SH. AFTAB AHMED,SAHARANPUR vs. ITO, SAHARANPUR

The learned departmental representative vehemently supported the orders of the lower authorities. It was stated that when in comparable cases the usual gross profit has been disclosed then it is very unusual that assessee has shown a very low gross profit.

We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact shows that the books of accounts of the assessee are audited and the learned assessing officer has made addition only on the basis of the comparable cases. Merely because some other assessee has shown higher profits, the addition cannot be made in the hands of the assessee without rejecting the books of the accounts of the assessee by pointing out latent, patents, and glaring defects in the books of accounts. The learned AO has failed to show that the books of accounts of the assessee are not reliable. The learned CIT – A has also confirmed the addition for the simple reason that there are chances of the manipulation of book results by the assessee as the purchases cannot be verified. This being a mere allegation and on the basis of an allegation the book results of the assessee which are audited under section 44AB of the act and no unaccounted sales or purchases have in fact been found by the lower authorities, rejection of the books of accounts and then making an addition in the hands of the assessee by comparable cases is not justified. Even the AO has not given the details of the comparable cases to the assessee. Therefore the conduct of the assessing officer also lacks fair play. In view of this we do not find any reason to sustain the addition of INR 7 5014 in the hands of the assessee on account of lower gross profit. Accordingly ground number 1 of the appeal of the assessee is allowed. The 2nd ground of appeal is with respect to the addition of INR 2 05680/– 8. on account of addition of the capital. As it was the 1st year of the business, the learned AO noted that in the month of April 2008 the assessee has made an investment of Rs. 2835000/– in purchase of live stocks for the 1st time. Therefore the assessee was directed to explain the source wherefrom such investment has been made. Assessee filed the copy of the account of buyer and copy of capital account. AO noted Page | 3 that on 14/4/2008 the assessee introduced a cash of INR 50,000/- and on 4/4/2008 cash of INR 1 55680/- has been introduced as a fresh capital. The source of this cash in the books of account was not explained and therefore the learned AO made an addition of INR 205680/– to the total income of the assessee. The assessee agitated the issue before the learned CIT – A. Before the learned CIT – A in para number 3.4 it was noted that appellant did not furnish any written submission on the impugned issue. However in the remand report the learned assessing officer reiterated the same facts as stated before him. The learned AO stated that despite giving opportunity to the assessee adequately to explain the source of investment, assessee did not bother to offer any explanation. In the rejoinder assessee submitted that he is an income taxpaying since assessment year 2005 – 06 and submitted the copies of the income tax returns for assessment year 2005 – 06 – assessment year 2008 – 09. He therefore stated that as assessee is assessed to income tax the source of capital introduced out of the savings made by the assessee during the past year with stands duly explained and therefore the addition has been wrongly made. It was further stated that vide reply dated 28/11/2011 the assessee also submitted the statement of affairs for financial year 2006 – 07, 2007 – 08 and 2008 – 09 which were not stated to be incorrect by the AO. The learned CIT – A examined the assessment order and found that appellant along with the written submission has filed only capital account for assessment year 2009 – 10 and copies of the income tax returns were not filed. Therefore he stated that the contentions raised by the assessee are blatantly wrong. He further stated that on the examination of the return of income for assessment year 2009 – 10 which shows that the appellant has earned meager salary of INR 96000 only. He further held that in absence of any details of earlier earning filed either before the assessing officer or during the appellate proceedings he confirmed the addition. Accordingly the assessee has challenged the above before us vide ground number 2 of the appeal.

The learned departmental representative vehemently supported the order of the learned AO as well as CIT – A. It was stated that when the assessee has failed to submit anything before the assessing officer and when the details are submitted as alleged by the assessee before the learned CIT – A, on examination of the assessment folder, the learned CIT – A has proved that the statement made by the assessee is wrong. Even otherwise there is no availability of the cash with the assessee in the business and therefore the addition has rightly been made by the AO. 11. We have carefully considered the rival contention and found that the assessee has introduced a sum of INR 205 680/–, assessee has introduced the cash as on 1/4/2000 of INR 50,000 and on 4/4/2008 cash of INR 155680/–. The assessee has taken a support of his tax returns filed for assessment year 2005 – 06 onwards to show that assessee has enough cash available in his hands to introduce in the books of account on those dates. The relevant papers have been submitted by the assessee at page number 21-44 of the paper book submitted. On verification of these documents it was found that assessee has not submitted the cash book of proprietary concern of the assessee. For assessment year 2008 – 10 the assessee has filed the return of income showing total income of INR 126,000 and out of which he has made an investment of INR 20,000 and therefore the net available amount with Page | 5