9911796707
TMI Blog2025 (1) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent it is booked in the financial statements and must have added the commission income which is the payment presumed to have been made. The net result would have been lesser than the retuned income AO has already proved that the purchases and sales as bogus based on the material found during the search and has already chose to treat them as bogus and cannot play hot and cold. As discussed above, he has to determine the actual income earned by the assessee and can charge to tax only the actual returned income. It is allowed to make penalties as per the law and cannot presume or make additional income as the income of the assessee without their being actually earned by the assessee. It is different if the AO has not come to conclusion that the transactions are not genuine. Therefore, after considering the factual matrix on this case, we are of the view that the gross taxable income cannot be less than the returned income filed by the assessee u/s 139(1) of the Act. In our view, the addition made by the Assessing Officer of commission and the elimination of bogus purchases and sales will reduce the taxable income. Therefore, we are inclined to delete the additions made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the above, it shows that the assessee has booked in genuine purchases and sales from various parties. The statement of Shri Shailendra Goyal was also recorded on oath under section 132 (4) of the Act, in which he has admitted that assessee has arranged entries to inflate books of accounts and no actual business activities were carried out. He has reproduced the relevant statement at paragraph 5.2 of the order. Further he observed that during the course of search proceedings, Shri Himanshu Gupta, Managing Director of the assessee was recorded, in which he has clearly stated that they have arranged these entries to inflate books of accounts. Based on the above, Assessing Officer has analysed the purchases from Ashok Sharaf, at para 5, similarly purchases from Shri Sakshasat Jain and Kundanlal Kedarnath were also analysed and reproduced in the order. He quantified the purchases/expenses booked by the assessee in their books of account and the assessee was confronted the above issue by issuing show cause notice. In response assessee submitted that all these parties were supplying raw materials and regularly complying to the GST on regular basis. Without there being any raw materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ONLY THE NATURAL ADMISSIONS BY THE ASSESSEE) In this regard, without prejudice to the earlier submission submitted as under: In the SCN it has been proposed that all the alleged bogus purchases should be disallowed along with commission expenses. However, at the same breath the bogus sale has been alleged against bogus purchases consideration. In such a situation, only commission income has been assumed against such sales, which has been proposed to be added while not touching the Sale at all. Such an approach would lead to accounting fallacy and would no he correct due to the following reasons: a. When it is alleged that sales are bogus then the correct profits can-not be determined without removing sales such from consideration. It is as much true as with bogus purchases. If for determination of the correct profits exclusion of bogus purchases is necessary, then removal of the sales is also equally necessary. b. There can be no sale without making purchase. If purchases are treated as bogus then as a corollary the respective sale would also be bogus. c. Even in the statements claimed by the revenue as correct it is clearly mentioned that the transactions of sale and purchase were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inflation of books was duly determined at the time of search. The information contained in the annexure relating to transaction of sales, purchases and commission received and paid clearly establishes that the data submitted by the assessee and duly verifiable from the GST portal, the ingenuine sale amount is almost equal to the ingenuine purchases. He observed that considering the facts, it is concluded that the assessee has engaged into ingenuine transactions. Therefore, in order to determine the true income which can be done only by ignoring such transactions from the consideration, accordingly he determined the commission from the alleged bogus parties relating to purchases and sales to the extent of Rs. 1,33,87,740/-and made the above addition to the total income declared by the assessee in the return of income. Therefore, he assessed the total income under section 153A of the Act at Rs. 32,81,82,960/-. 9. Aggrieved, the assessee preferred an appeal before the ld. CIT(A)-23, New Delhi 110 055. The assessee submitted detailed submissions and also raised jurisdictional issues relating to initiation and completion of assessment under section 153A of the Act and also on merits. Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed u/s 153A143(3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 05.01.2024) are both invalid and deserve to be quashed in toto as there is total lack of application of mind and arbitrariness at all stages as evident from cursory look to impugned orders; 4. TOTAL VIOLATION OF PRINCIPLE OF NATURAL JUSTICE: That impugned assessment order passed was 153A/143(3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 05.01.2024) are both invalid and deserve to be quashed in toto as there is complete violation of principle of natural justice (e.g lack of valid show cause notice /scn during asst. as per binding CBDT instructions) so impugned assessment /first appeal order are to be quashed /set aside; 5. TOTAL LACK OF CORROBORATION VIS A VIS MATERIAL USED: That impugned assessment order passed u/s 153A/143 (3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 196l Act (dated 05.01.2024) are both invalid and deserve to be quashed in toto as there is total lack of corroboration via a vis alleged material used against the assessee, so impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D FIT IN FACTS AND CIRCUMSTANCES OF THE CASE. 12. At the time of hearing, ld. AR for the assessee submitted as under: 1. Assessee is engaged in business of RCC Concrete Products like Pipes, manholes etc. 2. Assessee was subjected to search u/s 132 on 23.03.2021. 3. Assessee case was centralized u/s 127 on 30.07.2021. 4. Assessee is regularly filing ITR u/s 139 for all years under consideration, chart 1 is referred below: CHART 1 AY SALES DISCLOSED IN AUDITED P L A/C PURCHASES DISCLOSED IN AUDITED P L A/C NET PROFIT ITR FILED ON WITH RETURNED INCOME 2018-2019 4,01,03,39,533 2,69,99,39,389 29,92,85,032 (7.46%) 31,47,95,220 (31.10.2018) 2019-2020 4,31,63,10,162 2,88,80,61,035 30,43,12,367 (7.05%) 30,43,12,368 (26.10.2019) 2020-2021 5,99,56,17,675 4,68,22,72,751 33,02,53,502 (5.51%) 31,13,54,080 (27.03.2021) 2021-2022 3,38,51,56,289 1,66,01,97,642 1,20,51,259 (0.36%) 236,78,070 (28.02.2022) 5. Assessee case was assessed vide impugned orders passed u/s 153A/143(3) after issue of notice u/s 153A on 10/11/2021 143(2) notice on 10.03.2022 with following broad details/additions: CHART 2 AY ADDTION U/S 28 (ALLEGED UNACCOUTE D COMISSION EARNED0 ADDITION U/S 69C (ALELGED COMMISSIO N PAID) OTHE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and paying commission and with whom assessee has got CASH loans and to whom interest is paid (not a single notice u/s 133(6)/131 is issued); This itself is a fatal flaw as apparently entire asst is made on dictate /direction of investigation wing (appraisal report); (fatal impact of not making independent inquiry at end of Ld AO is to be considered) 7.7 That admittedly no hidden /unaccounted asset is found during extensive search owned by assessee; 7.8 That admittedly no benefit of NETTING and telescoping is given to assessee (as a matter of alternate/consequential relief due to assessee) vis a vis RETURNED INCOME; 7.9 That That Ld AO has made following main additions: a) That assessee is alleged to be earning UNACCOUNTED commission qua stated INGENUINE SALES b) That assessee is alleged to be paying UNACCOUNTED commission qua stated INGENUINE PURCHASES c) That assessee is alleged to be making unaccounted expenses u/s 69C (purchases) d) That assessee is alleged to paying UNACCOUNTED Interest and ALLEGED REPAYMENT on stated LOANS recd in CASH 8. ON SERIOUS IMPORTANCE OF VALID AND JUST TAX ASSESSMENT, reference is made to recent three judge bench decision of hon ble apex court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid on ingenuine purchases). The serious and fundamental error which has been done by Ld AO and not addressed by approving authority and which goes to ROOT of the matter is when assessee all sales/purchases as recorded in books (forming part of audited P L account) is accepted and same is no where doubted /disturbed u/s 145(3) (refer income computation last para of asst order starting from returned income), then how can assessee be alleged to have EARNED commission on ingenuine sales and PAID commission on ingenuine purchases. that is there is SERIOUS AND APPARENT contradiction in AO s approach to make such incongruous additions which has no where been addressed at end of approving authority u/s 153D. If revenue case is assessee is INFLATING figures can revenue rely on very same books/returned income which is classical case of non application of mind. Impact of CONTRADICTION is FATAL and DISPLAYS TOTAL ARBITRARINESS AND LACK OF APPLICATION OF MIND. 10.2 APROBATE AND REPROBATE :That secondly revenue has to consequentially reduce returned income if case against assessee is INFLATING BOOKS /INGENUINE SALES/PURCHASES as revenue can not approbate and reprobate ; Reference is made to l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter filed a suit against the purchaser for price of goods and obtained a decree. Not having obtained satisfaction, the principal next filed a suit against the agent for damages on the ground of negligence and breach of duty. It was held that such an action was barred. The ground of the decision is that when on the same facts, a person has the right to claim one of two reliefs and with full knowledge he elects to claim one and obtains it, it is not open to him thereafter to go back on his election and claim the alternative relief. The principle was thus stated by Bankes, L.J.: Having elected to treat the delivery to him as an authorised delivery they cannot treat the same act as a misdelivery. To do so would be to approbate and reprobate the same act . The observations of Scrutton, LJ on which the appellants rely are as follows: A plaintiff is not permitted to approbate and reprobate . The phrase is apparently borrowed from the Scotch law, where it is used to express the principle embodied in our doctrine of election namely, that no party can accept and reject the same instrument: Ker v. Wauchope [(1819) 1 Bli 1, 21] : Douglas-Menzies v. Umphelby [(1908) AC 224, 232]. The doctrin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage . 25. The Supreme Court in Rajasthan State Industrial Development and Investment Corpn. v. Diamond and Gem Development Corpn. Ltd. [Rajasthan State Industrial Development and Investment Corpn. v. Diamond and Gem Development Corpn. Ltd., (2013) 5 SCC 470 : (2013) 3 SCC (Civ) 153], made an observation that a party cannot be permitted to blow hot and cold , fast and loose or approbate and reprobate . Where one knowingly accepts the benefits of a contract or conveyance or an order, is estopped to deny the validity or binding effect on him of such contract or conveyance or order. This rule is applied to do equity, however, it must not be applied in a manner as to violate the principles of right and good conscience. 26. It is evident that the doctrine of election is based on the rule of estoppel, the principle that one cannot approbate and reprobate is inherent in it. The doctrine of estoppel by election is one among the species of estoppel in pais (or equitable estoppel), which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S MADE TO Hon ble apex court decision in case of FULESHWAR GOPE vs UOI2024 INSC 718 35. The meaning of the word independent, as is well understood, is that the act, or as in this case, evaluation is made in a way which is lone standing or which does not rely on any other factor, such as previous consideration or evaluation by another authority, to arrive at its conclusion. 35.1 The Cambridge dictionary defines the word independent to mean: not influenced or controlled in any way by other people, events, or things 35.2 The Merriam Webster dictionary defines the word independent as:- 1: not dependent: such as a (1): not subject to control by others ; (2): not affiliated with a larger controlling unit b (1): not requiring or relying on something else : not contingent; (2): not looking to others for one's opinions or for guidance in conduct; (3): not bound by or committed to a political party c (1): not requiring or relying on others (as for care or livelihood); (2): being enough to free one from the necessity of working for a living d: showing a desire for freedom 35.3 The Black s Law Dictionary defines: INDEPENDENT. Not dependent; not subject to control, restriction, modification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by Parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they condemn some administrative. The subject of abdication is more lucidly explained in De Smith s Judicial Review39 in the following words: - Acting under dictation An authority entrusted with a discretion must not, in the purported exercise of its discretion, act under the dictation of another body or person .. Where a minister entertaining a planning appeal dismissed the appeal purely on the strength of policy objections entertained by another minister, it was held that his decision had to be quashed because he had, in effect, surrendered his discretion to another minister. Authorities directly entrusted with statutory discretions, be they executive officers or members of distinct tribunals, are usually entertained and are often obliged to take into considerations of public policy, and in some contexts the policy of a minister or of the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of calling upon the petitioners to show cause is essentially rendered otiose and a mere formality iii) HON BLE CHATTISGARH HIGH COURT IN CASE OF 1. Deputy Commissioner of Income Tax (Assessment) Special Range Bhilai District Durg Chhattisgarh. ---- Appellant Versus 1. Surendra Kumar Jain (Dead) Through Legal Heirs 2024:CGHC:25811-DB Judgment delivered on 18-07 2024 ITA No. 6 of 2005 ON IMPUGNED REOPENING U/S 147/148 AND ASSESSMENT CARRIED OUT ON BASIS OF DICTATES OF DDIT(INV) AND WITHOUT INDEPENDENT APPLICATION OF MIND HEAD NOTE FRAMED BY HON BLE HIGH COURT (1) In democracy like ours every authority may, however high should function within four corners of law because the rule of law requires that all the machinery of state must function according to mandate of statute; (2) Statutory authority cannot permit its decision to be influenced by dictation of superior as same would amount to surrendering of discretion (3) General power of superintendence must be distinguished from the interference in the adjudication process. (4) The true test of bias is not whether the judge is actually biased or not, but whether there is a real danger of bias from view point of fair minded and informed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gular Assessee or as an Association of Person merely because revised return was not filed under Section 139(4) of the Act, within a time specified under Section 134 of the Act. 23. The last date for filing the returns under Section 139(4) of the Act would have expired on 31.03.2015 which was just few days before the return was processed on 12.03.2015 under Section 143(1) of the Act. 24. The Hon'ble Supreme Court in Formica India Division, Bombay, Burma Trading Corporation Limited Vs. Collector of Central Excise and others, 1995 Supp (3) SCC 552/1995 (77) ELT 511, had held as under:- When it was found that they were liable to pay duty on the intermediary product and had not paid the same, but had paid the duty on the end product, they could not ordinarily have complied with the requirements of Rule 56A. Once the Tribunal took the view that they were liable to pay duty on the intermediary product and they would have been entitled to the benefit of the notification had they met with the requirement of Rule 56A, the proper course was to permit them to do so rather than denying to them the benefit on the technical ground that the point of time when they could have done so had elapse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the statement of the Village Headman. The statement of the Village Headman can at best only corroborate the stand which department based on evidence, if there were other compelling evidence. 14. It was incumbent on the part of the Income Tax Department to have summoned the said Mr.Thangasamy of Alangudi Taluk, Pudukottai District and verified and confirmed whether the said person had indeed given the statement which was produced by the Appellant and if so whether the statement given by the said person was true or not. 15. Although the department is governed by preponderance of probability and not by strict rules of evidence, yet it was incumbent to have secured the presence of the said person. They should have cross examined him before disbelieving the statement. Therefore, an issuance of summon to Mr.Thangasamy who had given statement by the Income Tax department is not sufficient. 16. The Income Tax department should have secured the presence of Mr.Thangasamy to answer to the summons and should have confronted him and contradicted the content of the statement of Mr.Thangasamy produced by the appellant by way of cross examination. 17. Therefore, without cross examination, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly observed that such negative balance was made on unaccounted income and when necessary entries were made in the books of account, it is bound to result in negative cash balance. We are in complete agreement with the view taken by the learned Tribunal. Considering the aforesaid facts and circumstances of the case and more particularly when the entire unaccounted income, which was found during the search, was offered as part of overall disclosure, learned Tribunal has rightly held that the assessee shall be entitled to the benefit of telescoping of negative cash balance against the disclosure made. Under the circumstances, the learned Tribunal has rightly allowed the assessee the benefit of telescoping the original disclosure made against the negative balance in the books of accounts. No substantial question of law arises. Under the circumstances, present Tax Appeal deserves to be dismissed 9.9 ON FAIRNESS IN TAX ASST. :On aspect of apparent malafide (legal malice) in admitted facts of instant case on part of Ld AO (based on glaring and patent contradiction and errors on part of Ld AO) leading to invalidity of impugned asst in toto, reference is made to recent hon ble Bombay high c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de on basis of conjecture and surmise and thirdly sec 69A has no role qua stated loan repayment because assessee is never found to be owner of any money /valuable article etc which is sine qua non for invoking sec 69A reference is made to hon ble SC decision in case of DN Singh case 454 ITR 595 and BHC in case of PCIT Shri Parvez Mohammad Hussain Ghaswalaothers and Indore bench ITAT M/s. Nakoda Realties (22,04.2024). 10 Humble Prayer: Impugned assessment orders of Ld AO and first appeal order may please be accordingly quashed/set aside. 13. On the other hand, ld. DR for the Revenue brought to our notice relevant facts on the record and in particular, he brought to our notice findings of the Assessing Officer at para number 5.7 of the order. He submitted that the facts in this case are very clear from the material found during the search and the respective employees have accepted the ingenuine transactions and also explained the modus operandi. Therefore, he relied on the findings of lower authorities. 14. Considered the rival submissions and material placed on record. We observed from the record that during the search proceedings, certain documents were found in the form of pen dri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es from the financial records maintained by the assessee. If that be the case, the returned income to the extent of gross profit earned in those transactions will have to be removed. Therefore, the returned income to the extent of 7.46% of the alleged sales has to be reduced. In the normal cases of bogus purchases, we are directing AO to make addition on Gross Profit not on the basis of Net Profit or returned income. If that be the case, strictly speaking, we may have to reduce the gross profit from the financial results or returned income declared by the assessee i.e., average of 28% to 31%. 16. We are not able to understand that the AO has retained the returned income as per the ROI and also made the commission income on top of the retuned income. Strictly speaking he has to determine the actual income earned by the assessee not on the basis of presumption. In that case, he has to rework the actual income earned by the assessee. As discussed above, the AO may have to reduce the bogus purchases and sales to the extent it is booked in the financial statements and must have added the commission income which is the payment presumed to have been made. The net result would have been le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of securing some other advantage . 25. The Supreme Court in Rajasthan State Industrial Development and Investment Corpn. v. Diamond and Gem Development Corpn. Ltd. [Rajasthan State Industrial Development and Investment Corpn. v. Diamond and Gem Development Corpn. Ltd., (2013) 5 SCC 470 : (2013) 3 SCC (Civ) 153], made an observation that a party cannot be permitted to blow hot and cold , fast and loose or approbate and reprobate . Where one knowingly accepts the benefits of a contract or conveyance or an order, is estopped to deny the validity or binding effect on him of such contract or conveyance or order. This rule is applied to do equity, however, it must not be applied in a manner as to violate the principles of right and good conscience. 26. It is evident that the doctrine of election is based on the rule of estoppel, the principle that one cannot approbate and reprobate is inherent in it. The doctrine of estoppel by election is one among the species of estoppel in pais (or equitable estoppel), which is a rule of equity. By this law, a person may be precluded, by way of his actions, or conduct, or silence when he has to speak, from asserting a right which he wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
