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TMI Blog2015 (9) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, hold that in such a situation learned CIT(A) was correct in deleting the addition which according to him was based upon conjecture only.- Decided against revenue. Application of provisions of Section 40(A)(3) of the Act becomes infructuous, as once the question No.1 is held against the revenue and the judgement and order passed by the learned tribunal applying net profit ratio of 5.2% for respective Assessment Years has been confirmed, there is no question of further making any addition under section 40(A)3 - Tax Appeal No. 235 of 2015, Tax Appeal No. 236 of 2015, Tax Appeal No. 245 of 2015 - - - Dated:- 15-4-2015 - M. R. Shah And S. H. Vora, JJ. For the Petitioner : Mrs Mauna M Bhatt, Adv For the Respondents : None ORDER ( Per : Honourable Mr. Justice M. R. Shah) 1.00. As common question of facts and law arise in this group of petitions, and as such all these appeals arise out of the common judgement and order passed by the learned Income Tax Appellate Tribunal, A Bench, Ahmedabad ( hereinafter referred to as the learned tribunal for convenience) in the case of the very assessee but with respect to different Assessment Years, all these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to the A.O. in those Kachcha Note Books, the assessee had shown unaccounted transactions which were found recorded as per the original return filed, however, the assessee also noted that there were certain unaccounted transactions which were not recorded in the regular Books of Accounts. Therefore, after the search, in addition to the income as per the original return, the return filed in compliance of notice u/s. 153A the unaccounted transaction was also offered of respondents.14,85,000/-. 4.03. That the assessee adopted an estimation profit @ 5% on the unaccounted cash sales of ₹ 2,96,89,000/-. It appears that those accounted cash sales were also found recored in the seized Kachcha Note Book. The A.O. was not in agreement of estimation of income @ 5% applied on the unaccounted cash sales on the reasons mentioned I the assessment order. Therefore, the A.O. computed the profit on the basis of the total unaccounted sales and the unaccounted purchases etc. in the following manner:- Rs. (a) Unaccounted Sales: 2,96,89,586.00 (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit rate as per A.O.'s calculation Income Returned u/s 153A 2001-02 2,97,090 14,85,000 1,00,000 18,82,090 2002-03 2,83,264 17,86,000 1,25,000 21,94,264 2003-04 3,29,700 14,58,000 4,50,000 22,37,700 2004-05 6,27,513 16,63,554 1,50,000 24,41,067 2005-06 7,48,977 16,63,553 1,50,000 25,62,530 2006-07 13,52,179 15,53,775 1,50,000 30,55,954 2007-08 Nil Nil Nil Nil Total 36,38,723 96,09,882 11,25,000 1,43,73,605 4.07. That the learned CIT(A) also found that the income of ₹ 96.09 Lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001-02 Rs.16,15,803 Rs.16,04,036 2002-03 Rs.(-)10,25,499 Rs.31,87,728 2003-04 Rs.21,67,076 Rs.25,04,023 2004-05 Rs.26,54,974 Rs.16,63,554 2005-06 Rs.05,19,318 Rs.16,63,553 2006-07 Rs.25,01,070 Rs.15,53,775 2007-08 Rs.(-)21,12,276 Rs.00,36,083 4.10. In respect of the A.Y. 2007-2008, the learned CIT(A) deleted additions made by the A.O. by observing that quantity of 1425 MT was not found and in fact as on 4/8/2006, 632 MT goods was found. 4.11. Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A) in modifying the additions made by the A.O. in the respective years as above, the revenue preferred appeals before the learned tribunal, being IT(SS) No.594 to 599 of 2010 as well as 2312 of 2010 for A.Y. 2001- 2002 TO 2007-2008 and also preferred Cross Objections Nos.245 to 248 of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his fact was informed to the Revenue Department, therefore, written submission and relevant portion from pages 88 and 89 of the written submission is reproduced below to understand the modus operandi of the assessee. 4. However, the Appellant is maintaining kachcha books for another kind of activity which in the nature of commission agent. In such kind of kachcha books the Appellant maintains the details on behalf of the said parties, for whom, the coal are sold, on which the Appellant is getting only certain percentage of commission on sales. 5. The Appellant is neither required to make collection from the parties to whom coal are sold on behalf of other parties nor is required to make payment to the said other parties, transactions are directly settled in between both the parties. The Appellant only receives commission on such sales. Your Honours would appreciate that during the course of search carried out the authorized persons have not found any creditors or debtors for the said transaction in kachcha books of the Appellant, which is also evident that the Appellant is only concerned with its commission on sales and not with collection and payment of such transactions. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in case the payments made outside the books an assessee can resort to exceptional clauses as provided under Rule 6DD(j) of IT Act. Naturally, the answer should go in favour of the Revenue, however, the question as to whether a disallowance can be made u/s.40A(3), when the income is based on estimation, was not before the Hon'ble Court. So the question itself was distinguishable; hence, this issue of the applicability of the provisions of Section 40A(3) is to be decided on the merits and facts of this case only. Facts of this case have revealed that even after the search was carried out there were no evidence of expenditure and the AO was not able to lay hands on unaccounted purchases. Because the evidence of total expenditure or purchases was not available to the Revenue Department, therefore, the assessee as well as the AO, both have decided to determine the income by applying a reasonable estimate of profit. That estimation was very close to the income offered by the assessee. Resultantly, the grounds raised for all the years by the Revenue are hereby dismissed. 5.04. We are in complete agreement with the view taken by the learned tribunal as well as learned CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les was the closing stock must be lying with the assessee. He has computed the value of the closing stock at ₹ 20,02,602/-and taxed in the hands of the assessee. 15. When the matter was carried before the First Appellate Authority, learned CIT(A) has deleted the addition as per the following observation: In respect to A.Y.2007-08 the AO had noted that the entries in the seized diaries were for the period of 01.04.2006 to 04.08.2006. Also that purchases were made in the month of June and July and the goods purchased must be lying in godowns, since no sales were recorded. Such stated goods were computed by the AO to be of the value of ₹ 20.02 lacs and treated as unaccounted closing stock. In terms of prevailing price, the quantum of such goods would be approx. 793 MT (i.e. @ 2554/-per MT). At the time of search 04/08/2006, the stock of goods (coal) was found to be 625 MT approx. which was reconciled by the appellant as opening stock of 440 MT on 04/08/2006 and inwards of 207 MT from 01/08/2006 to 04/08/2006 less outward of 14.9 MT i.e. stock of 632 MT as on 04/08/2006. If the assumption of the AO was valid in respect of A.Y. 2007-08, the stock available with the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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