INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A": NEW DELHI
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
AND
SHRI A. T. VARKEY, JUDICIAL MEMBER
ITA No. 4139 & 4140/Del/2010
(Assessment Year: 2000-01 to 2001-02)
Ajay Gupta DCIT
A-2/14A, Model Town-I Circle-15
Delhi Vs. Jhandewalan
PAN:AAJPG0481E New Delhi
ITA No. 3598/Del/2010
(Assessment Year: 2001-02)
Sunita Gupta DCIT
A-2/14A, Central Circle-15
Model town-I, Vs. Jhandewalan
Delhi New Delhi
PAN:AAJPG0480F
(Appellant) (Respondent)
ITA No.1634,1635,1636,1637/Del/2010
(Assessment Year: 2000-01to 2004-05)
Dayawanti DCIT
500, Katra Ishwar Bhawan, Central Circle-15
Khari Baoli Vs. Jhandewalan
New Delhi New Delhi
PAN:AADP6869P
(Appellant) (Respondent)
ITA No. 2361/Del/2010
(Assessment Year: 2001-02)
Dayawanti DCIT
Through Smt. Sunita Central Circle-15
Gupta (Legal Heir), 500, Vs. Jhandewalan
Katra Ishwar Bhawan, New Delhi
Khari Baoli, New Delhi
PAN:AADP6869P
(Appellant) (Respondent)
Page No. 2
ITA No. 1537, 1538, 1539, 1540, 2796/Del/2010
(Assessment Year: 2000-01 to 2004-05)
ACIT Dayawanti
Central Circle-15 L/H Smt Sunita Gupta
New Delhi Vs. Prop M/s Assam Supari
Traders, A-2/14, Model
Town, Ph-1,
PAN:AADPD6869P
(Appellant) (Respondent)
ITA No. 3984, 3985/Del/2010
(Assessment Year: 2000-01 to 2001-02)
DCIT Ajay Gupta,
Central Circle-15, A-2/14A, Model Town-1,
Room No.344, Vs. Delhi
ARA Centre, E-2, PAN:AAJPG0481E
Jhandewalan Ext,
New Delhi
(Appellant) (Respondent)
ITA No. 3600/Del/2010
(Assessment Year: 2001-02)
Varun Gupta DCIT
A-2/14A, Model Town-I Central Circle-15
Delhi Vs. Jhandewalan
PAN:AEPPG7835J New Delhi
(Appellant) (Respondent)
ITA No. 3649/Del/2010
(Assessment Year: 2001-02)
DCIT Varun Gupta
Central Circle-15 Prop. M/s. Balajee
Room No.354, Vs. Perfumes,
3rd Floor, Jhandewalan 3641, Mori Gate,
Extension Delhi
New Delhi PAN:AEPPG7835J
(Appellant) (Respondent)
ITA No. 3599/Del/2010
(Assessment Year: 2001-02)
Anoop Gupta DCIT
A-2/14A, Central Circle-15
Model Town-I Vs. Jhandewalan
Delhi New Delhi
PAN:AAJPG0479Q
(Appellant) (Respondent)
Page No. 3
ITA No. 3648/Del/2010
(Assessment Year: 2001-02)
DCIT Anoop Gupta,
Central Circle-15, A-2/14A, Model Town-I,
Room No.354 Vs. Delhi
3rd Floor, Jhandewalan PAN:AAJPG0479Q
Extension, New Delhi
(Appellant) (Respondent)
ITA No. 3650/Del/2010
(Assessment Year: 2001-02)
DCIT Sunita gupta,
Central Circle-15, Room H.No.A-2/14A,
No.354, Vs. Model Town-I
3rd Floor, Jhandewalan Delhi
Extension, PAN:AAJPG0480F
New Delhi
(Appellant) (Respondent)
Appellant by : Salil Kapoor, Adv. &
Vikash Jain, Adv
Respondent by : A Mishara, CIT DR
PER BENCH
These are batch of 20 appeals. 10 preferred by assessee and 10 preferred by
Revenue arising from the order of ld CIT(A)-II, New Delhi and relates to Assessment Year
2000-01 to 2004-05 in the case of Dayawanti and for Assessment Year 2000-01 to 2001-02
in the case of Shri Ajay Gupta and for AY 2001-02 in the case of other 3 remaining
assessee's.
2. Since the issues involved are common, all the appeals were heard together and
are being disposed off by a common order.
3. First of all, we take up the appeals in ITA No. 1634/Del/2010 and ITA No.1537/Del/
2010 cross-appeals preferred by assessee and revenue in the case of Late Smt.
Dayawanti for Assessment Year 2000-01 in ITA No.1634/Del/2010. The following grounds
have been raised by the assessee:-
Page No. 4
"1. That on the facts and circumstances of the case and the provision of law
the ld CIT(A) II has failed to appreciate that the assessment order passed
by the ld AO u/s 153A is bad in law and wrong on facts.
2. That on facts and circumstances of the case and the provision of law the
ld CIT(A) II has failed to appreciate that there was no valid action u/s 132
of the IT Act consequently the assessment order passed by the ld AO u/s
153A is bad in law and wrong on facts.
3. That the assessment framed is against the scheme of the Act whereby the
reassessment in such search cases is to be confined to the additions and
disallowances consequent to the material found during the course of the
search and the material collected/ available with the AO and relatable
to such evidences and does not give power to the AO to re-apprise the
already settled issues and the completed assessment.
4. That the ld CIT(A) II has failed to appreciate that impugned assessment
order passed by the learned assessing officer is against the principles of
natural justice and has been passed without affording reasonable
opportunity of being heard.
5. That the ld CIT(A) II has failed to appreciate that on the facts and
circumstances of the case, the various observations and findings of the
learned assessing officer in the impugned assessment order is irrelevant
and vitiated in the law.
6. That on the facts and circumstances of the case and the provision of law
the ld CIT(A) II has failed to appreciate that the ld AO has erred in relying
on a statement of a third party without any basis enquiry and also without
allowing any cross examination.
7. That on the facts and circumstances of the case and the provisions of law
the ld CIT(A) II has failed to appreciate that the ld AO has erred in
completing the assessment on the basis of third party documents, enquiry
and statements without any basis, material and evidence and also
without its own satisfaction without any basis, material and evidence and
also without its own satisfaction and justification.
8. That on the facts and circumstances of the case and the provision of law
the ld CIT(A) II has failed to appreciate that the ld AO has erred in not
aggregating with the retracted statement without any basis material and
evidence and also without proving the same as not correct.
9. That on the facts and circumstances of the case and the provision of law
the ld CIT(A) II has erred in upholding the addition of Rs. 1,00,469/- on
account of trading results without any valid reason, basis and material.
10. That on the facts and on the circumstances of the case and the provision
of law the ld CIT(A) II has erred in not fully accepting the trading results
and in upholding the addition partly on account of GP Rate.
11. That on the facts and on the circumstances of the case and the provision
of law the addition made u/s 41(1) by the ld CIT(A) is illegal, bad in law
and without jurisdiction. The addition has been directed without any
notice to the appellant and it cannot be sustained.
12. That on the facts and circumstances of the case and the provision law the
ld CIT(A) II has erred in making addition of Rs. 1,24,530/- u/s 41(1) of the
Act.
Page No. 5
13. That the ld CIT(A) II has failed to appreciate that on the facts and
circumstances of the case, the ld AO has erred in law in not considering
the relevant material on record and has made the addition even when
no adverse material is there.
14. That on the facts and circumstances of the case the learned assessing
officer has erred in initiating the Penalty proceedings u/s 271(1)(c) of the
Income Tax Act 1961.
15. That on the facts and circumstances of the case the interest charged u/s
234A, 234B and 234C is excessive and has been wrongly and illegally
charged."
4. And in ITA No.1537/Del/2010, the Revenue has raised the following grounds:-
"1.(a) On the facts and in the circumstances of the case of ld CIT(A) has
erred in giving relief of Rs.11,68,570/- on account of trading results and by
directing to adopt the GP rate at 12% on sales of Rs.69,28,582/- instead of
20% on sales of Rs. 1 crores adopted by the Assessing Officer.
1.)b) On the facts and in the circumstances of the case of the ld CIT(A)
has erred by deleting addition of Rs.1,60,287/- on account of unexplained
interest payment as no interest has been charged from various debtors.
2. The order of the ld CIT(A) is erroneous and no tenable in law and
facts."
5. To appreciate the issues involved in the aforesaid cross-appeal, it would be
appropriate to adumbrate the factual matrix as emanating from the order of the
authorities below.
6. A search and seizure operation was carried out on 22nd March 2006 in the
premises of M/s. Balajee Perfumes Group, which is in the trade of manufacturing Gutka.
The group belongs to the family of late Shri Bishan Sarup Gupta, who has three sons
namely Shri Abhay Gupta, Shri Anoop Gupta and Shi Ajay Gupta. The whole business of
manufacturing of Gutka and sale purchase of Arcanut is looked after by the said three
brothers, through the firms M/s Balajee Perfumes and M/s Assam Supari Traders.
7. M/s. Balajee Perfumes is a partnership Firm of Shri Varun Gupta S/o Shri Abhay
Gupta and Smt. Deepa Gupta W/o. Shri Anoop Gupta. The second concern M/s.
Assam Supari Traders is in the name of Smt. Dayawanti (assessee) who is the mother of
the three aforesaid brothers.
8. At the time of search, the assessee along with other family members namely the
aforesaid three brother namely Abhay Gupta, Anoop Gupta and Ajay Gupta and their
wives namely Deepa Gupta, Sunita Gupta and Preeti Gupta along with Varun Gupta,
surrendered a sum of Rs.3.5 crores as additional income in respect of business carried
on outside books of accounts in respect of production and sale of Gutka. Statement of
Page No. 6
the assessee Smt. Dayawanti proprietor of M/s. Assam Supari Traders was also recorded
in the course of search. In this statement she has stated that she had no source of
income. It has been stated that she does not even own any bank account. She has
also stated, that she is not assessed to tax. It has been stated that she is the proprietor
only on record and all operations are looked after by Shri Anoop Gupta along with the
help of other family members. Notice u/s 153A was issued on 21st August 2006 requiring
the assessee to furnish return in prescribed form. In response no proper return u/s 153A
has been filed by the assessee, though on 22nd December 2007 a photo-copy of the
return filed earlier u/s 139(1) along with an audit report had been placed on record
before the AO. In the original return the assessee declared gross profit of Rs.7,30,961/-
on sales of Rs.69,28,582/- yielding gross profit rate of 10.55%. The AO asked the assessee
to produce vouchers of sale, purchases, and expenses. However, the assessee
produced computerized books of accounts and did not produce the sale bills,
purchase bill to substantiate the declared results. According to the AO, confirmation
from all creditors was also not furnished. Further discrepancy in respect of cash balance
as per books and financial results was also not explained. In such circumstances, the
AO rejected the books of accounts u/s 145 of the Act and estimated the sales at Rs. 1
crores and adopted the G.P. Ratio of 20% and thus made an addition of Rs.12,69,039/-.
Apart from the above, AO made the following additions:-
a) Addition of Rs.23,38,032/- on account of unexplained credits out of Sundry
credits and held it to be not genuine. Since confirmation from creditors was not
filed.
b) Addition of Rs.90,700/- on account of loans and liabilities not treated as
genuine.
c) Addition of Rs.2,24,240/- on account of loan from M/s. Manish Impo Expo
held to be not genuine.
d) Addition of Rs.1,60,287/- on account of disallowance of interest.
e) Addition of Rs.20,800/- on account of disallowance of salary.
f) Addition of Rs.15,647/- on account of disallowance of expenses.
g) Addition of Rs.2,30,000/- on account of unexplained credit of Shri
Rameshwar Das.
9. As such, the AO, determined the income of the assessee at Rs.45,90,799/- as
against declared income of Rs.2,42,054/-.
10. Being aggrieved the assessee preferred an appeal before the ld CIT(A), who was
pleased to uphold the initiation of 153A proceedings and also the rejection of books of
accounts. He however directed the AO to recompute the addition by adopting the
declared sales by assessee of Rs.69,28,582/- and the GP rate be applied @ 12% on it.
Thus ld CIT(A) adopted the GP at Rs.8,31,430/- as against Rs.7,30,961/- declared by the
Page No. 7
assessee. As such addition of Rs.1,00,469/- was upheld and addition of Rs.11,68,570/-
was deleted.
11. Out of remaining additions, the ld CIT(A) upheld addition of Rs.1,24,530/- and
deleted the remaining additions.
12. Aggrieved by the aforesaid order of the ld CIT(A), both the assessee and the
Revenue are in cross-appeal before us.
13. Ground 1, 2 and 3 of assessee's appeal relates to the validity of the proceedings
initiated u/s 153A of the Act.
14. As regards the legality of the assessment framed u/s 153A of the Act the assessee
submitted to the ld CIT(A) that the said assessment was illegal and invalid and ab-initio
void since there was no search warrant against the deceased assessee. Therefore the
assessment on merits be quashed since the AO completed the Section 153 assessment
without assuming jurisdiction in the absence of any valid action u/s 132 of the Act. The
assessee also submitted to the ld CIT(A) as under:-
"i) There is no search in the name of the appellant as in the panachnama
drawn at the residence of the appellant namely A-2/14A, Model Town-I, Delhi,
her name is not mentioned.
ii) In the Panchnama drawn at this place, names of her three sons Sh. Ajay
Gupta, Sh. Anoop Gupta & Sh. Abhay Gupta, and the names of the two
concerns namely M/s Balaji Perfumes and M/s. Assam Supari Traders have only
been mentioned. Though appellant is proprietor of M/s Assam Supari Traders but
based on this panchnama, it cannot be said that search has taken place in the
case of M/s Assam Supari Traders as M/s. Assam Supari Traders is having no
activity at A-2/14A, Model Town-I, Delhi.
iii) At A-2/14A Model Town-I, Delhi, she resides in her capacity as Dayawanti,
mother of three sons and not as proprietor of M/s. Assam Supari Traders.
iv) The business premises of M/s Assam Supari Traders is at 500, Katra Ishwar
Bhawan, Khari Baoli Delhi-6 and at this premise only survey u/s 133A has taken
place.
15. The ld CIT(A) forwarded the said submissions to the AO to furnish the reply vide
dated 23.03.2009. The ld CIT(A) also asked the comments of the legal heirs of the
assessee. After considering the submissions of the legal heirs of the assessee framed by
the AO ld CIT(A) observed that vide Panchnama Dated 22.03.2006 at A-2/14A Model
Town-I, Delhi, namely M/s. Assam Supari Traders had clearly been mentioned. He,
Page No. 8
therefore, was of the view that the warrant had been issued in the name of M/s. Assam
Supari Traders. Therefore notice u/s 153A was to issued in the name of the proprietor of
M/s. Assam Supari Traders i.e. the assessee only. The ld CIT(A) accordingly held that the
AO was correct in issuing notice u/s 153A of the Act. The ld CIT(A) also pointed out that
as per provisions of section 132A of the Act, where the competent authority, in
consequence of information in his possession, has reasons to believe that any person is
in possession of money/ bullion/ jewellery or other valuable articles or thing which
represents either wholly or partly income or property which has been earned but is not
disclosed or will not be disclosed or is in possession of books of accounts or documents
which will not be produced if called for to be produced u/s 142(1) or under summon u/s
131 of the Act, he may authorize any officer as defined in section 132(1)(a) of the Act
to enter and search any building place, vessel, vehicle or aircraft where he has reasons
to suspect that such books of accounts, other documents, money, bullion, jewellery or
other valuable articles or thing are kept. The ld CIT(A) was of the view that there was
two satisfaction necessary; one being against the person who is in possession of any
money/ bullion/ jewellery or other valuable article or thing or books of account and
other being the place where such books of accounts/ documents or money/ jewellery
bullion etc were kept. He was also of the view that that against one person, the
competent authority might have reasons to suspect that in many premises the
undisclosed money/ books of account etc. might have been kept and it was not
necessary that premises searched should belong to the person against whom the
competent authority has reasons to believe of having undisclosed money or
unaccounted books of accounts/ incriminating documents. The ld CIT(A) held that
warrant of authorization in the case of M/s. Assam Supari Traders had been issued
which had been executed also. And the assessee being the proprietor of M/s. Assam
Supari Traders therefore, the assessment in consequence of the search in the case of
M/s. Assam Supari Traders had to be made u/s 153A in the case of the assessee.
Accordingly, the ld CIT(A) held that the AO was fully justified in initiating 153A
proceedings of the Act and completion of the assessment u/s 153A read with section
143(3) of the Act against the assessee.
16. Now the assessee is in appeal on this legal issue. The ld counsel reiterated the
submission made before the authorities below and further submitted that in the present
case no incriminating material was found for the addition made pursuant to the section
153A proceeding to the relevant assessment year under consideration ; and whatever
addition was made, it was on account of rejecting the trading results and estimating
the turn over along with the GP rate, and on account of disallowance of interest of
Page No. 9
trade debtors and it was strenuously argued that no addition can be fastened on the
assessee without any incriminating material being unearthed during search and in order
to buttress the said submission reliance was placed on the case of Al Cargo Global
Logistics Ltd. vs. DCIT, 137 ITD 287 (SB).
17. In her rival submissions the ld DR strenuously supported the order of the ld CIT(A)
and stated that the AO did not consider the return filed by the assessee u/s 139(1)
because no assessment was framed u/s 143(3) of the Act. She, further, submitted that
the additions were made on the basis of the statement of assessee; and that assessee
failed to produce the vouchers relating to the purchase and sales, so the AO, rightly
rejected the books of accounts and made estimation as per law which could not be
faulted since it was reasonable however the ld CIT(A) erred in passing the impugned
order and so she pleads that the order of the ld CIT(A) may be set-aside and the order
of the AO be restored.
18. In his rejoinder the ld counsel submitted that the statement of the Shri Abhay
Gupta was not relating to this relevant assessment order which is in hand, because it
was recorded after the search on 03.05.2006 while the search took place on 22.03.2006.
So this statement was not u/s 132(4) of the Act. So the authorities below ought not to
have taken cognizance of this statement which is not admissible evidence. It was
further stated that the said statements were not pertaining to the relevant assessment
year but was related to AY 2006-07 and not for the year under consideration. Therefore
according to the ld counsel no addition can be made for the year under consideration
without any incriminating material being unearthed relating to this year. He further
submitted that the department has not filed any appeal against the reduction of the
addition. It was also stated that the excise department had accepted the sale for the
year under consideration so there was no occasion to make the estimate in respect of
turnover and increasing the GP rate without citing any comparable cases. It was further
submitted that no cessation of liability and the trade creditors which was appearing in
the books of account were paid in the subsequent years. Therefore the ld CIT(A) was
not justified in enhancing the addition u/s 41(1) of the Act. It was contended that on
merits also the addition cannot besustained and the addition made by the ld CIT(A)
deserves to be deleted and on legal issue there was no occasion to make the addition
u/s 153A of the Act without any incriminating material so found during the search.
19. We have heard both the parties and have carefully gone through the material
available on record and the case laws cited before us. In the present case the main
grievance of the ld counsel for the assessee is that neither valid search took place in
Page No. 10
respect of the assessee nor any incriminating documents was found which could
suggest that there was any undisclosed income earned by the assessee inrespect to
the A.Y under consideration, therefore, the addition made by the AO and sustained by
the ld CIT(A) was not justifiable.
20. The ld counsel for the assessee contended that there was no search in the name
of the appellant as her name is not mentioned in the Panchnama. According to the ld
counsel though it is an admitted fact that the name of the proprietorship concern of
the assessee, M/s. Assam Supari Traders is mentioned in the Panchanam, It was
submitted that on the said basis it cannot be held that a valid search has taken place
on the assessee. In our opinion the aforesaid argument cannot be accepted. A search
has been conducted on the assessee, once the proprietorship concern of the assessee
has been searched. In any case the assessee was the proprietor of the concern on
which the search was carried out u/s 132 of the Act. It is pertinent to add here that the
premises at which the search was carried out was on the basis of warrant issued in the
name of the proprietorship concern of the assessee and it was also the residential
premises of the assessee. Therefore we find that there was a valid search on the
assessee and as such, provision u/s 153A of the Act was rightly triggered and invoked
thereafter.
21. The ld counsel has further emphasized in the course of his submission that since
all the addition made in the order of assessment were not based on material found as a
result of search, the said additions, are against the scheme of the Act and so it is was
erroneous. He submitted that the Act does not give the power to the AO to reappraise
the already settled issues and the completed assessments.
22. In the instant case we find that AO had rejected the books of accounts and
made additions by estimating the sales & GP rates, inter-alia on the ground that in the
course of search, a statement was recorded by Shri Abhay Gupta u/s 132(4) of the Act
on behalf of the assesse too. In the said statement dated 18.04.2006, a copy of which
has been placed before us, in Page 89, 90, 91, 92, 93 & 94 of the PB, he has stated as
under on behalf of assesse and other assesses in appeal before us which is evident from
his opening remarks and signatures of assesse and other appellents appended below
the statement recorded on oath u/s 132(4) of the Act. The relevant answers to questions
legible from the hand written document is reproduced below for convenience:-
Page No. 11
"Statement of Shri Abhay Kumar Gupta S/o Late Shri Bishan Sarup Gupta R/o A-
2/14-A Model Town-I, Delhi aged 58 years old recorded on oath u/s 132(4) of the
Income Tax, 1961 at the office of ADIT (Investigation) Unit IV(3), New Delhi in the
case of M/s. Balaji Perfumes and M/s Assam Supari Traders on 18.04.2006.
sign
Oath Taken Oath Administered
Q. No.-Please Identify your self?
Ans: I am Abhay Kumar Gupta S/o Late Sh Bishan Sarup Gupta R/0 A-2/14-A,
Model Town-I, Delhi aged 58 years old.
Q No.2-In what capacity you have presented yourself in the cases of M/s Assam
Supari Traders and Balaji Perfumes?
Ans: I am present here as duly authorized by five of our family concern/ firms
namely M/s. Assam Supari Traders and M/s. Balaji Perfumes as a representative
on behalf of all of my family members including Smt Dayawanti Prop M/s. Assam
Supari Traders and Shri Varun Gupta prop M/s. Balaji Perfumes. Smt. Dayawanti is
my mother and Shri Varun Gupta prop M/s. Balaji Perfumes. Smt. Dayawanti is
my mother and M/s. Varun Gupta is my son. I am also another ... by my brother
namely Sh Ajay Gupta, Shri Anoop Gupta and Smt. Sunita Gupta w/o Sh Ajay
Gupta, Smt Deepa Gupta W/o Annop Gupta and Smt. Preeti Gupta W/o Varun
Gupta to make statements on all our family concern and our family members,
and to comment on their behest.
Q. No. 3.........................
Q. No. 4.........................
Q. No. 5.........................
Q. No. 6.........................
Q. No. 7. Please let me know whether all the purchases made by your family
firms namely M/s. Assam Suprari Traders and M/s. Balaji Perfumes is entered in
your regular Books of accounts and whether all the purchases, manufacturing
and sales made by above two firms is disclosed to income tax department.
Ans:- We and our family firms namely M/s Assam Supari Traders and M/s Balaji
Perfumes generally try to record the transactions made in respect of purchase,
manufacturing and sales in our regular books of accounts but it is also fact that
some time due to some factors like inability of accountant, our busy schedule
and some family problems, various purchases and sales of Supari, Gutka and
other items dealt by our firms is not entered and shown in the regular books of
accounts maintained by our firms.
Page No. 12
Q. No. 9 What are the books of account maintained by your firms?
Ans:- To the best of my knowledge, both our firms maintained cash books,
ledger, sales register, bills books and other general books of accounts.
Q,. No. 10- I am showing your annexure A-3 (Page 60 and 61) found I seized
from your residence at A-2/14-A, Model Town-I, Delhi on 23.03.2006 during the
course of search, seizure please explain the nature, contents and details of these
small hand written paichies.
Ans: These small handwritten on unaccounted cash purchase/ sales of various
items in Supari which were made by firm M/s. Asom Supari Traders and M/s. Balaji
perfumes. Also purchase dated 19.10 on page No. 60 of this annexure
represented unaccounted and credited.
Q. No. 11. I am showing your Annexure A-2 having page No. 1 to 29 found
and seized form your residence at A-2/14-A, Model Town-I, Delhi on 23.03.2006
during the course of search and seizure operation. Please explain the nature of
contents and details of these pages.
Ans:- I hereby admit that these papers also contend details of various
transactions include purchase/ sales/ manufacturing trading of Gutkha, Supari
made in cash out side Books of accounts and these are actually unaccounted
transactions made by our two firms namely M/s Asom Trading and M/s. Balaji
Perfumes.
Agreed by me
1. Ajay Gupta sign
2. Smt Daywanti sign
3. Anoop Gupta Sign
4. Smt Deepta sign
5. Varun Gupta sign
6. Snita Gupta sign
7. Preeti Gupta sign
23. From a perusal of the aforesaid statement on 18.04.2006 it is manifest that it was
not a case of mere surrender as claimed by the ld counsel. On the contrary we find in
Pg 60 & 61, Annexure `A'3 and Pg 1 to 29 of AnnexureA-2 were found and seized from
the assessee. Once confronted with the aforesaid seized documents it was admitted by
Shri Abhay Gupta that the proprietorship concern of the assessee was engaged in
unaccounted cash sales and purchases and therefore there was undisclosed income.
Thus the necessary logical fall out of the aforesaid is that there was material found as a
result of search on the assessee, showing unaccounted transactions. In our opinion,
even the statement obtained whereby, the additional income of Rs.3.5 crores was
Page No. 13
offered also constitutes material unearthed during search. The ld counsel however has
submitted that the said statement was not of the assessee, and was that of the son of
the assessee. This argument too does not come to the rescue of the assessee, because
the assessee also has signed the said statement as no.2 above; and it has been stated
very clearly in the statement of Shri Abhay Gupta to question No. 2 (supra) that he has
made the statement on behalf of others u/s 132(4) of the Act including the assessee.
Moreover the aforesaid statement dated 18.04.2006 was followed by another
statement on 03.05.2006, where too Shri Abhay Gupta represented himself as the
authorized representative of the proprietorship concern of the assessee and sister
concern Balajee Perfumes. In the said statement too the surrender was reiterated. The
aforesaid surrender no doubt was not acted upon by the assessee, but the said fact
cannot lead us from the irresistible conclusion that incriminating material was unearthed
during search. No material has been placed before us to negate the aforesaid factual
aspect as well as to support the claims of AR that the admission before the Revenue
was not valid and hit by duress and coercion. Before we conclude this issue, we
consider it appropriate to note that the ld AR, had also stated that no material Per-se
was found pertaining to the year under consideration. However, this argument also
does not hold any water because once Section 153A is triggered on account of
unearthing of incriminating material during search, the AO is empowered to compute
the total income for six assessment year prior to the year of search. There are no fetters
or limitation under the statute, so as to curtail the jurisdiction of the AO. We derive
support from the judgment of jurisdictional High court in the case of CIT Vs. Anil Bhatia
352 ITR 493 (Del) wherein it has been held by the Hon'ble High Court as under:-
"In the light of our discussion, we find it difficult to uphold the view of the Tribunal
expressed in paragraph 9.6 of its order that since the returns of income filed by
the assessee for all the six years under consideration before the search took
place were processed under section 143 (1) (a) of the Act, the provisions of
section 153A cannot be invoked. The Assessing Officer has the power under
section 153A to make assessment for all the six years and compute the total
income of the assessee, including the undisputed income, notwithstanding that
the assessee filed returns before the date of search which stood processed
under section 143(1)(a). The other reason given by the Tribunal in the same
paragraph of its order that no material was found during the search is factually
unsustainable since the entire case and the arguments before the Departmental
authorities as well as the Tribunal had proceeded on the basis that the
document embodying the transaction with Mohini Sharma was recovered from
the assessee. While summarizing the contentions of the assessee in paragraph 5
of its order, the Tribunal itself has referred to the contention that no document
much less incriminating material was found during the search of the assessee's
premises, except one unsigned undertaking for loan. Again, in paragraph 10 of
its order, while dealing with the assessee's contention against the addition of Rs.
1,50,000/- being unexplained loan given to Mohini Sharma, the Tribunal has
stated that it has analyzed "the subject document carefully, recovered from
Page No. 14
search" suggesting that the document was recovered during the search from
the assessee. The Tribunal has even proceeded to delete the addition of Rs.
1,50,000 as well as the notional interest on the merits, holding that the document
was unsigned, that Mohini Sharma was not examined by the income-tax
authorities and there was no corroboration of the unsigned document. If it is not
in dispute that the document was found in the course of the search of the
assessee, then section 153A is triggered. Once the section is triggered, it appears
mandatory for the Assessing Officer to issue notices under section 153A calling
upon the assessee to file returns for the six assessment years prior to the year in
which the search took place. There are contradictions in the order of the
Tribunal. We are unable to appreciate how the Tribunal can say in paragraph 9.6
that no material was found during the search and at the same time in
paragraph 10 deal with the merits of the additions based on the document
recovered during the search which allegedly contain the loan transaction with
Mohini Sharma. Therefore, both the reasons given by the Tribunal for holding that
the assessments made under section 153A were bad in law do not commend
themselves to us. The result is that the first substantial question of law is answered
in the negative, in favour of the Revenue and against the assessee."
24. In view of the aforesaid case laws and reason stated above, we dismiss the
ground no 1, 2 & 3 of the assessee.
25. Ground Nos. 4 to 10 of the assessee's appeal and ground 1(a) of revenue's
appeal are inter-related and pertain to addition made on account of the rejection of
trading result and adoption of estimated sales and GP rate.
26. The AO have observed that in the audited account for the year under
consideration, the assessee declared sales of Rs.69,28,582/- and Gross Profit of
Rs.7,30,961/- yielding gross profit rate of 10.55%. He has noted that the assessee
produced only computerized books of account and did not produce sale-bills,
purchase bills and vouchers for expenses incurred by it. He has also pointed out that the
assessee has not filed confirmation from sundry creditors and debtors other than five
creditors. He therefore rejected the books of account and adopted the sale at Rs.1
crore and GP rate at 20%. He thus made an addition of Rs.12,69,039/-. The ld CIT(A)
after considering the submission and comments of the AO, upheld the rejection of the
books of accounts. In this regard it has been observed by him as under:-
"11.1.3.1 But it is a fact that appellant except producing the books of
account maintained, sales and purchase bahis and stock register, has not been
able to substantiate various debits made in the trading account and P&L
Account by producing the relevant bills and vouchers. In the absence of bills
and vouchers entries made in books/ bahis cannot be verified and therefore,
book results cannot be accepted as such."
27. The ld CIT(A) has also referred to the statement of Shri Abhay Gupta dated
03.05.2006, wherein the assessee along with all other family members have admitted
that they are not disclosing correct gross-profit rate in all group concerns. However in
Page No. 15
the earlier part of the order, he has observed that so far as the instant year is
concerned, the AO has not brought on record any material to point out defect in the
books of account except saying that sales and purchase vouchers were not produced.
He also observes that on verification it is ascertained for this year that there is no
statement either of the appellant or of any other persons to suggest sales are
unrecorded. He accordingly has concluded as under:-
"I agree with the appellant that there is no justification for rejection of books of
accounts and estimating the total at Rs.1 crore for which no basis whatsoever
has been given by the AO especially when search as well as survey u/s 133A has
taken place in the case of proprietary concern of the appellant. I, therefore,
direct the AO not to disturb the sales figures and to adopt the sale at
Rs.69,28,582/- only as shown by the appellant."
28. He thus finally held that declared sales by the assessee has to be adopted, but G
P rate is to be adopted at 12% as against rate adopted by AO of 20%. This rate was
adopted by the ld CIT(A) on the basis of the GP rate of the assessee for Assessment
Year 2006-07. Accordingly, he computed the GP at Rs.7,30,961/-. Thus addition of
Rs.,1,00,469/- was upheld and balance of Rs.11,68,570/- was deleted. Thus both the
assessee and revenue are in appeal before us.
29. The ld Counsel reiterated the contentions of the assessee before the lower
authorities and the revenue relied upon the finding of the AO. We have heard both the
parties and perused the material on record. The trading addition has been made in the
instant year by the AO on the ground that book results as declared by the assessee are
not verifiable, since sales bills, purchase bills and vouchers for expenses have not been
produced by the appellant before him. We find that the assessee even could not
produce before the ld CIT(A) the sale bills, purchase bills and vouchers for the expenses
incurred by her in the relevant AY. Even before us there was no material led to assail the
aforesaid factual position. In such a scenario we have no other alternate but to uphold
the rejection of books of accounts as there is no material to substantiate the
correctness and completeness of such books of accounts. We may mention here that
thought the ld CIT(A) has correctly held at Pg. 11 in para 11.1.3.1 (supra) that in the
absence of bills and vouchers, entries made in books cannot be verified, therefore
book result cannot be accepted. However quite strangely he has held in Para1 11.1.3
of his order that there is no justification for rejection of books of account by observing
that AO has not placed any material on record to point out defects in books. The
aforesaid finding is contradictory to his own finding reproduced above in this order at
para 26 and therefore erroneous. Now coming to the estimation as noted above, AO
had estimated sales at Rs. 1 crore and GP at 20%. Whereas, the ld CIT(A) has accepted
Page No. 16
the declared sales and estimated GP at 12%. In the instant case, it is crystal clear that
each of the figures declared, be it sales or GP are unverifiable without supporting
documents. Thus the question which remains is whether the estimation made by the AO
is fair and reasonable on the facts on the case. We have already noted above while
disposing of ground No. 1 to 3 that as a result of search, shri Ajay Gupta on behalf of
assessee has admitted to unaccounted transactions outside regular books of accounts.
It is also true that there is no material indicating unaccounted transactions particularly
for the instant year unearthed during search, but it cannot be denied that once book
results for the year under consideration are unverifiable in the absence of supporting
vouchers, bills then the factum of admission u/s 132(4) of the Act made by Shri Abhay
Gupta on behalf of the assessee that unaccounted transactions took place for earlier
years would be relevant consideration for estimation. In such circumstances the burden
was on the assessee to show as to how the estimation as made by the AO was arbitrary
or unreasonable. No material has been placed before us to discharge the said burden.
The AO has increased the sales from Rs.69 lakh to Rs. 1 crore which on the facts cannot
be said to be arbitrary, where assessee has admitted unaccounted transactions albeit
for later years. However in respect of GP rate, while perusing the GP rate estimated by
the AO for subsequent Assessment Years. We find the following addition has been
made by the AO as under:-
Assessment Assessee AO Addition
Year
Sales GP% Sales GP
2001-02 8,,72,506 8.69% 2 crores 15%15 23,47,630
2002-03 67,36,523 9.68% 2 crores 15% 23,47,630
2003-04 79,72,200 9.47% 2 crores 15% 22,44,884
2004-05 60,65,498 10.73% 2 crores 15% 23,49,012
30. Since the AO for subsequent Assessment Year's has estimated GP rate of 15%,
we do not find any reason as to uphold the GP rate of 20% for this Assessment Year. So
we restrict the GP rate at 15% for this Assessment Year and direct the AO to compute
the trading addition by adopting the sales at 1 crore and GP rate at 15% for this
Assessment Year. We thus allow the ground raised by the revenue and reject the
ground raised by the assessee on this behalf.
31. Ground No. 11 and 12 of assessee's appeals pertain to addition of Rs.1,24,530/-
u/s 41(1) of the Act.
32. The AO had made the said addition on the ground that confirmation from M/s
Spices was not filed. The ld CIT(A) has confirmed the additions, on the basis that even
Page No. 17
after the expiry of limitation period confirmation has not been filed. Therefore there is
cessation of liability warranting addition. After considering the submission made by the
parties, since we have already upheld the rejection of books of account and estimated
the income for the instant year, there is no basis to make any further addition on the
basis of entries found in the books of accounts. Even otherwise we may add here that
the said addition is contrary to the judgment of Apex Court in the case of Commissioner
of Income-tax Vs. Sugauli Sugar Works (P.) Ltd. (1999) 236 ITR 518 (SC) wherein, the
Hon'ble Apex Court upheld the Hon'ble Delhi High Court's reasoning on the issue as
under:-
"The transfer of an entry is a unilateral act of the assessee, who is a debtor to its
employees. We fail to see how a debtor, by his own unilateral act, can bring
about the cessation or remission of his liability. Remission has to be granted by
the creditor. It is not in dispute and it indeed cannot be disputed, that it is not a
case of remission of liability. Similarly, a unilateral act on the part of the debtor
cannot bring about a cessation of his liability. The cessation of the liability may
occur either by reason of the operation of law, that is, on the liability becoming
unenforceable at law by the creditor and the debtor declaring unequivocally his
intention not to honour his liability when payment is demanded by the creditor or
a contract between the parties, or by discharge of the debt--the debtor making
payment thereof to his creditor. Transfer of an entry is neither an agreement
between the parties nor payment of the liability."
33. In such circumstances, following the ratio-laid above by the Apex Court, we
allow the ground of the assessee and delete the addition of Rs.1,24,530/-.
34. Ground No. 1(b) of revenue's appeal relates to addition of Rs.1,60,287/- out of
interest payment held to be not for the purpose of business.
35. The AO noted that the appellant has paid interest of Rs.2,32,386/- and has
received interest of Rs.72,099/-. Thus, a net interest of Rs.1,60,287/- has been debited in
the profit and loss account. He further noted that the assessee is having various debtors
against whom outstanding balances are there but from them interest is not being
charged. Thus, according to him on one hand appellant is paying interest and on other
hand she is not charging interest from debtors which relate or belong to the family of
the assessee. Therefore, he disallowed the entire interest of Rs.160287/- debited in the
P&L account. On appeal by the assessee, the ld CIT(A) has deleted the addition by
concluding as under:-
"11.5.3. I fully agree with the appellant. It is not the case of AO of diverting
interest bearing fund towards loan or advances for non interest bearing purposes
or for other than business consideration. Just because interest has not been
charged from some debtors majority of whom are business debtors who are
incidentally related to the appellant, entire interest payment cannot be
Page No. 18
disallowed. Therefore, following the decision of Apex Court in the case of SA
Builders, 197 Taxation 1 the disallowance of interest made by the AO is directed
to be deleted. Relief Rs.1,60,287/-.
36. We dismiss this ground raised by the revenue as we have already estimated the
income for the instant year and thus no separate disallowance is warranted so this
Ground of revenue is dismissed.
37. In the result the appeal filed by the assessee and revenue are partly allowed for
AY 2000-01.
38. Now we take up the remaining cross-appeals in the case of the assessee (Smt
Dayawanti) for Assessment Year 2001-02 to 2004-05.
39. Ground Nos. 1, 2 and 3 in the appeals filed by the assessee are identical to
Ground Nos. 1, 2 and 3 of the assessee's appeal for Assessment Year 2000-01 relating to
validity of initiation of 153A proceeding as stated by us while disposing of the Grounds
No. 1, 2 and 3 for 2000-01. So, we dismiss these grounds also of the assessee on the
aforesaid reasoning.
40. Ground No.4 to 10 of the assessee's appeal in Assessment Year 2001 -02 to 2004-
05 and ground No. 1(a) of the Department's appeal are in respect of additions made
on account of rejection of trading results. The details of the additions made and relief
granted by the ld CIT(A), and disputed by the Revenue on account of rejection of
books of account is as under:-
Assessment Assessee AO Addition
Year
Sales GP% Sales GP
2001-02 8,,72,506 8.69% 2 crores 15%15 23,47,630
2002-03 67,36,523 9.68% 2 crores 15% 23,47,630
2003-04 79,72,200 9.47% 2 crores 15% 22,44,884
2004-05 60,65,498 10.73% 2 crores 15% 23,49,012
Assessment CIT(A) Additional Relief Granted
Year sustained
Sales GP% Sales
2001-02 81,22,506 12% 2,69,025 20,25,300
2002-03 67,36,523 12% 1,56,013 21,91,617
20003-04 79,72,200 12% 2,01,548 20,43,446
2004-05 60,65,498 12% 76,872 22,72,140
Page No. 19
41. We have already held while adjudicating the appeal for Assessment Year 2000-
01 that books of accounts has been rightly rejected on the facts and reasons narrated
above. Following the aforesaid findings and the reasons stated therein, we direct the
AO to compute the trading additions by adopting sales at Rs. 1 crore and GP rate of
15% in all the four year i.e. 2001-02 to 2004-05. As such, grounds raised by the assessee
are dismissed and the ground raised by the revenue is partly allowed.
42. Ground No. 11 of this assessee's appeal for Assessment Year 2001-02 and Ground
No.1 (b) of department's appeal for Assessment Year 2001-02 are in respect of addition
of Rs.19,16,250/- being unexplained investment in Farm House.
43. During the year under consideration, the assessee along with 3 other family
members, namely Sunita Gupta, Varun Gupta and Anoop Gupta invested a sum of
Rs.3,75,000/- under an agreement to sale/purchase of agricultural land at Village
Singhola at Narela. The AO based on enquires has observed that assessee has not
purchased agricultural land but she has purchased a farm house. He has observed that
such farm house has a huge built up area and a swimming pool. He also conducted
enquired from the seller, Smt Priya who confirmed that she has sold the farm house for
Rs.15 lakhs. The AO however was not satisfied with the claim of the assessee and
proceeded to estimate the investment in the property as under:-
"Cost of land@20 lakhs per acre :60,00,000
Cost of house 1200 sq ft constructed :5,00,000
Cost of construction of addition of
Swimming pool :20,00,000
Cost of landscaping :6,65,000
91,65,000
7.2.1.1 He apportioned this amount in four hands as four persons are co-owners
of this property. Such apportioned amount is Rs.22,91,250/-. As each members
has shown only Rs.3,75,000/- as investment against acquisition of this property, he
has made addition of the difference of Rs.19,16,250/- in the hands of the four co-
owners and accordingly addition of Rs. 19,16,250/- has been made in the hands
of the appellant also."
44. The ld CIT(A) partly granted relief to the assessee, by reducing the investment
from Rs.91,65,000/- to Rs.18,65,000/- on the following basis:-
"i) Cost of land filing and land scaping :Rs.6,65,000/-
Ii) Cost of construction of Swimming Pool :Rs.10,00,000/-
iii) Cost of improvement and alteration
in the existing Farm House. :Rs.2,00,000/-
Total :Rs.18,65,000/-"
7.2.3.3 Thus, total investment made additionally in this Farm House can be
estimated at Rs.18,65,000/-. As none of the co-owners have shown any amount
Page No. 20
towards this improvement/ new construction, 1/4th of the same being
Rs.4,66,250/- is liable to be added separately in the hands of each of the four co-
owners including the appellant. The addition has to be made in this year itself
being the year of acquisition of the property as specific years in which these
improvements to this farm house were made, could not be stated by the ld AR of
the appellant except arguing that the addition might not have been done in the
year of acquisition but in subsequent years. Thus, as against addition of
Rs.19,16,250/-, the addition of Rs.4,66,250/- is directed to be made in the hands
of the appellant for the year. The appellant gets relief of Rs.14,50,000/- on this
account."
45. He therefore sustained an addition of Rs.4,66,200/- in the hands of the assessee
being 1/4th share in the total unexplained investment of Rs.18,65,000/- and granted a
relief of Rs.14,50,000/-.
46. Both the assessee and revenue are in appeal. Having considered the rival
submission we find that the ld CIT(A) estimated the investment made by the assessee
and family members in land filing and land scaping on the basis of the statement
recorded of Shri Abhay Gupta u/s 132(4) of the Act. We are therefore not inclined to
interfere with the addition made on account of unexplained investment in land
scaping. However, the remaining addition made by the AO and ld CIT(A) either on
account of cost of land or investment in Swimming Pool or alteration made to the farm
house, we find are not supported by any material and is a product of guess work,
though nomenclaturized as estimated cost . An estimate need to be based on some
material to hold that an expenditure has been incurred either for purchase of land or
for construction of swimming pool. However, in the instant case, there is none. On the
contrary, the deposition of the seller corroborates the claim of the assessee. The
Hon'ble Delhi High Court in the case of CIT Vs. Sakuntla Devi 316 ITR 46, held that where
department has failed to collect any information or material to show that any
consideration above and beyond the stated consideration has changed hands then it
would be legally impermissible to draw adverse interference against the assessee.
Following the above position, we sustain the addition of Rs.6,65,000/- out of total
investment estimated by the AO of Rs.91,65,000/-. As such addition of Rs.1,41,250/- is
sustained in the hands of the assessee and the balance addition against the assessee is
deleted. This ground is partly allowed for assessee and ground of revenue is dismissed.
47. Ground Nos. 12 and 13 of assessee's appeal for Assessment Year 2001 -02 and 11
to 13 for 2002-03, 2003-04 & 2004-05 relate to addition u/s 41(i) of the Act. This issue is
identical to ground No.11 to 13 for Assessment Year 2000-01. For the reason stated
therein, the said grounds of assessee is allowed.
Page No. 21
48. In the result the cross appeals preferred by the assessee's and Revenue for AY
2001-02 to 2004-05 are partly allowed in the case of Smt. Dayawanti..
49. Now we take up cross appeals in the cases of Sunita Gupta, Varun Gupta and
Anoop Gupta for Assessment Year 20001-02 and cross appeals in the case of Shri Ajay
Gupta for AY 2000-01 and 2001-02.
50. Ground Nos 1 to 3 of the aforesaid appeals filed by the assessee's relate to
validity of proceeding u/s 153A of the Act.
51. For the reasons stated herein before while deciding the appeal for Assessment
Year 2000-01 in the case of Late Smt. Dayawati, we are inclined to reject the aforesaid
ground of assessee's.
52. Further in assessee's appeals, Ground Nos. 4 to 7 in the case of Sunita Gupta and
Varun Gupta, Ground Nos.4 to 6 in the case of Anoop Gupta and Ground No.4 of Shri
Ajay Gupta are general in nature and therefore rejected.
53. Ground No. 8 in the appeal of the assessee in the case of Sunita Gupta and
Varun Gupta and Ground No.7 of Anoop Gupta and Ground No.2 of the Department's
appeal in the case of Varun Gupta and ground No. 1 of the Department's in the case
of Sunita Gupta and Anoop Gupta related to addition on account of unexplained
investment in property. (Farm House)
54. This issue is identical to ground No.11 in the case of Late Smt Dayawanti, for
Assessment Year 20001-02 whereby we have held that addition is sustained to the
extent of Rs.1,41,250/-, therefore the said amount is sustained in the hands of each of
three assessee. As such the ground raised by the Revenue is dismissed and the grounds
raised by the assessee are partly allowed.
55. In ground No. 1 of the revenue's appeal for Assessment Year 2001-02, the
revenue has challenged the deletion of estimated addition of Rs.75,000/-. The ld CIT(A)
has deleted the addition observing as under:-
"3.3 I have considered the facts of the case. The submission of the appellant
has also been gone through very carefully. I agree with the contention of the
appellant that the AO has not brought out any material on record to show that
what has been declared is incorrect, wrong or cannot be believed. It may be
true that the appellant is not able to produce evidences in support of the
income declared from business in its return of income but AO also has not
brought out any material to suggest that income declared from business is more
than what is declared by the appellant. Therefore, income can not be
enhanced on the basis of these facts unless the facts itself prove that there is an
income which has not been declared. This is more so when a search has taken
place and no evidence contrary to the returned income has been found. In
Page No. 22
view of the above facts, the AO is directed to delete the addition of Rs.75,000/-
made on this account."
56. Having considered the submission, we are in agreement with the conclusion of
the ld CIT(A) that in absence of any material, estimated addition is incorrect and as
such ground raised by the Revenue is rejected.
57. Ground No. 9 of the assessee's appeal in the case of Sunita Gupta is against the
additions of Rs.21,000/- on account of cash deposited in Bank Account.
58. The AO while making the addition of Rs.55,000/- has observed as under:-
"During this year, the assessee has deposited following amount in cash in her
Central Bank of India account.
Date Amount
26.04.2000 2000
26.06.2000 2000
16.08.200 55000
20.09.2000 2000
25.09.2000 2000
20.10.2000 2000
13.11.2000 20000
19.12.2000 2000
87000
Cash in hand as on 01.04.2000 was Rs.11,294/- only. From above chart it is clear
that up to August 2000, she has deposited about Rs.48,000/- in bank in cash
other than the cash in hand available as on 01.04.2000. On any day, still petty
cash remains in hand. So she has failed to substantiate the source of deposits of
Rs.55,000/- as cash in her bank account on 16.08.2000. No evidence or
explanation about above deposit has been filed which remains unexplained.
The same is added to returned income of the assessee as deposited out of
unexplained sources."
59. The ld CIT(A) however restricted the addition to Rs.21,000/- on the following
reasons.:-
"4.3. I have considered the fact of the case. The submissions of the appellant
have also been gone through very carefully. During the year under
consideration the appellant has already shown rental income of Rs.24,000/- and
income from tuition amounting to Rs.70,000/- which has been accepted also by
the AO. It is also submitted that these payments have been received in cash.
Accordingly if we take the above said income on average monthly basis then
the appellant must be having approximately cash of Rs.32,000/- (Rs.8,000X4) as
on 16.08.2000 on account of these receipts. In addition, as on 01.04.2000 there
was an opening cash balance of Rs.11,294/- which is mentioned by AO also in
his order. Thus total cash available up to 16.08.2000 is Rs.43,294/- and from it, if
we reduce deposit of Rs.4,000/- made in the month of April and June, 2000 and
estimated drawings of Rs.5,000/- till August, 2000( since total drawings shown for
the whole year is Rs.9,000/-), there will be cash available only to the extent of
Rs.34,000/- approximately. Accordingly out of deposit made of Rs.55,000/- on
Page No. 23
16.08.2000 which has been treated by AO as unexplained, to the extent of
Rs.34,000/- sources can be said as explained. The remaining Rs.21,000/- has to be
treated as unexplained. Accordingly the AO is directed to reduce the addition
from Rs.55,000/- to Rs.21,000. The appellant gets relief of Rs.34,000/-.
60. The ld counsel for the assessee was unable to persuade us to depart from the
aforesaid reasoning adopted by the ld CIT(A) while granting relief to the extent of
Rs.34,000/- and sustaining to the extent of Rs.21,000/- we therefore reject the ground of
appeal of the assessee.
61. Ground No. 8 of the assessee's appeal in the case of Anoop Gupta, projects the
grievance of the assessee regarding addition of Rs.78,000/- on account of house hold
expenses.
62. In this case the AO had made an addition of Rs.1,37,224/- which was restricted
by the ld CIT(A) to Rs.78,000/- by holding as under:-
"3.3 I have considered the facts of the case. I agree with the argument of the
ld AR of the appellant that the AO has not brought out any material on record
except mentioning that appellant's family consists of four members. He has not
considered the fact which he is fully aware and himself has mentioned n the
assessment order in the case of Smt. Dayawanti for Assessment Year 2001-02 that
the entire family resides jointly in a house in Model Town, Delhi. Therefore,
estimating household expenses at Rs.15,000/- per month is high in my opinion
looking to the fact that this estimation is being made not for current year but for
Financial Year 1999-2000. In my opinion therefore it will be fair and reasonable to
estimate the drawings in the hands of the appellant@ Rs.10,000/- per month i.e.
Rs.1,20,000/- for the year. This will lead to an addition of Rs.78,000/- (Rs.1,20,000-
Rs.42,000/- shown) on this account. Thus, the addition of Rs.1,37,224/- is restricted
to Rs.78,000/-. The appellant thus gets relief of Rs.59,224/- on this ground."
63. The ld CIT(A) has estimate the drawings of the assessee at Rs.10,000/- per month.
No material whatsoever has been led to assail the finding and addition sustained by
the ld CIT(A). Therefore this ground of the assessee is dismissed.
64. Ground No. 5 of assessee' s appeal in the case of Ajay Gupta relates to addition
of Rs. 2lakh on account of unexplained cash-credit. Facts in brief are that AO made an
addition of Rs.5,48,000/- on account of unconfirmed loan from M/s Anand Jute
company, since no confirmation was received from it. During the appellate
proceedings, in the remand report, the AO has stated that evidence filed at appellate
stage was incomplete and false. And that the account statement signed by an
accountant of the said firm cannot be accepted as genuine. The ld CIT(A), however
restricted the addition to Rs. 2 lakhs as it is was the only sum received during the year
from M/s Anand Jute Company. He has held as under:-
Page No. 24
"6.3 I have considered the facts of the case. The submission of the appellant
has also been gone through very carefully. I have also gone through the
confirmation as well as ledger account of the appellant. On going through the
same the contention of the appellant is found correct that during the year only
Rs.2 lakh has been shown as received from this party. The remaining amount as
appearing in the balance sheet for the year is out of opening balance. Thus
addition if any can be made during the year on account of unexplained cash
credit, it has to be only to the extent of Rs.2 lakh. As regard confirmation and the
explanation filed by the ld AR that M/s Anand Jute Co. is a proprietary concern
of Mrs. Alka Bansal and that is why her PAN has been quoted, no evidence
could not produced before the undersigned that this is a proprietary concern of
Mrs. Alka Bansal. In view of the above facts, the confirmation filed by the
appellant during appellate proceedings, which is signed by some accountant
and PAN mentioned therein is also not verifiable, is not being accepted. Thus we
have come to the situation that there is no confirmation/ valid confirmation from
the so called creditor. Therefore, the amount received during the year in the
absence of confirmation has to be treated as unexplained. As already discussed
Rs.5,48,000/- has been wrongly taken by the AO as unexplained cash credit
during the year as during the year new credit is only for Rs.2,00,000/-. Therefore
on the ground of non furnishing of confirmation addition during the year can be
made u/s 68 of only for Rs.2 lakhs. Thus the addition of Rs.2 lakh is upheld. The
appellant gets relief of Rs.3,48,000/- on this ground.
65. Having heard both the sides and after perusal of the records we find no infirmity
in the conclusion made by the ld CIT(A) to the extent that even the ld counsel in the
course of hearing could not demonstrate that the credit was confirmed by the creditor
namely Mrs. Alka Bansal who claimed to be the proprietor of M/s Anand Jute
company. A copy of the account signed by an accountant, has been admittedly
placed on record before us as well as the ld CIT(A). We note that the amount of Rs.2
lakh has been received by Account Payee cheque and interest thereon has been paid
to the creditor. Further PAN number of the creditor has also been furnished. In the said
circumstances, we are of the opinion that merely because confirmation has not been
filed separately from the creditor itself, would be amounting to deny the claim on hyper
technical ground, when other facts are not refuted by the department even in the
course of hearing. In such circumstances we feel it appropriate to allow the claim of
the assessee and delete the addition of Rs. 2 lakhs.
66. Ground N0.5 of assessee's appeal in the case of Ajay Gupta for Assessment Year
2001-02 relates to addition of Rs.28,559/- on account of un-explained creditors.
67. The ld CIT(A) has upheld the addition of Rs.28,559/- representing the balance
from the creditor observing as under:-
"7.3.2 Regarding Shivangi Printers, though no confirmation has been filed, the
copy of the bill has been filed which was forwarded to the AO and the AO has
not doubted the genuineness of this bill. Thus normally there is no case of
disallowance during this year just because the bill amount has not been paid
Page No. 25
during the year. However, on going through the balance sheet of the appellant
for Assessment Year 2001-02 it is seen that this amount remains outstanding even
as on 31.03.2002. Thus like Royal Packing, appellant could have offered this
amount in Assessment Year 2002-03 on the ground of cessation of liability.
However, on going through the return of Assessment Year 2002-03, it is seen that
this amount has not been offered. Therefore, the addition of the same in this year
is upheld though not on the ground on which addition has been made.
68. The ld CIT(A) has held that there is cessation of liability, on the ground that in
respect of another creditor M/s. Royal Packaging the said sum has been offered as
income. However we are of the opinion that the cessation of liability in respect of
another creditor cannot be a ground or basis to assume cessation of liability in respect
to this creditor we therefore delete the addition.
69. Ground No. 1 of the revenue's appeal in the case of Ajay Gupta is relating to
deletion of estimated trading addition of Rs.12 lakhs.
70. The facts as mentioned by the ld CIT(A) are that the assessee is a proprietor of
M/s. Balaji Products. Since the assessee did not produce the books of accounts or
vouchers the AO estimated the income at Rs.1 lakh per month for both the assessment
years.
71. The ld CIT(A) however deleted the addition in both the years by observing as
under:-
"5.3 I have considered the facts of the case. The submission of the appellant
has also been gone through very carefully. Admittedly this is the first year of M/s
Balajee Products, a proprietary concern of the appellant which started from
01.05.1999. Though AO has mentioned that this proprietary concern was there
from 01.05.1999 to 25.11.2000 but in the same sentence he is saying that it is
continued thereafter also. It has been clarified by the ld AR that the business of
the manufacturing in this concern was closed on 25.11.2000 but after that hire
charges etc has been shown in this concern. A search has been conducted in
this group including the appellant. No material, more specifically any
incriminating material has been found about this concern. No evidence of
suppression of turnover, inflation of purchases or inflation of expenses debited in
P&L Account, has been found during the course of search or at least it has not
been brought on record by the AO either in assessment order or in the remand
proceedings. Thought he assessee has failed to produce books of account and
bills and vouchers to support the net profit as declared in P&L A/c and also in the
return of income but at the same time it is also fact that in spite of search being
conducted in this case no contrary material has been found to suggest that the
income shown from this concern is suppressed. For a moment even if it is
presumed that income has been offered purely on estimate basis yet AO has no
evidence as far as this concern is concerned even after conducing search that
the income so shown by the appellant is suppressed. The reference made by the
AO of Excise evasion or unrecorded purchases etc. are related to M/s Balaji
Perfurmes and M/s Assam Supari Trading Co. No reference has been made by
him in the assessment order of any evidence of under reporting of income as far
Page No. 26
as this proprietary concern is concerned. The reference of AO that this group is
engaged in tax evasion is not relevant for the Income-tax purposes, as the
assessment has to be made of an individual assessee based on the material in
the case of the particular assessee and not based on the material found in any
group concern as group is not an assessable entity for the purposes of income-
tax Act. Therefore, the reasons given by the AO/ references made by him too
conclude that income of the assessee from this concern is under stated also
deserves to be estimated is not correct and therefore not upheld.
5.3.1 Even otherwise it is seen that the appellant has filed P&L account of this
concern as per which total turnover of Rs.26,52,030/- has been shown on which
the GP of Rs.6,88,517/- has been shown which is approximately 26%. Since no
evidence during the course of search of suppression of income of this concern
has been found and at the same time GP rate declared is @ 26% and net profit
rate is also declared @ 7.68% (which is better than 5% net profit prescribed in the
case of retailers u/s 44AF), there is no case of estimation of income even if it is
held that since the assessee has not produced books of account, bills and
vouchers, the income has to be estimated. This is so as the gross profit rate so
offered is almost the same as in the case of Balaji Perfumes engaged in the same
line of business wherein 25% gross profit rate has been adopted by the AO
himself for this year. The estimation of income at Rs.13 lakh from the above
concern is, therefore, directed to be deleted. The AO is directed to adopt the
income of Rs.2,03,795/- as shown by the appellant from this concern.
72. Having considered the rival submission, we find that during the assessment years
2000-01 and 2001-02, the assessee declared sales of Rs.26,52,030/- in Assessment Year
2000-01 and Rs.37,07,020/- in Assessment Year 2001-02. He has disclosed net profit of
Rs.2,03,795/- in Assessment Year 2000-01 and net profit of Rs.2,13,905/- in Assessment
Year 2001-02. The AO had noted that in this case as a result of search material was
found against the entire group whereby it was admitted by the assessee that they were
engaged in unaccounted transactions as stated in Dayawanti's case (supra) for
Assessment Year 2000-01, which are not repeated for the sake of brevity. In the said
circumstances, AO is right in estimating the income when nothing has been produced
to support the declared results. However on a perusal of the AO's order we find no
exercise what so ever has been conducted by the AO to arrive at the estimated
income. Therefore we set-aside the impugned order of ld CIT(A) and remit the matter
back to the file of AO, to estimate afresh the income of the assessee, after giving
adequate opportunity to the assessee. The grounds of revenue for the both the years
are allowed for statistical purposes.
73. Ground No. 2 of the Revenue's appeal for 2001-02 in Ajay Gupta's case related
to protective addition on account of unexplained investment in farm house.
74. On this issue, we have already upheld the substantive addition in the hands of
Sunita Gupta wife of the assessee. Therefore the protective assessment does not survive
and therefore we confirm the order of the ld CIT(A) and dismiss the revenue's appeal.
Page No. 27
75. Ground No.3 to 6 of the Revenue's appeal for Assessment Year 2001-02, in Ajay
Gupta case, relates to addition of Rs.72,000/- on account current liability held as non-
genuine and addition of Rs.2,61,896 and Rs.6,21,516/- on account of unsubstantial
sundry creditors.
76. Having considered the submission of both the parties, since we have already
held that estimation is warranted on the facts of the assessee. And for which purpose
we have restored the matter back to the file of the AO. It would be thus in the fitness of
things that the aforesaid issues are also restored to the file of AO, so that a proper
estimate be arrived after considering all the relevant facts including the aforesaid
additions on account of unsubstantiated creditor/ non-genuine current liability.
Therefore the aforesaid grounds of revenue are allowed for statistical purpose.
77. All the remaining ground in the appeal of the assessee in the case of late
Dayawanti, Sunita Gupta, Varun Gupta and Anoop Gupta are regarding levying of
interest which are consequential in nature; and ground regarding initiation of penalty
proceedings we feel at this stage is pre-mature and therefore dismissed.
78. In the result the appeal filed by the assessee and revenue are partly allowed.
Order pronounced in the open court on 22.09.2014.
-Sd/- -Sd/-
(N.K. SAINI) (A. T. VARKEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:22/09/2014
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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