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TMI Blog2016 (9) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... nal grounds in all the appeals except ITA No.1910/Kol/2009 which are legal in nature. On the contrary, Ld. DR has raised no objection regarding admission of assessee's additional grounds in all the four appeals, hence the additional grounds are hereby admitted. First we take up ITA No.1906/Kol/2009 AY 99-00. 4. In this appeal various grounds have been raised by assessee as under:- "1. That the ld. CIT(A)erred in law while deciding that if assessment of the relevant assessment year was not completed under section 143(3), all the issues irrespective of the fact whether the same was disclosed in the original return or whether the same were the findings of the search can be considered in assessment under section 153A. 2. That the Ld. CIT(A) erred in confirming the addition of Rs. 2,74,664/- against the sale of Gold/Silver jewelleries declared under VDIS, 97 without considering the Balance Sheet of the appellant for the period before VDIS, 97 where no such jewelleries were shown. 3. That the Ld. CIT(A) erred in sustaining the addition of Rs. 2,40,000/- made by the Ld. AO considering the gifts of Rs. 80,000/- each received by the appellant from three donors as unexplained which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. However, assessee in response to the notice u/s. 153A of the Act filed his returned declaring a total income of Rs.1,07,760/-. Thereafter notice u/s. 143(2) was issued and served upon assessee. The assessee, during the year, has sold silver utensils for an amount of Rs.2,03,934/- and gold ornaments for Rs.70,734/-. The assessee has claimed that these ornaments were purchased prior to AY 1981-82. On the sale of ornaments assessee has claimed Long Term Capital Loss after giving the effect of indexation. On query by AO about the details of such purchase of ornament, the assessee failed to give any documentary support in support of his claim except a cash memo demonstrating the sales of ornaments to M/s Junjunwala & Co. of Chadni Chock, Delhi. In the absence of any documentary evidence regarding the possession of old ornaments, the AO has made the addition of Rs. 2,74,668/- to the total income of assessee. 9. Aggrieved, assessee preferred an appeal before L'd CIT(A) whereas assessee submitted that details of silver and gold were duly declared under VDIS Scheme 1997 and this disclosure of gold was duly accounted for in balance-sheet as on 31.03.1998. However, Ld CIT(A) rejected the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 2 Parimal Ch. Ghosh 80,000 3 Kamakkhya Pada Saha 80,000 During the course of assessment proceedings, assessee filed to substantiate the claim of gift received from the aforesaid parties. Therefore, AO disallowed the same and added back to the total income of assessee. 14. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who upheld the action of AO by observing as under:- "... In my opinion these gifts have to be accepted as genuine. As far as the other gifts are concerned, the assessing officer has not been furnished with confirmations from the donors. The verification on the basis of the confirmation from the donors is subsequent event. The assessing officer did not have any document for the purpose of initiating verification of the gifts of Rs. 80,000/- each from Shri Bhupendra Nath Shah, Smt. Kamkhya pada Sha and Sri Parimal Chandra Ghosh. In my opinion these 3 gifts are justifiably disbelieved. Accordingly ground No. 3 is partly allowed." Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us. 15. We have heard rival contentions and perused the materials available on record. We find that assessee failed to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing chart:- A. Yr Turnover GP(%) NP(%) 99-00 4,42,310 35.76 15.1 00-01 4,78,356 35.21 Loss 01-02 6,84,500 30.02 Loss 02-03 7,17,700 22.70 Loss 03-04 7,44,200 28.68 Loss 04-05 3,10,398 40.20 8.96 On query by AO, the assessee failed to submit his books of account and other documents in support of loss claimed. The AO further observed that assessee has declared net profit @ 15.1% in AY 99-00 and 8.96% in AY 04-05. Therefore the AO in the absence of any documentary evidence has assumed the profit of assessee @ 12% which is average net profit ratio for AYs 1999-00 and 2004-05. Accordingly, AO disallowed the loss suffered by assessee and worked out the net profit of Rs.57,403/- and which was added to the total income of assessee. 20. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before the ld. CIT(A) submitted that the loss is arising due to the interest expense for Rs. 1,58,833/- claimed during the year on the loan obtained for the purpose of business. However, the Ld. CIT(A) has rejected the plea of assessee and upheld the action of assessee after giving partial relief to assessee by observing as under:- "3.3 The sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Rs.2,77,086/- which is inclusive of interest element of Rs.1,58,833/-. So it means only indirect expense of Rs.1,18,253/- has been claimed by assessee. In view of the mater and after considering the facts in totality of the case and in the interest of justice and fair play, we are inclined to limit the net profit @ 4% of assessee's turnover. Considering the facts and circumstances of assessee, we reverse the order of Authorities Below and ground raised by assessee is allowed partly in terms of above finding. AO is directed accordingly. 23. Next issue in grounds No. 4 and 5 are general in nature and do not require any separate adjudication. 24. Additional ground was not pressed by the assessee. Hence the same is dismissed as not pressed. 25. In the result, assessee's appeal allowed partly. Coming to ITA No.1909-1910/Kol/2009 for AYs 03-04 & 05-06. 26. In both appeals grounds have been raised out of which grounds No.4 & 5 in [ITA No. 1909/Kol/2009] and grounds No. 3 to 5 in [ITA No. 1910/Kol/2009] general in nature and do not require separate adjudication. The other grounds in ITA No. 1909/Kol/2009 are as under:- "1. That the Ld. CIT(A) erred in sustaining the part of the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act business exceeded the limit of Rs. 40 lakhs. 3. That the action of the Ld. CIT(A) in sustaining the addition made by estimating the income of Rs. 548,698/- @ 8% n gross receipts of Rs. 73,08,728/- from contract business in place of the profit of Rs. 409,505/- @ 5.6% declared by the appellant in the return of income. 4. That the Ld. CIT(A) erred in not giving cognizance to the interest factor for net loss from M/s Mukta Bricks though the corresponding loans and their utilization were reflected in the Balance sheet. 5. That the action of Ld. CIT(A) in upholding the estimation of profit @ 9% on a turnover Rs. 717,700/- instead of 12% estimated by the Ld. AO in place of net loss of Rs. 127,647/- declared in the return of income by the appellant is unwarranted and bad in law. 6. That as the order of the Ld. CIT(A) is devoid of merit, and bad in law, the same should be quashed and your appellant be given such relief(s) as prayed for. 7. That the appellant craves your Ld. Permission to add, amend and modify the above grounds on or before the date of hearing of the appeal." Additional ground:- "1. This application of the petitioner/appellant most respectfully prays for adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow. 34. We have heard both the parties and perused the materials available on record. We find that it is not in doubt that the provision of Sec. 44AD is applicable only to those assessee's who are having turnover up to Rs. 40 lakh. In the instant case, assessee's turnover is greater than Rs. 40 lakh. Therefore, in our considered view, resorting to be provision of Sec. 44AD is not proper. We also find that the AO has made the estimation @ 8% of the total turnover without making any comparison with the other cases who are engaged in same category of business. Therefore, we are not inclined to uphold the order of Authorities Below. However, we are not interested in sending back the matter to the AO to avoid further litigation. Therefore, in the interest of justice and fair play we restrict the net profit @ 6% which in our considered view is reasonable from the business of assessee after considering the facts and circumstances of the case. Hence, this ground of assessee is allowed in part. AO is directed accordingly. 35. Next inter-connected issue No. 4 & 5 are as regards that Ld. CIT(A) erred in estimating profit @ 7% on a turnover Rs. 717,700/- instead of 12% estimated by AO.in p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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