TMI Blog2022 (9) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary to the fact of invoices being recovered during the search at the residential premises of Shri Sanjay Dhawan. As also worth noting that as per the e-mail print out for June 2015, the bill numbers are running into series of 200 whereas as per the regular books of account the serial numbers of the invoices for the month of June 2015 is in the series of 700 onwards. Thus, this apparent contradiction castes a doubt on the veracity and the evidentiary value of the invoices recovered from the premises of Shri Sanjay Dhawan. Accordingly, on an overall view of the factual matrix of the case and for the various reasons as aforementioned in the preceding paragraphs, we are of the considered opinion that the Department could not have validly made the impugned additions by placing sole reliance on the invoices recovered from the residence of Shri Sanjay Dhawan as well as on the statement of the various third parties viz. S/Shri Gulshan Gaba, Naveen Salley and Sudhir Sethi which were recorded at the back of the assessee without giving the opportunity to the assessee to cross examine them. For the reasons mentioned in the preceding paragraphs, the impugned additions could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for scrutiny. The assessment in terms of section 143(3) of the Act was completed on 20.03.2016 at the returned income and further at an income of Rs. 3,42,59,028/- in terms of section 115JB of the Act. Subsequently, revisionary proceedings were initiated for assessment year 2013-14 u/s. 263 of the Act and vide order dated 31.08.2017, the Ld. Pr. Commissioner of Income Tax (PCIT), Patiala set aside the assessment order and directed the Assessing Officer (AO) to pass a fresh assessment order. The assessment subsequent to the revisionary proceedings was completed on 26.12.2018 wherein the income of the assessee was assessed as per the original assessment order passed u/s. 143(3) of the Act on 20.03.2016. 2.1. Meanwhile, there was a search and seizure operation on 05.08.2016 on the business premises of the assessee by the Directorate General of GST Intelligence and the search was also conducted on one Shri Sanjay Dhawan, Ex-President of the assessee company as well as three-four dealers of the assessee company and information was passed on by the Intelligence Wing of GST to the Income Tax Department that the assessee company had been allegedly suppressing its turn over by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering the facts of the case material available on records. 2. That the Ld. CIT(A) has erred in confirming the action of the Ld. A.O. regarding the addition of Rs. 16,02,706/-, made by applying net profit (Declared by the assessee) @ 4.42% on suppressed sales, ignoring the fact that the said books of accounts were already rejected u/s. 145(3) of the Income Tax Act, 1961. Thus such additions must be deleted by reversing the findings of the CIT(Appeal. 3. That the Ld. CIT(A) has erred in confirming the action of NIL the Ld. A.O. confirming the addition without considering the fact that the said addition is based on findings of excise authorities and the ld. Assessing officer has failed to conduct any independent enquiry in the matter and NO addition can be made on the basis of such findings when, Excise laws and Income tax laws are totally independent. 4. That the Ld. CIT(A) has erred in confirming the action of the Ld. A.O. by not allowing the interest income of Rs. 10,82,322/- to be reduced from net profit to calculate addition by applying Net Profit Rate of 4.42% on suppressed sales. 3. In ITA No. 83/Chd/2022 pertaining to assessment year 2014-15, the brief fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CIT(Appeal). 3. That the Ld. CIT(A) has erred in confirming the action of NIL the Ld. A.O. confirming the addition without considering the fact that the said addition is based on findings of excise authorities and the ld. Assessing officer has failed to conduct any independent enquiry in the matter and NO addition can be made on the basis of such findings when Excise laws and Income tax laws are totally independent. 4. That the Ld. CIT(A) has erred in confirming the action of Ld. A.O. by not allowing the interest income of Rs. 11,35,772/- to be reduced from net profit to calculate addition by applying Net Profit Rate of 4.19% on suppressed sales. 4. In ITA No. 84/Chd/2022, for assessment year 2015-16, the original return of income was filed on 31.10.2015 declaring an income of Rs. 1,58,54,752/- and the assessment was completed u/s. 143(3) of the Act on 28.08.2017. Subsequently, in view of the information received from the Directorate General of GST Intelligence, reassessment proceedings were initiated in this assessment year also and the assessment was completed at an income of Rs. 4,29,30,912/- after making an addition of Rs. 2,32,47,931/- by applying the net p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment from Directorate General of GST Intelligence, the assessee's case in this year was also reopened u/s. 147 read with section 148 of the Act. The re-assessment was completed at an income of Rs. 4,93,03,011/- after making an addition of Rs. 2,84,00,292/- in respect of additional net profit earned on suppressed turn over by applying net profit rate of 3.64% after rejecting the books of account. The alleged suppressed turnover in the year was computed at Rs. 20,67,53,177/- by the AO. 5.1. Aggrieved, the assessee approached the Ld. First Appellate Authority challenging the rejection of books of account as well as challenging the addition on merit and the Ld. First Appellate Authority, while upholding the rejection of books of account, allowed relief in respect of net profit on suppressed sales by holding that the net profit rate of 3.15% (as declared by the assessee) was to be applied rather than the net profit rate of 3.64%. This resulted in the addition on this account being sustained only to the extent of Rs. 65,12,725/-. 5.2. Now the assessee has approached this Tribunal challenging the order of the Ld. CIT(A) by raising following grounds of appeal:- 1. That t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of books of account, he gave part relief in respect of net profit earned on suppressed sales by holding that the net profit rate of 3.12% (as declared by the assessee) was to be applied rather than the average net profit rate of 3.64%. 6.2. Now, the assessee has approached this Tribunal challenging the order of the Ld. CIT(A) by raising following grounds of appeal:- 1. That the Ld. CIT(A) has erred in confirming the action of the Ld. A.O. regarding the rejection of books of accounts of the assessee without considering the facts of the case material available on records. 2. That the Ld. CIT(A) has erred in confirming the action of the Ld. A.O. regarding the addition of Rs. 14,70,900/-, made by applying net profit (Declared by the assessee) @ 3.12% on suppressed sales, ignoring the fact that the said books of accounts were already rejected u/s. 145(3) of the Income Tax Act, 1961. Thus such additions must be deleted by reversing the Findings of the CIT(Appeal). 3. That the Ld. CIT(A) has erred in confirming the action 01 the Ld. A.O. confirming the addition without considering the fact that the said addition is based on findings of excise authorities and the ld. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of search by the Excise Authorities in the premises of the assessee as well as on Shri Sanjay Dhawan who was the Ex-President of the company and had earlier worked in the company from year 2009 to year 2013. It was submitted that the search had also been carried out on certain dealers of the assessee like S/Shri Gulshan Gaba, Naveen Salley and Sudhir Sethi. It was submitted that during the course of search on the premises of Shri Sanjay Dhawan, certain invoices (being 225 in number) were found and in the said invoices, the registration numbers of vehicles belonging to the assessee company were also mentioned which led the AO to form an incorrect belief that the assessee's income for the captioned years had escaped assessment. It was submitted that the Excise Authorities had also recorded the statements of third parties like S/Shri Gulshan Gaba, Naveen Salley and Sudhir Sethi as well as of Manoj Kumar, the Director of the assessee company. It was submitted that the AO had relied upon that statements of S/Shri Sanjay Dhawan Gulshan Gaba, Naveen Salley and Sudhir Sethi to make the impugned additions but had totally ignored the statement of Shri Manoj Kumar, the Director of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad not made any undisclosed sales and that all these fake invoices had been created by Shri Sanjay Dhawan to put the assessee company under financial pressure and litigation. Our attention was drawn to the copy of the FIR and other complaints made in this regard and placed at pages 260 to 265 of the paper book. 7.4. It was further submitted that as far as assessment year 2013-14 was concerned, the original assessment was completed u/s. 143(3) of the Act vide order dated 23.03.2016 which was subject to proceedings u/s. 263 of the Act and subsequently consequential assessment was also framed at the same income without any further addition and, therefore, revisiting the same assessment for a third time was not to be sustained. 7.5. The Ld. AR also drew our attention to the reply filed by the assessee company in response to the show cause notice issued by Excise Authorities wherein it had been expressly stated that the recovery of documents from the residence of third parties had no relevance since Shri Sanjay Dhawan had already left the employment with the company three years prior to the date of search and as such no reliance could have been placed on such documents which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that on account of distance from one city to another city as per timings mentioned in the above Chart and considering the time required for loading and unloading, it could not have been possible for the vehicle to make a second trip within few hours on the same day considering the distance between the factory and the first destination. The Ld. AR submitted that these submissions were also made before the lower authorities but the same were not given due consideration. 7.10. Referring again to the yield chart, which has already been reproduced in the preceding paragraph No. 7.0, the Ld. AR submitted that there is no iota of evidence that any expenditure towards purchases of raw material, chemicals etc. or expenditure towards extra labour charges or power required for manufacturing the extra yield was incurred. It was submitted that there was no significant variation in percentage of yield from year to year and, therefore, the allegation of extra production being sold through fake invoices or being adjusted through under-valuation is totally misconceived and based merely on conjectures and surmises. It was submitted that in absence of any corroborative evidence having been found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne Shri Manish Jain in spite of having made a specific request to do so. The Ld. AR submitted that, thus, the additions were not sustainable more so for the reason that the identity of the person sending the e-mails to M/s. B.M. Paper Mart had not been established and, therefore, the addition based on such unverified electronic records was not sustainable. The Ld. AR drew our attention to the noting made by the AO at pages 6 7 of the assessment order wherein he has mentioned that the series of the alleged unrecorded bills pertaining to June 2015 were as under:- a) CC 204 b) CC 205 c) CC 213 d) CC 212 e) CC 219 f) CC 220 7.14. It was submitted that even if the statement of Shri Manish Jain is taken as correct then also as per the assessee's regular books of account, almost the same series of bills should have been existing, whereas, as per the regular books of account for the month of June 2015, the invoice series is 700. Our attention was drawn to the sample invoice placed at pages 297 to 306 of the paper book in this regard and it was submitted that, thus, the entire additions have been made by relying on irrelevant and incorrect allegations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o corroborate the same. The Ld. Sr. DR also referred to the statements of S/Shri Naveen Salley, Gulshan Gaba and Sudhir Sethi to demonstrate that both the lower authorities have rightly confirmed the unaccounted turn over. It was submitted that the AO has even explained the modus operandi being followed out by the assessee in this regard and it was submitted that the statement of the three parties were identical in as far as the modus operandi of the assessee company was concerned. He also submitted that the assessee was duly confronted with all the statements and the assessee did not offer any explanation in this regard and further submitted that since the assessee had no explanation to offer, the cross-examination was not necessary. It was further submitted that earlier, even Shri Manoj Kumar, the Director had accepted the fact of under invoicing and suppression of sales in his statement and it was only at a later stage that this statement of acceptance was retracted. It was submitted that the retraction by Shri Manoj Kumar was an afterthought and should not be accepted and the addition should be upheld based on his acceptance before the lower authorities. 8.1. The Ld. Sr. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorities, neither at the premises of the assessee company nor from any other premises, any other evidence with regard to undisclosed sales was found except for the invoices recovered from the residence of Shri Sanjay Dhawan and the impugned additions on account of the undisclosed/additional net profit on search alleged unaccounted sales have been made only on the basis of invoices recovered from the residence of Shri Sanjay Dhawan as well as the statements of S/Shri Gulshan Gaba, Naveen Salley, Sudhir Sethi, Manish Jain and Shiv Charan Lal. It is also an undisputed fact that the assessee had specifically requested the AO to provide an opportunity to it to cross- examine these four persons but such opportunity was not granted and the AO brushed aside the request of the assessee for the opportunity to cross- examine these persons by simply observing that since the assessee had no explanation to offer, there was no requirement for giving any such opportunity. Thus, the fact remains that the AO had proceeded to make the impugned additions on the basis of statements recorded behind the back of the assessee and without giving any proper opportunity to the assessee to rebut the same by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of filing of the complaints and FIR was an after thought by the assessee company. In light of this factual matrix, the reliance of the Department on the aforesaid invoices, in our considered opinion, has little persuasive value. 9.2. We have also gone through the Chart placed at paragraph No. 7.8 above which has been filed by the Ld. AR, wherein, it has been demonstrated that the allegation that unrecorded goods were being transported by vehicles owned by the assessee company is incorrect in as much as, it has been depicted in the above said chart that it was physically impossible for the same vehicle to have delivered goods at two different stations within a short span of time on the same day when time is required not only for movement of goods from one station to another but time is also required for loading and unloading of goods. A perusal of this chart would make it very clear that by taking into consideration the distance from one station to another, the same vehicle could not have been deployed for transporting the next consignment on the very same day. We note that this submission was also raised by the assessee both before the Excise Authorities as well as before the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statement of a third party, denial of cross-examination of such effected party would not be in accordance with law. The Hon'ble Apex Court in its judgement in the case of Andaman Timber Industries Vs. Commissioner of Central Excise (supra) held as under:- According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nrecorded sales stands demolished. The fact that parallel invoices were recovered from the Ex-President after three years of his having left the assessee company under circumstances in which the assessee company had already filed complaint and FIR against him (Shri Sanjay Dhawan) also does not support the case of the Department in as much as the Department should not have placed complete reliance without any corroborative evidence on such documents when the conduct of Shri Sanjay Dhawan itself was under suspicion. Therefore, in view of the above narrated factual matrix and after duly considering the various evidences which the Department has relied upon for making the impugned additions, we are of the considered opinion that the additions based on such alleged unrecorded sales do not have any sound basis and, therefore, for assessment years 2012-13 and 2013-14, the impugned additions on account of additional net profit earned on alleged unrecorded sales are liable to be deleted. It is so ordered accordingly. 9.6. Coming to the similar additions made in assessment years 2015-16, 2016-17 and 2017-18, it is seen that the basis of addition is e-mail communication received from the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -employee, who has categorically stated that the assessee company used to destroy the alleged parallel invoices once the consignment was delivered. This statement of Shri Shiv Charan Lal goes contrary to the fact of invoices being recovered during the search at the residential premises of Shri Sanjay Dhawan. It is also worth noting that as per the e-mail print out for June 2015, the bill numbers are running into series of 200 whereas as per the regular books of account the serial numbers of the invoices for the month of June 2015 is in the series of 700 onwards. Thus, this apparent contradiction castes a doubt on the veracity and the evidentiary value of the invoices recovered from the premises of Shri Sanjay Dhawan. Accordingly, on an overall view of the factual matrix of the case and for the various reasons as aforementioned in the preceding paragraphs, we are of the considered opinion that the Department could not have validly made the impugned additions by placing sole reliance on the invoices recovered from the residence of Shri Sanjay Dhawan as well as on the statement of the various third parties viz. S/Shri Gulshan Gaba, Naveen Salley and Sudhir Sethi which were recorded at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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