HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 347 / 2008 C I T Kota ----Appellant Versus M/S Chaman Lal & Brothers ----Respondent Connected With D.B. Income Tax Appeal No. 568 / 2008 C I T Kota ----Appellant Versus M/S Chaman Lal & Brothers ----Respondent For Appellant(s) : Ms. Parinitoo Jain For Respondent(s) : Mr. Gunjan Pathak HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Judgment 29/05/2017 In all these appeals identical question of law and facts are involved and they relate to same assessee therefore, they are decided by this common judgment. 1. By way of these appeals, appellant has assailed judgment and order of Tribunal whereby Tribunal has partly allowed appeal of assessee. 2. This court while admitting matters framed following questions of law:- (2 of 6) [ ITA-347/2008] In DBITA No. 347/2008 i) Whether under facts and circumstances of case and in law Tribunal has interpreted provisions of Section 113 in its right perspective? ii) Whether on facts and in circumstances of case, ld. ITAT is justified in reducing g.p. rate from 15% to 8.5% applied on unrecorded sales by holding that g.p includes sales tax at rate of 4% and octroi etc. At rate of 2.5% when admittedly sales tax at rate of 4% and octroi at rate of 2.5% was not paid as sales were unrecorded? In DBITA No. 568/2008 i) Whether under facts and circumstances of case in law, Tribunal was justified in deleting addition of interest of Rs. 16,40,738/- levied u/s 158BFA(1) which is being contrary to mandatory provisions of law of Section 158BFA(1)? ii) Whether under facts and circumstances of case and in law Tribunal was justified in upholding order of CIT(A) of deleting levy of surcharge u/s 113 for Rs. 7,62,746/- contrary to provisions of law? iii) Whether on facts and in circumstances of case, ld. ITAT is justified in reducing g.p. rate from 15% to 8.5% applied on unrecorded sales by holding that g.p includes sales tax at rate of 4% and octroi etc. at rate of 2.5% was not paid as sales were unrecorded? iv) Whether under facts and circumstances of case, ld. ITAT is justified in deleting additions of Rs. 8,78,292/- which has been made in accordance with provisions of Section 158BC by Assessing Officer. In DBITA No. 568/2008 3. Regarding first issue, counsel for appellant contended that in view of decision of Delhi High Court in case of CIT vs. Mesco Airlines Ltd. reported in [2010] 327 ITR 554 (Delhi), wherein under law after documents supplied by department, assessee is bound to pay interest for (3 of 6) [ ITA-347/2008] delayed payment. Taking into consideration documents which are supplied after 20 days of statutory period to be given to assessee thereafter, he is required to make payment. 4. On other issue, counsel for appellant contended that view taken by Tribunal is not just and proper and is required to be modified. However, counsel for respondents has relied upon judgment in case of Commissioner of Income Tax (Central) vs. Vatika Township Private Limited reported in [2014] 367 ITR 466 (SC) wherein speaking for Supreme Court it has been held in para 18 which reads as under:- 18. From reading of aforesaid statutory provisions in abstract, particularly relating to surcharge, it is clear that though provision for surcharge under Finance Act has been in existence since 1995, in so far as levy of surcharge for block assessment is concerned, it is introduced by insertion of aforesaid proviso of Section 113. It is in this background, question has arisen as to whether this surcharge on block assessment has been levied for first time by aforesaid proviso coming into effect from 01.06.2002 or it is only clarificatory in nature because of reason that provision for surcharge was made in Finance Act in year 1995 and that covered surcharge on block assessment as well. 5. He contended that in view of judgment in case of Commissioner of Income Tax (Central) vs. Vatika Township Private Limited (supra), issue is required to be answered in favour of assessee. 6. On third issue, counsel for appellant has contended that GP rate which is referred by Tribunal in para 11 is contrary to law and is required to be reversed and fourth issue (4 of 6) [ ITA-347/2008] regarding deletion of 8,78,292/- under Section 158BC by assessing officer. Counsel for appellant has taken us to observations made by AO in para 6.1 & 6.2 which was considered by CIT(A) in para 7.3 which reads as under:-- 7.3. It is submitted that AO has estimated unaccounted investment in purchases at rate of 25% of cost of goods sold which is very high and also unjust. ld. A/R has shown copy of annexure A-31, A-32 and A-20. A-31 is ledger account of creditor and A-20 and A-22 are ledger account of debtor. In creditor ledger account generally payment to creditors are made between 1 month to 2 months whereas payment from debtor are received within 7 days and in some time it took 2 months time. Purchases and sales are in rotation, therefore, in fitness of thing I take investment in 1 month purchases as unexplained investment in unaccounted business which is worked out as under:- Particulars A.Y. 97-98 A.Y. 98-99 Unrecorded 22,79,764/- 1,04,12,697/ sales as per - AO Less : Profit 1,93,780/- 8,85,079/- on sale @ 8.5% Cost of 20,85,984/- 95,27,618/- Goods sold Cost for 30 173832 793968 days of purchase Set off of 367612 profit and (193780+173 investment 832) in purchases Cost addition 173832 426086 Total 599918 addition Thus, AO is directed to make addition of Rs. 599918 on account of investment in purchases as against addition of Rs. 26,97,148/-. (5 of 6) [ ITA-347/2008] 7. However, in para 21 & 24, Tribunal has observed as under:- 21. Ground No. 4 of Revenue is against deleting addition of Rs. 8,78,292/- on account of undisclosed sundry creditor. 24. After considering rival submission, we noted that these are made creditors recorded in regular books of accounts. Neither any document/paper/evidence was found during course of search suggesting about non-genuiness of creditor nor any evidences was gathered by AO at his level for treating said creditor as non-genuine. Section 158BC provides for computation of undisclosed income on basis of evidences found in search and such other material or information available with AO relatable to such evidence. When amount was duly disclosed in balance sheet, it cannot be said that it was detected as result of search. Therefore, these amounts cannot be treated as undisclosed income while completing assessment u/s 158BC of Income Tax Act. This view is supported by following precedents:- Dang & Co. (P) Ltd. vs. DCIT 94 ITD 29 (Delhi) (TM) CIT vs. Ravi kant Jain [2001] 250 ITR 141 (Delhi) Bhagwati Prasad Kedia vs. CIT [2001] 248 ITR 562 (Cal.) M/s Jugal Kishore Modi Investment Co. Ltd. vs. ACIT XXXIII Tax World 1 Thus ground No. 4 of Revenue is dismissed. 8. On first issue, in view of decision of Delhi High Court (supra) assessee is bound to pay interest after 20 days from date of documents supplied by department and therefore, we accept view taken by Delhi High Court. issue is decided in favour of department against assessee and if above amount is not paid, it will be open for department (6 of 6) [ ITA-347/2008] to recover same and on issue No. 2 in view of judgment in Vatika Township (supra), issue is answered in favour of assessee against department. On third issue, in view of factual matrix and observations made by Tribunal on page 11, issue is answered in favour of assessee and last issue is also decided in favour of assessee in view of observations made in para 24 as reproduced hereinabove. In DBITA No. 347/2008 9. In this appeal, issue no. 1 is covered by issue no. 2 of Appeal No. 568/2008 and issue no. 2 is covered by issue no. 3 in Appeal No. 568/2008. issues are accordingly answered in favour of assessee. 10. appeals stand disposed off. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. A.Sharma/17-18 CIT, Kota v. Chaman Lal & Brother