M/s Aakriti Sugar Mill Ltd., Bhopal V. THE ACIT CENTRAL-1, Bhopal

CO 3/Ind/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2974 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-04-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-03-2024
• Assessment Year: 2019-2020
• Appeal Filed On: 09-02-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources
• Section: 132; 139; 143(3); 13; 22; 153C

Judgement Text

Page 1 of 30 आयकर अपीलीय अिधकरण, इंदौर Ɋायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No. 28/Ind/2023 (AY: 2019-20) ACIT, (Central)-I, Bhopal बनाम/ Vs. M/s. Akriti Sugar Mills Private Limited, Aakriti House, Aakriti Eco City, Bawadiya Kalan, Bhopal (PAN: AAECM8910E) (Revenue/Appellant) (Assessee/Respondent) Cross-Objection No.3/Ind/2024 (AY: 2019-20) M/s. Akriti Sugar Mills Private Limited, Aakriti House, Aakriti Eco City, Bawadiya Kalan, Bhopal (PAN: AAECM8910E) बनाम/ Vs. ACIT, (Central)-I, Bhopal (Assessee/Cross-Objector) (Revenue/Respondent) Assessee by Shri Ashish Goyal and Shri N. D. Patwa, ARs Revenue by Ms. Simran Bhullar, CIT DR Date of Hearing 11.03.2024 Date of Pronouncement 16.04.2024 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by appeal-order dated 23.03.2023 passed by Commissioner of Income-tax (Appeal)-3, Bhopal [“CIT(A)”] which in turn arises out of assessment-order dated 29.09.2021 passed by [“AO”] u/s 153C r.w.s. 143(3) of the Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2019-20, the revenue has filed the captioned appeal and the assessee has filed captioned cross-objection. ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 2 of 30 2. The background facts leading to present matters are such that the assessee is a company engaged in the business of manufacture of sugar and molasses. For AY 2019-20, the assessee filed original return u/s 139 on 23.10.2019 declaring a total income of Rs. Nil. A search u/s 132 of the Act was conducted upon one “Maheshwari Group” on 27.02.2020. Although the assessee is also identified as a part of the business entities of said group, no search was conducted upon assessee. But based on certain documents found and seized during search from the said group, a satisfaction u/s 153C was recorded against assessee pursuant to which notice u/s 153C was issued on 27.01.2021. In response, the assessee filed return on 23.09.2021. Ultimately, the AO completed assessment vide order dated 29.09.2021 u/s 153C r.w.s. 143(3) after making an addition of Rs. 3,71,55,481/- on account of gross-profit on estimated unaccounted sale of sugar. Aggrieved, the assessee carried matter in first-appeal whereupon the CIT(A) deleted addition fully. Now, the revenue is aggrieved by order of CIT(A) and has come in this appeal. The assessee has also come in Cross-Objection claiming that the assessment-order was void ab initio and illegal, therefore liable to be annulled. We proceed to dispose of both matters by this consolidated order. Revenue’s appeal: 3. The revenue has raised following grounds: ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 3 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 4 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 5 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 6 of 30 4. Ld. DR for revenue submitted that by means of various grounds, the revenue’s precise grievance is such that the CIT(A) was not justified in deleting the addition of Rs. 3,71,55,481/- validly made by AO. To explain revenue’s claim, Ld. DR straightaway carried us to Para No. 3 to 10 of assessment-order and submitted that the assessee-company is engaged in the business of manufacture of sugar and molasses. During the course of search on ‘Maheshwari Group’, the documents inventorised as BS(A)-10 & BS(A)-11 were found and seized. On perusal of Page No. 31 of BS(A)-10, which is scanned and re-produced in assessment-order, the AO found that the total quantities of sugarcane (raw material) crushed for the financial year 2017-18 & 2018-19, relevant to AY 2018-19 & 2019-20 respectively, are mentioned therein at 21,22,658.64 quintals & 25,68,077 quintals respectively. Then, the AO observed that the quantity of sugarcane crushed by assessee during the Financial Year 2017-18 & 2018-19 as reported in Form 3CD (audit report) were 19,60,404 quintals & 25,42,817.22 quintals only, thus the assessee has crushed unaccounted quantity of sugarcane. When the AO asked assessee to explain the difference, the assessee filed a reply which is also re-produced by AO in assessment-order. The precise submission of assessee before AO was such that the seized document clearly mentioned “Last season 2017-18” and “This year season 2018-19” which is not exactly same as “Financial year 2017-18” and “Financial year 2018-19” for the reason that sugar season falls from ‘October to September’. Therefore, the data of a few months of ‘financial year 2017-18’ and ‘financial ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 7 of 30 year 2018-19’ have got included/excluded in data of “Season 2017-18” and “Season 2018-19” which has resulted in difference. The assessee also submitted a reconciliation-statement to show that there was negligible difference if the data of ‘seasons’ are aligned to ‘financial years’ by making appropriate inclusion/exclusion. The AO considered assessee’s reply and made a working wherein he still arrived at excess quantity of sugarcane crushed at 1,87,679.88 quintals for financial year 2018-19 relevant to AY 2019-20 under consideration. The AO’s calculation is re-produced below: Quantity (Quintals) A Sugarcane crushing as per Page-31 of BS-10 (Nov 2018 to Mar 2019) 25,68,077 B Sugarcane crushing as per 3CD for FY 2018-19 25,42,817.22 C Difference (A-B) 25,259.78 D Sugarcane crushing figure for April, 2018 1,62,420.10 E Net difference (C+D) 1,87,679.88 Another adverse fact observed by AO from the noting in the very same seized-document, being Page No. 31 of BS(A)-10, was such that the recovery rate of sugar (finished product) was 12.16% of sugarcane crushed whereas the audit-report of assessee showed only 9.90%. Based on these, the AO concluded that the assessee has made unaccounted production-cum-sale of sugar. The AO also corroborated his conclusion from a Whatsapp chat found in the mobile phone of one Shri Gagan Maheshwari during the search revealing that the assessee received a sum of Rs. 15 lac in cash towards ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 8 of 30 unaccounted sale of sugar. Ultimately, in Para No. 10.3(iv) and 10.4 of assessment-order, the AO computed suppressed production of sugar at 22,821.87 quintals [being 12.16% of 1,87,679.88 quintals of unaccounted sugarcane crushed] (+) at 56,860 quintals [being difference of recovery rate of 12.16% – 9.90% = 2.26% on accounted sugarcane crushed], aggregating to 79,681.87 quintals; applied estimated selling rate of Rs. 3,207/- per quintal; thus estimated unaccounted sale at Rs. 25,55,39,757/-; applied GP rate of 14.54% and thereby determined unaccounted income of Rs. 3,71,55,481/-. 5. Having shown thus, Ld. DR contended that the AO has made a detailed working of unaccounted income on the basis of document seized during search. Therefore, there is no infirmity in the addition made by AO, his order must be preserved. 6. Per contra, Ld. AR firstly raised an important point that the seized document was made by Lab Technician (this fact is also noted in Para 4.3.4 of CIT(A)’s order) but none of the revenue authorities, not even AO, has provided any opportunity of cross-examination of Lab technician to assessee to bring the truth on record. Therefore, the entire basis of addition adopted by AO is illegal and against the principle of natural justice. Without prejudice, Ld. AR made vehement submissions to assail the merits of addition which are basically same as narrated, considered, analysed and accepted by CIT(A). Ld. AR submitted that the CIT(A) has correctly ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 9 of 30 appreciated the assessee’s case and thereafter taken a cogent conclusion to delete the addition. In short, Ld. AR relied heavily upon the order of CIT(A). 7. We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. At first, we re-produce below the order passed by CIT(A) for an immediate reference: ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 10 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 11 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 12 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 13 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 14 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 15 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 16 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 17 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 18 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 19 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 20 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 21 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 22 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 23 of 30 8. The AO has made addition of Rs. 3,71,55,481/- by applying four steps: (i) In Step-1, the AO has compared the quantity of sugarcane (raw material) crushed as mentioned in the seized document vis-à-vis the ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 24 of 30 quantity mentioned in the audit report and determined unaccounted quantity at 1,87,679.88 quintals. (ii) In Step-2, the AO applied recovery rate of 12.16% on unaccounted quantity of sugarcane crushed (+) accounted quantity of sugarcane crushed and thereby worked out supressed production of sugar (finished product) at 22,821.87 quintals. (iii) In Step-3, the AO worked unaccounted sales of sugar (finished product) at Rs. 25,55,39,757/- by applying estimating selling rate of 3,207/- per quintal. (iv) In last and final Step-4, the AO applied G.P. rate of 14.54% and thereby estimated unaccounted gross-profit of Rs. 3,71,55,481/-. Accordingly, made addition. 9. The CIT(A) has dealt all these steps in the order produced earlier and rejected AO’s working. We find that the basis of Step-1 and Step-2 is the document seized during search being Page No. 31 of BS(A)-10. We re- produce below this document for an immediate reference: ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 25 of 30 ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 26 of 30 10. So far as Step-1 is concerned, the assessee contended before AO that “Last season 2017-18” and “This year season 2018-19” mentioned in the seized-document was not exactly same as “Financial year 2017-18” and “Financial year 2018-19”. The assessee also filed a reconciliation-statement showing that if the quantity of April, 2018 is excluded and April, 2019 is included to the quantities shown in audit report, the result would get reconciled with the “seasonal data” mentioned in the seized document and there would remain a negligible difference of 793.21 quintals (correct figure would be slightly different i.e. 793.88 quintals). However, the AO rejected assessee’s submission by categorically mentioning in assessment-order “Whereas, the figure appearing in page 31 of BS-10 is 25,68,077 quintal for sugar season 2018-19 which is started from September, 2018 to 24 March, 2019 (As per page 31 of BS-10).” Thereafter, the AO computed excess quantity of sugarcane at 1,87,679.88 quintals which, in simple mathematics, is 1,86,886 quintals crushed in April, 2019 (+) 793.88 quintals of difference claimed by assessee as negligible. This way, the AO has not accepted assessee’s reconciliation. On the other hand, the CIT(A) has accepted the very same reconciliation supplied by assessee. Hence, the issue now arises as to whether the CIT(A) is correct in accepting assessee’s reconciliation or not? On a careful scrutiny of seized-document, reproduced above, we find that at the top of it the date of “24-03-2019” is mentioned which means the said document was prepared on 24-03-2019. When it is so, how can it be accepted that the sugarcane actually crushed in ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 27 of 30 subsequent month i.e. April, 2019 was included in the quantity noted in the said document? Then, there is one more noting in the middle of seized document which says “season end 20-3-2019”. Therefore, prima facie, the AO is right in rejecting assessee’s reconciliation by finding that the sugarcane sugar season started from September, 2018 to 24 March, 2019 and the CIT(A) is wrong in accepting assessee’s reconciliation. Going next to Step-2, we again find that the AO has considered recovery rate of 12.16% from the seized document but the CIT(A) has rejected AO’s action taking into account the globalised/generalised statistical data of recovery-rate pertaining to whole of India or State of Madhya Pradesh. Here also, we find that the AO has considered recovery rate of 12.16% on the basis of seized document and when the assessee has not disowned the seized document, how can CIT(A) take into account the globalised/generalised statistical data to reverse AO’s action? Therefore, there is a serious fallacy in the adjudication done by CIT(A) qua Step-1 and Step-2. But, however, we also find a substantial weightage in the stand of Ld. AR that the seized document prepared by Lab Technician has been considered against assessee without providing any opportunity of cross-examination to assessee. This is certainly against the principle of natural justice. Therefore, in our considered view, this case must go back to AO who shall give an opportunity to assessee of cross-examination of Lab Technician as also make further submissions and thereafter passed order afresh without being influenced by earlier order. The assessee shall ensure full co-operation to AO in this exercise. So far as Step- ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 28 of 30 3 and Step-4 are concerned, their applicability would depend upon final outcome of Step-1 and Step-2. Therefore Step-3 and Step-4 do not require any adjudication at present. The assessee may, however, make his submissions to AO qua those Steps also in case of necessity and the AO shall consider assessee’s submissions. The revenue’s appeal is disposed of accordingly. Assessee’s Cross-Objection: 11. The assessee has raised following grounds: 1. That the Ld. CIT(A) was not justified in confirming the assessment order, which is bad in law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. 2. The assessment order is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. 12. Ld. AR for assessee submitted that the assessment-order dated 29.09.2021 passed by AO u/s 153C r.w.s. 143(3) does not bear any Document Identification Number (DIN) as mandated by CBDT Circular No. 19/2019 dated 14.08.2019. Ld. AR submitted that in view of various judicial decisions of ITAT Benches and Hon’ble High Courts, the assessment-order without DIN as also without showing any exceptional circumstance as ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 29 of 30 mentioned in Circular No. 19/2019, is void ab initio being illegal. Therefore, the assessment-order be annulled and Cross-Objection of assessee be allowed. 13. Replying to this, Ld. DR for revenue submitted that identical issue was decided in favour of assessee by Hon’ble Delhi High Court in CIT (International Taxation)-1 Vs. Brandix Mauritius Holdings Ltd. (2023) 149 taxmann.com 238 (Delhi) order dated 20.03.2023 but on further appeal, the Hon’ble Supreme Court has, vide order dated 03.01.2024, stayed the operation of Hon’ble Delhi High Court’s decision and the matter is yet to be decided finally by Hon’ble Supreme Court. Therefore, the issue raised by assessee ought to be kept pending. 14. After a careful consideration and also having regard to the fact that we have already remanded Revenue’s appeal back to the AO for consideration afresh, we are inclined to keep the Cross-Objection of assessee open and undecided at this stage. The AO shall, while making adjudication afresh, check the departmental record and consider assessee’s claim in accordance with law and applicable judicial view. The Cross-Objection is disposed of accordingly. ACIT, Central-I, Bhopal vs. M/s. Akriti Sugar Mills Private Ltd., Bhopal. IT(SS)A No.28/Ind/2023 & C.O. No.3/Ind/2024 - A.Y.2019-20 Page 30 of 30 15. Resultantly, both of these matters are allowed for statistical purposes. Order pronounced in open court on 16.04.2024. Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 16.04.2024. CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore