TaxTMI 
TaxTMI 
2020 (12) TMI 1064
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....Tax (Appeals)-4, Kanpur, has erred in law and on facts 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.....
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....ord by the Ld. A.O. while making the impugned addition or disallowance, without any proper basis and consequent 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 an....
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....hat addition in the case of the assessees was not made on account of Long Term Capital Gain or unsecured loans but it was made by treating as bogus 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 v....
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....It was submitted that all the purchases and sales were made through banking channels and in this respect Learned counsel for the assessee heavily relied on the submissions made before learned CIT(A) vide letter 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 b....
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..... invited our attention to the order of the Assessing Officer wherein he has quoted the order of Hon'ble Allahabad High Court and wherein the entities belonging to Rich Group were held to be engaged in providing accommodation 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. O....
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....ecific defect has been pointed out in the maintenance of the books of accounts. The system of maintenance of books of accounts continues to be the same as was in the past years, which as already submitted above, has been accepted by the Learned Assessing Officer. Otherwise also, the 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....
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....s of Rich Group of Companies. 17) The Learned Assessing Officer thus failed to make reference of any incriminating information or document etc. in the body of the assessment order. As directed, copy of Panchnama prepared by the Learned Authorized Officers during the course of search u/s 132(1) of the Income Tax Act, 1961, at the premises of the 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 inc....
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..../Y 2012-13 was framed u/s 143(3) by the Learned Assessing Officer vide order dated March 2015. Original assessment for A/Y 2013-14 was framed by the Learned Assessing Officer u/s 143(3) vide order dated 22.03.2016. Copy of the same appears at pages 51 to 54 of the paper book. 27) The appellant is duly registered under U.P. VAT Act and the appellant has been filing VAT returns regularly. Regular assessment for the Financial year 2012-13 has been framed vide order dated 05.03.2016 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 ....
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....016- 17 also. It is, thus, respectfully prayed that the action of the Learned Commissioner of Income Tax (Appeals) in upholding the action of the Learned Assessing Officer of treating the additions as a deemed income rather than a normal business income is totally unwarranted, unjustified both in facts and on law and deserves to be negated. "Further, to submissions made by the appellant, following is also respectfully submitted for your honours kind consideration and necessary adjudication upon by the Hon'ble Bench:- 1) The Ld. Assessing Officer made 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'....
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....llowed...." b)Decision of Hon'ble ITAT Lucknow Bench in the case of Morning Glory Infra Limited Vs. DCIT Central Circle-ll, Kanpur IT(SS)A No. 72/LKW/2018 (copy enclosed) for the Assessment Year 2015-16, wherein it was held as under: "....... 16. Thus, one cannot but come to the inexorable conclusion that the order under appeal suffers from the vice of not taking into consideration the assessee's contention, which contention also does not stand rebutted, that it was not provided with any opportunity of cross examining Shri Anoop Asthana. 17. In view of the above, we hold that: (i) the case of the assessee 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....
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....ssment proceedings u/s 153A, seized documents found from the premises of the third party were also used. A detailed note on the scope of proceedings u/s 153A vis a vis requirement of incriminating material and other issue is attached as Annexure to this letter, which may kindly be placed before the Hon'ble Delhi ITAT for rebuttal of the ground of appeal taken by the appellant. Based on the above note, following conclusions can be drawn in the context of the issues raised by the assessee before ITAT: 1 There is no requirement of any incriminating material for the purpose of making assessment u/s 153 A, once a valid search has been initiated in the case of the assessee. The decision taking a contrary 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 15....
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....anner as provided u/s 153A only is also evident that u/s 153D, no requirement of any separate approval of Addl. CIT is prescribed for assessment u/s 153C meaning thereby that such assessments after being initiated u/s 153C are to be treated at par with assessments 153A only. 9 Any material/information pertaining to an assessee coming to knowledge of AO from any source such as search or survey or asstt records of any third party in relation to the same AYs for which proceedings are already pending before AO u/s 153A in case of such assessee, then there would be no requirement of initiating a fresh proceedings u/s 153C/148 etc as the case may be. Such material can be validly considered while making assessment u/s 153A itself in case of present assessee as per 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 a....
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....arch, while the AO is making assessment, it has to examine the correctness of income disclosed not only based on what material has been gathered during search but also based on these books or documents which in the opinion of PDlT(Inv) would not have been produced upon issue of summons, whether or not such books of accounts or documents have been actually found during search. In fact, there are numerous instances when even the books of accounts as per already filed audit reports are not found at any of the premises during search, more so when the searched entities represent only the shell companies. Similarly, there is a requirement of satisfaction by PDIT(Inv) in respect of income being fully or partly not disclosed for the purposes of the Act. Hence, even if some income/ entry is disclosed in books or audited 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. W....
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....sment of total income. Hence, it may be contrary to the scheme of the provisions of 132(1) r/w 153A, if it were to be held that power of AO is restricted only to make assessment the evidence found during search. The provisions of 153A not only require assessment of undisclosed income but total income also. The expression 'total income' would include the income emanating from disclosed items, income emanating from partly or wrongly disclosed items as well as income emanating from undisclosed items. U/s 153A, no distinction is made for assessment of total income in the cases which were earlier completed u/s 143(1), the cases which were earlier completed u/s 143(3)/147 or the cases where no return was filed prior to search. Thus, in all the three categories, it is as per the scheme of the Act that the total income of the assessee 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 p....
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....on under Section 132A, as the case may be, shall abate. " What is clear from this is that Section 153A is in the nature of a second chance given to the assessee, which incidentally gives him an opportunity to make good omission, if any, in the original return. Once the A.O. accepts the revised return filed under Section 153A, the original return under Section 139 abates and becomes non-est. Now, it is trite to say that the "concealment" has to be seen with reference to the return that it is filed by the assessee. Thus, for the purpose of levying penalty under Section 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee under Section 153A, and not vis-a vis the original return under Section 139. The Court in CIT v. Vijay Infrastructure Ltd. (2018) 402 ITR 363 (Alld) also while allowing a fresh claim of deduction 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 ....
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.... u/s 147, the intention of the legislature and the scheme of the Act for making assessment u/s 153A where search u/s 132 is initiated, is same i.e. in order to make assessment of total income, after having assumed the jurisdiction to assess total income, the powers of AO shall not remain restricted to mere those material which were seized during search but shall also include the assessment of income based on any entry already recorded prior to search or any claim/relief allowed prior to search, which has been found to be erroneous during the proceedings u/s 153A. 10. Further, due to non-obstante clause u/s 153A, no action u/s 148 is possible if the evidence is directly or indirectly linked to search. Even otherwise, once the proceedings u/s 153A for making asstt of total income are pending before AO for relevant AY and it comes to notice of AO of escapement of a part of total income for the same 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 p....
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....ocuments and such other materials or information as are available with the Assessing Officer and relatable to the evidence found. The earlier section 158BB which is not applicable in case of a search conducted after 31-5- 2003, provided that the computation of the undisclosed income can only be on the basis of the evidence found as a result of search or other documents and materials or information as are available with the Assessing Officer, provided they are related to the materials found. Section 153A(l)(b) requires assessment or reassessment of total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. This, however, does not mean that the assessment under section 153A can be arbitrary or made without any relevance or nexus with the seized material.....". (d) Kerala HC in the case of CIT Vs K.P. Ummer (Ker)(rendered in February 2019), has observed in 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 sea....
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....d be parallel proceedings continued for the same assessment year. 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. For the said years, the proceedings under Section 153A would be continued and the assessments concluded on that basis. However, when and if the said assessment proceeded with and concluded under Section 153A, is set aside by the statutory authorities or by this Court, then necessarily the original proceedings which stood abated would revive, which is the enabling provision under sub-section (2) of Section 153A. There can be no corollary inferred from the above provisions to find certain years to be of 'concluded assessment' being possible of re-assessment only on incriminating material recovered in search relatable to that year. Hence, we, on the above reasoning and respectfully following 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....
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....(India) (P.)Ltd. 256 Taxman 63(SC) High Court by impugned order held that where during search proceeding one of directors of assessee-company surrendered a certain sum as undisclosed income only for assessment year in question and not for each of six assessment years preceding year of search, said submission could not be said to be incriminating material qua each of preceding assessment years and, consequently, assumption of jurisdiction under section 153A and consequent additions made by Assessing Officer on said basis were not justified - Whether SLP against said impugned order was to be allowed - Held, yes. (k) The dismissal of SLP by supreme court in case of PCIT vs Meeta Gutgutia wherein also the same views were expressed as in Kabul Chawla, would also not lead to conclusion that the question decided by Delhi High court against the revenue in Meeta Gutgutia is settled because the SLP has already been admitted by SC for hearing on the same question in several other cases such as Continental warehousing, Best Infrastructure(supra). (l) Further, Supreme Court in Sinhgad Tech Edu Society 397 ITR 344(SC) held that no notice u/s 153C could be invoked unless there w....
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....s an evidence for making an assessment as also held by apex court in B Kishore Kumar Vs DCIT 234 Taxman 771(SC) as under: High Court by impugned order held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes Hence even a statement u/s 132(4) shall also constitute incriminating material to dislodge any earlier finding for the purpose of making an assessment u/s 153A. 14. The requirement of incriminating material is not specifically mentioned in the Act. However, w.e.f. 1/4/2005 the provisions of section 153C have been amended so as to allow the invocation of proceedings u/s 153C if any document, an entry or an asset is found in relation or pertaining to a person other than the searched person, which has a bearing on the assessment of total income as per the provisions of the IT Act. Hence the word "incriminating", as used by the courts in context of section 153A/C, needs to be understood in the context of events of misreporting an....
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.... Hayden's rule of mischief, the mere fact that such entries are recorded in the books of accounts or some fabricated or colorful documents have already been accepted as correct, will not prevent such material or entry from being incriminating, if the circumstances suggest otherwise. The Hayden's rule of mischief has been judicially accepted and applied by Calcutta High Court in Reckitt Colman of India Ltd. vs. ACIT (2001) 252 ITR 550 (Cal). 16. The incriminating material can be from the search or even from subsequent surveys or any other enquiries. Recently in CIT Chennai vs Ajit S Kumar 93 Taxman.com294(SC), the court in the context of section 158BB has upheld the use of information collected in a survey in case of connected person carried along with search in other person for the purpose of making asstt. u/s 158BB. Provisions of 158BB are Pari Materia to section 153A. The Delhi High court in PCIT Vs Kabul Chawla in para 37(iv) observed as under: "iv. Although Section 153 A 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....
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.... instead had relied on a document marked as BK-2, which was seized during a search operation on a different group of company and that too on 28/04/2015 that is more than one year before the date of search on assessees. This fact is further strengthened from the assessment order wherein the Assessing Officer, at page 8, has observed as under: "In this context, it is noteworthy that a search & seizure operation u/s 132 of the I.T. Act, 1961 conducted upon the companies of Shmshwat Agarwal on 28.04.2015 by the Investigation Wing, Kanpur. The incriminating documents which were found and seized are the premises also include a diary identified as BK-2, containing ledgers of different parties. On going through pages of these ledgers, it was found that the companies of Sri Shashwat Agarwal are paper companies and are engaged in providing the accommodation entries of bogus LTCG, unsecured loan etc, to various parties by accepting undisclosed cash from beneficiaries. Name of such beneficiaries, date-wise receipt of cash and issuance of cheques from and to them, is recorded in this diary very vividly. The name of Sri Navin Jain and his family members such as his father Sri N....
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.... diary identified as BK-2 wherein the names of some promoters/directors of the assessees were mentioned. Nowhere therein the names of the assessees have been mentioned. Learned counsel for the assessee had relied on a number of case laws for the proposition that in case no incriminating material is found, the additions cannot be made in the case of completed assessments. Particular reliance was placed on the judgment of Hon'ble Delhi High Court in the case of Kabul Chawla (supra) wherein the SLP filed by the Department was dismissed by Hon'ble Supreme Court. Learned counsel for the assessee had also relied on case law of Pr. CIT vs. Meeta Gutgutia (supra), the SLP of which has also been dismissed by Hon'ble Supreme Court. Though the SLP in the case of Kabul Chawla was dismissed due to low tax effect but the SLP in the case of Meeta Gutgutia was not dismissed due to low tax effect but was dismissed on merits. For the sake of completeness, the judgment of Hon'ble Delhi High Court in the case of Meeta Gutgutia is reproduced below: "A search and seizure under section 132 urns conducted in the premises of the FNP group which comprised of various companies, partn....
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....artment that such franchisee fee income was not disclosed by her. Both the Department and the assessee filed appeals before the Appellate Tribunal. Accepting the contention of the assessee that for the assessment years 2000- 01 to 2003-04, there was no incriminating material seized during the course of search, and therefore, the assessment orders in respect of those years ought to be quashed, the Appellate Tribunal held that the assumption of jurisdiction under section 153 A for those assessment years was illegal. In respect of the assessment year 2004-05, the Appellate Tribunal held that the additions made were based on seized documents and, therefore, the assessment under section 153A was valid. It dismissed the appeals filed by the Department in respect of the deletions made by the Commissioner (Appeals) and dismissed the assessee's appeal for non-prosecution. On appeals: Held, dismissing the appeals, (i) that it was only if during the course of search under section 132 incriminating material justifying the reopening of the assessments for six previous years was found that the invocation of section 153 A qua each of the assessment year would be justified." ....
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.... Department to issue notice u/s 143(2) therefore, the appeals filed for assessment year 2015-16 cannot be said to have completed. In view of the above discussion, ground No. 2 & 7 of the appeals in I.T.A. No.510, 515 & 517 are allowed. 6. The other common legal ground argued by Learned counsel for the assessee in all appeals is that the Assessing Officer has not provided opportunity to the assessees for cross examination of third parties on whose statements the addition was made and sustained by the authorities. 7. The relevant grounds of appeals covering this grievance of the assessee is contained in ground No. 5 of all appeals. In this respect we find that assessees have been declaring business from cloth trading since assessment year 2011-12 and have also been reporting such turnover with the VAT authorities. All the assessees are registered with VAT Department wherein cloth has been mentioned as one of the commodity for trading. The VAT Department has passed orders also and has accepted the turnover of cloth declared by the assessees. The relevant documents relating to VAT are placed in paper books as detailed below: S.No. Name of assessee Copy of VAT document....
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....ourse of hearing of Writ Petitions filed by Rich Group of companies. The alleged transactions in cloth trading by Rich Group of companies could not be verified from their books of account and sales tax department as well. Further, you have also failed to prove that genuineness of transactions in cloth trading during the course of assessment proceedings, which is evident from the following facts: • All the purchases have originated from one of Rich Group of companies and again the same was sold to Rich Group companies only. Thus, it is just a circular trading for providing/getting accommodation entries in the form of bogus profit. • Even a layman can understand that there was no logic for making purchase from one of the Rich Group of companies by the assessee and again selling the same to another companies of Rich Group directly or through its sister concern, when the main business of assessee was of manufacturing and trading in iron & steel. • Apparently, if one company of Rich Group would have required cloth, it could have purchased directly from its another group company, which in most of the cases are situated in same campus, instead of pur....
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....and customers of the assessee are only companies of Rich Group. • From the details provided by you it is found that no manpower has been engaged in the huge trading activities in cloth, which shows that the transaction claimed in cloth trading are only paper/bogus transactions. In view of the above facts, it is crystal clear that alleged cloth trading shown in your books of account is only book entries and bogus in nature. Hence, you are required to show cause as to why net of bogus sale and purchase credited in your books of account be not treated as cash credit u/s 68 of the I.T. Act and commission paid thereon be not treated as unexplained expenditure from undisclosed income u/s 69C of the I.T. Act and accordingly why these deemed incomes u/s 68 be not taxed u/s 115BBE of the I.T. Act. The date fixed for compliance is 22/12/2018." 8. The assessee vide letter dated 21/12/2018 in reply to questions raised in the questionnaire submitted that the Assessing Officer was using the information on the basis of statement of third party without confronting to the assessee which was not in accordance with law. In this respect the assessee had also replied t....
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.... case of Rich Group of Companies: The Show Cause Notice primarily rests on/around a search and High Court Proceedings of Shri Ashish Agarwal and Shri Shashwat Agarwal and Rich Group of Companies. Firstly their reference in the present proceedings is uncalled for and secondly the orders, documents, other information relied upon and mentioned in the Show Cause Notice and likely to be used against the noticee were never confronted to the assessee in accordance with standard operating procedure followed under the Income Tax Law, therefore, all this is non cognizable and cannot be made basis for completion of assessment in the present case. Without prejudice, you are requested to kindly confront all information, documents, orders referred to in your Show Cause Notice relating to any third party to the assessee by providing Original or certified true copy for explanation/rebuttal and till then they should not be used to draw any adverse inference in the case of the assessee. 4)Pointwise Explanation: i) Shri Ashish Agarwal arid Shri Shashwat Agarwal: At the outset, it is explained that the assessee has no dealings either with Shri Ashish Agarwal or Shri Shashwat....
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....od and higher margin than branded cloth trading. It is not understood how the same was found unreliable. Staff It is also not correct that the assessee company did not deploy proper staff for wholesale trading in unbranded cloth during the relevant years. Following staff members were engaged in wholesale trading of unbranded cloth: S.N. Name of the Staff Work looked after Designation Salary 1. Mr. Ankur Gupta Accounts Deptt. Manager 35,500/- 2. Mr. R.S. Chauhan Marketing/Sales Accountant 8,000/- 3. Mr. Atul Shukla Purchase/Sales Accounts Clerk 7,000/- 4. Mr. Ram Pratap Singh Godown/Stock Accountant 8,000/- viii) It is reiterated that - a)Whole sale trading in unbranded cloth done by the assessee in F.Y. 2012-13 relevant to A.Y. 2013-14 fully mentioned in the above referred show cause notice is genuine, carried on in the ordinary course of business and full and proper bills, vouchers and books of account are maintained by the assessee and are amenable to complete verification. b)No commission was paid as alleged in the last paragraph of your notice. In vie....
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....eld that these companies were doing money laundering in the form of unaccounted cash. In the findings the Hon'ble court has nowhere commented on the activities of cloth trading being undertaken by these companies. Moreover, the fact remains that either there was no statement of companies denying cloth trading with the assessees and if there was one then same has not been confronted to the assessees for cross examination despite specific request of the assessee. The entries of purchases and sales are supported by invoices and are further supported with the fact that these were reported to VAT authorities. The payments and receipts are through banking channels. 10. The assessee has recorded the entries of sales and purchase in its books of account and has duly disclosed the items of sales and purchase in the profit & loss account and has duly disclosed the profit earned on the trading in the profit & loss account and has offered the same as business income. The assessee has furnished as much information as possible to justify its claim about the transactions of cloth being genuine. Under these circumstances, Hon'ble Supreme Court in the case of CIT vs. Odeon Builders Pv....
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....s examination is an important right available to the assessee and not providing opportunity to cross examine will amount to violation of principles of natural justice. The findings of Hon'ble Supreme Court are reproduced below: "Insofar as the plea of the appellant that it was not allowed to cross-examine the dealers whose statements were relied upon by the Adjudicating Authority in passing the orders, the Tribunal rejected its plea in the following manner: "6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders." Challenging the aforesaid order, the present appeal is preferred by the appellant-assessee. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan,....