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TMI Blog2020 (5) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... Kohli who himself along with his father are also engaged in such metal trading business and not a single paper giving any hint of any unaccounted trading by the assessee outside his books of account was found from his premises, therefore, we are not able to agree with the finding of the CIT(A) that 70% of such unaccounted turnover belongs to the assessee for which the corresponding profit to be taxed in the hands of the assessee. In this view of the matter, we set aside the order of the CIT(A) and direct the AO to delete the addition being the profit on such unaccounted turnover outside the books of account. Since the addition on account of unaccounted turnover outside the books of account is deleted, the question of initial investment in such unaccounted turnover does not arise and therefore the same cannot be sustained. Accordingly, the same is directed to be deleted. Addition on account of unaccounted commission is concerned, we have held in the preceding paragraphs that the assessee has not done any unaccounted trading in metal in his name and whatever trading has been done was done by Shri Himanshu Kohli from whose premises all the seized documents, which are the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard together and are being disposed of by this common order. ITA No.6588/Del/2018 (A.Y. 2013-14) 3. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 31st July, 2013, declaring the total income at ₹ 8,07,290/-. A search and seizure action u/s 132 of the Act was carried out in Dua group of cases including the assessee on 25th April, 2014. Dua group is headed by the assessee Shri Pawan Kumar Dua and his brother Shri Rajesh Dua who are engaged in trading of non-ferrous metals through various companies. Shri Himanshu Kohli is a close associate of Dua brothers, who, according to the AO, handles the unaccounted cash sale/purchase of metal business of the Dua family. The premises of Shri Himanshu Kohli was also searched and the statements of the assessee as well as Shri Kohli were recorded u/s 132(4) wherein they have admitted to have been indulged in out of the book sale/purchase of non-ferrous metals. In response to notice u/s 153A, the assessee filed the return of income on 29th August, 2016 declaring the income at ₹ 8,07,290/- which was declared earlier. 4. During the course of assessment proceedings, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the assessee knows his father Shri Kewal Kohli for quite some time. It was submitted that only occasionally they have done very little business on commission basis and whatever business was done was done through one of the family concerns, namely M/s Klaxon Trading (P) Ltd. which is duly recorded in the books of account. It was submitted that the commission so paid to him for the business done through him was subject to TDS and duly reflected in the TDS return as well. So far as the statement of Shri Himanshu Kohli that the transactions in question had been carried out by him for the assessee is concerned, the assessee submitted that he has no connection at all with these transactions. The assessee vehemently submitted that since the transactions do not belong to him, the assessee is not in a position to give any further details. The assessee also requested for cross-examination of Shri Himanshu Kohli. 7. However, the AO was not satisfied with the explanation given by the assessee for the following reasons as per para 10.1 of his order:- 10.1 The above replies to various queries filed by the assessee are not acceptable in view of the following facts:- 1. Vide answer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86311689 Total 882218942 9. The AO on the basis of the seized documents worked out 70% of the total unaccounted turnover in respect of metal trading business of Dua group along with value @ 324 per Kg. as under:- Assessment Year Total Qty (revised as per discussions above ) 70% of Qty mentioned in Col 2 (belonging to Dua Group ) Value of stock in Col 2 @ ₹ 324 per KG as per DGS D rates (Rs) 1 2 3 4 2013-14 3920560.10 2744392.07 88,91,83,008 2014-15 14093661.30 9865562.91 3,19,64,42,088 2015-16 361287.22 252901.05 8,19,39,924 Total 18375508.62 12862856.03 4,16,75,65,020 10. Since the assessee had undertaken unaccounted transactions to the tune of ₹ 416.7 crores the AO, applying the GP rate of 1.92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of ₹ 1,70,72,313/- on account of alleged gross profit, is bad in law and against the facts and circumstances of the case. 2(c) That in any case and in any view of the matter, impugned addition has been made without confronting the entire adverse material available on record and without providing the opportunity of cross examination of Sh. Himanshu Kohli. 3. (a) That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of ₹ 1,31,95,532/- on account of alleged unaccounted investment on the basis of material allegedly found during the course of search of third person by treating it as alleged unaccounted income of assessee and that too by recording incorrect facts and findings and without observing the principles of natural justice. 3(b) That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of ₹ 1,31,95,532/- on account of alleged unaccounted investment, is bad in law and against the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in only one line. He submitted that these are search matters and in order to provide safeguard, the approval of the higher authorities have been provided u/s 153D. However, a perusal of such approval shows that there is neither proper satisfaction nor proper justification given in the approval. Referring to the following decisions, he submitted that the approval given by the superior authorities being not in accordance with the law, such order passed by the AO should be quashed:- i) Smt. Shreelekha Damani vs. DCIT (2015) 125 DTR 263 (Mumbai) (Trib); ii) PCIT vs. Smt. Shreelekha Damani approved by the Hon ble Bombay High Court vide ITA No.668 of 2016; iii) DCIT vs. Citimates Builders Promoters (P) Ltd. (ITA No.3169/Del/2015). 18. The ld. DR, on the other hand, submitted that proper approval has been given by the superior authorities and the assessee cannot challenge such approval by stating that the superior authorities have not applied their mind. 19. After hearing both the sides, we find no merit in the arguments advanced by the ld. Counsel in so far as additional grounds are concerned. The ld. Counsel could not substantiate with evidence to our satisfaction that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch to the statement recorded u/s 132(4)/133A of Shri Himanshu Kohli on 21st June, 2014, wherein he had given his residential address as D-237, 3rd Floor, Ashok Vihar, Phase-I, New Delhi. Referring to page 48 of the paper book filed by the revenue, he drew the attention of the Bench to the statement recorded u/s 132(4)/133A of Shri Himanshu Kohli on 24th June, 2014 wherein, again, he had given his residential address as D-237, 3rd Floor, Ashok Vihar, Phase-I, New Delhi. Referring to page 55 of the paper book, he drew the attention of the Bench to the statement recorded u/s 131(1A) of the IT Act of Shri Himanshu Kohli on 9th September, 2014 wherein again, he had given his residential address as D-237, 3rd Floor, Ashok Vihar, Phase-I, New Delhi. He accordingly submitted that the seized documents as per Annexure A-1 and A-2 seized by the party SA-8 from D- 237, 3rd Floor, Ashok Vihar, Phase-I, New Delhi are seized from the residence of Shri Himanshu Kohli and not that of the assessee. 29. The ld. Counsel for the assessee, referring to page 41 of the paper book, drew the attention of the Bench to the answer to Question No.2 recorded u/s 132(4)/133A wherein Shri Himanshu Kohli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and hereby confirm own the stock lying at 5723, Basti Harphool Singh, Sadar Bazar, New Delhi and this stock belongs to M/s Kewal Metal Store, the proprietorship concern of my father Sh. Kewal Kohli and I am the key person handling the affairs of the Kewal Metal Store due to ill health of my father. Q.3 Why you have not owned the ownership of the godown and the stock lying at 5723, Basti Harphool Singh, Sadar Bazar, New Delhi, earlier on two occasions on 25.04.2014 and 01.05.2014? Ans. This godown was under the knowledge of my father ,Sh. Kewal Kohli and he has been operated for heart ailment in the month of March 2014 itself, therefore, I was not aware of this godown earlier. Now I own the ownership of godown and stock lying thereat in 5723, Basti Harphool Singh, Sadar Bazar, New Delhi. 30. Referring to page 40 and 41 of the paper book filed by the Revenue, he submitted that Shri Himanshu Kohli in his statement recorded u/s 132(4)/133A on 1st May, 2014 has stated that his source of income was from metal business on commission basis and files his return of income regularly. Referring to pages 56 and 57 of the paper book filed by the Revenue, the ld. Counsel drew t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 11 companies who have purchased shares from his company at a premium of ₹ 40 per share and who have invested more than ₹ 1.2 crores in the share capital and share premium of M/s Kohli Homes (P) Ltd. He accordingly submitted that Shri Himanshu Kohli was not truthful. The ld. Counsel referring to the answer given by Shri Himanshu Kohli to various questions put by the Investigation Wing, submitted that Shri Himanshu Kohli was doing his business of dabba trading in different metals and is involved in cricket batting. He accordingly submitted that merely on the basis of statement of Shri Himanshu Kohli, who himself does metal trading business and also involved in MCX trading and dabba trading and who is not truthful, huge additions could not have been made in the hands of the assessee. 32. The ld. Counsel for the assessee submitted that the request of the assessee for cross-examination of Shri Himanshu Kohli was not accepted by the AO. Referring to the assessment order of Shri Kewal Kohli, Proprietor of M/s Kewal Metals, the ld. Counsel drew the attention of the Bench to the order passed u/s 143(3)/153A on 30th December, 2016 and drew the attention of the Bench to para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue has to consider the surrounding circumstances and they are entitled to find out the reality of the recitals made in the said documents. Referring to the decision of the Hon ble Patna High Court in the case of Dr. Gauri Shankar Prasad v. ITO, 393 ITR 635 , she submitted that the Hon ble High Court in the said decision has held that where the assessee had been given sufficient opportunity in the matter and at no point of time did he raise the plea that copies of the statements of persons relied upon or such evidence ought to be supplied to him or that he intended to cross-examine them, therefore, it was not open to him to turn around and claim that he had been denied the opportunity of cross-examination and the statements in question could not be used against him. Relying on various other decisions, she submitted that the assessee had not specifically asked for the cross-examination of Shri Himanshu Kohli, but, has requested for the details of transactions relating to him, so that the same can be confronted and cross-examination from the parties entered into transactions with Shri Himanshu Kohli. Therefore, when the assessee has not specifically demanded the cross-ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e seized documents were found from their premises, merely because Shri Himanshu Kohli in his statement submitted that only 30% belongs to Shri Himanshu Kohli and 70% belongs to Shri Pawan Kumar Dua, no addition could have been made in the hands of the assessee without any corroborative evidence. 37. We find some force in the above argument of the ld. Counsel for the assessee. We find the AO made the addition in the hands of the assessee on the basis of the following seized documents:- a) Annexrues A-1 A-2 seized by party SA-8 from D-237, 3rd Floor, Ashok Vihar, Phase-I, New Delhi; and b) Annexures A-13 to A-16, A-70 to A-89, A-91 to A-94, A-96 to A-99, A- 100 to A-120 seized by party SA-10 from flat 1-B, Pocket-A, Near Satyawati College, Ashok Vihar, New Delhi contain Dharam Kanta slips showing weight of different types of metals weighed alongwith vehicle number and handwritten slips containing noting of receipt/delivery of purchase/sale of such metals along with dates. c) Annexure A-34 to A-50, A-54, A-58, A-60 to A-65 and A-67 to A-69 seized by party SA-10 from Flat 1-B, Pocket-A, Near Satyawati College, Ashok Vihar, New Delhi in the form of small diaries/notepads c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... close associates S/Shri Gagan Arora Sandeep Kwatra maintained the record of unaccounted transactions at Flat- IB, Pocket A, Near Satyawati College, Ashok Vihar, New Delhi. 38.1 Similarly, at para 9 of the said order, the AO of Shri Kewal Kohli has mentioned as under:- 9. On examination of seized documents as per Annexures A-1 A-2 seized by party SA-8 from D-237, 3rd Floor, Ashok Vihar, Phase-I, New Delhi and Annexures A-13 to A-16, A-70 to A-89, A-91 to A-94, A.-96 to A-99, A-100 to A-120 seized y party SA-10 from Flat 1-B, Pocket-A, Near Satyawati College, Ashok Vihar, New Delhi (both premises of assessee son Sh Himanshu Kohli) which contain Dharam Kanta slips showing weight of different types of metals weighed alongwith vehicle number and hand written slips containing noting of receipt/delivery of purchase/sale of such metals, the assessment year wise breakup of 30% of total unaccounted turnover in respect of metal trading business of Kewal Metals as admitted by Sh Himanshu Kohli in his statement recorded u/s 132(4) alongwith value @ 324 per kg (being average rate of metals as per DGS D rates) works out as under:- Assessment Year Tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery of purchase/sale of such metals along with dates were found from the premises owned by Shri Himanshu Kohli who himself along with his father are also engaged in such metal trading business and not a single paper giving any hint of any unaccounted trading by the assessee outside his books of account was found from his premises, therefore, we are not able to agree with the finding of the CIT(A) that 70% of such unaccounted turnover belongs to the assessee for which the corresponding profit to be taxed in the hands of the assessee. In this view of the matter, we set aside the order of the CIT(A) and direct the AO to delete the addition of ₹ 1,70,72,313/- being the profit on such unaccounted turnover outside the books of account. 40. Since the addition on account of unaccounted turnover outside the books of account is deleted, the question of initial investment in such unaccounted turnover does not arise and therefore the same cannot be sustained. Accordingly, the same is directed to be deleted. 41. So far as the addition on account of unaccounted commission is concerned, we have held in the preceding paragraphs that the assessee has not done any unaccounted trading in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of ₹ 98,65,563/- on account of alleged commission paid and that too by recording incorrect facts and findings and without observing the principles of natural justice. 4. That in any case and in any view of the matter, addition made in the impugned assessment order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of Income Tax Act, 1961. 6. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 43. Grounds of appeal No.1(a), 1(b), 4 and 6 being general in nature are dismissed. 44. Ground of appeal No.5 relating to levy of interest u/s 234B being mandatory and consequential in nature is dmissed. 45. So far as grounds of appeal No.2(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter, impugned addition has been made without confronting the entire adverse material available on record and without providing the opportunity of cross examination of Sh. Himanshu Kohli. 3. That having regard to the facts and circumstances of the case, the ld.CIT(A) has erred in law and on facts in confirming the action of the ld.AO in making addition of ₹ 55,08,739/- on account of alleged commission received from MCX trading on the ground that pawan is appearing in seized document as per Exhibit-4 and impugned addition has been made by recording incorrect facts and findings and without observing the principles of natural justice. 4. That in any case and in any view of the matter, addition made in the impugned assessment order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of Income Tax Act, 1961. 6. That the appellant craves the leave to add, modify, amend or delete any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the appellant in his individual capacity was not engaged in the unaccounted metal trading business of Shri Himanshu Kohli. This argument is sans any force as the appellant is the key functionary and it is quite likely that the parallel trading was carried out separately from the formal trade channels. This ground is also dismissed accordingly. 53. We have heard the rival arguments made by both the sides and perused the record. We find the AO, on the basis of the seized document as per Exhibit-4 where the name Pawan appears, made the addition of ₹ 55,08,739/- which has been upheld by the CIT(A) and the reasons for which have already been reproduced in the preceding paragraphs. We have already held in the preceding paragraphs that when Shri Himanshu Kohli was himself engaged in such type of business and he has done some business for one of the concerns where the assessee is a director, namely, Klaxon Trading (P) Ltd., therefore, merely because the name of the assessee appears in a code word, addition could not have been made in the hands of the assessee especially in absence of any other corroborative evidence. The submission of the ld. Counsel that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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