TMI Blog2023 (9) TMI 1458X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken with respect to expenses of the outgoing in the loose sheets seized and impounded from the search proceedings. We do not find any reason to tinker with such a direction which is based on the facts and material on record. Accordingly, order of the ld. CIT(A) is confirmed on the grounds raised by the Revenue is dismissed. Unaccounted purchase - unexplained expenditure u/s.69C - CIT(A) deleted addition - HELD THAT:- Appellant has brought on record sufficient documentary evidences to justify its claim of genuineness of purchase of Spice Compound, which have not been controverted by the AO during assessment proceedings. No adverse view has been taken by the AO with respect to veracity of various documentary evidences or the claim made. AO has solely relied on the statements of two employees, which have later been clarified by the deponents Considering these facts, the addition as unexplained expenditure u/s.69C is correctly deleted. Addition u/s.68 - statement recorded during the search and survey - HELD THAT:- Once ld. AO is being directed to verify the assessee records and ascertain the correct figure of sales made to M/s. Samaira Enterprises and if there is any discrepanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in deleting the addition u/s 69A of the Income Tax Act 1961 amounting to Rs 9,00,000/- made by the assessing officer without considering the fact and circumstances of the case and settled position of law. 4 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the addition w/s 69C of the Income Tax Act 1961 amounting to Rs 4,72,00,000/- made by the assessing officer, without considering the facts and circumstances of the case and settled position of law. 5 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the addition u/s 69C of the Income Tax Act 1961 amounting to Rs. 11,20,000/- made by the assessing officer, without considering the facts and circumstances of the case and settled position of law. 4. The facts in brief are that the assessee company is engaged into the business of manufacturing of Herbal Nut, a natural substitute of betel nut and is used in pan masala and other mouth freshener industries. A search and seizure action was conducted on JMJ group and the assessee premises was covered u/s.133A of the Act, wherein a statement of employees of the assessee was recorded. Simultaneously, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eta Enterprises on the instructions of Shri Jagdish Joshi. (v) As per the statement of Shri Manoj Sharma (reply to Q.no. 15A, reproduced in page no 24 of the assessment order) the appellant has made cash sales of herbal nuts to concerns other than M/s Samaira Enterprises. Two parties identified are M/s. Jeet products, Hyderabad and M/s M K. Enterprise, Delhi. The sale proceeds of these sales are received in cash. Such cash received from unaccounted sales are booked as sales made to M/s Samaira Enterprises. The cash is deposited in the bank accounts of M/s Samaira Enterprises and later on transferred to the appellant Co. During F.Y. 2019-20 and F.Y. 2020-21 (till 05.02.2021), total such cash sales are Rs. 2.63 crore and Rs.4.63 crore. Similar modus operandi has been adopted for BAFPL and M/s Sangeeta Enterprises. (vi) The A.O. has also discussed the retraction statement of Shri Manoj Sharma. He has not accepted the retraction statement as there was a delay of 3 months. According to the A.O., only part of the statements has been retracted and not the entire statements recorded on earlier occasions. 7. Accordingly, AO has made the addition of Rs.2,27,19,500/- in this year and also bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that there is no actual movement of goods and there is only purchase bill, e-way bill and LR copies were received from Mumbai and these are booked as purchases in the books of accounts of the assessee which according to him ld. AO was not given. Thus, ld. AO added the entire purchases holding that assessee has failed to justify the purchases and according he added Rs.4,72,00,000/- u/s.69C. 11. With regard to addition of Rs.11,20,000 made u/s.69C, ld. AO noted that during the course of survey proceedings at the office premises of the assessee, there was an e-mail between Shri Jay Joshi, Accountant at Mumbai office and Shri Arvind Kumar Sing which contains the details of purchase of nirmali seeds (32 Tons) from M/s. M.S. Products. The ld. AO noted that as per the statement of Shri Arvind Kumar Singh, he has admitted that the price per Kg of nirmali seeds was around 71/- per kg and was booked at approximate price of Rs.32 per kg. as per the instruction of Shri Jagdish Joshi. Accordingly, he held that assessee might have paid cash for the balance price of Rs.11,20,000/- and same was treated as unexplained expenditure u/s.69C. 12. Lastly, he has made an addition on account of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arma, who was carrying on the business of M/s Samaira/Sangeetha, neither any scrutiny nor any enquiry has been carried out by A.O. d) The cash deposited in the bank account relates to the cash sales of M/s Samaira Enterprises, which was engaged into counter cash sales towards retail customers. e) No effort has been made by the A.O. in corroborating the entries in the loose sheet with the books of M/s Samaira Enterprises/Sangeetha Enterprises. The receipts as shown in the loose sheet may already have been disclosed as retail sales/not disclosed and the entries of expenses may have been the cash deposit in their bank accounts/undisclosed purchases. f) There are numerical inconsistencies in the addition made by the A.O. based on the loose paper, which is tabulated and highlighted in the submission of the appellant as reproduced above. According to the appellant, all the figures mentioned in the loose papers are summed up and considered as unexplained cash amount by the A.O. Further, aggregate of the numbers scribbled on the left hand side of the sheet are considered as unexplained cash credit and added u/s 69A while total of numbers mentioned or the right hand side of the sheet is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal sales GP Amount GP Ratio 1 2019-20 2,51,34,311 2,50,51,250 2,79,94,703 26,58,647 9.50% 2 2020-21 4,21,43,750 4,21,43,750 4,42,57,950 19,21,545 4.34 C.6.2 Therefore, for the year under consideration, M/s Samaira Enterprises has shown a purchase of Rs.4,21,43,750/- from the appellant company. The financial details of purchase/sales of the appellant company for the same period is as under:- Sr. No. F.Y Total Purchases Total sales Sales to Samaira GP Amount GP Ratio 1. 2017-18 69,94,994 2,65,09,900 42,79,590 16.14% 2. 2018-19 3,25,00,989 7,13,46,835 1,76,28,090 24.71% 3. 2019-20 2,44,56,556 2,44,56,556 2,50,51,250 1,32,60,212 23.01% 4. 2020-21 6,85,97,917 7,24,37,751 4,21,43,750 55,05,508 7.60% 6.6.3 Thus, it is seen that out of total sales of Rs.7,24,37,7517- by the appellant, during F.Y. 2020-21 relevant to A.V. 2021-22, Rs. 4,2143,750/- has been made to M/s Samaira Enterprises, which constitute 58% of the total sales. In my opinion, the findings in the assessment order regarding the cash sales transactions shown in the loose paper constituting unaccounted cash sales of the appellant company, got two fallacies- (i) It completely ignores the existence of M/s Samaira Enterprises ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statements of Mr. Manoj Sharma and other employees wherein they stated that sales are made to other parties (names of two parties have also been identifies in the statement of Mr. Manoj Sharma) in cash but these are booked in the name of M/s Samaira Enterprises. There is no doubt that these cash sales are related to Herbal nuts manufactured by the appellant for which purchases are made and duly accounted for in its books of accounts. 6.8 In this regard, there is substance in the argument of the appellant that if cash sales are directly treated as effected by the appellant, the purchases made by M/s Samaira Enterprises will be nil. Hence, entire sales by the appellant to M/s Samaira will also be nil in the books of accounts of the appellant. In such a Scenario, the entire sales made by M/s Samaira should be considered as sales of the appellant. Effectively, the gross profit of M/s Samaira should be considered addition to the net profit of the appellant resulting into nil turnover, profit and income of M/s Samaira As M/s Samaira Enterprises has already shown the gross profit in its return of income, no addition is warranted even as per the observation of the A.O. It appears that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side u/s. 69C of the Act, for A.Y. 2021-22), the same verification will be carried out for expenses/outgoings, as discussed above. 6.11 It is also observed that in para 8 of the assessment order, the AO has simultaneously made addition of Rs.4,63,52,504/- with respect to sales by the appellant to M/s Samaira Enterprises during FY 2020-21(till 05.02.2021). On the other hand, the appellant has stated that the correct figure of sales is Rs 4,21,43,750/-. I found that the figure of Rs. 4,63,52,504/- as taken by the AO, is based on the statements recorded during search survey proceedings. In this regard, the AO is directed to call for the necessary records and ascertain the correct figure of sales made to M/S Samaira Enterprise. In case of any discrepancy. necessary remedial measures in the case of M/s Samaira enterprise will be taken, as the same would constitute corresponding purchases by M/s Samaira Enterprises With the above direction, the addition of Rs.4,63,52,504/- is directed to be deleted in the hands of appellant following the same rationale as discussed in the preceding paragraphs. Thus, grounds of appeal no, 1 and 2 are allowed, with the aforesaid direction to the AO 15. Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corresponding sales which has been accounted in the books of M/s. Samaira Enterprises. If that premise of the AO is to be accepted then sale of M/s. Samaira Enterprises would be nil which cannot be the case, because this entity has shown sales and is assessed to tax since past. Thus, based on these documents and the ld. CIT (A) has given his elaborate finding for his conclusion and given direction to the ld. AO in para 6.10 and 6.11 as incorporated above, wherein, he has directed the ld. AO to verify and cross check, whether the sales adopted by him from the loose sheets appears in the cash book / bank book / sales of M/s. Samaira Enterprises or not and similar exercise to be undertaken with respect to expenses of the outgoing in the loose sheets seized and impounded from the search proceedings. We do not find any reason to tinker with such a direction which is based on the facts and material on record. Accordingly, order of the ld. CIT(A) is confirmed on the grounds raised by the Revenue is dismissed. 16. With regard to addition of Rs.4,72,00,000/- which has been made by the ld. AO on account of unaccounted purchases and treated as unexplained expenditure u/s.69C by the ld. AO, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt and vehicle no. carrying the Spice Compound and e mail correspondences etc. All these documentary evidences cannot be summarily rejected without finding any lacuna in it. 8.10 The employees, whose statements the AO has relied upon have later clarified before the Investigation Wing that (i) The Spice Compound has been used to give different tastes to the herbal nuts at the manufacturing stage during FY 2020-21. (ii) The mixing of Spice Compound being trade secret, is discreetly informed to the concerned staff only (iii) It is not possible that e-way bill has been generated and there is no physical transportation of goods. (iv) The e mail for generation of GRN should be read in totality, which actually demonstrate the goods are actually transported and received at the appellant's end. 8.11 These clarifications are also available at the time of assessment proceedings. It is observed that the AO has neither sought further clarification nor examined these employees / relevant persons, if he had any doubt on the veracity of later clarification made by these employees 8:12 Apart from the above, I found that the appellant has consistently claimed that for the first time Spice comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rise. In case of any discrepancy, necessary remedial measures in the case of M/s Samaira enterprise will be taken, as the same would constitute corresponding purchases by M/s Samaira Enterprises. With the above direction, the addition of Rs.4,63,52,504/- is directed to be deleted in the hands of appellant following the same rationale as discussed in the preceding paragraphs. Thus, grounds of appeal no, 1 and 2 are allowed, with the aforesaid direction to the AO . 19. Thus, once ld. AO is being directed to verify the assessee records and ascertain the correct figure of sales made to M/s. Samaira Enterprises and if there is any discrepancy, then remedial action has to be taken in the case of M/s. Samaira Enterprises as the same would constitute corresponding purchases in its hand. It is only with the direction ld. CIT(A) has directed to delete in the hands of the assessee. We do not find any infirmity in such direction because all these transactions have been stated to be recorded in the books of accounts of M/s. Samaira Enterprises. 20. Coming to the addition of Rs.9,00,000/- on account of addition made by the ld. AO of Rs.13,85,294/-, the ld. CIT(A) has dealt this issue in the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Tukda Nirmali Seeds at a lower price. (ii) Goods receipt note and transport copy. (iii) Ledger copy of M/s MS. Product showing all payments in cheques. 23. The ld. CIT (A) has deleted the said addition after observing as under:- 9.7. On careful consideration of above submission of the appellant, I do not find any merit in the impugned addition of Rs.11,20,000/-. Nowhere in the e mail, there is any mention of payment to be made in cash or under invoicing or under reporting. It simply says:- 32 Ton of Nirmali Seeds ordered x Rs 70 per kg = Rs 22,40,000/- 50% payment to be done le. Rs.11,20,000/ 9.7.1 This 50% payment has been reflected as paid to M/s MS. Product as per the Ledger account. 9.8 No documentary evidence has been brought on record by the AO that balance 50% payment was made in cash. Even the statement of Shri Arvind Kumar Singh as reproduced above, nowhere states that the balance payment was made in cash In my considered view, this is just the guess work of the AO, not supported by any documentary evidence. The AO has also not contradicted documentary evidences submitted, during the assessment proceedings. He has also not found any defect in the proof of payment and o ..... 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