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Shri Alpesh B. Gada, Prop. Appu Textile Mills,10/A-1, PI No.501, Gopal Nagar, Kalyan Biwandi Road, Bhiwandi Vs. The Income Tax Officer (Central), 2nd Floor, Pawar Industrial Estate, Edulji Road, Charai, Thane.
December, 01st 2014
                       MUMBAI BENCH "A", MUMBAI


                                ITA No.8436/M/2011
                              Assessment Year: 2002-03

        Shri Alpesh B. Gada,                   The Income Tax Officer
        Prop. Appu Textile Mills,              (Central),
        10/A-1, PI No.501,                     2nd Floor, Pawar Industrial
        Gopal Nagar,                           Estate,
        Kalyan Biwandi Road,                   Edulji Road,
        Bhiwandi                               Charai, Thane.
        PAN: AAWPG2164M
             (Appellant)                           (Respondent)

      Assessee by                   : Shri Satish Chandak, A.R.
      Revenue by                    : Smt. S. Padmaja, D.R.

      Date of Hearing               : 08.10.2014
      Date of Pronouncement         : 28.11.2014


Per Sanjay Garg, Judicial Member:

      The present appeal has been preferred by the assessee against the order
dated 29.07.11 of the Commissioner of Income Tax (Appeals) [(hereinafter
referred to as CIT(A)] relevant to assessment year 2002-03.

2.    The assessee has taken the following grounds of appeal:
      "1.    On the facts and circumstances of the Appellant's case and in law the Ld.
      CIT(A) erred in confirming the addition of Rs.5,00,169/- made by the Ld. A.O on
      account of alleged undisclosed sales without appreciating the fact that the
      estimated profit on unaccounted sales were declared in the Return of Income of
      Vipul Gada & Kalpesh Gada.

      2.      The Appellant crave leaves to add, amend, alter, modify and or withdraw
      any of the above grounds of appeal."
                                                                                        ITA No.8436/M/2011
                                                 2                                       Shri Alpesh B. Gada

3.    The facts as brought out in the impugned order passed by the Ld.
CIT(A) vide paragraphs No.3.1 to 3.5 are reproduced below for ready
         "3.1 The facts are that, there was an action taken u/s 132 of the Act
         on 12/07/07 in the premises of the group. The appellant in response
         to a notice u/s 153A, filed the return on 02/05/08 admitting a total
         income of Rs.82,879/-.

         3. 2 Furt her facts concerning t he iss ue are t hat , during
         s e a r c h , c e r t a i n documents indicating unaccounted sales were
         found and seized. In the statement recorded of Shri Ka lpesh Gada,
         one of the partne rs of M/s K K Enterprises, he categorically admitted
         that, the seized documents contained details of unaccounted sales and
         further admitted that, such unaccounted sales were recorded in the
         seized books / registers under the head 'p' 'v' 'j' and 'saibaba.'

         3.3 In a separate statement recorded on 16/08/07 u/s
         1 3 1 , i t w a s a dm itte d by S hri Bha gwanj i Ga da , anot he r ma in
         pe rs on of t he g roup t hat , t he e n t r i e s f o u n d i n s e i z e d d o c u m e n t s
         ( B u n d l e N o A - 3 a n d A - 1 3 ) p e r t a i n e d t o unaccounted trading activity.

         3.4 On close examination of the documents by the AO, it was
         f o u n d t h a t , the seized documents were qualitywise 'taka' registers
         maintained for the purpose of manufacturing. The registers were
         found to contain details of incoming of finished goods from factory
         and sales outside books. The AO found that, the taka register related
         to the concerns of M/s K K Tex Enterprises (a firm) and M/s Appu
         Textile Mills, (appellant) the main manufacturing concerns in the
         group. It was also found b y t h e A O t h a t , t h e a b o v e m e n t i o n e d
         t w o c o n c e r n s n a m e l y , M / s K K T e x Enterprises and M/s Appu
         Textile Mills, P rop the a ppella nt, had not offered a ny additional
         income on account of the said unaccounted sales in their returns and
         on the other hand, certain additional income allegedly arising from
         such unaccounted sales had been admitted in the cases of Shri Kalpesh Gada
         and Shri Vipul Gada.

         3.5 In reply to a show cause notice issued in this regard, it was
         stated on behalf of the appellant that, the sales found in the seized documents
         pertained to the unaccounted trading activities conducted by Shri Kalpesh Gada
         and Shri Vipul Gada in their individual capacity. The appellant, to push
         through this view, relied upon the maintenance of separate bank accounts,
         issue of cheques from the said unaccounted bank accounts for purchase /
         expenses, copies of bills for purchase of yarn outside books etc. The
                                                                                         ITA No.8436/M/2011
                                                 3                                        Shri Alpesh B. Gada

        AO rejected the claim of the appellant that unaccounted trading
        activity was conducted by Shri Vipul Gada and Shri Kalpesh Gada in
        their individual capacity and proceeded to conclude that, this is only
        the goods that were manufactured by Appu Textile Mills and K K
        Enterprises, that were sold outside the books and the same were
        found recorded in the seized documents, under the heads p, v, j and
        Saibaba. According to the AO, the claim of the appellant that, Shri
        Kalpesh Gada and Shri Vipul Gada have done trading outside the
        books was not established. The AO accordingly worked out the total
        unaccounted sales from the seized documents under the head Abbas
        Textiles at Rs.5,00,169/- which was deposited in the bank account
        held in the name of Abbas Textiles with Abhudaya Bank. The entries
        found in bank account were not corelatable to entries in books,
        accordingly, the A.O. treated the entire amount of Rs.5,00,169/- found credited
        in bank account as income arising from unaccounted sales and
        brought to tax. This is contested in the present appeal."

4.    The Ld. CIT(A) upheld the additions made by the Assessing Officer
(hereinafter referred to as the AO) concluding his findings in para 4.2 of the
impugned order which for the sake of ready reference is reproduced as under:

        "4. 2 I fi nd f rom t he a s s e s s m e nt or de r t ha t , t his pl e a o f t he
        a ppe l la nt ha s already been considered by the AO. I further find that,
        the appellant has failed to get entries in books (p, v, j and Abbas)
        correlated with the entries in bank accounts. So a ls o, t he appe lla nt
        produce d copies of a fe w bills cla im ing t o be bills for unaccounted
        purchases. The AO rejected them saying that, they were neither found
        during search nor they could be correlated with the entries in the
        seized documents or bank account. In the absence of any concrete
        details furnished to me during appellate proceedings to establish the
        nexus between the seized documents and the entries in bank account and
        also the bills for purported unaccounted purchases, I take the view that,
        there is no expenses or unaccounted purchases which could be set
        off against unaccounted sales and eventually, I take a view th a t,
        th e e n t ir e u n a c c o u n t ed s a l es r ep r e s en t u n a c c o u n te d in c o m e,
        accordingly, I confirm the addition of Rs 5,00,1691-."

5.    The assessee is thus in appeal before us. At the outset, the Ld. A.R. has
stated that the issue is squarely covered in favour of the assessee vide common
order of the Tribunal in the own case of the assessee for the assessment years
2003-04, 2005-06, 2006-07, 2008-09, & 2007-08 decided on 25.11.11 in ITA
                                                                       ITA No.8436/M/2011
                                        4                               Shri Alpesh B. Gada

Nos.893, 894, 895, 896 & 1487/Mum./2011. The Tribunal, after considering
the facts and circumstances of the case in detail on the identical issue vide para
26 of the said decision has held, "..... Thus, on this factual matrix, we hold that
the trading transactions in question did not belong to either the assessee Mr.
Alpesh G. Gada or M/s. K.K. Tex Enterprises. These unaccounted trading
transactions belong to Mr. Kalpesh G. Gada and Shri Vipul Gada.                    The
Assessing Officer is not sure as to what is the so called suppression of
production in each case. He assumes that the suppression is equal and made
ad-hoc addition. No evidence is found to link the assessee with these sales.
Thus, the addition made and sustained by the Commissioner (Appeals) on
account of unaccounted sales is hereby deleted.

27.   Even otherwise, the entire turnover could not have been brought to tax.
At best, only profits arising out of an activity can be brought to tax. Additions
are sought to be made on the basis of gross receipts in a bank account. At best,
the peak credit could have been added. In the case on hand, gross receipts have
been added as income which, to our mind, is not correct. Only surplus of the
transaction could be taxed.

28.   In any event, as we have held that the additions in the case of Mr.
Alpesh G. Gada and M/s. K.K. Tex Enterprises, which is made on a 50:50 ad-
hoc basis, is bad-in-law, for the reason that the transactions did not pertain to
these enterprises, we do not go into the issue of what is the surplus in these
transactions. Consequently, we set aside the impugned order passed by the
Commissioner (Appeals), and allow ground no.1, raised by the assessee."

6.    Since the facts and circumstances for the year under consideration are
identical and the issue is squarely covered in favour of the assessee by the
                                                                      ITA No.8436/M/2011
                                              5                        Shri Alpesh B. Gada

decision of the Tribunal in the own cases of the assessee for subsequent
assessment years, hence, respectfully following the said decision, the additions
made in the hands of the assessee on account of unaccounted sales are hereby

7.       In the result, the appeal of the assessee is allowed.

                  Order pronounced in the open court on 28.11.2014.

          Sd/-                                                  Sd/-
  (D. Karunakara Rao)                                      (Sanjay Garg)
ACCOUNTANT MEMBER                                       JUDICIAL MEMBER

Mumbai, Dated: 28.11.2014.
* Kishore, Sr. P.S.

Copy to: The Appellant
        The Respondent
        The CIT, Concerned, Mumbai
        The CIT (A) Concerned, Mumbai
        The DR Concerned Bench
//True Copy//                             [

                                                  By Order

                                 Dy/Asstt. Registrar, ITAT, Mumbai.
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