TMI Blog2011 (2) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly dismissed. - ITA No.599 of 2009 - - - Dated:- 18-2-2011 - MR. JUSTICE A.K. SIKRI, MR. JUSTICE M.L. MEHTA, JJ. For Appellant : Mr. N.P. Sahni with Mr. Ruchesh Kr. Sinha, Advocates. For Respondent : Mr. O.S. Bajpai, Sr. Advocate with Mr. V.N. Jha, Advocate. A.K. SIKRI, J. 1. The assessee is a firm which was constituted in July, 1997 with Shri R.D. Gupta, his wife Smt. Kusum Gupta and a company M/s. Bindal Apparels Pvt. Ltd. as partners, while Shri Anuj Bindal was admitted to the benefits of the partnership, being a minor. With effect from 03.04.1998, when Shri Anuj Bindal Attained majority, a fresh partnership deed was executed. The assessee is engaged in the business of trading of garments and other items like artificial jewellery, artificial garments plants, purses, etc. The assessee carried on its business from 47, Bungalow Road, Delhi. This property does not belong to the assessee firm but was purchased by its four partners from one Shri P.C. Jain. Four partners are the owners of different portions of this property which was purchased by separate sale deed. During the survey, the assessee firm offered an amount of ₹ 25 lacs on account of unexpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons given by him can be summarized as under: (1) Though in the Audit Report with the return for the assessment year 1998-99, it was mentioned that the assessee maintained cash book, bank book, ledger and sales/purchase registers, but for the assessment year in question, the Audit Report has mentioned only cash book and ledgers. Thus, the assessee is not maintaining any stock register and sale/purchase register, which it was doing in the preceding year. (2) The Auditor had qualified his report by saying that it was not possible to give quantitative details of items. This implies that no closing stock inventory is prepared at the end of the financial year. In this way, the assessee had complete freedom to show the closing stock and G.P. rate it wanted to show in further year. (3) The assessee was asked to file quantitative details of opening stock, purchases, sales and closing stock for Financial Year 1998-99. In response, the assessee filed inventories of opening and closing stock only which after verification, was found to be incorrect from which the AO deduced that the assessee had not maintained the accounts in the manner that real profits could be calculated therefrom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory evidence in support of this valuation could be produced, as already discussed. (c) In the inventory of opening stock and closing stock for the year, a flat rate has been applied to each item without taking into account size, brand, style, etc. In the inventory prepared at the time of survey, it has been found that the rate of any items varies according to brand, size, quality etc. It is, therefore, obvious that the inventory of opening and closing stock filed by the assessee during the course of assessment proceedings, is cooked up and does not give a true picture of the actual stock available either at the beginning or end of the financial year. (d) The assessee contended that it had returned some of the purchases made by it from various parties. Three such purchases returned were taken up on test check basis and the assessee was asked to relate them with the corresponding purchase bills. The assessee failed to do so in the case of Woman‟s World. (e) The assessee failed to correlate any sale with the corresponding purchase of an item. (f) The assessee was asked how it keeps track of all the items in the absence of stock register or stock tally. The assessee repli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as noted from the three trading accounts for the financial year 98-99 and deposition of Sh. R.D. Gupta, I am of the opinion that it would be reasonable and fair to apply a G.P. Rate of 21% on sales of ₹ 6 crores which would meet the ends of justice. This would result in gross profit of ₹ 1,26,00,000/- against ₹ 79,04,653/- disclosed by the assessee (addition of ₹ 46,95,347/-). 5. The first appeal preferred by the assessee against the aforesaid order of the AO was dismissed by the CIT (A). While accepting the reasoning given by the AO, the CIT (A) additionally stated that though the assessee was objecting to addition of ₹ 46,95,347. At the time of survey itself, discrepancies to the tune of ₹ 35.28 lacs was found which was unaccounted and was offered for taxation. So much unaccounted income within 9 months 21 days of the start of the business would show that it was at the rate of ₹ 3,61,850 per month. In this manner, unaccounted money for 12 months works out ₹ 43,42,200 and looking from this angle, the AO s estimate of ₹ 46,95,347 could not be said to be devoid of merit. 6. The Income Tax Appellate Tribunal ( Tribunal̶ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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