TaxTMI 
TaxTMI 
2022 (9) TMI 922
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.... engaged in the business of manufacturing of paper and paper products. The return of income for the relevant assessment year was filed on 28.09.2013 declaring a loss of Rs. 3,01,960/- whereas the book profit in terms of section 115JB of the Income Tax Act, 1961 (hereinafter called 'the Act') was computed at Rs. 3,27,62,297/- The case was selected for scrutiny. The assessment in terms of section 143(3) of the Act was completed on 20.03.2016 at the returned income and further at an income of Rs. 3,42,59,028/- in terms of section 115JB of the Act. Subsequently, revisionary proceedings were initiated for assessment year 2013-14 u/s. 263 of the Act and vide order dated 31.08.2017, the Ld. Pr. Commissioner of Income Tax (PCIT), Patiala set aside the assessment order and directed the Assessing Officer (AO) to pass a fresh assessment order. The assessment subsequent to the revisionary proceedings was completed on 26.12.2018 wherein the income of the assessee was assessed as per the original assessment order passed u/s. 143(3) of the Act on 20.03.2016. 2.1. Meanwhile, there was a search and seizure operation on 05.08.2016 on the business premises of the assessee by the Directorat....
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....ition only to the extent of Rs. 16,02,706/-. 2.4. Now the assessee has approached this Tribunal challenging the order of the Ld. First Appellate Authority by raising the following grounds of appeal: 1. That the Ld. CIT(A) has erred in confirming the action of the Ld. A.O. regarding the rejection of books of accounts of the assessee without considering the facts of the case & material available on records. 2. That the Ld. CIT(A) has erred in confirming the action of the Ld. A.O. regarding the addition of Rs. 16,02,706/-, made by applying net profit (Declared by the assessee) @ 4.42% on suppressed sales, ignoring the fact that the said books of accounts were already rejected u/s. 145(3) of the Income Tax Act, 1961. Thus such additions must be deleted by reversing the findings of the CIT(Appeal. 3. That the Ld. CIT(A) has erred in confirming the action of NIL the Ld. A.O. confirming the addition without considering the fact that the said addition is based on findings of excise authorities and the ld. Assessing officer has failed to conduct any independent enquiry in the matter and NO addition can be made on the basis of such findings when, Excise laws and....
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.... 2. That the Ld. CIT(A) has erred in confirming the action of the Ld. A.O. regarding the addition of Rs. 6,15,741/-, made by applying net profit (Declared by the assessee) @ 4.19% on suppressed sales, ignoring the fact that the said books of accounts were already rejected u/s. 145(3) of the Income Tax Act, 1961. Thus such additions must be deleted by reversing the findings of the CIT(Appeal). 3. That the Ld. CIT(A) has erred in confirming the action of NIL the Ld. A.O. confirming the addition without considering the fact that the said addition is based on findings of excise authorities and the ld. Assessing officer has failed to conduct any independent enquiry in the matter and NO addition can be made on the basis of such findings when Excise laws and Income tax laws are totally independent. 4. That the Ld. CIT(A) has erred in confirming the action of Ld. A.O. by not allowing the interest income of Rs. 11,35,772/- to be reduced from net profit to calculate addition by applying Net Profit Rate of 4.19% on suppressed sales. 4. In ITA No. 84/Chd/2022, for assessment year 2015-16, the original return of income was filed on 31.10.2015 declaring an income of Rs. 1,....
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.... No. 85/Chd/2022 for assessment year 2016-17, the return of income was filed on 17.10.2016 declaring income of Rs. 56,27,280/- after claiming deduction u/s. 80IA of the Act to the tune of Rs. 1,37,74,817/-. The book profits declared u/s. 115JB of the Act in this year were at Rs. 3,31,15,328/-. The return was processed u/s. 143(3) of the Act. Subsequently, in view of the information received by the Department from Directorate General of GST Intelligence, the assessee's case in this year was also reopened u/s. 147 read with section 148 of the Act. The re-assessment was completed at an income of Rs. 4,93,03,011/- after making an addition of Rs. 2,84,00,292/- in respect of additional net profit earned on suppressed turn over by applying net profit rate of 3.64% after rejecting the books of account. The alleged suppressed turnover in the year was computed at Rs. 20,67,53,177/- by the AO. 5.1. Aggrieved, the assessee approached the Ld. First Appellate Authority challenging the rejection of books of account as well as challenging the addition on merit and the Ld. First Appellate Authority, while upholding the rejection of books of account, allowed relief in respect of net profit on....
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....t earned on suppressed sales by applying the net profit rate of 3.64% after rejecting the books of account. The AO calculated the alleged suppressed sales at Rs. 4,71,44,275/- for this assessment year. 6.1. Aggrieved, the assessee carried the issue before the Ld. First Appellate Authority challenging the rejection of books of account as well as the addition on merits. Although the Ld. CIT(A) upheld the rejection of books of account, he gave part relief in respect of net profit earned on suppressed sales by holding that the net profit rate of 3.12% (as declared by the assessee) was to be applied rather than the average net profit rate of 3.64%. 6.2. Now, the assessee has approached this Tribunal challenging the order of the Ld. CIT(A) by raising following grounds of appeal:- 1. That the Ld. CIT(A) has erred in confirming the action of the Ld. A.O. regarding the rejection of books of accounts of the assessee without considering the facts of the case & material available on records. 2. That the Ld. CIT(A) has erred in confirming the action of the Ld. A.O. regarding the addition of Rs. 14,70,900/-, made by applying net profit (Declared by the assessee) @ 3.12% o....
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....it Report. It was submitted that the AO has not pointed out any defect or discrepancies in the quantitative details so produced. It was also submitted that there was no allegation of any misappropriation and incorrect recording of transactions relating to purchases, sales or expenditure or percentage of yield, as recorded in the books of account. It was submitted that the only reason for the impugned additions was the information of search by the Excise Authorities in the premises of the assessee as well as on Shri Sanjay Dhawan who was the Ex-President of the company and had earlier worked in the company from year 2009 to year 2013. It was submitted that the search had also been carried out on certain dealers of the assessee like S/Shri Gulshan Gaba, Naveen Salley and Sudhir Sethi. It was submitted that during the course of search on the premises of Shri Sanjay Dhawan, certain invoices (being 225 in number) were found and in the said invoices, the registration numbers of vehicles belonging to the assessee company were also mentioned which led the AO to form an incorrect belief that the assessee's income for the captioned years had escaped assessment. It was submitted that the ....
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.... Shri Sanjay Dhawan, against whom the assessee company had already filed a complaint and FIR, the AO could not have legally made any addition on account of alleged suppressed sales. 7.3. The Ld. AR further submitted that the FIR filed against Shri Sanjay Dhawan for theft of company's documents, which included sales invoices, bilty booklets, rubber stamps etc., was itself sufficient evidence to prove that the assessee had not made any undisclosed sales and that all these fake invoices had been created by Shri Sanjay Dhawan to put the assessee company under financial pressure and litigation. Our attention was drawn to the copy of the FIR and other complaints made in this regard and placed at pages 260 to 265 of the paper book. 7.4. It was further submitted that as far as assessment year 2013-14 was concerned, the original assessment was completed u/s. 143(3) of the Act vide order dated 23.03.2016 which was subject to proceedings u/s. 263 of the Act and subsequently consequential assessment was also framed at the same income without any further addition and, therefore, revisiting the same assessment for a third time was not to be sustained. 7.5. The Ld. AR also drew our a....
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....book there were numerous discrepancies in the invoices recovered from the residence of Shri Sanjay Dhawan. This Chart is being reproduced herein in under for ready reference:- 7.9. Referring to the Chart, the Ld. AR submitted that the time gap shown for completing the journey was unrealistic and it was practically impossible to transport the goods by the same vehicle in such quick succession. It was further submitted that on account of distance from one city to another city as per timings mentioned in the above Chart and considering the time required for loading and unloading, it could not have been possible for the vehicle to make a second trip within few hours on the same day considering the distance between the factory and the first destination. The Ld. AR submitted that these submissions were also made before the lower authorities but the same were not given due consideration. 7.10. Referring again to the yield chart, which has already been reproduced in the preceding paragraph No. 7.0, the Ld. AR submitted that there is no iota of evidence that any expenditure towards purchases of raw material, chemicals etc. or expenditure towards extra labour charges or power required ....
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....ent order) and the AO has mentioned that these invoices have not been recorded in the books of account of the assessee company and has made the addition by treating the cash portion mentioned in such electronic records as suppressed turn over. The Ld. AR submitted that this addition was based on the statement of one Shri Manish Jain of B.M. Paper Mart but again the assessee was not afforded any opportunity to cross-examine Shri Manish Jain in spite of having made a specific request to do so. The Ld. AR submitted that, thus, the additions were not sustainable more so for the reason that the identity of the person sending the e-mails to M/s. B.M. Paper Mart had not been established and, therefore, the addition based on such unverified electronic records was not sustainable. The Ld. AR drew our attention to the noting made by the AO at pages 6 & 7 of the assessment order wherein he has mentioned that the series of the alleged unrecorded bills pertaining to June 2015 were as under:- a) CC 204 b) CC 205 c) CC 213 d) CC 212 e) CC 219 f) CC 220 7.14. It was submitted that even if the statement of Shri Manish Jain is taken as correct....
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....ized from the residential premises of Shri Sanjay Dhawan and further the dealers had also confirmed that these invoices pertained to transactions with them which were not accounted in the books of account of the assessee. The Ld. DR drew our attention to pages 8 & 9 of the assessment order wherein the AO has summarised the sample invoices seized from the premises of Shri Sanjay Dhawan and it was submitted that no further evidence was required to corroborate the same. The Ld. Sr. DR also referred to the statements of S/Shri Naveen Salley, Gulshan Gaba and Sudhir Sethi to demonstrate that both the lower authorities have rightly confirmed the unaccounted turn over. It was submitted that the AO has even explained the modus operandi being followed out by the assessee in this regard and it was submitted that the statement of the three parties were identical in as far as the modus operandi of the assessee company was concerned. He also submitted that the assessee was duly confronted with all the statements and the assessee did not offer any explanation in this regard and further submitted that since the assessee had no explanation to offer, the cross-examination was not necessary. It was ....
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....through the statement of Shri Shiv Charan Lal, an Ex- employee of the company. We have also perused the copies of some of the invoices which were recovered from the residence of Shri Sanjay Dhawan based on which it has been alleged that the assessee company was engaged in making unaccounted sales through under billing of invoices. We note that it is an undisputed fact that during the course of search proceedings conducted by the Central Excise Authorities, neither at the premises of the assessee company nor from any other premises, any other evidence with regard to undisclosed sales was found except for the invoices recovered from the residence of Shri Sanjay Dhawan and the impugned additions on account of the undisclosed/additional net profit on search alleged unaccounted sales have been made only on the basis of invoices recovered from the residence of Shri Sanjay Dhawan as well as the statements of S/Shri Gulshan Gaba, Naveen Salley, Sudhir Sethi, Manish Jain and Shiv Charan Lal. It is also an undisputed fact that the assessee had specifically requested the AO to provide an opportunity to it to cross- examine these four persons but such opportunity was not granted and the AO bru....
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....ell forged the documents to the disadvantage of the assessee company due to strained relations between the assessee company and Shri Sanjay Dhawan. It would not be out of place to again underline the fact that the complaints as well as the FIR against Shri Sanjay Dhawan had been filed by the assessee company much before the date of search by Central Excise Authorities and, therefore, by no stretch of imagination it can be inferred that the act of filing of the complaints and FIR was an after thought by the assessee company. In light of this factual matrix, the reliance of the Department on the aforesaid invoices, in our considered opinion, has little persuasive value. 9.2. We have also gone through the Chart placed at paragraph No. 7.8 above which has been filed by the Ld. AR, wherein, it has been demonstrated that the allegation that unrecorded goods were being transported by vehicles owned by the assessee company is incorrect in as much as, it has been depicted in the above said chart that it was physically impossible for the same vehicle to have delivered goods at two different stations within a short span of time on the same day when time is required not only for movement of....
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....come of this batch of appeals for the simple reason that the AO has relied upon those statements which had been recorded at the back of the assessee and the assessee was not given any opportunity to effectively to rebut the same. This is in the very teeth of the judgement of the Hon'ble Apex court in the case of M/s. Andaman Timber Industries (supra) wherein it has been specifically held that where the party is being adversely affected by the statement of a third party, denial of cross-examination of such effected party would not be in accordance with law. The Hon'ble Apex Court in its judgement in the case of Andaman Timber Industries Vs. Commissioner of Central Excise (supra) held as under:- "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two wi....
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....d. " 9.5. Therefore, in our considered opinion, in absence of such cross-examination having been allowed to the assessee and also in view of no incriminating material having been recovered from any of the premises searched, coupled with the fact that the statement of Shri Shiv Charan Lal, Ex-employee itself states that the parallel invoices used to be destroyed after the delivery of the consignments, the very foundation to make the additions on account of unrecorded sales stands demolished. The fact that parallel invoices were recovered from the Ex-President after three years of his having left the assessee company under circumstances in which the assessee company had already filed complaint and FIR against him (Shri Sanjay Dhawan) also does not support the case of the Department in as much as the Department should not have placed complete reliance without any corroborative evidence on such documents when the conduct of Shri Sanjay Dhawan itself was under suspicion. Therefore, in view of the above narrated factual matrix and after duly considering the various evidences which the Department has relied upon for making the impugned additions, we are of the considered opinion that t....
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....ave simply relied on the contents of the e-mail and the statement of Shri Manish Jain without leading further evidence which could strengthen the case of the Department and, therefore, we are unable to agree with such action of the Department in placing its entire reliance on such third party evidence without there being any corroborative evidence to make the impugned additions. Once again, we would like to refer to the statement of Shri Shiv Charan Lal, an Ex-employee, who has categorically stated that the assessee company used to destroy the alleged parallel invoices once the consignment was delivered. This statement of Shri Shiv Charan Lal goes contrary to the fact of invoices being recovered during the search at the residential premises of Shri Sanjay Dhawan. It is also worth noting that as per the e-mail print out for June 2015, the bill numbers are running into series of 200 whereas as per the regular books of account the serial numbers of the invoices for the month of June 2015 is in the series of 700 onwards. Thus, this apparent contradiction castes a doubt on the veracity and the evidentiary value of the invoices recovered from the premises of Shri Sanjay Dhawan. According....