accounts' (Annexure-G). Thus, it can safely be assumed that the same has already been claimed in regular books and therefore, no further expenses can be allowed. Moreover the expenses, if at all any, cannot be allowed as it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of cheques discounted was to the extent of ₹ 4,72,05,175. He had stated that he was not maintaining any records of the persons who had given cheques for discounting and he had accepted that cheques worth ₹ 4,30,38,524 were discounted through him. Therefore, the volume of additional turnover of ₹ 4,72,05,175 still remained unconfirmed. At the same time, a copy of job account as reflected in Sanjay 06-07 file of laptop, (Annexure B of assessment order) it can be seen that the appellant had raised the bills for job charges to the extent of ₹ 18,72,00,523. Similarly the entries of discount granted as reflected in that account showed an amount of ₹ 2,01,47,795. Therefore, it is quite clear that the different figures reflected in the impounded materials showed contradictory picture and if the figure of total turnover of ₹ 18,72,00,523 is adopted, then the discount of ₹ 2,01,47,795 has also to be accepted. In view of these facts, it is quite clear that it is not precisely possible to determine the quantum of suppressed additional turnover from the evidences on record. Therefore, considering the detailed submissions made by the ARs alongwit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture on the basis of co-existence of entries related to accounted and unaccounted transactions in the laptop. The appellant had claimed that it had incurred a sum of ₹ 3,41,36,466 towards wages from unaccounted income. The AO stated that on the basis of voluminous salary slip submitted and other evidences on record, it cannot be proved categorically as to whether all such expense were accounted for or not and therefore he assumed that the same must have already been claimed in regular books of accounts. However, the records and evidences submitted by the appellant and existence of various entries in the laptop, in which combined accounts were maintained, it clearly suggests that various expenses were incurred by the appellant but not accounted for in the regular books of accounts. During assessment proceedings, the appellant had submitted the evidences of unrecorded wages and salary expenditure incurred out of unaccounted additional income. Also at the time of survey proceedings, the appellant had clarified that certain expenses and more particularly wages were not accounted for out of compulsion in view of certain restrictions of other laws and the existence of compulsive u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit on the basis of the available records and past trend as well as prevailing rate of net profit in case of similar industries as the books of accounts maintained by the appellant were not correctly reflecting the profit of the appellant and were rightly rejected U/s. 145(3) of the Act. On perusal of comparative gross profit statement, submitted by the ARs, it is observed that the appellant company had incurred gross loss in the A.Y. 2005-06 whereas the gross profit in the A.Y. 2006-07 was 5.22%. In the year under appeal, the appellant had shown gross profit at the rate of 4.85%. The comparative instances as quoted by the ARs showed the gross profit margin at 8.81% and 11.32%. In view of this trend, I agree with the contention of the ARs that if the entire addition is confirmed, the gross profit ratio would go up to about 23% which is definitely a distorted result looking to the present profitability of the appellant concern. Considering the past trend of loss, the margin of profit in the earlier year and the large volume of turnover, and also the possibility that some expenses might have been incorporated in the regular books of accounts, the profit margin from the unaccounted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termine the correct income representing true state of affairs of the assessee. Therefore, the books of accounts of the assessee-company were rejected. Further, the Assessing Officer found that the assessee was transacting cash, cheque, benami cheques, bearer cheque sales and discounting the cheques through a shroff Shri Jaikumar Periwal and during the year an amount of ₹ 4,72,05,175/- was discounted by the assessee from the shroff as revealed from the account of Jaikumar in Shri Sanjay Kumar Sudhrania s laptop. The Assessing Officer further noted that Sanjay s account in his laptop carried both regular book entries and unaccounted entries and he found from the cash book and Jaikumar s account as found in Sanjay 06-07 that only part of the cash receipt from Shri Jaikumar had gone to job charges account and remaining was directly carried to cash book from where it was either used for expenditure or investment or for application of the amount received. Therefore, the Assessing Officer held that the entire cash received from Shri Jaikumar can be treated as the unaccounted receipt on account of the job charges. He further observed that the net discount given can be found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted processing charges at 10% and restricted the addition to ₹ 42,07,397/- in place of the addition of ₹ 4,20,73,972 made by the Assessing Officer. 9. Being aggrieved by this order of the CIT(A), both Revenue and assessee are in appeal before us. 10. The Revenue is in appeal on the ground that the CIT(A) was not justified in restricting the addition to ₹ 42,07,397/- in place of ₹ 4,20,73,972/- made by the Assessing Officer and the assessee is in appeal on the ground that the addition sustained by the CIT(A) by estimating the gross profit of the assessee at 10% is on a higher side keeping in view the fact that the gross profit earned by the assessee in Assessment Year 2006-07, which is the highest, was at 5.22%, and therefore, the gross profit of the assessee in the present year on unaccounted processing charges should be estimated at 5.22% and not at 10% as held by the CIT(A). 11. The Departmental Representative contended before us that the Assessing Officer was justified in adding entire ₹ 4,20,73,972/- as it was found that the said amount was the suppressed processing charges receipt of the assessee. 12. We find that in this regard the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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