Dhariwal Industries Ltd., Pune V. ACIT, Pune

ITA 1626/PUN/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1968 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 30-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKESH KUMAR
• Assessee Lawyers: SANJAY N KAP ADIA
• Keywords: Document seized; Opportunity of being heard; Difference of opinion; Corroborative evidences; Prejudicial to interest; Documents seized; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 32; 147; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI G.S.PANNU, ACCOUNTANT MEMBER. ITA.NO.1626/PN/2012 (ASSTT. YEAR : 2003-04) DHARIWAL INDUSTRIES LTD., MANIKCHAND HOUSE, PLOT NO.100-101, D.KENNEDY ROAD, B/H HOTEL LE-MERIDIAN, PUNE. .. APPELLANT PAN: AAACD5896L VS. ACIT, CENTRAL CIRCLE-1(2), PUNE. .. RESPONDENT ASSESSEE BY : SHRI SANJAY N.KAPADIA DEPARTMENT BY : SHRI MUKESH KUMAR DATE OF HEARING : 19.03.2013 DATE OF PRONOUNCEMENT : 22.03.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(CENTRAL), PUNE, ON THE FOLLOWING GROUND: 1. THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LEARNED CIT HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT AND PASSING THE ORDER OF REVISION. 2. THE ASSESSING OFFICER ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.33,30,682 /-UNDER NORMAL PROVISIONS AND AT RS.3,20,55,646/- U/S 115JB OF THE ACT, AGAINST THE RETURNED INCOME (REVISED) OF RS.NIL VIDE RETURN DATED 02.07. 2004. BACKGROUND OF THE CASE IS THAT A SEARCH ACTION U/S 132 OF THE ACT, WAS CARRIED OUT ON 09.10.2009 IN THE CASE OF SHRI M ITHULAL, A REAL 2 ESTATE BROKER OF BANGALORE BY THE INVESTIGATION WIN G OF BANGALORE. IN THE COURSE OF SEARCH ACTION BY THE INVESTIGATION WING OF BANGALORE, A NUMBER OF DOCUMENTS, NOTE-BOOKS, LOOSE SLIPS OF PAPERS, BOOKS OF ACCOUNT ETC. RELATING TO THE FIRM M/S.MEHTA ASSOCIATES AND ONE SHRI SOHANRAJ MEHTA WERE FOUND A ND SEIZED FROM THE RESIDENTIAL PREMISES OF SHRI MITHULAL AND HIS SON SHRI MANOJ AT BANGALORE. PRELIMINARY EXAMINATION OF THES E DOCUMENTS, NOTE-BOOKS AND LOOSE SLIPS INDICATED THAT THEY WERE WRITTEN BY SHRI SOHANRAJ MEHTA, C&F AGENT OF THE ASSESSEE COMP ANY, FOR PAN MASALA AND GUTKHA PRODUCTS IN KARNATAKA REGION AND THAT THEY PERTAINED TO UNACCOUNTED SALE OF GUTKHA MANUFACTURE D BY THE ASSESSEE COMPANY M/S DHARIWAL INDUSTRIES LTD. 3. FURTHER EXAMINATION OF THE SAID DOCUMENTS SEIZED BY THE INVESTIGATION WING OF BANGALORE REVEALED THAT SHRI SOHANRAJ MEHTA, C&F AGENT OF RMD GUTKHA GROUP FOR KARNATAKA REGION USED TO MAINTAIN A DETAILED DAY TO DAY ACCOUNT OF THE TRANS ACTIONS OF SALE OF GUTKHA AND ALSO OF THE DEPLOYMENT OF THE SAID SALE PROCEEDS. FROM THE DAY TO DAY ACCOUNTS, HE USED TO DRAW A MONTHLY SUMMARY GIVING INFORMATION OF THE SALE PROCEEDS RECEIVED AN D ITS DEPLOYMENT DURING A PARTICULAR MONTH. FROM THE MONTHLY SUMMAR Y HE PREPARED A CONSOLIDATED SUMMARY FOR THE ENTIRE PERI OD. THUS, AS PER THE SAID SEIZED DOCUMENTS, THE TOTAL UNACCOUNTE D SALES EFFECTED BY SHRI SOHANRAJ MEHTA, C&F OF RMD GUTKHA ON BEHALF OF M/S.DHARIWAL INDUSTRIES LTD. FOR THE PERIOD JANUARY , 2003 TO FEBRUARY, 2008 WAS OF RS.345.72 CRORES APPROXIMATEL Y, OUT OF UNACCOUNTED SALES OF RS. 486.93 LAKHS PERTAINING TO A.Y. 2003-04 (JANUARY, 2003 TO MARCH, 2003). FURTHER, A SEARCH ACTION U/S.132 OF THE ACT WAS CARRIED OUT BY INVESTIGATION WING OF PUNE ON 20.01.2010 IN THE CASE OF RMD GUTKHA GROUP, DURING THE COURSE OF WHICH MANY CORROBORATIVE EVIDENCES WERE ALSO GATHER ED. THUS, CONSEQUENT TO THE BANGALORE & PUNE SEARCH ACTIONS U /S.132 IN THE CASE OF MITHULAL AND ASSESSEE ON 09.10.2009 AND 20. 01.2010 3 RESPECTIVELY, OWING TO DISCOVERY OF INCRIMINATING E VIDENCES WITH REGARD TO UNACCOUNTED GUTKHA SALES, CASE OF THE ASS ESSEE WAS REOPENED FOR THE A.Y. 2003-04 U/S. 147 OF THE ACT. THE REASON FOR REOPENING WAS THAT AS PER THE SEIZED DOCUMENTS, THE ASSESSEE HAD CARRIED OUT UNACCOUNTED SALE OF GUTKHA TO THE TUNE OF RS.486.93 LAKHS BETWEEN JANUARY, 2003 TO MARCH, 2003 AND THE INCOME ARISING FROM THIS UNACCOUNTED SALE OF GUTKHA HAS ES CAPED THE ASSESSMENT. ACCORDINGLY, ORDER U/S 143(3) R.W.S 14 7 WAS PASSED ON 30.12.2010 DETERMINING THE INCOME OF ASSESSEE AT RS.33,30,682/- UNDER NORMAL PROVISIONS AND AT RS.16 ,20,55,646/- U/S.115JB OF THE ACT, I.E., AT THE SAME INCOME AS P ER ORDER U/S.143(3) DATED 31.03.2006, AS THE ADDITION MADE W AS SET-OFF BY BROUGHT FORWARD LOSSES. HOWEVER, IN THE REASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER HAS ESTIMATED THIS INCOME ESC APING ASSESSMENT AT RS.1,31,13,025/- BY ADOPTING NORMAL G P OF THE ASSESSEE FOR THE RELEVANT YEAR @ 26.93%. IN DOING S O, THE ASSESSING OFFICER HAS ERRONEOUSLY GIVEN ASSESSEE THE BENEFIT OF EXCISE DUTY PAYMENT AS WELL THOUGH NO SUCH EXCISE DUTY WAS PAID BY THE ASSESSEE ON THIS UNACCOUNTED SALE OF GUTKHA OF RS.4 86.93 LAKHS ACCORDING TO THE CIT. ACTUALLY, THE EXCISE DUTY CO MPONENT OF THE UNACCOUNTED TURNOVER HAS BEEN CONCEALED BY THE ASSE SSEE. 4. ON PERUSAL OF RECORDS, IT WAS FOUND BY THE CIT T HAT THE ASSESSEE HAS PAID EXCISE DUTY OF RS.82,97,36,292/- DURING THE YEAR WHICH IS 32.08% OF THE GUTKHA TURNOVER. THUS, ACTUA L GP THAT SHOULD HAVE BEEN ADOPTED TO DETERMINE INCOME ESCAPI NG ASSESSMENT IN THE INSTANT CASE IS 59.01% (26.93% + 32.08 %) AND NOT 26.93%. THUS, INCOME ESCAPING ASSESSMENT BY AD OPTING THIS REAL GP OF 59.01% COMES TO RS. 2,87,33,740/- AS AGA INST AN AMOUNT OF RS.1,31,13,025/- ARRIVED AT BY THE ASSESS ING OFFICER BY ADOPTING GP OF 26,93%. IT WAS OBSERVED BY THE CIT THAT FOR THE GENERATION OF UNACCOUNTED TURNOVER, SEED CAPITAL IS REQUIRED FOR UNACCOUNTED PURCHASES AND OTHER COINCIDENTAL EXPENS ES. THIS SEED CAPITAL NEEDS TO BE TAXED AS THE SOURCE FOR THE SAM E WAS 4 UNEXPLAINED. THE ASSESSING OFFICER HAS FAILED TO TAKE COGNIZANCE OF THIS ISSUE OF SEED CAPITAL IN THE SAID ASSESSMEN T ORDER PASSED U/S 147 R.W.S 143(3) DATED 30.12.2010. BESIDES AS P ER PROVISIONS OF SECTION 147, THE ASSESSING OFFICER CAN ASSESS OR RE ASSESS NOT ONLY THE INCOME FOR WHICH ASSESSMENT WAS REOPENED BUT AL SO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF T HE REASSESSMENT PROCEEDINGS. THUS THE ASSESSMENT ORDER DATED 30.12 .2010 WAS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST S OF REVENUE. FOR THIS REASON, NOTICE U/S.263 DATED 01.03.2012 WAS IS SUED AND SERVED ON THE ASSESSEE. THE RELEVANT PORTION OF SHO W CAUSE NOTICE IS REPRODUCED AS UNDER: VERIFICATION OF CASE RECORDS REVEALED THAT THE ASS ESSMENT ORDER FOR A.Y. 2003-04 PASSED BY THE ASSESSING OFFI CER ACIT, CC-1(1) PUNE, U/S 147 R.W.S. 143(3) OF THE I.T.ACT, 1961 ON 30/12/2010 IN YOUR CASE IS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE FOR THE FOLLOWING REASONS: 02. AS PER THE SEIZED DOCUMENTS, YOU HAD CARRIED OU T UNACCOUNTED SALE OF GUTKHA TO THE TUNE OF RS. 486.9 3 LACS BETWEEN JAN 2003 TO MAR 2003. THE INCOME ARISING FR OM THIS UNACCOUNTED SALE OF GUTKHA HAD THEREFORE, ESCAPED ASSESSMENT, IN THE REASSESSMENT PROCEEDINGS, THE TH EN AO, HAS ESTIMATED THIS INCOME ESCAPING ASSESSMENT AT RS . 1,31,13.025/- BY ADOPTING THE NORMAL GP FOR THE REL EVANT YEAR @ 26,93%. IN DOING SO, THE THEN AO HAS INADVERTENTL Y GIVEN YOU THE BENEFIT OF EXCISE DUTY PAYMENT THOUGH NO SU CH EXCISE DUTY WAS PAID BY YOU ON THIS UNACCOUNTED SALE OF GU TKHA OF RS. 486.93 LACS. SINCE EXCISE DUTY WAS NOT PAID ON THE UNACCOUNTED TURNOVER THE GP ON THE UNACCOUNTED TURN OVER OBVIOUSLY WOULD BE MORE THAN THE NORMAL GP. ON PERUSAL OF RECORDS, IT IS SEEN THAT THE YOU HAVE PAID EXCISE DUTY OF RS. 82,97,36,292/-DURING THE YEAR WHICH IS 32.08% OF THE GUTKHA TURNOVER. THUS, ACTUAL GP THAT SHOULD HA VE BEEN ADOPTED TO DETERMINE INCOME ESCAPING ASSESSMENT IN THE INSTANT CASE, IS 59.01%(26.93%+ 32.08%) AND NOT 26. 93%. THUS, INCOME ESCAPING ASSESSMENT BY ADOPTING THIS R EAL GP OF 59.01% COMES TO RS. 2,87,33,740/~ AS AGAINST AN AMO UNT OF RS.1,31,13.025/- ARRIVED AT THE AO BY ADOPTING GP O F 26.93%. 03. FURTHER, FOR THE GENERATION OF UNACCOUNTED TURN OVER, SEED CAPITA! IS REQUIRED FOR UNACCOUNTED PURCHASES AND O THER 5 INCIDENTAL EXPENSES. THIS SEED CAPITAL NEEDS TO BE TAXED AS THE SOURCE FOR THE SAME IS UNEXPLAINED. THE AO HAS FAIL ED TO TAKE COGNIZANCE OF THIS ISSUE OF SEED CAPITAL IN THE SAI D ASSESSMENT ORDER. 04. THE ASSESSING OFFICER HAS THUS FAILED TO CONSID ER THE ABOVE MENTIONED ISSUES WHILE COMPLETING THE REASSES SMENT PROCEEDINGS. HENCE, THE ORDER OF THE AO IS ERRONEOU S IN MUCH AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 05. I, THEREFORE, INTEND TO SET ASIDE/MODIFY THE AS SESSMENT WITHIN THE MEANING OF SECTION 263 OF THE I. T. ACT, 1961. AN OPPORTUNITY OF BEING HEARD IS THEREFORE, GIVEN TO Y OU. YOU ARE REQUESTED TO ATTEND IN PERSON OR THROUGH YOUR AUTHO RIZED REPRESENTATIVE ON 15/03/2012 AT 3.30 P.M. IN MY OFF ICE AT PUNE. 5. ACCORDING TO THE CIT, REASONS FOR PROPOSING TO H OLD THE ASSESSMENT ORDER AS ERRONEOUS SO AS TO BE PREJUDICI AL TO INTERESTS OF REVENUE, WERE AS UNDER: (I) FAILURE TO ADOPT CORRECT GP TO ARRIVE AT UN DISCLOSED INCOME ON ACCOUNT OF UNACCOUNTED SALE OF GUTKHA BY THE ASSESSEE, AND (II) FAILURE TO ARRIVE AT AND ADD THE SEED CAPITAL OF T HE ASSESSEE FOR ITS UNACCOUNTED GUTKHA BUSINESS CHAIN. IN RESPONSE TO NOTICE U/S.263, THE ASSESSEE RAISED VARIOUS CONTENTIONS VIDE ITS LETTER DATED 10.04.2012. GIS T OF THE SAME IS AS UNDER: I) THE REOPENING WAS BASED ON GUESSWORK, CONJECTURES, SURMISES, PREPONDERANCE OF POSSIBILITIES AND ESTIMA TION. II) THAT THERE WAS NO LACK OF INQUIRY ON THE PART OF AS SESSING OFFICER OR ANY FRESH BASIS FOR THE SAID REVIEW OF T HE ASSESSMENT ORDER. III) THAT THE ALLEGATION OF UNACCOUNTED TURNOVER OF GUTK HA BY THE ASSESSEE WAS FACTUALLY INCORRECT AND AS SUCH THE QUESTION OF ADDING SEED CAPITAL OR OF GP ADDITION O N THIS UNACCOUNTED TURNOVER DOES NOT ARISE. IV) THAT IN THE REOPENED PROCEEDINGS, THE ASSESSING OFF ICER HAS PASSED ASSESSMENT ORDER AFTER VERIFICATION OF F ACTS AND MERITS AND AFTER RECORDING REASONS FOR ESTIMATI NG THE INCOME BY APPLYING THE GP MARGIN OF 26.93% AND SUCH A STAND OF THE ASSESSING OFFICER WAS, THOUGH DISPUTED BY 6 ASSESSEE BEFORE CIT(A), WAS NOT ERRONEOUS AND PREJU DICIAL TO THE INTERESTS OF REVENUE. 6. FURTHER ASSESSEE ALSO RELIED ON SOME CASE LAWS I N HIS FAVOUR ON THE POINTS DETAILED AT PAGE 6 OF THE ORDER OF TH E CIT. THE CIT HAVING CONSIDERED THE SUBMISSIONS ON BEHALF OF THE ASSESSEE, HELD THAT ORDER OF THE ASSESSING OFFICER U/S.143(3) R.W. S. 147 DATED 30.10.2010 FOR THE A.Y. 2003-04 WAS ERRONEOUS AND P REJUDICIAL TO THE INTERESTS OF REVENUE AS WELL. ACCORDINGLY, SAM E WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO FRAME THE ASSE SSMENT ORDER DENOVO IN THE LIGHT OF THE DISCUSSION MADE BY THE C IT IN HIS ORDER. SAME HAS BEEN OPPOSED BEFORE US. 7. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT AND PASSING THE ORDER OF REVISION WITHOUT ESTABLISHING IN WHAT MANNER THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AN D PREJUDICIAL TO THE INTERESTS OF THE REVENUE INSPITE OF SPEAKING OR DER BEING PASSED U/S.147 R.W.S. 143(3) OF THE ACT. THE CIT HAS PASS ED THE ORDER OF REVISION WITHOUT JUSTIFYING WITH ANY CORROBORATIVE, CONTRA- CONFIRMING AND TANGIBLE EVIDENCES AND CARRYING OUT OF ANY UNACCOUNTED SALES BY THE ASSESSEE COMPANY. THE CIT HAS NOT JUSTIFIED THE BASIS OF ASSUMPTION OF EVADING/SHAVIN G OF EXCISE DUTY ON THE ALLEGED UNACCOUNTED SALES PRESUMED BY THE AS SESSING OFFICER. REVISION ORDER IS WITHOUT ADDUCING ANY JU STIFIABLE EVIDENCE TO SUBSTANTIATE EVASION OF EXCISE DUTY BY THE ASSES SEE ON ALLEGED UNACCOUNTED SALES WHILE ADOPTING GP RATIO. ACCORDI NG TO THE LD. AUTHORISED REPRESENTATIVE, ORDER OF THE CIT REVISIN G THE ORDER OF THE ASSESSING OFFICER IS NOTHING BUT CHANGE OF OPINION WITH REGARD TO MAKING OF ADDITION OF GP MARGIN ON THE ALLEGED UNAC COUNTED TURNOVER WHICH HAS BEEN DULY CONSIDERED BY THE ASSE SSING OFFICER WHILE FRAMING THE ASSESSMENT ORDER U/S.147 R.W.S. 1 43(3). THE CIT WAS ALSO NOT JUSTIFIED IN ALLEGING THE EXISTENCE OF UNACCOUNTED SEED CAPITAL IN THE ACTIVITY OF ALLEGED UNACCOUNTED SALE S WITHOUT ANY JUSTIFIABLE CORROBORATIVE, CONTRA-CONFIRMING AND TA NGIBLE EVIDENCE 7 INTO CARRYING OUT IN UNACCOUNTED SALES BY THE ASSES SEE COMPANY. ACCORDINGLY REQUESTED TO SET ASIDE THE ORDER OF THE CIT. 8. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ORDER OF THE CIT AND SUBMITTED THAT T HE CIT WAS JUSTIFIED IN REVISING THE ORDER OF THE ASSESSING OF FICER BECAUSE SAME WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERES TS OF REVENUE BECAUSE OF FAILURE TO ADOPTING CORRECT GP TO ARRIVE AT UNDISCLOSED INCOME ON ACCOUNT OF UNACCOUNTED SALES OF GUTKHA BY THE ASSESSEE AND FAILURE TO ARRIVE AT AND ADD SEED CAPITAL OF AS SESSEE FOR ITS UNACCOUNTED GUTKHA BUSINESS TURNOVER. 9. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT SEARCH ACTION TOOK PLACE U/S.1 32 OF THE ACT BY BANGALORE AND PUNE INVESTIGATION DIRECTORATE OF THE DEPARTMENT AT THE BUSINESS PREMISES OF THE ASSESSEE AND RELATED C ONCERNS. DURING THE COURSE OF SEARCH ACTIONS, SEVERAL INCRIM INATING DOCUMENTS, LOOSE SHEETS, ETC., WHICH WERE MAINTAINE D BY SHRI SOHANRAJ MEHTA, C&F AGENT OF THE ASSESSEE COMP ANY FOR KARNATAKA, WERE SEIZED AND HAVE BEEN NUMBERED AS BU NDLE NO.A/M/1 TO A/M/29. DURING THE COURSE OF SEARCH AN D POST SEARCH PROCEEDINGS, SHRI SOHANRAJ MEHTA, C&F AGENT OF THE ASSESSEE COMPANY, HAS STATED THAT THE SEIZED BOOKS, LOOSE SHEETS ETC,, WERE ACTUALLY BELONGING TO THE BUSINESS OF C& F AGENCY I.E, M/S. DHARIWAL INDUSTRIES LTD. SHRI SOHANRAJ MEHTA USED TO MAINTAIN A DETAILED DAY TO DAY ACCOUNT OF THE TRANS ACTIONS OF SALE OF GUTKHA AND ALSO OF THE DEPLOYMENT OF THE SAID SALE PROCEEDS. FROM THE DAY TO DAY ACCOUNTS, HE USED TO DRAW A MONTHLY SUMMARY GIVING INFORMATION OF THE SALE PROCEEDS RECEIVED AN D ITS DEPLOYMENT DURING A PARTICULAR MONTH, FINALLY, FROM THE MONTHL Y SUMMARY HE USED TO PREPARE A CONSOLIDATED SUMMARY FOR THE ENTI RE PERIOD, THUS, AS PER THE SAID SEIZED DOCUMENTS, THE TOTAL U NACCOUNTED SALES EFFECTED BY SHRI SOHANRAJ MEHTA, C&F OF RMD G UTKHA ON 8 BEHALF OF M/S DHARIWAL INDUSTRIES LTD., FOR THE PER IOD JANUARY, 2003 TO FEBRUARY, 2003 WAS OF RS.345.72 CRORES APPR OXIMATELY. 9.1. FURTHER, SHRI SOHANRAJ MEHTA HAS PROVIDED THE ENGLISH TRANSLATION OF THE BOOKS WRITTEN IN MARVARI LANGUAG E WORKING OF AND QUANTIFIED THE UNACCOUNTED TURNOVER OF M/S.DHAR IWAL INDUSTRIES LTD., FOR VARIOUS YEARS. FURTHER, HE HAS DECLARED THAT HE HAS EARNED COMMISSION FROM SALE OF GUTKHA FOR VARIOUS YEARS AND OFFERED THE INCOME BEFORE THE ADI T(LNV.). SAID SHRI SOHANRAJ MEHTA EXPLAINED ENTIRE UNACCOUNTED BU SINESS CHAIN REGARDING UNACCOUNTED PURCHASES, UNACCOUNTED MANUFA CTURE, UNACCOUNTED PACKING, UNACCOUNTED PRINTING, CLANDEST INE REMOVAL OF GOODS, UNACCOUNTED SALE AND UTILIZATION OF THE S ALE PROCEEDS, WHICH HE HAS ADMITTED TO HAVE DONE FOR AND ON BEHAL F OF M/S.DHARIWAL INDUSTRIES LTD., BETWEEN 2003 AND 2008 . THE SAID SEIZED BOOKS AND DOCUMENTS REVEALED THE ENTIRE FACT S ABOUT UNACCOUNTED BUSINESS OF M/S.DHARIWAL INDUSTRIES LTD ., AS UNDER: A) THE SEIZED MATERIAL CONTAINS THE DAILY, MONTHLY AND YEARLY SUMMARY OF UNACCOUNTED SALES OF GUTKA LIKE SMALL, B IG & MINI PACKETS. FURTHER, IT ALSO SUBSTANTIATES THE VA LUE OF GUTKHA (I.E. PRICE PER PACK). DURING THE SEARCH PRO CEEDINGS, ONLY STOCK OF M/S. DIL WAS FOUND WITH SHRI SOHANRAJ MEHTA AND NO STOCK, WHATSOEVER, OF ANY OTHER COMPANY/BRAN D WAS FOUND. B) THE SUMMARY OF SALES AND APPORTIONMENT OF UNACCOUNT ED SALES OF GUTKHA IS AVAILABLE ON A/M/08 OF PAGE NO. 34 AND MONTHLY CASH BOOK SUMMARY (REGARDING SALE OF GUTKHA AND APPORTIONMENT OF FUNDS) IS AVAILABLE IN VARIOUS PAG ES OF A/M/08 (PAGE NO. 39 TO 58). C) FOR CARRYING OUT UNACCOUNTED SALES, THERE ARE MATCH ING UNACCOUNTED PURCHASES OF RAW MATERIALS LIKE BETEL N UT (SHRI. MALLIKARJUN, SHIMOGA), EDIBLE PERFUMES (FROM SHRI P.C.JAIN OF MUMBAI), CARDAMOM (FROM SHRI VIMAL NAHAR/JAIN OF HYDERABAD), MENTHOL (FROM M/S SWATHI MENTHOL), SUPARI (FROM SHRI KISHEN KUMAR GUPTA/M/S BHOLENATH RADHAKISHEN OF DELHI), CHEMICALS (FROM SHRI MUKESH GARG/M/S PREM BROTHERS OF DELHI) ETC. FURTHER, FOR PACKING THE UNACCOUNTED GOODS, THE ASS ESSEE HAS PAID UNACCOUNTED CONSIDERATION TO M/S. CHAMPION 9 PACKAGING WHICH IS ALSO REFLECTED IN THE SEIZED MAT ERIAL. TO PRINT ON THE POUCHES OF UNACCOUNTED GOODS, THE ASSE SSEE HAD PAID UNACCOUNTED CONSIDERATION TO PRINTER M/S.RAJHANS ENTERPRISES. D) THE UNACCOUNTED SALE PROCEEDS HAVE BEEN INVESTED IN REAL ESTATE AND ASSESSEE HAS PAID ON MONEY TO VARIOUS PA RTIES. IT IS PERTINENT TO NOTE THAT THESE ARE THE SAME PAR TIES WITH WHOM ASSESSEE HAS ACCOUNTED BUSINESS RELATIONSHIP A ND ASSESSEE HAS PAID ACCOUNTED CONSIDERATION THROUGH BANKING CHANNELS. SOME OF SUCH PERSONS ARE SHRI SEETHARAMAIH MLA, M/S. TEJASWINI BUILDERS AND M/S.MANTRI DEVELOPERS. FURTHER, THE ASSESSEE HAS AL SO PAID COMMISSION ( SHRI. J.K. REDDY WHO IS A BROKER) AND ALSO PAID FOR THE LEGAL OPINION ( SHRI. CHANDRAMOULI). E) THE UNACCOUNTED SALE PROCEEDS HAVE BEEN PAID TO ASSESSEE'S EMPLOYEE'S LIKE SHRI. JEEVAN SANCHETI AN D OTHERS WHO WERE AUTHORIZED TO COLLECT THE AMOUNTS. F) THE UNACCOUNTED SALE PROCEEDS HAVE BEEN PAID BY SHRI SOHANRAJ MEHTA TO ASSESSEE, SHRI. RASIKLAI M D HARIWAL (FOR THE SAKE OF BREVITY, HEREAFTER REFERRED TO AS 'RMD'), HIS SON SHRI. PRAKASH DHARIWAL (( FOR THE SAKE OF BREVI TY, HEREAFTER REFERRED TO AS 'PRO') & TO OTHERS, WHICH IS REFLECTED IN THE SEIZED MATERIAL A/M/29 & FURTHER R EFLECTED IN A/M/08 OF PAGE NO. 34. G) THE C&F AGENT HAS AGREED AND OFFERED UNACCOUNTED COMMISSION RECEIVED ON BEHALF OF UNACCOUNTED SALES AND FURTHER, THERE IS A REFLECTION OF SALES TAX MAMUL P AID TO SALES TAX AUTHORITIES FOR CARRYING OUT THIS MODUS O PERAND! OF UNACCOUNTED SALES. H) PACKING MATERIALS AND UNACCOUNTED PAYMENT OF FREIGH T AND TEMPO AND HAMALI CHARGES ARE ALSO REFLECTED. ALL TH ESE EVIDENCES PROVE BEYOND REASONABLE DOUBT THAT ENTIRE UNACCOUNTED BUSINESS CHAIN HAS BEEN ESTABLISHED IN THIS CASE REGARDING UNACCOUNTED PURCHASE, UNACCOUNTED MANUFACTURE, UNACCOUNTED PACKING, UNACCOUNTED PRINT ING, CLANDESTINE REMOVAL OF GOODS, UNACCOUNTED SALE AND UTILIZATION OF THE SALE PROCEEDS ETC. 9.2. THE CIT FURTHER OBSERVED THAT FOLLOWING FACTS ESTABLISHED THAT SEIZED DOCUMENTS BELONG TO ASSESSEE COMPANY. A) THE SAID DOCUMENTS SEIZED BY THE INVESTIGATION WING OF BANGALORE HAVE DETAILS OF THE ACCOUNTED DISPATCHES AND ALSO 10 THE UNACCOUNTED DISPATCHES MADE BY M/S DHARIWAL INDUSTRIES LTD. TO SHRI SOHANRAJ MEHTA. THE UNACCOU NTED DISPATCHES APPARENTLY HAVE LETTER 'A' MENTIONED BEF ORE THEM AND THE ACCOUNTED DISPATCHES HAVE 'DIL' MENTIONED B EFORE THEM. INVESTIGATIONS REVEALED THAT THE ACCOUNTED DI SPATCHES ARE DULY REFLECTED IN THE BOOKS OF M/S DHARIWAL IND USTRIES LTD,. SINCE SHRI SOHANRAJ MEHTA HAS ACCEPTED THAT T HE TRANSACTIONS WITH LETTER 'A' MENTIONED BEFORE THEM ARE IN RESPECT OF THE UNACCOUNTED DISPATCHES. B) THE NAMES OF BRANDS DEALT NAMELY BIG, MINI, 2 GMS A RE BELONGING TO M/S. DIL. THE PRICES QUOTED IN THE UNA CCOUNTED BOOKS AND ALSO UNACCOUNTED TURNOVER OF SHRI. SOHANR AJ MEHTA ON BEHALF OF M/S. DIL ALSO MATCH WITH THAT OF PRICE S OF M/S. DIL. C) THE SALE PROCEEDS OF UNACCOUNTED TURNOVER OF GUTKA HAS BEEN APPLIED/UTILIZED BY SHRI. SOHANRAJ MEHTA ON BEHALF OF M/S.DIL. THE PARTIES WHO ARE APPEARING IN RIGHT SID E OF A/M/08 OF PAGE 34 ARE PARTIES HAVING TRANSACTION WI TH M/S.DIL OR DIRECTORS. THE TRANSACTIONS ARE EITHER B EING SUPPLIERS, SELLERS OF PROPERTY, PEOPLE ON THEIR PAY ROLES (SALES TAX DEPARTMENT), C&F AGENT (SOHANRAJ MEHTA), LEGAL ADVISORS, ETC. THOUGH, THE PARTIES ON THE RIGHT SIDE HAVE NOT ACCEPTED TO HAVE RECEIVED THE UNACCOUNTED CONSIDERATION IN FULL , THEY HAVE ACCEPTED FOR HAVING TRANSACTED WITH M/S. DIL A ND HAVE REFLECTED THE TRANSACTIONS OF M/S. DIL TO THE EXTEN T OF ACCOUNTED ENTRIES. D) DURING THE SEARCH PROCEEDINGS, ONLY STOCK OF M/S. D IL WAS FOUND AT THE PREMISES OF M/S. MEHTA ASSOCIATES, A C ONCERN OF SHRI. SOHANRAJ MEHTA WHICH WAS C&F AGENT OF M/S. DI L. E) THE PRICE OF VARIOUS TYPES OF GUTKA LIKE BIG, MINI & 2 GMS ARE BRANDS OF M/S. DIL AND THE PRICE GIVEN IN THE WORKI NG OF UNACCOUNTED TURNOVER IS CORRESPONDING TO THE PRICE OF M/S.DIL BRANDS. F) THE C&F AGENT SHRI. SOHANRAJ MEHTA ALL THE WAY DURI NG SEARCH, POST-SEARCH AND ASSESSMENT PROCEEDINGS CLAI MED THAT HE HAS SOLD GUTKA OF M/S. DIL. HE HAS ALSO DECLARED THE COMMISSION EARNED BY HIM OUT OF UNACCOUNTED SALE OF GUTKAS AS C&F AGENT. G) SHRI SOHANRAJ MEHTA IN HIS CAPACITY AS PARTNER OF M /S MEHTA ASSOCIATES HAD UNDERTAKEN BOTH ACCOUNTED AS WELL AS UNACCOUNTED SALES OF GUTKA BELONGING TO M/S. DIL. UNACCOUNTED SALES WERE NOT REFLECTED IN THE BOOKS O F M/S DIL OR M/S. MEHTA ASSOCIATES OR IN HANDS OF SHRI. SOHAN RAJ 11 MEHTA. MOREOVER, SHRI SOHANRAJ MEHTA HAS ACTED IN C APACITY OF C&F AGENT. H) THE SALE PROCEEDS OF GUTKA ARE APPORTIONED TO SELLE RS OF IMMOVABLE PROPERTY OR SUPPLIERS OF RAW MATERIALS OF GUTKA OR TO PEOPLE WHO HAVE TRANSACTED WITH M/S. DIL ETC. MO REOVER, AS PER SEIZED MATERIAL A/M/29, THERE ARE RECEIPTS S IGNED BY SHRI. RASIKLAL M. DHARIWAI OR BY HIS SON SHRI. PRAK ASH DHARIWAI OR BY OTHERS ON HIS BEHALF FOR HAVING RECE IVED UNACCOUNTED SALE PROCEEDS WHICH WERE SENT TO THEM. I) ALL THIRD PARTIES APPEARING IN A/M/08 OF PAGE NO. 3 4 HAVE STATED THAT THEY HAD TRANSACTIONS ONLY WITH M/S. DI L, MOST OF THEM DENYING FOR HAVING EVEN KNOWN SHRI. SOHANRAJ M EHTA. J) OTHER SUPPORTING DOCUMENTS AVAILABLE IN THE SEIZED MATERIAL LIKE A/M/01 SHOWS THE DAILY SALES OF GUTKA BELONGIN G TO M/S.DIL, A/M/07 CONTAINS LEDGER EXTRACT OF UNACCOUN TED CONSIDERATIONS PAID TO VARIOUS PARTIES. K) FURTHER, MOST OF THE PARTIES BELONGING TO BANGALORE WHICH ARE APPEARING ON RIGHT SIDE OF THE PAGE 34 OF A/M/08 WE RE EXAMINED ON OATH BY THE DCIT CENTRAL CIRCLE 2(2), B ANGALORE AND THEY HAVE CLARIFIED THAT THEY HAD TRANSACTIONS ONLY WITH M/S.DIL OR SOME ENTITY BELONGING TO THEM BUT NOT WI TH SHRI SOHANRA] MEHTA. THIS SUBSTANTIATES THE FACT TH AT ALL THE THIRD PARTIES WHO ARE APPEARING IN THE SEIZED MATER IAL NAMELY A/M/08 OF PAGE NO. 34 ARE HAVING TRANSACTIONS ONLY WITH M/S.DIL. SIMILARLY, SOME OF THE OTHER PARTIES WHICH ARE APPEARING ON RIGHT SIDE OF THE PAGE 34 OF A/M/08 AN D ARE PRESENTLY BEING ASSESSED IN THIS OFFICE, WERE ALSO EXAMINED IN THIS REGARD. 9.3. IN VIEW OF THE ABOVE, THE CIT OBSERVED THAT TH E ASSESSEES CLAIM THAT SAID REOPENING WAS BASED ON GUESSWORK, C ONJECTURES, SURMISES, PREPONDERANCE OF POSSIBILITIES AND ESTIMA TION, WAS NOT JUSTIFIED AND IT WAS FOUND BY THE CIT THAT THE SAID REOPENING WAS BASED ON EVIDENCE FOUND DURING THE COURSE OF SEARCH ACTIONS. THIS REASONED FINDING OF THE CIT NEEDS NO INTERFERENCE F ROM OUR SIDE. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THERE W AS NO LACK OF INQUIRY ON THE PART OF ASSESSING OFFICER OR ANY FRE SH BASIS FOR REVISION OF THE ASSESSMENT ORDER. IN THIS REGARD, THE CIT OBSERVED THAT THERE WAS CLEAR ERROR ON THE PART OF ASSESSING OFFICER IN ADOPTING THE NORMAL GP OF THE ASSESSEE FOR THE RELE VANT YEAR @ 12 26.93% TO DETERMINE UNDISCLOSED INCOME ON ACCOUNT O F UNACCOUNTED SALE OF GUTKHA. IN DOING SO, THE ASSES SING OFFICER HAS ERRONEOUSLY GIVEN ASSESSEE, THE BENEFIT OF EXCISE D UTY PAYMENT, THOUGH NO SUCH EXCISE DUTY WAS PAID BY THE ASSESSEE ON THIS UNACCOUNTED SALE OF GUTKHA OF RS. 486.93 LAKHS. IN FACT, THE ACTUAL SUPPRESSION OF TURNOVER HAS BEEN DONE BY THE ASSESS EE TO EVADE EXCISE DUTY PAYMENT, THE INCIDENCE OF WHICH IS VERY HIGH IN GUTKHA BUSINESS. THE CIT FURTHER OBSERVED THAT THE ASSESS EE PAID EXCISE DUTY OF RS.82,97,36,292/- DURING THE YEAR WHICH IS 32.08% OF THE GUTKHA TURNOVER. THUS, ACTUAL GP THAT SHOULD HAVE BEEN ADOPTED TO DETERMINE INCOME ESCAPING ASSESSMENT PROCEEDINGS IN THE INSTANT CASE WAS @ 59.01% (26.93% + 32.08%) AND NOT 26.93%. THUS, INCOME ESCAPING ASSESSMENT PROCEEDINGS BY ADO PTING THIS REAL GP OF 59.01% COMES TO RS.2,87,33,740/- AS AGAI NST AN AMOUNT OF RS.1,31,13,025/- ARRIVED AT BY THE ASSESS ING OFFICER BY ADOPTING GP OF 26.93%. THE CIT WAS JUSTIFIED IN AR RIVING AT THE ABOVE CONCLUSION BECAUSE ASSESSEE WAS CONSISTENTLY SUPPRESSING SALES AND EVADING EXCISE DUTY AS DISCUSSED ABOVE. 9.4. THE CIT FURTHER OBSERVED THAT NO BUSINESS, WHE THER ACCOUNTED OR UNACCOUNTED, COULD BE CARRIED OUT WITH OUT SEED CAPITAL. THEREFORE, THE GENERATION OF UNACCOUNTED TURNOVER, SEED CAPITAL IS REQUIRED FOR UNACCOUNTED PURCHASES AND O THER INCIDENTAL EXPENSES. THIS UNACCOUNTED SEED CAPITAL NEEDS TO B E TAXED AS THE SOURCE OF THE SAME WAS UNEXPLAINED. THE CIT RIGHTL Y OBSERVED THAT THE ASSESSING OFFICER HAS FAILED TO TAKE COGNIZANCE OF THIS ISSUE OF SEED CAPITAL IN THE ASSESSMENT ORDER PASSED U/S.147 R.W.S. 143(3) DATED 30.12.2010. 9.5. WE FIND THAT THE ABOVE TWO ACTS OF OMISSION AN D COMMISSION ON THE PART OF THE ASSESSING OFFICER MAKE THE SAID ORDER OF ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF REVENUE BECAUSE THE PHRASE PREJUDICIAL TO THE INTE REST OF REVENUE IS NOT AN EXPRESSION OF ACT AND IS NOT DEFINED IN T HE ACT. 13 UNDERSTOOD IN ITS ORDINARY MEANING, IT IS OF VIDE I MPORT AND IS NOT CONFINED TO LOSS OF TAX. IF DUE TO AN ERRONEOUS OR DER OF THE ASSESSING OFFICER THE REVENUE IS LOSING TAX LAWFULL Y PAYABLE BY A PERSON, IT WOULD CERTAINLY BE PREJUDICIAL TO THE IN TEREST OF REVENUE. THE PHRASE PREJUDICIAL TO INTEREST OF REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. WHERE THE ASSESSING OFFICER DOES NOT MAKE PROPER ENQUIRIES CALLED FOR IN THE CIRCUMSTANCES OF THE CA SE AND THE ASSESSMENT ORDER DID NOT SHOW THAT THE ASSESSING OF FICER CONSIDERED ALL ASPECTS OF THE CASE INCLUDING EVASIO N OF EXCISE DUTY AND CONSEQUENCES THEREOF, IT MAY BE REVISED BY THE CIT BY INVOKING PROVISION OF SECTION 263 OF THE ACT. THERE IS NO R ULE OF UNIVERSAL APPLICATION WHICH COULD BE LAID FOR FOR EXERCISE OF REVISIONARY POWER OF SECTION 263 OF THE ACT. IT WOULD DEPEND ON FACT S OF EACH CASE BUT THE CIT MUST BE SATISFIED TO THE EXISTENCE OF TWIN CONDITIONS, I.E., THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND THAT IS PREJUDICIAL TO THE INTEREST OF REVENUE. FROM THE O RDER OF THE ASSESSING OFFICER IT IS CLEAR THAT HE HAS NOT LOOKE D INTO ASPECT OF EXCISE DUTY WHILE MAKING THE ASSESSMENT WHICH IS ES SENTIAL. ACCORDINGLY, THE CIT WAS JUSTIFIED IN REVISING THE ORDER IN QUESTION BY INVOKING THE PROVISIONS OF SECTION 263 OF THE AC T WHERE THE ASSESSING OFFICER DID NOT MAKE SUFFICIENT ENQUIRIES BEFORE ACCEPTING THE RETURN FILED BY THE ASSESSEE. IN THIS SITUATIO N, THE CIT IS JUSTIFIED IN HOLDING THE SAME AS ERRONEOUS AND PREJ UDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT IN THE CIRCU MSTANCES OF THE CASE THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER ENQUIRIES BEFORE ACCEPTING THE STATEMENT MADE BY THE ASSESSEE IN HIS RETURN. THE ASSESSING OFFICER IS NOT AN ADJUDICATOR BUT ALS O AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN FACE OF RETURN WHICH NE EDS FURTHER ENQUIRY. IT IS INCUMBENT ON THE ASSESSING OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN RETURN WHEN CIRCUMS TANCES WOULD MAKE SUCH ENQUIRY PRUDENT. ACCORDINGLY, THE CIT WA S JUSTIFIED IN SETTING ASIDE THE SAME TO THE ASSESSING OFFICER WIT H A DIRECTION TO 14 FRAME THE SAME DENOVO. THIS FACTUAL AND LEGAL FIND ING OF THE CIT NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 10. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF MARCH, 2013. SD/- SD/- ( G.S.PANNU ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 22 ND MARCH, 2013 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ACIT, CIRCLE-1(1), PUNE. 3. THE CIT(CENTRAL), PUNE. 4. THE DR A BENCH, PUNE. 5. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.