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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ C ’
Before: SHRI SUNIL KUMAR YADAV & SHRI JASON P BOAZ
Per Bench : These five appeals by the assessee are directed against the
common order of the Commissioner of Income Tax (Appeals)-11,
Bangalore dt.10.03.2015 for Assessment Years 2005-06 & 2008-09 to
2011-12. The grounds of appeal raised in all these appeals are mostly
similar and therefore these appeals were heard together and are
2 ITA Nos.827 to 831/Bang/2015 disposed off by way of this consolidated order for the sake of
convenience.
Briefly stated, the facts of the case are as under :-
2.1 A search and seizure operation was conducted in the case of
the assessee, Smt. Ambika Ghorpade (‘AKG’) on 28.09.2010 in pursuance
of warrant of authorisation dt.27.9.2010; wherein the statements of the
assessee, ‘AKG’ and Sri Kartikeya M Ghorpade were recorded and
material seized were as per A/AMB and C/AMB. Notices under Section
153A of the Income Tax Act, 1961 (in short 'the Act') dt.22.3.2011 were
issued for Assessment Years 2005-06 and 2008-09 to 2011-12 in
response to which the assessee filed returns of income for these years on
2.4.2012. The assessments were concluded under Section 143(3) r.w.s.
153A of the Act vide orders dt.14.3.2013 for Assessment Years 2005-06
and 2008-09 to 2010-11 and under Section 143(3) of the Act for
Assessment Year 2011-12. The details of income returned, additions /
disallowances made and assessed income are as under :
3 ITA Nos.827 to 831/Bang/2015 Asst. Year Income as Total Additions Assessed per Returns Income (Rs.) u/s.153A / 139 (Rs.) Unaccounted Wrong claim cash receipts of (Rs.) Expenditure (Rs.) 2005-06 2,92,04,526 -- -- 2,92,04,526 2008-09 12,25,45,583 8,35,91,047 NIL 20,10,87,760 2009-10 4,76,61,636 1,26,92,650 28,96,125 5,96,50,411 2010-11 19,86,40,388 6,56,72,629 78,57,020 26,71,70,037 2011-12 29,84,30,203 3,36,82,047 NIL 32,31,12,250
2.2 On appeal, the learned CIT (Appeals) – 11, Bangalore dismissed the
assessee's appeals for these years vide the impugned order dt.10.3.2015.
Assessee's Appeal in ITA No.827/Bang/2015 for Asst. Year 2005-06.
3.1 The original return for Assessment Year 2005-06 was filed by the
assessee on 28.10.2005 declaring total income of Rs.2,92,04,530.
Consequent to the search conducted in the assessee's case on 28.9.2010,
notice under Section 153A of the Act was issued to the assessee on
4 ITA Nos.827 to 831/Bang/2015 22.3.2011 and the assessment was completed accepting the returned
income of Rs.2,92,04,256 vide order dt.14.3.2013 wherein no additions
were made. On appeal before the learned CIT (Appeals), the assessee
challenged the validity of search action and the charging of interest
under Section 234A & 234B of the Act. The learned CIT (Appeals)
dismissed the assessee's appeal of the aforesaid issues vide the
impugned order dt.10.3.2015.
3.2 In this appeal before us, directed against the order of the CIT
(Appeals) dt.10.3.2015 for Assessment Year 2005-06, the assessee has
raised the following grounds :-
That the order of the authorities below in so far as it is against the assessee is opposed to law, facts, circumstances, natural justice, equity all other known principles of law.
That the total income computed and total tax computed is hereby disputed.
The proceedings of search and all other subsequent proceedings are bad in law, without jurisdiction and invalid.
The notice u/s 153A and subsequent proceedings are without jurisdiction and bad in law.
5 ITA Nos.827 to 831/Bang/2015 5. The order u/s 143(3) r.w.s 153A is bad in law, invalid, time barred and infructuous.
The CIT(A) erred in dismissing the ground on validity of search.
The AO erred in initiating proceedings u/s 153A and thereafter passing an order in the absence of any abatement as is envisaged in the law.
The CIT-Appeals erred in refusing to rely on the decision of the Special Bench in All Cargo Global Logistics Limited on the issue of abatement of assessment.
That the approval granted u/s153D is not as per law.
The appellant denies the liabilities of interest u/s 234B & 234C of the Act. Further prays that the interest if any should be levied only on returned income.
No opportunity has been given before levy of interest u/s 234B and 234C of the Act.
Without prejudice to the appellant’s right of seeking waiver before appropriate authority, the appellant begs for consequential relief in the levy of interest u/s 234B and 234C of the Act.
For the above and other grounds and reasons which may be submitted during the course of hearing of the appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered.
6 ITA Nos.827 to 831/Bang/2015 3.3 In written submissions filed before us, the assessee has contended as under :-
Assessee's Submissions.
The assessee filed her return of income for the above assessment year on 28.10.2005, declaring total income of Rs. 2,59,54,526/-. Notice u/s 153A of the Act dt 22.03.2011 was issued though there was no material warranting any undisclosed income and calling the assessee to file return of income. The assessee, vide her letter dt 26.03.2012 filed the return of income on 02.04.12 declaring the total income of Rs. 2,59,54,526/-. The assessment was completed by accepting the returned income of Rs. 2,59,54,526/-. In this case, the time limit for issue of notice u/s 143(2) of the Act was 30.09.2006 and since no notice u/s 143(2) of the Act has been issued the assessment stands concluded. Even in such cases, no reassessment u/s 153A can be made unless there is incriminating material. In this case there is no mention of incriminating material and no addition has been made. However interest u/s 234 B/C has been levied. Thus the assessment requires to be vacated and the assessee places reliance on the following decisions: 1) All cargo global logistics limited vs DCIT - 147 TTJ 513– Bombay ITAT (SB). 2) CIT vs Lancy Constructions - ITA 528 to 531/2014 - KAR HC. 3) Kusum Gupta vs. DCIT - 35 CCH 432 - Delhi ITAT. 4) CIT vs Kabul Chawla – (380 ITR 573) - Delhi HC”
3.4 The standing counsel for Revenue was heard in the matter and put forth the following written submissions :-
“ Search under section 132 of the Act was conducted in the case of of the assessee on 28/9/2010. Notice under section 153A of the Act dated 22/3/2011 was issued and served on the
7 ITA Nos.827 to 831/Bang/2015 assessee. The assessee filed return of income in compliance of notice under section 153A of the Act. 2. The Assessing Officer accepted the return filed by the assessee in compliance of section 153A of the Act and completed the assessment. 3. The order of assessment has been confirmed by the Appellate Commissioner. 4. Both the orders are in conformity with section 153A of the Act and no interference is warranted. 5. Contention of the assessee that no incriminating material was found in the course of search or undisclosed income is found is incorrect. Incriminating material was found and on that basis of assessment has been completed. 6. The further contention o f the assessee that approval granted under section 153D of the Act is without application of mind and in mechanical manner is incorrect. The approval has been granted strictly in conformity with the provisions of the Act. Wherefore it is prayed to dismiss the appeal filed by the assessee in the interest of justice and equity.” 3.5.1 Ground No.6 - We have heard the rival contentions and
perused and carefully considered the written submissions filed, the
judicial pronouncements cited and the other material on record. On the
issue of validity of search in Ground NO.6 (supra), it was contended that
the issue be decided in accordance with the decision of the Hon'ble
Karnataka High Court in the case of C. Ramaiah Reddy (339 ITR 210) and
that of the Hon'ble Apex Court in the case of Ess Dee Aluminium Ltd. Vs.
DDIT.
3.5.2 We are, however, not inclined to adjudicate this issue raised in
Ground NO.6 in the light of the recent amendment in Finance Act, 2017
8 ITA Nos.827 to 831/Bang/2015 to Sec. 132 of the Act by which the Tribunal is precluded from examining
this issue and, therefore, decline to go into the issue of validity of the
search action. The ITAT is a creation of statute and has to apply the law
as laid down in the Act. In this view of the matter, this issue is decided
against the assessee and consequently Ground NOs.3 and 6 of assessee's
appeal is dismissed.
4.1 The main contentions in the assessee's arguments put forth on other legal grounds is that there was no seizure of any incriminating material relevant to the impugned Assessment Year 2005-06 and further there is no mention of any incriminating or adverse material in the order of assessment. Consequently, the assessment for Assessment Year 2005- 06 does not abate as per the provisions of Sec. 153A of the Act and therefore no reassessment can be made; as has been done in the case on hand.
4.2.1 We have perused the order of assessment for Assessment Year 2005-06 dt.14.3.2013; copy of the panchanama dt.28.9.2010 (placed at Paper Book on page 272); Annexures of the seized material, A/AMB- a folder containing loose papers pages 1 to69 and C/AMB – cash seized – Rs.12,00,000 and the copy of the reasons recorded for issue of notice u/ 153A of the Act furnished to the assessee vide letter dt.20.09.2011. From a perusal of the reasons recorded for issue of notice under Section 153A of the Act and the order of assessment for Assessment Year 2005-
9 ITA Nos.827 to 831/Bang/2015 06, we do not find that there is mention of any incriminating material seized from the assessee. In the case on hand the time limit for issue of notice under Section 143(2) of the Act for Assessment Year 2005-06 was 30.9.2006 and is seen that no notice thereunder has been issued within the time specified and therefore the assessment for this year does not abate and therefore reassessment, if any, is to be carried out on the basis of incriminating material found in the course of search.
4.2.2 In this regard, the Hon'ble Karnataka High Court in the case of CIT Vs Lancy Constructions in its order in ITA Nos.528 to 531 has held as under : “ In our view, if assessment is allowed to be reopened on the basis of search, in which no incriminating material is found, and merely on the basis of further investigating the books of accounts which have been already submitted by the assessee and accepted by the Assessing Officer at the time of regular assessment, the same would amount to the Revenue getting a second opportunity to reopen the concluded assessment, which is not permissible under the law. Merely because a search is conducted in the premises of the assessee, would no entitle the revenue to initiate the process of reassessment, for which there is a separate procedure prescribed in the statute. It is only when the conditions prescribed for reassessment are fulfilled that a concluded assessment can be reopened. The very same accounts which were submitted by the assessee; on the basis of which assessment had been concluded cannot be reappreciated by the Assessing Officer merely because a search had been conducted in the premises of the assessee.”
4.2.3 Further, the Hon'ble Karnataka High Court in the decision rendered in M/s. IBC Knoweldge Park Pvt. Ltd., ITA No.403/2009
10 ITA Nos.827 to 831/Bang/2015 dt.28.4.2016 has explained the entire scope and principles governing the provisions of Sec. 153A and 153C of the Act. In their judgment, the Hon'ble Court has considered several decisions on this issue including Lancy Constructions (supra) cited by the assessee and Canara Housing Development Co. (2015) 274 CTR 122 (Kar) cited by Revenue. In its decision, in the case of IBC Knowledge Park Pvt. Ltd. (ITA No.403/2009 dt.28.4.2016) the Hon'ble Karnataka High Court has held that notice under Section 153A of the Act can be issued only if it is during a valid search when certain incriminating materials are detected. At paras 45 to 49 of its decision, the Hon'ble High Court has held as under :
11 ITA Nos.827 to 831/Bang/2015
12 ITA Nos.827 to 831/Bang/2015
13 ITA Nos.827 to 831/Bang/2015
14 ITA Nos.827 to 831/Bang/2015
15 ITA Nos.827 to 831/Bang/2015
16 ITA Nos.827 to 831/Bang/2015
17 ITA Nos.827 to 831/Bang/2015
18 ITA Nos.827 to 831/Bang/2015
4.2.4 In the case on hand, the assessment for Assessment Year 2005- 06 has been completed as the time limit for issue of notice had expired on 30.9.2006; before the date of search on 28.9.2010. Therefore, since no assessment was pending, there was no question of abatement of assessment. Respectfully, following the decisions of the Hon'ble Karnataka High Court in the case of IBC Knowledge Park Pvt. Ltd. (supra), we hold that for Assessment Year 2005-06 no assessment had abated and therefore the assessment under Section 143(3) r.w.s. 153A of the Act could have been made based only on incriminating documents / material found and seized in the course of search. That clearly not being the factual matrix in the case on hand, since no incriminating material was found / seized, the order of assessment for Assessment Year 2005-06 passed under Section 143(3) r.w.s. 153A of the Act vide order dt.14.3.2013 is cancelled. Consequently, the original assessment and income returned as per the original return of income filed on 28.10.2005 at Rs.2,92,04,526 stands restored. Assessee's appeal is allowed in terms of Grounds 1, 2, 4, 5, 7 and 8.
19 ITA Nos.827 to 831/Bang/2015
The assessee has raised other grounds of appeal on additions / disallowances made by the Assessing Officer in the order of assessment for Assessment Year 2005-06. Since we have already held that the notice issued under Section 153A of the Act is infirm and the proceedings and subsequent order of assessment passed under Section 153A of the Act are not valid and cancelled, therefore these grounds raised are only academic in nature and do not require adjudication.
In the result, the assessee's appeal for Assessment Year 2005-06 is allowed.
Assessee's appeal in ITA Nos.828 to 831/Bang/2015 for
A.Ys 2008-09 to 2011-12.
7.1 For Assessment Years 2008-09 to 2010-11, the assessments were completed under Section 143(3) r.w.s. 153A of the Act vide order dt.14.3.2013 and for Assessment Year 2011-12 under Section 143(3) of the Act vide order dt.14.3.2013. The additions / disallowances made therein are tabulated at para 2.2 of this order (supra) are as under :
20 ITA Nos.827 to 831/Bang/2015 (i) Additions on account of unaccounted cash sale receipts.
Assessment Year 2008-09 Rs.8,35,91,047 Assessment Year 2009-10 Rs.1,26,92,650 Assessment Year 2010-11 Rs.6,56,72,629 Assessment Year 2011-12 Rs.3,36,82,047
(ii) Disallowances of Bogus Expenditure.
Assessment Year 2009-10 : Rs.28,96,125.
Assessment Year 2010-11 : Rs.78,51,020.
7.2 Aggrieved by the orders of assessment for Assessment Year 2008- 09 to 2011-12, the assessee filed appeals before the CIT (Appeals) – 11, Bangalore, which were dismissed.
7.3.1 Aggrieved by the orders of CIT (Appeals) – 11, Bangalore dt.10.3.2015 for Assessment Years 2008-09 to 2011-12, the assessee has preferred appeals before the Tribunal. In the appeal for Assessment Year 2008-09, the assessee raised the following grounds :-
“ That the order of the authorities below in so far as it is against the assessee is opposed to law, facts, circumstances, natural justice, equity all other known principles of law. 2. That the total income computed and total tax computed is hereby disputed.
21 ITA Nos.827 to 831/Bang/2015 3. The proceedings of search and all other subsequent proceedings are bad in law, without jurisdiction and invalid. 4. The notice u/s 153A and subsequent proceedings are without jurisdiction and bad in law. 5. The order u/s 143(3) r.w.s 153A is bad in law, invalid, time barred and infructuous. 6. That the AO erred in relying on material that did not belong to the assessee which is contrary to the requirements of section 153C.
The CIT(A) failed to appreciate that sufficient and adequate opportunity were not provided by AO to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled.
The CIT(A) erred in dismissing the ground on validity of search.
The AO erred in initiating proceedings u/s 153A and thereafter passing an order in the absence of any abatement as is envisaged in the law.
The CIT-Appeals erred in refusing to rely on the decision of the Special Bench in All Cargo Global Logistics Limited on the issue of abatement of assessment.
The AO erred in making additions of Rs. 8,35,91,047/- as income from sale of iron ore.
The AO erred in not following the procedure as envisaged u/s 145(3) of the Act before completing the assessment.
22 ITA Nos.827 to 831/Bang/2015 13. The authorities below erred in relying on material A/BSG/01 & A/BSG/02 which was already held as belonging to Mr.Bharat S Ghorpade against whom separate proceedings u/s 153C was initiated and completed.
The authorities below erred in placing reliance on the statements given by Mr.Kartikeya M Ghorpade and Mrs.Ambika Ghorpade which was explained through their subsequent correspondence.
Without prejudice, the authorities below erred in relying on the material A/BSG/01 & A/BSG/02 without clarifying the questions raised on the said seized material.
The authorities below erred in relying on statements recorded from Mr. Bharat S Ghorpade, Mr. Dinesh Kumar Singhi, Mr.Kartikeya M Ghorpade, Mr. K.V. Balan and Mr. Antony Balraj.
The authorities below erred in relying on statements supra in Ground No.16 without providing opportunity to cross examine.
That the approval granted u/s153D is not as per law.
The appellant denies the liabilities of interest u/s 234A, 234B & 234C of the Act. Further prays that the interest if any should be levied only on returned income.
No opportunity has been given before levy of interest u/s 234A, 234B and 234C of the Act.
23 ITA Nos.827 to 831/Bang/2015 21. Without prejudice to the appellant’s right of seeking waiver before appropriate authority, the appellant begs for consequential relief in the levy of interest u/s 234A, 234B and 234C of the Act.
For the above and other grounds and reasons which may be submitted during the course of hearing of the appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered.”
7.3.2 Almost identical grounds have been raised by the assessee in the appeals for Assessment Year 2009-10 to 2011-12 as the issues are almost common except for change in the amounts. However, on the disallowances made on the issue of Bogus Expenses for Assessment Years 2009-10 and 2010-11, the grounds raised on this issue are as under :
For A.Y. 2009-10
“12. The authorities below erred in making additions of Rs.28,96,125 as bogus expenses claimed.”
For A.Y. 2010-11
“12. The authorities below erred in making additions of Rs.78,57,020 bogus expenses claimed.”
7.4 In written submissions filed by the assessee submitted as under :
“ The assessee for the assessment year AY 2008-09 filed her return of income on 28.09.2008 declaring Total Income of Rs. 11,40,81,970/-. The search and seizure operation purportedly u/s 132 of the Income Tax Act, 1961 was carried
24 ITA Nos.827 to 831/Bang/2015 on in pursuance of warrant of authorization dt 27.09.2010 in the case of Smt Ambika Ghorpade at C-1102, Mantri Elite Apartments, Bannerghatta Road, Bangalore. The premises at Gaurihara, Gandhi Colony, Hospet, was also searched purportedly u/s 132 of the Act and certain materials were seized. The said premise does not belong to the assessee but belongs to Mr. S.Y. Ghorpade. The warrant of authorization in this search was also not shown to the assessee or its representatives. It was shown to one Mr. S.Y.Ghorpade to whom the said premises belonged to. The seizure of documents marked A/BSG/01 and A/BSG/02 were made in the hands of S.Y. Ghorpade and Bharath S Ghorpade. The said material did not belong to the assessee. During the course of search at Bangalore premises at Mantri Elite, C-1102, Bannerghatta Road, Bangalore, a statement was recorded from Mr. Karthikeya M Ghorpade in the wee hours of the day. The assessee had lot of apprehensions about the legality and the manner in which statement was recorded and immediately filed a letter before the DDIT (Inv) seeking amendment to the statement recorded. Inspite of the said request, the DDIT (Inv) refused to give a copy of statement recorded to enable the assessee to confirm the veracity of the statements recorded. The above search was completed vide panchanama drawn on 29.09.2010 at 8.45 am. Thereafter, a notice u/s 153A dt 22.03.2011 was served on the assessee calling for filing return of income. The assessee filed return of income under protest and without prejudice on 02.04.2012 by declaring additional income of Rs. 30,00,000/- and total income of Rs. 12,04,96,710/- along with the letter dt 30.03.2012. The AO issued notices u/s 142(1) and 143(2) on 27.08.2012 calling for various details. Subsequently, notice was issued on 16.10.2012 proposing to make an addition of Rs. 8,35,91,047/- on the premise that the assessee had received the said sum in cash by sale of iron ore to Mr. Dinesh Kumar Singhi and M/s Bharath Mines and Minerals. The learned AO made the allegation of receipt of cash on the basis of the so called statements recorded from Mr. Bharath S Ghorpade, Mr. Dinesh Kumar Singhi and Mr. Karthikeya M Ghorpade. The AO placed reliance on seized material A/BSG/01 & A/BSG/02 seized at Gaurihara, Gandhi Colony, Hospet. The assessee had earlier informed that the material in A/BSG/01 & A/BSG/02 does not belong to it. Appreciating the clarification of the assessee, the AO had issued notice u/s 153A r.w.s 153C dt 05.03.2012 to Mr. Bharath S Ghorpade holding that the said materials belong to Mr. Bharath S Ghorpade. Even after holding that the material belonged to Mr. Bharat S Ghorpade, the AO proceeded to assess the income based on the said seized material and uncorroborated statements of Mr. Bharath S Ghorpade and Mr. Dinesh Kumar Singhi, without allowing Mr.
25 ITA Nos.827 to 831/Bang/2015 Karthikeya M Ghorpade to correct the statement. The assessment has been completed assessing the total income of Rs. 20,10,87,760/- by making additions of Rs 8,05,91,047/- (after considering income declared to the extent of Rs 30,00,000/-). The AO has erred in making the said addition by holding that the assessee had effected certain cash sales and has received cash. There is absolutely no evidence of what so ever nature available for the AO to make such addition. The objections filed by the assessee have been summarily dismissed without meaningfully going through the same. The AO has relied on ‘hear say’ and uncorroborated evidences in preference to facts and relevant evidence. The material in the form of A/BSG/01 and A/BSG/02 did not pertain to the assessee and the entries are totally in variance with the books maintained. Not even the rudimentary evidence that the assessee has received cash in excess of what is recorded in the books has been led by the AO. The detailed explanation given by the assessee has been ignored. Thus the addition is based on wholly inconsistent and unsustainable conclusions. There is neither any asset commensurate to the alleged cash receipts nor is actual cash available with the assessee. In the absence of any such asset or valuable, it would be wholly inconsistent to make the above additions. The AO having held that A/BSG/01 & A/BSG/02 belongs to Mr. Bharath S Ghorpade, should not have assessed the income in the hands of the assessee which is against section 153C of the Act. Thus, the addition is unsustainable and the assessee is aggrieved by the said addition. The assessee has filed return of income along with the audited financials comprising of Profit and loss account, Balance Sheet and other schedules. The AO has adopted the income as declared by the assessee based on books of account. The AO has not expressed any adverse view on the correctness or completeness of the accounts of the assessee. In fact, the AO has adopted and relied on books of account maintained. This being the case, he could not have made the additions except in the manner provided u/s 145(3) of the Act. Unless section 145(3) is invoked, there cannot be any addition to business income. Thus, non adherence to the provisions of section 145(3) of the Act, renders the additions unsustainable. All the arguments/submissions made in the case of M/s.Kartikeyas Manganese & Iron Ores Pvt Ltd in ITA nos. 832 to 835/B/2015 applies in the impugned case ITA nos.828 to 831/B/15 – AY 2008-09 to 2011-12 as well and the assessee relies on the same for the following additions made in the assessment order:
26 ITA Nos.827 to 831/Bang/2015 1) Alleged cash receipts from sale of iron ore – AY 2008-09 Rs.8,35,91,047/-, AY 2009-10 - Rs.1,26,92,650/-, AY 2010-11 Rs.6,56,72,629/- and AY2011-12 - Rs.3,36,82,047/- 2) Bogus expenses – Rs.28,96,125/- in AY 2009-10 and Rs.78,57,020/- in AY 2010-11 In view of the above, the additions made and the assessment order needs to be vacated . On the issue of approval u/s 153D, the assessee relies on the submissions given in the case of M/s.Kartikeyas Manganese & Iron Ores Pvt Ltd in ITA nos. 832 to 835/B/2015. The grounds on interest u/s 234A/B/C are consequential in nature.”
7.5 The Standing Counsel for Revenue was also heard in the matter and further put forward the following written submissions :
“ Search under section 132 of the Act was conducted in the case of the assessee on 28/9/2010. Notice under section 153A of the Act issued on 22/3/2011 and same was served. 2. The controversy for the present Assessment Year is similar to controversy involved in the case of M/s.Karthikeya Manganese and Iron Ore for the assessment year 2008–09 except to the figures. The detailed submissions made for Assessment Year 2008–09 in the case of M/s.Karthikeya Manganese and Iron Ore is adopted for the present year and for the sake of convenience the same is extracted below. 3. During the course of search in the case of Mrs Ambika Ghorpade and M/s. KMIORE (Kartikeya Manganese and Iron Ore Private Limited) the following facts came to light: – i. Mrs Ambika Ghorpade is owner of mining lease No. 2354 referred to as old mines(OM) and the company M/s.KMIORE owns mining lease No. 2559 referred to as new mines (NM). The mine owners have signed ore raising contracts with Mrs.Snehalatha Singi for extraction and processing the iron ore from these mines. ii. As per the business arrangement Mrs.Snehalatha Singi would undertake extraction and processing the iron ore
27 ITA Nos.827 to 831/Bang/2015 into lumps and fines, handover to the mine owners who in turn supplied processed iron ore to Bharat Mines and Minerals. iii. The mine owners are just leaseholders and entire set of activities is carried out by Mr Dinesh, Singhi of BMM though ore raising and processing contract is in the name of Mrs Snehalatha Singhi. Mine owners sell the processed iron ore only to BMM. During the course of search several documents relating to business activities were found and seized in the premises of Sri Bharat S Ghorpade, person in charge of affairs of the assessee mining business) marked as A/BSG/01 and A/BSG/02. iv. Show cause notice was issued and served on the assessee by making the seized documents as part of the show cause notice. The statements relevant of Mr Bharat S Ghorpade was also made as part of the show cause notice. The show cause notice is extracted in the assessment order at page 3 to 16 of the assessment order. The assessee in reply dated 15/11/2012 acknowledged the receipt of seized material marked as A/BSG/01 and A/BSG/02. All the statements recorded and relied on also provided to the authorised representative of the assessee. v. One more show cause notice dated 9/1/2013 was issued by incorporating the relevant pages of the seized material and the statements of Sri Kartikeya Ghorpade Managing Director of the assessee company (page 19 to 21 of the assessment order). The assessee filed reply on 6/2/2013 (page 21 to 24 of assessment order). vi. All the issues on point wise were considered and finding was recorded by the Assessing Officer as under: – a. with respect to objection stating statement does not indicate any payment of cash or activity outside books. Assessee attention was invited to statement dated 19/7/2010 to Q.No.8 of Mr Dinesh Kumar Singhi accepting payment of Rs.1.40 crores in cash and the remaining amount of Rs.27,03,33,112/– in cheque. b. Assessee’s objection regarding not indulged in sale outside the books of accounts and no supply has been made to JSW and KFIL, attention of the assessee was invited to the seized material found
28 ITA Nos.827 to 831/Bang/2015 and seized from the premises of Mr Bharat S Ghorpade and confirmed by Mr Dinesh Kumar Singhi, Mr Kartikeya Ghorpade and also Mrs Ambika Ghorpade. c. Assessee objection with respect to statements of Mr Dinesh Singhi, Mr Bharat S Ghorpade and Mr Karthik Ghorpade, the statements relied on have been provided to the assessee and acknowledged by the assessee. The material relied on (seized material) has been provided to the assessee and the same is acknowledged. The assessee has not objected to the material facts in the statements except for procedural issues which are incorrect. Seized material have been provided to the assessee three times. d. With respect to the assessee objection questioning the veracity of the entries in the seized material, the Assessing Officer held that the same has been confronted to the person who has written them and same has been confirmed. vii. The assessee has not objected to the quantification of the undisclosed income. However the same has been dealt for the sake of clarity as under: – a. Cash portion of sales consideration: – The profit margin on sale of iron ore with permit and without permit has been received by cheque as well as cash by the assessee. This is recorded month vise by Mr Bharat S Ghorpade and found and seized during search. The sale consideration received by cheque from BMM/BMM Ispat Ltd are accounted in the books of accounts of the assessee but the cash component is not accounted. This has been confirmed from books of accounts and the statements recorded from Mr Bharat S Ghorpade and Mr Kartikeya Ghorpade. (Tabulation at page 27 and 28 of the assessment order). b. Mr Bharat S Ghorpade admitted that entries in the seized material A/BSG/01 and A/BSG/02 written by him and sales of iron ore to Sri Mr Dinesh Kumar sINGHI of Bharat Mines and Minerals. Further admitted the sale of iron ore with permits and also without permits and the receipt of amounts being
29 ITA Nos.827 to 831/Bang/2015 sale consideration received by way of cheques and cash. Relevant portion of the statements of Mr Bharat S Ghorpade are extracted at page 29 to 37 of assessment order. c. Mrs Ambika Ghorpade was questioned and she stated that entire business activities are undertaken by husband and he only explain the seized materials. d. Mr Dinesh Kumar Singhi accepted the payment of cash of Rs.1.40 crores in respect of billing done in April 2010 reflected in seized material. e. Page 25 and 26 of the seized material marked as A/KMIORE/S/06 seized from the office of M/s.KMIORE Pvt Ltd during search and 28/9/2009 containing billing details for month of August 2009 and September 2009. As per this page, the total iron ore sold during these months was 127006.97 MT at the rate of Rs.750 per MT for total sale value of Rs.9,52,55,227. Out of this, the amounts covered in the invoice was Rs.6,64,55,424/– adjusted to the permitted quantity of iron ore measuring 52442.780 MT. The remaining sale consideration of Rs.2,87,99,803/– is written as cash for the month of August and September 2009 out of which a sum of Rs.37,99,803/– is written to have been received and the balance of Rs.2,50,00,000/– yet to be received. A sum of Rs.1,50,00,000/– being cash component for the month of August 2009 has been considered in the about table. The remaining amount of Rs.1,37,99,803/– needs to be taxed as unaccounted and undisclosed income in the hands of the assessee and Mrs Ambika Ghorpade proportionately. f. Similarly the cash receipts for period of April 2008 to March 2009, cash payments are tabulated at page 39 of the assessment order. Total amount received in cash is Rs.19,06,35,900/– for the above period and the same has been admitted by Mr Bharat S Ghorpade from Mr Dinesh Kumar Singhi of M/s. Bharat Mines and Minerals. Relevant portion of statement is extracted for ready reference at page 40 and 41 of the assessment order. The contents of the said page was also confronted to Mr Karthikeya M Ghorpade during course of search at
30 ITA Nos.827 to 831/Bang/2015 his residence and he has admitted the receipt of cash from Mr Dinesh Kumar Singhi of Bharat Mines and Minerals during the period from 26/4/2008 218/3/2009 from sale of iron ore. Mr Kartikeya Ghorpade has admitted the amount of Rs.19,06,35,900/– as undisclosed income of M/s.KMIORE Pvt Ltd for Assessment Year 2009–10. Relevant portion of statement extracted at page 41 and 42 of the assessment order. g. Page number 27, 28, 29, 34, 35 and 36 of the seized material marked as A/BSG/01 from residence of Mr Bharat S Ghorpade contains details of certain payments received by cash from Mr Dinesh Kumar Singhi during the period February 2008 till March 2009. Pages 27, 28 and 29 contains details of iron ore sold during the period from February 2008 to June 2008 with permits and without permits. As per the analysis of the seized material total permitted quantity of iron ore weighing 185600 MT was sold during the period February 2008 to June 2008. As per page 29 the total payment received or permitted quantity of iron ore was Rs.24,12,81,600/– which includes cash portion sale consideration of Rs.7,62,81,600/–. On detailed examination of the seized material it was found that sale consideration has been divided into two components with the different rates towards cheque and cash. h. Page 30 of the seized material A/BSG/01 reflects aggrieved prize at Rs 1300/– per MT. This was further divided into two parts for permitted quantity at Rs.889/- per MT for cheque and Rs.411/– per MTS for cash component the Page further contains details of cash received on sale of 119926.08 MT of iron ore without permits during the period February 2008 to June 2008 and cash receipt for without permit quantity was Rs.15,59,03,904/–. The total cash sales for the period February 2008 to June 2008 works out to Rs.23,21,85,504/–. The Page further contains cash receipts of Rs.8,86,98,500/– towards sale of iron ore without permits during month of July 2008 and August 2008 and the quantity of iron ore is 57041 MT (50767 Mt fines and 6274 MT lumps) hence total sale receipts for the
31 ITA Nos.827 to 831/Bang/2015 period February 2008 to August 2008 is Rs.32,08,84,004/–. i. Mr Bharat S Ghorpade admitted the above cash receipts on sale of iron ore during February 2008 to August 2008 and not being accounted in the books of accounts of the assessee for relevant period. (Statement extracted at page 44 to 48 of the assessment order). The above cash receipts have been admitted by Mr Kartikeya Ghorpade on sale of iron ore during the period on confrontation of the seized material, and the same has been admitted to be undisclosed income. (Relevant Statement of Mr Kartikeya Ghorpade extracted at page 49 to 50 of assessment order). j. The cheque component received on sale of iron ore by the assessee and Shri Ambika K Ghorpade mentioned in the seized material tallied with the books of accounts with minor differences which would have crept in due to rounding off of the rates or due to carry forward of the previous month sales to the following months or addition of arrears of royalty etc and fits to the modus of accounting and billing as discussed above. The month wise sale as found in the seized material is tabulated at page 51 to 52 of the assessment order. From the tabulation it is clear that Bill prepared at the end of month for the cheque portion of the consideration received, consideration received by cheque is apportioned to the permitted quantity of the iron ore sold. At the time of invoicing, the total sale consideration is increased by Rs 100/- per MT of permitted quantity of iron ore sold. k. The month wise sale of iron ore for which consideration is received by cheque tallies with the books of accounts and tallies with the quantity of iron ore shown to have been sold with permits in the invoices. l. As evidence from the seized material the total cash receipt is Rs.64,00,91,473/–. m. Bogus expenses:-The entire operations of the mines owned by the assessee are being carried out by Bharat Mines and Minerals as such the assessee has no expenses to be incurred except
32 ITA Nos.827 to 831/Bang/2015 administrative in miscellaneous expenses. In the course of search at residence of Mr Bharat Ghorpade and office premises of the assessee setting bills pertaining to the contract works were found and seized and the same is placed at page 55 of the assessment order reflecting adjustment bills in the name of the employees of the company. n. Similar entries were found for the Assessment Year 2010–11 in the notebook maintained by the assessee and same is scanned at page 57 of the assessment order reflecting generation of bills in the names of spouses of the employees by the assessee. The statement of employees (accountant) is extracted at page 59 and 60 admitting the contractors are either the employees of the company or the spouses or relatives. Further admitted generation of bills in the office of the assessee (relevant portion of statement at page 61 and 62 of the assessment order). An analysis it is found the contract work is only accommodation entries to avoid payment of tax. 4. The same has been appreciated in proper prospective by the Appellate Commissioner and upheld the same. 5. Reply to assessee submission. a. The contention of the assessee that addition of Rs.7,85,91,047/– towards cash sales and cash receipt is without evidence is incorrect. The seized material marked as A/BSG/01 and A/BSG/02 clearly reflected the sale of iron ore with and without permits, cheque component and cash component. The sale of iron ore with permits and the consideration received in cheque component tallied with the books of accounts maintained by the assessee. Invoices are tampered to match the quantity with permits. Mr Bharat Ghorpade was looking after the affairs of the assessee company has admitted the content’s to be correct. Another party to the contract Mr Dinesh Kumar Singhi has further admitted the contents to be true. Mr Kartikeya Ghorpade Managing Director of the assessee company has accepted the contention of the seized material to be correct and true. In such circumstances the contention of the assessee is an afterthought and without any basis.
33 ITA Nos.827 to 831/Bang/2015 b. The contention of the assessee that objection filed has been summarily dismissed without meaningful going through the same is incorrect on the face of it. Each and every objection has been dealt by the Assessing Officer point wise. The Assessing Officer has explained each and every page of the seized material and the relevance of the same with support of the statements of the above referred persons. c. The further contention that the material in the form of A/BSG/01 and A/BSG/02 does not belong to the assessee is an afterthought when the person in charge of the business of the assessee and the Managing Director have admitted the same, the above submission is only for the sake of argument without any substance. d. In view of the assessments being pending under section 153A of the Act, the contention of the assessee that assessment under section 153C of the Act has to be done in respect of the material found and seized from Mr Bharat S Ghorpade is incorrect and the Act does not provide for dual assessments one under section 153A and another under section 153C of the Act. Reliance is placed on the judgement of the High Court in the case of Canara Housing 274 CTR 122 wherein it is held that assessment under section 153A of the Act is not confined only to the seized material but also with reference to the material in possession of the Assessing officer and some other material found in the course of assessment proceedings. e. The contention of the assessee with respect to section 145 (3) of the Act is incorrect. All the additions made on the basis of the seized material not reflected in the books of accounts and hence question of books of accounts being rejected does not arise. f. The contention raised with respect to the discrepancies in the pagination of the seized material is hyper technical, afterthought and baseless. It is an attempt made by the assessee to deviate from the main issue. When the same material was provided to the assessee the same has been admitted and this is an attempt to overcome the admission made on oath. The entire set of seized material has been placed before this Hon’ble Tribunal and the authenticity can be examined. Each and every page of the document has been authenticated by Mr Bharat S Ghorpade by affising signature and date, from whose possession the same has been seized. In such a situation, the assessee is not correct in questioning the authenticity of the seized material that too in
34 ITA Nos.827 to 831/Bang/2015 a situation where majority of the entries tallied with the books of accounts maintained by the assessee. g. Another illogical contention raised by the assessee with respect to the possibility of confronting the same seized material to Mr Bharat Ghorpade and Mr Kartikeya Ghorpade’s immaterial and irrelevant. What is relevant is whether the material found and seized has been confronted and the same aspect is not under dispute. In view of the present technology, the contention of the assessee is illogical. h. All other contentions which are not specifically commented are denied as false. The further contention of the assessee that approval granted under section 153D of the Act is without application of mind and in mechanical manner is incorrect. The approval has been granted strictly in conformity with the provisions of the Act. Wherefore it is respectfully prayed to dismiss the appeal filed by the assessee.” 7.6 Similar rival arguments and contentions as were put forth by both sides for Assessment Years 2009-10 to 2011-12 as the facts and issues are similar. Both the assessee and Revenue have placed reliance on the submissions put forth in the case of M/s. Kartikeyas Mnaganese and Iron Ores Pvt. Ltd. in ITA Nos.832 to 835/Bang/2015 for Assessment Years 2008-09 to 2011-12 which have also been heard and decided by us simultaneously.
7.7 We have heard the rival contentions and perused and carefully considered the written submissions, the material on record and the judicial pronouncements cited. On an appraisal of the record before us, we find that the issues and facts in the case on hand are similar to that of the appeals in the case of M/s. Kartikeyas Manganese and Iron Ores Pvt. Ltd. in ITA Nos.832 to 835/Bang/2015 for Assessment Years 2008-09 to 2011-12. Since we have decided these issues in the appeals of the
35 ITA Nos.827 to 831/Bang/2015 assessee in the case of M/s. Kartikeyas Manganese and Iron Ores Pvt. Ltd. in ITA Nos.832 to 835/Bang/2015 for Assessment Years 2008-09 to 2011-12 in favour of the assessee on these very same issues, consequently, in the appeals in the case on hand also for Assessment Years 2008-09 to 2011-12 in ITA Nos.828 to 831/Bang/2015, by the same parity of reasoning, are also allowed / decided in favour of the assessee and consequently the following additions / disallowances made in these appeals are deleted :-
1) Additions on account of unaccounted cash sale receipts for Assessment Years 2008-09 to 2011-12 of Rs.8,35,91,047; Rs.1,26,92,650; Rs.6,56,72,629 and Rs.3,36,82,047 respectively and
2) Disallowances on account of Bogus Expenditure for the Assessment Years 2009-10 of Rs.28,96,125 and Rs.75,57,020 for Assessment Year 2010-11.
Consequently, Grounds at S.Nos.11 to 17 of the assessee's appeals are allowed.
Ground Nos. 19 to 22 - Charging of interest under Sections
234A, 234B & 234C of the Act.
8.1 In these grounds (supra), the assessee denies itself liable to be charged interest under Sections 234A, 234B & 234C of the Act and
36 ITA Nos.827 to 831/Bang/2015 that too without being afforded any opportunity before charging the same. The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition was upheld by the Hon'ble Apex Court in the case of Anjum H Ghaswala (252 ITR 1) (SC), and we therefore uphold the action of the Assessing Officer in charging the said interest under Section 234A, 234B and 234C of the Act. The Assessing Officer is, however, directed to recompute the interest chargeable, if any, under Section 234B & 234D of the Act while giving effect to this order.
Grounds 1 to 10 & 11 - Validity of search action.
Since we have allowed the assessee's appeals on merits, we decline to adjudicate on the remaining technical / legal grounds raised by the assessee in ground Nos.1 to 10 and 17 (supra). This view of ours is rendered in the light of the Amendment to Sec. 132 of the Act in Finance Act, 2017, by which the Tribunal is precluded from examining the issue of validity of search action. The ITAT is a creation of statute and has to apply the law as laid down in the Income Tax Act, 1961. In this view of the matter, the grounds raised challenging the validity of search action under Section 132 of the Act are dismissed as infructuous.
In the result, the assessee's appeals for Assessment Years 2009-10 to 2011-12 are partly allowed as indicated above.
37 ITA Nos.827 to 831/Bang/2015 11. To sum up, the assessee's appeals for Assessment Years 2008-09 to 2011-12 are partly allowed.
Order pronounced in the open court on the 10th day of April, 2018.
Sd/- Sd/- (SUNIL KUMAR YADAV) (JASON P BOAZ) Judicial Member Accountant Member Bangalore, Dt.10.04.2018
*Reddy gp
Copy to : 1 Appellant 4 CIT(A) 2 Respondent 5 DR. ITAT, Bangalore 3 CIT 6 Guard File
Senior Private Secretary Income Tax Appellate Tribunal Bangalore.