TMI Blog2022 (10) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in assuming that the assessee had made unaccounted purchases solitary on the basis that the customs authorities had enhanced the value of goods imported for the purpose of payment of custom, duty. In the absence of any evidence/material on record that the assessee has paid anything extra over and above the transaction value shown in import invoices, no addition on account of unexplained expenditure on purchases can be made and deleted the addition of Rs. 31,07,529/- made by the AO. As gone through the entire factum and without any hesitation, we hold that the Assessing Officer has made addition on a deeming fiction and the CIT(A) has succinctly analyzed every aspect of the business and transactions and gave a surefire decision. Hence, we decline to interfere with the order of the Ld. CIT(A) on this issue. Addition in gross profit - AO has rejected the books of account holding that the purchases as well as sales have not been fully accounted for - The books cannot be rejected on the solitary basis that sales were shown to be made in cash specially when there is no difference in the rate charged on sale of same product booked either in cash or on credit. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action under section 132 of the Act was carried out at the premises of the assessee on 16.02.2005 and in pursuance to which, notice under section 153A of the Act was issued on 27.10.2005 and served on the assessee. The assessee in compliance to the notice, filed a return of income on 07.12.2005 declaring income of Rs. 63,91,229/-. Thereafter, in pursuance to various notices, the Assessing Officer framed an assessment at an income of Rs. 2,35,19,018/-. 7. It was noted by the A.O. that a large number of loose papers were found and seized during the course of search on the assessee from 11, Paschimi Marg, Vasant Vihar, New Delhi. Most of these papers are bills of entries giving the details of goods imported by the assessee and duty charged by the Customs authorities thereon. The Assessing Officer has tabulated the details of such bills of entries in the assessment order and thereafter, found that in number of cases, the value of goods imported by the assessee was enhanced by the custom authorities, that the assessed value was increased by Rs. 31,07,529/- for the year under consideration. 8. In view thereof, the AO observed that obvious reason for enhancement by the custom author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of which, it has been alleged that the assessee has received part payments in cash and part payments by drafts from the persons whose names have been given in coded abbreviations and the pattern of the above receipts also indicates that the assessee is in the practice of receiving the payments in two modes possibly with an intention to show the sale in the books of account to the extent of drafts received and the remaining amount of cash is not accounted for in the books of account. Apart from above, it was noted that several other pages 1,2, 4 to 6, 12 to 15, 18, 20 to 22 and 26 of Annexure A-1 seized from FD-12, Vishakha Enclave, Pitampura, Delhi also indicated huge amount of unaccounted cash sales made by the assessee. 11. The sales reflected in these pages have been admitted and surrendered by the assessee in the assessment year 2005-06. It has also been stated that during the course of search, the assessee has also surrendered income of Rs. 32,50,000/- and Rs. 34,20,000/- on account of unaccounted stock and cash respectively in A.Y. 2005-06. 12. In light of the above factors, the Assessing Officer proceeded to hold that the purchases are not fully accounted for in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1086 69 3 10 , 8 8 , 69 3 2003 - 0 4 72 % 80 % 257 43 , 0 2 , 25 7 2004 - 0 5 38 % 93 % 26 48 , 6 0 , 75 2 2005 - 0 6 95 % 99 % 100 97 , 2 1 , 50 4 (b) The volume of sales has multiplied many times from the sales of Rs. 384.99 lakhs in A.Y. 2001-02. The increase is not by simple percentage but by hundreds of percent. Assessment Year Sales Rs. In Lakhs % of increase Over A. Y. 200 1 - 0 2 Last Year 2002 - 0 3 1353 . 87 252 % 252 % 2003 - 0 4 3359 . 65 773 % 148 % 2004 - 0 5 3585 . 18 831 % ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cash invoices to customers. It has been submitted that rates charged for the same item of sale where an invoice with the customers' name and address is issued and a cash invoice around the same date and the same product is the same. Thus it cannot even be alleged that the cash invoices are used to record lower sales. Reliance in this context was placed on the judgment of Bombay High Court in the case of RB Jessaram Fatehchand vs. CIT reported in 75 ITR 33 and decision of Pune Bench in the case of ACIT vs. Mahesh T. Patodia (79 ITD 40). 18. The Ld. CIT(A) held that the first and foremost issue involved in the instant appeal is in respect of rejection of books of accounts by invoking the provisions contained in section 145 of the Act. The Assessing Officer has rejected the books of accounts by holding that, neither the amount of purchase of goods is fully accounted for in the books of accounts and nor the sales have been fully accounted for and therefore, the book result of the assessee cannot be relied upon. So far as the conclusion regarding non-accounting for purchases is concerned, the same is essentially based on the bills of entries found and impounded during the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1537370 1601717 22705 1828277 1850982 A- 44 116 18 . 3 . 03 $. 231 1447348 1512682 65338 A- 44 103 18 . 3 . 03 $. 70 1793437 1821089 27652 A- 43 22 17 . 10 . 02 $. 675 885091 915739 30648 A- 49 1 15 . 5 . 02 $ 1 . 79 1344908 1362163 17255 A- 45 37 20 . 12 . 02 $. 74 84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A-187 242 31.7.02 - 4033427 4068270 34843 A-185 44 7.8.03 $1,121 867109 951897 84788 A-185 36 5.8.03 $1.21 777801 855633 77832 A-190 133 22.4.03 $.36 633270 651985 18711 A-190 132 22.4.03 $.36 633270 651985 18711 A-190 131 19.4.03 $.36 633270 651985 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptable in view of the comparable price. In this case, the department has not adduced even an iota of evidence to reject the transaction value on the ground that it is not the true commercial value of the goods. It is also not the case of the department that there was any special relationship between the importer and the supplier and that the former has paid anything extra over and above the transacted value. In fact, contrary to the Board's Circular No. 16/2003 dated 17.03.2003, the AO has not passed a speaking order for rejecting the transaction value which could have enlightened the appellate authority of the reasons for rejecting the transaction value. It is settled practice of law and it has been decided even in Supreme Court that the circular issued by the CBEC is binding on the administrative officer or field officer who am enforcing for implementing the Customs Act or Customs Valuation Rules 1988. The circumstances that permit such rejection and the alternative basis for fixing assessable value are specified in the Valuation Rules themselves no such legally permissible steps were taken in the present case. There is catena of decisions including the one given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. Hence, the Ld. CIT(A) held that the AO was not justified in assuming that the assessee had made unaccounted purchases solitary on the basis that the customs authorities had enhanced the value of goods imported for the purpose of payment of custom, duty. In the absence of any evidence/material on record that the assessee has paid anything extra over and above the transaction value shown in import invoices, no addition on account of unexplained expenditure on purchases can be made and deleted the addition of Rs. 31,07,529/- made by the AO. 22. We have gone through the entire factum and without any hesitation, we hold that the Assessing Officer has made addition on a deeming fiction and the Ld. CIT(A) has succinctly analyzed every aspect of the business and transactions and gave a surefire decision. Hence, we decline to interfere with the order of the Ld. CIT(A) on this issue. 23. The appeal of Revenue on this ground is dismissed. 24. Regarding addition in gross profit, the AO has rejected the books of account holding that the purchases as well as sales have not been fully accounted for. In regard to purchases it was held that there is no evidence or material on record ..... X X X X Extracts X X X X X X X X Extracts X X X X
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