TaxTMI 
TaxTMI 
2019 (9) TMI 975
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....nd 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 Commissioner of Income Tax , Chennai by an order u/s 127 of the 1. T Act. Neither o....
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....rs 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. Basanth Impex, a proprietorship of Shri Manish Khetan with its address as ,Old China Bazar Street, Kolkotta. ii: Shyam International, a proprietorship of Shri Manish Khetan with its address as, Old Ch....
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....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 substantial transaction with the business of Shri Sunil Kumar, M/s.Sabari Millennium Exports Pvt. Ltd., Sabari Enterprises P Ltd. and Sabari Switchgear P. Ltd. 5. On an examination of the books of accounts of Sabari Quality Foods, Sabari Enterprises P Ltd, and Sabari Switchgear P. Ltd. they have declared a profit as a percentage of their sales as under: Asst.Year Gross profit ratio declared by Sabari Quality Food Gross profit ratio declared by Sabari Enterprises Ltd Gross prof....
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....katta 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 answer to question No.10 which states. "Apart from the above companies these are the concerns in which my family members and I are / were associated with. Sl. No. Name of the Concerns Name of proprietor Nature of business 1 M/s Basanth Impex Late Gouri Shankar Khetan Deals in import licence. 2 Shree Chao Impex -do- -do- 3 Shyam International Mrs.Seema Khetan -do- 4 Mayur Impex Shri Manish Khetan -do- All these proprietorships concerns run from 9 Old China Bazar Street, Kolkotta-Ol " . Further he has stated that his late father Gouri Shankar Khetan managed and controlled all the above proprietorships and after his death he has taken over the business related work. In answer to question 12 he has explained that books of accounts of M/s Basanth lrnpex, M/s Shree Ch....
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.... 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 time limitation, is just a ploy to prevent further investigation and unearthing the truth behind the whole dealings. In order that retraction to be accepted as evidence, the witness need to be cross-examined. Even though, Shri Manish Khetan has retreated the statement given before the Income tax Authority, there are stark facts which cannot be denied. One of them is, it was his father and later on he himself who handled the business. They received a commission every year for their dealing with Sabari Group. His Pan is AFCPK5709F. Another fact is that bank accounts of these proprietorship are in Kollam branches of various banks as under: i. A/c No 200007114711 with IndusInd Bank, Kollam Branch in the name of Basanth Impex ii. A/c No 2000071 14811 with IndusInd Bank, Kollam Branch in the name of Mayur Impex iii. A/c No 200007114803 with Indus1nd Bank, Kollam Branch in the name of Shyam I....
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....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 Sunil Kumar. In fact they have only income in the range of I to 9 lakhs in spite of heavy turnover. This meager income cannot be account of any trade activity but some fees or commission for services rendered. d. All the aforementioned Kolkotta businesses are functioning from the same address and the fact that they are only businesses on paper are strengthened on the above facts. 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 Ko/kotta 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 busineeses with meagre income lacks credibility even though obtained through banking channels. Round tripping of funds or ploughing back of funds seem to be a dear possibility. On the basis of the principle of preponderance of probability these funds are ....
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....e a clear possibility. On the basis of the principle 'of preponderance of probability these funds are income of the assessee and treated as unexplained cash credits u/s. 68 of the Act. From the above, it is seen that, the AO has himself accepted that the transactions are through banking channels, and, therefore, genuineness of these transactions cannot be doubted. However, the AO suspects that there is a possibility of round tripping of funds or ploughing back of funds is also a possibility, and with these remarks, the AO added the difference between opening and closing balance as income of the appellant u/s. 68. In my opinion, the AO has stretched the scope of section 68 a bit too far in this case. In this case a search took place at the premises of Shri Sunil Kumar, the Managing Director of the appellant company, but no evidence regarding round tripping was found. The creditors are identifiable and they are admittedly income tax assesses. Admittedly, the transactions have happened through banking channels, adding credibility to the transaction. On the other hand, the AO has only suspicion and presumption on which he has reached conclusion. M/s. Ajay Iron and Steel Pvt. Ltd.....
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....se alleged Kolkota based companies acted as middlemen between the assessee and the final buyers, i.e. importers and, therefore, these Kolkota based companies have no option but to operate on thinnest of margins. Search was conducted at the residential as well as business premises of the assessee, Shri Sunil Kumar and consequently, statement of Shri Mahesh Khetan, s/o Late Shri Gauri Shankar Khetan, who managed the affairs of M/s. Basanth Impex, Shree Chao Impex, Shyam International and Mayur Impex, was recorded by DDIT, Kolkota, wherein Shri Mahesh Khetan stated that "all the business activities, books of accounts etc. in respect of these proprietory concerns were performed and 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 reco....
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.... Officer nor the Investigating authorities have brought on record any incriminating documents to suggest that the assessee is holding unaccounted income which was lend to the certain persons and got it back as loans and advances. The Assessing Officer cannot draw inference on the basis of suspicion, conjuncture and surmises. Suspicion cannot take place of material in support of the findings of the Assessing Officer. The Assessing Officer should act in a judicial manner, proceed with judicial spirit and should come to judicial conclusion. The Assessing Officer is required to act as a reasonable person and not arbitrarily and capriciously. The assessment should be made on the basis 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....