2016 (12) TMI 1769 - AT - Income Tax

Assessment u/s 153A - order passed on a date beyond the prescribed limit u/s 153B(1)(a) - HELD THAT - As per the assessment order the date of the assessment order is 28.3.2013 but there is no evidence before us that the order has been passed by the Assessing Officer after expiry of limitation. We find that the Assessing Officer had passed the order in time but it was dispatched on later date but it does not mean that the order is passed after the period of limitation therefore we dismiss this ground. Addition on account of share application money received by the assessee - whether incriminating material in respect of share application money was found or seized during the course of search under s.132? - HELD THAT - We allow the present appeal filed by the assessee for the assessment year 2007-08 on the issue of section 153A r.w.s. section 143(3) of the I.T. Act wherein it has been held that in absence of any incriminating documents found and seized during the course of search the Assessing Officer is not justified in making the additions in non-abated assessment while passing the order u/s 153A r.w.s. 143(3) of the Act. Thus we hold the making of addition in non-abated assessment for the A.Y. 2007-08 as void ab initio. Consequently the addition made in the present assessment order passed u/s 153A/143(3) for the assessment years 2007-08 is deleted. Addition of share application money - HELD THAT - Assessee has complied with all the information which was desired by the Assessing Officer to be submitted. Therefore we are of the view that no addition is called for as we have already held in Anant Steel P. Ltd. vs. ACIT 2015 (11) TMI 1758 - ITAT INDORE following the judgment of Lovely Export (SC) that if at all the Assessing Officer is not satisfied with the genuineness of transaction then the Assessing Officer is at liberty to make the addition in hands of that co. In decision of Hon ble Delhi High Court in the case of Principal CIT vs. Softline Creations P. Ltd. 2016 (9) TMI 255 - DELHI HIGH COURT it has been held that assessee has duly discharged burden of proof by providing necessary information and inability to produce share applicants could not lead to an adverse inference - ground of the appeal of the assessee is allowed. Rejection of books of account - excess stock found - HELD THAT - Finding of excess stock during the course of search by itself suggest that books of accounts of the assessee were not correct and complete and these were not reliable. Moreover we find that assessee co. and its directors have also surrendered Rs. 5 crores as additional income therefore it was the base for rejection of book results. Therefore we are of the view that Assessing Officer and learned CIT(A) are justified in rejecting the book results for the assessment year 2011-12. The assessee has relied upon many decisions during the course of hearing but the facts of all these cases are altogether different. Therefore we endorse the action of the Assessing Officer and learned CIT(A) regarding rejecting the book results u/s 145(3) Estimating the G.P. @ 1.25% of the total turnover - CIT(A) s action in reducing the g.p. addition on sale of gold bullion and silver bullion - HELD THAT - In absence of any incriminating documents there is absolutely no justification for making any estimation of g.p. in respect of assessment year 2010-11 for which rejection of books of accounts has not been upheld by us. Accordingly we hold that there was no justification in the AO s action as well as in the learned CIT(A) s action in estimating g.p. on sales for the assessment year 2010-11. However for assessment year 2011-12 we have upheld the rejection of books of accounts and therefore we hold that considering the facts and circumstances of the assessee s case it would be just and fair to estimate g.p. on sale of gold bullion and silver bullion @0.30% as against 0.29% shown by the assessee in its books of accounts. Enhancing the income of the assessee by suo-mottu estimating the sales of the assessee 20% higher than that shown in the audited books of account - HELD THAT - As during the course of the search proceedings not a single incriminating document or loose paper was found from which the unaccounted trading of bullion by the assessee could get established. We have also observed that the assessee had maintained stock register and such stock register was duly produced before the Assessing Officer. We also observed that the Revenue Authorities have not brought on record any single instance of any sales having been made at a rate lower than the then prevailing market rate. If the sale is not found to have been made at the rate below than the market rate any allegation regarding manipulation in the cash memos without any basis has no legs to stand. We thus find no substance in the action of the learned CIT(A) in enhancing the sales of the assessee on ad-hoc basis by 20% of the sales shown in the audited accounts Suppression of commodity trading income - Excess claim of transaction charges - HELD THAT - the transaction charges have no direct nexus with the commodity trading income for the reason that such charges are invariably required to be paid at a fixed rate by a dealer/broker in the forward commodity market to the respective commodity exchanges irrespective of the outcome of the transactions. So even for losses one would be required to pay the transaction charges. Further the commodity forward transactions are speculative in the nature and net result of transactions for one year cannot be compared with that of the other year. We find that except making the guess work the learned CIT(A) has not brought on record any material for his presumption of suppression of commodity trading income. In such circumstances there was no reason for the learned CIT(A) to estimate the income of the assessee for the assessment year 2010-11 on the basis of transaction charges vis-a-vis commodity income shown by the assessee for the immediately preceding assessment year i.e. 2009-10. Thus there was no justification for making an enhancement of Rs. 56, 47, 000/- in the assessee s income on account of commodity trading income for the assessment year 2010-11 and of Rs. 1, 92, 52, 243/- for assessment year 2011-12. We also find no justification in the learned CIT(A) s action in making an enhancement of Rs. 47, 47, 254/- in the assessee s income on account of excess claim of transaction charges. Enhancement of the salary - addition based on loose paper found in search - HELD THAT - Loose paper is in the form of P & L account of one of the several commodity divisions of the assessee i.e. of MCX division and that too for the period from 01.4.2010 to the date of search i.e. 25.11.2010. Similarly the loose paper inventorised was also in respect of monthly salary paid in one of the divisions. The learned CIT(A) misdirected himself that the salary stated was in respect of entire divisions whereas it was only one of the divisions. We find that the assessee has filed the complete details of salary paid to various staff members and the entire salary was paid through account payee cheques. DR could not controvert such fact by brining any contrary material on record. We also find that during the course of assessment proceedings the assessee had produced all the books of account and other records before the Assessing Officer and the Assessing Officer had not found any discrepancy in the salary payments recorded by the assessee in its books of account. Subject enhancement is a result of misinterpretation of the documents found during the course of search without considering that such documents were pertaining only in respect of one of the divisions and were containing the details for the part of the year only and therefore the same are not comparable with the consolidated details for the whole year. No addition to be made. Addition disbelieving the loss incurred by the assessee on account of sale of surplus stock of gold bullion found during the course of search - HELD THAT - AO without bringing any concrete material on record presumed that the sale of gold bullion was deliberately shown by the assessee on such date at which the gold rate was low as compared to the rate of previous couple of days and the assessee has shown to have sold the excess stock on 28-01-2011 for booking loss of Rs. 7, 40, 297/- on sale of unaccounted investment. We have already held that no evidence found as regard to suppression of any sale. In such circumstances we are of the view that the ld. CIT(A) was justified in deleting the entire addition holding that the AO failed to prove that sale bills of bullion were bogus. Even before us no contrary material has been brought on record by the Revenue to controvert the findings of the ld. CIT(A).

Summary

Issues Involved:
1. Limitation Period for Passing Assessment Order
2. Invocation of Section 153A
3. Addition on Account of Share Application Money
4. Rejection of Books of Account
5. Estimation of Gross Profit
6. Enhancement of Sales Turnover
7. Enhancement of Income from Commodity Trading
8. Enhancement of Salary Expenses
9. Addition on Account of Loss on Sale of Surplus Stock

Detailed Analysis:

1. Limitation Period for Passing Assessment Order:
The assessee contended that the assessment order was framed beyond the time limit prescribed under Section 153B(1)(a). The Tribunal held that there was no evidence to prove that the order was passed after the expiry of the limitation period. The order was passed within the prescribed time limit but dispatched later. Therefore, this ground was dismissed.

2. Invocation of Section 153A:
The assessee argued that no incriminating material was found during the search for the assessment year under consideration, and hence, invoking Section 153A was unjustified. The Tribunal noted that the assessment year was non-abated, and no incriminating material was found. Therefore, no additions could be made under Section 153A without incriminating material. This ground was allowed in favor of the assessee.

3. Addition on Account of Share Application Money:
The assessee contested the addition of Rs. 60,00,000 on account of share application money, arguing that no incriminating material was found, and the transactions were genuine. The Tribunal found that the assessee had provided sufficient evidence to establish the identity and creditworthiness of the share applicants and the genuineness of the transactions. The addition was deleted.

4. Rejection of Books of Account:
The AO rejected the books of account due to discrepancies found during the search, such as excess stock and cash deposits not matching with sales. The Tribunal upheld the rejection of books for A.Y. 2011-12 but not for A.Y. 2010-11, as there was no significant defect found for the latter year.

5. Estimation of Gross Profit:
The AO estimated the gross profit based on market inquiries, which was challenged by the assessee. The Tribunal held that the estimation of gross profit should be based on rational logic and comparable cases. For A.Y. 2010-11, the Tribunal accepted the book results, while for A.Y. 2011-12, the gross profit was estimated at 0.30%.

6. Enhancement of Sales Turnover:
The CIT(A) enhanced the sales turnover by 20%, presuming suppression of sales. The Tribunal found no incriminating documents to support this enhancement and deleted the addition, holding that the enhancement was based on assumptions.

7. Enhancement of Income from Commodity Trading:
The CIT(A) enhanced the income from commodity trading based on transaction charges and provisional profit and loss accounts found during the search. The Tribunal noted that the transaction charges were not directly related to the income and that the provisional accounts were for part of the year. The enhancement was deleted.

8. Enhancement of Salary Expenses:
The CIT(A) enhanced the salary expenses based on provisional accounts and monthly salary details found during the search. The Tribunal found that these documents were for part of the year and one division only. The complete details provided by the assessee showed no discrepancy. The enhancement was deleted.

9. Addition on Account of Loss on Sale of Surplus Stock:
The AO disallowed the loss on the sale of surplus stock found during the search, alleging that the sale was deliberately shown at a lower rate. The Tribunal found that the sale was at the prevailing market rate and that the AO's presumption was without concrete evidence. The addition was deleted.

Conclusion:
The appeals of the assessee were partly allowed, and the appeals of the Revenue were dismissed. The Tribunal provided detailed reasoning and relied on various judicial precedents to arrive at its decision.