IN INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI, [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER] . I.T.A. Nos. 641 Mds 2011 & 1259 Mds 2012 Assessment year : 2006-2007 Assistant Commissioner of Vs. M s. P.S.R. Thangamaligai, Income Tax, No.126,Bharathiyar Road, Circle I, Karaikal. Thanjavur [PAN AAEFO 5763F] ( Appellant) ( Respondent) Appellant by : Shri. Durai Pandian, IRS, JCIT. Respondent by : Shri. S. Sridhar, Advocate Date of Hearing : 15-09-2016 Date of Pronouncement : 21-09-2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER These appeals filed by Revenue are directed against orders dated 10.01.2011 and 21.03.2012 of ld. Commissioner of Income Tax (Appeals), Tiruchirapalli for impugned assessment year. :- 2 -: ITA No.641 2011 & 1259 2012 2. ITA No.641 Mds 2011 is first taken :- sole ground taken by Revenue is on direction of ld. Commissioner of Income Tax (Appeals) to treat 65,00,000 - as unaccounted sales against addition of 50,00,000 - made by ld. Assessing Officer. ld. Commissioner of Income Tax (Appeals) directed adoption of 24% of 65,00,000 - as profits for addition. 3. Facts apropos are that assessee, is dealer in Gold and Silver jewellery at Karaikal. There was survey u s.133A of Income Tax Act, 1961 (herein after referred to as Act ) on 9.11.2006. During survey proceedings, it was noticed that chit account of assessee has outstanding balance of 1,34,28,750 - against balance of 2,06,00,549 - shown by assessee in its Balance Sheet as on 31.03.2006. When this was pointed out by survey officials, it seems assessee accepted excess chit outstanding of 50,00,000 - and offered to show it as income and pay taxes thereon. In other words against 65,00,000 - difference in chit account assessee agreed with survey officials to offer 50,00,000 - as income. However, during course of assessment proceedings for impugned assessment year assessee explained to ld. Assessing Officer that difference could be reconciled. Nevertheless, ld. :- 3 -: ITA No.641 2011 & 1259 2012 Assessing Officer was not satisfied with explanation given by assessee, assessment was completed making addition of 50,00,000 - as agreed by partner of assessee at time of survey. 4. Aggrieved, assessee moved appeal before CIT(A). As per assessee, it had explained before ld. Assessing Officer how difference came into Books and had reconciled such difference. As per assessee difference between chit balance as per books and what was noted by survey officials were on account of following persons:- A. Balances outstanding earlier six groups of closed chits were not accounted by survey party. B. In groups Subamangala B & New Kanagathara the survey party had taken wrongly gross amount as sum to be collected instead of actual amount of collection. C. Though, New Kanagathara B commenced in May 2006 & advance collections made during year was not accounted by survey party. D. collections made in groups of various denomination of Rs.150 -, Rs.250 - & Rs.500 - were not accounted by survey party . However, assessee also stated before ld. Commissioner of Income Tax (Appeals) that yearwise and groupwise reconciliation of :- 4 -: ITA No.641 2011 & 1259 2012 earlier year chits, which were closed, was not immediately possible. ld. Commissioner of Income Tax (Appeals) after considering submissions of assessee came to opinion that excess in chit fund account had accumulated over years and entries in few groups of chit fund remained open due to omission in posting of sales. He held that amount shown as outstanding, in closed groups of chit funds were nothing but unaccounted sales of assessee. Since gross profit returned by assessee came to 24%, ld. Commissioner of Income Tax (Appeals) directed ld. Assessing Officer to consider 24% of 65,00,000 - as income of assessee from such unaccounted sales. 24% of 65,00,000 - came to 15,60,000 -. Thus addition of 50,00,000 - was scaled down to 15,60,000 - by ld. Commissioner of Income Tax (Appeals). 5. Now before us, ld. Departmental Representative strongly assailing order of ld. Commissioner of Income Tax (Appeals) submitted that difference in chit account could never be linked to sales of assessee. As per ld. Departmental Representative ld. Commissioner of Income Tax (Appeals) made error in considering difference to be undisclosed turnover of assessee. contention of ld. Departmental Representative was that difference represented undisclosed income of assessee. Thus, :- 5 -: ITA No.641 2011 & 1259 2012 according to him ld. Commissioner of Income Tax (Appeals) fell in error in scaling down addition from 50,00,000 - to 15,60,000 -. 6. Per contra, ld. Authorised Representative supported order of lower authorities. 7. We have considered rival contentions and orders of authorities below. It is not disputed that chit difference arose on account of closed chits being not properly accounted over number of years. ld. Commissioner of Income Tax (Appeals) has given clear finding that closed chits remaining open in Books could only be due to omission of posting of sales. assessee was trader of gold jewellery. assessee was not in chit business. Hence preponderance of probability was that difference arose only due to unaccounted sales, being not entered in Books. Obviously chit balance stood at higher amount than actual balance. In such situation, we are of opinion that ld. Commissioner of Income Tax (Appeals) had rightly considered sum of 65,00,000 - as undisclosed turnover of assessee. ld. Commissioner of Income Tax (Appeals) had applied 24% of GP rate which was admitted GP rate as per Books of assessee. We are of opinion that ld. Commissioner of Income Tax (Appeals) was justified in taking this view. We do not find any reason to interfere with order of :- 6 -: ITA No.641 2011 & 1259 2012 Commissioner of Income Tax (Appeals). appeal of Revenue stands dismissed. 8. Revenue in appeal No.1259 Mds 2012:- Revenue is aggrieved on deletion of addition 15,00,000 - made by ld. Assessing Officer in re-assessment done for very same assessment year, pursuant to reopening u s.147 of Act. 9. ld. Assessing Officer attempted reopening for reason that he had added only 50,00,000 - in original assessment against difference of 65,00,000 - in chit fund account. In such re-assessment additional sum of 15,00,000 - was also brought to tax. Assessee s appeal before ld. Commissioner of Income Tax (Appeals) was successful. He took view that he had already directed adoption of 24% of profit on 65,00,000 - being difference considering it as undisclosed turnover. According to him, there was no further scope for addition of 15,00,000 -. 10. We have already held in Revenue s appeal in ITA No.641 Mds 2011, which emanated from original assessment done on assessee, that ld. Commissioner of Income Tax (Appeals) was justified in considering difference of chit fund balance of 65,00,000 - as undisclosed sale of assessee and applying 24% GP :- 7 -: ITA No.641 2011 & 1259 2012 rate thereon. Considering this, we are of opinion that there was no scope for any further addition of 15,00,000 -. ld. Commissioner of Income Tax (Appeals) was therefore justified in deleting such addition made in re-assessment proceedings. We do not find any reason to interfere with order of ld. Commissioner of Income Tax (Appeals). appeal of Revenue stands dismissed. 11. In result, appeals filed by Revenue in ITA No.641 Mds 2011 and ITA No.1259 Mds 2012 stand dismissed. Order pronounced on Wednesday, 21st day of September, 2016, at Chennai. Sd - Sd - ( . . . )) ( . ) (N.R.S. GANESAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai Dated:21st September, 2016 KV Copy to: 1. Appellant 3. ( ) CIT(A) 5. DR 2. Respondent 4. CIT 6. GF Assistant Commissioner of Income-tax, Circle I, Thanjavur v. M/s. P.S.R. Thangamaligai