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Shri Roshanlal Soni C/o Roshanlal & Sons (Jewelers) Versus DCIT, Circle-2, Alwar

Sale of gold and silver ornaments - G.P. determination - Held that:- 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 est .....

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me set of documents namely the Katuria note book as well as Annex. A -12 to A-17 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 .....

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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 ₹ 36,13,140 during AY 2002-2003 relates to stock accumulated out of income earned from sale/purchase of gold and job work charges of ₹ 26,50,000, cash found during survey of ₹ 63,140, investment in house of .....

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f ₹ 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 .....

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For The Revenue : Shri G.R. Pareek (JCIT) ORDER PER SHRI VIKRAM SINGH YADAV, A.M. These are connected five appeals pertaining to A.Y. 2002-03 & A.Y. 1998-99 to A.Y. 2001-02 filed by the assessee against the order of Ld. CIT(A) Alwar dated 20.04.2011 for AY 2002-03 and dated 20.05.2011 for A.Y. 1998-99 to 2001-02 which were heard together and disposed off by this common order. First, we take up appeal for AY 2002-03 wherein the assessee has taken following grounds of appeal: A.Y. 2002-03 (1) .....

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ief 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 .....

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8377; 26,450/-. The assessee had shown 13.11% GP in the return. The assessee had not submitted any past figures of preceding years which favour of the assessee. Therefore, addition is confirmed. The appeal on this ground is dismissed. 2.2 The ld. AR submitted that firstly, he strongly rely upon the written submissions filed before the ld. CIT(A) wherein it was submitted as under: 1. Invalid application of Sec.145: At the outset we may submit that the ld. AO wrongly invoked Sec.145 on the facts a .....

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ses in the ledger also. However the precise detail with regard to house No. etc. may not be available in rural area and is practically difficult. Secondly, the another objection of the AO is also baseless in as much as the appellant has already been charging separately for the making of the ornaments as making charges. This being a part of the trading account already stands included in the gross profit declared. The A.O has merely proceeded on a suspicion presumptions and assumptions. He never c .....

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aj), wherein it has been held that mere rejection of books of accounts need not necessarily lead to additions to the returned income. It was also held that the books of account, together with past history of the case 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 .....

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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 case. Hence, the trading addition of ₹ 56,223 is deleted and the ground of the assesse .....

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ers, the outstanding of debtors for the same period were worked out at ₹ 1,07,316/- , totaling to ₹ 5,52,740/-. The AO alleged that this is in addition to the amount of ₹ 3,06,080/- declared by the assessee in return of income on the basis of loose papers found at the time of survey. Further, as there was no information regarding the rate of interest etc. on debtors, the AO calculated interest @ 20% on debtors of earlier years of ₹ 15,48,142/- which came to ₹ 3,09,6 .....

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f the assessee and case relied upon which are not squarely applicable on the assessee. It is found that the copy of account in the Journal register dated 10.08.2001 has been given to the assessee along with the letter dated 20.02.2005 for verification of Udhari account. The assessee had disclosed ₹ 3 lac on account of these outstanding debtors. The diary Katuria note book annexure A-9 is containing 35 written pages. The AO asked the assessee to give the narration pertaining to year under c .....

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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 .....

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as not contra-verted the findings of the AO. Therefore, the addition of ₹ 5,52,740/- is confirmed 3.2 The ld. AR of the assessee submitted that firstly, he strongly rely upon the written submissions filed before the ld. CIT(A). It was further submitted that it was a case of double addition. In this regard, it was submitted that the AO started his computation of total income based on the income declared of ₹ 30,45,945/- in the ROI filed on dt. 31.03.2003 as admitted by AO at pg 1 pr 1 .....

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income so surrendered is available at pg 2 of the AO which shows trade debtors outstanding, surrendered at ₹ 3,00,000/-. Therefore, mathematically speaking the addition of ₹ 5,52,740/- made on account of the outstanding debtors, is a double addition of the same income atleast to the extent of ₹ 4,00,000/-, as aforesaid. Though this contention was taken before the CIT(A) in the written submission filed and also stated at pg 4 of the CIT(A) order yet however, he did not specifica .....

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/-, for the detailed reasons submitted in separate written submission dated 11.03.2016 for other years. 3.4 The ld. AR of the assessee further submitted that the AO in all the years while making addition of outstanding debtors alleged that this was admitted by appellant in his statement recorded on 10.08.01. However, we may submit that these statements were recorded during the course of survey and the possibility of the existence of tensed and surcharged atmosphere in the case of search cannot b .....

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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 .....

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wer authorities. 3.7 We have heard the rival contentions and perused the material available on record. It is noted that the addition of ₹ 5,52,740/- on account of outstanding debtors has been made by the AO based on examination of diary Katuria Note Book (Annex. A-9) as well as loose papers marked as Annex. 12 to 17. In the return of income filed by the assessee subsequent to the survey proceedings, the assessee has declared a sum of ₹ 3,06,080/- in its return of income towards outst .....

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y. 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 .....

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/-. 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 .....

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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 there. An allegation remains a mere allegation unless proved. Suspicion cannot take the place of reality is a settled principles as held kindly refer Dhakeshwari cotton Mills 26 ITR 775 (SC). 4.2 The ld AR further submitted that it is a settled law that a businessman is the best judge to take care of its own interest &am .....

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ave heard the rival contentions and perused the material available on record. The addition of ₹ 2,000/-confirmed by the ld, CIT(A) is purely on adhoc basis hence the same is deleted. 5. Now we will take the appeal for A.Y. 1998-99 to 2001-02 wherein the assessee has taken the following sole ground which is consolidated for the all the years and read as under: The ld. AO has erred in making addition of ₹ 27,794/- in AY 1998-99, ₹ 1,10,810/ in A.Y. 1999-2000, ₹ 4,61,715/- i .....

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80/JP/2011 Rs.3,18,872/- Total (A) Rs.9,19,191/- 5.2 The ld AR submitted that the assessee had already surrendered undisclosed investment 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 unaccount .....

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use 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, the recoveries from the Outstanding debtors stood invested/converted into unexplained investment totalling to ₹ 36,13,140/- which, admittedly has already b .....

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ecoveries made from the debtors is also evident from the confirmations from the various debtors, wherein they (customers) have stated that they got the ornaments manufactured from the assessee, mentioning the amount thereof and that the payment thereof has been made within a maximum period of two months from the date of such purchase/making. From this, it is clear that within the maximum period of two months, the recoveries of outstanding sales were made. Based on the different Annexures showing .....

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Kalyan P 10 PB 115 118 6. Ratanlal P 6 PB 124 127 7. Jagdish Prasad P 6 PB 124 129 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 .....

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d 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 debtors disclosed at ₹ 4 Lac this year and those assessed in earlier years and that each year is a separate year. The ld. CIT(A) however, completely ignored the settled proposition of giving the benefit of set off of the tangible addition made in the past, towards the unexplained assets in later years. 5.5 The ld AR further submitted tha .....

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issions and factual legal & position. Hence, no addition should have been made or alternatively, the other part of the statements (as above) 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. 5.6 The ld AR further submitted that the allegation of the ld. CIT(A) th .....

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ring the settled law of fair estimation. 5.7 The ld AR further submitted that a similar situation i.e. claiming of the unexplained expenditure out of the unexplained income (arising out of the undisclosed sales based on these very papers), arose in A.Y.2002-03 where the AO at pages 1 & 2 noted that the assessee made surrender of ₹ 1 Lac on account of education expenses of her daughter Kumari Pooja. The AO reproducing Q. Ans no.4 accordingly, made the addition of ₹ 1 Lac u/s 69C. .....

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/-. 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 .....

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statement and 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 invest .....

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tated that they got the ornaments manufactured from the assessee, mentioning the amount thereof and that the payment thereof has been made within a maximum period of two months from the date of such purchase/making. The ld AR further submitted that the AO in all the years while making addition of outstanding debtors alleged that this was admitted by appellant in his statement recorded on 10.08.2001. At the same time, the other part of the statements where the assessee has repeatedly submitted th .....

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amount represented by that addition constitutes the undisclosed income of the assessee. That income, although commonly described as 'intangible', is as much 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, .....

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ar. 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 profits or they are reasonably explained by reference to concealed income earned in that very year. In each case, the true nature of the cas .....

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ceipt of undisclosed income earned during the assessment year under consideration. It is open in to the revenue to rely on all the circumstances pointing to that conclusion. 5.12 The Hon ble Rajasthan High in case of Tyaryamal Bal Chand (supra) has held as under: It is clear from the law discussed above, that the ITO was within his right to tax the amount of ₹ 16,950 as income from undisclosed sources. Even though he had added the amount of ₹ 18,117 in addition to the profit shown by .....

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tharam Veerasinghaiah & Co. (supra), their Lordships of the Supreme Court have held that the additions made to the book profits in earlier years are the real income and can be treated as available for use in subsequent years or even in the same year. 5.13 In the instant case, the surrender of ₹ 36,13,140 during AY 2002-2003 relates to stock accumulated out of income earned from sale/purchase of gold and job work charges of ₹ 26,50,000, cash found during survey of ₹ 63,140, .....

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