TMI Blog2017 (12) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... 3756/Del /2011, CO No. 320/Del/2011 And ITA Nos.:- 640 & 641/Del /2013 - - - Dated:- 5-12-2017 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Department : Smt. Paramita Tripathy, CIT(DR) For The Assessee : Shri Ashish Jaiswal, Advocate ORDER PER AMIT SHUKLA, J.M. The appeal for the assessment year 2006-07 has been filed by the Revenue and Cross objection by the assessee against order dated 23.5.2011 passed by Ld. CIT (Appeals) III New Delhi; and appeal for the assessment years 2004-05 and 2005-06 has been filed by the Revenue against separate impugned order of even date 26.11.2012 passed by the Ld. CIT (Appeals) XXXIII New Delhi. All the appeals are against the quantum of assessment passed u/s 143(3)/148. 2. Since the issues involved in all the three years are common arising out of identical set of facts, therefore, they were heard together and are being disposed of by way of this consolidated order. We will first take up the revenue s appeal for the assessment year 2006-07 and Cross objection filed by the assessee. In the grounds of appeal, the revenue has raised following grounds:- 1. On the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 dated, 13.10.2008. Assessee had filed its objection against the notice u/s 148, but it appears that it was not disposed of and neither has it been dealt with in the impugned assessment order. During the course of the reassessment proceedings, the AO required the assessee company to explain as to why a sum of ₹ 5,14,88,000/- allegedly on account under billing done through Shri Kamlesh Gupta should not be made or be treated as undisclosed income of the assessee based on the survey information and incriminating material found from the possession of one of the employee of Shri Kamlesh Gupta. In response, the assessee submitted that books of accounts/ documents found in the course of survey in the case of Shri Kamlesh Gupta did not relate to the assessee at all. It was also pointed out that the employee of Shri Kamlesh Gupta has owned up the entire transaction reflected in impounded annexure marked as A-2 found from his possession. The entire transaction as discussed in the said annexure A-2 on the basis of which adverse inference has been sought to be drawn by the AO against the assessee, now cannot be adversely viewed and it was also brought on record that a sworn affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d invoices of the assessee company with the entities of Shri Kamlesh Gupta has been found and seized. In absence of such documentary proof AO could not have proceeded on such information. In support reliance was placed on various decisions. Apart from that it was also brought to the notice of the Ld. CIT (A) that the first appellate authority in the case of Shri Kamlesh Gupta for the assessment year 2006-07, vide order dated 28.1.2010, after examining the annexure A-2 (which is the subject matter of adverse inference against the assessee) has clearly held that it does not contain the name of M/s. Rimjim Ispat Ltd. i.e., the assessee company. The entire transaction has been added in the hands of Shri Kamlesh Gupta. It was further explained that Shri Kamlesh Gupta was simply a consignee / agent of the company as per the agreement for which he has been paid commission on the basis of goods sent to him and sold. Besides this he is also doing similar business on his own. The assessee company has maintained complete record of movement of books sold through concerns of Shri Kamlesh Gupta and TDS has been deducted on total commission paid to him and there is relationship with Shri Kamlesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the AO of Sh. Kamlesh Gupta (the proprietor of M/s Rahul Ispat) who is a consignment agent of the appellant, it was not appropriate to have issued notice U/S 148 to the AO as these facts information cannot be the basis for reason to believe that income of the assessee for ₹ 5,14,88,0001- has escaped assessment. In this connection reliance is also placed on the ratio of the decision in case of Sarthak Securities Company P. Limited vs. ITO 329 I~R 110 wherein while quashing the notice for reopening issued U/S 148 the Hon'ble Jurisdictional High Court has inter alia held in the concluding para as under:- In the case at hand, as is evincible, the Assessing Officer was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the Assessing Officer was made aware of the situation by the investigation wing and there is no mention that these companies are fictitious companies. In the Initial notice nor communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not necessary to have the established fact of escapement of income but what is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A-I 0 particularly pages of3,4,5,6,7,8,9,10 of Annexure A-2 on page 14,15,16 17 and observed that:- I am of the opinion that transaction as per annexure A -2 is nothing but outside books transaction related to Mr. Kamlesh Gupta because Sh. Kamlesh Gupta himself accepted the transaction of page no. 6,7 8 of Annexure A -2 In the last page, the Ld. CIT (A) further observed and directed as under: Since, I hold the ownership of the seized papers particularly A -2 and others annexures in the hands of the assessee instead of M/s Rim-Jhim Ispat Ltd., therefore, this resulted into enhancement of income. The AO is directed to modify the assessment accordingly after and assessment order dated 08- 12-208 is modified in view of the decision given by me hereinabove. In view of the above facts the AO is directed to modify the assessment and work out the gross profit on the sales as per above annexure which has been treated as commission income. The quantum of sale value as per annexure A-2 work out to ₹ 1,19,68,5001- on this quantum of sale as per annexure A-2, GP rate as per assessment order shall be applied by AD instead of commission income worked out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notings on these pages relate to the assessee company then also the alleged receipt works out only to ₹ 1,19,68,5001- while the total consignment sale by the assessee to Sh. Kamlesh Gupta during AY 06-07 is for an amount of ₹ 56.42 Crores which is a much higher amount than that of the coded figures in above pages which total only to ₹ 1.19 Crores. Now as there are no dates written on these seized documents it cannot be said that these figures represent any unaccounted sales on part of the assessee to M/s Rahul Ispat Ltd. It is also noted that the total turnover of the appellant for AY 06- 07 is to the tune of ₹ 257.19 Crores. Taking all the above factors and submissions into consideration and also going through the assessment order which does not point out to any evidence so as to substantiate the fact that there has been an undisclosed sales by the assessee to the tune of ₹ 5,14,88,0001-, the addition made for this amount is directed to be deleted and Ground of Appeal Nos. 1,2 5 are allowed in favour of the appellant. 7. We have heard both the parties at length and also perused the relevant finding given in the impugned order as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction. Without any cross examination of Shri Kamlesh Gupta, the information and material does not have any relevant bearing to draw any adverse inference against the assessee. Accordingly, we uphold the order of the Ld. CIT (A) in allowing the validity of reopening u/s 148 in favour of the assessee. 8. When the issue of validity of reopening under section 148 has been held in favour of the assessee, then the issue on merits becomes academic, however for the sake of convenience and looking to the fact that similar addition has been made in the assessment year 2004-05 and 2005-06 also, we would like to deal the addition on merits. First of all, it is noticed that during the course of survey 133A in the case of proprietorship concerns of Shri Kamlesh Gupta, a pocket diary was found form the possession of his employee, Shri Sanjay Khandelwal. The said diary contains certain transactions carried out by M/s. Rahul Ispat to various parties outside Jodhpur on behalf of M/s. Rimjhim Ispat Ltd. i.e., the assessee company. The quoted figure on pages 3,4,5,9,10 of said annexure-A2 comes to ₹ 5,14,88/-, which after multiplying with 1000 willresult into the figure 5,14,88,000/-. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Sh. Kamlesh Gupta had admitted during the survey that he had no other source of income from consignment work of Mls Rim Jhim Ispat Ltd. 3. On the facts and in the circumstances of the case, the CIT (A) has erred on facts and in law in holding that the assessee was not involved in under billing of SS flats ignoring the evidence in the form of documents as per annexure A-2 and A-7 found during survey uls 133A at the business premises of M/s Rahul Ispat (Proprietor Kamlesh Gupta), Jodhpur. 11. Exactly same grounds have been raised in assessment year 2005-06 also. The common finding given by the Ld. CIT (A) is again based on the appellate order of the Ld. CIT(A) Agra in the case of Shri Kamlesh Gupta. The relevant observation and finding of the Ld. CIT(A) in this regard reads as under :- Findings: - I have perused the Assessment order, written submission argument of Ld. AR before me. Ld. AR filed copy of all impounded material from the proprietorship business namely Rahul Ispat of Sh. Kamlesh Gupta and contended that these paper does not contain the name of appellant company M/s Rim Jhim Ispat Ltd. On these documents, CIT (A)-II, Agra while deciding the case of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mls Rimjhim Ispat Ltd. and not to the assessee. Unless he decides the ownership of the transaction and papers found, the assessee cannot escape to be treated as owner of the transaction and papers found, The assessee cannot escape to be treated as owner of the transaction as per annexure A-2 instead of M/s Juhi Alloys Ltd is supplying the goods on consignment, this company cannot be held to be owner of unrecorded transaction unless there is some valid nexus. The assessee has no relationship with the Mls Rimjhim Ispat Ltd or his directors, he himself was doing business independently dealing in the same trade. Therefore, he cannot escape himself to be the owner of the transaction as per annexure A-2. I am of the opinion that transaction as per annexure A-2 is nothing but outside book transaction related to Mr Kamlesh Gupta because Sh. Kamlesh Gupta himself accepted the transaction of page no. 6, 7 8 of annexure A-2. Thus, the Assessing Officer should have assessed all the transaction of A-2 and other as undisclosed sales and gross profit should have been applied instead of commission income in his hand The A.O. has also wrongly allowed expenses on commission expenses w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s company. Accordingly following the decision of CIT (A) - III in assessee's own cases for A. Y. 06-07. I direct AO to delete the addition made on unaccounted sale of ₹ 21,12,20,680/ 12. Since similar facts are permitting in this year also, we like in the appeal for the AY 2006-07 find that, firstly, no evidence whatsoever was found from the department suggesting that assessee was indulged in any kind of under invoicing of sales for the year under consideration; secondly, assessee s name does not found place in the documents found and seized from the possession of Shri Kamlesh Gupta; thirdly, no confrontation or documents from the possession of employee Shri Kamlesh Gupta has been found nor any cross examination of Shri Kamlesh Gupta has been done; and lastly, in the case of Shri Kamlesh Gupta it has been found that these documents pertain to him and is unrelated to the assessee and adverse inference has already been drawn there against him in the appellate order which has been stated to be final. In the light of these facts on record and in view of our finding given above the aforesaid findings of the Ld. CIT (A) on the issue of quashing the notice u/s 148 and ..... 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