IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA

[Before Smt. Diva Singh, Honble JM & Shri C.D.Rao, Honble AM]

 /I.T.A No.59/Kol/2012
/Assessment Year : 2006-07
I.T.O., Ward-1(2), Jalpaiguri Vs- Sri Kajal Chaki
Prop. Chaki Enterprise,
Nantun Bazar, Maynaguri,
Dist-Jalpaiguri, West Bengal
(PAN:ACQPC 9293H)
(/Appellant)
(/Respondent)
Date of hearing:
25.09.2012
Date of pronouncement: 25.09.2012
For the Appellant : Shri D.K.Rakshit, Sr.DR
For the Department : Shri S.M.Surana, Advocate
/ORDER

Per Shri C.D.Rao, A.M.

The above appeal is filed by the Revenue aggrieved by the order of Ld.
CIT(A), Jalpaiguri dated 13.10.2011 passed under section 250 r.w.s. 143(3) of
the Income-tax Act, 1961 for the assessment year 2006-07.
2.

In this appeal, the Revenue has raised the following grounds:

i.
That on the facts and in the circumstances of the case, the Ld.
CIT(A), Jalpaiguri has erred in deleting the addition of Rs.2,54,075/made on the ground of undisclosed purchases.
ii.
That on the facts and in the circumstances of the case, the Id.
CIT(A), Jalpaiguri has erred in deleting the addition of Rs.9,01,400/made on the ground of undisclosed payments.
iii. That on the facts and in the circumstances of the case, the Ld.
CIT(A), Jcilpaiguri has erred in deleting the addition of Rs.7,622/- and
Rs.12,000/- made on gross profit on undisclosed business transactions.

ITA 59/Kol/2012 Sri Kajal Chaki

Assessment Year : 2006-07

iv.
That on the facts and in the circumstances of the case, the Id.
CIT(A), Jalpaiguri erred in treating the undisclosed purchases and
undisclosed receipts as part of the undisclosed payments when in fact, the
all the undisclosed transactions had been separately and distinctly
identified from different documents.
v.
That, in view of the aforementioned grounds of appeal, the Order
of the Ld.CIT(A) may be cancelled and the order of the Assessing Officer
be restored.
v.
That the appellant may please be allowed to add and/or alter the
grounds of appeal, if any.
2.

Brief facts of the above grounds are that while doing the scrutiny

assessment, the AO, on the loose sheets, found during the survey vide
Identification mark nos. KC-65, KC-66 and KC-69, which contained purchase
bills, sales bills, money receipts and approval slips, etc., added an amount of
Rs.2,54,075/- as unrecorded purchase and also added an amount of Rs.7,622/as the undisclosed income at 3% of the undisclosed investment in the business.
In addition to the above, he further added an amount of Rs.9,01,400/- as
unaccounted sales at Rs.2,70,42/- and Rs.12,000/-by stating that the assessee
earned 3% of the transaction involved in the Money Receipt Book amounting to
Rs.4 lakhs.
3.

Aggrieved by this, the assessee went in appeal before the ld. CIT(A).

After considering the various submissions of the assessee, the ld. CIT(A) has
deleted the addition made by the AO on account of the above undisclosed
purchase, sales and the profit elements involved in it. However, he confirmed
an amount of Rs.1,90,000/- as against the above addition by observing as under:
I have carefully considered the submission of the Ld ARs and also
perused the assessment order. It is apparent from the assessment order
that while examining the list of such transactions from the inventorised
documents, the AO got it signed by the assessee and has given two
opportunities to the assessee to establish that those were not unrecorded
transactions. But, the assessee could not offer any explanation resulting
in the additions made by the AO. However, the submission made by the
ARs in this regard in course of appellate proceedings has merit. The

ITA 59/Kol/2012 Sri Kajal Chaki

Assessment Year : 2006-07

submission of the ARs that the payments of Rs.9,01,400/- were made

against the corresponding undisclosed purchases which were included in
the purchase documents inventorised under marked KC-65, 66 and 69.
The Cash Receipt Book inventorised under marked KC-5 also shown the
cash receipts in respect of the sales made against those undisclosed
purchases. At the same time, since it was undisclosed purchases were
made over a period of time, the Ld AO was wrong in treating the whole
amount of purchase and payments made as undisclosed investment.
Therefore, the addition in the form of undisclosed investment made in
purchases of Rs.2,54,075/- and corresponding GP on the same amount of
Rs.7,622/- should be deleted. For the same reason, the addition of GP of
Rs.12,000/- on sales of Rs.4,00,000/- was also a double addition.
As per the documents inventorised, the AO found that the assessee
made unaccounted transactions as under:
Heads

GP Estimated

Purchase of Rs.2,54,075/- Rs.7,622/Payments ofRs.9,01,400/- Rs.27,042/Receipts of Rs.4,00,000/- Rs.12,000/-

Additions made
Principal
GP
Rs.2,54,075/- Rs.7,622/Rs.9,01,400/- Rs.27,042/Rs.12,000/-

It is, thus, apparent that the AO has already allowed the

telescoping benefit to the assessee in respect of the cash receipts of
Rs.4,00,000/- against the undisclosed sales. At the same time, the
payment made by the assessee against the undisclosed purchases of
Rs.9,01,400/- is higher than the undisclosed purchases of Rs.2,54,075/-.
Therefore, it can be presumed that the undisclosed purchases of
Rs.2,54,075/- was included in the undisclosed payments of Rs.9,01,400/-.
Similarly, sales of Rs.4,00,000/- as per the Cash receipt Book was also
made out of the said purchases. Therefore, addition in respect of the GP
should have been made on the amount of purchases I payments I sales
whichever is higher. As such, it is held that the addition on account of GP
to the extent of Rs.27,042/- estimated on payments of Rs.9,Ol,4001- is
confirmed and remaining two amounts are deleted.
So far as the addition on account of undisclosed investment is
concerned, considering the facts of the case, the total amount of
undisclosed purchases or payments cannot be treated as undisclosed
investment. It is found from the assessment order as well as the
submission of the ARs that the purchases and payments were made over a
period of time. Neither the purchases nor the payments were made in one
go. Time-to-time purchases were made and payments were also made in

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Assessment Year : 2006-07

same manner. It is found that on 23.05.2005, two payments of

Rs.1,00,000/- and Rs.90,000/- were made against the purchases. These
were the peak amount paid on a single day during the whole year.
Considering the submission of the Ld ARs, it is held that for making the
undisclosed business, the assessee, obviously, required some undisclosed
capital, and in this case, same is held to be Rs.1,90,000/- and addition to
that extent is confirmed. The rest of the additions under the head
undisclosed investment is deleted.
4.

Aggrieved by this, now the Revenue is in appeal before us.

5.

At the time of hearing, ld. DR, appearing on behalf of the Revenue, has

relied on the orders of the AO and further contended that the assessee is not in a
position to reconcile the unaccounted purchases with that of the unaccounted
sales. Therefore, the addition made by the AO is justifiable in the facts and
circumstances of the case. Hence, he requested to set aside the orders of the
ld.CIT(A) and restore that of the AO.
6.

On the other hand, the ld. Counsel, appearing on behalf of the assessee,

has submitted that on similar facts and circumstances in the case of Manoj
Textiles in ITA No.701/Kol/2010, this Tribunal has categorically mentioned
that when once the unaccounted purchases as well as sales are found at the time
of survey, the Revenue is to look into the profit elements involved in the same
but it is not fair on the part of the Revenue to add all the purchases, sales as well
as profit involved in the same. Therefore, he requested to uphold the order of
the ld. CIT(A).
7.

After hearing the rival submissions and on careful perusal of the

materials available on record, we are in agreement that the ld. Counsel for the
assessee that when once the Revenue has found that the assessee has not
recorded some of the purchases as well as some of the sales, they may not
constitute the income of the assessee in that particular year but the profit
element involved in the said sales and the investments required for procurement

ITA 59/Kol/2012 Sri Kajal Chaki

Assessment Year : 2006-07

of some of the unaccounted purchases are to be added. In this case, the ld.
CIT(A), after taking into consideration all the facts of the case, has confirmed
the addition of Rs.1,90,000/- and deleted the other four additions.
7.1

In the case relied on by the assessee, we consider it proper to extract the

relevant findings of the ld.CIT(A) in the case of Manoj Textiles (supra) and the
findings of the Tribunal are as under:
4.5 I have considered the assessment order and the submission of the
appellant. I have also perused the case laws relied upon by the
appellant. I find force in the argument that, since the AO has taxed
the profit on unaccounted purchases, he has admitted that the goods
were sold. The undisclosed purchases were not made on a single day; in
fact, they were made in small sums beginning from the accounting year.
The payments were made after the purchases. The sale proceeds were
available with the appellant for making payments against purchases;
moreover, the total payments are far lower than the purchases. The AO
has brought no material on record to show that investment remained in
purchases or that additional investment was required over and above
the capital employed by the appellant for such unaccounted purchase. I
find that the case of the appellant is directly covered by the
decisions of the jurisdictional ITAT in ITA No. 2635/Kol/2005 and ITA
No.1825/Kol/2006. I also find that in ITA No. 2635/Kol/2005, the
Honble ITAT has relied on the judgment of the Honble Calcutta High
Court in the case of CIT vs S.M. Omer (1993) 201 ITR 608 (Cal). In
view of the above, and also the ratio laid down by the jurisdictional
ITAT, I am of the opinion that the addition of Rs.17,36,692/- is not
justified and is directed to be deleted. Ground no.2 is allowed.
5.
On the other hand, the ld. Counsel appearing on behalf of assessee
has relied on the order of ld. CIT(A) and further relied on this
Tribunals orders in the case of Balaji Timber Co. vs ITO.Wd-50(4),
Kolkata vide ITA NO.43/Kol/2011 and in the case of ITO.Wd.Kolkata vs
Balaji Timber Co. vide ITA No.119/Kol/2011 dated 22.07.2011 wherein
the Tribunal has deleted the purchases in the similar facts and
circumstances of the case. Therefore he requested to upheld the action
of ld. CIT(A).
6.
After hearing the rival submissions and on careful perusal of
materials available on record, keeping in view of the fact that the ld. DR
could not bring any contrary decision relied on by ld. CIT(A) by deleting

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Assessment Year : 2006-07

the addition. We find no infirmity in the order of ld. CIT(A) to be

interfered with. Therefore we upheld the same and dismiss the appeal of
revenue.
7.2

Keeping in view of the present facts and the facts decided by the Tribunal

as relied on by the ld. Counsel of the assessee, since in this case, the ld. CIT(A)
has confirmed the addition of Rs.1,90,000/- being the peak credit of the
unaccounted transaction which is more than G.P. rate of the purchases as well
as sales, we find no infirmity in the orders of the ld. CIT(A) to be interfered
with. Therefore, we confirm the order of the ld. CIT(A) and dismiss the appeal
of the Revenue.
8.

In the result, the appeal filed by the revenue is dismissed.

This Order is pronounced in the open court on the date of hearing itself in
presence of the parties.
Sd/-

Sd/-

(Diva Singh)
Judicial Member

(C.D.Rao)
Accountant Member

(
)
) Dated : 25th September, 2012
" # #- Copy of the order forwarded to:
1.

/ I.T.O., Ward-1(2), Jalpaiguri

/ Sri Kajal Chaki, Prop. Chaki Enterprise, Nantun Bazar,

Maynaguri, Dist-Jalpaiguri, West Bengal

3.

()/ The CIT(A),

4.

/CIT,

5.

/ DR, Kolkata Benches, Kolkata

# /True Copy,

Kolkata

Kolkata

/ By order,

/Asstt. Registrar.

Talukdar/Sr.P.S.

ITA 59/Kol/2012 Sri Kajal Chaki

Assessment Year : 2006-07