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TMI Blog2011 (11) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in respect of the sale shown by the assessee of ₹ 39,45,105/-. As per the assessment order of that year, the AO did not accept the claim of the assessee regarding the sales and he held that the sale of only ₹ 5,04,400/- is acceptable. Against the loss disclosed by the assessee of ₹ 1,22,100/-, the AO estimated the income of the assessee at ₹ 36,506/- on the basis that profit at 8% was estimated on the Labour contract receipts and rent receipts of ₹ 4,56,331.00. Apart from this, the AO made addition of ₹ 10,09,000/- under Section 68 in respect of unsecured loans and assessment was completed at a total income of ₹ 10,45,500/- as against the loss declared by the assessee in the return of income at ₹ 1,22,100/-. Being aggrieved, the assessee carried the mater in appeal before the learned CIT(A), but without success and now, the assessee is in further appeal before us in the quantum proceedings. In the meantime, the AO initiated penalty proceedings under section 271(1)(c) in respect of the addition made by him of ₹ 10,09,000/- under section 68 and he imposed penalty of ₹ 3,16,415/-. Against this penalty order also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 74,411/- on account of bank interest and also for deletion of addition made by the AO of ₹ 1,00,000/- on account of labour expenses. Out of the addition made by the AO of ₹ 31.59 lakhs in respect of unsecured loan and of ₹ 81 lakhs in respect of cash deposit in various bank accounts made by the AO under Section 68, relief was allowed by the learned CIT(A) to the extent of ₹ 30.09 lakhs out of addition of unsecured loan and relief was also allowed of ₹ 41,17,600/- out of addition made by the AO of ₹ 81 lakhs in respect of cash deposit in various bank under Section 68. 4. The Revenue has raised these two issues also before us in the appeal filed by it. In the appeal filed by the assessee in the quantum proceedings for A.Y.2001-02, the assessee has raised two issues i.e. regarding confirmation of the addition made by the AO of ₹ 1,50,000/- received from V.K. Chaudhry and confirmation of ₹ 39,82,4000/- being funds deposited in various banks for payment of bank loan under OTS scheme. In addition to this, the AO initiated penalty proceedings for A.Y.2001-02 in respect of two additions confirmed by the learned CIT(A) of ₹ 1,50,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO also accepted in remand proceedings that the deposit in bank of ₹ 20 lakhs in on account of cheque deposit for unsecured loan received from Shri V.K. Chaudhari. He submitted that copy of the remand report of the AO is available at page no.101 to 112 of the paper book and in particular, our attention was drawn to page no.11 of the remand report which is available at page no.111 of the paper book where the AO has stated that out of total loan of ₹ 81 lakhs, an amount of ₹ 20 lakhs has been proved and the balance amount of ₹ 61 lakhs has not been proved. He has submitted that in view of this factual position that the sale of the assessment year 2001-02 are accepted by the AO and even if the sale of A.Y.2001-02 are not accepted, it will not have any impact on the cash position in view of ignoring of the purchases and therefore, the addition made by the AO on this account is not justified. 6. Regarding the addition made by the AO in respect of unsecured loan of ₹ 10.09 lakhs in A.Y.2000-01, it was submitted that no such addition is justified because the loan in question were not received during this year and these are opening balance. In support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A. O. is that there is no opening stock as against an opening stock of ₹ 34,91,710/- claimed by the assessee. In this regard, we feel that this action of the A. O. is also without any basis because when the A.O. initiated the proceedings u/s 148 for this year on 06.09.2005, he could have initiated such proceedings for A. Y. 1999 - 2000 also but he has not done so. It is settled position of law that the opening stock of a year has to be same as the closing stock of the preceding year. Without disturbing the closing stock of A. Y. 1999 - 2000, the A. O. cannot say that the opening stock of the present year is nil when as per the P/L Account and Balance Sheet for the year ended on 31.03.1999, closing stock was shown at ₹ 34,91,710/- as per copy of Balance Sheet and P/L Account of that year available in the paper book. Moreover, even on the accepted sales of the assessee of ₹ 504,400/-, the A. O. worked out Net Loss of ₹ 73,202.27 as per revised P/L Account prepared by the A. O. on page 13 of the assessment order but ignored the loss while computing the total income on page 17 of the assessment order. This shows that the A. O. himself has not accepted and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as on 31.03.2000 Liabilities As per Assessee Revised by us Assets As per Assessee Revised by us Loan Liability: Capital A/C 3,42,247.63 1,58,571.36 Bank OD 75,15,983.65 75,15,983.65 Fixed Assets: Secured loan 37,151.00 37,151.00 P & M 48,442.00 48,442.00 Unsecured Loan 10,09,000.00 9,59,000.00 Vehicles 2,60,576.00 2,60,576.00 Current Liability Furniture 25,915.00 25,915.00 Provisions 22,295.00 22,295.00 Shed 1,10,510.00 1,10,510.00 Sundry Crs. 36,169.00 36,169.00 Current Assets: Profit & Loss Account: Closing Stock 46,66,407.00 46,66,407.00 of this year -1,47,170.27 36,506.00 Deposit (Asset) 1,00,520.00 1,00,520.00 Less: Transferred to Capital 1,47,170.27 -36,506.00 Loan & Adv. 30,607.20 30,607.20 S. Debtors -876000.00 0.00 Cash in Hand 38,32,596.97 30,90,273.24 Bank A/cs 28,898.85 28,898.85 TDS for 1999-2000 49,878.00 49,878.00 86,20,598.65 85,70,598.65 86,20,598.65 85,70,598.65 Note: 1) Advance from Customers of ₹ 8.76 Lacs is taken as Nil for want of evidence. 2) cash in Hand is the balancing figure. 3) Unsecured loan is reduced by ₹ 50,000/- because of telescoping benefit allowed. 4) De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,55,810/- claimed by the assessee, the A. O. in the assessment order has estimated the sales of the assessee at ₹ 40 Lacs and G.P. was estimated by him at ₹ 8 lacs being 20 % of ₹ 40 Lacs. Hence, as per the assessment order for this year, the sales of the assessee are in fact increased by the A. O. and expenses are reduced because the A. O. has estimated the G.P. at a higher amount. As against this, learned CIT (A) has held that there is no sale in this year because the assessee has not maintained quantitative records and he has brushed aside the other evidences such as Sales Tax assessment order and copy of Bank Statements showing deposit of Cheques/drafts against sales. In our considered opinion, the claim of the assessee about sales in this year cannot be rejected in the light of these independent evidences being Sales Tax Assessment order and Bank Statements etc. In fact, the A. O. has estimated the sales of this year at ₹ 40 Lacs. On this aspect i.e. sales aspect, we reverse the order of learned CIT (A) and restore that of the A.O. The A.O. has made addition of ₹ 292,249/- by estimating the G.P. at ₹ 8 lacs being 20% of estimated Sales of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,75,774.35 59,068.65 Deposit (Asset) 10,20,520.00 10,20,520.00 Loan & Adv. 9,34,059.00 9,34,059.00 S. Debtors -1420000.00 0.00 Cash in Hand 81,36,133.57 71,84,652.84 Bank A/cs 22,619.45 22,619.45 TDS for 1999-2000 & 2000-01 1,20,217.00 1,20,217.00 1,15,51,986.00 1,15,01,986.00 1,15,51,986.00 1,15,01,986.00 Note: 1) Advance from Customers of ₹ 14.20 Lacs is taken as Nil for want of evidence. 2) Cash in Hand is the balancing figure before payment to bank of ₹ 81 Lacs 3) Unsecured loan is reduced by ₹ 50,000/- as in last year. 4) Debit balance in capital account is reduced to the extent of increase in net profit as per revised P/L account of this year and also of the preceding year. 5) Cash in hand above includes cheques deposited in bank on account of unsecured loans of ₹ 21.50 lacs used for repayment to SBI under OTS. 16. From the above working, we find that as against payment of ₹ 81 Lacs to bank, Cash in Hand is only of ₹ 71.84 Lacs and odd. Hence, to the extent of ₹ 9.16 Lacs, the repayment to Bank remains unexplained. Addition on this account is confirmed to the extent of ₹ 9.16 Lacs. Ground No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is rightly deleted by the learned CIT (A). 19. Now, the only remaining issue is penalty. Ground No. 2 of this Penalty appeal was not argued and hence it is treated as not pressed and dismissed accordingly. The penalty was confirmed by the learned CIT (A) in respect of addition confirmed by him of ₹ 39,82,400/-. Out of this, we have confirmed the addition of ₹ 9.16 Lacs only and hence penalty should be reworked for this addition only and while working out the amount of penalty, the direction of learned CIT (A) should be followed regarding quantum of the tax liability to be worked out as per applicable tax slab. Ground No. 1 of the Penalty appeal is partly allowed. 20. In the result, both the appeals of the assessee for A.Y. 2001-02 are partly allowed whereas the appeal of the revenue for this year stands dismissed. In quantum proceedings of this year, the income assessed should be ₹ 16,474.65 plus ₹ 27,687/- out of Vehicle Expenses, ₹ 14,907/- out of Telephone Expenses and ₹ 916,000/- being unexplained cash total ₹ 975,068.65 but Penalty should be worked out on ₹ 9,16,000/- only because no penalty was levied on account of addition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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