TMI Blog2019 (2) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... ss receipts and expenses ratio or profit is not at all the wholly acceptable procedure. Some further enquiry was required. Equally the arbitrary was the method of addition of ₹ 36 crore to the expenses of the assessee. On what basis the Settlement Commission got this figure? Most probably it was using the figure to bring the receipt expenses or profit/expenses ratio of the assessee within the acceptable range. In the case of Ajmera Housing Corporation & Anr. Vs. Commissioner of Income Tax [2010 (8) TMI 35 - SUPREME COURT OF INDIA] as clearly tells us that where the settlement commission passed a final order without considering unexplained expenses, loans and surplus etc., the Court of jurisdiction could interfere. Assessment of undisclosed income can only be made following the principle of Brij Lal & Ors. Vs. Commissioner of Income Tax [2010 (10) TMI 8 - SUPREME COURT] - decided against assessee. - APO 73 of 2018, GA 581 of 2018, WP 33 of 2016 with APO 74 of 2018, GA 582 of 2018, WP 34 of 2016 with APO 75 of 2018, GA 583 of 2018, WP 35 of 2016 - - - Dated:- 31-1-2019 - Mr. Justice I. P. Mukerji And Justice Amrita Sinha For the Appellant : Mr. J. P. Khaitan, Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The persons from whom these shell companies allegedly bought fuel, spares and other supplies are not traceable and the evidence establishes beyond doubt the fact that no transactions actually took place. (supra 9 12) (vi) All the given addresses of these shell companies, their directors and the alleged suppliers are of premises either owned or rented by the Jains. (supra 8 9) (vii) The money trail or the modus operandi for withdrawal of money paid by the applicant proves that the expenditure booked through the said four companies is bogus. (supra 5, 7, 9 12) (viii) Thus, it would be seen that the Jains have created an elaborate facade of these four shell companies. These four shell companies had 53 alleged sub suppliers and service providers. They were purported to be paid by cheque by the shell companies. The most intriguing discovery by the Income Tax Department was that these sub contractors were sought to be paid by cheque but, almost immediately, after the credit of those cheque amounts, the entire amount was siphoned off. The department found the addresses, both official and residential of the directors of the shell companies to be erroneo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter a detailed investigation and enquiry. At this stage it is very important to analyse the reasoning process adopted by the Commission. It referred to the search and seizure made under Section 132(1) of the said Act. It opined that during this action there was no evidence to suggest that the expenses shown by the assessee had been received back by them from the contractors. No amount had been recovered from the appellant or the persons who controlled it or from any person with whom the department thought, the appellant had a connection. The Commission remarked that adding of the entire expenses shown i.e. a further ₹ 272.15 crore under Section 245D(4) of the said Act for the assessment year 2011-12, 2012-13 and 2013-14 would produce absurd results. The purpose was to assess taxes on real income. The tribunal noted that the gross profit of the appellant for the assessment year 2007-08 was ₹ 106,09,37,772/-, for the assessment year 2008-09 was ₹ 132,40,66,799/- and for the assessment year 2009-10 was ₹ 164,83,84,582/-. Each of those figures was arrived at by computing the total income of the appellant when deducting direct expenses and depreciation so as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission by adding ₹ 36 crores. Adding the entire unexplained expenses of ₹ 272.15 crores paid by the shell companies would produce an absurd result. If the order of the Settlement Commission arrived at, is not arbitrary or perverse but plausible the court will not interfere with it. (See the Division Bench judgment of the Delhi High Court in Commissioner of Income-Tax Vs. Gopal Gupta reported in (2014) 364 ITR 446 (Delhi). The second argument was that the ratio of expenses to gross receipts as adjudged by the Settlement Commission is in accordance with the usual ratio for these factors in the trade of coal mine excavation, operation management etc. Therefore, this value ought to be accepted by the Court. The justification for this kind of acceptance is sought to be drawn from various cases on best judgment awards. In fact, it is contended on behalf of the assessee that in the case of organisations doing similar business, the ratio is much higher. The gross profit rate of 41.2% was higher than the previous gross profit rate of 36%, which was even higher than that of Coal India subsidiaries which was in the range of 22% to 38%. Honest guest work is permitted in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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