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2016 (1) TMI 1085 - ITAT JAIPUR

2016 (1) TMI 1085 - ITAT JAIPUR - TMI - Validity of assessments u/s 153A - Held that:- Original notice was issued u/s 153A and there as neither any warrant or search on assessee. Similarly while issuing notice u/s 153C no satisfaction in this behalf in the case of Modi group nor there was any assessment in the case of Shri Govind Dev as the 153A proceedings were dropped in that case. The satisfaction recorded by AO initiating 153C is silent regarding the pending proceeding initiated u/s 153A by .....

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153A. We find merit in the argument of ld. Counsel that assessments u/s 153A and 153C are independent and mutually exclusive, an assessment cannot be framed in continuation of both notices and similarly cannot be concluded u/s 153A if proceedings are undertaken u/s 153C. In view of the facts, circumstances and judicial precedents cited above we hold that impugned assessments are untenable and bad in law.- Decided in favour of assessee

Trading addition - Held that:- Trading results of .....

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ounted business - Held that:- It has not been disputed that assessee filed complete record of year wise and transaction wise accounts of material found in the locker. No adverse comments have been offered by ld. AO in this behalf. Regarding comparatively lesser GP from unaccounted business than regular business assessee offered proper reasons which have not been even considered by AO. The GP has been enhanced not based on any objective considerations but by summarily relying on estimated GP of r .....

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on market price whereas as per settled accounting principles same should have been valued at cost. Consequently valuation adopted by assessee is to be adopted. Thus the additions in question deserve to be deleted on merits also. - Decided in favour of assessee - ITA No. 303 & 304/JP/2014, ITA No. 449 & 448/JP/2014 - Dated:- 22-1-2016 - Shri R. P. Tolani, JM And Shri Vikram Singh Yadav, AM For the Petitioner : Shri S.L. Poddar, Advocate For the Respondent : Shri B.K. Gupta, CIT -DR ORDER Per R. .....

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at rejection of books of account has been upheld by him on the basis of earlier decision of ld. CIT(A) who sustained the trading addition of ₹ 50,000/- only, though the fact is that the rejection was upheld on the basis of seized documents. 2. On the facts and in the circumstances of the case, the ld. CIT(A), Ajmer has erred in not taking cognizance of various discrepancies pointed out by the AO. 3. On the facts and in the circumstances of the case, the ld. CIT(A), Ajmer has erred in not a .....

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was recorded. Assessee's common Ground No. 2 for AY 2008-09 and 2009-10 1. Under the facts and circumstances of the case the Learned CIT(A) has erred in sustaining the addition of ₹ 15,63,530/- by applying GP rate of 30.36% as against 15.55% for AY 2008-09 and addition of ₹ 1,09,37,185/- by applying GP rate of 33% as against 11.35% for AY 2009-10 declared by the assessee for unaccounted sales based on the P&L account which is not controverted. 1. Revenue's Grounds for AY .....

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Shri Radha Mohan Agarwal (director) as belonging to assesee company. Consequently, notice u/s 153A was accordingly issued by the Deputy Commissioner of Income Tax, Central Circle - 3. During the pendency of proceedings u/s 153A, ld. AO again dropped proceedings u/s 153A and initiated proceeding u/s 153C by issue of notice dtd. 19.07.2011. Though proceedings were taken further under the notice issued u/s 153C however, the impugned assessments are ultimately framed u/s 153A rws 143(3) determining .....

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sequently proceeding u/s 153A was initiated in that name. This notice u/s 153A was returned by the postal authorities with the remark 'incomplete address' In view of this the proceedings u/s 153A initiated in the name of Shri Govind Ram were dropped. 2. Later on the locker was owned by the assessee through its Director Shri Radha Mohan Agarwal, thus the notice u/s 153A was issued in the name of the assessee on 29.12.2009 without there being a warrant in its name or a search on its premis .....

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d Shri Govind Ram. The purported satisfaction for issuing notice u/s 153C referred to by ld. AO in para 4.2 on page 2 and 3 of the assessment order is as under - "Satisfaction note for initiating proceeding u/s 153c of the IT Act In the case of M/s Jypore Jewellery manufacturing Pvt. Ltd.,1&2,Ratan Shikha, Near Gokkle Park, Janta Colony, Jaipur PAN -AAACJ4640C for the A.Y.2004-05 to 2009-10. A search was conducted in the case of Private Vaults Group, jaipur on 08/09/2009 based on search .....

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nts 1000 $ (USA Dollars) jewellery - ₹ 93,63,209 1. Annexure AS-1 Exhibit 1 to 42 Statement of Ms. Usha Rani was recorded u/s 132(4) of the Income Tax Act, 1961. In the statement she admitted the locker was in the name of Shri Govind Dev and Shri Ram 26, Bani Park, Jaipur. Since the original search was initiated in the name of above named persons, the proceeding u/s 153A of the Income Tax Act, 1961 were also initiated in their name. Notice u/s 153A of the Income Tax Act, 1961 was issued to .....

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filed a letter dated 10.09.2009 before the investigation wing of the department claiming the ownership of the contents of the locker of this company. His statement were recorded dt 23.09.2009 and 25.09.2009 u/s 131 of the Income Tax Act, 1961 and in the statement he admitted oath that the locker no. 1004 searched was hired by him and the documents/assets were admitted property of the company. In view of above stated fact the proceedings initiated in the name of Shri Ram and Sh. Govind Dev have .....

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arrant or search on assessee. Therefore, any assessment u/s 153A is illegal. (ii) No satisfaction has been recorded while completing 153A assessments in the case of Modi group as contemplated by sec. 153C. Similarly there was no assessment in the case of Shri Govind Dev as the 153A proceedings were dropped in that case, consequently there is no valid satisfaction in this case also. (iii) The new satisfaction about initiating 153C satisfaction is silent regarding the pending proceeding initiated .....

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vi) The proceedings are continued u/s 153C but the assessment is completed u/s 153A despite consciously dropping the notice u/s 153A. (vii) Assessment u/s 153A and 153C are totally different and mutually exclusive, an assessment cannot be framed in continuation of both notices and similarly cannot be concluded u/s 153A if proceedings are undertaken u/s 153C. The relevant provisions for section 153C pre-suppose existence of the person referred to in section 153A. In other words there has to be a .....

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in law and in stark contravention of relevant provisions. and Therefore, the impugned assessments are vitiated by lack of proper jurisdiction and deserve to be quashed. Reliance is placed on following judicial precedents in support of these propositions: - (i) Jindal Stainless Ltd. Vs. Assistant Commissioner of Income Tax (2009) 122 TTJ 902 (Del) It has been held in this case by the Hon ble Tribunal that framing of assessment u/s 153A in place of 153C or vice versa is illegal. Such defect in fra .....

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alidity which arises merely by reason of any mistake, defect or omission in a notice. But framing of assessment under the wrong section goes to the very root of the matter. It is well settled that an Assessing Authority gets jurisdiction to reopen a concluded assessment only after serving a valid notice on the assessee. (iii) Similar decision was rendered by the Calcutta High Court in the case of Sun Rolling Mills Pvt. Ltd. Vs. ITO 160 ITR 412 wherein it was held that section 292B does not empow .....

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the impugned assessments purporting to be completed u/s 153A are ab-initio void and deserve to be quashed. 2.5 Apropos merits ld. Counsel contends that regular returns for all the impugned years were filed and regular assessments were framed by making some routine GP additions which were reduced or deleted in appeals. From the above referred locker papers reflecting regular unaccounted transactions mentioning details of sales and purchases along with the stock of unaccounted jewellery were found .....

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rns :- Financial Year Income declared 2006-07 21396 2007-08 1231754 2008-09 4391086 2009-10 1888254 7532490 It was further submitted that the unaccounted profits were found in the form of asset i.e. unaccounted jewelry stock found in the locker. The jewelry was also wrongly valued by ld. AO at market rate at ₹ 93,63,209/- whereas the same should have been valued at cost whose valuation was explained by the assessee at ₹ 75,32,490/-. Since ld. AO did not offer any adverse comments on .....

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undisclosed business as compared to GP on the sales recorded in regular books. Assessee categorically submitted that it was having two distinct business operations one of regular show room involving huge investment; the higher GP from regular show room was attributable to the cost of capital deployment. Whereas unaccounted business was carried on without capital cost, on existing market reputation for faster and quicker turn over in a competitive fast rolling jewelry trade. Such unaccounted tran .....

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sales of ₹ 1,05,60,429/- the profit was of ₹ 16,42,616/- which is 15.55% and in the subsequent year when the turnover became ₹ 5,05,49,546/- the GP rate falls down to 11.36%. The GP rate from unaccounted business though looked lesser than regular books but the comparative net profits are more since there is no expenditure. It is further contended that: (a) The unaccounted sales during the sale period are much higher than the regular sales, which is solely due to factor of high .....

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most negligible and therefore at the end net profits are more. Reliance is placed on: (i) Abhishek Corporation Vs. Deputy Commissioner of Income Tax 63 TEJ 651 (Ahd) It was held that only net profit rate can be applied on unaccounted sales/receipts. (ii) Further in the case of Moolchand Kumawat & sons Vs. DCIT Ajmer M.A. 93/JP/2008 out of ITSSA No. 24/JP/2005 dated 20.02.2009 Taxworld Vol. XLII page 241 the Hon ble ITAT Jaipur Bench Jaipur held as under - (a) Sales do not represent the incom .....

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addition is based neither on any objective consideration nor on the analysis of material made available to AO which remains uncontroverted. The arbitrary approach of department is clear from the facts that in every regular assessment the GP declared by assessee was disturbed which was appealed against, now the same GP is held as sacrosanct despite assessee s unctroverted justifications. Thus whenever it suits the department, GP is accepted or rejected on ad hoc basis, on summary assumption and o .....

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criminating material without pointing out inconsistencies in the relevant working. The profits so arrived at cannot be discarded summarily relying on higher GP from regular business which has totally different business module. It amounts to assuming oranges as apples in order to levy more taxes. Learned Assessing Officer has not found any defect whatsoever in the working of the unaccounted profits, consequently there is no case to discard such accounts without assigning any reason and arbitraril .....

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174 (Chd. Trib) (vi) Sukh Ram vs. Assistant Commissioner of Income Tax (2006) 99 ITD 227 (Ahd.) (vii) Anand Autoride ltd. vs. Jt. CIT (2006) 99 ITD 227 (Ahd) (viii) Kantilal Prabhudas Patel vs. Dy. CIT (2005) 93 ITD 117) (Indore TM) (ix) Smt. Rajrani Gupta vs DCIT (2000) 72 ITD 155 (Mum) (x) Dr. R.M.L. Mehrotra vs. Assistant Commissioner of Income Tax (1999) 64 TTJ 259 (All) 2.9 It is further submitted that following judicial precedents have held that incriminating material should be applied in .....

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gular books, ld. Counsel further contends that the book results have been examined in past making some additions, which on appeals have become final. No incriminating material is found as there was no search on assessee. However ld. AO again reviewed concluded book results and made GP additions qua the regular books. Thus without any defects in the regular books of accounts GP rate have been re disturbed. The action of the Learned Assessing Officer in applying GP rate of 35% both on accounted an .....

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ect verification of papers, working and accounts revealed undisclosed income to the extent of ₹ 75,32,490/- only which is offered by assessee. Law recognizes the right of the assessee to retract an admission made without support of proper details; by producing cogent reasons; assessee produced the same in the form of proper accounts and P & L a/c of unaccounted record found from the locker which has not at all been controverted by any authority below. The following case laws are quoted .....

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on made during survey retracted during assessment. An assessee offering additional income during the course of survey is not bound by the said offer for all times to come - During survey assesses offered an additional income of Rs/- 25 lac on being pointed by the survey party that there was under statement of stock. Assesses did not declare such income in the IT return A.O. made addition of ₹ 25 Lac. Not justified. (c) Kailash Ben Mohanlal Choksi v/s CIT (2008) 14 DTR (Guj) 257 It is too m .....

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are not evidences found during search. Addition cannot be made on the basis of statement alone. (f) Ajit Chintaman Karve V/s I.T.O. (2009) 311 ITR (AT) 66 (Puna) ITAT Branch That merely because an offer was made having no cogent basis or approval of law that should not stop a taxpayer from correcting his mistake. It was the duly of the A.O. to tax only the legitimate amount from a taxpayer. 2.11 As regards the GP rate application on regular turnover, hat the assessee is maintaining all the books .....

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Rate 2008-09 63176638 10983115 30.36% 2007-08 35823089 13216344 36.89% 2006-07 40047615 7015945 17.52% 2005-06 20996585 6268319 29.85% 2004-05 25826192 7418021 28.72% 2003-04 14135008 32.02% 2.12 The perusal of the aforesaid table reveals the following - (a) The turnover during the year has increased by almost 100% in comparison to Assessment Year 2007-08. Therefore Learned Assessing Officer was wrong in comparing the trading results with Assessment Year 2007-08. It is common knowledge that inc .....

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-08 the same is because of the increase of turnover. (c) The Learned Assessing Officer is not justifying in rejecting the books and estimating the profits on the ground that unaccounted turnover was found in the papers and locker. Separate working of the profits on such papers has been done and income has been surrendered accordingly. So far as regular turnover is concerned there was no case either for rejecting the trading results or for estimating the same without any basis. During the course .....

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result and estimate the regular GP which was already subject matter of appeals. The defects pointed out by the Learned Assessing Officer are superficial and have no significance on profit earning. In the absence of specific defect there was no justification with the Learned Assessing Officer for rejecting the books of accounts. The provisions of section 145(3) have therefore been wrongly invoked. 2.13 It is further contended that rejection of accounts is no ground for application of higher GP wi .....

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estimate and no opportunity was given to the assessee to rebut that basis, his order was liable to be set aside. II. Yaggina Veeraraghavulu & Mavuleti Sanaraju & Co. V. CIT[1966] 62 ITR 528 (AP). Where after rejecting the accounts of the assessee, an estimate of the turnover and gross profit is fixed to the detriment of the assessee, the assessee is entitled to know the basis and also to an opportunity to rebut the same. III. Seth Nathuram Munnalal V. CIT 25 ITR 216 (Nag.) If the assess .....

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gment; it means that he must make it according to the rules of reason and justice and not according to private opinion, but according to law and humour, and that the assessment is to be not arbitrary, vague and fanciful but legal and regular. 2.14 In view of these submissions it is contended that the above additions deserves to be deleted on merits also. 2.15 Ld. DR on the other hand supported the orders of AO and contends that:- i. Looking at the facts about complexities of locker s ownership, .....

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P from regular books, it is contended that in search assessment AO has plenary powers of assessment which includes rejection thereof and estimation of GP. 2.16 Ld. Counsel in rejoinder contends that all the facts were in the knowledge of ld. AO, assessee cannot guide him in adopting a particular provision as neither it is under obligation to do so, nor the AO will comply with assessee s guidance. Therefore, it was the statutory duty of ld. AO to adopt proper legal provisions. His onus of choosin .....

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incriminating material itself, accounts are prepared and profits are determined, it cannot be summarily discarded and additions made on wrong comparison based on gross presumptions. 2.17 Apropos surrender, assessee has cited various case laws to the effect that an unverified surrender can be amended based on cogent material. It has been duly discharged by the assessee and the cogent evidence has not been controverted at all by authorities below. In these circumstances the promissory estoppels is .....

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ped in that case. The satisfaction recorded by AO initiating 153C is silent regarding the pending proceeding initiated u/s 153A by notice dtd. 29.12.2009 in the case of the assessee. The proceedings though purported to be initiated u/s 153C the assessments are completed u/s 153A rws 143(3) as evidenced by the respective orders of ld. AO and CIT(A). This leads to a legal situation where during the pendency of 153A proceedings notice u/s 153C is issued. To further confound the situation the procee .....

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sessments are untenable and bad in law. Our view is fortified by Jindal stainless steel ltd. and Shital Prasad Kharag Prasad (supra). 2.19 Apropos merits also we are of the view that regular trading results of the assessee s business were already subject matter of appeals, there was no search on his show room, and therefore, no incriminating material was found. By estimating the GP from regular business ld AO has reviewed settled position without any incriminating material in this behalf, which .....

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