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2015 (8) TMI 364 - ITAT DELHI

2015 (8) TMI 364 - ITAT DELHI - TMI - Addition on net profit figure - addition based on print out sheet, taken out from the CPU of the assessee company’s computer, found during the course of survey u/s 133A - Held that:- Just one figure in the print out taken from the CPU/hard disk i.e. Net profit figure, cannot be added to the income of the assessee for the following reasons.

(1) There is no corroborative evidence to support this figure of Net Profit;

(2) The other documen .....

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and this burden is not discharged in the present case.

(6) The stocks found during survey do not support the stock figure in the P&L account and balance sheet found in the CPU/print out. The reconciliations of all the purchases and sales are not found fault with by the A.O. When the quantitative details of opening stock, purchases, sales are accepted then the closing stock should b arrived at from the figures only.

(7) There is no allegation of fabrication of books. The res .....

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hen books of accounts are not rejected, the question of estimating income does not arise. Here the figure of profit cannot be replaced without rejecting the books of accounts. Thus we delete the impugned addition of ₹ 3,06,91,356/- made by the AO as confirmed by the First Appellate Authority. - Decided in favour of assessee. - ITA No: 1944/Del/2013 - Dated:- 5-8-2015 - SHRI J.SUDHAKAR REDDY AND SHRI A.T. VARKEY, JJ. For The Assessee : Dr.Rakesh Gupta, Sh.A.Anand and Sh.Somil Aggarwal, Adv. .....

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appeal the First Appellate Authority vide order dt. 19.2.2010 allowed the appeal of the assessee. Aggrieved the Revenue carried the matter in appeal and the ITAT, in ITA no.2461/Del/2010 vide order dt. 22.9.2010, restored the matter to the file of the A.O. by observing as follows. 6. We have heard the rival submissions and have gone through the material available on record and the judgments cited by Ld.A.R. of the assessee. We are not in agreement with Ld.AR of the assessee that since the assess .....

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by Ld.CIT(A). Regarding judgements cited by the Ld.AR of the assessee, we find that the judgment of Hon ble Kerala High Court rendered in the case of MS Jewellery (supra) in fact, does not support the contention of the Ld.AR of the assessment that the assessee has to be annulled on this basis because in this case, it was held by Hon ble Kerala High Court that the assessment order passed by the AO in that case is void but it was also held by Hon ble Kerala High Court that the assessment can be re .....

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the assessee in the present case. In this case also the Tribunal order passed on 6th Dec.1988 was quashed on this basis that the petitioner was not afforded any opportunity of being heard but at the same time, the Tribunal was directed by Hon ble Delhi High Court to decide the application filed by the assessee u/s 254(2) in accordance with law after providing adequate opportunity of being heard to the petitioner. Hence, as per this judgement of Hon ble Delhi High Court also, the assessment orde .....

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merit. 3. Thereafter the AO passed an order u/s 254 r.w.s.143(3) of the Act on 2.1.2013 assessing the total income at ₹ 3,26,86,543/-, inter alia making an addition of ₹ 3,06,91,536/-, being net profit figure adopted from the print out sheet, taken out from the CPU of the assessee company s computer, found during the course of survey u/s 133A of the Act, on the premises of the assessee company on 7.9.2006. The CPU and hard disk were impounded during the course of survey and the same .....

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2001-02 Profit and closing stock as per return filed (in Rs.) Profit & closing stock as per records of impounded CPU and hard disk (in Rs.) Profit before tax 18,39,826/- Net profit ₹ 3,25,31,182/- Closing stock as on 31.3.2001 84,14,376/- Closing stock ₹ 3,54,96,490/- Addition in share capital 45,00,000/- The A.O. came to a conclusion that the assessee has undervalued its stock and that it has underdeclared the net profit earned by it. The under statement of income was estimated .....

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les. The AO accepted the contentions of the assessee and did not make any addition on account of under valuation of closing stock. Only the net profit figure taken from the figures found in the final accounts statements in the hard disk and CPU was added. Aggrieved the assessee carried the matter in appeal. The First Appellate Authority considered the various submissions of the assessee and also called for the remand report. He held as follows: (a) Though the assessee has given detailed submissi .....

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ept the figure of net profit and closing stock and hence the impounded hard disk revealed the correct figures. (c) On a submission that the closing stock of ₹ 3,06,91,356/-, has not been made part of the opening stock of the subsequent A.Y., he held that this means that the stock has been purchased out of the books from unexplained sources and that the sales have also taken place during the year which remained out of books and hence the gross profit on the sales should also be made part of .....

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O because the same had been passed without giving proper and adequate opportunity of being heard to the appellant. It is admitted fact on record that the assessment order was passed on the same day on which the seized CPU/hard disc was unsealed/operated on 26/29th December,2008 behind the back of the assessee. 2. That the Ld.AO had erred on facts and under law in making an addition of ₹ 3,06,91,356/- on account of alleged undisclosed income to the returned income of the appellant and simil .....

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ant on account of alleged undisclosed net profit was very excessive. 4. That the interest as levied u/s 234 is illegal and at any rate, without prejudice very excessive. 5. That the appellant reserves its right to add, amend, modify the grounds of appeal. 5. Heard Dr.Rakesh Gupta, Ld.Counsel for the assessee and Sh.KK Jaswal, Sr.D.R. on behalf of the Revenue. 6. The Ld.Counsel for the assessee submitted that the sole basis of addition is only one figure, out of the many figures found in a rough .....

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which is abnormal and absurd figure. He submitted that if this profit figure in the rough document in the C.P.U. is taken, the gross profit ratio would be 160% of the sales and submitted that this is an impossibility as the revenue can realise by examining the date of the competition of the assessee. He pointed out that the AO agrees that all the other figures i.e. opening stock, purchases, sales etc. Tally with regular books and accounts and hence correct. It is only the closing stock and profi .....

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erred to pages 94 to 179 of the paper book and submitted that the assessee has undertaken a detailed exercise and reconciled the statement of stock, a copy of which is placed at page 93 of the paper book. Item wise stock with values and quantities have been listed out and reconciled. He argued that the AO as well as the First Appellate Authority had not found fault with this stock movement details and the reconciliations. 6.1. He further submitted that the books of accounts of the assessee were .....

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the paper book. He made a comparison of purchases and sales and the gross profits that were earned on each of those transactions, a summary of which is at page 274 of the paper book and submitted that the maximum gross profit was about 15% and the average gross profit is around 10.38% and argued that 160% G.P. is an impossibility. He vehemently contended that there is no corroborative material available nor any evidence for the Revenue to come to a conclusion that the assessee had earned the in .....

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ent should be fair and objective and cannot be based on unrealistic figures. 6.2. Mr.KK Jaswal, the Ld.Sr.D.R. on the other hand opposed the contentions of the assessee and submitted that the assessee has indulged in purchase and sale outside the books of accounts and the profit figure found in the computer only reflected the result of such out of books transactions. He submitted that data was obtained from the premises of the assessee and hence the authenticity of the same cannot be denied. He .....

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ts so earned into the company through accommodation entries in the subsequent Assessment Years. When it was pointed out that this is not the issue before the Tribunal in the impugned A.Ys, the Ld.Sr.D.R. submitted that all the figures at page 224 of the paper book, which is part of the annual accounts are cooked up figures and are highly unreliable. The sum and substance of his submissions is that he relies on the order of the First Appellate Authority, as well as the order of the A.O. In reply, .....

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2000 to 31st March, 2001 and the Balance Sheet as at 31st March, 2001 as found in the hard disk and CPU of the computer, have been extracted in the original assessment order at pages 3 to 6 of that order. An examination of the documents from the C.P.U. demonstrates that the stock summary as on 31.3.2001, as found in the hard disk/CPU impounded during the course of survey, is different from the closing stock figure depicted in the Profit and Loss a/c and the Balance Sheet in the print out from t .....

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as follows. Accordingly the scrutiny proceeds were started by the then A.O. by way of notice u/s 143(2), for which the assessee company has never objected. During the course of assessment proceedings books of accounts were called for and it was noticed that almost all the figures reflected in the print outs taken from the impounded hard disc and CPU tallied except the figures of Net Profit and closing stock. Rest of the figures in the books of accounts were the same as shown in the P&L accou .....

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rofit. To this effect the assessee has not filed any explanation, therefore, it is clear that the assessee has no explanations to offer about it. Further, the conclusion drawn by the then AO after discussion and scrutiny of books of accounts and other documents etc. By way of hard copies and statements taken from the hard disc/CPU. The income of the assessee company was finally computed as under: Income as originally assessed u/s 143(3) dt. 31.10.2002 ₹ 19,95,187/- Add: (i) Undisclosed pro .....

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ssee in his annual accounts filed along with the return of income except figure of closing stock and net profit. The print out tally with the normal books of accounts. Hence this is not a case of maintaining duplicate books of accounts. When the opening stock, purchases and sales figures tally, the closing stock has to necessarily be the balancing figure. The closing stock figure cannot be increased, unless there are purchases. It is not the case of revenue that there are purchases outside books .....

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e. The A.O. does not give any reason as to why, the stock figure from the print out of CPU/hard disk, of the stock summary sheet, is not considered as the correct figure of stock. In fact this figure tallies with all other transactions recorded in the normal books as well as in the computer prints out from the CPU/hard disk. When two documents are found in the CPU/hard disc, of the one which is the true and realistic figure, is to be adopted. The Stock Reconciliation is at page 93 of the paper b .....

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the difference between stock as on 31st March, 2011 and 1st April,2001 is because of unaccounted sales. This argument is absurd. The closing stock of the Previous Year would be the opening stock of the subsequent year. Just one unrealistic and absurd figure of net profit is taken out from the print out of the rough document from the CPU/hard disk and adopted for assessment of total income. Such an approach cannot be approved. 8.2. The Kolkata A Bench of the Tribunal in the case of Bimal Kumar Si .....

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tries in the regular books of account of the respective assessees. The same should not however, have any deterrent effect on the assessee's case. It may be pointed out that the assessee has been consistently maintaining right from the very inception that the impugned books had been prepared for presentation before the bank in order to raise loans. All the bank transactions were duly incorporated therein with the apprehension that the bank may verify the said transactions. As such, the fact t .....

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M/s Trade Friends or any of the members of the Singhania Group except to the extent discussed above. Since all the premises belonging to the Singhania Group were covered under the search operation, if at all the assessee indulged in any unaccounted transaction to the extent apparent from the seized books, at least some evidence in the form of purchase challan, purchase bills, sales challan, sales bills or any correspondence with suppliers would have been found in the course of search. Further, .....

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o an admitted fact that expected rate of profit in case of a wholesaler is generally low. In this case, unrealistic results have been reflected in the seized books and this proves that the profit has been arrived at on the basis of fabricated books said to have been prepared for obtaining loan from the banks. 13.1 The assessee's contention is further corroborated by the fact that the impugned fabricated books were written only upto 31st Dec., 2001 whereas the search was conducted on 30th Jan .....

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earch, would have been found in the course of search; which under the circumstances would have been definitely maintained by the assessee so as to enable him to incorporate the same into the alleged Kaccha books. However, admittedly in the present case, although all the bills and vouchers supporting entries in the regular books of account upto the date of search were found and seized, no iota of evidence corroborating the alleged undisclosed transactions for the balance period (supra) was found .....

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se. 13.2 On the above premises, to sum up, the relevant facts reveal that in course of search in the various premises of the Singhania Group, no unaccounted assets or properties were found. Details of assets found and seized in course of search in the premises of Sri Kamal Kumar Singhania, Sri Bimal Kumar Singhania and Sri Jai Prakash Singhania have been mentioned in the assessment order and also recorded above. The cash found in the residential premises of Sri Kamal Kumar Singhania was part of .....

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ct by the AO. Likewise, the jewellery found at his residence was duly disclosed in the balance sheet of Smt. Shanti Devi Singhania. Accordingly, the said jewellery was not seized by the search party. The stocks inventorised in course of search in the premises of M/s Trade Friends and M/s Trade Wings were also found to the part of regular stock of the said concerns. As such, no unaccounted assets or properties were found in course of search in case of Singhania Group. 13.3 That apart, few books w .....

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were found and seized in course of search. The stock inventorised by the search party also corresponded to the stock as per regular books of account and did not commensurate with the figures shown in the fabricated books. Further, the fabricated books depicted impracticable financial results which were clearly far from reality and actual state of affairs of assessee's business. The said books were written only upto 31st Dec., 2001 and not upto the date of search, once again indicates that th .....

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stances and in the light of assets found in course of search. Since the assessee had discharged the primary onus of proving his stand, it was for the AO to disprove the same by bringing on record some positive material to establish that the impugned books recorded real transactions of the assessee, This was possible only if the AO came across some evidence, in the form of excess physical stocks, unaccounted bills, vouchers etc. supporting the entries in the fabricated books in the course of sear .....

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ay be presumed". It is thus clear that the drawing of presumption in such cases depends upon particular facts and circumstances of each case. The officer is not justified to draw such presumption in all cases without application of mind judiciously to the facts of a particular case. Even if such presumption is drawn against an. assessee the same is rebuttable and the person against whom such presumption is drawn is free to lead evidence to rebut such presumption and when that is done, the o .....

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hority.. To say so we draw support 'from the "decision of the Rajasthan High Court in the case of Addl CIT v. Thahmyammal Balchand .... Apparently no cause of action can lie between the assessee and Naihati Jute Mills Co. on the basis of such unsigned MoU and, therefore, there is no obligation or liability on the part of the company to pay to the assessee all those amounts mentioned in the unsigned MoU nor the assessee is entitled to claim from the company all those amounts mentioned in .....

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nk of Travancore v. CIT that the concept of real income its certainly applicable in judging whether there has been income or not. The Hon'ble Supreme Court again in the case of K.P. Varghese v. ITO has clearly stated that it would indeed be most harsh and inequitable to tax an assessee on income which has neither arisen to him nor is received by him, Apart from the unsigned MoU the AQ has not led any cogent and reliable evidence to establish that the assessee earned or received the amounts m .....

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Section 132(4A) of the Act and to prove that what was apparent from the seized books was not true. Our attention was also drawn to the judgment of the Tribunal, Lucknow Bench in the case of Satnam Singh Chhabra v. Dy. CIT (2002) 74 TTJ (Lucknow) 976 wherein it was held as under [at para 30(6) and (7)] : In any case, the loose paper and entries contained therein do not go to prove that these relate to undisclosed income of the assessee. In view of the peculiar facts of this matter and particularl .....

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roborated entries in the fabricated books in the hands of Sri Kamal Kumar Singhania and Sri Jai Prakash Singhania, the same are directed to be deleted. We order accordingly. 8.3. Applying the propositions of law laid down in this order, to the facts of the present case, we hold that just one figure in the print out taken from the CPU/hard disk i.e. Net profit figure, cannot be added to the income of the assessee for the following reasons. (1) There is no corroborative evidence to support this fi .....

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