9911796707
TMI Blog2021 (10) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the sake of convenience and brevity. 3. Although, these appeals filed by the Revenue and Assessee contain multiple grounds of appeals. However, at the time of hearing, we have carefully perused all the grounds raised by the Revenue as well as by the Assessee. Most of the grounds raised by the Revenue as well as assessee, are either academic in nature or contentious in nature. However, to meet the end of justice, we confine ourselves to the core of the controversy and main grievances of Revenue and the assessee as well. With this background, we concise and summarise, common grounds raised by the Revenue and Assessee, as follows: 4. Concise and common grounds of appeal raised by the Revenue, assessment year wise, are as follows: (i) Admitting additional evidence in relation to the addition made on account of cash profit without giving the opportunity to the Assessing Officer to offer his comments which is in contravention of provisions of Rule 46A of the Income Tax Rules. a) ASSESSMENT YEAR 2007-08 b) ASSESSMENT YEAR 2008-09 c) ASSESSMENT YEAR 2009-10 d) ASSESSMENT YEAR 2010-11 (ii) Deleting the addition made on account of cash profit earned by the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.1 raised by the Revenue is reproduced below for ready reference: i) Admitting additional evidence in relation to the addition made on account of cash profit without giving the opportunity to the Assessing Officer to offer his comments which is in contravention of provisions of Rule 46A of the Income Tax Rules. a) ASSESSMENT YEAR 2007-08 b) ASSESSMENT YEAR 2008-09 c) ASSESSMENT YEAR 2009-10 d) ASSESSMENT YEAR 2010-11 7. In this ground, Revenue has objected that ld.CIT(A) has admitted additional evidence, in respect of cash profit earned by the assessee and the Assessing Officer has not been given opportunity to offer his comments, which is in contravention of provisions of Rule 46A of the Income Tax Rules. We have heard both the parties on this preliminary issue and gone through order of the ld.CIT(A) and his findings for assessment years 2007-08 to 2010-11 and observed that assessee has not submitted additional evidences during the appellate proceedings. For instance, findings of ld CIT(A) for assessment year 2010-11, which is mentioned at para 5, (vide page 23 to 32 of his order) and noted that assessee did not submit any additional evidence during the appellate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the contents of the page and modus operandi of assessee The copy of seized Profit and Loss Account for the period ended on 30th April, 2006 reproduced by the Assessing Officer, is as under: Profit and Loss Account for the period ended 30.04.2006 Sales (MT) Production (MT) 2816.113 Local 296.268 Export 3121.281 Total 3520.476 Apr. 2006 PARTICULARS Apr. 2006 58162840 LOCAL SALES (Before Rebate, comm. Etc) 20654 340706 Rebate, Discount., Commissioner. Etc 121 57822134 NET SALES (After Rebate etc.) 20533 6220192 EXPORT SALES 20995 477455 EXPORT ENTITLEMENTS 1612 1318204 Direct Export Expenses 4449 5379443 NET EXPORT SALES (After Rebate etc.) 18157 63201577 TOTAL SALES 20307 30160 MISC. INCOME 10 63231737 TOTAL INCOME 20316 712014 PROFIT / LOSS BEFORE DEPRE. 229 1950000 DEPRECIATION 627 -1237986 POFIT / LOSS AFTER DEPRE. -398 1474396 NET PR. FROM TURBINE 236410 TOTAL ACS 20641 SALES 20632 DIFF 9 Quantitative Details in Closing various Disputes (1) Raw Materials 1160 .795 314 (2) Chem 598 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w materials', 'Chem', 'sales ac' and ' com' , certain figures are reflected which is nothing but cash profit generated by assessee not shown in Profit & loss account. The Assessing Officer has also referred to certain loose papers found (like Page 66,135,191 of Annexure BS -2) from the assessee's premises wherein summary of Profit & loss account for year wise is found which contains details like month, book profit of plant and turbine and under one column of 'cash' or 'dep' , figures notes equates to summation of figure mentioned under " Quantitative Details in Closing various Disputes" found in loose paper containing month wise profit & loss account referred (supra). Hence Assessing Officer has held that figures mentioned under the head " Quantitative Details in Closing various Disputes" is nothing but cash profit generated by assessee from sales, raw material etc, not recorded in books of account. Such reasoning of Assessing Officer was also substantiated by Assessing Officer by referring to certain loose papers wherein reconciliation of profit & loss account is prepared considering the profit as per costing and final figures comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 13. On the other hand, Shri P.M.Jagasheth, Learned Counsel of the assessee, begins by pointing that assessee has explained the contents of the loose papers by letter dated on 18.11.2011. The Assessing Officer has made entire addition ignoring the submissions filed by the assessee, on 18.11.2011. The ld.Counsel contended that various loose papers found during the search, were nothing but merely MIS Sheets prepared at the end of each month based on the data's then available in the system without reference to the actual figure in the financial books. The ld.Counsel pointed out that actual profit as per accounts is always more than what is reflected in the summary sheet prepared, year wise, from the loose papers, monthly working sheets, therefore, no addition is called for. The various loose papers, which contain the date of the monthly profitability of the company, are prepared on estimated basis for want of the final amounts, due to various variations in purchase, sales, expenses, stock and depreciation. These loose pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer has made addition and the mode of preparation of such MIS sheet, which only gives the estimated profit and argued that actual profit as per audited accounts is always more than what is reflected in the summary sheet prepared year wise from the loose monthly working sheets, hence no further addition is called for. The learned Counsel has explained that figures noted against 'sales' under the head "Quantitative Details in Closing various Disputes" appearing in monthly profit and loss account, found in seized material, reflects disputed sales, as the accounts department was expecting certain claims and discount besides the clear sales for the period but such sale is already recorded in financial statements, hence such figures cannot be termed as unaccounted cash profit generated by assessee. With regards to figures noted against Raw material, Chemical and Raw Material (Comm.), it is pleaded by the ld Counsel that such figures are already considered in the financial books of account and the overall there is hardly any difference in consumption of Raw Material as per audited financial books of accounts. On careful consideration of reasoning given by Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed annual account Sales as per audited annual accounts 2007-08 BS-2/168 50706.272 50425.07 50706.270 50387.609 2008-09 BS-6/53 55649.412 55476.602 55649.412 55471.686 2009-10 BS-14/142 60075.319 59972.399 60075.319 59972.399 (ii)Opening and closing stock of finished goods for the FY 2006- 07 relevant to A.Y. 2007-08 mentioned in BS-2/193 of seized data is tallied with audited annual accounts. The closing stock of finished goods noted in such seized paper is for 439.38 MT which is similar to quantity of closing stock of finished goods mentioned in audited annual accounts. Further, opening stock of finished goods mentioned in such seized material is for 115.36 MT and opening stock of finished goods as per audited annual accounts is for 120.721 MT which shows only a minor difference. 17. The ld CIT(A) observed that Assessing Officer on page No. 12 to 14 of the Assessment Order has mentioned that the cash profit after considering adjustment mentioned under the head 'quantitative details in closing various disputes' in different MIS Sheets were exactly tallying with the reconciliation of Profit & Loss Account maintained by the Costing Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty's ledger account and rebate account and it is found that the alleged sales which the Assessing Officer has treated as cash sales and not accounted for in the books of account are duly found recorded in financial books of account. This fact also gets strength from the fact that from the quantitative details of the sales the disputed sales in quantity were not reduced; only the sale value of such disputed sales where claims were to be received, was deducted from sales figures. The assessee has submitted party-wise details of sales before the Assessing Officer which also includes sales mentioned under the head 'quantitative details in closing various disputes'. 19. We note that during the appellate proceedings, the sample copies of invoices were also submitted before ld CIT(A) and were test checked by the ld CIT(A) and it is observed by ld CIT(A) that assessee has paid Excise Duty on such sales and such sale is already recorded in Excise Register. Further, whenever assessee has given rebate/claim on such sales, excise duty pertaining to such rebate/claim is reversed. The Assessing Officer on page 14 of the Assessment Order has observed that MIS sheets found and seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash sales which was not proved by the Assessing Officer by any corroborative evidence. 21. With regards to addition of raw material consumption , it was observed by ld CIT(A) that assessee has sold mixed waste and other raw material in cash as noted in certain sheets. The cash sales of raw material (waste) are noted on following seized sheets: A.Y. Seized material Month Amount of sale (Rs.) 2009-2010 BS4/8 April 2009 226755 2009-2010 BS4/41 May 2009 126000 2009-2010 BS4/7 June 2009 132123 Total 484878 The Figures mentioned herein above coincides with the figures noted in loose paper under the head " raw material" and the assessee has failed to submit any evidence that the sale of raw material has been reduced from raw material consumption in audited annual accounts hence addition of Rs. 6,75,537/- was restricted by ld CIT(A) to Rs. 4,84,878/-. On the basis of aforesaid discussion, and facts of assessee's case, addition made on account of unaccounted profit earned by assessee for Rs. 58,99,386/- was restricted by ld CIT(A) to Rs. 4,84,878. 22. We note that that additions have been made based on var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction is duly supported by production register and monthly production statement by factory and entry in RG 1 register. All purchases are duly supported with GRN, Delivery challan of party and transport LR copy, Purchase bills, Entry in form IV of excise reflecting total purchases for the month. All purchases are recorded in purchase inward register at the time of arrival. In form IV, assessee company provides details of opening stock, purchases, consumption and closing stock on monthly basis to excise department. Assessee is filing monthly excise returns, excise audit and checks are carried, out by the excise department on regular intervals. In all these excise audit and check not a single time it was found out by the excise department that there is any variation in book records and factory records. Therefore, based on this factual position we delete the addition sustained by ld CIT(A) for Assessment Year 2009-10 at Rs. 18,99,119/- ( Rs. 2,64,46,745- Rs. 2,45,47,626) and for Assessment Year 2010-11 , at Rs. 4,84,178/-(Rs. 58,99,386-Rs. 54,14,508). 24. In the result, Concise and Common ground No.2 raised by the Revenue is dismissed whereas, Concise and Common ground No.2 raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. The Assessing Officer simply made the addition on ad hoc basis without relying upon any admissible evidence of inflation of purchases by the assessee. The addition was made without any basis and on ad hoc basis only. The similar additions were made by Assessing Officer in A.Ys. 2004-05 to 2006-07, wherein ld CIT(A), vide his order dated 31st August, 2012 in Appeal No. CIT(A) II/CC-III /286 to 288/2011-12, similar additions made by Assessing Officer were deleted.In view of the above facts, we note that Assessing officer was not justified in making the ad hoc addition of Rs. 2,00,000/-. Hence, ld CIT(A) has rightly deleted the addition of Rs. 2,00,000/-.That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 29. In the result, the Concise and Common Ground No.3 raised by the Revenue is dismissed. 30. We note that Concise and Common Ground No.4 raised by the Revenue and Concise and Common Ground No.4 raised by the Assessee are identical and similar therefore, we adjudicate them together. Concise and Common Ground No.4 raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant has argued that as quantity of finished goods recorded in books of account tallies with quantity of finished goods as per Excise records being RG-1, no addition can be made as appellant cannot sell any goods without recording entry in Excise register. This argument of appellant cannot be accepted as during the course of search physical stock of finished goods was taken with the help of appellant's own employees and signature of employees was obtained. These employees were well versed with the location, variety of finished goods, different grading of finished goods and also the weighment system followed by the appellant company. The Authorised Officer and employees of the Department have noted the quantity, rate, and value of the finished goods as per description explained by the employees of the appellant company. There was no objection raised on behalf of the appellant company regarding quality/grade of finished goods, weighment and the rate applied in the inventorised finished goods during the search and post-search enquiry. As physical stock found during the course of search was less than stock recorded in books of accounts, it suggests that appellant has sold finis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of search though such stock was lying at factory premises. The appellant has submitted details of such stock along with purchase bills, date of purchase, copy of good receipt note and LR. The statement showing major chemicals not considered by Authorised Officer as submitted by appellant is reproduced at para - 8.3 herein above. On careful consideration of detailed submissions made by appellant and copy of panchnama prepared at the time of search, it is observed that though against few stocks quantity as per books of account was mentioned, corresponding figure of stock found during the course of search was mentioned as NIL which in opinion, of appellant reflects stock lying in factory premises not considered by authorized officer. It is not the case that, for particular item of chemical, physical stock was found as well as book stock was also found which has resulted into difference in quantity but difference is on account of no physical stock taken for certain products of chemical as pointed out by the AR. The argument of appellant seems to be partial correct as even certain chemical was purchased just prior to 4 to 5 days before the date of search, same was not consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that there is no difference in quantity of chemical recorded in books of account and stock as per inventory prepared at the time of search is found correct. Further, authorized officer has adopted the basic value from purchase bills while computing value of stock at the time of search but has not increased such value by other expenditure like sales tax, freight, insurance etc born by appellant on such purchase from bringing material at factory premises. The working adopted by authorized officer and considered by Assessing Officer is not proper as valuation of chemical is required to be considered at landing cost and not the basis value and if such value is added to the basic value adopted by authorized officer, appellant is entitled to relief of Rs. 5,07,211. In view of aforesaid discussion, appellant is entitled to relief of Rs. 17,28,064( Rs. 2,70,000+ Rs. 9,50,853+ Rs. 5,07,211) out of total addition of Rs. 30,16,809 made by assessing officer. 8.8 The assessing office has further held that stock of waster paper recorded in books of account at the time of search was for 67,24,728 kgs whereas stock physically found during the course of search was for 68,51,460 which means t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected in purchase bills as well as other documentary evidences. Similar is the case for other types of waste products. These evidences support the explanation of appellant that for each product, standard weight per bale cannot be adopted but stock as on the date of search is required to be considered after adopting actual weight per bill is found correct and this seems to be bonafide mistake on part of authorized officer. Even in the present case, there is no difference in no of bales/bundles found during the course of search and bales already recorded in books of account. Considering the facts of appellant's case as discussed herein above, addition made by Assessing Officer for Rs. 11,17,698 is thus deleted. In the result, ground of appeal raised by appellant for addition of shortage/excess of stock is partly allowed.9. In the result, the appeal is partly allowed." 33. We have gone through the order of ld CIT(A) on this particular issue and we note that panchnama prepared at the time of search, purchase bills for relevant chemical purchases as well as working of landing cost of such material computed by assessee alongwith supporting evidences shows that there is no difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been issued and the funds received has been returned back to Gayatri and Kherani Paper Mills. Therefore, assessing officer was of the view that these purchases are not real therefore, he made addition to the tune of Rs. 27,60,500/-. 37. Aggrieved by the order of the Assessing Officer, the assesse carried the matter in appeal before the ld.CIT(A) who has deleted the addition made by the Assessing Officer. Aggrieved by the order of the ld.CIT(A), the Revenue is in appeal before us. 38. We have heard both the parties. Learned DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. On the other hand, ld Counsel defended the order passed by the ld CIT(A). We note that assessee submitted before the assessing officer, purchase register and party ledger account. During the course of search proceeding, invoice of Gautam Enterprise dated 3rd July, 2009 relating to purchase of super-white cutting for Rs. 27,67,500/- was found. Further, a statement of Shri R. Balasubramanian, Chief Executive of M/s Gautam Enterprises was recorded on 24th July, 2009 wherein he has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to accept the contention of the Assessing Officer in any manner and the addition made by Assessing Officer for Rs. 27,60,500/- was rightly deleted by ld CIT(A), therefore, we dismiss the concise and common ground no.5 raised by the Revenue. 40. In the result, Concise and Common ground no.5 raised by the Revenue is dismissed. 41. Concise and Common ground no.6 raised by the Revenue is reproduced below for ready reference: (vi) Deleted the addition of Rs. 2,75,00,000/- being unaccounted expenses and sales realization made on the basis of entries in the seized loose papers. 42. Brief facts qua the issue are that during the assessment proceedings, the Assessing Officer has referred to following seized material found during the course of search and observed that there are unexplained expenditure incurred by the assessee. The seized material is reproduced below: 1. NRI / GSP Difference of 40 lacs- Cash portion 2. NRI / GSP Difference of 25 lacs- Interest 3. NRI / GSP Difference of 25 lacs- Maintenance 500/-Rs. p/f 4. NRI / GSP Difference of 60 lacs- R M cost 150 lacs 5. NRI / GSP Difference of 25 lacs - sales realisation due to second/first SM more Page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I) being the company of director's brother and these notings do not reflect any cash expenditure or receipt hence no addition is called for.The ld CIT(A) observed about remaining addition of Rs. 1 crore, it was also argued that there is no unaccounted expenditure but same is fixed expenditure noted on estimate basis. It was also argued that out of the notings, mentioned for Rs. 1 crore, Rs. 20 lacs is for KPM i.e Kherani Paper Mills and such amount cannot be considered as addition in case of appellant. It was also argued that as page No. 14 shows summary of expenditure of Rs. 40 lacs, and figures noted in such paper coincide with figure of Rs. 40 lacs mentioned on back side of page 19, therefore, addition made by Assessing Officer to the extent of Rs. 40 lacs is duplicate addition. 45. The ld CIT(A), on careful consideration of entire details, observed that at lower portion of page No. 13 seized from appellant's premises is showing comparison between certain expenditure/sales between appellant company and NR Paper Industries under the head "NRI/GSP Difference". In the seized paper, nowhere the date of transaction has been mentioned. Further, item mentioned like interest, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the difference in rates as mentioned in the seized paper and the books of account, the Assessing Officer calculated the 'on-money' and made addition accordingly. Held that notings in the seized diary found from the premises were the only material on the basis of which the Assessing Officer had made the impugned additions. The Assessing Officer had not brought any corroborative material on record to prove that such sales were made and 'on-money' was received by the assessee outside the books of account. The Assessing Officer had not examined any purchaser to whom the sales of shops were effected. Onus heavily lay on the revenue to prove with corroborative evidence that the entries in the seized diary actually represented the sales made by the assessee. Such onus had not been discharged by the revenue. Mere entries in the seized material were not sufficient to prove that the assessee had indulged in such a transaction. The inference of the Assessing Officer that the assessee has received 'on-money', was merely based on suspicion and surmises and there was no material whatsoever to support the conclusion of the Assessing Officer that the assessee had in fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is way, ld CIT(A) has deleted the entire addition of Rs. 2.75 crore made by the Assessing Officer. We do not find any infirmity in the above findings of ld CIT(A).The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A). 49. In the result, Concise and Common ground no.6 raised by the Revenue is dismissed. 50. Now, we shall take assessee`s appeal. The Concise and Common ground No.1 raised by the assessee is reproduced below for ready reference: "(1).Disallowance under section 14A of the Income Tax Act, read with Rule 8D, assessment year wise, are as follows: a) Assessment Year 2007-08 Rs. 5,12,276/- b) Assessment Year 2008-09 Rs. 6,99,230/- c) Assessment Year 2009-10 Rs. 7,19,687/- d) Assessment Year 2010-11 Rs. 6,29,794/- 51. This ground of appeal relates to disallowance u/s 14A of the Act. The Assessing Officer has observed that assessee has diverted its fund for earning income which is exempt, hence disallowance u/s 14A of the Act is made for all the assessment years by applying rule 8D of the Rules. The Assessing Officer has made following disallowance. Assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses relating to exempt income as per rule 8D read with section 14A of the Act. However, ld Counsel submits before us that for remaining assessment years, that is, assessment year 2008-09 to 2010-11, the disallowance under section 14A can not be invoked as there is no exempt income earned by the assessee in these relevant assessment years, and for that ld Counsel relied on the judgment of the Hon`ble High Court of Madras in the case of Chettinad Logistics Pvt. Ltd, 248 Taxman 55(Mad). The ld Counsel further submits that in relation to assessment year 2008-09 to 2010-11, there were no incriminating material found or unearthed by the search team in respect of disallowance under section 14A of the Act, hence no addition should be made. We note that a search action under section 132 of the Act, was carried out on 16.07.2009 in the case of N.R.Agarwal Group and others of Vapi. One of the subgroup covered was Gajendra sub-group. During the course of search, M/s Gayatri Shakti Paper & Board Ltd was also covered which is one of the main business concerns of Gajendra sub -group. Since the search action was carried out on 16.07.2009, which falls in accounting period 01.04.2009 to 31.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 57. We also note that the Hon'ble Calcutta High Court in ITA No. 661 of 2008 Commissioner of Income Tax vs.Veerprabhu Marketing Ltd. has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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