TaxTMI 
TaxTMI 
2014 (9) TMI 1170
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....and ground of appeal No.2 of the cross objection by the assessee relate to the same issue and read as under : Ground By Revenue : "1. On the facts and in the circumstances of the case the CIT(A) erred in allowing the depreciation claim of Rs. 86,10,000/- for the A.Y. 2003-04 of the assessee on wind mill" Cross Objection No.2 by the assessee : "2. The learned CIT(Appeals) erred in facts and circumstances of the case and in law in disallowing the claim of depreciation @ 80% on the total cost of the windmill by treating part of the cost as being incurred for civil works and thereby allowing depreciation @ 10% only on such costs. It be held that the entire costs of windmill, erection, foundation, infrastructure, installation etc are to be allowed depreciation @ 80% as they form a integral part of windmill by applying the functional tests." 2.1 Facts of the case in brief, are that the assessee is a company engaged in the business of manufacturing and trading in Pan Masala, Gutkha, trading in shares and also engaged in the business of construction and generation of power etc. During the course of assessment proceedings the Assessing Officer observed that the assessee has installed....
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....ing his decision in the case of Chhapalkar Brothers for A.Y. 2008-09, the CIT(A) held that the said decision will be applicable to the case of the assessee. He held that in the case of Chhalpalhar Brothers he has determined the various components which go on to make up the case of the windmill, the details of which are as under : Sr.No. Particulars 1. Cost of wind turbine generator 2.a) Cost of component & accessory (copper wound with accessories) b) Cost of component for generation of electricity supply of rotor blades c) Electrical items, components of RE device 3. Cost of tubular tower 4. Cost of work including foundation work 5. Labour related cost a) Installation of windmill b) Installation of electrical line for power transmission and meter c) Final testing and commissioning 6. Reimbursement of power evacuation facility and creation of infrastructure 7. Miscellaneous a) Processing charges b) Interest on loan capitalized upto 17-01-2008 c) Professional fees d) Registration fees e) Substation charges f) Franking charges g) MEDA or equivalent charges 4.1 He observed that he had directed the assessing officer in the said case to re....
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....on of Windmill is concerned, the same is liable to be considered as an integral part of the cost of Windmill having regard to the decision of the Pune Bench of the Tribunal in the case of Aminity Developers & Builders vide ITA no. 1505/PN/2011 dated 12.12.2012 and also in terms of the judgment of the Hon'ble Jurisdictional High Court in the case of CIT vs. Cooper Foundary Pvt. Ltd. vide Income Tax Appeal No. 1326 of 2010 dated 14.06.2011. The Tribunal in the case of Aminity Developers & Builders (supra) by applying the 'functional test' held that the cost incurred on the foundation of the Windmill is to be considered as an integral part of the cost of Windmill erection and is thus eligible for the depreciation @ 80%, prescribed for Windmill. The Hon'ble Bombay High Court in the case of Cooper Foundary Pvt. Ltd. (supra) has also upheld the proposition that cement, concrete foundation is to be included in the cost of Windmill, while granting depreciation @ 80% on the Windmill. Therefore, on the basis of the aforesaid, in-principle the plea of the assessee is liable to be upheld. 6. So, however it is pertinent to observe that the cost of civil works, etc. amounting to Rs. 20,00,000/....
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....taken by the Revenue in all the other appeals. The assessee has also taken similar ground in all the Cos (Ground No.2) and ground of appeal No.3 in ITA No.1986/PN/2012. Following our reasonings given in the preceding paras, the ground by the Revenue as well as by the assessee in the appeal and COs on the issue of depreciation on windmill is restored to the file of the AO for recomputing depreciation in the light of the order of the Tribunal. These grounds are accordingly allowed for statistical purposes. 9. Ground of CO No.1 by the assessee reads as under "1) The learned CIT( Appeals) erred in facts and circumstances of the case and in law in holding that all items of addition have to be separately considered before it can be held that a particular issue falls within the scope of section 153A or not. It be held that the impugned additions made are beyond the scope and provisions of Section 153 A as they are not based on any seized / incriminating material found during the course of search." 9.1 The Ld. Counsel for the assessee did not press the above ground for which the Ld. Departmental Representative has no objection. Accordingly, the above ground is dismissed. 10. Identical....
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....g over and above the declared sale price. It was submitted that one land owner by name Shri Pandurang D. Gore had confirmed in his statement that he has received Rs. 1 lakh in cash from the assessee in respect of land purchased from him and 10 other co-owners for a total consideration of Rs. 1,49,623/-. Referring to the decision of the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Pvt. Ltd. Vs. CIT reported in 26 ITR 775 it was submitted that the addition which was made on the basis of conjectures and surmises should be deleted. 13. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition by observing as under : "59. I have considered the submissions of the appellant with reference to the facts on record. It is observed that in the case of the appellant, the landlords from whom the land was purchased in the previous years relevant to assessment years 2003-04 to 2007-08 and 2009-10 were not produced by the assessee before the Assessing Officer despite his request for producing the witness. Simultaneously it is also true that the Assessing Officer, who could have used the powers under section 131 to enforce the attendance of witness, chose....
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....is addition is made. Hence, he is directed to find out the relevant assessment year for which the statement was made and retain the addition to that extent in the concerned assessment year. Consequently, the appellant gets relief in five assessment years and partial relief in one assessment year." 13.1 Aggrieved with such order of the CIT(A) the revenue is in appeal before us. 14. The Ld. Departmental Representative heavily relied on the order of the Assessing Officer. 15. The Ld. Counsel for the assessee on the other hand referring to the decision of the Tribunal in the case of DCIT Vs. Ghodawat International Pvt. Ltd. vide ITA Nos. 2147 to 2150/PN/2012 order dated 31-12-2012 for A.Yrs. 2005-06 to 2009-10 submitted that under identical facts and circumstances the addition made on account of unaccounted investment in land, which was deleted by the CIT(A), has been upheld by the Tribunal and the ground raised by the revenue has been dismissed. Therefore, the above ground by the Revenue should be dismissed. 16. We have considered the rival arguments made by both the sides. We find in the case of Ghodawat Foods International Pvt. Ltd. (Supra), a group concern in which similar addi....
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.... the documented price. The Assessing Officer concluded that the assessee has also paid an equal amount of unaccounted cash, over and above the price shown as land purchased in the books of account, therefore made the addition in every case of land purchase. Though in the real estate transactions there is a role of on money. But it could not be said that each of every real estate transaction involved cash component which is not part of documentation price for the purpose of income tax. One cannot make addition merely on assumption that because other individuals or persons have made payment of earned money in real estate purchases, another person belonging to the same group would have also made a similar payment of on money to acquire real estate in his or her own name. There is no presumption in law that there has to be an unaccounted transaction when there is a dealing in real estate. It is pertinent to mention that search and seizure was conducted on the premises of the assessee and no document or evidence whatsoever was found which could indicate unaccounted transactions in land dealing between the members of the Ghodawat group and the sellers. It is only the statement made by so....
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....ng and trading in Pan Masala, Gutkha, trading in shares and also engaged in the business of construction and generation of power etc. The original return of income for the impugned year was filed on 29-10-2003 declaring total income of Rs. 10,28,780/- and agricultural income of Rs. 4,06,52,243/-. A search and seizure operation u/s.132 /133A of the Act was carried out on 04-02-2009. In response to the notice u/s.153A(1) the assessee requested the Assessing Officer to treat the return filed earlier as return filed in response to the above notice. 17.2 During the course of assessment proceedings the Assessing Officer noted that a search and seizure action u/s.132 was also carried out at the factory premises of Ghodawat Industries India Pvt. Ltd. (in short 'GIIPL') at Village Mankapur District Belgaum, Karnataka. GIIPL is engaged in manufacturing of Gutkha & pan masala under various brand names such as Star 555 Gutkha & pan masala, Josh 111 Gutkha & pan masala, Lagaan Gutkha and Pan masala, SG 555 Gutkha & pan masala, Chakde Gutkha & pan masala, Star 555 premium Gutkha, Star 555 premium Gutkha (Export), U.P. No.1 Gutkha and pan masala, Star 555 scented supari & Zarda. 17.3 The Assess....
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....n the course of search action followed the method adopted by the Excise department for levy of Excise duty on production. The working of production capacity per machine for the month of October 2007 was prepared and quantified by the search party which resulted into suppression of production and sale to the tune of Rs. 12,71,43,500/- between the production shown in the books and the production worked out on the basis of machine capacity. 17.5 The Assessing Officer after analysing the statement recorded u/s.132(4) came to the conclusion that Shri Sanjay Ghodawat was also not able to give a rebuttal as to why the production method adopted by Excise department should not be adopted and books of accounts should not be rejected u/s.145 of the Income Tax Act. The Assessing Officer also referred to the statement of some of the employees/labourers working on the production machine which were recorded u/s.132(4) on 04-02- 2009 and 05-02-2009. In their sworn statements, the labourers handling the machine have confirmed that the capacity of each machine is production of 75 to 80 pouches of Gutkha and Pan masala per minute which is in conformity with the central excise method adopted for levy....
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....ahesh, one of the employees of GIIPL, who collected cash in Mumbai on day-to-day basis. After analysing the various documents seized by the sales tax department, the statement recorded during the course of survey of Shri Dharmesh Patel, the Assessing Officer determined the unaccounted sale of GIIPL through M/s. Shree Ambika Enterprise at Rs. 32,99,250/- for a period of 4 months of the F.Y. 2006-07. Relying on the decision of the Hon'ble Supreme Court in the case of H.M. Esufali H.M. Abdulali reported in 90 ITR 271, the AO determined the unaccounted sales for F.Y. 2006-07 at Rs. 98,97,750/-. Similarly, he determined the unaccounted sales for F.Y. 2007-08 at Rs. 32,04,31,758/- and for F.Y. 2008-09 at Rs. 65,85,27,850/-. 17.9 Similarly, in the case of M/s. Shaik Traders, Satara, Proprietor Mr. Kutubuddin Shaikh, the Assessing Officer noted that the survey was conducted at his business premises during which various papers and documents found were impounded. Such impounded documents reveal that M/s. Shaik Traders has purchased Gutkha and Pan masala in cash from GIIPL to the tune of Rs. 50 lakhs. He noted that the survey party in the course of survey found a copy of ledger account of Sh....
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....,96,00,000/-. 17.11 Since the books of account does not give a true and correct picture of the affairs of the assessee and the assessee was indulging in large scale sale outside books of account, the AO rejected the books of account. On the basis of his various analysis, the Assessing Officer determined the suppressed sales at Rs. 265,97,33,413/- during the period covered in the search and determined the profit for different years by observing as under : "9.6 Thus, the total suppressed sales comes to Rs. 265,97,33,413/- during the period covered in the search as tabulated below. The profits attributable to the suppressed sales during the various years of the search period from the F.Yrs. 2002-03 to 2008-09 is worked out by adopting GP ratio. The year-wise bifurcation of suppressed sales is as under : Sr. No Financial Year Estimated Suppressed sales 1 2002-03 37,99,61,916 2 2003-04 37,99,61,916 3 2004-05 37,99,61,916 4 2005-06 37,99,61,916 5 2006-07 4,17,26,141 6 2007-08# 38,00,31,758 7 2008-09#* 71,81,27,850 Total 265,97,33,413 F.Y. 06-07 Rs. 4,17,26,141 separately discussed in para (B) above. # F.Y. 07-08 Rs. 320431758+20000000+39600....
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.... total taxable undisclosed profits is determined as under. It is to mention here that for the assessment year 2007-08 though the unrecorded sale is, on the basis of proof found during the search at Rs. 4,17,26,141 on which profit at the rate of 54.87 comes to Rs. 2,28,95,133, for the assessment the unrecorded income is taken at Rs. 20,84,85,103/-. The year wise profit taxable in the hands of the assessee is worked out as under by adopting GP ratio at 54.87%: Thus for the impugned assessment year the Assessing Officer made addition of Rs. 20,84,85,103/- being profit on unaccounted sale of Gutkha and Pan masala. Sr. No Financial Year Suppressed Sales Profit @ 54.87% 1 2002-03 37,99,61,916 20,84,85,103 2 2003-04 37,99,61,916 20,84,85,103 3 2004-05 37,99,61,916 20,84,85,103 4 2005-06 37,99,61,916 20,84,85,103 5 2006-07 37,99,61,916 *20,84,85,103 6 2007-08 38,00,31,758 20,85,23,425 7 2008-09 71,81,27,850 39,40,36,751 18. Before the CIT(A) it was submitted that the assessee has maintained records to show the production and stock of Gutkha and Pan Masala. It was submitted that the Excise Department had verified the stock registers during the yea....
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....s per the records maintained at the head office and physical stock at factory premises was never brought out during search or assessment proceedings. The assessee submitted that the Excise duty during A.Y. 2009-10 was on advalorem basis and actual dispatches. From 01-07-2008 the Excise duty was sought to be levied on the number of operational packing machines used vide Notification No.42/2008-Central excise-dt. 01-07-2008. It was submitted that in view of the decision of the Hon'ble Karnataka High Court granting the assessee interim stay on levy of Excise duty on operational packing machines and directing the assessee to pay Excise as was paid prior to 11-09-2008 the assessee did not pay Excise duty on the basis of operational packing machines. This fact was also brought to the notice of the AO. 18.2 As regard the deposition of some of the workers that the capacity of packing machines was 75 to 80 pouches per minute the assessee submitted that the capacity of packing machines and that of production capacity is different and that these were theoretical calculations. The Excise and production records found and seized during search proceedings were verified during assessment proceedi....
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.... statement. The proprietor had mentioned that he had the bills in respect of purchases from the assessee and the payments were made by cheque only. The assessee further pointed out that the unrecorded turnover in the statement recorded was not mentioned at Rs. 50 lakhs for 3 months but Rs. 50 lakhs for the period 01-04-2008 to 03-02-2009. 18.7 As regards the sales to M/s Siddheshwar Agencies of Solapur is concerned, it was submitted in the statement recorded it was stated by the above party that the purchases for the unrecorded sales were made in cash from the local market. As far as purchases from the assessee are concerned they have received bills for each supply and payment thereof was made by cheque. It was accordingly submitted that the assessee is not involved in making any unrecorded sales. 18.8 So far as estimation of sales for F.Y. 2008-09 is concerned, the assessee submitted that during the course of search no document/ material was found to suggest that the company was indulging in making purchases or sales outside the books of account. It was submitted that the products manufactured by the company are liable to Excise duty and therefore all the records of purchases, p....
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....on of books of account on the ground that no defects were pointed out in the books of account which were audited. Auditors have not pointed out any mistake therein. It was argued that before rejection of the books of account, the AO should have recorded a clear finding that correct profits cannot be deduced from the method of accounting adopted. For the above proposition, the assessee also relied on the following decisions : 1. DCIT is Mewar Textiles Mills Ltd (MP) 64 TTJ 502. 2. CIT vs Smt Poonam Rani 326 ITR 223 (DEL) (2010) 3. Raghubar mandal Harihar Mandal vs. State of Bihar (1957) 8 STC 770 (SC) 20. Based on the arguments made by the assessee the Ld.CIT(A) called for a remand report from the AO who reiterated his earlier findings. The salient features of the remand report by the AO as brought out by the Ld.CIT(A) at para 93 of his order read as under : "93. The above submission of the appellant was remanded to the Assessing Officer for his comments vide this office letter dated 27/10/2011. The Assessing Officer in his remand report dated 14/03/2012 has not deviated from his decisions taken during assessment on the objections raised by the appellant. The points brought....
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....er : "94. I have carefully perused the submissions of the appellant, the facts on records and also the remand report. I have held in paragraph 35 of this order that in non-abated cases, the assessing officer has the jurisdiction to make an assessment on all issues except the concluded issue. Concluded issues can be reassessed only on the basis of new evidences or documents or income or assets found during the course of search, which can be held to be incriminating in nature. However, there cannot be a change of opinion unless the same is warranted by a change in law or by operation of a decision of the higher jurisdictional courts or the Supreme Court. The appellant has pointed out that in their case, assessment under section 143(3) was completed for assessment years 2003-04 to 2006-07 on various dates. It was submitted that during the course of regular assessment proceedings various information was called for in respect of raw material consumption, production and consumption of laminates. Questions were also asked regarding electricity consumption in the manufacturing process. The appellant submitted that all the details called for was submitted before the assessing officer and ....
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....5/05/2008 along with a detailed questionnaire was sent to the appellant. Questions 18 and 19 specifically deal with turnover, gross profit and expenses incurred in respect of trading and profit and loss account. Similarly, these aspects were looked into vide questions no. 14, 15, 16, 17 and 18 for assessment year 2005-06. In assessment year 2004-05, similar details were called for vide a questionnaire sent with the notice under section 142(1) dated 11/07/2006. The relevant questions are at 2(vii)(a), (b) and (c), 7, 11 and 16. Similarly, questions regarding consumption of raw material production, number of pouches produced and lamination used was called for vide the questionnaire sent along with notice under section 142(1) dated 21/09/2005 for assessment year 2003-04. The appellant provided quantitative details of production of gutkha, pan masala and other allied products manufactured by it. Similarly details of all sales and consumption of raw materials was provided. The aspect of production and sales was examined in depth inasmuch as even the ratio of consumption of raw material for every pouch of finished product and consumption of laminates per pouch were also examined. For all....
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....wn for the financial years 2006-07 to 2008-09 are being extrapolated for the financial years 2002-03 to 2005- 06 (please see paragraph 9.5 on page 38 for AY 2003-04). In fact, the assessing officer has rejected the books of account for all these assessment years under section 145 of the Income-tax Act on the ground that no primary or basic records are maintained at the factory premises. Thus, absence of records indicating consumption of raw material and production of finished goods has led the assessing officer to conclude that the correct business results of the appellant cannot be deduced. In this respect, the assessing officer has completely disregarded the fact that no evidence whatsoever reflecting suppressed production or sales and purchases outside the books of account were found during the course of search and seizure. It is a fact that the raw material and finished products found at the factory was reconciled with the bills and vouchers present in the head office and nothing incriminating was found there. Therefore, the only reason for rejection of books of account as can be seen from the order is ........... trend emerged (sic) from the impounded papers as regards the vol....
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....r of Sale-tax was requisitioned to provide the copies of seized documents. It seems from the assessment order that the copies requisitioned for, were sent by the Sales-tax department to the Investigation wing. These papers apparently contained details of sales of gutkha and pan masala by Shri Dharmesh Patel to various distributors for the financial years 2006-07, 2007-08 and 2008- 09. Statement of Shri Dharmesh Patel was recorded on oath under section 131 on 02/04/2009. In this statement he apparently confessed that sales to its distributors were made in cash and that the cash collected out of supply to distributors was handed over to Shri Sanjay Ghodawat through one Shri Mahesh. According to the statement taken Shri Dharmesh Patel was appointed as the C&F agent for gutkha and pan masala for Mumbai and Thane region. Shri Dharmesh Patel also admitted that he was not dealing in any other brands of gutkha and pan masala. Shri Dharmesh Patel confirmed that the Sales-tax department had seized the regular books of accounts recorded in the CPU and various loose papers and other documents on 20/01/2009. He stated that the data regarding gutkha business was from February 2006 onwards i.e. t....
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....Cir/Ser.Asstt./Ghodawat/2010-11/745 dated 06/12/2010 had requested the ADIT(Inv), Kolhapur that the statements which were recorded and reported was not made available to the assessing officer. Therefore, it is apparent that the assessing officer did not ask for the relevant books, registers etc. on the basis of which statements of these three persons were taken. 102. During the course of this appellate proceeding also I had requested the assessing officer to provide me with the evidences on the basis of which statements of these three persons were taken and on the basis of which unaccounted, suppressed production was calculated. However, the assessing officer was unable to supply me with these evidences as well. It will not be out of place over here to mention that Shri Dharmesh Patel had immediately retracted from the statement given to the Investigation Wing on 02/04/2009. The retraction was made in the form of an affidavit filed before a Notary on 04/04/2009. Subsequently, Shri Dharmesh Patel had also retracted from the statement by way of an affidavit filed before the Metropolitan Magistrate on 08/04/2009, the scanned copy of which is as under : 103. It is very clear that t....
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.... case of Avadh Kishore Das v. Ram Gopal AIR 1979 SC 861 has held that evidentiary admissions are not conclusive proof of the facts admitted and may be explained or shown to be wrong. They do however, raise an estoppel and shift the burden of proof on to the person making them. The Supreme Courtfurther held that they are not an efficacious proof of the facts admitted, if shown or explained to be wrong. 107. The statement to bind the maker must be voluntary and if it appears to have been obtained by coercion, inducement or threat it must be rejected. On retraction, earlier stated facts or admission, lose their effect as binding evidence and it is not permissible for any authority to conclude a matter on the basis of such earlier statement alone. At the same time, bald retractions of earlier admissions will not be enough and even after retraction such statements cannot automatically become nullities. Merely because a statement is retracted, it cannot become as involuntary or unlawfully obtained. For any retraction to be successful the retractor must show as to how earlier recorded statements do not state the true facts or that there was coercion, inducement or threat while recording....
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.... examine the maker carefully. On furnishing of an affidavit, the Assessing Officer is entitled to examine the witness or cross examine the deponent. If the Assessing Officer fails to cross-examine the deponent the statement made in the affidavit becomes unchallengeable. On this point, useful reference can be made to the decision of the Supreme Court in the case of Mehta Parikh & Co. v. CIT [1 956] 30 ITR 181 where it was held that it will not be open to the revenue to challenge the statements made by the deponent in their affidavits later on, if no cross examination with reference to the statements made in the affidavits is done. 111. The accepted position of admissions or confessions made in the statements recorded during search or survey, without there being any other evidence to support such admissions, is that they can successfully be made use of to assess the income, unless they are proved to be involuntary or are proved to have been taken under duress, coercion, misconception, or are patently wrong, or not backed by evidence etc. Therefore, we have to examine the statements of Shri Patel, Shri Shaikh and Shri Kharge in these milieus. We have to examine the statements to fin....
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....recorded in course of search wherein he admitted undisclosed income but later retracted from the said statement and accordingly the court held that without documentary proof, a statement alone cannot be utilized against the appellant. CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 1 77/102 Taxman 300 AP. (vi) In the case of appellant, no sufficient evidence was found in course of search conclusively indicating receipt of exact amount of cash sales which resulted in additions. (vii) It is settled principle that in case evidence is in the form of statement which is sought to be utilized against the appellant pertains to an ex-parte statement of witness, the same cannot be unilaterally utilized against the appellant without the witness being put to cross examination. In the case of Jaikisan R. Agarwal v. Asstt. CIT [2000] 66 TTJ 704 (Pune) it was held that in a case where no document was seized in course of a search showing payment of extra consideration for purchase of a property, whether additions can be made on the basis of statement recorded from third parties. It was held that any statement recorded at the back of the appellant has no evidentiary value and in the absence o....
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....All of them made themselves available for facilitating the cross-examination by the assessees. All these persons, who had initially deposed against the assessee, negated the statement made by them during the course of survey during the cross examination. Under these circumstances the. edifice of the evidentiary value built on the statement of that person collapses. This is the rule of law. Therefore, the initial statement does not constitute omnipotent evidence against the assessees. 114. A perusal of the cross examination conducted by the assessing officer reveals that after retraction of the statements made before the Investigation Wing, Shri Dharmesh Patel had categorically stated that apart from the purchasing of gutkha and pan masala from the Kotharis of Kanpur and from G M Joshi group, he had never given a statement that he was a C&F agent of the appellant. He further stated that all the goods purchased from Ghodawat Industries (India) Pvt. Ltd. are accompanied with the bill and the payments are made by cheque only. He further pointed out that contrary to what was recorded in the statement recorded on 02/04/2009, the Sales-tax department has also scrutinized the loose paper....
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....and gross profit in the following manner - 117. In the financial year 2006-07 the material seized by the Salestax department apparently indicated that there was a suppressed sales of Rs. 32,99,250/- during the four months period. Applying the decision of H M Esufali H M Abdulali (supra) the unaccounted sales for the entire year was arrived at Rs. 98,97,750/-. However, during this year the assessing officer had applied another formula which was not used in any subsequent or any earlier years to find out the quantum of suppressed sales. This formula was using the average weight of lamination per pouch to arrive at the "suppressed sales" figure. According to this formula, the "suppressed sales" was to the tune of Rs. 4,17,26,141/-. However, the income was computed by applying the multiplier of 54.87% on average sales, as for financial year 2002-03 to 2005-06, after excluding excise to arrive at a figure of Rs. 20,84,85,103/-. For the financial year 2007-08, the material collected by the Sales-tax department indicated unaccounted sales of Rs. 26,70,26,465/- during a ten months period. The assessing officer applied the ratio of decision in H M Esufali H M Abdulali (supra) to estimate ....
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....ing officer has stated that period of unaccounted turnover is for three months only. (c) Estimations are pure presumptions and not based on any evidences. (d) The assessing officer has wrongly assumed that the appellant is paying excise on production capacity of machines. The Karnataka High Court has stayed the notification dated 01/07/2008 No.29/2008-CE(N.T.) allowing levy of xcise on production capacity of installed machinery. Instead, excise is payable on actual production as per the interim order dated 11/07/2008 issued in favour of the appellant in Writ Petition filed in Karnataka High Court, Circuit Branch at Dharwad. This is ample proof of the fact that all manufacturing records are vetted by the excise department. They have not made out any case of suppressed production till date. (e) The appellant has also drawn my attention to the excise records available with the Department. This excise records are for the period 17/11/2007 to 24/02/2008 i.e. financial year 2007-08. They are Mazhar reports of excise officials of various dates which show the stock of raw materials, finished goods, inward of raw and packing materials received, the invoice numbers against which they....
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.... 4 30/11/2007 5 02/12/2007 6 04/12/2007 7 05/12/2007 8 12/01/2008 9 14/01/2008 10 15/01/2008 11 22/01/2008 12 01/02/2008 13 12/02/2008 14 13/02/2008 15 14/02/2008 16 15/02/2008 17 16/02/2008 18 19/02/2008 19 21/02/2008 20 22/02/2008 21 23/02/2008 These are the dates on which the Excise officials actually oversaw the entire production process and noted down the quantum of inward of raw and packing material and the clearances of bags of various products. These are contemporaneous documents which also record the stoppage time in production during the day. The Excise officials have also conducted random check of machine speed and found out the number of pouches produced by them. It was pointed out that it is on this actual production that excise has been levied due to the operation of the interim order of the Hon'ble Karnataka High Court in respect of payment of excise duty. (f) The appellant has pointed that contrary to the notion held by the assessing officer that excise duty is payable on machine basis irrespective of actual quantum of production, in their case excise is levied on actual production of pan masala and gutkha. 119....
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....n in law that in the absence of any evidence to the contrary, third party statements cannot be relied upon to make any additions especially of the kind that has been made in the appellant's case. The additions are arbitrary in nature and they are based on surmises and conjectures and is not backed by any evidence. As noted earlier, there was no material before the assessing officer except a retracted statement of another person that any part of the turnover of the appellant was suppressed. It is true that there was no material at hand at the production centre regarding inward of raw material and outward of finished product, it is equally true that the balance of raw material, and finished product as per the books maintained in the head office tallied with the physical stock found at the factory premises. The books seized by the Sales-tax department which were relied upon to make these generalizations, were not shown to the appellant and in fact, even the assessing officer did not have a glimpse of the basic documents on the basis of which conclusion was drawn that there was suppressed production. Those documents and evidences were not produced even at the appellate stage. In fa....
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..... 25 lakhs were purchased between 01/04/2008 to 01/12/2008 and another Rs. 24,82,196/- between 02/12/2008 to 03/02/2009. There is no evidence of any cash purchases by Shri Shaikh between 01/04/2008 to 01/12/2008 and after 03/02/2009. Hence, the conclusion drawn by the assessing officer that Rs. 50 lakhs worth of unaccounted sales was made through Shaikh Traders of Satara by the appellant in a three months period appears to be incorrect. The actual amount, even if we take the statement of Shri Shaikh as correct, is to the tune of approximately Rs. 25 lakhs for a three months period. Therefore, by way of logic followed by the assessing officer an extrapolation could have been made only to the extent of Rs. 1 crore and not Rs. 2 crores. 123. I have already dealt with the legal aspects on the ramification of statement of third parties and cross-examination earlier in this order. I have also referred to the decisions given in the Jai/dsan R. Agarwal v. Asstt. CIT (supra) wherein it has been held that retracted statements cannot be ignored and that the statements taken behind the back of the appellant do not have any evidentiary value unless backed by some documents, papers or other ev....
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....d on the premises of M/s Siddeshwar Agencies, Solapur and Ichalkaranji. The statements of Shri Udhav Kharge were recorded on 14/02/2009 and 27/02/2009. In the statement, Shri Udhav Kharge had accepted that he had made a total sale of Rs. 66,51,159/- which he has not recorded in his books of account. Since this sale pertained to a period of two months only during the financial year 2008-09, the quantum of total sale was extrapolated to Rs. 396 lakhs for the entire year. This amount was also added in the assessment year relevant to the financial year 2007-08. Thus, we find that like in the case of M/s Shaikh Traders, though the period of "unaccounted" sales pertained to the financial year 2008-09, the extrapolation was also done in the financial years 2007-08 for the reason that these persons (Shri Shaikh and Shri Udhav Kharge) were acting as distributors of the appellant during the financial year 2007-08 as well. 125. Shri Udhav Kharge was also examined in cross-examination on 24/12/2010 wherein his attention was drawn to question no. 18 of the statement dated 13/02/2009 wherein he had stated that he had also purchased the products of the appellant from the local market and that G....
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....he preceding years and estimation of sales and profit thereon for all the years. Apart from the various decisions relied on by the Assessing Officer the Ld. Departmental Representative also relied on the following decisions : 1. CIT Vs. Chetan Das Lachman Das reported in 25 taxmann.com 227 (Delhi) 2. Rajnik & Co. Vs. ACIT reported in (2001) 117 taxman 675 (AP) 3. CIT Vs. M.K.E. Memon reported in 112 taxman 96 (Bom.) 4. CIT Vs. Hotel Meriya reported in (2010) 195 taxman 459 (ker.) 5. Khopade Kisanrao Manikrao Vs. ACIT reported in (2000) 74 ITD 25 (Pune) (TM) 23. The Ld. Counsel for the assessee on the other hand heavily relied on the order of the CIT(A) to the extent of relief granted by him. Reiterating the arguments advanced before CIT(A) he submitted that the assessee maintained proper books of accounts which are audited. The assessee maintained proper excise records since the products manufactured by the assessee are liable to excise duty and are under the active supervision and surveillance of the central excise department. He submitted that during the years 2007-08 and 2008-09 the excise authorities have verified the stock registers on different dates and have confi....
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....stock in the tabular form. If no records were maintained, then it would not have been possible to give such details as required under the I.T. Act. u/s.44AB. Neither the search party during search proceedings nor the Assessing Officer during the course of assessment proceedings brought out any discrepancy in the book stock as per the records maintained at the head office and physical stock at the factory premises. 23.1 He submitted that the excise duty during A.Y. 2009-10 was on ad-valorem basis and on actual dispatches. However, from 01-07-2008, the excise duty was sought to be levied on the number of operational packing machines used vide Notification No.42/2008-Central Excise dated 01-07-2008. It was brought to the notice of the search party as well as the Assessing Officer that the Hon'ble Karnataka High Court vide their order dated 11- 07-2008 granted interim stay on levy of excise duty on operational machines and directed the assessee to pay excise duty as was paid prior to 11-07-2008. Since the factories are located in the state of Karnataka State, the assessee was not paying excise duty on the basis of operational packing machines used. He submitted that during the course ....
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....facturers also. Referring to the show cause notice dated 12-03-2009 received by him from the sales tax department after the scrutiny of the seized records he had submitted a copy of the show cause notice during the cross examination, according to which the unaccounted sales for the corresponding OMS (out of Maharashtra state) purchases for the period April 2008 to January 2009 are Rs. 2,33,24,556/- and tax is Rs. 29,15,570/-. The demand notice raised by the sales tax department was for unaccounted sales for the corresponding OMS (out of Maharashtra state) purchases for the period April 2008 to January 2009 amounting to Rs. 29,15,570/-. He submitted that the sales to Ambika Enterprises are within Maharashtra State. He submitted that Shri Dharmesh Patel has also stated during cross examination that some of the papers confronted to him during recording of his statement on 02-04- 2009 do not belong to him. Further, in his affidavit Shri Dharmesh Patel, while retracting from the statement made on 02- 04-2009, has categorically stated that some of the papers confronted to him were not belonging to him. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Shri Dhar....
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....that the assessee company is not involved in making any unrecorded sales. 23.6 So far as estimation of sales for A.Y. 2007-08 and 2008-09 are concerned he submitted that during the course of search no document/material was found to suggest that the company was indulging in making purchases or sales outside the books of accounts. Since the products manufactured by the assessee company are liable to excise duty the assessee has maintained proper records for excise duty purposes which were duly verified by the excise department authorities and which are the part of the seized documents. Not a single case is pending against the company for excise duty violation. Further, the dealers and C&F agents in their statements/affidavits have already denied that they have made any unaccounted transaction with the assessee company. He submitted that the figures arrived at by the Assessing Officer are imaginary and there is no basis for the same. The Ld.Counsel for the assessee submitted that the Ld.CIT(A) while deleting the addition made on account of estimated profit on estimated sales for all the years has sustained addition of Rs. 1,27,98,183/- being 54.87% of suppressed production of Rs. 2,3....
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....trapolation /estimation of income on the basis of suppressed sales determined by him for the A.Y. 2007-08. The same was on the basis of statement recorded from 3 dealers/C&F agents namely, Shri Dharmesh Patel, proprietor of M/s. Ambika Enterprises, Mumbai, Shri Kutubuddin R. Shaik, Proprietor of M/s. Shaik Traders, Satara and Shri Udhav Kharge (HUF) represented by Kata Shri U.S. Kharge. Further, the Assessing Officer also based his estimation on the basis of production capacity of the machines, the statements of some of the employees and consumption of lamination for production of pouches. 24.1 We find the Ld.CIT(A) while deleting the addition of estimated profit on suppressed sales for A.Yrs. 2003-04 to 2008- 09, however, has sustained an amount of Rs. 1,27,98,184/- for A.Y. 2009-10 on account of estimated profit on suppressed turnover of Rs. 2,33,24,556/- in case of sales to Shri Dharmesh Patil, Proprietor of M/s. Ambika Enterprises, Mumbai. The assessee has challenged the above in its appeal for A.Y. 2009-10 24.2 So far as the order of the order of the Ld.CIT(A) deleting the addition on account of unaccounted sale of Gutkha for different years are concerned, we find no infirmi....
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....atil, proprietor of M/s. Ambika Enterprises, Mumbai is concerned, we find although the Assessing Officer made his statement as basis for estimating the suppressed sales, however, the Mumbai Bench of the Tribunal vide ITA No.4522/Mum/2012 order dated 14-06-2013 has deleted the addition in the hands of Shri Dharmesh Patel by observing as under : "8. We have considered the rival submissions as well as the relevant material on record the Assessing Officer worked out the unaccounted sale of Gutkha and Pan Masala purportedly on the basis of the details contained in the loose papers seized by the Sales Tax Department during the search on 20th January, 2009. The Assessing Officer has supported its finding by the statement of the Assessee recorded on 02.04.2009 post survey carried on 05.02.2009. We find from the record that the Assessing Officer supplied the copy of the said statement to the Assessee but did not supply the other documents/record requisitioned from the Sales Tax Department based on which the unaccounted sale was worked out by the Assessing Officer. The Assess vide its letter dated 26.11.2010 placed at page No.46 of the Paper Book specifically demanded the alleged record. T....
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....the show case notice to the Sales Tax Department wherein the proposed unaccounted sale was to be taxed for a 10 months w.e.f. 01.04.2008 to 31st January, 2009. For ready reference we reproduced the show cause notice issued by the Sales Tax Department as under:- Officer of the Dy. Commr. Of Sales Tax (INV) Thane 4th Floor, Collector's Officer Comp. Above Treasury Officer, Thane (W) To, M/s Shri Ambika Enterprises 110, Narayan Udyog Bhavan, Lalbaug Industrial Estate, Ganeshnagar, Lalbaug, Mumbai-400 012 No. DCST/INV/THN/INV No.41/08-09/B-28 Dt.12/03/2009 Sub:- Show Cause Notice in the case of M/s Shri Ambika Enterprises Period 01/04/2008 to 31/01/2009 TIN No.-27350590340V/C Ref:- INV Visit No. 41/08-09 With reference to the above, your place of business was visited u/s 64 of MVAT Act-2002 on 20/01/2009. Some books of accounts, loose papers, Sales/Purchases bills and estimated memos were brought to this office. After scrutiny of the records its is revealed that you are doing business as Trading of Pan Masala (C & F Agent) etc. While going through the records it is seen that you have sold goods on Cash memos which are not accounted in your regular books of accounts for ....
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.... Income Tax Authorities have requisitioned the same from Sales Tax Department there may be some variation in appreciation of the evidence by different authorities but it cannot be said that one could completely discard the other. Therefore it. cannot be two conflicting views on the same evidence so that when it put to the test of sustainability one bound to fail. The primary evidence is with the Sales Tax Department being seized material and the record gathered by the Income Tax Authorities is only secondary evidence as the original was not given to them. However the outcome of the appreciation of the primary evidence cannot be superseded by the appreciation of the secondary evidence. 11. Another glaring aspect of conflict between the sales Tax Department and Income Tax Authorities is the conclusion arrived with respect to the unaccounted sale. The Sales Tax Department has arrived to the conclusion that the unaccounted sale is from the purchase made from outside the Maharashtra state where as the Assessing Officer took the unaccounted sale from the purchases from Godhwat Industries (within the Maharashtra State). Therefore when the Sales Tax Department who carried out the search ....
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....he case may be, of subsection (1) of section 132A, had been found in the possession or control of that person in the course of a search under section 132.] It is prerequisite condition for invoking the presumption under section 292 C that the Books of Accounts, other document or assets are either found in the possession or control of any person in the course of search under section 132 or survey under section 133A or requisitioned in the course of search under section 132. In the case of the Assessee before us there is no search under section 132 and there was only survey under section 133A. The documents in question were not found in possession or control of the assessee during the said survey. The case of the department is that these documents are requisitioned from the Sales Tax Department, but when there is no search under section 132 of the Income Tax Department, then the documents so requisitioned does not fall under subsection 2 of section 292C. Hence no presumption can be raised in respect of the documents which are neither found in the possession or control the assessee nor requisitioned under section 132A. 13. The another question arises regarding the admission by the....
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.... agents namely Mr. Kutubuddin R. Shaik and Mr. U.S. Kharge. We find force in the submission of ld. Counsel for the assessee that retracted statements cannot be made basis for addition unless there is any corroborative evidence. 24.5 Since the assessee in the instant case maintains proper books of accounts which are duly audited and since no addition has been made by the excise department on account of purchases, sales or production outside books and since no incriminating documents whatsoever were either found or seized from the office or the factory premises of the assessee regarding any unaccounted purchases or sales and since the stock found at the time of search tallied with the stock as per books of accounts maintained, therefore, under the facts and circumstances of the case, we are of the considered opinion that no addition can be made on account of estimated profit on suppressed turnover. 24.6 So far as the decision of Hon'ble Supreme Court in the case of H.M. Esufali H. M. Abdulali (Supra) and various other decisions relied on by the Ld. Departmental Representative are concerned, the same in our opinion are not applicable to the facts of the present case especially when t....
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....for the A.Y. 2003-04. While doing so, he kept in mind the production process and average credit given to C&F Agents, Distributors etc. 26. Before the CIT(A) it was submitted that no evidence of unaccounted purchases was found or seized in the course of search action or in post search enquiries. It was submitted that evidences, if any, were for alleged suppressed sales for F.Yrs. 2006-07 and 2008-09. It was argued that stock of finished product and raw material and cash found during the course of search tallied with the books of accounts. Therefore, the addition based on presumptions, surmises cannot be sustained. 27. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition. While doing so, he held that since the additions for A.Yrs. 2003-04 to 2006-07 and subsequently for A.Yrs. 2007-08 to 2009-10 were deleted by him which were based on presumptions, surmises and conjectures, therefore, no addition on account of initial working capital is warranted since there is no production requiring infusion of fresh capital. 27.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 28. We have considered the arguments made by both the sided ....
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....ns due to which it was not possible to arrive at the correct income of the appellant. Although the assessing officer has stated over and again that the books of account are not reliable, I find that this assertion has been made solely on the ground that inward and outward registers were not maintained at the production centre of gutkha and paan masala. Inward and outward registers give a comprehensive picture of consumption of raw material and output of finished products. If there is any discrepancy between what has come in and what has gone out after accounting for production then, the same would be reflected in the finished products lying in the godown or the raw material lying in the factory premises. Admittedly, no such discrepancy has been found. It has been recorded several times in this order that no incriminating evidences or material was found which would indicate that the book results were unreliable. Under these circumstances, I hold that the assessing officer was not right in rejecting the books of account under section 145 for all the years under consideration." 30.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 31. We have considered th....
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.... the Income-tax Act, 1961 and held that it would be fair and reasonable to take the gross profit at 5.59 per cent, which was also the rate for the preceding assessment year. While allowing the appeal filed by the assessee, the Commissioner (Appeals) noted that the assessee had furnished complete details including comparative details in respect of purchase of raw-materials, and manufacture of copper wire as well as in respect of sale during the year in question, as compared to the earlier years. He also felt that the assessee had explained the marginal increase in the weight of wire along with supporting data of the year in question as well as of the preceding years. He also took note of the fact that the assessee was duly registered under the Central Excise Act and was maintaining proper quantitative details in the prescribed manner. He, therefore, held that the assessee had adopted a consistent and regular method of accounting and valuation of stock during the year in question as was done by her in the preceding years. He, accordingly, held that the Assessing Officer was not justified in rejecting the books of account and in applying the enhanced gross profit ratio. The Tribunal, ....
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....by itself be a ground to reject the account books under section 145(3) of the Act. Whether fall in gross profit stood explained by the assessee or not was a question of fact. Both the Tribunal and the Commissioner (Appeals) having accepted the explanation given by the assessee and the finding of fact recorded by them having not been shown to be perverse in any manner, no substantial question of law arose to interfere with." 31.2 Relying on the above decision and in view of our discussion in the preceding paragraphs while adjudicating the ground relating to deletion of estimated profit on unaccounted sales made by the AO, we find no infirmity in the order of the CIT(A) holding that the AO was not justified in rejecting the books of accounts u/s.145 of the I.T. Act. We accordingly uphold the order of the CIT(A) on this issue and the ground raised by the Revenue on this issue is dismissed. 32. Grounds of appeal No. 6 and 7 being general in nature are dismissed. 1910/PN/2012 (A.Y. 2004-05) : 33. Ground of appeal No.2 by the Revenue reads as under : "On the facts and in the circumstances of the case the CIT(A) erred in deleting the addition on account of disallowance of depreciati....
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....vehicles are used by the directors, 'even if they are personally used by the directors' the vehicles are personally used by the company, because a limited company by its very nature cannot have any 'personal use'. The limited company is an inanimate person and there cannot be anything personal about such an entity. The view that we are adopting is supported by the provisions of section 40(c) and section 40A(5) of the Act. 53. In the case of Urmila & Co. Ltd. v. Deputy Commissioner of Income-tax [2012] 20 taxmann.com 324 (Mum.), the Assessing Officer disallowed 25 per cent of the total claim of telephone expenses on the ground of personal use of the telephone at the house of the executives as well as other places and made addition. It was held that the reimbursement of telephone expenses by the assessee could be treated as perquisites in the hands of the respective executives. Therefore, the addition was deleted. 54. In the case of Ramkishin Textiles (P.) Ltd. v. Income-tax Officer [2011] 16 taxmann.com 57 (Mum.) the Commissioner of Income-tax (Appeal) had approved the additions made by the assessing officer in respect of disallowance of transport, octroi and fre....
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.... of less than 6 months were purchased by the assessee at about half the price of its original cost. Similarly, in some cases, the Assessing Officer noted that only 50% of the cost, at which such cars were purchased, was reflected in books. The Assessing Officer referred to the statement recorded during assessment proceedings of one Shri Ponkshe who had stated to have sold the Maruti SX4 car to Ghodawat group at Rs. 7 lakhs whereas the amount reflected in the balance sheet was Rs. 3.50 lakhs only. The difference could not be explained by the authorised representative. In another group case, he observed the Assessing Officer in that case has observed that the assessee had purchased one Mercedez S-class car bearing No. MD-11- M55 from Shri Sunil Ramanlal Shah, an LIC agent for Rs. 31 lakhs which was purchased by Sri Shah at Rs. 56,29,015/-. Similar instances were there in respect of cars purchased from M/s.S.F. Chougule, Sangli and Shri H.T. Tamboli, Satara. Based on the above observations, the Assessing Officer made addition of Rs. 43,79,019/- for A.Y. 2004-05 (and an amount of Rs. 15 lakhs for A.Y. 2005-06). 38. Before the CIT(A) it was submitted that the addition made was on the b....
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....ulali reported in 90 ITR 271 and the decision of the Hon'ble Bombay High Court in the case of CIT Vs. M.K. Memon reported in 248 ITR 310 he deleted the addition made by the Assessing Officer. While doing so, he further noted that there is no basis for making the impugned additions except in the case of car purchased from Mr. Vikram Ponkshe who had stated that he received twice the amount of money than what was received by him in cheque. There was no other evidence apart from the oral evidence given by some sellers that the assessee had paid anything over and above the amounts shown in the books of accounts. There was no material before the Assessing Officer except oral evidence of one seller to come to the conclusion that assessee had paid twice the amount of registration value to purchase the other vehicles. He accordingly, deleted the addition. 39.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 40. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited by both the sides. We find i....
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....ra money over and above the purchase price as recorded in the books of accounts. None of the sellers was examined by the AO. The AO has not brought on record the date of original purchase price by the sellers, date of purchase by them, date of sale to the assessee etc. It is well known that the price of vehicle decreases after it is purchased and used for some time and the value never remains constant or increase. It only decreases. In view of the above and considering the detailed order of the CIT(A) which in our opinion is a reasoned one, we find no infirmity in the same. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed. 40.2 Identical ground has been taken by the Revenue in A.Y. 2005-06. Following our above reasoning, the ground raised by the revenue for A.Y. 2005-06 on this issue is also dismissed. 1913/PN/2012 (A.Y. 2007-08) : 41. Ground of appeal No.3 by the Revenue reads as under : "On the facts and in the circumstances of the case the CIT(A) erred in adopting the expenditure over gross receipt of agricultural income at 32% for A.Y. 2007-08 as against 45% taken for A.Y. 2006-07 of Rs. 1,00,45,781/-". 41.1 Facts of the case, in brief, ar....
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....abourers, purchase of pesticides, seeds, fertilizers, land cess, water and electricity consumption etc. Considering these facts, I hold that the disallowance accepted in earlier years hold good for the current year as well. However, as stated by the appellant, the addition should be of Rs. 69,30,802/- only. Appellant gets a relief of Rs. 31,14,979/-." 43.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 44. We have considered the rival arguments made by both the sides. We find the AO in the very first paragraph has stated that the agricultural income shown by the assessee is Rs. 3,93,99,179/. However, at para 15 of the order he has stated the agricultural income declared by the assessee at Rs. 3,62,84,200/-. We find although the Ld.CIT(A) accepted the reasoning given by the AO, he however accepted the contention of the assessee that there is some arithmetical inaccuracy. Since there is some variation in the agricultural income mentioned by the AO in the body of the assessment order, therefore, we restore this issue to the file of the AO with a direction to verify the figures and pass appropriate order. The ground raised by the Revenue is accordingly al....