TMI Blog2016 (9) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... found during the course of survey. Given that the AO has verified the entries and worked out the outstanding debtors for the year under consideration as well as for the previous years, we do not see a basis to hold that the surrender made by the assessee of ₹ 3,06,080/- is in addition to ₹ 5,52,740/- worked out by the AO. In light of that, we agree with the contentions of the ld. AR that there is double addition which has happened to the extent of ₹ 3,06,080/- hence we restrict the subject addition on account of outstanding debtors to the extent of Rs., 2,46,060/-. Addition towards outstanding debtors of ₹ 2,46,060 shall be covered by the unexplained assets surrendered and disclosed by the assessee amounting to ₹ 36,16,140/-. Hence, the same has to be telescoped and cannot be brought to tax separately. In light of that, we delete the whole of additions towards the outstanding trade debtors - Decided in favour of assessee. Addition of shop expenses - Held that:- The addition confirmed by the ld, CIT(A) is purely on adhoc basis hence the same is deleted. Undisclosed income in the shape of outstanding debts - Held that:- The surrender of ₹ 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading addition of ₹ 5,52,740/-on account of undisclosed income in the form of undisclosed debtors and CIT(A) has erred in confirming the same. (3) The ld. AO has erred in making trading addition of ₹ 5000/- on account of disallowance of expenses and CIT(A) has erred in restricting it ₹ 5000/-. 2. In respect of ground No.1, the brief facts of the case that the AO observed that the assessee had shown sale of gold and silver ornaments at ₹ 7,73,550/- giving GP rate @ 13.11%. He alleged that the purchases made from customers, are not verifiable and the ornaments were sold by charging rate of gold itself without deducting any amount for semi precious stones. The making charges were collected separately. Finally, the AO rejected the books result u/s 145(3) and estimated the sale at ₹ 8 lacs and also applied the GP rate @20%. The difference of ₹ 56,223/- was added to the income of the assessee. 2.1 In the first appeal, the ld. CIT(A) held as under: I have gone through the assessment order as well as submission of the assessee, it is found that during the course of survey various discrepancies were found in stock, in debtors, in sale and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also material collected by the AO will form the basis for making the additions. Even on merits there is no basis as to why the ld. AO should have enhanced the sale from ₹ 7.73 lacs to ₹ 8 lacs. There is no basis at all given by him. The entire additions therefore, may kindly be deleted in full. 2.4 The ld DR is heard who has relied on the order of lower authorities. 2.5 We have heard the rival contentions and perused the material available on record. The appellant has not taken any grounds before us relating to rejection of books of accounts under section 145(3) and hence, the contention of the ld AR regarding invalid application of section 145 cannot be accepted. Regarding estimation of sales at ₹ 8 lacs as against declared sales of ₹ 7.73 lacs by the assessee in its return of income, no basis or justification has been given by the AO. Further, the basis of estimation of G.P @ 20% as against declared G.P of 13.11% is also not clear from the assessment order. Inspite of the fact that the books of accounts have been rejected, the estimation of sales and G.P need to necessarily have some rational and reasonable basis which is absent in the instant ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.08.2001 at ₹ 4,45,424/- and worth ₹ 14,11,308/- for earlier year. Similar working of debtors on the basis of entries made loose vouchers was prepared for other annexure including A-12 to A-17 by the AO in which debtors were worked out ₹ 1,07,316/- for the year under consideration and ₹ 1,36,834/- for earlier years. The AO had verified the each and every items as assessee himself admitted and disclosed additional income on account of Udhari at ₹ 3 lac on 21.08.2001 u/s 131 of IT Act in presence of Advocate Shri A.K.Bansal. But full verification of these papers were made at the time of assessment by the AO with regular books of account as well as list of debtors disclosed by the assessee. I have also gone through the photocopy of the above loose papers and photocopy of the diary (Katuria note books) during the course of appellant proceeding which shows clearly debtors as when the assessee recovered the money from the debtors the assessee makes tick mark on it. It means the amount has been recovered and remaining entries are outstanding debtors. This matter was remanded back to the AO who has again give the opportunity to the assessee but the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of survey and the possibility of the existence of tensed and surcharged atmosphere in the case of search cannot be ruled out - kindly refer Jagdish Naraian Ratan Kumar 22 TW 209(JP). These statements therefore, are not at all reliable in view of the above submissions and factual legal position. It is submitted that the amount ₹ 5.52 lacs and similar additions made in other years, cannot be treated to be an income merely on the basis of these statement in absence of any direct cogent evidence. Therefore, no adverse inference should be taken from these statements. Alternatively, it was submitted that the other part of the statements where the assessee has repeatedly submitted that the unexplained assets already disclosed at ₹ 36,13,140/- came out of the recoveries from the outstanding debtors and the income there from, as detailed in our submission dt. 11.03.2016 for other years, must have been accepted. 3.5 The ld. AR of the assessee further submitted that the ld. AO silently accepted the surrender so made and was not at all able to lay his hands on any other corroborative cogent evidence to support this alleged admission by the appellant. No inquiry of any nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 36,16,140/-. Hence, the same has to be telescoped and cannot be brought to tax separately. In light of that, we delete the whole of additions towards the outstanding trade debtors. The ground No. 2 of the assessee is thus allowed. 4. Regarding ground no. 3, the brief facts of the case are that the AO observed that the assessee has claimed shop expenses ₹ 30,630/- which were not supported with original vouchers/receipts. The AO considered ₹ 5,000/- as personal nature. In the first appeal, the ld. CIT(A) held that The personal element in shop expenses can not be ruled out but addition appears to higher side. Therefore, I restrict this addition ₹ 3,000/-. The assessee gets relief of ₹ 2,000/-. 4.1 The ld. AR submitted that a bare reading of the order of lower authority shall reveal that in almost all the cases, the disallowances have been made on ad hoc basis, simply on mere suspicion, surmises and conjectures. No specific instance of any nature whatsoever has been given by the AO in the impugned order to support his contention with the documentary evidence that the expenditures were incurred for non-business purposes, element of personal user was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment made in the stock, cash, construction of the house and debtors totalling to ₹ 36,13,140/- (detailed at pg 11 of CIT(A) order). Shri Suresh Soni s/o the assessee in his statement recorded on 10.08.2001 i.e. the day of survey vide answer to Q. No. 13 14 has categorically stated that the investment in the construction of the house and in the unaccounted stock of gold and silver, was out of the undisclosed income of purchase and sales relating to M/s Roshan Lal Sons Jewelers, based on these loose papers. Shri Suresh Soni once again in his statement recorded u/s 131 on dated 21.08.2001 repeated the same. In answer to Q. No. 2 he stated that Ann. 8, 9 12-17 are related to the business M/s Roshan Lal Sons and the entries mentioned therein are the outstanding recoveries from unrecorded sales. The undisclosed investment in the house was the undisclosed business income. Whatever undisclosed income was generated out of the unrecorded sales was converted into cash and stock. At both the occasions, he stated the figure of the undisclosed stock of ₹ 26.05 Lacs and investment in the house at ₹ 5 Lacs and the other unexplained expenditure/asset also. Thus, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 129 8. Rameshwar Saini P 8 PB 124 128 Even assuming, the fact of recovery is not shown on these documents (impounded Annexure), yet however, when the AO has already made the additions of ₹ 9.91 Lacs, he was bound to have also given the benefit of telescoping/set off there against. The AO however, completely failed to rebut these factual contentions and to bring any contrary evidence thereto suggesting that the no recovery was made or recoveries so made stood invested/utilized elsewhere than in the undisclosed assets so surrendered. Therefore, only logical inference is that all the undisclosed income which has been added by the AO in the earlier years, totaling to ₹ 9,19,191/-, stood invested in various assets which have now been surrendered in the total amount of ₹ 36,13,140/-. 5.4 The ld AR further submitted that the submissions to this effect were made before the ld. CIT(A) under the head double taxation and he has discussed this aspect at page 12 of his order but denied the benefits saying that there is no direct relationship between the debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture was met out of the huge disclosure made by the assessee of ₹ 36,13,140/- hence, the addition should not be sustained because otherwise it amount to double taxation. Interestingly, the ld. CIT(A) vide para 4.3 page 2 deleted the addition observing that it is found that total withdrawal made by the assessee ₹ 1,48,500/- during the year. Besides this the assessee had also made disclosure of additional of ₹ 36,13,140/-. Therefore, the addition is no justified. However, there being similar legal factual situation in this ground, the ld. CIT(A) has contradicted his own finding. 5.8 The ld. AR further placed reliance on decisions in case of CIT vs. Tyaryamal Bal Chand (1987) 165 ITR 0453 (JP) and Eagle Seeds Biotech Ltd. vs. ACIT (2006) 102 TTJ 1065 5.9 The ld DR is heard who has relied upon the order of lower authorities. 5.10 We have heard the rival contentions and perused the material available on record. It is noted that Shri Suresh Soni son of the assessee in his statement recorded on 10.08.2001 i.e. the day of survey vide answer to Q. No. 13 14 has stated that the investment in the construction of the house and in the unaccounted stock of gol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of his real income as that disclosed by his account books. It has the same concrete existence. It could be available to the assessee as the book profits could be. There can be no escape from the proposition that the secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. But it is quite another thing to say that any part of that fund must necessarily be regarded as the source of unexplained expenditure incurred or of cash credits recorded during a subsequent assessment year. The mere availability of such a fund cannot, in all cases, imply that the assessee has not earned further secret profits during the relevant assessment year. Neither law nor human experience guarantees that an assessee who has been dishonest in one assessment year is bound to be honest in a subsequent assessment year. It is a matter for consideration by the taxing authority in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own statement, it has been mentioned that investments made in stock, cash found during survey, etc are out of the same business receipts and trade debtors. Nothing has been brought on record by the Revenue in terms of any tangible evidence to prove otherwise. The surrender of ₹ 36,13,140 and additions of trade debtors over all these years amounting to ₹ 9,19,191 have their origin in terms of statements recorded of Shri Suresh Soni, the assessee as well as same set of documents in terms of katuria note book and loose papers found during the course of survey which have to be read and considered in entirety and which prove that the quality of trade debtors in all these years and surrender of stock and cash and even investment in house is not different. In the entirety of facts and circumstances of the case, where the realisation from sales for the year and previous years have been invested in the stock of gold and house property and which have already been brought to tax as surrendered income, the same trade debtors cannot be brought to tax again in the hands of the assessee. In light of that and respectfully following the decisions of Hon ble Supreme Court in case of Ana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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