TaxTMI 
TaxTMI 
2022 (2) TMI 276
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....e search, various documents were found and seized 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 submi....
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....f the real facts of the trade. 7. The ld. CIT(A) erred in law and on facts in deleting 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, ....
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....mption that the assessee had been doing totally unaccounted trade and also was destroying the bills or the counter foil so issued. These seized bills are not bearing the address, sales tax number or any other form of identification 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 an....
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.... xerox not available 18.1.2002 Kantibhai Jivram 39 50 2392.42 18.1.2002 Choksi Dahyalal Vadilal & Sons 42 4 211.42 18.1.2002 Patel Vasantkumar Tulsidas 47 37 1655.56 18.1.2002 C.R. Enterprise 49 45 2185.76 18.1.2002 Mukeshkumar Vishnuprasad 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 a....
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....e goods on commission basis and the assessee has offered the commission income received on sale of 434 bags of jeera. 10.2 Before us nothing has been brought on record by the ld. DR to conclusively establish that the assessee has sold Jeera on his own account and not on commission basis. No any defect pointed out in the submission and records such as 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 ba....
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....ra and also castor seeds and Isabgul belonging to them. In the petition u/s. 264 dated 22.02. 2003 it is stated that confirmation letters giving details of vehicle number which head transported the woods claimed to be belonging to the farmers, proof of ownership of land etc. were submitted to support the claim that the goods belonging to farmers as discussed above. It was also claimed that 15743 kgs. of jeera purchased in the period 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 a....
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....l of the assessee. 15. Being aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. 16. Both the ld. DR and AR vehemently supported the order of the authorities below as favorable to them. 17. We heard the rival contention of both the parties and perused the material available on record. We have persuaded the reconciliation of stock and seized material. The DR did not draw specific evidence for sale of this 506 bag sale of Isabgul out 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 be....
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....on commission's basis. The AR of the assessee also submitted that whatever undisclosed commission income is offered is not disputed. Therefore, merely on the statement of the accountant believing that it is unaccounted sale is incorrect and the alleged sale is covered in the three group concerns and therefore, the grievance of the department is addressed. 23.1 The AR of the assessee vehemently argued that while making the addition the department has taken a stand that the addition 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 basi....
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....ntered in the regular books of accounts as unexplained investment in purchase of jeera u/s. 69 of the Act. 26. The figure of the addition is worked out considering the total of jeera recorded as purchase and by reducing an amount which is already taxed as unexplained sale dealt with in ground no 1 & 3. Thus, the figure of total alleged jeera purchase at Rs. 4,03,19,125 less Rs. 20,42,331/- (Ground no. 1) and Rs. 20,98,900 ( Ground no. 3) comes to Rs. 3,61,77,994/- is added as purchases 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....
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....468161 567875 1036036 Less : (1) Sales 320815 23320 344135 (2) Unrecorded sale of Jan 2002 deteced in A041 to be reduced from the book stock of 31.3.2002 23870 23870 Net stock 147346 520685 668031 26.4 The actual stock of Jeera found on the date of search was of 468160 kg as against the accounted book stock of 147346 kg. 26.5 The assessing officer further on page 23 of his assessment order after considering the show cause notice and replies filed by the assessee considered that the total purchases by the assessee during the year for trade 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 ....
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....sessment order 15371 Less : Stock duly recorded in books of accounts and verified by CIT in proceeding u/s. 264 of the Act (Pg 22 of CIT(A) order ) 5879 Balance 9492 Less : Duplication / Triplication as per Annexure A/27, A/29, A/15, & A/39 9492 Un accounted stock NIL 31. We have heard the rival contention of both the parties, have gone through the reconciliation statements and material placed before the assessing officer and before CIT(A) and a reconciliation statement filed before us. Also perused the finding in the order passed under section 264 by ld. CIT for release of seized goods before the assessment 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. ....
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.... been taxed in para 5.2.1(b) above. In the same manner as discussed in detail in the case of Jeera above, the sale proceeds need to be treated as having been reinvested in the procurement of unaccounted stock of Isabgul. Hence the effective addition on this count as unexplained purchase of Isabgul will be (3876894 - (910800) = Rs. 29,66,094/-. 33.1 The assessee stated that originally the AO had issued show cause notice proposing to make addition of Rs. 80,81,114/- on this Isabgul commodity. Thereafter, as tabulated in 12.2 para while considering unaccounted sales a table is extracted from the assessment order which was in the opinion of the assessing officer 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 as....
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....ing of the CIT(A) is in accordance with the material placed on record. The point of the AR of the assessee that the CIT(C)-II has already given his finding based on the remand report of the AO ( see para 9 above ), even the details of the farmer whose commodity is lying as confirmed by placing their confirmation have not been contradicted even though this details were placed well in advance in 2003 and the order is passed in 2004. The absence of the enquiry and reconciliation of statement coupled with the overall disclosure made by the assessee we are of the considered view that the addition deleted by CIT(A) has no error of facts. We have considered the rival submission and in the absence of the department 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.....
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....n para 11.1 on page 30 of his order he has stated that " I have looked in to the assessment order and have considered the contentions put forth on behalf of the assessee. For similar reasons as discussed above while dealing with the addition for the stock of Caster seeds, Isabgul etc. I hold that there is no justification for making the addition of Rs. 1,45,260/- as the goods belonged to the farmers received as Vaisiti Mal. It is deleted." 36.5 We have also gone through the submission made by the assessee before the CIT(A) where in the assessee has contended that the assessing officer has added a sum of Rs. 1,45,260 for the excess stock of trabuj seeds. The stock involved is 16,140 kgs. The same belongs to the farmers received 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 ab....
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....er took a view that the part of the stock could not be found during the search." 38.1 The next argument of the assessing officer is that the assessing officer given contradictory statements about the godowns and its location where in the goods were stored for the three concerns of the group. The assessee has not disclosed the godown No.6/B and 300 of APMC and Kamonia Para. It has been stated that in the Financial Express of 17th June 2002 it was reported that seal put by Incometax Department was systematically removed and the goods were taken out. 38.2 During the course of search proceeding the statement of Shri Virchand Shah had recorded wherein he stated that about 2000 to 2550 bags of Jeera, Isabgul etc. were kept in the said godown, FIR was launched with the Police 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 ....
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....n of any fresh welding made in the hinges of the doors. (b) The color of the hinges of the doors was same. 38.6 It was therefore, stated by the assessee that there was thus no proof of any depressing with the sealed premises as alleged by the ADI. He had launched the FIR only on the basis of hearsay and without any proof and merely based on some news reported in the news paper. The AR pointed out that the authorized officer had not taken stock of goods lying in godown before making seal which they have done. Thus, he has not counted the stock before recording the statement. In the circumstances, how the department can allege removal of stock which are not found in godown before making seal. There is no basis supported on the argument placed on record by the department and the assessee 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 fin....
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....any adjustment that figure too and there is no contrary finding placed on record in the assessment order and thus based on our finding on the various additions made on account of item jeera we find no force that the assessee is still having unexplained and hidden stock of jeera to the extent of Rs. 1,41,90,841/-, therefore, we find force in the finding of the CIT(A) on this point and looking to the arguments and evidence we also confirm the views of the CIT(A) on this issue and dismiss the ground raised by the department failing on merits. 39. The next ground of appeal before us is for deleting the suspended and protective addition of Rs. 2,27,77,749/- made on account of the unexplained and hidden stock of jeera of 3,20,814 kg found during the search. 39.1 In order to understand the arguments of the assessing 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 w....
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....Stock: 463828 Stock found during course of search in various godowns 468160 Excess stock covered under disclosure 4332 From the above, it may kindly be noted that excess stock of 4332 kgs valued at Rs. 70 per kg. at Rs. 3,03,000 has been covered under disclosure." 39.3 The argument of the AR before us and before the learned CIT(A) was that the huge difference as per the working of the AO was for the reason that he did not consider the accounted for purchases and also that he did not consider the stock of farmers lying with the assessee. The assessing officer has, however, in para 5.2.3 of the order stated that the plea of the assessee that the stock belonging to farmers was lying with him was after thought on the following grounds as observed in the order of the CIT(A) on page 35& 36: (a) During the search, the assessee and its associates had consistently clarified that it was not keeping any stock belonging 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 p....
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....hat the forensic report clearly establishes that the there is no tempering of the seal and the statement made by the assessee and their relative and staff with that of the quantity mentioned is not exactly matching. In fact, the quantity found in the questioned godown much more than mentioned the quantity mentioned in the statement. Had it been the case of the department than the quantity given in the statement may be matching exactly or in shortage whereas, the quantity found is much more than what is mentioned in the statement. Thus, looking to these two aspects and as quantity of the item jeera is already reconciled and for the reasoned mentioned the same is dealt with the other grounds in this appeal and thus, we do not find merit in the grounds placed before us that the CIT(A) has erred 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 fails and the same is dismissed. 40. The next ground no. 10 & 11 of the appeal before us are co-related to each other and is taken for deleting the suspended and protective addition of Rs. 1,20,06,548/- ( in fact the figure as per assessm....
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....9 10 ----- 25/11 10796 Int. 31/3 70 3.35572 15 19 It is stated by him that the appellant could not offer any worthwhile explanation. It is stated that in the statement u/s. 131 Shri Virchand D Shah recorded on 18/07/2002 he had stated that it may represent the sales. The notings against "Kishore" might be cash transactions. It is stated by the Assessing officer that the transactions can be easily de-coded on the basis of notings of page no.1 a figure 3.35572 identifiable as interest needs no further interpretation and he has recognized it as Rs. 3,35,572/- therefore according to him a total of the page no.1 can be established Rs. 70,00,000/-+ Rs. 45,00,000/ being un accounted cash loans taken by the assessee and the amount of Rs. 3,35,572/- represent interest paid thereof. Accordingly these amounts are held to be taxable u/s. 68 and 69C respectively. It is stated by the assessing officer that however, this amounts are identified as undisclosed income for which the addition is suspended on account of composite addition made for the unrecorded purchases. ....
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....handwritings of any other partner or any other connected persons. Initial burden lying upon the assessee, was thus discharged. On these grounds it was held that the Department had completely failed that the assessee had made any unexplained investment during relevant year. In our case also 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. He also stated that it is possible that it might be related to the sales. Our case is further supported by the Ahmedabad Tribunal decision in the case ACIT vs. Prabhat Oil Mill (1995) 52 TTJ 533 in which also it was held that mere entries in the account of a third party is not sufficient to prove that the assessee had made sales outside books of account. The Ahmedabad Tribunal has relied on the Bombay decision in Addl. CIT vs. Lata Mangeshker (1974) 97 ITR 696 (Bom). In this view of the matter, it is submitted that the amounts totaling to Rs. 1,12,35,000/- are not the cash transactions pertaining to the assessee and that they are not written in any books maintained by the assessee and, therefore, no addition u/s.68 r.w.s. 1588B requires to be mad....
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....s unexplained income in the form of cash credit and unexplained expenses. In view, of what is stated hereinabove, there is no justification to hold that a sum of Rs. 1,20,06,368 is otherwise taxable in the hands of the assessee in light of the provisions the Act; the question of suspending the addition does not arise. I have considered the contentions put forth on behalf of the assessee. I find enough force in the assessee's argument that there are nothing in the records to even indicate that it represents cash received by the assessee. Therefore, the question of taxing the same as cash credit simply does not arise. Similarly there is no justification in making the addition of Rs. 3,35,572/- invoking the provisions of section 69C of the IT. Act because there is nothing in the assessment order to justify the addition as the expenditure itself is not established. I therefore hold that there is no question of suspending the additions held by the Assessing Officer. These are deleted. " 40.3 Before us, the authorized representative have argued that a) The page seized did not belong to him b) It was not in his handwriting or the handwritings of ....
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....tings are recorded with date in the coded figures and thus the figures are related to unexplained cash credit and interest there on. He has not placed any further arguments or material before us and vehemently relied upon the order of the assessing officer and forcefully raised the contentions and stated that the addition be confirmed on the basis of the stated facts. 40.5 We have considered the rival submissions and material placed before us. We do not find any inconsistency in the finding of the CIT(A). The AR has relied upon the decision of the Ahmedabad bench decision and raised various points as noted in point no. 20.3 above and the points of the arguments placed before us by the DR. We considered the findings of the CIT(A) is the finding of the facts and in law and DR has not pointed out any single defects in the findings of the CIT(A). Considering the arguments of both the side we find force in the arguments placed by the AR of the assessee and finding of the CIT(A) and thus looking to the overall arguments of the both the sides we inclined to accept the findings of the CIT(A) and dismissed both the grounds of appeal of the department on facts and in law. Thus, Grounds No....