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TMI Blog2012 (8) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... al was right in deleting addition of Rs.65,15,268/- made by the Assessing Officer on account of low GP rate?" ITA 1734/2010 "(1) Whether the Income Tax Appellate Tribunal was right in deleting the addition of Rs.2,39,913/- made on account of low GP rate? (2) Whether the order of the Income Tax Appellate Tribunal confirming the order passed by the first appellate authority in respect of addition of Rs.1,94,64,000/- is in accord with the earlier order dated 11th August, 2009 passed in case of ACIT vs. Om Prakash Bhatia in ITA No.1688/Del/09?" 2. The common question for all the three assessment years, namely, 2004-05, 2003-04, 2000-01 relates to the addition towards gross profits. The brief facts in this connection may be noted. The respondent-assessee is an individual engaged in the business of Hing, Jeera etc. On 13.12.2005 there was a search on the assessee‟s premises under Section 132 of the Income Tax, Act, 1961, hereinafter referred to as the Act. Several connected persons and members belonging to the same group were also subjected to search on the same date. Proceedings for assessment of the assessee were initiated under Section 153A and the assessee was called upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned by the assessee at 10% and applied the same for these assessment years for which proceedings were initiated under Section 153A. The relevant details have been reproduced below:- Assessment Year Sales G.P. @ 10% G.P. declared Additions 2000-01 35,49,724 3,54,972 1,15,059 2,39,913 2001-02 16,44,403 1,64,440 1,32,048 32,392 2003-04 2,73,01,567 27,30,157 (-) 37,85,111 65,15,268 2004-05 1,22,08,877 12,20,888 (-)4,84,235 17,05,123 2005-06 23,06,298 2,30,630 1,54,291 76,339 2006-07 8,73,137 87,314 95,957 -- Thus for the assessment year 2004-05 an addition of Rs.17,05,123/- was made, for the assessment year 2003-04 an addition of Rs.65,15,268/- was made and for the assessment year 2000-01 an addition of Rs.2,39,913/- was made. 5. The assessee appealed to the CIT (Appeals) who passed a separate order for each of the above-said years. However, in substance the orders on this point are the same. The decision of the CIT (Appeals) in respect of the assessment year 2004-05 is reproduced below:- "The next addition is on account of low gross profit rate. The AO made a reference to some material found during search for the revision of gross profit rate. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee did not yield any incriminating material on the basis of which it can be said that the assessee was indulging in under-invoicing or suppression of sales. They also found that the documents on which the Assessing Officer has placed reliance, were seized from a different person and not from the assessee and that no nexus between that person and the assessee has been established beyond doubt. In such circumstances, it has been held that the seized material cannot be used against the assessee. It has also been recorded by the CIT (Appeals), whose decision has been confirmed by the Tribunal, that the documents upon which the Assessing Officer placed reliance relate to a subsequent period and not to the years under consideration. They relate to the period from 1.11.2005 to 18.11.2005. It has thus been concurrently found by the CIT(Appeals) and the Tribunal that even if an estimate of the gross profits has to be made, it has to be based on valid material which was absent in the present case and that there was no justification for making an addition for low gross profits on pure guess work. These factual findings have not been sought to be disturbed or impeached by reference to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it presently stands, we do not find any reference to the validity of the proceedings under Section 153A. Therefore, this question raised in ITA Nos.1731 & 1733/2010 cannot be answered. Since in some connected cases this question was involved and the Tribunal had also decided the same, we had framed a substantial question of law for decision. Since several cases of the group were heard together involving different assessees and different years with overlapping issues, it appears that this was not pointed out at the time of hearing. The question framed is infructuous. 9. In ITA No.1734/2010, question No.2 remains to be decided. This relates to the addition of Rs.1,94,64,000/- made in respect of alleged Hawala transactions. It would appear that on the basis of some papers found and recovered in the course of the search in one of the family members premises, the Assessing Officer came to the conclusion that the assessee has also committed violation of „Foreign Exchange Regulation Act („FERA‟) by making payments through Hawala business. The Adjudicating officer of the Enforcement Directorate had passed an order indicting the assessee as well as other family members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tia (Supra). The CIT(Appeals) in the impugned proceedings has no doubt deleted the addition made in respect of Hawala business, but that is only because the Appellate Tribunal for Foreign Exchange had set aside the order passed by the Adjudicating Officer, Enforcement Directorate. However, the Adjudicating Officer, Enforcement Directorate was also directed by the Appellate Tribunal for Foreign Exchange to pass fresh orders after supplying the relevant documents to the persons involved. Therefore, the CIT(Appeals) directed the Assessing Officer to pass necessary consequential orders as per law, after obtaining the order of the Adjudicating Officer by the Enforcement Directorate passed pursuant to the directions of the Appellate Tribunal for Foreign Exchange. These directions of the CIT(Appeals) have been confirmed by the Tribunal in the impugned order and in our opinion rightly so. We clarify that it would be open to the Assessing Officer, if he finds that the Adjudicating Officer of the Enforcement Directorate has reiterated his earlier order even after giving the concerned persons an opportunity of hearing as well as the relevant documents, to follow the same. However, before doin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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