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TMI Blog2015 (12) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... ide the addition of 25% undisclosed sales in the circumstances of the case? 2. Whether the ITAT acted in error on the question of commodity speculation alleged by the Revenue in the circumstances of the case? 3. If the ITAT fell into error in directing the deletion of amounts added by the AO on account of the inflated purchase by the assessee? 4. Whether the ITAT was correct in its conclusion with respect to disallowance of advertisement expenditure?" 3. Additionally in ITA Nos. 83 of 2013, 91 of 2013 and 211 of 2013, the following three further questions were framed: "5. Did the ITAT err in directing deletion of amounts added on account of unproved transactions, made by the AO, on the basis of seized material? 6. Did the ITAT fall into error in directing the deletion of amounts added as income by the AO under the head of 'Income Expenditure Investments' and the amounts relating to MDH account? 7. Is the Revenue correct in stating that the amounts have to be added towards the Assessee's investment in construction of school building at Byadagi, Karnataka." 4. For ITA No. 211 of 2013, following additional question was framed: "(8) Was the amount of Rs. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined entries, unexplained payments/balance, investment in the construction of a school building at Vyadgi in Karnataka, speculation in gold and the additions on account of the arms length price. 7. Against the aforementioned assessment order dated 31st December 2008, the Assessee appealed before the Commissioner of Income Tax (Appeals) [CIT (A)]. By the order dated 11th March 2010, the CIT (A) partly allowed the appeals of the Assessee for the AYs 2001-02 to 2004-05 by deleting the additions on account of unaccounted purchases, advertisement expenses and speculative income. However, the other additions were sustained. Against the finding of the CIT (A), deleting the additions made on account of advertisement expenses and speculative income, appeals were filed by the Revenue before the ITAT. However, as regards the deletion of the addition on account the unaccounted purchases, no appeal was filed. 8. By a common order dated 29th October 2010 both the Assessee's and the Revenue's appeals for AYs 2001-02 to 2004-05 were disposed of by the ITAT. 9. As regards the order of the AO for AYs 2005-06, 2006-07 and 2007-08, the matter was carried by the Assessee before the Dispute Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 25% of the sales was rightly deleted. Question No.1 is accordingly answered in the affirmative, i.e., in favour of the Assessee and against the Revenue. 12. Turning to Question No.2, regarding 'commodities speculation' Mr. Madan referred to the order of the AO which has extensively set out the statements made by Mr. Rajiv Gulati, Mr. Dharam Pal Gulati, Mr. Sushil Kumar Trehan and Mr. Prem Arora. In particular, reference is made to the statement of Mr. Rajiv Gulati, where he is supposed to have admitted to the Assessee having engaged in speculative trading. There is also a reference to the speculative trading in gold. Mr. Madan further relied on the decision of the Allahabad High Court in Dr. S.C. Gupta v. Commissioner of Income Tax 248 ITR 782 (All) to urge that even retracted statements could be relied upon. On the contrary, Dr. Rakesh Gupta, learned counsel for the Assessee, drew the attention of the Court to the decision of the Gujarat High Court in Kailash Ben Manhar Lal Chokshi v. CIT 328 ITR 411 (Guj) which supported the case of the Assessee. 13. At the outset, the Court would like to observe that the decision of the Allahabad High Court in Dr. S.C. Gupta v. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surmises and not on the basis of any credible evidence. The Court therefore holds that the deletion by the ITAT of the addition on the ground of speculative trading was for cogent and valid reasons. Consequently, Question No.2 is also answered in favour of the Assessee and against the Revenue. 15. Turning to Question No. 3 concerning inflated purchases, it is seen that the AO on an analysis of the books of accounts of the Assessee concluded that purchase invoices for chillies and haldi were over-invoiced by Rs. 3 per kg in case of haldi and Rs. 5 per kg in case of chillies. Reference was also made to the statement recorded of Mr. Sushil Kumar Trehan who is supposed to have effected sales and purchases without delivery. The AO held that the income so generated through "speculative activity in commodities is not reflected in the books of accounts of MDH Ltd." The CIT (A) concurred with the AO and affirmed the addition. 16. However, the ITAT has reversed the finding and deleted the addition after noticing that the additions had been made in this regard in the hands of Mr. Sushil Kumar Trehan. Further the transactions involving over invoicing was found in the AY 2004-05 but the AO ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. Turning to the additional three questions framed in ITA Nos. 93 of 2013, 91 of 2013 and 211 of 2013, Question No. 5 is of a general nature. Question No. 6 concerns an amount added under the head "Income Expenditure Investments" but counsel for the revenue frankly states that he has been unable to ascertain how the said question arises in the concerned AYs. It may also be noticed that certain amounts attributed to the Assessee have in fact been brought to tax in the hands of Mr. Trehan and therefore, their addition in the hands of the Assessee was not justified. 21. Question No. 7 is whether the expenses incurred by the Assessee in construction of school building at Byadagi, Karnataka require to be added as income. As has rightly been held by the ITAT, the Revenue has not been able to show that the amount incurred on the construction of the school building came from the Assessee. The said addition appears to be on the basis of surmises and conjectures and has been rightly deleted by the ITAT. Question No. 7 is accordingly answered in the negative, i.e., in favour of the Assessee and against the Revenue. 22. The further question framed in ITA No. 211 of 2013 is whether the ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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