TMI Blog2020 (6) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of sales outside the books of account under the nomenclature Domestic Sale and Cash payment in the name of OMASUM-DELHI. - No merit in the argument of the ld. CIT-DR that the addition on account bogus purchases are based on any incriminating material/evidence found during the course of search. Addition on account of under-invoicing of export sales - According to the ld.CIT(A), it is only a presumption drawn by the AO, but, there is no evidence on record to show that the difference in the rates of sales resulted in under-invoicing. CIT-DR could not controvert the findings of the ld.CIT(A) that the AO failed to co-relate the amount generated through under-invoicing of sales, if any and sending it abroad to be deposited in the bank accounts of the two entities or making payment to various parties as alleged. Further, the assessee has also explained satisfactorily that there can be various reasons for difference in the rates of goods exported such as size and quality of items, volume of transactions and relationship with buyers, etc. The relevant observation of the CIT(A) has already been reproduced in the preceding paragraph. In view of the above and in absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the following specific directions:- i) In the present case, the undisclosed sales detected pursuant to the search action aggregates to ₹ 38.93 crores as compared to undisclosed purchase aggregating to ₹ 143.52 crores. Therefore, yearwise profit from undisclosed activity will be determined by the AO by applying the GP rate on the basis of the figure of the yearwise purchase rather than sales. ii) For working the net profit from undisclosed activity , the AO may take combined simple average of gross profit of all the years comprised in the block period (A.Y.s 2008-09 to 2014-15) as per audited balance sheet of the assessee for A.Y. 2008-09 to 2014-15. This would take care of any aberrations and distortions. The above method of determination of profit from undisclosed trading in meat product, in our opinion, is fair and reasonable and would meet the ends of justice under the peculiar facts and circumstances of this case. The average gross profit so determined shall be applied across all the assessment years to determine the profit from undisclosed activity. Needless to say, the gross profit rate percentage will have to be appropriately modified upwardly to correspo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of other entities stated above. Needless to say the AO shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds on this issue are accordingly allowed for statistical purposes. - ITA Nos.2801 to 2803, 169, 2804/Del/2018, 4287 to 4289, 1499, 4290/Del/2018 (Assessment Years: 2008-09 to 2012-13) - - - Dated:- 29-5-2020 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA, JUDICIAL MEMBER Assessee by: Shri Hiren Mehta, CA, Shri Ashwani Gupta, CA Revenue by: Ms Pramita M. Biswas, CIT, DR ORDER PER R.K. PANDA, AM: ITA Nos.2801 to 2803, 2804 /Del/2018 filed by the assesse and ITA Nos. 4287 to 4289 , 4290/Del/2018 filed by the Revenue are cross appeals and are directed against the order dated 28th March, 2018 of the CIT(A)-27 for A.Y. 2008- 09 to 2010-11 and 2012-13 respectively. ITA No.169/Del/2018 filed by the assessee and ITA No.1499/Del/2018 filed by the Revenue are cross appeals and are directed against the order dated 26th December, 2017 of the CIT(A)-27 for A.Y.2011-12. Since common issues are involved in all these appeals therefore, these were heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income for the year under consideration in response to notice u/s 153A. 4. The AO analysed the nature of business of the assesseee and noted that the raw material of the assessee company is the raw meat which is procured by the assessee company from open market through various persons who procure such raw material directly from various slaughter houses where buffaloes are slaughtered and their meat parts i.e., Omasum, trachea and offal are broadly segregated from the dead body of the buffalo in raw form. The assessee company also stated, to purchase such products from the farmers for whom their cattle does not have any commercial value and are unproductive. The AO noted that the assessee company does not have its own slaughter houses. Once the raw meat is delivered at the Rampur factory, the assessee company segregates various parts i.e., Omasum and offal, it was then cleaned and then applied salt on the cleaned meat which act as a preservative. He noted that the main business of the AMQ group is export of byproducts i.e., Omasum, offal, etc. In order to make its raw material requirements, a two pronged strategy was adopted by the group. On the one hand, the group had enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13,03,59,824/- 2009-10 23,19,35,801/- 19,14,20,864/- 15,28,83,085/- 2010-11 28,97,33,15/- 28,21,46,148/- 19,60,83,215/- 2011-12 78,27,77,592/- 74,18,25,388/- 41,29,34,907/- 2012-13 49,48,02,468/- 34,67,78,496/- 30,80,49,586/- 2013-14 62,49,33,372/- 21,94,53,432/- 20,83,90,270/- 2014-15 77,31,82,290/- 37,52,45,574/- 32,35,43,094/- 6. According to the AO, majority of the purchases recorded in the books of account of the assessee company are not supported by the third party invoices/vouchers. The payments against majority of the purchases are made only in cash where each payment is made for an amount equal to or less than ₹ 20,000/- Even in respect of these no primary vouchers/bills/other evidences were available. He noted that the qualitative records i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee company and its trade associate Mr. Lucky Yuan, the AO noted that one container was agreed to be dispatched in the last week of March, 2009 and instructions were given to Mr. Lucky Yuan to transfer 1 lakh USD against such dispatched order and out of this amount, USD 60,000/- was to be transferred to Mr. Jean Louis Deniot and USD 40,000/- to be deposited in HSBC account of the assessee in India. Taking cue from this e-mail conversion, the AO further observed that there was difference in rates and value of the meat items exported by the assessee company as per the chart given at page 39 and 40 of the assessment order. This difference according to the AO is out of suppressed sales and resultant proceeds have been received by the assesseee abroad through settlement/hawala transactions to meet out the expenses of directors/shareholders and their family members and various foreign entities created by the directors. The AO, therefore, made addition of ₹ 2,56,42,430/- on account of such suppressed sales for A.Y. 2008-09 and added back the same to the total income of the assesseee. 8. On the basis of the incriminating documents/records found and seized from the premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nam for which it claimed deduction u/s 10B of the Act. According to the AO, the assessee company is not engaged in manufacturing activity as defined under the provisions of section 10B of the Act, but, is engaged in the process of sorting of raw/waste buffalo meat to the Omasum and offal part of buffalo meat by cutting and throwing unwanted inedible part, cleaning the shit (gobar) from the Omasum which is rudimentary part of buffalo. After cleaning the same, they apply salt to the finished product and pack the same in the designated size and make them freeze so as to ready for export. Therefore, this process does not qualify to be adjudged as manufacturing activity qualifying for claiming deduction u/s 10B of the Act. He, therefore, asked the assessee to explain as to why the exemption claimed u/s 10B should not be disallowed. In absence of any explanation from the side of the assessee to substantiate its claim, the AO rejected the claim of deduction u/s 10B and made an addition of ₹ 3,63,43,299/- to the total income. 12. The AO noted that during the year under consideration, the assessee company has shown travelling and conveyance of ₹ 50,77,021/-, membership fee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious parties to the tune of ₹ 2,75,20,000/-. He, therefore, computed such interest @ 12% at ₹ 33,02,400/- and added the same to the total income of the assesseee. 16. Similarly, in the absence of production of details to substantiate the claim of deduction u/s 80G at ₹ 1 lakh, the AO made addition of ₹ 1 lakh to the total income. 17. Similarly, the AO made addition of ₹ 2,26,923/- u/s 2(22)(e) of the Act on the ground that it has violated the provisions of section 2(22)(e) of the Act by giving loans and advances to Moin Akhtar Qureshi who held substantial interest in the assessee company. The AO accordingly determined the total income of the assessee for the year under consideration at ₹ 48,52,30,200/- as against the returned income of ₹ 1,84,50,000/-. 17.1 During the course of assessment proceedings, it was submitted by the assessee that in view of the decision of the Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla, 61 taxmann.com 412, the normal income already assessed cannot be disturbed in the absence of any incriminating material found during the course of search was rejected by the AO on the ground that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. In the subsequent decisions also, Hon'ble court has substantiated their aforesaid views. In the case Pr. CIT vs Ram Avtar Verma 395 ITR 252, Hon'ble Court has supported the aforesaid view that if the assessments are completed on the date of search and no incriminating material is found during the search, assessment u/s 153A of the Act is invalid. Similar view has been taken by Hon'ble Court in the case of Pr. CIT vs Meeta Gutgutia 395 ITR 526 also wherein assessments were completed on the date of search but no incriminating material pertaining to those completed assessment years were found during search. Hon'ble Court at invocation of section 153A for those years was invalid. 7.1.1. Now the facts of the appellant are to be examined in view of this legal position. It is clear from the assessment order as well as submissions of the appellant that search and seizure action 132(1) of the Act was undertaken by the Department in the case of appellant as on 15,2.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made on ad-hoc basis on the ground that the appellant failed to produce bills/vouchers and relevant details of aforesaid expenses, not on the basis of any incriminating material found during course of the search proceedings. v) Addition of ₹ 23,66,967/- on account of other expenses This addition also has been made on ad-hoc basis on the ground that the appellant failed to produce bills/vouchers and relevant details of car expenses, travelling and conveyance expenses, directors' foreign travel expenses etc., not on the basis of any incriminating material found during the search proceedings. vi) Addition of ₹ 18,64,000/- on account of salary expenses This addition also has been made on the ground that the payments have been made in cash to its employees who do not have bank accounts, not on the basis of any incriminating material found during the search proceedings. vii) Addition of ₹ 3,64,000/- on account-of rent expenses - This addition has been made on the ground that the assessee failed to provide any rent agreement/rent receipts to verify the same, not on the basis of any incriminating material found during the search proceedings. viii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded in the accounts maintained in the name of OMASUM DELHI. These details reflected the domestic safes made by Mr. Mohd. Shahnawaz on behalf of appellant company in different years i.e. from F.Y. 2006-07 to F.Y. 2013-14. These sales were made in cash and out of books of account. During the assessment proceedings as well as appellate proceedings, appellant has failed to give any submissions or file any details/evidence to demonstrate that these sales are recorded in the regular books of account and are from disclosed sources. It has even failed to identify and bifurcate these undisclosed sales that which sale transaction belonged to which entity of the group. It has also failed to establish that there were any additional purchases, outside regular books of account, against these undisclosed sales. Simply by saying that undisclosed profit was declared before the Income Tax Settlement Commission and only the peak amount should be taken for the purpose of addition, does not explain the source of undisclosed sales as worked out by AO. In such situation, the AO has correctly held that the purchases of these domestic sales have already been recorded by the group in their books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, though the appellant has taken this ground in the appeal Memo but nothing has been submitted in its support during the appellate proceedings. It is also difficult to understand why the disclosure made voluntarily and income included in the return of income by appellant itself, should be reduced by AO without any rhyme and reason. Moreover, the income of appellant has been assessed by AO at the amount much more than returned or voluntarily disclosed by appellant, therefore, there is no logic for reducing the amount disclosed by appellant in the return of income as claimed by it. I, therefore, reject the claim of appellant and dismiss the ground taken by it. 22. Aggrieved with such part relief granted by the CIT(A), the assesseee as well as the Revenue are in appeal before us by raising the following grounds:- Grounds of appeal by the assessee (A.Y. 2008-09) 1. That on the facts and circumstances of the case and in law, the order passed by CIT (A)-27, New Delhi (hereinafter referred to as CIT (A)), is bad in law. 2. That on the facts and circumstances of the case and in law the CIT (A) was not justified in upholding the action of AO in making an addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66,01,452/-) and undisclosed cash payments (₹ 8,95,00,000/-) together in a co-joint manner as both the issues are linked and of overlapping nature in as much as the undisclosed activity of sale/purchase of meat products outside books of accounts involved payments in cash, utilization of cash for purchases, subsequent sale, realization of cash from sales and reutilization of same cash for further purchases and therefore the same cash was rotated in the undisclosed business year after year for the entire block period from AY 2008-09 to AY 2014-15. 4. That on the facts and circumstances of the case and in law the CIT (A) was not justified in upholding the action of the AO in not reducing from the assessed income the amount of additional income already included in the Return of Income filed in response to notice u/s 153A based upon the application filed before the Income Tax Settlement Commission (ITSC), which was rejected and hence not decided by ITSC in AMQ Group of entities. 5. That the appellant craves leave to add, alter, modify any of the grounds at the time of hearing or before the hearing. Grounds of appeal by the Revenue (A.Y. 2008-09 1) The Ld. CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. 23. So far as the appeals filed by the Revenue are concerned, the ld.CIT-DR strongly challenged the order of the CIT(A) in deleting the various additions made by the AO in absence of any incriminating material. She submitted that the search took place in the instant case on 15th February 2014 consequent to which order u/s 153A have been passed for six assessment years from 208-09 to 2013-14 besides assessment order for search year i.e., 2014-15. Just after the search, the assessee filed application u/s 255C(1) which was rejected by the Hon ble Settlement Commission vide order of the Principal Bench, New Delhi, u/s 255D(4). After that, the assesseee filed the return u/s 153A which included additional income declared before the Income-tax Settlement Commission of ₹ 1.85 crore. Since the disclosure was not true and full and the manner of earning/deriving additional income was not disclosed, the Hon ble Settlement Commission held that the disclosure was not true and accordingly rejected the application. She submitted that the various additions made by the AO are on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the decision of the Hon ble Delhi High Court in the case of CIT vs. La Medica, 250 ITR 575, she submitted that the Hon ble High Court in the said decision has held that where the assessee failed to produce evidence to prove the benefits of seller for whom it had claimed to purchase raw material and the AO treated the value of raw material as assessee s income from undisclosed source, the AAC was of the view that though circumstances were unclear, fact remain that goods were pledged with bank after alleged purchase and, therefore, nonproduction of seller could not be a basis for doubting the genuineness of purchases and/or to infer that there was fictitious purchases. The Tribunal upheld the deletion of addition. The Hon ble High Court held that once it is accepted that supplies were made by such supplier to whom payments have been alleged to have been made, the question of purchases having been made from some other sources could not have been weighed with Tribunal as a factor in assessee s favour. Since the Tribunal has acted on partly relevant and partly irrelevant material and it was not possible to say as to what extent latter had influenced its mind, its order gave rise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the assessee for A.Y. 2012-13. She submitted that since the ld.CIT(A) has incorrectly applied the ratio of the above decision for A.Y. 2012-13 and has not decided the issue on merit, therefore, she submitted that the order of the CIT(A) being erroneous should be set aside and that of the order of the AO be restored. 27. So far as the addition made on account of under invoicing of export sales is concerned, she submitted that the addition was made on the basis of e-mail conversation between the export manager of the assesseee and its trade associates seized during the course of search vide Annexure A-12, Party to D-1. She submitted that the CIT(A) held that the email related to A.Y. 2009-10 and, hence, could be used only for this assessment year and not to the other assessment years as per the decision of the Hon ble Delhi High Court in the case of Kabul Chawla. So far as the merit of the case is concerned, the ld.CIT(A) for all the assessment years held that the conversation in the e-mail does not lead to the conclusion that the assessee is engaged in under-invoicing of export sales and Hawala transactions. He further held that the assessee has subsequently recorded trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 680000 2009-10 1080000 1080000 2010-11 1200000 1200000 2011-12 11400000 11400000 2012-13 2800000 2800000 2013-14 5000000 5000000 2014-15 107500000 0 Total 131660000 24160000 30. She submitted that the additions were made protectively in the case of AMQ Agro Pvt. Ltd. and substantively in the case of Moin Akhtar Qureshi for various assessment years, the details of which are as under:- Nature of Addition A.Y. 2008- 09 A.Y.2009-10 A.Y.2010-11 A.Y.2011-12 A.Y.2012-13 A.Y.2013-14 A.Y.2014-15 Cash received in Omasum account 8,95,00,000 17,73,84,049 28,68,36,793 55,95,50,573 13,21,11,994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - 7. Addition on Account of Rent paid for Guest House - - - - - 8. Addition u/s 14A of the IT Act, 1961 - - - - - 9. Addition on account of Rate Difference - - - - - 10. Addition on account of Rate Difference 1,84,50,000.00 1,61,27,545.00 2,42,44,168.00 7,03,43,456.00 3,54,13,197.00 AMQ AGRO INDIA PVT. LTD. YEAR-WISE GROUNDS/DETAILS OF ADDITIONS CHALLENGED BY AMQ AGRO INDIA PVT LTD. BEFORE HON BLE ITAT IN APPEAL FILED FOR AY 2008-09 TO 2014-15 S. No. PARTICULARS OF INCOME AY 2008-09 (ITA No.4287/Del/1 8) AY2009-10 (ITA No. 4288/Del/18) AY 2011-12 (ITA No. 4289/D/18) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Addition on account of interest free advances 33,02,400 31,34,297.00 33,91,117.00 - - 12. Addition of charity donation 1,00,000.00 - - - - 13. Addition on account of applicability of provisions of section 2(22)(e) - 1,36,78,517.00 6,00,000.00 65,00,000.00 10,00,000.00 14. Addition on account of unexplained investment in shares - - - 2,70,00,000.00 - 15. Addition on account of disallowance u/s 14A 2,62,721.00 16. Addition on account of unexplained investment u/s 69A of the IT Act 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned, the ld. Counsel for the assessee submitted that the addition made by the AO on account of under invoicing of export sales from A.Ys 2008-09 and 2010-11 to 2012-13 are not related to any seized material found during the course of search action. He submitted that the addition made by the AO on the ground that the assessee is engaged in under-invoicing of export sales is highly illogical, arbitrary and wrong assumption of fact on the basis of e-mail conversation in which there is nothing to suggest that the assessee company is engaged in under-invoicing of export sales. While making such addition, the AO has completely ignored the submissions made by the assessee, vide letter dated 3.11.2016 in which it has been elaborately explained that the alleged two page email conversation on which the entire addition is based are parts of two different conversations and cannot be read as a single conversation. The first page of e-mail conversation in which request has been made to Mr. Lucky Yuan, a trade associate of the assessee company for making payment against the supply of Omasum is not the part of the second part of e-mail conversation in which the bank account details of Cabinet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of outstanding sundry creditors is concerned, he, relying on the decision of the Hon ble Delhi High Court in the case of Kabul Chawla (supra) submitted that the CIT(A) was fully justified in deleting the addition. So far as the deletion of various other additions made by the CIT(A) is concerned, he submitted that in view of the decision of the Hon ble Delhi High Court in the case of Kabul Chawla, the CIT(A) was fully justified in deleting the addition. 36. So far as the addition sustained by the CIT(A) is concerned, the ld. Counsel for the assessee strongly challenged the same. So far as the addition of ₹ 5,66,01,452/- made by the AO and sustained by the CIT(A) is concerned, he submitted that there is no basis for addition of ₹ 8.95 crore as made by the AO. He submitted that the transaction related to cash payment to Mohd. Shahnawaz for making purchases and in turn domestic sales made by him are intrinsically related to each other. The search operation did not take into account the entire amount of undisclosed sales as the figures of undisclosed sale was ₹ 38.98 crores whereas the figures of cash paid for purchase was ₹ 143.52 crores. However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mohd Shahnawz for unaccounted purchases Page 54 of Asst order Thus while Mohd Shahnawaz was engaged by the group for making purchases, there would have been no difficulty in recording so in the books of accounts, if the withdrawals for purchases had been only from meat business. Page 54 of the Asst order Thus it is dear that although the group was purchasing animal by products from different suppliers through Mohd. Shahnawz but instead of integrating books of OMASUM DELHI with own regular books of accounts maintained at Rampur, the group was indulging in out of books purchase by utilizing cash that was generated over a period of time through unaccounted sources. Page 55 of the Asst order Please state whether the above cash payment to Mohd. Shah Nawaz are reflected in the books of accounts of afore mentioned proprietorship concern and company. If above payments are not accounted for in the books of accounts of M/s Abdul Majeed Qureshi and M/s AMQ Agro Pvt Ltd then why these should not be treated as unexplained cash purchase made by these two concerns. Further, how these cash purchase are going to be segregated to the between the concern/ company. 37. He submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the CIT(A) which substantiates the fact that additional income of ₹ 1.85 crore was declared from the undisclosed sale purchase activity. 40. So far as the contention of the ld.CIT-DR that the addition on account of bogus purchase are based on incriminating documents found during the course of search and for which she has produced a bunch of papers alleged to be incriminating documents on the basis of which it was argued that the assessee had made various purchases, the ld. Counsel for the assessee submitted that the assessment order for the relevant assessment year does not speak about any incriminating documents on the basis of which the alleged addition on account of bogus purchase has been made. In the assessment order, the additions have been simply made on the ground that during the course of assessment and special audit exercises, the assessee was found indulging in large amount of cash purchases for which no documents/evidences have been produced either during the assessment proceedings or to the special auditors. The AO has prepared a chart for each assessment year containing the total purchases made by the assessee, purchases for which invoices are not made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any incriminating material no addition can be made for these assessment years which were nonabated years, therefore, there is no merit in altogether new argument now being made by the CIT-DR that bunch of papers produced during the course of hearing are incriminating documents in relation to the bogus purchases made by the assessee. He accordingly submitted that the arguments advanced by the ld.CIT-DR that the addition is based on incriminating documents is not in accordance with the law. 41. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both the sides. We find, the assessee, in the instant case, is mainly engaged in the business of export of buffalo meat products called Omasum and offal primarily to China, Hong Kong and Vietnam. The assessee was claiming 100% deduction u/s 10A of the IT Act, 1961 being 100% export oriented unit. During the impugned assessment year, it filed its return of income declaring nil income after claiming deduction of ₹ 3,63,42,299/- u/s 10A of the IT Act, 1961. A search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) Undisclosed domestic sales 5,66,01,452/- iv) Cash received in Omasum-Delhi account 8,95,00,000/- v) Outstanding creditors 1,29,77,985/- vi) Disallowance of deduction claimed u/s 10B 3,63,42,299/- vii) Disallowance of expenditure through credit cards and foreign travelling 21,27,829/- viii) Other expenses disallowed 23,66,967/- ix) Salary disallowed 18,64,000/- x) Rent disallowed 3,64,000/- xi) Addition on account of notional interest on interest free advances 33,02,400/- xii) Charity/donation disallowed 1,00,000/- xiii) Addition on account of deemed dividend u/s 2(22)(e) 2,26,923/- 43. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-mail conversation between the assessee company and Mr. Lucky Yuan, a trade associate of the assessee company. Therefore, the ld.CIT(A) was not justified in deleting the addition in absence of any incriminating material found during the course of search. 46. So far as the argument of the ld.CIT-DR that the addition made on account of bogus purchases are based on incriminating documents found during the course of search is concerned, we find from the assessment order that the addition was made by the AO not on account of any incriminating material found during the course of search, but, on account of non-availability of supporting vouchers for purchases recorded in the books of account, payments made in cash for such purchase where each payment is less than ₹ 20,000/-, non-maintenance of quantitative records for purchases, rate of purchases shown in the books appears to be on the higher side and that the parties are not identifiable, etc. The AO has prepared the chart for each assessment year containing the total purchases made by the assessee, purchases for which invoices are not available and payments made in cash, the details of which are already given in the preceding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abroad to be deposited in the bank accounts of the two entities or making payment to various parties as alleged. Further, the assessee has also explained satisfactorily that there can be various reasons for difference in the rates of goods exported such as size and quality of items, volume of transactions and relationship with buyers, etc. The relevant observation of the CIT(A) has already been reproduced in the preceding paragraph. In view of the above and in absence of any incriminating material found during the course of search on account of under-invoicing of export sales, the ld.CIT(A) in our opinion, was fully justified in deleting the additions. 49. So far as the addition on account of sundry creditors, ad-hoc disallowance of expenses on account of salary, rent, other expenses, expenditure through credit cards, additions on account of notional interest on interest free advances, disallowance of charity and donation, addition on account of deemed dividend u/s 2(22)(e) and disallowance of deduction claimed u/s 10B are concerned, we find the same are not based on any incriminating material/evidence found during the course of search but are based on entries already recorded i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the issue as per fact and law. We hold and direct accordingly. The grounds raised by the Revenue for A.Y. 2012-13 are accordingly allowed for statistical purposes. 53. So far as the grounds raised by the assessee are concerned, the assessee has basically challenged the addition on account of undisclosed domestic sales, protective addition on account of cash received in OMASUM-DELHI account and not giving set off of the additional income on account of the profit declared in 153A return. For A.Y. 2010-11, the assessee has taken another ground challenging the addition on account of TDS not deducted. 54. So far as the addition on account of undisclosed domestic sales and protective addition on account of cash received in OMASUM-DELHI account is concerned, we find, during the course of search, certain documents were found and seized inventorised as Annexure A-1 to A-45/Party D-11. The said seized material along with daily backed up data found to be maintained in Tally software was referred as OMASUM-DELHI account. On the basis of the seized material, the AO made additions by holding undisclosed domestic sales and unexplained cash payments, the details of which are as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal, the ld.CIT(A) sustained both the additions, the reasons for which has already been reproduced in the preceding paragraphs. We find, the ld.CIT(A) confirmed the addition of ₹ 5.66 crores by holding that the assessee failed to establish that there were any additional purchases outside the books of account against undisclosed sales. According to him, by simply submitting that undisclosed profit was declared before the Income-tax Settlement Commission and, therefore, only peak amount should be added does not explain the source of undisclosed sales. He accordingly, upheld the action of the AO in making the addition on account of undisclosed domestic sales. 57. So far as protective addition of ₹ 8.95 crore is concerned, the ld.CIT(A) held that the AO has made corresponding addition on substantive basis in the hands of Moin Akhtar Qureshi and, therefore, the addition made on protective basis in the hands of the assessee was deleted subject to the decision of the appellate authority in the case of Moin Akhtar Qureshi. So far as the argument of the assessee that the additional income of ₹ 1.85 crore voluntarily disclosed before the Income-tax Settlement Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shahnawaz stated to have receive from either you I.e Moin Akhtar Qureshi, Prop. Abdul Majeed qureshi or from M/s AMQ Agro Pvt Ltd and has been utilized by him for making purchase of Omasum Slaughter meat for both the concerns. Page 54 of Asst order Thus it is dear that although M/s AMQ Agro India pvt ltd was purchasing animal byproducts from different suppliers through Mohd Shahnawaz but instead of integrating books of OMASUM DELHI with its own regular books of accounts maintained at Rampur, the group was indulging in out of books purchases by utilizing cash that was generated over a period of time through unaccounted sources by Moin Akhtar Qureshi Page 52 of Asst order 9. B Details of cash given to Mohd Shahnawz for unaccounted purchases Page 54 of Asst order Thus while Mohd Shahnawaz was engaged by the group for making purchases, there would have been no difficulty in recording so in the books of accounts, if the withdrawals for purchases had been only from meat business. Page 54 of the Asst order Thus it is dear that although the group was purchasing animal by products from different suppliers through Mohd. Shahnawz but instead of integrating books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find merit in the argument of the ld. Counsel that the transaction related to cash payments to Mohd. Shahnawaz for making purchases and in turn domestic sales made by him outside the regular books of account are correlated to each other. Both these transactions are correlated to each other inasmuch as payment of cash resulted in making of purchases outside the books of account and, thereafter, sale of goods purchased in cash was made outside the books of account giving rise to undisclosed sales which again yielded realization of cash which was again rotated for making subsequent cash purchases. Therefore, we are of the considered opinion that under no circumstances the entire amount of cash payments aggregating to ₹ 143.53 crore can be added as it is the same cash which is getting circulated year after year during the course of entire block period. The various decisions relied on by the ld. Counsel for the assessee also support to the proposition that in such circumstances it is the peak balance only which are to be taxed and not the entire cash payment. 64. We also find some merit in the argument of the ld. Counsel for the assessee that the entire amount of sales aggrega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable and would meet the ends of justice under the peculiar facts and circumstances of this case. The average gross profit so determined shall be applied across all the assessment years to determine the profit from undisclosed activity. Needless to say, the gross profit rate percentage will have to be appropriately modified upwardly to correspond the same to gross profit percentage on purchases. iii) The figure of purchases (₹ 143.52 crores in total) in respect of each assessment year will be apportioned between the assessee M/s AMQ Agro India Pvt. Ltd. and Moin Akhtar Qureshi in the same proportion as has been done in the assessment order in respect of undisclosed sales. iv) The amount of profit from undisclosed activity in meat trading determined in the above manner will be the undisclosed income of the assessee for each assessment year. v) The AO shall also determine the initial capital required for the undisclosed purchase in the first year i.e., A.Y. 2008-09 based on a working capital cycle of 15 days since the product is a perishable one. The above initial capital so computed by the AO shall be apportioned between the assessee i.e., AMQ Agro India (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to double taxation of the same. Since we are remitting the matter to the file of the AO for adjudication of the undisclosed income from meat business outside books and the appeals of above persons are not before us, the assessee may take up this matter before the AO at the time of the set aside proceedings. The AO shall ensure that there is no double addition of the amount of additional income declared in the hands of AMQ Agro and income declared in the 153 tax return of other entities stated above. Needless to say the AO shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds on this issue are accordingly allowed for statistical purposes. 70. So far as the addition of ₹ 5,50,669/- on account of non-deduction of TDS for A.Y. 2010-11 is concerned, it is the grievance of the ld. Counsel that although a specific ground was taken before the CIT(A), however, he has not adjudicated the same. We find, the ld.CIT(A) at para 4 of his order at page 8, has reproduced the said ground as ground of appeal No.15 where the assessee has raised the following ground:- 15. That on the facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
