Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 127362 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 9 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
27-08-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
24-08-2023
Assessment Year
2012-2013
Appeal Filed On
21-11-2018
Judgement Text
आयकर अपील य अ धकरण, कोलकाता पीठ “बी’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA ी राजपाल यादव, उपा य एवं ी राजेश क ु मार, लेखा सद य के सम [Before Shri Rajpal Yadav, Vice-President &Shri Rajesh Kumar, Accountant Member ] I.T.(SS)A. Nos. 137 to 140/Kol/2018 Assessment Years: 2010-11, 2012-13 to 2014-15 Sri Munisuvrata Agri International Ltd. (Formerly Known as M/s LMJ International Ltd.) (PAN: AAACL 4483 H) Vs. ACIT/DCIT, CC-2(4), Kolkata Appellant / (अपीलाथ ) Respondent / ( यथ ) I.T.(SS)A. Nos. 118 to 119/Kol/2018 Assessment Years: 2011-12 & 2012-14 ACIT/DCIT, CC-2(4), Kolkata Vs. Sri Munisuvrata Agri International Ltd. (Formerly Known as M/s LMJ International Ltd.) (PAN: AAACL 4483 H) Appellant / (अपीलाथ ) Respondent / ( यथ ) Date of Hearing / स ु नवाई क# $त&थ 02.05.2023/ 25.08.2023 Date of Pronouncement/ आदेश उ(घोषणा क# $त&थ 28.08.2023 For the Appellant/ $नधा./रती क# ओर से Shri Akkal Dudhwewala, FCA Shri Kush Kanodia, A.R For the Respondent/ राज व क# ओर से Shri Subhrajyoti Bhattacharjee, CITDR Shri Abhijit Kundu, CITDR ORDER / आदेश Per Rajesh Kumar, AM: These appeals by the assessee and the cross-appeals by the revenue are directed against the separate orders of the Ld. Commissioner of Income Tax 2 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) (Appeals)-20, Kolkata (hereinafter referred to as the Ld. CIT(A)”] even dated 11.09.2018 for AY 2010-11 to 2014-15. ITA No 137/Kol/2018 A.Y.2010-11: 2. Issue raised in ground nos. 1 to 6 is a legal issue challenging the order of ld CIT(A) whereby ld CIT(A) has upheld the additions as made by the AO in an unabated assessment without there being any incriminating materials found and seized during the course of search and accordingly additions made are without jurisdiction. 3. Facts in brief are that a search and seizure operation u/s 132 of the Act as well as survey operation section 133A of the Act were conducted on 09.09.2015 and also on subsequent dates at various premises of LMJ Group of companies and its associates concerns, the directors and their family members. The assessee being group concern of LMJ group was also covered under the said search and survey. LMJ group of companies are mainly engaged in the business of manufacturing of tea, trading and export of tea, coffee, rice, wheat etc. Consequent to search, a notice u/s 153A of the Act was issued on 23.08.2017 which was served on 25.08.2017. The assessee complied with the same by filing the return of income u/s 153A of the Act on 25.10.2017 declaring total income of Rs. 8,31,33,793/-. Thereafter the statutory notices were duly issued and served on the assessee. Pertinent to state that the original return was filed on 01.10.2010 declaring total income of Rs. 1,96,48,522/- under the normal provisions of Act besides showing book profit of Rs. 5,23,69,781/- u/s 115JB of the Act. The assessment was framed under limited scrutiny vide order dated 28.03.2013 passed u/s 143(3) of the Act. The assessment in the searched assessment proceedings was completed after taking into account the submissions of the assessee vide order dated 28.12.2017 passed u/s 153A / 143(3) of the Act by making two additions namely i) bogus purchases of Rs. 1,61,39,32,162/- and ii) cash purchases u/s 40A(3) of the Act of Rs. 1,26,80,486/-. While making the addition on account of bogus purchases, the AO relied on the statement of Shri Suresh Kumar Jain recorded during the course of survey u/s 133A of the Act conducted on 25.03.2015 by 3 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) DDIT(Inv), Unit-1(3), Kolkata in case of M/s Vista Dealcom Pvt. Ltd. and Fairplan Commodities Pvt Ltd. in which he had stated and admitted that these companies M/s Satyatej Vyapar Pvt. Ltd. and M/s Fairplan Commodities Pvt. Ltd. were managed and controlled by him and he has provided accommodation entries in the form of bogus purchases bills to the assessee and finally the AO added the entire purchases made from these two companies i.e. Rs. 81,26,75,043/- from M/s Satyatej Vyapar Pvt. Ltd. and Rs. 80,12,57,119/- from M/s Fairplan Commodities Pvt. Ltd. to the income of the assessee as bogus as the assessee could not establish and prove these purchases. Similarly the AO noticed during the course of assessment proceedings that the assessee had made purchases of several agricultural commodities including rice, wheat, dal etc. from several farmers which aggregated to Rs. 1,16,80,486/- the payments whereof were made in cash. Pertinent to state that these purchases were made from mandis/local haats wherein the assessee could negotiate through local persons who are well versed with the surroundings, local conditions , farmers and were used to make payments though them to these farmers and all the transactions were fully and duly disclosed in the books of the account. 3. The Ld. CIT(A) dismissed the appeal of the assessee by giving a finding that there was incriminating material found and seized during the search in the form of computer hard disk containing account of the assessee wherein it was found that on number of occasions the assessee made payment exceeding two thousands in cash and thus violated the provisions of Section 40A(3) of the Act. The Ld. CIT(A) also noted that the statement recorded of Shri Suresh Kumar Jain during the course of survey u/s 133A of the Act ,who controlled and managed two entities namely M/s Satyatej Vyapar Pvt. Ltd. and M/s Fairplan Commodities Pvt. Ltd., has admitted that the assessee was making bogus purchases from these entities. The AO also observed during assessment proceedings that bills and vouchers qua the said purchases were not found during search proceedings. The Ld. CIT(A) noted that the statements recorded u/s 133A or 132(4) of the Act are also incriminating materials and thus justified the validity of additions made in the assessment framed u/s 143(3) r.w.s. 4 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) 153A of the Act in respect of bogus purchases. Similarly the ld CIT(A) justified the addition in respect of cash payments in respect of rice ,wheat and dal etc. 4. The Ld. A.R vehemently submitted that impugned search was conducted on 9.9.2015 when the assessment had already been framed vide order dated 28.03.2013 passed u/s 143(3) of the Act and therefore impugned assessment had attained finality on the date of search. The Ld. A.R while explaining and reiterating the provisions of Section 153A of the Act contended that in case of unabated assessment on the date of search, the additions can only be made on the basis of incriminating materials found and seized during the course of search and not otherwise. The Ld. A.R stated that the AO has made addition in respect of purchases on the basis of statement recorded of Shri Suresh Kumar Jain during the course of survey conducted u/s 133A of the Act on 25.03.2015 by DDIT(Inv), Unit-1(3), Kolkata that he had provided accommodation entries in the form of bogus purchase bills to the assessee through M/s Vista Dealcom Pvt. Ltd. and M/s Fairplan Commodities Pvt. Ltd. which were managed and controlled by him. The ld AR stated that apart from this there was no incriminating material found and seized during the search operation. The Ld. A.R argued that the statement of the Mr. Jain could not be treated as the incriminating material found during the course of search. The ld AR argued that the finding of the Ld. CIT(A) that the search was conducted on the basis of concrete information during which no bills and vouchers were found in the premises of the assessee were based upon the wrong appreciation of facts. The Ld. A.R contended that the finding of the Ld. CIT(A) that the statement as well as the fact that the bills, vouchers not found during the course of survey itself constitute incriminating material found during the course of search were completely devoid of any substance and straightaway need to be rejected. The Ld. A.R therefore prayed that the addition on account of bogus purchases may be deleted in absence of any seized incriminating materials. Similarly in respect of payments made in cash amounting to Rs. 1,26,80,486/-, the Ld. A.R submitted that the AO had made an addition on the basis of entries in the books of account of the assessee which were produced during the course of assessment proceedings qua which no incriminating 5 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) materials whatsoever were found and seized during the course of search. The Ld. A.R therefore argued that the order of Ld. CIT(A) may kindly be set aside and additions made by the AO may kindly be deleted as without jurisdiction. The Ld. A.R in defense of his arguments relied on the latest decision of Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. (2023) 149 taxmann.com 399 (SC). 5. The Ld. A.R also submitted before the Bench that Shri Suresh Kumar Jain is neither director nor share holder of either M/s Satyatej Vyapar Pvt. Ltd. or M/s Fairplan Commodities Pvt Ltd. and even the so-called persons, who according to him were acting under his instructions, were not related to these entities in as much as even the named persons were neither director nor shareholders of the supplier companies. In such scenario, how the statement of such a person could be held to carry any evidentiary value when there was no connection with the supplier companies. The assessee also submitted that the assessee is managed and controlled by Madan Lal Jain and his family and Mr. Suresh Kumar Jain is actually the warring/opposite family member with whom there was an ongoing family dispute regarding management and control of the assessee company and several suits and litigations have been filed by Madanlal Jain and his family against him. The Ld. A.R submitted that having regard to all the circumstantial evidences and contemporaneous facts, it is ex-facie evident that the statement of Mr. Suresh Jain was biased and self- serving one with the sole intent to falsely implicate the assessee without bringing on record any evidence or material to back the same. The ld. A.R has also informed the Bench that Mr. Suresh Jain has retracted his statement at a later date copy of which is filed at pages 273 to 278 of PB and therefore the statement of Shri Suresh Jain is wholly unreliable and cannot be said to constitute incriminating material. The Ld. A.R argued that the addition which is solely based on the statement, which has been retracted subsequently, cannot be considered as incriminating material when it is not backed without any corroborating evidence . In defense of his arguments the Ld. A.R relied on the CBDT Instruction F. NO. 286/2/2003-IT(Inv.II) dated 10.03.2003 and Circular No. F No. 286/98/2013-IT (Inv.II) dated 18.12.2014. The Ld. A.R also 6 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) submitted that the assessment in the case of M/s Satyatej Vyapar Pvt. Ltd. for AY 2011-12 has been completed u/s 143(3)/147 of the Act and no adverse inference was drawn in relation to the purchases made by the assessee from the said company by referring to the copy of the said order filed at page 268 to 272 of PB. The Ld. A.R also argued that how the purchases can be disallowed where the corresponding sales have been accepted in the hands of suppliers. 6. The Ld. A.R also controverted the findings given by the Ld. CIT(A) in the appellate order to the effect that the director of the assessee company Shri Jayant Kumar Jain had confirmed the statement given by Suresh Jain whereas as a matter of fact in the statement recorded on 18.09.2015, which is also discussed at page 17 of the assessment order, Shri Jayant Kumar Jain has clearly stated in response to question no. 13 that all the details as asked for would be provided on or before 28.09.2015 and thus it is clear that there was no admission on the part of Shri Jayant Kumar Jain to any wrong-doing as has been allegedly mentioned by the ld CIT(A) and therefore the reliance placed by the Ld. CIT(A) on the statement recorded u/s 132(4) of the Act was completely misplaced and erroneous. 7. The Ld. A.R also stated that where any statement is obtained by the revenue behind the back of the assessee which is sought to be used as evidence to make the addition, then the principle of natural justice would be satisfied only if such evidence and statement is confronted to the assessee or an opportunity of cross-examination of such person is afforded to the assessee. The Ld. A.R stated that in the present case no such cross-examination was ever afforded by the revenue to the assessee either at the time of search or in the course of assessment proceedings and therefore reliance placed on statement is invalid and unsustainable. The Ld. A.R in defense of his arguments relied on the following decisions: i) Prakash Chand Nahta vs. Union of India (247 ITR 274)(SC) ii) Dhakeswari Cotton Mills Ltd. vs. CIT (26 ITR 775) 7 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) iii) CIT vs. Odeon Builders Pvt. Ltd. ( 418 ITR 315) (SC) iv) Andaman Timber Industries Ltd. vs. CCE (62 taxmann.com 3) (SC) v) CIT vs. Reliance Industries Ltd. (421 ITR 686)(Bom HC) 7.1. Finally the Ld. A.R submitted that the statement or third party did not constitute incriminating material found and seized during the course of search. The Ld. A.R referred to the series of decisions wherein the AO made addition u/s 68 by referring the statement of alleged entry operators/third party in the assessment framed u/s 153A of the Act however various judicial forums have cancelled and deleted the addition on the ground that the said statement does not constitute any incriminating material found and seized during search. The decisions referred and relied by the ld AR are as under: i) Bankatesh Synthetic Pvt. Ltd. vs.ACIT in IT(SS)A No. 142/kol/2018 dated 24.04.2019 ii) Mani Square Ltd. vs. ACIT (118 taxmann.com 452)(ITAT Kolkata) iii) Loyalka Farms Pvt. Ltd. vs. DCIT in IT(SS)A No. 67/KOl/2018 dated 14.11.2018 iv) Agson Global Pvt. Ltd. vs. ACIT in ITA NO. 3741 to 3746/ Del/2019 dated 31.10.2019 8. As regards the addition made by the AO in respect of cash purchases made by the assessee which were duly disclosed in the books of accounts , the Ld. AR submitted that the regular books of account maintained by the assessee did not constitute any incriminating material found during the course of search and it is not the case of the revenue these purchases were out of books or were not recorded in the books of account of the assessee.The Ld. A.R submitted that these purchases were made in the remote areas from farmers, mandis and local hats and therefore the provisions of Section 40A(3) of the Act are not applicable and the addition made by the AO on this account is also without jurisdiction. The Ld. A.R referred to the 8 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) decision of ITAT Delhi in the case of Lord Krishna Dwellers Pvt. Ltd. vs. ACIT in ITA No. 5294/Del/2013 and 2403/Del/2014 dated 17.12.2018. The Ld. A.R therefore prayed before the Bench that there being no incriminating material of any kind whatsoever which was found and seized during the course of search and as such the additions made by the AO in absence of any material are without jurisdiction and may kindly be deleted. 9. The ld. D.R on the other hand while strongly controverted the contentions of the assessee submitting that survey u/s 133A of the Act was conducted on 25.03.2015 by DDIT(INV), Unit-1(3), Kolkata in case of M/s Satyatej Vyapar Pvt. Ltd. and M/s Fairplan Commodities Pvt. Ltd. during which Shri Suresh Kumar Jain has admitted to have supplied accommodation purchase entries to the assessee in the form of bogus purchase through these two entities. The Ld. D.R stated that the Ld. CIT(A) has rightly appreciated the issue by upholding the order of AO by giving detailed findings holding the same to be incriminating material. The Ld. D.R also stated that during the course of survey/search no bills and vouchers were found at the premises of the assessee which were stated to be with the Custodian appointed by the Arbitral Tribunal for Arbitration and a consent award was passed on 03.01.2013 under which Mr. Kamlesh Sogani was appointed as custodian for the purpose of implementation of the award. Both the parties were stated have handed over all documents, papers, files pertaining to the accounts of all group companies and were kept in room/ chamber in 5 th floor ,15B Hemant Basu Sarani, Kolkata.The Ld. D.R stated that theory of internal feud between the family members was an after thought and cannot be relied as the records were missing from the custody of the Custodian at the above. The Ld. D.R submitted that on the basis of findings and information gathered during search such as statement recorded of Shri Suresh Kumar Jain during the course of survey u/s 133A on 25.03.2015, the additions were made by the AO. The Ld. D.R also stated that the assessee could not prove the purchases from two companies namely M/s Satyatej Vyapar Pvt. Ltd. and M/s Fairplan Commodities Pvt. Ltd. and therefore the legal issue 9 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) raised by the assessee that the additions are without any incriminating material is devoid of any merit and may kindly be dismissed. 10. We have heard rival contentions and perused the material on record. The undisputed facts are that LMJ group including the assessee was searched u/s 132(1) of the Act and surveyed u/s 133A of the Act on 09.09.2015 and thereafter including the directors and their family members. The assessment in the instant assessment year was originally framed u/s 143(3) of the Act vide order dated 28.03.2013 and therefore the instant assessment year is unabated on the date of search. The group is engaged in manufacturing and trading of tea beside exporting of tea ,coffee, rice and wheat etc.Prior to the search and survey on the LMJ group, a survey u/s 133A of the Act was conducted on M/s Satyatej Vyapar Pvt. Ltd. and M/s Fairplan Commodities Pvt. Ltd on 25.03.2015 and during the course of survey a statement was recorded u/s 133A of Act of Shri Suresh Kumar Jain in which he admitted to have provided accommodation entries to the assessee in the form of bogus purchases through the above two companies. Considering the facts before us and after perusing the impugned assessment order, we observe that there was no reference to any incriminating material/documents found and seized during the course of search at all except the statement of Shri Suresh Kumar Jain recorded u/s 133A of the Act in respect of addition of bogus purchases. In respect of second addition , we observe that the AO has referred to cash purchases which he found from the books of accounts maintained by the assessee. We note that during the search and survey on the assessee , admittedly the bills, vouchers and other books were not available in the premises of the assessee. We also observe from the facts before us that due to family feud in the Jain family consisting of Manohar Lal Jain and Suresh Kumar Jain , the litigations were going on among the family members. Finally the dispute was referred to Arbitral Tribunal for Arbitration and a consent award was passed on 03.01.2013 under which Mr. Kamlesh Sogani was appointed as custodian for the purpose of implementation of the award. Both the parties handed over all documents, papers, files pertaining to the accounts of all group companies and were kept in room and chamber in 5 th floor 10 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) ,15B Hemant Basu Sarani, Kolkata. The search was conducted and temporarily concluded on 10.09.2015 after issuing prohibitory order u/s 132(3) of the Act in respect of that place/room where the records were kept in the custody of Shri Kamlesh Sogani. The custodian was accordingly issued summon u/s 131 of the Act calling upon him to present at the said room/place on 6.11.2015 at 4.00pm for searching the said room/place however on the day and time appointed, it was found that the records were missing. Accordingly the search was concluded and thereafter the custodian lodged compliant with the Hare Street Police Station to this effect. The assessee stated before us that in view of the aforesaid incident, the bills, vouchers and books could not be found during the search operation. We also note that the AO has relied solely on the statement of Shri Suresh Kumar Jain ,which stood retractedand a copy of the retraction is filed at page 273 to 278 of PB. In our opinion statement that too retracted has no evidentiary value unless corroborated with the further evidences brought on records by the revenue. The case of the assessee find support from the CBDT Instruction F. NO. 286/2/2003-IT(Inv.II) dated 10.03.2003 and Circular NO. F No. 286/98/2013-IT (Inv.II) dated 18.12.2014 as in both communications it has been provided that a statement has no evidentiary value unless corroborated with some substantive materials. We also note that that in the assessment framed in the case of one supplier M/s Satyatej Vyapar Pvt. Ltd. for AY 2011-12 u/s 143(3)/147 of the Act, no adverse inference was drawn by the AO in relation to the purchases made by the assessee from that above supplier. A copy of the said assessment order is filed at page 268 to 272 of PB. We have also perused the statement of Shri Jayant Kumar Jain, the director of the assessee company in which Ld. CIT(A) has stated to have confirmed the statement of Shri Suresh Kumar Jain but we find that the said person in his statement dated 18.09.2015 in reply to query no. 13stated that all the details as called for would be provided on or before 28.09.2015 and there was no admission of any kind whatsoever of wrong-doing by the assessee. In our opinion reliance placed by the Ld. CIT(A) on the statement recorded u/s 132(4) of the Act is totally erroneous and misplaced. In respect of the addition made on account of cash purchases u/s 40A(3) of 11 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) the Act, we note that the AO has observed from the books of accounts of the assessee that the assessee has made cash payments in respect of purchases to the tune of Rs. 1,26,80,486/- which were made by the assessee for purchase of various agricultural commodities such as rice, wheat, dal etc. through several intermediaries from farmers and these cash payments were made to the farmers. We note that these transactions were duly recorded in the books of account and the AO on the basis of examination of books of account have found that the assessee has made purchases in cash in violation of Section 40A(3) of the Act which were already recorded in the books of account which in our considered view by no stretch of imagination could be termed as incriminating material found during the course of search. In our opinion, incriminating material has to be found during search which establishes or explains any assets/income/expenditure belonging to the assessee which has not been recorded in the books of account but this is not the case in the instant year. On the basis of these facts and circumstances , we observe that there was no incriminating material of any kind whatsoever found during the course of search by the search team and this being an unabated assessment year on the date of search as it attained has finality,therefore no addition can be made in absence of incriminating seized materials. Further a statement obtained by the revenue behind the back of the assessee and which is sought to be used as evidence against the assessee would meet the principles of natural justice only if that is confronted to the assessee and an opportunity of cross examination is allowed to the assessee as has been held by the Hon’ble Apex Court in a series of decisions namely Prakash Chand Nahta vs. Union of India (supra), CIT vs. Odeon Builders Pvt. Ltd. (supra), Andaman Timber Industries Ltd. vs. CCE (supra) and Hon’ble Bombay High Court in CIT vs. Reliance Industries Ltd. (supra). Similarly a statement of entry operator or third party does not constitute incriminating materials unearthed during search and therefore no addition can be made u/s 68 of the Act has been held by the coordinate benches in Bankatesh Synthetic Pvt. Ltd. vs.ACIT(Supra), Mani Square Ltd. vs. ACIT (supra), Loyalka Farms Pvt. Ltd. vs. DCIT(supra) and Agson Global Pvt. Ltd. vs. ACIT (supra). Considering these facts 12 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) and circumstances of the case , we are of the considered opinion, that there are no incriminating materials found during the course of search and therefore the additions made by the AO on account of bogus purchases as well as cash purchases are without jurisdiction. The case of the assessee is squarely covered the decision of the Hon’ble Apex Court in the case of PCIT Vs Abhisar Buildwell Pvt. Ltd. (supra) wherein the Hon’ble Apex Court has held that in case of unabated assessment year the addition can only be made on the basis of incriminating material found during the course of search. Accordingly respectfully following the ratio laid down by the Hon’ble Apex Court , we set aside the order of Ld. CIT(A) and direct the AO to delete the additions. Accordingly ground nos. 1 to 6 are allowed. 11. Since we have allowed the appeal of the assessee on legal issue , the grounds raised on merits are not being adjudicated and are left open to0 be decided ,if the need arises in the later date. ITA No 138/Kol/2018 A.Y.2012-13: 12. The issue raised in ground no. 1 to 4 in ITA No.138/Kol/2018 A.Y. 2012-13 are identical to one as decided by us in ITA No. 137/Kol/2018 A.Y.A.Y.2010-11 wherein we have held that no addition can be in an unabated assessment in absence of any seized incriminating materials during search. We have observed that in this appeal the assessment is unabated on the date of search and the addition in respect of cash purchases alleged to be made in violation of provisions of section 40A(3) of the Act is not based upon the incriminating seized materials. Accordingly our decision in ITA No. 137/Kol/2018 (supra) would, mutatis mutandis, apply to this appeal as well. Consequently the legal and jurisdictional issue in ground no. 1 to 4 is allowed. ITA No.139/Kol/2018 A.Y. 2013-14 13. The legal and jurisdictional issue raised in ground no. 1 to 4 in ITA No.139/Kol/2018 A.Y. 2013-14 is identical to one as decided by us in ITA No. 137/Kol/2018 A.Y.A.Y.2010-11 wherein we have held that no addition can be in an 13 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) unabated assessment in absence of any seized incriminating materials during search. We have observed that in the instant year ,the additions were made on following accounts: a)Disallowance of loss relating to High Sea Sales Rs.1,46,71,495.00 b)Bogus Purchases Rs. 9,06,268.00 c)Expenses paid in cash u/s 40A(3) Rs. 94,650.00 13.1. After perusal of the records as placed before us and hearing the rival parties , we observe that the authorities below have failed to bring any materials or evidence on record which showed that that any incriminating materials were found and seized during the course of search qua these items of additions.This being an unabated assessment , the addition can only be made on the basis of the incriminating materials found and seized during the search and not otherwise. The facts qua these additions are briefly discussed in the following paras: 13.2. The assessee company has entered into an agreement with M/S Snowhill Suppliers (P) Ltd for high sea sales of 65000 MT of met coke which was supplied by M/S Integrity Coal Sales International Inc. of USA . In terms of the agreement , M/S Snowhill Suppliers (P) Ltd paid 10% of the contract value to the assessee. The total coal imported was discharged at two ports in India. According to the assessee the entire coal was sold to M/S Snowhill Suppliers (P) Ltd but the said company did not lift the full quantity of the cargo and only 23000 MT was lifted and paid. Consequently the assessee company has to sell the balance stock of coal at lower price and in the process suffered losses. According to the AO, the assessee has suppressed income through fabricated loss to the tune of Rs. 1,46,71,495/- as revealed in post search investigation. During post search investigation, a survey was conducted on M/S Snowhill Suppliers (P) Ltd by DIT Kolkata but neither the said company nor any related person was found at Room No. 8 , Ground Floor, Park Plaza, 71, Park Street, Kolkata. The statement of the landlord Shri Ram Gopal Verma was recorded in which he acknowledged that the premises were given on rent to the said company and he 14 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) stated that the company M/S Snowhill Suppliers (P) Ltd has no creditworthiness. Thus the AO has relied on the statement given by Shri Ram Gopal Sharma who was the landlord of the premises in which the registered office of M/S Snowhill Suppliers (P) Ltd was housed. Mr Ram Gopal Verma was neither director in M/S Snowhill Suppliers (P) Ltd nor was he working for the said company. He was just an outsider not having any access to the business of this company nor knowing about other business places or transactions assessee was having with the said company. Thus the statement obtained by the revenue behind the back of the assessee which was sought to be used as evidence to make the addition , then cross examination has to be provided to the assessee which was not granted either post search by investigation wing or during assessment proceedings and therefore the reliance placed on such statement is invalid and unsustainable in view the decisions as cited above in first para 7. Besides in an assessment framed u/s 153A of the Act,the statement of third person can not constitute incriminating materials unearthed during search as has been held in the various decisions cited above in second part of para 7.It is abundantly clear from the abovethat during search no incriminating materials was found qua high sea sales and therefore the AO has no jurisdiction to make the addition. 13.3. In respect of second item of addition of bogus purchase , we note that the addition was made on account of purported discrepancies in transportation challans impounded during search. These were related to wheat purchased by the assessee from M/S Dinesh Traders and M/S Om Enterprises. According to the revenue authorities , the supplies of wheat were transported in buses and tractors and not in lorries. According to the AO when the assessee failed to produce the details of corresponding sales , the purchases were held to be bogus. We note that the invoices as well as the challans were part of the regular books of accounts and records ,which the assessee has maintained in the ordinary course of business. It was stated that all the vehicles were commercial vehicles and one of them was even goods carrier and it is not uncommon to transport the agricultural produces in the buses in the rural areas. The ld AR submitted that regular contemporaneous business documents forming part of the 15 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) books of accounts of the assessee can not constitute the incriminating materials to justify the addition in an unabated assessment. Having considered the rival contentions and materials on records , we are of the considered view that these invoices and challans were part of books of accounts maintained by the assessee and considering the ratio in the above decisions we are inclined to hold that these invoices and challans are not incriminating materials seized during the course of search. The case of the assessee finds support from the following decisions of the coordinate benches: a) ACIT Vs Majestic Commercials (P) Ltd. 116 taxmann.com 412(Kol Tri) b)Daffodil Vincom Pvt Ltd. Vs DCIT ITA Nos.(SS) 95 & 96 /Kol/2018 dated 28.06.2019 c)HBN Insurance Agencies Vs ACIT ITA No.3783 & 3784/Del/2014 dated 23.12.2019 d) ACIT Vs Goldstone Cements Ltd ITA 126 to 131/Gau/2020 dated 10.12.2021 13.4. The third item of addition is in respect of cash payments made to contractors and professionals in violation of provisions of section 40A(3) of the Act. These payments were duly recorded in the books of accounts maintained by the assessee which were seized during search .The AO held the regular books to be incriminating materials which is not correct. The case of the assessee finds support from the decision of the coordinate bench in the case of Lord Krishan Dwellers (P) Ltd. Vs ACIT ITA No. 5294/Del/2013 and 2403/Del/2014 dated 17.12.2018. 13.5. In view of the above facts, we are of the considered view that the additions were made by the AO without any incriminating materials found and seized during search and accordingly same are ordered to be deleted by relying on the decision of the Hon’ble Apex Court in the case of PCIT Abhisar Buildwell Pvt. Ltd. (supra). Consequently the legal and jurisdictional issue in ground no. 1 to 4 is allowed. 16 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) ITA No.140/Kol/2018 A.Y. 2014-15 14. The legal and jurisdictional issue raised in ground no. 1 to 4 and 6 in ITA No.140/Kol/2018 A.Y. 2014-15 is identical to one as decided by us in para 9.1 supra in ITA No. 139/Kol/2018 A.Y.A.Y.2013-14 wherein we have held that no addition can be in an unabated assessment in absence of any seized incriminating materials during search qua loss from high sea sales. Accordingly our decision in ITA No. 139/Kol/2018 would, mutatis mutandis, apply to this appeal as well. Consequently the legal and jurisdictional issue in ground no. 1 to 4 and 6 is allowed. ITA No. 118/Kol/2018 A.Y.2011-12&ITA No. 119/Kol/2018 A.Y.2012-13 15. The cross appeals by the revenue in ITA No. 118/Kol/2018 A.Y.2011-12 and ITA No. 119/Kol/2018 A.Y.2012-13 become infructuous in view of our decision on legal issue in assessee’s appeals supra and are accordingly dismissed. 16. In the result, the appeals of the assessee are allowed and appeals of the revenue are dismissed. Order is pronounced in the open court on 28 th August, 2023 Sd/- Sd/- (Rajpal Yadav /राजपाल यादव) (Rajesh Kumar/राजेश क ु मार) Vice-President/ उपा य Accountant Member/लेखा सद य Dated: 28 th August, 2023 SB, Sr. PS Copy of the order forwarded to: 1. Appellant- Sri Munisuvrata Agri International Ltd. (formerly known as LML International Ltd.) 16, British India Street, 2 nd Floor, Dalhousie, Kolkata- 700069. 2. Respondent – ACIT/DCIT, CC-2(4), Kolkata 17 I.T.(SS)A. Nos.137 to 140/Kol/2018 I.T.(SS). A Nos. 118 & 119/Kol/2018 Assessment Years: 2010-11 to 2014-15 Shri Munisuvrata Agri International Ltd. (Formerly known as LMJ International ltd.) 3. Ld. CIT(A)- 20, Kolkata 4. Ld. PCIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata
AI Insights
The case involves appeals by Sri Munisuvrata Agri International Ltd. against the additions made by the AO following a search and seizure operation under section 132 of the Income Tax Act. The AO had made additions for bogus purchases and cash purchases violating section 40A(3) of the Act. The Tribunal examined whether these additions were justified in the absence of incriminating material found during the search. The Tribunal noted that the search did not yield any incriminating documents or materials, and the additions were primarily based on statements and entries in the books of account, which were not found to be incriminating materials under the law.
