TaxTMI 
TaxTMI 
2016 (12) TMI 1856
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....e/07-08 dt 09.11.2012. Against those orders, the Revenue filed these appeals. The grounds of appeal related to the a y 2003-04 are extracted as under: Ground No 1 : Assessee's Modus operendi is that the assessee, M/s Paresh Exports Pvt Ltd is controlled by Mr. M. Parvez, who happens to be the MD of the concern. It is in the business of trading in bullion. Gold is imported from foreign suppliers through M/s PEC Ltd, a Government undertaking. Orders are placed on foreign suppliers through M/s PEC Ltd. Thereafter, gold is purchased by two methods as under : Consignment method:- Foreign suppliers make sales to M/s PEC Ltd who in turn sells the gold and makes payment after receiving the same from M/s Paresh Exports Pvt Ltd. Letter of credit method:- M/s PEC Ltd on behalf of M/s Paresh Exports Pvt Ltd opens a letter of credit or LC with a bank. On the strength of the LC, a foreign supplier makes delivery of gold to M/s PEC Ltd. Customs duties and Sales tax are borne by M/s PEC Ltd and are recovered from M/s Paresh Exports Pvt Ltd. Gold is kept at the locker maintained by M/s PEC Ltd at IDBI Bank. As and when payments are made by M/s Paresh Exports Pvt Ltd, gold is released fr....
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....M/s PEG. These FDs were made in such a way that on maturity, its value would match the cost of gold. Therefore, these FDs acted as a security until the actual payment was made by the assessee to M/s PEG. b. FDs were assets acquired by assessee and hence interest received/ accruing thereon is an income of the assessee. c. Rs. 1.99 crore was the total interest received during AY 2003-04. The assessee had disclosed Rs. 87.78 lakh as interest income in its Return. After giving credit to the said amount, Rs. 1,11,87,808/- was found to be undisclosed. d. The TDS certificates filed by assessee along with return of Income revealed that it had earned an interest income of Rs. 1,01,72545/- on which Tax was Deducted at Source. This fact was ignored by Ld CIT(A). e. Furthermore, as per assessee's agreement with M/s PEG, 'interest on Fixed Deposit realized from bank shall be to the account of M/s Paresh Exports Pvt. Ltd . Therefore , considering the above facts and circumstances, the DR submitted that the interest on FDs are definitely an income earned by the assessee but it has not disclosed it in its return . The AO has correctly brought it to tax. It is therefore reque....
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....hich continued upto the end of the month. These facts have not been dealt at length by the CIT(A) who on conjectures and surmises drew the conclusion that 'probability' of sales made on different dates being entered on 31/3/2003 is higher . Moreover the CIT(A) has also not looked into the fact that although there was no cash balance in its books, the assessee had unaccounted cash which was deposited in CITI Bank. It is therefore submitted that the AO has correctly made an addition on the peak balance as appearing on 29/3/2003. 10. We have considered the above submissions. It is clear from the above that the CIT (A) has examined this issue and drawn due conclusion. The Revenue has not brought any material to assail such conclusion and hence we confirm the decision of the CIT (A). 11. Ground No 3 : During the course of search , certain cash bills were found which contained details of date of sale, quantity of sale and value of sale made. On verification, it was found that many of them were not entered in the cash book. Since sales were made in cash, corresponding entry in the cash books should have been made . On being asked to explain the reasons as to why and how entr....
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....ubmitted that the working brought out by the CIT(A) defies any logic. Even, if it were to be accepted that telescoping benefit had to be granted on sale proceeds being rotated to make further sales, the peak investment in sales ought to have been worked out and not initial investment. It is therefore submitted that the AO had correctly brought the unaccounted sales to tax and the hence the addition be upheld. 14. We have considered the above submissions. It is clear from the above that the CIT (A) has examined the issue and found that the turnover made by M/s Spectra Investments on behalf of the assessee exceeded the cash turn over of the assessee at Rs. 7.06 crore as against Rs. 8.03 crore adopted by AO. He found the % of GP in this line of business .He has held that what to be taxed in such situation is only the profit element and not the entire turnover as the deduction for the cost of goods has necessarily to be allowed. Then he found that the initial cost of investment necessary for achieving the turn over as under : " Now the question of initial investment necessary for achieving this turnover arises. The seized material denotes that the transactions thro Spectra Invest....
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....ars amounting to Rs. 7,82,95,007/- had not been accounted for nor the sales is accounted in its books. It is therefore submitted that the AO had correctly brought to tax these unaccounted purchase and sales and the same may hence be confirmed. 18. We have considered the above submissions. The relevant portion of the CIT (A) order is extracted as under : " The assessing officer in his order of assessment has held that the appellant had purchased 1,000 TT Bars valued at Rs. 7,82,95,007/= and the same was not accounted. The appellant has objected to the same on the ground that the said quant i ty of 1,000 TT Bars was del ivered to the appellant by M/s. PEC Ltd., only in the month of April, 2003 i.e. during the assessment year 2004-05 and the same has been duly accounted for by appellant in that relevant year and this fact has been stated in a sworn statement during the search proceedings itself. The appellant further states that M/s. PEC Ltd., has during the search proceedings itself written a letter to the learned Additional Director of Income-tax [Inv], Bangalore vide their letter dated 02/02/2005 clarifying that the 1,000 TT Bars i.e. 500 TT Bars was delivered on 03/04/200....
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.... dated 28/05/2010 addressed to the assessing officer has categorically stated that the total supplies made by M/s. PEC Ltd., to the appellant for the assessment year 2003-04 and the same is 14,100 TT Bars, which clearly tal l ies wi th quant i ty purchased as per the books of the appellant. It can also be seen from the very same statement of sales made by M/s. PEC Ltd., that it has actually delivered / issued to the appellant 500 TT bars on 03/04/2003 and 500 U Bars on 04/04/2003 thus in all totaling to 1000 U Bars, which the A.O has erroneously treated as unaccounted purchase of A.Y.2003-04. In view of the above facts this addition of Rs. 7,82,95,007/- made on account of unaccounted purchase of gold bar is deleted." 19. From the above, it is clear that the CIT(A) has not properly appreciated the facts stated by the AO in his remand report dt 28.9.2010. Since this issue this issue requires verification & reconciliation we set aside this issue to the AO . The AO after giving adequate opportunity to the assessee would decide this matter in accordance with law. 20. Ground no 5 : The AO made an addition of Rs. 80,24,028/- on account of exchange fluctuation earned by the ass....
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....ved from M/s. PEC Ltd an amount of Rs. 18,24,208/- was added as income on account of difference of exchange for the A. Y. 2003-04 in the search assessment order. The assessee in his submission made to the Honorable CIT[A]-VI, Bangalore has contended that even though the assessee has received certain exchange gains he has also suffered certain exchange losses and the assessing officer has not take into account both exchange gain and loss. Hence the addition made is not correct. Before submitting this remand report as directed by the CIT[A]-VI reference was made to M/s. PEC Ltd., regarding the total amount credited to the assessee's account as difference of exchange. M/s. PEC Ltd., in their reply dated 10.06.2010 has given the ledger extracts of difference of exchange of the assessee in the books of accounts of M/s. PEC Ltd., as per which the net amount of gain of Rs. 14,63,5401- under the head difference of exchange [Copy of the letter from M/s. PEC Ltd is annexed [Annexure - 1] . Hence the total addition under the head difference of exchange is only to the extent of Z 14,63,5401- and not 18,24,2081- as estimated by the DDIT/1nvj in her appraisal report." As submi t ted....
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.... in deleting an amount of Rs. 6,00,13,928/- being the addition made on account of unaccounted interest income. 2. The learned CIT(A) has erred in fact and in law in deleting an ammount of Rs. 5.02.20.000/- being the addition made on account of unaccountd investment in Gold. 3. The learned CIT(A) has erred in fact and in law in deleting an amount of Rs. 27,00,000/- being the addition made on account of unexplained cash seized u/s 69A of the Act. 28. Ground no 1- The AO made an addition of Rs. 6,00,13,928/- holding that the assessee has short accounted interest income . On an appeal, CIT(A) called for a remand report and after examining it held that the ledger extract of the account copy of the assessee in the books of PEC Ltd is to be considered to arrive out the correct amount of income earned by the assesseee on the FDs from PEC Ltd and on such basis found that the assessee earned interest income of Rs. 5,74,91,439/-but admitted in its books at Rs. 5,45,45,971/- only and hence confirmed the addition at Rs. 29,45,468/-only. Since the Revenue has not brought any material to assail the conclusion of the CIT (A), we confirm the decision of the CIT(A). 29. Ground no 2- Sh. ....
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....s. PEC Ltd. , Bangalore and sold the same on 27/01/2005 and that both purchase and sale of 33 kgs are duly accounted for in the books of accounts and that there are no unaccounted purchases or sales. During the course of remand proceedings M/s. PEC Ltd have furnished the details of supplies made to the appellant and also the stock of Gold lying with them on 27/01/2005. The statement of M/s. PEC Ltd., denotes that the stock of bul l ion purchased by the appel lant from M/s. PEC Ltd., on 27/01/2005 is 33 Kgs and that they held 85 kgs as closing stock. Thus the entire 85 Kgs is actually found to be in the custody of M/s. PEC Ltd., as on the date of search and the same delivered to the appellant subsequently. In view of the above facts this addition of Rs. 5,02,20,000/- on account of alleged unaccounted purchases and sales made under section 69 is deleted ". 34. Thus, it is clear that the CIT (A) examined the materials furnished during remand proceedings and arrived the above conclusion. This being so, the Revenue has not brought any material to assail the above findings and hence we confirm the decision of the CIT (A). 35. Ground no 3 : During the search, Rs. 28.45 lakhs c....