TMI Blog2006 (12) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the assessee had not written books of account from 1st April, 2002, upto the date of search and even for the preceding year the books had been written only upto 13th March, 2002, and the cash balance was last written on 23rd Oct., 2001. He, therefore, rejected the books of account by applying the provisions of s. 145 of the Act. During the course of search, a cash memos book running from bill Nos. 1 to 144 was found as Annex. A-1 Exh. 2 showing cash memos from 1st April, 2002. It was noted that bill Nos. 141 to 144 only mentioned the date and even the customer's copy were retained therein. No details of item sold were mentioned. From the above, the AO came to conclude that the assessee was issuing bills as per his convenience and not as per actual sale. A rough order booking pad mentioned as Exh. 3 of Annex. A-1 running from pp. 1 to 4 was found. It was noticed that the earlier pages of this pad were torn off. Similar position was there in respect of Exh. 4 and pp. 9 to 14 of Exh. 8 which represented the business conducted by the assessee outside the books of account. The statements of the Halwais working with the assessee, namely. Shri Chatur Singh and Shri Bhanwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that the assessee had stated to have made actual sale of Rs. 8,000 per day on normal days against the sales reflected by him at Rs. 2,500 to Rs. 3,500 in his books of account. The AO observed that the assessee's statement was full of contradictions, as in response to question No. 15, the assessee had admitted average sales of Rs. 10,000 on normal days and Rs. 25,000 on festival days. Similarly, catering income was also admitted not have been shown properly by equal amount. The assessee, further in response to question No. 16, admitted that he had not shown sales property in his books of account for the last six years and the same basis be adopted for such earlier years. The AO further took assistance from the statements of Shri Hemdass (father), Shri Mohan Lal Vaishnav (father-in-law), Shri Prakash Vaishnav (brother-in-law), Shri Bhagwan Singh (accountant) and Halwais. The AO further noted that the Department had found clear evidence of unaccounted sales, wages, electricity, etc., which divulges that the assessee was carrying on business outside the books of account in earlier six years and such evidence compelled the assessee to disclose unaccounted sales. In the return for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Hotel Kiran vs. Asstt. CIT (2002) 77 TTJ (Pune) 87 : (2002) 82 ITD 453 (Pune). In the first appeal, the learned CIT(A) called for the remand report from the AO and finally adopted the sales for the festival days at Rs. 23,000 per day and for normal days at Rs. 10,000 per day as under: Festival period sales for 60 days @ Rs. 23,000 per day 13,80,000 Normal day sales for 300 days @ Rs. 10,000 per day 3,00,00,000 ----------- 43,80,000 ----------- Since the assessee had shown sales in the books of account at Rs. 18,85,739, the learned CIT(A) opined that the undisclosed sales were to be taken at 1.32 times more of the recorded sales and unrecorded catering receipts were also to be estimated at the same level of 1.32 times. Both the sides are in appeal against their respective stands. 4. We have heard both the sides and perused the relevant material on record. Insofar the application of provisions of s. 145 is concerned, it is not contested that the books of account were found incomplete during the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecomes clear that no specific amount of sales was admitted by him as remaining outside the books of account. Then comes the statement of Shri Prakash Vaishnav, who is brother-in-law of the assessee and was regularly employed with him. In response to question No. 7, he stated that average daily sale was between Rs. 20,000 to Rs. 25,000, the proceeds of which he was leaving at the house of the employer. He also stated the net profit was @ 30 per cent in this business. Then the statement of Shri Hemdass Vyas, father of the assessee, who was questioned about the receipt of envelopes containing cash for the four days prior to the date of search. Since he was not assisting the assessee in his business, so there was no question of his making any assertion about the average daily sales. Insofar as statements of two Halwais are concerned, they have only mentioned about the quantity of sweets manufactured by them on daily basis, which has not been considered by the AO because he had not moved from the production angle but has estimated the amount of sales directly. Now, comes the statement of the assessee himself, which is available at p. 41 onwards of the PB. In reply to question No. 9, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y acceptance. The Hon'ble Supreme Court in the case of Gum Singh vs. State of Rajasthan (2001) 2 SCC 205 has held that if concession is not obtained by inducement or favour, it would constitute the basis for conviction and retraction cannot be allowed in such circumstances. Similar view has been taken by the Jaipur Bench of the Tribunal in ITO vs. B.D. Dal Oil Industries (1992) 40 ITD 180 (Jp) and Mumbai Bench in the case of Himlal Maganlal Co. vs. Dy. CIT (2005) 97 TTJ (Mumbai) 377 : (2005) 96 ITD 113 (Mumbai). The Hon'ble Kerala High Court in the case of Vas ant Gordhandas vs. CIT (2005) 195 CTR (Ker) 415 : (2005) 142 Taxman 33 (Ker) refused to give any credence to the assessee's alleged threat by the Department and hence retraction was not allowed. Adverting to the facts of the case, we observe that the assessee had admitted in his original statement that the unrecorded sales were there which fact is corroborated by assessee's own disclosure of undisclosed sales and catering receipts at equal amount in the block return. Under these circumstances, it is not permissible to give any weightage to the subsequent affidavit filed by the assessee retracting from his original stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the learned CIT(A)'s estimation at Rs. 10,000 per day. The assessee in his statement initially stated the amount of average daily sales between Rs. 7,000 to Rs. 8,000 as per question No. 9. Then in response to question No. 10, he admitted the figure of sales on average days between Rs. 8,000 to Rs. 10,000. Finally, in response to question No. 15 when the assessee gave detail of his unaccounted business, the figure of Rs. 10,000 was given as average daily sales for normal days and Rs. 25,000 per day for festival days. In our considered opinion, the estimate of sales at Rs. 10,000 sustained by the learned CIT(A) for normal days is perfectly in order. Accordingly, the sales for Financial year 2001-02 are calculated as under: 1. Festival period sales for 60 days @ Rs. 25,000 Rs. 15,00,000 per day 2. Normal day sales for 300 days @ Rs. 10,000 Rs. 30,00,000 per day ------------- Rs. 45,00,000 ------------- The assessee has shown sales in his books of account at Rs. 18,85,739, which means the undisclosed sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the undisclosed sales which is perfectly justified and compares favourably with the GP rate of the preceding year. In our considered opinion, no interference can be made in the impugned order insofar as application of net profit rate of 20 per cent is concerned. In view of the above, the undisclosed income comes to Rs. 20,45,677 out of which the assessee has voluntarily declared the undisclosed income of Rs. 16 lakhs. This would result into sustenance of addition at Rs. 4,45,677. Thus, the ground raised by the assessee is dismissed and that of the Revenue is partly allowed. 5. Ground No. 2 of the Revenue's appeal deals with the addition of Rs. 2 lakhs on account of purchase of FDRs. 6. During the course of search at the residence of the assessee, FDRs amounting to Rs. 3,50,000 were found. The AO accepted the explanation of one FDR of Rs. 50,000 in the name of Smt. Kala Vyas. Another FDR of Rs. 1 lakh in the name of Shri Hemdass dt. 7th Jan., 2002 purchased from SBI, Shastri Nagar, Jodhpur was explained to have been purchased out of pension which was regularly deposited by him along with a sum of Rs. 60,480 which was receipt of maturity amount of LIC. The AO treated it as also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. Both the sides are in appeal against their respective stands. 7. We have heard both the sides and perused the relevant material on record. During the course of search when the statement of Shri Hemdass was recorded on 10th April, 2002, he replied to question No. 8 that he and his wife had FDR of Rs. 1 lakh each purchased from Bank of India. In reply to question No.9, he explained the source of this FDR. When his statement was again recorded during the course of assessment proceedings on 27th April, 2004, he explained in response to question Nos. 4 and 5 that the FDR of Rs. 1 lakh purchased from the Bank of India was out of his life long savings and retirement benefits: Explaining further, it was stated that he retired in July, 1989 from the India Air Force and at that time a sum of around Rs. 1 lakh was given to him as retirement benefits. He also submitted that a sum of Rs. 60,000 was given by him to his daughter, Smt. Shashi Vaishnav who had advanced this amount to some parties at interest and the entire amount was received back around two and a half years ago at Rs. 1,20,000 out of which this FDR of Rs. 1 lakh was purchased. The learned CIT(A) has not accepted the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from pp. 1 to 26 containing details of Shree Mad Bhagwat Saptah Katha Gyan Yagya from 1st May, 2001 to 7th May, 2001 at Satsang Bhawan, Sardarpura, Jodhpur. The AO, on the scrutiny of details observed that the Yagya was got conducted by Shri Hemdass father of the assessee, and other family members in which substantial expenditure was incurred. This expenditure was on specific heads, such as, banners, pamphlets, cards, microphone, lights, generator, videography, photography, booking of Satsang Bhawan, accommodation, band, flowers, gifts to Guruji and disciples, bedding, vehicles, items of Pooja, clothes for relatives and utensils, etc. with details of meals from breakfast to dinner. Shri Hemdass filed affidavit denying having incurred expenditure on the above and stated that the expenses were borne by other Bhaktas of the Guru. However, no details of persons having borne the expenses were furnished. The AO conducted enquiry from M/s Shriram Studio regarding payment made to it for photography and videography of Yagya function. That party stated that the amount of Rs. 7,377 was paid by Shri Hemdass Vyas. This was confronted to the assessee who denied any knowledge of the same. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther pages of the diary contain the list of such Bhaktas who were more than 100 in numbers. No question was asked from Shri Hemdass at the time of search under s. 132(4) about this diary. It was only during the course of assessment proceedings that when his statement was recorded for the first time that query was made on this aspect, which was properly responded by Shri Hemdass stating that no expenditure was incurred by him. The AO has referred to the video expenses of Rs. 7,337 which amount was admitted by M/s Shree Ram studio to have been paid by the assessee. There is no mention of the result of any investigation made by the AO to show that the entire expenditure was incurred by the assessee. Under these circumstances, we are of the considered opinion that the learned CIT(A) was not justified in coming to the conclusion that the entire amount of Rs. 2,51,069 was incurred by the assessee. At the same time, it is also a fact that the assessee was the main organizer of the event and it is not possible to rule out the contribution of Shri Hemdass. In order to make a fair estimate, it is observed that the said diary contains list of 124 Bhaktas and when the name of Shri Hemdass is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he PB. On this page, only 7,00,000 is written and on top of this page Amit Yadav is written and struck off. Thus, the only effective mention on this page of 7,00,000 is without any detail or narration. How this loose paper can be treated as undisclosed income of the assessee is beyond our comprehension. No doubt, the onus is upon the assessee to explain the documents found at the time of search but the fact of the matter is that such document should atleast be explainable. Writing of five digits on a plain paper without any further detail or narration cannot, under any circumstances, be treated as undisclosed income of the assessee. We are, therefore, of the considered opinion that the learned CIT(A) was justified in deleting this addition. 15. Ground No. 4 of the Revenue's appeal is against the deletion of addition of Rs. 1,67,240 on account of unrecorded household expenses. 16. The AO has discussed this aspect at p. 19 of the assessment order. The assessee stated that the sum of Rs. 3,81,380 was spent on household expenses during the block period. A chart of year-wise withdrawals by the assessee and his wife, Smt. Kala Vyas was furnished. In order to cover up unexplained expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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