Income Tax Appellate Tribunal - AhmedabadGyansingh Jitsing Chauhan, Surat vs Assessee on 6 February, 2009IN THE INCOME TAX APPELLATE TRIBUNAL : D' BENCH : AHMEDABAD

                                        Camp at Surat
       (Before Hon'ble Shri T.K. Sharma, J.M. & Hon'ble Shri D.C. Agrawal , A.M.)

                            I.T.A. Nos. 1228 to 1232/AHD./2009
                         Assessment Year : 2002-2003 to 2006-2007
     Gyansing Jitsing Chauhan, Surat       -vs.- Deputy Commissioner of Income Tax,
     (PAN : ABDPL 4282 F)                           Central Circle-2, Surat
            (Appellant)                                               (Respondent)
                     Appellant by        :    Shri Rasesh Shah
                      Respondent by       :    Shri Ashok Bal, CIT, D.R.
                                         ORDER

Per Shri T.K. Sharma, Judicial Member :These five appeals filed by the assessee are against the common order dated 06.02.2009
of Learned Commissioner of Income Tax(Appeals)-II, Ahmedabad for the assessment years
2002-03 to 2006-07.2.     Briefly stated the facts are that the assessee is running a proprietary concern in the name
of M/s. Ganesh Security Service, which is engaged in the business of providing security services
guards to various industrial houses and other parties. A search undersection 132of the Income
Tax Act, 1961 was carried out at the residence of the assessee on 16.03.2006. During the course
of search, statement of Shri Gyansing Jitsing Chauhan, proprietor was recorded undersection
132(4)of the Act. In this statement, he stated that about 150 security guards, 12 gunmen and 3
supervisors were working with him. In addition to this, he had also deputed 212 watchmen, 22
gunmen and 8 supervisors to 46 different parties. He has also stated that he is providing guards
for emergency duties and also on various social occasions like Navratri, Marriages, etc. In his
statement, he had stated that no receipts were being issued for payments received in cash from
various parties especially for emergency duties. Only receipts by way of cheques are recorded in
the books of accounts. However, no salary register or attendance register are maintained. During
the course of search, total receipts for assessment year 2006-07 was worked out to
Rs.81,38,400/-. At the time of search, the receipt of Rs.32,00,546/- was worked out being
received through cheque. In the statement recorded, the assessee accepted the differential amount
of Rs.49,37,854/- as his unaccounted receipts not shown in the books of accounts for the2ITA Nos.1228-1232/AHD/2009

assessment year 2006-07. The alleged suppressed receipts of Rs.49,37,854/- was worked out at
60% of the total receipts. In the statement recorded undersection 132(4), the assessee also stated
that unaccounted receipts in the earlier years were to the tune of 50% of total receipts.
Accordingly the assessee declared the unaccounted income of Rs.40,00,000/-, which is
bifurcated as under :-Assessment Year       Unaccounted income (in Rs.)
                    2001-02               1,00,000/-
                    2002-03               2,00,000/-
                    2003-04               5,00,000/-
                    2004-05               7,00,000/-
                    2005-06               10,00,000/-
                    2006-07               15,00,000/-2.1.   In response to notice undersection 153A(a)of the Income Tax Act, the assessee filed the
return of income showing total income for the assessment years 2001-02 to 2006-07 as under :-Assessment Year       Income declared (in Rs.)
                    2001-02               1,63,269/-
                    2002-03               1,77,310/- including       agricultural
                                          income of Rs.60,540/-
                    2003-04               Rs.2,78,430/- including    agricultural
                                          income of Rs.58,700/-
                    2004-05               2,10,020/- including       agricultural
                                          income of Rs.65,500/-
                    2005-06               Rs.1,31,100/- including    agricultural
                                          income of Rs.55,630/-
                    2006-07               Rs.3,06,300/-2.2.   For all the assessment years, the Assessing Officer framed the assessment undersection
143(3)read withsection 153A, wherein he observed that from the statement recorded undersection 132(4), it is clear that the assessee himself has admitted that he is recording only part of
receipts in his books. No details of expenses such as payment of salary to guards and other
persons are maintained. The Assessing Officer accordingly asked the assessee to explain the
basis of disclosure of Rs.40,00,000/- and how the same was earned. In reply, the assessee made
the following submissions :-"We would like to draw your kind attention towards the fact that
               abovementioned disclosure was made purely on estimate basis. Assessee
               being an illiterate person and having no particular method/ basis for3ITA Nos.1228-1232/AHD/2009

              calculation of undisclosed income has by mistake overstated his undisclosed
              income.Answers to question No. 6 and 15 reveals following facts regarding his gross
              margin of business :-Particulars                                           Rs.
              Charges of guard (Avg.)                              2,600.00
              Less : Payment to guard (Avg.)                       2,000.00
              Gross profit (per guard)                              600.00
              Gross profit margin (%)                              23.08%.Even if it is assumed that calculations regarding number of guards calculated
              in answer to question No. 6 is correct and that they were employed through
              out the FY 2005-06, assessee's turnover for FY 2005-06 comes to
              Rs.81,38,400/-. Accordingly, suppressed turnover is worked out to be
              Rs.49,37,857/- (as per answer to question No. 16 of the statement). Gross
              profit on the suppressed turnover comes to Rs.11,39,656/- (23.08%) as
              worked out before) as against declared undisclosed income of Rs.15,00,000/-.
              It clearly suggests inaccuracy of the disclosure made during recording of
              statement.However, we would like to clarify that return of AY 2006-07 (FY 2005-06) has
              been filed by the assessee considering all the suppressed turnover on the
              actual basis and tax has been paid accordingly. Hence, no disclosure has
              been shown separately in the above said return for AY 2006-07.
              With regard to returns for AY 2001-02 to 2005-06, we have to submit that
              assessee has filed returns on the basis of actual turnover (including
              suppressed turnover) and disclosed excess profit (undisclosed income)".2.3.   After considering the aforesaid submissions, the Assessing Officer accepted the returned
income only for the assessment year 2001-02. For the assessment years 2002-03 to 2006-07, the
Assessing Officer made additions of undisclosed income on the basis of statement amounting to
Rs.1,00,431/-, Rs.5,00,000/-, Rs.6,00,000/-, Rs.10,00,000/- and Rs.15,00,000/- respectively.3.     On appeal before the Learned Commissioner of Income Tax(Appeals), the assessee
contended that most of receipts were through Bank only and all the receipts were reflected in the
Bank a/c. and as shown in the books of accounts. The figures of additional income given in the
statement undersection 132(4)were on approximate basis in the absence of any documentary
evidence. It was contended that no addition should be made on the basis of statement when there4ITA Nos.1228-1232/AHD/2009

is no evidence or material to justify these additions. For this, reliance was placed on various
decisions namely ACIT -vs.-Jorawarsingh M. Rathod 94 TTJ (Ahd.) 867, CIT -vs.- Anupkumar
94 TTJ 288 (ASR), Smt. Ranchanaben M. Shah -vs.- ACIT 83 TTJ 369, etc. It was further
submitted by the ld. counsel of the assessee that, in the statement recorded, receipt in bank
account till the date of search was of Rs.32,00,546/- but in fact total receipt in the bank were of
Rs.58,20,793/-. Hence, it is wrong to conclude that 50% of receipts were suppressed and the
declaration was based on wrong information. On this basis, it was contended that actual cash
receipt should be taken as Rs.12,65,900/- for the assessment year 2006-07 and gross profit at the
rate of 23% on it gives undisclosed income of Rs.2,91,157/- only. Similarly, for the assessment
year 2005-06 suppressed income at the rate of 23% on cash receipt of Rs.10,81,434/- gives the
suppressed income of Rs.2,48,730/- for the assessment year 2004-05. It is reasonable to have
income of Rs.1,89,488/- (23% x Rs.3,23,863/-) for the assessment year 2002-03 and 2003-04 no
addition should be made at all.4.     After considering the aforesaid submissions, in the impugned order, the Learned
Commissioner of Income Tax(Appeals) upheld the action of Assessing Officer for the detailed
reasons given in para 5 of the impugned order, which reads as under :-"5.      I have considered the facts and submissions. I do not agree with
               the appellant's view. During the search, it was found that appellant is
               suppressing receipts. The receipts from cheque were only entered in the
               books, but the cash receipts were not shown. The amount of cash receipts
               received and the resultant income from these were in the personal
               knowledge of the appellant and on that basis he worked out and admitted
               in his statementu/s. 132(4)the quantum of suppressed income for all the
               years. He even narrated the number of security guards implied, their
               salary and income from deployment of each guard, G.P. rate, etc. Hence
               at this stage the submission of the assessee that cash receipt and resultant
               income admitted in the statement is incorrect is without any evidence and
               is after thought only. The case laws relied on by the appellant is not
               applicable as in this case addition is made by the A.O. on the basis of
               statement as well as evidence. Hence, action of the A.O. is justified and
               addition is confirmed".Aggrieve by the order of Learned Commissioner of Income Tax(Appeals), the assessee is in
appeals before the Tribunal.5ITA Nos.1228-1232/AHD/20095.     At the time of hearing before us, on behalf of assessee Shri Rasesh Shah, ld. counsel
appeared and contended that the total receipts of Rs.81,38,400/- determined for the assessment
year 2006-07 undersection 132(4)was an estimated figure. In the return of income, filed after
search for assessment year 2006-07, assessee included all his receipts by way of cheque; from
1.4.2005 to 31.3.2006 which is Rs.61,40,014/-. Assessee received Rs.58,20,793/- through
cheques till the date of search for financial year 2005-06 and Rs.3,19,221/- after the date of
search till 31.3.2006. So total receipts of Rs.61,40,014/- was reflected in the audited accounts for
assessment year 2006-07. Although it was stated that assessee also received cash receipts, no
evidence was found that assessee has received any cash receipt in the course of search. Assessee,
in fact, is not receiving any receipts through cash. Confession of additional income during the
course of search and seizure and survey operation cannot be taken as per instruction of the Board
No. F. No. 286/2/2003-IT (Inv.). This instruction of Board was followed in the case of
Kailashben Manaharlal Choksi -vs.- CIT 220 CTR 138 by Hon'ble Gujarat High Court. No
evidence was collected in the course of search in support of receipts of Rs.81,38,400/-. The ld.
counsel of the assessee contended that no evidence was found indicating that assessee received
any cash for deployment of the guards for emergency duties or for regular deployment of guards.
Even in the course of assessment proceedings, no evidence was brought on record by Assessing
Officer in support of working of receipts of Rs.81,38,400/-. The ld. counsel of the assessee also
contended that no asset was found in the course of search corresponding to disclosure made by
the assessee. Even the Assessing Officer has not identified any expenditure or asset against the
disclosure.5.1.   Without prejudice above, the ld. counsel of the assessee submitted that the authorized
officer at the time of search wrongly worked out receipts of bank which actually comes to
Rs.58,20,793/- and not Rs.32,00,546/-. Considering the cheque receipt, assessee disclosed
Rs.61,40,014/- in the audited accounts for the assessment year 2006-07. The suppressed cash
receipts for the assessment year 2006-07 till the date of search comes to Rs.23,17,607/- and for
full year it comes to Rs.19,98,386/-. He contended that on this basis and considering the total
receipts as worked out by the authorized officer as per the statementu/s. 132(4)of
Rs.81,38,400/-, the ratio of cash receipts to total receipts comes to 25 : 75 or 32.54% of the
cheque receipts. The ld. counsel submitted that the total receipts cannot be taxed but only the net
profit can be taxed. Even if it is assumed that assessee has accounted all his indirect expenditure6ITA Nos.1228-1232/AHD/2009

related to suppress receipts, only the gross profit can be taxed and not the total receipts. In the
statementu/s. 132(4), the assessee clearly stated that gross profit ratio comes to 23.08% only.
The ld. counsel of the assessee further submitted that the assessee made the above submission
which has been reproduced by Assessing Officer at para 7 of the assessment order for the
assessment year 2006-07. To sum up, the ld. counsel of the assessee submitted that the Assessing
Officer be directed to re-work out the addition accordingly. Therefore, addition at 23.8% being
the gross profit ratio comes to Rs.4,61,227/- which is explained by the following table :-Particulars                               Assessment year 2006-07
            Total receipts as per statement           Rs.81,38,400/-
            recorded        undersection
            132(4).................(A)
            Receipts as per return of                 Rs.61,40,014/-
            income.....(B)
            Suppressed cash receipts [C = (A)         Rs.19,98,386/-
            - (B)]
            Ratio of suppressed cash receipts           32.54%
            to recorded receipts
            Addition to be made at 23.08% [C          Rs.4,61,227/-
            * 23.08/100]There was no bank account of assessee in AY 2002-03 as assessee opened the bank account in
Sarvodaya Sahakari Bank Ltd. on 09.10.2002 and in Surat Mercantile Cooperative Bank Ltd. on
07.03.2003 relevant to AY 2003-04. However, assessee made voluntary disclosure of
Rs.99,569/- in return filed undersection 153A.According to ld. counsel of the assessee, the disclosed the cash receipts in his books of accounts
for the assessment years 2003-04 and 2004-05 and it is required to be set off against the cash
receipts which may be estimated at ratio of 32.54% of the cheque receipts. Accordingly, no
addition is worked out for assessment year 2003-04. It was submitted that for assessment year
2004-05, assessee declared additional income of Rs.1,00,000/- in the return of income filed after
search, so it is also required to be set off. Addition of Rs.79,261/- and Rs.2,43,656/- can be
worked out for assessment year 2004-05 and 2005-06 as per the following table :-7ITA Nos.1228-1232/AHD/2009
     Sr. No.     Particulars        AY 2002-03        AY 2003-04     AY 2004-05      AY 2005-06
     A           Cheque receipts                      10,23,229/-    24,50,795/-     32,44,302/-in the books
     B           Cash receipts in   19,88,591/-       10,17,426/-    20,794/-
                 books
     C           Cash receipts as                     3,32,959/-     7,97,489/-      10,55,696/-
                 per AY 2006-07
                 @ 32.54%
     D           Differential                                        7,76,695/-      10,55,696/-
                 suppressed cash
                 receipts
     E           Suppressed                                          1,79,261/-      2,43,655/-
                 profit on cash
                 receipts      @
                 23.08%
     F           Additional                                          1,00,000/-
                 income declared
                 in return filed
                 u/s. 153A
     G           Addition to be NIL                   NIL            79,261/-        2,43,655/-
                 madeIn view of the above, it was submitted that no addition should be made in any assessment year
because the disclosure made by the assessee at the time of search was not backed by any
evidence and no asset or expenditure was identified against disclosure made. Without prejudice
to above, the ld. counsel of the assessee submitted that if at all any addition is required to be
made, that should be Rs.79,260/- for A.Y. 2004-05, Rs.2,43,655/- for A.Y. 2005-06 and
Rs.4,61,227/- for A.Y. 2006-07.6.       On the other hand, Shri Ashok Bal, CIT, D.R. appearing on behalf of the Revenue
vehemently supported the order of learned Commissioner of Income Tax(Appeals). The ld. D.R.
pointed out that the assessee himself voluntarily gave the statement undersection 132(4),
wherein he furnished the various details and disclosed the additional income. The assessee
himself narrated the number of Security Guards, their salary and income earned from
deployment of each Guard. The contention that income disclosed was without any basis, at this
stage is of no consequence because income earned is within the knowledge of the assessee and it
was disclosed by him, therefore, the ld. D.R. pointed out that the view taken by the Learned
Commissioner of Income Tax(Appeals) be upheld.8ITA Nos.1228-1232/AHD/20097.     Having heard both the sides, we have carefully gone through the orders of authorities
below. Prima facie, it appears that for all the assessment years under appeals, the Learned
Commissioner of Income Tax(Appeals) confirmed the addition made by the Assessing Officer
only on the basis of statement recorded during the course of search. Admittedly, during the
course of search, the search party made no attempt to find out how the assessee spent/ invested or
utilized the undisclosed amount of Rs.40 lacs in various assessment years. This disclosure made
by the assessee at the time of search was neither back by evidence nor the search party made an
attempt to find out expenditure or assets created against disclosure made by the assessee. During
the course of hearing, ld. counsel of the assessee filed details of gross receipts. It is true that an
assessee who made a voluntary declaration on oath cannot be permitted to turn around later and
denied truth of said declaration. But at the same, it cannot be ignored that the assessee is an
illiterate person. Admission made by him is without any basis or any conclusive evidence. From
the statement recorded one thing is clear that assessee was not recording the entire receipts as
well as expenditure in the books of accounts. Therefore, keeping this in mind, let us examine the
facts in each assessment year.Assessment Year : 2002-03 : In the previous year relevant to the assessment year under appeal,
the assessee has not having Bank account, as stated earlier, both the Bank accounts opened by
the assessee in the next assessment year. According to assessee, all these receipts amounting to
Rs.19,88,591/- in this assessment year were in cash and are shown in the books of accounts. In
the statement recorded undersection 132(4), for this assessment year, the assessee declared
unaccounted income of Rs.2,00,000/-. As against this, income declared by the assessee in this
assessment year is Rs.1,77,310/-, which includes agricultural income of Rs.60,540/-. Prima facie
it appears that income declared by the assessee for this assessment year is fair and reasonable.
Therefore, no further addition is called for. Hence, the addition of Rs.1,00,431/- made is hereby
deleted.Assessment Year : 2003-04 : For this assessment year, in the books of accounts the assessee has
declared cheque receipts of Rs.10,23,229/- and cash receipts of Rs.10,17,426/-. The cash receipt
estimated as per assessment year 2006-07 are @ 32.54%, which works out to Rs.3,32,959/-. For
this assessment year, the assessment has declared total income of Rs.2,78,430/- including
agricultural income of Rs.58,700/-. The unaccounted income declared at the time of search for9ITA Nos.1228-1232/AHD/2009

this assessment year was Rs.5 lakhs. Keeping in view, the cash and cheque receipts declared by
the assessee in the books of accounts, we are of the view that no further addition for this
assessment year is called for. Therefore, the addition of Rs.5 lakhs made by the Assessing
Officer in the assessment order is deleted.Assessment Year : 2004-05 : In this assessment year, in the return of income, the assessee has
declared total income of Rs.2,10,020/- including agricultural income of Rs.65,500/-. At the time
of search, undisclosed income admitted by the assessee for this assessment year is Rs.7 lakhs.
However, the Assessing Officer made the addition of Rs.6 lakhs because according to him, the
assessee has already declared additional income of Rs.1 lakh in the return of income filed in
response to notice undersection 153A. In the books of accounts, the assesee has already
reflected the cheque receipts of Rs.24,50,795/- and cash receipts of Rs.20,794/-. Further cash
receipt (as per assessment year 2006-07) works out at Rs.7,97,489/- @ 32.54%. On this basis, the
assessee has computed its income. According to assessee, for this year further addition should be
restricted to Rs.79,260/-. It is pertinent to note that for this assessment year, the assessee made a
disclosure of Rs.7 lacs. Out of this, Rs.1 lac has already been declared in the return of income.
As per the assessee's working, further addition to be made is only Rs.79,260/-. Keeping in view
the totality of the facts and circumstances, we are of the view that it will meet the end of justice,
if further addition is restricted to Rs.1,00,000/- as against Rs.6,00,000/- made by the Assessing
Officer.Assessment Year : 2005-06 : In the books of accounts, the assessee has reflected receipts by
way of cheque amounting to Rs.32,44,392/-. The cash receipt estimated by the Assessing Officer
as per assessment year 2006-07 @ 32.54%, works out to Rs.10,65,696/-. In this manner, the
assessee has worked out the additional undisclosed income of Rs.2,43,655/- as against
Rs.10,00,000/- declared at the time of search. Looking to the facts and circumstances, we are of
the opinion that it will meet the end of justice if further addition to be made for this assessment
year is restricted to Rs.3,00,000/-.Assessment Year : 2006-07 : For this assessment year, the assessee has filed the return of
income of Rs.3,06,300/-. The Assessing Officer made the addition of Rs.15,00,000/-, which is
confirmed by the Learned Commissioner of Income Tax(Appeals). As per the assessee's
working (supra), the undisclosed income for this assessment year should be Rs.4,61,227/-.10ITA Nos.1228-1232/AHD/2009

Looking to the working submitted by the assessee and the fact that the search party failed to
point out that how much undisclosed income was invested/ utilized, in our opinion, it will meet
the end of justice if the addition for this assessment year is restricted ton Rs.5,00,000/-.8.     To sum up, the additions of Rs.2,00,000/- and Rs.5,00,000/- made in the assessment years
2002-03 and 2003-04 respectively are deleted. The Assessing Officer is directed to restrict the
addition to the extent of Rs.1,00,000/-, Rs.3,00,000/- and Rs.5,00,000/- for the assessment years
2004-05, 2005-06 and 2006-07 respectively.9.     In the result, the appeals filed by the assessee for the assessment years 2002-03 and 2003-
04 are allowed and the appeals for the assessment years 2004-05, 2005-06 and 2006-07 are partly
allowed.                 .The Order was pronounced in the Court on 23.07.2010
                     Sd/-                                                     Sd/-
                 (D.C. Agrawal)                                           (T.K. Sharma)
               Accountant Member                                         Judicial Member

               DATED : 23/ 07 / 2010

              Copy of the order is forwarded to :
       1) The Assessee
       (2) The Department.3) CIT(A) concerned, (4) CIT concerned, (5) D.R., ITAT, Ahmedabad.True Copy

                                                                       By Order

                                                           Deputy Registrar, ITAT, Ahmedabad

Laha/Sr.P.S.