IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI A.L. GEHLOT, A.M. AND SHRI R.S. PADVEKA R, J.M. ITA NO. 5686/M/2004 ASSESSMENT YEAR: 2001-02 M/S SHIVSAGAR VEG RESTAURANT, APPELLANT DHARAM APARTMENT, NEHRU ROAD, VILEPARLE (EAST), MUMBAI 400 057 (PAN AAMFS 7417 H) VS. ADDL. COMMISSIONER OF INCOME-TAX, RESPONDENT 24(2), BANDRA KURLA COMPLEX, BANDRA, MUMBAI 400 050. APPELLANT BY : MR. K. SHIVARAM RESPONDENT BY : MR. S.K. PRASAD ORDER PER A.L. GEHLOT, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A) XXIV, MUMBAI PASSED ON 30.06.2004 FOR THE ASSESSMENT YEAR 2001-02. 2. THE GROUNDS OF APPEAL OF THE ASSESSEE READ AS U NDER:- 1. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE AD DITIONAL INCOME OF RS. 36,73,526/-. 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A DDITIONS MADE ON ESTIMATE BASIS IN SALES. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A DDITION OF RS. 80,000/- ON ACCOUNT OF RENT PAYMENT. 4. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A DDITION OF RS. 39,611/- MADE U/S 43B. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A FIRM RUNNING FAST FOOD RESTAURANT. ACTION U/S 132 WAS CA RRIED OUT AT THE PROMOTER SHANKAR POOJARYS RESIDENCE. SIMULTANEOUSL Y A SURVEY U/S 133A CARRIED OUT AT ASSESSEES BUSINESS PREMISE S ON 24.01.2001. THE ASSESSEE FILED RETURN OF INCOME DEC LARING TOTAL LOSS ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 2 OF RS. 41,513/-. THE AO COMPLETED ASSESSMENT ON TOT AL INCOME OF RS. 37,32,010/-, DETAILS OF WHICH ARE AS UNDER:- SUBJECT TO THE ABOVE REMARKS, THE TOTAL INCOME IS C OMPUTED AS UNDER:- NET PROFIT AS PER P/L A/C RS. 1,15, 863/- ADD: (I) ADDITION TO THE TRADING RESULTS AS DISCUSSED ABOVE 3553915 (II) O/O RENT 80000 (III) O/O PAYMENTS U/S 43B 39611 36,73,526/- TOTAL 37,89,389/- LESS: B/F LOSS OF PREVIOUS YEAR 1999-2000 AS PER STATEMENT 57,376/- TAXABLE INCOME 37,32,013/- ROUNDED OFF TO 37,32,010/- 3.1 THE ASSESSEE FILED APPEAL BEFORE CIT(A). THE CI T(A) DISMISSED ASSESSEES APPEAL. THE ASSESSEE FILED APP EAL BEFORE THE ITAT VIDE ITA NO. 5686/M/2004. THE ITAT VIDE ITS OR DER DATED 21.10.2005 CONFIRMED THE ORDER OF CIT(A) IN RESPECT OF MAIN ADDITION OF RS. 35,53,915/-. IN RESPECT OF ADDITION U/S 43B, IT WAS DIRECTED THE AO TO ALLOW THE SAME IF PAYMENT WAS MA DE WITHIN GRACE PERIOD. THE ASSESSEE FILED M.A. NO. 131/M/06 AGAINST THE ORDER OF ITAT, WHICH HAS BEEN DISMISSED VIDE ORDER DATED 14.11.2006 BY ITAT. THE ASSESSEE FILED APPEAL BEFOR E HONBLE JURISDICTIONAL HIGH COURT WHICH HAS BEEN DECIDED VI DE INCOME TAX APPEAL NO. 144 OF 2006, JUDGMENT DATED 14.11.2008. THE HIGH COURT ADMITTED THE APPEAL. THE RELEVANT PARA 3 OF T HE JUDGMENT ARE REPRODUCED BELOW:- WE ADMIT THIS APPEAL AND FRAME THE FOLLOWING SUBSTA NTIAL QUESTION OF LAW FOR CONSIDERATION LEAVING ALL OTHER QUESTIONS OPEN FOR RECONSIDERATION SINCE THE MATTER IS BEING REMANDED TO THE TRIBUNAL FOR THE REASONS RECORDED. SUBSTANTIAL QUESTION OF LAW: WHETHER THE IMPUGNED ORDER PASSED BY THE APPELLAT E TRIBUNAL AFTER MORE THAN FOUR MONTHS FROM THE DATE OF HEARING WITHOUT DEALING WITH PROPOSITIONS AND CASE LAWS REL IED BY THE APPELLANT SUFFERS FROM NON APPLICATION OF MIND AND NON CONSIDERATION OF MATERIAL ON RECORD AND THEREFORE B AD IN LAW?. 3.2 THE HONBLE HIGH COURT HELD AS UNDER:- 17. NOW TURNING TO THE MERITS OF THE CHALLENGE SET UP TO THE IMPUGNED ORDER, PRIMA FACIE, WE ARE SATISFIED T HAT SOME OF THE VITAL POINTS RAISED IN THIS APPEAL AND CANVASSE D BEFORE US ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 3 ARE NOT TO BE FOUND IN THE JUDGMENT OF THE APPELLAT E TRIBUNAL THOUGH, ACCORDING TO THE LEARNED COUNSEL FOR THE AP PELLANT AND BORNE OUT FROM THE APPEAL MEMO, THEY WERE CANVASSED BEFORE THE TRIBUNAL. OMISSION TO MAKE REFERENCE TO THE CON TENTIONS CANVASSED CAN ONLY BE ATTRIBUTED TO THE DELAYED DEL IVERY OF JUDGMENT. IN THE CIRCUMSTANCES, WITHOUT GOING INTO THE MERITS OR DEMERITS OF THE IMPUGNED ORDER, DELAY IN DELIVER Y OF JUDGMENT BY ITSELF IS SUFFICIENT TO SET ASIDE THE I MPUGNED ORDER PASSED BY THE APPELLATE TRIBUNAL TO THE EXTENT IT I S CHALLENGED BY THE APPELLANT. 18. IN THE RESULT, APPEAL IS ALLOWED. THE IMPUGNED ORDER IS SET ASIDE TO THE EXTENT IT IS CHALLENGED. THE SU BJECT APPEAL, ITA NO. 5686/M/2004 IS RESTORED TO THE FILE OF THE APPELLATE TRIBUNAL WITH DIRECTION TO REHEAR THE SAID APPEAL F ILED AT THE INSTANCE OF THE PRESENT APPELLANT AND DECIDE THE SA ME AFRESH WITH A REASONED ORDER DEALING WITH ALL THE CONTENTI ONS RAISED AND CANVASSED ON ITS OWN MERITS. ALL THE RIVAL CONT ENTIONS ARE KEPT OPEN. APPEAL STANDS DISPOSED OF IN TERMS OF TH IS ORDER WITH NO ORDER AS TO COSTS. 3.3 IN COMPLIANCE TO WITH THE DIRECTIONS OF HONBLE JURISDICTIONAL HIGH COURT, THE APPEAL IS FIXED FOR HEARING TO DECIDE AFRESH. 4. THE LEARNED AR HAS NOT PRESSED GROUND NO. 3; THE REFORE, THE SAME IS DISMISSED AS NOT PRESSED. IN RESPECT OF GRO UND NO. 4, THE LEARNED REPRESENTATIVES SUBMITTED THAT MATTER MAY B E SENT BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE IN ACCORDANC E WITH JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PAMWI TISSUES LTD., 215 CTR (BOM.) 150, WE, THEREFORE, REMIT THE BACK TO THE FILE OF THE AO AND DIRECT THAT IF THE PAYMENT OF PF& ESI IS MADE WITHIN GRACE PERIOD THE SAME MAY BE ALLOWED. THE AO WILL D ECIDE THE ISSUE AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING T O THE ASSESSEE. NOW ONLY QUESTION REMAINED TO BE EXAMINED IN THE CA SE UNDER CONSIDERATION IS IN RESPECT OF ADDITION OF RS. 35,5 3,915/- ON ESTIMATION OF SALE IN GROUND NO. 2 OF ASSESSEES AP PEAL. GROUND NO. 1 IS GENERAL IN NATURE STATING TOTAL ADDITION MADE BY THE AO. 5. THE FACTS RELATING TO THE ISSUE ARE THAT A SURVE Y ACTION U/S 133A WAS CARRIED ON 24.01.2001. THERE WAS ALSO SEAR CH U/S 132 ON RESIDENCE OF PROMOTER/ PARTNER OF ASSESSEE FIRM, SH ANKAR POOJARI AND MANAGER, SHRI RAGHURAM POOJARI. DURING THE COUR SE OF SEARCH, ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 4 SOME LOOSE PAPERS WERE FOUND FROM THE RESIDENCE OF MANAGER,SHRI RAGHURAM POOJARI. SHRI SHANKAR POOJARI ONE OF THE PARTNERS HAS ADMITTED IN HIS STATEMENT RECORDED ON 24.01.2001 AT THE TIME OF SEARCH THAT FIGURES APPEARING ON PAGE NO. 26 OF LOO SE PAPER FILE NO. A-9 IS THE ACTUAL SALES FIGURES OF RESTAURANTS. DUR ING THE ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO EXPLAIN WHY BOOK RESULTS SHOULD NOT BE REJECTED IN ABSENCE OF P RIMARY EVIDENCE AND VERIFICATION OF SALES. THE AO RECORDED SUBMISSI ONS OF THE ASSESSEE AT PAGE NO. 3 OF HIS ORDER ARE AS UNDER:- AO PAGE NO 3-- ASSESSEE HAS FURNISHED HIS SUBMISSIONS VIDE LETTER DATED 13.02.2004. THE ASSESSEE HAS EXPLAINED INTER ALIA THAT THE SALES BILLS BEING VOLUMINOUS SAME COULD NO T BE PRESERVED & KEPT ON THE RECORD AT THE END OF THE DA Y, TOTAL SALES BILLS ARE TAKEN & ARE TALLIED WITH CASH BALAN CE AND THE SALES WERE RECORDED INTO THE DAILY SALES REGISTER M AINTAINED MANUALLY. AS REGARDS SEIZED LOOSE PAPERS FROM SHR I RAGHURAM N. POOJARI AND THE STATEMENT AS REPRODUCED ABOVE, THE ASSESSEE HAS STATED AS UNDER. WE HAVE TO INFO RM YOU THAT THE TOTAL SALES FOR THE MONTH OF DEC.2000 RECO RDED IN THE STATEMENT OF SHRI RAGHURAM NO. POOJARI ARE DULY REF LECTED IN THE MONTHLY SALES SUMMARY STATEMENT EARLIER SUBMITT ED TO YOU. IT WILL BE INCORRECT TO SAY THAT THESE SALES A RE NOT PROPERLY RECORDED IN THE BOOKS. WE HAVE SHOWN IN OUR BOOKS T RUE AND CORRECT SALES FIGURES. 5.1 DURING THE ASSESSMENT PROCEEDINGS THE AO VERIFI ED THE SEIZED MATERIAL AND FOUND THAT CERTAIN PURCHASES WH ICH ARE RECORDED BY THE AO AT PAGE 4 OF HIS ORDER WERE NOT ACCOUNTED IN BOOKS OF ACCOUNT. FOR READY REFERENCE THE SAME IS R EPRODUCED BELOW:- SEIZED PAPER NO. NAME OF SUPPLIER (PURCHASES) AMOUNT (RS.) DATE AT PURCHASE 73 K. KANTILAL & CO. 2,472.00 11.12.200 72 DAMJI NANJI 4,024.00 11.12.2000 71 NAGESHWAR DRY FRUITS 12,050.50 11.12.2000 70 KISHOR BROS. 5,502.00 11.12.2000 69 M/S M.H. SHETHIA 1,500.00 06.12.2000 68 M/S M.H. SHETHIA 750.00 11.12.2000 67 M/S TUSHAR & CO. 1325.10 04.12.2000 66 M/S TUSHAR & CO. 2358.60 06.12.2000 65 M/S TUSHAR & CO. 1165.80 08.12.2000 ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 5 5.2 THE EXPLANATION OF ASSESSEE & FINDING OF AO IN RESPECT OF ABOVE PURCHASES ARE AS UNDER:- AO PAGE NO 5 -- THE ASSESSEE HAS INTERALIA SUBMITTED IN HIS LETTER DATED 20.02.2004 THAT THE PURCHASE BILLS LISTED ABOVE ARE SHOWING THE NAME OF THE ASSESSEE I.E. SH IV SAGAR MALAD ARE IN FACT PART OF PURCHASES OF ANOTHER GRO UP CONCERN M/S SHIV SAGAR ANEX. AT VILE PARLE. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE IN THIS REGARD. I DO NOT FIND ANY FORCE OR SUBSTANCE IN THE ARGUMENT OF THE ASSESSEE REGARDING THE ISSUES RAISED IN THE SHO W CAUSE NOTICE DATED. 17.02.2004 AS THE SEIZED BILLS OF PUR CHASES LISTED IN EARLIER PARAS, CLEARLY INDICATES THE NAME OF PURCHASER AS SHIV SAGAR MALAD. FURTHER THE DDIT(INV.) UNIT- I, MUMBAI VIDE APPRAISAL REPORT HAS GIVEN A FINDING IN RESPEC T OF THE ABOVE REFERRED SEIZED LOOSE PAPER NO. 65 TO 73 AS P ERTAINING TO SHIV SAGAR MALAD AND THE SAME IS TO BE VERIFIED W ITH THE REGULAR BOOKS OF ACCOUNTS. THE RELEVANT EXTRACT REA DS AS UNDER:- PAGES 65 TO 73 ARE VARIOUS PURCHASE BILLS OF SHIV SAGAR, MALAD. THE AO MAY VERIFY THE SAME WITH REGULAR BOOK S OF ACCOUNT. ACCORDINGLY THESE PURCHASES ARE HELD TO BE UNACCOUN TED PURCHASES OF THE ASSESSEE AS THE SAME ARE NOT REFLE CTED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. ADMIT TEDLY AS REGARDS PROOF OF SALES RECORDED, NO SALES BILLS OR PRIMARY EVIDENCE HAVE BEEN PRODUCED IN SUPPORT OF THE DAILY SALES RECORDED IN MANUALLY MAINTAINED SALES REGISTER. 5.3 THE MONTHLY SALE REPRODUCED FROM PAGE 4 OF AOS ORDER AS UNDER:- APRIL 2000 3,69,700/- MAY 2000 4,41,962/- JUNE 2000 3,90,736/- JULY 2000 3,85,716/- AUG 2000 4,36,413/- SEP 2000 4,24,302/- OCT 2000 2,23,314/- NOV. 2000 2,17,284/- DEC. 2000 10.82,227/- JAN. 2001 7,56,232/- FEB. 2001 1,45,443/- MAR. 2001 1,62,317/- ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 6 5.4 THE AO DID NOT AGREE WITH ASSESSEES SUBMISSION S THAT SALES FOR THE MONTH OF DECEMBER 2000 WERE DULY REFLECTED AND PROPERLY RECORDED IN THE BOOKS. THE AO NOTED THAT ONLY BECAU SE THE RECORDED SALE RECEIPTS OF DEC2000 WERE IN THE POSS ESSION OF THE DEPARTMENT THEN ONLY THIS MONTH THE ASSESSEE HAS DE CLARED THE ACTUAL RECEIPTS. HE FURTHER NOTED THAT BOOKS OF ACC OUNT WERE NOT AVAILABLE AT THE TIME OF SURVEY. THE ASSESSEE DID N OT FILE ANY EXPLANATION REGARDING THE SALE FROM APRIL TO NOV. & JAN. TO MARCH, 2001. THE AO ASKED ASSESSEE WHY SALE SHOULD NOT BE ESTIMATED FOR WHOLE YEAR ON THE BASIS OF SALE FOR DEC.2000. AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE THE AO REJECTED THE BOOKS O F ACCOUNT OF THE ASSESSEE AND ESTIMATED THE INCOME OBSERVING AS UNDER:- AO PAGE NO, 5-- THE ASSESSEE HAS DECLARED SALES OF RS. 50,35,646/- AND HAS RETURNED G.P. OF RS. 29,36,085/ - WHICH GIVES THE RATE OF G.P. AT 58.31%. IN ABSENCE OF ANY KIND OF QUANTITATIVE DETAILS OF SALES, PURCHASES AND RAW MA TERIAL CONSUMPTION AND PRIMARY EVIDENCE REGARDING COUNTER SALES, THE CORRECTNESS OF G.P. DECLARED ALSO CANNOT BE REL IED UPON AND THE SAME IS ESTIMATED AT 59%. AO PAGE NO, 5 AND 6---- RELIANCE IS PLACED ON THE PRINCIPLE LAID DOWN IN THE CASE OF 4 ITR 387 AND 46 ITR 748 A RE APPLICABLE. IN THE SAID CASE, THE ASSESSEE DID NOT KEEP PROPER VOUCHERS AND STOCK REGISTERS. THE COURT HELD THAT T HE ACCOUNTS KEPT BY THE ASSESSEE WERE NOT SUFFICIENT TO ARRIVE AT THE TRUE PROFITS. HENCE, THE ESTIMATION OF G.P. AT FLAT RATE WAS JUSTIFIED. THE ASSESSEE HAS NOT MAINTAINED ANY TYPE OF QUANTIT ATIVE DETAILS OF PURCHASE DEBITED IN P/L A/C R QUANTITATI VE DETAILS OF CONSUMPTION OF SUCH PURCHASES. ASSESSEE HAS ALSO FA ILED TO EXPLAIN WHY THE ABOVE PURCHASE BILLS (FORMING PART OF SEIZED LOOSE PAPERS) DO NOT FORM PART OF AUDITED ACCOUNTS MAINTAINED BY THE ASSESSEE. IT IS ALSO EVIDENT THAT THE ASSESS EE HAD ADMITTEDLY DISCLOSED ONLY A PART OF SALES IN THE BO OKS OF A/CS MAINTAINED. THE FACTS OF THE CASE ARE THAT THE ASSE SSEE HAS COUNTER SALES IN CASH AND HAS NOT MAINTAINED ANY PR IMARY EVIDENCE LIKE SALE BILLS REGARDING SALES. ALSO IN V IEW OF THE QUALIFIED REPORT OF THE AUDITORS IN THIS REGARD WHE REBY, IT IS ADMITTED THAT THE DAILY SALES HAVE BEEN TAKEN AS CE RTIFIED BY THE MANAGEMENT. IT IS EVIDENT THAT THE AUDITORS HAV E MERELY RELIED ON THE INFORMATION REGARDING CASH SALES GIVE N BY THE MANAGEMENT. ASSESSEE HAS ALSO FAILED TO SUBSTANTIAT E THE WIDE VARIANCE AND STEEP FALL IN SALES RECORDED FOR THE MONTH OF APRIL TO NOVEMBER 2000 AND JANUARY TO MARCH 2001 AS ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 7 COMPARED TO THE ACTUAL SALES OF RS.10,82,227/- RECO RDED FOR THE MONTH OF DECEMBER 2000 IN VIEW OF THE FOREGOING DISCUSSION IN EARLIER PARA S, I HOLD THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASESSEE DO NOT REFLECT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE AS ENVISAGED IN SECTION 145(3) OF THE INCO ME TAX ACT, 1961 AND IT IS NOT POSSIBLE TO ARRIVE AT THE TRUE P ROFITS OF THE ASSESSEE. I HAVE NO OTHER OPTION BUT TO REJECT THE BOOK RESULTS AND AFTER CAREFUL CONSIDERATION OF THE FACTS AND CI RCUMSTANCES OF THE CASE IN ENTIRETY, I PROCEED TO ESTIMATE THE ACTUAL SALES OF THE ASSESSEE BASED ON THE FACTS EMERGING FROM THE A NALYSIS OF THE ABOVE SEIZED PAPER AND THE STATEMENT OF THE PAR TNER SHRI. SHANKAR POOJARI. FROM THE ABOVE CHART, THE TOTAL SA LES FOR ONE MONTH AMOUNTS TO RS.10,82,227/- BASED ON THE CLARIF ICATION OF SHRI. SHANKAR POOJARI REPRODUCED EARLIER. THEREFORE, THE TOTAL SALES WORKS OUT TO RS.1,29,86, 724/- AS AGAINST THE SALES AS PER P & L A/C FILED I.E. RS.50 ,35,646/-. HOWEVER, TAKING INTO CONSIDERATION A CONSERVATIVE V IEW AND TAKING INTO A/C LEAN PERIOD AND HOLIDAY OBSERVED TH E TOTAL SALES IS ESTIMATED AT RS.1,10,00,000/-. APPLYING G. P. RATE AT 59% ON THE SALES OF RS.1,10,00,000/- GIVES G.P. OF RS.64,90,000/- AS AGAINST G.P. DECLARED OF RS.29,36 ,085/-. THE RESULTANT DIFFERENCE OF RS.35,53,915/- IS ADDED BACK TO THE TRADING RESULTS DECLARED. PENALTY PROCEEDINGS U /S.271(1)(C) ARE INITIATED SEPARATELY. RELIANCE IS ALSO PLACED I N THE CASE OF RAJNIK AND CO., [251 ITR 561(AP)] WHEREIN ESTIMATIO N OF INCOME WAS JUSTIFIED BASED ON THE EVIDENCE FOUND FO R A PART PERIOD WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, NO ADDIT ION ON ACCOUNT OF UNACCOUNTED PURCHASES IS CONSIDERED BASE D ON THE SEIZED LOOSE PAPER DISCUSSED ABOVE IN VIEW OF ESTIM ATION OF SALES AND ADDITION TO TRADING RESULTS BASED ON ESTI MATED G.P. AS DISCUSSED IN EARLIER PARAS . 5.5 THE CIT (A) CONFIRMED THE ADDITION OBSERVING AS UNDER:- 5. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND FIND NO FORCE IN THE SAME. THE AO HAS MADE THE ADDITIONS BASED ON ENTRIES IN SEIZED PAPERS FOUND A T THE RESIDENCE OF ONE OF THE PARTNERS SH. SHANKAR POOJAR Y WHO HAD ADMITTED IN HIS STATEMENT THAT THERE WERE UNRECORDE D SALES AND ALSO EXPLAINED ELABORATELY HOW THE ABBREVIATION S USED IN THE SEIZED PAPERS REPRESENTED THE DISCLOSED AND UND ISCLOSED SALES (AS EXPLAINED IN THE AOS ASSESSMENT ORDER AT PAGE 2 AND 3). A DETAILED ACCOUNT TALLY WAS FOUND IN THE L OOSE PAPER NO. 26 OF FILE NO.A-9 SEIZED FROM THE RESIDENCE OF SHRI RAGHUNATH POOJARY, MANAGER AND CHIEF PARTNER. SH. S HANKAR ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 8 POOJARY GAVE A DETAILED EXPLANATION OF EACH AND EVE RY TRANSACTION RECORDED IN THE PAPER AND EXPLAINED HOW THE FIGURE DISCLOSED AND UNDISCLOSED SALES ADDED UP TO THE TRU E FIGURE OF SALES. THE AO THEREFORE HAD A SOUND BASIS FOR HIS C ONTENTION THAT THERE WERE UNRECORDED SALES BEING CONDUCTED IN THE RESTAURANT FOR WHICH NECESSARY EVIDENCES WERE FOUND BY WAY OF LOOSE PAPERS WHICH THE ASSESSEE HIMSELF ADMITTED TO BE REPRESENTING THE UNRECORDED SALES OF THE RESTAURANT . SINCE THE ASSESSEE MAINTAINS NO RECORD OF SALES TRANSACTIONS NOR ANY STOCK REGISTER, NO FURTHER EVIDENCE WAS REQUIRED BY THE AO TO COME TO THE CONCLUSION THAT LARGE VOLUMES OF UNRECO RDED SALES HAD TAKEN PLACE. THE APPELLANT VERY CONVENIENTLY TO OK PLEA THAT THESE WERE RECORDED FOR THE MONTH OF DECEMBER 2000 IN THE BOOKS OF ACCOUNTS KNOWING VERY WELL THAT THE RE CORDS OF THE SALES FOR THE MONTH OF DECEMBER 2000 WERE IN TH E POSSESSION OF THE DEPARTMENT AND HENCE IT DISCLOSED THE ACTUAL SALES. HOWEVER, THESE BOOKS OF ACCOUNTS WERE NEVER PRODUCED BEFORE THE SURVEY PARTY AT THE TIME OF SURVEY. THE AO HAS FOUND CLINCHING EVIDENCE REGARDING THE ACTUAL SALES IN THE MONTH OF DECEMBER 2000 BEING REPRESENTATIVE FIGURE OF THE AVERAGE SALES BEING DONE ON A MONTHLY BASIS. THE AO ALSO FOUND CONCLUSIVE EVIDENCE THAT THERE WAS A LARGE VO LUME OF UNRECORDED SALES WHICH WERE ADMITTED BY THE APPELLA NT IN THE STATEMENT GIVEN BY SH. SHANKAR POOJARY. THE APPELLA NTS CONTENTION THAT THESE FIGURES ARE ALREADY RECORDED IN THE BOOKS OF ACCOUNTS IS A MERE COVER-UP AS THESE FIGURES WER E RECORDED SUBSEQEUTNLY AFTER THE SURVEY. THE APPELLANTS CONT ENTION THAT IN VIEW OF CASE LAWS CITED, THE STATEMENT RECORDED WERE ONLY A ORAL REPLY WHICH WAS NOT BACKED BY ANY SUPPORTING E VIDENCE IS TOTALLY BASELESS SINCE THE ASSESSEE ITSELF ADMITTED THAT THE LOOSE PAPER FOUND AT THE TIME OF SEARCH SHOWED UNRE CORDED SALES AND THE PARTNER HIMSELF EXPLAINED THE QUANTUM OF UNRECORDED SALES ALSO. THUS THE CONTENTION THAT THE RE WAS NO SUPPORTING EVIDENCE IS UNFOUNDED. THERE WAS NO ONUS ON THE DEPARTMENT TO PROVE BEYOND REASONABLE DOUBT THAT TH E ENTRIES REPRESENTED UNDISCLOSED INCOME SINCE THE PARTNER HI MSELF, VOLUNTARILY ADMITTED AND EXPLAINED THE QUANTUM OF UNDISCLOSED SALES. THE APPELLANTS CONTENTION THAT THE STATEMENT WAS SUBSEQUENTLY RETRACTED AND THEREFORE HOLDS NO EVIDENTIAL VALUE IS BASELESS SINCE RETRACTION IS WI THOUT ANY BASIS AND THERE WAS NO SUBSTANTIATION OF THE RETRAC TION. WHERE AS THE STATEMENT OF THE PARTNER HAS THE PROPER BASI S SINCE HE HAS EXPLAINED HOW THE FACTS AND FIGURES REPRESENTED UNDISCLOSED SALES, THERE IS NO BASIS FOR THE RETRAC TION, AS THE SAME HAS NOT BEEN SUBSTANTIATED WITH ANY EVIDENCE. IT IS ALSO HELD THAT IN THE CASE OF RAJNIK & CO. V. ACIT [2001 ] 251 ITR 561(A.P.) THE ANDHRA PRADESH HIGH COURT HELD FOR ES TIMATION OF UNDISCLOSED INCOME, APART FROM SEIZED MATERIALS SHO WING SUPPRESSION FOR 24 DAYS IN 1996-97 THE CONFESSIONS IN THE STATEMENTS RECORDED FROM THE PARTNERS ADMITTING SUP PRESSIONS ON A DAY TO DAY BASIS WERE ACCEPTED AS EVIDENCE FOR PURPOSES OF ESTIMATION. ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 9 THE APPELLANT HAS ALSO FAILED TO EXPLAIN WHY THE FIGURES AND SALES FOR THE MONTH OF DECEMBER SHOULD NOT BE MADE REPRESENTED SALES FOR THE YEAR AS THERE WAS SHARP V ARIATION BETWEEN THE SALES MADE IN DECEMBER AND REST OF THE YEAR. SINCE THE FIGURES OF SALES FOR THE MONTH OF DECEMBE R WERE AVAILABLE WITH THE DEPARTMENT THE TRUE FIGURES HAVE BEEN DISCLOSED WHERE AS FOR THE REST OF THE YEAR THE ASS ESSEE HAS SHOWN EXTREME DECLINE WHICH HE COULD NOT SUBSTANTIA TE. THE APPELLANTS RELIANCE ON CASE LAWS IS ALSO NOT VALID AS THE CASE LAW IN THE CASE OF CIT VS. DR. M.K.E. MEMON [2001] 248 ITR 310 (BOM.). THE HONBLE COURT ACCEPTED THE PREPOSIT ION THAT UNDISCLOSED INCOME FOUND DURING SEARCH COULD BE TAK EN AS THE BASIS FOR COMPUTING THE SALES DURING THE YEAR IN QU ESTION AS AGAINST THE BLOCK PERIOD OF 10 YEARS AND THEREFORE ACCEPTED THE FACT THAT THE EVIDENCE OF UNRECORDED SALES COUL D BE ADOPTED FOR ESTIMATING THE SALES FOR THE YEAR IN QU ESTION. THE HONBLE COURT STATED THAT THE ASSESSEE, A MEDICAL P RACTITIONER, WAS FOUND TO HAVE UNDISCLOSED INCOME IN POST-NOVEMB ER, 1993 PERIOD. BUT THE AO ESTIMATED SIMILAR INCOME FOR EAR LIER PERIOD COVERED IN THE BLOCK PERIOD AS WELL. IT WAS FOUND T HAT THIS IS NOT POSSIBLE WITHOUT ANYTHING TO SUGGEST SUCH INCOM E DURING THE EARLIER PERIOD. REVENUE RELIED UPON THE DECISIO N OF THE SUPREME COURT IN CST V. H.M. ESUFALI H.M. ABDULALI [1973] 90 ITR 271(SC), WHICH WAS DISTINGUISHED ON THE GROUND THAT THE ESTIMATE IN THAT CASE RELATED TO THE WHOLE YEAR ON THE BASIS OF SUPPRESSED TURNOVER FOR A SHORT PERIOD IN THE SAME YEAR, WHILE IN A BLOCK ASSESSMENT ONE IS CONCERNED WITH BLOCK P ERIOD OF 10 YEARS. THE AO HAS MADE A REASONABLE ESTIMATION OF SALES AFTER CONSIDERING THE FACT THAT THERE 2WOULD BE HOL IDAYS, LEAVE PERIODS ETC. AND GAVE SUBSTANTIAL RELIEF TO THE ASS ESSEE BY ESTIMATING THE SALES AT RS. 1.1 CRORES AS AGAINST THE MONEY SALES OF DECEMBER 10.82 LAKHS. THE AO HAS FOUND OTH ER FLAWS IN BOOKS OF ACCOUNT SUCH AS UNACCOUNTED PURCHASES F OR WHICH THE ASSESSEE TOOK A PLEA THAT THESE REPRESENTED PUR CHASES FOR ANOTHER UNIT BUT HOWEVER THE SEIZED PAPER FOUND IN A-9 REVEALED UNACCOUNTED PURCHASES AS EXPLAINED BY THE AO IN HIS ASSESSMENT ORDER IN PAGE 4 WHERE THE LIST OF PARTIE S WERE NARRATED FOR WHICH THE PURCHASES WERE NOT REFLECTED IN CASH BOOK OR ANY EXPENDITURE ACCOUNT. THE ASSESSEES EXP LANATION WAS AGAIN BASELESS AS IT CLAIMED THAT THESE WERE NO T ITS PURCHASES. THE ESTIMATION MADE BY THE AO IS THEREFORE UPHELD AS (A) IT HAS BEEN SUBSTANTIATED BY THE ACTUAL SALES FIGURE I N THE MONTH OF DECEMBER DETECTED AT THE TIME OF SEARCH ON PARTN ER, SURVEY ON APPELLANT (B) EVIDENCE OF UNRECORDED SALES WAS F OUND AT THE TIME OF SEARCH AND ADMITTED BY THE PARTNER IN HIS S TATEMENT (C) THE ALLEGED RETRACTION OF STATEMENT HAS NOT BEEN SU BSTANTIATED WITH ANY EVIDENCE WHEREAS THE ORIGINAL STATEMENT IS SUBSTANTIATED BY EVIDENCE FOUND DURING SEARCH (D) B EING A FAST FOOD RESTAURANT THE SALES FOR DECEMBER ACTUALLY ADO PTED IS A REPRESENTATIVE MONTHLY AVERAGE OF SALES, REPRESENTE D FIGURE OF MONTHLY RATES (E) MUMBAI HIGH COURTS DECISION SUPP ORTS THE ESTIMATION MADE BY THE AO, WHEN IT HAS BEEN HELD BY THE COURT ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 10 THAT SUCH ESTIMATION IS VALID FOR THE YEAR IN QUEST ION WHEN SUCH SUPPRESSION OF SALES IS FOUND. 6. THE LEARNED AR SUBMITTED THAT DURING THE COURSE OF SURVEY U/S 133A, NO INCRIMINATING MATERIAL OR DOCUMENTS WE RE FOUND. DURING THE ASSESSMENT PROCEEDINGS BEFORE THE AO THE ASSESSEE FILED MONTHLY DETAILS OF SALE & PURCHASES VIDE LETTER DAT ED 10.01.2004. COMPUTERISED BOOKS OF ACCOUNT WERE ALSO PRODUCED BE FORE THE AO. THE LEARNED AR REFERRED VARIOUS PAGES OF PAPER BOOK WHERE ASSESSEE SUBMITTED THEIR SUBMISSIONS BEFORE THE AO & CIT (A). THE LEARNED AR SUBMITTED THAT THE ASSESSEE EXPLAINED TH E LOOSE SHEET, WHICH ALSO CONTAINS THE DETAILS PALI NAKA AND HILL ROAD I.E. OTHER RESTAURANT, SHIV SAGAR PALINAKA & HILL ROAD. THE AS SESSMENT OF SHIVSAGAR AND HILL ROAD HAS BEEN COMPLETED U/S 143( 3) AND NO ADDITION WAS MADE. THE COPY OF ORDER FILED IS PLACE D AT PAGE 106 & 110-111 OF PAPER BOOK. THE LEARNED AR FURTHER SUBMI TTED THAT BLOCK ASSESSMENT OF THAT FIRM U/S 158BD WAS ALSO CO MPLETED BUT NO ADDITION WAS MADE. IT IS ALSO POINTED OUT BY THE LEARNED AR THAT THE CIT HAD TAKEN ACTION U/S 263 AGAINST THE BLOCK ASSESSMENT OF THAT FIRM WHICH HAS BEEN QUASHED BY THE ITAT VIDE I T(SS)A NO. 75/M/07 ORDER DATED 05.05.2008. THE LEARNED AR SUBM ITTED THAT ASSESSMENTS OF GROUP CONCERNS HAVE ALSO BEEN COMPLE TED WITHOUT MAKING ANY ADDITION. (COPY OF ORDER FILED AT PAGE N OS. 110-138 OF PAPER BOOK). THE LEARNED AR SUBMITTED ESTIMATION FO R EARLIER AND SUBSEQUENT PERIOD WITHOUT ANY EVIDENCE OR MAKING ON THE BASIS OF DEC. 2000 SALES IS NOT JUSTIFIED. THE LEARNED AR IN SUPPORT OF HIS CONTENTIONS RELIED UPON THE FOLLOWING DECISIONS:- I) HARISH K. KAPADIA V. ASST. CIT, ITA NO. 1835 TO 1836/B/95, DATED 9.1.95. II). HONEY FURNITURES V. CIT [2008] 18 VST 70 (ALL. ) III). VED PRAKASH SANJYA KUMAR V. ACIT, 76 ITD 107 (CHD.) IV). CHHABRIA MKT LTD. V. DCIT, 81 ITD 314 (MUM.) 6.1 THE LEARNED AR SUBMITTED THAT ADDITION CANNOT B E MADE ON PRESUMPTION BASIS WITHOUT ANY MATERIAL OR EVIDENCE FOUND DURING THE COURSE OF SURVEY. THE UNDISCLOSED INCOME IF ANY WAS REQUIRED TO BE RESTRICTED TO EVIDENCES AND MATERIAL FOUND. THE LEARNED AR IN SUPPORT OF HIS CONTENTIONS RELIED UPON THE FOLLOWIN G DECISIONS:- ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 11 I). DHAKESHWARI COTTON MILLS LTD. V. CIT [ 1954 26 ITR 775 (SC). II). DHIRAJLAL GIRDHARILAL V. CIT [1954] 26 ITR 736 (SC) III). OMAR SALARY MOHAMED SAIT VS. CIT [1959] 37 IT R 151 (SC). 6.2 THE LEARNED AR SUBMITTED THAT THERE IS NO PRESU MPTION THAT A TAX RETURN FILED AFTER THE SURVEY IS THE ONE FURN ISHED AFTER THE DETECTION OF UNRECORDED INCOME. THE LEARNED AR IN S UPPORT OF HIS CONTENTIONS RELIED UPON CIT VS. MAYANK ROTOPLAST IN DUSTRIES (GUJ.) [2002] 253 ITR 442 (GUJ) 6.3 THE LEARNED AR SUBMITTED THAT BOOKS MAINTAINED AS PER SALES TAX ASSESSMENT ALSO COMPLETED AND ACCEPTED TH E TURNOVER, SALES TAX RECORD BINDING ON INCOME TAX DEPT. THE LE ARNED AR IN SUPPORT OF HIS CONTENTIONS RELIED UPON CIT V. ANAND HA METAL CORPN. [2005] 273 ITR 262 (MAD.), CIT VS. C.L. KHAT RI [2006] 282 ITR 97 (MP) (109) AND. CIT VS. ANAND KUMAR DEEPAK K UMAR [2007] 294 ITR 497 (DEL) 498 6.4 THE LEARNED AR SUBMITTED THAT STATEMENT RECORDE D OF SHRI SHANKAR POOJARI WAS RETRACTED THEREFORE THE SAME CA NNOT BE RELIED. THE LEARNED AR IN SUPPORT OF HIS CONTENTIONS RELIED UPON CIT VS. UTTAMCHAND JAIN ITA NO. 634 OF 2009 DT. 2.7.09. WHE RE IN FOLLOWED THE DECISION OF SUPREME COURT IN THE CASE OF VINOD SOLANKI VS. UOI [2008] 16 SCALE 31. 6.5 THE LEARNED AR SUBMITTED THAT IN CASE OF SHRI S HANKAR POOJARI THE ADDITION MADE IN RESPECT OF SUPPRESSION OF SALES OF RS. 66 LAKHS IS DELETED BY THE TRIBUNAL. HE FURTHER SUB MITTED THAT IN GROUP CASES THE ASST. IS COMPLETED WITHOUT ANY ADDI TION IN CASE OF SHIV SAGAR RESTAURANT AT PALI NAKA & HILL ROAD, BAN DRA. HENCE DEPT. CANNOT TAKE CONTRARY STAND. 6.6 THE LEARNED AR SUBMITTED THAT THE AO ERRED IN R EJECTING THE BOOKS OF ACCOUNT U/S 145(3) WITHOUT BRINGING OUT AN Y SPECIFIC DEFECT OR INFIRMITIES. THE LEARNED AR IN SUPPORT OF HIS CONTENTIONS RELIED UPON ASHOK RETRACTORIES 279 ITR 457 (CAL.) ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 12 6.7 THE LEARNED AR SUBMITTED THAT MERELY ON THE BAS IS OF STATEMENT ADDITIONS CANNOT BE MADE. THE LEARNED AR IN SUPPORT OF HIS CONTENTIONS RELIED UPON CIT VS. S. KHADAR KHAN SON [2008] 300 ITR 157 (MAD.), CIT VS. RAMDAS MOTOR CO.238 ITR 177 [183] [AP], ITAT DECISION IN THE CASE OF AC CR. 5(7) L.A. PANDY A ITA NO. 4417 TO 4420/M/97, DATED 31.05.2004 AND INSTRUCTION NO. 286/2/2003 (INV.) IT DT. 10. 03. 2002. 6.8 THE LEARNED AR SUBMITTED THAT DECISION IN THE C ASE OF RAJNIK & CO. VS. ACIT, 251 ITR 561[AP] CITED BY AO IS NOT APPLICABLE ON FACTS OF THE PRESENT CASE. IN THAT CA SE THERE WAS STATEMENT OF PARTNER ADMITTING THE SUPPRESSION OF S ALES. THERE WAS DETECTION OF SUPPRESSED SALES DURING THE SEARCH. TH E DECISION OF BOMBAY HIGH COURT IN THE CASE OF DR. MKE MENON, 248 ITR 310 (BOM){SLP REJECTED IN 250 ITR 4 (ST.) (SC)} IS DIRE CTLY APPLICABLE TO THE FACTS OF THE CASE. IN THE CASE OF [1936] 4 ITR 387 (LAHORE) BADRI SHAH SOHAN LAL V. CIT, PROFIT SHOWN LOW- BOOK S NOT PRODUCED HELD REJECTION OF BOOKS JUSTIFIED NOT APPLICABL E TO THE FACTS OF THE APPELLANT. AS BOOKS ARE AUDITED AND PRODUCE BEF ORE A. O. IN THE CASE OF [1962] 46 ITR 748 (AP) ROYAL MEDICAL HALL VS. CIT- PROPER VOUCHERS & STOCK REGISTER NOT KEPT THEREFORE IT WAS HELD THAT AO WAS NOT JUSTIFIED. THAT CASE IS NOT APPLICABLE TO T HE ASSESSEE CASE AS ASSESSEE KEPT ALL RECORDS WHICH IS REQUIRED BY L AW. EVEN SALES TAX ASSESSMENT COMPLETED ON THE BASIS OF THOSE RECO RDS. 6.9 THE LEARNED AR WHILE SUMMARIZING HIS ARGUMENTS SUBMITTED THAT DURING THE COURSE OF SURVEY NEITHER INCRIMINAT ING OCUMENTS/MATERIALS NOR EXCESS STOCK WAS FOUND, NOR WAS ANY DISCLOSURE MADE. ON THE DATE OF SURVEY I.E. 24.01.2 001, THE ACCOUNTING PERIOD NOT ENDED. THE BOOKS OF ACCOUNT W ERE AUDITED AND NO DISCREPANCY WAS FOUND. THE LEARNED AR SUBMIT TED THAT SALE FOR DEC.2000 FOR WHICH LOOSE PAPER FOUND IN CASE OF SEARCH OF OTHER PERSON HAS BEEN REFLECTED IN THE BOOKS OF ACCOUNT; THEREFORE, THERE IS NO SUPPRESSION OF INCOME. THE SALE DECLARED TO T HE SALE DEPARTMENT HAS BEEN ACCEPTED BY THE SALES TAX DEPAR TMENT. THE ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 13 SALES TAX ORDER FILED HAS BEEN PLACED AT PAGES 191- 196 OF PAPER BOOK. NEITHER THE STATEMENT OF PARTNER NOR ANY EMPL OYEES WERE RECORDED DURING THE COURSE OF SURVEY OR IN THE COUR SE OF ASSESSMENT TO VERIFY THE BUSINESS OF ASSESSEE FIRM. THE FIRM DISSOLVED ON 10.04.2001. 7. THE LEARNED DR RELIED UPON THE ORDER OF CIT (A) AND SUBMITTED THAT SALE WAS ESTIMATED ON THE BASIS OF S EIZED PAPER FOR THE MONTH OF DEC. 2000. THE SALE FOR THE DEC. 2000 HAS BEEN ACCEPTED BY THE ASSESSEE. THE ASSESSEE DID NOT FURN ISH EXPLANATIONS AS TO WHY SALES FOR OTHER MONTHS WERE LOW. THE ASSESSEE WAS IN THE HABIT OF CONCEALING SALE, THERE FORE, THE AO WAS RIGHT IN MAKING ESTIMATION OF SALE FOR WHOLE YEAR O N THE BASIS OF SALE FOR THE MONTH OF DEC. 2000. THE LEARNED DR, IN SUPPORT OF HIS CONTENTION RELIED UPON THE DECISIONS IN THE CASE O F RAJNIK & CO. VS. ACIT, 251 ITR 561[AP] AND CST V. H.M. ESUFALI H .M. ABDULALI [1973] 90 ITR 271(SC), 7.1 IN REJOINDER, THE LEARNED AR SUBMITTED THAT HE HAS ALREADY SUBMITTED THAT THE DECISIONS CITED BY THE DR ARE DI STINGUISHABLE ON FACTS. THE LEARNED AR HAS SUBMITTED THAT THE JUDGME NTS IN THE CASE OF DR. MKE MENON, 248 ITR 310 (BOM) AND CIT VS. MAY ANK ROTOPLAST INDUSTRIES (GUJ.) [2002] 253 ITR 442 (GUJ ) ARE DIRECTLY APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERA TION. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES O F THE PARTIES AND PERUSED THE RECORD. THE BRIEF IMPORTANT FACTS OF TH E CASE ARE THAT THE ASSESSEE FILED RETURN DECLARING LOSS AT RS. 41, 513/-. A SURVEY U/S 133A WAS CARRIED OUT ON 24.01.2001. IT WAS REPO RTED TO AO THAT SOME SALES WERE FOUND RECORDED IN LOOSE PAPER SEIZED FROM RESIDENCE OF SHRI SHANKAR POOJARI, ONE OF THE PARTN ERS WHO WERE SUBJECT TO SEARCH UNDER SECTION 132 OF THE ACT RELA TED TO ASSESSEE. SHRI SHANKAR POOJARI IN HIS STATEMENT RECORDED AT T HE TIME OF SEARCH ADMITTED THAT FIGURES APPEARING IN LOOSE PAP ERS RELATED TO SALE OF THE ASSESSEE. DURING THE SURVEY AT THE PREM ISES OF THE ASSESSEE, BOOKS OF ACCOUNT WERE NOT PRODUCED (PARA 3 OF AOS ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 14 ORDER). DURING ASSESSMENT PROCEEDINGS COMPUTERIZED BOOKS OF ACCOUNT WERE PRODUCED. THE AO NOTED THAT SOME OF TH E PURCHASES OF WHICH DETAIL NOTED BY THE AO AT PAGE 4, WERE NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT. IT WAS ALSO NOTED BY THE A O FROM AUDIT REPORT U/S 44AB FILED ALONG WITH RETURN THAT THE AU DITOR HAS PUT NOTES ON ACCOUNT THAT DAILY SALES WERE TAKEN AS CER TIFIED BY THE MANAGEMENT. OPENING AND CLOSING STOCK WAS TAKEN AS CERTIFIED BY MANAGEMENT. QUANTITY DETAILS WERE ALSO NOT GIVEN IN AUDIT REPORT IN FORM 3CD. THE AO ASKED THE ASSESSEE THAT WHY BOOK R ESULT SHOULD NOT BE REJECTED IN ABSENCE OF PRIMARY EVIDENCE AND VERIFICATION OF SALES. THE ASSESSEE REPLIED VIDE THEIR LETTER DATED 13.02.2004 WHICH IS REPRODUCED ABOVE IN PARA 5 OF THIS ORDER. THE AO ALSO NOTED THAT THE ASSESSEE DID NOT EXPLAIN SATISFACTORILY WHY THE SALE WAS LESS IN OTHER MONTHS IN COMPARISON TO SALE FOR THE MONTH OF DECEMBER, 2000. THE AO REJECTED THE BOOKS OF ACCOUNT AND ESTI MATED THE PROFIT. HE MADE ADDITION OF RS 3553915/- THE CIT (A ) CONFIRMED THE ADDITION MADE BY THE AO. BEFORE COMING TO THE I SSUE UNDER CONSIDERATION WE WOULD LIKE TO STATE THAT THE FINDI NG OF THE CIT (A) IS NEITHER ON THE CASE MADE OUT BY THE AO NOR IN A CCORDANCE WITH THE NORMAL ASSESSMENT PROVISIONS OF SECTION 144 AND 145 OF THE ACT .IT APPEARS FROM THE ORDER OF THE CIT (A) THAT HE H AS DECIDED THE CASE TREATING THAT IT WAS A BLOCK ASSESSMENT AND NO T IN ACCORDANCE WITH PROVISIONS OF NORMAL/REGULAR ASSESSMENT, SECT ION 145 AND 144 OF THE ACT. THEREFORE, THE ORDER OF THE CIT (A) CANNOT BE ACCEPTED ON THE ISSUE. IT IS TO NOTE THAT THE CASE UNDER CONSIDERATION IS REQUIRED TO DECIDE UNDER THE PROVI SIONS OF NORMAL ASSESSMENTS UNDER SECTIONS 144 AND 145 OF THE ACT. ACCORDING TO THOSE PROVISIONS, AFTER REJECTION OF BOOKS OF ACCOU NT A REASONABLE AND FAIR ESTIMATION OF INCOME/PROFIT IS TO MAKE. WH EN MATTER WAS HEARD ORIGINALLY, THE PARTIES WERE ARGUED AND PRESE NTED THE CASE AS THE CASE IS OF BLOCK ASSESSMENT BEFORE US. THEREFOR E, THE MATTER WAS RE-FIXED FOR CLARIFICATION AND WAS HEARD ON THE BASIS OF ISSUE INVOLVED REJECTION OF BOOKS OF ACCOUNT AND ESTIMATI ON OF PROFIT. THE LEARNED AR FILED CERTAIN DETAILS REGARDING NET PROF IT OF BUSINESS AND ARGUED THE MATTER ACCORDINGLY. THE LEARNED DR ON TH E OTHER HANDS RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE AO HAS ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 15 RIGHTLY MADE THE ADDITION ON THE BASIS OF GP. THE T HEORY OF NET RATE OF PROFIT IS NOT APPLICABLE TO THE FACTS OF THE CAS E UNDER CONSIDERATION. AFTER HEARING LEARNED REPRESENTATIVE S OF THE PARTIES WE NOTICED THAT THIS IS AN OLD MATTER AND ISSUE INV OLVED IS ONLY FAIR REASONABLE ESTIMATION OF INCOME ON THE BASIS OF MAT ERIAL AVAILABLE ON RECORD AFTER REJECTION OF BOOKS OF ACCOUNT, THER EFORE TO AVOID MULTIPLE INNING OF LITIGATION IT WAS DECIDED TO DEC IDE MATTER AT THIS STAGE ITSELF. 8.1 ON CONSIDERATION OF FACTS OF THE CASE, WE FIND THAT IT IS A CASE OF REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT. AS REGARDS DECISIONS CITED BY THE PARTIES, WE AGREE WI TH THE RATIOS AND PRINCIPLES LAID DOWN IN THOSE DECISIONS. THE RATIO AND PRINCIPLES LAY DOWN BY THE COURTS IN THOSE CASES AFTER CONSIDERING THE FACTS OF RESPECTIVE CASE WHICH ARE NOT TO SIMILAR TO THE CAS E UNDER CONSIDERATION. IN SOME OF THE CASES ON WHICH THE LE ARNED AR PLACED RELIANCE ARE RELATED TO BLOCK ASSESSMENT WHEREAS TH E CASE UNDER CONSIDERATION IS REGULAR ASSESSMENT. IN THE CASE UN DER CONSIDERATION THE MATERIAL FOUND DURING SEARCH IN O THER CASES WERE USED BY AO WHILE FRAMING REGULAR ASSESSMENT OF THE ASSESSEE. THUS, THESE DECISIONS ARE DISTINGUISHABLE ON FACTS. 8.2 NOW COMING TO THE ISSUE UNDER CONSIDERATION, WHETHER UNDER THE CIRCUMSTANCES, THE AO WAS JUSTIFIED IN REJECTIN G BOOKS OF ACCOUNT AND AFTER REJECTING BOOKS OF ACCOUNT WHETHE R HE WAS CORRECT IN ESTIMATION OF PROFIT FROM BUSINESS. TO E XAMINE THE ISSUE WE WOULD LIKE TO REFER THE RELEVANT SECTION 145 OF THE ACT WHICH READS AS UNDER:- (1) INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURC ES SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE CO MPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. (2) THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFIC IAL GAZETTE FROM TIME TO TIME ACCOUNTING STANDARDS TO BE FOLLOW ED BY ANY CLASS OF ASSESSEE OR IN RESPECT OF ANY CLASS OF INCOME. 3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECT ION (1) OR ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 16 ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB-SECTION (2), HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, THE ASSESS ING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SE CTION 144.] 8.3 ON CONSIDERING THE SECTION 145 OF THE ACT I N THE LIGHT OF FACTS OF THE CASE UNDER CONSIDERATION, WE FIND THAT THE IN THE CASE UNDER CONSIDERATION BOOKS OF ACCOUNT WAS NOT PRODU CED AT THE TIME OF SURVEY, SOME PURCHASES FOUND NOT RECORDED I N THE BOOKS OF ACCOUNT, SALES FOR THE MONTH OF DEC. 2000 WERE REC ORDED IN BOOKS OF ACCOUNT ON THE BASIS OF LOOSE PAPER RELATED TO T HE ASSESSEE FOUND IN A SEARCH CASE OF OTHER ASSESSEE, THE AUDITORS R EPORT IS QUALIFIED REPORT , PRIMARY VOUCHERS WERE NOT PRODUCED BEFORE AO, QUANTITY DETAILS DID NOT MAINTAIN , THE AO ALSO FOUND CONCL USIVE EVIDENCE THAT THERE WAS UNRECORDED PURCHASES/SALES WHICH WE RE ADMITTED BY THE APPELLANT IN THE STATEMENT GIVEN BY SH. SHAN KAR POOJARY .THE ASSESSEE CHALLENGED THE REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) BEFORE CIT(A) THROUGH GROUND NUMBER ONE WHEREAS NO SUCH GROUND HAS BEEN RAISED BEFORE US , THEREFOR E IT CAN BE SAID THE REJECTION OF BOOKS OF ACCOUNT BY THE AO WAS ACC EPTED BY THE ASSESSEE. UNDER THE CIRCUMSTANCES, WE ARE OF THE CO NSIDERED VIEW THAT THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AS HE DID NOT SATISFY ABOUT THE CORRECTNESS OR COMPLETENE SS OF THE ACCOUNTS OF THE ASSESSEE, THEREFORE, THE ORDER OF T HE AO IS CONFIRMED ON THE ISSUE. 8.4 NOW COMING TO THE SECOND ASPECT OF THE MATT ER WHETHER AFTER REJECTING BOOKS OF ACCOUNT UNDER SECTION 145 (3) THE AO HAS MADE THE ASSESSMENT IN THE MANNER PROVIDED IN SECTI ON 144 I.E. BEST JUDGMENT. THAT THE SECTION 145 (3) CLEARLY P ROVIDES THAT WHERE THE AO IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, HE MAY MAKE THE AS SESSMENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT. THE SCOPE OF BEST JUDGMENT ASSESSMENT HAS BEEN EXAMINED BY THE APEX C OURT IN THE CASE OF STATE OF KERALA. VS. C. VELUKUTTY 60 ITR 23 9 (SC). PAGE 243 --WHAT IS THE SCOPE OF SECTION 12(2) (B) OF THE AC T? THE EXPRESSION 'TO THE BEST OF HIS JUDGMENT' IN THE SAID CLAUSE IS PRESUMABLY BORROWED FROM SECTION 23(4) OF THE IN COME-TAX ACT. THE SAID EXPRESSION IN THE INCOME-TAX ACT WAS THE SUBJECT ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 17 OF JUDICIAL SCRUTINY. THE PRIVY COUNCIL IN COMMISSI ONER OF INCOME-TAX V. LAXMINARAYAN BADRIDAS (5 ITR 170 AT 1 80 )HAS CONSIDERED THOSE WORDS. THEREIN IT OBSERVED: PAGE- 244 -- HE (THE ASSESSING AUTHORITY) MUST NOT ACT DISHONESTLY, OR VINDICTIVELY OR CAPRICIOUSLY BECAUS E HE MUST EXERCISE JUDGMENT IN THE MATTER. HE MUST MAKE WHAT HE HONESTLY BELIEVES TO BE A FAIR ESTIMATE OF THE PROP ER FIGURE OF ASSESSMENT, AND FOR THIS PURPOSE HE MUST, THEIR LOR DSHIPS THINK, BE ABLE TO TAKE INTO CONSIDERATION LOCAL KNO WLEDGE AND REPUTE IN REGARD TO THE ASSESSEE'S CIRCUMSTANCES, A ND HIS OWN KNOWLEDGE OF PREVIOUS RETURNS BY AND ASSESSMENTS OF THE ASSESSEE, AND ALL OTHER MATTERS WHICH HE THINKS WIL L ASSIST HIM IN ARRIVING AT A FAIR AND PROPER ESTIMATE; AND THOUGH THERE MUST NECESSARILY BE GUESS-WORK IN THE MATTER, IT MU ST BE HONEST GUESS-WORK. IN THAT SENSE, TOO, THE ASSESSME NT MUST BE TO SOME EXTENT ARBITRARY. ' THE PRIVY COUNCIL, WHILE RECOGNIZING THAT AN ASSESS MENT MADE BY AN OFFICER TO THE BEST OF HIS JUDGMENT INVOLVED SOME GUESS- WORK, EMPHASIZED THAT HE MUST EXERCISE HIS JUDGMENT AFTER TAKING INTO CONSIDERATION THE RELEVANT MATERIAL. TH E VIEW EXPRESSED BY THE PRIVY COUNCIL IN THE CONTEXT OF TH E INCOME-TAX ACT WAS FOLLOWED WHEN A SIMILAR QUESTION AROSE UNDE R THE SALES TAX ACT. A DIVISION BENCH OF THE CALCUTTA HIG H COURT IN JAGADISH PROSAD PANNALAL V. MEMBER, BOARD OF REVEN UE, WEST BENGAL(2 STC21), CONFIRMED THE ASSESSMENT MADE BY T HE SALES TAX AUTHORITIES, AS IN MAKING THE BEST JUDGMENT ASS ESSMENT THE SAID AUTHORITIES CONSIDERED ALL THE AVAILABLE M ATERIALS AND APPLIED THEIR MIND AND TRIED THEIR BEST TO COME TO A CORRECT CONCLUSION. SO TOO, A DIVISION BENCH OF THE PATNA H IGH COURT IN DOMA SAHU KISHUN LAL SAO V. STATE OF BIHAR(2 STC 37 ) REFUSED TO INTERFERE WITH THE BEST JUDGMENT ASSESSMENT OF A SALES TAX OFFICER AS HE TOOK EVERY RELEVANT MATERIAL INTO CON SIDERATION, NAMELY, THE SITUATION OF THE SHOP, THE RUSH OF THE CUSTOMERS AND THE STOCK IN THE SHOP AND ALSO THE ESTIMATE MAD E BY THE ASSISTANT COMMISSIONERS IN THE PREVIOUS QUARTERS. UNDER SECTION 12(2)(B) OF THE ACT, POWER IS CONFERR ED ON THE ASSESSING AUTHORITY IN THE CIRCUMSTANCES MENTIONED THERE UNDER TO ASSESS THE DEALER TO THE BEST OF HIS JUDGM ENT. THE LIMITS OF THE POWER ARE IMPLICIT IN THE EXPRESSION 'BEST OF HIS JUDGMENT'. JUDGMENT IS A FACULTY TO DECIDE MATTERS WITH WISDOM TRULY AND LEGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY CAPRICE OF A JUDGE, BUT ON SETTLED AND IN VARIABLE PRINCIPLES OF JUSTICE. THOUGH THERE IS AN ELEMENT O F GUESS-WORK IN A 'BEST JUDGMENT ASSESSMENT', IT SHALL NOT BE A WILD ONE, BUT SHALL HAVE A REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND THE CIRCUMSTANCES OF EACH CASE. THOUGH SUBSECTI ON (2) OF SECTION 12 OF THE ACT PROVIDES FOR A SUMMARY METHOD BECAUSE OF THE DEFAULT OF THE ASSESSEE, IT DOES NOT ENABLE THE ASSESSING AUTHORITY TO FUNCTION CAPRICIOUSLY WITHOUT REGARD F OR THE AVAILABLE MATERIAL. ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 18 8.5 CAN IT BE SAID THAT IN THE INSTANT CASE THE I MPUGNED ASSESSMENT SATISFIED THE ABOVE TESTS LAID DOWN BY T HE APEX COURT.? WE FIND THAT THE AO ESTIMATED SALE AT RS. 1,10,00,0 00/- ON THE BASIS OF SALE OF DECEMBER, 2000 DECLARED BY THE ASS ESSEE AGAINST SALE SHOWN BY THE ASSESSEE FOR RS. 50,35,646/-. THE GROSS PROFIT WAS ESTIMATED AT RS. 64,90,000/- BY APPLYING G.P. R ATE OF 59% AS AGAINST GROSS PROFIT DECLARED BY THE ASSESSEE AT RS . 29,36,085/-., G.P. RATE AT 58.31%. SO FAR AS ESTIMATION OF SALE I S CONCERNED, WE FIND THAT THE AO MADE THE ESTIMATION AFTER CONSIDER ING SALE FOUND IN LOOSE PAPER FOR THE MONTH OF DECEMBER, 2000. THE ASSESSEE FAILED PROVE THAT WHY THE SALE FOR THE MONTH OF DEC EMBER WAS HIGH IN COMPARISON TO OTHER MONTHS. IN ABSENCE OF EXPLAN ATION IT CAN BE SAID THAT THE ASSESSEE DID NOT DECLARED THE CORRECT SALE IN THE BOOKS OF ACCOUNT. THE SALE FOUND IN LOOSE PAPER AND SUBSEQUENT RECORDING PROVES THE PRACTICE OF THE ASSESSEE OF NO T RECORDING CORRECT SALE IN THE BOOKS OF ACCOUNT. AFTER CONSIDE RING THE ABOVE GUIDE LINES THAT IN ESTIMATION SOME GUESS WORK IS T HERE. WE FIND THAT THE SALE DETERMINED BY THE AO IS REASONABLE ES TIMATION OF SALE. THERE IS NO MATERIAL AVAILABLE ON RECORD BASIS ON W HICH A DIFFERENT/ OTHER REASONABLE ESTIMATION CAN BE MADE. THE NEXT S TEP TO BE TAKEN IN THIS REGARD IS FAIR AND REASONABLE ESTIMATION OF PROFIT ON THE ESTIMATED TURNOVER. THE AO MADE ADDITION OF RS. 35, 53,915/- ON THE BASIS OF DIFFERENCE OF G.P. ESTIMATED BY AO AND DECLARED BY THE ASSESSEE. IT IS IMPORTANT TO NOTE THAT AFTER REJECT ING BOOKS OF ACCOUNT, INCOME CHARGEABLE UNDER THE HEAD PROFITS & GAINS OF BUSINESS. THE ASSESSEE DECLARED NET PROFIT OF RS. 1,15,863/- INCLUDING SOME ITEMS OF OTHER INCOME WHICH ARE NOT IN DISPUTE. THE ASSESSEE DECLARED SALE OF RS. 50,35,646/-. THE ASSESSEE FILED FOLLOWING DETAILS ACCORDING TO WHICH THE EFFECTIVE NET PROFIT OF THAT BUSINESS COMES BEFORE DEPRECIATION AND INTEREST AND REMUNERATION TO PARTNERS IS 0.12%. ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 19 AS ON 31/03/2001 NET PROFIT AS PER PROFIT & LOSS A/C. ADD: 1) DEPRECIATION 225,283.15 2) INTEREST ON PARTNERS CAPITAL 2,272.36 3) PARTNERS REMUNERATION 50,000.00 LESS: 1) INCOME FROM OTHER SOURCES 225,000.0 0 2) FOOD COLLECTION 149,014.00 3) TELEPHONE COLLECTION 13,354.00 NET PROFIT 115,863.16 227,555.51 393,418.67 387,368.00 6,050.67 NET PROFIT RATIO 0.12% B) FOOD COLLECTION AMOUNT REFLECTED ON CR.SIDE OF P ROFIT & LOSS A/C IS THE AMOUNT RECOVERED FROM STAFF FROM THEIR S ALARY FOR PROVIDING THEM FOOD. THE AMOUNT CREDITED IS AT NORM AL RATE. C) TELEPHONE COLLECTION: REPRESENTS AMOUNT COLLECTE D FROM PEOPLE USING OUR PRIVATE TELEPHONE. D) OTHER INCOME REPRESENTS ROYALTY COMMISSION RECEI VED FROM COCO-COLA TO MONOPOLISE OF COLD DRINK. 8.6 LET US SEE EFFECTIVELY WHAT THE AO HAS DONE . THE AO MADE ADDITION OF RS35,53,915/- , IF WE ADD THIS AMOUNT O F ADDITION TO THE NET BUSINESS PROFIT SHOWN BY THE ASSESSEE RS 6, 050/- THE TOTAL COMES TO RS 35,59,965/-. THUS TOTAL ESTIMATION OF I NCOME FROM BUSINESS BY THE AO IS RS 35,59,965/-. ON ESTIMATED SALE OF RS. 1,10,00,000/-. THE CALCULATION OF NET PROFIT RATE C OMES TO 32.36%. UNDER THE CIRCUMSTANCES, CAN IT BE SAID THAT THE ES TIMATION MADE BY AO WAS IN ACCORDANCE WITH PRINCIPLES OF BEST JUD GMENT ASSESSMENT? IT IS CERTAINLY NOT; BECAUSE IN THIS LI NE OF BUSINESS NET PROFIT RATE OF 32.36% CANNOT BE SAID TO THE NET PRO FIT RATE WHICH IS FAIR AND REASONABLE AND PREVAILING NET PROFIT RATE OF THE MARKET. FOR THE PURPOSE OF BEST JUDGMENT WHERE IN FAIR AND RE ASONABLE ESTIMATION OF INCOME IS TO ESTIMATE, WE APPLY THE G UIDELINES LAID DOWN BY THE APEX COURT AS DISCUSSED ABOVE TO THE FA CTS OF THE CASE UNDER CONSIDERATION. IN THE LIGHT OF GUIDELINES LAI D DOWN BY THE APEX COURT ESTIMATION OF INCOME IS TO DECIDE WITH W ISDOM TRULY AND LEGALLY .ESTIMATION SHOULD NOT DEPEND UPON THE ARBI TRARY CAPRICE, BUT ON SETTLED AND INVARIABLE PRINCIPLES OF JUSTICE . THOUGH THERE IS ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 20 AN ELEMENT OF GUESS-WORK IN A 'BEST JUDGMENT ASSESS MENT', IT SHALL NOT BE A WILD ONE, BUT SHALL HAVE A REASONABLE NEXU S TO THE AVAILABLE MATERIAL AND THE CIRCUMSTANCES OF THE CAS E. IN THIS CASE MATERIAL FOUND IS IN RESPECT OF SALE/TURNOVER F OR THE MONTH OF DECEMBER ON THE BASIS OF WHICH THE AO HAS ESTIMATE D AT SALE/TURNOVER RS. 1,10,00,000/- AS AGAINST TURNOVER DECLARED BY THE ASSESSEE AT RS. 50,35,646/-. IN OTHER WORDS, TH E AO ESTIMATED EXTRA SALE/TURNOVER THAN DECLARED BY THE ASSESSEE I S RS. 59,64,354/-(1,10,00,000-50,35,646).THE ENTIRE SALE/ TURNOVER OR GP IS NEVER AN INCOME OR PROFIT, BUT ONLY ESTIMATE N ET PROFIT IS INCOME FOR THE PURPOSE OF THE ACT. IT IS ALSO TO NO TE THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED THE SAME CANNOT BE AG AIN CONSIDERED FOR THE PURPOSE OF MAKING ADDITIONS. IN THE CASE UN DER CONSIDERATION THE AO AFTER REJECTING BOOKS OF ACCOU NT AGAIN HE RELIED UPON REJECTED BOOKS OF ACCOUNT PRESUMING THA T THE EXPENDERS RELATED TO PROFIT AND LOSS ACCOUNT HAVE B EEN CORRECTLY RECORDED IN THE BOOKS OF ACCOUNT BY THE ASSESSEE. T HIS PRESUMPTION OF THE AO IS NOT ACCEPTABLE. HOWEVER AT THE MOST T HE TURNOVER ESTIMATED BY THE AO CAN BE ACCEPTED AS THE ESTIMATI ON MADE WAS BASED ON SOME MATERIALS AND COVER ALL LAPSES FOUND DURING THE COURSE OF SURVEY & ASSESSMENT PROCEEDINGS. THE LIM ITED ISSUE REMAINED TO BE SEEN IN THIS CASE IS WHAT SHOULD BE THE ESTIMATION OF INCOME/ PROFIT FOR THE YEAR UNDER CONSIDERATION FROM BUSINESS. IF WE SEE THE PROVISIONS OF THE ACT, THERE ARE SOME PR OVISIONS RELATED TO PRESUMPTIVE TAX, ONE OF THE SECTION IS SECTION 4 4AF. SECTION 44AF PROVIDES THAT IN THE CASE OF AN ASSESSEE ENGAG ED IN RETAIL TRADE IN ANY GOODS OR MERCHANDISE, A SUM EQUAL TO F IVE PER CENT OF THE TOTAL TURNOVER IN THE PREVIOUS YEAR ON ACCOUNT OF SUCH SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS O R PROFESSION. WE ARE AWARE THAT THE ABOVE PROVISIONS ARE STRICTLY NO T APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION BUT BY TH E HELP OF THESE PROVISIONS ONE CAN MAKE AN ESTIMATION OF A FAIR AND REASONABLE PROFIT. AFTER CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE AND SURROUNDING CIRCUMSTANCES OF THE CASE, CONSIDERING THE BOTH SIDES, SIDE OF REVENUE AND SIDE OF THE ASSESSEE WE FIND TH AT IT WILL FAIR AND ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 21 REASONABLE IF WE ESTIMATE THE NET PROFIT OR INCOME BY APPLYING NET PROFIT RATE OF 5% AFTER ALLOWING ALL EXPENDITURES I NCLUDING DEPRECIATION ON THE ESTIMATED TURNOVER, RS. 1,10,00 ,000/- OF WHICH CALCULATION COMES TO 5,50,000/-AS AGAINST ASSESSEE S CALCULATION OF BUSINESS PROFIT RS 6,050/-. THE NET ADDITION IN TOT AL INCOME REQUIRED IS RS 543950/-. (5,50,000-6,050). ACCORDIN GLY ADDITION TO THE EXTENT OF RS 543950 IS SUSTAINED OUT OF THE ADD ITION OF RS 35,53, 915/-THE BALANCE ADDITION OF RS. 30,09,965 I S DELETED. THE AO IS DIRECTED TO RECALCULATE THE TOTAL TAXABLE INC OME AFTER TAKING INTO CONSIDERATION THE ADDITION OF RS 543950/- SUST AINED BY US IN ACCORDANCE WITH LAW. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY A LLOWED AS INDICATED ABOVE. ORDER PRONOUNCED ON THE 27 TH DAY OF NOVEMBER, 2009. SD/- SD/- (R.S. PADVEKAR) (A.L. GEHLO T) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 TH NOVEMBER, 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, G BENCH, I. T.A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, IT.A.T., MUMBAI. KV ITA NO. 5686/M/04 M/S SHIV SAGAR VEG. RESTAURANT 22 S.NO. DESCRIPTION DATE INITLS 1. DRAFT DICTATED ON 12.11.09 SR.P.S./P. S 2. DRAFT PLACED BEFORE AUTHOR 23.11.09 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P. S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P. S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER