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TMI Blog2021 (5) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... esidence of the employee could well be examined at the premises or questioned u/s 132(4). The revenue has not questioned the shortage of cash during the search proceedings. Even so, shortage of cash cannot be a reason to reject the books of accounts and recomputed gross profit based on the performance of the company for the last three years. The action of the Assessing Officer cannot be supported and we decline to interfere with the order of the ld. CIT (A). Delay in ESI/PF Contribution - CIT (A) deleted the addition made by the AO on account of delay in ESI/PF Contribution owing to payment of the same by the assessee before the due date of filing of the return of income u/s 139(1) - HELD THAT:- Since, the decision of the ld. CIT (A) is in consonance with the judgment of Hon ble Apex Court in the case of CIT Vs ALOM Extrusions Ltd. [ 2009 (11) TMI 27 - SUPREME COURT] we decline to interfere with the order of the ld. CIT (A). Addition/Seized material - Before the ld. CIT (A), the assessee explained this page as outward records of empty reels on which wires and cables have been rolled. No financial value. No impact on revenue. - HELD THAT:- CIT (A) held that this is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be added in the hands of the assessee company. The addition made by the AO is hereby directed to be deleted. Excess Stock found in search - HELD THAT:- The assessee submitted that there was no quantitative difference in items of Inventory of stock found, and the difference was only because of valuation of stock which was taken during the year, whereas the stock was required to be valued at the end of the assessment year, as per cost or market value whichever is less. In the interest of justice, we hereby direct that the assessee shall produce all the relevant documents to substantiate the purchase of the stock in quantitative terms as per the books before the revenue authorities. The AO shall value the stock taking into consideration, the opening balance as per the balance sheet and the purchase invoices (at cost price) till the date of search and take an appropriate decision as per the provisions of the Act. - ITA No. 6221/Del/2017, CO No. 01/Del/2018 - - - Dated:- 7-4-2021 - Ms. Suchitra Kamble, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. Rakesh Gupta, Adv. For the Revenue : Sh. V. K. Kataria, Sr. DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) at page 12 of his order and has erred in not al lowing the benefit of deduction u/s 80IC on the said addition. 3. That in any case and in any view of matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of ₹ 16,43,947/- on account of alleged excess stock, is bad in law and against the facts and circumstances of the case. 4. The assessee company is engaged in the business of manufacturing of switches, boxes, wires, control panels, tables and related items at Plot No.99, Sector-4, Integrated Industrial Estate, SIDCUL, Opposite Mahindra and Mahindra Factory, Haridwar, Uttrakhand. Return of income was f i led on 30.10.2015 declaring an income of ₹ 67,21,140/- under normal provisions and ₹ 64,64,160/- under the MAT provisions. In this group of cases, search u/s 132 of the I.T. Act was carried out by Chennai Investigation Directorate. The premises located at Plot No.99, Sector-4, Integrated Industrial Estate, SIDCUL were covered u/s 132 and premises situated at Plot No.92, Sector-7A, SIDCUL Haridwar was covered u/s 133A of the I.T. Act. During the course of search and survey various documents were seized and impounded. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortage of cash during the search proceedings. Even so, shortage of cash cannot be a reason to reject the books of accounts and recomputed gross profit based on the performance of the company for the last three years. The action of the Assessing Officer cannot be supported and we decline to interfere with the order of the ld. CIT (A). 9. Trivia, The Assessing Officer failed to perceive any motive why an assessee claiming deduction u/s 80IC of the Income Tax Act, 1961 would try to indenture down profits by declaring low GP. Delay in ESI/PF Contribution: 10. The ld. CIT (A) deleted the addition made by the AO on account of delay in ESI/PF Contribution owing to payment of the same by the assessee before the due date of filing of the return of income u/s 139(1). Since, the decision of the ld. CIT (A) is in consonance with the judgment of Hon ble Apex Court in the case of CIT Vs ALOM Extrusions Ltd. 319 ITR 306, we decline to interfere with the order of the ld. CIT (A). Addition/Seized material: 11. The AO observed that as per page 121 of Annexure A-2 of Seized material total sales of ₹ 2,72,210/- on output gate pass rejected was not recorded in the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,63,733/- 3. M/s. Bheron Enterprises - ₹ 56,64,353/- Total Addition Made - ₹ 83,18,322/- Respectfully submitted that assessee company was dealing with these parties even in the preceding years as well. Vide reply submitted dated 9.11.2016 (PB 51), assessee company informed the Ld. AO that details of creditors was furnished through email on 8.12.2016, and further provided the copies of the ledger accounts of the sundry creditors. PB 107-111 is copy of ledger account of M/s. Bheron enterprises with their complete address for the period 1.4.2014 to 31.3.2015 showing the outstanding balance payable of ₹ 56,64,353/-. PB 112 is copy of ledger account of M/s. Bheron Enterprises for the period 1.4.2015 to 31.3.2016 showing the outstanding payment cleared during the Asstt. Year 2016-17. PB 113-155 are copies of the purchases bills for purchases made from M/s. Bheron Enterprises to prove the genuineness of transactions and identity of the party. These bills given their complete detail of TIN and their Phone number as well. PB426-427 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of returns of Shri Rohit Gupta, Proprietor of M/s. Standard Plastics for AY 2013-14 to 2015-16, in order to establish their identity, and genuineness of the transactions. PB 443-445 is confirmation of account for the period 1.4.2013 to 31.3.2014 given by M/s. R.G. Industries, with their PAN details in order to prove the identity of the said party which confirms the identity, and genuineness of the transactions. PB 446 is confirmation of account for the period 1.4.2014 to 31.3.2015 given by M/s. R. G. Industries, with their PAN details which confirms the identity, and genuineness of the transactions. PB 447 is confirmation of account for the period 1.4.2015 to 31.3.2016 given by M/s. R. G. Industries, with their PAN details which confirms the identity, and genuineness of the transactions. It is submitted that these confirmations could be received by the assessee only now and as such are being submitted with our written submissions, and are placed in the paper book. All the above parties are assessed to tax, and payments were made to these parties through bank account only. Without prejudice to above, it is not out of place to submit here that even other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 6.2 In view of the reply furnished by the assessee company, the loose sheets reflecting production of AC boxes is treated as undisclosed business of the assessee company. Therefore, the assessee was asked vide notesheet noting dated 19.12.2016 as to why this unexplained investment should not be taken as your income for the relevant period. This office has also directed the assessee to produce Sh. Brajesh Ojha (his statement u/s 133A was recorded on the day of survey, i.e. 13.05.2014), Sh. Digamber Joshi and Sh. Mohit Talwar. Summons u/s 131 was also issued to Sh. Digamber Joshi and Sh. Brajesh Ojha through the assessee but no compliance of summons was made. One director of the company Sh. Vishal Tayal summoned through the counsel of the assessee but he did not appear on the said date. 6.3 In view of these discussions, purchase of raw material were not found recorded in the books of accounts of the asseessee in said periods. Therefore, I am of the view that the initial investment on account of purchases of AC bodes is liable to be added in the year of initial purchase i.e. FY 2012-13. Based on this, another opportunity has been provided to assessee. 6.4 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the expenses of the unit. 6.5 From the above, the assessee company vehemently contested that the above impounded documents reflect the job work carried out by M/s. Electromech in its premises. It has been considered but found not tenable on the basis of the following: 1. There is no rent income from M/s. Electromech Industries was credited in the P L account of the assessee. 2. Assessee s letter head has been found to have been used for recording above inventory of AC boxes purchases. 3. M/s. Electromech Industries never disclosed this premises as its business premises in any record produce / submitted before any authority. 4. No other expenses related to said factory premises was found debited by M/s. Electromech Industries. 6.6 In the absence of any concrete evidences, initial investment on account of initial purchases shown in the name of M/s. Electromech Industries from said premises was treated as income of the assessee company on the basis of circumstantial evidences in the Assessment order of AY 2013-14. Further, the statement of Sh. Brajsh Ojha u/s 133A dated 13.05.2014 reveals that the assessee has manufactured 500 AC boxes per day. The stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 19,50,000/- (Sale of a year = ₹ 97,50,000 x 20%). 6.9 On the basis of this estimate, this extrapolated for the years of which impounded documents have been found. This was confronted to the assessee vide note sheet noting dated 30.12.2016. I am of the view that the Gross profit of the year of ₹ 19,50,000/- should be treated as income of the assessee for AY 2013-13. 6.10 Hence, in view of the above, I estimate the initial investment on account of purchases and gross profit u/s 145(3) of the IT Act since it is the other segmental activity of the assessee company. During the course of appellate proceedings, AR of the appellant submitted as under: Respectfully submitted that as stated supra one survey action was also carried out at assessee s business premises located at Plot No. 92, Sector 7 (wrongly mentioned as Sector 7A in the assessment order), SIDCUL, Haridwar, Uttarakhand, wherefrom certain documents were seized and impounded and are stated to be as under:- LP-2: Page 1 to 185 LP-5: Page 24 to 31 and Page 35 to 43 According to the Ld. AO the above documents found reveal manufacturing of some AC boxes sold to M/s. Anchor E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. A bare perusal of this statement shall reveal that this statement cannot be relied upon for the reasons that first of all it is a statement of some casual labour of the assessee company and secondly, none of the document found relate to assessee company, since these documents found were relating to M/s. Electromech Industries only. In most of the replies given Shri Brajesh Ojha has expressed that he has no knowledge which proves that he replied to any query of the survey team either as the survey team wanted to write, or whatever little knowledge he was having about the work done by M/s. Electromech Industries, from the premises of the assessee company. Ld. AO concluded that the work done by M/s. Electromech Industries, was not of that concern but was only of the assessee company, and thus, he estimated that there was manufacturing for average 300 days and 500 pieces per day which worked out to 1,50,000Z- in the year, on which he estimated profit of ₹ 13/- piece and made the impugned addition of ₹ 19,50,000/-. First of all it is submitted that an admission made in the statement recorded during a survey u/s 133A has no evidentiary value and as such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AO drawn from such dumbed documents, may kindly be excluded from consideration. 2. Ld. AO stated that there is no rent income from M/s. Electromech Industries was credited in the P L A/c of the assessee. In reply it is submitted that when the small portion of the assessee premises was given to some friend in a friendly manner by the director of the assessee company, there was no question of charging of any rent for the portion given by the assessee to M/s. Electromech Industries. Infact, Shri Mohit Talwar was allowed to use the said small portion, for business expediency of the assessee company, as assessee company used to purchase some material / job work done from the said concern, so that priority may be given by the said concern to the work of the assessee company. Moreover, it is not the case of the Ld. AO that M/s. Electromech Industries have claimed to have paid some rent to the assessee company and that has not been accounted for by the assessee in its books of account. Therefore, when no rent was received by the assessee for the portion allowed to be used by M/s. Elecromech Industries, there was no reason that any rent was to be recorded as received by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acility was provided by the assessee to M/s, Electromech Industries, except allowing to use a small portion, there was no question of any expense found debited by M/s. Electromech Industries. It is submitted, that even still there was some doubt in the mind of the Ld. AO he could have passed the information to the assessing officer of M/s. Elecrromech Industries, for further needful action in their hands. But to make addition just on whims and surmises, and on doubts, without bringing on record some specific evidence to show that assessee has not declared any income which has actually been earned by the assessee is against the principles of natural justice, contrary to law and fats of the case and may kindly be held so. In view of the above, it is humbly prayed that the addition made just on whims, surmises and doubts may kindly be directed to be deleted. 17. We find that the Assessing Officer concluded that the work done by M/s. Electromech Industries, was not of that concern but was only of the assessee company, and thus, he estimated that there was manufacturing for average 300 days and 500 pieces per day which worked out to 1,50,000/- in the year, on which he estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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