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TMI Blog2018 (5) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... en rejected, then one part of credit side of the trading account, that is, sales cannot be discarded completely so as to hold that it is unexplained money. Because here in this case in the earlier years, scrutiny assessment have been done whereby the assessee’s opening stock, closing stock and trading activities have been duly accepted and it is not a simple case where mere return income has been accepted u/s 143(1). Thus, we hold that AO is not justified under law to treat the sales as income from unexplained sources and accordingly addition made by the AO and sustained by the CIT (A) is directed to be deleted. - Decided in favour of assessee - ITA No.:-6527/Del/2017 - - - Dated:- 27-4-2018 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For The Assessee : Shri Gautam Jain, Advocate, Shri Piyush Kumar Kamal, Advocate, Shri Lalit Mohan, CA For The Department : Shri Ravi Kant Gupta, Sr. DR ORDER PER AMIT SHUKLA, J.M. The aforesaid appeal has been filed by the assessee against impugned order dated 28.9.2017, passed by Ld. CIT (Appeals)-37 New Delhi for the quantum of assessment passed u/s 143(3) for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea as specified in the address it was observed that the entire area is an area where heavy construction is being undertaken of residential housing societies. The area is not a market space and is not situated in a habituated town/city. While the area is not difficult to reach, the entire area is dominated by construction activity and a few heavy goods industries. The area is not well addressed and the plots are known by Survey nos. 1 was able to locate various survey plots numbers. The photographs of the entities located on these plots are placed on record. The details of these construction sites are given below: Indiabulls Greens- This construction site is a huge residential project and is currently near completion. The construction has been going on for almost ten years. The construction under this project is being undertaken on the following Survey Nos.: At Survey NO 63/0, 64/1, 6511 to 3, 66/2. 66/3. 66/5 to 66/8, 66/13, 66/14,66/15, 67/1A, 67/1B, 67/2, 68/1 to 7, 69/1A, 69/1B, 69/2, 69/6, 70/1, 70/'2, 71ilA + 2A + SB. 7111R, 71/3, 71/4 +25K, 71/5A.71/8B + 9K, 71/6A, 71/11. 71/12 to 16, 71:17A,71/17B. 71/17K. 71/18 to 20. 71/21B.71/12 + 21A. 71/23B, 71/24 + 23A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction site surrounded by construction material and debris. There is no basis for having a trading business in a place which is not even properly addressed. Further any fabric trading business having a turnover of ₹ 4,20,62,550/- is not an invisible entity. Any business even if currently not operational leaves footprints in the vicinity, specifically if the business has been undertaken for a period or more than 6 years out of the same location ( as per the AR, the sales are being made form stocks available since 2007). From the above physical verification, it is apparent that there was no trading business in the name of M/s. Loraiya Enterprises. 4. The AO further notes that summon u/s 131 were issued to the assessee, however he did not responded. On perusal of stock register and sale register, again she noted the following facts:- That the daily sales ranged between ₹ 19.8 lakh to ₹ 15.7 lakhs. Interestingly the daily sales for each month have gradually declined starting from ₹ 19.9 lakh in April and ending at 15.7 lakh in March 2013. The trend has been consistent, there are no fluctuating patterns. This is a clear indication that the stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wealth tax orders as well as assessment order for assessment year 2007-08. AO has observed that earlier assessment year does not mention about any kind of inquiry and each and every assessment year is independent and principle of resjudicata does not apply. - The vouchers have been verified by the auditors on which AO has countered that verification by the auditors does not give any unquestionable certificate and that there has been no wrong doing in a business. - In so far as the closing stock and expenses claimed in the profit and loss account, it was contented that it has been accepted u/s 143(1) and no adverse inference can be drawn; to which AO repudiated by stating that process of ITR u/s 143(1) is done through computerised process and does not imply that information given in the ITR per se is genuine and opening and closing stock has not been scrutinised by the department. - Regarding no weighing machine and the fabric was sold in bales, the AO held that bills are to be measured in Kgs then same should have been recorded in the stock register as well as the sale bill in Kgs only. - On the issue of no building and fixed assets shown in the balance sheet and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 133B the inquiry report has been duly confronted to the assessee and there is no violation of any rules or natural justice. ii) Secondly, on the physical verification of the business premises, AO has found that no business exists at the business mentioned in the audit report and the enquiries conducted from nearby premise also confirmed the fact that business in the fabric could not have been undertaken from the premise which is far from town area or market place. iii) Thirdly, assessee s own audit report categorically states that there was no opening stock for the current year and as such a concept of having massive turn over in the assessment year 2013-14 and the closing balance of stock is also a fanciful claim of the assessee when juxtaposed with the findings of the AO. Thus, this fact proved that there was no opening stock. iv) Lastly, the findings of the AO in assessment order u/s 143(3) for earlier assessment years cannot be binding upon the findings of the AO in this year, because both are different assessment years and rule of consistency at times may result into anomalous results and for this proposition he has referred to certain decisions also. 6. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60 143(1) 2010-11 30,79,98,500 2,82,310 34,75,200 30,50,92,555 2,86,945 8.25 143(1) 2011-12 30,50,92,555 5,73,191 12,46,390 3,045,60,276 1,40,920 11.30 143(1) 2012-13* 30,45,60,276 - 5,60,47,074 25,05,05,320 19,92,118 3.55 143(3) 2013-14 25,05,05,320 - 51,72,536 19,53,79,660 20,46,876 3..58 143(1) 2014-15 19,53,79,660 - 4,20,62,550 15,48,57,470 15,40,360 3.66 143(3) 2015-16 15,4 8,53,470 - 10,56,92,040 5,30,77,950 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Telephone Expenses 38,250 Net Profit 3,19,580 15,40,360 15,40,360 8. He further submitted that subsequent to assessment order, an order u/s 154/143(3) was passed on 03.02.2017, against which assessee had preferred an appeal before the Ld. CIT (A), who has allowed the assessee s appeal and quashed the order passed u/s 154. Now the position that emerges is that the profit shown by the assessee also got accepted which was included in the return of income filed for ₹ 41,60,010/- and making any further addition will be double addition. Further, if action of the AO is to be accepted then income assessed under the business head ignoring the same would result into loss of ₹ 4,17,42,969/- and even if addition of ₹ 4,20,62,550/- is made the same should be set off against the said loss. This has been explained in the following manner:- Sr. No. Particulars Amount (Rs.) i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below ₹ 20,000/-, he submitted that there is no prohibition law or any provision that cash sales cannot be made for sum below ₹ 20,000/- and in support, he relied upon judgment of Hon ble Bombay High Court in the case of R.B. Jessaram Fetehchand vs. CIT reported in 75 ITR 33. Here the AO had not disputed the fact that opening stock existed in the balance sheet worth ₹ 19,53,79,660/- which in quantity wise was 19,85,109.53 Kgs. and it is this part of the opening stock which has been sold in this year. It is a matter of record that once in the earlier years, assessments have been made where opening and closing stock has been accepted or at the most the G.P. has been tinkered but the entire business of trading in fabric has been accepted, then this goes to prove that not only the assessee has the business but same has been duly accepted by the department in the scrutiny proceedings whereby assessee s opening and closing stock also stands accepted. Thereafter he pointed out various discrepancies in the assessment order and also assessee s case before the AO with regard to the various evidences countered by the assessee to prove that the business was being carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / cloth bales is to added as unexplained income or sale of existing stocks or not. From the Revenue s perspective, it is palpable that AO had made very genuine efforts to carry out a physical inquiry to find out whether such trading of fabric was done by the assessee from the premises mentioned in the audit report or not. But at the same time it is also an admitted fact that on the date of inquiry, i.e., made on 5.11.2016 at 75A/2, Kon Village, Panvel Taluka Raigad, the assessee has stated to have closed its business long back in July 2015 when all the stock have been claimed to have been sold. For the year ending 31st March, 2016 the stock has been shown at NIL , which factum has been shown in audit report and return of income for A.Y. 2016-17. This inter-alia means that entire stock alleged to have been kept by the assessee were sold during the financial year 2015-16 and all the business was shut down. In her inquiry report AO had stated that the areas specified in the address, heavy construction was being done for residential housing society and this was not the area of market place situated in a habituated town /city. Even the area was not well addressed and she also stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was carrying out any business from the premises made available by M/s. S.K. Wheels or not. The finding recorded by the AO in light of her inquiry prima facie negates most of the assessee s claim regarding the premises available to the assessee at a given place for carrying out such a large scale of trading of fabric/cloth bales. Such a detailed finding of the AO and Ld. CIT (A) for the existence of any trading business especially at the time of inspection has not been properly countered by the assessee except for adducing certain evidences which again does not have much credentials in wake of actual inquiry conducted by the AO. But such an inquiry in F.Y. 2016-17, i.e., post closure of business how far will affect the past history and the year under consideration, i.e., F.Y. 2013-14 is the moot point for our consideration juxtaposed with entire facts and material on record. 14. The finding of the AO in her inquiry conducted in November, 2016 and past assessment records have to be weighed in light of all probable factors and preponderance of probability of such factors has to be seen qua material on record which we shall discussed herein after. One of the most glaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee stood accepted and only addition made was on account of higher profit rate, but the sales made during that year; trading/ business carried out by the assessee was duly accepted, including opening and closing stock. Again in the assessment year 2013-14 the opening and closing stock and trading account including sales has not been disturbed. Now in the impugned assessment year 2014-15, the audited balance sheet reflected an opening stock of ₹ 19,53,29,660/- which opening stock stood accepted by the department either under the scrutiny proceedings or by not selecting the return for scrutiny proceedings or by taking any action to disturb such returned income. Hence the quantity and valuation of stock stood accepted which had attained finality. Thus, the quantum and figure of the opening stock which stood accepted in the earlier years has to be taken as an actual stock available with the assessee. Out of the said stock purported sales of ₹ 4,20,62,550/- has been made leaving a closing stock of ₹ 15,48,57,470/-. The trading account was thus reflected in the following manner:- Item Details Unit Opening Qty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear, when it has been stated that in subsequent year, that is, in July, 2015 the entire stock was sold and business was closed down which was prior to the initiation of the impugned assessment proceedings and much before the inspection carried out by the AO in November, 2016. 16. Though there may be a lot of strength in the AO s inquiry, however the same simply whittles down from the fact that; firstly, it has been done after one and a half year from the closure of the business; secondly, the assessee s purchases and the stock acquired in assessment year 2006-07 and 2007-08 have neither been repudiated nor has been disturbed, which only goes to show that such stock did existed with the assessee and were also subjected to scrutiny from time to time; thirdly, once a huge investment shown in the books of account for the purchase of stock which has subjected to examination in scrutiny proceedings, then it cannot be held that on the first day of April of 2013, the entire stock did not exist; and lastly, the AO has neither rejected the books of accounts nor disturbed the opening and closing stock nor the gross profit; and once that is so, then to treat the entire sales as income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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