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DCIT, CC-13, New Delhi Versus Mohan Proteins Ltd.

2015 (6) TMI 631 - ITAT DELHI

Addition on cash seized from Shri Ghanshyam Sharma - CIT(A) deleted the addition - Held that:- There is no dispute that Shri Deepak Aggarwal, Director of MIs Continental Milkose India Ltd had accepted the fact of having sent the cash of ₹ 1,75,000/ - to the assessee company through Shri Ghanshyam Sharma. The source of the amount of ₹ 1,75,000/- has also been explained by statement of Shri Deepak Aggarwal recorded the course of survey. As such the ownership of the cash recovered from .....

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account of Shri Sanjeev Goyal, appearing the books of assessee company as found from his residence and as per- records of title company - CIT(A) deleted the addition - Held that:- There is no evidence on record to indicate that the page-l , Annexure A-4 contained the up to date entries of the imprest account of Shri Sanjeev Goyal with the company. There is bound to be difference in the two records if the period to which each relates is different from each other. The addition made by the A.O. is .....

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ept in view while judging the issue. Accordingly, it is held that the finding of the A.O. that spare parts valued at ₹ 15,70,373/- had been sold outside the books is based only on presumption, without any concrete evidence. No evidence has also been found during the search to indicate any suppression of sales, specifically of spare parts. The actual rate of individual items of spare parts is supported by the books of accounts and vouchers kept by the appellant - Decided in favour of assess .....

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y cannot be relied upon, particularly when the assessee has maintained detailed record of spare parts in list- III and the rate of items is verifiable from the purchase documents. The arguments given by the A.O. for making the addition are general in nature and no specific discrepancies in explanation have been pointed out. There is also no incriminating evidence found during the search regarding sale of spare parts outside the books of account. The appellant is also correct in pointing out that .....

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lying in the fumigation chamber that there is no mention in the search inventory of any material lying in the fumigation chamber and contention of the assessee regarding stock having not been considered being old/scrap material cannot also be discard. The contentions regarding packing material lying in the packing room are also reasonable. Thus there is no question of any sale of even rejected packing material, as the same contains the name of the assessee preprinted on them. In these circumsta .....

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und at the time of search on 141912000. Such reconciliation was prepared by the appellant and furnished vide replies dated 28/5/2003 and 18/6/2003. The appellant has also filed copies of stock ledger account of the factory at Kosi Kalan, which is a part of the seized record, from which the goods were received and issued to stock at production. This shows that the stock found during the search is reconcilable with reference to the books of accounts and variations if any are very nominal. Accordin .....

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m the stock ledger account, it is noted that the appellant company is regularly recording the quantity of SMP only in terms of weight in kgs and not in terms of number of bags. Accordingly, the exercise made by the Assessing Officer to work out alleged shortage of skimmed milk powder not justified. The reasons for mentioning the quality in terms of kgs in the stock ledger have also been explained by the appellant in its written submissions, which have been reproduced above. It is also noted that .....

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ed in favour of assessee.

Unexplained investment in stock of work in progress - CIT(A) deleted the addition - Held that:- The work in progress has necessarily to be estimated, considering the nature of production carried on by the appellant company. The estimate so made in the assessment is in line with the quantity and value of work in progress shown by the assessee earlier for the year ended 31/3/2000 in the balance sheet at ₹ 53,07,490/-. Further no material or evidence has .....

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Respondent: Shri C S Aggarwal, Adv & Shri Ravi Pratap Mall, Adv. ORDER PER T.S. KAPOOR, AM: This is an appeal filed by Revenue against the order of Ld . CIT(A) dated 25.06.2003. The Revenue had sought adjournment in this case. However Ld. Senior Counsel for the assessee strongly objected to the adjournment letter and invited our attention to the order sheet entries and submitt4ed that Revenue has been taking adjournments unnecessarily which is causing great harm to the assessee. Our specifi .....

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revenue was given last opportunity vide order sheet entry dated 26.05.2014. Again on 02.03.2015, the adjournment was granted on the written request of Ld. D.R. and again on 03.03.2015 after imposing a token cost on revenue, the adjournment was granted for hearing on 22.05.2015, therefore, request of revenue to seek adjournment again was not justified. In view of above facts and circumstances, the adjournment application of revenue was rejected and Ld. D.R. was asked to argue the case on merits. .....

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ing the fad that in. rite of sufficient opportunities to the assessee to explain the seized cash the assessee failed to explain the nature of cash" ii) "On the facts and in the circumstances of the case the Ld, CIT(A) erred in deleting the difference of ₹ 1,04,250/- in the account of Shri Sanjeev Goyal, appearing the books of assessee company as found from his residence and as per- records of tile company iii) "On the facts and circumstances of tile case the I Ai. CIT(A) err .....

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/- made on accoutn of undisclosed income of sale of packing material outside the books of account. vi. "On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs.l,70,81,755/- made on account of unexplained investment in stock of finished goods found in excess", (vii.) "On the fact" and in the circumstances of the case the Ld.CIT(A) erred in deleting V the addition of ₹ 50,84,400/- made on account of undisclosed income on acco .....

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rguments advanced by Ld. A.R. are noted as under: 4. Ld. D.R. argued upon ground No.1 and submitted that during search, cash of ₹ 1.75 lacs was seized from Shri Ghanshyam Sharma for which no satisfactory explanation was submitted by assessee. He submitted that in answer to question No.2 Shri Ghanshyam Sharma replies that he had come to deliver cash of ₹ 1.75 lacs to Shri R. L. Goel whereas Shri Pradeep GM(F) who is on record could not recognize Mr. Ghanshyam and, therefore, the amoun .....

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Coming to ground No.3, the Ld. D.R. submitted that during search and seizure operation, the search team had found a difference of ₹ 15,70,373/- in the amount of payer as per books of account of the assessee and as per final inventory of stores and spares and the difference was not explained. 7. Ld. D.R. in this respect invited our attention to para 8(3) of assessment order and submitted that the stock physically found was less as compared to that reflected in the books of account and there .....

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of Ground No.5 wherein the A.O. had made addition on account of sales outside books of account of packing material. 9. As regards ground No.6, Ld. D.R. submitted that there was difference in physical stock of finished goods with the computer generated list of finished goods and A.O. had noticed the difference in various items as noted in assessment order at page 14 which the assessee was not able to explain. Therefore, the A.O. had rightly made the addition. Similar arguments were advanced in re .....

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submitted for other additions. Ld. CIT(A) hadforwarded the submissions of assessee to A.O. for his remand report and the A.O. in his remand report, has not pointed out any discrepancy and rather has accepted that the necessary reconciliation has been filed by assessee and, therefore, Ld. CIT(A), after examining and evaluating submissions and on the basis of remand report had allowed relief to the assessee. He submitted that Ld. D.R. could not controvert any of the finding of Ld. CIT(A) and, ther .....

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dditional ground of appeal. 12. We find that the A.O. in his remand report dated 12.05.2003 has covered each ground of appeal taken before Ld. CIT(A). In the remand report he has admitted that necessary details has been furnished and has not advanced any comments on the submissions which implies that the A.O. himself had no objection to the submissions and he was satisfied with the submissions of assessee. For the sake of convenience, remand report dated 12.05.2013 is reproduced below: Remand Re .....

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n Proteins Ltd. (MPL) while search action was going on. As the assessee failed to prove that this amount was advance money against order of 5 MT of Lactose placed by Continental Milkose India Ltd., the said amount was added as undisclosed income of the assessee on account of sales outside books of account. 'In their statements recorded during survey operations U/S 133A of the I.Tax Act, 1961 on 14.09.2000 at the premises of Continental Milkose India Ltd., Sh. Deepak Aggarwal. Exe. Director a .....

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therein that order for supply of 5 MT of Lactose was placed by Sh. Anupam Saxena of Continental Milkose India Ltd. on 13.09.2000 on telephone and Sh. Ghanshyarn Sharma has brought ₹ 1,75.000/- as advance for this order. Ground No.2: Assessee has contested addition of ₹ 1,04,250/- as undisclosed income. Perusal of seized documents marked as page 1 of Annexure A-4 (of Panchnama drawn at the residence of Sh. Sanjeev Goyal and ledger account of Sh. Sanjeev Goyal appearing in Annexure A-5 .....

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00. Ground No.3: The assessee has contested the addition of ₹ 35,000/- as unexplained investment in color TV. This addition was made in the hands of MPL as the delivery challan and receipt are in the name of MPL C/o Sh. Sanjeev Goel The assessee has now made submission that the said transaction stands explained in the hands of block assessment of Sh. Sanjeev Goyal and filed copy of case flow statement of Sh. Sanjecv Goyal along with copy of assessment order for the block period. Ground No. .....

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s physically found and inventoried was ₹ 98,80,700/- and value of this stock as per computerized list (list III) was Rs. l , 14,51 ,073/-. The explanation forwarded by the assessee that the difference may be due to the reason that spares that are issued after 6 p.m. can be entered only on the next morning. Assessee also failed to produce the documentary evidence during assessment proceedings. Assessee has now filed copies of requisition slips evidencing the issue of spares. Ground No. 5(b) .....

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e assisted them. Sh. Jiteder Kumar Yadav, Asstt. Stores Officer of MPL who signed the inventory would be aware of the value of various stores items. The assessee has now filed affidavit ofsh. D.S. Negi, Dy. Manager (Stores) stating that Sh. Pankaj Kumar Saini, who has assisted the search party in preparation of the inventory of spares, job was primarily to handle store Items. The assessee has also now relied on the comparative chart of Stock taking report as on 31.03.1998, 31.03.19j99 and 31.03. .....

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7; 4,22,717/- on account of packing material. Assessee has submitted that old/scrap material amounting to ₹ 2,06,805/-; packing material valued at ₹ 2,00,531/- lying in fumigation chamber and petty packing material valued at ₹ 15,3811- lying at packing room was not inventorized at the time of search. This explanation of the assessee was not accepted. Ground No. (d) : No comments. Ground No.6: The assessee has objected to the addition of Rs. 32,440/- on account of 'Quantity .....

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ddition of Rs. 1,94,12,755/- (reduced to ₹ 1,70,81,7555/- U/S 154) on account of difference in stock physically found on the date of search and as per stock register of the assessee. Assessee's contention, that this is due to the return of defective goods from customers and/or return from store record, was not accepted as some of the items returned were as early as in the month of February, 1998. The assessee has now filed evidence regarding goods returned. The assessee has also submit .....

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he addition of ₹ 99,223/- (reduced to ₹ 49,993/- U/S 154) on account of sale of packing material outside books of account.. This addition was made as there was difference of material physically found during search and as per stock record of the assessee. Assessee has now furnished copies of stock requisition slips with the submission that the material issued on the intervening night of 13.09.2000 and 14.09.2000 could have been entered only next day i.e. 14.09.2000. Ground No.9: The a .....

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40/- being unexplained investment due to excess stock. Assessee's explanation that some of the raw material was transferred to production process and the stock of raw material is taken by weight and not by the size of packing, was not accepted. The assessee has now furnished copies of requisition slips for the issue of raw material. Ground No. 12 : The assessee has contested addition of Rs. 48,53,675/- on account of stock of work in progress found at the time of search operation. The additio .....

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ate this, the assessee has now filed requisition sI1ps for SMP and Melted Butter. Ground No. 13: This ground is of general nature and no comments are offered. Yoursfaithfully , (P.K.SINGH), Asstt. Commissioner of Tax Central Circle - 13, New Delhi 12. Keeping in view the above remand report, Ld. CIT(A) has deleted the additions by holding as under: Ground No.1 : 5. I have considered the facts of the case. There is no dispute that Shri Deepak Aggarwal, Director of MIs Continental Milkose India Lt .....

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. As explained by the appellant, the amount is not reflected in its books as the money was not received by the company and the proposed sale never took place. In these circumstances of the case, the explanation furnished by the appellant is reasonable. As such the addition of ₹ 1,75,000/- is deleted. Ground No.2: 7. I have considered the facts and circumstances relating to the addition made by the A.O. The appellant's contention that the entries on page-l of Annexure A-4 represented th .....

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if the period to which each relates is different from each other. The addition made by the A.O. is on insufficient material and basis and the discrepancy having been explained the addition of Rs.l,04,250/- is deleted. Ground No.3: 13. I have carefully perused the facts discussed in the assessment order and the submissions and documents furnished by the appellant. From the details given in the preceding paragraphs, it has been noted that the appellant has reconciled the alleged shortage/excess i .....

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arts throughout the year has also force. Hence, merely on the basis of surmises, it cannot be said that the claim of the appellant regarding quantity of spare parts used on 13/14.9.2000 was incorrect or manipulated. The position appearing from the books of accounts of the assessee itself has to be kept in view while judging the issue. Accordingly, it is held that the finding of the A.O. that spare parts valued at ₹ 15,70,373/- had been sold outside the books is based only on presumption, w .....

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377; 15,70,373/- is unjustified and the same is deleted. Ground No.4: 15. I have considered the facts and circumstances, relating to the addition made in the assessment. I have also perused the inventory prepared at the time of search. The appellant's contention that approximately 2800 items were available in stock as per" list-III, which forms part of seized record cannot be considered as incorrect. However, in the inventory prepared during the search, the items of spares listed are 28 .....

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ition are general in nature and no specific discrepancies in explanation have been pointed out. There is also no incriminating evidence found during the search regarding sale of spare parts outside the books of account. The appellant is also correct in pointing out that the spare parts used in the production process would not be of any value to outside parties as these have specific enduse. The spare parts are specific to the production process and are not generally capable of being sold as such .....

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d and it is noted that there is no mention in the search inventory of any material lying in the fumigation chamber. The contention of the assessee regarding stock of ₹ 2,06,865/- having not been considered being old/scrap material cannot also be discard The contentions regarding packing material lying in the packing room are also reasonable. I have also considered the submission of the appellant that there is no question of any sale of even rejected packing material, as the same contains t .....

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sued by the appellant s customers have been filed in support of the contentions. It is also clear from the balance sheets of the appellant company for the years ended 31.03.99, 31.03.2000 & 31/312001 that the closing stock of goods stock at production was being regularly shown as part of the total closing stock of finished goods in these various years. Thus, finished goods termed as stock at production by the assessee have been shown in the years prior to the search as part of the closing st .....

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ooks of accounts at the end of the year. In fact the value of stock at production has been worked out at a higher amount than the value considered in the assessment order. During the course of appellate proceedings, the appellant was required to furnish quantitative reconciliation of stock at production for the period 114/2000 to 14/9/2000 ( i.e. the date of the search), viz. total stock of WPC and other items as per books as on 311312000 and stock of WPC etc. found at the time of search on 1419 .....

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hat stock at production is part of finished goods and reflected in the books of accounts is accepted and the addition of Rs. 1,94,12,755/- (reduced to Rs.l,70,81,755/- in the order U/S 154 dt.26/212003) is deleted. Ground NO.7 & 8: 29. I have considered the facts of the case. The appellant's contention that the quantity of skimmed milk powder is recorded in the stock ledger by weight in kgs and not by the size of the packing is found to be correct. Copy of the stock ledger account furnis .....

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he appellant in its written submissions, which have been reproduced above. It is also noted that the recording in the stock ledger does not mention the supplier's name. Further, it is also clear from the record that during the course of search no evidence is found to indicate sale of SMP, which is a raw material used in the production process of the appellant. Similarly, there is no justification for treating a sum of ₹ 37,05,240/- as undisclosed investment in stock of SMP, as per grou .....

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ourse of time) have been explained by the appellant. Accordingly, the addition of ₹ 50,84,400/- on account of alleged sales of SMP outside the books of account and addition of ₹ 37,05,240/- as unexplained investment in SMP is deleted. Ground No.9: 31. I have considered the facts of the case. It is noted that the log sheets prepared during the production process do not contain quantitative data of production, and hence cannot be said to indicate measurement of work in process The argu .....

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