9911796707
TMI Blog2012 (2) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... ng total income at loss of ₹ 1,42,84,106/-. The Assessing Officer observed that at the time of search in the case of Anant Steels, the assessee has agreed to surrendered an amount of ₹ 89,61,911/- under the following heads of income :- S.No. Description of Head Anant Steels P.Ltd. 1. Excess Stock 37,94,670 2. Loose papers found 42,67,241 3. Payment made out of book 9,00,000 4. At the time of search in case of Shivangi Estates, the assessee has agreed to surrender an amount of ₹ 57,23,421/- under the following heads of income :- S.No. Description of Head Shivangi Estates Limited 1. Excess stock 2490662 2. Loose papers found 32,32,759 3. Payment made out of book Nil 57,23,421 5. With regard to the amount surrendered during search, the Assessing Officer observed that the assessee has offered an amount of Rs. l,46,85,332/- in both these companies, break up of the same are given above, consisting of Excess Stock of ₹ 62,85,332/-, Loose Papers of ₹ 75,00,000/- and unrecorded payment of ₹ 9,00,000/-. On screening of the audited final account and reply of the assessee it is noticed that the assessee had offered an amount of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at payment made out of books towards purchase of goods duly considered in the amount of excess stock found. Hence, no separate addition is justified. The assessee has not claimed credit of unpaid stock. Hence, no separate addition is justified on account of payment made out of book. For this reason only the said amount of ₹ 9,00,000/- was not offered by the assessee separately in its return of total income. 2.5.1] That as regard additional income of ₹ 75 Lacs declared on the basis of loose papers are concerned. On perusal of the loose papers, we find that the crux of loose papers has already been included in form of Excess stock found. Hence, there is no reason for declaring additional income on account loose papers. 2.5.2] The assessee in its return of total income though declared additional income of ₹ 25,00,000/- on account of loose papers separately. However, by way of notes annexed with the return of total income it was claimed that the said amount of additional income as declared on account of loose papers of ₹ 25,00,000/- be withdrawn and assessed income requires to be reduced by that amount. 7. Further the AO required the appellant to explain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f account. This means up to 18/11/2006 or in the 223 days the company had issued 1399 invoices which did not enter in the sales of the assessee company. From this inference can be drawn that the assessee company issued parallel invoices up to 1399 and by taking average weight of 21.000 M.Tons by considering the rate of ₹ 19,840/-, unrecorded sales up to issuance of 1399 invoices works out to ₹ 58,28,79,360/- (21 M.Tons * 1399= 29379 @ ₹ 19,840/-), for 340 days it will be ₹ 88,86,94,988/- (582879360/223X340) in the hands of Shivangi Estates Ltd. The Assessing Officer further stated that the receipt method and from parallel bills method there are no major difference in the amount of un-recorded total turnover. Receipt methods were considered by Assessing Officer for calculating total turnover of the assessee company. Since the average receipts are not identifiable as to which are of Anant Steels Pvt. Ltd. and which are of Shivangi Estates Ltd. Assessing Officer divided the same in the ratio of turnover of these companies as shown in the return of income for the Asstt. Year 2006-07. Anant Steel Pvt Ltd has shown total sales at ₹ 33,61,43,746/- and Shivang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 On account loose papers 4 Slrivangi Estate Limited 77,93,467 On account of Excess stock-found 5,51,88,221 5] That in view of the above, it was submitted that the assessee company and other persons related to the group on the basis of assets found declared income in their respective hands. Hence, there is no justification for the assessing officer to calculate the income on notional basis. 6] That in view of the above it is submitted that addition made on account of income earned on unaccounted sales be deleted in full. Without prejudice to, above, following was the further submissions of assessee before the CIT(A) :- 7.1] That your honour at the time of last hearing asked from the assessee to submit the calculation based on actual sale in respect of Sale bill issued till Sale Bill No 1399 7.2] That till sale Bill No 13 99 issued till the date of search includes 1 081 sale bill related to the actual sale and balance 318 sale bill issued for Factory consumption. If the said sale bill multiplied with the actual Qty and actual sale price, the amount of unrecorded sales calculated comes to ₹ 220348338/·. calculated as under:- Sale Bill issued till sale Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such unaccounted turnover till the date of search but till the end of the F.Y. ignoring the basic fact that there was no evidences or basis whatsoever to draw any inference that such parallel invoicing continued even after search & seizure operation when the assessee was pre-occupied with sorting out the issues arising from the search & seizure operation carried out by the Department. It was emphasized that the AO in working out the total turnover has also included the bills issued for factory consumption which were subsequently verified and accepted in remand proceedings. It was also emphasized that average quantity per bill and the average rate of goods sold were also adopted at much higher figures than actual as under, which has been accepted in course of remand proceedings. Name of assessee Quantity Average rate of goods sold Adopted by A.O. Actuals Adopted by A.O. Actuals M/s.Shivangi Estate Ltd. 21 MT 11.5 MT 19840 17725 M/s. Anant Steel Pvt.Ltd. 16 MT 123.768 MT 19674 Lastly, it was emphasized that the sales declared by the appellants have been accepted by Sales Tax Department and Shri Pankaj Bansal, Director of both the concerns in his post-search inquirie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted receipts for assessee for both concerns were taken at ₹ 48.36 lakhs and that has been multiplied by 340 days in estimating unrecorded sales of both companies at ₹ 164.44 cr. The AO has finally adopted such higher figure compared to the figure arrived on the basis of other approach i.e. parallel duplicate billing. 4.3 In course of appeal hearing it was emphasized that the document relied upon by the AO for estimating unaccounted sales were for all purpose dumb documents because two of such documents were totally undated and in one document though the date was mentioned as 16.10, the year was not mentioned and hence could not have been relied upon by AO in making any valid estimation of unaccounted sales. It was further emphasized that the very tenure of recording on such loose papers indicated that these were summary of transactions and did not relate to a single day and could not have been so inferred as Inferred by AO to be sort of cash book recording on one side the receipts of the day and on the other side payment of the day. It was further emphasized that page no.101 bearing date 20.11 even mentioned separate dates of 15.11 and 18.11 in the inner columns an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d up huge unaccounted excess stock and has other income to the extent of ₹ 1.47 crores in the hands of these two companies besides further amount of ₹ 3.65 crores in the hands of the Directors." 4.4 The broad undisputed position, which emerges after considering the contention advanced by the appellant in course of appeal proceedings and factual position verified by the AO are taken into consideration, quantity of unrecorded sales to the date of search would be as per working given in para 7.2 of the written submissions dated 22.11.09 as under: "That till sale Bill no.1399 issued till date of search includes 1081 sale bill related to the actual sale and balance 318 sale bill issued for Factory consumption. If the said sale bill multiplied with the actual quantity and actual sale price, the amount of unrecorded sales calculated comes to ₹ 220348338/ -. Calculated as under: Sale Bill issued till sale Bill No. 1284 1081 Actual average quantity of goods sold 11,500 M.T. Total quantity 1,12,431.50 M.T. Averages sale rate 17,725/- per MT Total Sales 220348338 Average rate of G.P. Negative Unaccounted income NIL 4.4.1 The similar working given in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 crores even going by AO's approach in the matter of estimating sales on the basis of parallel unaccounted billing and totally ignoring appellant's contention in this behalf. 4.5 The next question arises is what should be appropriate rate of GP or NP to apply on such unaccounted sales. The Hon'ble M.P.- High Court in the case of CIT v. Balchand Ajitkumar, 263 ITR 610 (MP) and further in the case of Manmohan Sadani v. CIT, 304 ITR 52 (MP) has clearly held that only NP is to be estimated on unaccounted sales. In that view of the matter, there is some merit in appellant's contention that AO should not have resorted to further estimation of GP ignoring the GP worked out by himself for arriving at unrecorded income on such transactions. The GP as per appellant's contention is nil, if other incomes which are not directly linked with production and sales are excluded. Once such GP rate is nil, NP on such unrecorded transactions according to appellant's record would be obviously negative. 4.5.1 Now the question arises when the appellant's records are found to be unreliable and it is held that the appellant was indulging in unrecorded transaction leading to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies to which the assessee has filed return of income on 14.11.2007. In the return of income so filed, the assessee has surrendered additional income of ₹ 94,09,754/- on account of excess stock and loose papers, as against incomes surrendered at the time of search at ₹ 89,61,911/-. Similarly, in case of Shivangi Estates Limited surrender was made on account of excess stock amounting to ₹ 24.90 lakhs, loose papers ₹ 32.33 lakhs, which works out to be ₹ 57.23 lakhs. As against the surrender of income of ₹ 57.23 lakhs during course of search, the assessee has offered income of ₹ 77,93,467/- in the return of income on account of excess stock. However, while framing the assessment, the Assessing Officer has not only made addition on account of excess stock, loose paper etc, but also made addition by estimating the sales on the basis of two bills found at the premises of M/s. New Sardar Steels. The Assessing Officer observed that Bill No.1284 dated 15.11.2006 of 176.070 M.T of Anant Steels Private Limited issued in the name of New Sardar Steel found at the premises of New Sardar Steels. Similarly bill no. 1399 dated 18.11.2006 of 22.608 M. T. of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted sales. The ld. CIT(A) deleted the addition after calling for remand report on the submission given by the assessee with regard to the actual sale bill and bills related to factory consumption, and the bills found at the premises of Sardar Steels and loose papers found at the premises of the Director of the Company. After considering the remand report and the assessee's reply thereon, the CIT(A) found that there was no merit in the Assessing Officer's estimate of sale based on certain loose papers, which were clearly numbering 10 including other papers referred by the Assessing Officer. It was found that the transactions recorded in such loose papers were in the nature of summary of transaction and there are no indication whatsoever to draw the inference that these were summary of the cash receipts and payment of a single day as neither opening balance are indicated in the paper nor closing balance have been drawn. The CIT(A) observed that approach of the Assessing Officer for treating such receipts and payments as transaction of a single day and that by arriving at an average receipt in a single day at ₹ 48.36 lakhs cannot be said to be supported by facts on record and ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bills issued by both the concerns, Bills issued for factory consumption, bills issued for actual sales, quantity related to goods sold in respect of each of the two concerns. The Assessing Officer vide its letter dated 17.12.2009 sent its remand report, which is also forming part of the CIT(A)'s order as per Annexure 'A', wherein Assessing Officer has duly verified and confirmed the total sales bills issued by each of the concern for the purpose of factory consumption and the bills actually issued for sales in respect of each of the concern i.e. M/s. Anant Steels Private Limited and M/s. Shivangi Estates Limited. In the remand report, the Assessing Officer has also duly incorporated quantity related to the goods sold, quantity per bill, sale value of each of the concern and the sale value per M. T. in respect of each of the concerns. As per the remand report, precise figure/quantity of the details discussed above are as under :- S.No. Particulars Anant Steels P. Ltd. Shivangi Estate Limited 1. Total Sale bill issued 1315 1409 2. Bills related to the Factory consumption 363 315 3. Bills actually issued for sale 952 1094 4. Qty. related to the goods sold 12155.74 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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