TaxTMI 
TaxTMI 
2014 (3) TMI 1132
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....he order passed by the ld. A.O. u/s 143(3)/ 153A is void ab inito. 2. In the facts and circumstances of the case, the ld CIT(A) has erred in upholding the action of ld. A.O. in rejecting the books of account u/s 145(3) of the Income-tax Act, 1961. 3. In the facts and circumstances of the case, the ld CIT(A) has erred in sustaining the trading addition of Rs. 32,40,627/- by applying the gross profit rate of 15%. 4. In the facts and circumstances of the case, the ld CIT(A) has erred in sustaining the addition of Rs. 18,26,339/- on account of alleged undisclosed profit of silver star. 5. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.'' The grounds raised by the Department in ITA No.461/JP/2013 reads as under:- ''1. On the facts and in the circumstances of the case, the ld CIT(A), Ajmer has erred in reducing the trading addition to Rs. 32,40,627/- as against addition of Rs. 60,94,433/- made by the A.O. and thus allowing relief of Rs. 28,53,806/- through the rejection of books of account u/s 145(3) has been confirmed by him. 2. On the facts and in the circum....
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....r dated 18-09-2009 passed in (ITA No.04/JP/2009 for the assessment year 2005-06. 2.3 In the proceedings, u/s 153A of the Act, the assessment was made and completed on 23-08-2011. The assessee company derives its income from business of manufacturing of jewellery and trading in gem stones. This company has four separate main units situated at different locations in Jaipur carrying on business from these four different locations in the city of Jaipur besides having other branches at Mumbai and other places across the country. The assessee maintains separate books of account for all these units. These separate units are treated as separate business divisions for the purpose of accounting. The four units at Jaipur are given four different names, like, Gem Unit, Silver Star Unit, Jewellery Division and Nizami Division. The Gem Unit operated from the Sardar Patel Marg, Jaipur is the Registered Office of the assessee-company whereas its Head Office is situated at Metro House (2nd Floor) in Mumbai which is also a separate division for the purpose of accounting. Mumbai Branch is being managed by the main Director namely Shri S.S. Gupta with the help of Shri Khushi Kumar Ameriya, the othe....
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....M/s. Marine Mineral & Herbal Remedies (P) Ltd. are stated to have obtained bogus purchase bills totaling to Rs. 13.59 crores from two such entry providers of this group. Shri Khushi Kumar Ameriya admitted in his statement that most of the turnover appearing in the books of Gem Units of M/s. Clarity Gold (P) Ltd. were bogus and have been arranged through brokers by paying commission to inflate the stock in trade and turnover of the company so that it can obtain higher credit limit from the bank. It was noticed that the assessee has been obtaining such bogus purchase bills from Vijay Group and Lalwani Group for the last 04 years i.e. from financial year 2005-06 onwards. Shri Khushi Kumar Ameriya admitted that the commission between 0.25% to 0.60% was being charged by the above bill providers for giving these purchase bills. He also enumerated the list of concerns of Lalwani Group and Vijay Group in whose names the bogus bills had been obtained. He also confirmed the modus operandi of issuing the bogus bills against commission by depositing cheque and thereafter deducting commission as stated above, withdrawing cash and paying back the cash to the beneficiaries. It was found that the ....
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....d turnover deal because both sales as well as purchases are arranged by the same broker. The agents gets commission for arranging the turnover which is shown in the table under the head % of premium. The commission is calculated on the basis of amount of bogus purchases. According to Summary-B, the Broker Sh. Anup Kalani had arranged bogus purchase amounting to Rs. 5,27,70,390/- in F.Y. 2006-07 and Rs. 6,28,89,135/- in F.Y. 2007-08. The commission was worked out @ 0.65% at Rs. 7,51,787/- of Rs. 113659525. Similarly, on S.No.2, Sh. Ram Shyam arranged the bogus purchases amounting to Rs. 16,88,54,539/- during F.Y. 2007-08. The deal of Sh. Ram Shyam was also arranged through Sh. Anup Kalani but since Sh. Ram Shyam did not get his brokerage, he came in direct touch with the assessee. On the basis of direct dealing with Sh. Ram Shyam, it was decided that the brokerage will be paid @ 0.40% because the remaining 0.25% was the share of Sh. Anup Kalani. On the basis of new rate, the assessee's liability towards Sh. Ram Shyam was determined at Rs. 6,75,412/- and cheques of different dates were given to Sh. Ram Shyam against that liability. However, the cheques were dishonored or instruction ....
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....ons of the Unit termed as No.2 accounts. The No.2 accounts were being maintained in a pen drive and the working was directly done in the pen drive so that no copy could be available in the computer of the same. The pen drive was impounded as annexure A-43 in the course of survey from premises of this unit at Tripolia bazaar, jaipur. The pen drive gives insight into the actual state of affairs and business transactions of the Unit. The natures of transactions appearing there is are as under. 14.1Undisclosed Sale: There are the sales which are actually affected in cash but find no mention in the regular books of accounts. These take place on Kacchi Parchi prepared by Sh. Pawan Khandelwal or Sh. Mahesh Khandelwal employees. The Kacchi Parchi is sent by them to the accountant Sh. Raghu Dutt Tiwari who enters them in the pen drive. The Kacchi Parchi is prepared item wise mentioning the details of jewellery items such as earings, necklace, bangles, etc. The price of each item, date and name of the party is also mentioned in the slip and it is in hand writing of Sh. Pawan Khandelwal or Sh. Mahesh Khandelwal./ The details of cash receipt are also recorded in the pen drive by Sh. R....
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....Jaipur. In the narration of this entry, the details of the cheques issued and the cash received back are also mentioned. Further, a payment voucher of all these entries is also made in the pen drive which contains complete particulars of such transactions. This account clearly proves beyond doubt the fact of obtaining bogus bills of purchases and making payment through cheques which were subsequently received back in cash after deduction of commission. The concerned persons have admitted this fact in their statements recorded u/s 132(4) of the IT Act. Year wise summary of this account is mentioned at pages 16 to 21 of the assessment order 14.5Fake Sales: These are the sales against which bill is issued but no goods are supplied. The payment received by cheque is paid back in cash by deducting the commission. The income from issuing fake sale bills is booked as "bill commission" receipt in the pen drive. Copy of bills account already reproduced above. 15 As stated earlier detailed examination on the issue, was made, of Shri Raghu Dutt Tiwari Accountant, maintaining and supervising the accounts. He was confronted with above evidences, specifically the entries in pen dreiv....
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....ained in pen drive. '' 17.1 Assessee did not furnish the desired details nor the entries in pen drive were got verified from regular accounts. Every time the A/R stated that comments and explanation would be submitted on next hearing. However, vide reply dated 5.8.2011 reproduced below in para 19, the A/R simply denied the statements of Shri Raghu datt Tiwari on the basis of an affidavit filed by him before the District magistrate while challenging the search proceedings. But the basis fact of undisclosed sales and profit of Silver Star unit remained undisputed. On verification of entries of data in pen drive and in regular accounts, the same are not found matching. As such the turnover and of the transactions maintained in pen drive are over and above regular accounts and the profit earned thereon is profit over and above regular profit disclosed. 18. In post search proceedings a detailed query letter was issued on 16.7.2009 for explaining the issues of bogus purchases in view of statements of Shri K K ameriya, bogus sales, discrepancies in silver star unit and submissions of silver star persons but assessee did not respond and opted not to comply the terms of the letter. Th....
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.... types of qualities that are to be looked into. There are thousands of packets of stones(stones kept in packets). These values have without adhering to the norms of valuation, have mixed the lots of stones and valued the stones. Each category of stone may have valuation ranging from Rs. 1 per carat to more than Rs. 1.00 lac per carat. This has also caused our business an irreparable loss as we are at loss to reclassify the stones as they were kept in the lots originally. 2.5 It is also surprising to note that the valuers have managed to value over 14 Tonnes of various Raw-Materials kept in 89 bags in a short span of few hours, whereas it would take several man-days just to open them and keep them for weighment. The volume of finished goods (cut stones) was equally huge and one cannot possibly weigh even in a few hours when packets were to be opened, seen, weighted in weighment machine and again put back in packets, etc. etc. 2.6 It is clear that the total exercise undertaken by the paid personnel's of the department is as per dictated terms and in connivance and is a total farce and deserves to be ignored. 3. With regards to the alleged statements of Shri Khush....
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.... are supplying the products. Our checks are based on PAN issued by the Income-tax Department and TIN issued by the Sales-tax Department we do not have the infrastructure nor have the power to investigate the parties who are supplying us the goods. What else are we supposed to gather from the parties? That is not the intention of the income-tax Act and if that were the case then how one will conduct the business? If you as an official of the Income-tax Department do not own upto the parties to whom you have issued PAN then it is not the fault of the businessmen. Entire issue of bogus bill being raised by you time and again has instilled fear in the minds of the businessmen and in turn it is leading to collapse of the trade in the city of Jaipur. 4.2 Even the banker has to be satisfied when one opens a bank account, identity is obtained, complete particulars are obtained, all payments are by account payee cheques and this fact can be verified from both the banks by you. 4.3 The goods and the bills are procured from the registered sellers. All the goods purchased have been entered in the stock register maintained by the company. Entire payment towards the purchase of....
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.... Thus, as far as these units are concerned they have to be treated to have been properly accounted for are genuine, not tainted, are fool proof and all purchases/sales in these units deserve to be accepted as such and no addition is required to be made as far as these three units are concerned. For other units also, we have already explained that no addition is required to be made as all sales are vouched, detailed, verifiable and mainly on credit and all purchases are vouched, detailed, verifiable and mainly on credit and all payments of purchases so made have been made by A/c payee cheques and all payments relating to sales have been received by the assessee by A/c Payee cheques. Further verification can be made from the Income Tax Assessments, Sales Tax Assessment and from Banks directly. In view of the above facts and circumstances and earlier letters, no addition is required to be made treating the purchases or/and sales as bogus/tainted in all the units. Further if you so rely on the statements of Shri K.K. Ameriya, Shri Raghu Dutt Tiwari or/and other persons then certainly the assessee has a right to cross-examine these persons as they have stated wrongly u....
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....u to provide right to cross-examine of the persons who say otherwise/adversely other than, what is apparent on record. One may be a Director or an employee but if coercive measures are used one may not withstand atrocities committed by the officers & can write whatever one wishes & sign on the dotted lines. It is on record that pressurizing tacks were used employees were man-handled, were not permitted to eat properly, meet family members, sleep properly & threatened. We again submit that it is merely a bold statement by them and deserves to be ignored or it has not evidentiary value. 20 Various submissions made by the A/R have been considered carefully and the same have been discussed below. It may be submitted that inspite of specific requirements, the assessee has not been able to produce the parties from whom it has purchased goods, specifically the parties referred by Shri K.K. Ameriya and Shri Raghu Datt Tiwari in their statements. On enquiry by the Inspector of the circle most of he parties were found non existing at the given addresses. As regards to the claim of concerned parties having valid PAN/TIN and payment/receipt through account payee cheques it may be submitted ....
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....lance sheet found during the course of search shows sales of Rs. 106.58 crores purchases of Rs. 99.10 crores and profit of Rs. 4.21 crores. For the sake of clarity the unaudited profit and loss account on page No.113 of the annexure A-24 is mentioned at page 31 of the assessment order- 21(ii) An other important document found from business premises of the Co at c-82, Star Mansion Shastri Nagar at page No.1 of Annexure A-3. This is a computer generated sheet giving details of monthwise sales of all the units of the company. Total sales during FY 2008-09 of all the units were of Rs. 1072033904 whereas the assessee has shown sales of Rs. 103628721 only in the audited accounts. Shri Khushi Kumar Ameriya had also admitted sales during F.Y. 2008-09 around Rs. 107 crores in his statements. Unit wise sales details were called for but the same are not tallying with the figures of the month wise sale details found on this page. The A/R was asked to explain the references and it was submitted that it may be on account of certain inter unit stock transfers which might have been considered as sales in the chart. He was asked to reconcile such stock transfer but reconciliation could not be do....
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....nd incorrect accounts is the value of stock found during the course of search. At the time of search no stock details as per books, were made available and therefore the stock physically found could not be verified in correct manner. Assessee is not maintaining any quantitative stock register as is observed by the auditors who have commented that at the time of audit assessee did not produce stock register. Non maintenance of quantitative stock details definitely leads to conclusion of application of section 145(3) of the IT Act. It may further be seen that in jewelery unit, nizami unit and partly in Silver Star unit, the assessee is manufacturing gold and silver jewellery but no regular manufacturing records or consumption records are maintained so as to verify the consumption of raw material vis a vis production of finished goods. The assessee uses substantial quantity of other alloys such as copper, zinc, cadmium etc for manufacturing of jewellery but there are no records to verify the proportionate part of alloys and how the same was considered in valuation of the finished goods. As such not only the trading activities of gem unit are unverifiable but the trading and manufactur....
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....tion was done by the experts, in the presence of assessee's employees dealing/managing the affairs on the date of search/seizure, no objection of any nature were raised by the employees at the time of search or just after the search. Now challenging the valuation on frivolous grounds is only an after thought and just too devoid the investigation. Even the assessee has not been able to produce correct quantification and valuation after search, if it was of the view that valuation made by the search party was faulty or incorrect. It may further be seen that assessee itself admits that there is vast difference in rate of items of one category and under such circumstances if assessee itself was not possible to quantify and value the goods, the figures of stock and sale/purchases in trading accounts are admittedly not subject to proper verification. Deficient stock found clearly proves that either fake purchase bills are introduced so as to increase the stock or the sales are reduced. The submission of Shri KK Ameriya again comes in to the picture that stock statements are inflated by way of showing bogus purchases, debtors and turnover. This fact is a conclusive proof of incorrectness ....
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....ons are further supported with clear evidences found during the course of search. The other claim of the A/R in his letter dated 9.8.2011 that the transaction of the other units as Nizami, Jewellery and Mumbai are 100 correct and fool proof as stated by the director and it should be accepted as such, is also not correct. It may be seen from the statements of Shri Khushi Kumar Ameriya Q.No.15, wherein he had only stated that the sales of these units are 100% correct and fool. He has not stated as to correctness of purchases of these units, manufacturing activities of and status of stock maintenance etc. At the cost of repetition the relevant question and is mentioned in Hindi at page 34& 35 of the assessment order . 27 In view of above detailed discussion it may be inferred that accounts of the company are not correct and complete within the meaning of section 145(3) of the IT Act and accordingly the account books and trading results of the assessee company are rejected. For this purpose support is driven from the judgment of Hon'ble Supreme Court in the case of Kachwala Gems reported in 288 ITR 10 (SC) having almost identical facts of bogus claim of purchases through fake pur....
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....s. 1,40,96,552/- from 10 concerns were not genuine. The said 10 parties were found to be bogus parties during the course of search on 20.04.2007 in the case of Haldia Group. In that case of Haldia Group, similar trend of business was found as was noticed in the case of present assessee. The said 10 parties are same which are in the present search were admitted bogus by the key person Shri KK Ameriya. After detailed discussion, examination and enquiry it was concluded by the AO in AY 2005-06 that purchases from the said 10 parties were fake and therefore he applied GP rate of 13.28% after rejecting the accounts u/s 145(3) of the IT Act. The ld CIT(A) upheld the GP rate at 13%. Subsequently the ITAT has also confirmed the findings of rejection of accounts for the reasons of fake/bogus purchases but reduced the addition to lumpsum amount of Rs. 1 lac. 29. In AY 2006-07, while completing the assessment the AO found that purchases of Rs. 5.40 crores from various parties were not genuine and after applying the ratio of judgment of Hon'ble Gujarat High Court reported in 10 DTR 153(Guj) in the case of Sanjay Oil Cake Industries V/s CIT, he disallowed 25% of such bogus and non genuine pu....
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.... 17 of the order of Rs. 1826339 is separately added. With the above remarks income of the assessee company is computed as under: Net income from business as per return Rs. 3326622 Add:- Trading addition as discussed Rs. 6094433 Undisclosed profit of Silver Star as discussed Rs. 1826339 Income from business and profession Rs.11247394 Less:- Unabsorbed business loss b/f as per Computation for AY 2004-05 (-)Rs.1331662 Unabsorbed depreciation (-) Rs. 28575 Total Income Rs. 9887157 Assessed at Rs. 98,87,160. Tax and interest payable as per the provisions of the IT Act have been calculated as per separate calculation sheet which is part of this order. Demand notice u/s 156 of the IT Act has been issued accordingly. Penalty proceedings u/s 2711(c) of the IT Act have been separately initiated by issue of show cause notice of even date. Prior approval u/s 153D of I.T. Act , 1961 of the JCIT, Central Range, Jaipur has been obtained vide letter No. Jt.cit/CR/Jaipur/2011-12/867 dated 23-8-2011.'' 2.5 Similar computations of income have been made by the A.O. in other four assessment years namely 2006....
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....There is no denial of the fact that these documents found from the assessee's premises at various sites and it's Director's premises pertain to the appellant. The bogus purchases and sales have been entered into the books of accounts as is evident from the enquiries carried out from the Director and employees of the concerns. The assessee has indulged in obtaining bogus purchase bills from Lalwani & Vijay Group against which no goods were received as is evident from the investigation carried out by the BCTT wing and accepted by M/s K.K. Ameriya, Director of the company. The assessee in the post search proceedings did not explain the issue of bogus purchases as required by letter dated 16.07.2009. The assessee has not been able to produce the parties from whom the goods were shown to have been purchased and as per enquiry by the inspector of the Circle most of the parties were found non existent at the given address. The bill commission account payment found during the search shows that after issue of cheques for the purchases, the amount was received back in cash. In case of Silver Star Unit, undisclosed sales, partly undisclosed sales, undisclosed purchases, b....
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....m the list of incriminating documents stated above. In fact issue involved in A.Y. 2005-06 was regarding ten parties from whom the purchases were considered as non genuine and in A.Y. 2006-07 purchases made from 22 parties at Rs. 5.04 crores was considered. In the present proceedings, the documents mentioned above show that assessee has indulged in bogus purchases, bogus sales, unaccounted sales, partly unaccounted sales, undisclosed purchases etc. The unaudited purchase and sales in the profit and loss account are not tallying with the audited purchase and sale account and assessee has not maintained stock register, manufacturing record and consumption records. There is no restriction to make the assessment u/s 153A of the I.T. Act after considering the above incriminating documents found during search. The A.O. has to determine the total income based on all the relevant material available on the record. Moreover, even in the regular assessment proceedings made u/s 143(3) A.Y. 2005-06 issue considered by Hon'ble ITAT was regarding bogus purchases from 10 parties only where the rejection of book results u/s 145(3) has been upheld as the assessee could not produce the a....
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....004-05 2005-06 2006-07 2007-08 2008-09 2009-10 audited 2009-10 unaudited 2010-11 Sales 198490 1426903 5466428 68749794 9777583 10306287 10720339 1540384 Stock Dif. 144657 5147868 0 71450573 6769267 83951400 83334242 5750095 Total 2129557 1941690 5466428 75894851 1054510 11145801 11553681 2115394 Purchases 181023 1698878 4962283 68670235 9376682 96584379 99103051 1S74824 Direct Cost 0 6118276 9962436 1409772 1312092 8607118 10319346 8163403 Total 181023 1760061 5061907 70080007 9507891 97445091 10013498 1956458 Grow Profit 3193228 18162927 4045206 5S14844 9466185 14012920 15401828 1589358 GP rate 16.08% 12.72% 7.40% 8.45% 9.68% 13.59% 14.36% 10 .31% A. It has been mentioned by the A.O. that from above chart it is seen that G.P. of the assessee varies from 7.04% to 16.08%. In the regular assessment for A.Y. 2004-05 purchases from 10 parties were found to be bogus and during scrutiny G.P. rate of 13.28% was applied by the A.O. which was reduce....
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.... D. As referred to by A.O. it is seen that in the case of Gem Paradise for A.Y. 2003-04, the Hon'ble ITAT has confirmed G.P. rate of 25.5% on account of unverifiable purchases as against 24.92% shown by the assessee. Also, in the case of Deepak Dalela for AY. 2006-07, addition to the extent of G.P. rate of 25% only in respect of bogus purchases was upheld by Hon'ble ITAT. These decisions are on their on facts but go to support the view of addition being upheld in case of unverifiable purchases. E. It is noted that G.P. rate of 19% and 16.8% was shown by the assessee in A.Y. 2003-04 and 2004-05 respectively though on the low turnover. The incriminating documents found during the search mainly relate to later years. In order to ascertain the reasonable rate of G.P., apparently the years in which no adjustments by way of unverifiable purchases or sales or stock was made form the reliable basis. In this context the A.O. has pointed out following instances: i. From the chart above, it is noted that in A.Y. 2009-10, unaudited book results show G.P. rate of 14.36% in the case of the assessee which has been pointed out by the A.O. in the remand report. ii....
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....rive was impounded during survey as Annexure A-3 from the business premises of this unit. The A.O. has discussed in detail the nature of transactions appearing therein regarding undisclosed sales, actual sales against which bill is partly issued, actual undisclosed purchases, bogus purchases and fake sales as under: a. Undisclosed sales are noted in the kachhi parchi and do not find mentioned inthe regular books of accounts while record is maintained in the pen drive only. b. Actual sales against which bill is partly issued: The actual sales done throughkachi parchi are entered into pen drive. However, when part pakka bill is to be issued and payment received by cheque, this is also noted in the pen drive. c. Undisclosed purchases: These purchases are made through kachi parchi-and entered into pen drive but are not mentioned in the regular books. d. Bogus purchases: These purchases are entered into the regular books but not entered into the pen drive. Only the brokerage expenses for arranging these bogus purchase are recorded in the pen drive under 'bill commission account' which is also supported by the Annexure A-45, Page 27 to 35 impou....
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....isclosed." 7.2 During appeal appellant has submitted as under: "The Learned Assessing Officer has made the addition with reference to PAN driver reported to have been maintained by Shri Raghu Dutt Tiwari. While making the addition following observation in para 17 of the assessment order - (a) That the transaction of purchase and sales made in cash are different than those from the regular books. (b) All the transactions represent undisclosed income. The Learned Assessing Officer has made the addition unilaterally without providing the printout from the PAN drive, without providing how the income was calculated. In the absence of these the determination of income from Silver Star is without any justification. The assessee has already challenged that all the addition made on the basis of statement of all the three person including Shri Raghu Dutt Tiwari as no cross examination was allotted. In view of this the entire exercise by the Learned Assessing Officer is without any basis. The assessee has been consistently arguing that even if the theory of Learned Assessing Officer is accepted of making bogus purchase and sales and the statemen....
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....rounds of appeal are as under: "1. That the order passed by the Learned Assessing Officer u/s 143(3)/153A is void ab-initio. " "2. In the facts and circumstances of the case the Assessing Officer has erred in rejecting the books of accounts u/s 145(3) of the Income Tax Act, 1961," "3. In the facts and circumstances of the case the Assessing Officer has erred in applying a G.P. rate of 17% and thereby making trading addition of Rs. 5,12,77,2 ]//-. " "4. In the facts and circumstances of the case the Assessing Officer has erred in making addition of Rs. 6.91,371/- on account of alleged undisclosed profit of Silver Star." These grounds of appeal are decided as under. 9.1 The issue raised in first ground of appeal has been decided in Appeal for A.Y. 2005-06 and this ground of appeal has been dismissed. On the same reasoning, this ground of appeal is dismissed here also. 9.2 The 2nd and 3rd grounds being regarding rejection of books of accounts u/s 145(3) and application of G.P. rate were involved in A.Y. 2005-06 where the rejection of the books of accounts u/s 145(3) has been upheld and application of G.P. rate of 15% has been sustained. Sim....
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....G.P.rate of 15% is upheld. The above G.P. rate on a turnover of Rs. 68,74,97,941 will result in gross profit of Rs. 1 0,3 1,24,691 while assessee has declared G.P. of Rs. 5,8 1,48,440. Thus, the trading addition of Rs. 4,49,76,251 is sustained and balance amount is deleted.1 1.3 The 4th ground as regarding addition on account of undisclosed profit of Silver Star Unit was involved in the A.Y. 2005-06 also where the addition on account of undisclosed income from the Silver Star Unit has been upheld. However, during the year under consideration there is a net loss of Rs. 16,36,185 which has been allowed by the A.O. as the profits earned in all the other years of Rs. 79,66,963 have been added separately in the relevant years. This allowance of the loss is based on evidences found during the search in the form of Pen drive which have been discussed in details in A.Y. 2005-06. In view of above, similar being the facts during the year under consideration, this ground of appeal is dismissed. 12.0 The 5th ground of appeal is as under: "In the facts and circumstances of the case the Assessing Officer has erred in making addition by way of disallowance u/s 36(1 )(va) of Rs. 1,07,1....
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....itself. Similarly, the payment of Rs. 76,166 on account of provident fund was also paid before filing the due date of return. 12.3 I have gone through the assessment order and the contentions of the appellant. It is seen that appellant has pointed out that employees contribution of ESIC of Rs. 30,937 has already been paid within the financial year i.e. 27.09.2006 itself. Further, employees PF contribution of Rs. 76,166 was paid on 27.09.2006 ( Rs. 68,521+ Rs. 5,322) and on 25.10.2007 of ?2,323 i.e. before due date of filing the return. The said payment is allowable in view of decision of Honourable Supreme Court in the case of Vinayal Cement reported at 239 ITR 268 which has been followed in the case of P.M. Electronic l-td reported at 313 ITR 161. Accordingly, employees contribution is allowable under section 43B, if it has been paid before the date of filing the return under section 139(1) of the Act. Therefore, the disallowance of Rs. 1,07,103 is deleted. This ground of appeal is allowed. 13.0 In the result, assessee's appeal is partly allowed. A.Y. 2008-09. Appeal No. 239/2011-2012 14.0 The various grounds of appeal are as under: " 1. That (he order pas....
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....rading addition of Rs. 4,21,16,555/-. 4. In the. facts and circumstances of the case the Assessing Officer has erred in makingaddition of Rs. 23,19,672/- on account of alleged undisclosed profit of Silver Star. " These grounds of appeal are decided as under 16.1 The issue raised in first ground of appeal has been decided in Appeal for A.Y, 2005- 06 and this ground of appeal has been dismissed. On the same reasoning this ground of appeal is dismissed here also. 16.2 The 2nd and 3rd grounds being regarding rejection of books of accounts u/s 145(3) and application of G.P. rate were involved in A.Y. 2005-06 where the rejection of the books of accounts u/s 145(3) has been upheld and application of G-P. rate of 15% has been sustained. Similar being the facts during the year under consideration, addition to the extent of application of G.P. rate of 15% is upheld. The sale figure adopted by the A.O. on the basis of monthly sales statement of all units referred to in the assessment order of ^107,20,33,904 is held to be appropriate as discussed in the assessment order. So, the above G.P. rate on a turnover of Rs. 107,20,33,904 will result in gross profit of Rs. 16,08,05,085....
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.... such a character so as to persuade the Assessing Officer for action u/s 153. Thus the foundation of proceedings u/s 153A in the case of the assessee is bad in law. The assessment framed deserves to be quashed. 2. Principle of natural justice violated - Secondly, the Learned Assessing Officer has utilized the statement of Shri K.K. Ameria, Shri Raghu Dutt Tiwari and Shri Pawan Kumar Khandelwal which were recorded during the course of search. Their statements have been quoted at length in the assessment order and the books of accounts have been rejected on that basis. During the course of assessment proceedings the assessee had requested for cross examination of these persons but the same was not allow. On the contrary the Learned Assessing Officer has stated on page 34 para 26 that Shri K.K. Ameria was a director and hence being the owner his cross examination was not necessary. In the view of the Learned Assessing Officer he was representing the company. In respect of the two other employees Shri Raghu Dutt Tiwari and Shri Pawan Kumar Khandelwal the Learned Assessing Officer has observed that it was for the assessee to produce them. Thus the Learned Assessing Off....
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.... Vs. Invert Import AIR 1981 Supreme Court 2085 The ratio of the aforesaid cases is fully applicable to the facts of the case. In view of this the assessment framed deserves to be quashed. The Learned Assessing Officer has given his finding while rejecting the ground of the assessee in para 5.4 on page 4 of the appellate order and he mentioned that the case law given by the assessee are not applicable. For the case of Sibu Soren Vs. ACIT reported in 47 SOT 331 the Learned CIT(A) mentioned that this was assessment u/s 158BA(2) under chapter XIV of the Income Tax Act, 1961 whereas the present assessment is under section 153A of the Income Tax Act, 1961. In this regard our submission is that the main provisions regarding search assessments are same then the decisions are applicable. The decision in the case of CIT vs S.M. Agarwal 293 ITR 43 (Del) is also not applicable because of the additions are not based on dumb document. Our case is same that the assessee is claiming all the documents seized during the course of search are dumb document. Therefore the claim of the assessee is correct and the ground deserves to be accepted. Departmental Ground No. 1 & 2: - On th....
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....ith their supporting as prescribed U/s 44AA of the Income Tax Act, 1961. The books of accounts are maintained on mercantile system of accounting. The books of accounts are audited u/s 44AB of the Income Tax Act, 1961 and audit report was submitted along with the return of income. The auditors have not made any adverse remarks regarding the maintenance of the books of accounts. During the course of assessment proceedings all these books of accounts were produced before the Learned Assessing Officer and no serious defect was pointed out. In view of this the Learned Assessing Officer was not justified in rejecting the books accounts. Appellate order of ITAT does not abate u/s 153A - It is submitted at the outset in the case of the assessee assessment for the Assessment Year 2005-06 already stood completed u/s 143(3) and even appeal upto the stage of ITAT stood decided. The provisions of section 153A do not abate the order of appeals. In view of this only additional issues not covered in the original assessment and which arise on account of material found during search could be considered in the assessment u/s 153A. In this case the issue of bogus purchases stood cons....
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....the Learned Assessing Officer. This is quoted in para 7 on page 2 of the assessment order. The assessee could increase his turnover in the process of alleged bogus purchase vouchers and bogus sale vouchers. Therefore the entire exercise of the Learned Assessing Officer is of no avail. There is no iota of evidence or any material brought on record by the Learned Assessing Officer which suggests that assessee earned in the aforesaid process of bogus vouchers. The Learned Assessing Officer has not conducted any post search inquiries which may also support the finding of the Learned Assessing Officer of earning higher profits by the assessee by way of obtaining bogus purchase vouchers and issuing bogus sale vouchers. Thus there was no justification of the Learned Assessing Officer for taking u/s 153 in the case and subsequently completing the assessment by making addition of Rs. 60,94,433/-. 4. Sanjay Oil Case Industries vs. CIT 10 DTR 153 (Guj) case is not applicable - The Learned Assessing Officer has referred the aforesaid case law on page no. 36 of the assessment order. It is submitted that the ratio of this case has not been found applicable in the case of the as....
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....e trading results of the assessee in Assessment Year 2004-05, 2005-06 & 2007-08 A.Y. Turnover Gross Profit G.P. Rate Remarks 2004-05 19849007 3193228 16.08% -- 2005-06 142690358 18162927 12.72% 12.79% accepted by the ITAT 2006-07 546642847 40452067 7.40% 8.5% applied by the Learned CIT(A) The perusal of the aforesaid table reveals that the result shown in Assessment Year 2005-06 stand finally decided by the Hon'ble ITAT. No reconsideration was called for. During the assessment proceedings the assessee submitted detailed reply and filed additional submission in this regard. The Learned CIT(A) has specifically asked to the assessee that why the case of M/s Gupta Emerald Mines Pvt Ltd for Assessment Year 2009- 10 is not applicable for application of GP rate. Then the assessee submitted the reply that - "It is submitted that the Learned Assessing Officer has elected gross profit rate of 17% disclosed in the case of M/s Gupta Emerald Mines Private Limited in Assessment Year 2009-10 and has applied the same in all the other cases of the group. In this regard the Learned Assessing Officer has not brought any ....
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....or the same period is of Rs. 1,03,06,27,271/-. The turnover in the case is more than 100 times. Hence both the cases do not stand on the same footing and are therefore not comparable. Thus the above factors establish that the cases are not comparable and the Learned Assessing Officer erred in law and fact in applying GP rate of 17% of M/s Gupta Emerald Mines Private Limited in rest of the cases of the group. Such additions made on the basis of the GP rate deserve to be deleted." But the Learned CIT(A) has partly accepted the contention of the assessee and has only reduced the GP rate by 2% which is 15% but again there is no basis for applying the GP rate of 15% specially when the complete bogus purchases and bogus sales are identifiable and the actual profit of the company was found recorded in the shape of pen drive in the name of M/s Silver Star Unit. The whole addition on this account deserves to be deleted. Assessee's Ground No. 4:- In the facts and Circumstances of the case the Learned CIT(A) has erred in sustaining the addition of Rs. 18,26,339/- on account of alleged undisclosed profit of Silver Star. The Learned Assessing Officer has made the additi....
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....hole business activities. It is further submitted that the Learned Assessing Officer has not given the details that how these transaction were not matching with the regular books and how these have been considered as genuine and not of bogus purchase and sales. In view of this also the addition made by the Learned Assessing Officer of Rs. 18,26,339/- is most unjustified specially when the assessee has already declared the profit of Rs. 17,86,474/- in the regular return and this was the real profit of the company as the books of accounts are not reflecting true and correct profit because of bogus purchase and sales and inflating the turnover by the assessee. The actual profit earned by the assessee was only Rs. 18,26,339/- out of which Rs. 17,86,474/- should be reduced as profit disclosed by the assessee. The Learned CIT(A) alleged that the assessee has not furnished the trial balance and balance sheet of Silver Star Unit. The assessee's contention is that the actual transactions are kept and recorded in PEN drive in the name of Silver Star and the profit earned in Silver Star unit are actual profit. Therefore no addition should be made on this account. Departmental Ground....
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....ed with documents as described above but it was surprising for us to note in most of the later cases that the parties stated to have sold the goods to the assessee were neither produced nor found at their given addresses. Thus in such cases only option left to us was to estimate the profit of the assessee upholding the rejection of books of account on the basis that admittedly the claimed purchases from the named parties remained unverifiable. Likewise, in the present case, the above named parties from whom the assessee claimed to have purchased the goods were neither produced nor found in existence in business at their given addresses. Thus the claimed purchases stated to have been made from them remained unverified. The rejection of books of account invoking the provisions of Section 145(3), therefore, cannot be treated as unwarranted and unjustified. We uphold the action of the lower authorities in this regard. However, considering these aspects that there was substantial growth of 13.88% in the turnover in comparison to last year, it cannot be said that the g.p. rate shown at 12.73% during the year on declared sales of Rs. 14,26,90,358/- against g.p. rate of 13.97% on the turno....