AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 276
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....ized indicating undisclosed income of the various assessee of this group. Notice under section 158BC was issued and served on the assessee. In response the assessee filed the return of income for block period declaring undisclosed income of Rs. 7,95,000/- which was assessed at Rs. 4,61,93,130/- after making addition on different account. However on appeal by the assessee the ld. CIT(A) deleted the all the addition made by the AO. Against which the Revenue is in appeal. 3. The Revenue has raised the following grounds of appeal: 1. The ld. CIT(A) erred on facts in holding that the assessee has earned only commission income in the admittedly unaccounted sales of 434 bags of jeera in January 2002, as evident from Annexure A-41. The ld. CIT(A) also erred in law in deleting the resultant addition of Rs. 20,42,331/-. 2. The ld. CIT(A) erred on facts in erroneously referring to the order u/s. 264 passed by CIT(Central)II, Ahmedabad, on the order u/s. 132B in this case and thereby holding that there was no sales proceeds of 506 bags of Isabgul for which the addition of Rs. 9,10,800/- was made. The order u/s. 264 nor the submission made during the proceeding u/s. 264 had not held or cla....
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....the addition of Rs. 1,45,260/- made on account of the excess stock of Trabuj seeds. 8. The ld. CIT(A) erred in law and on facts in deleting the suspended and protective addition of Rs. 1,41,90,841/- made on account of the unexplained and hidden stock of jeera of the assessee, disregarding and ignoring the fact that Police investigation in this regard is yet to be finalized. 9. The ld. CIT(A) erred in law and on facts in deleting the suspended and protective addition of Rs. 2,27,77,749/- made on account of unexplained stock of jeera of 3,20,814/- kg found during the search. 10. The ld. CIT(A) erred in law and on facts in deleting the suspended and protective addition of Rs. 1,20,06,548/- made on the basis of page 1 & 2 of the Spiral diary Annexure A-04 on which the key man of the group and the father of the assessee, Shri Virchand Shah had stated on oath that the figures noted in the pages are sales figures of the assessee. 11. The ld. CIT(A) erred in law in totally ignoring the sworn statements of the accountant of the group and of Shri Virchand Shah, father of the assessee, recorded during the search and post search enquires and thereby solely relying on some affidavits pr....
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....tion of the assessee. They are merely meant for intimation of the price of the goods and the amount so to be recovered almost all of these bills bear notings as to how much money has been recovered. The total of the sales made as detected in these bills to come to 434 bags of Jeera. The total sales proceeds of Jeera as reflected in these bills and as having been shown as collected in cash, come to Rs. 20,42,331/-. The assessee could not reconcile these sales transactions with any of its books of account. The sales proceeds discussed above are clearly unaccounted cash receipts of the assessee and the same warrants treated as undisclosed income. Corresponding purchases of these bills were not detected during the search. This is because of the obvious modus operandi of the assessee firm to destroy the evidences of purchases and sales, once they are squared up. Under the circumstances, the unaccounted receipts of Rs. 20,42,331/-, are prices of both cost factor and the undisclosed profit factor are taxes u/s. 158BB of the Act. 5.1 The AO on perusal of the above found that bills were not in a serial numbers, bills were not bearing the address, sales tax number or any other form of ident....
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.... 50 39 1638.19 434 It may please be seen that they are not the sale transactions but the Adat transactions and, therefore, such transactions would not be recorded in the regular books of accounts. Copies of seized Delivery Notes are enclosed which show that the assessee has earned commission only on the aforesaid 434 Bories" Thus, it will be appreciated that the above said seized papers represent the commission business of the assessee and such commission income has been considered by the assessee in total disclosure of the group cases of Rs. 24.85 lacs. In view of the above position the addition made for the alleged unaccounted sales of Rs. 20,42,331/- as appellants income from the sale of Jeera is unjustified and unaccounted." 7. The ld. CIT(A) after considering the submission of the assessee deleted the addition by observing as under: I have looked into the assessment order and have considered the contentions put forth on behalf of the assessee. I find that except the alleged logical interpretation on which the addition is based nothing has been brought on record to conclusively establish that the assessee has sold Jeera on his own acc....
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....reconciliation sheet made available by the appellant, and in the commission offered to tax by the assessee, as such no any enquiry carried out from the parties to assessee claimed to have sold goods on commission basis. Therefore, in the absence of contrary finding and since the assessee has filed the reconciliation of the entries with that the name of the parties, we inclined to agree with the categorical finding given by the CIT(A). 10.3 Therefore, in view of the above discussion the contention of the ld. DR that instead of commission income the entire sale proceeds is to be added fails on merits and in law. Hence the ground of appeal of the Revenue is dismissed. 11. The second ground is that the ld. CIT(A) erred in deleting addition of Rs. 9,10,800/- on account of unaccounted sale by holding that there was no sale of 506 bags of Isabgul. 12. It is derived by the assessing officer that the assessee has sold 506 bags of Isabgul without recording the sales proceeds of this commodity and thereby a sum of Rs. 9,10,800/-(506*75*24=910800) being the price of the goods is added as unaccounted sales of Isabgul. The impugned unaccounted sale was calculated based on the seized document ....
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....od 01.04.2002 to 6.6.2002 has not been considered while working out the booked stock of jeera on the date of the search. The assessing officer in his remand report as per direction of the undersigned has considered this aspect and after taking into account the claim of the assessee has worked out the closing stock....." 14.3 Extract from the second para of page 9 of order dated 26-06-2002 u/s. 264 "ISABGUL In the petition u/s. 264, it is claimed that purchases made from 5 farmers from 8.6.2002 to 11.6.2002 as per page 7 of the petition u/s. 264 have not been given credit while working out the profit. The A. O. in his verification report submitted to me that during the course of search 278250 kgs of Isabgul was found and seized. There after 30381 kgs and 89475 kgs of Isabgul have been released u/s. 132B order dated 21.10.2002 and 9.12.2002 respectively. The book stock as on 5.6.2002 is verified to be of 209748 kgs and after adding further purchase between 8.6.2002 and 11.6.2002 the same is worked out to 323913 kgs. 278250 kgs of Isabgul were found on the date of search. Since, the verified booked stock as per the A. O. is worked out to 323913 kgs as against the Isabgul found on....
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....t of the books with reference to the seized material. The learned Departmental representative vehemently submitted that there is no mistake in the order of the assessing officer. We have carefully considered the rival contentions and considering the facts as stated above, we concur with the finding of the CIT(A) on this aspect and dismiss this ground of appeal of revenue on the basis of the reasoning that before CIT(C) -II the assessee has reconciled the quantity, given the details of the farmer whose goods are lying, the stock is duly reconciled in the paper book filed before us and the balance stock as argued before us are covering the adat commission disclosed in respect of the quantity of goods that alleged to have been sold as sale made on behalf of farms and the quantity of the goods lying with the assessee even on the date of search thus, the fact that the assessee is engaged in the business of adat commission and vachyati sale the sale computed by the assessing officer without any reference to the seized material and therefore, we find no merits in respect of this addition made the ground of appeal of the department dismissed. 18. The third ground of the Revenue appeal is ....
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....ition is purely based on the statement of an accountant namely Shri Mahindra Patel, that transaction pertains to F. Y. 02- 03. The statement that the department is relying is retracted. The appellant has already disclosed the adat commission on the undisclosed quantity of the commodity jeera which also cover the entries in seized material being Annexure A041 and therefore, the finding of the AO is erroneous and finding of the CIT(A) is correct based on the facts available on record. 24. We have heard the rival contention of both the parties and perused the material available on record. Admittedly the addition of Rs. 20,98,000/- for unaccounted sale of jeera weighing 23320 kg was made by the AO on the basis of admission by the accountant of the assessee which was deleted by the ld. CIT(A). The CIT(A) has given a finding that as the statement relied upon is retracted and assessee has earned commission income out of such sales which would be covered in the total disclosure by the group. 24.1 We have also gone through the content of the affidavit filed by Shri Mahendra A. Patel. The affidavit filed states that they did not have the correct facts on hand have requested to call for the....
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....es not entered in the books of account of the assessee, and the view of the CIT(A) that the stock was belonging to the farmer is untenable. 26.1 The assessing officer during the course of assessment proceedings based on seized material found out that the assessee had purchased 15,371 bags of Jeera as detailed below: Bags in number ( i ) Purchase bills appearing in Annexure A-29** 6655 ( ii ) Purchase bills appearing in Annexure A-27** 4972 ( iii ) Purchase bills appearing in Annexure A-39** 1332 ( iv ) Purchases clearly marked as "Vyapar Khatu" in Annexure A-22 2412 Total number of Bags 15371 26.2 The assessing officer further observed that the 15371 bag of jeera weighing at 845405 kgs of Jeera whereas the appellant had recorded purchase of jeera at 277530 kg only. Thus balance 567875 kg of jeera have remained unrecorded. The accountant of the assessee also admitted in statement recorded under section 132(4) that many purchases were not recorded in the books of account. The AO worked out the value of unaccounted purchase at Rs. 4,03,19,125/- by taking average cost of jeera at Rs. 71 per kg. The AO treated the same as unexplained investment in purch....
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....rade was of 15371 bags or 845405 kg. Out of this, the assessee was seen to have above unrecorded quantity of 567875 kg of Jeera which was valued at Rs. 4,03,19,125.00 and added the same after setting off the amount ( Rs. 41,41,131.00) of unrecorded sale (Rs. 3,61,77,994.00) to the total income of the assessee. 27. Aggrieved assessee preferred to appeal before learned CIT(A) who deleted the addition made by the AO by observing as under: 7.2 I have considered the assessment order and the above submissions made on behalf of the appellant and also the chart submitted by the appellant which shows the correct amount of purchases based on the seized material. It seen that as explained by the assessee, if the duplications etc.. are excluded the assessee has purchased 5S79 bags and that these bags are duly recorded in the books. This positions about and duty recorded begs in the books has also been accepted in the proceedings u/s. 264 when the CIT has observed that : "The A.O has re-verified the claim and accordingly worked out the book stock as on 05.06.2002 as 227053 Kgs. Accordingly, the excess stock on 05.06.2002, with reference to the book stock as verified above even after consid....
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....proceeding which were also discussed in the preceding paragraph in this order, where in the assessing officer has also filed a detailed remand report. We have persuaded all these arguments, finding recorded in the assessment order and finding of the CIT(A) in his order. So far as the reconciliation of the quantity found and recorded in the books with that of the disclosure has been reconciled. 31.1 The main grievance in this ground raised before us that the purchase price of 5,67,875 kg of jeera are not entered in the regular books of accounts. Whereas, the quantity as disputed has already been reconciled and shown to us that the same is accounted. As the difference in quantity was on account of duplicate entries for same bags of jeera in different seized material. The income being vachayati sales commission on those bags of jeera also covered under discloser of unaccounted income made by the assessee and assessee groups. Before us, the ld. DR has not brought any new evidence or arguments to controvert and the reference to remand report u/s 264 against that no independent enquiry is also conducted during the assessment proceeding and thus, the finding of the CIT(A) is also based o....
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....r to be the alleged unaccounted purchase of 2436 bags. The value as derived for this purchase comes to Rs. 38,76,894/- out of that AO has considered 506 bags unexplained sales of Rs. 9,10,800/- and balance amount of Rs. 29,66,094/- as unrecorded purchase and added to the income of the assessee. In this regard we have discussed the finding at para 12.2 that the book stock is more than the goods found. Even we have considered the finding of the CIT(C)-II that the goods were lying are of the farmers as per remand report of the assessing officer submitted in that proceeding. As discussed in para 12 there is no reference to the seized material that these goods are purchased out of the books, on the one hand CIT(C)-II has accepted the assessee is in possession of the farmer stock and AO himself sent a remand report to the CIT( C )-II in the matter and the extracted portion has been reproduce at para 9 above for the sake of understanding the facts. Even while making the addition there is no specific finding about the reconciliation statement submitted by the assessee and departmental representative before us not placed any contrary facts or finding. The AR of the assessee that no enquiry ....
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....artment brought any contrary material on record we concurred the view of the CIT(A) and the ground of the department that the assessee has unaccounted purchases of 2436 bags out of the book fails on facts in absence of any evidence and the against the finding and the same is dismissed. 34. The ground no. 6 of the department appeal is on account of the excess stock of 6 bags of Isabgul found which has been deleted by the CIT(A) considering the facts presented before the CIT(A). 35. The assessing officer is of the view that unrecorded purchase of Isabgul was 1930 (see table at 14.2 ) whereas the excess stock of Isabgul was found at 1936 thus, there is difference of 6 bags which was in the opinion of the assessing officer is required to be added under section 69 of the Act. Since, we have considered the detailed reconciliation of the stock of the commodity Isabgul and relied upon the finding of CIT(C)-II recorded at para 9 and at point no. 14 and 15 above we do not find any force in the argument of the department. Before us there is no contrary facts presented by the department and even the CIT(A) has given a detailed finding about the quantity of this commodity and considering the ....
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....ed by the assessee on "Vasiyati Mal" for commission account. The details of the goods of the farmer were lying with the AO since 2003 and the order is passed in 2004 nothing is contrary finding given on the fact that the goods were of the farmer even though the details of the farmer in the form of confirmation filed before CIT(C)-II filed for similar reasons as stated in the case of Jeera, Isabgul the addition is uncalled for. 36.6 Based on the above facts we find force in the arguments of the assessee and finding of the CIT(A) we do not find any inconsistency and in the absence of any contrary material placed before us we do not find any irregularity in the finding given by the CIT(A). Therefore, this ground of appeal that the tarbuj seeds stock is excess stock of the assessee, raised before us is fails on merits and the department has already accepted the fact that the assessee is engaged in the sale of goods on commission, we hold the decision of the CIT(A) is on finding of facts and we do not wish to consider the grounds of the department in absence of any contrary evidence and DR has merely relied upon finding given in the assessment order. In the light of the stated facts th....
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....and the investigation was started in the matter. It is stated by the assessing officer that from the said godown 594 bags of Isabgul, 30 bags of Jeera and 142 bags of cattle feed were found which was much less than statement of Shri Virchand Shah dated 17-5-2002. He has therefore, took a view that the assessee might have removed the stock and might have kept in another godown which could still not be recovered by the search authorities. 38.3 Therefore the stock of 199871 kg of Jeera valued at 1,41,90,841/- is treated as excess stock removed and kept hidden which is taxed u/s.69 of the Act by the assessing officer and the addition was suspended for the reason that the stock is part of the result of the unaccounted purchases quantified and taxed separately. 38.4 In this matter the arguments of the assessee is that the door were sealed on 12.6.2002 in the presence of the witnesses and that the police inspector, Unjha police station, Unjha was also requested to protect the said seal on 12.6.2002. No stock taking was done but the premises were simply sealed. It was only on 18th June, 2002 the said godown was opened and although the ADI happened to be knowing that there was a Press Rep....
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....stated that they have proved with the forensic report that the seal is not tempered. Thus, the AR argued before us that no addition could be on the basis of such presumptions which are not supported by any proof. On the contrary the department representative vehemently argued and relied upon the finding given in the assessment order. 38.7 We have persuaded the rival submissions, and finding given in the assessment order and the finding on the CIT(A). The Assessing Officer in the order and the department representative before did not bring on record any new argument or evidence to conclusively establish that any goods were removed from the godown except for the allegations contained in the assessment order. This allegation is not based on any evidence or recording any statement of any witness thus, the arguments are unsupportive and based only on the presumptions and assumptions. Department has not brought any evidence which conclusively proves on record that the assessee has removed the stock from the godown. 38.8 During the course of search itself certain allegations were made by the Departmental officer there is no reason not to believe the claim of the assessee that nothing wa....
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....ssessing officer we have extracted the arguments of the assessing officer made as per para 5.2.3 of the assessment order here in below: Extract from Page 3 of the assessment order, last para reads as under: "PURE TRADE OF JEERA: As briefly discussed above, your procurement of 15371 bags of Jeera from 01/04/2002 till the date of search, has been proven with documentary evidence during the search. On verification of your regular books, it is seen that you have recorded the inward of only 57046 bags or 277530 Kg in this count. It is further seen from the seized sale bills that you had not recorded the sales of 5833 bags or 320815 kg in your regular books. In the loose paper file Annexure A-41, it is also seen that some sales pertaining to January 2002, totaling 434 bags, had not been recorded anywhere in your closed books. Under the circumstances combined stock position of all your 3 concerns on the date of search will be as under: Narration Recorded [kg] Unrecorded [kg] TOTAL [kg] Book stock on 31-3-2002 Add: purchases 190631 277530 - 567875 190631 845405 Total 468161 567875 1036036 Less (1) Sales ....
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....elonging to any other person. (B) None of the gunny bags bore any identification mark to even distantly suggest the ownership of the stock. (c) During the search not even a piece of paper was found which indicated the arrival or custody of this stock. (d) It is virtually impossible to believe that the assessee, its employees and associates had kept the full data regarding the farmers and their quantum of stock in memory and had reproduced the data, from their memory, during the post search enquiry and 132B proceedings. (e)The assessee has not recorded anything regarding this stock in any of its books or even in any of the seized papers. (f) The unaccounted trade of the assessee is evident in the "Vepor Khatu" in the diary identifiable as A-22. (g) Even while presenting a list of farmers and their so-claimed stock, during the revocation proceedings on 17-6-2002, the assessee could not identify as to which part of the stock belonged to which former, Under the circumstances, the actual stock found in excess of the book stock of the assessee represents its unaccounted investment taxable u/s.69 and assessable u/s.158BB. 39.4 The undisclosed income quantified in this regard,....
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....en for deleting the suspended and protective addition of Rs. 1,20,06,548/- ( in fact the figure as per assessment order it is Rs. 1,20,06,368/- and thus we have taken and decided accordingly) made on the basis of page 1 & 2 of the spiral diary Annexure A - 04 on which the key man of the group and the father of the assessee Shri Virchand Shah had stated on oath that the figures noted in the pages are sales figures of the assessee. In ground no 11 the department has stated that CIT(A) has ignored the sworn statements of the accountant of the group and thereby solely relying on some affidavits prepared by these persons negating their earlier depositions under oath. 40.1 These are the additions made under section 68 and 69C and assessed in the assessment order u/s 158BB of the Act. The breakup of this addition as is made on page 20 of the assessment order is reproduced here in below for the sake of brevity of the amount and its nature. Unexplained cash credit Rs. 1,15,00,000/- Unexplained interest Rs. 3,35,572/- Unexplained cash credit (Kishore) Rs. 1,60,000/- Unexplained interest (Kishore) Rs. 10,796/- Rs. 120,06,368/- 40.2 Before us the authorized representativ....
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....is connection the appellant referred to the following explanation furnished to the assessing officer: "In this connection, reference to para 2 of our letter dated 15.4.2002 is invited. In this para, it is submitted that this annexure contain some papers with no details and that the assessee did not recollect as to who and for what purpose the said writing was made. It was also submitted by Shri Virchand D. Shah in the said letter that the writing on page nos.1 & page no.2 was either in single digit or in double digits and in decimal and that it was too much to say that the said single digit figure represented the amount in lacs. The assessee further submitted that he has not obtained any cash loan of Rs. 70 lacs or Rs. 40.75 lacs as alleged. Statement of Shri Virchand D. Shah was recorded u/s.131 on 18.7.2002 and the question Nos. 5, 6, 7 & 8 are in respect of those amounts, written on a dumb paper. He stated that though he did not recollect anything, but the figures might be related to the sales. If those papers are related to the sales during the course of business, the assessee might have purchased some goods or sold some goods and the papers might be related to those purchase....
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....he assessee group." In the course of hearing the appellant further stated that a cursory glance at the figures mentioned on the said pages 1 & 2 would show that there is nothing in these figures to even indicate that it represent cash received by the assessee. The alleged de-codification of the interest of Rs. 3,35,572/-. It may be pointed i out that there is nothing in the seized material even to presume that Interest and such interest of Rs. 3.35,572/- was ever received by the assessee. Similarly there is nothing about the unexplained cash of R5.1,60,000 in the name of one Shri Kishorebhai and the unexplained interest of Rs. 10,976 in the name of Shri Kishorebhai. Therefore, on that score alone no addition is called for. In this regard reliance is placed on the following decisions : i. Ashok Kumar Rastogl v. CIT (1991) 100 CTR 204 (All.) ii. Ajpalsingh Ram Avatar v. ITO (1991) 39 TTJ (Del) 544 (ITAT Delhi bench) iii. ACIT v. Prabhat Oil Mill (1995) 52 TTJ 533 (Ahmedabad Tribunal) iv. Addl. CIT v. Lata Mangeshker (1974) 97 ITR 696 (Bom.) Without prejudice to the above, it may be specifically pointed out that these interests are disallowed invoking the provisions of s....
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....discharged. d) On these grounds it was held that the Department had completely failed that the assessee had made any unexplained investment during relevant year out of that money so borrowed all the investment and stock found has been duly reconciled and there is no portion of the assesse that has been deemed to have been acquired out of this cash credits. e) The assessee has stated that he had not written that paper and that he did not remember/recollect as to for what purpose and who had written that paper. f) He also stated that it is possible that it might be related to the sales. g) The moment the interest expenses are added invoking the provisions of section 69C it is established that the Assessing Officer is satisfied that these represent the expenditure incurred by the assessee which is not recorded in the books of account, than the position in law would be that the alleged unexplained credits are also accepted to be genuine by the Assessing Officer then only the question of payment of interest would arise. It is not that the expenditure is claimed and therefore, disallowable. h) It may also be perused from assessment order that there is not a word in this referen....
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.... between the three assessee's irrespective of the fact that the purchases had been effected in the case of the assessee only and ground no. 13 is in relation the findings of the CIT(A) directing that the undisclosed income of the group of assessee shall be apportioned equally between the three assessee even though the assessee or his associates could, at any point of time, identify or part of trade as belonging to the other concerns. 42. In respect of this issue the AR of the assessee vehemently argued before us that the addition is in respect of the all the three concerns and the stock has been accepted to have been reconciled considering the three firm as group and accordingly, he has accepted the books stock and accordingly he has considered the various reconciliation of commodities of stock of the group. Now while making the assessment, he cannot take a different stand that the income is of one particular assessee, when the finding of the fact that all the three concern were part of the group and have been doing the business and there is no contrary finding that is available the benefit of the apportionment of the addition is given to the group of assessee operating in the gro....