9911796707
TMI Blog2015 (4) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... as repayment of loan effected during the year. The CIT(A) appreciated each observation of the AO and after giving detailed finding confirmed the action of the AO for rejection of the account. On the basis of observation made by the AO in its order vis-à-vis details of account submitted along with the return of income the CIT(A) found that total sale of the assessee was ₹ 2,12,72,304/-. After applying net profit rate on total sales, the net profit was worked out at ₹ 10,63,615/-. The CIT(A) also worked out working capital requirement at Thane Shop at ₹ 2,50,000/- on the basis of 15 days cycle in procurement of raw material and sale of products. The CIT(A) also made separate addition of ₹ 4,75,616/- in respect of payment made to India Bulls from whom assessee has taken loan. The addition was also confirmed on account of payment made towards the credit card. Thus, the total addition of ₹ 7,21,233/- was made u/s.69C. In sum and substance, out of total addition of ₹ 36,06,744/- made by the AO, the CIT(A) upheld the addition of ₹ 19,95,196/-. Detailed findings recorded by CIT(A) have not been controverted by department by bringing any positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee manufactures sweets and some eatables in his shops at CBD Belapur and at Thane. A survey action u/s.133A of the Income Tax Act 1961 was carried out at the assessee s premises on 18/10/2010. During the course of survey, it was observed by the survey team that the assessee is not maintaining books of accounts. During the assessment proceedings the assessee has filed tax audit report in Form 3CB 3CD alone with Balance Sheet and P L account. As per AO, the assessee had started business from one more shop from October 2008, situated at Shop No.1 to 5, Soham Plaza, Ghodbunder Road, Thane (West) and has not incorporated business transactions in the audited books of account. The AO observed that only a lump sum amount of ₹ 1,47,990/- is shown as income from this shop under the head, Income from other Sources . 3. In its order AO observed that the assessee had not declared three bank accounts; namely (a) Account Number 61056928789 with State Bank of Bikaner Jaipur (SBBJ), GB Road, Thane Branch, (b) Account Number 11245 with NKGS Bank (NKGSB), Belapur Branch and (c) Account Number 18/4356 with Parsik Janta Sahkari Bank Ltd. (PJSB), Sanpada Branch. In these accounts subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of entries on each page. The assessee did not file any details so he was again asked to give the details when his statement was recorded u/s 131 on 06/12/2011, the relevant question answer are as under: Q.1 During the course of survey on 1811012010 a College marked red colour diary bearing annexure No. 3 was impounded from the shop premises at 5A, Prabhat Centre, CBD Belapur, Sector-1, Novi Mumbai. A photo copy of this seized diary was provided to ,- you and you were asked to explain the contents of page wise entry written. Till date you have neither given me any explanation nor submitted any details in respect of entries mode therein. On going through the diary it is seen that it records wages paid to various workers on various dates pertaining to A. Y. 2009-10. It also contains certain entries of large amount which you have not explained till date. The total of all these entries including wages works out to ₹ 41,00 lacs. In the absence of any plausible or logical explanation given by you, please explain why this amount of ₹ 41 lacs should not be added in your total income. You may consult Shri J. D. Sachdev, C.A. and your Authorized Representative before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd unrecorded expenditure out of the unaccounted income of the assessee and added to the total income. 11.5 On page No. 4 (copy enclosed as Annexure 'III' to this order), an amount of ₹ 7,19,600/- has been written and after subtracting an amount of ₹ 1,40,000/- from this is, the net figure of ₹ 5,79,000/- has been arrived at. The assessee, when asked to explain these entries, failed to give any explanation in this regard also. These figures apparently represent the working of balance loan amount receivable out of a total loan amount of ₹ 7,19,600/- after adjusting repayment of ₹ 1,40,000/-. In the absence of any information, the amount of ₹ 7,19,600/- is treated as unexplained and unrecorded expenditure out of the unaccounted income of the assessee and added to the total income. 11.6 On the same page-4 there are two entries of amounts of ₹ 1,60,000/- and ₹ 13,000/-. The assessee, when asked to explain these entries, failed to give any explanation for these entries. Apparently, these amounts are payments made towards business at Vashi. In the absence of any information, the amount of ₹ 1,73,000/(1,60,000 + 13,000) is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me as a partner of M/s Bikaner Sweets Namkeen. The assessee filed its return of income on 25.09.2009, declaring Total Income of ₹ 6,15,150/-. Initially, return was processed u/s 143(1) of the Income Tax Act, 1961. A survey action u/s 133A of the Income Tax Act, was carried out at the Assessee's premises on 18.10.2010. Notice u/s 143(2) and u/s 142(1) were issued and served upon the Assessing requiring him to file details as called for. The learned Assessing Officer rejected books of accounts of the assessee on the that G.P. income declaring by the assessee is very low and estimated net profit of ,Rs.28,84,034/- (Para 7.3 page 9-11) The Ld. A.O also estimate income on the basis of utilization of funds and determined income of ₹ 40,22,112/- and compared both the estimates and made addition of ₹ 35,06,744/- over and above the returned income of ₹ 5,15,068/-. Being aggrieved by the action of learned assessing officer the appellant is in appeal before your Honour:- 1)The learned Assessing Officer has erred in rejecting the books of accounts of the Assessee u/s 145 of the Income Tax, 1961 and by treating the business of the Assessee as manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not belongs to the business of the appellant hence the same is not incorporated in the books of the proprietary concern of the assessee. Therefore there is no bank account which is undisclosed to the department. The Ld. A.O. further increased the assumed turnover of ₹ 2.12 crore by ₹ 1800,000/- assuming the payment to supplier out of sale proceeds. The Ld.A.O. has not considered the withdrawals made from these accounts. Total withdrawal from these bank account is more than ₹ 18,00,000/- during the year, hence the payment to supplier before depositing the net amount in the bank account can not considered against such payment. Therefore there is no need to further increase the turnover. Further the Ld.A.O. has assumed net profit @ 12.5% of the total turnover without any basis. No comparative data of other assessee engaged in the same business were provided by the Ld. AD. before taking such high NP rate. Further the assessee is offering net profit of 3% of its total turnover, therefore rate of 12.5 % is on very higher side. There your Honour is requested to kindly restrict the estimation to N.P. only to 5% of the Total Turnover as estimated by the Ld. AD. which wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk state Co. of. Bikaner Jaipur are the business receipts. The appellant has then pleaded that profit applicable to him @3% as net profit or maximum at 5% should be taken to estimate income from Thane shop. 4.3. As discussed above books of account being maintained only for Belapur branch for which no defects were found by the A.O. , I am of the view that same cannot be rejected. Simultaneously the transactions pertaining to Thane shop admittedly remained undisclosed where purchase and sales are not recorded, A.O. has rightly opted to treat the deposits as turnover of appellant's business from the same business. However, for e r 1 e same reflects surplus amount available after deducting expenses incurred in cash like wage labour which is supported by impounded entries in diary also ; will reduce the profit if accounted for by drawing a tentative trading cum profit and loss account. It has to be appreciated that unaccounted receipts are to be added simultaneously the unaccounted expenses also have to be given effect to ;as receipts and expenses go together. As it has been discovered from the impounded material also that these expenses were unrecorded though found incurred fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that total turnover including cash deposit made during the previous year relevant to assessment year 200910 is 2,12,72,304/-. Same is coming out of the assessment order also. However, after going through the assessment folder it is noted that audit has raised an objection stating that the cash deposit in all the three accounts, including deposits in two undisclosed account is totaling to rupees higher by an amount of Rs,43,07,200/- as the cash deposit is in NKGSB bank is actually ₹ 43,36,200/- whereas same has been taken at 20,29,000/- only. In view of the same you are asked to reconcile the cash deposit made in NKGSB bank and consequently turn over. 4.7 In response, appellant has filed reply giving name of the bank, account number, total cash deposit along with copy of bank account statement as given by the bank. Appellant has submitted that the figures have rightly been taken by them as well as A.O for the account maintained with bank PJSB, State Bank of Bikaner, NKGSB Co-op Bank CD/5437. As regards NKGSB Savings Bank Account No. SB/ 11245 is concerned, appellant has submitted that actual total cash deposit are ₹ 20,31,000/- for which date wise deposit detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... working capital requirement is considered reasonable and hence accepted. In view of this, the amount of working capital of ₹ 2,50,000/- alongwith is estimated profit at the rate of 5% on the turnover which was worked out by the A.O. at ₹ 2,12,72,304/- has to be added. Thus addition this count which includes the estimated profit at 5% on the turnover worked out, which comes to ₹ 10,63,615 along with working capital of ₹ 2,50,000/- an amount ₹ 13,13,715/- has to be made. 4.10 Further as there is a finding in survey that expenses did include some expenses for non -business purpose only, same have to be looked into, which the appellant says have all been taken into account while offering 5% profit. I am not in agreement with appellant on this issue for the reason that the profit is estimated on turnover with accepted principle that estimation takes care of deduction of business expenses as per the provisions of Act only. Hence looking into the nature of expenses which were found to be capital and/or personal in nature and admitted so also by the appellant have obviously to be disallowed being not for the purpose of business, or alternatively percent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintaining proper books of account. It was found that assessee was having bank account which were not disclosed in the return of income. It was also found that the assessee has taken some loan which was repaid, however, the amount repaid was not disclosed in the books of account in the return filed with the department. Accordingly, by rejecting books of account, the AO computed the income by applying estimated net profit rate as well as made addition in respect of amount deposited in bank as well as repayment of loan effected during the year. The CIT(A) appreciated each observation of the AO and after giving detailed finding confirmed the action of the AO for rejection of the account. On the basis of observation made by the AO in its order vis- -vis details of account submitted along with the return of income the CIT(A) found that total sale of the assessee was ₹ 2,12,72,304/-. After applying net profit rate on total sales, the net profit was worked out at ₹ 10,63,615/-. The CIT(A) also worked out working capital requirement at Thane Shop at ₹ 2,50,000/- on the basis of 15 days cycle in procurement of raw material and sale of products. The CIT(A) also made separa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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