AJIT PRASAD DEY,BANKURA vs. I.T.O WD - 1,BANKURA, BANKURA

At the outset, Ld. Counsel for the assessee stated that he is not interest in prosecuting ground no.3 qua the addition of commission income. As the assessee has not contested this issue the same is dismissed as not pressed.

The two interconnected issues i.e. addition of gross profit by application of percentage on gross undisclosed purchases and addition of deposits in the bank account of assessee’s brother as undisclosed investment. For this, assessee has raised ground nos. 1 and 2: “1. That on facts and under the circumstances of the case, the Ld. CIT(A) was not justified in holding that the Ld. AO was right in calculating the Gross Profit by application of a percentage on the Gross Purchases. 2. That on facts and under the circumstances of the case, the Ld. CIT(A) was not justified in holding that the Ld. AO was right in adding back the closing balance of a Bank Account belonging to the Appellant’s brother whereas it had already been offered for taxation.”

Briefly stated facts are that the assessee is engaged in wholesale and retail trade of eggs and other perishable goods. The assessee produced complete books of account i.e. cash book, ledger, closing stock statement, bank ledger, bank statement, purchase bills, sale bills and also filed other details of purchases and sales. The assessee declared his gross profit @ 5.37% on total sales of Rs.316.24 lacs. The AO during the course of 2 Ajit Prasad Dey AY 2009-10 assessment proceedings noticed that the assessee had made purchases to the tune of Rs.4,07,82,792/- as per purchase ledger but in the trading account purchases shown were at Rs.2,99,19,693/-. According to AO, there are suppressed purchases of Rs.1,08,63,099/- including discount of Rs.3,88,545/-. According to AO, the assessee sold these purchases amounting to Rs.1,04,74,554/- out of the books of account and sale was not offered for taxation. Accordingly, the AO estimated Gross Profit on alleged suppressed purchases @ 5.37% and added to the total income of the assessee amounting to Rs.5,94,403/- as gross profit.

Similarly, the AO also noted during the course of scrutiny that assessee’s younger brother Nandalal Dey is maintaining bank accounts with Axis Bank, Bankura, A/c. No. 491010100002554 and 4910101000056416. According to AO, the assessee has paid to his creditors from these bank accounts as well as sale proceeds of assessee also deposited in these bank accounts. Accordingly, the AO taking peak credit of the deposits in these two bank accounts as assessee’s own accounts made addition of closing balance of these two accounts at Rs.4,28,407/- and added to the total income of the assessee as unexplained investment.

On both the counts, assessee preferred appeal before CIT(A), who confirmed the addition as it is. Aggrieved now, assessee is in appeal before Tribunal.

I have heard rival submissions and gone through facts and circumstances of the case. Before me as well as before the lower authorities, the assessee claimed that the purchases to the tune of Rs.1,04,74,554/- treated as suppressed purchases by the assessee and not disclosed in the books of account includes an amount of Rs.21,37,500/- being the amount of transportation expenses and the balance amount of Rs.87,25,599/- are actually the unrecorded purchases which are actually sold by the assessee. Ld. Counsel for the assessee in support of his claim of transportation expenses stated that this is normal procedure in the assessee’s business and he carried me through paper book pages wherein purchases are disclosed, which includes transportation charges. Ld. Counsel for the assessee stated that in this trade transportation expenses are part of purchases as it is a trading expense. I am convinced with the argument of Ld. Counsel for the assessee that this transportation expenses amounting to Rs.21,37,500/- being part

In regard to the undisclosed bank deposits in assessee’s brother’s account maintained with Axis Bank, Bankura Branch i.e. the two bank accounts, the AO has rightly treated the peak amount of Rs.4,28,406/-, eventually which was closing balance also as undisclosed income of the assessee. But in any case, as requested by ld. Counsel for the assessee the same is to be telescoped against the income, which is estimated by me in consequence to ground no.1. I find that the gross profit computed on undisclosed purchases is at Rs.4,68,565/- which is higher than the peak amount on account of deposits in these two bank accounts at Rs.4,28,406/- and no further addition is required on this count. In term of the above, the AO will delete this addition and compute the income accordingly. I direct the AO accordingly.

In the result, appeal of assessee is partly allowed as indicated above.

Order is pronounced in the open court on 11.12.2015.