TaxTMI 
TaxTMI 
2020 (12) TMI 1064
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....acts in sustaining the treatment of profit in wholesale trading in cloth amounting to Rs. 3,78,24,737/-, as unexplained cash credit by the Ld. A.O., under section 68 r/w section 115BBE of the Income Tax Act, 1961. 2. That while sustaining the profit in wholesale trading in cloth as unexplained cash credit, the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur failed to appreciate the fact that even in the course of search, no incriminating document(s)/evidence, indicating or suggesting that the business of wholesale trading in cloth was not genuine, was found. 3. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in treating the business of trading in cloth as bogus, without appreciating the fact that the business of trading in cloth was duly accepted in the original assessment(s) made under section 143(3) of the I.T. Act, 1961, and thus the A.O. cannot review his own order passed earlier u/s 143(3) of the I.T. Act, 1961 in the assessment made u/s 153A of the Income tax Act, 1961, without any incriminating documents found during the course of search. 4. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur has erred in law and on....
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....quent addition in the income of the appellant deserves to be deleted. 10. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur has erred in law and on facts by not appreciating the fact that even if the seized document(s) was found from the premises of the 3rd party then, the assessment and addition on the basis of the said documents can only be made under section 153C of the Income Tax Act, 1961, hence the impugned assessment/addition(s) made u/s 153A of the Income Tax Act,1961 is illegal, bad in law and liable to be quashed/deleted. 11. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts and failed to appreciate that the approval granted by Joint Commissioner of Income Tax under section 153D of the Income Tax Act, 1961, before passing the impugned assessment order, was mechanical in nature and thus, the whole assessment is liable to be quashed. 12. That the order passed under section 127 of the Income Tax Act, 1961 is unsustainable in law, therefore the impugned assessment order is illegal, bad in law and liable to be quashed. 13. That the impugned assessment made u/s 153A of the Income Tax Act, 1961 is unsustainable in law an....
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.... the sale and purchase of cloth made by the assessees on wholesale basis from Rich Group of companies managed by Shri Shashwat Agarwal. Learned counsel for the assessee therefore, argued that first of all the addition has not been made on the basis of documents recovered during search on the assessees which is apparent from the assessment order itself and secondly, the additions have not been made on account of Long Term Capital Gain or on account of share capital or unsecured loans for which the documents were found at the premises of the third party. Learned counsel for the assessee submitted that for assessment year 2013-14 and 2015-16, the assessments stood completed and therefore, in the absence of any incriminating material, the addition could not have been made. 2.1 Reliance in this respect was placed on the following case laws: (i) 395 ITR 526 Pr. CIT vs. Meeta Gutgutia (ii) 380 ITR 573 (Del) CIT vs. Kabul Chawla (iii) 380 ITR 571 (Del) CIT vs. Murele Paper Mills (iv) 352 ITR 493 (Del) CIT vs. Anil Kumar Bhatia (v) 374 ITR 645 (Bom) CIT vs. Continental Warehousing Corpn. (vi) 386 ITR 483 (Bom) CIT vs. Gurinder Singh Bawa (vii) 392 ITR 501 (Del) Pr. CIT vs. Sm....
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....dated 28/07/2019, copy placed at pages 62 to 71 of the paper book. Learned counsel for the assessee further submitted that Assessing Officer held the sales and purchase of the assessee as bogus and made the addition of the net profit u/s 68 of the Act and charged the income tax u/s 115BBE of the Act thereby disallowing the assessee the benefit of set off. Learned counsel for the assessee submitted that however the learned CIT(A) had allowed relief to the assessee by allowing set off of such income against the other income of the assessee but he did not agree to the contentions of the assessee that the income was from genuine business activity and needed to be included under the head income from profits & business instead of it having been treated as unexplained credit u/s 68 of the Act, therefore, it was prayed that keeping in view the above legal issues and the merits of the cases, the income held by the authorities below to be taxed u/s 68 be treated as being income from business activity. 3. Learned D. R., on the other hand, vehemently argued that assessee cannot take the argument that no incriminating document was found. It was submitted that the documents relied on by the Ass....
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....ccommodation entries. 3.2 As regards the merits of arguments, Learned D. R. submitted that Assessing Officer in respect of reply to queries after specifically citing a number of adversities held that the turnover of the assessee from cloth business was bogus and heavily relied on the findings of Assessing Officer. Therefore, it was argued that learned CIT(A) has rightly confirmed the addition to be u/s 68 of the Act. 4. In rejoinder Learned counsel for the assessee submitted that in the order of Hon'ble Allahabad High Court there are only observations with regard to the companies being involved in providing accommodation entries in the form of providing Long Term Capital Gain and share capital etc. and there is no whisper as to the cloth business being run by the companies and also there is no Long Term Capital Gain or unsecured loans entries taken by assessees. It was submitted that the Assessing Officer has made addition on account of trading in cloth. On the conclusion of the arguments by the parties, the Bench directed both the parties to furnish written submissions along with the copy of Panchnama and list of documents etc. seized during the course of search in the case....
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....Learned Assessing Officer, while framing assessment, proceeded to compute the total income by adopting the figures as Profit & Loss Account and the return of income which is solely based on the books of accounts maintained by the appellant company. 9) In addition to the above treatment of profit in trading of cloth, the A.O. also estimated and added an amount of Rs. 7,56,491/-, representing 2% of the total profit in trading in cloth, declared by the appellant, as an unexplained expenditure to obtain the alleged accommodation entry by resort to provisions of Section 69C of the Act. 10) While computing the total income, the Learned Assessing Officer did not allow the set off of the income declared by the appellant in trading of cloth against the business losses in the same year in accordance with the provision in Section 71 and 72 of the Act. 11) The appellant preferred an appeal against the said assessment before the Learned Commissioner of Income Tax (Appeals)-4, Kanpur. On adjudication, the Learned Commissioner of Income Tax (Appeals)-4, Kanpur upheld the action of the Learned Assessing Officer in treating the amount declared as profit on cloth trading as an unexplained cred....
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....Appellant Co. is enclosed. 18) Before going into the various legal and factual issues, your humble appellant would very vehemently like to state that neither any incriminating document was found from the premises of the appellant during the course of search nor the Learned Assessing Officer has referred to any such document in the body of assessment order. 19) The appellant is agitating the action of the Learned Assessing Officer and upholding of the same by the Learned Commissioner of Income Tax (Appeals) on the ground that the case of the appellant is that the assessment had been framed u/s 153A of the Act and is not a regular assessment. 20) It is worth noting that an addition or any adverse inference in the case of the assessment u/s 153A of the Income Tax Act, 1961 can be made only on the basis of incriminating material whereas, in the case of the appellant, no incriminating material was found/noticed or referred to in the Assessment Order. 21) Entire thrust of the Learned Assessing Officer has been on the documents/ledger found and seized from the premises of Rich Group of Companies, which was seized by the Department way back on 28.04.2015. This fact is amply clear f....
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.....2016 and copy of assessment order under VAT has been enclosed at pages 55 to 61 of the paper book. 28) All the transactions of purchase and sale of cloth are duly recorded in the books of accounts and all payments are routed through normal banking channels. 29) The Learned Assessing Officer had sought various details and explanations vide different show cause notices in response to which the appellant Co. furnished detailed replies to explain and support full facts relating to trading of cloth. Copies of all such show cause notices and relevant replies have been placed at pages 72 to 125 of the paper book. 30) It is also significant to point out that complete details of month-wise purchases and sales of cloth were also filed before the A.O. vide reply dated 27.08.2018 and the same are placed at pages 72 to 76 of the paper book. 31) Your Honour's kind attention is drawn to the ratio propounded by Hon'ble Supreme Court in the judgment of CIT vs Odeon Builders Pvt. Ltd. reported 418 ITR 315, wherein, their Lordships have held that where assessee had submitted purchase bills, transportation bills, confirmed copy of account and VAT registration of sellers and payments w....
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.... the addition(s) based on alleged findings given in the order of the Hon'ble Allahabad High Court in the case of M/s. Rich Udyog Network Ltd. and M/s. Cityon Nano Technology Pvt. Ltd., which inter-alia revealed that the group was involved in providing accommodation entry by issuing cheques and taking back cash and its commission. 2) The finding in the order of the Hon'ble Allahabad High Court does not relate to trading in cloth or purchase and sale of cloth by the companies of Shashwat Agarwal Group of cases. The finding is therefore, not relevant in the present appeals before the Hon'ble Bench, because there is no addition or adverse inference in the present appeal relating to any accommodation entry whatsoever. 3) However, during the course of entire search assessment, the appellant was neither confronted with the statements recorded under section 132(4) of the Income Tax Act, 1961 or otherwise of Shri Shashwat Agarwal Group of cases nor an opportunity of cross examination was allowed to the appellant to ascertain correct facts relevant for the search assessment. 3) The denial of cross examination was wholly arbitrary and contrary to the principles of natural ju....
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....has been prejudiced for want of providing him opportunity of cross-examination of Shri Anoop Asthana, whose unilateral statement recorded exparte qua the assesses has been made the sole basis of the addition, thereby violating the principles of natural justice; and (ii) the other material, i.e., three pages of the diary found in the search do not establish any case for addition in the hands of the assesses, in the year under consideration, as none of these documents relate to the year under consideration, one of them does not contain any date/year and the other two pertain to earlier years, in which, no addition based on these documents was made. 18. Therefore, the grievance sought to be raised by the assesse is justified. It is accepted as such. Accordingly, the addition made is deleted. Nothing further survives for adjudication, nor was anything else argued. 19. In the result, the appeal is allowed......" c) In the Judgment of C.I.T. Vs. Odeon Builders Pvt. Ltd; [2019] 110 Taxmann.com 64 (SC) (copy enclosed), the Hon'ble Apex Court while dismissing the appeal of the Revenue upheld the order of the Ld.CIT(A), Tribunal as well as High Court, affirmed the finding of the Ld....
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.... view by non-jurisdictional High courts have not become final and further they have not considered the arguments raised in above note. Dismissal of SLP is not a binding precedent. 2 On the other hand, the jurisdictional High court of Allahabad also favour the view that u/s 153A, the assessment of total income needs to be made irrespective of any incriminating seized material. 3 In absence of any specific requirement of 'incriminating material' u/s 153A, even if there is requirement of some material to make addition u/s 153A or upset any concluded assessments, such material should be such that it forms the basis of the additions, irrespective whether such material was seized or obtained otherwise. 4 An entry recorded in books but found false later on, would by itself constitute incriminating material. 5 The scheme of the Act does not envisage multiple assessment proceedings, i.e. u/s 143(3)/147/153A/153C for same AY at the same point of time in case of an assessee who has been subjected to search. It is for this very reason, the section 153A starts with non-obstante clause overriding the provisions of 143 or 147 etc. Further, the existence of the provisions for abate....
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.... the scheme of the Act as already explained. This view is also supported by decision in CIT Chennai vs Ajit S Kumar 93 Taxman.com294(SC) and provisions of 153A are 158BB are pari materia. 10 This interpretation of the scheme of the Act, gets further strengthened by the fact the u/s 148 also, once the jurisdiction has been validly assumed, it has been specifically provided therein that there is no need to issue another notice u/s 148 for any other item of income. On the same logic, when the proceedings u/s 153 A to assess the total income are validly initiated in case of any assessee after the search, then for assessment of any other item forming part of total income based on material gathered from some other source (third party search/survey) also needs to be considered during the existing proceedings u/s 153A itself, without resorting to separate proceedings u/s 153C. DETAILED NOTE 1. The language of section 153A makes it very clear that there is no explicit or intended requirement of seizure of incriminating material during the search u/s 132(1) before issuing the notices u/s 153A. The jurisdiction of section 153A is automatic from the moment a search is initiated. There is ....
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....ited accounts, the AO is mandated to examine whether such income / entry was disclosed fully or partly and/ or represents its real nature and source for the purposes of the Act. This interalia would mean that even the entries disclosed in accounts which might represent income fully or partly would in itself be an incriminating material for which a search was initiated. When the non-production of books or other documents can give rise to a belief for initiating search u/s 132(1), then it may be counterproductive to conclude that the power of AO is restricted to assessment based only on incriminating material found in search, irrespective of any other item of income which might have remained fully or partly undisclosed for the purposes of the Act, based upon the entries already appearing in such books, if any. 4. It is the 'assessment of total income' which is required to be made u/s 153A. The total income as defined u/s 2(45) would be the total income computed as per section 5 of the Act. The word 'assessment' cannot have a different meaning for different purposes under the same Act, unless restricted by specific provisions. The process of assessment for the purpos....
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....essee as defined u/s 2(45) needs to be assessed for all the 6 AYs for which the AO is mandated to issue notice u/s 153A. 5. Further u/s 153A, there is a provision for abatement of pending assessments whether or not any evidences were found for that year. There can also be a situation where neither any regular assessments were made earlier nor any proceedings were pending, which could be abated. The section also envisages the issue of notice u/s 153A whether or not any evidences were found for that year. It is also implicit that u/s 153A, the items of total income which could be assessed u/s 153A in abated proceedings cannot be different for the cases which could not be abated such as i) where no proceedings were pending; or ii) where earlier assessments were completed u/s 143(3)/147; or iii) where earlier assessments were not made at all. The only caveat could be that before making any addition to the total income, the AO must bring on the record how such items are falling into the category of total income for the purposes of the Act. 6. If it were to be held that no addition can be made without any incriminating material in respect of the years covered by section 153A, then it....
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....ction u/s 80-IA claimed u/s 153A return, held that the return under S.153A is not a revised return but an original return. If that be so, the deduction under S. 80-IA, if otherwise admissible, always could have been claimed. The above observations of the Delhi and Allahabad High Courts once again suggest that the assessee gets a second chance to make good his omissions by claiming fresh deductions/disclosing such income in return filed u/s 153A which was not claimed/offered earlier in return filed u/s 139 and such return becomes final granting immunity from penalty also, whether or not it is emanating from seized material?. If that be so, then why the AO only would be powerless u/s 153A to examine/revisit the incomes/claims which may or may not be emanating from the seized material only. If this is not interpreted so, then it will lead to an absurd situation where the assessee has freedom to revise the income/claim of deduction which may not be emanating from seized material but the AO is powerless in probing/examining the veracity of such incomes/claims, even though declared in return filed u/s 153 A and the AO has to assess the total income of assessee including the one which h....
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....relevant AY though not directly emanating from the seized material, it may be difficult for AO to record a belief simultaneously about escapement of income for initiating proceedings u/s 147, when another proceedings u/s 153A wherein also AO can assess the total income is already pending before him. That being the case, if any information or evidence not directly emanating from the search/seized evidence is found, then there cannot be one asstt u/s 153A and at the same time a simultaneous asstt u/s 147 also for same AY. In fact, the second proviso is intended at keeping in abeyance any pending proceeding for assessment in a particular year; in which there is a proceeding initiated under Section 153A, pursuant to a search under Section 132. Hence, when a notice is issued pursuant to a search under Section 132, for assessment under Section 153A, all pending proceedings with respect to a regularly initiated assessment or re-assessment would stand abated. This would clearly reflect the intention of legislature to that to avoid parallel proceedings of regular asstt as well as search asstt, the income from all sources are to be assessed u/s 153A itself. Hence to avoid any anomalous situa....
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.... para 10 and 12, is quoted as below- "Hence, when a notice under Section 153A is issued, it enables the department to carry out re-assessment or assessment with respect to the six immediate prior years and the year in which the search is carried out. This does not require any incriminating material recovered on search relating to those prior years; in which there is no time left, on the date of search, for an assessment under Section 143. The provision under Section 153A is a non obstante clause having overriding effect over Sections 139, 147, 158, 149, 151 and 153. The intention of the legislature is to enable assessment, if it has not been regularly done in any of the previous years, or to re-initiate assessment in case there is already proceedings pending or to re-assess in the case of completed assessments; if the search under Section 132 reveals material pointing to a practice of suppression of income from taxation. These materials need not necessarily be that relevant to the previous six years since a practice of suppression detected in the subject year permits a like presumption to be drawn in the earlier six years too; on best judgment with reference to the business or ....
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....lowing the cited decisions of another Division Bench of this Court, answer the question of law against the assessee and in favour of the revenue". (e) In Commissioner of Income-tax-VII v. Chetan Das Lachman Das 254 CTR 392 (Delhi)the Delhi High Court has held as below: - Section 153A of the Income-tax Act, 1961 - Search or seizure - Assessment in case of-Assessment years 2000- 01 to 2006-07 - Whether there is no condition in section 153A that additions should strictly be made on basis of evidence found in course of search or other post-search material or information available with Assessing Officer which can be related to evidence found - Held, yes - Whether seized material can also be relied upon to draw inference that there can be similar transactions throughout period of six years covered by section 153A - Held, yes [In favour of revenue]. (f) Filatex India Ltd Vs CIT-IV 229 Taxman 555(Delhi) Whether during assessment under section 153A, additions need not be restricted or limited to incriminating material found during course of search and, hence, argument of assessee that addition under section 115JB was not justified in order under section 153A as no incriminating mate....
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.... Further, Supreme Court in Sinhgad Tech Edu Society 397 ITR 344(SC) held that no notice u/s 153C could be invoked unless there was incriminating material is also of no consequence as the provisions of section 153C has been amended w.e.f 1/4/2005 and that the decision of Sinhgad Tech Edu society was for period prior to 1/4/2005. 12. The sum and substance of all the decisions above could only indicate that the question of whether the AO has powers u/s 153A to assess total income as defined u/s 2(45) dehors the incriminating material also, has not at all become final and the same is yet pending final adjudication before the SC in SLPs admitted. Hence the arguments made in preceding paragraphs can be pitched up to support the revenues' contention before courts. 13. Further, the 'incriminating material' can be in any form. The word incriminating can have multiple manifestations, such as (i) evidence in the nature of a document, content of any document; ii) an entry in books of account; iii) an asset; iv) a statement given on oath in absence of any fact claimed earlier but coming to notice during search; vi)falsity of nature of entries already recorded in books of accou....
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....tion 153A/C, needs to be understood in the context of events of misreporting and under reporting as defined u/s 270A. The provisions of section 153A/153C are not the normal assessment provisions like 143(3); rather they are curative provisions to plug the mischief of misreporting or under reporting of taxable income based on evidences found in pursuance to search. Hence, if on account of search, the facts and circumstances suggest that any entry already appearing in books or accepted in earlier assessments based on documents submitted at that point of time, are camouflaged or manipulated or reflected to be in the nature or from a source which is different from the real nature or source as appearing from the evidences found during a subsequent search resulting in misreporting as defined u/s 270A(10), then such material/ facts coming to fore will definitely constitute an incriminating material, even if does not get directly seized from the search of the assessee itself. Section 270A(10) defines under reporting and misreporting as under: 270A (10): The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:- (a) Misrepresentation or suppres....
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....n be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this Section only on the basis of seized material" Delhi High court has thus explained the underlying principle that though the assessment may not be based on seized evidence only but the addition cannot be arbitrary. There can be no dispute on this proposition. It has to be based on evidences found during search, or post search or information available with the AO which can be related to the evidence found. Thus, any entry already recorded in the books which is not true in its nature or source and any information even coming to the AO post search shall constitute incriminating material for the purpose of making an assessment u/s 153 A 17. Since the proceedings under the Act are civil in nature, even the circumstantial evidences based on preponderance of probability will constitute incriminating material enough to make an assessment of income and fasten the tax liability as held by in Sumati Dayal Vs CIT 214 ITR 801(SC). It will therefore include any circumstantial material also,....
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....his mother Smt. Shrimati Jain and his wife Neetu Jain also figure in this diary. Shri Navin Jain and his aforementioned family members have taken accommodation entries of tax exempt Long Term Capital Gain by the way of pre-arranged and manipulative trading in the shares Cityon Systems (India) Limited. This sale was stage managed by Sh. Shashwat Agarwal and his brothers as all the shares were purchased by the companies controlled by Sh. Shashwat Agarwal." 5.1 The above observations, noted by the Assessing Officer, clearly demonstrate that a diary identified as BK-2 was impounded during search & seizure operation on 28/04/2015 in the case of search on the companies belonging to Shri Shashwat Agarwal wherein the name of Shri Navin Jain and his family members were mentioned. The Assessing Officer nowhere noted that the names of the assessees was also mentioned in such diary. Moreover, from the findings of the Assessing Officer, we find that the companies of Shri Shashwat Agarwal were engaged in providing accommodation entries of bogus Long Term Capital Gain, unsecured loans etc. to various parties and there is no mention of bogus transactions of cloth. Moreover, the above findings cl....
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.... an employee PG was recorded on oath under section 133A. The assessee was a director/partner/shareholder in the group of companies/concerns. She was the proprietor of the concern FNP. On the basis of documents recovered during the search operation, a notice under section 153A was issued to the assessee. Thereafter, a notice and questionnaire under sections 143(2) and 142(1) were also issued. The Assessing Officer passed separate orders in respect of the assessment years 2000-01 to 2003-04. For the assessment year 2004-05, as in the preceding years, the assessee had claimed deduction on account of franchisee commissions paid to various parties. The Assessing Officer held that the addresses of the franchisees were not revealed and that there were discrepancies in the details of the accounts of the franchisees filed by the assessee. Consequently, the franchisee commission payments claimed by the assessee were added back to her income. For the assessment year 2004-05, the Assessing Officer also made an addition on account of stock. The Assessing Officer estimated the undisclosed income, on account of franchisee fee, at a certain percentage for the assessment years 2001-02 to 2006-07.....
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....9;ble Supreme Court as the SLP filed by Revenue has been dismissed which is reported at 96 Taxmann.com 468. Hon'ble Delhi High Court in above case has distinguished the case law of Dayawanti Gupta vs. CIT 390 ITR 496 (Del) which Learned D. R. had heavily relied. The case law of Hon'ble Allahabad High Court in the case of Raj Kumar Arora 367 ITR 517, though supports the contentions of the Revenue but since Hon'ble Supreme Court has decided the issue in favour of the assessee in the case of Meeta Gutgutia therefore, the judgment of jurisdictional High Court will not help the Revenue. The contention of the Revenue that since the Department has not accepted the decision of Hon'ble Supreme Court in the case of Kabul Chawla and Meeta Gutgutia as SLP in the case of CIT vs. Continental Warehousing Corporation 235 Taxman 568 (SC) has been admitted is also of no help to Revenue. Therefore, in view of the above case laws, we hold that in case of completed assessments, the addition can be made only on the basis of incriminating material found during search. We have already held that no incriminating material was found from the premises of the assessee therefore, the additions c....
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.... 63 3. Paras Castings & Alloys (P) Ltd. P.B. pages 57 to 69 4. Shri Radhey Radhey Ispat (P) Ltd. P.B. pages 57 to 63 5. Quality India (P) Ltd. P.B. pages 48 to 52 Admittedly, the payments and receipts for all the purchases and sales have been made through banking channels. The Assessing Officer, vide show cause notice dated 12/12/2018, confronted the assessee the following questionnaire: "Sub:Show cause notice for assessment proceedings u/s 153A/143(3) of the I.T. Act for the assessment year 2012-13, 2013-14, 2014-15, 2015-16, 2016-17 & 2017-18 Reg. Please refer to the assessment proceedings pending before the undersigned of the I.T. Act for assessment year 2012-13 to 2017-18. From the perusal of records and the details furnished by you, it is noticed that you have claimed to have made purchases and sales of cloth as per details given below: Assessment year Total purchases (Rs.) Total Sales (Rs.) 2012-13 39,84,04,295 48,75,48,301 2013-14 25,11,10,095 28,87,36,832 2014-15 26,90,31,480 32,17,14,504 2015-16 50,02,71,240 59,97,21,277 2016-17 49,99,04,843 61,30,18,425 2017-18 44,83,60,330 48,07,39,041 During the course of assessment pro....
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.... the property situated at 122/235, Fazalganj Kanpur. However, during the course of search & seizure operation in Sigma Group of cases at the premises 122/235, Fazalganj, Kanpur, Shri Ankur Gupta, employee of M/s Shri Radhey Radhey Isptal Pvt. Ltd. and also its signatory, stated that cloth trading has been conducted in Sigma Casting Ltd. & Shree Radhey Radhey Ispat Pvt. Ltd. from financial year 2011-12 and in M/s Kundan Casting Ltd. during financial year 2012-13 and 2013-14 but failed to give any details as to where stock of cloth was being stored as no trace of any cloth whatever was found during the search. Thus the assessee could not susbstantiate the alleged cloth trading during the search & seizure operation. * During the search & seizure operation at 122/235, Fazalganj, Kanpur no stock of cloth was found and even sample of cloth was also not found. * The assessee was also asked to submit name of the retailers, where the cloth traded by it, is available for end users, it simply replied that it did not deal with retailers. It is highly improbable that the assessee group companies which are having huge turnover of around 1000 crore from financial year 2011-12 to 2016- 17, did....
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.... of the Income Tax Act, 1961, for the Assessment Year 2013- 14 Explanation regarding. With reference to your Notice referred above, we wish to explain and submit as under: 1)Pre-conceived inferences; A search was conducted on 23.08.2016 (concluding on 25.08.2016) and despite almost 27 months passed from the said date, no enquiry except from Shri Ankur Gupta 2-3 questions were asked during the course of search at the office of M/s. Radhey Radhey Ispat Pvt. Ltd. Group, about the cloth trading, no meaningful enquiry was done from any responsible person of the assessee group till now. However, in the Show Cause Notice based on third party information, that too never confronted to the assessee for rebuttal/explanation, pre- conceived inferences have been drawn relating to the cloth trading done by the assessee. 2)Twisting of Facts; Certain facts mentioned in the Show Cause Notice are not part of assessment record of the assessee or M/s. Radhey Radhey Ispat Pvt. Ltd. Group of cases. For example cloth trading up to 30.06.2017 was not subjected to any VAT/Sales Tax still inference has been drawn by saying that no information could be obtained from Sales Tax Department. Further, t....
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....d. iii) Sales Tax: The assessee company is registered under UPVAT for trading in cloth, hence the inference relating to Sales Tax information not received from Sales Tax Department in the case of third party referred to in your Show Cause Notice is neither relevant nor meaningful in the present case. Further, a copy of VAT Registration, Annual Return and copy of order etc. of the assessee company has already been filed with earlier replies. iv) Godown; The assessee group has taken 2 godowns and 5 shops on rent as per details given below: Godown/Shop No. Premises No. Owner of Shop/Godown Tenant of Shop/ Godown 1 to 5 (Five shops) 2 Godowns 122/325 Plot No. 17, Fazal Ganj Kanpur Sigma Casting Ltd., 122/225, Plot No. 17, Fazalganj, Kanpur l)Shree Radhey Radhey Ispat Pvt. Ltd. 2)Kundan Casting (P) Ltd. 3)Paras Casting & Alloys Pvt. Ltd. 4)Sadahari Shakti Pvt. Ltd. The assessee company was authorized (Licensed) User of Godown and shops for its cloth trading business besides using the same for other business activity(ies), hence the space required for holding of stock from time to time was sufficient and have been unnecessarily ignored to draw adverse inference in....
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....rms of your referenced Show Cause Notice." 9. From the above questionnaire and reply to the questionnaire, it is clear that the authorities below have not cited any statement of the parties from whom the purchases and sales were made wherein they had denied these transactions and if there are any statements of these parties wherein they had denied these transactions, such statements were not made available to the assessee for cross examination. The assessee in para 3 of the above reply had specifically requested to confront all information and documents etc. but no such opportunity was granted to assessee. The argument of Learned D. R. that since the Hon'ble Allahabad High Court had held the parties to be bogus therefore, there was nothing to be confronted to assessees is not helpful to the Revenue as opportunity of cross examination of third parties on whose statements the Revenue is relying is a legal right available to the assessee and which has been held by various Hon'ble courts including Supreme Court in the case of Andman Timber Industries vs. CIT 281 CTR 241. Moreover, we find that the Assessing Officer had made the additions on the basis of a report from the Asses....
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....ce of Rs. 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted." 4. The ITAT by its judgment dated 16th May, 2014 relied on the self-same reasoning and dismissed the appeal of th....
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.... the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot t....