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TMI Blog2002 (6) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... could not furnish any plausible explanation for the deposit of security with Markfed. 4. In the first appeal before the CIT(A), it was stated that the amount of Rs. 20,000 was available as cash in hand and, therefore, the addition should have been deleted. However, the learned CIT(A) observed that no evidence has been furnished by the assessee regarding the availability of the cash and accordingly the addition of Rs. 20,000 was confirmed. 5. Before us, Shri Padam Bahl, CA, the learned counsel for the assessee, submitted that the AO has assessed the income of Rs. 57,000 and Rs. 88,000 for the asst. yrs. 1988-89 and 1989-90, respectively. According to him, cash of Rs. 1,45,000 was available with the firm. He also brought to our notice that the learned CIT(A) had confirmed the addition of Rs. 37,184 for the asst. yr. 1994-95 and Rs. 4,060 for the asst. yr. 1996-97. As such, cash in hand to the extent of Rs. 41,244 was also available with the assessee-firm on account of aforesaid additions. Accordingly, it was submitted by the learned counsel for the assessee that the assessee-firm had rotated cash in hand of Rs. 1,86,244 (Rs. 1,45,000 plus Rs. 41,244) available with it and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee as the book profits could be." In the instant case, it is beyond doubt that the additions of Rs. 37,184 and Rs. 4,060 were made in the hands of the assessee on account of undisclosed income for the asst. yrs. 1994-95 and 1996-97, respectively. The deposit under consideration is dt. 5th June, 1996. In other words the deposit was made after the period relating to the asst. yr. 1996-97. From the above facts it would be clear that the amount was available with the assessee for making deposit with Markfed. Considering the facts as well as the ratio laid down by the Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah Co., we find no justification in making the addition of Rs. 20,000 and accordingly the same deserves to be deleted. Accordingly, these grounds are allowed. 7. Ground Nos. 3 and 4 read as under: "3. That the learned CIT(A), Amritsar, has grossly erred in confirming the addition of Rs. 1,89,904 on account of the income for the period 1st April, 1997 to 9th Oct., 1997, on the ground that books of account were not available on the date of search and in applying the provisions, of s. 145 in the block assessment. 4. That both the learned CIT(A), Amri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7,737 had been made by the AO in the light of various seized documents and also in the face of adverse findings regarding non-disclosures of commission and other income. As regards the claim of depreciation at Rs. 96,148, the learned CIT(A) observed that it was not clear whether the assessee actually claimed the same before the AO. According to him, the income of Rs. 1,89,904 as disclosed by the assessee was rightly assessable since the books of accounts on the date of search were not available. Accordingly, the addition of Rs. 1,89,904 was confirmed whereas remaining addition of Rs. 7,737 was restored to the AO to ascertain the extent and nature of addition from the seized material. 9. Before us, Shri Padam Bahl, CA, the learned counsel for the assessee, reiterated the submissions made before the authorities below and also submitted that the AO while computing the addition at Rs. 1,97,641 allowed the depreciation only for half of the year whereas the claim of the assessee was for full year and the claim was in accordance with law. He further pointed out that in the facts and circumstances of the case, there was no justification in invoking the provisions of s. 145 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. We have heard the learned representatives of both the parties. It appears that the AO while making the addition estimated the income of the assessee for the period 1st April, 1997 to 9th Oct., 1997, by applying the net profit rate of 8 per cent on the total receipts of Rs. 36,72,987. He allowed the benefit of depreciation only for half year but disallowed the claim on account of interest and salary to the partners. It seems that the AO allowed the depreciation on the basis that the period involved was 1st April, 1997 to 9th Oct., 1997, and considering that the depreciation was allowed for half year. We find merit in this contention of the learned counsel for the assessee that the benefits for interest and salary to the partners is also to be given for the period 1st April, 1997 to 9th Oct., 1997, which is available as per law. It is made clear that the issue relating to the application of GP rate of 8 per cent on the gross receipts was not seriously contested by the learned counsel for the assessee. In that view of the matter, we find substance in the alternative argument of the learned counsel for the assessee that the deduction on account of salary and interest paid to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nior Departmental Representative, submitted that the AO was justified in including the income of the assessee estimated under the provisions of s. 145 in block period as undisclosed income because the books of accounts were not produced before the AO, so there was no alternative except to estimate the income under the provisions of s. 145 of the IT Act, 1961. 12. After considering the above submissions of both the parties, we are of the view that the AO was not justified in treating the income of the period 1st April, 1997 to 9th Oct., 1997, as undisclosed income of the assessee. In the instant case, it is not in dispute that the figures of total receipts were taken by the AO from the bank account of the assessee and nowhere it is claimed by the Department that the contract receipts were found unrecorded during the course of search. The AO has not disputed the contract receipts which were shown in the regular bank account and TDS on contract receipts was deducted by the contractual party. The amount of TDS was also not disputed by the Department. Further, it was also brought to our notice that refund of Rs. 1,45,000 was allowed for the asst. yr. 1998-99 on the basis of return su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this is also the effect of the amendment in s. 158BA of the Act with retrospective affect from June, 1995. No question of law arose from its order." It would also be relevant to point out here that during the course of search nothing was detected by the Department to justify that the assessee, in fact, has undisclosed income in the form of contract receipts. In that view of the matter also, no addition is called for in the block period. Accordingly, ground Nos. 3 and 4 are disposed of. 13. Vide ground No. 5, the assessee contended as under: "5. That the learned CIT(A), Amritsar, has grossly erred in not appreciating that a TDS of Rs. 1,95,410 had been deducted from the assessee-firm and that the books of account were never demanded from the assessee at the time of search." 14. It was the contention of the learned counsel for the assessee before us that this ground is co-related with ground Nos. 3 and 4. Since, we have already disposed of ground Nos. 3 and 4, so no separate findings are required to be given for this ground. 15. Ground No. 6 raised by the assessee, reads as under: "6. That the learned CIT(A), Amritsar, has grossly erred in confirming the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department. In our view, there is merit in this contention of the learned counsel for the assessee that the Department cannot ask the assessee to do something impossible and at the same time, penalise him for not being able to do so. Admittedly, the photocopies of the documents were made available to the assessee by the IT Department in the month of October, 1998. Considering all the facts of the present case and also keeping in view the ratio of the decision of the Tribunal, Patna Bench, in the case of Dy. CIT vs. Late Ratan Lal Jain, we are of the opinion that in the instant case, the assessee was prevented by sufficient cause from filing the return for the block period in time. In our view, reasonable cause can be reasonably said to be a cause which prevents a man of average intelligence or ordinary prudence, acting under normal circumstances, without negligence or inaction or want of bonafides. 18.1 In view of the above, we do not find any justification in levying the interest under s. 158BFA of the IT Act, 1961. We accordingly direct the AO not to charge interest under s. 158BFA of the Act. 19. Now, we will take the Departmental appeal, i.e., IT(SS)A No. 16/Asr/2000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted by way of application by stating as under: "It is humbly submitted that the diaries as per Annexs. A-43, A-33, A-14, A-9, A-96, A-98, A-93 and A-94, etc., which have been made the basis for addition for Rs. 12,27,700 have been written by Sh. Surjit Singh s/o Sh. Joginder Singh. This fact was brought to the notice of AO by the assessee on several occasions as is evident from photocopy of the letters addressed to the Asstt. CIT. It was presumed that the AO had accepted the submission of the assessee. Although, an affidavit dt. 2nd Oct., 1999, had been procured from Sh. Surjit Singh, no need was felt to file the same with AO. This is evident from the submission made in the case of Daljit Singh Bros., Amritsar. The assessee submitted that, "It is also submitted that the relevant papers under reference were not seized from any of the partners or business premises of the firm. The papers were seized from the residence of Sh. Joginder Singh where Surjit Singh s/o Sh. Joginder Singh also resides. It appears that the papers are in the handwriting of Sh. Surjit Singh and only he is competent to explain the nature of those expenses". Again Sh. M.R. Bhagat, vide his letter in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t., 1999, i.e., the date of last hearing. Moreover, 2nd Oct., 1999, was a national holiday, how can an affidavit be got sworn with the judicial authorities on that day. The documents submitted in other cases were well after the closing of the assessment proceedings in this case and they were also not supported by any evidence." The learned CIT(A) after considering the circumstances narrated in the application of the assessee and reply of the AO came to the conclusion that failure to furnish affidavit before the AO occurred due to the presumption that the explanation of the assessee had been found to be satisfactory. He further noted that the papers were in the handwriting of Sh. Surjit Singh and this fact was also brought to the notice of the AO during the block period assessment proceedings. So, it was open to the AO to make necessary querries from Sh. Surjit Singh and since these enquiries were not made the assessee was under the bona fide belief that its version had been found to be acceptable and, therefore, the learned CIT(A) allowed the admission of additional evidence in the form of affidavit. 21. After hearing the rival submissions, we are of the view that the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00, Rs. 27,475, Rs. 40,200 are being surrendered in the return to be filed for the block period." Later on vide a written reply filed on 6th Oct., 1999, Sh. Bahl submitted that "That A-93, A-94, A-96, A-98 do not belong to our firm as is clear from the documents themselves." The assessee has changed his version now and claims that the abovementioned annexures do not belong to it, but also failed to furnish the name of the persons to whom these documents pertain to, which is required as per s. 132(4A) of the IT Act. The onus is on the assessee. He just cannot deny the ownership of these papers when these have been found from its premises. Once it has admitted that amounts mentioned in the annexures "being surrendered" which neither if surrendered in its return nor in the two returns of the group which were filed on 30th Sept., 1999. Now its disown these without stating as to whom these annexures belong to. On some of the pages source of receipt and dates have also been mentioned as "K.L." which stands for Sh. Kharati Lal, who admitted of having cash of the assessee-firm at the time of search at his residence, thus establishing a link with the firm. If it does not belong to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness run by the assessee and the alleged money paid to the Government officials. It was stated that the assessee had income from transportation of trucks to fertiliser company and was not engaged in any personal business in which it could be held to have incurred the expenses as payment to any Government officials. It was submitted that the papers on the basis of which the addition was made were written by Sh. Surjit Singh and not by assessee. As such the assessee had proved that the diary was not seized from its possession. Sh. Surjit Singh was never examined by the AO even though he had admitted in his affidavit that the papers were in his handwriting, however, the AO has not accepted the contents of the affidavit. Accordingly, it was stated that the assessee has discharged the initial onus that laid on it and hence the notings in the papers could not be used against the assessee. The learned CIT(A) after considering the submissions deleted the addition by observing as under: "10.3, I have considered the above facts and arguments. In my appellate order No. A-210/99-2000, dt. 19th April, 2000, in the case of Daljit Singh Bros., Goal Bagh, Amritsar, which is a sister-concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly during the financial year 1993-94, it was doing handling on behalf of the dealer and the company used to pay dealer directly, so the amount had been wrongly debited in the account of the assessee. The AO made the addition by observing that the explanation of the assessee was not having any force and accordingly the addition of Rs. 4,64,817 was made in the asst. yr. 1994-95 and another addition of Rs. 50,751 was made for the asst. yr. 1996-97. 25. In the first appeal before the learned CIT(A), it was stated that if at all any addition was called for, it was only for the profit earned by the assessee in respect of those receipts and not the entire receipts. The reference was made to the decision of the Chandigarh Bench of the Tribunal in the case of Wazir Singh vs. Asstt. CIT (2000) 108 Taxman 291 (Chd)(Mag) and also to the decision of the Tribunal, Ahmedabad Bench, in the case of Kishor Mohanlal Telwala vs. Asstt. CIT (1999) 64 TTJ (Ahd) 543, wherein it has been held that Chapter XIV-B taxes the undisclosed income and not undisclosed receipts. The learned CIT(A), after considering the submissions of the assessee and the decisions quoted, as mentioned above, came to the conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that the assessee earned a GP rate of 8 per cent only on the contract receipts, so there was no justification in treating the unaccounted receipts as the income of the assessee. In that view of the matter, we are of the view that the learned CIT(A) was justified in the directing the AO to consider only the income of Rs. 37,180 and Rs. 4,060 for the asst. yrs. 1994-95 and 1996-97, respectively. We are also fortified by the Third Member decision of the Tribunal in the case of ITO vs. Gurubachan Singh J. Juneja, wherein it has been held that the CIT(A) was justified in deleting the addition of Rs. 10,85,003 made on account of unexplained cash sales. It has been further held that the value of cash sales cannot be added to the total income as there was no material on records that the assessee made the investment to make unaccounted sales. Accordingly, it was directed by the Tribunal that the GP can be applied to the unaccounted sales. Ground No. 2 stands disposed of in the manner discussed above. 27. Vide ground No. 3, the grievance of the Department relates to the deletion of additions of Rs. 46,693, Rs. 16,327 and Rs. 3,50,809 for the asst. yrs. 1995-96, 1996-97 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the various truck owners, but in the absence of any evidence the whole of the liabilities cannot be treated as genuine. The assessee is allowed a benefit of 10 per cent of the total transportation charges debited in the P L a/c as liability and worked out as under: Asst. yr. Transportation Charges Rs. 10% Transportation Charges Rs. 1995-96 30,62,422 3,06,242 1996-97 41,30,436 4,13,044 1997-98 38,76,673 3,87,667 The peak of the difference of the liability under this head and these amount in the respective assessment years are added to the income of the assessee, which is worked out as under: Asst. yr. Liability shown Rs. 10% of TC Rs. Difference Rs. 1995-96 3,54,935 3,06,242 48,693 1996-97 8,78,064 4,13,044 4,65,020 1997-98 12,03,496 3,87,667 8,15,829 Thus, an addition of Rs. 48,693 in the asst. yr. 1995-96, Rs. 4,16,327 in the asst. yr. 1996-97 and Rs. 3,50,809 in the asst. yr. 1997-98 is added to the undisclosed income of the assessee." 27.2 Before the CIT(A), it was explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish the genuineness of the liability. Therefore, the action of the AO was justified in making the additions, submitted by the learned senior Departmental Representative. 27.4 In his rival submissions, Shri Padam Bahl, CA, the learned counsel for the assessee, submitted that the assessee explained before the AO that the funds of the assessee remained blocked on 31st March, and as a result, the transport charges remained unpaid on 31st March of every year. It was stated that the assessee filed the list of transport charges payable to various truck owners giving the list of truck numbers. However, the AO treated the transport charges payable as on 31st March of every year to the extent of 10 per cent of total transport charges as unexplained liability of the assessee and treated the same as undisclosed income of the block period. It was vehemently argued that the allegation of the AO that the amount in excess of 10 per cent of transport charges must be paid by the assessee out of undisclosed income, was totally baseless and was only conjectures devoid of any evidence. The learned counsel for the assessee, therefore, justified the learned CIT(A) in coming to the conclusion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 996, are not recorded in the books of accounts. No proper or satisfactory explanation has been furnished by the assessee, therefore, a sum of Rs. 12,608 is added to the undisclosed income of the assessee in the asst. yr. 1997-98." Before the learned CIT(A), it was submitted that the addition was not called for as the expenses were allowable in view of the decision of the Tribunal, Ahmedabad Bench "A", in the case of Ruby Builders vs. ITO reported in 50 BCAJ 526 and in the case of S.F. Wadia vs. ITO (1987) 27 TTJ (All) 437. The learned CIT(A) after considering the submissions of the assessee observed that the AO himself has held that a sum of Rs. 46,500 represented transportation charges. On that basis, he held that the expenditure was an allowable business expense. Accordingly, the addition of Rs. 46,500 was deleted. 28.2 As regards the additions amounting to Rs. 14,040 and Rs. 12,608 for the asst. yrs. 1996-97 and 1997-98, respectively, the learned CIT(A) observed that the AO has not given any finding. He, therefore, restored the issue to his file for fresh decision. 28.3 Before us, the learned senior Departmental Representative submitted that the assessee had not furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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