PARAM DAIRY LTD.,NEW DELHI vs. ACIT, CENTRAL CIRCLE- 14, NEW DELHI

Since primary issue(s)/ addition(s) in both the appeals are similar, so same were heard together and are being disposed off by way of this consolidated order.

We will first take up the appeal for the assessment year 2013-14 in ITA No 3993/Del/2019. The grounds of appeal raised are reproduced as under:

That the Commissioner of Income-tax (Appeals) [‘CIT(A)’] erred on facts and in law in not holding that the assessment completed vide order dated 29.12.2017 under section 143(3) r.w.s. 153A of the Income-tax Act (‘the Act’) is beyond jurisdiction, bad in law and void-ab- initio. 2. That the CIT(A) erred on facts and in law in not appreciating that the assessment order passed under section 143(3)/ 153A was passed in gross violation of provisions of section 153D of the Act inasmuch as the statutory approval of the JCIT, if any, was not provided to the appellant, and thus the assessment completed is beyond jurisdiction and bad in law. Without prejudice: 3. That the CIT(A) erred on facts and in law in upholding addition of Rs.23,03,77,859 made by the assessing officer under section 69C of the Act treating purchase of milk in cash under the nomenclature “milk purchases tanki” as unsubstantiated/ unverified/ bogus.

In grounds of appeal no.2, the appellant had argued that the assessment order dated 29.12.2017 passed by the assessing officer (‘AO’) u/s 153A was in violation of section 153D of the Act and thus beyond jurisdiction and bad in law. Section 153D provides that order u/s 153A of the Act cannot be passed by the assessing officer (below the rank of Joint Commission) without prior approval of the Joint Commissioner. At the end of the assessment order dated 29.12.2017 passed u/s 153A/ 143(3), the AO has remarked that the order was passed by taking approval from Joint CIT u/s 153D of the Act vide letter dated 29.12.2017.

In this regard, the appellant had submitted that copy of approval u/s 153D from JCIT was not provided to it, which is in gross violation of the principles of natural justice. It has

The learned DR contended that the approval of JCIT was available on record, detail of which has been referred at end of the assessment order. He further stated that there is no specific requirement to provide the assessee with copy of such approval. The Ld. DR submitted that non-availability of the approval cannot be presumed and therefore, there is no merit in the ground raised by the appellant.

After considering the aforesaid submissions and on perusal of the assessment order and record, we find that it is an undisputed fact that the Ld. Assessing Officer before passing the assessment order had taken statutory approval u/s.153D from JCIT Central Range-4, New Delhi, who had accorded his approval vide letter No.F.No.JT.CIT/CR- 4/approval 153D/2017-18/1123 dated 29.12.2017. The contention of the ld. counsel before us is that the copy of approval granted by JCIT u/s.153D has not provided to them, and therefore, it is presumed that requisite sanction was not obtained by the Assessing Officer or the approval obtained may not be proper. Such a presumption first of all is unfounded, because nowhere Section 153D provides that before according the approval, JCIT should give opportunity of hearing or who provide the copy of approval to the assessee. This section only provides that, no order of assessment or re-assessment shall be passed by an officer below the rank of JCIT, except for the prior approval of the JCIT. Simply because approval has been taken on the same date does not lead to any presumption that is mechanical or without application of mind by the approving authority. We agree with the contention of the ld. DR that, what is required in the statute is the approval of JCIT which was available on record and the detail have been mentioned in the assessment order also and there is no statutory requirement under the law that copy of such approval or opportunity of hearing is to

Thus, the dispute is only with regard to purchases categorised as “tanki purchases”. As against the total milk purchases of Rs.332.67 crores during the relevant year, the AO, has accepted all other purchases, except he has made addition qua ‘Milk purchases Tanki’ payment which was made in cash by the appellant. Similar addition(s) were made by the AO in all assessments completed pursuant to search, viz., for AYs 2008-09 to 2014-05. It has been brought on record that additions made in the earlier assessment years 2008-09 to 2012-13 stood deleted by the Tribunal vide order dated 19.11.2019 in ITA No.3988 to 3992/Del/2019, wherein the Tribunal held that since the additions were not based on any incriminating material seized during the course of search and the purchases stood recorded in the books of account.

In the assessment order, it has been stated that during the search operation, ledger account of “milk purchase tanki”

On first appeal, the appellant filed detailed submissions alongwith various documents before the CIT (A), for assessment years 2008-09 to 2014-15 combined. Complete details of stock, details of each farmer, payments made to them day wise etc. were placed on record. The submissions were remanded by the CIT (A) to the assessing officer for

The CIT (A) has upheld the addition made by the appellant under section 69C holding that the appellant could not properly establish the bona fides of the purported purchases by either producing the suppliers with proper supporting evidences or establish the supply of milk in the manner as specified by the appellant during the course of scrutiny proceedings or even during search. The appellant is stated to have not furnished any specific details to establish its claim about having made cash payments. The CIT(A) held that the appellant had also not established the source of funds to generate cash amounting to Rs.23,03,77,859/- to be able to make the payments apart from merely mentioning the same to be from its books of accounts; the appellant did not give the source of funds and cash withdrawals etc., though the appellant had all the opportunity and requirement to counter the conclusions of the AO. The CIT (A) also doubted such tanki purchases on the ground that the same was made at relatively low rates. For the said reasons, addition of milk tanki purchases under section 69C of the IT Act was upheld by the CIT (A) holding the same to be bogus.

That apart, it was held by the CIT(A) that Rule 6DD of the IT Rules, which provides for exceptions to applicability of section 40A(3) of the IT Act cannot be invoked as the persons examined by the AO were clearly of trade dispensation and cannot be said to be agriculturists nor can other constraints of not having banking channels be seen. On examination of factual details by the CIT(A), a sum of Rs.45,30,989 was

The ld. Senior Counsel, Mr. Ajay Vohra appearing on behalf of the appellant argued that at the threshold itself the aforesaid addition cannot be sustained since provisions of section 69C of the IT Act are not applicable to expenditure/ amount duly recorded in the books of account. He submitted that section 69C of the IT Act deems an expenditure incurred by the assessee to be the income if source of such expenditure is not explained satisfactorily. He contended that once an expenditure is recorded in the books of accounts, the source obviously stands established in as much as expenditure stands incurred out of funds in the books of accounts, whereas primary pre-condition for invoking section 69C that the expenditure incurred by the assessee is out of books of account, is not satisfied. In support he relied on the decision of Delhi High Court in case of CIT vs Radhika Creations: [2011] 10 taxmann.com 138, wherein it was held that once the expenditure was recorded in the books of accounts, the source was obviously explained not warranting any addition u/s 69C of the Act. Our attention was also invited to the decision of the Delhi Bench of the Tribunal in case of Manoj Sharma vs ITO: [2019] 103 taxmann.com 105 (SMC), wherein it has been held that if the source of

Mr. Vohra further submitted that tanki milk purchases are admittedly recorded in the regular books of the account and was duly reflected in:- (a) the audited financial statements wherein total purchases including milk tanki purchases have been debited to the P&L account (copy placed at pages 5-49 specifically at page 22 of paper book); (b) cash tanki purchases being acknowledged by the AO relying on the ledger accounts forming part of regular books placed and reference was made to page 8 of assessment order; and (c) the fact that payment has been made against the said purchases which is also duly recorded in the books of account. In this factual background and relying upon legal position, he was argued that since ‘milk purchases tanki’ were recorded in the books of account, the impugned addition under section 69C of the Act was to be deleted.

Apart from the aforesaid legal submission, the Ld. Sr. Counsel also made various alternative submissions. His second limb of submission was that purchases made were genuine and there were no reasons for doubting the tanki purchases made by the appellant in cash. In this context, the modus operandi for milk purchases tanki was explained by him in the following manner: • Farmers from nearby villages having limited milk production come to the assessee’s factory and sell their daily milk production to the assessee. Sometimes, one head/ select farmer from the village collects all the milk and sends the same to the assessee’s factory. In case where head/ select farmer of the village collects and gets the milk, assessee keeps record of the select farmer of each village but not of the individual farmers, considering that the regular purchase/ dealing is made with the select farmer on behalf of the individual farmers. In the books of accounts, the assessee makes a common entry of purchases in order to avoid multiple and numerous ledgers. • At the time milk is received at the factory gate, the milk is weighed and tested for quality of milk. A quality slip is generated which contains the details of the milk, including gross weight/ net weight, temperature, taste, acidity, BB, fat content, CLR and SNF, sodium content, adulterants, etc. Such weighment/ quality slips have been placed at pages 83-98 of paper book.

In respect of the aforesaid submissions and to substantiate the genuineness of purchase, the appellant had placed on record: (a) Weighment/ quality slip issued/ generated at the time of receipt of milk into the factory; [pages 83-98 of paper book]; (b) Copies of bills, milk receipt notes/

Highlighting the aforesaid process/ modus operandi and the process documentation maintained by the assessee, it was contended by Mr. Vohra that purchases made by the assessee are clearly recorded in the books and are fully verifiable. Further, it was submitted by the appellant that the Ahmedabad Bench of the Tribunal in the case of Gamdiwala Dairy vs. ACIT: 136 TTJ 33 noted similar system of milk procurement by the assessee engaged in the dairy business. It was vehemently contended the aforesaid process is being adopted by the assessee for the last several years and has always been accepted in the past years. It was also submitted that other milk purchases (other than tanki purchases) are also substantially/ largely in cash but are not disputed by the Department. It is further submitted that the assessee has been dealing with same farmers’ year on year, which has not been doubted by the assessing officer in preceding and even

As regards the findings/ allegations of the Assessing Officer and Ld. CIT(A) that purchases were bogus since; (i) assessee failed to produce the farmers (except two); and (ii) farmers produced could not substantiate the capacity to have sold the quantity of milk recorded in the assessee’s books, Mr. Vohra submitted that, enough documentary evidence were placed on record to justify the genuineness of purchases; producing of all the farmers/ persons was beyond the control of the assessee, specifically considering that the parties were undisputedly unrelated to the assessee. Further, non- appearance of parties cannot be the ground to draw adverse inference against the assessee [refer CIT v. Fancy International: 166 Taxman 183 (Delhi),CIT vs Nikunj Eximpt Enterprises P Ltd in ITA No.5604 of 2010 (Bom.), M/s Lalsons Jewellers Ltd. v. ACIT: ITA No.5726/Del./2010 (Del. Trib.)]; various other farmers appeared before the assessing officer during remand proceedings; however, their statements were not recorded by the assessing officer and in support thereof the appellant placed on record affidavit of such farmers at pages 127-155 of the paper book.

It was submitted that as regard allegation that Mr. Manvir Singh has admitted to have supplied average 6,000

It was next submitted by the ld. Senior Counsel that the appellant had more than sufficient cash generated from substantial undoubted cash sales to source the purchases

Mr. Vohra, submitted that it is not open to the Revenue to have simply doubted part of the purchases, duly recorded in the books of account, stock registers, etc., and treat the same as bogus without any cogent reasons. It was submitted that: (i) complete stock details were filed before the assessing officer as under- (a) Stock summary register, chart explaining manufacturing process, etc [69,75 of paper book]; and (b) Details of parties from whom purchases and sales made along with quantitative details of stock, yearly purchase and sales, input output ratio, etc. [page 70-72 of paper book]; (ii) the

It was emphatically argued that appellant could not have made the admitted sales without having made the disputed purchases and therefore, it is not correct to disallow such purchases as bogus. Since sales (quantity and value) stands accepted, corresponding purchase could not have been disallowed. Reference in this regard was made to the following decisions: - Ashok Nanda vs DCIT: 54 ITR (T) 54 (Indore Trib.) - ACIT vs Mahesh Shah: 184 TTJ 702 (Mum) - Manoj Sharma vs ITO: [2019] 103 taxmann.com 105 (Del Trib) (SMC) - Ganesh DassPiara Lal Jain vs ITO: 49 ITR(T) 36 (Chd) - Fancy Wear vs ITO: 194 TTJ 125 (Mum) - ITO v. Pushpal Kumar Das: ITA No. 1442/Kol/2012 (Kol. Trib.)

It was further argued by Mr. Vohra that no adverse inference could be drawn on the facts of the present case for the reasons that:- (i) books of accounts are duly audited by the auditors and no adverse comment/ qualification thereon has been given; (ii) the books of account are accepted as correct and complete and have not been rejected by the assessing officer; and (iii) the Revenue department has accepted the history of book results declared by the assessee. Support was also drawn from the fact that if the aforesaid alleged tanki purchases are to be considered as bogus, then the GP ratio would increase drastically which defies logic and the consistently accepted GP ratio over the years, which supports the fact that purchases were genuine. In support reliance in this regard was placed on the decision of the jurisdictional Delhi High Court in the case of CIT v. Paradise Holidays 325 ITR 13 (Del.) wherein the Court held that the accounts which are regularly maintained in the course of business and are duly audited, free from any qualification by the auditors, should normally be taken as correct unless there are adequate reasons to indicate that the same are incorrect or unreliable. The Hon’ble Court further observed that the onus was upon the Revenue to show that either the books of account maintained by the assessee were incorrect or incomplete or that the method of accounting adopted by him was such that true profits of the assessee could not be deduced there from.

Without prejudice to the aforesaid proposition, Mr. Vohra argued that even if the purchases are held to be bogus, then, addition could have, at worst, been made only to the extent of profit on the sales made against the said purchases – the entire purchases cannot be disallowed (GP ratio is around 3% in the present case) [refer CIT vs. President Industries: 258 ITR 654 (Guj.), CIT v. Gurubachansingh J. Juneja: 302 ITR 63 (Guj.), PCIT vs. Ashokkumar C. Dharewa, HUF: TA No. 351 of 2017 (Guj.)].

Lastly, it was submitted that similar purchases on account of milk tanki purchases have been accepted by the assessing officer in assessment years 2015-16 and AY 2016- 17 in the assessment completed under section 143(3) of the Act and no addition has been made on account of milk tanki purchases being bogus [assessment orders have placed at pages 1 to 3 of Case Law paper book]. It was argued that there is no change in the modus operandi in the purchases/ business of the assessee company; and thus even on grounds of consistency, the issue deserves to be allowed in favour of the assessee company.

As regards alternate disallowance under section 40A(3) of the Act amounting to Rs.45,30,989, it was argued by the Ld. Sr. Counsel that the same is not sustainable inasmuch as the transaction is covered in terms of exceptions provided under clause (e) of Rule 6DD of the Rules. Reference was made to Gamdiwala Dairy vs ACIT: 136 TTJ 33 (Ahd.), where it was held that if the assessee and producers of milk

The Ld. DR, on the other head, vehemently relied upon the orders of the authorities below. He further submitted that addition under section 69C of the IT Act was rightly made by the assessing officer since the assessee failed to produce supporting evidences and failed to justify cash milk purchase tanki and that he could not establish cash payments. It was submitted that since the assessee was claiming expenses towards purchases, the onus was entirely on the assessee to establish the genuineness of the purchases. It was also contended that the claim of the appellant of having made purchases from farmers is not established in this regard,

We have heard the rival submissions, perused the relevant finding given in the impugned order as well as material referred to before us at the time of hearing. The addition of Rs.23,03,77,859/- has been made in respect of cash purchase of milk shown under the head ‘milk tanki purchases’ which has been added under the deeming provision of Section 69C, i.e., the assessee has incurred expenditure without any explanation about the source of such expenditure. The assessee is a manufacturer and exporter of milk and milk products and during the year it has declared purchases of Rs.332.76 crores in the books of account. The entire purchases of milk have been shown under 5 categories, which have been elaborated in foregoing paragraph 9 above. Out of various heads of purchases of milk, the dispute is with regard to milk purchases under the head ‘Tanki’ which has been purchased from the farmers of nearby villages, who

At the threshold, it is noticed that all the purchases under the head ‘Tanki’ have been duly recorded in the books of account and is reflected in the audited financial statements, wherein total purchases including Milk Tanki Purchases have been debited to the profit and loss account. Secondly, these purchases are duly reflected in ledger

The case of the Revenue is that the genuineness of the purchases could not be established merely for the reason that the payments have been made in cash to the farmers which was not open to independent verification from all the farmers. However, the nature of business of the assessee and modus operandi for milk tanki purchases has to be understood and in that light explanation has to be seen as to why the cash payments for such purchases are inevitable. The modus operandi as has been highlighted in the foregoing paragraphs needs to be kept in mind. For purchase of such huge quantum of milk from large number of farmers and individuals, it is very difficult to make individual account of

In none of the above details, the Assessing Officer has found any discrepancy or has found any fault, that the same is either not explainable or is not corroborated with other records. If the quantity of purchases are verifiable from other records maintained by the assessee and no discrepancy or defect has been found in the stock register or in the production register and above all the sale of milk/milk products have been accepted, then it is very difficult to hold that the purchases made by the assessee are not genuine or

The main charge of the Assessing Officer hinges upon the fact that the assessee has failed to produce the farmers, except for two, who also could not substantiate the capacity to sell the quantity of milk recorded in the books of account of the assessee. First of all, it is improbable that when assessee’s purchasing milk from hundreds of farmers, to produce all of them or to get the purchases verified from each of them. Without going into the aspect, whether the other farmers were produced before the Assessing Officer during the assessment/ remand proceedings and their statements were not recorded by the Assessing Officer, as has been alleged by the assessee before us, we are of the opinion that, simply because the farmers could not be produced, the entire purchases cannot be held to be bogus or not genuine, if the

Further, it cannot be disputed that sufficient cash is generated from cash sales which are duly reflected and accounted for in the books of account and is part of income, then such cash itself forms the source of purchases which too has been recorded in the books of account. It has been stated before us that the milk tanki purchases were used only to produce skimmed milk powder and substantial sale of skimmed milk powder have been made shown in the books of account. Without any purchase such huge quantity of tanki milk, skimmed milk powder could not have been sold. In support, quantitative summary chart of milk and milk products have also been filed before us which goes to show that entire milk tanki have been utilized for manufacturing of skimmed milk powder. Once the sales have been accepted, then corresponding purchases cannot be doubted especially when all the purchases and sales are recorded in returns filed before the VAT authorities. We agree with the contention of Mr. Vohra that assessee could not have made admitted sale without having made the disputed purchases especially when

Lastly, if the Assessing Officer has not rejected the books of account or the trading result, then Assessing Officer cannot tinker with the gross profit by disallowing entire purchases. Accordingly, the addition made by the Assessing Officer and sustained by the CIT (A) for sums amounting to Rs.23,03,77,859/- is deleted.

The other arguments of the ld. counsel that in the subsequent years and in the earlier years, similar purchases has not been doubted and the trading result have been accepted, though gives credence to the assessee’s explanation but does not warrant any binding precedence, because in such matters same has to be seen on the facts of those years.

As regards the alternate disallowance u/s.40A(3) amounting to Rs.45,30,989/- made by the ld. CIT(A), we find much substance in the arguments of the ld. Senior Counsel that, in terms of exception provided under clause (e) of Rule 6DD of the Income Tax Rules, if the assessee and producer of milk have agreed upon the arrangement that milk in a particular village would be collectively supplied to the assessee through mutually agreed person and assessee has agreed to make payment to the farmers for milk, then also no disallowance can be made even if the cash is in excess of Rs.20,000/-. This contention of the Ld. Senior counsel is inconsonance with the decision of the Co-ordinate Bench in

In ground of appeal no. 4 the appellant has challenged the addition of Rs.8,11,239/- made by the AO under section 69C of the IT Act on account of unexplained salary expenditure on the basis of contents of Page 50 of Annexure A7 of seized material relating to PD-2 (reproduced at page 17 of assessment order). The assessing officer held that during the post search enquiries, the assessee was asked to explain the contents of this page and a verification with the books of accounts shows that these data could not match. Since the figures remained verified from the regular books, the assessing officer treated the salary difference as out of books of payments not recorded in the regular books of accounts. The assessing officer did not accept the submission of the appellant that the seized page contains details of proposed salary arrears which were never given to employees and the paper was merely in the nature of a rough estimate.

On further appeal, the CIT(A) upheld the addition made on the ground that the details in the annexure appears to be salary paid outside books of accounts. The CIT (A) held that the AO in the remand report submitted that the appellant did not submit any documentary evidence or explanation against

During the course of arguments, the Ld. Senior Counsel for the appellant submitted that vide letter filed before the assessing officer (page 113 of paper book), the appellant explained that the said seized document is in nature of rough jottings and is dumb document inasmuch as it was stated that: (a) the author of the document is not known; (b) the document do not bear any signature; and (c) contains mere rough jottings as ‘salary difference’. It was submitted that the jottings merely relate to estimations/ deliberation/ discussion by the management/ executives for reduction in salary cost/ expenses and are not in the nature of any financial transactions undertaken by the appellant impacting its income/ expenses.

The Ld. Sr. Counsel also argued that the assessing officer has failed to bring on record any corroborative evidence to support his conclusion with regard to the allegations made in the assessment order that these expenses are actually incurred and are unexplained. Reliance in this regard was placed on various decisions wherein it has been held that where addition has been made solely on the basis of certain

Mr. Vohra further submitted that the issue is squarely covered in favour of the appellant by order dated 19.11.2019 passed by the Delhi Bench of Tribunal in appellant’s own case for preceding assessment years 2008-09 to 2012-13 in ITA No.3988 to 3992/Del/2019 wherein similar addition on account of alleged “salary difference” (relying in the very same Annexure) has been deleted.

After considering the aforesaid submission and on perusal of the material placed on record, it is seen that the addition of Rs. 8,11,239/- has been made u/s. 69C on account of seized diary which has been treated to be unexplained salary. Since its entry was not verified from the regular books of account, the Assessing Officer has treated the salary outside the books and has made the addition. The case of the assessee is that the seized paper content proposed salary arrears which were never given to the employees. Before us, the Ld. Senior counsel has stated that these are

In ground of appeal no.5 the appellant has challenged addition of expenses of Rs.4,14,120/- made by the AO under section 69C of the IT Act and affirmed by the CIT(A) on the ground that the same were not accounted in books of account. During the course of search, certain vouchers for expenses were seized. The same were marked as Page Nos. 114 to 127 of Annexure A6 pertaining to party PD-2 (placed at pages 159-171 of paper book). The assessing officer made addition of aforesaid amount of Rs.4,14,120/- holding that the same were expenses incurred outside books of accounts. The CIT (A) affirmed the addition.

During the course of arguments, the Ld. Sr. Counsel submitted that the pages/ material relied by the assessing officer are not incriminating material and further submitted that papers (first paper) contain rough jottings with heading

We have heard the rival submissions and also relevant finding given in the impugned order. The addition of Rs.4,14,120/- has been made u/s.69 C on the ground that during the course of search, certain expenses were noted in the vouchers which were seized and were not recorded in the books of account. The case of the ld. counsel before us is that these are rough jottings and the amounts mentioned in the vouchers are not actual and are only draft vouchers which were prepared by various employees not been submitted before the management for reimbursement. The said contention of the ld. counsel is too vague and cannot be

In ground of appeal no.6 the appellant has challenged the action of the assessing officer/ CIT (A) in levying and computing interest under sections 234A, 234B and 234C of the IT Act.

It is submitted by the appellant that levy of interest is incorrect for the reason that: (a) Interest under section 234A

On the issue of levy of interest as challenged, we agree with the contention of the ld. counsel as submitted above and direct the Assessing Officer to compute the interest u/s.234A, because the delay has to be accounted from the time allowed to file the return of income in response to notice u/s.153A. Here in this case, assessee was required to file the return u/s.153A within 15 day from the dated of notice, i.e., 26.05.2015, which assessee has filed on 11.01.2016. Therefore, interest has to be computed for the period of 8 months. As regard interest u/s 234C, the Assessing Officer has to verify the computation of interest u/s.234C which is to be computed on the basis of return of income. In so far as interest u/s.234B is concerned, same is consequential.

Accordingly, appeal for the earlier year 2013-14 is partly allowed.

Now we take up the appeal for assessment year 2014-15 in ITA No.3994/Del/2019. The grounds of appeal for AY 2014-15 are reproduced here under: 1. That the Commissioner of Income-tax (Appeals) [‘CIT(A)’] erred on facts and in law in not holding that the assessment completed vide order dated 26.12.2016 under section 143(3) of the Income-tax Act (‘the Act’) is beyond jurisdiction, bad in law and void-ab-initio. 2. That the CIT(A) erred on facts and in law in upholding addition of Rs.21,48,95,768 made by the assessing officer under section 69C of the Act treating purchase of milk in cash under the nomenclature “milk purchases tanki” as unsubstantiated/ unverified/ bogus. 2.1 That the CIT(A) erred on facts and in law in upholding the aforesaid addition alleging that – (i) the appellant failed to produce supporting evidences in the manner required by the assessing officer to justify tanki purchases; (ii) the appellant did not give the source of funds and cash withdrawals; (iii) payment in cash made by the appellant was not justified; (iv) the appellant could not produce many of the suppliers; and (v) supplier produced could not demonstrate the capacity to supply milk. 2.2 That on the facts and circumstances of the case, the CIT(A)/ assessing officer failed to appreciate – (i) the modus operandi/ procurement process of milk of the appellant; (ii) that assessed/ accepted sale could not have been made by the appellant in absence of the disputed purchases. 2.3 That the CIT(A) erred on facts and in law in not appreciating that provisions of section 69C of the Act is not applicable on expenses duly recorded in the books of

That the CIT(A) erred on facts and in law in upholding addition of (i) Rs. 25,85,554 and (ii) Rs. 15,10,148; made by the assessing officer under section 69C of the Act on account of unexplained expenditure, alleging that the same were not recorded in the books of account. 8. That the CIT(A) erred on facts and in law in upholding the action of the assessing officer in making addition of Rs.9,78,194 alleging the same to be unreconciled balance between the seized manual ledger account of parties and the books of account, treating the same as unaccounted sales. 8.1 That without prejudice, the CIT(A) erred on facts and in law in not appreciating that addition, if any, could have been made only to the extent of profit element included in the alleged undisclosed/ unaccounted sales. 9. That the assessing officer erred on facts and in law in levying/ charging and computing interest under section 234B and 234C of the Act. 52. Ground of appeal no.1 is stated to be general in nature, not requiring any specific adjudication and is therefore, dismissed.

Grounds of Appeal Nos. 2 to 2.5 are identical to grounds of appeal nos. 3 to 3.5 in respect of appeal for AY 2013-14 dealt with above in the earlier paras of the order relating to alleged bogus milk tanki purchases. Since similar facts are permeating in this year also and exactly the same nature of findings, therefore, our decision in respect of the appeal for assessment year 2013-14 shall apply mutandis mutandis herein.

Ground of Appeal No.3 was not pressed by the appellant and thus, dismissed as not pressed.

In ground of appeal no.4, the appellant has challenged addition of Rs.89,29,854 under section 69C of the IT Act on the ground that certain expenditure incurred towards packing material was not accounted or recorded in the books of accounts. The facts in brief qua this issue are that during the course of search, certain loose papers were seized which were marked as Page Nos. 6 to 22 of Annexure A7 seized from party PD-2. The said annexure contained some details of transactions with several parties towards purchase of packing material such as name, purchase amount, TDS, cash, cheque, etc. On the basis of the said papers, the assessing officer held that amount shown under column ‘cash’ was expenditure incurred outside the books of accounts. Accordingly, the same was treated as unexplained expenditure under section 69C of the IT Act and added to income of the assessee. The addition was upheld by the CIT (A) observing that the appellant failed to offer any substantive explanation in this regard.

The Ld. Sr. Counsel for the appellant submitted that the assessee purchases packing material from several vendors for packing its products for sale in the market. The material received from the vendor is firstly tested by the assessee company and only if it satisfies the standards/ specifications as prescribed by the assessee, then the same is purchased by

It was further argued that addition made by alleging that the cash payments have been made outside books by the appellant is not sustainable, because; (i) All the expenditure/ payments are duly recorded by the appellant in the books of account; (ii) Trading results declared by the assessee company which is in line with the industry standards have been accepted inasmuch as the method of accounts and the books of accounts prepared in accordance with section 145 of the Act have been accepted; (iii) No defects have been found/ pointed out by the assessing officer/ books maintained by the assessee; (iv) No evidence or material whatsoever has been brought on record by the assessing officer to substantiate any movement or transfer of payment of cash by the appellant; (v) No efforts were made by the assessing officer to ascertain if the parties have received any cash payments from the

It has further been argued that in absence of any material/ evidence to corroborate the allegation that appellant had made any cash payments towards purchase of packing material, no addition under section 69C could have been made. It has been argued that if an item of unexplained income/ expense is not admitted by an assessee for it to be assessed, then the burden to establish that such income is chargeable to tax is on the assessing officer. Reliance in this regard was placed on the decision of the apex Court in the case of CBI v. V.C. Shukla &Ors.: (1998) 3 SCC 410, wherein the Court held that the contents of a diary impounded from a third party could not by itself be the basis of making any addition and the same requires corroboration by independent material/ evidence. The said decision has been, followed in Common Cause (A registered Society) vs. Union of India: 394 ITR 220 (SC). It has also been submitted that any allegation of movement of money must be corroborated by evidence supporting such allegation for making addition, in absence of which no addition could be made [Shankerlal Nebhumal (HUF) V. DCIT: 80 TTJ 69 (Ahd.) affirmed in DCIT V. Jivanlal Nebhumal (HUF): 182 CTR 370, Kences Foundation (P) Limited: 289 ITR 509 (Mad), Ramesh K. Shah v. DCIT: 82 TTJ 827 (Bang)].

We have heard the rival submissions and perused the relevant finding given in the impugned order as well as the material referred to before us, the addition has been made u/s.69C on the ground that certain expenditure incurred towards packing material has not been accounted for or recorded in the books of account. Addition has been based on seized paper marked as Annexure A-7 where it contains details of transaction with several parties towards purchase of packing material wherein various details have been mentioned. The Assessing Officer has inferred that the amount shown in the column ‘cash’ has been incurred outside the books of account. Before us, the ld. counsel has duly clarified that the packing material are purchased from various vendors for packing its product for sale. It is first tested by the assessee for its quality and specifications and then same are recorded in the books as purchases. If the packing material does not meet the required specifications, then the same is returned to the concerned vendors. What has been mentioned in Annexure A-7 in column of ‘cash’ is in fact reflects the amount of material returned back by the assessee company to the vendor. In support, the assessee has submitted the receipt of goods and return vouchers issued by the assessee company on return of packing material, the details of which has been shown before us from the documents placed in the paper book at pages 150 to 277.

The packing material is direct cost and is part of the trading account. Once all the expenditure/payment have duly

In ground of appeal no.5, the appellant has challenged addition of Rs.14,37,410 made in the assessment order on the basis of Annexure BB1 seized from Party PD-2, copy

The assessing officer did not accept the contention of the assessee, since date wise entries have been made with narrations given against each entry. The assessing officer further held that these pages relates to the month of February 2014, as on top of these pages date of February 2014 is mentioned. Accordingly, the assessing officer proceeded to make addition of Rs.14,37,410/- as unaccounted sales. The CIT(A) affirmed the addition made by the assessing officer on the ground that the appellant failed to offer any explanation except stating that only profit of such transactions should be added.

Before us, the Ld. Sr. Counsel submitted that the seized papers are merely rough noting of sales prepared by small depots in-charge which are part of total sale in the profit and loss account and that the said sale has already been offered to tax by the assessee. It was contended that, apart from the aforesaid rough noting, no evidence have been brought on

The Ld. DR vehemently supported the orders of the lower authorities and contended that in the absence of any explanation, the AO has rightly made addition of unaccounted sales.

After considering the aforesaid submission and on perusal of the records, we find that this addition is again based on seized document which has been inferred as

In ground of appeal no.6, the appellant has challenged addition of Rs.35,72,166 made by relying on pages 68,70,74 of Annexure 9 found from PD-3 and addition of Rs.65,14,988 as per pages 38 to 44 of Annexure A2 found from PD-3 as unexplained difference between receipts and payments recorded in the said documents, which has been upheld by the CIT(A).

Before us, the Ld. Sr. Counsel submitted that the aforesaid seized annexures are merely some handwritten

The Ld. DR vehemently supported the orders of the lower authorities and contended that the AO has rightly made addition on based on specific seized annexures which cannot simply be regarded as unreliable/ dumb document.

We have heard the rival submissions and perused the relevant finding given in the impugned order and the records referred to before us. The addition has been made on account of unexplained difference between the receipts and payments

In ground of appeal no.7, the appellant has challenged two additions made under section 69C of I.T. Act, i.e. of Rs.25,85,554/- on the basis of Page No. 54 of Annexure A7 pertaining to party PD-2 as expenses are not recorded in books of account and of Rs.15,10,648/- on the basis of Page Nos. 55 to 81 of Annexure A7 on the ground that expense vouchers seized are not reflected in the books of account and

As regards addition of Rs.25,85,554/- on the basis of Page No. 54 of Annexure A7, the Ld. Counsel submitted that the seized annexures are merely handwritten rough noting on papers wherein certain amounts are mentioned against which short descriptions of items are given and merely some names and amounts are written. Similar arguments were made that the paper(s) are in the nature of unauthenticated dumb documents, author whereof is not known and the document/ paper do not bear any seal/ stamp etc.

As regards addition of Rs.15,10,648/- on the basis of Page Nos. 55 to 81 of Annexure A7 it was submitted that the said seized annexures are expense vouchers and journal vouchers. It was submitted that the expense vouchers relates to cash paid to various persons and the corresponding journal vouchers shows that cash was returned/ received back from the said parties, not resulting in any undisclosed income of the appellant. It is contended that the factum of such cash payment and received are recorded in the books of accounts of the appellant which is evident from the ledger accounts placed at pages 340 to 345 of the paper book. It was submitted that since amounts were accounted in books of account the provisions of section 69C of the IT Act were not applicable. Reliance was placed on the decision of Delhi High Court in case of CIT vs. Radhika Creations: 10 taxmann.com

The Ld. DR vehemently supported the orders of the lower authorities and contended that the AO has rightly made addition on based on specific seized annexures.

As regard the addition challenged in ground no.7 of Rs.25,85,554/- based on seized documents at page no. 54; we find that the document at page no. 54 clearly show the name against which the amount has been mentioned the assessee’s claim to have made payment against these expenses. For the amount of Rs.25,85,554/- again the same arguments has been reiterated that the same is based on rough noting. But these are specific expenditure mentioned against specific name which contains the signature and the dates and in such a case, the onus was heavily upon the assessee to explain the same. If these expenditures are not recorded in the books of account, then ostensibly such expenditure has rightly been added by the Assessing Officer as unexplained expenditure. Accordingly, addition is confirmed.

In so far as addition of Rs.15,10,648/- based on seized documents at page no. 55 to 81 Annexure A-7, it is seen that, it contains expense vouchers and general vouchers relating to cash paid to various persons and corresponding general

In ground of appeal no.8, the appellant has challenged the addition of Rs.9,78,194 made as un-reconciled balance between the seized manual ledger account of parties and the books of account, treating the same as unaccounted sales.

In the assessment order, the assessing officer referred to Annexure A-24 seized from the party PD-2 at the corporate office, Param Tower, Pusa Road, New Delhi, which contains the names of various parties without any address. It was observed that on top of these pages "ledger" is written and on each and every page against the name of party credit and debit balances are shown and at the end balance figure is arrived at. The assessing officer held that in the said Annexure data is maintained day wise for the month of January and debit and credit entries are recorded by the assessee. The AO further observed that in majority of the cases, the debit and credit entries have been

Before us, the Ld. Sr. Counsel submitted that during assessment proceedings, appellant explained that the aforesaid seized papers are manual ledger maintained for convenience wherein business transactions with various parties were recorded including the opening balance, sales made during the year, payments received and closing balance for convenience of the accountant. The ledger was used for immediate reference only and all the entries (after correction of errors) appearing in the manual ledger was completely recorded in books of accounts maintained by the assessee company. To substantiate the said contention, the appellant

The Ld. DR vehemently supported the orders of the lower authorities and contended that the AO has rightly made addition only in respect of un-reconciled sales, which the AR has not been able to explain and hence there is no reason to delete the addition made.

After considering the aforesaid submissions and perused the relevant material placed on record, the amount of Rs. 9,78,194 /- added as un-reconciled balance between seized manual ledger account of parties and the books of account has been treated as unaccounted sales. It has been clarified and explained by the ld. Senior counsel that the seized paper are manual ledgers maintained for convenience, wherein business transaction with various parties are recorded including the opening balance, sales made during the year, payment received and the closing balance. It was

In ground no.9, it is contended that interest under section 234C is required to be computed basis returned income whereas calculation made in the assessment order is erroneous. Further, interest under section 234B is stated to be consequential to the outcome of grounds raised in the present appeal.

On the issue of levy of interest, we hold that interest u/s.234C is to be computed on the basis of return of income and interest u/s.234B is consequential.

In the result, for both the years, the appeal of the assessee is partly allowed.