TMI Blog2019 (6) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and also for purchase of material - HELD THAT:- Such an addition cannot be sustained by invoking the provisions of section 68 which talks about any sum found during the books of accounts and in respect of which the assessee offers no explanation or the explanation so offered is not found satisfactory. In the instant case, there is no sum which is found credited in the books of accounts of the assessee and hence, on this ground itself, the assessee deserve the relief and the addition so made is hereby deleted. In view of the same, we have not dealt with other contentions so raised by the ld AR. In the result, the ground of appeal is allowed. Estimation of turnover - addition based on dairy found during the course of survey - HELD THAT:- AO basis the dairy found during the course of survey which has been owned up by the assessee has determined the undisclosed sales for the year amounting to ₹ 29,91,458 as against the reported turnover of ₹ 21,69,740 in the return of income. The matter relating to sales return are considered but not found established and hence, not acceptable. Therefore, the turnover is determined at ₹ 29,91,458 as against the figure of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not pressed. 4. In ground No. 2, the assessee has challenged the action of the Assessing officer in confirming the trading addition of ₹ 43,341/- after adopting the N.P. rate of 5% on an estimated sales of ₹ 25,00,000/-. 5. Briefly, the facts of the case are that during the course of assessment proceedings, the Assessing Officer, on the basis of the diary found during the course of survey which admittedly belongs to the assessee, considered the amount of ₹ 13,20,574/- to be undisclosed balance with debtors as on 31st March, 2004. He further observed that there must have been some cash sales also, and on adhoc basis, estimated the turnover at ₹ 30,00,000/- for the year, and applied 5% presumptive profit rate on the same resulting into a trading addition of ₹ 68,341/-. 6. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). It was contended before the Id. CIT(A) that the law gives relaxation to the assessee from maintenance of books of accounts. The diary was maintained by the assessee on memorandum basis and was not at all regularly and systematically maintained. It was fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an assessee engaged in retail trade in any goods or merchandise, a sum equal to five percent of the total turnover in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and gains of business or profession 9. In view of the above legal provision, it was submitted that the. AO is not given any authority to estimate the turnover. Since, Books of Accounts are not to be maintained, declared turnover cannot be rejected and replaced by the ld. AO s estimation. Needless to mention that even provisions of section 145(3) are not applicable, as no Books of Accounts are required to be maintained. Thus, lower authorities have erred in resorting to estimation of turnover. It was submitted that the Ld. CIT(A) for estimating the turnover has upheld the invoking of the provisions of section 145(3) which is not correct. 10. Without prejudice, it was further submitted that against the declared turnover of ₹ 13,82,346/-, ld. AO had estimated the turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of assessment proceedings submitted that there were no cash sales and all sales were credit sales. Ld. AO without bringing anything on record to substantiate the same, and without providing a basis made a general statement and estimated the sales on adhoc basis. 12. The ld DR is heard who has vehemently argued the matter and took us through the findings of the lower authorities which we have already noted above. 13. We have heard the rival contentions and perused the material available on record. The limited issue under consideration is what should be the turnover of the assessee for the year under consideration. The assessee has reported a turnover of ₹ 13,82,346 and the undisclosed balance with the debtors as on 31 March 2004 comes to ₹ 13,20,574 basis the diary found during the course of survey which has been owned up by the assessee. There is nothing on record to show that corresponding sales relating to the undisclosed balance with the debtors as on 31 March 2004 forms part of the reported turnover and thus, the same is clearly the undisclosed turnover of the assessee. Given that the Revenue is not in appeal, we are of the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enjoys the credit limits from the suppliers. Thus, the assessee also enjoys the credit period from his suppliers. Also, there is nothing on record to prove that the assessee purchases goods in cash whereas all evidences and circumstances substantiate that purchases were made in credit. During the assessment proceedings it was submitted that assessee is enjoying the credit from its suppliers and he allows to his customers a period less than the credit he enjoys. Thus, in assessee s business model, the requirement of capital was very meager. The meager capital required was accumulated over the years and therefore no additional capital is required for running the business. 19. Without prejudice to above, it is submitted that ld. CIT(A) has upheld the rejection of books. Once the books are rejected, no further addition can be made u/s 68. The issue is covered by the Hon ble Jurisdictional High Court in the case of CIT vs. G.K. Contractor [2009] 19 DTR 305 (Raj) wherein it was held as under: However, in our considered opinion, even if the assessee has failed to discharge his onus of proof in explaining the cash credits shown in the books of account as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading addition of ₹ 66,513/- (1,75,000- 1,08,487) after adopting the N.P. rate of 5% on an estimated sales of ₹ 35,00,000/-. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition amounting to ₹ 66,513/-. 3. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO regarding addition of a sum of ₹ 3,00,000/- u/s 68 of the IT Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of ₹ 3,00,000/-. 24. The ground no. 1 was not pressed during the course of hearing, hence the same is dismissed. 25. In ground no. 2, similar contentions have been raised by the ld AR as we have noted above in context of AY 2004-05. It was submitted that based on past history and average growth rate of 13%, the estimated turnover of the asssessee comes to ₹ 20,79,661 as against ₹ 35,00,000 estimated by the AO and which has been confirmed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have heard the rival contentions and pursued the material available on record. The AO basis the dairy found during the course of survey which has been owned up by the assessee has determined the undisclosed sales for the year amounting to ₹ 29,91,458 as against the reported turnover of ₹ 21,69,740 in the return of income. The matter relating to sales return are considered but not found established and hence, not acceptable. Therefore, the turnover is determined at ₹ 29,91,458 as against the figure of ₹ 35,00,000 sustained by the ld CIT(A). The assessee thus get s the consequent relief on profit determination on the turnover of ₹ 29,91,458 and the ground is thus partly allowed. 28. Regarding ground no. 3, both the parties fairly submitted that the facts and circumstances are exactly identical as in ITA No. 859/JP/2013. Therefore, our findings and directions contained in ITA No. 859/JP/2013 shall apply mutatis mutandis to this ground of appeal which is accordingly allowed. 29. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 26/10/2018. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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