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2022 (3) TMI 1668
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.....12.2018 u/s 153A/143(3) of the I.T. Act Departmental appeals bearing ITA Nos. 261,262,263 & 264/Ind/2019) A.Y. 2010-11, 2011-12, 2012-13 & 2013-14: 2. For the above assessment years, the department has filed appeals on the following grounds: AY. 2010-11 1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 15,19,87,876/- made by the Assessing Officer on account of unaccounted sales based on incriminating documents seized in group cases. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 84,00,000/- made by the Assessing Officer on account of unexplained expenditure of gold incentive. AY. 2011-12 1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 7,42,22,400/- made by the Assessing Officer on account of unaccounted sales based on incriminating documents seized in group cases. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 84,00,000/- made by the Assessing Officer on account of unexplained expenditur....
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....s, the ld. AO connected V.A. Thomas to the case and decoded certain things from his mobile in relation to the modus operandi as stated above. The Assessing Officer interpreted the figures of the seized documents in terms of the quantity and price of the TMT Bars. A major part was also decoded in terms of the incentive given against the sales to various dealers. Further on the basis of the seized documents the Assessing Officer concluded that the information relates to 11 months which were then spread over by the Assessing Officer for the period April 2013 to April 2015 (cumulative period comes to 25 months i.e. three financial years). The total quantity worked out as unaccounted was 65033 MT of which monthly average was taken as 6500 MT per month (65033/10). For arriving at the figure of rate of steel, actual bills were considered by AO and average rate for each year was calculated by the Revenue. After that the total unaccounted sales were extrapolated for the seven years on the basis of above mentioned figures as mentioned at page 68-70 of the assessment order. The total unaccounted sales arrived by the AO was then divided between Jaideep Ispat & Alloy Pvt. Ltd. and Rathi Iron & ....
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....y year. Thus, the assessee company cannot assign the task of sales to a person who has no interest in the assessee company in any manner. Learned Counsel for the assessee (in short 'Ld.AR') also submitted that the assessee's business process particularly the manufacturing and removal of goods is subject to Central Excise Rules and Regulations and the central excise authority keeps a vigilant watch on the in and out movement of goods and therefore there can be no scope of removal of goods without the knowledge of the central excise authorities. Moreover, the industry of the company has the machinery of clear specification about the permissible production and therefore, there was no scope of production over and above100% capacity of the unit. Ld.AR submitted that the Revenue Authorities did not appreciate the aspect of the consumption of power vis-à-vis the production of finished goods and alsono documents evidencing unaccounted sales was recovered pertaining to AY 2010-11 to AY 2013-14and this fact was appreciated by the Ld. Commissioner of Income Tax (Appeals) who deleted the addition relying on plethora of decisions laying down the ratio that no addition could b....
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....ecord even a single piece of evidence of excess production/ stock/ finished good and un- account sales outside the books of account during the period relevant to these assessment years. There is no evidence of generation of unaccounted income and undisclosed assets during the period relevant to the A. Y. 2010-11 to A.Y. 2013-14. The addition of Rs. 15, 19,87,876/- (A.Y. Rs. 7,42,22,400/- (A.Y. 2011-12) Rs. 13,12,45,056/-(A.Y. 2012-13) and Rs. 13,70,11,485/- (A.Y. 2013-14) have been found made solely on the strength of incriminating documents pertaining to A.Y. 2014-15 to 2015-16. These incriminating documents have been found discussed and interpreted appropriately in various pages of assessment order. The findings of AO on the veracity of these documents shall be considered while adjudicating the issue of unaccounted sales and income during assessment years 2014-15 to 2016-17. 6.15 However, it is found that the addition made during the A. Yrs. 2010-11 to 2013-14 have not been found based on incriminating documents evidencing sales out of books of account. During the course of appeal proceedings, I had tried to ascertain from the AO if any document relevant to suppression o....
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....in the ambit of section 153A of the Income Tax Act, 1961 and section 153C of the Income Tax Act, 1961 as well as assessment years 2015-16 and A.Y. 2016-17. Though the disclosure has not been acted upon by the appellant, yet it is found that no specific surrenders during the period relevant to A.Y. 2010-11 to A.Y. 2013-14 have been made by the appellant company. No further inquiries and examination of the issue have been found carried out by the investigation wing and the AO. The issue of disclosure shall be dealt with while adjudicating, the grounds for the A.Y. 2014-15 to A.Y. 2016-17. In my considered opinion, with the advent of section 153A of the Income Tax Act, 1961, the entire scenario has under gone drastic change. It has been laid down by various judicial authorities, that while invoking section 153A of the Income Tax Act, 1961, the completed assessment cannot be revisited unless there is incriminating material pertaining to said assessment year found and seized during the search. It has been clearly held by Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) ITR 0573 (Delhi) that in the absence of incriminating material, completed assessments can be re-....
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....e concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 6.16 Hon'ble jurisdictional ITAT, Indore Bench, Indore relying on the judgment of Hon'ble Delhi High Court and other similar judgment of judicial authorities, has held in the case of DCIT vs Kalani Brothers Put. Ltd. (2016) 27 ITJ 286 (Indore ITAT) and Anant Steel Put. Ltd. vs. ACIT (2016) 28 ITJ 47 (Indore ITAT) that the additions can be made in the assessment years completed u/s 143(3) of the Income Tax Act, 1961 only on the basis of incriminating material found and seized during the cour....
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....vtarVerma, Hon'ble Delhi High Court; 7. Deputy CIT, Central Circle-2(2), Kolkata vs. M/s Rashmi Float Glass Ltd. Hon'ble ITAT, Kolkata; 8. Pr. CIT vs. Kurele Paper Mills Put. Ltd. the order of Hon'ble Delhi High Court; 9. Hon'ble High Court of Bombay in case of CIT vs. M/s SKS Ispat and Power Limited, (2017) 398 ITR 0584 (Bom.); 10. Hon'ble ITAT, Mumbai in the case of Anil P. Khimnani vs. DCIT; 11. All Cargo Glolbal Logistics Ltd. vs. DCIT 137 ITD 287 (ITAT Mumbai Special Bench); 12. CIT vs. Anil Kumar Bhatia 211 taxman 453 (Delhi); 13. Gurinder Singh Bawa vs. DCIT 150 ITD 040 (Mum.); 14. AtulBarotvs. DCIT 44 Taxman.com 167 (Mum.); 15. CIT vs. Singhgad Technical Education Society (2017) 397 ITR 344 (SC); 16. Pr. CIT vs. VikasGutgutia (2017) 396 ITR 691 (Del.); 17. Pr. CIT &Ors. Vs. MeetaGutgutiaProp. Ferns 'N' Petals and Ors. S (2017) 295 CIT 0466 (Del.): (2017) 152 DTR 0153 (Del.): (2017) 395 ITR 0526 (Delhi : (2017) 248 Taxman 0384 (Delhi). SLP of department also rejected by the Hon'ble Supreme Court (2018) 102 CCH 0038 ISCC ; 18. Pr. CIT vs. Ms. Lata Jain (20....
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....tock/finished good and unaccounted sales outside the books of accounts for the Assessment Years 2010-11 to 2013-14. Even before us, learned CIT-DR could not controvert above facts by bringing any contrary material on record. Therefore, in light of the findings of the decision of Hon'ble Delhi High Court in case of CIT v. Kabul Chawla, (2016) 2 ITJ Online 869 (Delhi) : (2016) 380 ITR 573 : (2015) 281 CTR 45 : (2015) 234 Taxman 300 and also decision of Pr. CIT v. Meeta Gutgutia, (2020) 8 ITJ Online 273 (Delhi) : (2017) 395 ITR 526, we are of the considered view that proceedings initiated u/s 153A of the Act for the A.Y. 2010-11 to 2013-14 being non-abated and completed assessments deserve to be quashed since no incriminating material was found during the course of search thereby warranting initiation of proceedings u/s 153A of the Act for these years. We, therefore, confirm the findings of Ld. CIT(A) for the Assessment Year 2010-11 to 2013-14 on this ground and hold that proceedings initiated in the case of the assessee for A.Y. 2010-11 to 2013-14 are without jurisdiction and consequently, assessments framed for these years u/s 153A of the I.T. Act were invalid and additions made....
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....7,10,509/- as unexplained expenditure in gold and cash incentive u/s 69C without considering the facts of the case. 3. That the Ld. CIT(A) erred in law and facts of the case and confirmed the addition made by Assessing Officer of Rs. 19,82,758/- on account of cash sales without considering the facts of the case. 4. That the Ld. CIT(A) erred in law and facts of the case and confirmed the disallowance made by Assessing Officer by treating Rs. 42,46,027/- on account of interest on unsecured loans without considering the facts of the case. 5. That the Ld. CIT(A) erred in law and facts of the case and did not decide the issue raised for interest of Rs. 1,77,12,000/- on account of advances surrendered and credited in books of accounts for the AY 2015-16 under appeal. The said issue was specifically raised by Assessee during the course of hearing and in written submission as well. That without prejudice to above for such estimation of interest, no any incriminating document was found during the course of search. A.Y. 2016-17 1. That the Ld. CIT(A) erred in law and facts of the case and confirmed the addition made by Assessing Officer by treatin....
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.... by adopting the net profit @4% of unaccounted sales rather than Gross Profit. Ground No.1 raised by assessee and Ground Nos. 1 & 2 raised by Revenue on the issue of Addition on account of unaccounted cash sales/ application of net Profit rate Assessee's appeal for A.Y. 2014-15 to AY 2016-17 & Department's Appeal for A.Y. 2014-15&2015-16 9. Facts, with regard to the ground no. 1 raised in the assessee's appeals for the Assessment Years 2014-15 to 2016-17 and ground nos.1 & 2 raised in the departmental appeals for the Assessment Years 2014-15 & 2015-16, as culled out from the records are that that a search and seizure operation was carried out on Moira Group of cases on 17.06.2015 and Gaurav Sanghvi, alleged key person was also covered. During the course of search, various loose papers/dairy were found and seized from the premises of Mr. Sanghvi. The Assessing Officer at para no. 13.1 of the assessment order made discussion and alleged that modus operandi is adopted by the assessee co. to generate income by way of sales out of books of accounts. The related statements were said to be given by Gaurav Sanghvi confirming the modus operandi. Also some evidences were sa....
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.... 26,655 12,52,78,500 March 09-10 4700 26,655 12,52,78,500 1,50,33,42,000 April 10-11 4700 32,900 15,46,30,000 May 10-11 4700 32,900 15,46,30,000 June 10-11 4700 32,900 15,46,30,000 July 10-11 4700 32,900 15,46,30,000 August 10-11 4700 32,900 15,46,30,000 September 10-11 4700 32,900 15,46,30,000 October 10-11 4700 32,900 15,46,30,000 November 10-11 4700 32,900 15,46,30,000 December 10-11 4700 32,900 15,46,30,000 January 10-11 4700 32,900 15,46,30,000 February 10-11 4700 32,900 15,46,30,000 March 10-11 4700 32,900 15,46,30,000 18,55,56,000 April 11-12 4700 40,400 18,98,80,000 May 11-12 4700 40,400 18,98,80,000 June 11-12 4700 40,400 18,98,80,000 July 11-12 4700 40,400 18,98,80,000 August 11-12 4700 40,400 ....
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.... 14-15 6019.310 45,800 27,56,84,398 October 14-15 6500 45,800 29,77,00,000 November 14-15 6500 45,800 29,77,00,000 December 14-15 6500 45,800 29,77,00,000 January 14-15 6500 45,800 29,77,00,000 February 14-15 6500 45,800 29,77,00,000 March 14-15 6500 45,800 29,77,00,000 3,55,40,12,674 April 15-16 12341.170 32,750 40,41,73,318 May 15-16 6500 32,750 21,28,75,000 June 15-16 3250 32,750 10,64,37,500 72,34,85,818 Total 425323.99 15,33,36,86,572 The total sale was then bifurcated by the Ld.AO between Jaideep Ispat & Alloys Pvt. Ltd. and Rathi Iron & Steel Industries Ltd. in the ratio of 2.62:1, which was based on their actual production. The same is summarized as under: - F.Y. Yearly Sales Unaccounted Sales by RISIL Unaccounted Sales by JIAPL 09-10 1503342000 0 1503342000 10-11 1855560000 0 1855560000 11-12 2278560000 0 2278560000 12-13 2659800000 7327774900 19....
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....uthority keeps a vigilant watch on the above processes, therefore, there can be no scope of removal of goods without the knowledge of the central excise authorities. Moreover, the industry of the company has the machinery of clear specification and on the question of permissible production, there is no scope of production over and above100% capacity of the unit. Learned Counsel for the assessee also contended that the Revenue Authorities did not appreciate the aspect of the consumption of power vis-à-vis the production of finished goods. Ld.AR further submitted that no document evidencing unaccounted sales was recovered which was appreciated by the Ld. Commissioner of Income Tax (Appeals) who deleted the additions for the Assessment Years 2010-11 to 2013-14 relying plethora of judgments that no addition could be made in the search case unless there is incriminating material pertaining to the Assessment year concerned. But, for the Assessment Years, 2014- 15 to 2016-17, the learned CIT(A) did not appreciate the factual aspects of the case and partly confirmed the additions applying 4% net profit rate unjustifiably. Alternatively, Ld.AR submitted that ld. CIT(A) was not justif....
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....of various persons including some employees of the assessee, unrelated outsiders and concocted a story of unrecorded sales. It carried out search in the premises of Gaurav Sanghvi, who happened to be consultant for few matters of the company and was never entrusted any task of executing sales on behalf of and for the assessee company or its sister concerns. During the course of search in his premises he was made to confess that the documents related to the assesse co. This confession was clearly a product of coercion as the Assessing Officer/ CIT(A) termed Gaurav as Marketing Director but had Gaurav Sanghvi been Marketing Director, he would have been on the board of the company or on its payroll. However, we find that the ld. CIT(A) has examined the various documents found and seized from the residential premises of Gaurav Kumar Sanghvi and thereafter, the ld. CIT(A) found that Mr. Sanghvi was not an unconnected person as he was looking after the marketing part of the company. 12.2 Further, we find that the assessee, during survey on 21.8.2014, made surrender of Rs.14.76 crores and Shri Gaurav Sanghvi made a surrender of Rs.9 lacs and Rs.5 lacs for the A.Y. 2015-16 & 2016-17. Th....
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.... of Rathi(%) GP rate of Jaideep (%) GP of Rathi GP of Jaideep 14-15 2758926080 760084135 1998841945 3.44 8.32 26146894.25 166303649.8 15-16 3554012674 979130491.7 2574882182 3 6 29373914.75 154492930.9 16-17 723485818 199320342.9 524165475.1 3 6 5979610.286 31449928.51 TOTAL 15333686572 2671309870 12662376702 80259456.72 846713326.1 6.22 It is observed that the AO has estimated sales and income on the basis of various documents found and seized from the residential premises of ShriGaurav Kumar Sanghvi, the close associate of the company. The appellant had been consistently stating through various written submissions that Mr. Sanghvi was not associated and authorized person for maintaining record and giving statement as such every time tried to disown the incriminating material related to "out of books sales" found and seized from the premises of Mr. Sanghvi during the course of search proceedings. I have discussed in detail at para nos. 6.10 & 6.11of th....
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....14 Incentive @100 per Ton to Exclusive dealers as well as Sales detail 16,11,406 18034.10 54-56, 57-59 September 13-14 Sales 6906.100 October 13-14 Sales 5889.815 November 13-14 Sales 6440.300 December 13-14 Sales 8273.530 72-75 April 15-16 Sales 12341.17 Total 130387.888 6.23 During the course of appeal proceedings, the counsel of the appellant was given an opportunity to explain and file documentary evidences contrary to the finding of the AO. The counsel of the appellant could not file any further reply except relying on the submissions filed and reproduced in pre-pages of the order. The submissions of appellant have been dealt with appropriately in the assessment order and appeal proceedings. In view of above discussion, the existence of incriminating material showing unaccounted sales for as many as 14 months has been found spread over a period from April, 2013 to April, 2015. This has further been corroborated with evidences gathered during pre-search and post search in....
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....8 166303650 2015-16 2574882182 6 154492930.9 154492931 2016-17 524165475.1 6 31449928.51 31449928 TOTAL 12662376702 84,67,13,326.1 84,67,13,326 6.26 The basis of estimating turnover has been discussed in detail at page nos. 67 to 71 of the assessment order. The same was again confronted to the appellant during course of appeal proceedings. The counsel of appellant appearing on behalf of company has not been in position to find out any infirmity in estimating the turnover except disputing the rate of TMT bar applied in the F.Y. 2014-15 relevant to A.Y. 2015-16. The objections through letter dated 26/08/2019 were filed on 25/09/2019 which were provided to the AO on same date for her verification. 6.27 The AO during the course of appeal proceedings on 27/09/2019, had produced the record containing page nos. 48 and 49 of LPS-3. It was found that the sales recorded during the F.Y. 2014-15 were recorded at the rates ranging between Rs.44,800/- to Rs.46,800/- in accordance with rates found in above pages of LPS-3. These documents were shown to the counsel who was satisfied after confirming the same. Apart from thi....
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....hat the assessing authority was not having material before it to prove exact turnover. Further, Hon'ble Apex Court has held that duty was cast on the assessee to prove the circumstances to show that the sales for the period during 01/09/ 1960 to 19/09/1960, outside the books of account were due to some exceptional circumstances. Therefore, reversing the decision of Hon'ble M.P. High Court, the Apex Court had confirmed the action of AO (STO) in estimating the turnover for entire period under consideration on the basis of unrecorded sales for only 19 days during the relevant period. The operative part of above decision is reproduced hereunder :- "Now coming to the facts of this case, it is necessary to remember that at the initial stage, e assessee denied that the bill book seized was his bill book and the entries therein related to his dealings. He asserted that he had nothing to do with the bill book in question and the entries therein do not relate to his dealings. But, at a later stage, he conceded that that bill book was his and the entries therein related to his dealings. It is now proved as well as admitted that his dealings outside his accounts during a perio....
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....mate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best Judge of the situation. It is his "best judgment" and not of anyone else. The High Court could not substitute its "best judgment" for that of the assessing authority .- In the case of " best judgment" assessments, the Courts will have to first see whether the accounts maintained by the assessee were rightly rejected as unreliable. If they come to the conclusion that they were rightly rejected, the next question that arises for consideration is whether the basis adopted in estimating the turnover has reasonable nexus with the estimate made. If the basis adopted is held to be a relevant basis even though the Courts may think that it is not the most appropriate basis, the estimate made by the assessing authority cannot be disturbed. In the present case, there is no dispute that the assessee's accounts were rightly discarded. We do not agree with the High Court that it is the duty of the assessing authority to adduce proof in support of its estimate. The basis a....
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....rofit rates on alleged unaccounted sales. The working of the learned Assessing officer (kindly refer Page No. 80 of the Assessment order) is appended as below: Assessment Year Sales estimated outside the books Gross Profit Rate (in %) Addition (based on G.P. Rate) 2014-15 1,99,88,41,945 8.32 16,63,03,650 2015-16 2,57,48,82,182 6.00 15,44,92,931 2016-17 52,41,65,475 6.00 3,14,49,929 The learned Assessing officer has erred in applying gross profit ratio instead of net profit ratio. This is so because learned Assessing officer has treated some documents which were discovered from the premises of third party i.e. ShriGauravSanghvi as evidences of incentive paid to various dealers. The alleged incentive paid to various dealers stands to be other expense. It is submitted that the learned Assessing officer has made additions on account of alleged incentives paid. However, she did not allow deductions of these incentives to the assessee. Other expenses attributable to the revenue generated, if any, from the alleged unrecorded sales cannot be ruled out, considering the business exigency in this line of business like sales co....
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....ial of JaideepIspat& Alloys Put. Ltd. &Rathi Iron & Steel Industries Ltd. Particulars A.Y. 2012-13 A.Y. 2013-14 A.Y. 2014-15 A.Y. 2015-16 F.Y. 2011-12 F.Y. 2012-13 F.Y. 2013-14 F.Y. 2014-15 Sales 4,08,50,43,833 5,68,27,28,336 6,35,69,58,404 6,24,42,83,649 Net Profit (before considerations) 6,37,06,227 8,55,09,129 10,54,48,254 15,21,81,759 Less: Surrendered Income - - - 14,76,00,000 Less: Other Income 1,12,94,495 21,76,156 1,88,99,258 1,39,88,809 Net Profit 5,24,11,732 8,33,32,973 8,65,48,996 (94,07,050) Net Profit Rate 1.28% 1.47% 1.36% -0.15% Average Net Profit Rate 0.99% From the aforesaid working, it is clear that the net profit rate of 0.99% on margin basis and on yearly basis same is ranging between 1.28% to 1.47%. The nature of business run by the assesse is such that neither the gross profit nor the net profit could be consistent or static. Market conditions play a pivotal role in this regard. Such conditions some time compel the assessee to disposs off the....
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....written submission as reproduced above and also observed that the AO has made additions on account of incentives in the form of gold and cash to various dealers as unexplained expenditure u/s 69C of the Income Tax Act, 1961. These expenses have been found recorded in the same incriminating documents viz BS-1, LPS-1, LPS-2 and LPS-3 from where the AO had detailed the unrecorded sales for the period between April, 2013 to April, 2015. Therefore, the AO should have considered and reduced these expenses from the income calculated on the impugned unrecorded sales. I fully agree with the contention of the appellant that the same documents cannot be interpreted by the AO in a different manner. If, the income has been drawn from the said documents the AO is bound to consider expenses also. Similarly, there may be a number of other expenses like commission, salaries and other overhead expenses which must have been incurred by the appellant while effecting sales out of books. Therefore, in order to arrive at real taxable income, the application of gross profit rate cannot be considered as reasonable and realistic. Nor the average net profit rate as calculated by the appellant as per the char....
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....s made by the appellant and associates vide letter dated 09/07/2015 which is duly reproduced by the AO at page no. 83 of the assessment order. The appellant while filing ROI in compliance to notice u/s 153A of the Income Tax Act, 1961 had not given effect to the disclosure by including the surrendered income in the ROI. No reasons have been found given before the AO during assessment proceedings. During appeal proceedings also, the appellant was required to explain as why the surrendered income during search was not included in the ROI, but the appellant has not filed any cogent reasons on the issue. Therefore, I fully agree with the findings of AO that surrendered income for A. Yrs. 2015-16 and 2016-17 was required to be taxed. 6.37 However, separate addition has not been sustained on this account. The same shall be considered as included in the various additions sustained in this appeal order. In view of above discussion, finally, the additions made in the A. Yrs. 2010-11 to 2013-14 are deleted and additions made in the A.Yrs. 2014-15 to 2016-17 are hereby partly confirmed. Accordingly, the grounds of appeal for A. Yrs. 2010-11 to 2013-14 are allowed and grounds for A.Yr....
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....wherein the Ld. CIT(A) agreed with the contention of assessee and formed an opinion that "the AO should have considered and reduced these expenses from the income calculated on the impugned unrecorded sales. I fully agree with the contention of the appellant that the same documents cannot be interpreted by the AO in a different manner. If, the income has been drawn from the said documents the AO is bound to consider expenses also. Similarly, there may be a number of other expenses like commission, salaries and other overhead expenses which must have been incurred by the appellant while effecting sales out of books. Therefore, in order to arrive at real taxable income, the application of gross profit rate cannot be considered as reasonable and realistic. " 15. On consideration of above, we find that the Learned Assessing Officer worked out unaccounted sales by extrapolating the sales worked out from seized documents for a very brief period and the Ld. CIT(A) deleted the additions on this ground in AY 2010-11, AY 2011-12, AY 2012-13 and AY 2013-14 holding that documents found in a particular year cannot affect in other years. However, the Ld. CIT(A) upheld the Assessing Officer....
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....ve at the unaccounted sale figures of another assessment year. In the case law cited supra, Hon'ble Supreme Court had held that sale record of 19 days can be sufficient basis for the AO to determine the sale of entire year in the absence of anything contrary brought on record by the assessee. The AO has also not brought on record any piece of statement of directors or any other responsible persons recorded on the issue of unrecorded sales during the course of search. There is no evidence brought on record to prove that the appellant had been making out of books during the period relevant to these assessment years." Thus, we are of the view that the ld. Assessing Officer unwarrantedly assumed that the asssessee might have incurred out of book sales for the remaining months for which no incriminating document was found. We find that ld. CIT(A) did not appreciate the fact that the assessee co. is subjected to excise under the Central Excise Authorities (who are responsible for collecting excise duty on production/sales) and after due verification, the Hon'ble Principal Commissioner, CGST & Central Excise, Ujjain dropped the proceedings regarding unaccounted sales by way of ....
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....was done then the financial ratios of assessee company would have been affected badly and the financial position would have looked pathetic. It is obvious that giving half of the effect to any transaction; i.e. considering only expenses and not income; would result into an absurd view of the company's financial statements, which no company or organisation will want to happen. No company will prefer to lower down its profit rate and deteriorate its position in front of its shareholders and market unnecessarily. Therefore, the net profit rate applied and the expenses claimed by the assessee were genuine and were only related to the sales recorded in the books. The unrecorded sales would definitely have been made on the cost of unrecorded expenses which are ought to be deducted from the sales and for which the application of Net Profit Rate is realistic and logical. Therefore, if the unrecorded sales are to be added to the income, then the respective percentage of expense deduction shall also be granted. Therefore, the application of Net Profit Rate is genuine and realistic. The net profit rate for different years is reproduced hereunder: - -Average Net Profit Rate = 1.55....
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....icer made additions totalling to Rs.4,49,94,055/- for the Assessment Years 2010-11 to 2016-17. Being aggrieved, the assessee approached the learned CIT(A) and learned CIT(A) deleted the additions for the Assessment Years 2010-11 to 2013-14 on the ground that in these years, no incriminating material was found. However, for the Assessment Years 2014-15 to 2016- 17, the learned CIT(A) confirmed the addition holding that for these years, the incriminating material was found and as such, the Assessing Officer was justified in extrapolating the amount of sales and unaccounted expenditure. Being aggrieved, the assessee is before this Tribunal for the Assessment Years 2014- 15 to 2016-17. 16. Before us, learned Counsel for the assessee submitted that the Ld. CIT(A) as well as Ld. AO erred in blindly relying upon the documents and diaries seized during the course of search which appear to contain some rough work, best known to the writer of the document only, therefore, no addition could be made on the basis of such documents. Moreover, no independent enquiry was conducted by AO to substantiate the opinion of the Investigation Wing who recommended addition on this ground. Further, witho....
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....n any such activity of awarding incentive. Moreover, no independent enquiry was conducted by AO to substantiate the opinion of the Investigation Wing who recommended addition on this ground despite the fact that the assessee disowned the same explaining that the documents under reference have no link and relation with the assessee co. in any manner. Therefore, we are of the view that no cognizance of these documents can be taken in the case of the assessee. Further, since the Net Profit Rate has been applied on the cash sales by the learned CIT(A), all the expenses are deemed to be accounted for out of those unaccounted cash sales and no any separate treatment was required to be given to any other expense or income because if there is consideration of unaccounted cash sales then there shall be consideration of proportionate expenses out of it and for which net profit rate was applied, therefore, the Revenue Authorities should have considered the fact that the addition of an expense of any nature will temper the effect given by applying net profit rate, which would in turn increase the rate of net profit which would give an unreasonable and incorrect effect to the ultimate figure of....
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....ich was then confirmed by Ld. CIT(A). However, we find that the sales which the AO has earmarked were already incorporated in books of accounts and the copy of the ledger Amaltas Education Welfare Society was also submitted before Ld. CIT(A). But, the Ld. CIT(A) overlooked the same provided by assessee. Further, we find that the assessee explained that no excess cash was found in assessee's premises. We find force in the contention of the assessee in view of the fact that if there had been any activity of unaccounted cash sales then there would have been presence of unaccounted cash to the tune of the addition made by Ld. Assessing Officer and the assessee cannot be held responsible for that Amaltas Education Welfare Society failed to respond to the interrogations of the Ld. AO. However, the learned CIT(A) failed to appreciate the same in true spirit. Therefore, we do not find any reason to confirm the order of learned CIT(A) on this issue. Accordingly, we delete the addition of Rs. 19,82,758/-. Thus, ground no.3 raised by the assessee for the Assessment Year 2015-16 is allowed. Ground no.3 raised by the assessee:(A.Y. 2016-17) Addition on account of unexplained expenditure ....
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....f the AO and confirmed the disallowances. Thus, the assessee is before this Tribunal. 28. Before us, learned Counsel for the assessee submitted that while framing the assessment for the AY 2012-13 the Ld. AO did not act judiciously as the ld. Assessing Officer overlooked the evidences in support of genuineness of the credits as well as the identity and creditworthiness of the creditors and acted under a misconceived notion that the creditors were only the paper companies without bringing any corroborative material on record. Further, the unsecured loans under reference have been repaid in the subsequent periods. Per contra, the ld. CIT-DR defended the actions of the Revenue Authorities. 29. We have considered rival contentions and gone through the material available on record. We find that interest was debited on account of interest paid on the unsecured loans outstanding as on beginning of the financial year and this interest was disallowed by the AO holding that the unsecured loans were found fictitious in the AY 2012-13. The Ld. CIT(A) confirmed the view of the Assessing Officer. We find that while framing the assessment for the AY 2012-13, the assessee had furnished evide....
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....d for statistical purposes only. Ground No.5 raised by the assessee-Interest of Rs. 1,77,12,000/- on account of Advances (A.Y. 2015-16 & 2016- 17): 30. Facts, in brief, are that the survey operations u/s 133A were conducted in assessee's premises on 21.08.2014 where no incriminating document was unearthed during the course of survey. However, the assessee voluntarily offered Rs. 14.76 crores and duly incorporated the surrendered amount in books of accounts during the Assessment year 2015-16. However, the ld. Assessing Officer treated the same as loan advanced to various parties and made additions on account of interest @ 12% of Rs. 1,77,12,000/- in A.Y. 2015-16 and A.Y. 2016-17. Being aggrieved, the assessee approached the learned CIT(A) but the learned CIT(A) overlooked the issue and no finding was recorded by the learned CIT(A). Thus, the assessee is before this Tribunal. 31. Before us, the learned Counsel for the assessee submitted that charging of income-tax on notional income is improper because the ld. Assessing Officer simply presumed that that the assessee might have earned interest @ 12% on Rs. 14.76 crores without finding any corroborative evidence on record. Fu....
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....s point, we do not find any reason to confirm the action of the Revenue. Accordingly, ground no.5 raised by the assessee for the Assessment Years 2015-16 & 2016-17 stands allowed. Ground No.6 raised by the assessee (A.Y. 2016-17): Rs. 35,00,000/- on account of unaccounted cash seized 33. Facts, in brief, are that the present ground relates to addition made by the Assessing Officer on account of cash of Rs.35,00,000/- seized from alleged Hawala agent, M/s J.K. Enterprises of Rajkot. Shri Vivek Kumar Gupta and Shri Sanjay Jain were present when the search in the premises of above firm was carried out and Revenue Authorities noted that Mr. Vivek Gupta was found managing all the hawala related affairs of the concern at Indore as in his statement, he informed that he had been helping businessmen of Indore in transferring cash "in" and "out" against their unaccounted sales and purchases. In the statement given to search party, both the above mentioned persons stated that they had also handled the unaccounted cash of Moira Group for the above stated purpose as per the relevant extract of the statements at page nos. 102 to 105 of the assessment order. The Revenue Authorities further ....
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....which reads as under: "A search operation was conducted on premises of an unknown person/ concern (alleged to be a Hawala Agent) located at LG-34, Prem Trade Centre, Maharani Road, Indore. The statements of Shri Sanjay Jain and ShriVivek Gupta (who were supposedly employees of the said person/ concern) have been recorded under oath. The learned Assessing officer placed her credence on statements of these employees without even sanctioning a lease of natural justice to the assessee and made addition of Rs. 35,00,000/-. Firstly, no incriminating material was found during the course of search operations from said person/ concern. This action calls for relevance to the judgements cited supra, i.e. PCIT v. Sunrise Finlease (P.) Ltd. (2018) and CIT vs. Veerprabhu Marketing Ltd. [2016]. Secondly, the assessee company does not hold to be in any relation with the said person/ concern or its employees. They are unknown identities to the company. No opportunity to cross examine the said persons; Shri Sanjay Jain and Shri Vivek Gupta was provided to the assessee. It is further stated that these individual may be subjected to unimaginable amount of coercion and pressu....
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....k of assessee or statement recorded at the back of assessee cannot be used as evidence against the assessee, unless the same is confronted to the assessee during assessment proceedings and right of cross- examination has to be granted to assessee to such statements. Thus, these statements recorded at the back of the assessee which were adverse in nature to the interest of assessee cannot be relied upon against the assessee and no addition could be made on that basis. The decisions relied upon by the Learned Counsel for the assessee before the learned CIT(A) also apply to the facts and circumstances of the case. But, the Ld. CIT(A) did not comment specifically on the reasons submitted by assessee company in the support of its contentions and the observations given by Ld. CIT(A) lacked the specific remarks that why the assessee's explanation was non-satisfactory and insufficient. We also find that the assessee company had already offered an income of Rs. 1 crore during A.Y. 2016-17 covering in the computation of Income of the relevant year and as such, this amount would cover all such miscellaneous amounts after giving set off of Rs. 35 Lakhs out of the said income offered. The s....
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....re, grounds raised in the appeal of the assessee for the Assessment Year 2013-14 stand allowed. However, both the parties have advanced arguments on the grounds raised by the assessee for the Assessment Year 2013-14 on merits too, therefore, discussing in brief, we are deciding these grounds for the Assessment Year 2013-14 on merits. 39 So far as ground no.1 with regard to the addition of Rs. 3,14,00,000/- made by the ld. Assessing Officer as unexplained share capital is concerned, we find that the Balance sheets of the assessee as well as the relevant grouping of Share Application and Share capital show that the amount under reference has not been received in the books during the subject year rather it is way back in the financial year relevant to the Assessment year 2011-12during which subscribers had contributed share application money which was outstanding in the books up till the subject year during which the shares had been allotted to the subscribers. We find that no funds were introduced during the subject year under this head. The details of Share Application Money and balance sheet for the Assessment Year A.Y. 2011-12 was submitted before Ld. CIT(A) as also filed befor....
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....- was debited on account of interest paid on the unsecured loans outstanding as on beginning of the financial year. This interest was disallowed by the AO holding that the unsecured loans were found fictitious in the AY 2012-13. The Ld. CIT(A) agreed with the view of the AO and confirmed the disallowance. 41. We find the interest under reference was paid within the relevant financial year itself after deducting tax under section 194A. The tax so deducted was duly credited to Central Government account and the respective creditors have taken credit of the tax so deducted. Further, it is also a fact that the unsecured loans under reference were repaid in the subsequent periods. Details of repayment of loans under reference were submitted before AO as well as Ld. CIT(A) in the shape of copy of unsecured loan account and a chart depicting date-wise payment of respective creditors with mode of payment. Further, we find that this point has already been considered by us at Para 27 to 29 of this order. Therefore, following the same reasoning, we set aside the orders of Revenue Authorities and accordingly, this ground is remanded to the file of the AO who shall decide this issue after th....
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....sclosed interest income on cash loans. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 5,00,00,000/- made by the Assessing Officer on account of income surrendered u/s 132(4) of the Income Tax Act, 1961 on the basis of incriminating documents seized during search. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs.1,52,87,098/- made by the Assessing Officer on account of bogus inflation of purchases among group concerns which is based on TPO's order u/s 92CA(3) of the Income Tax Act, 1961." 45. Facts, in brief, are that the assessee is a company engaged in the business of manufacturing and trading of steel ingots. The assessee company filed original returns of income, declaring return of income as follows: A.Y. Date of Filing Return of Income Returned Income as per ITR u/s. 139 Date of filing of Return against notice u/s 153A Income declared in Return u/s 153A 2014- 15 03/09/2014 1,01,30,200/- 15/04/2017 1,01,30,200/- 2015- 16 24/03/2017 5,57,20,410/- ....
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..... 48. So far as the ground no.1 and ground no.3 raised for the Assessment Year 2014-15 & 2015-16 with regard to additions on account of alleged bogus Inflation of purchases at Rs.2,84,04,890/- & Rs.1,52,87,098/-, respectively, are concerned, the facts, in brief, are that during the course of assessment proceedings, the AO observed that the assessee entered into specific domestic transactions, from parties covered u/s 40A(2)(b) of the Act, within the meaning of section 92CA of the Act and therefore, case of the assessee was referred to Transfer Pricing Officer-1, Ahmadabad. The TPO-2, Ahmedabad passed order u/s 92CA(3) for AY 2014-15 & 2015-16 on 12.10.2018. The relevant extract of orders is also reproduced at page no 5 to 30 of the assessment order. The AO after considering the orders of the TPO noted that as per order u/s 92CA(3) of the I.T. Act, the TPO determined the Arm length price in respect of domestic transaction and held that excess price paid u/s 92CA comes to Rs.2,84,04,890/- for the Assessment Year 2014-15 and Rs.1,52,87,098/- for the Assessment Year 2015-16. Thus, the ld. Assessing Officer added the adjustment made by the TPO u/s 92CA on account of excess payment to....
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.... Indian company, made certain payments in the nature of remuneration to its directors, purchase of raw materials and payments for job work to its associated enterprises, commission and interest paid to directors and the definition of "Specified Domestic Transaction" has been elaborately discussed under provisions of sec. 92BA of the Act which read as under: - 92BA. For the purposes of this section and sections 92, 92C, 92D and 92E, "specified domestic transaction" in case of an assessee means any of the following transactions, not being an international transaction, namely :- (i) [ *** ] (ii) any transaction referred to in section BOA; (iii) any transfer of goods or services referred to in sub- section (8) of section 80-IA; (iv) any business transacted between the assessee and other person as referred to in sub-section (JO) of section 80-IA; (v) any transaction, referred to in any other section under Chapter VI-A or section J OAA, to which provisions of sub-section (8) or sub-section(10) of section 80-IA are applicable; or Following clause (va) shall be inserted after clause (v) of section 92BA by the Taxation Laws (Amendment) A....
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....2) 124 Taxman 432 (SC). There is merit into this contention as the Hon'ble Apex court has referred to the Judgments by the Hon'ble constitutional bench of the Supreme Court rendered in the case of Kolhapur Cane Sugar Works Limited Vs. UOJ (2000) (2) SCC 536. The Hon'ble Apex court in General Finance Company Vs. ACIT (supra) after considering the submissions of the Ld. Counsel for the revenue in that case held as under: "8. Though we find the submissions of the learned counsel to be forceful, we are constrained to follow the two decisions of the Constitution Benches of this Court in RayalaCorpn. (P) Ltd.'s case (supra) and Kolhapur Canesugar Works Ltd.'s case (supra). This view has held that field for over three decades and reiterated even as late as two years ago. Non-compliance with section 269SS attracted prosecution as well as penalty. Omission of the provision regarding prosecution will not affect the levy of penalty. The advantage arising out of application of the ratio of the two decisions resulting in prosecution in cases of non-compliance with section 269SS is only transactional affecting a few cases arising prior to 1.4.1989. Such cases may be ....
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....6 after its omission which means that the provisions of a section when omitted cannot be invoked. 55. Further, the Hon'ble Karnataka High Court in the case of CIT vs M/S Ge Thermometrics India (I.T.A. No.424/2009), on the similar issue has held as under: "4. During the course of arguments, learned counsel for both parties bring to our notice the judgment of this Court rendered in I.T.A.NO.87612008 C/W l.T.A.N0.87712008 ON 25.11.2014 in the case of COMMISSIONER OF INCOME TAX AND ANOTHER vs. MIS. GE THERMOMETRJCS INDIA (P) LIMITED and submit that this Court having considered a similar question has in similar circumstances, affirmed the order passed by the Tribunal. 5. Perusal of the aforesaid judgment makes it clear that this Court, after considering the substantial question of law raised with regard to the correctness of the view taken by the Tribunal to the effect that in view of the omission of sub- Section (9) in Section 1OB with effect from 01.04.2004 should it be understood that the said section never existed in the statute book and therefore, the benefit claimed by the assessee under Section 1OB should be allowed, has held in paragraph 8 after referrin....
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....s as noted by the Revenue Authorities are that during the course of search, two LPSs 28 & 29 were found and seized which contained details of cash loans advanced by the assessee. LPS-28 contained details of cash loan given by M/s Bharti Ingot Pvt. Ltd to various parties. Shri Pawan Singhania, Director of the assessee co., in his statement admitted that the sum of Rs.5.12 crores represented unaccounted cash loans and was not incorporated in books of accounts. The AO during the course of assessment proceedings observed that the assessee while filing return of income u/s 153A had incorporated income of Rs. 5,08,00,000/- under the head 'income from other sources' and paid due taxes, however, the balance amount of Rs. 4,00,000/- was not shown in return filed u/s 153A of the Act. Therefore, the AO made addition of balance amount to the income of the assessee. The AO further presumed that the assessee could have earned interest @ 12% on the said cash loans and made further addition of Rs. 61,44,000/- to the income of the assessee in AY 2015-16 under consideration. Being aggrieved, the assessee went into appeal before the learned CIT(A) and learned CIT(A) deleted the addition on th....
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....le Apex Court in the case of Umacharan Saha& Bros Co. v/s CIT 37 ITR 21 (SC) held that suspicion, however, strong cannot take place of proof. 2. Hon'ble Supreme court in the case of K P Varghese v/S ITO (1981) 131 ITR 597(SC) held that assessee must be shown to have received more than what is disclosed by him as consideration. 3. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd v/s CIT (1954) 26 ITR 775 (SC) held that although strict rules of evidence Act do not apply to income tax proceedings, assessment cannot be made on the basis of imagination and guess work. 4. Apex court in the case of DhirajLal Girdharilal v/ s CIT (1954) 26 ITR 736 (SC). 60. On consideration of above, we are of the view that burden of proof lies upon him which affirms not upon him who denies and the ratio laid down in the above judicial pronouncements is squarely applicable to the facts of the present case as the ld. Assessing Officer was required to bring some tangible and positive material on record to prove that assessee had actually received interest on cash loans. Therefore, the learned CIT(A) rightly deleted the addition considering the facts and ....
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....00/- during the search and the assessee year-wise bifurcated the surrendered income i.e. Rs. 5,08,00,000/- for AY 2015-16 and Rs. 1,00,00,000/- for AY 2016-17 which was incorporated in the books of accounts in the respective years and were also offered for taxation in return of income u/s 153A under the head 'Other Sources'. We find that the copies of ledger account indicating the above-mentioned surrender amount incorporated in the books and returns for the above years indicating the same offered for taxation were submitted before Ld. AO as well as before Ld. CIT(A). Therefore, it is clear that the surrendered income was duly accounted for, offered in the return of income and also the taxes due were paid. Thus, the same were not required to be added again to the total income of the assessee. Further, the ld. Assessing Officer giving reference to the statement of the assessee made addition for undisclosed income. However, no specific reference was made to any incriminating material having its bearing on the surrendered income. Ld. Assessing Officer failed to consider the fact that the voluntary surrender was made on account of cash loans as mentioned on LPS-28 found and sei....
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....as open to the person who made the admission to show that it was incorrect. However, reliance is placed on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT Vs. ChandrakumarJethmalKochar (2015) 55 Taxmann.com 292 (Gujarat), wherein it has been held that merely on the basis of admission that few benami concerns were being run by assessee, assessee could not be basis for making the assessee liable for tax and the assessee retracted from such admission and revenue could not furnish any corroborative evidence in support of such evidence. It was further urged by the assessee that admission should be based upon certain corroborative evidences. In the absence of corroborative evidences, the admission is merely a hollow statement. We have given our thoughtful consideration to the rival contentions of the parties. It is undisputed fact that the statement recorded u/s 132(4) of the Act has a better evidentiary value but it is also a settled position of law that the addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the contents of the statement. In the case in hand, revenue could not point out as what w....
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.... learned counsel for the assessee, ShriBinodPoddar, in fact, was because of coercion exerted by the search officers. In explanation, it was submitted that the firm or the individual had no undisclosed income. The assessee's said retraction was not accepted by any of the authorities below on the ground that the statement given by the assessee appears to be voluntarily given statement disclosing undisclosed income of Rs. 20 lacs. According to the learned counsel for the assessee, ShriBinodPoddar, the Assessing Officer had full jurisdiction to proceed for further enquiry and could have collected evidence in support of alleged admission of undisclosed income of the assessee. 6. We are of the considered opinion that statement recorded under section 132(4) of the Income Tax Act, 1961 is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Drawing inference from the facts is a question of law. Here in this case, all the authorities below have merely reached to the conclusion of one conclusion merely on the basis of assumption resulting into fastening of the liability upon the assessee. The statement on oath of the assesse....
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....under: "we are of the considered view that, for deciding any issue, against the assessee, the authorities under the IT Act, 1961 have to consider, as to whether there is any corroborative material evidence. If there is no corroborating documentary evidence, then statement recorded under s. 132(4) of the IT Act, 1961, alone should not be the basis, for arriving at any adverse decision against the assessee. If the authorities under the IT Act, 1961, have to be conferred with the power, to be exercised, solely on the basis of a statement, then it may lead to an arbitrary exercise of such power. An order of assessment entails civil consequences. Therefore, under Judicial review, courts have to exercise due care and caution that no man is condemned, due to erroneous or arbitrary exercise of authority conferred." The court further held that "if the assessee makes a statement under s. 132(4) of the Act, and if there are any incriminating documents found in his possession, then the case is different. On the contra, if mere statement made under s. 132(4) of the Act, without any corroborative material, has to be given credence, than it would lead to disastrous results. Cons....