AI Drafter 
TaxTMI 
TaxTMI 
2020 (5) TMI 123
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.... assessee Shri Pawan Kumar Dua and his brother Shri Rajesh Dua who are engaged in trading of non-ferrous metals through various companies. Shri Himanshu Kohli is a close associate of Dua brothers, who, according to the AO, handles the unaccounted cash sale/purchase of metal business of the Dua family. The premises of Shri Himanshu Kohli was also searched and the statements of the assessee as well as Shri Kohli were recorded u/s 132(4) wherein they have admitted to have been indulged in out of the book sale/purchase of non-ferrous metals. In response to notice u/s 153A, the assessee filed the return of income on 29th August, 2016 declaring the income at Rs. 8,07,290/- which was declared earlier. 4. During the course of assessment proceedings, the AO noted that Shri Himanshu Kohli in his statement recorded on oath u/s 132(4), on being confronted with the seized documents had admitted that out of the book sale/purchase of metals was done by Dua group through him for which he was paid commission of Rs. 1 per Kg. He also admitted that 70% of the total turnover of this metal trading business belonged to Shri Pawan Kumar Dua and 30% belonged to M/s Kewal Metal Store, a proprietorship c....
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....and duly reflected in the TDS return as well. So far as the statement of Shri Himanshu Kohli that the transactions in question had been carried out by him for the assessee is concerned, the assessee submitted that he has no connection at all with these transactions. The assessee vehemently submitted that since the transactions do not belong to him, the assessee is not in a position to give any further details. The assessee also requested for cross-examination of Shri Himanshu Kohli. 7. However, the AO was not satisfied with the explanation given by the assessee for the following reasons as per para 10.1 of his order:- "10.1 The above replies to various queries filed by the assessee are not acceptable in view of the following facts:- 1. Vide answer to question no 13 of his statement recorded u/s 132(4) on 25.04.2014 the assessee deposed as under (English version as statement was recorded in Hindi):- Q.13. What is your relation with Sh Himanshu Kohli who is Director in M/s Kohli Homes Pvt Ltd ? Ans Sh Himanshu Kohli is my friend and there is no business relationship with him. 2. Vide answer to question no 5 of his statement recorded on ....
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....4093661.30 9865562.91 3,19,64,42,088 2015-16 361287.22 252901.05 8,19,39,924 Total 18375508.62 12862856.03 4,16,75,65,020 10. Since the assessee had undertaken unaccounted transactions to the tune of Rs. 416.7 crores the AO, applying the GP rate of 1.92% on the stock value of Rs. 88,91,83,008/- for the year under consideration, determined the taxable income in the hands of the assessee at Rs. 1,70,72,313/-. Similarly, the AO made addition of Rs. 1,31,95,532/- being the unaccounted investment in the metal trading business. The AO also made an addition of Rs. 27,44,392/- being the commission paid to Shri Himanshu Kohli as per his staemnt that he is being paid commission @ Rs. 1 per Kg. The AO accordingly determined the total income of the assessee at Rs. 3,38,19,530/-. 11. Similar addition has been made by the AO in A.Y. 2014-15 wherein he made addition of Rs. 6,13,71,688/- on account of GP on unaccounted metal trading business and Rs. 98,65,563/- being the commission paid in cash to Shri Himanshu Kohli. 11.1 For A.Y. 2015-16, the AO made addition of Rs. 5,40,803/- being GP on account of unaccounted metal trading business and Rs. 2,52,901/- bein....
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....rinciples of natural justice. 3(b) That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs. 1,31,95,532/- on account of alleged unaccounted investment, is bad in law and against the facts and circumstances of the case. 3(c) That in any case and in any view of the matter, impugned addition has been mad without confronting the entire adverse material available on record and without providing the opportunity of cross examination of Sh. Himanshu Kohli. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs. 27,44,392/- on account of alleged commission paid and that too by recording incorrect facts and findings and without observing the principles of natural justice. 5. That in any case and in any view of the matter, addition made in the impugned assessment order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search. 6. That having regard to the facts and ....
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....nnot challenge such approval by stating that the superior authorities have not applied their mind. 19. After hearing both the sides, we find no merit in the arguments advanced by the ld. Counsel in so far as additional grounds are concerned. The ld. Counsel could not substantiate with evidence to our satisfaction that the AO has not obtained valid approval u/s 153D. Under these circumstances, and in absence of any material to substantiate his case, the additional grounds raised by the assessee are dismissed. 20. The ld. Counsel for the assessee did not press grounds No.1(a) and 1(b). Accordingly, the same are dismissed. 21. Grounds of appeal No.5 and 7 being general in nature are dismissed. 22. Ground of appeal No.6 relates to charging of interest u/s 234B of the Act which is mandatory and consequential in nature. Accordingly this ground is also dismissed. 23. So far as the remaining grounds are concerned, these relate to the order of the CIT(A) in confirming the addition of Rs. 1,70,72,313/- as unaccounted income outside the books of account and Rs. 1,31,95,532/- on account of unaccounted investment and Rs. 27,44,392/- on account of alleged commission paid to Shr....
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....rd Floor, Ashok Vihar, Phase-I, New Delhi' are seized from the residence of Shri Himanshu Kohli and not that of the assessee. 29. The ld. Counsel for the assessee, referring to page 41 of the paper book, drew the attention of the Bench to the answer to Question No.2 recorded u/s 132(4)/133A wherein Shri Himanshu Kohli in his reply had stated that he deals in the business of metals like copper, zinc, brass, etc. Referring to page 44 of the paper book, he submitted that in his reply to question No.11 on the said date, he had mentioned that he owns two godowns out of which one is situated at Sadar Bazar and the second one is at Village Karala, Near Water Tank, Delhi. Referring to page 60 of the paper book, he submitted that Shri Himanshu Kohli in his reply to Question No.3, vide statement recorded u/s 132(4) on 25th April, 2014, had stated that his main source of income is from metal trading, commission income on metal trading and MCX trading/'dibba' trading, etc. Referring to pages 288 and 289 of the paper book, the ld. Counsel for the assessee drew the attention of the Bench to answer to Question No.2 recorded u/s 132(4)/133A of the Act wherein Shri Himanshu Kohli had stated that....
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....and 41 of the paper book filed by the Revenue, he submitted that Shri Himanshu Kohli in his statement recorded u/s 132(4)/133A on 1st May, 2014 has stated that his source of income was from metal business on commission basis and files his return of income regularly. Referring to pages 56 and 57 of the paper book filed by the Revenue, the ld. Counsel drew the attention of the Bench to the Question No.3, wherein Shri Himanshu Kohli, in his reply to question No.3 has stated that he does all the transactions of metal business on commission basis which were not recorded in the books of account. Referring to page 50 of the paper book, the ld. Counsel drew the attention of the Bench to the reply given in response to Question No.6 recorded u/s 132(4)/133A on 24th June, 2015 wherein he had explained the seized documents found regarding the copper ingots, number of pieces, etc. Referring to various other pages of the Revenue's paper book, the ld. Counsel drew the attention of the bench to the reply given by Shri Himanshu Kohli explaining the manner in which he does the metal trading business. Referring to page 42 of the paper book filed by the assessee, the ld. Counsel for the assessee drew ....
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....ubmitted that the request of the assessee for cross-examination of Shri Himanshu Kohli was not accepted by the AO. Referring to the assessment order of Shri Kewal Kohli, Proprietor of M/s Kewal Metals, the ld. Counsel drew the attention of the Bench to the order passed u/s 143(3)/153A on 30th December, 2016 and drew the attention of the Bench to para 8 and 9 of the said order according to which Shri Himanshu Kohli along with his close associates Shri Gagan Arora and Sandeep Kwatra maintained the record of unaccounted transactions at flat 1-B, Pocket-A, Near Satyawati College, Ashok Vihar, New Delhi. Therefore, when both father and son were doing this unaccounted sale and purchase of metal trading from the premises owned by them at D-237, 3rd Floor Ashok Vihar, New Delhi and Flat No. 1-B, Pocket-A, Near Satyawati College, Ashok Vihar, additions could not have been made in the hands of the assessee on the basis of the seized documents found from the premises of Shri Kewal Kohli and Shri Himanshu Kohli. 33. He submitted that the ld.CIT(A) without appreciating the facts properly that Shri Himanshu Kohli was also indulged in unaccounted metal trading business and has given evasive re....
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....ee had not specifically asked for the cross-examination of Shri Himanshu Kohli, but, has requested for the details of transactions relating to him, so that the same can be confronted and cross-examination from the parties entered into transactions with Shri Himanshu Kohli. Therefore, when the assessee has not specifically demanded the cross-examination of Shri Himanshu Kohli, therefore, the assessee now cannot claim that he was denied the opportunity of cross-examination. 35. The ld. Counsel for the assessee in his rejoinder submitted that on 25th April, 2014, the premises of both Shri Kohli as well as the assessee were searched. If at all the assessee was doing business of that much magnitude then how nothing was found from the premises of the assessee. Therefore, the preponderance of probability is not against the assessee, but, against Shri Himanshu Kohli who himself was doing such type of trading. He submitted that addition, if any, could only be made entirely in the hands of Shri Himanshu Kohli and no addition can be made in the hands of the assessee. He submitted that when the assessee was doing metal trading business in the name of the company M/s Klaxon Trading (P) Lt....
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.... weighed alongwith vehicle number and handwritten slips containing noting of receipt/delivery of purchase/sale of such metals along with dates. c) Annexure A-34 to A-50, A-54, A-58, A-60 to A-65 and A-67 to A-69 seized by party SA-10 from Flat 1-B, Pocket-A, Near Satyawati College, Ashok Vihar, New Delhi in the form of small diaries/notepads contain details of various sale/purchase parties, quantity of different types of metals purchased/sold aggregating to 2,71,96,665 Kgs and the value of total sale in respect of these transactions noted in the said Annexures/diaries totaling to Rs. 845,93,84,275. The printout of the same was provided to the assessee as Exhlbit-2 with the questionnaire. d) Annexure A-18, A-20. A 22, A-24, A-27, A-29 and A-32 seized by party SA-10 from Flat 1-B, Pocket-A, Near Satyawati College, Ashok Vihar, New Delhi in form of various Notepads/Diaries which contain the datewise details of amounts received and paid. The total receipt comes to Rs. 1466,40,76,135 and the total payments made comes to Rs. 1224,01,14,255. The year wise detail of the above receipts and payments on the basis of material seized as per the above annexures was provided to ....
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....eceipt/delivery of purchase/sale of such metals, the assessment year wise breakup of 30% of total unaccounted turnover in respect of metal trading business of Kewal Metals as admitted by Sh Himanshu Kohli in his statement recorded u/s 132(4) alongwith value @ 324 per kg (being average rate of metals as per DGS&D rates) works out as under:- Assessment Year Total Qty (revised as per discussions above) 30% of Qty mentioned in Col 2 (belonging to Dua Group) Value of stock in Col 2 @ Rs. 324 per KG as per DGS&D rates (Rs) 1 2 3 4 2013-14 3920560.10 1176168.03 381078442 2014-15 14093661.30 4228098.39 1369903878 2015-16 361287.22 108386.16 35117116 Total 18375508.62 5512652.58 1786099436 39. Thus, a perusal of the statement of Shri Himanshu Kohli and assessment order of Shri Kewal Kohli conclusively shows that both the premises D-237, 3rd Floor Ashok Vihar, New Delhi and Flat No. 1-B, Pocket-A, Near Satyawati College, Ashok Vihar, New Delhi are owned by Shri Himanshu Kohli who is also engaged in metal trading and was owning different godowns. Under these circumstances, merely because Shri Himanshu Kohli, in his sta....
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.... has not done any unaccounted trading in metal in his name and whatever trading has been done was done by Shri Himanshu Kohli from whose premises all the seized documents, which are the basis of addition in the hands of the assessee, were found and that Shri Himanshu Kohli has done some business of metal trading for the family concern, namely, M/s Klaxon Trading (P) Ltd. and all the transactions were recorded in the books of account of the said concern as stated and the commission so paid was through account payee cheque on which TDS has duly been deducted, therefore, no addition on account of unaccounted commission paid by the assessee to Shri Himanshu Kohli is called for. Accordingly, the same is directed to be deleted. ITA No.6589/Del/2018 (A.Y. 2014-15) 42. The grounds of appeal filed by the assessee read as under:- 2. (a)That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction u/s 153A and further erred in passing the impugned assessment order. 1(b) That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld.....
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....nd consequential in nature is dmissed. 45. So far as grounds of appeal No.2(a), 2(b) and 2(c) are concerned, these are identical to ground of appeal No.2(a), 2(b) and 4 in ITA No.6588/Del/2018. We have already decided the issue and the grounds raised by the assessee have been allowed. Accordingly, these grounds by the assessee are allowed. 46. So far as the additional grounds are concerned, the same is identical to the additional grounds raised in ITA No.6588/Del/2018. We have already dismissed the additional grounds. Following similar reasonings, the additional grounds raised by the assessee are dismissed. ITA No.6590/Del/2018 (A.Y. 2015-16) 47. The grounds of appeal filed by the assessee read as under:- 1.(a)That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs. 15,73,246/- (which has been wrongly mentioned as Rs. 5,40,803/- in para 11 of the assessment order) on account of alleged gross profit calculated on the basis of material allegedly found during the course of search of third person by treating it as alleged unaccounted income of the assessee an....
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....234B of Income Tax Act, 1961. 6. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other." 48. Grounds of appeal No.1(a), 1(b), 1(c), 2(a), 2(b), 2(c) are identical to grounds of appeal No.2(a), 2(b), 2(c) and 4 of ITA No.6588/Del/2018. We have already decided the issue and the grounds raised by the assessee have been allowed. Following similar reasonings, these grounds by the assessee are allowed. 49. Ground No.3 raised by the assessee relates to the order of the CIT(A) in confirming the addition of Rs. 55,08,739/- on account of alleged commission received from MCX Trading. 50. Facts of the case, in brief, are that the AO, during the course of assessment proceedings, noted that the name 'Pawan' appearing in the seized document as per Exhibit-4 is the assessee himself and the total commission on the basis of these documents comes to Rs. 55,08,739/-. In absence of any proper explanation given by the assessee, the AO made an addition to the total income of the assessee by observing as under:- "10.5 Further, as discussed in detail abo....