ACIT, CC-2, CHANDIGARH vs. SHRI KARAJ SINGH, YAMUNA NAGAR

39,61,88,233 As per page 105-106 of CITA Order
LESS: EXPENSES RECORDED AS PER SEIZED PAPER AT PG 46 OF PBK-2 BUT NOT ALLOWED BY CIT(A)
VAT (NET OF CREDITS)
(2,31,20,138) As per seized material refer page 46 of PBK-2, VAT expense of Rs 4.94cr was recorded in debit side while VAT & GST Recovered of Rs. 2.63cr was recorded on credit side. CIT(A) has ignored both the items while computing profit while
VAT being actual business expense deserved to be allowed.

7
NEW POINT EXPENSES
(1,54,45,530) As per seized material at ps46, new point expenses of Rs. 1,04,00,000/- New point investment and Rs. 50,45,300/- New point Jaidhari was recorded as expense. CIT(A) has wrongly considered these expenses as Capital expense on pg 108 of his order whereas these related to expenditure on setting up new mining point and thus was a revenue expenditure and not a capital expenditure

LESS: EXPENSES RECORDED IN ACTUAL BOOKS OF ACCOUNTS
OF MINING ENTITIES BUT ONLY
ALLOWED PARTIALLY BY CIT(A)
MINING INSTALLMENT
(28,04,68,722) As per audited books of the 9 entities, total mining installments expense stood at Rs. 98,74,18,222/- (refer summary above). However, CIT(A) has only allowed expense of Rs.70,69,50,000/-on pg 105 of order. The amount as per books was in line with amounts payable as per mining contracts and-had accrued during the current year and was thus allowable in full.
LESS: EXPENSES RECORDED IN ACTUAL BOOKS OF ACCOUNT
OF MINING ENTITIES BUT NOT ALLOWED ENTIRELY BY CIT(A)
CSR EXPENSES
(15,235,000) On page 106, CITA has only allowed depreciation, interest and audit fees as per actual books of accounts. On page 108, CITA observed that CSR expenses and Environment protection expense are not allowable separately as they were part of misc expenses of Rs 6.28cr already allowed as per seized books. However, there is no basis to such assumption when other expenses as per actual books have already been allowed. CSR expense and Environmental protection expense and Labour welfare expense were actually paid by assessee as per books and thus allowable while estimating profits. The figures are as per audited P&L of 9
entities at pg 65-77. ENIVRONMENTAL PROTECTION
EXP
(22,402,500)
LABOUR WELFARE EXP
(5,613,000)
PROFIT AS PER ASSESSEE 3,39,03,343

PROFIT %
(AGAINST SALES OF RS
230,78,96,752/- CONSIDERED
BY CIT(A))
1.47%

In above tabulation, Ld. AR demonstrated that by considering the expenses as recorded in the seized material and expenses as debited in the regular books of accounts, the profit rate as earned by all the mining entities would only be 1.47% whereas all these entities have already declared NP rates in the range of 14% to 15% which are substantially higher than this profit.
10. To further support his argument, Ld. AR also tabulated comparative chart of profit computed by CIT(A) for all mining entities and as computed by the assessee for this year as under: -
COMPARITIVE CHART OF PROFIT COMPUTED BY CIT(A) AND AS PER ASSESSEE FOR AY 2018-19
(CONSOLIDATED FOR ALL 9 MINING ENTITIES)
PARTICULARS
AS PER CIT(A)
AS PER
ASSESSEE
Remarks
Gross sales receipt as per seized documents
2,307,896,752
2,307,896,752 As per pg 46 of PBK
Rehabilitation charges recovered
766,072,879
766,072,879 As per pg 46 of PBK
Misc. Income
371,552
371,552 As per audited books of accounts of all 9 entities
Total Gross Receipts
3,074,341,183
3,074,341,183
Less: (-)
Discount
1,533,521,146
1,533,521,146 As per pg 46 of PBK
Annual contract money (payable to the Govt, of Haryana for mining rights)
706,950,000
987,418,722 As per audited books of accounts of all 9
entities
Salary account
64,590,764
64,590,764 As per pg 45 of PBK
Wages
40,844,566
40,844,566 As per pg 45 of PBK
Diesel
44,394,113
44,394,113 As per pg 45 of PBK
Diwali expenses
4,370,100
4,370,100 As per pg 45 of PBK
Land compensation
110,803,555
110,803,555 As per pg 45 of PBK less Rs 76 lakhs disallowed by CITA
Land on rent
24,116,384
24,116,384 As per pg 45 of PBK
Other expense
20,000,000
20,000,000 As per pg 45 of PBK
Misc. expenses
62,870,938
62,870,938 As per pg 45 of PBK
Bank charges
373,976
373,976 As per pg 45 of PBK
Crossing contract expenses
840,500
840,500 As per pg 45 of PBK
Generator expenses
1,632,000
1,632,000 As per pg 45 of PBK
Machine rent
26,770,458
26,770,458 As per pg 45 of PBK
Fees and taxes
11,162,300
11,162,300 Including HPSCB Draft and Wildlife forest A/c as per pg 45 of PBK
Insurance account
650,590
650,593 As per pg 45 of PBK
Legal expenses
5,733,000
5,733,000 As per pg 45 of PBK
Printing stationary
1,429,972
1,429,972 As per pg 45 of PBK

Road repair
9,356,588
9,356,588 As per pg 45 of PBK
Depreciation
3,586,000
3,586,000 As per books of account
Interest on loan
3,756,000
3,756,000 As per books of account
Audit fees
400,000
400,000 As per books of account
VAT (net of recovery)
-
23,120,138 As per pg 45 of PBK
NEW POINT EXPENSE

15,445,530 As per pg 45 of PBK
CSREXPENSES
-
15,235,000 As per books of account of all 9 mining entities
ENVIRONMENTAL
PROTECTION EXP

22,402,500 As per books of account of all 9 mining entities
LABOUR WELFARE EXP

5,613,000 As per books of account of ail 9 mining entities
Total expenses
2,678,152,950
3,040,437,843
Net Business Profit
396,188,233
33,903,340
PROFIT %
17.16%
1.47%

The Ld. AR thus demonstrated that going by the seized document and regular books, the profit earned by the ground is merely in the range of less than 1.5%.
11. After going through above tabulations, we find substance in the plea
/ working of Ld. AR. It could be seen that considering the expenses found recorded in the seized material as well as in the regular books of accounts (allowed partially by Ld. CIT(A) while arriving at profit rate of 17.16%), the aggregate net profit margin for the group as a whole is less than 1.5%. If the material is considered in toto, the NP rate for all the entities work out to be 1.47% which is substantially lower than the declared profit of 14% to 15% by the assessee group in the revised return of income. This being the case, the profit declared in the revised return of income is to be accepted and in our considered opinion, no further addition is warranted in the hands of the assessee. The profit rate declared by the assessee is substantially higher. Pertinently, profit rate of less than 3% has been accepted in immediately preceding year in assessee’s case and such higher estimation of 18%, under identical business conditions, could not be sustained in law. In other orders, we delete the impugned addition of Rs.86.27 Lacs as sustained in the impugned order and allow the corresponding grounds of assessee’s cross-objection. The revenue’s ground of appeal stands dismissed.
12. On the issue of agricultural income as discarded by Ld. AO, it could be seen that the estimation of Rs.50,000/- per acre is without any supporting document on record. It is undisputed fact that the assessee was having sufficient land holding to earn the agricultural income so disclosed by the assessee. The claim of the assessee stood substantiated by copies of “J” forms and copies of Khasra and Khatauni.
Therefore, the approach of Ld. CIT(A) in discarding the estimation made by Ld. AO could not be faulted with. The grounds raised by the revenue stand dismissed.
13. On issue of unsecured loans as taken by the assessee from three parties, it could be seen that the assessee had furnished sufficient documents with respect to M/s Guru Nanak Stone Crusher as required in terms of Sec.68. With respect to loan as taken from Smt. Mandeep Kaur and Shri Rajbeer Singh, the assessee duly filed confirmation letters from the lenders along with their respective PAN details, copies of ITRs etc.
The same has been disbelieved only because some immediate cash has been found to be deposited in their respective bank accounts. However, no verification has been done by Ld. AO from these two lenders. The assessee had filed confirmatory letters as well as income tax details of all the lenders and duly discharged the primary onus as required u/s 68. Therefore, the deletion of addition of Rs.16 Lacs by Ld. CIT(A) is upheld.
The remaining addition of Rs.10 Lacs as sustained in the impugned order stand deleted. We order so. The corresponding grounds of revenue’s appeal stand dismissed. The corresponding ground in assessee’s cross- objection stand allowed.
14. The assessee has raised issue of mechanical approval u/s 153D by Ld. Addl. CIT. This legal issue has been rendered infructuous since we have dismissed revenue’s grounds on merits and allowed assessee’s cross-objections on merits.
Conclusion
15. In the result, the revenue’s appeal ITA No.726/Chandi/2022 stands dismissed. The assessee’s cross-objection CO. 16/Chandi/2024 stand partly allowed.
Order pronounced on 08/10/2025 (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL)
VICE PRESIDENT ACCOUNTANT MEMBER

Dated: 08/10/2025

आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to :
1. अपीलाथŎ/Appellant
2. ŮȑथŎ/Respondent
3. आयकरआयुƅ/CIT
4. िवभागीयŮितिनिध/DR
5. गाडŊफाईल/GF