TMI Blog2015 (4) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... already disclosed excess undisclosed income over undisclosed investment in the return itself. It is a fact that the assessee has admitted additional income on account of cash found during the course of search. The statement recorded U/s 133A of the Act has no evidentiary value as held by the Hon'ble Supreme Court but the statement recorded U/s 132(4) has evidentiary value, which is also rebuttable presumption as held by the Hon'ble Apex Court in various cases. It is fact that Shri Madan Mohan Gupta in question to answer No. 21 in statement U/s 133A dated 22/10/2008 had admitted that the cash of ₹ 20 lacs was found at residence, had disclosed additional income. The learned AR for the assessee's argument that the excess cash found during the course of search at residence was result of unaccounted sale made in preceding years. The learned CIT(A) also analysed the whole facts with reference to cash and unaccounted investment found and has given detailed findings on this issue, which has not been controverted by the learned CIT DR. Therefore, we confirm the order of the learned CIT(A). Addition on account of unexplained stock - The learned AR considered the reconciliation in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2009-10) 1. The learned Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming trading addition of ₹ 2,29,402/- by applying GP rate 16%. 2. The learned Commissioner of Income Tax (Appeals) has erred on facts and in law in computing the alleged unexplained investment in stock at ₹ 4,63,345/- and thereby confirming addition of ₹ 2,80,238/- on account of unexplained investment in stock after allowing set off of trading addition. 2. First ground of revenue's appeal and assessee's C.O. are against reducing the G.P. rate from 18.5% to 16% by the learned CIT(A) and confirming the G.P. rate @ 16%. 2.1 The assessee is in trading of fireworks. There was a search and seizure operation U/s 132(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) carried out on 22/10/2008 at the business and residential premises of the assessee's group. During the course of search and seizure operation, incriminating documents/loose papers were found and seized. The assessee filed its return of income on 30/09/2009 declaring income of ₹ 46,03,850/-. The case was scrutinized U/s 143(3) of the Act by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such address etc. 1. M/s Arjun Fireworks, Sivakashi. 2. M/s Shri Divan Foreworks, Thiruthangal, Sivkashi 3. M/s Rajavel Fireworks factor, Sivkashi. 4. M/s Jaya Latchana Fireworks, Sivkashi. 5. M/s Durgaiamman Fireworks, Vishwanathan, Sivkashi. 6. M/s Anitha Sparklers Fireworks, Sivkashi 7. M/s Gokila Fireworks, Sivkashi. As the notices issued to the purchase parties returned unserved by the postal authority, therefore, the assessee was asked vide order sheet dated 26/11/2010 to verify all the above parties from whom the assessee has made purchases with supporting evidences. The assessee was required to verify purchase made from all the above parties but assessee has been unable to verify the purchase with supporting evidences to substantiate the genuineness of purchases. The learned Assessing Officer also held that the onus to prove the purchases genuine is on the assessee by relying on the various decisions considered by him, which is as under:- (i) M/s Indian Woolen Carpet Factory Vs. ITAT Others (2002) 178 CTR 420 and M.P. High Court in the case of VISP (P) Ltd. Vs. CIT Anr. 186 CTR 718. (ii) Awadesh Pratap Singh Abdul Rehman Bros. Vs. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in the regular books of account and ₹ 9,16,182/- out of books. The trading addition of ₹ 4,58,950/- was made by the Assessing Officer. 3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the learned CIT(A), who had allowed the appeal partly by observing as under:- 2.3 I have considered the submission of learned A.R. and have perused the material on record. Undisputedly, on going through the facts, provisions of section 145(3) are clearly applicable. This has also not been disputed by the A.R. Coming to the application of G.P. rate, it is quite evident that G.P. rate shown by the appellant for different year is certainly quite less than the G.P. rate of 17.02% to 18% declared by M/s Rajan Fire Works @ Emporium. The appellant as well as this firm both are wholesaler. It may be possible that M/s Rajan Fire Works Emporium may be doing some manufacturing of its own, part from main business of wholesale trading. Considering this position, it will be appropriate and reasonable to apply the G.P. rate of 16% in the case of appellant on recorded (Rs. 21,57,817/-) as well as unrecorded sales (Rs. 70,24,060/-) both, giving th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -04 11,89,909/- 1,41,239/- 11.87% From the above table, it can be noted that the G.P. rate declared by the assessee is better and comparable to the earlier years. In the present case since the assessee has declared better results, the G.P. rate declared should be accepted. The assessee has declared undisclosed miscellaneous income of ₹ 42 lacs, apart from undisclosed interest income and income from unaccounted business of ₹ 10,12,675/-. Once this is assessed, no separate trading addition of ₹ 4,50,8950/- is required as miscellaneous income offered is much more than the trading addition made by the A.O. In view of above the trading addition made by the A.O. is uncalled for and be deleted. 7. We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that the assessee has been indulging in unaccounted sales/purchases. The major expenses on account of trading of fireworks have already been debited by the assessee in P L account except unaccounted purchase. Therefore, in unaccounted purchase resultant to unaccounted sales, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer has not accepted the books of account prepared after the date of search by including the unaccounted sales and purchases and also considering that in the statement, the appellant had admitted the cash to be unaccounted. On the basis of unaccounted purchases/sales, the availability of cash has been explained by the assessee before the Assessing Officer, which has been rejected by him without appreciating the facts. It is also argued by the AR before the learned CIT(A) that undisclosed profit from undisclosed sale recorded in seized material totaling to ₹ 26,73,213/- spread over in four years. The additional income has further been offered for taxation to explain the acquisition of unaccounted assets. Such income is ₹ 42 lacs for A.Y. 2009-10, ₹ 3.5 lacs for A.Y. 2008-09 and ₹ 6.5 lacs for A.Y. 2007-08. Thus, total additional income offered by the assessee was ₹ 52 lacs included the undisclosed profit as well as interest on loan additionally offered, total unaccounted income offered, came to ₹ 79,69,706/- whereas unaccounted assets found to be noticed during the course of search, inter alia, includes cash loan of ₹ 35 lacs, unexp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment 69,50,059/- Excess of undisclosed income over undisclosed investment 9,09,842/- From the above, it is evident that cash found in search is covered by the undisclosed income offered by the assessee in the return. CIT(A) has therefore rightly deleted the addition. The ground of the department be therefore be dismissed. 13. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee has already disclosed excess undisclosed income over undisclosed investment in the return itself. It is a fact that the assessee has admitted additional income on account of cash found during the course of search. The statement recorded U/s 133A of the Act has no evidentiary value as held by the Hon'ble Supreme Court but the statement recorded U/s 132(4) has evidentiary value, which is also rebuttable presumption as held by the Hon'ble Apex Court in various cases. It is fact that Shri Madan Mohan Gupta in question to answer No. 21 in statement U/s 133A dated 22/10/2008 had admitted that the cash of ₹ 20 lacs was found at residence, had disclosed additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lizable value and not at MRP, it worked out total stock as per its valuation at ₹ 17,52,601/- and claimed that there is no difference in physical stock found during the course of search and stock declared as per book. It also submitted that there was a discrepancy in chart of stock taking at shop No. 865, Hawa Mahal Bazar, Jaipur and calculated the difference in the stock at ₹ 18,30,610/-. The learned Assessing Officer fairly accepted the discrepancy pointed out by the assessee during the course of assessment proceedings. There was a totaling mistake in the summary sheet of stock taken by the authorized officer at ₹ 20,81,172/- which has also been accepted by the Assessing Officer. Finally, he calculated the physical stock on date of search at ₹ 39,92,438/- after reducing the G.P. @ 18.5% from the total stock found in physical, the cost of stock calculated at ₹ 32,53,880/- as per books of account. After considering the various purchases, not recofrded in the regular books of account, the stock was at ₹ 17,52,601/-, thus excess stock of ₹ 15,01,237/- was found at the time of search, which was added in the income of the assessee as unrecorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d report. iv. CIT(A) after considering the various evidences, the remand report and also the rejoinder of the assessee on the remand report accepted that a discount is to be allowed from MRP rate to arrive at the sale rate but at the same time incorrectly observed that heavy discount ranging from 70% to 90% is not believable. Finally, she allowed a discount of 45% to the MRP to arrive at the sale price. The discount so allowed is at a lower side. Considering the evidences filed, such discount should be at least 50% as claimed by the assessee. v. CIT(A) has considered that stock valued at ₹ 2,67,395/- at godown no. 3 and at ₹ 1,91,530/- at godown no. 4 are not at MRP rate in as much as the MRP rate is not mentioned in these lists whereas on other list, MRP rate is mentioned. It may be noted that this list contain the various items of crackers. The rate mentioned in this list is per box/case. The rate on the box/case is only the MRP rate and therefore discount of 50% need to be allowed from this value also to arrive at the sale value. vi. On the above basis, the cost of the stock found in search would work out as under:- Stock valued at MRP ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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