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TMI Blog2017 (6) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case where even though the place is served by the bank but at the relevant point in time (evening) when the payment is made, whether the place is served by the bank or not. In absence of the same, we are unable to accede to the contention of the ld. AR in respect of payment amounting to ₹ 2,13,314/- covered under Rule 6DD (g) of the Income Tax Rules. Accordingly, the assessee deserves relief to the extent of only ₹ 79,392/-. Addition on profit earned on unaccounted sales - Held that:- Assessing Officer has worked out the unaccounted sale based on the impounded papers which clearly show the quantity of the material, rate, date & name of the party. Therefore, the contention of the ld. AR that these were rough estimates cannot be accepted and we accordingly confirmed the unaccounted sales as worked out by the Assessing Officer at ₹ 13,37,586/-. Regarding estimation of GP rate on the unaccounted sales, the ld. CIT(A) has applied the GP rate which is otherwise offered by the assessee herself in respect of accounted sales recorded in the books of accounts for the year under consideration. Where the GP rate of the same year is available, there is no justification f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements and actual purchases noted on loose paper were duly recorded in the books of accounts, therefore, addition of ₹ 1,25,105/- as sustained by the Ld. CIT(A) deserves to be deleted. 4. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in making the addition of ₹ 61,873/- [though telescoped from addition sustained on account of profit on unaccounted sales] on account of stock alleged as found excess arbitrarily, thus the resultant addition deserves to be deleted. 4.2 That the Ld. CIT(A) has further erred in ignoring the fact that valuation of stock done by the department during the course of survey was on higher side on estimate basis without considering the stock of Red blocks and Pink blocks separately, therefore, addition so sustained of ₹ 61,873/- deserves to be deleted. 2. Briefly, the facts of the case are that the assessee is an individual and proprietor of M/s Narang Stone which is engaged into the business of manufacturing and trading of pillars slabs of sand stones. For the year under appeal, the assessee furnished her return of income declaring total income at ₹ 4,29,320/-. Thereafter, a survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash in respect of the purchases made by assessee from M/s Mahalaxmi Stone, Sarmathura on four different dates. The details regarding such cash payments is as under: Date Name of the Party Amount 14.12.2007 Mahalaxmi Stone, Sarmathura ₹ 61,342.00 14.12.2007 Mahalaxmi Stone, Sarmathura ₹ 65,452.00 25.12.2007 Mahalaxmi Stone, Sarmathura ₹ 79,392.00 29.01.2008 Mahalaxmi Stone, Sarmathura ₹ 86,250.00 Total ₹ 2,92,706.00 These cash payments totalling to ₹ 2,92,706/- were disallowed by Ld. AO u/s 40A(3) of the Act. However, while doing so, the AO failed to consider the submission of assessee that, the case of assessee falls within the exceptional circumstances as provided for under rule 6DD of the Income Tax Rules, 1962. 2.5 In this regard, the ld AR submitted that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid in the same day. It is submitted here that, at the relevant time. i.e. the date of making these payments, there was no evening branch of any Bank at Bayana so that no payment could be deposited directly in the bank account of the party and it has to be made in cash only. In support of this statement, the assessee had also furnished her affidavit during the course of appellate proceedings which remained uncontroverted. Therefore, it is submitted that the case of assessee is completely covered by Rule 6DD(g) of the Income Tax Rules, 1962. 2.8 It was further submitted that during the course of appellate proceedings, upon submission of affidavit of assessee, the matter was referred to the AO for his comments thereupon who submitted his report on 11.06.2013 and the sole objection raised by him therein was that, the contention regarding no evening branch of bank at Bayana is not acceptable because it is story after thought to avoid tax liability . Apart from this, the Ld. AO has not raised any other objection. 2.9 In this regard, it was further submitted that, at the relevant time in the year 2007 when these payments were made, there existed no evening bank branch and in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id argument, since it is not a case, where there had been no transactions with the seller in the past, nor it is a case of any compelling circumstance, which required cash payment. The appellant has failed to bring on record any evidence to justify such payments made in cash. To support this, I rely on the following judgments of the Hon ble Allahabad High Court, in the case of Evershine Plateres Vs. CIT 295 ITR 349; and of the Hon ble Kerla High Court in the case of Silk Feb Exports Vs. CIT 295 ITR 0123; and of Hon ble Kalkatta High Court in the case of CIT Vs. Himachal Terepene Products Pvt. Ltd. 269 ITR 538; and of Hon ble Himachal Pradesh High Court in case of CIT Vs. Dalip Chand and Sons 301 ITR 276 where it was held that payments in cash where banking facility are available, disallowance U/s 40A(3) is justified. Further, it has been held that the onus is on assessee to prove the existence of exceptional circumstances. 4.6 Thus, the payments made in cash by the appellant during the year are not justified and hence the addition of ₹ 2,92,706/- made by the AO U/s 40A(3) is confirmed. 3. In grounds of appeal Nos. 02 2.1, the assessee has challenged the enhance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned on a paper, out of which there was job work worth ₹ 7,79,306/- which was duly recorded by assessee in the books of account as mentioned in Para 3 of page 8 of the assessment order. However, the Ld. AO treated this entire amount of ₹ 10,64,420/- as the amount of actual sale / job work. With regard to the difference amount of ₹ 2,85,114/- it was submitted before the Ld. AO as well as Ld. CIT(A) that the same is mere rough calculation and cannot be treated as actual sale. 3.5 With regard to the other alleged sales of ₹ 6,54,802/-, ₹ 38,876/-, ₹ 1,03,669/-, it was further submitted that these were mere rough estimate, which has been treated by the Ld. AO as actual sale without establishing the same and merely on the basis of assumptions and presumptions. 3.6 It was further submitted that the burden of proving the fact of execution of unaccounted sales was on the Ld. AO which he has failed to discharge and without proving which, no addition on account of unaccounted sales can be made. In this regard reliance is placed on order of Hon ble ITAT in the case of Mahavir Prasad Choudhary Vs. ITO (ITAT Jodhpur) (XLII TW 98). Therefore, in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of the party. Further, the AO had also given credit for the job work done by the appellant and which was found recorded in the regular books of accounts. The arguments given by the appellant are repetitive and have already been considered by the AO at the assessment stage as well as at the appellate stage, while furnishing the remand report. 5.6 Thus, I confirm the unaccounted sales at ₹ 13,37,586/- as worked out by the AO in his remand report. However, while making the trading addition the AO applied the average GP rate for the last 3 years (for FY 2005-06 to FY 2007-08 of 25%). I do not agree with the average rate adopted by the AO, while working out the profit earned on unaccounted sales. The rate of GP declared by the appellant for the period under consideration should be adopted, while working out the profit on unaccounted sales and this fact has also been pointed out by the AO in his remand report. The appellant in the counter comments on remand report did not offer any explanation on this point. However, this issue was discussed with the AR during the appellate proceedings and it was fairly conceded by him. The GP rate declared by the appellant for FY 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e correlation between the quantum of addition made on account of profit earned on unaccounted sales and the investment in unaccounted purchases. The Hon ble ITAT Jaipur has held in the above mentioned case that no separate addition on account of unexplained investment of ₹ 23,600/- is required to be made and the benefit of telescoping may be given against the addition of ₹ 54,789/- made on account of gross profit on unaccounted sales. 6.8 Following the ratio of the decision, I hold that the benefit of telescoping may be given to the appellant in this case, as regards the addition of ₹ 1,25,105/- on account of unaccounted purchases is concerned as a trading addition of ₹ 4,14,652/- on account of gross profit earned on unaccounted sales has already been confirmed above. Thus, there would be no separate addition of ₹ 1,25,105/- on account of unaccounted purchases. 5. In respect of grounds of appeal Nos. 4 and 4.1, the assessee has challenged the action of Ld. CIT(A) in sustaining the addition of ₹ 61,873/- made by Ld. AO on account of alleged unaccounted investment in excess stock, though telescoped with the addition made on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en confirmed above. Thus, there would be no separate addition of ₹ 61,873/- on account of unexplained investment in excess stock. 6. The ld. DR has vehemently argued the matter and has relied on the order of the ld. CIT(A) which we have taken note of as above. . 7. We have heard the rival contentions and perused the material available on record. Firstly, in respect of grounds no. 1 and 1.1, the payment of ₹ 79,392/- was made on 25/12/2007 being a public holiday which is covered under Rule 6DD(j) of the Income Tax Rules 1962. Regarding the remaining payment of ₹ 2,13,314/-, the appellant has submitted that these payments have been made in cash to M/s Maha Laxmi Stone in respect of auction purchase which has been completed in the evening. As per the terms of the contract, the amount has to be paid on the same day and given that there was no evening branch of any bank at Bayana, the assessee was left with no option but to make payment in cash and hence the case of the assessee is covered under Rule 6DD(g) of the Income Tax Rules. On perusal of the said rules, it is provided therein that where the payment is made in a village or town which on the date of such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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