M/s Gupta Global Exim Pvt. L:td., RAJKOT-GUJARAT V. The Assistant Commissioner of Income Tax, Gandhidham Cirle, GANDHIDHAM

ITA 790/RJT/2010

• Counselvise Citation: 79024914 RSA 2010
• Duration Of Justice: 3 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-06-2013
• Assessment Year: 1999-2000
• Appeal Filed On: 15-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: KALPESH DOSHI
• Keywords: Unexplained investment; Business income; Loose papers; Documents seized
• Section: 69C; 139; 133A

Judgement Text

0 I : S : IN THE INCOME TAX APPELLATE TRIBUNAL: RAJKOT BENCH: RAJKOT . . R . . BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM ITA NO S. 790 & 791 /R JT /2010 3 3 / ASSESSMENT YEAR S1999 - 2000 & 200 1 - 02 M/S. GUPTA GLOBAL EXIM PVT. LTD. V. AC IT GANDHIDHAM GANDHIDHAM CIRCLE PAN: A A ACG7805L GANDHIDHAM DATE OF HEARING: 11 .0 6 .2013 DATE OF PRONOUNCEMENT: 21 .0 6 . 2013 FOR THE ASS ESSEE: KALPESH DOSHI , FCA FOR THE REVENUE : K. C. MATHEWS , DR / ORDER . . /D K SRIVASTAVA: A PPEAL BEARING ITA NO. 790/RJT/2010 FILED BY THE ASSESSEE RELATES TO ASSESSMENT YEAR 1999 - 2000 AND IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 17 - 12 - 2009 WHILE THE OTHER APPEAL BEARING ITA NO. 791/RJT/2010 RELATES TO ASSESSMENT YEAR 2000 - 2001 AND IS DIRECTED AGAINST THE APPELLATE ORDER OF EVEN DATE PASSED BY THE CIT(A) . THE ISSUES INVOLVED IN BOTH THE APPEALS ARE COMMON. IT IS THER EFORE CONVENIENT TO DISPOSE OF BOTH THE APPEALS BY A CONSOLIDATE D ORDER. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT IS ENGAGED IN THE BUSINESS OF TRA D ING IN TIMBER. THE RETURN OF INCOME FOR ASSESSMENT YEAR 199 - 2000 WAS FILED ORIGINALLY U/S 139 ON 29 - 09 - 1999 RETURNING TOTAL INCOME AT RS.90,47,831/ - . A SURVEY OPERATION U/S.133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF M/S. GOLD GREEN TIMBER PVT. LTD. ON 11 - 09 - 2002. BOOKS OF ACCOUNT AND DOCUMENTS FOUND AND IMPOUNDED AT THE PREMISES OF THE M/S. GOLD G REEN TIMBER PVT. LTD. REVEALED THAT A SUM OF RS.3,46,12,481/ - WAS PAID IN CASH ON DIFFERENT DATES IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL . BASE D ON THE AFORESAID INFORMATION, NOTICE U/S.147/148 WAS ISSUED AND SERVED BY THE AO ON T HE ASSESSEE PURSUANT TO WHICH ORDER OF RE - ASSESSMENT FOR ASSESSMENT YEAR 1999 - 2000 WAS PASSED ON 28 - 12 - 2006 BY THE AO ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.1,39,25,044/ - AFTER ADDING RS.18,87,953/ - BEING PROFIT ON SUPPRESSED SALES AND RS.29,89,2 60/ - BEING UNEXPLAINED INVESTMENT IN PURCHASES. 2 ITA 790 & 791 /201 0 3. UNDER IDENTICAL CIRCUMSTANCES AS THOSE IN ASSESSMENT YEAR 1999 - 2000, NOTICE U/S 147/148 WAS ISSUED ON 19 - 03 - 2008 FOR ASSESSMENT YEAR 2001 - 02 ALSO AS A RESULT OF WHICH A SUM OF RS.16,98,943/ - WAS ADDED AS PROFIT ON SUPPRESSED TURNOVER. 4. BOTH THE ASSESSMENTS MADE BY THE AO WERE CHALLENGED BEFORE THE CIT(A) WITHOUT SUCCESS. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. 5. GROUND NO.1 TAKEN B Y THE ASSESSEE IN ITS APPEAL BEARING ITA NO. 790/RJT/2010 FOR THE ASSESSMENT YEAR 1999 - 00 IS AS UNDER: - THAT, THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW BY CONFIRMING ADDITION ON ACCOUNT OF GROSS PROFIT OF RS.18,87,953/ - . 6. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUN DS OF APPEAL IN ITS APPEAL BEARING ITA NO.791/RJT/2010 FOR THE ASSESSMENT YEAR 2001 - 02 : - 1. THAT, THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW BY CONFIRMING ADDITION OF RS.16,98,943/ - ON ACCOUNT OF GROSS PROFIT. 2. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW BY CONFIRMING REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE I.T. ACT, 1861. 7 . AS STATED EARLIER, THE ISSUE AS REGARDS DETERMINATION OF SUPPRESSED SALES AND APPLICATION OF RATE OF GROSS PROFIT THEREON IS COMMON IN BOTH THE ASSESSME NT YEARS UNDER APPEAL . FOR THE SAKE OF CONVENIENCE, FACTS HAVE BEEN C U LLED OUT FROM THE RECORDS RELATING TO ASSESSMENT YEAR 1999 - 2000. PERUSAL OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 1999 - 2000 SHOWS THAT DOCUMENTS FOUND AT THE TIME OF SURVEY OPERATIONS U/S 133A AT THE BUSINESS PREMISES OF M/S. GOLD GREEN TIMBER PVT. LTD. ON 11 - 09 - 2002 REVEALED THAT M/S GOLD GREEN TIMBER PVT. LTD. HAD MADE PAYMENTS AGGREGATING TO RS.3,46,12,481/ - IN CASH TO THE ASSESSEE ON DIFFERENT DATES AS PER DETAILS GIVEN IN THE ASSE SSMENT ORDER. THOSE PAYMENTS WERE FOUND TO HAVE BEEN MADE OVER A PERIOD OF 11 MONTHS. ACCORDING TO THE AO, THE AFORESAID PAYMENTS MADE BY M/S. GOLD GREEN TIMBER PVT. LTD. TO THE ASSESSEE RELATED TO 3 ITA 790 & 791 /201 0 UNACCOUNTED SALES MADE BY THE ASSESSEE OUTSIDE THE BOOKS. THE AO THEREFORE INFERRED THAT THE ASSESSEE WAS MAKING UNACCOUNTED SALES OUTSIDE THE BOOKS REGULARLY. HE ALSO NOTICED THAT THE AFORESAID AMOUNT , NAMELY , RS.3,46,12,481/ - RELATED TO 11 MONTHS ONLY. HE THEREFORE EX TRAPOLATED THE SAME AND WORKED OUT UNACCOUN TED SALES FOR THE WHOLE YEAR AT RS.3,77,59,068/ - . THE AO ALSO HELD THAT UN ACCOUNTED SALES MADE BY THE ASSESSEE WOULD NOT HAVE BEEN POSSIBLE IN THE ABSENCE OF UNACCOUNTED PURCHASES. HE THEREFORE QUANTIFIED INVESTMENTS IN UNACCOUNTED PURCHASES AT RS. 29,89,26 0/ - FOR THE REASONS GIVEN IN THE ASSESSMENT ORDER. 8 . ON APPEAL, THE LD. CIT (A), AFTER DETAILED ANALYSIS OF THE FACTS , HAS ENDORSED THE FINDINGS OF THE AO WITH REGARD TO DETERMINATION OF UNACCOUNTED SALES AS ALSO APPLICATION OF RATE OF GROSS PROFIT. THE LD. CIT (A) HAS SUMMARIZED HIS FINDINGS AT P P. 22 - 23 OF HIS APPELLATE ORDER AS UNDER: - (CI) TO CONCLUDE, I AM TO STATE: - THAT THE APPELLANTS CONTENTION THAT THE MATERIALS FOUND DURING SURVEY IN THE PREMISES OF GOLD GREEN TIMBER HAD NO EVIDENTIARY VALUE AND THEY COULD NOT BE USED AGAINST APPELLANT IS NOT CORRECT, AS THERE EXISTED SOME NATURE OF TRANSACTIONS, WHETHER ACCOUNTED OR UNACCOUNTE D OR BOTH BEFORE THE DATE OF SURVEY. THAT DEPARTMENTS PRESUMPTION THAT THE NOTINGS IN DIARIES / NOTE BOOKS IMPOUND ED HAD PERTINENT NEXUS WITH THE APPELLANT IS CORRECT ON THE BASIS OF CERTAIN CODE WORDS USED IMPLY THE APPELLANT AND ALSO FINDINGS GIVEN BY SETTLEMENT COMMISSION IN THE CASE OF GOLD GREEN TIMBER. SHRI MUKESH GUPTA, THE APPELLANTS DIRECTOR, HIMSELF STATED IN THE STATEMENT THAT THE ENTRIES FOUND IN THESE MATERIALS REPRESENTED DIRECT SALES TO GREEN GOLD TIMBER REFUTING THE OTHER PARTYS CLAIM THAT IT WAS A COMMISSION AGENT. 4 ITA 790 & 791 /201 0 THE APPELLANT ALSO ACCEPTED THAT IT FILED A RECOVERY SUIT AGAINST GREEN GOLD TIMBER FOR RECOVERY THE SALES PROCEEDS. WHEN THE DEPARTMENT PUT FORWARD ITS MATERIALS, WHICH WERE CERTAINLY RELEVANT TO THE TRANSACTIONS OF THE APPELLANT, IT WAS THE DUTY OF THE APPELLANT TO EXPLAIN EACH AND EVERY ENTRY SATISFACTORILY. IN THE INSTANT CASE, THE APPELLANT DID NOT DISCHARGE ITS ONUS EFFECTIVELY AND SATISFACTORILY, BUT KEPT ON STRESSING THE POINT THAT EVIDENCES FOUND IN THE THIRD PARTYS PLACE WOULD NOT HAVE ANY RELEVANCE WITH ITS TRANSACTIONS. BOTH, THE APPELLANT AND GREEN GOLD TIMBER WERE HAND IN GLOVE IN THIS KIND OF UNACCOUNTED TRANSACTIONS TO DEFRAUD THE REVENUE AND ONCE DEPARTMENT SURVEYED ONE PARTY, ANOTHER PARTY, THE APPELLANT, TOOK VAGUE STAND, SO AS TO ESCAPE FROM THE CLUTCHES OF THE DEPARTMENT. HOWEVER, ULTIMATELY, OTHER PARTY, GREEN GOL D TIMBER, REALIZED ITS MISTAKE, APPROACHED SETTLEMENT COMMISSION AND SURRENDERED REASONABLE AMOUNT FOR TAXATION. WITH THE ABOVE ARGUMENTS, I PROCEED TO HOLD THAT THE APPELLANT HAD UNACCOUNTED SALES TRANSACTIONS IN CASH DURING THIS ASSESSMENT YEAR WITH GRE EN GOLD TIMBER. NEXT QUESTION ARISES, WHETHER THE FIGURE OF TOTAL SALES ARRIVED AT BY THE A.O. AND ESTIMATION OF G.P. WAS CORRECT OR NOT ? (CJ) IN THIS REGARD, I HAVE NO OTHER GO, EXCEPT CONFIRMING THE ACTION TAKEN BY A.O. IN ADOPTING G.P. AT 5% ON THE T OTAL SALES OF RS.3,77,59,068/ - . THE A.O.S BASIS WAS ALREADY REPRODUCED IN PARA (AD) OF PAGE - 8/9 OF THIS APPELLATE ORDER. I FULLY ENDORSE HIS OBSERVATIONS AND CONCLUSION. NEITHER BEFORE ME, NO R BEFORE THE A.O. THE APPELLANT GAVE ANY ARGUMENTS AGAINST TH E ESTIMATION OF SUPPRESSED TURNOVER AS WELL AS G.P. AS I SAID EARLIER, THE APPELLANTS ARGUMENT WAS THE MATERIALS IMPOUNDED DID NOT HAVE LINK WITH IT, 5 ITA 790 & 791 /201 0 WHICH CONTENTION I REJECTED SUMMARILY ON THE BASIS OF ABOVE LENGTHY DISCUSSION. THE GP ADDITION IS CONF IRMED. 9 . AGGRIEVED BY THE ORDER PASSED BY THE CIT (A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, I T IS STATED BY THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE ASSESSEE IS BEING ASSESSED TO TAX REGULARLY AND THAT THE ASSESSEE HAS ALWAYS RETURNED ITS INCOME ON THE BASIS OF REGULAR BOOKS OF ACCOUNT MAINTAINED BY IT AND ALSO AUDITED BY THE T AX AUDITOR . IT IS FURTHER SUBMITTED THAT BOTH THE ADDITIONS HAVE BEEN MADE BY THE AO ON THE BASIS OF SURVEY OPERATION CARRI ED OUT AT THE PREMISES OF A THIRD PARTY , NAMELY, M/S. GREEN GOLD TIMBER PVT. LTD. IT IS ALSO SUBMITTED THAT CERTAIN MATERIALS WERE FOUND AND IMPOUNDED BY THE DEPARTMENTAL AUTHORITIES AT THE TIME OF SURVEY AT THE PREMISES OF M/S. GREEN GOLD TIMBER PVT. LTD. IT IS FURTHER SUBMITTED THAT BOTH THE ADDITIONS IN THE HANDS OF THE ASSESSEE HAVE BEEN MADE ON THE BASIS OF DOCUMENTS FOUND AT THE BUSINESS PREMISES OF M/S. GREEN GOLD TIMBER PVT. LTD. AND NOT AT THE BUSINESS PREMISES OF THE ASSESSEE. IT IS CONTENDED THAT M/S. GREEN GOLD TIMBER PVT. LTD. CAME INTO EXISTENCE AS AN I NCORPORATE D C OMPANY ON 15 - 10 - 1998 AND HENCE IT WAS NOT POSSIBLE FOR THE SAID COMPANY TO HAVE MADE PAYMENTS BEFORE 15 - 10 - 1998 TO THE ASSESSEE . ACCORDING TO THE ASSESSEE, THE AO HAS TAKEN THE PAYME NTS MADE BY M/S. GREEN GOLD TIMBER PVT. LTD. W.E.F. 24 - 04 - 1998 WHEREAS, ACCORDING TO HIM, IT WAS NOT POSSIBLE FOR M/S. GREEN GOLD TIMBER PVT. LTD. TO MAKE PAYMENTS W.E.F. 24 - 04 - 1998 AS THE SAID COMPANY WAS NOT IN EXISTENCE BEFORE 15 - 10 - 1998 . HIS SECOND ARG UMENT WAS THAT THE LOOSE PAPERS FOUND AT THE PREMISES OF M/S. GREEN GOLD TIMBER PVT. LTD. NEITHER BELONG ED TO THE ASSESSEE NOR W ERE PREPARED BY THE ASSESSEE NOR BY ITS D IRECTORS OR EMPLOYEES AND THEREFORE PRESUMPTION WHICH WAS AVAILABLE AGAINST M/S. GREEN GOLD TIMBER PVT. LTD. WAS NOT AVAILABLE AGAINST THE ASSESSEE. HE SUBMITTED THAT THE ADDITIONS MADE ON THE BASIS OF THE AFORESAID LOOSE PAPERS WERE COMPLETELY UNWARRANTED ON FACTS AND UNT E NABLE IN LAW. 10. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSE E HAS ALSO FILED SYNOPSIS OF HIS WRITTEN SUBMISSIONS, WHICH READ AS UNDER: - 6 ITA 790 & 791 /201 0 ON BEHALF OUR ABOVE CLIENT WITH REGARD TO ABOVE SUBJECT MATTER, WE WOULD LIKE TO STATE THAT THE LEARNED CIT (A) HAS WRONGLY CONFIRMED THE ADDITION. WE HAVE FILED THE DETAILED SU BMISSIONS, HOWEVER THE SYNOPSIS IS AS UNDER: - 1 . FACTS OF THE CASE - THE TWO ADDITIONS ARE BASED ON THE SURVEY CARRIED OUT AT THE PREMISES OF M/S. GREEN GOLD TIMBERS PVT. LTD. (THIRD PARTY) - DURING THE COURSE OF SURVEY AT THE PREMISES OF M/S. GREEN GOLD TIMBE RS PVT. LTD., SOME LOOSE MATERIALS WERE FOUND AND ON THE BASIS OF SUCH MATERIALS BOTH THE ADDITIONS ARE BEING MADE BY A.O. - THE PAGE 2 OF THE ASSESSMENT ORDER STATES ABOUT THE DATES, NAME AND AMOUNT, THE STARTING DATE IS 20 - 04 - 1998, THE SAID COMPANY GREEN G OLD PVT. LTD. HAS COME INTO EXISTENCE ON 15 - 10 - 1998 HOW IT IS POSSIBLE TO MAKE PAYMENT PRIOR TO THAT DATE MORE THAN 75% TRANSACTIONS ARE RECORDED PRIOR TO INCORPORATION OF THE SAID COMPANY. - THE LOOSE PAPERS DO NOT BELONG TO A. THE LOOSE PAPERS WERE ALSO NOT PREPARED BY THE A. THE A OR NONE OF THE DIRECTORS OR EMPLOYEES OF THE COMPANY ARE AUTHOR OF SUCH LOOSE PAPERS. - THE PRESUMPTION CAN BE USED AGAINST GREEN GOLD TIMBERS PVT. LTD. AND NOT AGAINST THE A. THE A HAS NO IDEA FOR WHAT PURPOSE SUCH PAP ERS WERE MAINTAINED BY THE GREEN GOLD TIMBER PVT. LTD. - SINCE, THESE PAPERS WERE NOT FOUND FROM THE PREMISES OF THE A, THE PRESUMPTION U/S.132 (4A) OF THE I.T. ACT CANNOT BE APPLICABLE IN RESPECT OF SUCH LOOSE MATERIALS SO FAR AS THE A IS CONCERNED. - THE SAID MATERIALS CAN ONLY BE USED AGAINST GREEN GOLD TIMBER PVT. LTD. IN WHOSE POSSESSION SUCH PAPERS WERE FOUND. - THE NOTING SHOULD FURTHER BE SUBSTANTIATED BY ADDITIONAL LEGAL SUPPORTIVE DOCUMENTS. ALL THE TRANSACTIONS WITH GREEN GOLD TIMBER PVT. LTD. WER E DULY RECORDED IN THE BOOKS OF ACCOUNTED A, THE PAYMENTS ARE ALSO RECEIVED THROUGH BANKING CHANNEL. 7 ITA 790 & 791 /201 0 - IN N ONE OF THESE PAPERS NAME OF THE A IS WRITTEN OR MENTIONED. ONLY GG IS STATED AND GG MAY AMOUNT TO GREEN GOLD ALSO AND NOT THE A . - THE GREEN GOLD PVT. LTD. WAS INCORPORATED ON 15/10/1998 AND THEREFORE ADDITION PRIOR TO INCORPORATION COULD NOT BE MADE. - EVEN BOTH THE DIRECTORS OF THE GREEN GOLD TIMBER PVT. LTD. HAVE ALSO ACCEPTED THESE TRANSACTIONS AS THEIR OWN TRANSACTION DURING THE COURSE OF SURVEY . IN THEIR STATEMENT THEY HAVE ACCEPTED AS THEIR OWN TRANSACTION AND HAVE NEVER REFERRED NAME OF THE A. - REFERENCE OF SOME OF THE IMPORTANT QUESTIONS TO AKILESH MANGLIK AND ANUJ MANGLIK, RECORDED DURING THE COURSE OF SURVEY WERE GIVEN VIDE PARA 16 & 18 P AGE NO. 3 & 4 OF THE SUBMISSION. THE DIRECTOR OF GREEN GOLD TIMBER PVT. LTD. IN STATEMENT RECORDED U/S. 131 VIDE QUE. 63 HAS DECLARED RS.1.5 CR. AS UNDISCLOSED INCOME IN THEIR HANDS. - THE GREEN GOLD TIMBER WAS INVOLVED IN VARIOUS SUSPICIOUS TRANSACTIONS AS BOGUS FIRMS, BOGUS LETTER HEADS, BOGUS C FORMS, BOGUS RUBBER STAMPS WERE FOUND AND THEREFORE RELIABILITY OF SUCH PARTY IS DOUBTFUL. - VIDE PARA NO. 17 PAGE NO.13 OF THE SETTLEMENT COMMISSION ORDER, THE HONBLE SETTLEMENT COMMISSION HAS STATED THAT IT MAY BE SUFFICIENT TO GIVE ANY FINDINGS ABOUT THE NATURE OF THE ENTIRE TRANSACTIONS NOTED IN THE IMP O UNDED DIARIES. - DURING THE RELEVANT ACCOUNTING YEAR THE APPLICANT FUNCTIONED ONLY FOR FIVE AND HALF MONTHS. IT IS NOT FULLY CLEAR IN WHAT CAPACITY THE TRANSACTIO NS OF THE PRIOR PERIOD WERE UNDERTAKEN WHICH WERE CONTINUED AFTER THE INCORPORATION OF THE COMPANY. - RELIANCE IS PLACED ON FOLLOWING DECISIONS : 1 . PUNJAB TRADERS 88 TTJ (CHD.) 2 . UNIQUE ORGANIZERS & DEVELOPERS PVT. LTD. (2001) 070 TTJ 131 (AHD.) 3 . MISS LATA MANGES HKAR 97 ITR 696 (BOM.) 4 . JAIKUMAR 99 TTJ 744 (JP) 5 . RATAN CORPORATION 197 CTR 536 (GUJ.) 6 . J.R.C. BHANDARI 079 TTJ 0001 (JD) 7 . MONGA METALS (P) LTD. (2000) 067 TTJ 247 (ALL) 8 . PRATHANA CONSTRUCTION (P) LTD. (2001) 070 TTJ 0122. 8 ITA 790 & 791 /201 0 THEREFORE, CONSIDERING THE FACTS AND LEGAL POSITION, THE P ENALTY IS WRONGLY IMPOSED AND REQUIRED TO BE DELETED. 11 . IN REPLY, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER S PASSED BY THE AO AND THE CIT (A). HE ALSO FILED A COPY OF ORDER PASSED BY THIS TRIBUNAL ON 06 - 03 - 2013 IN M/S. SHIPRA OCEAN TRADE PVT. LTD. V. ACIT, ITA NO.1128/RJT/2010 FOR ASSESSMENT YEAR 2001 - 02 IN WHICH ADDITIONS MADE ON SIMILAR SET OF FACTS INVOLV ING IN M/S. GREEN GOLD TIMBER PVT. LTD. HAS BEEN CONFIRMED BY THIS TRIBUNAL. 12 . WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS. THERE IS NO DOUBT THAT THE DOCUMENTS IMPOUNDED AT T HE BUSINESS PREMISES OF M/S. GREEN GOLD TIMBER PVT. LTD. HAVE FO RMED THE BASIS FOR DETERMINING THE QUANTUM OF SUPPRESSED SALES BY THE ASSESSEE. IT IS THE CASE O F THE ASSESSEE THAT NO ADDITION CAN BE MADE ON THE BASIS OF DOCUMENTS FOUND FROM THE PREMISES OF THE THIRD PARTY, WHICH, IN THE PRESENT CASE , IS M/S. GREEN GOLD TIMBER PVT. LTD. IN OUR VIEW, THERE CAN BE NO SUCH UNIVERSAL PROPOSITION OF LAW THAT DOCUMENTS SEIZED FROM THIRD PARTY CAN NEVER PROVIDE THE BASIS FOR ACTION IN THE HANDS OF OTHERS. IN THE PRESENT CASE, DOCUMENTS RECOVERED FROM THE PREMISES OF M/S. GREEN GOLD TIMBER PVT. LTD. REVEALED THAT A SUM OF RS.3,46,12,481/ - WAS PAID IN CASH TO THE ASSESSEE O VER 11 MONTHS OF THE YEAR. DETAILS OF THESE PAYMENTS ARE AVAILABLE ON PP. 2 - 6 OF THE ASSESSMENT ORDER FOR AY 1999 - 2000 . THE SAID COMPANY, NAMELY, M/S. GREEN GOLD TIMBER PVT. LTD. , HAS SHOWN THESE PAYMENTS TO HAVE BEEN MADE TO GG E, WHICH HAS BEEN HELD BOTH BY THE AO AND CIT(A) TO MEAN THE ASSESSEE , NAMELY, M/S. GUPTA GLOBAL EXIM P. LTD. BOTH THE PARTIES ARE HAVING REGULAR BUSINESS DEALINGS . SIMPLY BECAUSE PAYMENTS MADE BY M/S. GREEN GOLD TIMBER PVT. LTD. HAVE NOT BEEN RECORDED BY THE ASSESSEE IN ITS BOOKS , IT DOES NOT IPSO FACTO MEAN THAT PAYMENTS WERE NOT MADE BY M/S. GREEN GOLD TIMBER PVT. LTD. THE MATERIALS GATHERED AT THE TIME OF SURVEY AT THE BUSINESS PREMISES OF MS/ GREEN GOLD TIMBER PVT. LTD. ARE SPECIFIC IN THAT THEY CONTAIN NOT ONLY THE AMOUNTS BUT ALSO THE DATES ON WHICH THEY WERE PAID AND ALSO THE NAME OF THE ASSESSEE TO WHOM THEY WERE PAID. SUCH MATERIALS CANNOT BE IGNORED UNLESS THEY ARE REBUTTED. THERE IS NOTHING IN THE ORDER OF THE AO OR CIT(A) THAT THE ASSESSEE HAS REBUTTED THOSE MATERIALS. 9 ITA 790 & 791 /201 0 1 3 . TURNING TO THE FACTS OF THE CASE, IT IS SEEN THAT THE DOCUMENTS IMPOUNDED AT THE TIME OF SURVEY AT THE PREMISES OF M/S. GREEN GOLD TIMBER PVT. LTD. CONTAIN DETAILS OF DATE - WISE PAYMENT AS WELL AS NAME OF THE PARTY TO WHOM SUCH PAYMENTS WERE MADE : PP. 2 - 6 OF THE ASSESSMENT ORDER FOR AY 1999 - 2000 . M/S GREEN GOLD TIMBER PVT. LTD. HAS ALREADY ADMITTED BEFORE THE SETTLEMENT COMMISSION THAT IT HAS RECEIVED SALE PROCEEDS IN CASH FROM SEVERAL PARTIES. THE FINDING RECORDED BY THE CIT(A) THAT M/S. GREEN GOLD TIM BER PVT. LTD. AND THE ASSESSEE WERE INVOLVED IN CERTAIN CLANDESTINE TRANSACTION S HAS NOT BEEN REBUTTED BEFORE US. THE LD. CIT (A) HAS GIVEN DETAILED REASON S FOR ENDORSING THE ACTION OF THE AO IN THIS BEHALF. WE ARE IN COMPLETE AGREEMENT WITH THEM. 14. IT WAS SUBMITTED BY TH E ASSESSEE THAT M/S GREEN GOLD TIMBERS PVT. LTD. WAS INCORPORATED ON 15.10.1998 AND HENCE ADDITIONS IN THE HANDS OF THE ASSESSEE ON THE BASIS OF TRANSACTIONS PRIOR TO 15.10.1998 WITH THE AFORESAID COMPANY WERE COMPLETELY UNWARRANTED. I NCORPORATION OF M/S GREEN GOLD TIMBERS PVT. LTD. ON 15.10.1998 DOES NOT IPSO FACT MEAN THAT THE SAID COMPANY DID NOT EXIST AS UNINCORPORATED ENTITY BEFORE 15.10.1998 . IT WAS FOR THE ASSESSEE TO ESTABLISH ITS ASSERTION THAT THE SAID COMPANY DID NOT EXIST EI THER AS INCORPORATED OR UNINCORPORATED ENTITY BEFORE 15.10.1998. BUT THE ASSESSEE FAILED TO DO SO. 1 5 . THE SUBMISSIONS MADE BY SHRI KALPESH DOSHI, LD. AR FOR THE ASSESSEE BEFORE US WERE ALSO MADE BY HIM BEFORE THE CIT(A). THE LD. CIT(A) HAS CONSIDERED EACH OF THEM IN DETAIL. BESIDES, SIMILAR SUBMISSIONS MADE BY THE SAME LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ON SIMILAR SET OF FACTS IN M/S. SHIPRA OCEAN TRADE PVT. LTD. V. ACIT, ITA NO.1128/R JT /2010 INVOLVING M/S GREEN GOLD TIMBER PVT. LTD. HAVE A LREADY BEEN REJECTED BY THIS TRIBUNAL IN ITS ORDER DATED 06 - 03 - 2013 , WITH THE FOLLOWING OBSERVATIONS: 7. AT THE TIME OF HEARING BEFORE US ON BEHALF OF ASSESSEE SHRI KALPESH DOSHI, CA APPEARED AND CONTENDED THAT THE ADDITION IN QUESTION HAS BEEN MADE ON THE BASIS OF DOCUMENTS FOUND IN THE CASE OF GREEN GOLD TIMBER PVT. LTD. HE SUBMITTED THAT NO PAYMENT IN CASH IS RECEIVED BY THE ASSESSEE FROM GREEN GOLD TIMBER PVT. LTD. THE PAPER IN QUESTION WAS NOT PREPARED 10 ITA 790 & 791 /201 0 BY THE ASSESSEE. THE ASSESSEE HAS NO IDEA AB OUT THE PAPER FOUND AND MAINTAINED BY GREEN GOLD TIMBER PVT. LTD. THE DIRECTORS OF GREEN GOLD TIMBER PVT. LTD. IN THE STATEMENT RECORDED U/S 131VIDE QUESTION NO.63 HAS DECLARED 1.5 CRORE AS UNDISCLOSED INCOME. THE SETTLEMENT COMMISSION VIDE PARA NO.17 PA GE NO.13 HAS STATED THAT IT MAY NOT BE SUFFICIENT TO GIVE ANY FINDINGS ABOUT THE NATURE OF THE ENTIRE TRANSACTIONS NOTED IN THE IMPOUNDED DIARIES. THEREFORE, WE ARE NOT ABLE TO GIVE ANY CATEGORICAL FINDINGS AS TO WHETHER ALL THE SALES APPEARING IN THE DIA RIES ARE COMMISSION SALES OF THE GOODS OF MR.MUKESH GUPTA THROUGH THE APPLICANT OR THEY WERE DIRECT SALES TO THE APPLICANT. VIDE PARA NO.14 PARA NO.19, HONBLE SETTLEMENT COMMISSION HAS GIVEN FINDINGS THAT THE TRANSCATIONS OF THE DIARY RELATING TO THE PER IOD AFTER 15/10/1998 (I.E. FROM THE INCEPTION OF THE COMPANY M/S GREEN GOLD TIMBER PVT. LTD.) WERE ESTIMATED AS INCOME OF THE M/S GREEEN GOLD TIMBER. 8. THE COUNSEL OF THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISION: - PUNJAB TRADERS 88 TTJ 394 (C HD.) - UNIQUE ORGANIZERS & DEVELOPERS PVT. LTD. (2001) 070 TTJ 131 (AHD.) - MISS LATA MANGESHKAR 97 ITR 696 (BOM.) - JAIKUMAR 99 TTJ 744 (JP) - RATAN CORPORATION 197 CTR 536 (GUJ.) - J.R.C. BHANDARI 079 TTJ 0001 (JD) - MONGA METALS (P) LTD. (2 000) 067 TTJ) 247 (ALL) - PRARTHANA CONSTRUCTION (P) LTD. (2001) 070 TTJ 0122. 9. THE COUNSEL OF THE ASSESSEE FINALLY CONCLUDED THAT AO FAILED TO PROVE ANY TRANSACTION OUTSIDE THE BOOKS OF ACCOUNTS WITH GREEN GOLD TIMBER PVT. LTD. THEREFORE, THE ADDI TION OF RS.123000/ - BE DELETED. 10. ON THE OTHER HAND, SHRI AVINASH KUMAR, DR WHEMENTLY SUPPORTED THE ORDER OF THE LD.CIT(A). THE LD.D.R. FURTHER POINTED OUT THAT IN THE CASE OF GUPTA GLOBAL PVT. LTD., ALSO ON IDENTICAL FACTS UNEXPLAINED INVESTMENT IN P URCHASE OF RS.2989260/ - AND ADDITION ON ACCOUNT OF SUPPRESSION OF SALES OF RS.18.87 ADDITIONS WERE CONFIRMED BY LD.CIT(A). SINCE NO SATISFACTORY EXPLANATION HAS BEEN SUBMITTED BEFORE THE AO, ADDITION WERE RIGHTLY MADE AND CONFIRMED BY LD.CIT(A) IN THE IMP UGNED ORDER. 11 ITA 790 & 791 /201 0 11. RIVAL SUBMISSION WERE CONSIDERED. A SURVEY U/S 133 IN THE CASE OF GREEN GOLD TIMBER PVT. LTD. WAS CARRIED OUT AND FROM THE SURVEY MATERIAL (A - 3 PAGE - 11) IT WAS FOUND THAT GREEN GOLD TIMBER PVT. LTD. RECEIVED CASH OF RS.123000/ - FOR HO LLOCK A/C FROM THE ASSESSEE ON 21 - 07 - 2000. THE AO OPION THAT THIS AMOUNT PERTAIN TO THE ASSESSEE AS GREEN GOLD TIMBER PVT. LTD. RECEIVED FROM CHITANJILAL ON ITS BEHALF. THE EXPLANATION IN THIS REGARD SUBMITTED BEFORE BOTH THE DEPARTMENTAL AUTHORITIES BE LOW IS IN OUR OPINION NEITHER COMPLETE NOR SATISFACTORY. WE ARE THEREFORE OF THE VIEW THAT LD.CIT(A) IN THE IMPUGNED ORDER GIVEN COGENT REASON FOR CONFIRMING THE ADDITION OF RS.123000/ - , WE ARE THEREFORE, DECLINE TO INTERFERE. 16 . FOR THE REASONS AFORES AID, THE ORDER OF THE CIT(A) AS REGARD S ADDITION ON ACCOUNT OF GROSS PROFIT IN BOTH THE ASSESSMENT YEARS IS CONFIRMED. RESULTANTLY, GROUND NO.1 TAKEN BY THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 1999 - 2000 AND THE APPEAL FILED BY THE ASSESSEE FOR ASSES SMENT YEAR 2001 - 02 ARE DISMISSED. 1 7 . GROUND NO.2 TAKEN BY THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 1999 - 2000 READS AS UNDER: - 2. THAT, THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW BY CONFIRMING ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASES OF RS.29,89,260/ - . 1 8 . THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION, WITH THE FOLLOWING OBSERVATIONS: - FURTHER, IT IS PERTINENT THAT WHEN THE ASSESSEE IS CARRYING OUT SALES OUTSIDE THE BOOKS OF ACCOUNTS, THE PURCHASES WOULD ALSO NATUR ALLY BE OUT OF THE BOOKS. IT CANNOT BE THE CASE WHERE ALL PURCHASES ARE ACCOUNTED FOR AND ONLY PART OF THE SALES ARE RECORDED. IN THE ASSESSEES CASE, THE AVERAGE SALE FOR 1 MONTH WORKS OUT TO RS. 31,46,589/ - AS DISCUSSED IN THE PARAS SUPRA. SINCE THE G ROSS PROFIT RATE ADOPTED IN THE ASSESSEES CASE IS 5% THE AMOUNT OF GROSS P R O FI T FROM THIS MONTHLY SALE IS REDUCED, WHICH WORKS OUT TO RS.1,57,329/ - (RS.31,46,589 X 5%). AFTER REDUCING THE GROSS PROFIT OF 1 12 ITA 790 & 791 /201 0 MONTH FROM THE SUPPRESSED SALE OF A MONTH, THE U NEXPLAINED INVESTMENT OF THE ASSESSEE IN PURCHASE OF SUCH GOODS WOULD WORK OUT TO RS.29,89,260/ - (RS. 31,46,589 RS.1,57,329/ - ). THIS UNEXPLAINED INVESTMENT IN PURCHASES OF GOODS BY THE ASSESSEE IS TREATED TO BE OUT OF UNDISCLOSED SOURCES AND TAXED UNDER THE PROVISIONS OF SECTION 69C OF THE ACT. THE UNEXPLAINED INVESTMENT IN PURCHASE OF SUBSEQUENT MONTHS MUST HAVE BEEN MET BY THE ASSESSEE FROM UNACCOUNTED CA S H WOULD BE IN CIRCULATION AND NOT LYING IDLE. THE ADDITION ON THIS SCORE WORKS OUT TO RS.29,89,2 60/ - . SINCE THE ASSESSEE HAS MADE UNEXPLAINED INVESTMENT IN PURCHASES, PENALTY PROCEEDINGS U/S.271(1)(C) ARE SEPARATELY INITIATED. 1 9 . ON APPEAL, THE LD. CIT (A) HAS CONFIRMED THE IMPUGNED ADDITION, WITH THE FOLLOWING OBSERVATIONS: - (C) AFTER HAVING C ONSIDERED THE APPELLANT AND ITS A.R.S ARGUMENTS, I HAVE NO OTHER GO, EXCEPT UPHOLDING THE ADDITION MADE BY THE A.O. TOWARDS UNEXPLAINED INVESTMENT IN PURCHASES. THE SIMPLE ARGUMENT THAT WAS TAKEN BY THE APPELLANT WAS THAT THE DECISION OF VIJAY PROTEINS W AS NOT APPLICABLE ON THE FACTS OF ITS CASE AND THE A.O. DID NOT BRING ANY EVIDENCE IN THIS REGARD ON RECORD. IT WAS A.OS CONTENTION THAT IT COULD NOT BE THE CASE WITH THE APPELLANT THAT ALL THE PURCHASES WERE FULLY ACCOUNTED AND ONLY A PART OF SALES WAS R ECORDED. HE GAVE HIS OWN WORKING IN THE PRECEDING PARA HOW HE ARRIVED AT THE QUANTUM OF UNEXPLAINED INVESTMENT IN PURCHASE OF THE GOODS. I AM NOT GOING INTO THE DETAILS WHETHER THE A.O. WAS CORRECT OR WRONG IN ADOPTING THIS METHOD TO FIND OUT THE QUANTUM OF UNACCOUNTED PURCHASES. IN THE INTEREST OF THE APPELLANT, THE A.R. SHOULD HAVE BROUGHT SOME CONCRETE MATERIALS BEFORE ME TO REFUTE THE A.OS METHODOLOGY AND APPROACH, INSTEAD OF SIMPLY REPEATING THE VERY OLD ARGUMENT THAT THE MATERIALS IMPOUNDED DID NOT HAVE ANY BEARING ON THE ISSUE IN QUESTION AND THE CASE LAW RELIED UPON BY THE A.O. WAS NOT APPLICABLE IN ITS CASE. IT IS THE DUTY OF THE APPELLANT AND ITS A.R. TO PUT FORWARD EFFECTIVE ARGUMENT WITH RELEVANT MATERIALS AND EVIDENCES FOR MY PERUSAL IN CAS E HE WAS NOT HAPPY WITH A.O.S OBSERVATIONS AND CONCLUSION. HAD THERE BEEN SITUATION LIKE THAT, I WOULD HAVE DEFINITELY 13 ITA 790 & 791 /201 0 ANALYZED HIS SUBMISSION S AND EVIDENCES BEFORE GIVING AN ADVERSE FINDING AGAINST THE A.OS INFERENCE. HERE, SUCH EVENT DID NOT TAKE PLACE . SO, I HAVE NO OTHER GO, EXCEPT CONFIRMING THE METHOD ADOPTED BY THE A.O. IN ESTIMATING THE QUANTUM OF UNACCOUNTED PURCHASES. THE ADDITION IS CONFIRMED. 20 . THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS NOT MADE ANY INDEPENDENT SUBMISSION WITH REGARD TO THE IMPUGNED ADDITION. THE W RITTEN S UBMISSIONS FILED BY HIM IN THIS BEHALF ARE ALSO SILENT WITH REGARD TO THE IMPUGNED ADDITION. 21 . WE HAVE HEARD BOTH TH E PARTIES. IT IS NOT POSSIBLE TO ENVISAGE A SITUATION WHERE AN ASSESSEE COULD CARRY OUT UN ACCOUNTED SALES OF MORE THAN RS. 3 CRORES WITHOUT ANY INVESTMENT IN PURCHASING THE GOODS. UNLESS THE GOODS ARE PROCURED, THEY CANNOT BE SOLD. THE ASSESSING OFFICER HAS QUANTIFIED SUCH INVESTMENT AT RS.29,89,260/ - . THE ASSESSEE HAS GIVEN NO MATERIAL TO REBU T THE SAME OR EVEN TO ESTABLISH THAT THE ASSESSEE COULD MAKE UNACCOUNTED SALES OF MORE THAN RS.3 CRORES WITHOUT ANY IN VE STMENT. IN THIS VIEW OF THE MATTER, THE ORDERS PASSED BY THE AO AND THE CIT(A) IN THIS BEHALF ARE CONFIRMED. GROUND NO.2 TAKEN BY THE AS SESSEE IN ASSESSMENT YEAR 1999 - 2000 IS DISMISSED . 22 . IN VIEW OF THE FOREGOING, BOTH THE APPEALS ARE DISMISSED. L 21 .0 6 . 201 3 L ORDER PRONOUNCED ON 21 .0 6 . 2013 SD/ - SD/ - ( 0 . . 3 / T. K. SHARMA) ( . . E / D. K. SRIVASTAVA) S E / JUDICIAL MEMBER 2013 / ACCOUNTANT MEMBER /RAJKOT : 2 1 .0 6 . 2013 NVA/ - 0 RJO O / COPY OF ORDER FORWARDED TO: - 1 . /APPELLANT - M/S. GUPTA GLOBAL EXIM PVT. LTD. GANDHIDHAM 2 . R /RESPONDENT - THE ASSISTANT COMMISSIONER OF INCOME - TAX , GANDHIDHAM CIRCLE , GANDHIDHA M 3 . I D / CONCERNED CIT - I, RAJKOT 4 . D - / CIT(A) - I I , RAJKOT 5 . 1 I , 0 I , / DR, ITAT, RAJKOT 6 . 3 / GUARD FILE / BY ORDER TRUE COPY. PRIVATE SECRETARY, ITAT, RAJKOT