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Facts
During a search operation u/s 132, documents were seized, leading to proceedings against the assessee. The assessee, a firm dealing in raw wool, declared a significant loss. The Assessing Officer made a protective addition of Rs. 2 crore, which was challenged.
Held
The Tribunal held that the protective addition of Rs. 2 crore could not be sustained as the substantive addition for the same amount had already been confirmed in the hands of M/s ARK Imports Pvt. Ltd., and taxing it again would amount to double taxation.
Key Issues
Whether a protective addition made by the AO can be sustained when a substantive addition for the same amount has already been confirmed in the hands of a group concern, leading to potential double taxation.
Sections Cited
132, 127, 153C, 153A, 142(1), 139(1), 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
Order Per Krinwant Sahay, AM : Appeal in this case has been filed by the Revenue against the order dated 23.04.2018 passed by the ld. Commissioner of Income Tax (Appeals)-2, Jalandhar [hereinafter referred to as ‘CIT(A)’], for the Assessment Year 2013-14.
2. Grounds of appeal are as under:
1. 1 Whether on facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 2 crore in this case where the assessee had 960-Chd-2018 Punjab Wool Traders, Ludhiana
2 declared additional income of Rs.2 crore during the course of search operation u/s 132 which has been assessed as such. 2 Whether on the facts & in circumstances of the case, the Ld. CIT(A) has erred in holding that the income of Rs. 2 crore has been taxed twice when the impugned amount is not relatable to addition made in the order of M/s ARK Imports (P) Ltd.
3 The Appellant craves leave to add or amend the grounds of appeal on or before is heard and disposed off.
In fact, it is a bunch of 16 appeals directed at the instance of Assessee except three appeals namely 956 and 960/Chd/2018 by the Revenue. It emerges out from the record that and other cases of this group are on Board since 29th March 2017. From the Note Sheet entry, it is seen that Shri Tej Mohan Singh, Shri Jasleen Khera and others have appeared from time to time and thereafter all the Counsels have withdrawn their power of attorney and pleaded no instructions. On 26.9.2024, Shri Tej Mohan Singh, Advocate and Shri Sanjay Sood, CA also withdrew their power of attorney. It is pertinent to note that as and when a counsel withdrew his power of attorney, it is a duty cast upon him to serve a notice through registered post upon the Assessee informing that he is withdrawing his power 960-Chd-2018 Punjab Wool Traders, Ludhiana
3 of attorney so that Assessee can make alternative arrangement thereafter. The Tribunal is not required to serve a fresh notice. But in the interest of justice and for abundant caution, Tribunal issued fresh notice for hearing to the Assessee for 20.11.2024. But none appeared on behalf of the Assessee. It is 50th occasion that this group has been listed for hearing. The notice was issued through the A.O. and the A.O. has informed that notice has been sent on the last e.mail available with the Department. It is further observed that DCIT, Central Circle, Ludhiana vide his letter dated 7.1.2025 informed the Tribunal that officials from the Range visited the premises of the Assessee which was found locked.
During proceedings before us, the ld. DR informed the Bench that he has been intimated by the Assessing Officer that the Assessee is absconding. We have been apprised that there are large number of cases pending against the head of the group with different investigating agencies. Looking to all these cumulative setting of circumstances would suggest that the Assessee is not very much interested in persecuting this appeal. Even otherwise, it is trite (‘S. Velu Palandar Vs. DCIT’, 83 ITR 686 (Mad.)] and incumbent on the authority to decide 960-Chd-2018 Punjab Wool Traders, Ludhiana
4 an appeal on merit in accordance with the principles of natural justice.
Now coming on merits of the case, the brief facts, as taken from the assessment order are as under:
The assessee belongs to Genex Group of cases, Ludhiana where a search and seizure operation u/s 132 of the Income Tax Act was conducted on 23.05.2013. During the search operation, various documents were found and seized from the various business and residential premises of the group. In the course of proceedings, it is noticed that there are certain documents which pertains to the assessee, under reference. Accordingly, the case was centralized u/s 127 of Income Tax Act, 1961 vide order No. CIT-III/Ldh/Tech/2013-14/818 dated 24.03.2014. On the basis of various documents found and seized in the course of search operation at the various business and residential premises of Genex Group of cases, the proceedings within the meanings of Sec 153C of the Act were initiated after recording satisfaction thereof and a notice u/s 153C r.w.s. 153A of the I.T. Act, requiring the assessee to file its return of income was issued on 18.01.2016, which was served on the assessee on 19.01.2016.
960-Chd-2018 Punjab Wool Traders, Ludhiana 5 1.2 In response thereto, a return declaring a loss of (-) Rs. 13,76,30,288/- was filed by the assessee on 20.04.2015 as was originally filed u/s 139(1) on 30.11.2013. The case was taken up for scrutiny and statutory notice u/s 142(1) along with questionnaire was issued on 18.01.2016 and the same was duly served on the assessee on 19.01.2016. Subsequently, notices u/s 143(2) and 142(1) issued and complied with. In response to the notices, Sh. Gaurav Gupta, C.A., authorized representative of the assessee attended the proceedings from time to time and furnished the requisite information/details/explanation etc., with whom the case was also discussed.
The assessee is a firm and allegedly a trader of raw wool and other allied products. The firm was constituted as per instrument of partnership deed dated 08.08.2012 consisting of two partners namely Ms. Rajni Aggarwal and her son Sh. Anubhav Aggarwal, having equal shares of 50%. In the year under consideration, the assessee has declared a loss of (-) Rs. 13,76,30,288/- as business loss under the head "Income from Business or Profession".
3. As stated supra, in the course of search operation, certain documents containing the details of purchases and sales made during 960-Chd-2018 Punjab Wool Traders, Ludhiana
6 different periods as also the purchase and sale bills were found and seized. On examination of such documents and purchase & sale bills, it is noticed that: The description of goods is mentioned as just "Raw Wool" with no specification of microns/length etc. The rates of raw wools vary from 150/KG to 2000/KG depending upon microns/length.
The phone number mentioned in bills/invoices are the same.
A large number of parties do not have sales tax number /vat number.
The style & format of the bills are similar and appears to have been printed from the same printer.
There are no G.R. number mentioned on the bills.
No trading expenses such as loading unloading, transportation etc. have been debited despite having substantial turnover. 3.1 In order to verify the genuineness and authenticity of such documents, purchase and sale bills, certain information /details /documents/explanation etc. were called for through issue of notices u/s 142(1) and on receipt of such information, details, documents etc. it is found that the discrepancies as pointed 960-Chd-2018 Punjab Wool Traders, Ludhiana 7 out in para 3 above are correct. It is further noticed that as per the Audit Report in Form 3CB/3CD, the assessee has declared gross revenue from operation amounting to Rs.13,51,13,53,412/-, out of which, expenses to the tune of Rs. 14,24,91,40,650/'- towards cost of material consumed etc. have been debited, thereby leaving a closing stock of Rs.61,05,21,430/-. It may be highlighted that the assessee has no godown/godown rent debited in the books. It is further clarified by the assessee that the maximum amount of purchases and sales has taken place on the NSEL platform at the then prevailing prices on the exchange.
During the proceedings before us, while none appeared from the Assessee’s side (despite 50 opportunities given). The ld. DR filed written submissions, which are as under: - “The above captioned cases came up for hearing before the Hon'ble Bench on 06.02.2025. None represented on behalf of the assessee. 2. The facts in all the three above mentioned departmental Appeals are identical. A search & seizure action u/s 132 of the Income Tax Act, 1961 had been carried out in the Genex Group of cases, Ludhiana, and the above captioned entities are the group concerns of this Group. Voluntary disclosures were made at the time of search in the hands of 960-Chd-2018 Punjab Wool Traders, Ludhiana
8 different group entities and assessments were framed thereafter. The above mentioned three group entities made a voluntary disclosure of Rs. 2,00,00,000/- each, during the search proceedings under the head 'Other Income'.
3. During the subsequent assessment proceedings, substantive addition of more than Rs 500 crores has been made in the hands of M/s ARK Imports Pvt Ltd, the main group concern for the proceedings w.r.t A.Y 2013-14. It has been held by the Departmental Assessing Officer(s) that the main dealings of sham transactions (bogus sales and purchases, especially on the NSEL exchange) were being resorted to by the main group concern namely M/s ARK Imports Pvt. Ltd. and the other group concerns were largely a means for circuitous routing of transactions. Accordingly, the AO (common for the three entities) has stated in her assessment orders in the above mentioned three cases that the addition/disallowance is being made only on protective basis since the substantive addition has already been made in the hands of M/s ARK Imports Pvt. Ltd. However, the AO after rejecting the books of accounts of each entity (since the sale/purchase transactions were fictitious), has held that taxes are payable on the amount of Rs. 2,00,00,000/- surrendered by each entity as Income from Other Sources. This addition has been over turned by the CIT(Appeals) by holding that protective addition 960-Chd-2018 Punjab Wool Traders, Ludhiana
9 cannot be sustained when the substantive addition in the case of M/s ARK Imports Pvt. Ltd. has already been upheld by the CIT(Appeals). 4. It is submitted that since the three assesses have themselves declared an undisclosed income of Rs. 2,00,00,000/- apiece, being 'Other Income', the order of the AO may kindly be restored and that of the CIT(Appeals) be set aside”.
Apart from the above facts filed in the form of written submissions, the ld. CIT DR also relied on the exhaustive and speaking order of the Assessing Officer. As already discussed above, no one appeared from the Assessee’s side, therefore, there was no rebuttal on the part of the Assessee on any fact / issues brought on record by the ld. DR.
We have considered the written submissions filed by the ld. CIT DR and the arguments advanced by him during the proceedings before us. We have also gone through the assessment order passed by the Assessing Officer and the appellate order passed by the ld. CIT(A). We find that the Assessing Officer has passed an exhaustive and speaking assessment order and all the facts brought on record by the 960-Chd-2018 Punjab Wool Traders, Ludhiana
10 Assessing Officer are based on various material / statements found / recorded during the search operation.
However, we find that it is a protective assessment made by the Assessing Officer of Rs. 2 crores. The substantive addition for the same amount has already been made in the case of M/s ARK Imports Private Limited in A.Y. 2013-14. The appeal of that case has already been heard by us. We have already confirmed the addition made on substantive basis in that case. We also find that the ld. CIT(A) in his appellate order has given a very clear-cut finding on this issue.. The relevant portion of CIT(A)’s order is as under: - “4.7 I have carefully considered the contentions and have also gone through the appeal order passed by ld. CIT(A)-5, Ludhiana dated 29.12.2016 and find that total addition made by the Assessing Officer has been confirmed in the hands of M/s ARK Imports Private Limited. Therefore, I find merit in the contentions raised that same income cannot be subjected to taxation again in the hands of the appellant. Hence, addition made by the A.O. on protective basis in the hands of the appellant is deleted.”
Once, the substantive addition of Rs. 2 Crores in the hands of M/s ARK Imports Pvt. Ltd. in the assessment year 2013-14 is confirmed, the same amount cannot be added on 960-Chd-2018 Punjab Wool Traders, Ludhiana
11 protective basis in the hands of M/s Punjab Wool Traders, Ludhiana as it would BE tantamount to double taxation of the same amount. Accordingly, we are of this considered view that this protective addition of Rs. 2 crore s in the hands of Punjab Wool Traders cannot be sustained. Thus, Revenue’s appeal on this issue is dismissed.
In the result, Revenue’s appeal is dismissed.
Order pronounced on 24 02.2025.