TMI Blog2006 (2) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... against the assessee. In this view of the matter and considering the material on record, we are of the view that the CIT(A) was justified in deleting the entire addition. As a result, the revenue's appeal fails to make out a case against the assessee. The revenue's appeal is, therefore, dismissed. Addition - We set aside the orders of the authorities below on this issue and direct the Assessing Officer to apply net profit rate as disclosed by the assessee in the books of account because it seems to be reasonable and appropriate in the facts of the case. There is no hard and fast rule as to which NP rate is to be applied. It depend upon the facts of each case. The assessee has filed a chart at page 18 of the paper book showing that in the assessment year 2002-03 the assessee has shown net profit rate as per audited books of account in 0.96 per cent and in the assessment year 2003-04 net profit rate of 1.12 per cent has been shown. The Assessing Officer has made addition with regard to the undisclosed income only in these years. If such net profit rate is applied then the addition would be worked out as has been calculated by the assessee and the copy of the same has been fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness and residential premises belonging to the assessee company, its Directors and their family members on 5-6-2002. In the course of search, various variables and other incriminating documents were found and seized. The details regarding valuables found during search and seizure are as under- S. No. Particulars Found Seized (a) Cash: Office Premises Rs. 9,60,430 9,40,000 Locker of Shri R.K. Jain, Director and his family members Rs. 97,850 58,350 Total Rs. 10,58,280 9,98,350 (b) Gold Ornaments: Locker of Shri R.K. Jain, Director and his family Members gms 1,825,270 1625.270 Total 1,825,270 1625.270 4. Upon issue of notice, the assessee filed a block return of income under section 158BC of the ILT Act on 18-7-2003 showing an undisclosed income of Rs. 52,00,000 the details of which are as under- Assessment Year Undisclosed income (Rs.) 1998-99 9,00,000 1999-2000 16,00,000 2000-01 9,00,000 2001-02 10,50,000 2001-02 9,00,000 2002-03 5,50,000 The assessment was completed under section 158BC at a total undisclosed income of Rs. 1,25,75,650. In doing so, the learned Assessing Officer made the following additions- (1) Unaccounted income of Rs. 57,88,943 from transactions with Shri Rajendra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the impugned parties. As regards instances of few bearer cheque payments bearing the signature of Sitaram Mittal or Ram or Rajendra on the reverse, Shri R.K. Jain explained that as per trade practice, payment was made by the assessee to the parties who produced Beej Prapti Receipt . During block assessment e proceedings, the assessee reiterated the above explanation. However, the Assessing Officer did not accept the above explanation of the assessee and held that - A. The impugned payments made to Shri Rajendra Agrawal represented payments for purchase of 'soyabean' by the assessee; B. The Department was not required to establish each and every transaction of the assessee with Shri Rajendra Agrawal and the few instances of bearer cheques be signature of Sitaram or Rajendra or Raju established the factum of purchase and computed undisclosed income of the assessee from the impugned transactions of Rs. 57,88,943 as under - Assessment Year Purchases (Rs.) Profit margin Undisclosed income (Rs.) 1998-1999 15,55,000 12.21% 1,89,866 1999-2000 4,74,60,474 7.16% 33,98,170 2000-2001 1,05,38,269 8.99% 9,47,390 2001-2002 21,97,339 10.73% 2,35,774 2002-2003 1,23,66,255 8.23% 57,88, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nference drawn by the Department about the entries recorded in the impugned seized material belonging to Shri Rajendra Agrawal representing unaccounted seeds purchases of the assessee, is merely a figment of its imagination and is without any basis. It was also submitted that interestingly, the copies of incriminating documents found by the Department during search in the case of Shri Rajendra Agrawal were given to the assessee at the fag end of the block assessment proceedings thereby leaving very little time and opportunity to explain them and cross examine him. It was also submitted that as far as the statement of Shri Sitaram Mittal, accountant of Shri Rajendra Agrawal about the payment having been received from Eagle Seeds Biotech Limited against the supply of soyabean and wheat, it is submitted that the impugned statement can be neither relied upon nor given any credence because the crucial and material statement of Shri Rajendra Agrawal in respect of the seized material found and seized during search in his case and on which material reliance was placed by the Assessing Officer, has not been recorded till date and if recorded, copy thereof has not been provided to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inating documents and material seized in the case of Shri Rajendra Agrawal were not made available to the assessee. As regards the contention of the Assessing Officer about evidences collected by the Department in the form of bearer cheques of the assessee encashed by Shri Sitaram Mittal amounting to Rs. 41,95,000 are sufficient to establish payment to Shri Rajendra Agrawal towards unaccounted purchases of soyabean and wheat, it was submitted that while encashed cheques to the extent of evidences brought on record by the Department established payment to the persons whose signatures appeared on the reverse side of the cheques, that did not establish unaccounted purchases of soyabean and wheat from Shri Rajendra Agrawal. The Investigation Wing of the Income-tax Department as well as the Assessing Officer utterly failed to bring any evidence in the form of bills, challans, transporters receipt, etc. on record to show that the cheques encashed by Shri Sitaram Mittal were towards unaccounted purchases of soyabean and wheat. In the absence of the above, it is clear that the payments were made by the assessee to the parties who produced 'Beej Prapti Receipt' as per trade practice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6; Dhakeswari Cotton Mills Ltd v. CIT [1954] 26 ITR 775; Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288; Umacharan Shaw Bros. v. CIT [1959] 37 ITR 271 and Umar Salay Mohamed Sait v. CIT [1959] 37 ITR 151. The CIT(A) considering the material on record and the submissions of the assessee, deleted the entire addition. His findings in paras 3.3 and 3.4 are reproduced below- 3.3 I have considered the submissions made by the appellant and gone through the contents of the assessment order. I have also carefully gone through the case-laws referred to. First of all, it will be pertinent to describe in brief the modus operandi of the appellant's business. The assessee procures seeds from farmers and issues 'Beej Prapti Receipt' to them. The samples of seeds are processed and the samples are sent to Seed Testing laboratories. Upon their testing and meeting the requisite standards, the assessee is issued tags for putting them on the bags of processed seeds. The assessee is prohibited from purchasing seed from traders or any other person. These receipts are prepared in duplicate. The original receipt is given to the farmer and the copy is kept at godown. The godown issues a Bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer on the basis of evidences found as a result of search. Therefore, the computation of undisclosed income of Rs. 57,88,943 by the Assessing Officer was factually as well as legally unjustified. The investigation wing of the Department as well as the Assessing Officer could not bring any material on record to controvert the assessee's explanation. The above facts clearly establish that the payments made to Sh. Rajendra Agrawal and his employees through self-bearer cheques, were payments made against Beej Prapti Receipts issued to farmers and not towards any unaccounted purchases. Therefore, the addition of undisclosed income of Rs. 57,88,943 on account of undisclosed purchases is deleted. 10. The revenue is in appeal on the above grounds. 11. The Learned DR relied on the order of the Assessing Officer and submitted that the Assessing Officer on the basis of material on record was justified in making the aforesaid addition. The Learned DR further submits that the assessee was allowed opportunity to cross-examine Sitaram, Accountant/employee of Rajendra Agrawal and as such the Assessing Officer was justified in making the addition. 12. On the other hand, the learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases in his books of account. During the course of search, no material was brought on record to show if any material was recovered to connect the assessee with unaccounted purchases made by the assessee from Rajendra Agrawal. Therefore, we take that there was no material available on record which is recovered during the course of search in the case of the assessee to prove that the assessee has made unaccounted for purchases. The CIT(A) was, therefore, justified in holding that the payment may be made through bearer cheques or cash. However, in the books of account the payment is entered in the name of the farmer only from whom seeds were purchased. Since these findings of the CIT(A) have not been challenged before us, the revenue had miserably failed to prove anything wrong in the findings of the CIT(A). The CIT(A) has also given a clear finding that even in the search of Rajendra Agrawal, no incriminating document was seized to show that the payments were made towards unaccounted purchases of seed by the assessee through Shri Rajendra Agrawal. Therefore, there is no question of giving any opportunity to the assessee to cross-examine Rajendra Agrawal. The CIT(A) has also given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by him is true, he is at liberty to act thereon after disclosing it to the assessee and affording him a reasonable opportunity or rebutting it. The CIT(A) was, therefore, justified in holding that no proper opportunity is given to the assessee to cross-examine Shri Rajendra Agrawal despite request made by the assessee. Similarly, no incriminating material was confronted to the assessee. The Assessing Officer tried to make out a case by showing that the assessee was allowed to cross examine Sitaram, accountant of Rajendra Agrawal but Sitaram is not connected in any way with the recovery from the possession of Rajendra Agrawal. Sitaram is not accountable in case recovery is not made from him. Since recovery is stated to have been effected from Rajendra Agrawal, he should comment upon the same as to how it was connected with the assessee. Since nothing specified by the learned DR whether Rajendra Agrawal was examined or not and that if opportunity is given to the assessee to cross-examine Rajendra Agrawal, no material collected during the course of search in case of Rajendra Agrawal would be admissible in evidence against the present assessee. Therefore, the CIT(A) was justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 ESBT/RNT/LPS-1 found and seized. During the block assessment proceedings the assessee explained that most of the documents contained in the impugned annexure represented unaccounted purchases of soyabean or wheat, etc. relating to its grain business and offered profit margin thereon for taxation as undisclosed income for the block period. The Assessing Officer did not accept the above contention of the assessee and held that impugned purchases of soyabean, wheat, etc. as per the seized material represented unaccounted for purchases of seeds. He has estimated the trade cycle of 5 days and applied gross profit margin applicable to the assessee's seed business to determine undisclosed income of the assessee resulting into the addition of Rs. 23,76,570. It was submitted before the CIT(A) that there is no dispute about the fact that purchases as per the seized material were not recorded in the books of p account. The only grievance of the assessee was about trade cycle of 5 days instead of 2 days and the application of gross profit margin or the net profit margin. It was submitted that the Assessing Officer ignored the judgment of the Hon'ble jurisdictional High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 90 ITR 271. 18. We have considered the rival submissions and the material available on record. It is not in dispute that the assessee has filed the return of income showing undisclosed income of Rs. 52 lakhs on the basis of material recovered during the course of search in the case of the assessee in different years as mentioned above in this year. The Assessing Officer has made addition of Rs. 23,76,570 by applying GP rate. The Hon'ble M.P. High Court in the case of Balchand Ajit Kumar considering a case of search and seizure operation, held that the total sale could not be regarded as the profit of the assessee. The net profit rate had to be adopted and once it was adopted it could not be said that there was perversity of approach. Whether rate was low or high would depend upon the facts of each case . The Hon'ble Gujarat High Court in the case of CIT v. President Industries [2002] 258 ITR 654 held dismissing the application for reference, that the amount of sales could not represent the income of the assessee who had not disclosed the sales. The sales only represented the price received by the seller of the goods; only the realisation of the excess over the cost incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions made by the Assessing Officer would be excessive. We may mention that it is not the end of the matter because the assessee has claimed set off of the undisclosed income already declared in the return of income in a sum of Rs. 52 lakhs. It is a settled law that the undisclosed income declared by the assessee and accepted by the authorities below is available to the assessee for the purpose of explaining the other additions/investments and the same would also be available to the assessee for set off purposes in respect of the agreed or other additions. We are fortified in our view by the following decisions:- (1) S. Kuppuswami Mudaliar v. CIT [1964] 51 ITR 757 (Mad.) (2) Anantharam Veerasinghaiah Co. v. CIT [1980] 123 ITR 457 (SC) (3) CIT v. Prem Chand Jain [1991] 189 ITR 320 (Punj. Har.) (4) CIT v. Tyaryamal Balchand [1987] 165 ITR 453 (Raj.) Income in a sum of Rs. 52 lakhs. It is a settled law that the undisclosed income declared by the assessee and computed by the authorities below is available to the assessee for the purpose of explaining the other additions/investments and the same would also be available to the assessee for set off purposes in respect of the agreed or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 52 lakhs in the return of block period on the basis of calculation of the seized material is available to the assessee for the purpose of explaining other additions/investments. Since the addition on account of undisclosed income on account of undisclosed purchases is less than the amount of returned income of Rs. 52 lakhs, no separate addition is liable to be made. As a result, the entire addition of Rs. 23,76,570 is deleted. As a result, this ground of appeal of the assessee is allowed. In this view of the matter, the decision cited by the learned DR is not applicable. 20. The other ground of appeal raised in the assessee's appeal is challenging the addition of Rs. 39,000 made by the Assessing Officer on account of repayment to Smt. Sudha Jain. This ground relates to addition of Rs. 39,000 representing payment to Smt. Sudha Jain. As per annexure seized during the course of search, certain payments made to Smt. Sudha Jain were found from 21st August, 1996 to 14th April, 1997 in a sum of Rs. 39,000 on different dates. The Assessing Officer made the addition. The CIT(A) confirmed the same. 21. The learned counsel for the assessee referred to page 32 of the paper book to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
