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TMI Blog2015 (12) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... t understood why the AO undertook this exercise to arrive at a notional figure. On the other hand, in the impugned order of the ITAT, it has been noted that the Assessee announced several schemes, one of which was distribution of gold chains on the birthday of Mr. Dharam Pal Gulati, to the dealers who achieved certain targets. The Assessee purchased the gold and alloy and got them converted into chains from M/s Vijay Kumar Jewellers with whom the Assessee had a regular account. The ITAT found that “the assessee is not engaged in purchase and sale of gold on the basis of which it could be presumed that the assessee was engaged in speculative business.” It was further pointed out that if the Revenue wanted to rely on the surrender of certain amount made by the Directors after the search, the necessary evidence should have been brought on record since the statements made had been retracted. As rightly pointed out by the ITAT, the conclusion of the AO that the Assessee was engaged in the speculative business in agricultural commodities and gold was based on surmises and not on the basis of any credible evidence. The Court therefore holds that the deletion by the ITAT of the addition on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of discrepancy in stock. The contention was that he was misled on account of pressure during the search operation into surrendering the said sum . This explained his retraction of the said surrender on 28th November 2006 itself. The ITAT also referred to the CBDT Instruction dated 10th March 2003 in this regarding making it mandatory that in the absence of discrepancy in the search inventory of the stock, no addition can be made. In the circumstances, the Court holds that the ITAT was justified in holding that the AO should have brought material in the form of inventory on record, if he wanted to make an addition of ₹ 11 crores. The ITAT, therefore, rightly deleted the said addition. - Decided in favour of the Assessee and against the Revenue. - ITA No. 963/2011, ITA No. 965/2011, ITA No. 964/2011, ITA No. 981/2011, ITA No. 83/2013, ITA No. 91/2013, ITA No. 211/2013 - - - Dated:- 23-11-2015 - S. Muralidhar And Vibhu Bakhru, JJ. For the Petitioner : Mr. Rohit Madan, Senior Standing counsel with Mr. Akash Vajpai, Mr. Zoheb Hussain, Adv For the Respondent : Dr. Rakesh Gupta, Adv with Ms.Poonam Ahuja, Mr. Somil Agarwal and Mr.Rohit Kumar Gupta, Adv ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor of MDH at Vasant Vihar, New Delhi, the premises of Mr. Prem Arora, who was the main broker of MDH and Mata Chanan Devi Hospital which was being looked after by Mr. Sushil Kumar Trehan, son-in-law of Mr. Dharam Pal Gulati, Chairman-cum-Managing Director (CMD), MDH. According to the Revenue, cash of ₹ 48,00,000 was found in the premises of Mr. Rajiv Gulati and ₹ 24,86,00,000 at the premises of Mr. Dharam Pal Gulati. A sum of ₹ 1 crore was found in the premises of Mr. Prem Arora. The statements of all the above four persons i.e. Mr. Rajiv Gulati, Mr.Prem Arora, Mr. Sushil Kumar Trehan and Mr. Dharam Pal Gulati were recorded. A diary was seized from the premises of Mr. Prem Arora. Some papers from the premises of Super Delicacy containing hand-written entries, a bunch of loose papers serially numbered regarding sales of Financial Year 2000-01 to 2004-05 titled as All India Sales Report of MDH ( AISR ), and certain papers pertaining to Gold Ornaments A/c of MDH were also seized. The statements made during the search were subsequently retracted. 6. The Assessing Officer ( AO ) in the assessment order dated on 31st December 2008 for AY 2001-02 to 2004-05 made ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales figures, as per invoices which also showed trade discounts. It was noted that for each of the AYs 2001-02 to 2004-05, there was no difference between the figures reported in the monthly income sales ( MIS ) report and the sales as per the books of accounts. Further it was noticed that the Assessee has been following this accounting policy consistently. It was noticed that trade discounts were being allowed at a regional level all over the country and only the net amount of sales was taken to the Assessee s books of accounts. The Assessee was also allowing 2% discount on cash payments. These facts have been discussed by the ITAT in the impugned order extensively. On that basis, it was concluded there is no difference between the figures reported in AISR and sales recorded in the books of accounts . Importantly, the ITAT also noted that the details under reconciliation were submitted by the Assessee both before the AO as well as CIT(A). 11. Mr. Rohit Madan, Senior Standing counsel for the Revenue, has produced a chart to show the difference between the figures of sales as per the AISR and the figures of sales given in the return of income. The difference is 15 to 20%. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced which contradicts the purported admissions made in the statements given at the time of search, then the additions cannot be sustained only on the basis of the retracted statements. There has to be some corroborative evidence de hors the retracted statements. The Court is inclined to follow the approach of the Gujarat High Court as far as the present case is concerned. 14. A perusal of the order of the AO reveals that there is no basis to come to the conclusion that the speculative purchases were made or that the Assessee was engaged in speculative trading . In fact for arriving at a figure of so called speculative purchase , the AO took the alleged amount surrendered by the Assessee by multiplied it by the ratio of the sales turnover during the AY in question and the sales turnover for the year of search. It is not understood why the AO undertook this exercise to arrive at a notional figure. On the other hand, in the impugned order of the ITAT, it has been noted that the Assessee announced several schemes, one of which was distribution of gold chains on the birthday of Mr. Dharam Pal Gulati, to the dealers who achieved certain targets. The Assessee purchased the gold a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of the expenditure. 17. The Court is unable to find any error in the approach of the ITAT in the matter. Indeed if the amount has already been taxed at the hands of Mr. Sushil Kumar Trehan it is not understood how it could be brought to tax again in the hands of the Assessee by disallowance of the expenditure. Moreover the papers on the basis of which addition was made were found in the office of Mr. Sushil Kumar Trehan, who himself was engaged in the procurement of haldi and chillies. Further Mr. Rakesh Gupta, learned counsel for the Assessee informs that Mr. Trehan has paid the tax along with the interest in terms of the order of assessment of his return which has attained finality. Accordingly, this Court answers Question No. 3 in the negative, i.e., in favour of the Assessee and against the Revenue. 18. Question No. 4 concerns advertisement expenditure. The AO disallowed the said expenses on the ground that the Assessee had been unable to prove that it was towards the promotion of the products in the market place and that it was allowable as a legitimate business deduction. The AO disallowed 20% of the total expenditure in each year since according to the AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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