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2022 (5) TMI 1087 - AT - Income TaxAssessment u/s 153A - Addition on difference between purchase/sales made to certain parties treating these as ungenuine/bogus transactions - Whether No incriminating material at all was found during the course of search? - HELD THAT - In A.Y. 2014-15, notice u/s 143(2) was issued before the search on 31.08.2015 and assessment proceedings u/s 143(3) were pending on the date of search i.e. 30.03.2016. In view of these facts, the assessment did not stand completed on the date of search and hence addition could be made even in the absence of incriminating material as held by Hon ble Delhi High Court in the case of CIT vs Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT In A.Y. 2015-16, the appellant had not filed return of income upto date of search i.e. 30.03.2016. Return of income was filed on 25.08.2017 in response to notice u/s 153A of Income Tax Act. Hence, assessment proceedings did not stand completed on the date of search i.e. 30.03.2016. Since the appellant had not filed return of income for A.Y. 2015-16 upto the date of search, the assessment did not stand completed on the date of search and hence addition could be made even in the absence of incriminating material as held by Hon ble Delhi High Court in the case of CIT vs Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT In A.Y. 2016-17, the appellant had not filed return of income upto date of search i.e. 30.03.2016. Return of income was filed on 25.08.2017 in response to notice u/s 153A of Income Tax Act. Hence, assessment proceedings did not stand completed on the date of search i.e. 30.03.2016. Since the appellant had not filed return of income for A.Y. 2016-17 upto the date of search, the assessment did not stand completed on the date of search and hence addition could be made even in the absence of incriminating material as held by Hon ble Delhi High Court in the case of CIT vs Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT Assessing Officer was justified in making additions u/s 153A and u/s 143(3) of Income Tax Act in A.Ys. 2014-15 to 2016-17 even in the absence of incriminating material. Hence, we affirmed the order of the ld. CIT(A). Disallowance u/s 40A(3) - CIT(A) held that the factum of purchase has been confirmed by the Mandi Samiti Officials and deleted the addition - HELD THAT - The assessee is not required to collect any evidence from the seller to show that he is a farmer or producer once paddy has been purchased through Form No. 6. The status of the seller as farmer or trader is determined by the Mandi Samiti at the time of his entry and the assessee undertakes transactions on the basis of said determination. It is also clear from the provisions of Mandi Act that the authority to decide whether the seller is a farmer or not is solely in the domain of Director of the Mandi Samiti as per the relevant Act and not the Assessing Officer. It is also a settled law that when an authority has been designated for the purpose, then none else can decide the said issue. The assessing officer has not brought on record any case where any person claimed as farmer by the assessee has been declared otherwise by the Director of Mandi Samiti. In the absence of the any such adjudication, no adverse cognizance can be taken and the sellers declared as farmers by the assessee and confirmed by the Mandi Samiti officials has to be considered as conclusive proof of the fact that the purchases were made from farmers. Taking into consideration, the undisputed fact of purchases being made from Mandi Samiti, provisions of Mandi Samiti Act, 1964, provisions of Rule 6DD, Circular No. 8 of 2006 of CBDT and the judgments of various Hon ble High Courts on the issue of disallowance u/s 40A(3), applicability of the provisions of Rules 6DD for purchase of paddy, we decline to interfere with the order of the ld. CIT(A) on this issue. Addition of unexplained credits on the basis of seized material - scope of benefit of telescoping - CIT(A) has perused the seized cash book and the chart placed on record and held that some entries were found recorded in the regular books of account whereas some entries were not thus restricted the addition - HELD THAT - Since the source of the said receipts and payment has not been explained by the assessee during the assessment proceedings or the appellate proceedings, the same cannot be considered as explained and are held as undisclosed income of the appellant. However, the assessing officer has made addition for the entire amount received by the appellant without giving any benefit of telescoping for the payments made. The seized day book was maintained by one person i.e. Shyam Lal and it contained transactions from 01.01.2016 to 31.03.2016. Since there are regular cash deposits and withdrawals during the period, it is logical to conclude that withdrawals were available for subsequent deposits. Hence, benefit of telescoping has to be allowed for undisclosed cash receipts and cash payments and addition can be made only for the peak balance. The assessee was asked by the Ld.CIT(A) to submit the working of the peak balance. The appellant submitted peak balance of cash as per the said chart was computed at Rs. 1,67,95,639/-. However, from perusal of above chart, Ld. CIT(A) held that highest peak cumulative balance on 22.02.2016 was Rs.2,05,94,826/-. Hence, addition on account of peak balance of Rs. 2,05,94,826/- was confirmed and balance addition of Rs.29,00,49,409/- was deleted. Addition on basis of peak balance - HELD THAT - The assessee submitted that peak balance of the cash as per the chart would be Rs.1.67 Crores. The ld. CIT(A) observed that the peak cumulative balance was Rs.2.05 Crores. While the remission of Rs.29.00 crores is not being interfered by us, we deem it proper to remand the matter to the file of the Assessing Officer for the purpose of re-computation and determine the peak balance. Difference between Purchase/sale-Bogus Bills - commission paid to the parties for arranging bogus purchase/ sale bills of rice - onus to prove - AO held that the cases where the statement of the parties have been recorded by the department where they have accepted that they were not doing genuine business transactions and copies of the same were provided to the appellant for rebuttal and the cases where the Assessing Officer has issued notices u/s 133(6) of the Act and the same were either not served and returned back or were not complied with - HELD THAT - Since, there is no qualitative, quantitative difference or any difference in the value of the sales purchases, no addition is called for on this account. Stock Difference in rice - as per AO total quantity of 6,180.98 quintals of rice was found excess and therefore the addition of Rs. 1,88,14,912/ was made by applying the rate of Rs. 3,044/- per quintal - We find that the assessee has handled a total quantity of 92,40,810 Quintals and had 33,23,290 Quintals as on 31.03.2016 which is equal to approximately 33,200 truck loads. The excess stock of 6,180 Quintals of excess stock is just little over 1% of the total quantity at the premises. Similarly, the shortage of quantity of 2,768 Quintals was 0.16% of 16,60,600 Quintals of the rice as per the books. While dealing with such high volume, there could be error of computation of quintals/sacks/bags of price. It is also an undisputed fact that no actual weighment was undertaken during the process of stock taking at the time of search. Hence, keeping in view the peculiar facts of the business of the instant case, we hold that no addition on account of stock difference is called for.
Issues Involved:
1. General grounds of appeal. 2. No incriminating material unearthed during the search. 3. Alleged bogus transactions and commission paid. 4. Income earned by a subsidiary treated as the income of the appellant. 5. Time-barred assessment order. 6. Levy of interest under section 234A. 7. Disallowance under Rule 6DD(e) and Section 40A(3) of the Income Tax Act. 8. Restriction of addition based on peak balance. 9. Stock difference in rice during physical verification. Detailed Analysis: 1. General Grounds of Appeal: The appellant contended that the CIT(A) erred in confirming the additions/disallowances aggregating to substantial amounts made by the AO. The appellant argued that these additions were based on conjecture and surmises without due application of mind, violating principles of natural justice. The Tribunal noted that the additions were made without proper basis and in violation of natural justice principles. 2. No Incriminating Material Unearthed During Search: The appellant argued that no incriminating material was found during the search operations, and hence, the additions made were illegal. The Tribunal observed that the assessments for certain years were unabated, and no additions could be made without incriminating material. The Tribunal upheld the CIT(A)'s decision to delete the additions where no incriminating material was found. 3. Alleged Bogus Transactions and Commission Paid: The appellant contested the addition of substantial amounts on account of alleged bogus transactions and commissions. The Tribunal noted that the AO made these additions based on discrepancies in the documents and statements of certain parties. However, the Tribunal found that the appellant provided sufficient evidence to prove the genuineness of the transactions, such as bills, banking channel transactions, and confirmations from parties. The Tribunal held that the AO's reliance on statements without cross-examination was unjustified and deleted the additions. 4. Income Earned by Subsidiary Treated as Income of Appellant: The appellant argued against the addition of income earned by its wholly-owned subsidiary in Dubai, treated as the appellant's income. The Tribunal observed that the income was accrued and received by the subsidiary outside India and was duly accounted for in its books. The Tribunal held that the subsidiary was an independent legal entity beyond the jurisdiction of the AO, and no incriminating material was found to demonstrate that the income belonged to the appellant. The Tribunal deleted the addition. 5. Time-Barred Assessment Order: The appellant contended that the assessment order was time-barred. The Tribunal noted that the assessment order was passed within the extended time limit prescribed under the Act and upheld the CIT(A)'s decision. 6. Levy of Interest Under Section 234A: The appellant argued that there was no delay in filing the return of income, and hence, the interest levied under section 234A was unlawful. The Tribunal found merit in the appellant's argument and deleted the interest levied. 7. Disallowance Under Rule 6DD(e) and Section 40A(3): The AO made additions under section 40A(3) for cash purchases of paddy, alleging violations of the provisions. The appellant argued that the purchases were made from farmers in Mandi Samitis and were covered under Rule 6DD(e). The Tribunal observed that the purchases were confirmed by Mandi Samiti officials and were made through Form No. 6, which sufficed as evidence. The Tribunal upheld the CIT(A)'s decision to delete the additions, citing various judgments supporting the applicability of Rule 6DD(e). 8. Restriction of Addition Based on Peak Balance: The AO made an addition of Rs. 31.06 crores based on unexplained credits. The Tribunal noted that the cash book contained undisclosed transactions, and the AO did not give the benefit of telescoping for cash receipts and payments. The Tribunal upheld the CIT(A)'s decision to restrict the addition to the peak balance of Rs. 2.05 crores and remanded the matter to the AO for re-computation. 9. Stock Difference in Rice During Physical Verification: The AO made an addition of Rs. 2.07 crores for stock differences in rice. The Tribunal observed that the excess stock found was just over 1% of the total quantity, and the shortage was 0.16%. The Tribunal noted that no actual weighment was undertaken during stock-taking, and the differences were due to estimation errors. The Tribunal deleted the addition, considering the high volume of stock handled and the lack of evidence of unaccounted purchases. Conclusion: The Tribunal allowed the appeals of the appellant on various grounds, including the deletion of additions for alleged bogus transactions, income earned by the subsidiary, and stock differences. The Tribunal upheld the CIT(A)'s decisions where applicable and remanded the matter for re-computation of the peak balance. The appeals of the Revenue were dismissed.
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