LALJI JETSI MAHESHWARI,,NASHIK vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the assessee against the order of CIT(A)-I, Nashik, dated 05-02-2016 for the Assessment Year 2011-12.

assessee on 22-03-2011. During the said survey, certain loose papers

bundles were impounded. On the basis of impounded papers, AO

computed the shortage of cash worth Rs.77.71 lakhs, the cash

difference of Rs.17,053/- and unrecorded sales purchases. Assessee

was asked to explain the said discrepancies. Assessee filed the

submission stating that the books of account were incomplete at the

time of survey. The above discrepancies were worked out only based on

the tentative trading account/cash account. After recording all the

missing entries relating to the said purchases, sales, stock, the

discrepancies pointed out by the AO are reconciled. Therefore, no

disallowance on these accounts need to be made. However, at the end

of assessment proceedings u/s.143(3) of the Act, AO made the following

additions and determined the assessed income at 63,44,200/- :

Addition on account of shortage of stock – Rs.13,48,147/- Addition on account of unexplained cash – Rs. 1,00,000/- Addition on account of unaccounted income-Rs.15,43,670/- Addition on account of bogus purchases – Rs.6,83,046/-

----------------------------- Total Addition Rs.36,74,863/- ----------------------------- 4. Assessee challenged the additions made by the AO before the

CIT(A) by filing an appeal.

BEFORE THE CIT(A)

opined that the shortage of stock includes unrecorded sales. On finding

that GP of the assessee is around 3.30% of the sales, the CIT(A)

concluded that adding of 25% of the shortage of stock i.e.

Rs.13,48,747/- would be appropriated. CIT(A) reasoned that the AO did

not bring any incriminating evidence against the assessee on the

purchases outside the books. Accordingly the AO is directed to add an

amount of Rs.3,37,186/- (25% of Rs.13,48,747/-). Then, the CIT(A)

granted relief of Rs.10,11,560/- to the assessee. Contents of Para

No.4.3 of the order of CIT(A) are relevant in this regard.

unexplained cash, the CIT(A) after considering the submissions of the

assessee as well as the ledger extracts pertaining to the sales to one Mr.

Khalil Qureshi Shaikh for the A.Y. 2011-12, CIT(A) found no

discrepancy in the ledger extracts. Thus, the CIT(A) directed the AO to

delete the addition. Contents of Para No.5.3 of the order of CIT(A) are

relevant in this regard. Revenue is not in appeal on this issue.

amounting to Rs.15,43,670/-, AO analysed the impounded loose papers

and added the said sum on the basis of principle of preponderance of

probability as the assessee could not explain certain transactions with

the help of the books of account. On going through the facts, CIT(A)

opined the following :

Thus, the CIT(A) opined that the AO completely failed to give any

evidence to support the addition of Rs.15,43,670/-. According to him,

the addition is based on surmises, assumptions, conjectures and

without any basis. However, since the assessee has already offered

Rs.15 lakhs for taxation in return of income filed u/s.139(1) of the Act

and taxes were paid against any discrepancies, CIT(A) found it

appropriate to give set off of Rs.15 lakhs and chose to add Rs.43,670/-

to meet the ends of justice. Contents of Para No.6.3 of the order of

CIT(A) are relevant on this issue. Revenue is not in appeal. Further,

assessee is also not aggrieved with the decision given by the CIT(A).

purchases, the CIT(A) confirmed the addition made by the AO. While

doing so, the CIT(A) observed the following :

i. Assessee has not produced the party before him for verification of the facts. ii. Assessee has not been able to produce any evidence to show the movement of goods from Magnum Steel (the alleged hawala party as per the information from Maharashtra Sales Tax Department). iii. Assessee has not produced delivery challans, Octroi receipts or any other evidence.

Relying on the decisions of Pune Bench of the Tribunal in the

case of Shri Mukeshkumar Pukharaj Prop. Arihant Tubes in ITA

No.2026/PN/2014, dated 03-11-2015 and in the case of Kolte Patil

Developers in ITA Nos. 1478 to 1483/PN/2013, dated 20-02-2015, the

CIT(A) upheld the addition of Rs.6,83,046/- made by the AO.

appeal on couple of issues (1) addition of 25% of Rs.13,48,747/- on

account of unrecorded sales and (2) confirming of addition of

Rs.6,83,946/- on account of bogus purchases.

BEFORE THE TRIBUNAL

rate @25% of the unrecorded sales of Rs.13,48,747/-, Ld. Counsel for

the assessee submitted that the profit of 25% was never recorded in the

history of the assessee’s business. Therefore, he submitted for

restricting the same to 10% of the alleged shortage of stock qua the

unrecorded sales.

Counsel for the assessee submitted that adding entire such purchases

is not sustainable. Alternatively, referring to many decisions of the

Tribunal, Ld. AR submitted that Pune Benches of the Tribunal

continues to restrict the addition @10% of the bogus purchases.

Therefore, Ld. AR prayed for adopting 10% on the alleged bogus

purchases.

CONCLUSION OF THE TRIBUNAL

It is a fact that assessee maintained three accounts (1) steel trading

account; (2) cement trading account and (3) general trading account.

There is no shortage of stock so far as steel trading account is

concerned. The discrepancy was with regard to cement and general

trading accounts. The turnover of the cement trading account is very

negligible and predominant shortage is only in the general trading

account.

sales/unaccounted income, we find the AO made addition of

Rs.15,43,670/- on account of unaccounted sales which was restricted

by the CIT(A) to 25% of the same. On hearing the parties, we are of the

opinion that restricting the same to 10% should the ends of justice. As

such, it is not the case of the Revenue that the assessee recorded profit

rate of 25% in any assessment year. Accordingly, we direct the AO to

restrict the addition to 10% instead of 25% adopted by the CIT(A).

Thus, the ground raised by the assessee is partly allowed in favour of

the assessee.

find the Pune Benches of the Tribunal has been consistently confirming

the GP addition on account of the bogus purchases. Following the rule

of consistency, we direct the AO to restrict the addition to 10% instead

of 25% adopted by the CIT(A). Accordingly, this ground by the assessee

is partly allowed in favour of the assessee.

Order pronounced in the open court on this 23rd day of May, 2018.

Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे Pune; �दनांक Dated : 23rd May, 2018 सतीश

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-I, Nashik 4. CIT-I, Nashik िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A Bench” Pune; 5. गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार

स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune