TMI Blog2020 (2) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ding results of the assessee s business were already subject matter of appeals, there was no search on his show room, and therefore, no incriminating material was found. By estimating the GP from regular business ld AO has reviewed settled position without any incriminating material in this behalf, which is not permissible in search assessments. In view thereof we delete the additions made in respect of estimation of GP from regular business. Apropos the income declared from unaccounted business it has not been disputed that assessee filed complete record of year wise and transaction wise accounts of material found in the locker. No adverse comments have been offered by ld. AO in this behalf. Regarding comparatively lesser GP from unaccounted business than regular business assessee offered proper reasons which have not been even considered by AO. The GP has been enhanced not based on any objective considerations but by summarily relying on estimated GP of regular business. In our considered view the incriminating material should be considered in totality and when assessee has submitted copious accounts for incriminating material it cannot be discarded summarily as done by ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound No. 2 for AY 2008-09 and 2009-10 1. Under the facts and circumstances of the case the Learned CIT(A) has erred in sustaining the addition of ₹ 15,63,530/- by applying GP rate of 30.36% as against 15.55% for AY 2008-09 and addition of ₹ 1,09,37,185/- by applying GP rate of 33% as against 11.35% for AY 2009-10 declared by the assessee for unaccounted sales based on the P L account which is not controverted. 1. Revenue's Grounds for AY 2008-09 On the facts and in the circumstances of the case, the Learned CIT(A), Ajmer has erred in deleting trading addition of ₹ 21,68,172/- despite the fact that rejection of books of account has been upheld and ignoring the fact that on unaccounted sales, G.P. rate has to be higher because of evasion of local taxes and other cesses. 2.1 Brief facts are - a search was conducted on 08-09-2009 in Bank locker no. 1004 standing in the name of one Shri Govind Dev/Shri Ram, which was owned by Shri Radha Mohan Agarwal (director) as belonging to assesee company. Consequently, notice u/s 153A was accordingly issued by the Deputy Commissioner of Income Tax, Central Circle 3. During the pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate Safe Deposit Vaults were identified which were suspected to be belonging to this group. The warrant was issued in the name of locker owners i.e. Shri Govind Dev and Shri Ram, 26, Bani Park, Jaipur on the basis of address available with the vault operator. The D.D. Modi Group disownered these lockers. The following assets were seized from the locker as per panchnama prepared during search Sr.No. Assets seized Seized/Impounded documents 1000 $ (USA Dollars) jewellery ₹ 93,63,209 1. Annexure AS-1 Exhibit 1 to 42 Statement of Ms. Usha Rani was recorded u/s 132(4) of the Income Tax Act, 1961. In the statement she admitted the locker was in the name of Shri Govind Dev and Shri Ram 26, Bani Park, Jaipur. Since the original search was initiated in the name of above named persons, the proceeding u/s 153A of the Income Tax Act, 1961 were also initiated in their name. Notice u/s 153A of the Income Tax Act, 1961 was issued to Sh. Govind Def and Shri Ram, 26, Bani Park, Jaipur which returned by postal authorities with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms laid down in this behalf. (vi) The proceedings are continued u/s 153C but the assessment is completed u/s 153A despite consciously dropping the notice u/s 153A. (vii) Assessment u/s 153A and 153C are totally different and mutually exclusive, an assessment cannot be framed in continuation of both notices and similarly cannot be concluded u/s 153A if proceedings are undertaken u/s 153C. The relevant provisions for section 153C pre-suppose existence of the person referred to in section 153A. In other words there has to be a person in whose hands action u/s 153A is taken. In the case of the assessee there is no existence of such person. No assessment has been completed u/s 153A in whose hands a satisfaction has been recorded for initiating proceedings u/s 153C in assessee s hands. Ld. AO has made a mess of the whole legal proceedings by issuing notice u/s 153C when already proceedings u/s 153A were in progress. In these circumstances the proceeding ostensibly taken u/s 153C and concluded u/s 153A are untenable, bad in law and in stark contravention of relevant provisions. and Therefore, the impugned assessments are vitiated by lack of proper jurisdiction and deser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of impugned assessment proceedings in order to determine the profits from unaccounted papers, assessee prepared complete accounts of sale, purchases, P L a/c and determined the unaccounted business. Same were produced and verified by ld. AO and no inconsistency or discrepancy is pointed out therein. Thus on the basis of papers and jewelry stock found in the locker year wise unaccounted profit earned by assessee was worked out as under and offered as income in search returns :- Financial Year Income declared 2006-07 21396 2007-08 1231754 2008-09 4391086 2009-10 1888254 7532490 It was further submitted that the unaccounted profits were found in the form of asset i.e. unaccounted jewelry stock found in the locker. The jewelry was also wrongly valued by ld. AO at market rate at ₹ 93,63,209/- whereas the same should have been valued at cost whose valuation was explained by the assessee at ₹ 75,32,490/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firstly on the ground that turnover is just the double. Secondly the assessee compromises in the profit in the unaccounted sales as the expenses on unaccounted sales are almost negligible and therefore at the end net profits are more. Reliance is placed on: (i) Abhishek Corporation Vs. Deputy Commissioner of Income Tax 63 TEJ 651 (Ahd) It was held that only net profit rate can be applied on unaccounted sales/receipts. (ii) Further in the case of Moolchand Kumawat sons Vs. DCIT Ajmer M.A. 93/JP/2008 out of ITSSA No. 24/JP/2005 dated 20.02.2009 Taxworld Vol. XLII page 241 the Hon ble ITAT Jaipur Bench Jaipur held as under (a) Sales do not represent the income of the assessee and only the profit thereupon can be taxed. (b) Same profit rate as disclosed by the assessee shall have to be applied on unrecorded sales. (iii) CIT vs. S.M. Omer (1993) 201 ITR 608 (iv) Income Tax Officer vs. Gurubachhan Singh J. Juneja (1995) 55 ITD 75 (Ahd. TM) 2.6 Ld. AO however, did not controvert the books results of unaccounted business however by an ad hoc and summary approach mechanically adopted the GP rate of regular business as GP of unacco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Assistant Commissioner of Income Tax (1999) 64 TTJ 259 (All) 2.9 It is further submitted that following judicial precedents have held that incriminating material should be applied in totality and not on piece meal basis to favor the revenue, the seized evidence is to be accepted in totality in the interest of natural justice. The concept of Heads I win and tails you lose is alien to the principles of income tax law. (i) CIT vs. Indio Airways Pvt Ltd (2012) 79 DTR 289 (Del) (ii) Vivek Kumar Kathotia vs. DCIT (2013) 142 ITD 394 (Kol. Trib) (iii) Kanti Lal Brothers vs. Assistant Commissioner of Income Tax 52 ITD 412 (Pune) 2.10 Apropos the estimation of GP declared in regular books, ld. Counsel further contends that the book results have been examined in past making some additions, which on appeals have become final. No incriminating material is found as there was no search on assessee. However ld. AO again reviewed concluded book results and made GP additions qua the regular books. Thus without any defects in the regular books of accounts GP rate have been re disturbed. The action of the Learned Assessing Officer in applying GP rate of 35% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made only on the basis of admission in statement V/s 132 (4) (e) Chitra Devi V/s ACIT (Jodhpur Branch) (2002) 77 TTJ (Jd) 640 Statements recorded during search are not evidences found during search. Addition cannot be made on the basis of statement alone. (f) Ajit Chintaman Karve V/s I.T.O. (2009) 311 ITR (AT) 66 (Puna) ITAT Branch . That merely because an offer was made having no cogent basis or approval of law that should not stop a taxpayer from correcting his mistake. It was the duly of the A.O. to tax only the legitimate amount from a taxpayer. 2.11 As regards the GP rate application on regular turnover, hat the assessee is maintaining all the books of accounts including cash book, bank books, journal book, Ledger, bills voucher and stock register along with their supporting as prescribed U/s 44AA of the Income Tax Act, 1961. The books of accounts are maintained on mercantile system of accounting. The books of accounts are audited. The auditors have not made any adverse remarks regarding the maintenance of the books of accounts. The trading results of the assessee are reflected in the following table A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso produced. When quantitative details have been maintained, no incriminating material was found and no serious defect are pointed out ld. AO was not justified in reviewing the trading result and estimate the regular GP which was already subject matter of appeals. The defects pointed out by the Learned Assessing Officer are superficial and have no significance on profit earning. In the absence of specific defect there was no justification with the Learned Assessing Officer for rejecting the books of accounts. The provisions of section 145(3) have therefore been wrongly invoked. 2.13 It is further contended that r ejection of accounts is no ground for application of higher GP without any basis as rejection of books does not give a license for making presumptive trading addition unless something specific is pointed out. The Learned Assessing Officer neither pointed out any serious defect in the books of accounts nor any comparable case for applying GP rate of 35%. Reliance is placed on the following case laws: I. S. Sarabhaiah Setty Sons V. CIT[1967] 64 ITR 175 (AP). Assessee must be given opportunity to rebut estimate. Where the ITO did not state the basis of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to do so, nor the AO will comply with assessee s guidance. Therefore, it was the statutory duty of ld. AO to adopt proper legal provisions. His onus of choosing appropriate legal provisions for initiation, continuation and concluding of assessments cannot be shifted on assessee. Besides if the proceedings are conducted on wrong jurisdictional premise, they are untenable and void proceedings, as held by catena of judicial proceedings. In the name of search proceedings AO cannot review his own orders when no incriminating material qua the assessee s regular books is found as there was no search on assessee. Qua unaccounted turnover when on the basis of incriminating material itself, accounts are prepared and profits are determined, it cannot be summarily discarded and additions made on wrong comparison based on gross presumptions. 2.17 Apropos surrender, assessee has cited various case laws to the effect that an unverified surrender can be amended based on cogent material. It has been duly discharged by the assessee and the cogent evidence has not been controverted at all by authorities below. In these circumstances the promissory estoppels is not applicable to assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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