$ R-128 * IN HIGH COURT OF DELHI AT NEW DELHI Date of Decision: December 09, 2014 + ITA 4/2003 COMMISSIONER OF INCOME TAX DELHI ..... Appellant Through Mr.Kamal Sawhney, Sr. Standing Counsel with Mr.Sanjay Kumar, Advocate versus S.PRITAM SINGH ..... Respondent Through Mr.Prakash Kumar, Advocate CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE V. KAMESWAR RAO SANJIV KHANNA, J (ORAL) This appeal by Revenue pertains to block period, assessment year 1986-87 to 13.10.1995, and impugns findings recorded in order dated 26.06.2002 passed by Income Tax Appellate Tribunal in relation to deletion of addition of Rs.9,10,000/- on account of profit from undisclosed sales i.e. sales made outside books of accounts. 2. By order dated 19.12.2003, following substantial question of law was framed:- (a) Whether on facts and in circumstances of case Tribunal was correct in law in deleting addition of Rs.9,10,000/- made on account of profits eawrned on unaccounted sales, notwithstanding fact that additions on account of unexplained cash and unexplained investments in stocks had been restored to file of Assessing Officer for further investigations? 3. respondent assessee individual was subjected to seizure operations on 13.10.1995 at his residential and business premises under Section 132 of Income Tax Act, 1961. Seizure of incriminating material including cash of Rs.12,42,950/- was made. Subsequently notice under Section 158BC dated 15.03.1996 was issued requiring assessee to file return of income for aforementioned block period. respondent assessee filed return on 27.08.1996 declaring undisclosed income of Rs.14 lacs, break up of which is as under:- (a) Undisclosed cash Rs.5,13,650 (b) Excessive stock Rs.6,07,900 (c) On a/c of incriminating loose papers, expenses, undisclosed assets, marriage expenses Rs.2,78,450 Rs.14,00,000 4. Assessing Officer however computed undisclosed income for block period at Rs.37,81,674/- and had made addition of Rs.9,10,000/- as profits on sales outside books of accounts. Two other additions which had bearing on issue in question, were Rs.10,10,000/- on account of excess cash and Rs.8,84,127/- on account of unexplained investment in excess stocks. 5. Tribunal by impugned order while examining addition of unexplained cash, observed that assessee had himself surrendered Rs.5,13,650/- and in respect of Rs.4,63,300/- assessee s explanation should be accepted. Marriage of assessee s son had taken place just 5 days before date of search and Rs.1,63,300/- was found in envelopes, which were gifts received on occasion of marriage. In respect of other amounts assessee had established and shown withdrawal of money from bank accounts. In respect of Rs.50,000/- order of remand has been passed. We have been informed by counsel for respondent assessee at Bar that addition of Rs.50,000/- has been sustained in appeal effect order and assessee has accepted said addition. 6. With regard to unexplained stock, assessee had surrendered Rs.6,07,900/- in return for block period. Assessing Officer had made further addition of Rs.2,76,227/-. Tribunal restored issue to Assessing Officer. It is stated at Bar by counsel for respondent assessee that in consequential or in appeal effect order, Assessing Officer had sustained addition of Rs.1,58,910/- on account of undisclosed stock and said addition has been accepted by assessee. 7. With regard to profit from undisclosed sales, Assessing Officer has recorded that diary and certain loose papers were found. Assessing Officer computed figures mentioned in diary and loose papers as Rs.1,37,62,147/-. Assessing Officer held this turnover of Rs.1,37,62,147/- was not recorded in books of accounts. He applied gross profit rate of 6.5% to compute undisclosed profits of Rs.9,10,000/-. stand of assessee before Assessing Officer and Tribunal was that diary and loose papers were maintained for personal purposes. It included entries duly recorded in books of accounts. However, papers/diary were not maintained systematically and therefore entries in diary/loose papers could not be matched with entries in books of accounts. Further, assessee had made surrender of cash as well as unaccounted stock. assessee had also surrendered Rs. 2,78,450/- as unaccounted income in block assessment return. 8. Tribunal has dealt with said issue in following manner:- At time of search, loose papers and small pocket diary was seized from my residence and from my business place. These documents are mostly rough records kept by us for internal control purposes. My diary contains collective sale figure of our three business units. But it has not been maintained systematically to prove from books of accounts maintained. loose papers which are mentioned by your honour are related to our purchases as I am controlling most of purchases and items are distributed according to requirement as on different units. I keep records of main suppliers. These slips are estimated amounts and unsystematically maintained, therefore, I cannot match slips with books of accounts maintained for all units. However, I wish to point out that totals which are arrived at, by your honour in respect of my diary are grossly wrong as point given in figures has been totally ignored. Over and above all, we have surrendered all assets cash and unaccounted expenses in our block returns. Whatsoever unaccounted cash, unaccounted stock and unaccounted expenses incurred, are surrendered is result of business transactions not recorded in books of accounts, on points of law, facts and justice it is wrong to tax same income twice, once on assets and secondly on basis of transactions resulting with creation of assets. Hence it is prayed that as your Honour is taxing unaccounted cash, stocks and expenditure transactions from which these assets are accumulated be ignored. Apart from that, it was also contended that keeping in mind fact that assessee in his block assessment return has returned amount of Rs.5,13,650/- apart from that Rs.6,07,900/- has been returned on account of excessive stock as such, addition in manner made out by AO was not warranted in facts and circumstances of case. Learned DR, on other hand, placed, reliance on impugned order. Having heard rival submissions and perused material placed on our files and also considering specific submissions made by assessee before A.O and also considering fact that surrender to A.O and also facts that surrender to tune of Rs.5 lacs odd has been made on account of cash found at time of search and surrender of Rs.6 lacs odd has been made on account of excessive stock in return filed by assessee for block period as such, we are of opinion that addition estimating income of assessee on account of sales made outside books of account is not warranted in peculiar facts and circumstances. Accordingly, addition made is deleted. 9. We have considered reasoning given by Tribunal specifically last paragraph quoted above and have reservation on reasons and conclusion recorded by Tribunal. said reasoning holds that assessee had surrendered about Rs.5 lacs on account of cash found at time of search and also Rs.6 lacs on account of excessive stock and therefore no addition should be made on account of profits outside books of accounts. Thus factum that assessee had earned undeclared profits outside books was accepted. In other words, entries recorded in diary etc. were treated as incriminating and reliable material. In case assessee was transacting business outside books of accounts, necessarily he would have earned profit from said transactions. Some profit would have been used for personal expenses and entertainment etc. entire undisclosed profits would not have been redeployed in trade or for purchase of undeclared stocks. said factor and factum has not been taken into account. Moreover assessee was unable to explain and match entries given in diary and loose papers with entries found in books of accounts. transactions were for substantial amount. 10. In these circumstances we are inclined to remand matter to Tribunal for fresh determination. However, counsel for assessee on instructions has stated that assessee would like to surrender amount of Rs.2 lacs on account of undisclosed profits, in addition to surrender of Rs.2,78,450/- which was made in return of income. As noted above, assessee had also accepted addition of Rs.50,000/- and Rs.1,58,910/- on account of unexplained cash and unexplained excessive stock. assessee had earlier accepted undisclosed income of Rs.2,78,450/- in block assessment return. In these circumstances, noticing fact that case relates to block period, assessment year 1986-87 to 13.10.1995, we accept said concession made by counsel for respondent assessee rather than pass order of remand. Thus, total undisclosed income surrendered by assessee would be Rs. 4,78,450/-. Accordingly, substantial question of law is answered in favour of Revenue and against respondent assessee and it is directed addition of Rs.2 lacs will be made to undisclosed income over and above undisclosed income of Rs.14 lacs declared by assessee and other addition of Rs.2,08,910/- made by Assessing Officer upon remand. appeal is accordingly disposed of. No costs. SANJIV KHANNA, J. V. KAMESWAR RAO, J. DECEMBER 09, 2014/km Commissioner of Income-tax, Delhi v. S. Pritam Singh