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TMI Blog2017 (10) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to substantiate the wrong done by the assessee and their G.P. etc. were on the basis of their regular books of account. 2 Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in ignoring the incriminating evidences gathered against the assessee during the survey operation and which authenticity has not been questioned by the assessee either during the assessment proceedings or appellate proceedings. 3. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in appreciating the fact that the assessee itself has accepted the total sales suppression of sales of Rs. 44.64.425/- from 1.4.2003 to 4.9.2003 and agreed to pay the tax in three installments. 4. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in ignoring the observation of the ITAT and defeated the very purpose of the restoring the matter back to the A.O. while holding again that the GP rate for the profit should be taken as 22% despite the fact that the A.O. worked out the enhancement of sales on the basis of the evidence gathered and applying very scientific method of ratio of raw material consumption to sales. 5. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 6,89,600/-. The case was selected for scrutiny. In scrutiny proceedings, the Assessing Officer observed that in the return of income filed, the monthly sales for the month of August, 2003 was shown by the assessee at a figure of Rs. 16,52,854/- and thus, the admitted sale suppression detected during the course of survey for the month of August, 2003 and for the period from April, 2003 to June, 2003 remain to be disclosed. The Assessing Officer noticed from the submission made on behalf of the assessee that all the expenses incurred by the assessee during the course of business including raw material etc. had already been claimed and nothing had remained unrecorded in the regular books of accounts. According to the Assessing Officer, the consumption of raw material is found recorded in the books of assessee for the month of August, 2003 and the actual sales made by the assessee in the said month as found during the course of survey in the computer at ground floor, i.e., primary records, thus represented correct figures and taking the said figures amounting to Rs. 11,24,396/- and Rs. 26,20,765/- respectively, he worked out the ratio of material consumption to sales at 42.9%. Appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dopted by him at 50% to the raw- material consumption as shown by the assessee company in its regular books of accounts. Accordingly, the actual sales of the assessee company for the year under consideration were determined by the AO and the difference between the said figure and the figure of sales as shown by the assessee company in its books of accounts was treated by him as the quantum of sales suppressed by the assessee company. This basis adopted by the AO to work out the quantum of sales suppressed by the assessee company was held to be unacceptable by the learned CIT(A) mainly relying on the submissions made on behalf of the assessee company during the course of appellate proceedings before him. First of all, he held that the ratio adopted by the AO of raw material consumption to sales was without any basis. He, however, appears to have overlooked the fact that the ratio of raw material consumption to sales initially adopted by the AO at 42.9% was taken on the basis of raw material consumption actually recorded by the assessee company in its books of accounts for the month of August, 2003 and the quantum of actual sales made in that month as found during the course of surve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w material consumption in case of specific sweets furnished by the assessee company for the first time before him without giving any opportunity to the AO to verify the same. He also held that the entire amount of suppressed sales could not be added in the hands of the assessee company and only the gross profit of such unaccounted sales could be added. He however ignored that nothing was found during the course of search to show that any consumption of raw material or other expenditure had remained unaccounted for by the assessee company. A perusal of the assessment order also shows that it was not even the case of the assessee company before the AO that any expenditure in relation to the suppressed sales was incurred outside the books of accounts. If at all such a case was sought to be made out by the assessee company before the learned CIT(A), the onus was on it to support and substantiate the same on evidence and the AO in that case should have been afforded an opportunity to verify the said evidence. As such considering all the facts of the case, we are of the view that it would be fair-and proper and in the interest of justice to set aside the impugned order of the learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceeding, it was also stated on behalf of the assessee that fact of nonmaintenance of stock register was mentioned in the tax audit report. The Ld. Sr. DR further submitted that the fact of suppression of the sales for the month of August, 2003 amounting to Rs. 9,67,911/- has been found in the computer records of the assessee and which has not even retracted by the assessee. According to the Ld. Sr. DR, these factual evidences were sufficient enough to reject the books of accounts of the assessee. 4.3 We have heard the rival submissions and perused the relevant material on record. We find that the Ld. CIT-(A) rejected the book result on the ground that the assessee was not able to give suitable explanation for difference in sales as the two computers found in its establishment. We also agree with the argument of the Ld. Sr. DR that in absence of day-to-day consumption register or stock register, the book results cannot be said reliable and same are liable to be rejected. 4.4 In our opinion, the finding of the learned CIT-(A) as far as the rejection of books of accounts is concerned, is well reasoned and we do not find any infirmity in the same and we uphold the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute and perused the relevant material on record. There is no dispute as far as discrepancy of sales of Rs. 9,67,911/- for the month of August, 2003. This discrepancy is evident in view of the figure of sales recorded in computer maintained at the shop and sales entered in books of accounts maintained in computer at first floor. The sale depicted in computer at shop was Rs. 26,02,765/- whereas the sales recorded in books of accounts was of Rs. 16,52,854/-. On the basis of this discrepancy, the survey party determined that 58.5% of the sales recorded in books of accounts represented suppressed sales. This ratio was applied on the sale of April to July, 2003 and on that basis suppressed sale of Rs. 44,64,425/- was worked out for the entire period from 01/04/2003 to the date of survey. Thus, the dispute in respect of the suppressed sale is in respect of the amount of Rs.(44,64,425 - 9,67,911) = Rs. 34,96,514/-. The assessee has contended that no discrepancy was found in sales for the month of April to July, 2003 nor any evidence was found with regard to any unrecorded sales for the months and the, director of the assessee company has already retracted his statement dated 04/09/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in the case of Overseas Chinese Cuisine Vs. Assistant Commissioner of Income-tax, reported in (1996) 56 ITD 67 (Mum.), held as under: "66. The assessee's Restaurant started in 1984 and assessment year 1986-87 is the first assessment year. Originally sales billing was made manually. Later in the middle of the accounting year, relevant to assessment year 1990-91, the computer billing was introduced. Even after computer billing was introduced side by side manual sale bills also were issued. Shri Nelson Wang was the Managing Director of the assessee company. From the beginning he had introduced systematic service of food articles to the customers as well as systematic billing system. It was never the case of the assessee that this system of either billing or receiving cash at the counter as per bills was ever changed during any of the accounting years relevant to these three assessment years under consideration. When the same system is being practised in all the three accounting years, the modus operandi adopted while manipulating bills even though found out while investigating the case for assessment year 1990-91 applies to back assessment years also since the nature of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to be existing or was found to be practised by the assessee in assessment year 1990-91, the same state of things can be found to be existing even in the earlier accounting years. That means the habit of manipulation of sale bills an be presumed to be existing even in assessment year 1988-89. Therefore, coupled with the fact that none of the sale bills were produced and none of the sales registers were also produced for assessment year 1988-89, a presumption can be drawn that the habit of manipulation of sale bills can be presumed to be existing even in assessment year 1988-89, can be stated to be a legitimate presumption which can be drawn under law." 11. In the instant case, suppression of the sales for the month of August 2003 has been established on the basis of discrepancy in the sales recorded in books of accounts and sales recorded in the computer at shop, which is used for billing i.e. primary record of sales. Thus, in view of suppression of the sales found in the month of August, 2003 on the basis of the primary records and not finding of the primary records of the sales for the period from April, 2003 to July, 2003 in the computer at shop, relying on decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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