SHRI HARESH NANDLAL NARAYANI,DHULE 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)-1, Nashik, dated 02-09-2015 for the Assessment Year 2010-11.

“1. The Appellant request for condonation of delay in filing the appeal, as appellant was under suffering from “jaundice and was under treatment since 1-10-2015 to 04-02-2016. Therefore, he could not contact to the counsel and handed over the relevant papers for preparation of appeal. Hence, there is delay. Appellant had received the said notice about in the 6th October, 2015 and accordingly, appeal was due to be filed on or before 6th of December, 2015. Thus, there is delay about 2 month and 20 days. Therefore, appellant sincerely request to please condone the delay in filing the appeal and it may please be admitted to deliver the justice. 2. On the facts and in the prevailing circumstances of the case and the CIT(A) has erred in confirming the additions of unrecorded sale of Rs.4,84,905/-, though profit thereon and peak amount of Rs.1,90,180/- was offered by the appellant in the return of income. The aforesaid addition being arbitrary, devoid of merits and hence, addition may please be deleted.

us, Ld. Counsel for the assessee submitted that there is delay of 81 days in

filing of this appeal. Ld. Counsel brought our attention to the affidavit

dated 20-02-2016 and stated that, during the relevant point of time

i.e. 01-10-2015 to 04-02-2016, the assessee suffered with jaundice and

therefore, he could not contact his counsel and hand over the relevant

papers.

affidavit, we are of the opinion that the delay of 81 days in filing of the

appeal can be condoned in view of the reasonable cause. Therefore, the

appeal is admitted for adjudication. Accordingly, Ground No.1 raised by

the assessee is allowed.

Nos. 2 & 3 include that the assessee is a wholesale trader in General Mal

Bidi, Gutkha, Cigarette, Tobacco, Pan Masala Etc. Assessee filed the return

of income declaring total income of Rs.22,07,300/-. This is a case where

assessee was surveyed u/s.133A of the Act on 08-09-2010 and a statement

of Shri Haresh Nandlal Narayani, Proprietor of Sai Agency was recorded on

the said date. Assessee offered the following income as additional income

during the survey action amounting to Rs.19,35,182/-. Break-up details

are given as under :

Sr.No. Nature in respect of which Amount discrepancies noticed disclosed (Rs.) 1 Excess stock 8,85,612/- 2 Excess cash 3,50,000/- 3 GP on unrecorded sales 24,485/- 4 Unrecorded purchase of Bidi 6,75,085/- Total 19,35,182/-

However, in the return of income filed by the assessee, AO noticed in the

return of income that the above said disclosure of income was not offered in

toto. Special reference is made to the said sum of Rs.6,75,085/-. At the

end of the assessment proceedings, AO made various additions and

quantified the assessed income at Rs.27,67,706/-. AO added the said

income of Rs.6,75,085/-, which is part of the gross disclosure of

Rs.19,35,182/- and it relates to the addition on account of unrecorded

purchases of Bidi. Ground No.2 raised by the assessee before us revolve

around this addition. Assessee offered only Rs.2,14,615/- in place of

Rs.6,75,085/-.

assessee quantified the unaccounted purchases of Rs.6,75,085/- and on

sale of the same, assessee earned the gross profit of Rs.24,485/-. These

sales pertain to the period from 21-06-2009 to 26-08-2009. As per

assessee, the peak purchases works out to Rs.57,745/- and peak credit for

the said period works out to Rs.1,32,435/-. Thus, the peak purchases and

peak credit works out to Rs.1,90,180/-. The same is offered to tax on this

account. Thus, gross profit of Rs.24,485/- and peak purchases credit of

Rs.1,90,180/- (totalling to Rs.2,14,615/-) were eventually offered to tax by

the assessee in the return of income in place of original offer of

Rs.6,75,085/- during the survey action. This offer of Rs.2,14,615/- out of

Rs.6,75,085/- was not acceptable to the AO. Therefore, as per assessee, no

separate addition is called for on this account. However, the AO dismissed

the said submission of the assessee as per the discussion given in Para No.

5.1(c) of the assessment order. Therefore, the entire amount of

Rs.6,75,085/- should be added in view of the admission given by the

assessee during the survey action. AO relied heavily on the said statement.

6.1 During the First Appellate proceedings, assessee made various

written submissions. Contents of Para No.4.2 of the order of CIT(A) is

relevant. Eventually, the CIT(A) dismissed the appeal of the assessee on

this issue as per the reasoning/discussion given in Para No.4.3. In the said

paragraph, CIT(A) held that the assessee cannot back-track and state that

only peak credit plus gross profit should only be added. CIT(A) also

observed that the assessee failed to substantiate its claim with cogent

documentary evidences in support of the assessee’s claim. Assessee failed

to link the unaccounted purchases of Bidis to the account sales of the

bidis. CIT(A) also dismissed the assessee’s submission stating that the

assessee was not in proper frame of mind when the declaration of entire

unaccounted purchases are given during survey action. Thus, the CIT(A)

confirmed the entire addition of unaccounted purchases after netting the

income offered by the assessee in the return of income.

grounds extracted above.

Bidi worth Rs.6,75,085/- was offered originally during the survey action

without much application of mind on the issue. However, considering the

fact that the said unrecorded transactions is part-and-parcel of the

business transactions, the assessee quantified the relevant profits of the

said unrecorded purchases and worked out the same at Rs.24,485/- which

was included while filing the return of income. Further, assessee also

offered peak credit based investment in the said purchases. Therefore, as

per assessee, taxing of income of Rs.2,14,615/- (Rs.24,485 + Rs.1,90,180/-

(supra) on this discrepancy is fair instead of Rs.6,75,085/- on account of

unrecorded purchases.

survey resulted in discovery of unrecorded purchases amounting to

Rs.6,75,085/- and the same were not recorded in the books of account.

Survey u/s.133A of the Act took place on 08-09-2010 and incorporation of

the same in the books of account subsequently constitutes an afterthought.

Finalisation of the return of income for the year based on the said updated

books of account constitutes an afterthought. Further, the assessee’s

failure to link the unaccounted purchases to unaccounted sales, does not

give rise to a valid peak credit addition. Therefore, it is a case of back-

tracking the statement given by the assessee and the same is

unsustainable.

include the discovery of unrecorded purchases amounting to

Rs. 6,75,085/-. The same are subsequently recorded in the books of

account before filing the return of income. In the return, assessee

disclosed the additional income of Rs.24,485/- on account of gross profit

on the unrecorded sales over Rs.1,90,180/- on account of peak credit on

the unrecorded purchases totalling to Rs.2,14,615/- (Para No.4.2 of order

of CIT(A). It is the case of the assessee that there is no case of making

entire unaccounted purchases of Rs.6,75,085/- when the above referred

working is within the scope of the peak credit linked principles. Further,

we find the principle of peak credit is a valid and sustainable method of

arriving at the income linked to unaccounted purchases/sales. This is the

case where the AO failed to bring any contrary evidence to deny the benefit

of peak credit additions. Considering the same, we are of the opinion that

the related investment in the said purchases and related profits on the

unaccounted sales stand taxed. Therefore, making addition merely relying

on the statement given by the assessee is not sustainable. Accordingly, we

reverse the order of CIT(A) on this issue. Thus, the ground No.2 raised by

the assessee is allowed in favour of the assessee.

the CIT(A). AO disallowed Rs.25,000/- out of the expenses claimed by the

assessee on various accounts of Telephone, Shop, Transport & Petrol. AO

reasoned that the assessee has not maintained details of the vouchers. In

the absence of supporting vouchers, AO disallowed a sum of Rs.25,000/-

out of the said expenditure on adhoc basis. However, in the First Appellate

proceedings, the CIT(A) restricted the said disallowance to Rs.10,000/-

again on adhoc basis in view of the possible element of personal use of the

phones, vehicles etc.

we find it relevant to extract the finding given by the CIT(A) in Para No.6.2.

The same is reproduced as under :

“6.2 I have considered facts of the case, the submission of the appellant and the order of the Assessing Officer. It is observed the AO has made the disallowance on estimation. However, the interest of personal use cannot be ruled out. Conceding the facts and circumstances of the case the AO is directed to restrict the expenditure to Rs.10,000/-.”

In our view, no case is made out by the assessee that the assessee

maintained any log book showing the use of these facilities. Therefore, we

concur with the above finding of the CIT(A). Assessee failed to substantiate

the expenditure is for wholly and exclusively for the business activity of the

assessee. We therefore confirm the order of CIT(A) on this issue. Thus, the

ground No.3 raised by the assessee is dismissed.

Order pronounced on this 25th day of April, 2018.

Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 25th April, 2018. Satish

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

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “एक सद�य 5. एक सद�य” / एक सद�य एक सद�य DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

//True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune