TaxTMI 
TaxTMI 
2016 (2) TMI 1320
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee on 03.11.2011. Consequently, a notice 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 appeal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in relation to search and seizure assessments, it would have specifically provided it under the relevant provisions. In the absence of the term 'undisclosed income' 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 compleme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ould lead to an irresistible conclusion that the term 'assessment' has to be read in the context of abated assessments and the term 'reassessment' has been used in the context of unabated assessments. In the case of completed assessments, 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment 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 sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essments amounted to change in opinion on the same set of facts which is not permissible u/s.153A. 11. The learned counsel for the assessee pleaded to allow these grounds while the learned DR pleaded that incriminating documents and unrecorded sales, unaccounted wealth was discovered by search, hence, the assessments u/s 153A of the Act are valid and facts of the assessee's case at variance to the facts of the cases relied upon. 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t order are 45 to 60 which are reproduced hereunder :- "45. The facts in relation to investment and reacquisition of shares of Adroit Industries (India) Ltd. are that the Signet group, Sangla family and its associates concerns acquired management control of Adroit Industries (India) Ltd., Indore, a 100% export oriented auto ancillary unit, from Anand family of Indore in March 2007. There is no dispute regarding the price at which shares were acquired from Anand Family as well 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')....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8,84,237 3,13,32,877 2,06,68,119 3.67 31.03.2011 26,16,49,372 6,08,43,868 4,09,00,040 3.89 31.03.2012 23,45,32,888 4,56,79,338 3,20,21,038 3.05 31.03.2013 36,78,86,610 7,13,90,758 4,91,83,297 4.68 The assessee has not given a single name either of any broker or any investor through whom he contacted the ultimate investor. Any prudent business group will acquire another company only after having firm financial tie ups. The divestment to the tune of 73.5% immediately after acquiring a company is against all human probabilities. The contention of the assessee that due to bad capital market situation, 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....explained investment of the assessee. Accordingly, the following additions are made: Assessment Year Amount (Rs.) Remarks 2008-09 14,72,800 Unexplained Cash Credit 2010-11 1,02,65,813 Unexplained Investments 49. The C.I.T.(A) confirmed the action of the A.O. and rejected the assessee's contention. Agreeing to the findings of the assessing officer, C.I.T.(A) also observed that the Sangla group had introduced certain more layers of entities in whose name the shares were transferred (in some cases six transfers) and finally repurchased the shares at a price of Rs. 11.25 to Rs. 12.25 per share. The flow of shares of Adroit Industries (India) Ltd. involving 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ingh Anand 3,10,550 13.03.07 Pranay trade link Pvt Ltd 3,10,550 40.25 1,24,99,638 10.05.07 Shalimar Ferrous Metals Pvt. Ltd. 3,10,550 40.40 1,25,46,220 Ishdeep Singh Anand 3,750 13.03.07 M/s Mukesh Sangla HUF 3,750 40.25 1,50,938 10.05.07 Shalimar Ferrous Metals Pvt. Ltd. 32,875 44.80 14,72,800 Rupinder Singh Anand GamanBhasin 2,500 13.03.07 M/s Mukesh Sangla HUF 2,500 40.25 1,00,625 Rajendrapal Singh Bhasin Taranjot Kaur Chandok 17,875 13.03.07 M/s Mukesh Sangla HUF ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Gajendra Kaur Anand IshwerlalBhavsar 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Ramesh Sen 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Ramesh Pal 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Neelkanth Bade 500 13.03.07 Mukesh Sangla 500 30.00 15,000 D.G.Kamble 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Shyam Sharma 500 13.03.07 Mukesh Sangla 500 30.00 15,000 JyotiVallabhTripathi 500 13.03.07 Mukesh Sangla 500 30.00 15,000 Narayan Suryavanshi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 30.00 15,000 Surendra Singh Chadda 500 13.03.07 Mukesh Sangla 500 30.00 15,000 22,88,025 22,88,025 9,19,40,056 22,88,025 9,44,90,310 CHART II [Further transfer of 22,88,025 shares of Chart-I and 3,10,550 shares originally held by Shri Jagjit Singh Anand and Gajendra Kaur Anand = 25,98,575 Shares] Name of shareholder of Anand Family No. of shares held 2nd Transfer 3rd Transfer Date Name No. of shares Rate Amount Date Name No. of shares Rate Amount Jagjit Singh Anand 310,550 13.03.07 Shalimar Ferrous Metals Pvt. Ltd. 310,550 40.25 12,500,000 10.12.07 Lucky Commotrade Pvt Ltd 2,598,575 41.37 107,510,026 Gajendra Kaur Anand ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; 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 12.00 25,26,600 08.09.09 Mukesh Sangla HUF 2,00,000 12.00 24,00,000 &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 30.10.07 Samyank Share & Stock Brokers 21,500 46.00 9,89,000 30.10.07 Sea Entertainment Ltd. 21,500 46.00 9,89,000 30.10.07 Sky touch Infracture 28,000 46.00 12,88,000 30.10.07 Palasia Leasing & Finance Ltd. 47,500 46.00 21,85,000 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Name No. of shares Rate Amount Virendra Singh Anand 1,490,650 13.03.07 Signet Overseas Ltd. 1,490,650 40.25 60,000,403 Narinder Kaur Anand Yogendra Bhatia 750 05.06.08 Mukesh Sangla 750 30.00 22,500 50. The reduction in market value of Adroit Industries (India) Ltd. from Rs. 40.25 in Financial Year 2006-07 to Rs. 11.25 to Rs. 12.25 in Financial Year 2009-10 is beyond comprehension particularly when the company is consistently earning higher profits as observed by the A.O. The learned CIT(A) also observed that it is beyond comprehension that the Signet Group, Sangla family and its associate concerns would divest about 75% of their holding to unrelated parties after taking over the control and management of Adroit Industries (India) Ltd. The contention of the assessee about public issue of Adroit Industries (India) Ltd. in future being a reason for divestment is also unconvincing. Relying upon the case of C.I.T. vs. Rathi Finlease Ltd. (2008) 215 CTR 429 (MP) and Industrial Filters and Fabric....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the source of investment by Signet Group, members of Sangla Family and its associate concerns in March 2007 for acquiring 56,21,500 shares of Adroit Industries (India) Ltd. alongwith its control and management was not disputed by the Revenue Authorities. The source of investment in the shares of Adroit Industries (India) Ltd. was mainly out of loans provided by Signet Industries Ltd. and partly by unsecured inter-corporate loans, which were advanced to various group entities and Lucky Commotrade Pvt. Ltd. through Shalimar Ferrous Metals Pvt. Ltd. ('Shalimar'). The assessee has submitted a fund flow chart in this regard. Shalimar Ferrous Metals Pvt. Ltd. ('Shalimar') was incorporated on 18.06.1986 under the provisions of the Companies Act, 1956, having PAN No. AAICS 4429G. It was regularly assessed to tax. The assessment for assessment year 200708 was completed u/s.143(3) r.w. Sec.264 of the Income-tax Act, 1961. The returned income was accepted. During financial year relevant to the assessment year 2007-08 Shalimar Ferrous Metal Pvt. Ltd. received unsecured loan from following entities :- Name of the company P.A.No. Amount (Rs.) Nalanda Merchant Pvt. Ltd. (Out of lo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....incorporated on 16.03.1994 having PAN No. AAACL 4501 E. It is not a group concern or associate concern of Signet Group. It is having an independent Board of Directors. Its Share Capital and free reserves as on 31.03.2005, stood at Rs. 1,28,80,000/- and Rs. 9,34,20,000/- respectively. For A.Y.2007-08 the Shareholders Fund stood at Rs. 10,63,97,734/-. The assessment for A.Y.2007-08 was completed u/s.143(3) and total income assessed was Rs. 1,23,92,580/-. The assessment for A.Y.2005-06 was also completed u/s. 143(3). Copy of order was placed before the lower authorities. The financial capacity of the company and its creditworthiness stood established from the following table showing its financials as: Assessment years Paid-up share capital Free reserves Profit for the year Taxes paid 2008-09 1,28,80,000 9,35,17,734 1,17,408 44,400 2009-10 1,28,80,000 9,40,46,001 6,04,107 75,840 2010-11 1,28,80,000 9,63,52,036 34,40,035 11,34,000 2011-12 1,28,80,000 9,78,27,075 22,03,439 7,28,400 2012-13 1,28,80,000 9,85,63,971 11,54,896 4,18,000 Once the Income-tax department, Kolkata assessed Lucky Comm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cash outflow of about Rs. 22.61 crores to finance the acquisition. It is not uncommon for the promoters to divest their investment prior to public issue, collect funds to unburden the company of its financial liabilities and provide an honourable exit to the investors. However, due to negative stock market sentiments (Sensex fell from high of 20,500 in 2007 to lows of 8,000 in 2009), the public issue did not materialize despite utmost efforts of the promoters. Further, the auto industry globally was facing tremendous recession and uncertainty as evident from BSE Auto Index which fell from a high of 5,900 in 2007 to lows of 2,350 in 2009. The turnover of Adroit Industries (India) Ltd. declined from Rs. 24.61 crores in Financial Year 2008-09 to Rs. 16.88 Crores in Financial Year 2009-10. Although the profit showed an increase from Rs. 2.23 Crores to Rs. 3.13 Crores but it was due to valuation of work-in-progress which was written off in Financial Year 2011-12. Also, the company was facing severe labour problems with the arrival of trade unions and ultimately the entire work force was laid off after incurring a huge severance cost. With these problems, the investors wanted an honourab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vestment at the lower price. Shri Ramchand Kedia, the directors of Lucky Commotrade Pvt. Ltd. is a close friend of Shri Mukesh Sangla, head of Signet Group and Sangla Family. Also, there were regular financial transactions between Lucky and various Signet Group Companies. To save cost of transfer of funds, interest cost and facilitating movement of funds, Lucky opened a banking account at Indore and Shri Ramchand Kedia kept a signed cheque book with Shri Mukesh Sangla. There was a clear understanding between the two that Shri Mukesh Sangla would give complete account of transaction to Lucky immediately and reconcile the account interse. Therefore, there was nothing suspicious about cheque book of Lucky having been found with Shri Mukesh Sangla during search particularly when all the transactions were at Arm's Length, recorded in the regular books of accounts of respective entities and interest bearing. There were no cash transactions between Lucky and Signet Group entities. As regard Palasia Leasing & Finance Ltd., the honourable Madhya Pradesh High Court confirmed the addition of Rs. 5 Lacs in the case of Rathi Finlease (215 CTR 429) because summon could not be served on it during....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s; ii. Based on the material facts, the assessing officer finds that the amount expended on such investment actually exceeds the amount recorded in the books of account; and iii. The assessee either offers no explanation about the nature and source of investment or the explanation offered is not satisfactory in the opinion of the assessing officer. iv. The satisfaction of the assessing officer cannot be arbitrary and subjective but has to be based on the relevant material 57. Wherever the legislature desired determination of income in a specific manner or existence of certain state of affairs, it has specifically provided for in relevant sections. Sec.69 and Sec.69B dealing with taxation of unaccounted investments are deeming provision and does not deal with presumptive taxation of unaccounted/under-valued investments. In absence of the clear legislative mandate, the A.O. cannot presume market value/fair value of investments and make addition under Sec.69 or Sec.69B of the Act. Reliance is placed upon the following judgements: (i) C.I.T. Vs. Naveen Gera 328 ITR 516 (Del) (ii) C.I.T. Vs. Dinesh Jain HUF 352 I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the assessee could not go for public issue due to capital market situation is also not justified. These shares have changed many hands before coming Signet group which is usually not possible in unlisted shares. He also pleaded that the assessee has not brought on record anything to show that sale proceeds were utilised in discharging the interest bearing liabilities and he pleaded that it is not possible to accept the assertions of the assessee with regard to disinvestment that it was to reduce the risk of the group. He pleaded that the disinvestment of shares of Adroit Industries (India) Ltd. was a sham transaction. He relied upon the orders of the Assessing Officer and the learned CIT(A) on this issue. He also drew our attention to various case laws relied on by him. 60. In earlier part of this order, we have held that the assessments framed u/s 153A r.w.s. 143(3) of the Act against the assessee are not as per law. However, we are also deciding the issue on merits of the addition made of Rs. 13,23,220/- in respect of sale proceeds of 32,875 shares of Adroit India Limited in the assessment year 2008-09 as unexplained income of the assessee and also issue regarding the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unaccounted transaction in any form was done by any of the persons of this group and associates. There is no evidence against the assessee with regard to transfer and reacquisition of shares of Adroit Industries Ltd. during the relevant period to the assessment years 2007-08, 2008-09 and 2010-11 respectively. The revenue's allegations are general and not supported by any evidence. In our considered view, no addition could be sustained only on the basis of guess work or in the absence of any positive evidence. In view of this factual matrix, we find no merit in the addition made in the assessment year 2008-09 on the transfer of shares of Adroit Industries Limited and also the addition made for unexplained investment on account of reacquisition of shares of Adroit Industries Ltd. during the financial year 2010-11. We direct to delete the same." 15. The facts of the assessee's case are the same as of the decided cases, therefore, in view of that we direct to delete these additions. GROUND NO.3.0 (A.Y. : 2012-13) OF THE ASSESSEE'S APPEAL Ground No.3.0 (A.Y. : 2012-13) of assessee's appeal reads as under : ASSESSMENT YEAR : 2012-13 ADDITION ON THE BASIS OF ASSESSEE'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me for assessment year 2012-13 was offered for taxation after verification of seized material, the copies of which had already been provided to the assessee. d) For assessment year 2012-13, the assessee declared undisclosed income of Rs. 12.61 Crores on the basis of LPS-3 and other papers seized from various premises in his statement u/s.132(4) read with letter furnished before the A.D.I.T. (Inv.), Indore, but did not offer any undisclosed income for taxation in the Return of Income filed pursuant to notice u/s.153A. e) The undisclosed income for assessment year 2012-13, finally determined by the C.I.T.(A) was Rs. 3,17,44,585/- . As it fell short of Rs. 12.61 Crores declared in the statement u/s.132(4) by Rs. 9,43,55,415/- [Rs. 12,61,00,000/- (-) Rs. 3,17,44,585/-], the difference of Rs. 9,43,55,415/- was brought to tax on the basis of assessee's statement u/s. 132(4). f) The reliance was placed upon the following judgements: i. Ishwardin Mewalal vs. C.I.T.[1986] 169 ITR 584 (MP) ii. Dr. S.C. Gupta vs. C.I.T. [2001] 248 ITR 782 (All) iii. S.S. Ratanchand Bholanath vs. C.I.T. [1984] 210 ITR 682 (MP) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....making an addition solely on basis of admission. The learned counsel for the assessee placed reliance on the following judgements: (i) The honourable Supreme Court held in the case of Pullangode Rubber Products Co. Ltd. vs. State of Kerala & Anr. (91 ITR 18) that an admission in statement recorded on oath is an extremely important piece of evidence but it cannot be said that it is conclusive and it is always open to the person who made the admission to show that it is incorrect. (ii) The honourable Supreme Court held in the case of Krishnan vs. Kurushetra University (AIR 1976 SC 377) that mere admission cannot be bedrock or foundation of an assessment and it is always open to the assessee who made the admission to show that what he admitted was not correct. The honourable Supreme Court also observed that the effect of an alleged admission depends upon the circumstances in which it was made. A statement made in ignorance of legal rights or under duress cannot bind the maker of the admission. (iii) The honourable Jharkhand High Court held in the case of Shree Ganesh Trading Co. vs. C.I.T. (2013) (30 taxmann.com 170) that 'We are of the considered opinion th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....question of law arises where the Income-tax Appellate Tribunal deleted the addition made on account of unexplained household expenses on the basis of facts that it was a case where a prolonged search had taken place and the Revenue has not been able to find any evidence except the assessee's own statement given under stress and strain and only giving an estimate on the basis of memory regarding an event which occurred about three years back. (vi) The honourable Ahmedabad Bench of I.T.A.T. held in the case of A.C.I.T. vs. Sushiladevi S. Agarwal (50 ITD 524) that search operations under the Income-tax Act is a lawful invasion on the privacy, life and property of a citizen which may affect him/her mentally also, besides causing several other inconveniences, hardships, embarrassment and harassment. There is every likelihood of a statement tendered to or recorded by the searching officers on the search day being incoherent or at variance with subsequent statements tendered to or recorded in any further or collateral proceedings. But to make addition to the returned income or to put such person to sufferance or to adverse consequences on such statement is not justified in law. B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6)(TM) that the general legal principle is well settled that a statement u/s.132(4) is not the last word and if the person concerned retracts/clarifies the same subsequently on ascertainment of correct state of affairs and explain the same, it can be allowed. The burden to prove that the statement was given under misunderstanding lies on him. (x) The honourable Gujarat High Court held in the case of Kailashben Manharlal Chokshi vs. C.I.T. (174 Taxmann 466) that a statement recorded u/s.132(4) at midnight cannot be considered a voluntary statement if it is subsequently retracted by the assessee and necessary evidence is laid contrary to such admission. (xi) The honourable Allahabad High Court held in the case of C.I.T. vs. Radhakishan Goyal (278 ITR 454) that it is a matter of common knowledge, which cannot be ignored that the search is being conducted with the complete team of the officers consisting of several officers with the police force. Usually telephone and all other connections are disconnected and all ingress and egress are blocked. During the course of search person is so tortured harassed and put to a mental agony that he loses his normal mental state o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sclosed income offered for taxation and categorically stated that declaration of undisclosed income was based upon provisional verification of seized material. In this regard, attention of the honorable tribunal may be brought to the fact that over 30,000 pages were seized by the Income-tax department along with hard discs of all the computers. As per the impugned letter, undisclosed income of Rs. 12.61 crores for the assessment year 2012-13 was based on provisional verification of seized material viz. LPS-3, BS-1 to BS-3 (Residence of the assessee), Annexure A-2 (Mumbai office of Signet Industries Ltd.), LPS-1 and BS-3 (Residence of Paras Patidar), undisclosed sliverwares and unmatched diamond ornaments. To ascertain undisclosed income scientifically on a proper analysis of unaccounted cash transactions as per seized material, the assessee prepared a cash book in which all unaccounted cash receipts and unaccounted cash payments and investment were recorded datewise in a chronological order and on the basis thereof, the assessee ascertained the peak credit and offered the year-wise peak credit for taxation. The rationale behind applying peak credit theory is that the sum of all une....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aining cash payments and undisclosed investments during the year. In view of the facts and legal position discussed above, the assessee humbly request deletion of the addition sustained by the C.I.T.(A) and determine undisclosed income offered by the assessee on the basis of peak credits for various assessment years on the basis of cash book prepared by him and placed before the Tribunal as well as the lower authorities. 20. The learned CIT(A) has made the addition of difference between the income offered in the statement recorded u/s 132(4) and confirmed in the letter submitted to the Investigation Wing for the assessment year 2012-13. The peak credit in view of various issues decided in these appeals including appeal in Signet Industries Limited needs to be reworked out. The income worked out of poly product sold out of books and under-invoiced for assessment years 2006-07, 2007-08 and 2008-09 have been held to be taxed in the hands of Signet Industries instead of the assessee. Part of this income was offered by the assessee in his return of income for these years which shall be reduced in view of these facts. Further, various other issues are also restored to the file of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... initiated u/s.153A of the Act. If the assessee found any mistake in his original Return of Income, the correct course was to revise the return which has not been done. 24. The learned CIT(A) relying on the judgement of Jai Steel India vs. A.C.I.T. [36 taxman.com 523 (Raj)] and Charchit Agarwal vs. A.C.I.T. [34 SOT 348 (ITAT-Del)], the C.I.T.(A). held that where a claim for deduction/exemption was not made by the assessee in Return of Income filed under original return of income, no fresh deduction or claim can be made by the assessee in the Return of Income filed u/s.153A pursuant to a search u/s.132 or requisition u/s.132A because the proceedings u/s.153A are for the benefit of revenue and not for the benefit of the assessee. 25. Before us, the learned counsel for the assessee submitted that the claims/deductions made by the assessee while filing the Return of Income pursuant to notice u/s.153A were such claim/deductions which were legally allowable to the assessee. In fact, because of their very nature, the assessing officer should have allowed these deductions on his own and he should not have taken advantage of assessee's ignorance. In this regard the reliance is place o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....return of income. In fact, in the return of income, the assessee had admittedly sought to exclude its dividend income and long term capital gains from sale of shares under section 1O as is evident from the return of income. However, in the return of income as filed originally on the assessee by mistake, omitted to exclude the dividend income and income from long term capital gains from the total income being declared by it. [Para 6] The Honourable Madras High Court held in the case of C.I.T. vs. Geo Industries & Insecticides (I) (P.) Ltd. (234 ITR 541) as under : "We are of the view that, when the assessee made a claim for consideration of an item for deduction during the course of assessment proceedings, it is the duty of the ITO to examine the claim on the merits of the claim. The present case is not a case where the assessee made a claim with reference to a matter which was concluded and has become final in the original assessment proceedings. But, on the other hand, it was found in the subsequent year's assessment proceedings that the liability of the assessee had accrued when the suit for injunction filed by the assessee was dismissed by the city civil Court, Madra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erived from the order of the C.I.T., his jurisdiction to allow or disallow the carry forward losses of the defunct business would be derived from the order of the C.I.T., but in other respects and, for completing the assessment, his powers would be traceable to s. 143(3) of the Act. This Court in Faizunnissa Begam vs. Asstt. CED (supra) has indicated such an approach and it was held that in so far as other items not considered by the higher authorities are concerned, the power of the ITO to reassess the income would be traceable to the provisions of the statute. Therefore, the refusal of the ITO even to consider the claim of the assessee is not justifiable and we are of the opinion that both the C.I.T.(A) and the Tribunal were right in directing the ITO to consider the claim of the assessee on the merits of the matter. Though we are not agreeing with the view expressed by the Tribunal that the entire assessment order was set aside by the C.I.T., still the power of the ITO to consider the claim of the assessee is neither curtailed nor taken away by the order of the C.I.T. The ITO was bound to consider the claim of the assessee under s. 143(3) of the Act when he was in final process ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fficer of his duty to apply section 24 in an appropriate case. " Similar view was taken by the honourable I.T.A.T. Indore in the case of Subhadra Devi Gupta vs. A.C.W.T. (WTA Nos.1 to 6/IND/2012 dt.28.06.2013). 26. In the wake of the above submissions, the learned counsel for the assessee prayed for allowing the legitimate claims/deductions of the assessee notwithstanding the fact that these claims were not made in the original Return of Income filed u/s.139(1) of the Act. 27. We have heard both the sides. We find that in the case of Mukesh Sangle HUF, IT(SS)A Nos. 94 & 95/Ind/2015 and others IT(SS) A. Nos. this Bench had taken the following view :- 21. The assessee has made fresh claim as stated in the earlier part of this para with regard to exclusion of short term capital gain on the sale of shares of 29,471, cost of acquisition of shares Rs. 30,000/-, deduction for bank charges Rs. 1629/- and deduction of interest difference of Rs. 450/-. We have held that while filing the return of income u/s 153A of the Act, the assessee cannot reduce the taxable income originally declared. A similar view we have taken in the case of Mukesh Sangla HUF. The relevant para is r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uld have been excluded from the assessed income of the assessee and (b) that the same income cannot be taxed in the hands of two assessees. 29. The facts in brief are that during search, page no.129, 130, 132 to 137 and 254 of LPS-2/14 were seized from the office of the Signet Industries Ltd. These pages represented detailed working on the basis of which Shri Mukesh Sangla revised his return of income for A.Y. 2006-07 to A.Y. 2008-09 on the basis of documents found and seized during search by Central Excise Authorities. After search by Central Excise Authorities 06.12.2007, the assessee voluntarily offered undisclosed income of Rs. 4 crores on account of cash payments to Shri Deepak Kalani and Shri Pankaj Kalani, under-invoicing of sales of Logic Poly Products, a unit of Signet Industries Ltd. and unaccounted sales and paid applicable taxes thereon. The details of undisclosed income voluntarily offered for taxation by the assessee and taxes paid thereon are as under: Asstt. Year Undisclosed Income (Rs.) Taxes (Rs.) 2006-07 45,00,000 20,86,755 2007-08 1,95,00,000 86,88,340 2008-09 1,60,00,000 65,49,450 4,00,00,000 1,73,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rson was the Signet Industries Ltd. and not Shri Mukesh Sangla. The contention of the assessee that Shri Mukesh Sangla voluntarily declared the impugned income in his hands which was accepted by the Income-tax Department is of no consequence and is immaterial in view of the apex court judgment. As expenses relating to raw material and other overheads had been accounted for in the regular books of accounts of Signet Industries Ltd., the entire under-invoiced amount as well as out of book sales was income of Signet Industries Ltd. and the net profit rate cannot be applied. Accordingly,following additions on account of under invoicing and unaccounted sales were confirmed : Asstt. Year Unaccounted Sales of Polymer Business Under-invoicing of Polymer Business Total 2006-07 2,89,97,976 2,89,97,976 2007-08 1,75,60,798 1,34,65,988 3,10,26,786 2008-09 93,56,857 1,19,47,395 2,13,04,252 5,59,15,631 2,54,13,383 8,13,29,014 The C.I.T.(A). telescoped cash paid to Pankaj Kalani and Deepak Kalani, unsecured loans from Lucky Commotrade Pvt. Ltd. and undisclosed income from under-invoicing and unaccounted sales. However, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Shri Mukesh Sangla, the addition thereof in the case of Signet Industries Ltd. would amount to double addition and double taxation causing great injustice to the assessee. 34. Without prejudice to the above and alternatively, the learned counsel for the assessee submitted that if the honourable Tribunal confirms the addition on account of cash payment to Shri Pankaj Kalani and Shri Deepak Kalani, under-invoicing and unaccounted sales in the case of Signet Industries Ltd., we humbly request that the income voluntarily offered for taxation on this ground by Shri Mukesh Sangla in his Return of Income should be reduced to avoid double taxation and the benefit of taxes paid by him should be given in the case of Signet Industries Ltd.. In support of it, the reliance is placed upon the judgement of honorable Supreme Court in the case of Ashish Plastic Industries vs. A.C.I.T. (373 ITR 45) 1. The appellant-assessee is a registered firm engaged in the business of manufacture of PVC pipes of different varieties and sizes. Survey operations were conducted by the Income Tax authorities under Section 133A of the Income Tax Act, 1961 (hereinafter referred to as 'Act') at the factory....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erred under Section 260A of the Act on the ground that no substantial question of law arose. 3. Normally, going by the aforesaid facts noted, the High Court may be correct in its observation that no substantial question of law arose. However, learned counsel for the appellant-assessee has brought to our notice a different aspect which was raised at the time of admission of the present special leave petition filed by the appellant. He drew our attention to orders dated 27.02.2004 which reads as under: - "Leave granted limited to the question as to whether in respect of sales of 32,809 kg., which are shown in the stock register of M/s. Ashish Agro Plast Private Limited, there has been double taxation." 4. It is clear from the above that leave was granted limited to the question as to whether the addition made on account of aforesaid sale would amount to double taxation. To put it differently, the submission of the learned counsel for the appellant is that on the aforesaid sales, which are found in the accounts of M/s Ashish Plastic Industries, the receipts are shown as income on which tax has been paid by M/s Ashish Agro Plast Private Limited. 5. D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....RING 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/- made by the assessing officer on the basis of page 17 of LPS-4 found and seized from his residence, notwithstanding the fact that : (a) it did not pertain to the year under consideration and (b) it was considered by the assessee in the year wise peak of cash as per the cash flow statement and offered for taxation. ASSESSMENT YEAR : 2010-11 ADDITION ON THE BASIS OF ENTRIES OF CASH PAYMENT RECORDED IN THE MATERIAL FOUND AND SEIZED DURING SEARCH : Rs. 23,06,22,104/- 3.0 The learned Commissioner of Income-tax (Appeals) erred in facts as well as in law in partly confirming the addition to the extent of Rs. 23,06,22,104/- made by the assessing officer on the basis of entries of cash payments and cash receipts recorded in the material found and seized during search. 3.1 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 determination of undisclosed income of the assessee. CASH RECEIPTS RECORDED IN THE MATERIAL FOUND AND SEIZED DURING SEARCH AS UNEXPLAINED CASH RECEIPTS : Rs. 8,17,35,166/- 3.4 The learned Commissioner of Income-tax (Appeals) erred in law as well as in facts in confirming the addition of Rs. 8,17,35,166/-, although set off against sum of all the cash payments, made by the assessing officer as unexplained cash receipts, as per LPS 4 found and seized during search. ASSESSMENT YEAR : 2011-12 ADDITION ON THE BASIS OF ENTRIES OF CASH PAYMENT RECORDED IN THE MATERIAL FOUND AND SEIZED DURING SEARCH : Rs. 14,27,33,397 /- 2.0 The learned Commissioner of Income-tax (Appeals) erred in facts as well as in law in partly confirming the addition to the extent of Rs. 14,27,33,397/- made by the assessing officer on the basis of entries of cash payments and cash receipts recorde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fficer 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 cash payments, made by the assessing officer as unexplained cash receipts as per LPS 3 found and seized during search. 7.0 Ground No.1 (A.Ys. : 2010-11 to 2012-13) of revenue's appeals reads as under: ASSESSMENT YEAR : 2010-11 1. On the facts and in the circumstances of the case the C.I.T.(A). erred in deleting the addition made on account of unexplained cash transaction of Rs. 8,17,35,166/-. ASSESSMENT YEAR : 2011-12 1. On the facts and in the circumstances of the case the C.I.T.(A). erred in deleting the addition made on account of unexplained cash transaction of Rs. 9,12,86,409/-. ASSESSMENT YEAR : 2012-13 1. On the facts and in the circumstances of the case the C.I.T.(A). erred in deleting the addition made on account of unexplained ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndustries 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 Industries Ltd. The A.O rejected the assessee's submission in relation to elimination of duplicate entries for avoiding double taxation. The A.O. also ignored unaccounted transactions regarding purchase and sale of gold. 41. On appeal, the learned CIT(A) observed that on the basis of facts like seized material being found at the residential premises of Shri Mukesh Sangla at 1-B, Gulmohar Extension, Indore, many loose papers of the seized material bearing the name of Shri Mukesh Sangla, statement of Shri Mukesh Sangla u/s.132(4) and presumption u/s.132(4A) and section 292C, the C.I.T.(A) held that the right person to be taxed in respect of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 receipts and cash payments, investment, trading in polymers etc., it was not possible to determine correct undisclosed income merely by addition of all payments and receipts, an approach adopted by the A.O. in the assessment order, which has been over-ruled by the C.I.T.(A). After examination of transactions recorded in the cash book, the first appellate authority allowed telescoping of cash receipts against cash payments albeit on yearly basis and taxation of the higher of the two in each assessment year. The learned counsel for the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd 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 appearing in the loose paper were mere camouflage. He also submitted that the statements of various persons like Shyam Gupta, S.S.Mehta, Sikkaji, Umeshji etc. were recorded by the Investigation Wing during post search proceedings and they confirmed the factum of cash receipt from Shri Mukesh Sangla for safe custody and payment thereof as and when recalled by him from time to time. The learned counsel for the assessee submitted that when a large number of unaccounted transactions in the form of cash receipts and cash payments, recall ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 explained by the assessee; As per the cash book prepared by Shri Mukesh Sangla, he carried a huge cash of more than Rs. 11 corers from 01.04.2009 till 30.06.2009 and again cash balance of more than Rs. 12 corers from 31.01.2010 till mid of 2010. In the mid of 2010 Shri Mukesh Sangla has shown huge purchase of gold starting from April 2010 from one Mr. Kuldeep ji. These purchases continued till June 2010 even after which Shri Mukesh Sangla carried cash in hand of more than Rs. 5 corers till May 2011. These facts prove beyond doubt tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nses 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. 10,99,00,900/- for investment in gold and not Rs. 21,98,01,800/- made as per the assessment order. By ignoring the entries relating to purchase and sale of gold as per the seized material as stated above, showed that the A.O. adopted a pick and choose approach by selecting a few entries for the purpose of making addition and ignoring a few entries which resulted in double addition. As the above mistake is quite obvious on the face of the seized material, we humbly request your honour....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 assessee did not claim deduction of cash payments as expenditure and no material was brought on record by the assessing officer to show that the cash payments were towards any expenditure or he claimed any deduction thereof in determination of his undisclosed income [C.I.T. Vs. Hariram Bhambhani I.T.A. No.313 of 2013 dt. 04.02.2015 (Bom), C.I.T. Vs. Anil Bhalla 322 ITR 191 (Delhi)]....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 cannot, at the same breath, say that these profits did not in fact exist because they did not appear from the company's books and could not, therefore, have been available for the payment of dividends. Among common men, such an attitude would be regarded as blowing hot and cold or playing fast and loose." (b) ANANTHAR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st 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 assessments of the previous years of the assessee were on the basis that he had earned larger income than what was shown and that he had in fact earned that income. That amount was, therefore, available to him for investment in the assessment year. A sim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 that he has prepared cash receipt and cash payments account on the basis of these documentsand the excess amount has been offered for taxation while the revenue'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4/- 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 (c) accordingly, determining net profit of Rs. 1,19,50,150/- from trading in Polym....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ingly, 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 justificat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 58. The learned counsel for the assessee submitted that it is a settled law 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 con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onstitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure 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 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sources in the previous years, of assessment was not available to the assessee. Accordingly, our answer to the question is in the affirmative. (g) A.C.I.T. VS. DHARAMCHAND AGRAWAL [144 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 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e does not empower those authorities to make an arbitrary order. The power to levy assessment on the basis of best judgment is not an arbitrary power; it is an assessment on the basis of best judgment. In other words, that assessment must be based on some relevant material. It is not a power that can be exercised under the sweet will and pleasure of the 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: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on had been supplied to it by the departmental representative. Next, it did not give any opportunity to the assessee to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result was that the assessee had not had a fair hearing. The estimate of the gross rate of profit 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,105 4,590,468 4,921,269 G/P Ratio 6.46% 6.62% 6.95% Net Profit 837,670 933,699 982,897 N/P Ratio 1.39% 1.35% 1.39% Signet Industries Limited [P.A.No.: AABCS 3489 F] Particulars A.Y. 11-12 A.Y. 12-13 A.Y. 13-14 A.Y. 14-15 Turnover 4,32,02,88,732 5,11,92,53,770 5,63,57,83,317 6,10,80,35,458 Gross Profit 24,99,07,205 53,01,16,534 68,71,62,395 88,23,18,576 G/P Ratio 5.78% 10.36% 12.19% 14.45% 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 accou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....VESTMENT IN DIAMOND JEWELLERY (Rs. 74,72,863/-) AND SILVERWARES (Rs. 49,77,460/-) AGAINST UNDISCLOSED INCOME: 5.1 In doing so, he erred in law as well as in facts in not telescoping the unexplained diamond ornaments and unexplained silverwares against undisclosed income offered for taxation by the assessee. Ground No.3 (A.Ys. : 2012-13) of revenue's appeals reads as under: ASSESSMENT YEAR :2012-13 3. On the facts and in the circumstances of the case the C.I.T.(A). erred in deleting the addition made on account of unexplained investment in jewellery of Rs. 2,68,86,366/-. 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. Valu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4430.42 3836.99 31,02,071 1382.98 2,81,06,048 b) Also, substantial jewellery was acquired by the assessee during marriage of his son, Shri Saurabh Sangla which was duly shown in the books of account of the family members and wealth-tax returns filed before the Income-tax Department. The details of which are as follows: Name of the family member Amount (Rs.) Asstt. Year Shri Mukesh Sangla 5,00,000/- 2006-07 5,00,000/- Shri Saurabh Sangla 39,48,124/- 2006-07 Shri Saurabh Sangla 1,80,891/- 2007-08 41,29,015/- Smt.Monika Sangla 53,32,523/- 2006-07 Smt.Monika Sangla 10,000/- 2007-08 53,43,523/- c) Ms. Avantika Sangla, the daughter-in-law of the assessee also acquired jewellery of Rs. 55,50,570/- and silver wares of 30.353 Kgs. Which was duly shown in her Income-tax Returns, the details of which are as follows : Asstt. Year Jewellery Silverwares 2005-06 - 1,82,706 2006-07 35,99,454 2,73,535 2007-08 6,75,070 - 2008-09 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vantika Sangla 155.61 137.86 8.25 Saurabh Sangla 1319.50 1053.95 270.14 Locker No. 357 363.77 331.25 87.60 Monika Sangla 1367.37 1210.46 371.68 Locker No. 434 1278.42 1090.62 388.20 3222.50 2814.95 733.63 3819.02 3301.49 1201.47 g) The assessing officer compared jewellery as per balance sheets of members of Sangla family with the value of jewellery found during search and brought the same to tax as undisclosed income of the assessee. The basis adopted by the assessing officer was absolutely illogical because in the books of accounts, the assets are stated at historical cost whereas in the Wealth-tax Return, the assets are stated at market rate on the valuation date. In fact, the comparison has to be on the basis of quantity of jewellery and silver wares found during search with the quantity of jewellery and silver wares as per Wealth-tax Returns. h) However, in the alternative and without prejudice submission, the assessee determined the value of unmatched diamond ornaments at Rs. 74,72,863/- and offered such unmatched diamond ornaments for ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and alternative submission. The unaccounted silver wares were determined at Rs. 49,49,402/-, which had been offered for taxation by the assessee in the Return of Income and the assessee sought to telescope the same against undisclosed income of the preceding years. The assessee's claim for telescoping was not considered. 71. The learned counsel for the assessee did not offer any undisclosed income on account of diamond ornaments because the carat wise weight of diamonds and grams-wise weight of net gold content as per Wealth-tax Return was more as compared to the carat wise weight of diamonds and grams-wise weight of net gold content found during search. Therefore, no addition on account of unaccounted diamond ornaments was warranted. The learned counsel for the assessee submitted that the assessee determined the value of unmatched diamond ornaments at Rs. 74,72,863/- as required by the A.O. and it is only as an alternative and without prejudice submission, offered such unmatched diamond ornaments for tax to be telescoped against undisclosed income of preceding years. It is submitted that addition should not have been sustained by the C.I.T.(A). on the basis of such alternative ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on a large sum as its undisclosed income, it cannot, at the same breath, say that these profits did not in fact exist because they did not appear from the company's books and could not, therefore, have been available for the payment of dividends. Among common men, such an attitude would be regarded as blowing hot and cold or playing fast and loose." (b) 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (f) 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 assessments of the previous years of the assessee were on the basis that he had earned larger income than what was shown and that he had in fact earned that income. That amount 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d and jewellery and silver-wares of Rs. 49,77,460/- in the A.Y.2012-13. The learned CIT(A) has deleted addition of Rs. 2,68,86,336/- for which revenue is in appeal. The assessee himself offered unmatched diamond ornaments of Rs. 74,72,863/- for taxation for the assessment year under consideration. The assessee also offered unaccounted silver wares worth Rs. 49,49,402/- for taxation. 75. We have gone the through the various details filed before us regarding jewellery items of various family members. We have also considered the alternate plea of the assessee and after considering all these aspects, we find no merit in the appeal of the assessee. The learned CIT(A) has rightly sustained the addition up to Rs. 74,72,863/- on the diamond ornaments. Similarly, the addition sustained on the silver wares was also justified as the assessee was having no explanation for the same. The assessee himself has offered the silver wares of Rs. 49,49,402/- in his return of income. Moreover, the assessee has disclosed the unaccounted income for the assessment year 2012-13 at Rs. 12,61,00,000/- in the statement recorded u/s 132(4) and the learned CIT(A) has made further addition of Rs. 9,43,55,415/-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ained 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. The Assessing Officer and the learned CIT(A) did not deal with the issue of telescoping. 77. Before us, the learned counsel for the assessee submitted that without prejudice to the above grounds of appeal and submission made by the assessee, Shri Mukesh Sangla and other group entities in respect of additions made on various grounds, 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....DALIAR 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 Incometax [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, therefo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. (c) 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, 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 clearl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arious 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 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. 80. In the assessee's case, t....