TMI Blog2016 (5) TMI 1482X X X X Extracts X X X X X X X X Extracts X X X X ..... enhancement in turnover by 5% on the sales recorded in the books of accounts shall be reasonable for the assessment year 2011-12 The gross profit estimated on unrecorded sales cannot be applied to the recorded sales as the margin of tax also remains with the seller of unaccounted sales while in the recorded sales the prices are increased by VAT which reduces the margin of profit by the similar amount. The cumulative effect of increase in turnover and increase in gold price must have reduced the gross profit for the assessment years 2010-11 and 2011-12 - we are of the view that on unrecorded sales estimated, the profit has to be worked out at the rate of 1.25%. Considering all these aspects we sustain the gross profit rate of 1.25% on the enhanced turnover of gold bullion for the assessment years 2010-11 and 2011-12 and on the recorded turnover disclosed in the books of accounts, we direct to apply gross profit rate of 0.25%. CIT(A) was not justified in considering the combined sales of gold and silver bullion because there was not a single incriminating document or any evidence found on the basis of which the Assessing Officer could reject the book results of purchase/sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his amount was received as partners’ contribution by that firm. Hence, the addition u/s 68 could not be sustained and it was merely refund of partners’ contribution repaid through cheque. We have no alternate but to delete the addition. Addition of undisclosed income - receipt for non-performance of the agreement - addition made on account of arbitration award - Held that:- We find that the so called award was not complete as one of the arbitrators did not sign arbitration award. We further find that the addition has been made only on the basis of presumption that the assessee might have received the amount as per the award but no positive evidence has been brought on record to suggest that such amount was received by the assessee in terms of the agreement/award. It is also a fact that the assessee received ₹ 51 lacs as advance through banking channel which was returned back to the intending buyer. The assessee continued to show this plot of land in the fixed assets in his balance sheet. It is also a fact that Indore Development Authority declared scheme no. 131 on this land. Therefore, the above agreement could not be materialized and as such the land could not be transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,64,852/- & ₹ 20,22,954/- made on the basis of notings on these pages is deleted”. We have also decided the issue of estimating the gross profit and the turnover of the assessee in earlier part of this order. We, therefore, following our above order, direct the Assessing Officer to work out the gross profit as per our above direction. Telescoping benefit - Held that:- Telescoping benefit should be given for explaining any subsequent investment or cash credit which could not be explained to full satisfaction. In case any addition is still sustained by applying the GP Rate, it was definitely available for investment in the books. This is an assessment of the undisclosed income which is taxed as earned outside the books of accounts, has to be considered for the investment and for the entries in the loose papers. The learned counsel for the assessee, therefore, correctly prayed that telescopic benefit be given to assessee. - IT(SS)A Nos. 241 to 243/Ind/2015, IT(SS)A Nos. 254 to 256/Ind/2015 - - - Dated:- 17-5-2016 - Shri D.T. Garasia and Shri B.C. Meena, JJ. Assessee by Shri S.S. Deshpande Revenue by Shri Rajeev Varshney ORDER Shri B.C. Meena, Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment. The conclusion that it is an unaccounted investment is bad in law and deserves to be deleted. 6. The Ld CIT(A) has erred in making a remark that the purchases made from M/s Hyundai Exports at ₹ 17,85,88,277/- are unexplained purchases. The remark about the seal or about the signatures are not proper and could not be satisfactorily explained is totally contrary to the facts since the original bills and the confirmation of accounts were filed before the lower authorities and the purchases were duly entered in the stock register. 7. The Ld CIT(A) has erred in maintaining the addition of ₹ 50,00,000/- u/s 68 from M/s Pramila Investors Finance Ltd. when all necessary papers were filed before the lower authorities and the transaction was made through banking channel. 8. The assessee craves to alter, amend, add or delete any of the grounds of appeal. In IT(SS) A No.242/Ind/2015 the assessee has taken the following grounds of appeal :- 1. The Ld CIT(A) has erred in observing that the order passed by the Ld AO which was received by the assessee on 02/04/2013 is within the time and is as per law. 2. The additions maintained on account of estimates of G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er authorities and the transaction was made through banking channel. The disallowance of interest of ₹ 14,46,575/- may please be deleted. 8. The Ld CIT(A) has erred in maintaining the addition of ₹ 1,00,00,000/- u/s 68 in the name of M/s Vinay Jems when all necessary papers were filed before the lower authorities and the transaction was made through banking channel. The disallowance of interest of ₹ 7,59,452/- may please be deleted. 9. The assessee craves to alter, amend, add or delete any of the grounds of appeal. In IT(SS) A No.243/Ind/2015 the assessee has taken the following grounds of appeal :- 1. The Ld CIT(A) has erred in observing that the order passed by the Ld AO which was received by the assessee on 02/04/2013 is within the time and is as per law. 2. The Ld CIT(A) has erred in upholding the rejection of books of accounts on the grounds that the deposits in the bank are not commensurate with the sale receipts on a particular day and relying on the loose papers without taking any cognizance of the fact that all entries in the loose paper were completely explained. 2.1 The rejection of books of accounts on above grounds are totally illega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a remark that the entries on the loose paper LPS5 Page 55 of ₹ 27,69,710/-, 1,12,60,200/-, 5,00,000/-, 5,00,000/- , 79,40,236/- are unrecorded transactions when all the entries were explained. 10. The Ld CIT(A) has erred in making a remark that the entries on the loose paper LPS2 Page 5 6 of ₹ 6,47,000/- belong to the assessee and it is the income. 11. The Ld CIT(A) has erred in maintaining the addition of ₹ 1,00,00,000/- u/s 68 in the name of Sanskar Eximes Pvt. Ltd. when all necessary papers were filed before the lower authorities and the transaction was made through banking channel. The disallowance of interest of ₹ 7,15,397/- may please be deleted. 12. The Ld CIT(A) has erred in maintaining the addition of ₹ 17,99,014/- and ₹ 12,00,000/- being the interest paid on the unsecured loans received from Khushi Exports and Vinay Gems which were added u/s 68 in the earlier year. 13. The Ld CIT(A) has erred in maintaining the addition of ₹ 2,74,06,204/- on the basis of the seized paper LPS2 Page 52 which was taken out from the internet. The confirmation from Balkrishna Parasmal was filed that he has taken over the firm M/s Jitesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the same should not have been substituted by the estimation of gross profit, that too on the basis of the assessee s accounts which have been proved to be unauthentic and ethereal. This act of the CIT(A) defies logic and contradicts his own stand. (vi) Erred in fact and law in deleting the addition of ₹ 2,002,47,590/- made on account of unaccounted stock without bringing any finding or material on record which could prove that the unaccounted stock was an application of unaccounted gross profit, even after categorically admitting that the seized stock of silver was unaccounted stock. (vii) Erred in fact and law in deleting the addition of ₹ 45,00,000/- made on account of unexplained credit u/s 68, by not providing the basis for his conclusion or contrary finding to the reasons given in the assessment order. (viii) Erred in fact and law in deleting the addition of ₹ 17,85,88,277/- made on account of unaccounted purchases, without bringing any finding or material on record which could prove that the unaccounted purchases were out of unaccounted gross profit or the gross profit was out of such unexplained purchases. In IT(SS) A No.255/Ind/2015 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid ₹ 2,00,00,000/- as unaccounted income of the assessee. (vii) Erred in facts and law in deleting the addition of ₹ 2,71,75,000/- without bringing any finding or material on record which could prove that the said amount was included in the amount already offered for taxation, and despite the fact that no direct nexus between the two could be established. This error is all the more glaring for the reason that the CIT(A) has himself held the aforesaid ₹ 2,71,75,000/- as unaccounted income of the assessee. (viii) Erred in facts and law in deleting the addition of ₹ 9,47,306/- without appreciating the facts narrated by the A.O. while making such addition and also without giving any contrary finding against the order of the A.O. In IT(SS) A No.256/Ind/2015 the revenue has taken the following grounds of appeal :- On the facts and in the circumstances of the case, the CIT(A) has (i) while altering the addition of ₹ 30,97,58,529/- on account of estimation of gross profit on sales of gold bar made by the A.O., has erred in fact in holding that the A.O. made mistakes in conversion of 1 kg gold bar in 100 grams of gold bar during estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s profit and despite the fact that no direct nexus between the two could be established. This error is all the more glaring for the reason that the CIT(A) has himself held the aforesaid ₹ 84,84,900/- as unaccounted income of the assessee. (viii) erred in facts and law in deleting the addition of ₹ 70,72,244/- and ₹ 11,07,760/- made on account of unaccounted jewellery without appreciating the facts narrated by the A.O. while making such addition. The CIT(A) has erred in accepting the claim of the assessee that investment in gold ornaments to the extent of only ₹ 52 lakhs was unaccounted and deleting the rest of the addition without bringing concrete material on record. The CIT(A) has erred in arriving the conclusion that the unaccounted investment in gold ornament of ₹ 52 lakhs is an application of income estimated on account of unaccounted gross profit without establishing any link which could prove the nexus between the two. (ix) erred in facts and law in deleting the addition of ₹ 1,98,36,250/- made on account of project at Bhopal from unaccounted money without bringing any finding or material on record which could prove that unaccounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) has himself held the aforesaid amounts as unaccounted. (xiv) erred in facts and law in deleting the addition of ₹ 6,47,000/- made on the basis of LPS-2 without establishing any link which could prove that unaccounted expenses were included in the unaccounted income even when the CIT(A) himself has admitted that the assessee could not overcome himself from the deeming provision u/s 132(4A) of the IT Act. (xv) erred in facts and law in deleting the addition of ₹ 4,34,30,138/- made on the basis of LPS-2. While doing so, the CIT(A) has overlooked the facts drawn by the A.O. and has deleted the addition without bringing any findings or material on record which could prove that addition ofRs.4,34,30,138/- is the part of unaccoutned income of ₹ 6,07,51,227/- taxed from MCX trading confirmed by him elsewhere in his order. Also as discussed supra, the CIT(A) has erred in arriving at the conclusion that the amount of ₹ 4,34,30,138/- was included in the unaccounted income determined on account of estimation of gross profit. (xvi) erred in facts and law in deleting the addition of ₹ 3,85,520/- made on the basis of LPS-2. While doing so, the CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that on an average 1 kgm silver bar was sold with profit in the range of ₹ 600/- to ₹ 1000/- during the years under consideration. The Assessing Officer, therefore, was of the opinion that any prudent businessman who is taking risk of selling this precious metal that too in cash where place of delivery of bullion and place of cash deposit against sale is different, will not take risk for very low gross profit of ₹ 264.48 on sale of per 100 gram gold bar and ₹ 217.39 on sale of per kg. silver bar (as shown by the assessee in his audited account for the assessment years under reference. The Assessing Officer also mentioned that the employees of the assessee provide facility to the customers for collecting the cash and delivering the bullion and for this purpose the assessee has maintained more than 20 collection centres. The employees of the assessee stay in hotels where there is no permanent establishment. Thus it is very obvious that the cost of expenditure incurred to provide this facility must have been made good from the sale price of bullion. The Assessing Officer also observed that the expenses were incurred on Dalali which were not claimed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a rough memorandum cash book dated 10.7.2010, page 55 of LPS-5 is a rough memorandum cash book dated 25.11.2010, LPS-5 page 108 and 109 is Sauda book dated 24.11.2010 and LPS-5 page 107 is the trial balance as on 24.11.2010. On the basis of these papers and the fact that the assessee is selling gold in cash, the Assessing Officer reached the conclusion that the books are liable to be rejected. He further submitted that LPS-1 page 34 and LPS-5 page 35 are totally explained and all the entries of the credit side are entered in the books of accounts. He also submitted that LPS-1 page 34 is the entry of ₹ 45,30,200/- for cash sales and entered under the head Sales and the corresponding debit is the deposit in the bank which is entered in the bank statement and reflected in the books. With regard to the debit entry MCX of ₹ 1,79,415/- LPS-1 page 34 and ₹ 5 lac of LPS-5 page 55, it was submitted that these were temporary advances. The opening cash balance shown is the cash balance of branch office which forms part and parcel of total cash balance shown in the books of accounts. He explained that the assessee has two offices one in Sarafa and one in Gumasta Nagar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the income tax matters and each year is independent and provisions of section 153A clearly provide for taxing the undisclosed income for each year. He, therefore, finally submitted that on the basis of the trial balance for the assessment year 2011-12, the books of accounts cannot be rejected. 9. The learned counsel for the assessee further submitted that the authorities below have rejected the books of accounts on hypothetical grounds and on pure surmises. He also submitted that no specific defect has been pointed out in the books of accounts, especially in the cash book where all the transactions including the cash sales are duly recorded. He also submitted that the assessee has maintained complete day-to-day stock register with quantities and all the purchases are fully vouched and are done through the banking channel. The sales are also vouched and total sales are recorded in the books. The learned counsel for the assessee submitted that the assessee deals in the gold bar, the market of which is often fluctuating in hours. The assessee is required to sale the goods without holding much stock. He emphasized that all the purchases are made either from bank or from reputed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Gopal Lal Bhadruka vs. DCIT; 346 ITR 106 (AP). 11. We have heard both the sides. We have also gone through various loose papers found and seized during search operation. For all these three assessment years, the assessments were abated. From various loose papers seized during search operation relevant to assessment year 2011- 12, we find that certain entries are not tallying with the regular books of accounts. Further certain entries in the seized documents showing trial balance are also not reflected in the regular books of accounts. The assessee admittedly accepted the fact that for the assessment year 2011-12 there were incriminating documents which were not recorded in the books of accounts. All these facts suggest that the books of accounts maintained by the assessee for the assessment year 2011-12 were not reflecting true affairs and were liable to be rejected for working out the taxable profit. Therefore, we sustain the rejection of books of accounts by invoking the provisions of section 145(3) of the Act for the assessment year 2011-12 as held by the lower authorities. For the assessment year 2010-11 there is sharp decline in GP rate. The assessment was abated. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 2011-12 by estimating gross profit on sale of silver bullion. It was also contended by the learned counsel for the assessee before us that no incriminating documents regarding purchase/sale of silver bullion were found. Gross profit on sales of silver bullion was disclosed @ 0.63% in A.Y. 2010-11 and @ 1.06% in A.Y. 2011-12. Quantitative records have been maintained and books of accounts are audited. Sale of silver bars during and in A.Y. 2010-11 was ₹ 1,27,93,794/- (522.946 kg) whereas sale in A.Y. 2011- 12 was ₹ 5,50,01,943/- (1861.524 kg.). The Assessing Officer did not apply gross profit rate but he conducted market enquiry of silver bullion trade business. The Assessing Officer on the basis of market enquiry found that profit on one kg silver bar was in the range of ₹ 1200/- to ₹ 2500/- per kg. He, therefore, estimated the gross profit @ ₹ 2,000/- per kg. in A.Y. 2010-11 and @ ₹ 2,500/- per kg. on sales of 522.946 kg in A.Y. 2010-11 on 1861.524 kg in A.Y. 2011-12 on sales of silver bar. 15. We also find that the assessee is dealing in precious metal like gold and silver and the rates are verifiable and available in open to every cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eller of unaccounted sales while in the recorded sales the prices are increased by VAT which reduces the margin of profit by the similar amount. The cumulative effect of increase in turnover and increase in gold price must have reduced the gross profit for the assessment years 2010-11 and 2011-12. We also find that the Additional Commissioner of the same Range in the case of Shri Nitesh Kumar Doshi for the A.Y. 2010-11 has accepted the G.P. rate at 0.14% on the recorded sales and Shri Doshi was also engaged in similar business. In the case of Baldev Krishna the GP was estimated at ₹ 400/- per 120 gms which comes to around 0.2% of the sales recorded. Similarly in the case of Vonamala Jagdishwaraiah; (2015) 44 CCH 005 GP at 0.1% has been accepted by Hyderabad Bench of ITAT and in the case of Mahendra Kumar Agrawal (2015) Tax Publication (DT) 2124 the Jaipur Bench of the Tribunal accepted the GP of 0.1%. Further, we are of the view that on unrecorded sales estimated, the profit has to be worked out at the rate of 1.25%. Considering all these aspects we sustain the gross profit rate of 1.25% on the enhanced turnover of gold bullion for the assessment years 2010-11 and 2011-12 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us, while pleading on behalf of the assessee, the learned counsel for the assessee submitted that for the purchase of this silver, the assessee has made advance payment through RTGs and the sellers have confirmed the transactions. The bills were produced. Even the bills of exchange, which were obtained by the seller on the import of goods, were also produced. He also pleaded that the bar numbers on the seized silver and the bar numbers in the purchase bill were tallying. These silver bars were purchased from Riddhi Siddhi Bullion which is assessed to tax which has declared income for more than ₹ 5 crores. As such it is a reputed firm and, therefore, not believing the bills issued by Riddhi Siddhi Bullion is highly unjustified. He, therefore, prayed to delete the addition. 20. On the other hand, the learned DR submitted that no proof of transport of silver from Ahmedabad to Indore has been filed and, therefore, the transaction is unexplained. He, therefore, pleaded that the authorities below were justified in making the addition. 21. After hearing both the sides, we are of the view that the assessee has made payment in advance through RTGs and submitted a bill issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales have already been enhanced from ₹ 190.26 crore to ₹ 223.96 crore and GP is enhanced from ₹ 1.01 crore to ₹ 2.79 crore i.e. by ₹ 1,77,80,700, that duly takes care of such questionable purchases. Hence while such purchases of ₹ 17,85,88,277/- are held as unexplained, their separate addition made by AO is hereby deleted, as on that basis as well as for other reasons, GP addition is already made. In this sense, Gr. no.10 of appeal is partly allowed. 25. Against the above findings of the learned CIT(A), the assessee as well as the revenue are in appeal before us. 26. The learned counsel for the assessee submitted that the Assessing Officer made the addition of ₹ 17,85,88,277/- in a small paragraph with a remark that the assessee has shown purchases of gold and silver from Hyundai Exports since the assessee could produce the original bill to the tune of ₹ 12,56,94,400/- only and remaining bills could not be produced. He further submitted that the Assessing Officer observed that on some of the bills official seal of the seller was not affixed, receiver of the bill has also not signed, the date of order and column of order numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is in appeal before the Tribunal. 30. The learned counsel for the assessee submitted that the assessee has filed confirmation with PAN along with income tax return of M/s Pramila Investment Finance Ltd. This transaction was through banking channels. He submitted that this amount was not received as loan but it was received for future trading MCX business and this amount was received as advance/margin money for trading in MCX. The learned counsel for the assessee has submitted the following documents before us :- i) Confirmation certificate along with PAN of the creditor M/s. Pramila Investment Finance Ltd, ii) Copy of acknowledgment of return of income filed by M/s. Pramila Investment Finance Ltd. The learned counsel for the assessee submitted that from the copy of bank statement of M/s Pramila Investment Finance Ltd. for the period from 01.02.2009 to 31.03.2009 it is clear that this amount of ₹ 25 lacs each was transferred to the assessee through MICR on 28.02.2009 and 07.03.2009 and there was no cash deposit in this bank account. He also submitted that the assessee himself requested the Assessing Officer to issue summons u/s 131 of the Act for calli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution repaid through cheques. Hence addition of ₹ 45 lakh is hereby deleted. Gr. no.9 of appeal is allowed. 35. Against the above order of the learned CIT(A), the revenue is in appeal before us. 36. After hearing the parties, we find that the learned CIT(A) has deleted the addition by holding that the amount of ₹ 45 lacs was invested by the assessee in the firm, M.P. Real Estate Developers in earlier years and in this year this amount was received as partners contribution by that firm. Hence, the addition u/s 68 could not be sustained and it was merely refund of partners contribution repaid through cheque. The learned DR failed to controvert the findings of the learned CIT(A). We, therefore, after hearing both the parties, sustain the order of the learned CIT(A). Hence, this ground of the revenue stands dismissed. 37. Ground nos. 2 to 4 in In IT(SS) A No. 242/Ind/2015 and ground nos. 1 to 5 in In IT(SS) A No. 255/Ind/2015 are already decided by us while deciding the appeal for the assessment year 2009-10 in the earlier part of this order. Therefore, these grounds are decided accordingly. IT(SS) A No. 242/Ind/2015 IT(SS) A. No. 255/Ind/2015 A.Y. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an award in the eyes of law. He further submitted that this agreement also provided that in case the assessee enters into an agreement with third party for sale of the land, he will have to make full payment to the purchaser. It was also pleaded that this establishes that the assessee has neither made any payment for non-performance of the agreement nor received any amount except ₹ 51 lacs. It was also claimed that when the Assessing Officer asked to produce the arbitrators, the assessee arranged their appearance on the appointed date but the Assessing Officer was not present on the appointed date. Therefore, the Assessing Officer s observation that the assessee failed to produce the arbitrators is factually incorrect. It was also pointed out that all the three arbitrators filed affidavits on 08.08.2014, duly notarized which were submitted before lower authorities, copies of which were submitted at page nos. 17 to 28 of paper book II. Shri Kamal Kishore Nachani, one of the arbitrators, appeared before the Assessing Officer in response to summons u/s 131 of the Act. His statement was recorded by the Assessing Officer which was never confronted to the assessee. It was also pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the fixed assets in his balance sheet. It is also a fact that Indore Development Authority declared scheme no. 131 on this land. Therefore, the above agreement could not be materialized and as such the land could not be transferred. It was informed that this land is even today under the scheme and not transferable. All the three arbitrators filed affidavits which contain the entire details with the assertion that no damages were paid by the assessee because of non-performance of the agreement due to forcemajeure. In view of these facts and circumstances, we set aside the orders of the authorities below and hold that the addition ₹ 2 crores made by the Assessing Officer for A.Y. 2010-11 is not sustainable. We, therefore, direct to delete the same. 44. Ground nos. 6, 7 and 8 are against sustaining the addition made u/s 68 of the Act of ₹ 3 crores from M/s Sambhav Exports, ₹ 3 crores from M/s Khusi Exports and ₹ 1 crore from Vinay Gems and also interest paid of ₹ 10,71,780/- to M/s Sambhav Exports, ₹ 14,46,575/- to M/s Khushi Exports and ₹ 7,59,452/- to M/s Vinay Gems. 45. Brief facts of the case are that the Assessing Officer observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through banking channel and the existence of M/s Sambhav Exports was fully proved. The confirmation letter was filed from the above named party. Since all necessary details have been filed the additions upheld may please be deleted. Addition u/s. 68 in the name of Khushi Exports. The Ld. AO has made the additions of ₹ 3,00,00,000/- being the sundry credit balance in the name of M/s. Khushi Exports on the ground that the identity, the Income tax return and the bank statements of the said party have not been filed. It was submitted that the assessee has filed the confirmation with PAN NO. It would be noticed that the transaction has taken place through banking channel. Vide our letter dated 11/02/2013 (page 5 of common pb), the assessee has requested the Ld. AO to issue notice u/s, 131 or to call for information u/s. 133(6) directly from the party. The Ld.CIT(A) has upheld the additions on the ground that the party was not produced for verification. Since all necessary details have been filed the additions upheld may please be deleted. Addition u/s. 68 in the name of Vinay Gems. The Ld. AO has made the additions of ₹ 1,00,00,000/- being the sundry credit bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 394.(Bom.) v. CIT v/s Jugal Kishore Bakliwal 366 ITR 217(Raj) vi. CIT v/s Bhawani Oil Mills Pvt. Ltd.239 ITR 445 (Raj.) vii. CIT v/s Varinder Rawlley 366 ITR 232(Pun) viii. CIT v/s Dharamdev Finance Pvt. Ltd. 43 Taxmann.com 395 (Guj.) ix. Anant Steels Pvt. Ltd. vs. ACIT; IT(SS)A Nos. 31, 28, 29 30/Ind/2010 order dated 18.11.2015 (Indore Bench) The learned counsel for the assessee submitted that in view of the above judgments, the additions made u/s 68 of the Act deserve to be deleted. 48. On the other hand, the learned DR relied upon the orders of the authorities below. 49. We have considered the arguments of both the sides in the wake of the facts of the case and the decisions cited before us. We find that Indore Bench of the Tribunal vide its order dated 18.11.2015 in the case of M/s Anant Steel Pvt. Ltd. vs. ACIT; IT(SS) A Nos. 31, 28, 29 30/Ind/2010 have decided an identical issue at length wherein it was observed as under :- 5. During hearing the learned Senior DR contended that the issue is covered by the decision of the Tribunal in the case of M/s Agrawal Coal Corporation decided by this Bench on 31st October, 2011 in ITA Nos. 151/Ind/2009, 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g ourselves in dealing with each and every case individually, especially in the light of the evidences, filed by the assessee, evidencing that the identity of such share applicants was very much proved by further filing of confirmation by them. 7. In view of these facts, the decision from Hon'ble Apex Court in Lovely Exports (supra) and uncontroverted fact that the summons issued to the impugned share applicants were duly received by them with further filing of confirmation by such share applicants, at least their identity is proved, therefore, this appeal of the assessee deserves to be allowed. Hon ble Delhi High Court in the case of CIT Vs. Oasis Hospitalities (P) Ltd reported in 333 ITR 119 (2011) has held as under:- (i) Section 68 provides that if the assessee is not able to give satisfactory explanation as to the nature and source of a sum found credited in his books, the sum may be treated as the undisclosed income of the assessee. The initial burden is on the assessee to explain the nature and source of the credit and to do so, the assessee is required to prove (a) Identity of the shareholder (b) Genuineness of transaction and (c) credit worthines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s including the decision of the Indore Bench of the Tribunal in the case of M/s Anant Steel Pvt. Ltd. (supra), direct the authorities below to delete the addition made u/s 68 of the Act. IT(SS) A No. 255/Ind/2015 for A.Y. 2010-11 (Revenue s appeal) 52. Ground no. 6 in this appeal is against deleting the addition of ₹ 2 crores relating to arbitration award as discussed above. The revenue claims that the addition has been deleted by the learned CIT(A) without bringing any finding or material on record. The revenue claimed that there was no direct nexus between the income offered for taxation and the amount taxed. 53. We have heard both the sides. While deciding ground no. 5 in the assessee s appeal, we have held that this arbitration award, on the basis of which this addition has been made, was not effected. Therefore, this issue gets covered by our decision in ground no. 5 in the assessee s appeal relating to arbitration award. We, therefore, for the reasons mentioned therein, dismiss this ground of the revenue. 54. Ground no. 7 in this appeal is against deleting the addition of ₹ 2,71,75,000/-. The revenue claims that this addition has been deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The quantification shall be done by the Assessing Officer. The learned CIT(A) granted relief on the basis that the addition of gross profit of ₹ 7.79 crores was confirmed in the assessee s case for the assessment year 2010-11. We, therefore, find it appropriate to restore the issue to the file of the Assessing Officer to work out the additional profit by application of gross profit on enhanced turnover as directed in earlier para of this order and to give credit for the same. If any balance towards investment remains, it shall be sustained. 57. In ground no. 8 the revenue has raised the issue of deleting the addition of ₹ 9,47,306/-. The learned CIT(A) has dealt with this issue in para 17 which is reproduced as under :- 17. Gr. no. 11 of appeal is against the addition of ₹ 9,47,306/- as a result of disallowance out of salary expense of MCX trading of ₹ 9,47,306/-. AO compared salary expenses of AY 2008-09 with that of ₹ 2010-11 found them excessive. But considering the fact that huge transactions were noticed on MCX as per seized papers and an unaccounted income from MCX trading of ₹ 6.07 crore is already added, expense on salary for MC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is not properly explained. As discussed in table give on page 92 of this order, many of the entries on this loose paper are not reflected in books of account and that page was used to establish modus operandi of manipulating cash sales, whereby sale were suppressed and profits were suppressed. Thereafter, instead of adding the amounts given on this page, sales itself was enhanced by 17.5% and profit of this year was calculated at 1.25% rate instead of 0.10% rate as shown by appellant. Therefore, data on this page was used to calculate GP and make addition of GP. Hence, no separate addition can be made for such notings on this loose paper page 34 of LPS-1. Hence, all the five additions made on the basis of this paper are deleted. Ground No. 13 of appeal is allowed. 65. Against the above findings of the learned CIT(A), the assessee as well as the revenue are in appeal before the Tribunal. 66. Before us, the learned DR strongly contested the order of the learned CIT(A) and relied upon the order of Assessing Officer by submitting that there being no direct nexus between estimation of gross profit and unaccounted income, the learned CIT(A) was wrong in granting relief to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eunder :- 20. Ground No. 14 of appeal is against addition of ₹ 8,44,62,392/- on the basis of seized paper LPS-5 page 107 which contained a trial balance. According to appellant following explanation was furnished for each of the entry in the trial balance:- In case of Ravi Bullion Jewellers, Proprietor Om Prakash Dhanwani S.No. Description Unrecorded entries Recorded entries Total Submission of appellant Remarks of CIT(A) 1. ANAND 60000 0 60000 Not recorded in books of accounts -- 2. ATUL RAJKOT 4500902 0 4500902 Not recorded in books of accounts This shows unaccounted advance payment against sales which establishes modus operandi of unaccounted cash sales. 3. DP JEWELLERS 134632 0 134632 Not recorded in books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounted cash sales. 13 CASH HAJAR 0 2769710 2769710 Recorded transaction. Out of Cash in hand ₹ 68,86,569/- opening Bal Discussed in par 16 of this order 14 DAMU 0 7526900 7526900 Cross entry. This is cross entry with Damu Brajesh $ Co. -- 15 DEVA RAM 400000 0 400000 Not recorded.Temporary advance -- 16 GOPAL RAJKOT 14627 0 14627 Not recorded -- 17 JATIN 2100000 0 2100000 Not recorded This proves modus operandi of unrecorded cash sales 18 KAPIL 0 5023673 5023673 Rs.15,09,999 in books As debit to Hitesh Dhanwani Diff. 35,13,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has identified various entries related to trading of bullion as either accounted or unaccounted . But in case of one single entry of MCX ₹ 6,50,10,406/-, appellant has not identified it as accounted/ unaccounted, but stated that this trial balance entry in name of MCX is not about him trading of MCX , but it is Ahmedabad branch current a/c balance which was ₹ 6,80,22,823/-. This shows a lot of hesitation and reservation on the part of appellant, and a calculated move to mislead the department which is clearly discernable from three facts. 20.2 Firstly in this entire trail balance give above, not a single entry is in coded language, but every entry is in the same name as is used in business of appellant, both accounted as well as unaccounted. For example Axis Saving a/c, D.P. Jewellers, Damu Brajesh Co., Rajesh MM, Lal BPL, Pappu Jai Mata Di etc are all in real or abbreviated name, but none of them is in bogus name. Hence MCX is also to be taken as real name especially when appellant has done huge transactions on MCX in name of self as well as on child ID s and dabba trading. In order to avoid any examination of MCX trading a/c, appellant tried to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him and profit earned by him, is not disclosed by appellant. In turn appellant has suppressed his own brokerage income and also did not pay tax on party net surplus . 20.4.1 Appellant is TCM member of MCX with membership no. 12700. They have done large scale trading in fictitious names like Choudhary -12002, Ishwar Ji - 25018, Kailash Jhansi 25027, Kishore Ji 12026, Monty 25012, Patni 25029, Pyarelal 12038, Suresh JBL 12022, Vinod Jhansi -25047, Zaveri 25043, Shared JBL 25036, Tony Sharad etc as per page no.7 to 51 of LPS-2 seized during search, which shows large net surplus in each of the aforestated account, total of which comes to ₹ 4,31,82,986/- and a brokerage receipt of just 4 days from 20-11-22010 to 24-11-2010 of ₹ 2,47,152/- as per the table given below :- Fictitious name Number enclosed Actual name for Net surplus Brokerage Choudhary 12002 516827 2313/- Ishwar ji 25018 Sanjay 5586694 11764 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,406/- is held as income from MCX trading as both profit brokerage income. Out of this since ₹ 39,78,823/- and ₹ 2,80,356/- is shown by appellant in profit loss a/c as income from future trade profit and brokerage received , hence those amounts are reduced and net amount ₹ 6,07,51,227/- is held as unaccounted income reflected as net surplus, as also unaccounted brokerage income, not reflected in books of account. It may be added here that appellant through submission dated 25-02-2015 have stated that such income is already disclosed in overall surrendered income of ₹ 10 crores, but the amount added in profit loss a/c as surrendered income is only ₹ 7,28,25,000/- which is not enough to cover the GP addition of ₹ 14.14 crore and the MCX trading income addition of ₹ 6.07 crore. 20.6 This also takes care of ground no.18 of this appeal where ₹ 4,34,30,138/- was separately added on the basis of seized papers page 7 to 51 of LPS-2, regarding MCX trading which are also discussed in previous para. Both ground of appeal i.e. Gr. no.14 18 are merged together and net uncounted income of ₹ 6,07,51,227/- is added as net surplus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid trial balance appellant has identified various entries related to trading of bullion as either accounted or unaccounted . We find that the assessee did not identify or clarify the entries in the name of MCX at ₹ 6,50,10,406/-, except that it relates to Ahmedabad Branch. He did not clarify as to what extent such entries are accounted/unaccounted in the books. According to the assessee, the same relates to Ahmedabad Branch and such balance was appearing in the regular books of account at ₹ 6,80,22,823/-. The CIT(A) did not accept this claim of Ahmedabad Branch balance on the ground that the name in the trial balance is MCX instead of Ahmedabad Branch and the figures also differ. He further stated in para 20.5 of his order Hence amount of ₹ 6,50,10,406/- is held as income from MCX trading as both profit and brokerage income. Out of this since ₹ 39,78,823/- and ₹ 2,80,356/- is shown by appellant in profit loss account as income from future trade profit and brokerage received . As per CIT(A), on the transactions of ₹ 4,31,82,986/- no profit has been offered for tax but only brokerage income earned from MCX trading was reflected a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessment instead of the entire entries. 78. We have heard both the sides on this issue. We find that the CIT(A) while sustaining the addition relating to MCX transactions deleted the addition of ₹ 2,37,11,165/- on account of the differential amount of trial balance of found during search. Total entries in the referred trial balance were of ₹ 8,44,62,392/- against which an addition of ₹ 6,07,51,227/- was confirmed by learned CIT(A) and the balance addition of ₹ 2,37,11,165/- was deleted on the ground that G.P. addition made would cover the same. On specific query by the Bench regarding aforesaid figure of ₹ 6,07,51,227/-, it was explained by the learned counsel for the assessee that the CIT(A) deducted the amount of profit of ₹ 39,78,823/- and brokerage of ₹ 2,80,356/- disclosed in books from the amount of ₹ 6,50,10,406/- in the name of MCX. We further find that such working of CIT(A) is not correct because unexplained (unrecorded) credit entries of the trial balance vide page 74 to 76 of paper book-I should have been added. It would be fair and proper to consider such unexplained credit amount as additional income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-11-2010 Mukesh K. 100 gm 20,495 No datewise bills of 11-11-2010 , 15-11-2010, 16-11-2010, 19-11-2011 or 22-11-2011 shown, only consolidated bill of later date shown. 15-11-2010 Mukesh K. 200 gm 20,298 16-11-2010 Mukesh K. 100 gm 20,277 19-11-2010 Mukesh K. 500 gm 20,081 22-11-2010 Mukesh K. 5000 gm 20,288 22-11-2010 Mukesh K. 1000 gm 20,285 3. 19-11-2010 D.P. Jewellers 500 gm 20,086 Reflected in books 4. 19-11-2010 Govind Soni 500 gm 20,110 Cash sales not reflected in any cash sale bill 5. 23-11-2010 Mukesh K. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such there was no justification in making the addition by treating the transactions as unrecorded sales. It was, therefore, submitted that the learned CIT(A) was fully justified in deleting the addition after considering the detailed submissions of the assessee to the effect that enhancement turnover and application of gross profit rate would cover such discrepancy, if any. 85. We have heard both the sides. We find that the learned CIT(A) has deleted this addition on the basis that since addition of gross profit of ₹ 14.14 crore is already made in this year taking into consideration, the various unrecorded transaction, hence no separate addition is called for, for the entries recorded on page 108-109 of LPS-5. Hence additions of ₹ 20,27,500/-, ₹ 2,34,64,852/- ₹ 20,22,954/- made on the basis of notings on these pages is deleted . We have also decided the issue of estimating the gross profit and the turnover of the assessee in earlier part of this order. We, therefore, following our above order, direct the Assessing Officer to work out the gross profit as per our above direction. This ground of the revenue is decided accordingly. 86. In ground no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression of GP, for which sales is enhanced by 17.5% and GP is enhanced by ₹ 14.14 crore. Therefore though seized paper shows modus operandi of unrecorded transactions, but all five additions made on the basis of this paper are deleted. Gr. no.16 of appeal is allowed. 89. Before us, the learned DR supported the assessment order. 90. On the other hand, the learned counsel for the assessee submitted that LPS-5/55 was explained in detail before the authorities below and detailed explanation finds place from page 29 to 37 of the assessment order. The entries were of purchase and sale which were properly recorded. As regards cash balance stated on the loose paper LPS-5/55 it was explained by the learned counsel for the assessee that the same forms part of total cash found during search over ₹ 84 lacs. The assessee maintained cash at different locations, hence, transfer of cash from one location to another location does not reflect in the main cash book. He, therefore, submitted that the cash entry on the loose paper cannot be considered to be unaccounted income of the assessee. However, the learned counsel for the assessee submitted the assessee has already surrendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the 6[Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year :] 7[Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.] (emphasis supplied) From a bare perusal of the above section it becomes crystal clear that unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income. Since these payments were made by the assessee but not recorded in the books of accounts, the learned CIT(A) was not justified in granting relief against the addition made towards gross profit. We, therefore, reverse the findings of the learned CIT(A) on this issue and restore the addition made by the Assessing Officer. 95. In the result, ground no. (ix) of the revenue is allowed whereas ground no. 10 of the assessee is dismissed. 96. In ground no. 11 the assessee has challenged the sustaining of addition of ₹ 1 crore made u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1 crore remained unexplained and its addition u/s 68 of I.T. Act is hereby confirmed. For this purpose reliance is placed on the decision in cases of M/s Agarwal Coal Corp. P. ltd [2011] 17 ITJ 111 (Indore Trib.) wherein it was held that credit entries taken from paper companies remained unexplained as also on the decision of jurisdictional High Court in case of Gyan Chand Anil Kumar [2002] 120 Taxman 842 (MP) wherein addition of cash credit was upheld even though same was returned very next day, as entries were manipulated ones. Reliance is also placed on decisions in cases of Umesh Krishnani [2013] 217 Taxman 13 (Gujarat) Hindon Forge P. Ltd [2012]211 Taxman 113 (Allahabad) and Smt. Suman Gupta [ 2012] 138 ITD 153 (Agra). As addition of ₹ 1 crore is confirmed, the disallowance of interest expense on such loans of ₹ 7,15,397/- is also upheld. As a result Gr. no. 20 of appeal is dismissed. 26.4 It can be added here that there is nothing in law which prevents assessing officer in an appropriate case in taxing both sundry credits, source nature of which is not satisfactorily explained and business income estimated after rejecting books of account of assessee as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake of the facts obtaining in this case, we find that similar addition made u/s 68 of the Act in relation to deposits received from three depositors has been deleted by us for the reasons given in the foregoing paragraphs. The facts as well the evidence produced i.e. confirmation certificates along with copies of bank statement and acknowledgment of returns remain the same. The facts being identical, the loan taken from M/s. Sanskar Exim Pvt Ltd. at Rs. One crore is held to be genuine and, therefore, the addition made by the authorities below is hereby deleted. We, therefore, direct the Assessing Officer to delete the addition. 100. In ground no. 12 the assessee has taken the ground that the learned CIT(A) has erred in maintaining the addition of ₹ 17,99,014/- and ₹ 12 lacs being the interest paid on the unsecured loans received from Khusi Export and Vinay Gems which were added u/s 68 in earlier year. 101. We have heard both the sides. We have decided this issue in IT(SS) A No. 242/Ind/2015 for the assessment year 2010-11 in favour of assessee by holding that unsecured loans were genuine. For the same reasons, this issue is decided accordingly. 102. Ground no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the learned CIT(A), the assessee is in appeal before the Tribunal. 105. Before us, the learned counsel for the assessee submitted as under :- Addition in respect of paper on internet of O-Brien. The copy of the said paper is given at Pg.357 of the PB. This paper was recovered from the internet and address of the party is given as Jitesh International of Sharjaha. The reply to the notice given is placed at P.221 of the common PB. It is submitted that Jitesh International was transferred by the assessee prior to the year 2001 to Shri Balkrishna Parsram of Dubai. The dealing is with that firm which is situated outside India. The Ld. AO wanted the assessee to produce Shri Balkrishna Parsram and his accounts book which was not possible. During the course of the proceedings the letter was filed by him stating that this company belongs to him. It is humbly submitted that the assessee has no connection with this firm. The name of the assessee has not been mentioned on this paper nor it depicts that any income arose to the assessee. The Ld.CIT(A) has simply remarked in para 28 Pg. 120 that the assessee did not furnish any document to show that this firm was transferred to Shri Balk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of unaccounted jewellery found during search. 108. The learned CIT(A) has accepted the claim of the assessee that the gold ornaments up to ₹ 52 lacs were unaccounted. The learned CIT(A) has dealt with this issue in paras 17 and 17.1 at pages 106 and 107 of his order which are reproduced hereunder :- 17. Gr. no.11 of appeal is against making an addition of ₹ 70,72,244/- ₹ 11,17,760/- u/s 69 A of I.T. Act, on account of investment in Jewellery. During search at residence of appellant, Jewellery weighing 4122.230 gm of ₹ 70,72,244/- was found, out of which Jewellery weighting 2431.831 gm of ₹ 41,64,385/- was seized. Besides this Jewellery of ₹ 11,07,760/- was found in locker no.1298, Bank of India. During post search proceedings, appellant has accepted that Jewellary seized from residence lockers of ₹ 52 lakh has been purchased by him, out of his unaccounted sources and surrendered the same. However the AO considered entire Jewellery found at residence of ₹ 70,72,244/- and in locker of ₹ 11,07,760/- as unaccounted investment of appellant and added them in hands of appellant. 17.1 After considering all facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted investment of appellant was found of a total of ₹ 5.40 crore in C-21 Mall Bhopal and Globus Green Area project, Bhopal both being project of Shri Keshav Nachani partners. On that basis appellant admitted following unaccounted investment:- AY 2010-11 ₹ 2,71,75,000/- AY 2011-12 ₹ 1,98,36,250/- AY 2011-12 ₹ 70,38,750/- (cash seized anddisclosed at ₹ 84 lacs) 18.1 On the basis of such admission, while AO accepted that part of such investment of ₹ 70,38,750/- was returned back to appellant as cash was covered in disclosure of cash seized of ₹ 84 lakhs, he made addition of ₹ 1,98,36,250/- as unaccounted investment made by appellant in Bhopal properties (C-21 Mall and Globus green Acre Project) in AY 2011-12. It is therefore held that as per seized documents from pen drive and as per admission of appellant, there is no doubt that amount of ₹ 1,98,36,250/- was unaccounted investment of appellant in AY 2011-12, in Bhopal property but since an addition of gross profit of ₹ 14.14 crore is already confirmed in hands of appellant , in this year, as unaccounted profit earned, hence investment of ₹ 1,98,36,250/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10.7.2010 of ₹ 2,24,19,341/-. This was not accepted by the Assessing Officer. So far the addition of ₹ 4,79,215/- was explained by the learned counsel for the assessee as contra-entry of cheque issued of ₹ 3 lacs and another amount of ₹ 1,79,215/- as temporary advance for purchase of jewellery. As regards the addition of ₹ 1,24,456/- it was explained that the assessee received advance payment of ₹ 92,50,000/- from M/s Jai Mata Di Bullion and Jeweller against which sale bill was issued of ₹ 91,25,544/-. The learned counsel for the assessee submitted that it is thus apparent that ₹ 1,24,456/- was the excess amount over and above the bill issued. He further submitted that how the excess amount can be treated as suppressed sale ? To prove the veracity of these facts, the learned counsel for the assessee drew our attention to pages 9 to 13 of the assessment order. The learned counsel for the assessee, therefore, prayed that in the wake of the facts mentioned above, learned CIT(A) was fully justified in deleting the addition and as such the revenue s appeal deserves to be dismissed. 116. We have heard both the sides. We have already de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of deleting the addition of ₹ 3,85,520/- made on the basis of LPS -2. 128. The learned CIT(A) has dealt with this issue in para 25 at page 117 as under :- 25. Gr. no. 19 of appeal is against addition of ₹ 3,85,520/- added on the basis of page no.91 of LPS- 1/91, which is a purchase bill of gold of ₹ 3,85,520/- from M/s Prakash Jewellers. AO added the same in apprehension that same was not recorded in books, whereas appellant produced the books before AO showing both inward outward entry, showing that such purchase was cancelled. Since books were produced showing reversal of such entry, no adverse inference could be drawn, without any basis. Hence addition of ₹ 3,85,520/- is hereby deleted. Gr. no.19 of appeal is allowed. 129. The learned DR failed to controvert the findings of the learned CIT(A) that the books of accounts produced reflected such entries and no adverse inference is drawn. For the same reasons, this ground of the revenue is dismissed. 130. In ground no. 17 the revenue has taken the issue regarding deleting the addition of ₹ 9,43,900/- made on account of trading on MCX. The learned CIT(A) has dealt with this issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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