TMI Blog2008 (2) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... regularly and returns of income filed along with balance sheets and P L a/c. AO should have pointed out defects and recorded reasons as to why he was inclined to reject the books of account. In this case when there is no rejection of the books of account at all, we are of the opinion that the CIT(A) was in error in coming to the conclusion that impliedly the AO rejected the books of account. What the AO has done is took the income declared as per the return of income and added further the GP rate of 70.79 per cent on the estimated suppression of sale. This, in our considered opinion, is not correct. No material is brought on record to support such an action by the Revenue. Therefore, the assessment orders passed by the sales-tax authorities which record that the turnovers of the assessee are at a particular figure based on the verification of its books of account and in view of the lack of investigation or evidence to contradict the submissions of the assessee or the orders of another Government agency, we are inclined to agree with the arguments of the learned counsel for the assessee and delete the addition made in this regard. Thus the estimation of turnovers for both the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these data found for 5 days. 4. It is also to be noted that during the course of survey, one Shri Naresh S. Kanchan, who was managing the cash counter has confirmed that the day's sale on 11th/12th Feb., 2005 was in fact ₹ 39,134. The AO also states that on way of market enquiries and incognito visits to the business premises of assessee it has come to light that the gross profit earned by the assessee is very high. A chart of rates was also given in the assessment order. Thus the AO estimated the sales and profits for the impugned assessment year. 5. Aggrieved, the assessee carried the matter of estimation of income based on the record of 5 days sales for both the assessment years in appeal. The first appellate authority observed that at the time of survey, the survey party did not find the books of account, in the business premises of the assessee except some loose papers. Subsequent to the survey, Shri Satish P. Hegde was examined under s. 131 on 16th Feb., 2005 and 23rd Feb., 2005 and that in these positions Shri Hegde had refused to accept the proposition that the average sales be determined on the basis of sales figure of the day of survey and preceding five d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey, there was no material whatsoever to come to a conclusion that the books of account were not maintained at all. He vehemently contends that the books were audited by the auditors and the balance sheet and P L a/c filed with the Department along with the return of income tallied with the balances in the books of account. On the comment of the CIT(A) that no books of account have been produced before the first appellate authorities he submitted that the CIT(A) has never called for the books of account and that there is no evidence in this regard. Thus he filed the following additional grounds challenging these contentions : 1. On the facts and circumstances of the case learned CIT(A) erred in coming to the conclusion that the appellant firm had not maintained regular books of accounts and in any case, in holding that the AO was justified in not being satisfied with the correctness and completeness of the accounts of the appellant, if at all the same had been produced before him. 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in holding that the application of the provisions of s. 145(3) of the Act, even though made in implied mariner was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty after due examination of the books of account and other records, cannot be brushed aside and estimates made on pure guesswork based on the record of 5 days' sales. He filed written submissions in this regard. 10. Shri U. Anjaneyulu, the learned Departmental Representative controverted the submissions made by the assessee and submitted that no books of account were found at the premises of the restaurant during the course of survey and hence the theory that the assessee was maintaining books of account has to be rejected. He contends that this is a case of sales suppression and that during the survey evidence was found on the quantum of sale of that day and also the sale record of the previous 5 days. As per Shri Anjaneyulu this is sufficient evidence to prove that the assessee is in the habit of suppressing sales. Thus he justified the order of the Revenue authorities wherein the turnovers are extrapolated and estimate of sales for each of the assessment years involved arrived at. On the issue of the sales-tax authorities doing assessments based on the books of account, he submits that the information collected during the course of survey was not available to the sales-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bar and restaurant. The sales figures of the earlier 5 days' were also found. The claim of the assessee that the sales as found in the survey, were recorded in the books of account and accounted for is not contradicted either by the AO or by the first appellate authority. The learned Departmental Representative only submits that the books of account cannot be believed. No incriminating material whatsoever has been found during the course of survey. When the sales found during survey are truly recorded in the books of account, there is no other material to reject the books. No defects have been pointed out. There is no dispute in the methods of accounting. The whole basis for the addition is extrapolation of the sale figures of 5 days and that too without rejecting the books of account and arriving at sales figures right from 2001-02 to 2005-06 i.e. 5 years. Now the question is whether the AO could be right in estimating the sales and profits, based on the sales of 5 days recorded in the books of account and making an assessment without rejecting the books in question. In our considered opinion this is not legally correct. The AO should have pointed out defects and recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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