9911796707
TMI Blog2020 (6) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... t found to be maintained in the name of OMASUM-DELHI during the course of search operation at the premises of Mohd. Shahnawaz for which separate addition has been made by the AO on account of sales outside the books of account under the nomenclature Domestic Sale and Cash payment in the name of OMASUM-DELHI. - No merit in the argument of the ld. CIT-DR that the addition on account bogus purchases are based on any incriminating material/evidence found during the course of search. Addition on account of under-invoicing of export sales - According to the ld.CIT(A), it is only a presumption drawn by the AO, but, there is no evidence on record to show that the difference in the rates of sales resulted in under-invoicing. CIT-DR could not controvert the findings of the ld.CIT(A) that the AO failed to co-relate the amount generated through under-invoicing of sales, if any and sending it abroad to be deposited in the bank accounts of the two entities or making payment to various parties as alleged. Further, the assessee has also explained satisfactorily that there can be various reasons for difference in the rates of goods exported such as size and quality of items, volume of transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, we deem it proper to restore the issue to the file of the AO for computing the undisclosed income from the activity of trading with the following specific directions:- i) In the present case, the undisclosed sales detected pursuant to the search action aggregates to ₹ 38.93 crores as compared to undisclosed purchase aggregating to ₹ 143.52 crores. Therefore, yearwise profit from undisclosed activity will be determined by the AO by applying the GP rate on the basis of the figure of the yearwise purchase rather than sales. ii) For working the net profit from undisclosed activity , the AO may take combined simple average of gross profit of all the years comprised in the block period (A.Y.s 2008-09 to 2014-15) as per audited balance sheet of the assessee for A.Y. 2008-09 to 2014-15. This would take care of any aberrations and distortions. The above method of determination of profit from undisclosed trading in meat product, in our opinion, is fair and reasonable and would meet the ends of justice under the peculiar facts and circumstances of this case. The average gross profit so determined shall be applied across all the assessment years to determine the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... double addition of the amount of additional income declared in the hands of AMQ Agro and income declared in the 153 tax return of other entities stated above. Needless to say the AO shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds on this issue are accordingly allowed for statistical purposes. - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA, JUDICIAL MEMBER Assessee by: Shri Hiren Mehta, CA, Shri Ashwani Gupta, CA Revenue by: Ms Pramita M. Biswas, CIT, DR ORDER PER R.K. PANDA, AM: ITA Nos.2801 to 2803, 2804 /Del/2018 filed by the assesse and ITA Nos. 4287 to 4289 , 4290/Del/2018 filed by the Revenue are cross appeals and are directed against the order dated 28th March, 2018 of the CIT(A)-27 for A.Y. 2008- 09 to 2010-11 and 2012-13 respectively. ITA No.169/Del/2018 filed by the assessee and ITA No.1499/Del/2018 filed by the Revenue are cross appeals and are directed against the order dated 26th December, 2017 of the CIT(A)-27 for A.Y.2011-12. Since common issues are involved in all these appeals therefore, these were heard together and are being disposed of by this common orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 153A. 4. The AO analysed the nature of business of the assesseee and noted that the raw material of the assessee company is the raw meat which is procured by the assessee company from open market through various persons who procure such raw material directly from various slaughter houses where buffaloes are slaughtered and their meat parts i.e., Omasum, trachea and offal are broadly segregated from the dead body of the buffalo in raw form. The assessee company also stated, to purchase such products from the farmers for whom their cattle does not have any commercial value and are unproductive. The AO noted that the assessee company does not have its own slaughter houses. Once the raw meat is delivered at the Rampur factory, the assessee company segregates various parts i.e., Omasum and offal, it was then cleaned and then applied salt on the cleaned meat which act as a preservative. He noted that the main business of the AMQ group is export of byproducts i.e., Omasum, offal, etc. In order to make its raw material requirements, a two pronged strategy was adopted by the group. On the one hand, the group had entered into a long-term contract/agreement of one to two years dura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 468/- 34,67,78,496/- 30,80,49,586/- 2013-14 62,49,33,372/- 21,94,53,432/- 20,83,90,270/- 2014-15 77,31,82,290/- 37,52,45,574/- 32,35,43,094/- 6. According to the AO, majority of the purchases recorded in the books of account of the assessee company are not supported by the third party invoices/vouchers. The payments against majority of the purchases are made only in cash where each payment is made for an amount equal to or less than ₹ 20,000/- Even in respect of these no primary vouchers/bills/other evidences were available. He noted that the qualitative records in respect of purchases are not maintained in terms of actual inward quantities as per invoices and the quantities are stated to have been recorded net off wastage without any corresponding record of the same. He noted that no evidences are available in respect of such payment either in the form of payment vouchers or in the form of acknowledgement of such payments by the recipients. Further, the parties to whom the payments are stated to have been made are not identifiable due to lack of any evidence to prove their identity or existence of such parties. The AO further noted that the rates for purchases as recorded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order. This difference according to the AO is out of suppressed sales and resultant proceeds have been received by the assesseee abroad through settlement/hawala transactions to meet out the expenses of directors/shareholders and their family members and various foreign entities created by the directors. The AO, therefore, made addition of ₹ 2,56,42,430/- on account of such suppressed sales for A.Y. 2008-09 and added back the same to the total income of the assesseee. 8. On the basis of the incriminating documents/records found and seized from the premises of the representative of the assessee company, namely, Shri Mohd. Shahnawaz, resident of 4618, Second Floor, Basti Harphool Singh, Delhi-06, the AO observed that the assessee company was engaged in domestic sale of raw meat, Omasum and offal and byproducts of buffalo meat. According to the AO, the seized material as per Annexure-A39, Party D-11 reflects that the total sales to the aggregate amount of ₹ 38,98,90,677/- has been made from financial year 2007-08 to 2013-14 which included the sales for ₹ 8,08,59,217/- pertaining to the year under consideration. It was further observed by the AO that the sales be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudged as manufacturing activity qualifying for claiming deduction u/s 10B of the Act. He, therefore, asked the assessee to explain as to why the exemption claimed u/s 10B should not be disallowed. In absence of any explanation from the side of the assessee to substantiate its claim, the AO rejected the claim of deduction u/s 10B and made an addition of ₹ 3,63,43,299/- to the total income. 12. The AO noted that during the year under consideration, the assessee company has shown travelling and conveyance of ₹ 50,77,021/-, membership fee and subscription expenses of ₹ 66,180/-, director s foreign travel expenses of ₹ 56,95,212/- and export and development expenses of ₹ 4,41,084/-. He observed that more than ₹ 1 crore have been claimed as expenses under the head travelling and conveyance. Since the assessee failed to substantiate by producing supporting evidence/vouchers in respect of the expenses incurred through credit cards as well as in respect of foreign travelling expenses to substantiate that these expenses are incurred wholly and exclusively for the purpose of business, the AO disallowed an amount of ₹ 21,17,829/- being 50% of the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income of the assessee for the year under consideration at ₹ 48,52,30,200/- as against the returned income of ₹ 1,84,50,000/-. 17.1 During the course of assessment proceedings, it was submitted by the assessee that in view of the decision of the Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla, 61 taxmann.com 412, the normal income already assessed cannot be disturbed in the absence of any incriminating material found during the course of search was rejected by the AO on the ground that the said decision was not accepted by the Department and the appeal is pending before the Hon ble Supreme Court and the decision is still awaited. 18. Before the Ld.CIT(A), it was pleaded that most of the additions made by the AO are on the basis of the book results declared by the assessee in the Profit Loss Account and the balance sheet in accordance with the regular books of account maintained by it. Only two additions unaccounted domestic sale and cash amount received by Mr. Mohd. Shahnawaz have been made on the basis of the incriminating material found during the course of search. Accordingly, it was claimed that the additions made by the AO on the basis of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents were completed on the date of search but no incriminating material pertaining to those completed assessment years were found during search. Hon'ble Court at invocation of section 153A for those years was invalid. 7.1.1. Now the facts of the appellant are to be examined in view of this legal position. It is clear from the assessment order as well as submissions of the appellant that search and seizure action 132(1) of the Act was undertaken by the Department in the case of appellant as on 15,2.2014 and on that date, assessments for A.Y. 2009-10 to A.Y. 2012-13 were completed assessments as the time period to issue notices u/s 143(2) for aforesaid years had already expired. In these years, additions could have been made by AO only on the basis of incriminating material/evidence found during the search proceedings. However, as can be seen from the present assessment order, some of the additions are made on the basis of incriminating material found during the search proceedings and remaining on the basis of scrutiny of book results and entries of profit and loss account and balance sheet filed along with return of income in regular course. As discussed in earlier paragraphs, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made on the ground that the payments have been made in cash to its employees who do not have bank accounts, not on the basis of any incriminating material found during the search proceedings. vii) Addition of ₹ 3,64,000/- on account-of rent expenses - This addition has been made on the ground that the assessee failed to provide any rent agreement/rent receipts to verify the same, not on the basis of any incriminating material found during the search proceedings. viii) Addition of ₹ 2,26,923/- on account of applicability of provisions of section 2(22)(e) of I. T. Act - Again this addition has been made in the regular course of assessment proceedings on the ground that there was maximum outstanding balance of ₹ 2,26,923/~ in the nature of advance in the account of director of appellant company who is having substantial share holding, not on the basis of any incriminating material found during the search proceedings. ix) One more addition has been made by AO amounting to ₹ 33,02,400/- on account of loans of ₹ 2,75,20,000/- advance by appellant to different parties but no interest has been charged. He therefore calculated the interest @12% on this lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases, outside regular books of account, against these undisclosed sales. Simply by saying that undisclosed profit was declared before the Income Tax Settlement Commission and only the peak amount should be taken for the purpose of addition, does not explain the source of undisclosed sales as worked out by AO. In such situation, the AO has correctly held that the purchases of these domestic sales have already been recorded by the group in their books of account in normal course, therefore, the total undisclosed sales are to be treated as additional income of appellant. In view of this, I confirm the addition made by AO and dismiss the ground taken by appellant. 20. So far as the addition of ₹ 8,95,00,000/- on account of cash received in Omasum-Delhi account is concerned, the ld.CIT(A) restored the issue to the file of the AO by observing as under:- 7.4.4 As regards the other addition of ₹ 8,95,00,000/- on protective basis, the AO has mentioned that the actual source of this cash amount was Mr. Moin Akhtar Qureshi from his undisclosed activities of dealing in meat products and liasoning with higher authorities, who had given this cash to Mr.Mohd. Shahnawaz for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the Revenue are in appeal before us by raising the following grounds:- Grounds of appeal by the assessee (A.Y. 2008-09) 1. That on the facts and circumstances of the case and in law, the order passed by CIT (A)-27, New Delhi (hereinafter referred to as CIT (A)), is bad in law. 2. That on the facts and circumstances of the case and in law the CIT (A) was not justified in upholding the action of AO in making an addition of ₹ 5,66,01,452/- by treating the entire sales as undisclosed income, by rejecting the contention of the appellant that all income emanating out of the incriminating seized documents on the basis of which the alleged addition on account of Domestic sales has been made has already been disclosed in the Income Tax Return filed in response to notice u/s 153A based upon the application filed before the Income Tax Settlement Commission (ITSC), which was rejected and hence not decided by ITSC in AMQ Group of entities. 2.1 That the CIT (A) was not justified in upholding the alleged addition by not considering and not adjudicating the submission of the appellant that during the course of assessment proceedings the appellant had requested for providing the recasted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of Income filed in response to notice u/s 153A based upon the application filed before the Income Tax Settlement Commission (ITSC), which was rejected and hence not decided by ITSC in AMQ Group of entities. 5. That the appellant craves leave to add, alter, modify any of the grounds at the time of hearing or before the hearing. Grounds of appeal by the Revenue (A.Y. 2008-09 1) The Ld. CIT(A) has erred in law in relying on Kabul Chawla 61 taxman.com 412(Delhi) and in holding that completed assessment could not be interfered by the AO without incriminating material. On the contrary for making the assessment u/s 153A of the Act does not stipulates any such conditionality on A.O. 2) The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the addition of ₹ 23,53,53,913/- made on account of unexplained purchases. 3) The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the addition of ₹ 1,29,77,985/- made on account of outstanding creditors. 4) The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the addition of ₹ 3,63,42,299/- made on account of deduction c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Settlement Commission of ₹ 1.85 crore. Since the disclosure was not true and full and the manner of earning/deriving additional income was not disclosed, the Hon ble Settlement Commission held that the disclosure was not true and accordingly rejected the application. She submitted that the various additions made by the AO are on the basis of the report of the Special Auditor and further investigation carried out on the basis of the seized material found during the course of search. 23.1 So far as the deletion of ₹ 23,53,53,913/- made on account of undisclosed purchases is concerned, she submitted that during the search, accounts related to purchases of Omasum and Offal by the assessee found and seized in the premises of Mr. Mohd. Shahnawaz whom the assessee had made cash payments for purchases were found. Further enquiry has been carried out by the AO on the basis of seized documents and made addition on account of bogus purchases. Under these circumstances, the ld.CIT(A) is not justified in deleting the addition by relying on the decision of the Hon ble Delhi High Court in the case of Kabul Chawla. She submitted that the decision in the case of Kabul Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been made, the question of purchases having been made from some other sources could not have been weighed with Tribunal as a factor in assessee s favour. Since the Tribunal has acted on partly relevant and partly irrelevant material and it was not possible to say as to what extent latter had influenced its mind, its order gave rise to a question of law. Accordingly, it was held that the order of the Tribunal was unsustainable. She also relied on the following decisions:- i) Vijay Proteins Ltd. vs. ACIT (1996) 58 ITD 428 (Ahmedabad); ii) N.K. Proteins Ltd. vs. CIT (2017-TIOL-23-SC-IT); iii)Dayawanti vs. CIT (2016) 75 taxmann.com 308 (Del). 24. So far as the deletion of various additions as per ground Nos.3 to 11 are concerned, she submitted that the additions are based on special audit report, seized documents and post search enquiries. Since it is a complicated case and transactions are unrelated and unverifiable, the matter was referred for special audit and it was found by the special auditors that the assessee is not maintaining proper accounts and failed to furnish information during special audit. Further, nothing was furnished during the assessment proceedings. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o far as the merit of the case is concerned, the ld.CIT(A) for all the assessment years held that the conversation in the e-mail does not lead to the conclusion that the assessee is engaged in under-invoicing of export sales and Hawala transactions. He further held that the assessee has subsequently recorded transactions reflected in the e-mail in the regular books of account and, therefore, no case for settlement/hawala is established. This according to the ld.CIT-DR is not correct. She submitted that as per the e-mail dated 20th March, 2009, the export manager of the assessee instructed its trade associate to deposit 40,000 USD in the bank account of Mr. Jean Louis Deniot . As per other emails recovered as per Annexure A-12, Party D-1, it is clearly established that the amount of 40,000 USD was actually deposited in the bank account of Cabinet Jean Louis Deniot on 30th Mach, 2009 by the trade associate of the assessee. Thus, it leads to clear understanding that the assesseee was involved in under invoicing of export sales and diverting of the proceeds to other account overseas but, so far as the finding of the ld.CIT(A) that the transaction referred in the e-mail dated 20th March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared in 153A return) 5,66,01,452.00 (1,85,00,000) 3,71,84,257.00 (1,50,00,000) 4,65,90,949.00 (10,00,000) 5,20,70,899.00 (2,00,00,000) 1,32,76,893.00 (17,00,000) 2. Protective addition on account of cash received in OMASUM DELHI Account 8,95,00,000.00 17,73,84,049. 28,68,36,793.00 55,95,50,573.00 13,21,11,994.00 3. Addition on account of TDS Not deducted - - 5,50,669.00 - - 4. Addition on account of purchases by holding 25% of purchases as bogus/inflated - - - - - 5. Addition on account of disallowance of 20% of expenses incurred through credit cards - - - - - 6. Addition on account of disallowance of 20% of other expenses - - - - - 7. Addition on Account of Rent paid for Guest House - - - - - 8. Addition u/s 14A of the IT Act, 1961 - - - - - 9. Addition on account of Rate Difference - - - - - 10. Addition on account of Rate Difference 1,84,50,000.00 1,61,27,545.00 2,42,44,168.00 7,03,43,456.00 3,54,13,197.00 AMQ AGRO INDIA PVT. LTD. YEAR-WISE GROUNDS/DETAILS OF ADDITIONS CHALLENGED BY AMQ AGRO INDIA PVT LTD. BEFORE HON BLE ITAT IN APPEAL FILED FOR AY 2008-09 TO 2014-15 S. No. PARTICULARS OF INCOME AY 2008-09 (ITA No.4287/Del/1 8) AY2009-10 (ITA No. 4288/Del/18) AY 2011-12 (ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search action. He submitted that the normal income already assessed cannot be disturbed in the absence of any incriminating material found during the search. For the above proposition, he relied on the decision of the Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla, 61 taxmann.com 412 wherein it has been held that completed assessment can be interfered by the AO while making assessment u/s 153A only on some incriminating material that was unearthed during the course of search which was not produced or not already disclosed or not made in the case of the original assessment. He submitted that the Hon ble Delhi High Court while holding so has distinguished its earlier decision in the case of CIT vs. Chetan Das Laxman Das, 211 taxmann.com 61 and Filatex India Ltd. vs. CIT, 229 taxmann.com 555. Merely because the Department has not accepted the decision of the Delhi High Court in the case of Kabul Chawla and an appeal is pending before the Hon ble Supreme Court, the same would not be a ground to take a contrary decision than the view taken by the Hon ble Delhi High Court. He accordingly submitted that since the decision of the CIT(A) is based on the decision of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases by alleging that the average purchase cost of the assessee company is much higher than the average export price of buffalo meat and on the other hand, in the same assessment order, while making the alleged addition is claiming that the assessee company is indulged in under-invoicing of export sales which are self-contrary, therefore, deserves to be deleted. He submitted that the product in which the assessee is dealing is not a mechanical product in which the quality and size of the product remains the same at all the time. The product in which the assessee is dealing is an animal husbandry product, namely omasum which is part of buffalo offal, the size and quantity of which varies from animal to animal and, therefore, there can be a different price at every stage of the product sale depending upon the size and quantity of the final product and which can only be ascertained at the time of sale of that particular consignment to the buyer. Different rates may be charged from different buyers depending upon the relationship with each individual buyer, volume of business done with the buyer, prospects of product order in future, etc. Therefore, the contention of the AO that dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such circumstances, it is the peak balance only which has to be taxed and not the entire cash payment. He submitted that the AO has wrongly added the entire undisclosed sales as income by holding that purchases are recorded in the regular books of account. However, contrary to the same, it is stated by him at a number of places in the assessment order that the assessee was engaged in the activity of making undisclosed purchases through Md. Shahnawaz. The ld. Counsel drew the attention of the Bench to the following instances in the assessment order:- Page 47 of Asst Order Further the above chart shows cash money to the tune of ₹ 146.66 crores have been received by Mohd. Shahnawaz during the period FY 2007-08 to FY 2013-14, which Mohd shahnawaz stated to have receive from either you I.e Moin Akhtar Qureshi, Prop. Abdul Majeed qureshi or from M/s AMQ Agro Pvt Ltd and has been utilized by him for making purchase of Omasum Slaughter meat for both the concerns. Page 54 of Asst order Thus it is dear that although M/s AMQ Agro India pvt ltd was purchasing animal byproducts from different suppliers through Mohd Shahnawaz but instead of integrating books of OMASUM DELHI with its own re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of accounts then what is the source of regular sales recorded in books of accounts; c) Without prejudice to the above, even if the undisclosed sales are assumed to have emanated out of purchase recorded in regular books of accounts only the profit elements can be said to be the income of the assessee and under no circumstances the entire sales can be added. 38. For the proposition that entire unaccounted sales cannot be added to income but only the net profit, the ld. Counsel for the assessee relied on the following decisions:- (i) CIT v. President Industries 124Taxman.com 654; (ii) CIT v. Sameer Synthetics Mill 362 ITR 410; (iii) CIT v. Leo Formulation Pvt. Ltd. 48 Taxmann.com 328; (iv) CIT v. Bahubali Neminath Muttin 72 Taxmann.com 139 (v) CIT v. Aggarwal Engg. Co. (Jal) 156 Taxmann.40. 39. So far as the observation of the CIT(A) that the assessee did not produce any material in support of its contention that undisclosed income of ₹ 1.85 crore voluntarily declared in the return filed in response to section 153A notice is concerned, the ld. Counsel for the assessee submitted that in para 17 of its written submissions, it was clearly submitted that corresponding credit in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Counsel submitted that these documents pertained to the undisclosed sales/purchase activities of meat outside the books of account. He submitted that substantial addition on account of such undisclosed activity has been separately made in the assessment order under the nomenclature Domestic sales and cash payments made for purchases on the basis of entries found recorded in books of accounts found to be maintained in the name of OMASUM DELHI by the AO for A.Y. 2008-09 to 2012-13. He submitted that there exist incriminating material for undisclosed sale/purchase activity outside books of account for which separate additions have been made in the assessment order. The assessee is also contesting the quantum of such addition in its appeal before the Tribunal on the ground that the entire sale and purchase cannot be simultaneously added and the quantum of addition has to be restricted to the profit earned from such activity carried on outside the books of account. In addition to the same an altogether separate addition has been made by the AO by disallowing part of the purchases as bogus by holding that substantiating evidence in the form of bills and vouchers and invoices was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice u/s 153A on 18th June, 2016 offering additional income of ₹ 1,85,00,000/- which was offered before the Settlement Commission by filing application u/s 245C(1) of the Act stating that this income was earned from the business of meat. 42. Since there was complexity in accounts due to volume and multiplicity of transactions and specialized nature of business which created doubt towards the correctness and truthfulness of accounts and financial results declared by the assessee, the AO, after obtaining approval of the PCIT, directed the assessee to get its accounts audited from the special auditor. After the special auditor s report was received, the AO examined the facts of the case in the light of the findings given by the auditors and questionnaire was issued to the assessee. After considering the submissions of the assessee, the AO completed the assessment determining the total income of the assessee at ₹ 48,52,30,200/- as against ₹ 1,84,50,000/- declared by the assessee in the return filed in response to notice u/s 153A wherein he made various additions, the details of which are as under:- (Amount in Rs.) i) Bogus purchase 23,53,53,913/- ii) Under-invoicing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the CIT(A) in deleting the above additions for A.Y. 2008-09 to 2011-12. It is an admitted fact that the search took place on 15th February, 2014 and on that date the assessments for 2008-09 to 2011-12 were completed. The additions which are deleted by the ld.CIT(A) are not based on any incriminating material/evidence found during the course of search. At the time of hearing, the ld.CIT-DR heavily argued that the addition made by the AO on account of bogus purchases are based on incriminating material found during the course of search. The addition on account of under invoicing was also made on the basis of the e-mail conversation between the assessee company and Mr. Lucky Yuan, a trade associate of the assessee company. Therefore, the ld.CIT(A) was not justified in deleting the addition in absence of any incriminating material found during the course of search. 46. So far as the argument of the ld.CIT-DR that the addition made on account of bogus purchases are based on incriminating documents found during the course of search is concerned, we find from the assessment order that the addition was made by the AO not on account of any incriminating material found during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision in the case of Kabul Chawla (supra) has also decided the issue on merit. He has observed that an e-mail cannot lead to the conclusion that the assessee is engaged in the under-invoicing of export sales or hawala transactions. According to the ld.CIT(A), it is only a presumption drawn by the AO, but, there is no evidence on record to show that the difference in the rates of sales resulted in under-invoicing. Further, the ld.CIT-DR could not controvert the findings of the ld.CIT(A) that the AO failed to co-relate the amount generated through under-invoicing of sales, if any and sending it abroad to be deposited in the bank accounts of the two entities or making payment to various parties as alleged. Further, the assessee has also explained satisfactorily that there can be various reasons for difference in the rates of goods exported such as size and quality of items, volume of transactions and relationship with buyers, etc. The relevant observation of the CIT(A) has already been reproduced in the preceding paragraph. In view of the above and in absence of any incriminating material found during the course of search on account of under-invoicing of export sales, the ld.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the arguments advanced by the ld.CIT-DR that the ratio of decision of the Hon ble Delhi High Court in the case of Kabul Chawla (supra) is not applicable for A.Y. 2012-13. However, since the ld.CIT(A) has deleted the additions made by the AO by relying on the decision of the Hon ble Delhi High Court in the case of Kabul Chawla (supra) and has not decided the issues on merit, therefore, we deem it proper to restore the issue to the file of the ld.CIT(A) for deciding the issues on merit. Needless to say, the ld.CIT(A) shall give adequate opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the Revenue for A.Y. 2012-13 are accordingly allowed for statistical purposes. 53. So far as the grounds raised by the assessee are concerned, the assessee has basically challenged the addition on account of undisclosed domestic sales, protective addition on account of cash received in OMASUM-DELHI account and not giving set off of the additional income on account of the profit declared in 153A return. For A.Y. 2010-11, the assessee has taken another ground challenging the addition on account of TDS not deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions, the reasons for which has already been reproduced in the preceding paragraphs. We find, the ld.CIT(A) confirmed the addition of ₹ 5.66 crores by holding that the assessee failed to establish that there were any additional purchases outside the books of account against undisclosed sales. According to him, by simply submitting that undisclosed profit was declared before the Income-tax Settlement Commission and, therefore, only peak amount should be added does not explain the source of undisclosed sales. He accordingly, upheld the action of the AO in making the addition on account of undisclosed domestic sales. 57. So far as protective addition of ₹ 8.95 crore is concerned, the ld.CIT(A) held that the AO has made corresponding addition on substantive basis in the hands of Moin Akhtar Qureshi and, therefore, the addition made on protective basis in the hands of the assessee was deleted subject to the decision of the appellate authority in the case of Moin Akhtar Qureshi. So far as the argument of the assessee that the additional income of ₹ 1.85 crore voluntarily disclosed before the Income-tax Settlement Commission and unclaimed in the return filed in respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htar Qureshi, Prop. Abdul Majeed qureshi or from M/s AMQ Agro Pvt Ltd and has been utilized by him for making purchase of Omasum Slaughter meat for both the concerns. Page 54 of Asst order Thus it is dear that although M/s AMQ Agro India pvt ltd was purchasing animal byproducts from different suppliers through Mohd Shahnawaz but instead of integrating books of OMASUM DELHI with its own regular books of accounts maintained at Rampur, the group was indulging in out of books purchases by utilizing cash that was generated over a period of time through unaccounted sources by Moin Akhtar Qureshi Page 52 of Asst order 9. B Details of cash given to Mohd Shahnawz for unaccounted purchases Page 54 of Asst order Thus while Mohd Shahnawaz was engaged by the group for making purchases, there would have been no difficulty in recording so in the books of accounts, if the withdrawals for purchases had been only from meat business. Page 54 of the Asst order Thus it is dear that although the group was purchasing animal by products from different suppliers through Mohd. Shahnawz but instead of integrating books of OMASUM DELHI with own regular books of accounts maintained at Rampur, the group was ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making purchases and in turn domestic sales made by him outside the regular books of account are correlated to each other. Both these transactions are correlated to each other inasmuch as payment of cash resulted in making of purchases outside the books of account and, thereafter, sale of goods purchased in cash was made outside the books of account giving rise to undisclosed sales which again yielded realization of cash which was again rotated for making subsequent cash purchases. Therefore, we are of the considered opinion that under no circumstances the entire amount of cash payments aggregating to ₹ 143.53 crore can be added as it is the same cash which is getting circulated year after year during the course of entire block period. The various decisions relied on by the ld. Counsel for the assessee also support to the proposition that in such circumstances it is the peak balance only which are to be taxed and not the entire cash payment. 64. We also find some merit in the argument of the ld. Counsel for the assessee that the entire amount of sales aggregating to ₹ 38.98 crore (for the year under appeal ₹ 5.66 crore) cannot be brought to tax and only the net pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o determined shall be applied across all the assessment years to determine the profit from undisclosed activity. Needless to say, the gross profit rate percentage will have to be appropriately modified upwardly to correspond the same to gross profit percentage on purchases. iii) The figure of purchases (₹ 143.52 crores in total) in respect of each assessment year will be apportioned between the assessee M/s AMQ Agro India Pvt. Ltd. and Moin Akhtar Qureshi in the same proportion as has been done in the assessment order in respect of undisclosed sales. iv) The amount of profit from undisclosed activity in meat trading determined in the above manner will be the undisclosed income of the assessee for each assessment year. v) The AO shall also determine the initial capital required for the undisclosed purchase in the first year i.e., A.Y. 2008-09 based on a working capital cycle of 15 days since the product is a perishable one. The above initial capital so computed by the AO shall be apportioned between the assessee i.e., AMQ Agro India (P) Ltd. and Moin Akhtar Qureshi on the basis of their respective purchases and to be added to the income of the assessee as undisclosed investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s outside books and the appeals of above persons are not before us, the assessee may take up this matter before the AO at the time of the set aside proceedings. The AO shall ensure that there is no double addition of the amount of additional income declared in the hands of AMQ Agro and income declared in the 153 tax return of other entities stated above. Needless to say the AO shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds on this issue are accordingly allowed for statistical purposes. 70. So far as the addition of ₹ 5,50,669/- on account of non-deduction of TDS for A.Y. 2010-11 is concerned, it is the grievance of the ld. Counsel that although a specific ground was taken before the CIT(A), however, he has not adjudicated the same. We find, the ld.CIT(A) at para 4 of his order at page 8, has reproduced the said ground as ground of appeal No.15 where the assessee has raised the following ground:- 15. That on the facts and circumstances of the case and in law, the AO was not justified in making an addition of ₹ 5,50,669/- by disallowing the interest expenses paid on a car loan ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
