9911796707
TMI Blog2013 (4) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... uting undisclosed income wherein he excluded receipts of Rs. 1,91,02,221/- (total in respect of three assessees) as capital receipts as called by the assessee without there being any evidence or without the assessee explaining the nature and source of such receipts. 3. Brief facts of the case are case are that a search operation u/s 132 of the Act took place on 16-11-1999 on the premises of Manek Group and associated persons including Gujrat Multi Gas Base Chemicals Pvt. Ltd, (GMGB) Manek Chemical Pvt Ltd (MPCL) and Sri Dashrathbhai V. Patel ,Proprietor Sri Ram Chemical Industries (SRCI) in response to notices u/s 158BC, return for the block period from 01-04-1984 to 16-11-1995 filed declaring nil undisclosed income. The Assessing Officer provided copies of the seized documents and served notices u/s 143(2)/142(1) along with questionnaires. The replies of the assessees were received. Assessing officer reproduced partly the contents of his show cause notices and submissions of the assessee in his orders. The assessing officer has also referred to the statements of Sri Dashrathbhai Patel, Proprietor of SCRI and director of GMGB and MCPL and of the accountant of the Group namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of unaccounted transactions in cash as reflected in the aforementioned seized annexures. This was detailed/summarized by the A.O. in his relevant show cause notices partly reproduced in his assessment orders. 5. The reply of these assessees which have also been partly reproduced by the A.O. in his assessment order it was submitted that the referred seized books of account contained the consolidated picture of the unaccounted transactions of the three group concerns namely the three appellants. The entries in these books were in the nature of credits and debits. The credit entries reflected receipts, both on revenue and capital account, while the debit entries reflected business expenses and other outgoings and it was the cumulative total effect of these debit/credit entries that was required to be considered for determining the undisclosed income and not the gross total of the entire receipts as had been proposed by the A.O. The entire receipts could not be considered as concealed income, since the unaccounted receipts were not fully in the nature of trading receipts and the same included several items in the nature of capital receipts not liable to income-tax. There wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- 5,90,426/- - 26,99,706/- 94-95 72,96,770/- 23,79,360/- - 96,76,130/- 95-96 53,61,832/- 10,10,990/- 33,955/- 64,06,777/- 96-97 1,05,80,948/- 14,74,255/- 10,02,859/- 1,30,58,062/- 97-98 96,85,670/- 11,70,721/- 25,84,728/- 1,34,41,119/- 98-99 1,04,01,242/- 23,92,213/- 53,01,957/- 1,80,95,412/- 99-2000 81,65,324/- 14,44,841/- 83,15,906/- 1,79,26,071/- 2000-01 35,81,207/- 11,58,813/- 43,70,149/- 91,10,169/- 6,19,99,307/- 1,46,50,246/- 2,16,09,554/- 9,82,59,107/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s represented business revenue expenditure. The nature of the receipts on the credit side and of the payments representing expenses and outgoings on the debit side was ascertainable and identifiable from a bare scrutiny of the related seized record, particularly in view of the clear and discernible narration against such entries. It was emphatically urged that the A.O. should have computed the undisclosed income and its allocation among the assessees, only after excluding the receipts and outgoings on the capital account and the business expenses, on the following basis: Summary of Receipts Payments as per Seized Books And Determination of Net Undisclosed Income Amount Rs. Amount No. Total Receipts (added as income by A.O.) 9,82,59,103/- Less: Receipts on Capital Account (not in the nature of taxable income as per Sr. No. 7 of Paper Book) 1,91,02,221/- Balance being Undisclosed Sales 7,91,56,882/- Total Payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trated this with examples. (b) The total of receipts i.e. 9,82,59,103/- (Col. A) is not disputed. It is also as per the quantum taken in the assessment order. (c) The total of Receipts on Capital Account i.e. Rs. 1,91,02,221/- (in Col. B) and the total of Payments on Capital Accounts Rs. 3,01,16,524/- (Col. E) also tallied with the figures mentioned in the seized records. The A.O. however felt that narration (in Col. B) was not reported in full and receipts in name of AO BHI appeared to be of revenue and not of capital nature. Similarly it was not clear if the payment/outgoing (in Col. E) was on capital account. (d) The totals in Col. C and Col. G represented the difference of the totals of Col. A and B and Col. C and F respectively, and were subject to variation accordingly. (e) The quantum mentioned in Col. D, i.e. Rs. 8,89,48,819/- is not backed by date-wise-page-wise details (of seized documents), though the yearly totals are found in seized Annexure A-18 (being summary sheets). (f) The expenses of Rs. 5,88,32,295/- (Col. F) is deduced, being different of totals in Col. D and Col. E and so depends on variations in Column D/E. The AO in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs 3.01 crores, under Col. E was not clear whether the payment was on revenue of capital account, it was submitted that the same had no meaning as the appellant had not treated the same as admissible expenditure for computing the net undisclosed income. (f) The A.O. has himself accepted the veracity of the figures appearing under Col. D and Col. E and therefore, the quantum of business expenditure of Rs. 5.88 crores under Col. F (being the difference between Col. D and Col. E) do not call for any further verification. (g) Thus, the undisclosed income worked out at Rs. 2.03 crores should not be a matter of dispute. It was further confirmed that the charts/analysis of seized documents submitted in the appellant's paper book, had been verified by the A.O. with the copies of the seized documents, as given to the appellant by the department and the same had also been duly certified in the undertaking given ' the appellant to the A.O. 13. The specific observations of the A.O. on the analysis of the seized documents carried out by him with reference to the charts furnished by the assessees in his paper book and the explanation of the assessees, in response to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or various personal purpose s of D V Patel and hence the same is shown as payment to Mehsana-D.V. Patel. 21 A/6 55 to 74 Detailed narration of each entry with name of the person from whom cash is received back. Petty Cash Return These entries appearing in Capital Outgoing relate to payments made for various parties for various purposes and the same not being in the nature of admissible expenditure, have been shown on the capital account and grouped as Petty Cash Return as described under the common group heading as appearing in the Summary Sheet A/18 21 A/12 125 Rs. 25,000/- Rs. 15,000/- Cash (Heading-R. Gandalal co.) M.R./Go The heading relates to the party Mehsana R. Gandalal Co., which has been referred to in abbreviated from as M R/Go. While page 125 refers to two amount of Rs. 25000 an Rs. 1500 separately, the Summary Sheet Annexure A/18 reflects the total of the two being Rs. 40,000 21 A/6 63, 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senting small advances to various employees as advance against salary. Since this amount is treated as payment on capital account the same has not been claimed as allowable business expenditure 21 A/6 55 Send to Janta Soap through Somabhai Angadia KA/R Rs. 1,00,000/- This amount appearing in Capital Outgoing was sent through Somabhai Angadia to Usha Chemicals and Janta Soap. Since this finance transaction was made on behalf of Rambhai of Kalol, the same has been reflected in the Summary Sheet Annexure A/18, against the name of KA R, abbreviated for KAlol Rambhai. 21 A/6 56 Rs. 25,000/- (Cash Received from A/O murv Traders) Rs. 25000/- (cash paid) KA/R This amount appearing in Capital Outgoing was a personal advance given to Rambhai N. Patel of Deepak Ceramics, Kalol. Since this finance transaction was made with Rambhai of Kalol, the same has been reflected in the Summary Sheet Annexure A/18, against the name of KAR, abbreviated for KAlol Rambhai. The A.O. has errone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es out of the same were capital receipts on account of loans, etc. from various persons as indicated from the narration against the relevant entries and further cross verified by entries in the summary sheet i.e. Annexure A-18. The doubts of the A. O., as expressed in his Report about the nature of these receipts being capital or otherwise, are only in relation to the brevity of the narration. The A.O also expressed his reservation in regard to the entry appearing in the name of AO BHI . I find that these doubts and reservation of the A.O. have been satisfactorily explained by the appellant in its response. Thus the net figure of the undisclosed sales (after deducting the amount of receipts on capital account from the total receipts) as appearing in Col. C at Rs. 7,91,56,882/- as per the appellant's contention is accepted. 13.1 The appellant has shown total payments on the debit side at Rs. 89,48,819/- representing outgoings on capital account, business expenses and other inadmissible expenses. The year-wise break up of these payments for the Financial Years 1993-94 1999-2000 as appearing in the seized records has also been given for the three Financial Years 1990-91 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the computation of the total undisclosed income is the overall total of yearly payments and classification of expenditure as allowable or disallowable being in the nature of revenue or capital, and the verification of the break up of daily figures of such expenses is not relevant for this purpose. 13.4 Even in the assessment order finalized u/s. 158BC (under Para 14-1)., the A.O. has treated the entire receipts as undisclosed income, mainly on the count that to claim the relevant expenditure pertaining to undisclosed income, the onus lies on the assessee to provide basic details such as bifurcation of the nature of expenditure as basis of expenditure, personal expenditure, capital expenditure etc. and that the assessee has not produced the necessary working of the expenditure incurred for earning the unaccounted income. In view of the fad that the appellants have raised the relevant claims and contentions in regard to admissible business expenditure during the course of the appeal proceedings and the same has also been examined by the A.O. under his report submitted after due verification, I am of the opinion that the appellants' claim for deduction of business expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,43,871 0 13,31,060 1992-93 5,35,351 1,39,575 0 6,74,926 1993-94 10,00513 3,48,979 0 13,49,492 1994-95 14,05,380 2,90,505 0 16,95,885 1995-96 15,14,910 2,29,775 11,25,860 28,70,545 1996-97 5,77,582 74,169 9,29,478 15,81,230 1997-98 27,28,443 8,48,904 14,84,516 50,61,863 1998-99 19,65,806 3,47,996 9,15,571 32,29,373 199-2000 10,97,118 4,70,641 3,32,099 18,99,858 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission of the assessee to A.O. for verification. The assessing officer submitted his remand report, assessee s comment on this remand report of the A.O. were also obtained by Ld. CIT(A). In para 12 of his order which we have already reproduced in para 13 of this order, the Ld. CIT(A) analyzed the entry-wise explanation of the assessees in respect of variations pointed out by assessing officer in his report and found that contention of the assessees was correct and justified and therefore the same was accepted by him. While doing so he followed the ratio of the two decisions in the cases of CIT vs. S.M. Omer 201 ITR 608 (Cal) and CIT vs. President Industries 258 ITR 654 (Guj) of jurisdictional High courts wherein it was held that entire undisclosed sales could not be added as income of the assessee in as much as for earning this income the assessee had made certain expenditure and additions could be made only to the extent of estimated profits embedded in sales. We further find that during the pendency of appeals before Ld. CIT(A), these assessees moved applications before Settlement Commission offering total undisclosed income for the block period as under:- Na ..... X X X X Extracts X X X X X X X X Extracts X X X X
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