9911796707
TMI Blog2012 (6) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... examination of the actual details, matter restored to file of AO Interest paid in cash and relatable loan taken and repaid in cash - assessee contended that interest was taken upfront i.e. the interest would be deducted from the principal amount at the time of advancing the loan itself and these amounts are taken by way of cheques - Held that:- As far as the amounts of loan taken, they are tallying with the dates and these amounts are taken by way of cheques. Matter require further examination - File restored to AO. Alleged unaccounted sales to Depot - dispute is with reference to the goods sent to Branch considered as unaccounted sales of the HO on the basis of the statement obtained from the Branch office - assessee submitted that out of sales statement of 6346 No. of items, Branch has accounted sales of 2698, hence sales of 2698 may be added - Held that:- Addition is restricted upto 2698 items, balance to be deleted. Entire sales proceeds of aforesaid items will be added as against assessee contention of adding only profits. Alleged unaccounted stock at depot - no addition made in assessment order - Held that:- Unaccounted stock found subsequent to the date of search c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HMA Group . 5. This ground relates to treatment of Rs.1,50,25,864/- as unexplained investment. The related facts in brief are that assessee is a manufacturer of denim jeans and was covered by search and seizure action on 12.12.2002. During the course of search certain bills relating to the HMA group were found with the assessee and hence the HMA group was covered by a survey u/s. 133A. The HMA group comprising M/s. HMA Interlinings Pvt. Ltd., M/s. HMA International and M/s. Super Garment Accessories, is engaged in making linings for jeans as well as supplying zippers for jeans. During the course of survey, three invoices in the names of the assessee were found with M/s.HMA Interlining Pvt. Ltd., reflecting transactions totaling Rs1,19,94,864/-, which were neither recorded in the books of account of the assessee nor in the books of account of the respective parties. During the search, the director of M/s. HMA Interlining Pvt. Ltd., Shri Manohar Ahuja was questioned on these transactions and it was stated by him that the bills did not represent real transactions but were merely accommodation bills, prepared solely for the purpose of discounting the L/C s with bank and clearing out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter was sent in remand to the AO. In the remand report after examination of the documents as above, the AO has concluded that Mere submission of affidavit is not sufficient to denounce the facts gathered during the search. The delivery challans have been signed the assessee giving sufficient proof for the purchase of the goods. The letter of credit is also very concrete evidence proving the payment male to the firms involved in the transactions. To say that, L.C. (letter of credit) was produced to the bank for obtaining the loan, only indicates some unlawful activity, which are not possible in normal circumstances because the bank makes necessary verification before granting the loan. In view of these circumstances, the statement/affidavit of Mr. Ahuja is an after thought, meant only for accommodating assessee . 9. When confronted with the above findings in the remand report, it was submitted that the AO s observation in fact was confirming the contention of the assessee that though the purchases were not recorded, LC s discounted were recorded in the books of account against the old outstanding. The ledger accounts of the parties concerned together with the relatable bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the return of income had also been filed. Therefore, it was pointed out that the bills could not have been the actual bills for purchases, but were accommodation bills. It was also submitted that the transactions of purchaser had never been denied by the assessee. The only difference was that the transactions had taken place on earlier dates and the bills in question merely represented earlier transactions against which no payments were made. The contention therefore, was that bills in question found with MIs. HMA Interlining had been prepared only as accommodation bills and therefore no addition was warranted. 10. After that the learned CIT (A) however, confirmed AO s action by holding as under: 2.4. I have perused the facts, and considered the contention of the appellant. The undisputed facts are that addition has been made on the basis of the following four bills :- A) Purchases from: M/s HMA Interlining Pvt.Ltd. Rs 45,20,821/- on 09.102.2000 M/s SuperGarments Accessories Rs 56,39,479/- on 09.02.2000 M/s HMA Interlining Rs.18,34,564/- on 09.02.2000 Total R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion namely that the purchases are out of book purchases and hence represent unexplained investment. It is the appellant s case that the entry in its books of the L/C s discounted against outstanding as well as the entry of repayment, both before the date of search, proved that the bills in question were merely accommodation bills and did not reflect any real transactions as no prudent person would record payments against purchases without recording purchases. The appellant s contention is absolutely baseless because unrecorded purchases is one thing and bogus purchases absolutely another. Evidences during search established unrecorded purchases of Rs.1.50 crores. The appellant raised loans on such unrecorded purchases actually made, issuing L/Cs against bills of Rs.1.50 crores in favour of the HMA group, who discounted and adjusted the same against outstanding arising out of regular, recorded sales to the appellant. But before the search, this ingenious manner of simultaneously reducing profit and making available liquidity would not have been detected. As the loan so raised was utilized for payment of recorded outstanding, the entry had to be made in the regular books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of unrecorded purchases with regard to purchases, no way establishes that purchases reflected in the bills are entered in the regular books of account. 13. We have considered the issue. As can be seen from the facts stated above, there is no dispute with reference to the fact that these transactions have occurred in 1999-2000 and the so called bills were discounted by the Bank and proceeds thereon were adjusted with the existing outstanding amounts in books without there being any debit or credit towards the purchase or sale. This supports assessee s contentions that these are only accommodation bills after obtaining LC facility. It is also supported by the statement of Shri Manohar Ahuja not only in the course of search but also by way of affidavit subsequently filed. The evidence on record does indicate that these are only accommodation bills for obtaining the loans and not unaccounted purchases. Just because there are certain bills available, it cannot be considered as unaccounted purchases unless there is evidence that assessee purchased the goods in question and paid the amount outside the books of account. As contended by assessee, the amounts were settled by way of LC proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Zulfikar Page 80 of A-1 4,72,477 Siyaz Zulfikar Pages 70 to 72 of A-1 1,72,565 Liberty Marketers Pages 75 to 79 of A-1 20,13,803 Liberty Marketers 16. The above seized documents, apart from other loose papers, also contain ledger accounts of assessee as appearing in the books of M/s. Liberty Marketers and Siyaz Zulfikar and some of them bear the caption UNACCOUNTED ASHAPURA . This led the AC to prima-facie conclusion that the transactions were unrecorded. Assessee denied any transactions with Siyaz and Zulfikar, and confirmed that it only transacted with M/s. Liberty Marketers. Photo copies of the sale bills together with the ledger account of M/s. Liberty Marketers as well as the bank statement was submitted as was a reconciliation statement of the balances in the ledger accounts of M/s. Liberty Marketers. The AO, after examination of the documents, concluded that the seized documents described the transactions as UNACCOUNTED ASHAPURA and as they had been seized from the premises of the assessee, the onus was on the assessee to prove otherwise, which had not been discharged satisfactorily. He therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents were the same as those recorded by assessee in its books in the name of M/s. Liberty marketers and the cheque numbers noted against these bills were also matching with the cheque numbers recorded against bills entered by M/s. Liberty Marketers in the name of Siyaz Zulfikar. It was pointed out that purchases to the extent of Rs 23,37,203/- were covered by similar entries, which had been booked by M/s Liberty Marketers in the name of Siyaz Zulfikar but had been booked by assessee in the name of M/s. Liberty Marketers. 19. During the course of the appellate proceedings, the CIT (A) examined the transactions in detail and noticed that the transactions of Rs.23,37,263/- were reflected in the regular books of account and accordingly he directed AO to delete the amount after verification. Likewise, an amount of Rs.1,75,565/- which was the closing balance was also examined and directed to be deleted. This aspect was also accepted by the Revenue. However, the CIT (A) confirmed an amount of Rs.4,72,477/- and Rs.20,13,803/-. The balance amount was confirmed on the reason that the transactions were not reflected in assessee s books of account which were clearly stated as unacc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the transactions are found to be unaccounted consequent to the inquiry, AO may consider the assessee alternate submission of bringing it to tax the profit element involved in the sales, as the entire sales proceeds cannot be taken as income following the decision in the case CIT vs President Industries 258 ITR 654( Guj) . With these directions, the issue in Ground No.2 is restored to the file of AO for further examination of the amounts to the extent confirmed by the CIT (A). 22. Ground No.3 is as under: The learned CIT (A) erred in confirming the addition of Rs.78,16,200/- being alleged undisclosed interest payment to Thakkar Group 23. Ground No.3 relates to addition of Rs.78,16,200/- by AO as undisclosed income on account of interest paid in cash and relatable loan taken and repaid in cash. The CIT (A) confirmed only the interest portion of Rs.78,16,200/- which was contested in Ground No.3. The Revenue is contesting in Ground No.1 deletion of Rs.1.40 crores which will be dealt with in Revenue appeal. The related facts in brief are that during the course of search, data relating to INT PAID TO THAKKAR GROUP IN CASH was found in one of the files on the computer. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows that the interest paid in cash was for loans taken in cash only. Here it may be observed that Smt. Bhavana Thakkar has also admitted in her statement of having given cash loan to the assessee. Therefore, it is logically conclusive that interest which was paid in cash was for the cash loans taken by the assessee. It is also well known fact in the market that Shri Ajay A. Thakkar used to give cash loans to various parties in the market. Therefore, it is not out of place that the assessee had taken cash loan from tie said party. 26. He therefore, made the addition of Rs70,51,963/- as interest and Rs1.40 crores as the principal amount repaid by working backwards. 27. During the course of the appellate proceedings before CIT(A), it was submitted that apart from seized documents found during the course of search showing payment of interest in cash, AO had also relied upon the statement of Smt. Bhavana Thakkar for making the addition as above. However, assessee had not been given an opportunity to cross-examine Smt. Bhavana Thakkar. The matter was therefore remanded to the AO with specific directions of giving assessee an opportunity to cross examine Smt. Bhavana Thakkar. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, attention was also drawn to the fact the outstanding principle and interest amount as appearing in the books of account of assessee was Rs3,77,17,172/- which higher than Rs.3,41,82,125/- worked out by the Mumbai Police after examining the books of account of late Shri Ajay Thakkar as well as other documents found with him. Therefore, it was stated that no addition called for. It was further stated with regard to the addition of Rs.1,40,83,714/- made on account of repayment of cash loan, that no documents whatsoever were found during the course of search indicating repayment of loan in cash and even Smt. Bhavana Thakkar had shown her inability to give the details of cash loans taken. It was therefore, the contention that no addition of the repayment of principal amount was called for on the basis of the details of interest paid found on the computer. Attention was drawn to the fact that even as on date, the principal amount was outstanding. 30. After considering the above submissions the learned CIT (A) confirmed the interest and deleted the principle amount by stating as under: 4.4 I have examined the facts and considered the submission made. In so far as the addition of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3.00 2,500,000 26.4.00 Bhavana A.Thakkar 275,500 440,000 102287 26.4.00 5,000,000 5.5.00 Bhavana A.Thakkar 275,500 440,000 102329 3.5.00 5,000,000 11.5.00 Bhavana A.Thakkar 28,000 44,000 102362 10.5.00 500,000 1.8.00 Bhavana A.Thakkar 275,500 440,000 105360 2.8.00 5,000,000 5.8.00 Ajay A Thakar 275,500 440,000 105384 4.8.00 5,000,000 12.8.00 Ajay A Thakar 275,500 440,000 105415 8.8.00 5,000,000 18.8.00 Ajay A Thakar 275,500 440,000 105435 14.8.00 5,000,000 2.9.00 Ajay A Thakar 275,500 440,000 105518 31.8.00 5,000,000 7.9.00 Ajay A Thakar 165,300 264,000 107001 6.9.00 3,000,000 9.9.00 Bhavana A. Thakkar 110,200 176,000 107017 7.9.00 2,000,000 13.9.00 Ajay A Thakar 330,500 528,000 107033 8.9.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch being subjudice, is outstanding even as on date. It is settled law that additions in search assessments have to be limited to documents found during the search and statements recorded. In the absence of any documentary evidence substantiating repayment in cash of the loan of Rs 1.40 crores, and on the basis of the fact that the AO has made the addition of this amount on the basis of surmises, the addition of Rs.1.40 crores is deleted . 31. The learned Counsel referring to the table considered by the CIT (A) submitted that even though there were amounts said to be paid in cash what exactly happened was that the said party deducts amount upfront but, all transactions were by cheque only. There are no cash loans, nor there are any payments in cash. What the documents seized from assessee s computer was only calculations of up-front interest on the loan amount. It was stated that assessee had borrowed funds from the said party and was paying amounts by way of cheques to the said party and there is no cash transactions at all. It was further submitted that crime branch has made inquiry and the matter was sub-judice. Therefore, addition of amounts without any findings cannot be sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directions the issue was restored to the file of AO for fresh examination as directed above. Ground No.3 is accordingly allowed for statistical purposes. 33. Ground No.4 is as under: The learned CIT (A) erred in confirming the addition of Rs.63,46,000/- being the alleged unaccounted sales relating to Hyderabad Depot . 34. The related facts in brief are that during the course of search, the backup of the computer was taken from Hyderabad depot of assessee, which contained a statement giving quantitative details of sales and sales returns, as well as the balance of stock at the Hyderabad depot of assessee. On analysis, AO found that sales of 6346 pairs of jeans as per the statement, was not recorded in the books of assessee. The AO has reproduced the reply of assessee in response to the show cause as to why addition not be made on account unaccounted sale in the assessment order, the gist of it being as under :- (a) The statement in question was merely reflecting stock transfer to Mumbai to Hyderabad and not actual sales. Copies of challans showing that 6346 pairs of jeans had been sent as samples from Mumbai to Hyderabad were filed in substantiation. (b) It was explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation statement with difference of stock of one item. It was assessee s contention that the Branch was opened in October, 2001 and in order to capture the market, large number of goods were sent as samples for display in various show rooms, which was not taken as sales. Learned Counsel drew our attention to the sales statement made therein to submit that out of 6346 No. of items transferred to Branch the Branch accounted sales of 2698 Nos. only with 1102 returned. There was also purchase return from the Branch to Head Office. Even this aspect was also not taken into consideration by AO. It was his submission that transfer to Branch cannot be considered as unaccounted sales. However, without prejudice it was submitted that if at all any addition is to be considered that can only be considered on the items shown as sales that is 2698 Nos., the cost of which at the company price is only Rs.500/- and not Rs.1000/- as adopted by AO as a retail price. It was submitted that the addition can be restricted to the above amount as admitted by assessee in the course of the assessment proceedings. It was also further submitted that only profit can be brought to tax and not the entire sales proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted stock at Hyderabad Depot . 39. This Ground pertains to addition of Rs.5,01,000/- being allegedly unaccounted stock at Hyderabad Depot relating to M/s Prem Trading Co. The related facts in brief are that during the proceedings, excess stock of 501 pairs of jeans was found at the Hyderabad depot which in the name of M/s. Prem Trading Co. and unaccounted in assessee s books. It was assessee s contention that the stock found did not relate to assessee but was counterfeit being sold by one of the staff at Hyderabad, using the brand name of the company and the company had registered a legal complaint with the Trade Registry Department much before the date of search. As this fact was not brought out before the AO, the matter was sent in remand before the AO. In the remand report the AO has stated that as the stock was found in the premises of the assessee and the same was not recorded in the books of account, there was no merit in the contention of assessee. The CIT (A) confirmed the same. 40. It was submitted by the learned Counsel that in the transactions with the said Prem Trading Company was considered by AO as unaccounted. The only addition is made on account of excess sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces were made to assessee and in the absence of genuineness of the loan, he brought to tax an amount of Rs.29.50 lakhs as undisclosed income of assessee. Consequent to the further evidences filed, remand report was asked from AO and after considering the remand report and documents filed, the CIT (A) considered that credits from M/s Mehta Engineering Company and M/s Judicial Member Mehta (HUF), M/s Arihant Enterprises were accepted as genuine whereas the loans received from M/s Manisha Trading Co. and M/s Ashok Textiles were not accepted. To that extent the cash credits were confirmed. 44. It was the contention of assessee s Counsel that all these cash credits were available in the books of account and there was no incriminating material found during search and assessee had furnished the necessary details before AO. The objection raised by the learned Counsel is that since there is no incriminating material, the addition cannot be made in the block assessment. He relied on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Vikaram Joshi, 256 ITR 129 . The Departmental Representative however, relied on the orders of the CIT (A). 45. We have considered the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h provide that: The undisclosed income of the block period shall be the aggregate of the total income of the previous year falling within the block period computed (in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with AO and relatable to such evidence) (ii) On the facts and in the circumstances of the case and in law, the learned CIT (A) has erred in deleting the addition of Rs.1,40,83,713/- made on account of repayment of principal component of loan in cash. (iii) On the facts and in the circumstances of the case and in law the learned CIT (A) has erred in deleting the addition made by AO under section 68 on account of unexplained cash credit (and interest thereon) from M/s Mehta Engg. Co., M/s J.M. Mehta, HUF and M/s Arihant Enterprises without appreciating the fact that the onus cast on assessee to prove the credit worthiness of the creditors and the genuineness of the transactions was not discharged by assessee at any stage of the proceedings before AO . 48. Ground No.(i) is general in nature. 49. Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
