TMI Blog2019 (11) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... company despite the fact that in the deviation report the A.O. expressed doubts in making addition into the matter. It may also be noted here that no cash have been reported to have been deposited in the accounts of the assessee, the Investor Companies and other related parties. We are of the view that assessee has been able to prove that it has received genuine amounts which is routed through various companies. Therefore, there was no justification to make any addition under section 68. There is no evidence on record that assessee paid any amount on account of commission for arranging any transaction because it was a genuine transaction between the parties. Therefore, there is no justification to make the addition under section 69C of the I.T. Act as well. In view of the above, we set aside the Orders of the authorities below and delete the entire additions in all the assessment years under appeals Addition on account of the bogus purchases out of books sales and suppressed profit - HELD THAT:- The books of accounts were duly audited as per the companies act and as per the income tax act. No defects in such books were found either by the learned assessing officer or by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are the 12 cross appeals filed by the assessee and the learned Assessing Officer involving similar issue in case of one assessee for all 6- assessment years. Both the parties argued them together raising similar arguments on these issues for concluded assessment and abated assessment. Therefore, these all appeals are disposed of by this common order. 2. The parties agreed that AY 2012-13 is a lead Assessment Year and facts relating thereto were adverted by them. It was stated that identical additions were made in the hands of the assessee company for AY 2013- 14, 2014-15, 2015-16, 2016-17 and 2017-18. In case of AY 2017-18 there is also a separate addition other then the identical addition as mentioned in Ay 2012-13 , which would be dealt with by both the parties independent and separate manner as the facts and circumstances leading to that additions were different. For ascertaining the status of each of the assessment, it is important to note that on 21/3/2017 there was a search on this group including the assessee company. 3. Therefore, we cull out brief facts of the case which shows that assessee is a company [Appellant] who originally filed its retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs after investment in the assessee company, the operations in most of the companies have reduced further. These companies have common directors. The companies are operated by Kolkata based operator. Further, during the course of search blank sign share transfer forms, blank signed power of attorney and other documents necessary for transfer of shares were found and seized. These documents related to the companies from which the assessee is claimed to received share capital and share premium. Thus, the AO noted that the entire transaction is a sham transaction. Mr. Apresh Garg, MD of appellant, was confronted issue of share capital in his statement u/s 132 (4) of the act. In response to question number 22 in statement dated 22/3/2017, he stated that the amounts so received, as share capital is nothing but the assessee s own money that was routed back to the assessee company in the form of share capital. He submitted that assessee has paid through cheque to the depositors, who in turn made deposit of the above sum as share capital with the assessee company. The learned AO further noted that books of all these entities are maintained at the office of the assessee company, however, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of share capital and share premium. The AO further made an addition of INR 9639750/ being 2% of the amount of share capital as commission to obtain share capital. Thus, total addition of ₹ 491626740/ was made. 10. The second addition was with respect to the sum of INR 149,200,000/- received during the year from M/s Mahalaxmi Traders, whose financials are obtained and it was found that it does not have financial worth to introduce the sum. The depositor was examined who denied the investment. Such addition was made u/s 68 of the act. In addition, of above, 2 percent on the above sum as commission was also added. Thus, total addition of INR 175814034/ was made. 11. During the course of search, Managing director of the assessee company, Mr. Apresh Garg, in his statement recorded u/s 132 (4) on 22/3/2017, has admitted that it resorted to bogus sale/purchase transactions. The learned AO noted that assessee has undertaken these bogus sale and purchase transaction with these entities to inflate its expenses and suppress taxable income. Such suppression of income has been brought back in the form of share capital. He further noted that assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bank accounts. Based on the gross profit ratio, he held that the appellant had sale/purchase of the similar quantity but instead of showing transactions with the real entities, the transactions were shown in the name of the species entities created by the appellant itself, which were not real but artificial to suppress the profit. He further noted that the entities are also showing the purchases and the sales to and from the appellant of such purchases and sales, which are bogus. Therefore, he noted that the assessing officer was not justified in disallowing 25% of the purchases since it is not a case where only purchases are in doubt and assessee has recorded fictitious sales and purchases to cover up the profits of actual sale and purchases. Therefore he held that in such a situation, in the interest of natural justice, it would be reasonable that the trading results to the extent of sale and purchase from the fictitious entities are rejected u/s 145 (3) of the act and the gross profit on the same is estimated. Accordingly gross profit shown by the assessee from its books for different years/periods was recorded and for assessment year 2012 13 where the gross profit shown by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,47,73,43,098 3,47,73,43,098 9,00,53,54,461 3,13,16,21,562 19. The assessee has raised the following grounds of appeal in ITA No. 3741/Del/2019 for the Assessment Year 2012-13:- 1. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) has erred in law and on facts in upholding the assessment made u/s. 153A of the Act in spite of the fact that no incriminating documents whatsoever was found/seized during the search operation u/s. 132 of the Act which is sine qua non for making any additions in an assessment framed u/s. 153A of the Act. 2. That in view of the facts and in law, since no incriminating material was found in the course of search and the unabated assessment years remained undisturbed, the AO was wrong in invoking the provisions of section 153A of the Act and recomputing the income of the current assessment year. 3. That on the facts of the case and in law, the Ld. CIT(A) erred in confirming the order of the learned AO in adding the share capital received and allotted during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were furnished during the course of assessment and ingredients of provisions of sec. 68 required to be satisfied by the assessee were fulfilled in the impugned share allotment transactions. 5 That on the facts and in law the learned CIT(A) erred in confirming the action of the learned AO, without any discussion in the appellate order, in adding the sum of ₹ 17,23,66,700/- received as share application money in the preceding years and the said preceding years were a part of the proceedings before the Hon ble Settlement Commission and therefore cannot be brought to tax in the present assessment year u/s 68 of the Act. 5a. That section 2451 of the Act makes the order of the Settlement Commission under section 245D (4) conclusive in respect of matters covered by it and these findings are not liable to be reopened or reviewed either in proceeding under this Act or in any other proceedings. 5b. That on the facts of the case and in law the learned CIT(A) erred in confirming the action of the learned AO in adding the sum of ₹ 34,47,334/- as commission paid for arranging the share capital money without any evidence found in the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was immediately retracted by him since the contents of the impugned statement were incorrect and the same was forcefully signed by him. 7. That the learned CIT(A) erred in sustaining the assessment order passed by the learned AO u/s 153A of the Act read with section 143(3) of the Act wherein admittedly the said order was not based on his own judgment and belief but was made under pressure and force of the Coordination Committee comprising of AO, ACIT, ADIT(Inv) and JCIT(Inv) whereas the AO himself in his letter addressed to ADIT(Inv) had clearly admitted the impugned additions as unwarranted, thereby the whole order is erroneous, bad in law and liable to be quashed. 8. That the order of the Ld. CIT(A) being not based on the facts of the case of the appellant and being contrary to law, should hence be quashed and the appellant company be given such relief or reliefs as prayed for. 20. Identical grounds have been raised by the assessee for Ay 2013-14 to 2017- 18 except in case of 2017-18 where in ground no 5 is with respect to addition of sales u/s 68 of ₹ 73.13 Crores 21. The revenue has raised the following grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that both these issues are arising from the order of the learned CIT A. He submitted that the powers of the CIT A with respect to finding out the new source of income as well as rejection of the books of account are challenged. He therefore submitted that these grounds should be admitted. He further submitted that these two additional grounds have been raised in all the six assessment years in appeal of the assessee as they involve identical facts and circumstances. He further relied upon plethora of the judicial precedents support its contention. 25. The learned departmental representative vehemently opposed additional grounds raised by the assessee stating that there should not be admitted. 26. We have carefully considered the rival contention and perused the application for the additional ground of appeal of the assessee is wherein the assessee has challenged the power of the learned CIT A for rejection of the books of accounts by invoking the provisions of section 145 (3) of the act partially with respect to certain transactions of the assessee and that too without issue of notice u/s 251 of the act. Thus the grounds raised by the assessee are i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disturb the unabated assessment years. He submitted that even the statement recorded of the managing director of the assessee company which was made on 22/3/2017 u/s 132 (4) of the act was retracted on 24/3/2017 within 2 days of the recording of the statement and was also placed before the additional director of income tax (investigation) on 31/3/2017. He referred to the retraction statement placed at page number 171 175 of the paper book 1 of the assessee. To support its contention he further relied upon the decision of the honourable Bombay High Court in CIT vs. Continental warehousing Corp Ltd and All Cargo Global Logistics Ltd 374 ITR 645 (2015) (BOM). He further relied upon the decision of the honourable jurisdictional High Court in CIT (C) vs Kabul Chawla (Delhi) (2015) 61 taxmann.com 412 and specifically at para number 37 and 38 of that order which held that assessment has to be made u/s 153A only on the basis of incriminating material and in the absence of any incriminating materials, the completed assessment can be reiterated and the abetted assessment are assessment can be made. Thus, he submitted that completed assessments could be interfered by the assessing officer whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submitted that the alleged seized material are not incriminating in nature because firstly, they are merely photocopies and not the original documents and secondly they mention the statement of facts. They do not have any transaction date, transaction value and the name of the transaction parties other than the persons who are holding the shares of the company. They are not incriminating in nature. He referred to several judicial precedents wherein such evidences were found during the course of search however, they were not held to be incriminating in nature. He further referred to mainly the decision of the coordinate bench in case of Galaxy rice industries Ltd in ITA number 1451, 52, 53 for assessment year 2007 08 2009 10 dated 1/3/2008 wherein in para number 9.4 the identical situation was discussed, he therefore submitted that it applies squarely to the facts of the case. 32. He further submitted that the statement recorded u/s 132 (4) do not constitute any incriminating materials for the purpose of assessment u/s 153A of the income tax act. He submitted that the statement of the managing director and the statement of Mr. Praveen Agarwal recorded u/s 132 (4) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2 of his order waiting that the financial position of the companies who invested in the share capital of the assessee were not discovered during the course of assessment proceedings. He even otherwise submitted that assessing officer himself has stated that their financial has is robust but they have meager income. Thus, even otherwise there financials creditworthiness is established. He further referred to the para number 5.2 of the order of the learned CIT A wherein he referred to the statement recorded by the investigation wing of third party in altogether different search. He submitted that such a statement recorded in the search of third party could not be considered even otherwise as an incriminating material found during the course of search on assessee. With respect to para number 5.2 of the order of the learned CIT A wherein it has been held that during the course of search operation in the office of the appellant, certain blank sign share transfer forms, blank sign receipts, blank sign the power of attorney and other documents necessary for transfer of shares were found and seized based on which learned CIT A held that these are the incriminating documents, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2012 13 and 2013 14 and 2014 15 deserves to be quashed at the very threshold for want of valid jurisdiction u/s 153A of the act. 33. On the merits of the addition of the share capital, he submitted that AO has submitted a deviation report on 20/12/2018 addressed to The Deputy Director Of Income Tax (Investigation) which is placed at page number 368 377 of paper book 1 in para number 3 the learned assessing officer himself has stated that on verification of the records as well as details and evidences filed by the assessee, it is seen that the assessment proceedings u/s 143 (3) of the income tax act, 1961 was conducted for the assessment year 2012 13, 2013 14 and 2014 15 wherein the issue of share capital were examined and verified in detailed by the assessing officer and were partly accepted at that stage. In para number 3 (ii) in deviation report with respect to the share capital returns been stated by the assessing officer that AO had added an amount of INR 185,000,000 to the total income of the assessee company for assessment year 2012 13 on account of share application and premium. The above addition of INR 185,000,000 is later on deleted by the learned CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isal report. He therefore submitted that even the assessing officer stating that the addition suggested in the appraisal report is not sustainable. He further referred to the argument of the assessing officer that if both purchase and sale from the aforesaid parties are treated as bogus, it will lead to a reduction in the returned income of the assessee instead of an addition which will be detrimental to the interest of the revenue. He therefore submitted that, (1) There is no additional incriminating evidence for making this addition, (2) The deviation report itself suggests that if the addition is made of bogus purchases and sales in the hands of the assessee, it will result into the reduction from the returned income. He submitted that the reasons for the same is that assessee has booked sales from these parties from assessment year 2012 13 to 2017 18 of INR 36,20,60,89,783/ whereas the purchases from these parties is amounting to INR 36,02,14,17,848/ thus ultimately for all these years it will result into reduction of the returned income by INR 18,46,71,935/ . Thus, despite the above observation of the learned assessing officer in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, iv. without considering the explanation of the assessee that during the course of search the stocks lying at one of the godowns was not at all considered, v. without issuing any show cause notice, vi. finding the new source of the income, vii. partly accepting the books of account and partly rejecting it, viii. ignoring the principles of natural justice. He further referred to para number 7.6 of the learned CIT A wherein it is alleged that stock was found to be short during the course of search. The learned AR submitted that the learned CIT A has completely ignored the submission of the assessee that the godown of the assessee at a logistic Park Sonipat, Haryana wherein part of the stock of the assessee was not at all covered under the search action. He submitted that stock lying at the said premises was not taken into consideration while arriving at the physical stock as on the date of search resulting in the alleged difference of INR 450 crore. He submitted that in fact there was no actual discrepancy in the stock physically lying with the assessee vis-a-vis the stock as per books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee, or where the method of accounting provided under subsection (1) has not been regularly followed by the assessee, or income has not been computed in accordance with this standards notified under subsection (2), the assessing officer may make an assessment in the manner provided in section 144 of the income tax act. He therefore submitted that the power of rejection of the books of accounts solely rests with the assessing officer only. He referred to the provisions of section 2 (7A) where the definition of the assessing officer is provided and he submitted that this does not include the power of the learned CIT A as he is not an assessing officer. He therefore submitted that there is no power available with the learned CIT A for invoking the provisions of section 145 (3) of the income tax act when specifically the learned assessing officer has tested the method of accounting of the assessee in the original assessment proceedings u/s 143 (3) of the income tax act as well as in the assessment proceedings u/s 153A of the income tax act and he does not find any reason to deviate from the book results. He submitted that it is not the case of the revenue that the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT A defies any logic and is clearly perverse and unsustainable in law. He therefore referred to the additional grounds of appeal wherein there is a specific challenge to the invocation of the provisions of section 145 (3) of the act by the learned CIT A. 36. Thus, the learned authorised representative submitted that in addition in the case of unabated assessment years i.e. Assessment Year 2012 13, 2013 14 and 2014 15 is made without any incriminating evidence. In case of addition assessment years (abetted assessment) for assessment year 2015 16, 16 17 and 17 18 the addition cannot be made on the merits of the issue. 37. The learned CIT DR vehemently referred to the order of the learned assessing officer and the learned CIT A supporting the order. He submitted that during the course of search, it was observed that the assessee has obtained huge share capital and share premium from various entities in different assessment years. He submitted that during the course of search at the office premises of the assessee at Jasola, photocopies of blank signed share transfer forms, blank signed receipts, blank signed power of attorney and other docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us submitted that the above stated documents, statements, stock positions lead to unavoidable conclusion that substantial incriminating material was discovered during the course of search. He further referred to the paper book submitted by the assessing officer which contains the statement of the managing director and the various documents such as blank share transfer certificates, affidavits, share application forms, copies of parties bank statement, property sale deeds and other documents which were seized from the premises of the assessee. However he admitted that the assessment for assessment year 2012 13 to assessment year 2014 15 was completed u/s 143 (3) however the assessments for assessment year 2015 16 to assessment year 2017 18 are not completed as on the date of search i.e. 21/3/2017 is the time for issue of notice u/s 143 (2) was available to the assessing officer. 39. On the issue of merit of the addition u/s 68 of the income tax act, he extensively referred to the order of the learned assessing officer as well as the learned CIT A to show that the share applicants do not have much business operation yet have a robust balance sheets, the shares are issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th respect to the addition on account of the bogus purchases, the learned DR vehemently relied upon the decision of NK proteins Ltd vs. CIT (2017 TIOL 23 SC IT), the decision of the honourable Gujarat High Court in case of NK industries Ltd vs. DCIT (2016) 72 taxmann.com 289 (Gujarat), decision of the honourable Delhi High Court in CIT vs. La Medica (2001) 117 Taxman 628 (Del), decision of the honourable Allahabad High Court in case of Shri Ganesh Rice mills vs. CIT (2007) 294 ITR 316, decision of the honourable Gujarat High Court in case of Vijay proteins Ltd vs. ACIT (2015) 58 taxmann.com 44 (Gujarat), Sanjay oilcake industries vs. CIT (2009) 316 ITR 274 (Gujarat). The learned departmental representative also referred to the decision of the coordinate bench in ITA number 84 85/ Viz/2018 for assessment year 2012 0 13 and 2014 15 dated 17/10/2018 wherein in para number 8 it has been held that where the assessee is not able to explain the details of unexplained purchases, quantity of the purchases and also the details of unaccounted sales and the source of the unrecorded purchases, the assessee has failed to prove that he made unaccounted purchases and therefore the addition cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years, after that addition made is deleted by the learned CIT A, against which no appeal has been preferred and therefore no addition is required to be made in the hands of the assessee. He further submitted that why even the photocopies were found at the premises of the assessee, detailed explanation was given that there were some negotiations going on in the past with respect to the acquisition of those shares by the assessee from those investors however, the deal could not materialize and those shareholders are still shareholders of the assessee company. Further blank share transfer forms are only in respect of few of the shareholders from who share capital is received, in case of all the shareholders there is no such evidences found during the course of search. He submitted that even the photocopies with respect to all the shareholders except for 4 5 parties, were not found from the premises of the assessee. He submitted that during the original assessment proceedings as well as in the 153A proceedings, assessee has submitted the complete documentary evidences with respect to the permanent account number, bank statements, audited accounts, income tax return, memorandum of artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 68 is not warranted. 44. With respect to the difference in stock, he reiterated his submission that godown of the assessee at Agson Global Logistic Park, Sonepat Haryana, was not covered during the course of search, where part of the stock of the assessee was stored, that stock was not taken into consideration while arriving at the physical stock. Alleged difference of ₹ 450 crore was recorded, but that is the stock at that Godown. Thus, he submitted that there is no difference in the actual stock as well as the book stock. He therefore stated that for assessment year 2012 13 to assessment year 2014 15, no incriminating material was found during the course of search and thus addition cannot be made. 45. With respect to AY 2015 16 to 2017 18, he submitted that as assessee has maintained the complete quantitative details of the goods purchased, goods sold no addition can be made in the hands of the assessee. He submitted that deviation report itself suggest that assessee has sold more goods than what is purchased by the assessee. Therefore, if the purchases and sales are excluded, it will result into lower profit in the hands of the assessee then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication forms and associated documents such as affidavit, receipts, power of attorney, indemnity bonds and copy of the acknowledgement of the income tax returns of the depositors have been seized during the course of search and seizure proceedings are only Photostat copies. However, he submitted that though these are the 4 a state copies they however depict the fact that unrelated blank share application forms and sale certificates are signed with share, undated special power of attorney and general power of attorney were executive is blank name, the acknowledgement of the income tax returns, certificate of incorporation, bank statement of investing companies show meager amount of income which do not permit this commensurate and justify the quantum of the investment, indemnity bonds although undated without dates, undated money receipts and receipt of shares, undated blank delivery notes and declarations, dividend requests, undated resolution, op Agson Global Pvt. Ltd Vs. ACIT, undated bills and sale ways, list of signatories and undated confirmation of investing parties clearly shows that the documents are incriminating in nature and the assessee has introduced its unaccounted mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years, 3 assessment years i.e. Assessment Year 2012 13, 2013 14 and 2014 15 are concluded assessment years and 3 assessment years i.e. A.Y. 2015 16, 2016 17 and 2017 18 are abetted assessment years. There is no dispute between the parties that in case of concluded assessment years, the addition would only be made on the basis of incriminating material found during the course of search. There is no dispute between the parties that in case of abetted assessment years, the addition would be made irrespective of existence of any incriminating material but would only be made as if, it is a normal assessment proceedings. 54. Therefore, the 1st issue that is required to be determined is whether with respect to share capital and bogus purchases for assessment year 2012 13 to assessment year 2014 15 whether there is any incriminating material found during the course of search not. According to the revenue, the statement of the director of the company as well as the photocopies of blank share transfer forms, power of attorney et cetera found during the course of search from the premises of the assessee are incriminating material. Therefore, addition can be made in the ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involve of the transaction there is no unaccounted income of the assessee, which has been introduced in the books of accounts of the company as share capital. In fact, assessee issued cheques in the form of advances et cetera to various concerns who in turn deposited the money with the assessee through cheque as a share capital and share premium. Therefore apparently on the issue of the share capital there is no confession in the statement recorded u/s 132 (4) of the managing director of the appellant company that there is any incriminating material or unaccounted income of the assessee. Further on 24/3/2017 this statement was retracted and communicated on 31/3/2017 to the assistant director of income tax (investigation), unit 7 (4), 2nd floor, ARA Centre, Jhandewalan extension, New Delhi 55 with subject headline of search and seizure u/s 132 (1) of the income tax act, 1961 on 21/3/2017 concluded on 23/3/2017 in the name of the appellant company. As per that letter, it was stated that as per annexure A 1 to annexure A 8 for the copy of the set of share application money papers were found and seized. According to that letter, the assessee agreed to avail the benefit of the scheme u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of some of the share allottee companies such as M/s NEPC Industries Ltd, M/s Telstar Editing Pvt. Ltd, and M/s Softgate Technologies Pvt. Ltd, etc But in para no para no 24 the coordinate bench held that 24. In the present case, since no incriminating material was found, therefore, the addition made by the AO u/s 153A of the Act was not justified. 59. Further in case of 2018 (1) TMI 88 - ITAT DELHI M/S. BRAHMAPUTRA FINLEASE (P) LTD. VERSUS DCIT, CENTRAL CIRCLE -17, NEW DELHI [ No.- ITA No. 3332/Del/2017 Dated.- December 29, 2017] the facts were that:- 4.5 On the contrary, Ld. CIT(DR) submitted that addition in dispute has been made on the basis of the incriminating material found during the course of search. She referred to page 5 of the assessment order and submitted that alongwith the search proceeding under section 132 of the Act at the premises of the assessee, a survey under section 133A of the Act was also carried out at the premises of Sh. M.L. Aggarwal, Chartered Accountant located at N-5, Azadpur, Commercial Complex New Delhi and documents including blank signed share transfer form, blank signed money receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee either under section 153C or under section 148 of the Act depending on material belonging to or pertaining to that another assessee but it cannot be termed as material found during the course of the search of another assessee for making addition under section 153A of the Act. If any material impounded during the course the survey at the premises of one assessee and found to be belonging to or related to another assessee, then action may be taken in terms of section 148 of the Act depending on the material found but that material cannot be treated as part of the search carried out at the premises of the another assessee. Further, the Assessing Officer in the impugned order has not brought on record what was incriminating in the said material impounded from the premises of Sh. M.L. Agrawal. In view of our discussion, we reject the above contentions of the Ld. CIT(DR) that any incriminating material qua the addition was found during the course of the search action under section 132 of the Act. 4.10 Another argument, made by the Ld. CIT(DR) in support of her claim of incriminating material was that the Item No.(i) mentioned on page 6 of the assessment order, was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also could not explain as how the said recording was related to the addition in question made in respect of alleged unexplained share capital. She only stated that said recording on the page reflected accommodation entry obtained by the Brahmaputra Group and but no documentary evidence regarding the claim that the document was incriminating qua the addition, are filed. In respect of the Items No. (ii) to (v), the Ld. counsel has submitted that additions in respect of the amounts mentioned in the document has been made in the case of another company namely M/s Brahmaputra Infrastructure Ltd in assessment year 2009-10. This fact was not controverted by Ld. CIT(DR). Thus, we find that no incriminating material qua the addition made is found during the course of search from the premises of the assessee. Accordingly, above contention of Ld. CIT(DR) are rejected. She also submitted that during the course of search, hard disks of computers and others material were also seized which contained incriminating material. The Ld. CIT(A) failed to substantiate the claim either by the impugned assessment order or through any other documentary evidence. In the assessment order, there is no ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re during the course of search against share capital and share premium. Another Director, Sh. Harjit Singh in his statement also concurred with the statement of Sh. Anu Aggarwal. In the case, the learned CIT-(A) held that evidence does not mean only documentary evidence and the statement under section 132(4) of the Act is an important evidence collected as a result of search and seizure operation and thus, the addition of share capital was based on evidence gathered during the search. However, the Tribunal held that no incriminating material for each of the assessment year other than the year of search, to justify the assumption of jurisdiction under section 153A of the Act. The Hon ble High Court, after considering the arguments of both parties on the issue whether statement under section 132(4) of the Act constitute incriminating material, held as under: 38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax Vs. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating evidence/material unearthed or found during the course of search. The Hon ble High Court also cited the decision of CIT Vs. Sh. Ramdas Motor Transport, (1999) 238 ITR 177 of Hon ble Andhra Pradesh High Court, where it is explained that in case no unaccounted documents or incriminating material is found, the powers under section 132(4) of the Act cannot be invoked. 4.18 Further, as far as the decision of the Hon ble Supreme Court in the case of Video Master (supra), is concerned, we agree with the argument of the Ld. counsel that in said case certain other materials like loose papers and vouchers were found which corroborated the statement and in those circumstances it was held that it could not be said that addition was based on no evidence. The relevant finding of the Hon ble Supreme Court is reproduced as under: 3. In the second round, the assessment order dated March 29, 2000, gave detailed reasons for arriving at the conclusion that the figures stated in the statement recorded were corroborated, in particular, by various loose sheets found at the premises of the assessee as well as vouchers, some of which related to the two films in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search. 60. On identical facts in 2018 (3) TMI 1598 - ITAT DELHI M/S BRAHMAPUTRA REALTORS (P) LTD. VERSUS DY. COMMISSIONER OF INCOME-TAX, it was held that all such documents even though they were found to be in original in all those cases it was held to be not incriminating document based on which the concluded assessment can be disturbed. 61. On further identical facts in 2018 (10) TMI 50 - ITAT DELHI M/S M.L. SINGHI ASSOCIATES (P) LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-7, NEW DELHI it was held that all such documents even though they were found to be in original in all those cases it was held to be not incriminating document based on which the concluded assessment can be disturbed. 62. In another decision of the coordinate bench in ITA number 1451, 1452, 1453 dated 1/3/2008 for assessment year 2007 08 09 10 wherein on identical facts and circumstances, where 1 of us is a co-author of the judgment, following documents were found:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar less than the price of shares issued. It is not the case of the Assessing Officer that either such shares are subsequently transferred at lower price, or such shares stood disposed of by the investor companies. In view of this, the case of the Revenue is merely based on assumption and surmises . 63. Therefore apparently compared to all those decisions cited above which are referred by the learned authorised representative where such forms and documents were found in original, the case of the assessee is on far better footing that only in case of few shareholders these documents were found which were also not in original but only photocopies. It is also confirmed repeatedly by the learned assessing officer present in the hearing as well as in his letter to the bench that original of these documents were not found during the course of search. 64. Even otherwise, provisions of section 61 of the evidence act prescribe that the contention of a document may be proved either by primary evidence or by secondary evidence. According to section 67, thereof primary evidence means the document itself reduced for the inspection of the court. Explanation to of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount. The A.O. also made addition of ₹ 34,47,334/- on account of assessee company paid commission @ 2% for obtaining the entry on account of share capital. The Ld. CIT(A) confirmed the addition. 67. In assessment year 2013-14, assessee has raised Ground No.3, challenging similar addition of ₹ 49,99,50,000/- on account of unexplained cash credit under section 68 of the Income Tax Act and sum of ₹ 99,99,000/- as commission paid for arranging the share capital. The A.O. noted that assessee company has received share capital from M/s. Balaji Enterprises of ₹ 15,20,00,000/- and ₹ 34,79,50,000/- from M/s. Vishal Traders. The A.O. as regards M/s. Vishal Traders noted that it has not filed return of income. Further, Mr. Arpesh Garg was confronted on issue of share capital/premium received by the assessee company and in reply to Question No.22 of his own statement recorded on oath under section 132(4) of the Act on 22.03.2017 has stated that the amount so received in form of share capital/premium represents the amounts given to various parties/entities in the form of loans/bogus sales/purchases and it had nothing but assessee company s own money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of commission paid @ 2% for arranging the share capital/premium. Similarly the statement of Mr. Arpesh Garg was reproduced in the assessment order. The Ld. CIT(A) confirmed the addition. 71. In A.Y. 2017-2018, the assessee has raised Ground Nos.1 and 2 challenging the addition of ₹ 52,23,87,900/- on account of unexplained share capital received from M/s. Rustagi Exim Pvt. Ltd., amounting to ₹ 52,23,87,900/- which was added under section 68 of the I.T. Act. Further addition was made with respect to commission paid @ 2% for arranging the above share capital/ premium. Addition was made of ₹ 1,04,47,758/-. The A.O. similarly referred to the statement of Mr. Arpesh Garg. The Ld. CIT(A) confirmed the addition. 72. Learned Counsel for the Assessee has submitted that share application monies received by the assessee company (AGPL) from these parties are as under : Share application monies received by the Assessee Company (AGPL) from the alleged related parties: Particulars A.Y. Share Application received from Mahalaxmi Traders (MT):₹ 14,92,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/-. As per the details filed by the assessee along with books of account the entire amount of ₹ 49,49,50,000/- was received by these concerns either directly or indirectly from the assessee company itself as advance or payment for purchase. He submitted that as per documents and bank accounts relevant to A.Y. 2017-2018 during the year M/s. Rustagi Exim Pvt. Ltd., has introduced ₹ 52.23 crores. On examination of the transaction the assessee company has transferred ₹ 54.56 crores to M/s. Rustagi Exim Pvt. Ltd., which has been routed back to the assessee company in the form of share capital/premium which also suggest that source of the funds introduced in the shares is assessees itself. Similarly, in A.Ys. 2014-15, 2015-16, 2016-17, the details filed by the assessee would show that ultimate source of the share application money received by the assessee was from the disclosed source of the assessee itself. The transactions are verifiable from the bank account of both the parties. The assessee also filed confirmation of both the parties supported by their bank statements. In some cases, assessee company has routed its own fund directly from the share application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pies of the relevant bank accounts evidencing the movement of the funds have been enclosed along with confirmations. All the investors are assessed to tax. The confirmations bears the stamp of the Revenue Department which would show that all the confirmations are part of the assessment record supported by all the bank statements of the assessee along with all the Investors and other related parties. The assessee has filed summary of the trails of funds and source of investment because the details are voluminous in nature as filed in the Paper Books No.7A to 7E. The summary of the transfer of funds with documentary evidences filed in the paper book is reproduced as under : A. Details of Share Application received from alleged related parties for A.Y. 2012-13: Share Application received from Mahalaxmi Traders (MT):₹ 14,92,00,000/- B. Details of Share Application received from alleged related parties for A.Y. 2013- 14: (1) Share Application received from Sri Balaji Enterprises (SBE): ₹ 15,20,00,000/- (2) Share Application received from Vishal Traders (VT) : ₹ 34,79,50,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements filed by the assessee company. It may also be noted here that initially the A.O. expressed doubts in the deviation report that no addition under section 68 could be made on account of share capital/premium and/or alleged commission @ 2% for any of the year under consideration. However, later on the A.O. without any justification on the basis of the view expressed by the Investigation Wing made these additions against the assessee company. The findings of the A.O. are not based on any evidence or material on record and were clearly in violation of the deviation report earlier filed by the A.O. Since all the parties are related to assessee and it was the amount of assessee itself, which was ultimately introduced in the share of share capital/premium, therefore, there was no justification to hold that assessee would have paid any commission @ 2% for arranging the above share capital/premium The A.O. in A.Y. 2012-2013 has referred to statement of Shri Manoj Gupta, Proprietor of M/s. Mahalaxmi Traders whose statement was recorded during the course of search in which he has stated that he has not made any investment in assessee company. However, it is not clear from the Orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni Builders. 256 ITR 360 (Gujarat) held as under : The assessee was a firm engaged in the business of dealings in land. During the assessment year under consideration the assessee had taken loans from various parties and during the course of assessment proceedings, the assessee had furnished the loan confirmations giving full addresses, GIR numbers/permanent account numbers, etc., of all the depositors. The assessee however issued summons to some of the creditors and also conducted inquiries into the genuineness or otherwise of the loans taken by the assessee. After considering the evidence, the Assessing Officer made an addition of ₹ 12,85,000 to the returned income of the assessee. This was confirmed by the Commissioner of Incometax (Appeals). On further appeal to Tribunal the Tribunal held that the phraseology of section 68 of the Income tax Act, 1961, was clear, that the Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year, that the legislative mandate is not in terms of the words shall be charged to income-tax as the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eversed the order of the Income-tax Officer on the grounds that all the hundi loans taken by the assessee were through crossed cheques which had passed through recognised banks, the assessee had given complete names and addresses of all bankers who had advanced moneys to him and all the bankers were themselves income-tax assessees, the bankers had submitted letters before the Income-tax Officer confirming the advances made to the assessee, and that the Income-tax Officer had not brought on record any evidence to show that the assessee's explanation was untrue. On an application for reference against the order of the Tribunal: Held, that the finding arrived at by the Tribunal was based purely upon appreciation of the evidence and no question of law arose out of that finding. 81. The Hon ble Delhi High Court in the case of CIT vs. Victor Electrodes Ltd., [2010] 329 ITR 271 (Del.) held as under : Held, dismissing the appeal, that it had not been disputed that the share application money was received by the assessee by way of account payee cheques, through normal banking channels. Admittedly, copies of applications for allotment of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed. 84. The Hon ble Delhi High Court in the case of CIT vs. (i) Dwarakadhish Investment P. Ltd., (ITA.No. 911 of 2010) and (ii) Dwarkadhish Capital P. Ltd., (ITA.No.913 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was held as under : In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established by the assessee. 86. Considering the facts of the case in the light of material on record in voluminous paper books and confirmations of the parties and the summary of transfer of funds reproduced above, it is clear that assessee produced sufficient documentary evidences before the A.O. to prove that money routed from the assessee itself which came back to the assessee in the form of share capital/premium, therefore, assessee proved identity of the Investors, their creditworthiness and genuineness of the transaction in the matter and as such have been able to prove ingredients of Section 68 of the I.T. Act. The A.O. however did not make any further enquiry on the documentary evidences filed by the assessee. The A.O. did not verify the trail of the source of funds received by assessee through various entities as explained above. We may also note that during the course of hearing of these appeals, A.O. was present in the Court, but, did not make any adverse comment upon the documentary evidences filed in the paper book filed by the assessee. The A.O. thus, failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company under the instruction of the accountant of the assessee. Thus, the assessing officer reached at the conclusion that the assessee has undertaken bogus sale and purchase transaction with these entities to inflate its expenses, suppressed taxable profits and bring his unaccounted money in the books in the form of share capital. The learned AO noted that analysis of telemetry data shows that during FY 2014 15 the assessee has purchased Inshell Almonds From M/s Rustagi Impex at an average price of INR 4 41/ per KG while the average sale price to the same entity is 440/ per KG hence booking a loss of Rs. one per KG. Thus he noted that the above transaction is suggesting that the assessee company is involved in bogus sales and purchases, which is also been observed by the investigation wing. He further noted that similar trend has also taken place in other years also but with similar or different parties. He further noted that the above facts have clearly been strengthened from the stock position as noticed to be short by nearly INR 4 50 crore is against the stock recorded in its books of accounts. Therefore he reached at a conclusion that the assessee has booked bogus p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 15, the profit booked was INR 350,000,000 on the transactions with the said parties instead of the loss as has been alleged in the appraisal report. In view of the same, if the transactions with the said parties are treated as bogus, then the said profit reflected by the assessee in its profit and loss account shall have to be reduced since it cannot be a case where purchases were disallowed as being bogus, but the sales from the same parties are treated genuine and brought to tax. e) In the appraisal report only transactions of purchases have been examined and treated as bogus whereas no such examination of sales to the same parties have been made leading to a suggestion that purchases be disallowed but the sales against the said purchases to same parties leading to a profit have been completely ignored. In view of the above situation, it becomes difficult to make an ad hoc addition of 25% of the purchases being bogus as suggested in the appraisal report. Under the circumstances, if both the purchases and the sales in such a situation are to be treated as bogus then it will lead to a reduction in the returned income of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unication exchanged as mentioned in the order sheet. 91. The learned assessing officer during the course of hearing before the learned Commissioner of income tax (appeals) submitted a remand report dated 22/3/2019 through the additional Commissioner of income tax CR 7, New Delhi which is placed at page number 387 of the paper book. At page number 390, the learned assessing officer has dealt with the bogus purchases for which the addition has been made. The learned AO mentioned that during the assessment proceedings it was found about 50% of the purchases were made by the assessee from different parties other than related parties and the same were verified by issuing notices u/s 133 (6) of the income tax act. Further confirm material letters were filed by the assessee from these parties and no variation found between the reply received from this parties in response to notice u/s 133 (6) and confirmatory ledgers filed by the assessee. Therefore, as per the remand report it is clear that according to the assessing officer the addition made on account of the bogus purchases is not sustainable as no deviation was found in the purchases recorded by the assessee and confirma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee the learned assessing officer proceeded to make an addition at the rate of 25% of such purchases without conducting any enquiry. In the deviation proceedings, the learned assessing officer after scrutiny of the books of accounts, appraisal report and statement of the managing director of the company, which was retracted, held that no such addition should have been made. In the remand proceedings, also the AO held that on enquiry also made on test check basis of the 50% of the items got confirmed. 94. In view of above categorical facts coming out of the assessment proceedings, on perusal of the deviation report and appraisal report that 4 the concluded assessment is no incriminating evidences were found. In view of this, additions made by the learned assessing officer for assessment year 2012 13 to 2014 15, respectfully following the decision of the honourable jurisdictional High Court, the additions deserves to be deleted. So, for these years same are deleted. Accordingly ground no 6 for AY 2012-13, Ground no 4 for Ay 2013-14 and Ground no 4 of Ay 2014-15 are allowed. 95. With respect to abated assessment years 9 i.e. AY 2015-16 , 2016-17 and 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o account, there was no excess or shortage of the stock compared to the book stock of the assessee. This is also evident as no addition with respect to any excess or shortage of stock made in the assessment order for any of the years. 99. When the matter reached before the learned CIT A, he rejected the action of the learned assessing officer so far as addition with respect to the alleged bogus purchases are concerned. He applied the provisions of section 145 (3) of the income tax act. He segregated the transactions of purchase and sales from the alleged bogus parties and applied the gross profit ratio, which is earned by the assessee from transactions with other parties. He applied such ratio for making an addition for assessment year 2012-13, 2013 14 2015 16 and 2016 17. For assessment year 2014 15, the gross profit ratio of the assessee from other parties (other than the alleged parties) was only 4.13 percentages. However, the learned CIT A did not apply this percentage but took average gross profit ratio for assessment year 2012 13 and 2013 14 of 16.20 percentage and 9.41 percentage. He applied the average, which is 12.80 percentages to the sales for that year for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties, resulted in partial rejection of the books of accounts, which is not permitted in the law. Even otherwise, it was submitted that during the course of remand proceedings the assessee as per letter dated 25/3/2019 on the specific requisition of the learned CIT A filed the details of the gross profit ratio in case of 2 of the other companies engaged in similar line of business having similar size along with their balance sheet and profit and loss account. There year -wise sales and gross profit reflected by the 2 companies was also shown to the learned CIT A. It was contended that the gross profit ratio on by these 2 entities is much lower than gross profit shown by the assessee. It was also submitted that, before applying the different method of making an addition, the learned CIT A did not issue any notice u/s 251 of the income tax act. It was further argued that the learned CIT A has found a new source of income of gross profit, which is not permitted as per the law. Therefore, the action of the learned CIT A was under challenge on all these grounds. We deal with them point vice hereinafter. 101. Coming to the 1st issue whether the learned CIT A is empowered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 145 (3) of the income tax act then, he can do so, but he has to examine the books of accounts and reach at a conclusive finding that the books of accounts of the assessee are either not correct or are incomplete. He is also required to look in to the method of accounting regularly employed by the assessee. In the present case, on careful reading of the order of the learned CIT A, we did not find that the learned CIT A has even called for the books of accounts. In the remand report also there is no whisper from the side of the assessing officer that books of accounts are incorrect or incomplete. The learned CIT DR as well as the learned assessing officer present during the course of hearing also could not show us even a single piece of evidence where it was found that the books of accounts were not correct or incomplete. In the present case, the purchases and sales with alleged bogus parties are supported by the bills and vouchers as well as the stock register maintained by the assessee. Such stock register was maintained in Tally accounting software. The books of accounts of the assessee are duly audited. Payment of purchase consideration to the alleged parties and receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied the same rate to the sales from allegedly bogus parties. We fail to understand that how the gross profit ratio of one year can be applied to another year for determining the profit of some of the transactions of another year. 107. In view of the above discussion, we are of the opinion that the learned assessing officer has incorrectly disallowed 25% of the purchases from the alleged bogus parties without finding any evidence and ignoring the sales paid by them to the assessee. Further, the learned CIT A applied the provisions of section 145 (3) of the income tax act by rejecting the books of accounts of the assessee partially, without even looking at the books of accounts is also incorrect. In view of this the addition made by the learned assessing officer for all those years on account of bogus purchases deserves to be deleted for concluded assessment as well as pending assessments. Accordingly Ground no 2 for Ay 2015-16, ground no 2 for Ay 2016-17 and ground no 3 for Ay 2017-18 are allowed. The two additional Grounds raised by the assessee for Ay 2-15-16 to 2017-18 are partly allowed. These additional grounds for AY 2012-13, 13-14 and 14-15 are infructous as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the cash in hand are on the higher side this year. Further explanation over this would be submitted after reconciliation. However, he submitted that INR 5 0 crores which were shown in the cash book of the company actually represents his unaccounted and undisclosed income, for which he has no explanation however by 31/03/2017, the appellant had deposited the due taxes and deposits under PMGKY an amount of INR 30 crores only. The revenue authorities found that pattern of cash deposits in the bank accounts is highly erratic and not in line with the normal trend. It was noted that monthly cash deposit is generally of 90.26 crores in these 2 months viz a viz INR 4 2.35 crore for the period prior to demonetization and INR 354,000,000 in the last financial year. The explanation of the assessee regarding the increased sales on account of increased demand for dry fruit was also found baseless and it was noted that the company has manipulated the books of accounts to reflect higher gross profit margin in the current year to adjust its own unaccounted cash in the process. The gross profit of the assessee was also found to have gone up to 7.9% for the period 1/1/2017 to 20/3/2017 compare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 42.70 Cr. 42.05 Cr. 58.48 Cr 45.66 Cr May 08.51Cr. 10.71 Cr. 23.55 Cr. 21.72 Cr. 61.92 Cr. 57.49 Cr. June 12.95 Cr. 04.77 Cr. 12.20 Cr. 14.89 Cr. 73.35 Cr. 37.64 Cr. July 03.13 Cr. 02.90 Cr. 19.70 Cr. 22.36 Cr. 20.46 Cr. 04.97 Cr. August 02.01 Cr. 03.46 Cr. - 02.50 Cr. 21.58 Cr. 07.07 Cr. September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15(As per audit report) 6.42 FY 2015-16(As per audit report) 4.19 FY 2016-17(As per audit report) 6.10 01.04.16 to 08.11.2016(As per tally data) 25.2 09.11.16 to 31.12.2016(As per tally data) 40.8 01.01.17 to 20.03.2017(As per tally data) 7.9 Thus, he held that Assessee Company had manipulated the books of account to reflect higher GP margin in the F.Y. 2016-17 to adjust its own unaccounted cash in the process. It was further alleged that during the course of search the stock position was found to be short vis- -vis the stock as per books of account. As on 08.11.2018, the Assessee had a cash balance of ₹ 113.03 crores whereas on the date of demonetization, the Assessee had deposited cash in bank of ₹ 13.99 crores only. The AO opined that as on the date of demonetization the Assessee had legitimate cash balance of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessity for keeping such huge amount of cash in hand and that the Appellant had created an artificial picture in its books of account by which unaccounted income was routed through showing cash sales and the same was shown to have been deposited into the bank account as per the convenience of the Assessee on future dates. He opined that ₹ 99.04 crores represented unaccounted income of the appellant, which did not represent cash sales. Further, cash representing new currency and non-demonetized currency aggregating to ₹ 63.41 crore in the opinion of the Ld. CIT (A) represented cash sales. He thus directed the AO to restrict the addition to ₹ 73.13 crores [i.e. (180.53 30) i.e. 150.53 crores 13.99 crores 63.41 crores]. Thus, assessee is in appeal for as 112. In regard to the above, it is firstly pointed out that both the AO and Ld. CIT (A) have erred in deeming the total cash deposits between 09.11.2016 to 30.12.2016 (i.e. during the demonetization period) as ₹ 180.53 crores instead of the actual deposits of ₹ 175.28 crores during the said period. While arriving at the said figure of ₹ 180.53 crores, the Revenue Authorities have err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as per the A.O s own observation at page 5 of the Assessment Order for A.Y. 2017-18, ₹ 13.99 crores deposited on the first day subsequent to the demonetization represented actual legitimate cash held by the Assessee and ₹ 30 crores was declared by the Assessee under PMGKY. Therefore, even going by the A.O s allegations, the maximum addition as per the A.O s own logic works out to ₹ 67.88 crores[i.e. (175.28 63.41) i.e. 111.87 - 13.99 30] instead of ₹ 150.53 crores erroneously made by him contrary to his own observations. 115. The Ld. C.I.T(A) while allowing reduction of ₹ 30 crores, ₹ 63.41 crores ₹ 13.99 crores on account of the disclosure made under PMGKY, the cash deposited in new valid currency notes and the cash deposited on the first day subsequent to demonetization respectively, has erroneously considered the cash deposited during the demonetization period as ₹ 180.83 crores instead of the actual deposits during the said period of ₹ 175.28 crores. i. That the Assessee is engaged in the trading of dry fruits and kirana items. The customers usually pay in cash and as such, the Assessee norma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The audited books of account and the tax audit report for the impugned F.Y. 2016- 17 were also filed before the AO in course of the search assessment proceedings. v. On the query as to why the cash deposited during the demonetization period (i.e. 09.11.2016 to 30.12.2016) was relatively higher than the cash deposited in the pre-demonetization period, the Assessee explained that the demonetization on 08.11.2016 was immediately preceded by Diwali sales on 30th October 2016, which is the main season of sales in the dry-fruits business. The same trend existed in the past years as well. The Assessee submitted the following figures in corroboration: Table 18: Financial Year Diwali Month Cash Sales in Diwali Month Cash Deposit in Diwali Month Total Cash Sales in the F.Y Total Cash Deposits in the F.Y 2014-15 October 14.60 Cr. 25.16 Cr. 237.44 Cr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entirety before 30.12.2016. This also explains the reason why the cash deposited into the banks between 09.11.2016 to 30.12.2016 was more than the cash deposited in the earlier months. x. As regards the A.O s allegation that cash deposited during the demonetization period was unusual, it was submitted that in the immediately preceding month pre-demonetization i.e. in October 2016, the Assessee deposited a sum of ₹ 77.09 crores in banks. Further, in the immediately preceding year i.e. in the month of December 2015, the Assessee deposited a sum of ₹ 94.36 crores in banks. Thus, there was no unusual trend in depositing cash in banks during the demonetization period. Further, the total cash deposited in banks during F.Y. 2016-17 (i.e. ₹ 633.74 crores) was higher than the cash deposited in the past years for the simple reason that the cash sales in the said F.Y. 2016-17 (i.e. ₹ 633.26 crores) was way higher than the cash sales in the preceding years. Thus, the cash deposited in the banks was directly proportional to the cash sales in the respective years. xi. Apropos the A.O s allegation that average monthly cash deposits during October ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the date of demonetization and deposited subsequently into various bank accounts is clearly evident from the entries in the books of account. xiv. The Revenue Authorities while making the impugned addition u/s 68 and rejecting the explanation offered by the Assessee with respect to the nature and source of the cash deposited in various bank accounts during the demonetization period (i.e. 09.11.2016 to 30.12.2016) have acted merely on surmises, conjectures, suspicion, presumptions and assumptions. The humble submissions of the Assessee highlighting the glaring internal inconsistencies in the orders of the Revenue Authorities the repeated violations of the provisions of law by them are as under: xv. The AO has treated the cash deposited in the banks during the demonetization period as unexplained cash credits u/s 68 of the Act although the nature and source of the cash deposits being proceeds arising out of cash sales is patently evident from the entries in the audited books of account of the Assessee. xvi. It is not the case of the Department that the cash deposited in the banks during the demonetization period was in excess of what was ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department is that the physical stock recorded in course of search was short of the book stock by around ₹ 450 crores (the reason for the alleged discrepancy has already been explained in the earlier paras). Thus, the recording of any bogus cash sales is not borne out from the facts on record or from the findings of the search action in the case of the Assessee. xviii. The cash sales are duly supported by relevant vouchers, which were produced before the AO in course of the assessment proceedings, and nothing adverse in connection therewith was noted by the A.O. The figure of cash sales offered by the Assessee in its Return of Income for F.Y. 2016-17 was accepted as such by the Department and considered in arriving at the assessed income of the Assessee for F.Y. 2016-17. Therefore, the cash sales recorded in the books of the Assessee having been accepted as such by the Department, the corresponding cash deposits made out of such cash sales cannot be rejected and deemed to have arisen on account of income from unexplained sources on mere surmises and conjecture of the AO. xix. The fact that cash sales and corresponding cash deposits in banks have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84,398 LESS :- TOTAL CASH DEPOSITED IN BANKS DURING THE YEAR 1,84,18,16,318 2,60,71,58,700 1,58,68,73,600 2,42,70,47,200 4,28,25,20,400 6,33,80,14,000 CASH EXPENSES FOR THE YEAR 2,35,09,899 62,80,460 4,40,84,998 4,41,50,149 4,73,53,560 1,57,46,613 CLOSING CASH BALANCE AS ON 31ST MARCH 5,35,36,527 5,40,24,002 3,88,25,827 3,34,11,689 3,88,77,076 5,40,23,785 xxi. It is pertinent to note that while the A.O. has accepted the cash deposited in the bank accounts in the following periods to be sourced out of cash sales recorded in the books of the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of search operation, as a natural corollary, the same was deposited into the bank accounts as claimed in the books of account of the Assessee. xxvi. No incriminating material was found in course of search to even remotely suggest that the Assessee had indulged in any other unaccounted business activity leading to any unaccounted income as alleged by the Revenue Authorities. Further, such allegation was not even established by the Revenue Authorities in the course of the search assessment proceedings by conducting any inquiry/investigation by following the procedure laid down u/s 142(2) 142(3) of the Act. Thus, bald allegation of the Departmental Authorities that the cash deposited during the demonetization period had arisen from some undisclosed source not reflected in the books of account as against the accounted cash sales claimed in the audited books of account dehors any credible evidence/material on record is unsustainable both in law and on facts. Addition so made by the AO deeming the impugned cash deposits arising out of accounted cash sales as unexplained cash credits merely on the basis surmises conjectures is fallacious and deserves to be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d taking into consideration all the circumstances which had been adverted to by the ITO held that the appellant might be expected to have possessed as part of its business cash balance of at least ₹ 1,50,000 in the shape of high denomination notes on 12th Jan., 1946, when the Ordinance above-mentioned was promulgated. The Tribunal came to the conclusion that the nature of the source from which the appellant derived the remaining 141 high denomination notes of ₹ 1,000 each remained unexplained to its satisfaction. It accordingly ordered that the addition be reduced from ₹ 2,91,000 to ₹ 1,41,000. On the said facts, the Hon ble Supreme Court held that the Tribunal having held that books of assessee were genuine which showed a cash balance of ₹ 3,10,681 on the relevant date; the Tribunal could not have accepted the cash balance of ₹ 1,50,000 out of the value of high denomination notes of the value of ₹ 2,91,000 and treated the balance ₹ 1,41,000 as income from undisclosed sources. It was held that in doing so, The Tribunal had indulged in conjectures and surmises and acted without any evidence or upon a view of facts which could not reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,50,000 in the high denomination notes of ₹ 1,000 each leaving the possession of the balance of 141 high denomination notes of ₹ 1,000 each unexplained. Either the Tribunal did not apply its mind to the situation or it arrived at the conclusion it did merely by applying the rule of thumb in which event the finding of fact reached by it was such as could not reasonably be entertained or the facts found were such as no person acting judicially and properly instructed as to the relevant law could have found, or the Tribunal in arriving at its findings was influenced by irrelevant considerations or indulged in conjectures, surmises or suspicions in which event also its finding could not be sustained. [para 19] As the conclusion of the ITO was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb came to the conclusion that the possession of 150 high denomination notes of ₹ 1,000 each was satisfactorily explained by the appellant but not that of the balance of 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was promulgated or that 10 notes were from some undisclosed source. These cannot be recognised as finding at all. The assessee's business was not one in which large amount of petty notes might have been necessary for the purpose of business, and keeping money in large notes is evidently more convenient for counting, for making payments and for other purposes and no material has been placed to show that the explanation offered by the assessee was one which was inherently improbable or one which could not be accepted. The so-called estimate made by the Tribunal was based on no reason and was a mere guess. In fact there was no justification in the circumstances of the case for making an estimate at all. The assessee had a large cash balance which could very conveniently include the 45 high denomination notes encashed by him. The explanation offered by the assessee was not unreasonable and nothing has been said which could justify its being rejected as unreasonable. On the other hand the so-called estimate by the Tribunal is based on no reason and is purely arbitrary and cannot be upheld as legal. xxx. Further, the Hon ble Allahabad High Court in the case of Kanpur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as undisclosed income of the Assessee u/s 68 without bringing on record any credible evidence/materialin support of such allegation merely on the basis of surmises and conjecture of the Revenue Authorities. xxxiii. The whole purpose of the Departmental Authorities in singling out the cash deposited during the demonetization period as arising out of unexplained sources(as against the accepted position in the past and the subsequent periods) is to somehow trigger the provisions of section 115BBE read with section 68 of the Act to the income already offered for tax by the Assessee (as cash sales) at a higher rate of tax of 77.25% (i.e. flat rate of 60% plus surcharge @ 25% on such tax and cess as applicable) on gross basis (without any deduction/allowance). In fact the treatment of the cash deposits as unexplained cash credits u/s 68 by the A.O has resulted in double taxation of the same amount, once in the form of cash sales already offered to tax by the Assessee at the rate of tax applicable to companies and again by way unexplained cash credit on deposits arising from such sales u/s 68 at higher rates specified u/s 115BBE. Section 115BBE of the Act is a machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities to reject genuine explanations offered by the Assessee with respect to sums credited/offered as income in its books as unsatisfactory solely to extort higher rates of taxes thereon u/s 115BBE of the Act. The A.O in exercising his powers u/s 68 of the Act is not vested with unfettered powers to reject any explanation as being not to his satisfaction merely on the basis of surmises and conjecture. The AO is bound under law to act reasonable and just while framing any satisfactory opinion surrounding the explanation offered by the taxpayer. From the facts of the case at hand, it is clear that the A.O has acted unreasonably and capriciously in rejecting the genuine explanations offered by the Assessee in respect of the impugned cash deposits as unsatisfactory solely with the aim of fastening exorbitant tax liability on the Assessee-Company under the garb of unexplained cash credit u/s 68 of the Act. Such recourse primarily hedged on surmises, conjecture, assumptions, presumptions and whims of the Revenue Authorities is clearly unwarranted and the additions so made is unsustainable in the eyes of law and thus deserves to be quashed. 116. In view of the above, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 80.53 crores by the assessee has correctly been added by the learned assessing officer as income of the assessee. He further referred to the order of the learned CIT A and stated that the addition has correctly been confirmed by analyzing all the facts which are material to the addition. 118. With respect to the appeal of the learned assessing officer wherein the learned CIT A has upheld the addition to the extent of only INR 7 3.13 crores instead of addition made by the learned assessing officer of INR 1 50.53 crores he submitted that the learned CIT A has wrongly granted relief to the extent of INR 13.99 crores and INR 63.41 crores. He submitted that whether the amount is deposited in the currency or old currency the addition is required to be made. The learned CIT A has held that as INR 6 3.41 crores are deposited in the new currency no addition is required to be made in the hands of the assessee. He further submitted that merely because the amount is credited to the profit and loss account as sales the addition thereon couldn t be deleted. 119. We have carefully considered the rival contention and perused the orders of the lower authorities. Admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: Note denomination Number of notes Total amount in Rs. 2000 (notes) 284349 568698000/ 1000 (old notes) 738556 738556000/ 500 (old notes) 760248 380124000/ 500 (new notes) 36 18000/ 100 622772 62277200/ 50 52614 2630700/- 20 5105 102100/- 10 41800 418000/ Total 1752824000/ From the above chart, it is seen that out of total cash deposit of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.70 22.36 20.46 4.97 August 2.01 3.46 - 2.50 21.58 7.07 September 15.21 8.20 11.71 15.63 20.10 43.76 October 14.60 25.16 29.95 32.64 99.68 77.09 November 16.49 14.46 45.18 47.12 47.73 113.52 December 22.26 28.08 97.35 94.36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion iii. as per balance sheet as at 31/03/2013, 2014, 2015 and 2016 the cash holdings are 5.50 crores, 3.88 crores, 3.34 and INR 3.88 crores respectively iv. further from the analysis of cash holdings from 1/11/2016 revealed the following scenario date opening cash balance cash deposit in bank closing balance 1/11/2016 88.12 crores - 95.60 crores 3/11/2016 102.39 4.45 103.90 4/11/2016 103.90 4.15 99.75 5/11/2016 99.75 5.50 108.11 7/11/2016 108.05 5.0 109.24 8/11/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sited during demonetization also included the sales made during Diwali, which was on 30/10/2016, and the sale of dry fruits increases every year as compared to other months. The version of the assessee on the above appears to be an acceptable contention since distribution of dry fruits during Diwali is a normal and accepted phenomena. In view of all these facts and circumstances, the addition on account of unaccounted cash, which were introduced in the books of accounts of the assessee under the garb of the cash sales proceeds and deposited in the bank account in the wake of demonetization, of INR 9 9.04 crores may be considered to be reasonable as against the proposal for addition of INR 1 80.53 crores for the assessment year 2017 18 which appears to be exaggerated and which may lead to high pitch assessment. 120. The Deputy Director of income tax replied as per letter dated 24/12/2018 wherein it was directed that assessee has not provided any evidence to show that INR 6 3.41 crores was on account of sales accounted for in the books of account, therefore, the contention that INR 6 3.41 crore deposited in respect of new notes of INR 2000 500 and old notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand report dated 18/3/2019 the learned assessing officer submitted before the learned CIT A as under:- Agson Global Pvt. Ltd Vs. ACIT, Cash deposit of INR 1 80.53 crores During the year under consideration, the assessee has deposited huge cache of INR 1 80.53 crores into its different bank account. During assessment proceedings, the assessee was asked to furnish details of cash deposits, pattern of cash deposits, and source of cash deposits and justification of huge cash in hand. The source of cash deposit was claimed to be cash sales made by the assessee. Further, on perusal of pattern of cash deposits in 3 assessment years i.e. assessment year 2015 16, 2016 17 and 2017 18, it was noticed that the entire cash sales made by the assessee, were not deposited by the assessee on the same day but Cash in hand for its business operations. However, no proper justification was given for keeping huge cash in hand on day-to-day basis. Further, as per evidence furnished by the assessee regarding deposits of cash during demonetization period, it was found that cash of INR 6 3.41 crore was made by the assessee in new currency notes of INR 2000 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on 21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017 ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019 ITA.II. though some of the instructions/circular are after the passing of the assessment order but it gives a hint that what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases. In 1 of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of wide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.72 15.04 176.73 61.92 57.49 38.37 162.93 June 12.95 4.77 12.20 14.89 -0.75 -5.79 73.35 37.64 61.15 501.23 July 3.13 2.90 19.70 22.36 16.57 529.39 20.46 4.97 0.76 3.86 August 2.01 3.46 0.00 2.50 -2.01 -100.00 21.58 7.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59.93 57.54 55.00 1115.62 Total 237.44 242.65 412.52 428.19 175.08 73.74 633.86 633.74 221.34 53.66 Increase in sales (%) 173.74 153.66 Sales in November 16.49 45.18 28.69 173.98 47.73 47.73 105.64 sales in December 22.26 97.35 75.09 337.33 69.83 69.83 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t demonetization, assessee has booked higher sales. iv. On analyses of cash sales to cash deposit ratio it was noted that in financial year 2014 15 assessee recorded cash sales of INR 237.44 crores against which the assessee deposited INR 242.65 crores. Therefore the amount of cash deposit in the bank account is equivalent to the cash is recorded by the assessee for the year subject to a minor difference. For financial year 2015 16 assessee recorded cash sales of ₹ 412.52 crores against which the cash deposit is INR 4 28.19 crores. Therefore, for financial year 2015 16 also the cash deposit is almost equal to the amount of cash sales recorded by the assessee. For financial year 2016 17 assessee recorded cash sales of ₹ 633.86 Crores against which assessee deposited cash in bank account of ₹ 633.74 crores. For this year, in addition, amount of cash deposit is less than cash is recorded by the assessee. Thus, it is apparent that whatever cash sales recorded by the assessee for the year is deposited equal amount of cash in its bank account. v. On analysis of the month wise sales it is apparent that in the month of May, June and October there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the learned assessing officer as well as the learned CIT DR. It was not also shown to us that there was any discrepancy in the physical stock found during the course of search and stock as per the books of account if the stock at the Sonipat go down was taken into consideration. There is no whisper about the alleged shortage of stock during the assessment proceedings, deviation proceedings and also in remand proceedings. During assessment proceedings, we also directed AO to show the shortage of stock of ₹ 450 Crore, which is also the basis of addition along with the panchanama and response to explanation of assessee about stock lying at godown at Sonipat as stated by the assessee. There is no reference in any of the statements recorded by the investigation wing with respect to such shortage of stock. Even in the appraisal report produced before us there is no such finding about shortage of stock. Even in the submissions made by the learned CIT DR there is no reference made to such shortage of stock during the course of search proceedings. There is no addition in any of the assessment year including the search year with respect to any such shortage of stock. No quantitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be said that assessee has purchased goods or sold goods to unidentified parties. xi. The assessee has also obtained the proceedings it for assessment year 2017 18 under the right to information act. This shows that on 17/11/2018 where assessee submitted cashbook along with the statement of bank account before the assessing officer. On 20/11/2018, assessee submitted the details to specific questions raised by the AO. On 26/11/2018 assessee submitted complete details on cash else on deposits. On 10/12/2018, assessee submitted books of accounts along with documents and summary of details of sales and purchases, which were examined with the books of accounts of the assessee along with the seized material. On 20/12/2018 the AO prepared the detailed deviation not which has already been discussed herein above. On 24/12/2018, the reply was received from the investigation wing and on 30/12/2018 the assessing officer passed the order u/s 153A read with section 143 (3) of the act. Thus, on reading of these proceedings it, it is amply clear that the AO did not make any enquiry on the material submitted by the assessee. He merely proceeded on statistical analysis, which is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not have that cash. It can merely lead to a suspicion but based on this addition cannot be made without making further enquiry and conclusively proving that assessee did not have that kind of cash available with it. Even otherwise, if the assessee had to introduce his unaccounted money he would have deposited it at the first instance. xv. Assessee also filed its VAT returns, which are not found to be in variance with the accounting and tax records. Therefore, it cannot be substantiated that the assessee has backdated the transactions of the sale. xvi. The another claim of the learned assessing officer is that assessee has huge cash in hand but a large amount of bank loans are outstanding and therefore, the claim of the assessee that it was having a huge cash is unacceptable. On careful analysis of the balance sheet of the assessee company for the year ended on 31st of March 2017 it is apparent that assessee has long-term borrowing in the form of secured loans, which are Term loan. These loans are payable at regular installments and have the commitment charges. Therefore, it could not have been paid by the assessee. The assessee further referred to not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il of the transactions, which are altered. If the assessee maintains its books of accounts on tally software and back dates the transactions in that particular software, it is impossible to trace them and find out whether they are backdated or not. The only option left with the revenue is to get the accounts of such assessee is subject to forensic audit to know that whether there is a back dating of such accounts or manipulation of the accounts or not. In absence of this, it is impossible to catch hold of an assessee who can manipulate his accounts to suit his requirement. In many of the accounting, software there is an absence of any audit Trail and they can be easily erased, altered, backdated without any evidence or trace. The time has come to also look into usability of such accounting software by the regulator for filing the tax and financial results. Either this software s should be compliant of the audit trail or they may be regulated to provide such audit trails. xviii. Even otherwise as per retraction letter dated 24/3/2017 of the managing director of the company which was submitted on 31/3/2017 where assessee has revised its disclosure from INR 50 crores to I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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