9911796707
TMI Blog2016 (5) TMI 1482X X X X Extracts X X X X X X X X Extracts X X X X ..... of documents which suggest unaccounted sales for the assessment year 2011-12 and with a view to plug the loopholes, we are of the view that the enhancement in turnover by 5% on the sales recorded in the books of accounts shall be reasonable for the assessment year 2011-12 The gross profit estimated on unrecorded sales cannot be applied to the recorded sales as the margin of tax also remains with the seller of unaccounted sales while in the recorded sales the prices are increased by VAT which reduces the margin of profit by the similar amount. The cumulative effect of increase in turnover and increase in gold price must have reduced the gross profit for the assessment years 2010-11 and 2011-12 - we are of the view that on unrecorded sales estimated, the profit has to be worked out at the rate of 1.25%. Considering all these aspects we sustain the gross profit rate of 1.25% on the enhanced turnover of gold bullion for the assessment years 2010-11 and 2011-12 and on the recorded turnover disclosed in the books of accounts, we direct to apply gross profit rate of 0.25%. CIT(A) was not justified in considering the combined sales of gold and silver bullion because there was not a single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , M.P. Real Estate 51 lacs as advance through banking channel which was returned back to the intending buyer. The assessee continued to show this plot of land in the fixed assets in his balance sheet. It is also a fact that Indore Development Authority declared scheme no. 131 on this land. Therefore, the above agreement could not be materialized and as such the land could not be transferred. It was informed that this land is even today under the scheme and not transferable. All the three arbitrators filed affidavits which contain the entire details with the assertion that no damages were paid by the assessee because of non-performance of the agreement due to forcemajeure - addition to be deleted. Addition u/s 68 - Held that:- As decided in Shri Barkha Synthetics Limited vs. CIT [2005 (8) TMI 67 - RAJASTHAN HIGH COURT] if the transactions are made through banking channels and once the existence of the persons is shown, the assessee company cannot be held responsible to prove whether that person himself has invested the said money or some other person had made investment. The burden then shifts on the revenue to establish that such investment has come from the assessee itself. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, correctly prayed that telescopic benefit be given to assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in observing that the order passed by the Ld AO which was received by the assessee on 02/04/2013 is within the time and is as per law. 2. The additions maintained on account of estimates of G.P. and on account of the entries appearing in the books of accounts which are already disclosed in the balance sheet filed along with the original returns, are bad in law since no incriminating material has been found. 3. The Ld CIT(A) has erred in upholding the rejection of books of accounts on the grounds that the deposits in the bank are not commensurate with the sale receipts on a particular day and relying on the papers pertaining to the A.Y. 2011-12 and not taking any cognizance of the fact that all entries in the loose paper were completely explained. 3.1 The rejection of books of accounts on above grounds are totally illegal and bad in law in the absence of any defect found in the books of accounts specially in the cash book where all transactions including the cash sales are recorded. The assessee has maintained day to day stock registers which has been verified by the Ld AO and the Ld CIT(A). 4. The Ld CIT(A) has erred in observing that there is a huge suppression of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apers without taking any cognizance of the fact that all entries in the loose paper were completely explained. 2.1 The rejection of books of accounts on above grounds are totally illegal and bad in law in the absence of any defect found in the books of accounts specially in the cash book where all transactions including the cash sales are recorded. The assessee has maintained day to day stock registers which has been verified by the Ld AO and the Ld CIT(A). 3. The Ld CIT(A) has erred in observing that there is a huge suppression of cash sales and as such enhancing the sales at 17.5% and estimating the G.P. at the rate of 1.25% in gold transaction. All sales and purchases are fully vouched and the quantitative details have been maintained by the assessee. The Ld CIT(A) further erred in maintaining the addition in the silver account by estimating the G.P. 3.1 The G.P. addition maintained at ₹ 14,14,94,803/- may please be deleted. 4. The Ld CIT(A) has erred in making a remark that the arbitration was correct and that the assessee has made the payment of 5 Crores to Lal Sai Estates. The Ld CIT(A) further erred in observing that even if the IDA acquires the land the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of the seized paper LPS2 Page 52 which was taken out from the internet. The confirmation from Balkrishna Parasmal was filed that he has taken over the firm M/s Jitesh International. The said paper was found on E-mail which does not prove that the transaction belongs to the assessee. The addition made is unwarranted for and may please be deleted. 14. The assessee has offered the additional income of ₹ 7,28,25,000/- in his return. The additions maintained upto this amount is already covered in the said surrender. 15. The telescopic benefit may please be allowed in respect of the additions maintained in the earlier year when such an amount was available to the assessee. 16. The assessee craves to alter, amend, add or delete any of the grounds of appeal." 3. In IT(SS) A No.254/Ind/2015 the Revenue has taken the following grounds of appeal :- "On the facts and in the circumstances of the case, the CIT(A) has - (i) While altering the addition of ₹ 4,15,97,088/- on account of estimation of gross profit on sales of gold bar made by the A.O., has erred in fact in holding that the A.O. made mistakes in conversion of 1 kg gold bar in 100 grams of gold bar durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the unaccounted purchases were out of unaccounted gross profit or the gross profit was out of such unexplained purchases." In IT(SS) A No.255/Ind/2015 the revenue has taken the following grounds of appeal :- "On the facts and in the circumstances of the case, the CIT(A) has - (i) While altering the addition of ₹ 17,35,42,064/- on account of estimation of gross profit on sales of gold bar made by the A.O., has erred in fact in holding that the A.O. made mistakes in conversion of 1 kg gold bar in 100 grams of gold bar during estimation of gross profit on sale of gold bar. Whereas, nowhere in the assessment order, the A.O. mentioned such conversion, but only talked about 100 grams out of 1 kg gold bar. (ii) erred in giving the aforesaid relief. The aforesaid issue was not clarified by the A.O. in the remand report. As such, the remand report was incomplete and defective. Instead of calling for the complete remand report, the CIT(A) relied on the incomplete and defective remand report and has given relief to the assessee. This tantamount to perverse finding of facts, since the revenue's version on the matter was neither obtained nor considered. (iii) While altering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r made by the A.O., has erred in fact in holding that the A.O. made mistakes in conversion of 1 kg gold bar in 100 grams of gold bar during estimation of gross profit on sale of gold bar. Whereas, nowhere in the assessment order, the A.O. mentioned such conversion, but only talked about 100 grams out of 1 kg gold bar. (ii) erred in giving the aforesaid relief. The aforesaid issue was not clarified by the A.O. in the remand report. As such, the remand report was incomplete and defective. Instead of calling for the complete remand report, the CIT(A) relied on the incomplete and defective remand report and has given relief to the assessee. This tantamount to perverse finding of facts, since the revenue's version on the matter was neither obtained nor considered. (iii) While altering the addition of ₹ 30,97,58,529/- and ₹ 40,69,563/- on account of estimation of gross profit on sales of gold and silver bar respectively made by the A.O. erred in not giving any contrary finding or any contrary enquiry against the A.O.'s findings on the basis of which the A.O. took the gross profit rate for gold and silver bar respectively. (iv) erred in not accepting the rates taken by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of project at Bhopal from unaccounted money without bringing any finding or material on record which could prove that unaccounted investment is a mere application of unaccounted income determined on account of estimation of gross profit and despite the fact that no direct nexus between the two could be established. This error is all the more glaring for the reason that the CIT(A) has himself held the aforesaid ₹ 1,98,36,250/- as unaccounted. (x) erred in facts and law in deleting the additions of ₹ 16,60,044/-, ₹ 45,30,200/-, ₹ 4,79,215/- and ₹ 1,24,456/- without bringing any finding or material on record which could prove that the said amounts were included in the amount of unaccounted income determined on account of estimation of gross profit and despite the fact that no direct nexus between the two could be established. (xi) erred in facts and law in deleting the addition of ₹ 8,44,62,392/- made on account of unaccounted transactions in MCX on the basis of seized paper LPS-5 page No. 107. The CIT(A) has erred in arriving at the conclusion that addition of ₹ 2,37,11,165/- was the amount accounted for in the books without bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xvi) erred in facts and law in deleting the addition of ₹ 3,85,520/- made on the basis of LPS-2. While doing so, the CIT(A) has overlooked the facts drawn by the A.O. as far as purchase of gold from M/s Prakash Jewellers is concerned. (xvii) erred in facts and law in deleting the addition of ₹ 9,43,900/- made on account of trading on MCX. While doing so, the CIT(A) has overlooked the facts drawn by the A.O. as far as trading on MCX and expenses in this regard is concerned. (xviii) erred in facts and law while deciding the ground no. 5 of appellant by ignoring that the surrendered amount of ₹ 7,28,25,000/- is already reduced from the additions made on various accounts in the computation of assessed income in the end of the assessment order." 3. In the assessee's appeals, ground no. 1 & 8 in IT(SS) A Nos. 241/Ind/2015, ground nos. 1 & 9 in IT(SS) A No. 242/Ind/2015 and ground nos. 1, 14, 15 and 16 in IT(SS) A No. 243/Ind/2015 are general in nature and as such do not require any adjudication. 4. In the revenue's appeals, ground no. (ix) in IT(SS) A No. 254/Ind/2015, ground no. (ix) in IT(SS) A No. 255/Ind/2015 and ground no. (xix) in IT(SS) A No. 256/Ind/2015 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of bullion. The Assessing Officer also observed that the expenses were incurred on Dalali which were not claimed in the profit and loss account. The Assessing Officer, therefore, held that all these cumulative factors show that the assessee was earning higher profit. The Assessing Officer accordingly made the addition towards gross profit in all the assessment years under consideration. 7. On appeal, the learned CIT(A) applied GP rate of 1.25% on the sale of gold & silver bullion in these years and also enhanced the turnover by 17.5% for all the years. Learned CIT(A) confirmed the addition of ₹ 1,77,80,700/- for the assessment year 2009-10, ₹ 7,79,54,342/- for the assessment year 2010-11 and ₹ 14,14,94,809 for the assessment year 2011-12. Now the assessee is in appeal before us. 8. Before us, the learned counsel for the assessee submitted that no incriminating documents were found. He further submitted that the assessee maintained complete stock records of all the purchases and sales which were fully vouched. The assessee imported gold and silver bullion under the Government policy through the banks. The assessee also purchased goods either from the banks or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown in the books of accounts. He explained that the assessee has two offices one in Sarafa and one in Gumasta Nagar. Therefore, all these entries in the loose papers are duly entered in the books of accounts and these cannot be made basis for rejection of books of accounts. With regard to LPS-5 page 106 to 109 he submitted that these are the copies of Sauda book wherein Saudas were entered. He pleaded that all the entries of sauda purchases are entered in the books and actual transactions took place subsequently. He submitted that copies of the sale bills when actual sale took place are placed in the paper book pages 131 to 157. With regard to sauda at page 118 on 24.11.2010, it was submitted that this was a holiday on account of Guru Tegh Bahadur Jayanti and sauda made has been entered in the sauda book. This paper does not depict any purchase or sale but merely shows the saudas and cannot be regarded as an unaccounted entry. He submitted that without prejudice to the above pleadings, the purchases are entered in books at cost without VAT and VAT charges are separately debited in the VAT A/c. A bill showing approximate rate of ₹ 20,000/- of Riddhi Siddhi Bullion dated 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods without holding much stock. He emphasized that all the purchases are made either from bank or from reputed dealers who purchase the goods from the banks. He submitted that under these circumstances the books cannot be rejected and a net profit rate cannot be applied. The learned counsel for the assessee submitted that the Additional Commissioner of same Range in the case of Ritesh Kumar Joshi has accepted GP rate of 0.14%. He also drew our attention to the order in the case of Baldev Krishna 65 TTJ 254 wherein the GP estimated at ₹ 400/- per 120 gms, which comes to around 0.2%, was accepted. He also relied upon the case of Vonamala Jagdishwaraiah wherein GP at 0.1% has been accepted by Hyderabad Bench of ITAT. He also claimed that in the case of Mahendra Kumar Agrawal the rejection of books was held unjustified and the GP of 0.1% was accepted. He also pleaded that similar view has been taken in the case of ITO v/s Girish M Mehta. The assessee had filed number of instances of sale and purchase showing the rate of profit earned by the assessee at pages 40 - 46 of paper book no. II. It would be noticed that in the earlier year when the quantum of the sale was very less th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities. For the assessment year 2010-11 there is sharp decline in GP rate. The assessment was abated. The GP rate for assessment year 2009-10 was 0.53% which declined to 0.13% in the assessment year 2010-11. Therefore, we sustain the rejection of books of accounts for the assessment year 2010-11 also. 12. As regards application of gross profit rate and enhancement in the turnover, we have gone through the various documents placed before us as also the record of the case. We find that the assessee has disclosed GP rate of 0.53% in the assessment year 2009-10, 0.13% in assessment year 2010-11 and 0.10% in the assessment year 2011-12 on the sales recorded in the books of accounts. The turnover as per books of the assessee for the assessment year 2009-10 was ₹ 190.26 crores. The turnover of gold bullion for the assessment year 2010-11 increased to ₹ 585.95 crores and for the assessment year 2011-12 it increased to ₹ 1035.53 crores. One of the major reasons claimed for the fall in GP rate was the manifold increase in the turnover. The Assessing Officer estimated the profit on 1 kg. of gold in the range of ₹ 4000/- to ₹ 6000/- per 100 gm and GP on sales of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recious metal like gold and silver and the rates are verifiable and available in open to every customer from MCX gold reports or Sarafa Publications. Thus, the customers who purchase goods from the assessee were well aware about the prevailing market price of these metals at the relevant time. Most of the purchases are from reputed dealers. Very few documents pertaining to the assessment year 2011-12 were seized which suggest that the assessee indulged in trading which was not recorded in the books of accounts. For recorded purchases, the assessee was maintaining day to day stock register with quantities and purchase vouchers. The payments were also made through banking channels. Therefore, the learned CIT(A)'s action in enhancing the turnover by 17.5% for all the years is unjustified. There was seizure of documents which suggest unaccounted sales for the assessment year 2011-12 and with a view to plug the loopholes, we are of the view that the enhancement in turnover by 5% on the sales recorded in the books of accounts shall be reasonable for the assessment year 2011-12. We accordingly direct the Assessing Officer to enhance the turnover by 5%. Further, on account of sharp fall in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1.25% on the enhanced turnover of gold bullion for the assessment years 2010-11 and 2011-12 and on the recorded turnover disclosed in the books of accounts, we direct to apply gross profit rate of 0.25%. 16. We also hold that the CIT(A) was not justified in considering the combined sales of gold and silver bullion because there was not a single incriminating document or any evidence found on the basis of which the Assessing Officer could reject the book results of purchase/sale of silver bullion. No addition can be made on estimations and on hypothetical grounds with regard to sale of silver bullion. We are also of the view that not only the enhancement made by the CIT(A) in silver bullion account by 17.5% but the application of GP rate of 1.25% applied by the learned CIT(A) is not justified. We, therefore, delete the additions made in silver bullion account for the assessment years 2010-11 and 2011-12. 17. Ground no. 5 in IT(SS) A No. 241/Ind/2015 (assessee's appeal) and ground no. 6 in IT(SS) A No. 254/Ind/2015 (revenue's appeal) is regarding the addition sustained of ₹ 2,02,47,590/ - on account of unaccounted investment in A.Y. 2009-10. 18. The facts, in brief, are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has made payment in advance through RTGs and submitted a bill issued by Riddhi Siddhi Bullion. The seller has also confirmed the transaction. The copy of bill of exchange obtained from the seller on account of import of goods was also produced. Since it was an imported material and the bar numbers were inscribed on the seized bars which tallied with the purchase bills, we find no merit in sustaining such addition. We, therefore, direct to delete the same. 22. Ground no. 6 in IT(SS) A No. 241/Ind/2015 is regarding sustaining the addition of purchases made from M/s Hyundai Exports at ₹ 17,85,88,277/- as unexplained purchases and ground no. 8 in the revenue appeal in IT(SS) A No. 254/Ind/2015 is regarding the issue of unaccounted purchases. 23. During the financial year 2008-09 relevant to A.Y. 2009-10 the assessee has shown purchases from M/s Hyundai Exports of ₹ 17,85,88,277/-. As per the Assessing Officer, the assessee could produce the original bills to the tune of ₹ 12,56,94,400/- and the remaining bills were not produced. The Assessing Officer observed that bill/tax invoice does not bear the official seal of the seller. In place of seller, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the bill has also not signed, the date of order and column of order number and delivery memo are found blank and various bills were signed by different persons. He submitted that confirmed ledger copy of account was filed from the firm Hyundai Exports. They have confirmed the purchases made by the assessee. For all these purchases, the assessee has made advance payments through banking channels, which is evident from page 168 of the paper book and copies of all the bank statements were filed during the assessment proceedings and all the entries in connection with the payment for these purchases were recorded in the books of accounts. He also pleaded that before the learned CIT(A) all the bills including the bills which could not be filed before the Assessing Officer, were filed, which were verified by him. The learned CIT(A) observed that the assessee has entered in the stock register different purchases. He further submitted that the confirmation from the seller has been filed, bills were produced, purchases are entered in the regular books of accounts and also in the stock register, payments for all these purchases were made through banking channels, all these payments are veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to issue summons u/s 131 of the Act for calling the information u/s 133(6) of the Act directly from the party. The Assessing Officer thereafter issued letter to the above party on 18.3.2013 asking for compliance by 30.3.2013. The learned counsel for the assessee submitted that since the period given by the Assessing Officer to the above party was very short within which it was not possible for the above party to appear, the Assessing Officer was not justified in making the addition only on the ground of non-compliance with notice u/s 131 of the Act. The learned counsel for the assessee, therefore, submitted that the learned CIT(A) without considering these facts, simply rejected the assessee's contention and sustained the addition. 31. On the other hand, the learned DR supported the orders of the authorities below with the submission that the assessee failed to prove its case before the learned CIT(A) and as such he was fully justified in maintaining the addition made by the Assessing Officer. 32. We have heard both the sides. We find from the bank statement of M/s Pramila Investment & Finance Limited that there was bank balance of ₹ 32.5 lacs on the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ind/2015 & IT(SS) A. No. 255/Ind/2015 A.Y. 2010-11 38. In ground no. 5 in IT(SS) A No. 242/Ind/2015 and ground nos. 6 and 7 in IT(SS) A No. 255/Ind/2015 relate to arbitration award. 39. The facts of the case are that during the course of search at the premises of Shri Keshav Nachani, one loose paper page 53 LPS-1/7 was found and seized. It was an arbitration award. As per this award, the assessee has entered into an agreement for sale of property owned by him at Khajrana village and received ₹ 2,50,00,000/-. For some reason there was a dispute between both the parties. Three arbitrators were appointed. In this award it has been stated that because of non-performance of agreement and non-registration of documents, the assessee would pay a sum of ₹ 5 crores as under :- (i) 11.8.2009 ₹ 1,00,00,000/- (ii) 31.01.2010 ₹ 1,00,00,000/- (iii) 30.4.2010 ₹ 1,50,00,000/- (iv) 31.8.2010 ₹ 1,50,00,000/- The Assessing Officer in his order for the assessment year 2010-11 observed that the assessee has paid ₹ 2 crores which was from his undisclosed income. He accordingly made the addition. 40. Being aggrieved by the addition so made by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee. It was also pleaded that this addition has been made by referring to section 292-C of the Act but these documents were not found from the premises of the assessee. Thus, the basic presumption, as provided in section 292-C of the Act, is missing. The learned counsel for the assessee submitted that this agreement, if at all relied upon, should be read as a whole. There is no document or evidence that the assessee has made any payment in compliance with this award. Complete details were filed before the learned CIT(A) which include affidavits of all the arbitrators. The learned counsel for the assessee submitted that the buyer under the agreement, M/s Lal Sai Estate Private Limited issued a cheque of ₹ 1.99 crore but it was not encashed as the scheme was pronounced by Indore Development Authority, hence cheque was returned back and cancelled. The assessment order of M/s Lal Sai Estate Private Limited was also filed before the authorities below. He submitted that these facts also find mention in the assessment order of M/s Lal Sai Estate Private Limited, the party with whom said agreement was executed. It was claimed that possession of the land was not given and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer observed in the assessment order that the above amounts were received as unsecured loan. According to him, the assessee failed to prove genuineness and creditworthiness of these parties and also failed to furnish their identity proof. He also observed that the amount outstanding towards M/s Khusi Exports and M/s Vinay Gems was wrongly clubbed under the head 'sundry creditors' although no goods were purchased from them. Further, the accounts of M/s Sambhav Exports were squared up during the year itself. On enquiry by the DDIT (Investigation), Mumbai, it was found that the above creditors hired a table space in the premises of Harshad Govind Mehta and in the statement Shri Harshad Govind Mehta stated that the table space has been hired to Abhishek P. Jain but neither any director or employee was found at the space nor any new address was furnished. The Assessing Officer, therefore, made the additions u/s 68 of the Act. 46. Being aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the learned CIT(A). After considering the arguments of the assessee and the facts of the case, the learned CIT(A) sustained the addition by holding that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y credit balance in the name of M/s. Vinay Gems on the ground that the identity, the Income tax return and the bank statements of the said party have not been filed. It was submitted that the assessee has filed the confirmation with PAN NO. It would be noticed that the transaction has taken place through banking channel. Vide our letter dated 11/02/2013 (page 5 of common pb), the assessee has requested the Ld. AO to issue notice u/s, 131 or to call for information u/s. 133(6) directly from the party. The Ld.CIT(A) has upheld the additions on the ground that the party was not produced for verification. Since all necessary details have been filed the additions upheld may please be deleted." Kind attention is invited to detailed submissions made before Assessing Officer (Page 335 to 337 of paper book dated 07.01.2016) wherein complete explanation regarding location of the company and its directors along with PAN and telephone nos. were given. The confirmation of the landlord M/s. Mehta Industrial Corporation who had given the premises (table space) on rent to the lender company was also filed. The bank statements and the copies of the IT returns were also filed which proves the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 34/Ind/2010, 190/Ind/09, 158/Ind/2010 etc. We are not agreeing with this proposition because in that case the identity of such share applicants was not proved and even the addresses of such share applicants were found non-existent/bogus. In view of those facts, this Bench concluded that the decision from Hon'ble Apex Court pronounced in Lovely Exports Private Limited is not applicable and the addition was confirmed in the hands of the assessee. However, in the present appeal, since the identity of such share subscribers, as we have discussed above, was established, therefore, no addition u/s 68 is warranted in the case of the assessee company. So far as the decision from Hon'ble jurisdictional High Court in the case of CIT vs. Rathi Finlease Limited (2008) 215 CTR (MP) 249 is concerned, in that case, despite several opportunities, the assessee was unable to provided confirmations from the concerned parties, therefore, the Hon'ble Court reached to a particular conclusion, whereas in the present appeals, the identity of share applicants, namely, M/s. Shrilal Traders Private Limited, M/s Lakeview Vinimay Private Limited, M/s Saharsh Suppliers Private Limited and M/s Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers; (a) The identity of the shareholder can be proved by either (if individual) producing him before the AO or by way of documents, registered address, PAN etc; (b) The genuineness of the transaction can be shown from the fact that the money has been received from the shareholder. If the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc; (c) The creditworthiness or financial strength of the creditor/subscriber can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharge the onus cast upon him. The AO can discredit the documents produced by the assessee with cogent reasons and materials but not on the realm of suspicion; (ii)If the assessee has produced documents like PAN Card, bank account details or details from the bankers the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial on record to prove that the said amount was included in the amount already offered for taxation and there was no direct nexus between the two. 55. The learned CIT(A) has dealt with this issue in paras 16 and 16.1 which are reproduced hereunder :- "16. Gr. no. 10 of appeal is against the addition of ₹ 2,71,75,000/- on the ground of entries in pen-drive. During simultaneous search at office premises of appellant's maternal uncle Shri Keshav Nachani a pen-drive inventorized at S.No.1 of Ann. BS-1 dated 26-11-2010 was seized from Orbit Mall office. From this pen drive unaccounted investment of appellant was found of a total of ₹ 5.40 crore in C-21 Mall Bhopal and Globus Green Area project, Bhopal both being project of Shri Keshav Nachani & partners. On that basis appellant admitted following unaccounted investment:- AY 2010-11 ₹ 2,71,75,000/- AY 2011-12 ₹ 1,98,36,250/- AY 2011-12 ₹ 70,38,750/- (cash seized and disclosed at ₹ 84 lacs) 16.1 On the basis of such admission, while AO accepted that part of such investment of ₹ 70,38,750/- was returned back to appellant as cash & was covered in disclosure of cash seized of ₹ 84 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,47,306/- is deleted. As a result Gr. no. 11 of appeal is allowed." 58. Before us, the learned DR could not controvert the findings of the learned CIT(A). We, therefore, confirm the same and dismiss this ground of appeal of the revenue. IT(SS) A No. 243/Ind/2015 - A.Y. 2011-12 59. Ground no. 4 in the assessee's appeal is regarding the addition made on account of arbitration award. 60. This issue has been dealt with by us while deciding ground no. 5 for the assessment year 2010-11 in IT(SS)A No. 242/Ind/2015 wherein we have deleted the addition. On the said arbitration award, addition was made at ₹ 3 crores for this year on the basis that as per the aforesaid award the assessee will pay ₹ 1.5 crores on 30.04.2010 and ₹ 1.5 crores on 31.08.2010. As discussed while deciding ground no. 5 in appeal for A.Y. 2010-11, the award did not reach its finality, hence on presumption addition made in the A.Y. 2011-12 also is not sustainable. We, therefore, direct to delete the same. This ground of the assessee is, therefore, allowed. 61. Ground no. 5 is regarding sustaining the addition of cash found of ₹ 84,84,900/-. The revenue has also taken this issue in its grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that during search LPS-1/34 was seized according to which ₹ 16,60,044/- was the opening cash as on 10.7.2010. It was explained by the learned counsel for the assessee that such cash was kept by the proprietor's son with him on behalf of the assessee out of previous day closing of cash in hand which is verifiable from the books of accounts. Regarding the addition of ₹ 45,30,200/-he submitted that it was already included in total sales effected on 10.7.2010 of ₹ 2,24,19,341/-. This was not accepted by the Assessing Officer. So far the addition of ₹ 4,79,215/- was explained by the learned counsel for the assessee as contra-entry of cheque issued of ₹ 3 lacs and another amount of ₹ 1,79,215/- as temporary advance for purchase of jewellery. As regards the addition of ₹ 1,24,456/- it was explained that the assessee received advance payment of ₹ 92,50,000/- from M/s Jai Mata Di Bullion and Jeweller against which sale bill was issued of ₹ 91,25,544/-. The learned counsel for the assessee submitted that it is thus apparent that ₹ 1,24,456/- was the excess amount over and above the bill issued. He further submitted that how t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65010406 Recorded As per Books of account. This represent the branch balance of Ahmedabad branch with H.O. recorded in books and it is part and parcel of the Capital and liabilities. Verifiable from books. Since noting on this trial balance are in correct names, hence this noting here as MCX means profit in trading on MCX and brokerage income. 8. PAPPU JAI MATA DI 0 4800 4800 Recorded As per Books of account -- 9. RAJESH MM 4248000 0 4248000 Not recorded in books. Advance against sale of goods. Proves modus operandi of unaccounted cash sales 10. PVR JWELLS RSBL 0 2040700 2040700 Recorded As per Books of account -- 11 SATISH OP 100000 0 100000 Not recorded 12 CADBURY 0 47600940 47600940 Recorded Transaction. Stock in hand 26.899 Kg gold of ₹ 5,41,21,082.0 0 Gold in this trial balance was found short in comparison of opening gold balance on 25-11-2010 indicating unaccounted cash sales. 13 CASH HAJAR 0 2769710 2769710 Recorded transaction. Out of Cash in hand ₹ 68,86,569/- opening Bal Discussed in par 16 of this order 14 DAMU 0 7526900 7526900 Cross entry. This is cross entry with Damu Brajesh $ Co. -- 15 DEVA RAM 40000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f "MCX" is not about him "trading of MCX", but it is "Ahmedabad branch current a/c balance" which was ₹ 6,80,22,823/-. This shows a lot of hesitation and reservation on the part of appellant, and a calculated move to mislead the department which is clearly discernable from three facts. 20.2 Firstly in this entire "trail balance" give above, not a single entry is in coded language, but every entry is in the same name as is used in business of appellant, both accounted as well as unaccounted. For example Axis Saving a/c, D.P. Jewellers, Damu Brajesh & Co., Rajesh MM, Lal BPL, Pappu Jai Mata Di etc are all in real or abbreviated name, but none of them is in bogus name. Hence "MCX" is also to be taken as real name especially when appellant has done huge transactions on MCX in name of self as well as on child ID's and dabba trading. In order to avoid any examination of MCX trading a/c, appellant tried to divert department's attention by stating that it was "Ahmedabad Branch current a/c balance" without explaining how noting as "MCX" could mean "Ahmedabad Branch balance". 20.3 Secondly it is interesting to note as to how two entries namely "MCX - ₹ 6,50,10,406/-" and "Ahm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious names like Choudhary -12002, Ishwar Ji - 25018, Kailash Jhansi - 25027, Kishore Ji - 12026, Monty - 25012, Patni - 25029, Pyarelal - 12038, Suresh - JBL - 12022, Vinod Jhansi -25047, Zaveri - 25043, Shared - JBL - 25036, Tony Sharad etc as per page no.7 to 51 of LPS-2 seized during search, which shows "large net surplus" in each of the aforestated account, total of which comes to ₹ 4,31,82,986/- and a brokerage receipt of just 4 days from 20-11-22010 to 24-11-2010 of ₹ 2,47,152/- as per the table given below :- Fictitious name Number enclosed Actual name for Net surplus Brokerage Choudhary 12002 516827 2313/- Ishwar ji 25018 Sanjay 5586694 11764/- Kailash Jhansi 25027 Kumar 1766912 0 Kishore ji 12026 3146848 5972/- Monty 25012 Mahesh 102960 Dr. 0 Patni 25029 Santosh Kuamr 810039 6185/- Pyarelal 12038 Nachare 132363 3081/- Suresh JBL 12022 1220831 3384 Vinod 25047 4654359 0 Zaveri 25043 117801 0 Tony 2394506 6680/- Sharad JBL 25036 22835206 2,07,773/- Total 4,31,82,986/- 2,47,152/- Both of these amounts i.e. Net surplus in MCX trading in these 12- names of ₹ 4,31,82,986/- is nowhere reflected in boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince out of "MCX - ₹ 6,50,10,406/-" and out of total entries of ₹ 8,44,62,392/- in this trial balance, only an addition of ₹ 6,07,51,227/- is confirmed as unaccounted income from MCX trading while balance addition of ₹ 2,37,11,165/- is deleted, as some of that amount is accounted for in books and for unaccounted transactions in trading of bullion, a G.P. addition is already made in para 14 of this order. As a result Gr. No.14 of appeal is partly allowed." 71. Against the above finding of the learned CIT(A), the revenue as well as the assessee are in appeal before us. 72. The earned counsel for the assessee submitted that so far as loose paper LPS 5 page 107 is concerned, it is a trial balance as on 24.11.2010. He submitted that the assessee had given the complete bifurcation of the accounted and unaccounted entries. He also submitted that the unaccounted entries were only to the tune of ₹ 95,69,286/- on the credit side and ₹ 59,76,204/- on debit side. Regarding the entry in the name of MCX of ₹ 6,50,10,406/- it was submitted that this entry is the amount of Ahmedabad branch balance which was to the tune of ₹ 6.8 Crores. Without prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unrecorded transactions of credit side were ₹ 95,69,286/- and debit side were ₹ 59,76,204/- as per page no. 74 to 76 of paper book-I. The CIT(A) merged both the figures vide para 20 of the his order and considered unrecorded transactions at ₹ 1,54,50,578/-. It is a matter of general knowledge that trading in MCX is being done for short duration of a week's time and in most of the cases they are intra-day transactions which are normally settled by payment/receipt of difference. When such trading is done on behalf of others, brokerage income is earned. Therefore, it would be unrealistic approach to consider entire trading transactions as unrecorded income. The approach of the CIT(A) to consider credit balance appearing in the name of MCX as undisclosed income even after deducting profit earned and recorded in the books cannot be sustained. While carrying out transactions in any commodity exchange like MCX, nominal margin money is required. Therefore, it would be fair and proper to estimate further additional profit over and above disclosed by the assessee. We, accordingly direct to estimate net profit @ 5% on undisclosed income on ₹ 6,50,10,406/- appearing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net profit @ 5% directed to be applied on transactions in MCX. This ground of appeal of the revenue is, therefore, partly allowed. 79. Ground no. 8 of the assessee's appeal IT(SS) A No. 243/Ind/2015 is against the addition made on account of loose paper LPS-5 pages 108 and 109 of ₹ 20,27,500/-, ₹ 2,34,64,832/- and ₹ 20,22,924/- treating the same as unrecorded transaction. The revenue has also filed appeal by taking ground no. (xii) in IT(SS) A No. 256/Ind/2015 on this issue. 80. Brief facts of the case are that during the course of search some loose papers were found and entries made therein were found not to have been explained by the assessee. As per the assessment order (page 19) the assessee made cash sales of ₹ 20,27,500/- and made purchases of ₹ 20,22,954/- (page 25). The Assessing Officer found that both these transactions were not recorded in the books. At page 25 of the assessment order the Assessing Officer observed that unrecorded sales of the assessee were ₹ 2,34,64,852/- as per entries on page 109 of LPS-5. He, therefore, treating these transactions as out of book, made the additions thereof. 81. Felt aggrieved, the assessee prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted. Gr. no. 15 of appeal is allowed." 82. Against the above findings, the assessee as well as the revenue are before the Tribunal. 83. The learned DR while supporting the assessment order, submitted that the learned CIT(A) was not justified in granting relief to the assessee without any basis. 84. On the other hand, the learned counsel for the assessee submitted that LPS-5/109 was explained in detail before the authorities below and detailed explanation finds place from page 20 to 25 of the assessment order. The entries were in the form of Saudas of purchase and sale and they were properly recorded as and when the delivery was given/taken. He submitted that as such there was no justification in making the addition by treating the transactions as unrecorded sales. It was, therefore, submitted that the learned CIT(A) was fully justified in deleting the addition after considering the detailed submissions of the assessee to the effect that enhancement turnover and application of gross profit rate would cover such discrepancy, if any. 85. We have heard both the sides. We find that the learned CIT(A) has deleted this addition on the basis that "since addition of gross profit of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of which GP addition of ₹ 14.14 crore is already made in this year in para 14 of this order. Therefore while some transaction on this seized paper are held to be unrecorded, addition of ₹ 22,69,710/-, ₹ 1,12,60,200/-, ₹ 5,00,000/- ₹ 5,00,000/- & ₹ 79,40,236/- on account of cash book opening balance of ₹ 27,69,710/- on 25-11-2010, cash sales of ₹ 1.12 crores, unaccounted cash payments of ₹ 5 lakh each to M.J. Jewellers and to Ishwar (MCX) and unaccounted cash purchases of ₹ 79,40,236/-, could not be made separately, as all those transactions indicate suppression of cash sales and suppression of GP, for which sales is enhanced by 17.5% and GP is enhanced by ₹ 14.14 crore. Therefore though seized paper shows modus operandi of unrecorded transactions, but all five additions made on the basis of this paper are deleted. Gr. no.16 of appeal is allowed." 89. Before us, the learned DR supported the assessment order. 90. On the other hand, the learned counsel for the assessee submitted that LPS-5/55 was explained in detail before the authorities below and detailed explanation finds place from page 29 to 37 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition is deleted. As a result Gr. no.17 of appeal is allowed." 94. We have heard both the sides. The learned CIT(A) has deleted the addition on the basis of gross profit. From a perusal of pages 37 and 38 of the assessment order, we find that pages 5 and 6 of LPS-2 contain cash vouchers regarding various payments made by the assessee which were found not recorded in the books. Section 69C of the Act reads as under :- 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the 6[Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year :] 7[Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.] (emphasis supplied) From a bare perusal of the above section it becomes crystal clear that unexplained expenditure which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of account, in order to establish their identity. Copy of Income Tax return of such company alongwith balance sheet was also not furnished for AY 2011-12. In view of surrounding circumstances, it was proved beyond doubt that cash credit of ₹ 1 crore from a paper company namely M/s Sanskar Exim P. ltd remained unexplained & when he could not face the compelling circumstances & findings of investigations of DDIT, he surrendered this unsecured loan of ₹ 1 crore, as his unaccounted income, as a part of his overall disclosure of ₹ 10 crore made by appellant. 26.3 As a result it is held that cash credit of ₹ 1 crore remained unexplained and its addition u/s 68 of I.T. Act is hereby confirmed. For this purpose reliance is placed on the decision in cases of M/s Agarwal Coal Corp. P. ltd [2011] 17 ITJ 111 (Indore Trib.) wherein it was held that credit entries taken from paper companies remained unexplained as also on the decision of jurisdictional High Court in case of Gyan Chand Anil Kumar [2002] 120 Taxman 842 (MP) wherein addition of cash credit was upheld even though same was returned very next day, as entries were manipulated ones. Reliance is also placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable with him. The notice to the working directorShri Nitesh Bohra was sent but no reply was received. This proves that the company is in existence. The Ld.CIT(A) has simply raised certain doubts about the transactions and upheld the additions. It is humbly submitted that the transaction is routed through banking channel and the existence of Sanskar Exim Pvt. Ltd. was fully proved. The confirmation letter was filed from the above named party. Since all necessary details have been filed the additions upheld may please be deleted." 99. We have heard both the sides. After considering the arguments of the parties in the wake of the facts obtaining in this case, we find that similar addition made u/s 68 of the Act in relation to deposits received from three depositors has been deleted by us for the reasons given in the foregoing paragraphs. The facts as well the evidence produced i.e. confirmation certificates along with copies of bank statement and acknowledgment of returns remain the same. The facts being identical, the loan taken from M/s. Sanskar Exim Pvt Ltd. at Rs. One crore is held to be genuine and, therefore, the addition made by the authorities below is hereby deleted. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is for the appellant to explain how such unexplained transactions in international commodity market were done, whether through hawala or through some other mode. But since such transactions were not disclosed in the return of income filed in India or in any other audited accounts, hence they are treaded as unaccounted transactions. It is also a fact that appellant is involved in large scale commodity transaction on MCX. Considering all these facts the addition of ₹ 2,74,06,204/- made on the basis of seized paper is hereby confirmed. Gr. no. 23 of appeal is dismissed." 104. Against the above findings of the learned CIT(A), the assessee is in appeal before the Tribunal. 105. Before us, the learned counsel for the assessee submitted as under :- "Addition in respect of paper on internet of O-Brien. The copy of the said paper is given at Pg.357 of the PB. This paper was recovered from the internet and address of the party is given as Jitesh International of Sharjaha. The reply to the notice given is placed at P.221 of the common PB. It is submitted that Jitesh International was transferred by the assessee prior to the year 2001 to Shri Balkrishna Parsram of Dubai. The deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des. The learned counsel for the assessee failed to controvert the findings recorded by the learned CIT(A). Before us also, the learned counsel for the assessee did not furnish any document either in form of proof of transfer of firm in terms of transfer deed duly notarised or an affidavit of Balkrishna Parasram in support of its claim. We, therefore, sustain the order of the learned CIT(A) and dismiss this ground of the assessee. IT(SS) A No. 256/Ind/2015 - Revenue's appeal 107. Ground no. 8 in this appeal is regarding the deletion of addition of ₹ 70,72,244/- and ₹ 11,07,760/- made on account of unaccounted jewellery found during search. 108. The learned CIT(A) has accepted the claim of the assessee that the gold ornaments up to ₹ 52 lacs were unaccounted. The learned CIT(A) has dealt with this issue in paras 17 and 17.1 at pages 106 and 107 of his order which are reproduced hereunder :- "17. Gr. no.11 of appeal is against making an addition of ₹ 70,72,244/- & ₹ 11,17,760/- u/s 69 A of I.T. Act, on account of investment in Jewellery. During search at residence of appellant, Jewellery weighing 4122.230 gm of ₹ 70,72,244/- was found, out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's maternal uncle, Keshav Nachani a Pen drive was found and investment in C-21 Mall, Bhopal and Globus Green Area project, Bhopal was found. The learned CIT(A) has dealt with this issue in paras 18 & 18.1 of his order as under :- "18. Gr. no.12 of appeal is against addition of ₹ 1,98,36,250/- in hands of appellant on the ground of entries in the pen-drive. During simultaneous search at office premises of appellant's maternal uncle Shri Keshav Nachani a pen-drive inventorized at S.No.1 of Ann. BS-1 dated 26-11- 2010 was seized from Orbit Mall office. From this pen drive unaccounted investment of appellant was found of a total of ₹ 5.40 crore in C-21 Mall Bhopal and Globus Green Area project, Bhopal both being project of Shri Keshav Nachani & partners. On that basis appellant admitted following unaccounted investment:- AY 2010-11 ₹ 2,71,75,000/- AY 2011-12 ₹ 1,98,36,250/- AY 2011-12 ₹ 70,38,750/- (cash seized anddisclosed at ₹ 84 lacs) 18.1 On the basis of such admission, while AO accepted that part of such investment of ₹ 70,38,750/- was returned back to appellant as cash & was covered in disclosure of cash seized of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was totally wrong in granting relief to the assessee. 115. On the other hand, the learned counsel for the assessee submitted that during search LPS-1/34 was seized according to which ₹ 16,60,044/- was the opening cash as on 10.7.2010. It was explained by the learned counsel for the assessee that such cash was kept by the proprietor's son with him on behalf of the assessee out of previous day closing of cash in hand which is verifiable from the books of accounts. Regarding the addition of ₹ 45,30,200/-he submitted that it was already included in total sales effected on 10.7.2010 of ₹ 2,24,19,341/-. This was not accepted by the Assessing Officer. So far the addition of ₹ 4,79,215/- was explained by the learned counsel for the assessee as contra-entry of cheque issued of ₹ 3 lacs and another amount of ₹ 1,79,215/- as temporary advance for purchase of jewellery. As regards the addition of ₹ 1,24,456/- it was explained that the assessee received advance payment of ₹ 92,50,000/- from M/s Jai Mata Di Bullion and Jeweller against which sale bill was issued of ₹ 91,25,544/-. The learned counsel for the assessee submitted that it is thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided this ground along with ground no. 10 of the assessee's appeal (supra). This ground of the revenue is accordingly allowed. 125. Ground no. 15 of the revenue is that the learned CIT(A) was not justified in deleting the addition of ₹ 4,34,30,138/- made on the basis of LPS-2. 126. We have heard both the sides. We have decided this ground along with ground no. 7 relating to MCX transactions in the assessee's appeal (supra). This ground shall also be dealt with as per our directions above. 127. In ground no. 16 the revenue taken the ground in respect of deleting the addition of ₹ 3,85,520/- made on the basis of LPS -2. 128. The learned CIT(A) has dealt with this issue in para 25 at page 117 as under :- "25. Gr. no. 19 of appeal is against addition of ₹ 3,85,520/- added on the basis of page no.91 of LPS- 1/91, which is a purchase bill of gold of ₹ 3,85,520/- from M/s Prakash Jewellers. AO added the same in apprehension that same was not recorded in books, whereas appellant produced the books before AO showing both inward & outward entry, showing that such purchase was cancelled. Since books were produced showing reversal of such entry, no adverse infe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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