9911796707
TMI Blog2016 (3) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... dated so 30th November 2010 by proper application of mind could not legally be interfered with by the Ld. Commissioner of Income Tax. c) Various observation made particularly in Para 7 at Pages 7-16 of the impugned order u/s 263 are either incorrect or legally untenable. d) The Ld. Commissioner of Income Tax had exceeded her jurisdiction to invoke section 263 in the facts and circumstances of this case there by ignoring the submission made and documentary evidence filed by the appellant before the A.O. in the course of Assessment Proceedings and again before her by the appellant. e) Provision of Sec. 145(3) are not applicable to the facts of applicant case and the Ld. Commissioner of Income Tax has invoke them without any proper justification. 2. That impugned order u/s 263 deserves to be cancelled. 3. That without prejudice to the above ground the addition of Rs. 2,95,58,101 as made by Ld. Commissioner of Income Tax is arbitrary unjust illegal at any rate without prejudice, the addition is made very excessive. 4. Direction issued by Ld. Commissioner of Income Tax vide pages 14 and 15 of the impugned order with regard to fresh unsecured loans and Sundry Creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed u/s 143(3) dated 30/1112010 by ACIT, Circle 1, Meerut copy placed at page 54 of the paper book. 2) The Ld. CIT, Meerut issued a notice dated 12/02/2013, copy placed at pages 55 - 57 of the paper book to which Assessee had filed a reply dated 25/02/2013 alongwith the annexures mentioned therein copies placed at pages 58 - 128 of the paper book. 3) However, the Ld. ClT has passed the impugned order on 08/03/2013 by holding that the assessment order was found to be erroneous and prejudicial to the interest of Revenue and has made an addition of Rs. 2,95,58,101/- on account of alleged suppressed income as under:- a. Addition on account of inflated consumption of paper vide vide page-13 of impugned sec. 263 order. Rs. 3,00,00,000 b) Less: Irtcome shown Rs. 7,37,800 Net addition made Rs. 2,92,62,200 Add: Other income (interest as shown in P & La/c): Rs. 3,35,901 Total income computed Rs. 2,95,58,101 Against the above order, the appellant relies on the following documents/submissions: 1. The Assessee is actually engaged in publication of Books for small children of Montessory section i.e. from nursery to Class V. Most of the books have coloured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, Hari Iron Trading Co. ve. CIT (P & H High Court) b) 259ITR 502, CIT vs. Arvind Jewellers (Gujarat H.C.) c) 203 ITR 108 C1T Vs. Gabriel India Ltd., (Bombay H.C.). d) 243 ITR 83, Malabar Industrial Co. Ltd. Vs. CIT, (Supreme Court) e) 323 ITR 206, CIT vs. Development Credit Bank Ltd. (Bombay H.C.), f} 323 ITR 632, CIT VS. Design and Automation Engineers (Bombay) P. ltd. (Bombay H.C.). g) 320 ITR 674, CIT vs. Ashish Rajpal (Delhi H.C.). h) 171 ITR 141, CIT vs. Ratlam Coal Ash Co. (M.P. High Court i) 111 ITR 326 J.P. Srivastava & Sons Vs. CIT, (Jurisdictional Allhd. H.C.) j) 343 ITR 329, CIT vs. D.G. Housing Projects Ltd. (Delhi H.C.). k) 344 ITR 554, CIT vs. International Travel House Ltd. (Delhi H.C.). Therefore, section 263 order deserves to be cancelled because as demonstrated above, assessment order of the AO dated 30/11/2010 uls 143(3) was passed by proper application of mind and therefore section 263 in terms had no application to the facts of this case. 7. There is yet another aspect of the matter. Even before the Ld. CIT, the appellant having filed all the details before her and the ld. CIT having not herself rejected the same, the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4% in the assessment years 2005-06, 2006-07 and 2007-08 respectively which had been accepted by the Revenue by passing assessment orders uls 143(3). 12. No justification subsisted on the part of the ld. CIT to invoke section 145(3) of the I.T. Act. She is also wrong in saying in last para at page 9 of the impugned order that the purchases and expenses debited to the P & L Alc were highly inflated without bringing any evidence on the record of such alleged inflation. 13. As regards non showing of any opening or dosing stock of paper, the Ld. CIT is factually incorrect because the Assessee had duly shown opening stocks as under: Books : Rs.34,36,337 Paper .: Rs.11 ,68,450 Semi finished : Rs. 5,30,478 Total : Rs.51,35,265 For details filed before the authorities below, kindly see pages 47 - 48 of the paper book. Similarly details of closing stock had also been duly filed by the Assessee vide details at pages 49-50 of the paper book as per summary given below: Books : : Rs.13,48,344 Paper : Rs. 9,21,150 Semi finished : Rs. 2,48,644 Total : Rs25,68,138 Such opening and closing stocks duly appear in the audited P & LAIc, copy placed at page 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfronting the same to the Assessee in the course of section 263 proceedings. 16. Further observations made by the Id CIT at page 13 that it is also not clear if 'sales' are credited at 'selling price' or at 'discounted' rate' which is a normal feature of this trade and in the absence of categorical answer to this and even after giving the assessee maximum margin of showing sales at discounted rate of 2/3 of the 'selling' price' the inflation of paper purchases come to Rs. 3 crores (Rs. 4.5 crores minus 1/3 of this) manifold on account of gross suppression of turnover and sales based upon consumption of paper shown as consumed in the publishing of books are also based on no evidence brought on record by her and the same are based on mere presumption. . Then she herself has not relied upon her own view by making the fol1owing observations in last 140e of para 1 at page 13 of her impugned order: "However, no such view is being drawn". On merits, such observations are untenable because before drawing adverse inferences, the Ld. CIT had not confronted the Assessee with the same nor she had brought any evidence on record to prove her i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad not been part of the show cause notice. Therefore, it could not form the basis for revision of assessment order under section 263". 19. Moreover, in response to section 263 notice, the appellant had filed a reply dated 25/02/2013 copy placed at pages 58-59 alongwith the following: a) Comparative chart of trading results page 60. b) Details of unsecured loans as on 31/03/2008 at page 61 alongwith confirmed copies of their accounts from pages 62 - 77 c) Details of sundry creditors at page 78 alongwith their complete confirmed copies of accounts at pages 79 - 128. The Ld. CIT had neither controverted nor disproved the above documentary evidence. Consequently, the impugned order as passed u/s 263 deserves to be cancelled. 5.2 The Additional Synopsis filed by the Asseessee's counsel are reproduced hereunder:- "In continuation of our Synopsis as already filed on 19/03/2015, reliance is also placed on the following proposition of law as laid down in the following case laws: 1. Revisional jurisdictional jurisdiction u/s 263 of I.T. Act cannot be exercised where enquiry as made by AO is considered as inadequate enquiry in the opinion of CIT:- a) 335 ITR 83, CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 ITR 547, CIT vs. Honda Siel Power Products Ltd. (Delhi H.C), in which it was held as under: "When a regular assessment is made under section 143(3), a presumption can be raised that the order has been passed upon an application of mind. No doubt, this presumption is rebuttable, but there must be some material to indicate that the Assessing Officer had not applied his mind". b) 297 ITR 99, CIT VS. Mahendra Kumar Bansal (Jurisdictional Allahabad H.C.), in which at page 100, it was held as under: "That for the assessment year 1983-84, the assessment had been made under section 143(3)/148 of the Act. The date fixed by the assessing authority was July 18,1986, and on that very date the assessee's counsel had filed certain details and evidence and after discussion the assessment was framed. Even though in the assessment order there was no mention that detailed enquiry had been made nor any evidence had been discussed yet the returned income was accepted. The order was not erroneous and could not be revised". Revisional power u/s 263 cannot be justified on mere suspicion: a) 258 ITR 331, CIT VS. Girdhari Lal (Rajasthan H.C.), in which it was held as under: "It is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner to take such a different view. There was nothing on record to suggest that the view taken by the Assessing Officer was unsustainable in law. [The Supreme Court has dismissed the special leave petition filed by the Department against this decision: See 313 ITR (St.)5- Ed.]". 5. If no defects had been pointed out in the account books, the same could not be rejected and no addition could be made to the income of the assessee:- a) 76 ITR 365, St. Terasa's Oil Mil Vs. CIT (Kerala H.C.), in which it was held as under: "Accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that, they are unreliable. The department has to prove satisfactorily that the account books are unreliable, incorrect or incomplete before it can reject the accounts. Rejection of accounts should not be done lightheartedly. Though it may not be possible to lay down the exact circumstances in which the accounts should be rejected as unreliable or incorrect, the accounts may be rejected as unreliable if important transactions are omitted therefrom or if proper particulars and vouchers are not forthcom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red with earlier years was better. Moreover, this issue was not mentioned by the Ld. CIT in her section 263 notice and therefore the same cannot be made the basis for addition of Rs. 3,00,00,000/- on account of inflated consumption of papers for which reliance is placed on Delhi High Court judgment in CIT vs. Ashish Rajpa 320 ITR 674 and CIT vs. Contimeteres Electrical Pvt. Ltd. 317 ITR 249. 6. Non maintenance or incomplete stock records do not entitle the AO to reject the account books : a) 74 ITR 279, Vijaya Traders Vs. CIT, (Mysore H.C.) b) 26 ITR 159, Pandit Brother Vs. CIT (Punjab) In Appellant's case, day to day stock register may not be maintained due to the nature of its business but opening and closing stock tally with quantitative details were duly maintained as reflected at pages 47-50 of the paper book. Moreover, such method of accounting including stock accounting has been accepted by the Dept. in previous years and there is no change in the facts and circumstances of the case during the year under consideration. Copies of following assessment orders as passed uls 143(3) in Appellant's case in previous years accepting the trading results as declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the audited balance sheet amount of Rs. 37,16,410/- (kindly refer to page 5 of the paper book) as also explained before the AO vide letter dated 20/08/201 0 (kindly see page 39 of the paper book). The same was again explained before the Ld. CIT vide reply to section 263 notice dated 25/02/2013, copy placed at pages 58- 59 of the paper book . 10. Regarding Ld. CIT's allegation that regarding NP rate of 0.679% as shown by the Appellant, interest income to the tune of Rs. 3,35,901/- being income from other sources should have been excluded from such NP rate calculation. If such interest income is to be excluded from net profit, the revised net profit would become Rs. 3,69,889/- and the revised net profit rate would become 0.36% which is still higher than the net profit rate of last three years shown at page 60 of the paper book. Hence, the AO's categorical finding that both GP rate as well as NP rate during the year under consideration was higher than the respective rates in preceding years continues to be correct. 11. With regard to unsecured loans as taken during the year under consideration, complete details with respect to the same alongwith the parties PAN det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection of cases for scrutiny. The AO appears to have accepted the same without proper inquiry. d) Increase in fixed assets to the tune of Rs. 49,57,1 10/-- have been shown which was also to be looked into from different angles including the actual investment, date of actual use, admissibility of depreciation etc. the records, however, appear to be silent on the same. e) The assessee had maintained Current Bank A/c. No. 2159001800000105 in Punjab National Bank, Sports Goods Complex, Delhi Road, Meerut. The assessee had made Fixed Deposits of Rs. 30,80,000/-- by way of Auto Sweep transactions from the same Bank Account. But, the assessee had not shown any Fixed Deposits made during the year in Balance Sheet as on 31.03.2008. The Closing Balance of Bank Account showed Rs. 3,33,194.47. The assessee had filed a hand written Bank statement and other details shown at Page No. 353, 354, 355 & 356. As per Bank Statement Page No. 356 Fixed Deposit shown NIL. As per Bank Statement Page No. 355 Fixed Deposit made Rs. 30,80,000/-. By way of Auto Sweep transactions from the aforesaid Bank Account. As per Page No. 354 Closing Bank Balance as on 31.03.2008 shown Rs. 3,33,194.47. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch order will fall under the category of erroneous order. 5.1. Further, it has been held in CIT vs. V.N.M.A. Rathinasabapathy Nadar, (1995) 215 ITR 309, 315 (Mad.), that if an order is passed in ignorance without taking into consideration of the relevant facts or is affected by the presence of any irrelevant fact into consideration, the same is erroneous. 5.2. It is beyond dispute that, under section 263, the Commissioner does have the power to set aside the assessment order and send the matter for a fresh assessment if he is satisfied that further enquiry is necessary, and that the order of the AO is prejudicial to the interest of the Revenue (Swarup Vegetable Products Industries Ltd. vs. CIT, (1991) 187 ITR 412, 415-416(AlI.)]. In that case, refund of excise duty was received by the assessee and the same was placed in the suspense account and not in the P&L Alc. Such amount of refund was claimed not to be included in the income of the assessee because, apart from the above fact, a large part of that amount was claimed by a third party by filing a suit and also a writ petition and the same were pending. The officer accepted the claim of the assessee and did not include any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yped order which simply accepts what the assessee has stated in his return and fails to make enquiries which are called for in the circumstances of the case [Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal vs. CIT, (1973), 88 ITR 323 (SC). 5.4. It is not necessary for the Commissioner to make further enquiries before cancelling the assessment orders of the AO. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the AO should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. Unlike the Civil Court which is neutral to give decision on the basis of evidence produced before it, an AO is not only an adjudicator but is also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke inquiry. The meaning to be given to the word "erroneous" in section 263 of the Act emerges out of this context. The word "erroneous" in that section includes cases wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book results have been accepted as such. Following is the brief description whereby the tax auditors have categorically stated that books are not maintained in the manner so as to give a true and fair view in conformity with the accounting principles generally accepted in India. The tax auditors in its report at para VI have categorically stated as follows:- "In our opinion and to the best of our information and according to the stated that books are not maintained in the manner so as to give a true and fair view in conformity with the accounting principles generally accepted in India. The tax auditors in its report at para VI have categorically stated as follows: explanations given to us, the accounts: read with and subject to the remarks that the Company has not maintained quantitative records as mentioned in Note No. 2.2: confirmation of parties appearing under the head, Unsecured loans, re Current Liabilities, Sundry Creditors, Sundry Debtors etc not shown to 'Auditors as mentioned in Note 2.4 and Non Creation of Deferred Tax Assets Liabilities as mentioned in Note No. 2.6 of the Notes read with other Notes to Accounts, in the manner so required and give a true and fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are taken as consumption of paper such consumption is even more than the purchases as the closing stock is about half of opening stock which comprised of finished and semi finished goods. Total Sales Rs. 10,39,27,633/- Less: G.P. Rs. 2,46,15,652/- Cost of Sale Rs: 7,93,11,981/- Consumption of paper Rs. 5,92,52,253/- Ratio of paper consumed 74.70% As per this percentage of paper consumption, the consumption of paper comes to as high as 74.70 % which is extremely inflated. Since the books of the assessee are unreliable from which profit could not be ascertained, the rates of paper prevailing during the year under consideration were obtained from outside vendors which showed the following picture: F.Y. Size & weight of paper per ream of 500 Sheets Approximate Rates of Papers A Grade B Grade 2007-08 20" X 30" , 11.2 Kgs. Rs. 40/- Per Kg . Rs. 37/- Per Kg 2007-08 23" X 36", 15.4 Kgs. Rs. 40/- Per Kg. Rs. 37/- Per Kg The weight of 500 sheets of 23"x36" comes to 15.41 Kg, one sheet of 23x36 makes 16 book pages of normal book size and 8 big pages of A4 size (32 and 16 pages in a book written on both the sides of a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this) manifold on account of gross suppression of turnover and sales based upon consumption of paper shown as consumed in the publishing of books. However, no such view is being drawn. Since the assessee has debited a number of other expenses as also wages all of which are also not duly vouched or supported by any material evidence and nothing has been brought on record so as to ascertain the correctness of the same, the actual profit earned by the assessee will further increase by substantial amount than Rs. 3 crores taken by conservative estimate of profits bases upon inflated purchases only. In view of above after rejecting books of accounts u/s. 145(3) the IT Act 1961 as discussed above, the suppressed income of the assessee is computed as under: Addition on account of inflated consumption of paper Rs. 3,00,00,000/- Less: Income shown Rs. 7,37,800/- Addition on account of inflated consumption of paper Rs. 3,00,00,000/- Total Rs. 2,92,62,200/- Add: Other Income (Interest as shown in P & L a/c): Rs. 3,35,901/- TOTAL Rs. 2,95,58,101/- This will mean an addition of Rs. 2,95,58,101/- with initiation of penalty uls 271(1)(c) of the I.T. Act 1961 as the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the assessee reasonable opportunity of being heard and reconcile the difference with supporting evidence, if any. 8. In the result, the assessment order passed by the AO is partly revised and partly set aside with the direction that a fresh order, after examining the issues properly and considering all the points stated above, as also after considering all evidences and affording reasonable opportunity to the assessee, be passed by the AO expeditiously." 8. We have heard both the parties and perused the orders of the Revenue authorities alongwith documentary evidence filed by the Ld. Counsel of the assessee in the shape of Paper Book containing pages 1 to 128 in which he has attached the various documents evidence which the assessee has produced before the AO as well as before the Ld. CIT. After considering the documents evidence filed b the Ld. Counsel of the assessee alongwith finding given by the Ld. CIT as well as AO in their respective orders. We feel very much relevant to reproduce the questionnaire / letter dated 29.7.2010 issued by the AO to the assessee u/s. 142(1) of the I.T. Act, 1961 requiring information from the assessee as under:- "Sub: Information required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans given by them. 9. Details of share application money/share capital raised during the year giving complete addresses & asstt. Particulars of the persons concerned. Please also furnish confirmed copies of A/cs there from. Also give details of shares allotted, if any. Please also furnish evidences regarding identity, genuineness and creditworthiness of new share application creditors and sources of amounts given by them. 10. Details of loans/advances given to the parties' alongwith their complete addresses & their asstt. Particulars. Please also give detail of interest charged thereupon, if any specifying rate of interest. Also, specify the purpose of Advances given alongwith copies of agreements and copies of accounts. 11. Details of all loan and advances given by the co. where provisions of Section 2(22) (e) of the I.T. Act are attracted. 12. Inventory of opening and closing stock (both quantitatively as well as qualitatively). Also give basis of valuation of stock alongwith supporting / documentary evidences and prove the authenticity of stock declared. 13. Monthwise details of sales/receipts and purchases (both quantitatively as well as qualitatively). Also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Income for Last Two Years etc.: The details are at Page No. 401 The copy of Balance Sheet as at 31.3.2005 is at Page No.388.~ to Page No. 400. The copy of Balance Sheet as at 31.3.2006 is at Page No. 375 to Page No. 387. The copy of Balance Sheet as at 31.3.2007 is at Page No. 362 to Page No. 374 The copy of Last Scrutiny Order for Asstt. Year 2006-07 along with Order of C.IT. (Appeals) are at Page No. 353 to Page No. 361. 5. Comparative Figures for Last Three Years: The List is at Page No. 357 6. Bank Accounts: The complete details of Bank Accounts in assessee's Ledger; copy of Bank Statements for the whole year from 1.4.2007 to 31.3.2008, Bank Reconciliation Statement as at 31.3.2008 are at Page No. 120 to Page No. 356 7. Audit Report: F.Y. 2007-08 L: A copy of audited annual accounts for the year ended 31.3.2008 is at Page No . 107 to page no. 119. A copy of Tax Audit Report for Asstt. Year 2008-09 is at Page No. 87 to Page 106. A copy of Statement of Income for Asstt. Year 2008-09 is at Page No 88 8. Unsecured Loans: The complete details in the Tabular Form is at Page No .. 85 to Page No. - The confirmation of Fresh Depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Packing Expenses Page No. 33 to Page no. 36. Bad Debts Page No. 32 to Page no. .............. Depreciation Page No. 31 to Page no. .............. 15. Books of Accounts: The Books of Accounts along with all the Vouchers will be produced before your honour for your honour's verification as and when desired. 16. Increase in Share Capital and Expenses incurred thereon: There has been no increase in Share Capital during the year; as per details below: Share Capital 31.3.2007 31.3.2008 Authorised Rs. 3,000,000 Rs. 3,000,000 Issued and Subscribed Rs. 2,600,000 Rs. 2,600,000 Thus the question of any expenditure incurred thereon does not apply to the assessee's case during the year under consideration. 17. Secured Loans: There has been NO Secured Loans with the assessee. 18. Interest Paid: . The details of Interest Paid are at Page No. 30. 19. Sales Monthwise - of Partywise : The details of Sale. - Monthwise -- are at Page No :. to Page No The details of Sale - Partywise - are at Page No to Page No . 20. Valuation of opening and Closing Stock . This will be produced on the next date of hearing. 21. Details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to query no. 15 the Assessee mentioned that books of accounts alongwith all vouchers will be produced before the AO for verification as and when desired; with regard to query no. 25 is concerned, the assessee has stated that these will be produced before your honour on the next date of hearing. From these unanswered replies, it is crystal clear that assessee has not fully answered the queries alongwith the documentary evidences. The AO has accepted the version of the assessee in a casual manner without verifying the documentary evidence filed by the assessee and without making any enquiry which is very much essential before accepting the claim of the assessee and completed the assessment in a hurry manner on 30.11.2010 passed u/s. 143(3) of the I.T. Act by passing a non-speaking order which is reproduced as under:- "In this case return of income was e- filed on. 18.09.2008 declaring total income of Rs. 737800/- which was processed uls 143(1) of the IT. Act. The case was selected for scrutiny through CASS and statutory notice uls 143(2) was issued on 22-09-2009, which was duly served upon the assessee. In response to the notices issued u/s 142(1) and 143(2) counsel of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be looked into from different angles including the actual investment, date of actual use, admissibility of depreciation etc. the records, however, appear to be silent on the same. d) The assessee had maintained Current Bank A/c. No. 2159001800000105 in Punjab National Bank, Sports Goods Complex, Delhi Road, Meerut. The assessee had made Fixed Deposits of Rs. 30,80,000/-- by way of Auto Sweep transactions from the same Bank Account. But, the assessee had not shown any Fixed Deposits made during the year in Balance Sheet as on 31.03.2008. The Closing Balance of Bank Account showed Rs. 3,33,194.47. The assessee had filed a hand written .Bank statement and other details shown at Page No. 353, 354, 355 & 356. As per Bank Statement Page No. 356 Fixed Deposit shown NIL As per Bank Statement Page No. 355 Fixed Deposit made Rs. 30, 80,000/- By way of Auto Sweep transactions from the aforesaid Bank Account As per Page No. 354 Closing Bank Balance as on 31.03.2008 shown Rs. 3,33,194.47 Total Rs. 3,33,194.47 e) As per Page No. 353, The Manager, Punjab NationalBank, Sports Complex, Delhi Road, Meerut had Certified vide his letter dated 16/06/2008 addressed to the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made any attempt to make any enquiry before accepting the claim of the assessee and accepted the claim in a hurry manner without applying mind, but in the citation given by the Ld. Counsel of the assessee, the AO has made enquiry may be sufficient or may be insufficient, which is not the question before us. The present case is not a case of insufficient/ inadequate enquiry, but here the AO has accepted the claim of the assessee without any enquiry. 14.1 With regard to queries raised in the Notice u/s. 263 raised vide para no. (a) is concerned, we find that against the gross receipts of Rs.I03927634/- it has returned an NP of merely Rs. 705790/- yielding the NP rate 0.679% one of the main reasons for which the case was selected for scrutiny was negligible NP rate. However the asstt. record show that despite there being a large number of discrepancies and despite their being the books of alc incorrect, incomplete and suffering from a number of discrepancies provisions of s.145(3) have not been invoked and book results have been accepted as such. We further find that the tax auditors have categorically stated that books are not maintained in the manner so as to give a true and fair v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losing stock is about half of opening stock which comprised of finished and semi finished goods. As per this percentage of paper consumption, the consumption of paper comes to as high as 74.70 % which is extremely inflated. Since the books of the assessee are unreliable from which profit could not be ascertained, the rates of paper prevailing during the year under consideration were obtained from outside vendors. 14.5 We further find that the inflation of expenses and thereby the suppression of profit of Rs. 4.5 crores is merely on account of inflated paper consumption on account of bogus or inflated purchases. We also observed that since the assessee has debited a number of other expenses as also wages all of which are also not duly vouched or supported by any material evidence and nothing has been brought on record so as to ascertain the correctness of the same, the actual profit earned by the assessee will further increase by substantial amount then Rs. 3 crores taken by conservative estimate of profits basis upon inflated purchases only. In the background of the aforesaid discussions, we are of the considered opinion that Ld. CIT has rightly made the addition of Rs. 2,95,58,10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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