ITA No. 160/Pat/2013. IN INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. No. 160/PAT/2013. Assessment Year : 2009-10. Smt. Renu Poddar, Income-tax Officer, Bettaih. Vs. Ward Bettiah. Appellant. Respondent. Appellant by : Shri G.P. Tulsiyan. Respondent by : Shri R.K. Mishra. Date of Hearing : 03 -08-2016 Date of Pronouncement : 21st Sept., 2016 ORDER This appeal by assessee is directed against order of learned CIT(Appeals) dated 03-01-2013 and pertains to assessment year 2009-10. grounds of appeal read as under : 1. That order of AO is bad in Law and not based on appreciation of facts. 2. As there were Sale & Purchases out of books produced before AO, found at time of survey, sale, profit and expenditure are to be estimated to best of circumstantial evidences. AO had estimated sale as Rs. 75 lacs as compared to sale in books of Rs.23,49,877 maintained by assessee and applied 5% NP rate estimating profit of Rs.3,75,000, though it is on higher side. 3. A) In above circumstances, when there are out of books transactions, telescopic view of total transactions has to be taken to arrive at justified profit. AO arbitrarily treated sum of Rs.6,71,241/- as unexplained capital required to do this business without considering capital available in books as produced before AO and also unexplained profit of earlier year i.e. AY:2008-09, which also resulted from survey operation and was 2 ITA No. 160/Pat/2013. assessed for sum of Rs.9,75,630/- already pending before CIT-A in another appeal case filed pending for decision. B) Once AO has himself assessed unexplained income of Rs.9,75,630/- in earlier year same capital has rolled over to subsequent year and assessee was in no need to bring above unexplained capital to do out of books business. C) This contention of AO has led to double addition of same amount on similar facts. learned CIT-A has also appreciated this fact but failed to give relief. 4. A) As regards stock found at time of survey amounting to Rs.14,34,393/- as against book stock of Rs.7,13,914/-, difference of Rs.7,24,479/- has been treated by AO as unexplained and again added to income. b) When finding of AO and submissions of assessee clearly establish that there was out of books business, profit earned on such out of books business has gone to add to increase of inventory which consisted of both book inventory as well as inventory created out of income earned from out of books of business. c) Once taxable income has been assessed by AO as Rs.3,75,000/- and also capital employed Rs.6,71,241/- required to do out of book business, this will adequately cover stock creation and difference of stock of Rs.7,20,479/-. Therefore addition of difference in stock Rs.7,20,479/- is unwarranted and unjustified making it double addition. 5. Unexplained expenditure added to income under head Committee Rs.1,25,100/- also pertains to business of assessee and therefore adequately covered by profit of unaccounted business and therefore its addition is not justified. 2. Ground Nos. 1 and 2 were not pressed by learned counsel of assessee. Hence they are dismissed as not pressed. 3. Apropos issue of treatment of Rs.6,71,241/- as unexplained capital. Brief facts of case are as under : 3 ITA No. 160/Pat/2013. appellant runs proprietary concern M/s Shree Laxmi Hardware at Lal Bazar, Bettiah. As per Profit & Loss account submitted during assessment proceedings on 14-11-2011, total sale and purchases were shown at Rs.23,49,877/- and Rs.24,27,084/- only. However, books of account and loose sheets impounded during survey revealed that assessee was making clandestine purchases and sales throughout year. From notebooks and loose sheets impounded from business premises of appellant during course of survey operation, Assessing Officer worked out unaccounted purchases of appellant at Rs.53,69,931/-. These purchases were not found recorded in regular books of account impounded and marked PK-26. total purchases of appellant were worked out as under : On basis of impounded books/loose sheets - Rs.53,69,931/- Purchases as per P&L a/c submitted on 14-11-2011- Rs.24,27,084/-. Or Rs. 53,69,931 + Rs.24,27,084 = Rs.77,97,015/-. Applying ratio of 0.97 between purchases & sales as given in P&L account submitted on 14-11-2011, AO estimated total sales or turnover of appellant at Rs.75,00,000/-. By applying net profit rate of 5% of gross sales, AO estimated taxable profit i.e. 5% of Rs.75,00,000/- = Rs.375,000/- AO estimated initial capital of appellant at 1/8th of total unaccounted purchases at Rs.53,69,931/-, or Rs.671,241/- which was added back. 4. On issue of treatment of Rs.6,71,241/- as unexplained capital, learned counsel of assessee has submitted that unexplained profit of Rs.9,75,630/- was added for assessment year 2008-09 which also resulted from survey 4 ITA No. 160/Pat/2013. operation. He submitted that this matter is already pending before learned CIT(Appeals) in another appeal. Learned counsel pleaded that this sum of Rs.6,71,241/- should be telescoped against addition of Rs.9,75,630/- as unexplained income of previous year. 5. I find that above submission of learned counsel was before learned CIT(Appeals) as well. Learned CIT(Appeals) has not considered same by noting that this appeal was not before him. I do not find this sufficient reason to ignore assessee s request. Hence I deem it appropriate to remit issue to learned CIT(Appeals). Learned CIT(Appeals) shall consider this issue along with issue of 2008-09 which has been claimed by learned counsel of assessee to be pending before him. Learned CIT(Appeals) shall consider assessee s request as per law after giving assessee opportunity of being heard. 6. Apropos issue of addition on account of difference in stock of Rs.7,20,479/-. 7. During course of survey, stock was inventorised at Rs.14,34,393/- as against actual stock of Rs.7,13,914/- on basis of books of accounts. difference of Rs.7,20,479/- was added back. 7. On this issue contention of learned counsel of assessee is that proper books of accounts were not maintained by assessee. AO is also making additions for unaccounted purchases and sales, then with comparison to which figures excess stock is arrived at is not comprehendible. I find this submission having some cogency. When AO has found books of accounts to be incomplete and has found loose sheets which has laid to working out of unaccounted purchases then with what books physical stock has been compared needs to be elaborated. No such discussion is there in orders of 5 ITA No. 160/Pat/2013. authorities below. Hence I remit this issue to file of AO. AO should examine issue afresh in light of discussion as above. 8. In result, this appeal by assessee stands allowed for statistical purposes. Order pronounced in Open Court on this 21st day of Sept., 2016. Sd/- ( SHAMIM YAHYA) ACCOUNTANT MEMBER. Dated: 21st Sept., 2016. Copy forwarded to : 1. Smt. Renu Poddar, Prop. shree Laxmi Hardware, Lal Bazar, Battiah. 2. I.T.O., Ward Battiah. 3. C.I.T.- 4. CIT(Appeals)- 5. D.R., ITAT, Patna. 6. Guard File True Copy By Order Assistant Registrar, Income Tax Appellate Tribunal, Patna Bench, Patna. Wakode. Renu Poddar v. Income-tax Officer, Ward Bettiah