9911796707
TMI Blog2013 (12) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs.98,82,976/- holding that the entire expenses is not accounted and hence the entire amount is to be added to the income of the appellant. 6.2 The lower authorities have erred in holding that the scribbling in the seized documents were in the nature of expenditure and that these expenses were incurred by the appellant. The appellant never incurred or spent any such amount and therefore the addition, having been made on the wrong premise and being erroneous both on facts and law is to be deleted. 6.3 In any case the enhancement as made by Commissioner of Income-tax (Appeals) being bad in law is to be deleted." 4. In the A.Y. 2005-06, ground nos. 1 to 5 and ground no. 8 was not pressed and therefore the only effective grounds remaining for adjudication reads as under : "6.1 The learned Assessing Officer had erred in adding a sum of Rs.1,69,768/- u/s. 40A(3) of the Act and the learned Commissioner of Income Tax (Appeals) had erred in enhancing this amount of Rs. 81,05,775/- holding that the entire expenses is not accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were in the nature of expenses and that these expenses were incurred by the appellant. The appellant never incurred or spent any such amount and therefore the addition having been made on the wrong premise and being erroneous both on facts and law is to be deleted. 4.3 In any case the enhancement as made by Commissioner of Income-tax (Appeals) being bad in law is to be deleted. 5.1 The learned Assessing Officer had erred in adding a sum of Rs.1,47,48,900/- being amount withdrawn by several persons from 25 bank accounts in the names of and belonging to different persons and the Commissioner of Income-tax (Appeals) has erred in confirming the same. 5.2 The lower authorities have erred in holding that the appellant had control over the bank accounts. Further the lower authorities have also erred in holding that the expenses claimed by the appellant are bogus to the extent of amounts withdrawn from the bank. This conclusion of the lower authorities being without basis and being only on surmises and conjectures are to be totally ignored and additions as made by Assessing Officer and sustained by Commissioner of Income-tax (Appeals) is to be delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to be telescoped. 7.1 The learned Assessing Officer had erred in making an addition of Rs.22,35,21,842/- (20,32,03,707 + 2,03,18,135) as income on account of unexplained investment in purchase of iron ore and profit element on unaccounted sales. The addition as made by Assessing Officer being wholly on suspicion and surmises was wholly erroneous. 7.2 The learned Commissioner of Income-tax (Appeals) has however restricted the above addition to 2.92 Crores only by holding that the appellant had made unaccounted turnover of Rs.29,25,88,980/- on behalf of third person and that on such turnover be made a profit of 10%. 7.3 The conclusions drawn by Commissioner of Income-tax (Appeals) based on various observation in the course of appellate order are absolutely without any basis, the observations are totally unsubstantiated and therefore to be totally ignored. 7.4 The addition on this account as sustained being totally bad on fact and in law, requires to be deleted. 8.1 The learned Assessing Officer has erred in holding a sum of Rs. 1,43,000/- as unexplained investment in plots and learned Commissioner of Income-tax (Appeals) has erred in confirming the same. There were no unaccou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant though no addition / enhancement is sustained / made on this count after telescoping. 5.2 The lower authorities have erred in holding that the scribbling in the seized documents were in the nature expenditure and that these expenses were incurred by the appellant. The appellant never incurred or spent any such amount and therefore the addition having been made on the wrong premise and being erroneous both facts and law is to be deleted. 5.3 In any case the enhancement as made by Commissioner of Income-tax (Appeals) being bad in law is to be deleted. 6.1 The learned Assessing Officer has erred in holding that the appellant had excess unaccounted stock and in adding a sum of Rs.4,75,00,000/- to the income of the appellant and the learned Commissioner of Income-tax (Appeals) has erred in confirming the same. 6.2 There was no excess stock at all and there is no evidence therefor. No inventory of such stock was ever found or made by the Income-tax Department. The addition was made on conjecture and hence being without basis and confirmed by Commissioner of Income-tax (Appeals) also without basis requires to be deleted. 7.1 The learned Assessing Officer had erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 3,35,83,130 2006-07 3,90,38,732 31.03.2009 5,57,13,703 2007-08 7,85,65,715 31.03.2009 49,23,75,811 2008-09 6,54,42,660 17.08.2009 2,02,90,39,645 In making the above assessment, the AO accepted the claim of the Assessee in the return of income with regard to the turnover of iron ore business declared in the return filed as if it were his own turnover/sales and not on behalf of Shri Anil Lad or Anil Lad's group concerns, M/s. VSL Mining etc. However, the disallowances and additions were made as detailed in the assessment orders including the additions made by treating some of the purchases as totally unaccounted shown in the names of persons as detailed in the assessment orders (relevant for A.Ys 2007-08 and 2008-09). Also, with regard to another category of purchases (again relevant for A.Ys 2007-08 and 2008-09) made from certain parties, the Assessing Officer accepted the claim of the appellant since the parties were existing parties but made a disallowance on protective basis, the substantive addition being in the hands of the individual parties. The Assessee went in appeal before CIT(A). CIT(A) noted that the Assessee has been dealing in electronics under the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to Rs. 98,82,976/- since the correct amount which represents the cash payment as per seized document A/MJ/56 dt. 1.4.2008 as per AO is Rs. 62,15,790/-. Therefore, the addition should have been enhanced to Rs. 62,15,790/-. In view of this, we reduce the addition from Rs. 98,82,976/- to Rs. 62,15,790/-. To that extent, the order of CIT(A) is confirmed. Thus, the ground taken by the Assessee is partly allowed. A.Y 2005-06 - 10. Ground no. 6 which survives for our adjudication relates to the issue regarding disallowance made by CIT(A) amounting to Rs.81,05,775/-. The brief facts relating to this ground are that as per seized documents marked as A/MJ/7 dt. 1.4.2008, the AO noted that the Assessee had made cash payment amounting to Rs. 81,05,775/-. He worked out 20% thereof to be Rs. 16,21,155/- and gave opportunity to the Assessee to explain why the amount of Rs.16,21,155/- be not disallowed u/s 40A(3). The Assessee after going through the details of the payments, worked out the details in respect of payments above Rs. 20,000/- at Rs. 8,48,843/-. The AO verified the same and found that the payment made by the Assessee in excess of Rs. 20,000/- relating to the impugned year are Rs. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le subsequently the Assessee submitted before the AO the expenses relating to this year are not Rs. 81,05,775/- but were only Rs 8,91,043/-. In our opinion, the Assessee once has incurred the expenses or made the payment outside the books of accounts, the onus is on the Assessee to explain the source thereof to the satisfaction of the Income Tax Officer. Since in this case the Assessee failed to explain the source of these expenses/payments, therefore, to that extent CIT(A), in our opinion, has correctly made the addition but the quantum of the addition made by CIT(A) is not correct. According to the details submitted, the total expenses/payment relating to this A.Y are only Rs. 8,91,043/-. We, therefore, reduce the addition to Rs. 8,91,043/-. To that extent, order of CIT(A) is confirmed. Thus, this ground is partly allowed. 11. Ground no. 7 relates to the sustenance of the addition of Rs. 2,88,25,000/- by CIT(A) being the amount withdrawn by several persons from 25 bank accounts in the names of and belonging to different persons. The brief facts relating to this ground are that during the course of search at the business premises of the Assessee evidences of 25 bogus bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the CIT(A). CIT(A) confirmed the amount so withdrawn by the Assessee in each of the A.Ys. 11.1 The ld. AR before us vehemently contended that the very premise of these additions is absolutely erroneous. The AO has not pointed under which section or under which provision of law the addition has been made. Per se the withdrawal from the bank accounts cannot par-take the character of income. Therefore, the very basis of the addition, being total withdrawal from the bank be it bogus or otherwise, is not correct and the addition on this basis itself be deleted. The AO has incorrectly concluded that the 25 bank accounts are bogus. The allegation that the bank account-holders are all employees of the Assessee is totally baseless. The statement of salary paid by the Assessee clearly shows that none of these persons are the employees of the Assessee. Name of the bank account holders as mentioned from pg. 6-8 of the assessment order do not match with the names of the employees as mentioned in Annexure-A to the assessment order. Merely some of the cheque leaves, passbooks and pay slips were found in the Assessee's premises and the bank accounts are consecutively numbered did not make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployees of the Assessee. The Assessee explained that the Assessee has assisted the transporters to open these bank accounts as the transporters are located at faraway places so that the payment can be made to these transporters through cheque and the transporters or his truck driver may withdraw the amount as and when it is needed. It is not denied by the ld. DR that TDS has been deducted out of the transport charges so paid. It is not denied by the revenue that the transport charges so paid by the Assessee have been claimed by the Assessee as deduction. The AO has nowhere held that the transport charges paid by the Assessee are bogus even though the AO presumed that these bank accounts belonged to the Assessee and made the addition in respect of the amount withdrawn from these bank accounts. In our opinion, it is a fact that no addition has been made in respect of the deposits made in these bank accounts. We do not agree with the ld. AR that per se the withdrawal from these bank accounts, even if the bank accounts are treated to be belonging to the Assessee, cannot be regarded to be the undisclosed income. There is no provision under the Income Tax Act that the amount withdrawn by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered a sum of Rs. 2,41,00,000/-. Although income is earned on account of VSL Group but the same has been utilized by the Assessee in making payment outside the books of accounts and, to that extent, telescoping should be allowed to the Assessee. 13.2 The ld. DR, on the other hand, relied on the order of CIT(A). 13.3 We have heard the rival submissions and carefully considered the same alongwith the order of the tax authorities below. It is not denied that the sum of Rs. 2,68,97,758/- represents the payment made by the Assessee outside the books of accounts. The details of these payments were not produced to us. In our opinion, if the Assessee has incurred any expenditure outside the books of accounts, the onus is on the Assessee to prove the source of such expenditure. We noted that the Assessee, in this case, surrendered an income while filing the return (copy of which is available in the paper book) u/s 153A amounting to Rs.2,41,00,000/- although in respect of reconciliation with M/s. VSL Group but the amount to that extent could be regarded to have been available with the Assessee. Therefore, in our opinion, to that extent the expenses incurred outside the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 20.11.2008, the Assessee tried to reconcile the figures arising out of the seized material A/MJ/29 and agreed to make a declaration of Rs. 16,10,04,519/- being the extent of outflows which also includes cash payments as per annexure A/MJ/29 of Rs. 2,68,67,758/- + Rs.8,50,39,441/- but in the return, the Assessee has offered a sum of Rs. 6,31,00,000/- as declaration for the relevant year. Therefore, he accepted the explanation of the Assessee and no disallowance u/s 40A(3) was made. When the appeal went before CIT(A) for the relevant A.Y. even though no ground of appeal was taken by the Assessee on this issue, the CIT(A) issued a notice of enhancement u/s 251(2) dt. 6.5.2013 and asked the Assessee to explain the source of the sum of Rs. 9,28,15,521/-. CIT(A) did not agree with the finding of AO that this addition is telescoped into already declared additional income of Rs. 6,31,00,000/-. 16.1 The ld. AR before us vehemently contended that the enhancement made by CIT(A) is illegal and void. There was no ground of appeal taken by the Assessee as the Assessee was satisfied with the finding of the AO that the sum of Rs. 9,28,15,521/- which was incurred by the Assessee outside the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the undisclosed assets to the extent of stock being of eleven crores. Our attention was also drawn towards para 8 of the impugned assessment order. The AO also agreed that the correct figure of the cash payment outside the books of accounts for the A.Y were Rs. 8,50,39,441/-. It was also contended that whatever income is generated by making unaccounted sales and purchase the said income has either been invested, consumed or withdrawal for making personal assets. There had been search in the case of the assessee and ultimately all these payments made outside the books of accounts culminated into an unaccounted asset by way of stock. It was stated that the A.O made separate addition on estimate basis in respect of the profit earned by the assessee on unaccounted purchase and sale carried outside the books of accounts. This has been challenged by the assessee in the impugned assessment year as well as in the assessment year 2008-09 by way of ground no.7. If your Honour sustains the addition on account of profit on unaccounted turnover the assessee be allowed telescoping in respect of profit if any so sustained as it will be a source for making the cash payments made outside the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, books of accounts And for other disallowances that may be called for Rs. 25,00,000/- Total Rs. 11,00,00,000/- We further noticed that vide letter dt. 20.11.2008 the Assessee further agreed to make an additional declaration of Rs. 5,10,04,519/- in addition to the sum of Rs. 11 crores as under : 1. Cash payments made as noted in the seized material A/MJ/38 Rs. 7,90,97,320/- Less : Duplication entry at page 4 and 5 Rs. 3,00,00,000/- Undisclosed Income based on the above seized material Rs. 4,90,97,320/- 2. Cash payments as per A/MJ/29 Rs. 2,68,67,758/- 3. Cash payments as per A/MJ/29 Rs. 8,50,39,441/- Rs.16,10,04,519/- Less : Disclosure already given earlier Rs.11,00,00,000/- Balance being disclosed now Rs. 5,10,04,519/- We have also noted that for A.Y 2007-08 the Assessee mentions that the cash payment as per the seized documents are Rs. 8,50,39,441/-. The AO has also mentioned the figure in the assessment order while accepting that the said amount is duly covered by the disclosure made by the Assessee but ultimately in the said declaration, the Assessee has divided the total declaration of Rs.16,10,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable with the assessee and therefore we allow the telescoping of the said sum of Rs.89,40,874/- also alongwith the telescoping of Rs.6,31,00,000/- and therefore, we, sustain the balance addition of Rs. 1,29,98,567/-. Thus, this ground is partly allowed. 17. Ground no. 6 relates to the addition of sum of Rs. 4,96,39,000/- sustained by CIT(A), added by AO as amount withdrawn by several persons from 25 bank accounts. Both the parties agreed that the issue is also similar to ground no. 7 taken in A.Y. 2005-06 and whatever view this Tribunal may take on this addition during the A.Y 2005-06, the same view may be taken for the impugned A.Y. We have already deleted this addition while dealing with ground no. 7 during A.Y. 2005-06 in the preceding paragraphs. Respectfully following our finding for A.Y. 2005-06 on this issue, we delete the addition of Rs.4,96,39,000/-. Thus, ground no. 6 is allowed. 18. Ground no. 7 in assessment year 2007-08 and 2008-09 is common and relates to the addition of Rs. 2,92,00,000/- sustained by CIT(A) out of addition of Rs. 22,35,21,842/- made by the AO in the assessment year 2007-08 and Rs.4,30,000/- out of the addition of Rs.43,00,000/- made by the A.O in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Sep 2006 19213.060 19117.110 17063464.00 7 Oct 2006 40616.720 40585.830 37651577.00 8 Nov 2006 54528.950 53737.420 54671594.00 9 Dec 2006 40170.180 39505.420 32062623.00 10 Jan 2007 19378.850 19244.300 2306982.18 11 Feb 2007 56997.570 56417.330 66621779.50 287301.480 284708.580 292588980.68 CIT(A) in view of the statement of the Assessee and the circumstantial evidence in the form of seized material accepted the claim of the Assessee that he has earned only a profit margin on this unaccounted cash sales but was not satisfied with the claim of the Assessee that the Commission earned by the Assessee varies from 2-4% and assessee was only providing accommodation entries to Shri Anil Lad. He estimated the profit of the Assessee on unaccounted sales amounting to Rs. 29,25,88,981/- @ 10% and sustained the addition to the extent of Rs. 2,92,00,000/-. During the assessment year 2008-09 the CIT(A) estimated the unaccounted sales at Rs. 43,00,000/- and worked out net profit @ 10% at Rs. 4,30,000/-. Even no telescoping was given to the Assessee in respect of the said amount against cash payment made by the Assessee found during the search am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60% and if FE is greater than 60%, the Assessee is to be paid a fixed amount of Rs. 14/- per ton. This agreement is dt. 7.10.2005 and is available in the seized material A/MJ/29 (pg. 51-56). As per the remand report, the excess of the declared quantity of the fines extracted is 237863 MT. On that basis itself, at the most Rs. 33,30,082/- could be added to the income of the Assessee. Attention was also drawn towards para 8, pg. 216 of the paper book which forms part of the remand report and it was stated that on the basis of Annexure A/MJ/77 the AO observed that for procuring the bill, Commission is paid @ 4% as per the instructions of Shri Anil Lad. Thus, it was contended that CIT(A) was not correct in estimating the sales at Rs. 29,25,88,981/- instead of Rs. 22,35,21,842/- as has been taken by the AO. Even the profit estimated by the CIT(A) was arbitrary. It is a fact that at the most the profit can be estimated @ 4% which the Assessee has stated from time to time that the Assessee was providing accommodation entries and all the sales made outside the books of accounts relate to the iron ore of Shri Anil H. Lad. It is also a fact that on the basis of the seized material as found f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t search investigations conducted in this case revealed that Sri. Manoj Kumar Jain was acting as an agent for Anil Lad group of concerns to regularize their unaccounted illegally extracted iron-ore and sale thereof through his own concerns. Such unaccounted and illegally extracted iron-ore was brought to the market as purchases from unregistered dealers in the concern of Sri. Manoj Kumar Jain. The sales proceeds received in cheques on such sales is withdrawn from bank in cash and after deducting his own commission, balance cash was handed over to Mr. Anil Lad and his associates from time to time. The various evidences found during the course of search proceedings in the case of Mr. Manoj Kumar Jain and Mr. Anil H Lad and the sworn statements recorded from Mr. Manoj Kumar Jain clearly proves this modus operandi." Further, AO in para 4 of the remand report observed as under :- "4. Incriminating evidences in favour of Mr. Anil H. Lad and his concerns : During the course of search proceedings in the office and the residential premises of Sri. Manoj Kumar Jain, hundreds of incriminating documents in the different formats su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises of Shri Anil H. Lad as well as in the premises of the Assessee. The Assessee agreed to declare an additional income of Rs. 10.75 crores in respect of the unaccounted stock. The Assessee explained the source to be the cash withdrawal from the bogus accounts and cash generated through unaccounted sales. The Assessee in the various statements recorded either during the course of the search u/s 132(4) or u/s 131 stated that he was merely acting as Commission agent and operating affairs of Shri Anil H. Lad. The excess stock was nothing but the result of unaccounted extracted iron ore belonging to Shri Anil H. Lad and his concerns. Under para 8 of the remand report, the AO has stated that during the course of the search various evidences in the form of loose sheets were found indicating substantial cash payments made by the Assessee to Shri Anil H. Lad and his two concerns. The details of these payments are given as under :- Document Particulars Cash A.Y A/MJ/38, dated: 01.04.2008 Cash paid to M/s VSL(VSL Mining Company; Prop Mr. Anil H Lad) 7,90,97,320 2008-09 A/MJ/2, dated: 02.04.2008 Cash paid to VS lad and sons 64,38,080 2007-08 A/MJ/29, dated: 02.04.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the mines of Anil H. Lad group concerns and the transactions are routed through the proprietorship concern of the Assessee on which the Assessee was getting Commission @ 2-4%. The relevant portion of the statement recorded on 5.4.2008 and 24.6.2008 are reproduced as under :- 5.4.2008 : Ques No. 2 During the course of search and seizure proceedings in your office premises on 01.04.2008 and 02.04.2008, the computerized books of accounts maintained by you for your business concerns and other data available in the computers including the books of accounts in the form of hard disc and some loose paper files were seized. I am showing one of the file seized and marked as " A/MJ/29/02.04.2008". Please go through the page numbers 7, 8,12,14,15 to 20, 22 to 44, 46 to 48,58-to 61, 64 to 65, 78, 81,83 of this file and explain the transactions recorded on these pages. Also state the difference between CQ sales and CC sales? Also state who has made these sales and whether CQ sales as well as CC sales are reflected in the regular books of accounts of M/s GRMTC or any of your business concerns? Ans. I have gone through the pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to that extent. Thus the declaration made by me is correct as per my calculation. In the case of my employees and other concerns mentioned in ques no. 2 payments were made by M/s GRMTC considering their margin of profit and each person has paid advance tax for the A.Y 2008-09 on such profit (Commission). I may mention here that while making the payments to the persons mentioned, in ques no. 2 due care has been taken to consideration the VAT payments which have been paid by the concerned persons to the concerned authorities. Remaining money has been withdrawn from the relevant accounts and they have been paid to Sri. Anil H Lad group of concerns or his associates partly and we have paid remaining amounts to the URD sellers of iron-ore because some purchases made by M/s GRMTC, its employees and other persons mentioned in ques no. 2 are genuine transactions". Ultimately the AO at pg. 18 of the remand report took the view as under : "The incriminating evidences which clearly shows the systematic recording of transactions for different periods pertaining to various A.Y's both in cash and cheque found during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der these facts and circumstances, in our opinion, the finding of the AO are to be confirmed that the unaccounted cash sales were only to the extent of Rs. 22,35,21,842/-. The Revenue has categorically accepted that the Assessee was a conduit for carrying on the business of Shri Anil H. Lad in respect of iron ore illegally extracted. The Assessee has also stated these facts in the statement recorded from time to time and stated that he has been paid Commission from 2-4% on such cash sales. CIT(A) just estimated the profit on such unaccounted sales @ 10%. Income tax is a tax to be levied on the real income. Until and unless the income is earned by the Assessee, tax cannot be levied. The onus, in our opinion, is on the revenue to prove that the Assessee has earned income more than what has been estimated or returned by the Assessee. There had been a search in the case of the Assessee. A number of incriminating documents were found and seized but no documents proved that the Assessee has earned income much more than what has been estimated by the Assessee. Even no such evidence was found which may prove that the Assessee had made the investment or incurred personal expenses much more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 4%. Under these facts and circumstances, it will be proper and reasonable, in our opinion, the addition be made by estimating the profit on such unaccounted sales @ 4% as in case the Assessee has earned more income, the surrender made by the Assessee will take care of the same. We, accordingly direct the AO to estimate the profit @ 4% of sale of Rs. 22,35,21,842/-. Thus, this ground of the Assessee is partly allowed. Thus, addition of Rs. 2,92,00,000/- sustained by the CIT(A) be reduced to Rs.8940874/-. We may mention here that the net profit so added is available to the Assessee for telescoping the cash payment made by the Assessee outside the books of accounts during the year. Similarly, in the assessment year 2008-09 We reduced the addition of Rs. 4,30,000/- to Rs.1,56,365/- thus this ground in both the years is partly allowed. 19. The next ground of appeal relates to sustenance of the addition of Rs.86,97,774/- as suppressed profit of the Assessee. The facts relating to this ground are that during the course of search a computer print-out of the balance sheet of GRMTC (the proprietorship concern of the Assessee) for the impugned assessment year was found and seized and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of this fact, we set aside the order of CIT(A) and delete the addition of Rs. 86,97,774/-. 20. The next ground relates to addition of Rs. 1,43,000/- sustained by CIT(A). The brief facts relating to this ground are that as per the seized document A/MJ/30 dt. 2.4.2008 it was noted that the Assessee has made investment in plot/NA land amounting to Rs. 3,89,045/-. When asked for, the Assessee stated that all the plots have been duly disclosed. The AO noted from the details filed by the Assessee that the plots mentioned at sr. nos. 16 to 18 were not accounted for on the date of the investment i.e. 16.12.2006 but were accounted for as on 1.4.2007. The total investment in these plots was Rs.1,43,000/-. The AO added the same. The Assessee went in appeal before the CIT(A). CIT(A) confirmed the addition. 20.1 We have heard the rival submissions and carefully considered the same. In our opinion, CIT(A) has rightly confirmed the addition. It is a fact that the investment of Rs. 1,43,000/- in the plot of land made on 16.12.2006 was not accounted for during the impugned assessment year. We, therefore, confirm the order of CIT(A) on this issue. Thus, this ground stands dismissed. 21. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk purchase voucher books of third parties were found in the Assessee's premises. The Assessee said that these purchase bills were prepared by the suppliers of iron ore. The DDIT conducted inquiry with regard to 30 different parties from whom the Assessee had claimed to have made purchases of iron ore. The inquiry revealed that purchases from 18 parties are bogus. It was also noticed in the statement recorded on 24.6.2008 in response to question no. 4 in which Assessee has stated that he was operating mines of Anil H. Lad group of cases and he was in charge of transportation/sales of iron ore of Shri Anil H. Lad and group concerns. Part of the transactions are routed through the proprietorship concern of the Assessee and he got only Commission of 2-4% for accommodating part of the business. In his statement, he also admitted that he used the stationary/bill books and bank accounts of some of the parties for accommodation only and cash was withdrawn by bearer cheques from the bank accounts of the parties and same was partly paid to Shri Anil H. Lad and group concerns and partly paid to URD sellers of iron ore where purchases made by M/s. GRMTC are genuine transactions. In the statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterprises Shailaja Chandra P.N. Chandrakanth Prop. Venkateshwara Minerals Lingaraj Lingaraj Mulimani Prop. Sai Minerals Hemant Hemant Jain Prop. Hemant Trading Co., David Mailar Usha Sowkat Shoukat Pirawalle Prop. S.R.Trading Co., As per page No.23 of the document No.A/MJ/34 Dated 1.4.2008 it is seen that M/s GRMTC has issued circular on 7.7.2007 to his various above employees and other employees (which were shown as proprietors of various concerns) directing them to submit their bio data along with self addressed 50 paise post card to the office manager on or before 10.7.2007. All the above evidences show that it was systematically planned to create bogus entities with the help of employees by giving some incentives to them. Apart from voucher books in the names of these concerns various other evidences were found indicating they are nothing but paper concerns floated with his own persons." The AO, therefore, treated the purchases made to be bogus one and added the same in the income of the assessee along with the profit estimated thereon . The Assessee went in appeal before the CIT(A). CIT(A) confirmed the addition on account of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales as well as the closing stock. The sales made by the Assessee has duly been accepted by the AO. It is not a case where the purchases have been inflated. Since it is a case where illegally mined iron ore was to be accounted for, therefore, the Assessee has to take the bills by paying commission @ 4%. This fact is apparent from the seized computer data for the month of August, October, November and December, 2007 which has been reproduced by the AO in the remand report. To the extent the sales are accounted for, the purchase bills have to be obtained. It is not a case that these purchases were not recorded in the books of accounts. Once the Assessee has made the sales and sales has been duly been accepted, it is not possible for the Assessee to make the sales without any purchases being made. Even if the bills of the purchase may not be genuine, but it will not make the purchases to be bogus as the Assessee could have not sold the iron ore without procuring the same. It is also a fact that whatever sales and purchases have been accounted for by the Assessee in his books of accounts, those represents the sales made on behalf of Shri Anil H. Lad. There are evidence being seized wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases, blank bill book of the relevant concerns were found from the possession of the Assessee. The assessee himself was preparing the bills and putting into the books of accounts and in this manner the assessee has reduced the profit. The CIT(A) has rightly confirmed the purchases so claimed by the assessee on substantive basis in the hands of the assessee. The CIT(A) has dealt the facts of each and every party for which the attention was drawn towards page 22 to 30 of the order of the CIT(A). 21.4 In the rejoinder the learned A.R referred to page 28 to 29 of the order of CIT(A) contended that the CIT(A) has given clear cut finding on the basis of the incriminating documents found during the course of the search that the assessee was carrying out trading iron ore under close monitoring by Shri Anil Lad even he has observed that the seized material was confronted to the assessee at the time of search, the assessee has stated on 24.6.2008 that he was incharge of the mining plots of Shri Anil H. Lad and carrying our transactions on their instructions and a part of their transactions were routed through the proprietorship concern of the assessee GRMTC. This fact was denied by Shri Ani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the dictum of law pronounced by the Hon'ble Supreme Court the iron ore illegally extracted from the mines of Shri Anil H. Lad and the farm owned by him belong to Shri Anil H. Lad not to the assessee. There are also evidences found during the course of search that the assessee made cash payments to Shri Anil H. Lad and the iron ore so extracted routed to the proprietorship concern of the assessee. It cannot be said that whatever iron ore illegally extracted from the mining belonging to M/s VSL and Sons a firm of Shri Anil H. Lad, was given by Shri Anil H. Lad to the assessee without charging any cost. The Assessee has submitted quantitative reconciliation showing the quantity of the material purchased as well as material sold. The Assessee has both accounted as well as unaccounted sales. So far as the unaccounted sales are concerned, the same has been dealt with separately in the preceding paragraphs. Here, we are concerned with the accounted sales and accounted purchase bills. On the basis of the seized material the AO came to the conclusion that the Assessee has procured the bills for the iron ore and accounted for these bills in his books of accounts. Some of the concerns are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s duly filed. These concern made the sales to the proprietorship concern of the assessee to the extent of Rs.50,33,07,161/- in both the years as per the details given at page 146 of the paper book. These concerns have inter sales also to the extent of Rs.33,75,75,865/- in both the years. We noted that during the year ended 31.3.2007 the purchases were disallowed by the A.O to the extent of Rs.17,72,99,484/- and during the year ended 31.3.2008, the purchases disallowed were Rs.23,26,29,989/-. The gross profits as per the books of assessee were 16.35% and 6.06% for the assessment year 2007-08 and 2008-09 respectively. We do agree with the learned A.R that once the purchases are disallowed the gross profit will increase to 50.9% and 90.7% for the assessment year 2007-08 and 2008-09 respectively. No material or evidence whatsoever showing the comparative instance was produced before us to justify such a high gross profit. Under these facts in our opinion no addition on account of bogus iron ore purchases can be made as without procuring the iron ore by incurring the cost in our opinion the assessee cannot sell the iron ore. At the most the revenue could have added the profit on such pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,320/-. He therefore, sort explanation of the assessee vide 20% of the expenses amounting to Rs.1,58,19,464/- be not disallowed. The assessee submitted that the correct figure is an amount of Rs. 4,90,97,320/- arising out of seized material marked at A/MJ/38. The assessee made declaration before ADIT(Inv) on 20.11.2008 agreed to make a declaration of Rs.16,10,04,519/-which includes an amount of Rs.4,90,97,320/-.The assessing officer took the view that the assessee made the declaration of Rs. 97,00,000/- towards unexplained and inadmissible expenses, therefore he disallowed 20% of Rs.7,90,97,320/- amounting to Rs.1,58,19,464/- u/s 40A(3) of the Income Tax Act the assessee went in appeal before the CIT(A). The CIT(A) after giving notice to the assessee for the enhancement u/s 251(2) dated 6.5.2013 enhanced the addition to Rs.7,90,97,320/- but telescoped the same against the addition made on account of bogus purchases. 23. Before us, the learned A.R vehemently contended that the enhancement made by the CIT(A) is illegal and void. It was pointed out that there were the cash payments as per annexure A/AMJ/38 which relate to the assessment year 2008-09.This annexure contains duplicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year as well as in the assessment year 2007-08 by way of ground no.7. If your Honour sustains the addition on account of profit on unaccounted turnover the assessee be allowed telescoping being in respect of profit if any so sustained as it will be a source for making the cash payment outside the books of accounts. Therefore, the addition made by CIT(A) be deleted. 24. The ld. DR on the other hand, contended that no doubt the Assessee had submitted letters before the Asst. Director of Income-Tax (Inv.) dt. 23.4.2008 and 20.11.2008 making the total disclosure of Rs.16,10,04,519/-. The sum of Rs.11,00,00,000/- were disclosed vide letter dt. 23.4.2008 while the sum of Rs.5,10,04,519/- were declared vide letter dt. 20.11.2008 and while working out the additional income of Rs.5,10,04,519/- the Assessee has mentioned cash payments for the impugned A.Y as per Annexure A/MJ/29 at Rs.4,90,97,320/- after mentioning therein duplicate entries at page 4 and 5 amounting to Rs.3,00,00,000/- but in fact the Assessee has disclosed only a sum of Rs. 7.38 crores for the impugned A.Y which includes closing stock amounting to Rs. 6.41 lakhs. Our attention was drawn towards para 6 of the letter d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentions that the cash payment as per the seized documents are Rs. 4,90,97,320/- after reducing there from a sum of Rs. 3 crores representing duplicate entries. The AO has also mentioned the figure in the assessment order while accepting that the said amount is duly covered by the disclosure made by the Assessee but ultimately in the said declaration, the Assessee has divided the total declaration of Rs.16,10,04,519/- in the following assessment years as under : Rupees in crores Asst year Stock Inadmissible Expenditure Admissible Expenditure Book Reconciliation diff with VSL Total (In Rs) (In Rs) (In Rs) (In Rs) 2006-07 2.41 2.41 2007-08 6.00 0.23 0.08 0.00 6.31 2008-09 6.41 0.83 0.14 7.38 25.2 We have also gone through the statement of total income computed by the Assessee and filed before the AO alongwith the return filed in response to notice issued u/s 153A. As per the said return also (copy of which is available in the paper book at page 75), we noted that the Assessee has disclosed only a sum of Rs.6,41,00,000/- during the year as undisclosed income of the Assessee towards closing stock. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with the orders of the tax authorities below as well as the declaration made by the assessee. We noted from the computation statements for the impugned assessment year that the assessee has declared stock at Rs. 6,41,00,000/- and out of which he reduced the stock amounting to Rs. 6,00,00,000/- claimed to have been declared in assessment year 2006-07. The net effect is that the assessee only declared the stock of Rs. 41,00,000/- during the impugned assessment year and as claimed by the assessee and accepted by the A.O Rs. 6,00,00,000/- in the assessment year 2006-07. This is an undisputed fact during the search, undisclosed stock of Rs.10.75 crores was found and accepted by the assessee lying at Krishnapatnam, Nellore district, the assessee vide its declaration dated 5.4.2008 and confirmed vide letter dated 20.11.2008 declared undisclosed stock at Rs.10,75,00,000/-. In the said letter the assessee has also given the breakup of the declaration in which the stock of Rs.12.41 crores were shown during the two assessment year. For the impugned assessment year the income by way of investment in stock was to be declared at Rs. 6.41 crores but the assessee while filing the return we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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