TaxTMI 
TaxTMI 
2020 (6) TMI 134
X X X X Extracts X X X X
X X X X Extracts X X X X
....A No.2801/Del/2018 and 4287/Del/2018 for A.Y. 2008- 09 as the lead case. 3. Facts of the case in brief, are that the assessee is a private limited company having 12% shares of Shri Moin Akhtar Qureshi, and 73% shares of Mrs. Nasreen Moin Qureshi. It claimed to be a 100% export oriented unit engaged in the business of exports of buffalo meat primarily called Omasum and Offal primarily for consumption in China, Vietnam and Hong Kong and claimed deduction u/s 10A of the Act. It had filed its original return on 17th August, 2009 declaring nil income. For the impugned assessment year, the assessee had also claimed deduction u/s 10A of the Act amounting to Rs. 3,63,42,299/-. A search and seizure operation u/s 132(1) of the Act was conducted on 15th February, 2014 in the case of the assessee along with other cases of the AMQ group at various residential and business premises. A notice u/s 153A was issued to the assessee on 14th October, 2014 requiring the assessee to file the return for the relevant assessment year within 30 days which was served on the assessee on the same day. The assessee filed the return in response to notice u/s 153A declaring the total income of Rs. 1,84,50,000/-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d like M/s Allanasons Ltd. and its associate companies, etc. Such contracts were at mutually agreed rate for supply of Omasum, trachea, offal, etc. Apart from that, in order to meet its shortfall of raw material the group companies were engaged in purchasing raw material from slaughter houses and abattoirs in and around Delhi region. Such purchases were made on ad-hoc basis as and when need arose. The main processing plant/factory of the group is at Nainital Road, Rampur. During the course of assessment proceedings, the AO observed that there was complexity in accounts due to volume and multiplicity of transactions and specialized nature of business which created doubt towards the correctness and trueness of account and financial results declared by the assessee. Therefore, after obtaining approval of the PCIT, Central-2, New Delhi, directions for special audit u/s 142(2A) of the Act were issued on 19th December, 2016 to the assessee to get its accounts audited from special auditors. The special auditors furnished its special audit report on 5th May, 2017. After receiving the audit report from the special auditor and the reply of the assessee to the questionnaire issued by the AO f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r noted that the rates for purchases as recorded in the books of account of the assessee company are very high as compared to the average export rates for buffalo meat, more particularly when the nature of procurement by the assessee is waste product and buffalo meat is the main useful product. Considering the manner in which the payments are recorded at amounts equal to or less than Rs. 20,000/- on a day spread over various days even when the purchase value from the respective parties are very high. The AO opined that the payments are recorded in the books of account in such a way that limit prescribed u/s 40A(3) is not violated. According to the AO, the payments made by the assessee are not covered under exclusions given in Rule 6DD for the reason that the purchases made by the assessee are through various persons and not directly from the cultivators/growers or producer of such products the payments to whom is excluded from the applicability of provisions of section 40A(3). Further, the assessee has not maintained any records to prove that the payments made by it fall within the exclusions prescribed in Rule 6DD. On the basis of the above, the AO disallowed the purchases made by....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... observed by the AO that the sales belonged to two concerns of the group, namely, M/s AMQ Agro India Pvt. Ltd. and M/s Abdul Majeed Qureshi. In absence of any satisfactory reply, the AO apportioned the amount of domestic sales in the ratio of turnovers for both the concerns and accordingly attributed the sales of Rs. 5,66,01,452/- to the account of the assesseee and added back to its total income. 9. The AO further noted from the books of account maintained in computer, seized as per annexure A-39 that Shri Mohd. Shahnawaz had received the cash amounts aggregating to Rs. 1,46,66,79,302/- pertaining to F.Y. 2006-07 to 2013-14 and out of this amount Rs. 8,95,00,000/- pertained to the year under consideration. According to the AO, this cash was received by Mohd. Shahnawaz from Moin Akhtar Qureshi/AMQ Group from undisclosed sources. However, as per him, since the funds received by Mohd. Shahnawas is actually the undisclosed income of Moin Akhtar Qureshi, the substantive addition was made in his account and the same was added in the case of the assessee on protective basis. 10. During the course of assessment proceedings, the AO noted that the assessee company has shown sundry cre....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... total foreign travel expenses of Rs. 42,55,658/-. Similarly, for want of detailed vouchers to substantiate the necessity of other expenditure, wholly and exclusively for the purpose of business, the AO made disallowance of Rs. 23,66,967/- being 50% of Rs. 47,33,934/- under the head 'other expenses', 'export development expenses', 'motor cycle expenses', etc. 13. The AO observed that the assesseee has claimed salary expenses of Rs. 21,66,000/-, but failed to respond to the questionnaire raised during the course of assessment proceedings to substantiate such salary expenses. Subsequently, from the reply so furnished by the assessee that the necessary cash receipts in respect of salary paid in cash amounting to Rs. 18,64,000/- are in record of the assessee company and same were also made available to the special auditors for their verification at the time of special audit was not accepted by the AO. Since these payments from salary was made in cash to employees who do not have any bank accounts and the salary register was recently created and the handwriting of the persons was same in most part of the register, the AO disallowed salary expenses of Rs. 18,64,000/- debited by the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....minating evidence was found during the course of search proceedings are liable to be deleted in view of the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla, 380 ITR 573 and in the case of PCIT vs. Lata Jain 384 ITR 543. 18.1. On the basis of the arguments advanced by the assessee and on the basis of the decisions cited before him, the ld.CIT(A) deleted the additions which are not on the basis of any incriminating material found during the course of search by observing as under:- "7.1. I have considered the contentions of the appellant. In such situation, the issue, when no incriminating material/evidence is found and assessments in those years are completed assessments, can any addition/disallowance be made, has been dealt with and answered by Hon'ble Jurisdiction High Court in the case CIT vs. Kabul Chawla, as mentioned by appellant in its submission. Hon'ble Court has taken a view in such cases that although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owing additions have been made by AO in regular course of assessment proceedings, without the basis of any incriminating material/evidence found during the search. i) Addition of Rs. 23,53,53,913/- on account of unexplained purchases - As referred above and as discussed in details by AO in the assessment order, these purchases were shown by appellant in its books of account and correspondingly in the profit and loss account; and after making enquiry in the regular course of scrutiny, AO has treated substantial part of these purchases as bogus on account of cash payments made and non-maintenance of bills/vouchers. However, no incriminating material/evidence was found during the search proceedings in respect of these purchases. ii) A disallowance of Rs. 3,63,42,299/- has been made u/s 10B of I. T. Act by observing that the assessee failed to establish that its activities of dealing in raw meat comes in the category of manufacturing activity as per the provisions of section 10B of I. T. Act. iii) Addition of Rs. 1,29,77,985/- on account of outstanding creditors - These additions also have been made by AO in the course of regular scrutiny of books of account ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lated the interest @12% on this loan amount and added back to the income of assessee. x) The last addition of Rs. 1,00,000/- made by AO is on account of disallowance of deduction u/s 80G of I. T, Act as the assessee failed to provide the receipts/evidence with regard to donation/charity, if any made by him, 7.1.2 In view of above, it can be seen that none of the above additions have been made by AO on the basis of incriminating material/evidence found during the search proceedings. Since the assessment year under consideration is a completed assessment year, any addition/disallowance ought to have been made by AO on the basis of such incriminating material/evidence as found during the search proceedings in view of various decisions, including CIT Vs. Kabul Chawla (supra), of Hon'ble Jurisdiction High Court. In view of this, the aforesaid additions made by AO are not sustainable and deserve to be deleted as made during the regular course of assessment proceedings, not on the basis of incriminating material/evidence found during the search proceedings. I, therefore, delete the aforesaid additions made by AO and allow the respective grounds taken by appellant." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, who had given this cash to Mr.Mohd. Shahnawaz for the purpose of making purchases from focal market. In view of this, he has made the addition on substantive basis of the aforesaid amount in the hands of Mr. Moin Akhtar Qureshi and on protective basis in the hands of appellant company. Since the AO has already made the addition on substantive basis in the hands of Mr. Moin Akhtar Qureshi, the addition made on protective basis in the hands of the appellant company is being deleted subject to the decision of appellate authority in the case of Mr. Moin Akhtar Qureshi. The addition may get revived in case the findings are given by appellate authorities in the case of Mr. Moin Akhtar Qureshi that the said money belonged to the appellant company. In view of this, this ground is allowed for statistical purposes." 21. Before the CIT(A), the assessee had taken a ground stating that the income voluntarily disclosed before Settlement Commission for the year under consideration which was offered as additional income in the return filed u/s 153A of the Act should be given set off. 21.1. However, the ld. CIT(A) rejected the same by observing as under:- "8. The Last Ground taken....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant that during the course of assessment proceedings the appellant had requested for providing the recasted books of accounts on the basis of which alleged addition on account of undisclosed domestic sales has been computed but neither the books of accounts nor any basis for making alleged addition was provided by the AO to the appellant. 2.2 That the CIT (A) was not justified in upholding the alleged addition by rejecting the submission of the appellant that the entire sales cannot be added as undisclosed income, it is only the profits emanating from undisclosed sales after reducing corresponding purchase cost and overheads that could have been taxed. 2.3 That the CIT (A) was not justified in upholding the alleged addition by not considering the submission of the appellant that the AO has not provided credit for the income from undisclosed activity of meat sale/ purchase already included in the return of Income filed in response to notice u/s 153A based upon the application filed before the Income Tax Settlement Commission (ITSC), which was rejected and hence not decided by ITSC in AMQ Group of entities. 3. That the CIT(A) was not justified in h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of outstanding creditors. 4) The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the addition of Rs. 3,63,42,299/- made on account of deduction claimed u/s 10B of the IT Act, 1961. 5) The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the addition of Rs. 21,27,829/- on account of expenditure through credit cards and foreign travelling 6) The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the addition of Rs. 23,66,967/-on account of other expenses. 7) The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the addition of Rs. 18,64,000/- on account of salary expenses. 8) The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the addition of Rs. 3,64,000/- on account of rent expenses. 9) The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the addition of Rs. 1,00,000/- on account of charity/donation receipts / evidences. 10) The Ld. Commissioner of Income Tax (Appeals) has erred in law and on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....count of bogus purchases. Under these circumstances, the ld.CIT(A) is not justified in deleting the addition by relying on the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla. She submitted that the decision in the case of Kabul Chawla (supra) does not apply in the present case as in the case of Kabul Chawla, addition made had no connection with any material evidence/statement found/recorded. 23.2 Referring to the decision of the Hon'ble Supreme Court in the case of Mukundray K. Shah, 290 ITR 433, she submitted that the Hon'ble Supreme Court in the said decision has held that even if the addition arises out of enquiry related to source of investment, if details of such undisclosed investment is found during the course of search, addition has to be sustained. 23.3 Referring to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Arun Malhotra, 363 ITR 195, she submitted that the Hon'ble High Court in the said decision has held that where the AO having found that transaction of purchase and sale were bogus, made addition u/s 69A, the Tribunal was not justified in deleting the addition without going into evidence on record. Referring to the de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elated and unverifiable, the matter was referred for special audit and it was found by the special auditors that the assessee is not maintaining proper accounts and failed to furnish information during special audit. Further, nothing was furnished during the assessment proceedings. Under these circumstances, the ld.CIT(A) was not justified in deleting the addition by relying on the decision of Kabul Chawla (supra). Referring to the decision of the Hon'ble Apex Court in the case of Mukundray Shah, 290 ITR 433 and the decision of the Hon'ble Delhi Bench of the Tribunal in the case of Parag Dalmia, ITA No.5499/Del/2017, she submitted that the ld.CIT(A) is not justified in deleting the various additions made by the AO by simply relying on the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla. 25. So far as Ground No.2 is concerned, she submitted that the protective addition of Rs. 8.15 crore was deleted by the ld.CIT(A) with some directions. She submitted that the AO made the addition on the basis of evidence found during the search containing detail/record of cash claimed to have been received by Mr. Mohd. Shahnawaz from Mr. Moin Akhtar Qureshi. He could not tall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e associate of the assessee. Thus, it leads to clear understanding that the assesseee was involved in under invoicing of export sales and diverting of the proceeds to other account overseas but, so far as the finding of the ld.CIT(A) that the transaction referred in the e-mail dated 20th March, 2009 being disclosed in the books of account of the assessee is not borne out from any record, books of account or submissions that during the course of assessment proceedings or during the assessment proceedings before the CIT(A). 28. So far as the income reported before the Income-tax Settlement Commission is concerned she submitted that the income reported by AMQ Agro Pvt. Ltd. before the Settlement Commission are as follows:- A.Y. Income offered before ITSC (In Rs.) Income Offered in return (In Rs.) 2008-09 18500000 18500000 2009-10 15000000 15000000 2010-11 1000000 1000000 2011-12 20000000 20000000 2012-13 1700000 1700000 2013-14 4000000 4000000 2014-15 2500000 2500000 Total 62700000 62700000 29. Similarly, the details of income reported by Moin Akhtar Qureshi before the Settlement Commission are as u....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of expenses incurred through credit cards - - - - - 6. Addition on account of disallowance of 20% of other expenses - - - - - 7. Addition on Account of Rent paid for Guest House - - - - - 8. Addition u/s 14A of the IT Act, 1961 - - - - - 9. Addition on account of Rate Difference - - - - - 10. Addition on account of Rate Difference 1,84,50,000.00 1,61,27,545.00 2,42,44,168.00 7,03,43,456.00 3,54,13,197.00 "AMQ AGRO INDIA PVT. LTD. YEAR-WISE GROUNDS/DETAILS OF ADDITIONS CHALLENGED BY AMQ AGRO INDIA PVT LTD. BEFORE HON'BLE ITAT IN APPEAL FILED FOR AY 2008-09 TO 2014-15 S. No. PARTICULARS OF INCOME AY 2008-09 (ITA No.4287/Del/1 8) AY2009-10 (ITA No. 4288/Del/18) AY 2011-12 (ITA No. 4289/D/18) AY 2011-12 (ITA No. 1499/D/18) AY 2012-13 (ITA No. 4290/D/18) 1. Addition on account of purchases made during the year. 23,53,53,913.00 19,14,20,864.00 28,21,46,148.00 74,18,25,388.00 34,67,78,496.00 2. Addition on account of under-invoicing of export sales 2,56,52,430.00 2,72,51,370.00 2,5....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessment u/s 153A is specialised proceeding for the purpose of assessing the normal income of the assessee along with any undisclosed income pursuant to the search action. He submitted that the normal income already assessed cannot be disturbed in the absence of any incriminating material found during the search. For the above proposition, he relied on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla, 61 taxmann.com 412 wherein it has been held that completed assessment can be interfered by the AO while making assessment u/s 153A only on some incriminating material that was unearthed during the course of search which was not produced or not already disclosed or not made in the case of the original assessment. He submitted that the Hon'ble Delhi High Court while holding so has distinguished its earlier decision in the case of CIT vs. Chetan Das Laxman Das, 211 taxmann.com 61 and Filatex India Ltd. vs. CIT, 229 taxmann.com 555. Merely because the Department has not accepted the decision of the Delhi High Court in the case of Kabul Chawla and an appeal is pending before the Hon'ble Supreme Court, the same would not be a ground to take a contrary ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Lucky Yuan along with other supporting documents. He submitted that the AO, on the one hand, in the same assessment order has made addition on account of bogus purchases by alleging that the average purchase cost of the assessee company is much higher than the average export price of buffalo meat and on the other hand, in the same assessment order, while making the alleged addition is claiming that the assessee company is indulged in under-invoicing of export sales which are self-contrary, therefore, deserves to be deleted. He submitted that the product in which the assessee is dealing is not a mechanical product in which the quality and size of the product remains the same at all the time. The product in which the assessee is dealing is an animal husbandry product, namely omasum which is part of buffalo offal, the size and quantity of which varies from animal to animal and, therefore, there can be a different price at every stage of the product sale depending upon the size and quantity of the final product and which can only be ascertained at the time of sale of that particular consignment to the buyer. Different rates may be charged from different buyers depending upon the relati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h which is getting circulated year after year taking into consideration the entire block period. Relying on various decisions, he submitted that in such circumstances, it is the peak balance only which has to be taxed and not the entire cash payment. He submitted that the AO has wrongly added the entire undisclosed sales as income by holding that purchases are recorded in the regular books of account. However, contrary to the same, it is stated by him at a number of places in the assessment order that the assessee was engaged in the activity of making undisclosed purchases through Md. Shahnawaz. The ld. Counsel drew the attention of the Bench to the following instances in the assessment order:- "Page 47 of Asst Order "Further the above chart shows cash money to the tune of Rs. 146.66 crores have been received by Mohd. Shahnawaz during the period FY 2007-08 to FY 2013-14, which Mohd shahnawaz stated to have receive from either you I.e Moin Akhtar Qureshi, Prop. Abdul Majeed qureshi or from M/s AMQ Agro Pvt Ltd and has been utilized by him for making purchase of Omasum Slaughter meat for both the concerns." Page 54 of Asst order "Thus it is dear th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd misplaced in view of the following:- a) No interference has been carried out by the AO in the declared results in the audited P&L Account. b) If the undisclosed sales are assumed to have been made out of purchases recorded in regular books of accounts then what is the source of regular sales recorded in books of accounts; c) Without prejudice to the above, even if the undisclosed sales are assumed to have emanated out of purchase recorded in regular books of accounts only the profit elements can be said to be the income of the assessee and under no circumstances the entire sales can be added. 38. For the proposition that entire unaccounted sales cannot be added to income but only the net profit, the ld. Counsel for the assessee relied on the following decisions:- (i) CIT v. President Industries 124Taxman.com 654; (ii) CIT v. Sameer Synthetics Mill 362 ITR 410; (iii) CIT v. Leo Formulation Pvt. Ltd. 48 Taxmann.com 328; (iv) CIT v. Bahubali Neminath Muttin 72 Taxmann.com 139 (v) CIT v. Aggarwal Engg. Co. (Jal) 156 Taxmann.40. 39. So far as the observation of the CIT(A) that the assessee did not produce a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....name of the supplier, address of the supplier, ledger account containing the particulars of purchases and payments made. So far as the bunch of papers produced by the CITDR before the Bench and alleged to be incriminating documents found during the course of search in relation to bogus purchases are concerned, the ld. Counsel submitted that these documents pertained to the undisclosed sales/purchase activities of meat outside the books of account. He submitted that substantial addition on account of such undisclosed activity has been separately made in the assessment order under the nomenclature - Domestic sales and cash payments made for purchases on the basis of entries found recorded in books of accounts found to be maintained in the name of "OMASUM DELHI" by the AO for A.Y. 2008-09 to 2012-13. He submitted that there exist incriminating material for undisclosed sale/purchase activity outside books of account for which separate additions have been made in the assessment order. The assessee is also contesting the quantum of such addition in its appeal before the Tribunal on the ground that the entire sale and purchase cannot be simultaneously added and the quantum of addition has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent Commission on 3rd March, 2016 in a combined order passed u/s 245D(4) of the Act, 1961. The reason for such rejection was that the disclosure was not true and full and the assessee has not explained the manner in which it has derived the income. Subsequently, the assessee filed its return of income in response to notice u/s 153A on 18th June, 2016 offering additional income of Rs. 1,85,00,000/- which was offered before the Settlement Commission by filing application u/s 245C(1) of the Act stating that this income was earned from the business of meat. 42. Since there was complexity in accounts due to volume and multiplicity of transactions and specialized nature of business which created doubt towards the correctness and truthfulness of accounts and financial results declared by the assessee, the AO, after obtaining approval of the PCIT, directed the assessee to get its accounts audited from the special auditor. After the special auditor's report was received, the AO examined the facts of the case in the light of the findings given by the auditors and questionnaire was issued to the assessee. After considering the submissions of the assessee, the AO completed the assessment de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....grounds raised by the Revenue relate to the order of the CIT(A) in deleting the additions as per para 39 except Sl.No.3 and 4 by relying on the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) wherein it is held that additions cannot be made in an order passed u/s 153A in absence of any incriminating material/evidence found during the course of search in a completed assessment. We do not find any infirmity in the order of the CIT(A) in deleting the above additions for A.Y. 2008-09 to 2011-12. It is an admitted fact that the search took place on 15th February, 2014 and on that date the assessments for 2008-09 to 2011-12 were completed. The additions which are deleted by the ld.CIT(A) are not based on any incriminating material/evidence found during the course of search. At the time of hearing, the ld.CIT-DR heavily argued that the addition made by the AO on account of bogus purchases are based on incriminating material found during the course of search. The addition on account of under invoicing was also made on the basis of the e-mail conversation between the assessee company and Mr. Lucky Yuan, a trade associate of the assessee company. Therefore, the l....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., therefore, the ratio of the decision in the case of Kabul Chawla (supra) is squarely applicable for A.Y. 2008- 09, 2010-11 and 2011-12. We, therefore, hold that no addition can be made for these years. So far as the A.Y. 2009-10 is concerned, a perusal of the assessment order shows that the addition is basically made on account of difference in rates of sales which resulted under-invoicing. We find, the ld.CIT(A) while deleting the addition by relying on the decision in the case of Kabul Chawla (supra) has also decided the issue on merit. He has observed that an e-mail cannot lead to the conclusion that the assessee is engaged in the under-invoicing of export sales or hawala transactions. According to the ld.CIT(A), it is only a presumption drawn by the AO, but, there is no evidence on record to show that the difference in the rates of sales resulted in under-invoicing. Further, the ld.CIT-DR could not controvert the findings of the ld.CIT(A) that the AO failed to co-relate the amount generated through under-invoicing of sales, if any and sending it abroad to be deposited in the bank accounts of the two entities or making payment to various parties as alleged. Further, the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which is awaited, cannot be a ground to take a contrary decision. In view of the above discussion, the grounds raised by the Revenue for A.Y. 2008-09 to 2011- 12 are dismissed. 52. However, so far as A.Y. 2012-13 is concerned, the assessment proceedings for the said year were abated as notice u/s 143(2) was issued on 23rd September, 2013. The assessment proceedings were not completed on the date of search i.e., on 15th February, 2014. We, therefore, find merit in the arguments advanced by the ld.CIT-DR that the ratio of decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) is not applicable for A.Y. 2012-13. However, since the ld.CIT(A) has deleted the additions made by the AO by relying on the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) and has not decided the issues on merit, therefore, we deem it proper to restore the issue to the file of the ld.CIT(A) for deciding the issues on merit. Needless to say, the ld.CIT(A) shall give adequate opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the Revenue for A.Y. 2012-13 are accordingly allo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....holding undisclosed sales. So far as the cash received on OMASUM account aggregating to Rs. 143.52 crores, the entire amount was protectively added in the hands of AMQ Agro India Pvt. Ltd. and substantively in the hands of Moin Akhtar Qureshi. For the A.Y. 2008-09, addition of Rs. 8.95 crore has been made holding undisclosed cash payment for OMASUM account protectively in the hands of the assessee, i.e., AMQ Agro India (P) Ltd. and substantively in the hands of Moin Akhtar Qureshi for A.Y. 2008-09. 56. We find, in appeal, the ld.CIT(A) sustained both the additions, the reasons for which has already been reproduced in the preceding paragraphs. We find, the ld.CIT(A) confirmed the addition of Rs. 5.66 crores by holding that the assessee failed to establish that there were any additional purchases outside the books of account against undisclosed sales. According to him, by simply submitting that undisclosed profit was declared before the Income-tax Settlement Commission and, therefore, only peak amount should be added does not explain the source of undisclosed sales. He accordingly, upheld the action of the AO in making the addition on account of undisclosed domestic sales. 57. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ever, contrary to the same, it is stated at number of places in the assessment order that the assessee was engaged in the activity of making undisclosed purchases, through Shri Mohd. Shahnawas. These instances from the assessment order are again being reproduced for the sake of clarity:- "Page 47 of Asst Order "Further the above chart shows cash money to the tune of Rs. 146.66 crores have been received by Mohd. Shahnawaz during the period FY 2007-08 to FY 2013-14, which Mohd shahnawaz stated to have receive from either you I.e Moin Akhtar Qureshi, Prop. Abdul Majeed qureshi or from M/s AMQ Agro Pvt Ltd and has been utilized by him for making purchase of Omasum Slaughter meat for both the concerns." Page 54 of Asst order "Thus it is dear that although M/s AMQ Agro India pvt ltd was purchasing animal byproducts from different suppliers through Mohd Shahnawaz but instead of integrating books of OMASUM DELHI with its own regular books of accounts maintained at Rampur, the group was indulging in out of books purchases by utilizing cash that was generated over a period of time through unaccounted sources by Moin Akhtar Qureshi" Page 52 of Asst....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to notice u/s 153A, whether the credit for such income has to be provided against undisclosed income computed from the activity of undisclosed sales/purchase outside books of account. 62. A perusal of the orders of the authorities below show that the search operation did not detect the entire amount of undisclosed sales since the figures of the undisclosed sales mentioned in the assessment order is Rs. 38.98 crores whereas the figures of cash paid for purchase is Rs. 143.52 crores for the entire block period for A.Y. 2008-09 to 2014-15. 63. We find merit in the argument of the ld. Counsel that the transaction related to cash payments to Mohd. Shahnawaz for making purchases and in turn domestic sales made by him outside the regular books of account are correlated to each other. Both these transactions are correlated to each other inasmuch as payment of cash resulted in making of purchases outside the books of account and, thereafter, sale of goods purchased in cash was made outside the books of account giving rise to undisclosed sales which again yielded realization of cash which was again rotated for making subsequent cash purchases. Therefore, we are of the considered opinio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the AO by applying the GP rate on the basis of the figure of the yearwise purchase rather than sales. ii) For working the net profit from undisclosed activity , the AO may take combined simple average of gross profit of all the years comprised in the block period (A.Y.s 2008-09 to 2014-15) as per audited balance sheet of the assessee for A.Y. 2008-09 to 2014-15. This would take care of any aberrations and distortions. The above method of determination of profit from undisclosed trading in meat product, in our opinion, is fair and reasonable and would meet the ends of justice under the peculiar facts and circumstances of this case. The average gross profit so determined shall be applied across all the assessment years to determine the profit from undisclosed activity. Needless to say, the gross profit rate percentage will have to be appropriately modified upwardly to correspond the same to gross profit percentage on purchases. iii) The figure of purchases (Rs. 143.52 crores in total) in respect of each assessment year will be apportioned between the assessee M/s AMQ Agro India Pvt. Ltd. and Moin Akhtar Qureshi in the same proportion as has been done in the assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deem it proper to restore the issue to the file of the AO with a direction to grant appropriate relief to the assessee on the basis of such additional income declared in the return of income from undisclosed sales. 69. Since the entire profit from undisclosed activity has been brought to tax in AMQ Agro India Pvt. Ltd. and Moin Akhtar Qureshi, therefore, additional income declared in section 153 tax return of other entities such as Mrs. Nasreen Qureshi and Mohd. Shahnawaz was argued to be excluded from their income on the ground that it will amount to double taxation of the same. Since we are remitting the matter to the file of the AO for adjudication of the undisclosed income from meat business outside books and the appeals of above persons are not before us, the assessee may take up this matter before the AO at the time of the set aside proceedings. The AO shall ensure that there is no double addition of the amount of additional income declared in the hands of AMQ Agro and income declared in the 153 tax return of other entities stated above. Needless to say the AO shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and di....