Appeal details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 5280 (ITAT-INDORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
26-01-2022
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB
Assessment Year
2014-2015
Appeal Filed On
26-12-2019
Judgement Text
अपील य अ धकरण, इ दौर यायपीठ, इ दौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI MANISH BORAD,ACCOUNTANT MEMBER AND MIS MADHUMITA ROY, JUDICIAL MEMBER Virtual Hearing IT(SS)A No.272 to 276/Ind/2019 Assessment Year:2009-10 to 2013-14 DCIT Central-I, Bhopal बनाम/ Vs. M/s Kareli Sugar Mills Pvt. Ltd. (Appellant) (Respondent ) P.A. No.AACCK1098H IT(SS)A No.277 & 278/Ind/2019 Assessment Year:2013-14 & 2014-15 M/s Kareli Sugar Mills Pvt. Ltd. बनाम/ Vs. DCIT Central-I, Bhopal (Appellant) (Respondent ) P.A. No.AACCK1098H IT(SS)A No.182 &183/Ind/2018 Assessment Year:2013-14 & 2014-15 M/s Reva Kripa Sugars Pvt. Ltd. Bhopal बनाम/ Vs. DCIT Central-I, Bhopal (Appellant) (Respondent ) P.A. No.BPLR04688F Appellant by S/Shri Ashish Goyal & N.D. Patwa, ARs Revenue by Shri P.K. Mitra, CIT-DR 2 Date of Hearing: 08.12.2021 Date of Pronouncement: 27.01.2022 आदेश / O R D E R PER MANISH BORAD, A.M: The above captioned appeals in the case of M/s. Kareli Sugar Mills Private Limited by the revenue pertaining to Assessment Years 2009-10, 2010-11, 2011-12, 2012-13 and cross appeal for the Assessment Year 2013-14 and the assessee’s appeal for the Assessment Year 2014-15 are directed towards the consolidated order of the Ld. Commissioner of Income Tax (Appeals)-3, Bhopal (in short ‘Ld. CIT(A)’) dated 29.10.2019; arising out of the consolidated Assessment Order u/s. 153A/ 143(3) of the Income Tax Act, 1961 (in short the ‘Act’) passed on 29.03.2016 framed by DCIT (Central)-1, Bhopal (in short Ld. ‘A.O.’).Further, assessee’s appeal in the case of M/s. Reva Kripa Sugar Mills Private Limited for the Assessment Year 2013-14 and 2014-15 are directed towards the consolidated order of the Ld. Commissioner of Income Tax (Appeals)-3, Bhopal (in short ‘Ld. CIT(A)’) dated 23.10.2018 arising out of the consolidated Assessment Order u/s. 153A/ 143(3) of the Income Tax Act, 1961 (in short the ‘Act’) passed on 29.03.2016 framed by DCIT (Central)-1, Bhopal (in short Ld. ‘A.O.’). 3 In the case of M/s. Kareli Sugar Mills Pvt. Ltd. The following grounds are raised by the revenue: - IT(SS)A 272/ IND/ 2019, A.Y. 2009-10 “On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 2,24,00,587/- made by the A.O., on account of unexplained expenditure.” IT(SS)A 273/ IND/ 2019,A.Y. 2010-11 “On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 2,61,81,724/- made by the A.O., on account of unexplained expenditure.” IT(SS)A 274/ IND/ 2019,A.Y. 2011-12 “On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 8,14,11,546/- made by the A.O., on account of unexplained expenditure.” IT(SS)A 275/ IND/ 2019,A.Y. 2012-13 “On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 4,50,29,054/- made by the A.O., on account of unexplained expenditure.” IT(SS)A 276/ IND/ 2019,A.Y. 2013-14 “On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 6,91,72,174/- made by the A.O., on account of unexplained expenditure.” The following grounds are raised by the assessee: - IT(SS)A 277/ IND/ 2019,A.Y. 2013-14 “1. The ld. CIT(A) was not justified in sustaining the assessment order, which is bad-in-law, void-ab-initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. 2. That the ld. CIT(A) erred in making the separate addition of Rs. 2.50 crores purely on the basis of statement of one of the directors recorded during the search proceedings in the case of M/s. AG8 Ventures (P) Ltd under some misunderstanding created with misrepresentation of facts and law by the search party when the appellant was not aware of correct facts and was also retracted subsequently by filing the return u/s. 153A and subsequently a letter. 3. That the ld. CIT(A) erred in making the separate addition of Rs. 2.50 crores towards income voluntarily accepted by the director of 4 the appellant company without having any corroborative/ supportive evidence or material. 4. The appellant craves leave, to add, to alter and/ or to modify the grounds of appeal on or before the date of hearing.” IT(SS)A 278/ IND/ 2019,A.Y. 2014-15 “1. The ld. CIT(A) was not justified in sustaining the assessment order, which is bad-in-law, void-ab-initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. 2. That the ld. CIT(A) was not justified in confirming that entries of cash payment recorded in cash book/ payment register on the same dates represented unexplained expenditure. 3. That the ld. CIT(A) erred in making the addition to the income of the appellant to the extent of Rs. 17,68,547/- on account of unexplained expenditure without considering the facts and circumstances of the case. 4. That the ld. CIT(A) erred in making the separate addition of Rs. 7.50 crores purely on the basis of statement of one of the directors recorded during the search proceedings in the case of M/s. AG8 Ventures (P) Ltd under some misunderstanding created with misrepresentation of facts and law by the search party when the appellant was not aware of correct facts and was also retracted subsequently by filing the return u/s. 153A and subsequently a letter. 5. That the ld. CIT(A) erred in making the separate addition of Rs. 7.50 crores towards income voluntarily accepted by the director of the appellant company without having any corroborative/ supportive evidence or material. 6. The appellant craves leave, to add, to alter and/ or to modify the grounds of appeal on or before the date of hearing.” In the case of M/s. Reva Kripa Sugars Pvt. Ltd. IT(SS)A 182/ IND/ 2018 A.Y. 2013-14 “1. On the facts and in the circumstances of the case, the hon’bleCIT(A) was not justified in confirming the addition of Rs. 1.00 crore purely on the basis of statement of one of the directors recorded during the search proceedings in the case of the sister concern M/s. AG8 Ventures (P) Ltd at about 2 a.m. under some misunderstanding created by misrepresentation of law and facts about the appellant. 5 2. On the facts and in the circumstances of the case, the hon’ble CIT(A) was not justified in confirming the addition of Rs. 1.00 crore without having any corroborative evidence/ supporting evidence or even material.” IT(SS)A 183/ IND/ 2018 A.Y. 2014-15 “1. On the facts and in the circumstances of the case, the hon’ble CIT(A) was not justified in confirming the addition of Rs. Rs. 1,15,761/- towards statutory liability of CST and in making the same as a part of the addition of Rs. 4.00 crore. 2. On the facts and in the circumstances of the case, the hon’ble CIT(A) was not justified in upholding that there was the shortage of stock of sugar as on the date of search of 3254 quintals, which had estimated market price of Rs. 71,97,848/-. 3. On the facts and in the circumstances of the case, the hon’bleCIT(A) was not justified in upholding that there were the estimated unrecorded sales of Rs. 71,97,848/-, which yielded the G.P. of Rs. 11,39,420/- and in confirming the addition of Rs. 11,39,420/- in the hands of the appellant and in making the same a s a part of the addition of Rs. 4.00 crore. 4. On the facts and in the circumstances of the case, the hon’bleCIT(A) was not justified in upholding that the cash found at the time of search at Rs. 47,58,550/- was unexplainable and in confirming the addition of Rs. 47,58,550/- in the hands of the appellant and in making the same as a part of the addition of Rs. 4.00 crore. 5. On the facts and in the circumstances of the case, the hon’bleCIT(A) was not justified in confirming the addition of Rs. 4.00 crore purely on the basis of statement of one of the directors recorded during the search proceedings in the case of the sister concern M/s. AG8 Ventures (P) Ltd at about 2 a.m. under some misunderstanding created by misrepresentation of law and facts about the appellant. 6. On the facts and in the circumstances of the case, the hon’ble CIT(A) was not justified in confirming the addition of Rs. 4.00 crore without having any corroborative evidence/ supporting evidence or even material.” 6 First we take up the appeals in the case of M/s. Kareli Sugar Mills Private Limited. 2. Briefly stated, the facts as culled out from the records are that the assessee company is engaged in the business of sugar manufacture. On 29 th January 2014 a search and seizure operation was carried u/s. 132 of the Income Tax Act, 1961 at the business premises of the assessee company. The search thereafter continued upto 31 st January 2014. Various books of accounts and documents were seized. After the search u/s. 132 of the Act, notices u/s. 153A was issued for filing of return. Return was thereafter filed by the assessee disclosing same income as offered u/s. 139(1) of the Act. Thereafter, the Ld. AO, after considering all the documents and after detailed inquiries, passed a consolidated Assessment Order u/s. 153A r.w section 143(3) on 29.03.2016, making addition on different grounds. Thereafter, the assessee preferred an appeal before the Ld. CIT(A), who vide consolidated order dated 29.10.2019 deleted part additions and confirmed part additions. Aggrieved with the order of the Ld. CIT(A), both the assessee and the Revenue are in appeal before us. 3. We will first take the revenue’s appeal, where only one issue is raised for all the years, relating to the addition for unexplained expenditure on account of Sugarcane (in short “SC”) Register. Further, the addition of Rs. 17,68,547/- confirmed by the Ld. CIT(A) in respect of the SC register is challenged by the assessee in Ground No. 2 and 3 for A.Y. 2014-15. The discussion of the above department appeals shall 7 also decide the Ground No. 2 and 3 for assessee’s appeal for A.Y. 2014-15. 4. The facts as culled from the Assessment Order are that during the course of search action at the sugar mill premises of the assessee company, at Gardarwara Road, Kareli, Narsinghpur, discrepancies were found between the entries made in the Sugar Cane Register, Payment Vouchers and Cash book. During search, statement of Ratnesh Jain s/o Shri Rakesh Jain, General Manager (Accounts) was recorded on oath u/s. 132(4) of the Act. He was enquired about the complete process of purchase of sugarcane to sale of Sugar. He explained the entire Modus-operandi. Thereafter he was confronted with the discrepancies regarding the payments made to farmers for purchase of sugarcane as appearing in the SC Register and Vouchers on the one hand and the Cash Book on the other, which he failed to explain. He stated that Shri Hemant Kumar Soni, Managing Director of the assessee- company may provide explanation/ information in this regard. During assessment, Ld. AO mentioned that on examination of the Sugar Cane Payment Register, Payment Vouchers and the Cash book following discrepancies were found: - (i) Category -1 : Excess of payment as per cash book in comparison to payment as per register and vouchers. (ii) Category – 2: Excess of payment as per payment vouchers and payment registers in comparison to cash book. (iii) Category – 3: Payments recorded only in Sugar Cane Payment Registers (iv) Category – 4 : Payments recorded only in Cash book. 8 5. Ld. AO narrated the date wise differences at page 20 to 28 of his order and thereafter summarized the differences year-wise as under: Assessment Years Less payment as per SC payment register and more as per Cash books Point No. 6 No payment as per SC payment register and more as per cash books Point No. 9 Less payment as per cash book and more as per SC payment register Point No. 7 No payment as per cash book and more as per SC payment register Point No. 8 Total expenditure presumed as unexplained for making addition 2009-10 912334 Nil 1970354 19517899 22400587 2010-11 4537886 Nil 21643838 Nil 26181724 2011-12 8709572 2276148 70121139 304687 81411546 2012-13 3641974 25692295 10141969 5552816 45029054 2013-14 16356919 47811737 30003518 Nil 94172174 2014-15 29518107 21827759 13000000 Nil 64345866 Total 333540951 6. On being confronted, the assessee tried to explain the difference by contending that on the date of purchase of sugarcane, payments were not made to farmers and on many occasions payments were made on subsequent dates. Ld. AO after considering the submissions of the assessee held that the same are not acceptable for the following reasons:- i. The assessee has not at all disputed the difference of cash worked out by the Assessing Officer as per the cash book and other documents maintained by the assessee itself. Therefore, the fact that the observations of the Assessing Officer about the discrepancies in the books remains undisputed and are to be considered as final. ii. The assessee has merely tried to explain the difference of cash worked out by the Assessing Officer as per the cash book and other documents maintained by the assessee itself on the basis of some general explanation. However, the said explanation has been submitted only on 23.3.2016, leaving very little time with the Assessing Officer to carry out further enquiries as requested by the assessee. iii. Even if the explanation of the assessee were to be considered as true, there is no explanation as to why there is no entry to this 9 effect in the books of accounts of the assessee or even in the audit report. iv. Even if the explanation of the assessee were to be considered as true, there is no specific explanation correlating the excess payments with the short payments as claimed by the assessee. For example, the assessee has been unable to correlate that the short payment made to a specific sugar cane grower in the cash book on a specific date correlates with the excess payments made to the specific sugar cane grower in the cash book on a specific date. v. If the explanation of the assessee were to be considered as true, then in effect it means that there is no sanctity of the books of accounts maintained by the assessee at least about the position of cash with it, as it would mean that the entries made have been manipulated to suit its convenience thereby having sanct regard for the law of the land. vi. Even during the search action, no evidence in support of the contentions of the assesseehave been found. vii. The books of accounts of the assessee are duly audited. However, even the auditor has not commented anything about these glaring differences in the cash book and other documents maintained by the assessee itself, thereby clearly establishing the mensrea on the part of the assessee and others in connivance with it. It seems that now on being cornered, the assessee is trying to take this plea to save itself, which however, is contrary to the facts and circumstances of the case. 7. Accordingly Ld. AO added the following differences as unexplained expenditure in the following manner: Assessment Years Unexplained Expenditure 2009-10 2,24,00,587 2010-11 2,61,81,724 2011-12 8,14,11,546 2012-13 4,50,29,054 2013-14 9,41,72,174 2014-15 6,43,45,866 Total 33,35,40,951 8. Thereafter assessee challenged the addition before the Ld. CIT(A) submitting that there was no unexplained expenditure as assumed by the Ld. AO. The entire approach of the Ld. AO was faulty. He has considered the cash book as not reliable 10 where there is an entry short or Nil payment in the cash book at the time of payment for purchase of Sugar Cane but considered it to be reliable when excess payment for cash purchase of Sugar Cane is made in the cash book and vice versa. At both the times, the payment is almost equal. At the time of receipts of sugarcane the quantity of sugar cane received is ascertained and thereafter depending upon the rate fixed by the government the amount payable to the farmer is determined and is recorded in the permit issued to the farmer which is in the shape of a passbook and contains the details of the sugarcane purchased from the farmer and details of the corresponding payments made. Thereafter, the farmer approaches the finance section for getting the dates on which the due payment would be made to them. The finance section prepares a daily cash budget in advance in which the expected cash receipts on the future dates are estimated and based on such estimated cash inflow the amount available to be disbursed to the farmer on various future dates is ascertained/ estimated. When the farmers approaches the finance section then, the finance department in consultation with the farmers decides a payment schedule and cash part of this agreed payment schedule is recorded in the sugarcane register mentioning the permit no, name of the farmer, address, the amount agreed to be paid on that respective dates. Signature of the farmer is obtained in the said register as a token of his acceptance of the payment schedule so that the farmer does not make any complaint to the sugarcane authorities for delay in payment. After the entry in the sugarcane register on the 11 respective dates, the date and the amount are also punched in the computer for ready ascertain ability of the total amounts agreed to be paid on respective date to ensure that payment promised to be made on any specific date does not exceed the budgeted estimated cash availability on that date. At the time of punching of the aforesaid details the system generates a computer number which is also mentioned in the sugar cane register. On the fixed date the farmer approaches the finance department, who after verifying that the payment is due to be made to the farmer on that date, instructs the cashier to make the payment as promised to the farmers and the amount so paid is recorded in the cash book. The cashier while making the payments also records the payment in the permit book brought by the farmer. In case of large number of people coming to receive the payments at the same time, the finance department for the convenience of the farmer and the cashier, issues a token and makes a mention of such token number in the sugarcane payment register. Thus on these dates the amount of cash paid to the farmers would reconcile with the amount of cash promised to be paid to the farmers and appearing in the Sugarcane register. Thus it would be appreciated that the sugar cane register is in fact a due date diary in which the payment promised to be made to the farmers are recorded and does not have any direct relation with the cash book. On dates when the available cash balance are sufficient to make payment mentioned in the sugar cane register the payments are made in full and accordingly the payment mentioned in due date register (sugar cane register) 12 and the payment recorded in cash book will tally with each other and on dates when the cash available is not sufficient to make the promised payment the payment are made on part basis and balance is paid subsequently as and when surplus cash is available. On these dates the payment recorded in cash book is less than the amount appearing in the due dates register (sugar cane register). The short payment as mentioned here in above are subsequently paid as per the availability of surplus cash balance and on that date the cash payment recorded in the cash book will be more than the amount shown as payable in the due date register (sugar cane register) of the respective date. Thus it was submitted that the Sugarcane register is only a record maintained for administrative compliance and to avoid litigation and is not a part of the books of account maintained by the assessee. Further the same does not have any relation to the actual payments made as the entries made therein are the agreed dates and payment to be made on such agreed dates may or may not be honoured on the fixed dates. 9. It was also submitted before the Ld. CIT(A) that to establish the above modus-operandi, the assessee has already produced the confirmation letters of many cultivators before the Ld. AO during the Assessment proceedings, and he recorded their statement on oath. The cultivators categorically stated in the statements that they did not collect the whole money at the time of sale of Sugar Cane but any time mutually agreeable to both the parties. The assessee further submitted 13 before the Ld. CIT(A) that the books of accounts were audited, and the book results showing production, and reasonable profits were already accepted on year-to-year basis. The purchase of Sugarcane is also duly regulated by the State Government and the purchases were to be made at the rates fixed by the Government. 10. Regarding the objections raised by the Ld. AO, it was submitted by the assessee as under: - (i) There is no difference in the Cane grower cash payment register maintained by the appellant because the register shows the cash amount payable for Cane, which has been weighed. The actual payment has been shown in the cash book. It is the stand maintained by the appellant right from beginning. The amount payable is worked out as per weighing machine and the amount payable is put down on the permit already given. The permit amounts agreed to be paid on various dates and record of the dates and amount so agreed is entered in cane growers cash payment register and, when it is actually paid it is entered in the cash book. So, there is no difference between the Cane grower payment register and there is no difference in cash book. But there may be and ought to be some difference in cane grower payment register qua cash book as pointed out by the assessee earlier. (ii)The assessing officer has observed that the assessee has merely tried to explain the difference of cash as shown in the cane payment register and the cash book on the basis of some general explanation. He further observed that the explanation 14 was filed on 23-03-2016 and there was no time for further enquiries. Here, the A.O. is completely wrong because the stand that Cane growers payment register reflected the amount payable and cash book reflected the cash payment made .The second detailed letter was filed by the assessee on 01-03-2016 and it was for later assessment years as the assessee was asked about only two assessment years i.e. for AY 2013-14 and AY 2014-15, then the A.O. issued another notice and asked about the discrepancies in the a.yrs. 2009-10 to 2014-15, while the confirmation letters were filed before 21-03-2016 and the statement were recorded by the A.O. himself on 21-03- 2016 as it was impossible in the opinion of A.O. to record the statements of all the cane growers present and therefore, the statements were recorded only of such cane growers, who had filed their confirmation letters. Only on 23-03-2016, the appellant filed the final letter. So, it is wrong on the part of the assessing officer to say that there was very little time to make further enquiries. In fact, the time was available right from beginnings of the assessment proceedings or at least from 01- 03-2016. (iii)The ld. A. O has observed that even if the explanation of the appellant was true but there is no entry to the above effect in the books of the appellant or even in the audit report. In this connection, it was pointed out that there are more than 5000 cane growers and payment has been made to the cane growers in 1 to 3 installments. In the audit report, the outstanding payment to the cane growers is reflected along with sundry creditors from year to year. The breakup of sundry creditors 15 including outstanding cane growers is available in the balance sheet given and particulars filed before the Ld. CIT(A). For ready reference, the details of sundry creditors was shown in the balance sheet and the outstanding cash amount payable to the cane growers and paid after31 March of the year. The chart showing balance of cane payment as on 31 March is given below and is enclosed herewith, which was available in hard disk seized by the search authorities and was handed over to the A.O. AS ON AS ON AS ON AS ON AS ON AS ON 31-03-2009 31-03-2010 31-03-2011 31-03-2012 31-03-2013 31-03-2014 A.YR. A.YR. A.YR. A.YR. A.YR. A.YR. 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Rs. Rs. Rs. Rs. Rs. Rs. CREDITORS IN 85890602 181899629 147151774 121758281 101094280 69668988 THE B/S ,WHICH INCLUDESTHE FOLLOWING SC PAYMENT [A] 54357781 112423073 68067859 54421149 61219290 52485402 OTHERS [B] 31532821 69476556 79083915 67337132 39874990 17183586 [A+B] 85890602 181899629 147151774 121758281 101094280 69668988 (iv) The ld. A.O. has observed that the appellant did not file the specific explanation correlating the payments to the specific SC grower. In this connection, it was submitted that in the balance sheet, the amount of outstanding payable to sundry creditors are shown on 31 st March from year to year and thereafter the payment is shown in the detailed manner. In the list of Cane growers name, land, area, village and cash amount out of total cash payable amount as paid is shown. 16 (v)The Ld.A.O. observed that if the explanation of the appellant is considered as true then there is no sanctity of books of the accounts and the appellant has scant regard for the law of land. In this connection, it is submitted that the appellant has maintained the same stand right from the day of search and the date of passing the final order. The books of accounts are maintained properly and they are audited from year after year. The payments made to the cultivators was available before the A.O. Nobody has doubted the accounts books even the assessing officer has himself accepted the books of accounts and following the same he has accepted the returned income for AY 2008-09 and AY 2009-10 to 2014-15 except for so called unexplained expenditures and therefore, the observation of the A.O. was not correct that entries are manipulated and the appellant has scant regard for the law of land. (vi)The ld. A.O. observed that no evidence in support of the contention of appellant was found in the search. The assessing officer has referred to the statement of Ratnesh Jain in para - 9(ii) of his order, which willshow that there is no evidence in support of inference of the assessing officer. Infact, truck loads of regular books etc. were seized and they were accepted as true and genuine. (vii) The A.O. has observed that there is glaring differences in the account books and it proves the collaboration between the appellant and others. Cane register is not the account book as per the definition of account books. In this connection, it is submitted that the ld. A.O. has levied a very serious charge 17 without any evidence and without proper understanding of the books kept in sugar business. 11. After considering the entire facts, Ld. CIT(A) held that the assessee has during the course of assessment as well as appellate proceedings has clearly established that the SC payment register represented the ‘amount payable’ and the cash book represents ‘amount paid’. Ld. CIT(A) stated that discrepancies pointed out by the Ld. AO were of four categories. Category-1 represented more payments made as per cash book and category-4 represented payments made only through cash book. Similarly, category-2 represented less payment made from cash book and category-3 represented no payment made from cash book. After clubbing these two situations (one where more payments have been made and other where less payments have been made through cash book) the following picture emerges: - A. Yr. Less Payment as per SC Register and more as per cash books Point No.6 No Payment as per SC Register and more as per cash books Point No.9 Less Payment as per cash book and more as per SC Register Point No.7 No payment as per cash book and more as per SC Register Point No.8 Addition made by A.O. Rs. Category- 1 as per order Category- 4 as per order Category -2 as per order Category-3 as per order [2 to 5] [1] [2] [3] [4] [5] [6] 2009-10 912334.00 NIL 1970354.00 16177900.00 In thebody of the order 2,24,00,587.00 Correctly 1,90,60,588.00 2010-11 4537886.00 NIL 21643838.00 3339999.00 In the body of the order 2,61,81,724.00 Correctly 2,95,21,723.00 2011-12 8709572.00 2276148.00 70121139.00 304687.00 8,14,11,546.00 2012-13 3641974.00 25692295.00 10141969.00 5552816.00 4,50,29,054.00 18 Correctly 25603681.00 Correctly 4,49,40,440.00 2013-14 16356919.00 47811737.00 30003518.00 NIL 9,41,72,174.00 2014-15 29518107.00 As per body of the order 47418107.00 21827759.00 13000000.00 NIL 6,43,45,866.00 Correctly 8,22,45,866.00 TOTAL 81576792.00 97519325.00 146880818.00 25375402.00 33,35,40,951.00 C.1 + C.4 81576792.00 97519325.00 C.2 + 146880818.00 C.3 25375402.00 CORRECTLY 35,13,52,337.00 TOTAL 179096117.00 172256220.00 179096117.00 172256220.00 ============ Difference 6839897.00 Cash found (-)5071350.00 Addition worth Making 1768547.00 12. Ld. CIT(A) therefore concluded that the both the differences shall be set-off and the difference i.e. Rs. 17,68,547/- needed to be added. He therefore confirmed the addition of Rs. 17,68,547/- in the A.Y. 2014-15 and deleted the balance addition. 13. Before us, Learned Departmental Representative (in short Ld.DR) relied heavily on the order of Ld. AO and contended that the addition is justified. He submitted that discrepancies were found in the cash book and the SC register. During the course of search, when the discrepancies were pointed out to Shri Ratnesh Jain, General Manager (Finance) he could not explain the same and simply stated that the same could be explained only by Shri Hemant Kumar Soni, Managing 19 Director. The story that the amount as per the SC register was only a due date register and the payment was not made to the farmers on the date of purchase, but on a subsequent date was only an after-thought. He submitted that on plausible evidence was submitted to establish that the farmers were paid at a later stage. Further, he submitted that once farmer is selling his produce, he would always insist and take the payment at that very time and will not accept a payment at a later stage. Ld.DR therefore submitted that the difference between the SC register and the cash book represented unexplained expenditure by the assessee and the Ld. AO was justified in making the addition. 14. Per Contra , Ld. Counsel for the assessee submitted that modus-operandi of purchase of sugarcane is as under: “1.Modus Operandi 1. It would be pertinent to note that the procedure for receipt of sugarcane and the payments to farmers. In fact, if this procedure is taken into account, there would be no discrepancy. a) Sugar season starts from October and ends in December. During this period, the company purchases sugarcane crops from farmers. b) Sugarcane is received at the factory from the farmers, who bring them on tractors/ trollies to the factory premises. c) Quantity of the same is ascertained; Rate is as fixed by the government. At the rate fixed by the government, the transaction is recorded (Permit is issued to the farmer). d) Farmer then approaches the Finance department for payment → Based on the advance Budget of the receipts and payment, date is given to the farmer for disbursement of the payment. → Entry is made in the Sugarcane (in short “SC”) payment register. → Signature of farmer is taken in the SC Register as acceptance of payment schedule. → Entry is also punched in computer. Computer generated number is issued; this number is mentioned in the SC Register also. e) On the fixed date, farmer approaches with Permit slip, and takes the payment. Cashier also makes entry in the permit slip. If 20 large number of farmers appear on a single day, token is issued. Token number is also mentioned in the SC Register. f) On these dates, cash payable as per register tallies with the cash paid on the respective dates. There are only two cases where there would be a difference: → If the farmer does not come on the respective date. In such a case, payment would be made on the future date. → In some cases, assessee fails to arrange payment on respective dates. Payments in such cases in full/ part are made on future dates. g) It is pertinent to mention that SC Register is only a SC due date Diary. This register is maintained for administrative compliance and to avoid litigation with farmers. This register is not a part of books of account, but is only for control purposes. All entries in the register tally with the payments on subsequent dates.” 15. The Ld. Counsel for the assessee thereafter submitted that the difference of the cash book and the “SC” Register was duly explained. Learned counsel submitted that on many dates, when amount as per SC Register was more, it indicated that on the given date, lesser payment was made to farmers, and balance payment was made to farmers on subsequent date. In fact, in the reconciliation, the specific date on which payment was made subsequently had been given with the list of parties to whom payment was not made on the specific date, but on a subsequent date. He further stated that on many dates, when amount as per Cash book was more, it indicated that payment pertaining to the earlier date was made on this given date. In other words, Sugarcane was purchased on earlier date; but payment was made on the current given date. This resulted in cash book amount to be more. He referred to page 554 to 598 of the paper book. On these pages, each and every entry of the difference was duly reconciled. 21 16. During the course of hearing, Ld. Counsel for the assessee referred to 904-914, and submitted that this was a copy of “SC” Register for 22.12.2010. This Register consisted of list of farmers, with village, amount, Computer Parchi No., Token No., Permit No. and signature of the farmer. To demonstrate as to how the entry reconciled with the cash book, he submitted that the total of the SC payment register for 22.12.2010 comes to Rs. 41,36,125/-. On this date, payment of Rs. 21,36,125/- was made, which was duly recorded in the cash book. He referred to PB 918-919, where the details of each farmer to whom this payment were made, were on record. He thereafter submitted that balance payment of Rs. 20,00,000/- was made on 16.01.2011. He referred to PB 934-935 and contended that on 16.01.2011, out of the total payment of Rs. 22,17,733/-, Rs. 2,17,733/- related to 16.01.2011 and balance Rs. 20,00,000/- related to 22.12.2010. PB 934-935 was the list of farmers to whom payments were made on 16.01.2011, which can be verified from the list of farmers to who payment was due on 22.10.2010. He therefore contended that each and every difference of SC Register could be reconciled with the Cash book and there was no difference at all. He thereafter, referred to PB 554 to 598 and contended that on these pages each difference is reconciled as to what was the difference, and when the payment was made. These all documents were already on record. Ld. Counsel, during the course of hearing similarly demonstrated the difference of 03.01.2011, which 22 was paid on 14.01.2011. His contention as per his synopsis is reproduced as under: - ii. “Date 03.01.2011 and 14.01.2011. As per the SC Register dated 03.01.2011 (at PB 920-933), a list of farmers, with village, amount, Computer Parchi No., Token No., Permit No. and signature is given. The total of the sheet is Rs. 55,81,418. This list contains 205 farmers. A computer typed list is also at PB 936-939. 2. As per the cash book dated 03.01.2011, the payment made to the farmers was Rs. 15,81,418. 3. A reconciliation is given at PB 582/III and PB 581. It is mentioned that on 03.01.2011, payment of Rs. 15,81,418 was made to the farmers. Balance, Rs. 40,00,000 remained outstanding and was paid on 14.01.2011. Details of farmers to whom payment was made on 03.01.2011 is at 940-941. Further, details of farmers to whom payment was made on 14.01.2011 is at PB 944-946. Total payment made on 13.01.2011 is Rs. 61,58,262, which includes payment to farmers in respect of purchase of sugar on 13.01.2011 itself. The list of farmers from whom sugar was purchased on 13.01.2011 itself is at PB 942-943, which was of Rs. 21,58,262. 4. Thus, the total purchase of Sugarcane on 03.01.2011 was at Rs. 55,81,418. Payment was made of Rs. 15,81,418 on 03.01.2011 and balance payment was made on 13.01.2011 at Rs. 40,00,000. Thus there was no discrepancy. Ld AO has stated that there is a difference on 03.01.2011 at Rs. 40,00,000 and added it (Category III). Further, he has stated that there is a difference of Rs. 40,00,000 on 13.01.2011, being excess payment as per cash book, and added it again (Category I). PB 581 and PB 582.” 17. During the course of hearing, Ld. Counsel for the assessee further submitted that when the farmer comes to factory for selling Sugarcane, a permit slip is issued. Proforma of Permit Slip so issued is at PB 609 to 612. These permit slips bear permit nos. these permit nos. can be duly cross-checked in the SC Register which was seized. There was no scope of any manipulation therefore. Similarly, proforma of payment vouchers are given at PB 606 to 608. These vouchers bear 23 token nos, which are also mentioned in the SC Register which was seized and can be cross-checked. 18. Ld. Counsel thereafter submitted that the affidavits/ confirmation of some farmers were given before the Ld. AO to demonstrate that the payment was not made on the date of purchase of sugarcane, but on a subsequent date. Ld. AO had already examined the farmers after calling them u/s. 131 of the Income Tax Act, 1961. The farmers had accepted that the payments were made on a subsequent dates. He referred to PB 640 to 741 for the affidavits and the statements recorded u/s. 131 of the Act. Ld. Counsel, lastly submitted that since the payment to the farmers were not paid on date of purchase of itself, the amount payable to farmers was lying in the books as sundry creditors. At the year-end each year, the amount payable was a part of the Audited Balance sheet under the head, “Sundry creditors”. He referred to Page 743 of the paper book. 19. In respect to addition of Rs. 17,68,547/- sustained by the Ld. CIT(A), Ld. Counsel for the assessee submitted that the Ld. CIT(A) was not justified in sustaining this addition. He contended that the entire approach of the search party was incorrect in seizing the SC Register of only certain dates and comparing it with the cash book of those dates. If the SC Register would have been compared with the cash book for the entire period, there would have been no difference. Ld. Counsel submitted that for the period, SC Register was seized, the 24 assessee has already given reconciliation explaining that there was no difference at all. Each and every entry of the SC Register tallied with the cash book on a subsequent date. When there was excess amount as per SC register, the same was paid on subsequent date, which has been reconciled by the assessee before the Ld. Authorities and placed at PB 554 to 598 of the paper book. Where there was excess payment as per Cash book, it related to payment towards purchase made on earlier dates, which was again reconciled at PB 554 to 598, as above. Thus, there was no since difference existing and no addition could have been made. 20. In rebuttal Ld.DR submitted that there were differences in the cash book and the SC register, which were confronted to the assessee during the search but it could not explain the same during the course of search. The entire story, now put by the assessee is an after thought and therefore additions made by Ld.AO should be confirmed. 21. We have considered the rival submissions, perused the records placed before and careful gone through the facts and evidences on record. Alleged addition is towards the difference between the Sugarcane Register (SCR), Vouchers and the Cash book. During the course of search, the “SCR” was found, which was tried to be tallied with the cash book for certain dates. There were differences between the cash book and the SCR, which were categorized in four categories: - 25 (i) Category -1 : Excess of payment as per cash book in comparision to payment as per SCR and vouchers. (ii) Category – 2: Excess of payment as per payment vouchers and payment registers in comparision to cash book. (iii) Category – 3: Payments recorded only in Sugar Cane Payment Registers (iv) Category – 4 : Payments recorded only in Cash book. 22. It is a pertinent fact, that when the difference in the SCR, vouchers and cash book was pointed to Shri Ratnesh Jain (G.M Finance), he submitted that Shri Hemant Soni, Managing Director could clarify the same. No question was put to Shri Hemant Soni during the course of search regarding this discrepancy. Later on, during the assessment, Ld. AO asked the assessee-company to explain the difference. Assessee submitted that this difference was reconcilable as when amount as per SCRr was more, the payment was made on a subsequent date; and when payment as per cash book was more, it related to payment in respect of purchase on earlier date. Ld. AO however added the difference as per Category 1 and 4, in comparison to Category 2 and 3 above. Where amount as per Category 1 and 4 came more, he added this amount; and where amount per Category 2 and 3 came more, he added that amount also. Ld. CIT(A) however, restricted his addition, after giving set-off of the Category 1 and 4 with Category 2 and 3. After this set-off, Ld. CIT(A) gave credit of cash-in-hand, to make the balance addition. The chart mentioned in the order of Ld. CIT(A) is reproduced below: 26 A. Yr. Less Payment as per SC Register and more as per cash books Point No.6 No Payment as per SC Register and more as per cash books Point No.9 Less Payment as per cash book and more as per SC Register Point No.7 No payment as per cash book and more as per SC Register Point No.8 Addition made by A.O. Rs. Category- 1 as per order Category- 4 as per order Category -2 as per order Category-3 as per order [2 to 5] [1] [2] [3] [4] [5] [6] 2009-10 912334.00 NIL 1970354.00 16177900.00 In thebody of the order 2,24,00,587.00 Correctly 1,90,60,588.00 2010-11 4537886.00 NIL 21643838.00 3339999.00 In the body of the order 2,61,81,724.00 Correctly 2,95,21,723.00 2011-12 8709572.00 2276148.00 70121139.00 304687.00 8,14,11,546.00 2012-13 3641974.00 25692295.00 Correctly 25603681.00 10141969.00 5552816.00 4,50,29,054.00 Correctly 4,49,40,440.00 2013-14 16356919.00 47811737.00 30003518.00 NIL 9,41,72,174.00 2014-15 29518107.00 As per body of the order 47418107.00 21827759.00 13000000.00 NIL 6,43,45,866.00 Correctly 8,22,45,866.00 TOTAL 81576792.00 97519325.00 146880818.00 25375402.00 33,35,40,951.00 C.1 + C.4 81576792.00 97519325.00 C.2+ 146880818.00 C.3 25375402.00 CORRECTLY 35,13,52,337.00 TOTAL 179096117.00 172256220.00 179096117.00 172256220.00 ============ Difference 6839897.00 Cash found (-)5071350.00 Addition worth Making 1768547.00 23. We find that the entire approach of the Ld. AO was wrong in adding the entire amount at the outright. Also, Ld. CIT(A), on the one hand accepted the entire reconciliation of the SCR with the Cash book, and the modus-operandi regarding the purchase of Sugarcane; but on the other hand, he gave set-off 27 of the Category 1 and 4 with 2 and 3 and added the difference, after further giving credit of the cash-in-hand. Firstly, it is unknown why the SCR for only particular dates was verified with the cash book. Secondly, it is an accepted fact that the nature of sugar industry is an agro based industry. And in the sugar season, farmers in huge number approach the sugar factory for sale of sugarcane. It is impossible to make payments to all farmers on the same date. The assessee has created SCR for control purposes, to know as to who has sold sugarcane to assessee company, and parchi no were issued to farmers, and further payment slips were given so that the farmer comes with proof, when he comes to collect payment. All the details were duly recorded in the SC register i.e. name of farmer, village, parchi no., payment slip no. quantity, amount and signature of farmer was also put. Thus, payment on subsequent dates is undoubted. Thirdly, the assessee gave affidavits of the farmers in certain cases. Those farmers were called and examined and they confirmed that the payments were made on subsequent dates. Fourthly, a detailed reconciliation is placed in the paper book at pages 554 to 605 where each and every entry, date-wise is explained. No discrepancy in the said reconciliation was pointed by the Ld. Lower authorities. During the course of hearing also, Ld. CIT(DR) could not point out any error in the said reconciliation. Fifthly, during the course of hearing, the Ld. Counsel for the assessee demonstrated the entire difference was clearly explained by referring to the differences of dated 22.12.2010 and 03.01.2011 on illustrative basis, whereby 28 farmer-wise, amount-wise details were given as to on the given dates, payments of which farmers remained outstanding and how same was paid on subsequent date. Sixth, the amount which could not be paid to the farmers on the same date, remained outstanding. The same was duly recorded in the books under the head Sundry creditors. In the audited balance sheet each year, the said amount was duly reflected under the head of Sundry creditors. Seventh, the approach of Ld. CIT(A) in accepting the reasons for difference, but still adding Rs. 17,68,547/- after giving set-off of the Category 1 and 4 with Category 2 and 3 is improper. Since all the differences were reconciled date-wise, making addition giving set-off on an overall basis was improper. 24. Considering the above discussion, on the facts on record, in our considered opinion, no addition is called for. The entire difference in respect of SC register, vouchers and Cash books remains reconciled in terms of our discussion above and the addition is hereby deleted. 25. Thus, The Grounds of appeal of the revenues’ appeals are dismissed and Ground no. 2 and 3 of the assessee’s appeal for A.Y. 2014-15 are allowed. 26. Now we take the common grounds, Ground No. 2 and 3 of the assessee’s appeal for A.Y. 2013-14 (Rs. 2,50,00,000/-) and Ground No. 4 and 5 of the assessee’s appeal for A.Y. 2014-15 (Rs. 7,50,00,000/-) relating to addition on account of 29 retraction of the surrender made during the course of search u/s. 132. 27. The facts relating to this round of appeal are that during the course of search and seizure operations at the premises of the assessee-company between 29 th January 2014 to 1 st February 2014, statement on oath u/s. 132(4) of the Act was recorded of the Managing Director of the assessee-company Shri Hemant Kumar Soni on multiple occasions. On 1 st February 2014, he accepted surrender of income of Rs. 50 crores in the group. Further, on 4 th February 2014, he gave the break-up of Rs. 50 crores as surrendered; Rs. 30 crores being related to AG8 Ventures Ltd, Rs. 10 crores related to M/s. Kareli Sugar Mills Ltd. (Rs. 2.50 crores surrendered for A.Y. 2013-14 and Rs. 7.50 crores surrendered for A.Y. 2014-15), Rs. 5 crores related to M/s. Maa Bhagwati Sugar Mills Ltd., and Rs. 5 crores related to M/s. Reva Kripa Sugar Mills Ltd. (Rs. 1 crores surrendered for A.Y. 2013-14 and Rs. 4 crores surrendered for A.Y. 2014-15). Later on, certain correspondences took place between the department and the assessee-company. Thereafter on 30.05.2014, statement of Shri Hemant Soni was again recorded, where he was asked about the surrender made during the course of search. He replied that voluminous documents were seized from the premises, and therefore it is taking time for analyzing the same. Once the documents seized are verified from the books, he will provide the breakup of same. Subsequently, on 12.11.2014, return was filed for A.Y. 2013-14 and A.Y. 2014- 30 15. In this return, the income surrendered earlier was not offered. Later on, during the course of assessment, a retraction letter was also filed on 06.02.2016. Ld. AO however, disregarded the retraction, and made addition of the amount surrendered during the course of search as unaccounted income. Against this, the assessee preferred appeal before the Ld. CIT(A), who confirmed the addition relying on the surrender made during the course of search. 28. During the course of hearing before us, Ld. Counsel for the assessee strongly relied on the order in the group case of M/s. AG8 Ventures Ltd. IT(SS)A 90-91/ IND/ 2019 passed by the Hon’ble Indore Bench, Indore and submitted that there is no change in the facts except the amount surrendered. Ld. CIT(DR) did not dispute this fact, but merely relied on the order of Ld. AO and Ld. CIT(A) submitting that the assessee himself had made the surrender on different occasions. 29. We have considered the rival contentions, perused the facts and records placed before and carefully gone through the decision relied by Ld.Consel for the assessee. We find that the issue of additions made only on the basis of statement recorded u/s.132(4) of the Act without corroborating with an incriminating material stands squarely covered by the order of the this Tribunal in the assessee’s own group case of AG8 Ventures ltd. Vs. JCIT (OSD), Central, Bhopal IT(SS)A 90, 91/ IND/ 2019, order dated 16.02.2021 wherein this Hon’ble Tribunal has decided in the favour of assessee in the same group as under: 31 “215. We have considered the rival submissions, the facts on records and the case laws quoted by both the sides. Through Ground No. 2 to 5 for Assessment Year 2013-14 and Ground No.2 & 3 for Assessment Year 2014-15 the assessee has raised a common issue challenging the finding of Ld. CIT(A) confirming the addition made on the basis of the surrender of the income made by the assessee during the course of search conducted u/s 132 of the Act. 216. Before moving further to examine the facts we would like to go through the judicial precedents with regard to the issue that where in case no corroborative material is found during the course of search having its nexus with the income surrendered during the course of search whether the addition can be made merely on the basis of statement recorded during the courseof search. Though Ld. Counsel for the assessee has referred and relied on plethora of judgments, we find that this Tribunal has dealt with this issue. In the case of ACIT vsShriSudeepMaheshwari, ITA 524/ Ind/ 2013, vide order dated 13.02.2019, this Tribunal observed as under:- “6. It is the case of the assessee that during the course of search & seizure, no incriminating material or undisclosed income or investments were found. It is stated that the assessee was under mental pressure and tired. Therefore, to buy peace of mind, he accepted and declared Rs.3 crores in personal name. It is also stated that the case laws as relied by the A.O. are not applicable on the facts of the present case. The assessee has relied on the decision of the Hon'ble Supreme Court rendered in the case of Pullangode Rubber Produce Co. Ltd. 91 ITR 18 (SC), wherein the Hon'ble Court has held that admission cannot be said that it is conclusive. Retraction from admission was permissible in law and it was open to the person who made the admission to show that it was incorrect. However, reliance is placed on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT Vs. ChandrakumarJethmalKochar (2015) 55 Taxmann.com 292 (Gujarat), wherein it has been held that merely on the basis of admission that few benami concerns were being run by assessee, assessee could not be basis for making the assessee liable for tax and the assessee retracted from such admission and revenue could not furnish any respectively. The A.O. failed to co-relate the disclosures made in the statement with the incriminating material gathered during the search. Therefore, no inference is called for in the finding of the Ld. CIT(A) and is hereby affirmed. Ground raised by the revenue is dismissed.” 217. Recently, in Ajit Singh Melhotravs ACIT, IT(SS)A 63/ Ind/ 2019 vide order dated 22.10.2020, this Tribunal after 32 consideringvarious judgments including thoseofHon'ble Gujarat High Court aswell as Hon'ble Apex Court and also following its own decision in the case of ACIT vsShriSudeepMaheshwari (supra) observed as under:- “6. We have heard rival submissions and perused the material available on record and gone through the orders of the authorities below. We find that the addition was made on the basis of admission of assessee’s son during the course of search. It was contended before us, that all these documents were properly recorded in the regular books of accounts of the persons to which these documents actually pertained. However, we find that the assessing officer did not establish the fact that any of the documents as found and seized was not recorded in the books of accounts of the persons to which these documents actually pertained. Therefore, we find force in the contention of the assesee that without referring to any of the documents was not binding on the assessee and the same cannot be used against the assessee as an evidence and that too in search assessment proceedings. Our view is supported by ratio laid down in the following judicial pronouncement: 1. M/s. Ultimate Builders vs ACIT (ITA No. 134/Ind/2019 dated 09.08.2019)(Indore Tribunal). 2. ACIT vsSudeepMaheshwari (ITA No. 524/Ind/2013 dated 13.02.2019)(Indore Tribunal). 3. KailashbenManharlalChokshivs CIT (2010) 328 ITR 0411 (Guj) 4. Pullangode Rubber Produce Co. Ltd. vs. State of Kerala (1973) 91 ITR 18 (SC) 7. On consideration of above facts/submissions in the light of judicial pronouncements (Supra) and the fact that no adverse material was filed by the revenue to controvert the factual submission advanced before us, we direct the assessing officer to delete the addition of Rs. 10,00,00/-.” 218. On going through the above judgments it is judicially settled that an addition made on the basis of mere surrender of income during the course of serach without referring to any of the incriminating documents is not binding on the assessee and the same cannot be used against the assessee as an evidence. 219. Now we proceed to examine the facts of the instant case in the light of above stated principle. In the instant case during the course of search various documents and other material were found and seized. Assessee accepted to surrender Rs.2 crores for Assessment Year 2013-14 and Rs.28 crores for Assessment Year 2014-15 on behalf of the various group 33 concerns and the individuals connected there to. During the course of assessment proceedings Ld. A.O made various additions based on the incriminating material seized during the course of search. Along with these additions Ld. A.O also made addition for the income surrendered during the course of search. It is not in dispute that various incriminating material found during the course of search were duly considered by the Ld. A.O and necessary additions were made based on them which were challenged before Ld. CIT(A) and before us. We have adjudicated and decided the issues raised before us connected to the additions made on the basis of incriminating material. As regards the addition made by the Ld. A.O made on the basis of statement recorded during the course of search there was no reference to any other incriminating material other than those considered above for making the other additions. 220. Even before us Ld. Departmental Representative failed to bring any incriminating material found during the course of search having its nexus with the impugned addition and which was not been considered by the Ld. A.O while making the other additions. So there remains no dispute to the fact that there is no material to show that how the addition for Rs. 30 crores was made by Ld. A.O for undisclosed income without corroborating with any incriminating material found during search. What is the working of this Rs. 30 crores, and how it was divided in two years is baseless except the confession of ShriHemantSoni. Ld. AO himself pointed in the assessment order that it is not possible for the authorised officer u/s. 132 to put every minute detail of the discrepancies and documents in the statement recorded during the search proceedings. It is clear from the findings of the Ld. AO that this addition is purely based on a mere declaration and nothing else. We see that after 4 days of search, on 01.02.2014, in question no. 30, ShriSoni made a declaration that on-money of 5 to 10% was received on sale of land in Highland project. Further in the subsequent question, question no. 31, he made the surrender. So far as the surrender of Rs. 30 crores in the assessee company and the confession of receipt on Highland project are concerned, there was no basis for making this surrender. In our view only surrenderof income would not bind the assessee company. 221. We therefore in the light of settled judicial precedents and respectfully following the decision of this Tribunal in the case of ACIT vsShriSudeepMaheshwari (supra) and Ajit Singh MelhotraV/s ACIT (supra) which were decided after considering the settled judicial precedence by the Hon'ble courts are of the considered view that Ld. AO was not justified 34 in making the additions merely on the basis of statement given during the course of search without referring to any incriminating material in the case of assessee company, and further Ld. CIT(A) was not justified in enhancing this addition. We therefore delete the addition of Rs. 4,34,08,100/- in A.Y. 2013-14 and Rs. 28,00,00,000/- in A.Y. 2014-15. Thus, these grounds of the assessee are allowed.” 30. In that very case of AG8 Ventures Ltd, the statement of the same Managing Director was considered who was also Managing Director of AG8 Ventures Ltd and also of the assessee company. In his statement on oath, he had surrendered Rs. 30 crores in the hands of M/s. AG8 Ventures Ltd; Rs. 10crores in the hands of M/s. Kareli Sugar Mills Ltd. ;Rs. 5 crores in the hands of M/s. MaaBhagwati Sugar Mills Limited and Rs. 5 crores in the hands of M/s. RevaKripa Sugar Mills Ltd and there was no incriminating document which was referred in the statement. In the assessment, or in the appeal before the ldCIT(A), no incriminating document was discussed by the ld Lower Authorities. Before us, during the course of hearing, the Ld. DR could not point out any incriminating material leading to the surrender of income. He merely relied on the statement on oath of Shri Hemant Soni. Considering the above findings in the group case, based on same statement and since there are no changes in the facts of the present case, we respectfully follow the above decisions and delete the additions, which are purely based on mere surrender by the assessee and no incriminating material is pointed out. 31. In the result, the addition of Rs. 2.50 crores in the A.Y. 2013-14, and Rs. 7.50 crores in the A.Y. 2014-15 stands 35 deleted. Ground No. 2 and 3 for A.Y. 2013-14 and Ground No. 4 and 5 for A.Y. 2014-15 of the assessee’s appeal are therefore allowed. Now we take up M/s. Reva Kripa Sugar Mills Pvt. Ltd. 32. Now we take the appeals of the assessee in the case of M/s. RevaKripa Sugar Mills P. Ltd. The grounds of appeal are as under: - 33. First we shall take Ground no. 1 and 2 for A.Y. 2013-14 and Ground No. 5 and 6 for A.Y. 2014-15 which relates to retraction of surrender during the course of search recorded u/s. 132(4) amounting to Rs. 1 crores and Rs. 4 crores respectively. 34. We find that the similar issue is dealt by us in the case of Kareli Sugar Mills Pvt Ltd in Ground no. 2 and 3 for A.Y. 2013- 14 and Ground No. 4 and 5 of A.Y. 2014-15 and taking a consistent view we delete the addition of Rs. 1 crores in A.Y. 2013-14 and Rs. 4 crores in A.Y. 2014-15. Thus, ground no.1 & 2 for A.Y. 2013-14 & ground no.5 & 6 for A.Y. 2014-15 are allowed. 35. Now we take up Ground No. 1 for A.Y. 2014-15 relating to addition of Rs. 1,15,761/- towards statutory liability of Central Sales Tax (in short CST). 36. Ld. AO, during the assessment, noticed that CST was payable of Rs. 1,15,761/- and therefore disallowed the same u/s. 43B of the Income Tax Act, as the same was not paid upto the due date of filing of return. Ld. CIT(A) confirmed the 36 addition, as assessee was unable to demonstrate that the amount was paid upto the due date of filing of return. 37. Before us, the Ld. Counsel for the assessee submitted that since the amount was not paid upto the due date of filing of return, the same was not allowable during the current A.Y. 2014-15, but since it was adjusted with the CST liability on 31 st March 2015, same was allowable in the A.Y. 2015-16 (F.Y. 2014-15), when the same was actually paid. He referred to the ledger of CST, which was placed at page 6 of the synopsis. On the other hand, Ld.DR supported the order of Ld. AO and Ld. CIT(A). 38. We have heard rival contentions and perused the records placed before us. Issue related to disallowance made u/s.43B of the Act for not paying Central Sales Tax. As per section 43B of the Income Tax Act, 1961, any tax, duty ,cess or fees (by whatever name called) is allowable only on actual payment basis. Further, if the payment is made upto the due date of filing of return, the same would be allowable. However, in case the payment is not so made upto the due date of filing of return, the same would be allowable in the financial year in which the same is actually paid. In the present case, as fairly conceded by the Ld. Counsel for the assessee, the payment was not made upto the due date of filing of return. Therefore, the CST payable would not be allowed in the current A.Y. 2014-15. However, Ld.AR tried to demonstrate that the alleged amount of CST was adjusted on 31.03.2015 i.e. during AY 2015-16 and hence the deduction is allowable in A.Y. 2015- 37 16. We, therefore, direct the Ld. AO to make necessary verification that whether the alleged amount of CST has been adjusted in the A.Y. 2015-16 and if found correct the same should be adjusted in A.Y. 2015-16. 39. In the result, Ground No. 1 of assessee’s appeal for AY 2014-15 is dismissed. 40. Now we take up Ground No. 2 for A.Y. 2014-15 which relates to shortage of stock of sugar as on the date of search of 3254 quintals, having estimated market price of Rs. 71,97,848/-. Further, Ground No. 3 relates to treating this Rs. 71,97,848/- as unaccounted sale and making addition of Rs. 11,39,420/- towards Gross Profit on same. 41. The facts as culled from the records are that during the course of search physical verification of stock of sugar at the factory was done by the search party. On physical verification by the search party, stock of 22527 quintals of sugar was found. Stock as per the stock register was mentioned at 29281 quintals. Thus there was a shortage of stock of 6754 quintals. During assessment the assessee Stock of sugar was kept in two difference places in the factory. Some quantity of sugar was kept at Sugar House, the place where the sugar is manufactured. The Sugar House had a capacity of 10000 quintal. Stock of 6754 quintals was kept at Sugar House, which had undergone the manufacturing process on the same day. For this a certificate by Lab Incharge and General Manager (Production) was filed. Therefore there was no 38 shortage of stock. However, Ld. AO did not agree with the arguments of the assessee. As per the Assessment Order, the search party enquired about the same from Shri Gitesh Rathore of the assessee- company. He confirmed that the entire stock was kept in factory premises only and he confirmed that the stock found on physical verification was correct and that he was in agreement with the results of physical verification. At the time of search proceedings also, the accountant of the assessee could not satisfactorily explain the difference in the stock. However, Ld. AO took note of the fact that the manufacturing process was running during the course of search and gave a deduction of 3500 quintals as sugar under manufacturing process. He therefore, treated 3254 quintals (6754 – 3500) as shortage of stock. On this shortage of stock, he applied a gross profit ratio of 15.83%, which was the Gross Profit rate of F.Y. 2013-14. This resulted in a gross profit of Rs. 11,39,420/-. Ld. AO treated his Rs. 11,39,420/- as gross profit on unaccounted sales and added this to the income of the assessee. Ld. CIT(A) further confirmed the addition. Thus, the assessee is in appeal before us. 42. During the course of hearing before us, Ld. Counsel for the assessee ( in short Ld.AR) at the outset submitted that there was no shortage of stock. It was an accepted fact that the production process was going on, at the time of search. The sugar of 6754 quintals was kept at the Sugar House. Ld. AO himself accepted that certain sugar was kept at the place where production process was going on. He therefore gave a 39 credit of 3500 quintals. How the Ld. AO arrived at 3500 quintals is unknown. Once the fact that the sugar was kept at the place where production process was going on is accepted, the stock so physically verified becomes defective and the deduction of entire 6754 quintals as certified by the Lab Incharge and GM (Production) should have been accepted. There is no basis for rejecting their certificate. Further, the Ld. Counsel submitted that the Ld. AO stated in his order that the search party enquired about the same from Shri Gitesh Rathore. No such statement was on record. The Panchanama along with statements is already placed on record. Statement of Shri Gitesh Rathore was never recorded. Had this fact been enquired during the search, the same would have been clarified at that time itself. Further, as regards the application of the profit rate, Ld. Counsel submitted that it is a settled proposition of law that in respect of unaccounted sales, Net profit rate shall be applied and not gross profit rate. He relied on the judgment of jurisdictional High Court in the case of Bal chand Ajit Kumar 186 CTR 419 (M.P.), and Manmohan Sadani 304 ITR 52 (M.P.); and also of Gujarat High Court in the case of President Industries 258 ITR 654 (Guj.). He submitted that in the present case, Net profit rate comes to 0.88% based on the audited accounts for A.Y. 2013-14. He submitted that in any case, N.P. rate of 0.88% shall be applied on purported unaccounted sales. 43. On the other hand Ld. CIT(DR) relied on the orders of Ld. AO and Ld. CIT(A). He submitted that there was shortage of 40 stock of sugar during the course of search. When enquired, the accountant of the assessee could not clarify the same at the time of search. It was only during the course of assessment the assessee came out with the story that the stock was kept at Sugar House and submitted a certificate of Lab Incharge and G.M. (Production). This certificate was a self created document and the story of stock being kept at Sugar House was an afterthought. Ld. CIT(DR) submitted that the Ld. AO has already given deduction of purported sugar under production process. No further deduction was called for. In respect of application of profit rate, Ld. CIT(DR) contended that the Ld. Lower authorities were justified in applying Gross Profit rate of 15.83% on the facts of the present case. 44. We have considered the rival submissions and the facts on record. Issue of addition of Gross Profit on the shortage stock of sugar is in dispute before us. The uncontroverted facts are that the stock of sugar as per register, during the course of search was 29281 quintals and the stock as taken on physical verification was 22527 quintals. Thus, as per the search party, there was a shortage of stock of 6754 quintals. Ld. Counsel for the revenue submitted that the reasons for shortage was enquired from the accountant, which he was unable to explain. However, Ld. Counsel for the assessee submitted that the reasons for difference were not enquired and had these been enquired the same would have been explained at that moment itself. We find that from the records, it is not clear whether the reasons for difference were enquired from the accountant 41 during the course of search. However, an important fact for our consideration is that the Ld. AO himself gave deduction for certain stock being under process of production. Thus, he himself accepted that a part of stock of sugar was at Sugar House/ for production. It is unknown as to how he arrived at the figure of 3500 quintals. Further, assessee could not explain as to how the entire shortage of sugar of 6754 quintals was at Sugar House, except by filing a self created document of Lab (Incharge) and GM (Production). It is an accepted fact that certain stock was kept under production process. Thus, in the given circumstances we are left we no option but to accept the shortage of stock at 3254 quintal as confirmed by Ld.CIT(A). The rate of Rs. 2,212/- per quintal as applied by the Ld. AO was not disputed during the course of hearing. Therefore Rs. 71,97,848 (Rs. 2,212/- x 3254 quintals) is considered as unaccounted sales. 45. Now coming to the application of profit rate on same, we agree with the contention of the Ld. Counsel for the assessee that net profit rate shall be applied and not gross profit rate. This finding is supported by the judgment of jurisdictional High Court in BalchandAjit Kumar 186 CTR 419 (M.P.). We therefore hold that N.P. rate shall be applied. Ld. Counsel for the assessee submitted that based on the audited accounts of A.Y. 2013-14, the profit comes to 0.88%. We therefore, in the interest of justice, deem it proper to apply a net profit rate of 42 1.5% on the unaccounted sales as above. Thus the unaccounted profit on the same comes to Rs. 1,07,967/-. 46. In the result, we partly allow ground no. 2 and 3 in terms of our findings above. Addition of Rs. 1,07,967/- is hereby confirmed and balance addition of Rs. 9,81,705/- is deleted. 47. Now we take Ground No. 4 for A.Y. 2014-15 relating to cash-in-hand found during the course of search at Rs. 47,58,550/-. 48. The facts as culled from the orders of Ld. Authorities are that during the course of search cash in hand was found from the premises of assessee company to the tune of Rs. 47,58,550/-. Ld AO mentioned that the accountant was required to explain the nature and source of such cash and to state whether the cash was recorded in the books of account of the assessee, and the nature and source of cash; which he failed to explain. During assessment, when confronted, assessee explained that at the time of search cash-in-hand as per the books of accounts of the assessee company was Rs. 85,89,942/-. Out of which, the search party only physically examined the cash of Rs. 47,58,550/- and seized the same. Thus, infact there was no excess cash found during the course of search. Assessee produced the copy of the cash book for the period 01.01.2014 to 28.01.2014 to explain that there was sufficient cash-in-hand as per the books of the assessee company. 43 49. Ld. AO being dis-satisfied with the submissions of the assessee, treated the cash-in-hand as per the books of the assessee-company as nil and added the entire cash-in-hand found at Rs. 47,58,550/- in the hands of assessee-company as unexplained cash. 50. Thereafter, assessee preferred an appeal before the Ld. CIT(A), whereby similar submissions were given. Again the Ld. CIT(A) being not satisfied with the submissions held that the cash-in-hand is unexplained and confirmed addition of Rs. 47,58,550/-. 51. Against this finding the assessee is in appeal. 52. Before us, the Ld. Counsel for the assessee submitted that assessee is engaged in the business of sugar manufacture and is an agro based industry. The primary raw material of the assessee is sugarcane. For around half of the year, assessee purchases sugarcane/ makes payments to farmers for the purchases. The farmers come in tractor trolley for selling their Sugarcane produce. The payment has to be made in cash only as the farmers do not have bank account and/ or accept payments in cash only. For making payments for huge purchases, assessee company always keeps sufficient cash-in- hand. He referred to the opening and closing balance each month from 01.04.2012 onwards. He contended that it would be seen that cash-in-hand in most of the period was very high and more than Rs. 50 lakhs. Further in some months the cash-in-hand was as high as Rs. 6 crores. During the course of 44 hearing, he contended that there was no restriction in keeping cash-in-hand. He submitted that due to the peculiar nature of the business, huge cash-in-hand was kept for all the period. He further contended that the books of accounts for various years have been accepted u/s. 153A/ 143(3) assessments. Further he referred to the cash book for the period 01.01.2014 to 28.01.2014 to contend that the perusal of the cash book would show that on 28.01.2014 cash-in-hand was Rs. 85,89,942/-, which was quite sufficient to explain the cash-in-hand found. It was submitted that the transactions recorded between these dates have not been doubted by the Ld. AO. Once the transactions leading to cash-in-hand of Rs. 85,89,942/- are accepted, the cash-in-hand cannot be denied. Lastly he submitted that it is unbelievable that the cash-in- hand would be NIL, and the Ld. Lower authorities lost sight of this fact and added the entire amount. 53. On the contrary, learned Departmental Representative contended that the during the course of search, cash-in-hand of Rs. 47,58,550/- was found on physical verification. The books were not produced during the course of search, and no explanation was given as to how such huge cash-in-hand was available at the time of search. Later, the story of having cash in hand of Rs. 85,89,942/- was fabricated and the books of accounts were made to synthetically raise the cash to hand to Rs. 85,89,942/- just to explain the huge cash-in-hand. The cash books is just a cooked-up figure and therefore the Ld. Lower authorities were justified in disregarding the cash and 45 per the books and treating the entire cash-in-hand found to be unexplained. 54. We have considered the rival submissions of the parties, the facts on record. Issue of addition for cash in hand of Rs. Rs. 47,58,550/- is in dispute before us. Ld AO considered the cash in hand at Rs.NIL. On a thoughtful consideration, we find that the cash-in-hand as per the books cannot be taken as NIL. Assessee company is engaged in the business of sugar manufacture. Throughout the year assessee kept huge cash- in-hand which is demonstrated by the Cash summary of monthly opening and closing cash balances. On 31.05.2012 cash-in-hand was Rs. 39,50,710/-; on 30.06.2012, cash-in- hand was Rs. 75,65,639/-; on 31.07.2012, cash-in-hand was Rs. 68,69,060/-; on 30.04.2013, cash-in-hand was Rs. 67,62,858/-; on 31.05.2013, cash-in-hand was RS. 3,00,71,718/-; on 30.06.2013 cash-in-hand was Rs. 4,79,97,638/-; on 31.07.2013, cash-in-hand was Rs. 5,46,90,341/-; on 31.08.2013, cash-in-hand was Rs. 6,28,12,451; on 30.09.2013, cash-in-hand was Rs. 6,62,82,433. The fact of huge cash balance duly recorded in the books of accounts clearly justify that the assessee had to maintain huge cash balance to make payments to farmers, who accept payments in cash as most of the farmers would not have bank accounts. It is seen that even after the search took place on 29.01.2014, the cash balance as per the books was Rs. 5,44,43,369/- on 28.02.2014; and huge cash balances existed in the subsequent year. Looking to the nature of the business, it cannot be disputed that that assessee company 46 had kept huge cash-in-hand over a long-period of time. Now coming to the cash-in-hand found during the course of search, it is seen that the cash book for the period 01.01.2014 to 28.01.2014 was filed by the assessee during the course of assessment, which had been accepted and no any entry was doubted. Most of the receipts relate to withdrawal from bank. On 20.01.2014, cash was withdrawn to the tune of Rs. 30 lakhs, further on 22.01.2014, cash of Rs. 30 lakhs was again withdrawn, and on 27.01.2014, cash of Rs. 20 lakhs was withdrawn. Once the department itself has accepted the entries in the cash book, it cannot reject the same merely for the reason that the cash found physically was huge. Now coming to the contention that the cash-in-hand was not explained during the course of search by the accountant, on perusal of the records, we are unable to find any question raised by the search party to the accountant in this regard. The Ld. Authorities have not referred to any of such statement recorded during the course of search. Even during the course of hearing before us, the Ld. Counsel for the revenue could not point any such question being asked during the course of search. Thus, the revenue’s contentions that the cash-in-hand was not explained do not find any merit. 55. We therefore under the given facts and circumstances of the case hold that the cash-in-hand found during the course of search is duly explained and accordingly delete the addition of Rs. 47,58,550/- and allow this ground of appeal of the assessee. 47 56. No other ground was argued or pressed during the course of hearing. 57. In the result, appeals of the revenue in case of M/s Kareli Sugar Mills Pvt. Ltd. IT(SS)ANos. 272 to 276/Ind/2019 for A.Y. 2009-10 to 2013-14 are dismissed and assessee’s appeal IT(SS)ANos. 277 & 278/Ind/2019 for A.Ys. 2013-14 & 2014-15 are allowed and in case of M/s Reva Kripa Sugars Pvt. Ltd. assessee’s appeal IT(SS)ANo. 182 /Ind/2018 for A.Ys. 2013-14 is allowed and IT(SS)ANo.183/Ind/2018 for 2014-15 is partly allowed. The order pronounced as per Rule 34 of ITAT Rules, 1963 on 27.01.2022. Sd/- Sd/- (MADHUMITA ROY) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER दनांक /Dated : 27.01 . 2022 Patel/PS Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore
