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TMI Blog2019 (2) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... Cross Objections of the assessee. But clearly these will not be material for the grounds raised by the department. Hence in the facts and circumstances of the case, we do not find any infirmity in the order of the Ld. CIT(A) on this issue, therefore, we uphold the order of the Ld. CIT(A) and confirm the relief granted by him. - Decided against revenue. Unaccounted income calculated on the basis of unaccounted sales allegedly recorded in the seized documents - Held that:- The papers in question do not belong to M/s Gupta Perfumers P. Ltd. The assertion of M/s Gupta Perfumers P. Ltd. has not been found to be acceptable by the Settlement Commission and Hon’ble Delhi High Court. The papers were found from the assessee’s business premises as well as its Director’s residence. Neither any other party other than M/s Gupta Perfumers P. Ltd. has owned up these papers nor any such reference has been found in the narrations. Therefore the undisclosed sales and consequently the undisclosed income attributable to the assessee appears to be a reasonable decision in the circumstances. Hence the addition is upheld. Status of the income arising out of seized documents - Held that:- What was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : These appeals by the Revenue and Cross Objections filed by the Assessee are directed against the respective Orders of the Ld. Commissioner of Income Tax (Appeals-35), New Delhi pertaining to Assessment Years 2008-09 2009-10. Since the issues involved in these appeals and cross objections are identical, hence, the same are being disposed of by this common order for the sake of convenience, by first dealing with ITA No. 729/Del/2016 (AY 2008-09) wherein the following grounds have been raised :- 1. That the Commissioner of Income Tax Appeals has erred in law and on facts of the case in restricting the additions of ₹ 7,45,501/- and giving a relief of ₹ 76,10,799/- to the applicant out of the total addition of ₹ 83,56,300/- which was made to the income of the assessee on account of undisclosed income. 2. That the Commissioner of Income Tax Appeals has erred in law and on facts by restricting the addition made only to the amounts mentioned in the seized documents and ignoring that these documents acted as a base for rejecting the books of accounts and doing further estimation of unaccounted income. 2. The facts of the case are that there was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the department will be free to work out the correct income contained in these documents The order further goes on to say 91) Section 245C(3) states that an application made, under sub- section (i) shall not be allowed to be withdrawn by the applicant. Thus, the settlement application filed cannot be allowed to be withdrawn even when it is held that the seized papers on which the applicant has based its computation of income do not belong to it. 2.1 The matter thereafter travelled to Hon ble Delhi High Court, mainly on the ground that the order of the Settlement Commission is inconclusive and contradictory, particularly as per observation contained in the paras reproduced earlier. However, the Hon ble Delhi High Court in its decision dated 18/05/2012 upheld the decision of Commission in entirety. It observed that the assessee should not have any grievance if the Commission holds that the paper in question can be used against third party because the Commission s order cannot become a shield to any third person (para17 of the order). It also held that the order was complete and conclusive as far as the petitioner was concerned. The third person was not befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83,56,300 7 09-10 1,12,14,300 Total 4,37,57,250 2.5 The CIT(A) while adjudicating on the issue of income arising out of the unaccounted sales/ excess stock gave relief to the assessee. The unaccounted income worked out by CIT(A) for various years were as follows: A.Y Income Rs. 2003-04 Nil 2004-05 Nil 2005-06 98,014 2006-07 95,977 2007-08 45,466 2008-09 7,45,501 2009-10 54,85,091 2.6 It is in the above background that the department has filed appeal for A.Y. 2003-04 to 2009-10, while the assessee came up in Cross Objections for the assessment years 2005-06 to 2009-10. 2.7 Prior to hearing of these appeals, the departmental appeals for the A.Y. 2003-04 to 2007-08 got dismissed on the ground of low tax effects keeping in view the Circular no.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoice sales in the books. On the same analogy, there is no reason to doubt that unaccounted sales are understated. The Ld. Assessing Officer ought to have given a finding by thoroughly examining the invoiced part of sales and comparing it with the books of accounts to show that accounted/invoiced sales are understated therefore a presumption could be raised that unaccounted/uninvoiced sales are also understated. But once having come to the conclusion that accounted sales recorded in the seized documents matched with books of accounts and there is no understatement, then no presumption can be made that unaccounted sales are recorded in the seized documents are understated. A document found in the search has to be read as whole and it should be accented as correct unless contrary is proved. For this, reliance is placed on the following judgments: Dhanvarsha Buildersand Developers (P.) Ltd .v. DCIT, SR-2, Aurangabad [2OO6]102ITD 375 (PUNE) : Seized document shouldbe read as a whole if it has to be relied upon for computing undisclosed incomeof assessee in a proceeding under section 1588C. They cannot be read in bitsand parts to suit the convenience of one party or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of above discussion and adjudication, the unaccounted income calculated on the basis of unaccounted sales recorded in the seized documents and after applying G.P rate as per Audit report is worked out as under: A.Y Unaccounted sales as Per seized documents GP rate % Income Rs. 1 2 3 4 2003-04 NIL NIL 2004-05 NIL NIL 2005-06 4,05,519/- 24.17 98,014/- 2006-07 4,11,035/- 23.35 95,977/- 2007-08 1,44,983/- 31.36 45,466/- 2008-09 2 4,37,076/- 30.59 7,45,501/- 2009-10 2,11,82,627/- 25.88 54,82,064/- TOTAL 2,45,81,240/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the AR with respect to the ownership of the document, the present position of litigation and its consequences in our context, are being discussed later in the Cross Objections of the assessee. But clearly these will not be material for the grounds raised by the department. Hence in the facts and circumstances of the case, we do not find any infirmity in the order of the Ld. CIT(A) on this issue, therefore, we uphold the order of the Ld. CIT(A) and confirm the relief granted by him. Accordingly, the appeal filed by the Revenue for the assessment year 2008-09 stands dismissed. ASSESSEE s CROSS OBJECTION NO. 150/Del/2016 for A.Y 2008-09 6. Ground No. 1 and 2A of cross objections are taken up together, being inter connected. These are as follows:- 1. On the facts and in the circumstances of the case, the learned C.I.T. (Appeals) erred in confirming addition in respect of the alleged unaccounted income calculated on the basis of unaccounted sales allegedly recorded in the seized documents, to the extent of ₹ 7,45,501. 2.(a) On the facts and in the circumstances of the case, the learned C.I.T. (Appeals) erred in holding that the relevant seized documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Delhi High Court. The papers were found from the assessee s business premises as well as its Director s residence. Neither any other party other than M/s Gupta Perfumers P. Ltd. has owned up these papers nor any such reference has been found in the narrations. Therefore the undisclosed sales and consequently the undisclosed income attributable to the assessee appears to be a reasonable decision in the circumstances. Hence the addition of ₹ 7,45,501/- is upheld and assessee s Cross objections 1 and 2A is rejected. 6.4 Ground No. 2(b) of the cross objection is as follows:- 2(b) Without prejudice to the foregoing ground No.2(a), it is submitted that if the seized documents are held as belonging to the Respondentcompany and not to M/s. Gupta Perfumers Pvt. Ltd., then the income-tax paid by M/s. Gupta Perfumers Pvt. Ltd. on any unaccounted income determined on the basis of such seized documents, should be treated as income-tax paid by the Respondentcompany and credit thereof should be allowed in the case of the Respondent-company. 6.5 Similar issue was raised before Ld. CIT(A) and he decided the issue in the following manner:- 6.4.12 It is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of ownership of such unaccounted income) but they have not disturbed the finality if the order made in hands of M/s Gupta Perfumes. Therefore, unless there is an option with the appellant company, M/s Gupta Perfumes or the department to unsettle the finality of the order which is apparently protective as the department has not accepted the ownership of the unaccounted income in the hands of M/s Gupta Perfumes but in absence of any chance of disturbing the finality of the order U/s 245 D(4) then the assessment framed as a consequence to order u/s 245 D(4) in the hands of Gupta Perfumes becomes substantive and taxes are recovered from it. Therefore assessment framed in the hands of the appellant is merely a protective assessment. There cannot be two substantive assessments of the same income in the hands of two persons. One assessment has to be void. Income Tax Act nowhere provides that same income can be assessed in the hands of two persons. It is one thing to say that AO can make two assessments one substantive and other protective and it is another thing to say that they could not only make the assessment in respect of one set of dues but proceeds to realize both. (Refer: Lal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 248 ITR 482(Del.) 6.6.1 The Ld. AR also highlighted the issue of tax travels with income relying on rule 37BA for the credit of the tax paid on such income i.e. the credit should be given to the person in whose hands the income finally gets taxed and not in whose hands. He cited:- 1. Naresh Bhavani Shah(HUF) vs. Commissioner of Income Tax (2017) 84 taxmann.com53(Gujarat) 2. Parmanad Tiwari Vs. ITO (Kol. ) ( Trib.) [2015]54 taxmann.com 25 (Kolkatta-Trib.) 3. Commissioner of Income Tax , Delhi IIv. Malibu Estate [2007] 164 Taxman 518 (Delhi) 6.7 The Ld. DR relied on the order of the Settlement Commission argued that present assessed income is different from the one that has offered by M/s Gupta Perfumers P. Ltd. before the Settlement Commission. As the papers which were claimed as theirs has been held as not belonging to them. 6.8 We have heard both the parties and perused the records. It is a trite law that the same income cannot be taxed twice. There can also not be any dispute that what was offered to Settlement Commission and what has been taxed by Assessing Officer in the present Assessment Order before us pertain to the same transactions emanating from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of unaccounted profit, unless circumstances warrant otherwise. Therefore in the facts and circumstances of the case the action of Assessing Officer is confirmed and the ground is rejected. 11. In the result, the Revenue s Appeal ITA No. 729/Del/2016 (AY 2008- 09) is dismissed and the Assessee s Cross Objection No. 150/Del/2016 (AY 2008-09) of the assessee is partly allowed. Departmental Appeal No. 730/Del/2016 for A.Y. 2009-10 12. The following three grounds of appeal have been raised:- 1. That the commissioner of Income Tax (Appeals) has erred in law and on facts of the case in restricting the addition to ₹ 61,42,176/- and giving a relief or ₹ 50,72,124/- to the applicant out of total addition of ₹ 1,12,14,300/- which was made to the income of the assesse on account of undisclosed income. 2. That the commissioner of Income Tax (Appeals) has erred in law and on facts by restricting the addition made only to the amounts mentioned in the seized documents and ignoring that these documents acted as a base for rejecting the books of accounts and doing further estimation of unaccounted income. 3. That the commissioner of Income Tax (Appeals) has erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of the Act , Sh. V.K. Gupta, director admitted the difference of physical stock over the closing stock as per books of accounts was ₹ 7,63,95,003/-. However no income was declared in the return filed with respect to this discrepancy. During the assessment proceedings, when confronted the assessee denied that there was any difference between the two values. It was contended that the same was due to the way the stock inventory has been prepared. There was duplication of item No. 1 to 387 and non accounting of excise duty etc. The assessing officer after due verification of the issues raised by the assessee and giving benefit for them, still held the value of unaccounted stock at ₹ 3,71,60,520/-. Before Ld. CIT(A) the assessee contended that although effect to the duplication of items was given by the assessing officer, yet he has not attended to the other mistakes committed while preparing the inventory. It was stated that both the quantity of items and value of items was inflated, so as to extract the declaration of about ₹ 8 to 9 crores from the assessee. It was strongly argued before the Ld. CIT(A) that given the nature of item assessee is manufacturing, keep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excess stock also cannot be worked out and therefore charge under Section 69A would fail. 7.10.10 In view of this, I delete the addition of ₹ 3, 71, 60,520/- made on account of excess stock and consequently there is no requirement of telescoping or set off. However, as no separate addition is proposed by Ld. AO on this account, the appellant gets a technical relief. 16. Ld. DR relied on the order of the Assessing Officer. However, assesse s counsel supported the finding of the Ld. CIT (A). 17. We have heard both the parties and perused the records, especially the impugned order, we are inclined to go with the order of the Ld. CIT(A) primarily on the ground that once an inventory is found to be defective, its reliability for estimating the income becomes doubtful. The assessment order does not counter in anyway the assessee s grievance/objections that there is misreporting /inflation of the quantity and price of various items particularly raw material. This could have been easily done on the basis of of books of accounts available with him. He could have made an attempt to support his valuations, which he did not. Similarly, neither before Ld. CIT(A) nor before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of N.P rate. Accordingly, the ground no. 1 2(a) are rejected. 20. Cross objection No. 2(b) is having different issue which is reproduced below:- 2(b) Without prejudice to the foregoing ground No. 2(a), it is submitted that if the seized documents are held as belonging to the Respondent-company and not to M/s Gupta Perfumers Pvt. Ltd., then the income-tax paid by M/s Gupta perfumers Pvt. Ltd. On any unaccounted income determined on the basis of such seized documents, should be treated as income-tax paid by the Respondent-company and credit thereof should be allowed on the case of the Respondent- company. 21. The matter has been discussed in detail for A.Y 2008-09 also, as aforesaid. We reiterate our position here again that the same income cannot be taxed twice. The income as upheld by us in earlier paragraphs for year under consideration in the hands of the assessee is same which has been offered for taxation by M/s Gupta Perfumers Pvt. Ltd. before the Settlement Commission. The matter has yet to attain finality as M/s Gupta Perfumers Pvt. Ltd. is before Hon ble Supreme Court. Therefore the ground is disposed of with similar directions as for A.Y 2008-09, as aforesaid. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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