Parag Syntex Pvt. Ltd., Surat V. Dy. Commissioner of Income Tax Cir.2, Surat

ITSSA 62/SRT/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1713 (ITAT-SURAT)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-07-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 19-09-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained investment; Opportunity of being heard; Tax effect; Additional evidence; Validity of assessment; Retraction
• Section: 132; 143(3); 142(1); 153A; 250; 143(2); 13; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./IT(SS)A No.58/SRT/2021 Assessment Year: (2013-14) (Physical Court Hearing) Priyanshi Creations Pvt. Ltd., Plot no.93, Pandesara, GIDC, Pandesara, Surat-394221. Vs. The DCIT, Circle-2, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAFCP0589D (Assessee) (Respondent) आयकर अपील सं./IT(SS)A No.59/SRT/2021 Assessment Year: (2014-15) (Physical Court Hearing) Priyanshi Creations Pvt. Ltd., Plot no.93, Pandesara, GIDC, Pandesara, Surat-394221. Vs. The DCIT, Circle-2, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAFCP0589D (Assessee) (Respondent) आयकर अपील सं./IT(SS)A No.60/SRT/2021 Assessment Year: (2015-16) (Physical Court Hearing) Priyanshi Creations Pvt. Ltd., Plot no.93, Pandesara, GIDC, Pandesara, Surat-394221. Vs. The DCIT, Circle-2, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAFCP0589D (Assessee) (Respondent) आयकर अपील सं./IT(SS)A No.61/SRT/2021 Assessment Year: (2010-11) (Physical Court Hearing) Parag Syntex Pvt. Ltd., Plot No.43 to 45, G.I. D.C., Pandesara, Surat-394230. Vs. The DCIT, Circle-2, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCP3969M (Assessee) (Respondent) Page | 2 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. आयकर अपील सं./IT(SS)A No.62/SRT/2021 Assessment Year: (2011-12) (Physical Court Hearing) Parag Syntex Pvt. Ltd., Plot No.43 to 45, G.I.D.C., Pandesara, Surat-394230. Vs. The DCIT, Circle-2, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCP3969M (Assessee) (Respondent) आयकर अपील सं./IT(SS)A No.63/SRT/2021 Assessment Year: (2012-13) (Physical Court Hearing) Parag Syntex Pvt. Ltd., Plot No.43 to 45, G.I.D.C., Pandesara, Surat-394230. Vs. The DCIT, Circle-2, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCP3969M (Assessee) (Respondent) आयकर अपील सं./IT(SS)A No.64/SRT/2021 Assessment Year: (2013-14) (Physical Court Hearing) Parag Syntex Pvt. Ltd., Plot No.43 to 45, G.I.D.C., Pandesara, Surat-394230. Vs. The DCIT, Circle-2, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCP3969M (Assessee) (Respondent) आयकर अपील सं./IT(SS)A No.65/SRT/2021 Assessment Year: (2014-15) (Physical Court Hearing) Parag Syntex Pvt. Ltd., Plot No.43 to 45, G.I.D.C., Pandesara, Surat-394230. Vs. The DCIT, Circle-2, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCP3969M (Assessee) (Respondent) Page | 3 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. आयकर अपील सं./IT(SS)A No.66/SRT/2021 Assessment Year: (2015-16) (Physical Court Hearing) Parag Syntex Pvt. Ltd., Plot No.43 to 45, G.I.D.C., Pandesara, Surat-394230. Vs. The DCIT, Circle-2, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCP3969M (Assessee) (Respondent) Assessee by Shri Rasesh Shah, CA Respondent by Shri H. P. Meena, CIT(DR) Date of Hearing 15/07/2022 Date of Pronouncement 29/08/2022 आदेश / O R D E R PER BENCH: This set of nine appeals filed by two assessees, belongs to same group, pertaining to different assessment years, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals)-4, Surat, which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). In all the appeals, certain facts are common, parties have raised common grounds of appeal. Thus, with the consent of parties, all these appeals were clubbed and heard together and are being decided by common order to avoid the conflicting decision. 2. At the outset, Learned Counsel informs the Bench that assessee does not wish to press Ground No.1 in IT(SS)A No.66/SRT/2021 and IT(SS)A No.60/SRT/2021, as both these appeals are pertaining to abated assessment years, 2015-16. After hearing ld DR for the Revenue, we dismiss ground No. 1 raised by the assessee, in IT(SS)A No.66/SRT/2021 and IT(SS)A No.60/SRT/2021. Page | 4 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. 3. Since, the issues involved in all the appeals are common and identical; therefore, these appeals have been heard together and are being disposed off by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in IT(SS)A No. 58/SRT/2021 for assessment year 2013-14, have been taken into consideration for deciding the above appeals en masse. 4. Grounds of appeal raised by the assessee in lead case in IT(SS)A No.58/SRT/2021 are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Dy. Commissioner of Income Tax and the assessment made u/s 143(3) read with section 153C of the Act for A.Y.2013-14 is liable to be quashed as the learned Assessing Officer has failed to record satisfaction note in the case of other person that document found and seized during search in M/s. Sumeet Group conducted on 19.02.2015 belonged to the assessee nor any incriminating material belonging to the assessee was found. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming part action of assessing officer in making addition of Rs.11,16,327/- being profit @5% of alleged unaccounted job receipts. 3. It is therefore prayed that addition made by the assessing officer and confirmed by CIT(A) may please be deleted.” 4. Assessee craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal” 5. Now, we shall take Ground No.1 raised by the assessee in which the assessee has challenged the correctness of the order passed by the Assessing Officer under section 153C r.w.s 143(3) of the Income Tax Act, 1961. 6. At the outset, Shri Rasesh Shah, Learned Counsel for the assessee, begins by pointing out that assessment made u/s 143(3) read with section 153C of the Act for A.Y.2013-14 is liable to be quashed as the Assessing Officer has failed to record satisfaction note in the case of other person that document found and seized during search in M/s Sumeet Group conducted on 19.02.2015 belonged to the assessee. The ld Counsel also stated that no any incriminating material belonging to the assessee was found in the search, therefore, assessment framed u/s 143(3) read with section 153C of the Act, may be quashed. Page | 5 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. 7. On the other hand, Learned Departmental Representative (Ld. DR), pleaded that satisfaction was recorded by the assessing officer, on the basis of the statement of Shri Satyam Somani, who is Director in assessee-company as well as Director in Priyanshi Creations Pvt. Ltd. Therefore, in the satisfaction- note, the Assessing Officer has mentioned that Mr.Satyam Somani, had clearly stated under section 132(4) of the Act that the gold bar belongs to M/s Priyanshi Creations Pvt. Ltd. Hence, the satisfaction-note, recorded by the Assessing Officer is in accordance with law, therefore order of the assessing officer may be upheld. 8. We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assessee. We note that solitary grievance of the assessee in ground No.1 is that Assessing Officer has failed to record satisfaction-note in accordance with law. Brief facts qua the issue are that a search action u/s 132 of the Income-tax Act, 1961 was carried out on 19.02.2015 in the group cases of Sumeet Industries Limited Group of Surat. During the course of search action jewellery was found which belongs to the assessee. Therefore, after recording the reasons, the case was selected for scrutiny by issuing notice u/s 153C r.w.s. 153A of the Income Tax Act, 1961. The notice u/s 153C r.w.s 153A of the Act was issued by assessing officer on 04.03.2016 and served upon the assessee. In response to the said notice, the assessee furnished the return of income on 11.04.2016, which was filed on 30.03.2016, declaring total income at Rs. Nil. Subsequently, notices u/s 143(2) and 142(1) of the Act, were issued along with questionnaire. We note that during the assessment proceedings, the assessee did not object satisfaction-note and validity of assessment under section 153C r.w.s. 143(3) of the Act. 9. On appeal, the assessee took a ground before ld CIT(A) that satisfaction- note is defective thus assessment framed under section 153C r.w.s.143(3) of the Act may be quashed. However, ld CIT(A) upheld the validity of satisfaction-note and validity of assessment under section 153C r.w.s.143(3) of the Act, observing as follows: Page | 6 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. “6. DECISION Submission of the assessee and the facts mentioned in the assessment order has been carefully considered. Facts of the case are that a search action was conducted u/s 132 of the Act on 19.02.2015 upon Sumeet Industries Limited, its directors and associate concerns. During the course of search, jewellery was found, which has been stated to belong to the assessee, therefore, the Assessing Officer issued notice u/s 153C of the Act after recording the satisfaction. The notice was issued on 04.03.2016 and in response to the same, the assessee filed return of income on 11.04.2016 declaring NIL income. Notices u/s 143(2) & 142(1) were issued subsequently. The assessee is engaged in the business of dying and printing of grey on job work basis. 6.1 The assessee raised additional ground challenging the legality of issue of notice u/s 153C of the Act. The same was forwarded to Assessing Officer for his comments. The Assessing Officer submitted comments vide letter 09.07.2021 which are reproduced below; To, The Commissioner of Income-tax(A)-4, Surat Sir, [Submitted through Jt. CIT, Central Range, Surat] Sub: Submission of remand report in the case of M/s. Priyanshi Creations P. Ltd. PAN-AAFCP0589D - A.Y. 2013-14 - Reg. Ref: Your good self's letter No. SRT/CIT(A)-4/RR/PCPL/2021-22 dated 02.06.2021 Kindly refer to the above. 2. Vide above referred letter, your Honour has directed to examine the written submission as additional evidence / comments and other details and also the admissibility of fresh evidences under Rule 46A of the IT Rules. 3. As directed, the admissibility of additional grounds of appeal before the Ld.CIT(A) is covered in the sec. 250 of the Act read with Rule 46A of income Tax Rules, 1962 wherein the conditions are to be satisfied by the AO: (i) Where the [Assessing Officer] has refused to admit evidence which ought to have been admitted; or (ii) Where the assessee was prevented by sufficient cause from producing the evidence which he has called upon to produce by the [Assessing Officer]; or (iii) Where the assessee was prevented by sufficient cause from producing before [Assessing Officer] any evidence which is relevant to any ground of appeal; or (iv) Where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the assessee to adduce evidence relevant to any ground of appeal. Page | 7 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. 3. The case of the assessee is not covered with any of the exemptions for admitting the additional evidences. In this submission before your Honour, the assessee failed to furnish the reasons why it had not made submissions before the then AO. 4. Without prejudice to the above, as directed by your Honour, this office has examined the case records of the assessee. A search action u/s 132 of the Act was carried out on 19.02.2015 in the group cases of Sumeet Industries Ltd. group of Surat. During the course of search action some incriminating documents were found which related to the assessee. During the search and survey action on Sumeet Industries Ltd and other group concerns, details of job work of Rs.256,79,99,218/- of group concerns of Sumeet Industries Ltd have been retrieved from computers back / pen-drive. These job work of Rs.256,79,99,218/- was not accounted for in their books of account of respective concerns. The assessee company is one of the group concerns of the Sumeet Industries Ltd. group. 4.1 Dyeing and printing units of Sumeet Group undertake job work for which they receive fabrics from different parties. When the grey fabrics enter into the premise of company, number of taka is matched with delivery challan. A numeric lot No. is allotted to identify the taka of grey fabrics received from each such party on the same day and entry is made in lot register. Generally, 4, 8 or 12 takas make a lot. Based on lot no. Job card is prepared. Job card is used to identify a lot during various processes of dyeing & printing. In normal practice, lot number is unique for a year. These companies make their books of accounts based on entry in lot register and sales job register. But during the course of search and survey operation indicated that dyeing and printing companies of Sumeet Group, it was admittedly noticed that destroy delivery challan, job card after dyeing, printing is finished and fabric is dispatched. 4.2 During the course of search proceedings at the bank locker No. 256 maintained with Canara Bank, Ghod Dod Road, Surat gold bar was seized and Shri Satyen Somani in his statement recorded u/s 132(4) of the Act that the gold bar belongs to the assessee. After recording satisfaction u/s 153C of the Act, notice u/s 153C of the Act dated 04.03.2016 and proceedings initiated. 4.3 During the search proceedings at the premises of Betex India Ltd., delivery challans found which have been inventorised and seized as loose paper files from A- 16 to A-45. Page. No. 86 & 87 of Annexure A-36 were shown to Shri Dinesh Agrawal, Accountant on sample basis and asked whether these delivery challans were entered in the books of accounts or not, he replied that they were not reflected in the regular books of accounts. During the course of survey at another premises belonging to Betex India Ltd. at 397, GIDC, Pandesara, Surat, one PEN DRIVE had been found in the possession of an employee viz. Shri Nathurambhai and data contained in the said PEN DRIVE got printed and inventorise as Annexure A-15. Pg. No. 3 to 5 of such Annexure contains certain data. On being asked about the content of the said pages, it was stated by Shri Dinesh Agrawal that these pages reflect details of part wise grey receipt and job charges as 47,89,719 mts. and Rs.3,38,19,281/- respectively. Shri Dine Agrawal in his statement at Q. No. 13 was asked whether these transactions were duly reflected regular books of accounts or not, he replied negative. When this fact was confronted with Sh Rajkumar Somani and Shri Maheshkumar Somani, both the directors of Betex India Ltd. Have Page | 8 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. confirmed that neither the grey receipts nor the job work receipts were reflected in the books of accounts. 4.4 Hard disks found at the above premises during search / survey proceedings got closed Purchi.exe, the companies viz. Sitararn Prints P. Ltd., Betex India Ltd., Akashganga Processors P. Lt Ambaji Syntex P. Ltd., Vasant Fabrics P. Ltd., Parag Syntex P. Ltd., Varsha Dyg. & Ptg. P. Ltd., Priyan: Creations P. Ltd., Devi Darshan Processors P. Ltd. and Ekta Polyfab P. Ltd. have maintained some documents relating to job work done by them and data contained in Purchi.exe was not reflected in the Audit Books of accounts. 4.5 During the assessment proceedings, statement of Shri Satyen Somani, director of the company as recorded. In his statement, he was unable to explain the reason why the parties mentioned Purchi.exe software not matched with the parties which were reflected in books of account reprocessing was possible for only that parties for which processing was recorded. It was clear that deleted data which was retrieved from Purchi.exe containing date, party code, bill No., Sr. No., taka meter, amount, bag No., lot No. etc. was exclusively different from data maintained in GP.exe in which details of accounted job work was recorded. During the course of search / survey proceedings Sumeet Group where physical evidence related to job work found, statement of Dinesh Agrawal Accountant and Shri Rajkumar Somani, director of Sumeet Group of companies were recorded on oath and they have admitted to carrying out unaccounted job work outside books of account. 4.6 In view of the above discussion, the average gross profit of the assessee worked out to 20% receipts of unaccounted job work of Rs.2,23,26,555/- which comes to Rs.44,65,311/- was added to total income of the assessee for the year under consideration. 5. Now, the contentions raised against the assessment completed are baseless. The submission made by the director of the assessee company at this juncture cannot be accepted. So, it is kindly requested to upheld the order passed of the AO. 6.2 The comments of the Assessing Officer forwarded to the assessee who filed rejoinder vide letter dated 16.07.2021, which is reproduced below: To, The Commissioner of Income Tax (Appeals - 4), Aaykar Bhavan, Majura Gate, Surat Sub: Reply to Remand Report in the case of M/s Priyanshi Creation Pvt Ltd for A.Y.2013 Ref: Letter No. SRT/DCIT/CC-2/Remand Report/PCPL/2021-22 dated 09.07.2021 Dear Sir, In the remand proceedings, the Ld. Assessing Officer has mentioned that the assessee had submitted additional evidences and the case of the assessee is not covered under Page | 9 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. any exemptions for admitting additional evidences. In this connection, we would like to state that the assessee had filed additional grounds of appeal and not additional evidences before your honour. In para 4 of the letter, the Ld. Assessing Officer has mentioned that during the course of search proceedings some incriminating documents were found at the premises of the Sumeet Group of Industries relating to unaccounted job work. In this connection we would like to state that no such documents were found/seized from the premises of the Sumeet group, in-fact during the survey operations the department has impounded the hard-disk from the premises of the assessee in which they had retracted the deleted data. In para 4.2 of the letter, the Ld. Assessing Officer has mentioned that gold bar was seized which belongs to the assessee. In this connection, we would like to state that the gold bars belongs to M/s Satyen Somani and not the assessee. In para 4.3 of the letter, the Ld. Assessing Officer has mentioned that a pen-drive was found and Mr.Dinesh Agarwal has stated that these data were part of job charges. In this connection we would like to state that the assessee had nothing to do with the data found of Betex India Ltd. as the data was relating to M/s Betex India Ltd. In para 4.4 of the letter, the Ld. Assessing Officer has mentioned that the hard-disk was found at the premises of the assessee and some incriminating data was retrieved. In this connection we would like to state that the data found relates to internal process of the company and that there are numerous reprocess, process and multiple process, reprint, rework, etc which are undertaken on single material. The data contained in the hard-disk provided are the data maintained for such kind of internal process work. The same will never match for the reason that there is duplication or triplication of work. The final job bill is prepared on the basis of final output which is recorded in FAS.exe software i.e., books of accounts. We hope that the above information would suffice the requirement of your honour; however, if your honour would require any further clarification in respect of same, we shall be pleased to provide the same on hearing from your end. 7. The assessee has challenged the additions made by the Assessing Officer as mentioned in the above paras on legal & merit grounds. The legal ground raised by the assessee as additional ground of appeal is that the Assessing Officer has failed to record satisfaction note in this case, hence notice issued u/s 153C of the Act and assessment made thereafter is not valid. Therefore, this may be quashed. The fact of the case has been considered. The assessee in his submission dated 12.07.2021 in para 3 (a) reproduced the satisfaction note recorded by the Assessing Officer before issuing notice u/s 153C of the Act which is as under; "During the search proceedings at the bank locker no. 256 at Canara bank, Ghod dod Road, surat, gold bar was seized and Shri Satyen Somani has said in his statement u/s. 132(4) that the gold bar belongs to M/s. Priyanshi Creations Pvt. Ltd. Hence, I am satisfied that the gold bar seized as mentioned above from the above premises belong to M/s. Priyanshi Creations Pvt. Ltd. and this is a fit case for issue of notice u/s.153C of the Act." Page | 10 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. In the paper book, (On page no. 26 & 27) filed by the assessee during the course of appellate proceedings, the assessee enclosed copy of proforma for recording of satisfaction note u/s 153C of the Act by the Assessing Officer. As per this recording of satisfaction u/s 153C, the Assessing Officer recorded satisfaction on 04.03.2016 and the assessee itself filed these documentary evidences before me, which prove that the Assessing Officer has recorded satisfaction before issuing notice u/s 153C of the Act hence this ground of appeal is factually incorrect. Therefore, it is dismissed. 7.1 The another contention taken by the assessee is that the facts mentioned in the satisfaction note are not sufficient reason to issue notice u/s 153C of the Act. The assessee stated that during the course of search proceedings at bank locker no. 256 Canara Bank at Ghod Dod Road, Surat, gold bar was seized and Shri Satyam Somani stated in his statement u/s 132(4) that the gold bar belongs to M/s. Priyanshi Creation Pvt. Ltd. i.e. the assessee. The assessee stated that assessment in the case of Shri Satyam Somani for A.Y.2015-16 was made u/s 143(3) of the Act and not u/s 153A of the Act. Therefore, assessment made u/s 153C of the Act in the assessee's case is not legally correct, as no assessment was made u/s 153A of the Act. But the contention of the assessee is found factually incorrect as search was conducted upon Shri Satyam Somani, Directors of M/s Surneet Industries Limited on 19.02.2015 & on 15.04.2015 (upon locker). Panchnama of search conducted on 19.02.2015 at the residence of Shri Satyam Somani at Megh Dhanush Apartment has been filed by the assessee itself during appellate proceedings. The assessee also filed copy of statement of Shri Satyam Somani recorded u/s 132(4) on 15.04.2015 while searching locker at Canara bank. During the course of search, gold bars & jewellery worth Rs.32,09,440/- was seized and Shri Satyam Somani filed application before the Pr. Commissioner of Income Tax-1, Surat on dated 18.11.2018 requesting for release of this jewellery seized during the course of search & seizure action at his residence & from locker u/s 132 of the Act on 19.02.2015. The Chief Commissioner of Income Tax (OSD), Surat released the jewellery vide order dated SRT/Pr. CIT-1/HQ/Release Jewelry/Satyen Somani/2018-19 dated 25.03.2019 in which it has been stated that the jewellery was seized during the course of search on 19.02.2015. Copy of these letters and Annexures showing seizure from the residence & locker in the case of Shri Satyam Somani and his wife Smt. Anju Somani have been filed by the assessee on page no. 28 to 31 in the paper book during the appellate proceedings. Moreover, the statement of Shri Satyam Somani was recorded u/s132(4) on 15.04.2015 of the Act during locker search as mentioned in the satisfaction note, which itself prove that search was conducted at his premises. These documents clearly prove that search action u/s 132 of the Act was conducted at the premises of Shri Satyam Somani and assessment for A.Y.2015-16 was assessment of current year, in which the search was conducted and therefore, this assessment was made u/s143(3) of the Act. Keeping in view these facts, the contentions raised by the assessee are found factually incorrect, hence these are rejected. 7.2 The next contention raised by the assessee is that in the satisfaction note it is mentioned that the gold bar seized from locker no. 256 at Canara Bank, Ghod dod Road, Surat was belong to the assessee as stated by Shri Satyam Somani while recording statement u/s 132(4) of the Act. However, no additions were made on this issue while passing this order. And even in the case of Shri Satyam Somani, these gold bars were found accounted for; hence additions were not made in his hands too. The assessee contended that additions cannot be made on other issues if additions Page | 11 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. have not been made on the issue recorded in satisfaction note. The facts of the case have been considered. It is mentioned in the satisfaction note and it is stated by Shri Satyam Somani while replying question no. 10 of the statement recorded u/s 132(4) of the Act on 15.04.2015 that 1000 grams of 24 carat gold bars belong to M/s Priyanshi Creation Pvt. Ltd. i.e. the assessee and it is unaccounted investment of the assessee. He has also stated that he will disclose it as income of the assessee for the F.Y.2014-15. But, thereafter, Shri Satyam Somani filed retraction dated 20.05.2015 before the DDIT(Inv.) stating that the gold bars found & seized from the locker belong to him in his individual capacity. It is clear from the facts that on the date of search during recording statement u/s 132(4) of the Act, Shri Satyam Somani categorically stated that the gold bars seized from the locker belong to the assessee. Then the Assessing Officer has valid reason and satisfaction to issue notice u/s 153C of the Act. The Assessing Officer need not to give his conclusive findings before issuing the satisfaction that this is the income of the assessee. At the initiation of proceedings u/s153C of the Act, the Assessing Officer has valid evidence under his possession in the form of statement of Shri Satyam Somani which categorically stated that the gold bars seized from the locker belong to the assessee. Therefore, the Assessing Officer was correct in issuing notice u/s 153C of the Act after following the due procedure as laid down in the Act. Regarding the additions made by the Assessing Officer on the other issues, it is important to mention that once the assessment is taken u/s 153C of the Act and the additions made are based on incriminating material found during the course of search, then the Assessing Officer is justified in making the additions. The additions made by the Assessing Officer as unaccounted job charges income are only on the basis of incriminating documents found during the course of search/survey at the premises of associate concerns of the assessee as well as the premises of assessee itself, it is not mandatory that the Assessing Officer record each & every document found during the course of search in the satisfaction note itself. For initiation of proceedings u/s 153C of the Act, one evidence is enough, which belong to the assessee. There is difference between initiations of proceedings u/s 153C of the Act and passing assessment order u/s 153C of the Act after analyzing the seized evidences, making necessary enquiries & providing opportunity of being heard to the assessee. Further the contention of the assessee that additions for seized gold bars & jewellery not made in the hands of the assessee is also factually incorrect. The Assessing Officer made the additions in the assessment year 2015-16 related to search year and the assessee had filed grounds of appeal against the same. Thus, the contentions of the assessee is found factually incorrect. The case laws cited by the assessee are not relevant as facts of the assessee's case are different than the facts of the case laws cited. Keeping in view the above discussion, the Assessing Officer is justified in issuing notice u/s. 153C of the Act, thus, this contentions of the assessee is also rejected.” 10. We note that during the course of search proceedings at the bank locker No. 256 maintained with Canara Bank, Ghod Dod Road, Surat gold bar was seized and Shri Satyam Somani, in his statement recorded u/s 132(4) of the Act, stated that gold bar belongs to the assessee. After recording satisfaction u/s 153C of the Act, notice u/s 153C of the Act, dated 04.03.2016 was issued and then proceedings initiated. Thus, it is clear that satisfaction-note was recorded by the assessing officer, on the Page | 12 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. basis of the statement of Shri Satyam Somani, who is Director in assessee-company, as well as Director in Priyanshi Creations Pvt. Ltd. Therefore, in the satisfaction- note, the Assessing Officer has mentioned that Mr. Satyam Somani, had clearly stated under section 132(4) of the Act that the gold bar belongs to M/s. Priyanshi Creations Pvt. Ltd. 11. The Learned Counsel for the assessee pleads that satisfaction recorded under section 153C of the Act is not in accordance with law. For that, he took us through the satisfaction- note recorded by Assessing Officer, which is reproduced below: Page | 13 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. 12. With help of the above satisfaction-note, the Ld. Counsel pleaded that satisfaction-note was recorded on dated 04.03.2016 which relates to AY.2016-17 and not for AY.2013-14, therefore satisfaction- note recorded by the Assessing Officer is itself wrong and therefore section 153C proceedings may be quashed on this point alone. Further, Ld. Counsel stated that in point no.7 of the satisfaction note, the satisfaction has been manually recorded based on the gold bar ceased and based on the statement of Shri Satyam Somani. Shri Satyam Somani stated that gold bars were belonged to Priyashi Creations Pvt. Ltd., however the Assessing Officer did not refer any incriminating material with reference to the gold bar. Therefore, the substance of the satisfaction recorded by the Assessing Officer clearly provides that there is no incriminating material referred and hence the addition made by the Assessing officer based on the incriminating material should be deleted. 13. We have gone through the satisfaction- note recorded under section 153C of the Act and noted that the satisfaction -note pertains to AY.2009-10 to 2014-15 that is, satisfaction note related to AY.2009-10 to 2013-14 and in the satisfaction note, Shri Satyam Somani, Director, who is also Director of Priyanshi Creations Pvt. Ltd, has clearly stated that the gold bar belongs to M/s Priyanshi Creations Pvt. Ltd. Based on such satisfaction-note, the Assessing Officer has initiated proceedings under section 153C of the Act. We note that as per this recording of satisfaction u/s 153C of the Act, the Assessing Officer recorded satisfaction on 04.03.2016 and the assessee itself filed these documentary evidences before assessing officer, which prove that Assessing Officer has recorded satisfaction before issuing notice u/s 153C of the Act. Thus, we do not find any defect in the satisfaction-note. We have also gone through the case laws cited by the ld Counsel, and noted that these case laws are not relevant as facts of the assessee's case are different than the facts of the case laws cited. Hence, the satisfaction-note, recorded by the Assessing Officer is in accordance with law, therefore, we dismiss ground No.1 raised by the assessee. 14. In the result, ground No.1 raised by all assessees` are dismissed. Page | 14 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. 15. Now coming on merits of the case, we note that assessee raised ground No.2 stating that learned CIT(A) has erred in confirming part action of assessing officer in making addition of Rs.11,16,327/- being profit @5% of alleged unaccounted job receipts. The facts being already narrated by us in above para, therefore we did not repeat the facts for the sake of brevity. We note that Assessing Officer has determined the 20% profit on receipts of unaccounted job work of Rs.2,23,26,557/-, which comes to Rs.44,65,311/-. During the assessment proceedings, the assessing officer observed that gross profit ratio from other companies engaged in the same business activity of dyeing and printing is differ from 2% to 12 % and gross profit of Sumeet group companies vary from 4% to 14%. The average gross profit of the Sumeet group company is 9.6%. Therefore, it is quite reasonable if the average gross profit @ 9.6% applied in the case of assessee. Further, major direct expenses of the group concerns of Sumeet group has also been verified, which affect the profit element of any processing concerns. On perusal of nature of expenses, expenses can be divided in two major category first- which can be procured from open market and payment can be made in cash without recording the transaction in the books of supplier/provider, second which cannot be procured from open market and payment thereof recorded in system of providing entity or in which any manipulation is not in the hands of party which is making payment. If one try to identify such expenses which cannot be procured from open market and payment thereof recorded in system of providing entity electricity expenses are fit in second category without any exception. Therefore, in these circumstances, average electricity consumption @ 8.32% is also be added in gross profit of the assessee on receipts from unaccounted job work as all the electricity expenses related to job work shown in books or unaccounted already booked in books of account of the assessee. There are other expenses like SMC water charges (not in all companies of Sumeet Group (2.81%), store and spares (2.45%) repair and maintenance (0.66%) and other small expenses, which cannot be fit in second category in total but there are chances that they are already booked in books of account of the assessee. And to cover up all these small expenses 2% addition in gross profit would not be unreasonable. Therefore, such expenses which are already booked in books of the assessee and need to be added over and above in average Page | 15 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. gross profit of the assessee comes to 10.32% (8.32 + 2 = 10.32). After adding such expenses in gross profit comes to 19.92 or says 20% (10.32 + 9.6 = 19.92). If the profit of assessee on receipt of unaccounted job work done by the assessee is determined @ 20% it will be rational, judicious and not arbitrary. Hence, profit @ 20% on receipts of unaccounted job work of Rs.2,23,26,557/- which comes to Rs.44,65,311/- was being added towards income of the assessee during the year under consideration. 16. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has restricted the addition @ 5% on receipts of unaccounted job work of Rs.2,23,26,557/-, observing as follows: “As per the above mentioned binding judgment of Hon'ble Jurisdictional High Court of Gujarat, Ahmedabad, only net profit embedded in sales and not wholesale proceeds would be treated as undisclosed income of the assessee. In the case of Commissioner of Income Tax vs Samir Synthetics Mill [326 ITR 410] it has been held by the Hon'ble Gujarat High Court, Ahmedabad that addition was justified on account of suppression of sale consideration but only to the extent of profit. The Hon'ble Madhya Pradesh High Court in the case of Commissioner of Income Tax vs Balchand Ajit Kumar [263 ITR 610] has held that the sole question that arise for consideration is whether the entire income has to be treated as profit or there should be adoption of a method of net profit income and relied upon the case law of CIT vs. President Industries (supra) decided by the Hon'ble High Court of Gujarat and held that only net profit income should be considered as income of the assessee. The Hon'ble Madhya Pradesh High Court in the case of Man Mohan Sadani vs CIT (304 ITR 52) has held that it is net profit rate which has to be adopted in such cases. The Hon'ble ITAT, Bench Ahmedabad in the case of Shri Samir P. Jariwala vs. 1TO in ITA no.201/Ahd/2012 and in the case of ITO vs M/s. Muralilal C. Gupta in ITA No.2418/Ahd/09 has held that net profit rate is to be applied to compute the suppressed unaccounted income. Keeping in view the above mentioned binding judgments of Higher Judicial Authorities and the assessee's case is found squarely covered by the above mentioned judgments, the net profit rate should be considered as income of the assessee and not the Gross Profit rate as other expenditure, as additions have been made by the Assessing Officer, it is also important to mention here that during the course of search/survey proceedings, stock of grey cloth, color chemicals, store space etc. has been tallied and no unaccounted investment was found. Therefore, the additions made by the Assessing Officer are also found unreasonable & high pitch. The assessee's net profit chart in past 5 years is mentioned below;- Assessment Year Turnover Net Profit Net Profit Ratio 2011-12 13,99,99,619 1,41,843 0.10% 2012-13 18,04,44,569 (-74,87,866) NA 2013-14 26,70,28,594 57,96,992 2.17% Page | 16 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. 2014-15 28,03,90,729 50,55,962 1.80% 2015-16 27,40,23,233 23,89,652 0.87% On going through the net profit chart as mentioned above, it is found that average net profit rate is 1.24%. Keeping in view the overall facts of the case, it is reasonable to consider 5% as net profit of the assessee as income for the assessment year and additions are restricted to 5% of the suppressed job work charges. Accordingly, additions of Rs.11.16,327/- (5% of Rs.2,23,26,557/-) are confirmed and remaining additions of Rs.33,48,984/- are deleted. This ground of appeal is Partly Allowed.” 17. Aggrieved by the order of ld CIT(A), the assessee is in further appeal before us. 18. We have heard the submission of both the parties and have gone through the orders of lower authorities carefully. The Ld. Counsel for the assessee contended that there was no incriminating material found or seized during the search proceedings in relation to the assessee, therefore without incriminating material, addition should not have been made. The Ld. Counsel, to support his plea, has relied on the following judgments: (i) CIT vs Kabul Chawla (380 ITR 573) (Del HC) [SLP Dismissed in SC – 380 ITR (ST) 4] (vide paper book page nos. 107 to 108) (ii) CIT vs Arpit Land Pvt. Ltd. (2017) 78 taxmann.com 300 (Bombay HC) (vide paper book page nos. 109 to 112) (iii) PCIT vs Dreamcity Buildwell P. Ltd. (2019) 110 taxmann.com 28 (Del HC) (vide paper book page nos.113 to 115) (iv) CIT vs Renu constructions (P.) Ltd. (2018) 99 taxmann.com 426 (Del HC) (vide paper book page nos.116 to 118) (v) Pepsico India Holdings (P.) Ltd. vs ACIT (2014) 50 taxmann.com 299 (Del HC) (vide paper book page nos.119 to 120) (vi) PCIT vs Meeta Gutgutia (2017) 82 taxmann.com 287 (Del HC) (vide paper book page nos. 121 to 124) (vii) Anil Kumar Gopikishan Agarwal vs ACIT (2019) 106 taxmann.com 137 (Guj. HC) (vide paper book page nos.125 to 134) Page | 17 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. 19. On the other hand, Ld. DR for the Revenue submitted that addition was made, based on the incriminating material found or seized during the course of search, which belongs to the assessee and therefore addition sustained by the ld. CIT(A) should not be disturbed. 20. We have considered the submissions of both the parties and have carefully gone through the documents furnished and the case laws relied upon. We have also gone through the orders of lower authorities carefully and other material brought on record. On considering the submission of parties, we do not agree with the contention raised by ld Counsel to the effect that in assessee`s case there is no incriminating material unearthed by the search team. We note that with reference to the evidences found during the course of search in the form of soft data in various files as stated by the Assessing Officer in the assessment order as well as documentary evidences found during the course of search/ survey proceedings. As mentioned by the Assessing Officer in the assessment order, it is clear that the data found stored in file Purchi.exe does not match with the regular books of accounts and thus, the Assessing Officer has proved beyond doubt with detailed discussion in the assessment order that the data recorded in these files remains unaccounted for. Moreover, documentary evidences, in the form of invoice and job bill are found and there were several differences between these two documents, which the Assessing Officer has narrated in details in the assessment order. Therefore all these are incrementing material unearthed by the search team. The enquiries have been made from about 50 parties by the DDIT (Inv.) to verify the contention of the assessee about the reprocessing work but these persons from whom enquires were made, no one stated that they have given any reprocessing work to the assessee. The Assessing Officer has made detailed analysis in the assessment order and proved beyond doubt that assessee was indulged in the activities of doing job work which remain unaccounted. Therefore, the contention of ld Counsel that addition should not be made as no unaccounted job work was done by the assessee is not accepted, in fact, addition was made by the assessing officer based on incrementing material. In the result, the submission of ld. AR of the assessee that addition is not based on incriminating material, is rejected. Page | 18 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. 21. Now adverting to merit of the additions, we note that the Assessing Officer made the addition of 20% of profit of receipt of unaccounted job work, the ld. CIT(A) has sustained the addition @ 5% as net profit of the assessee in respect of suppressed job work charges. The ld. AR of the assessee submits that the Assessing officer made addition @ 20% of alleged suppressed job work expenses on comparison of books of account and the data extracted from Purchi.exe software. The Assessing Officer failed to appreciate the reprocessing work undertaken by the assessee. The assessee explained that the data recollected from Purchi.exe software was not real. Entire stock tallied with the books of account and there was not unaccounted finished stock or WIP found during the course of search action. The ld. AR submits that the entire addition is liable to be deleted as there is no unaccounted job receipt. 22. In alternative submission, the ld. AR submits that the average net profit in six assessment years was only 1.82%. The ld. AR for the assessee submits that there are numerous decisions of Hon’ble Jurisdictional High Court wherein it has been categorically held that only profit element embedded on the disputed job charges may be taxed and not the substantial part of the transaction. The ld. AR for the assessee submits that the addition if any may be restricted to 1.82% only. 23. On the other hand, the ld. CIT-DR for the revenue submits that the Assessing Officer in the assessment order has given detailed finding about the discrepancies found during the search action in the data retracted from the Purchi.exe software and the books of account. The assessee has not shown unaccounted job work in his books of account. The Assessing Officer in a fair and reasonable manner, made addition of 20% of such unaccounted job receipt. The ld. CIT(A) restricted the addition to the extent of 5% of the unaccounted job work. The ld. CIT-DR for the revenue submits that the revenue could not file appeal due to low tax effect in challenging such deletion of unaccounted/ suppressed job work charges. The ld. CIT-DR for the revenue prayed for dismissal of appeal of assessee. 24. We have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. We have also deliberated on various case Page | 19 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. laws. We find that in assessee’s group case in Sitaram Prints Pvt. Ltd. in IT(SSA) No. 67 & 68 & ITA No. 157/Srt/2021 for the A.Y. 2013-14 to 2015-16 on identical grounds of appeal on the basis of similar submission of parties, we have dismissed all those appeals by passing the following order: “9. We have considered the rival submissions of both the parties and have gone through the orders of the authorities below carefully. We have also deliberated on various case laws referred and relied by the ld. CIT(A) in his order. We find that the Assessing Officer made addition of 20% on unaccounted job work charges by taking a view that the assessee has not shown actual job work done for the parties. If there was no processing work were carried out for these parties, how such work is reflected in the data recovered from computer back up as reprocessing work. The Assessing Officer was also of the view that on comparison of the parties which are common in the books and data recovered from the computer back up, the job work done is very higher than job work reflected in the books of account. Such summary was prepared in the assessment order. The assessee claimed that reprocessing is internal process of organization and data maintained in Purchi.exe software is only for organization the how can reprocessing work be done after the one month of dispatch of finished goods. Such action shows that the claim of reprocessing is not genuine. On the basis of such discrepancies, the Assessing Officer was of the view that there are two different set of data related to job works maintained in the computer and data maintained in Purchi.exe software is not accounted in the books of account. The Assessing officer disallowed 20% of receipt of unaccounted job work by treating as 20% profit of such unaccounted job work. 10. As noted above, before the ld. CIT(A), the assessee has filed detailed written submission. The ld. CIT(A) after considering the submission of assessee noted that it is clear that the data found stored in file of Purchi.exe software does not match with the regular books of account, thus the Assessing officer has proved beyond doubt with detailed discussion in the assessment order that the data recorded in this file remains unaccounted. The documentary evidences in the form of invoices and job bills found, there were several differences between these documents, which the Assessing Officer has narrated in detail in the assessment order. The entries have been made from about 50 parties by the DDIT (Inv.) to verify the contention of assessee about reprocessing work from whom enquiries were made, but no one had stated that they have given any reprocessing work to the assessee. All these details were analysed by the Assessing Officer and proved beyond doubt that the assessee was indulged in activities of doing job work which remained unaccounted. Thus, the contention that no unaccounted job work was done by assessee was not accepted and the corresponding submission of assessee was rejected. Page | 20 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. 11. We find that the ld. CIT(A) on the alternative contention of addition for considering gross profit of assessee for last preceding years as well as electricity consumption and other expenditure was of the view that the Assessing Officer was not correct in making addition by taking gross profit and these direct expenditure. The contention of assessee was that only profit element should be taxed and not the addition @ 20% of job work of the whole receipt. The assessee claimed that 20% is too high and is not real. The assessee submitted gross profit and net profit for six assessment years which was at 1.82% and the contention of assessee that it should not be more than average net profit of 1.82%. The ld. CIT(A) after considering the submission of assessee and by following the decision of Hon’ble Jurisdictional High Court in the case of CIT Vs President Industries and CIT Vs Samir Synthetics Mill (supra) and after compiling the turnover, net profit and gross profit ratio from A.Y. 2010-11 to 2015-16 held that the average net profit in all the years is 1.82%. The ld. CIT(A), accordingly restricted the addition of suppressed job work to the extent of 5% to the total turnover of Rs. 2.589 crores. 12. We independently examined the contention of both the parties and find that the Assessing Officer has given very detailed reasoning while making addition of 20% of unaccounted job charges. We further find that the ld. CIT(A) restricted the addition to the extent of 5% to the extent that only profit element embedded in such unaccounted receipt. It is settled law under the income tax proceeding that only income component is to be taxed and not the substantial part of the transaction. Considering the fact that the ld CIT(A) has already granted substantial relief to the assessee and directed to tax only to the extent of 5% of Rs. 2.589 Crore. In our view the ld CIT(A) has already granted substantial relief to the assessee, which we affirm. Hence, we do not find any merit in further reducing the addition which has already been reduced substantially by the ld. CIT(A). Therefore, we do not find any justifiable reason to given further relief to the assessee. 13. In the result, this appeal of assessee is dismissed.” 25. Considering our decision in assessee’s group case on similar set of facts wherein we have dismissed the appeal of assessee, therefore, following the principle of consistency, this appeal of the assessee is also dismissed with similar directions. 26. In the result, appeal of assessee in IT(SS)A No. 58/Srt/2021 for the A.Y. is dismissed. 27. Since, we have adjudicated the issue by taking the lead case in IT(SS)A No.58/SRT/2021 for AY.2013-14. Since the facts and the grounds raised by the other assessees in other appeals, are identical and similar, therefore, our instant adjudication Page | 21 IT(SS)A 58 to 66/SRT/2021 Priyanshi Creation Pvt. Ltd. & Parag Syntex Pvt. Ltd. in IT(SS)A No. 58/SRT/2021 is applicable mutatis mutandis to the other assessees` appeals also. 28. In the combined result, appeals of all the assessees [IT(SS)A Nos. 58 to 66/SRT/2021] are also dismissed with similar observation. Registry is directed to place one copy of this order in all appeals folder / case file(s). Order is pronounced in the open court on 29/08/2022 and result was also placed on the notice board. Sd/- Sd/- Dr. A.L. SAINI PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER lwjr /Surat Ǒदनांक/ Date: 29/08/2022 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat