9911796707
TMI Blog2012 (11) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... f account in the same manner and same fashion as adopted from the year of inception of the appellant firm which is a well recognized method of accounting and also accepted by the department year after year, therefore both the lower authorities while framing and confirming the orders/additions ignored the principles of consistency, hence the addition/ disallowances made are confirmed and unwarranted. 3. That in any view of the matter order dated 28.12.2011 passed under Section 153A(b) of the Income Tax Act vide which income as determined at Rs. 24,27,32,281/- is at all not correct as the same is not based on any incriminating material found in the course of search but based on presumption and surmises and wrong inferences drawn by ignoring all the Seized annexures which includes subsidiary books though entries were co-related with each book, hence the two lower authorities are wrong in making and maintaining the addition. 4. That in any view of the matter the undisclosed income was not determined on the basis of any search material and the Assessing officer simply proceeded as if it is a normal assessment and not on the basis of any search material, therefore section 153A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the verification and even no finding was recorded in their orders, hence the addition is unjustified and illegal in facts and circumstances of the case. 9. That in any view of the matter after submission of two sets of voluminous paper books before the Commissioner of Income Tax (Appeal) which contain written submission and chart explaining details of the facts of all the columns of all the aforesaid annexures, based on which a remand report was also called from the assessing officer. Even before submitting the remand report the concerned Assessing Officer examined and verified all the annexure together at a time in presence of appellant on 23.07.2012 and he found that the entries of the annexures correlate with each other and he admitted this fact in his order sheet also but the learned Commissioner of Income Tax (Appeal) failed to consider the same and even failed to make any finding in this regard in his order, hence the addition is wrong and unwarranted. 10. That in any view of the matter allegation made by the assessing officer that the partners were indulged in potatoes business by twisting the facts of Annexure P-11 & P-13 IS absolutely wrong and the so called inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire concocted theory for making and confirming the addition is illegal and actions of the assessing officer as confirmed by the CIT(A) is also incorrect and unwarranted. 14. That in any view of the matter the alleged profit of Rs. 2,22,58,483/- as worked out by the assessing officer at page 6 & 7 of the assessment order is only an artificial and imaginary figure which has no value in the eyes of law specially when declared rental receipts from cold storage business have been accepted, therefore the two lower authorities were wrong in making and confirming the addition. 15. That in any view of the matter the learned Commissioner of Income Tax (Appeals) failed to give cognizance to the contents of the affidavit of the partner, past record of the appellant and failed to consider principle of consistency, disclosed rental receipts has been accepted year after year, no verification was done by the constituents kept their potatoes in cold storage, no discussion by the Commissioner of Income Tax (Appeals) on the explanation dated 22.08.2012, non consideration of paper book no. 2 hence the entire addition made and confirmed in first appeal is unwarranted. 16. That in any view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 filed by the assessee. 3. We have heard the ld. Representatives of both the parties, perused the findings of authorities below and considered the material on record. 4. Briefly, the facts of the case are that the assessee is a partnership firm engaged in cold storage business with its head office at Sahson. The branches of the assessee are M/s. Bhola Sheet Grah at Sahson and M/s. Kesarwani Sheetalaya at Soraon. Action u/s. 132(1) was taken on 27.08.2009 in group cases of Keserwani Zarda Bhandar, Sahson, Allahabad and its partners. The AO framed the assessment u/s. 153A vide order dated 28.12.2011 for assessment year under appeal, i.e., 2008- 09 and made several additions, which were challenged before the ld. CIT(A). The assessee raised the additional grounds of appeals as well as sought admission of additional evidences before the ld. CIT(A), which were admitted by the ld. CIT(A) for hearing of appeal. 5. Though several grounds have been raised in the appeal of the assessee, but mainly the assessee challenged two major additions on merits apart from disallowances of expenses. 6. The ld. Counsel for the assessee submitted that ground No. 1 & 2 of appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot maintained regular books of a/c in the shape of cash book, ledger etc. The search & seizure action did not result in recovering any books of a/c from the business premises of the firm or from the residential premises of the partners of the firm. The said regular books of a/c were not found even in the premises of Shri Sanjay Gupta, FCA whose places were covered u/s 133A of the I.T. Act. On the strength of above discussion, the A.O. has treated Rs. 37,30,710/- as bogus liability and has made the additions u/s 68 of the I.T. Act. 7.2 The assessee challenged the addition before the ld. CIT(A) and the submissions of the assessee are reproduced in the appellate order as under : "That the assessing officer has discussed the facts in para-3 of the assessment order. The manner and basis of making the addition is highly objectionable in so far as the loose paper marked as annexure A-3/1 page 107 is nothing but a rough, waste and dumb document hence liable to be discarded. The assessing officer while computing the income left this amount to included in the total assessed income of the appellant as he was satisfied with the explanation. That Sir, the first objection of the appellant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer is free to make any kind of allegation according to her own test. That the assessing officer vide notice dated 28.02.2011 u/s 142 (1) a query no. 06 was made which is reproduced as under : "No books of account of firm have been found and seized during the course of search/ survey operation of the group, in the absence of books of account you are required to justify the books result shown in the audit final account" That in compliance to the query no. 06 reply was given in following manner : That thus is the light of addition made above reply was given on the basis of query hence there is no justification to draw a different view. That in this case a search was conducted on 27.08.2009 and before the date of search income tax return for the assessment year in question was already on record of the department along with the audit report. Likewise advance tax was also paid earlier. From the date of search i.e. 27.08.2009 till the start of the assessment proceeding books of accounts were not required by the assessing officer though produced on various date. Sir our auditor appeared before the assessing officer from time to time alongwith books of accounts and other details. Dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86 as balance appearing in rough, dumb and waste document. The balance on such rough paper relates to different dates and so he deducted the said amount of Rs. 27,39,932.86 from the closing balance as per audit report as on 31.03.2008 and made addition to the extent of Rs. 37,30,732.00 (Rs. 64,70,642.65 - 27,39,932.00). For such artificial and irrelevant working the assessing officer stated in the order "It is established on the basis of above mentioned annexure that assessee has raised either bogus liability or unexplained cash introduced by partners by Rs. 37,30,732.00 and added to the income of assessee u/s 68 of Income Tax Act". In the above observation the word "either" is very important which suggests that the addition was made with negative mindset and is clear cut case of confusion in assessing officer's mind. Sir in the Income Tax Act or under principle of accountancy, comparison is to be made in uniform method and not in haphazard manner as done in the present case therefore the theory of artificial bogus liability as imagined and created by the assessing officer is unjustified, incorrect and highly objectionable. That for making the said addition the second step is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with seized books of accounts. Assessee was asked by the undersigned during the course of discussion on 25.07.2012 to verify the above paper with the books of accounts. But on 25.07.2012, an adjournment was sought for 26.07.2012 and on 26.07.2012, another adjournment was sought for 27.07.2012. On 27.07.2012 also no one attended nor written reply was filed. In the circumstances, I have no option but to justify the addition by my predecessor amounting to Rs. 37,30,710/-." 7.4 The assessee further filed his rejoinder to the remand report filed by the AO, which is reproduced in the appellate order as under : "(a) That with regard to para-9 C of the remand report, it is submitted that in the remand report the assessing officer has tried simply to cover the lapses for not verifying the facts. Annexure A-3/1 (page no. 107) is a single loose / rough paper only because some figures is annexure A-3/1 correlate with audit report but some figures of the rough notings which do not correlate with each other. In this connection a detailed explanation has already been furnished in the paper-book at page 14-23 filed before your good self and contents of the submission are true and real facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash in hand of all the three units from the audit balance sheet for F.Y. 2006- 2007 relevant to A.Y. 2007-2008 which is Rs. 12,37,518.06 and then deducted the cash balance as on 11.03.2008 and 03.03.2008 from Rs. 39,77,450.93 which comes to Rs. 27,39,932.86 (Rs. 39,77,450.92 - 12,37,518.06). In this way the closing cash balance as on 31.03.2008 at Rs. 64,70,642.65 of three units is being compared with Rs. 27,39,932.86 and by such working he added the difference of Rs. 37,30,732.00 (Rs. 64,70,642.65-27,39,932.06) which is totally incorrect and thus the entire working of assessing officer is against the principles of accountancy and done in haphazard manner. In this regard it is also necessary to mention here that only cash in hands of two units of the appellant firm should have been taken from the books of account for the purpose of correct and accurate comparison of cash in hand as per the referred document/ annexure but the assessing officer failed in doing so which is unjustified. (d) (1) That as per the audited balance sheet for F.Y. 2007-2008, the cash in hand as on 31.03.2008 for the two units under consideration is as under : Kesarwani Sheetalay, Sahson, Allahabad (Head Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waste and dumb document hence liable to be discarded. I do not agree with this submission of the appellant because the said loose paper was found from the premises of the assessee. The description of this particular loose paper pertains to the cash receipts and the cash expenditure of three branches of the assessee concern. There are definite figures, definite dates and definite mention of branches. There is also definite mention of cash deposit in the bank. With these definite descriptions how can the assessee deny the significance and the relevance of entries on the above loose sheets. There is no doubt about the fact that the entries pertain to the assessee. The presumption as envisaged u/s 132(4A) is not successfully rebutted by the assessee. Even if the papers are not in the hand writing of any particular person related to the assessee, the entries are very definite in nature. Moreover, as pointed out by the A.O. regular books of a/c were not found and seized from any of the concerned premises including the office premises of the Chartered Accountant who has audited balance sheet and the Profit & Loss a/c. The assessee also failed to turn up before the A.O. during the remand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. Act. Accordingly, the above grounds of appeal are dismissed. Though the A.O. has made the addition in the body of the assessment order, she has forgotten to add amount of Rs. 37,30,710/- in the computation of income. Vide order-sheet entry dated 31.07.2012, the A.Rs. were asked to show cause as to why amount of Rs. 37,30,710/- should not be added in the computation. As a matter of fact, this mistake was noticed during the course of appellate proceedings, the appellant has not objected to the addition of the above amount in case it is upheld by my decision. I, therefore, enhance the income of the assessee u/s 251(1)(a) r.w.s. 251(2) of the I.T. Act by Rs. 37,30,710/-." 8. The ld. Counsel for the assessee reiterated the submissions made before the ld. CIT(A) and submitted that the seized paper was seized from residence of Shri Sanjay Gupta, Chartered Accountant. The assessee is not author of the document and is also not signed by any of its partners. The Chartered Accountant is not examined at the time of search or at the assessment stage. The assessee maintained proper books of account for last 30 years and audited accounts have been prepared on the basis of the books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." 10.1 Before applying the above provision, it is necessary for the AO to record findings of fact that the assessee is found to be owner of anymoney and such money is not recorded in the books of account, if any, maintained by him for any source of income and the assessee offers no explanation about the nature and source of acquisition of money or explanation offered by him is not in the opinion of the AO satisfactory. In the present case, the cash in hand in the books of account was found to be more than the actual cash found during the course of search. Therefore, it is not a case where money is not recorded in the books of account of the assessee. The assessee maintained regular books of account i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. At the most, the authorities below could have presumed that the assessee has spent the difference of amount in question somewhere as per cash in hand as per books of account and lesser cash as per seized documents, but that would also not suffice to make addition under any of the above provisions because every person is at liberty to spend their own amount anywhere as per his choice because the assessee has not claimed any deduction in this case. Examining the case of the assessee from every possible angle, we find the addition of Rs. 37,30,710/- wholly unjustified. We, accordingly, set aside the orders of the authorities below and delete the addition of Rs. 37,30,710/-. These grounds of appeal of the assessee are accordingly allowed. 11. The other major addition challenged by the assessee is Rs. 23,31,28,321/-. The assessee denied to have engaged in the business of potatoes. It was stated that the recorded entries in the seized register marked A-1/7, A-2/9 Bhandaran, gate pass and exit records etc. were totally ignored by the AO. The AO did not try to ascertain the truth. The AO made the additions based on Annexure P-11 and P-13, i.e., Nikasan (outgoing) release register of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and marked as Annexure P-13 for the period 08.10.2007 to 30.11.2007 have the entries from SI No. 2743-3047. This register also does not bear the name and address of the persons from SI No.3048- 6292. 11.4 In reply to the notice issued by the A.O., the assessee had stated that as when the potato is released from the storage, rent receipts were issued to the potato owners and these receipts had complete details. The assessee has recorded the rent receipt on the basis of the above. It was also explained by the assessee that the names and addresses of the persons were not recorded due to rush for release of potato. Such details are available on the receipts issued to farmers/ parties. 11.5 The A.O. remarked that the modus operandi of the assessee is such that as when the potato is released from the storage, rent receipts are issued to the owners and complete details are mentioned in the receipt. The details in the books are recorded on the basis of rent receipt. Therefore, the A.O. stepped up her argument that the names and addresses of the persons were not recorded from certain serial no. to certain serial no. relating to different premises because the rent receipts were not issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition before the ld. CIT(A) and submissions of the assessee are reproduced in the appellate order as under : "That the Assessing Officer has discussed the facts in para 4 of the assessment order. The manner and approach as adopted by the assessing officer is highly unjustified, surprising and incorrect. For making the addition the colours which have been given by the assessing officer in respective para are far away from the true facts of the case with an only intention to mislead and confuse higher authorities/court and to create tax liability in wrong manner. According to the colourful invention of the assessing officer alleging that the partners of the firm during the year under consideration indulged in potato business through own Cold Storages by making an investment of Rs. 21,08,69,838/- in such business as per artificial working of the Assessing Officer and by making such alleged investment they earned alleged profit of Rs. 2,22,58,383/-. In this way according to the assessing officer there was alleged suppression of income of Rs. 23,21,28,321/-. (210869838 + 22258383) That the allegation and self made formulas about so called suppressed income as invented/ worked out as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constituent and Carbon Copy of the same is retained with us. Photo copies of some of the gate passes are enclosed herewith. (3) That after that Taul Parchi consisting of Sl. No. Date, Name & Address of the Constituents, no. of bags of potato and Weight of Potato brought by the constituents, lot no., chamber no. etc. is made and a copy of the Taul Parchi is also given to the constituent. Photo copies of some of the Taul Parchi are enclosed herewith. (4) That all these details are recorded in stock & rent register called as Bhandaran Nikasi Register also. The said register was found and seized by the Search Party in the course of search operation on 27.08.2009 and a panchanama was prepared at the premises of M/s Kesharwani Sheetalaya (Head Office) and Bhola Sheetagrah, Branch. Copy of which is enclosed herewith in which that register has been marked as Annexure-A-2/22, A-2/9 and A-1/1 to A-1/5 respectively. In the said registers complete detail, such as Gate Pass No., Taul Parchi details, No. of bags, Weight of potato, delivery date, receipt no., rent amount are mentioned and those registers are still lying with the department. In this regard, a query was also made vide letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the Cold Storage which have no names and address of the owners of potato be not treated as appellant's own potato. That in nutshell the only objection of the Assessing Officer is that Sl. No. 225 to 4268 in P/11 and Sl. No. 3048 to 6292 of P/13 do not bear names and addresses of the potato owners and only this fact has been adopted as a basis by the Assessing Officer to draw inference and allege that the partners indulged in potato business and as such made huge addition. But it is absolutely incorrect, as the assessing officer measurably failed to consider and understand full facts appearing in the said annexures i.e. Gate-pass number, Room/Chamber No., Taul Parchi No., Lot No., Nos. of Bags, Weight of Potato, Rent Amount only with a view to give a colour to her thought and formula for making huge addition by twisting the true facts. All columns of the annexure P-11 & P-13 at sl. No. 225 to 4268 and Sl. No. 3048 to 6292 respectively are duly filled in except name and addresses of farmers who stored their potatoes but the A.O. ignored all these fill up columns which are tallied with gate pass, Taul Parchi, rent receipt and bhandaran / nikasi register where every facts are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, arbitrary and without any basis or adverse material on record in any of the past and future years when no such inference drawn and additions made. That the most important fact that the said P-11 & P-13 were found from the premises of M/s Gupta Sanjay Associate and not from the premises of the appellant, therefore it was a seizure of documents from the office of our C.A. Sanjay Gupta No doubt the appellant confirmed that the annexures P-11, P-13 belongs to the appellant firm and which is a compilation of subsidiary books, such Gate- pass, Taul Parchi, Weight-slip, rent receipt register etc as mentioned above. That in this connection it is also necessary to mention here that the rent receipt figures Shown in aforesaid P-11 & P-13 has been duly shown/ entered in cash book and duly considered in the gross receipt as true and correct. There is no adverse finding in this regard and department has accepted the same gladly, meaning thereby that the books of accounts and receipts are accepted as true and correct and when rental receipts are considered as correct which are based on the same supported documents then there is no justification to say simply that because no names and address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is highly unjustified. The aforesaid fact were already brought to the knowledge of ADI also vide our letter dated 22.10.2009 in compliance to the query dated 19.10.2009. Copies of the same are enclosed at pages........ of the paper books. That Sir, for instance in most of the government departments while entering, a gate pass is made in which gate pass no. and name of party, purpose of visit etc. are mentioned and issued to the concerned person and while going out of the office if only gate pass no. was noted and scored out in register that does not mean that since name and address of out going person is not mentioned again therefore the said person is still in the office. The similar situation is there with the appellant in this case also simply because the assessing officer failed to understand and correlate all the facts mentioned in the aforesaid annexures P-11, P-13, A-2/22 & A-2/9 together at a time with judicious approach and open mind. That on the basis of the annexures A-2/22 & A-2/9 and P-11 & P- 13 a compilation has been prepared and is being filed herewith for your kind consideration and convenience to verify the submission and position explained above please be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith bhandaran / nikasi register also i.e. the above four registers which may kindly be verified at your end also. That Sir, it is a search assessment and chapter XIV-B of Income Tax Act' 61 deals with ascertainment of undisclosed income of the party for the block period with reference to the evidence unearthed during the search or information available which are relatable in such evidence but in the present case the documents mentioned above as P- 11 & P-13 and its columns which are in dispute duly tallied with regular books, therefore the said document under reference can not be called incriminating documents, so based upon the same addition made by the Assessing Officer is illegal. That in this connection it is also necessary to mention here that in said annexure P-11 & P-13 on various dates, the partners of the firm have put their signatures also in token of verification of the details of the respective columns and collected the rent receipt too and once the rent is tallied with the regular books then drawing any adverse view based on surmises and conjectures are unwarranted. That it is also a fact that the Assessing Officer failed to bring any person from whom the partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n surmises only . That further a notice under section 142(1) read with section 153A of the I.T. Act was issued and in the said notice a query was made (query no. 4) which is reproduced as under: "You are requested to submit that the inventories of opening stock and closing stock with vouchers in support of valuation of stock to justify the stock shown in the audited final account filed with the return of income. To furnish comparative purchases, sales and gross profit rate for the year under consideration and for last three years." That in compliance to query no. 4 a details explanations were furnish which is dated 01.07.2011 and reply to query no. 4 the explanation of the assessee is as under: That in compliance to query no. 5 our explanation given before the Assessing Officer is as under: That from the above two replies on the basis of query made by the assessing officer a specific reply as narrated above was given to the assessing officer that assessee never indulged / dealt trading activity in respect of potato business on the basis of explanation offered and considering the past records as well as nature of business no adverse view was taken by the assessing officer till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be deleted. That thus in the light of above submission it is further stated that even no enquiry was made by the assessing officer by calling any partner whether they are engaged in potato business and whether any purchase and sale of potatoes was made by them. This request is made with a background that in any earlier or subsequent assessment year such type of allegation was never made by the department especially when sufficient evidences exist on record that the firm kept/ stored potato of different constituents only on rent basis. Likewise the assessing officer while framing the assessment forgot the fact that search assessment is to be framed only on the basis of incrementing materials found during the course of the search and not on the basis of regular books and presumption/ wrong inferences as taken in the present case." 11.9 The Assessing Officer submitted his report which is reproduced in the appellate order as under : "With regard to addition of Rs. 23,31,28,321/-, it is submitted that after discussion with FCA, assessee was required to explain on following points vide order sheet entry dated 18.07.2012 fixing the date of compliance on 19.07.2012. i. Produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 780 - 1799 1797-799 5 01.10.2007 68,363 68,363 1800 - 1832 1817- 832 Close to 50 entries were test checked. In respect of previous hearing, the counsel has submitted few documents in order to explain on entries on page no. 47 of LP-1 seized from the residence of Sri Raj Kumar Kesarwani, the partner. The documents are - i. Litigation in Allahabad High Court between Jyoti Agarwal and ADJ and others pertaining to Narendra Cold Storage ii. Certificate from Allahabad Bank, Civil Lines, Allahabad to explain the entries at sl. No. 9 and sl. No.11 of above LP. One of the entries amounting to Rs. 75000/- does match with the certificate provided but the other entry is that of Rs. 1,00,000/- whereas the certificate pertains to Rs. 1,27,600/-. Further, because order of the consumer has not been produced, it is difficult to fully agree with the contention of the assessee . iii. Further, clarification are also needed on the issue of reconstitution of partnership deed of the firm on the death of any partner. All partnership deed ( duly certified) executed after death of any of the partner pertaining to the relevant assessment years may be produced. On perusal of one of the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- has been made in arbitrary manner. In the remand report the assessing officer has mainly put his all emphasis that the appellant failed to extend his co-operation in remand proceedings but his such allegation is only an attempt to justify his incorrect and unhealthy action and in this regard events of this proceedings are as under : EVENTS a) Hearing of the appeal before your goodself was fixed on 09.07.2012. b) On 09.07.2012 two separate sets of paper books were filed voluntarily one set for your good self and another for the assessing officer for comments and sending remand report. (copy of covering letter at page 85) c) On 12.07.2012 a notice for hearing of appeal was served fixing the date on 30.07.2012. (copy of notice at Page 84) d) On 15.07.2012 i.e 15 days before the hearing the appellant suo-motto moved an application through speed post before the Dy. C.I. T , Central Circle, Allahabad for verification of the facts on the basis of seized annexures as mentioned in the written submission also at page 77 to 83 of the paper books. e) On 18.07.2012 the appellant suo-moto/voluntarily appeared before the aforesaid Dy. C.I.T. Central Circle, Allahabad and discussed the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts it is further submitted that in the remand report at page-5 allegation made by the assessing officer that the compliance were not made is incorrect and it appears that the purpose of such allegation is nothing but to divert the mind of higher authorities. The appellant su-moto vide his letter sent on 15.07.2012 through speed post made a request to the assessing officer to verify the seized documents and thereafter on 18.07.2012, 23.07.2012 and 25.07.2012 the said documents were verified and examined by the assessing officer in the light of submission made in the paper books and found the same in order. Copies of the letters furnished before the assessing officer during the verification process are enclosed in the paper book. In this way the verification of the seized documents was started on the basis of appellant's written and verbal requests and not by the department nor any such notice was given by the assessing officer to that effect. Hence such allegation of non-compliance made by the assessing office is false and unjustice and therefore the same are liable to be withdrawn. 13 (iii) That at page-5 of the remand report other allegation of the assessing officer that point no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ype of khasara khautani is demanded from the constituents who store their potatoes then how we can do so? And if we demand such thing no body will come to us to store the potatoes and in this way the cold storage will come to stand still and ultimately it will cause loss to the revenue and unemployment also. d) That sir kindly consider that our receipt received from the constituents during the year, books entries, method of accounting and past record, are not in doubt, therefore querries as raised by the assessing officer are not appropriate nor suits to the nature of business activities. e) That regarding point no -2 that how much potatoes are produced in the land of partners, it is stated that already we have submitted that potatoes are produced in limited quantity only in ancestral land of the partner's for consumption of huge family members of this group and consumed in domestic use only and seeds for coming year. Moreover it is an agriculture produce/ agriculture income which in any way cannot be linked up with any other business. f) That regarding point no -3 about a loose paper found from the residential premises of Sri Raj Kumar, it is stated that in this respect our exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int no 1, 2 and 3 raised by the assessing officer were properly and fully explained by the appellant which even could not be perused by the assessing officer and therefore he made such uncalled for allegation, for the reason best known to him but the same is unfair and unjustice. 13 (vii) That in the remand report at page -5 another new issue was raised by the assessing officer about non execution of partnership deed due to death of Bhairo Nath Kesarwani on 29.10.2008 and at the time of putting the query, the assessing officer on his own arrived on a conclusion also that the firm should be assessed as "AOP". In this regard it is clarified that the partnership deed was duly been executed and the partnership firm is valid and the said issue as raised is of no relevance for the year under consideration. 13 (viii) That sir kindly consider that your good self called a remand report from the assessing officer in the light of our submissions/ details/ information in the form of two sets of paper books made in the light of assessment order dated 28.12.2011. Though on the initiative of the appellant the assessing officer verified the seized documents in connection with the additions of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e asked the assessee through order-sheet entry dated 18.07.2012 to comply with the following:- i. Produce Khasra and Khatauni of at least 50 farmers who had stored potatoes in your cold storage in support of holding of agricultural lands. ii. Please state as to how much potatoes are produced in land owned by the partners of the firm. Detail of consumption of potatoes may also please be explained. During the course of discussion, you have stated that potatoes which are produced are part of daily consumption. Please furnish the details of above consumption alongwith supporting evidence. iii. Justification of purchase of potatoes and storage as per seized paper found from residential premises of one of the partners Sri Raj Kumar Kesarwani may please be explained. The said seized paper cannot be a rough paper because some entries are reflected in the books. As has been stated by you that the entries in the seized papers and potatoes relates to M/s Narendra Cold Storage is not acceptable because Narendra cold storage was not in existence from the years relevant to the block period. The building of cold storage was not in existence and plotting of land was being executed, therefore qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mainly because (i) the letters only reiterate what the assessee had stated (ii) the possibility of the employees under the influence of the assessee cannot be ruled out. I, therefore, dismiss the grounds taken above." 12. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the addition has been made merely because the names and addresses of the parties/constituents are not recorded in the Exit Register. The AO in the remand report found the entries of assessee in Bhandaran and Nikasan registers tally with the exit register. Complete copies of Annexure P- 11 to P-13 of Bhandaran Nikasan register seized by the department as A-2/22, A- 2/9, A-1/1 to A-1/5 have been filed in the paper book and specimen of the same are filed in the written submissions at page 76 to 83. The ld. Counsel for the assessee by referring to these documents, submitted that all the entries of Exit Register which is the basis for making addition, tally with the Bhandaran and Nikasan Register. PB-87 is the remand report of the AO dated 23.07.2012 in which the AO after verifying the records of P-11 to P-13 and A-/, A-2/9, A-1/1 to A-1/5 found with the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, submitted that the entire addition is unjustified. 13. On the other hand, the ld. DR relied upon the orders of the authorities below and submitted that the assessee failed to explain the entries in receipt and dispatch registers. No names and addresses are mentioned in the register. Therefore, onus upon the assessee to explain the entries has not been discharged. From Annexure P-11 to P-13, the AO found that the assessee has made unaccounted investment in purchase of potatoes and also earned profit. The assessee did not produce complete details before the AO. The AO called for details at the remand proceedings, which were not filed. The principle of bailment would not be applicable in the case of the assessee and the findings of the authorities below lead to an inference that the stock belonged to the assessee only. 14. We have considered the rival submissions and the material on record. The ld. Counsel for the assessee, during the course of arguments, referred to U.P. Regulations of Cold Storage Act, 1976, which regulated the functioning of cold storages and extended to whole of Uttar Pradesh. The definition of cold storage has been provided as "Cold Storage" means an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd shall not be re-issued. Subject to agreement between the parties, the hirer may take partial delivery of the goods stored in a cold storage and in every such case, the licensee shall make necessary endorsement on the receipt and return it to the hirer. Section 20 provides licensee's lien over possession of goods in cold storage until the receipt thereof is surrendered and necessary charges are paid in accordance with section 19. Section 27 provides every licensee shall maintain account books and records in such form and manner as may be prescribed. Section 32 provides, every licensee shall issue in the form prescribed, a receipt for the agricultural produce stored in his cold storage. The above salient features / provisions in the U.P. Regulation of Cold Storages Act clearly specify the rights and duties of the licensee and hirer. The assessee claimed to have received rent from the hirer for storage of potatoes in its cold storage. Thus, the above Act clearly specified and highlighted that the licensee could run the business of cold storage on getting license from the State Government for the purpose of storage of agricultural produce and at the time of inward and delivery of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatoes to owners/constituents and copies retained by the assessee. Weight receipt (Taul Parchi) is issued with complete details of potatoes and the names of owners/constituents are filed in the paper book to support the above findings. Bhandaran and Nikasan Registers were also seized as A-2/22, A-2/9, A-1/1 to A- 1/5. These contain complete details of gate passes, Taul Parchi, number of bags, weight, delivery and rent etc. The same tally with the seized documents P-11 to P- 13, which is the only basis of the addition. At the remand proceedings, these documents were produced before the AO and the AO vide order sheet dated 23.07.2012 found the contention of the assessee to be correct and the receipt book and Taul Parchi support the contention of the assessee and the entries tally with the seized paper P-11 to P-13 and the AO on verification and test checking found the contention of the assessee to be correct. It would lead to irresistible conclusion that the assessee delivered back the same goods (potatoes) to their owners / constituents, who have stored their goods in the cold storage of the assessee, on surrender of rent receipts after expiry of storage period. It would also establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales or earning profit thereon. Since no violation of the Rules of Cold Storages Act has been brought on record and the assessee maintained mandatory rent receipts as per this Special Act, which is available on record, therefore, the authorities below should not have drawn adverse inference against the assessee. In the absence of any incriminating material or evidence against the assessee, we are of the view that the huge addition made against the assessee was merely based on presumption and assumptions of facts, which cannot take place of legal proof. No evidence of purchase, sales or unaccounted stock belonging to the assessee during the course of search or survey was found or established. Thus, the assessee has been able to prove that the assessee acted only as a bailee and earned rental income. Thus, the authorities below have acted against the assessee in haste in making substantive addition without any basis and without considering entire seized material. We, therefore, do not find any justification for the authorities below to make or confirm the addition of the aforesaid nature. We accordingly, set aside the orders of the authorities below and delete the addition of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce has been made prior to the block period and all vehicles were used for the purpose of business On the other hand, the ld. DR relied upon the orders of the authorities below. 18. On consideration of the rival submissions, we are of the view that the addition is excessive in nature. The assessee is a firm and running a cold storage at different branches Therefore, vehicles must have been used for the purpose of business. Nothing is specified in the order as to how the AO disallowed 20% of the expenses, but in absence of maintenance of any record or logbook of the vehicles, it could be inferred that the vehicles have been partly used for other than business purposes. Further, in preceding assessment year as per chart filed at PB- 115 prior to block period, no disallowance has been made under this head. Therefore, the addition appears to be excessive in nature We, accordingly, modify the orders of the authorities below and restrict the disallowance to 5% of the expenses on both these disallowances of expenses. The AO is directed to disallow 5% of expenses instead of 20%. These grounds of appeal of the assessee are partly allowed. 19. On ground No. 20 and 21, the assessee challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also mentioned in respect of each items in the books. Simply because valuation report was of a higher amount, books could not be said to be unreliable. The Tribunal was, therefore, justified in deleting the addition of Rs. 55,780/-." The assessee filed details of investment made in earlier years in the property at pages 116 of the paper book, which support the submissions of the assessee that investment has been made from the assessment year 2004-05 to 2010- 11. The assessee maintained proper books of account in past and it was only when no regular books of account were found during the course of survey, the AO inferred that the assessee did not maintain regular books of account, but with regard to shortage of cash on which addition of Rs. 37,30,710/- was made, the AO on perusal of the audit report relevant to assessment year under appeal took the figure of cash available with the assessee firm at Rs. 64,70,642/-. Thus, the AO acted on the audit report, which is prepared on the basis of the books of account maintained by the assessee. Thus, there were no reasons to discard the books of account merely because the same were not found during the course of survey. The AO should have ve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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