TMI Blog2014 (8) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.2004 and the plea of the assessee was that the said 59 workers as on the date of survey belonged to the assessee and its sister concern. The requisite list of workers employed with either of the concerns were filed on record. Merely because the said statement was confronted to one of the partners who had signed the list does not establish that the workers belonged to the firm in which he was a partner i.e. the assessee firm before us. In the absence of any concrete evidence found, we find no merit in the orders of the authorities below and no addition is warranted in the hands of the assessee on the basis of said list prepared by the survey team, where the assessee had clearly explained its case that the said total number of workers belonged to two concerns and not to the assessee itself. In any case, the additions in the hands of the assessee for the years under consideration have been made on pure estimation as no evidence of excess workers was found in the years under appeal. - Decided in favour of assessee. Sales made outside the books of account - Held that:- Addition is based on the documents seized from the residence of the partners of the assessee. The said documents r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961. 3. All the appeals relating to the two assessees on similar issue were heard together and are being disposed off by this consolidated order for the sake of convenience. 4. The learned A.R. for the assessee has pointed out that there are two main issues arising in all the appeals, first is in relation to the addition on account of un-explained expenditure booked under the head wages and the second issue is on account of the income of Meena Garg being added as income of the assessee on substantive basis from year to year. We proceed to decide these two issues and thereafter consider the grounds of appeal raised in the respective assessment years. 5. The assessee in ITA No.300/Chd/2014 has raised following grounds of appeal: 1. That the learned CITA has erred in law and facts in confirming an addition of ₹ 2,67,443/- on account of unexplained expenditure under the head wages . (para 4 page 2-4 of Assessment order) (para 5.3 page 3 of CIT(A) order) 1 (a) That authorities below has erred in law and facts in making addition on account of unexplained expenditure under the head wages without rejecting the books of accounts. 2. That the appellant craves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factory of M/s Aggarwal Wood Industries also. It is the finding of the Assessing Officer that both the concerns are sister concerns and the premises of both the concerns were independent gates. It was further pointed out by the Assessing Officer that during the assessment proceedings, the assessee had not furnished any documentary evidence that the list contained the names of the workers working in M/s Aggarwal Wood Industries. In view thereof, the addition of ₹ 2,67,443/- was made in the hands of the assessee on account of unexplained expenditure. 7. The CIT (Appeals) upheld the addition made by the Assessing Officer. 8. The plea of the assessee before us was that the list of the workers were drawn on the date of survey and the sad list comprised of two concerns i.e. M/s Punjab Plywood Industries and M/s Aggarwal Wood Industries. Further the Assessing Officer has applied the ratio of labour to sales to compute the expenditure on labour and made addition on account of suppression in the expenditure of wages. However, no books of account were rejected by the Assessing Officer before making the said addition. 9. The learned D.R. for the Revenue pointed out that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises of the assessee on 9.9.2004 could not be utilized for computing unexplained expenditure on account of wages while completing the assessment under section 143 (3) r.w.s. 153A of the Act pursuant to search carried out at the premises of the assessee on 20.3.2007. The second plea raised by the learned A.R. for the assessee before us was that the list of the workers prepared by the survey team comprised of the workers of sister concerns and merely because the assessee had not pointed out the said fact during the course of survey, does not change the fact situation. We find merit in the plea of the assessee in this regard. First of all, the assessment in the case has been completed under section 143 (3) r.w.s. 153A of the Act vide order dated 30.12.2008. The said assessment was made pursuant to the search operation carried out at the premises of the assessee on 20.3.2007. During the course of search the team had detected suppression in sale in the hands of the assessee and had computed income of the assessee after the said detection by making various disallowances under various heads of expenditure. One said head of expenditure was on account of unexplained expenditure on labou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) l(a) That authorities below has erred in law and facts in making additions on account of unexplained expenditure under the head wages without rejecting the books of accounts. 2. That learned CITA has erred in law and facts in confirming an addition of ₹ 1,44,210/- being income of Meena Garg Prop Punjab Timber Trading Co. as Income of appellant on substantive basis. (para 5 page 5-8 of Assessment order) (para 6.1 page 5 of CIT(A) order) 3. That appellant craves leave to add, alter, amend or to substitute the above grounds of appeal either before or at the time of hearing of case. 14. The assessee in ITA No.301/Chd/2014 has raised two issues. The ground No.1 raised by the assessee is against the addition made on account of unexplained expenditure under the head wages . The facts and circumstances of the present issue are identical to the facts and circumstances of the issue raised in assessment year 2001-02. Following the same parity of reasoning we allow the claim of the assessee and delete the addition of ₹ 1,82,867/- made by the Assessing Officer. The ground of appeal No.1 raised by the assessee is thus allowed. 15. The issue in ground No.2 raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mend or to substitute the above grounds of appeal either before or at the time of hearing of case. 20. The assessee in ITA No.302/Chd/2014 vide ground No.1 has raised the issue against the addition on account of unexplained expenditure under he head wages . The facts and circumstances of the present issue are identical to the facts and circumstances in the issue raised in assessment year 2001-02. Following the same parity of reasoning we allow the claim of the assessee and delete the addition of ₹ 3,20,921/- made by the Assessing Officer. The ground of appeal No.1 raised by the assessee is thus allowed. 21. The issue in ground No.2 raised by the assessee on account of addition of ₹ 1,41,060/- being income of Smt.Meena Garg, proprietary of M/s Punjab Timber Trading Company. The facts, circumstances and issue raised vide ground No.2 is identical to the ground No.2 raised in assessment year 2002-03 and following the same parity of reasoning we find no merit in the said addition. We direct the Assessing Officer to delete the addition of ₹ 1,41,060/-. The ground of appeal No.2 raised by the assessee is thus allowed. 22. The assessee in ITA No.303/Chd/2014 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the books of accounts. 2. That learned CITA has erred in law and facts in confirming an addition of ₹ 2,99,680/- being income of Meena Garg Prop Punjab Timber Trading Co. as Income of appellant on substantive basis. (para 5 page 5-8 of Assessment order) (para 9.1 page 9 of CIT(A) order) 3. That appellant craves leave to add, alter, amend or to substitute the above grounds of appeal either before or at the time of hearing of case. 26. The assessee in ITA No.304/Chd/2014 vide ground No.1 has raised the issue against the addition on account of unexplained expenditure under he head wages . The facts and circumstances of the present issue are identical to the facts and circumstances in the issue raised in assessment year 2001-02. Following the same parity of reasoning we allow the claim of the assessee and delete the addition of ₹ 4,69,176/- made by the Assessing Officer. The ground of appeal No.1 raised by the assessee is thus allowed. 27. The issue in ground No.2 raised by the assessee on account of addition of ₹ 2,99,680/- being income of Smt.Meena Garg, proprietary of M/s Punjab Timber Trading Company. The facts, circumstances and issue raised vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002-03 and following the same parity of reasoning we find no merit in the said addition. We direct the Assessing Officer to delete the addition of ₹ 3,57,316/-. The ground of appeal No.2 raised by the assessee is thus allowed. 31. Another issue raised by the assessee vide ground No.3 is on account of addition of ₹ 13,840/-. The learned A.R. for the assessee pointed out that the said addition had been made in the hands of the assessee on account of valuation of particular stock. However, the search team had counted the stock of falli, one of the byproduct of wood as stock of fatti, which is another byproduct and costs less. The case of the assessee before us is that because of the similarity in names, there was a discrepancy in counting stock and hence the addition. 32. The learned D.R. for the Revenue placed reliance on the orders of the authorities below. 33. We have heard the rival contentions and perused the record. On the perusal of record and evidence produced by the assessee, we find merit in the plea of the assessee especially in view of the fact of similar sounding names. The assessee had placed evidence on record to show that falli s cost is lesser t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is thus allowed. 36. The issue in ground No.2 raised by the assessee on account of addition of ₹ 3,35,405/- being income of Smt.Meena Garg, proprietary of M/s Punjab Timber Trading Company. The facts, circumstances and issue raised vide ground No.2 is identical to the ground No.2 raised in assessment year 2002-03 and following the same parity of reasoning we find no merit in the said addition. We direct the Assessing Officer to delete the addition of ₹ 3,35,405/-. The ground of appeal No.2 raised by the assessee is thus allowed. 37. The issue in ground No.4 raised by the assessee is against the addition made on account of difference in valuation of building on the basis of report of the Valuation Officer. 38. The learned A.R. for the assessee at the outset pointed out that the books of account of the assessee were not rejected and consequently no addition on account of difference in valuation of the Valuation Officer was warranted in view of the ratio laid down by the Hon'ble Supreme Court in Sargam Cinema Vs. CIT [328 ITR 513 (SC)]. 39. The learned D.R. for the Revenue has fairly admitted that the books of account were not rejected. 40. We are of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isor/ employees of the assessee through his partner Sh. Kewal Garg along with the witnesses. However, when he was confronted to the fact that as per the above stock inventory, the value of the stock found is short by ₹ 82,57,226/- with the book stock as on the date of the search, he was not able to furnish any explanation for the same. c) The assessee at no point of the post search proceedings filed any objection/valuation of the stock. In view of the above GP on ₹ 82,57,226/- @ 13.3% is 10,98,211/-as discussed above is being added back to the income of the assessee. 44. Before the CIT (Appeals) the assessee contended that the search was carried out on 20.3.2007 and after the search on 23.3.2007 the assessee requisitioned DDIT (Investigation), Ambala to give the copy of stock inventory prepared on the date of search. The DDIT issued letter to the assessee pointing out discrepancy in the stock taken on search vide letter dated 2.4.2007 and copy of the inventory was enclosed. Vide letter dated 11.4.2007 the assessee filed copy of explanation alongwith reconciliation of stock found on the date of search and value as per books of account. The DDIT had forwarded the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the search itself i.e. at the time of signing of the inventory as per notings at page 109 of the Paper Book. The learned A.R. for the assessee pointed out that another letter was addressed to the DDIT(Investigation) on 12.4.2007 pointing out that the stock valuation was not done properly by the search party. 47. The learned D.R. for the Revenue pointed out that no explanation was furnished before the search team and the stock was counted in the presence of the assessee and hence there was no merit in the claim made by the assessee in this regard. 48. The learned A.R. for the assessee pointed out that Ground No.3 raised by the assessee is linked to ground No.5 under which the addition on account of falli was proposed to be made by the Assessing Officer as per the documents seized which are placed at pages 106 to 113 of the Paper Book. Notional sales of the said item were computed and separate addition was made by the Assessing Officer, but the same was to be set off against the addition made on account of difference in the stock. 49. The learned D.R. for the Revenue pointed out that the assessee had admitted to the fact of unaccounted sales totaling ₹ 4,41,345 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fronted with the fact that there was discrepancy in the stock, no explanation was furnished by him. However,, we find that the partner had made an endorsement on stock list itself, prepared at the time of search, which is available on record. The Assessing Officer also observed that in post search proceedings no objection/valuation of the stock was filed by the assessee and consequently the GP on the difference in the stock of ₹ 82,57,226/-@ 13.3% i.e. ₹ 10,98,211/- was added as income of the assessee. 52. The assessee before the CIT (Appeals) has pointed out the consequences of post search proceedings and has refuted the claim of the Assessing Officer that the assessee at no point in post search proceedings had filed any objection to the valuation of stock. The facts as narrated by the assessee are reproduced at pages 28 and 29 of the appellate order, which read as under: a) Physical'stock inventory taken at the time of search has many defects. The firm has two partners, namely Sh. Naresh Garg and Sh. Kewal Garg. During the entire period of search, Sh. Naresh Garg was held at the residence in Madhu Colony, Yamuna Nagar and he was not aware how and when the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessment proceedings assessee has filed detailed reply before assessing officer vide our letter dated 22.12.2008 during the course of assessment proceedings alongwith annexures. Copy of letter is being enclosed. i] The kind attention of your honor is invited to the fact that learned AO has accepted value of closing stock as on 31.03.2007 and the said stock was arrived at after making adjustment of purchases and sales between 20.03.2007 to 31.03.2007. Once she accepted our stock position as on 31.03.2007, there is no scope of disbelieving that stock as on 20.03.2007. In fact the stand of revenue is for convenience to make additions to the returned Income. Rejection of Books of Accounts It is to bring to your kind notice that as per the provisions of Income Tax Act it is open to AO to reject the books of accounts if he is not satisfied with correctness or completeness of the accounts of the assessee as per the provisions of s. 145(3) and can complete the assessment in the manner provided u/s. 144. The learned Assessing Officer has accepted our book results as such she has not rejected the book results and assessment is not completed in the manner of s. 144. That it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer as no books of account had been rejected by the Assessing Officer and no trading addition had been made except on account of the difference in stock and the sales outside the books of account. 57. In the totality of the facts and circumstances where the GP rate declared by the assessee has been accepted by the Assessing Officer, we find merit in the plea of the assessee that the same rate should be applied while preparing trading account as on the date of search. During the year under consideration, the assessee had shown fall in GP rate and the explanation of the assessee was that due to huge increase in the turnover there was marginal fall in GP rate, which undoubtedly has been accepted by the Assessing Officer in toto. In view of the totality of the facts and circumstances where we have already upheld the addition of ₹ 4,41,345/- on account of sale depicted in the seized documents being outside the books of account and on account of the explanation given by the assessee that the discrepancy stands reconciled on account of the GP rate to be applied and other discrepancies explained by the assessee, there is no merit in any further addition. Another aspect to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sq.mtr. 154569 sq.mtr. was allegedly used for manufacturing of plyboard and similar measurement for manufacturing of ply. The Assessing Officer thereafter as per paras 7.4 and 7.5 of the assessment order computed that the plyboard and ply manufactured from core would be approximately 90,000 sq.mtr., as against which as per RG-1 register, the production was approximately 31248.60 sq.mtr. The Assessing Officer thus worked out the alleged suppression in the manufacturing of ply and plyboard and as per para 7.8 of the assessment order show caused the assessee as to why addition of ₹ 60 lacs should not be made. The assessee refuted the allegations of the Assessing Officer. However, the Assessing Officer in view of the seized documents computed the addition in the hands of the assessee of ₹ 39,90,000/- by adopting GP rate of 13.3% on production worth ₹ 3 crores. 61. Before the CIT (Appeals) the assessee explained that the seized documents pertained to the period 27.10.2006 to 31.1.2007 and the actual production of ply and plyboard during the relevant year was 57791 sq.mtr. and not 31248.60 sq.mtr. as alleged by the Assessing Officer. The assessee submitted the recon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G-1 contains only the daily total production without any bifurcation of the two products. So the veracity of the claim of the assessee cannot be cross checked. Furthermore, core veneer received on job work is apparently also not accounted for. On the other hand, 1 find that the AO has given the benefit of considering only one Press as used for manufacturing during the year, wastage of 10% as claimed was allowed and the core dried on basis of the seized papers at 309138 sq mt as against the higher amount of 414614 sq mt worked out by the assessee. The RG-1 showed the production at 31,248.6 sq mt only for the given 52 days from both the Presses. So, 1 am inclined to hold that more than adequate leverage has been afforded to the assessee. The AO calculated the minimum production at 90,000 sq mt for the 52 days ie for period 27.10.2006 to 19.1.2007 as against the disclosed production in RG-l of 31,248 sq mt. In other words there is suppression of production of at least l/3rd viz. 60,000 sq mt. On applying the average sale price of ₹ 82/- sq mt the value comes to ₹ 48,00,000/-approx. and extrapolating it for the whole year, an amount of ₹ 39,90,000/- was added on ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries) 65. The assessee in ITA No.299/Chd/2014 has raised following grounds of appeal: 1. That learned CITA has erred in law and facts in confirming an addition of ₹ 13,64,908/- on account of unexplained expenditure under the head wages . (para 3 page 2-4 of Assessment order) (para 11 page 9-13 of CIT(A) order) l(a) That authorities below has erred in law and facts in making additions on account of stock found short on the date of search without rejecting the books of accounts. 2. That appellant craves leave to add, alter, amend or to substitute the above grounds of appeal either before or at the time of hearing of case. 66. The only issue raised by the assessee in the present appeal is against confirmation of addition on account of stock found short on the date of search. The learned A.R. for the assessee pointed out that the issue raised in the present appeal is similar to the issue raised by the sister concern of the assessee vide ground of appeal No.5 in ITA No.1171/Chd/13. The learned A.R. for the assessee further pointed out that the inventory of the stock is placed at pages 7 to 13 of the Paper Book and reconciliation is at page 20 of the Paper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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