TMI Blog2020 (6) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of appeal is dismissed. - ITA No. 566/JP/2013 (Assessment Year :2009-10) - - - Dated:- 23-6-2020 - SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM Assessee by: Sh. Himanshu Goyal (CA) Revenue by: Sh. K. C. Gupta (JCIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A) (Central), Jaipur dated 26.03.2013 wherein the assessee has taken the following grounds of appeal:- 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (appeals) is bad both in the eye of law and on facts. 2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in conferring the action of A.O in making addition of an amount of ₹ 1,66,92,172/- on account of undisclosed income. (ii) That the above addition has been conferred despite the fact that the same was made only on the basis of some reply filed by a third person explaining the material found during the course of search seizure action conducted at his premises. (iii) That the addition has been conferred despite the same having bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order which reads as under:- (iv) Surrender of ₹ 2.5 crores by Sh. Pradeep Agarwal then Director of the company: In the post search proceedings before Investigation wing, Jaipur Sh. Pradeep Agarwal then Director of the company surrendered undisclosed income of ₹ 2.5 crores as unaccounted income of M/s Raghuveer Metal Industries Ltd for the F.Y 2008-09 in his letter dated 02.12.2008 submitted to the Assistant Director of Income-tax (Investigation-II), Jaipur. He further mentioned in the letter that the amount of ₹ 2.5 crores would cover entire loose paper of M/s Raghuveer Metal Industries Ltd and Sh. Pradeep Agarwal and Sh. Ashish Agarwal who has routed through and introduced the undisclosed income as capital and loan in the books of company mention in page no. 21 to 23 of annexure A-5 seized during the course of search and will file the assessee-wise bifurcation after receiving the photocopies of seized paper. Further in his letter dated 20.01.2009 submitted to the Assistant Director of Income-tax (Investigation-II), Jaipur, Sh. Pradeep Agarwal gave the bifurcation of unaccounted income introduced by following persons in M/s Raghuveer Metal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company to conduct business affairs of the company which included dealing with various departments like sales-tax, Central Excise, Income-tax etc. Therefore, the assessee company cannot take the plea that Sh. Pradeep Agarwal was not authorized to make statement or submission before the Income-tax authorities on behalf of the company. Therefore, whatever has been stated by Sh. Pradeep Agarwal still holds as he has not retracted the contents of the letters submitted by him to Assistant Director of Income-tax (Investigation-II), Jaipur on 02.12.2008 and 20.01.2009. In this regard it is worth noticing that Sh. Sunil Pokharna, one of the directors of the company made a surrender of ₹ 15 lacs on account of excess and short stock found during the course of survey u/s 133A in his statement recorded on 17.09.2008. The company has accepted the contents of the statement of Sh. Sunil Pokharna by admitting in it s reply filed in this office on 04.12.2010 as follows: The excess stock found during the course of survey operations has been sold during the normal course of business and the total sales consideration was included in the sales reflected in the books of account of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im but by his predecessor. In the similar vein, decision of an earlier Director are binding on the company and its current management. Even if, the surrender was retracted by Sh. Pradeep Agarwal, it would still be binding on the assessee company and Sh. Pradeep Agarwal in view of following decision of Supreme Court of India High Courts. In view of the discussion as above it is held that the amount of ₹ 2.5 crores have been correctly surrendered by Sh. Pradeep Agarwal and who has owned unaccounted income to the tune of ₹ 83,07,825/- for himself and other members of his family. Therefore, the remaining amount of ₹ 1,66,92,175 [2,50,00,000 - 83,07,825/-] is considered to be unaccounted income of the assessee company. 6. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who has since confirmed the addition made by the AO holding that the finding of the AO cannot be faulted. Against the said finding, the assessee is in appeal before us. 7. During the course of hearing, the ld. AR submitted that a search operation took place at the premises of Kamdhenu Group on 17.09.2008 including Sh. Pradeep Agarwal, the director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cannot be bind the appellant. We would like to further submit that we were never part of the Shri Pradeep Aggarwal group of companies as is evident from the statement of Shri Vijesh Karanwal wherein he has given names of P. K. Gaddi, P. K Company, P. K. Sons etc. We are making Kamdhenu Brand TMT Bar which the official trade mark of Kamdhenu Ispat Limited and paying royalty to M/s Kamdhenu Ispat Limited which is an entity owned by Mr Satish Aggarwal. It would not be out of place to mention that as we were not part of the Pradeep Aggarwal Group though Sri Pradeep Aggarwal and his group of company has challenged the centralization of cases in Alwar in the High Court we did not oppose centralization even though we are located far away in Ajmer. From the documents which have been cited as having been seized during the search and survey operations at the various premises of Shri Pradeep Aggarwal none of them relates to our company. It would not be out of place to mention that nothing incriminating was seized from the premises of the company. Without prejudice to the above after a close reading of letter provided to us we would like to submit as under: 1. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has paid commission out of unaccounted/undisclosed income. Such payment of commission being unaccounted stands surrendered in the year of payment in the hands of the relevant person. The same will be quantified soon after the photocopies of relevant seized material are provided to us. The assessee in letter stands for Mr. Pradeep Agarwal clearly evident from substance of Letter and the para 1-4 above and he may have received such commission. The page No. 21-23 of annexure A-5 was neither seized from the premises of the company nor the papers were explained by the company as they were not provided also. The alleged submission of even Mr. Pradeep Agarwal describes the document as revalued Balance Sheet though his basis and yardsticks would be known to him or the person who has prepared this. We are unable to understand the purpose of preparation of the documents. 1. ₹ 2.5 Crores has never been surrendered by M/s Raghuveer Metal Industries Ltd. and surrender if any was by Mr. Pradeep Agarwal in his individual capacity as is also evident from the fact that on the letter provided to us he has written that The above suggestion was given by my counsel as per my ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized from the premises of the appellant and the description about revaluation of assets of the appellant and the increase in the capital amount of Shri Pradeep Agarwal and of Shri Anil Pokhrana as mentioned in said loose papers are incorrect and not pertaining to the appellant and Shri Anil Pokhrana. 6. That I solemnly affirm that neither the appellant nor the deponent other directors, viz. Shri Sunil Pokhrana Shri Rajesh Pokhrana were aware about revaluation of the assets nor about the increase in the capital amount of Shri Pradeep Agarwal and of Shri Anil Pokhrana. 7. That I solemnly affirm that the appellant has neither authorized to Shri Pradeep Agarwal for the revalualtion of the assets nor such revaluation of assets and corresponding entries in the capital of Shri Pradeep Agarwal and of Shri Anil Pokhrana has ever been authenticated. 8. That I solemnly affirm that Shri Pradeep Agarwal was never authorized by the appellant for making any surrender of income and the surrender of ₹ 2.5 crores vide letters dated 02.12.2008 and 15.12.2008 before the ADIT (Inv.) as made by him was not on behalf of the appellant as it was not approved by the Board of Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fixed Assets 7,89,28,394 17,98,66,704/- 10,10,00,000/- Total Undisclosed Income (Approx) 2,50,00,000/- Unaccounted money on account of loans introduced in the assessee s books 83,07,825/- Addition made 1,66,92,172/- Correct Calculation (as per Assessee):- Increase in valuation of assets as per the Capital ledger accounts of Anil Pokharana and Pradeep Aggarwal is ₹ 3.90 Cr+ 3.60 Cr + 3.90 Cr + 3.60 Cr = ₹ 15 Cr. Particulars As on 31.03.2018 As on 30.06.2008 (B) Difference/Increase (B-A) Total of Capital Accounts 13,66,50,000 26,25,00,000 12,58,50,000/- Fixed Assets 15,00,00,000/- Total Undiclosed Income (Approx.) NIL Unaccounted money on account of loans introduced in the assessee s books 83,07,825/- Therefore Addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for ₹ 125850000/-. The reason for extra capital was revaluation of fixed assets for the purpose of the partition between both the directors namely Sh. Pradeep Agarwal and Sh. Anil Pokharan. By such revaluation the fixed asset of ₹ 78928394/- was arrived at ₹ 179866704/- and the difference of ₹ 101000000/- was credited in directors capital account by ₹ 5.50 Cr. in each director. The actual undisclosed income of the company shared by both the directors and credited in the capital account was at ₹ 24850000/- (125850000- 101000000) and accordingly surrender of ₹ 2.50 Cr. was made as undisclosed income/unaccounted income of M/s Raghuveer Metal Industries Ltd. to purchase peace of mind. It was also stated in the letter that this surrender will cover the entire loose papers of M/s Raghuveer Metal Industries Ltd. Sh. Pradeep Kumar Agarwal and Sh. Ashish Agarwal who has routed and introduced the undisclosed income as capital and loan in the books of the company. In the subsequent letter dated 15.12.2008, bifurcation of ₹ 2.5 Cr was given and undisclosed income amounting to ₹ 8307825/- was admitted in the hands of Sh. Achin Agarwal, Smt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under sec. 132(4) of IT Act but such surrender was in consequence to search and based on specific incriminating documents and therefore such surrender of income can definitely be said to be similar to surrender of income made u/s 132(4) and the admission made u/s 132(4) are definitely having strong evidentiary value. Reliance is placed on the following case laws for the above proposition of law:- ACIT vs. Hukum Chand Ors. (2010) 337 ITR 238 (Chhatisgarh) Rajmal Nawal vs. CIT Anr. (2003) 183 CTR 144 (Raj.) Hotel Kiran vs. ACIT (2002) 77 TTJ 87 (Pune) V. Kubhambu Sons vs. CIT (1986) 131 CTR 396 (Ker) Rakesh Mahajan vs. CIT (2008) 214 CTR 218 (P H) Keeping in view the above facts and circumstances, the finding of the AO making addition of ₹ 16692175/- cannot be faulted. The addition is made by the AO is accordingly confirmed. The ground of appeal is dismissed. 15. We have heard the rival contentions and perused the material available on record. Firstly, we refer to the statement of Shri. Pradeep Agarwal recorded u/s 132(4) on 17.10.2008. In response to Question No. 3, he has stated that he is engaged in iron and cement busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that the said balance sheet contains both unaccounted and accounted transactions of the actual business of the company. Further, he has stated that according to the said balance sheet whatever profits have not been shown in the books of accounts, he will pay the taxes by accepting the unaccounted income of the current financial year. Now, lets looks at Annexure-A5 page 23, the contents thereof read as under: 18. On perusal of the above, we find that it is a handwritten document which is not authenticated by any person. There is no mention of any figure of profit or loss as on 30.06.2008. Further, on perusal of the ledger accounts of Sh. P. K. Agarwal and Sh. Anil Pokharna marked as Annexure-A5 page 21- 22, we find that it contains particulars and corresponding figures about fixed furnace, fixed rolling and furnace, running account and director remuneration and again does not contain any specific figure of share of profit and loss account and their respective share capital as on 30th June, 2008. Further, we find that there is no finding recorded by the Assessing Officer as to the actual profits as per books of accounts as on 30th June, 2008 and the unaccounted profits e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 15.12.2008 addressed to the ADIT (Investigation-II), Jaipur by Shri S L Poddar, Counsel for Shri Pradeep Agarwal which have been taken note of by the Assessing officer during the assessment proceedings. It would be relevant to refer to the contents of the said letter dated 02.12.2008 as under: 21. Thereafter, there is another letter dated 15.12.2008 and the contents thereof read as under:- 22. Taking the contents of these two letter dated 02.12.2008 and 20.01.2009 into account, the Assessing Officer held that out of total undisclosed income of 2.5 crores, Sh. Pradeep Agarwal has surrendered ₹ 83,07,825/- in the individual hands of his family members and HUF on account of unaccounted income introduced in assessee company and the balance amount of ₹ 1,66,92,175/- was therefore considered as unaccounted income of the assessee company and a notice u/s 142(1) was issued to the assessee company on 11.11.2010. The assessee company has however disputed such surrender made on its behalf by Sh. Pradeep Agarwal and filed its submission explaining its position to the Assessing Officer vide letter dated 27.11.2010 which were not found acceptable and add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and HUF on account of unaccounted income introduced in M/s Raghuveer Metal Industries and the balance amount of ₹ 1,66,92,175/- was therefore considered as unaccounted income of the assessee company. We therefore find that the Assessing officer has merely gone by the statement of Shri Pradeep Agarwal which suits his individual requirement without independently verifying the same with the books of accounts of the assessee company. The same is also apparent from contents of the letter dated 02.12.2008 where Shri Pradeep Agarwal has confirmed similar surrender of unaccounted income in the hands of M/s Kali Metals Ltd which read as under: (2) That as per Annexure A-7, the balance sheet of M/s Kali Metals Pvt ltd was there in which the total profit of ₹ 1,13,02,911/- whereas in the books of accounts the profit is only ₹ 68 lacs so we surrendered ₹ 50 lacs as unaccounted income of M/s Kali Metals Pvt ltd for the current financial year 2008-09. The above nature of surrender in respect of M/s Kali Metals was identical to surrender in case of the assessee company in respect of unaccounted income and also matches with his statement recorded under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. However, merely revaluing the fixed assets doesn t generate any profits and that too, unaccounted profits which can be brought to tax in the hands of the assessee company. Though the assessee company is disputing any such revaluation exercise as actually been conducted and thereafter implemented by passing appropriate entries in the books of accounts, even if, we go by the aforesaid findings of the ld CIT(A), the revaluation reserve so created by revaluation of fixed assets doesn t generate any immediate cash flows in the hands of the assessee company and give rise to any taxable income which can be brought to tax. In our view, such revaluation at best could be used to determine the enterprise value of the assessee company and the basis for liquidation of the assessee company and distribution among the shareholders and liability if any will therefore arise in the hands of individual shareholders and not the assessee company. 25. In light of aforesaid discussions, merely relying on the statement of Shri Pradeep Agarwal on a standalone basis without any corroborative evidence to show that there is any unaccounted income in the hands of the assessee company will not satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant for ₹ 2,32,193/- and making addition accordingly. He accordingly supported the findings of the lower authorities. 30. We have heard the rival contentions and perused the material available on record. On perusal of records, we find that goods worth ₹ 5,98,965/- were initially lost and out of which, goods worth ₹ 3,66,772/- were recovered and the remaining goods worth ₹ 2,32,193/- were permanently lost and a claim of ₹ 2,32,193/- was made by the assessee. Such a loss of goods during the course of business is an eligible loss while computing the income under the head Income from business/profession and has rightly been claimed by the assessee. In the result, we set-aside the order of the lower authorities and the matter is decided in favour of the assessee and against the Revenue. In the result, the ground of assessee s appeal is allowed. 31. Regarding Ground No. 3 and 4, the relevant facts and findings of the ld CIT(A) which are under challenge before us reads as under: 6.1 The ground No. 3 is against the disallowance of ₹ 11,00,469/- whereas the ground no. 3 is against the disallowance of ₹ 44,800/- on account of excess st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of survey i.e. upto 17.09.2008 and P L account for the period 18.09.2008 to 18.03.2010 mere statement that the excess stock has been sold during the normal course of business and sales have been properly accounted for does not explain that the excess stock has been included in the income of assessee. In view of it, an addition of ₹ 11,00,469/- is made to the income of the assessee. 6.3 As regards addition of ₹ 44,800/- on account of shortage of stock the findings of the AO are as under:- Short stock of certain items: The assessee has not filed any reply regarding stock of ₹ 4,48,005/- found short of certain items. In view of it, an addition of ₹ 4,48,007/- is made to the income of assessee by applying rate of 10%. 6.5 I have carefully considered the submission of the appellant as also the findings of the AO. It may be noted that during the course of survey u/s 133A certain items of stock were found excess for ₹ 11,00,469/- whereas certain specific items of stock were found short for ₹ 4,48,007/-. There is no dispute on the value of such stock found excess as well as short. It may be mentioned that it is not a case whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld in unaccounted manner. The action of the AO is accordingly confirmed. 32. During the course of hearing, the ld. AR submitted that the surrender was made during the survey and in the absence of trading account when the assessee could not substantiate that the excess amount of stock was duly sold with other sales and hand infact formed part of the P L a/c. Without prejudice to the above, the GP rate on the said undisclosed stock be applied, GP of the assessee for the year under consideration is 1.25%. Books of the assessee has not been rejected, this stand has been taken by the department in succeeding years. Regarding short Stock, it was submitted that the shortage of stock should be deducted from excess stock. Without prejudice to the above, the GP rate applied by the AO is excessive as the GP of the assessee company is 1.25%. 33. Per contra, the ld. DR relied on the findings of the lower authorities. 34. We have heard the rival contentions and perused the material available on record. Admittedly and undisputedly, the excess stock amounting to ₹ 11,00,469/- not recorded in the books of accounts was found as on date of survey and surrendered by the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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