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TMI Blog2016 (10) TMI 1114X X X X Extracts X X X X X X X X Extracts X X X X ..... . The impugned order is, therefore, upheld on this issue and both the grounds are dismissed. Addition on account of unexplained investment u/s 69 - Held that:- AO has himself recorded in the assessment order that the assessee proved that all the purchase transactions recorded on these loose papers were duly entered into the books of account of the assessee. When the position is so, we fail to appreciate as to how any addition on account of unexplained investment can be made u/s 69 of the Act, which presupposes the making of investment without recording the same in the books of account. In that view of the matter, there remains no rationale or logic in making any addition u/s 69 of the Act for the transactions recorded in the books of account. It is further seen that the ld. CIT(A) has sustained the addition to the extent of ₹ 74,186/- as there was some difference in the amounts appearing on different dates which was duly accepted by the assessee. We, ergo, uphold the confirmation of the addition to the extent of ₹ 74,186/- and the deletion of the remaining addition. The other half of each loose paper found during the course of search represents sales made by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chauhan, CIT, DR ORDER R. S. Syal (Accountant Member) This batch of eight cross appeals four by the assessee and equal number by the Revenue - relates to the AYs 2002-03 to 2005-06. Since some of the issues raised in these appeals are common, we are, therefore, proceeding to dispose them by this consolidated order for the sake of convenience. Assessment Years 2002-03 to 2004-05 2. Briefly stated, the facts of the case are that the assessee is engaged in the business of purchase and sale of flowers and petals. A search and seizure operation u/s 132 of the Income-tax Act, 1961 (hereinafter called as the Act ) was conducted on 23.12.2005 in Ferns N Petals group of cases. The assessee is a part of this group. A notice u/s 153A was issued to the assessee on 20.12.2006 for filing return in relation to the AY 2002-03. In response, the assessee furnished its return wherein the income amounting to ₹ 2,89,825/-, as per the original return filed on 31.10.2010, was repeated. No further undisclosed income was declared. During the course of assessment proceedings, the AO called upon the assessee to furnish list of the persons with their complete addresses from wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the GP rate to 15% as against 11.3% declared by the assessee. In the like manner, for the AY 2004-05, the assessee s gross profit rate declared at 10.45% came to be restricted at 15% as against 56% as would have been if the addition made by the AO would have been sustained. For the Assessment years 2003-04 and 2004-05 also, the ld. CIT(A) has noticed that there was no evidence of any incriminating material found during the course of search/assessment proceedings to establish that the purchases were not genuine. Both the sides are in appeal on their respective stands. 4. The assessee has raised a legal ground challenging the making of additions in the three years in question on the premise that no incriminating material qua the purchases from Mandi vendors was found during the course of search and the assessments for these three years already stood completed before the date of search. The following chart has been filed depicting the status of assessments as under :- Events AY 2002-03 AY 2003-04 AY 2004-05 Date of filing of return of income u/s 139 31.10.2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the amount of refund due to, the assessee and the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee. Processing of the return u/s 143(1) and the consequential issuing of Intimation is construed as passing of the assessment order except where a notice u/s 143(2) is issued for a scrutiny assessment u/s 143(3). In a case, where notice u/s 143(2) is issued, the processing of return u/s 143(1) and the consequential issuing of Intimation does not amount to passing of the assessment order because the assessment order, in such circumstances, is passed after due scrutiny u/s 143(3) of the Act. There can be only one assessment order for one year. The crux of the matter is that where no notice u/s 143(2) is issued within the permissible maximum time, the issuance of Intimation, after processing of return u/s 143(1), is treated as completion of assessment. However, where such a notice is issued, the intimation issued u/s 143(1)(a) loses the character of an assessment order, which in that case, is passed u/s 143(3) after thorough scrutiny. To sum up, an assessment is termed as completed on the passing of an order u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act which was duly processed u/s 143(1) of the Act, thereby assigning finality to the assessment, because no notice u/s 143(2) was issued for completing assessment u/s 143(3) up to the date of search. In the like manner, the assessee filed original return of income u/s 139(1) of the Act for the A.Y. 2004-05 on 30.10.2004. No notice u/s 143(2) was issued by the AO for the said year as well, which could have been possibly issued up to 31.10.2005. This shows that the assessee filed its return u/s 139(1) of the Act which was duly processed u/s 143(1) of the Act, thereby assigning finality to the assessment, because no notice u/s 143(2) was issued for completing assessment u/s 143(3) up to the date of search. These facts have remained uncontroverted on behalf of the Revenue. This divulges that the assessment for the first three years from this batch of appeals stood completed on the date of search. Going by the verdict given by the Hon ble Delhi High Court in the case of Kabul Chawla (supra) that no addition can be made otherwise than those based on incriminating material found during the course of search in the case of completed assessments, we find that the instant additions ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found during the course of search, but otherwise also. 13. Adverting to the facts of the instant case, we find that the assessee admittedly did not produce any books of account and the supporting vouchers/bills. The contention of the ld. AR that the books were available in the computer, which was available with the Department, cannot be accepted because even if soft copy of such books was available, but there were no supporting bills/vouchers, which could have been verified by the AO. The assessee did not furnish any evidence or details during the course of assessment proceedings. In such a situation, the argument of the ld. AR that since the books of account were not rejected, hence, no addition could have been made by estimating the profit rate, is jettisoned as without any substance. When the books and the relevant vouchers/bills were not produced before the AO, it was, but, natural to make the assessment on the basis of some estimate. As against the AO disallowing all the purchases, we find that the ld. CIT(A) was justified in approving the application of GP rate of 15% on the declared sales to cover the leakage of profit on the possibility of unverified purchases. The impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of addition made by the AO u/s 69 of the Act as an unexplained investment. The AO has himself recorded in the assessment order that the assessee proved that all the purchase transactions recorded on these loose papers were duly entered into the books of account of the assessee. When the position is so, we fail to appreciate as to how any addition on account of unexplained investment can be made u/s 69 of the Act, which presupposes the making of investment without recording the same in the books of account. In that view of the matter, there remains no rationale or logic in making any addition u/s 69 of the Act for the transactions recorded in the books of account. It is further seen that the ld. CIT(A) has sustained the addition to the extent of ₹ 74,186/- as there was some difference in the amounts appearing on different dates which was duly accepted by the assessee. We, ergo, uphold the confirmation of the addition to the extent of ₹ 74,186/- and the deletion of the remaining addition. 16. The other half of each loose paper found during the course of search represents sales made by the assessee for which the respective amounts were not recorded. This is certainl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al submissions and perused the relevant material on record, we find that the assessee argued before the ld. CIT(A) that these were trade creditors. Some sketchy information was given, such as, the ledger account of first and second parties and confirmation from the third party. Apart from that, the ld. CIT(A) has recorded that the assessee furnished delivery challans in respect of purchases from one party, namely, Murgan Ooty. When the trade creditors were appearing in the books, it was obligatory on the part of the assessee to prove their genuineness by furnishing necessary invoices and also producing them, if required by the AO. Here is a case in which apart from filing confirmation from the third party, the assessee has not even furnished invoices, what to talk of proving the genuineness of these creditors. As such, the ld. CIT(A) cannot be held as justified in deleting this addition. In our considered opinion, the ends of justice would meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of the AO. We order accordingly and direct him to decide this issue afresh, after allowing a reasonable opportunity of being heard to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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