ACIT, Central Circle, Cuttack V. Pasupati Feeds, Cuttack

ITSSA 49/CTK/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2820 (ITAT-CUTTACK)
• Duration Of Justice: 4 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-09-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 16-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Business income; Document seized; Documents seized
• Section: 153A; 251; 48

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री जाजज माथन, न्याययक सदस्य एवं श्री अरुण खोड़पऩया ऱेखा सदस्य के समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER IT(SS)A Nos.48 - 51/CTK/2018 (नििाारण वषा / Asses s m ent Years :2011-2012 to 2014-2015) ACIT , Cent ral Ci rc l e, Cuttac k ............ ......Re ven ue Versus M/s Pa supati Feeds, Kota Sahi, T angi, Cuttack P AN : AAE F P 4117 F ...... ...... ........As sessee AND Cross Objection Nos.36 - 39/CTK/2018 ( Ar i s i n g o u t o f I T ( S S ) A N o s . 4 8-5 1 / C T K / 2 0 1 8 ) (नििाारण वषा / Asses s m ent Years :2011-2012 to 2014-2015) M/s Pa supati Feeds, Kota Sahi, T angi, Cuttack P AN : AAE F P 4117 F ...... ...... ........As sessee Versus ACIT , Cent ral Ci rc l e, Cuttac k ............ ...... Re ven ue Shri M.K.Gautam, CIT-DR for the Revenue Shri P.R.Mohanty, Advocate for the assessee Date of Hearing : 15/09/2022 Date of Pronouncement : 15/09/2022 आदेश / O R D E R Per Bench : The revenue has filed four appeals being IT(SS)A Nos.48- 51/CTK/2018 against the separate orders passed by the ld. CIT(A)-2, Bhubaneswar in IT Appeal No.0389/2016-17, 0377/2016-17, 0386/2016- 17 & 0378/2016-17, all dated 30.01.2018. The assessee has also filed cross objections against the above appeals filed by the revenue for the IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 2 assessment years 2011-2012, 2012-2013, 2013-2014 & 2014-2015, respectively. 2. The ld. CIT-DR has filed written submissions, which are extracted hereunder :- These are the Departmental appeals against the relief allowed by the Id. CIT(A)-2, Bhubaneswar. The assessee firm is engaged in the business of manufacturing and sale of poultry/cattle feeds as well as growing & sale of broiler chickens. At the outset, it is necessary to analyze the seized documents and other evidences gathered by the A.O. i.) The A.O. has worked out the unaccounted sales of Rs.82,16,851/- in FY 2012-13 on the basis of PFO-70 (Excel formats were put in an external HDD). These are being produced by the undersigned before your Honours for kind perusal consisting of 1-25 pages and 909-934 pages. Taking out the printouts of all the 934 pages would have been voluminous but if desired, the complete printouts can be furnished. As per PFO-70, the sales work out to Rs.246,78,07,777/-. On the other hand, M/s. Pasupati Feeds has shown sales of Rs.245,95,90,926/- as per books of account prepared after the search operations. As mentioned by the A.O., during the course of search, no books of account were found from the premises of said firm. ii.) The A.O. has worked out unaccounted purchases of Rs.1,66,18,977/- in FY 2010-11 (para-4 on pages-6 & 7 of the assessment order). As per seized material PFO-8 (pages 47 & 48), the purchases were found at Rs.125,19,12,121/- whereas the assessee firm had shown purchases of Rs.123,52,93,144/- in the books of account prepared after the search operations. As mentioned by the A.O., during the course of search, no books of account were found from the premises of said firm. The Id. AR of the assessee firm has provided zerox copies of PFO-8 which are being produced for your kind reference. iii.) The A.O. has worked out unaccounted purchases of Rs.10,44,48,496/- in FY 2011-12(para-4 on pages-6 & 7 of the assessment order). As per seized material PFO-8 (page 39), the purchases were found at Rs.196,03,30,627/- whereas the assessee firm had shown purchases of Rs.185,58,82,131/- in the books of account prepared after the search operations. As mentioned by the A.O., during the course of search, no books of account were found from the premises of said firm. The Id. AR of the assessee firm has provided zerox copies of PFO-8 which are being produced for your kind reference. IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 3 iv.) The A.O. has worked out unaccounted purchases of Rs.9,85,95,485/- in FY 2012-13 (para-4 on pages-6 & 7 of the assessment order). As per seized material PFO-70 (Excel formats were put in an external HDD), the purchases were found at Rs.222,61,48,644/-. These are being produced by the undersigned before your Honours for kind perusal consisting of 95 pages. Whereas the assessee firm had shown purchases of Rs.212,75,53,159/- in the books of account prepared after the search operations. As mentioned by the A.O., during the course of search, no books of account were found from the premises of said firm. The Id. AR of the assessee firm has provided zerox copies of PFO-8 which are being produced for your kind reference. v.) Thus the A.O. has shown with the help of seized material that not only the sales are suppressed but also the purchases are made out of books of account. Similarly as per page-67 of PFO-2, the total issue of finished goods as per data maintained in the computer is lesser than that actually issued from the godown. For example, from April to June,2013, it can be seen that 29,198 bags have been issued but the actual figure was 61,648 bags. In terms of kgs, the finished material weighing 25,12,834 kg was issued from godown whereas the actual figure was 30,98,363 kg. vi.) The Id. CIT(A) has not taken cognizance of such a vital documentary evidence which was found and seized during the course of search. Even otherwise, the seized material pertaining to FY 2010-11, FY 2011-12 and FY 2012-13 should have been considered by him in these respective years. Even if he did not confirm the action of estimation of NP@ 8% or 11% on gross turnover, then also he should have confirmed separate additions on account of purchases out of books of account or unaccounted sales in AY 2011-12, AY 2012-13 and AY 2013-14. vii.) It is a settled law that in case of unaccounted purchases, the assessee has to demonstrate the sources of funds out of which said purchases were made. In absence of necessary explanation, the unexplained investment in purchases is liable to be disallowed. As far as unaccounted sales are concerned, the Hon'ble Ahmedabad ITAT in the case of Somabhai Ambalal Prajapati vs. ACIT (88 taxmann.com 369) held in para-6.1 that entire amount of unaccounted sales was liable to be added to the returned income and there was no question of estimating GP on such sales since in the impounded documents, though unaccounted sales were recorded yet corresponding purchases were not recorded in those documents. While holding so, it was held that the decision of Hon'ble Gujarat High Court in the case of CIT vs, President Industries (258 ITR 654) was not applicable to the facts of said case. It was further held that if both evidences are IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 4 found then only the question of estimation of GP will arise. In the present case, the Id. CIT(A) has not even applied the prevailing law. viii.) The Id. CIT(A) has blindly foUowed the version of the Id. AR of the assessee firm. In para-4.3.2 on page-9 of the appellate order (AY 2008-09), the Id. CIT(A) has held that the A.O. has not examined any person to verify correctness of purchases or sales shown by the assessee firm but he has forgotten that in respect of seized documents (PFO-8 or PFO-70), it was the onus of the assessee to rebut the presumption as laid down in section 292C that the contents of such documents were not true. In absence of names and addresses of the suppliers, how the A.O. could have made any enquiries. Same was also true in respect of suppression of sales. It was held by the Hon'ble Mumbai ITAT in the case of Biren V. Savia vs. ACIT (100 TTJ 1006) that a document found during the course of search should be treated as genuine with respect to all the entries recorded therein. The entire document should be read as a whole. This view was also held by the Hon'ble Gujarat High Court in the case of Glass Line Equipment Co. Ltd. vs. CIT (253 ITR 454). ix.) In para-4.3.2 on page-9 of the appellate order (AY 2008-09), the Id. CIT(A) has held that the A.O. has not rejected the book results. Had he gone carefully through the assessment order, he would have noticed that in last para on page- 7 of assessment order (AY 2008-09), the A.O. had rejected the books of account prepared subsequent to the search. x.) The comparison of rates advertised/published in the newspaper and as per data maintained in the computer was only an indicator that sales were suppressed. The A.O. had not made any addition of Rs.25.29 crores on that account to the income of the assessee firm. xi.) The Id. CIT(A) held in para-4.3.4 on page-10 of the appellate order (AY 2008-09) that difference of Rs.82,16,851/- on account of suppressed sales in FY 2012-13 was on account of credit notes. However neither the Id. AR of the assessee could explain nor the CIT(A) could apply his mind to the fact that such credit notes were not found during the course of search and also no such details were found in the data stored in the computer. These notes were prepared after the search operation to reconcile the difference in figures. xii.) The Id. CIT(A) held in paras-4.3.6 to 4.3.8 on pages-11 to 12 of the appellate order (AY 2008-09) that unaccounted purchases of Rs.l,66,18,977/- in FY 2010-11, unaccounted purchases of Rs.l0,44,48,496/- in FY 2011-12 and unaccounted purchases of Rs.9,85,95,485/- in FY 2012-13 as noted by the A.O. from the seized documents (PFO-8) were VAT returns statements. However on perusal of same, no VAT returns are seen. These are actually typed entries showing details of purchases within the state and purchases outside the state. There is no mention of purchases of IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 5 raw material or purchases of capital goods or purchases of consumables and purchases of other goods. The Id. CIT(A) has blindly followed the version of the Id. AR of the assessee that impugned purchases were recorded under different heads in the books of account. He neither himself verified the figures given in the VAT returns nor asked the A.O. to examine the same. The alleged reconciliation statement furnished before the CIT(A) has also not been placed before this Hon'ble Bench. It was held by the Hon'ble Delhi Tribunal in the case of DOT vs. Aithent Technologies (P.) Ltd. (53 taxmann.com 298) that it is well-settled that the correctness of the conclusion when questioned in higher forum can only be considered taking into consideration the discussion on the reasons prevailing in the mind of the adjudicating authority (CIT- Appeals). In the absence of any discussion addressing the reason the finding is open to challenge on the grounds of being arbitrary. In view of the above in the absence of any reasoning, the order is held to be non-speaking and same is restored back to the file to the Commissioner (Appeals) with the direction to decide the same by way of a speaking order in accordance with law. It was thus held that where no reasoning was given by Commissioner (Appeals) for accepting assessee's claim, it was a non-speaking cryptic order; matter required re-adjudication. xiii.) In the case of Debasish Banerjee vs. ITO (60 taxmann.com 65), the assessee was a trader in Indian made foreign liquor. In the books of account, purchases of Rs.78 lakhs were debited. However in the TCS certificate, purchases were shown at Rs.93 lakhs. The assessee could not reconcile the said difference. In view of above facts, the Hon'ble Kolkata Tribunal held that amount in question was rightly added by the A.O. as unexplained investment. 3. It was submitted by the ld. CIT-DR that the assessee is engaged in the business of manufacturing and selling of cattle feeds, poultry feeds etc. and also engaged in growing and selling of broiler chicken through integrated farming. It was the submission that there was a search on the premises of the assessee and its partners on 30.10.2013. Subsequent to search, a notice u/s.153A of the Act came to be issued on 19.05.2015. The assessee has filed its returned income in pursuance to the notice issued u/s.153A of the Act disclosing the same income as was disclosed in its regular returns. It was the submission that in the course of search IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 6 substantial documents have been found which showed sale suppressed and purchases outside the books of accounts. Ld. CIT-DR drew our attention to page 2 of the assessment order and submitted that the assessee had disclosed total income of Rs.1,62,41,410/- in its return of income for the assessment year 2011-2012. It was the submission that the facts were identical for all the four assessment years and consequently the assessment year 2011-2012 to be taken as the sample year. It was the submission that out of this income of Rs.1,62,41,410/- the interest income was to an extent of Rs.1,31,88,860/-. It was, thus, the submission that net business income was an amount of Rs.30 lakhs on a turnover of nearly Rs.137 crores. It was the submission that the net profit came to 0.22%. It was submitted that the books were prepared after the search and no regular books of accounts were found in the course of search. It was the submission that the assessee purchased one day old chicks from its sister concern M/s Pasupati Breeding Farm and these chicks were given to contract farmers. Along with the chicks necessary feeds and medicines were also provided to the contract farmers and 35 to 45 days old chicken are taken back. It was submitted that the price of chickens that is sold in the market was published in the daily news paper, namely, “The Samaj”. The AO had taken an instant of 15 th March, 2012, wherein the sale price of chickens was showed at Rs.75.15 and estimated the average rate of chicken sold by the assessee on 15.05.2012 at Rs.64.08. Consequently, this showed a difference in the sale proceeds of IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 7 Rs.25.29 crores. Ld. CIT-DR further drew our attention to para 2 of the order of the AO at page 3 to submit that a hard disk was seized marked as PFO-70 and working copy of the external hard disk, the sale data were extracted which showed the discrepancy of sales at Rs.82,16,851/-. He further drew our attention to page 4 of the assessment order to submit that inflation in purchases was also been done and the AO had arrived at inflation of Rs.11.28 crores. It was the submission that other discrepancies have also been pointed out insofar as in PFO-70, which is an extract of the hard disk, the purchases were to an extent of Rs.222 crores, whereas the purchase in the books was Rs.212 crores, thereby having a difference of Rs.9.85 crores and in respect of sales the PFO-70 showed Rs.246.78 crores as against the sales in the books at Rs.245.95 crores having difference of Rs.82.95 lakhs. It was also submitted that two pages in PFO-8 showed total purchases of Rs.125 crores and as per books the purchase was Rs.123 crores thereby causing a difference of Rs.1.66 crores. 4. It was further submitted by the ld. CIT-DR that a stock difference had also been estimated by the AO and there was no reconciliation by the assessee. It was the submission that consequently the AO for the assessment years 2011-2012 & 2012-2013 took the turnover as disclosed by the assessee and estimated the net profit of the assessee at 8% excluding the interest income as against 0.22% disclosed by the assessee. For the assessment year 2013-2014, the AO took the turnover IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 8 by applying number of chickens sold with the news paper rate and applied 11% as the net profit as against 0.49% excluding interest income. For the assessment year 2014-2015, the AO applied the same principle as A.Y.2013-2014 and applied 11% as against 0.84%. It was the submission that the ld. CIT(A) had deleted the addition by giving invalid reasons. The ld. CIT-DR drew our attention to para 4.3.2 of the order of the CIT(A) to submit that the ld. CIT(A) has recorded that the AO has not even rejected the book results of the assessee. 5. Ld. CIT-DR further drew our attention to page 7 of the assessment order to submit that the AO had rejected the assessee’s books of accounts and had estimated the income. It was further submission that in para 4.3.3 the ld. CIT(A) mentions that the assessee has given name in respect of the purchases to whom sales have been made. 6. Ld. CIT-DR placed before us a copy of the written submission filed by the assessee before the ld. CIT(A) to submit that out of 43894 buyers the assessee has given the name of only 12 buyers’ and the address is not clear. It was the submission that the provisions of Section 292C of the Act was categorical insofar as there is a presumption that the contents of the seized paper are true unless rebutted. It was the submission that no reconciliation statement was filed before the lower authorities nor any credit note or register found to substantiate the claim on discounts. 7. It was the prayer that the Tribunal should enhance the assessment for which purpose he placed reliance on the decision of the Hon’ble Delhi IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 9 High Court in the case of Jansampark Advertising & Marketing (P.) Ltd., reported in [2015] 56 taxmann.com 286 (Delhi) to support his arguments that though it is an obligation of the AO to conduct proper scrutiny of the material, in the event of AO falling to discharge his functions properly, the obligation to conduct proper inquiry on facts would naturally shift to the CIT(A) and the Tribunal and they cannot simply delete the addition made by the AO on the ground of “lack of inquiry”. It was thus the submission that the order of the AO is liable to be restored and that of the CIT(A) be reversed. 8. In reply, the ld. AR submitted that the PFO-70 is a hard disk, which was found in the course of search. The said PFO-70 was not opened in the presence of the assessee or two witnesses. The ld. AR placed before us a copy of a news paper cutting, namely, The New Indian Express, Dated 23 rd March, 2018, wherein it was mentioned that the CBI had conducted the search at the official and residential premises of former officers in connection with his involvement of tampering of evidence seized against the Odisha Based Pasupati Group. It was the submission that the assessee has been exonerated in the CBI enquiry. It was the submission that PFO-70 print out did not contain the seal and signature of any officer or the search party. It was further submitted that the PFO-08 is categorically sealed and signed and only pages 47, 48 & 39 of the same have been considered by the AO. It was the submission that in respect of PFO-70 reconciliation of the same in depth has been produced before the IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 10 AO. It was also submitted that during the search it was mentioned that the assessee was shifting its accounting tally package to SAP package. The persons involved in the shifting being the persons from the company have also appeared before the AO and had given a statement to the effect that various entries in the SAP package were only samples and they were not the actual entries. It was the submission that the AO has recognised in para 5 of his order that the assessee was in the process of transferring into a new SAP accounting package. It was the submission that though the assessee has provided the reconciliation of PFO-70 and PFO-08, nothing is mentioned by the AO in his assessment order. The AO also does not mention anything regarding the statement given by the employees of SAP, who have appeared before him. 9. It was the submission that nothing was found in the course of search to substantiate any addition. It was the submission that there was no excess cash found, no bullion found, no immovable property, no unaccounted assets found. It was the submission that the regular books of accounts maintained by the assessee on tally package was also taken by the search party. It was the submission that the price of chickens vary on a daily basis. The price is controlled by various factors such as the possibility of avian flu, religious months, so on and so forth. It was the submission that the AO sitting in an arm chair ought not to have estimated the income of the assessee without considering the ground realities. It was the submission that the price of chickens had also crashed to the IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 11 extent that nobody was buying chicken and the Government of Odisha had to provide chicken pakoda free of cost on the road side so as to restore confidence in the minds of the public to buy chicken. It was further submitted that the documents which have been used for the purpose of estimation are not incriminating documents. It was the prayer that the addition as made by the AO has rightly been deleted by the CIT(A) and, therefore, the order of the ld. CIT(A) deserves to be upheld. 10. At this point, the Bench put a query to the ld. CIT-DR has to how an estimation can be made in respect of the income of an assessee in an assessment framed u/s 153A of the Act when the search has been conducted on the assessee. 11. In reply to the above query, ld. CIT-DR submitted that there are various case laws which hold that estimation is permissible in such cases. In this regard, ld. CIT-DR placed reliance on the decision of the Hon’ble Allahabad High Court in the case of Lal Chand Jaiswal, reported in [2013] 40 taxmann.com 372 (Allahabad), wherein the Hon’ble High Court has held that since the assessment of business income and estimation of investment were made on the basis of papers found during search operations, the Tribunal was right in rejecting the assessee’s plea that the unexplained turnover should be taken only at figure available in cash book of 12 days. This decision does not apply to the facts of the case, insofar as this is not a decision in respect of provisions of Section 153A of the Act. Also, in assessee’s case, the turnover as disclosed by the assessee IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 12 has been accepted though substantial allegations have been made that there is a suppression of purchase and unaccounted purchase so also suppression of sales and end result, for the purpose of estimation of the net profit, the turnover of the assessee has been accepted and it is on that turnover of the assessee as disclosed by the assessee that the estimation on the net profit has been done. 12. He further relied on the decision of the Hon’ble Andhra Pradesh High Court in the case of Rajnik and Co vs ACIT (2001) 251 ITR 561 (AP), wherein, the Hon’ble A.P. High Court had upheld the findings of the Tribunal determining the undisclosed income on the basis of loose slips seized during the search. This was not the case where the assessment was made u/s.158BB. This is not a case of estimation of income. This is a case where the Tribunal had upheld the computation of the undisclosed income on the basis of loose slips during the course of search. In the impugned assessee’s case, the undisclosed income is not computed on the basis of the seized material. Therefore, the facts in the said case are not applicable to the facts in the impugned assessee’s case. 13. Ld CIT DR further relied upon the decision of Hon’ble Bombay High Court in the case of CIT vs Dr. M.K.Memon, 112 taxman.com 96 /(2000) 248 ITR 310 (Bom). In the said case, the Hon’ble Bombay High Court has categorically held that the Tribunal findings that the Assessing Officer was not right in applying the peak income on post search period to the entire period of block assessment was the findings of fact and no IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 13 substantial question of law arises. Further, the Hon’ble Bombay High Court has categorically held that the ITO cannot estimate the undisclosed income under Chapter XIV on arbitrary basis. The said decision of the Hon’ble High Court relates to an estimation u/s.158BB, where the concept of block assessment is dealt with. The said principles of block assessment do not apply to an assessment under section 153A. Even otherwise, this decision categorically would go against the principles proposed by ld CIT DR. 14. Ld CIT DR further relied upon the decision of Hon’ble Bombay High Court in the case of CIT vs C.J. Shah and Co. (2000) 246 ITR 671 (Bom), which is also a case under section 158BB, wherein, the Hon’ble High Court reiterated that the estimation of undisclosed income on the basis of material seized, it is not permissible for the AO to adopt an arbitrary method of calculation and that the entire findings of the Tribunal was based on facts and no question of law arises. This decision also is not applicable to the facts of the assessee but the principle laid down in the said decision categorically goes against the principles proposed by ld CIT DR. 15. Ld CIT DR relied upon the decision of Hon’ble Delhi High Court in the case of Smt. Dayawanti vs CIT, (2016) 75 taxmann.com 308 (Del) to support his stand that in the case of search, assessment u/s.153A is permissible to reject the books of account of the assessee and make addition estimating the sales and gross profit rates, inter alia, on the IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 14 ground that in the course of search, a statement has been recorded from the assessee’s son, wherein, he has admitted the unaccounted transaction outside the regular books of account and has not been able to show as to how estimation made by the Assessing Officer was arbitrary or unreasonable. In the said decision, the Hon’ble Delhi High Court had held that the estimation is permissible in an assessment u/s.153A of the Act. Further, in the said case, the estimation has been done taking into consideration the fact that the assessee’s son had categorically admitted to the unaccounted transaction outside the regular books of account and the assessee had not been able to show how the estimation made by the AO was arbitrary and unreasonable. This is not the fact in the impugned case. It was thus the submission that the estimation made by the AO was arbitrary done and the order of the ld CIT(A) was erroneous and liable to be reversed. 16. We have considered the rival submissions. 17. At the outset, we may mention here that when the order is dictated in the open court, ld CIT DR left the court stating that he was having back problems and waiting for the dictation, it may take considerable time and he may not be able to assist the court on the next day. 18. A perusal of the assessment order in the present case shows that a search has been conducted on the assessee. Substantial numbers of documents have been found. However, it is surprising that there is no discussion in the assessment order as to what has happened in the IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 15 course of assessment. What was the query raised to the assessee and what was the reply given by the assessee. The assessee states that he has given reconciliation in respect of PFO-70 & PFO-8. There is no discussion in respect of the same in the assessment order. Further, the ld CIT(A) mentions that the reconciliation has been given. The assessee says that the hard disk identified as PFO-70 was not opened in the presence of the assessee and two witnesses. There is no discussion about this. In respect of search by the Central Bureau of Investigation (CBI) on the Director of Income Tax (Investigation), who was involved in the search on the assessee, it has been mentioned by the ld CIT DR that the search is on account of complaint filed by the assessee. Ld AR reacted to the said submission that the assessee has not given any complain to anybody. It was the department who has filed complaints against the concerned officer and this has been categorically mentioned in the news paper also. It was also submitted that the search on the DI (Inv) took place in March, 2018 much after the assessment had been completed u/s.153A on 31.3.2016. The appeal had been adjudicated by the ld CIT(A) on 30.1.2018 and proceedings u/s.263 have also been initiated and completed in respect of the said assessment order on 20.2.2018. It is also noticed that when estimating the various items identified by the AO in the assessment order, there are substantial errors. For example, in page 2, the Assessing Officer mentions suppression of sales by Pasupati Feeds. He has mentioned that the news paper price of IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 16 chicken is Rs.75 per kg. After this, he computed the average rate of chicken as sold by the assessee and taken number of chicken sold at 55,027 and the total chicken sales as per books is 70,52,452. Then he assumes that the average weight of each chicken is 2 kg. On what basis, he takes the assumption of average weight per chicken at 2 kg is not explained. The assessee has also categorically mentioned that Rs.75 mentioned in the news paper is highest price for sale of chicken. The chicken could be sold depending upon the circumstances and the price would always be lower. The assessee has also admitted and this has not been refuted by the revenue that the assessee is a wholesale and the retailers are selling the chicken. Rs.75 per kg is the retailer price of the chicken and that Rs.75 is the maximum price at which the retailer could sell the chicken per kg. The assessee supplies chicken to the retailers. Obviously, there would be a margin of profit for the retailer. This has not been considered. Thus, the Assessing officer has assumed the average weight per kg of chicken at 2 kg. Further, he has erred in assuming that the assessee is a retailer whereas the assessee is a wholesaler in respect of chicken. Therefore, the alleged suppression of sales as identified by the Assessing officer at page 2 para 1 of the assessment order stands unsubstantiated and admittedly, the calculation is arbitrary. 19. Coming to the next issue of unaccounted sales by Pasupati Feeds, the Assessing Officer mentions that the assessee has shown IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 17 Rs.245,95,90,926/- as the total sales whereas as per the external HDD, the sales data shows Rs.246,78,07,777. The assessee’s reply and reconciliation in respect of hard disk, which is PFO-70 has not been discussed at all. The assessee was asked to show the reconciliation, which was produced before the Assessing Officer and the assessee has placed before us the reconciliation. The said reconciliation shows that the difference is on account of sales discount representing the discount given to the retailers who sells the assessee’s produce. A perusal of the assessment order clearly shows that no trade discount deduction whatsoever has been allowed to the assessee either. The alleged difference on account of suppression of sales as arrived at by the Assessing Officer is Rs.82 lakhs at a turnover of Rs.245.95 crores. This is less than 0.5% of the total sales. This is not unusual discount. It is worthwhile to mention here that at page 8 of the assessment order for the assessment year 2011-12, the Assessing Officer himself records that prior to assessment year 2013-14, there was no suppression of sales. 20. Coming to the next issue i.e. inflation of purchases in the case of Pasupati Feeds, the Assessing Officer while computing the sales has adopted the average rate of Rs.60.71 per kg. In the computation of suppression of sales, the Assessing officer has arrived at average rate of Rs.64.08 per kg. The Assessing officer had adopted the cost of each chicks at Rs.13 purchased from sister concerns Pasupati Breeding Farm Pvt Ltd. This figure is also a variable figures and again the estimation has IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 18 been resorted to here. In para 3(d), the Assessing Officer further goes on to give a finding that the average feed consumed by a chick to grow to 2 kgs is 3.6 kgs. After this in para (e), he draws the calculation that 50% of the total chicks could have died. After consuming feed of 3.6 kgs and remaining 50% of chicks might not have consumed anything. In clause (c) of para 3, the Assessing Officer has arrived at mortality rate at the farm of the contract farmers at 8.84%. How he has assumed that 8.4% is correct mortality rate or that 3.6 kg is the feed required or that 50% chick dies for the purpose of computing the inflation of purchases stands unsubstantiated. After the jugglery, the Assessing Officer has arrived at the figure of Rs.11.28 crores as the inflation. Thus, there is suppression of sales of Rs.25.29 crores, unaccounted sales of Rs.82 lakhs and inflation of purchases of Rs.11.28 crores. Thus, on account of sales, the Assessing Officer has computed the figure of 25.29 crores + 82 lakhs of unaccounted sales and inflation of purchases of Rs.11.28 crores. After this, further difference in purchases has been determined by comparing the purchases as per the audited profit and loss account and purchases as per the seized material PFO-8. There is no discussion of the reconciliation, which has been submitted by the assessee, wherein, the assessee has categorically stated that GST and other charges are also to be included with the purchases as per the audited profit and loss account and also the capital purchases, which has been made, had to be reduced and taken to the capital head. IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 19 21. In respect of stock of the assessee, when ld CIT DR had been asked what was the difference found, ld CIT DR submitted that there were large variations in respect of the value of the stock. When he was specifically questioned as to what was the difference as per the physical inventory and the stock register as maintained by the assessee, it was submitted by him that there is nothing available with him to clarify the same. Then proceeding further at page 7 of the assessment order, the Assessing Officer takes average price of chicken per kg at Rs.68.50 to arrive at an estimated net profit at Rs.29.08 crores. Now, we are faced with three estimates in respect of sales price of chicken per kg as adopted by the AO at Rs.64.08 in page 3 of the assessment order at Rs.60.71 at page 4 of the assessment order and Rs.68.5 at page 7 of the assessment order. 22. There is no discussion at all in respect of number of chickens sold by the assessee as per the books alongwith sales price recorded by the assessee in its books to arrive at average price of sales. However, at page 4 of the assessment order, the total number of chickens has been identified, the sales have also been identified at Rs.246.78 crores. We did attempt the computation of the price of the chicken per kg but then the amount of Rs.246.78 crores representing the total sales, which included the sales of chicken and the sale of cattle feed and poultry feed. It was then recognized that when computing the various purchases of inflation and purchases and on account of sales as done by the Assessing IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 20 Officer, no demarcation has also been done and adhoc method has been applied. Thus, clearly the determination of 11.7% by the AO of the gross sale and then adoption of 8% as net profit is clearly arbitrary method, unsubstantiated by any of the evidences found or seized in the course of search. 23. This being so, we are of the view that the rejection of assessee’s books and estimation as done by the Assessing officer is unsubstantiated and the same has rightly been deleted by the ld CIT(A). Resultantly, appeals of the revenue stand dismissed 24. As we have already held that the estimation of the income by the AO and the rejection of books of accounts of the assessee is unsubstantiated, we are not going into the technical grounds raised by the assessee in its cross objection. Consequently, the cross objections filed by the assessee are dismissed as infructuous. 25. In the result, appeals of the revenue are dismissed as well as the cross objections filed by the assessee are dismissed. Order dictated and pronounced in the open court on 15/09/2022. Sd/- (अरुण खोड़पऩया) (ARUN KHODPIA) Sd/- (जाजज माथन) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 15/09/2022 Prakash Kumar Mishra, Sr.P.S. IT(SS)A Nos.48-51/CTK/2018 & CO Nos.36-39/CTK/2018 21 आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीऱाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. पिभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 6. गार्ज पाईऱ / Guard file. सत्यापऩत प्रयत //True Copy//