TMI Blog2018 (10) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years - Held that:- We upheld the order of the learned Commissioner of Income-tax (Appeals) deleting the addition for suppression in cash sales. Since the credits in bullion margin money account were transferred as sales, the learned Commissioner of Income-tax (Appeals) directed the Assessing Officer to reduce the peak credit considered for addition under section 68 of the Act from sales accounted by the assessee. As mentioned by us it is an undisputed position that credits in bullion margin money account were generally transferred to sales account. Addition of credit in bullion margin money account has been sustained by us, only to the extent not transferred/ accounted in the sales. Otherwise, it will result in double addition of the same amount. In such circumstances, we are of the opinion that the learned Commissioner of Income-tax (Appeals) was justified in giving direction to set off of credit in bullion margin money account with sales accounted by the assessee, so that double addition was avoided. Addition made for diversion of interest bearing funds - Held that:- CIT-A has given a clear finding that the assessee had more than sufficient own funds for giving t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Trading Corporation (M/s. STC) account - Held that:- Nothing to show what was the nature of the income sought to be added as from State Trading Corporation. Discussion in the assessment order for the assessment year 2011-12 is only on difference with regard to M/s. Metals and Minerals Trading Corporation credit/debit notes and reconciliation. The order of the learned Commissioner of Income-tax (Appeals), also does not deal with any issue regarding addition made by the learned Assessing Officer for income from M/s. State Trading Corporation. Only conclusion we can reach is that the addition made by the learned Assessing Officer was purely on a surmises. The said addition stands deleted. Addition for exchange rate fluctuation debited in its account based on alleged instructions from M/s. Metals and Minerals Trading Corporation - Held that:- If M/s. Metals and Minerals Trading Corporation had charged on the assessee, exchange fluctuation loss of ₹ 7,53,46,987, it would definitely appear in the account of the assessee with M/s. Metals and Minerals Trading Corporation. We have already held that the learned Assessing Officer can take a wholesome view considering the reconc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in considering the cost equivalent of three plots as unexplained investment of the assessee. Addition made for credit balance in sundry debtors account - Held that:- The transactions ought not have been disbelieved just for the delay in supplying the goods. The assessee having shown that sales were effected to clear the credit in the debtors account, in our opinion, an addition ought not have been made. Such addition stands deleted. Addition for a credit balance in the account of one Mrs. Pista Bai - Held that:- ommissioner of Income-tax (Appeals) has noted that the amounts received from Mrs. Pista Bai were repayment of earlier advance of ₹ 30 lakhs given by Mr. Naresh Prasad Agarwal, when the business was run as a proprietorship concern. The latter transactions were reflected in the accounts of the proprietorship concern. Hence, it was only a repayment of a debt by a debtor. Once the business was taken over by the assessee company, any repayment of debt by a debtor will not create a fresh credit but will only square off the debt. We do not find any reason to interfere with the order of the Commissioner of Income-tax (Appeals). - I. T. A. Nos. 1447, 1448, 1449, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27,34,700 2007-08 60,20,920 2008-09 2,65,78,640 2009-10 5,10,37,770 2010-11 5,73,77,152 2011-12 1,95,28,380 2012-13 (4,53,089) The assessee M/s. Shiv Sahai and Sons (India) Ltd. had filed its return for the impugned assessment years declaring the following income. Assessment year Amount 2011-12 1,25,51,610 2012-13 3,37,17,950 3. There was a search under section 132 of the Income-tax Act, 1961 (in short the Act ) in the premises of the assessees on January 6, 2012 and what has been termed as a follow-up search on March 2, 2012. Pursuant to the search, notices under section 153A of the Act were issued. In the returns filed pursuant to such notice, income returned by the assessee Shri Naresh Prasad Agarwal were as under : Assessment year Amount 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gold Sales 567 2229 3159 5079 9371 4263 11464 16860 GP amount 1.63 1.87 0.97 (6.38) 11.5 (7.12) 14.79 GP rate 0.29 0.08 0.09 (0.13) 0.12 (0.17) 0.13 Silver Sales 129 191 466 635 750 623 929 1702 GP amount (0.89) 1.16 (0.63) 8.03 0.82 5.73 (19.37) GP rate (0.69) 0.61 (0.14) 1.26 0.11 0.92 (2.08) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash. The reply of the assessee was that what were mentioned in the diary were the rates for 0.999 purity gold whereas what were sold by it was 0.995 purity gold. Further, as per the assessee it could quote a lower rate for cash sales, considering the buyers credit received from Metals and Minerals Trading Corporation. The assessee also stated that it was following London bullion market (hereinafter LMB ) for fixing rates and not following association rates. As per the assessee the rates were moving every minute and was never static. According to the assessee, it made its own calculation and adjustment for import duties and other expenses while fixing the rates. 7. However, the learned Assessing Officer did not buy any of the above arguments of the assessee. He rejected the assessee's contention that lower rates for cash sales, were due to buyer credits or due to rate difference on account of disparity in purity. The learned Assessing Officer also did not accept the contention of the assessee that it was guided by London Bullion Market rates. According to the learned Assessing Officer, the categories of billings done by the assessee were as under : (a) Cash bills s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tax show-cause notice (iii) The assessee has misled the Department regarding high-low selling rates (iv) The assessee has not produced the diary for five years including for 2012 (v) The assessee has furnished limited billing data, in non-analys able format, during the last fortnight of March (vi) The assessee has manipulated the allocation of expenses in the assessment year 2009-10 to prevent probe into gross loss in gold (vii) The assessee has manipulated in preparing the bill-diary matching chart for July 2011 (viii) The assessee is manipulating its sales bills to circumvent the provisions of section 139A (ix) Sales tax authorities have found that his method of raising the tax invoice is defeating the object and reasons of introduction of the Tamil Nadu Value Added tax Act (x) Sales tax authorities have found that his gross profit is less than the normal gross profit in bullion trade (xi) Sales tax authorities have found that his selling rates are below the purchase rates (xii) The accounts manager in Salem has admitted that no bills are issued for cash sales (xiii) For sales in branches, bills are prepared in Chennai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India) Ltd., the learned Assessing Officer chose the third method. There were no addition for suppression of sales in the hands of the assessee Shri Naresh Prasad Agarwal for the assessment years 2010- 11, 2011-12 and 2012-13 or in hands of the assessee M/s. Shiv Sahai and Sons (India) Ltd. for the assessment year 2012-13. The computation of sales suppression as made by the learned Assessing Officer read as under: Asst. Year Average rate of bills in the names of jewellers (per kg) Average rate of cash bills Average rate of others Cash bill amount is lower by Others bills amount is lower by 2006-07 646020 643795 644877 2225 1143 2007-08 920719 915575 917248 5144 3471 2008-09 1028939 946440 930829 82499 98110 2009-10 1227703 1201087 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the cash bills as well. According to the learned Assessing Officer, whatever remained as balance in the bullion margin account at each year-end was fully liquidated by crediting the sales account. Anomalies noted by the learned Assessing Officer as it appear at paragraph 8.5 of his order are reproduced hereunder : 8.5 When this account was further analysed certain interesting facts came to light : (i) cash brought in on a single day went up to 21.5 crores (on January 25, 2011). But the narration is simply bullion margin account. (ii) the cash brought in was not immediately or in the subsequent days adjusted. It remained in the account for very long periods e.g from January 24, 2011 to January 31, 2011 a sum of ₹ 69.12 crores cash was brought in. Out of this, 68.72 crores was adjusted from February 1, 2011 to March 7, 2011. But before March 7, 2011 further 39.99 crores cash was brought in from February 4, 2011 to March 5, 2011 and part of it could have also been adjusted within the figure of 68.72 crores (iii) Generally on 31st March the, moneys remaining were adjusted. But on March 31, 2012 (in the hands of company) huge sum of ₹ 17,38,74,036, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for sale and not a loan or advance. The assessee also stated that it was not possible to maintain records like name, address and permanent account number for each of its customers since there were no credit sales. As per the assessee it was not obliged to do so under law and was also not practicable. According to the assessee, money received from its clients, credited to bullion margin money account had to be considered only as sales and not as credit. As per the assessee, such amounts were fully reflected in sales, and there was no occasion to make an addition under section 68 of the Act. 13. However, the learned Assessing Officer was not impressed by the above arguments. The learned Assessing Officer refused to accept the explanation given by the assessee and held that the amounts listed at table in paragraph 11 above were unexplained cash credits under section 68 of the Act. Specific reasons mentioned by the learned Assessing Officer appear at paragraph 8.9 of his order and these are reproduced hereunder : 8.9 The reply was considered. The reply is vague and does not answer any of the questions asked in the statement recorded under section 131 from Shri Naresh Prasad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation and was charging expenses in its account in the guise of debit notes issued by M/s. Metals and Minerals Trading Corporation. The assessee was given a copy of its account in the books of Metals and Minerals Trading Corporation for previous years relevant to the assessment years 2007-08 to 2012-13 and was required to reconcile it with its own books. The assessee thereupon through its letter dated March 18, 2014 submitted to the learned Assessing Officer that a number of debit/credit notes claimed to have been issued by Metals and Minerals Trading Corporation during the previous year relevant to the assessment years 2006-07, 2007-08 and 2008-09 were never received by it. Further, as per the assessee, such notes issued by Metals and Minerals Trading Corporation were arbitrary in nature and was so issued only with an ulterior intention of showing huge dues from the assessee to Metals and Minerals Trading Corporation. The assessee also submitted that there were a large number of entries which were reversed by Metals and Minerals Trading Corporation in their books, without any narration. As per the assessee, if what was stated by the Metals and Minerals Trading Corporation wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for unpaid liabilities under section 43B of the Act, disallowance for interest on TDS/service tax, disallowance of salary, addition for unexplained investments in properties for various years and addition for low drawings. 18. In the hands of the assessee M/s. Shiv Sahai and Sons (India) Ltd., apart from the disallowances/additions of the nature mentioned in the preceding paragraph there were additions for sundry debtors reflecting negative balance for want of confirmation, disallowance for VAT payment and an addition for under valuation of closing stock for the assessment year 2012- 13. Summary of the additions /disallowance made by the learned Assessing Officer are reproduced in the table hereunder : Assessee : Naresh Prasad Agarwal Assessee : M/s. Shiv Sahai and Sons (India) Ltd. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Cross appeals and the assessment years I. T. A. 1449 and 1485/17 A.Y. 06-07 I. T. A. 1450 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,452 38,90,061 16,49,846 59,71,343 59,54,533 5,69,97,153 29,48,676 5,88,000 5,88,000 5. Sundry debtors with negative balance without confirmation - - - - - - - 4,31,50,000 - 6. Donations 2,51,000 5,001 - - - - - 10,000 - 7. Section 43B disallowance - - - 44,51,445 - - - 4,11,563 - 8. Closing stock valuation difference - - - - 4,93,69,063 - - 19,00,874 - 9. Legal expense, vehicle expenses, interest commission u/s. 40(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y/PF/Bonus 50% disallowed - - - - - - 4,09,277 - - 19. Aggrieved, both the assessees moved in appeal before the learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) dealt with the appeal of the assessee Shri Naresh Prasad Agarwal on the following lines : 20. On the issue of addition for suppression of sales and rejection of loss, the learned Commissioner of Income-tax (Appeals) held in favour of the assessee. Reason why the learned Commissioner of Income-tax (Appeals) held in favour of the assessee as it appears in paragraphs 14 to 17 of his order is reproduced hereunder : 14. The issue is considered and analysed carefully. The assessee has submitted the books of maintained by him for all the years. The said books have in fact been seized by the Department during the course of search conducted. These are the same books submitted by the assessee year on year for audit. The book results have been accepted by the Department for all these years after due verification for some of the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l aspect and has forced himself to come to a wrong conclusion. 17. The Assessing Officer has computed a large amount of surplus undeclared profits for several years and has disallowed losses for some years. This would amount to the assessee understating his prof its by several hundreds of crores. However, having conducted search in the premises of the assessee on two occasions, the search party has been unable to detect any concealed assets/wealth/cash of the asses see. The detection of escaped assets of the assessee is in lakhs of rupees where as the addition to the returned incomes is in hundreds of crores. This high pitched nature of addition cannot be seconded. The additions to the returned incomes have not been supported by strong evidence as well as corresponding matching assets. The addition of profits and rejection of losses has been based on surmises, conjectures and guess work. The computation of undeclared profits and rejection of losses as per paragraphs 7.20 and 7.22 of the assessment order is deleted. The assessee's grounds of appeal are allowed on this issue. 21. On the issue of cash credits (bullion margin money accounts), the learned Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years is sustained on account of detailed reasons given as above. 22. Nevertheless, the learned Commissioner of Income-tax (Appeals), while confirming the addition made under section 68 for bullion margin money account, allowed telescoping of such addition with the accounted sales of the assessee since it had squared up the bullion margin account by correspondingly increasing its sales. 23. Vis-a-vis addition made for difference in credit/debit notes of Metals and Minerals Trading Corporation accounted by the assessee, the learned Commissioner of Income-tax (Appeals) though he confirmed such addition directed the learned Assessing Officer to recompute the amount by netting the aggregate value of the credit notes with the aggregate value of the debit notes issued by M/s. Metals and Minerals Trading Corporation. Directions given by the learned Commissioner of Income-tax (Appeals) as it appear at paragraph 26 of its order is reproduced hereunder : 26. The submissions made by the authorised representative are considered. The action of the Assessing Officer in bringing the incomes arising to the assessee on account of credit/debit notes by M/s. Metals and Minerals Trading C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Minerals Trading Corporation issued bills, the quantity received was only 50,405 kg and that 30 kg, gold was still to be received as on March 31, 2010. Vide questionnaire under section 143(1) dated January 27, 2014 served on January 29, 2014 you were requested to furnish the closing stock inventory (branch-wise) and the method and the basis for the valuation. But vide your reply dated March 10, 2014 you have merely reproduced the closing stock figures in the return. In the absence of required details it is not possible to verify whether the 30kg. stock was included in your closing stock figures. Hence it is proposed to make and addition of ₹ 4,93,69,063 at ₹ 16,45,635 per kg. at which rate purchase of 5,121 kg gold from Metals and Minerals Trading Corporation was entered in your item register on March 31, 2010. Vide its reply the assessee requested as under : There are no mistakes or error in recording the correct figures of stock that has come in. The error pointed out is only typing error in the bill quantity raised. There is no extra addition in purchase or in closing stock. Hence this addition may kindly be dropped. No evidence was produced in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charging interest out of own capital as well as interest free advances received. The disallowance of interest has been done cursorily without taking note of interest debited for corresponding years, the net amount of advances made as well as fund flow statement of the assessee. Considering the same, the disallowance of interest would be unjustified. The interest disallowed for all the years is deleted. 27. Vis-a-vis, the additions made for low drawings, the learned Commissioner of Income-tax (Appeals) upheld the order of the learned Assessing Officer. 28. On the disallowance made by the learned Assessing Officer for want of deduction of tax at source, the learned Commissioner of Income-tax (Appeals) sought a remand report from the learned Assessing Officer. In the remand report, the learned Assessing Officer stated as under : After considering the payments of interest covered by form 15G, the following interest payments are still disallowable under section 40(a)(ia) Name of the loan creditor Interest paid without TDS/form 15G Babitha Agarwal 6,648 Nilesh Kothari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dersigned, the assessee has not been able to confirm the loan creditors and other creditors claimed. Considering the same, the unsubstantiated loan creditors and other creditors are brought to tax as unexplained credits under section 68 of the Income-tax Act for the assessment year 2010-11. 32. On the disallowance under section 43B of the Act for non remittance of TDS ₹ 52,956 and taxes ₹ 43,98,489 aggregating ₹ 44,51,445, the learned Commissioner of Income-tax (Appeals) was of the opinion that the assessee was unable to produce any evidence even in the remand proceedings. He confirmed such disallowance. 33. For the disallowance of ₹ 18,393 being interest on TDS debited the assessment year 2010-11, interest on service tax ₹ 24,436 debited in the assessment year 2011-12 and VAT of ₹ 7,240 debited in the assessment year 2012-13, the learned Commissioner of Income-tax (Appeals) confirmed the order of the learned Assessing Officer noting that these were penal in nature. 34. Vis-a-vis, disallowance made for 50 per cent. of salary, provident fund, employees' State insurance and bonus claimed for the assessment year 2011-12, the learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debit notes issued by M/s. Metals and Minerals Trading Corporation. These directions were similar to those made by him in the case Shri Naresh Prasad Agarwal also. 39. For the assessment year 2011-12, one other issue raised by the assessee M/s. Shiv Sahai and Sons (India) Ltd before the learned Commissioner of Income-tax (Appeals) was on an addition of ₹ 4,31,50,000 made for negative balance in sundry debtor's account. These were in the name of four persons listed hereunder : 1. Sampath, Trichy (1,70,00,000) 2. Sundar, Trichy (1,05,50,000) 3. Thangamani, Trichy (56,00,000) 4. Veeramani, Trichy (1,00,00,000) The learned Commissioner of Income-tax (Appeals) called for a remand report from the learned Assessing Officer. The learned Assessing Officer stated as under in his remand report : As regards the addition of ₹ 4,31,55,000 it was made because the credit balances in the names of the above four persons were shown under the group 'sundry debtors' and nor 'sundry creditors' or 'loan creditors' and even though the confirmation letters from these parties were called for they were not furnished during the course of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was taken up with the assessee. Vide letter dated October 20, 2014, the assessee has submitted as under : 'Addition on account of difference in closing stock value : The learned Assessing Officer added huge amount fit the due of the closing stock based on the value of the last purchase made with out appreciating the fact that the closing stock value would be decided based on cost of market value whichever is low on the closing date. We could not provide the market closing rate during the course of assessment proceedings due to dearth in true, however we have now provided all the details to prove that the value adopted by us is correct and based on the accounting policy we follow. The comments on the same is expected from the Assessing Officer on this also.' 39. The addition made to the value of closing stock is considered. The Assessing Officer has taken the purchase made of 3251 kgs. an March 31, 2011 as against the closing stock of 24,500 kg. of gold declared a closing stock inventory. The purchase values of the balance stock on dates prior to March 31, 2011 are not a available. The asses see has been continuously maintaining the same method ftr valuing stock as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the hon'ble Commissioner of Income-tax (Appeals) may uphold the action of the Assessing Officer in treating this credit entry as unexplained . The learned Commissioner of Income-tax (Appeals) held that the assessee had properly explained the credit entries since such entries only squared up the debit balance in the name of the said person appearing in the books of the proprietorship earlier running the business. 45. In the backdrop of above, we first take up the appeals and cross appeals of the assessee Shri Naresh Prasad Agarwal. First of the impugned assessment years is the assessment year 2006-07 and the grounds taken by the assessee are reproduced hereunder : 1. The order of the Commissioner of Income-tax (Appeals)-19 is against the facts of the case and the principles of natural justice. 2. The learned Commissioner of Income-tax (Appeals) erred in adopting the accounts as provided by M/s. Metals and Minerals Trading Corporation. 3.The learned Commissioner of Income-tax (Appeals) failed to understand the fact that there were huge errors in the statement of accounts as provided by M/s. Metals and Minerals Trading Corporation and the erroneous accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for the years in which additions were made for insufficiency were as under : Name 2006-07 2007-08 2008-09 2009-10 2012-13 Naresh Prasad Agarwal 135475 170556 195505 558725 377263 Ganesh Agarwal 48000 113699 69138 70000 244120 Munni Devi 48000 48000 54000 54000 60000 Babitha Agarwal 48000 48000 54000 66000 84000 Total 279475 380255 372643 748725 765383 The claim of the assessee is that the above drawings were sufficient for meeting the living cost of its family. Addition proposed by the learned Assessing Officer which was confirmed by the learned Commissioner of Income-tax (Appeals) was & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 68 of the Act would result in double addition. 52. Per contra, the learned Departmental representative strongly supporting the orders of the lower authorities submitted that once the assessee credited cash in its books, whatever be the nomenclature, it was bound to record the name of the person who advanced the money and to prove the source. The contention of the learned Departmental representative was that the assessee was having no records to show the details or source of the persons from whom the money was received. The contention of the learned Departmental representative was that profits suppressed by underpricing its sales, was ploughed back as bullion margin money. According to him, additions made by the lower authorities were only for the peak in such bullion margin money account. As per the learned Departmental representative, if section 68 of the Act was strictly applied, every receipt of margin money, for which the assessee failed to give any confirmation or details, an addition ought have been made. As per the learned Departmental representative, the learned Commissioner of Income-tax (Appeals) was justified in confirming the additions made under section 68 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, were the same as produced by the assessee during original assessment proceedings. It was not a set of parallel books maintained by the assessee. Incriminating documents relied upon by the learned Assessing Officer, which has been referred by the learned Commissioner of Income-tax (Appeals) at paragraph 5 of his order, are only two diaries numbered as ANN/SSK/SSS/B D/S-46 and ANN/VJ/Diary/GA/S-1. These records did not go counter to the books of account, except for the rate difference in cash sales, when compared to the rates mentioned in the seized diary. The seized diaries pertained to calendar years 2010 and 2011, and there was no seizure of any diaries for earlier or subsequent year. The assessee's assertion that there were no diaries for earlier years were never disproved by the Revenue. If at all such diaries were there for the earlier years, in every probability it would have been found at the time of search. The Revenue has not pointed out anything in the seized diaries which could help reach a conclusion that margin money received from customers for bullion were wholly unexplained credits. Presumption under section 132(4A) of the Act can support the claim of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleting the addition of ₹ 1,06,84.527 made towards suppression of sale amounts of gold bullion made by the Assessing Officer, in the assessment order passed under section 143(3) read with section 153A of the Income-tax Act, 1961 for the assessment year 2006-07 in the assessee's case. 2.1 The learned Commissioner of Income-tax (Appeals) ought to have appreciated the fact that the assessee has deliberately under invoiced its cash sales made to buyers without bills as compared with sales made to jewellers with bills resulting in huge difference between the two when both the sales were made in cash. 2.2. The learned Commissioner of Income-tax (Appeals) erred in allowing relief on the ground that the Assessing Officer has not subjected the books of account to special audit, overlooking the modus operandi of the assessee, discussed in detail in the assessment order, and also the reasons recorded by the Assessing Officer for non- rejection of books of account in paragraph 7.19 of the assessment order for the assessment year 2011-12, on the basis of which, addition was made in the assessment order for the assessment year 2006-07 in the assessee's case. 2.3. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2006-07 in the assessee's case. 3.1 The learned Commissioner of Income-tax (Appeals) ought to have appreciated that while computing the peak credit (as per detailed working sheets, for the assessment years 2006-07 to 2010-11 annexed to the assessment order for the assessment year 2011-12) the adjustments have already been taken into account by the Assessing Officer and there is no double addition as claimed by the assessee. 3.2. The learned Commissioner of Income-tax (Appeals) has erred in directing to allow relief from the sales without appreciating that the peak credit addition made is towards unexplained credits introduced i.e for the reasons that no details from whom received etc. were furnished by the assessee with respect to such buyers from whom the amounts were stated to have been received. 3.3. The learned Commissioner of Income-tax (Appeals) ought to have appreciated that the fact that the said amounts were also accounted for as sales, does not absolve the assessee from the liability of proving the source of such credits irrespective of whether the same were adjusted against sales or any other transactions thereafter upon such receipt. 4. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Departmental representative, the learned Commissioner of Income-tax (Appeals) placed undue reliance on sales tax assessment orders produced by the assessee, which was never produced before the learned Assessing Officer. According to him, there was clear violation of rule 46A of the Income-tax Rules, 1962 as well. Further, as per the learned Departmental representative, the assessee had deliberately avoided production of diaries for years prior to the assessment year 2011-12. Such diaries as per the learned Departmental representative, indicated the rates to be higher than what were billed for cash sales. According to him, the assessee's books did not reflect the actual transactions. There were a number of defects pointed out by the learned Assessing Officer. The contention of the learned Departmental representative was that the learned Assessing Officer had carefully verified the rates at which the assessee sold gold to jewellers and found it to be higher than the rate at which cash sales were effected. As per the learned Departmental representative, no good reason was shown by the assessee for selling bullion in cash at a rate which was ₹ 5 to ₹ 10 lower pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative submitted that London bullion market rates noted in the diary was for 0.999 purity gold, whereas gold traded by the assessee was of 0.995 purity. According to him, bullion trading was different from other business and the assessee could not share all the secrets with its employees. As per the learned authorised representative, employees were given information based on the need to know principle. Vis-a-vis the argument of the learned authorised representative that sales tax assessment orders relied on by the learned Commissioner of Income-tax (Appeals) was never placed before the learned Assessing Officer, submission of the learned authorised representative was that sales tax assessments were not the sole reason for the Commissioner of Income-tax (Appeals) deleting the addition. According to him, it was considered only as a collateral evidence. The learned authorised representative pointed out sales bills 1107 and 1117 dated August 12, 2010 and 397 and 614, dated December 3, 2010, which reflected sales in cash at rates more than what was charged to jewellers. Thus, according to him, finding of the learned Assessing Officer was incorrect. Further, as per the learned author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low association rate or London bullion market or rates followed by another bullion dealer or a rate which it thought best fit for it, considering the nature of its business. The Revenue cannot force an assessee to sell his product at a particular rate. Coming to the notings in the diary, admittedly the diaries seized were of the calendar years 2010 and 2011. It is an admitted position that no other diaries were found at the time of search nor any evidence brought in by the Revenue that there indeed were any diaries for earlier years, against the assessee's assertion that no such diaries were there for earlier years. Thus the rates mentioned in the diary even if presumed as correct would have been relevant for the assessment year 2010-11 and the assessment year 2011-12. Admittedly, there were no additions for suppression of sales for both these years. No doubt there could have been a spill over of three months of the calendar year 2010 for the assessment year 2009-10. However, this also in our opinion will not justify extrapolating the rates mentioned in the diary to an earlier or subsequent year. Now coming to statement given by Shri Vijayababu one of the employees of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er's table, and take the gold bar and hand over to the customer. No signature will be taken against delivery of the gold. Khazana is an iron chest, kept near manager's table from where the gold bars will be taken and delivered to the customers. Any remaining unsold bars will be stored in the strong room after closure of business for the day. Q. 7 There are four separate categories of bills for each branch with bill numbers starting with on 1st April. 1. For gold cash bill 2. For gold credit bill 3. For silver- cash bill 4. For Silver- credit bill. Q. 8 How will you know as to which type of bill to be prepared, and for which branch ? A 8 Shri Ganesh Sir or Shri Neresh sir or Shri Ashok Sir call me over phone and ask me to prepare a bill for a particular branch-Chennai, Coimbatore, Salem, etc. They will also tell whether it is a cash bill or credit bill. In the case of credit bill, name of the buyer will also be told. Then I will prepare the bill. Manager will sign the bill. Two copies of cash and credit bill will be taken. Both the copies of credit bills will be handed over to manager along with one acknowledgment form. He will hand over to the customer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 4-30 pm and mailed it. I prepared the cash bill at 5 pm only after getting (he call from Salem. So whenever the customer at Salem wants the cash bill they will call Shri Ganesh Sir who will in turn ask me to prepare the bill. Q 14. In your reply to 0.5 you have stated that Shri Ganesh sir will come at 9 a.m. You or Smt. Sumithra comes only at 11-30. That means that for sales made between 9.00 am and 11-30 a.m. bills will be prepared only after 11-30 a.m. Is it not A 14 Yes. Only after we reach office, Shri Ganesh Sir will ask either me or in my absence Smt. Sumithra to prepare the bill. So if any sales were made before 11-30 a. m. the customers who want bills will wait and collect it. 0.15 In your reply to Q. 8 you have stated that you will get instruc tions over phone from Shri Ganesh Sir or Shri Neresh Sir or Shri Ashok Sir for preparation of bills. Will he tell the quantities, rates and amounts ? A 15 He will tell only the quantity and the rate. Amounts will come in the billing package Q 16. Is there any system in your office by which you know what is the cash collected for each and every cash bill prepared by you. A 16 There is no system. If Shri Ganesh Sir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is that the learned Commissioner of Income-tax (Appeals) deleted the disallowance for interest-free advances made by the assessee. 65. We have considered the rival contentions and perused the orders of the authorities below. What was held by the learned Commissioner of Income- tax (Appeals) on this issue has been reproduced by us at paragraph 26 above. He has given a clear finding that the assessee had more than sufficient own funds for giving the interest-free advances. When the assessee was having sufficient own funds, we cannot say that any interest bearing funds were diverted for giving interest-free advances. That apart, the learned Departmental representative was unable to show what were the interest bearing funds that were held by the assessee which were diverted. We do not find any reason to interfere with the finding of the learned Commissioner of Income-tax (Appeals) in this regard. Ground No. 4 of the Revenue is dismissed. 66. Adverting to ground No. 5, the learned Departmental representative submitted that the learned Commissioner of Income-tax (Appeals) deleted the disallowance made for personal use of car despite the assessee admitting such use. 67. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amounts collected in margin account represented part sale consideration these were received from prospective buyers and on receipt of the balance the margin money was accounted as sales. The learned Commissioner of Income-tax (Appeals) though provided relief from double taxation but failed to understand the fact that names, address, and other KYC norms was not applicable for sales below ₹ 2 lakhs and hence the appellant did not maintain the same, hence confirming the addition on account of unexplained credits is bad in law. Ground No. 1 is in general, needing no specific adjudication. 70. Adverting to grounds Nos. 2 to 4, the learned authorised representative submitted that the lower authorities went by the version of M/s. Metals and Minerals Trading Corporation while taxing the net credit based on their creditor notes. As per the learned authorised representative, the learned Assessing Officer took a view that the assessee had not accounted many of the credit notes issued by the M/s. Metals and Minerals Trading Corporation and was charging expenses incurred by M/s. Metals and Minerals Trading Corporation purportedly on behalf of the assessee, without any debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit notes issued by M/s. Metals and Minerals Trading Corporation, mentioned in their letters dated December 28, 2011 and February 14, 2013 related to the earlier assessment years, entries for which were entered by M/s. Metals and Minerals Trading Corporation in their books for the financial year 2011-12. As per the learned authorised representative, the learned Commissioner of Income-tax (Appeals), though he directed the learned Assessing Officer to reduce the value of debit notes from the value of credit notes, fell in error, in confirming the addition without taking cognizance of the appointment of arbitrator on differences between M/s. Metals and Minerals Trading Corporation and the assessee. Relying on a memorandum of understanding dated April 2, 2008 entered by the assessee with M/ s. Metals and Minerals Trading Corporation, the learned authorised representative submitted that it contained clear stipulation under which they were to supply bullion to the assessee. As per the learned authorised representative, the assessee had preferred an arbitration petition invoking clause 11 of the memorandum of association. The contention of the learned authorised representative was that M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the credit notes indicated the assessee's right to recover such amounts mentioned therein from M/s. Metals and Minerals Trading Corporation. The assessee, as per the learned Departmental representative, in the alternative could set off such credits from its dues to M/s. Metals and Minerals Trading Corporation. Hence, according to him, aggregate value of the credit notes, not accounted by the assessee was rightly considered for the addition by the learned Assessing Officer, and confirmed by the learned Commissioner of Income-tax (Appeals). However, according to him, the learned Commissioner of Income-tax (Appeals) fell in error in directing the Assessing Officer to set off the aggregate value of debit notes while calculating the addition. As per the learned Departmental representative, both credit as well as debit notes were considered by the learned Assessing Officer while calculating the addition required for unaccounted credit notes. The submission of the learned Departmental representative was that the learned Assessing Officer had mistakenly stated the addition to be aggregate of credit notes alone in the remand report. Hence, as per the learned Departmental represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/003907/di-I the respondent raised an invoice for ₹ 21,15,38,550, whereas the actual transaction was only for ₹ 2,18,31,555. Excess invoice raised by respondent was for ₹ 18,97,06,995. (ii) On April 22, 2010 vide invoice No. #d109/00344/di-I vide raised an invoice for ₹ 5,10,85,532, when the actual transaction was only for ₹ 1,37,00,000. Excess invoice raised by respondent was for ₹ 3,73,85,532. (iii) Total excess invoice made was for ₹ 22,70,92,527 (Rs.18,97,06,995 + ₹ 3,73,85,532)'. . . 13. As detailed above, the excess funds of claimants retained by the respondent are 58,78,00,000 (rupees fifty-eight crores seventy-eight lakhs only), which the respondent is liable to pay the claimants along with interest. The claimants provide the day-to-day details of the bullion purchases, exchange rate of US dollar fixed with the respondent/their bankers and payments made by the claimants vide cheques. The details available and being filed herewith are : '(a) Bullion purchased and Forex fixed for the years 2009-10, 2010-11 and 2011-12 (b) Payments made for the bullion purchased for the years 2008- 09, 2009-10, 2010-11 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to the interest on loan against fixed deposits and pertaining to a period which was more than 3 years old was suddenly debited to the claimants' account in December 2011. As stated elsewhere, the claimants never opened any fixed deposits and it is the obligation of the respondents to open fixed deposits, that too in the name of the respondent. Only the respond ent could avail of loans if any, depending on the necessity of the respondent. The claimants had nothing to do with the fixed deposits nor did it authorise any loan to be taken against any fixed deposit. As the claimants were not the fixed deposit holders, it was impossible for the claimants to avail of any loan on the basis of the fixed deposits. The respondent is exclusively responsible, liable and answerable regarding each and every transaction. M/s. Metals and Minerals Trading Corporation had filed an appeal, assailing the arbitration. Bickerings between M/s. Metals and Minerals Trading Corporation and the assessee reached the hon'ble Madras High Court and their Lordships in O. S. A. No. 244 of 2014, through the judgment dated October 28, 2014 (MMTC v. Shiv Sahai and Sons) took note of these disputes. Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictional High Court while quashing the proceedings clearly held that the dispute between the assessee and Metals and Minerals Trading Corporation was civil in nature and approved arbitration proceedings initiated under clause 11 of memorandum of understanding dated April 2, 2008. What was held by their Lordships in the judgment dated April 17, 2017 in Criminal Original Petition No. 21243 of 2014 and Criminal Revision Case No. 1191 of 2015 (Naresh Prasad Agarwal v. The State) is reproduced hereunder : 213. The memorandum of understanding dated April 2, 2008 and clause 11 thereof would clearly indicate that the entire transaction is civil in nature. It is to be noted that the Metals and Minerals Trading Corporation Ltd., Chennai had also filed a Civil Suit in C. S. No. 249 of 2013, which is still pending on the file of this court for recovery of certain amounts from the petitioners and the first accused. If a business decision had resulted in loss even as per the prosecution case, (as found in the charge-sheet in the middle of page No. 5) it would be in the account of the customer. Claiming the same, debit notes were raised by Metals and Minerals Trading Corporation Ltd., Chennai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. 219. On a careful examination of the materials placed before this court, this court finds that there is no investigation on the line as to how, crores and crores of deposits were made in banks out of the sale proceeds without paying the suppliers and how loans were taken and how the banks were chosen for deposits as well as for taking loans and why for the serious lapses no bank officials were made liable ? Moreover, no documents were produced by the respondent-police (CBI) which led to the making of deposits and taking of loans. 220. Even as per the special audit report, the entire problem was due to the placing of fixed deposits for a longer period. It could be seen from page No. 66 of the special audit report which proceeds to say that the fixed deposits as well as LADs were in excess to the extent of ₹ 776 crores/Rs. 885 crores. 221. The Investigating Officer has miserably failed to find an answer for the question : 'as to whether the allocation of duties and responsibilities including the delegation of powers at various levels of management is fair/ proper/justifiable and the same have been adequately defined by the prosecution ? 222. This cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice of fraud in connivance with the Mr. V. Gurumoorthi (first accused). The allegations of fraud were made only against the first accused Mr. V. Gurumoorthi and not against the petitioners. It is to be noted that even as per the prosecution case, the first accused Mr. V. Gurumoor thi in connivance and in collusion with the petitioners had fudged the accounts and caused loss to the Metals and Minerals Trading Corporation Ltd., Chennai From this language, it could be easily understood that no serious allegations of fraud were made against the petitioners because the petitioners could not have had access to the accounts maintained by the Metals and Minerals Trading Corporation Ltd., Chennai as they were supposed to have handled only by the officials of Metals and Minerals Trading Corporation Ltd., Chennai. 228. A perusal of the entire charge-sheet it would go to show that no prima facie case is made out as against the petitioners to continue the prosecution. Even if the case against the petitioners is allowed to proceed further by way of trial, the chance of conviction would be bleak. 229. It is to be noted that taking into consideration the entire allegations made in the charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the members of the conspiracy remain in agreement and as long as they are acting in accord and in furtherance of the object for which they entered into the agreement.' 232. In the charge-sheet it is stated that during the period 2008-09 A1 to A3 (as per charge-sheet) (1) Mr. V. Gurumurthy, former General Manager (Finance and Accounts), Metals and Minerals Trading Corporation Ltd., Chennai Regional Office, Chennai and unknown officials of Metals and Minerals Trading Corporation Ltd., Chennai Regional Office, Chennai (2) Mr. N. P. Agarwal, Proprietor M/s. Shiv Sahai and Sons and (3) Mr. Ganesh Agarwal (A3 as per charge-sheet) had entered into a criminal conspiracy at Chennai and other places to do or cause to be done certain illegal acts., viz., to cheat Metals and Minerals Trading Corporation Ltd., Chennai (A Government of India undertaking) in the matter of purchase of gold under the buyer's credit scheme. 233. One can easily infer and understand the contradiction and inconsistency between the first information report and the charge- sheet with reference to the alleged offence of conspiracy. 234. As seen from the first information report, the check period is 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Ltd., Chennai. 238. In this connection a question that arises for the consideration of this court is who had actually committed the offence of criminal conspiracy ? Section 415 of the Indian Penal Code is relating to the offence of cheating. It reads that : 'whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intention ally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to cheat. Explanation.-A dishonest concealment of facts is a deception within the meaning of this section. 416 of the Indian Penal Code deals with cheating by personation section. 417 of the Indian Penal Code is the penal provision for cheating. It reads that whoever cheats shall be punished with imprisonment of either description for a term which may extend to one year, or with fine, or with both.' Section 418 of the Indian Penal Code deals with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luctuation and they had intention ally omitted to take forward cover for the purchases made and availed of foreign exchange loan under buyer's credit scheme and thereby caused wrongful loss of ₹ 113.38 crores to the Metals and Minerals Trading Corporation Ltd., Chennai and corresponding wrongful gain to the petitioners. In order to substantiate these allegations no substantial or adequate grounds are available against the petitioners. Admittedly, the transaction between the complainant Metals and Minerals Trading Corporation Ltd., and the petitioners is a commercial transaction. In the absence of proof of conspiracy and the criminal intention to cheat the Metals and Minerals Trading Corporation Ltd., it could not be heard to say that the petitioners have committed the offence of cheating. Everything is borne out by records as stated in the special audit report. The failure, on the part of the officials of Metals and Minerals Trading Corporation Ltd., to maintain proper accounting system could not rise to the commission of any offence much less the offence of cheating. Therefore, the alleged charges levelled against the petitioners under section 120B read with section 420 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 13(2) of the said Act. 242. For the foregoing reasons the charges under section 477A of the Indian Penal Code and section 13(2), read with section 13(1)(d) of the Prevention of Corruption Act, 1988 would not be attracted as against the petitioners, as no prima facie case is made out against them. Thus, in our opinion, there is much strength in the argument of the assessee that credit and debit notes issued by M/s. Metals and Minerals Trading Corporation could not be taken at face value and could have been raised by them to cover up their own misdeeds. 76. That apart, as pointed out by the learned authorised representative, debit notes as well as credit notes issued by M/s. Metals and Minerals Trading Corporation were vague and carried narrations like claim pending reconciliation , reserve for bad and doubtful debts , incompletion of VTS under ERP software system , exchange rate difference , notional entries passed as per Accounting Standard 11 etc. However, these credit/debit notes do not show how the assessee became entitled for the credit or the assessee was bound by the debits. In such a situation, in our opinion, the assessee could not have been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that there is no discussion whatsoever regarding any reconciliation difference or income from State Trading Corporation credited in the assessment year 2010-11 or in any other year. No doubt the learned Departmental representative has pointed out paragraph No. 8.1 of the assessment order which according to him hints on such income from M/s. State Trading Corporation. The said paragraph is reproduced here under : The assessee's business is such that he has to pay the cost of the gold bars in advance to Metals and Minerals Trading Corporation/ State Trading Corporation/other banks. Huge sums of money are required to be paid to Metals and Minerals Trading Corporation/State Trading Corporation/ banks through banking channel. That is the reason why, as admitted by Shri Naresh Prasad Agarwal, there is no credit sales in his business as per normal commercial meaning. Indi viduals or jewellers have to pay the cost of god in advance either by cash or by account transfer or RTGS. Availability of adequate cash/ bank balance is an absolute necessity to purchase the gold bars. We do not find anything in the above paragraph to show what was the nature of the income sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2011-12, on the basis of which, addition was made in the assessment order for the assessment year 2007-08 in the asses see's case. 2.3. The learned Commissioner of Income-tax (Appeals) is not justified in allowing relief on the basis of sales tax orders submitted during the appeal proceedings as an additional evidence, without giving an opportunity to the Assessing Officer under rule 46A of the Income-tax Rules, 1962. 2.4. Having held that parallel set of books of account were not found in the assessee's case, the learned Commissioner of Income-tax (Appeals) ought to have appreciated that in the modus operandi employed by the assessee there is no need for parallel set of books since the exact quantum of suppression of cash sales amount and the amount introduced in bullion margin account was known only to the assessee or his son and the fact of suppression of cash sales was entirely within their knowledge. 2.5. The learned Commissioner of Income-tax (Appeals) having deleted the addition by accepting the explanation of the assessee as to why the selling rate could be lesser than invoice purchase rate when the real issue at hand was why the selling r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he source of such credits irrespective of whether the same were adjusted against sales or any other transactions thereafter upon such receipt. 4. The learned Commissioner of Income-tax (Appeals) erred in directing the Assessing Officer to take into account the debit notes as well while arriving at the net of credit notes issued by Metals and Minerals Trading Corporation (MMTC) for taxation in the assessment for the assessment year 2007-08 in the assessee's case. 4.1 The learned Commissioner of Income-tax (Appeals) ought to have appreciated that the addition made in the assessment order for the assessment year 2007-08 in the case of the assessee, was based on the findings of the Assessing Officer in paragraph 9.3 of the assessment order under section 143(3) read with section 153A of the Income-tax Act for the assessment year 2011-12 in the assessee's own case, which clearly establishes that the debit notes were taken into consideration while arriving at the net of credit notes. 4.2 The learned Commissioner of Income-tax (Appeals) ought to have appreciated that as per the chart of reconciliation furnished by the assessee during the course of assessment proceedings, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer be restored. 81. Grounds Nos. 1 and 7 are in general, needing no specific adjudication. Ground No. 2 is similar to ground No. 2 raised by the Revenue for the assessment year 2006-07. We have already held at paragraph 61 above, that the learned Commissioner of Income-tax (Appeals) was justified in deleting the sales suppression estimated by the learned Assessing Officer. For the very same reasons mentioned therein, we dismiss ground No. 2 of the Revenue. 82. Ground No. 3 of the Revenue assails the direction of the learned Commissioner of Income-tax (Appeals) to reduce the peak bullion margin money amount from the sales accounted by the assessee. We have at paragraph 63 above, in relation to a similar ground, raised by the Revenue for the assessment year 2006-07, held that the directions given by the learned Commissioner of Income-tax (Appeals) was justified since otherwise there will be duplication. Accordingly ground No. 3 of the Revenue is dismissed. 83. Ground No. 4 of the Revenue assails the direction of the learned Commissioner of Income-tax (Appeals) to reduce the value of debit notes also while taxing the aggregate of credit notes. We have already held at para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for finalisation of the appellant's accounts. 4. The learned Commissioner of Income-tax (Appeals) failed to appreciate the fact that both the appellant and M/s. Metals and Minerals Trading Corporation were disputing each other and that the matter was pending before hon'ble Madras High Court. 5. The learned Commissioner of Income-tax (Appeals) erred in upholding the ad hoc drawings fixed by the learned Assessing Officer. 6. The learned Commissioner of Income-tax (Appeals) erred in not providing relief on account of exchange fluctuation which was accounted for by the appellant based on the debit notes issued by M/s. Metals and Minerals Trading Corporation, while on the contrary he had directed the Assessing Officer to consider both debit notes and credit notes, thus resulting in double addition on same account. 7. State Trading Corporation : The learned Commissioner of Income-tax (Appeals) failed to appreciate the fact that appellant had duly recorded the credit notes from State Trading Corporation on receipt of the same in the assessment year 2010-11 and hence not providing relief to this while confirming the addition has resulted in double addition. 8. Addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions from M/s. Metals and Minerals Trading Corporation. 92. The learned authorised representative submitted that debit for exchange fluctuation loss was made based on instructions from M/s. Metals and Minerals Trading Corporation. As per the learned authorised representative, such expenditure was reversed in the assessment year 2011-12. Contention of the learned authorised representative was that there were ongoing dispute between M/s. Metals and Minerals Trading Corporation and the assessee with regard to various entries passed by M/s. Metals and Minerals Trading Corporation in the assessee's account and the matter was being considered by the Arbitral Tribunal. The learned authorised representative submitted that it was premature at this stage to disallow exchange fluctuation of ₹ 7,53,46,987 debited by the assessee under instructions from M/s. Metals and Minerals Trading Corporation. The contention of the learned authorised representative was that the learned Commissioner of Income-tax (Appeals) confirmed the disallowance without considering the submissions made by the assessee. 93. Per contra, the learned Departmental representative supported the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was given a number of opportunity during the course of assessment proceedings and also in the remand proceedings for substantiating the credit. It seems, the assessee could not produce any evidence before the learned Assessing Officer. In such situation, we are of the opinion that the learned Commissioner of Income-tax (Appeals) was justified in confirming the addition of ₹ 25 lakhs. Ground No. 8 of the assessee stands dismissed. 98. Ground No. 9 for the impugned assessment year assails the addition made for bullion margin money under section 68 of the Act. Similar ground No. 6 raised by the assessee in its appeal for the assessment year 2006-07 stands adjudicated by us at paragraphs 53 and 54 above. We give similar directions for the impugned assessment year also. Ground No. 9 stands partly allowed. 99. Now we take up the Revenue's appeal for the assessment year 2008-09. 100. Grounds Nos. 1 and 7 are general needing no adjudication. Grounds Nos. 2 to 6 taken by the Revenue are similar to grounds Nos. 2 to 6 taken by it for the assessment year 2007-08. The directions given by us at paragraphs 61, 63, 83, 65 and 67 for the assessment years 2006-07 and 2007-08 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 is general, needing no specific adjudication. 104. Grounds Nos. 2 to 4 of the assessee are similar to its grounds Nos. 2 to 4 of its appeal for the assessment year 2007-08. We have already held at paragraphs 73 to 76 above that the addition for credit notes from Metals and Minerals Trading Corporation was unjustified and deleted it. Grounds Nos. 2 to 4 of the assessee for the assessment year 2009-10 are allowed. 105. Ground No. 5 of the assessee for the impugned assessment year is similar to its ground 5 of its appeal for the assessment year 2006-07. We have already held at paragraph 50 above that addition for low drawings was not warranted under the facts and circumstances of the case. Ground No. 5 of the assessee is allowed. 106. Ground No. 6 of the assessee assails an addition for M/s. State Trading Corporation Credit notes. Similar issue has been raised by the assessee as ground No. 6 in its appeal for the assessment year 2007-08. We have at paragraph 78 deleted such addition. For the very same reasons mentioned in the said paragraph, the addition made for the impugned assessment year is also deleted. Ground No. 6 of the assessee is allowed. 107. Ground No. 7 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced in the bullion margin account was known only to the assessee or his son and the fact of suppression of cash sales was entirely within their knowledge. 2.5. The learned Commissioner of Income-tax (Appeals) having deleted the addition by accepting the explanation of the assessee as to why the selling rate could be lesser than invoice purchase rate when the real issue at hand was why the selling rate as per cash bills was less than that of selling rate as per bills to jewellers (to be accounted by purchasers) when there is no difference between them while fixing the rates as per the seized diaries and as admitted by the assessee under section 131 that in bullion trade there is no credit sales in the normal meaning (with higher margin when compared to cash sales) 2.6 The learned Commissioner of Income-tax (Appeals) ought to have appreciated the various circumstantial evidences and facts gath ered by the Assessing Officer in the form of obtaining the rates from various registered professional jewellers' associations, the sales tax authorities as well as from the sworn statements of the assessee's staff to prove the fact of deliberate suppression of sales by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as confirmed additions : 4. The learned Commissioner of Income-tax (Appeals) erred in directing the Assessing Officer to take into account the debit notes as well while arriving at the net of credit notes issued by Metals and Minerals Trading Corporation (MMTC) for taxation in the assessment for the assessment year 2009-10 in the assessee's case. 4.1 The learned Commissioner of Income-tax (Appeals) ought to have appreciated that the addition made in the assessment order for the assessment year 2009-10 in the case of the assessee, was based on the findings of the Assessing Officer in paragraph 9.3 of the assessment order under section 143(3) read with section 153A of the Income-tax Act for the assessment year 2011-12 in the assessee's own case, which clearly establishes that the debit notes were taken into consideration while arriving at the net of credit notes. 4.2 The learned Commissioner of Income-tax (Appeals) ought to have appreciated that as per the chart of reconciliation furnished by the assessee during the course of assessment proceedings, the net of credit notes (i.e., total amount of credit notes minus total amount of debit notes) issued by Metals and M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound Nos. 2, 3, 4 and 5 are dismissed. 110. Now, we take up cross-appeals of the assessee and the Revenue for the assessment year 2010-11, in that order. 111. Ground No. 1 of the assessee is general. Grounds Nos. 2 to 4 and 5 are similar to its grounds Nos. 2 to 4 and 5 for the assessment years 2007-08, 2008-09 and 2009-10. These grounds have been dealt with at paragraphs 73 to 76 and paragraph 50 and the additions have been deleted. Accordingly, these grounds are allowed for the impugned assessment year also. 112. Vide its ground No. 6, the assessee assails an addition of ₹ 4,93,69,063 for difference in closing stock. 113. not received 30 kg. gold out of a quantity of 50,405 kg. gold sold and billed The learned authorised representative submitted that the assessee had by M/s. Metals and Minerals Trading Corporation. As per the learned authorised representative, the assessee had received only 50,405 kg. gold from M/s. Metals and Minerals Trading Corporation whereas the bills issued by M/s. Metals and Minerals Trading Corporation should aggregate to 50,438 kg. Contention of the learned authorised representative was that lower authorities disbelieved the claim of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ped'. No evidence was produced in support of its claim. The addition is made as proposed. What was held by the learned Commissioner of Income-tax (Appeals) on the assessee's appeal has been reproduced at paragraph 25 above. At para 11 of the claim statement filed by the assessee before Arbitral Tribunal, part of which has been reproduced by us at paragraph 73 above, the claim regarding shortage of delivery of gold has been raised by the assessee. It is claimed by the assessee in the arbitral proceedings that the assessee received only 50,405 Kg gold against delivery notes of 50,438 kg gold. There is thus much strength in the argument of the learned authorised representative that this is also a reason for the reconciliation difference between the assessee and the M/s. Metals and Minerals Trading Corporation, and a clear indication of anomalies in the books of M/s. Metals and Minerals Trading Corporation. At paragraphs 73 to 76 above, in relation to ground Nos. 2 to 4 of the assessee we have already deleted the addition made for credit notes and reconciliation difference. We are of the opinion that the question of any shortage in stock is also intrinsically connected w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismiss this ground. 121. Ground No. 3 raised by the Revenue is similar to its ground No. 4 for the assessment year 2007-08. For the reasons given at paragraph 83, we dismiss this ground. 122. Ground No. 4 raised by the Revenue is similar to its ground No. 4 for the assessment year 2006-07. For the reasons given at paragraph 65 above, we dismiss this ground of the Revenue. 123. Ground No. 5 raised by the Revenue is similar to its ground No. 5 for the assessment year 2006-07. For the reasons given at paragraph 67 above, we allow this ground of the Revenue. 124. Now, we take up the cross-appeals of the assessee and the Revenue for the assessment year 2011-12. 125. The assessee in its appeal has taken altogether seven grounds of which Ground No. 1 is general in nature, requiring no specific adjudication. 126. Grounds Nos. 2 to 4 and 5 of the assessee are similar to its grounds Nos. 2 to 4 and 5 for the assessment years 2007-08, 2008-09 and 2009-10. These grounds have been dealt by us at paragraphs 73 to 76 and paragraph 50 above. For the reasons mentioned in these paragraphs, we delete the additions. Ground Nos. 2 to 4 and 5 are allowed. 127. Vide its ground No. 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assailing the addition made for peak in bullion margin money account is similar to its ground No. 6 for the assessment year 2006-07. We have already adjudicated this issue at paragraphs 53 and 54 above. Similar directions are given here also. Accordingly, ground No. 7 of the assessee is partly allowed. 133. Now, we take up appeal of the Revenue for the assessment year 2011- 12. 134. The Revenue has taken altogether four grounds of which grounds Nos. 1 and 4 are general, needing no specific adjudication. 135. Vide it ground Nos. 2, the Revenue assails deletion of the disallowance of proportionate interest for diversion of interest bearing funds for giving interest-free advances. This ground is similar to its ground No. 4 in its appeal for the assessment year 2006-07. We have for reasons mentioned at paragraph 65 above, confirmed the order of the learned Commissioner of Income-tax (Appeals), deleting such addition. Accordingly, ground No. 2 of the Revenue is dismissed. 136. Ground No. 3 of the Revenue assails the deletion of disallowance made for personal use of cars. This issue has also been dealt by us in the Revenue's appeal for the assessment year 2006-07, wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue for the assessment years 2011-12, in that order. 146. As already mentioned by us at paragraph 2 above, M/s. Shiv Sahai and Sons (I.) Ltd., had taken over the bullion trading business of the proprietorship concern owned by Mr. Naresh Prasad Agarwal in September, 2010, and was continuing the same business, earlier done by Mr. Naresh Prasad Agarwal. The business in its entirety was conducted by the Mr. Naresh Prasad Agarwal and his son Shri Ganesh Agarwal. The assessments of this company for the impugned two assessment years were also done, pursuant to the search conducted in its premises on January 6, 2012 and March 2, 2012. 147. Grounds taken by the assessee for the assessment year 2011-12 are reproduced hereunder : 1. The order of the Commissioner of Income-tax (Appeals)-19 is against the facts of the case and the principles of natural justice. 2. The learned Commissioner of Income-tax (Appeals) erred in adopting the accounts as provided by M/s. Metals and Minerals Trading Corporation. 3. The learned Commissioner of Income-tax (Appeals) failed to understand the fact that there were huge errors in the statement of accounts as provided by M/s. Metals and Minerals T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t balance in sundry debtors account. 151. The books account of the assessee reflected credit balances in the following debtors account. Rs. Sampath, Trichy 1,70,00,000 Sundar, Trichy 1,05,50,000 Thangamani, Trichy 56,00,000 Veeramani, Trichy 1,00,00,000 4,31,50,000 The learned Assessing Officer considered the above credits as unexplained, since the assessee could not file any confirmation nor give any details on the above credit balance. The assessee's appeal before the learned Commissioner of Income-tax (Appeals) did not meet with any success. The learned Commissioner of Income-tax (Appeals) noted that the assessee was unable to furnish any evidence in support of the credits even during the remand proceedings. Now before, us the learned authorised representative submitted that the amounts were adjusted against the sales on April 11, 2011 and April 12, 2011. As per the learned authorised representative, the credit balances were part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer had calculated suppression in sales, by substituting the rates adopted for cash sales with the rates applied for sale to jewellers, and made additions for the assessment years 2006-07 to 2009-10. The learned Commissioner of Income-tax (Appeals) on appeals of the said assessee for those years had deleted such additions. In Revenue's appeals for those assessment years in the case of Shri Naresh Prasad Agarwal (I. T. A. No. 1485/Chny/2017 to 1488/Chny/2017) vide paragraph 61 above, we have already upheld order of the learned Commissioner of Income-tax (Appeals) deleting the addition made by the learned Assessing Officer. For the very same reasons mentioned in these paragraphs, we are of the opinion that the learned Commissioner of Income-tax (Appeals) was justified in allowing the claim of loss. Ground No. 2 of the Revenue is dismissed. 159. Vide its ground No. 3, the Revenue is aggrieved on the direction of the learned Commissioner of Income-tax (Appeals) to reduce peak credit amount in bullion money margin account from the accounted sales of the assessee. The learned Assessing Officer had allowed set off of the peak in bullion margin money account with suppression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-13, in that order. 164. The assessee in its appeal has taken altogether five grounds, of which Grounds No. 1 is general, needing no specific adjudication. 165. Grounds Nos. 2 to 4 of the assessee for the impugned assessment year are similar to grounds Nos. 2 to 4 in its appeal for the assessment year 2011-12. For the reasons mentioned in paragraph 149 read along with paragraphs 73 to 76, we delete the addition. Grounds Nos. 2 to 4 are allowed. 166. Ground No. 5 of the assessee assails the addition made for peak credit in the bullion margin money account. This is similar to ground No. 6 of the assessee's appeal for the assessment year 2011-12. We have adjudicated this issue at paragraph 154 read along with paragraphs 53 and 54 above. Similar directions are given here also. Accordingly, ground No. 5 of the assessee is partly allowed. 167. Now, we take up appeal of the Revenue for the assessment year 2012- 13. 168. The Revenue has raised altogether five grounds of which grounds Nos. 1 and 5 are general, needing no specific adjudication. 169. Vide its ground No. 2, the Revenue assails the direction of the learned Commissioner of Income-tax (Appeals) to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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