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2015 (9) TMI 137

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..... the syndicate group, the answer is certainly no, as the Assessing Officer himself is not confident with regard to the addition in the hands of the assessee on the basis of the statement of Shri. Prakash Chandra Bhutoria and the seized documents which were neither confronted nor the assessee was allowed to cross-examine Shri. Prakash Chandra Bhutoria whose statement was used to make the addition in the hands of the assessee. It is settled opposition of law that any evidence/statement/declaration cannot be used against a person or the assessee unless and until the same is confronted to the assessee and the assessee is allowed to crossexamine the said witness or person. In the instant case, the assessee has asked the Assessing Officer during the course of assessment proceedings to allow him to cross-examine Shri. Prakash Chandra Bhutoria whose statement was sought to be relied on by the Assessing Officer. Initially the Assessing Officer has summoned Shri. Prakash Chandra Bhutoria and asked the assessee to cross-examine in Kolkata, but on the designated date Shri. Prakash Chandra Bhutoria did not appear and the assessee was forced to come with empty hands. Thereafter though the as .....

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..... Gidwani, D.R. For The Respondent : Shri. P. K. Kapoor, C.A. ORDER PER SUNIL KUMAR YADAV: These appeals are preferred by the Revenue against the respective orders of the ld. CIT(A) for assessment year 2005-06 and 2006-07. Since common issues are involved in these appeals, these were heard together and are being disposed of through this consolidated order. We, however, for the sake of reference extract the grounds raised in both the appeals. 2. Grounds raised in I.T.A. No. 86/LKW/2012:- 1. That Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 55,83,300/-made by the A.O. on protective basis on account of coal business carried out by the assessee through the syndicate of Bhutoria Group, without appreciating the fact that the AO had given his finding on the basis of seized documents found during the course of search at the premises of Mr. Bhutoria and that on the basis of seized document PB-20, PB-17, the assessee was found to have received ₹ 55,83,300/- in cash, which was not disclosed in his books of account. 2. That Ld. CIT (A) has erred in law and on facts in deleting the addition of ₹ 55,83,300/-made by the AQ on .....

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..... n the coal business, ignoring the fact that the AO has given his finding on the basis of sufficient evidence on record that the assessee was also engaged in the trading of coal in his own account. 8. That Ld CIT(A) has erred in law and on facts in deleting the addition of ₹ 1,17,93,900/- made by the A.O. on account of investment in the coal business, without appreciating the fact that the addition was based on the contents of the seized documents and statement of Shri P. C. Bhutoria that the assessee was earning premium on coal supplies other than the regular commission income earned by him. 9. That the appellant craves leave to amend any one or more of the grounds of the appeal as stated above as and when need for doing so may arise. 10. That the order of the Ld. CIT (A) deserves to be vacated and the assessment order passed by the A.O. be restored. 3. Grounds raised in I.T.A. No. 54/LKW/2012:- 1. That the Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 36 lacs made by the AO on protective basis on account of coal business carried out by the assessee through the syndicate of Bhutoria group, without appreciating the fact that the AO .....

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..... . 4. First three grounds in both the appeals relate to the additions made by the Assessing Officer on protective basis in the hands of the assessee on account of Coal business carried out by the assessee through syndicate of Bhutoria Group on the basis of the seized documents PB-20 and PB-17. 5. The facts in brief borne out from the record are that on 6.12.2005 a search and seizure action under section 132 of the Income-tax Act, 1961 (hereinafter called in short the Act ) was taken place in the case of Shri. Prakash Chand Bhutoria at Kolkota, a person belonging to Bhutoria Group which was engaged in Coal business. His family members had been Directors in the company, namely Panchsheel Commodities Pvt. Ltd. having its registered office at Kolkata. During the course of search operation, some computer printouts (three in number) from the business premises of this group was seized and with respect to the seized documents, statement of Shri. Prakash Chandra Bhutoria was recorded under section 132(4) of the Act and Shri. Prakash Chandra Bhutoria has deposed that there was a syndicate consisting of 10 persons identified through codes which were decoded as under:- (i) PB : decode .....

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..... . 9. In assessment year 2006-07, the Assessing Officer has completed the assessment at an income of ₹ 2,48,03,100/- by making the following additions:- i ₹ 5583300/- Addition on account of coal business done by the at Kolkatta made on protective basis. ii Rs.11793900/- Addition for alleged profit on sale proceeds of four coal rakes amounting to ₹ 3,93,13,000, treated as 'turnover' of the appellant at Kanpur. iii Rs.1282850/- Income said to have been earned by the appellant, in the coal business at Kolkata. iv Rs.1817200/- Income said to have been earned by the appellant, in the coal business at Bhubaneshwar. v Rs.1263760/- Deposit said to have been made by the appellant with NCCF at Kolkata. vi Rs.100000/- Disallowance out of various expenses 10. While completing the assessment in both the years, .....

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..... year 2005-06. Addition of ₹ 55,83,300/- in assessment year 2006-07 was also deleted following the order of the ld. CIT(A) passed in assessment year 2005-06. The relevant observations of the ld. CIT(A) for assessment year 2005-06 are reproduced hereunder:- 6.1 The learned counsel appearing on behalf of the Appellant has strongly objected to the additions made by the A.O. They have contended that the Assessing Officer has not properly considered the facts of the case submissions made before him from time to time, it has been argued that the said computer sheets(on the basis of which addition of ₹ 36,00,000.00 has been made)do not constitute any material which can be taken cognizance of in the assessment of the appellant for the reasons that - (a) contents of the said computer printouts are wholly uncorroborated and untested (b) the existence of the syndicate in the coal business stands wholly disproved by the testimony of Sri Laxman Poddar who was alleged to be one of the members of the syndicate as per the statement of Sri Prakash Chand Bhutoria the attendance of Sri Prakash Chand Bhutoria (who was required to be cross examined by the appellant) was not enfor .....

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..... n (1995) UPTC page 987 wherein their lordships have observed and held as under:- This Court has repeatedly emphasised that the entries in the books of accounts a third person cannot be automatically used against a dealer and they have to be proved according to law by examining the person concerned who can prove the correctness of the entries and allowing the dealer against whom those entries are sought to be used, an opportunity of hearing. The entries in the books of accounts of another person are merely statements of that person and they cannot be used against the third party except by proving them in accordance with the established proce dure. True, the provision of Indian Evidence Act do not apply to proceedings under the Sales Tax Act but that does not mean that the general principle that statement of a person made at the back of the party sought to be bound by it cannot be used unless it is made in the presence of that party and that party is allowed an opportunity of cross examining the person concerned. There is no legal principle under which books of accounts of Vishwakarma Oil Traders could be given precedence over the books of account of the present assessee. Therefo .....

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..... lesale dealers were not shown in the books of account of the assessee. The Sales Tax Officer relied on the evidence furnished by the entries in the books of account of Haji Usmankuttv and other wholesale dealers for the purpose of coming to the conclusion that the return filed by the assessee was incorrect or incomplete. Placed in these circumstances, the assessee could prove the correctness and completeness of his return only by showing that the entries in the books of account of Haji Usmankutty and other wholesale dealers were false, bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries, and this obviously the assessee could not do, unless he was given an opportunity of cross-examining Haji Usmankutty and other wholesale dealers with reference to their accounts. Since the evidentiary material procured from or produced by Haji Usmankutty and other wholesale dealers was sought to be relied upon for showing that the return submitted by the assessee was incorrect and incomplete, the assessee was entitled to an opportunity to have Haji Usmankutty and other wholesale dealers summoned as witnesses for cross-examination. .....

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..... basis statement of a party, made behind back of assessee to effect that cash payments were made by assessee to such party for acquiring development reight- No search had taken place m case of such party and no documents or records evidencing payment of on money were seized Assessee was given no opportunity to cross-examine said party. Whether addition made on basis of statement of such party would be unsustainable-Held yes. (vi) S. P. Goyal Vs. Dy. CIT reported in 82 ITD page 85 (ITAT Mumbai Third Member) In the present case, it was a mere loose sheet in which the assessee confirm that the entry was in his own handwriting. The loose papers in itself has got no intrinsic value. It does not represent negotiable instrument which can be exchanged for a sum of ₹ 60 lakhs. Therefore, the above decision did not have direct application on the fact of the present case. When it was a mere entry on a loose sheet of paper and if the assessee claimed that it was only a planning, not supported that this entry really represented cash of ₹ 60 lakhs. There was no such evidence found by the revenue in the form of extra cash, jewellery or investments outside the books. In such .....

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..... ash paid to Sri Pawan Kumar Gupta @ ₹ 300/- per metric ton. PB-17 Page-29 would show that he has been paid in cash ₹ 1200000/- @ ₹ 300/- per metric ton for the quantity lifted for April quota. The names of the syndicate members have been given being the short names. Sri Prakash Chand Bhutoria in his statements dated 7.12.2005 has explained the short names which are as under:- i) PB - Prakash Chand Bhutoria ii) IB - Indrajmal Bhutoria iii) LP - Laxman Poddar iv) MB- Mahendra Bhutoria v) LCS- Labhchand Surana In reply to question no. 10 of page no. 5 of statement of Shri Prakash Chand Bhutoria recorded, which are as under:- Page-47: This relates to the transaction of the syndicate with M/s. National Cooperative Consumers Federation of India Ltd., through Pawan Gupta when 36 lacs have been paid to him by the various members of the Syndicate by in their sharing ratio of investment and profit Mr. Pawan Gupta is 50% share holder of the total transaction in this account and the entire payment was made to him is-out of books. The details and address of the Pawan Gupta are known to Sri Indrajmal Bhutoria and Laxman Poddar. How .....

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..... - or not The third issue is as to whether the syndicate should be taxed as an entity or the department should rest with taxing the sum given to Shri Pawan Kumar Gupta by syndicate. To my view it be assessed as an A OP. In that view the sum of ₹ 36,00,000/- will be taxed in A.Y. 2006-07 on protective basis and the sum of ₹ 55,53,300/- will be taxed in A.Y. 2005-06 on protective basis. The assessing officer holding jurisdiction will be intimated to take action under section 148 of the I. T. Act 1961 to assess the AOP 6.4.4 Since it has been the department s stand that such income belong to the Syndicate (AOP), ₹ 3600000.00 was added in the hands of appellant (who was allegedly a member of the said syndicate (AOP) only on protective basis. On perusal of records, statement recorded during the course of search at Kolkata and also the impugned seized computerized sheets, it is seen that the said transactions as embodied in these seized documents, (which give graphic details like % of profits between members, profit shares between the members in absolute number capital contribution by each of members etc.) actually represent the trading transactions of the syndica .....

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..... page 987 (ii) State of Kerala vs. K. T. Shaduli reported in (1977) (S. C.)AIR (1977)(S. C.) page 1627 (iii) Dharam Chand Agarwal reported in (2004) (4) MFC Page 474 Lucknow Bench (iv) Amarjit Singh Bakshi HUF Vs. ACIT (2003) 8SITD page 13 (Delhi) TM. (v) Pratihana Construction (P) Ltd. Vs. DY. CIT reported in 118 Taxmann Page 112 (Ahmedabad Bench) (vi) S. P. Goyal Vs. Dy. CIT reported in 82 ITD page 85 (ITAT Mumbai Third Member) 6.4.7. Since there was admittedly nothing more in this regards, no addition (which is purely based on the impugned documents), can survive. The addition made is, therefore, deleted. 14. Aggrieved, the Revenue has preferred an appeal before the Tribunal with the submission that from the statement of Shri. Prakash Chandra Bhutoria and the seized documents, it has been established that the coal business was carried own by the syndicate group of which assessee was a member and have received a particular amount narrated in the seized documents from the coal business. Therefore, the Assessing Officer has rightly made the additions. The ld. D. R. has also placed reliance upon the order of the Assessing Officer. 15. The ld. cou .....

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..... wed to cross-examine the third party with respect to his statement in order to judge the veracity of the same:- 1. CBI vs. V. C. Shukla and Others, AIR (1998) (SC) 1406. 2. Malwa Vanaspatii and Chemicals Co. Ltd. vs. CST (1995) UPTC 987, 3. State of Kerala vs. K. T. Shaduli, AIR (1977) (SC) 1627. 4. Amarjit Singh Bakshi, HUF vs. ACIT, 86 ITD 13. 5. Prarthana Construction (P) Ltd. vs. DCIT, 118 Taxmann 112. 6. S. P. Goyal vs. DCIT, 82 ITD 85. 16. Having carefully examined the orders of the lower authorities in the light of the rival submissions and from a careful perusal of the written submissions, case laws filed and also the documents filed before us, we find that undisputedly the addition was made in the hands of the assessee on protective basis. Though it was observed in the assessment order that substantive addition is to be made in the hands of the alleged syndicate AOP pointed out by Shri. Prakash Chandra Bhutoria in his statement recorded during the course of search conducted at Bhutoria group or his premises, but nothing has been placed on record to establish whether any substantive addition was made in the hands of the AOP syndicate. Now the question a .....

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..... ade on protective basis which means the Assessing Officer himself was not confident with respect to the tax liability of the alleged income estimated by him in the hands of the assessee. In the light of these facts, we are of the view that the ld. CIT(A) has rightly deleted the additions and we find no infirmity therein. Accordingly we confirm his order in this regard in I.T.A. No. 54/LKW/2012 and I.T.A. No. 86/LKW/2012.. 17. Grounds No.4 and 5 in I.T.A. No. 54/LKW/2012 and grounds No.7 and 8 in I.T.A. No. 86/LKW/2012 relate to the addition made on account of investment in coal business without appreciating the fact that the addition was based on the contents of the seized documents and statement of Shri. Prakash Chandra Bhutoria. 18. The facts in brief borne out from the record in this regard are that the Assessing Officer in assessment year 2005-06 was of the view that the assessee has handled the business himself along with his associates namely, Rama Vimimay, Kailash Coal Coke company, Bansal Coal Company Others, Chandrika Enterprises, S. G. Projects, etc. The Assessing Officer has also noted that there are certain deposits made by the associates with M/s National Coope .....

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..... that the price of coal was fixed and distributor price was also fixed by NCCF. The assessee was only allowed to a fixed commission for the services rendered. The relevant observations of the ld. CIT(A) for assessment year 2005-06 are extracted hereunder:- I have carefully considered the facts of the case and I find that the said addition has been made merely on conjectures and surmises without pointing out any material relating to the alleged trading activity carried on by the appellant. I also find from the records that complete quantitative/volume wise details of lifting the coal and its distribution to tiny consumers have been filed on which the appellant has earned commission which has been duly assessed to tax. Since the business model of the appellant was to make advance payments to NCCF for lifting the coal, it was natural that certain amount of investment had to be made by the appellant and since he was supplying the coal to the tiny consumers, it was quite natural again that there would be debtors/creditors. Therefore, I agree with the learned A. R. s contention that mere presence of debtors/creditors and payment of interest cannot prove that the appellant was indulg .....

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..... No. 4 to 6 in I.T.A. No. 86/LKW/2012 relate to the addition made by the Assessing Officer under different heads as profit earned by the assessee. 26. With regard to these additions, the Assessing Officer has estimated the profit having treated certain deposits with NCCF as the investment made for purchase and sale of coal by the assessee. The Assessing Officer accordingly made the following additions:- 1) ₹ 1,17,93,900/- for profit in trading of coal at Kanpur. 2) ₹ 12,82,850/- for profit in trading of coal at Kolkata. 3) ₹ 18,17,200/- for profit in trading of coal at Bhubaneswar. 27. Before the ld. CIT(A), it was contended that the assessee was a handling and distribution agent of NCCF for lifting, transportation and distribution of any weight of coal located at coal companies on all India basis. Therefore, he has to make payments to NCCF for lifting coal and whatever payments were made, it was duly recorded in the books of account. The assessee was simply concerned with the commission and no transaction was undertaken outside the books of account. The Assessing Officer has formed a view, having taken cognizance of the documents seized from Shri. .....

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