M/s.Prince Roller Flour Mills P. Ltd, Palakkad V. The ACIT, Kochi

ITA 36/COCH/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0658 (ITAT-COCHIN)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-11-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: C B M WARRIER
• Keywords: Bogus purchase; Income from undisclosed sources; Document seized; Deemed to accrue or arise in india; Block assessment; Retraction; Documents seized; Set aside
• Section: 271(1)(c); 143(3); 133A; 153A; 115JB; 201; 143(2); 64; 43; 48; 73; 13; 32; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M ITA NOS. 36 TO 41 /COCH/ 20 19 ASSESSMENT YEARS: 2009 - 10 TO 2014 - 15 M/S. PRINCE ROLLER FLOUR MILLS (P) LTD., 9/75, ANAPPURAMKADU, KINASSERY, PALAKKAD - 678 707. [PAN:AABCP 3681J] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 1, KOCHI. ( ASSESSEE - APPELLANT) ( REVENUE - RESPONDENT) ITA NO S . 21 TO 26/ COC H/ 2019 ASSESSMENT YEAR S : 2009 - 10 TO 2014 - 15 THE ASSISTANT COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 1, KOCHI. VS. M/S. PRINCE ROLLER FLOUR MILLS (P) LTD., 9/75, ANAPPURAMKADU, KINASSERY, PALAKKAD - 678 707. [PAN:AABCP 3681J] ( REVENUE - APPELLANT) (ASSESSEE - RESPONDENT) ASSESSEE BY SHRI C.B.M. WARRIER, FCA REVENUE BY S MT. A.S. BINDHU, SR. DR D ATE OF HEARING 14/11/2019 DATE OF PRONOUNCEMENT 20 /12/2019 O R D E R PER CHANDRA POOJARI, AM: THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(A) - III, KOCHI DATED 17/10/2018 AND PERTAIN TO ASSESSMENT YEARS 2009 - 10 TO 2014 - 15. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING COMMON GROUNDS OF APPEAL S : 1) THE ORDER OF THE ASSESSING AUTHORITY AS WELL AS THE FIRST APPELLATE AUTHORITY IN SO FAR AS IT IS PREJUDICIAL TO THE APPELLANT, IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2 ) THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN REJECTING THE TRANSACTIONS OF SALE OF WHEAT TO SRI. P .K.KUNJUMOIDEEN ASSUMING THAT, WHEAT PRODUCTS ARE SOLD TO SRI. P.K.KUNJUMOIDEEN. 3) THE ASSESSING OFFICER HAS NOT CO NSIDERED THE STATEMENT OF RETRACTION GIVEN BY SRI . P.K.KUNJUMOIDEEN AND ALSO NOT ACCEPTED THAT WHEAT IS SOLD BY THE APPELLANT COMPANY. 4 ) THE ASSESSING OFFICER HAS GONE WRONG IN OMITTING TO CONSIDER THE FACTS THAT SRI. P.K.KUNJUMOIDEEN IS ENGAGED IN PURCH ASE AND SALE OF WHEAT AND PURCHASES ARE MADE BY HIM FROM GOVERNMENT AGENCIES THROUGH TENDERS AND PURCHASES FROM OTHERS. 5) THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN SUSTAINING THE ADDITION TO THE EXTENT OF 50% AFTER FINDING THAT WHEAT IS SOLD BY THE APPELLANT COMPANY TO SRI. P.K.KUNJUMOIDEEN. 6) FOR THE ABOVE GROUNDS AND EVIDENCES PRODUCED AT THE TIME OF HEARING, THE APPELLANT MAY REQUEST THE HON'BLE INCOME TAX APPELLATE TRIBUNAL TO CANCEL THE ASSESSMENT ORDER. 3. THE REVENUE HAS RAISE D THE FOLLOWING COMMON GROUNDS OF APPEALS: 1) THE ORDER OF THE CIT(A) IS OPPOSED TO LAW, WEIGHT OF EVIDENCE AND FACTS OF THE CASE. 2) THE CIT(A) ERRED IN RESTRICTING THE ADDITION MADE BY THE ASSESSING OFFICER, ON THE ISSUE OF SUPPRESSED SALES TO 50%, WITH OUT ANY REASONING, WHEREAS THE ADDITION MADE BY THE ASSESSING OFFICER WAS ARRIVED AT SCIENTIFICALLY ON THE BASIS OF PRODUCTION DATA OF THE ASSESSEES RECORDED TRANSACTIONS. 3) THE CIT(A) HAS NOT POINTED OUT ANY SPECIFIC DEFICIENCIES IN THE METHODOLOGY EMP LOYED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FOR RESTRICTING THE ADDITION TO 50%. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 3 3.1 THE CRUX OF THE ABOVE GROUNDS IS THAT THE ASSESSEE WAS AGGRIEVED BY THE SUSTENANCE OF ADDITION AT 50% MADE BY THE ASSESSING OFFICER AND THE DEPARTMENT WAS AGGRIEVED BY THE GRANTING OF RELIEF OF 50% TO THE ASSESSEE ON THE ESTIMATED PROFIT FROM ESTIMATED UNDISCLOSED TURNOVER OF WHEAT PRODUCTS. 4. WE SHALL CONSIDER THE FACTS AS NARRATED IN ASSESSEES APPEAL IN ITA NO.37/ C OCH/2019 . A S EARCH UNDER SECTION 1 32 OF THE IT ACT WAS CONDUCTED IN THE RESIDENTIAL AND COMMERCIAL PREMISES OF THE ASSESSEE GROUP ON 5/9/20 1 3. DURING THE SEARCH OPERATIONS, INCRIMINATING MATERIALS RELATED TO SUPPRESSION IN SALES AND INCOMES OF THE ASSESSEE GROUP WERE UNEARTHED IN THE VARIO US PREMISES OF THE ASSESSEE GRO UP. STATEMENTS GIVEN BY SHRI. T.K. ABDUL KARIM, SHRI. ANUB SHA AND SHRI. AHMED FAIZAL SHA AND THEIR EMPLOYEES CONFIRMED THE PRACTICES OF THE ASSESSEE GROUP IN DOING SO. THE ASSESSEE FILED RETURN OF INCOME IN RESPONSE TO N OTICE U/S 153A DATED 30.07.2014 ON 04/12/2014. TH E CASE WA S SELECTED FOR SCRUTINY VIDE NOTICE U/S. 143(2) DATED 01.07.2015. 4.1 FROM TH E STATEMENTS GIVEN BY THE DIRECTORS AND THE EMPLOYEES, IT WAS SEEN THAT THE ASSESSEE GROUP IN THE WHEAT FLOUR MANUFAC TURING FRONT , RESORTED TO DIFFERENT METHODOLOGIES TO GENERATE UNACCOUNTED SALES AND INCOME FROM THE TRADE. THE ASSESSEE HA D USED SHRI. P.K. KUNJU M OIDEEN (PAN - AHDPK83Q1E) AS A FRONT. SHRI. P.K. KUNJU M OIDEEN WAS SHOWN AS THE PROPRIETOR OF M / S . TEEKAY RICE M ILL WITH PREMISES AT PALLIMUKKU, THATHAMANGALAM, PALAKKAD. THE PROPERTY AT THE SAID ADDRESS WAS OWNED BY SHRI. T.K. ABDUL KARIM HIMSELF AND MANY OF HIS OTHER I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 4 CONCERNS HAD OFFICES IN THE SAME ADDRESS ITSELF. AT THE TIME OF THE S EARCH, SHRI. P.K. KUNJU M OIDEE N WAS NOT AVAILABLE IN THE BUSINESS ADDRESS OF HIS. HE WAS FOUND TO BE RESIDING AT CHENGAMAN A D NEAR ALUVA RUNNING A GROCERY SHOP THERE . HE HA D BEEN LIVING AND SEEKING A LIVING OUT OF TH E BUSINESS FOR THE PAST 20 YEARS AT CHENGAMANAD. THE ASSESSEE HA D USED THE BUSINESS ADDRESS O F M/S. TEEKAY RICE MILL, TO SHOW THAT A PORTION OF ITS WHEAT PROCURED IS SOLD TO THE SAID CONCERN, WHICH IN TURN HAS SOLD THE SAME IN THE OPEN MARKET. IN ACTUALITY THE WHEAT SHOWN AS SOLD TO M/S . TEEKAY RI CE MILL WAS MILLED IN T HE ASSES SEE'S FACTORY ITSELF AND WAS SOLD AS WHEAT FLOUR IN ITS VARIOUS FORMS (A TT A, SOOJI. MAIDA AND BRAN) . THE ASSESSEE USED TO BILL THE WHEAT A T 1% MARKUP ON ITS FUNDING COST TO M/S. TEEKAY RICE MILL. IN REALITY, THE ASSESSEE USED TO MILL THE WHEAT AND SELL IT AT A HIGHER PROF IT IN THE MARKET. THE DIFFERENCE IS THE ADDITIONAL INCOME TO THE ASSESSEE FROM THIS CIRCUMROUTING ACTIVITY . 4. 2 SHRI. P.K. KUN J U M OIDEEN WA S QUESTIONED ABOUT HIS BUSINESS ACTIVITIES ON THE DAY OF THE SEARCH TO WHICH HE HAS DESCRIBE D HIS GROCERY BUSINESS AT CHENGAMANAD AS HIS SOURCE OF INCOME. THI S INDIVIDUAL WAS NOT AWARE OF THE TRADING ACTIVITIES IN HIS NAME AT M/S. TEEKAY RICE MILL. HE SAID THA T SHRI. ABDUL KAREEM AND SHRI. AMEER ALI ARE HIS COUSIN BROTHERS LIVING AT PA LAKKAD AND ARE OWNING THE PRINCE GROUP OF CONCERNS AND ADDED THAT THEY AR E RUNNING SOME BUSINESS IN HIS NAMES, FOR WHICH HE HAS GIVEN VARIOUS SIGNED FORM S AND CHEQUES TO THEM AND HE IS NO T AWARE OF EXACTLY WHAT KIND OF BUSINESS IS RUN IN HIS NAME. WHEN QUESTIONED ABOUT HIS BANK ACCOUNT, HE COULD RECALL ONLY HIS BANK ACCOUNT AT THE LOCAL BANK AT ALUVA AND NOT THA T OF T HE ONE AT PA L AKKAD. EVENTUALLY WHEN REMINDED OF THE BANK ACCOUNT IN HIS NAME AT I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 5 PAL AKKAD , HE SAID T HAT SHRI. ABDUL KAREEM HA D OBTAINED SIGNATURES FROM HIM ON SEVERAL FORMS AND CHEQUES AND HE HIMSELF HA D NO T OPERATED ANY TRANSACTIONS IN THIS ACCOUNT. 4 . 3 SHRI. P.K. KUNJU M OIDEEN JUSTIFIED THE NECESSITY TO LEND HIS NAME FOR THE BUSINESS R EQUIREMENTS OF PRINCE GROUP AS OUT OF BLOOD RELATIONSHIP AND ALSO THE FACT THAT FAMILY MEMBERS OF PRINCE GROUP USED TO PAY TO HIS BANK ACCOUNT AT ALUVA AMOUNTS PERIODICALLY IN RECIPROCATION. HE SAID T HE AMOUNTS ARE REQUIRED TO MEET HIS LIVING EXPENSES AS A LSO THE MEDICAL EXPENSES OF HIS AILING MOTHER. HE SAID PRINCE GROUP HAS TAKEN A PAN IN HIS NAME AND IS FILING THE RETURN OF INCOME AT PALAKKAD IN HIS NAME. FROM THE ENQUIRIES WITH HIM , IT WAS EVIDENT THAT SHRI. P.K. KUNJU M OIDEEN IS JUST A NAME LENDER TO TH IS CONCERN AND IN ACTUALITY WAS NOT AT ALL INVOLVED IN US TRANSACTIONS. THE STATEMENTS OF OTHER OFFICIALS OF PRINCE ROLLER FLOUR MILLS RATIFY AND STRENGTHEN HIS VERSION . 4 . 4 SHRI. PREMIL DEEP, MANAGER OF M/S. PRINCE ROLLER HOUR MILLS P LTD. KINASSERY, (P RFM) PALAKKAD HA D ALSO DEPOSED ON THE DAY OF THE S EARCH THA T THE ACCOUNTS FOR THE CONCERN OF M/S. TEEKAY RICE MILL W ERE ACTUALLY CONTROLLED FROM THE BUSINESS PREMISES OF M/S PRINCE ROLLER FLOUR MILLS P LTD. KINASSERY , PALAKKAD AND THE ACCOUNTS WER E MAINTAINED BY ONE SUBRAMANIYAM. SHRI PREMIL IN HIS DEPOSITION HA D STATED THAT ACTUALLY NO RAW WHEAT WAS PA S SED ON TO THE FIRM M/S. TEEKAY RICE MILL AND THE WHEAT BILLED IN THE NAME OF M ; S TEEKAY RICE MILL WAS MILLED AT M/S PRINCE ROLLER FLOUR MILLS ITSELF AND IS SOLD IN THE MARKET AS WHEAT FLOUR IN THE FORM OF ATTA. MAIDA, I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 6 SOOJI ETC. THE BILLING TO M/S. TEEKAY RICE MILL IS SEEN DONE AT THE INSTRUCTIONS OF SHRI. AB DUL KAREEM. THE SALE PROCEEDS OF M/S. TEEKAY RICE MILL WAS REMITTED INTO ITS BANK ACCOUNT BY TH E ROLLER FLOUR MILL STAFF ONLY FROM MONEYS GIVEN TO THEM BY SHRI. ABDUL KAREEM. THE AMOUNT PAYABLE TO PRFM IS THEN REMITTED FROM ITS ACCOUNT INTO PRFM ACCOUNT. 4. 5 A SIMILAR DEPOSITION WAS GIVEN BY SHRI. SABARIGIREESAN , ACCOUNTANT OF THE ASSESSES. HE ALSO STATED THAT NO RAW WHEAT WAS SENT TO M/S. TEEKAY RICE MILL. HE STATED THAT ONLY TWO WHEAL PURCHASES MADE FROM FOOD CORPORATION OF INDIA ON 27/8/20/2 AND 9/10/2012 WERE ACTUALLY DONE BY IT. WHEAT PURCHASES SHOWN TO HAVE MADE FROM PRFM WAS ONLY A CCOM M ODATIVE IN NATURE. THE BILLING WAS MADE AT 1% MARKUP ON THE LANDING CO ST TO PRFM . HE ALSO IDENTIFIED MATERIALS IN CHN/11/J3 - 14/EAM/A - 38 AS THE SALES COLLECTION MADE ON THE MILLED FLOUR BY PRFM FROM THESE SALES AND THE SAID SU MS WERE NOT ENTERED IN THE TALLY ACCOUNTS AND THE AMOUNTS WERE GIVEN TO SHRI. ABDUL KAREERN DIRECT. 4.6 FROM THE ABOVE DEPOSITIONS IT WAS EVIDENT THAT THE ASSESSES WAS RESORTING TO METHODS TO UNDERSTATE ITS TRUE S ALES R EVENUE AND INCOMES. THERE CANNOT BE ANY SITUATION WHERE THREE OF THE ACTIVE PARTICIPANTS OF A TRADE WILL DEPOSE ON THE MODUS OPERAND I USED BY THEM IN THE SAME MANNER. HENCE , THERE W E RE NO REASONS TO DISBELIEVE THEIR DEPOSITIONS. THE ASSESSEE TR I ED TO SAVE ON ITS ACTUAL GP ON THE WHEAL QUANTITY ROUTED THROUGH M/S. TEEKAY RICE MILL AND ALSO ON THE VAT TAX COMPONENTS THEREIN. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 7 4. 7 SALES OF WHEAT TO M/S TEEKAY RICE MI LL THE ASSESSES WAS FOUND TO HAVE MADE THE FOLLOWING RAW WHEAT SALES TO M/S TEEKAY RICE MILL S : FY RAW WHEAT SALES TO M/S. TEEKAY RICE MIL L IN METRIC TONNES 2007 - 08 - 2008 - 09 162,000 2009 - 10 7877.000 2010 - 11 5431.400 2011 - 12 2995.800 2012 - 13 3088.000 2013 - 14 2178.100 AS PER THE FINDING OF THE S EARCH AND RE LA TED MATERIALS, THE ABOVE QUANTUM OF WHEAT WAS MILLED IN THE PREMISES OF PRFM ITSELF AND WAS SOLD TO THE MARKET IN ITS NORMAL BUSINESS CHANNEL. CALCULATION OF UNACCOUNTED INCOMES OF M/S PRINCE ROLLER FLOUR MILLS P LTD. 5 . THE ABOVE SAID QUANTUM OF WHEAL WAS THEREFORE MILLED AND SOLD TO THE MARKETS AT THE NORMAL SELLING PRICE OF THE ASSESSEE. IT BECOMES IMPERATIVE TO CALCULATE THE QUANTUM OF DIFFERENT WHEAT PRODUCTS THAT COULD BE PRODUCED FROM THE ABOVE QUANTITY OF WHEAT. IT WAS SEEN THAT THE RATE OF YIELD OF THE WHEAT PRODUCE W OULD CHANGE ACCORDING TO THE QUALITY OF WHEAT MILLED. THEREFORE, THE ASSESSEE'S AVERAGE RATE OF YIELD FOR THE YEAR WAS USED T O COMPUTE THE QUANTITY O F EACH PRODUCT THAT COULD BE PRODUCED FROM THE ABOVE QUANTUM OF 162.000 MT OF WHEAT STATED TO BE SOLD TO M/S TEEKAY RICE MILL. THESE OBSERVATIONS OF THE ASSESSING OFFICER WERE FOR A L L THE ASSESSMENT YEARS . I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 8 5. 1 DETAILS OF AS PER THE A SSESSMENT O RDER FOR THE A SSESSMENT Y EARS SEPARATELY ARE GIVEN BELOW : AY 2009 - 10 TABLE 1 SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % SALE VALUE SALE QUANTITY AVERAGE SELLING RATE PER TONNE 1. MAIDA 6081.548 61.72% 101483622.70 6057.883 16752.32 2. SOOJI 828.493 8.41% 14798857.49 846.653 17479.25 3. ATTA 731.648 7.43% 12763754.75 751.041 16994.75 4. BRAN 2042.200 20.73 18520453.00 2085.290 8881.48 98.29% WHEAT MILLED 9853.130 TH E P RODUCTION Y IELD WAS DERIVED IN COLUMN 4 AND THE A VERAGE S ELLING RATE ON R EAL T IME BASI S WAS WORKED OUT IN COLUMN 7. ON THE ABOVE BASIS, THE SALE VALUE OF W HEAT PRODUCTS THAT COULD BE PRODUCED FROM THE CIRCUMVENTED SALE OF 162 MT THE A Y WAS WORKED OUT BELOW : SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % AVERAGE SELLING RATE PER TONNE SALE VALUE 1. MAIDA 99,990 61.72% 16752.32 16752.32 2. SOOJI 13,622 8.41% 17479.25 238096.19 3. ATTA 12.029 7.43% 16994.75 204436.19 4. BRAN 33,577 20.73% 8881.48 2415802.09 98.29% WHEAT SOLD TO P.K. KUNJUMOIDEEN 162.000 SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN 2164672.28 PROFIT 25112981 THE ASSESSEE'S UNACCOUNTED INCOME FROM THE ABOVE TRADE PRACTICE WAS WORKED OUT BELOW: SALE V ALUE OF MILLED WHEAT FLOURS (AS IN TABLE 2) RS.21,64,672 LESS: SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN RS.24,15,802 INCOME UNDISCLOSED IN THE HANDS OF THE ASSESSEE RS. 2,51,130 [1] I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 9 SAVINGS ON VAT ON THE SAID RS.[4 - 1] = 3% [24,15,802 X 3%] RS.64,940/ - [2] THE ASSESSEE WHEN PRICING THE PRODUCT IN THE OPEN MARKET WOULD NOT DIFFERENTIATE BETWEEN ITS VAT LEVIED AND NON LEVIED ITEMS AND COULD HAVE PRICED IT AT THE SAME RATE. VAT RATES WERE 4% FOR F.Y. 2008 - 09. T HUS THERE WAS AN U NFAIR ENRICHMENT OF RS. 3,16,070/ - ( 1 ) + (2) IN THE HANDS OF THE ASSESSES OUT OF THIS ACTIVITY. ADDITION: RS.3,16,070/ - PENAL T Y PROCEEDINGS U/S. 271( 1 )(C) OF THE INCOME T A X ACT WERE INITIATED SEPARATELY. ACCORDINGLY, THE ASSESSMENT WAS COMPLETED AS UNDER : INCOME FROM BUSINESS [ AS RETURNED] RS.30,93,270/ - ADDITION ( AS PER PARA 5.3] RS. 3,16,070/ - ADDITION AS PER ORDER U/S. 143 ( 3 ) DT. 13.7.20 11 RS. 1,50,000/ - TOTAL INCOME ASSESSED RS.35,59,340/ - DEEMED INCOME U /S. 115JB RS.28 , 73 ,031/ - AY 2010 - 11 TABLE 1 SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % SALE VALUE SALE QUANTITY AVERAGE SELLING RATE PER TONNE 1. MAIDA 7558.224 60.38 138827 637.94 7614.544 18231.90 2. SOOJI 1068.949 8.54 1991985411 1060.039 18791.62 3. ATTA 920.527 7.35 15766326.52 90 1 .821 17482.77 4. BRAN 2 807.850 2 2 . 4 3 27385048.00 2758.495 9927.53 98. 70 % WHEAT MILLED 12517.695 5.2 TH E P RODUCTION Y IELD WAS DERIVED IN COLUMN 4 AND THE A VERAGE S ELLING RATE ON R EAL T IME BASI S WAS WORKED OUT IN COLUMN 7. ON THE ABOVE BASIS, THE SALE VALUE OF I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 10 W HEAT PRODUCTS THAT COULD BE PRODUCED FROM THE CIRCUMVENTED SALE OF 1 2517.695 MT FOR THE A Y WAS WORKED OUT BELOW : TABLE - 2 SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % AVERAGE SELLING RATE PER TONE SALE VALUE 1. MAIDA 4756.158 60.38 18231.90 86713810.82 2. SOOJI 672.657 8. 5 4 1 8791.62 12640311.45 3. ATTA 12.029 7. 35 17482.77 1 0127055.35 4. BRAN 33,577 2 2.43 3 9927.58 17540892.57 127022070.19 WHEAT SOLD TO P.K. K UNJUMOIDEEN 7877.00 SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN 10632611594 PROFIT 2069595 THE ASSESSEE'S UNACCOUNTED INCOME FROM THE ABOVE TRADE PRACTICE WAS WORKED OUT BELOW: SALE V ALUE OF MILLED WHEAT FLOURS (AS IN TABLE 2) RS. 1 2 ,70 , 22,070 LESS: SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN RS. 10,63,26,115 INCOME UNDISCLOSED IN THE HANDS OF THE ASSESSEE RS. 2, 06,95,955 [1] SAVINGS ON VAT ON THE SAID RS. 12,70,22,070 [4 - 1] = 3% [ 12,70,22,070 X 3%] RS. 38,10,662/ - [2] THE ASSESSEE WHEN PRICING THE PRODUCT IN THE OPEN MARKET WOULD NOT DIFFERENTIATE BETWEEN ITS VAT LEVIED AND NON LEVIED ITEMS AND COULD HAVE PRICED IT AT THE SAME RATE. VAT RATES WERE 4% FOR F.Y. 2009 - 10 . THUS , THERE WAS AN U NFAIR ENRICHMENT OF RS. 2,45,06,617/ - ( 1 ) + (2) IN THE HANDS OF THE ASSESSE S OUT OF THIS ACTIVITY. ADDITION: RS. 2,45,06,617/ - PENAL T Y PROCEEDINGS U/S. 271(1)(C) OF THE INCOME T A X ACT WERE INITIATED SEPARATELY. ACCORDINGLY, THE ASSESSMENT WAS COMPLETED AS UNDER : INCOME FROM BUSINESS [ AS RETURNED] RS. 26,26,850/ - I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 11 ADDITION ( AS PER PARA 5.3] RS. 2,45,06,617/ - T OTAL INCOME ASSESSED RS. 2,71,3 3,467/ - DEEMED INCOME U /S. 115JB RS. 30,70,160 / - AY 201 1 - 12 TABLE 1 SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % SALE VALUE SALE QUANTITY AVERAGE SELLING RATE PER TONE 1. MAIDA 10330.061 58.70 202034147.71 10378.160 19467.24 2. SOOJI 1518.089 8.63 30303306.97 1530.759 19796.26 3. ATTA 1130.821 6.43 21031695.83 1142.502 18408.45 4. BRAN 4379.56 2 4.88 48661543.20 4441.160 10956.94 98. 64 % WHEAT MILLED 5431.400 TH E P RODUCTION Y IELD WAS DERIVED IN COLUMN 4 AND THE A VERAGE S ELLING RATE ON R EAL T IME BASI S WAS WORKED OUT IN COLUMN 7. ON THE ABOVE BASIS, THE SALE VALUE OF W HEAT PRODUCTS THAT COULD BE PRODUCED FROM THE CIRCUMVENTED SALE OF 5431.400 MT FOR THE A Y WAS WORKED OUT BELOW : TABLE - 2 5.3 THE ASSESSEE'S UNACCOUNTED INCOME FROM THE ABOVE TRADE PRACTICE WAS WORKED OUT BELOW: SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % AVERAGE SELLING RATE PER TONNE SALE VALUE 1. MAIDA 3187.989 58.70 19467.24 6261351.64 2. SOOJI 468.502 8.63 19796.26 9274582.38 3. ATTA 348.986 6.43 1848.45 6424289.66 4. BRAN 1351.588 24.88 10956.94 14809277.27 92569500.95 WHEAT SOLD TO P.K. KUNJUMOIDEEN 5431.400 SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN 83439379.67 PROFIT 914121 I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 12 SALE : V ALUE OF MILLED WHEAT FLOURS (AS IN TABLE 2) RS. 9,25,69,501 LESS : SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN RS. 8,3 4, 39,3809 INCOME UNDISCLOSED IN THE HANDS OF THE ASSESSEE RS. 91,40,121 [1] SAVINGS ON VAT ON THE SAID RS. 9,25,69,501 [4 - 1] = 3% [ 9,25,69,501X3%] RS. 27,77,084/ - [2] THE ASSESSEE WHEN PRICING THE PRODUCT IN THE OPEN MARKET WOULD NOT DIFFERENTIATE BETWEEN ITS VAT LEVIED AND NON LEVIED ITEMS AND COULD HAVE PRICED IT AT THE SAME RATE. VAT RATES WERE 4% FOR F.Y. 20 1 0 - 1 1 . THUS , THERE WAS AN U NFAIR ENRICHMENT OF RS. 1,19,07,199/ - ( 1 ) + (2) IN THE HANDS OF THE ASSESSES OUT OF THIS ACTIVITY. ADDITION: RS. 1,19,07,199/ - PENAL T Y PROCEEDINGS U/S. 271(1)(C) OF THE INCOME T A X ACT WERE INITIATED SEPARATELY. ACCORDINGLY, THE ASSESSMENT WAS COMPLETED AS UNDER : INCOME FROM BUSINESS [ AS RETURNED] RS. 3304990/ - ADDITION ( AS PER PARA 5.3] RS.11907199/ - TOTAL RS.15212189/ - LESS: CHAPTER VIA DEDUCTION (80G) RS. 1500/ - TOTAL INCOME ASSESSED RS. 1 5 210689/ - A.Y. 2012 - 13 SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % SALE VALUE SALE QUANTITY AVERAGE SELLING RATE PER TONE 1. MAIDA 14528.698 60.77 272247800.53 14423.143 18875.76 2. SOOJI 1820.881 7.62 35064443.36 1817.269 19295.13 3. ATTA 12 6 1.643 5.28 23238391.53 1269.196 18300.89 4. BRAN 5834.635 24.4 67499940.00 4441.160 10956.94 98. 07% WHEAT MILLED 23908.930 I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 13 5.4 TH E P RODUCTION Y IELD WAS DERIVED IN COLUMN 4 AND THE A VERAGE S ELLING RATE ON R EAL T IME BASI S WAS WORKED OUT IN COLUMN 7. ON THE ABOVE BASIS, THE SALE VALUE OF W HEAT PRODUCTS THAT COULD BE PRODUCED FROM THE CIRCUMVENTED SALE OF 2995.800 MT FOR THE A Y WAS WORKED OUT BELOW : TABLE - 2 THE ASSESSEE'S UNACCOUNTED INCOME FROM THE ABOVE TRADE PRACTICE WAS WORKED OUT BELOW: SALE :V ALUE OF MILLED WH EAT FLOURS (AS IN TABLE 2) RS.5,01,49,933 LESS: SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN RS. 3,73,73,850 INCOME UNDISCLOSED IN THE HANDS OF THE ASSESSEE RS. 1,27,76,083 [1] SAVINGS ON VAT ON THE SAID RS. 5, 01 ,49,933/ - [4 - 1] = 3% [ 5,01,49,933 X3%] RS. 15,04,498/ - [2] THE AS SESSEE WHEN PRICING THE PRODUCT IN THE OPEN MARKET WOULD NOT DIFFERENTIATE BETWEEN ITS VAT LEVIED AND NON LEVIED ITEMS AND COULD HAVE PRICED IT AT THE SAME RATE. VAT RATES WERE 4% FOR F.Y. 2011 - 12 . THUS, THERE WAS AN U NFAIR ENRICHMENT OF RS. 1, 42,80,581 / - ( 1 ) + (2) IN THE HANDS OF THE ASSESSES OUT OF THIS ACTIVITY. ADDITION: RS. 1,42,80,581/ - PENAL T Y PROCEEDINGS U/S. 271(1)(C) OF THE INCOME TAX ACT WERE INITIATED SEPARATELY. SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % AVERAGE SELLING RATE PER TONNE SALE VALUE 1. MAIDA 1820.523 60.77% 18875.76 34363755.22 2. SOOJI 228.166 7,62% 19295,13 4402492.632 3. ATTA 158.091 5.28% 18300.89 2893206.001 4. BRAN 731.111 24. 40 11613.12 8490479.776 50149933.63 WHEAT SOLD TO P.K. KUNJUMOIDEEN 2995.800 SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN 37373850.04 PROFIT 12776083.59 I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 14 ACCOR DINGLY, THE ASSESSMENT WAS COMPLETED AS UNDER : INCOME FROM BUSINESS [ AS RETURNED] RS. 4919560/ - ADDITION ( AS PER PARA 5.3] RS.1 4280581/ - TOTAL RS.1 92900141/ - LESS: CHAPTER VIA DEDUCTION (80G) RS. 2500 / - TOTAL INCOME ASSESSED RS. 1 919 7 641/ - DEEMED INCOME U/S. 115 JB RS.44,69,606/ - AY 201 3 - 14 TABLE 1 SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % SALE VALUE SALE QUANTITY AVERAGE SELLING RATE PER TONE 1. MAIDA 1 2165.779 61.74% 2 65845916..6 1 2 3 22.247 21574.47 2. SOOJI 15 06.042 7.64 % 33669626.72 15 14.622 19796.26 3. ATTA 1 206.178 6. 12 % 23 768699.99 11 98.925 19825.01 4. BRAN 429.225 22.99 % 64357599 4 552.91 14135.42 98. 4 9 % WHEAT MILLED 19704.550 5.5 THE P RODUCTION Y IELD WAS DERIVED IN COLUMN 4 AND THE A VERAGE S ELLING RATE ON R EAL T IME BASI S WAS WORKED OUT IN COLUMN 7. ON THE ABOVE BASIS, THE SALE VALUE OF W HEAT PRODUCTS THAT COULD BE PRODUCED FROM THE CIRCUMVENTED SALE OF 3088.000 MT FOR THE A Y WAS WORKED OUT BELOW : TABLE - 2 THE ASSESSEE'S UNACCOUNTED INCOME FROM THE ABOVE TRADE PRACTICE WAS WORKED OUT BELOW: SL. NO. PRODUCTS QTY. PRODUCED IN PR ODUCTION YIELD % AVERAGE SELLING RATE PER TONNE SALE VALUE 1. MAIDA 1906.561 61.74% 21574.47 .1 2. SOOJI 236.019 7.64% 22229.72 5246636.285 3. ATTA 189.026 6. 12% 19825.01 3747442.34 4. BRAN 709.798 2 2 . 99% 1 4135.42 10033292.85 60160414.57 WHEAT SOLD TO P.K. KUNJUMOIDEEN 3088.000 SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN 42118437.55 PROFIT 1 8041977.0 2 I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 15 SALE :V ALUE OF MILLED WHEAT FLOURS (AS IN TABLE 2) RS. 6,01,60,414 LESS: SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN RS. 4,21,18,437 INCOME UNDISCLOSED IN THE HANDS OF THE ASSESSEE RS. 1,80,41,977 [1] SAVINGS ON VAT ON THE SAID RS.9,25,69,501 [4 - 1 ] = 3% [9,25,69,501X3%] RS.27,77,084/ - [2] THE ASSESSEE WHEN PRICING THE PRODUCT IN THE OPEN MARKET WOULD NOT DIFFERENTIATE BETWEEN ITS VAT LEVIED AND NON LEVIED ITEMS AND COULD HAVE PRICED IT AT THE SAME RATE. VAT RATES WERE 4% FOR F.Y. 20 11 - 12 . THUS, THERE WAS AN U NFAIR ENRICHMENT OF RS. 1, 80,41 ,977 / - ( 1 ) + (2) IN THE HANDS OF THE ASSESSES OUT OF THIS ACTIVITY. ADDITION: RS. 1, 80,41,977/ - PENAL T Y PROCEEDINGS U/S. 271(1)(C) OF THE INCOME TAX ACT WERE INITIATED SEPARATELY. ACCORDINGLY, THE ASSESSMENT WAS COMPLETED AS UNDER : INCOME FROM BUSINESS [ AS RETURNED] RS. 4812959/ - ADDITION ( AS PER PARA 5.3] RS.1 8041977/ - TOTAL RS. 22854956/ - LESS: CHAPTER VIA DEDUCTION (80G) RS. 25 00/ - TOTAL INCOME ASSESSED RS. 22852436/ - AY 201 4 - 15 TABLE 1 SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % SALE VALUE SALE QUANTITY AVERAGE SELLING RATE PER TONE 1. MAIDA 13471.78 60.77 343938538 13552.485 25378.26 2. SOOJI 1708.666 7.71 44029446.31 1711.706 25722.55 3. ATTA 1572.911 7.10 34542429.02 1561.91 22115.51 4. BRAN 5069.765 22.87 79387964 5079.05 15630.47 98. 4 4 % WHEAT MILLED 22169.120 I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 16 5. 6 TH E P RODUCTION Y IELD WAS DERIVED IN COLUMN 4 AND THE A VERAGE S ELLING RATE ON R EAL T IME BASI S WAS WORKED OUT IN COLUMN 7. ON THE ABOVE BASIS, THE SALE VALUE OF W HEAT PRODUCTS THAT COULD BE PRODUCED FROM THE CIRCUMVENTED SALE OF 2178.200 MT FOR THE A Y WAS WORKED OUT BELOW : TABLE - 2 THE ASSESSEE'S UNACCOUNTED INCOME FROM THE ABOVE TRADE PRACTICE WAS WORKED OUT BELOW: SALE :V ALUE OF MILLED WHEAT FLOURS (AS IN TABLE 2) RS. 4,91,14,120 LESS: SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN RS. 3,82,76,401 INCOME UNDISCLOSED IN THE HANDS OF THE ASSESSEE RS. 1,08,37,719 THE ASSESSEE WHEN PRICING THE PRODUCT IN THE OPEN MARKET WOULD NOT DIFFERENTIATE BETWEEN ITS VAT LEVIED AND NON LEVIED ITEMS AND COULD HAVE PRICED IT AT THE SAME RATE. VAT RATES WERE 4% FOR F.Y. 20 13 - 14 . THUS, THERE WAS AN U NFAIR ENRICHMENT OF RS. 1, 08,37,719/ - IN THE HANDS OF THE ASSESSES OUT OF THIS ACTIVITY. ADDITION: RS. 1, 08,37,719 / - THERE IS AN AMOUNT OF RS.5,038/ - BOOKED AS COMPOUNDING FEE IN THE P&L A/C OF THE ASSESSEE. THIS EXPENSE WILL BE DISALLOWED. ADDITION:5,038/ - SL. NO. PRODUCTS QTY. PRODUCED IN PRODUCTION YIELD % AVERAGE SELLING RATE PER TONNE SALE VALUE 1. MAIDA 1323.653 60.77 % 25378.26 33592009.98 2. SOOJI 167.883 7.71 % 25772.55 4318378.862 3. ATTA 154.544 7.10 % 22115.51 3417819.377 4. BRAN 498.124 22.87% 15630.47 7785912.238 49114120.46 WHEAT SOLD TO P.K. KUNJUMOIDEEN 2178.2 00 SALE VALUE OF WHEAT TO P.K. KUNJUMOIDEEN 38276401.16 PROFIT 10837719.3 I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 17 ACCORDINGLY, THE ASSESSMENT WAS COMPLETED AS UNDER : INCOME FROM BUSINESS [ AS RETURNED] RS. 47,72,756/ - ADDITION ( AS PER PARA 5.3 RS.1 ,08,37,719 / - ADDITION (AS PER PARA 5.4) RS. 5,038/ - TOTAL RS. 1,56,15,513/ - LESS: CHAPTER VI A DEDUCTION (80G) RS. 2 500/ - TOTAL INCOME ASSESSED RS. 1 , 5 6,13,013/ - 6 . ON APPEAL, THE CIT(A) OBSERVED THAT IMMEDIATELY AFTER THE SEARCH, ALL THE EMPLOYEES, WHOSE STATEMENTS WERE RECORDED DURING THE COURSE OF SEARCH DECIDED TO FILE AFFIDAVITS RETRACTING FROM STATEMENTS GIVEN DURING THE COURSE OF SEARCH. THE CIT(A) OBSERVED THAT THEY HAV E ALL STATED THAT STATEMENTS WERE TAKEN FROM THEM UNDER PRESSURE AND DURESS. HOWEVER, THE CIT(A) NOTICED THAT IN THEIR AFFIDAVITS, NONE OF THEM HAVE MENTIONED AS TO WHAT PRESSURE WAS EXERTED ON THEM AND WHAT WAS THE PORTION OF STATEMENT, WHICH WAS UNTRUE. ON THE OTHER HAND, THE CIT(A) OBSERVED THAT IN THE ASSESSMENT ORDER, THE AO HA D NOWHERE MENTIONED REGARDING THESE RETRACTIONS . ACCORDING TO THE CIT(A), SI NCE THERE WA S NOTHING SPECIFIC IN THE RETRACTIONS, THERE WA S NO NEED TO CONSIDER THE RETRACTIONS AND C LEARLY, THE RETRACTIONS WERE THE AFTER THOUGHT HAVING NO BEARING ON THE FACTS OF THIS CASE . 6.1 ACCORDING TO THE CIT(A), ON T HE BASIS OF THE VARIOUS STATEMENTS RECORDED, THE AO REACHED THE CONCLUSION THAT THE ASSESSEE DID NOT SELL THE RAW - MATERIAL TO M/S . TEEKAY RICE MILL AND I T WAS USED ONLY FOR THE NAME SAKE. IN FACT, FINISHED PRODUCTS LIKE MAIDA, SOOJI ETC. WAS SOLD AND THE RESULTANT PROFIT WAS POCKETED BY THE ASSESSEE WITHOUT ROUTING THROUGH THE BOOKS OF THE ASSESSEE WITH A PURPOSE TO EVADE TAXES. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 18 REG ARDING THE FIRST LIMB, ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE CIT(A) WAS CONVINCED THAT THE TRANSACTION WHICH HAD BEEN ENTERED INTO BETWEEN M/S. TEEKAY RICE M ILL AND THE ASSESSEE WA S ONLY A FICTITIOUS TRANSACTION, CARRIED ON ONLY ON PAPER, AND T HE GOODS WERE DIRECTLY SOLD BY THE ASSESSEE , THROUGH ITS OWN CHANNELS, IN THE MARKET AND THE RESULTANT PROFIT WAS POCKETED BY THE ASSESSEE . THUS, HE DISMISSED THE G ROUNDS OF APPEAL, RELATING TO THIS LIMB . 6.2 IN THE SECOND LIMB, THE CIT(A) OBSERVED THA T THE AO HA D CONCLUDED THAT FINISHED PRODUCTS WERE SOLD WHEREIN THE PROFIT MARGINS ARE MUCH HIGHER, IN PLACE OF RAW MATERIAL AS CLAIMED BY THE ASSESSEE. THE AO REACHED THIS CONCLUSION ON THE BASIS OF STATEMENTS RECORDED DURING THE COURSE OF SEARCH, WHEREAS THE ASSESSEE CONTENDED THAT ONLY THE RAW MATERIAL, WITH LOW PROFIT MARGIN WAS SOLD, THAT THE STATEMENTS WERE GIVEN UNDER PRESSURE AND DURESS WHICH WERE SUBSEQUENTLY RETRACTED AND NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH EVIDENCING SALE OF FINISH ED PRODUCTS LIKE MAIDA AND SOOJI. ACCORDING TO THE CIT(A), THE ASSESSING OFFICERS WORKING OF P ROFIT FROM SALE OF FINISHED PRODUCTS WAS AN ESTIMATION WHICH WAS NOT BASED ON ANY COGENT MATERIAL, BUT ON ASSUMPTION, PRESUMPTION AND SURMISES. IT WAS OBSERVED THAT T HE AMOUNT OF WHEAT CLAIMED TO HAVE BEEN SOLD TO M/S. TEEKAY RICE MILL WAS AVAILABLE AND THE AO HA D APPLIED THE MANUFACTURING RATIO OF THE ASSESSEE TO WORK OUT PRODUCTION FINISHED PRODUCT AND HA D THEN APPLIED THE MARKET RATE TO REACH THE PROFITS ON TH E PRESUMED SALE OF THE SAME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, CIT(A) WAS OF THE OPINION THAT THE CLAIM OF THE ASSESSEE WAS NOT CORRECT AND ON THE OTHER SIDE, THE AO'S ESTIMATION OF PROFIT, WAS DEFINITELY I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 19 ON THE HIGHER SIDE. ACCORDING TO THE CI T(A), SI NCE, SUCH MATERIAL WAS NOT AVAILABLE, ON THE BASIS OF WHICH EXACT CALCULATION OF SUPPRESSED PROFIT COULD BE DONE, THE ONLY OPTION LEFT WAS TO MAKE A REASONABLE ESTIMATE OF PROFITS. THUS, TAKING AN OVERALL VIEW, IN HIS OPINION, IF THE PROFIT WAS RES TRICTED TO 50% OF THE PROFIT ESTIMATED BY THE AO, IT SHALL MEET THE ENDS OF JUSTICE. THUS, TH E RESULTANT SUPPRESSED PROFIT SHALL BE AS FOLLOWS: A.Y. PROFIT WORKED OUT BY THE A.O. 50% OF THE SAME 2009 - 10 1,51,130/ - 1,25,565/ - 2019 - 11 2,06,95,955/ - 1,03,47,978/ - 2011 - 12 91,40,121/ - 45,70,000/ - 2012 - 13 1,27,76,083/ - 63,88,041/ - 2013 - 14 1,80,41,977/ - 90,20,989/ - 2014 - 15 1,08,37,719/ - 54,18,860/ - THUS, THE CIT(A) RESTRICTED THE ADDITIONS TO 50% OF THE ADDITION S MADE BY THE AO ON THIS ACCOUNT AND BALANCE 50% WA S DELETED. 7. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR SUBMITTED THAT IN RESPECT TO THE A.Y. 'S 2009 - 10 TO 2014 - 15 THE ASSESSEE HAD SOLD WHEAT TO SHRI. P.K. KUNJUMOIDEEN , M/S. TEEKAY RICE MILL, P ALAKKAD. THE ASSESSING OFFICER CONSIDERED WHAT WAS SOLD BY THE ASSESSEE COMPANY WERE WHEAT PRODUCTS SUCH AS ATTA, MAIDA, SOOJI ETC, INSTEAD OF WHEAT. AFTER PRESUMING THIS POSITION THE ASSESSING OFFICER ESTIMATED THE PROFIT OF WHEAT PRODUCTS FOR THE A. Y. AS UNDER: A.Y. ALLEGED PROFIT ALLEGED SAVINGS ON VAT TOTAL ADDITION 2009 - 10 251130.00 64940.00 316070.00 2010 - 11 20695955.00 3810662.00 24506617.00 2011 - 12 91 40121.00 2777084.00 11917205.00 I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 20 2012 - 13 12776083.00 1504498.00 14280581.00 2013 - 14 18041977.00 0.00 18041977.00 2014 - 15 10837719.00 0.00 10837719.00 7.1 IT WAS SUBMITTED THAT THE ASSESSEE HAD ACCOUNTED THE SALE OF WHEAT TO P.K.KUNJUMOIDEEN, M/S. TEEKAY RICE MILL AND ALREADY INCLUDED PROFIT @ 1% ON SALES. AFTER REDUCING THIS PROFIT THE ASSESSING OFFICER HAS MADE THE FOLLOWING ADDITIONS IN RESPECT TO THE FOLLOWING ASSESSMENT YEARS . AY SALE VALUE OF WHEAT TO P.K.KUNJUMOIDEEN EXCLUDING VAT (AMOUNT IN RS.) MARK UP PROFIT @1% INCLUDED IN COL.2 (AMOUNT IN RS.) 2009 - 10 2164672.00 21432.00 2010 - 11 106326114.00 1052734.00 2011 - 12 83439380.00 826132.00 2012 - 13 37373850.00 370038.00 2013 - 14 42118437.00 417014.00 2014 - 15 38276401.00 378974.00 7.2 REGARDING SHRI P.K. KUNJUMOIDEEN, IT WAS SUBMITTED AS FOLLOWS: S H R I P.K. KUNJUMOIDEEN STARTED HIS BUSINESS IN PALAKKAD BY TAKING M/S T EEKAY RICE MILL AT THATHAMANGALAM IN 1986. HE WAS GIVEN KCST REGISTRATION IN THE SAME YEAR. M/S. PRINCE ROLLER FLOUR MILLS (P) LTD STARTED IN THE YEAR 1990 ONL Y I.E., 4 YEARS AFTER HE STARTED HIS BUSINESS. S H RI P.K. KUNJU MOIDEEN R A N HIS BUSINESS INDEPENDENTLY AS PROPRIETOR. HIS TRADING ACTIVITIES INCLUDE D PURCHASE AND SALE OF WHEAT, STEEL SCRAP, PADDY, GUNNY BAGS ETC . HE WAS AN A S SESSEE UNDER THE ROLLS OF THE INCOME TAX DEPARTMENT FROM VERY EARLY PERIOD WHICH CAN BE CROSS CHECKED. HE PURCHASED WHEAT NOT ONLY FROM M/ S . PRINCE ROLLER FLOUR MILLS (P) L T D. BUT FROM VARIOUS PARTIES IN NORTH INDIAN STALES LIKE UTT AR PRADESH, MADHYA PRADESH, RAJASTAN ETC., THROUGH RAI LWAY WAGONS. HE PURCHASED WHEAT FROM FOOD CORPORATION OF INDIA AND KERALA I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 21 STATE CIVIL SUPPLIES CORPORATION LTD . ALSO THROUGH OPEN SALES WHEAT TENDER. HE WAS SUPPLYING WHEAT PURCHASED FROM OPEN MARKET TO MANY ESTABLISHED COMPANIES IN AND AROUND MALA B AR EVEN DURING THE EIGHTIES. HENCE , IT WAS NOT CORRECT TO STATE THA T HE WAS NOT CARRYING OUT ANY TRADING OPERATIONS. THE LD. AR DREW OUR ATTENTION TO THE SUMMARY OF MAJOR PURCHASES EFFECTED BY HIM OVER THE YEARS TO ESTABLISH THAT THE TRANSACTIONS WERE NOT LIM ITE D TO ONE OR TWO DEALINGS, BUT THERE WERE CONTINUOUS TRANSACTIONS, INVOLVING SUBSTANTIAL QUANTITIES. IT WAS SUBMITTED THAT HE WAS NOT ENTIRELY ASSOCIATING WITH THE ASSESSEE , BUT WAS ALSO DEALING WITH OTHER BUSINESS ENTITIES TOO. ALMOST THE ENTIRE TRANSACTIONS WERE BEING REGULARLY ROUTED THROUGH HIS B ANK ACCOUNT, WHICH ALSO ESTABLISHES THE GENUINENESS OF SUCH DEALINGS. THE STATEMENT GIVEN BY HIM TO THE CONTRARY WAS ONLY DUE TO THE FACT THAT HE WAS UNDER TREMENDOUS PRESSURE TO MAKE SUCH A STATEMENT. IT WAS SUBMI TTED THAT IN HIS STATEMENT HE MENTION ED THAT EVEN THE LICENCE AND KVAT REGISTRATION OF M/S. PRINCE ROLLER FLOUR MILLS (P) LTD. WAS IN HIS NAME. IT WAS ALSO ADMITTED FACT THAT THE SEARCH CONDUCTED AT HIS PREMISES, OR THE SURVEY AT HIS BUSINESS PREMISES DID NOT YIELD ANY DOCUMENTARY EVIDENCE TO SHOW THAT WHAT WAS SOLD TO HIM BY THE ASSESSEE WAS NOT WHEAT BUT WHEAT PRODUCTS. A SCRUTINY OF THE INCOME TAX/VAT RETURN FILED BY HIM WOULD REVEAL THAT HE HA D BEEN REGULARLY TRADING IN WHE AT AND STEEL SCRAP. THE FACT THAT HE HAS SUPPLIED SUBSTANTIAL QUANTITIES OF WHEAT TO WELL ESTABLISH ED CONCERNS LIKE M/S. YAMUNA ROLLER FLOUR MILLS AND ALSO TO THE ASSESSEE WAS EVIDENT FROM THE BOOKS OF ACCOUNTS IMPOUNDED. HE SUBMITTED THAT COPIES OF CONFIR MATION OF SUPPLY OF WHEAT TO M / S YAMUNA ROLLER FLOUR MILLS WAS FILED BEFORE CIT(A). IT WAS SUBMITTED I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 22 THAT TO DISCREDIT THESE CONCRETE EVIDENCES, WHICH ARE PART OF THE RECORDS, EVIDENCING THE NATURE OF TRANSACTIONS, JUST ON THE STRENGTH OF A STATEMENT REC ORDED IS NOT WHAT IN EXPECTED OF WHILE COMPLETING THE ASSESSMENT. THE ASSESSING AUTHORITY OUGHT TO HAVE COMPARED THESE EVIDENCES WITH THE FINDINGS EMANATING FROM THE SWORN STATEMENTS. 7.3 I N THE ACTION UNDER SECTION 133A, IN THE CASE OF SHRI. P.K. KUNJUMO I DEEN , IT WAS SUBMITTED THAT NO MATERIAL EVIDENCES TO THE CONTRARY WERE RECOVERED FROM HIS PREMISES OR FROM THE PREMISES OF PRINCE ROLLER FLOUR MILLS (P) L T D . THE ENTIRE SALE OF WHEAT EFFECTED BY THE ASSESSEE TO P.K. KUNJUMOIDEEN WER E DULY SUPPORTED BY CREDIT INVOICES ISSUED BY THE ASSESSEE AND ENTRIES IN THE STOCK REGISTER, RECEIPT OF SALE PROCEEDS F ROM HIM THROUGH PROPER BANKING CHANNELS, VARIOUS STATUTORY RETURNS, MONTHLY AS WELL AS ANNUALLY FILED BY US AND HIM BEFORE THE VAT AUTHORITIES, REMITTAN CE OF TAX TO THE SLATE EXCHEQUER ON SUCH SALES ETC. IT WAS SUBMITTED THAT THE ASSESSMENT PROCEEDING S UNDER THE VA T R ULES ALSO STANDS COMPLETED WITHOUT ANY ADVERSE REMARKS. IT WAS SUBMITTED THAT THE ASSESSEE WAS SELLING WHEAT WITHOUT MANUFACTURING OR PROCE SSING TO OTHERS (QUANTITIES IN METRIC TONNE) FOR VARIOUS YEARS AS FOLLOWS: SL. NO. NAME OF PARTY A.Y. 201 0 - 11 A.Y. 201 1 - 1 2 A.Y.2012 - 13 A.Y. 2013 - 14 A.Y. 2014 - 15 1. B INDU TRADERS 125.60 86.310 2. CENTRAL STORES 62.090 3. COIMBATORE ROLLER FLOUR MILLS 239.230 4. ESSEM TRADERS 54.100 5. HARIKRISHNA AGENCIES 31.480 40,700 148.960 I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 23 6. MALIAKKAL ROLLER FLOUR MILLS 159.690 7. PERIYAR AGRO PRODUCTS 70.760 8. PREMIER AGRO PRODUCTS 10.080 506.280 9. RETAIL SALES 4760.600 625.600 83.500 10. S.R. TRADERS 93.410 41.600 11. SREERAMA ROLLER FLOUR MILLS 263.90 12. SRINIVASA ROLLER FLOUR MILLS 70.990 13. STAR TRADING CO. 308.475 14. V.P. ROLLER FLOUR MILLS 332.850 15. VELIYATH AGRO 191.030 TOTAL 4770.680 1884.285 406.00 240.990 1008.700 7.4 THE LD. AR SUBMITTED THAT THE COPIES OF SALES INVOICES, VAT RETURNS AND LEDGER ACCOUNTS OF THE CUSTOMERS TO THIS EFFECT WERE FILED BEFORE THE LOWER AUTHORITIES. IT WAS SUBMITTED THAT IN FACT THE CO MMERCIAL TAX AUTHORITIES HAD ON MANY OCCASIONS INSPECTED THEIR PREMISES AND VERIFIED THE BOOKS AND RECORDS ETC RELATING TO PURCHASE, PRODUCTION, SALE ETC. PERIODICALLY. EVEN ON 12.07.2013, A F EW D AYS BEFORE THE SEARCH UNDER SECTION 132, THERE WAS AN INSPECTION BY THE VAT AUTHORITIES . THE LD. AR ALSO SUBMITTED THAT COP IES OF MAHASARS DATED 12.07.2013 AND PROCEEDINGS DATED 30.01.2014 ISSUED BY THE VAT DEPARTMENT TO THIS EFFECT WERE FILED BEFORE CIT(A). T H E LD. AR SUBMITTE D THAT CONTRARY TO THE PROCEEDINGS UNDER SECTION 132 WHERE NO EFFORT WAS MADE BY THE DEPARTMENT TO PHYSICALLY VERIFY AND RECONCILE THE STOCK AVAILABLE AT THE PREMISES, THE VAT DEPARTMENT HA D ELABORATELY CONDUCTED PHYSICAL VERIFICATION OF THE ENTIRE S T OCK A T THEIR PREMISES AND THE ALLEGED VARIATION WAS VERY MINISCULE WHICH ITSELF IS INDICATIVE OF THE FACT THAT THE TRANSACTION BETWEEN P.K.KUNJUMOIDEEN AND PRINCE ROLLER FLOUR MILLS (P) LTD. AS RECORDED IN THE VARIOUS I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 24 BOOKS ARE GENUINE . AN ANALYSIS OF THESE FAC TS GOES TO CLEARLY PROVE THAT WHAT WAS SOLD BY PRINCE ROLLER FLOUR MILLS (P) LTD. WAS RAW WHEAT ONLY TO P.K. KUNJUMOIDEEN 7. 5 IN THE SWORN STATEMENT TAKEN FROM SHRI SABARIGIR EESAN, ACCOUNTANT, IT WAS STATED THAT THERE WAS NO ACTUAL SALE OF WHEAT TO SRI. P.K. KUNJUMOIDEEN BUT THE ITEMS SOLD WERE WHEAT PRODUCTS VI Z. MAIDA, SOOJI, ATTA AND BRAN. THIS STATEMENT WAS A LSO ONE WHICH WAS RECORDED UNDER TREMENDOUS PRESSURE SITUATION . IT WAS SUBMITTED THAT THE STATEMENT RECORDED FROM SHRI SABARIG IREESAN ALSO SUFFER ED FROM SERIOUS MISTAKES AND IT WAS ON RECOGNISING THIS THAT HE HAD RETRACTED FROM HIS OWN FINDINGS, BEFORE THE ASSESSING AUTHORITY . 7. 6 IN THE STATEMENT OF SHRI PREMIL DEEP, MANAGER, HE HA D JUST S T ATED THAT HE WAS LOOKIN G AFTER THE ADMINISTRATION SIDE OF THE GROUP OF COMPANIES, AND HA D NOT CONCURRED WITH THE STATEMENTS MADE BY MR SABARI GIREESAN NOR HA D GIVEN ANY INDI CATION OF THE SORT, TO POINT UN ACCOUNTED TRANSACTION. WHAT WAS SAID WAS ONLY THAT SINCE THE MATTER WAS PERSONALLY BEING HANDLED BY MR. SABARI GIREESAN , HE WOULD BE A BETTER PERSON TO THROW LIGHT ON THE FACTS AND THIS CANNOT BE TERMED AS AN ADMISSION BY ITSELF OF UNACCOUNTED TRANSACTION, BY ANY STRETCH OF IMAGINATION. THIS STATEMENT WAS RETRACTED BY HIM AS HE HAD WRITTEN THE SAME UNDER COERCION AND THREAT. IT WAS SUBMITTED THAT R ETRACTION STATEMENTS BY WAY OF AFFIDAVIT WERE PREPARED ON 06.09 . 2013 WITHOUT SEEING THE COPIES O F THE STATEMENT RECORDED ON THE PREVIOUS DATE FROM THE RESPECTIVE PERSONS WHO FELT TH AT THE STATEMENTS GIVEN WERE WRONG AND THE SAME WAS GIVEN UNDER PRESSURE FROM THE INVESTIGATING OFFICERS. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 25 SUBSEQUENTLY BOTH SHRI SABARI GIRE ESAN AND S H RI P.K. KUNJUMOIDEEN HAVE APPLIED FOR THE COPIES OF STATEMENTS ON 18.11.2014 AND IT WA S RECEIVED ON THE SAME DAY. THE LD. AR DREW OUR ATTENTION TO THE COPIES OF THE RETRACTION STATEMENTS OF THESE TWO PERSONS WHICH WERE PLACED IN PAPER BOOK, P AGE NO S . 57 TO 66 AND 109 TO 140 FILED BEFORE US. THE ASSESSING OFFICER HAD NOT MADE ANY REFERENCE TO THE RETRACTION S TATEMEN TS F ILED BY THESE PERSONS IN THE ASSESSMENT ORDER , THOUGH IT WAS PLACED BEFORE HIM . 7. 7 IT WAS SUBMITTED THAT S WORN STATEMENTS W E RE TAKEN FROM S HRI T.K. ABDU L KARIM , MANAGING DIRECTOR OF THE COMPANY ON 05.09.2013 AND 30 . 09.2013 AND NO SPECIFIC QUESTION WAS ASKED TO HIM WHETHER THE SALE TO S HRI P.K. KUNJUMOIDE EN WER E SALE OF WHEAT OR WHEAT PRODUCTS. 7. 8 IT WAS SUBMITTED THAT THE ONLY ONE SEIZED DOCUMENT REFERRING IN THE ASSESSMENT ORDER PARA 3. 7 IN SUPPORT OF THE ADDITI ON MADE VIDE REFERENCE NO. CHN/11/13 - 14/EAM/A - 38. THESE DOCUMENTS REPRESENT ED THE COLLECTION ON SALE OF WHEAT PRODUCTS ON 04.09.2013, THE IMMEDIATE PREVIOUS DAY OF THE SEARCH ON 05.09.2013. IT WAS SUBMITTED THAT N ORMALLY THE ENTRIES OF THE PREVIOUS DAY W ERE MADE IN THE ACCOUNTS ON THE SUBSEQUENT DAY. SINCE THE SEARCH HA D COMMENCED AT 10.30 AM ON 05 09 2 01 3, THE ENTRY OF THE TRANSACTION COULD NOT BE ENTERED IN THE COMPUTER. IT WAS SUBMITTED THAT THE TOTAL A MOUNT OF RS. 1 , 50,985/ - OUT OF WHICH RS. 93,545/ - WERE BY WAY OF CHEQUES AND THE BALANCE OF RS. 57,440/ - WAS IN CASH AND AFTER THE SEARCH THIS TRANSACTION WAS ENTERED IN THE ACCOUNTS AND THE COPY OF I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 26 SEIZED DOCUMENT WITH THE COPIES OF LEDGER IN RESPECT OF DEBTORS MENTIONED IN THE SEIZED DOCUMENTS WERE P R ODUCED BEFORE THE CIT(A) IN PAPER BOOK PAGE NO S . 157 TO 198. THUS, IT WAS SUBMITTED THAT THE ENTIRE SEARCH AND SURVEY OPERATION THAT TOOK PLACE AT THE PREMISES OF PRINCE ROLLER FLOUR MILLS ( P ) LTD. OR SHRI P.K . KUNJUMOIDEEN DID NOT UNEARTH EVEN A SINGLE PIECE O F PAPER WHICH CAN POINT OUT UNACCOUNTED DEALINGS LIKE LIST OF SUNDRY DEBTORS OR COLLECTION. IT WAS SUBMITTED THAT IN A SEARCH ASSESSMENT, ADDITIONS CAN ONLY BE MADE ON THE STRENGTH OF MATERIAL EVIDENCES UNEARTHED DURING THE COURSE OF SUCH PROCEEDING , WHICH IN TH E PRESENT CASE WAS ABSENT . IT WAS SUBMITTED THAT T HERE WERE NO EVIDENCE OR INCRIMINATING DOCUMENTS SEIZED AT THE T IME OF SEARCH AND NO DOCUMENTARY EVIDENCE TO PROVE THAT THE SALE WAS EFFECTED AS WHEAT PRODUCTS WERE OBTAINED AT THE TIME OF SEARCH B O TH AT THE P REMISES OF THE ASSESSES AND IN THE P REMISES OF S H RI P.K. K UNJU MOIDEEN AND HENCE , THE ASSESSMENT NOW DONE STANDS TO BE CANCELLED. 7.8.1 FURTHER, IT WAS SUBMITTED THAT T HERE ARE NO EVIDENCES OR INCRIMINATING DOCUMENTS SEIZED AT THE TIM E OF SEARCH. NO DOCUMENTARY EVIDENCE TO PROVE THAT THE SALE WAS EFFECTED AS WHEAT PRODUCTS, ARE OBTAINED AT THE TIME OF SEARCH BOTH AT THE PLACE OF ASSESSEE COMPANY AND IN THE PLACE OF SHRI P.K. KUNJUMOIDEEN. IT WAS SUBMITTED THAT I N THE ABSENCE OF ANY SUCH EVIDENCE IT IS WRONG TO PURSUE THAT THE SALES EFFECTED AS WHEAT PRODUCTS TO ENABLE THE DIFFERENTIAL INCOME IN THE ASSESSMENT AND IN THE ABSENCE OF ANY EVIDENCES TO INDICATE THAT THE WHEAT IS SOLD AS WHEAT PRODUCTS, THE ASSESSMENT AFTER ASSUMING THE QU ANTITY OF WHEAT IS SOLD AS WHEAT PRODUCTS IS ILLEGAL AND LIABLE TO BE CANCELLED. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 27 7.8.2 THE LD. AR SUBMITTED THAT THE CIT(A) ASSUMED THAT THE ASSESSEE SOLD WHEAT PRODUCTS TO S HRI P.K.KUNJUMOIDEEN OF M/S. TEE KAY RICE MILL WITHOUT ANY EVIDENCE. THE ASSESSI NG OFFICER AND THE CIT(A) HAD COME TO THE CONCLUSION THAT WHEAT PRODUCTS WERE SOLD WITHOUT ANY EVIDENCES SEIZED AT THE TIME OF SEARCH. IT WAS SUBMITTED THAT T HE ASSESSING OFFICER VERIFIED THE STOCK, PRODUCTION AND SALES RECORDS OF WHEAT PRODUCTS AND COULD NOT FIND OUT ANY MISTAKE. IN ADDITION TO THIS, THE SALE OF WHEAT PRODUCTS TO S HRI P.K.KUNJUMOIDEEN WAS NOT EVIDENCED AT THE TIME OF SEARCH BY SUPPORTING DOCUMENTS. THE LD. AR SUBMITTED THAT THE CIT(A) SUSTAINED THE ADDITION OF 50% OF THE ADDITION MADE BY T HE ASSESSING OFFICER AS PER THE OBSERVATION IN PAGE NO. 24 OF THE APPELLATE ORDER. IT WAS SUBMITTED THAT IN THE ABSENCE OF ANY EVIDENCE SEIZED AT THE TIME OF SEARCH REGARDING THE SALE OF WHEAT PRODUCTS, THE ESTIMATED ADDITION ASSUMING THE SALE IS WRONGLY MADE AND THE ADDITION MAY BE CANCELLED COMPLETELY. 7. 9 REGARDING ASSESSMENT OF VAT AS INCOME, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER MADE ADDITIONS OF INCOME BY WAY OF VAT FOR ALL THE ASSESSMENT YEARS. IT WAS SUBMITTED THAT T HERE WA S NO EVIDENCE SHOWING THAT THE ASSESSEE COLLECTED VAT AND NOT PAID TO AUTHORITIES. IN THE ABSENCE OF ANY EVIDENCE THE ASSESSMENT OF VAT FOR THE VARIOUS ASSESSMENT YEARS WERE WITHOUT BASIS AND THE ASSES SMENTS OF VA T AS I NCOME MAY BE CANCELLED. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 28 AY 2009 - 10 RS.64940/ - A.Y 2010 - 11 RS.3810662/ - A.Y 2011 - 12 RS.2777084/ - AY 2012 - 13 RS.1504498/ - AY 2013 - 14 NIL A.Y 2014 - 15 NIL 7. 9.1 IT WAS SUBMITTED BY THE LD. AR THAT THERE WERE DOCUMENTARY EVIDENCE IN SUPPORT OF THE CONTENTIONS OF THE ASSESSING OFFICER THAT WHEAT PRODUCTS WER E SOLD TO S HRI P.K. KUNJUMOIDEEN , S H RI S ABARIGIREESAN AND SRI P.K. KUNJ U MOIDEEN HA D FILED RETRACTION STATEMENTS BEFORE THE ASSESSING OFFICER , BUT THE ASSESS ING OFFICER HA D NOT REFERRED THE RETRACTION STATEMENTS IN THE ASSESSMENT ORDER. IT WAS SUBMITTED THAT T HERE WERE NO OTHER SEIZED DOCUMENTS TO INDICATE T HAT WHEAT PRODUCTS WER E SOLD TO S HRI P.K. KUNJUMOIDEEN AS CLAIMED BY THE ASSESSING OFFICER. IN THE ABSENCE OF ANY SUCH EVIDENCE THE ASSESSMENT OF THE ADDITIONAL INCOME FOR THE VARIOUS ASSESSMENT YEARS BY WAY OF DIFFERENTIAL PROFIT ARE LIABLE TO BE CANCELLED. AY 2009 - 10 2,51,130/ - AY 2010 - 11 2,06 , 9 5, 955/ - AY 2011 - 12 91 , 40 , 121/ - AY 2012 - 13 1,27,76,083/ - AY 2013 - 14 1,80,41,977/ - AY 2014 - 15 1,08 , 37,719/ - HENCE, IT WAS SUBMITTED BY THE LD. AR THAT A S PER THE REASONS STATED ABOVE , THE ASSESSMENTS OF THE ABOVE INCOME IN THE RESPECTIVE ASSESSMENT YEARS WERE FOUND WITHOUT BASIS AND ACCORDINGLY, THE ADDITIONS MAY BE CANCELLED. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 29 8. THE LD. DR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN MANU FACTURE OF WHEAT PRODUCTS AND THAT SHRI P.K. KUNJUM OIDUEEN WAS ONLY NAME LENDER, BEING THE PROPRIETOR OF M/S. T EEKAY RICE MILL. ACCORDING TO THE LD. DR, M/S. T EEKAY RICE MILL IS A BENAMI CONCERN OF THE PRESENT ASSESSEE. THE ASSESSEE ITSELF HAD MANUFACTURED WHEAT PRODUCTS AND SOLD IN THE NAME OF M/S. T EEKAY RICE MILL. THIS WAS CONFIRMED BY THE ASSESSEE AS WELL AS BY P RINCE FLOUR MILLS . ACCORDING TO THE LD. DR, PRODUCTION AND MANUFACTURE OF WHEAT PRODUCTS IS BASED ON THE PRODUCTION YIELD DERIVED BY THE ASSESSEE FOR THESE ASSESSMENT YEARS AND RATE OF NET PROFIT COMPUTED AT THE SAME RATE THAT WAS ACTUALLY EARNED BY THE ASSESSEE IN THESE ASSESSMENT YEARS AND THERE IS NO QUESTION OF REDUCING IT TO 50% BY THE CIT(A). HE RELIED ON THE ORDER OF THE ASSESSING OFFICER AND MADE A PLEA TO CONFIRM THE ASSESSMENT ORDER IN ALL THE ASSESSMENT YEARS. FINDINGS : - 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSMENTS HEREIN WERE FRAMED IN THESE SIX ASSESSMENT YEARS U/S 143(3) R.W.S. 153A OF THE ACT, CONSEQUENT TO SEARCH ACTION U/S 132 OF THE ACT ON 05.09.2013 . O NCE A SEARCH TAKES PLACE UNDER SECT ION 132 OF TH E ACT, NOTICE UNDER SECTION 153 A(1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. ASSESSMENTS AN D REASSESSMENTS PENDING ON THE DATE I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 30 OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX. ALTHOUGH SECTION 153A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST - SEARCH MATER IAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY ASSESSMENT HAS TO BE MADE UNDER THIS SECTI ON ONLY ON THE BASIS OF SEIZED MATERIAL. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E . THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENT PROCEEDINGS. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SEC TION 153 A I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 31 ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOW N IN THE COURSE OF ORIGINAL ASSESSMENT. 9.1 IN THESE CASES, THE ADDITION IS BASED ON THE STATEMENT S RECORDED FROM VARIOUS PERSONS AND SEIZED DOCUMENTS BEARING NO.CHN/11/13 - 14/EAM/A - 36, NO.CHN/11/13 - 14/EAM/A - 37 AND NO.CHN/11/13 - 14/EAM/A - 38. NOW WE WILL GO THROUGH THESE STATEMENTS AND SEIZED DOCUMENTS ONE BY ONE. STATEMENT RECORDED FROM SHRI P.K. KUNJUMOIDEEN RECORDED U/S. 132(4) OF THE ACT ON 05/09/2013 WHICH READS AS FOLLOWS: 1. PLEASE INTRODUCE YOURSELF? (A) MY NAME IS P. K. KUNJUMOIDEEN, S/O. PADIYATH KOYA AGED 52 YEARS. MY FAMILY IS FROM MAMBRA IN THRISSUR DISTRICT. I AM RESIDING NOW AT CHENGAMANAD IN ERNAKULAM DISTRICT AND IS RUNNING A GROCERY SHOP HERE. 2. WHAT IS YOUR ANN UAL TURNOVER FROM THIS BUSINESS? (A) APPROXIMATE TURNOVER OF 20 LAKH S RUPEES. 3. ARE YOU FILING INCOME TAX RETURNS? ( A ) NO, I DON'T THAT MUCH INCOME FROM MY SHOP 4 . HOW LONG YOU HAVE BEEN DOING THIS SHOP (A) APPROXIMATELY 22 YEARS 5. DO YOU HAVE A PAN NO. (A) NO 6. IN WHICH BANKS YOU ARE OPERATING YOUR BANK ACCOUNTS I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 32 (A ) A L UVA URBAN CO - OPERATIVE BANK, CHENGAMANAD BRANCH (A/C NO. 6433) AND INDIAN BANK, CHENGAMANAD BRANCH (A/C NO. 746281754) 7. DO YOU HAVE ANY BANK ACCOUNT IN PALAKKAD ( A) YES, I HAVE AN ACCOUNT IN SB1, PALAKKAD BRANCH, I DON'T REMEMBER ITS NU MBER. THAT ACCOUNT IS OPERATED BY T.K . ABDUL KARIM AND T.K. AMEERALY. THEY ARE RUNNING P RINCE S TEEL AND PRINCE ROLLER FLOUR MILLS ( P) LTD ., KINASSERY, PALAKKAD . THEY ARE OPERATING THIS ACCOUNT. 8. WHAT IS YOUR RELATIONSHIP TO THIS FIRM, (A) THE LICENSE, REGISTRATION, KVAT REGISTRATION OF FLOUR MILL IS ON MY NAME. I HAVE TAKEN PAN THERE. IT WAS TAKEN BY THEM FOR THE PURPOSE OF PRINCE ROLLER FLOUR MILLS (P) LTD. THEY ARE MY MOTHER'S ELDER SISTER SONS (MY COUSINS). THEIR FAMILY IS ALSO FROM MAMBRA IN THRISSU R DISTRICT. 9. WE ARE SHOWING A BANK ACCOUNT STATEMENT OF A/C NO. 00000010620044052 SB1, PALAKKAD BRANCH WHICH IS IN YOUR NAME. PLEASE EXPLAIN. (A) THERE IS A FIRM NAMED TEEKAY RICE_MIL LS IN M Y NAME. THE DAY - TO - DAY BUSINES S ARE CARRIED OUT BY SHRI T. K. ABDUL KARIM AND AMEERALLY T. K. THE CHEQUE BO OK OF THAT ACCOUNT ARE ALREADY SIGNED BY MYSELF AND IS KEPT BY T. K. ABDUL KARI M AND T. K. AMEERALLY. HENCE THE DETAILS OF TRANSACTIONS ARE NOT KNOWN TO ME. THE STATEMENT SHOWING TRANSACTIONS FROM 17/9/2010 TO 18/10/2010 ARE WITHOUT MY KNOWLEDGE. SHRI T. K. ABDUL KARIM AND SHRI. T. K. AMEERALLY CA N EXPLAIN ABOUT THESE TRANSACTIONS. 10. ARE YOU THE MANAGING PARTNER OF TEEKAY RICE MILL. (A) SINCE THE FIRM IS IN MY NAME, THE ABOVE SAID PERSONS TOOK PAN IN M Y NAME AN D HAS FILED INCOME TAX RETURN REGULARLY AT PALAKKAD INCOME TAX OFFICE. FOR THA T PURPOSE I DO SIGN VARIOUS FORMS. C.K.NAIR & CO, CHARTERED ACCOUNTANTS FIRM IS FILING MY RETURN. SABARI AND VENKITESH ARE SUBMITTING THE ACCOUNTS TO THEM. 11. PLEASE EXPLAIN ABOUT THE CREDIT IN THE BANK STATEMENT OF A/C NO. 746281754 OF INDIAN BANK CHENGAMANAD BRANCH. (A) THE MONEY RECEIVED AT INDIAN BANK, CHENGAMANAD BRANCH ARE SENT BY T. K ABDUL KARIM, AHAMED FAIZAL, ANUP SHA, KHADEEJA, AISHABI O N MONTHLY BASIS. I GUESS IT MAY BE THE PROFIT OF BUSINESS RUNNING IN MY NAME. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 33 12. DO YOU INCLUDE INCOME FROM THE GROCERY SHOP AT C HENGAMANAD IN THE IT RETURN FILED AT PALAKKAD. (A) NO. I DO SIGN PAPERS AT C.K.NAIR & CO ON THE DIRECTIONS OF SABARIGIREESH AND VENKATESH. 13. DO YOU INCLUDE TURNOVER OF YOUR GROCERY SHOP AT C HENGAMANAD IN THE VAT RETURN FILED AT PALAKKAD. (A) NO. VAT RETURN DOES NOT INCLUDE TURNOVER OF SHOP AT C HENGAMANAD 14. PLEASE EXPLAIN, TOWARDS WHICH ACCOUNT THE DEPOSITS FROM PALAKKAD TO INDIAN BANK, CHE N GA M ANAD BRANCH ARE MADE? MANY TIMES THE AMOUNTS ARE DIFFERENT. (A) SOMETIMES THEY MAY BE SENDING DEPENDS UPON THE PROFIT FROM TEEKAY RICE MILL. I DON'T ENQUIRE ABOUT IT. AS STATED ABOVE, TEEKAY RICE MILL IS IN MY NAME AND ITS LICENSE AND PAPERS ALSO. THOUGH I LEFT 20 YEARS AGO FROM THERE AND I AM STILL GETTING MONEY AS A SHARE OF PROFIT. I AM NOT CHECKING ITS RECORDS, IT IS T.K . ABDUL KARIM WHO HANDLES ITS ACCOUNTS AND RECORDS. (A) ALL THE BUSINESS AT PALAKKAD ARE LOOKED AFTER BY T.K. ABDUL KARIM AND T.K. AMEERALI. THEY ARE PREPARING AND FILING INCOME TAX RETURN AND VAT RETURN IN MY NAME. I AM JUST SIGNING FOR THEM. I AM LIVING WITH THEIR HELP. I HAVE ONLY A RESIDENCE WITH 33 CENTS. I MAY BE PARDON FOR WRONG DOING IF ANY FROM MY SID E. 9. 2 SHRI P.K. KUNJUMOIDEEN HA D RETRACTED THE ABOVE STATEMENT VIDE AFFIDAVIT DATED 06/09/2013 WHICH READS AS FOLLOWS: I, P.K.KUNJUMOIDEEN, S/O. PADIYATH KOYA, AGED 52 YEARS RESIDING AT PADIYATH HOUSE, CHENGAMANAD, PIN : 683578, ERNAKULAM DISTRICT SOLEMNLY STATE AS UNDER. I STATE THAT I AM A BUSINESS MAN DOING BUSINESS AT THATHAMANGALAM, PALAKKAD DISTRICT AND CHENGAMAND, ERNAKULAM DISTRICT. I STATE THAT THE INCOME TAX OFFICIALS CONDUCTED A SEARCH U/S 132 OF THE INCOME TAX ACT IN THE BUSINESS PREM ISES OF PRINCE GROUP OF COMPANIES, PALAKKAD ON 05.09.2013 AND AS PART OF THIS INVESTIGATION, I WAS CALLED TO THE OFFICE OF INCOME TAX AT ALUVA AND THE OFFICERS RECORDED MY STATEMENT ON THE SAME DAY. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 34 THE OFFICERS FORCED ME TO SIGN THE STATEMENT WRITTEN AND PREPARED BY THEM WHICH WAS NOT ACCORDING TO THE FACTS. I STATE THAT THE STATEMENT RECORDED ON 05.09. 2 013 IS NOT TRUE AND VOLUNTARY. I WAS FORCED, THREATENED AND COMPELLED TO SIGN AND WRITE THE DECLARATION IN THE STATEMENT WITHOUT MY CONSENT. I THEREFORE HEREBY RETRACT THE STATEMENT SIGNED BY ME BEFORE THE INCOME TAX OFFICIALS ON 05.09.2013. I STATE THAT, I AM EXECUTING THIS SWORN AFFIDAVIT SO THAT I MAY MAKE USE OF THIS AFFIDAVIT IN CASE THE INCOME TAX OFFICIALS USE MY STATEMENTS EITHER AGAINST ME OR THE ABOVE MENTIONED COMPANIES. 9. 3 SIMILARLY , STATEMENT WAS RECORDED U/S. 132(4) OF THE ACT FROM SHRI M. PREMIL DEEP , WHO WAS A MANAGER OF THE ASSESSEE COMPANY ON 05/09/2013 WHICH READS AS FOLLOWS: Q. NO. 3 KINDLY EXPLAIN THE MAIN DUTIES ATTACHED TO YOU IN PRINCE ROLLER FLOUR MILLS (P) LTD.? A. NO. 3 I AM MAINLY LOOKING AFTER THE ADMINISTRATIVE SIDE OF PRINCE ROLLER FLOUR MILLS. ALL THE GOVERNMENTAL AS WELL AS BANKING DU TIES (LIAISON WORK) CONNECTED WITH THE CONCERN ARE ATTENDED BY ME. IN A DDDITLON, I AM ASSISTING THE MD SHRI T. K ABDU L KARIM IN FINALIZING THE PAYMENT OF CHEQUES TO VARIOUS PARTIES AND RECEIPT OF CHEQUES. THE VERIFICATION OF THESE CHEQUES ARE DONE BY ME BEFORE FINALIZATION BY MD. THE VERI FICATION OF FINAL ACCOUNTS ARE ALSO DONE BY ME. WE ARE MAINTAINING THE BOOKS OF ACCOUNTS IN THE TALLY SOFTWARE AND MONTHLY VERIFICATION IS DONE BY ME. THE CORRECTIONS WITH REGARD TO THE INVOICES IS ALSO LOOK AFTER FOR EACH AND EVERY BILL BEFORE MAKING THE PAYMENT OF THOSE CHEQUES IS ALSO ONE OF MY DUTY. THE UNIT WISE ACCOUNTS ARE MAINTAINED IN THE CONCERNED UNITS. HOWEVER, DATA SYNCHRONIZATION IS DONE EVERY DAY AMONG THE UNITS AND THE SAME IS AVAILABLE IN THE SERVER IN THIS UNIT. Q, NO.4 . ON V ERIFICATI ON OF ACCOUNTS I N THE TALLY SOFTWARE BY THE I NCOME - T AX DEPT TODAY . IT I S NOTICED THAT, A LEDGER ACCOUNT OF SHR I KUN JUMOI DEEN, WAS SEEN WHICH RELATES TO THE SALE OF RAW WHEAT TOHIM AND ALSO CONTAINING THE DETAILS OF WHEAT PURCHASED FROM HIM . KINDLY EXPLAIN THE TRANSACTION WITH HIM? A. NO . 4. THERE IS A BOOK ENTRY IN THE TALLY SOFTW ARE RELATES TO THE PURCHASE AND SA L E OF RAW WHEAT FROMSHRI KUN JU MOIDEEN. SHR I KUN JU MO I DEEN I S A RELATIVE OF SHRI T K ABDUL KAREEM, MD OF PRINCE GROUP O F CONCERNS. IT I S LEARNED THAT, THERE IS NO ACTUAL SALE OR PURCHASE OF WHEAT WAS DONE WITH SHR I I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 35 KUN JU MOIDEEN. THE LEDGER ACCOUNT WAS CREATED ONLY AS ACCOMMODATING ENTRIES. THE RECEIPT AND PAYMENT TOWARDS THIS TRANSACTION ARE DONE THROUGH A BANK ACCOUNT BEARING NO. 10620044052 AT SB I, ENGLISH CHURCH ROAD, PALAKKAD. Q . NO . 5 : ON QUESTIONING THE BILLING STAFF WITH REGARD TO THE SALE OF WHEAT, THEY STATED THAT, THEY HAVE NOT MADE ANY INVOICE WITH REGARD TO THE SALE OF WHEAT TO SHRI KUNJU MOIDEEN. KINDLY OFFER YOUR COMMENTS? A . NO.5: THE VERSION OF BILLING STAFF I S CORRECT. IT I S WORTH MENTIONING THAT OUR MD HAD A PERSONAL ACCOUNTANT SHRI SUBRAMANIAN, WHO ON INSTRUCTION BY THE M D MAKES THE INVOICES FOR THE SALE OF WHEAT. AS STATED EARLIER TO MY ANSWER FOR QUESTION NO . 4, THERE IS NO A CTUAL SALE OF WHEAT TO SHRIKUN JU MOIDEEN. ONLY BILLS WERE PREPARED AND ACCOUNTED IN THE TALLY SOFTWARE. LIKEWISE BOGUS PURCHASE BILLS WERE ALSO PREPARED AGAINST SHRI KUN JU MOIDEEN. OUT OF THE TOTAL PURCHASES RECORDED AGAINST HIM, CERTAIN TRANSACTIONS ARE GENUINE, WHICH WERE OBTAINED DIRECTLY FROM FC I GODOWN. Q . NO. 6 FROM THE ANSWERS GIVEN TO THE LAST TWO QUESTIONS, IT IS VERY CLEAR THAT THE WHEAT SHOWN AS BOGUS SALE TO S HRI KUNJUMOIDEEN HAVE BEEN PROCESSED AND SOLD AS ITS BYE PRODUCTS MAIDA, SOOJI , ATTA AND BRAN. SINCE ALL THE EXPENSES RELATED TO THE PURCHASE AND PRODUCTION HAS BEEN ACCOUNTED IN THE BOOKS OF ACCOUNTS MAINTAINED THERE WILL BE A HIGHER GROSS PROFIT FROM TH E TRANSACTION. PLEASE EXPLAIN MORE ABOUT THIS. A. NO. 6. ACCOUNTS OF PRINCE ROLLER FLOUR MILLS IS LOOKED AFTER BY SHRI SABARI GIREESH. IT IS TRUE THAT, ALL THE EXPENSES RELATED TO PURCHASE AND MANUFACTURING HAVE BEEN FULLY ACCOUNTED IN THE BOOKS OF A CCOUNT. THE PROFIT FROM THE ABOVE REFERRED TRANSACTION CAN BE EXPLAINED IN DETAIL BY SHRI SABARI GIREESH. Q. NO.7. HOW DO YOU MAINTAIN THE DAILY PHYSICAL CASH STATEMENTS? PLEASE EXPLAIN THE METHOD OF REPORTING TO THE MD. A. NO. 7. THE CASHIER PREPARES T HE CASH STATEMENT AND FORWARDED TO THE ACCOUNTS DEPARTMENT. AFTER TAKING NOTE OF THE SAME, THEY REPORT IT TO THE MD. Q. NO. 8 . DO YOU HAVE ANYTHING ELSE TO SAY? A.NO. 8. NOTHING. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 36 9. 4 SHRI M. PREMIL DEEP HAD RETRACTED THE ABOVE STATEMENT VIDE AFFIDAVIT DATED 06/09/2013 WHICH READS AS FOLLOWS: I, PREMIL DEEP . M, AGED 53 YEARS RESIDING AT H.NO. B, ACCESS REVERA, CHECKDAM ROAD, YAKKARA , PALAKKAD SOLEMNLY STATE AS UNDER : I STATE THAT I AM MANAGER OF M/S. PRINC E ROLLER FLOUR MILLS (P) LTD, 9/75, ANAPPURAMKADU, KINASSERY POST, PALAKKAD 678707. I STATE THAT THE INCOME TAX OFFICIALS CONDUCTED A SEARCH U/S 132 OF THE INCOME TAX ACT IN THE ABOVE COMPANY ON 05 . 09.2013 AT AROUND 10.30 AM AND IN THE COURSE OF INVESTIGA TION THE OFFICERS RECORDED MY STATEMENT AT THE LATE NIGHT ON THE SAME DAY. THE OFFICERS FORCED ME TO SIGN THE STATEMENT WRITTEN AND PREPARED BY THEM WHICH WAS NOT ACCORDING TO THE FACTS. I STATE THAT THE STATEMENT RECORDED ON 05.09.2013 IS NOT TRUE AND VO LUNTARY. I WAS FORCED, THREATENED AND COMPELLED TO SIGN AND WRITE THE DECLARATION IN THE STATEMENT WITHOUT MY CONSENT. I THEREFORE HEREBY RETRACT THE STATEMENT SIGNED BY ME BEFORE THE INCOME TAX OFFICIALS ON 05.09.2013. I STATE THAT, I AM EXECUTING THIS SWORN AFFIDAVIT SO THAT I MAY MAKE USE OF THIS AFFIDAVIT IN CASE THE INCOME TAX OFFICIALS USE MY STATEMENTS EITHER AGAINST ME OR THE ABOVE MENTIONED COMPANY. 9. 5 SIMILARLY , STATEMENT WAS RECORDED U/S. 132(4) OF THE ACT FROM SHRI SABARIGIREESHAN , ACCOUNTANT OF THE ASSESSE - COMPANY ON 05/09/2013 WHICH READS AS FOLLOWS: 1. PLEASE INTRODUCE YOURSELF. (A) MY NAME IS SABARIGIRISAN. B. AND I AM B.COM GRADUATE. FROM 2002 ONWARDS I AM WORKING AS AN ACCOUNTANT AT PRINCE GROUP CORPORATE OFFICE 2) WHAT ARE YOUR RESPONSIBILITIES BEING AN ACCOUNTING AT PRINCE GROUP CORPORATE OFFICE AT PALAKKAD ? (A) MY PRIMARY DUTY IS THE ACCOUNTING OF M/S. PRINCE ROLLER FLOUR MILL S (P) LTD UNDER THE PRINCE GROUP. ACCOUNTING WORKS OF OTHER COMPANIES UNDER THE I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 37 PRINCE GROUP ARE BEING HANDLED AT ITS OWN PREMISES. THE TRANSACTIONS RELATING TO BANKS ARE HANDLED IN THIS CORPORATE OFFICE. 3) PLEASE DESCRIBE THE OPERATIONS OF M/S. PRINCE ROLLER FLOUR MILL (P) LTD OF WHICH YOU ARE AN ACCOUNTANT. (A) M/S. PRINCE ROLLER FLOUR MILL (P) LT D PURCHASES WHEAT FROM RAJASTHAN, MADHYA PRADESH, UTTER PRADESH, GUJARAT ETC., AND PROCESS INTO PRODUCTS LIKE MAIDA, SOOJI, ATTA, BRAN ETC., AND SELLS IN THE MARKET. IN ADDITION WHEAT IS ALSO PURCHASED FROM F.C. I . UNDER OPEN SALE AND SOMETIMES SMALL QUANTI TIES ARE PROCURED FROM LOCAL TRADERS ALSO. MILL IS SITUATED IN KINASSERY. GODOWN ADJACENT TO MILL AND A NEARBY GAJENDRA RICE MILL ARE MAIN PLACES WHERE WHEAT IS STOCKED. THE PROCESSED PRODUCTS LIKE MAIDA, ATTA, ETC., ARE KEPT STORED INSIDE THE MILL ITSELF. THE SALES PROCEEDINGS, BILL PREPARATION AND COLLECTION FROM CASH SALES ARE DONE FROM THE GROUND FLOOR OF THIS BUILDING (COUNTER). 4) HOW ARE THE BOOKS OF ACCOUNTS MAINTAINED IN M/S. PRINCE ROLLER FLOUR MILL (P) LTD (A) BOOKS OF ACCOUNTS OF THE FINANCIAL TRANSACTIONS ARE MAINTAINED IN COMPUTER SOFTWARE VIZ., TALLY. MY SELF IS UPDATING THE ACCOUNTS. IN ADDITION, I AM ALSO MAINTAINING DETAILS RELATED TO PURCHASE, EXPENSES ALONG WITH COPY OF INVOICES, BILLS AND VOUCHERS. 5) WHAT IS THE APPROXIMATE PERCENTAG E OF YIELD FROM THE PROCESSING OF WHEAT IN M/S. PRINCE ROLLER FLOUR MILL (P) LTD (A ) THE APPROXIMATE PERCENTAGE OF YIELD FROM THE PROCESSING OF WHEAT IS AS UNDER 1. MAIDA 59% 2. ATTA 7% TO 8% 3. SOOJI 24% 4. BRAN 25% 5 9% DEPENDING UPON THE QUALITY OF WHEAT THERE WILL BE A SLIGHT VARIATION IN YIELD OF WHEAT, IN ADDITION TO THE ABOVE THERE WILL BE APPROXIMATELY 2% WASTAGE ALSO. 6) WHILE CONDUCTING THE SEARCH BY THE INCOME TAX DEPARTMENT IN THIS FIRM TODAY, THE RECORDS SHOWS THERE ARE SALES OF RAW WHEAT AS WELL AS PURCHASE OF RAW WHEAT IN HUGE VOLUME FROM/TO SRI. P. K. KUNJUMOIDEEN, WHEN OFFICIALS ASKED ABOUT THESE TO SRI. BALASUBRAMANIAN WHO IS THE PERSONAL ACCOUNTANT OF SRI. P. K. KUNJUMOIDEEN AND THE MANAGING DIRECTOR OF THIS FIRM S RI. T. K. ABDUL KARIM, THEY HAVE STATED THAT THE PURCHASE AND SALES WITH SRI. P. K. KUNJUMOIDEEN ARE BOGUS. PLEASE EXPLAIN IN DETAIL. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 38 (A) THE SALES AND PURCHASE OF WHEAT WITH SRI. P. K. KUNJUMOIDEEN IS RECORDED IN THE BOOKS OF ACCOUNTS AND THE SUPPORTING SALES BILLS AND PURCHASED INVOICE ARE MAINTAINED. BUT IN REALITY THERE IS NO SALES MADE TO SRI. P. K KUNJUMOIDEEN. INSTEAD THE ENTIRE QUANTITY SHOWN AS SALES ARE USED IN TH E PROCESS OF WHEAT AND ITS PRODUCTS LIKE MAIDA, ATTA, S OOJI, BRAN ARE SOLD. IT I S ALSO SHOWN IN THE RECORDS THAT THERE ARE MANY PURCHASES MADE FROM SRI. P. K.K UNJUMOIDEEN. THE PURCHASES MADE ON 27/08/2012 FOR RS.26,86,600/ - AR E ON 09/10/2012 FOR RS.1 ,58,06,500/ - ARE REAL. THESE PURCHASES ARE AGAIN PROCUREMENT OF WHEAT ON OPEN SALES OF F.C.I, BY SRI . P. K. KUNJUMOIDEE NB Y CHECKING THE PURCHASES OF WHEAT FROM F.C.I . BY SRI. P. K. KUNJUMOIDEE N YOU CAN UNDERSTAND WHETHER THERE IS MORE PURCHASES LIKE THIS. PAYME NT AGAINST THESE PURCHASES ARE MADE BY REMITTING CHEQ UES FROM THE ACCOUNT P.K.KUNJUMOIDEEN MAINTAINED IN SBI, PALAKKAD. 7) YOU SAID WHEAT SALES MADE IN THE NAME OF SRI. P. K. KUNJUMOIDEEN ARE ACTU ALLY PROCESSED HERE AND THE PRODUCTS ARE SOLD FROM HERE. BUT THE RECORDS OF SUCH SA LES ARE NOT SHOWN IN THE BOOK OF ACCOUNTS, PLEASE EXPLAIN ABOUT THIS. (A) THE SO CALLED SALES OF WHEAT TO SRI. P. K. KUNJUMOIDEEN WILL BE SHOWN AS RE TAIL SALES BY SRI. P. K. KUNJUMOIDEEN TO VARIOUS PARTIES, SRI. BALASUBRAMANIA NIS RECORDING AND PREPARING BOOKS OF ACCOUNTS OF SRI. P. K . KUNJUMOIDEEN. THESE RECORDS ARE KEPT AT M/S.TEEKAY RICE MILL, THATHAMANGALAM. THE SALES OF W HEAT TO SRI. P. K. KUNJUMOIDEEN SHOWN ARE ACTUALLY PROCESSED AT M/S. PRINCE F LOUR MILL (P) LTD TO MAIDA, ATTA ETC., AND SOLD. THESE SALES ARE NOT SHOWN IN BOOK OF ACCOUNTS OF BY M/S. PRINCE ROLLER FLOUR MILL (P) LTD. THESE SALES MADE WITHOUT PROVIDING BILLS. INCOME FROM THESE CASH SALES ARE HANDED OVER TO THE MANAGING DIRECTOR SRI. T. K. ABDUL KARIM AND THE AMOUNT HE GIVES WI LL BE REMITTED TO SRI. P. K. KUNJ UMOIDEEN'S BANK ACCOUNT. THESE CASH REMITTANCES ARE SHOWN IN THE ACCOUNTS AS MADE OUT OF RET AIL SALES ACCOUNTED IN P.K.KUNJUMOIDEEN'S BOOKS. 8) WHILE SHOWING WHEAT SALES TO SRI. P. K. KUNJUMOIDEEN WHAT IS PERCENTAGE OF MARGIN YOU HAVE ADDED? (A) WE HAVE ADDED 1% OF PROFIT MARGIN OVER THE LANDING COST OF WHEAT PURE FROM INTER - STATE. 9) YOU ARE SELLING WHEAT TO SRI. P. K. KUNJUMOIDEEN BY SHOWING 1% OF PROFIT MARGIN OVER THE LANDING COST OF WHEAT, BUT IN REALITY WHILE THESE WHEAT ARE PROCESSED AND PRO DUCTS SOLD NOT ONLY YOU COULD EARNED A HIGH RATE OF PROFIT MARGIN ESPECIALLY SINCE EXPENSES LIKE PURCHASES COST FREIGHT AND COOLIE CHARGES, PRODUCTION EXPENSES ARE ALREADY SHOWN IN BOOKS OF ACCOUNTS. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 39 CONSIDERING THESE FACTS PROFIT FROM THESE TRANSACTIONS S HOULD BE VERY HIGH. WHAT IS YOUR COMMENT ON THIS. (A) AS YOU SAID BY PROCESSING THESE WHEAT INTO PRODUCTS AND SELLING IT COULD HAVE EARNED MORE THAN 1% SHOWN IN THE BOOKS OF ACCOUNTS. THE COST OF PURCHASES AS WELL AS PRODUCTION COSTS ARE INCLUDED IN THE BOOKS OF ACCOUNTS . 10) WHAT WILL BE THE APPROXIMATE PROFIT MARGIN EARNED WHILE TRANSACTING THESE PRODUCTS. (A) IT COULD ONLY BE ASCERTAINED BY CALCULATING RATE OF PURCHASE AND SALES AND OTHER RELATED DETAILS OF EACH YEAR . 11) WE ARE SHOWING THE MATERIAL S MARKED CHN/11/13 - 14/EAM/A36, CHN/11/13 - 14/EAM/A - 37, PAPER BUNCH SEIZED BY INCOME TAX, TODAY WHILE CONDUCTING SEARCH. PLEASE CHECK AND EXPLAIN. I HAVE CHECKED IT. THESE ARE COMPUTER PRINTOUT OF LEDGER ACCOUNT OF SRI. P. K. KUNJUMOIDEEN PREPARED IN TALLY SOFTWARE. 12) WE ARE SHOWING THE MATERIALS MARKED CHN/ 11 / 13 - 14/EAM/A38 SEIZED BY INCOME TAX, TODAY WHILE CONDUCTING SEARCH. PLEASE CHECK AND EXPLAIN. I HAVE CHECKED IT. FROM PAGE 1 TO 20, THE DETAILS OF ARRIVAL OF WHEAT LOAD. PAGE 21 CONTAINS COLLECTIO N DETAILS OF CHEQUE AND CASH RECEIVED ON 04/09/2013 FROM VARIOUS PARTIES AGAINST SALES. CASH COLLECTIONS ARE NOT SHOWN IN THE BOOK OF ACCOUNTS, IT IS USUALLY HANDED OVER TO THE MANAGING DIRECTOR. 13) WHILE CONDUCTING SEARCH TODAY, IT IS FOUND THAT THE ACTUAL CASH BALANCE IN LESS THAN THE CASH BOOK BALANCE. WHAT IS YOUR EXPLANATION IN THIS REGARD? THE CASHIER SRI. SANKARAKRISHNAN ONLY CAN EXPLAIN THIS. 14) DO YOU HAVE ANYTHING MORE TO SUBMIT. NOTHING MORE THAN WHAT I HAVE SUBMITTED HEREINABOVE. 9.6 THE SEIZED MATERIALS AS REFERENCE TO SECTION 132(4) STATEMENT FROM SHRI B. SABARIGIREESAN ARE AS FOLLOWS: I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 40 S.NO. SEARCH DOC. REFERENCE NO. CONTENTS 1. CHN/11/13 - 14/EAM/A - 36 BUNCH OF LOOSE SHEETS SERIALLY NUMBERED FROM 1 TO 13 CONTAINING LEDGER ACCOUNTS I N THE CASE OF THE APPELLANT REGARDING WHEAT SOLD TO P.K. KUNJUMOIDEEN FOR THE FINANCIAL YEAR 2012 - 13 2. CHN/11/13 - 14/EAM/A - 37 BUNCH OF LOOSE SHEETS SERIALLY NUMBERED FROM 1 TO 13 CONTAINING LEDGER ACCOUNTS OF SHRI P.K. KUNJUMOIDEEN FROM 1.4.2013. 3. CHN/11/13 - 14/EAM/A - 38 BUNCH OF LOOSE SHEETS SERIALLY NUMBERED FROM 1 TO 21 CONTAINING WHEAT RECEIPT FROM GODOWN AND DAILY COLLECTION REPORT AS ON 04.09.2013. 9. 7 THE ABOVE STATEMENT WAS RE TRACTED BY SHRI SABARIGIREESAN VIDE AFFIDAVIT DATED 06/09/2013 WHIC H READS AS FOLLOWS: I, SABARI GIREESANB., S/O BALACHANDRAN,4 3 YEARS RESIDING AT NANDHANAM PAZHATHARA POST, THENKURISSI, ALATHUR TALUK, PALAKKAD DISTRICT SO LEMNLY STATE AS UNDER : I STATE THAT I AM AN ACCOUNTANT OF M/S. PRINCE ROLLER FLOUR MILLS (P) LTD, 9/75, ANAPPURAMKADU, KINASSERY POST, PALAKKAD 678707. I STATE THAT THE INCOME TAX OFFICIALS CONDUCTED A SEARCH U/S 132 OF THE INCOME TAX ACT IN THE ABOVE COMPANY ON 05 . 09.2013 AT AROUND 10.30 AM AND IN THE COURSE OF INVESTIGATION THE OFFICERS RECORDED MY STATEMENT AT THE LATE NIGHT ON THE SAME DAY. THE OFFICERS FORCED ME TO SIGN THE STATEMENT WRITTEN AND PREPARED BY THEM WHICH WAS NOT ACCORDING TO THE FACTS. I STATE THAT THE STATEMENT RECORDED ON 05.09.2013 IS NOT TRUE AND VOLUNTARY. I WAS FORCED, THREATENED AND COMPELLED TO SIGN AND WRITE THE DECLARATION IN THE STATEMENT WITHOUT MY CONSENT. I THEREFORE HEREBY RETRACT THE STATEMENT SIGNED BY ME BEFORE THE INCOME TAX OFFICIALS ON 05.09.2013. I STATE THAT, I AM EXECUTING THIS SWORN AFFIDAVIT SO THAT I MAY MAKE USE OF THIS AFFIDAVIT IN CASE THE INCOME TAX OFFICIALS USE MY STATEMENTS EITHER AGAINST ME OR THE ABOVE MENTIONED COMPANY. 1 0 . ON THE STATEMENTS RECORDED FROM SRI . P.K. KUNJUMOIDEEN AND THE E MPLOYEES, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE GROUP IN THE WHEAT FLOUR I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 41 MANUFACTURING FRONT , RESORTED TO DIFFERENT METHODOLOGIES TO GENERATE UNACCOUNTED SALES AND INCOME FROM THE TRADE. THE ASSESSEE HA D USED SHRI. P.K. KUNJU M OIDEEN (PAN - AHDPK83Q1E) AS A FRONT. SHRI. P.K. KUNJU M OIDEEN WAS SHOWN AS THE PROPRIETOR OF M / S . TEEKAY RICE MILL WITH PREMISES AT PALLIMUKKU, THATHAMANGALAM, PALAKKAD. THE PROPERTY AT THE SAID ADDRESS WAS OWNED BY SHRI. T.K. ABDUL KARIM HIMSELF AND MANY OF HIS OTHER CONCERNS HAD OFFIC ES IN THE SAME ADDRESS ITSELF. AT THE TIME OF THE S EARCH, SHRI. P.K. KUNJU M OIDEEN WAS NOT AVAILABLE IN THE BUSINESS ADDRESS OF HIS. HE WAS FOUND TO BE RESIDING AT CHENGAMAN A D NEAR ALUVA RUNNING A GROCERY SHOP THERE . HE HA D BEEN LIVING AND SEEKING A LIVING OUT OF TH E BUSINESS FOR THE PAST 20 YEARS AT CHENGAMANAD. THE ASSESSEE HA D USED THE BUSINESS ADDRESS O F M/S. TEEKAY RICE MILL, TO SHOW THAT A PORTION OF ITS WHEAT PROCURED IS SOLD TO THE SAID CONCERN, WHICH IN TURN HAS SOLD THE SAME IN THE OPEN MARKET. IN ACTUALITY THE WHEAT SHOWN AS SOLD TO M/S . TEEKAY RI CE MILL WAS MILLED IN THE ASSES SEE'S FACTORY ITSELF AND WAS SOLD AS WHEAT FLOUR IN ITS VARIOUS FORMS (A TT A, SOOJI. MAIDA AND BRAN) . THE ASSESSEE USED TO BILL THE WHEAT A T 1% MARKUP ON ITS FUNDING COST TO M/S. TEEKAY RICE MILL. IN R EALITY, THE ASSESSEE USED TO MILL THE WHEAT AND SELL IT AT A HIGHER PROF IT IN THE MARKET. THE DIFFERENCE IS THE ADDITIONAL INCOME TO THE ASSESSEE FROM THIS CIRCUMROUTING ACTIVITY . 10.1 SHRI. P. K. KUN J U M OIDEEN WA S QUESTIONED ABOUT HIS BUSINESS ACTIVITIES ON THE DAY OF THE SEARCH TO WHICH HE HAS DESCRIBED HIS GROCERY BUSINESS AT CHENGAMANAD AS HIS SOURCE OF INCOME. THI S INDIVIDUAL WAS NOT AWARE OF THE TRADING ACTIVITIES IN HIS I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 42 NAME AT M/S. TEEKAY RICE MILL. HE SAID THA T SHRI. ABDUL KAREEM AND SHRI. AMEER ALI ARE HIS COUSIN BROTHERS LIVING AT PA LAKKAD AND ARE OWNING THE PRINCE GROUP OF CONCERNS AND ADDED THAT THEY AR E RUNNING SOME BUSINESS IN HIS NAMES, FOR WHICH HE HAS GIVEN VARIOUS SIGNED FORM S A ND CHEQUES TO THEM AND HE IS NO T AWARE OF EXACTLY WHAT KIND OF BUSINESS IS RUN IN HIS NAME. WHEN QUESTIONED ABOUT HIS BANK ACCOUNT, HE COULD RECALL ONLY HIS BANK ACCOUNT AT THE LOCAL BANK AT ALUVA AND NOT THA T OF T HE ONE AT PA L AKKAD. EVENTUALLY WHEN REMIND ED OF THE BANK ACCOUNT IN HIS NAME AT PALAKKAD , HE SAID T HAT SHRI. ABDUL KAREEM HA D OBTAINED SIGNATURES FROM HIM ON SEVERAL FORMS AND CHEQUES AND HE HIMSELF HA D NO T OPERATED ANY TRANSACTIONS IN THIS ACCOUNT. 10.2 SHRI P.K. KUNJU M OIDEEN JUSTIFIED THE NECESSITY TO LEND HIS NAME FOR THE BUSINESS REQUIREMENTS OF PRINCE GROUP AS OUT OF BLOOD RELATIONSHIP AND ALSO THE FACT THAT FAMILY MEMBERS OF PRINCE GROUP USED TO PAY TO HIS BANK ACCOUNT AT ALUVA AMOUNTS PERIODICALLY IN RECIPROCATION. HE SAID T HE AMOUNTS ARE REQUIRED TO MEET HIS LIVING EXPENSES AS ALSO THE MEDICAL EXPENSES OF HIS AILING MOTHER. HE SAID PRINCE GROUP HAS TAKEN A PAN IN HIS NAME AND IS FILING THE RETURN OF INCOME AT PALAKKAD IN HIS NAME. FROM THE ENQUIRIES WITH HIM , IT WA S EVIDENT THAT SHR I P.K. KUNJU M OIDEEN IS JUST A NAME LENDER TO THIS CONCERN AND IN ACTUALITY WAS NOT AT ALL INVOLVED IN US TRANSACTIONS. THE STATEMENTS OF OTHER OFFICIALS OF PRINCE ROLLER FLOUR MILLS RATIFY AND STRENGTHEN HIS VERSION . I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 43 10.3 SHRI PREMIL D EEP, MANAGER OF M/S. PRINCE ROLLER HOUR MILLS P LTD. KINASSERY, (PRFM) PALAKKAD HA D ALSO DEPOSED ON THE DAY OF THE S EARCH THA T THE ACCOUNTS FOR THE CONCERN OF M/S. TEEKAY RICE MILL W ERE ACTUALLY CONTROLLED FROM THE BUSINESS PREMISES OF M/S PRINCE ROLLER FL OUR MILLS P LTD. KINASSERY , PALAKKAD AND THE ACCOUNTS WER E MAINTAINED BY ONE SUBRAMANIYAM. SHRI PREMIL IN HIS DEPOSITION HA D STATED THAT ACTUALLY NO RAW WHEAT WAS PA S SED ON TO THE FIRM M/S. TEEKAY RICE MILL AND THE WHEAT BILLED IN THE NAME OF M / S TEEKAY RICE MILL WAS MILLED AT M/S PRINCE ROLLER FLOUR MILLS ITSELF AND IS SOLD IN THE MARKET AS WHEAT FLOUR IN THE FORM OF ATTA. MAIDA, SOOJI ETC. THE BILLING TO M/S. TEEKAY RICE MILL IS SEEN DONE AT THE INSTRUCTIONS OF SHRI. AB DUL KAREEM. THE SALE PROC EEDS OF M/S. TEEKAY RICE MILL WAS REMITTED INTO ITS BANK ACCOUNT BY THE ROLLER FLOUR MILL STAFF ONLY FROM MONEYS GIVEN TO THEM BY SHRI. ABDUL KAREEM. THE AMOUNT PAYABLE TO PRFM IS THEN REMITTED FROM ITS ACCOUNT INTO PRFM ACCOUNT. 10. 4 A SIMILAR DEPOSITI ON WAS GIVEN BY SHRI SABARIGIREESAN , ACCOUNTANT OF THE ASSESSES. HE ALSO STATED THAT NO RAW WHEAT WAS SENT TO M/S. TEEKAY RICE MILL. HE STATED THAT ONLY TWO WHEAL PURCHASES MADE FROM FOOD CORPORATION OF INDIA ON 27/8/20 1 2 AND 9/10/2012 WERE ACTUALLY DONE B Y IT. WHEAT PURCHASES SHOWN TO HAVE MADE FROM PRFM WAS ONLY A CCOM M ODATIVE IN NATURE. THE BILLING WAS MADE AT 1% MARKUP ON THE LANDING CO ST TO PRFM . HE ALSO IDENTIFIED MATERIALS IN CHN/11/J3 - 14/EAM/A - 38 AS THE SALES COLLECTION MADE ON THE MILLED FLOUR BY P RFM FROM THESE I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 44 SALES AND THE SAID SUMS WERE NOT ENTERED IN THE TALLY ACCOUNTS AND THE AMOUNTS WERE GIVEN TO SHRI ABDUL KAREERN DIRECT. 10.5 THUS, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSE E WAS RESORTING TO METHODS TO UNDERSTATE ITS TRUE S ALES R EVENUE AND INCOMES. ACCORDING TO THE ASSESSING OFFICER, THERE CANNOT BE ANY SITUATION WHERE THREE OF THE ACTIVE PARTICIPANTS OF A TRADE WILL DEPOSE ON THE MODUS OPERAND I USED BY THEM IN THE SAME MANNER. HENCE , THE ASSESSING OFFICER OPINED THAT THERE W E RE NO REASONS TO DISBELIEVE THEIR DEPOSITIONS. HE ALSO O BSERVED THAT T HE ASSESSEE TR IED TO SAVE ON ITS ACTUAL GP ON THE WHEAL QUANTITY ROUTED THROUGH M/S. TEEKAY RICE MILL AND ALSO ON THE VAT TAX COMPONENTS THEREIN. 11. I N RESPECT TO THE A.Y. 'S 2009 - 10 TO 2014 - 15 THE ASSESSEE HAD SOLD WHEAT TO SHRI. P.K. KUNJUMOIDEEN , M/S. TEEKAY RICE MILL, P ALAKKAD. THE ASSESSING OFFICER CONSIDERED WHAT WAS SOLD BY THE ASSESSEE COMPANY WERE WHEAT PRODUCTS SUCH AS ATTA, MAIDA, SOOJI ETC, INSTEAD OF WHEAT. AFT ER PRESUMING THIS POSITION THE ASSESSING OFFICER ESTIMATED THE PROFIT OF WHEAT PRODUCTS FOR THE A. Y. AS UNDER: A.Y. ALLEGED PROFIT ALLEGED SAVINGS ON VAT TOTAL ADDITION 2009 - 10 251130.00 64940.00 316070.00 2010 - 11 20695955.00 3810662.00 24506617.00 2011 - 12 9140121.00 2777084.00 11917205.00 2012 - 13 12776083.00 1504498.00 14280581.00 2013 - 14 18041977.00 0.00 18041977.00 2014 - 15 10837719.00 0.00 10837719.00 I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 45 11.1 THE ASSESSEE HAD ACCOUNTED THE SALE OF WHEAT TO P.K.KUNJUMOIDEEN, M/S. TEEKAY RICE MILL AND ALREADY INCLUDED PROFIT @ 1%ON SALES. AFTER REDUCING THIS PROFIT THE ASSESSING OFFICER HAS MADE THE FOLLOWING ADDITIONS IN RESPECT TO THE FOLLOWING ASSESSMENT YEARS . AY SALE VALUE OF WHEAT TO P.K.KUNJUMOIDEEN EXCLUDING VAT (AMOUNT IN RS.) MARK UP PROFIT @1% INCLUDED IN COL.2 (AMOUNT IN RS.) 2009 - 10 2164672.00 21432.00 2010 - 11 106326114.00 1052734.00 2011 - 12 83439380.00 826132.00 2012 - 13 37373850.00 370038.00 2013 - 14 42118437.00 417014.00 2014 - 15 38276401.00 378974.00 , 11.2 S H R I P.K. KUNJUMOIDEEN STARTED HIS BUSINESS IN PALAKKAD BY TAKING M/S T EEKAY RICE MILL AT THATHAMANGALAM IN 1986. HE WAS GIVEN KCST REGISTRATION IN THE SAME YEAR. M/S. PRINCE ROLLER FLOUR MILLS (P) LTD STARTED IN THE YEAR 1990 ONLY I.E., 4 YEARS AFTER HE STARTED HIS BUSINESS. S H RI P.K. KUNJU MOIDEEN R A N HIS BUSINESS INDEPENDENTLY AS PROPRIETOR. HIS TRADING ACTIVITIES INCLUDE D PURCHASE AND SALE OF WHEAT, STEEL SCRAP, PADDY, GUNNY BAGS E TC . HE WAS AN A S SESSEE UNDER THE ROLLS OF THE INCOME TAX DEPARTMENT FROM VERY EARLY PERIOD WHICH CAN BE CROSS CHECKED. HE PURCHASED WHEAT NOT ONLY FROM M/ S . PRINCE ROLLER FLOUR MILLS (P) L T D. BUT FROM VARIOUS PARTIES IN NORTH INDIAN STALES LIKE UTT AR PRADE SH, MADHYA PRADESH, RAJASTAN ETC., THROUGH RAILWAY WAGONS. HE PURCHASED WHEAT FROM FOOD CORPORATION OF INDIA AND KERALA STATE CIVIL SUPPLIES CORPORATION LTD . ALSO THROUGH OPEN SALES WHEAT TENDER. HE WAS SUPPLYING WHEAT PURCHASED FROM OPEN MARKET TO MANY ES TABLISHED COMPANIES IN AND AROUND MALA B AR EVEN DURING THE EIGHTIES. HENCE , IT WAS NOT CORRECT TO STATE THA T I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 46 HE WAS NOT CARRYING OUT ANY TRADING OPERATIONS. T HE ASSESSEE FILED SUMMARY OF MAJOR PURCHASES EFFECTED BY SHRI P.K. KUNJUMOIDEEN OVER THE YEARS W HIC H W OULD CATEGORICALLY ESTABLISH THAT THE TRANSACTIONS WERE NOT LIM ITE D TO ONE OR TWO DEALINGS, BUT THERE WERE CONTINUOUS TRANSACTIONS, INVOLVING SUBSTANTIAL QUANTITIES. SHRI P.K. KUNJUMOIDEEN WAS NOT ENTIRELY ASSOCIAT ED WITH THE ASSESSEE , BUT WAS ALSO DEALING WITH OTHER BUSINESS ENTITIES TOO. 11.2.1 T HE REGISTRATION NUMBERS OF KGST, CST AND VAT OF M/S. TEEKAY RICE MILL, PROPRIETOR, SHRI P.K. KUNJUMOIDEEN ARE AS FOLLOWS: KGST 31131005 DT. 17.7.1986 CST 31136005 DT.17.7.1986 VAT 32090755252 - C 11.2. 2 IT IS NOT DISPUTED THAT A LMOST THE ENTIRE TRANSACTIONS WERE BEING REGULARLY ROUTED THROUGH HIS B ANK ACCOUNT, WHICH ALSO ESTABLISHES THE GENUINENESS OF SUCH DEALINGS. THE STATEMENT GIVEN BY HIM TO THE CONTRARY WAS ONLY DUE TO THE FACT THAT HE WAS UNDER TREMENDOUS PRESSURE TO MAKE SUCH A STATEMENT. I N HIS STATEMENT HE MENTION ED THAT EVEN THE LICENCE AND KVAT REGISTRATION OF M/S. PRINCE ROLLER FLOUR MILLS (P) LTD. WAS IN HIS NAME. IT WAS ALSO ADMITTED FACT THAT THE SEARCH CONDUCTED AT HIS PREMISES, OR THE SURVEY AT HIS BUSINESS PREMISES DID NOT YIELD ANY DOCUMENTARY EVIDENCE TO SHOW THAT WHAT WAS SOLD TO HIM BY THE ASSESSEE WAS NOT WHEAT BUT WHEAT PRODUCTS. IT IS THE FACT THAT THE INCOME TAX/VAT RETURN FILED BY HIM WOULD REVEAL THAT HE HA D BEEN REGULARLY TRADING IN WHEAT AND STEEL SCRAP. THE I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 47 FACT THAT HE HAS SUPPLIED SUBSTANTIAL QUANTITIES OF WHEAT TO WELL ESTABLISH ED CONCERNS LIKE M/S. YAMUNA ROLLER FLOUR MILLS AND AL SO TO THE ASSESSEE WAS EVIDENT FROM THE BOOKS OF ACCOUNTS IMPOUNDED. THE CO PIES OF CONFIRMATION OF WHEAT FROM M / S YAMUNA ROLLER FLOUR MILLS WERE FILED BEFORE THE LOWER AUTHORITIES IN PAPER BOOK PAGE NOS. 20 TO 22. THE AUTHORITIES OUGHT TO HAVE COMPARED THE SE EVIDENCES WITH THE FINDINGS EMANATING FROM THE SWORN STATEMENTS. 11.3 I N THE PROCEEDINGS UNDER S ECTION 133A, IN THE CASE OF SHRI. P.K. KUNJUMO I DEEN , NO MATERIAL EVIDENCES TO THE CONTRARY WERE RECOVERED FROM HIS PREMISES OR FROM THE PREMISES OF PRINCE ROLLER FLOUR MILLS (P) L T D . THE ENTIRE SALE OF WHEAT EFFECTED BY THE ASSESSEE TO P.K.KUNJUMOIDEEN WER E DULY SUPPORTED BY CREDIT INVOICES ISSUED BY THE AS SESSEE AND ENTRIES IN THE STOCK REGISTER, RECEIPT OF SALE PROCEEDS F ROM HIM THROUGH PROPER BANKING CHANNELS, VARIOUS STATUTORY RETURNS, MONTHLY AS WELL AS ANNUALLY FILED BY US AND HIM BEFORE THE VAT AUTHORITIES, REMITTANCE OF TAX TO THE S T ATE EXCHEQUER ON SUCH SALES ETC. T HE ASSESSMENT PROCEEDING S UNDER THE VA T R ULES ALSO STANDS COMPLETED WITHOUT ANY ADVERSE REMARKS. T HE ASSESSEE WAS SELLING WHEAT WITHOUT MANUFACTURING OR PROCESSING TO OTHERS (QUANTITIES IN METRIC TONNE) FOR VARIOUS YEARS AS FOLLOWS: SL. N O. NAME OF PARTY A.Y. 2010 - 11 A.Y. 2011 - 12 A.Y.2012 - 13 A.Y. 2013 - 14 A.Y. 2014 - 15 1. BINDU TRADERS 125.60 86.310 2. CENTRAL STORES 62.090 3. COIMBATORE ROLLER FLOUR MILLS 239.230 4. ESSEM TRADERS 54.100 I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 48 5. HARIKRISHNA AGENCIES 31.480 40,700 148.960 6. MALIAKKAL ROLLER FLOUR MILLS 159.690 7. PERIYAR AGRO PRODUCTS 70.760 8. PREMIER AGRO PRODUCTS 10.080 506.280 9. RETAIL SALES 4760.600 625.600 83.500 10. S.R. TRADERS 93.410 41.600 11. SREERAMA ROLLER FLOUR MILLS 263.90 12. SRINIVASA ROLLER FLOUR MILLS 70.990 11. 4 IT WAS THE PLEA OF THE ASSESSEE THAT TH E CO MMERCIAL TAX AUTHORITIES HAD ON MANY OCCASIONS INSPECTED THEIR PREMISES AND VERIFIED THE BOOKS AND RECORDS ETC . RELATING TO PURCHASE, PRODUCTION, SALE ETC. PERIODICALLY. EVEN ON 12.07.2013, A F EW D AYS BEFORE THE SEARCH UNDER SECTION 132, THERE WAS AN INSPECTION BY THE VAT AUTHORITIES . THE ASSESSEE PRODUCED THE COPIES OF MAHASARS DATED 12.07.2013 AND PROCEEDINGS DATE D 30.01.2014 ISSUED BY THE VAT DEPARTMENT BEFORE THE LOWER AUTHORITIES WHICH ALSO DID NOT YIELD ANY ADVERSE FINDINGS. C ONTRARY TO THE PROCEEDINGS UNDER SECTION 132 WHERE NO EFFORT WAS MADE BY THE DEPARTMENT TO PHYSICALLY VERIFY AND RECONCILE THE STOCK AVA ILABLE AT THE PREMISES, THE VAT DEPARTMENT HA D ELABORATELY CONDUCTED PHYSICAL VERIFICATION OF THE ENTIRE S T OCK AT THEIR PREMISES AND THE ALLEGED VARIATION WAS VERY MINISCULE WHICH ITSELF IS INDICATIVE OF THE FACT THAT THE TRANSACTION BETWEEN P.K.KUNJUMOIDE EN AND PRINCE ROLLER FLOUR MILLS (P) LTD. AS RECORDED IN THE VARIOUS BOOKS WERE GENUINE . AN ANALYSIS OF THESE FACTS GOES TO CLEARLY PROVE THAT WHAT WAS SOLD BY PRINCE ROLLER FLOUR MILLS (P) LTD. WAS RAW WHEAT ONLY TO P.K.KUNJUMOIDEEN . I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 49 11.4.1 FURTHER, A LL THE SALES DETAILS OF TEE KAY RICE MILLWERE ACCEPTED BY THE VAT AUTHORITIES AND THERE WAS NO ADVERSE REPORT FROM THE VAT AUTHORITIES. AS HELD BY CIT VS. ANANDHA METAL CORPORATION 273 ITR 262 (MAD.)WHEREIN IT WAS HELD THAT RETURN ACCEPTED BY THE COMMERCIAL TAX DEPARTMENT UNDER THE TAMIL NADU GENERAL SALES TAX ACT IS BINDING ON THE INCOME - TAX AUTHORITIES AND THE ASSESSING OFFICER HAS NO POWER TO SCRUTINIZE THE RETURN SUBMITTED BY TH E ASSESSEE TO THE COMMERCIAL TAX DEPARTMENT UNDER THE PROVISIONS OF THE TAMIL NADU GENERAL SALES TAX ACT AND AS ACCEPTED BY THE SAID AUTHORITIES. TH EREFORE, THE ASSESSING OFFICER DOES NOT HAVE ANY JURISDICTION TO GO BEYOND THE VALUE OF THE CLOSING STOCK DE CLARED BY THE ASSESSEE AND ACCEPTED BY THE COMMERCIAL TAX DEPARTMENT. 11. 5 IN THE SWORN STATEMENT TAKEN FROM SHRI SABARIGIR EESAN, ACCOUNTANT, IT WAS STATED THAT THERE WAS NO ACTUAL SALE OF WHEAT TO S HRI P.K. KUNJUMOIDEEN BUT THE ITEMS SOLD WERE WHEAT PRODUCTS VI Z. MAIDA, SOOJI, ATTA AND BRAN. HOWEVER, THE STATEMENT WAS ALSO SAID T O BE RECORDED UNDER TREMENDOUS PRESSURE SITUATION . HOWEVER, THE STATEMENT RECORDED FROM SHRI SABARIG IREESAN ALSO SUFFER ED FROM SERIOUS MISTAKES AND IT WAS ON RECOGNISING TH IS THAT HE HAD RETRACTED FROM HIS OWN FINDINGS, BEFORE THE ASSESSING AUTHORITY . 11. 6 IN THE STATEMENT OF SHRI PREMIL DEEP M. , MANAGER, HE HA D JUST S T ATED THAT HE WAS LOOKING AFTER THE ADMINISTRATION SIDE OF THE GROUP OF COMPANIES, AND HA D NOT CONCURRED WITH T HE STATEMENTS MADE BY MR SABARIG IREESAN NOR HA D POINT ED OUT ANY I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 50 UN ACCOUNTED TRANSACTION. IT WAS ONLY SAID THAT SINCE THE MATTER WAS PERSONALLY BEING HANDLED BY MR. SABARI G IREESAN , HE WOULD BE A BETTER PERSON TO THROW LIGHT ON THE FACTS AND THIS CANNOT BE TERMED AS AN ADMISSION BY ITSELF OF UNACCOUNTED TRANSACTION, BY ANY STRETCH OF IMAGINATION. THIS STATEMENT WAS RETRACTED BY HIM AS HE HAD WRITTEN THE SAME UNDER COERCION AND THREAT. RE TRACTION STATEMENTS BY WAY OF AFFIDAVIT WERE PREPARED ON 06.09 . 2013 WITHOUT SEEING THE COPIES O F THE STATEMENT RECORDED ON THE PREVIOUS DATE FROM THE RESPECTIVE PERSONS WHO FELT THAT THE STATEMENTS GIVEN WERE WRONG AND THE SAME WAS GIVEN UNDER PRESSURE FROM THE INVESTIGATING OFFICERS. SUBSEQUENTLY BO TH SHRI SABARI GIRE ESAN AND S H RI P.K. KUNJUMOIDEEN H AD APPLIED FOR THE COPIES OF STATEMENTS ON 18.11.2014 AND IT WA S RECEIVED ON THE SAME DAY. R ETRACTION STATEMENTS OF THESE TWO PERSONS WERE PLACED BEFORE US IN PAPER BOOK, P AGE NO S . 57 TO 66 & 109 TO 140 R ESPECTIVELY. THE ASSESSING OFFICER HAD NOT MADE ANY REFERENCE TO THE RETRACTION STATEMEN TS F ILED BY THESE PERSONS IN THE ASSESSMENT ORDER. 11. 7 THE S WORN STATEMENTS W E RE TAKEN FROM S HRI T.K. ABDU L KARIM , MANAGING DIRECTOR OF THE COMPANY ON 05.09.2013 AND 30 . 09.2013 AND NO SPECIFIC QUESTION WAS ASKED TO HIM WHETHER THE SALE TO S HRI P.K. KUNJUMOIDE E N WER E SALE OF WHEAT OR WHEAT PRODUCTS. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 51 11. 8 THE SEIZED MATERIALS AS REFERENCE TO SECTION 132(4) STATEMENT FROM SHRI B. SABARIGIREESAN ARE AS FOLLOWS: S.NO. SEARCH DOC. REFERENCE NO. CONTENTS 1. CHN/11/13 - 14/EAM/A - 36 BUNCH OF LOOSE SHEET S SERIALLY NUMBERED FROM 1 TO 13 CONTAINING LEDGER ACCOUNTS IN THE CASE OF THE APPELLANT REGARDING WHEAT SOLD TO P.K. KUNJUMOIDEEN FOR THE FINANCIAL YEAR 2012 - 13 2. CHN/11/13 - 14/EAM/A - 37 BUNCH OF LOOSE SHEETS SERIALLY NUMBERED FROM 1 TO 13 CONTAINING LEDG ER ACCOUNTS OF SHRI P.K. KUNJUMOIDEEN FROM 1.4.2013. 3. CHN/11/13 - 14/EAM/A - 38 BUNCH OF LOOSE SHEETS SERIALLY NUMBERED FROM 1 TO 21 CONTAINING WHEAT RECEIPT FROM GODOWN AND DAILY COLLECTION REPORT AS ON 04.09.2013. 11.8.1 IN THE PRESENT CASE , THEO NE SEIZED DOCUMENT BEARING REFERENCE NO. CHN/11/13 - 14/EAM/A - 38 READS AS FOLLOWS: I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 52 JAYASHREE STRORES 41000 FATHIMA SUGARS 19990 RAMACHANDRAN & CO. 12410 ANWAR TRADERS 20145 TOTAL 93545 SHRI AMMAN TRADERS 31310 EPM TRADERS 4530 S. BALAKRISHNAN 19500 TOTAL 57440 TOTAL CHEQUES 93545 TOTAL CASH 57440 TOTAL 150985 PREMIL DEEP DATED 4/9/2013 11.8.2 THESE DOCUMENTS REPRESENT ED THE COLLECTION ON SALE AMOUNT ON 04.09.2013, THE IMMEDIATE PREVIOUS DAY OF THE SEARCH ON 05.09.2013. NOR MALLY THE ENTRIES OF THE PREVIOUS DAY WERE MADE IN THE ACCOUNTS ON THE SUBSEQUENT DAY. SINCE THE SEARCH HA D COMMENCED AT 10.30 AM ON 05 09 2 01 3, THE ENTRY OF THE TRANSACTION COULD N OT BE ENTERED IN THE COMPUTER. THE TOTAL A MOUNT OF RS. 1 , 50,985/ - OUT OF WHICH RS. 93,545/ - WERE BY WAY OF CHEQUES AND THE BALANCE OF RS. 57,440/ - WAS IN CASH AND AFTER THE SEARCH THIS TRANSACTION WAS ENTERED IN THE ACCOUNTS . THUS, THE ENTIRE SEARCH AND S URVEY OPERATION THAT TOOK PLACE AT THE I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 53 PREMISES OF PRINCE ROLLER FLOUR MILLS ( P ) LTD. OR SHRI P.K . KUNJUMOIDEEN DID NOT UNEARTH EVEN A SINGLE PIECE O F PAPER WHICH CAN POINT OUT ANY UNACCOUNTED DEALINGS LIKE LIST OF SUNDRY DEBTORS OR COLLECTION. IN A S EAR CH ASSESSMENT, ADDITIONS CAN ONLY BE MADE ON THE STRENGTH OF MATERIAL EVIDENCES UNEARTHED DURING THE COURSE OF SUCH PROCEEDING OR FOUND DURING THE COURSE OF POST SEARCH , WHICH IN TH E PRESENT CASE WAS ABSENT . 11.8. 3 IN THESE CASES, T HERE WERE NO EVIDENCE OR INCRIMINATING DOCUMENTS SEIZED AT THE T IME OF SEARCH AND NO DOCUMENTARY EVIDENCE TO PROVE THAT THE SALE WAS EFFECTED AS WHEAT PRODUCTS WERE OBTAINED AT THE TIME OF SEARCH B O TH AT THE P REMISES OF THE ASSESSES AND IN THE P REMISES OF S H RI P.K. K UNJU MOIDEEN AND HENCE , THE ASSESSMENT S CANNOT BE UPHELD . 11 .8. 4 FURTHER, T HERE ARE NO EVIDENCES OR INCRIMINATING DOCUMENTS SEIZED AT THE TIME OF SEARCH. NO DOCUMENTARY EVIDENCE TO PROVE THAT THE SALE WAS EFFECTED AS WHEAT PRODUCTS, ARE OBTAINED AT THE TIME OF SEARCH BOTH AT THE PLACE OF ASSESSEE COMPANY AND IN THE PLACE OF SHRI P.K. KUNJUMOIDEEN. I N THE ABSENCE OF ANY SUCH EVIDENCE IT IS WRONG TO PRESUME THAT THE SALES EFFECTED AS WHEAT PRODUCTS TO ENABLE THE DIFFERENTIAL INCOME IN THE ASSESSMENT AND IN THE ABSENCE OF ANY EVIDENCES TO INDICATE THAT THE WHEAT IS SOLD AS WHEAT PROD UCTS, THE ASSESSMENT AFTER ASSUMING THE QUANTITY OF WHEAT IS SOLD AS WHEAT PRODUCTS IS IMPROPER . I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 54 11 .8. 5 IN THESE CASES, THE LOWER AUTHORITIES ASSUMED THAT THE ASSESSEE SOLD WHEAT PRODUCTS TO S HRI P.K.KUNJUMOIDEEN OF M/S. TEE KAY RICE MILL WITHOUT ANY EVIDENCE. THE LOWER AUTHORITIES HAVE COME TO THE CONCLUSION THAT WHEAT PRODUCTS WERE SOLD WITHOUT ANY EVIDENCES SEIZED AT THE TIME OF SEARCH. IT IS TO BE NOTICED THAT T HE ASSESSING OFFICER VERIFIED THE STOCK, PRODUCTION AND SALES REC ORDS OF WHEAT PRODUCTS AND COULD NOT FIND OUT ANY MISTAKE. IN ADDITION TO THIS, THE SALE OF WHEAT PRODUCTS TO S HRI P.K. KUNJUMOIDEEN WAS NOT EVIDENCED AT THE TIME OF SEARCH BY SUPPORTING DOCUMENTS. THERE WAS NO EVIDENCE BROUGHT ON RECORD BY THE LOWER AUTHO RITIES FOR SALE OF WHEAT PRODUCTS BY M/S. TEEKAY RICE MILL, PROPRIETOR SRI.P.K. KUNJUMOIDEEN. THERE WERE NO SALES INVOICES, GATE OUT PASSES, TRANSPORT DOCUMENTS FOUND DURING THE COURSE OF SEARCH IN SUPPORT OF SALE OF WHEAT PRODUCTS. THERE WERE NO SEIZED MA TERIALS TO SUGGEST THE CONVERSION OF WHEAT INTO WHEAT PRODUCTS IN THE FORM OF ELECTRICITY BILLS, LABOUR PAY ROLLS, PRODUCTION RECORDS , AND OTHER ADMINISTRATIVE RE CORDS. WITHOUT ANY MATERIAL FOUND DURING THE COURSE OF SEARCH WITH REGARD TO CONVERSION WHEAT INTO WHEAT PRODUCTS AND THE SALE OF THE SAME, THE CIT(A) SUSTAINED THE ADDITION OF 50% OF THE ADDITION MADE BY THE ASSESSING OFFICER AS PER THE OBSERVATION IN PAGE NO. 2 4 OF THE APPELLATE ORDER. IN OUR OPINION, IN ABSENCE OF ANY EVIDENCE SEIZED AT THE TIME OF SEARCH REGARDING THE SALE OF WHEAT PRODUCTS, THE ESTIMATED ADDITION ASSUMING THE UNDISCLOSED SALE OF WHEAT PRODUCTS IS WRONGLY MADE AND THE ADDITION CANNOT BE SUSTAI NED . 11 .8 . 6 FURTHER, T HE COPIES OF INCOME TAX RETURN S OF SHRI P.K. KUNJUMOIDEEN FOR THE AY 2008 - 09 TO AY 2014 - 15 WERE PLACED BEFORE US IN THE PAPER BOOK, PAGE NO S . I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 55 81 TO 102. THE SUMMARY OF MA J OR PURCHASES EFFECTED BY HIM OVER THE YEARS IS AS FOLLOWS WHICH WILL CATEGORICALLY ESTABLISH THAT THE TRANSACTIONS WERE NOT LIMITED TO ONE OR TWO DEALINGS, BUT THERE WERE CONTINUOUS TRANSACTIONS, INVOLVING SUBSTANTIAL QUANTITIES AND HE WAS NOT ENTIRELY ASSOCIAT ED WITH OUR CONCERN, BUT WERE ALSO DEALING WITH OTHE R BUSINESS ENTITIES TOO : A.Y S.NO. BILL NO.&DATE AMOUNT NAME OF SUPPLIER 2009 - 10 1 2502/29.12.08 3,30,55,700.00 K.S. ENTERPRISES, MAHWA, RAJASTHAN 2 020/18.05.09 70,98,537.00 SHREE BALAJI RICE MILL, SHAJAHANPUR 3 018/18.05.09 38,69,712.00 SEWAK INDUSTRIES, SHJAHANPUR 2010 - 11 4 01 - 018 18.05.09 23,29,219.00 RAM JI INDUSTRIES, S HAJAHANPUR 5. 01 - 017/18.05.09 31,54,906.00 SHREE GARG INDUSTRIES, SHAJAHANPUR 2010 - 11 6. 10/18.05.09 7,88,727.00 MAA BHAGAVATHI INDUSTRIES, SHAJAHANPUR 7. 01 - 015/18.05.09 23,66,179.00 SHIV OM TRADING CO., SHAJAHANPUR 8. 01 - 015/18.05.09 7,88,727.00 ANILKUMAR SANJAYKUMAR, SHAJAHANPUR 9. 0911615/31.12.09 20,38,800.00 KERALA STATE CIVIL SUPPLIES CORPORATION LTD. 2011 - 12 10. 043/01.05.10 39,40,700.00 R.L. ENTERPRISES, SHAJAHANPUR 11. 3522/01.05.10 31,91,214.00 RAHUL RICE TRADERS, DELHI 12. 01 - 41/01.05.10 22,97,403.00 AMBEY EDIBLE FOOD PRODUCTS (P) LTD., SHAJAHANPUR 13 027/01.05.10 23,71,950.00 SUDHIR TRADING CO., SHAJAHANPUR 14 682/ - 34/01.05.10 26,36,100.00 FOOD CORPORATION OF INDIA, PALAKKAD 15 269 - 18/07.09.12 1,33,46,300.00 FOOD CORPORATION OF INDIA, THRISSUR 2013 - 14 16 269 - 43/03.10.12 1,57,05,500.00 FOOD CORPORATION OF INDIA, CHALAKUDY 17. 269 - 49/16.11.12 63,83,200.00 FOOD CORPORATION OF INDIA, CHALAKUDY 11. 9 FURTHER, THERE WAS DOCUMENTARY EVIDENCE IN SUPPORT OF THE CONTENTIONS OF THE ASSESSING OFFICER THAT WHEAT PRODUCTS WER E SOLD TO S HRI P.K. KUNJUMOIDEEN , S H RI S ABARIGIREESAN AND S H RI P.K . KUNJ U MOIDEEN HA D FILED RETRACTION STATEMENTS BEFORE THE ASSESSING OFFICER , BUT THE ASSESSING OFFICER HA D NOT REFERRED THE RETRACTION STATEMENTS IN THE ASSESSMENT ORDER. T HERE WERE NO OTHER SEIZED DOCUMENTS TO INDICATE T HAT WHEAT PRODUCTS WER E SOLD TO S HRI P.K. KUNJUMOIDEEN AS CLAIMED BY THE ASSESSING OFFICER. IN THE ABSENCE OF ANY SUCH EVIDENCE THE ASSESSMENT OF THE I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 56 ADDITIONAL INCOME FOR THE VARIOUS ASSESSMENT YEARS BY WAY OF DIFFERENTIAL PROFIT CANNOT BE SUSTAINED. 12. WITH REGARD TO PLACING RELIANCE ON THE ABOVE STATEMENT RECORDED FROM SHRI P.K. KUNJUMOIDEEN, THERE IS NO BAR TO RELY UPON IT IN RESPECT OF PENDING PROCEEDINGS BEFORE THE ASSESSING OFFICER. IT IS A PIECE OF EVIDENCE BUT NOT ON THE SOLE BASIS FOR IMPOSIN G ADDITION UPON THE ASSESSEE OR TO DENY ANY BENEFIT WHICH AN ASSESSEE OTHERWISE IS ENTITLED TO OR SUBJECT HIM TO PERSECUTION. IF THERE EXISTS ANY OTHER SUPPORTIVE MATERIAL, THE STATEMENT RECORDED U/S. 132(4) CAN CERTAINLY BE TAKEN AID OF. CONVERSELY, IN THE ABSENCE OF ANY SUCH SUPPORTIVE MATERIAL, STATEMENT OF THAT NATURE CANNOT CONSTITUTE THE BASIS FOR SUSTAINING OR MAKING ADDITIONS. THUS, WHERE THE STATEMENT RECORDED U/S. 132(4) WAS RETRACTED VIDE AFFIDAVIT DATED 06/09/2013 AND THE DEPARTMENT DID NOT PRESS INTO SERVICE ANY OTHER MATERIAL, IN SUCH A SITUATION, THE STATEMENT RECORDED U/S. 132(4) OF THE ACT CANNOT CONSTITUTE THE BASIS OF ADDITION AND THE ADDITION CANNOT BE MADE SOLELY ON THE BASIS OF SUCH STATEMENT. IN THE PRESENT CASE, THE ASSESSING OFF ICER DREW HIS CONCLUSION ON THE BASIS OF STATEMENT RECORDED U/S. 132(4) OF THE ACT FROM MR. P.K. KIUNJUMOIDEEN TO HOLD THAT HE IS A FRONT PERSON ON BEHALF OF THE PRESENT ASSESSEE AND HE IS CARRYING ON THE BUSINESS ON BEHALF OF THE PRESENT ASSESSEE. IN OUR OPINION, THE STATEMENT OF SHRI P.K. KUNJUMOIDEEN HAS NO EVIDENTIARY VALUE ON THE REASON THAT THIS STATEMENT WAS RETRACTED VIDE AFFIDAVIT DATED 06/09/2013 WHICH WAS NOT EXAMINED BY THE ASSESSING OFFICER. HE HAS TOTALLY IGNORED THE SAME. FURTHER, THE STATE MENT RECORDED FROM SHRI I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 57 P.K. KUNJUMOIDEEN ON 05/09/2013 WAS NOT CONFRONTED TO THE ASSESSEE FOR CROSS EXAMINATION. FROM THAT POINT OF VIEW ALSO THE STATEMENT RECORDED U/S. 132(4) IS NOT HAVING ANY EVIDENTIARY VALUE. 12 .1 FURTHER, U/S. 153A OF THE ACT, THE STATEMENT RECORDED U/S. 132 OF THE I.T. ACT, THE BOOKS OF ACCOUNTS, OR OTHER DOCUMENTS OR ANY ASSETS OR REQUISITION U/S. 153 A , THE ASSESSING OFFICER AFTER ISSUING NOTICE TO FURNISH INCOME OF THE ASSESSEE IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITH IN SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED OR REQUISITION MADE , THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASS ESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELATING TO THE PREVIOUS YEAR IN WHICH THE SEARCH IS CONDUCTED OR REQUISITION MADE ,AS THE CASE MAY BE, OF BRINGING ON RECORD MATERIAL TO SHOW THAT THERE IS UNDISCLOSED INCOME OF THE ASSESSEE. IN OTHER WORDS, THERE SHOULD BE MATERIAL ON RECORD TO SHOW THAT INCOME IS ASSESSED ON THE BASIS OF MATERIAL OR DOCUMENTS IN THE HANDS OF THE ASSESSEE AND THE ADDITION CA NNOT BE MADE IN VACCUM . THE GUESS WORK IS NOT POSSIBLE IN THE CASE OF SEARCH ASSESSMENT FRAMED U/S. 143(3) R.W.S. 153A OF THE I.T. ACT. THE ASSESSING OFFICER SHOULD HAVE BASIS FOR HOLDING THAT SHRI P.K. KUNJUM OIDEEN IS ACTED ON BEHALF OF THE PRESENT ASSESSEE. E VEN OTHERWISE, U NCORROBORATIVE STATEMENTS COLL ECTED BY THE ASSESSING OFFICER CANNOT BE AN EVIDENCE FOR SUSTENANCE OF ADDITION MADE BY THE ASSESSING OFFICER. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 58 12. 2 AT THIS STAGE, IT IS PERTINENT TO REFER TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF VINOD SOLANKI ( 2009) (233) ELT 157 OBSERVED AS UNDER : '22. IT IS A TRITE LAW THAT EVIDENCES BROUGHT ON RECORD BY WAY OF CONFESSION WHICH STOOD RETRACTED MUST BE SUBSTANTIALLY CORROBORATED BY OTHER INDEPENDENT AND COGENT EVIDENCES, WHICH WOULD LEND ADEQUATE ASSURANCE TO THE COURT THAT IT MAY SEEK TO RELY THEREUPON. WE ARE NOT OBLIVIOUS OF SOME DECISIONS OF THIS COURT WHEREIN RELIANCE HAS BEEN PLACED FOR SUPPORTING SUCH CONTENTION BUT WE MUST ALSO NOTICE THAT IN SOME OF THE CASES RETRACTED CONFESSION HAS BEEN USED AS A PIE CE OF CORROBORATIVE EVIDENCE AND NOT AS THE EVIDENCE ON THE BASIS WHEREOF ALONE A JUDGMENT OF CONVICTION AND SENTENCE HAS BEEN RECORDED. [SEE PON ADITHAN VS. DY. DIRECTOR, NARCOTICS CONTROL BUREAU (1999) 6 SCC 1] ............... 12. 3 YET AGAIN IN ROMESH CHANDRA MEHTA VS. STATE OF WEST BENGAL (1969) 2 SCR 461 ALTHOUGH THIS COURT HELD THAT ANY STATEMENT MADE UNDER SS. 107 AND 108 OF THE CUSTOMS ACT BY A PERSON AGAINST WHOM AN ENQUIRY IS MADE BY A CUSTOMS OFFICER IS NOT A STATEMENT MADE BY A PERSON AC CUSED OF AN OFFENCE, BUT AS INDICATED HEREINBEFORE, HE BEING AN OFFICER CONCERNED OR THE PERSON IN AUTHORITY, S. 24 OF THE INDIAN EVIDENCE ACT WOULD BE ATTRACTED. 12. 4 IT HAS BEEN SIMILARLY HELD BY THE HONBLE SUPREME COURT IN THE CASE OF K.T.M.S. MOHD. & ANR. VS. UNION OF INDIA ( 1992 ) (197 ITR 196) AS UNDER : 'WE THINK IT IS NOT NECESSARY TO RECAPITULATE AND RECITE ALL THE DECISIONS ON THIS LEGAL ASPECT. BUT SUFFICE IT TO SAY THAT THE CORE OF ALL THE DECISIONS OF THIS COURT IS TO THE EFFECT THAT THE VOLUN TARY NATURE OF ANY STATEMENT MADE EITHER BEFORE THE CUSTOMS AUTHORITIES OR THE OFFICERS OF ENFORCEMENT DIRECTORATE UNDER THE RELEVANT PROVISIONS OF THE RESPECTIVE ACTS IS A SINE QUA NON TO ACT ON IT FOR ANY PURPOSE AND, IF THE STATEMENT APPEARS TO HAVE BEE N OBTAINED BY ANY INDUCEMENT, THREAT, COERCION OR BY ANY IMPROPER MEANS, THAT STATEMENT MUST BE REJECTED BREVI MANU. AT THE SAME TIME, IT IS TO BE NOTED THAT, MERELY BECAUSE A STATEMENT IS RETRACTED, I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 59 IT CANNOT BE RECORDED AS INVOLUNTARY OR UNLAWFULLY OBTAI NED. IT IS ONLY FOR THE MAKER OF THE STATEMENT WHO ALLEGES INDUCEMENT, THREAT, PROMISE, ETC. TO ESTABLISH THAT SUCH IMPROPER MEANS HAVE BEEN ADOPTED. HOWEVER, EVEN IF THE MAKER OF THE STATEMENT FAILS TO ESTABLISH HIS ALLEGATIONS OF INDUCEMENT, THREAT, ETC., AGAINST THE OFFICER WHO RECORDED THE STATEMENT, THE AUTHORITY, WHILE ACTING ON THE INCULPATORY STATEMENT OF THE MAKER, IS NOT COMPLETELY RELIEVED OF HIS OBLIGATION AT LEAST SUBJECTIVELY TO APPLY ITS MIND TO THE SUBSEQUENT RETRACTION TO HOLD THAT THE INCULPATORY STATEMENT WAS NOT EXTORTED. IT THUS BOILS DOWN TO THIS THAT THE AUTHORITY OR ANY COURT INTENDING TO ACT UPON THE INCULPATORY STATEMENT AS A VOLUNTARY ONE SHOULD APPLY ITS MIND TO THE RETRACTION AND REJECT THE SAME IN WRITING. IT IS ONLY ON THIS PRINCIPLE OF LAW THAT THIS COURT, IN SEVERAL DECISIONS, HAS RULED THAT, EVEN IN PASSING A DETENTION ORDER ON THE BASIS OF AN INCULPATORY STATEMENT OF A DETENU WHO HAS VIOLATED THE PROVISIONS OF THE FOREIGN EXCHANGE REGULATION ACT OR THE CUSTOMS ACT, ETC., THE DETAINING AUTHORITY SHOULD CONSIDER THE SUBSEQUENT RETRACTION AND RECORD ITS OPINION BEFORE ACCEPTING THE INCULPATORY STATEMENT LEST THE ORDER BE VITIATED. REFERENCE MAY BE MADE TO A DECISION OF THE FULL BENCH OF THE MADRAS HIGH COURT IN ROSHAN BEEVI VS. JT. SECRETARY TO THE GOVERNMENT OF TAMIL NADU, PUBLIC DEPTT. ETC. (1983) MAD LW (CRL.) 289 : (1984) 15 ELT 289 : AIR 1984NOC 103, TO WHICH ONE OF US (S. RATNAVEL PANDIAN, J.) WAS A PARTY.' 12. 5 THE RATIO THAT EMERGES FROM THE AFORESAID DECISIONS IS THAT ONCE A STATEMENT IS RETRACTED, THE CONTENTS STATED IN THE RETRACTED STATEMENT MUST BE SUBSTANTIALLY CORROBORATED BY OTHER INDEPENDENT AND COGENT EVIDENCE. IT HAS BEEN CONSISTENTLY HELD BY VARIOUS COURTS THAT SOLELY SWORN STATEMENT CANNOT BE RELIED UPO N FOR MAKING ANY ADDITION AND MUST BE CORROBORATED BY INDEPENDENT EVIDENCE FOR THE PURPOSES OF MAKING ASSESSMENTS. 12 .6 WE ARE OF THE VIEW THAT THE STATEMENT RECORDED U/S. 132(4) CAN NOT BE INDEPENDENTLY USED FOR MAKING ANY ADDITION IN THE HANDS OF THE ASSESSE E AND THE SAID STATEMENT CANNOT, IN OUR VIEW, BE THE SOLE BASIS FOR MAKING ANY ADDITION AND MUST BE INDEPENDENTLY CORROBORATED BY EVIDENCES. THUS , ON A CAREFUL READING OF THE I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 60 D ECISIONS OF THE HONBLE SUPREME COURT REFERRED ABOVE , WE ARE OF THE V IEW THAT THE LEGAL POSITION THAT EMERGES IS THAT A SWORN STATEMENT, THOUGH BI NDS THE ASSESSEE, IT CANNOT BE THE SOLE BASIS FOR MAKING THE ASSESSMENT. IT IS OPEN TO THE ASSESSEE TO SHOW THE CIRCUMSTANCES IN WHICH CONFESSIONAL STATEMENTS WERE RECORDED AND ONCE THE ASSESSEE PROVES THAT CONFESSIONAL STATEMENTS WERE RECORDED UNDER THREAT AND COERCION AND RETRACTS FROM THE SAME, THE CONFESSIONAL STATEMENTS CANNOT BE THE SOLE BASIS FOR MAKING ASSESSMENTS OR FOR MAKING ANY ADDITION IN THE HANDS OF THE ASSESSEE. 12. 7 FURTHER, IN THE CASE OF CIT VS. S. KHADER KHAN SON (300 ITR 157), THE MADRAS HIGH COURT HELD AS FOLLOWS: THE PRINCIPLES RELATING TO SECTION 133A OF THE INCOME TAX ACT, 1961, ARE AS FOLLOWS: (I) AN ADMISSION IS EXTREMELY AN IMPORTANT PIECE OF EVIDENC E BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT AND THAT THE ASSESSEE SHOULD BE GIVEN A PROPER OPPORTUNITY TO SHOW THAT THE BOOKS OF ACCOUNTS DO NOT CORRECTLY DISCLOSE THE CORRE CT STATE OF FACTS ; (II) IN CONTRADISTINCTION TO THE POWER UNDER SECTION 133A, SECTION 132(4) ENABLES THE AUTHORIZED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION CAN ALSO BE USED IN EVIDENCE UNDER THE INCOME - TAX ACT . ON THE OTHER HAND, WHATEVER STATEMENT IS RECORDED UNDER SECTION 133A OF THE INCOME - TAX ACT IT IS NOT GIVEN ANY EVIDENTIARY VALUE OBVIOUSLY FO R THE REASON THAT THE OFFICER IS NOT AUTHORISED TO ADMINISTER OATH AND TO TAKE ANY SWORN STATEMENT WHICH ALONE HAS EVIDENTIARY VALUE AS CONTEMPLATED UNDER LAW ; (III) THE EXPRESSION 'SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OF FICER' CONTAINED IN SECTION 158BB OF THE INCOME - TAX ACT, 1961, WOULD INCLUDE THE MATERIALS GATHERED DURING THE SURVEY OPERATION UNDER SECTION 133A ; (IV) THE MATERIAL OR INFORMATION FOUND IN THE COURSE OF SURVEY PROCEEDING COULD NOT BE A BASIS FOR MAKING ANY ADDITION IN THE BLOCK ASSESSMENT ; (V) FINALLY, THE WORD 'MAY' USED IN SECTION 133A (3)(III) OF THE AC T, VIZ., 'RECORD THE STATEMENT OF ANY PERSON WHICH MAY BE USEFUL FOR, OR RELEVANT TO, ANY PROCEEDING UNDER THIS ACT, AS ALREADY EXTRACTED ABOVE, I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 61 MAKES IT CLEAR THAT THE MATERIALS COLLECTED AND THE STATEMENT RECORDED DURING THE SURVEY UNDER SECTION 133A ARE NOT CONCLUSIVE PIECE OF EVIDENCE BY ITSELF. A SURVEY WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE - FIRM. ONE OF THE PARTNERS IN HIS SWORN STATEMENT OFFERED AN ADDITIONAL INCOME OF RS.20 LAKHS FOR THE ASS ESSMENT YEAR 2001 - 02 AND RS.30 LAKHS FOR THE ASSESSMENT YEAR 2002 - 03. HOWEVER, THE SAID STATEMENT WAS RETRACTED BY THE ASSESSEE - FIRM IN ITS LETTER DATED AUGUST 3, 2001, STATING THAT THE PARTNER FROM WHOM A STATEMENT WAS RECORDED DURING THE SURVEY OPERATIO N UNDER SECTION 133A, WAS NEW TO THE MANAGEMENT AND HE COULD NOT ANSWER THE ENQUIRIES MADE AND AS SUCH HE AGREED TO AN AD HOC ADDITION. THE ASSESSING OFFICER BASED ON THE ADMISSIONS MADE BY THE ASSESSEE, WHICH WERE DIRECTLY RELATABLE TO THE DEFECTS NOTICE D DURING THE ACTION UNDER SECTION 133A OF THE ACT, RECOMPUTED THE ASSESSMENT. THE ORDER WAS SET ASIDE BY THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THIS ORDER WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE HIGH COURT: HELD, DISMISSING THE APPEAL, THAT IN VIEW OF THE SCOPE AND AMBIT OF THE MATERIALS COLLECTED DURING THE COURSE OF SURVEY ACTION UNDER SECTION 133A SHALL NOT HAVE ANY EVIDENTIARY VALUE. IT COULD NOT BE SAID SOLELY ON THE BASIS OF THE STATEMENT GIVEN BY ONE OF THE PARTNERS OF THE ASSESSEE - FIRM THAT THE DISCLOSED INCOME WAS ASSESSABLE AS LAWFUL INCOME OF THE ASSESSEE. 12. 8 FURTHER, T HERE WAS A CIRCULAR ISSUED BY C BDT ISSUED CIRCULAR IN F. NO. 286/ 98/2013 - IT(INV.II) DATED 1 8 TH DECEMBER 2014 STATING AS FOLLOWS: INSTANCES /COMPLAINTS OF UNDUE INFLUENCE/COERCION HAVE COME TO NOTICE OF THE CBDT THAT SOME ASSESSEES WERE COERCED TO ADMIT UNDISCLOSED INCOME DURING SEARCHES/SURVEYS CONDUCTED BY THE DEPARTMENT. IT IS ALSO SEEN THAT MANY SUCH ADMISSIONS ARE RETRACTED IN THE SUBSEQ UENT PROCEEDINGS SINCE THE SAME ARE NOT BACKED BY CREDIBLE EVIDENCE. SUCH ACTIONS DEFEAT THE VERY PURPOSE OF SEARCH/SURVEY OPERATIONS AS THEY FAIL TO BRING THE UNDISCLOSED INCOME TO TAX IN A SUSTAINABLE MANNER LEAVE ALONE LEVY OF PENALTY OR LAUNCHING OF PR OSECUTION. FURTHER, SUCH ACTIONS SHOW THE DEPARTMENT AS A WHOLE AND OFFICERS CONCERNED IN POOR LIGHT. I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 62 2. I AM FURTHER DIRECTED TO INVITE YOUR ATTENTION TO THE INSTRUCTIONS/GUIDELINES ISSUED BY CBDT FROM TIME TO TIME, AS REFERRED ABOVE, THROUGH WHICH TH E BOARD HAS EMPHASIZED UPON THE NEED TO FOCUS ON GATHERING EVIDENCES DURING SEARCH/SURVEY AND TO STRICTLY AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/UNDUE INFLUENCE. 3. IN VIEW OF THE ABOVE, WHILE REITERATING THE AFORESAID GUIDELINES OF THE BOARD, I AM DIRECTED TO CONVEY THAT ANY INSTANCE OF UNDUE INFLUENCE/COERCION IN THE RECORDING OF THE STATEMENT DURING SEARCH/SURVEY/OTHER PROCEEDING UNDER THE IT ACT, 1961 AND/OR RECORDING A DISCLOSURE OF UNDISCLOSED INCOME UNDER UNDUE PRESSURE/COE RCION SHALL BE VIEWED BY THE BOARD ADVERSELY. 12.9 FR OM THE ABOVE CIRCULAR, IT IS AMPLY CLEAR THAT THE CBDT HAS EMPHASIZED ON ITS OFFICERS TO FOCUS ON GATHERING EVIDENCES DURING SEARCH/SURVEY OPERATIONS AND STRICTLY DIRECTED TO AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/UNDER INFLUENCE. KEEPING IN VIEW THE GUIDELINES ISSUED BY THE CBDT FROM TIME TO TIME REGARDING STATEMENTS OBTAINED DURING SEARCH AND SURVEY OPERATIONS, IT IS UNDISPUTEDLY CLEAR THAT THE LOWER AUTHORITIES HAVE NOT COLLECTED ANY OTHER EVIDENCE TO PROVE THAT THE IMPUGNED INCOME WAS EARNED BY THE ASSESSEE. 12.9. 1 IN VIEW OF THE ABOVE DISCUSSION, THE STATEMENT OF SHRI P.K. KUNJUMOIDEEN CANNOT BE THE BASIS TO HOLD THAT HE IS ACTED AND CARRIED ON BUSINESS OF WHEAT PRODUCTS ON BEHALF OF THE ASSESSEE. ON THE OTHER HAND, THE EVIDENCE BR OUGHT ON RECORD BY THE ASSESSEE SHOWS THAT SHRI P.K. KUNJUMOIDEEN IS NOT CARRYING ON BUSINESS ON BEHALF OF THE ASSESSEE. 1 3 . SIMILARLY , SHRI M. PREMIL DEEP, MANAGER OF M/S. PRINCE ROLLER FLOUR MILL P LTD, KINASSERY, (PRFM) PALAKKAD HAD DEPOSED ON THE DAY OF THE S EARCH THAT THE ACCOUNTS I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 63 FOR THE CONCERN OF M/S. TEE K AY RICE MILL WAS ACTUALLY CONTROLLED FROM THE BUSINESS PREMISES OF M/S PRINCE ROLLER FLOUR MILL P LTD, KINASSERY, PALAKKAD AND THE ACCOUNTS WERE MAINTAINED BY ONE SUBRAMANIYAM. SHRI PREMIL IN HIS DEPOSITION HAS STATED THAT ACTUALLY NO RAW WHEAT WAS PASSED ON TO THE FIRM M/S. TEEKAY RICE MILL AND THE WHEAT BILLED IN THE NAME OF M/S TEE K AY RICE MILL S WAS MILLED AT M/S PRINCE ROLLER FLOUR MILL ITSELF AND IS SOLD IN THE MARKET AS WH EAT FLOUR IN THE FORM OF ATTA, MAIDA , SOOJI ETC. THE BILLING TO M/S. TEE K AY RICE MILL WAS SEEN DONE AT THE INSTRUCTIONS OF SHRI. ABDU L KAREEM. THE SALE PROCEEDS OF M/S. TEE K AY RICE MILL WAS REMITTED INTO ITS BANK ACCOUNT BY THE ROLLER FLOUR MILL S STAFF ON LY FROM MONEYS GIVEN TO THEM BY SHRI. ABDUL KAREEM. THE AMOUNT PAYABLE TO PRFM WAS T HEN REMITTED FROM ITS ACCOUNT INTO PRFM ACCOUNT. THE SAID STATEMENT WAS RETRACTED BY SHRI M. PREMIL DEEP VIDE AFFIDAVIT DATED 06/09/2013. 13.1 IN VIEW OF THIS, THE STATEME NT OF SHRI PREMIL DEEP CANNOT BE T HE BASIS TO HOLD THAT SRI.P.K.KUNJUMOIDEEN IS ACTED AND CARRIED ON BUSINESS OF WHEAT PRODUCTS ON BEHALF OF THE ASSESSEE. 14. A SIMILAR DEPOSITION WAS GIVEN BY SHRI. SABARIGIREESAN , ACCOUNTANT OF THE ASSESSES. HE ALSO STATED THAT NO RAW WHEAT WAS SENT TO M/S. TEE KAY RICE MILL S . HE STATED THAT ONLY TWO WHEAL PURCHASES MADE FROM FOOD CORPORATION OF INDIA ON 27/8/20 1 2 AND 9/10/2012 WERE ACTUALLY DONE BY IT. WHEAT PURCHASES SHOWN TO HAVE MADE FROM PRFM WAS ONLY A CCOM M ODATIVE IN NATURE. THE BILLING WAS MADE AT 1% MARKUP ON THE LANDING CO ST TO PRFM . HE ALSO IDENTIFIED MATERIALS IN CHN/11/J3 - I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 64 14/EAM/A - 38 AS THE SALES COLLECTION MADE ON THE MILLED FLOUR BY PRFM FROM THESE SALES AND THE SAID S UMS WERE NOT ENTERED IN THE TALLY ACCOUNTS AND THE AMOUNTS WERE GIVEN TO SHRI. ABDUL KAREERN DIRECT. T HE SAID STATEMENT WAS RETRACTED BY SHRI SABARIGIREESAN VIDE AFFIDAVIT DATED 06/09/2013. 1 4.1 IN VIEW OF THIS, THE STATEMENT OF SHRI SABARIGIREESAN CANNOT BE THE BASIS TO HOLD THAT HE IS ACTED ON BEHALF OF THE ASSESSEE. 15. FURTHER, WE HAVE GONE THROUGH THE ABOVE SEIZED DOCUMENT MENTIONED IN PARA 11.8 AND 11.8.1 OF THIS ORDER. THE ASSESSING OFFICER PRESUMED THAT IT REPRESENTS THE SALE OF WHEAT PRODUCTS. THERE IS NO BASIS FOR SUCH ASSESSMENT ORDER. THE ASSESSING OFFICER HAD NOT EXAMINED ANY OF THE PARTIES MENTIONED THEREIN AND HE PRESUMED THAT SHRI P.K. KUNJUMOID EEN WAS ACTED ON BEHALF OF THE ASSESSEE AND HE WAS SELLING THE WHEAT PRODUCTS LIKE MAIDA, SOOJI, ATTA AND BRAN. FOR THIS, THE ASSESSING OFFICER RELIED ON THE SWORN STATEMENT OF SHRI P.K. KUNJUMOIDEEN, SHRI PREMIL DEEP AND SHRI SABARIGIREESAN. FURTHER, THE SE STATEMENTS HAVE NO EVIDENTIARY VALUE IN VIEW OF RETRACTION MADE BY THESE PERSONS IMMEDIATELY THE NEXT DAY. HENCE, WHAT WAS LEFT TO RELY ON WAS THE SEIZED DOCUMENT CITED SUPRA. THE SEIZED DOCUMENT SUGGEST THAT THE ASSESSEE WAS ENGAGED IN THE SALE OF WH EAT PRODUCTS FROM TEE KAY RICE MILLS. THE SOLE BASIS ON WHICH THE ASSESSING OFFICER PRESUMED THAT THE ASSESSEE WAS SELLING THE WHEAT PRODUCTS THROUGH SHRI P.K. KUNJUMOIDEEN IS COLLAPSED. THE ESTIMATION OF PRODUCTION OF WHEAT PRODUCTS AND SELLING THEREOF HAVE NO BASIS AND IT IS ONLY A PRESUMPTION WITHOUT ANY BASIS. THE I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 65 CIT(A), THOUGH AGREED THAT ESTIMATION MADE BY THE ASSESSING OFFICER IS WRONG, HE SUSTAINED THE ESTIMATION OF PROFIT TO 50% OF THE PROFIT THAT WAS ESTIMATED BY THE ASSESSING OFFICER. IN OUR O PINION, THE ESTIMATION OF PROFIT BY BOTH ASSESSING OFFICER AS WELL AS CIT(A) IS NOT BASED ON COGENT MATERIAL PROCURED THROUGH SEARCH ACTION OR AFTER PRE SEARCH ENQUIRY WHICH CANNOT BE SUSTAINED. ACCORDINGLY, WE ARE OF THE VIEW THAT SHRI P.K. KUNJUMOIDEEN CANNOT BE TREATED AS ACTED AND CARRIED ON BUSINESS OF WHEAT PRODUCTS ON BEHALF OF THE ASSESSEE AND SOLD WHEAT PRODUCTS LIKE MAIDA, SOOJI, ATTA AND BRAN ON BEHALF OF THE ASSESSEE. 15. 1 IN VIEW OF THIS, IN OUR OPINION, IN THE PRESENT CASE, EVIDENCE COLLECTED BY THE REVENUE AUTHORITIES WAS NOT SUFFICIENT TO ESTABLISH THEIR STAND THAT THE TRANSACTIONS CARRIED ON BY PROPRIETOR OF M/S. TEEKAY RICE MILL S , SHRI P.K. KUNJUMOIDEEN WERE ONLY ON BE HALF OF THE ASSESSEE AND THE ASSESSEE ACTUALLY IN THE RELEVANT TIME CONTROLLED AND CARRIED OUT THE TRANSACTIONS THROUGH SHRI P.K. KUNJUMOIDEEN AS HIS AGENT AND EARNED INCOME FROM THEREOF. IN OUR OPINION, THE ENTIRE EVIDENCE HAS TO BE APPRECIATED IN A WHOL ESOME MANNER AND EVEN WHERE THERE IS DOCUMENTARY EVIDENCE, THE SAME CAN BE OVERLOOKED. IF THERE ARE SURROUNDING CIRCUMSTANCES TO SHOW THAT THE CLAIM OF THE ASSESSEE IS OPPOSED TO THE NORMAL COURSE OF HUMAN THINKING AND CONDUCT OR HUMAN PROBABILITIES. EVEN APPLYING THIS PRINCIPLE TO THE PRESENT CASE, THERE WAS DIFFICULTY IN REJECTING THE ASSESSEES PLEA AS OPPOSED TO THE NORMAL COURSE OF HUMAN CONDUCT. THE CIRCUMSTANCES SURROUNDING THE CASE WERE NOT STRONG ENOUGH TO JUSTIFY THE REJECTION OF ASSESSEES PLEA AS UNTRUE. THE DOCUMENTS BROUGHT ON RECOR D BY THE ASSESSEE IN RESPECT OF M/S. TEEKAY RICE MILL S I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 66 PLACED IN PAPER BOOK PAGE NOS. 13 TO 22, INCOME TAX RETURNS IN RESPECT OF SHRI P.K. KUNJUMOIDEEN PLACED IN PAPER BOOK PAGE NOS. 81 TO 102, KGST, CST AND VAT REGISTRATION CERTIFICATES PLACED IN PAPER BOOK PAGE NOS. 103 TO 108, PROCEEDINGS DATED 30/01/2004 ISSUED BY THE VAT DEPARTMENT ON INSPECTION OF TEEKAY RICE MILL ON 12/07/2013 SUGGEST THAT SHRI P.K. KUNJUMOIDEEN WAS AN INDEPENDENT ASSESSEE AND HE CARRIED ON THE BUSINESS IN HIS INDIVIDUAL CAPACITY. HENCE, HIS TRANSACTIONS CANNOT BE CONSIDERED AS TRANSACTIONS RELATING TO THE PRESENT ASSESSEE. THUS, THE SURROUNDING CIRCUMSTANCES, APART FROM THE DIRECT EVIDENCE IN THE INSTANT CASE DID NOT CONTAIN ANYTHING WHIC H BELIED THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF M/S. TEEKAY RICE MILL WERE ONLY PAPER TRANSACTIONS AND WAS AT THE BEHEST OF THE ASSESSEE. THEREFORE, NO ADDITION CAN BE MADE ON ACCOUNT OF TRANSACTIONS OF M/S. TEEKAY RICE MILL IN THE HANDS OF TH E PRESENT ASSESSEE BY TREATING THE ENTIRE TRANSACTIONS AS PERTAINING TO ASSESSEES BUSINESS. SIMILARLY THERE CANNOT BE ANY ADDITION ON SAVINGS ON ACCOUNT OF VAT COLLECTIONS IN THE HANDS OF THE ASSESSEE AS WE ARE OF THE OPINION THAT THERE IS NO UNDISCLOSED SALES OF WHEAT PRODUCTS. ACCORDINGLY, WE DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS UNDISCLOSED SALES OF WHEAT PRODUCTS FOR ALL THE ASSESSMENT YEARS. THUS, THE APPEALS OF THE ASSESSEE ARE ALLOWED. 16. SINCE WE HAVE ALLOWED THE APPEALS OF THE ASSESSEE, THE APPEALS FILED BY THE REVENUE HAVE BECOME INFRUCTUOUS AND HENCE, THEY ARE DISMISSED AS INFRUCTUOUS. EVEN OTHERWISE REVENUE APPEALS IN ITA NOS.36, 38 TO 41/COCH/2019 FOR THE ASSESSMENT YEARS 2009 - 10 AND 2011 - 12 TO 2014 - 15, WHEREIN THE T AX EFFECT INVOLVED I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 67 HEREIN IS LESS THAN RS.50 LAKH AND AS PER CBDT CIRCULAR NO. 1 7/2019 DATED 8 TH AUGUST, 2019, AND THE DEPARTMENT IS PRECLUDED FROM FILING THE APPEALS BEFORE THE TRIBUNAL. 17. IN TH E RESULT, APPEAL S OF THE ASSESSEE ARE ALLOWED AND THE APPE ALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER , 2019. SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 20 TH DECEMBER , 2019 GJ COPY TO: 1 . M/S. PRINCE ROLLER FLOUR MILLS (P) LTD., 9/75, ANAPPURAMKADU, KINASSERY, PALAKKAD - 678 707. 2. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 1, ERNAKULAM, KOCHI. 3. THE COMMISSIONER OF INCOME - TAX(APPEALS) - III, KOCHI. 4 . THE COMMISSIONER OF INCOME - TAX, CENTRAL, KO CHI. 4 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 5 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN I.T.A. NOS. 36 TO 41/COCH/2019 & ITA NOS. 21 TO 26/COCH/2019 68