SH. GHANSHYAM SHARMA,NEW DELHI vs. DCIT, NEW DELHI

This appeal is filed by the Revenue against order dated 29/03/2013 passed by CIT(A)-XXXI, New Delhi for assessment year 2009-10.

The grounds of appeal are as under:- 1. “That on the fact and circumstances of the case the order passed by Ld. CIT(A)-XXXI is bad in law and nature because the Ld.CIT (Appeal) has ignored the following premises on which the assessment was framed: a) The AO has rejected the books of accounts under sec. 145(3) and after the rejection also the AO has framed the assessment under section 143(3) instead of section 144.

A search u/s 132 of the Act was conducted in case of M/s Radharani Trading Company (Raj Darbar Group) on 31/07/2008 during this action certain documents and stock belongings to Shri Ghanshyam Sharma, Proprietor of M/s A. K. Traders were found. Certain other documents were also seized from other premises and accordingly proceedings u/s 1543C of the Income Tax Act, were initiated in the case of the assessee. For Assessment Year 209-10, the assessee filed return of income on 30/09/2009 declaring an income of Rs.46,15,830/-. Notice u/s 143(2) was issued on 6/9/2010 and was duly served upon the assessee. The assessee filed necessary responses before the Assessing Officer. The assessee is carrying the business of manufacturing of Pan Masala/Gutka of Raj Darbar Brand. During the search proceedings certain discrepancies with reference to stock physically found at the factory of the assessee vis-à-vis the stock as per stock register was found. Therefore, during the post search proceedings, the assessee made a surrender of Rs.25 lac as undisclosed income for the Assessment Year 2009-10. Though the amount surrendered as undisclosed in the return by the assessee is Rs. 25 lacs but since the head under which the surrender has been made are different than those of declared in the return of income. The assessee was asked to file explanation by the Assessing Officer. In response to this, the assessee submitted that the surrender was made in the heads as shown in the return.

It is submitted that the assessee by letter dated 13.10.2008 before filing any income tax return made an offer of surrender of Rs. 25,00,000/- towards the value of stock that was found in excess of the stock shown in the books of account to cover-up any of the discrepancy found in papers and materials seized by the department. (PB 22-23 and also 18-19 in PB - 2). It would be seen that a return of income was due on 30th September 2009 and the same was filed on that day i.e. much after declaration was made. Copy of ITR is place at PB 1 to 21. It is necessary to submit that difference in stock was below Rs. 5 lakhs as explained on 02.12.2008 during the course of statement recorded, however, the appellant has already declared Rs. 25 lakhs as income and does not want to retract and paid taxes thereon. At the time of the filing of the return the consultant declared the same in two parts Rs. 5 lakhs against stock and 20 lakhs as cash in hands in the books of accounts. During the course of assessment proceedings it was explained accordingly vide letter dated 20.12.2010 PB - 57-59 and 20-22 in PB -2.

It is submitted that the AO has wrongly calculated the difference at Rs. 72,08,460/- without giving effect to the purchases made by the appellant supported by the bills as well as transport receipts as difference in stock was only 4,71,139.60 as explained at PB 60 and page 23 of PB - 2. The AO has noticed that this explanation was given much before filing ITR and stock register showing opening figures of 24.07.2008 was not complete and after giving effect to the purchase bills which was submitted at the time of search or thereafter as during the course of search it could not be entered into stock register. Further these bills were supported by transport receipts and taxes have been paid as shown in the bills.

It is submitted that during the course of assessment proceedings various ledger accounts, cash book, bank statement, sales account of the various items, all the bank accounts of the related parties were filed and the AO did not find any discrepancy in the account after noticing various transactions of purchase and sales through the bank account.

It is submitted that there cannot be addition twice by the AO for the same cause unless the AO bring some material on its own as the material placed by the appellant was supported by the evidence and the AO cannot reject the same merely on doubts. The income declared by the appellant was already much more than he has to declare but in order to cover up all the discrepancy, additional income was declared of Rs. 25 lakhs instead of 5 lakhs due to differences in stock. 8. It is submitted that both the lower authorities have noticed the facts and merely on doubts made the addition which was confirmed by the first appellate authority. 9. It is submitted that this assessment was made u/s 143(3) on the basis of search material found during the search of Rajdarbar Group at the premises belonging to Rajdarbar Group of companies. The AO did not refer to any satisfaction note of the assessing officer that these documents belong to the appellant’s undisclosed income. Further assessment was also not made u/s 153C as required under the relevant provisions and there is nothing on record to show that assessment was taken up for scrutiny on the ground of material found during search. AO has merely referred to notice u/s 153C but no satisfaction note was mentioned in the assessment order. The assessee in order to buy peace did not challenge these legal issues before the lower authorities as well as before the Appellate Tribunal. This was also because business of the assessee was closed in June 2009 and premises belonging to Rajdarbar Group of companies had not allowed to continue from those premises. The appellant was totally dependent on them as goods were manufactured only for them. He has to stop the business and shifted to his village Sarendhi Tehsil, Kheragardh, Dist- Agra for looking after farming on small piece of land for his livelihood.”