THE ITO , SENDHWA vs. SHRI DWARKA PRASAD TAYAL , SENDHWA

PER BENCH

The above captioned appeals filed at the instances of the

assessee and revenue pertaining to Assessment Year 2011-12 are

directed against the order of Ld. Commissioner of Income Tax

(Appeals)-II (in short ‘Ld.CIT(A)’], Indore dated 15.01.2018 which is

arising out of the order u/s 143(3) of the Income Tax Act 1961(In

short the ‘Act’) dated 07.07.2014 framed by ITO, Khargone.

individual engaged in the business of cotton trading and ginning

and running two proprietorship concerns namely M/s Monika

Trading Co & M/s White Gold Enterprises. Return of income was

filed on 20.09.2011 for Assessment Year 2011-12 declaring income

of Rs.5,80,310/-. The return was processed u/s 143(1). This case

was manually selected for scrutiny and notice u/s 143(2) dated

24.09.2012 was served upon the assessee followed by questionnaire The appellant assessee u/s 142(1)(ii) dated 15.1.2013. maintained 19 [Nineteen] bank accounts, out of that 14 [Fourteen] bank accounts were incorporated in the regular books of account. However, following five bank accounts 2

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 remains to be incorporated in the regular books of

account:-

S.No Name the Type of A/ c in the name of A/c Number Bank A/c Current M/s White Gold 1 HDFC Bank 2572560004723 Enterprises Union Bank of Current M/s White Gold 2 582601010050069 Enterprises India Union Bank of Current M/s Monica Trading 3 582601010050068 Co India Buldhana 4 Loan Shri Dwarka Pd Tayal 181/ 2005 to 1210 Urban Co-op Bank A/c Ltd Buldhana 5 CIA Shri Dwarka Pd Tayal 21/180 Urban Co-op Bank Ltd

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 Total Turnover S. No Name of the Firm Disclosed (Rs) Undisclosed (Rs) (Rs.) M/s Monika 1 5,77,24,480 5,44,64,764 11,21,89,244 Trading Co 2 M/s White Gold 17,24,13,447 15,09,34,202 32,33,47,649 Enterprises 23,01,37,927 20,53,98,966 43,55,36,893 During the course of assessment proceedings assessee 4. furnished copy of additional Profit & Loss Account and balance sheet of both the sole proprietorship concerns and furnished revised computation of income showing income at Rs.33,08,911/- (Original income Rs.5,80,301 + income of Rs.27,28,601/- offered on undisclosed turnover of Rs. 20,53,98,366/- @ 1.33%)

S.No Particulars Amount (Rs.) 1 Net profit as estimated on total 2,17,76,845 turnover @5% on Rs.43,55,36,893/- 2 Addition on account of investment 2,56,74,870 @12.50% of unrecorded turnover of Rs.20,53,98,966/-

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 Gross Total Income 4,74,51,715 Less: Deduction u/s 80C 1,00,000 Total taxable income 4,73,51,715

S.No Particulars Income as Addition Relief Addition as Income returned made by AO allowed by maintained finally (Rs.) (Rs.) the CIT(A) (Rs.) assessed (Rs.). 1 Net Profit 33.08.911 1,94,67,934 1,84,21,477 10,46,457 43,55,368 2 On account of 2,56,74,870 2,05,08,966 51,65,904 51,65,904 investment in undisclosed business 33,08,911 4,51,42,804 3,89,30,443 62,12,361 95,21,272

preferred an appeal before the Hon'ble Bench. The

grounds of appeal as taken by the appellant assessee and

also by the department are as under:-

[A] GROUNDS OF APPEAL AS TAKEN BY THE APPELLANT ASSESSEE

1.1] That on the facts and in the circumstances of the case the Ld CIT[A] erred in approving the reference to the special audit as correct without properly appreciating the facts of the case and submission made before him.

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 1.2] That on the facts and in the circumstances of the case the Ld Assessing officer failed to bring on records any complexity in the books of account of the appellant prior to reference to the special audit U / s 142 [2A] of the Act.

1.3] That on the facts and in the circumstances of the case the Ld CIT[A] erred in approving the assessment order as passed during the extended time period as allowed as per proviso to section 142[2C] of the Act as valid.

2] That on the facts and in the circumstances of the case the Ld CIT[A] erred in estimating the net profit of the appellant at Rs 43,55,368/ - as against net profit as declared by the appellant was of Rs 34,08,911/-.

3] That on the facts and in the circumstances of the case the Ld CIT[A] erred in maintaining the addition on account of investment in unrecorded business to the tune of Rs 51,65,904/- even when sufficient amount of stock and cash was lying in the regular books of account of the appellant.

(B) GROUNDS OF APPEAL AS TAKEN BY THE DEPARTMENT

1] The Ld CIT(A) has erred in directing the AO to estimate the Profit of business @1% of total turnover as against 5% of total turnover applied by the AO. In view of the Hon’ble ITAT, Indore Bench decision in the case of M/s Amar Agrawal ( ITA No 611/Ind/2012 ) wherein the Hon'ble ITAT directed to apply net profit @5% of total turnover in such case.

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 2] The Ld. CIT(A) has erred in restricting the addition of Rs.2,56,74,870/- made on account of profit of turnover shown in undisclosed bank accounts to Rs.51,65,904/- being the peak unrecorded turnover, grossly ignoring the following peculiar facts:-

a. Purchases made from M/s Raghu Cotton Corporation, Sutala and Anand Prasad Daliya, Warangal were itself totalling to Rs. 1.07 Cr. (Page 7 para (c) & (d) of CIT(A) order.

b. Cotton purchase is a seasonal activity and cannot be spread over 300 days as taken by Ld. CIT(A).

c. The fact of doing unaccounted business was accepted by assessee in the inquiry proceedings.

d. Set off of funds & stocks in the books cannot be given while determining unaccounted investment outside books of accounts.

No.284/1/2018 through which the assessee’s grievance is

that the Ld. CIT(A) erred in approving the assessment order

passed during the extended time period as allowed as per

proviso to Section 142(2C) of the Act. In support of this

ground Ld. Counsel for the assessee referred to the

following written submission:-

b. 7

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 3] GROUND No1 of the Appellant assessee:

3.1] The appellant assessee in this ground of appeal has challenged the reference to the special audit U/s 142[2A] of the Income Tax Act and also challenged that the assessment order as passed by the assessing officer was barred by limitation of time.

3.2]The date of events in the case of the above assessee is as under:- S.No Particulars Date/ Events 1 Date of filing of the return of total income 20-09-2011 2 Notice U/s 143[2] of the Act was issued on 24-09-2012 3 Time till which the assessment order can be p[assed 31-03-2014 U/s 153 of the Act 4.1 Letter dt 23-12-2013 being proposal for special 23-12-2013 audit U/s 142[2A] served on the counsel of the assessee 4.2 Proposal sent to get approval for special audit from 06-01-2014 the Hon’ble Chief Commissioner of Income Tax , Indore 4.3 The assessing officer has filed his objection for 16-01-2014 invoking the provision of section 142[2A] of the Income Tax Act taken on record on 4.4 After verifying the books , final report was sent to 28-01-2014 the Hon’ble CCIT, Indore recommending the case of the assessee for Special Audit U/s 142[2A] of the Act 4.5 Approval was received from the Hon’ble 21-02-2014 Commissioner of Income Tax -2, Indore VIDE Letter No CIT-2/Indore/ Tech/ Spl. Audit/ 13-14/ 6088 dt 18/02/2014 & 20/02/2014

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 4.6.1 The assessee again objected the reference to the Special Audit on 4.6.2 The objection as raised by the assessee was rejected 26-02-2014 by the assessing officer vide letter F.No ITO/ KGN/2013-14/ 4238 dt 26-02-2014 4.7 The assessing officer directed the assessee to get his 26-02-2014 accounts audited from M/s Mahesh C Solanki & Co, Chartered Accountants vide letter F.No ITO/ KGN/2013-14/4252 dt 26-02-2014 dt. 4.8 The time allowed to the apecial auditor to submit 15-04-2014 his report by 4.9 The special auditor requested to extend time for 23-04-2014 completing the special audit letter is received by the assessing officer on 4.10 On the request of the special auditor, the time for 15-05-2014 completing the special audit was extended upto 4.11 The speical audit report dt 15-05-2014 but the 23-05-2014 same was submitted by the special auditor on 4.12 The assessment order was passed by the assessing 07-07-2014 officer on

3.3] Copy of order sheet entry as noted by the assessing officer are attached on Page Nos 187 to 195 of the Compilation. On perusal of the same, it is evident that, time allowed to submit the report was till 15-04- 2014. The extension was sought by the Auditor on 23-04-2014 which was not correct. Since, the extension in any case be sought on or before 15-04-2014. After expiry of the time as allowed to furnihs the repoert, extension cannot be granted.

3.4] The extension of time as allowed on 23-04-2014 to till 15-05-2014 was not correct. Since, the due date for filing of the report expired on 15- 9

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 04-2014. Thus, limitation for the passing of the assessment order start from 15-04-2014 which was expired on 14-06-2014 but the assessment order was passed by the assessing officer on 07-07-2014 which was barred by limitation of time. The order so passed on 07-07-2014 therefore requries to be quashed as barred by limitaiton of time. 9. Per contra Ld. Departmental Representative vehemently

argued and relied to the following finding of Ld. CIT(A:-.

“4.1] In Ground Nos 1 and 3 of the appeal, the appellant has challenged that the assessment order as passed was barred by limitation of time. The appellant had filed his return of total income on 20.09.2011, notice u/s 143(2) was issued on 24.09.2012 and therefore the assessment order was to be passed by the Assessing officer till 31-03-20 14. The appellant during the course of assessment proceeding produced revised books of account after incorporating the bank accounts which remained to be included at the time of filing of the original return of total income. Considering the complexity in the accounts as prepared by the appellant and produced during the course of assessment proceeding, the assessing officer issued show cause notice for special audit and objection from the assessee was also obtained, and after considering the objection of the assessee proposal was send to the Pr ClT-2, lndore and approval was obtained on 21-02- 2014. On receipt of the approval from the Pr CIT-2, lndore M/s Mahesh C Solanki &Co, Chartered Accountants of Indore was appointed for conducting of the special audit and time to furnishing of audit report was allowed till 26-02-2014. However, on receipt of request for more time for conducting of special audit, the same was extended from time to time to till 15-05-2014 and assessment order was passed on 07- 10

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 07-2014 i.e. within sixty days from the date of receipt of the audit report from the special auditor. Thus, the order as passed by the assessing officer was within the time as allowed U Is 153 of the Income Tax Act. Thus, these grounds of appeal as taken by the appellant are hereby dismissed .

4.2] In ground No 4 of the appeal, the appellant has challenged the rejection of the books of account by invoking the provision of section 145[3] of the Act. It is an undisputed fact that out of 19 [Nineteen] bank accounts of the appellant, only 14 [ fourteen] bank accounts were incorporated in the books of account and five bank accounts remains to be incorporated. The appellant himself during the course of assessment proceeding produced revised books of accounts wherein all other bank accounts were duly incorporated, the books of account so produced were also referred for special audit, hence, books of account as prepared at the time of filing of the return of total income were not reliable and the books of account as produced during the course of assessment proceeding were also not reliable. The assessing officer was therefore justified in rejecting the books of account by invoking the provision of section 145[3] of the Income Tax Act. Thus, this ground of appeal is also dismissed”.

placed before us and carefully gone through the findings of Ld.

CIT(A) as well as written submission filed by the assessee. Through

Ground No.1 assessee has challenged the finding of Ld. CIT(A)

approving the reference to Special Audit u/s 142(2A) of the Act and 11

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 also approving the assessment order passed during the extended

time period as allowed as per proviso to Section 142(4C) of the Act.

Ld. A.O looking to the complexities of the case coupled with

unaccounted entries appearing in 5 undisclosed bank accounts

submitted a proposal to the Ld. CCIT, Indore for granting

permission for referring the assessee’s books of accounts and

unaccounted bank accounts for special audit u/s 142(2A) of the

Act. Necessary approval was received on 21.2.2014. Objections of

the assessee were placed on record and were rejected on

26.02.2014 and on the same date Ld. A.O directed the assessee to

get his accounts audited from the Auditor namely M/s Mahesh C

Solanki & Co, Chartered Accountant. As per the order of the Ld.

A.O Special Auditor was to submit the report latest by 15.04.2014.

From this point onwards the controversy began. Records shows

that on 23.04.2014 request was made by the Special Auditor to Ld.

A.O for extending time limit which was accepted and time was

extended to 15.05.2014. Through a letter dated 15.05.2014 along

with the Audit Report u/s 142(2A) of the Act dated 15.05.2014 was 12

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 submitted with the Income Tax Department. The receipt by the

Department is shown as 23.05.2014, copy of the receipt is placed at

page 97 of the paper book. The assessment u/s 143(3) of the Act

was completed on 07.07.2014. In the light of above facts Ld.

Counsel for the assessee has contended that firstly the Special

Auditor did not apply for extention of time for submitting the report

before 15.4.2014. Secondly the time was extended to 15.05.2014

and report was submitted on 23.05.2014 which was delayed. Major

emphasis of the Ld. Counsel for the assessee was that first due date

allowed by Ld. A.O to the Special Auditor i.e. 15.04.2014 was

important. Since till this date no extension was applied the

assessment ought to have been completed latest by 14.06.2014 i.e.

within two months from 15.04.2014. Since the limitation for

passing the order was expired on 14.06.2014 the impugned

assessment order dated 07.07.2014 is barred by limitation.

provisions which in this case are Section 142(2A), 142(2C) and

proviso to Section 142(2C) and the same are reproduced below:-

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 Section 142(2A)

If, at any stage of the proceedings before him, the Assessing

Officer, having regard to the nature and complexity of the accounts

of the assessee and the interests of the revenue, is of the opinion

that it is necessary so to do, he may, with the previous approval of

the Chief Commissioner or Commissioner], direct the assessee to

get the accounts audited by an accountant as defined in the

Explanation below sub- section (2) of section 288, nominated by

the Chief Commissioner or Commissioner] in this behalf and to

furnish a report of such audit in the prescribed form duly signed and

verified by such accountant and setting forth such particulars as

may be prescribed and such other particulars as the Assessing]

Officer may require.

Section 142(2C) Every report under sub- section (2A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer: Provided that the Assessing Officer may, on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under sub- section (2A) is received by the assessee.

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 13. Now after going through the above section, as far as Section

142(2A) is concerned there is no dispute at the end of Ld. Counsel

for the assessee. The issue is confined to the provision of proviso of

Section 142(2C) of the Act which refers to the submission of report

within such period as may specified by the Ld. A.O. On going

through the proviso of Section 142(2C) of the Act we observe that the

time for furnishing the report could be extended not exceeding 180

days from the date on which the directions u/s 142(2A) of the Act is

received by the assessee. Extension can be either suo-moto by the

Ld. A.O or on an application made in this behalf by the assessee

quoting good and sufficient reasons. In the proviso there is no

mention that whether the Special Auditor can approach for

extension of time limit to submit the report. In our view the power is

vested with the Ld. A.O which either on the application of the

assessee or suo-moto (emphasis applied) can extend the time period

up to 180 days. In the instant case the assessee has not

approached for extension of time period. It was only between the Ld.

A.O and the Special Auditor that there was a communication of

extension of time period. In our considered view Ld. A.O who is

having sufficient powers under proviso to Section 142(2C) of the Act 15

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 to suo-moto extend the period not exceeding 180 days from the date

of issue of order u/s 142(2A) of the Act. Ld. A.O has acted well

within his power and extended the time period and subsequently

accepted the Special Audit Report dated 23.05.2014 and further

completed the assessment u/s 143(3) of the Act within two months

from the date of receipt of Special Audit Report. We therefore find

no reason to interfere in the findings of Ld. CIT(A) and find no merit

in Ground No.1 raised by the assessee. Accordingly Ground No.1 of

assessee’s appeal is dismissed.

Ground No.1 raised by the Revenue.

estimated the net profit of the assessee at Rs.43,55,368/- as

against Rs.34,08,911/- declared by the assessee. On the other

hand Revenue has challenged the relief given by Ld. CIT(A) of

having applied 1% of net profit rate as against 5% net profit rate

applied by Ld. A.O on total turnover. With regard to this issue of

application of net profit rate Ld. Counsel for the assessee referred to

the following written submissions:-

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 1.1] The appellant had filed his original return of total income on 20-09-

2011 declaring total income at Rs 5,80,310/-.

1.2] The net profit as declared by the appellant assessee in his both the firms are as under:- S.No Particulars Monika Trading Co White Gold [Rs] Enterprises [Rs]

1 Sales 5,77,24,480 17,24,13,447

2.1 Net Profit 1,66,660 5,13,645 2.2 % of Net Profit 0.29% 0.29%

1.3] The appellant assessee declared net profit on the amount of unrecorded total turnover by applying the net profit rate at 1.33%. The same is calculated as under:-

S.No. Particulars Monika Trading White Gold Total [Rs] Co [Rs] Enterprises[Rs 1 Sales as 5,77,24,480 17,24,13,447 23,01,37,297 disclosed 2 Net Profit as 1,66,660 5,13,645 680,305 disclosed in the regular books of account Add Interest as debited in the P & L A/c Paid to Bank 27,157 3,72,485 3,99,642 Others 1,52,720 18,22,806 19,75,526 [80% of Rs 17

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 2278508/-] % of Net Profit 1.33% % of Net profit 1.33% applied

1.4] The appellant assessee himself not claimed deduction in respect of interest paid to Bank and part deduciton in respect of Interest paid to others while calculating the net profit in respect of unrecorded sales as executed with bank accounts which remains to be incorporated in the regular books of account.

1.5] The Net profit as shown by the appellant assessee in respect of disclosed and undisclosed source is as under:-

S.No. Particulars Monika Trading Co White Gold Enterprises Total (Rs.) (Rs.) Disclosed Undisclosed Disclosed Undisclosed 1 Sales 5,77,24,480 5,44,64,764 17,24,13,447 150934202 435536893 2.1 Net Profit 1,66,660 7,24,381 5,13,645 20,04,225 34,08,911 2.2 % of Net Profit 0.29% 1.33% 0.79% 3.1 Consolidate 11,21,89,244 32,33,47,649 3.1 Consolidate Total turnover Total turnover 3.2 % of 0.79% 3.2 % of 0.79% Consolidated Consolidated Net Profit Net Profit

1.6] The assessing officer applied the rate of net profit at 5% on the amount of total turnover which includes both disclosed and undisclosed turnover. However, the Ld CIT(A) while deciding the appeal restricted the rate of net profit rate at 1% as against 5% as applied by the assessing officer and 0.79% as disclosed on the amount of consolodiated total turnover by the appellant assessee.

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 1.7.1] The assessing officer on the basis of discrepancies as pointed out from the undisclosed bank account rejected the books of account as maintained by the appellant assessee.

1.7.2] The assessing officer has not described any genuine reason for rejection of the regular books of account as maintained by the appellant assessee. 16. Ld. A.O estimated net profit rate @5% placing reliance on the

decidion of Hon’ble ITAT, Indore Bench in the case of ACIT V/s Amar

Agrawal ITA No.611/Ind/2012. Ld. Counsel for the assessee

submitted that the case of the assessee is clearly distinguishable from

that in the case of Shri Amar Agrawal (supra) on account of following

reasons:-

(a) The case of Shri Amar Agrawal (supra) pertains to Assessment

Year 2007-08 and Hon’ble Tribunal referred to the provisions of

Section 44AF whereas the assessee’s case pertains to

Assessment Year 2011-12 and provision of Section 44AF are not

applicable.

(b) In the case of Shri Amar Agrawal (supra) the case involved the

application of Mandi Tax Rules, payment to farmers on purchase

and the assessee having no record of payments made to the

farmers on the date of purchase whereas in the case of assessee,

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 in the instant case there is no such issue raised by the Ld. A.O

that payments were made by the appellant from the undisclosed

sources.

(c) In the case of Shri Amar Agrawal (supra) the issue was with

regard to the payment made to the farmers from undisclosed

sources on a particular date which were shown as outstanding

in the books wherein in the case of assessee in the instant case

the issue relates to unaccounted turnover carried out through

five undisclosed bank accounts.

16(A) Further Ld. Counsel for the assessee submitted that the issue

of Net profit rate raised in this appeal is squarely covered by the

decision of Hon’ble Indore Bench of ITAT in the case of Shri Sitarm

Agrawal ITA No.925/Ind/2018 order dated 20.08.2020.

16(B). Ld. Counsel for the assessee also referred to the assessment of

suceeding year i.e. Assessment Year 2012-13 wherein the percentage

of net profit declared by the assessee was duly accepted and the same

is calculated as under:-

S.No Particulars Monika White Gold Total [ Rs] Trading Co Enterprises

1 Sales 1,12,73,581 9,50,94,395 10,63,67,976

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 2.1 Net Profit 1,60,220 4,45,282 6,05,502 2.2 % of Net Profit 1.42% 0.47% 0.57%

account of the following firms which are also regularly assessed to tax

with the income tax department for the Asst Year 2011-12 and

percentage of Net Profit as declared by them is as under:-

S.No Particulars Mittal Industries Pawan Cotton Navin Ginning Ind Factory 1 PAN No AACFM0427D AAJFP0999G AAOPT4069Q

2 Sales 40,80,89,647 46,56,19,435 42,19,25,011 3.1 Net Profit 9,10,601 6,42,047 28,12,927 3.2 % of Net Profit 0.22% 0.14% 0.67%

(i) Hon'ble Jurisdicitonal High Court in the case of CIT vs Bal Chand Ajit Kumar ( 263 ITR 0610). (ii) Hon'ble Gujarat High Court in the case of CIT vs President Industries (258 ITR 0654) (iii) Hon'ble Jurisdictional High Court in the case of Man Mohan Sadani vs CIT ( 304 ITR 0052) (iv) Hon’ble ITAT, Indore Bench in the case of Shri Sitaram Agrawal [ Prop of M/s SMO Industries ] ( Appeal No ITA No 925/Ind/ 2018 dt 20-08-2020 ] 19. Per contra Ld. Departmental Representative vehemently argued

supporting the order of Ld. A.O.

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 20. We have heard rival contentions and perused the records placed

before us and carefully gone through the decisions referred and relied

by the Ld. Counsel for the assessee. The issue raised in Ground No.2

by the assessee and Ground No.1 raised by the Revenue relates to

estimation of Net profit rate. We observe that the assessee carried out

various transactions of purchases and sale through 5 undisclosed

bank accounts. The undisputed figure of undisclosed turnover in the

case of M/s Monika Trading Co and M/s White Gold Enterprises is

Rs.5,44,64,764/- and Rs.15,09,34,202/- respectively. The assessee

has offered 1.33% of net profit on the undisclosed turnover in the

Revised computation of total income filed during the course of

assessment proceedings. Ld. A.O after relying on the decision of Amar

Agrawal (Supra) applied the net porofit of 5% on the total turnover

(disclosed + undisclosed) thereby computing Net Profit of

Rs.2,17,76,845/-.

was granted by Ld. CIT(A) observing as follows :-

“4.4.1] In Ground Nos 2 & 6 of the appeal, the appellant has challenged the, estimation of income of Rs 2,17,76,845/ - from business by adopting the rate of' profit at 5 on the gross turnover

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 of Rs 43,55,36,893/-. The appellant while filing his return of total income declared total turnover of his both the proprietorship concern is as under: - S.No. Name of the Proprietorship concern Amount (Rs.) 1 M/s Monika Trading Co 5,77,24,480 2 M/s White Gold Enterprises 17,24,13,447 23,01,37,927

4.4.2] The amount of total turnover after incorporating all the bank accounts was increased from Rs 23,01,37,927 to Rs 43,55,36,893/-, the same is calculated as under:- S.No. Name of the Original Additional Additional Proprietorship in revised in revised concern 1 M/s Monika 57724480 54464764 112189244 Trading Co 2 M/s White Gold 172413447 150934202 323347649 Enterprises 435536893

4.4.3 The appellant on the amount of total turnover as declared at the time of filing of the original return of total income and also after incorporating the revised turnover calculated as under:- S.No Particulars Monika Trading Co White Gold Enterprises Disclosed Undisclosed Disclosed Undisclosed 1 Sales 57724480 54464764 172413447 150934202 2.1 Net profit 166660 724381 513645 2004225 2.2 % of Net profit 0.20% 1.33% 0.29% 1.33 3.1 Consolidate 11,21,89,244 32,33,47,649 Total turnover 3.1 Consolidate 8,91,041 25,17,870 Net profit 3.2 % of 0.79% 0.79% consolidated net profit

4.4.4] On perusal of the above table it is evident that the appellant has shown net profit at 0.29 only in both his 23

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 proprietorship concern but the percentage of net profit increased from 0.29 to 1.33 on the amount of turnover as not recorded in his books of account. The case of the appellant for the Asst Year 2012-13 was also selected in scrutiny and book result as declared by the appellant was duly accepted, the appellant in that year declared net profit at 1.42% in his proprietorship concern M/s Monika Trading Co and 0.47% in the proprietorship concern M/s White Gold Enterprises, the same is summarised as under:- Particulars Monika Trading White Gold Enterprises Co S.No 1 Sales 1,12,73,581 9,50,94,395 Net profit 1,60,220 4,45,282 2.1 2.2 % of Net profit 1.42% 0.47% 3.1 Consolidated turnover 10,63,67,976 Consolidated Net profit 0.57% 3.2

4.4.5] On perusal of both the table Le. as provided in paras 4.4.3 & 4.4.4, it is evident that of consolidated profit as declared by the appellant on the amount of disclosed or undisclosed turnover in the year under appeal was at 0.79 and consolidated profit as declared in the Asst Year 2012-13 which was duly accepted by the assessing officer was 0.57 . The margin of the appellant in large volume is significantly lower than the rate as provided U / s 44AF /44AD of the Act. The assessing officer while passing the assessment order applied the rate of net profit at 5 based on the decision the case of Shri Amar agrawal [ Appeal No ITA No 611/ Ind/ 2012]. The appellant deals in Agro product and the price of the product varies due to the quality of rains and soil, availability and supply of the material. Hence, net profit rate of one assessee cannot be applied in the case of other assessee. The appellant 24

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 during the course of hearing also provided rate of net profit of few more concerns in the same assessment year, the same is reproduced as under:-

S.No Particulars Mittal Industries Pawan Cotton Ind Naving Ginning Factory 1 PAN No AACFM0427D AAJFP0999G AAOPT4069Q 2 Sales 408089647 465619435 421925011 3.1 Net profit 910601 642047 2812927 3.2 % of Net 0.22% 0.14% 0.67% profit

4.4.6 On perusal of the above, it is clear that the percentage of net profit of all the concerns varies from 0.22 to 0.67 but the appellant himself in his case accepted conso1odated net profit rate at 0.79 in the year under appeal and 0.57 in the succeeding assessment year i.e. in the Asst Year 2012-13. Hon'ble jurisdictional High court in the case of CIT Vs Bal Chand Ajit Kurnar as reported in 263 ITR 0610 and in the case of Man Mohan Sadani Vs CIT as reported in 3'04 ITR 0052 has held that only net profit rate is to be applied in case of unrecorded sales. In the present case, though the books of account of the appellant was rejected and rightly so but the rate of net profit can be applied on the basis of net profit as declared by the appellant himself in his own case and also considering the other comparable cases as available. The appellant in his own case in the year under appeal had declared consolidated net profit at 0.79 and 0.57 in the Asst Year 2012-13 but in all the other similar cases where turnover is more or less similar to the revised turnover of the appellant the percentage of net profit varies between 0.22 to 0.67. Hence, to meet the end of justice, net profit rate in the case of the appellant applied at 1% on total turnover of Rs 43,55,36,893/- which

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 calculated comes to Rs 43,55,368/- as against net profit as declared by the appellant in his revised Profit & loss account was of Rs 34,08,911/-. I hereby direct the assessing officer to considered the net profit of Rs 43,55,368/- in place of Rs 2,17,76,845/_. The appellant accordingly get relief of Rs 1,74,21,447/-.”

confirmed by Ld. CIT(A) and the Revenue has challenged the relief

granted by Ld. CIT(A). As submitted by Ld. Counsel for the assessee

that similar facts and issue came up before this Co-ordinate Bench in

the case of Shri Sitaram Agrawal (supra). On going through this

decision we find that in the case of Shri Sitaram Agrawal (supra) also

there were undisclosed bank accounts which had undisclosed

turnover. Assessee accepted the undisclosed turnover and offered net

profit on such undisclosed turnover. Net profit rate adopted by the

assessee namely Shri Sitaram Agrawal (supra) was the average net

profit rate accepted by the department in the earlier years and the

percentage of financial expenses (Bank interest, other finance

charges) already incorporated in the regular books. In these given

facts the Tribunal confirmed the finding of Ld. CIT(A) and accepted

the net profit rate offered by the assessee observing as follows:-

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 “26. From perusal of the detailed finding of fact by Ld. CIT(A) and the factual aspect we observe that the Ld. A.O has only taken the basis of undisclosed bank account for rejecting the books of accounts. Nowhere in the assessment order he has pointed out any other irregularity in the regular books of accounts maintained by the assessee which are duly audited. Ld. Departmental Representative has failed to bring on record any such observation of the Ld. A.O. It is well evident that the fact of undisclosed bank account has duly been admitted by the assessee in the revised return of income and has offered the net profit @2.5% on the total transactions of the undisclosed bank account treating it as undisclosed sales atRs.18,82,79,709/- on which net profit of Rs.47,06,993/- has been offered. Apart from this fact during the course of assessment proceedings Ld. A.O while examining the stock records and books of accounts has not come across any mistake or irregularity which could prove that the books of accounts regularly maintained by the assessee and book results are questionable. In these given facts and circumstances of the case we are of the view that the action of the Ld.A.O rejecting the book results thereby invoking provisions of section145(3) of the Act was not justified and so was also not justified in estimating the net profit on the regular turnover in the books of accounts @2.5% as against 0.73% offered by the assessee. Revenue has also failed to rebut the fact that Ld. A.O has not pointed out any mistake in the submissions of the assessee wherein it was mentioned that net profit rate of 2.5% applied on the undisclosed turnover was on the basis of calculation as per which the interest and bank charges were claimed in the regular books which in percentage terms were around 1.82% of the total disclosed turnover and since they have already been claimed so the percentage of interest and bank charges were added to the net profit offered in the books of accounts and fair net profit @2.5% was applied. This application of 2.5% on undisclosed turnover cannot be equated to be applied on the regular turnover disclosed by the assessee. In the immediately preceding assessment year 2013-14 assessee has offered 27

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 0.91% as net profit rate which has been accepted by the revenue. In these given facts and circumstances of the case we hereby find no reason to interfere in the finding of Ld. CIT(A) deleting the addition of Rs.67,76,734/- and we also find no justification in the action of the Ld. A.O rejecting the books of accounts u/s 145(3) of the Act. We accordingly dismiss Ground No.2 of the revenue’s appeal.” 23. Examining the facts of the instant case with the case of Shri

Sitaram Agrawal (supra), we are satisfied that the issue and the facts

are verbatim similar. In the case of the assessee net profit rate @

0.29% is declared on the turnover disclosed in the regular books. Ld.

A.O has not pointed out any mistake in the regular books maintained

by the assessee. Just because that the assessee is having 5 bank

accounts and not shown in the regular books cannot be the sole basis

to reject the regular books of accounts. On the undisclosed turnover

the assessee has already opted and duly offered the net profit

seperately but on the disclosed turnover unless the Ld. A.O points

outs specific mistake or doubt about the genuineness of the

purchase/sale and expenses transactions, the book results cannot be

doubted. This is also a fact that the assessee has maintained

quantitative details and books are duly audited. So far as the book

results i.e. net profit shown in the regular books @0.29% on the

disclosed turnover of Rs.23,01,37,927/- is concerned, we are of the 28

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 view that the same should be accepted and estimation of Ld. A.O

applying @5% of net profit and Ld. CIT(A) @1% of net profit on the

disclosed turnover is devoid of any merits.

assessee has offered net profit of 1.33%. This net profit rate has been

calculated by adding interest cost @1.03% which has been calculated

by dividing the total finance charges of Rs.23,75,168/- divided by the

disclosed turnover of Rs.23,01,37,927/-. The assessee suo-moto

accepted that the bank charges have already been charged in the

regular books and therefore net profit rate before claiming of finance

charges should be adopted as net profit on the undisclosed turnover.

Assessee has accordingly added 1.04% of finance cost to 0.29% of the

net profit offered in the regular books and the total i.e. 1.33% is

adopted as Net Profit rate and accordingly offered net profit of

Rs.27,28,606/- on the undisclosed turnover of Rs.20,53,98,966/-.

We are thus satisfied with the net profit offered by the assessee in the

Income Tax Return on the disclosed turnover and Net profit of 1.33%

offered on undisclosed turnover during assessment proceedings and

thus applying the ratio of the decision in the case of Shri Sitaram

Agrawal (supra) which is squarely applicable in the instant case, we 29

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 allow Ground No.2 of the assessee’s appeal and dismiss Ground No.1

of the Revenue’s appeal.

No.2 raised by the Revenue. The common issue raised by both the

assessee and Revenue in this grounds relates to addition made on

account of peak balance in undisclosed bank accounts.

was satisfied that the books of accounts needs to be rejected since

various transactions of sales were not recorded in the regular books.

The Ld. A.O apart from estimating higher net profit on total turnover

also made addition for undisclosed investment in the unrecorded

turnover. For making the alleged addition on account of investment in

unrecorded turnover Ld. A.O examined the balance sheet of both the

proprietorship concerns of the assessee and observed that the

assessee has employed funds at Rs. 2.88 crores and the disclosed

turnover is Rs. 23.01 crores. Taking this basis of the ratio of fund

employed to total accounted turnover Ld. A.O applied the same to the

unaccounted turnover and computed the unaccounted investment at

Rs.2,56,74,870/- and added the same to the income of the assessee.

When the matter came before Ld. CIT(A) he granted partial relief by 30

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 sustaining the addition of Rs.51,65,904/- taking the basis of peak

bank balance of the total 5 unaccounted bank accounts.

Tribunal. Assessee has challenged the addition confirmed by Ld.

CIT(A) and Revenue is aggrieved with the relief granted by Ld. CIT(A).

submissions:-

2.1] The assessing officer qwhile passing the assessment order estimated the net investment at 12.5% of the Unrecorded sales as executed by the appellant assessee.

2.2] The appellant assessee having total turnover of Rs 23,01,37,927/- in his proprietorship concerns, the amount of total turnover , cash and stock in these units are as per audited final account are as under:- S.No Name of the Firm Total Turnover Cash & Bank Stock [ Rs] [Rs] [ Rs] 1 M/s Monika Trading 5,77,24,480 7,11,867 NIL Co 2 M/s White Gold 17,24,13,447 9,61,814 2,80,89,197 Enterprises 23,01,37,927 16,73,681 2,80,89,197

2.3] The assessing officer while passing the assessment order estimated the amount of Investment in the unrecorded sales of Rs 2,56,74,870/- i.e 12.5% of total unrecorded turnover of Rs 20,53,98,966/-.

2.4.1] The assessing in the assessment order further observed that the appellant assessee had shown purhcases from M/s Ragho Cotton Corporation , Sutala in his Proprietorship Concern M/s Monika Trading Company to the tune of Rs 81,81,365/- during the period from 13-08-2010 31

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 to 01-12-2010 and payment to the said party was made on 03-02-2011 and 09-02-2011. It was also stated by the assessing officer that the Inspector in his report has submitted that the said party is not available in the addresses as provided. Similarly in the case of Shri Anand Prasad Daliya, Warangal purhcases was shown in the book of M/s Monika Trading Companyduring the period from 04-10-2010 to 09-10-2010 to the tune of Rs 25,20,120/-. In this case a letter was issued under section 133(6) of the Act which was also return unserved.

2.4.2] The payment made to both these parties from the bank account of the appellant assessee was duly reflected. Please refer Page No 276 of the compilation, wherein the amount paid to these parties were duly highlighted.

2.4.3] It is pertinent to note that appellant assessee while calculating the peak, credit of purhcases as made from both these parties have not taken into account. However, the cash balance and stock as lying in the regular books of account only was considered by the appellant assessee for working of peak.

2.5] The appellant assessee before the Assessing officer and also before the Ld CIT(A) claimed that the amount of cash and stock as lying in his regular books of account is sufficient as to executed total turnover through these Five bank accounts which remained to be incorporated in the regular books of account.

2.6] The appellant assessee during the course of assessment proceeding obtgained revised Audited final accounts after incorporating entrie transactions as executed through these five bank accounts which remained to be included in the regular books of account. The audit report as obtained on the basis of revised books has also been filed before the assessing officer. On perusal of the same it was clearly evident that stock and cash as 32

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 per regular books of account duly justified all the transactions as executed through these five bank accounts.

2.7] The amount of cash in hand and stock as lying in the regular books of account of the appellant assessee as summarized are attached herewith. The said detail was prepared on the basis of books of account which was before the assessing officer and also referred for Special Audit. Few dates as summarized is as under:-

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 2.8] That in view of the above, there was no negative balance of cash and Stock even after considering the closing bank balances of all the five bank accounts which remains to be incorporated in the regular books of account.

2.9.1] The appellant while calculating the peak has considered the following components: S.No Particulars 1 Cash as per regular books of account and as available with the assessee for his business 2 Stock of goods as per books of account and as available for sale out of book proceed of which was deposited in the bank accounts which was not incorporated in the regular books of account

2.9.2] The appellant assessee also declared additional income of Rs 27,28,601/- on the amount of total unrecorded turnover. The said amount is also available with the appellant assessee against the peak credit if any calculated. However, in the present case, the cash balance and stock as per regular books of account was much higher than the bank balance as reflected in all five bank accounts. Hence, there was no reason for making any addition to the total income of the appellant assessee on account of unexplained investment in the unrecorded total turnover. 29. Ld. Counsel for the assessee submitted that the issue raised in

this ground isalso squarely covered by the decision of Co-ordinate

Bench in the case of Shri Sitaram Agrawal (supra) so much so that

in the case of assessee also the total of cash in hand and stock in

hand in the regular books of accounts was always more than the

peak balance of the undisclosed 5 bank accounts and thus the

assessee was having sufficient fund available in the regular books 34

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 to carry out transactions of undisclosed turnover and to cover the

peak balance. Reliance was also placed on following decisions:-

(i) Hon’ble Jodhpur Bench of ITAT in the case of ACIT vs Kashmir Trading Company as reported in 20 Taxmann.com 337. (ii) Hon’ble Allahabad High Court in the case of CIT vs Fertilizer Traders as reported in 42 taxmann.com 476 (iii) Hon’ble Gujarat High Court in the case of CIT vs Tirupati Construction Co as reported in 55 taxmann.com 308. (iv) Hon'ble Punjab & Haryana high court in the case of CIT vs Aggarwal Engg Co ( JAL) (302 ITR 0246). (v) Hon’ble ITAT, Indore Bench in the case of Shri Sitaram Agrawal [ Prop of M/s SMO Industries ] ( Appeal No ITA No 925/Ind/ 2018 dt 20-08-2020] 30. Per contra Ld. Departmental Representative vehemently

argued supporting the order of Ld. A.O.

placed before us. Through Ground No.3 in the assessee’s appeal

and Ground No.2 of Revenue’s appeal, the issue raised relates to

peak credit/investment unrecorded turnover. We observe that the

assessee in addition to the regular transactions of sales recorded in

regular books also carried out unaccounted transactions of sales

through 5 bank accounts. The assessee has admitted that the sales 35

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 carried out in the 5 bank accounts mentioned in the impugned

assessment order were carried out by him but there is no record in

the books of accounts. After admitting the same assessee had

offered net profit on the unrecorded sales turnover. During the

assessment proceedings Ld. A.O also examined the aspect of

investment carried out in the unaccounted sales turnover. Ld. A.O

took the basis of regular books of accounts and after examining the

balance sheet in the case of the assessee that the assessee had

employed funds to the tune of Rs. 2.88 crores and shown a

turnover of Rs. 23.30 crores applied the same ratio and computed

the unaccounted investment of Rs. 2.57 crores for carrying out the

unaccounted turnover of Rs. 20.54 crores. Ld. CIT(A) while

adjudicating this issue substained the addition to the extent of peak

balance available in the 5 bank accounts on a particular date which

in this case was 27.10.2010 and adopted the peak balance as

Rs.51,65,904/-. Ld. CIT(A) confirmed this addition of peak credit

observing as follows:-

“4.5.1] In Ground Nos 2 & 7 of the appeal, the appellant has challenged the addition of Rs 2,56,74,870/- made on account of unexplained investment. The assessing officer while passing the

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 assessment order added 1/8th of total unrecorded turnover of Rs 20,53,98,966/- which calculated comes to Rs 2,56,74,870/- was added to the total income of the appellant on account of unexplained investment in the business of the appellant. The appellant during the course of hearing with the table tried to explain that total unrecorded turnover in his both the proprietorship concern was of Rs 23,01,37,927/- breakup of the same was as under:- & Total Turnover [ Cash Bank SN Name of the Firm Stock [Rs] Rs] [Rs] 1 M/s Monika Trading Co 5,77,24,480 7,11,867 NIL 2 M/ s White Gold Enterprises 17,24,13,447 9,61,814 2,80,89,197 23,01,37,927 16,73,681 2,80,89,197

4.5.2 The appellant further claimed that even if the amount of total unrecorded turnover is considered for 300 days in that case also, the total unrecorded turnover calculated comes to Rs 6,84,663/ - per days. The appellant further claimed that he had sufficient amount of cash and' also stock in his regular books of account and therefore no addition on account of unexplained investment was justified in the case of the appellant. The appellant further relied on the decision of the :-

Hon'ble Punjab & Haryana High Court in the case of CIT vs Agrawal Engg Co (JAL) as reported in 302 ITR 0246 wherein it was held that that no separate addition on account of cash credit and on account of unexplained payments for purchases made outside the books can be made once the net profit rate is applied on contract receipts of an assessee for estimating his income from contract work.

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 Hon'ble Gujarat High Court in the case of CIT vs President Industries as reported in 258 ITR 0654 has held that:-

2] The Tribunal also found that there is no material on the record to suggest that the assessee made any investment outside books of accounts to make alleged unaccounted sales in respect of the aforesaid appellate order. The applicant made an application under s. 256(1) for referring the aforesaid two questions said to be arising out of Tribunal)s order.

Hon'ble Allahbad High Court in the case of CIT vs Banwarilai Banshidhar as reported in 229 ITR 0229 has held that:-

Where income is assessed at G.? rate by rejecting the books of assessee under s. 145(1), proviso, no disallowance can be made separately under s. 40A(3).

That Hon'ble Allahabad High Court in the case of Ashok Kumar Rastogi vs CIT as reported in 100 CTR 204 has held that [ refer preamble]

"For recalling its finding, the Appellate Tribunal has not relied upon or referred to any document and addition of Rs. 50,000 as unexplained investment has been made merely on the basis of the sale transactions amounting to Rs. 4,24,396 estimated on the basis of documents seized in raid. Even the ITO and the CIT(A) have given the same reason for adding the aforesaid Rs. 50,000 as unexplained investment. Though the ITO is not bound the technical rules of evidence and pleadings and is entitled to consider any material which may not be technically accepted as evidence in a civil court, but he cannot make the assessment on a pure guess without reference to any evidence or material.

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 No evidence or material has been referred to any evidence or material. No evidence or material has been referred to any relied upon for ,treating the aforesaid sum of Rs. 50,000 as unexplained investment and the only circumstance which has been referred in this connection is the estimated sale of Rs. 4,24,396. From the estimated sale it cannot necessarily be inferred that the assessee has invested Rs. 50,000 in some unexplained business. It being not a necessary inference is a pure guess and the finding seem to be based on surmises and conjectures. Thus, there was no material for the Tribunal to hold that the assessee had made an unexplained investment of Rs. 50,000 outside the account books.-Dhakeswari Cotton Ltd. vs. CIT(1954) 26 ITR 775 (sq relied on."

Hon'ble Gujarat High Court in the case of CIT vs Gurubachhan Singh J Juneja reported in 302 ITR 63 has held that [ refer from premable] :-

"In absence of any material on record to show that there was any unexplained investment made by the assessee which was reflected by the alleged unaccounted sales) the finding of the Tribunal that only the GP on the said amount can be brought to tax does not call for any interference."

4.5.2] Thus, as such although the appellant was having sufficient cash and stock in his regular books of account and more so when the books of account was rejected and net profit rate was applied there was no justification for making addition of Rs 2,56,74,870/- to the total income of the appellant on account of Unexplained investment for unrecorded total turnover; however, the appellant has not been able to corroborate the fact that the cash and stock in hand of the business was used for making the 39

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 initial investment in the out of books sales. Thus, it cannot be denied that the appellant must have made some initial investment for doing business outside the books of account. But this addition on account of initial unexplained investment for doing business outside books of account can not exceed the peak of the unrecorded turnover in the books of account. This peak works out to Rs 51,65,904/- as on 27.10.10 which is on page 276-'or~the paper book of the appellant.

"4.5.3 Thus, 1 feel that it would serve the ends of the justice and it would be fair and reasonable to restrict this addition to Rs 51,65,904/- on account of unexplained investment for unrecorded turnover. Hence, 1 therefore direct the assessing officer to restrict this addition to Rs 51,65,904/ - made to the total income of the appellant. The appellant accordingly gets part relief.

5.0 As a result, this appeal is partly allowed”. 32. Before us when the matter was being heard Ld. Counsel for

the assessee referred to the decision of Hon’ble ITAT Indore Bench

in the case of Sitaram Agrawal (supra) which was also authored by

us. In this case of Sitaram Agrawal (supra) similar issue of

unaccounted turnover through undisclosed bank account was

there. The Ld. A.O computed the peak balance of the unaccounted

bank accounts. We however confirmed the finding of Ld. CIT(A)

that the addition for peak balance can be made only if it is more

than the cash or stock in hand available in the regular books and 40

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 profit offered as unaccounted turnover of preceeding year or years.

Our relevant findings in the case of Sitaram Agrawal (supra)

adjudicating this issue reads as under:-

In our considered view assessee had carried out the transactions of sales and purchases with the regular parties of which some have been recorded in the regular books and some have not been recorded which are routed through the ICICI bank. This facts strongly supports the submission of the assessee that the physical stock and cash in hand in the regular books have been utilised for making unaccounted sales. It is noteworthy that the assessee is carrying out of books sales transactions in the past also and till the date of peak bank balance on 28.2.2014 the profits earned on unrecorded sales have been offered to tax and they form part of the peak bank balance. So in nutshell against peak balance found in the bank account not disclosed in the regular books in the instant case three things have to be considered, firstly stock in hand available with the assessee, secondly cash in hand available in regular books and thirdly the undisclosed profit earned on the unaccounted sales till the date of peak balance which have been offered to tax. Taking these factors together, in the instant case the peak balance in the undisclosed ICICI bank account is much less than the total of stock in hand, cash in hand and unaccounted profits offered to tax. We therefore in the given facts and circumstances of the case and considering judicial precedence find no inconsistency in the finding of Ld. CIT(A) deleting the peak credit addition of Rs.1,25,33,136/-. We accordingly dismiss revenue’s Ground No.1.

decision we observe that on 27.10.2010 the total peak bank balance

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 as per undisclosed bank accounts is Rs. 75,80,285/- ( which

however has been wrongly taken by Ld. CIT(A) at Rs. 51,65,904/-

as he ignored the bank balance of Union Bank at Rs.24,14,381/-).

Against this peak balance of Rs. 75,80,285/- if we look at the book

results we find that on the very same date i.e. 27.10.2010 cash

balance available in M/s. Monika Trading Company and M/s. White

Gold Enterprises is Rs. 3,26,957/- and Rs.3,74,978/- totalling to

Rs. 40,76,737/-. Apart from cash the assessee also has stock in

hand and the same in the case of M/s. Monika Trading Company

and M/s. White Gold Enterprises is Rs. 56,25,609/- and Rs.

25,59,663/- respectively totaling to Rs.81,85,272/-. So as on

27.10.2010 total of cash and stock in hand available in the regular

books of the two proprietorship concerns run by the assessee totals

to Rs. 1,22,62,009/- and this figure is much more than than the

peak balance of unaccounted bank accounts at Rs. 75,80,285/-. So

there is no negative balance of cash and stock after considering the

total closing balance of all the 5 bank accounts. We thus applying

our own finding in the case of Sitaram Agrawal (supra) are of the

considered view that in the instant case Ld. A.O as well as Ld.

CIT(A) erred in making the addition of unaccounted investment/ 42

Dwarka Prasad Tayal ITA Nos. 284 & 334/Ind/2018 peak balance of undisclosed 5 bank accounts. We therefore set

aside the finding of Ld. CIT(A) and delete the addition of

Rs.51,65,904/- sustained by Ld. CIT(A). Thus Ground No.3 raised

by the assessee is allowed and Ground No.2 raised by the Revenue

is dismissed.

partly allowed and that of the Revenue ITA No.334/Ind/2018 is

dismissed.

The order pronounced in the open Court on 13.10.2020.

Sd/- Sd/-

( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 13th October, 2020

/Dev

Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore