TMI Blog2000 (1) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period10th Feb., 1995, to7th Nov., 1995. Annexure A-6 : This is a note book with a record of bills for the sale for the period8th Nov., 1995, to19th July, 1996. Annexure A-7 : This is a note book having a record of bill for sale for the period from27th April, 1994, to10th Feb., 1995. The entire sale for the above period aggregated to Rs. 1,43,98,428. The Annexures A-8 and A-9 are relating to bills for the period1st April, 1995, onwards. The total sales recorded in these Annexures worked out to Rs. 2,78,16,000 as follows : Annexures A-8 : Rs. 76,86,000 Annexure A-9 : Rs. 2,01,27,000 The AO, therefore, worked out the unaccounted sales for the period from1st April, 1994, to31st March, 1996, as follows: Rs. (1.)1st April, 1994, to31st March, 1995, and1st July, 1996, to19th July, 1996 1,43,98,428 (2.)31st March, 1996, to30th June, 1996 76,89,000 (3.)1st April, 1995, to31st March, 1996 2,01,27,000 4,22,14,428 The AO confronted the assessee with these figures in the hearings before him. The AO also proposed to apply a G.P. rate of 7 per cent on these unaccounted sales. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e without any evidence to support such statements. The assessee, therefore, said that the offers of admissions/surrender should not be made the basis for making the assessment. The AO however, found that the assessee was given proper opportunity and, therefore, whatever admissions and surrenders made during the assessment proceedings are vaild and the same has to be taken into account. He, accordingly worked out the income on account of unaccounted sales at Rs. 10,07,890 on the sale of Rs. 1,43,98,428 and a sum of Rs. 19,47,120 on a sale of Rs. 2,78,16,000. 4. The assessee is still aggrieved and has come up in appeal before the Tribunal. Shri O.S. Bajpai, the learned counsel, vehemently objected to the addition on this account. According to him, the addition was without any basis and only on the basis of the statement which was retracted by the assessee at the first opportunity. According to him, it is well settled that a party s admission is substantive evidence and if such admission is clearly and unequivocally made is the best evidence against the party making it. Though the same is not conclusive, the onus shifts on the maker on the principle that what a party himself admits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of making assessment as they are not legally valid. On receipt of statements supplied to the assessee, the assessee immediately sent its objection on27th Sept., 1996, copies of which are placed at p. 105 of the paper book. It is, therefore, submitted that the AO was not justified in making the addition on the basis of the statement as burden shifts to the Department which was not discharged. 6. With regard to the merit, it is submitted that the assessee immediately claimed deduction of the expenses incurred by the assessee which were recorded in the seized books of accounts. The AO rejected the claim without any basis and applied a G.P. rate of 7 per cent. If the expenses claimed by the assessee on the basis of the documents seized during the year are deducted then the net profit comes to approximately 1.5 per cent which is normal profit in the regular business of the assessee from year to year. It is, therefore, submitted that even if any addition is to be made then the profit on account of unaccounted sales should not exceed more than 1.5 per cent. 7. On the other hand, Shri L.S. Negi, learned senior Departmental Representative vehemently supported the order of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements were furnished to the assessee, the assessee wrote a letter dt.27th Sept.,1996claiming that the expenses entered in the documents seized at the time of search should be deducted from the gross profit determined by the AO. This claim was reiterated at the time of assessment proceedings. The AO rejected the claim on the reasoning that the expenses claimed by the assessee have not been correctly worked out. The expenses incurred by the assessee are not quantifiable as there was no break-up or complete details of unaccounted purchases, corresponding to the unaccounted sales. In such a case, it was his view that the expenses incurred were claimed by the assessee in its regular books of accounts and, therefore, no further deduction was required on this account. 9. We are unable to agree with the reasoning of the AO. The assessee in this case did not seriously object to the application of gross profit rate of 7 per cent. It, however, claimed certain expenses of revenue nature in the form of cleaning expenses, warehouse charges and packing charges, etc. as found in Annexures A-8 and A-9. If these expenses are deducted from the profit estimated by the AO, the net profit rate comes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust eight days. He, therefore, held that unaccounted peak investment worked out at Rs. 26,87,240 on a total turnover of more than Rs. 4.2 crores was fair and reasonable. He, accordingly added back as unexplained investment in the purchases for the period during the asst. yr. 1996-97. 11. Aggrieved by the said addition, the assessee came up in appeal before us. Firstly, the learned counsel of the assessee submitted that the addition in this case is without any basis as there is no mention of the section under which the addition was made. Reliance was placed on the decision of the Tribunal in the case of Asstt. CIT vs. Sailesh S. Shah (1997) 59 TTJ (Mumbai) 574 : (1997) 63 ITD 153 (Mumbai). According to the learned counsel the benefit of presumption cannot be taken without specific mention of the section. Secondly, the addition is baseless as the investment was estimated hypothetically on the basis of sales made during the period. Replying on the decision of the Hon ble Supreme Court in the case of Janki Ram Bahadur Ram vs. CIT (1965) 57 ITR 21 (SC) it was submitted that it was for the Revenue to establish that the profit earned in a transaction is within the taxing provision and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has already offered the unexplained investment for taxation and there is, therefore, no plausible reason for reversal of the offer earlier made. It is, therefore, submitted that no interference is called for in this regard. 13. We have carefully considered the rival submissions, in the light of the material on record. From the order of the AO and the material placed on our record, it is an admitted fact that the assessee made unaccounted sales. Admittedly the unaccounted sales for the period from1st April, 1995, to31st March, 1996, was to the tune of Rs. 2,01,27,000. It was the explanation of the assessee that the purchases were made on credit and the payments for the purchases were made after realisation of the sale proceeds. In support of this claim, reliance was placed on the Annexure A-3 at p. 24 recovered from D-21, Bhagat Singh Marg, at the time of search. The said p. 24 reflected an amount payable to the suppliers due to creditors balance at Rs. 61,36,159 as on31st March, 1996. The debit side shows a sum of Rs. 19,16,008. It is, therefore, the claim of the assessee that more than Rs. 42 lacs were available at any point of time on account of creditors supply for goods. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained investment found in the Annexures which were treated as unexplained investment. The unexplained investment was merely estimated on the basis of the turnover less the gross profit and, therefore, the investment for a period of one month was estimated on that basis. Since there is no specific investment which can be said to be unrecorded in the books of account, the addition made by the AO on estimated basis cannot be upheld. Even in any case, peak investment presupposes actual purchases of each day less the resources available in the form of balance of the previous day plus sale proceeds received during the course of the day. If the investments of the assessee are worked out on the basis of the documents found, at the time of the search, the assessee has the benefit of purchase on credit to the tune of Rs. 42 lacs on a particular day. If the turnover of these credit purchases are made at 5 to 10 times during the year, the unaccounted sales during the period are more than covered. There is, therefore, no basis for making any addition on account of peak investment on account of unaccounted purchases. The addition is accordingly deleted. The above view taken by us has the indirec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted sales on the basis of Benami bank account No. 5556 with Union Bank ofIndia, Ajadpur 3,96,488 Insofar as the addition of Rs. 2,81,164 is concerned, it is seen that the AO found debit and credit figures amounting to Rs. 12,61,237 and Rs. 40,16,628, respectively, in the Annexure A-2 recovered from B-21, Bhagat Singh Marg. It is a small note book in which the debit and credit entries are noted. It was explained by the assessee that these transactions related to asst. yr. 1983-84. In the absence of any specific dates in the note book and the entries made therein, the AO held that the entries related to the present period. Applying the same G.P. rate of 7 per cent on the estimated sale of Rs. 40,16,628, he made an addition of Rs. 2,81,164. This addition was made for the period31st March, 1996, to20th July, 1996, of the block assessment. The AO also found that the assessee was maintaining bank account No. 42063 with State Bank ofIndia, Azadpur. The bank account was maintained in the name of M/s Anil Kumar Co. It was explained that this account belonged to M/s Anil Kumar Khurana Co. which was used by them for the last two years. The transactions of the earlier pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable. It is, therefore, submitted that no interference is called for in this regard. 19. We have carefully considered the rival submissions in the light of the material on record. From the order of the AO and the various statements given by the partners of the assessee, it cannot be denied that the assessee has been making unaccounted sales from time to time. It is also clear that the margin of profit in this line is not as high as in other business. In the regular business, the net profit rate never crossed beyond 1 per cent in the past. In such a case, it will meet the ends of justice if the income from this transaction and credit entries, etc. is estimated at 1.5 per cent. The AO is directed to recompute the income from unaccounted sales/transactions on this basis. 20. The last ground is in regard to the addition of Rs. 31,079 on account of commission receipts. The learned counsel before us did not press this ground at the time of hearing. It is accordingly dismissed as not pressed. In the result, the appeal stands partly allowed. u.b.s. bedi, j.m. : 12th Feb., 1999 I have gone through the proposed order of learned Brother word by word but despite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record of bills for sale for the period from27th April, 1994, to10th Feb., 1995. The entire sale for the above period aggregated to Rs. 1,43,98,428. Annexures A-8 and A-9 are relating to bills for the period1st April, 1995, onwards. The total sales recorded in these Annexures worked out to Rs. 2,78,16,000 as follows: Rs. Annexure A-8 : 76,86,000 Annexure A-9 : 2,01,27,000 The AO, therefore, worked out the accounted sales for the period from1st April, 1994, to31st March, 1996, as follows: Rs. 1.1-4-1994, to31-3-1995and1-7-1996, to19-7-1996 1,43,98,428 2.31-3-1996, to30-6-1996 76,89,000 3.1-4-1995, to31-3-1996 2,01,27,000 4,22,14,428 3. The AO confronted the assessee with these figures in the hearings before him. The AO also proposed to apply a g.p. rate of 7 per cent on these unaccounted sales as admitted by Shri Purshottam Das Saini, partner of the assessee-firm in his statement. The assessee did not deny the fact of unaccounted sales as worked out by the AO. The assessee, however, claimed that the undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexure-6 and Annexure-7. Assessee was confronted with the aforesaid Annexures and nature of sales accounted for/reflected therein during the post-search enquiries. Since perusal of these statements reveal that assessee had accepted and admitted not only to the undisclosed nature of above-mentioned transactions in figures but also agreed for addition to be worked out by applying proper rate of 7 per cent and exact amount of profit was specifically admitted to be added in the income. The statement of Shri Purshottam Das Saini, the managing partner, recorded on 10th Sept., 1996, 12th Sept., 1996, and letter dt.24th Sept., 1996, placed on record clearly brings out this fact. Vide question No. 7 of his statement recorded on oath dt.12th Sept., 1996, assessee was asked to explain and it is at p 134 of Annexure A-8 (sale account of Rs. 76,89,000) and page No. 128 of Annexure A-9 (sale account of Rs. 2,01,27,000). As per assessment order in his answer, assessee clearly stated as under : ".........these are unaccounted sales for the period 14th Jan., 1996, to 30th June, 1996, and 1st April,1995, to 31st March, 1996, respectively, which comes to a total figure of Rs. 2,78,16,000. Vide que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1th July, 1997, at points 5 and 6 has not agitated the undisclosed nature of sales reflected in Annexures A-5, A-6 and A-7 recovered from D-21, Bhagat Singh Marg, and Annexures A-8 and A-9 recovered from the premises of Aryapura Chowk,Delhi. The application of 7 per cent g.p. rate has also not been disputed by the assessee as noted by the AO. However, certain points have been raised in the submission of the assessee which as noted by AO in assessment order are detailed as under: "(vii) The assessee has pointed out that figures of undisclosed income worked out by this office, should be reduced by expenses incurred in the process of making unaccounted sales. Attention has been drawn towards p 516 to 570 of Annexure A-9 recovered from Aryapura,Delhi. However, no specific break-up or working of expenses deductible, was furnished by the assessee. In response to further queries on this point, the assessee vide point No. 4 of his letter, dt.19th July, 1997, has furnished certain explanations in this respect. Extracts of certain seized papers of Annexures A-8 and A-9 have been filed. These papers are purported to reflect unaccounted expenses jotted down, including seed cleaning expenses, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the question of unaccounted sales, at point Nos. 5 and 6 of letter dt.11th July,1997, has submitted that unaccounted sales on the basis of Annexures A-5, A-6 and A-7 and A-8 and A-9 (as discussed in the preceding paras) have been considered at the time of filing of return of income under s. 158BC. A perusal of the return of income under s. 158BC reveals that a total undisclosed income of Rs. 5 lakhs for the entire block-period, has been declared. The assessee has not furnished a proper explanation of the break-up of undisclosed amounts declared in the aforesaid return filed under s. 158BC. No working has been given to justify the same. In view of the elaborate discussion on the unaccounted sales made in the preceding paras and in the light of specific admissions made by the assessee, the amounts of disclosure made by the assessee, are obviously disproportionate to the undisclosed income by the assessee, are obviously disproportionate to the submissions on the issue of expenses deductible, has already been considered. In the facts and circumstances of the case, the return of undisclosed income filed by the assessee is not acceptable. The assessee vide his letter, dt.11th July, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciple that what a party himself admits to be true may reasonably be presumed to be so and until the presumption is rebutted the fact admitted to be taken to be established as held by the Hon ble Supreme Court in the case of Thiru John Ors. vs. The Returning Officer AIR 1977 SC 1724. It was also submitted that even if the confession is inculpatory but corroboration is necessary if the confession is retracted as held by the Hon ble Supreme Court in the case of Pangambam Kalan Joy Singh AIR 1956 SC 9. It was also submitted that since the assessee in his case, has retracted the statement made before the AO, such statement cannot be made basis for assessment without any corroboration as held by the Hon ble Supreme Court in the above cases. The learned counsel also cited the decision of Hon ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala Anr. 1972 CTR (SC) 253 : (1973) 91 ITR 18 (SC) for the proposition that admission is extremely an important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect and assessee should be given opportunity to show that the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized documents and so these could not be allowed and it was taken rightly that the expenses accounted for in the seized documents have actually been claimed against accounted for sales in the books of account being maintained by the assessee and shown to the IT authorities. So application of g.p. rate of 7 per cent on the total turnover is fair and reasonable and it was submitted that the same calls for no interference. 10. With regard to reliability of the statement of the assessee admitting the turnover and the rate of gross profit, etc. it was submitted that there can be no better evidence than admission of the assessee himself and the assessee has neither successfully withdrawn the statement nor it was established to be erroneous. Therefore, the statement cannot be ignored for estimating the profit for unaccounted sales which fact has duly been admitted by the assessee in the statements and letters submitted in post-search enquiry and also during the proceedings. It was thus pleaded that no interference is called for and appeal of the assessee deserves to be dismissed in this regard. 11. After having gone through the rival submissions in the light of material on record it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the counsel for the assessee, he could not controvert the same. Therefore, this plea of the assessee is found to be not valid and the same is rejected. As regards other objections about statement I am of the view that since strict technical rules of evidence were not applicable to tax proceedings, therefore, other objections which are in the nature of technical objections are found to be of no consequence more so when assessee has himself relied upon and agreed for fixing of turnover as admitted in the statement. Therefore, these pleas are not tenable and as such rejected. 13. As regards retraction of statement is concerned, it was vehemently argued by the learned counsel of the assessee that letter dt. 27th Sept., 1996, is clear retraction of admission made by the assessee during post-search enquiries and by virtue of the said letter assessee while confirming the deposition regarding conducting of unaccounted sales were concerned he categorically pleaded for deduction of expenses as appearing in the seized documents. Therefore, it was emphasised by the assessee s counsel that gross profit as agreed to by the assessee in his statement should be further subjected to deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s retraction of earlier admission/statement made by the assessee but only request was made to deduct the amounts of expenditure incurred against gross profit calculated on unaccounted for sales. However, it is admitted in the above letter that the assessee has been practising unaccounted sales against unaccounted purchases which the assessee does not enter even in other books of accounts as seized by the Department. To support this assessee s counsel relied upon the Hon ble Supreme Court s decision in the case of Thiru John. Ors. vs. Returning Officer wherein it was held that even if confession is retracted then corroboration is necessary. Support was taken from Pangambum Kalan Joy Singh. It was pleaded by the assessee s counsel that since the assessee, in this case, has retracted from the detected statement earlier made before the tax authorities, therefore, the said statement cannot be made basis for assessment without any corroboration as held by the Hon ble Supreme Court in the above case. Assessee s counsel further cited the case of Hon ble Supreme Court in the case reported in 1972 CTR (SC) 253 : (1973) 91 ITR 18 (SC) for the proposition that admission is extremely an impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh not conclusive is decisive of the matter, unless successfully withdrawn or proved erroneous as held by the Hon ble Supreme Court in the case of Narain Bhagwant Rai G. Balajiwala AIR 1960 SC 100. Though the value of admission must depend upon the circumstances in which they are made and possible motives for incorrect statement by interested persons should not be ignored and in order to retract from such admission, it is incumbent upon the assessee to show that admission made by him before the IT authorities is erroneous or he must successfully withdraw it. Unless he does so, and gives a satisfactory explanation with regard to that admission, the admission made by him shall be binding upon him. In this case admission with regard to unaccounted sales to the extent of Rs. 4,22,14,428 was admitted by Shri Purshottam Das Saini, partner of the assessee, himself, voluntarily, for the period under consideration and similarly admission to the extent of 7 per cent of gross profit on the sales for the block period in the same statement was made by the same partner of the assessee Shri Purshottam Das Saini on the basis that firm had been earning and reflecting similar rate of gross profit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to earning of 7 per cent gross profit on the unaccounted for sales of Rs. 4,22,14,428 has neither been proved erroneous nor successfully withdrawn with any evidence. Therefore, AO was fully justified in taxing the same as income of the assessee as offered by the assessee in his statement recorded at various stages. The case law as relied upon by the assessee s counsel is of no help to the assessee as neither any books of accounts nor any other documents to support purchase or expenses have been adduced to justify the claim of the assessee made in letter dt.27th Sept., 1996. There is no retraction as claimed by the assessee in the said letter even because retraction means to withdraw, to draw back, to withdraw a vow, promise or the like, to make is dis a vow, a statement or an opinion; to withdraw or shrink back to withdraw as unjustified as a statement or opinion and no such categorical or specific mention is therein the said latter called by the assessee as so-called retraction letter, dt. 27th Sept., 1996, as reproduced above and simple request was made to work out profit after giving deduction of expenses incurred as per seized documents and that too without any evidence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the same period. He also during the proceedings found that there was unaccounted purchases totalling Rs. 4,12,000 (debited in Annexure A-9) made over the period of just 8 days. He, therefore, held that unaccounted peak investment worked out at Rs. 26,87,240 on a total turnover of more than Rs. 4.2 crores was fair and reasonable and the assessee too has offered vide his statement dt.16th Sept., 1996, made before Adll. DIT, Unit-II(2), Investment,New Delhi. Therefore, he added back as unexplained investment in the purchases for the period during asst. yr. 1996-97 at Rs. 26,87,240 and aggrieved by this addition assessee has come up in appeal and is before the Tribunal. 20. The learned counsel for the assessee submitted that addition in this case is made without any basis, firstly, as there is non-mention of any section under which the addition was made and reliance was placed on Tribunal decision as reported Asstt. CIT vs. Sailesh S. Shah (1997) 59 TTJ (Mumbai) 574 : (1997) 63 ITD 153 (Mumbai). According to the assessee s counsel the benefit of presumption cannot be taken without specific mention of section. Secondly, the addition is baseless as investment was estimated hypot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 8 days. In that view of the matter, the unexplained investment computed by the AO for the asst. yr. 1996-97 at Rs. 26,87,840 is more than fair and reasonable particularly when the unaccounted sales during the above period was found to be at least Rs. 4 crores. It is also submitted that the assessee itself has already offered the unexplained investment for taxation and there is, therefore, no plausible reason for reversal of the offer earlier made. It is therefore, submitted that no interference is called for in this regard and order of AO requires to be confirmed. 22. I have carefully considered the rival submissions in the light of material on record as emerging from the order of AO and material placed on record. It is an undisputed fact that assessee made unaccounted for sales for the block period to the extent of more than Rs. 4.2 crores. Admittedly, the unaccounted sales for the period1st April, 1995, to31st March, 1996, was to the tune of Rs. 2,01,27,000. It was the explanation of the assessee that purchases were made on credit and payments for the purchases were made after realisation of sale proceeds. Reliance was placed in support of Annexure A-8 at p 24 recovered fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents at D-21, Bhagat Singh Marg, Adarsh Nagar,Delhi, also recorded in Annexure A-9 of the seized documents, which is duplicate ledger for the period1st April, 1995, to31st March, 1996? Ans. 6 : Yes, all these parties mentioned in the pp. 13 to 23 of Annex. A-3, of the seized documents at D-21, Bhagat Singh Marg, Adarsh Nagar, Delhi, have been taken from the duplicate ledger, i.e., Annex. A-9 of the seized documents for the period1st April, 1995, to31st March, 1996." 23. Since there is a clear admission made by the assessee in his statement made (relevant portion reproduced above) and no other evidence or material has been adduced to substantiate the claim made of creditors balance at Rs. 61,36,159 as on 31st March, 1996, when onus of proving the same heavily lies on assessee, therefore, the action of AO is justified and calls for no interference at the level of the Tribunal. Therefore, while rejecting this ground of appeal I confirm the order of the AO in this regard. So far as case law relied upon by the assessee s counsel is concerned, I am of the view that the same is distinguishable on facts and found to be not applicable to the present case. 24. The next ground rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for asst. yr. 1996-97, on the basis of admission made by the assessee was justified or the assessee is entitled to further relief on account of subsequent stand taken in the course of assessment proceedings? 2. Whether, on the facts and in the circumstances, the AO was justified in applying the profit rate of 7 per cent on undisclosed sales for the period31st March, 1996, to20th July, 1996, and on the undisclosed sales on the basis of two Bbank accounts or it should be reduced to 1.5 per cent?" Phool Singh, J.M. (As a third member): 24th Jan., 2000 There being difference of opinion between the two Members who heard the above captioned appeal, following questions under s. 255(4) of the IT Act, 1961, were referred to the President, Tribunal. The President, Tribunal, has nominated me to express my opinion on the question of difference, reproduced below: "1. Whether, on the facts and circumstances, the addition made by the AO of Rs. 29,55,010 on unaccounted for sales of Rs. 4,22,10,428 for the block period and of Rs. 26,87,340 on account of peak investment in purchases for asst. yr. 1996-97, on the basis of admission made by the assessee was justified or the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income work out by the assessee should be reduced by the expenses incurred in the process of making unaccounted sales. Reliance was placed by the assessee on pp 516 to 529 of Annexure A-9 recovered from Aryapura, Delhi, and it was submitted that expenses mentioned therein be deducted from the income estimated on the basis of g.p. rate of 7 per cent. The nature of expenses stated to be as of seed cleaning expenses, warehouse charges, packing charges, etc. The amount of expenses for the period 1st April, 1996, to 20th July, 1996, was shown at Rs. 4,25,090 and expenses for the period 1st April, 1995, to 31st March, 1996, were calculated at Rs. 11,00,155 which were sought to be reduced from the amount of income worked out by the AO after applying the rate of gross profit. The AO did not find favour with the plea of the assessee mainly on the ground that no specific break-up of working out expenses were furnished by the assessee. He disputed the correctness of the detail of the expenses as he was of the opinion that total expenses comes to Rs. 72,415 as against Rs. 4,25,000 claimed by the assessee and Rs. 7,12,711 instead of Rs. 11,00,155. He was also of the opinion that the amounts c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in hand the assessee had made a plea before the AO proved that his statement recorded at the time of search stands rebutted from the material in the custody of Department and thus said statement cannot be the basis for making the addition. Further reliance was placed on the decision of Hon ble Supreme Court in the case of Pallangoda Rubber Produce Co. Ltd. vs. State of Kerala Anr. 1972 CTR (SC) 253 : (1973) 91 ITR 18 (SC) in which Their Lordships have laid down that admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to prove that the books of account did not disclose the correct state of facts. The plea of the learned counsel for the assessee before the Tribunal was that statement of the assessee was also not recorded as per procedure because no legal assistance was provided to the assessee. The statement was recorded in English. It was not read out to the assessee in the language he understood before obtaining his signatures nor there was any witness to the statement. On this basis it was the plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. He noted that unaccounted sales of Rs. 2,01,27,000 relates to period1st April, 1995, to31st March 1996. The AO estimated the turnover cycle at one month and worked out the peak figure of purchases for one month at Rs. 35,02,430. He worked out undisclosed investment amount at Rs. 26,87,340 after deducting the element of gross profit worked out at 7 per cent. The plea of the assessee before AO was that most of the purchases were credit purchases and payments were made after selling the goods. To substantiate this plea, reliance was placed by the assessee to p. 24 of Annexure A-3 wherein the outstanding amount payable to the supplier in view of credit balance of Rs. 61,36,150 as on31st March, 1996, was reflected and an amount of Rs. 19,16,008 was recoverable from different purchasers. The assessee submitted that this document which was seized at the time of search indicates that purchases were usually being made at credit and sales were also being made in cash and on credit and amount was being paid to suppliers as and when the amount was realised from purchasers. The AO did not find any force in the claim so submitted before him. He noted that theory of the assessee that payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto consideration then there will be no justification to work out the amount of peak investment as assessee was having rotation money to enable him to go for a turnover of Rs. 40 lakh. 2.10. The Departmental Representative relied upon the order of AO and particularly on the admission of assessee at the time of statement in which he admitted the correctness of the amount of peak worked out at Rs. 36,87,340 and reiterated the reasons given by the AO. 2.11. After considering the submissions of respective representatives of the parties, the Hon ble Senior Vice President did not find any basis to agree with the view of the AO. He did find force in the plea of assessee that purchases were being made on credit and the payment for the purchases were being made after realisation of the sale proceeds. As this plea of the assessee did find support from page No. 24 of Annexure A-3, copy of which was appearing at p. 41 of the paper book, in which creditor s balance was shown as Rs. 61,36,156 as against debit side of Rs. 19,16,008 as on 31st March, 1996. He noted that more than Rs. 42 lakh were available at any point of time on account of creditor s supply for goods and if assessee makes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence was made to page Nos. 125 and 126 of Annexure A-8 and page Nos. 100 and 102 of Annexure A-9 in which expenses incurred by the assessee-firm in relation to unaccounted sales were mentioned and it was prayed that the expenses mentioned therein may be deducted from the gross profit calculated by the Revenue. The plea of the assessee s learned representative is that these expenses were not recorded in the P L a/c and were in addition to the expenses claimed by the assessee in relation to accounted sales. The AO was not justified to infer that assessee had already claimed these expenses in the P L a/c as there is no specific finding of AO on that point. 3.2. The other plea of the learned counsel was that AO was not justified to observe that there had been no details of these expenses. My attention was drawn to page Nos. 14 to 16 of the paper book which are details of the expenses of Rs. 11,04,055, and these are copies of page Nos. 516 to 521 of Annexure A-9. In the same way my attention was drawn to p. 106 which was calculation of unaccounted expenses appearing in these papers was found included in the P L a/c. On this basis the contention was that addition was not justified an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the fact that there is no justification from the side of assessee to show that said statement was made under any threat, etc. The learned Departmental Representative further placed reliance on the reasoning given by the AO for not entertaining the plea of assessee for allowing the deduction on account of unrecorded expenses as AO rightly noted that there was no detail of the expenses nor there was any basis for quantification of the expenses. About the detail of expenses appearing at pp. 16 to 17 and 106 to 120, the learned Departmental Representative pointed out that the statement of Rajinder Pal, copy of which is appearing at p. 99 and about A-B, he stated that the same is containing list of guests invited by him to attend the marriage of his son Ravi Pal and details of gifts received from them. So, as per the learned Departmental Representative this detail is not relating to expenses of the unaccounted sales but towards marriage expenses of son of Rajinder Pal. In view of these facts the learned Departmental Representative submitted that these documents were not going to help the assessee and learned AO was justified in rejecting the plea. 3.5. After considering the admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the account books/seized material, etc. In the case in hand, the assessee after 7 days of the admission made moved application dt. 27th Sept., 1996, copy of which appears at p. 105 of the paper book sticking to his statement but submitted on the basis of seized material the necessary deduction of expenses noted in pp. 125 and 186 of Annexure A-8 and pp. 102 and 100 of Annexure A-9 be made from the gross profit to be calculated. This prayer of the assessee deserved to be scrutinized at the time of assessment proceedings. The AO had rejected the plea of the assessee by observing that details of the expenses were not there, secondly, the assessee had not submitted specific break-up of working out expenses. Thirdly the assessee has claimed deductible expenses in the regular books of account. The other plea is that calculations are not correct and he gave out his own calculation at Rs. 72,415 for Rs. 4,25,090 claimed by the assessee and Rs. 7,12,711 in place of Rs. 11,00,455 claimed by the assessee and lastly on the ground that g.p. rate at 7 per cent be applied and that would cover the plea of the assessee as in identical nature of business the rate of g.p. is more. All these ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n my attention was drawn to paper No. 116 of the paper book which contains the amount of turnover, rate of g.p. as well as net profit rate. In asst. yr. 1993-94 and asst. yr. 1997-98 the net profit rate was ranging between 0.11 per cent to 0.54 per cent while in the case in hand if deduction are allowed then net profit rate will be 1.5 per cent and that will take care of the fact that these are block assessment proceedings and assessee admitted indulging in unaccounted sales. This approach was justified one and accordingly I concur with the view taken by the Hon ble Senior Vice President (AM) in giving credit to the plea of the assessee for allowing the deduction on account of expenses found duly recorded in the seized material out of unaccounted sales resulting into net profit rate of 1.5 per cent. 4. So far as the second point of difference is concerned, the reliance of the learned AO as well as that of learned JM is on the statement of Purshottam Das Saini who in his statement recorded at the time of search on 20th July, 1996, admitted that peak investment in any particular month will be Rs. 26,87,340 and copy of the statement is appearing at p. 72 of the paper book. Purshotta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident and submitted that he rightly gave credit to the paper No. 41 of the paper book which indicates that assessee was having liability of Rs. 42 lakh on 31st March, 1996, and that proves the theory of the assessee that assessee-firm was making purchases on credit and that plea was rightly believed and there was justification for deleting the addition. 4.2. As against it the learned Departmental Representative reiterated the same submissions which were taken before the Bench and also submitted that paper No. 41 of paper book is not containing any date and there is no description to the effect that assessee was making purchases on credit. The AO was justified to ignore the said document. The assessee was indulging in making unaccounted sales and volume thereof exceeded Rs. 4 crore and in such circumstances the AO was justified to make estimate of peak investment which might have been made by the assessee in the initial stage and addition was justified. 4.3. In his rejoinder the learned counsel submitted that AO has not made any addition on the basis of alleged initial investment made by the AO but he has worked out the addition on the basis of estimated peak investment on month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statement recorded on 10th Sept., 1996, alone and observed that there was no evidence to prove that Rs. 61,36,158 was the amount of correct liabilities but this is evidence from paper No. 41 which stands explained by the assessee vide his statement dt.12th Sept., 1996, a copy of which is appearing at page No. 65 relied upon by the learned counsel. The statement of Shri Purshottam Das Saini specifically explained this paper No. 41 of the paper book by saying that Rs. 61,36,159 represented the payment to be made by the firm for purchases and Rs. 19,16,008 representing payment to be received from the parties. Not only this he gave out the detailed break-up of parties to whom the payments were to be made and from whom the payments were to be received. If this is the position then how it can be presumed that earlier statement is to be given importance in view of the documentary evidence seized at the time of search which was also explained by the assessee in the statement recorded which is after two days of the earlier statement. The AO has not brought out any material to meet this explanation of the assessee. It can be concluded that it being block assessment no addition can be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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