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TMI Blog2022 (8) TMI 1544X X X X Extracts X X X X X X X X Extracts X X X X ..... s as admitted by the assessee during the appellate proceeding? - In this regard we note that assessee itself has admitted that sales were made outside books in order to gain some extra profit besides commission and admitted to have earned profit around 6.6% on such unaccounted sale. Thus, we find no infirmity in the order of CIT-A with respect to such addition made by CIT-A in his appellate order. Hence, the addition made by the learned CIT-A is hereby confirmed. Enhancement of the addition by CIT-A on account of alleged purchases made by the assessee outside the books of accounts - whether the learned CIT-A can make the addition of altogether a new item which was not subject matter of dispute at the assessment stage? - CIT-A has exceeded his jurisdiction by making the addition of an item representing the unaccounted purchases which was not subject matter of dispute before the AO. DR at the time of hearing has also not brought anything on record contrary to the argument advanced by assessee. Accordingly, we set aside the finding of the learned CIT-A, and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is partly allowed whereas the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T MEMBER AND SMT. MADHUMITA ROY, JUDICIAL MEMBER For the Assessee : Shri S. N. Soparkar Shri Parin Shah, A.Rs. For the Revenue : Shri V. K. Singh, Sr. D.R. ORDER PER BENCH: The above seven appeals (six by assessee and one by Revenue) arise from respective orders of the Commissioner of Income Tax (Appeals) ( CIT(A) ) for assessment years mentioned above. ITA No. 3048/Ahd/2014 2. The assessee has raised the following grounds of appeal: 1. Ld. C1T (A) erred in law and on facts in holding that unaccounted profits derived on unaccounted sales of Rs. 5,40,17,485/- remained to be offered by the appellant. Ld. CIT (A) ought to have held that once the unaccounted sales are regularized in the books of the appellant income earned on total sales is offered separate addition of profits amounts to double taxation. It be so held now. 2. Ld. CIT(A) erred in law and on facts in making addition of estimated GP of Rs.37,81,224/- on unaccounted sales failing to consider that income of Rs.49,75,530/- offered on total sales already includes profits earned on unaccounted sales. Ld. CIT(A) ought not to have made double addition of profits. It be so held now. 3. Alternatively and without prejudice to the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the year under consideration has shown balance of sundry creditor in the name of M/s KIFL for an amount of ₹ 9,22,40,790/- as on 31st of March 2009 which was inclusive of the opening balance of Rs. 4,15,66,015/- only. As such the credit balance of the current year was worked out at ₹ 5,06,74,775/- (Rs. 9,22,40,790.00 4,15,66,015.00) only. On the contrary, the company namely M/s KIFL has shown receivable in its balance sheet as on 31st March 2009 in the name of the assessee at ₹ 96,92,659/- only leading to a difference of Rs. 4,09,82,116/- representing the excessive amount of sundry creditor shown by the assessee. 4.2 On question about the impugned difference by the AO, the assessee failed to reconcile the same. Therefore, in the absence of any reconciliation by the assessee, the AO treated the impugned amount of difference of ₹ 4,09,82,116/- as unexplained cash credit under section 68 of the Act which was added to the total income of the assessee. 5. Aggrieved, assessee preferred an appeal to the learned CIT-A. 5.1 The assessee before the learned CIT-A has furnished various additional evidences on many occasions and likewise the learned CIT-A has also forw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor who made direct deposit in the bank of M/s KIFL, the assessee failed to provide the same. Now the assessee came up with entirely new submission. Therefore, the additional evidence submitted by the assessee cannot be relied upon or accepted. The AO in the remand report submitted that the assessee produces 5 individuals claiming the cash customer, but on examination, these person found to be daily wage laborers or rickshaw puller, not having PAN, bank account or any business arrangement or establishment. They received commission of Rs. 200 to 500 for alleged sale shown in their name. 5.5 However, the learned CIT-A after considering the facts in totality held that the provision of section 68 of the Act cannot be applied. However, the ld. CIT-A made the addition of GP on unaccounted sale and also made addition for the unaccounted purchases by observing as under: 3.31. I have considered all the submissions and rejoinders of the appellant, remand reports of the A.O. and Addl.CIT and it is found that the appellant has sold the stock of goods lying with him on consignment received form KFIL and the sale proceeds thereof have not been recorded in the books of accounts. These sale proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission dtd. 4.9.2014 (reproduced in preceding paras) has replied to the various points raised by the Addl.CIT, Range-12, Ahmedabad in his letter enclosed alongwith the AO's remand report. The same have been verified and found duly replied by the appellant. 3.33. During the course of appellate proceedings, on verification, it was found that the appellant has sold the accounted stock without recording into the books of accounts and the unaccounted sales was in excess to the closing stock shown in the books of accounts. Further, it is found that the unaccounted sales were at Rs.5,40,17,485/- against the book stock only of Rs.2,93,12,514/- which means for the balance unaccounted sales the appellant had made unaccounted purchases and same has not been recorded in the books of accounts. The summary of the stock position in this regard is depicted as under :- Opening Stock 178.960 Tones Add: Purchases 25339.830 Tones Total 25518.79 Tones Less: Sales 24217 Tones Closing Stock 1301.79 Tones Valued at Rs.2,93,12,514/- Unaccounted Sales 1843.25 Tones Valued at Rs.5,40,17,485/- So it is apparent from the above that the appellant has made the unaccounted sale of 1843.25 Tones as agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities have already been debited in the books of accounts. Further, it is noticed that the unaccounted sales of Rs.5,40,17,485/- includes the gross profit of Rs.37,81,224/- thereupon and excluding this gross profit the cost of goods sold works out to Rs.5,02,36,261/- (Rs.5,40,17,485/- (-) Rs.37,8l,224/-). Against the cost of goods sold at Rs.5,02,36,261/- the appellant was having the closing stock of Rs.2,93,12,514/- only in its books of accounts which means the rest of the stock has been purchased by the appellant out of books which works out to Rs.2,09,23,747/- (Rs.502,36,261/- (-) Rs.2,93,12,5,14/-) for which addition u/s.69 C is warranted. 3.36. In other words on the unrecorded sales of Rs.5,40,17,485/- the addition on account of gross profit of Rs.37,81,224/- and the unaccounted purchases u/s,69C amounting to Rs.2,09,23,747/- totaling to Rs.2,47,04,971/- is worked out as above for which an enhancement notice vide order sheet entry dtd. 05.09.2014 was given to the appellant to give submission upon the above enhancement. The appellant was asked to give his submission upon the above enhancement. The appellant was asked to give his submission upon the aforesaid show cause of enh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned AR, there was no difference between the purchase shown by the assessee and the sales shown by the concerned party and the sundry creditor was arising out of such purchases. Therefore, the question of doubting or making any addition of such sundry creditor without disturbing the corresponding purchases does not arise. 7.1 The learned AR further contended that there was no issue arising from the order of the AO with respect to the investment in the unaccounted purchases under section 69C the of the Act and therefore no addition is warranted by way of enhancement. As such the ld. CIT-A has no power to enhance the income of the assessee with respect to the item of addition which was not disturbed by the AO in the assessment order. The learned AR in support of his contention has relied on the judgment of Hon ble Supreme Court in case of CIT vs. Shapoorji Pallonji Mistry reported in 44 ITR 891. 7.2 On the other hand, the learned DR before us filed a paper book and contended that it was the duty upon the assessee to furnish the documentary evidence that the debtors have made the payment directly to the supplier namely KIFL. Thus the AO rightly treated the amount of difference as une ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egative. It is for the reason that such credit balance was arising out of the purchases which have not been disputed. As such the amount of credit was not reflecting against any loans and advances from the parties. In holding so we draw support and guidance from the judgment of Hon ble Allahabad High court in case of CIT vs. Pancham Das Jain reported in 156 Taxman 507/205 CTR 444, where it was held as under: The Tribunal had recorded a categorical finding of fact based on appreciation of materials and evidence on record that the said amounts represented the purchases made by the assessee on credit and, therefore, the provisions of section 68 could not be attracted in the instant case. The view taken by the Tribunal was correct and, therefore, there was no question of, making any addition under section 68. [Para 8] 8.2 The next controversy arises whether the addition can be made on estimated basis on the amount of unaccounted sales as admitted by the assessee during the appellate proceeding and elaborated above. In this regard we note that assessee itself has admitted that sales were made outside books in order to gain some extra profit besides commission and admitted to have earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonably possible. 8.4 In view of the above, we hold that the learned CIT-A has exceeded his jurisdiction by making the addition of an item representing the unaccounted purchases which was not subject matter of dispute before the AO. The ld. DR at the time of hearing has also not brought anything on record contrary to the argument advanced by the ld. AR for the assessee. Accordingly, we set aside the finding of the learned CIT-A, and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is partly allowed whereas the ground of appeal of the Revenue is dismissed. 9. In the result, the appeal of the assessee is partly allowed. Coming to ITA No. 3336/Ahd/2014 an appeal by the Revenue for A.Y. 2009-10 10. At the outset we note that the issue raised by the Revenue in its grounds of appeal has been adjudicated along with assessee s grounds of appeal in ITA No. 3048/Ahd/2014, where we have decided the issue vide paragraph no. 8 of this order partly in favour of the assessee and against the Revenue. For detailed discussion, please refer the aforesaid paragraph of this order. Hence the ground of appeal raised by the Revenue is hereby dismissed. 11. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation i.e. AY 2008-09. Hence, the ground of appeal filed by the assessee is hereby partly allowed. 15. The other issues raised by the assessee vide ground No. 5 6 of its appeal are either consequential or premature to decide at this stage. Hence the same are dismissed as infructuous. 16. In the result appeal of the assesse is hereby partly allowed. Coming to ITA No. 3448/Ahd/2016 an appeal by the assessee for A.Y. 2010-11 17. The assessee has raised following grounds of appeal: 1. Ld. CIT (A) erred in law and on facts in not adjudicating ground no. 4 challenging reassessment order passed by AO being invalid, bad in law and without jurisdiction as conditions required under the provisions of sec. 147 of the Act are not fulfilled. Ld. CIT (A) ought to have quashed the order passed in absence of 'reason to believe' that income escaped assessment. 2. Ld. CIT (A) erred in law and on facts in confirming addition made by AO of Rs. 2,93, 12,514/- opening stock u/s 69C of the Act simply following appellate order of A Y 2009/10. Ld. CIT (A) ought to have deleted addition allowing opening stock as expenditure against credit of sales. 3. Ld. CIT (A) erred in law and on facts in confirmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of accounts wherelt had actually been sold outside the books. It was held that there was actually no closing stock of this amount The appellant also has stated in its submissions that there had been unaccounted sales with delivery of goods for which there had been no entries ir the books of accounts and to cover up the same, fictitious bills for the same quantity and. vadue without actual delivery had been prepared. Considering the detailed order of the ld. CIT(A) in Asst. Year 2009-10, the discussion of the AO in her assessment order and the submissions made by the appellant, I am of the view that the AO was justified in making the impugned addition and the addition of Rs.2,93,12,514/- is confirmed. Grounds of appeal Nos. 1 to 6 are dismissed. 23. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 23.1 The learned AR before us contended that the amount of closing stock was brought forward as opening stock in the year under consideration. As such, brought forward opening stock cannot be disturbed without disturbing the closing stock of the earlier year. 23.2 On the other hand learned DR vehemently supported the order of the authority below. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of income nor concealed income. 2. Ld. CIT(A) erred in law and on facts confirming penalty on addition of alleged unaccounted purchases by mis-appreciation of factual position duly explained by the appellant. 29. The only issue raised by the assessee is that the learned CIT(A) erred in confirming the levy of penalty of Rs. 1,31,12,748/- on account of addition made u/s 69C of the Act on alleged unaccounted purchases. 30. At the outset, we note that the quantum addition made by the AO and confirmed by the learned CIT(A) were deleted by us vide paragraph no. 14 of this order in ITA No. 126/Ahd/2019. Thus, the question of concealment of income or furnishing inaccurate particular of income does not arise and therefore the penalty cannot be sustained. Under the provisions of section 271(1)(c) of the Act, the amount of penalty has been specified which shall not be less than hundred percent of the amount of tax sought to be evaded subject to the maximum limit of 300% of such amount. Under explanation 4 to section 271(1)(c) of the Act, the manner for quantifying the amount of tax sought to be evaded has been specified which has direct nexus with the additions/ disallowances mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained cash credit under section 68 of the Act. 35. The learned CIT(A) in appellate proceeding held that no addition under section 68 of the Act can be made on alleged difference in closing balance of creditor in assessee s books viz-a-viz creditor books. However the CIT(A) found that difference in closing balance arises due to proceeds of cash sale of Rs. 5,40,17,485/- which were directly deposited to the bank of creditor M/s KFIL without recording the same in the books of assessee. Thus the learned CIT(A) made the addition of estimated profit of Rs. 37,81,224/- on account of unaccounted sale of Rs. Rs. 5,40,17,485/-. Besides this the learned CIT(A) was also of the view that there was no sufficient inventory available in the books of the assessee to meet the unaccounted sale of Rs. 5,40,17,485/-. Accordingly the learned CIT(A) drawn inference that assessee made unaccounted purchase which was worked out at Rs. 2,09,23,747/- and in absence of source of purchase the addition of Rs. 2,09,23,747/- under section 69C of the Act was made. Thus, the learned CIT(A) made total addition of Rs. 2,47,04,971/- and initiated penalty proceeding under section 271(1)(c) of the Act for furnishing ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09,23,747/- under section 69C of the Act in concerned, we note that the quantum addition has been deleted by us vide paragraph no. 8 of this order in the assessee s appeal bearing ITA No. 3048/Ahd/2014. Once, the quantum addition on the basis of which penalty levied itself stand deleted, the question of concealment of income or furnishing inaccurate particular of income does not arise and therefore the penalty cannot be sustained. 37.2 Coming to levy of penalty on the addition of Rs. Rs. 37,81,224/- being estimated profit on account of alleged unaccounted sale. In this regard we find that the quantum proceeding and the penalty proceeding are different. Any addition or disallowances under quantum proceeding do not ipso facto empower the revenue authority to levy penalty under section 271(1)(c) of the Act. Further the addition made was based on estimation and it settled position of law by the various Hon ble High court that the no penalty under section 271(1)(c) can be sustained in case of estimated addition. At this juncture we feel pertinent to refer the judgment of Hon ble Allahabad High Court in case of CIT v. Norton Electronics System Pvt. Ltd [2014] 41 taxamm.com 280 [Allahabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained on account of addition of Rs. 37,81,224/- based on estimation. Accordingly we hereby set aside the order of the learned CIT(A). Hence the grounds of appeal raised by the assessee is allowed. 38. In the result appeal, of the assessee is allowed. Coming to ITA No. 128/Ahd/2019 an appeal by the assessee for A.Y. 2010-11 39. The assessee has raised following grounds of appeal: 1 Ld. CIT (A) erred in law and on facts confirming penalty levied by AO of Rs.90,87,566/- on disallowance of opening stock. Ld. CIT (A) erred in confirming penalty ignoring that appellant neither furnished inaccurate particulars of income nor concealed income. 2 Ld. CIT (A) erred in law and on facts confirming penalty on disallowance of opening stock without appreciating that as per audited books of account opening stock with quantity and value brought forward from earlier years were sold during the year. 40. The only issue raised by the assessee is that the learned CIT(A) erred in confirming the levy of penalty under section 271(1)(c) of the Act for Rs. 90,87,566/- on account of disallowances of opening stock. 41. At the outset we note that the quantum additions made by the AO and confirmed by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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