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Income Tax Appellate Tribunal, DELHI BENCHES “D” : NEW DELHI
Before: SHRI R.K. PANDA & MS. SUCHITRA KAMBLE
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “D” : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.111/Del./2016 Assessment Year 2010-11 The ACIT, M/s. Lepro Herbals Pvt. Central Circle – 28, vs., Ltd., 4, Empire Estate, Room No.317, ARA Mehrauli Gurgaon Road, Centre, Jhandewalan Sultanpur, New Delhi. Extn., New Delhi-055. PIN – 110 030 (Appellant) (Respondent) For Revenue : Shri Pravin Rawal, CIT-DR For Assessee : Dr. Rakesh Gupta, Advocate Date of Hearing : 09.11.2021 Date of Pronouncement : 18.01.2022 ORDER PER R.K. PANDA, A.M.
This appeal filed by the Revenue is directed against the order dated 21.10.2015 of the Ld. CIT(A)-29, New Delhi, relating to the A.Y. 2010-2011.
Facts of the case, in brief, are that assessee is a company engaged in the business of manufacture and sale of 2 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. medicinal herbal drugs. It filed its return of income on 15.10.2010 declaring total income of Rs.3,21,00,577/- .
2.1. A search action under section 132 of the of the I.T. Act, 1961 was carried- out in the Alchem group of cases which also covered the assessee-company on 04.02.2010/05.02.2010. Search warrant under section 132(1) of the of the I.T. Act, 1961 was issued and executed in the name of the assessee-company. The official premises of assessee company i.e., 4, Empire Estate, Mahrauli Gurgaon Road, Sultanpur, New Delhi, was covered for search action which is also the residential address of Sh. Raman Mehta, Nidhi Mehta, Bharat Mehta, Divya Mehta, Neha Mehta, M/s Alchem International Ltd. and other companies. No additional income was offered by the assessee-company pursuant to search action.
2.2. As per the Annexure-A of Panchnama dated 04.02.2010, following documents etc. were found and seized by party D 1 :
3 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi.
S.No. Articles Description of pages 1. Bunch of loose papers 1-114 2. Spiral note book Neelgagan 1-50 3. Spiral note book (light blue colour) 1-27 4. Original hard disk laptop One 5. Original hard disk laptop One 6. Pen drive One 7. Old laptop One 8. Old laptop One 2.3. During the course of assessment proceedings, the A.O. provided the cloned copy of the hard disk so seized and required the assessee to furnish various details alongwith explanation of seized material. In reply, vide letter dated 05.12.2011 it was mentioned by the assessee that "these hard disk belongs to personal computer of Divya Mehta/Neha Mehta, contains their personal data and does not seem/contain any financial data….”
2.4. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He noted that this hard disk contains the details of various transactions of the assessee including purchase, sale, GP and NP for some of the months of the year under consideration. A further opportunity was provided to the assessee by issuance of show cause 4 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. notice on 16.12.2011, enclosing the printout of the information contained in the hard disk. Based on the data of the printout, the AO observed that net profit through the end of September, 2009 in the case of assessee comes to Rs.6,27,96,178/-. However, in the final accounts, the profit disclosed is much less. He, therefore, asked the assessee to explain the discrepancy and to explain as to why the books of accounts should not be rejected under section 145 of the Act and profit adopted based on the said document/information for the first six months and extrapolating the profits on the same percentage of net profit for the rest of the year, resulting into the determination of total income at Rs.11,90,00,214/-.
2.5. Vide letter dated 22.12.2011 the assessee furnished reply before the Assessing Officer. For ready reference, the relevant part of the said reply reproduced hereinbelow:-
In response to the above mentioned letter, at the outset it is submitted that the explanation about the seized material has been furnished by the assessee 5 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. from time to time. Kindly note that the cloned copy of hard disk and pen drive seized from the residence of Sh. Raman Mehta were not provided to the assessee by the Investigation Department and it was only recently i.e. 31st October, 2011, your goodself had provided a cloned copy of the said hard disk and pen drive. On going through the said hard disk and pen drive, we observed that the data in question is found in pen drive (Annexure VI) party D-l and not in hard disk (Annexure IV) party D-l. In the said pen drive the data of Sh. Bharat Mehta an executive looking after the production and marketing of Alchem group was stored. Please note that Sh. Bharat Mehta used to forecast the targets of sales, estimated cost of production, estimated expenses, etc. To set the targets of the company to achieve the such results. On the perusal of above pen drive and even on opening of the pen drive the lists of files and folders contained in the said pen drive, your goodself will observe that most of the information stored in the 6 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. said pen drive are the figures in relation to the Forecasts". This aspect has been ignored to your attention in drafting the questionnaire.
Your goodself has provided the assessee with Annexure HD-1, which is being made as basis for taking adverse inference in the hands of the assessee during the year. Please not that the said papers contain the information of Lepro Forecasts and did not represent the actual amounts. Although your goodself has provided the assessee with the copy of the said documents taken out from the seized pen drive but the assessee has also taken print out from the said seized pen drive which clearly shows that these figures are "Forecasts" is not appearing the printout provided by you to the assessee, which is matter of record. You are requested to please verify our submissions with the piece of document provided to us was nothing but only "Forecasts".
7 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. For your ready reference, we are enclosing the copy of print out taken form pen drive and the copy of the same paper provided to us by your goodself under Annexure HD-1 2.6. It was also submitted by the assessee that while computing the proposed addition/determination of income based on the document/information, the AO has not considered the depreciation, lower profit in the processing of item "solenosol crude extract", difference in exchange, interest in financial charges, selling and distribution expenses etc.
2.7. The assessee has also submitted the following during assessment proceedings:-
That during the course of search, no incriminating (i) paper or document was found/seized to suggest that any amount of sale/expenses/raw material cost etc. was not accounted for The assessee company is subject to Excise Rules (ii) and all the statutory records under Excise Rules are maintained. There is no adverse evidence on 8 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. record to suggest that there was any violation of Excise Rules, vis-a- vis unaccounted sales, production etc. (iii) The accounts of the assessee company were duly audited and no discrepancy, whatsoever was pointed out by the Auditors in the said audited accounts. (iv) The company is registered with sales tax department and filing the sales tax return regularly and the sales turnover of the company is duly accepted/reconciled with the sales tax records. (v) The company is maintaining the quantitative records of purchase, sales, consumption etc. and even during the course of search, no discrepancy was found therein.
(vi) That as per the accepted legal position, no adverse inference can be drawn on estimated basis on search related proceedings.
9 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. Kindly note that the assessee company has filed the audited accounts and no discrepancy, whatsoever has been found therein. All the items of income and expenses are duly supported with the evidence and in view of the same, the books of accounts of the assessee may not kindly be rejected under section 145 of the IT Act and no adverse inference may be drawn on this account."
2.8. However, the AO was not satisfied with the submissions made by the assessee. He observed that sales figures has been tallying in the value and quantity with Annexure ES- I/page 1 to 4 and hard disk printout HD 1. He, therefore, was of the opinion that the transactions recorded in hard disk are actual transactions prepared by the assessee under the head "Forecast". Relying upon the provisions of section 292C of the Act, AO did not accept the submission of the assessee. Rejecting the book results of the assessee by invoking provisions of section 145(3) of the Act, the AO determined the total income of the assessee at Rs.11,90,00,210/- by computing as under:-
10 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. “Net profit for the period 01.04.2007 to 30.09.2007 as per seized material Total Sales through end of September, 2009 Rs.22,99,26,268/- Less:-Total Manufacturing price(direct cost) Rs.10,07,77,865/- through end of Sep, 2009 Less: Manufacturing & overheads through end of Rs. 5.16.98,208/- Sept, 2009 Net profit through end of September, 2009 Rs.6,27,96,178/- Estimated net profit for the next six months = 15,66,18,183*27.31 100 = Rs. 4,27,72,425/- Net profit of the assessee for the whole assessment year is computed as under: Net profit for the first six months Rs. 6,27,96,178/- Add: Net profit for the next six months Rs. 4,27,72,425/- Add: Other income Rs. 3,49,25.342/- Total Net profit Rs.14,04,93,945/- Less:-lncrease/decrease in stock Rs. 2,14,93,731/- Total income Rs. 11,90,00,214/- Rounded off to Rs. 11,90,00,210/-“ 11 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. 2.9. The total income of assessee is computed on the basis of documents/informations contained in the hard disk/pen drive which is determined at Rs.11,90,00,210/ -.
Before the Ld. CIT(A) it was argued that the return of income was based on audited accounts and supported with vouchers, stock records, Excise and Sales tax records as per the statutory provisions. It was further submitted that the alleged document is nothing but a "Forecast" for the period 01.04.2009 to 30.09.2009 and the document contained in the pen drive belongs to Mr. Bharat Mehta who is an executive of the assessee company and not a director of the assessee company and was a third party. It was submitted that before relying upon the said document seized from third party (on whose basis the addition has been made) the AO was under legal obligation to first record that this document belongs to the assessee company. It was argued that by virtue of the provisions of section 292C of the Act the pen drive belongs to Sh. Bharat Mehta and not to the assessee. It is argued that the correctness of seized document can be attributed to the person from whom the said document is seized and the same 12 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. does not apply to a third party. In case a document is seized from a person, normal presumption is that the document belongs to that person and not to any third party. Relying on various decisions, it was submitted that the addition made by the AO is not justified.
3.1 The assessee also submitted that the addition was made on the basis of a document seized from Sh. Bharat Mehta, who is a third party and no satisfaction has been recorded that the said seized document belongs to the assessee company and not to Sh. Bharat Mehta. Relying on various decisions, it was argued that unless a satisfaction is recorded by the AO, any action adversely impacting the assessee on the seized document from third person is not in consonance with law and deserves to be deleted. It was contended that information/document found from the pen drive of Sh. Bharat Mehta cannot be applied adversely in the case of assessee company, in absence of any satisfaction recorded by the AO. 3.2. Based on the arguments advanced by the assessee, the Ld. CIT(A) deleted the addition by observing as under :
13 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. 14 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. 15 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. 16 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. 17 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. 18 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. 19 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. 20 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. 21 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi.
4. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds :
1. “On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.8,68,99,833/- made by the AO on the basis of the figures obtained from the printouts of the Pen drive seized from Sh Bharat Mehta, executive in the assessee Company and accepting the contention of the assessee that the figures mentioned therein are forecast and not actual figures despite the fact that the assessee failed to submit any evidence in support of its contention.
22 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.8,68,99,833/- by holding that the AO failedto bring any corroborative evidence completely overlooking the fact that the AO has clearly mentioned in the assessment order (refer pg no. 12 and 13 and Annexure ES-1 of assessment order) that the figures of sales submitted by the assessee during the course of assessment proceeding matched exactly with the figures of sales mentioned in the printouts of Pen Drive seized.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in holding that the AO rejected books of account without examining books of account and thus rejection is unlawful whereas the Ld. CIT(A) failed to appreciate that the AO compared the actual figures given in books of account and as submitted by the assessee with the figures mentioned in the printouts of Pen Drive (refer pg no. 12 and 13 and Annexure 23 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. ES-1 of assessment order) before rejecting books of account.
That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law.
That the grounds of appeal are without prejudice to each other.
6. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal.”
5. The Ld. DR strongly challenged the order of the Ld. CIT(A) in deleting the addition made by the Assessing Officer. He submitted that the Assessing Officer had clearly brought on record that the figures of sales submitted by the assessee during the course of assessment proceedings clearly matches with the figures of the sales mentioned in the print out of the Pen drive seized. He submitted that the Ld. CIT(A) without appreciating the facts brought on record by the Assessing Officer as to why the books of accounts should not be rejected and profit estimated has erroneously accepted the contention 24 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. of the assessee that the figures mentioned therein are forecast and not actual figures. He accordingly submitted that the order of the Ld. CIT(A) be reversed and that of the Assessing Officer be restored.
The ld. counsel for the assessee on the other hand heavily relied on the order of the Ld. CIT(A). Referring to para 3.6 of the order of the Assessing Officer, he drew the attention of the Bench to the following observations of the Assessing Officer:-
3.6. Even otherwise, if the contention of the assessee that the said print out taken from the seized hard disc is prepared under the heading ‘forecast’ is accepted, the assessee gets no support from the same in order to justify its claim.
He submitted that the Ld. CIT(A) deleted the additions treating the figures in the printouts of the seized hard-disc as forecast. Referring to paper book pages 154 and 155, he submitted that it is clearly mentioned therein ‘product name’ and ‘forecast’. Referring to paper book pages 214 to 217, he drew the attention of the Bench to the show 25 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. cause notice dated 16.12.2011 for Assessment Year 2010-11 where the Assessing Officer has show caused the assessee to explain as to why the books of account should not be rejected u/s 145 of the Act and profit estimated on the basis of evidences as per Hard-disc for first six months and by extrapolating, the proportionate profit for the remaining period. Referring to paper book pages 151 to 153, he submitted that the Assessing Officer has also raised identically worded query for Assessment Year 2008-09 vide notice dated 16.12.2011. Referring to pages 156-162 of the paper book, he drew the attention of the Bench to the reply to the notice issued by the Assessing Officer for Assessment Year 2008-09. Referring to pages 218 to 222 of the paper book, he drew the attention of the Bench to the reply given by the assessee to the notice issued by the Assessing Officer for Assessment Year 2010-11. Referring to page 222 of the paper book, he drew the attention of the Bench to the application dated 22.12.2011 for direction u/s 144A of the Act for Assessment Year 2010-11 filed before the Addl. CIT. Referring to pages 163 of the paper book, he drew the attention of the 26 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. Bench to the application dated 22.12.2011 for direction u/s 144A of the Act, filed before the Addl. CIT for Assessment Year 2008-09. Referring to the copy of assessment order for Assessment Year 2009-10, he submitted that the Assessing Officer has passed the order without making any addition. However, the Assessing Officer deviated from the stand taken for Assessment Years 2008-09 and 2009-10 and made huge addition during the year by rejecting the book results and estimating the profit which is not justified. Referring to the following decisions, he submitted that in view of Rule of consistency, the addition made by the Assessing Officer is not justified and the ld. CIT(A) has rightly deleted the addition.
Radhasoami Satsang vs CIT [1992] 193 ITR 321 (SC) 2. CIT vs Excel Industries Ltd. 358 ITR 295(SC)
He accordingly submitted that the order of the ld. CIT(A) being in accordance with law should be upheld and the grounds raised by the Revenue should be dismissed.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the 27 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. learned CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find a search action 132 of the Act was carried out in the case of assessee during which Hard-disc from the residential premises of Shri Raman Mehta was seized. The cloned copy of the Hard-disc was provided to the assessee who stated that the Hard-disc belongs to personal computer of Bharat Mehta, Divya Mehta and Neha Mehta and contains their personal data and does not seem contain any financial data. It was further submitted that various details of sales, purchases etc.contained in the said hard disc are only estimates and not actual figures. However, the Assessing Officer did not accept the contention of the assessee and concluded that these documents provide true picture of profitability of the assessee and accordingly adopted the figures of Rs.6,27,96,178/- as profit for the period from 01.04.2009 to 30.09.2009 and estimated the net profit for next six months. Extrapolating the percentage with reference to sales made between 01.10.2009 to 31.03.2010 which comes to Rs.4,27,72,425/-. Accordingly, the Assessing 28 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. Officer made addition of Rs.11,90,00,214/-. We find the ld. CIT(A) deleted the addition, the reasoning of which have already been reproduced in the preceding paragraph.
We do not find any infirmity in the order of the Ld. CIT(A) deleting the addition made by the Assessing Officer. The finding given by the Ld. CIT(A) that no enquiry has been conducted with Sh. Bharat Mehta to find out the reason for difference between the cost mentioned in the document vis-à- vis the expenditure claimed as per the books of accounts could not controverted by the Ld. DR. Further, although, it is a case of search but no other incriminating or corroborative documents were found to establish that expenditure mentioned in seized document is true and correct. We find no purchase bills or bills of expenditure recovered to be said to be bogus or inflated. No cash, investment or any other asset has been found to be belonging to the assessee to show as outcome of such inflation of expenditure or generation of unaccounted income. We find merit in the finding of the Ld. CIT(A) that had there been inflation in expenses or bogus/inflated purchases, then it should have been found 29 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. during the search proceedings. Further, although, search action took place on 04.02.2010, however, Assessing Officer has only taken the figure up to September, 2009 and nothing has been mentioned regarding the period between 01.10.2009 to 03.02.2010.
10.1 We find that the assessee is subjected to sales tax and Excise Duty and no adverse inference is on record to show that there is any difference between the sales and production figures in the audited accounts of the company. We further find on the basis of identical printout for Assessment Year 2008-09 to 2010-11, the Assessing Officer had raised identical queries for Assessment Year 2008-09, 2009-10 and 2010-11. Although, no addition has been made in Assessment Years 2008-09 and 2009-10 under identical facts and circumstances, however, we find the Assessing Officer deviated from his earlier stand and made huge addition for the impugned Assessment Year by rejecting the book results and extrapolating the profit which in our opinion is not justified.
30 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. 10.2 We find Hon’ble Supreme Court in the case of CIT vs Excel Industries Ltd.(supra) has observed as under:-
“28. Secondly, as noted by the Tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there is no reason for us to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue.
In Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax, [1992] 193 ITR 321 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same “fundamental aspect” permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said: “Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken.”
Reference was also made to Parashuram Pottery Works Ltd. v. Income Tax Officer, [1977] 106 ITR 1 (SC) and then it was held:
31 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. “We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. “On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter — and if there was no change it was in support of the assessee — we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income Tax in the earlier proceedings, a different and contradictory stand should have been taken.”
It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop on the issue and it ought let the matter rest rather than spend the tax payers’ money in pursuing litigation for the sake of it.”
Since, the printouts of the hard disc clearly mentioned that “forecast” and since, the Assessing Officer in the two preceding assessment years has accepted the reply of the assessee and no addition has been made in the order passed u/s 143(3) of the Act, therefore, following the rule of consistency, no addition can be made for the impugned assessment year, especially when no other corroborative 32 ITA.No.111/Del./2016 M/s. Lepro Herbals Pvt. Ltd., New Delhi. evidences such as bogus purchases bills/bogus expenses or unexplained investment, etc. were found during the course of search. In this view of the matter and in view of the detailed reasoning given by the Ld. CIT(A) while deleting the addition, we do not find any infirmity in his order. Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 18.01.2022.