AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 936
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....7-08 97,121 2008-09 11,91,321 2. Brief facts of the case are that, assessee is a partner in various concerns of Kothari Group, which is mainly engaged in the business of chemicals and other allied products. For all the assessment years in question, the assessee had filed its return of income u/s 139(1), that is on respective due dates. A search and seizure action was carried out in the case of a different person, Shri Jitendra Doshi and his associates / concerns on 26.07.2007. During the course of such search & seizure action, it was found that, Shri Jitendra Doshi and his group was engaged in issuing accommodation bills to various parties, including the assessee and his group concerns. In pursuance of such an information and material, summon u/s 131 was issued to the assessee by the Investigation Wing and also simultaneous Survey action u/s 133A was carried out at the business premises of Kothari Trading Company and other concerns. During the course of survey, Shri Bharat Kothari, brother of the assessee and one of the partners of Kothari Group made a statement and submitted a letter dated 26.12.2007, wherein it was categorically admitted that the assessee and his grou....
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....he income offered by the assessee was subsumed in the GP addition. 3. In the first appeal, the Ld. CIT(A) after detailed discussion, held that 2% of the GP rate on grey market purchases would meet the end of justice. However, from such an addition, he did not give telescopic effect of peak credit of investment and confirmed the disclosure of Rs. 2,14,52,862/- on account of peak investment on grey market purchases. In other words, the Ld. CIT(A), firstly, partly confirmed the addition on account of GP rate of 2% on alleged bogus purchases, and secondly, restored the peak investment as declared by the assessee. Since, there was no GP addition made by the AO in assessment year 2002-03, therefore, only the peak investment offered by the assessee at Rs. 22,77,801/- stood confirmed. However, the Ld. CIT(A) vide para 3.2.8 made very important observation after considering all the facts, which are very relevant :- "The appellant's group concerns has regularly maintained and tax audited its books of accounts and no irregularity is pointed in the assessment. The requisite details of purchases are furnished. The relevant materials showing details of purchase of materials and its use in ....
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....he extra profit generated was used for the purpose of the investment for buying material/goods in the grey market. He submits that the A.O. himself has admitted this factual position and hence, has given the benefit of telescoping to the assessees and on the same line, if the GP addition is sustained then to that extent the peak amount may be reduced. 20 In our opinion, we have to accept alternate plea of the assessees as admittedly it is also accepted by the A.O. that profit generated from grey market transactions is used in further transactions in grey market for making purchases. We, therefore, allow alternate plea of the assesses and direct the A.O. that to the extent of 2% addition towards grey market transactions, benefit of telescoping or set off should be given in immediate next year from the peak of amounts declared by these assessees. For example, addition of 2% of profit/benefit towards grey market transactions sustained in A.Y. 2002-03, should be set off in immediate next A.Y. 2003-04 from peak of amounts offered by the assessees and like wise in all other years. Accordingly, ground no.2 in all assesses' appeals is partly allowed". Accordingly, addition sustained fr....
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....general principle that no penalty can be levied where income is assessed on estimate basis and in support of the same, he referred to various judicial authorities in para 10.5 of the order. 8. Before us, Ld. Counsel, Shri Vijay Mehta submitted that assessee has reflected all purchases in the books of accounts but instead of making from Party "A" it has made from Party "B". In assessee's line of trade, identity of suppliers and customers are not disclosed because they mostly sell in grey, i.e. in cash therefore, the assessee was required to procure the goods from grey market and thereafter same was regularized by taking accommodation bills. Further, the assessee has offered negative peak of investment which was not based on any evidence albeit was taxed on various assumptions, like assessee did not had any credit period and the cash payments were made on the same day and other factors which are otherwise not correct. The entire declaration was made to buy peace and was on voluntary basis without any iota of evidence found at the time of survey that assessee has made any undisclosed cash investment for purchases. Further, the addition has been sustained from the stage of the Tribuna....
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..... We have heard the rival contentions, perused the relevant material on record and also the finding given in the impugned orders. The assessee and his group concerns were engaged mostly in the business of trading in chemicals. In the course of search and seizure action in the case of Jitendra Joshi Group, it was gathered that assessee and his group concerns were procuring accommodation bills for the purchase of chemicals/materials. The modus operandi being that, assessee used to purchase materials in cash from the grey market from various suppliers and to regularize such purchases in the books of account, the assessee used to procure accommodation purchase bills from Jitendra Doshi Group by paying the purchase amount through account payee cheques. In turn, Jitendra Doshi and his group concerns pay back the amount in cash to the assessee which again was used to make the payments for purchases. When confronted with such an information and simultaneous survey action, the assessee offered for surrendering of additional income in form of cash investment after working out the peak investment in respect of purchases made from the grey market for each year, the details of which have been i....
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.... the assessee was found to be engaged in making cash purchases of chemicals and materials from the grey market and to regularize the same, he was involved in getting the accommodation bills from Jitendra Doshi Group. It is also true that such modus operandi of regularizing cash purchase, would not have surfaced, had there not been any search or survey action. But it is equally borne out from the record, that nothing was found that assessee was making the purchases from the sources outside the books of account. At the time of surrendering the peak investment, the assessee vide letter dated 11.03.2008 had stated as under : "I would like to mention here that to keep the identity of our suppliers and our customers both, secret, we need to procure the goods from grey market and thereafter the same was regularized by taking accommodation bill from Shri Jitendra Doshi and his group. We had from time to time made cheque payment to Shri Jitendra Doshi and his concerns and in return we had received cash from him which was utilized for making the purchases. Further, there was substantial discounts if the goods were purchased in cash and the above system was followed since many years due to t....
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....side. Even though the assessee may have surrendered the peak investment but such a peak investment was not corroborated by any factual evidence or material that assessee has introduced cash outside the books of accounts for making the purchases. The assessee's explanation as given in the penalty proceedings before the AO as well as before the CIT(A) stands unrebutted. Here the penalty has been levied mainly on the ground that assessee has not offered the peak investment voluntarily albeit only when he was cornered. This factum may have great probative value for initiation of penalty proceedings or arriving at a satisfaction, but that alone is not a conclusive fact to levy the penalty. Presumption as cast upon the assessee under Explanation 1 is a rebuttable presumption and if such a onus upon the assessee has been rebutted with proper explanation and facts, then no penalty can be levied, without any material evidence to controvert the assessee's explanation or facts. Such material facts which raises the presumption in favour of the assessee are that, firstly, the books of account and trading result for AY 2002- 03 has been accepted by the AO inasmuch as no defect whatsoever has bee....