TMI Blog2016 (1) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... gument of ld. Counsel that assessments u/s 153A and 153C are independent and mutually exclusive, an assessment cannot be framed in continuation of both notices and similarly cannot be concluded u/s 153A if proceedings are undertaken u/s 153C. In view of the facts, circumstances and judicial precedents cited above we hold that impugned assessments are untenable and bad in law.- Decided in favour of assessee Trading addition - Held that:- Trading results of the assessee’s business were already subject matter of appeals, there was no search on his show room, and therefore, no incriminating material was found. By estimating the GP from regular business ld AO has reviewed settled position without any incriminating material in this behalf, which is not permissible in search assessments. In view thereof we delete the additions made in respect of estimation of GP from regular business.- Decided in favour of assessee Income declared from unaccounted business - Held that:- It has not been disputed that assessee filed complete record of year wise and transaction wise accounts of material found in the locker. No adverse comments have been offered by ld. AO in this behalf. Regarding compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sound basis of adopting gross profit rate of 30% in the current year. Assessee s common ground No.1 for AY 2008-09 2009-10 1. The assessment order framed by the Learned Assessing Officer has erred in passing the order u/s 153A/153C/143(3) of the Income Tax Act, 1961 in void abinitio deserves to be quashed because no incriminating documents were found during the course of search and no proper satisfaction was recorded. Assessee's common Ground No. 2 for AY 2008-09 and 2009-10 1. Under the facts and circumstances of the case the Learned CIT(A) has erred in sustaining the addition of ₹ 15,63,530/- by applying GP rate of 30.36% as against 15.55% for AY 2008-09 and addition of ₹ 1,09,37,185/- by applying GP rate of 33% as against 11.35% for AY 2009-10 declared by the assessee for unaccounted sales based on the P L account which is not controverted. 1. Revenue's Grounds for AY 2008-09 On the facts and in the circumstances of the case, the Learned CIT(A), Ajmer has erred in deleting trading addition of ₹ 21,68,172/- despite the fact that rejection of books of account has been upheld and ignoring the fact that on unaccount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order is as under Satisfaction note for initiating proceeding u/s 153c of the IT Act In the case of M/s Jypore Jewellery manufacturing Pvt. Ltd.,1 2,Ratan Shikha, Near Gokkle Park, Janta Colony, Jaipur PAN AAACJ4640C for the A.Y.2004-05 to 2009-10. A search was conducted in the case of Private Vaults Group, jaipur on 08/09/2009 based on search in the case of sh. DD. Modi Group. Certain Lookers in private Safe Deposit Vaults were identified which were suspected to be belonging to this group. The warrant was issued in the name of locker owners i.e. Shri Govind Dev and Shri Ram, 26, Bani Park, Jaipur on the basis of address available with the vault operator. The D.D. Modi Group disownered these lockers. The following assets were seized from the locker as per panchnama prepared during search Sr.No. Assets seized Seized/Impounded documents 1000 $ (USA Dollars) jewellery ₹ 93,63,209 1. Annexure AS-1 Exhibit 1 to 42 Statement of Ms. Usha Rani was recorded u/s 132(4) of the Income Tax Act, 1961. In the statement s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) The proceedings though are initiated u/s 153C the assessments have been completed u/s 153A rws 143(3) as is clear from the respective orders of ld. AO and CIT(A). (v) In these circumstances the Learned Assessing Officer erred in issuing notice u/s 153C when the proceedings u/s 153A were already pending. Besides ld. AO has erred in holding that the notice issued u/s 153C satisfy the terms laid down in this behalf. (vi) The proceedings are continued u/s 153C but the assessment is completed u/s 153A despite consciously dropping the notice u/s 153A. (vii) Assessment u/s 153A and 153C are totally different and mutually exclusive, an assessment cannot be framed in continuation of both notices and similarly cannot be concluded u/s 153A if proceedings are undertaken u/s 153C. The relevant provisions for section 153C pre-suppose existence of the person referred to in section 153A. In other words there has to be a person in whose hands action u/s 153A is taken. In the case of the assessee there is no existence of such person. No assessment has been completed u/s 153A in whose hands a satisfaction has been recorded for initiating proceedings u/s 153C in assessee s hands. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tends that regular returns for all the impugned years were filed and regular assessments were framed by making some routine GP additions which were reduced or deleted in appeals. From the above referred locker papers reflecting regular unaccounted transactions mentioning details of sales and purchases along with the stock of unaccounted jewellery were found. During the course of impugned assessment proceedings in order to determine the profits from unaccounted papers, assessee prepared complete accounts of sale, purchases, P L a/c and determined the unaccounted business. Same were produced and verified by ld. AO and no inconsistency or discrepancy is pointed out therein. Thus on the basis of papers and jewelry stock found in the locker year wise unaccounted profit earned by assessee was worked out as under and offered as income in search returns :- Financial Year Income declared 2006-07 21396 2007-08 1231754 2008-09 4391086 2009-10 1888254 7532490 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher and faster turnover and lesser GP. (b) It is further noticed that although GP is better in regular sales but ultimately the regular sales disclose very less NP whereas unaccounted sales the GP is lower but average net profit rate is around 8.68% which supports the assessee s contentions. (c)The GP rate is comparatively low firstly on the ground that turnover is just the double. Secondly the assessee compromises in the profit in the unaccounted sales as the expenses on unaccounted sales are almost negligible and therefore at the end net profits are more. Reliance is placed on: (i) Abhishek Corporation Vs. Deputy Commissioner of Income Tax 63 TEJ 651 (Ahd) It was held that only net profit rate can be applied on unaccounted sales/receipts. (ii) Further in the case of Moolchand Kumawat sons Vs. DCIT Ajmer M.A. 93/JP/2008 out of ITSSA No. 24/JP/2005 dated 20.02.2009 Taxworld Vol. XLII page 241 the Hon ble ITAT Jaipur Bench Jaipur held as under (a) Sales do not represent the income of the assessee and only the profit thereupon can be taxed. (b) Same profit rate as disclosed by the assessee shall have to be applied on unrecorded sales. (iii) CIT vs. S.M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (2006) 99 ITD 227 (Ahd.) (vii) Anand Autoride ltd. vs. Jt. CIT (2006) 99 ITD 227 (Ahd) (viii) Kantilal Prabhudas Patel vs. Dy. CIT (2005) 93 ITD 117) (Indore TM) (ix) Smt. Rajrani Gupta vs DCIT (2000) 72 ITD 155 (Mum) (x) Dr. R.M.L. Mehrotra vs. Assistant Commissioner of Income Tax (1999) 64 TTJ 259 (All) 2.9 It is further submitted that following judicial precedents have held that incriminating material should be applied in totality and not on piece meal basis to favor the revenue, the seized evidence is to be accepted in totality in the interest of natural justice. The concept of Heads I win and tails you lose is alien to the principles of income tax law. (i) CIT vs. Indio Airways Pvt Ltd (2012) 79 DTR 289 (Del) (ii) Vivek Kumar Kathotia vs. DCIT (2013) 142 ITD 394 (Kol. Trib) (iii) Kanti Lal Brothers vs. Assistant Commissioner of Income Tax 52 ITD 412 (Pune) 2.10 Apropos the estimation of GP declared in regular books, ld. Counsel further contends that the book results have been examined in past making some additions, which on appeals have become final. No incriminating material is found as there was no search on assessee. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any correct and conscious discloses Disclosure statement recorded at odd hours cannot be considered to be a voluntary statement. . (d) Contech Transport Service (P) ltd Ors V/s ACIT (2009) 19 DTR 191 (Mumbai) 28-11-08 No addition can be made only on the basis of admission in statement V/s 132 (4) (e) Chitra Devi V/s ACIT (Jodhpur Branch) (2002) 77 TTJ (Jd) 640 Statements recorded during search are not evidences found during search. Addition cannot be made on the basis of statement alone. (f) Ajit Chintaman Karve V/s I.T.O. (2009) 311 ITR (AT) 66 (Puna) ITAT Branch That merely because an offer was made having no cogent basis or approval of law that should not stop a taxpayer from correcting his mistake. It was the duly of the A.O. to tax only the legitimate amount from a taxpayer. 2.11 As regards the GP rate application on regular turnover, hat the assessee is maintaining all the books of accounts including cash book, bank books, journal book, Ledger, bills voucher and stock register along with their supporting as prescribed U/s 44AA of the Income Tax Act, 1961. The books of accounts are maintained on mercantile system of accounting. The books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Assessing Officer is wrong in observing that no stock register was maintained. The assessee has maintained quantitative details of stock, which was also produced. When quantitative details have been maintained, no incriminating material was found and no serious defect are pointed out ld. AO was not justified in reviewing the trading result and estimate the regular GP which was already subject matter of appeals. The defects pointed out by the Learned Assessing Officer are superficial and have no significance on profit earning. In the absence of specific defect there was no justification with the Learned Assessing Officer for rejecting the books of accounts. The provisions of section 145(3) have therefore been wrongly invoked. 2.13 It is further contended that rejection of accounts is no ground for application of higher GP without any basis as rejection of books does not give a license for making presumptive trading addition unless something specific is pointed out. The Learned Assessing Officer neither pointed out any serious defect in the books of accounts nor any comparable case for applying GP rate of 35%. Reliance is placed on the following case laws: I. S. Sarabhaiah Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in the knowledge of ld. AO, assessee cannot guide him in adopting a particular provision as neither it is under obligation to do so, nor the AO will comply with assessee s guidance. Therefore, it was the statutory duty of ld. AO to adopt proper legal provisions. His onus of choosing appropriate legal provisions for initiation, continuation and concluding of assessments cannot be shifted on assessee. Besides if the proceedings are conducted on wrong jurisdictional premise, they are untenable and void proceedings, as held by catena of judicial proceedings. In the name of search proceedings AO cannot review his own orders when no incriminating material qua the assessee s regular books is found as there was no search on assessee. Qua unaccounted turnover when on the basis of incriminating material itself, accounts are prepared and profits are determined, it cannot be summarily discarded and additions made on wrong comparison based on gross presumptions. 2.17 Apropos surrender, assessee has cited various case laws to the effect that an unverified surrender can be amended based on cogent material. It has been duly discharged by the assessee and the cogent evidence has not been cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of material found in the locker. No adverse comments have been offered by ld. AO in this behalf. Regarding comparatively lesser GP from unaccounted business than regular business assessee offered proper reasons which have not been even considered by AO. The GP has been enhanced not based on any objective considerations but by summarily relying on estimated GP of regular business. In our considered view the incriminating material should considered in totality and when assessee has submitted copious accounts for incriminating material it cannot be discarded summarily as done by ld. AO. Since there is no rebuttal in respects of accounts of unaccounted income furnished by the assessee, the profits declared deserve to be accepted in given facts and circumstances. Similarly it is not disputed that value of stock of jewelry found from locker was taken by ld. AO on market price whereas as per settled accounting principles sme should have been valued at cost. Consequently valuation adopted by assessee is to be adopted. Thus the additions in question deserve to be deleted on merits also. 3.0 In the result appeals filed by assessee are allowed and that of revenue are dismissed. Order p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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