Dcit New Delhi v. M S Rimjhim Ispat Ltd Kanpur

Income Tax Appellate Tribunal Delhi Bench F New Delhi Before Shri Amit Shukla Judicial Member And Shri Prashant Maharishi Accountant Member Ita No 3756 Del 2011 Assessment Year 2006 07 Asstt Commissioner Of Income Tax Central Circle 19 Room No 319 Ara Centre E 2 Jhandelwalan Extn New Delhi Vs M S Rimjhim Ispat Ltd 123 355 Fazal Ganj Kanpur Up Appellant Respondent Co No 320 Del 201 1 Arising Appeal No 3756 Del 2011 Assessment Year 2006 07 Rimjhim Ispat Ltd 123 355 Fazal Ganj Kanpur Pan Aaacr 6582 K Vs Acit Central Circle 19 Room No 319 E 2 Ara Centre Jhandewalan Extn New Delhi Appellant Respondent Ita Nos 640 641 Del 2013 Assessment Years 2004 05 2005 06 Dy Commissioner Of Income Tax Central Circle 19 Room No 319 Ara Centre E 2 Jhandelwalan Extn New Delhi Vs M S Rimjhim Ispat Ltd 123 355 Fazal Ganj Kanpur Up Pan Aaacr 6582 K Appellant Respondent Department By Smt Paramita Tripathy Cit Dr Assessee By Shri Ashish Jaiswal Advocate Date Of Hearing 06 11 2017 Date Of Pronouncement 05 12 2017 Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 2 O R D E R Per Amit Shukla J M The Appeal For The Assessment Year 200 6 07 Has Been Filed By The Revenue And Cross Objection By The Assessee Ag Ainst Order Dated 23 5 2011 Passed By Ld Cit Appeals Iii New Delhi And Appeal For The Assessment Years 2004 05 And 2005 06 Has Been Filed By The Revenue Against Separate Impugned Order Of Even Date 26 11 2012 Passed By The Ld Cit Appeals Xxxiii New Delhi Al L The Appeals Are Against The Quantum Of Assessment Passed U S 143 3 148 2 Since The Issues Involved In All The Three Ye Ars Are Common Arising Out Of Identical Set Of Facts Therefore They We Re Heard Together And Are Being Disposed Of By Way Of This Consolidated Order We Will First Take Up The Revenues Appeal For The Assessment Y Ear 2006 07 And Cross Objection Filed By The Assessee In The Grou Nds Of Appeal The Revenue Has Raised Following Grounds 1 On The Facts And In The Circumstances Of The Ca Se The Cit A Has Erred On Facts And In Law In Holding That The R Eopening Of Assessment On The Basis Of The Report Of Assessing Officer Of Sh Kamlesh Gupta Was Not Justified As The Name Of The Assessee Was Not Mentioned Anywhere In The Document S Impounded During The Survey Despite The Facts That In His Statement Recorded During Survey Under Section 133 A On 22 09 2005 Sh Kamlesh Gupta Had Categorically Sta Ted That He Was Working As Consignment Agent Of M S Rim Jhim Ispat Ltd On Commission Basis And Had No Other Source Of Income Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 3 2 On The Facts And In The Circumstances Of The Cas E The Cit A Has Erred On Facts And In Law In Holding That The T Ransactions Mentioned At Page Number 3 4 5 9 And 10 Of Annexure 2 Do Not Belong To The Assessee Company Despite The Fact That Sh Kamlesh Gupta Had Admitted During The Survey That H E Had No Other Source Of Income From Consignment Work Of M S Rim Jhim Ispat Ltd 3 On The Facts And In The Circumstances Of The Case The Cit A Has Erred On Facts And In Law In Holding That The A Ssessee Was Not Involved In Under Billing Of Ss Flats Ignoring The Evidence In The Form Of Documents As Per Annexure A 2 And A 7 Found During Survey U S 133 A At The Business Premises Of M S Rahul Ispat Proprietor Kamlesh Gupta Jodhpur 4 The Order Of The Cit A Is Erroneous And Is Not Tenable On Facts And In Law 3 The Facts In Brief As Culled Out From The Asse Ssment Order Are That The Assessee Is A Limited Company Engaged In The Business Of Manufacturing Of Iron And Steel Of Ss Flat Regular Return Of Income Was Filed On 29 5 2006 Declaring Income Of Rs 4 62 22 340 Which Was Duly Processed U S 143 1 A Survey Action U S 1 33 A Was Conducted On 22 5 2009 By Adi Inv Jodhpur At The Bu Siness Premises Of A Third Party Shri Kamlesh Gupta Propri Etor M S Rahul Ispat And M S Namrata Metals Situated In Jodhp Ur And Jhansi In Wake Of Information Gathered In Such Surve Y Action A Letter Dated 7 7 2008 Was Received From I T O 6 3 Jhansi Informing That Certain Loose Incriminating Papers And Other Documents Were Found Seized By The Survey Party Which Are Against The Asse Ssee The Entire Information As Received By The Ao Has Been Incorporate D In The Assessment Order From Pages 1 To 3 Based On This Info Rmation Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 4 Assessees Case Was Reopened U S 147 By Issuance Of Notice U S 148 Dated 13 10 2008 Assessee Had Filed Its Objection Ag Ainst The Notice U S 148 But It Appears That It Was Not Disposed Of And N Either Has It Been Dealt With In The Impugned Assessment Order Durin G The Course Of The Reassessment Proceedings The Ao Required The A Ssessee Company To Explain As To Why A Sum Of Rs 5 14 88 000 Allegedly On Account Under Billing Done Through Shri Kamlesh Gupta Should Not Be Made Or Be Treated As Undisclosed Income Of The As Sessee Based On The Survey Information And Incriminating Material Found From The Possession Of One Of The Employee Of Shri Kamlesh Gu Pta In Response The Assessee Submitted That Books Of Accounts Documents F Ound In The Course Of Survey In The Case Of Shri Kamlesh Gupt A Did Not Relate To The Assessee At All It Was Also Pointed Out That The Employee Of Shri Kamlesh Gupta Has Owned Up The Entire Transaction Refle Cted In Impounded Annexure Marked As A 2 Found From His P Ossession The Entire Transaction As Discussed In The Said Annexure A 2 On The Basis Of Which Adverse Inference Has Been Sought To Be Draw N By The Ao Against The Assessee Now Cannot Be Adversely Viewed A Nd It Was Also Brought On Record That A Sworn Affidavit On Behalf Of S Hri Kamlesh Gupta Owning Up The Entire Transaction In His Hand Has Been Filed Before His Ao At Jhansi In The Assessment Proceedings In His Case I E Of Shri Kamalesh Gupta And There Was No Nexus Directl Y Or Indirectly Of Any Transaction Related To The Assessee Company It Was Submitted That The Entire Books Of Accounts Alongwith The Bills An D Vouchers Were Produced During The Course Of The Assessment Pro Ceedings Which Was Examined By The Ao However The Ld Ao Made The A Ddition After Observing And Holding As Under Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 5 5 That After Examination Of Explanation And Info Rmation Received On Account Of Survey Conducted U S 133 A On 22 9 2005 At Jhansi There Is Clear Finding That The Assessee Company Transaction Pertaining To On The Nature Of Under Bi Lling Of Sale Of Ss Flat Were Found Therefore It Is A Clear Case Of Concealment Of Income The Replies Filed By The Assessee From Time To Time Are Not Able To Justify The Claim For Not Treating The Same As Undisclosed Income The Contention Of Assessee That Shri Sanjay Khandelwal An Employee Of Kamlesh Gupta Has Owned The Transac Tion Cannot Be A Basis To Shift The Taxability Of The Assessee Company To A Third Person Accordingly As Discussed In Details In Foregoing Paras Income As Discussed Above Is Being Treated A S Undisclosed Income Of The Assessee Accordingly Addition Of Rs 5 14 88 000 Was Made 4 Before The Ld Cit A The Assessee Had Cha Llenged The Validity Of Reassessment Proceedings U S 148 On Various Count S Firstly There Was No Proper Service Of Notice U S 148 Upon The Ass Essee And Assessee Has Clearly Denied The Service Of Notice Bef Ore The Ao Secondly Ao Has Failed To Dispose Of The Objections Raised By The Assessee In Response To The Notice U S 148 And After Co Mplying With The Provisions Laid Down By The Honble Supreme Court In The Case Of G K N Drive Shafts India Ltd Vs Ito 259 Itr 19 And Lastly The Entire Addition Of Rs 5 14 88 000 Is Based On Info Rmation Received From Ito Jhansi Without Correlating The Documents Incr Iminating Papers With The Assessee Or Applying His Own Mind Ind Ependently He Has Simply Relied Upon The Version Of The Ito Jhansi And Without Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 6 Verifying The Veracity Of The Papers Relating To Rahul Ispat And Namrata Metals Or Correlating With That Of Bills And I Nvoices Issued By The Assessee No Such Papers Linking The Bills And In Voices Of The Assessee Company With The Entities Of Shri Kamlesh Gup Ta Has Been Found And Seized In Absence Of Such Documentary Pro Of Ao Could Not Have Proceeded On Such Information In Support Relian Ce Was Placed On Various Decisions Apart From That It Was Also Bro Ught To The Notice Of The Ld Cit A That The First Appellate Authority In The Case Of Shri Kamlesh Gupta For The Assessment Year 2006 07 Vide Or Der Dated 28 1 2010 After Examining The Annexure A 2 Which I S The Subject Matter Of Adverse Inference Against The Assessee Has Clearly Held That It Does Not Contain The Name Of M S Rimjim Ispat Ltd I E The Assessee Company The Entire Transaction Has Been Add Ed In The Hands Of Shri Kamlesh Gupta It Was Further Explained That Shri Kamlesh Gupta Was Simply A Consignee Agent Of The Co Mpany As Per The Agreement For Which He Has Been Paid Commission O N The Basis Of Goods Sent To Him And Sold Besides This He Is Also Do Ing Similar Business On His Own The Assessee Company Has Maint Ained Complete Record Of Movement Of Books Sold Through Concerns Of Shri Kamlesh Gupta And Tds Has Been Deducted On Total Commission P Aid To Him And There Is Relationship With Shri Kamlesh Gupta Was O Nly That He Was The Agent The Main Addition Is Based On Certain P Ages Of Annexure 2 Which Is A Pocket Diary Found From The Po Ssession Of Shri Sanjay Khandelwal Who Was The Employee Of Shri Kamle Sh Gupta During The Course Of Survey And In The Reassessment Proceedings The Said Employee Of Shri Kamlesh Gupta Has Filed An Af Fidavit Confirming That Transactions Noted Therein And Has Categorically Said That It Did Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 7 Not Belong To The Assessee Company And Nowhere He Has Stated That Transaction Of This Diary Belong To Rimjim Ispat Limited And He Was Never Cross Examined By The Ao In The Course Of Reas Sessment Proceedings The Department Even Has Not Made Inquiry Of Cross Examination To Shri Kamlesh Gupta Also The Assessee S Detail Submission In This Regard Have Been Dealt And Incorp Orated By The Ld Cit A In The Impugned Order From Pages 3 To 16 Of The Appellate Order 5 Ld Cit A After Taking Note Of The Entire Ma Terial Facts On Record And Also The Incriminating Papers Found Duri Ng The Course Of Survey First Of All Held That Entire Reopening U S 148 Is Invalid His Relevant Finding Quashing The Entire Proceedings U S 1 48 Is Reproduced Herein Below I Have Carefully Gone Through The Above Submission S Made By The Appellant As Well As The Seized Documents At Annexu Re A 2 Namely Pages 3 4 5 9 And 10 Which Were Found Durin G The Course Of Survey From Possession Of Sh Sanjay Khandelwal An Employee Of Sh Kamlesh Gupta At Jodhpur I Have Also Gone T Hrough The Notings Made On The Pages Of The Pocket Diary Namel Y 3 4 5 9 10 Found From The Person Of Sanjay Khandelwal From The Same It Is Seen That These Are Nothing But Details Of Amoun T Shown To Be Receivable Received From Parties Whose Names Are Rama Acme Rk Srm Jm Trivedi Bhagat Raju Madan J Ent Tu Kothari Anshul Kash Shri Ram Brajit Certain Mobile Numb Ers Have Also Been Mentioned Against The Name Of These Parties M Oreover Admittedly These Jotting Have Been Written In Codif Ied Form Therefore Merely On The Basis Of These Jottings In Which The Name Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 8 Of M S Rimjhim Ispat Does Not Figure And Without An Y Further Preliminary Verification Thereof As To Whether Thes E Jottings In Any Manner Prima Facie Indicate Unaccounted Transaction On Part Of The Appellant Company And That Too Without Giving A N Opportunity To The Appellant To Explain His Case And Solely Rel Ying On The Report Of The Ao Of Sh Kamlesh Gupta The Proprietor Of M S Rahul Ispat Who Is A Consignment Agent Of The Appellant It Was Not Appropriate To Have Issued Notice U S 148 To The Ao As These Facts Information Cannot Be The Basis For Reason To Believe That Income Of The Assessee For Rs 5 14 88 0001 Has Es Caped Assessment In This Connection Reliance Is Also Pla Ced On The Ratio Of The Decision In Case Of Sarthak Securities Compa Ny P Limited Vs Ito 329 I R 110 Wherein While Quashing The Noti Ce For Reopening Issued U S 148 The Honble Jurisdictional High Court Has Inter Alia Held In The Concluding Para As Under In The Case At Hand As Is Evincible The Assessin G Officer Was Aware Of The Existence Of Four Companies With W Hom The Assessee Had Entered Into Transaction Both The Orders Clearly Exposit That The Assessing Officer Was Made Aware Of The Situation By The Investigation Wing And Ther E Is No Mention That These Companies Are Fictitious Compani Es In The Initial Notice Nor Communication Providing Reas Ons Remotely Indicate Independent Application Of Mind True It Is At That Stage It Is Not Necessary To Have The Esta Blished Fact Of Escapement Of Income But What Is Necessary Is Th At There Is Relevant Material On Which A Reasonable Person C Ould Have Formed The Requisite Belief To Elaborate The Conclusive Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 9 Proof Is Not Germane At This Stage But The Formatio N Of Belie Must Be On The Base Or Foundation Or Platform Of Pr Udence Which A Reasonable Person Is Required To Resultant Ly The Initiation Of Proceedings Under Section 147 And Iss Uance Of Notice Under Section 148 Of The Act Are Hereby Quas Hed Applying The Above Principles As Initiated By The H Onble Court It Is Apparent That There Has Been No Independent Appl Ication Of Mind By The Ao And Had Some Care Been Shown In Purs Uing The Pages At 3 4 5 9 10 Of Annexure A 2 And An Expla Nation Been Obtained From The Appellant Relating To These Pages The Ao Would Have Been In A Better Position To Appreciate The Fa Cts Of The Case And Take A Prima Facie Considered Legal View As To Whether There Has Indeed Been Escapement Of Income In Appellants Case Based On Documents Found From The Possession Of An Employ Ee Located At Jodhpur Of The Consignment Agent Of Sh Kamlesh Gupta Located At Jhansi It Is Also Noticed That The Ao Has Not Disposed Off The Objection Raised By The Appellant Even In T He Assessment Order And Therefore There Has Been Non Observance O F The Directions Of Honble Supreme Court In M S Gkn Driv Eshafts Supra Accordingly In View Of The Above Discussi On The Ground No 3 4 6 Which Are Essentially Against The Reop Ening U S 148 Is Allowed In Favour Of The Appellant However The Appeal Is Also Decided On Merits In The Succeeding Paras 6 Thereafter On Merits He Noted That Ld Cit A Ii Agra Vide His Order Dated 28 1 2010 First Of All Has Corrected The Amount Of Rs 5 14 88 000 To Rs 1 19 68 500 As This Was The Actu Al Figure Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 10 Worked From Annexure A 2 And Held That The Income From All These Annexures Shall Be Assessed In The Hands Of Shri Ka Mlesh Gupta In Assessment Year 2006 07 The Relevant Observation And Finding Of Ld Cit A Ii Agra And Also The Observation And Finding O F The Ld Cit A While Deleting The Addition Of The Merits Reads As Under Xxx The Relevant Part Of Cit A Li Agra Finding While Deciding The Case Of Sh Kamlesh Gupta For Ay 06 07 Has Been Cit Ed By The Appellant In His Submission And Which Is Reproduced As Under The Ld Cit A Thoroughly Elaborated The Matter Of Annexure A 2 To A I 0 Particularly Pages Of 3 4 5 6 7 8 9 10 Of A Nnexure A 2 On Page 14 15 16 17 And Observed That I Am Of The Opinion That Transaction As Per Annexu Re A 2 Is Nothing But Outside Books Transaction Related To Mr Kamlesh Gupta Because Sh Kamlesh Gupta Himself Accepted Th E Transaction Of Page No 6 7 8 Of Annexure A 2 In The Last Page The Ld Cit A Further Observed And Directed As Under Since I Hold The Ownership Of The Seized Papers P Articularly A 2 And Others Annexures In The Hands Of The Assesse E Instead Of M S Rim Jhim Ispat Ltd Therefore This Resulte D Into Enhancement Of Income The Ao Is Directed To Modify The Assessment Accordingly After And Assessment Order D Ated 08 12 208 Is Modified In View Of The Decision Given By Me Hereinabove In View Of The Above Facts The Ao Is Directed To Mo Dify The Assessment And Work Out The Gross Profit On The Sal Es As Per Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 11 Above Annexure Which Has Been Treated As Commission Income The Quantum Of Sale Value As Per Annexure A 2 Work Out To Rs 1 19 68 5001 On This Quantum Of Sale As Per Annexure A 2 Gp Rate As Per Assessment Order Shall Be Applied By Ad Instead Of Commission Income Worked O Ut At Rs 81 0001 The Figure Of Annexure A 2 Is Also Direct Ed To Be Modified Accordingly Thus Appeal Is Allowed In Pa Rt The Appellant Has Inter Alia Also Submitted That Sh Kamlesh Gupta Has Never Admitted Before The Survey Party Th At These Transactions Noted In Annexure Belonged To Any Othe R Party Including The Principal Supplier Like Rimjhim Ispat Ltd That The Transactions As Per The Copy Of Account Of The Comp Any Were Not Cross Tallied Date Wise Amount Wise Quantit Y Wise And Rate Wise Found In Annexure A 2 From Sh Sanjay Kha Ndelwal That There Is No Corroborative Evidence Found From The Possession Of Sh Kamlesh Gupta And Sh Sanjay Khan Delwal On Which The Ao Has Supported The Departments Theo Ry Of Under Billing By The Appellant The Appellant Has A Lso Relied On The Affidavit Of Sh Sanjay Khandelwal Regarding Th E Ownership Of The Seized Diary And Regarding The Con Tents Of The Diary That On A Perusal Of The Annexure A 2 I T No Where Shows The Name Of Rimjhim Ispat Ltd And That The T Heory Of Codification Is Also Imaginary In Fact This Annexu Re Is A Dumb Document Not Written In The Hand Writing Of Rimjhim Ispat Ltd But An Employee Of Sh Kamlesh Gupta That There Is No Direct And Indirect Evidence Of Unaccounted Sale In The Fo Rm Of Under Billing By Rimjhim Ispat Ltd Rather It Is Out Of As Sessees Own Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 12 Business Which He Is Doing Independently In Additio N To Consignment Sale Of Rimjhim Ispat Ltd Therefore All The Transactions As Per Annexure A 2 To A 10 Have Bee N Held To Be Belonging To Rahul Ispats Own Business And Not That Of Others Like Rim Jhim Ispat Ltd The Ld Cit A Fur Ther Held That Transaction As Per Annexure A 2 Mentioned At Si No 1 2 3 4 5 6 7 8 9 10 And Other Annexures Belongs To Him I Have Carefully Gone Through The Above Submission S Made By The Appellant As Also The Order Of Cit A Ii A Gra In Case Of Sh Kamlesh Gupta Wherein He Has Held That The Seized A Nnexure A 2 Is Outside Books Transactions Of Mr Kamlesh Gupta The Learned Cit Has Also Got Re Worked The Quantum Of Sale Valu E As Per Annexure A 2 Which Works Out To Rs 1 19 68 5001 I Have Also Carefully Perused The Notings On Pages 3 4 5 9 1 0 Of Annexure A 2 And Have Not Noticed The Name Of The Appellant On These Pages Further The Appellant Has Submitted On 12 05 1 1 That Even If For Argument Sake It Is Presumed That The Notings O N These Pages Relate To The Assessee Company Then Also The Allege D Receipt Works Out Only To Rs 1 19 68 5001 While The Total Consignment Sale By The Assessee To Sh Kamlesh Gupta During Ay 06 07 Is For An Amount Of Rs 56 42 Crores Which Is A Much Highe R Amount Than That Of The Coded Figures In Above Pages Which Total Only To Rs 1 19 Crores Now As There Are No Dates Written On These Seized Documents It Cannot Be Said That These Figur Es Represent Any Unaccounted Sales On Part Of The Assessee To M S Rahul Ispat Ltd It Is Also Noted That The Total Turnover Of Th E Appellant For Ay Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 13 06 07 Is To The Tune Of Rs 257 19 Crores Taking All The Above Factors And Submissions Into Consideration And Also Going Through The Assessment Order Which Does Not Point Out To An Y Evidence So As To Substantiate The Fact That There Has Been An Undisclosed Sales By The Assessee To The Tune Of Rs 5 14 88 00 01 The Addition Made For This Amount Is Directed To Be Del Eted And Ground Of Appeal Nos 1 2 5 Are Allowed In Favour Of The Appellant 7 We Have Heard Both The Parties At Length And Al So Perused The Relevant Finding Given In The Impugned Order As Well As The Material Referred To Before Us Ld Cit Dr Has Mainly Relie D Upon The Information As Has Been Incorporated In The Assessment Order Which Was Received From Ito Jhansi And Submitted That During The Course Of Survey It Revealed That The Assessee Company Was Indu Lged In Under Billing Of Sales And Simply Because The Addition Has Been Confirmed In The Hands Of Shri Kamlesh Gupta That Does Not Absolve The Assessee Company To Explain Its State Of Affairs And How The Und Er Billing Has Not Been Done On The Other Hand Contention Of The Ld Co Unsel For The Assessee Was That Firstly The Assessee Right From The Stage Of The Ao Has Denied Such Transactions And Proved That The Tran Sactions Which Have Been Noted In Annexure A 2 Does Not Pertai N To The Assessee Secondly In The Case Of Shri Kamlesh Gupta The Addition On The Same Transaction Has Been Confirmed Which Has Atta Ined Finality And Lastly He Informed That No Appeal Has Been Filed By Shri Ka Mlesh Gupta Before The Tribunal Thus No Addition Can Be M Ade In The Hands Of The Assessee Company At All Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 14 8 First Of All We Find That The Ld Cit A Has Quashed The Entire Proceedings U S 148 And Held That The Proceedings Are Not Valid Which Is Evident From The Relevant Portion Of The Ld Cit A Incorporated Above Before Us Though The Revenue Has C Hallenged The Observation And Finding Of The Ld Cit A That Reopeni Ng Is Valid Vide Ground No 1 However Nothing Has Been Brought On Rec Ord To Controvert The Finding Of The Ld Cit A That There Was Any Document Found That The Assessee Was Doing Any Under Billing Especially When The Transaction Has Been Owned By The Employee Of Shri Kamlesh Gupta And Further What Was The Information And Material After Correlating The Documents Found During The Survey With That Of The Assessee On The Basis Of Which Ao Has Applied His Mind That It Is A Fit Case For Reopening The Case U S 147 The Material An D The Information On The Basis Of Which Assessment Is Sought To Be Reopen Ed Should Not Only Be Relevant But Also Should Have Live Link Nexus With The Income Chargeable To Tax Escaping Assessment There Is No Iota Of Material Against The Assessee Qua The Papers Which Was Found From The Possession Of The Third Person Or There Is Any Refer Ence Of The Assessee Doing Any Clandestine Activity In Connivance With Shri Kamlesh Gupta Especially When The Said Person Has Owned Up The Entir E Transaction Without Any Cross Examination Of Shri Kamlesh Gupta Th E Information And Material Does Not Have Any Relevant Be Aring To Draw Any Adverse Inference Against The Assessee Accordin Gly We Uphold The Order Of The Ld Cit A In Allowing The Validity Of Reopening U S 148 In Favour Of The Assessee 8 When The Issue Of Validity Of Reopening Unde R Section 148 Has Been Held In Favour Of The Assessee Then The Issue O N Merits Becomes Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 15 Academic However For The Sake Of Convenience And Lo Oking To The Fact That Similar Addition Has Been Made In The Assessment Y Ear 2004 05 And 2005 06 Also We Would Like To Deal The Addition O N Merits First Of All It Is Noticed That During The Course Of Survey 1 33 A In The Case Of Proprietorship Concerns Of Shri Kamlesh Gupta A Pock Et Diary Was Found Form The Possession Of His Employee Shri Sanj Ay Khandelwal The Said Diary Contains Certain Transactions Carried Out By M S Rahul Ispat To Various Parties Outside Jodhpur On Behalf Of M S Rimjhim Ispat Ltd I E The Assessee Company The Quoted Figu Re On Pages 3 4 5 9 10 Of Said Annexure A 2 Comes To Rs 5 14 88 Which After Multiplying With 1000 Willresult Into The Figure 5 14 88 000 This Is The Exact Amount Which Has Been Added By The Ao In The I Mpugned Order Now In The Case Of Shri Kamlesh Gupta From The Assessment Stage To First Appellate Stage It Has Been Found That These Transactions Relate To Shri Kamlesh Gupta Only And The Amount Of R S 5 14 88 000 Is Only Rs 1 19 68 500 And The Entire Amount Has Been Added In The Case Of Shri Kamlesh Gupta As Noted Above Apart F Rom That There Is Also A Finding Of Fact That Shri Kamlesh Gupta Never Admitted Either Before The Survey Party Or Before The Ao During The C Ourse Of His Assessment Proceedings That The Transaction Noted In The A Nnexure A 2 Belong To Any Other Party Including The Assessee T Here Was No Corroborative Evidence Qua The Assessee That Assessee Has Been Resorting To Any Kind Of Under Billing After Appreci Ation Of The Facts And Material On Record The Addition Has Been Deleted By The Ld Cit A In The Hands Of The Assessee And Therefore We Do Not Find Any Infirmity In Such An Order Of The Ld Cit A And Acc Ordingly Same Is Affirmed And Consequently The Revenues Appeal Is Dis Missed Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 16 9 In The Cross Objection It Has Been Submitted That It Has Been Filed In Support Of The Order Of The Ld Cit A And Hence N O Adjudication Is Required Therefore Same Is Dismissed As Infructuou S 10 Now Coming To The Appeal To The Assessment Year 2004 05 And 2005 06 We Find That Similar Grounds Have Been Raise D In Both The Years And For The Sake Of Ready Reference The Grounds Of Appeal Raised By The Revenue For The Assessment Year 2004 05 Reads A S Under 1 On The Facts And In The Circumstances Of The Case The Cit A Has Erred On Facts And In Law In Holding That The Reope Ning Of Assessment On The Basis Of The Report Of Assessing Officer Of Sh Kamlesh Gupta Was No Justified As The Name Of The A Ssessee Was Not Mentioned Anywhere In The Documents Impounded D Uring The Survey Despite The Facts That In His Statement Reco Rded During Survey Under Section 133 A On 22 09 2005 Sh Kamles H Gupta Had Categorically Stated That He Was Working As Con Signment Agent Of M S Rim Jhim Ispat Ltd On Commission Basi S And Had No Other Source Of Income 2 On The Facts And In The Circumstances Of The Cas E The Cit A Has Erred On Facts And In Law In Holding That The Trans Actions Mentioned At Page Number 3 4 5 9 And 10 Of Annexure 2 Do Not Belong To The Assessee Company Despite The Fact Tha T Sh Kamlesh Gupta Had Admitted During The Survey That H E Had No Other Source Of Income From Consignment Work Of Mls Rim Jhim Ispat Ltd 3 On The Facts And In The Circumstances Of The Cas E The Cit A Has Erred On Facts And In Law In Holding That The Asses See Was Not Involved In Under Billing Of Ss Flats Ignoring The Evidence In The Form Of Documents As Per Annexure A 2 And A 7 Found During Survey Uls 133 A At The Business Premises Of M S Rah Ul Ispat Proprietor Kamlesh Gupta Jodhpur Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 17 11 Exactly Same Grounds Have Been Raised In As Sessment Year 2005 06 Also The Common Finding Given By The Ld Ci T A Is Again Based On The Appellate Order Of The Ld Cit A Agra In The Case Of Shri Kamlesh Gupta The Relevant Observation And Finding Of The Ld Cit A In This Regard Reads As Under Findings I Have Perused The Assessment Order W Ritten Submission Argument Of Ld Ar Before Me Ld Ar F Iled Copy Of All Impounded Material From The Proprietorship Business Namely Rahul Ispat Of Sh Kamlesh Gupta And Contended That These Paper Does Not Contain The Name Of Appellant Company M S Rim J Him Ispat Ltd On These Documents Cit A Ii Agra While Deciding The Case Of Sh Kamlash Gupta For A Y 06 07 Cited Supra Has Given Categorical Finding That The Annexure A 2 Other Annexure Belon Gs To Sh Kamlesh Gupta Has Estimated Income In His Hands The Department Has Not Filed Any Appeal Against The Ord Er Of Cit A Ii Agra Therefore The Finding Of Cit A Ii Agra Ha S Become Final Following The Decision Of Cit A Ii Agra Cit A I Ii New Delhi In Appellants Own Case For A Y 06 07 Has Held That T Hese Papers Belong To Sh Kamlesh Gupta Proprietor Of M S Rahul Ispat Deleted The Addition On Merits I Have Perused The Appellate Order Passed By Cit A Ii Agra In The Case Of Sh Kamlesh Gupta For A Y 06 07 Relevant Portion Of Cit A S Order Is Reproduced As Under I Have Considered The Submission Of The Ar Assess Ment Order Remand Report Position Of Law In My Opinion The Appellant Deserves To Succeed Partly The Contention Of The A Ppellant In Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 18 Connection With Transaction As Per Annexure A 2 App Earing At Page No 1 2 3 4 5 9 As Well As 6 7 8 Are N Ot Acceptable Because Of The Following Grounds A The Papers Containing The Transaction On The Bas Is Of Commission Income Has Been Alleged To Be Earned Is Found From The Possession Of Sh Kamlesh Gupta And His Employe Es It Is Admitted Fact That The Assessee Was Doing Consignme Nt Sales As Well As His Own Business Of Same Nature This Fa Ct Is Clear From The Assessment Order Where The Issue Of Gross Profit Rate Is Discussed There Is A Good Turnover Of His Own The Assessing Officer Has Failed To Confront The Consig Nee Namely M S Rimjhim Ispat Ltd And Juhi Alloys Ltd Regardi Ng This Annexure A 2 It Is Also Admitted Fact That All The Consignment Sales As Per Copy Of Account Of M S Rimjhim Ispat L Td And Juhi Alloys Ltd Were Cross Verified From The Assessees Books Of Account Tds Has Been Deducted By The Consignee B In The Assessment Proceedings It Has Not Been As Serted By The Assessee Or Any Corrobative Evidence Were Found To Suggest That The Alleged Transaction As Per Annexure A 2 We Re Related To Rimjhim Ispat Ltd And Juhi Alloys Ltd C That The Assessing Officer Has Made Assumption T O Assess Only Commission Income Over And Above The Transaction Re Corded As Per Annexure A 2 He Has Not Brought Any Evidence O N Record Except Simply Relying Upon The Investigation Report That The Transaction As Per Annexure A 2 Related To Mls Rimj Him Ispat Ltd And Not To The Assessee Unless He Decides The Ownership Of The Transaction And Papers Found The Assessee C Annot Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 19 Escape To Be Treated As Owner Of The Transaction An D Papers Found The Assessee Cannot Escape To Be Treated As Owner O F The Transaction As Per Annexure A 2 Instead Of M S Juhi Alloys Ltd Is Supplying The Goods On Consignment This Company Ca Nnot Be Held To Be Owner Of Unrecorded Transaction Unless There Is Some Valid Nexus The Assessee Has No Relationship With The Ml S Rimjhim Ispat Ltd Or His Directors He Himself Was Doing Bu Siness Independently Dealing In The Same Trade Therefore He Cannot Escape Himself To Be The Owner Of The Transaction A S Per Annexure A 2 I Am Of The Opinion That Transaction As Per Annexur E A 2 Is Nothing But Outside Book Transaction Related To Mr Kamlesh Gupta Because Sh Kamlesh Gupta Himself Accepted The Tran Saction Of Page No 6 7 8 Of Annexure A 2 Thus The Assess Ing Officer Should Have Assessed All The Transaction Of A 2 And Other As Undisclosed Sales And Gross Profit Should Have Been Applied Instead Of Commission Income In His Hand The A O H As Also Wrongly Allowed Expenses On Commission Expenses Whi Ch Are On Higher Side And Not Allowable It Can Be Allowed On Ly In The Hands Of Assessee After Ascertaining The Gross Profit Of Undisclosed Turnover Since This Was A Case Of Enhancement Of I Ncome The Assessee Was Given A Show Cause Notice To Explain A S To Why The Content Of Transaction Of A 2 And Another Annexures Of The Same Type Of Transactions Shall Not Be Treated As Exclus Ively Belonging To Him Instead Of M S Rimjhim Ispat Ltd And Also Wh Y Gross Profit Rate Shall Not Be Applied As Per Trading Results As Per Assessees Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 20 Own Business Results The Assessee Has Filed A Repl Y Dated 21 07 2009 And Has Relied Upon Only Explanation As Per Wr Itten Submission Filed Earlier And Has Not Challenged Of Rebutted My Above Show Cause In Absence Of Clear Evidence That The Transaction As Per A 2 And Other Similar Annexures Belongs To M S Rimjhim Ispat Ltd And Not To The Assessee I Hold T Hat Transaction As Per Annexure A 2 Mentioned At Si No 1 2 3 4 5 6 7 8 9 10 And Other Annexures Belongs To Assessee Himself This Shall Be Considered Assessees Own Business Transaction And Hence Not Recorded In His Regular Books Of Account The Sales As Per The Annexure Shall Be Considered For Quantification Of Sales And Gp Rate As Per Assessees Trading Rate Accepted By The Department Shall Be Applied And Expenses May Be Allowed At The Ratio While Considering Commission Shall Be Adjusted Since I Hold The Ownership Of The Seized Paper Par Ticularly A 2 And Others Annexures In The Hands Of Assessee I Nstead Of M S Rimjhim Ispat Ltd Therefore This Resulted I Nto Enhancement Of Income The Ao Is Directed To Modify The Assessm Ent Accordingly After And Assessment Order Dated 08 12 2008 Is Modified In View Of The Decision Given By Me Herein Above Facts Of Case Are Same In Fact In The Assessment O Rder The Assessing Officer Has Mentioned That Unaccounted Sa Les In Appellants Case Is For A Y 06 07 As Quoted Supra Has Not Specified Correlated Even Any Material Found Im Pounded In The Case Of M S Rahul Ispat To Appellant Company For Un Accounted Income For A Y 05 06 Therefore I Have No Reason To Differ From The Findings Of Ld Cit A H Agra In The Case Of Sh Kamlesh Gupta For Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 21 A Y 06 07 Cit A Ii New Delhi Order For A Y 06 07 In Assessees Own Case That The Paper Found In The Case Of M S Ra Hul Ispat Does Not Relate To Appellants Company Accordingly Foll Owing The Decision Of Cit A Iii In Assessees Own Cases For A Y 06 07 I Direct Ao To Delete The Addition Made On Unaccounted Sale Of Rs 21 12 20 680 12 Since Similar Facts Are Permitting In This Ye Ar Also We Like In The Appeal For The Ay 2006 07 Find That Firstly No Evidence Whatsoever Was Found From The Department Suggesting That Assessee Was Indulged In Any Kind Of Under Invoicing Of Sal Es For The Year Under Consideration Secondly Assessees Name Does Not Found Place In The Documents Found And Seized From The Possession Of Shri Kamlesh Gupta Thirdly No Confrontation Or Documents From The Possession Of Employee Shri Kamlesh Gupta Has Been F Ound Nor Any Cross Examination Of Shri Kamlesh Gupta Has Been Done And Lastly In The Case Of Shri Kamlesh Gupta It Has Been Found Tha T These Documents Pertain To Him And Is Unrelated To The Assesse E And Adverse Inference Has Already Been Drawn There Agai Nst Him In The Appellate Order Which Has Been Stated To Be Final In The Light Of These Facts On Record And In View Of Our Finding Given Abo Ve The Aforesaid Findings Of The Ld Cit A On The Issue Of Quashing The Notice U S 148 And On Merits Cannot Be Tinkered With And The Same Is Af Firmed 13 Thus The All The Grounds Raised By The Revenu E Are Dismissed Both For The Assessment Year 2004 05 And 2005 06 In The Result All The Appeals Of The Revenue Are Dismissed And Also The Assessees Cross Objection Ita No 3756 Del 2011 Co No 320 De L 2011 Ita Nos 640 641 Del 2013 Acit Vs M S Rimjhim Ispat L Td M S Rimjhim Ispat Ltd Vs Acit Dcit Vs M S Rimjhim Ispat Ltd 22 Order Pronounced In The Open Court On 5 Th December 2017 Sd Sd Prashant Maharishi Amit Shukla Accountant Member Judicial Member Dated 5 Th December 2017 Veena Copy Forwarded To 1 Applicant 2 Respondent 3 Cit 4 Cit A 5 Dr Itat Assistant Registrar Itat New Delhi