2020 (5) TMI 123 - AT - Income Tax

Assessment u/s 153A - approval u/s 153D is not valid statutory approval - no proper satisfaction nor proper justification given in the approval - Addition on account of alleged gross profit calculated on the basis of material allegedly found during the course of search of third person by treating it as allege unaccounted income of assessee - HELD THAT - Counsel could not substantiate with evidence to our satisfaction that the AO has not obtained valid approval u/s 153D. Under these circumstances, and in absence of any material to substantiate his case, the additional grounds raised by the assessee are dismissed. Unaccounted income outside the books of account, unaccounted investment and commission paid - HELD THAT - Since the documents relating to unaccounted trading outside the books of account along with Dharam Kanta slips showing weight of different types of metals weighed alongwith vehicle number and handwritten slips containing noting of receipt/delivery of purchase/sale of such metals along with dates were found from the premises owned by Shri Himanshu Kohli who himself along with his father are also engaged in such metal trading business and not a single paper giving any hint of any unaccounted trading by the assessee outside his books of account was found from his premises, therefore, we are not able to agree with the finding of the CIT(A) that 70% of such unaccounted turnover belongs to the assessee for which the corresponding profit to be taxed in the hands of the assessee. In this view of the matter, we set aside the order of the CIT(A) and direct the AO to delete the addition being the profit on such unaccounted turnover outside the books of account. Since the addition on account of unaccounted turnover outside the books of account is deleted, the question of initial investment in such unaccounted turnover does not arise and therefore the same cannot be sustained. Accordingly, the same is directed to be deleted. Addition on account of unaccounted commission is concerned, we have held in the preceding paragraphs that the assessee has not done any unaccounted trading in metal in his name and whatever trading has been done was done by Shri Himanshu Kohli from whose premises all the seized documents, which are the basis of addition in the hands of the assessee, were found and that Shri Himanshu Kohli has done some business of metal trading for the family concern, namely, M/s Klaxon Trading (P) Ltd. and all the transactions were recorded in the books of account of the said concern as stated and the commission so paid was through account payee cheque on which TDS has duly been deducted, therefore, no addition on account of unaccounted commission paid by the assessee to Shri Himanshu Kohli is called for. Accordingly, the same is directed to be deleted. Addition on account of alleged commission received from MCX Trading - AO on the basis of the seized document as per Exhibit-4 where the name Pawan appears, made the addition which has been upheld by the CIT(A) - HELD THAT - As already held that when Shri Himanshu Kohli was himself engaged in such type of business and he has done some business for one of the concerns where the assessee is a director, namely, Klaxon Trading (P) Ltd., therefore, merely because the name of the assessee appears in a code word, addition could not have been made in the hands of the assessee especially in absence of any other corroborative evidence. The submission of assessee in his individual capacity was not engaged in unaccounted metal trading business also has some force since in his statement recorded u/s 132(4), the assessee had categorically stated that his family concern, namely, Klaxon Trading (P) Ltd., was engaged in metal trading business and whatever commission has been paid to Shri Pawan Kumar Dua was paid by the company through proper banking channel which was duly recorded in the books of account and due TDS procedures have been followed. In this view of the matter, the order of the CIT(A) is set aside and the ground raised by the assessee is allowed.

Issues Involved:
1. Jurisdiction under Section 153A.
2. Addition on account of alleged gross profit.
3. Addition on account of alleged unaccounted investment.
4. Addition on account of alleged commission paid.
5. Validity of the assessment order due to lack of incriminating material.
6. Charging of interest under Section 234B.
7. Validity of approval under Section 153D.

Detailed Analysis:

Jurisdiction under Section 153A:
The assessee challenged the jurisdiction of the Assessing Officer (AO) under Section 153A. The Tribunal found no merit in the arguments advanced by the assessee. The additional grounds raised by the assessee regarding the invalidity of approval under Section 153D were dismissed due to lack of evidence.

Addition on Account of Alleged Gross Profit:
The AO made additions based on seized documents found during the search, attributing 70% of unaccounted turnover to the assessee. The AO applied a Gross Profit (GP) rate of 1.92% on the stock value of ?88,91,83,008/- for the year under consideration, resulting in an addition of ?1,70,72,313/-. The Tribunal found that the seized documents were from the premises of Shri Himanshu Kohli and his father, who were also engaged in metal trading. The Tribunal held that no addition could be made in the hands of the assessee without corroborative evidence and directed the AO to delete the addition.

Addition on Account of Alleged Unaccounted Investment:
The AO made an addition of ?1,31,95,532/- on account of unaccounted investment in metal trading business. The Tribunal held that since the addition on account of unaccounted turnover was deleted, the question of initial investment in such unaccounted turnover does not arise. The Tribunal directed the AO to delete the addition.

Addition on Account of Alleged Commission Paid:
The AO made an addition of ?27,44,392/- being the commission paid to Shri Himanshu Kohli. The Tribunal held that the assessee had not done any unaccounted trading in metal and whatever trading was done was through the family concern, M/s Klaxon Trading (P) Ltd., where all transactions were recorded in the books of account and commission was paid through account payee cheque with TDS deducted. The Tribunal directed the AO to delete the addition.

Validity of the Assessment Order Due to Lack of Incriminating Material:
The assessee contended that the additions made in the assessment order were beyond jurisdiction as no incriminating material was found as a result of the search. The Tribunal found merit in the argument and deleted the additions made by the AO.

Charging of Interest under Section 234B:
The assessee challenged the charging of interest under Section 234B. The Tribunal held that charging of interest under Section 234B is mandatory and consequential in nature and dismissed this ground.

Validity of Approval under Section 153D:
The assessee raised additional grounds challenging the validity of the assessment order due to lack of proper approval under Section 153D. The Tribunal dismissed these additional grounds due to lack of evidence.

Conclusion:
The Tribunal allowed the appeals filed by the assessee partly, directing the AO to delete the additions made on account of alleged gross profit, unaccounted investment, and commission paid. The Tribunal dismissed the grounds related to jurisdiction under Section 153A, charging of interest under Section 234B, and validity of approval under Section 153D.

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