TaxTMI 
TaxTMI 
2018 (12) TMI 1702
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....7. The assessee is an individual conducting business of trading of import duty scrips. A search was conducted at the residential and business premises of the assessee on 03/02/2015. The assessee has filed his return of income u/s. 139(1) on 30/09/2009, declaring a total income of Rs. 3,21,05,740/-. Consequent to search, notice u/s. 153A was issued for the assessment years 2009-10 to 2014-15 on 29/11/2016 in response to which the assessee filed return of income on 06/12/2016, declaring a total income of Rs. 3,21,05,740/-. 3.1 The assessee is primarily a trader in export incentives received under Vishesh Krishi Gram Udyog Yojna, Duty Entilement Pass Book etc. The export incentives received by the cashew exporters, marine exporters who are mainly based in Kollam are purchased by the assessee and sold to importers based outside the State. The assessee conducts same kind of business through the following Companies as Managing Director: i) M/s. Sabari Quality Foods ii) M/s. Sabari Enterprises P. Ltd. iii)M/s. Sabari Milllenium Exporters P. Ltd. iv)M/s. Sabari Switchgear P. Ltd. Among the major purchasers of export incentives as per the books of a....
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....14-15 371758345 156528239 47586619 167643487 0 2015-16 341213767 164791823 176521944 0 0 Total 0 1279027551 28487253 167643487 7775455 c). M/s. Ajay Iron and Steel P Ltd Asst.Year Total Turnover Turnover with SQF Turnover with Sabari Millenium Exports P Ltd Turnover with Sabari Enterprises Ltd Turnover with Sabari Switchgear P Ltd 2009-10 0 0 0 0 0 2010-11 0 0 0 0 0 2011-12 64841 0 64841 0 0 2012-13 0 0 0 0 0 2013-14 4034750 0 2555749 1479001 0 2014-15 4457276 0 2576166 1881110 0 2015-16 0 0 0 48718355 0 Total 0 0 5196756 52078466 0 d) Vani Exporters Asst.Year Total Turnover Turnover with SQF Turnover with Sabari Millenium Exports P Ltd Turnover with Sabari Enterprises Ltd Turnover with Sabari Switchgear P Ltd 2009-10 120407959 15500035 58934156 0 45973768 2010-11 125761421 118503685 87124 0 7170612 Total 0 134003720 59021280 0 53144380 3.3 The Assessing Officer noticed from the af....
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....760114 0.34 2011-12 845673545 211683 3.0 2012-13 2184183988 982890 0.42 2013-14 658241184 374514 0.60 2014-15 444409756 525030 1.06 2015-16 220741120 408150 2.92 Shyam International Asst Year Total Turnover Total Income Returned Gross profit ratio declared 2009-10 1432628764 188960 0.06 2010-11 1862136442 211590 0.16 2011-12 607109343 94480 0.37 2012-13 403987517 206970 0.46 2013-14 - - IT Not Filled 2014-15 1651106916 265480 0.22 2015-16 2991294481 103420 0.28 3.4 According to the Assessing Officer, it was evident from the declared turnover and total income returned that the Kolkota businesses were not earning profits in the scale of Sri Sunil Kumar even though they are also doing the same business and these businesses were also viewed in the background of a statement recorded from Sri Mahesh Khetan S/o Late Gouri Shankar Khetan by the Deputy Director of Income tax (Inv)Unit 2(1), Kolkota on 7.4.2016. The substantive part of the statement is the answer to question no.10 which states: " Apart from the above compan....
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....e at the end of the statement whose meaning he did not understand. 4. That he was not allowed to go through the statement and he was just following the direction of the officer taking deposition 5.That he was retreating his earlier statement which was recorded under threat correction and pressure. 3.5 Shri Manish Khetan had alleged criminal intimidation while recording the statement by the Income tax Authority and that the same was being retracted since it was done under coercion and pressure. According to the Assessing Officer, though he had alleged criminal intimidation no complaint was raised before any authority. Moreover, it was found that the affidavit dated 12th May 2016 was never furnished to the Income tax Authority who had recorded the statement after retracting. According to the Assessing Officer, in order that retraction is to be accepted as evidence, the witness need to be cross examined Reliance was placed on the judgment of the Supreme Court in the case of CIT vs. Durga Prasad More (82 ITR 540) (SC) where in a case party relied on self serving recitals in documents it was for the party to establish the truth of these recitals. According to the As....
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....were obtained under the head loans and advances from the Kolkota businesses and these loans weree non interest bearing and remained in the books for period ranging from one to three years. According to the Assessing Officer round tripping of funds or ploughing back of funds seem to be a clear possibility. The Assessing Officer found that there was regrouping of liabilities as Sundry Creditors or Loans and Advances. On the basis of the principle of preponderance of probability funds remaining as payable in the hands of the assessee are to be considered as assesses funds received from persons whose creditworthiness is not proved. According to the Assessing Officer, the balance sheet, P & L A/c and its schedules of M/s Basanth Impex, Shyam International, Shree Chao, M/s Ajay Iron and Steel P Ltd showed sundry creditors and sundry debtors and no long term loans to Shri Sunil Kumar or his companies and only M/s Ajay Iron and Steel paid amounts for share application to Sabari Enterprises Ltd., Sabari Millenium Impex P Ltd and Sabari Switchgear P. Ltd. and received share premium from financial years 2009-10 onwards. According to the Assessing Officer, even though as per the accounts of M/....
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....im, the transaction was not satisfactorily explained by the assessee. It was submitted that the retraction statement cannot be considered. The Ld. CIT(DR) submitted that the CIT(A) should have caused necessary enquiry under the power vested with him in terms of section 250(4)of the Act or he should have directed the Assessing Officer to cause necessary enquiry. Since he has failed to do so, he prayed that the issue may be remitted to the file of the CIT(A) for fresh consideration. 6. On the other hand, the Ld. AR submitted that the assessee sold the import licenses to the Calcutta based Companies on F Form basis and saved the sales tax @ 4% on the turnover, which was the main reason for the higher profit earned. The Ld. AR submitted that the statement recorded u/s. 133A of the I.T. Act does not authorize any income tax authority to examine any person on oath and hence, any such statement has no evidentiary value and any admission made during such statement cannot by itself by made the basis for addition. The Ld. AR relied on the judgment of the Jurisdictional High Court in the case of Paul Mathew & Sons vs. CIT (263 ITR 101) and the judgment of the Madras High Court in the case ....
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....s. The Ld. AR submitted that the assessee had disclosed the identity of the creditor, its creditworthiness by providing income tax assessment details of the creditors and the Assessing Officer was having in his possession the financial statements of the creditors and the Assessing Officer had himself admitted that the funds were received through banking channels. Therefore, it was submitted that all the criteria prescribed for proving the credits as per the provisions of sec. 68 having been discharged, the onus of proving otherwise shifted to the Assessing Officer and he cannot make an addition u/s. 68 merely on the basis of his assumptions that the funds were of the assessee himself and without discharging this onus with documentary evidences, the addition made u/s. 68 is not sustainable. For this, the Ld. AR relied on the judgment of the Delhi High Court in the case of CIT vs. Shiv Dhooti Pearls and Investments Ltd. (237 Taxman 104) wherein it was held that Assessing Officer had ample 'freedom 'to make an enquiry "Not only into the Source(s) of the Creditor, but also of his (Creditor's) Sub-Creditors and prove, as result, of such an enquiry that money received by the Assessee, in....
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.... maintained by Sabari Group. They were used only for signing authorities by Sabari group. In lieu of signature they got commission from Sabari group". However, Shri Mahesh Khetan, later retracted from his statement claiming that the statement from him was taken exerting undue pressure and force. Subsequent to retraction by Shri Mahesh Khetan, the Assessing Officer did not carry out any further investigation and relied on the statement originally recorded by the DDIT, Kolkota. In the statement, originally recorded by the DDIT, Kolkota, Shri Mahesh Khetan stated that the books of accounts of his concerns, i.e., Basanth Impex, Shyam International, Vani Exports etc. were maintained by the assessee Shri P. Sunil Kumar. However, search was conducted at the premises of the assessee, and if the books of Mahesh Khetan's group were found at assessee's premises, the Assessing Officer would have mentioned the same in the assessment order. Obviously, the books of accounts relating to Shri Gauri Shankar Khetan and Shri Mukesh Khetan group of cases were not found within the contents of original statement of Shri Mahesh Khetan recorded by DDIT, Kolkota are not true and cannot be relied upon. Simil....
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.... of adequate material and it should stand on its own legs. The Assessing Officer without examining the issue properly, he cannot come to the conclusion that the assessee had advanced loans to other business concerns and got it back. The evidence brought on record by the Assessing Officer does not suggest that the source of funds received from the alleged parties was sourced by the assessee. Addition was made only because of low profit margin of the parties who had advanced money to the assessee. These are the assessments u/s. 153A of the Act. The documents relied on by the Assessing Officer for the purpose of determining the income of the assessee is to be put before he assessee for comments or for cross examination. More so, if the Assessing Officer wants to rely on any statement of third party, the same is required to be furnished to the assessee and if the assessee wants to cross examine any of the parties whose statements were relied on by the Assessing Officer, the same is to be provided to the assessee. 7.1 In the present case, the assessee is having grievance of not being provided an opportunity of cross examination of the parties whose statements were relied on by the As....
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....s of the case as narrated in ITA No. 349/Coch/2017 are that from the balance sheet of M/s. Basanth Impex for the F.Y. 2010-11, it was found that an amount of Rs. 1,00,00,000/- was paid to Shri Thulasidhas, a close friend and partner of the assessee. They were partners of M/s. Sabari Developers, a firm with the same address as that of M/s. Thulasi Developers P. Ltd. The payment was made by Basanth Impex as interest free loan on behalf of the assessee. Therefore, this amount was assessed in the hands of the assessee u/s. 69B of the Act. 8.2 On appeal, the CIT(A) found that the loan was given by M/s. Basanth Impex to Shri Thulasidhas and therefore, the amount cannot be given by the assessee to Shri Thulasidhas. According to the CIT(A), the Assessing Officer has not spoken about any evidence in support of this conclusion drawn. It was noticed that the transaction was not recorded in the books of the assessee and the transactions between M/s. Basanth Impex and Shri Thulasidhas had taken place through banking channels and was duly recorded by them in their books. Under these facts and circumstances of the case, the CIT(A) held that the addition made by the Assessing Officer cannot be ....
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....of appeals of the Revenue is also dismissed. 9. The next ground in ITA No. 348/Coch/2017 is with regard to deletion of the addition of Rs. 61 lakhs being investment made by the assessee in shares of Penver Products (P) Ltd. 9.1 The facts of the case are that the assessee had purchased 19444 shares of Penver Products (P) Ltd. each costing Rs. 828 and the requisite proof was furnished by the MD of the said firm under oath. Thus, the total investment came to Rs. 1,60,99,632 (Rs. 1.61 crores). The assessee made payment of Rs. 1 crore as shown by seized material SKP/KLM/DS/8 and the balance of Rs. 61 lakhs was paid by M/s. Basanth Impex which did not have the sources to make such a large investment. Therefore, the Assessing Officer made the addition of Rs. 61 lakhs, being unexplained investment. 9.2 On appeal, the CIT(A) deleted the addition by observing that the assessee, M/s. Basant Impex and M/s. Penver Products Pvt. Ltd. are three different entities. The assessee had paid an amount of Rs. 1 crore for subscription of 12,077 shares of M/s. Penver Products Pvt. Ltd. and recorded the same in his books of account. Similarly, M/s. Basanth Impex had paid an amount of Rs. 61 lakhs ....
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.... land at Ambalipadam by M/s. Sabari Quality Foods. A cash flow statement was filed by the assessee which showed a total cash outflow of Rs. 4,22,00,079/-. According to the Assessing Officer, the actual cash outflow as per the seized document PSK/DS/2(1) was Rs. 7,39,53,500/- in place of Rs. 6,07,00,000/- and the difference between the two was treated as unaccounted investment made by the assessee. 10.2 On appeal, the CIT(A) found that there was no mention of any statement recorded of Shri Vishwajith Menon in respect of the paper and this transaction in the assessment order. No statement of the assessee was seen to have been taken on this transaction which was lawfully required, as the addition was made in his hands. The CIT(A) observed that no inquiry was made with the seller of land to verify the actual price of land and no admission was made by the assessee during the course of search regarding payment of unaccounted consideration for purchase of land. The CIT(A) noticed that the Assessing Officer had not made any effort whatsoever to enquire about the transaction reflected in the seized piece of paper. The CIT(A) was of the opinion that the piece of paper found and seized dur....
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....e without any corroborative evidence and without making any enquiry, the Ld. AR prayed that the addition may be deleted. For this, he relied on the judgment of the Jurisdictional High Court in the case of CIT vs. Lakshmi Hospital (347 ITR 367). 10.5 We have heard the rival submissions and perused the record. In this case the addition was made on the basis of jottings in a loose paper found during the course of search. The Assessing Officer co-related these jottings in the loose paper to purchase of land at Ambalipadam by M/s. Sabari Quality Foods. According to him, there was a difference between the actual transaction recorded by the assessee in his books of account and entries in the loose paper found during the course of search. In our opinion, entries in the loose paper cannot be considered as material to sustain the addition. More so, the CIT(A) observed that there was no statement recorded from the assessee towards this transaction by the Department. Further, there was no inquiry made with the seller of the land to verify the actual price of the land and there was no admission made by the assessee during the course of search regarding this transaction. Under these facts and....
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.... was only a negative figure of Rs. 18,09,269/-. Similarly, the loan of Rs. 40,23,407/- received from Sabari Switchgear P. Ltd. was included under the Schedule of Loans and Advances. The assessee had advanced Rs. 8,48,01,579/- to M/s. Sabari Switchgear P. Ltd. during this assessment year itself and was included under the Schedule Deposits and Advances in the balance sheet of the assessee as on 31/03/2009. So, it was submitted that when these amounts were clubbed together, the net amount as on 31/03/2009 will only be an advance to M/s. Sabari Switchgear P. Ltd. at Rs. 8,07,78,171.43. Therefore, it was submitted that both the schedules should have been verified by the Assessing Officer which was available to him. As there was no loans as on 31/03/2009, it was submitted that the both the additions may be deleted. 11.5 We have heard the rival submissions and perused the record. During the year under consideration, the assessee received Rs. 40,23,407/- as loan from M/s. Sabari Switchgear Pvt. Ltd. The accumulated profit of this Company was Rs. 57,83,680/-. Hence, the Assessing Officer treated the amount of Rs. 40,23,407/- as deemed dividend u/s. 2(22)(e) of the I.T. Act. However, the ....
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..... 68 of the I.T. Act amounting to Rs. 5,44,344/- being amount payable to M/s. Shyam International. 12.2 At the time of hearing, the Department sought withdrawal of the appeal in view of the CBDT Circular No. 3/2018 in F.No. 279/Misc. 142/2007-ITJ(Pt) dated 11/07/2018 wherein the monetary threshold limit for filing appeals before the ITAT was enhanced and tax effect is below Rs. 20 lakhs. In the present case, the tax effect being less than Rs. 20 lakhs, this ground of appeal of the Revenue is dismissed. 13. The other common ground in all the Revenue appeals is that the CIT(A) erred in holding that the Assessing Officer had made inadequate enquiry on any point. The Ld. DR submitted that the CIT(A) should have issued a direction u/s. 250(4) for conduct of further enquiry and report especially when his power is coterminus with that of the Assessing Officer. 13.1 We have heard the rival submissions and perused the record. In all these appeals, the CIT(DR) made the plea that there is no enquiry made by the Assessing Officer and the CIT(A) should have set aside the issue to the file of the Assessing Officer for fresh enquiry. In our opinion, the argument of the CIT(DR) is misconc....
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....oned with last warrant executed and there was no dispute about the fact that last warrant was executed in F.Y. 2014-15 and, therefore, the AO had correctly initiated the proceedings u/s. 153A for A.Y. 2009-10 and dismissed this ground of appeal of the assessee. Accordingly, this ground of Cross Objections of the assessee is dismissed. 15. The next common ground of the assessee is that the AO issued Notice U/S.153A on 29.11.2016 without having jurisdiction as his objection filed on 26.12.2016 was not disposed off u/s.124(3). 15.1 From the statement of facts narrated by the assessee himself, the CIT(A) observed that centralization order was served on the assessee on 08.11.2016, which was received by the assessee at his Chennai address on 21.11.2016. Since the order was already passed on 08.11.2016, the CIT(A) was of the view that the ACIT, Central Circle had valid jurisdiction and accordingly he issued notice U/s. 153A on 29.11.2016. The Principal CIT, Chennai had given time upto 25.11.2016 for filing objections. However, no objection was filed by the assessee by that date and the AO correctly issued Notice on 29.11.2016. The CIT(A) was of the view that the assessee filed his o....
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....e. Therefore, this ground of appeal, being factually incorrect, was dismissed. We confirm the same and dismiss this ground of Cross Objections of the assessee. 18. The next common ground of the assessee is that no notice u/s.143(2) was issued and, therefore, the assessment needs to be quashed. 18.1 The CIT(A) noticed that this ground was not raised by the assessee before the AO. Notice u/s. 143(2) was issued to establish the jurisdiction by the AO. From the records, the CIT(A) found that the Assessing Officer had issued Statutory Notices and the same was complied by the assessee also. It was observed that the assessee had raised this issue of jurisdiction, albeit belatedly, before the CIT, Chennai, when the case was transferred from Chennai to Kollam. Since the objection was filed late, beyond the date given by the Principal CIT, Chennai, the same was not considered by him. In view of these facts, the CIT(A) held that this ground was not maintainable and the same was dismissed. We confirm the same and dismiss this ground of Cross Objections of the assessee. 19. The next common ground is that the original assessment was completed u/s, 143(3) and no incriminating material wa....