TMI Blog2002 (12) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee claims that the assessment is time-barred and is illegal in view of proviso to s. 143(2), which runs as under: "Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of month in which the return is furnished." But the plea of the assessee was not accepted by the CIT(A), who observed in his order: "I find that the condition laid down under the Act is relatable only to returns filed under s. 139 and the present proceedings being under s. 148, the objections raised are not acceptable". 6. During the course of argument, the learned authorised representative submitted that the assessee, vide letter dt. 20th Jan., 1996, requested to treat the original return filed on 6th May, 1994, as return filed in response to notice under s. 148. Hence, the time-limit mentioned in proviso to s. 143(2), is applicable to the return filed under s. 148 too. Therefore, the assessment should be quashed. 7. On the other hand, the learned Departmental Representative submitted that the return of income was filed on 6th May, 1994, which was beyond the time-limit prescribed under the provisions of s. 139. However, certain m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, we do not accept the plea of the assessee and the same is hereby dismissed. So, the assessment made by the lower authorities is valid. 9. However, on merit the next grievance of the assessee is mentioned in ground No. 2 which relates to the estimation of profit in respect of trading in machinery item at Rs. 83,562. 10. The assessee was carrying on the business of supply of machinery items for which no day-to-day accounts were maintained. The said business was carried out in the names of following firms: (i) M/s Nirmal Engineering Industries where the assessee was the sole proprietor of this concern. (ii) M/s Maheshwari Co. This business was carried out in the name of assessee s wife, Smt. Prameshwari Devi Mundra. (iii) M/s Nirmal Brothers. This was the proprietorship concern of assessee s son Shri Madhusudan Mundra for which regular books were kept and regular returns were filed by the son. But the AO opined that the assessee was using the name of these concerns for his own unaccounted business also. During the asst. yr. 1991-92, the assessee has shown the total sales of these three firms as under: Rs. (i) M/s Nirmal Engineering Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the order of the CIT(A). The same is hereby upheld. 14. The third grievance of the assessee is pertaining to the addition of Rs. 60,702 in respect of investment made in purchases for machinery items of the business. 15. The assessee claimed that the purchases were made from the open market. Without purchases, there will be no sale. The said purchases were made on credit and payments were made only after the realisation of the sale proceeds. No exact details either in respect of the period for purchases on credit or that of realisation of sales made on credit were available. So, the purchases were worked out on the basis of the prevalent trade practices. The total sale was estimated by the AO at Rs. 18,00,000. So, the unexplained investment under s. 69 for the period of two months was computed at Rs. 2,10,000. But in first appeal, the CIT(A) observed that the credit period of both, purchases and sales, ranges between 45 to 60 days. So, he took the credit period for 45 days and sustained the addition to the extent of Rs. 60,702 after reducing Rs. 93,750 in respect of the addition made on this account in the preceding year. In other words, the addition was sustained for Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover of Rs. 14,46,877. Out of it, Rs. 14,45,323 was worked out from the bank statement and Rs. 1,554 was found as cash sales on p. 18 of Annexure A-1, which was seized during the course of search. But the AO estimated the turnover at Rs. 18,00,000 and applied the net profit rate at 10 per cent, and estimated the profit at Rs. 1,80,000. In first appeal, the CIT(A) has reduced the turnover to Rs. 16,64,000 by applying the net profit rate at 10 per cent. Thus, she has given the relief to the assessee of Rs. 13,000 and confirmed the addition of Rs. 1,64,400. 21. After hearing both the parties and on perusal of record, it appears that the AO treated the assessee as a manufacturer and trader in the semi-precious and precious stones. Therefore, the AO estimated the net profit rate of 10 per cent. But, on the other hand, the assessee is claiming that he was merely doing the business of billing. During the search, a nominal stock of rejected stones was found which amounted to Rs. 24,440. The assessee was not maintaining any showroom or business establishment for this purpose. Thus, he was doing this business without making any investment. During the course of argument, it was submitted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee was not the manufacturer-cum-trader. Hence, there is no question of making any investment. No material, stock, showroom, machinery, staff were found to prove the said investment. As we approved that the assessee was doing merely a billing business, then the addition of Rs. 3,32,800 is unwarranted pertaining to the unexplained investment. Therefore, by setting aside both the orders of lower authorities, we delete this addition, as there was no investment made by the assessee. 25. The next grievance of the assessee is mentioned in ground Nos. 6, 7 and 8 which relates to the unexplained investment, net profit and further investment for purchasing the raw material to the firm M/s Shree Engineering. 26. The assessee was also running another business under the name of M/s Shree Engineering in the partnership with Shri R.S. Kabra and Shri T.D. Vyas. This business was carried under the oral partnership and no document was executed. So, the said business can be considered as the AOP business. This business was exclusively meant for sale and purchase of the iron scrap. 27. In this regard, the first grievance of the assessee is mentioned in ground No. 6 which relates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no documentary evidence pertaining to the existence of M/s Turnwell Industries. But as mentioned by the learned authorised representative that the balance sheet of M/s Turnwell Industries was submitted before the lower authorities and is available in the paper book, then we are of the view that matter needs a fresh adjudication. Therefore, we restore the matter back to the file of the AO regarding the addition of Rs. 69,922 only with a direction to decide the same de novo after examining the entire evidence pertaining to the genuineness of the existence of erstwhile firm M/s Turnwell Industries as well as by providing the reasonable opportunity to the assessee. Thus, this ground is restored back. 32. The ground No. 7 of the assessee is the supplement to the previous ground, which relates to the estimation of profit @ 10 per cent on estimated sale in respect of M/s Shree Engineering. 33. The AO, while applying the profit rate of 15 per cent on the estimated sale of Rs. 18,00,000 made the addition of Rs. 2,70,000. The AO took the comparative figure of M/s Maheshwari Co. and M/s Nirmal Engineering Industries for the purpose. The CIT(A), in first appeal, reduced the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appears that the comparison of the trade in iron scrap is not good with the comparison of trading in machine parts. The AO should have taken the comparative figure of the other scrap dealers. In the instant case, the AO made the addition of Rs. 2,10,000. But the CIT(A) has taken unexplained investment at Rs. 1,54,000 for two months purchasing cycle by giving a partial relief. But still the addition is looking on higher side in the facts and circumstances of the case. 38. It may be mentioned that the scrap transaction is not based on credit transaction as it prevails in the trade of precious stones. Hence, the addition regarding unexplained investment in purchases of M/s Shree Engineering is restricted to Rs. 50,000 (Rupees fifty thousand) only. 39. So, by considering the totality of the facts and circumstances of the case and by keeping in mind the doctrine of equity, justice and good conscious, we modify both the orders of lower authorities and restrict the addition to Rs. 50,000 (Rupees fifty thousand) only in the hands of AOP/firm by giving a further relief of Rs. 48,000 (Rupees forty-eight thousand) only. The AO is further directed to decide the share of assessee in propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and circumstances are identical for the assessment year under consideration. Therefore, by respectfully following the earlier decision of the Tribunal, we set aside both the orders of lower authorities and delete the addition of Rs. 1,00,000. 46. The next grievance of the assessee is mentioned in ground No. 10, which relates to the addition of Rs. 46,848 on account of low household withdrawal. 47. The assessee has shown the total withdrawal of Rs. 31,152. But the AO was not satisfied, who estimated it at Rs. 78,000 on the basis that in previous year it was estimated at Rs. 72,000. So, he made the addition of Rs. 46,848 which was confirmed by the CIT(A). 49. The assessee s family is consisting of husband, wife and two major sons. The assessee was engaged in a number of business, as stated above and was having the status in the society. Therefore, we are of the view that the AO has rightly estimated the expenditure at Rs. 78,000 but the same looks on higher side. By looking to the Tribunal order for immediate previous year, we modify both the orders of lower authorities and estimate it to Rs. 60,000 (Rupees sixty thousand) only. Thus, the assessee will get a further par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 20,000 by setting aside both the orders of lower authorities. Thus, this ground is allowed in favour of the assessee. 57. The next grievance of the assessee is mentioned in ground No. 13, which relates to the addition of Rs. 43,536 on account of estimated interest from debtors. 58. The AO alleged that a sum of Rs. 1,00,000 given to M/s Tikkam Exports in the asst. yr. 1990-91 and payment of Rs. 1,00,000 to M/s Bearing Co. in the asst. yr. 1991-92 were treated as unexplained payments. On the said payments, no interest was charged by the assessee. The AO has mentioned that the assessee has already declared Rs. 7,536 pertaining to the interest without giving any detail. So, he estimated the interest on the above at Rs. 54,000 in addition to Rs. 7,536 declared by the assessee. Thus, he made the addition of Rs. 61,536. 59. But in first appeal, the CIT(A) has given the partial relief and estimated the interest at Rs. 36,000 (18 per cent of Rs. 2,00,000). Thus, she sustained the addition of Rs. 43,536 for the balance. 60. After hearing both the parties and on perusal of record, it appears that the payments were made of Rs. 2,00,000 under s. 40A(3). The said payments were made fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (sic-second) grievance of the Department is mentioned in ground No. 2 which relates to the reduction of addition from Rs. 2,10,000 to Rs. 60,702 by following earlier decision of the Tribunal. 66. We have already deleted the remaining addition. Thus, this ground taken by the Department has no merit and the same is hereby dismissed. 67. The third grievance of the Department is related to the relief of Rs. 13,000 out of the addition of Rs. 1,80,000 made in precious and semi-precious stones account. 68. In para 22, we upheld the turnover taken by the CIT(A) for Rs. 16,64,000 but net profit was taken at 1.5 per cent. In other words, we have already given the relief to the assessee. When it is so, then we find no merit in the ground taken by the Department and the same is hereby dismissed. 69. The last grievance of the Department is pertaining to the relief of Rs. 27,200 out of the total addition of Rs. 3,60,000 in respect of purchase of precious and semi-precious stones. 70. This issue we have already discussed in the assessee s appeal (ground No. 5) under the head of "Investment in purchase of precious and semi-precious stones". 71. It is a supplement ground to the previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de both the orders of lower authorities, we delete this addition of Rs. 2 lakhs as there was no investment made by the assessee during the assessment year under consideration. This ground is allowed in favour of the assessee. 80. The fourth grievance of the assessee is pertaining to the addition of Rs. 64,318 on account of unexplained investment in M/s Manish Engineering Industries. 81. During the course of search, an Annexure A-20 of the paper book was found. Accordingly, the assessee has advanced a sum of Rs. 64,318 to M/s Manish Engineering Industries, which is a partnership-firm consisting of assessee s son Shri Nirmal Mundra and others Shri A.K. Sharma and Shri Manish Bagaria. The assessee explained that the assessee s son Shri Nirmal Mundra is the partner in M/s Manish Engineering as per the partnership deed dt. 1st July, 1991 and retirement deed dt. 1st Sept., 1993. It was claimed by the assessee that the said investment is explained investment. But the AO was not satisfied, who made the addition in the hands of the assessee of Rs. 64,318 as unexplained investment. The CIT(A) has confirmed the same. 82. During the course of argument, it was submitted that Rs. 40,000 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e seizure of the paper in question from the business premises of the assessee is not unusual. So, he made a request that the addition may kindly be deleted. 87. On the other said, the learned Departmental Representative relied on the orders of the lower authorities by submitting that in course of search the books of account of M/s Pink City Enterprises as per serial Nos. 1 to 17 and 81 to 87 of Annexure A to Panchnama dt. 28th March, 1994, were also found. He further submitted that premises might be common but there is no evidence in support of the claim that the payments recorded in the document have nothing to do with the assessee. Shri R.B. Partania is the son-in-law of the assessee. If the said paper pertained to the individual business of Shri R.B. Partania and has nothing to do with the assessee, then the name of Shri R.B. Partania would not have been written on the said document. So, he justified the addition. 88. After hearing both the parties and on perusal of record, it appears that on the said paper the name of Shri R.B. Partania had been written against a specific amount. Both debit and credit have been noted down on the said paper. It clearly indicates that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, this ground taken by the assessee is dismissed. 97. In the result, the appeal filed by the assessee is partly allowed as stated above. ITA No. 1449/Jp/1997 (Asst. yr. 1992-93): 98. This is the cross-appeal filed by the Department for the asst. yr. 1992-93. 99. The first grievance of the Department is pertaining to the reduction of addition from Rs. 1,50,000 to Rs. 15,000 by applying the net profit rate of 7.5 per cent on estimated sale of Rs. 8 lakh as against net profit rate of 15 per cent applied by AO on estimated sales of Rs. 10 lakhs. 100. This issue we have already dealt in the cross-appeal filed by the assessee in ground No. 1. This issue was also discussed for the asst. yr. 1991-92 in ground No. 2 of the assessee s appeal and in ground No. 1 of the Departmental appeal. We have already declined to interfere with the order of the CIT(A), who has estimated the net profit rate at 7.5 per cent on the estimated sale. During the assessment year under consideration the facts and circumstances are identical, therefore, we decline to interfere with the order of the CIT(A), which is hereby upheld by dismissing the ground of appeal taken by the Department. 101. The ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground No. 2 is related to the addition of Rs. 49,950 by applying the net profit rate of 7.5 per cent on estimated sales of Rs. 14,66,000. 110. This issue we have already dealt in the assessee s appeals for the asst. yr. 1991-92 (ground No. 2) and for the asst. yr. 1992-93 (ground No. 1). For the similar reasons, we dismiss this ground of appeal taken by the assessee by upholding the order of the CIT(A). 111. The third grievance of the assessee is related to the addition of Rs. 28,798 on account of unexplained investment in the purchases. 112. This issue we have already dealt in the assessee s appeal for the asst. yr. 1991-92 (ground No. 3). Therefore, for the similar reasons, we delete the addition of Rs. 28,798. 113. The fourth grievance of the assessee is pertaining to the net profit of 10 per cent on estimated sales of Rs. 14,00,000 on account of precious and semi-precious stones business. 114. This issue we have already dealt in the assessee s appeals for the asst. yr. 1991-92 (ground No. 4) and for the asst. yr. 1992-93 (ground No. 2). 115. By following the same reasons, we direct the AO to estimate the net profit rate at 1.5 per cent on the estimated sale adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase, sale and profit/loss in respect of these shares. The net result of all these transactions is loss of Rs. 14,165. So, he concluded that when the full details are available, then no estimation can be made out. 124. On the other hand, the learned Departmental Representative relied on the orders of the lower authorities by mentioning that the CIT(A) has already given the relief of Rs. 50,000. The learned Departmental Representative further submitted that in the statement before the AO it was accepted that there were certain transactions with M/s R. Vinod Associates which were not actually open to verification because there was no direct correlation between the income of the assessee and the investment in shares. The AO has rightly observed that in the transactions of purchase and sales losses were claimed which were speculative losses. In these circumstances, he justified the addition made by the AO. 125. After hearing both the parties and on perusal of record, it appears that a seized diary was found from the custody of the assessee. Share certificates were also found, which were inventorised as per Annexure O-1. Accordingly, the investment was determined at Rs. 40,375 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 17,428 were received by cheques and the same were credited to the bank account of M/s Manish Exports on 20th April, 1992 and 28th April, 1992, respectively. 129. During the course of argument, the learned authorised representative has drawn our attention to p. 28 of the paper book, which is the bank account to prove these entries. The learned authorised representative further submitted that from the said amount, Rs. 97,000 were drawn in cash and Rs. 10,000 were transferred to M/s Vinod Associates in dates 22nd April, 1992 to 1st May, 1992, as verifiable from the bank statement at p. 28 of the paper book. Out of these amounts, Rs. 75,000 and Rs. 17,000 were paid to Karigars and Rs. 12,700 were paid for purchase of shares as appearing in the seized papers. The AO has compared this with transaction of Rs. 94,000 in connection with S.B. Linker and the same represented sale by M/s N.K. Jewellers. Finally, he has concluded his argument by submitting that all the transactions are verifiable. Alternatively, he also argued that this amount has already been included in turnover by assessee and, therefore, any other addition in this regard would result into double addition. 130. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs the date of 20th Jan., 1993. So, it will have to be taxed during the assessment year under consideration. Therefore, the AO computed the interest @ 15 per cent which comes to Rs. 1,350 and made the total addition of Rs. 31,350. The CIT(A) has confirmed the same. However, the CIT(A) has directed the AO to verify whether this Hundi of Rs. 30,000 has also been included in the asst. yr. 1994-95, then consequential deduction be given in that assessment year. 137. After hearing both the parties and on perusal of record, we agree with the order of the CIT(A), who has already given the direction to the AO to verify if the same amount has been included for taxation in the asst. yrs. 1994-95 and 1995-96, consequential deduction may be granted in those assessment years. About the interest, it may be mentioned that assessee was not maintaining any books of account. So, the AO was justified to compute the interest. In other words, we uphold the order of the CIT(A) in toto by dismissing this ground taken by the assessee. 138. The ground No. 10 is related to the addition of Rs. 4,050 by estimating interest income on alleged advance given to Shri R.B. Partania (son-in-law). 139. During th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances to debtors and interest estimated on those amounts is justifiable at 18 per cent of the total sum advanced. As regards M/s Manish Engineering Industries, it was distinct from the investment in the said firm made by his son. Since there was no evidence that the money so advanced had been received back this year, the addition made on account of interest on this amount would also be justified in this year. 143. During the course of argument, it was submitted by learned authorised representative that the AO himself accepted the payments pertaining to serial Nos. (i) to (iii) above against purchases. The addition under s. 40A(3) for cash payment against purchases has been made in the relevant assessment year. Hence, now treating the very same amount as being advance on interest itself shows the contradictory stand taken by the AO. Even in the seized record, there was no paper to suggest that the assessee has earned any interest on these amounts. Regarding M/s Manish Engineering Industries, which was the proprietary concern of the assessee s son Shri Nirmal Mundra a sum of Rs. 25,000 was received back on the dissolution of the said firm. So, he made a request that no addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. 151. In the result, the appeal filed by the assessee is partly allowed, as stated above. ITA No.256/Jp/1999 (Asst. yr. 1993-94) 152. In this cross-appeal, the first grievance of the Department is pertaining to the trading addition of Rs. 1,80,000 by applying a net profit rate of 15 per cent on the estimated sales of Rs. 16,00,000 by the AO. 153. This issue we have already dealt in the cross-appeal filed by the assessee (ground No. 2) where we upheld the order of the CIT(A). Thus, this ground of the Department has no merit and the same is dismissed. 154. The second grievance of the Department is pertaining to the addition of Rs. 1,86,670 made under s. 69 for unexplained investment in purchases. 155. This ground we have already dealt in the cross-appeal filed by the assessee (ground No. 3) where we have already deleted the remaining addition of Rs. 28,797. When it is so, then the ground taken by the Department is dismissed. 156. The third grievance of the Department is pertaining to the relief of Rs. 20,000 out of the addition of Rs. 1,60,000 in precious and semi-precious stones. 157. This issue we have already dealt in the cross-appeal field by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, AO treated the Kanakati as unexplained jewellery of the assessee. He also has drawn our attention to the details of the said jewellery and made a request that the addition may kindly be deleted. 170. On the other hand, the learned Departmental Representative relied on the orders of the lower authorities. 171. After hearing both the parties and on perusal of record, it appears that Smt. Kiran Mundra (daughter-in-law) was claiming the total jewellery of 300 gms. but the AO accepted only 192 gms. and made addition for 108 gms. Similarly, Smt. Hemlata, who is the married daughter of the assessee claimed 77 gms. but AO accepted nil and made the addition for the entire 77 gms. 172. About the Kanakati, we are of the view that statement given by the lady is acceptable rather than statement of the assessee because about the jewellery, women have better knowledge than male in the family. About Smt. Kiran Mundra, who is the daughter-in-law, it was claimed that 300 gms. jewellery belongs to her but AO accepted only 192 gms. on estimate basis without mentioning any cogent reason. The assessee s family is the highly reputed family in the society. It is expected that in Hindu society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one Rs. 2,500 Rs. 19,500 The CIT(A) confirmed the same. 180. After hearing both the parties and on perusal of record, it appears that said items were common items which might have been purchased by the assessee or received as a gift at the time of marriage of his son. During the course of argument, it was claimed that the said TV was black and white and not coloured as observed by the AO. Further, the taperecorder was an old piece. This TV was shown for Rs. 2,200 in the balance sheet filed for the asst. yr. 1983-84 and onwards. 181. By considering the totality of the facts and circumstances of the case, we are of the view that no addition is warranted for these two items as these are very common items in every family specially when one TV is reflected in the balance sheet from the asst. yr.1983-84 and onwards. Hence, we set aside both the orders of lower authorities said delete the addition of Rs. 19,500. 182. The next grievance of the assessee is mentioned in ground No. 4 which relates to the net profit rate of 7.5 per cent on estimated sale of Rs. 21 lakhs. 183. This issue we have already dealt in the assessee s appeals for the asst. yr. 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anced Rs. 94,000 to M/s S.B. Linker and Rs. 70,000 to Shri R.B. Partania, son-in-law of the assessee. For the said loans, he estimated the interest @ 18 per cent and made the addition of Rs. 30,000 as per the details given above. 196. After hearing both the parties and on perusal of record, it appears that the payment of Rs. 94,000 was made to M/s S.B. Linker. 197. We have already restored this issue to the file of the AO in the previous asst. yr. 1993-94 (ground No. 8). For the similar reasons, we restore this issue to the file of the AO to determine whether the said payment was loan or made for purchases. If it was loan, then interest may be calculated and charged. If it was a payment for purchasing, then no interest is warranted. 198. About the loan of Rs. 70,000 to Shri R.B. Partania, son-in-law of the assessee, it appears that this issue we have already dealt in the assessee s appeal for the asst. yr. 1993-94 (ground No. 10) where we upheld the order of the CIT(A), who has reduced the loan amount to Rs. 22,500. In other words, the loan was accepted by the CIT(A) of Rs. 22,500 instead of Rs. 70,000. 199. For the similar reasons, we direct the AO to charge the interest @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted the remaining addition. When we have deleted the remaining addition, then we find no merit in the ground taken by the Department and the same is dismissed. 209. The third grievance of the Department is pertaining to the relief of Rs. 20,000 out of the addition of Rs. 1,40,000 on account of precious and semi-precious stones. 210. This issue we have already dealt in the cross-appeal filed by the assessee (ground No. 6) as well as for the asst. yr. 1991-92 (ground No. 4) where we have directed the AO to estimate the net profit rate @ 1.5 per cent on the estimated turnover adopted by the CIT(A). When it is so, then this ground of the Department is dismissed. 211. The last grievance of the Department is pertaining to the relief of Rs. 40,000 out of the total addition of Rs. 2,80,000 made on account of unexplained investment in precious and semi-precious stones. 212. This issue we have already dealt in the cross-appeal filed by the assessee (ground No. 7). The detailed discussion was also made in the assessee s appeal for the asst. yr. 1991-92 (ground No. 5) where we have deleted the said addition. For the similar reasons, we dismiss this ground taken by the Department. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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