Appeal Details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 1975 (ITAT-SURAT)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 4 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-06-2022
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
10-04-2022
Assessment Year
2012-2013
Appeal Filed On
31-01-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकरअपीलसं./ITA Nos.1680 to 1682/AHD/2017 आयकरअपीलसं./ITA No.61/SRT/2019 (Ǔनधा[रणवष[ / Assessment Years: (2011-12 to 2013-14) (Virtual Court Hearing) The DCIT, Circle-1(1)(1), Surat. Vs. M/s. Anushree Sarees Pvt. Ltd., D-5409, Raghukul Textile Market, Ring Road, Surat-395001. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAGCA5772J (Appellant)/(Revenue) (Respondent)/(Assessee) Assessee by : Shri Aaditya Nemani, CA Revenue by : Shri H. P. Meena, CIT(DR) & Ms Anupama Singla, Sr. DR Date of Hearing : 11/04/2022 Date of Pronouncement : 23/06/2022 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned four appeals filed by the Revenue, pertaining to Assessment Years (AY) 2011-12 to 2013-14, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals) [in short “the ld. CIT(A)”], which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) and u/s 143(3) r.w.s. 263 of the Income Tax Act, 1961 [hereinafter referred to as the “Act”]. 2. Since, the issues involved in all the appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in 1682/AHD/2017 for AY.2013-14, have been taken into consideration for deciding the above appeals en masse. 3. Grounds of appeal raised by the Revenue in ITA No. 1682/AHD/2017 for AY.2013-14, are as follows: Page | 2 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. “1. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) was justified in restricting the disallowance @25% of various expenses which was found bogus during the course of Survey Proceedings as well as assessment proceedings and giving benefit of telescoping of IDS declared by the director of assessee company in his hand not in the hand of company? 2. On the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the assessing officer. 3. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of assessing officer may be restored to the above extent.” 4. Succinct facts are that assessee filed Return of Income in respect of AY. 2013-14, declaring income of Rs.38,36,560/- on 29.09.2013. Consequent to selection of the case for scrutiny, through CASS, statutory notice u/s 143(2) of the I.T. Act dated 03.09.2014 was issued to the assessee. As per details filed before assessing officer, the main source of income of the assessee for the year under consideration, is income from Business and Profession. The assessee is engaged in the business of manufacturing and trading of art silk cloth. The turnover for the year is Rs.66.74 crores as against turnover of Rs.72.34 crores for the preceding year. Various direct and indirect expenses as debited in the Profit and Loss Account have been claimed. The gross profit for the year is Rs.4.10 crores as against Rs.4.34 crore for the preceding year. The net profit for the year is Rs.41.74 lakhs as against Rs.52.94 lakhs for the preceding year. The gross profit ratio for the year is 6.14% as against 6% for the preceding year. The net profit ratio for the year is 0.63% as against 0.73% for the preceding year. The Survey proceedings u/s 133A of the Income Tax Act, 1961, were carried out in case of the assessee on 27 th May 2013 by the Directorate of Income Tax (Investigation), Surat. A tabulated summary of some of the significant points relating to the survey proceedings is mentioned in assessment order page no. 2 to 4. During the course of survey proceedings, some of the parties shown to be doing embroidery job work for the assessee- company, which were summoned to verify the genuineness of job work expenses debited in the Profit & Loss account. In response to the summons, one Shri Navinchandra S. Rangrej, proprietor of the some concerns attended the proceedings and stated on oath that he has not done any job work for the company, M/s Anushree Sarees Pvt. Ltd. He Page | 3 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. further added that he was a retired person since last 10 years and that he did not have any embroidery machine for job work. Shri Navinchandra S. Rangrej further admitted that bills given by him were for entry purpose only. He admitted the factum of having received commission @1% on total bill amount having returned the amount through crossed cheques to the company. He further stated that the following are the business concerns owned by him and his family members who provide job-work bills to the company M/s Anushree Sarees Pvt. Ltd without any actual work done by him: i. Balaji Creation (HUP) ii. Dhruval Arts iii. Dhyan Creation iv. Mohini Creation v. Mitesh Navtnchandra Rangrej VI. Jay Ambe Creation. Out of the total bogus job-work bills of Rs.3,85,16,552/- raised by Shri Navinchandra S. Rangrej, proprietor and his family members through these concerns for the three years i.e. F.Y.2010-11 to 2012-13, the amount pertaining to AY 2013-14 is Rs.83,56,000/- and details of the same is as under: 1. Balaji Creation (HUF) Rs.14,24,000/- 2. Dhruval Arts Rs.14,23,000/- 3. Mohini Creation Rs.14,23,500/- 4. Mitesh Navinchandra Rangrej Rs.14,22,000/- 5. Dhyan Creation Rs.12,31,500 6. Jay Ambe Creation Rs.14,32.000/- Rs.83,56,000/- Therefore, having considered assessee`s reply, the assessing officer made addition on account of bogus expenses Rs.83,56,000/- Page | 4 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. 5. The assessing officer also observed that transaction of Rs.85,65,425/-, shown as purchase from Rawalwasiya Filaments Pvt. Ltd. and Syntex Gold, represents only an accommodation entry without actual delivery of goods. After considering the reply of the assessee, the assessing officer held that the amount of expenditure made to Rawalwasiya Filaments Pvt. Ltd, and Syntex Gold which there was nothing which came to the business of the assessee, is liable to be disallowed being not an ‘expenditure incurred wholly and exclusively for business purposes’. Such claim of bogus purchase is, therefore, disallowed by the assessing officer. 6. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer observing as under: “DISCUSSION AND DECISION OF THE APPELLANTE AUTHORITY The ld assessing officer made following additions:- Sr. No. Description of the disallowance/addition Amount in rupees 1 Bogus job work expenses to concerns of Shri Rangrej 83,56,000 2 Bogus purchase from Rawalwasiya Filaments P Ltd. 85,65,425 Total addition on above items 1,69,21,425 Ground nos.1 & 2 8.1During the appeal proceedings, the AR namely Shri Dileep Patel, CA from PKMG & Co. appeared on 23.03.2017 and filed submission about details of IDS scheme 2016 made by the Director of appellant-company. The same were forwarded to the ld assessing officer for his remand report, report of the ld AO was received on 13.04.217 wherein the ld AO and the ACIT(HQ) / Pr. Commissioner of Income Tax-1, Surat have confirmed the IDS, 2016. 8.2The director of the appellant-company namely Shri Amitkumar Khemka has made the following declaration in IDS 2016 scheme as reflected in Form number 1 (annexure) reproduced below:- STATEMENT OF UNDISCLOSED INCOME Description of undisclosed income and income declared in the form of investment in assets (use separate sheet in case of multiple assets in the same category) I. Total undisclosed income S. No. Assessment year to which the undisclosed income pertains Amount of undisclosed income (in Rs.) Nature of undisclosed income 1 2011-12 Rs. 2,20,00,000/- Business income earned related to Textile Business M/s Anushree Sarees Pvt. Ltd. 2 2012-13 Rs. 90,00,000/- Page | 5 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. 3 2013-14 Rs 40,00,000/- Total (to be taken to item 7 of the Form) Rs.3,50,00,000/- *Explanation to Disclosure and explanation to the quantification of unaccounted income offered for tax: An Addition of Rs. 7.00 Crores approximate was made on account of purchases/ Job Work from bogus or unidentified parties. We assume 12.5% as income earned from the purchases/Job Work from bogus or unidentified parties as allegated in the assessment order of the M/s Anushree Sarees Private Limited for the A. Y. 11-12 which comes to approx. 87.50 Lacs as income. Further an addition to total income was made as Rs 2.20 Crores as introduction of share application which subsequently converted to Share premium and Share Capital. To arrive the quantum for AY 11-12 the income earned was applied in the form of Share application hence out of the both amount the higher amount offered as Income for AY 11-12 , therefore, I offer as 2.20 Crores as investment in shares of Anushree Sarees Private Limited through Principal Commodities Private Limited (Benami Name) for AY.11-12. As the Book value and Value of Shares as on 1-6-2016 of M/s Anushree Sarees Pvt. Ltd is much lower than Rs.2.20 Crores and the initial investment to acquire the shares was Rs 2.20 Crores Approx. so Rs.2.20 Crores offered as income for the AY 11-12. In the assessments order of M/s Anushree Sarees Private Limited AY 12-13, no addition was made on account of purchases/ Job Work from bogus or unidentified parties as allegated in the earlier year. But on assumption basis or lump sum I offer Rs.90.00 Lacs as Income for A.Y 12-13. An Addition of Rs.1.40 Crores approximate made on account of purchases/ Job Work from bogus or unidentified parties, we assume 12.5% as income earned from the purchases / Job Work from bogus or unidentified parties as allegated in the assessment order of the M/s Anushree Sarees Private Limited for the AY. 13-14 which comes to approx. 17.50 Lacs as income. But I offer Rs 40.00 Lacs as Income on Lump sum Basis for the A.Y. 13-14 Both the Amount as discussed above Rs.90.00 Lacs and Rs.40.00 Lacs in total Rs.130.00 Lacs was invested or introduced by me as Long Term Capital in the Book in following manner and remaining is expenses to arrange to LTCG transaction as detailed Below in the Script Name M/s Surabhi Chemical and Investment Limited as detailed below: AY Name Amount 14-15 Shri Amit Khemka 28,51,317/- 15-16 Shri Amit Khemka 5,71,325/- 14-15 Smt Shivani Khemka (PAN: ANEPK6219J) 30,38,834/- 14-15 Amit Khemka (HUF) (PAN: AAGHA7087M) 63,02,664/- Remaining Rs.2,35,860 Approx. was taken on account of expenses to arrange LTCG if any. So total disclosure for the AY 11-12 Rs 2.20 Crores, for AY 12-13 Rs 90.00 Lacs and Rs.40.00 for the AY 13-14. 8.3 The above declaration in IDS 2016 scheme has been accepted by the Pr. Commissioner of Income Tax -1 Surat and issued form no. 2 dated 14.10.2016. The scanned copy of the same is also reproduced below:- Page | 6 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. 8.4 The AR submitted that the declarant Shri Amitkumar Khemka has made payment of two installments of tax arising from his declaration. The Circular no. 12/2016 dated 11.11.2016 of CBDT (in para 3) empowers the assessing officer to obtain written undertaking alongwith documentary evidence from assessee, about the issues and quantum of amount covered under the declaration having bearing on the pending assessment proceedings and to go on give relief as specie in para 4 of the said Circular. In pursuance of the said Circular, the declarant has filed a written undertaking in fifty rupees stamp paper purchased on 11.04.2017 and 21.04.2017. 8.5 Both the grounds of appeal, pertain to disallowance of purchases made from and job work expenses paid / payable to bogus and unverifiable persons. The facts are identical to the similar disallowances made in the assessment year 2011-12 and even the persons involved are also same. The issue is discussed in detail in my appellate order in appellant’s own case for assessment year 2011-12 (in appeal no CAS-3/Trfd-1/127/2014-15) dated 28. 04. 2017 in paras 10.1 to 10.3. The same applies “mutatis mutandis” to this appeal. As decided therein, a disallowance of above expense @ 25% is reasonable and just. The disallowances confirmed accordingly are as under:- Page | 7 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. Particulars Amount (in Rs.) (Disallowed 100% by the ld AO ) Amount addition confirmed @ 25% (in Rs) Bogus Job Work Expenses to concerns of Shri. Rangrej group 83,56,000 20,89,000 Bogus Purchases from Rawalwasiya group 85,65,425 21,41,356 Total 1,69,21,425 42,30,356 8.6 As narrated in para 3.2 and 8.3 above, Shri Amitkumar Khemka Director of appellant - company has made declaration of Rs.40,00,000 in IDS Scheme 2016, on this account. The issue of whether the amount declared by Shri Amitkumar Khemka is to be given credit in the hands of appellant-company is discussed in para 11.1 to 11.6 of the appellate order for Assessment Year 2011-12 (supra). The same applies “mutatis mutandis” to this year too. Accordingly, the net addition confirmed here is Rs.42,30,356 – Rs.40,00,000 = Rs.2,30,356/-. The ld assessing officer is hereby directed to restrict the disallowance to Rs.2,30,356/-.” 7.Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. 8. Learned Departmental Representative (ld. DR) for the Revenue argued before the Bench that learned CIT(A) was not justified in restricting the disallowance @25% of various expenses, that is, “bogus job work expenses and bogus purchase expenses”, which were found bogus during the course of Survey Proceedings, as well as assessment proceedings and giving benefit of telescoping of IDS declared by the director of assessee- company in his hand not in the hand of company. Therefore, ld DR contended that addition made by the assessing officer may be sustained. 9. On the other hand, learned Counsel for the assessee, pleads that assessee had paid the tax on unaccounted bogus job work expenses and bogus purchase expenses under IDS scheme 2016, therefore further addition should not be made. Apart from this, ld Counsel defended the order passed by the ld CIT(A) and stated that ld CIT(A) has passed speaking and reasoned order, therefore, the same may be upheld. 10. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned DR for the Revenue supported the Page | 8 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. findings of assessing officer. On the other hand, learned Counsel defended the order passed by the ld CIT(A). We note that issue before us is relating to alleged bogus job charges at Rs.1,69,21,425/-. The assessing officer made 100% addition, however, on appeal by the assessee, the ld CIT(A) restricted same to 25%, and also granted telescoping for the same being source for Share capital.The basis formed here is that the alleged over-invoicing within the job charges is the source of the funds that have in turn been deployed (application) in the form of LTCG in the hands of the individuals. Thus Rs.40,00,000/- has been offered as income in the hands of Shri Amit Khemka, Director of the Company.The ld Counsel submits that the said IDS declaration made in the hands of the Director is Tax Neutral since the same quantum of tax would have been payable even if the said sum was declared in the hands of the company.The basis and purpose of the income computed to be offered to tax has been explained at the time of the filing of the IDS application itself, thus it cannot even be stated as an afterthought. The Ld. CIT(A) had communicated (on 24.03.2017) with the Ld. Assessing Officer, as well as Addl. CIT /Director seeking their comments on the said application made where the above mentioned reference was made and issue claimed to be covered by the said IDS Application. The Ld. AO has vide his communication to the Ld. CIT(A) dated 12.04.2017, confirmed the same, quoting the comments from the Hon`ble PCIT office as, “The contents of your letter as well as enclosures have been gone through. As far as declaration under IDS 2016 in the case of Shri Amitkumar R. Khemka, Director of M/s Anushreee Sarees Pvt. Ltd. (copy of which is already forwarded to you by CIT(A)-3 Surat) is concerned, the same is verified from record and found correct. I am directed to communicate the above by the Pr. CIT-1, Surat.” The ld PCIT and also AO were aware and have accepted of the said issue in appeal being covered by the said application filed in IDS. The IDS Application was made on 30.09.2016 (Form 1), From 2 has been issued on 14.10.2016,Proof of taxes paid in Form 3 filed on 29.06.2017 and Final Form 4 accepting the said declaration of the applicant was issued on 04.10.2017. Manner of the earning of the income has been Page | 9 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. mentioned elaborately in the IDS Application made on 30.09.2016 (Form 1) itself. Therefore, based on these facts, ld CIT(A) deleted the addition. That being so, we decline to interfere in the order passed by ld CIT(A) and appeal of the Revenue is hereby dismissed. 11.In the result, appeal filed by the Revenue ( In ITA No.1682/Ahd/2017) is dismissed. 12.In Revenue`s appeal in ITA No.1680/Ahd/2017, for Assessment Year 2011- 12, the ld CIT(A) deleted the addition observing as follows: “DISCUSSION AND DECISION OF THE APPELLATE AUTHORITY: The Id assessing officer made following additions:- Sr.no Particulars Amount (Rs.) Amount (Rs.) Total income as per computation of income 58,91,610 Add: Disallowance/Additions 1. Unexplained Share Application Money u/s 68 of the Act 2,20,00,000 2. Bogus Job Work Expenses to concerns of Shri. Navin C. Rangrej 1,25,53,893 3. Bogus Job Work Expenses to concerns of Rawalwasiya Group 3,06,530 4. Bogus Purchases from Rawalwasiya Filaments Pvt. Ltd. 2,13,12,685 5. Untraceable Job Work Parties 3,27,88,941 8,86,55,519 Assessed Income 9,45,47,129 Rounded off 9,45,47,130 Deemed Total Income u/s 115JB 58,65,676 8.1 The ground no. 1 of the appeal is regarding rejection of books of accounts. On detailed perusal of the assessment order, it is found that the Id assessing officer has not given a categorical finding that he is rejecting books of accounts. Even though in the discussions made in para 19 of the assessment order, it appears that the Id AO intends to reject the books of accounts of the assessee, but nowhere he specifies this. It is further seen that there is no estimation of profit, which is to be done, after rejection of books of accounts. The contention of the Id AO is that the appellant has booked purchase, job work expenses which are bogus in nature and hence, the Id AO feels that the profit arrived at as per the books of accounts is not correct. By way of offering a part of the amount said expenses in IDS Scheme 2016, the Director of the appellant - company has indirectly admitted to this contention of the ld AO. In view of this ground of appeal is not only irrelevant but is also redundant and hence this ground no. 1 is dismissed. 8.2 During the appeal proceedings, the AR namely Shri Menul Shah CA appeared and filed a few details and an exhaustive argument / legal submissions on the above additions. However, the appellant - company meanwhile changed its authorized representative and intimated the same. It has also indicated its desire to avail of IDS / DRS scheme available to it vide letter dated 25.05.2016. Subsequently, the new AR namely Shri Dileep Patel CA from PKMG & Co. appeared on 23.03.2017 and filed Letter of Authority and later filed submission about details of IDS made by Page | 10 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. the Director of appellant - company. The same were forwarded to the Id assessing officer for his remand report, report of the ld AO was received on 13.04.2017 wherein the Id AO and the AC1T ((HQ] / Pr Commissioner of Income Tax- 1, have confirmed the IDS. The director of the appellant-company namely Shri Amitkumar Khenka has made the following declaration in IDS 2016 scheme as reflected in Form number 1 (annexure ) reproduced below:- STATEMENT OF UNDISCLOSED INCOME Description of undisclosed income and income declared in the form of investment in assets (use separate sheet in case of multiple assets in the same category) Total undisclosed income s. No. Assessment year to which the undisclosed income pertains Amount of undisclosed income (in Rs.) Nature of undisclosed income 1 2011-12 Rs. 2,20,00,000/- Business income earned related to Textile Business M/s Anushree Sarees Pvt. Ltd. 2 2012-13 Rs. 90,00,000/- 3 2013-14 Rs 40,00,000/- Total (to be taken to item 7 of the Form) Rs.3, 50,00,000/- *Explanation to Disclosure and explanation to the quantification of unaccounted income offered for tax: An Addition of Rs 7.00 Crores approximate was made on account of purchases/ Job Work from bogus or unidentified parties, We assume 12.5% as income earned from the purchases/Job Work from bogus or unidentified parties as allegated in the assessment order of the M/s Anushree Sarees Private Limited for the A Y 11-12 which comes to approx. 87.50 Lacs as income. Further an addition to total income was made as Rs 2.20 Crores as introduction of share application which subsequently converted to Share premium and Share Capital. To arrive the quantum for AY 11-12 the income earned was applied in the form of Share application hence out of the both amount the higher amount offered as Income for AY 11-12 , therefore I offer as 2.20 Crores as investment in shares of Anushree Sarees Private Limited through Principal Commodities Private Limited ( Benami Name) for AY 11-12. As the Book value and Value of Shares as on 1-6-2016 of M/s Anushree Sarees Pvt. Ltd is much lower than Rs 2.20 Crores and the initial investment to acquire the shares was Rs 2.20 Crores Approx. so Rs 2.20 Crores offered as income for the AY 11-12. In the assessments order of M/s Anushree Sarees Private Limited AY 12-13 No addition was made on account of purchases/ Job Work from bogus or unidentified parties as allegated in the earlier year. But on assumption basis or lum sum I offer Rs 90.00 Lacs as Income for A.Y 12-13. An Addition of Rs 1.40 Crores approximate made on account of purchases/ Job Work from bogus or unidentified parties, We assume 12.5% as income earned from the purchases/Job Work from bogus or unidentified parties as allegated in the assessment order of the M/s Anushree Sarees Private Limited for the A Y 13-14 which comes to approx. 17.50 Lacs as income. But I offer Rs 40.00 Lacs as Income on Lump sum Basis for the A.Y. 13-14. Both the Amount as discussed above Rs 90.00 Lacs and Rs 40.00 Lacs in total Rs 130.00 Lacs was invested or introduced by me as Long Term Capital in the Book in following manner and remaining is expenses to arrange to LTCG transaction as detailed Below in the Script Name M/s Surabhi Chemical and Investment Limited as detailed below: AY Name. Amount Page | 11 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. 14-15 Shri Amit Khemka 28,51,317/- 15-16 Shri Amit Khemka 5,71,325/- 14-15 Smt Shivani Khemka (PAN: ANEPK6219J) 30,38 / 834/- 14-15 Amit Khemka (HUF) (PAN: AAGHA7087M) 63,02,664/- Remaining Rs 235860 Approx. was taken on account of expenses to arrange LTCG if any. So total disclosure for the AY 11-12 Rs 2.20 Crores, for AY 12-13 Rs 90.00 Lacs and Rs 40.00 for the AY 13-14. 8.4 The above declaration in IDS 2016 scheme has been accepted by the Pr. Commissioner of Income Tax -1 Surat and issued form no. 2 dated 14.10.2016. There was no report sought for from the undersigned even though the declaration pertains to the issues pending in appeal. The scanned copy of the same is also reproduced below: Page | 12 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. AR submitted that the declarant Shri Amit kumar Khemka has made payment of two installments of tax arising from his declaration. The Circular no. 12/ 2016 dated 11. 11. 2016 of CBDT (in para 3 ) empowers the assessing officer to obtain written undertaking alongwith documentary evidence from assessee, about the issues and quantum of amount covered under the declaration having bearing on the pending assessment proceedings and to go on give relief as specified in para 4 of the said Circular. In pursuance of the said Circular, the declarant has filed a written undertaking dated 21.04.2017 made on a fifty rupees stamp paper purchased on 11.04.2017. 9 SHARE APPLICATION MONEY Page | 13 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. 9.1 On perusal of the assessment order, records, submissions of earlier AR namely Shri Mehul Shah CA, I find that the appellant has furnished details of share applicants viz, names, addresses, copy of ITRs, financial statements, copy of statement before me as well as before the Id assessing officer. The appellant had also filed copies of annual returns and form no. 2 for allotment of shares filed with the ROC in its own case before the Id AO as well as before me. Apart from this, the appellant had also filed details of “sources" of the share applicant companies for making investment in the appellant -company . I have perused all the above details and I find that the Id assessing officer has not made any adverse finding to rebut the details, however, the following adverse factors overweigh the details filed by the appellant - company. (i) The director of the share applicant - company namely Shri Anupam Rungta denied having any knowledge of making investments in the appellant - company. (ii) The report of the DDIT ( Inv) Kolkata Unit No. 1, Kolkata says that the share applicant - company was not found in the given address, and also summons issued to it, was not complied with. It is also found in earlier searches and surveys conducted that address given is known as "Jama Karchi” addresses, where many shell companies are being run by the entry operators. (iii) The appellant - company has not furnished any convincing evidence to prove its address before the Id Assessing Officer or before the undersigned. In view of the above 3 factors, an adverse inference is drawn regarding 3 ingredients that are required to be proved u/s 68 in respect of said share application money. Hence, the addition made by the Id Assessing Officer u/s 68 on this account is confirmed subject to the conclusion drawn in para 11.5 and 11.6 ahead in this order. 10. Disallowance of expenditure debited in the P & L account towards, job work expense, purchases, etc. 10.1 The contention of the new AR Shri Dileep Pate CA is different from the submissions made by the earlier AR. In the circumstances, the submission of the new AR is considered. The submission of the AR in short is that the expense claimed towards purchases, job work etc. which are entirely disallowed by the Id assessing officer are not fully bogus, but may perhaps involve certain inflation The portion of inflation involved in the same is offered in IDS 2016 scheme, by the Director of the appellant-company @ 12.5 % of the said expenses and the same amount is brought into appellant - company as "share application money" in the name of Principal Commodities Pvt. Ltd. The AR relied on the following to justify the 12.5% offered in the IDS Scheme. (i) all the relevant documents such as invoices, vouchers, bank account show payment made by a/c payee cheques, TDS is made in case of job work. These details have been produced before the ld AO and there is no impeachment of the same. (ii) the sales of the appellant - company and inventory figures have not been doubted by the Id assessing officer. Without these purchases and without the value addition made by job work, the sales reported and inventory shown could not have been possible. The impugned purchases / job work expenses are included in sales and the Gross Profit on same is already offered to tax. (iii) in such cases, the Hon'ble jurisdictional ITAT and Gujarat High Court have in the following cases held that, the entire expenses cannot be disallowed and only profit element embedded in such expenses needs to be taxed. 10.2 I have perused the submissions and the records and I find that facts in the case support the above argument of the A.R. Page | 14 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. In such circumstances, the Hon'ble jurisdictional ITAT in the case of Bholanath Polyfab Pvt. Ltd (in ITA No. 137/Ahd/ 2009 dt 26. 07. 2011) and other cases, has arrived at a conclusion that purchases from said suppliers maybe bogus, but the appellant has made purchases from some other parties. The observation of the jurisdictional ITAT in the case of M/s Bholanath Polyfab P. Ltd is reproduced below:- "The learned counsel for the assesses was unable to controvert the factual finding recorded by the AO in this regard. However, there is no dispute that the assessee is only a trader in the iron and steel and it has maintained quantitative details. The statement made by the Id Counsel that the purchases claimed to have been made by the assessee from Girnar Sales Corpn and Shiv Metal Corpn is duly recorded in the books of the assessee and has been reflected either in the sales or in the closing stock, is not controverted. On these facts, the decision in the case of Kulubi Steel (supra) would be squarely wherein the ITAT held as under. "8 From the above, it is evident that the assessee did not make any effort to controvert the finding recorded by the DDIT (Inv) and it made no efforts to produce the seller parties on the other hand it claimed that it is not his responsibility to produce the seller. It is a settled law that onus is on the assessee to establish the genuineness of the purchase. The assessee has produced various evidence with regard to the receipt of goods by it i.e. stock register, receipt of wegh - bridge for weighment of goods purchased by the assessee, Octroi receipt to the payment of Octroi duty, etc. After considering the entire material, we are of the opinion that the assessee did not purchase the goods from the parties mentioned in the sales bills. At the same time, it did purchase the goods from some other suppliers, may be without bill. Therefore, purchase rate as mentioned in the alleged sales bill cannot be accepted. Any person indulging in the practice of purchasing goods from the grey market and obtaining bogus bills of some other parties, would do so, for getting some benefit. But, what would be the magnitude of the benefit would depend upon facts of each case. In the case of Vijay Proteins, ITAT held that such benefit to be 25% and therefore sustained the ITA No. 137/Ahd/2009 disallowance for bogus purchase at 25%. In the case of Sunsteel (supra), the ITAT deemed it fit to sustain the disallowance for a lump sum amount of Rs 50,000. However, we find that in the case of Shri Anubhai Shivlal (supra) the ITAT has considered both the decisions in the case of Vijay Protens and Sunsteel (supra) and thereafter sustained the disallowance at 12.5%. Relevant findings of the ITAT in the case of Anubhai Shivalal reads are under: "3. At the time of hearing before us, it is submitted by the Id Counsel that the, addition sustained is excessive. In support of this contention he referred to the decision of the Tribunal in the case of ITO v/s Sun Steel 92 TTJ (Ahd) 1126 wherein the Tribunal has sustained the addition of Rs 50,000 on a/c of bogus purchases. However, we find that the facts in the above case were different. In the above case, the assessee has shown purchases of Rs 27,39 410/- sale of Rs.28,17,207 and GP at Rs.94,740/-.The AO made the addition of Rs.27,39,407/- for bogus purchases. If the above sum is added to the GP, the GP works out Rs28,34,247/- which was more than the sale itself. The Tribunal held that it is impossible that the GP is more than the sale itself. The Tribunal also found that the assessee has maintained the quantitative details in respect of materials purchased and sold. . Considering peculiar facts of that case, the Tribunal arrived at the conclusion that it would be fair and reasonable to estimate the addition at Rs 50,000 as against the addition of Rs 27,39,407/- made by the AO. However, the Id CIT (A) considering the facts of the assessee’s case, has sustained the addition at 12.5 %. While doing so, he has also relied upon the decision of the Tribunal in the case of M/s Vijay Proteins Ltd 55 TTJ (ahd) 76. In the case of M/s Vijay Proteins Ltd, the Tribunal has sustained the addition of 25 % of the bogus purchases. However, considering the facts of assessee’s case, the CIT (A) restricted the disallowance to 12.5% as against 25% made in the case of M/s Vijay Proteins Ltd. From these facts, it is evident that the CIT (A) has sustained the addition at 12.5% of the non - genuine purchases considering the facts of the assessee’s case. We, therefore, do not find any justification to interfere with the Order of the CIT (Appeals) in this regard. The same is sustained" Page | 15 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. After considering the facts and arguments of both the sides, we are of the opinion that it would meet ends of justice, if the disallowance is sustained at 12.5% of the purchase from these ITA No 137/Ahd/2009 two parties. The AO is directed to work out the disallowance accordingly. Since the facts of the assessee’s case are identical, we respectfully follow the above decision of the ITAT, direct the AO to disallow 12.5 % of the purchases made during the under consideration. Since the facts in the present case is identical to the facts cited in the case mentioned above, we respectfully following the above decision of the ITAT in the case of M/s Sanket Steel Traders (supra), restrict the disallowance to 12.5% of the purchase. We direct the AO to work out disallowance accordingly." As held above, it is clear that, the appellant appear to have made purchases from elsewhere, but have obtained bills from the impugned parties. Also as held above, the appellant would have indulged in above practice in order to get some benefit. And it is this benefit derived by the appellant that needs to be taxed. What would be the magnitude of benefit derived by the appellant is the mute question. Hon'ble ITAT in the case of Bholanath Polyfab P Ltd in ITA NO 137/ Ahd/ 2009 dated 26. 07. 2011 has held that 12.5% of the impugned purchases is reasonable estimate of such benefit. 10.3 I have carefully considered the above submissions and facts of the case. The quantitative details culled out from form no. 3 CD column no. 28 (reproduced in AR’s submission at para 2.6) clearly demonstrates that the sales made includes impugned purchases. It is also evident from the details that, the value addition made after job work drives - up the sales price to Rs 590/- as against the sales price of Rs 450/- without said job work. The Id assessing officer has not doubted sales / inventory shown in Trading a/c and P & L a/c. There is no effort by the Id assessing officer to modify the sales figures and closing stock quantity and value as a natural corollary of disallowing the impugned purchases and job work expenses. The facts of the appellant’s case match with the facts of the above decided cases by the Hon'ble jurisdictional ITAT. The above decisions are binding, however, looking at the peculiar circumstances of this Trade as well as the facts of the appellant’s case, I feel the disallowance of 12.5% is not adequate instead propose to make disallowance @ 25% of the impugned job work expenses and purchases. This in my considered opinion would meet the ends of justice. The disallowance confirmed is as under:- Particulars Amount (in Rs.) (Disallowed 100% by the ld AO ) Amount addition confirmed @ 25% ( in Rs) Bogus Job Work Expenses to concerns of shri. Navin C. Rangrej 1,25,53,893 31, 38, 473 Bogus Job Work Expenses to concerns of Rawalwasiya Group 3,06,530 76,632 Bogus Purchases from Rawalwasiya Filaments Pvt. Ltd. 2,13,12,685 53,28, 181 Untraceable Job Work Parties 3,27,88,941 81,97, 235 Total 6,69,62,049 1,67,40,512 10.4 Further, the AR claims that the said disallowance is to be given telescoping against the share application money received of Rs.2.20 crores by appellant-company. The rational behind the disallowance of above expenses is that these expenses have been inflated so as to reduce the profit of the appellant - company and the excess money so paid to the parties is likely returned back to the appellant or to the directors of the appellant-company. In the absence of any specific findings of application of this money, it is to be presumed that the same amount constitutes the ‘source’ of the share application money brought into the appellant-company through M/s Principal Commodities Pvt. Ltd which is already held by me to be unexplained. Hence, I find merit in the Page | 16 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. contention of the AR that the telescoping for the disallowance (which forms “source”) has to be given against the addition in respect of share application money (application). Moreover, this telescoping is also accepted by the Pr. Commissioner of Income Tax-1, Surat in declaration under IDS Scheme 2016 (made by the Director of the appellant -company). Accordingly, the net addition to be confirmed in the case is to the extent of Rs 2.20 Crores. 11. Declaration in IDS, 2016 by the Director. 11.1 The AR has submitted that the promoter/director of the company Shri Amitkumar Khemka has made a declaration under IDS-2016 wherein he has declared that the investments in the share capital /share premium of the appellant company of Rs.2.20 Crore was made by him through M/s Principal Commodities Pvt. Ltd. It is explained in his declaration that the above sum is his income earned from purchase / job work expenses shown as paid / payable to bogus or unidentified parties as alleged in the assessment order of M/s Anushree Sarees Pvt. Ltd (the appellant) for Asstt Year 2011-12 and he has invested same in the appellant - company as 'share application money. 11.2 In order to verify this claim, a remand report was called for from the AO vide this office letter dt 24.03.2017 as under:- "The Appellant/AR has submitted a copy of IDS Declaration Form No. 1,2,3 in case of Shri Amit Khemka, the director of the appellant company (Copy Enclosed). You are hereby directed to examine the same give your report containing your finding and comments." The AO vide his letter dtd.12/04/2017 informed that the declaration made by the promoter/director under IDS-2016 has been verified. It was also submitted that the ACIT (Hq), O/o the Pr. CIT-1; Surat has informed that the said IDS declaration 2016 in the case of Shri Amit Kumar R Khemka director of M/s Anushree Sarees Pvt. Ltd is verified from the record and found correct. " The submission of the AR and the declaration itself make it quite clear that, the appellant - company is claiming that the declaration made by Director covers the addition made in the hands of appellant-company (subject matter of appeal); the Id AO and the ld ACIT (HQ) have not offered any adverse comments on this. The reports just confirm the declaration made by the declarant. 11.3. It is seen from the IDS declaration form (reproduced para 8.3 above), Shri Amitkumar Khemka Director of the appellant Company has declared as under:- " An addition of Rs.7.00 Crores approximate was made on account of purchases/job work from bogus or unidentified parties, we assume 12.5 % as income earned from the purchases/Job Work from bogus or unidentified parties as allegated in the assessment order of M/s Anushree Sarees Private Limited for the A. Y: 11-12 which comes to approx. 87.50 lacs as income, further an addition to total income was made as Rs.2.20 Crores as introduction of share application money which subsequently converted to share premium and share capital. To arrive the quantum for A. Y: 11-12 the income earned was applied in the form of share application hence out of the both amount the higher amount offered as income for A.Y: 11-12, therefore I offer as 2.20 Crores as investment in shares in Anushree Sarees Private Limited through Principal Commodities Private Limited (Benami Name) for A.Y:11-12. As the Book Value of Shares as on 01/06/2016 of M/s Anushree Sarees Pvt. Ltd is much lower than Rs.2.20 Crores and the initial investment to acquire the share was Rs.2.20 Crores Approx. so Rs.2.20 Crores offered as income for the A.Y 11-12." 11.4 This declaration, where in the nexus between unverifiable purchases/job work expenses assessed in the hands of appellant - company, the alleged bogus share application money received in appellant company with the amount declared by Shri Amit kumar Khemka in IDS Scheme 2016 is clearly claimed has been accepted as valid declaration by the Pr. Commissioner of Income -1 Surat Page | 17 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. and form no. 2 has been issued. The declarant has also paid 2 installments (50 %) of the tax payable on the said declaration as per From 2 issued. A question arises here, "whether the declaration made by the Director of appellant - company can be said to cover the additions made in the hands of the appellant -company? This has been answered by the CBDT vide Circular No.29 of 2016 dated 18.08.2016 Q. No.1 has clarified that appellant can make disclosure of undisclosed income reflected as loans/advances, creditors, share capital etc. which are fictitious in nature. Further vide Q.n.2, it has been clarified that amount declared under scheme for earlier year can be taken into account to explain the transactions of the subsequent year. Reference can also be made to reply to Q. No.4 of Circular No.27 of 2016 dt. 14/07/2016. In an identical case, the ld CIT (Appeals) (2) Surat (M/s. Vrindavan Fashions Pvt. Ltd. Appeal No. CAS/2/491/2015-16) has considered the issue and held that since the IDS declaration has been verified and accepted by the Principal CIT and also in view of the Board Circulars above, the IDS declaration made by the Director of the Company can be accepted to explain the "source" of share application money in the Appellant Company. 11.5 Since, the nexus of unaccounted income declared by the promoter director, Shri Amit kumar Khemka in respect of source of “share application money” introduced in the appellant - company has been accepted under IDS scheme 2016, I am constrained to hold that the addition u/s 68 and disallowances confirmed by me in paras 9 and 10 above is covered by this Declaration made by Shri Amit kumar Khemka. Even though, in my opinion this is not strictly valid as per Law, but since the Pr. Commissioner of Income Tax-1, Surat has already accepted the declaration in the above format, any contrary decision by the undersigned will amount to levying tax and penalty in the hands of the appellant company, on the amount for which, the Director namely Shri Amitkumar Khemka has already paid tax @ 45 % based on the acceptance issued in form no. 2 by the Pr. CIT- 1, Surat. This acceptance of declaration of IDS scheme 2016 by the Pr. Commissioner of Income Tax -2 Surat act as estoppel. In the present case, the income has been declared in the hands of real owner of that undisclosed income, hence, it is not justified to again tax the same amount when introduced in the hands of the appellant - company. It is significant here to mention that, this is not the only case where, such declarations have been made by the Director(s) of Companies. Similar declarations have been made in other cases wherein, share application money added during assessment of the Company have been declared by the Directors of the Company in their individual hands and in all such cases, the declaration made in IDS Scheme 2016 have been accepted by the Pr. Commissioner of Income Tax concerned. In such cases, the appellate decision and order is a mere formality as the additions made by the Id AO have been admitted and declared under the IDS Scheme, 2016 albeit in different hands, and same is accepted by the Pr. Commissioner of Income Tax concerned. This is a situation where both the sides are in agreement. 11.6 In view of the facts and circumstances and detailed discussions made above, though I am of the opinion that addition made by the AO is sustainable to the extent of Rs.2.20 Crores. I have to hold that the same is covered by the declaration of equivalent amount made by the Shri Amit Kumar Khemka Director of appellant Company under IDS 2016, which is accepted as valid declaration by Pr. CIT-1 Surat. Hence the Id assessing officer is hereby directed to delete the addition made by him, in the impugned assessment order dated 31.03.2014 for the assessment year 2011-12 in the case of the appellant -company. 12. As a result, the appeal stands PARTLY ALLOWED.” 13. We have heard both the parties and gone through the order passed by the ld CIT(A). Learned DR for the Revenue supported the findings of assessing officer. Page | 18 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. On the other hand, learned Counsel defended the order passed by the ld CIT(A). We note that basis in the assessee`s case is that alleged Over-invoicing within the job charges (GP Rate @ 12.50%) is the source of the Funds that have in turn deployed (application) in the form of Share Capital. Thus, considering the higher of the two amounts, Rs.2,20,00,000/- has been offered as income in the hands of Shri Amit Khemka, Director of the Company. (para 4, page 121 onwards of the CIT(A) orders). The said basis the income computed to be offered to tax has been explained at the time of the filling of the IDS Application itself, thus it cannot even be stated as an afterthought. Besides, the Ld. CIT(A) had communicated (on 24.03.2017) with the Ld. AO as well as Addl. CIT seeking their comments on the said application made where the above mentioned reference was made and issue claimed to be covered by the said IDS Application. The Ld. AO has vide his communication to the Ld. CIT(A) dated 12.04.2017 confirmed the same, quoting the comments from the Hon'ble PCIT office as, “The contents of your letter as well as enclosures have been gone through. As far as declaration under IDS 2016 in the case of Shri Amit kumar R. Khemka, Director of M/s Anushree Sarees Pvt. Ltd. is concerned, the same is verified from record and found correct. I am directed to communicate the above by the Pr. CITT- 1, Surat.” Thus, it would be appreciated here that the Hon'ble. PCIT and also the Ld. AO were aware and have accepted the said issue in appeal being covered by the said application filed in IDS. We note that while IDS Application was made on 30.09.2016 (Form ) and Form 2 has been issued on 14.10.2016, the Proof of Taxes paid in Form 3 filed on 29.06.2017 and final Form 4 accepting the said declaration of the Applicant was issued in the IDS Application made on 3.069.2016 (Form 1) itself. Thus, based on these facts, ld CIT(A) has deleted the addition. We do not find any infirmity in the order of ld CIT(A), therefore, we approve and confirm the findings of ld CIT(A) and ground no.1 and 2 raised the Revenue are hereby dismissed. Page | 19 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. 14. In the result, appeal filed by the Revenue ( in ITA No.1680/Ahd/2017) is dismissed. 15.In Revenue`s appeal in ITA No.1681/Ahd/2017, for Assessment Year 2012- 13, the ld CIT(A) deleted the addition observing as follows: “8. DISCUSSION AND DECISION OF THE APPELLATE AUTHORITY 8.1 The only ground in this case is regarding addition of Rs. 7,00,00,000 u/s 68 on account of unexplained share application money, received by the appellant - company form one M/s Shivkhri Mercantile P Ltd (in short SMPL) . The shares carry face value of Rs 10/- and premium of Rs 490/-. The Id assessing office after examining the issue held that, the 3 ingredients of section 68 being (i) identity, (ii) creditworthiness of share applicants and (iii) genuineness of the transaction is not established and accordingly, he made addition u/s 68 of the Act. 8.2 It is seen from the records, assessment order and submission made before me that, the appellant - company had filed the following details before the ld assessing officer. a) Ledger account of share application money b) Bank statement of the assessee. c) Bank Statement of M/s Shivkhori Merchantile Pvt. Ltd (in short SMPL) d) Share Certificate issued to share holder e) Audited accounts of M/s Shivkhori Merchantile Pvt.Ltd f) Acknowledgement of return of income along with computation of total income of Shivkhori Merchantile Pvt. Ltd g) Share application form h) Share allotment letter issued to the share holders i) Copy of Pan of Shivkhori Merchantile Pvt.Ltd j) Return of allotment filed in the ROC. Further, the AR before me filed the assessment order u/s 143(3) of the Act in the case of share applicant (in short SMPL) for very same assessment year passed by the jurisdictional Assessing Officer being ITO Ward 10(1), Kolkata on 22.03.2015. 8.3 The ld AO has given a table showing layers of companies used for investments (page nos. 10 - 14) . He has explained that, funds are routed through these Layers of Companies and invested in "Share Capital of SMPL and from there in Share Capital of appellant - company. The AO gives finding that, companies appearing Layer 2 and in some cases in layer 3 as bogus / shell companies. The Id AO traces the path of funds passing through Layers and how they all converge in the account of M/s Shivkhori Mercantile P Ltd as Share Capital and share premium. The identity of M/s Shivkhori Mercantile P Ltd is not in question due to above details filed and also because, simultaneously assessment proceedings u/s 143 (3) were being carried on in its for the same assessment year. As explained by the ld AO in above table, the funds from various layers of companies converged in the account of M/s Shivkhori Mercantile P Ltd and from there it flowed into the appellant -company as share application money. Strictly as per Law, the source of these funds need to be examined in the case / hands of M/s Shivkhori Mercantile P Ltd as they are found first credited in its accounts. 8.4 It is seen from the assessment order u/s 143 (3) dated 22. 03. 2015 in the case of M/s Shivkhori Mercantile P Ltd that, the ld AO has examined this issue and is not satisfied with the explanation Page | 20 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. provide by the assessee. It is also seen from the assessment order and the audited financial statements enclosed that M/s Shivkhori Mercantile P Ltd was incorporated in the Financial Year 2011-12 itself. It has raised Share Capital to the extent of Rs 72,43,000 and share premium of Rs.11,31,57,000/- (total Rs 12,04,00,000). As discussed in table given page no. 10-14 (supra), this amount has flowed to M/s Shivkhori Mercantile P Ltd through Layers of Companies. The Id assessing officer in the case of M/s Shivkhori Mercantile P Ltd (in short SMPL) has held this entire Share Capital (Rs.12,04,00,000) as unexplained and added this u/s 68 of the I T Act. It is clear from the assessment order in the case of appellant-company as well as from balance sheet of M/s SMPL that, share application money invested in the appellant - company is out of the above Share Capital of Rs.12,04,00,000 of M/s SMPL. 8.5 It is an admitted fact that same funds have moved from various Layers to M/s SMPL to the extent of Rs 12.04 crores and from their, a sum of Rs 7.00 crores has been invested in the appellant - company. The entire share" capital of M/s SMPL is added u/s 68 and taxed by its assessing officer. So, the natural corollary is that investments made out of this share capital (reflected in balance sheet of M/s SMPL) stand taxed. So, they cannot be unexplained in the hands of the companies who have received the above amount, since M/s SMPL has confirmed that it has invested the same. They need not be taxed again u/s 68. This would amount to double taxation. Hence, the addition u/s 68 of Rs.7,00,00,000 in the hands of the appellant -company is directed to be deleted as it is already taxed, in the hands of Share applicant company ( M/s SMPL). ENHANCEMENT NOTICE 9.1 It is noticed that the Id assessing officer has made disallowance of certain purchases made from and job work expenses paid to the bogus and unverified parties in assessment year 2011-12. However, no such disallowance was made by the Id AO in this year, even though the parties remained same. Hence, an enhancement notice was issued to the AR and his submission is considered. During the year, the purchases from said parties and job work expenses paid to the parties are 1. Job work Rs 29, 72, 065 2. Purchases Rs 1,35,72,410 Rs 1,65,44,475 9.2 This issue has been discussed and decided by me in my appellate order in appellant’s own case for the Asstt Year 2011-12 (in appeal no. Appeal NO. CAS-3/TRFD-1/127/2014-15 dated 28.04.2017). The paras 10.1 to 10.3 of that order apply ‘mutatis mutandis’ to this order also. Accordingly, 25 % of above sum comes to Rs.41,36,120/- is hereby confirmed in this year to. However, the AR submitted that Shri Amitkumar Khemka, Director of appellant - company has made declaration of Rs.90 lacs on this account under IDS scheme 2016. This is reproduced and discussed at length in para 8.3 and 8.4 and paras 11.1 to 11. 6 in my appellate order for Assessment Year 2011-12 (supra). These paragraphs apply to this appeal also. Accordingly, declaration of Rs 90 lacs made by the director namely Shri Amitkurnar Khema is held to cover the disallowance confirmed by me. Hence, there will be no disallowance or addition in the hands of the appellant - company. 10. As a result, the appeal stands ALLOWED.” 16.We have heard both parties and gone through the order of ld CIT(A). Learned DR for the Revenue supported the findings of assessing officer. On the other hand, learned Counsel defended the order passed by the ld CIT(A). We note that issue involved in this Revenue`s appeal is the addition made by the assessing officer in Page | 21 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. respect of Share capital received from Shivkhori Mercantile Pvt. Ltd at Rs.7,00,00,000/- The ld Counsel submits that said sum was also added in the assessment proceedings of M/s Shivkhori Mercantile Pvt. Ltd., for the same said year, so double addition is not permissible under Income Tax provisions, Shivkhori Mercantile Pvt. Ltd., is an associate concern.Subsequently, the said sum added in Shivkhori Mercantile Pvt. Ltd., which matter was pending in appeal, the said assessee has resorted to declaration under Vivad se Vishwas and paid the taxes due on the same, the said application having also been duly accepted. Related documents pertaining to order passed and V-Se-V application made and taxes due paid thereon after receipt of Form 3, were furnished by ld Counsel. It is settled position of law that an income can not be taxed twice. We note that M/s Shivkhori Mercantile Pvt. Ltd. has opted Vivad -Se- Visvas Scheme and paid taxes, therefore ld CIT(A) has rightly deleted the addition in the hands of the assessee, therefore based on this factual position, we do not find any error in the decision of ld CIT(A), hence we uphold the order passed by ld CIT(A) and dismiss the appeal of the Revenue. 17.In the result, appeal filed by the Revenue ( In ITA No.1681/Ahd/2017) are allowed. Page | 22 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. 18.In Revenue`s appeal in ITA No.61/Ahd/2019, for Assessment Year 2012-13, the ld CIT(A) deleted the addition observing as follows: “7. DISCUSSION AND DECISION OF THE APPELLATE AUTHORITY 7.1 I have perused the assessment order, the submissions of AR. the learned Assessing officer has made following additions in the assessment order u/s 143(3) r.w.s 263. SR. No. Particulars Debited in P & L A/c. Disallowances made by AO 1 Bogus Job Work Expense to concerns of Shri Navin C. Rangrej as discussed in Para 3 Rs. 1,35,72,410 Rs. 1,76,06,659 2 Addition on account of Bogus Purchase as discussed in para Rs. 29,72,065 Rs. 29,72 065 Rs. 2,05,78,724 All the grounds of appeal raised by appellant are interrelated and pertain to the above two additions. 7.2 The AR pointed out that the addition suffer from two flaws i.e. (i) The above additions are already covered by enhancement made by the Ld. CIT(A)-3, Surat in his order CAS-3/TRFD-1/427/2015-16 dated 28-04-2017 (ref. para 7 to 9 of order) (ii) The Ld. AO has included opening balance of Rs.40.34 lacs in job work Expenses the above disallowance, whereas the same was part of expenses claimed in 2011-12 and was also disallowed in A.Y.2011-12. (iii) I have carefully perused the above, and I find that both the above disallowances have already been made by Ld. CIT(A)-3, Surat in the appeal order for same asst. year (supra). In the above appeal order, it is held as under: “9. ENHANCEMENT NOTICE 9.1 It is noticed that the Id assessing officer has made disallowance of certain purchases made from and job work expenses paid to the bogus and unverified parties in assessment year 2011-12. However, no such disallowance was made by the Id AO in this year, even though the parties remained same. Hence, an enhancement notice was issued to the AR and his submission is considered. During the year, the purchases from said parties and job work expenses paid to the parties are 1. Job work Rs 29, 72, 065 2. Purchases Rs 1,35,72,410 Rs 1,65,44,475 9.2 This issue has been discussed and decided by me in my appellate order in appellant’s own case for the Asstt Year 2011-12 (in appeal no. Appeal NO. CAS-3/TRFD-1/127/2014-15 dated 28.04.2017). The paras 10.1 to 10.3 of that order apply ‘mutatis mutandis’ to this order also. Accordingly, 25 % of above sum comes to Rs.41,36,120/- is hereby confirmed in this year to.” Page | 23 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. 7.4 Evident from above, the bogus job work expenses & bogus purchases have been examined by Ld. CIT(A)-3, Surat and a disallowance to the tune of 25% is made in above order. The above appellate order is subject matter of appeal before Hon'ble ITAT as the IT Department has preferred appeal against the same. The department an appeal before the Hon'ble ITAT has prayed for restoration of 100% disallowances made by the Ld. AO. So the percentage of disallowance to be made 25% or 100% will be decided by Hon'ble ITAT. In such circumstances the disallowance made in the impugned assessment order (u/s. 143 r.w.s. 263) amounts to double disallowance. Hence, this disallowance cannot survive. In view of this, the disallowance made (of Rs.2,05,78,725/-) in assessment order u/s. 143(3) r.w.s. 263 is hereby deleted. All grounds of appeal are decided in favour of appellant. 8. As a result, the appeal is ALLOWED.” 19.We have heard both parties and gone through the order of ld CIT(A). Learned DR for the Revenue supported the findings of assessing officer. On the other hand, learned Counsel defended the order passed by the ld CIT(A). We note that proceedings under section 263 of the Act were initiated and order was passed (dated 31.03.2017) by the Ld. PCIT directing disallowance of alleged non-genuine expenses/purchases amounting to Rs.2,05,78,724/-. The Ld. AO subsequently passed order u/s 143(3) r.w.s. 263 of the Act dated 23.12.2017 disallowing the said Matter was carried to CIT(A) and appellate order passed on 30.11.2018 partly allowing the appeal of the Assessee by confirming the said addition to the extent of 25% and allowing relief of 75%. The Ld. CIT(A) during the course of the Appellate proceedings for the appeal filed against assessment order passed under section 143(3) of the Act (original appeal) had enhanced the income of the Assessee for the year on the same said issue by considering purchases amounting to Rs.1,65,44,475/- , thus adding a sum of Rs.41,36,120/- to the taxable income of the Assessee (considering the parties that were common for the year under consideration where similar disallowance was made in the immediately preceding year). The same has been mentioned in the CIT(A) order passed dated 28.04.2017. We note that Ld. PCIT has accepted IDS Scheme 2016 application of the Director of the company, Shri Amit Khemka wherein sum offered was to be extent of 12.50% of the same said purchases, thus accepting the contention of the company/Director. The Ld. CIT(A) had communicated (on 24.03.2017) with the Ld. AO as well as Addl. CIT seeking their comments on the said application made where the above mentioned reference was made and issue claimed to be covered by the said IDS Page | 24 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. Application. The Ld. AO has, vide, his communication to the Ld. CIT(A) dated 12.04.2017 confirmed the same, quoting the comments from the Hon'ble PCIT office as, “The contents of your letter as well as enclosures have been gone through. As far as declaration under IDS 2016 in the case of Shri Amitkumar R. Khemka, Director of M/s Anushree Sarees Pvt. Ltd is concerned, the same is verified from record and found correct. I am directed to communicate the above by the Pr. CIT-1, Surat.” Thus, ld. PCIT and also Ld. AO were aware and have accepted of the said issue in appeal being covered by the said application filed in IDS. The IDS Application was made on 30.09.2016 (Form 1), Form 2 has been issued on 14.10.2016, Proof of Taxes paid in Form 3 filed on 29.06.2017 and final Form 4 accepting the said declaration of the Applicant was issued on 04.10.2017. Manner of the earning of the income has been mentioned elaborately in the IDS Application made on 30.09.2016 (Form 1) itself. Based on these facts, ld CIT(A) deleted the addition, therefore, we do not find any infirmity in the order passed by ld CIT(A), hence we confirm the order passed by ld CIT(A). 20.In the result, appeal filed by the Revenue ( In ITA No.61/SRT/2019) is dismissed. Registry is directed to place one copy of this order in all appeals folder / case file(s). Order is pronounced in the open court on 23/06/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 23/06/2022 SAMANTA Page | 25 ITA.1680 to 1682/AHD/2017 & 61/SRT/2019 Assessment Years. 2011-12 to 2013-14 M/s. Anushree Sarees Pvt. Ltd. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr.PS/PS ITAT, Surat
