THE ACIT, KOLLAM vs. SRI.P. SUNIL KUMAR, KOLLAM

Per BENCH:

These appeals filed by the Revenue and the Cross Objections and appeal in

ITA No.355/Coch/2017 filed by the assessees are directed against the different

orders of the CIT(A) for different assessment years. Since the issues involved in

these appeals and Cross Objections are common, they were clubbed together,

heard together and are being disposed of by this common consolidated order.

AYs 2009-10 to 2015-16 is with regard to deletion of addition made under

section 68 of the I.T. Act.

narrated in ITA No. 347/Coch/2017. The assessee is an individual conducting 2

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 business of trading of import duty scrips. A search was conducted at the

residential and business premises of the assessee on 03/02/2015. The assessee

has filed his return of income u/s. 139(1) on 30/09/2009, declaring a total

income of Rs.3,21,05,740/-. Consequent to search, notice u/s. 153A was issued

for the assessment years 2009-10 to 2014-15 on 29/11/2016 in response to

which the assessee filed return of income on 06/12/2016, declaring a total

income of Rs.3,21,05,740/-.

3.1 The assessee is primarily a trader in export incentives received under

Vishesh Krishi Gram Udyog Yojna, Duty Entilement Pass Book etc. The export

incentives received by the cashew exporters, marine exporters who are mainly

based in Kollam are purchased by the assessee and sold to importers based

outside the State. The assessee conducts same kind of business through the

following Companies as Managing Director:

i) M/s. Sabari Quality Foods ii) M/s. Sabari Enterprises P. Ltd. iii)M/s. Sabari Milllenium Exporters P. Ltd. iv)M/s. Sabari Switchgear P. Ltd.

Among the major purchasers of export incentives as per the books of accounts of

Sabari Quality foods, Sabari Millennium Exporters p. Ltd. and Sabari Switchgear

P. Ltd. are:

1) Basanth Impex, a proprietorship of Shri Manish Khetan with its address as Old China Bazar Street, Kolkota.

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 2) Shyam International, a proprietorship of Shri Manish Khetan with its address as Old China Bazar Street, Kolkota.

3) Sree Chao Impex, a proprietorship of Sri Manish Khetan with its address as Old China Bazar Street, Kolkota.

4) M/s Ajay Iron and Steel P Ltd , Fortune Chambers,6 Lyons Range, Mezzanine Floor, Kolkota 5) Vani Exporters, CLIVE Ghat Street, Room No. 7, 2nd Floor, Kolkota 6) Mayur Impex, P-68B, Block -2, Scheme -VII M, CIT Road, Kolkota

3.2 The seized materials as per annexure marked SKP/KLM/DS 1 to 23 clearly

showed a lot of trade activities between the assessee and theses companies

namely, M/s.Sabari Enterprises P Ltd, M/s. Sabari Millenium Exports P Ltd, M/s.

Sabari Switchgear P Ltd , and Basanth Impex, Shyam International, Sree Chao

Impex, Ajay Iron and Steel P Ltd, Vani Exports and Mayur Impex. The total

turnover of the aforementioned businesses and their turnover with each of

businesses of Sabari Group (Sabari Quality Foods)

a) Basanth Impex & Shree Chao Impex

Asst.Year Total Turnover Turnover with Turnover with Turnover with Turnover with SQF Sabari Millenium Sabari Sabari Exports P Ltd Enterprises Ltd Switchgear P Ltd

2009-10 410006631 386596312 8594439 0 14815880

2010-11 244490336 194527698 34520537 0 15442101

2011-12 938148418 175959088 287770321 465465876 8953133

2012-13 256142048 98954776 29957586 116784990 10444696

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 2013-14 167547824 27370525 13802840 124601709 1772750

2014-15 106509871 16065781 25116634 64952906 374550

Total 899474180 399762357 771805481 51803110

b) Shyam International

Asst.Year Total Turnover with Turnover with Turnover with Turnover with Turnover SQF Sabari Millenium Sabari Sabari Exports P Ltd Enterprises Switchgear P Ltd Ltd

2009-10 500617946 443543973 53660593 0 3413380

2010-11 523243688 514163516 4718097 0 4362075

2011-12 0 0 0 0 0

2012-13 0 0 0 0 0

2013-14 0 0 0 0 0

2014-15 371758345 156528239 47586619 167643487 0

2015-16 341213767 164791823 176521944 0 0

Total 0 1279027551 28487253 167643487 7775455 -

c). M/s. Ajay Iron and Steel P Ltd

Asst.Year Total Turnover Turnover with Turnover with Turnover with Turnover with SQF Sabari Millenium Sabari Sabari Exports P Ltd Enterprises Ltd Switchgear P Ltd

2009-10 0 0 0 0 0

2010-11 0 0 0 0 0

2011-12 64841 0 64841 0 0

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017

2012-13 0 0 0 0 0

2013-14 4034750 0 2555749 1479001 0

2014-15 4457276 0 2576166 1881110 0

2015-16 0 0 0 48718355 0

Total 0 0 5196756 52078466 0

d) Vani Exporters

Asst.Year Total Turnover Turnover with Turnover with Turnover with Turnover with SQF Sabari Millenium Sabari Sabari Exports P Ltd Enterprises Ltd Switchgear P Ltd

2009-10 120407959 15500035 58934156 0 45973768

2010-11 125761421 118503685 87124 0 7170612

Total 0 134003720 59021280 0 53144380

3.3 The Assessing Officer noticed from the aforementioned tables that Kolkota

based businesses were having substantial transaction with the businesses of Shri

Sunil Kumar, M/s Sabari Millenium Exports P. Ltd., Sabari Enterprises P. Ltd. and

Sabari Switchgear P Ltd. On an examination of the books of accounts of Sabari

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 Quality Foods, Sabari Enterprises P Ltd, and Sabari Switchgear P Ltd, they have

declared a profit as a percentage of their sales as under:

Asst Gross profit Gross profit Gross profit ratio Gross profit Year ratio declared ratio declared declared by Sabari ratio declared by by Sabari by Sabari Millenium P Ltd Sabari Switchgear Quality Foods Enterprises Ltd P Ltd

2009-10 2.7 - 2 -

2010-11 3.3 - 12 11

2011-12 6.4 4.8 4.5 20

2012-13 4.6 2.6 5.4 15

2013-14 5.8 1.1 20 25

2014-15 3.6 6.4 18 52

The Assessing Officer noticed that the businesses of Sabari Group declared a

profit of 1.1 to 52% for the Asst Years mentioned above. The Kolkota based

businesses declared incomes in their returns as under:

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 Basanth Impex and Shree Chao Impex

Asst Year Total Total Income Gross profit Turnover Returned ratio declared

2009-10 1217756546 134990 0.10

2010-11 910675187 207600 0.14

2011-12 1884595022 252810 0.11

2012-13 1636835083 189540 0.28 2013-14 1194591232 218590 0.19 2014-15 801062840 291630 0.73

M/s. Ajay Iron and Steel P Ltd

AsstYear Total Total Income Gross profit Turnover Returned ratio declared

2009-10 0 640 0

2010-11 0 5390 0

2011-12 0 66100 0

2012-13 0 372908 0

2013-14 0 331001 0

2014-15 3963751 449359 3.05

2015-16 69970609 2896310 3.43

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 Mayur Impex

AsstYear Total Total Income Gross Turnover Returned profit ratio declared

2009-10 652200365 143400 0.086

2010-11 139942304 167910 0.399

2011-12 433860902 179160 0.988

2012-13 965138557 214270 0.47

2013-14 656787328 125770 0.62

2014-15 242906501 292310 2.49

2015-16 3594855 9830 57.76

Vani Exports

AsstYear Total Total Gross profit Turnover Income ratio Returned declared

2009-10 2863662066 990900 0.60

2010-11 3031108532 760114 0.34

2011-12 845673545 211683 3.0

2012-13 2184183988 982890 0.42

2013-14 658241184 374514 0.60

2014-15 444409756 525030 1.06

2015-16 220741120 408150 2.92

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 Shyam International

Asst Year Total Total Income Gross profit Turnover Returned ratio declared

2009-10 1432628764 188960 0.06

2010-11 1862136442 211590 0.16

2011-12 607109343 94480 0.37

2012-13 403987517 206970 0.46

2013-14 - - IT Not Filled

2014-15 1651106916 265480 0.22

2015-16 2991294481 103420 0.28

3.4 According to the Assessing Officer, it was evident from the declared

turnover and total income returned that the Kolkota businesses were not earning

profits in the scale of Sri Sunil Kumar even though they are also doing the same

business and these businesses were also viewed in the background of a

statement recorded from Sri Mahesh Khetan S/o Late Gouri Shankar Khetan by

the Deputy Director of Income tax (Inv)Unit 2(1), Kolkota on 7.4.2016. The

substantive part of the statement is the answer to question no.10 which states:

" Apart from the above companies these are the concerns in which my family

members and I are/were associated with:

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 SI No Name of the Concerns Name of Nature of business proprietor

1 M/s Basanth Impex Late Gouri Shankar Deals in import Khetan licence

2 Shree Chao Impex -do- -do-

3 Shyam International Mrs. Seema Khetan -do-

4 Mayor Impex Shri Manish Khetan -do-

All these proprietorships concerns run from 9 Old China Bazar Street, Kolkotta-

01" .

Further he stated that his late father Shri Gouri Shankar Khetan managed and

controlled all the above proprietorships and after his death he had taken over the

business related work. In answer to question 12 he had explained that books of

accounts of M/s Basanth Impex, M/s Shree Chao Impex, M/s Shyam

International and M/s Mayur Impex were maintained by Sabari Group and are

kept in their possession. He stated that they only put signature on legal

documents, P&L A/c, Balance Sheet, Cheque books as per direction of Sabari

Group. He also went on state under Oath that M/s Basanth Impex, M/s Shree

Chao Impex, M/s Shyam International and M/s Mayur Impex are controlled and

managed by Sabari Group itself. According to him all the business activities,

books of accounts etc. in respect of these proprietorships concerns were

performed and maintained by Sabari Group. They were used only for signing

authorities by Sabari Group. In lieu of signature they got commission from Sabari 11

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 Group. He had further stated that the proprietorship concerns were only paper

transactions. In reply to notice u/s. 142(1) on 29/11/2016, an affidavit was filed

before the Judicial First Class Magistrate, Alipur stating that the statement given

before the Income tax Authority was being retracted on the following grounds

1 That he was the proprietor of M/s Mayur Impex, 9, Old China Bazar Street, Kolkotta-700001. Further the name of the concerns as Sl. 1& 2 in which his father late Gourii Shankar Khetan was the proprietor of the firm.

(i) M/s Chao Impex, 9, Old Bazar Street, Kolkotta-70001 (ii) M/s. Basanth Impex, 9, Old Bazar Street, Kolkotta-700001

3.That he was forced to sign on the statement perpetuated to have been given by him and that there was criminal intimidation. He was also forced to sign a certificate at the end of the statement whose meaning he did not understand.

5.That he was retreating his earlier statement which was recorded under threat correction and pressure.

3.5 Shri Manish Khetan had alleged criminal intimidation while recording the

statement by the Income tax Authority and that the same was being retracted

since it was done under coercion and pressure. According to the Assessing

Officer, though he had alleged criminal intimidation no complaint was raised before any authority. Moreover, it was found that the affidavit dated 12th May

2016 was never furnished to the Income tax Authority who had recorded the

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 statement after retracting. According to the Assessing Officer, in order that

retraction is to be accepted as evidence, the witness need to be cross examined

Reliance was placed on the judgment of the Supreme Court in the case of CIT

vs. Durga Prasad More (82 ITR 540) (SC) where in a case party relied on self

serving recitals in documents it was for the party to establish the truth of these

recitals. According to the Assessing Officer, for a retraction to be valid, threat or

coercion has to be proved. He relied on the decision of the ITAT, Ahmedabad

Bench in the case of Manoharlal Kasturchand Chokshi vs. ACIT (61 ITD 55).

Reliance was also placed on the decision of the ITAT, Bangalore Bench in the

case of Carpenters Classics (Exim) (P) Ltd. vs. DCIT (108 ITD 142) wherein it

was held that when a statement was made voluntary and was not alleged to

have been obtained under threat or coercion onus was on assessee to prove that

declaration was made under any misconception of facts, since assessee has not

taken any steps to rectify his declaration before authorities before whom such

declaration was made, there was no valid reason for retraction of the same after

2 and ½ months. According to the Assessing Officer it was his father and later

on he himself who handled the business. They received a commission every year

for their dealing with Sabari Group. His Pan is AFCPK5709F and the bank

accounts of these proprietorship were in Kollam branches of various banks as

under:

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 i)A/c No 200007114711 with IndusInd Bank, Kollam Branch in the name of Basanth Impex.

ii. A/c No 200007114811 with Induslnd Bank, Kollam Branch in the name of Mayur Impex

iii.A/c No 200007114803 with Induslnd Bank, Kollam Branch in the name of Shyam International

3.6 It was found that another Kolkota based business having substantial

transactions with Sri Sunil Kumar and his companies are M/s Ajay Iron and Steel

P Ltd. A survey u/s 133A was conducted at the business premises of the

company at Kolkota on 28/4/2016 and during the course of it a statement was

recorded from Sri, Ravi Biyala, Chartered Accountant. In the statement, Sri Ravi

Biyala stated that M/s Ajay Iron and Steel P Ltd conducts its business at Kollam

and the Kolkota address is for namesake only. In support of this, he produced

sales tax file of M/s Ajay Iron and Steel P Ltd which declared Nil sales in Kolkota.

It was found that Sri Viswajith Menon, CEO of Sabari Group was one of the

directors of this company. According to the Assessing Officer the retraction of

Shri Ravi Biyala dated 20/12/2016 at this late hour can be taken as an

afterthought by Ravi Biyala or due to the influence made by the assessee. On

an examination of the books of accounts of the assessee and his companies, it

was found that enormous funds were obtained under the head loans and

advances from the Kolkota businesses and these loans weree non interest

bearing and remained in the books for period ranging from one to three years.

According to the Assessing Officer round tripping of funds or ploughing back of

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 funds seem to be a clear possibility. The Assessing Officer found that there was

regrouping of liabilities as Sundry Creditors or Loans and Advances. On the basis

of the principle of preponderance of probability funds remaining as payable in

the hands of the assessee are to be considered as assesses funds received from

persons whose creditworthiness is not proved. According to the Assessing

Officer, the balance sheet, P & L A/c and its schedules of M/s Basanth Impex,

Shyam International, Shree Chao, M/s Ajay Iron and Steel P Ltd showed sundry

creditors and sundry debtors and no long term loans to Shri Sunil Kumar or his

companies and only M/s Ajay Iron and Steel paid amounts for share application

to Sabari Enterprises Ltd., Sabari Millenium Impex P Ltd and Sabari Switchgear P.

Ltd. and received share premium from financial years 2009-10 onwards.

According to the Assessing Officer, even though as per the accounts of M/s

Basanth Impex P. Ltd., Shri Sunil Kumar, his companies and his friends are

grouped in sundry creditors, the payment to Thulsidhas and Tulsi Developers P

Ltd during the FY 2012-13 was a loan as Tulsi Developers P Ltd is not in the

business of trading of duty scrips. These transaction makes it abundantly clear

that payments were made to businesses of the assessee and his close relatives

in the guise of trading on behalf of the assessee.

3.7 The AO found that the assessee had received Rs 1,70,62,169/- from M/s.

Sabari Millneium Impex P Ltd as loans and advances. This was loan paid to

Director Sri Sunil Kumar by M/s. Sabari Millenium Impex P Ltd which was

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 incorporated in 2003. As the reserves for the financial year 2007-2008 was only

Rs 1,88,051/-, payment received from M/s Sabari Millenium P Ltd was restricted

to Rs 1,88,051/-. According to the Assessing Officer, during the relevant

previous year a sum of Rs 40,23,407 from M/s. Sabari Switchgear was received

as loans and advances which was also a payment by M/s Sabari Switchgear P Ltd

to its Managing Director and therefore taken as deemed dividend u/s 2(22)(e).

The Assessing Officer made addition to total income at Rs 40,23,407/- as the

previous years accumulated profits wass Rs 57,83,680/-. Under the head

Sundry creditors, the balances from the following are:

Basanth Impex : 16169669 Shyam International : 78815886 Vani Exporters : 48103927

Therefore these balances were added to the total income as unexplained income

and addition on account of this was Rs 14,30,89,482/-.

made addition, not on the basis of facts or evidences, but purely on assumption

and suspicion. The CIT(A) observed that the Assessing Officer had not brought

on record any evidence to prove that the assessee was generating any

unaccounted income. According to the CIT(A), the addition was made only on

suspicion, which cannot be sustained. Thus, considering overall facts of the case,

the CIT(A) deleted the addition of Rs.14,30,89,482/- u/s. 68 of the Act.

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 5. Against this, the Revenue is in appeal before us. The Ld. CIT(DR) submitted

that when the credits were found in the books of accounts, it is the duty of the

assessee to prove the genuineness of the transactions and the capacity of the

lenders to advance loans. According to him, the transaction was not

satisfactorily explained by the assessee. It was submitted that the retraction

statement cannot be considered. The Ld. CIT(DR) submitted that the CIT(A)

should have caused necessary enquiry under the power vested with him in terms

of section 250(4)of the Act or he should have directed the Assessing Officer to

cause necessary enquiry. Since he has failed to do so, he prayed that the issue

may be remitted to the file of the CIT(A) for fresh consideration.

licenses to the Calcutta based Companies on F Form basis and saved the sales

tax @ 4% on the turnover, which was the main reason for the higher profit

earned. The Ld. AR submitted that the statement recorded u/s. 133A of the I.T.

Act does not authorize any income tax authority to examine any person on oath

and hence, any such statement has no evidentiary value and any admission

made during such statement cannot by itself by made the basis for addition. The

Ld. AR relied on the judgment of the Jurisdictional High Court in the case of Paul

Mathew & Sons vs. CIT (263 ITR 101) and the judgment of the Madras High

Court in the case of CIT vs. Kader Khan & Sons (300 ITR 157). The Ld. AR

submitted that this view was supported by the CBDT Circular dated 10/03/2003.

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 6.1 The Ld. AR submitted that Shri Manish Khetan had no knowledge about the

business of the Calcutta based companies since his father, Shri Gauri Shankar

Khetan was looking after the business till his death in July, 2015. It was

submitted that Shri Manish Khetan retracted the above statement by way of an

affidavit after 2 and ½ months from the date of recording his statement u/s.

133A by the Income tax authorities. The Ld. AR submitted that the retraction is

valid and his submission that the original statement recorded was under coercion

was to be accepted. It was submitted that there was no evidence for payment

of any commission form Sabari Group to the Calcutta based companies and the

Bank accounts of these concerns were maintained by them in Kollam branches in

order to save the bank charges on account of transfer of funds and for speedy

transfer of funds. It was submitted that Shri Ravi Biyala was only a partner of

the C.A. firm, who had audited the accounts of M/s. Ajay Iron & Steel Pvt. Ltd.

and he had issued an audit report in Form No. 3CA and its annexure in From No.

3CD. It was submitted that Shri Ravi Biyala also retracted his statement by way

of an affidavit dated 20/12/2016, by which he admitted that he had only little

knowledge about the affairs of the Company. The Ld. AR submitted that the

Assessing Officer had doubted that the credits appearing in the assessee’s books

were his own funds and round tripping of funds or ploughing back of funds seem

to be a clear possibility which showed that the Assessing Officer himself was not

convinced that the funds were that of the assessee. The Ld. AR relied on the

judgment of the Madras High Court in the case of A. Rajendran & Ors. Vs. ACIT

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 (291 ITR 178), Rajasthan High Court in the case of CIT vs. Jaykumar Bakliwal

(366 ITR 217) and Madras High Court in the case of Lalitha Jewellery Mart vs.

DCIT (39 ITR 425) wherein it was held that an addition u/s. 68 cannot be made

on suspicion. The Ld. AR relied on the judgment of the Supreme Court in the

case of Lalchand Bhagat Ambica Ram vs. CIT (37 ITR 288) wherein it was held

that additions in the assessments cannot be made on mere suspicion and

surmises or by taking note of the notorious practices prevailing in trade circles.

The Ld. AR submitted that the assessee had disclosed the identity of the creditor,

its creditworthiness by providing income tax assessment details of the creditors

and the Assessing Officer was having in his possession the financial statements

of the creditors and the Assessing Officer had himself admitted that the funds

were received through banking channels. Therefore, it was submitted that all

the criteria prescribed for proving the credits as per the provisions of sec. 68

having been discharged, the onus of proving otherwise shifted to the Assessing

Officer and he cannot make an addition u/s. 68 merely on the basis of his

assumptions that the funds were of the assessee himself and without discharging

this onus with documentary evidences, the addition made u/s. 68 is not

sustainable. For this, the Ld. AR relied on the judgment of the Delhi High Court

in the case of CIT vs. Shiv Dhooti Pearls and Investments Ltd. (237 Taxman 104)

wherein it was held that Assessing Officer had ample ‘freedom ’to make an

enquiry “Not only into the Source(s) of the Creditor, but also of his (Creditor’s)

Sub-Creditors and prove, as result, of such an enquiry that money received by

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 the Assessee, in form of Loan from Creditor though routed through Sub-

Creditors, actually belonged to, or was of, Assessee himself. It was not burden

of Assessee to prove genuineness of transactions between his Creditor and Sub

Creditors nor was it burden of Assessee to prove that Sub Creditor had credit

worthiness to advance cash credit to Creditor from whom cash credit has been,

eventually, received by Assessee.” The Ld. AR relied on the following judgments

of the High Courts in support of the above contention:

1) CIT vs. Sahibganj Electric Cables Pvt. Ltd. (115 ITR 408) (Cal.) 2) ACIT vs. Hanuman Agarwal (151 ITR 150) (Patna) 3) Mod Creations Pvt. Ltd. vs. ITO (354 ITR 282) (Delhi) 4) CIt vs. Anirudh Narayan Agarwal (84 CCH 24)(All.) 5) DCIT vs. Rohini Builders (265 ITR 360) (Guj.)

material marked as SKP/KLM/DA 1 to 23 clearly showed a lot of trade activities

between the assessee and these companies namely, M/s.Sabari Enterprises P

Ltd, M/s. Sabari Millenium Exports P Ltd, M/s. Sabari Switchgear P Ltd , and

Basanth Impex, Shyam International, Sree Chao Impex, Ajay Iron and Steel P

Ltd, Vani Exports and Mayur Impex. The narrated facts in earlier pages of this

order in the tabular form proved the trade activities carried on by the assessee

with the alleged parties. The Assessing Officer has not denied these business

transactions with the alleged parties. The assessee is a trader of DEPB import

licences. The assessee purchases these licenses from exporters in Kerala and

other neighbouring states and sells them to these Kolkota based companies and

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 who sells it to other importers. These alleged Kolkota based companies acted as

middlemen between the assessee and the final buyers, i.e. importers and,

therefore, these Kolkota based companies have no option but to operate on

thinnest of margins. Search was conducted at the residential as well as business

premises of the assessee, Shri Sunil Kumar and consequently, statement of Shri

Mahesh Khetan, s/o Late Shri Gauri Shankar Khetan, who managed the affairs of

M/s. Basanth Impex, Shree Chao Impex, Shyam International and Mayur Impex,

was recorded by DDIT, Kolkota, wherein Shri Mahesh Khetan stated that “all the

business activities, books of accounts etc. in respect of these proprietory

concerns were performed and maintained by Sabari Group. They were used only

for signing authorities by Sabari group. In lieu of signature they got commission

from Sabari group”. However, Shri Mahesh Khetan, later retracted from his

statement claiming that the statement from him was taken exerting undue

pressure and force. Subsequent to retraction by Shri Mahesh Khetan, the

Assessing Officer did not carry out any further investigation and relied on the

statement originally recorded by the DDIT, Kolkota. In the statement, originally

recorded by the DDIT, Kolkota, Shri Mahesh Khetan stated that the books of

accounts of his concerns, i.e., Basanth Impex, Shyam International, Vani Exports

etc. were maintained by the assessee Shri P. Sunil Kumar. However, search was

conducted at the premises of the assessee, and if the books of Mahesh Khetan’s

group were found at assessee’s premises, the Assessing Officer would have

mentioned the same in the assessment order. Obviously, the books of accounts

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 relating to Shri Gauri Shankar Khetan and Shri Mukesh Khetan group of cases

were not found within the contents of original statement of Shri Mahesh Khetan

recorded by DDIT, Kolkota are not true and cannot be relied upon. Similarly,

statement of Chartered Accountant, Shri Ravi Biyala was recorded, who also

retracted subsequently. During the course of assessment proceedings, since the

Assessing Officer was using these statements against the assessee, the assessee

requested cross-examiantion of Shri Khetan and Shri Biyala, which was not given

by the Assessing Officer as there was no sufficient time available with the

Assessing Officer. As seen from the facts of the case, the Assessing Officer has

not found any mistake in the books of account maintained by the assessee and

he has not rejected the assessee’s books of account. The addition made by the

AO was mainly based on the statement recorded from Shri Manish Khetan who

later retracted his statement and therefore, much credence cannot be given to

the statement recorded from these persons as we do not know whether the

statement is correct as they have not brought on record any corroborative

evidence. Further, the Assessing Officer has not given opportunity of cross

examination of these persons to the assessee. The books of accounts of these

concerns were duly audited and they have filed the returns of income. The

Department having accepted their returns of income, it is not possible to reject

certain entries without bringing in any contra evidence against those entries.

The main reason for making the addition in the hands of the assessee is that the

other concerns were doing business with very low margin of profit. The

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 Assessing Officer suspected extending such huge advances to the assessee. In

our opinion, suspicion cannot be reason for making additions and it cannot

replace the evidence on record. As rightly pointed out by the CIT(A), neither the

Assessing Officer nor the Investigating authorities have brought on record any

incriminating documents to suggest that the assessee is holding unaccounted

income which was lend to the certain persons and got it back as loans and

advances. The Assessing Officer cannot draw inference on the basis of suspicion,

conjuncture and surmises. Suspicion cannot take place of material in support of

the findings of the Assessing Officer. The Assessing Officer should act in a

judicial manner, proceed with judicial spirit and should come to judicial

conclusion. The Assessing Officer is required to act as a reasonable person and

not arbitrarily and capriciously. The assessment should be made on the basis of

adequate material and it should stand on its own legs. The Assessing Officer

without examining the issue properly, he cannot come to the conclusion that the

assessee had advanced loans to other business concerns and got it back. The

evidence brought on record by the Assessing Officer does not suggest that the

source of funds received from the alleged parties was sourced by the assessee.

Addition was made only because of low profit margin of the parties who had

advanced money to the assessee. These are the assessments u/s. 153A of the

Act. The documents relied on by the Assessing Officer for the purpose of

determining the income of the assessee is to be put before he assessee for

comments or for cross examination. More so, if the Assessing Officer wants to

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 rely on any statement of third party, the same is required to be furnished to the

assessee and if the assessee wants to cross examine any of the parties whose

statements were relied on by the Assessing Officer, the same is to be provided to

the assessee.

7.1 In the present case, the assessee is having grievance of not being provided

an opportunity of cross examination of the parties whose statements were relied

on by the Assessing Officer while framing the assessment, though the said

parties retracted the statements. According to us, not allowing the assessee to

cross examine the parties whose statements were relied upon to make addition

in the impugned assessment order is a serious flaw which makes the order null

and void in as much as it amounted to violation of principles of natural justice

because of which the assesses were adversely affected. More so, the

circumstances surrounding the case are not strong enough to justify rejection of

the assessee’s plea of providing opportunity of cross examination. In the

present case, the entire evidence has to be appreciated in a wholesome manner

and even when there is a documentary evidence, the same can be overlooked if

there are surrounding circumstances to show that the claim of the assessee is

opposed to the normal course of human thinking and conduct or human

probabilities. There is difficulty in rejecting the assessee’s plea as opposed to

the normal course of human conduct. The evidence collected by the lower

authorities was not enough to establish their stand that the main transactions

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 carried out by the assessee with the above parties were only paper transactions

and only accommodation entries. As discussed earlier, there is no evidence

which was brought on record to directly show that these transactions are

accommodation entries. Therefore, no addition could be made on account of

these alleged transactions in the hands of the assessee by treating them as

unexplained credits u/s. 68 of the Act. In our opinion, transaction shall be

accepted to be real as there is no evidence showing otherwise. Further, the

surrounding circumstances apart from the direct evidence in the instant case did

not contain anything which belied the claim of the assessee. In view of this we

are of the opinion that the addition made by the Assessing Officer cannot be

sustained. As such, the CIT(A) is justified in deleting such additions made u/s.

68 of the I.T. Act and confirm the order of the CIT(A). Similar ground was raised

in other appeals. This ground of appeals of the Revenue is dismissed for all the

assessment years.

deletion of addition made u/s. 69B of the I.T. Act at Rs. 1.00 crore and Rs.7.01

cores for the assessment years 2011-12 and 2012-13 respectively.

8.1 The facts of the case as narrated in ITA No. 349/Coch/2017 are that from

the balance sheet of M/s. Basanth Impex for the F.Y. 2010-11, it was found that

an amount of Rs.1,00,00,000/- was paid to Shri Thulasidhas, a close friend and

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 partner of the assessee. They were partners of M/s. Sabari Developers, a firm

with the same address as that of M/s. Thulasi Developers P. Ltd. The payment

was made by Basanth Impex as interest free loan on behalf of the assessee.

Therefore, this amount was assessed in the hands of the assessee u/s. 69B of

the Act.

8.2 On appeal, the CIT(A) found that the loan was given by M/s. Basanth

Impex to Shri Thulasidhas and therefore, the amount cannot be given by the

assessee to Shri Thulasidhas. According to the CIT(A), the Assessing Officer has

not spoken about any evidence in support of this conclusion drawn. It was

noticed that the transaction was not recorded in the books of the assessee and

the transactions between M/s. Basanth Impex and Shri Thulasidhas had taken

place through banking channels and was duly recorded by them in their books.

Under these facts and circumstances of the case, the CIT(A) held that the

addition made by the Assessing Officer cannot be sustained and thereby, deleted

the addition of Rs. 1,00,00,000/- u/s. 69B of the Act.

8.3 Against this, the Revenue is in appeal before us. The Ld. CIT(DR)

submitted that since M/s. Basanth Impex did not have the wherewithal to

advance loan, the funds came from the assessee only. It was submitted that the

CIT(A) overlooked the close nexus between M/s. Basanth Impex and the

assessee. The Ld. DR submitted that the proprietor of M/s. Basanth Impex, Shri

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 Manish Khetan admitted on oath that this was only a paper business doing the

bidding of the assessee. Therefore, it was prayed that the addition made u/s.

69B of the Act may be restored.

8.4 On the other hand, the Ld. AR submitted that the addition was not made

on the basis of any documentary evidence but purely on suspicion, presumption

and surmises and therefore, it cannot be assessed as unexplained investment of

the assessee /s. 69B of the I.T. Act.

8.5 We have heard the rival submissions and perused the record. Since, the

transaction was between M/s. Basanth Impex and Shri Thulasidas, there is no

material on record to suggest that the assessee was in any way involved in this

business. Therefore, the order of the CIT(A) on this issue is confirmed, deletion

of addition is justified. This ground of appeals of the Revenue is dismissed.

8.6 Similarly, for the assessment year 2012-13, the Assessing Officer made the

addition u/s. 69B towards interest free loans of Rs.80 lakhs advanced by M/s.

Basanth Impex to Shri Thulasidas, a close friend and associate of the assessee,

interest free loans of Rs. 2 crores advanced by Ms/. Basanth Impex to Shri

Jayakrishnan, a close friend and associate of the assessee and interest free loans

of Rs.4.21 crores advanced by M/s. Basanth Impex to M/s. Thulasi Developers

which is promoted by Shri Thulasidas, a close friend and associate of the

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 assessee. The Assessing Officer suspected that these advances were actually

made by the present assessee himself, hence, he treated it as unexplained

income of the assessee. As discussed earlier in para 8.5, there is no material to

establish that loans advanced by M/s. Basanth Impex to these persons are

undisclosed investments of the assessee. In other words, the assessee had not

advanced the loans to these parties. Hence, we are not in a position to interfere

with the order of the CIT(A) in deleting the addition. Thus, this ground of

appeals of the Revenue is also dismissed.

addition of Rs. 61 lakhs being investment made by the assessee in shares of

Penver Products (P) Ltd.

9.1 The facts of the case are that the assessee had purchased 19444 shares of

Penver Products (P) Ltd. each costing Rs.828 and the requisite proof was

furnished by the MD of the said firm under oath. Thus, the total investment

came to Rs.1,60,99,632 (Rs.1.61 crores). The assessee made payment of Rs.1

crore as shown by seized material SKP/KLM/DS/8 and the balance of Rs.61 lakhs

was paid by M/s. Basanth Impex which did not have the sources to make such a

large investment. Therefore, the Assessing Officer made the addition of Rs.61

lakhs, being unexplained investment.

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 9.2 On appeal, the CIT(A) deleted the addition by observing that the assessee,

M/s. Basant Impex and M/s. Penver Products Pvt. Ltd. are three different

entities. The assessee had paid an amount of Rs. 1 crore for subscription of

12,077 shares of M/s. Penver Products Pvt. Ltd. and recorded the same in his

books of account. Similarly, M/s. Basanth Impex had paid an amount of Rs.61

lakhs for subscribing 7367 shares of M/s. Penver Products Pvt. Ltd. and recorded

the same in its books of account. The CIT(A) observed that there is no evidence

showing that the assessee funded Rs, 61 lakhs to M/s. Basanth Impex out of

books. Under the facts and circumstances of the case, the CIT(A) held that the

only on the basis of suspicion and in the absence of any evidence, the Assessing

Officer was not justified in making the addition of Rs.61 lakhs u/s. 69 of the Act

and deleted the same.

9.3 Against this, the Revenue is in appeal before us. The Ld. CIT(DR)

submitted that the CIT(A) overlooked the fact that M/s. Basanth Impex did not

have the sources to make such a large investment and that preponderance of

probability suggested that the investment was made on the behalf of the

assessee.

9.4 On the other hand, the Ld. AR submitted that the assessee had duly

reflected this investment in his books of accounts. If the Assessing Officer had

doubt about the sources of investment by M/s. Basanth Impex, the Ld. AR

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 submitted that inquiry should have been conducted in the case of M/s. Basanth

Impex and addition should have been made in that case.

9.5 We have heard the rival submissions and perused the record. The total

investment was made at Rs.1.61 crores. Out of this, the assessee paid Rs. 1

crore and the balance amount of Rs. 61 lakhs was paid by M/s. Basanth Impex

towards subscription of 7367 shares of M/s. Penver Products Pvt. Ltd. which was

duly recorded in the books of account of M/s. Basanth Impex. Being so, it

cannot be said that the said investment was by the assessee so as to treat the

unexplained investment in the hands of the assessee. Accordingly, we do not

find any infirmity in deletion of the addition by the CIT(A). This ground of

appeal of the Revenue is dismissed. Thus, the appeals of the Revenue in ITA

Nos. 348, 349 & 350/Coch/2017 are dismissed.

addition towards unexplained investment of Rs.3,08,19,727/-.

10.1 The facts of the case are that during the course of search a piece of paper

was found, claimed to have been in the handwriting of Shri Vishwajith Menon,

CEO of Sabari Group. There was some calculation on this piece of paper and at

the end of calculation a figure of 1.33 was jotted down. The Assessing Officer

co-related these jottings to purchase of land at Ambalipadam by M/s. Sabari

Quality Foods. A cash flow statement was filed by the assessee which showed a

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 total cash outflow of Rs.4,22,00,079/-. According to the Assessing Officer, the

actual cash outflow as per the seized document PSK/DS/2(1) was

Rs.7,39,53,500/- in place of Rs.6,07,00,000/- and the difference between the

two was treated as unaccounted investment made by the assessee.

10.2 On appeal, the CIT(A) found that there was no mention of any statement

recorded of Shri Vishwajith Menon in respect of the paper and this transaction in

the assessment order. No statement of the assessee was seen to have been

taken on this transaction which was lawfully required, as the addition was made

in his hands. The CIT(A) observed that no inquiry was made with the seller of

land to verify the actual price of land and no admission was made by the

assessee during the course of search regarding payment of unaccounted

consideration for purchase of land. The CIT(A) noticed that the Assessing Officer

had not made any effort whatsoever to enquire about the transaction reflected in

the seized piece of paper. The CIT(A) was of the opinion that the piece of paper

found and seized during the course of search was good enough to start

investigation but not good at all to reach a conclusion. According to the CIT(A)

addition made on the basis of loose paper, notings without any cogent

supporting corroborative evidence cannot be sustained. Accordingly, he deleted

the addition.

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 10.3 Against this, the Revenue is in appeal before us. The Ld. CIT(DR)

submitted that the CIT(A) overlooked that as per section 132(4A), the contents

of seized documents are presumed to be true. It was submitted that the CIT(A)

erred in holding that sufficient enquiries had not been done by the Assessing

Officer and the CIT(A) could have got the same investigated by the Assessing

Officer rather than summarily deleting the addition.

10.4 The Ld. AR submitted that the Assessing Officer himself admitted that the

advance paid as per books was Rs.6,07,00,000/- which was evident from the

first sentence of para 13, page 10 of his assessment order. So what was not

recorded even according to the Assessing Officer should have been 13253500/-

i.e., Rs.73953500/- minus Rs.6,07,00,000/- in place of which he made an

addition of Rs.3,08,19,727/- which figure cannot be derived from the other

figures mentioned in his assessment order. Therefore, with respect to this

addition also, no explanation was sought from the assessee and the quantum of

addition was also not as per provisions of s. 69B since the section envisages only

to add what is not recorded in the books of accounts. The Ld. AR relied on

section 34 of the Indian Evidence Act wherein it is held that only entries in the

books of accounts regularly kept in the course of business are relevant

evidences. Further, the Ld. AR relied on the judgment of the Supreme Court in

the case of Jain Hawala case which was followed recently in Birla Sahara case

wherein it was held that there should be independent evidence to prove that this

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 transaction took place and the recipients had actually received this payment. In

the case of Ambalipadam land, it was submitted that the copy of the document

was available with the Assessing Officer and the names and addresses of the

land owners were mentioned in these documents. It was submitted that the

Assessing Officer should have made enquiry with the land owners, whether they

have received the actual consideration of Rs.7,39,53,500/- before proceeding

with the addition. As the addition was made without any corroborative evidence

and without making any enquiry, the Ld. AR prayed that the addition may be

deleted. For this, he relied on the judgment of the Jurisdictional High Court in

the case of CIT vs. Lakshmi Hospital (347 ITR 367).

10.5 We have heard the rival submissions and perused the record. In this case

the addition was made on the basis of jottings in a loose paper found during the

course of search. The Assessing Officer co-related these jottings in the loose

paper to purchase of land at Ambalipadam by M/s. Sabari Quality Foods.

According to him, there was a difference between the actual transaction

recorded by the assessee in his books of account and entries in the loose paper

found during the course of search. In our opinion, entries in the loose paper

cannot be considered as material to sustain the addition. More so, the CIT(A)

observed that there was no statement recorded from the assessee towards this

transaction by the Department. Further, there was no inquiry made with the

seller of the land to verify the actual price of the land and there was no

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 admission made by the assessee during the course of search regarding this

transaction. Under these facts and circumstances, the CIT(A) deleted the

addition as no corroborative material was found to sustain the addition.

Accordingly, we do not find any infirmity in the order of the CIT(A) and confirm

the same. This ground of appeal of the Revenue is dismissed.

addition made u/s. 2(22)(e) of the I.T. Act.

11.1 The facts of the case are that the assessee received Rs.1,70,62,169/- from

M/s. Sabari Milineium Impex P. Ltd. as loans and advances which was paid to

Director, Shri Sunil Kumar, the assessee. As the reserves for the F.Y. 2007-08

was only Rs.1,88,051/-, the payment received from M/s. Sabari Milineium Impex

P. Ltd. was restricted to Rs.1,88,051/-. During the relevant previous year, a

sum of Rs.40,23,407/- from M/s. Sabari Switchgear P. Ltd. as loans and

advances was paid to its Managing Director and therefore, taken as deemed

dividend u/s. 2(22)(e) of the Act. The Assessing Officer made addition to total

income of Rs.40,23,407/- as the previous years accumulated profits at

Rs.57,83,680/-.

11.2 On appeal, the CIT(A) deleted the addition by observing that the addition

was made in a routine mechanical manner without verifying the facts of the

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 case. During the year under consideration, it was observed that the reserves

and surplus of M/s. Sabari Milineium Impex P. Ltd. was a negative figure and

consequently provisions of section 2(22)(e) are not applicable. In the case of

M/s. Sabari Switchgear P. Ltd., it was observed that the assessee had given loan

to the company in net effect and therefore, no addition can be made in the

hands of the assessee u/s. 2(22)(e) of the Act. Accordingly, the CIT(A) deleted

both the additions. .

11.3 Against this, the Revenue is in appeal before us. The Ld. CIT(DR)

submitted that CIT(A) overlooked the fact that section 2(22)(e) does not

envisage “netting off” of dealings between the shareholder and company. If the

shareholder had received loans from the company in which he is substantially

interested, the condition of section 2(22)(e) was met. Accordingly, he justified

the addition made by the Assessing Officer.

11.4 On the other hand, the Ld. AR submitted that the loan of Rs.1,70,62,169/-

was not out of the Reserves and Surpluses of M/s. Sabari Milineium Impex P.

Ltd. as on 31/03/2009 since the same as per its balance sheet as on 31/03/2009

was only a negative figure of Rs.18,09,269/-. Similarly, the loan of

Rs.40,23,407/- received from Sabari Switchgear P. Ltd. was included under the

Schedule of Loans and Advances. The assessee had advanced Rs.8,48,01,579/-

to M/s. Sabari Switchgear P. Ltd. during this assessment year itself and was

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 included under the Schedule Deposits and Advances in the balance sheet of the

assessee as on 31/03/2009. So, it was submitted that when these amounts were

clubbed together, the net amount as on 31/03/2009 will only be an advance to

M/s. Sabari Switchgear P. Ltd. at Rs.8,07,78,171.43. Therefore, it was submitted

that both the schedules should have been verified by the Assessing Officer

which was available to him. As there was no loans as on 31/03/2009, it was

submitted that the both the additions may be deleted.

11.5 We have heard the rival submissions and perused the record. During the

year under consideration, the assessee received Rs.40,23,407/- as loan from

M/s. Sabari Switchgear Pvt. Ltd. The accumulated profit of this Company was

Rs.57,83,680/-. Hence, the Assessing Officer treated the amount of

Rs.40,23,407/- as deemed dividend u/s. 2(22)(e) of the I.T. Act. However, the

Assessing Officer has not noticed the fact that the assessee had advanced a sum

of Rs.8,48,01,579/- to M/s. Sabari Switchgear Pvt. Ltd. Thus, net amount of

Rs.8,07,78,171.43 as on 31/03/2009 was advanced by the assessee to M/s.

Sabari Switchgear P. Ltd. Without verifying these facts, the Assessing Officer

treated the advance of Rs.40,23,407/- given by M/s. Sabari Switchgear Pvt. Ltd.

to the assessee as deemed dividend u/s. 2(22(e) of the Act which is not correct.

Hence, the CIT(A) deleted the addition. In view of this, we do not find any

infirmity in the order of the CIT(A) and the same is confirmed. Hence, this

ground of appeal of the Revenue in ITA No. 347/Coch/2017 is dismissed.

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017

11.6 The only ground in assessee’s appeal in ITA No. 355/Coch/2017 is with

regard to deletion of addition of Rs.62,78,256/- made u/s. 2(22)(e) of the I.T.

Act as deemed dividend.

11.7 We have heard both the parties. In this assessment year, the assessee

being the Managing Director and beneficiary owner of shares of M/s. Sabari

Switchgear Pvt. Ltd., received loan of Rs.4,94,78,237/-. The cumulative profit in

the hands of M/s. Sabari Switchgear Pvt. Ltd. was at Rs.62,78,256/-. To that

extent, the Assessing Officer treated it as deemed dividend. Now the contention

of the Ld. AR that this is a temporary advance to the assessee. In our opinion,

even temporary advance is to be treated as deemed dividend u/s. 2(22)(e) of

the Act unless the assessee proved that it is on account of commercial

expediency and the transaction is only trade advance. In the present case, since

the assessee has not been able to prove that it is trade advance, we are not in a

position to interfere with the order of the CIT(A). Hence, this ground of appeal

of the assessee is dismissed. The appeal of the assessee in ITA No.

355/Coch/2017 is dismissed.

to deletion of addition made u/s. 68 of the Act at Rs.6.53 crores and 2.00 crores

for the assessment year 2012-13 and 2014-15 respectively. The facts in these

cases are similar to the facts in ITA Nos. 347 to 352 and 354/Coch/2017 and 37

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 therefore, by applying the same ratio as in para 7 above, we confirm the

finding of thee CIT(A) and accordingly, this ground of appeals of the Revenue is

dismissed.

12.1 The only ground in ITA No. 360/Coch/2017 is with regard to addition

made u/s. 68 of the I.T. Act amounting to Rs.5,44,344/- being amount payable

to M/s. Shyam International.

12.2 At the time of hearing, the Department sought withdrawal of the appeal

in view of the CBDT Circular No. 3/2018 in F.No. 279/Misc. 142/2007-ITJ(Pt)

dated 11/07/2018 wherein the monetary threshold limit for filing appeals before

the ITAT was enhanced and tax effect is below Rs.20 lakhs. In the present case,

the tax effect being less than Rs.20 lakhs, this ground of appeal of the Revenue

is dismissed.

erred in holding that the Assessing Officer had made inadequate enquiry on any

point. The Ld. DR submitted that the CIT(A) should have issued a direction u/s.

250(4) for conduct of further enquiry and report especially when his power is co-

terminus with that of the Assessing Officer.

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 13.1 We have heard the rival submissions and perused the record. In all these

appeals, the CIT(DR) made the plea that there is no enquiry made by the

Assessing Officer and the CIT(A) should have set aside the issue to the file of the

Assessing Officer for fresh enquiry. In our opinion, the argument of the CIT(DR)

is misconceived. The assessments were framed u/s. 153A of the I.T. Act and it

is the duty of the investigating authorities as well as the Assessing Officer to

make necessary enquiry before framing the assessment. The failure on the part

of the Assessing Officer to carry out necessary enquiry for bringing evidence on

record, cannot be attributed to the assessee and at this stage, we are not in a

position to extend time so as to cause further enquiries to facilitate evidence on

record to sustain the additions. There cannot be any further enquiry or

examination of facts, if the basic facts necessary for the disposal of the matter

are already on record. In our opinion, factually, further enquiry can be done in

rare cases by the CIT(A) only when it is not possible for the CIT(A) to make just

order. There cannot be any further enquiry or calling for remand report by the

CIT(A) for patching up the weak part of the case and fill up the omission of the

authorities by giving another innings. The CIT(A) should decide the matter one

way or the other rather than causing further enquiry, when all the facts required

for adjudication were already available on record. In our opinion, calling for

remand report by the CIT(A) should be made in very rare cases and exceptional

circumstances. If at the original stage, there was patently grave error committed

by the authorities or when the assessment by the Assessing Officer was made in

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 a haste owing to limitation period or remand can also be justified if the first

appellate authority has violated and not followed without meeting the statutory

provisions properly. In the present case, we do not find any lapse on the part of

the CIT(A) in not calling for the remand report or not conducting further enquiry.

In view of this, we dismiss all the appeals of the Revenue.

C.O. Nos. 33 to 39 & 40 to 41/Coch/2017

panchanama was drawn in this case on 17/04/2015.

14.1 The facts of the case as narrated in C.O. No. 33/Coch/2017 are that the

assessee contended that the last panchanama was drawn in this case on

17.04.2015 and, therefore, year of search would be F.Y. 2015-16 i.e. A.Y. 2016-

years starting from 2010-11 and not 2009-10.

14.2 We have heard both the parties. The date of search has to be reckoned

with last warrant executed and there was no dispute about the fact that last

warrant was executed in F.Y. 2014-15 and, therefore, the AO had correctly

initiated the proceedings u/s. 153A for A.Y. 2009-10 and dismissed this ground

of appeal of the assessee. Accordingly, this ground of Cross Objections of the

assessee is dismissed.

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017

U/S.153A on 29.11.2016 without having jurisdiction as his objection filed on

26.12.2016 was not disposed off u/s.124(3).

15.1 From the statement of facts narrated by the assessee himself, the CIT(A)

observed that centralization order was served on the assessee on 08.11.2016,

which was received by the assessee at his Chennai address on 21.11.2016. Since

the order was already passed on 08.11.2016, the CIT(A) was of the view that the

ACIT, Central Circle had valid jurisdiction and accordingly he issued notice U/s.

153A on 29.11.2016. The Principal CIT, Chennai had given time upto 25.11.2016

for filing objections. However, no objection was filed by the assessee by that

date and the AO correctly issued Notice on 29.11.2016. The CIT(A) was of the

view that the assessee filed his objection on 26.12.2016, which can only be

treated as an afterthought and needed to be ignored, as by then assessment

proceedings were in advance stage and the appellant was aware that substantial

additions are likely to be made. In view of the sequences of events discussed

above, the CIT(A) held that this ground of appeal was of no relevance and the

same was dismissed.

15.2 We have heard the rival submissions and perused the record. Considering

the above facts, we do not find any infirmity in the order of the CIT(A) and

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 uphold the same. Thus, this ground of Cross Objections of the assessee is

dismissed.

getting barred by limitation of time on 31.12.2017 and not on 31.12.2016.

16.1 The Ld. AR contended that the last Panchanama was drawn on

17.04.2015 and, therefore, the time barring date for completion of assessment

was 31.12.2017. Since the AO took time barring date as 31.12.2016, there was

paucity of time and he was not given cross-examination of persons, whose

statements were used against him in the assessment proceedings.

16.2 We have heard both the parties. The dates of limitation have to be

counted from the date of execution of last warrant and not the last panchanama,

therefore, the AO correctly held 31.12.2016 as time barring date for finalization

of assessment. Accordingly, we confirm the finding of the CIT(A) and dismiss

this ground of Cross Objections of the assessee.

was violated and he was not given a proposal for addition before passing the

assessment order.

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 17.1 The CIT(A) rejected this contention of the assessee as factually incorrect.

According to the CIT(A), during the course of appellate proceedings, the

assessee filed paper book on technical grounds and Page Nos.12 to 16 of the

paper book was a letter written by the assessee to the AO and the same was

dated19.12.2016. According to the CIT(A), in this letter the assessee had

furnished his explanation against the proposed addition by the Assessing Officer

and therefore, this letter in itself is a proof that the assessee was made aware of

the intention of the AO and he was also given opportunity to defend himself.

Thus, according to the CIT(A), it was very clear that the principle of natural

justice was not violated in this case. Therefore, this ground of appeal, being

factually incorrect, was dismissed. We confirm the same and dismiss this ground

of Cross Objections of the assessee.

issued and, therefore, the assessment needs to be quashed.

18.1 The CIT(A) noticed that this ground was not raised by the assessee before

the AO. Notice u/s. 143(2) was issued to establish the jurisdiction by the AO.

From the records, the CIT(A) found that the Assessing Officer had issued

Statutory Notices and the same was complied by the assessee also. It was

observed that the assessee had raised this issue of jurisdiction, albeit belatedly,

before the CIT, Chennai, when the case was transferred from Chennai to Kollam.

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 Since the objection was filed late, beyond the date given by the Principal CIT,

Chennai, the same was not considered by him. In view of these facts, the CIT(A)

held that this ground was not maintainable and the same was dismissed. We

confirm the same and dismiss this ground of Cross Objections of the assessee.

u/s, 143(3) and no incriminating material was found in the search.

19.1 The Ld. AR submitted that the seized document SKP/KLM/DS 1 to 23 were

accounted for in the books of accounts of the assessee and, therefore, it was not

an incriminating seized material. The Ld. AR contended that in absence of

incriminating found in the search, assessment u/s.153A was not sustainable

under the law. According to the CIT(A), there was no doubt about the fact that

documents evidencing financial transactions of the assessee were found and

seized during the course of search at assessee's premises. The CIT(A) held that

whether these transactions were recorded in the books of the assessee and

whether the income emanating from these transactions were offered to tax by

the assessee or not could only be ascertained in assessment proceedings

u/s.153A r.w.s. 143(3). According to the CIT(A), it is not necessary that all the

documents found and seized in the search should result in addition to total

income. The CIT(A) took the view that the very purpose of assessment is to

examine these documents and then the AO takes a decision regarding the

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 taxability. Therefore, the CIT(A) did not find any infirmity in the action of the AO

and dismissed this ground of appeal of the assessee. We are in agreement with

the finding of the CIT(A) and dismiss this ground of Cross Objections of the

assessee.

C.O. No. 42/Coch/2017

view of the tax effect, the cross objection of the assessee has become

infructuous and the same is dismissed as infructuous.

Objections and appeal of the assessee are dismissed. Order pronounced in the open Court on this 13th December, 2018.

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 13th December, 2018 GJ Copy to: 1. Shri Sunil Kumar, Sabari Qualtiy Foods, Asramam, Kollam-2 2. M/s. Sabari Enterprises, Asramam, Kollam-2. 3. The Deputy Commissioner of Income-tax, Central Circle, Kollam. 4. The Commissioner of Income-tax(Appeals)-IV, Kochi.,

I.T.A. Nos.347-354 etc. /Coch/2017 & C.O. Nos. 33-39, 40-42/Coch/2017 5. The Pr. Commissioner of Income-tax, Central, Kochi. 6. D.R., I.T.A.T., Cochin Bench, Cochin. 7. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin