9911796707
TMI Blog2024 (4) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... /Chd/2022 M/s Seo Bridal Studio Pvt. Ltd. CIT(A)-5, Ludhiana 08/07/2022 2018-19 2. All these appeals were heard together and are being disposed off by this consolidated order. Firstly, we shall deal with the appeal of the assessee in ITA No. 307/Chd/2022 pertaining to Assessment Year 2013-14, wherein the assessee has raised following grounds of appeal: "1. a) That the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition on account of unexplained expenditure u/s 69 amounting to Rs. 3,32,371/- being the commission paid on bogus purchases and sales by the company. b). Without prejudice to above ground of appeal, the Ld. CIT(A) has failed to appreciate that the assessee has already disclosed the profit of Rs. 14,57,154/- on the bogus purchases and sales, which were never made and, thus, the addition of Rs. 3,32,371/- is liable to be set off against such gross profit already offered to tax. 2. a). That the Ld. CIT(A) has erred in confirming the addition of Rs. 58,58,524/- on account of unexplained investment u/s 69 of the Act on the basis of rough working/rough jottings. b). Notwithstanding the above said ground of appeal, the CIT(A) has erred in no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale were made though Shri Satish Kapoor to whom the cash commission was paid and which was never accounted for in regular books of account. 6.2 It was further stated by the AO that summons were issued to Shri Satish Kapoor which remained uncomplied with and the actual rate of commission could not be verified. Thereafter, a show cause was issued to the assessee as to why commission @ 1% on total amount of bogus purchase and sale amounting to Rs. 17,85,59,558/- which comes to Rs. 17,85,596/- should not be treated as unexplained expenditure under section 69C of the Act. 6.3 In response, the assessee submitted that they have paid commission at the rate of 0.25% on total bogus purchase and sale which can be verified from the statement of Shri Shivam Singla, partner of the assessee firm recorded before DDIT, Ludhiana on 13/04/2018. It was further submitted that the assessee has itself shown gross profit on bogus purchase and sale which were never earned by it @ 1.6% on bogus sale of Knitted Cloth which comes to Rs. 14,57,154/-. It was accordingly submitted that total alleged commission payment for declared bogus purchase and sale is duly covered by the gross profit shown in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus purchase and sale were made, was not cross examined in spite of various requests. The Ld. CIT(A) further took note of the assessee's submission that the gross profit shown by the assessee is more than the amount of the commission which has been brought to tax by the AO. However the said submission was not found convincing for the reason that the assessee was doing genuine business also and the profit for which was taxable. However the contention regarding the rate of commission @ 0.25% was found acceptable for the reason that nothing has been brought on record by the AO to show the exact amount of commission payment by the assessee. The Ld. CIT(A) therefore upheld the commission payment @ 0.25% of Rs. 13,29,48,751/- which comes to Rs. 3,32,371/- and the remaining addition was directed to be deleted. 9. Against the addition of Rs. 3,32,371/- sustained by the ld CIT(A), the assesses is now in appeal before us. 10. During the course of hearing, the Ld. AR submitted that it is an admitted fact that there were bogus purchase and sale recorded in the books of accounts on which the tax has been paid and the AO has duly acknowledged the said fact at page 2 of the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the commission for procuring the bogus purchase and sale amounting to Rs 5,31,795/- as so determined by the AO stand covered by the said gross profit of Rs 14,57,154/- and there cannot be any separate addition in this regard. Therefore, the addition of Rs 332,371/- sustained by the ld CIT(A) is hereby directed to be deleted and the ground of appeal is allowed. 13. In Ground No. 2, the assessee has challenged the sustenance of addition of Rs. 58,58,524/- on account of unexplained investment under section 69 of the Act. 14. In this regard, briefly the facts of the case are that during the course of search, certain documents referred to as Annexure-A2 were seized from the House No. 1017, Garewal Colony, Jagraon. Basis the said documents, the AO stated that the assessee has made unaccounted purchases amounting to Rs. 1,28,09,583/- and a show cause was issued as to why same should not be treated as unexplained investment in purchase of stock and brought to tax under section 69 of the Act. 14.1 In response, the assessee submitted that these figures are not reliable as these are part of rough Trial Balance and the same may not be treated as unexplained investment under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 583/-, the entries/purchases totaling Rs. 51,50,402/- have been duly shown in the purchase account of the assessee which were got verified during the appellate proceedings by the Inspector of Income Tax who in his report has stated that purchase amounting to Rs. 46,52,059/- have been recorded in the regular books of account of the assessee. The Ld. CIT(A) accordingly held that the balance amount of Rs. 81,57,524/- remained unexplained. 15.2 In this regard, referring to the contention of the assessee that the same is covered by the initial surrender of Rs. 82,00,000/- at the time of survey on 26/10/2012, the Ld. CIT(A) referred to the contents of the surrender letter and stated that the surrender against the stock was Rs. 23,00,000/- only and the sundry receivables represents the sale yet to be realized and therefore the assessee was entitled for credit of Rs. 23,00,000/- and after giving the credit for the same, the remaining amount of Rs. 58,57,524/- was found to be unexplained and which was sustained by the Ld. CIT(A). 16. Against the said findings and the direction of the Ld. CIT(A), the assessee is in appeal before us. 17. During the course of hearing, the Ld. AR submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts and further submitted that the valuation was done on estimation basis by applying average price, whereas there is no method in accountancy called average price for valuation of closing stock. It is also submitted that the department had made valuation of 805 pieces of Lehanga at average rate of Rs. 24,175/- per piece (at Rs. 1,94,60,875/-) which is the rate for stitched/completed Lehanga, whereas the assessee was having stock of 512 unstitched Lehanga, the rate of which was Rs. 6,096/- per piece as per valuation done by the department also and accordingly argued that the value has been wrongly increased by an amount of Rs. 92,56,448/-. The AR enclosed the bill for stitched and unstitched Lehanga in support of the claim. The documents were sent to the AO for comments during the course of appellate proceedings and in the remand report dated 19.05.2022, the AO has accepted this fact that rate of unstitched Lehanga was inadvertently taken at Rs. 24,175/- per piece instead of Rs. 6,096/- per piece and the higher rate was applied for all the Lehanga (including the unstitched Lehanga). Therefore, as per the AO, the plea of the assessee is acceptable on this issue. Under the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome is as much a part of real income as that disclosed in the account books, has the same existence and could be available to the assessee as the books profits could be and may constitute a fund from which the assessee may draw subsequently for meeting expenditure or introducing amount in his books. At the same time, it was held that the mere availability of such fund cannot in all cases imply that the assessee has not earned further secret profits. It is for the taxing authority in each case to determine whether the unexplained cash deficit and the cash credits can be reasonably attributable to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that year. In the instant case, we find that the unaccounted receivables amounting to Rs 57.85 lacs which were brought to tax as undisclosed income at the time of survey was available to the assessee to make subsequent purchases which again remain unaccounted for and now sought to be taxed by the authorities. Given that the said amount has already been brought to tax in the impugned assessment year, there cannot be any further addition on utilization of the said amount toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. 26.2 It was submitted that the AO has made an addition of Rs. 3,32,986/- @ 0.40% on total bogus purchase and sale which has been brought down to Rs. 208,116/- @ 0.25% by the ld CIT(A). It was submitted that since the assessee has already offered the profit of Rs. 40,40,351/- which was never realized at first place therefore the addition of Rs. 208,116/- is liable to be set off against the said income already offered to tax. 27. Per contra, the Ld. DR has fairly admitted that the facts and circumstances are identical as in A.Y 2013-14 and has relied on the order of the lower authorities. 28. We have heard the rival contention and perused the material available on the record. We find that the assessee has been contending right from the assessment proceedings that it has disclosed and offered to tax gross profit on bogus sales which has been accounted for in its books of accounts and the commission payment to the broker is therefore duly covered by the quantum of gross profit already offered to tax. The factum thereof has not been disputed by the Revenue and at the same time, both the lower authorities have failed to give due effect to the same. On perusal of records, it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in confirming the addition of Rs. 8,83,826/- on account of rough jottings as unexplained expenditure. 4. That appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 34. Regarding Ground No. 1 wherein the addition of Rs. 4,67,441/- being the commission paid on bogus purchases and sales have been sustained by the Ld. CIT(A), the assessee has reiterated the submission as made in the Assessment Year 2013-14 and it was submitted that the facts and circumstances of the case are identical wherein the assessee has already disclosed the profit of Rs. 59,66,942/- on the bogus purchase and sales which were never made and therefore the addition of Rs. 4,67,441/- may be allowed to be set off against the income already offered to tax. 35. Per contra, the Ld. DR has fairly admitted that the facts and circumstances are identical as in A.Y 2013-14 and has relied on the order of the lower authorities. 36. We have heard the rival contentions and perused the material available on the record. We find that the assessee has been contending right from the assessment proceedings that it has disclosed and offered to tax gross profit on bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has already disclosed the profit of Rs. 43,10,127/- on the bogus purchases and sales, which were never made and, thus, the addition of Rs. 4,90,995/- is liable to be set off against the such income already offered. 2. That the Ld. CIT(A) has erred in confirming the addition of Rs. 1,56,000/- account of rough jottings as unexplained expenditure. 3. That appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off." 42. Regarding Ground No. 1 wherein the addition of Rs. 4,90,995/- being the commission paid on bogus purchases and sales have been sustained by the Ld. CIT(A), the assessee has reiterated the submission as made in the Assessment Year 2013-14 and it was submitted that the assessee has already disclosed the profit of Rs. 43,10,127/- on the bogus purchase and sales which were never made and therefore the addition of Rs. 4,90,995/- may be allowed to be set off against the income already offered to tax. 43. The Ld. DR relied on the order of the lower authorities. 44. We have heard the rival contentions and perused the material available on the record. We find that the assessee has been contending right from the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of CIT(A). v) Addition of Rs. 12,60,606/- As per para 4.7.1, Pages 44 to 45 of the order of CIT(A). vi) Addition of Rs. 750/- As per para 4.7.2, Page 45 of the order of CIT(A). 4. That the Ld. CIT(A) has erred in confirming the following additions. i) Addition of Rs. 1,49,464/- As par para 4.8.1 of the order of CIT(A) ii) Addition of Rs. 97,648/- As par para 4.8.3, page 48 of the order of CIT(A) iii) Addition of Rs. 98,136/- As par para 4.8.4, page 49 of the order of CIT(A) iv) Addition of Rs. 8,05,798/- As per para 4.8.1, Page 49 & 50 of the order of the order of CIT(A) 5. Without prejudice to ground No. 3 & 4, the Ld, CIT(A) should have allowed the benefit of sum available with the assessee to the tune of Rs. 1,49,664/-, 97,648/-, 98,136/- and 8,05,798/- against the addition of unexplained expenditure. 6. That appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off." 48. Regarding Ground No. 1 wherein the addition of Rs. 1,83,016/- being the commission paid on bogus purchases and sales have been sustained by the Ld. CIT(A), the assessee has reiterated the submission as made in the Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against unexplained expenditure and only the remaining amount to be brought to tax. In the result, ground no. 3 & 4 are dismissed as not pressed and ground no. 5 is allowed. 54. In the result, the appeal of the assessee is partly allowed. 55. Now we shall deal with the appeal of the assessee in ITA No. 617/Chd/2022 pertaining to Assessment Year 2018-19, wherein the assessee has raised following grounds of appeal: "1. a). That the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition on account of unexplained expenditure u/s 69 amounting to Rs. 78,726/-being the commission paid on bogus purchases and sales by the company. b). With prejudice to above ground of appeal, the Ld. CIT(A) has failed to appreciate that the assessee has already disclosed the profit of Rs. 3,80,237/- on the bogus purchases and sales, which were never made and, thus, the addition of Rs. 78,726/- is liable to be set off against the such income already offered. 2. That the Ld. CIT(A) has erred in confirming (restricted) the addition of Rs. 17,22,325/- out of 39,83,040/- on account of alleged difference in stock as on the date of survey. 3. That the Ld. CIT(A) has erred in confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand covered by the said gross profit of Rs 3,80,237/- and there cannot be any separate addition in this regard. Therefore, the addition of Rs 78,726/- sustained by the ld CIT(A) is hereby directed to be deleted and the ground of appeal is allowed. 59. Regarding Ground No. 2 during the course of hearing, the Ld. AR submitted that the department at the time of search has valued the stock at Rs. 2,46,80,750/-. It is also a matter of fact that another valuation was made at Rs. 2,37,78,482/-. The Assessee has submitted that the stock as on date of search in the books of accounts was to the tune of Rs. 1,77,43,710/-. Thus, there was difference in stock of Rs. 69,37,040/-. During the course of assessment proceedings, detailed submissions were given but the same were not accepted completely by the AO. Detailed working of dead stock of Rs. 42,20,000/- was also given before the AO and it was stated that the value of such stock is normally 10-15%. The Assessing Officer assessed the value of dead stock of Rs. 42,20,000/- @ 30% and relief of value of 70% of 42,20,000/- was given. Thus, net addition of Rs. 39,83,040/- was made on account of difference in stock. It was submitted that the ld C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod for two quarters which has been duly addressed by the ld CIT(A) where he has held that the stock has to be valued at cost after reducing the gross profit rate. Therefore, we find no merit in the said contention. In the result, we do not find any justifiable basis to interfere with the order of the ld CIT(A) where he has sustained the addition of Rs 17,22,325/- and the same is hereby upheld and the ground of appeal taken by the assessee is dismissed. 63. Ground No. 3, 4, 5 and 6(a) were not pressed during the course of hearing, at the same time in terms of ground no. 6(b), it was submitted that the assessee be allowed set off of unexplained expenditure of Rs. 6,73,458/- against the confirmation of addition of Rs. 10,966/- on account of GP Rate. 64. We have heard the rival contention and perused the material available on the record. In view of the limited prayer raised on behalf of the assessee which we find acceptable, the gross profit addition of Rs. 10,986/- is hereby sustained and being the intangible addition is available to the assessee and is hereby directed to be set off against the addition of Rs. 6,73,458/- towards unexplained expenditure. In the result, ground no. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
