Seleo Ceramic Private Limited, MORBI V. DCIT-CC-2, RAJKOT

ITA 239/RJT/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 5459 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 28-07-2024
• Assessment Year: 2019-2020
• Appeal Filed On: 09-07-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Principle of natural justice; Documents seized
• Section: 132; 143(3); 153A; 43; 13; 145(3); 153C; 20

Judgement Text

आयकर अपीलीय अिधकरण, राजकोट Ɋायपीठ, राजकोट । IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH: RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER And SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER Sl.No(s) ITA/IT(SS)A No(s) Assess- ment Year(s) Appeal(s) filed by: Appellant vs. Respondent 1. ITA 239/RJT/2023 2019-20 Seleo Ceramic Pvt.Ltd. At Rangpar Tal Morbi Post Rajkot Morbi 363 642 (Gujarat) PAN: AASCS8650F The DCIT Central Circle-2, Rajkot 2. IT(SS)A 88/RJT/2023 2019-20 Shaileshbhai Kanjibhai Mendpara At Pithad Tal Jodiya Dist. Jamnagar Jamnagar- 381220 (Gujarat) PAN: APOPM5059E The DCIT Cen.Cir-2 Rajkot 3. ITA 242/RJT/2023 2019-20 M/s.Alfa Vitrified Pvt.Ltd. Survey BNo.943/P-1, Nr. Lexus Granito Lakhdhirpur Road Morbi – 363 642 PAN: AAJCA1071F The DCIT Cen.Cir-2 Rajkot अपीलाथŎ ओर से / Assessees by : 1&2.Shri Mehul Ranpura, Ld.AR 3. Shri Vimal Desai, Ld.AR ŮȑथŎ की ओर से/Respondent by : 1&2.Shri Shramdeep Sinha, Ld.CIT-DR 3. Shri Ashish Kumar Pandey, Ld.Sr.DR सुनवाई की तारीख / Date of Hearing 29/07/2024 घोषणा की तारीख /Date of Pronouncement 20/08/2024 ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 2 - आदेश / O R D E R PER DINESH MONHAN SINHA, JUDICIAL MEMBER : These three appeals have been filed by different assessees, pertaining to same Assessment Year (2019-20) are directed against the separate orders passed by the Commissioner of Income Tax (Appeals)- (NFAC), Delhi [in brief ‘CIT(A)] dated 16/05/2023, 18/07/2023 and 30/03/2022 (Sl.Nos. 1, 2 & 3 respectively), which in turn arise, out of separate assessment orders passed by the Assessing Officer (AO) u/s. 143(3)/153C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) . 2. Since, the issues involved in all three appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No.239/RJT/2023 for AY 2019-20 in the case of “Seleo Ceramic Pvt.Ltd.”, have been taken into consideration for deciding the above appeals en masse. “1. The grounds of appeal mentioned hereunder are without prejudice to one another. 2. The Ld. Commissioner of Income Tax (Appeals)-11, Ahmedabad (hereinafter referred as a CIT (A)] erred on facts as also in law in confirming the addition to the extent of Rs.19,97,076/- out of the addition made by Assessing Officer [hereinafter referred to as AO] of Rs. 24,96,345/-. The addition has been made on the alleged ground of unaccounted profit estimated on the alleged unaccounted sales of Rs 99,85,381/-. The addition confirmed by CIT (A) is bad in law as also on facts and therefore the same may kindly be deleted. ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 3 - 3. The Id. CIT(A) erred on facts as also in law in partly confirming the addition made by AO without allowing the appellant an opportunity of cross- examination to third party. 4. Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.” The tabulation-sheet submitted by the assessee(s) are in the following terms: Sl. No. Name of Assessee A.Y. Asst.Order Section Appeal No. Name of the seized material Date Cate - gory Violation of facts and as per Hiren Kalaria’s statement 1. Shailesh Kanji Mendpara 2018- 19 153C IT(SS) A 88/RJT/ 2023 Shailesh 29/07 /2024 A Only Mobile number given by Mr. Hiren Kalana. The app is engaged in vehicle repairing garage business. Many person saves mobile no.of app for repairing of servicing of their vehicles. Ld.CIT(A) restricted estimated profit at @ 20%. 2. Seleo Ceramic Pvt.Ltd. 2019- 20 143(3) ITA 239/RJ T/2023 29/07/2 024 Mr Hiren Kalar ia stated that the Tarun repres ent Seleo Cera mic Pvt.L td. Ld. CIT (A) restri cted estim B ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 4 - ated profit at @ 20%. 3. Alfa Vitrified Pvt.Ltd. 2019- 20 143(3) ITA 242/RJ T/2023 Alpha 29/07 /2024 C App’s name was in seized material. 3. The brief facts of the case, qua the issue as per lead case in the case of Selco Ceramic Pvt.Ltd. are that the assessee is engaged in the business of manufacturing of ceramic tiles. Search and seizure action was carried out in the case of one Shri Hiren Khimjibhai Kalariya and during the course of search in his case, various incriminating documents were seized containing noting of fund deposited in various bank accounts operated by him and withdrawal of such funds in cash for disbursing the same to the actual beneficiaries. Shri Hiren Khimjibhai Kalariya in his statement recorded u/ss.132(4) and 131 of the Act, has described the modus operandi of his Angadiya/ Shroff business activities and also given name of the beneficiaries of unaccounted cash transactions. The AO of searched person in his satisfaction recorded has identified the assessee being one of the beneficiaries of unaccounted cash transactions and accordingly, the AO of the appellant recorded his satisfaction for initiating assessment proceeding and notice issued to the assessee u/s.153C of the Act, and AO made addition of Rs.24,96.345/-. 4. Aggrieved by the order of the AO, the assessee carried the matter before the Ld.CIT(A), who has reduced the estimated addition from 25% to 20%. ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 5 - 5. Aggrieved by the order of the Led.CIT(A), now the assessee is further in appeal before us with abovementioned grounds of appeal. 6. We have heard the Ld.Representatives of the assessee(s) and the Ld.Representative of the Department and perused the material available on record. The Ld.AR for the assessee(s) argued at the similar lines as he had argued in the group cases; in IT(SS)A 66/RJT/2023 & 26 Others in the case of M/s.Range Ceramic Pvt.Ltd. & 26 Ors., wherein the Coordinate Bench of ITAT Rajkot passed an order dated 19/08/2024. On the other hand, the Ld.DR for the Revenue has also argued on the similar lines as he has argued in the Group cases; in IT(SS)A 66/RJT/2023 & 26 Others. Therefore, we do not repeat the arguments as were advanced before us 1by the Ld.counsel for the assessee(s) and the Ld.DR for the Revenue. 7. After careful consideration of the matter, we find that the issue in these three appeals are squarely covered by the decision of the Coordinate Bench in the case of M/s.Range Ceramic Pvt.Ltd. passed in IT(SS)A No.66/RJT/2023 & 26 Others vide ITAT Rajkot Bench dated 19/08/2024, wherein the Tribunal has held as follows:- “44. We note that in the following cases, wherein assessment order was framed by the assessing officer u/s 143(3)/153C of the Act, wherein we find that neither Shri Hiren Kalaria has given any statement or clarification about these assessees nor these assessees are linked with group cases. That is, Shri Hiren Kalaria, in his statement stated that he did not know the name of the ultimate beneficiaries, hence, these assessees relate to a different segment of trade and moreover, the trading activities of these assessees, noted below, are not similar to that of the other assessees in the group. Moreover, Shri Hiren Kalaria did ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 6 - not mention in his statement about these assessees that these assessees are related to the group business or they are connected with ultimate beneficiaries. Therefore, we note that the lists of assessees, given below, are not connected persons, and they are not ultimate beneficiaries. They are engaged in the different trade and business. The details of these assessees are mentioned below: Sr. No. Name of Assessee AY Asst. Order Section IT(SS)A/ ITA No. Name in seized material Date of Hearing Category Variation of facts and as per Hiren Kalaria’s statement 1 Laxmi Plastic 2019-20 143(3) 448/Rjt/2023 Jalpesh 18.07.24 A Mr Hiren Kalaria has not given mobile number of Jalpesh. In one of the statement there is other party named as Jalpesh Trading. Further, Jalpesh is not partner or employee of firm. 2 Vijay Fefar 2019-20 143(3) 449/Rjt/2023 Kishor 18.07.24 A Only Mobile No given. Mobile no. belongs to Kishor of Om Wire Products. Further, Vijay Fefar is deriving salary income from PGVCL and not engaged in any Ceramic Business. 3 Shailesh Kanji Mendpara 2019-20 143(3) 313/Rjt/2023 Shailesh 18.07.24 A Only Mobile number given by Mr Hiren Kalaria. The appellant is engaged in vehicle reparing garage business. Many person saves mobile no of appellant for repairing or servicing of their vehicles. 4 Lucaso Ceramic Pvt. Ltd. 2019-20 143(3) 352/Rjt/2023 Ramesh 18.07.24 A Name given by Mr Hiren Kalaria. However, Rameshbhai resigned from directorship of the Company from 13-06- 2016. 5 Admark Ceramic Industries 2019-20 143(3) 455/Rjt/2023 Vikas 18.07.24 A No name of the appellant was in seized material and Hiren Kalariya in his statement also stated that he didn’t know the name of the ultimate beneficiary 6 Laxmi Plastic 2018-19 153C 94/Rjt/2023 Jalpesh 18.07.24 A Mr Hiren Kalaria has not given mobile number of Jalpesh. In one of the statement there is other party named as Jalpesh Trading. Further, Jalpesh is not partner or employee of firm. [Para (f) Page 18 of Paperbook]. 7 Vijay Fefar 2018-19 153C 95/Rjt/2023 Kishor 18.07.24 A Only Mobile No given. Mobile no belongs to Kishor of Om Wire Products. Further, Vijay Fefar is deriving salary income from PGVCL and ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 7 - not engaged in any Ceramic Business. 45. Therefore, we note that above these seven assessees are not connected with tile business and these assessees’ names are not therein the seized material, therefore, these assessees have been incorrectly identified, as beneficiary, by the assessing officer. These assessees are in different line of business, such as, Kiran shop wala, Paanwala, Pancturewala, or salaried employees etc. These above persons are not connected with ceramic industry and their names do not reflect in the seized materials. Therefore, in the case of above assessees, no addition should be made in their hands and whatever documents are relied by the assessing officer, for the purpose of above assessees, are dumped documents and, therefore, we delete the complete addition in their hands. 46. In the result, appeals filed by the assessee in ITA Nos. 448/Rjt/2023, 449/Rjt/2023, 313/Rjt/2023, 352/Rjt/2023, 455/Rjt/2023, IT (SS) Nos. 94/Rjt/2023, & 95/Rjt/2023, are allowed.” 8. In the above case of assessee (in the case of Shailesh Kanjibhai Mendpara – A Category), there is no incriminating material, even his name in the seized material does not exist, and Shri Hiran Kalariya also stated in his statement that he did not know about this assessee. Therefore, the seized material for the purpose of this assessee are dump documents. Therefore, this assessee is fully covered by the decision of the Co-ordinate Bench, in IT(ss)A Nos.66/RJT/2023 & 26 Others(supra), vide Paragraph Nos. 44 to 46 of the said decision, wherein we have deleted the entire addition sustained by the ld. CIT(A), hence, we delete the addition in the hand of this assessee in IT(SS)A No.88/RJT/2023 for AY 2019-20 in the case of Shailesh Kanjibhai Mendpara. 9. Now we shall take up assessee’s appeal(s) in the case(s) of Selco Ceramic Pvt.Ltd. and M/s.Alfa Vitrified Pvt.Ltd. (in ITA 239/RJT/2023 & ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 8 - ITA No.242/RJT/2023 respectively), wherein these two appeals are squarely covered by the decision of Co-ordinate Bench of ITAT Rajkot in IT(SS)A No.66/2023 & 26 Others (supra), wherein the Tribunal has held as follows:- “Analysis and conclusion 31. We have heard the rival parties and have gone through the material placed on record. First, we shall deal with “satisfaction note”, whether it is defective or not. For the sake of clarity and also being pertinent, we reproduce the provisions of section 153C of the Act, ( to the extent useful for our analysis), as follows: “153C Assessment of income of any other person. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then,the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to [sub-section (1) of section 153A] shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 9 - Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated......” From the provisions of section 153C of the Act, as referred above, it is vivid that the primary condition for initiation of assessment proceeding u/s 153C of the Act, is that during the course of search in the case of any person, money, bullion, jewellery or other valuable article or thing is seized and the assessing officer of ‘searched persons’ satisfies, that such asset belongs to other person. Alternatively, during the course of search, any books of account or documents are seized or requisitioned, and the assessing officer of ‘searched person’ satisfies that such books or document pertains to or any information contained therein relates to other person. The mechanism provided in the Act is that in such manner that the assessing officer of ‘searched person’ after recording his satisfaction should handover the relevant seized assets or books of account or documents or information to the assessing officer of ‘other person’ and then,the assessing officer of ‘other person’ should record his satisfaction before initiating assessment proceeding in the case of ‘other person’ u/s 153C of the Act that the books of account / documents / assets seized from "searched person" is bearing on the determination of total income of "other person". 32. In the context of the above provisions of section 153C of the Act, we should examine the ‘satisfaction note’ recorded by the assessing officer, of the assessee under consideration. In the assessee`s case under consideration, the satisfaction note, recorded by the assessing officer, under section 153C of the Act, is reproduced below: “1. Search action named "Operation White Flower" U/S. 132 was conducted on 03-01-2019 on the 'Coral Group of Companies' and its various associated concerns and persons along with at the premises of Shri Hiren Khimjibhai Kalariya. 2. During the course of search at the residential premises of Shri Hiren Khimjibhai Kalariya (Shroff), his statement was recorded u/s. 132(4) of the Income-tax Act. In his statement, he has explained the detailed modus operandi adopted by him to assist the various companies in collection of proceeds of unaccounted sales. He has stated that initially the money is deposited by the customers of concerned companies in various designated bank accounts, at ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 10 - multiple locations as per the business practice adopted by the group companies, these accounts are being maintained by him or his accomplice and later on, the money so deposited by customers of various companies are withdrawn and handed over to the key person of the concerned companies. 3. He has further stated that he regularly deals with Coral Group through Sh. Ketan Bhalodia and hands over the cash to the person as told by Ketan Bhalodia. He also stated that if the cash received is of any other company / concern, he calls the concerned person of the company / concern and hands over the cash to him. He also keeps record of such transactions in manual form at his business/ residential premise. 4. On being confronted with the statement of Shri Hiren Khimjibhai Kalariya, Shri Ketan Vaghji Bhalodiya agreed with the contents of his statement. Shri Hiren Khimjibhai Kalariya has also admitted in this statement (reply to Q. No. 8 & 9) that he does the same type of transactions/ business with other ceramic entities also and receives commission income on such transactions. 5. Further appraisal report and the details of investigation done in the matter and statement recorded by the Investigation wing is examined and it is found that RANGE CERAMIC PRIVATE LIMITED (AAGCR6625M) has also been received amount of Rs. 2,59,22,887/- in cash by adopting the modus operandi as discussed above. 6. In view of above, I am satisfied that the above discrepancy found from party named Shri Hiren Khimjibhai Kalariya covered u/s 153A of the I. T. Act belongs to and information in this regard and is relates RANGE CERAMIC PRIVATE LIMITED (AAGCR6625M) i.e. assessee being other than the person 153A of the Act, 7. As per amended section 153C(1)(b), where the Assessing Officer is satisfied that any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to a person other than the person referred to in section 153A, then the proceedings u/s 153C shall be initiated. 8. Therefore, I have satisfaction to proceed against the assessee RANGE CERAMIC PRIVATE LIMITE(AAGCR6625M) as per the provision of section 153C of the Income-tax Act, 1961. Hence, it is a fit case for initiation of proceedings u/s. 153C of the Act. The provisions of section 153C(1) has to be invoked for AY 2013-14 to AY 2018-19 and for u/s 143 (3) for AY 2019-20.” 33. We have gone through the above ‘satisfaction note’, recorded by the assessing officer, in the assessee`s case under consideration, and noted that ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 11 - there is no infirmity, in the ‘satisfaction note’ recorded under section 153C of the Act. As, we have already noted that a search and seizure action was carried out in the case of one Shri Hiren Khimjibhai Kalariya and during the course of search in his case, various incriminating documents were seized containing noting of fund deposited in various bank accounts operated by him and withdrawal of such funds in cash for disbursing the same to the actual beneficiaries. Shri Hiren Khimjibhai Kalariya in his statement recorded u/s 132(4) and 131 of the Act, has described the modus operandi of his Angadiya/Shroff business activities and also given name of the beneficiaries of unaccounted cash transactions. The assessing officer of searched person in his satisfaction recorded has identified the assessee, being one of the beneficiaries, of unaccounted cash transactions and accordingly, the assessing officer of the assessee recorded his satisfaction for initiating assessment proceeding and notice issued to the assessee u/s 153C of the Act. The materials seized from Hiren Khimjibhai Kalariya is undisputedly in respect of unaccounted sales and collection of cash of companies/persons. The satisfaction note has been recorded, by the assessing officer, on the basis of the statement given by Shri Hiren Kalariya and supported by the seized documents and therefore it clearly establishes the link between the seized documents and the assessee. Therefore, initiation of proceedings u/s 153C of the Act is not on mere surmises or conjectures and on the basis of the incriminating materials seized during search in case of Hiren Khimjibhai Kalariya. Therefore, this argument of ld.Counsel for the assessee, is not acceptable and therefore, rejected. Thus, the ground of appeal No. 2 is dismissed. 34. Since we have adjudicated the issue pertaining to ‘satisfaction note’, under section 153C of the Act, by taking the lead case in IT (SS)A No.66/RJT/2023, for assessment year 2017–18, in the case of Range Ceramic Private Limited. In other assessees` case, the satisfaction note, are recorded by the assessing officer, in the same manner, as that of the assessee under consideration. Therefore, our instant adjudication shall applymutatis mutandis to the aforesaid other appeals of various assessees. Hence, we dismiss the ground raised by all other assessees, pertaining to ‘satisfaction note’, under section 153C of the Act. 35. In the result, grounds relating to ‘satisfaction note’, mentioned in IT(ss) Nos. 94/Rjt/2023, 95/Rjt/2023, 66/Rjt/2023,67/Rjt/2023, 41/Rjt/2023, 42/Rjt/2023, and 43/Rjt/2023, are dismissed. 36. So far merit, is concerned, we find that during the course of search action in the case of Shri Hiren Khimjibhai Kalariya, various diaries and loose papers ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 12 - sheets containing details of cash transactions were seized in Annexure No. A-1 to A-7. During the course of recording statement u/s 132(4), Shri Hiren Kalariya explained in detail, the modus operandi, adopted by him, to assist various beneficiaries for collection of sale proceeds of unaccounted sales. The assessing officer stated that on analysis of the data seized from Shri Hiren Kalariya, it is found that the assessee is one of the beneficiaries of unaccounted cash transactions (recipient) worth of Rs.1,64,000/-. The assessing officer rejected book results of the assessee by invoking provision of Section 145(3) of the Act, and by relying on the decision of Hon'ble High Court of Gujarat in the case of CIT vs. President Industries (2002) 258 ITR 654 (Gujarat), estimated unaccounted profit at the rate of 25% of the unaccounted gross receipts of Rs.1,64,000/-. The assessing officer stated that on perusal of past records of the assessee, it is noticed that the assessee has been showing gross profit (GP) in the range of 19.52% to 18.66% in accounted sales, but it is established fact that in unaccounted sales, such margin and profit would be higher. Thus, assessing officer, estimated profit element of Rs.41,000/- (1,64,000 * 25%), which was treated as unaccounted income of the assessee and added to the total income of the assessee. On appeal by the assessee, the learned CIT(A), restricted the estimated addition @ 22% on unaccounted gross receipts of Rs.1,64,000/-. Therefore, addition made by the assessing officer towards unaccounted business income to the extent of Rs.36,080/- (1,64,000 x 22%) was confirmed by ld CIT(A) and balance addition of Rs.4,920/- ( Rs.41,000- Rs.36,080) was deleted by ld CIT(A). Now, the assessee is in appeal before us, and contended that balance addition of Rs.36,080/- may be entirely deleted or percentage of estimated addition @ 22% adopted by ld CIT(A) may be reduced at a reasonable rate. 37. We find that during the course of assessment proceeding, assessee has requested the assessing officer, to provide an opportunity of cross-examination of Shri Hiren Kalariya, however, the assessing officer did not provide the same. In this context, the ld Counsel relied on various case laws and argued that principle of natural justice has not been followed. The ld Counsel also contended that the presumption u/s 132(4A) and 292C of the Act, applies only to a person from whose possession the material was seized and not to a third party. We note that it is an undisputed that Shri Hiren Kalariya was a commission agent and he was acting as a mediator for the collection of sale proceeds of unaccounted sales in lieu of commission. During the course of search and in post-search investigation, Shri Hiren Kalariya has admitted the modus operandi of his business activities, which also found recorded in various diaries and loose papers seized from his premises. The assessing officer has also noted in the assessment order that some of the beneficiaries whose names are mentioned in ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 13 - the seized diaries admitted that they had received cash from Shri Hiren Kalariya. Thus, where the addition is made by the assessing officer, based on the documentary evidences, and these documentary evidences, speak clearly, then there is no need to provide opportunity for cross- examination. It is pertinent to note that Shri Hiren Kalariya recorded the names of the parties in his diaries as he knew the beneficiaries. Even in respect of representatives coming to collect cash on behalf of beneficiaries, Shri Hiren Kalariya clearly linked the names of such representatives with the respective beneficiaries in his statements recorded. Thus, Shri Hiren Kalariya had full knowledge of the persons with whom he was dealing as a commission agent and whose representatives' names are mentioned in the seized diaries. Further, in respect of such transactions of undisclosed sales and receipts thereof, all the links in the chain remain well connected and therefore, the remittance of cash always reaches the intended recipients and not to anyone else. Therefore, mere denial on the part of the assessee stating that they have not carried out any transactions with Shri Hiren Kalariya is not sufficient in any manner. Since the seized material is clear in its contents and the assessee is not able to rebut such content by any contradicting evidence, the legal arguments of the assessee fail and they cannot be accepted de hors of the undeniable picture emerging from the seized material the sanctity of which is already established. Seized material (The diaries) was systematically maintained by Shri Hiren Kalariya and it is not just loose papers or dumb documents which is not capable of any meaning. Therefore, where the seized material contains the name of any beneficiary or the name of any representative of such beneficiary and such representative and the beneficiary are subsequently linked by Shri Hiren Kalariya, the beneficiary cannot escape consequential tax liability. The assessee has not produced any confirmation of Shri Hiren Khimjibhai Kalariya stating that notings in such seized material does not pertain to the assessee. 38. We find that about issue of cross examination, no natural justice requires that there should be a kind of a formal cross- examination. Formal cross- examination is procedural justice. It is governed by rules of evidence. It is the creation of Courts and not a part of natural justice but of legal and statutory justice. Natural justice certainly includes that any statement of a person, before it is accepted against somebody else, that somebody else should have an opportunity of meeting it whether it, by way of interrogation or by way of comment, does not matter, so long as, the party charged has a fair and reasonable opportunity to see, comment and criticise the evidences, statement or record on which the charge is being made against him the demands and therefore the test of natural justice are satisfied. The question whether denial of ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 14 - opportunity of cross-examination results in violation of natural justice depends upon facts of each case. The object of cross-examination is to test the veracity of the version given in examination in chief. As, in the assassee`s case, under consideration, the assessee had proper opportunity to controvert the material gathered by the search team and assessing authority and used against it, then there had been compliance of the principle of natural justice. Having gone through the above findings of the ld. CIT(A), we observed that there was no need to provide opportunity of cross- examination, as the addition was made by the assessing officer, based on the documents and evidences seized during the search. Considering the above factual position, we reject the plea raised by the ld. Counsel for the assessee, in respect of cross examination. Hence, grounds raised by the assessees, relating to cross examination, are dismissed. 39. So far, merit of the case is concerned, we note that ld CIT(A) sustained the additions in the hands of various assessees at the rate of 20%, 22% and 25%. However, in most of the cases, the ld CIT(A) sustained the estimated addition at the rate of 20%, as against the addition made by the assessing officer at the rate of 25%. Both the ld Counsels, argued before us that documents and data were seized from the possession of third-party and these documents are dumb documents and moreover, these documents found in the search are not sufficient to prove that the various assessees are indulged in the transactions mentioned in the dump documents, therefore entire additions made in the hands of the respective assessees may be deleted. 40. We do not find merit in the above submissions of ld Counsels. We find that seized documents are incriminating documents, moreover, the statement of Shri Hiran Kalaria, is clearly corroborated with seized documents, therefore entire addition made by the assessing officer cannot be deleted, except in case of those assessees, whose name do not appear in seized documents, directly or indirectly. 41. However, we find that estimated additions, in the hands of various assessees, sustained by ld CIT(A), at the rate of 20%, 22% and 25% are at higher side. Both the ld Counsels for the assessees, have raised an alternative plea, before the Bench, that the estimation of rate of profit at 22% on undisclosed sales by the ld CIT(A), is arbitrary and exaggerated. In support of this, the ld Counsel furnished its audited financial statements of the assessees, before the Bench, (which were submitted by the assessees, before the lower authorities also), and, on that basis, it is argued that rate of profit estimated by the ld CIT(A), is on the higher side of declared gross profit and net profit(GP/NP). The ld Counsel, mainly contended that if profit is estimated then it should be net profit only as ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 15 - per the audited accounts or trend in the industry, whereas the ld CIT(A) sustained the estimated the profit @ 20%, in most of the cases, which is very high and impracticable. 42. We find merit in the submissions of ld. Counsel to the effect that profit rate sustained by the ld CIT(A), is at very higher side. Therefore, considering the nature of business, we proceed to work out the estimation of profit keeping in mind the following facts: (i)The estimate is not opened up to be framed in an arbitrary manner. (ii)The estimate by rule of thumb is absolutely infirm. (iii)The estimation of rate of profit return must necessarily vary with the nature of the business. (iv)There cannot be any uniform yardstick. (vi)An assessment to be best of judgement can only be based on the material available on record and past records and considering the totality of the facts. (v) Only real income and neither notional income nor astronomical income, can be taxed under the Income Tax Act, 1961. Accordingly, we hereby estimate the net profit (NP) at 13%, keeping in mind that the method to be adopted for estimation, must be, which is approximately nearer to the truth. In view of the above factual discussion, the addition made by the assessing officer ( in the lead case) towards unaccounted business income to the extent of Rs.21,320/- (1,64,000 x 13%) should confirmed and balance addition should be deleted. Our above findings, are applicable to the following assessees: Sr. No. Name of Assessee AY Asst. Order Section IT(SS)A/ ITA No. Name in seized material Date of Hearing Category Seized material, facts and as per Hiren Kalaria’s statement 1 Roland Ceramic Pvt. Ltd. 2019-20 143(3) 232/Rjt/2023 Dipesh/ Lanbagh/ Rohan 18.07.2024 B Mr Hiren Kalaria stated in statement that Dipesh, Lanbagh and Rohan represents the company represents Roland Ceramic Pvt Ltd.. However, Lanbagh and Rohan are not directors. 2 Range Ceramic Pvt. Ltd. 2019-20 143(3) 231/Rjt/2023 Harshad 18.07.2024 B Mr Hiren Kalaria stated that the Harshad represent Range Ceramic Pvt. Ltd. ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 16 - 3 Winsun Ceramic Pvt. Ltd. 2019-20 143(3) 233/Rjt/2023 Nirav 18.07.2024 B Mr Hiren Kalaria stated that the Nirav represent Range Ceramic Pvt. Ltd. 4 Lorians Ceramic LLP 2019-20 143(3) 235/Rjt/2023 Hiren/ Hirmolo 18.07.2024 B Mr Hiren Kalaria stated Hiren and Hirmolo represents Lorians Ceramic LLP. 5 Livanto Ceramic Pvt. Ltd. 2019-20 143(3) 236/Rjt/2023 Jayesh 18.07.2024 B Mr Hiren Kalaria stated that the Jayesh represent Livanto Ceramic 6 Legend Ceramic Pvt. Ltd. 2019-20 143(3) 234/Rjt/2023 Legend / Lejend/ Lijend 18.07.2024 C Mr Hiren Kalaria stated that the Legend represents Legend Vitrified 7 Flecto Ceramic Pvt. Ltd. 2019-20 143(3) 315/Rjt/2023 Sunil 18.07.2024 C Mr Hiren Kalaria stated that the Sunil represents Flecto Ceramic Private Limited 8 9 Range Ceramic Pvt. Ltd. 2017-18 153C 66/Rjt/2023 Harshad 18.07.2024 B Mr Hiren Kalaria stated that the Harshad represent Range Ceramic Pvt. Ltd. 2018-19 153C 67/Rjt/2023 10 Admin Vitrified Pvt. Ltd. 2019-20 143(3) ITA 216/R/23 Chali, Charlie, Savan, Savant 18.07.2024 B No name of the appellant was in the seized material but Hiren Kalariya in his statement stated that the same belonged to the Appellant. 11 Adore Ceramic Pvt. Ltd. 2017-18 153C ITSS 41/R/23 H 18.07.2024 B 12 Adore Ceramic Pvt. Ltd. 2018-19 153C ITSS 42/R/23 H, M, Yogesh 18.07.2024 B 13 Adore Ceramic Pvt. Ltd. 2019-20 143(3) ITA 211/R/23 H, M, Yogesh 18.07.2024 B 14 Dovel Ceramics 2019-20 143(3) ITA 214/R/23 Deali 18.07.2024 B 15 Success Ceramic Pvt. Ltd. 2019-20 143(3) ITA 217/R/23 Sanjay 18.07.2024 B 16 Lasa Cera Pvt. Ltd. 2018-19 153C ITSS 43/R/23 Lasasera 18.07.2024 C Appellant’s name was in seized material 17 Lasa Cera Pvt. Ltd. 2019-20 143(3) ITA 212/R/23 Lasasera 18.07.2024 C We note that above assessees, are ultimate beneficiaries. They worked through connected persons. For example, M/s Range Ceramic Pvt. Ltd, vide ITA No. 231/Rjt/2023, Mr. Hiren Kalaria stated that Shri Harshad represents, M/s Range Ceramic Pvt Ltd, therefore, M/s Range Ceramic Pvt. Ltd, is ultimate beneficiary and it falls in B category. For example, Lasa Cera Pvt. Ltd, vide ITA 212/Rjt/23, the assessee`s name is there in the seized material, that is, there is direct evidence available in this case, and this case falls in C category. We also find that in case of B category, the name mentioned in the seized material are resembling with the beneficiaries, identified by Shri Hiren Kalariya, therefore, in case of these assessees, it cannot be said that the seized materials are dumped documents, as we have noted that they are ultimate beneficiaries and in their ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 17 - hands the assessing officer has estimated the income @ 25%, however, on appeal, Ld. CIT(A) reduced the estimated profit from 25% to 20% and in some cases, from 25% to 22%. Therefore, these assessees are in appeal before us and praying the Bench that estimated addition is very higher side and it should be reduced, at a reasonable level. Considering the facts and circumstances, narrated above, we find that the estimation done by the assessing officer, and re-estimated addition, sustained by the Ld. CIT(A) @ 20% is very higher side. Therefore, we are of the view that the estimated addition on their unaccounted transaction should be @ 13%, which will take care of inconsistency in the undisclosed income. Therefore, the assessing officer, is directed to make the addition in the hands of all above assessees, at the rate of 13%, hence, appeals of those assessees, falling in category B and C, are partly allowed. 43. In the result, appeal filed by the assessees in ITA Nos. 232/Rjt/2023, 231/Rjt/2023, 233/Rjt/2023, 235/Rjt/2023, 236/Rjt/2023, 234/Rjt/2023, 315/Rjt/2023, 66/Rjt/2023, 76/Rjt/2023, 216/Rjt/2023, 211/Rjt/2023, 214/Rjt/2023, 217/Rjt/2023, 212/Rjt/23, IT(SS)A Nos. 41/Rjt/2023, 42/Rjt/2023 & 43/Rjt/2023, are partly allowed in above terms.” 10. We note that in identical group cases, in IT(ss)A Nos.66/RJT/2023 and 26 Others(supra), we sustained the addition @ 13% in case of B and C categories, therefore, our adjudication in the group cases, in IT(ss) Nos.66/RJT/2023 & 26 Others(supra), vide order dated 19/08/2024, and vide relevant Paragraph Nos.41 to 43 of the said decision, wherein the Co-ordinate Bench of ITAT, Rajkot, made the addition @ 13% in ‘B’ and ‘C’ categories cases. Accordingly, in ITA No.239/RJT/2023 for AY 2019- 20 (in the case of Seleo Ceramic Pvt.Ltd.) and ITA No.242/RJT/2023 for AY 2019-20 (in the case of M/s.Alfa Vitrified Pvt.Ltd.), the Assessing Officer (AO) is directed to estimate the income @ 13% in both the case(s) of the assessee(s). Therefore, respectfully following the above decision ITA No.239/RJT/23, ITSS 242- RJT/2023 & ITA 242/RJT/2023 Seleo Ceramic Pvt.Ltd, Shailesh Kanjibhai Mendpara and M/s.Alfa Vitrified Pvt.Ltd. vs. DCIT respectively Asst.Year – 2019-20 - 18 - of the Co-ordinate Bench of ITAT, Rajkot, we allow the above two appeal(s) of the assessee partly. 11. In the combined result, the appeal of the assessee in IT(SS)A No.88/RJT/2023 for AY 2019-20 is allowed, whereas the appeal(s) of the assessee(s) in ITA No.239/RJT/2023 and ITA No.242/RJT/2023 for AY 2019-20 are partly allowed. Order pronounced in the Open Court on 20 August, 2024 at Rajkot. Sd/- Sd/- (DR. ARJUN LAL SAINI) (DINESH MOHAN SINHA) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT; Dated 20/ 08 /2024 टȣ.सी.नायर, व.Ǔन.स./T.C. NAIR, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आय ु Èत / Concerned CIT 4. आयकर आय ु Èत(अपील) / The CIT(A)-concerned 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,राजोकट/DR,ITAT, Rajkot 6. गाड[ फाईल / Guard file. आदेशान ु सार/ BY ORDER, स×याͪपत ĤǓत //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलȣय अͬधकरण, राजोकट / ITAT, Rajkot