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TMI Blog2015 (8) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgments cited by Ld.A.R. of the assessee. We are not in agreement with Ld.AR of the assessee that since the assessment was completed by the AO on 26.12.2008 and copy of the impounded documents were also provided to the assessee on the same date, it has to be accepted that since opportunity was not provided to the assessee, assessment order has to be quashed. We feel that this order of Ld.CIT(A) cannot be upheld and the matter has to go back to the file of the AO for a fresh decision after providing adequate opportunity of being heard because on this basis, the assessment cannot be annulled as has been done by Ld.CIT(A). Regarding judgements cited by the Ld.AR of the assessee, we find that the judgment of Hon'ble Kerala High Court rendered in the case of MS Jewellery (supra) in fact, does not support the contention of the Ld.AR of the assessment that the assessee has to be annulled on this basis because in this case, it was held by Hon'ble Kerala High Court that the assessment order passed by the AO in that case is void but it was also held by Hon'ble Kerala High Court that the assessment can be redone after affording proper opportunity to the assessee. Hence, as per this judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariations. A.Y. 2001-02 Profit and closing stock as per return filed (in Rs.) Profit & closing stock as per records of impounded CPU and hard disk (in Rs.) Profit before tax 18,39,826/- Net profit Rs. 3,25,31,182/- Closing stock as on 31.3.2001 84,14,376/- Closing stock Rs. 3,54,96,490/- Addition in share capital 45,00,000/- The A.O. came to a conclusion that the assessee has undervalued its stock and that it has underdeclared the net profit earned by it. The under statement of income was estimated at Rs. 3,06,91,356/- (Rs.3,25,31,182 (-) 18,39,826) and that stock has been under valued at Rs. 2,70,82,114/- (Rs.3,54,96,490 (-) 84,14,376). The assessee contended that there will be double addition, if both these figures are taken together. Certain technical contentions were also raised such as that, the CPU was not opened in the presence of the assessee, etc. The assessee also produced a list of purchase invoices, sales, as well as bill wise and item wise break-up of purchases and sales. The AO accepted the contentions of the assessee and did not make any addition on account of under valuation of closing stock. Only the net profit figure taken from the fig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservations made by the authorities below in their respective orders are either incorrect or untenable. Detailed written submissions along with the paper book as filed before the Ld.CIT(A) and the arguments advanced by the Counsel had not been appreciated properly or had been ignored. 3. That without prejudice to ground no.2 Above, the addition of Rs. 3,06,91,356/- as made towards the assessable income of the appellant on account of alleged undisclosed net profit was very excessive. 4. That the interest as levied u/s 234 is illegal and at any rate, without prejudice very excessive. 5. That the appellant reserves its right to add, amend, modify the grounds of appeal." 5. Heard Dr.Rakesh Gupta, Ld.Counsel for the assessee and Sh.KK Jaswal, Sr.D.R. on behalf of the Revenue. 6. The Ld.Counsel for the assessee submitted that the sole basis of addition is only one figure, out of the many figures found in a rough document contained in the CPU, which is at page 90 of the paper book. He submitted that the AO did not refer to the other material found during the course of survey, which includes stock in hand month wise, which is at page 88 of the paper book and a stock summary which is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the maximum gross profit was about 15% and the average gross profit is around 10.38% and argued that 160% G.P. is an impossibility. He vehemently contended that there is no corroborative material available nor any evidence for the Revenue to come to a conclusion that the assessee had earned the income as reflected by the figure in the C.P.U. He relied on the decision of Hon'ble Patna High Court in the case of 101 ITR 525 for the proposition that abnormal profits would be considered as an improbability. He referred to the last four lines of the Ld.CIT(A)'s order and submitted that if a closing stock is adopted at the original figure, the net profit has to be computed as per that figure of such closing stock as Net Profit is only a balancing figure. He vehemently contended that the assessment should be fair and objective and cannot be based on unrealistic figures. 6.2. Mr.KK Jaswal, the Ld.Sr.D.R. on the other hand opposed the contentions of the assessee and submitted that the assessee has indulged in purchase and sale outside the books of accounts and the profit figure found in the computer only reflected the result of such out of books transactions. He submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts found in the C.P.U./Hard disk, the stock figure in the stock summary sheet and stock figure in the Profit and Loss a/c and balance sheet are substantially different. In the remand proceedings the AO had held as follows. "Accordingly the scrutiny proceeds were started by the then A.O. by way of notice u/s 143(2), for which the assessee company has never objected. During the course of assessment proceedings books of accounts were called for and it was noticed that almost all the figures reflected in the print outs taken from the impounded hard disc and CPU tallied except the figures of Net Profit and closing stock. Rest of the figures in the books of accounts were the same as shown in the P&L account and the balance sheet filed along with the return of income. In view of the above facts, it is clear that when almost all the other figures in the print outs taken from the hard disc/CPU tally with the normal books of accounts produced by the assessee before A.O. which was examined, then there is no reason as to why the net profit and closing stock shown in the print out taken from the hard disc/CPU, as mentioned above, be not held as the true figures in respect of closing stock and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocumentary evidences are not found wrong by the A.O. or by the Ld.CIT(A), then the only conclusion is that the closing stock figure as appearing in the P&L account and Balance Sheet obtained from CPU/hard disk is a wrong figure. The A.O. does not give any reason as to why, the stock figure from the print out of CPU/hard disk, of the stock summary sheet, is not considered as the correct figure of stock. In fact this figure tallies with all other transactions recorded in the normal books as well as in the computer prints out from the CPU/hard disk. When two documents are found in the CPU/hard disc, of the one which is the true and realistic figure, is to be adopted. The Stock Reconciliation is at page 93 of the paper book and the item wise purchases and sales details are at pages 94 to 240 of the paper book. During the course of survey as well as, on the examination of CPU/hard disk during the course of survey, no evidence was found, which could take us to a conclusion that there were either purchases out of the books of accounts or sales out of the books of accounts. There is no evidence or suggestion that the assessee has maintained parallel sets of books of accounts. The allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase bills, sales challan, sales bills or any correspondence with suppliers would have been found in the course of search. Further, we find substantial force in the contention of the assessee that if the assessee had indulged in unaccounted transactions to the extent apparent from the fabricated books and trial balance, the value of stock found in course of search would have corresponded approximately to the figures appearing in the fabricated books and not to the stock as per regular books of account. As such, the odds clearly weigh in favour of the assessee's explanations as against the AO.'s allegations. It is also an admitted fact that expected rate of profit in case of a wholesaler is generally low. In this case, unrealistic results have been reflected in the seized books and this proves that the profit has been arrived at on the basis of fabricated books said to have been prepared for obtaining loan from the banks. 13.1 The assessee's contention is further corroborated by the fact that the impugned fabricated books were written only upto 31st Dec., 2001 whereas the search was conducted on 30th Jan., 2002. Therefore, presumption can safely be drawn that if the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o verified and found to be correct by the AO. Likewise, the jewellery found at his residence was duly disclosed in the balance sheet of Smt. Shanti Devi Singhania. Accordingly, the said jewellery was not seized by the search party. The stocks inventorised in course of search in the premises of M/s Trade Friends and M/s Trade Wings were also found to the part of regular stock of the said concerns. As such, no unaccounted assets or properties were found in course of search in case of Singhania Group. 13.3 That apart, few books were found and seized in course of search in the premises of Sri Jai Prakash Singhania, The assessee explained all along that the said books had been fabricated on the basis of regular bank transactions for the purpose of availing loan from bank. This explanation was corroborated by the fact that no corresponding vouchers or bills supporting the entries recorded :.n the fabricated books were found in course of search although all supporting documents, bills, etc. relating to regular transactions were found and seized in course of search. The stock inventorised by the search party also corresponded to the stock as per regular books of account and did not commen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the question is what quantum of evidence is required to rebut such presumption in a given case or set of facts ? In our opinion, no hard or fast rule can be laid down nor has been laid down by any Courts. The evidence for rebutting presumption may be either direct or indirect or may be both. And in some cases perhaps even the statement of the assessee may be enough to rebut such presumption drawn by the officer or authority.. To say so we draw support 'from the "decision of the Rajasthan High Court in the case of Addl CIT v. Thahmyammal Balchand .... Apparently no cause of action can lie between the assessee and Naihati Jute Mills Co. on the basis of such unsigned MoU and, therefore, there is no obligation or liability on the part of the company to pay to the assessee all those amounts mentioned in the unsigned MoU nor the assessee is entitled to claim from the company all those amounts mentioned in that unsigned MoU. We are also inclined to agree with the assessee's counsel that when no income has resulted at all on the basis of unsigned MoU then there is neither accrual nor receipt of income. Under the provisions of the IT Act it is the real income which has to be taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the propositions of law laid down in this order, to the facts of the present case, we hold that just one figure in the print out taken from the CPU/hard disk i.e. Net profit figure, cannot be added to the income of the assessee for the following reasons. (1) There is no corroborative evidence to support this figure of Net Profit; (2) The other documents found in the CPU prove that this figure is wrong. All the transactions are accepted as correct. Then the question of not accepting the result of such transactions for assessing total income does not arise. (3) The G.P. rate arrived at by taking this figure of Net profit is absurd and abnormal. It is an improbable figure. (4) Only real income can be taxed and not hypothetical incomes; (5) The burden is on the revenue to prove that a particular figure is income and this burden is not discharged in the present case. (6) The stocks found during survey do not support the stock figure in the P&L account and balance sheet found in the CPU/print out. The reconciliations of all the purchases and sales are not found fault with by the A.O. When the quantitative details of opening stock, purchases, sales are accepted then the closing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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