ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(4), HYDERABAD vs. VASUDEVA REALTORS PRIVATE LIMITED, HYDERABAD

The grounds raised by the Revenue in read as under :

The grounds raised by the assessee in read as under :

The learned counsel for the assessee Shri S. Rama Rao, Advocate, referring to the petition filed by the assessee for admission of additional grounds, submitted that the assessee has filed a petition requesting for admission of additional grounds of appeal and raised certain legal grounds challenging the validity of reassessment notice issued by the jurisdictional Assessing Officer i.e., DCIT, Circle - 6(1), Hyderabad on the ground that the Assessing Officer does not have jurisdiction to issue such notice and therefore, all the consequential proceedings are invalid and Page 3 of 29 liable to be dismissed. Since legal grounds taken by the assessee challenging validity of reopening of the assessment is purely a legal issue, which can be taken at any time, including the proceedings before the Tribunal and therefore, in view of the decision of Hon'ble Supreme Court in the case of NTPC Vs. CIT reported in (1998) 229 ITR 383, the additional grounds filed by the assessee may be admitted.

The ld.CIT-DR Shri B. Bala Krishna, on the other hand, strongly opposed the petition filed by the assessee for admission of additional grounds and submitted that the assessee could not make out a case, as to why it could not challenge the legality of assessment proceedings before the LD.CIT(A). Further, the assessee has also failed to make out a case that the facts related to said grounds are already on record before the Assessing Officer and no further inquiry is required to ascertain the facts. Since the assessee has not made out a case for filing additional grounds, the petition filed by the assessee should be dismissed.

We have heard both the parties and considered the relevant petition filed by the assessee for admission of additional grounds. The assessee has filed a petition for taking certain legal grounds, challenging the validity of notice issued by the Assessing Officer u/s 148 of the Act in light of the order passed u/s 148A(b) by the jurisdictional Assessing Officer i.e., DCIT, Circle-6(1), Hyderabad and supported his contentions in light of the decision of Hon'ble jurisdictional High Court of Telangana in the case of Sri Venkataramana Reddy Patloola Vs. DCIT, Circle 1(1), Hyderabad in W.P. Nos.13353, 16141 and 16877 of 2024 dt.24.07.2024.

The brief facts of the case are that the assessment has been reopened u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), on the basis of the reasons recorded, as per which, as per information available with the department, the assessee has deposited huge cash in current account No.052611011010273 held with Andhra Bank. The total credit transactions for the F.Y. 2014- 15 has been reported to Rs.7,53,69,079/-, out of which, the total cash deposits are Rs.6.48 crores. On verification of the return of income filed by the assessee for A.Y. 2015-16, it is seen that the assessee had declared a net loss from a total turnover of Rs.20,30,27,556/-, however, the assessee has not disclosed the bank account held with Andhra Bank in its return of income. Further, as per the records, the assessee filed original return of income u/s 139(4) of the Act on 01.10.2015 disclosing loss of Rs.11,06,628/-. Therefore, the Assessing Officer issued notice u/s 148 of the Act, dated 05.04.2021 and in view of the Hon'ble Supreme Court’s decision in the case of Union of India Vs. Ashish Agarwal and others in Civil Appeal No.3005/2002 order dt.04.05.2022, treated 148 notice, as notice issued under Section 148A of the Act dt. 25.02.2022 and after due procedure, issued

During the course of assessment proceedings, the Assessing Officer obtained information u/s 133(6) of the Act, from Andhra Bank, SBI, and ICICI Bank, and observed that, there are huge credits in its bank account. Therefore, called upon the assessee to file relevant evidence to justify the cash deposits and credits in bank account. In response, the assessee submitted that the credits in the bank account held with Andhra Bank is accounted in the books of accounts prepared for the assessment year under consideration, however, due to inadvertent error, the said bank account was not disclosed in the particulars provided for declaring bank accounts in ITR form. The said lapse is on account of the fact that, the bank account held with Andhra Bank is a current account, on which the assessee has taken Over Draft facility, and the same has been reported in the secured loans. The Assessing Officer after considering the relevant submissions of the assessee and also taking note of total credits in Andhra Bank account observed that, the assessee could not substantiate the claim of cash and credits in the bank account held with Andhra Bank are accounted in its books of accounts. The Assessing Officer further noted that although the appellant has received total credits of Rs.11,11,25,076/- in bank account held with Andhra Bank, but could not explain the credit with nature and source of income or relevant evidences. Further, there are discrepancies in the books of accounts, and tax audit report, where the stock particulars reported by the assessee are having discrepancies. Further, the Page 6 of 29 assessee claims to have reported sales, however, on perusal of sales ledger submitted by the assessee, the assessee claims to have sold gold ornaments to Latha B, R/o. Karimnagar on 08.04.2014, however, the fact remains that the State of Telangana was born on 02.06.2014. Therefore, observed that the explanation furnished by the assessee with regard to the credits appearing in the bank account held with Andhra Bank is unsubstantiated and therefore, rejected the explanation of the assessee and made addition of Rs.11,11,25,076/- u/s 69A of the Act, as unexplained money and brought to tax u/s 115BBE of the Act.

Being aggrieved by the order of Assessing Officer, assessee preferred appeal before the LD.CIT(A). Before the LD.CIT(A), the assessee has reiterated its submissions made before the Assessing Officer and argued that the Assessing Officer is erred in making addition towards credits in bank account held with Andhra Bank, without appreciating the fact that, the assessee has already considered said bank account in the books of accounts and also explained the nature and source of credit in the said bank account. The assessee has also explained the discrepancies noticed by the Assessing Officer in the assessment order and submitted that the Assessing Officer has merely for the reason of few discrepancies, observed that the books of accounts maintained by the assessee are not verifiable, however, the fact remains that the books of accounts maintained by the assessee are audited by an accountant and no adverse comments have been made and therefore, the assessee submitted that the addition made by the Assessing Officer should be deleted.

The LD.CIT(A) after considering the relevant facts and also taking note of various evidence filed by the assessee observed that, although the assessee claims to have accounted credits appearing in the Andhra Bank account, but on perusal of details filed by the assessee, the real facts behind the issue of cash deposits are that claim of the assessee is without any genuine and substantial evidence and therefore, observed that the assessee has failed to furnish any corroborative evidence to prove its argument of being accounted its cash deposits in the books of accounts. Although, the assessee claims to have explained cash deposits and credits in Andhra Bank account, out of cash sales, but on perusal of the details filed by the assessee, it is abundantly clear that, no credible evidence has been filed to prove the arguments of the assessee. Further, the assessee has fabricated its submissions only after re-assessment proceedings to cover up the issue of cash deposits out of its unaccounted sales for the year under consideration. Therefore, rejected arguments of the assessee and treated credits appearing in Andhra Bank account, as unaccounted sales of the assessee for the year under consideration. However, deviated from the stand taken by the Assessing Officer, in respect of the addition made towards cash deposits, as unexplained money and after considering relevant facts, observed that, the assessee has credited its unaccounted sales in the bank account and therefore, by taking into account, the gross profit declared by the assessee for the earlier assessment year, which was at 6.31% directed the Assessing Officer to estimate gross profit on total credits appearing in Andhra Bank account and estimate profit of Rs.70,11,992/-.

Aggrieved by the order of LD.CIT(A), the assessee and Revenue are now in appeal before us.

The first issue that came up for our consideration from additional grounds of appeal filed by the assessee, is the validity of reopening of re-assessment notice issued u/s 147 of the Act, by the jurisdictional Assessing Officer and consequent assessment proceedings.

The learned counsel for the assessee Shri. S. Rama Rao, Advocate, submitted that the notice issued u/s 148 by the jurisdictional Assessing Officer, is invalid because after introduction of provisions of Section 144B of the Act, only the Faceless Assessing Officer can issue re-assessment notice. Since the jurisdictional Assessing Officer issued notice u/s 148 of the Act, the consequent proceedings are null and void and are liable to be quashed. In this regard, he relied upon the decision of jurisdictional High Court of Telangana in the case of Sri Venkataramana Reddy Patloola Vs. DCIT, Circle 1(1), Hyderabad (supra).

The Ld.CIT-DR, Shri B. Bala Krishna, on the other hand, referring to the decision of Hon'ble High Court of Bombay in the case of JD Printers Vs. ITO in W.P. No.12187 of 2024 dated 10.09.2024 submitted that, in view of SLP admitted by the Hon'ble Supreme Court in the case of Hexaware Technologies Limited Vs. ACIT and others, the Hon'ble Bombay High Court has not entertained the Writ Petition filed by various assessees, including

We have heard both parties, perused the material on record and gone through the orders of the authorities below. Although, the assessee has challenged validity of notice issued by the jurisdictional Assessing Officer under Section 148 of the Act, but because the issue has been assailed before the Hon'ble Supreme Court by the Revenue and the Hon'ble Apex Court has seized of the matter, in our considered view, it is not appropriate for us to adjudicate the issue of validity of notice issued by the jurisdictional Assessing Officer under Section 148 of the Act, at this stage. Further, there is no dispute with regard to the fact that, this issue is covered by the decision of Hon'ble Jurisdictional High Court of Telangana in the case of Sri Venkataramana Reddy Patloola Vs. DCIT, Circle 1(1), Hyderabad (supra), where the Hon'ble High Court held that any notice issued by jurisdictional Assessing Officer under Section 148 of the Act, after 01-04-2021 is invalid, and consequent proceedings to the said notice is held to be null and void. Since the Revenue has challenged the orders of various Hon'ble High Courts, and the matter is now seized by the Hon'ble High Court, in our considered view, the additional grounds Page 10 of 29 filed by the assessee, challenging the validity of notice issued by the jurisdictional Assessing Officer cannot be entertained at this stage. Thus, we rejected the additional grounds filed by the assessee challenging the validity of notice issued by the jurisdictional Assessing Officer under Section 148 of the Act. Further, the assessee has questioned the jurisdiction of the Assessing Officer for issuing notice u/s 148 of the Act, by the JAO i.e., DCIT, Circle - 6(1), Hyderabad, for the first time, before the Tribunal after a lapse of more than 3 years, without there being any valid reason as to why it could not raise objections before the Assessing Officer. Further, as per the provisions of Section 124(3)(b) of the Act, the jurisdiction of the Officer cannot be questioned by the assessee after expiry of one month from the date on which, he was served with the notice for reopening of the assessment u/s 148 of the Act. This view is supported by the decision of Hon'ble Delhi High Court in the case of Abhishaik Jain Vs. ITO reported in (2018) 94 taxmann.com 355 Delhi. Therefore, we are of the considered view that there is no merit in the additional grounds taken by the assessee, challenging the validity of notice issued u/s 148 of the Act, and thus, we reject the additional grounds taken by the assessee.

The next issue that came up for our consideration from grounds of appeal filed by the assessee and grounds of appeal filed by the Revenue, is the addition made by the AO towards total credits in bank account held with Andhra Bank and consequent estimation of profit @ 6.31% on total credits by the LD.CIT(A).

The Learned Counsel for the assessee submitted that the LD.CIT(A) is erred in upholding the reasons given by the AO to treat the credits appearing in Andhra Bank account, as unexplained and further, estimating profit on the said credit at 6.31%, without appreciating the fact that, the assessee has accounted credits appearing in Andhra Bank account in the books of accounts, which is part of regular books of accounts, maintained by the assessee and return filed for the relevant assessment year. The Learned Counsel for the assessee further submitted that the AO disbelieved the financials declared by the assessee on flimsy grounds, even though, there is no valid grounds for rejection of books of accounts. The LD.CIT(A) without appreciating the relevant facts, simply, upheld the reasons given by the AO and treated total credits appearing in bank account, as unexplained credits. Further, the LD.CIT(A) erred in estimating profit @ 6.31% by considering gross profit declared by the assessee for assessment year 2017-18, ignoring the fact that, for all the assessment years, the assessee has continuously declared losses from its business and therefore, the profit cannot be estimated based on one year financial results. Therefore, he submitted that the addition made by the Assessing Officer and sustained by the LD.CIT(A) should be deleted.

The Ld.CIT-DR, on the other hand, submitted that the Assessing Officer has brought out clear facts to the effect that the assessee could not explain credits appearing in the bank account held with Andhra Bank, which is evident from the ITR filed by the assessee for the assessment year under question, where the said bank account has not been considered. Further, the assessee has Page 12 of 29 filed revised return on 08.08.2022 and claims that bank account held with Andhra Bank has been considered in the books of accounts. If we go by the original return of income filed by the assessee on 01.10.2015 and revised return filed by the assessee on 08.08.2022 for the assessment year under consideration, there is huge difference between loss declared by the assessee and from the above, it is undisputedly clear that the books of accounts submitted by the assessee, are not susceptible for verification, and therefore, the Assessing Officer has rightly rejected books of accounts and made the addition towards total credits, as unexplained money u/s 69 of the Act. The LD.CIT(A) without appreciating the relevant facts, simply estimated profit @ 6.31% on total credits. Therefore, he submitted that, the order of the LD.CIT(A) should be set aside and the addition made by the Assessing Officer should be upheld.

We have heard both the parties, perused the material on record and have gone through the orders of authorities below. There is no dispute with regard to the fact that the bank account held with Andhra Bank bearing Account No.052611011010273, is not disclosed in the return of income filed by the assessee for the assessment year under consideration, which is evident from the ITR filed by the assessee on 01.10.2015. Although, the assessee admitted the fact that Andhra Bank account is not disclosed in the ITR filed for the relevant assessment year, but argued that the said bank account is current account, and the assessee has taken overdraft facility and the same has been reported under Secured Loans Account. The assessee further claimed that the credits

We have given our thoughtful consideration to the reasons given by the AO to make additions towards credits in the bank account held with Andra Bank and the reasons given by the LD.CIT(A) to estimate gross profit at 6.31% on said credits and after hearing both the sides, we are inclined to agree with the reasons given by the LD.CIT(A) to consider total credits in Andra Bank account, as unaccounted sales of the assessee for the year under consideration. We further noted that although, the assessee claims that the credits in Andhra Bank account are considered in the books of account prepared for the year under consideration, but on perusal of the details filed by the assessee, the assessee has filed original return of income on 01.10.2015 where the account held with Andhra Bank account was not disclosed in the ITR filed by the assessee. Further, the assessee has filed revised return on 08.08.2022 and claimed that the credits appearing in Andhra Bank account has been considered in the financial statements filed along with return of income, however, on perusal of various details filed by the assessee, we find that the arguments of the assessee with regard to explanation for credits appearing in bank account is an afterthought to circumvent the re-assessment proceedings initiated

Having said so, let us come back to estimation of profit @ 6.31% on total credits. Although, the Assessing Officer treated the total credits, as unexplained money, and added as per Section 69A of the Act, but the LD.CIT(A) by considering the nature of the business of the assessee, has treated total credits, as unaccounted sales of the assessee. Further, the LD.CIT(A) has considered the gross profits declared by the assessee for the assessment year 2017-18, where the assessee has declared 6.31% of gross profit and 5.5.% net profit and after taking into account the gross profit of the assessee, has estimated gross profit at 6.31% for the year under consideration and sustained addition of Rs.70,11,992/-. In our considered view, the reasons given by the LD.CIT(A) to estimate net profit is based on facts and assessee’s own financial results declared for the subsequent assessment year and therefore, in the absence of any contrary material brought on record by the assessee to disprove or negate the findings recorded by the LD.CIT(A), the reasons given by the LD.CIT(A) should be accepted. Therefore, we are of the considered view that there is no error in the order of LD.CIT(A) to estimate profit on total credits appearing in bank account held with Andhra Bank. Thus, we are inclined to uphold

In the result, the appeals filed by the assessee and the Revenue are dismissed. and 751/Hyd/2024 for A.Y. 2017-18

The grounds raised by the Revenue in read as under :

The grounds raised by the assessee in read as under :

The brief facts of the case are that the assessee is a partnership firm engaged in business of trading in silver, jewellery etc. The assessee field return of income for A.Y. 2017-18 on 31.10.2017 declaring total income of Rs.20,614/-. During the course of assessment proceedings, the Assessing Officer noticed that during the demonetization period, the assessee has made total cash deposits of Rs.5,30,35,000/- in bank account held with SBI, Ameerpet Branch, Hyderabad and ICICI Bank, Ameerpet Branch. A survey operation u/s 133A of the Act, was conducted in the business premises of the assessee on 15.03.2017. During the course of survey, it was noticed that the assessee firm along with the proprietary concern of Shri Suresh Kumar Champalal Jain was operating from the same premises and that these were inter- connected transactions between both the concerns. During the course of survey, the stock was valued by the authorized jewellery valuer for both the assessee firm and proprietary concern and as per the valuation, the physical stock was valued at Rs.3,18,81,083/-, whereas the closing stock of the firm was at Rs. 31,03,13,072/- in the hands of the firm and Rs.6,96,58,694/- in the case of the proprietary concern. During the course of survey, the assessee firm could not furnish purchase bills and sales bills as on the date of survey. The assessee has not furnished any Page 17 of 29 reconciliation for difference in deficit of stock of Rs. 31.03 crores in the name of the assessee firm and Rs. 3.00 crores in the name of the proprietor Shri Suresh Kumar Champalal Jain. Therefore, AO called upon the assessee to file relevant evidence to prove source for cash deposits in the bank account during the demonetization period and also explain the deficit in the stock found during the course of survey.

In response, the assessee has filed relevant details and explained that the cash deposited in the bank account, is out of cash sales for the year, which is recorded in the books of accounts maintained by the assessee and further, cash in hand available as on the date of demonetization is sufficient to explain the cash deposits in the bank account. The assessee has also explained the difference in physical stock found during the course of survey when compared to book stock, as on the date of survey. The AO, after considering the relevant submissions of the assessee and also taking note of various facts, observed that, there is an abnormal increase in cash sales for the month of October, 2016 and November, 2016 when compared to previous Financial years and for which, the assessee could not offer any explanation. Further, the assessee has not filed VAT returns from 01-04-2015 onwards. In the absence of any supporting evidence for sales claimed by the assessee, the explanation of the assessee with regard to source for cash deposits cannot be accepted. Therefore, taking into account relevant financial results, including total sales declared by the assessee, sundry debtors and sundry creditors, has worked out total cash available at Rs. 2.12 crores and after considering relevant explanation, made addition of Rs. 5,90,035,000/- under Page 18 of 29 Section 69A of the Act, and brought to tax under Section 115BBE of the Act.

The AO has also made addition towards deficit stock found during the course of search for Rs. 31.03 crores and estimated 30% profit on the deficit stock on the ground that, the assessee could not explain the physical stock held as on the date of survey with bills and vouchers, and further, no reconciliation has been filed to explain deficit stock and therefore, treated deficit stock, as unaccounted sales and estimated 30% profit and made addition of Rs. 9,30,93,920/- . Similarly, the AO has made addition of Rs.12,00,000/- towards difference in unsecured loans received from M/s.Metalika Industries on the ground that there is a difference of Rs. 12 lakhs in repayment of loan shown by the assessee in the books of accounts, when compared to bank statements.

Being aggrieved by the assessment order, the assessee preferred an appeal before the LD.CIT(A). Before the LD.CIT(A), the assessee has reiterated the submissions made before the AO, and argued that the AO is erred in making addition towards total cash deposits of Rs.5,90,35,000/- even though, the assessee has explained cash deposits out of cash in hand available as on the date of demonetization, as per the cash book maintained for the year. The assessee further contended that the AO is erred in working out the availability of cash in hand by considering only the amount of sundry creditors, even though, the sundry debtors is not out of sales, but on account of transfer between partnership firm and the proprietary firm and the assessee had also submitted that Page 19 of 29 the Assessing Officer is erred in estimating 30% profit on stock deficit.

The LD.CIT(A) after considering the submissions of the assessee and also taking note of relevant evidence filed by the assessee submitted that although, the Assessing Officer has arrived at Rs. 2.12 crores cash out of total sales declared by the assessee, and sundry debtors held as on the date, but failed to give credit for cash in hand available with the assessee, and therefore, allowed relief to the extent of Rs. 2.12 crores out of total addition made by the AO towards cash deposit of Rs.5,90,35,000/- and sustained balance cash deposits of Rs.3,78,35,000/- as unexplained money under Section 69A of the Act. The relevant findings of the LD.CIT(A) are as under :

In so far as the addition made by the Assessing Officer towards unsecured loans taken from M/s.Metalika Industries, after considering the relevant reconciliations filed by the assessee, directed the Assessing Officer to delete the addition of Rs.12 lakhs towards unsecured loans taken from M/s.Metalika Industries.

Aggrieved by the order of Ld.CIT(A), the assessee and the Revenue are now in appeal before the Tribunal.

The first issue that came up for our consideration from ground nos.2 to 5 of assessee appeal and ground no.2 of Revenue appeal is the addition made towards cash deposits during the demonetization period of Rs.5,90,35,000/- and sustained by the Ld.CIT(A) for Rs.3,78,35,000/-. The learned counsel for the assessee submitted that the Ld.CIT(A) erred in sustaining addition of Rs.3,78,35,000/- without appreciating the fact that, the assessee has explained cash deposits in the bank account during demonetization period out of cash in hand available as on the date of demonetization, as per cash book maintained by the assessee, which is further supported by cash sales declared for the year under consideration. The learned counsel for the assessee further referring to various evidence, including, comparative sales for two years submitted that, although, there is slight increase in cash sales for the month of October and November, 2016, but fact remains that if we go by the cash sales of the assessee for the Page 23 of 29 earlier financial year even in December, 2015, there is huge cash sales and therefore, only on the basis of the abnormal increase in cash sales during the demonetization period, the genuine source explained by the assessee, cannot be disbelieved. Therefore, he submitted that the addition made by the Assessing Officer should be deleted.

The Ld. CIT-DR, on the other hand, submitted that the Assessing Officer has brought out clear facts that the sales declared by the assessee is not genuine, which is not supported by necessary bills and vouchers and the assessee could not prove the authenticity of the sales claimed with relevant VAT returns filed for the year under consideration. Although, the Assessing Officer has brought out various facts, but the Ld.CIT(A) has allowed relief of Rs. 2.12 crore, without giving any valid reasons. Therefore, he submitted that the order of the Ld.CIT(A) should be set aside on this issue and the addition made by the Assessing Officer should be sustained.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The facts borne on record clearly indicate that although the assessee claims to have explained cash deposits during the demonetization period out of cash in hand as per books of account as on 08.11.2016, but facts remain that the cash sales declared by the assessee is not proved with credible evidences, which is evident from the survey conducted u/s 133A of the Act, where the assessee could not justify the sales and purchases with bills and Page 24 of 29 vouchers. Further, there is huge deficit in stock held by the assessee when compared to physical stock and from the above, it is undisputedly clear that the financial results declared by the assessee is not susceptible for verification. Further, the Assessing Officer and the Ld.CIT(A) has considered the availability of cash in hand, as per the financial results declared by the assessee and as per the working of the Assessing Officer in the assessment order, the maximum cash in hand available with the assessee to explain cash deposits in the bank account was at Rs.2.12 crores. Although, the Assessing Officer has not allowed relief even for available cash in hand, but the Ld.CIT(A) after considering the relevant cash in hand of Rs.2.12 crores worked out by the Assessing Officer, allowed partial relief of Rs. 2.12 crores, out of total addition made by the Assessing Officer towards cash deposit of Rs.5,90,35,000/- and sustained balance cash deposit of Rs.3,78,35,000/- as unexplained cash credits. In our considered view, the findings recorded by the Assessing Officer and the Ld.CIT(A) is not controverted by the assessee with any evidence and therefore, we are of the considered view that, there is no error in the reasons given by the Ld.CIT(A) to sustain additions towards cash deposits of Rs.3,78,35,000/- u/s 69A of the Act. Thus, we are inclined to uphold the findings of the LD.CIT(A) on this issue and reject the grounds taken by the assessee and Revenue.

The next issue that came up for our consideration from ground no.6 of assessee’s appeal is estimation of 30% profit on deficit stock found during the course of survey on 15.03.2017 and addition of Rs.9,30,93,920/- by the Assessing Officer and scaled

The ld.CIT-DR, on the other hand, supporting the order of Ld.CIT(A) submitted that although the Assessing Officer has estimated 30% profit on unaccounted sales being deficit stock of Rs.31,03,13,072/- and made addition of Rs.9,30,93,920/- but the Ld.CIT(A) by taking a pragmatic view, has scaled down the additions to the tune of Rs.1,95,80,755/- by estimating 6.31% profit on total unaccounted sales, being stock deficit and therefore, the order of Ld.CIT(A) should be upheld.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that during the course of survey, stock deficit of Rs.31,03,13,072/- was found and the Page 26 of 29 assessee could not reconcile stock deficit with relevant evidence. Further, the assessee could not furnish relevant purchase invoices and sales invoices to support financial results declared for the year under consideration. In the absence of any explanation with regard to purchase and sales and further, non-reconciliation of difference in the stock when compared to physical stock found during the course of survey and the book stock maintained by the assessee, in our considered view, the reasons given by the Assessing Officer and Ld.CIT(A) to treat deficit stock, as unexplained sales of the assessee for the year under consideration, cannot be overturned. In fact, even before us, the assessee except stating that the Assessing Officer is erred in estimating 30% profit on unaccounted sales being deficit stock of Rs.31,03,13,072/-, but could not file any evidence and also not filed any reconciliation to explain the deficit stock found during the course of survey. Therefore, we are of the considered view that there is no error in the reasons given by the Assessing Officer and Ld.CIT(A) to treat stock deficit, as unaccounted sales of the assessee and thus, we are inclined to uphold the findings of Ld.CIT(A), in this regard.

In so far as the estimation of profit on unaccounted sales, although the Assessing Officer has estimated 30% profit on unaccounted sales, but no comparable cases of similar nature were brought on record and no valid reason has been given, as to why 30% profit is reasonable going by the nature of the business of the assessee. On the other hand, the Ld.CIT(A) has adopted 6.31% gross profit on unaccounted sales which is based on financial results declared by the assessee, where the assessee has declared 6.31% gross profit. Iin our considered view, even in a case of Page 27 of 29 estimation, there should be some basis and there cannot be any arbitrary estimation of profit. In the present case, although the Assessing Officer has estimated 30% profit on unaccounted sales, which is not supported by any case of similar nature. However, the Ld.CIT(A) has estimated 6.31% gross profit by considering the assessee’s own financial results declared for the year under consideration and therefore, in our considered view, the reasons given by the Ld.CIT(A) to estimate 6.31% profit is based on sound footing. Although, the assessee has disputed profit estimated by the Ld.CIT(A), but failed to bring on record any contrary evidence to support its stand. Therefore, we are of the considered view that there are no errors in the reasons given by the Ld.CIT(A) to sustain the additions made by the Assessing Officer towards estimation of profit on unaccounted sales, being deficit stock found during the course of survey. Tthus, we are inclined to uphold the findings of Ld.CIT(A) and reject the grounds taken by the assessee.

In the result, the appeal filed by the assessee and the appeal filed by the Revenue are dismissed.

To sum up, both the appeals of assessee as well as Revenue are dismissed.