TaxTMI 
TaxTMI 
2017 (11) TMI 625
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....tinental Foods Ltd.) 3. This appeal by the assessee has been directed against the order of LD.CIT(A)-V, Ludhiana dated 28.12.2016 for A.Y. 2013-14. 3.1. Briefly the facts of the case are that the return of income was filed on 31.03.2015 at income of Rs. 35,220/-. The case was selected for scrutiny assessment and the assessee put in appearance before the AO through Counsel and submitted replies and details which were asked for from time to time. 4. The assessee company is engaged in trading of foodgrains items namely paddy and rice. During the year, the assessee was the licensed member appointed by NSEL to deal in paddy at NSEL platform. NSEL was a platform provided to enable buyers and sellers to transact on spot against the actual delivery of the goods through the licensed members appointed by NSEL. In this case, the assessee was appointed as a Licensed member to deal in paddy. For this purpose, a settlement account of assessee is maintained by NSEL with a designated Bank in which the amount of net proceeds are credited to settlement account. In the case of the assessee settlement account was opened with HDFC Bank, Feroze Gandhi Market, Ludhiana and as per the settlement acc....
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....orm by other group concerns, such name has been mentioned. In the list of sales, there are Government undertaking as well. Thus, no adverse view be drawn and copies of account of all five parties have already been filed to indicate that there are no outstanding as on 31.02.2013. 8. The AO considering the reply of the assessee, noted that copies of the accounts of the aforesaid parties inter se i.e. NSEL with other group companies of the assessee company have not been filed to show the transactions and payment inter se. The assessee was, therefore, asked to file copies of the accounts of all the group companies having transactions with NSEL. The AO noted that the copies of the accounts of the group concern have not been filed. 9. The AO again asked for the explanation of the assessee. The written submission of the assessee is reproduced in the assessment order in which the assessee briefly explained that group companies of the assessee were Members of NSEL upto 31.03.2013 and at times, the membership card of one company was used by other companies for making the transactions at NSEL platform and such transactions were not made with NSEL but with other parties. This modus opera....
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....es with their copies of the accounts. It was pointed out that NSEL is a platform provided for spot purchase and sale of goods between actual purchasers and sellers and not between NSEL members. The AO also called for the copy of the account of M/s. MMTC with assessee but M/s. MMTC could not produce transport bilti either at the time of purchases or sales. At NSEL platform actual delivery of good is must. It proves only sham transaction of purchase and sale were taking place without actual delivery. The AO also reproduced the part of the order of the Hon'ble Bombay High Court dated 22.08.2014 in the assessment order for releasing accused Sh. Jignesh Shah on bail in criminal bail application No.1263/2014. In view of the above discussion, the AO noted that books of accounts of the assessee are not reliable and rejected. The AO also noted that the report submitted by M/s Sharp and Tannan Associates submitted to the Board of Directors of NSEL, recoveries have been worked out from various members of NSEL. In the case of the assessee, the recoverable amount from assessee as on 31.08.2013 was shown at Rs. 338.40 crores, since the assessee failed to file confirmation of account from NSEL as....
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....y upon the Report of M/s Sharp and Tannan Associates. The assessee requested the AO to allow cross-examination of M/s Sharp and Tannan Associates as to how the dues have been shown against the assessee. The assessment year under appeal is 2013-14 whereas the report submitted by M/s Sharp and Tannan Associates pertain to period from 01.08.2013 to 31.08.2013 which would fall in assessment year 2014-15. Therefore, no addition could be made against the assessee in assessment year under appeal. The assessee produced complete books of accounts, bills and vouchers and all details of purchases and sales in which no defects have been pointed out in the audited accounts of all the sister concerns. The AO verified some of the ledgers u/s 133(6) of the I.T.Act, 1961 and also verified the transactions with M/s. MMTC Ltd., a Government of India undertaking and all the figures tallied. Therefore, there is no reason to reject the books of accounts of the assessee or to make above addition on account of alleged receivable from assessee company. 13. Ld.CIT(A) after considering the submissions of the assessee confirmed the addition and dismissed this ground of appeal of the assessee. The Ld.CIT(A)....
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....tails in various replies, copies of which are filed in the Paper Book from pages 70 to 78. Paper Book pages 79 to 80 is the order sheet of the AO in which the AO refereed to the Report of M/s Sharp and Tannan Associates showing the amount receivable from the assessee as on 31.08.2013 of the impugned amount and directed the assessee to file a confirmation of accounts from NSEL. He had submitted that since the assessee was not Member of NSEL during this period, there is no question of any recovery against the assessee or to have any transaction conducted during this period. Therefore, there was no question of filing of any confirmation of account on this period. The reply of the assessee in this regard is filed at page 84 of the Paper Book. The Ld. counsel for the assessee submitted that if NSEL wanted to recover any amount from the assessee, it would mean that the assessee made purchases of some items from NSEL but it is admitted facts that NSEL is not involved in purchases and sales as it provides only platform only to member, buyers and sellers against the actual delivery of goods and charge commission only. Therefore, all the allegations of the AO are incorrect for making the add....
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....ccount in the books of NSEL. It is also affirmed that NSEL has not filed any counter-claim or case against the assessee company in alleged recovery. The Ld. Counsel for the assessee submitted that if due amount is liability on the assessee, it could only be on account of purchase or loans taken from NSEL but no evidence or material in support of the same have been brought on record. If material is collected at the back of the assessee cannot be read in evidence against the assessee unless confronted. No right of cross-examination has been allowed by the AO to cross-examine any such person of NSEL or M/s Sharp and Tannan Associates for alleged recovery against the assessee. No specific reasons have been given for rejecting the books of accounts of the assessee. No material has been brought on record to support the addition made against the assessee. The bail order of Sh. Jignesh Shah has no concern whatsoever with assessee. How the liability of the assessee has arised is not clear in the impugned order. The Counsel for the assessee, therefore, submitted that the rejection of the books of accounts and addition of Rs. 338.40 crore is wholly unjustified. 16. On the other hand, Ld. D....
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....1.03.2013 only. It is also not in dispute that only Members registered with NSEL could transact the activities at the platform of NSEL. Therefore, after 31.03.2013 there is no question for the assessee to have transacted any business activity through the platform of NSEL. The Ld. Counsel for the assessee also filed receipt of membership of the assessee, certifying the assessee company was Member of NSEL till 31.03.2013. The copy of the assessment order in the case of group concern M/s. Lakshmi Energy & Foods Ltd. u/s 143(3) for assessment year 2013-14 is filed in which no additions have been made for purchases from whom the substantial purchases have been made by the assessee. The assessee also filed copy of the procedure of operation from NSEL platform. The assessee also filed copy of the Civil Suit filed against NSEL in which NSEL is restrained from printing or publishing or circulating any notice or advertisement in newspapers or others against the assessee. 19. The AO in the assessment order specifically mentioned the fact that NSEL was a platform provided to enable the buyers and sellers to transact on spot against actual delivery of the goods through licensed members appoi....
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....r M/s Sharp and Tannan Associates have been recorded during the course of the assessment proceedings so as to prove the case of the Revenue. The AO was not able to explain the nature of the transaction conducted by the assessee, whether it was purchase or loan? It was an inference of the AO that the assessee might have made some unaccounted purchase from NSEL for which no evidence or material have been collected or brought on record. No right to cross-examine the Report of M/s Sharp and Tannan Associates have been provided to the assessee at the assessment stage. Hon'ble Supreme Court in the case of Kishanchand Chelaram vs CIT (1980) 125 ITR 713 held that "any material collected at the back of the assessee unless confronted to the assessee and allowed cross-examination cannot be read any evidence against the assessee." In this case only copy of Exhibit (A) Paper Book page 181 was supplied to the assessee after completion of the assessment proceedings according to the submissions of the Ld. Counsel for the assessee. The complete report of M/s Sharp and Tannan Associates dated 02.04.2014 have been placed on record by the Ld. DR during the course of hearing of the appeal, therefore, s....
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....uld have examined NSEL and M/s Sharp and Tannan Associates. However, the AO did not make any investigation from them so as to make any addition of the impugned amount against the assessee. Since the AO failed to make proper investigation into the matter and no basis have been shown for making the addition on account of the recoveries to be made by NSEL, the AO failed to discharge the onus upon him to make the addition of the aforesaid nature. There cannot be negative onus on assessee to prove it has not made purchases from NSEL in dispute. No evidence of any sham purchases/transactions have been brought on record. No evidence of any purchase made by assessee from NSEL have been brought on record. 20. The above discussion clearly prove that the AO without any basis rejected the books of accounts of the assessee and without bringing any evidence or material on record, made the addition of the impugned amount. Even during the course of hearing of the appeal, the AO was present in the Court but could not provide any evidence or material so as to sustain the orders of the authorities below. In such circumstances, we do not find it appropriate to remand the matter to the AO for fresh ....