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TMI Blog2022 (10) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... Facts have been taken from the order of the Ld. CIT(A). 4. These grounds are against addition in gross profit of Rs. 1,38,17,091/- and addition of Rs. 31,07,529/- on account of variation in the valuation made by the customs authorities in the assessable value of goods imported. 5. The brief facts are that the assessee is a proprietor of M/s. Shikhar Enterprises and is wholesaler dealer of PVC films, Sheets, Tape, Leather clothes and shoes. During the financial year 2002-03, the assessee also started two new proprietorship concerns namely M/s. Sterling Impex and M/s. Diamond Overseas. 6. A search and seizure action under section 132 of the Act was carried out at the premises of the assessee on 16.02.2005 and in pursuance to which, notice under section 153A of the Act was issued on 27.10.2005 and served on the assessee. The assessee in compliance to the notice, filed a return of income on 07.12.2005 declaring income of Rs. 63,91,229/-. Thereafter, in pursuance to various notices, the Assessing Officer framed an assessment at an income of Rs. 2,35,19,018/-. 7. It was noted by the A.O. that a large number of loose papers were found and seized during the course of search on the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the sales without bringing in the record the name of the purchasing party and it is impossible to verify the genuineness of the rates charged and the goods supplied. The Assessing Officer thereafter has stated that the assessee makes sales against the cash only and it is in exceptional cases only that credit sales are made. 10. The Assessing Officer noted, that the assessee was also asked to furnish the addresses of the person to whom, as revealed from the loose papers seized, huge sales have as also referred to page 7 of Annexure A-1 seized from FD-12, Vishakha Enclave, Pitampura, New Delhi on the basis of which, it has been alleged that the assessee has received part payments in cash and part payments by drafts from the persons whose names have been given in coded abbreviations and the pattern of the above receipts also indicates that the assessee is in the practice of receiving the payments in two modes possibly with an intention to show the sale in the books of account to the extent of drafts received and the remaining amount of cash is not accounted for in the books of account. Apart from above, it was noted that several other pages 1,2, 4 to 6, 12 to 15, 18, 20 to 22 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business-which is from domestically to imported goods as well as the nature of goods dealt is depicted by the following table. Assessment Year Domestic items dealt in Assessment Year 2 001 - 02 Imported Leatherite Fabric Sales in % Decrease Over last yea r Decrease over 2 001 - 0 2 Increase ov er last year Increase ov er 2001 - 0 2 2002 - 0 3 60 % 60 % 1086 69 3 10 , 8 8 , 69 3 2003 - 0 4 72 % 80 % 257 43 , 0 2 , 25 7 2004 - 0 5 38 % 93 % 26 48 , 6 0 , 75 2 2005 - 0 6 95 % 99 % 100 97 , 2 1 , 50 4 (b) The volume of sales has multiplied many times from the sales of Rs. 384.99 lakhs in A.Y. 2001-02. The increase is not by simple percentage but by hundreds of percent. Assessment Year Sales Rs. In Lakhs % of increase Over A. Y. 200 1 - 0 2 Last Year 2002 - 0 3 1353 . 87 252 % 252 % 2003 - 0 4 3359 . 65 773 % 148 % 2004 - 0 5 3585 . 18 831 % 7 % 2005 - 0 6 4367 . 70 1034 % 22 % (c) The growth in the volume of sales can be achieved by reducing the margins and thereby increasing the total net profit. It will be observed that while the GP rate has changed, but the NP rate has not changed much. Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by holding that, neither the amount of purchase of goods is fully accounted for in the books of accounts and nor the sales have been fully accounted for and therefore, the book result of the assessee cannot be relied upon. So far as the conclusion regarding non-accounting for purchases is concerned, the same is essentially based on the bills of entries found and impounded during the course of search from the premises at 11, Paschimi Marg, Vasant Vihar, New Delhi. According to the A.O., these bills of entries give details of goods imported by the assessee and duty charged by the custom authorities. The AO found that a number of occasions, value of goods imported by the assessee was enhanced by the custom authorities and same was also accepted by the assessee. The AO found that in the instant year, the assessed value was increased by Rs. 31,07,529/-, the details whereof are tabulated hereunder: S. No Page No. Date Value Loaded per kg Original value Assessed Value Difference & Assessment year 2002 - 03 2003 - 04 2004 - 05 A- 14 15 30 . 04 , 03 $ 1 , 51 843401 1072434 229033 A- 35 43 2 . 12 . . 02 $ 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 16617 3107529 983612 19. It was to be noted that the assessee had challenged the action of customs authorities regarding variation in the invoice value in three cases where the Ld. Commissioner of Customs (Appeals) deleted the assessment of transaction value made by the customs authorities as no evidence was brought on record by the customs authorities to show that transaction value shown by the assessee was not true commercial value. The relevant portion of observation of Ld. Commissioner of Customs (A) is reproduced as under: "The Hon'ble Supreme Court's decision in the case of M/s. Etcher Tractors Limited, (2000) (122) ELT 321), has laid down that transaction value cannot be rejected without clear and cogent evidence produced by the department with regard to the quantity, quality, country or origin and place and time of import. It also well settled that it is for the department to produce the evidence to show that the transaction value is not acceptable in view of the comparable price. In this case, the department has not adduced even an iota of evidence to reject the transaction value on the ground that it is not the true com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellants." 20. In the case of the assessee, there is no evidence on record to suggest that assessee, has paid any amount over and above the purchase consideration shown in the purchase bills. It may also be noted that the excise duty payable on each bill on the difference in valuation made by the customs authorities @ 16% works out to be in a few hundreds and there is a force in the contention of the assessee that, the cost of filing of further appeal is higher than additional custom duty paid and it was not economical to contest the variations. Moreover, if an assessee opts to contest the variations, it delays the clearance of the goods and result into higher cost. Therefore, keeping in view the totality of the facts and circumstances of the case, I am of the opinion that only on the fact that the assessee had paid custom duty on the enhancement made by the custom authorities cannot be regarded has a valid basis to suggest that there was unaccounted purchases made by the assessee. 21. Hence, the Ld. CIT(A) held that the AO was not justified in assuming that the assessee had made unaccounted purchases solitary on the basis that the customs authorities had enhanced the va ..... X X X X Extracts X X X X X X X X Extracts X X X X
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