TaxTMI 
TaxTMI 
2022 (3) TMI 151
X X X X Extracts X X X X
X X X X Extracts X X X X
....ales made to M/s. Hari Iron India Ltd. 4,84,675/- 1259/Del/2018 2011-12 Undisclosed income on sales made to M/s. Hari Iron India Ltd. 4,96,572/- 1260/Del/2018 2012-13 1. Undisclosed income on sales made to M/s. Hari Iron India Ltd. 5,27,142 2. Undisclosed Income on sales made out of Books on the basis of information received from Excise Department 9,39,813/- 1261/Del/2018 2013-14 Undisclosed income on sales made to M/s. Hari Iron India Ltd. 5,91,847/- 1262/Del/2018 2014-15 Undisclosed income on sales made to M/s. Hari Iron India Ltd. 2,66,423/- Assessee has also taken ground no.14 to allow claim of brought forward depreciation 59,38,469/- RATHI BARS LIMITED ITA No. Assessment Years Addition made by the Ld. AO Amount (in Rs.) 1162/Del/2018 2009-10 Undisclosed income on sales made to M/s. Hari Iron India Ltd. 77,54,676/- 1252/Del/2018 2010-11 Undisclosed income on sales made to M/s. Hari Iron India Ltd. 8,83,084/- 1253/Del/2018 2011-12 Undisclosed income on sales made to M/s. Hari Iron India Ltd. 3,13,433/- 1254/Del/2018 2012-13 Undisclosed in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urce of income. Ans. I am deriving income from business of trading of cement and steel. Apart from these, I also get rental income in the form of interest from savings. Q.7 Give details of assessment particulars of company / concern you own. Ans. I don't own any company. Neither I am director of any company. I work in Hari Iron (India) Ltd company in the capacity of chief operating officer. I draw salary of Rs.One lakh per month. Q.14 Please give details about the nature of business of the company Hari Iron (India) Ltd. Ans. M/s Hari Iron India Ltd. is a channel development partner of M/s Lafarge Cement Ltd. for Gurgaon and Mewet district taking care of the dealers and motivating them for enhancing the sale. Apart from this we are the distributors of Rathi Steel and maintain their dealers end motivate them to enhance sales. We are also responsible for enhancing sale of Monnet Ispat Ltd., for Lafarge Cement Ltd. and Monnet Ispat Ltd. we are sole channel partners of these two companies. Q.24 What is 'W' and do you deal in 'W'? Ans. 'W' is without bill it refers to transfer of good without bill. When a client approache....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce, you are requested to explain why suitable additions arising involving such sales should not be made to your total income. You are further requested to file ledger of Hari Iron (India) Ltd. as appearing in your books of account for the relevant previous year." 6. When this was confronted to the assessee by the AO in the show-cause notice dated 23.12.2016, assessee gave its detail rebuttal and given its reply vide letter dated 27.12.2016 which, for the sake of ready reference and assessee's explanation, is reproduced as under :- "On behalf of the above captioned assessee, we acknowledge the receipt of the above notice and in this regard, we hereby submit that the assessee company has made sales to M/s Hari Iron (India) Ltd during these years under consideration, however all the sales made by the assessee company has been properly booked in the regular books of accounts and no any sales have made by assessee company to the said party or any other party that has not been recorded in its books of accounts. Further, in this regard, we hereby submit that assessee is required to prepare various records as per the Sales Tax Law as well as Excise laws prevailing and all the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r confronted with any of the directors of the assessee company except of the following questions asked during the course of search from Sh. Anurag Rathi stated as under :- Q. Do you know Mr Amit Gupta? How is he related to your Business? Ans He is a distributors of M/s Rathi Bars Ltd. and M/s Rathi Special Steels Ltd. in North India. Q. How do you deal with Mr Amit Gupta in business and /or business activities? Ans. Mr Amit Gupta is a distributor of my companies. From the perusal of the above, your goodself will find that directors of assessee Company were never confronted with the statement given by Amit Gupta during the search proceedings as well as post search investigation and it clearly proves that even the search team does not found the statement of Amit Gupta reliable and realistic. In view of the above, we again submit before your goodself that all the sales made by the assessee company has been duly recorded in the books of accounts and the assessee company has not made any sales without bills i.e. outside books of accounts and therefore, no any adverse inference should be taken against the assessee company in this rega....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng clear evidences of sales out of books. Thus, the statement of Amit Gupta is getting corroborated with the seized material also. Hence it is held that the assessee has shown only 70% of its sales to M/s. Hari Iron India Ltd. and at least 30% of the sales remained outside the books, on which the assessee has suppressed its income. The assessee has also held as suppressed its capital which was used for affecting such unaccounted sales income arising out of such sales as well as capital deployment is being calculated as under :- Asst. Year Sales to Hari Iron India Ltd. recorded in books (A) Sales remained out of books (B) [A x 30%/70%] Profit earned (taking N.P. as disclosed in regular books for relevant previous year (C) Total Sales made during the year (D) Capital Employed (including share premium) (E) Undisclosed Capital (F) [B/DxE] 2009-10 13,05,95,264 5,59,69,399 3,63,801 258,89,40,790 34,18,74,995 73,90,875 Thus, total addition on account of undisclosed capital and income arising out of sales comes to Rs. 77,54,676/-." 8. For the sake of ready reference, the addition made by the AO in the case of Rathi Special Steels Ltd. f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A/143(3) of the Act for the instant Assessment Year and the facts available on record for the year under consideration. The grounds are disposed off issue wise as below. The findings are as below- Action u/s 132 was undertaken in respect of the appellant assessee on the assessee & its associates, on 2010112015. It has been contended on behalf of the appellant that- "Because no incriminatory materials/documents/ information's were found and the assessment u/s 153A were made without any seized material and documents found during search, the addition made were outside the search materials as fresh assessment or reassessment are against the -provision of section 153A of the Act itself as such the assessment passed making additions outside search materials changing his opinion from the earlier orders passed by the Department is illegal and bad in law." The issue of existence of incriminating material has to be considered in totality. The assessee cannot hide behind seizure or non seizure of documents. The same has to be construed with the trade practices and the expected action on part of an independent entity in normal circumstances. The AO and this appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave been made by assessee company to the said party or any other party that has not been recorded in its books of accounts. Further, in this regard we hereby submit that assessee is required to prepare various record as per the sales tax law as well as excise laws prevailing and all the details such as sales tax returns as well as excise returns have already been submitted before your goods self, further each and every sales entry has to be entered in the excise records and the documents are in possession of your good self being part of the seized records whereby gram by gram quantity of sales made by the assessee company has been recorded and by perusal of the same your goodself will find that no any sales has been made by assessee company without bills and not booked in the books of accounts of the assessee company. In this regard we hereby further submit that search action u/s 132 of the act was made by the income tax department t the office premises of assessee company and not a single iota of document was found during the course of search which can indicate that assessee company has made sales out of books of accounts I.e. without bills to the said party, further with regards ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has been duly recorded in the books of accounts and the assessee company has not made any sales without bills i.e. outside books of accounts and therefore no any adverse inference should be taken against the assessee company in this regard. However as required by your good self ledger, accounts of M/s. Hari Iron India Ltd. In the books of assessee company for each of the assessment year have been enclosed herewith for your kind perusal. Further, it is evident from the perusal show cause notice that your good self intends to make estimated additions to the income of assessee company by relying on the statement of Amit Gupta without corroborating the same with any incriminating material found during the course of search relating to these transactions without prejudice to the submission made above. We hereby submit that no any addition could be made in case of the assessee has not entered into any such transactions during the years under consideration and even otherwise no any purchases in this regards .has been entered into the books of accounts of the assessee company .no any expenses relating to such have been entered into the books of accounts of assessee company; then in such cir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ontrary, as stated by the assessee before the AO and ld. CIT (A), all the sales made by the assessee to M/s. Hari Iron India Limited has been properly accounted in the regular books of account and no sales have been made outside the books. The assessee has to maintain statutory records under the sales-tax as well as excise law and all the details, such as, sales-tax returns and excise returns were submitted before the AO wherein each and every entry of the sales have been recorded in the excise records which were in the possession of the AO as part of the seized records, whereby gram by gram quantity of sales made by the assessee has been duly recorded. He further submitted that the AO who was in possession of entire books of account including excise record of the assessee, and no discrepancy has been found or detected which could have been remotely correlated with the statement of Amit Gupta. In absence of any rejection of books of account, neither the sales can be estimated nor can any profit rate be applied. Once the trading account has been accepted including the figures of debit and credit side, there is no scope for estimating any GP or NP rate. 12. Ld. Counsel further sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not been delivered to the parties could not found any favour as the details stated on these papers clearly mentioning the name of party, name of brokers alongwith the details of vehicles through which the material must have been delivered to these parties In view of the above, it can be safely concluded that sales of Rs. 41,95.493/- has been made and not accounted for in the books of accounts. The assessee has also held as suppressed its capital which was used for affecting such unaccounted sales. Income arising out of such sales as well as capital deployment is being calculated as under: Asst. Year Sales remained out of books (A) Profit earned (taking manufacturing GP i.e. 5.86% as disclosed in regular books for relevant previous year) (B) Total sales made during the year (C) Capital Employed (including share premium) (D) Undisclosed Capital (e) [A/C x D] 2015-16 41,95,493 2,45,856 2,64,49,254 34,18,74,995 5,41,963 Thus, total profit on undisclosed sales comes to Rs. 2,45,856/- and total undisclosed capital required to affect the sales calculated at Rs. 5,41,963/- but as an addition has already been made during the last years on accoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pon the judgement of Hon'ble Delhi High Court in case of PCIT (Central) -3 vs. Anand Kumar Jain(HUF) 2021 (3) TMI 8 - Delhi High Court for the proposition that statement recorded in search against the third person cannot be used for making the additions in the hands of the assessee on the assessment made u/s 153A. 15. On the other hand, ld. CIT DR for the Revenue though did not rebut the assessee's contention that no incriminating material found during the course of search in the case of the assessee, however, he submitted that the statement recorded u/s 132(4) even though in a different search has a great evidentiary value and AO can utilize such information gathered from the statement to use against the assessee. In his statement, he has categorically stated that he has been making sales to parties through the assessee companies partly without bills. Therefore, AO has rightly concluded that the assessee was making undisclosed sales to various parties for which AO has estimated the profit rate as disclosed by the assessee on its disclosed sales. In support of his contention that statement recorded u/s 132(4) has a great evidentiary value, he has referred to Hon'ble Allahabad Hi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Del.); (v) Pr. CIT, Central 3 vs. Baba Global Ltd. 2017 (2) TMI 346 - Delhi High Court; (vi) Pr. CIT, Central 3 vs. Dharampal Premchand Ltd. (vii) CIT, Central I vs. Jakson Engineers Ltd. 2015 (12) TMI 1523 - Delhi High Court; (viii) Smt. Jami Nirmala vs. The Pr.CIT, Bhubaneswar and Ors. dated August 10, 2021 - 2021 (8) TMI 594 - Orissa High Court; and (ix) Pr. CIT vs. Gahoi Dal 7 Oil Mills - 2019 (7) TMI 1050 - Madhya Pradesh High Court. 17. Thus, at the threshold, the additions which have been made by the AO right from AYs 2009-10 to 2013-14 are beyond the scope of assessment u/s 153A and, therefore, the same are directed to be deleted. 18. Now, coming to the adverse inference drawn on the basis of the statement of a third party in a different search, the same cannot be considered to be an incriminating material found during the course of search in the case of assessee. It is not a case here that any incriminating statement of any of the Director or any of the employee of the assessee company was recorded u/s 132(4) based on which any adverse inference has been drawn, albeit it is a statement of different person unrelated to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee in response to show-cause notice vide letter dated 22.12.2016 has filed the entire explanation and also reconciliation and the summary sheet of stock valued at the time of search which has been incorporated in the assessment order wherein various errors were pointed out. However, the ld. AO has made addition of Rs. 58,40,136/- after observing and holding as under :- "Observation and Conclusion The submission of the assessee has been considered but found to be devoid of merits. The assessee has submitted that the survey team has not taken the inventory of stock on actual basis instead it has been argued that the stock has been inventorised on estimation basis only. This contention of the assessee could not be accepted as the survey team has inventorised the stock in the presence of the employees of the assessee company. Further, the assessee has submitted a detailed calculation of stock based in the ISI standards defined for a certain description of Steel Bars and bas submitted that difference between the inventory of Finished Stock of Steel Bars on the basis of such standards and the Inventory of Stock of Finished Goods as per the Stock register has been reduce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation basis applying universally the different diameter goods as having the same length and weight. The appellant premises was covered in search and inventory was taken. The physical inventory has been taken by weighing item of one dimension and projecting the same on other similar items the appellant maintains inventory basis weight of the produce in specific category and there are small variations in diameters of the product being process based variations. The excise record and the sale bills etc are all as per the weight of the lot in transaction and it may have variations at times. The margin of error is not ruled out but based on submissions and the material placed on record, it is clear that the inventory variations cannot be determined precisely by only projecting the dimensions and weight of one item on other similar products. The AO made the additions on dual premises of physical inventory differences and backward projection of unaccounted projected sales into inventory manufactured out of books, the appellant has submitted thus: "As such your honour, your goodself will find that the addition of Rs. 40,73,065/- (138.07 MT x 29500/-) so made by the ld AO for differ....