TaxTMI 
TaxTMI 
2025 (4) TMI 2160
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....01.2005. During the course of assessment proceedings, the AO issued notices u/s 142(1) of the Act, however, either they were remained uncompiled with or part details such as financial statements etc. were filed. Therefore, the AO vide final show cause letter dated 27th February, 2006 has asked the assessee to furnish additional information in respect of both the proprietorship firms which is reproduced at pages 3 to 10 of the assessment order. However, this notice was also remained un-complied with. In the meantime, while making verifications of the details in the case of assessment proceedings simultaneously caried out for other assessee namely M/s Vision Inc. in his jurisdiction, it was come to the knowledge of the AO that a search was carried by the Department of Revenue Intelligence (DRI) at the premises of the assessee i.e. Sh. Sanjeev Malhotra and therefore, he communicated with the DRI and called for the details collected by them during the course of search. In response, the DRI had supplied the copy of show cause notice No. DRI. F. No.50C/11/2003 dated 31.01.2004 issued to the assessee and five other persons. Based on such information and show cause supplied by the DRI, the....
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.... XXIII New Delhi is arbitrary, biased to the extent of addition sustained by him. 2) That the Learned CIT (Appeals) has grossly erred in sustaining the addition of Rs. 4.09 Crores paid by the Appellant to the Customs authorities as unexplained expenditure u/s 69C of the Act. 2.1) That the Learned CIT(Appeals) has grossly erred in disregarding the confirmation of Rs. 1.83 Crores (being the amount of loan of Rs. 1,32,00,000/- received from M/s Gullu Exports (P) Ltd and Rs. 51,00,000/- from M/s Sarthak International Ltd for payment of Customs duty) filed and facts on record while sustaining the addition of Rs. 4.09 Crores made on this count. 2.2) That the Learned CIT(Appeals) has grossly erred in not passing a speaking order with regard to the amount of Rs. 2,06,00,000/-(out of total addition of Rs. 4.09 crores as referred in Ground No. 2) being the amount paid by the appellant from his bank accounts towards Customs duty ignoring the bank statements of proprietorship concerns from where the amount had been sourced/withdrawn on record of the lower authorities. 2.3) That the Learned CIT(Appeals) has grossly erred in sustaining the addition of Rs. 4.09....
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....ellant craves leave to add, alter or delete the above grounds of appeal at the time of hearing." 5. The grounds of appeal taken by the Revenue in its appeal are as under: "1. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in law and on facts in deleting the addition made on account of sale proceeds Rs. 3,07,96,87,763/-. 2. The Ld. CIT(A) has ignored the fact that all the sale proceeds were bogus as established by the DRI, hence proceeds deposited in the bank account of the assessee were treated as income. 3. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in law and on facts in deleting the addition made on account of duty draw back/export incentive of Rs. 43,15,24,270/-. 4. Since the sales were bogus, hence amount received by the assessee on account of duty draw back was treated as his, the fact which was ignored by the Ld. CIT(A). 5. On the facts and in the circumstances of the case the Id. CIT(A) has erred in law and on facts in deleting the addition made on account of advance received from customers of Rs. 54,67,707/-. 6. The Ld. CIT(A) has ignored the fact that asses....
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....ot intimated the department about his present address. At the same time, the assessee pursued his appeal before the ld. CIT(A), therefore it cannot be said that he was not aware of the pending proceedings. At the same time, the AO was aware of the fact that the assessee was appearing before the ld. CIT(A) thus he could have requested CIT(A) to direct the assessee to appear before the AO. The additional evidences so filed before the ld. CIT(A) are shipping bills, bills of lading, bank certificates regarding realization of sale proceeds, confirmations of the parties, letter of credit issued by bank for foreign affairs of USSR of Moscow, copy of cross examination of Mr. P.S. Ahluwalia, Ex-Director of Conti Shipping Transport Pvt. Ltd. on 21.03.2006, Sh. Harshwardhan, chief Manager, PNB, copy of account of parties from whom advances were received along with photocopy of bank statement and details of payments of 4.09 crore to Customs Department etc. A perusal of these additional evidences, we find that all these are necessary for the determination of the issues involved in the appeal of the assessee as well as of the revenue, therefore, looking to the nature of the documents being cruci....
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.... AMOUNT(RS.) 15.02.2003 689305 PNB 900,000.00 15.02.2003 689306 PNB 900,000.00 15.02.2003 689307 PNB 900,000.00 15.02.2003 689308 PNB 900,000.00 15.02.2003 689309 PNB 900,000.00 15.02.2003 689310 PNB 900,000.00 15.02.2003 689311 PNB 100,000.00 20.02.2003 689324 PNB 900,000.00 20.02.2003 689325 PNB 900,000.00 20.02.2003 689326 PNB 300,000.00 22.02.2003 689333 PNB 100,000.00 22.02.2003 689332 PNB 900,000.00 24.02.2003 689336 PNB 900,000.00 24.02.2003 689337 PNB 300,000.00 25.02.2003 689343 PNB 900,000.00 25.02.2003 689344 PNB 500,000.00 27.02.2003 689362 PNB 200,000.00 27.02.2003 689361 PNB 800,000.00 07.04.2003 689344 PNB 900,000.00 07.04.2003 689345 PNB 100,000.00 Total 13,200,000.00 We further certify that we are income tax assessee and our PAN is AAACG4332J SARTHAK INTERNATIONAL LTD. CERTIFICATE DATE D.D.NO. NAME OF BANK AMOUNT(RS.) 28.02.2003 675649 PNB 600,000.00 01.03.2003....
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....vement of the money through banking channels was not sufficient to prove the genuineness of the transaction. As such, it is held that the explanation offered by the assessee under the provisions of sec. 69C is not satisfactory and therefore the addition made on this account deserves to be upheld. The assessee fails in ground of appeal No.8. 9.2. Before us, the Ld. AR of the assessee argued that assessee was taken to the custody on 28.12.2003 and earlier on 13.03.2003 where he was asked to make the payment of Rs. 4.50 crores against the wrong claim of duty draw back incentives. Assessee gave cheques of this amount and later paid Rs. 4.09 Crores by way of demand draft under protest. A sum of Rs. 2.06 Crores were deposited by the assessee from his proprietary firm M/s K.S. Traders, a sum of Rs. 1.32 Crores from M/s Gllu Exports Pvt. Ltd. where he was one of the Director and Rs. 51 lacs from M/s Sarthak International Ltd., a proprietorship firm of his relative and Rs. 20 lacs from M/s Mohinder Exports, proprietorship firm of his another relative. The necessary copies of the bank statement of the respective parties along with confirmations were filed in Paper Book pages 338 to 363 wh....
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....ee. Needless to say assessee be provided sufficient opportunity of being heard before concluding the issue. As a result, this ground of the assessee is partly allowed for statistical purposes. 10. Ground of appeal No.3 is in relation to the addition of Rs. 2,40,48,000/- made by the AO on account of addition in the capital account. 10.1 Before us, the Ld. AR of the assessee submitted that in the capital account of both the firms of the assessee there were credit entries. In the books of M/s Alpha Exports a sum of Rs. 1,20,24,000/- was credited on 31st March, 2023 with the narration "OOO Fair. Similarly in the capital account of M/s K.S. Traders a credit entry of Rs. 1,20,24,000/- is appearing on 21st August, 2022 with the narration "OO Fair Trade". Both the accounts are available in the PB pages 364 and 267 respectively. The corresponding entries of the said amount were also available in the PB pages 309 and 381 which are the ledger accounts of "OO Fair Trades" in the books of M/s K.S. Traders and "OOO Fair" in the books of M/s Alpha Exports respectively. The Ld. AR submitted that from the perusal of these entry it is clear that they are book entries made with no fresh inducti....
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....eated as 'Income from Other Sources' and not as income from 'Business or Profession'. 11.1 Before us, the Ld. AR submitted that FDRs were made with the bankers against the margin money towards the credit facilities obtained which were utilized for business purposes, therefore, there was a direct nexus between interest received on such FDRs and the business income of the assessee. He thus submitted that the interest received on such FDRs should be treated as business income and would be eligible for deduction u/s 80HCC of the Act. He further submit that while confirming the interest income from FDRs as income from other sources, the Ld. CIT(A) has placed reliance on the judgment of Hon'ble Supreme Court in the case of IPCA Lab (supra) wherein it is held by the Hon'ble Supreme Court that since profit figure in both the proprietary firm of the assessee is negative, thus, assessee will not got the benefit u/s 80HCC of the Act. He further submitted that the Hon'ble Supreme Court vide order in the case of CIT vs. Avani Exports reported in 58 taxman.com 100(SC) held that condition stipulated in 3rd and 4th proviso of section 80HCC would not retrospective and in case having export turn ....
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....er, Central Excise which is adjudicating authority, wherein the witnesses had confirmed the fact of exports made by the appellant. These additional evidences further include bills issued by the appellant, shipping bills, bill of lading, bank certificate regarding realization of sale proceeds, and letter of credit issued by bank for foreign affairs of USSR of Moscow. Copy of cross examination of Mr. P.S. Ahluwalia, Ex-Director of Conti Shipping Transport Pvt. Ltd. on 21.03.2006, Sh. Harshwardhan, chief Manager, PNB, copy of account of parties from whom advances were received along with photocopy of bank statement and details of payments of 4.09 crore to Customs Department etc. However, Ld. CIT(A) by observing in para 6 of the appellate order that assessee during the course of assessment proceedings had failed to disclose the fact of search carried out by DRI and also failed to state that show cause notice dated 31.01.2004 issued by DRI was already available with him and was non-cooperative during the course of assessment proceedings, had rejected the additional evidences so filed. Before the ld. CIT(A), it was the claim of the assessee that Assessing officer has solely relied upon t....
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....validly, the opportunity of cross examination could have also been afforded by the same method of affixation. Moreover, in spite of specific directions to the then AO, at the appellate stage, the initiative was lacking on an incorrect appreciation of law. 14. From the above, two conclusions can be drawn (i) The Id. AO has relied totally on the show cause notice of the DRI to make the impugned additions; and (ii) Principles of natural justice was not followed. One may take the first part, wherein the Id. AO from the perusal of the assessment order has evidently relied totally on the investigations of the DRI. No corroborative evidence has been brought on record. No independent enquiry with a view to ascertain the truth or the veracity of the contents of the show cause issued by DRI has even been made. There is not even a whisper to that end in the impugned order. Evidence as collected by the DRI has also not been examined. Recently the Madras High Court was confronted with similar facts in CIT v Vignesh Kumar Jewellers [2009] 222 CTR (Mad) 79, wherein the DRI had found and seized unaccounted stock of jewellery and gold idols of foreign origin during a search at the business....
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....it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine the manager of the bank with reference to the statements made by him. (emphasis supplied) 18. In State of Kerala v K. P. Shaduli Yusuff [1977] 39 STC 478 (SC), the Apex Court has emphasised on the need of providing the assessee with evidence and giving an opportunity to cross examine witnesses. The Hon'ble Apex Court observed that cross examination was one of most efficacious methods of establishing truth. 19. In view of the aforesaid judgments of the Hon'ble Supreme Court, It is settled law that where the AO seeks to rely upon evidence obtained from other parties, the same has to be provided to the assessee and the third parties should be made available to the assessee for cross examination by summoning them. 1 am already on record that the Id. AO has not afforded any opportunity to the assessee to cross examine the witnesses, before arriving at a conclusion. On this ground also, the assessee deserves to succeed. 20. There is another angle to the issue. The Id. AO has relied he....
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....t would naturally mean that the assessee was carrying out an unlawful activity. However, the Income-tax Act does not a make a distinction between income or profit derived from a legal or an illegal business. In CIT v S. C. Kothari [1971] 82 ITR 794 (SC), the Apex Court observed as under: "If the business is illegal, neither the profits earned nor the losses incurred would be enforceable in law. But, that does not take the profits out of the taxing statute. Similarly, the taint of illegality of the business cannot detract from the losses being taken into account for computation of the amount which can be subjected to tax as 'profits' u/s. 10(1) of the Act of 19922. The tax collector cannot be heard to say that he will bring the gross receipts to tax. He can only tax profits of a trade or business. That cannot be done without deducting the losses and the legitimate expenses of the business." In CIT v Piara Singh [1980] 124 ITR 40 (SC), the assessee had been apprehended by the Indian Police while crossing the Indo-Pakistan border into Pakistan. A sum of Rs. 65,500/- in currency notes was recovered from him. On interrogation, he stated that he was taking the c....
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....6 as applied in Kisanlal Shivhandrai v CIT 88 ITR 293 (P&H), Pulangode Rubber Produced Co. Ltd. v State of Kerala 91 ITR (AT) (SC), CIT v Doris S. Luiz 96 ITR 646 (Ker), Roshan Beevi v Joint Secretary to Govt. of Tamilnadu AIR 1984 NOC 103 etc. 25. There is no doubt that confession made before a Custom official meets the principles of natural justice as held in Surjit Singh Chhabra v Union of India AIR 1997 SC 2560. However, it is also settled law that while a confession is a valid piece of evidence, it has to be backed by corroborative evidence particularly when the assessee has retracted from the said statement. It is also settled law that while considering a retracted statement, it has to be seen that after how much delay the said retraction has been made. In the case in hand, no corroborative evidence has been brought on record with regard to the impugned additions. Secondly, the statement which was made on 28.12.2003, was retracted before a Civil Magistrate on 29.12.2003 i.e. within 24 hours. Thus, not much credence can be given to the alleged confession statement especially in the Income-tax Act, 1961. Even assuming for a moment that the statement recorded on 28.12.2....
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.... submitted that assessee claimed export was made to the Russian Federation, however, neither the goods were exported to the Russian Federation and nor the payments were received from the parties situated at Russian Federation and the goods were diverted to Dubai and, therefore, AO has rightly treated the entire sale turnover of Rs. 3,07,96,87,763/- as unexplained receipts in the hands of the assessee. Ld. DR further submitted that assessee has also failed to produce the books of accounts to verify the expenses claimed against such exports which include the cost of goods sold and further expenses claimed in the profit and loss account, and, therefore, in absence of such verification, the AO had rightly disallowed the expenses. Ld. CIT DR further submitted that assessee had received exports incentives in violation to the Customs Act and RBI Circulars which incentives were meant for export to Russian Federation only and, therefore, AO has rightly made the addition of Rs. 43,15,24,270/- on account of exports incentives as unexplained receipts. Ld. CIT DR submitted that Ld. CIT(A) had made undue pressure on the Assessing Officer for examinations of the evidences/investigations report an....
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....He, accordingly, prayed for confirmation of the order of Ld. CIT(A). 14.4. We have heard the rival submissions and perused the material available on record. In the instant case, it is seen that the assessee since beginning had not complied with any statutory notice and part information were filed on few occasions and majority of details were never filed. It is also a matter of fact that books of accounts were not produced before the Assessing Officer. The additional evidences filed before the Ld. CIT(A) were not admitted by the Ld. CIT(A) for the reason that assessee has not able to demonstrate as to why he was prevented by sufficient cause for not producing such details before the Assessing Officer. It is contended by the assessee that such evidences should be admitted for adjudication. During the course of appellate proceedings, the assessee vehemently argued that the Assessing Officer has not provided the material relied upon nor any opportunity of cross examining the witnesses were provided to it. He further filed various details as additional evidences which were not admitted, however, Ld. CIT(A) on three occasions asked the Assessing Officer to submit the remand report aft....
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....s to be taxed. Therefore, under these circumstances, we are in agreement with ld. CIT(A) who had rightly deleted the additions made, which order is hereby upheld on these two issues. The grounds of appeal No.1 to 4 of the Revenue are thus dismissed. 15. Ground No.5 & 6 of the Revenue are in relation to the deletion of addition of Rs. 54,67,707/- made by Assessing Officer on account of advances received from parties holding the same as unexplained. 15.1. Brief facts leading to the facts are that assessee has shown advances of Rs. 54,67,707/- received from four parties of Moscow, Russia. The AO during the course of assessment proceedings vide notice u/s 142(1) asked the assessee to file the copies of the accounts and, further asked to file the necessary details to show how these advances were dealt with in subsequent financial years. The Ld. AO further observed that as per DRI show cause notice parties at Moscow are non-existent, hence, advances claimed to have been received from the parties from Russia are doubtful. However, as the assessee had failed to submit any details in this regard, therefore, the AO had made the addition. During the course of appellate proceeding before....