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TMI Blog2007 (12) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... t after rejecting the book result. 3. The facts of the case are that a search operation under section 132 of the Act took place on 17-10-2003 which was concluded on 31-10-2003. In the search 12 residential premises, two office premises, one factory and a locker was searched. The assessee is a company manufacturing "Gutkha" by the brand name of "Goa 1000" under the licence from J.N. Jyoshi Group, proprietor of the brand. The factory premises where Gutkha was manufactured by the assessee is owned by one M/s. Jani Waker (P.) Ltd. From the factory premises, plot No. 901-A, GIDC, cash of Rs. 2,64,740 was found and seized. Stock of Rs. 36.69 lacs was found. From the residence of Shri Dilip Amrutlal Jani, a director of the assessee company, cash of Rs. 1,19,45,750 was found and seized. The documents of the assessee company seized from the factory premises are marked as Annexs. A1 to A47. The documents pertaining to the assessee company were reportedly found and seized from the premises of its director and employees also. In response to the notice issued under section 153A the return of assessment year 2000-01 was filed on 17-10-2005 at a loss of Rs. 1,02,750. It was stated to be the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as office lighting, tubewell and almost 50 per cent of the consumption was for such activities other than production. The assessee further submitted that consumption of electricity by equipments like ovens was huge for baking Supari, consumption of electricity was huge even when there was no production to keep ready stock of roasted Supari. It was submitted that consumption by packing machine was not uniform and depended on its usage and efficiency of the workers. The packing machines were not continuously used unlike oven and other items. The assessee further submitted that Gutkha was subject to excise duty. The periodical inspection was carried out by excise inspector. Copy of the inspection report was furnished before the Assessing Officer. In one of the reports it was mentioned that no production was being done and some machines were under repairs while at the other inspection no unaccounted production and sale for evasion of excise duty were found. Even, during the search no incriminating documents to indicate any sale or production outside the books during the period have been found. 5. The contention of the Assessing Officer to reject the books of account was also ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the same production recovered from the staff quarter (Plot 882, Sector 27) showed sale of 260 boxes to one M/s. Sahayog Agency (between June to September, 2003). In both, the sale rate was same i.e., Rs. 9,500 per box. The Assessing Officer was of the view that stock were accounted for was sold at the same rate as the unaccounted stock even though the duty was very high on the accounted stock. The loss from the unaccounted business was set off against the profit from the unaccounted sales. The expenditure incurred on raw materials, salary etc., on unaccounted production was also scaled down. Therefore, in the opinion of the Assessing Officer, the manufacturing and Profit and Loss account did not reflect the correct picture owing to the suppression of expenses on unaccounted production. Hence, the Assessing Officer estimated the net profit. 7. The Assessing Officer also observed that huge profit from sale of unaccounted production was partly shared with the wholesaler and retailers, also there was competition in the market which could have reduced the profits. The Assessing Officer was of the view that the assessee has possibly made unaccounted payment also for smooth runnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he estimated the production of pouches at 3,09,97,928 and taking the average price of pouch at Rs. 0.743 per pouch arrived at the sales of Rs. 2,30,31,461 and by taking the net profit ratio of 20 per cent arrived at the net profit of Rs. 46,02,292. 10. Similarly, in the assessment year 2002-03, the Assessing Officer estimated the production of pouches at 4,08,76,457 and taking the average price of the pouch at Rs. 0.743 per pouch arrived at the sales of Rs. 3,03,71,207 and by taking net profit ratio at 20 per cent arrived at the profit of Rs. 59,56,760. 11. In the assessment year 2003-04 also in this way, he estimated the production of pouches at 1,26,51,428 and by taking the average price of pouch at Rs. 0.743 estimated the sales at Rs. 94,00,011. By taking net profit ratio at 20 per cent he estimated net profit before depreciation at Rs. 70,91,891. 12. Similarly, in the assessment year 2004-05, the Assessing Officer estimated the production of pouches at 5,50,85,785 and by taking the average sale price rate of Re. 0.743 worked out the total sales at Rs. 4,09,28,738 and by taking net profit ratio before depreciation at 20 per cent he worked out the income of the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as laminating papers which would have been printed for packing unaccounted production. The excise inspection and details filed before the sales-tax authorities also do not advance the case of the Assessing Officer. The learned CIT(A) concluded that assumption of production on the basis of electricity consumption is not validated. In the facts and circumstances of the case, particularly no intention of suppressed production as well as defects in the books of account have been found in the assessment years under appeal. Hence, he held that the action of the Assessing Officer in rejecting the books of account and applying net profit rate on estimated sales in these assessment years cannot be sustained and deleted the addition made. 14. In the assessment year 2004-05, the learned CIT(A) observed that the Assessing Officer has computed the production and estimated net profit solely relying on consumption of electricity estimated by him for the entire year. The approach of the Assessing Officer suffers from a fatal flaw as discussed in the appellate orders for assessment years 2001-02 to 2003-04. He observed that on same approach he estimated the understated sales. He observed that un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Departmental Representative, on the other hand, fully supported the order of the Assessing Officer. 18. We have heard the rival submissions and perused the orders of the lower authorities and the materials available or record. The undisputed facts of the case are that during the course of above search and seizure proceedings no evidence and/or material indicating any suppressed sales made by the assessee during the assessment years 2000-01, 2001-02, 2002-03 and 2003-04 was found. No material was also found to indicate that there was any suppressed production in the aforesaid assessment years. The Assessing Officer finding that material was seized relating to the assessment year 2004-05 in the above search indicating suppressed production and sales existed in the assessment year 2004-05, on the basis of this, he presumed that there might have been suppressed production and sales in the assessment years 2000- 01 to 2003-04 also. Hence, he taking the consumption of electricity as basis and on the further assumption and presumption arrived at some suppressed production and sales for the said assessment years. It is not in dispute that no defect in the books of account maintained fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial on record to corroborate the finding of the Assessing Officer for suppressed production and sales merely on the basis of variation in electricity consumption. The revenue has also failed to point out any specific error in the order of the learned CIT(A). In the facts and circumstances of the case we do not find any good and justifiable reason to interfere with the findings of the learned CIT(A) which is confirmed and the grounds of appeals of the assessee are dismissed. 21. In the assessment year 2000-01, ground No. 4 of the appeal is directed against the addition of Rs. 9,26,858 on account of unaccounted investment. 22. The brief facts of the case are that the Assessing Officer after estimating the turnover of the assessed at Rs. 92,68,583 further observed that the assessee-company would need capital for purchase and other key inputs. The unaccounted sales have been computed for various assessment years. However, it would be in the first year of operation when such unaccounted investment would be made. In subsequent years, the funds generated out of unaccounted sales during the earlier years would be ploughed back to the company's operation. He observed that looking to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the residence of Shri Dilip Jani, director of the assessee-company. In his statement recorded on oath on 30th Oct., 2003 Shri Dilip Jani claimed that this cash was his income from dealing in land from 1-4-2003 to the date of search. As a result, Shri Dilip Jani has shown this cash as income from the land dealing activities in the return of income filed for the year under consideration. The Assessing Officer observed that a detailed discussion has been made in the assessment order of Shri Dilip Jani for assessment year 2004-05. In the said order it has been established that cash seized does not pertain to business and dealing as claimed by Shri Dilip Jani during post-search enquiry and during assessment proceedings. It has been held that Shri Dilip Jani was not engaged in any trading activities as claimed by him at the fag end of the assessment proceeding in his case. The concluding part of the assessment order of Shri Dilip Jani in the assessment year 2004-05 reads as under: "....held that the cash seized from other undisclosed sources, for which assessee is not furnishing details due to one reason or other. However, in view of the fact that the assessee has owned up the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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