TMI Blog2017 (10) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... has been worked out on the pro rata basis (58.50 %) of the sales entered in the books of accounts for this period. We do not find any error in the principle employed for working out the amount of suppressed sales for the period from April, 2003 to July, 2003. Working out of profit on suppressed sales - Held that:- In principle we are agreed that cost of goods should be reduced out of the sales while working out the profit. But in the instant case, during the course of survey proceedings no evidence was found that assessee incurred expenses on raw material etc. which were not entered in the books of accounts. Thus, it is evident that all the expenses towards the cost of goods, whose sales has not been recorded in the books of account, are already entered in the regular books of accounts. Once the expenses towards the suppressed sales are already entered in the regular books of accounts, such expenses are not required to be reduced out of the suppressed sales. If it is found that both the sales as well as cost of goods sold are not recorded in the books of accounts, then only, while computing the undisclosed profit, the cost of goods should be reduced out of the suppressed sales. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of apneal. 2. The ground raised by the assessee in the cross objection is as under: That on the facts and in the circumstances of the case and in law the learned CIT(Appeals) erred in sustaining the rejecting of the books of accounts and the additions to the profits without any cause. The same being superfluous and unnecessary must be quashed. 3. Briefly stated facts of the case are that the assessee is engaged in the business of manufacturing and sale of sweets and namkeens and retail trading of various confectionery items. A survey operations under section 133A of the Income Tax Act, 1961 (in short the Act ) was conducted at the shop of the assessee located at Sunder Nagar market, New Delhi on 04/09/2003. During the survey operation, a discrepancy in the sales figure for the month of August, 2003 was found by the survey team in the computer syst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of survey in the computer at ground floor, i.e., primary records, thus represented correct figures and taking the said figures amounting to ₹ 11,24,396/- and ₹ 26,20,765/- respectively, he worked out the ratio of material consumption to sales at 42.9%. Applying the said ratio to the total value of raw material ( i.e. ₹ 1,62,74,157/-) consumed by the assessee company during the year under consideration/-, the total sales for the year under consideration of the assessee were worked out by him at ₹ 3,79,35,098/- as against the total sales disclosed by the assessee in its books of accounts of ₹ 2,33,09,880/-. In the course of assessment proceeding, after considering the submission of the assessee, he took the ratio of raw material consumption to sales at 50% and worked out the sales of the company at ₹ 3,25,48,2014 as against the sales of ₹ 2,33,09,880/- as recorded in the books of accounts of the assessee and the difference of ₹ 92,38,434/-was added to the total income of the assessee on account of suppression of sales. 3.2 On further appeal, the Ld. CIT-(A) did not accept the basis of computing sale suppression by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 survey and accepted on behalf of the assessee company. It thus cannot be said that there was no basis for the ratio of raw material consumption to sales adopted by the AO. The ld. CIT(A) also held that the raw material consumption in respect of trading items in the case of the assessee company was on the higher side giving low W.P. rate and this aspect according to him was not taken into account by The AO. The working given by the AO as contained in the assessment order however clearly shows that the initial ratio of raw material consumption to sales adopted by him at 42.9% was increased by the AO to 50% for the purpose of final working in order to take care of the fact that the sales of the assessee company were comprising of trading items also wherein the gross profit was on the lower side than the manufacturing items. The learned CIT(A) also held that the consumption of packing m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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(A) on this issue and restored the matter to the file of the AO for deciding the same afresh on the basis of fresh working to be made after taking into consideration all the objections of the assessee company. We do so and allow this appeal of the Revenue as well C.O. of the assessee for statistical purposes. 3.4 In compliance to the direction of the Tribunal, the assessment proceedings were re-initiated and after detailed discussion on the various issues raised during the set aside assessment proceedings, the Assessing Officer finally made addition of ₹ 44,64,425/- as amount of sales suppressed by the assessee for the period from 01/04/2003 to 04/09/2003. The Assessing Officer held that during the course of survey no evidence indicating expenses incurred out of books of accounts was found which established that all the expenses corresponding to the suppressed sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. The grounds of cross objection of the assessee, is accordingly dismissed. 5. Now, we take up the grounds of Revenue wherein mainly the two issues are involved. The first issue is what should be the amount of sales suppressed in the case of the assessee. The second issue is whether the entire suppressed sale is profit in the hand of the assessee or profit of the suppressed sale should be computed applying the net or gross profit rate. 6. The learned Sr. DR vehemently argued that the director of the assessee company himself admitted during the survey proceeding that the discrepancy in the figures of sales for the month of August 2003 recorded in computer was a matter of fact only and he could not explain the discrepancy. The director of the company himself accepted to workout tax on the sales suppressed from 01/04/2003 till the date of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the suppressed sale is in respect of the amount of Rs.(44,64,425 - 9,67,911) = ₹ 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 04/09/2003 on 19/9/2003. 9. In the facts of the case, we find that the computer maintained at the shop was for issuing invoices, which was primary record of the sales of the assessee. It was admitted by the parties during hearing before us that in this computer, only sales for the month of August, 2003 was found. The Ld. Sr. DR contended before us that the sales figure of earlier month were already deleted and on admission of the director of the company that the company had suppressed sales from the beginning of the financial year to the date of survey, no further efforts were made to retrieve deleted records on the computer. She said that the survey proceedings were closed on the admission of the director to accept the suppressed sales and to pay the taxes thereon in three installments. Further, we find that subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the business as well as the nature of establishment and the method of billing followed by them remain the same in all these accounting years. 67. Under section 114(d) of the Indian Evidence Act, there is a presumption that a thing or state of things which has been shown to be in existence within a period shorter than that within which such things or state of things usually ceases to exist, is still in existence. 68. Now the question in this case is whether the presumption which arises u/s 114(d) runs retrospectively, i. e., a particular state of things found obtaining in the accounting year relevant to assessment year 1990-91 can be presumed to exist in back years also or retrospectively also is the question. In Woodroffe and Amirali's Law of Evidence, 14th Edition, 1980 in the comment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy 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 third Member in the case Overseas Chinese Cuisine Vs. ACIT (supra), the habit of suppressing the sales can be presumed to be existing in the period from April, 2003 to July, 2003 and which is a legitimate presumption drawn under the law. 12. In view of these facts and circumstances, we are of the opinion that that the assessee company was engaged in suppression of the sales during the period from April, 2003 to July, 2003 also. The suppression of sales amounting to ₹ 34,96,514/- for the month of April, 2003 to July, 2003 has been worked out on the pro rata basis (58.50 %) of the sales entered in the books of accounts for this period. We do not find any error in the principle employed for working out the amount of suppressed sales for the period from April, 2003 to July, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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