Sri Deepak Kumar Gupta, v. The ITO Wd.- 2,

CO 104/IND/2006 | misc
Pronouncement Date: 29-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 10422723 RSA 2006
Assessee PAN AEOPG1769J
Bench Indore
Appeal Number CO 104/IND/2006
Duration Of Justice 4 year(s) 12 day(s)
Appellant Sri Deepak Kumar Gupta,
Respondent The ITO Wd.- 2,
Appeal Type Cross Objection
Pronouncement Date 29-10-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted Not Allotted
Tribunal Order Date 29-10-2010
Date Of Final Hearing 26-10-2010
Next Hearing Date 26-10-2010
Assessment Year misc
Appeal Filed On 17-10-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C.SHARMA ACCOUNTANT MEMBER PAN NO. : AEOPG1769J I.T.A.NO. 578/IND/2006 A.Y. : 2003-04 INCOME-TAX OFFICER SHRI DEEPAK KUMAR GUPTA WARD 2 PROP. GUPTA AGENCY RATLAM ALIRAJPUR APPELLANT RESPONDENT C.O.NO. 104/IND/2006 (ARISING OUT OF I.T.A.NO. 578/IND/2006) SHRI DEEPAK KUMAR GUPTA INCOME-TAX OFFICER PROP. GUPTA AGENCY WARD 2 ALIRAJPUR RATLAM CROSS OBJECTOR RESPONDENT PAN NO. : ADNPG9106F I.T.A.NO. 579/IND/2006 A.Y. : 2003-04 INCOME-TAX OFFICER SHRI DHANRAJ GUPTA WARD 2 PROP. GUPTA RADIO & ELECTRONICS RATLAM ALIRAJPUR APPELLANT RESPONDENT C.O.NO. 103/IND/2006 (ARISING OUT OF I.T.A.NO. 579/IND/2006) - 2 - 2 SHRI DEEPAK KUMAR GUPTA INCOME-TAX OFFICER PROP. GUPTA AGENCY WARD 2 ALIRAJPUR RATLAM CROSS OBJECTOR RESPONDENT DEPARTMENT BY : SMT. APARNA KARAN SR. DR ASSESSEE BY : SHRI P. N. DIXIT ADV. O R D E R PER R. C. SHARMA A.M. THESE APPEALS OF DIFFERENT ASSESSEES BELONGING TO T HE SAME GROUP FILED BY THE REVENUE AND CROSS OBJECTIONS BY THE AS SESSEES AGAINST THE ORDERS OF CIT(A) DATED 5.6.2006 FOR THE ASSESSMENT YEAR 2 003-04 IN THE MATTER OF ORDERS PASSED U/S 143(3) OF THE INCOME-TAX ACT 196 1. 2. COMMON GROUNDS HAVE BEEN TAKEN IN BOTH THE APPEALS EXCEPT THE AMOUNTS OF ADDITIONS. HOWEVER WE WILL FIRST DECIDE THE ISSUES IN I.T.A.NO. 578/IND/2006 AND CROSS OBJECTION NO. 104/IND/2006. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE MR. DEEPAK KUMAR GUPTA PROP. OF M/S. GUPTA AGENCY DEALS IN TRADING OF STEEL ALMIRAHS COOLERS TV BOXES ETC. THERE WAS SURVEY U/S 133A ON 3.3.2003 INCLUDING OTHER SIS TER CONCERNS OF THE ASSESSEE NAMELY M/S. GUPTA RADIO AND ELECTRONICS AND M/S. RAGHAV MINERALS ALIRAJPUR. DURING THE COURSE OF SURVEY T HE ASSESSEE WAS ASKED TO - 3 - 3 SHOW THE BOOKS OF ACCOUNT AND IT WAS REPLIED BY THE ASSESSEE THAT THE BOOKS ARE NOT COMPLETE SAME WERE ALSO NOT LYING AT SHOP THEREFORE COULD NOT BE PRODUCED AT THE TIME OF SURVEY. DURING THE COURSE O F SURVEY INVENTORY OF CASH STOCK LOOSE PAPERS WERE PREPARED BUT IN THE ABSENCE OF BOOKS OF ACCOUNT NOT AVAILABLE WITH THE ASSESSEE THE ASSESS EE COULD NOT OFFER ANY EXPLANATION WITH REGARD TO CASH AND STOCK FOUND AT BUSINESS PREMISES. STATEMENT OF ASSESSEE WAS RECORDED U/S 133A WHEREI N THE ASSESSEE OFFERED CASH AND SOME AMOUNT ON ACCOUNT OF LOOSE PAPERS. CA SH OFFERED WAS RS.3 56 713/- WHILE RS. 5 LAKHS WAS OFFERED IN RES PECT OF LOOSE PAPERS FOUND AND INVENTORIZED IN RESPECT OF ALL THE THREE CONCER NS JOINTLY. HOWEVER AT THE TIME OF FILING RETURNS OF INCOME THE ASSESSEE OFFE RED ONLY RS. 1 LAKH AS ADDITIONAL INCOME THEREBY RETRACTING FROM THE ORIGI NAL INCOME OFFERED DURING THE COURSE OF SURVEY IN RESPECT OF CASH AND LOOSE P APERS FOUND. HOWEVER DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSEE HAS PRODUCED COMPUTERIZED BOOKS OF ACCOUNT PURCHASE AND SALE BI LLS ETC. THE CLAIM OF THE ASSESSEE WAS THAT THE LOOSE PAPERS FOUND DURING THE COURSE OF SURVEY WAS VERIFIABLE WITH REFERENCE TO THE BOOKS OF ACCOUNT P RODUCED NOW FOR VERIFICATION BEFORE THE AO. HOWEVER THE AO DID NOT ACCEPT THE CORRECTNESS OF BOOKS OF ACCOUNT ON THE PLEA THAT THE SAME WAS P REPARED AFTER SURVEY WITH THE HELP OF COPIES OF LOOSE PAPERS RECEIVED BY THEM AND NO BOOKS WERE - 4 - 4 AVAILABLE WITH THE ASSESSEE EITHER AT THE TIME OF S URVEY AND THEREAFTER. ACCORDINGLY THE AO REJECTED THE BOOK RESULT BY INV OKING PROVISIONS OF SECTION 145(3) AND ESTIMATED PROFIT ON THE SALES UN DERTAKEN BY THE ASSESSEE. THE AO ALSO MADE VARIOUS OTHER ADDITIONS WITH REGAR D TO AMOUNT INVESTED IN PURCHASE STOCK AND CASH FOUND DURING THE COURSE OF SURVEY AND ALSO CERTAIN ADDITIONS ON THE BASIS OF ENTRIES IN LOOSE PAPERS. BY THE IMPUGNED ORDER THE LD. CIT(A) DELETED ALL THE ADDITIONS BY OBSERVING T HAT THE ASSESSEE IS A SMALL TRADER AND IS COVERED BY THE PROVISIONS OF SECTION 44AF ON WHICH THE PROFIT RATE OF 5 % IS TO BE APPLIED. HOWEVER IN PLACE OF SALE OF RS. 20.28 LAKHS DISCLOSED BY THE ASSESSEE IN THE PROFIT AND LOSS AC COUNT THE LD. CIT(A) DIRECTED FOR ESTIMATING SALES AT RS. 35 LAKHS AND FOR APPLYING NET PROFIT RATE OF 5 % THEREON. ACCORDINGLY THE ADDITION OF RS. 1. 75 LAKHS WAS DIRECTED BY CIT(A) TO BE MADE ON ACCOUNT OF PROFIT ON SUCH SA LES IN ADDITION TO RS. 1 LAKH ADMITTED BY THE ASSESSEE AS UNEXPLAINED CASH F OUND IN THE COURSE OF SURVEY WHICH WAS IN THE RETURN OF INCOME SO FILED. BOTH THE REVENUE AND ASSESSEE ARE AGGRIEVED BY THE ABOVE ORDER OF LD. CI T(A). THE REVENUE IS AGGRIEVED FOR DELETION OF VARIOUS ADDITIONS MADE BY THE ASSESSING OFFICER WITH REFERENCE TO THE STOCK CASH AND LOOSE PAPERS FOUND DURING COURSE OF SURVEY WHEREAS THE ASSESSEE IS AGGRIEVED BY THE AC TION OF THE LD. CIT(A) FOR - 5 - 5 ESTIMATING SALE AT RS. 35 LAKHS IN PLACE OF SALE OF RS. 20.28 LAKHS DISCLOSED IN THE BOOKS OF ACCOUNT WITHOUT ANY COGENT REASONS . 4. FOLLOWING ARE THE GROUNDS TAKEN IN THE REVENUES A PPEAL AS WELL AS CROSS OBJECTION :- GROUNDS IN APPEAL : (REVENUES GROUND) (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 3 56 7 13/-ON ACCOUNT OF UNEXPLAINED CASH INSPITE OF THE FACT THA T THE AO HAS MADE THIS ADDITION AS THE CASH FOUND DURING THE SURVEY U/S 133A WAS UNEXPLAINED. (II) THE LD. CIT(A) FURTHER ERRED IN DELETING THE ADDITI ON OF RS. 1 79 042/- ON ACCOUNT UNEXPLAINED INVESTMENT S ALE AND DEPOSITS INSPITE OF THE FACT THAT THE AO MADE THIS ADDITION ON THE BASIS OF LOOSE PAPERS FOUND DURING THE COURSE OF SURVEY PRECEDING FOR WHICH NO EXPLANATION WAS OFFERED. (III) THE LD. CIT(A) FURTHER ERRED IN DELETING THE ADDITI ON OF RS. 1 99 382/- ON ACCOUNT OF UNEXPLAINED PURCHASES WHICH WERE TAKEN ON THE BASIS OF PEAK PURCHASES OF YEAR - 6 - 6 AS PER CREDIT SALES BOOK FOUND DURING SURVEY OPERAT ION FOR WHICH NO EXPLANATION WAS OFFERED. (IV) THE LD. CIT(A) FURTHER ERRED IN DELETING THE ADDITI ON OF RS. 3 19 090/- ON ACCOUNT OF UNEXPLAINED PURCHASES INSPITE OF FACT THAT THE AO HAS MADE THIS ADDITION AS UNEXPLAINED INVESTMENT IN PURCHASES OF STOCK SHOWN AS DEBTORS. (V) THE LD. CIT(A) FURTHER ERRED IN DELETING THE ADDIT ION OF RS. 68 000/- (WRONGLY TAKEN BY THE CIT(A) AS RS. 60 880/-) ON ACCOUNT OF GROSS PROFIT ON UNRECORDED SALES INSPITE OF THE FACT THAT THE AO HAS MADE THIS ADDIT ION AFTER NECESSARY VERIFICATION. (VI) THE LD. CIT(A) FURTHER ERRED IN DELETING THE ADDITI ON OF RS. 1 40 340/- ON ACCOUNT OF UNEXPLAINED STOCK FOUN D ON PHYSICAL VERIFICATION INSPITE OF THE FACT THAT THE AO HAS MADE THIS ADDITION AFTER MAKING NECESSARY VERIFICAT ION. (VII) THE LD. CIT(A) FURTHER ERRED IN DELETING THE ADDITI ON OF RS. 12 000/- AND RS. 8 000/- ON ACCOUNT OF SALARY EXPENSES AND GODOWN RENT INSPITE OF THE FACT THAT T HE AO - 7 - 7 HAS MADE THESE DISALLOWANCES AFTER NECESSARY VERIFI CATION FROM THE RECORDS OF THE ASSESSEE . GROUNDS IN CROSS OBJECTION : (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS FULLY JUSTIFIED IN GRANTING A LL THE RELIEFS BEING CONTESTED IN THE DEPARTMENTAL APPEAL AT GROUN DS NO. (I) TO (VII). (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN ESTIMATING THE SALES AN D ALSO APPLYING NET PROFIT RATE OF 5 % ON THE SALES SO EST IMATED THEREBY ENHANCING THE DECLARED TOTAL INCOME BY RS. 68 309/- (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN SO ENHANCING THE DECLAR ED TOTAL INCOME BY RS. 68 309/- WITHOUT ANY NOTICE U/S 251(2). 5. SMT. APARNA KARAN SR. DR APPEARED ON BEHALF OF T HE REVENUE AND ASSAILED THE ORDER OF THE LD. CIT(A) AND CONTENDED THAT THE ASSESSEE COULD NOT PRODUCE BOOKS OF ACCOUNT NEITHER AT THE TIME OF SURVEY NOR THEREAFTER EVEN THOUGH THE AO HAS ISSUED NOTICE U/S 131 FOR PR ODUCING THE REGULAR - 8 - 8 BOOKS OF ACCOUNT. SHE FURTHER CONTENDED THAT NO COG ENT REASON HAS BEEN GIVEN BY THE LD. CIT(A) FOR DELETING THE ADDITION M ADE WITH RESPECT OF CASH AND STOCK FOUND DURING THE COURSE OF SURVEY AS WELL AS TRANSACTION FOUND TO BE RECORDED IN THE LOOSE PAPERS. SHE JUSTIFIED THE ACTION OF THE AO FOR REJECTING BOOKS OF ACCOUNT SINCE THE ASSESSEE COUL D NOT PRODUCE THE SAME BEFORE THE SURVEY TEAM AND THE COMPUTERIZED BOOKS W ERE MAINTAINED THEREAFTER ONLY. 6. ON THE OTHER HAND SHRI P. N. DIXIT ADVOCATE APPE ARED ON BEHALF OF THE ASSESSEE AND FULLY SUPPORTED THE ACTI ON OF THE LD. CIT(A) IN SO FAR AS HE HAS DELETED ALL THE ADDITIONS MADE BY AO. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOU ND FROM RECORD THAT THE ASSESSEE IS A TRADER DEALING IN T.V. FREEZE ETC. WH OSE TURNOVER WAS STATED TO BE BELOW RS. 40 LACS. THERE WAS SURVEY AT BUSINESS PREMISES OF THE ASSESSEE AND INVENTORY OF STOCK CASH AND LOOSE PAPERS WERE PREPARED. THE ASSESSEE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNT ON WHICH HE REPLIED THAT THE SAME WERE NOT LYING AT SHOP BUT WERE LYING WITH THE ACCO UNTANT OF THE FIRM. THEREFORE BOOKS COULD NOT BE PRODUCED BEFORE SURVE Y TEAM. THE ASSESSEE ALSO FAIRLY CONCEDED THAT THE BOOKS OF ACCOUNT WERE NOT COMPLETE. THE AO OBSERVED THAT THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME AFTER - 9 - 9 ASSESSMENT YEAR 1999-2000. HOWEVER AT THE TIME OF SCRUTINY ASSESSMENT THE ASSESSEE PRODUCED BOOKS OF ACCOUNT MAINTAINED ON CO MPUTER WHICH WAS DISBELIEVED BY THE ASSESSING OFFICER ON THE PLEA TH AT AT THE TIME OF SURVEY THE ASSESSEE COULD NOT PRODUCE THE REGULAR BOOKS OF ACCOUNT AND EVEN THEREAFTER THE ASSESSEE DID NOT COMPLY WITH THE DIR ECTION OF THE AO FOR PRODUCING THE REGULAR BOOKS OF ACCOUNT. IN THE ASSE SSMENT ORDER NO WHERE AO HAS STATED THAT THE ASSESSEE HAS NOT PRODUCED TH E BOOKS OF ACCOUNT AT THE TIME OF ASSESSMENT STAGE. THE AO ALSO DID NOT POIN T OUT ANY DEFECTS IN THESE BOOKS OF ACCOUNT NOR HE HAS TRIED TO VERIFY CASH S TOCK ETC. FOUND AT THE TIME OF SURVEY WITH THE ENTRIES RECORDED IN THE COMPUTER IZED BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS. MERELY ON THE PLEA THAT THE BOOKS WERE NOT AVAILABLE AT THE T IME OF SURVEY AND WERE MAINTAINED ON COMPUTER CANNOT BE MADE THE REASON F OR REJECTING THE BOOK RESULT UNLESS SOME DEFECTS ARE FOUND IN THE BOOKS O F ACCOUNT ON VERIFICATION. BOOKS OF ACCOUNT MAINTAINED IN COMPUTER WITH THE HE LP OF REGULAR PURCHASE AND SALE BILLS EXPENDITURE VOUCHERS ARE AS VALID A S BOOKS MAINTAINED MANUALLY. AS PER PROVISIONS OF SECTION 44AF WHEN TH E ASSESSEE IS NOT REQUIRED TO MAINTAIN REGULAR BOOKS OF ACCOUNT AND P ROFIT IS TO BE ESTIMATED @ 5 % OF NET PROFIT ON SALES THE MAINTENANCE OF BOOK S OF ACCOUNT CANNOT BE THROWN ON HIM AND PROVISIONS OF SECTION 44AB AND 44 AA OF THE INCOME-TAX - 10 - 10 ACT 1961 ARE NOT APPLICABLE ON HIM. BOOKS OF ACCO UNTS MAINTAINED IN COMPUTER WILL NOT LOSE AUTHENTICITY UNLESS SOME DEF ECTS ARE FOUND THEREIN BY THE ASSESSING OFFICER ON VERIFICATION. SUCH COMPUTE RIZED BOOKS OF ACCOUNT PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDING S CANNOT BE REJECTED LIGHT HEARTEDLY MERELY ON THE PLEA THAT THESE BOOK S WERE NOT AVAILABLE EARLIER AT THE TIME OF SURVEY WHEN THE ASSESSEE WAS NOT RE QUIRED TO MAINTAIN REGULAR BOOKS OF ACCOUNT AS PER PROVISIONS OF SECTION 44AF. FOR REJECTING THE BOOKS OF ACCOUNT IT IS REVENUES ONUS TO PROVE THAT EITH ER THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE NOT CORRECT AND COMP LETE OR THE METHOD OF ACCOUNTING ADOPTED IS SUCH THAT TRUE PROFITS CANNOT BE DEDUCED THERE FROM. AS THE ONUS TO MAKE OUT THE CASE FOR REJECTION OF B OOKS OF ACCOUNT IS ON THE REVENUE THE AO IS REQUIRED TO INDICATE THE SPECIFI C DEFECTS IN THE BOOKS OF ACCOUNT WHICH CLINCHES THE PROFITS SHOWN BY THE AS SESSEE OR ITS STATE OF AFFAIRS. AFTER PRODUCTION OF BOOKS OF ACCOUNT AND S UBMISSION OF EXPLANATION BY THE ASSESSEE IF ANY ASKED BY THE ASSESSING OFF ICER WITH RESPECT OF THE CONTENTS OF THE RETURN AND BOOKS OF ACCOUNT THE RE VENUE MAY ACCEPT THE SAME OR AFTER POINTING OUT SPECIFIC DEFECTS MAY RE JECT THE BOOKS OF ACCOUNT AND PROCEED TO DETERMINE THE ASSESSEES INCOME AS P ER THE PROVISIONS OF SECTION 145. EVEN THOUGH IT IS NOT POSSIBLE TO LAY DOWN THE EXACT CIRCUMSTANCES IN WHICH ACCOUNTS SHOULD BE REJECTED AS UNRELIABLE OR - 11 - 11 INCORRECT YET THE ACCOUNTS MAY BE REJECTED AS UNRE LIABLE IF IMPORTANT ENTRIES AND TRANSACTIONS ARE OMITTED THEREFROM OR IF PROPER PARTICULARS AND VOUCHERS BILLS ETC. ARE NOT FORTHCOMING OR IF THEY DID NOT I NCLUDE ENTRIES RELATING TO PARTICULAR CLASS OF BUSINESS TRANSACTION. THE ASSES SEE SHOULD INVARIABLY BE GIVEN OPPORTUNITY FOR OFFERING EXPLANATION REGARDIN G DEFECTS IN ACCOUNTS AND ON HIS FAILURE TO SATISFACTORILY EXPLAIN THE DEFECT S THE DEPARTMENT WOULD BE JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. THUS THE BOOKS OF ACCOUNT SHOULD NOT BE REJECTED LIGHT-HEARTEDLY. IN THE INSTANT CA SE UNDISPUTEDLY THE ASSESSEE HAS PRODUCED THE COMPUTERIZED BOOKS OF ACC OUNT ALLEGED TO BE MAINTAINED AS PER THE REGULAR TRANSACTIONS ENTERED BY THE ASSESSEE. THE BOOKS WERE SUPPORTED BY PURCHASE AND SALE BILLS AND EXPEN DITURE VOUCHERS ETC. WHICH WERE DULY PRODUCED FOR VERIFICATION. EVEN THE TRANSACTIONS FOUND TO BE RECORDED IN THE LOOSE PAPERS AS FOUND DURING THE CO URSE OF SURVEY WAS ALSO ALLEGED TO BE FINDING PLACE IN THE BOOKS OF ACCOUNT . HOWEVER THE AO DID NOT TAKE ANY PAIN TO RECONCILE THE TRANSACTIONS IN THE LOOSE PAPERS WITH REFERENCE TO THE ENTRIES IN BOOKS OF ACCOUNT SO PRODUCED TH EREFORE NO FAULT CAN BE FOUND ON THE PART OF THE ASSESSEE AND THE BOOKS OF ACCOUNT REJECTED WITHOUT POINTING OUT ANY DEFECTS THEREIN IS NOT ACCEPTABLE . NO WHERE IN THE ASSESSMENT ORDER THE AO HAS ALLEGED THAT STOCK DE BTOR POSITION SALE AND PURCHASES ETC. WERE NOT MATCHING WITH THE ENTRIES M ADE IN BOOKS OF ACCOUNT - 12 - 12 NOR IT IS THE CASE OF AO THAT SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE WAS NOT REFLECTING CORRECT STATE OF AFFAIRS/PROFIT ETC. IN CASE OF ASSESSEE BEING A SMALL TRADER AND COVERED BY THE PROVISIONS OF SEC TION 44AF HE IS NOT SUPPOSED TO MAINTAIN REGULAR BOOKS OF ACCOUNT AND P ROFIT IS ASSESSABLE AT NET PROFIT OF 5 % OF THE DECLARED SALES. HOWEVER IF T HE ASSESSEE HIMSELF DECLARE HIGHER PROFIT RATE SAME IS TO BE TAKEN INTO CONSIDE RATION. WHEN THE CASE OF ASSESSEE IS TAKEN UNDER SCRUTINY DUE TO SURVEY ACTI ON THE AO IS AT LIBERTY TO VERIFY THE BOOKS OF ACCOUNT IF ANY MAINTAINED BY TH E ASSESSEE AND IF SOME DEFECTS ARE FOUND THEREIN OR IF SOME SALES ARE FOUN D UNACCOUNTED ADDITION CAN BE MADE WITH RESPECT TO UNRECONCILED TRANSACTIO NS. IN THE INSTANT CASE VARIOUS ADDITIONS WERE MADE BY THE ASSESSING OFFICE R WERE WITH RESPECT OF THE PURCHASE STOCK CASH ETC. WHICH WERE AS VERIF IABLE FROM THE BOOKS OF ACCOUNT PRODUCED BY ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BUT INSPITE OF VERIFYING THE AVAILABILITY OF STOCK DEBTOR POSITION ETC. WITH REFERENCE TO THE ENTRIES IN THE BOOKS OF ACCOUNT T HE AO WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS REJECTED THE SAME AND MADE ADDITION IN RESPECT OF WHATEVER CASH STOCK ETC. WAS FOUND DURING COURSE O F SURVEY. VARIOUS OTHER ADDITIONS WERE ALSO MADE WITH REFERENCE TO ENTRIES ON THE LOOSE PAPERS. IF ASSESSEE IS CARRYING ON BUSINESS SOME CASH AND STO CK IS BOUND TO BE THERE. MAKING ADDITION OF ENTIRE CASH STOCK ETC. WITHOUT VERIFYING THEIR CORRECTNESS - 13 - 13 WITH THE BOOKS OF ACCOUNT ARE NOT JUSTIFIABLE. WE D O NOT APPRECIATE THIS ACTION OF THE AO. ACCORDINGLY WE DO NOT APPROVE TH E ACTION OF AO FOR THE ADDITIONS SO MADE EXCEPT THE CASH FOUND DURING SURV EY WHICH WAS OFFERED BY THE ASSESSEE HIMSELF IN HIS STATEMENT. IT IS VERY P ERTINENT TO MENTION HERE THAT WHILE DELETING THE ADDITION EVEN THE LD. CIT(A) HAS NOT VERIFIED THE CASH STOCK AND THE ENTRIES RECORDED IN THE LOOSE PAPER S EIZED DURING THE COURSE OF SURVEY WITH REFERENCE TO THE ENTRIES IN THE BOOKS OF ACCOUNT WHICH WERE PRODUCED BY THE ASSESSEE BEFORE THE AO BUT HE DID N OT TAKE ANY PAIN TO VERIFY THE SAME AND REJECTED OUTRIGHTLY. THERE IS N O DISPUTE TO THE WELL SETTLED LEGAL PROPOSITION THAT THE POWERS OF THE LD . CIT(A) ARE COTERMINUS WITH THAT OF THE AO WHAT THE AO HAS FAILED TO DO T HE LD. CIT(A) CAN VERY WELL DO IT AND HE HAS GOT ALL THE POWERS TO ASK ANY REMAND REPORTS FROM THE AO IF HE WANTS TO VERIFY THE CORRECT STATE OF AFFAI RS.. IN THE INSTANT CASE THERE IS A GROSS FAILURE ON THE PART OF THE AO TO VERIFY THE BOOKS OF ACCOUNT PRODUCED BY SMALL ASSESSEE DURING THE COURSE OF ASS ESSMENT AT THE VERY SAME TIME THE LD. CIT(A) HAS DONE THE SAME MISTAKE OF NOT VERIFYING THE BOOKS OF ACCOUNT WHICH WERE IGNORED BY THE ASSESSI NG OFFICER WITHOUT ANY COGENT REASON IN SO FAR AS NO WHERE IN THE APPELLA TE ORDER THE CIT(A) HAS GIVEN ANY OF HIS FINDING TO THIS EFFECT. NOWHERE IN THE APPELLATE ORDER THE LD. CIT(A) HAS STATED THAT HE HAS CHECKED THE BOOKS OF ACCOUNT TO VERIFY THE - 14 - 14 CORRECTNESS OF ADDITION MADE IN RESPECT OF CASH S TOCK AND ENTRIES IN THE LOOSE PAPERS. HOWEVER A SMALL ASSESSEE CANNOT BE N OW PUNISHED FOR THE LAPSE ON THE PART OF THE DEPARTMENTAL AUTHORITIES BY SETTING ASIDE THEIR ORDERS AND RESTORING THE MATTER BACK TO THE FILE OF AO FOR DOING DE NOVO AFTER VERIFYING THE BOOKS OF ACCOUNTS. KEEPING IN VIEW T HE FACT OF ASSESSEE BEING A SMALL TRADER COVERED U/S 44AF IT IS REASONABLE A ND LEGITIMATE TO ESTIMATE THE NET PROFIT AT 5 % OF THE SALES IN SO FAR AS NO DEFECT WAS POINTED OUT BY THE DEPARTMENTAL AUTHORITIES IN THE BOOKS OF ACCOUNT MA INTAINED AND PRODUCED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PRO CEEDINGS AND WAS VERY MUCH THERE EVEN DURING APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A). 8. THE POWERS OF THE LD. CIT(A) FOR ENHANCEMENT OF AS SESSMENT IS SUBJECT TO THE REASONABLE OPPORTUNITY BEING GIVE N TO THE ASSESSEE U/S 251(2). AS PER CONTENTION OF THE LD.AUTHORIZED REPR ESENTATIVE NO SUCH NOTICE FOR ENHANCEMENT WAS GIVEN BY THE LD. CIT(A) NOR ANY BASIS FOR ESTIMATING THE SALES AT SUCH A HIGHER FIGURE WAS CO NVEYED TO THE ASSESSEE. ACCORDINGLY ACTION OF THE LD. CIT(A) WAS ALLEGED T O BE AGAINST THE PRINCIPLE OF NATURAL JUSTICE TO ENHANCE THE ASSESSMENT WITHOU T GIVING OPPORTUNITY AND WITHOUT BRINGING ANY MATERIAL MUCH LESS A COGENT MA TERIAL ON RECORD. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTA NCES SINCE NO BASIS HAS BEEN GIVEN BY THE LD. CIT(A) FOR HIGHER ESTIMATION OF SALES WE DIRECT THE - 15 - 15 AO TO ACCEPT THE BOOK RESULT AND INCOME OF THE ASS ESSEE IS TO BE ASSESSED AT NET PROFIT RATE OF 5 % OF THE SALES DECLARED BY HIM AT RS. 20.28 LAKHS. 9. IN TERMS OF STATEMENT RECORDED DURING SURVEY CASH FOUND AT BUSINESS PREMISES WERE OFFERED BY THE ASSESSEE AT R S. 3.56 LAKHS. HOWEVER WHILE FILING RETURN THE ASSESSEE RETRACTED FROM HI S STATEMENT AND OFFERED ONLY RS. 1 LAC IN THE RETURN OF INCOME ON ACCOUNT O F CASH FOUND DURING COURSE OF SURVEY. SINCE NEITHER ANY FINDING NOR AN Y REASONING HAS BEEN GIVEN BY THE LD. CIT(A) FOR ACCEPTING THE RETRACTIO N BY THE ASSESSEE WE DO NOT FIND ANY VALID JUSTIFICATION IN CIT(A)S ACTION FOR DELETING THIS ADDITION OF RS. 3 56 713/-. SMALL TRADER IS NORMALLY NOT SUP POSED TO CARRY THIS MUCH OF CASH UNLESS SPECIAL CIRCUMSTANCES NECESSITATING THIS MUCH OF CASH IS EXPLAINED TO THE REVENUE AUTHORITIES. NO WHERE IN T HE INSTANT CASE THE ASSESSEE HAS SUBSTANTIATED HIS ACTION OF HAVING HUG E CASH OF RS. 3.56 LAKHS NOR CIT(A) HAS GIVEN ANY JUSTIFICATION FOR ACCEPTIN G ASSESSEES RETRACTION OR FOR DELETING THE ADDITION SO MADE BY THE ASSESSING OFFICER WITH REFERENCE TO CASH FOUND DURING SURVEY AND STATEMENT RECORDED WHE REIN ASSESSEE AGREED TO OFFER THIS CASH AS HIS INCOME. WHENEVER THERE IS AN Y RETRACTION BY THE ASSESSEE AND THE LD. CIT(A) WANTS TO ACCEPT IT THE SAME SHOULD BE SUPPORTED BY PROPER REASONING AND THE RELEVANT MATERIAL ON RE CORD. WHEN ANY STATEMENT IS MADE DURING THE COURSE OF SURVEY THE ASSESSEE HAS ALL THE RIGHTS - 16 - 16 TO SUBSTANTIATE THE CORRECTNESS OF THE STATEMENT AN D IF THE SAME ARE NOT FOUND TO BE CORRECT SUBSEQUENTLY WITH THE HELP OF RELEV ANT MATERIAL THE ASSESSEE HAS ALSO THE RIGHTS TO RECTIFY THE SAME TO THE SATI SFACTION OF THE REVENUE AUTHORITIES. SINCE NO REASONING HAS BEEN GIVEN BY T HE LD. CIT(A) FOR ACCEPTING THE RETRACTION FROM THE OFFER CLEARLY MAD E DURING THE COURSE OF SURVEY WITH REFERENCE TO THE CASH FOUND AT THE BUSI NESS PREMISES WHICH THE ASSESSEE COULD NOT EXPLAIN WE DO NOT FIND ANY JUST IFICATION IN CIT(A)S ACTION FOR DELETING THIS ADDITION. ACCORDINGLY WE DIRECT THE AO TO RETAIN THE ADDITION OF RS. 3.57 LAKHS IN PLACE OF RS. 1 LAKH O FFERED BY THE ASSESSEE IN THE RETURN OF INCOME. WE DIRECT ACCORDINGLY. 10. IN VIEW OF THE ABOVE DISCUSSION FOLLOWING ADDITIO NS ARE DIRECTED TO BE SUSTAINED. (I) RS. 3.57 LAKHS IN RESPECT OF CASH FOUND DURING THE COURSE OF SURVEY. (II) COMPUTATION OF INCOME AT 5% OF THE NET PROFIT OF TH E SALES DECLARED BY THE ASSESSEE AT RS. 20.28 LAKHS. ALL OTHER ADDITIONS ARE DIRECTED TO BE DELETED. 11. THE FACTS AND CIRCUMSTANCES IN THE CASE OF SHRI DH ANRAJ GUPTA IN I.T.A.NO. 579/IND/2006 ARE PARI MATERIA AS DISCUSSED HEREINABOVE. ADDITION IN THIS CASE WAS ALSO MADE WITH REFERENCE TO THE SAME SURVEY. - 17 - 17 RESPECTFULLY FOLLOWING OUR OBSERVATION AND VERDICT AS ELABORATED ABOVE WE DIRECT THE AO FOR RETAINING THE ADDITION OF RS. 2. 41 687/- LAKHS IN RESPECT OF CASH SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY IN PLACE OF RS. 1.00 LAKH OFFERED IN THE RETURN IN ADDITION TO EST IMATING NET PROFIT AT 5.00 % OF THE SALE OF RS. 29.18 LACS DECLARED BY THE ASSES SEE IN THE BOOKS OF ACCOUNT. WE DIRECT ACCORDINGLY. 12. IN THE RESULT THE APPEALS OF THE REVENUE AND CROS S OBJECTIONS FILED BY THE ASSESSEES ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER 2009. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29 TH OCTOBER 2010. CPU* 2829