Appeal details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 2987 (ITAT-INDORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
10 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
30-08-2022
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
25-07-2022
Assessment Year
2009-2010
Appeal Filed On
25-10-2021
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE (CONDUCTED THROUGH VIRTUAL COURT) BEFORE Ms. MADHUMITA ROY, JUDICIAL MEMBER & SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER I .T ( S S) .A . N o s. 1 7 5 to 1 8 0 /I n d /2 0 2 0 ( A s se ss m e n t Y e a r s : 2 0 0 6 - 0 7 & 2 0 0 8 - 0 9 t o 2 0 1 2 - 1 3 ) D C I T C e n tr a l - I , B h o p la V s. M / s. V a ib h a v E n te r p r i se s Sta ti o n R o a d , M a i h a r , S a t n a , M a d h ya Pr a d e s h PA N N o .A B D F S1 3 3 0 B (Appellant) .. (Respondent) C . O . N o s. 2 0 to 2 5 / I n d /2 0 2 1 ( in I T ( SS ) A N o s . 1 7 5 to 1 8 0 /I n d /2 0 2 0 ) ( A s se ss m e n t Y e a r s : 2 0 0 6 - 0 7 & 2 0 0 8 - 0 9 t o 2 0 1 2 - 1 3 ) M / s. V a ib h a v E n te r p r i se s Sta ti o n R o a d , M a i h a r , S a t n a , M a d h ya Pr a d e s h V s. D C I T C e n tr a l - I , B h o p la PA N N o .A B D F S1 3 3 0 B (Appellant/Cross Objector) .. (Respondent) Appellant by : Shri Anil Kamal Garg & Arpit Gaur, A.Rs. Respondent by : Shri P.K. Mitra, CIT-DR D a t e o f H e a r i ng 26.07.2022 D a t e o f P r o no un c e m e nt 31.08.2022 O R D E R PER Ms. MADHUMITA ROY - JM: The bunch of appeals filed by the Department and the Cross Objection filed by the assessee are directed against the orders dated 11.09.2020 & 01.10.2020 passed by the Ld. CIT(A)-3, Bhopal arising out of the orders dated 20.03.2014 & 11.03.2015 passed by the DCIT, Central, Bhopal under Section IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 2 – 147 r.w.s. 143(3) and under Section 153C r.w.s. 143(3) of the Income Tax Act, 1961(hereinafter referred to as “the Act”) for A.Ys. 2006-07 & 2008-09 to 2012-13 respectively. Since the issues involved in these matters are identical and relate to the same assessee these are heard analogously and are being disposed of by a common order. 2. The grounds preferred by the Revenue in all the appeals are on two counts: (i) Addition on account of suppression of sales (ii) Addition on account of unexplained cash credit. However, in the Cross Objections filed by the assessee challenged the maintainability of the re-assessment proceeding on several grounds. C.O. No. 21/Ind/2021(A.Y. 2008-09):- 3. One of the grounds raised by the assessee is this that in view of the first proviso to the sub-Section (1) of Section 153C, the AO does not have jurisdiction to reopen the assessment of A.Y. 2008-09. Not recording of satisfaction by the AO of the searched person has also been challenged before us. Accordingly, the entire proceeding is vitiated and thus liable to be quashed as the case made out by the appellant. Not recording satisfaction as regards to the belongingness of any seized materials with the appellant has been raised. The other ground of addition being not sustainable without having recourse to any incriminating materials found during the course of search from the premises of the searched person as contemplated under the provision of Section 153C in a concluded assessment has been argued vehemently by the IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 3 – Ld. A.R. Since the point of maintainability of the re-assessment proceeding has been raised by the appellant on very many counts we deem fit and proper to address these grounds first. 4. The brief facts leading to the case is this that the assessee, a partnership firm, engaged in the business of mining activities mainly business of trading of iron ores and it variants having two partners namely Smt. Deepa Ghai and Smt. Poonam Chopra, filed its return of income on 30.10.2006 declaring total income at Rs. 1,29,400/-. Subsequently, a search under Section 132 was carried out in the premises of SR Ferro Group on 20.06.2012 and simultaneously Survey Operations under Section 133A of the Act were carried out in the business premises of the appellant during which some loose papers and computer data were impounded. Upon perusal of the entire set of documents the Ld. AO opined that as per Clauses 16 & 17 of the agreement dated 16.02.2005 entered into by and between the appellant and one M/s. Jai Minerals the lease owner of the mines, the appellant was required to forward 40% of its total sale proceeds to the said M/s. Jai Minerals and also to bare cost of excavation; and all the mining expenses. Apart from that royalty, taxes, cess etc. as levied by any Government Department from time to time to be borne by the assessee. In fact, the appellant is bound to lift on a daily basis the whole of iron ore and its variants as raised from the mines owned by M/s. Jai Minerals, the party of the first part of the agreement. The assessee is further bound to arrange its own transportation, loading and/or unloading facilities for the purpose of mining activities and bare the necessary expenses thereof. IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 4 – 5. The Ld. AO on the basis of the transportation expenses booked by the appellant in its books of account came to a finding that the appellant was engaged in illegal mining of iron ore and selling the same out of his books. He, therefore, estimated the sales of the appellant and applying the net profit rate, determined the suppressed income of the appellant and made addition of Rs. 7,07,69,171/- which stood deleted by the Ld. CIT(A). Hence, the instant appeal before us. 6. A notice under Section 153 C dated 12.09.2014 were issued to the assessee directing it to file return of income for A.Y. 2007-08 to 2012-13 in response whereof on 30.09.2014 the assessee requested to treat the regular return filed by it under Section 139(1) in response to the notice under Section 153C of the Act. The return of income filed by the assessee for the relevant assessment year is as under: A.Y. Date of filing of return u/s 139(1) Returned income (In Rs.) Date of filing of return by the assessee against u/s 153C Declared income in Return u/s 153C Income (In Rs.) Additional income 2007-08 02/11/2007 11,63,190/- 30/09/2014 11,63,190/- Nil 2008-09 29/09/2008 36,36,350/- 30/09/2014 36,36,350/- Nil 2009-10 28/09/2009 86,53,580/- 30/09/2014 86,53,580/- Nil 2010-11 27/09/2010 63,44,990/- 30/09/2014 63,44,990/- Nil 2011-12 22/09/2011 4,43,00,800/- 30/09/2014 4,43,00,800/- Nil 2012-13 30/03/2013 3,15,54,060/- 30/09/2014 3,15,54,060/- Nil 2013-14 30/10/2014 Nil - - Nil 7. Under this circumstances the appellant contended that the searched was conducted under Section 132 of the Act on 20.06.2012 in the premises of SR Ferro Group and the AO of the appellant had recorded the satisfaction for issuance of notice under Section 153C of the Act only on 11.09.2014 which reveals that the AO of the appellant had received this material from the AO of IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 5 – the searched person during the F.Y. 2014-15 i.e. relevant to A.Y. 2015-16 only. In view of the specific provision of the first proviso to sub-Section (1) of 153C of the Act, the AO of the appellant was permitted to issue the notices under Section 153C only for the six assessment years preceding to A.Y. 2015- 16. Therefore, the AO could have issued the notice under Section 153C of the Act only for six years commencing from 2009-10 to 2014-15. As the AO does not have any jurisdiction for the A.Y. 2007-08 and 2008-09, the notices issued under Section 153C of the Act for these two assessment years and consequent assessment proceeding carried out in pursuance of such notices is bad in law and deserves to be quashed in their entirety. The appellant relied upon various judgments passed by different judicial forum in support of his argument. However, the Ld. DR supported the addition made by the Ld. AO. Apart from that, non-recording of satisfaction by the AO of the searched person vitiates the entire proceeding as also argued by the Ld. A.R. In support of his argument the Ld. A.R. relied upon the judgment passed in the matter of CIT vs. Calcutta Knitwears, reported in (2014) 6 SCC 444 . The Ld. D.R. relied upon the order passed by the Hon’ble Apex Court in the matter of Super Malls Pvt. Ltd. vs. PCIT dated 07.03.2020. 8. It appears from the records that the AO of the searched person and the appellant are one and the same and therefore, as per our understanding no physical transmission of the seized material was required from the AO of the searched person to the AO of the appellant before us. In that view of the matter the first proviso to sub-Section (1) of Section 153C is not applicable at all and therefore, the proceeding under Section 153C for A.Y. 2007-08 to IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 6 – 2012-13 has been upheld by the Ld. CIT(A). Thus, so far as the allegation of not recording satisfaction by the AO of the searched person is concerned we do not find any substance in such submission made by the Ld. A.R. We further find that on these issues when the Remand Report was submitted by the Ld. AO as called for no rebutted was made by the appellant. 9. We further find that while dealing with this issue the Ld. CIT(A) observed as follows: “4.1.2 I have carefully considered the submission of the appellant, relevant provisions of the Act and as also various judicial pronouncements upon which the appellant has placed reliance. The case of the appellant was transferred and centralized from Satna (M,P.) to the DCIT-Central, Bhopal vide Order u/s. 127 of the Act, passed by the CIT-II, Jabalpur, on 11.11.2013. From the comment given by the AO in his remand report dated 07.03.2018, which has not been rebutted by the appellant too, it is evident that the AO of the searched person and the appellant were one and the same, while making assessments in the case of searched person u/s. 153A and that in the case of the appellant u/s. 153C of the Act. Thus, effectively, in my view, no physical transmission of the seized material was required from the AO of the searched person to the AO of the appellant, as both the AOs were one and the same. In such circumstances, in my view, the first proviso to sub-section (1) to section 153C would have no application. Accordingly, in my considered view, in order to give full effect to the provisions of the Act, in the instant case, the search u/s. 132 having taken place on 20.06.2012, six years were rightly computed by the AO from A.Y. 2007-08 to A.Y. 2012-13. For my such view, I also draw the support from the recent judgment of the Hon'ble Apex Court in the case of Super Malls Pvt. Ltd vs. PCIT dated 07.03.2020. In such case, the Hon'ble Apex Court had an occasion to examine that in a situation when the AO of the person searched and the AO of the other person is the same, whether there would be any requirement of recording two satisfactions, as contemplated u/s. 153C of the Act viz. in the case of the person searched and as also in the case of the other person. The Hon'ble Apex Court, distinguishing its earlier judgement in the case of CIT vs. Calcutta Knitwears (2014) 6 SCC 444 was pleased to hold that the position where the AO of the searched person and other person is same, would be on a different footing than the AO of both the person are different. The Apex Court hold that in a case where the AO is the same, there is no mandatory requirement of recording of any satisfaction in the file of the searched person. I am of the view that the decisions relied upon by the appellant on various judicial authorities were rendered prior to the decision of the Hon'ble Apex Court in the case of Super Malls (supra), and therefore, cannot be applied in the present case. Therefore, appeal on these grounds is Dismissed.” IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 7 – 10. We find that the Ld. CIT(A) also found the re-assessment proceeding as per the provision of laws as discussed above. Further that, the ratio laid down by the Hon’ble Apex Court in the case Super Malls (supra) where on the identical situation meaning thereby where the AO of the searched person and the appellant were one and the same, recording of satisfaction by the Ld. AO of the searched person not found to be mandatory has been rightly applied by the Ld. CIT(A). Thus, we do not find any substance in the argument advanced by the Ld. A.R. These grounds preferred in Cross Objection, thus, fail. 11. However, the Ld. Counsel for the assessee vehemently argued in support of the ground raised that no addition under Section 153C could be made without having recourse to any incriminating material during the course of search from the premises of the person searched in respect of the year in question. He further relied upon the order passed by the Hon’ble Delhi High Court in the matter of CIT vs. Kabul Chawla, reported in 380 ITR 573(Del). 12. On the other hand, we find that the Ld. DR has relied on the order passed by the Ld. CIT(A) in this regard. 13. Before dealing with this ground it is necessary to examine the document relied upon by the Ld. AO which was found and impounded during the course of search and seizure operation at the premises of M/s. Jai Minerals at 72, 1 st Floor, Aditya Avenue Building, Zone-II, M.P. Nagar, Bhopal. In his order the Ld. AO deals with the following documents impounded during the aforesaid search: Page No. Details 75 of LPS-Letter from Sona Agencies to M/s Vaibhav IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 8 – 1/1 Enterprises dated 09.04.20U regarding purchase order of 500 Tonnes Iron Ore from Sindursi Iron Ore Mines. 74 of LPS 1/1 Letter from M/s Vaibhav Enterprises to M/s Raipur Power & Steel Ltd., Plot No. 75-76, Industrial Growth Centrer, Borai, Gurg, CG., dated 01.04.2011 regarding Supply of Hematite 10-40 mm and 5-18 mm. 73of LPS-1/1 Letter from M/s Vaibhav Enterprises to M/s Nirnidhir Marketing Pvi. Ltd. 105, Sukh Sagar Apartment, Ashok Colony, Katni, dated 19.04.2011 regarding Supply of Hematite Fines. 72of LPS-1/1 Letter from M/s Vaibhav Enterprises to M/Mono Steel India Ltd., 202, Pruthvi Complex, Kalanala, Bhavnagar-364001(Gujrat), dated 16.04.2011 regarding offer for Supply of Hematitle. 1-9 of LPS-3/31 Copy of Agreement between Shri Jai Kumar Singh and Shree Vaibhav Enterprises dated 14.02.2005. 22 of LPS- 3/31 Letter from M/s Vaibhav Enterprises to Shri J.K. Singh M/s Jai Minerals. 72, 1 st Floor, Aditya Avenue Building, Zone-H, M.P. Nagar, Bhopal, dated 23.11.2005 regarding Rate Revision of mixed material. 32-33 of LPS-3/31 Letter from M/s Vaibhav Enterprises to Shri J.K. Singh M/s Jai Minerals, 72, 1 st Floor, Aditya Avenue Building, Zone-11, M.P. Nagar, Bhopal, dated 25.04.2009 regarding details of dispatch, mining return, stock of material royalty paid or due from last six months. 34-42 of LPS-3/31 Agreement between Shri Jai Kumar Singh and Shree Vaibhav Enterprises dated 14.02.2005. 43-61 of LPS-3/31 Agreement between Shri Jai Kumar Singh and Shree Vaibhav Enterprises dated 14.02.2005 72-73 of LPS-3/31 Agreement for termination of Agreement for sale of hemantitle & laterite between Shri Jai Kumar Singh and Shree Vaibhav Enterprises dated 03.10.2011 82-88 of LPS 3/31 Agreement for termination of Agreement for sale of hemantitle & laterite between Shri Jai Kumar Singh and Shree Vaibhav Enterprises dated 03.10.2011 87-88 of LPS 3/31 Agreement for Sale-Purchase of a screening, plant with belt conveyors etc. at sinduarsi hematite & laterite mine, village:Sindursi, Tehsil- Sihora, Distt. Jabalpur, between Shree Vaibhav Enterprise and Shri Jai Kumar Singh dated 28.11.2011 IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 9 – 14. The Ld. CIT(A), however, not appreciated the stand taken by the assessee, in this regard while dismissing the ground the Ld. CIT(A) observed as follows: “4.2.1 Once the assessee has participated in assessment proceedings before the A.O the appellant assessee cannot claim that issue of notice u/s 153C r.w.s 143(3) for A.Y 2007-08 to 2012-13 is not in order. Once the assesse has been put to notice and has filed returns in response to the notices and has attended the assessment proceedings, it cannot be said that issue of notice u/s 153C is not in order. It is seen that the issue of notice u/s 153C by the A.O for A.Ys. 2007-08 to 2012-13 is in order Perusal of the assessment order shows that during search and seizure operations books of account, document, loose papers etc. were seized which has been summarized in para 5 of the assessment order. Photocopies of the seized material was also provided to the assessee by the A.O. The seized documents and papers are the incriminating material on the basis of which the additions have been made. 4.2.2 In view of the above, the ground taken by the appellant that no incriminating material is found and the issue of notices u/s 153C for A.Y 2007-08 to 2012-13 is not justified, has no merit and is therefore, rejected. Therefore, appeal on this ground is dismissed.” We do not find any irregularities in the order passed by the Ld. CIT(A) on this aspect. In fact, we find that the documents relied upon by the Ld. AO while making addition which was impounded during the course of search in the premises of M/s. Jai Minerals has some bearing or the other on the merit of addition made by the Ld. AO. Hence, we do not find any force in the argument advance by the Ld. Counsel appearing for the assessee and on the present facts and circumstances of the case the ratio laid down in the case of Kabul Chawla (supra) is found to be not applicable at all. Hence, this ground of appeal fails. 15. All the Cross Objections preferred by the assessee are, therefore, dismissed. IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 10 – IT(SS)A No. 176/Ind/2020 (A.Y. 2008-09):- 16. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record. 17. The Ld. AO on the basis of the transportation expenses booked by the appellant in its books of account came to a finding that the appellant was engaged in illegal mining of ore and selling the same out of his books. He, therefore, estimated the sales of the appellant and applying the net profit rate, determined the suppressed income of the appellant and may the impugned addition of Rs. 7,07,69,171/- which stood deleted by the Ld. CIT(A). Hence, the instant appeal before us. 18. The assessee was supplied the reasons for issuance of the notice under Section 153 of the Act alongwith the copies of all the documents seized during the search conducted in the office premises of the proprietor of M/.s Jai Minerals, MP Nagar, Bhopal. The AO while making addition considered the distribution of revenue and the expenses as per the agreement in force. According to him 40% of the total sale proceeds both unaccounted and accounted has been taken as taxable income of M/s. Jai Minerals. The remaining 60% has been taken as the proceeds by the appellant. Since the entire expenses is to be borne by the appellant, the entire expenditure claimed, direct and indirect made in the books of accounts of M/s. Jai Minerals have been allowed as expenses actually incurred by the assessee on the basis of which sale of iron ore has been computed by the Ld. AO in the following manner: IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 11 – 2011-12* 11970,91,161 4256,11,711 338,15,196 135,74,439 278,05,364 312,54,508 7182,54,697 2010-11 17977,68,362 7191,07,345 298,87,890 35,19,022 746,28,708 747,70,328 8958,55,069 2009-10 3283,98,268 1313,59,307 60,11,226 17,71,516 223,62,271 141,42,491 1527,51,457 2008-09 4743,29,836 1897,31,935 31,95,793 27,53,285 407,37,114 267,45,377 2111,66,333 2007-08 2043,29,970 817,31,988 17,50,000 40,14,305 284,11,951 173,67,769 710,53,957 2006-07 324,11,734 129,64,694 0 65,83,234 53,47,025 68,09,749 7,07,033 2005-06 386,27,189 154,50,876 0 28,87,835 26,75,789 10,64,751 165,47,939 *Total Expenses of both the Firms have been equally divided as the disclosed sale proceeds are roughly equall. JM additionally sold 44,374 MT of ore in Open Market. Its income is therefore to be additionally supplemented by the following adjustments. However, in Financial Year 2007-08 and 2008-09 as M/s. Jai Minerals was also engaged into trading by purchasing manganese ore from M/s. Shivlika Minerals and selling the same to various parties. Working of the taxable income of the two firms have been done in the following manner: Financia l Year Sale Proceeds after accounting for Average Rate Suppression (20%) Taxable Income of Jai Minerals on account of Iron Ore Sale @ 40% as per Agreement Indirect Income of M/s Jai Mineral s Income of M/s. Jai Minerals from Trading Business* Total Income of M/s Jai Minerals Taxable Income of M/s. Vaibhav Enterprise on account of Iron Ore sale after deducting all expenses Indirect Income of M/s. Vaibhav Enterpri ses Closing Stock Less Opening Stock of M/s. Vaibhav Enterpris es Total Income of M/.s Vaibhav Enterprises 2011-12 1,197,091,161 425,611,711 796,293 102,551,275 528,959,279 718,254,697 4,712,63 1 205,166 723,172,494 2010-11 1,797,768,362 719,107,345 33,726 0 719,141,071 895,855,069 2,984,59 3 115,396 898,955,058 2009-10 328,398,268 131,359,307 24,508 0 131,383,815 152,751,457 2,118,14 8 8,592 154,878,197 2008- 09# 474,329,836 189,731,935 35,480 3,004,248 192,771,663 211,166,333 1,728,96 3 -319,719 212,575,577 2007- 08# 204,329,970 81,731,988 2,000 1,051,696 82,785,684 71,053,957 0 78,860 71,132,817 2006-07 32,411,734 12,964,694 0 0 12,964,694 707,033 0 337,100 1,044,133 2005-06 38,627,189 15,450,876 0 0 15,450,876 16,547,939 0 0 16,547,939 *For Financial Year 2011-12 the total Expenses of both the Firms have been equally divided as the disclosed sale proceeds were roughly equal. The sale proceed of ore sold in open market of Rs. 10.2 crores is reflected here. #Trading income after allowing credit for VAT, CST and Royalty; being sale made to parties other than M/s Vaibhav Minerals less purchases from Shivalika Minerals Finally the income concealed by the assessee has been worked out as follows:- A.Y. Total Income of assessee as tally account (In Rs.) Net Profit of assessee as per books of account (In Rs.) Concealed Income of assessee (In Rs.) IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 12 – 2007-08 10,44,133/- 6,17,071/- 4,27,062/- 2008-09 7,11,32,817/- 3,63,646/- 7,07,69,171/- 2009-10 21,25,75,577/- 86,53,582/- 20,39,21,995/- 2010-11 15,48,78,197/- 61,96,487/- 14,86,81,710/- 2011-12 89,89,55,058/- 4,41,50,794/- 85,48,04,264/- 2012-13 72,31,72,494/- 3,13,64,918/- 69,18,07,576/- Ultimately the AO made additions of Rs.4,27,062/-, Rs.7,07,69,171/-, Rs.20,39,21,995/-, Rs.14,86,81,710/-, Rs.85,48,04,264/- and Rs.69,18,07,576/- respectively for the A.Y. 2007-08, A.Y. 2008-09, A.Y. 2009-10, A.Y. 2010- 11, A.Y. 2011-12 & A.Y. 2012-13 on suppression of sales. 19. During the course of appellate proceeding the assessee filed additional evidences alongwith an application under Rule 46A of the Tax Rules, 1962. The Ld. AO was directed to submit his comments on the additional grounds of appeals raised by the appellant which was duly submitted by and under the remand report dated 07.03.2018. In short on 04.09.2019 the AO objected the very admission of the additional evidences since the same were not placed before him during the assessment proceeding. However, the same was duly considered and allowed by the Ld. CIT(A). 20. As regards, the merit of the matter is concerned the assessee submitted the written notes of submission before us and before the Ld. CIT(A) as well. The crux of the submissions of the assessee are as follows: (i) It is merely a trading concern which deals in iron ores and its variants and it was not having any license to prospect any mines at its own and during all the years under appeal, it had made its entire purchases only from M/s. Jai Minerals, Prop. Shri Jai Kumar Singh and further, under the purchase IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 13 – agreement, it had excavated the goods from only one mine situated at Village Sindursi, Dist. Jabalpur. (ii) The Jai Minerals had obtained a mining lease from the Government of Madhya Pradesh under a Lease Agreement dated 06.09.2004 entered into between M/s. Jai Minerals and the Government of Madhya Pradesh. (iii) The appellant had entered into one sole selling agreement for an initial period of fifteen years on 14.02.2005 with M/s. Jai Minerals under which the appellant was required to lift a minimum quantity of the minerals on a daily basis, the whole of the iron ore and its variants from the mine situated at Village Sindursi, Dist. Jabalpur, by incurring and bearing transportation and loading/unloading expenses and was also required to maintain proper records under the Mines Act, 1952 and the Mines & Minerals (Regulation and Development) Act, 1956 and such lifted material shall be invoiced by M/s. Jai Minerals to the appellant at a fixed selling price and further, as per the agreement, all the excavation charges, royalty, taxes, cess on mining goods were required to be borne by the appellant only. (iv) In pursuance of the agreement dated 14.02.2005, it had carried out activities of excavation of minerals from the mine and after performing various activities on the minerals so excavated to make it saleable, the appellant used to apprise M/s, Jai Minerals about the available quantity for sale and after verifying the details provided by the appellant, M/s. Jai Minerals used to raise bills upon the appellant on monthly basis and in turn, the appellant used to sale IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 14 – the minerals so purchased to various parties after raising serially numbered sales bills which have duly been recorded in its books of accounts. (v) The appellant could have sold only those goods which were purchased by it from M/s. Jai Minerals and the entire quantity of purchases recorded by the appellant in its books of account corresponds with the sales shown by M/s. Jai Minerals in their books of account, except, in those cases, where M/s. Jai Minerals had made the sales out of the purchases sourced from some other mines or parties. (vi) In view of the specific agreement dated 14.02.2005, there could not have been any other purchases in the hands of the appellant and therefore, there could not have been any other sales over and above that recorded by the appellant itself, in its audited books of account. (vii) It had shown reasonable amount of gross profit in various assessment years ranging between G.P. Rate of 29.80% to 43.54%. (viii) Its turnover, as recorded in the books of account got tremendously increased and it has shown a very substantial increase in sales from year to year, uptill A.Y. 2011-12, however, due to termination of the agreement, w.e.f. 21.09.2011 relevant to A.Y. 2012-13, its sales had got reduced. (ix) Although, the appellant was casted an obligation to excavate minerals from the mines and to perform further process thereon, but, in a true sense, it was only an agreement for sale and purchase of minerals between M/s. Jai Minerals and the appellant. IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 15 – (x) Although, as per the clause (20) of the agreement dated 14.02.2005, the fixed selling rate was to be reviewed only after a period of six years from the date of agreement, but, M/s. Jai Minerals, showing the threat of pre-mature termination of the agreement, used to revise the selling rates and compelled the appellant to purchase the material at a higher rate.. (xi) It was only in the financial year 2011-12 relevant to A.Y. 2012-13, under a new letter of contract dated 19.04.2011, that a 40% - 60% ratio of the sales realization of the minerals made by the appellant, from selling to the customers was entered upon. Accordingly, the appellant was required to continue to bear all the mining expenses, transportation expenses, royalty, taxes, cess and accordingly the appellant was required to pay a 40% fiat rate of eventual sales made by it from its customers to M/s. Jai Minerals, but unfortunately, the AO proceeded on the assumption ihat such 40%-60% arrangement was prevailing even in the assessment years prior to A.Y. 2012- 13. (xii) An agreement of termination was also seized from the premises of M/s. Jai Minerals and the AO in his satisfaction note at item nos. 10 & 11 of the table given in such satisfaction note has also mentioned the description of such agreement for termination of original agreement dated 14.02.2005. (xiii) The AO while making the bald estimation of sales and net profit has nowhere made reference of any loose paper or documents which were relied upon by him for issuance of notices u/s. 153C of the Act. IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 16 – (xiv) During the course of the simultaneous survey proceedings in its premises on 20.06.2012. not a single loose paper or document or any other incriminating material or evidence was found from which it could have been inferred that the appellant was engaged in any sort of out of books transactions. (xv) During the course of the assessment proceedings, the appellant was issued a show cause notice in which there was reference of some excel sheets but copies of such excel sheets were never provided to the appellant and further, the AO also made references of some other documents allegedly seized from the premises of M/s. Jai Minerals but, these documents were not considered as belonging to the appellant in the satisfaction note. (xvi) It made detailed reply of each and every query of the AO and such replies are placed at page no. 289 to 309 of the paper book. (xvii) The appellant in his reply letter dated 16.10.2014 furnished its detailed explanation on each and every loose paper referred to by the AO in the satisfaction note and also established that the transaction represented by the various documents in the form of letters/orders/quotations were duly recorded in its regular books of account. (xviii) During the course of the assessment proceeding itself, the appellant, vide its letter dated 16.11.2014 had clearly brought to the notice of the AO that the formula of 40% - 60% came into force from 01.04.2011 only which falls in the A.Y. 2012-13. Further, the appellant also furnished year wise details of dispatch in six volumes and in such statements furnished the complete details of dispatches IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 17 – such as date, bill no., pit-pass reference no., name of the customer, G.R. Number issued by the transporter, name of the transporter, Destination, description of the goods dispatched and quantity. (xix) During the course of the assessment proceedings, the appellant also apprised the AO that at its own, it had sent letters of confirmation to all the customers, to whom it had sold the goods during the period from 01.04.2006 to 21.09.2011, through speed post arid all the letters of the confirmation as sent to the customers along with their postal receipts were duly filed before the AO. (xx) It had vide letter dated 25.02.20J 5 had intimated that all the customers had duly confirmed the transactions as shown in the books of account of the appellant and there was no variation of any single penny. The appellant further submitted the copies of all the confirmation letters as were also filed before the AO, which is annexed to the Paper Book filed before us. (xxi) It had vide its letter dated 25.02.2015, before the AO had rebutted the allegation as regard to the suppression of sales by pointing out that the letters of confirmation had already been given by such customers and therefore, there was no basis for the AO to make any estimation of the rate of sale on the basis of some excel sheet seized from the premises of M/s. Jai Minerals. (xxii) It had vide its letter dated 25.02.2015 rebutted the proposal of the AO of estimating the quantity of dispatch on the basis of transportation expenses incurred. It had strongly objected that the dispatch cannot be worked out merely on the basis of transportation cost debited in the books of account as it was required to incur transportation cost for movement of goods for various IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 18 – purposes and many a times goods are required to be moved for the purposes other than for sale. For all such movements of goods, the appellant was required to incur transportation cost. (xxiii) By and under the letter dated 09.03.2015, it was submitted before the AO that as per the mining rules, M/s. Jai Minerals, the leasee of the mine, was required to furnish half-yearly returns of quantity produced, sold and stock-in- hand and accordingly such returns were submitted by M/s. Jai Minerals for the period from 01.01.2006 to 30.06.2011 and in such periodical returns, the quantities of opening stock, production, sales, closing stock of various variants of minerals were duly shown along with the rate and amount of royalty payable. It was submitted that the periodical returns so furnished by M/s. Jai Minerals gets tallied with the purchases shown by the appellant in its books of account. It was also submitted that the periodical returns so furnished by M/s. Jai Minerals were duly accepted by the Mining Authorities without any adverse observation. The copies of the returns so furnished have been filed in the paper book filed before us. (xxiv) It had also, by its letter dated 09.03.2015, furnished the purchase register for the period from 01.04.2005 to 31.03.2012, giving month wise details of purchases made by it from M/s. Jai Minerals and also made a comparison thereof with the sales shown by M/s. Jai Minerals in the periodical returns submitted by them to the mining authorities. (xxv) It had also furnished the summary of purchases shown by it in its books of account and its comparison with the periodical returns submitted by M/s. Jai IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 19 – Minerals to mining authorities before the AO and the same has also been furnished before us being part of the Paper Book filed before us. (xxvi) The appellant had furnished the dispatch statement before the AO and in such statements, the details of Pit Pass Numbers and Pit Pass Books were furnished. It was submitted that in the mining industry, no goods produce can be moved out of the mine without first issuance of a Pit Pass. It was submitted that Pit Pass is a government document issued by the Mining Department on advance payment of royalty by putting the seal of the Department on the Pit Passes so issued. It was submitted that Pit Passes are prepared in duplicate and one copy is provided to the customer along with sales bills. It was further submitted that the original copy of the Pit Pass was required to be deposited with the Mining Department. It was thus submitted that since in the case of the appellant, the entire purchases shown by it get perfectly tallied with the dispatch statements prepared on the basis of Pit Passes issued and as also, with the corresponding sales shown by M/s. Jai Minerals, there could not have been any reason for disbelieving the quantities of purchases or sales shown by the appellant in its regular books of account. (xxvii) Its assessment for A.Y. 2007-08 and A.Y, 2009-10 had got framed u/s. 143(3) of the Act and in none of the years, any discrepancy was found by the then AO, either in the quantity of sales or selling rates. (xxviii) It was a registered dealer under the then M.P. Vat Act, 2002 and under such Act, it had furnished periodical returns and had also produced the books IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 20 – of accounts before the Vat Authorities and the Vat Authorities did not find any suppression in the sales made by the appellant in its books of account; (xxix) The genuineness of the rates of sales can be verified from the abstract of the Indian Minerals Year Book, 2011 , which is the 50 th edition of Government of India, Ministry of Mines, Indian Bureau of Mines, issued in the month of October, 2012 along with the aforesaid reply dated 09.03.2015. In such abstract, the prices of metallic minerals in domestic markets for the financial year 2008-09, 2009-10 and 2010-11 have been given. By furnishing such abstract containing the prices of various minerals in India, the appellant demonstrated that it had sold its products at a much higher rate than that shown by the Ministry of Mines, Government of India in its yearly Minerals Book. 21. Apart from that the appellant rebutted each and every findings made by the Ld. AO. It was contended by the assessee that mining activity are subjected to royalty and taxes levied by the Government on quantitative basis and when there was no charge against it regarding the evasion of any such royalty or tax, there could not have been any suppression of quantity of production from the mine or the purchases made by the appellant from M/s. Jai Minerals. It was further pointed out that most of the time the negotiation was made with the customers directly by the M/s. Jai Minerals and the nothing to that effect made by them and further excel sheets prepared by them ought not to have been viewed against the appellant. 22. Apart from that there was no independent enquiry from the customers. Merely on the basis of the excel sheets found in the premises of M/s. Jai IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 21 – Minerals, the Ld. AO has wrongly drawn inference against the appellant only because there was variation of the rates in respect of 4-5 parties the approach of the Ld. AO for presuming suppression of rate of each and every case is not justified. 23. Further that the attempt made by M/s. Jai Minerals to overstate their expenses for reducing their taxable profit cannot be viewed against the appellant. Estimation of quantity of production merely on the basis of transportation expenses incurred by the assessee is also not full proof. 24. Before us the appellant further submitted following in support of the case made out by it and to justify the order passed by the Ld. CIT(A) as well: S. No. Submission in Brief 1. Agreement of 40:60 was only effective from 01.04.2011 2. The AO applied the theory of 40:60 uniformly for all the years 3. The assessee had entered into an agreement with M/s. Jai Minerals on 14-02- 2005 whereby the assessee would carry out the excavation work on behalf of M/s. Jai Minerals, at its own cost and would also make entire purchases from such M/s. Jai Minerals on the rates specified in the agreement. 4. The agreement dated 14-02-2005 came to an end vide an Agreement for Termination dated 01-10-2011. 5. Subsequent to termination of contract, the assessee sold plant & machineries vide agreement dated 28-11-2011 6. No minerals can be moved out of mine without issuing any Pit-Pass. Dispatch Statements showing dispatches made were duly furnished before the AO. 7. As per the Mining Rules, M/s. Jai Minerals, the lessee of the mine, was required to furnish half-yearly returns of quantity produced, sold and stock-in-hand. Periodical returns so furnished by M/s. Jai Minerals gets tallied with the purchases shown by the appellant in its books of account. It was also submitted that the a periodical returns so furnished by M/s. Jai Minerals were duly accepted by the Mining Authorities any adverse observation. 8. Before the AO, the assessee submitted its purchase register, for the period from 01-04-2005 to 31-03-2012 giving month-wise details of purchases made by it from M/s. Jai Minerals and also made a comparison thereof with the sales shown by M/s. Jai Minerals in the periodical returns submitted by them to the IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 22 – mining authorities. 9. Entire purchases tallied with the Dispatch statements prepared on the basis of Pit Passes issued. 10. The assessee duly furnished periodical returns with VAT authorities who had not found any suppression of sales. 11. The assessee had sold its products at a much higher rate than that shown by the Ministry of Mines, Government of India in its yearly Minerals Book 12. In the excel sheet scanned at page no. 12 of the Order, there has been shown sales to as many as 6 parties viz. M/s. Mahamaya Sponage Iron Pvt. Ltd., M/s. Sparsh Beldev Export Pvt. Ltd., M/s. Sona Agencies, M/s. Raipur Power & Steel Ltd., M/s. Mona Steel India Ltd. and M/s. Nirnidhi Marketing Pvt. Ltd.. Only variation found by the AO in the sales made to M/s. Nirnidhi Marketing. Such excel sheet was not recovered from the assessee’s premises but from the premises of M/s. Jai Minerals. 13. Assessee received entire consideration only through banking channels at the sales amount recorded in the regular books of account. Not even a single penny received in cash. 14. During the survey in the assessee’s premises, no single material or adverse evidence found regarding suppression of sales. 15. The customers to whom sales have been made by the assessee have also confirmed in writing. 16. AO had not conducted any independent enquiry from the buyers. 17. The AO estimated the finished quantity on the basis of transportation cost. Entire exercise of AO is guess work. 18. Multiple transportation involved in mining. Substantial quantity of over-burden (scrap) gets generated and the same is transported from place to place. 19. The AO wrongly presumed rate of trip by tractors at the uniform rate of Rs.60/- per trip. Whereas the facts remained that at the relevant time, the transportation by tractor cost, to the assessee, was varying between Rs.60 per trip to Rs.100 per trip. 20. The AO alleged that percentage of wastage at crusher only ranges between 2- 5% whereas the fact remained that such wastage at crusher site and washing sites account for 30-40%. 25. The Ld. CIT(A) upon examining the entire aspect of the matter deleted the addition with the following observation: “4.5.1 I have considered the assessment order, copies of the seized documents filed, written as well as oral submissions of the appellant, remand reports of the AO and appellant's rejoinders thereon. Upon putting the entire facts of the case in a juxtaposition, the appellant is a partnership firm, which is engaged in the business of trading of iron ores and its variants. The appellant firm had entered into one agreement for purchase of iron ores and its variants, on 14.02.2005 with Shri Jai IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 23 – Kumar Singh, Prop. M/s. Jai Minerals of Bhopal, who was having a mining lease to explore Iron Ore and its variants from the Government of Madhya Pradesh in respect of one mine situated at Village Sindursi, District jabalpur. As per the agreement, all the mining expenses, transportation expenses, royalty, tax, duty or fees relating to mining were required to be incurred by the appellant at is own and further, it was required to purchase such goods from M/s. Jai Minerals at a fixed cost stated in the agreement, which have been revised from time to time. The said agreement was also found during the course of the search in the case of Shri Jai Kumar Singh and the same was also made a part of satisfaction note by the AO of the appellant. In accordance with such agreement, the appellant earned out excavation work and after excavation and performing other incidental activities, apprised M/s. Jai Minerals about the finished quantity so produced and accordingly, M/s. Jai Minerals raised sales invoices upon the appellant and corresponding entries recording the purchases were made by the appellant in its regular books of account. Further, on the basis of such books of account, the appellant had been furnishing its returns of income u/s. 139 of the Act, from year to year and was computing its income. The appellant also got its books of accounts duly audited by a firm of Chartered Accountants u/s. 44AB of the Act, and also furnished copies of the Audit Reports and Audited Financial Statements along with the returns of income from year to year. The copies of such audit reports and audited financial statements were also furnished before me and I found that the Auditors conducting the audit have not found any discrepancy or defect in the books of account so maintained by the appellant. In the case of the appellant, two assessment years viz. for A.Y. 2007-08 and A.Y. 2009-10 have been framed u/s. 143(3) as per the copies of the assessment orders placed on record. Upon perusal of the assessment orders, I find that the AOs making the assessments have not found any discrepancy in the purchases or sales recorded by the appellant in its books of accounts. 4.5.2 I find a strong force in the contentions raised by the appellant that it was only a trading concern for dealing in iron ores and its variants and it was not having any license to prospect any mines at its own. Further, the appellant has shown its entire purchases, for all the years, only from M/s. Jai Minerals. It is not the case of the AO, who also happens to be the AO of M/s. Jai Minerals, that any of the sales shown by M/s. Jai Minerals was not found recorded in the books of account of the appellant. Also, during the course of the assessment proceedings, the appellant vide its letter dated 09.03.2015, furnished the purchase register for the entire period of 1.4.2005 to 31.3.2012 giving month wise details of purchases made by it from M/s. Jai Minerals and also made a comparison thereof with the sales shown by M/s. Jai Minerals in the mining returns furnished by them to the mining authorities. I find that the AO has not given any adverse finding on the details submitted by the appellant before him. 4.5.3 The arrangement between M/s. Jai Minerals and the appellant continued till 31.03.2011. However, it was only through a letter of contract dated 19.04.2011 that the new arrangement of the sharing of the revenue between M/s. Jai Minerals and the IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 24 – appellant in the ratio of 40% & 60% respectively, came into force w.e.f. 01.04.2011. Under such new arrangement too, the appellant's liability towards transportation expenses mining expenses, royalty, tax, duty and cess etc., continued to be that of the appellant. Thus, the arrangement of 40% - 60% was applicable only from A.Y. 2012- 13 and for the prior assessment years, from A.Y. 2007-08 to A.Y. 2011-12, such arrangement was not prevailing at all. Such assertion of the appellant could not be rebutted by the AO in any of his remand reports. However, in the instant case, the very foundation of the AO in making the huge additions in the income of the appellant, on allegation of suppression of sales quantity and selling rate is based upon the assumption that such arrangement for 40%-60% was prevailing in all the assessment years since beginning. Thus, the very foundation of the AO to make the additions has no legs to stand. 4.5.4 Further, The AO in the body of the assessment order, has made reference of some statements of profit and loss account of M/s. Jai Minerals for the period for 1.4.2011 to 31.03.2012, some excel sheet showing the sales during the period from 1.4.2011 to 31.05.2012 to some parties, other excel sheets and rough notings, found and seized from the premises of M/s. Jai Minerals, during the course of search u/s. 132 in its case. The AO then made a comparison of the details furnished in the excel sheets with the books of account of the appellant and finally, reached to the conclusion that the appellant was suppressing its sales quantity and sales value by 20%. In my considered view, such an approach cannot be said to be justified for the reason that firstly, none of the documents referred to by the AO was made a part of die satisfaction note and secondly, the attempt of M/s. Jai Minerals to evade its own profit cannot be viewed adversely against the appellant. I also find substance in the contention of the appellant that after coming into force the arrangement of 4()%- 60% ratio, all the negotiations for sales to the ultimate customers of the appellant were being made by M/s. Jai Minerals only and therefore, if at all they have collected any on money at their own, without bringing the same to the knowledge of the appellant and without parting with any single penny out of such on-money with the appellant, no adverse inference ought to have been drawn against it. 4.5.5 The appellant has also contended that during the course of the simultaneous survey proceedings carried out u/s. 133A of the Act in its premises on 20.06.2012, not a single loose paper or document or books of account or any other evidence was found or impounded which could, have given any iota of evidence as regard to the suppression of sales quantity or rate by the appellant. The AO even failed to make any reference of the cogent evidence found during the survey carried out u/s. 133A of the Act in the premises of the appellant. The appellant during the course of the assessment proceedings had furnished letters of confirmation of accounts by most of the customers and none of the customers had alleged or informed the AO about any variation in the sales shown by the appellant to them. The copies of the letters of the confirmations have also been filed by the appellant before me. IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 25 – 4.5.6 It is important to mention here that the AO before making huge additions has not conducted any single inquiry from any of the customers despite the fact that names and addresses of all such customers were available with him in the form of details given in the tally accounts, which have been referred to by the AO himself at various places. Further, the appellant being a VAT Dealer, was required to get its turnover duly assessed under the M.P. Vat Act, 2002 by way of filing Vat Returns and the charge of suppression of any turnover was never made by the Vat Authorities. Jn the present case, the AO failed to make the necessary inquiries from the Vat Authorities before making the estimation of the sales. The appellant has also explained that as per the mining rules and regulations no minerals can be moved out of mine without issuing any Pit-Pass and filing a copy of such Pit-Pass to the mining authorities. During the course of assessment proceedings, the appellant had duly submitted year-wise details of dispatch. Jn these dispatch statements, the appellant furnished all the necessary year wise details, such as date, bill no., Pit-Pass Reference no.. Name of the customer, GR No. issued by the Transporter, name of the transporter, destination, description of the goods dispatched and quantity. Copies of some specimen dispatch statements have also been furnished before me. On the other hand, M/s. Jai Minerals was required to furnish periodical details before the Mining Authorities and copies of such periodical returns were duly furnished by the appellant before the AO but, the AO could not find any variation in the quantity of production and sales shown in such periodical returns with those recorded by the appellant as purchases in its books of account. The copies of such periodical returns have also been furnished before me at page no. 710 to 718 of the paper book. It is worth mentioning that the appellant has constantly shown a remarkable increase in sales as well as its total income, from year to year, except during the F.Y. 2011-12 relevant to A.Y. 2012-13, in which the sales have fallen down to Rs. 19,43,04,456/- in comparison to sales for the F.Y. 2010-11 relevant to A.Y. 2011-12 at Rs. 26,62,92,822/- shown in the books. I find substance in the contention of the appellant that the very reason for fall of sales in A.Y. 2012-13 was that during such year, its agreement dated 14.02.2005 with M/s. Jai Minerals had got terminated, w.e.f. 21.09.2011 under an agreement for termination of agreement duly executed between both the parties. A copy of such termination agreement was also found daring the course of search in the case of M/s. Jai Minerals and it has also been made a part of satisfaction note by the AO issuing the notices u/s. 153C of the Act. The appellant has also shown GP rate ranging between 29.80% to 43.54% in its books of account and the same can be considered as quite reasonable. Thus, the appellant has rebuted each and every finding given by the AO in his assessment order with the necessary evidences. 4.5.7 In the aforesaid circumstances, in my considered view, the AO was not justified in estimating the sales proceeds of the appellant, for all the aforesaid assessment years and also by estimating an average suppression of 20% in the selling rate. The AO has estimated the sales quantity and thereafter, sales value, for all the assessment years merely on the basis of transportation expenses recorded in the regular books of account of the appellant. I find that the entire theory of the AO IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 26 – is based upon some estimation and superimposition of estimation thereon. The AO firstly estimated the average carrying weight capacity of one tractor trolly, then estimated the per trip expenses of transport vehicle, then estimated Rs. 15 per metric ton as the average cost of transportation from mine to crusher and thereafter, by making a reference of the transportation expenses debited by the appellant in its books of account, estimated the quantity of mine ore, produced and sold by the appellant. The AO ought to have considered that, in the mining industries there are several activities involved, requiring transportation of materials and before dispatching the goods to the customers there are many activities for which the movement of goods take place and which also requires incurrence of transportation expenses. The appellant has filed an activities flow chart and has demonstrated flow of the activities and also demonstrated that many of such activities require movement of goods from one place to another and due to bulkiness these are not possible manually and transport vehicles are required. The appellant has shown that from the mine, after blasting and drilling of mine, there results generation of Run-off mine (ROM) which are then transported to platform and at platform, the process of sorting takes place by separately identifying 'nearly saleable material' ‘material saleable at a later stage' and 'non saleable materials’ called as overburden. The material saleable at a later stage are then transported to a different yard, whereas overburden are transported to a dumping place and then, again, from the dumping place for the purpose of refilling the same are transported to the mine. The readily saleable goods are firstly transported to the crusher yard and from the crusher yard through tractors, these are taken to the loading point of the crusher. After performing the crushing process, certain unused dust and materials are again transported to the dumping place. From the crusher materials are then transported to the mixture machine, then to the washing yard and finally then to the railway sidings, for transportation to the ultimate customers. The appellant also submitted that it is not necessary that every time full capacity of the loading vehicles were utilized and also, the freight charges used to vary from time to time. Thus, I find full force in the contention of the appellant that merely on the basis of transportation expenses found recorded in the books of account of the appellant itself, the quantity of finished goods produced and sold to the customers cannot be ...scientifically estimated. It is not the case of the revenue that the appellant was found to have incurred any transportation expenses for effecting it's out of books sales. It is utmost important to mention that during the course of the search in the premises of M/s. Jai Minerals, so far it relates to the goods excavated by the appellant and as also, during the course of the survey proceedings in the case of the appellant, not a single evidence was found as regard to the unrecorded removal or sale of goods by the appellant. Also, in respect of the mine excavated by the appellant, no case of evasion of any royalty was detected by any mining authority. In such circumstances, there was no absolutely no justification for the AO to make the bald estimation of the sales quantity and consequently, sales value and net profit of the appellant. 4.5.8. In view of the above discussion, additions made by the AO amounting to Rs. 4,27,062/- in A.Y. 2007-08, Rs. 7,07,69,171/- in A.Y. 2008-09, Rs. 20,39,21,995/- in IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 27 – A.Y. 2009-10, Rs. 14,86,81,710/- in A.Y. 2010-11, Rs. 85,48,04,264/- for A.Y. 2011- 12 and Rs. 69,18,07,576/- in A.Y. 2012-13 are Deleted. Therefore, appeal on these grounds is allowed.” 26. Upon careful consideration of the matter the modus operandi of the business of the assessee has been elaborately discussed by the Ld. CIT(A) which further demonstrated that the same has been done in terms of the agreement entered into by the assessee and M/s. Jai Minerals. It is also a fact that the assessee’s books of account were duly audited and no discrepancy has been pointed out by the auditor. The fact that no discrepancy has been found in the purchase and sale of the assessee for two assessment years i.e. A.Y. 2007-08 & 2009-10 framed under Section 143(3) has been duly noted by the Ld. CIT(A). Further fact is to be noted that the assessee is not having any license to prospect any mines at its own rather entire purchases were made from M/s. Jai Minerals details whereof were duly submitted before the authorities below which is reflected in the written submission filed by the assessee being part of the Paper Book before us. It is also a fact that the Letter of Contract was of dated 19.04.2011 under which the new arrangement for 40:60 ratio were made effective from 01.04.2011. In fact, earlier, the arrangements between the appellant and the said Jai Minerals continued till 31.03.2011. In that view of the matter the arrangement of 40:60 was found to be made applicable from A.Y. 2012-13 by the Ld. CIT(A) which according to us is not questionable at all. Since prior to that period the said arrangements was not prevailing the foundation of the Ld. AO to presume suppression of sales on the arrangement of 40:60 for the entire block period was rightly found baseless by the Ld. CIT(A). IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 28 – 27. Apart from that the attempt of Jai Minerals to evade its own profit cannot be applied adversely against the assessee particularly when the documents referred to by the AO is not forming part of the satisfaction note by the Ld. AO. No single loose paper or material regarding suppression of sales was found during the survey under Section 133 of the Act in the premises of the appellant rather the appellant furnished copies of confirmation letters from the buyers wherein no contrary view has been expressed and/or informed by the said buyers to the authorities below. The question of variation of sales, therefore, does not have any leg to stand. To our utter surprise we find that before making huge addition no enquiry from any customer addresses whereof was though available with the Ld. AO was made. Neither any enquiry from the VAT authorities was made. No variation either found from the copy of the Pit-pass, dispatch statements, periodical returns furnished by the Jai Minerals before the mining authorities found by the Ld. AO. As because there was a termination of agreement w.e.f. 21.09.2011 the sales of the assessee though increased earlier, declined during the F.Y. 2011-12. In that view of the matter the gross profit shown by the assessee is found quite reasonable by the Ld. CIT(A). It is also evident from the order passed by the Ld. AO that the theory of estimation of sales and average suppression of 30% in selling rate applied by the Ld. AO is based upon estimation and superimposition of estimation thereon. The AO first estimated the average carrying weight capacity of one tractor trolley followed by estimation as per the trip expenses and thereafter estimated the quantity of iron ore produced and sold by the assessee. As the mining activity involves multiple transportation before final dispatch of the goods, merely on the basis of transportation expenses recording in books, IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 29 – quantity of goods produced and sold cannot be estimated as rightly pointed out by the Ld. CIT(A). In respect of mine excavated by the assessee, the fact of no evasion of royalty was detected by the mining authority has been taken in its proper perspective by the Ld. CIT(A). We, therefore, taking into consideration the entire aspect of the matter as narrated hereinbefore do not find any irregularities in the order passed by the Ld. CIT(A) in deleting the addition so as to warrant interference. The appeal preferred by the Revenue is, therefore, found to be devoid of any merit and thus, dismissed. ITA No. 175/Ind/2020(A.Y. 2006-07):_ 28. Ground No.2:- The addition on account of unexplained cash credit to the tune of Rs. 2,00,000/- for A.Y. 2006-07 has been challenged before us. 29. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record. 30. During the course of assessment proceeding it was found that the capital of Rs. 2,00,000/- was introduced by its partners Smt. Deepa Ghai & Smt. Poonam Chopra in the assessee firm. The explanation in regard to the source of the said capital and the genuineness of the said transaction since not furnished by the assessee the AO added the said amount of Rs. 2,00,000/- credited in the books of accounts of the assessee treating the same a undisclosed income of the assessee under Section 68 of the Act which was, in turn, deleted by the Ld. CIT(A). Hence, the instant appeal before us. 31. Upon perusal of the relevant records available before us it appears that the capital of Rs. 1,00,000/- was introduced by each of the partners in cash as IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 30 – on 01.04.2005 upon constitution of the partnership firm. They are also having their separate and independent sources of income out of which the contribution has been made. Both the partners of the firm are also regularly assessed in income tax. The details of identity of the partners have been duly filed before the Ld. CIT(A) and before us as well. So far as the genuineness of the transaction is concerned, the said capital has been introduced by the partners for the constitution of the firm as their initial capital. In this regard, the certified copy of the account of the partners in the books of the appellant firm for the relevant previous year is found to be annexed in the Paper Book from Page No. 46 to 54 filed before us. The copy of the partnership deed duly executed between the partners is also found in place in the Paper Book. The Income Tax Return with computation of return of the partners for the relevant assessment year is also made available as appearing at Page 62 to 65 of the Paper Book which establishes the creditworthiness of the partners. Considering the entire set of documents as narrated hereinabove we find that the appellant has been able to proof the identity, genuineness of the transaction. The creditworthiness of the partners is also found to be beyond doubt. Thus, the appellant has discharged its onus as contemplated under Section 68 of the Act. It further appears that the Ld. CIT(A) while deleting the addition relied upon the judgment passed by the Hon’ble Madhya Pradesh High Court in the case of CIT vs. Metachem Industries, reported in (2000) 245 ITR 160 (M.P.). Relying upon the ratio laid down in the said judgment the Ld. CIT(A) came to a finding that the credit appearing in the books of firm, in the name of the partners, identity of whom is undisputed, no addition can be made in the hands of the assessee firm. As we are also satisfied with the identity and IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 31 – the creditworthiness of the partners of the firm and the genuineness of the transaction we do not find any ambiguity in the order passed by the Ld. CIT(A) in deleting the addition made by the Ld. AO relying upon the ratio laid down by the Hon’ble Madhya Pradesh High Court in the case of Metachem Industries (supra) so as to warrant interference. This ground of appeal preferred by the Revenue is found to be devoid of any merit and thus, dismissed. IT(SS)A Nos. 175 to 180/Ind/2020(A.Y. 2006-07 & 2008-09 to 2012-13):- 32. On identical issue raised in all other appeals preferred by the Revenue are dismissed. 33. In the combined result, the C.O. filed by the assessee are dismissed and the appeals filed by the Revenue are also dismissed. This Order pronounced in Open Court on 31 /08/2022 Sd/- Sd/- Sd Sd/- Sd/- (BHAGIRATH MAL BIYANI) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 31/08/2022 TANMAY, Sr. PS TRUE COPY O r d e r p r o n o u n c e d on 3 1/ 0 8 / 2 0 2 2 b y p l a c i n g t h e r e s u l t o n t h e N o t i c e B o a r d a s p e r R u l e 3 4 ( 4 ) o f t h e In c o m e T ax ( A p p e l l a t e T r i b u n a l ) R u l e , 1 9 6 3 . IT(SS)A Nos.175to180/Ind/2020 DCIT vs. M/s. Vaibhav Enterprises C.O. Nos. 20 to 25/Ind/2021 M/s. Vaibhav Enterprises vs. DCIT Asst. Years–2006-07 & 2008-09 to 2012-13 - 32 – आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Indore 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, (Dy./Asstt.Registrar) ITAT, Indore 1. Date of dictation 22&23.08.2022, 29&30.08.2022 2. Date on which the typed draft is placed before the Dictating Member 23,24&25.08.2022, 30.08.2022 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S .08.2022 5. Date on which the fair order is placed before the Dictating Member for pronouncement .08.2022 6. Date on which the fair order comes back to the Sr.P.S./P.S .08.2022 7. Date on which the file goes to the Bench Clerk .08.2022 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................
