TMI Blog2018 (10) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... - In the present appeals, it is noticed that the notices issued under section 133(6) were not complied with and the assessee did not produce the parties before the learned Assessing Officer to prove the genuineness of the transactions. Even the new addresses, if any, of these parties were never supplied by the assessee to the AO so that the noticed could be issued to such parties at the new addresses. The genuineness of the transactions thus, could not be established by the assessee. Therefore, considering the totality of facts, cases relied upon by both sides, discussion made hereinabove, to plug the leakage of revenue, we are of the view that the learned CIT(A) has taken one of the best possible view to estimate the profit @12.5%. Thus, the stand taken by the learned CIT(A) is affirmed. - ITA NO.3236/Mum/2016, ITA NO.2698/Mum/2016 - - - Dated:- 25-9-2018 - Shri Joginder Singh, Judicial Member, And Shri G. Manjunatha, Accountant Member For the Assessee : Shri V D Parmar For the Revenue : Shri Satishchandra Rajore ORDER PER JOGINDER SINGH (JUDICIAL MEMBER) The assessee as well as the Revenue are aggrieved by the impugned order dated 25/02/2016 of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant provision of section 147 of the Act for ready reference and analysis:- If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 4.2. If the aforesaid provision of the Act is analyzed, we find that after insertion of Explanation -3 to section 147 of the Act by the Finance (No.2) Act of 2009 with effect from 01/04/1989 section 147 has an effect that Assessing officer has to assess or reassess income (such income) which has escaped assessment and which was basis of formation of belief and, if he does so, he can also assess or reassess any other income which has escaped assessment and which came to the notice during the course of proceedings. Identical ratio was laid down by Hon ble jurisdictional High Court in CIT vs Jet Airways India Pvt. Ltd. (2010) 195 taxman 117 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y held that proceedings u/s 147 are for the benefit for the Revenue, which are aimed at gathering the escaped income . At the same time, We are aware that powers u/s 147 and 148 of the Act are not unbridled one as it is hedged with several safeguards conceived in the interest of eliminating room for abuse of this power by the AO. However, the material available on record, clearly indicates that income chargeable to tax had escaped assessment, therefore, the ld. Assessing Officer was within his jurisdiction to reopen the assessment. The Hon ble Apex Court in Ess Ess Kay Engineering Co. Pvt. Ltd. (2001) 247 ITR 818 (SC) held that merely because the case of the assessee was correct in original assessment for the relevant assessment year, it does not preclude the ITO to reopen the assessment of an earlier year on the basis of finding of his fact that fresh material came to his knowledge. 4.4. Under section 147, as substituted with effect from 01/04/1989, the scope of reassessment has been widened. After such substitution, the only restriction, put in that section is that reason to believe . That reason has to be a reason of a prudent person which should be fair and not necessarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. Venus Industrial Corporation vs Asst. CIT (1999) 236 ITR 742, 746 (Punj.), xiv. Srichand Lalchand Talreja vs Asst. CIT (1998) 98 taxman 14, 19 (Bom.), xv. Usha Beltron Ltd. vs JCIT (1999) 240 ITR 728, 736-37, 739 (Pat.) xvi. Kapoor Brothers vs Union of India (2001) 247 ITR 324, 331, 332-33 xvii. Vippy Processors Pvt. Ltd. vs CIT (2001) 249 ITR 7, 8 (MP) 4.6. In Dilip S. Dahanukar vs Asst. CIT (2001) 248 ITR 147, 150-51 (Bom.). The Hon ble jurisdictional High Court held as under:- Held, that there was material on record on the basis of survey and statement of person to show that the assessee had wrongfully claim deduction u/s 80IA. Therefore, the Assessing Officer had reason to believe that income had escaped assessment for assessment year 1994- 95. Identically in the case of Srichand Lalchand Talreja v. Asst. CIT, (1998) 98 Taxman 14, 19 (Bom), where the information regarding acquisition of the asset was not available with the Assessing Officer during the relevant assessment year 1992-93 and such information was disclosed in the return for the assessment year 1995-96, the Hon ble jurisdictional High Court held that the Assessing Officer can form a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassessment notice on the ground that excise duty was shown as an asset in the balance sheet and was not routed through the profit and loss account. The reopening at this stage was held to be valid. In the case of Vipan Khanna v. CIT, (2002) 255 ITR 220, 230 (P H), where from the facts it was clear that the assessee had claimed depreciation in the return at the rate of 50 per cent and he had nowhere disputed the fact that the admissible rate of depreciation to him was 40 per cent., such fact alone was sufficient to initiate reassessment proceedings under section 147 and, therefore, such initiation was sustained. The Hon ble Punjab Haryana High Court in Mrs. Rama Sinha v. CIT, (2002) 256 ITR 481, 483, 486, where the reassessment notice has been issued on the basis of definite information from CBI regarding investments by the assessee which had not been disclosed during the original assessment proceedings, such initiation has been upheld. 4.11. In the case of Pal Jain v. ITO, (2004) 267 ITR 540, 544-45, 548, 549 (P H), applying Phool Chand Bajrang Lal v. ITO, (1993) 203 ITR 456 (SC), although the transaction of sale of shares was disclosed and accepted in the original ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation the letter written by the Assistant Commissioner as well as the fact that no return had been filed by the assessee for assessment year 1995-96. Thus, it was held that the Assessing Officer had rightly invoked the jurisdiction to initiate the reassessment proceedings under section 147. In the case of CIT v. Hukam Singh, (2005) 276 ITR 347 (P H), it was held that the respondents did not have the locus standi to question the orders of reassessment on the ground of lack of notice. Non-issuance of notice to some of the legal heirs of the late P was merely an irregularity and the same did not affect the validity of the reassessment orders. Likewise, in Tilak Raj Bedi v. Joint CIT, (2009) 319 ITR 385 (P H), wherein, facts coming to light in a subsequent assessment year could validly form the basis for initiating reassessment proceedings, in view of Explanation 2 to section 147. The action of the income tax authorities in reopening the assessment of the assessee and restricting the deduction under section 80-IB was held to be valid. 4.14. In the case of Smt. Usha Rani v. CIT, (2008) 301 ITR 121 (P H), there was nothing on record to show the relationship between the donor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1995-96 was processed under section 143(1)(a) accepting the net profit rate declared by the assessee, who carried on con- tract business, initiation of reassessment proceedings by issuing a notice dated 15-5-2001 proposing to reassess petitioner-assessee at higher rate in view of the presumptive rate prescribed under section 44AD has been sustained. In the case of Dr. Sahib Ram Giri v. ITO, (2008) 301 ITR 294 (Raj), the reassessment proceedings were initiated after recording reasons in writing by the AO. The non-availability of a few documents demanded by the assessee would not make the reassessment proceedings initiated for the reasons recorded in detail illegal. 4.17. In the case of Desh Raj Udyog : Chaman Udyog v. ITO, (2009) 318 ITR 6 (All), in the assessment years in question, the matter was still to be decided finally by the assessing authority whether the income should be treated under the head 'Business income' or 'property income'. The assessee would get opportunity to show sufficient cause to the assessing authority during the course of assessment. Thus, it could not be said that there was no relevant material to initiate proceedings u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raders v. ITO, (2006) 282 ITR 536 (All), the account books or record and other material were all common which were being considered by the CIT(A) in the proceedings relating to three appeals. The petitioner had notice and opportunity of being heard. The reassessment proceedings were held to be validly initiated. In the case of Inductotherm (India) P. Ltd. v. lames Kurian, Asst. CIT, (2007) 294 ITR 341 (Guj), the Assessing Officer had found that there were errors in the computation of allowances. The reassessment proceedings were held to be valid. In the case of Papaya Farms Pvt. Ltd. vs. DCIT, (2010) 323 ITR 60 (Mad), where the assessee had furnished incorrect particulars and therefore, the reopening of the assessment was held to be justified. 4.20. In the case of CIT v. Kerala State Cashew Development Corporation Ltd., (2006) 286 ITR 553 (Ker), wherein, the assessee was following the mercantile system of accounting should not have claimed deduction of penal interest which had accrued not in the previous year relevant to the assessment year but in earlier years. This the assessee had not disclosed. The reassessment was held to be valid. Likewise, in Kusum Industries P. Ltd. v. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the books of account and other documents had not been delivered to the requisitioning authority. The proceedings initiated under section 147 was held to be valid. 4.22. In Ramilaben Ratilal Shah v. CIT, (2006) 282 ITR 176 (Guj), held that the noting in the diary constituted sufficient information for the escapement of income by either non-declaration of correct sale consideration or furnishing of inaccurate particulars as regards sale consideration. Thus, the Tribunal was justified in holding that the assessee had failed to disclose fully and truly all material facts necessary for the assessment of the relevant assessment year. The reassessment proceedings had been validly initiated. 4.23. Likewise, in CIT v. Abdul Khader Ahamed, (2006) 285 ITR 57 (Ker), it was clear from the reasons recorded by the Deputy CIT that he prima facie had reason to believe that the assessee had omitted to disclose fully and truly the material facts and that as a consequence income had escaped assessment. The reassessment was held to be valid. In the case of U.P. State Brassware Corporation Ltd. v. CIT, (2005) 277 ITR 40 (All), the principles laid down by the Calcutta High Court in CIT v. New Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reassessment in question were held to be valid on the fact that the assessee claimed and was given relief under section 80HHA for the three preceding year which disentitled her for deduction under section 80HH for the assessment years 1992-93 and 1993-94. 4.26. In the case of Aquagel Chemicals P. Ltd. v. Asst. CIT, (2013) 353 ITR 131 (Guj), since there being sufficient material on record for the Assessing Officer to form a belief as regards the escapement of income in relation to the claim of depreciation in respect of the building of coal fire boiler, the reassessment was held to be valid. In the case of Convergys Customer Management v. Asst. DIT, (2013) 357 ITR 177 (Del), where there being prima facie material in the possession of the Assessing Officer to form a tentative belief that section 9(1)(i) held attracted, said reason by itself constituted a relevant ground to reopen the assessment of the assessee. Reference may also be made to i. Ajai Verma v. CIT [(2008) 304 ITR 30 (All)]; ii. Ashok Arora v. CIT [(2010) 321 ITR 171 (Del)]; iii. CIT v. Chandrasekhar BaLagopaL [(2010) 328 ITR 619 (Ker)]; iv. Jayaram Paper Mills Ltd. v. CIT [(2010) 321 ITR 56 (Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed companies. Statements of many entry operators and dummy Directors recorded during various search and seizure operation, survey operation and investigation were checked. The Assessing Officer thereupon proceeded to record that On perusal of data so provided by the Deputy Director (Investigation), it is noticed that during the period under consideration, the assessee company has accepted share capital/share premium from the following entries/parties which have been proved to be shell companies based on the investigation conducted by the Deputy Director (Investigation). Underneath, he provided a list of 17 companies who had transacted with the assessee company during the year under consideration and were alloted equity shares by purported investment of sizeable share capital and share premium amounts. On verification of such materials, the Assessing Officer noted that the assessee had received share capital/share premium amount, since the investor companies were found to be shell companies indulging in providing accommodation entries, the Assessing Officer was of the opinion that the share capital/share premium claimed to have been received from the company by the assessee was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer and upon examination thereof, he formed a belief that the assessee company had received share application and share premium money from as many as 20 different investor companies who were found to be shell companies and indulging in giving accommodation entries. From this view point, since the Assessing Officer had sufficient material at his command to form such a belief. Such materials did not form part of the original assessment proceedings and was placed before the Assessing Officer only after the assessment was completed. Since on the basis of such materials, Assessing Officer, came to a reasonable belief that income chargeable to tax had escaped assessment, merely because these transactions were scrutinised by the Assessing Officer during the original assessment also would not preclude him from reopening the assessment. His scrutiny during the assessment will necessarily be on the basis of the disclosures made by the assessee. [Para 8] The contention that there was no failure on part of the assessee to disclose truly and fully facts cannot be accepted. The Assessing Officer, as noted, received fresh material after the assessment was over, prima facie , sugge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n found to be satisfactory. Essentially, this proviso eases the burden of proof on the revenue while making addition under section 168 with respect to non genuine share application money of the companies. Even in absence of such proviso as was the case governing the periods with which we are concerned in the present case, if facts noted by the Assessing Officer and recorded in reasons are ultimately established, invocation of section 68 would be called for. [Para 15] The contention that the Assessing Officer had merely and mechanically acted on the report of the investigation wing also cannot be accepted. One has reproduced the reasons recorded by the Assessing Officer and noted the gist of his reasons for resorting to reopening of the assessment. The Assessing Officer had perused the materials placed for his consideration and thereupon, upon examination of such materials formed a belief that income chargeable to tax had escaped assessment. [Para 16] In the result, petition is dismissed. [Para 17] 4.29. The Hon'ble Gujarat High Court while validating the reopening of assessment under section 147/148 of the Act in a later order (aforesaid) dated 20/02/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived at the later stage, which in our opinion was sufficient to initiate reassessment proceedings. Explanation-1 to section 147 of the Act supports our view. Referring to the said explanation in consolidated Photo Finvest Ltd. (2006) 281 ITR 394 (Del.), Hon'ble High Court observed as under:- 8. It is clear from the above that the two critical aspects which need to be addressed in any action under section 147 are whether the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment and whether the proposed reassessment is within the period of limitation prescribed under the proviso to section 147. Explanation (1 ) to the said provision makes it clear that production of account books or other evidence from which the Assessing Officer could with due diligence discover material evidence would not necessarily amount to disclosure within the meaning of the proviso that stipulates an extended period of limitation for action in cases where the escapement arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. 4.31. The formation of opinion by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned issue of validity of reopening, we uphold the same, resulting in to, dismissal of the ground raised by the assessee. 5. The next ground i.e. ground nos. 4 to 6 pertains to addition of ₹ 39,31,494/- with respect to purchases/sales from six parties. The learned counsel for the assessee contended that the purchases so made are made through account payee cheque, the details of which were submitted by the assessee. Therefore, these cannot be bogus and the case of the assessee is covered by the decision in the case of Income Tax Officer vs. Deepak Popatlal Gala (ITA No.2826/Mum/2013, order dated 5.11.2014)and another decision in Smt. Neeta Sanjay Shah vs. Income Tax Officer (ITA NO.6700/Mum/2017, order dated 20.07.2018). On the other hand, the learned DR strongly defended the assessment order by placing reliance upon the decision in the case of N K Proteins from Hon'ble Apex Court. 6. We have considered the rival submissions and perused the material available on record. We note that the learned Assessing Officer made the addition @100% of such bogus purchases, which was reduced to 12.5% by the learned CIT(A). The assessee has challenged the retention of additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the parties other than the persons who had issued bills for such goods. Though the purchases are shown to have been made by making payment thereof by account payee cheques, the cheques have been deposited in bank accounts ostensibly in the name of the apparent sellers, thereafter the entire amounts have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount from the bank accounts. In the light of the aforesaid nature of evidence it is not possible to record a different conclusion, different from the one recorded by the Commissioner (Appeals) and the Tribunal concurrently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether the purchase price reflected in the books of account matches the purchase price stated to have been paid to other persons. The issue is whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to the Tribunal's decision in the case of Vijay Proteins Ltd. v. Asst. CIT [1996] 58 ITD 428 (Ahd). 6. We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this court in the case of Sanjay Oilcake Industries v. CIT [2009] 316 ITR 274 (Guj). Such decision is also followed by this court in a judgment dated August 16, 2011, in Tax Appeal No. 679 of 2010 in the case of CIT v. Kishor Amrutlal Patel. In the result, tax appeal is dismissed. 7.3. Likewise, the Hon'ble Gujarat High Court in CIT vs Vijay M. Mistry Construction Ltd. (2013) 355 ITR 498 (Guj.) held/observed as under:- 6. As is apparent from the facts noted hereinabove, the Commissioner (Appeals) after appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r disallowed the amount ₹ 7,88,590 on account of payment made to MMTC. 11. The assessee preferred an appeal before the Commissioner (Appeals), who upon appreciation of the evidence on record found that the Assessing Officer had not rejected the genuineness of the purchases made from MMTC while making the disallowance. His observations were based on inflation of rates which were being charged from the assessee. According to the Commissioner (Appeals), though MMTC in some respect could be attributed to be associated with the assesseecompany, still it could not be expected that MMTC was carrying out its business without any motive or profit. According to the Commissioner (Appeals), it was proved by the assessee that the rates charged by MMTC were comparable with the prevailing market rates, no such addition can stand. The Commissioner (Appeals) took note of the fact that it was not the case of the Assessing Officer that the purchases had been directly effected from third parties and not directly from MMTC ; the difference could not be the net profit in the hands of MMTC ; and that while conducting the entire exercise MMTC would have to incur certain expenditure in transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts of the crane and other machineries were in the nature of acquisition of capital asset. According to the Commissioner (Appeals), the disallowance could have been made on depreciation only if at all the Assessing Officer conclusively proved that the purchases of crane and other parts are bogus. Upon appreciation of the material on record the Commissioner (Appeals) found that the Assessing Officer has simply brushed aside all the evidence on account of technical infirmities and that the evidence such as octroi receipt ; hypothecation of the crane to the bank; existence of the crane even till date with the assessee conclusively proved that the crane was purchased and it was in use even as on date with the assessee. The Commissioner (Appeals) accordingly found that there was no scope for any disallowance and accordingly deleted the disallowance made on account of purchase of crane and allowed the depreciation as claimed by the assessee. 15. The Tribunal, in the impugned order, has noted that the cost of crane was never claimed by the assessee in the return of income. Before the Tribunal, the assessee produced the evidence that the crane in question was registered with the RTO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y had sought remand report and even at that stage the genuineness of the statement has not been established by allowing cross examination of the person whose statement was relied upon by the revenue. In these circumstances, the decision of the Tribunal being based on the fact, no substantial question of law can be said to arise from the order of the Tribunal. The appeal is dismissed with no order as to costs. 7.5. The Hon'ble Gujarat High Court in CIT vs M.K. Brothers (163 ITR 249) held/observed as under:- Being aggrieved by the aforesaid order, the assessee went in second appeal before the Tribunal. It was urged on behalf of the assessee that the transactions in question were normal business transactions and the assessee had made payments by cheques. The parties did not come forward and if they did not come, the assessee should not suffer. However, on behalf of the Revenue, it was urged that detailed inquiries were made and thereafter the conclusion was reached. The Tribunal found that there was no evidence anywhere that these concerns gave bogus vouchers to the assessee. No doubt, there were certain doubtful features, but the evidence was not adequate to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs showing that material purchased was actually delivered at the site was furnished before the AO. It was also argued that some of the material purchased from the said parties were lying part of closing stock as on 31.03.2009 as per the statement submitted on record. After considering the assessment order and the submissions made by the assessee, FAA held that the transactions were supported by proper documentary evidences, that the payments made to the parties by the assessee were in confirmation with bank certificate,t hat the suppliers was shown as default under the Maharashtra VAT Act could not be sufficient evidences to hold that the purchases were non-genuine, that the AO had not brought any independent and reliable evidences against the assessee to prove the non-genuineness of the purchases, that there was no evidence regarding cash received back from the suppliers. Finally, he deleted the addition made by the AO . 2.3.Before us, Departmental Representative argued that both the suppliers were not produced before the AO by the assessee, that one of them was declared hawala dealer by VAT department, that because of cheque payment made to the supplier transaction cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 18/03/2016 supports the case of the assessee and the conclusion drawn in the impugned order. However, as relied by the Ld. DR, the Hon'ble Gujarat High Court in the case of N.K. Industries Ltd.,etc vs DCIT (supra) considering various decisions decided the issue in favour of the Revenue and the Hon'ble Apex Court dismissed the SLP vide order dated 16/01/2017 (SLP No.(c) 769 of 2017). We find that in that case, during search proceedings, certain blank signed cheque books and vouchers were found and thus the purchases made from these concerns, were treated as bogus by the Assessing Officer. 7.8. The Hon'ble Gujarat High Court in N.K. Industries Ltd. vs DCIT (IT Appeal No.240, 261, 242, 260 and 241 of 2003), vide order dated 20/06/2016 considered the decision of the Tribunal and various judicial decisions including the case of Vijay Proteins and Sanjay Oilcakes Industries ltd., M/s Woolen Carpet Factory vs ITAT (2002) 178 CTR 420 (Raj.), the Tribunal was held to be justified in deciding the case against the assessee. The Hon'ble Apex Court confirmed the decision of the High Court for adding the entire income on account of bogus purchases (SLP (C) Nos. 769 of 2017, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance was placed on the judgment of the Hon'ble Gujarat High Court in the case of CIT v. N.R. Paper Boards Ltd. (supra) and other such decisions. 51. Before we go through the ratio of judgment of the Hon'ble Gujarat High Court in the case of NR Paper Boards Ltd. (supra), it would be relevant here to refer to the decision of the Hon'ble Supreme Court in the case of CIT v. Sun Engineering Works (P) Ltd. (1992) 198 ITR 297 (SC). The Hon'ble Supreme Court has observed as under at p. 320 of 198 ITR; Such an interpretation would be reading that judgment totally out of context in which the questions arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete law declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a lat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with the return of income submitted by them for the asst. yr. 1995-96. The assessee pointed out that the search and seizure operation carried out on 1st Dec., 1995, was concluded on 6th Jan., 1996. Their block assessment under Chapter XIV-B of the Act was made for the block period from 1st April, 1985 to 6th Jan., 1996. In accordance with the provisions of Section 158BB of the Act, the total income was worked out after giving credit for the amount disclosed. The assessee pointed out that the income for the asst. yr. 1995-96 was already computed in the assessment for the block period. Hence, there was no question of proceeding with the regular assessment for the asst. yr. 1995-96. It was further submitted that in any event no addition could be made to the total income disclosed in the said returns in view of the block assessment made for the period which included the said asst. yr. 1995-96. The Division Bench of this Court in the case of N.R. Paper Boards Ltd. v. Dy. CIT (1998) 234 ITR 733 (Guj) considered the provisions in detail. The Court pointed out that the block assessment of undisclosed income to be charged at a higher rate of tax prescribed was independent of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, follows that what the assessee had already disclosed or would have disclosed is not to be treated as undisclosed income. From the provisions of Section 158BA(1), it would appear that the AO can proceed to assess the undisclosed income only if a search is initiated under Section 132 of the Act by the authorised officer. The total undisclosed income relating to the block period is to be charged to tax at the higher rate of 60 per cent presently specified in Section 113 of the Act after such undisclosed income is assessed in accordance with the provisions of this chapter by the AO as income of the block period as defined in Section 158B(a) of the Act. This has to be done irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not as provided in Sub-section (2) of Section 158BA. This expression clearly indicates that the block assessment of undisclosed income and its being charged to a higher rate of tax prescribed, was independent of the pending regular assessments and it operated in a different field from the assessment of undisclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment made under this chapter of undisclosed income and the regular assessment made under Section 143(3). The powers of regular assessment are kept intact. All the provisions affecting such regular assessments and all the statutory consequences flowing from exercise of such powers would follow along with this special assessment procedure devised for dealing with undisclosed income as a result of search. 56. The legislature thought it fit to insert an Explanation to Section 158BA by the Finance (No. 2) Act, 1998 with retrospective effect from 1st July, 1995 to explain and declare that the assessment made under Chapter XIV-B of the Act shall be in addition to the regular assessment in respect of each previous year included in the block period, and the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period. It further provides that the income assessed in this chapter shall not be included in the regular assessment of any previous year included in the block period. The mere fact that the AO is empowered to assess the concealed income in regular assessment does not lead to the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded by the Finance Act, 2002 with retrospective effect from 1st July, 1995. The said provision is reproduced below: 158B--In this Chapter, unless the context otherwise requires,-- (a)......:.... (b) undisclosed income includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act or any expense, deduction or allowance claimed under this Act which is found to be false. It may also be relevant here to reproduce Section 158BB(1): 158BB(1).--The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal, if any, made before the CIT(A) for asst. yr. 1999-2000. This clearly shows that the assessee as well as the AO both had understood the relevant provisions in the same manner, namely, that the addition, if any, is required to be made in respect of alleged bogus purchases or inflated purchases made from these five suppliers, it is to be made in the block assessment and not necessarily in the regular assessment. If this point is not considered in block assessment, it will escape tax altogether, as regular assessments have already been made, in which no such additions have been made. In view of the aforesaid facts and discussions, we are of the view that the question relating to addition of purchases made, from these bogus suppliers or addition in respect of inflated purchase price shown as paid to these bogus suppliers comes within the ambit of block assessment under Chapter XIV-B. 59. The other main argument advanced by the learned counsel was that the impugned assessment made by the AO for the block period is solely based on enquiries made by the Addl. DIT/Dy. DIT and on the appraisal report sent by them. All the affidavits/statements on which the AO has placed reliance we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel on the judgments of the Hon'ble Supreme Court in the cases of CIT v. Plantation Corporation of Kerala (supra) and Andhra Pradesh Chambers v. State of AP and Ors. (2001) 247 ITR 36 (SC) holding that resort to any interpretative process to unfold legislative intent in a case where statutory language is clear, is impermissible, is misplaced, as the judgment of the Hon'ble Gujarat High Court in the case of Arti Gases (supra) is a direct decision involving interpretation of the relevant provisions contained in the IT Act, 1961. Furthermore, there is no merit in the aforesaid submissions of the 4earned counsel as the AO has provided adequate and reasonable opportunity to the assessee in respect of all such material, affidavits, statements obtained by the Dy. DIT/Addl. DIT in the course of assessment proceedings for the block period. A perusal of the assessment order at p. 2 shows that the AO gave complete details about such inquiries, affidavits/statements along with the letter dt. 4th Dec., 2000. Thereafter, the AO gave several opportunities to the assessee in respect of all such material gathered by the Addl. DIT/Dy. DIT before using the same against the assessee in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er circumstantial evidence referred to in the assessment order. 63. Let us examine the facts relating to these five parties from whom the assessee claimed to have made purchases of wash cotton seed oil aggregating to ₹ 11.99 crores. The detailed facts stated by the AO in the assessment order in relation to all these five parties viz. Adinath Corporation, Tirupati Corporation, M/s Krishna Industries, M/s Karnavati Industries and M/s Vimal Industries, clearly indicate the following facts and features: (A) Certain blank bill books, blank signed cheque books, letter heads and vouchers of these concerns were found from the business premises of the assessee during the course of search conducted on 24th Feb., 1999. (B)(i) There are various similar features in relation to bank accounts of all these suppliers. For instance, the bank account of Adinath Corporation was opened on 17th April, 1998 by depositing ₹ 1,000 in cash on that date during the block period from 17th April, 1998 to 7th July, 1998. The total deposits in their bank account was Rs. 2,10,54,076.50. Whenever any cheque given by the assessee towards payment of purchase price to this party wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 942369 3,97,792 These amounts have been credited in the bank account of M/s Tirupati Corporation with Visnagar Nagrik Sahakari Bank Ltd. A copy of account of Tirupati Corporation in the books of the assessee has also been placed at p. 42 to 45 of the said paper book, which shows that the purchase bills were obtained from Tirupati Corporation only upto 13th Feb., 1998. Thereafter, that account was discontinued and purchase bills were obtained from Adinath Corporation from 8th April, 1998 to 7th July, 1998. Likewise, cheque No. 79489 dt. 7th July, 1998 for ₹ 3,79,967 debited in the account of Krishna Industries in the books of the assessee has been deposited in the bank account No. 531 with Mehsana Urban Co-op. Bank Ltd. in the name of M/s Adinath Corporation. It may also be relevant here to mention that the total purchases claimed to have been made by the assessee from M/s Adinath Corporation during the period from 8th April, 1998 to 7th July, 1998 was ₹ 2,16,13,276 out of which deposits in their bank account were only ₹ 2,10,54,076. This implies that remaining cheques must have been deposited by M/s Adinath Corporation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of M/s Vimal Industries, though various payments even prior to December, 1998 have been made by cheques other than the cheques marked as self cheques. (B)(iv) Krishna Industries : They opened bank account No. 4203 with Visnagar Nagrik Sahakari Bank Ltd. Usmanpura Branch on 30th June, 1998 with an initial deposit of ₹ 1,100. The total deposits in this bank account for the period from 30th June, 1998 to 21st July, 1998 were ₹ 29,93,310 as mentioned at p. 20 of the assessment order which tallies with copies of bank statement furnished at p. 79 of the paper book dt. 1st July, 2002. The assessee in the paper book has also submitted copy of bank statement of Krishna Industries with Mehsana Urban Co-op. Bank account No. 1130. This account was opened with an initial deposit of ₹ 1,000 on 2nd July, 1998. The total purchases claimed to have been made by the assessee from this party were of ₹ 3,19,56,782. The total deposits credited in the bank accounts of Krishna Industries as mentioned at p. 34 of the assessment order in ₹ 2,79,01,621. The deposits in bank account No. 4203 with Visnagar Nagrik Sahakari Bank were followed by withdrawal of an equiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1100 and balance in all these accounts for most of the times ranged between small figures of ₹ 1000 to ₹ 10,000. Had they really supplied the goods on credit of such large magnitude to the assessee, as claimed by the assessee, they will have some evidence of substantial contribution of capital and/or substantial credit purchases made from various mills/big traders. The debits in their bank accounts would have mostly been by way of crossed/account payee cheques issued in favour of those oil mills/big traders from whom they have purchased such material and in turn supplied to the assessee. The major withdrawals by self cheques immediately when the cheques in their bank accounts were credited exposes the impossibility of their having supplied such material of lacs/crores of rupees on credit to the assessee. (C) The ITO made inquiries from sales-tax authorities in respect of some of these suppliers. Those inquiries revealed that the copies of ration cards given by these name lenders to sales-tax Department were found to be fake, Copies of electricity bills did not pertain to the addresses given. Also the residential addresses of owners given to the sales-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not ask the ITO to produce these suppliers and brokers for their cross-examination nor any material in rebuttal of such clinching and categorical denial by the suppliers and brokers, was furnished. The AO thereafter once again gave a show-cause notice dt. 8th Jan., 2001 which has been reproduced at p. 28 of the assessment order. The AO clearly stated that the purchases made from all these parties are bogus in nature. The gist of inquiries conducted by the Department along with the copies of statements/affidavits have already been given to the assessee along with the letter dt. 4th Dec., 2000, The assessee was given one more opportunity to explain the same. 64. The assessee submitted a reply dt. 22nd Jan., 2001 which has been reproduced at pp. 28 and 29 of the assessment order. In this letter the assessee has inter alia, simply stated as under: You have based your such opinion on the basis of statements and affidavits of certain parties. In this connection, it may please be noted that as far as the company is concerned, the company has purchased the goods from these parties and has made the payment through a/c payee cheque which is not disputed by any of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all these affidavits at the fag end of the assessment proceedings, when it was soon going to be barred by limitation of time. No request for cross-examination of these suppliers or brokers was made by the assessee in any of the letters submitted to the AO during the course of assessment proceedings. 66. The burden lies on the assessee to prove that the suppliers were genuine suppliers and they really had capacity to supply wash cotton seed oil of such large magnitude costing several lakhs/crores within such short period and they in fact had supplied such material to the assessee. In the normal course, if these purchases of ₹ 11.99 crores would have really and genuinely been made from these parties, as claimed by the assessee, the assessee would at once raise a strong protest after receiving the copies of statements of those suppliers/brokers explicitly and emphatically denying such transactions and the assessee would have submitted in the very first reply to show-cause notice dt. 4th Dec., 2000 that their affidavits are blatantly false and all these persons should be examined in their presence. The assessee should have himself produced all these suppliers/brokers soon a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be proved by producing cogent material and evidence. The assessee rested with submission of subsequent affidavits of suppliers. The least, in rebuttal of earlier affidavits/statements, which the assessee should have done, in addition to submission of their affidavits, is to produce all those suppliers and brokers along with the books of accounts, purchase vouchers and evidence to show their capacity to supply goods worth several lakhs/crores in such short period. The assessee obtained those subsequent self-serving affidavits from the suppliers. Therefore, the onus lies upon the assessee to produce those persons along with their records, to prove that earlier affidavits do not contain true and correct facts and were obtained under coercion. The assessee failed to produce them before the AO. They have also failed to produce them before the Tribunal along with their relevant records, though a specific opportunity was granted to them during hearing. All these facts prove beyond doubt that all the five supplier concerns were created/floated only for the purposes of issuing fake/fictitious bills. They had no capacity to supply wash cotton seed oil of such large magnitude to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions has admitted that all the entries of such purchases made from bogus parties are appearing in the inward register but he has pointed out certain strange coincidence in relation to those entries. For instance, he has pointed out that nine trucks shown as per inward register 2311 to 2319 have been shown as received on 16th Nov., 1997 from M/s Tirupati Corporation. All such nine trucks have been emptied within one hour and 15 minutes as per inward and outward time recorded in the said register. It has been pointed out that the tankers received from other regular dealers have taken more than 4 to 5 hours in carrying out the entire process of unloading which includes weighment, taking sample from the tanker for the purpose of checking the quality, colour and odour and then after obtaining lab report it has to be emptied in the assessee's tanks. The assessee in the rejoinder has replied that they had adequate capacity to unload 10 to 12 tankers at their unloading station. It has also been submitted that there are other instances where third parties have unloaded their tankers within such short time. The day-today stock records are prepared on the basis of raw material entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial has really been received/purchased, the assessee is entitled to deduction of reasonable price in respect of such material purchased and consumed. The AO has also reported in the remand report submitted to the CIT(A) that such purchases have been made almost at the prevailing market rate/price charged by other regular dealers. Therefore no disallowance of any part amount would be justified in the present case, as was done in the case of Vijay Proteins Ltd. (1996) 55 TTJ (Ahd) 76 : (1996) 58 ITD 428 (Ahd) or in some other cases. He also pointed out that part disallowances made in respect of inflation of purchase price made in the cases of Adinath Industries and Arun Industries have been deleted by the Tribunal and those orders of the Tribunal have been confirmed by the Hon'ble Gujarat High Court. The judgment of the Hon'ble Gujarat High Court is binding, says the learned counsel. We have already indicated while discussing the ratio of principles laid down by the Hon'ble Gujarat High Court in these two cases that the facts of the present case are totally different. In the present case there is an unequivocal, clear and emphetic denial by these suppliers as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rces also enable the assessee to utilise their black money/unaccounted funds for making purchases of such raw material in cash from open market. The assessee has shown credit purchases from these name lenders/billing agents. A statement of peak has been reproduced in earlier part of this order which shows that the peak amount credited in the account of one of these name lenders/billing agents relating to credit sales alleged to have been made by them to the assessee is ₹ 1,54,14,534. This only gives an idea of the large amount of black money kept utilised by the assessee for making unaccounted purchases from open market in cash and obtaining the bills from billing agents/name lenders to record such quantity of material purchased in their stock registers, to meet the effective checking done by the civil supply department and by other departments. The assessee has not only derived the benefit of circulation of large black money for purchases of such unaccounted material from open market but has also derived extra profit by purchasing them at a much lower rate from the real suppliers/mills, who had really supplied the material in question to the assessee. Therefore what was actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such material may be willing to sell such unaccounted goods at a much lower rates in view of various manifold advantages, such as savings in all kinds of taxes, duties, utilisation of black money and various other factors, The legislature in its wisdom has amended Section 40A(3)by the Finance Act, 1995 w.e.f. 1st April, 1996 which provides for disallowance of 20 per cent of such expenditure incurred otherwise than by crossed or account payee cheques. This figure of 20 per cent must have been arrived at by taking into consideration all the relevant facts. This 20 per cent disallowance is contemplated in cases where black money is not employed in respect of such unaccounted purchases. It is applicable only in cases where the payment of expenditure exceeding ₹ 20,000 is made otherwise than by a crossed cheque or crossed demand draft. Here is a case where not only the benefit by way of avoidance of various kinds of taxes such as excise duty, sales-tax at various stages of inputs are there but it is a case where such purchases on the strength of fictitious invoices given by the billing agents/name lenders are treated as credit purchases. Therefore, while estimating the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra). 71. On a careful consideration of the entire relevant facts, we are of the opinion that it would be just and proper to direct the AO to restrict the addition on account of inflated purchases to 25 per cent i.e. ₹ 3 crores which is approximately equal to 25 per cent of ₹ 11.99 crores shown to have been purchased from these five bogus suppliers. 72. Now we will deal with ground No. 4 raised in NKPL's appeal. The assessee has challenged the confirmation of an addition of ₹ 3,86,968 being the profit on alleged sales made by the company. The AO has dealt with this issue in para 8 on p. 35 and onwards of the assessment order. During the course of search, one loose paper file was seized from the premises of NKPL, which is marked as Annex. A-G of Panchnama prepared at the time of search. In this file, certain sale bills of NKIL in respect of sales made to NKPL were found. The said file also contained certain sale bills issued by NKPL in respect of sales made to Triveni Corporation and Tirupati Corporation. These bills of purchases and sales found from the said seized file were not accounted for in the books of accounts of the assessee as well as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2,05,86,761, after reducing ₹ 2,01,99,793 being the cost of purchases made by the assessee from NKIL, addition should be sustained only to the tune of ₹ 3,86,968 in substitution of both the aforesaid additions made by the AO. The CIT(A) accordingly sustained the addition of ₹ 3,86,968. 74. The learned counsel appearing on behalf of the assessee reiterated his arguments as were made before the learned Departmental authorities, In the written submissions submitted before the CIT(A), it was submitted vide paras 4.2 to 4.4 that these transactions had not actually taken place. It was admitted that there was a seal of sale entry on the bills of NKIL but the transactions did not finally take place. This can be verified from the dayto-day stock register maintained by NKIL and NKPL. No evidence whatsoever has been adduced by the AO to prove that the assessee has in fact purchased and sold wash cotton seed oil. The addition cannot be made merely on the basis of certain loose papers found during the search. Copy of board's resolution confirming the cancellation of these bills was also furnished at the time of assessment. An alternative prayer was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments have been submitted by the Department in their paper book dt. 22nd Oct., 2002. Copies of bills issued by NKIL to NKPL included in Annex. A-6 clearly shows that the sale invoices were issued by them for wash cotton seed oil. It also bears truck numbers, delivery challan numbers and inward date and number and date on the seal of NKPL. The sale invoices issued by NKPL in favour of Triveni Corporation and Tirupati Corporation are for Exp. Soyabean Oil . These bills also contain truck numbers and delivery challan numbers, etc. 76. The assessee in the rejoinder has simply stated in para 13.1 that the allegation of the learned Senior Departmental Representative that the supplies by M/s Kothari Global is not correct since Kothari Global has supplied from some traders or manufacturers nearby Ahmedabad. The supply was in December, 1997. The old records are not available. Further it was also mentioned that such evidence is being produced for the first time before the Tribunal. Such objection was not raised by the Addl. DIT or by the AO or CIT(A). The same cannot therefore be raised for the time before the Tribunal. 77. We have considered the submissions made by the learned r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and after providing adequate and reasonable opportunity to the assessee. 79. Ground No. (6) relates to levy of interest under Section 158BFA(1). No arguments were advanced by the learned representatives of both sides in relation to this point. The AO is directed to grant consequential relief. 80. Ground No. (7) relates to initiation of penalty proceedings under Section 271(1)(c). No such ground can be raised in an appeal against the assessment order. Separate appeal will lie against any such penalty, if and when levied. This ground is therefore infructuous and is rejected accordingly. IT(SS)A No. 41/Ahd/2002 in the case of N.K. Proteins Ltd.: 81. We will now deal with the cross appeal submitted by the Revenue in the case of N.K. Proteins Ltd. being IT (SS) A No. 41/Ahd/2002. The Revenue has raised the following two grounds in this appeal: 1. The learned CIT(A) has erred in law and on facts in deleting the addition of ₹ 31,48,13,392 made on a/c of unexplained investments. 2. The learned CIT(A) has erred in law and on facts in deleting the addition of ₹ 2,01,99,792 made on a/c of unexplained purchases. 82. The AO has discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar nature was in the case of NKIL which is subject-matter of revenue's appeal in IT(SS)A No. 38/Ahd/2002. Ground No. (2) of Revenue's appeal in IT(SS)A No. 38/Ahd/2002 in the case of NKIL relates to deletion of addition of ₹ 6,63,19,496 made in respect of alleged unexplained deposits in the accounts of bogus suppliers. The said point has been discussed in para 13 of assessment order passed in the case of NKIL which is reproduced below: 13. Unaccounted payments: As already discussed in the preceding paras, certain bank accounts were found during the course of search of different concerns. After inquiries it was held that these concerns are bogus and purchases made by the assessee to these concerns are added as bogus purchases. From the perusal of these bank accounts, it is noticed that in the bank account of Krishna Marketing, total amount of ₹ 2,47,14,062 is deposited during the financial year 1998-99. In the bank account of Somnath Industries total deposits made is amounting to ₹ 3,24,57,568 during the financial year 1998-99. These also represent payments made by assessee group concerns for purchases and other expenses. Inquiries are being c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,50,05,834 7. Krishna Industries 6,52,08,617 8. Somnath Industries 3,25,77,224 9. Krishna Marketing 2,47,14,062 ------------- Total 44,43,05,403 -------------- It appears that these deposits in the bank accounts of these suppliers are for the period upto the date when copies of their bank accounts were obtained by the Dy. DIT/Addl. DIT. However, details in respect of deposits in their bank accounts upto the date of search i.e. 24th Feb., 1999 have been given in para 10 on p. 33 of the assessment order, which are as under: .. 85. The AO relying upon the affidavits of those suppliers obtained by the Dy. DIT, which have been discussed while dealing with the issue relating to bogus purchases, made an addition of ₹ 37,19,85,062 which was bifurcated in two years falling in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment orders but those payments made by cheques by NKIL and NKPL by no stretch of imagination be treated as unexplained deposits in the bank accounts of those bogus suppliers. The same addition cannot be made in the hands of either NKIL or NKPL, nor in the case of Shri Nileshbhai K. Patel. As regards the deposits aggregating to ₹ 21,89,82,084 are concerned, it was contended that all these deposits in the bank accounts of various suppliers have been received by cheques from other parties. The AO has brought no material on record to show that such undisclosed deposits in the bank accounts of these suppliers were made by NKIL or by Shri Nileshbhai K. Patel, On the other hand, the AO, while passing the assessment orders in the cases of NKIL and NKPL, had observed that the inquiries would be made in relation to those deposits by cheques in the accounts of these suppliers to find out which other concerns have made payments by cheques to these suppliers and substantive additions will be made in the hands of those concerns after necessary inquiries and investigation. The assessee has placed reliance on the following judgments before the CIT(A): (i) CIT v. Daulatram Rawatm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not brought any evidence in this respect that the appellant was benamidar of such parties. As a matter of fact, even the names of parties from whom such amounts have been received and deposited in the said bank accounts have not been discussed anywhere in the assessment order. The only reference made by the AO is at p. 39 of the order in the case of NKIL and at p. 35 of the order in the case of NKPL, in which the AO had observed that inquiries will be made in respect of those concerns and substantive addition made in those cases. In view of these facts, there is no justification for treating the same as undisclosed income of the appellant and that too without any finding or supporting evidence emerging out of search action under Section 132 in the case of appellant. (c) In respect of the amount of ₹ 3,64,01,316 as stated in the written submissions before me, the amount is represented towards sale by NKPL and the transactions are duly recorded in the books of account. There is no finding that the source of the same is the appellant or that it is based on any material discovered as a result of search. (d) The appellant has strongly submitted that the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of the proprietors/concerns. It is relevant to note that it is observed by the AO that withdrawals made relating to purchases of NKPL have been used by the appellant itself. 7.5 In view of the above facts, I do not see any justification in making further addition on the basis of deposits in the said accounts without any basis. The addition made on this account on protective basis, therefore, cannot be sustained and directed to be deleted. 90. The CIT(A) in the case of NKIL has considered this issue in para 6 to 6.2 on pp. 12 to 14 of his order as under: 6. This relates to addition of ₹ 5,71,71,630 in respect of deposits in the bank account of the said suppliers and ₹ 91,47,866 on account of undisclosed deposits in the said bank account. This has been discussed and referred by the appellant in para 2.2 of its written submissions reproduced above. The said additions have been made on protective basis. It is pleaded by the appellant in the written submissions as per para 10 as under: 10, Unaccounted payment of ₹ 5.71 crores (para 13page No. 38 and 39): 10.1 The learned AO has made addition of ₹ 5.71 crores as unaccounted paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as benamidar and the deposits in the accounts of suppliers of NKIL and NKPL is treated as undisclosed income in the case of Nilesh K. Patel and therefore, the question of treating any such payments as unaccounted in the case of NKIL even on protective basis does not arise. 6.1 Similarly, in respect of addition of ₹ 91.47 lakhs, it has been submitted as under as per para 11 of the written submissions as under: 11. Unaccounted deposit of ₹ 91.47 lakhs (para 13 page No. 39) : 11.1 The learned AO has made addition of ₹ 91.47 lakhs as unexplained deposit since it is argued that the company has made such deposits in the account of Sejal Enterprises. In other words, Sejal Enterprises is treated as benamidar of NKIL. There is no evidence whatsoever adduced by the learned AO for holding Sejal Enterprises as benamidar of the company. In fact, the company has made deposit since it is argued that the company has made such deposits in the account of Sejal Enterprises. 11.2 In other words, Sejal Enterprises is treated as benamidar of NKIL. There is no evidence whatsoever adduced by the learned AO for holding Sejal Enterprises as benamidar of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records in computers. You are requested to note that we have the record of the name of the branch through which the instruments were presented by our bank. Moreover, all original instruments are presented to the concerned branch of the bank. Therefore it is not possible to furnish the data as per your requirements. 2. Page No. 40 to 49 all the details furnished by the Mehsana Urban Co-op. Bank Ltd. In the details filed by the bank, the cheque number and name of the bank mentioned. They have not mentioned the branch of the bank. Kindly see the page No. 39 wherein the reply the bank has written that we don't have records of the bank branch from which these instruments were presented. Kindly see the page No. 1 in which Co-operative Bank of Ahmedabad Ltd. has stated that the cheque No. 44156 as mentioned is not clear from this branch and so we are unable to furnish further details as required by you. The Kalupur Commercial Co-op. Bank Ltd. has stated as appeared at page No. 4 that furnish the name of the company under N.K. group and the date of clearance of cheque. On page No. 50, the Sabarmati Co-op. Bank Ltd. has stated due to shifting process our records related to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut in the name of Swastik Overseas Ltd. The learned Senior Departmental Representative admitted that no such interrogation of Shri Rajesh Mehta was made. The extracts from the statement of Shri Rajesh Mehta reproduced on p. 10 of the assessment order in the case of NKPL shows that not a single question was put by the AO or Addl. DIT to Shri Rajesh Mehta about Swastik Overseas Ltd. 93. Likewise, the learned Senior Departmental Representative has also drawn our attention to the bank account opening form of Issan Overseas Ltd. placed at p. 34 of the said paper book. One of the persons authorised to operate the bank account on behalf of Issan Overseas Ltd. is Shri Rajesh Mehta, the same person who claimed to have acted as broker on behalf of the assessee. Not a single question was put to Shri Rajesh Mehta-broker in the said statement reproduced at p. 10 of the assessment order in the case of NKPL and at p. 9 of the assessment order in the case of NKIL. There is no discussion about any transaction carried out by the assessee with Swastik Overseas Ltd. and Issan Overseas Ltd. in the assessment order. Copy of bank account of Tirupati Corporation submitted at p. 20 of the said submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The address of M/s Madhukant Agrotech (P) Ltd. as given in the account opening form is as under: Madhukant Agrotech (P) Ltd. Aarohi, Nr Vijay Restaurant, University Road, Navrangpura, Ahmedabad. 94. The persons authorised to operate the said bank account are Shri Kiritbhai K. Shah and Shri Maulik K, Shah. The account was introduced by Giriraj Trading Co., Girishkumar K. Shah-HUF. Copy of resolution passed for opening of the said bank account by Madhukant Agrotech (P) Ltd. was also supplied by the said bankers to the AO. The Bench required the learned Senior Departmental Representative to state as to whether any further investigation was made from M/s Madhukant Agrotech (P) Ltd. to show as to whether they had any direct or indirect connection with any of the persons or concerns of N.K. Group. The learned Senior Departmental Representative admitted that no further enquiries were made from Madhukant Agrotech (P) Ltd. The learned Senior Departmental Representative also tried to explain that the bankers have indicated that they did not have the records of bank branches from which various instruments relating to such bank accounts were presented. For example, atten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NKPL and NKIL. There is no material or evidence on record that any funds were provided by Shri Nileshbhai Patel for deposits in all or any of these bank accounts. Shri Nileshbhai Patel had no transactions with any of these suppliers. Mere introduction of some bank accounts cannot lead to the conclusion that the assessee were the real owners of the amounts credited in the bank accounts of such suppliers particularly when all such credits in the bank accounts of those suppliers are by way of cheques deposited in these accounts. Such cheques other than cheques given by NKPL and NKIL towards purchase invoices were given by outside parties/third parties with whom neither Shri Nileshbhai Patel, nor NKPL nor NKIL had any connection whatsoever. The burden squarely lies upon the Revenue to prove that such cheques were deposited by these assessees. The learned counsel relied upon the judgment of the Hon'ble Supreme Court in the case of CIT v. Daulatram Rawatmal (supra); and the decision of Tribunal in the case of Parakh Foods Ltd. v. Dy. CIT (supra) and various other decisions referred to in para 4.7 of the order of CIT(A) in the case of Shri Nileshbhai Patel. The learned counsel furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of NKPL and NKIL on protective basis with the observation that further inquiries will be made from various branches of banks to ascertain that which other concerns have given such cheques which have been deposited in the bank accounts of these bogus suppliers. It is also clear from the facts discussed above that the Department did not make any serious efforts to make effective investigation or deep further probe in this regard after completion of the assessments on 30th April, 2001. Some letters were sent to the bankers in the month of March to May, 2001 and thereafter the matter was not pursued. 97. The deposits in the bank accounts of these bogus suppliers can be validly added in the hands of any of these assessees only if the Department discharges the burden of proving that these suppliers were benamidars of any one of these three assessees of N.K. Group and the Department has to further discharge the burden of proof that the deposits in these bank accounts by way of cheques were made out of funds provided by these persons or concerns of N.K. Group. Such a burden has to be discharged by the Revenue by bringing positive and clinching evidence on record. No such evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the record to show that the amount came from the coffers of the respondent-firm or that it was tendered in Burrabazar Calcutta Branch of the Central Bank, on 15th Nov., 1944, on behalf of the respondent. As regards the destination of the amount, it has already been mentioned that there is nothing to show that it went to the coffers of the respondent. On the contrary, there is positive evidence that the amount was received by Biswanath on 22nd Jan., 1946. It would thus follow that both as regards the source as well as the destination of the amount, the material on the record gives no support to the claim of the Department. 99. In the present case the Department has not even found out the names of the concerns/parties who gave cheques to these bogus suppliers aggregating to ₹ 21,89,82,084 upto the date of search and further amount deposited in their bank account even after the date of search upto the time when Dy. DIT/Addl. DIT had obtained copies of bank accounts of these suppliers from respective banks. It will be worthwhile to repeat that as per chart given in para 86 total deposits in the bank accounts of those bogus suppliers as per show-cause notice dt. 18th Jan., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to whom such cheques/demand drafts have been given can be obtained from the respective branch of the concerned banks. The Department can also obtain photo copies of self cheques by which the names of the persons who have withdrawn such cash can be found out by interrogation of concerned persons including bogus suppliers/concerned employees of the banks and concerned employees of the concerns of assessee group and other concerns who gave such cheques. The total deposits in the bank account of these bogus suppliers/billing agents/name lenders is more than ₹ 44 crores. The Department has only found out the details of cheques given by NKIL and NKPL which is only a small portion thereof. The details of major credits in all these accounts have not yet been found out by the Department. It is incumbent on the part of the Department to find out complete details of all other concerns who gave such cheques to these bogus suppliers. Those other concerns might also have taken fictitious purchase invoices from these bogus suppliers. They may not have even received the material sought to have been supplied to those other concerns through such fictitious invoices issued by such bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 41/A/2002]. This ground relates to deletion of addition of ₹ 2,01,99,792 made on account of unaccounted purchase. As already stated hereinbefore, this addition was made on the basis of invoices found in Annex. A-6 during the search. Certain sale bills issued by NKIL in respect of sales made to NKPL were found and seized during the search. These invoices were not accounted for in the books of accounts of the assessee as well in the books of NKIL. We have already dealt with this issue while dealing with the connected ground raised in this regard in assessee's appeal. After consideration of the entire relevant facts, we consider it just and proper to set aside the orders of the CIT(A) and the AO in relation to this ground and restore the matter back to the AO for conducting further probe and decide this issue in accordance with the provisions of law and after providing reasonable opportunity to the assessee. IT (SS) A No. 16/Ahd/2002 filed by assessee in the case of NKIL: 102. Now we will deal with assessee's appeal in the case of NKIL in IT (SS) A No. 16/Ahd/2002. The assessee has raised the following grounds in this appeal: 1. The learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is similar in contents with the affidavits and statements obtained in the case of N.K. Proteins Ltd. and therefore, it appears that such affidavit is obtained under undue influence, therefore, any finding based on such affidavit cannot be relied upon. 2.7 The appellant further says and submits that the learned Dy. CIT ought to have summoned the said persons and should have found out the truth and that the opportunity to cross-examine the said persons should have been given. 2.8 The appellant further says and submits that the assessee-company has in fact, made purchases and has furnished the evidences at the time of assessment by giving the details such as date of inward, quantity received, MRS No., report No. along with the xerox copy of purchase bill, weighment slip, material inward receipt, transporter's LR, analysis report with reference to inward and stock register and that the assessee has also stated that if the purchases are ignored the production is more than the consumption of raw material. The appellant submits that the CIT(A) called for the remand report and the AO submitted remand report dt. 26th Dec., 2001 confirming the receipt of material and the consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means that the power is quasi-judicial and not of administrative nature. 6.2 The appellant says and submits that the approval granted by the Jt. CIT appears to be mechanical without application of mind inasmuch as the approval is granted on 30th April, 2001, i.e., date of passing of the order and the date of service of the order. 7. The interest under Section 158BFA(1) is wrongly charged. 8. The proceedings under Section 271(1)(c) r/w Section 158BFA(2) is wrongly initiated. 103. Ground No. 1 raised in this appeal is similar to ground No. 1 raised in the appeal of NKPL. The facts are similar. In view of the reasons given in our order in the case of NKPL in relation to this ground, we hold that this ground is devoid of any merit and is accordingly rejected. 104. Ground No. 2 relates to confirmation of addition of bogus purchases made from Sejal Enterprises amounting to ₹ 2,50,427 for asst. yr. 1995-96, ₹ 62,75,837 for asst. yr. 1998-99 and ₹ 61,21,796 for asst, yr. 1999-2000 amounting in all to ₹ 1,26,48,060. Ground Nos. 2.1 to 2.10 and Ground No. 3 relating to the aforesaid additions of ₹ 1,26,48,060 made in respect of bogus pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o given are recorded on p. 9 of the assessment order. 107. The facts relating to Krishna Marketing have been discussed on pp. 9 and 10 of the assessment order. They opened their bank account on 18th June, 1998 with Sabarmati Co-op. Bank Ltd. on 18th June, 1998 with initial deposit of ₹ 1,100, The proprietor of this concern is Shri Rajesh P. Doshi. The nature of this bank account is exactly similar to the other bank accounts of other alleged bogus suppliers. The address given by Shri R.P. Doshi to the bank was also fictitious. Shri R.P. Doshi filed an affidavit before the IT authorities in which it was stated by him that the whole business is controlled by Shri Nileshbhai Patel who is the main person handling all the day-to-day activities of the assessee-company. The AO arrived at similar conclusion in relation to purchases shown to have been made by NKIL from this fictitious entity. 108. The facts relating to Sejal Enterprises have been discussed by the AO on pp. 10 and 11 of the assessment order. The summons were issued to proprietor of Sejal Enterprises on the address given to the bank but those were returned back as the party was not available at the given addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in the bank account of this concern was by way of transfer entries from the appellant and moneys were immediately withdrawn from the said bank account. The CIT(A) also relied upon the judgment of the Hon'ble Delhi High Court in the case reported in CIT v. La Medica (2001) 250 ITR 575 (Del). The CIT(A) also observed that since no affidavit has been submitted in respect of Sejal Enterprises, the submissions made relating to affidavit of other parties are not relevant. It is also found from the orders of the AO and the CIT(A) that the assessee had, inter alia, submitted the affidavit of Shri Kaushik R. Surti, proprietor, M/s Somnath Industries. The AO has rejected the said affidavit as the signature thereon did not tally with the signature on his affidavit filed before the Dy. DIT. 111. The learned counsel made oral arguments and also submitted written arguments with the heading notes . The submissions made by the learned counsel are almost similar as were made in the case of NKPL. Reliance has been placed on similar set of judgments in this case also. It has been argued that even if it is assumed that these concerns were bogus concerns, so far as the assessee is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own in those cases does not in any manner support the view so taken by the CIT(A). The basic facts that the concerns of N.K. Group viz. NKPL and NKIL are resorting to the device of obtaining fictitious purchase invoices from the bogus suppliers came to the knowledge of the authorised officers, Dy. DIT/Addl. DIT as a result of search. The result of search clearly demonstrated that the assesses is claiming deduction in respect of inflated purchases, by debiting bogus purchases or may be by inflating the purchase price by obtaining the purchase invoices from name lenders/billing agents. It may also be relevant here to once again refer to the amended definition undisclosed income given in Section 158B(b) which, inter aha, includes any expenses, deduction or allowance claimed under this Act, which is found to be false. This detection of falsity of purchases made from all these parties was made by the Department only as a result of search. If search would not have been conducted, the Department would have never come to know of such a device adopted by the assessee. We are therefore of the considered opinion that the order passed by the CIT(A) of deleting such additions is not valid and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st May, 1998. These figures have been given just with a view to show that credit purchases were shown as having been made from these billing agents/name lenders to aforesaid extent which proves that the assessee used black money for purchase of raw material from undisclosed sources which are within the exclusive knowledge of the assessee. 117. On a careful consideration of the entire relevant facts, we are of the view that it would be just and proper to direct the AO to restrict the addition in respect of undisclosed income relating to purchases shown as having been made from these three billing agents/name lenders, to only 25 per cent of total purchases claimed to have been made from these three parties i.e. 25 per cent of ₹ 2,92,93,288 which comes to ₹ 73,23,322. The basis of adopting 25 per cent of such purchases is same as discussed in detail while upholding the addition of 25 per cent in the case of NKPL in relation to similar grounds. 7.11. It is worth mentioning Hon'ble Apex Court in N K Proteins Ltd. vs. DCIT (2017) 250 Taxman 22 on the issue of income from undisclosed sources and bogus purchases shown on the basis of fictitious invoices where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder and merely granted relief to the assessee. Even right from the assessment stage till the stage of this Tribunal, the assessee did not produce the party. Before us, the stand of the Revenue was that the assessee is a manufacturer whereas the stand of the assessee is that the assessee is a manufacture as well as trader. Even as per mandate of Article 265 of Constitution of India only due taxes has to be levied/collected. Therefore, in the interest of justice and fair play, we deem it appropriate to direct the assessee to produce the concerned party before the learned Assessing Officer along with necessary evidence in support of its claim. The learned Assessing Officer is also directed to examine the factual matrix and also record a finding whether the assessee is a manufacturer/trader or both and then decide in accordance with law considering the aforementioned decisions along with the decisions in the case of N K Proteins Ltd (supra). We have also perused the orders relied upon both sides and are of the view that there cannot be any sale without purchases and only profit embedded therein can be considered. In the present appeal, even the learned counsel for the assessee was ask ..... X X X X Extracts X X X X X X X X Extracts X X X X
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