9911796707
TMI Blog2015 (4) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... ving shop of Sweets & Namkeen. During the year the assessee has having a proprietary concern in the name & style of M/s. Bikaner Sweets & Namkeen and also derived income as a partner of M/s. Bikaner Sweets & Namkeen. The assessee manufactures sweets and some eatables in his shops at CBD Belapur and at Thane. A survey action u/s.133A of the Income Tax Act 1961 was carried out at the assessee's premises on 18/10/2010. During the course of survey, it was observed by the survey team that the assessee is not maintaining books of accounts. During the assessment proceedings the assessee has filed tax audit report in Form 3CB & 3CD alone with Balance Sheet and P&L account. As per AO, the assessee had started business from one more shop from October 2008, situated at Shop No.1 to 5, Soham Plaza, Ghodbunder Road, Thane (West) and has not incorporated business transactions in the audited books of account. The AO observed that only a lump sum amount of Rs. 1,47,990/- is shown as income from this shop under the head, 'Income from other Sources'. 3. In its order AO observed that the assessee had not declared three bank accounts; namely (a) Account Number 61056928789 with State Bank of Bikaner & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded and was numbered as No A-3 of the list of impounded books/documents containing pages from 1 to 188. A copy of this diary was provided to the assessee and he was asked to give details of entries on each page. The assessee did not file any details so he was again asked to give the details when his statement was recorded u/s 131 on 06/12/2011, the relevant question & answer are as under: Q.1 During the course of survey on 1811012010 a "College" marked red colour diary bearing annexure No. 3 was impounded from the shop premises at 5A, Prabhat Centre, CBD Belapur, Sector-1, Novi Mumbai. A photo copy of this seized diary was provided to ,- you and you were asked to explain the contents of page wise entry written. Till date you have neither given me any explanation nor submitted any details in respect of entries mode therein. On going through the diary it is seen that it records wages paid to various workers on various dates pertaining to A. Y. 2009-10. It also contains certain entries of large amount which you have not explained till date. The total of all these entries including wages works out to Rs. 41,00 lacs. In the absence of any plausible or logical explanation given by you, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranged is also specified. Accordingly, in the absence of any information, the amount of Rs. 16,51,000/- is treated as unexplained and unrecorded expenditure out of the unaccounted income of the assessee and added to the total income. 11.5 On page No. 4 (copy enclosed as Annexure 'III' to this order), an amount of Rs. 7,19,600/- has been written and after subtracting an amount of Rs. 1,40,000/- from this is, the net figure of Rs. 5,79,000/- has been arrived at. The assessee, when asked to explain these entries, failed to give any explanation in this regard also. These figures apparently represent the working of balance loan amount receivable out of a total loan amount of Rs. 7,19,600/- after adjusting repayment of Rs. 1,40,000/-. In the absence of any information, the amount of Rs. 7,19,600/- is treated as unexplained and unrecorded expenditure out of the unaccounted income of the assessee and added to the total income. 11.6 On the same page-4 there are two entries of amounts of Rs. 1,60,000/- and Rs. 13,000/-. The assessee, when asked to explain these entries, failed to give any explanation for these entries. Apparently, these amounts are payments made towards business at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equiring him to file details as called for. The learned Assessing Officer rejected books of accounts of the assessee on the that G.P. & income declaring by the assessee is very low and estimated net profit of ,Rs.28,84,034/- (Para 7.3 page 9-11) The Ld. A.O also estimate income on the basis of utilization of funds and determined income of Rs. 40,22,112/- and compared both the estimates and made addition of Rs. 35,06,744/- over and above the returned income of Rs. 5,15,068/-. Being aggrieved by the action of learned assessing officer the appellant is in appeal before your Honour:- 1)The learned Assessing Officer has erred in rejecting the books of accounts of the Assessee u/s 145 of the Income Tax, 1961 and by treating the business of the Assessee as manufacture without considering the facts & circumstances of the case as well as law. 2)The Learned Assessing Officer has erred in making additions of Rs. 40,22,112/- to business income on account of alleged: * Inia Bull loan repayment Rs. 4,75,616/- * Credit Card payments Rs. 2,45,617/- * Payment to labourers Rs. 33,00,879/- Merely on assumptions and estimates without considering the facts & circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment. Therefore there is no need to further increase the turnover. Further the Ld.A.O. has assumed net profit @ 12.5% of the total turnover without any basis. No comparative data of other assessee engaged in the same business were provided by the Ld. AD. before taking such high NP rate. Further the assessee is offering net profit of 3% of its total turnover, therefore rate of 12.5 % is on very higher side. There your Honour is requested to kindly restrict the estimation to N.P. only to 5% of the Total Turnover as estimated by the Ld. AD. which works out to Rs. 10,63,615/- (5% Rs. 2,12,72,304) including net profit offered by the appellant in the return of income of Rs. 5,15,368/-, therefore net addition should be restricted to Rs. 5,48,247/-. Ld. A.O. has also estimated income on the basis of investments made/assets Acquired/Iiabilities squared off and estimated following income:- 1. Payment for repayment of loan Rs. 4,75,616/- 2. Payment of credit card dues Rs. 2,45,617/- 3. Payment of wages to labourers Rs.33,00,879/- Total Rs.40,22,112/- In the above estimation the Ld. A.O. failed to note that payment on account of above expenses/liability already considered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for by drawing a tentative trading cum profit and loss account. It has to be appreciated that unaccounted receipts are to be added simultaneously the unaccounted expenses also have to be given effect to ;as receipts and expenses go together. As it has been discovered from the impounded material also that these expenses were unrecorded though found incurred from entries in the impounded diaries, it is not the case that they were not incurred. The, it is also noted from the bank account statement that there are withdrawals also. Hence I am of the considered opinion that entire deposits cannot be added as income of the appellant without giving effect to such expenses incurred for that very business .Since source of deposits in the bank accounts maintained as saving accounts as well the undisclosed current account ; are from receipts of business only ;I am of the view that estimation of G.P. as percentage over volume in appellant's own case from audited books of accounts maintained and no defects found in them, except that they were stated as not maintained but actually audit report with p& 1 account with balance sheet were produced during the assessment proceedings, should be tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... figures have rightly been taken by them as well as A.O for the account maintained with bank PJSB, State Bank of Bikaner, NKGSB Co-op Bank CD/5437. As regards NKGSB Savings Bank Account No. SB/ 11245 is concerned, appellant has submitted that actual total cash deposit are Rs. 20,31,000/- for which date wise deposit details have also been given by the appellant. The appellant has then submitted that A.O has taken the figure of Rs. 20,29,000/- as cash deposit during the year and thus the gap is only of 11%s.2,0001- in the assessment order. In view of this reply supported by bank statement furnished by the appellant, the turnover reflected by the A.O. at Rs. 2,12,72,304/- is taken at Rs. 2,14,74,304/-. Accordingly, addition on this count which includes the estimated profit at 5% on the turnover is worked out to Rs. 10,63,715/. 4.8. Further, as this branch was opened at Thane during the year only and after lapse of six months of the previous year, an addition for the amount required as working capital to be made. It is noted that A.O. has not taken into account the working capital requirement for the business of the appellant. Since it is an admitted fact that the shop was opened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with regularly disclosed cannot be made. Here in the case during survey itself, it was found that there were non-business expenses also incurred by the appellant thought not recorded and exact amount with specific details of these two expenses are available also, I am of the opinion that same should be disallowed straightway instead of enhancing the percentage of profit; especially when no comparables have been made available. In view of this, the payment found to have been made to India Bull an amount of Rs. 4,75,616/- being capital expenditure and credit cared payments made for travel, personal and purchase of gold, totaling to Rs. 7,21,233/- which were found to be unrecorded expenditure have to be added u/s 69C of the Act. The appellant's plea that these expenses are not separate but covered by estimation is not tenable as they are unrecorded but coming out of unrecorded sales, a fact admitted by appellant in survey proceeding however could not be quantified. Hence with the same logic that A.O's estimate to workout unrecorded sales at Rs. 1,00,000/- per month per shop is not tenable, on the other hand having found that such expenses are done form such unrecorded sales and bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an. The addition was also confirmed on account of payment made towards the credit card. Thus, the total addition of Rs. 7,21,233/- was made u/s.69C. In sum and substance, out of total addition of Rs. 36,06,744/- made by the AO, the CIT(A) upheld the addition of Rs. 19,95,196/-. Detailed findings recorded by CIT(A) have not been controverted by department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the finding recorded by CIT(A) resulting into part deletion of addition made by AO. 9. Under Rule 27 of ITAT Rules, ld. AR raised a ground to the effect that amount paid to India Bulls loan amounting to Rs. 4,75,616/- was out of sale proceeds on which profit has already been estimated and addition has been made, therefore, the CIT(A) was not justified for making separate addition of Rs. 4,75,616/- on account of unexplained payments. We found that neither the assessee filed any appeal nor any cross objection and under Rule 27, assessee can raise a plea which is in support of CIT(A)'s action. The ground taken by the assessee is not in support of CIT(A)'s action but amounts to separate ground for which neither assessee has filed any ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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