TMI Blog2015 (6) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... those issues, then impliedly part books stand rejected. The AO is not entitled to altogether discard the evidence of the books of account. It is open to the AO to accept assessee’s books with regard to certain kind of transactions and reject them in respect of other transactions as was held in Ganeshilal Chhappan Lal Vs. CIT [1940 (9) TMI 17 - ALLAHABAD HIGH COURT]. Therefore, there is nothing wrong in accepting the book results to the extent of no discrepancy found. The AO though had rejected the books of a/c, but had made addition only in respect of bogus purchases. Thus, impliedly the books of a/c were rejected to this extent only, which was sustained by ld. CIT(A), but he reduced the addition by applying only estimated gross profit to the impugned transactions. Therefore, we uphold the ld. CIT(A)’s action in part rejection of books of account. - Decided against assessee. - ITA No. 1466/Del/2011, ITA No. 1582/Del/2011 - - - Dated:- 21-11-2014 - SHRI S.V. MEHROTRA AND SHRI H.S. SIDHU : JJ. For the Appellant : Shri C.S. Agarwal Sr. Adv., Shri Ravi Pratap Mall Adv. For the Respondent : Smt. Parminder Kaur Sr. DR ORDER PER S.V. MEHROTRA, A.M:- These c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has given details, obtained in regard to parties shown under creditors, which was as under: S. No. Name of party Amount PAN with AO Remarks 1. M/s Jooni Enterprises, Prop. Shri Umesh Kumar 10,03,500 Wd.5(1) As per database no return filed 2. M/s M.N. Overseas 7,84,160 Wd. 30(1) -do- 3. M/s Necola International 24,17,168 Wd. 33(2) Invalid PAN 4. M/s Nirvana Trading Co. Prop. Bahadur Singh 83,97,572 Wd. 30(1) -do- 5. M/s S.R. International 24,10,621 Wd. 36(3) -do- 6. M/s S.S. Enterprises 72,18,444 Wd. 24(1) -do- 7. M/s Satyam Trading 46,15,523 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same time he was also not fully convinced with the assessee s explanation also , particularly in view of the observations in the remand report as under:- 2.6. In the remand report, the AO had pointed out that TIN no. was allotted to all the parties in 2005 and the entities were owned/ co-owned by five persons, namely, Naresh Kumar Khandelwal, M.H. Sharma, Yogesh Kumar Jain, Umesh Kumar and R.B. Singh. Summons were issued to all persons, which were either not responded or not served. 2.7. In the remand report observations in regard to these persons were as under: Summons u/s 131 of the IT Act were issued to above 5 persons for personal deposition on 29-09-2010 asking for certain details, summons issued to Shri Yogesh Kumar Jain, Naresh Kumar Khandelwal, Umesh Kumar returned back as unserved with the following remark of postal authorities: Yogesh Kumar Jain No such prson Naresh Kumar Khandelwal Left without address. Umesh Kumar No such person. The summons issued to Shri M.M. Sharma and Shri R.B. Singh neither returned back nor nobody ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecline of 2.28% in the GP rate from AY 2006-07 and even in AY 2008-09 it remained somewhat low which was attributable to the fact that the closing stock of unbranded item for ₹ 32,94,296/- had been sold at a loss in this year too. He further observed that the GP rate had been a healthy figure of 4.95% in AY 2006-07 and 4.25% in AY 2009-10 when there had been no disputed sales of unbranded items. He has extracted the assessee s submission in this regard at pages 22 to 25 of order and concluded that the explanation provided by the assessee for suffering losses on the transactions which were under scanner revolves around his self serving statement that he choose to suffer the losses in order to ward off competition from other suppliers vis- -vis his existing vendors. 2.10. Ld. CIT(A) did not accept this explanation and, inter alia, observed as under: This explanation is quite flimsy and superficial in case of a trading business as his. It is indeed possible for a trader to sell at reduced profit margin if the overall result is increase in turnover and consequent profitability but operating at a loss in transaction after transaction defies all human business profitabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions in books of accounts as correct. In fact under circumstances as existing in instant case the rejection of the entire books of accounts would have resulted in miscarriage of justice to the assessee than applying a reasonable estimated addition with reference to only such transactions which are doubtful/ disputed. 2.13. Being aggrieved with the order of ld. CIT(A), both assessee and the department are in appeal before us. Assessee s appeal (ITA no. 1466/Del/11): 4. Following grounds are raised: 1. The Ld. CIT(A) has erred in law and facts of the case in sustaining the addition amounting to ₹ 68,31,195/- on account of estimated gross profit on the sale of items in question, ignoring the submissions of the assessee and treating the same as undisclosed income, which is unjustified, uncalled for and bad in law. 2. The Ld. CIT(A) has erred in rejecting the part of books of accounts for the purpose of resorting to the estimates and making addition on the basis of G.P. rate, which is based upon surmises, conjectures and is bad in law. 3. The assessee craves to have the right to add, amend or modify the ground of appeal. 5. Ground no. 3 is general in nature a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire purchases from nine parties as bogus and had accordingly made an addition of ₹ 3,62,49,274/-. The total purchase shown by assessee was ₹ 10,34,26,283/- and the sales were for ₹ 10,62,59,747/-. The AO had not commented upon the sales. Ld. CIT(A), after considering the remand report and the documents filed by the assessee concluded that the impugned parties were having bank accounts where payments received in the subsequent financial year from the assessee had been deposited and this goes to establish the identity of the parties. However, ld. CIT(A), inter alia, observed that all efforts including sending inspector of Income-tax at addresses gathered from the banks had been made to trace nine parties but unfortunately there was not a single compliance from any of these nine parties. He further observed that a direct inquiry relating to the source from where these parties had made the purchases as well as their cost should have possibly made only if these parties had appeared before the AO at the same time. Therefore, ld. CIT(A) has not given any conclusive finding as regards the genuineness of purchases. He has rightly observed that disputed purchases carry wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irstly, whether ld. CIT(A) exceeded his powers and resorted to a new source of income; secondly, whether ld. CIT(A) had made enhancement of income; and thirdly, whether ld. CIT(A) was justified in rejecting the sales returned by assessee. 8.2. As far as the issue regarding taking a new source of income is concerned, ld. counsel has relied on following two case laws for the proposition that the same cannot be done by ld. CIT(A): - CIT Vs. Sardari Lal Co. 251 ITR 864 (All.)(FB); - CIT s. Shapoorji Pallonji Mistry 44 ITR 891 (SC) 8.3. However, in the case of CIT Vs. Nirbheram Daluram 224 ITR 610 (SC), it has been held that the appellate powers conferred on the AAC u/s 251 of the Act were not confined to the matters considered by the ITO. It was held that even if the sum added by the AAC related to new sources of income not considered by the ITO, the AAC could not be held to have exceeded his jurisdiction in making the addition. In this case in reassessment proceedings, the AO had included in the total income, a sum of ₹ 2,45,000/- referable to ostensible transactions in hundi loans shown by the assessee firm. On appeal, the AAC not only sustained the addition of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the fact that there was no evidence to establish that the impugned purchases were included in the sales-tax returns of the parties, ld. CIT(A) s conclusion of arriving at a reasonable estimate, considering the entire conspectus of t he case cannot be faulted. We, accordingly, confirm the order of ld. CIT(A) on this count. 9. As far as ground no. 2 is concerned, the main contention of ld. counsel for the assessee is that ld. CIT(A) was not justified in rejecting part books of accounts. 10. Having heard both the parties, we do not find any infirmity in the order of ld. CIT(A) on this count also because when-ever AO examines specific issues in course of assessment and make additions/ disallowances qua those issues, then impliedly part books stand rejected. The AO is not entitled to altogether discard the evidence of the books of account. It is open to the AO to accept assessee s books with regard to certain kind of transactions and reject them in respect of other transactions as was held in Ganeshilal Chhappan Lal Vs. CIT 9 ITR 81 (All). Therefore, there is nothing wrong in accepting the book results to the extent of no discrepancy found. The AO though had rejected the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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