TaxTMI 
TaxTMI 
2015 (7) TMI 47
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....13 for 2007-08 Assessment year as it was a common stand of the parties before the Bench that the arguments made therein would fully apply to the issues arising in ITA No.-2926/Del/2013 also. Accordingly in view of the above stated factual position the facts relatable to 2007-08 Assessment year are being referred to wherein the grounds raised by the Revenue in ITA No.2453/Del/2013 read as under:- 1. "On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 1,47,78,159/- out of total addition of Rs. 2,68,11,454/- made by the Assessing Officer on account of undisclosed income out of regular books of account of the assessee. 2. The order of the CIT(A) is erroneous and is not tenable on facts and in law. 3. The appellant craves leaves to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 2. The Ld. AR appearing on behalf of the assessee submitted that although qua the re-opening the assessee has raised Ground Nos.-1-3 in 2007-08 Assessment year however on account of the instructions received from his client he would be confining his arguments only on the merit of the a....
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.... trading account made by AO. 10. Without prejudice to the above and in the alternative the learned CIT(A) has erred both on facts and in law in making an addition of Rs. 99,73,187 on account of minimum capital required to carry on the business, without there being any basis for the same. 11. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in applying debtors to sales ratio of 35.86% even without ascertaining the nature of the transactions for computing the capital requirement. 12. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in taking aggregate of sale of two years while computing capital requirement of Rs. 99,73,187/- for the year under consideration. 13. That the appellant craves leave to add, amend or alter any of the grounds of appeal." 3. The relevant facts of the case are that a search and seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as "Act" ) was carried out by the Investigation Wing on 26.02.2009 on Shri Ram Hari Ram Group of cases. It is a matter of record that the case of the present assessee amongst others was also cover....
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.... "the ROC" and the official income tax site) submitted the assessment details of M/s Smridhi Sponge as well as list and names and addresses of its Directors including the mailing address of M/s Smridhi Sponge. 3.3. Taking note thereof, the AO accordingly issued notice u/s 133(6) of the Act at the given address of M/s Smridhi Sponge requiring the said concern to furnish copy of the ledger account for the business carried out with M/s Delco India Pvt. Ltd. The notice was received back unserved with the remark "left". In view of these facts, the AO considering that the entries on the pages which the assessee was required to explain and co-relate with its books of accounts remained unverifiable and unexplained, he concluded that in the absence of any verification the assessee company had relations with M/s Smridhi Sponge and was dealing in business with it out of its books of account. Summary of entries/transactions on page 11 -14 of the seized documents was extracted by him in para 6.2 of the assessment order and addition was made as undisclosed income u/s 68 in view of the following facts:- "Page no. 14 & 13 contains transactions of purchases and payment made to Smridhi Sponge ....
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....been recorded at pages 8 - 17 of the impugned order wherein the CIT(A) while upholding the G.P. addition of Rs. 20,60,108/- gave part relief to the assessee in terms of para 7.15 to 7.18 in the following manner:- 7.15 "I, therefore, upheld the gross profit addition of Rs. 20,60,108, however I have my own reservations with the AD's action of adding the entire sale proceeds as income outside the books of accounts of Rs. 2,78,11,454 and giving benefit of just Rs. 10,00,000 on account of purchases. When any person makes both, sales and purchases outside the books of accounts (as is the case now), there is always some money locked up in debtors and he does require some minimum amount with himself, to carry on the business outside the books of accounts, because business is a continuous activity and all the purchases and sales does not happens on one single day. Therefore when documents suggests that an assessee has made sales and purchases both outside the books, than in that case, in my humble view by applying the accounting concept of peak theory or telescoping, two additions are called for i.e. (a) one on account of gross profit earned and (b) minimum capital requireme....
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....side the books i.e. Capital determined x Sales for Assessment Year 2007-08 as per para 7.17 Total sales as per impounded documents 1,69,14,743 x 2,78,11,454 Rs.99,73,187 4,71,68,832 &nb....
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.... Rs.83,75,435 The appellant thus gets a relief of Rs. 1,47,78,159 (Rs.2,68,11,454 minus....
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....nbsp; Payment made of Rs. 95,96,303/- 6.1. In reply to the said query, it was submitted the assessee filed a detailed reply dated 26.11.2010 denying any transactions with the said concern. The reply it was stated is at pages 57-62. These assertions, it was submitted were supported by documents at pages 63 to 65 from the ROC site and the income tax official site. These evidences given to the AO, it was submitted in appeal were further supplemented by moving a petition under Rule 46 A dated 29.10.2012 before the CIT(A). However to revert back to the evidence before the AO, attention was invited to the following submissions dated 26.11.2010 before the AO:- - "That assessee company has never undertaken any transaction with M/s Smridhi Sponge - That assessee company is not aware of where about of M/s Smridhi Sponge. - That details found during survey might be of some one who visited the assessee's office and used the assessee's computer for mail of the account found or might have left the some one unknowingly." 6.2. Attention was further invited to the very same page i.e paper Book page 61 so a....
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....; ....
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....de is 2894. Following two cheques have been encashed from above account of the M/s.Galaxy Exports (P) Ltd -4/12/07 MR.JUN ch.No.177699 Rs.2500000/ - 9/12/07 MR.JUN ch.No.186001 Rs.1500000/- The amount of above cheques are appearing in loose sheet found during search in respect of M/s. Smridhi Sponge." &n....
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....Simridhi Sponge and also provided to AO following particulars of M/s Smirdhi Spong. * Particulars of M/s Simridhi sponge as per the official records of the registrar of companies. Particulars include address of the company, date of incorporation etc. * List of directors of the company along with their address. * PAN of M/s Simridhi Sponge and jurisdiction of assessing officer as available in official records of I.Tax Site. * Particulars of M/s Galaxy Exports (P) Ltd. and name of the Bankers, its address and account no."M/s Galaxy" has issued two cheques of Rs. 25 lacs and Rs. 15 lacs respectly to M/s Simridhi Sponge and its details has been given at page no 11 of Annexure A-1 of seized documents. * Thus assessee on one hand categorically dismissed that it never had any dealing with M/s Simridhi sponge ans also filed affidavit to confirm of having no relationship with M/s Simridhi Sponge and one other hand also provided sufficient details regarding where about of M/s Simridhi Sponge with evidence. However, AO never dispose of the objection raised by the assessee regarding having any transaction with M/s Simridhi Sponge. Thus AO has failed and here to the a....
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....sp; (emphasis provided) 6.5. In the above background, it was his submission that it is surprising that despite these facts, the AO insists that the assessee is answerable for explaining the transactions found on its computer with M/s Smridhi Sponge. The assessee's answer has all along been on record as no transactions were ever done by the assessee with the said concern who was a stranger to the assessee. It was his submission that the assessee has done what it could have done best in the circumstances where he is called upon to explain the transactions of a stranger. It was submitted that the assessee has never said that the documents w....
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....d have been done by the department it was submitted that instead of carrying the enquiry to its logical conclusion the authorities have instead viewed the efforts of the assessee with suspicion and forget about lauding the assessee have instead caste aspersions on the efforts of the assessee who out of the compulsions and necessities of needing to save itself from the consequences of the additions on unrelated facts has all along given relevant facts searched diligently on the official government sites and made available to the department. It was his submission that it is presumed that the search and seizure efforts of the department are for the purposes of unearthing undisclosed income, thus where as per the seized documents transactions found from the assessee's premises transactions with the said concern is denied the denial remains unrebutted the assessee on the other hand demonstrates the connections of M/s Smridhi Sponge with M/s Galaxy why is there a reluctance with the department to proceed against them. The payments therein it was submitted admittedly were made in cheques and also by cash by various parties, particulars of two of them are available with the Revenue instead....
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.... referring to Paper Book page 69, these efforts did not succeed as the assessee being a total stranger to M/s Smridhi Sponge the said concern refused to oblige. The submissions are extracted from the said page hereunder:- "It is pertinent to note that assessee efford to collect evidence etc has failed as M/s. Simridhi Sponge has denied to response to the request of the assessee's representative who visited them at Jamshedpur office after receipt of the assessment order." 6.7. In this background, petition to file fresh evidence before the CIT(A) was moved, copy of the same it was stated is at page Nos.-70-75 of the Paper Book filed. The assessee assailed the repeated adamancy of the AO before the CIT(A) for not carrying out the due and necessary enquiries in the manner which he was supposed to make. The following submission before the CIT(A) extracted from page 70 of the Paper Book relied upon are extracted hereunder for readyreference:- "That AO issued notice u/s 133(6) at the given address of M/s Smridhi Sponge at Calcutta almost after a year (after providing him such details) and that too at the address of the company at Calcutta, however, no notice appeared to....
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....s AO never informed the assessee about non-compliance of notice u/s 133(6) of I.T. Act served on M/s Smridhi Sponge Ltd. The assessee provided following address which was available in ROC site, as on 12.09.2010 (Assessee filed print of 'Company/LLP Master Data down loaded from ROC official site). Copy enclosed. Smridhi Sponge Ltd. 23 Netaji Subhash Road, Kolkata However, on 25.10.12 following address of M/s Smridhi Sponge Ltd. is available at ROC site. Room No. 3AB, 3rd Floor, Bishnu Residency 193, Netaji Subhash Road Kolkata, West Bengal-700040 It is quite possible that alleged company changed the address during the period from 13.09.2010 to before the date of service of notice u/s 133(6) of I.T. Act.  ....
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....ication under Rules 46A for A.Y. 2008-09)' that name of M/s Galaxy Exports Pvt. Ltd. is appearing with outstanding balance of Rs. 122,04,722/-. There is every possibility that M/s Galaxy mentioned in seized loose paper at Page No.11 is the same firm as mentioned in the list of sundry debtors as on 31.3.2008 viz; Galaxy exports Pvt. Ltd. That as per director's report for financial year 2006-07 and 2007-08 address of the company is the same which assessee has provided to AO viz; 23, Netaji Subhash Road, Kolkata. " 6.10. Inviting attention to the Index of the Paper Book filed, it was submitted that the assessee in the form of additional evidence has placed the following details and evidence before the ACIT:- 11. "Copy of Application of Additional Evidence filed before ACIT dated 29.10.2012 Page 70-76 - Form 23AC of Samridhi Sponge Ltd. Page-77-82 - Copy of Balance Sheet of Samridhi Sponge Ltd. for the year ended 31st March 2007 Page 83-102 - Copy of Form 23ACA of Samridhi Sponge Lt....
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....bsp; Page-137 6.12. Taking us through the documents filed and co-related with the seized documents it was his submission that where on facts the assessee repeatedly states that it had no interactions with M/s Smridhi Sponge and the repeated statement is supported by an affidavit, the nature of work of the two concerns being entirely different has been addressed where the seized documents demonstrate that M/s Smridhi Sponge had interactions with M/s Galaxy Exports whose complete particulars like that of Smridhi Spogne are filed alongwith bank details, PAN details etc why does the Revenue it was questioned not want to look into these unimpeachable evidences. Referring to the detailed evidences on record it was his submission that the Revenue instead of making due and necessary enquiries has chosen to pick on a soft target that is the assessee who is connected to a jewellers business as the assessment order itself demonstrates that the search was primarily conducted on the Sri Ram Hari Ram Group of cases and one of the Directors of the assessee is related to the said Group. 6.13. Inviting attention to the judgements relied upon by the CIT(A), i....
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....o notice issued u/s 133(6) of the Income Tax Act. Letters sent to Jamshedpur Address and New Kolkata Address as well by the Ld. AO while matter was on remand. However letters were again unserved. Fact that the Letter dated 11.10.2012 was received was denied by Ld. CIT and alleged that appellant wanted to drag and delay the issue. 1. No letter is sent to the bankers of Smridhi Sponge Ltd. 2. No letter has been sent to Galaxy Exports. 3. Assessee said that Letter dated 11.10.2012 has been received. 4. Assessee has never said that this reply had been received on 11.10.2012. (i) CIT vs Babu Mohan lal AryaSmarak Educational Trust (High Court of Allahabad) ITA No.-303 of 2013; (ii) ACIT vs Vatika Greenfiled (P.) Ltd. ITAT Delhi [2009] 121 TTJ 208 Delhi; (iii) ACIT vs Dr. Kamla Prasad Singh 3 ITR 533 [2010] ITAT Patna Bench; (iv) CIT Panchkula vs M/s Khosla Ice & General Mills, Punjab & Haryana High Court 2013 (1) TMI 451; (v) ACIT vs Buldana Urban Co-op Creidt Society Ltd. 23 ITR (Trib) 411; and (vi) Alliance Hotels vs ACIT 142 ITD 270 (Mumbai Tribunal. 6.14. Referring to the seized documents it was submitted that a perusal....
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....ge Ltd. repeatedly giving different addresses, it demonstrates the falsity of the pleadings of the assessee in stating that is has no interaction with the said concern. In the face of the various details of these concerns given by the assessee, both the authorities it was submitted have rightly rejected the false claim of the assessee and held that the assessee on facts had interactions with M/s Smridhi Sponge Ltd. which are not recorded in its books of accounts. These arguments of the assessee it was submitted have been strongly deprecated by the CIT(A) who has rightly dis-believed the confirmation belatedly relied upon stated to be from M/s Smridhi Sponge Ltd., copy filed at Paper Book page 136 relied upon by the assessee dated 11.10.2012. Referring to the impugned order it was submitted that the assessee's version has rightly been rejected and has been fully addressed by the CIT(A) in para 7.3 & 7.4 of his order so as to hold that the assessee is not disclosing the true facts in para 7.5. Heavy reliance was placed on these findings in para 7.5. For ready-reference, these are reproduced hereunder:- 7.5 "The computer print outs of documents found and impounded during the survey....
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....s. Attention was invited to Paper Book page 128 which addresses the Remand Report (at pages 125 to 127) of the AO where he reports that the notices sent to the new address also came back unserved from the Kolkata address with the comment "left" and Jamshedpur as "addressee left". It was submitted that these comment itself prove that the said concern did exist at these addresses. Addressing the reply filed by the assessee at page 128 onwards it was stated that the information provided was as per the ROC records and there is no change in any particular of the M/s Smridhi Sponge Ltd. in the public domain demonstrated by the downloaded print outs from the ROC site. The addresses of Kolkata and Jamshedpur Main office and factory office respectively continued to remain the same on the site. Addressing the information provided as confirmation of the assessee's version by the Director of M/s Smridhi Sponge Ltd. dated 11.10.2012 it was stated the CIT(A has viewed this too with suspicion. Inviting attention to Paper Book pages 130 and 131, it was submitted would bring out the following facts which were brought to the notice of the CIT(A) and were again relied upon heavily on behalf of the as....
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.... Yours faithfully, &....
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....bsp; Director" The assessee is making all efforts to pursue M/s Smridhi Sponge Ltd to sent the above letter directly to the depa....
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....has been brought on record till date. Accordingly in the facts of the present case, it was his submission that the addition has wrongly been made in the hands of the assessee and deserves to be deleted. 9. Since the arguments of the CIT DR have also been filed by way of written submissions which also addresses the issue of re-opening which need not be addressed as the issue has not been agitated before us. Accordingly we refer to Kahan Udyog v Commissioner of Income Tax [2013] 38 taxmann.com 261 (Delhi) relied upon by the Revenue wherein addition u/s 69C for unrecorded unexplained expenditure had been made. Reliance was also placed on Hiren Vasantlal Shah v. Assistant Commissioner of Income Tax [2012] 19 taxmann.com.241 (Guj.) and Commissioner of Income-tax v. Sonal Constructions 28 taxmann.com 127 (Delhi) for the proposition that the seized documents constitute undisclosed income of the assessee in terms of section 292C of the Act so as to justify the addition made. 9.2. Further relying upon the principle laid down by the Apex Court in the case of Dhakeshawari Cotton Mills vs CIT 26 ITR 775 (SC) and Homi J Gheesta vs CIT 41 ITR 135 (SC) it was submitted that there was no nee....
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....fic pages 11-14 of Annexure A-1 which showed that they pertained to M/s Smridhi Sponge Ltd. The assessee accordingly was required by the AO to explain the entries made therein as a presumption was drawn that the seized documents pertained to the assessee. The copy of the detailed notice issued u/s 143(2) is appearing at pages 57 to 62. The relevant query raised has been reproduced in the earlier part of this order. The assessee as per record is found to have stated vide reply dated 26.11.2010 that these documents do not pertain to the assessee. The statement made as per record has also been supported by an affidavit. These facts are found recorded in the assessment order itself. Alongwith the denial supported by an affidavit the assessee as per its reply dated 26.11.2010 is also found to have provided the assessment details of the said company along with the names of the Directors and the mailing address of the said concern. The detailed reply on record has also been reproduced in the earlier part of this order and stands unrebutted on record. These facts are also evidenced from para 6 of the assessment order and reproduced hereunder:- 6. "During the course of survey, loose pape....
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.... of Form 23AC of M/s Smridhi Sponge Ltd. which is the Form in which the balance sheet is filed before the ROC for the said concern of the year ended 31.03.2007. On the basis of the same, it was claimed that M/s SMridhi Sponge Ltd. was a genuine business concern in existence despite the claim that notices returned unserved. The address was stated to be correct at page 77 in the first address given to the AO these facts were downloaded from the ROC site. The notice returned unserved presumably because notice was sent at the fag end of the assessment proceedings as per submissions of the assessee before the CIT(A), reproduced in the earlier part of this order. The copies of Directors Report, the Auditors's Report; Copy of form 23ACA of M/s Smridhi Sponge Ltd.; copy of Form 20B along with annual return filed before the ROC disclosing its authorized share capital etc. were also filed; details of registered office and the details of authorized share capital of M/s Smridhi Sponge Ltd. and M/s Galaxy Exports (P). Ltd. as per record at pages 70 to 123 were also filed. The record shows that the CIT(A) confronted the said evidence to the AO who as per record issued notice u/s 133(6) to the ch....
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....ain came with a different story on 13.02.2013 that they have contacted the director of Smridhi Sponge and through one iron and steel broker they have procured a letter dated 11.10.2012 from Smridhi Sponge, in which the director of Smridhi Sponge have stated that Smridhi Sponge has no dealing with the appellant company." The above submission of the appellant cannot be relied upon and it appears that the appellant wants to delay and unnecessary drag the issue. If the appellant had received a letter dated 11.10.2012 from the director why the same was informed now on 13.01.2013, and was not attached with, when the application under Rule 46A was filed at the appellate stage on 22.10.2012, when he provided the new address of Smridhi Sponge at Jamshedpur and the copy of Rule 46A application was filed with the AD and AD was requested to make the inquires with the Smridhi Sponge at their new address at Jamshedpur. 7.4 The so called alleged confirmations letter dated 11.10.2012 having procured from the director of Smridhi Sponge and not filed with the undersigned with the Rule 46A application on 29.10.2012 and even on any of the subsequent dates of hearings viz. 12.12.2012, 14.01.203, ....
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.... the Revenue. The said finding has been challenged by the assessee. 10.4. In the context of the above facts on record, we find that where we have called upon to consider the provisions of section 292C of the Act, it is appropriate to first set out the specific provision:- 292C. (1) "Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, t....
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....nbsp; WBG/W/113/4 5. Directors Particulars Particulars of Directors - Copy Of the extracts taken &nbs....
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....found and will submitted the same." ....
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....r law is required to be confronted and the documents as per record have been confronted. Whether the onus placed upon the assessee in a given set of facts is discharged or not has to be seen from the replies of the assessee based on facts. However, the law is well settled that the presumption is rebuttable. In the facts of the present case, the assessee has denied having any transactions with M/s Smridhi Sponge and has also denied consequently the contents of the seized document as relatable to it; the denial as per the assessment order is also on an affidavit; the particulars available in the public domain procured through the internet searches from the ROC and the official income tax sites as per print outs of the downloads are relied upon. The fact that these were unimpeachable third party evidences that too from the official government sites goes without saying. In these facts, merely sending notices to the addresses provided on the ROC site cannot be said to be rebutting the evidence on record namely that M/s Smridhi Sponge, assessed to tax in a specific jurisdiction in Kolkata manufacturing M.S.Ingot and Sponge Iron, having specific address as per ROC site receiving payments ....
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....ced to a farce. The repeated inactions speak louder than the half-hearted actions taken. We are of the view that as far as the assessee is concerned the onus to address the seized documents qua which a statutory presumption has been drawn stands fully discharged. 10.7. In view of the above, detailed reasoning in the peculiar facts on record and our reasoning thereon having considered the statutory provision and the judgement relied upon by the Revenue, we find that the ground nos.4 to 8 raised by the assessee have to be allowed. The onus placed upon the assessee is a rebuttable onus and on facts the same has been discharged. The onus thus having shifted to the department castes a duty upon the Revenue to act upon the information made available to them and take action thereon. As far as the assessee is concerned, the income has wrongly been assessed in its hands. There is nothing in the seized documents or anywhere also on record to show that the assessee was dealing in undisclosed transaction with M/s Smridhi Sponge. The judgements relied upon by the tax authorities and the parties before the Bench proceed on facts peculiar to their own as such do not require a detailed mention.....