TMI Blog2005 (4) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... was given, hence, prayed that this addition is to be deleted which is decided as per the CIT(A)'s order page 28 para 11. (2) In not appreciating the facts that no specific defect has been pointed out in books itself and the appellant has already reconciles Annexure- Assessment order 24 with Annexure- A/51 and as such there is no case of any unaccounted sales nor there is any supporting evidence of unaccounted sales was found, hence, CIT(A) has erred in confirming so-called unaccounted sales of Rs. 13,50,799 for the purpose of making gross profit addition. (3) In confirming the disallowance of Rs. 6,000 out of telephone expenditure. (4) in confirming disallowance of Rs. 10,494 in respect of vehicle expenditure, inter alia, depreciation. It is said that there is no such personal use as far as the expenditure is concerned and because of the block, system introduced, there is no case of any personal use by the partner. (5) In not appreciating the facts that the appellant totally denies liabilities to pay interest under section 234 of the Act, and as such he ought to have decided the issue on facts as well as in law, which he fails when he gives consequential direction as per or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer was of the opinion that the above cash, bank deposits, investment in shares, etc., were part of the disclosure of Rs. 24 lakhs by the assessee-firm. Therefore, the Assessing Officer assessed the sum of Rs. 6,15,800 in the hands of Shri K.B. Kandoi on protective basis. 4. On appeal, the CIT(A) was of the view that in the case of the firm only unrecorded sale of Rs. 13,50,799 was found and therefore 25 per cent of such unrecorded sale, i.e., Rs. 3,37,700 is to be added as against the sum of Rs. 24 lakhs added by the Assessing Officer. He therefore restricted the addition of Rs. 24 lakhs made by the Assessing Officer to Rs. 3,37,700. He has also held that the sum of Rs. 6,15,800 disclosed by Shri K.B. Kandoi should be assessed on substantive basis in his hands. The revenue has challenged the above finding of the CIT(A) vide ground Nos. 1, 2 and 4 of its appeal in the case of the assessee-firm and also by filing separate appeal in the case of Shri K.B. Kandoi. The assessee has also challenged the finding of the CIT(A) with regard to sustenance of addition for unrecorded sales at Rs. 3,37,700 vide Ground Nos. 1 and 2 of the assessee's appeal. 5. At the time of hearing before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B. Kandoi was fully fired and he gave the statement as was persuaded by the search party. He has also stated that the search party had stated to Shri K.B. Kandoi that unless the sum of Rs. 24 lakhs is declared, harassment will follow. In the above circumstances the disclosure was made. The learned counsel further submitted that the investment of Rs. 24 lakhs as recorded in reply to question No. 38 is fully explainable. He submitted that some cash, investment in shares and bank accounts which belonged to Shri K.B. Kandoi have been separately disclosed by him in his income-tax return. The gold ornaments belonged to the assessee's mother and other lady members and there was no unexplained investments in renovation of furniture. There were no unrecorded trade debtors or other debtors as stated by Shri K.B. Kandoi. Therefore, except the cash and investment in shares, there was no unexplained investment. The learned counsel has also vehemently contended that there was no sale outside the books of account and even if there is any sale outside the books of account, then entire sale consideration outside the books is not the income but it is only net profit on such unrecorded sale, which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Ashramroad shop. Q. 18 Today during search cash of Rs. 68,990 is found from your shop whereas as per the cash book it is Rs. 66,196. Give information for the excess cash of Rs. 2,794. Q. 22 To whom the cash of Rs. 3,95,000 found from your residence belong to? Ans. Yes, it is my cash. It belongs to my firm. Q. 23 From where you have received this cash? Ans. This is the income of the sales made during Diwali which is not recorded in the books of account. This entire Rs. 3,95,000 are not recorded in the books. Q. 33 What is your daily expenses and what kind of it is? Ans. I daily eat five (pan) masala. At present I have reduced it. One masala costs rupees five thus the expense on masala is Rs. 25. Q. 34 Do you agree that during the course of search books of account and other papers found it is proved that you make sales out of books? Ans. Yes, I fully agree, I do not record all the sales in the books and effect sales outside the books. Q. 35 Give information as to how many percentage of sales is not shown in the books of account of both the branches of your M/s. KandoiBhogilal Mulchand. Ans. In both the branches of my M/s. Kandoi Bhogilal Mulchand, we do not sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,000 arc received at the time of marriage. (vi) During the course of search of our house valuable articles as per Annexure P are found. Out of these only Maruti Van valued at Rs. 55,000 is recorded in the books of account of the remaining are purchased out of unrecorded income. The total value of the same is Rs. 1,01,200. (vii) I declare unrecorded stock worth Rs. 2,00,000 found during the search of our house, shop and factory. (viii) I declare Rs. 3,00,000 spent in renovation and furniture of our house which is out of unrecorded income. (ix) I further declare Rs. 3,50,000 which is not recorded in our books of account which comprises of sweets supplied to our various customers during Diwali and Rakshabandhan. (x) I further declare Rs. 3,00,000 given over to our various relatives and friends during some occasion or as loans which is out of unrecorded income. (xi) Over and above this about Rs. 56,000 are expended towards different occasions in our house which is also out of unrecorded income of the current year. 8. The above statement was retracted by the assessee vide affidavit dated 23-2-1993, i.e., after three and half months of the disclosure. The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee can discharge this burden by giving a direct evidence of coercion or threat by the Authorised Officer or by circumstantial evidence in this regard. The time gap between the statement and the retraction of statement would also one of the important points to be taken into account while deciding whether the statement was voluntary or not. (ii) The other circumstance is where the statement was given under the mistaken belief of either fact or law. Here again the burden is upon the person giving the statement to prove that the statement given by him was factually incorrect or was untenable in law. 10. This view of ours is supported by the decision of the Tribunal Ahmedabad Bench in the case of Manharlal Kasturchand Chokshi and Hotel Kiran's case. 11. The learned counsel for the assessee has relied upon several decisions to support his contention that the addition cannot be made on the basis of statement only. However, we find that the facts in all those cases were different than the facts in the case of assessee. In the case of Pullangode Rubber Produce Co. Ltd. the assessee has recorded the expenditure towards immature plants as capital expenditure but for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e additions. The additions are deleted." 14. Let us examine the facts of the case in the light of the legal provisions as enumerated above. From question Nos. 5 and 6 of the statement it is evident that Shri K.B. Kandoi admitted that the correct gross profit should be 30% to 40%. It is not in dispute that the gross profit disclosed in the books of account was even less than 25%. Therefore, Shri K.B. Kandoi was aware that the gross profit disclosed by the assessee in the books was less. With regard to question No. 18, Shri K.B. Kandoi admitted that the assessee did not show small sale in the books. From question Nos. 22 and 23, it is clear that the cash of Rs. 3,95,000 was found from the assessee with Shri K.B. Kandoi has admitted to be unrecorded cash and he has also admitted that it is from the unrecorded sale made during Diwali period. With regard to question No. 33 he admitted that his personal expenditure on eating Pan Masala is Rs. 25 per day. With regard to question No. 34, he reiterated that the assessee did not record all the sales in the books of account and effect the sales outside the books. Thus it was found and admitted that the assessee was suppressing the sales. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airly admitted that the only source of income of Shri K.B. Kandoi is the share income from the firm. Moreover we also find that in reply question Nos. 22 and 23 Shri K.B. Kandoi has clearly admitted that unrecorded cash is out of unrecorded sale of the assessee-firm. 16. In the above circumstances the contention of the assessee that there was no undisclosed income of the assessee-firm but there was undisclosed income of the partner Shri K.B. Kandoi, cannot be accepted. The learned counsel for the assessee has also contended that there was no unexplained investment in gold ornaments, stock, furniture/renovation. He also contended that there were no loan and advances to the friends and no money was recoverable from the customers. However, we find that the Revenue has made the addition of Rs. 24 lakhs as the income disclosed by Shri K.B. Kandoi in his statement recorded at the time of search. No separate addition has been made for unexplained investment in gold ornaments, unaccounted stock, renovation and furniture and for sundry debtors or for loan and advances to the relatives. The unexplained assets were only a corroborative evidence to examine whether the statement of Shri K.B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of S.M. Omer. However, we find that in the case of S.M. Omer, the assessee has received a cheque of Rs. 1,13,603 from the Controller of Defence Accounts (Navy). The Assessing Officer treated the entire sum as income of the assessee. On appeal, the CIT(A) directed to apply the net profit rate on the above receipt. The decision was upheld by the Tribunal. On a reference by the Revenue, the Hon'ble Calcutta High Court has held- "that section 69 of the Income-tax Act, 1961, was not applicable in the instant case. The assessee supplied the goods after incurring certain cost and after manufacturing the goods and the amount that was received from the Defence Department could not represent the net income but it was the sum received including the profit and expenditure. The Tribunal was justified in upholding the deletion of Rs. 1,01.649." 20. Thus in the case of S.M. Omer there was evidence that the assessee incurred certain expenditure for manufacturing of goods which were supplied to the Defence Department and therefore the net profit rate was applied. The learned counsel for the assessee has also relied upon the decision of the ITAT Ahmedabad Bench in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Revenue's appeal, we have upheld the order of the Assessing Officer with regard to the addition of Rs. 24 lakhs which was made by him on the basis of disclosure made by Shri K.B. Kandoi in the case of the assessee-firm, therefore, no addition of Rs. 6,15,800 is required to be made in the hands of Shri K.B. Kandoi. We therefore allow Ground No. 2 of Revenue's appeal. 24. Ground No. 3 of Revenue's appeal is against deletion of GP addition of Rs. 7,22,770. We have heard both the sides and perused the material placed before us. The assessee has disclosed the Gross Profit of Rs. 14,86,871 on the turn over of Rs. 73,65,473. The GP rate works out to 20.18%. The Assessing Officer rejected the books of account and applied GP rate of 30% which resulted in the addition of Rs. 7,22,770. The CIT(A) deleted the addition. Hence the Revenue was in appeal. While disposing of Ground No. 1 of Revenue's appeal we have sustained the addition of Rs. 24 lakhs made by the Assessing Officer on the basis of statement of Shri K.B. Kandoi. After considering the above sum of Rs. 24 lakhs the GP of the assessee would be more than 50% which is much more than the GP rate applied by the Assessing Officer. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted. ITA No. 2455/Ahd./99- Assessment year 1992-93 - Revenue's appeal in the case of M/s. Bhogilal Mulchand Kandoi- 30. The only ground raised in this appeal by the Revenue reads as under:- "The ld. CIT(A) has erred in law and on facts in deleting the addition made by the Assessing Officer for the amount of Rs. 2,13,941 on the ground of estimation of GP at the rate of 24%." 31. We have heard both the parties and perused the material placed before us. For the year under consideration the assessee has disclosed the sales of Rs. 65,62,616 on which gross profit of Rs. 13,61,123 was disclosed. The Assessing Officer rejected the books of account and applied the GP rate of 24% which resulted in the addition of Rs. 2,13,941. The same is deleted by the CIT(A). Hence this appeal by the Revenue. 32. We have heard both the parties and perused the material placed before us. The assessee has filed the comparative chart of sale and gross profit of various years. From the said chart we find that in the immediately preceding year, i.e., 1991-92 the assessee disclosed GP rate of 22.13% on sales of Rs. 41,03,964. The Assessing Officer rejected the books of account and applied the GP ra ..... 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