Income Tax Officer Ward-1(3), RAIPUR V. M/s Hari Om Casting Udyog, RAIPUR

ITA 72/BIL/2011

• Counselvise Citation: 7224714 RSA 2011
• Duration Of Justice: 3 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 05-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Assessee Lawyers: G S AGRAWAL
• Keywords: Unexplained cash credit; Unexplained investment; Business income
• Section: 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI REJENDRA, ACCOUNTANT MEMEBR ITA NOS.72 & 73/BLPR/2011 A.YS. 2003-04 & 2004-05 INCOME TAX OFFICER-1(3), VS. M/S HARI OM CASTING UDYOG, RAIPUR (CG). VILLAGE DHANELI, P.O. GIRODH, DISTT. RAIPUR (CG). (PAN: AACFH 9124 N). ITA NOS.74 & 75/BLPR/2011 A.YS. 2003-04 & 2004-05 M/S HARI OM CASTING UDYOG, VS. INCOME TAX OFFICER -1(3), VILLAGE DHANELI, RAIPUR (CG). P.O. GIRODH, DISTT. RAIPUR (CG). (PAN: AACFH 9124 N). (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI S.K. MEENA, SR. D.R. ASSESSEE BY : SHRI G.S. AGRAWAL DATE OF HEARING : 23.12.2014 DATE OF PRONOUNCEMENT : 23.12.2014 ORDER PER H.L. KARWA, PRESIDENT THESE FOUR CROSS APPEALS INVOLVING COMMON ISSUES WE RE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NOS.72, 73, 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 2. THE FIRST GROUND RAISED BY THE REVENUE IN ITA NO.72/BLPR/2011 READ AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.27,02,500/ - MADE BY THE AO ON ACCOUNT OF PROFIT ON UNACCOUNTED PURCHASES AND SALE S OF SCRAPS/GOODS WITHOUT PROPERLY APPRECIATING FACTS OF THE CASE. 3. GROUND NOS.1 TO 3 OF ASSESSEES APPEAL I.E. ITA NO.74/BLPR/2011 READ AS UNDER :- 1) THAT UNDER THE FACTS AND THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) ERRED IN HOLDING THAT THE APPELLANT WAS ENGA GED IN PURCHASE AND SALE OF IRON AND STEEL SCRAP IN RAILWAY AUCTION BY REJECTING THE EXPLANATION AND EVIDENCES FILED. PRAYED THAT THE APPELLANT WORKED ON COMMISSION BASI S (BARRING PURCHASE OF RS.88,900/-) AND DID NOT PURCHASE GOODS IN RAILWAY AUCTION, NOR MADE SALES. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT (APPEALS) FURTHER ERRED IN APPLYING NET PROFIT RATE OF 0.4% AMOUNTING TORS.4,00,439/- ON THE SALES ESTIMATED AT RS.10,01, 09,869/- PREYED THAT THE SALES WERE NOT MADE BY THE APPELLAN T, AND THEREFORE, ESTIMATION OF INCOME AT RS.4,00,439/- IS UNJUSTIFIED AND BE DELETED. 3. WITHOUT PREJUDICE TO ABOVE, IN ALTERNATE, THE AP PLICATION OF NET PROFIT RATE OF 0.4% IS ON THE HIGHER SIDE. 4. IT IS OBSERVED THAT IN GROUND NO.1 OF THE APPEAL OF THE REVENUE IT IS STATED THAT THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 27,02,500/-. IT APPEARS THAT THE REVENUE HAS TAKEN A WRONG FIGURE. IN FACT, THE LD. CIT(A) HAS ALLOWED A RELIEF OF 3 ITA NOS.72, 73, 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 RS.23,02,061/- TO THE ASSESSEE FOR THE A.Y. 2003-04 . 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS PRIMARILY ENGAGED IN MANUFACTURING OF IRON SHOTS AND GIRTS AND ITS T RADING. THE A.O. OBSERVED THAT AS PER THE INFORMATION RECEIVED FROM DY. CHIEF ESTA TE MANAGER, GSD ,SE RAILWAY, RAIPUR, THE ASSESSEE FIRM PURCHASED VARIOUS ITEMS O F SCRAP IN THE AUCTION CONDUCTED BY THE RAILWAY DEPARTMENT DURING THE F.Y. 2002-03 R ELEVANT TO THE A.Y. UNDER CONSIDERATION. SUCH PURCHASES AMOUNTED TO RS.11,47 ,95,125/-. FOR THE A.Y. UNDER CONSIDERATION, THE ASSESSEE, FILED ORIGINAL RETURN OF INCOME ON 28.11.2003 DECLARING NIL INCOME. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON 28.03.2004. SUBS EQUENTLY, A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED TO THE ASSESSEE FIRM. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE SUBMITTED TO CONSIDER THE RETURN OF INCOME FILED ON 28.11.2003 AS RETURN FILED IN RESPONSE TO THE AFORESAID NOTICE. THE A.O . OBSERVED THAT THE AUDITED STATEMENT OF ACCOUNT FURNISHED ALONG WITH RETURN DI D NOT REFLECT THE PURCHASES OF ITEMS OF SCRAP AMOUNTING TO RS.11,47,95,125/- MADE FROM RAILWAY DEPARTMENT. THE A.O. REQUIRED THE ASSESSEE TO FURNISH COMPLETE DETAILS IN THE GIVEN FORMAT IN RESPECT OF THE PURCHASES MADE FROM RAILWAYS. VIDE ANOTHER QUERY, THE A.O. ASKED THE ASSESSEE TO FURNISH THE DETAILS OF GOODS/SCRAP WHICH ON THE AUTHORIZATION GIVEN BY THE ASSESSEE WERE DIRECTLY LIFTED BY OTHER PARTI ES FROM RAILWAYS. THE A.O. ALSO ASKED THE ASSESSEE TO FURNISH THE NAMES AND COMPLET E ADDRESS OF THE PARTIES WHO DIRECTLY LIFTED THE GOODS/SCRAP. YET BY ANOTHER QU ERY, THE A.O. REQUIRED THE ASSESSEE 4 ITA NOS.72, 73, 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 TO FURNISH DATE-WISE DETAILS OF THE COMMISSION RECE IVED DULY BY GIVING NAME AND COMPLETE ADDRESS OF THE PARTIES FROM WHOM COMMISSIO N WAS RECEIVED. IN RESPONSE TO THE QUESTIONNAIRES ISSUED BY THE A.O., THE ASSES SEE SUBMITTED THE WRITTEN REPLY ON 20.11.2007. IN ITS REPLY, THE ASSESSEE DENIED HAVI NG MADE HUGE PURCHASES OF SCRAP/GOODS FROM RAILWAYS. THE ASSESSEE ALSO SUBMI TTED THAT DURING THE YEAR PURCHASES BARRING ONLY RS.37,838/ -, IT HAS NOT PURCHASED ANY SCRAP/GOODS FROM RAILWAYS IN BIDDING/TENDER DURING THE YEAR UNDER CO NSIDERATION. IT WAS ALSO CONTENDED BY THE ASSESSEE THAT THE NAME OF THE ASSE SSEE WAS USED BY VARIOUS PARTIES FOR THEIR BENEFITS. THEREFORE, THE ASSESSEE SUBMIT TED THAT THE NAME OF THE ASSESSEE WAS APPEARING IN THE RAILWAY RECORDS FOR THE TRANSA CTION IN QUESTION, BUT THE ASSESSEE IS NOT BENEFICIALLY INTERESTED OR ENTERED INTO ABOVE TRANSACTIONS FOR SELF. 6. THE A.O. DID NOT FIND ANY MERIT IN THE ABOVE SUB MISSIONS OF THE ASSESSEE AND PASSED A DETAILED ORDER AND MADE ADDITION OF RS.27, 02,500/- APPLYING THE NET PROFIT @ 2.3% ON ESTIMATED SALES OF RS.11,75 CRORES. THE RELEVANT FINDINGS OF THE A.O. ARE AS UNDER :- 8. THE MAIN POINT FOR CONSIDERATION IN THIS CASE I S WHETHER THE ASSESSEE MADE PURCHASES OF GOODS/SCRAP IN THE AUCTI ON CONDUCTED BY RAILWAYS OR THE SAME WERE PURCHASED BY SOME OTHER P ARTIES. IN ORDER TO HAVE A CLEAR UNDERSTANDING OF THE WHOLE ISSUE UN DER CONSIDERATION, (I) THE STATEMENT RECEIVED FROM DEPUTY CHIEF ESTATE MANAGER, GSD, SE RAILWAY, RAIPUR CONTAINING THE PARTICULARS ACCORDIN G TO WHICH THE ASSESSEE FIRM NAMELY M/S HARI OM CASTING UDYOG, DHA NELI, RAIPUR MADE TOTAL PURCHASES (THROUGH BID) OF RS.11,47,95,1 25/- DURING THE PERIOD 01.04.2002 TO 31.03.2003, (II) COPIES OF TWO LETTERS (RANDOMLY PICKED) OF OFFICE OF THE DY. CONTROLLER OF STORES ( SALES), RAIPUR FORWARDING THE DRAFTS TO THE DIVISIONAL CASHIER, BI LASPUR, AND 5 ITA NOS.72, 73, 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 (III)COPIES OF TWO SPECIAL POWER OF ATTORNEY (RANDO MLY PICKED) ISSUED BY THE ASSESSEE FIRM IS MADE PART AND PARCEL OF THI S ORDER. 8(II) IT MAY BE SEEN THAT THE HEADING OF THE STATEM ENT RECEIVED FROM RAILWAYS IS STATEMENT SHOWING THE PARTICULARS OF PURCHASE MADE BY M/S HARI OM CASTING UDYOG, DHANELI, RAIPUR. ALL 5 9 COPIES OF D. COS (SALES), RAIPURS LETTER (TWO OF THEM MADE PART AND PARCEL OF THIS ORDER) FILED BY THE ASSESSEE AND PLACED ON RECORDS ALSO SHOW THE NAME AND ADDRESSES OF THE PURCHASER AS M/S HARIOM CAS TING UDYOG, DHANELI, GIRODH, RAIPUR. ALL 39 COPIES OF SPECIAL POWER OF ATTORNEY EXECUTED ON STAMP PAPER OF FIFTY RUPEES (TWO OF TH EM MADE PART AND PARCEL OF THIS ORDER) FILED BY THE ASSESSEE IS GIVE N BY SHRI MANOJ KANODIA ON BEHALF OF M/S HARIOM CASTING, DNANELI, R AIAPUR. IN THE SPECIAL POWER OF ATTORNEY SO GIVEN, IT IS AVERRED T HAT M/S HARIOM CASTING UDYOG DHANELI RAIPUR HAS BEEN THE HIGHEST B IDDER IN AUCTION SALE OF A PARTICULAR A LOT HELD ON A PARTICULAR DAT E AT CSD, RAIPUR AND HAVE PAID THE FULL AMOUNT TOWARDS THE COST OF MATER IALS AGAINST THE CONCERNED LOT. IT IS ONLY AFTER THIS AVERMENT THAT THE FIRM AUTHORIZED, NOMINATED AND APPOINTED THE PERSON NAMED THEREIN TO RECEIVE ALL THE THINGS, GOODS AND ARTICLES FROM THE CONTROLLER OF S TORES, S.E. RAILWAY PURCHASED BY HIM (EMPHASIS PROVIDED). IT IS ABUNDA NTLY CLEAR FROM ALL THESE PAPERS IN THE NATURE OF GOVERNMENT RECORDS AN D THE POWER OF ATTORNEY EXECUTED UNDER CIVIL LAW THAT THE PURCHASE S OF GOODS/SCRAP WERE MADE BY THE ASSESSEE FIRM BY BIDDING IN THE AU CTION HELD BY RAILWAYS. 8(III) IN HIS STATEMENT ON OATH RECORDED AT THE TIM E OF SURVEY, SHRI MANOJ KANODIA, PARTNER OF THE FIRM AFFIRMED THAT PU RCHASES OF RAW MATERIAL WERE MADE FROM OPEN MARKET AND AS WELL AS FROM RAILWAYS; THAT OUT OF PURCHASES FROM RAILWAYS, ACCOUNTS OF MA TERIAL USED BY THE FIRM WAS KEPT AND THE ACCOUNTS OF REMAINING RAILWAY PURCHASES WAS NOT KEPT (ANS. 10 OF 24.06.2003); THAT ENTIRE PURCH ASES FROM RAILWAY ARE NOT ENTERED IN THE BOOKS OF ACCOUNT (ANS. 27 OF 23.06.07); THAT FIRMS PURCHASES FROM RAILWAYS WERE MORE THAN RS.2 CRORES OUT OF WHICH PURCHASES OF RS.2 LAKH TO RS.2.5 LAKH ONLY WE RE USED BY THE FIRM AND REST OF THE PURCHASES WERE SOLD OUTSIDE THE BOO KS. ASSESSEES REPLY THAT NEITHER IT PURCHASED THE GOODS FROM RAILWAYS N OR SOLD IT IS, THEREFORE, NOT AT ALL TENABLE IN VIEW OF CATEGORICA L DEPOSITIONS AS ABOVE. 8(IV) INSPITE OF SPECIFIC QUERY GIVEN IN THE QUESTI ONNAIRE DATED 30.08.2007 THE ASSESSEE HAS NOT FURNISHED THE NAME AND COMPLETE ADDRESS OF THE CONCERNS WHICH, IF AT ALL, AS CLAIME D BY THE ASSESSEE, 6 ITA NOS.72, 73, 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 HAVE DIRECTLY LIFTED THE GOODS/SCRAP FROM RAILWAYS. IT IS CLAIMED THAT EMD AND BALANCE SALE VALUE WAS DEPOSITED BY THE CON CERNS WHO LIFTED THE GOODS/SCRAP BUT HERE AGAIN THE ASSESSEE DID NOT GIVE THE NAME AND COMPLETE ADDRESS OF THE CONCERNS WHO DEPOSITED EMD AND TENDERED DRAFTS FOR BALANCE SALE VALUE. AS PER THE DETAILED CHART FURNISHED BY THE ASSESSEE, EMD FOR LOT NO.1245, 1246 & 1247 WAS DEPOSITED BY DEMAND DRAFT. FOR ALL OTHER 119 LOTS EMD WAS DEPOS ITED IN CASH. THEREFORE, IT BECOMES ALL THE MORE NECESSARY FOR TH E ASSESSEE TO FURNISH THE NAME AND COMPLETE ADDRESS OF THE CONCERNS IF IT CLAIMS THAT THE EMD AND BALANCE SALE VALUE WAS NOT DEPOSITED BY THE ASSESSEE FROM BUT BY SOME OTHER PARTY BECAUSE IN THE RECORDS/LEDG ER OF RAILWAYS EMD AMOUNT AND BALANCE SALE VALUE IS SHOWN TO HAVE BEEN RECEIVED FROM NONE ELSE THAN THE ASSESSEE FIRM. ASSESSEE HA S FURNISHED THE DETAILS OF SO CLAIMED COMMISSION RECEIPT OF RS.2,97 ,800/-. PERUSAL SHOWN THAT THE DETAILS HAVE BEEN PREPARED IN A VAGU E MANNER JUST TO MATCH THE COMMISSION RECEIPT SHOWN IN THE ACCOUNTS. VALUE OF LOT IN MOST OF THE CASES HAS BEEN INCORRECTLY TAKEN AT QUI TE LOW FIGURE. BOOKS/RECORDS ON THE BASIS OF WHICH THESE DETAILS H AVE BEEN FURNISHED WERE NOT PRODUCED BEFORE ME. HERE AGAIN THE ASSESS EE HAS FAILED TO GIVE THE NAME AND COMPLETE ADDRESS OF THE PARTY FRO M WHOM THE COMMISSION WAS RECEIVED. IN CASE, AS CLAIMED BY TH E ASSESSEE, ITS NAME WAS USED BY OTHER CONCERNS, HE WAS UNDER OBLIG ATION TO KEEP COMPLETE DETAILS OF THE CONCERNS, IN RESPECT OF EAC H LOT OF AUCTION, WHO BID, DEPOSITED EMD AND BALANCE SALE VALUE IN ITS NA ME AND PAID COMMISSION TO THE FIRM. IN NUTSHELL, THE ASSESSEE HAS NO SORT OF EVIDENCE, WHATSOEVER, TO ESTABLISH ITS CLAIM OF PUR CHASE OF MATERIAL BY OTHERS IN ITS NAME FROM RAILWAYS AND RECEIPT OF COM MISSION. 8(V) IT MAY BE MENTIONED THAT SIMILAR ISSUE WAS INV OLVE IN THE ASSESSMENT FOR ASSESSMENT YEAR2004-05 COMPLETED ON 19.12.2006. FOR THE DETAILED REASONS GIVEN ABOVE IN THIS PARA AS AL SO THE REASONS GIVEN IN THE ASSESSMENT ORDER DATED 19.12.06 FOR ASSESSME NT YEAR 2004-05, THE ASSESSEES CLAIM OF PURCHASE OF GOODS/SCRAP FRO M RAILWAYS ON BEHALF OF OTHERS IN LIEU OF COMMISSION IS SNOT ACCE PTED AND IT IS HELD THAT THE GOODS/SCRAP AMOUNTING TO RS.11,47,95,125/- WERE PURCHASED BY THE ASSESSEE BY WAY OF BIDDING IN AUCTION HELD B Y RAILWAYS. IT IS ALSO HELD THAT AN AMOUNT OF RS.2,97,800/- CREDITED IN THE P&L ACCOUNT MAYBE ASSESSEES INCOME BUT ITS SOURCE IS NOT ESTAB LISHED BY THE ASSESSEE TO BE THE COMMISSION INCOME EARNED FROM TH E SALE TRANSACTIONS OF THE PURCHASES MADE BY IT BY BIDDING IN THE AUCTION HELD BY RAILWAYS. 8(VI) IN ITS REPLY DATED 20.11.2007 FILED DURING TH E CURSE OF HEARING ON 7 ITA NOS.72, 73, 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 22.11.2007 THE ASSESSEE HAS STATED THAT BARRING RS. 1,37,838/- IT HAS NOT PURCHASED ANY SCRAP/GOODS FROM RAILWAYS. ASSESSEE HAS SHOWN RAW MATERIAL PURCHASES OF RS.31,05,624/- IN ITS AUDITED STATEMENT OF ACCOUNTS FILED WITH THE RETURN OF INCOME. DETAILS OF PURCHASES OF RS.31,05,624/- HAS BEEN FILED WITH THE REPLY DATED 20.11.2007. PURCHASES ARE TO THE TUNE OF RS.30,54,881/- AND FRE IGHT EXPENSES ARE RS.50,743/-. IT MAY BE MENTIONED THAT HE PURCHASE DETAILS OF RS.30,54,881/- INCLUDE PURCHASE OF RS.48,938/- ONLY FROM S.E. RAILWAY ON 25.11.2002 (11 MT @ RS.4449/- PMT). THUS, BY AS SESSEES OWN ADMISSION, THE BALANCE PURCHASE OF RS.88,900/- WAS NOT RECORDED IN ITS BOOKS. 8(VII) ASSESSEE HAS, THUS, NOT ACCOUNTED FOR THE PU RCHASES OF GOODS/SCRAP TO THE TUNE OF RS.11,47,46,187/- (RS.11 ,47,95,125/- MINUS RS.48,938/-) AND ITS SALE IN ITS BOOKS OF ACCOUNT. IT IS, THEREFORE, HELD THAT THESE PURCHASES HAVE BEEN SOLD OUTSIDE THE BOO KS OF ACCOUNT. ALES OUTSIDE THE BOOKS ARE ESTIMATED AT RS.11,75,00,000/ -. CONSIDERING THE NET PROFIT SHOWN BY ASSESSEES ENGAGED IN TRADING OF SCRAPS, NET PROFIT OF 2.3% IS ADOPTED IN WORKING OUT THE INCOME EARNED FROM SALES OUTSIDE THE BOOKS. NET PROFIT ON ESTIMATED SALES O F RS.11.75 CRORES AT 2.3% WORKS OUT TO RS.27,02,500/-. THIS SHALL BE AD DED IN DETERMINING TOTAL INCOME. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TA ACT, 1961 HAVE BEEN INITIATED SEPARATELY. 7. ON APPEAL, THE LD. CIT(A) RESTRICTED THE ADDITIO N TO RS.4,00,439/- AND ALLOWED A RELIEF OF RS.23,02,061/- TO THE ASSESSEE. THE LD . CIT(A) REDUCED THE PURCHASES TO RS.10,01,09,869/- AND ADOPTED A NP @ 0.4% WHICH COM ES TO RS.4,00,439/-. NOW THE REVENUE IS IN APPEAL AGAINST THE RELIEF OF RS.2 3,02,061/- ALLOWED BY THE LD. CIT(A) AND THE ASSESSEE IS IN APPEAL AGAINST THE AD DITION OF RS.4,00,439/- SUSTAINED BY THE LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE HAS NOT DENIED THAT SCRAP/GOODS WERE 8 ITA NOS.72, 73, 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 NOT PURCHASED IN ITS NAME. THE ASSESSEE HAS CATEG ORICALLY STATED THAT BID AUCTION WAS MADE IN THE NAME OF THE ASSESSEE FIRM. POWER O F ATTORNEY WAS ISSUED TO VARIOUS PERSONS BY THE ASSESSEE FIRM TO REMOVE THE GOODS FR OM RAILWAY PREMISES, SALE RELEASE ORDER ISSUED BY THE RAILWAYS FOR PAYMENT OF BID MONEY IS IN THE NAME OF THE ASSESSEE. BOTH THE AUTHORITIES BELOW HAVE CATE GORICALLY OBSERVED THAT THE ASSESSEE HAS MADE THE PURCHASES. IT WAS INCUMBENT UPON THE ASSESSEE TO PROVE THAT GOODS WERE NOT PURCHASED BY IT, BUT BY OTHERS IN TH E NAME OF THE ASSESSEE FIRM. THERE IS NO MATERIAL OR EVIDENCE ON RECORD TO PROVE THE CLAIM OF THE ASSESSEE. THE ASSESSEE HAS MISERABLY FAILED TO SATISFY THE LOWER AUTHORITIES AS WELL AS THE BENCH. DURING THE COURSE OF SURVEY PROCEEDINGS SHRI MANOJ KANODIA, PARTNER OF THE FIRM CONFIRMED THAT PURCHASES WERE MADE FROM OPEN MARKET AS WELL AS FROM RAILWAYS. HE FURTHER STATED THAT OUT OF PURCHASES MADE FROM R AILWAYS, ACCOUNTS OF MATERIAL USED BY THE FIRM WAS KEPT AND ACCOUNTS OF REMAINING RAILWAY PURCHASES WAS NOT KEPT. HE ALSO STATED THAT THE ENTIRE PURCHASES FRO M RAILWAYS WERE NOT INCLUDED IN THE BOOKS OF ACCOUNT. HE HAS ALSO ADMITTED THAT PURCHA SES WERE DONE OUTSIDE THE BOOKS OF ACCOUNT. WE HAVE ALSO PERUSED THE SPECIAL POWER OF ATTORNEY EXECUTED IN FAVOUR OF VARIOUS PERSONS (PAGES 57 TO 114 OF THE ASSESSEE S PAPER BOOK). ONE OF THE SPECIAL POWER OF ATTORNEY APPEARING AT PAGE 57 OF T HE PAPER BOOK READS AS UNDER:- SPECIAL POWER OF ATTORNEY I MANOJ KR. KENODIA OF M/S HARI OM CASTING UDYOG BE ING THE HIGH BIDDER IN AUCTION SALE OF SL. NO.48 LOT NO SP/1/260102072 HEL D ON 23.07.02 AT GSD RAIPUR AND HAVING PAID THE FULL AMOUNT OF RS.274500 /- (RUPEES TWO LAC SEVENTY FOUR THOUSAND FIVE HUNDRED ONLY) TOWARDS TH E COST OF MATERIALS 9 ITA NOS.72, 73, 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 AGAINST THE SAID LOT, HEREBY AUTHORIZE, NOMINATE AN D APPOINT SHRI ARUN KUMAR BIRGAON RAIPUR TO RECEIVE ALL THE THINGS, GOO DS AND ARTICLES FROM THE CONTROLLER OF STORES RAILWAY PURCHASE BY ME IN AUCT ION SALE OF THE SAID SL. NO.48 LOT NO SP/1/260102072 HELD ON 23/7/02 AT GSD RAIPUR AND TO PASS RECEIPT THEREOF FOR AND ON MY BEHALF. I HEREBY AGREE THAT ALL ACTS, DEEDS AND THINGS DONE BY MY SAID ATTORNEY SHALL BE CONSTRUED TO AS ACTS, DEEDS AND THINGS DONE BY M E AND I UNDERTAKE TO RATIFY AND CONFIRM ALL WHATSOEVER THAT MY SAID ATTORNEY SH ALL BE OR CAUSE TO BE DONE FOR ME BY VIRTUE OF THE POWER HEREBY GIVEN. IN WITNESS WHEREOF, I HAVE SIGNED THIS DEED ON THIS DAY 31 JUL 2002 SIGNATURE OF ATTORNEY ATTESTED SD/- SIGNATURE (EXECUTANT) WITNESS: PRAVEEN KUMAR NOTARY STAMP 9. ALL SPECIAL POWER OF ATTORNEY EXECUTED ON STAMP PAPER OF RS.50/- WAS GIVEN BY SHRI MANOJ KUMAR KANODIA AND OTHERS ON BEHALF OF M/S HARIOM CASTING UDYOG DHANELI, RAIPUR. FROM THE ABOVE SPECIAL POWER OF A TTORNEY IT IS CLEAR THAT M/S HARI OM CASTING HAS BEEN THE HIGHEST BIDDER IN AUCTION S ALE OF SL. NO.48 HELD ON 23.07.2002 AT G.S.D, RAIPUR AND HAVE PAID THE FULL AMOUNT TOWARDS THE COST OF MATERIAL AGAINST THE CONCERNED LOT. IT IS ONLY AFT ER THIS AVERMENT THAT THE ASSESSEE FIRM HAS AUTHORIZED, NOMINATED AND APPOINTED ONE SH RI ARUN KUMAR TO RECEIVE ALL THE THINGS, GOODS AND ARTICLES FROM THE CONTROLLER OF STORES PURCHASED BY THE ASSESSEE FIRM. THUS, NOBODY CAN DENY THAT THE PURC HASES OF GOODS/SCRAP MADE BY THE ASSESSEE FIRM IS BY BIDING IN THE AUCTION HELD BY RAILWAYS. THUS IT IS CLEAR THAT THE ASSESSEE HAS MADE THE PURCHASES OF SCRAP FROM R AILWAYS AND ONE OF THE PARTNERS 10 ITA NOS.72, 73 , 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 OF THE ASSESSEES FIRM SHRI MANOJ KANODIA ADMITTED IN HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY THAT PURCHASES OF RAW M ATERIAL WERE MADE FROM OPEN MARKET AS WELL AS FROM RAILWAYS. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. HAS CORRECTLY ESTIMATED THE SALES AT RS.11,75,00,000/-. IN OUR VIEW, THE LD. CIT(A) HAS WRONGLY ACCEPTED THE VERSION OF THE ASSESSEE THAT T HERE WAS MISTAKE IN THE LIST OF PURCHASES IN RAILWAY AUCTION BY RS.1,10,31,006/-. HOWEVER, THE TOTAL PURCHASES AS PER THE LIST OF RAILWAY AUCTION HAS BEEN TAKEN BY T HE A.O. AT RS.11,47,95,125/-. IT APPEARS THAT COPY OF WRITTEN SUBMISSION WAS FORWARD ED TO THE A.O. FOR VERIFICATION BUT NO COMMENTS WERE RECEIVED FROM A.O. IN OUR VI EW, THE LD. CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE VERSION OF THE ASSESSEE WITHOUT VERIFYING THE PURCHASES MADE FROM THE RECORDS AND ALSO WITHOUT OBTAINING TH E REPORT OF THE A.O. WE HAVE ALSO HELD THAT THE LD. CIT(A) HAS WRONGLY HELD THAT THE ASSESSEE HAS SUCCESSFULLY PROVED THE PURCHASES BY OTHER PERSONS TO THE TUNE O F RS.59,58,800/-. THESE OBSERVATIONS OF THE LD. CIT(A) ARE CONTRARY TO THE INFORMATION RECEIVED FROM DY. CHIEF ESTATE MANAGER, GSD SE RAILWAY, RAIPUR. THE LD. CIT(A) HAS MADE THESE OBSERVATIONS WITHOUT OBTAINING THE COMMENTS OF THE A.O. THE RAILWAY AUTHORITIES HAVE CONFIRMED THAT DURING THE F.Y. 2002-03 RELEVAN T TO THE A.Y. UNDER CONSIDERATION THE ASSESSEE FIRM HAS PURCHASED ITEMS OF SCRAP TO THE TUNE OF RS.11,47,95,125/-. WE ALSO OBSERVED HERE THAT ASSE SSEE HAS NEVER GIVEN SUCH EXPLANATION BEFORE THE A.O. 10. WE ALSO OBSERVE HERE THAT AT THE TIME OF HEARIN G SHRI G.S. AGRAWAL, LD 11 ITA NOS.72, 73 , 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 COUNSEL FOR THE ASSESSEE WAS FAIR ENOUGH TO CONCEDE THAT SALES OUTSIDE THE BOOKS MAY BE ESTIMATED AT RS.11.75 CRORES, AS IT HAS BEEN DONE BY THE A.O. IN HIS STATEMENT, SHRI MANOJ KANODIA, PARTNER OF THE FIRM AFFIRMED THAT PURCHASES OF RAW MATERIAL WERE MADE FROM OPEN MARKET AS WELL AS FROM RAILWAYS BUT THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT. THE SALES WER E ALSO MADE OUTSIDE THE BOOKS OF ACCOUNT. UNDER THESE CIRCUMSTANCES, THE A.O. WA S JUSTIFIED IN ESTIMATING THE SALES AT RS.11.75 CRORES. 11. AS REGARDS THE APPLICATION OF THE N.P. ON ESTIM ATED SALES, WE ARE OF THE VIEW THAT THE N.P. RATE TAKEN BY THE A.O. IS ON HIGHER S IDE. HOWEVER, THE ASSESSEE HAS REFERRED TO COMPARABLE CASE OF ONE M/S. S.M. STEEL CENTRE, RAIPUR (PAN: ADBPG8425F) WHEREIN NP RATE WAS 0.27% IN THE A.Y. 2 003-04 ON SALES OF RS.6.09 CRORES. IN THE INSTANT CASE, THE SALES ARE MORE TH AN RS.11.00 CRORES. TAKING INTO CONSIDERATION THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, W HOLD THAT THE N.P. RATE OF 0.5% WILL MEET THE ENDS OF JUSTICE IN THIS CASE. WE DIRECT THE A.O. TO RECOMPUTE THE INCOME OF THE ASSESSEE ACCORDINGLY. RESULTANTLY, GROUND NO.1 OF REVENUES APPEAL IS ALLOWED PARTLY WHILE GROUND NOS .1 TO 3 OF THE ASSESSEES APPEAL ARE REJECTED. 12. GROUND NO.2 OF REVENUES APPEAL READ AS UNDER : - 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, LD. CIT(A) 12 ITA NOS.72, 73 , 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 HAS ERRED IN DELETING THE ADDITION OF RS.11,17,900/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE IT ACT, 1961 WITHOUT PROPERLY APPRECIATING FACTS OF THE CASE. 13. WHILE FRAMING THE ASSESSMENT, THE A.O. MADE ADD ITION OF RS.11,17,900/- ON ACCOUNT OF UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT. 14. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION RELYING ON THE FOLLOWING DECISIONS. 1. COMMISSIONER OF INCOME TAX VS. AGGARWAL ENGG. (J AL.) (2008) 302 ITR 246 (P&H) 2. GUPTA CONSTRUCTION COMPANY VS. ACIT (2004) 84 TTJ (ALL.) 46 3. CITS. BANWARILAL BANSIDHAR (1998) 229 ITR 229 (ALL.) 15. THE LD. CIT(A) OBSERVED THAT IN THE ABOVE DECIS IONS IT HAS BEEN HELD THAT ONCE THE NET PROFIT RATE IS APPLIED THAT WOULD TAKE CARE OF EVERYTHING. THUS, NO SEPARATE ADDITION IS CALLED FOR. THE OBSERVATIONS MADE BY T HE LD. CIT(A) ARE AS UNDER :- THEIR LORDSHIPS, PUBJAB & HARYANA HIGH COURT IN CA SE OF CIT VS. AGGARWAL ENGG., REPORTED IN 302 ITR 246 HAVE OBSERV E WE HAVE ALSO PERUSED THE LAW LAID DOWN BY THE HONBLE ALLAHABAD HIGH COURT IN CIT VS. BANWARI LAL BANSHIDHAR REPORTED IN (1998) 229 ITR 2 29, WHEREIN, IT WAS OBSERVED (PAGE 232), WHEN THE GROSS PROFIT RATE IS APPLIED, THAT WOULD TAKE CARE OF EVERYTHING AND THERE WAS NO NEED FOR THE AS SESSING OFFICE TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURCHASES BY THE ASSESSEE. NO CONTRARY VIEW HAS BEEN SHOWN OR RELIED UPON IN THE MEMO OF APPEAL. WE ARE OF THE VIEW THAT THE COMMISSIONER OF INCOME TAX (AP PEALS) AND THE TRIBUNAL WERE JUSTIFIED IN HOLDING THAT ONCE THE NET PROFIT RATE WAS APPLIED, NO FURTHER ADDITION WAS CALLED FOR IN RESPECT OF PURCHASES AND INTRODUCTION OF CASH IN 13 ITA NOS.72, 73 , 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 THE FACTS AND CIRCUMSTANCES OF THE CASE. 16. IN VIEW OF THE ABOVE, THE LD. CIT(A) DELETED TH E ADDITION. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI S.K. MEENA, DEPARTMENTAL REPRESENTATIVE RELIED ON THE VARIOUS DECISIONS AND SUBMITTED THAT THE CASH CREDIT CAN BE ASSESSED EVEN WHEN BUSINESS INCOME IS ESTIMATED. HE FURTHER SUBMITTED THAT THERE WAS NOTHING IN LAW WHICH PREVENTS THE AO IN T AXING BOTH UNEXPLAINED CASH CREDIT AND BUSINESS INCOME ESTIMATED AFTER REJECTIN G THE BOOKS BEING UNRELIABLE. IT IS FOR THE ASSESSEE TO PROVE THAT EVEN IF THE CASH CREDIT REPRESENTS INCOME, IT IS FROM A SOURCE WHICH HAS ALREADY BEEN TAXED. IN OUR OPIN ION, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE LD. CIT(A) W AS JUSTIFIED IN DELETING THE ADDITION. IT IS ALSO WELL SETTLED LAW THAT WHEN TW O VIEWS ARE THERE, THEN THE VIEW IN FAVOUR OF THE ASSESSEE SHOULD BE TAKEN. THE DECISI ONS RELIED UPON BY THE LD. CIT(A) ARE IN FAVOUR OF THE ASSESSEE AND, THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD. CIT(A) IN TAKING A VIEW IN FAVOUR OF THE ASS ESSEE. CONSEQUENTLY, WE DISMISS GROUND NO.2 OF REVENUES APPEAL. 18. GROUND NO.4 OF ASSESSEES APPEAL READS AS UNDER :- THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) FURTHER ERRED IN NOT CONSIDERING THE INCOME FROM COMMISSION OFFERED AT RS.2,97,800/- SIMULTANEOUS ESTIMATING THE NET PROFIT ON SALES MAD E BY THE APPELLANT, CAUSING DOUBLE TAXATION. 14 ITA NOS.72, 73 , 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 19. WHILE DECIDING THE APPEAL, THE LD. CIT(A) OBSER VED AS UNDER : FOR ASSESSMENT YEAR 2003-04, THE LD COUNSEL FURTHE R OBJECTED THAT ON ONE HAND THE AO HAS CONSIDERED PARTICIPATION IN RAILWAY AUCTION AS HIS BUSINESS AND ON THE OTHER HAND ALSO TAXED THE COMMISSION INC OME AT RS.2,97,800/-. ONE CANNOT EARN COMMISSION FROM SELF. IT WAS ARGUE D THAT IT IS DOUBLY TAXING THE SAME INCOME. HOWEVER, THE APPELLANT HAS NOT ES TABLISHED AS TO FROM WHOM THE COMMISSION WAS EARNED BY HIM. THEREFORE, THIS GROUND IS DISMISSED. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE A.O. HAS STATED THAT AMOUNT OF RS.2,97,800/- CREDITED IN THE P&L ACCOUNT MAY BE AS SESSEES INCOME BUT THE SOURCE OF THE SAME IS NOT ESTABLISHED BY THE ASSESSEE TO B E THE COMMISSION INCOME EARNED FROM THE TRANSACTION OF PURCHASES MADE BY IT BY BID ING IN THE AUCTION HELD BY RAILWAYS. WE FIND THAT THE ASSESSEES CLAIM OF PURC HASE OF GOODS/SCRAP FROM RAILWAYS ON BEHALF OF OTHERS IN LIEU OF COMMISSION HAS NOT BEEN ACCEPTED BY THE AUTHORITIES BELOW. IN OUR VIEW, THE ASSESSEE FAILE D TO ESTABLISH AS TO FROM WHOM THE COMMISSION WAS EARNED BY HIM. CONSEQUENTLY, WE DO NOT SEE ANY MERIT IN THIS GROUND OF APPEAL AND ACCORDINGLY, WE REJECT THE SAM E. ITA NO.73/BLPR/2011 21. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,43,360/- MADE BY T HE AO ON ACCOUNT OF PROFIT ON UNACCOUNTED PURCHASE AND SALES OF SCRAPS/GOOD WI THOUT PROPERLY APPRECIATING FACTS OF THE CASE. 15 ITA NOS.72, 73 , 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.23,55,010/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENTS U/S 69 OF THE I.T. ACT 1961 WITHOUT PROPERLY APPRECIATING FACTS OF THE CASE. 22. AS REGARDS GROUND NO.1, THE A.O. ESTIMATED THE SALES OF GOODS/SCRAP OUTSIDE THE BOOKS AT RS.1,04,44,400/- AND N.P. @ 2.33% WAS APPLIED WHICH COMES TO RS.2,43,360/- 23. ON APPEAL, THE LD. CIT(A) WITHOUT DISTURBING TH E SALES HAS APPLIED N.P. @ 0.4% WHICH COMES TO RS.41,777/-. THUS, THE LD. CIT (A) ALLOWED RELIEF OF RS.2,01,583/- TO THE ASSESSEE FOR A.Y. 2004-05. TH E FACTS OF THE PRESENT YEAR ARE SIMILAR TO THAT OF IMMEDIATELY PRECEDING YEAR. THE RE IS NO DISPUTE ABOUT THE SALES ESTIMATED BY THE AUTHORITIES BELOW. IN VIEW OF OUR DECISION GIVEN IN ITA NO.72/BLPR/2011 FOR A.Y. 2003-04, WE DIRECT THE A.O . TO RECOMPUTE THE INCOME OF THE ASSESSEE BY APPLYING N.P. @ 0.5%. THIS GROU ND OF THE REVENUES APPEAL IS ALLOWED PARTLY. 24. AS REGARDS GROUND NO.2, THE FACTS OF THE PRESEN T YEAR ARE SIMILAR THAT OF A.Y. 2003-04. THE DECISION GIVEN IN ITA NO.72/BLPR/2011 RELATING TO A.Y. 2003-04 IN RESPECT OF GROUND NO.2 SHALL APPLY TO THIS GROUND O F APPEAL ALSO WITH EQUAL FORCE. ACCORDINGLY, WE REJECT THIS GROUND OF APPEAL. 75/BLPR/2011 25. GROUND NOS. 1 TO 3 OF ASSESSEES APPEAL READ AS UNDER :- 16 ITA NOS.72, 73 , 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 1) THAT UNDER THE FACTS AND THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) ERRED IN HOLDING THAT THE APPELLANT WAS ENGA GED IN PURCHASE AND SALE OF IRON AND STEEL SCRAP IN RAILWAY AUCTION BY REJECTING THE EXPLANATION AND EVIDENCES FILED. PRAYED THAT THE APPELLANT WORKED ON COMMISSION BASI S, AND DID NOT PURCHASE GOODS IN RAILWAY AUCTION, NOR MADE SALES. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT (APPEALS) FURTHER ERRED IN APPLYING NET PROFIT RATE OF 0.4% AMOUNTING TO RS.41,777/- ON THE SALES ESTIMATED AT RS.1,04,44 ,400/-. PRAYED THAT THE SALES WERE NOT MADE BY THE APPELLAN T, AND THEREFORE, ESTIMATION OF INCOME AT RS.41,777/- IS U NJUSTIFIED AND BE DELETED. 3. WITHOUT PREJUDICE TO ABOVE, IN ALTERNATE, THE AP PLICATION OF NET PROFIT RATE OF 0.4% IS ON THE HIGHER SIDE. 26. IN VIEW OF OUR FINDINGS GIVEN IN ITA NO.72/BLPR AND 74/BLPR/2011 RELATING TO A.YS. 2003-04, WE DO NOT FIND ANY MERIT S IN THESE GROUNDS OF APPEAL. ACCORDINGLY, WE DISMISS THE SAME. 27. IN THE RESULT, ITA NOS.72/BLPR/2011 AND 73/BLPR /2011 ARE ALLOWED PARTLY AS INDICATED ABOVE, WHILE ITA NOS.74/BLPR/2011 AND 75/BLPR/2011 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2014. SD/- SD/- (RAJENDRA) (H.L. KARWA) ACCOUNTANT MEMBER PRESIDENT RAIPUR, DATED: 23.12.2014 PBN/* 17 ITA NOS.72, 73 , 74 & 75/BLPR/2011 A.YS.2003-04 & 2004-05 COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. D.R. ITAT, RAIPUR BENCH, RAIPUR 6. GUARD FILE //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, RAIPUR