TaxTMI 
TaxTMI 
2020 (6) TMI 607
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.... material found during the course of search & seizure action conducted at his premises. (iii) That the addition has been conferred despite the same having been made totally indulging in surmises and conjectures. 3. On the facts and circumstances of the case, the learned CIT(A) has erred in sustaining the disallowance of Rs. 2,32,193/- being loss claimed by assessee on account of theft of goods. 4. On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the disallowance of Rs. 11,00,469/- on account of excess stock of certain item & short stock of certain item found during the survey. 5. On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the disallowance of Rs. 44,800/- on account of short stock found during the course of survey." 2. With the consent of both the parties, the present appeal, along with two other appeals in ITA Nos. 555 & 556/JP/2016 was taken up for adjudication on 30.01.2020. The other two appeals have already been disposed off vide order dated 12.03.2020, however, this matter couldn't be pronounced within the prescribed time due to current situation prevailing ....
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.... (Investigation-II), Jaipur, Sh. Pradeep Agarwal gave the bifurcation of unaccounted income introduced by following persons in M/s Raghuveer Metal Industries Ltd. Sh. Achin Agarwal Rs. 5,04,690/- Smt. Geeta Agarwal Rs. 15,45,312/- Sh. Pradeep Agarwal Rs. 36,32,837/- M/s Pradeep Kumar Agarwal & sons (HUF) Rs. 26,24,986/- Total Rs. 83, 07, 825/- As such amount of Rs. 1,66,92,175/- was the unaccounted income of the assessee company. However, the assessee company has not included in its income for the year 2008-09 any amount out of Rs. 2.5 crores surrendered on its behalf by Sh. Pradeep Agarwal, Director. In view of it, the assessee company was asked to explain vide notice u/s 142(1) dated 11.11.2010 why it has not included the amount surrendered during search as discussed above in its income for the year 2008-09 relevant to A.Y 2009-10. The assessee company has replied in its letter dated 27.11.2010 that the company was not aware of any such letter submitted by Sh. Pradeep Agarwal to the Assistant Director of Income-tax (Investigation-II), Jaipur nor has the board of Directors of our company ever given sanction to any such letter nor has ever aut....
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....Sh. Sunil Pokharna how can it deny the submission/admission made by other director i.e. Sh. Pradeep Agarwal. As such admission made by Sh. Pradeep Agarwal on behalf of the company is also binding on it. ii) Even if, there is a dispute with Sh. Pradeep Agarwal, it cannot be denied that he was not the director of the company when he made submission before the Assistant Director of Income-tax (Investigation- II), Jaipur, therefore the admission made by him as discussed in para above, is binding on the company. iii) Submission of the assessee that the document seized at Page no. 21-23 of annexure A-5 were neither seized from the premises of the company nor the papers were explained by the company, is no ground for denying the contents of the documents. If a document indicating its ownership by the company is seized from the residence of the Director of the company, the company cannot deny its contents only for the reason that it was not seized from the business premises of the company but from the residence of its Director. It is very normal for the Directors to carry business activity of a company from its residence also. Therefore, finding of documents rela....
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....oose papers found, Sh. Pradeep Agarwal surrendered an amount of Rs. 1,66,92,172/- in the name of assessee company through a letter filed by his Counsel before the ADIT (Investigation-II), Jaipur on 02.12.2008. It was submitted that the said letter was executed on the letter head of the Counsel of Sh. Pradeep Agarwal signed by the Counsel himself and thereafter, Sh. Pradeep Agarwal authorized contents of the said letter on 20.01.2009. It was further submitted that another letter was filed by the Counsel of Sh. Pradeep Agarwal on 15.12.2008 which was again executed on the letter head of the Counsel and signed by the Counsel himself and thereafter, the contents of the letter were authorized by Sh. Pradeep Agarwal on 20.01.2009. 8. Further, our reference was drawn to the submission filed by the assessee company before the AO vide letter dated 27.10.2010 in response to the notice issued by the AO u/s 142(1) dated 11.11.2010 and the contents of the said letter read as under:- "To, The Asstt. Commissioner of Income Tax Central Circle, Alwar, Rajasthan Ref: M/s Raghuveer Metal Industries Ltd. 21, Adrash Nagar, Ajmer Sub: Not....
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....he assessee stands invested in M/s Raghuveer Metal Industries Ltd. in the form of unsecured loans etc. through various channels." From the above it is apparent that the assessee stands for Mr Pradeep Agarwal and not M/s Raghuveer Metal Industries Ltd. 2. In Para-2 he has submitted "That the assessee has arranged loans in the name of various persons in his personal files and also directly in the books of M/s Raghuveer Metal Industries and all such loans and other credits are appearing as capital in annexure A-5 Page 21 to 23." From the above it is apparent again Mr. Pradeep Agarwal may have arranged loans etc. and M/s Raghuveer Metal Industries did not have any undisclosed income. 3. In Para-3 he has submitted "In the group case of Shri Pradeep Agarwal as per Balance Sheet of various individual files on the date of search. The following loans are appearing which have been routed through/introduced in the books of M/s Raghuveer Metal Industries:- Sr. No. Particulars Amount (a) In the file of Shri Achin Agarwal Rs. 5,04,690/- (b) In the file of Smt. Geeta Agarwal Rs. 15,45,312/- (c) In the file of Shri Pradeep Agarwa....
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....if it is presumed that it is his extra capital then it should be taxed in his personal hand. We hope the above will serve your purpose. If your good self requires any other details/clarifications we shall be eager to provide the same to you. However if your goodself is not satisfied with our submission then an opportunity of personal hearing may be granted before any adverse view is taken again us. Thanking you Yours Truly, For Raghuveer Metal Industries Pvt. Ltd. (Authorized Signatory)" 9. Further, our reference was drawn to the affidavit of Sh. Sunil Pokhrana, director of the assessee company which was filed before the ld. CIT(A) and the contents of the said affidavit read as under:- 1. "That I Sunil Pokhrana S/o Sohan Lal Pokhrana R/o 21, Adarsh Nagar, Ajmer solemnly affirms that I am director of M/s Raghuveer Metals Industries Ltd. and I am fully aware about the facts and transaction of this company and I am also competent to file explanation and affidavit on behalf of said Raghuveer Metal Industries Ltd. 2. That I solemnly affirm that in the case of M/s Raghuveer Metals Industries Ltd. & also in the case of Shri....
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....t last. If we eschew the letters filed by the Counsel of the Ex-Director, Pradeep Aggarwal which was authorized by him after a month, then there is logically no incriminating material on record to justify the additions. It was submitted that the Financials so generated by the Counsel of Pradeep Aggarwal were made indulging in conjectures and surmises. It was further submitted that a statement recorded or confession made by a hostile director cannot be taken as a ground conclusive enough for making an addition on the assessee company. His intent being malafide towards the assessee cannot be doubted. Even otherwise on the basis of a handmade ledger found in the premises of a third party and the third party's statement cannot be taken as a ground for making any addition in case of assessee and in support, reliance was placed on the following decisions: • CIT vs. Anil Khandelwal (ITA No. 247/2015 & 248/2015 & 248/2015) • DCIT vs. Yash Pal Narendra Kumar (ITA No. 5340, 5341 & 5342/D/2012) • Shri Ketan V Shah and Others vs. ACIT (ITA No. 2321 & 2322/Mum/2013) 11. It was further submitted that no addition could be made on the basis of loose papers....
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....O. 14. Further, ld DR placed reliance on the findings of the ld CIT(A) which read as under: ".........in this group case the search was conducted on 17.09.2008 and the group cases are Raghuveer Metal Industries Ltd. Kamdhenu Ispat Ltd. etc. There is no dispute on the fact that on the date of search Sh. Pradeep Agarwal and Sh. Sunil Pokharna were the main directors of the appellant company. Though it is stated that there was some dispute between the directors even before the date of search but no such fact appear to have been brought to the notice of the search party or the department during the course of search, therefore it cannot be said that Sh. Pradeep Agarwal was not competent to make such disclosure of income. On perusal of such letters dated 2.12.2008 and 15.12.2008 it may be noted that the contents of such letters are very specific. In letter dated 02.12.2008 it is mentioned that on the basis of page no. 21 to 23 of Annex. A-5 which is revalued balance sheet of M/s Raghuveer Industries Ltd. as on 30.06.2008 and in this balance sheet the total capital of both the directors are mentioned at Rs. 262632985/- (129882027 and 132750958). Against such capital, fixed ass....
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....y document and the fact detailed exercise and basis is given as to how the undisclosed income was determined. Even reference of seized documents is also made. It may also be stated that even if such surrender was not made strictly u/s 132(4) it may not affect the authenticity and validity of such admission. As regards the objection of the appellant that such surrender was based on the revaluation of assets and that for revaluation of assets certain procedures are laid down which were not fulfilled, it may be stated that thought the appellant company is a corporate entity but on the basis of incriminating documents/ papers one of the director made very specific disclosure of undisclosed income and such admission of unaccounted income may not necessarily be as per the parameters and procedures for revaluation of assets but simply non-adherence of procedural requirement may not be a valid ground of negate the authenticity of valid disclosure of income. The other objections of the appellant are broadly of academic nature without any way affecting the validity of surrender of undisclosed income. The ultimate fact remains that on the basis of incriminating documents found from the premis....
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...., he has stated that besides his family, the family of Sh. Anil Pokharna and family of Sh. Tarsen Singh are also involved in this company in capacity of Director and share holder. In response to Question No. 7, he has stated that M/s Raghuveer Metal Industries is involved in the business of manufacturing iron Bars. In response to Question No. 8, he has stated that Sh. Surendra Kumar is a main person involved in M/s Raghuveer Metal Industries. We therefore find that as on date of recording of aforesaid statement u/s 131 of Sh. Pradeep Agarwal, he was one of the share holders and the Director of the assessee company and besides him, Sh. Anil Pokharna, Sh. Tarsen Singh and their family members were also share holders and directors in the assessee company. 17. Thereafter, in his another statement recorded u/s 131 on 19.11.2008, in response to Question No. 53 wherein he was shown Annexure A1 to A10 which were seized during the course of search from the residence of Sh. Ashish Agarwal who was incharge of Khamdenu Industries, he has stated that these loose papers are relating to his companies and business establishments which may include accounted and unaccounted transactions, he will ....
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....e assessee company which lends credence to the fact that Shri Pradeep Agarwal was not confronted with the said document at the time of recording his statement u/s 132(4) of the Act. There is nothing on record which shows that Shri Ashish Agarwal was confronted with such document and his statement was recorded and his explanation was called for regarding the contents and authencity of such documents. Further, when Shri Pradeep Agarwal, the director of the assessee company was confronted with such document while recording his statement u/s 131 on 19.11.2008, he has stated that the said document shows the balance sheet of accounted and unaccounted transaction of the assessee company as on 30.06.2008, whatever profits have not been shown in the books of accounts, he will pay the taxes by accepting the unaccounted income of the current financial year. However, as we have seen above, there are no efforts which have been made by the Assessing officer to verify the contents of the said documents with the books of accounts of the assessee company and to determine the profits which have been reported as on 30.06.2008 and the profits which remain unaccounted. Therefore, merely relying on the ....
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....hing on record that he was confronted with such documents. Further, there are claims and counter-claims as to whether Shri Pradeep Agarwal has authorized the contents of these two letters in his individual capacity or in the capacity of director of the assessee company, whether he has become hostile and has dispute with other directors, etc. However, keeping these issues aside for the moment, in our view, where these two letters have to be considered, they cannot be considered, read and understood in isolation and independent of his statement recorded u/s 131 of the Act and thus, have to be read in furtherance of his statement recorded u/s 131 of the Act. In his statement recorded u/s 131 of the Act, he has stated that the said document shows the balance sheet of accounted and unaccounted transaction of the assessee company as on 30.06.2008, whatever profits have not been shown in the books of accounts, he will pay the taxes by accepting the unaccounted income of the current financial year. However, as we have seen above, there are no efforts which have been made by the Assessing officer to verify the contents of the said document with the books of accounts of the assessee company ....
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....revalued balance sheet of the assessee company as on 30.06.2008 and "the capital as per loose papers was at Rs. 262500000/- whereas the capital as per books was at Rs. 136650000/- and accordingly, extra capital as per loose papers was shown for Rs. 125850000/-. The reason for extra capital was revaluation of fixed assets for the purpose of the partition between both the directors namely Sh. Pradeep Agarwal and Sh. Anil Pokharan. By such revaluation the fixed asset of Rs. 78928394/- was arrived at Rs. 179866704/- and the difference of Rs. 101000000/- was credited in directors' capital account by Rs. 5.50 Cr. in each director. The actual undisclosed income of the company shared by both the directors and credited in the capital account was at Rs. 24850000/- (125850000-101000000) and accordingly surrender of Rs. 2.50 Cr. was made as undisclosed income/unaccounted income of M/s Raghuveer Metal Industries Ltd. to purchase peace of mind." As per the aforesaid findings returned by the ld CIT(A), there is thus an extra capital which is represented by revaluation of fixed assets for the purposes of partition between the two directors. Such extra capital has been credited in respective cap....
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.... on account of theft of goods by the assessee company was found not tenable, hence disallowed which on appeal, has been confirmed by the ld. CIT(A). 28. During the course of hearing, the ld. AR referring to the invoice out of which goods were lost and partially recovered back, submitted that 15.400 MT of Kamdhenu TMT- Bar was sold for Rs. 5,98,965/-and out of which, 9.430 MT goods were recovered back and in this manner, proportionally a loss of Rs. 2,32,193/- was incurred which was claimed by the assessee company. In support , weighment slip of goods returned, affidavit of Director of the assessee company were also filed during the course of assessment proceedings and which were not considered and appreciated by the lower authorities. 29. Per contra, the ld. DR relied on the findings of the lower authorities and submitted that a theft had occurred in the premises of the appellant for goods amounting to Rs. 2,32,193/- for which an FIR was lodged before the police authorities. However subsequently such stolen goods of Rs. 2,32,193/- were recovered by the police and handed over to the assessee. In this circumstances, there was no case for claim of such amount as business expendi....
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....of account on 17.09.2008 found on physical verification. He has further admitted that these amounts would be the additional income of the company in addition to the regular income, declared by the company for the year 2008-09. (a) Rs. 4,28,498/- Excess Stock of TMT Bar surrendered. (b) Rs. 36,314/- Excess Stock of Runner & Rizer surrendered. (c) Rs. 2,55,697/- Excess stock of End Cutting, Stag (Mix), Miss Roll (Mix) (d) Rs. 3,79,960/- Excess stock of scrop, Ferro Ferro Silicon, etc. Similarly, stock of Rs. 4,48,005/- was found to be short of certain items. However, on going through the return of income filed for A.Y 2009-10 it is seen that no income on account of excess stock or short stock surrendered has been declared. In view of it, you are required to explain why an addition of Rs. 11,00,469/- on account of excess stock admitted during the Survey and Gross profit on short stock considering it to sales out of books, should not be made to the income of the company of the year 2008-09. The assessee has replied in its submission filed on 04.12.2010 that the excess stock found during the course of survey operation has be....
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....e is that the appellant has failed to prove by necessary documentary evidence as to how income on account of undisclosed stock to the extent of Rs. 11,00,469/- was shown in the return. In this connection it may be mentioned that as the excess stock amounting to Rs. 11,00,469/- was admitted to be undisclosed income as on date of survey therefore income to such an extent as on date of survey was to be shown separately in the total income of the A.Y under consideration. During the appellate proceedings also the appellant had failed to justify as to how by making sales of such stock the total income was offered for taxation. In this background the AO was justified in making such addition of Rs. 11,00,469/-. As regards addition of Rs. 44,800/- on account of short stock the AO's case is that such short stock of Rs. 4,48,005/- indicated that the stock has been sold in unaccounted manner and the AO accordingly applied GP rate of 10%. The appellant has not disputed application of GP rate of 10%. The appellant also did not dispute such short stock for Rs. 4,48,005/- as also why the stock was found short to such an extent. In this background when neither the value of short stock is d....
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.... 3016/08 193 ciabilities Shree Ganesh Jee Amount Assefs Amount 7960.00 Fixed Assets 1798.66,704 Sh. P. K. Aggarwal 12,9803027-00 Sh. Anil Pokhara (13,27,50,958.00 consurmable stock. Pellosing Stock 1151/61026 143,44285 Sh. Danee Ji ni 2000,000. Store (Spares) 1,29,33,509 Bank A/C 403,61 873-4 Debtors 278,23,306 Term Loan 19387 112:00 Bank Accounts 14815945 Creditors 㧠57762715:00 Cash in Hand 5,51,567 Current Liabilities 32, 46, 39,269.00 Sh. Sunil Pokharnati 22,45,700. Expenses Payable Cash Imprest FD.R. 40,15,500 Security - RSEB-other- 1,33,21 972- Current Assets 21712900. (Loans Advane, TUS, ED.) Suprinsicourt ED. Refann Total 40,6791914700 WS, Tavy sa Total 4067919147 Note 112 Truck Sale & Tractor Purchase Entry Mot Enter this Sheet. 251560.00 वृतà¥à¤¤. मायà¥à¤•à¥à¤¤ अलवर Document 2 21/1 48 S.L. PODDAR & COMPANY (TAX CONSULTANT & ADVOCATES) E-3A, "Gokul Apartment", Kanti Chandra Road, Bani Park, Jaipur-06, Ph.: 2207504, 2207505, M.: 9....
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....nce of complete record of earlier period. This money was introduced in the safe of entries for loans and other methods. The details of which are not available with us right now. But we confirmed the surrender of Rs. 2.5 crore undisclosed income in the hands of M/s Raghuveer Matel Industries Ltd. for the Financial Year 2008-09. This surrender will cover the entire loose papers of M/s Raghuveer Matel Industries Ltd and Shri Pradeep Kumar Agarwal and Shri Ashish Agarwal who has routed through and introduced the undisclosed income as capital and loan in the books of company and 'mentioned in page no. 21 to 23 of annexure A-5 seized during the course of search. However after providing complete photocopy of seized documents we will file detailed bifurcation. That as per annexure A-7 the balance sheet of Rs. Kali Matel Pvt. Ltd. was there in which the total profit of Rs. 1,13,02,911/- whereas in the books of accounts the profit is only 68 lacs so we surrendered Rs. 50 Lacs as unaccounted income of M/s Kali Matels Pvt. Ltd. for the current Financial Year 2008-09. You are requested to provide photocopy of all seized documents to bifurcate the ....