AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (2) TMI 1320
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....ice u/s.153A was issued. The status regarding return of income furnished by the assessee u/s.139(1) and 153A of the Income-tax Act, 1961 and assessments completed as per original assessment u/s.143(3) / 143(1) as well as u/s.153A are as under : A.Y. Date of Original return filed Returned income u/s.139 (Rs.) Date of filing return u/s.153A Returned income u/s.153A (Rs.) Assessed income u/s.153A/ 143(3) Rs. *2006-07 21.07.2009 49,33,297 25.04.2013 49,95,358 49,95,358 *2007-08 21.07.2009 2,02,05,908 25.04.2013 2,02,12,600 2,08,89,235 *2008-09 21.07.2009 1,78,30,901 25.03.2013 1,77,70,290 2,89,20,310 2009-10 21.07.2009 6,80,000 25.03.2013 44,83,580 44,83,580 2010-11 28.03.2011 16,47,191 25.03.2013 12,38,31,050 34,47,11,770 2011-12 01.08.2011 22,28,937 25.03.2013 22,24,320 25,01,48,230 2012-13 19.04.2013 40,43,320 - - 16,58,69,300 * Returns of Income for assessment years 2006-07, 2007-08 and 2008-09 were voluntarily revised after search by Central Excise Authorities 2. The assessee filed appeals before the learned C.I.T.(A) against the assessments completed u/s.153A who partly allowed the assessee's appeals. Against the order passed by ....
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....me' having been incorporated in the section itself, the same cannot be read into the section. While Sec.153A provides for determination of total income which includes both the disclosed as well as undisclosed income, chapter XIV-B provided for determination of undisclosed income for the whole block period. Unlike Chapter XIV-B, there is nothing in Sec.153A which requires completion of a search assessment only on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the AO and relatable to the evidence found. The AO is statutorily required to make assessment u/s.153A for all such six years and compute total income of the assessee including undisclosed income notwithstanding that returns of these assessment years have already been processed u/s 143(1) or assessed u/s 143(3) of the Act. The scope of Sec.153A is similar to Sec.143(3) and in that context, the legislature used the word 'Total Income'. The first and second Proviso to sec.153A are complementary to each other and requires the AO to assess or re-assess the 'total income' in respect of each assessment year falling within such six assessment y....
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....essments, income has to be re-assessed in terms of Sec.153A. The reassessment requires belief of assessing officer regarding escapement of income from assessment. The belief should be founded on existence of appropriate material or information. It should be rational belief held in good faith and not arbitrary, subjective or a mere pretence. The material or information in his possession should have direct nexus with his belief regarding escapement of income. The absence of such nexus shall render the re-assessment proceedings invalid. Thus, the re-assessment of income u/s.153A cannot be made sans any incriminating material or merely on change of opinion in relation to material already considered. [Indian & Eastern Newspaper Society Vs. C.I.T. (119 ITR 996 SC); Calcutta Discount Co. Ltd. Vs. I.T.O (41 ITR 191 SC)]. The contention of the revenue to the effect that once a notice under Section 153A of the Act is issued, the assessments for all the six years are at large for the AO has no warrant in law. 6. The learned counsel for the assessee placed reliance upon the following judicial pronouncements :- 1. Jai Steel (India) vs. A.C.I.T. (2013) 259 CTR 281 (Raj) The relevant pa....
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.... or reassessment can be made. Though such a claim by the assessee for the first time under Section 153A of the Act is not completed, the case in hand, has to be considered at best similar to a case where in spite of a search and/or requisition, nothing incriminating is found. In such a case though Section 153A of the Act would be triggered and assessment or reassessment to ascertain the total income of the person is required to be done, however, the same would in that case not result in any addition and the assessments passed earlier may have to be reiterated. ............ 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has....
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....date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. 39. The question framed by the Court is answered in favour of the Assessee and against the Revenue." 8. The learned couns....
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.... 12. We have heard both the sides. We hold that the incriminating documents pertaining to the various assessment years even for years where the assessments are not abated, were found and seized. The assessee himself had admitted before the Assessing Officer that several loose papers seized as Annexure LPS 1 to LPS 5 and BS-1 to BS-5 are having entries relating to personal unaccounted business of the assessee. The assessee himself had prepared a cash flow statement of these unaccounted cash transactions incorporating debit and credit cash transactions. The unrecorded sales and unaccounted assets were also discovered in the search operation. The assessee has also admitted undisclosed income on the basis of these documents and assets. Therefore, the ratio laid down in case laws relied on by the learned counsel for the assessee is not applicable to the facts of the assessee's case. Considering all these factual aspects, we dismiss all these grounds for all the assessment years raised before us. 13. GROUND NO.2.0 & 2.1 (A.YS. : 2008-09 & 2010-11)OF THE ASSESSEE'S APPEAL AND GROUN NO.2 (A.YS. : 2010-11)OF REVENUE'S APPEAL : Ground No.2.0 & 2.1(A.Ys. : 2008-09 & 2010-11) of assessee's....
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.... as from employees and other associates and the revenue did not dispute the investment by Signet group, Sangla family and its associates concerns. The details of shares purchased are as follows: Name of the Parties Number of Shares Price Per Shares (Rs.) Total Amount (Rs.) Anand Family 56,06,750 40.25 22,56,71,688 Employees, etc. 14,750 30.00 4,42,500 56,21,500 22,61,14,188 Shares not acquired in March 2007 3,500 Total 56,25,000 In May 2007, various entities of Signet group and members of Sangla family sold 22,88,025 shares to Shalimar Ferrous Metals Pvt. Ltd., Indore, ('Shalimar') at various rates ranging from Rs. 40.35 to Rs. 44.80 per shares. The resultant short term capital gain was duly shown in their Return of Income filed before the Income-tax Department. At the end of March 2009, the Signet group was holding only 26.51% of the total paid up share capital of Adroit Industries (India) Ltd. (14,91,400 shares) and rest of the shares were held by nonSignet group entities (41,33,600 shares). In August and September 2009, the shares of Adroit Industries (India) Ltd. held by non-Signet group were acquired by member....
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....ituation, the group could not go public and was compelled to acquire shares of Adroit Industries (India) Ltd. at Rs. 11 to Rs. 12.5 per share is also not justified because no investor would ever invest in the shares of the unlisted company without having proper exit route and without ensuring proper returns on his investment particularly when these shares have changed many hands before coming back to Sangla Group which is usually not possible in case of unlisted shares. The assessee did not bring anything on record that there was high interest bearing debt to be discharged or was facing any financial liquidity problem. Further, nothing was brought on record to show that the sale proceeds were utilized for discharging any interest bearing liability. If the acquisition of Adroit Industries (India) Ltd. was so risky, why the investment in Adroit Industries (India) Ltd. was made in the first place? It is not possible to accept the assertion of the assessee that the divestment of part of the investment was to reduce the assessee group's risk. Merely because the entire transaction was through banking channels would not make a sham transaction genuine. The A.O. held that these investor co....
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....olving number of transfers is as under : CHART-I [Flow of transfer of 22,88,075 shares originally held by Anand Family] Name of shareholder of Anand Family No. of shares held 1st Transfer 2nd Transfer Date Name No. of shares Rate Amount Date Name No. of shares Rate Amount Jagjit Singh Anand 3,10,550 13.03.07 Ornate Leasing & Finance Pvt. Ltd. 3,10,550 40.25 1,25,00,000 10.05.07 Shalimar Ferrous Metals Pvt. Ltd. 3,10,550 42.60 1,32,29,430 Gajendra Kaur Anand Jagjit Singh Anand 3,10,550 13.03.07 Signate Leasing & Finance Pvt. Ltd. 3,10,550 40.25 1,25,00,000 10.05.07 Shalimar Ferrous Metals Pvt. Ltd. 3,10,550 40.35 1,25,30,693 Gajendra Kaur Anand Jagjit Singh Anand 2,00,000 13.03.07 Swan Holding Pvt. Ltd. 2,00,000 40.20 80,40,625 10.05.07 Shalimar Ferrous Metals Pvt. Ltd. 2,00,000 40.40 80,80,000 Gaje....
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.... Rupinder Singh Anand 2,500 13.03.07 M/s Mukesh Sangla HUF 2,500 40.25 1,00,625 Parminder Kaur Anand Parminder Kaur Anand 2,500 13.03.07 M/s Mukesh Sangla HUF 2,500 40.25 1,00,625 Rupinder Singh Anand Jashdeep Singh Anand 3,750 13.03.07 M/s Mukesh Sangla HUF 3,750 40.25 1,50,938 Rupinder Singh Anand Name of shareholder of Anand Family No. of shares held 1st Transfer 2nd Transfer Date Name No. of shares Rate Amount Date Name No. of shares Rate Amount Kamal ....
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.... Mukesh Sangla 500 30.00 15,000 Shailesh Vyas 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Ajay Garud 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Parvati Bai Bable 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Ramesh Nimbalkar 500 13.03.07 Mukesh Sangla 500 30.00 15,000 D.N. Vyas 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Hari Shankar Gaud 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Jagjit Singh Punjabi 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Ashok Awesthi 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Kishorilal Patel 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Rajesh Seth` 500 13.03.07 Mukesh Sangla 500 30.00 15,000 PahdurangPahalkar 500 13.03.07 Mukesh Sangla 500 30.00 ....
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....8,619 12.09.09 Saurabh Sangla 1,18,550 12.25 14,52,238 12.09.09 Smt. Avantika Sangla 2,00,000 12.25 24,50,000 12.09.09 Can India Overseas 1,28,250 12.25 15,71,063 22.09.09 Signet Impex Pvt Limited 1,28,250 12.25 15,71,063 6,36,075 77,91,919 1,28,250 15,71,063 15.03.08 Gyneshwar Trading & Co. ltd 6,21,100 40.95 2,54,34,045 08.09.09 Saurab hSangla 2,10,550 ....
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....nbsp; 19.03.09 Clifton Securities Pvt Ltd 272,235 40.50 11,025,518 19.03.09 Novelty Traders Ltd 375,000 40.55 15,206,250 10.03.09 Olmpus Vision Pvt Ltd 250,000 40.50 10,125,000 1,294,775 1,294,775 52,114,694 1,294,775 52,477,015 3rd Transfer 4th transfer Date Name No. of shares Rate Amount Date Name No. of shares Rate Amount 0 0 0 25.09.09 Swan-Holding Pvt Ltd 1,52,500 11.50 17,53,750 26.09.09 Ornate Leasing & Finance Pvt Ltd 2,45,040 11.50 28,17,960 3,97,540 45,71,710 ....
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....bsp; 30.10.07 Palasia Leasing & Finance Ltd. 47,500 46.00 21,85,000 30.10.07 Uno Industries Ltd. 76,000 46.00 34,96,000 2,37,500 2,37,500 95,59,375 2,37,500 1,09,25,000 3rd Transfer 4th Transfer Date Name No. of shares Rate Amount Date Name No. of shares Rate Amount 12.08.09 Can-India Overseas Limited 21,500 11.50 2,47,250 21.09.09 Ornate Leasing Pvt Ltd 97,000 11.38 11,03,625 13.08.09 Can-India Overseas Limited 21,500 11.25 2,41,875 23.09.09 Signate Leasing Pvt Ltd 64,500 11.33 7,30,785 13.08.09 Can-India....
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.... Unno Industries Ltd., Siddhachal Developers Pvt. Ltd. and Palasia Leasing and Investment Pvt. Ltd. were entry providers. Further, in case of Signet Industries Ltd., it was held that Lucky Commotrade Pvt. Ltd. is a paper company which is used by the Sangla group to introduce unsecured loan and share application money within the group concerns. The transaction of transfer of shares of Adroit Industries (India) Ltd. by various members and concerns of Sangla group were only accommodation entries and not genuine transactions and therefore, the amount of sale proceeds credited in the books of various members and concerns of Sangla group amounted to unexplained cash credit in the Assessment Year 2008-09. However, the short term capital gain which was offered for taxation by various entities of the assessee group were reduced from sale proceeds. The working in this regard is as under: No. of shares sold Rate (Rs.) Sale proceeds (Rs.) Short term capital gain (Rs.) Unexplained cash credit (Rs.) 32,875 44.80 14,72,800 1,49,580 13,23,220 For the Assessment Year 2010-11, assuming fair market value of the shares at Rs. 40.25 (original cost of acquisition from Anand Family in March 2....
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....40,00,000 Snehshil Marketing Pvt. Ltd. AAJCS 5894 E 50,00,000 Lekhraj Steel Pvt. Ltd. AABCL 0866 B 2,05,000 Kamdeep Marketing Pvt. Ltd. AAACK 9556 A 2,30,000 Signet Overseas Ltd. AABCS 3489 F 5,46,05,407 Bank Overdraft (Cheque issued but not presented for payment in the bank and cleared in the immediately succeeding year out of loan of Rs. 3,73,15,000/- received from Signet Overseas Ltd.) 3,58,47,845 17,13,88,252 The unsecured loans so received were advanced to the following persons/entities for acquiring shares of Adroit Industries (India) Ltd. :- Name of the company P.A.NO. Amount (Rs.) Group Companies Ornate Leasing & Finance Pvt. Ltd. AABCO 1101 A 14,20,000 Signet Leasing & Finance Pvt. Ltd. AAMCS 5841 G 1,26,00,000 Swan Holding Pvt. Ltd. AAHCS 5640 Q 80,50,000 Signet Impex Pvt. Ltd. AAICS 5582 Q 1,26,60,000 Swan Petrochemicals Pvt. Ltd. AABCR 9592 C 1,24,40,000 Smt. Monika Sangla ANAPS 5580 Q 1,83,32,399 Shri Saurabh Sangla ANBPS3195 G 1,53,41,162 Shri Mukesh Sangla ANAPS 5579 F 1,34,62,000 Shri Mukesh Sangla HUF AADHM 4930 J 81,947 Smt. AvantikaSangla AEOPG 4774 R 60,000 Non-gro....
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....even a single notice to it u/s.133(6) to collect information or summon u/s 131 for making investigation. Therefore, these charges against Lucky Commotrade Private Ltd. are baseless, hearsay and mere conjectures and surmises. In case of Lal Chand BhagatAmbica Ram Vs. C.I.T. 37 ITR 288, honourable Supreme Court strongly disapproved the practice of making addition in the assessment on mere suspicion and surmises or taking note of so called notorious practice prevailing in trade circles. 54. Shalimar sold its shareholding in Adroit Industries (India) Ltd. to Lucky and the proceeds thereof were utilized for repayment of inter-corporate loan to Signet Industries Limited. This fact was explained to the lower authorities with evidence like bank statements of Shalimar, Lucky and Signet, duly confirmed copies of accounts. But the same was brushed aside by them on the pretext that Lucky sold its holding to various 'bogus paper companies' notwithstanding the fact that these so called bogus paper companies produced all the documents as required by the A.O. in terms of notice u/s 133(6) for verification of transaction and establishing their identities and creditworthiness. Surprisingly, the lo....
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.... company before its public issue with the intention to earn significant gains on listing of shares. However, sometimes their calculation go haywire and they have to exit at a significant loss particularly in a situation in which most of the public issues devolved on bankers and guarantors and there was no public participation. The same is evident from the fact that many IPOs were withdrawn or deferred by various companies during this period and no of IPOs fell from 108 in 2007 to 22 in 2009. In the case of Adroit Industries (India) Ltd., the promoters made utmost efforts to bring IPO and incurred significant cost (about Rs. 83.80 Lacs) in this pursuit but they could not achieve any success due to negative market conditions and sentiments as discussed above. The statement of directors of Shalimar viz. Shri Paras Ram Patidar and Shri Vimal Kumar Bandi was recorded after a lapse of over 4 years (acquisition of shares in May 2007 and their statement was recorded in November 2011). Moreover, the day to day affairs of Shalimar were looked after by the employees of Signet Group and controlled by Shri Mukesh Sangla as its executive officer. As the transactions were verifiable from bank sta....
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.... Developers Pvt. Ltd., the assessee was not given the copy of judgement passed by C.I.T.(A) II, Indore in the case of Industrial Filters and Fabrics Pvt. Ltd. and therefore, the same cannot be used for adverse inference against the assessee. Moreover, in compliance of notice issued u/s.133(6), these companies furnished the copies of their bank account, return of income filed by them etc. in which the transactions were duly reflected and no discrepancy whatsoever was brought on record by the lower authority. As regard Can-India Overseas Ltd., it was a company in which the close relatives of Shri Mukesh Sangla were shareholders and directors. The company was filing its return of income regularly and also assessed to tax. Its paid up share capital was Rs. 30 Lacs and free reserves of Rs. 30 Lacs. As at 31.03.2010, it had a cash and bank balance of Rs. 41,79,012/- and investment of Rs. 8,80,000/- in 2,40,000 shares (including bonus shares 1,60,000) of Signet Industries Ltd. Under these circumstances, the Can-India Overseas Ltd. cannot be called a bogus paper company. 56. Section 69 of the Act is applicable on cumulative satisfaction of the following conditions : i. The assessee sho....
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....ated and recorded consideration in the books of respective assessee. The A.O. merely presumed the fair value of shares at Rs. 40.25 per share (original cost of acquisition from Anand Family in March 2007) and treated the difference between the cost of reacquisition and fair value per share as unexplained investment in the case of the assessee, without bringing any evidence on record. He simply rejected the explanation given by the assessee group. In the assessee's case, there were no incriminating material whatsoever in relation to investment in shares of Adroit Industries (India) Ltd. in assessment year 2007-08, transfer of these shares in assessment year 2008-09 and their reacquisition subsequently in assessment year 2010-11. No proceedings in relation to assessments for these assessment years were pending and therefore no addition could have been made in assessment completed u/s.153A/153C of the Act in the absence of any incriminating material on account of unexplained cash credits in assessment year 2008-09 and unexplained investment in assessment year 2010-11. The addition made by the assessing officer by way of reassessment in relation to impugned concluded assessments amount....
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....ing document seized during the search operation in relation to acquisition of shares of Anand family and transfer of shares by the assessee. The assessee has explained the reason for transfer of shares to raise the funds. It is also established that Adroit Industries Ltd. was to go for public issue for which expenditure has been debited in the financial years 2010-11 and 2011-12. Ultimately this public issue could not be materialised. The expenditure debited in the books of Adroit Industries Ltd. establishes that Adroit Ind. Ltd. was to go to for public issue. No evidence either during the search operation or in the post search inquiries showing even suggesting that any consideration over and above recorded in the books of accounts of any assessee of Signat group was realised in cash or otherwise. Even no positive evidence was collected during the proceedings u/s 153A/153C of the Act. Thus, there is no evidence regarding any unaccounted transaction with relation to shares acquired, transferred and re-acquired by various family members of Sangla family and associate concerns. The revenue's claim that no promoter would divest with such a huge holding at a very nominal profit is witho....
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....eized material. During post search proceedings, the assessee filed a letter before the Investigation Wing admitting undisclosed income of Rs. 35.04 crores for various assessment years in his own case and Rs. 9.96 crores in the case of Signet Industries Ltd. for the assessment year 2012-13 on the basis of provisional verification of seized material and assets. However, for the assessment year 2012-13, no income was offered for taxation by the assessee in his Return of Income filed u/s.153A as against undisclosed income of Rs. 12.61 Crores offered for taxation as per the letter filed before the Investigation Wing. The A.O. did not make any addition on the basis of assessee's statement because the total income assessed by him was more than Rs. 12.61 Crores offered for taxation in assessment year 2012-13. The first appellate authority made addition of Rs. 9,43,55,415/- on the basis of difference between undisclosed income of Rs. 12.61 crores offered for taxation by the assessee in his statement u/s.132(4) r.w. letter filed before the Investigation Wing and addition of Rs. 3,17,44,585/- confirmed by him for the assessment year 2012-13 vide his order dt.30.04.2015. 17. The contention of....
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.... is recorded under great stress, anxiety and tension and the deponent does not have access to books of accounts and other documents to verify the facts before recording it in his statement, it cannot be said that such a statement recorded during search is free from all ambiguity and doubts and it is quite likely that certain vital facts might be omitted or ignored or incorrectly stated. The statement u/s.132(4) is not a test of deponent's memory. If he has stated something in his statement either out of ignorance of certain vital facts or negligence or for nonaccessibility to the books of accounts and other relevant documents or for any other reason, which is contrary to the established facts of the case, he cannot be assessed to tax merely on the basis of such erroneous statement. The assessing officer being a quasi judicial officer, should consider all the facts and evidences like books of accounts, documents, bills, agreements, seized documents etc. to arrive at the truth and correct status. The statement should be corroborated with the facts found and documents seized at the time of search to ascertain its reliability. The deponent cannot be assessed merely on the basis of stat....
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....by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific reason has been given for rejection of the assessee's contention by which the assessee has retracted from his admission. None of the authorities gave any reason as to why Assessing Officer did not proceed further to enquire into the undisclosed income as admitted by the assessee in his statement under section 134(2) in fact situation when during the course of search, there was no recovery of assets or cash by the Department. This fact also has not been taken care of and considered by any of the authorities that in a case where there was search operation, no assets or cash was recovered from the assessee, in that situation what had prompted the assessee to make declaration of undisclosed income of Rs. 20 lacs. Mere reading of statement of assessee is not the assessment of evidentiary value of the evidence when such statement is self-incriminating. Therefore, we are of the considered opinion that in the present case, a wrong inference had been drawn by the authorities below in holding that there was undisclosed income to the tune of Rs. 20 lacs.' (iv) The ....
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....ferent occasions about certain facts. But when it comes to be tested or examined in a judicial or quasi-judicial proceedings before any Court, Tribunal or authority, then the question which arises for determination is as to which of the story/statement is right, truthful and/or reliable and believable. (vii) The honourable Pune Bench of I.T.A.T. held in the case of Kasat Paper and Pulp Ltd. vs. A.C.I.T. (74 ITD 455) that addition cannot be made solely on the basis of the statement of Managing Director particularly when evidence to the contrary were placed on record before the assessing officer. (viii) In the case of Jagdeeshchandra Gupta Vs. A.C.I.T. 56 TTJ 337 (Chd.), the assessee retracted from the statements made before FERA authorities and statement made u/s.132(4) of the Income-tax Act, 1961 before the A.D.I. by making detailed submission during proceedings u/s.132(5) as well as u/s.143(3) of the Income-tax Act, 1961. Except these confessional statements, there was no other evidence which supported the payment of Rs. 48,00,000/- to Shri J.M.Paul by the assessee. No papers indicating alleged payment of Rs. 48 lacs were seized either from residence of the assessee or from Sh....
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....ce of law or it has otherwise vitiated [G. Murugesan & Bros. Vs. C.I.T. (1973) 88 ITR 432 (SC)]. In other words, the statement u/s 132(4) made before the Incometax authorities is an important piece of evidence but it is not conclusive. It is rebuttable and the assessee can always show that it was incorrect. The addition cannot be made merely on the basis of admission made before the income-tax authorities. If the assessee produces evidences which proves his admission to be incorrect or contrary to the facts and such evidences remain uncontroverted, addition made in such case merely on the basis of admission of the assessee cannot be sustained. The surrounding circumstances and other relevant factors have to be considered before making an addition solely on the basis of admission. Reliance was placed in the case of C.I.T. vs. Bhanwarlal (225 ITR 870).' 19. The learned counsel for the assessee submitted that in his statement recorded u/s.132(4) on 04.11.2011, the assessee offered undisclosed income of Rs. 45 crores for taxation, subject to verification of the seized material. Subsequently, the assessee filed a letter before the Investigation Wing in which he admitted undisclosed inc....
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....s offered for taxation by the assessee during the year notwithstanding the fact that the assessee earlier offered undisclosed income of Rs. 12.61 Crores for assessment year 2012-13 in his letter filed before the Investigation Wing. The judgments relied upon by the first appellate authority while making addition of Rs. 9,43,55,415/- on the basis of assessee's statement are not applicable to the facts of the assessee's case in as much as in all the cases either the assessee claimed the statements having been given under threat or intimidation whereas it was a voluntary statement or retraction was filed after many years or no reasons were assigned for retraction or retraction was made despite existence of incriminating material. The facts of the assessee's case are totally different. While offering undisclosed income for taxation, the assessee categorically stated that the declaration was on the basis of provisional verification of seized material. While filing return of income pursuant to notice u/s.153A, the assessee scientifically analysed the entire seized material as well as undisclosed investment and assets, worked out peak credit by datewise chronologically arranging unaccounte....
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....ation by the assessee in assessment year 2007-08 29,471/- (b) Deduction of cost of acquisition of shares of Adroit Industries (India) Limited, in computing short capital gain on sale of shares 30,000/- (c) Deduction of bank charges 1,629/- (d) Deduction of interest, being difference in interest paid (Rs. 1,60,610/-) and interest claimed as deduction in the Return of Income (Rs. 1,60,160/-) 450/- 22. The facts relating to this ground are that while filing the return pursuant to the notice issued u/s.153A the assessee claimed the following deductions: S. No Particulars Amount Rs. (a) Exclusion of short term capital gain on sale of shares, which had already been offered for taxation by the assessee in assessment year 2007-08 29,471/- (b) Deduction of cost of acquisition of shares of Adroit Industries (India) Limited, in computing short capital gain on sale of shares 30,000/- (c) Deduction of bank charges 1,629/- (d) Deduction of interest, being difference in interest paid (Rs. 1,60,610/-) and interest claimed as deduction in the Return of Income (Rs. 1,60,160/-) 450/- The said claim were not made while filing the return u/s.139(1)/139(4). 23. The cont....
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....on or other ; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. The honourable Bombay High Court held in the case of Sanchit Software and Solutions P. Ltd. vs. C.I.T. [2012] (349 ITR 404) as under : In any civilized system, the assessee is bound to pay the tax which he liable under the law to the Government. The Government on the other hand is obliged to collect only that amount of tax which is legally payable by an assessee. The entire object of administration of tax is to secure the revenue for the development of the country and not to charge assessee more tax than that which is due and payable by the assessee. It is in aforesaid circumstances that as far back as in 11-4-1955 the Central Board of Direct Tax had issued a circular directing Assessing Officer not to take advantage of assessee's ignorance and/or mistake. Therefore, the above Circular should always be borne in mind by the officers of the respondent - revenue while administering the said Act. [Para 5] There was a fundamental error in the order of C.I.T. as it proceeds on the erroneous basis that the asse....
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....he ITO within four years from the date of the original assessment order and when he is on the process of the completion of the assessment, he is bound to consider each and every claim preferred by the assessee. Let us imagine a case of a concluded assessment and there are no pending assessment proceedings, but when the assessee makes a claim for deduction of losses, the ITO cannot refuse to entertain the claim and he may reject the claim on the parameters found in s. 154 of the Act. In the instant case, it is a stronger case for the assessee as the ITO was directed to determine the correct total income of the assessee according to law and during that proceedings when the assessee makes a claim, the ITO is bound to consider the claim of the assessee. We are of the opinion that, while considering such' a claim, the question of fulfillment of the conditions for rectification is not a sine qua non and even the conditions to rectify the mistakes are not present, the ITO, in our opinion, should examine the claim of the assessee on merits of the case. The power of the ITO to make the assessment as observed by this Court in C.I.T. vs. Seth Manicklal Fomra (supra) is derived from the statut....
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....T. Central Tilak,(2012) (346 ITR 543) as under : "Needless to mention that proviso of section 112(1) was introduced with effect from 01.04.2000 by the Finance Act, 1999. In other words, it was introduced during the assessment year under consideration and assessee was not aware about latest 'amendment introduced by the Finance Act, 1999 w.e.f. 01.04.2000. Though ignorance of law has no excuse, but it can be excused in tax matter as per the ratio laid down in the case of P. V. Devassy Vs. C.I.T., 84 ITR 502 (Ker). It is not expected that the Department shall take the advantage of assessee's ignorance as per CB.D. T. Circular No.14 (XL* 35)1955 dated 11 April 1955. Even under the bonafide belief, the assessee has shown the long term capital gain at the rate of 20%, but it was expected from the A.O. to know the latest amendment. The mistake might have been corrected by passing an order under section 154 of the Act. In the case of C.I.T. Vs. Mahalaxmi Sugar Mills Co. Ltd. (1986) 160 ITR 920 (SC), it was observed that: "There is a duty cast on the Income-tax Officer to apply the relevant provisions of the Indian Income-tax Act for the purpose of determining the true figure of the ass....
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....evised return and not otherwise. Therefore, whatever claim the assessee has not made while filing the return u/s 139(1)/139(4) of the Act, he cannot make fresh claim by filing the return u/s 153A/153C of the Act and reduce the taxable income originally declared. Such view has been upheld by the Hon'ble Rajasthan High Court in the case of Jai Steels (India) vs. ACIT (supra). Therefore, this ground of the assessee's appeal stands dismissed." 28. Keeping these facts in view, we dismiss this ground of appeal of the assessee. Ground No.5.0 (A.Y. : 2008-09)of assessee's appeal reads as under : ASSESSMENT YEAR :2008-09 UNDISCLOSED INCOME FROM UNACCOUNTED SALES AND UNDER-INVOICING ASSESSED IN SIGNET INDUSTRIES LIMITED, INCLUDED IN THE ASSESSEE'S TOTAL INCOME : Rs. 1,60,00,000/- "The learned Commissioner of Income-tax (Appeals) erred in law as well as in facts in confirming the income assessed by the assessing officer at Rs. 2,89,20,310/- ignoring the vital facts that : (a) it included the additional income of Rs. 1,60,00,000/- voluntarily offered for taxation by the assessee on account of unaccounted sales and underinvoicing, which formed part of income from unaccounted sales....
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....derinvoicing in the assessment year 2006-07 and 2007-08 instead of assessment year 2007-08 and 2008-09 which was rectified by the C.I.T.(A). while disposing off the assessee's appeal. Without prejudice and alternatively, he also applied Sec.40A(3) by assuming that the purchases would have been made in cash or alternatively applied the proviso to Sec.69C by holding that unaccounted purchases were made in cash. 32. The contention of the C.I.T.(A) can be summarized that Logic Poly Products was a unit of Signet Industries Ltd. and therefore, under invoicing of sales as well as out of books sales of manufacture goods pertained to Signet Industries Ltd. and not to Shri Mukesh Sangla. Signet Industries Ltd. filed settlement petition before the honourable Customs and Central Excise Settlement Commission in which Signet Industries Ltd. admitted that the unaccounted transaction viz. under-invoicing of sales and outside book sales pertained to it and it agreed to pay excise duty of Rs. 69,58,009/-. The income should be assessed in the hands of right person only as held by the honourable Supreme Court in the case of C.I.T. vs. Atchaiah (218 ITR 239). On the facts, the right person was the Si....
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....merging from these pages consisted of payment to Shri Deepak Kalani and Shri Pankaj Kalani, under invoicing of sales and unaccounted sales, which was offered for taxation by the assessee voluntarily in his Returns of Income and the same was assessed u/s.143(3) r.w. Sec.147. As these documents had been the subject matter of assessment proceedings in the assessee's own case prior to search and considered by the A.O., there was nothing incriminating about them. As no proceedings were pending in relation to the subject assessment years and these assessments were non-abated or completed assessments, no addition could have been made in terms of Sec.153A of the Act in the absence of any incriminating material. Therefore, the undisclosed income emerging from the impugned working should have been considered in the case of the assessee and not Signet Industries Ltd. Moreover, the income on account of cash payment to Shri Deepak Kalani and Shri Pankaj Kalani alongwith, under-invoicing of sales and unaccounted sales had already been offered for taxation in the case of Shri Mukesh Sangla, the addition thereof in the case of Signet Industries Ltd. would amount to double addition and double taxat....
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....9 Kg. as shown in the sales register of the sister concern tallies with the impounded stock register. It was also found that the sales proceeds was received by the sister concern, namely M/s Ashish Agro Plast Private Limited through its bank account in Bank of Baroda, Dudheshwar Road Branch, Ahmedabad. The cheques received against those sales were cleared even prior to the date of survey. Notwithstanding the aforesaid finding which vindicated the stand of the assessee to the aforesaid extent, it was further found that the sale of 33682 Kg. of finished goods was nothing but unaccounted sales out of which 32809 Kg. sales was made to the aforesaid sister concern of the assessee. Taking into consideration this aspect, the Commissioner upheld the order of the assessing authority justifying the additions made on account of unaccounted production, sales and closing stock of finished products. This order has been upheld by the Income Tax Appellate Tribunal as well as the High Court. In fact, the High Court dismissed the appeal of the assessee preferred under Section 260A of the Act on the ground that no substantial question of law arose. 3. Normally, going by the aforesaid facts noted, t....
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....ng of poly product were product of Logic Poly Products which is a unit of Signet Industries Ltd. Further Signet Industries Limited has filed settlement petition before the Customs & Central Excise Commission and admitted it as unaccounted transaction in its own hands. We have sustained the addition totaling to Rs. 8,13,29,014/- for three assessment years 200607, 2007-08 and 2008-09 in the hands of Signet Industries Limited. We have also directed that this amount may be reduced in case of Mukesh Sangla(assessee) , therefore, on this account we allow this grounds of assessee's appeal. 37. GROUND NO.3.0 TO 3.4(A.Y. :2008-09 &2010-11), 2.0 TO 2.1 (A.YS. : 2011-12 & 2012-13) OF THE ASSESSEE'S APPEAL AND GROUND NO.1 (A.YS. : 2010-11 TO 2012-13) OF REVENUE'S APPEALS : Ground No. 3.0 to 3.4 (A.Y. : 2008-09 &2010-11) and 2.0 to 2.1 (A.YS. : 2011-12 & 2012-13) of assessee's appeal reads as under : ASSESSMENT YEAR : 2008-09 ADDITION ON ACCOUNT OF LOSE PAPER FOUND AT RESIDENCE OF SHRI MUKESH SANGLA DURING THE SEARCH AND SEIZURE PROCEEDINGS: Rs. 21,96,498/- 3.0 The learned Commissioner of Income-tax (Appeals) erred in law as well in facts in confirming the addition of Rs. 21,96,498/- m....
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....ed from office premises at Dewas Naka, (c) it resulted in double addition of Rs. 10,99,00,900/- and (d) it resulted in overlooking profit of Rs. 1,20,99,100/- from sale of gold and its exclusion in determination of peak to be offered for taxation. ADDITION ON THE BASIS OF PAGE 16 to 20 OF LPS-3 FOUND AND SEIZED FROM THE RESIDENCE OF SHRI MUKESH SANGLA DURING SEARCH : Rs. 68,28,304/- 3.3 The learned Commissioner of Income-tax (Appeals) erred in law as well as in facts in confirming the addition of Rs. 68,20,304/- made by the assessing officer on the basis of page 16 to 20 of LPS-3 found and seized from the assessee's residence despite the fact that : (a) the transactions recorded therein were considered by the assessee while computing the year wise peak of cash as per the cash flow statement and offered for taxation (c) some of the cash entries appearing on Page No.17 and its back of LPS 3 and back side of Page no.5 of LPS 3 were duplicate entries and should have been eliminated. (c) Rs. 15,00,000/- paid for registration charges of land in Pithampur, which was duly recorded in books of accounts of Signet Industries Limited should not have been considered in determinati....
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..../- (sic Rs. 90,39,800/) made by the assessing officer on the basis of entries of cash payments and cash receipts recorded in LPS 3 found and seized during search. 2.1 In doing so, he erred in law as well as in facts in : (a) confirming the rejection of scientifically prepared date-wise cash book by the assessing officer and bringing higher of the sum of cash payment (Rs. 90,39,800/-) or sum of cash receipts (Rs. 38,52,470/-) as undisclosed income of the assessee, (b) not considering the peak determined by the assessee on the basis of date wise recording of cash receipts and cash payments and offered for taxation, despite holding that both the receipts and the payments cannot be taxed and receipts were available for making payments, and (c) confirming the action of the assessing officer in selectively overlooking entries recorded in the seized material resulting in multiple additions CASH RECEIPTS RECORDED IN THE MATERIAL FOUND AND SEIZED DURING SEARCH AS UNEXPLAINED CASH RECEIPTS : Rs. 38,52,470/- 2.2 The learned Commissioner of Income-tax (Appeals) erred in law as well as in facts in confirming the addition of Rs. 38,52,470/-, although set off against sum of all the ca....
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....see failed to explain - the true nature and source of such receipts, the nature and purpose of payments made, identity of persons whose names were appearing in the loose papers and undisclosed income could not be earned on the very first day of the year. Accordingly, he proceeded to add all cash payments and cash receipts as undisclosed income of either the assessee or Signet Industries Ltd.. While the cash receipts were added u/s.68, the cash payments were added u/s.69C of the Act. He made the following additions: Asstt Year Undisclosed Income Remark 2008-09 21,96,498 - 2009-10 14,00,000 On protective basis in Shri Mukesh Sangla and on substantive basis in Signet Industries Ltd. 2010-11 8,37,35,166 On protective basis in Shri Mukesh Sangla and on substantive basis in Signet Industries Ltd. 22,86,22,104 31,23,57,270 Total 2011-12 9,89,26,409 On protective basis in Shri Mukesh Sangla and on substantive basis in Signet Industries Ltd 13,50,93,397 23,40,19,806 Total 2012-13 1,28,92,270 40. The A.O. partly considered the cash transaction in case of Shri Mukesh Sangla and partly in case of Signet....
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....sonal hands and not in the case of Signet Industries Ltd. on account of following reasons: (a) The seized material was recovered from the residential premises of Shri Mukesh Sangla at 1-B, Gulmohar Extension, Indore; (b) Many loose papers of the seized material bearing the name of Shri Mukesh Sangla; (c) Shri Mukesh Sangla categorically admitted in his statement recorded u/s.132(4) that these loose papers were related to his unaccounted polymer trading business and various names appearing therein were used for camouflaging real transactions. (d) The polymer trading business was carried out by Shri Mukesh Sangla in his personal capacity; (e) The presumption in terms of Sec.132(4A) and Sec.292C of the Act clearly necessitated taxation of undisclosed income in the hands of Shri Mukesh Sangla. (f) In view of the Supreme Court judgement in the case of C.I.T. Vs. Atchiah (218 ITR 239), the right person to be taxed in respect of undisclosed income emerging from the impugned seized material particularly LPS-3 and LPS-4 is Shri Mukesh Sangla and not Signet Industries Ltd. 44. The learned counsel for the assessee further submitted that as there were a large number of cash receip....
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...., (d) the assessee has prepared a cash book for the period from 01.04.2008 to 31.03.2012 and simply stated the amount received /paid from/to various persons, (e) the assessee has not explained the various transactions mentioned in the name of various persons such as Ganpaty, Mahavir Chemical, Globe Pharma, Ghambir Ji, Ashok Khasgiwala, Mehta Ji and so on, (f) Mukesh Sangla has simply prepared the cash book without preparing the ledger accounts, (g) no narration of transactions, (h) no evidence regarding cash sent to various persons and recalled and confirmation from them, (i) nature of income was not described, (j) income could not be earned on the very first day, etc., it is submitted that once the addition was made on account of cash receipts and payments and other entries recorded in the seized material and each and every transaction was considered for determination of undisclosed income by the assessee in a logical and scientific manner, the identity of person and confirmation, nature and purpose of transaction, narration of transactions, evidence regarding cash paid and cash received etc. lost their relevance, particularly when the assessee categorically stated that the names ....
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....introduced such undisclosed income in the cash book on the very first day of the year so as to verify the peak credit determined by him and availability of cash throughout the year. As regard contention of the assessing officer that "Further, in the absence of any explanation and in the absence of any supporting documents, various other receipts and payments in the names of different person cannot be accepted as per the assessee's version. In respect of transaction with Shri Ashok Khasgiwala, Shri Mukesh Sangla has shown that he has purchased gold on 01.04.2008 for Rs. 21,96,498/- and again on 01.07.2009 for Rs. 10.77 crores. The assessee has further claimed that the said gold was sold on 31.01.2010 for Rs. 12.20 crores and has stated that an amount of Rs. 1.21 corers has been offered by him as short term capital gain on sale of gold in the return filed u/s 153A for AY - 2010-11. The assessee has not filed any details of the persons to whom gold was sold in such huge quantity. Further the assessee has not explained the purchase of gold from Shri Ashok Khasgiwala nor has filed any confirmation to this effect. In these circumstances the transactions cannot be accepted as tried to be ....
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....quite irrelevant in determination of undisclosed income of the assessee. The learned counsel for the assessee invited our attention to page no. 17 on which cash transactions under the account Shri Ashok Khasgiwala are recorded and backside of page no. 28 of Annexure 2/16 found and seized from the assessee's office premises at Dewas Naka, Indore are interlinked as manifest from the following extract: Page no. 17 of LPS-4 Opening Balance 10,99,00,900/- -------- 31.07.2009 Misc. expenses 10,99,00,900/- Backside of page no. 28 of LPS-2/16 31.07.2009 Ashok Khasgiwala A/c 10.99 Cr Misc. Exp. Gold 31.01.2010 Sale "G" 12.20 46. The learned counsel for the assessee submitted that The entries on page no.17 of LPS-4 showed that opening balance in the account of Shri Ashok Khasgiwala was Rs. 10,99,00,900/-. The said balance was utilized for purchase of gold which is evident from entry dt.31.07.2009 on page 17 and entries recorded on the backside of page no. 28 of Annexure LPS-2/16. The impugned gold was sold on 31.01.2010 for Rs. 12.20 i.e. 12.20 Cr. On the basis of these entries, the Assessing Officer should have made addition of Rs.....
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....s u/s.69C as unexplained expenditure by the assessing officer, the learned counsel for the assessee submitted that all the credit entries and debit entries were considered by the assessee in the cash book provided to the Assessing Officer which was verified by him with the seized material. He did not bring any material on record to show that the cash receipts were not considered by him for the purposes of determination of peak credit and consequently, not offered for taxation as his undisclosed income. Further, Sec.68 is applicable to entries recorded in the assessee's regularly maintained books of accounts as defined u/s.2(12A) and not credits appearing in the loose papers forming part of the seized material because such loose papers are not books of accounts within the meaning of Sec.2(12A) of the Income-tax Act, 1961. [(Sheraton Apparels vs. C.I.T. 123 Taxman 238 (Bom)] [(CBI vs. V.C Shukla 1998 AIR SC 1406)]. Therefore, addition of sum of all credit entries u/s.68, without taking into account the debit entries, amounted to multiple addition and incorrect determination of undisclosed income. The learned counsel for the assessee submitted that Sec.69C has no application where the....
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....ontend that the addition was only for purposes of taxation and that it should never be taken as true income of the assessee.. In coming to the above conclusion, the honourable high court relied upon the following observation of honourable A.P. high court in the case of Lagadapati Subba Ramaiah v. Commissioner of Income-tax [1956] 30 ITR 593 "In the present case, it is somewhat difficult to say that there were no profits of the company out of which a dividend could have been paid. When the revenue authority levied a tax of Rs. 62,000 on the company, it proceeded on the basis that the books of the company which showed a total income of only Rs. 34,532 for all the four years of its existence were unreliable and that the bulk of the company's profits had been kept outside its books. Now those secret profits less the income-tax paid, therefore, would be available with the company for distribution as dividends. Once the secret profits had been assessed to tax, it would have been open to the company to bring those profits into the books and distribute them, or what remained after payment of tax, as dividends.... Having assessed the company on a large sum as its undisclosed income, it ....
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....fits shown by the assesses in its account books. However, the assessee was well within its right to plead that the amount of Rs. 16,950 was covered from the intangible income assessed at Rs. 18,117, and added in the income of the assessee and apart from this, since for the last preceding 3 years, substantial additions amounting to Rs. 32,797 had been added, the amount of Rs. 16,950 could have been taken as having come out of such intangible additions. Accordingly, the Tribunal in the instant case was right in treating the unexplained cash credit entries to the extent of Rs. 16,950 as covered by added gross profit in the sum of Rs. 18,117 on the basis of the estimate. (d) C.I.T. VS. JAWANMAL GEMAJI GANDHI [151 ITR 353 (BOM)] The Supreme Court has clearly stated in the case of Anantharam Veerasinghaiah & Co. vs. C.I.T. [123 ITR 457 (SC)] that the secret profits or undisclosed income of an assessee earned in an earlier assessment year can constitute a fund, though concealed, from which the assessee may draw subsequently. (e) C.I.T. VS. SAHU BROTHERS [115 ITR 438 (M.P.)] A Division Bench of this court in that decision held that the additions by the ITO in the asse....
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....s. (3) If any unexplained cash deposit or cash credit can reasonably be related to the amount covered by the intangible additions made in the past or in that very year necessary set off may be given by the authorities on that account. (4) In each case, the true nature of the cash deficit or cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case. Applying the aforesaid principles to the facts of the instant case, the Tribunal was justified in allowing a set-off on account of intangible additions made in the past against unexplained cash deposit and investment of the relevant assessment years. 49. The learned counsel for the assessee submitted that in view of the above submissions, peak cash balance obtained from the Cash Flow Statement prepared by the assessee on the basis of seized material and offered for taxation by the assessee be accepted and delete various additions on account of loose papers made by the assessing officer and partly confirmed by C.I.T.(A). 50. We have heard both the sides. These additions were based on certain incriminating papers found and seized during search operation. The assessee claimed....
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.....1 and 4.0 & 4.1 of assessee's appeal reads as under : ASSESSMENT YEAR : 2011-12 ADDITION ON ACCOUNT OF UNACCOUNTED TRADING IN POLYMERS: Rs. 29,24,624/- 3.0 The learned Commissioner of Income-tax (Appeals) erred in law as well as in facts in partly confirming the addition to the extent of Rs. 29,24,624/- made by the assessing officer, on account of unaccounted polymer trading. 3.1 In doing so, he erred in law as well as in facts in : (a) estimating initial investment of Rs. 13,85,348/- in unaccounted polymer trading business, (b) estimating net profit @ 10% and (c) accordingly, determining net profit of Rs. 15,39,276/- from trading in Polymers. ASSESSMENT YEAR :2012-13 ADDITION ON ACCOUNT OF UNACCOUNTED TRADING IN POLYMERS: Rs. 2,27,05,285/- 4.0 The learned Commissioner of Income-tax (Appeals) erred in law as well as in facts in partly confirming the addition to the extent of Rs. 2,27,05,285/- made by the assessing officer, on account of unaccounted polymer trading. 4.1 In doing so, he erred in law as well as in facts in : (a) estimating initial investment of Rs. 1,07,55,135/- in unaccounted polymer trading business, (b) estimating net profit @ 10% and (....
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....d. on substantive basis. Accordingly, the following additions were made by him on protective basis in the assessee's case: Assessment year Purchases Net Profit @ 2% Total 2011-12 1,38,53,482 50,626 1,39,04,108 2012-13 10,75,51,347 21,51,027 10,97,02,374 12,14,04,829 22,01,653 12,36,06,482 The contention of the C.I.T.(A). is summarized as under : a) The C.I.T.(A). held that unaccounted Polymer business and profit therefrom belong to the assessee and not Signet Industries Ltd. because (i) all documents were found from the residential premises of Shri Mukesh Sangla at 1B, Gulmohar Extention, Indore (ii) many documents were bearing the name of Shri Mukesh Sir, H.S.Sangla, etc. (iii) Shri Mukesh Sangla admitted the impugned transactions to be his own transactions and offered undisclosed income emerging therefrom for taxation in his personal hands (iv) While arriving at the above conclusion, the reliance was placed upon presumption u/s.132(4A), 292C and the judgement of the honourable Supreme Court in the case of C.I.T. vs. C.H.Atchaiah (218 ITR 239) b) The C.I.T.(A). rejected the assessee's justification that initial investment was made out of undisc....
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....y the lower authorities or intangible additions made by lower authorities is always available to the assessee for set off against undisclosed investments/expenses etc. In the assessee's case, having assessed the yearly peak amount as his undisclosed income, the assessing officer cannot take a stand that such income did not exist and therefore, not available with the assessee for set off against undisclosed cash, investment, loans and advances, expenses, jewellery etc. In this regard, we rely upon the following judgements: (a) S. KUPPUSWAMI MUDALIAR VS. C.I.T. [51 ITR 757 (MAD)] Additions are no doubt made very often on estimate basis. But it can never be said, or at any rate the department cannot contend, that the amount of the addition is not the real income but something which the assessee may not have earned. It is wholly illogical for the department to contend that the addition was only for purposes of taxation and that it should never be taken as true income of the assessee.. In coming to the above conclusion, the honourable high court relied upon the following observation of honourable A.P. high court in the case of Lagadapati Subba Ramaiah v. Commissioner of In....
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....9 ITR 320 (P&H)] In view of the decisions in C.I.T. v. Ram Sanehi Gian Chand [1972] 86 ITR 724 and Anantharam Veerasinghaiah & Co. v. C.I.T. [1980] 123 ITR 457 the Tribunal was right in holding that the past intangible additions made in the case of the firm of which the assessee was a partner and allocated to the assessee's share could be taken into account in considering the unexplained investments of the assessee and these would also be available for set off purposes in respect of the agreed additions for low household expenses made in the assessee's income in the year under consideration and in remitting the matter to the AAC. (d) C.I.T. VS. TYARYAMAL BALCHAND [165 ITR 453(Raj)] In the present case, the ITO was within his right to tax the amount of Rs. 16,950 as income from undisclosed sources even though he had added the amount of Rs. 18,117 in addition to the profits shown by the assesses in its account books. However, the assessee was well within its right to plead that the amount of Rs. 16,950 was covered from the intangible income assessed at Rs. 18,117, and added in the income of the assessee and apart from this, since for the last preceding 3 years, substant....
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....ing in case of Anantharam Veerasinghaiah & Co. vs. C.I.T. [123 ITR 457 (SC)] and approved the telescoping of undisclosed income against undisclosed assets. (h) C.I.T. VS. NABADWIP CHANDRA DEY [198 ITR 133 (GAU.)] The principles governing set off of intangible additions made in the assessment against unexplained cash credits or unexplained investments are no more res integra. The principles that emerge from the various decisions can be summarized as follows: (1) Amounts represented by 'intangible additions' to the book profits of an assessee during an assessment proceeding constitute undisclosed income of the assessee and are as much a part of his real income as those disclosed by his account books. It has the same concrete existence. (2) Income from intangible additions is available to the assessee for meeting expenditure or introducing amounts in his account books. (3) If any unexplained cash deposit or cash credit can reasonably be related to the amount covered by the intangible additions made in the past or in that very year necessary set off may be given by the authorities on that account. (4) In each case, the true nature of the cash deficit or cash credit ....
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....e concerned authorities. The scope of that power has been explained over and over again by this court." In the assessee's case, the net profit estimated by the C.I.T.(A). was without any basis and in complete disregard of the material before him. The basis of net profit rate of 10% estimated by him was simply a wild guess and basis, if at all any, was only in his mind. He did not site a single comparable case. Moreover, in unaccounted trade, both the parties do not pay any taxes and therefore no one gets any benefit inasmuch as the benefit obtained by one party for non-payment of tax is passed on to the other party. Therefore the net-profit rate cannot increase merely because the transaction was not recorded in the books. The honourable Supreme Court in the case of Dakeshwari Cotton Mills Vs. C.I.T. (26 ITR 775) held as under: "It is not possible to define with any precision the limitations on the exercise of the discretionary jurisdiction vested in the Supreme Court by the constitutional provision made in Article 136. The limitations, whatever they be, are implicit in the nature and character of the power itself. It being an exceptional and overriding power, it has to be exerci....
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....fit on sales, both by the C.I.T. and the Tribunal, was based on surmises, suspicions and conjectures. The Tribunal took from the representative of the department a statement of gross profit rates of other cotton mills but did not show that statement to the assessee did not give him a opportunity to show that statement had no relevancy whatsoever to the case of the mill in question. It was not known whether the mills which had disclosed these rates were similarly situated and circumstanced. Not only did the Tribunal not show the information given by the representative of the department to the assessee, but it refused even to look at books and papers which assessee's representative produced before the Accountant Member in his chamber. The assessment in this case and in the connected appeal, was above the figure of Rs. 55 lakhs and it was just and proper when dealing with a matter of this magnitude not to employ unnecessary haste and show impatience, particularly when it was known to the department that the books of the assessee were in the custody of the Sub-Divisional Officer. Thus both the C.I.T. and the Tribunal in estimating the gross profit rate on sales did not act on any mater....
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....;Net Profit 9,18,14,175 8,05,03,622 17,57,23,076 21,21,88,332 N/P Ratio 2.13% 1.57% 3.12% 3.47% 62. The learned counsel for the assessee, therefore, submitted that the unaccounted net profit of Polymer business should be estimated at 2% as evident from the comparable cases. 63. We have heard both the sides on this issue. The addition made on the basis of loose papers seized as Annexures B-1, B-2 and B-3 from the residence of the assessee, we have held in the case of Signet Industries Limited that Shri Mukesh Sangle has admitted doing the business of trading in polymer which was not recorded in the books of accounts. In various loose papers seized the name of Mukesh Sangla was appearing, therefore, these incriminating papers shall be considered only in case of Mukesh Sangla for making the addition. 64. The controversy is regarding the addition of initial investment for the purchase of polymer for trading business and estimating the profit @ 10% on this trading. This addition for initial investment has been made at Rs. 13,85,349/- for the assessment years 2011-12, Rs. 1,07,55,135/- for the assessment year 2011-12. 65. After hearing both the sides, we find that on t....
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.... 68. The facts, in brief are that the details of gold ornaments, silverwares and diamond ornaments found during search are as under: Gold Ornaments : Particulars Gross Weight Gms. Net Weight Gms. Value as on the date of search Rs. Bedroom of Smt. Monika 862.69 615.70 22,15,066 Bedroom of Smt. Avantika 3.66 3.20 7,600 Locker No. 357 826.21 811.83 19,33,053 Locker No. 434 201.56 185.55 4,29,938 1,894.12 1,616.28 45,85,657 Silverwares : Particulars Gross Weight Kgs. Net Weight Kgs. Value as on the date of search Rs. Bedroom of Smt. Monika 175.84 175.84 88,27,764 175.84 175.84 88,27,764 Diamond Ornaments : Particulars Gold Diamonds Other Stone Gross Weight(Gms.) Net Weight (Gms.) Value (Rs.) Cts Value (Rs.) Value (Rs.) Bedroom of Smt. Monika 1406.25 1237.27 25,63,885 247.08 1,23,83,950 267.15 13,035 On Persons 18.45 17.95 37,614 2.50 40,000 Bedroom of Smt.Avantika 155.61 137.86 2,88,886 8.25 1,03,050 Locker No. 357 363.77 331.25 6,90,407 87.60 39,42,500 4,500 Locker No. 434 1278.42 1090.62 22,29,774 388.20 1,86,78,274 ....
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....706 2006-07 35,99,454 2,73,535 2007-08 6,75,070 - 2008-09 1,20,071 - 2009-10 44,975 - 2011-12 11,11,000 - 55,50,570 4,56,242 d) As the gold ornaments as per Wealth-tax Returns filed by members of Sangla family was more than the gold ornaments found during search, the assessee did not offer any undisclosed income on account of gold ornaments found during search. Gold Jewellery found during search Gold Jewellery as per wealth tax returns Particulars Gross Weight (Gms.) Net Weight (Gms.) Name of the assessee Gross Weight (Gms.) Net Weight (Gms.) Bedroom of Smt. Monika Sangla 862.69 615.70 Mukesh Sangla 208.18 208.18 Bedroom of Smt. Avantika Sangla 3.66 3.20 Mukesh Sangla HUF 617.43 613.63 Locker No. 357 826.21 811.83 Saurabh Sangla 212.56 193.42 Locker No. 434 201.56 185.55 Monika Sangla 1965.95 1886.45 1,894.12 1,616.28 3004.12 2901.68 e) As the silver wares found during search were more than the silverwares as per Wealth-tax Returns filed by the members of Sangla family, the excess silver wares weighing 98.587 Kgs. and valued at Rs. 49,49,402/- were offered for taxation by the assessee as his undisc....
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.... treated the difference between value of jewellery and silverwares found during search and value of jewellery as per balance sheet of various members of Sangla Family as unexplained jewellery and made addition of Rs. 3,92,41,339/- [Silverwares : Rs. 87,82,414/- (+) Diamond studded gold jewellery : Rs. 3,04,58,925/-]. The detailed working thereof is as under: Particulars Jewellery Silverwares Residence 1,76,03,086 88,77,764 Locker No.357, UCO Bank, New Palasia Branch, Indore 65,70,460 Locker No.434, UCO Bank, New Palasia Branch, Indore 1,91,08,212 Total 4,32,81,758 88,77,764 Less : Jewellery as per balance sheets Shri Mukesh Sangla 9,66,784 28,444 M/s. Mukesh Sangla (HUF) 18,59,515 66,906 Shri Saurabh Sangla 43,98,391 Smt. Monica Sangla 56,48,143 1,28,72,833 95,350 Unaccounted Jewellery 3,04,08,925 87,82,414 70. The contention of the C.I.T.(A). is summarised as under.The basis of determination of unexplained jewellery i.e. difference between jewellery found during search and jewellery as per balance sheets of members of Sangla family was totally illogical be....
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....w that the undisclosed income declared by the assessee and assessed by the lower authorities or intangible additions made by lower authorities is always available to the assessee for set off against undisclosed investments/expenses etc. In the assessee's case, having assessed the yearly peak amount as his undisclosed income, the assessing officer cannot take a stand that such income did not exist and therefore, not available with the assessee for set off against undisclosed cash, investment, loans and advances, expenses, jewellery etc. In this regard, we rely upon the following judgements: (a) S. KUPPUSWAMI MUDALIAR VS. C.I.T. [51 ITR 757 (MAD)] Additions are no doubt made very often on estimate basis. But it can never be said, or at any rate the department cannot contend, that the amount of the addition is not the real income but something which the assessee may not have earned. It is wholly illogical for the department to contend that the addition was only for purposes of taxation and that it should never be taken as true income of the assessee.. In coming to the above conclusion, the honourable high court relied upon the following observation of honourable A.P. high ....
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....re or introducing amounts in his account books.... (c) C.I.T. VS. PREM CHAND JAIN [189 ITR 320 (P&H)] In view of the decisions in CIT v. Ram Sanehi Gian Chand [1972] 86 ITR 724 and Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 the Tribunal was right in holding that the past intangible additions made in the case of the firm of which the assessee was a partner and allocated to the assessee's share could be taken into account in considering the unexplained investments of the assessee and these would also be available for set off purposes in respect of the agreed additions for low household expenses made in the assessee's income in the year under consideration and in remitting the matter to the AAC. (d) C.I.T. VS. TYARYAMAL BALCHAND [165 ITR 453(Raj)] In the present case, the ITO was within his right to tax the amount of Rs. 16,950 as income from undisclosed sources even though he had added the amount of Rs. 18,117 in addition to the profits shown by the assesses in its account books. However, the assessee was well within its right to plead that the amount of Rs. 16,950 was covered from the intangible income assessed at Rs. 18,117, and added in....
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....44 ITR 143 (M.P.)] The honourable high court followed the honourable Supreme Court ruling in case of Anantharam Veerasinghaiah & Co. vs. C.I.T. [123 ITR 457 (SC)] and approved the telescoping of undisclosed income against undisclosed assets. (h) C.I.T. VS. NABADWIP CHANDRA DEY [198 ITR 133 (GAU.)] The principles governing set off of intangible additions made in the assessment against unexplained cash credits or unexplained investments are no more res integra. The principles that emerge from the various decisions can be summarised as follows: (1) Amounts represented by 'intangible additions' to the book profits of an assessee during an assessment proceeding constitute undisclosed income of the assessee and are as much a part of his real income as those disclosed by his account books. It has the same concrete existence. (2) Income from intangible additions is available to the assessee for meeting expenditure or introducing amounts in his account books. (3) If any unexplained cash deposit or cash credit can reasonably be related to the amount covered by the intangible additions made in the past or in that very year necessary set off may be given by the autho....
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....0 (A.Ys. : 2008-09 & 2012-13), 2.0 & 2.1 (A.Y. : 2009-10) and 4.0 (A.Y. : 2010-11 & 2011-12)of assessee's appeal reads as under : ASSESSMENT YEAR : 2008-09, 2010-11, 2011-12& 2012-13 TELESCOPING Without prejudice to the above grounds of appeal and in the event of various additions made by the assessing officer are confirmed at any stage of appellate proceedings in any of the assessees belonging to Signet Group as well as Sangla Family, the assessee may be allowed to telescope, to the extent possible, the undisclosed income finally assessed by the Income-tax Department against unexplained investment in jewellery, unexplained cash credit in the form of unsecured loans, share application money and share capital, unexplained cash, unexplained expenditure, unexplained investment, unexplained stock, unexplained bank transactions, unexplained bank accounts etc. belonging to Signet Group as well as Sangla Family so as to prevent addition of income as well assets, liabilities and expenses. ASSESSMENT YEAR : 2009-10 TELESCOPING 2.0 The learned Commissioner of Income-tax (Appeals) erred in law as well as in facts in confirming the rejection of scientifically prepared date-wise cas....
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....d from the residence of Shri Mukesh Sangla, wherefrom it emerges that the impugned material contained transactions like receipts from various sources, payments to various persons, purchase and sale of gold, unaccounted trading in polymer, stock of chick peas, etc. As there were a large number of cash receipts and cash payments, investment etc. trading in polymers etc., it was not possible to determine correct undisclosed income merely by addition of all payments and receipts. Under these Shri Mukesh Sangla prepared a cash flow statement or cash book in which all the transaction appearing in the impugned seized material were recorded date wise, year-wise peak was worked out and such peak amount was offered for taxation by Shri Mukesh Sangla in his Return of Income filed pursuant to the notice issued u/s.153A. The income emerging from the impugned seized material was offered for taxation in Shri Mukesh Sangla's hands because (a) the seized material was found and seized from the his residence and (b) the seized material contained several accounts and documents which bear his name, (c) the impugned pages were owned up by him in his statement recorded u/s.132(4) and (d) polymer business....
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....lable for the payment of dividends. Among common men, such an attitude would be regarded as blowing hot and cold or playing fast and loose." (a) ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [123 ITR 457 (SC)] In the instant case, the Tribunal had relied entirely on the basis that an intangible addition of Rs. 2,00,000 had been made to the book profits of the assessee for the assessment year 1957-58 and it inferred that an amount of Rs. 90,000 was available for being put to use in the relevant assessment year. Now it can hardly be denied that when an 'intangible' addition is made to the book profits during an assessment proceeding, it is on the basis that the amount represented by that addition constitutes the undisclosed income of the assessee. That income, although commonly described as 'intangible', is as much a part of his real income as that disclosed by his account books. It has the same concrete existence. It could be available to the assessee as the book profits could be. There can be no escape from the proposition that the secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed....
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....ount was, therefore, available to him for investment in the assessment year. A similar question was considered by the Allahabad High Court in the decision in CIT v. Ram Achal Ram Sewak [1969] 73 ITR 501 and it was held (page 502): "The short question raised in the present applications is whether the deposits made by the assessee in various banks from year to year could be set off against the extra profit added during previous years. In Kuppuswami Mudaliar v. CIT [1964] 51 ITR 757 , it was held by the Madras High Court that, where the income-tax authorities made an addition to the income of the assessee over and above the income as disclosed by the assessee, on an estimate basis, the amount so added must be treated as the real income of the assessee. It is not open to the authorities to take the view that the addition was only for purposes of taxation, and that it should not be regarded as the true income of the assessee." Apparently, therefore, it could not be contended that this income which had been added up as income from intangible sources in the previous years, of assessment was not available to the assessee. Accordingly, our answer to the question is in the affirmative. ....