COMMISSIONER OF INCOME TAX vs. RITESH AGRAWAL (SIMHAL)

ITA-78-2009 ( COMMISSIONER OF INCOME TAX Vs RITESH AGRAWAL (SIMHAL)) 07-07-2015 Shri Sanjay Lal for the appellant. This is revenue’s appeal under section 260-A of the Income Tax Act, calling in question the concurrent orders passed by the Income Tax Appellate Tribunal and Commissioner (Appeals). The premises of the assessee, dealing with jewelries, was subjected to search and seizure action on 1.8.2002. Notice and proceedings were held under section 158 BC for the block period 1.4.96 to 1.8.2002 and the undisclosed income was assessed at Rs. 20 Lacs and the total income assessed was Rs.7,88,08,743/-. On appeals being filed, the appellate authorities having interfered into the matter, this appeal by the revenue under section 260-A, of the Act. The only question raised in this appeal at the time of hearing was that the order passed by the appellate authorities in deleting an addition of Rs.1,04,14,407/- on the ground of unaccounted transaction referred by the Assessing Officer, which was recorded in the seized documents – BS-1 to BS-8, and by ignoring the same, reduction of the amount is said to be unsustainable. Shri Sanjay Lal, learned counsel for the appellant, referring to the order of the Assessing Officer and the manner in which the entries made in the seized documents, indicated in BS-1 to BS-8, has been analysed by the Assessing Officer to work out the undisclosed income at Rs. 1,45,60,000/- and argues that without considering all these aspects of the matter, interference made by the learned appellate authorities is unsustainable. We have considered the contentions advanced and we find from page 21 of the order passed by the Commissioner (Appeals), the following reasons are given for interfering into the matter: “ Thus, Undisclosed income on unrecorded turnover at Rs.68,91,604/- is worked out as per documents BS-1 to BS-8 as against an income of Rs.1,45,06,000/- computed by the Assessing Officer.

As regards further addition made by the Assessing Officer on account of peak investment amounting to Rs.4,56,80,360/-, in my view, such huge addition of Rs.4,56,80,360/- looking to the nature of business transactions found unrecorded in documents BS-1 to BS-8 appears to be too high. Peak investment is usually worked out when similar transactions are recorded on both sides which is not applicable in case of the appellant. Therefore, computation of peak investment worked out by the Assessing Officer does not appear to be logical. However, admittedly appellant had done unrecorded business as found reflected in documents BS-1 to BS-8 and some capital is required for doing unrecorded turnover as discussed above. Appellant’s unrecorded turnover has been worked out at Rs.7,12,75,633/- in the preceding paragraphs. Keeping in view of the nature of business conducted by the appellant where there is a quick turnover, I consider it fair and reasonable if addition on account of unexplained investment for doing unrecorded turnover as found recorded in documents BS-1 to BS-8 is taken at Rs.30,00,000/- as against the peak investment taken by the Assessing Officer at Rs.4,56,80,360/-. Thus, appellant will get relief of Rs. 5,03,48,756/- [(Rs.1,45,60,000/- + Rs. 4,56,80,360/-) – (Rs.68,91,604/- + Rs.30,00,000/- )].” Further, after considering the same again in detail, the learned appellate tribunal has recorded the reasons in paragraph 39, as under:- “39. We have considered rival submissions and material available on record. The AO made the addition on this issue on the basis of loose papers found during course of the search which are not included in the documents BS-1 to BS-8. However, the assessee made detailed submission before the ld. CIT(A) noted above explaining each and every loose paper which are found recorded in BS-1 to BS-8. The detailed explanation of the assessee and tabulation with reference to BS-1 to BS-8 are reproduced by ld. CIT(A) at pages 22 to 51 of the appellate order. The papers and tabulations of the assessee were forwarded to the AO for his comments in which AO has not pointed out any mistake. The ld CIT(A) also verified the facts himself and gave a categorical finding that most of the transactions on documents/loose papers discussed by the AO in para 10 of the assessment order are found recorded in the documents BS-1 to BS-8. The assessee himself admitted few transactions not entered into BS-1 to BS-8. Working of the same is also given and the basis of the same. Ld. CIT(A), DR during the course of the arguments did not dispute working of the assessee given before ld. CIT(A) and has not pointed out any infirmity in the findings of the ld. CIT(A) on this issue. Ld. CIT(A), DR did not bring any material on record to contradict the findings of the fact recorded by the ld. CIT(A). We therefore do not find any justification to interfere in the order of the ld. CIT(A) as regards the transaction entered into the documents BS-1 to BS-8. It is settled law that in the block assessment, addition could be made on the basis of evidence recorded and found during course of the search. The submission of the ld. DR shows that even if some loose papers are recovered during course of the search, the computation of undisclosed income should be computed for whole of the block period. Such a submission itself would prove and support the findings of the fact recorded by ld. CIT(A) that there is no basis whatsoever in making huge addition against the assessee. The submission of ld. DR is already considered and decided against the revenue in the cases of M/s Sunita Jute Packagers, Radheshyam Gupta HUF and Kailash Agrawal (supra) by ITAT, Indore Bench. We therefore do not find any merit in the contention of the ld. DR. No material is also found during course of the search if assessee made any investment in making those unrecorded sales. If the sales are there, there are bound to be purchases. The income however could be computed on the basis of unrecorded sales made outside the books of account for which evidence is recovered. The ld. CIT(A) on going through the submission of the assessee and material on record noted that the transactions relating to the sale of gold ornaments weighing 1587.472 grams and unrecorded sales of Rs.60,790/- are not recorded in the books of account as well as in BS-1 to BS-8. The ld. CIT(A) took the value of the same as 6,98,488 and applied n.p rate of 13% and make the addition of Rs.90,903/- and further addition of Rs.34,000/- being investment in the aforesaid sales. We have applied n.p rate of 3% in the case of the assessee being wholesale dealer. The same rate is applicable on this issue also therefore for unrecorded sale of gold ornaments, the entire sale receipts cannot be profit of the assessee as is held by the Hon’ble MP High Court in the case of Balchand Ajitkumar (supra). On both the figures of Rs.6,98,488/- and Rs.60,970/- as is confirmed by ld. CIT(A), if n.p rate of 3% is applied, it would give approximate profit of Rs.21,000/- + Rs.1830/- (Rs,22,830/-). Since no evidence of undisclosed investment is found, the addition of Rs.34,000/- is deleted. We accordingly set aside the orders of the authorities below to the above extent and direct the authorities below to take the profit on undisclosed sales at Rs.22,830/- as against Rs.1,85,593/- sustained by the ld. CIT(A). As a result, departmental ground No.3 is dismissed and ground No.11 of the CO of the assessee is allowed.” This concurrent finding of fact recorded by both the authorities are based on due appreciation of the material and documents available on record and the discretion exercised by the authorities cannot be termed as perverse or illegal to such an extent that interference into the matter is called for. Accordingly, finding no ground to interfere into the matter, we dismiss the appeal. (RAJENDRA MENON) JUDGE (SUSHIL KUMAR GUPTA) JUDGE