TMI Blog2016 (5) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... t revenue Unexplained investment in land - Held that:- CIT(A) observed that the land was acquired by a different entity other than the assessee-firm. Also the statement of the Partner was not categorical that the assessee-firm had paid on behalf of the purchaser from unaccounted source; however, the statement recorded under section 131(1) of the Act referred to a figure of ₹ 70 lacs as affirmed by the Partner of the assessee-firm as the consideration and the books of account recorded a sum of ₹ 60.62 lacs. This was the basis for addition to the differential amount in the appropriate hand. Thus, CIT(A) correctly observed that the addition made in the hands of the assessee-firm was not justifiable and, if at all any addition should be made, it could be to the extent of the unexplained and not beyond. Further, he rightly held that the addition made in the A.Y.2009-10 was not the relevant year considering the transactions which pertained to the A.Y. 2006- 07. It was found possible such overlapping in case where the Managing Partners manages affairs of various entities and in such eases the Assessing Officer was duty bound to take appropriate action so that such unexplain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment order that the assessee had suppressed sales thereby in the assessee gained benefit. The survey was conducted in the month of September 2008 and how can the Assessing Officer assume that after September 2008 the assessee would pay salary & wages from outside the books of account. The Assessing Officer obviously has not rightly appreciated the submissions made by the assessee in this regard. As rightly observed by the CIT(A), the Assessing Officer completely ignored the basic records and audited books of accounts of the assessee submitted before him. His reliance on the statement has been the sole basis for such addition. In this circumstances, the Assessing Officer was not justified in making such addition and the same has been rightly deleted by the CIT(A). - Decided against revenue Unexplained expenditure - Held that:- The assessee has furnished the ledger account of TDS while crediting to these parties and also furnished proof of filing of TDS return incorporating these credits. On perusal of the same, the CIT(A) inferred that there was no reason to believe that the said transactions appeared in trial balance and the ledger accounts were not inclusive of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 9,05,074/- made by the A.O. on account of unaccounted expenditure. 3. The first issue is with regard to the addition of ₹ 2,72,78,269/- made by the Assessing Officer in respect of unaccounted profit. The Assessing Officer made this addition as undisclosed net profit with the following observations:- 10(a). During the course of survey, copy of trial balance/profit and loss account for the period of 1/4/2008 to 31/03/2009 was found reflecting the net profit of ₹ 2,88,20,686/- by the assessee firm. In said paper the correction/modification of figure of net profit is worked out which shows that there is a profit of the firm for the said period amounting to ₹ 15.42,417/-. This is clear cut concealing the income of net profit of the firm to the extent of ₹ 2,72,78,269/- for a period of 5 months of the financial year. This paper clearly shows that the actual profit earned by the assessee firm was ₹ 288,320,686/- but the net profit reduced to ₹ 15,42,417/-, which has resulted into unaccounted income earned by the assessee firm and not accounted in the books of the firm to the extent of ₹ 2,72,78,269/-. On this issue, the assessee was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or estimating the advance tax liability which was payable on 15.09.2008 (two days after the date of survey; thus, the pencil working in the paper was for the corresponding period of the earlier year. The CIT(A) has also perused the comparative statement of gross profit ratio supplied by the assessee for the current year and previous year and the substantive portion of the submissions made by the assessee is reproduced below for the sake of clarity:- i) The appellant worked out Advance tax Liability three days earlier to the date of survey. That Balance sheet relied by the learned Assessing Officer to make high pitch addition was not a final audited P L A/c and not for the whole year. The assessee is engaged in the business of Job work of fabrication, erection of structural steel at different cites spread all over India and therefore, updating the books of account take 2-3 months. The pencil figures were nothing but such adjustment as is needed in arriving at profit for that period to ascertain the advance tax liability by 15th September. The same has been explained to the learned Assessing Officer which he conveniently disregarded and wrongly held that profit as ₹ 272.78 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years as assessed to tax under section 143(3) of the Act and accepted by the Learned Assessing Officer, which establishes that during the year also these were no rejection of any purchase or expenses. viii) Further be noted that the Assessment is made on business profits ₹ 87,10,030 for the whole year accepting the sales at ₹ 12,15,05,030/- and considering various expenses. If the accounts for the period 01.04.2008 to 16.09.2008 are considered once and thereafter the accounts are accepted for whole period 01.04.2008 to 31.03.2009 engulfing the above referred period, it amounts to double taxation and hence otherwise also requires lo be disregarded. All the records, produced before the Learned Assessing Officer arc accepted and verified and hence, the accounts for the period 01.04.2008 to 31.03.2009 relevant to Assessment Year 2009-10 gets accepted and thus P L relied for the intermediary period needs to be disregarded. As a principle of natural justice, to avoid any duplication the Learned Assessing Officer ought to have disregarded this rough statement, which is otherwise properly explained above. 3.4 From the above, it is clear that the Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this issue, the confession of the partner of the assessee in the answer of question No.19 of the statement dated 16/9/2008 has become final, as there is no dispute, by the assessee firm as described above, the unaccounted cash payment of ₹ 21 lakh is unaccounted income of the assessee firm which is paid for the purchase of plot of land and the same is not shown in the books of the assessee firm and also in the return of income. In view of this, ₹ 21,00,000/- paid in cash by the assessee firm for the purchase of plot of land is added to the income of the assessee firm u/s 69 of the I.T. Act. 8.1 The appellant contended that the Assessing Officer has made an addition of ₹ 21,00,000 as unexplained income purely on the basis of statement under section 133A of the Act without having any corroborative evidence. The following submissions were made by the appellant during the course of hearing. 8.2 It may please be noted that the statement recorded under section 133 of the Act, was not supplied to the appellant. Since the appellant had no idea as to what was recorded by the Survey team, he could not retract immediately and hence retraction statement was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recorded under section 133A of the Act. I have purchased plot of land for Aditya Engineering during FY 2005-06, i.e. AY 2006-07 for ₹ 70 lacs, out of which ₹ 49 lacs have been paid through cheque and-balance amount oj'Rs. 21 lacs have been paid in cash out of books. . 8.5 Without going to the veracities of the amounts mentioned therein which will be logically explained as and when called for, we wish to furnish that the learned Assessing Officer failed to appreciate that the plot of land is belonging to other assessee other than whom scrutiny assessment he is doing and falls in other assessment year other than which he is assessing. In a fit of urgency, he swept every figure into income of the appellant and of the year of assessment just to arrive at a figure probably a target figure which was in his mind to assess the assessee. It may please be appreciated that assessment needs to be made of the real income and not at the whims and fancies of the officer who is conducting the assessment. The whole exercise will be nothing but an arbitrary act which the Income tax Act does not permit the officer to travel beyond his jurisdiction. The learned Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee-firm as the consideration and the books of account recorded a sum of ₹ 60.62 lacs. This was the basis for addition to the differential amount in the appropriate hand. Thus, CIT(A) observed that, considering the factum of the case, the addition made in the hands of the assessee-firm was not justifiable and, if at all any addition should be made, it could be to the extent of the unexplained and not beyond. Further, he rightly held that the addition made in the A.Y.2009-10 was not the relevant year considering the transactions which pertained to the A.Y. 2006- 07. It was found possible such overlapping in case where the Managing Partners manages affairs of various entities and in such eases the Assessing Officer was duty bound to take appropriate action so that such unexplained transactions do not escape the rigor of taxation. The CIT(A) in the concluding lines rightly observed that the Assessing Officer may take corrective measures legally to assess the admitted amount of ₹ 21 lacs paid from outside the books of account in the appropriate hand and in the relevant assessment year. These reasoned and factual findings of the CIT(A) need no interference from our side. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee and having considered the same, the CIT(A) granted relief to the assessee which has been opposed on behalf of the Revenue inter alia submitting that the CIT(A) has erred in deleting the addition of ₹ 18,00,000/- on account of unaccounted investment in purchase of cranes. On the other hand, ld. Authorized Representative supported the order of the CIT(A). 5.2 After going through the rival contentions and material on record, we find that the assessee placed on record the audited accounts of Pragati Crane Centre for FY 2005-06 and 2006-07 alongwith summary of crane purchases made during the FY 2006-07, relevant to AY 2007-08. It is also noticed that confirmation from the parties were also placed on record in relation to the purchases. Majority of the cranes were purchased on loan through finance company as per the records. As per CIT(A), for the proprietary concerns of Shri P.B. Haridas, i.e., M/s. Aditya Engineering and M/s. Deepti Engineering for the FY 2005-06 were also provided which established that there were no purchase of cranes in those entities. Further the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cranes. Thus, the order of the CIT(A) in this regard is upheld and Ground No.3 raised by the Revenue is accordingly dismissed. 6. Next issue is with regard to restricting the addition to the extent of ₹ 63,597/- as against the total addition of ₹ 14,83,789/- on account of unaccounted investment in stock. The Assessing Officer made this addition by observing as under:- 10(d) During the course of survey, the inventory of stock was taken which were worked out and the value of stock on the date of survey was of ₹ 22,38,770/-. This inventory of the stock was prepared and value of the stock was calculated in the presence of partner of the firm and which is duly acknowledged by the partner on the date of survey. It was also noticed that there was a stock of ₹ 754,972/- as per books of accounts as on the date of survey, the same facts are recorded in the statement taken on oath. The excess stock of ₹ 14,83,798/- was noticed and while recording the statement the same issue was asked to explained. The partner of the assessee could not explain the excess stock of ₹ 14,83,798/-. The partner has replied that I will explain the same tomorrow at your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of one of the copies of the profit and loss account found in the impounded documents. The assessee placed on record the last audited balance sheet showing the closing balance at ₹ 11,71,729/-. It was found that between the date of survey and the commencement of the financial year, there exists transactions of purchases, consumption and sale of the stock items which need to be taken into record while working out the stock level as on the date of survey. The Assessing Officer was not justified in neglecting the transactions in between the period and he even did not consider the difference between the stock found and opening stock as. unexplained investment in stock. The CIT(A) rightly observed that when the audited accounts were available, the right thing was to consider the figures as per audited records instead of impounded materials. However, as per the reconciliation of stock statement, the stock difference arrived at ₹ 63,597/- which was admitted by ld. Authorized Representative on behalf of the assessee. Hence, the CIT(A) has rightly directed the Assessing Officer to restrict the addition to the extent of differential amount, i.e., ₹ 63,597/- and res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.1 Matter was carried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee and having considered the same, the CIT(A) granted relief to the assessee which has been opposed on behalf of the Revenue inter alia submitting that the CIT(A) has erred in deleting the addition of ₹ 72,00,000/- made by the Assessing Officer on account of unaccounted expenditure of salary and wages. On the other hand, ld. Authorized Representative supported the order of the CIT(A). 7.2 We have heard the rival contentions and perused the material on record. In this case, the Assessing Officer observed that, as per the authorized officer for conducting the survey, the assessee had been paying salary and wages of ₹ 6.00 lakhs every month outside the books of account. This fact was accepted by the partner in his statement recorded during the survey. On that basis the Assessing Officer made addition of ₹ 72.00 lakhs for 12 months. The Assessing Officer has failed to corroborate this finding with any other evidence except the statement by the partner of the firm. In this regard, the stand of the assessee has been that the audited salary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in making such addition and the same has been rightly deleted by the CIT(A). Therefore, the order of the CIT(A) in this regard does not require any interference from our side. We uphold the same. 8. Next issue is with regard to the deletion of addition of ₹ 9,05,074/- as unexplained expenditure holding that out of three parties whose total outstanding amounted to ₹ 45,61,074/- appearing in the trial balance drawn as on 16.09.2008, only ₹ 36,56,000/- written back and shown as income. 8.1 Matter was carried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee and having considered the same, the CIT(A) granted relief to the assessee, which has been challenged on behalf of the Revenue inter alia submitting that the CIT(A) has erred in deleting the addition of ₹ 9,05,074/- made by the Assessing Officer on account of unaccounted expenditure. On the other hand, ld. Authorized Representative supported the order of the CIT(A). 8.2 After going through the rival contentions and material on record, we find that the assessee has placed on record the ledger accounts of the three parties namely (i) Jay Ganapa ..... 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