TMI Blog1999 (12) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee firm is engaged in dairy business having operations at Astha, Pune and Mumbai. The business of the assessee involves collection, processing and sale of milk and milk products like butter, ghee, chakka, shrikhand etc. There was a search action in the case of the assessee firm on 5.2.1997 during the course of which certain documents, registers, cash book etc. were seized. These included certain memo books and memo files. The Assessing Officer noted that material seized from Mumbai included memo-slips that apparently contained details of milk received and sold on a day to day basis. According to the Assessing Officer, cash generated through sales admittedly made at Mumbai and recorded in the seized memo-slips was being sent from Mumbai to Ashta sometimes through drivers of tankers by way of tapal rokh and sometimes through DD etc. The Assessing Officer found that total dispatch of sale proceeds from Mumbai to Ashta during the accounting year relevant to the assessment year 1996-97 came to ₹ 8,77,58,675/- as per the details given in para 3 of the Commissioner of Income-tax (Appeals)' order. As per the Assessing Officer against the above- said amount of ₹ 8,77,58,67 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputerized books on account of sales made at Mumbai. According to the Commissioner of Income-tax (Appeals), it if were so, certainly the Assessing Officer would have been justified in treating the difference as undisclosed income of the assessee, but the fact was that the proceeds of sale at Mumbai were lower in 'Thote Dairies Mumbai A/c' in comparison to that shown in the computerized books of account by ₹ 39,39,315/-. As per the Commissioner of Income-tax (Appeals), it was incumbent upon the Assessing Officer to show that the amount of ₹ 39,39,315/- was not part of assessee's turnover but represented undisclosed cash. The Commissioner of Income-tax (Appeals) further observed that since the unexplained cash deposit of ₹ 30,30,315/- has already been assessed to tax in regular assessment in the assessee's case by way of turnover disclosed in books of account, the Assessing Officer could not have treated the same as undisclosed income for the purpose of the block assessment. The Commissioner of Income-tax (Appeals) ultimately held that the amount of ₹ 39,39,315/- was wrongly taxed as assessee's undisclosed income as it was already included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax as such. 7. In appeal, the Commissioner of Income-tax (Appeals) found force in the assessee's claim that there was no evidence to suggest that the seized register (bearing Sr No.8) of Annexure A of the Panchnama dt 6.2.1999 actually belonged to the assessee and not to any other person. Further according to him, there was no basis in the assertion of the Assessing Officer that sale of milk products should have been recorded in a separate ledger account. As per the Commissioner of Income-tax (Appeals), there was no fixed rule as to how an assessee should record sales of different merchandise in its books of account and, therefore, no fault could be found with the assessee for not having recorded sale of milk and milk products separately. The Commissioner of Income-tax (Appeals) accordingly concluded that on the basis of the material available on record, the undisclosed income of the assessee from alleged unaccounted sales of milk products recorded in the seized register A-8 has to be taken at ₹ 78,900/-. In this view of the matter, he scaled down the addition of ₹ 7,33,400/- to ₹ 78,900/-, thus granting a relief of ₹ 6,54,500/- against which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 1997-98, the learned CIT-Departmental Representative submitted that the Commissioner of Income-tax (Appeals) was not correct because in terms of section 132(4A) of the Act the onus is on the assessee to prove that the seized material did not belong to the assessee. According to the learned CIT-Departmental Representative, the Commissioner of Income-tax (Appeals) erred in holding that the seized register was not proved by the Assessing Officer to be belonging to the assessee and, therefore, he deleted the addition. As per the CIT-Departmental Representative, the stand of the Commissioner of Income-tax (Appeals) is particularly in contrast to the provisions of section 132(4A) of the Act, which provide a presumption that the material found on a person belongs to him unless it is proved otherwise by the said person. Therefore, the onus to prove that the seized register showing unaccounted sales of milk product did not belong to the assessee, the burden was on the assessee which has not been discharged. In this manner, the relief allowed by the Commissioner of Income-tax (Appeals) has been sought to be assailed. 9. On the other hand, the learned Counsel for the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar computerized books of account maintained by the assessee for the sales effected at Mumbai. In fact, for the assessment year 1996-97 comprised in the block period, the amount of sales credited in the regular computerized account books was in excess of the figures appearing in the memo books by a sum of ₹ 39,39,315/-. This amount has been added by the Assessing Officer as unaccounted money credited in the account books as sales under the guise of the money remitted from Mumbai as per the memo books. The assessee had offered an explanation in this regard which has since been accepted by the Commissioner of Income-tax (Appeals). It was explained that the said sum was indeed sales effected by the assessee, but the amounts were not reflected in the memo books since sometimes the partner personally carried cash from Mumbai to Ashta and therefore the same was not recorded in the memo books and, in any case, memo books were not the basis to maintain the account books, but it was only a rough record. 11. We have carefully examined the rival positions on this aspect and find that the Assessing Officer has mis-directed himself in appreciating the memo books seized during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng before us, the learned Counsel contended that since the sales credited in the account books was of a higher amount though it did not include the sale of milk products, no separate addition was warranted, inasmuch as it can be understood that the sale of milk product have also been recorded in the account books as sale of milk. In our considered opinion, we find no justification for the aforesaid proposition sought to be made out by the assessee inasmuch as the seized material itself shows the sale of milk products separately than the sale of milk. Therefore, the only inference liable to be deduced on this aspect is that the sales of milk products reflected by the seized material are over and above the sale recorded in the regular books which contain only the sales of milk. On being confronted on this aspect, the learned Counsel for the respondent-assessee strongly argued that the addition if any on this score is maintainable only with respect to the unrecorded gross profit and not the gross amount of sales. In other words, as per the learned representative for the assessee, the amount of unrecorded sales detected are not to be assessed as such, but only the profit element on suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of ₹ 25,80,045/- made on account of suppressed sales of milk product. As already discussed in the foregoing paragraphs, during the course of search action under section 132 in the business premises of the assessee firm and at the residences of its partners on 5.2.1997, certain books of account, documents, memos etc. were seized. The Assessing Officer noticed that the seized register (bearing Sl. No. 8) contained details of unaccounted sale of milk products of the order of ₹ 25,80,045/- made at Mumbai. For the various defects pointed out by the Assessing Officer in the assessment order, he concluded that the estimated sale consideration of ₹ 25,80,045/- apparently received during the financial year 1995-96 by the assessee from sale of milk products mentioned in the seized register had not been declared in the assessee's books of account. According to the Assessing Officer, the milk products, sale whereof was indicated by the seized register. As per the Assessing Officer, assessee obtained substantial quantities of butter, arising through the process of natural separation and this separation of butter had taken place due to automatic churning of milk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise, in law the impugned addition could have only been made in the block assessment of the assessee and not under regular assessment. He accordingly deleted the addition of ₹ 25,80,045/- made by the Assessing Officer. Against this decision, the Revenue is in appeal before us. 19. Before us, the learned CIT-Departmental Representative appearing for the Revenue has contended that the Commissioner of Income-tax (Appeals) erred in deleting the addition of ₹ 25,80,045/- on account of suppressed sales of milk products when the Assessing Officer had clearly proved that such sales were not recorded in the regular account books. The learned CIT-Departmental Representative also assailed the action of the Commissioner of Income-tax (Appeals) in deleting the addition on account of suppressed sale in both the assessments, namely, in the block assessment dated 22.2.1999 as well as in the regular assessment for assessment year 1996-97 made under section 143(3) dated 12.2.1999. It has been pointed out that in the two orders passed by the Commissioner of Income-tax (Appeals) 15.12.1999 and 7.1.2000, both additions have been deleted. In the impugned order dt 7.1.2000 against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,045/- to have been considered for separate addition in the appellant's hands in the regular assessment that was being made under section 143(3). The impugned assessment order was passed first and the block assessment was made subsequently. Therefore, the inference about entries of sale made in the seized register, as drawn by the AO in the impugned assessment runs contrary to a more categorical view taken by him subsequently n the aforesaid block assessment. As such, I have no hesitation in holding that the view taken in block assessment must prevail. That is, undisclosed sale of milk products, if any, evident from the entries made in the seized register, should be treated as covered by excess cash sale/credit appearing in M/s J D Thote Dairies Mumbai A/c in the appellant's books. The seized computerized books show that the said excess credits have eventually been transferred to the sales account and form part of the appellant's overall turnover of ₹ 12,09,34,255/-, on the basis of which net profit of ₹ 4,68,231/- has been disclosed in the appellant's profit and loss account. As such, it is obvious that on facts there is no case for the impugned additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant in the light of material already available, including that regarding shortage of milk shown to have occurred in transit. From the aforesaid findings of the Commissioner of Income-tax (Appeals), it is clear that the first appellate authority has set aside the issue relating to determination of gross profit rate to the file of the Assessing Officer with certain directions. We do not find anything wrong in such action of the Commissioner of Income-tax (Appeals) and accordingly affirm his decision. Revenue fails on this Ground of appeal. 25 The next issue raised in the appeal by the Revenue relates to the deletion of the addition of ₹ 53,380/- made on account of advertisement expenses. During the course of assessment proceedings, the Assessing Officer observed that assessee had paid an amount of ₹ 53,380/- to Jai Shree Publicity of Sangli towards advertisements in local dailies. He also noticed that this amount was inclusive of a sum of ₹ 30,500/- pertaining to an item of good wishes published in local news papers on the occasion of the 67th Birthday of Shri J D Thote. According to the Assessing Officer, this expenditure did not in any way further the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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