TMI Blog2014 (10) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... d only be of ₹ 5,73,69,778/-. Wherever the details are available from the computer, there is no justification in estimating the suppressed sales by the AO after rejecting the books of account - the mode of computation of suppressed sales on the basis of the material impounded during the course of survey operation is proper/correct - nothing has been brought on record by the Revenue with regard to the unexplained investment in the purchase - addition of the entire suppressed sales is not called for, only gross profit worked on the sales is required to be added to the total income of the assessee. Whether the gross profit is to be estimated or net profit is to be worked out for making the addition – Held that:- The initial gross profit is to be worked out, the other indirect expenses are to be reduced to work out the net profit - the other indirect expenses have already been booked while computing the normal income of the assessee as per books of account - the gross profit rate is to be applied - the gross profit rate was declared between 10.82% and 13.99% - Since in other years, the gross profit was declared at lesser rate, the gross profit declared by the assessee durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Yadav: These appeals are preferred by the assessee against the respective order of the ld. CIT(A), inter alia, on various grounds which are as under:- GROUNDS IN I.T.A. No.449/LKW/2013: 1. Because on facts and in circumstances of the case, ld. CIT (A) has erred in enhancing the assessment by enhancing addition of ₹ 32,48,571.00 to ₹ 6,93,14,587.00 instead of allowing appeal filed before him. 2. Because on facts and in circumstances of the case, ld. CIT (A) has erred in enhancing the escaped turnover from ₹ 1,19,44,809.00 to ₹ 6,93,14,587.00. 3. Because on facts and in circumstances of the case, ld. CIT (A), Kanpur has erred in holding that entire sales is assessable as income, which is neither practical nor acceptable from accounting principles. 4. Because on facts and in circumstances of the case, ld. CIT (A) has erred in going into irrelevant considerations in enhancing additions and his observations/conclusions are not based on sound reasoning and deserves to be struck down and entire claims of the assessee is to be allowed. 5. Because on facts and in circumstances of the case, the assessment order as well as observations of ld. A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as enhancement in 1st appeal is bad in law as well as on facts and appropriate relief deserves to be allowed. 2. Since common issues are involved in these appeals, these were heard together and are being disposed of through this consolidated order. 3. The common grounds raised in these appeals relates to the addition made on account of suppressed sales. In I.T.A. No.451/LKW/2013, one more ground was also raised with regard to the addition made on account of difference between closing cash in hand not as on 31.3.2007 and opening cash in hand not as on 1.4.2007 as per books of account amounting to ₹ 1,04,20,567/-. 4. The brief facts borne out from the record with regard to the addition made on account of suppressed sales are that the assessee is engaged in the business of manufacturing and trading of Tiranga Agarbatti and other products like mehandi, dhup, etc. and has filed his return of income on 31.10.2007 for assessment year 2007-08 declaring income of ₹ 10,44,720/- and return of income for assessment year 2008-09 was filed on 30.9.2008 declaring income of ₹ 14,25,590/-. 5. A survey action under section 133A of the Income-tax Act, 1961 (herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales declared by the assessee and computed by the ld. CIT(A) on the basis of the impounded materials (Rs.21,88,28,854 ₹ 16,14,09,076/-). The ld. CIT(A) further added unaccounted sales estimated by the Assessing Officer after rejecting the books of account of ₹ 1,19,44,809/- and enhanced the return of income shown by the assessee by ₹ 6,93,14,587/-. 9. In assessment year 2008-09, the ld. CIT(A) has confirmed the addition made by the Assessing Officer. Besides, he has also made an addition of ₹ 1,03,43,877/- being the difference in closing stock as on 31.3.2007 and opening stock as on 1.4.2007 as per the books of account maintained by the assessee in his computer. 10. Aggrieved, the assessee has preferred appeals before the Tribunal. The ld. counsel for the assessee has invited our attention that during the course of survey operation, no books of account were found by the Department and they have taken the figures from the computer, in which accounts were maintained by his Accountant. Due to certain glitches in the computer, difference in figure were shown in the closing cash balance as on 31.3.2007 and opening cash balance as on 1.4.2007. The closin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt; whatever books of account are maintained it was only in the computer and from the computer, two different cash balances were noticed by the survey team. When the difference in opening cash balance and closing cash balance was confronted to the assessee, he could not furnish any satisfactory reply, therefore, the Revenue has rightly made addition of the difference in the cash balance in assessment year 2008-09. 15. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the authorities below and the documents placed on record, we find that during the course of survey operation, no hard copy of the books of account were found. The assessee has maintained the accounts in the computer and from the computer, the survey team has obtained details of sales and opening closing cash balance. The ld. CIT(A) has also extracted the details of total sales in his order at page Nos.4 to 9, according to which the total sales as per the details was at ₹ 21,88,28,854/- in assessment year 2007-08. Undisputedly, the assessee has shown total sales of the year at ₹ 16,14,59,076/-. The difference of ₹ 5,73,69,778/- was conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made by the assessee and that investment was also not disclosed, only the excess over the cost incurred could be treated as profit. 19. Again in the case of CIT vs. Gurubachhan Singh J Juneja (supra), the Hon'ble Gujarat High Court has again reiterated the same findings by holding that where the Revenue had not proved by bringing any material on record that the assessee had made any investment to make the alleged unaccounted sales, the entire amount cannot be taxed; only the gross profit earned on sales can be taxed. 20. In the case of K.C.K.A. Gupta vs. ACIT (supra), the Hyderabad Bench of the Tribunal, following the aforesaid judgment, has also held that even though it is established from the seized documents that the assessee was receiving premium/on-money on booking of flats belonging to third parties, entire receipts of on-money/premium cannot be treated as undisclosed income of assessee; only net profit rate can be applied on unaccounted sales/receipts for making addition. 21. In the instant case also nothing has been brought on record by the Revenue with regard to the unexplained investment in the purchase. Therefore, addition of the entire suppressed sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cash balance moves further and how much cash balance was shown in succeeding dates. In the absence of proper explanation of the assessee, we are of the view that difference in opening and closing cash balance is required to be added under section 68 of the Act and this addition is possible only in assessment year 2008-09. But we find force in the contention of the assessee that if addition of the difference in opening and closing balance is called for, the credit of the income generated on suppressed sales is to be given therefrom and the net amount is to be added on account of difference in closing and opening cash balance, because the income generated from suppressed sales has to be taken into account while computing the opening cash balance as on 1.4.2007. We, therefore, hold that profit/income generated on suppressed sales by applying the gross profit rate be reduced from the difference in closing balance as on 31.3.2007 i.e. ₹ 1,03,43,833- and to make addition of the balance amount on account of difference in closing balance and opening balance. Accordingly, the matter is restored to the file of the Assessing Officer to re-compute the total income of the assessee in te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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