TaxTMI 
TaxTMI 
2019 (9) TMI 975
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.... that the addition has been made only on suspicion and presumption. 2. The CIT(A) has ignored the statement of Shri Manish Khetan S/o Late Shri Gouri Shankar Khetan deposed before the Dy.Director of Income Tax (Inv) Unit 2(1), Kolkatta on 07.04.2016. 3. The CIT(A) has overlooked the fact the enormous funds have been obtained under the head "Loans & Advances" by the assessee from the Kolkatta based paper concerns, which had remained in the books of the assessee for period ranging from one to three years and on the basis of the principle of preponderance of probability these funds are to be treated as unexplained cash credits u/s 68 of the 3. The Cross Objections filed by the assessees, which are in support of the orders of the Assessing Officer, in both the appeals are as follows:- "1. The Commissioner of Income Tax Appeals (III) Kochi has erred in rejecting the following technical grounds , on irrelevant and flimsy grounds. 2. The CIT has erred in rejecting the Appellant's ground of Appear on the question of Jurisdiction of the ACIT , Central Circle, Kollam , without even assigning Jurisdiction to him by the Director General or Principal C....
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.... 7.1 These grounds of appeal of the appellant relate to additions made u/s 68 of the I.T.Act. 7.2 The AO has passed identical orders for A.Y. 2010- 2011and 2011-12, contents of which are reproduced as under: 2. The assessee company, as mentioned earlier, is primarily a trader in export incentives received under Vishesh Krishi Gram Udyog Yojana (VKGUy), DP EB (Duty Entitlement Pass Book) and the like. 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. Shri P Sunil Kumar also conducts the same kind' of business through his Companies as Managing Director. The businesses are i. M/s Sabari Quality Foods as proprietor ii. M/s Sabari Enterprises P Ltd as Managing Director ii. M/s. Sabari Millenium Exporters P Ltd as Managing Director and iii. M/s. Sabari Switchgear P Ltd as Managing Director 3. Among the major purchasers of export incentives as per the books of accounts of Sabari Quality Foods, Sabari 'Millenium Exporter P Ltd and Sabari Switchgear P Ltd are i. Ba....
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....767 164791823 176521944 0 0 Total 0 1279027551 28487253 167643487 7775455 iii. M/s.Ajay Iron and Steel P Ltd. Asst.Year Total Turnover Turnover with SQF Turnover with Sabari Millennium Exports Pvt. Ltd. Turnover with Sabari Enterprises Ltd. Turnover with Sabari Switchgear Pvt. 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 iv. Vani Exporters Asst.Year Total Turnover Turnover with SQF Turnover with Sabari Millennium Exports Pvt. Ltd. Turnover with Sabari Exnterprises Ltd. Turnover with Sabari Switchgear Pvt. Ltd. 2009-10 120407959 15500035 58934156 0 45973768 2010-11 125761421 118503685 87124 0 7170612 Total 0 134003720 59021280 0 53144380 It can be noted from the aforesaid mentioned tables that business mentioned in para 3 were having ....
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....eclared 2009-10 2863662066 990900 0.60 2010-11 3031108532 760114 0.34 2011-12 845673545 211683 3.00 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 142628764 188960 0.60 2010-11 1862136442 211590 0.16 2011-12 607109343 94480 0.37 2012-13 403987517 206970 0.46 2013-14 -- -- IT not filed 2014-15 1651106916 265480 0.22 2015-16 2991294481 103420 0.28 It is evident from the declared turnover and total income returned that the Kolkatta businesses are not earning profits in the scale of Shri Sunil Kumar even though they are also doing the same business. 7. These business also should be viewed in the background of a statement recorded from Shri Mahesh Khetan S/o of Late Gouri Shankar Khetan by the Deputy Director of Income tax (Inv.) Unit 2(1), Kolkatta on 07.04.2016.The substantive part of the statement is the an....
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.... he was forced to sign on the statement perpetuated to have been given by him and that there was criminal intimidation. He was also forced to sign a certificate 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. 8. The affidavit filed before the Judicial First Class Magistrate, Alipur has been carefully studied. Shri Manish Khetan has alleged criminal intimidation while recording the statement by the Income tax Authority and that the same was being "retreated" since it was done under "correction and pressure". The averments made by assessee lack clarity. There was no correction in the statement recorded from him. Though he has alleged criminal intimidation no complaint was raised before any authority. Moreover, the affidavit dated 12th May 2016 was never furnished to the Income tax Authority who had recorded the statement or his assessing Officer after 'retreating'. This affidavit now produced, near to ti....
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.... came to light on account of the Statement cannot be denied. 10. The balance sheets of M/s Basanth Impex, Shyam International. Shree Chao, Mayur Impex, M/s Ajay Iron and Steel P Ltd was obtained U/S 131 of the Act. As per the balance sheet schedules of Mis Basanth Impex. they have Sundry Creditors and Sundry Debtors. Where as the asseessee has grouped the receipts under loans and advances for A Y 2010-11. Similarly the facts narrated above makes the following abundantly clear: a. Shri P Sunil Kumar is the main person conducting the business of trading in export incentives either as proprietor or through his three other companies mentioned in para 2 of this order b. The Kolkotta based proprietorships namely Mis Basanth Impex, Shree Chao Impex, Mayur Impex, and Shyam International are having substantial transactions with businesses of P Sunil Kumar. and his other companies Sabari Millenium Impex P Ltd. Sabari Enterprises P Ltd. Sabari Switchgear P Ltd. c. Though on books they have trade activity with Shri Sunil Kumar or this Companies. Mis Basanth Impex, Shree Chao Impex, Mayur Impex and Shyam International do not have income in the scale of Shri S....
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....the assessee preferred appeal to the first appellate authority. The CIT(A) observed as under:- 7.4. I have gone through the assessment order and submission of the appellant. The order passed by the AO is identical to the orders passed in the cases of Shri P. Sunil Kumar and M/s. Sabari Enterprises Pvt. Ltd. The AO has reached his conclusion in para 10 of the assessment order, which has been reproduced earlier in this order. However! even at the cost of repetition, contents of para 11 of the assessment order are reproduced as under: 11. On an examination of the books of accounts of the assessee and his companies it is noted that enormous funds have obtained under the head loans and advances from the Kolkotta businesses. These loans are non interest bearing and remained in the books for period ranging from one to three years. Such substantial amounts loaned by businesses with meager income lacks credibility even though obtained through banking channels. Round tripping of funds or ploughing back of funds seem to be a clear possibility. On the basis of the principle 'of preponderance of probability these funds are income of the assessee and treated as une....
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....see's group cases, in the case of Shri P.Sunil Kumar, Sabari Quality Foods in ITA Nos.347/Coch/2017 & Others. The Tribunal vide its order dated 13.12.2018 held as under:- "7. We have heard the rival submissions and perused the record. The seized material marked as SKP/KLM/DA 1 to 23 clearly showed a lot of trade activities between the assessee and these companies namely, M/s.Sabari Enterprises P Ltd, M/s. Sabari Millenium Exports P Ltd, M/s. Sabari Switchgear P Ltd , and Basanth Impex, Shyam International, Sree Chao Impex, Ajay Iron and Steel P Ltd, Vani Exports and Mayur Impex. The narrated facts in earlier pages of this order in the tabular form proved the trade activities carried on by the assessee with the alleged parties. The Assessing Officer has not denied these business transactions with the alleged parties. The assessee is a trader of DEPB import licences. The assessee purchases these licenses from exporters in Kerala and other neighbouring states and sells them to these Kolkota based companies and who sells it to other importers. These alleged Kolkota based companies acted as middlemen between the assessee and the final buyers, i.e. importers and, therefore, t....
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....ly based on the statement recorded from Shri Manish Khetan who later retracted his statement and therefore, much credence cannot be given to the statement recorded from these persons as we do not know whether the statement is correct as they have not brought on record any corroborative evidence. Further, the Assessing Officer has not given opportunity of cross examination of these persons to the assessee. The books of accounts of these concerns were duly audited and they have filed the returns of income. The Department having accepted their returns of income, it is not possible to reject certain entries without bringing in any contra evidence against those entries. The main reason for making the addition in the hands of the assessee is that the other concerns were doing business with very low margin of profit. The Assessing Officer suspected extending such huge advances to the assessee. In our opinion, suspicion cannot be reason for making additions and it cannot replace the evidence on record. As rightly pointed out by the CIT(A), neither the Assessing Officer nor the Investigating authorities have brought on record any incriminating documents to suggest that the assessee....