Referred Sections:
Section 143 (3) of the income tax act, 1961
Section 153A of the act.
Section 68 of the income tax act.
Section 2451 of the Act
Section 245D (4)
Section 132 (4) of the act
Section 133A of the Act
Section 260A
Referred Cases / Judgments:
DCIT vs. Rohini Builders 256 ITR 360,
CIT vs. Victor Electronics 329 ITR 271
CIT vs. U.K. Shah 90 ITR 396.
CIT vs. V.M. Shah 90 ITR 396
CIT vs. Laxman Industrial Resources Pvt. Ltd., ITA.No.169 of 2017
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A": NEW DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No. 3741, 3742, 3743, 3744, 3745 & 3746/Del/2019
(Assessment Year: 2012-13 to 2017-18)
Agson Global Pvt. Ltd, Vs. The Assistant
A-25, Nirman Vihar, New Delhi Commissioner of Income Tax
,
Central Circle-28,
New Delhi
(Appellant) (Respondent)
ITA No. 5264, 5265, 5266, 5267, 5268 & 5269/Del/2019
(Assessment Year: 2012-13 to 2017-18)
The Assistant Commissioner of Vs. Agson Global Pvt. Ltd,
Income Tax , A-25, Nirman Vihar, New
Central Circle-28, Delhi
New Delhi
(Appellant) (Respondent)
Assessee by : Shri S. K. Tulsiyan, Adv
Ms. Abha Agarwal, FCA
Ms. Puja Somani, ACA
Revenue by: Shri Sanjay Goyal, CIT DR
Shri K. S. Rawat, ACIT (AO)
Date of Hearing 06/08/2019
Date of pronouncement 31/10/2019
ORDER
PER BENCH
1. These are the 12 cross appeals filed by the assessee and the learned
Assessing Officer involving similar issue in case of one assessee for all 6-
assessment years. Both the parties argued them together raising similar
arguments on these issues for concluded assessment and abated
assessment. Therefore, these all appeals are disposed of by this common
order.
2. The parties agreed that AY 2012-13 is a lead Assessment Year and facts
relating thereto were adverted by them. It was stated that identical
additions were made in the hands of the assessee company for AY 2013-
14, 2014-15, 2015-16, 2016-17 and 2017-18. In case of AY 2017-18 there
1
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
is also a separate addition other then the identical addition as mentioned
in Ay 2012-13 , which would be dealt with by both the parties independent
and separate manner as the facts and circumstances leading to that
additions were different. For ascertaining the status of each of the
assessment, it is important to note that on 21/3/2017 there was a search
on this group including the assessee company.
3. Therefore, we cull out brief facts of the case which shows that assessee is a
company [Appellant] who originally filed its return of income u/s 139 (1) of
The Income Tax Act, 1961 (hereinafter referred to as The Act) on
31/10/2013 declaring income of INR 60285750/. Assessment u/s 143 (3)
of the act was made on 24/3/2015 at the assessed income of INR
245285750/-, wherein an addition of INR 185,000,000 was made because
of unexplained share capital and share premium.
4. On appeal before the learned CIT A, per order dated 31/3/2016, the above
addition was deleted. Against this, ld AO did not prefer further appeal. So,
assessment for assessment year 2012 13 was concluded.
5. Status of other assessment years is as under:-
a) AY 2013-14 assessment u/s 143 (3) is completed as per order dated
31/3/2016 wherein the returned income of the assessee of INR 7
2289816/ was accepted.
b) AY 2014 15, assessment u/s 143 (3) of the income tax act was
passed on 28/12/2016 accepting the returned income of the assessee
at INR 1 31641113/.
c) For assessment year 2015 16 assessee filed its return of income on
30/3/2017 declaring income of INR 1 58775950/ which is pending
on the date of search on 21/3/2017.
d) For assessment year 2016 17 assessee filed its return of income on
29/12/2017 declaring income of INR 3 55009894/, which was
pending on the date of search on 21/3/2017.
e) For assessment year 2017 18 the return of income was filed by the
assessee on 29/12/2017 declaring an income of INR 6 81855980/
Page | 2
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
which was pending for assessment as on the date of search on
21/3/2017.
6. A search and seizure operation was carried out on 21/3/2017. For AY
2012-13, Notice u/s 153A of the act was issued on 6/8/2018. Assessee
filed return of income, which was originally filed, on 28/8/2018. AO noted
that assessment year 2011 12 was already settled before the income tax
settlement commission (ITSC) order dated 11/3/2016. The assessment
u/s 153A was carried out and it was found that assessee has issued share
capital at different premium from different assesses on different dates and
therefore assessee was asked to prove identity and creditworthiness of these
companies. The learned assessing officer found that these companies do
not have much operation but have a robust balance sheet. The companies
have paid heavy premium per share and there is no rational for paying such
a high premium. In the subsequent years after investment in the assessee
company, the operations in most of the companies have reduced further.
These companies have common directors. The companies are operated by
Kolkata based operator. Further, during the course of search blank sign
share transfer forms, blank signed power of attorney and other documents
necessary for transfer of shares were found and seized. These documents
related to the companies from which the assessee is claimed to received
share capital and share premium. Thus, the AO noted that the entire
transaction is a sham transaction. Mr. Apresh Garg, MD of appellant,
was confronted issue of share capital in his statement u/s 132 (4) of the
act. In response to question number 22 in statement dated 2/3/2017, he
stated that the amounts so received, as share capital is nothing but the
assessee's own money that was routed back to the assessee company in the
form of share capital. He submitted that assessee has paid through cheque
to the depositors, who in turn made deposit of the above sum as share
capital with the assessee company. The learned AO further noted that
books of all these entities are maintained at the office of the assessee
company, however, those books of accounts were not found. During the
course of assessment proceedings, assessee was specifically asked to file the
Page | 3
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
details of share capital and premium along with supporting evidences. On
14/11/2018, Assessee furnished chart showing name, address,
correspondence address, share capital, share premium, total amount
received from shareholders, confirmation, bank statement, ITR, . On
verification of bank of these parties it was evident that it is own funds of
the assessee, which has been routed through these parties by cheques, have
been reintroduced in books of accounts of assessee as share capital. The
assessee further contested that issue of share capital has already been
decided in the completed assessment u/s 143 (3) of the act on 24/3/2015,
wherein the addition made by the learned assessing officer out of the total
addition has been deleted by the learned CIT A, No appeal has been
preferred before higher forum. It was therefore stated that, in absence of
any incriminating documents/evidences found during the course of search,
in the concluded assessment for assessment year 2012-13, 13-14 and 14-
15, no addition could be made.
7. Further, assessee also submitted that all these cash credits have been duly
verified during the original assessment proceedings, only addition was made
to the extent of INR 185,000,000, which is deleted by the learned CIT
Appeal, against which no appeal has been preferred before the higher
forum, therefore, assessee has completely proved identity and
creditworthiness of the depositors, source of the money invested in the
assessee company, which is the assessee itself, genuineness of the
transaction is also proved.
8. In view of this, no addition could have been made in the hands of the
assessee, even in case of abated assessments.
9. The learned assessing officer rejected the contention of the assessee and
held that most of the shareholders have meager returned income, investors
to not have any substantial business activities, absence of substantial fixed
assets, absence of strong financials, and absence of date in the documents
found during the course of search such as blank share transfer forms etc.
Shows that it is a sham transaction. Thus, the learned AO made an addition
of INR 4 81987000/ as unaccounted income of the assessee which has
Page | 4
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
been introduced into the books in the form of share capital and share
premium. The AO further made an addition of INR 9639750/ being 2% of
the amount of share capital as commission to obtain share capital. Thus,
total addition of Rs 491626740/ was made.
10. The second addition was with respect to the sum of INR 149,200,000/-
received during the year from M/s Mahalaxmi Traders, whose financials are
obtained and it was found that it does not have financial worth to introduce
the sum. The depositor was examined who denied the investment. Such
addition was made u/s 68 of the act. In addition, of above, 2 percent on the
above sum as commission was also added. Thus, total addition of INR
175814034/ was made.
11. During the course of search, Managing director of the assessee company,
Mr. Apresh Garg, in his statement recorded u/s 132 (4) on 22/3/2017, has
admitted that it resorted to bogus sale/purchase transactions. The learned
AO noted that assessee has undertaken these bogus sale and purchase
transaction with these entities to inflate its expenses and suppress taxable
income. Such suppression of income has been brought back in the form of
share capital. He further noted that assessee has purchased in shell
almonds from one company at an average purchase price of 4414 KG
whereas the sale price to the same entity was 04/04/2004 KG on average
and thus the loss of Rs. one per KG. Thus, the AO noted that Assessee
Company is involved in bogus sales and purchases. There was also a
shortage of stock by nearly INR 450 crore is against the stock recorded in it
is of accounts. Thus 25% of the total purchase price from these parties
were added to the total income of the assessee amounting to INR
353,24,93,127/.
12. Thus, the total income of the assessee was assessed at INR 1 610849810/
against the returned income of INR 60285750/ per order dated
30/12/2018 passed u/s 153A read with section 143 (3) of the income tax
act, 1961 passed by the assistant Commissioner of income tax, central
circle 28, New Delhi (the learned AO).
Page | 5
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
13. Assessee, aggrieved with the order of the learned assessing officer preferred
an appeal before The Commissioner of Income Tax (Appeals) 29, New
Delhi. He passed an order dated 25/4/2019.
14. On the issue of absence of any incriminating material found during the
course of search, thus, no addition can be made in case of concluded
assessments, he confirmed the addition with respect to share capital
holding that statement of the director of the company has been recorded
based on the good and cogent material and such statement recorded
constitutes incriminating material within the meaning of section 153A of the
act. He mainly referred to the seizure of photocopies of few blank share
transfer deeds relating to the part of the share capital issued to outsider as
well as the statement recorded u/s 132 (4) of the managing director of the
appellant company as incriminating material. Thus, he held that the
decision of the learned assessing officer passed u/s 153A of the act is not in
conflict with the judgment of the honourable Delhi High Court including
that of Kabul Chawla and others. He further confirmed the addition with
respect to the share capital u/ 68 of the act. He also confirmed the
addition because of commission paid allegedly for the above share capital.
15. With respect to the addition because of bogus purchases, he directed the
learned assessing officer to submit a remand report giving the periodical
gross profit ratio of the assessee as well as the cash deposit in the bank
accounts. Based on the gross profit ratio, he held that the appellant had
sale/purchase of the similar quantity but instead of showing transactions
with the real entities, the transactions were shown in the name of the
species entities created by the appellant itself, which were not real but
artificial to suppress the profit. He further noted that the entities are also
showing the purchases and the sales to and from the appellant of such
purchases and sales, which are bogus. Therefore, he noted that the
assessing officer was not justified in disallowing 25% of the purchases since
it is not a case where only purchases are in doubt and assessee has
recorded fictitious sales and purchases to cover up the profits of actual sale
and purchases. Therefore he held that in such a situation, in the interest of
Page | 6
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
natural justice, it would be reasonable that the trading results to the extent
of sale and purchase from the fictitious entities are rejected u/s 145 (3) of
the act and the gross profit on the same is estimated. Accordingly gross
profit shown by the assessee from its books for different years/periods was
recorded and for assessment year 2012 13 where the gross profit shown
by the assessee was 16.20% from the other parties, he applied that rate on
the sales with the alleged bogus parties and restricted the addition to the
extent of INR 54,43,23,729/.
16. Therefore, the learned AO as well as assessee both are aggrieved with the
order of the learned CIT A, are in appeal before us.
17. Similarly for AY 20-13-14 to 2017-18 following addition were made by the
ld AO in assessment u/s 153A rws 143(3)of the Act for all these years:-
S Particulars of A.Y. A.Y. A.Y. A.Y. A.Y. A.Y.
l Additions made by 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
N the A.O
Addition u/s 68 on
1 a/c of share capital
and premium
received from:
(i) Outsiders/ 48,19,87,00 - - - - -
unrelated parties 0
(ii) From alleged
associated
parties: - - - - -
- Mahalaxmi 14,92,00,00 15,20,00,00 - - - -
Traders 0 0 65,30,99,00 24,81,49,80 17,86,74,75 -
- Sri Balaji - 34,79,50,00 0 0 0 52,23,87,90
Enterprise 0 9,55,55,000 11,60,00,10 37,60,99,65 0
- Vishal Traders - - 6,48,90,000 0 0 -
- Rustagi Exim P. - - - -
Ltd - -
- Vikas 2,31,66,700 - - -
International ___________ ____________
81,35,44,00 ____________ ___________ _
(iii) From alleged 65,43,53,70 49,99,50,00 0 36,41,49,90 55,47,74,40 52,23,87,90
unknown parties 0 0 0 0 0
2 Total addition u/s 68
on account of share 1,62,70,880
capital/ premium 1,30,87,074 99,99,000 ___________ 72,82,998 1,10,95,488 1,04,47,758
____________ ____________ ___________ ____________ ____________
Alleged commission 82,98,14,88
expenses @ 2% on 66,74,40,77 50,99,49,00 0 37,14,32,89 56,58,69,88 53,28,35,65
the above 4 0 8 8 8
3 Disallowance of
alleged bogus 88,31,23,28 65,25,24,88 1,79,46,43,2 2,67,93,04,3 2,99,56,36,9 1,21,763
purchases (being 2 2 07 97 30
25% of purchases
from alleged related
parties)
4 Addition u/s 68 on - - - - - 1,50,53,24,
a/c of cash deposited 000
in bank a/cs post
Page | 7
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
demonetization
5 TOTAL ADDITIONS 1,55,05,64,0 1,16,24,73,8 2,62,44,58,0 3,05,07,37,2 3,56,15,06,8 2,03,82,81,
(1+2+3+4) 56 82 87 95 18 421
6 Income as per 6,02,85,750 7,22,89,816 13,16,41,11 15,87,75,95 35,50,09,89 68,18,55,98
Return 3 0 4 0
7 Assessed Income 1,61,08,49,8 1,23,47,63,6 2,75,60,99,2 3,20,95,13,2 3,91,65,16,7 2,72,01,37,
(5+6) 06 98 00 45 12 401
8 Assessed Income 1,61,08,49,8 1,23,47,63,7 2,75,60,99,2 3,20,95,13,2 3,91,65,16,7 2,72,01,37,
(Rounded off to) 10 00 00 50 10 400
18. On appeal before the ld CIT (A) by the assessee , addition u/s 68 on
account of share capital were confirmed and addition on account of bogus
purchases was restricted to the extent of the appropriate profit rate on such
purchases as per finding in AY 2012-13
Addition u/s 68 on a/c of share capital/ premium Addition on a/c of alleged bogus purchases
A.Y. & alleged commission expenses @ 2% thereon
Made by the A.O Sustained by the Made by the A.O Sustained by the
C.I.T(A) C.I.T(A)
2012-13 66,74,40,774 66,74,40,774 88,31,23,282 54,43,23,729
2013-14 50,99,49,000 50,99,49,000 65,25,24,882 23,50,36,945
2014-15 82,98,14,880 82,98,14,880 1,79,46,43,207 54,71,66,863
2015-16 37,14,32,898 37,14,32,898 2,67,93,04,397 72,00,54,941
2016-17 56,58,69,888 56,58,69,888 2,99,56,36,930 1,08,45,52,031
2017-18 53,28,35,658 53,28,35,658 1,21,763 4,87,053
TOTAL 3,47,73,43,098 3,47,73,43,098 9,00,53,54,461 3,13,16,21,562
19. The assessee has raised the following grounds of appeal in ITA No.
3741/Del/2019 for the Assessment Year 2012-13:-
"1. That on the facts and in the circumstances of the case, the Ld. CIT
(Appeals) has erred in law and on facts in upholding the assessment
made u/s. 153A of the Act in spite of the fact that no incriminating
documents whatsoever was found/seized during the search operation
u/s. 132 of the Act which is sine qua non for making any additions in
an assessment framed u/s. 153A of the Act.
2. That in view of the facts and in law, since no incriminating material
was found in the course of search and the unabated assessment years
Page | 8
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
remained undisturbed, the AO was wrong in invoking the provisions
of section 153A of the Act and recomputing the income of the current
assessment year.
3. That on the facts of the case and in law, the Ld. CIT(A) erred in
confirming the order of the learned AO in adding the share capital
received and allotted during the year amounting to Rs.48,19,87,000/-
as unexplained cash credit u/s. 68 of the Act in the hands of the
assessee in spite of the fact that no incriminating material was found
in the course of search and all the required information/evidences in
support of such share transactions were furnished during the course
of assessment and ingredients of provisions of sec. 68 required to be
satisfied by the assessee were fulfilled in respect of the impugned
share allotment transactions.
3.a That on the facts of the case, the learned CIT(A) failed to consider that
the issue of share capital and premium of Rs.48.,20.0.0,000/- had
already been examined and considered in the original assessment
order passed u/s 143(3) of the Act dated 24-03-2015 wherein out of
the sum of Rs.48.20 crores, a sum of Rs. 18.50 crores was added to
the income of the assessee and on appeal by the assessee, the
preceding learned CIT(A) vide his order dated 31- 03-2016 had deleted
the said addition made by the learned AO and the department had not
filed any further appeal before the Hon'ble ITAT in this regard and as
such, this issue has attained finality, therefore no addition could have
been made in the absence of any incriminating documents.
3b. That on the facts and in law the Ld. CIT(A) erred in confirming the
action of the learned AO in adding the sum of Rs.96,39,740/- as
commission paid for arranging the share capital money without any
evidence found in the course of search evidencing any such payment,
more so when the transaction does not relate to the present
assessment year.
3c. That on the facts and in law, no incriminating material was found in
relation to the share capital issued during the year to invoke the
provisions of section 68 of the Act in an assessment made u/s 153A
of the Act read with section 143(3) of the Act.
4 That on the facts of the case and in law the learned CIT(A) erred in
confirming the action of the learned AO, without any discussion in the
appellate order, in adding the share application money received
during the year amounting to Rs. 14.92.00.000/- as unexplained
cash credit u/s. 68 of the Act in the hands of the assessee in spite of
the fact that no incriminating material was found in the course of
search and all the required information/evidences in support of such
share transactions were furnished during the course of assessment
and ingredients of provisions of sec. 68 required to be satisfied by the
assessee were fulfilled in the impugned share allotment transactions.
Page | 9
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
5 That on the facts and in law the learned CIT(A) erred in confirming the
action of the learned AO, without any discussion in the appellate
order, in adding the sum of Rs.17,23,66,700/- received as share
application money in the preceding years and the said preceding years
were a part of the proceedings before the Hon'ble Settlement
Commission and therefore cannot be brought to tax in the present
assessment year u/s 68 of the Act.
5a That section 2451 of the Act makes the order of the Settlement
Commission under section 245D (4) conclusive in respect of matters
covered by it and these findings are not liable to be reopened or
reviewed either in proceeding under this Act or in any other
proceedings.
5b That on the facts of the case and in law the learned CIT(A) erred in
confirming the action of the learned AO in adding the sum of
Rs.34,47,334/- as commission paid for arranging the share capital
money without any evidence found in the course of search evidencing
any such payment, more so when the transaction does not relate to
the present assessment year.
6. That on the facts of the case and in law, the ld CIT(A) erred in
confirming the addition of an amount of Rs. 54,43,23,729/- on the
allegation of bogus purchases out of the total addition of Rs.
88,31,23,282/- made by the ld AO on this account.
6a That on the facts of the case and in law, the Ld. CIT(A) erred in
accepting the contention of the learned AO that the transactions with
M/s Mahalaxmi Traders, M/s Shree Balaji Enterprises, M/s Vikas
International, M/s Vishal Traders and M/s Rustagi Exim Pvt Ltd were
bogus without any basis for the same nor any evidence having found
in the course of search for drawing such adverse conclusions.
6b That on the facts of the case and in law, the Ld. CIT(A) erred in
treating the transactions with M/s Mahalaxmi Traders, M/s Shree
Balaji Enterprises, M/s Vikas International, M/s Vishal Traders and
M/s Rustagi Exim Pvt Ltd as bogus and thereby computing GP on the
sales to them @ 16.20%, being the GP wrongly calculated by the AO
on the other transactions accepted as genuine by him.
6c. That on the facts of the case and in law, the Ld. CIT(A) erred in
accepting the incorrect GP @ 16.20% as calculated by AO and
applying the same on the alleged bogus sales made to the alleged
bogus parties.
6d That on the facts of the case and in law, the Ld. CIT(A) erred in
assuming that the appellant had made sales to other parties and had
booked them in the name of bogus parties when no such evidence was
found in the course of search nor such allegation was made by the
learned AO in the assessment order.
Page | 10
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
6e That on the facts of the case, the Ld. CIT(A) erred in not giving
cognizance to the replies filed by the alleged bogus parties in response
to the notices issued by the learned AO u/s 133(6) of the Act to them
during the course of assessment and the learned AO could not point
out any infirmity between the books of the appellant and the replies
received from the alleged bogus parties.
6f That on the facts of the case and in law, the Ld. CIT(A) erred in relying
on the purported statement recorded of Shri Apresh Garg, Director of
the company u/s 132(4) of the Act on 23-03-2017 inspite of the fact
that the said statement was immediately retracted by him since the
contents of the impugned statement were incorrect and the same was
forcefully signed by him.
7 That the learned CIT(A) erred in sustaining the assessment order
passed by the learned AO u/s 153A of the Act read with section
143(3) of the Act wherein admittedly the said order was not based on
his own judgment and belief but was made under pressure and force
of the Coordination Committee comprising of AO, ACIT, ADIT(Inv) and
JCIT(Inv) whereas the AO himself in his letter addressed to ADIT(Inv)
had clearly admitted the impugned additions as unwarranted, thereby
the whole order is erroneous, bad in law and liable to be quashed.
8 That the order of the Ld. CIT(A) being not based on the facts of the
case of the appellant and being contrary to law, should hence be
quashed and the appellant company be given such relief or reliefs as
prayed for."
20. Identical grounds have been raised by the assessee for Ay 2013-14 to 2017-
18 except in case of 2017-18 where in ground no 5 is with respect to
addition of sales u/s 68 of Rs. 73.13 Crores
21. The revenue has raised the following grounds of appeal in ITA No.
5264/Del/2019 for the Assessment Year 2012-13:-
1. On the facts and circumstances of the case, the Ld. CIT(A) has erred
in restricting the addition on account of bogus purchase to the extent
of Rs. 54,43,23,729/- only as against the total addition of Rs.
88,31,23,282/- made at the GP rate disclosed by the assessee. The Ld
CIT(A) ignoring the fact that the assessee was engaged in
unaccounted sale and purchase the gross profit @25% of bogus
purchase whereas, the Ld CIT(A) has restrict disallowance to the
extent of estimated GP @16.20% .
2. That the grounds of appeal are without prejudice to each other."
22. Identical grounds have been raised by the ld AO for Ay 2013-14 to 2016-17
except in case of 2017-18 where in ground no 1 is with respect to addition
of sales u/s 68 of Rs. 77.40 Crores deleted by the ld CIT (A).
Page | 11
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
23. The assessee has made an application for admission of additional ground of
appeal for assessment year 2012 13 to A.Y. 2017 18 identically
"Additional Ground of Appeal
1. That on the facts and in the circumstances of the case and in
law, the CIT (A) erred in rejecting the books of `s account of
the assessee by invoking section 145 (3) of the income tax
act, 1961 in relation to the transactions with the alleged
related party the order on the basis of surmises and
conjectures although the search and seizure operation u/s
132 (1) in case of the assessee, the assessment proceedings
and enquiry conducted by the AO u/s 142 (2) as the further
enquiry conducted by the learned CIT (A) u/s 250 (4) did not
lead to any adverse material whatsoever contrary to the
entries recorded in the regular books of accounts of the
assessee.
2. That further, the CIT (A) erred in invoking section 145 (3) of
the act without complying with the mandatory requirement of
law of issuing prior show cause notice and allowing the
assessee and about opportunity of being heard on materials,
if any, transferred to be relied upon by him in support of the
interest as rejection of the books and the consequent best
judgment assessment u/s 145 (3) of the act."
24. He submitted that these are the additional grounds, which are going to the
root of the matter, jurisdictional on issues, legal in nature, and therefore
they deserve to be admitted. He submitted that both these issues are
arising from the order of the learned CIT A. He submitted that the powers
of the CIT A with respect to finding out the new source of income as well as
rejection of the books of account are challenged. He therefore submitted
that these grounds should be admitted. He further submitted that these
two additional grounds have been raised in all the six assessment years in
appeal of the assessee as they involve identical facts and circumstances. He
Page | 12
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
further relied upon plethora of the judicial precedents support its
contention.
25. The learned departmental representative vehemently opposed additional
grounds raised by the assessee stating that there should not be admitted.
26. We have carefully considered the rival contention and perused the
application for the additional ground of appeal of the assessee is wherein
the assessee has challenged the power of the learned CIT A for rejection of
the books of accounts by invoking the provisions of section 145 (3) of the act
partially with respect to certain transactions of the assessee and that too
without issue of notice u/s 251 of the act. Thus the grounds raised by the
assessee are illegal in nature and goes to the root of the assessment and
additions sustained by the learned CIT A. Therefore, they are admitted for
all these assessment years. They would be dealt with on the merits of the
addition when the respective additions would be dealt with.
27. The 1st ground of appeal is as under:-
"That on the facts and in the circumstances of the case, the
learned CIT (Appeals) has erred in law and on facts in upholding
the assessment made under section 153A of the act in spite of the
fact that no incriminating documents whatsoever was found/seized
during the search operation u/s 132 of the act which is sine qua
non for making any addition in an assessment framed u/s 153A of
the act."
28. Ground no 2 is supporting ground no 1 .
29. Adverting to the above ground of appeal, the learned authorised
representative submitted that assessment u/s 143 (3) is concluded by order
dated 24/3/2015. The search took place in case of the assessee on
21/3/2017. Therefore, the assessment for this year remains concluded
hence it does not abate. He also submitted that accordingly for
assessment year up to AY 2015-16 are unabated assessments, Therefore,
any addition or adjustment to the total income of the assessee can only be
made if there is any incriminating material found during the course of
search. Thus, he stated that in absence of any incriminating material
Page | 13
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
found, the concluded assessment could not be disturbed even after search.
He further submitted that addition u/s 68 of the income tax act or addition
of unaccounted purchases made by the learned AO for assessment year
2012 13 to A .Y. 14 15 are without any incriminating material. He
referred to copies of panchnama placed at page number 1 89 of the paper
book 1 to show that no incriminating material was found during the course
of search. Therefore, he submitted that learned assessing officer cannot
make any addition. However, he hastened to add that the learned
assessing officer has mainly referred to the seizure of photocopies of few
blank share transfer deeds relating to the part of the share capital issued to
outsider as well as the statement recorded u/s 132 (4) of the managing
director of the appellant company were considered by AO as incriminating
material. He further submitted that none of these could be construed as
incriminating materials to disturb the unabated assessment years. He
submitted that even the statement recorded of the managing director of the
assessee company which was made on 22/3/2017 u/s 132 (4) of the act
was retracted on 24/3/2017 within 2 days of the recording of the statement
and was also placed before the additional director of income tax
(investigation) on 31/3/2017. He referred to the retraction statement
placed at page number 171 175 of the paper book 1 of the assessee. To
support its contention he further relied upon the decision of the honourable
Bombay High Court in CIT vs. Continental warehousing Corp Ltd and All
Cargo Global Logistics Ltd 374 ITR 645 (2015) (BOM). He further relied
upon the decision of the honourable jurisdictional High Court in CIT (C) vs
Kabul Chawla (Delhi) (2015) 61 taxmann.com 412 and specifically at para
number 37 and 38 of that order which held that assessment has to be made
u/s 153A only on the basis of incriminating material and in the absence of
any incriminating materials, the completed assessment can be reiterated
and the abetted assessment are assessment can be made. Thus, he
submitted that completed assessments could be interfered by the assessing
officer while making the assessment u/s 153A only based on some
incriminating material unearthed during the course of search or acquisition
Page | 14
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
of documents or undisclosed income or property discovered in the course of
search. He also referred to the decision of the honourable jurisdictional
High Court in the principal Commissioner of income tax vs. Meeta
Gutgutia wherein the special leave petition is dismissed by the honourable
Supreme Court reported in (2018) 96 taxmann.com 468.
30. He further submitted that unless there is a specific incriminating material,
each of the assessment years in which and additions are sought to be made,
the assumption of jurisdiction u/s 153A would be vitiated in law. For this
proposition, he referred to the decision of the honourable Delhi High Court
in 82 taxmann.com 287 (Delhi) (2017). To support his submission for
assessment year 2012 13 to 2014 15, he referred to plethora of judicial
precedents. He further placed into service the decision of the honourable
Supreme Court in case of CIT vs. Sinhgad technical education society
(2017) 397 ITR 344 (SC) wherein it has been held that where as per the
provisions of section 153C of the act, incriminating material which was
seized had to be pertaining to assessment year in question and the
documents which were seized did not establish any co-relation document -
wise with those assessment years, then order passed for initiation of
proceedings u/s 153C should be quashed. He further referred to the
decision of the honourable Delhi High Court in case of principal
Commissioner of income tax, Delhi 2 vs. Best infrastructure (India) private
limited and others in ITA number 11/2017 to 22/2017 (2017) 397 ITR 82
(Delhi) which is in fact, carrying with the decision of the honourable Delhi
High Court in CIT vs. Kabul Chawla (supra). He further referred to the
decision of the honourable Delhi High Court in case of principal
Commissioner of income tax vs. Dharampal Premchand Ltd (2017) 99 CCH
2002 wherein it has been held that when there was no incriminating
material seized, each of assessment years, assessment for which were shot
to be reopened, addition made in course of proceedings u/s 153A/143 (3)
were not warranted.
31. With respect to the contention of the learned assessing officer pertaining to
the photocopies of the blank transfer form pertaining to the share capital
Page | 15
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
issued, he submitted that the alleged seized material are not incriminating
in nature because firstly, they are merely photocopies and not the original
documents and secondly they mention the statement of facts. They do not
have any transaction date, transaction value and the name of the
transaction parties other than the persons who are holding the shares of the
company. They are not incriminating in nature. He referred to several
judicial precedents wherein such evidences were found during the course of
search however, they were not held to be incriminating in nature. He
further referred to mainly the decision of the coordinate bench in case of
Galaxy rice industries Ltd in ITA number 1451, 52, 53 for assessment year
2007 08 2009 10 dated 1/3/2008 wherein in para number 9.4 the
identical situation was discussed, he therefore submitted that it applies
squarely to the facts of the case.
32. He further submitted that the statement recorded u/s 132 (4) do not
constitute any incriminating materials for the purpose of assessment u/s
153A of the income tax act. He submitted that the statement of the
managing director and the statement of Mr. Praveen Agarwal recorded u/s
132 (4) of the act. With respect to the evidentiary value of the statement
recorded u/s 132 (4) with respect to assessment in search cases he referred
to the decision of the honourable Delhi High Court in CIT vs. Harjeev Agrwal
(2016) 290 CTR 263 (Delhi) wherein it has been held that evidence found as
a result of search would not take within its sweep statements recorded
during search and seizure operations unless they are related to any material
found during the course of search. He therefore submitted that there
should be a nexus between the statement recorded u/s 132 (4) and
evidence/material which are incriminating in nature found during the
search. To support his this proposition he relied of the decision of the
honourable Delhi High Court in case of principal Commissioner of income
tax vs. Best infrastructure (India) private limited wherein it has been held
that the statements recorded u/s 132 (4) do not by themselves constitute
incriminating material for the purpose of assessment u/s 153A of the act.
He further relied upon the decision of the coordinate bench in Brahmputra
Page | 16
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Finlease (private) Ltd in ITA number 3332/del/2017 dated 29/12/2017 to
support his contention. He even otherwise submitted that that the
managing director of the company retracted his statement immediately on
24/3/2017. He referred to the copy of retraction placed at page number
169 171 of the paper book number 1. He further referred to the circular
number F. NO. 286/2/2003 IT (INV) dated 10/3/2003 and 286/98/2013
IT dated 18/12/2014. He further referred to the decision of the
honourable Gujarat High Court in principal Commissioner of income tax vs.
Sayumya construction private Ltd (2016) 387 ITR 529 (Gujarat). He further
submitted that information gathered with regard to the share application
money are the entries with respect to the sum is received by the assessee
which are duly disclosed in the regular books of accounts of the assessee
and therefore are part of the regular records of the assessee. Hence, it
cannot be considered as an incriminating material. He further submitted
that the copies of the power of attorney and share application forms are
merely photocopies. He further submitted that share application forms even
otherwise in original also should be with the assessee company who issued
the share capital. He further referred to the order of the learned CIT A in
para number 5.1 and 5.2 of his order waiting that the financial position of
the companies who invested in the share capital of the assessee were not
discovered during the course of assessment proceedings. He even otherwise
submitted that assessing officer himself has stated that their financial has
is robust but they have meager income. Thus, even otherwise there
financials creditworthiness is established. He further referred to the para
number 5.2 of the order of the learned CIT A wherein he referred to the
statement recorded by the investigation wing of third party in altogether
different search. He submitted that such a statement recorded in the
search of third party could not be considered even otherwise as an
incriminating material found during the course of search on assessee. With
respect to para number 5.2 of the order of the learned CIT A wherein it
has been held that during the course of search operation in the office of the
appellant, certain blank sign share transfer forms, blank sign receipts,
Page | 17
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
blank sign the power of attorney and other documents necessary for
transfer of shares were found and seized based on which learned CIT A
held that these are the incriminating documents, the learned authorised
representative submitted that original copies of the transfer deeds and other
papers were not found from the premises of the assessee. The documents
found were only the photocopies, which could not have been capable of
being acted upon. Those photocopies does not give any right to the assessee
over the shares, therefore they are not incriminating in nature. Even
otherwise, he submitted that as there was certain negotiation going on with
respect to the acquisition of the shares of the assessee from those investors
for the future public issue of the assessee, they were found at the premises
of the assessee. He otherwise submitted that the shares are still held by
those persons. He otherwise stated that the AO has not made any enquiry
with respect to this material. With respect to the statement of the managing
director of the company he submitted that in statement recorded u/s 132
(4), he never stated that the unaccounted money of the assessee had been
routed through various companies in the form of share capital. In fact, he
stated that the share capital received from the impugned entities
represented amount from the books of the assessee company from the
disclosed sources rooted through these entities and received in back in the
form of share capital. He submitted that the ultimate source of share
application money received by the assessee was from the disclosed source of
the assessee itself the transactions were verifiable from the bank account of
the party as well as from the bank account of the assessee as the source of
money is the assessee himself. Therefore, he submitted that there is no
unaccounted money flowing fom the assessee to the depositors but the
accounted money is flowing to the depositors. He otherwise submitted that
the statement of the managing director was retracted. With respect to the
amount of INR 149,200,000 he submitted that it was initially paid by the
assessee from it disclosed bank account to Mahalaxmi traders as advance,
which was written back by Mahalaxmi trader's assessee to the assessee
therefore no addition u/s 68 on this court could be warranted. He further
Page | 18
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
referred to the deviation report submitted by the learned assessing officer,
which clearly held that according to the AO himself addition u/s 68 could
not be made. He therefore submitted that the addition made by the learned
assessing officer for assessment year 2012 13 and 2013 14 and 2014
15 deserves to be quashed at the very threshold for want of valid
jurisdiction u/s 153A of the act.
33. On the merits of the addition of the share capital, he submitted that AO has
submitted a deviation report on 20/12/2018 addressed to The Deputy
Director Of Income Tax (Investigation) which is placed at page number 368
377 of paper book 1 in para number 3 the learned assessing officer
himself has stated that on verification of the records as well as details and
evidences filed by the assessee, it is seen that the assessment proceedings
u/s 143 (3) of the income tax act, 1961 was conducted for the assessment
year 2012 13, 2013 14 and 2014 15 wherein the issue of share capital
were examined and verified in detailed by the assessing officer and were
partly accepted at that stage. In para number 3 (ii) in deviation report with
respect to the share capital returns been stated by the assessing officer that
AO had added an amount of INR 185,000,000 to the total income of the
assessee company for assessment year 2012 13 on account of share
application and premium. The above addition of INR 185,000,000 is later
on deleted by the learned CIT (A) after examination of the details filed by the
assessee. Since the learned CIT A being a higher authority had duly
examined the amount of share capital of INR 185,000,000 is an allowable if
there on against which no appeal was preferred by the Department before
the income tax appellate tribunal. Therefore, the addition of this amount on
the ground of bogus share capital/premium can only be made in the light of
incriminating fees material. In the deviation report in para number 3 (iii)
the learned assessing officer himself has stated that the chart prepared by
the investigation wing is factually incorrect. Therefore, the learned
authorised representative submitted that even in the deviation report dated
20/12/2018 the learned assessing officer himself was of the opinion that no
addition u/s 68 on account of share capital is warranted for any of the years
Page | 19
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
under consideration. He further submitted that such a deviation report
dated 20/12/2008 was once again reiterated by the AO and also the
additional Commissioner of income tax, CR 7 in the deviation meeting held
on 28/12/2018, the minutes of such meeting were enclosed at page number
381 385 of paper book 1, even after consideration of the reply dated
24/12/2018 of the Deputy Director Of Income Tax (Investigation). Thus the
learned AR vehemently stated that when the assessing officer and his
superior both are of the view that no addition can be made in the hands of
the assessee u/s 68, the whole addition was made on account of the opinion
of the deputy director of income tax (investigation) as recommended in the
appraisal report. He therefore submitted that assessing officer was not
satisfied that addition is deserves to be made u/s 68 of the income tax act.
In view of this, he submitted that the addition could not be made u/s 68 in
the hands of the assessee.
34. With respect to the issue of bogus purchases from 3 different concerns, the
learned assessing officer has relied upon the statement of the managing Dir
recorded u/s 132 (4) of the act dated 22/3/2017 to hold that sales and
purchases with the alleged parties are bogus, the learned authorised
representative submitted that in the deviation report submitted by the
assessing officer dated 20/12/2018 he has observed that it would be
difficult to make an ad hoc disallowance of 25% of purchases from the
aforesaid parties as suggested in the appraisal report. He therefore
submitted that even the assessing officer stating that the addition suggested
in the appraisal report is not sustainable. He further referred to the
argument of the assessing officer that if both purchase and sale from the
aforesaid parties are treated as bogus, it will lead to a reduction in the
returned income of the assessee instead of an addition which will be
detrimental to the interest of the revenue. He therefore submitted that,
(1) There is no additional incriminating evidence for making this addition,
Page | 20
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
(2) The deviation report itself suggests that if the addition is made of bogus
purchases and sales in the hands of the assessee, it will result into the
reduction from the returned income.
He submitted that the reasons for the same is that assessee has booked
sales from these parties from assessment year 2012 13 to 2017 18 of
INR 36,20,60,89,783/ whereas the purchases from these parties is
amounting to INR 36,02,14,17,848/ thus ultimately for all these years it
will result into reduction of the returned income by INR 18,46,71,935/.
Thus, despite the above observation of the learned assessing officer in his
deviation report itself, The Deputy Director Of Income Tax (Investigation) as
per letter dated 24/12/2018 advised the assessing officer to make an
addition on account of alleged bogus purchases at the rate of 25% of
purchases from the impugned parties as recommended in the appraisal
report. Thus, the learned authorised representative submitted that if the
purchases and sales from these parties, which are alleged to be bogus
purchases and sales recorded by the assessee are removed, there would be
a net reduction in the returned income of the assessee of INR 1 84671935/-
in the hands of the assessee. He further stated that there is absence of any
incriminating material with the assessing officer on this issue. He
submitted that the deviation report shon by the AO clearly states that
there cannot be any additions in the hands of the assessee and addition is
merely based on the appraisal report. He otherwise stated that the
purchases made from these parties have been sold to other parties and the
sales made to these parties the goods have been purchased from other
parties. Thus, he submitted that one leg of the transaction is accepted as
correct by the assessing officer and the other leg of the transaction is held to
be bogus. He thus submitted that such addition could not be made. He
further submitted that when
i. the assessee maintains the detailed stock register showing
quantity wise detail of each item,
ii. purchases are vouched,
Page | 21
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
iii. sales are vouched,
There is no reason that this addition can be made in the concluded
assessment or even in the open assessment. Coming to the order of the
learned CIT A, he submitted that, the learned CIT A has found an
innovative way, not provided in the income tax act, by invoking the
provisions of section 145 (3), without verification of the books of accounts,
rejects part of the books of accounts, applies the gross profit rate of the
other transactions other than with these parties to the alleged transactions
from the tainted parties and makes the addition on account of gross profit.
He submitted that above addition has been made by the learned CIT A
i. without verifying the books of accounts,
ii. without finding any latent patent or glaring defects in the
books of accounts,
iii. without rejecting the quantitative tally of the assessee,
iv. without considering the explanation of the assessee that
during the course of search the stocks lying at one of the
godowns was not at all considered,
v. without issuing any show cause notice,
vi. finding the new source of the income,
vii. partly accepting the books of account and partly rejecting
it,
viii. ignoring the principles of natural justice.
He further referred to para number 7.6 of the learned CIT A wherein it is
alleged that stock was found to be short during the course of search. The
learned AR submitted that the learned CIT A has completely ignored the
submission of the assessee that the godown of the assessee at a logistic
Park Sonipat, Haryana wherein part of the stock of the assessee was not at
all covered under the search action. He submitted that stock lying at the
said premises was not taken into consideration while arriving at the
physical stock as on the date of search resulting in the alleged difference of
INR 450 crore. He submitted that in fact there was no actual discrepancy in
Page | 22
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
the stock physically lying with the assessee vis-a-vis the stock as per books
of accounts. He submitted that had this stock was not available with the
assessee, the addition would have been made of INR 450 crore , as shortage
of stock could have been found as unaccounted sale of the assessee. He
submitted that no evidences were found, that such a shortage of stock was
sold by the assessee out of the books of accounts without recording it. He
therefore submitted that when one premises was not at all covered in search
wherein the stock of INR 450 crore is lying, it has no impact on the alleged
transaction with these parties. Therefore, it was stated that the search
action in the case of the assessee did not lead to the discovery of any
incriminating material indicating that the assessee had recorded any bogus
purchases or sales or that the assessee has made any purchase or sales
outside the books of accounts. In the course of assessment proceedings, no
evidence or material was brought on record by the assessing officer to prove
that the transactions with the alleged related parties were bogus. The ad
hoc disallowance of 25% of the purchases from the alleged parties was made
by the learned assessing officer on mere direction contained in the appraisal
report contrary to his own independent view expressed in the deviation
report that addition on account of bogus purchases result into the reduction
of the returned income. This fact itself shows that, even otherwise, even if
the parties are accepted to be alleged bogus parties, the assessee has shown
high profit in the return of income with respect to the transaction of
purchase and sales from these parties. Thus, he submitted that in the
concluded assessment, the addition is made without any incriminating
material and in open assessment (abetted assessment); the addition was
made without any evidence and contrary to the deviation report of the
assessing officer.
35. He further submitted that the additional grounds raised by the assessee are
on this point where the learned CIT A has rejected the books of accounts
of the assessee partially without issue of any show cause notice for
providing an opportunity of being heard to the assessee before invoking
provisions of section 145 (3) of the act. He referred to the provisions of
Page | 23
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
section 145 (3) of the income tax act and submitted that where the
assessing officer is not satisfied about the correctness or completeness of
the accounts of the assessee, or where the method of accounting provided
under subsection (1) has not been regularly followed by the assessee, or
income has not been computed in accordance with this standards notified
under subsection (2), the assessing officer may make an assessment in the
manner provided in section 144 of the income tax act. He therefore
submitted that the power of rejection of the books of accounts solely rests
with the assessing officer only. He referred to the provisions of section 2
(7A) where the definition of the assessing officer is provided and he
submitted that this does not include the power of the learned CIT A as he
is not an assessing officer. He therefore submitted that there is no power
available with the learned CIT A for invoking the provisions of section
145 (3) of the income tax act when specifically the learned assessing officer
has tested the method of accounting of the assessee in the original
assessment proceedings u/s 143 (3) of the income tax act as well as in the
assessment proceedings u/s 153A of the income tax act and he does not
find any reason to deviate from the book resuls. He submitted that it is not
the case of the revenue that the assessing officer has not at all referred to
the method of accounting employed by the assessee or the correctness and
completeness of the books of accounts maintained by the assessee. He
therefore submitted that when the learned assessing officer in two
consecutive scrutiny assessment u/s 143 (3) and under section 153A of the
income tax act, does not find any issue but is satisfied in fact with the
correctness and completeness of the accounts of the assessee and as well as
the method of accounting employed by the assessee, there is no reason for
the learned CIT A to reject the books of account and work out the
appropriate gross profits. He further submitted that there is a defective
methodology employed by the learned CIT A in estimation of the gross
profit. He submitted that the learned CIT A has estimated the gross profit
on the alleged transaction with the order identified parties though reflected
in the books in the names of the alleged related parties at the lower gross
Page | 24
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
profit ratio is cryptic, perverse, illogical and heavily prejudiced against the
assessee. He stated that the learned CIT A while selectively rejecting the
trading results in relation to the transactions with the alleged related parties
has accepted the trading results of the remaining transaction with the other
parties and worked out the gross profit ratio for the assessment year 2012
13 to 2017 18. The above gross profit ratio is showing of Iran's of 16.20
percentage for assessment year 2012 13 to 4.13 percentage for
assessment year 2014 15. He further stated that the learned CIT A has
once again selectively accepted the gross profit ratio only for the those years
where the same appeal is to be higher side and rejected the gross profit ratio
for the years where the same appears to be lower side and thus has reached
at the result which is not sustainable in law. He submitted that the learned
CIT A selectively rejected the gross profit ratio on transaction with other
parties for assessment year 2014 15 is not sufficient and adopted the
average of the gross profit ratio of the preceding 2 years instead for making
the addition. He therefore submitted that the learned CIT A has accepted
one methodology in one assessment year for computing the gross profit and
has adopted altogether a different methodology for computing gross profit in
different year. He therefore submitted that the approach adopted by the
learned CIT A defies any logic and is clearly perverse and unsustainable in
law. He therefore referred to the additional grounds of appeal wherein there
is a specific challenge to the invocation of the provisions of section 145 (3) of
the act by the learned CIT A.
36. Thus, the learned authorised representative submitted that in addition in
the case of unabated assessment years i.e. Assessment Year 2012 13,
2013 14 and 2014 15 is made without any incriminating evidence. In
case of addition assessment years (abetted assessment) for assessment year
2015 16, 16 17 and 17 18 the addition cannot be made on the merits
of the issue.
37. The learned CIT DR vehemently referred to the order of the learned
assessing officer and the learned CIT A supporting the order. He
submitted that during the course of search, it was observed that the
Page | 25
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
assessee has obtained huge share capital and share premium from various
entities in different assessment years. He submitted that during the course
of search at the office premises of the assessee at Jasola, photocopies of
blank signed share transfer forms, blank signed receipts, blank signed
power of attorney and other documents necessary for transfer of shares
were found and seized. These documents related to companies from which
the assessee has claimed to have received share capital and share premium.
Together these companies have invested INR 481,900,000 in the target
assessee company. Further the managing director of the assessee company
was confronted on issue of share capital premium received by the assessee
in statement u/s 132 (4) of the act on 22/3/2017 wherein in reply to
question number 22 he stated that the amounts received in the form of
share capital was nothing but the assessee's companies own money which
is rooted back to the assessee company in the form of share capital
premium. He referred to the statement of the managing director of the
assessee. Therefore, he submitted that for making an addition in the hands
of the assessee in case of concluded assessment, there are enough
incriminating materials available/found during the course of search. He
therefore submitted that the addition of share capital has been made on the
basis of the incriminating material found during the course of search thus
the learned CIT A is also correct in holding that the addition u/s 68 with
respect to the share capital has been made on the basis of incriminating
material found during the course of search u/s 153A of the act and
therefore the addition is sustainable on this ground.
38. He further stated that assessee is engaged into the large-scale transaction of
bogus sales/purchases with various entities and in statement recorded u/s
132 (4) on 22/3/2017 of the managing director all the concerns were found
to be associated with the assessee and the books of accounts on all these
are also maintained at the office of the target company. The companies also
submitted that all sale and purchases are at the instructions of Mr. Rajesh
Garg, the accountant of the assessee. He submitted that these companies
do not have any independent existence. He further stated that during the
Page | 26
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
course of search the physical stock position of the appellant company was
also not telling with the stock recorded in its books of accounts, which
further strengthens the fact that the appellant was involved in bogus, sale
purchase transactions. He further referred to the transaction of in shell
almonds recorded which resulted into profit of INR 1 per KG is transferred
to the non-existent entity. He thus submitted that the above stated
documents, statements, stock positions lead to unavoidable coclusion that
substantial incriminating material was discovered during the course of
search. He further referred to the paper book submitted by the assessing
officer which contains the statement of the managing director and the
various documents such as blank share transfer certificates, affidavits,
share application forms, copies of parties bank statement, property sale
deeds and other documents which were seized from the premises of the
assessee. However he admitted that the assessment for assessment year
2012 13 to assessment year 2014 15 was completed u/s 143 (3) however
the assessments for assessment year 2015 16 to assessment year 2017
18 are not completed as on the date of search i.e. 21/3/2017 is the time for
issue of notice u/s 143 (2) was available to the assessing officer.
39. On the issue of merit of the addition u/s 68 of the income tax act, he
extensively referred to the order of the learned assessing officer as well as
the learned CIT A to show that the share applicants do not have much
business operation yet have a robust balance sheets, the shares are issued
at a heavy premium which is varying from year to year so there is no
rational. After the investment made by the investor was the operation in
most of the concerns have been reduced further, the share applicants have
common directors and further in case of certain companies, the controlling
person is given a statement to the investigation wing on 12/11/2012 that
these companies have given an accommodation entries. He therefore
submitted that coupled with the above evidence the entire transactions are
sham transactions are in fact a way to introduce the assessee's own
unaccounted income in the garb of the share capital receipts. He submitted
that the share transfer forms are signed by the transfer. He submitted that
Page | 27
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
such document should be in possession of the shareholder and not the
share issue in companies. He further submitted that transaction of the
purchase and sales with respect to four parties is bogus as held by the
assessing officer wherein, the profit of the assessee is reduced, reintroduced
in the books of the assessee as unaccounted income in the form of share
capital. He therefore submitted that in view of this submission the order of
the learned CIT A is based on sound analysis based on the facts available
on record and based on incriminating material found during the course of
search. With respect to the share capital, he relied upon the decision of the
honourable Supreme Court in case of principal Commissioner of income tax
vs. NRA iron and steel (2019) 103 taxmann.com 48, decision of the
honourable Delhi High Court in NDR promoters private limited (2019)
TIOL 172 HC Del- IT. He also relied on plethora of judicial precedents
on the issue of taxability of share capital. On the issue of the validity of the
statement recorded u/s 132 (4) of the income tax act he further referred to
the decision of the honourable Delhi High Court prominently in Smt
Dayawanti vs. CIT (2016) 75 taxmann.com 308 (Delhi) wherein it has been
held that where inferences drawn in respect of undeclared income of the
assessee was revised on basis of materials found as well as statements
recorded by the assessee son in course of search operations and assessee
had not been able to show as to how estimation made by the assessing
officer was arbitrary or unreasonable, addition so made by the assessing
officer by rejecting the books of account was justified.
40. With respect to the addition on account of the bogus purchases, the learned
DR vehemently relied upon the decision of NK proteins Ltd vs. CIT (2017
TIOL 23 SC IT), the decision of the honourable Gujarat High Court in
case of NK industries Ltd vs. DCIT (2016) 72 taxmann.com 289 (Gujarat),
decision of the honourable Delhi High Court in CIT vs. La Medica (2001) 117
Taxman 628 (Del), decision of the honourable Allahabad High Court in case
of Shri Ganesh Rice mills vs. CIT (2007) 294 ITR 316, decision of the
honourable Gujarat High Court in case of Vijay proteins Ltd vs. ACIT (2015)
58 taxmann.com 44 (Gujarat), Sanjay oilcake industries vs. CIT (2009) 316
Page | 28
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
ITR 274 (Gujarat). The learned departmental representative also referred to
the decision of the coordinate bench in ITA number 84 85/ Viz/2018 for
assessment year 2012 0 13 and 2014 15 dated 17/10/2018 wherein in
para number 8 it has been held that where the assessee is not able to
explain the details of unexplained purchases, quantity of the purchases and
also the details of unaccounted sales and the source of the unrecorded
purchases, the assessee has failed to prove that he made unaccounted
purchases and therefore the addition cannot be made on the basis of the
gross profit but complete addition of the unaccounted purchases should be
made.
41. As per ground number 1 of the appeal of the AO, With respect to the order
of the learned CIT A in rejecting partially the books of accounts and then
determining the profit at the rate of gross profit earned by the assessee from
other parties with respect to the profit earned on alleged bogus transaction,
he submitted that the learned assessing officer has made the addition
correctly and therefore the approach of the learned CIT A in adopting the
gross profit rate of 16.20% compared to the 25% disallowance made by the
learned assessing officer. He therefore submitted that in the grounds of
appeal of the learned assessing officer, it challenges the order of the learned
CIT A in reducing the addition made by the learned assessing officer by
deriving the gross profit as unaccounted income of the assessee by applying
the rate applicable to untainted parties. He therefore submitted that the
order of the learned assessing officer with respect to the alleged purchases
should be upheld.
42. The learned authorised representative in rejoinder submitted a point wise
rebuttal on the issue raised by the learned departmental representative.
With respect to the argument of the learned AR about the seizure of the
copies of the blank signed transfer forms, power of attorney et cetera
relating to share capital and premium received by the assessee constituting
an incriminating material found during the course of search, he submitted
that originals were never found at the premises of the assessee during the
course of search. He submitted that such originals are always with the
Page | 29
AgsonGlobal Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
shareholder and not with the issue company. He submitted that
photocopies of the transfer form duly signed by the holder of the shares,
undated, without the name of the transferee, without share transfer fees
paid thereon, does not have any evidentiary value as such evidence,
document cannot be acted upon. He further submitted that photocopy of a
document cannot be an evidence. He further stated that in the deviation
report by the assessing officer, these evidences were not held to be
incriminating evidence. The AO in deviation report has categorically held
that the share capital is examined during the course of original assessment
u/s 143 (3) of the act for all these years, after that addition made is deleted
by the learned CIT A, against which no appeal has been preferred and
therefore no addition is required to be made in the hands of the assessee.
He further submitted that why even the photocopies were found at the
premises of the assessee, detailed explanation was given that there were
some negotiations going on in the past with respect to the acquisition of
those shares by the assessee from those investors however, the deal could
not materialize and those shareholders are still shareholders of the assessee
company. Further blank share transfer forms are only in respect of few of
the shareholders from who share capital is received, in case of all the
shareholders there is no such evidences found during the course of search.
He submitted that even the photocopies with respect to all the shareholders
except for 4 5 parties, were not found from the premises of the assessee.
He submitted that during the original assessment proceedings as well as in
the 153A proceedings, assessee has submitted the complete documentary
evidences with respect to the permanent account number, bank statements,
audited accounts, income tax return, memorandum of articles and articles
of Association, confirming the transaction as well as the resolutions, which
proves the identity, creditworthiness and genuineness of the share
applicants. He submitted that in original proceedings all the shareholders
complied with the notices issued by the assessing officer u/s 133 (6) of the
act. He therefore submitted that all the queries raised by the assessing
officer were directly replied by the shareholders. Thus, according to him,
Page | 30
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
the initial onus is discharged by the assessee. He submitted that the
learned assessing officer or the learned CIT A has not made any enquiry
with any of the shareholders. He submitted that when the AO does not
carry out any enquiry with respect to those shareholders, it does not reject
the evidence submitted by the assessee, he does not have a right to make
any addition u/s 68 of the income tax act as assessee has discharged initial
onus cast upon him.
43. On the issue of the statement u/s 132 (4) of the managing director of the
company, he reiterated his submission that same is retracted later on
within a short span of 3 days and therefore it does not have any evidentiary
value. Even otherwise, he submitted that even if the statement recorded
u/s 132 (4) retraction is not considered, assessee has submitted evidence
of overwhelming nature such as :-
i. bank statements of alleged parties,
ii. funds flow showing inflow and outflow of funds,
iii. Deviation report of the learned assessing officer wherein he
conclusively held that the ultimate source of share application money
received by the assessee was from disclosed sources of the assessee
itself
iv. All such transactions are verifiable from the bank accounts,
v. source of said capital is directly traced to the bank account of the
assessee,
vi. absence of any cash movement,
vii. Complete confirmation of parties with the ITR, bank statements etc
Therefore, addition u/s 68 is not warranted. He further stated that even in
the statement, managing director did not say that it is the unaccounted
money of the assessee, he stated that the assessee has rooted its own
accounted money through banking channel for bringing in share capital,
therefore, source of money is the bank account of the assessee and no
unaccounted money is routed,, therefore, addition u/s 68 is not warranted.
Page | 31
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
44. With respect to the difference in stock, he reiterated his submission that
godown of the assessee at Agson Global Logistic Park, Sonepat Haryana,
was not covered during the course of search, where part of the stock of the
assessee was stored, that stock was not taken into consideration while
arriving at the physical stock. Alleged difference of Rs. 450 crore was
recorded, but that is the stock at that Godown. Thus, he submitted that
there is no difference in the actual stock as well as the book stock. He
therefore stated that for assessment year 2012 13 to assessment year
2014 15, no incriminating material was found during the course of search
and thus addition cannot be made.
45. With respect to AY 2015 16 to 2017 18, he submitted that as assessee
has maintained the complete quantitative details of the goods purchased,
goods sold no addition can be made in the hands of the assessee. He
submitted that deviation report itself suggest that assessee has sold more
goods than what is purchased by the assessee. Therefore, if the purchases
and sales are excluded, it will result into lower profit in the hands of the
assessee then the returned income. Hence, even otherwise no addition can
be made. He further referred to the gross profit analysis of similar parties
having similar size of the business and the nature of commodities traded
therein in case of imperial merchants private limited and Matadin Bhagwan
das, he submitted that the average gross profit ratio shown by these parties
compared to the gross profit ratio shown by the assessee is much higher.
He submitted that the average gross profit ratio shown by them was hardly
2% whereas the assessee has shown the gross profit ratio of 6% with respect
to these years. He therefore submitted that even on the comparison of the
companies engaged in the similar nature of business with similar size, the
book results of the assessee are far better than the comparable company.
Even otherwise, he submitted that in absence of any defect in the books of
accounts, which is so glaring, obvious, and patent, and latent, which could
result in skewng profits of the assessee company, the book results cannot
be disturbed.
Page | 32
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
46. On hearing the parties, the bench raised a specific query with respect to the
addition of share capital and unaccounted purchases that whether all the
seized paper referred to in the assessment order are found in originals or
were photocopies of the original. The bench made it clear that it wanted to
know whether the blank share transfer forms and other forms with respect
to the share capital are found and seized in original or mere photocopies.
47. The bench further raised a specific query to the learned DR, where the
learned assessing officer was also present during the course of hearing, to
know that why a deviation report was filed by the assessing officer and
whether any such procedure is laid down or not.
48. The bench further asked the learned CIT DR as well as the learned
assessing officer to clarify that in view of the deviation report as well as the
appraisal report are differing, then, how the additions are ultimately made
in the assessment order.
49. To all these queries, the learned assessing officer submitted a letter dated
6/8/2019.
50. On the 1st issue whether all the seized papers referred to in the assessment
order are photocopies or are in original, the learned assessing officer stated
that the documents related to unrelated blank share application forms and
associated documents such as affidavit, receipts, power of attorney,
indemnity bonds and copy of the acknowledgement of the income tax
returns of the depositors have been seized during the course of search and
seizure proceedings are only Photostat copies. However, he submitted that
though these are the 4 a state copies they however depict the fact that
unrelated blank share application forms and sale certificates are signed with
share, undated special power of attorney and general power of attorney were
executive is blank name, the acknowledgement of the income tax returns,
certificate of incorporation, bank statement of investing companies show
meager amount of income which do not permit this commensurate and
justify the quantum of the investment, indemnity bonds although undated
without dates, undated money receipts and receipt of shares, undated blank
delivery notes and declarations, dividend requests, undated resolution, op
Page | 33
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
undated bills and sale ways, list of signatories and undated confirmation of
investing parties clearly shows that the documents are incriminating in
nature and the assessee has introduced its unaccounted money by way of
bogus share capital premium accordingly warranted additions have been
made.
51. With request to the deviation report filed, he submitted that on detailed
analysis of the documents and the report of the investigation wing
(appraisal report) during the course of assessment proceedings, a report was
submitted to the authorised officer for his comment and the issues were
also discussed in detail in the deviation meeting held with the concerned
officer of investigation wing. After discussion at length, the considered view
was taken superseding the proposal for deviation and the assessment in
case of assessee were made on merits on the basis of the fact and material
available on record. He further submitted that deviation note is part of
assessment proceedings as per guidelines envisaged in the "INCOME TAX
manual of office procedure", volume II( Technical), Chapter 3, paragraph
4 at page number 44. He further produces the paragraph of the guidelines
as annexure to the letter dated 6/8/2019.
52. On the issue of the addition, he submitted that the assessments were made
after taking into consideration the information contained in the appraisal
report and corroborating with the same with the material available on
record as well as informational information gathered during the course of
assessment proceedings. He reiterated that assessment was made after
considering all the facts and findings of the case. He extensively referred to
all the addition as made in the assessment order. Thus, it was once again
contended that addition has been correctly made.
53. We have carefully considered the rival contentions as well as perused the
orders of the learned assessing officer and learned CIT A. For all these
years, there are 2 types of additions made by the learned assessing officer.
(1) The 1st addition is with respect to the issue of share capital
under section 68 of the income tax act.
Page | 34
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
(2) The 2nd issue is with respect to the bogus purchases and
thereby addition of the appropriate percentage on such bogus
purchases in the hands of the assessee.
Additions of both these types are identically made in 6 different assessment
years assessments framed under section 153A of the act. They are starting
from assessment year 2012 13 and ending on assessment year 2017 18.
Out of above 6 assessment years, 3 assessment years i.e. Assessment Year
2012 13, 2013 14 and 2014 15 are concluded assessment years and 3
assessment years i.e. A.Y. 2015 16, 2016 17 and 2017 18 are abetted
assessment years. There is no dispute between the parties that in case of
concluded assessment years, the addition would only be made on the basis
of incriminating material found during the course of search. There is no
dispute between the parties that in case of abetted assessment years, the
addition would be made irrespective of existence of any incriminating
material but would only be made as if, it is a normal assessment
proceedings.
54. Therefore, the 1st issue that is required to be determined is whether with
respect to share capital and bogus purchases for assessment year 2012 13
to assessment year 2014 15 whether there is any incriminating material
found during he course of search not. According to the revenue, the
statement of the director of the company as well as the photocopies of blank
share transfer forms, power of attorney et cetera found during the course of
search from the premises of the assessee are incriminating material.
Therefore, addition can be made in the hands of the assessee even in case
of concluded assessment, as there is an existence of incriminating material,
with respect to the share capital. With respect to share capital in para
number 6.3 of the order of the learned CIT A it is mentioned as under:-
"6.3 further, from the office of Agson global private limited at JA
1218 1225, 12th floor, DLF tower, Jassal, New Delhi, blank signed
share transfer forms, blank signed receipts, blank signed power of
attorney and other documents necessary for transfer of share were
Page | 35
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
found and seized. These documents related to companies from which
the appellant has claimed to have received share capital and share
premium."
55. In para number 6.5 the learned CIT A held as under:-
"6.5 further, Shri Apresh Garg was confronted on the issue of share
capital, premium received by the appellant company and in reply to
question number 22 of his sworn statement recorded on oath under
section 132 (4) of the act on 22/3/2017, he stated that the amount so
received in the form of share capital, premium represents the amount
is given to various parties, entities in the form of loans or bogus
sales/purchases and it was nothing but the appellant company's own
money which was rooted back in the books of the appellant company
in the form of share capital/premium."
56. During the course of search, in the statement of Mr Apresh garg in question
number 16 with respect to the share capital he stated that though he does
not remember the exact information about the shareholders but whatever
share capital and save premium has been received by the appellant
company is basically the money out of the companies sale proceeds which
have been rooted back through banking channel through the shareholders
which included the employees of the company as well as his other
companies. Further, in response to question number 22 of his statement he
submitted Trail of the funds from the assessee company through cheque to
Vishal traders and from Vishal traders to Mrs Balaji traders and from Shri
Balaji traders to the assessee company in the form of share capital. He
further stated that the assessee gave cheque to Vishal traders, Vishal
traders passed on the cheque to Balaji traders and Balaji traders introduced
the same some to the assessee company in the form of share capital.
Therefore, it is apparent that involve of the transaction there is no
unaccounted income of the assessee, which has been introduced in the
books of accounts of the company as share capital. In fact, assessee issued
cheques in the form of advances et cetera to various concerns who in turn
deposited the money with the assessee through cheque as a share capital
Page | 36
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
and share premium. Therefore apparently on the issue of the share capital
there is no confession in the statement recorded u/s 132 (4) of the
managing director of the appellant company that there is any incriminating
material or unaccounted income of the assessee. Further on 24/3/2017
this statement was retracted and communicated on 31/3/2017 to the
assistant director of income tax (investigation), unit 7 (4), 2nd floor, ARA
Centre, Jhandewalan extension, New Delhi 55 with subject headline of
search and seizure u/s 132 (1) of the income tax act, 1961 on 21/3/2017
concluded on 23/3/2017 in the name of the appellant company. As per
that letter, it was stated that as per annexure A 1 to annexure A 8 for
the copy of the set of share application money papers were found and
seized. According to that letter, the assessee agreed to avail the benefit of
the scheme under PMGKY by offering tax on INR 500,000,000. The
assessee stated that as the offer was made under tremendous pressure and
realized that it was not possible to carry out the above promise for the
reason that assessee did not have any undisclosed income or assets and
assessee is not capable of paying the huge tax and deposit the above sum
and therefore the assessee company made the declaration under the
aforesaid scheme of INR 300,000,000 instead of INR 500,000,000, thus the
statement made on 23/3/2017 was revised to that extent. Therefore, it is
apparent that in the statement made by the managing director of the
company and there was no disclosure because of share capital at any point
of time. Thus the statement so made which has no disclosure on account of
share capital cannot be considered as an incriminating document/evidence
for making the addition on account of share capital.
57. The next question that arises is that whether the photocopies of the blank
share transfer forms, blank signed receipts, blank signed power of attorney
and other documents necessary for transfer of shares which were found and
seized, are they incriminating evidences in nature based on them addition
can be made on account of such share capital. As per the statement
submitted by the assessee out of 36 shareholders, photocopies of such
documents were found in case of 12 shareholders and in case of balance 24
Page | 37
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
shareholders, no evidences whether incriminating or otherwise were found
during the course of search.
58. In the decision of coordinate bench in ACIT, Central Circle-5, New Delhi Vs
M/s Gee Ispat Pvt. Ltd., A-28, Sector 19, Rohini, Delhi-110085 [ITA No.
4256/Del/2014 : Asstt. Year : 2005-06 ITA No. 4257/Del/2014 : Asstt.
Year : 2006-07 ITA No. 4258/Del/2014 : Asstt. Year : 2007-08 ITA No.
4259/Del/2014 : Asstt. Year : 2008-09 dated 31/5/2018 ] identical
documents were found in Original and bench held that they were not
incriminating in nature. In para no 18 (f) it was argued by the ld DR that
"f) Search at the assessee's premises led t the seizure of
blank, share transfer forms duly signed by the allottees and
affidavits of some of the companies/persons who were shown as
investors in the share capital of the assessee company e.g.
pages 9,10,12,15,16, 33, 34, 55, 56, 61 and 62 of annexure AA-
1 are blank sign share transfer forms of some of the share
allottee companies such as M/s NEPC Industries Ltd, M/s
Telstar Editing Pvt. Ltd, and M/s Softgate Technologies Pvt. Ltd,
etc"
But in para no para no 24 the coordinate bench held that
"24. In the present case, since no incriminating material was found,
therefore, the addition made by the AO u/s 153A of the Act was not
justified."
59. Further in case of 2018 (1) TMI 88 - ITAT DELHI M/S. BRAHMAPUTRA
FINLEASE (P) LTD. VERSUS DCIT, CENTRAL CIRCLE -17, NEW DELHI [
No.- ITA No. 3332/Del/2017 Dated.- December 29, 2017] the facts were
that:-
"4.5 On the contrary, Ld. CIT(DR) submitted that addition in
dispute has been made on the basis of the incriminating
material found during the course of search. She referred to page
5 of the assessment order and submitted that alongwith the
search proceeding under section 132 of the Act at the premises
of the assessee, a survey under section 133A of the Act was also
Page | 38
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
carried out at the premises of Sh. M.L. Aggarwal, Chartered
Accountant located at N-5, Azadpur, Commercial Complex New
Delhi and documents including blank signed share transfer
form, blank signed money receipts for transfer of shares, blank
signed power of attorney, Memorandum and Articles of
Association with some ROC papers and copy of bank
statements etc. in relation to one of the share applicants, i.e.,
Edward Supply P. Ltd. were impounded from his premises. The
Ld. CIT(DR) submitted that the survey proceedings at the
premises of Mr. M.L. Aggarwal was part of the search
proceeding at the premises of the assessee and the material
impounded was in the nature of incriminating material and
therefore the condition of incriminating material found during
the course of search is satisfied."
Based on above facts the coordinate bench after considering the statement
as well as the above documents held that :-
"4.7.2 In view of above decision, we are required to examine the two
conditions. The First condition is whether for the year under
consideration, the assessment stood completed before the date of
search or not. The second condition is that whether any incriminating
material unearthed during the course of the search qua the addition
made, which was not already disclosed or made known in the course
of original assessment.
4.8 As regard the first condition, the Ld. counsel has already referred
to page 105A of the paper book, which is a copy of the assessment
order passed under section 143(3) of the Act on 24/11/2009. Since in
the case of the assessee search was carried out on 28/09/2010, thus,
it is undisputed that assessment was completed prior to the date of
search. 4.9 Now regarding the second condition, the Ld. CIT(DR) has
mentioned that documents impounded from the premises of Sh. M.L.
Aggarwal, Chartered Accountant, during the course of survey
proceeding are incriminating material found during the course of
search. We do not agree with the contention of the Ld. CIT (DR) that
these materials like blank shares transfer forms etc could be termed
as found during the course of search at the premises of the assessee.
The survey proceedings carried out at the premises of the Chartered
Accountants, ML Aggarwal are separate from the search proceedings
carried out at the premises of the assessee. There is no concept of
Page | 39
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
group of assessee in Income-tax assessments. Each assessee is
treated separately. If any material is found during the course of
search from the premises of one assessee, it can be used against
another assessee either under section 153C or under section 148 of
the Act depending on material belonging to or pertaining to that
another assessee but it cannot be termed as material found during
the course of the search of another assessee for making addition
under section 153A of the Act. If any material impounded during the
course the survey at the premises of one assessee and found to be
belonging to or related to another assessee, then action may be taken
in terms of section 148 of the Act depending on the material found
but that material cannot be treated as part of the search carried out
at the premises of the another assessee. Further, the Assessing
Officer in the impugned order has not brought on record what was
incriminating in the said material impounded from the premises of
Sh. M.L. Agrawal. In view of our discussion, we reject the above
contentions of the Ld. CIT(DR) that any incriminating material qua
the addition was found during the course of the search action under
section 132 of the Act.
4.10 Another argument, made by the Ld. CIT(DR) in support of her
claim of incriminating material was that the Item No.(i) mentioned on
page 6 of the assessment order, was incriminating in nature as it
contained detail of accommodation entry. For having clarity on the
issue raised by the Ld. CIT(DR), we may like to reproduce the relevant
part of the assessment order as under:
"Apart from, during the course of search operation in Brahmaputra
Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the
following incriminating documents were inter alia seized by party BA-5
i. Page No. 23 of Annexure A-6 (a diary relating to F.Y. 2009- 10)- on the
back side of this page recording is made in the name of "Shri Shyam
Trexim & Fincom P. Ltd." against which 50 lakhs is written.
ii. Page No. 1 of Annexure A-7 - on this page a recording of funds
mentioning debit as well as credit of 25 lakhs in the name of Murari
Lai Aggarwal dated 31.05.2008 and further comments of the payment
of same amount by cash to Murari Lal Aggarwal (MLA) is made
iii. The back side of the above page 1 of Annexure A-7 mentions that
Sarat Aggarwal was paid with cash of 30 lakhs bring back equal
amount in other form. The date of noting is 04.06.2008.
iv. Page 1 of Annexure A-10 - it contains a hand written extract of cash
book containing entry of 5 lakhs in the main of M.L. Aggarwal. It also
shows as debit of 3 lakhs in the name of Sarat Aggarwal. The entries
are for the date 28.05.2008, the date of writing of this page.
Page | 40
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the
name Mr. A Singhal and M.L. Aggarwala dividing into 25 lakhs and 5
lakhs respectively. On this page the name of Sudarshan Casting P. Ltd.
is also written.
During the course of search and post search investigation, the
assessees of this group have not been able to explain the above entries
satisfactorily. Though these entries are to be dealt with in relevant
cases but this also proves the fact that this group is engaged in bring
back their unaccounted/undisclosed income in the guise of share
capital/share application money."
4.11 We find that the Item No. (i) contains recording in the name of
"Shri Shyam Trexim & Fincom Pvt. Ltd". The Assessing Officer has
nowhere brought on record how the said recording on the page relates
to the addition in question of share capital. The Ld. CIT(DR) also
could not explain as how the said recording was related to the
addition in question made in respect of alleged unexplained share
capital. She only stated that said recording on the page reflected
accommodation entry obtained by the `Brahmaputra Group' and but
no documentary evidence regarding the claim that the document was
incriminating qua the addition, are filed. In respect of the Items No.
(ii) to (v), the Ld. counsel has submitted that additions in respect of
the amounts mentioned in the document has been made in the case
of another company namely "M/s Brahmaputra Infrastructure Ltd" in
assessment year 2009-10. This fact was not controverted by Ld.
CIT(DR). Thus, we find that no incriminating material qua the
addition made is found during the course of search from the premises
of the assessee. Accordingly, above contention of Ld. CIT(DR) are
rejected. She also submitted that during the course of search, hard
disks of computers and others material were also seized which
contained incriminating material. The Ld. CIT(A) failed to substantiate
the claim either by the impugned assessment order or through any
other documentary evidence. In the assessment order, there is no
mention that any incriminating material is found in hard disk etc.
Thus, this contention of Ld. CIT(A) is also rejected.
4.12 The next argument of the Ld. CIT(DR) is that the statement
recorded under section 132(4) of the Act of Sri Sampat Shrama is
incriminating material found during the course of search. We have
observed that said statement of Sh. Sampat Sharma was recorded at
his residential premises during search proceeding carried out
separately. In our opinion, the statement of Sh. Sampat Sharma was
not recorded in search proceeding of the assessee and thus, it cannot
be considered as incriminating material found during the course of
the search of the assessee.
Page | 41
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
4.13 Without prejudice to our observation, we do not find any
mention of any incriminating material in the statement of Sh. Sampat
Shrama recorded under section 132(4) of the Act. The Ld. counsel
drawn our attention to copy of the statement available on page 427 to
450 of the paper book and english translation of the same available
on pages 420 to 426 of the paper book. In response to question No. 6,
regarding details of the bank accounts, Sh. Sharma stated that he did
not remember the bank account numbers and all the pass books of
the accounts were kept in the office of Brahmaputra Infra Projects
Ltd. In response to question No. 8, he explained where the books were
kept. The documents referred in question No. 20 to 25 are admittedly
not belonging to the assessee. The question No. 26 relates to
investment by Sh. Sharma. On perusal of the entire statement of Sh.
Sampat Shrama, we do not find any mention of any incriminating
material qua the addition made.
4.14 Further, in the case of Best Infrastructure (India) Private Limited
(supra) the question of law framed is as under:'
"Did the ITAT fall into error in holding that the additions made under
Section 68 of the Income Tax Act, 1961, on account of the statements
made by the assessee's Directors in the course of search under Section
132 of the Act were not justified ?"
4.15 In the said case, a search was conducted in case of Mr. Tarun
Goyal and Best Group Companies. During the course of search, Sh
Tarun Goel admitted of having provided accommodation entry to the
best group companies. The Director of the Best group of companies,
Sh Anu Aggarwal also surrendered 8 crore during the course of
search against share capital and share premium. Another Director,
Sh. Harjit Singh in his statement also concurred with the statement of
Sh. Anu Aggarwal. In the case, the learned CIT-(A) held that evidence
does not mean only documentary evidence and the statement under
section 132(4) of the Act is an important evidence collected as a result
of search and seizure operation and thus, the addition of share capital
was based on evidence gathered during the search. However, the
Tribunal held that no incriminating material for each of the
assessment year other than the year of search, to justify the
assumption of jurisdiction under section 153A of the Act. The Hon'ble
High Court, after considering the arguments of both parties on the
issue whether statement under section 132(4) of the Act constitute
incriminating material, held as under:
"38. Fifthly, statements recorded under Section 132(4) of the Act do not
by themselves constitute incriminating material as has been explained
by this Court in Commissioner of Income Tax Vs. Harjeev
Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts
in the present case are different from the facts in Smt. Dayawanti
Page | 42
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Gupta Vs. CIT (supra) where the admission by the Assessees
themselves on critical aspects, of failure to maintained accounts and
admission that the seized documents reflected transactions of
unaccounted sales and purchases, is non-existent in the present case.
In the said case, there was a factual finding to the effect that the
assessee were habitual offenders, indulging in clandestine operations
whereas there is nothing in the present case, whatsoever, to suggest
that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh
contained any such admission.
39. For all the aforementioned reasons, the Court is of the view that the
ITAT was fully justified in concluding that the assumption of jurisdiction
under Section 153A of the Act qua the Assessee herein was not justified
in law."
4.16 In the case of Harjeev Aggarwal (supra), the Hon'ble High Court
observed as under:
"19 In view of the settled legal position, the first and foremost issue to
be addressed is whether a statement recorded under Section 132(4) of
the Act would by itself be sufficient to assess the income, as disclosed
by the Assessee in its statement, under the Provisions of Chapter XIV
B of the Act.
20. In our view, a plain reading of Section 158BB(1) of the Act does not
contemplate computing of undisclosed income solely on the basis of a
statement recorded during the search. The orks evidence found as a
result of search" would not taken within its sweep statements recorded
during search and seizure operations. However, the statements
recorded would certainly constitute information and if such information
is relatable to the evidence or material found during search, the same
could certainly be used in evidence in any proceedings under the Act as
expressly mandated by virtue of the explanation to Section 132(4) of the
Act. However, such statements on a standalone basis without reference
to any other material discovered during search and seizure operations
would not empower the Assessing Officer to make a block assessment
merely because any admission was made by the Assessee during
search operation.
4.17 The Hon'ble High Court in the above case further noted that the
statement recorded under section 132(4) of the Act may be used for
making the assessment but only to the extent it is relatable to the
incriminating evidence/material unearthed or found during the
course of search. The Hon'ble High Court also cited the decision of
CIT Vs. Sh. Ramdas Motor Transport, (1999) 238 ITR 177 of Hon'ble
Andhra Pradesh High Court, where it is explained that in case no
unaccounted documents or incriminating material is found, the
powers under section 132(4) of the Act cannot be invoked.
Page | 43
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
4.18 Further, as far as the decision of the Hon'ble Supreme Court in
the case of Video Master (supra), is concerned, we agree with the
argument of the Ld. counsel that in said case certain other materials
like loose papers and vouchers were found which corroborated the
statement and in those circumstances it was held that it could not be
said that addition was based on no evidence. The relevant finding of
the Hon'ble Supreme Court is reproduced as under:
"3. In the second round, the assessment order dated March 29, 2000,
gave detailed reasons for arriving at the conclusion that the figures
stated in the statement recorded were corroborated, in particular, by
various loose sheets found at the premises of the assessee as well as
vouchers, some of which related to the two films in question. In an
appeal filed to the Tribunal, the Tribunal framed three issues, two of
which were unnecessary for the reason that the statement recorded on
August 25, 1995, was said to be relevant but not conclusive. Therefore,
whether the statement was made under duress and whether it was
retracted lawfully would have no relevance at this stage. However, the
Tribunal went into these issues as well and ultimately, found that the
statement could be used as evidence. Further, it examined other
corroborative evidence referred to in the assessment order and arrived
at a finding that the added income would be income which can be
added under section 158BC for the block assessment period in
question. In an appeal filed under section 260A to the Bombay High
Court, the High Court found, after narrating the facts, that no
substantial question of law arises.
4. We are of the view, in accordance with the view of the High Court,
that no substantial question of law arises. Further, though it was
vehemently argued by Shri Devansh A. Mohta, learned counsel
appearing for the assessee, that this was a case both of perversity and
of there being no evidence at all. We find that not only are the findings
of fact recorded in some detail but that it is not possible to say that this
is a case of no evidence at all inasmuch as evidence in the form of the
statement made by the assessee himself and other corroborative
material are there on record."
4.19 We find that in the case of best infrastructure (India) private
limited (supra), despite the admission of accommodation entry in
statements under section 132(4) of the Act, the court held that the
statement do not constitute as incriminating material. In the instant
case, neither is there any statement of any accommodation entry
operator claiming that any entry was not provided nor any director
has admitted that assessee obtained accommodation entry. Thus, the
case of the assessee is on better footing then the case of Best
Infrastructure (I) P. Ltd (supra). In such facts and circumstances,
respectfully following the decision of the Hon'ble Delhi High Court in
the case of best infrastructure (India) private limited (supra), we do
Page | 44
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
not have any hesitation to hold that the statement under section
132(4) of Sh. Sampat Sharma cannot be treated as incriminating
material found during the course of search.
In the result, we hold that addition of share capital in the year under
consideration has been made without relying on any incriminating
material found during the course of search."
60. On identical facts in 2018 (3) TMI 1598 - ITAT DELHI M/S BRAHMAPUTRA
REALTORS (P) LTD. VERSUS DY. COMMISSIONER OF INCOME-TAX, it was
held that all such documents even though they were found to be in original
in all those cases it was held to be not incriminating document based on
which the concluded assessment can be disturbed.
61. On further identical facts in 2018 (10) TMI 50 - ITAT DELHI M/S M.L.
SINGHI & ASSOCIATES (P) LTD. VERSUS DEPUTY COMMISSIONER OF
INCOME TAX, CENTRAL CIRCLE-7, NEW DELHI it was held that all such
documents even though they were found to be in original in all those cases
it was held to be not incriminating document based on which the concluded
assessment can be disturbed.
62. In another decision of the coordinate bench in ITA number 1451, 1452,
1453 dated 1/3/2008 for assessment year 2007 08 09 10 wherein on
identical facts and circumstances, where 1 of us is a co-author of the
judgment, following documents were found:-
5.1 The perusal of the above details reveals that the assessee has
received share premium from above companies. Certain
documents were found and seized from the residence of the
assessee company ,Sh. Vinod Goel which are as under;
1. Annexure No 1. Memorandum and Articles of Association
Annexure A-3, A-6, A-7, A-97 A10, A-11, A-12, A-13 a A-14
2. Bank statements DO
3. Blank share transfer forms
Do4. Blank special power of attorneys in original signed by the
authorized signatory
Page | 45
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Do5. affidavits by Director of the concerned companies stating
therein that their company has applied for equity shares of M/s
Goel International Pvt. Ltd
Do6 Blank receipts against the shares held by the company in
M/s Goe International Pvt. Ltd, signed by the Director of
company.
Photocopies of AnnexureA-3 showing details of Incriminating
documents as mentioned above in the case of one company who
had invested in the shares of the assessee company is enclosed
alongwith this order. Exactly similar evidence is found in case of
other companies also who had made investment in the shares of
the assessee company ,which are marked as Annexures
mentioned above.
Dealing with all these documents in para number 9.4 of the decision the
coordinate bench dealt with the issue as under:-
"9.4 Furthermore, three blank documents were found with respect
to these companies. These are blank share transfer forms, special
power of attorney signed by the authorized signatories and blank
receipts against the shares. All these three documents are
admittedly non-executed and do not show any transactions. Had
there been any transaction recorded on blank share transfer
forms, receipts regarding any money or transfer in favour of any
person, it would have made them suspicious. The entries in those
forms are not at all made, but are merely blank. The assessee has
given detailed explanation why they were found at the place of
assessee. The Assessing Officer has not examined the signatories
of these documents to arrive at the true nature of the
transactions. The Assessing Officer is just making an assumption
that these are the documents which would have been used by the
assessee for transferring those shares in the name of the
promoters or their group concerns at a price which is far less than
the price of shares issued. It is not the case of the Assessing
Page | 46
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Officer that either such shares are subsequently transferred at
lower price, or such shares stood disposed of by the investor
companies. In view of this, the case of the Revenue is merely
based on assumption and surmises ."
63. Therefore apparently compared to all those decisions cited above which are
referred by the learned authorised representative where such forms and
documents were found in original, the case of the assessee is on far better
footing that only in case of few shareholders these documents were found
which were also not in original but only photocopies. It is also confirmed
repeatedly by the learned assessing officer present in the hearing as well as
in his letter to the bench that original of these documents were not found
during the course of search.
64. Even otherwise, provisions of section 61 of the evidence act prescribe that
the contention of a document may be proved either by primary evidence or
by secondary evidence. According to section 67, thereof primary evidence
means the document itself reduced for the inspection of the court.
Explanation to of section 60 provides that copy of a common original are not
primary evidence. Thus, even otherwise the photocopy cannot be primary
evidence. As such, it cannot also be classified as a document. In absence
of any other material, even such photocopy cannot be treated to be
secondary evidence also. Such documents are only overly being claim to be
a photocopy without claiming that what was photographed was the original
order that it was compared with the original. Therefore, the photocopy to be
admissible as evidence has to be a certified 1. Thus for the income tax
proceedings the learned assessing officer should have summoned all those
investors to verify whether these documents are really executed or not.
65. In view of this, whether such documents can be said to be incriminating
documents or not has been answered by all these decisions of the
coordinate benches in favour of the assessee. Therefore, we are of the view
that for assessment year 2012 13 to assessment year 2014-15 , there were
no incriminating evidences with respect to the share capital based on which
Page | 47
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
the addition can be made. Accordingly, Ground no 1, 2 for AY 2012-13,
2013-14 and 2014-15 is allowed.
66. Even otherwise, on merits of the addition we deal with issue for all these
impugned years together. In assessment year 2012-13 the assessee
challenged the addition of Rs.14,92,00,000/- on account of unexplained
cash credit on Ground No.4 and on Ground Nos.5(a) and (b) challenged the
commission paid for arranging share capital @ 2%. A.O. noted that
assessee has furnished details of Rs.14.92 crores received during the year
under consideration from M/s.Mahalakshmi Traders, the proprietorship
concern of Shri Manoj Gupta. The financials of the proprietorship were
obtained which shows in proceeding assessment year 2011-12 it's return of
income was at Rs.3,90,540/- and assessment year 2014-15 return of
income was at Rs.10,28,742/- In assessment year 2016-17 return of income
was at Rs.15,85,400/-. The A.O. was of the view that M/s. Mahalaxmi
Traders has no financial worth to make investment in assessee company.
During the course of search, proprietor of M/s. Mahalakshmi Traders in his
statement recorded on 22nd March, 2017 under section 132(4) denied to
have made any investment in assessee company. The A.O. accordingly made
the addition of the impugned amount. The A.O. also made addition of
Rs.34,47,334/- on account of assessee company paid commission @ 2% for
obtaining the entry on account of share capital. The Ld. CIT(A) confirmed
the addition.
67. In assessment year 2013-14, assessee has raised Ground No.3, challenging
similar addition of Rs. 49,99,50,000/- on account of unexplained cash
credit under section 68 of the Income Tax Act and sum of Rs. 99,99,000/-
as commission paid for arranging the share capital. The A.O. noted that
assessee company has received share capital from M/s. Balaji Enterprises of
Rs. 15,20,00,000/- and Rs. 34,79,50,000/- from M/s. Vishal Traders. The
A.O. as regards M/s. Vishal Traders noted that it has not filed return of
income. Further, Mr. Arpesh Garg was confronted on issue of share
capital/premium received by the assessee company and in reply to Question
No.22 of his own statement recorded on oath under section 132(4) of the Act
Page | 48
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
on 22.03.2017 has stated that the amount so rceived in form of share
capital/premium represents the amounts given to various parties/entities in
the form of loans/bogus sales/purchases and it had nothing but assessee
company's own money which was routed back to the assessee's own money
routed back to assessee company in the form of share capital/premium. The
A.O. therefore, noted that the amount that assessee has resorted to
circuitous and sham transaction with these entities, therefore, addition of
the above amount was made as unexplained credit under section 68 of the
I.T. Act. Further, the addition on account of commission was also added.
The Ld. CIT(A) confirmed the addition.
68. In A.Y. 2014-2015, the assessee raised Ground No.3 challenging the
addition of Rs.81,35,44,000/- on account of unexplained credit under
section 68 of the I.T. Act and commission paid of Rs.1,62,70,880/-. The
A.O. noted that assessee has received share capital from M/s. Rustagi Exim
Pvt. Ltd., of Rs.9,55,55,000/- Rs.6,48,90,000/- from M/s. Vikas
International and Rs.65,30,99,000/- from M/s. Vishal Traders. Similar
statement of Mr. Arpesh Garg was referred to. The A.O. accordingly made
the addition under section 68 of the I.T. Act and unexplained commission as
well. The Ld. CIT(A) confirmed the addition.
69. In A.Y. 2015-2016, the assessee has raised Ground No.1 challenging the
addition of Rs.36,41,49,900/- under section 68 of the I.T. Act and
Rs.72,82,998/- on account of unexplained commission paid. The A.O.
similarly noted that in assessment year under appeal the assessee has
received Rs.11,60,00,100/- from M/s. Rustagi Exim Pvt. Ltd., and
Rs.24,81,49,800/- from M/s. Vishal Traders and addition was made under
section 68 of the I.T. Act. The A.O. also made addition on account of
commission paid @ 2% of Rs.72,82,998/- on account of arranging the share
capital. The A.O. similarly referred to the statement of Mr. Arpesh Garg. The
Ld. CIT(A) confirmed the addition.
70. In A.Y. 2016-2017, the assessee has raised Ground No.1 challenging the
addition of Rs.55,47,74,700/- on account of unexplained credit under
section 68 of the I.T. Act and addition of unexplained commission of
Page | 49
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Rs.1,10,95,448/-. The A.O. similarly noted that in assessment year under
appeal the assessee received Rs.37,60,99,650/- from M/s. Rustagi Exim
Pvt. Ltd., and Rs.17,86,74,750/- from M/s. Vishal Traders on account of
share capital. Addition under section 68 of the I.T. Act was made. Further
addition was made of Rs.1,10,95,448/- on account of commission paid @
2% for arranging the share capital/premium. Similarly the statement of Mr.
Arpesh Garg was reproduced in the assessment order. The Ld. CIT(A)
confirmed the addition.
71. In A.Y. 2017-2018, the assessee has raised Ground Nos.1 and 2 challenging
the addition of Rs.52,23,87,900/- on account of unexplained share capital
received from M/s. Rustagi Exim Pvt. Ltd., amounting to Rs.52,23,87,900/-
which was added under section 68 of the I.T. Act. Further addition was
made with respect to commission paid @ 2% for arranging the above share
capital/ premium. Addition was made of Rs.1,04,47,758/-. The A.O.
similarly referred to the statement of Mr. Arpesh Garg. The Ld. CIT(A)
confirmed the addition.
72. Learned Counsel for the Assessee has submitted that share application
monies received by the assessee company (AGPL) from these parties are as
under :
"Share application monies received by the Assessee Company (AGPL)
from the alleged related parties:
Particulars A.Y. A.Y. A.Y. A.Y. A.Y. A.Y.
2012-13 2013-14 2014-15 2015-16 2016-17 2017 18
(i) Mahalaxmi
Traders 14,92,00,000
Page | 50
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
- - - -
(ii) Sri Balaji
Enterprise 15,20,00,000
(iii) Vishal
Traders 34,79,50,000 65,30,99,000 24,81,49,800 17,86,74,750
(iv) Rustagi Exim - -
P. Ltd 9,55,55,000 11,60,00,100 37,60,99,650 52,23,89,700
(v) Vikas 6,48,90,000 " ~
International
73. He has submitted that with reference to share capital/premium received in
A.Y. 2012-2013 from M/s. Mahalakshmi Traders in a sum of Rs.14.92
crores that assessee filed the details during the assessment proceedings to
show that this amount was initially paid by assessee company itself to M/s.
Mahalakshmi Traders as advance which were returned back by M/s.
Mahalakshmi Traders as share capital to the assessee company. In view of
the above fact, the source of fund for share capital made by M/s.
Mahalakshmi Traders was the assessee itself. As such, it cannot be stated
that the said share capital was unexplained/undisclosed income of the
assessee to be added under section 68 of the I.T. Act. These transactions
were duly reflected both in the Bank Account of the assessee and M/s.
Mahalakshmi Traders.
74. Similarly for A.Y. 2013-2014 assessee company received share capital from
M/s. Vishal Traders of Rs.34,79,50,000/- and M/s. Balaji Enterprises of
Rs.15,20,00,000/-. As per the details filed by the assessee along with books
of account the entire amount of Rs.49,49,50,000/- was received by these
concerns either directly or indirectly from the assessee company itself as
advance or payment for purchase. He submitted that as per documents and
bank accounts relevant to A.Y. 2017-2018 during the year M/s. Rustagi
Exim Pvt. Ltd., has introduced Rs.52.23 crores. On examination of the
Page | 51
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
transaction the assessee company has transferred Rs.54.56 crores to M/s.
Rustagi Exim Pvt. Ltd., which has been routed back to the assessee
company in the form of share capital/premium which also suggest that
source of the funds introduced in the shares is assessees itself. Similarly, in
A.Ys. 2014-15, 2015-16, 2016-17, the details filed by the assessee would
show that ultimate source of the share application money received by the
assessee was from the disclosed source of the assessee itself. The
transactions are verifiable from the bank account of both the parties. The
assessee also filed confirmation of both the parties supported by their bank
statements. In some cases, assessee company has routed its own fund
directly from the share application money transactions. In those cases
sources are apparently proved. As the source of the share capital/premium
can be traced directly to bank accounts of the assessee company and there
is no cash movement, therefore, addition of entire share capital/premium of
Rs.365.28 crores is not justified and may lead to highpitched assessments.
He has further submitted that A.O. in the deviation report has expressed
that no addition could be made under section 68 of the I.T. Act on account
of share capital/premium and commission @ 2%. After filing of the deviation
report, no independent evidences have been given against the assessee. The
conclusion drawn by the A.O. that these are unexplained share capital and
premium is wholly unjustified and based on no evidence. He has relied upon
Judgment of Hon'ble Gujarat High Court in the case of DCIT vs. Rohini
Builders 256 ITR 360, Judgment of Hon'ble Delhi High Court in the case of
CIT vs. Victor Electronics 329 ITR 271 and Judgment of Hon'ble Bombay
High court in the case of CIT vs. U.K. Shah 90 ITR 396. Learned Counsel for
the Assessee further submitted that since the entire amount is routed
through the funds of the assessee through different intermediary parties,
therefore, there is no question of payment of any commission @ 2%. Further
findings of the A.O. are based on no evidence or material on record and as
such, entire additions are liable to be deleted.
75. On the other hand, Ld. D.R. relied upon the Orders of the authorities below
and submitted that assessee failed to explain the source of the share
Page | 52
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
capital/premium in all the assessment years under appeals. Therefore,
addition have been correctly made by the authorities below.
76. We have considered the rival submissions and perused the material on
record. The assessee has filed several paper books on this issue which
contain the confirmations from the Investor Companies along with bank
statements of assessee and all the Investor Companies etc., in all the
assessment years. In all the confirmations, the Investor Companies have
confirmed that the impugned amount transmitted in their bank accounts
from the bank account of the assessee company and as per the enclosed
details the trail and transfer back to the account of the assessee company in
the form of their share application money in their company. Complete trail
of funds with the copies of the relevant bank accounts evidencing the
movement of the funds have been enclosed along with confirmations. All the
investors are assessed to tax. The confirmations bears the stamp of the
Revenue Department which would show that all the confirmations are part
of the assessment record supported by all the bank statements of the
assessee along with all the Investors and other related parties. The assessee
has filed summary of the trails of funds and source of investment because
the details are voluminous in nature as filed in the Paper Books No.7A to
7E. The summary of the transfer of funds with documentary evidences filed
in the paper book is reproduced as under :
A. "Details of Share Application received from alleged related parties for A.Y.
2012-13:
Share Application received from Mahalaxmi Traders (MT):Rs.14,92,00,000/-
Amt. paid by AGPL to MT either directly or Amt. received by
indirectly via intermediaries AGPL as Share Paper Book Ref.
Particulars (Payment by AGPL to (Payment to MT) Application from
Intermediaries) Rs. Rs. MT Rs.
Between 19.04.2011 to
Following docs
04.05.2011: enclosed in Paper
Book No.-7A:
(i) AGPL paid to Mahalaxmi
(i) Confirmation of
Traders 3,79,95,063 Mahalaxmi
(ii) Mahalaxmi Traders paid to Traders:
3,75,25,400
Page | 53
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
AGPL in the form of share Annexure A
application
6,53,01,570
(ii) Complete Trail of
Between 04.05.2011 to Funds: Pgs. 1-2
13.05.2011:
(i) AGPL paid to Shri Balaji (iii) Relevant bank
Enterprises statements of
concerned parties
(ii) Sri Balaji Enterprises paid -
evidencing
to Mahalaxmi Traders 6,52,97,700 movement of
(iii) Mahalaxmi Traders paid to 6,38,24,600 funds: Pgs. 3-46
AGPL in the form of share
application
Between 30.05.2011 to -
26.08.2011
(i) AGPL paid to Mahalaxmi
Traders 8,57,87,900
(ii) Mahalaxmi Traders paid to 4,85,00,600
AGPL in the form of share
application. -
TOTAL 18,90,80,663 14,98,50,600
Less: Amount adjusted against 6,50,600
goods
Amount received towards share 14,92,00,000
application form MT
B. Details of Share Application received from alleged related parties for A.Y. 2013-
14:
(1) Share Application received from Sri Balaji Enterprises (SBE): Rs.
15,20,00,000/-
Amount paid by AGPL to SBE either directly Amt. received by
or indirectly via intermediaries AGPL as Share Paper Book Ref.
(Payment by AGPL to (Payment to SBE) Application from
Particulars Intermediaries) Rs. Rs. SBE Rs.
On 18.03.2013 : Following docs
enclosed in Paper
(i) AGPL paid to Rustagi Exim 1,50,00,000 - - Book No.-7B:
Pvt. Ltd.
(i) Confirmation of
(ii) Rustagi Exim Pvt. Ltd. paid 30,00,000 -
to Sri Balaji Enterprises Sri Balaji
(iii) Sri Balaji Ent. paid to AGPL 30,00,000 Enterprises :
in the form of share
application Annexure-A.
Between 26.03.2013 to
28.03.2013 : (ii) Complete Trail
(i) AGPL paid to Sri Balaji - 5,89,40,280 - of Funds : Pgs. 1-2.
Enterprises
(ii) Sri Balaji Enterprises paid - - 1,05,50,000
to AGPL in the form of share (iii) Relevant bank
application.
4,83,91,200 - - statements of
(iii) AGPL paid to Vishal Trader
- 3,34,00,000 - concerned parties
(iv) Vishal Traders paid to Sri
Page | 54
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Balaji Enterprises evidencing
4,94,91,000 - -
(v) AGPL paid to Vikas movement of
International . - 4,94,95,000 -
funds: Pgs.3-19.
(vi) Vikas International paid to
Sri Balaji Enterprises. 2,00,00,000 - -
(vii) AGPL paid to Rustagi Exim
Pvt. Ltd. - 81,20,000 -
(viii) Rustagi Exim Pvt. Ltd.
paid to Sri Balaji Enterprises - - 13,85,00,000
(ix) Sri Balaji Enterprises paid
to AGPL in the form of share
application.
Total 15,29,64,280 15,20,50,000
(2) Share Application received from Vishal Traders (VT) : Rs.34,79,50,000/-
Amt. paid by AGPL to VT either directly or indirectly
Paper
via intermediaries (intm) Book Ref.
Amt. Following
received by docs
AGPL as enclosed
(Payment Payment by Share in
(Payment by Intm. to Intm. to (Payment to Application Paper
by AGPL another another Vishal from Vishal Book No
Particulars: to intm) Intm) Intm) Traders) Traders 7D:
Rs. Rs. Rs. Rs. Rs. (i)
Between 03.04.2012 to 24.04.2012: - - -
Confirmat
(i) AGPL paid to Vishal Traders - 4,16,25,000 ion
(ii) Vishal Traders paid to AGPL in the form of
- 1,60,00,000
of
share application
- - Vishal
- - - (ii)
Between 18.10.2012 to 06.11.2012 - - Complet
(i) AGPL paid to Vishal Traders 2,24,00,000 e
- Trail
(ii) Vishal Traders paid to Rustagi Exim 2,24,10,000
Pvt. Ltd of
(iii) Rustagi paid to ASM Traxim Pvt. Ltd. 2,11,75,000
- Fund
(iv) ASM Traxim paid to Vishal Traders 1,50,25,000 (iii)
- - Relevant
(iv) Vishal Traders paid to AGPL in the - 1,44,50,000
form of
share application - -
-
(v) AGPL paid to Vishal Traders bank
- - - 2,15,00,000
- statemen
(vi) Vishal Traders paid to AGPL in the 2,15,00,000
form of - - - ts of
share application
Between 22.11.2012 to 14.12.2012: - - concern
(i) AGPL paid to Rustagi Exim Pvt. Ltd. 2,65,50,000 - - ed
(ii) Rustagi Exim Pvt. Ltd. paid to ASM 2,65,20,000 -
- - parties
Pvt. Ltd. Traxim
(iii) ASM Traxim paid to Vishal Traders - - - 2,65,15,000
evidenci
(iv) Vishal Traders paid to AGPL in the - - 2,65,17,000
form of
share application -
-
Between 07.01.2013 to 07.02.201
6,74,68,900
Page | 55
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
(i) AGPL paid to Vishal Traders
(ii) Vishal Traders paid to AGPL towards share
application 6,60,83,900
1,50,00,000
1,50,60,000
Between 18.02.2013 to 19.02.2013
(i) AGPL paid to Rustagi Exim Pvt. Ltd.
- 1,48,34,500
(ii) Rustagi Exim paid to RJ Cold Storage Pvt. Ltd.
(iii) RJ Cold Storage Pvt Ltd. paid to Vishal Traders
1,48,3
(iv) Vishal Traders paid to AGPL in the form of share 4,500
application
Between 25.02.2013 to 26.02.2013
2,90,00,000
(i)AGPL paid to Vishal Traders
(ii) Vishal Traders paid to AGPL in the form of share 4,06,0
application 0,000
Between 25.02.2013 to 27.02.2013 3,10,00,000
(i)AGPL paid to Rustagi Exim Pvt. Ltd. 2,99,70,000 -
(ii) Rustagi Exim paid to RJ Cold Storage Pvt. Ltd.
(iii) RJ Cold Storage paid to Vishal Traders 2,87,50,400 3,10,2
(iv) Vishal Traders paid to AGPL in the form of share 1,000
application.
Between 27.02.2013 to 13.03.2013
(i)AGPL paid to Vishal Traders 6,06,24,000
(ii) Vishal Traders paid to AGPL in the form of share 4,03,7
application 0,000
Between 18.03.2013 to 22.03.2013
(i) AGPL paid to Rustagi Exim Pvt. Ltd.
4,00,00,000
(ii) Rustagi Exim paid to RJ Cold Storage
2,47,20,000
(iii) RJ Cold Storage paid to Vishal Traders - 2,51,00,000
(iv) Vishal Traders paid to AGPL in the form of share application
2,37,7
3,600
On 25.03.2013
2,00,00,000 -
(i) AGPL paid to Vishal Traders
Page | 56
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Between 26.03.2013 to 28.03.2013
(i) AGPL paid to Rustagi Exim Pvt. Ltd. 6,72,91,400
(ii) Rustagi Exim paid to RJ Cold Storage
5,25,90,000
(iii) RJ Cold Storage paid to Vishal Traders - 5,45,00,000
5,28,0
(iv) Vishal Traders paid to AGPL in the form of share application 0,000
TOTAL 40,49,42,800 34,79
,50,0
00
C. Details of Share Application received from alleged related parties for A.Y. 2014-
15:
1. Share Application received from Vishal Traders (VT): Rs. 65,30,99,000/-
Particulars Amt. paid by AGPL to VT either directly or indirectly via Amt. received Paper
intermediaries (intm) by AGPL as
(Payment by (Payment by (Payment by (Payment to Book Ref.
Intm. to Intm. to Vishal Traders) Share
AGPL to Intm)
another Intm) another Intm) Rs. Application
Following docs
Rs. Rs. from Vishal
Rs. Traders Rs. enclosed in
Paper Book No.-
7D :
Between 05.04.2013
to 27.03.2014 :
(i) Confirmation
(i) AGPL paid to of Vishal
Vishal Traders.
50,45,75,253 Traders :
(ii) Vishal Traders
Annexure A
paid to AGPL in the
form of share
application. (ii) Complete
5,01,79,000
Trail of Funds:
Between 18.11.2013
to 10.12.2013 Pgs. 110-112
(i) AGPL paid to Rustagi
Exim Pvt. Ltd
7,90,00,000 - - - (iii) Relevant
(ii) Rustagi paid to Vishal -
Traders bank
- - - 7,86,50,000 -
(iii) Vishal Traders paid to statements of
AGPL in the form of share
application - - - - concerned
7,56,66,000
parties
On 11.12.2013 evidencing
Page | 57
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
(i) AGPL paid to 1,75,00,000 movement of
Rustagi Exim
Pvt. Ltd. funds : Pgs.
(ii) Rustagi Exim paid 1,75,25,000
113-212.
to ASM Traxim
Pvt. Ltd.
(iii) ASM Traxim Pvt.
Ltd. paid to Vishal
Traders. - 1,75,00,000
(iv) Vishal Traders
paid to AGPL in
the form of share
application
1,74,95,000
Between 13.12.2013 to
30.03.2014
(i) AGPL paid to Rustagi 5,85,00,000
Exim Pvt. Ltd.,
(ii) Rustagi Exim paid to
Vishal Traders.
5,84,95,000
(iii) Vishal Traders paid to
AGPL in the form of
share application. 5,84,70,000
TOTAL 65,92,20,253 65,30,99,000
2. Share Application received from Rustagi Exim Pvt. Ltd. (REPL)
Rs.9,55,55,000/-.
Particulars: Amt. paid by AGPL to Amt. received by AGPL Paper Book Ref.
REPL as Share Application
from REPL
Rs.
Rs.
Between 06.09.2013 to 30.09.2013 Following docs enclosed in Paper
(i) AGPL paid to Rustagi Exim Book No.-7E:
Pvt. Ltd., 9,78,46,415 (i) Confirmation of Rustagi Exim
(ii) Rustagi Exim Pvt. Ltd. Paid
to AGPL in the form of share 9,55,55,000 Pvt. Ltd.: Annexure A
application. (ii) Complete Trail of Funds: Pg. 1
Relevant bank statements of
concerned parties evidencing
movement of funds: Pgs.2-18
TOTAL 9,78,46,415 9,55,55,000
3. Share Application received from Vikas International (VI) Rs.6,48,90,000/-
Page | 58
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Particulars: Amt. paid by AGPL to Amt. received by AGPL Paper Book Ref.
VI as Share Application
from VI
Rs.
Rs.
Between 04.04.2013 to 1.10.2013 Following docs enclosed in Paper
(iii) AGPL paid to Vikas Book No.-7C:
International 6,82,39,975 (i) Confirmation of Vikas
(iv) Vikas International paid to
AGPL in the form of share 6,48,90,000 International : Annexure A
application. (ii) Complete Trail of Funds:
Pg. 1
(iii) Relevant bank statements of
concerned parties evidencing
movement of funds: Pgs.2-18
TOTAL 6,82,39,975 6,48,90,000
D. Details of Share Application received from alleged related parties for A.Y.
2015=2016 :
1. Share application received from Vishal Traders (VT) Rs.24,81,49,800/-
Particulars: Amt. paid by AGPL to Amt. received by Paper Book Ref.
VT AGPL as Share
Application from VT
Rs.
Rs.
Between 18.12.2014 Following docs enclosed in
to 28.03.2015 Paper Book No.-7D:
(i) AGPL paid to
Vishal Traders (i) Confirmation of
26,54,83,540 Vishal Traders
(ii)Vishal Traders Annexure A
paid to AGPL in the
form of share (ii) Complete Trail of
application. 24,81,49,800 Funds: Pg. 213.
(iii) Relevant bank
statements of
concerned parties
evidencing
movement of
funds: Pgs.2-18
2. Share application received from Rustagi Exim Pvt. Ltd. (REPL)
Rs.11,60,00,100/-.
Particulars: Amt. paid by AGPL to Amt. received by Paper Book Ref.
REPL AGPL as Share
Application from
REPL
Rs. Rs.
Between 02.04.2014 Following docs enclosed in Paper
Page | 59
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
to 02.06.2014 Book No.-7E:
(v) AGPL paid to
Rustagi Exim (i) Confirmation of Rustagi
Pvt. Ltd. 12,73,68,123 Exim Pvt. Ltd.
(vi) Rustagi Exim Annexure A
Pvt. Ltd. paid
to AGPL in (ii) Complete Trail of
the form of Funds: Pg.19.
share 11,60,00,100 (iii) Relevant bank
application.
statements of
concerned parties
evidencing
movement of funds:
Pgs.20-44.
TOTAL 12,73,68,123 11,60,00,100
E. etails of Share Application received from alleged related parties for A.Y.
2016-17 :
1. Share Application received from Vishal Traders (VT) : Rs.17,86,74,750/-
Amt. paid by AGPL to VT either directly Amt. received by Paper Book Ref.
Particulars. or indirectly via intermediaries. AGPL as Share
(Payment by AGPL (Payment to VT) Application from VT Following docs enclosed in
to Intermediaries) Rs. Rs.
Rs. Paper Book No.-7D:
Between 16.01.2016
to 03.03.2016 :
(i) AGPL paid to (i) Confirmation of
Vishal Traders.
(ii) Vishal Traders - 16,66,00,000 Vishal Traders
paid to AGPL
in the form of Enterprises :
share
application - - 12,16,64,750 Annexure A.
n 10.02.2016 :
(i) AGPL paid to (ii) Complete
Vishal - 90,00,000 -
Traders.
Trail of Funds:
(ii) AGPL paid to
Rustagi Exim 4,80,00,000 - - Pg.243
Pvt. Ltd.
(iii) Rustagi Exim (iii) Relevant bank
Pvt. Ltd. paid
to Vishal statements of
Traders. - 4,79,50,000 -
(iv) Vishal Traders concerned parties
paid to AGPL
in the form of evidencing
share - - 5,70,10,000
application. - movement of funds:
Pgs.244-264.
Total 22,35,50,000 17,86,74,750
2. Share Application received from Rustagi Exim Pvt. Ltd., (REPL)
Rs.37,60,99,650/-.
Particulars: Amt. paid by AGPL to REPL either directly Amt. Paper Book Ref.
Page | 60
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
or indirect y via intermediaries (Intm) received by
(Payment by (Payment by (Payment to AGPL as
Following docs enclosed
Share
AGPL to Intm to Application in Paper
REPL)
from REPL
Book No.-7E:
Intm) another Rs. (i) Confirmation of
Between 13.04.2015 to Intm.) Rs.
20.06.2015: Rustagi Exim Pvt
Rs.
Ltd.: Annexure A.
(i) AGPL paid to Rustagi
Exim Pvt. Ltd.. - 38,27,20,000 -
- (ii) Complete Trail of
(ii) Rustagi Exim Pvt. Ltd. - Funds: Pg. 45.
paid to AGPL in the form of
share application - - 33,22,99,650 (iii) Relevant bank
statements of concerned
On 17.04.2015: parties
4,70,00,000 - evidencing movement of
(i) AGPL paid to - funds: Pgs.46-97
Vishal Traders
-
(ii) Vishal Traders 4,45,00,000
paid to RJ Cold -
Storage
(iii) RJ Cold Storage - -
paid to Rustagi
Exim Pvt. Ltd.
(iv) Rustagi Exim
Pvt. Ltd. paid to 4,44,50,000
AGPLin the form
of share 4,38,00,000
application
Total 42,71,70,000 37,60,99,650
F. Details of Share Application received from alleged related parties for A.Y.
2017-18 :
1. Share Application received from Rustagi Exim Pvt. Ltd. (REPL)
Rs.52,23,89,700/-.
Amt. paid by AGPL
Particulars: to REPL
Amt. received by AGPL
as Share Application Paper Book Ref.
Rs. from REPLRs.
Between 23.11.2016 to Following docs enclosed in
20.03.2017 Paper Book No.-7E:
(i) AGPL paid to Rustagi 54,56,02,154 (i) Confirmation of Rustagi Exim Pvt. Ltd.
Exim Pvt. Annexure A
Ltd. 52,23,89,700 (ii) Complete Trail of Funds: Pg. 98
(iii) Relevant bank statements of concerned parties
(ii)
TOTAL 54,56,02,154 52,23,89,700 evidencing movement of funds: Pgs.99-154
Page | 61
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
77. On verification of facts as stated in the above summary details, which are
supported by the confirmation letters and bank statements of all these
parties. The details contained in respect of all the assessment years under
appeals. The details noted above clearly support the explanation of assessee
that initially the amounts have been paid by the assessee company itself to
various Investor Companies and others and ultimately the amounts in
question have come back to the assessee in the shape of share
capital/premium. The details reproduced above are supported by the
confirmations and bank statements of the parties. Thus, the trail of the
money which travelled back to the account of the assessee company in the
form of share application money is clearly explained which, therefore,
explained the source of the funds invested in Assessee Company. All the
transactions are routed through banking channel and all the parties are
assessed to tax. The authorities below have not doubted the above
confirmations and bank statements filed by the assessee company. It may
also be noted here that initially the A.O. expressed doubts in the deviation
report that no addition under section 68 could be made on account of share
capital/premium and/or alleged commission @ 2% for any of the year under
consideration. However, later on the A.O. without any justification on the
basis of the view expressed by the Investigation Wing made these additions
against the assessee company. The findings of the A.O. are not based on
any evidence or material on record and were clearly in violation of the
deviation report earlier filed by the A.O. Since all the parties are related to
assessee and it was the amount of assessee itself, which was ultimately
introduced in the share of share capital/premium, therefore, there was no
justification to hold that assessee would have paid any commission @ 2%
for arranging the above share capital/premium The A.O. in A.Y. 2012-2013
has referred to statement of Shri Manoj Gupta, Proprietor of M/s.
Mahalaxmi Traders whose statement was recorded during the course of
search in which he has stated that he has not made any investment in
assessee company. However, it is not clear from the Orders of the
Page | 62
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
authorities below whether copy of such statement was supplied to assessee
for rebuttal or whether he was produced before A.O. for cross-examination
on behalf of the assessee. Since nothing is clear from the assessment order,
therefore, any statement recorded at the back of the assessee, cannot be
read in evidence against the assessee unless it is confronted to assessee and
right of cross-examination have been provided by the A.O. to assessee to
cross-examine that statement. We rely upon the Judgments of Hon'ble
Supreme Court in the cases of Kishanchand Chellaram 125 ITR 713 (SC)
and Andaman Timber Industries 281 CTR 214 (SC).
78. It is interesting to note that in the remaining years, the A.O. referred to
statement of Mr. Arpesh Garg who was confronted on the issue of share
capital/premium received by the assessee company. The A.O. noted the
reply given by him of his own statement recorded under section 132(4) on
oath in which he has stated that the amount so received in the form of
share capital/premium represents the amounts given to various
parties/entities in the form of loan for bogus sales/purchase and it is
nothing but the assessee company's own money which were routed back to
the assessee company in the form of share capital/ premium. Though there
is nothing clear from the assessment order whether such statement was
also provided to the assessee company for cross-examination on behalf of
assessee company or for rebuttal and it may not be admissible against
assessee company, but, this statement itself support the explanation of
assessee company that it was the amount of the assessee itself which were
routed through various entities. This statement would support explanation
of assessee that the source of funds for share capital made by the Investor
Companies was the assessee itself. Therefore, in such a situation, it could
not be stated that the share capital was unexplained/undisclosed income of
the assessee so as to make the addition under section 68 of the I.T. Act.
Since all the transactions are recorded in the books of account of assessee
and other related parties referred to above which are supported by
confirmations, bank statements, therefore, there is no reason to believe that
assessee has earned any unaccounted/undisclosed income in the issue of
Page | 63
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
share capital/premium. The Hon'ble Gujarat High Court in the case of CIT
vs. Rohini Builders 256 ITR 360 (Gujarat) held as under :
"The assessee was a firm engaged in the business of dealings in
land. During the assessment year under consideration the
assessee had taken loans from various parties and during the
course of assessment proceedings, the assessee had furnished
the loan confirmations giving full addresses, GIR
numbers/permanent account numbers, etc., of all the
depositors. The assessee however issued summons to some of
the creditors and also conducted inquiries into the genuineness
or otherwise of the loans taken by the assessee. After
considering the evidence, the Assessing Officer made an
addition of Rs.12,85,000 to the returned income of the
assessee. This was confirmed by the Commissioner of Income-
tax (Appeals). On further appeal to Tribunal the Tribunal held
that the phraseology of section 68 of the Income tax Act, 1961,
was clear, that the Legislature has laid down that in the
absence of a satisfactory explanation, the unexplained cash
credit may be charged to income-tax as the income of the
assessee of that previous year, that the legislative mandate is
not in terms of the words "shall be charged to income-tax as the
income of the assessee of that previous year", that the un-
satisfactoriness of the explanation does not and need not
automatically result in deeming the amount credited in the
books as income of the assessee. The Tribunal found that the
assessee had discharged the initial onus which lay on it in
terms of section 68 by proving the identity of the creditors by
giving their complete addresses, GIR numbers/ permanent
account numbers and the copies of assessment orders wherever
readily available, that it had also proved the capacity of the
creditors by showing that the amounts were received by the
assessee by account payee cheques drawn from bank accounts
of the creditors and the assessee was not expected to prove the
genuineness of the cash deposited in the bank accounts of
those creditors because under law the assessee can be asked to
prove the source of the credits in its books of account but not
the source of the source. Thus taking into consideration the
totality of the facts and circumstances of the case, and, in
particular the fact that the Assessing Officer had not disallowed
the interest claimed/paid in relation to these credits in the
assessment year under consideration or even in the subsequent
years, and tax had been deducted at source out of the interest
paid/credited to the creditors, the Tribunal held that the
Departmental authorities were not justified in making the
addition of Rs.12,85,000. On appeal to the High Court :
Page | 64
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Held, that considering the facts and circumstances of the case
narrated by the Tribunal and the law explained by it, the appeal
was liable to be dismissed."
79. This Judgment has been confirmed by the Hon'ble Supreme Court by
dismissing the SLP of the Revenue Department reported in 254 (Statute)
275 (SC).
80. The Hon'ble Bombay High Court in the case of CIT vs. V.M. Shah 90 ITR
396 (Bom.) held as under :
"The accounts of the assessee disclosed an amount of
Rs.2,77,500, described as loans. The assessee gave details of
the names and addresses of the bankers who had advanced
the loans. The Income-tax Officer summoned the banker
instead of appearing, each of them sent a letter confirming
the loan advanced by him. The Income-tax Officer was not
satisfied with this and added the sum to the total income of
the assessee as income from undisclosed source. On appeal
the Tribunal reversed the order of the Income-tax Officer on
the grounds that all the hundi loans taken by the assessee
were through crossed cheques which had passed through
recognised banks, the assessee had given complete names
and addresses of all bankers who had advanced moneys to
him and all the bankers were themselves income-tax
assessees, the bankers had submitted letters before the
Income-tax Officer confirming the advances made to the
assessee, and that the Income-tax Officer had not brought on
record any evidence to show that the assessee's explanation
was untrue. On an application for reference against the order
of the Tribunal:
Held, that the finding arrived at by the Tribunal was based
purely upon appreciation of the evidence and no question of
law arose out of that finding."
81. The Hon'ble Delhi High Court in the case of CIT vs. Victor Electrodes Ltd.,
[2010] 329 ITR 271 (Del.) held as under :
"Held, dismissing the appeal, that it had not been disputed
that the share application money was received by the assessee
by way of account payee cheques, through normal banking
channels. Admittedly, copies of applications for allotment of
shares were also provided to the Assessing Officer. It was not
the case of the Revenue that the share applications were not
signed on behalf of the applicant-companies and were forged
documents. It was also not the case of the Revenue that the
shares were not actually allotted to the companies. If the
Page | 65
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Assessing Officer had any doubt about the identity of the
share applicants, he could have summoned the directors of
the applicant-companies. No such attempt was, however,
made by him. Therefore, the Commissioner (Appeals) and the
Tribunal were justified in holding that the identity of the share
applicants and the genuineness of the transactions had been
established by the assessee. The amount was not assessable
under section 68."
82. The Hon'ble Delhi High Court in the case of CIT vs. Kamdhenu Steel and
Alloys Ltd., & Ors. 361 ITR 220 (Del.) held as under :
"Once adequate evidence/material is given, which would
prima facie discharge the burden of the assessee in proving
the identity of shareholders, genuineness of the transaction
and creditworthiness of the shareholders, thereafter in case
such evidence is to be discarded or it is proved that it has
"created" evidence, the Revenue is supposed to make
thorough probe before it could nail the assessee and fasten
the assessee with such a liability under s.68; AO failed to
carry his suspicion to logical conclusion by further
investigation and therefore addition under s.68 was not
sustainable."
83. The Hon'ble Delhi High Court in the case of CIT vs. Laxman Industrial
Resources Pvt. Ltd., ITA.No.169 of 2017 dated 14th March, 2017, held as
under :
"The CIT(A) took note of the material filed by the assessee and
provided opportunity to the AO in Remand proceedings. The AO
merely objected to the material furnished but did not undertake
any verification. The CIT(A) deleted the addition by relying upon
the decision of the Hon'ble Apex Court in the case of Lovely
Exports Pvt.Ltd. (supra) and judgment of Delhi High Court in the
case of CIT vs Divine Leasing & Finance Ltd. [2008] 299 ITR 268.
The ITAT confirmed the opinion of the Ld.CIT(A). Hon'ble High
Court in view of the above findings noted that the assessee had
provided several documents that could have showed light into
whether truly the transactions were genuine. The assessee
provided details of share applicants i.e. copy of the PAN,
Assessment particulars, mode of amount invested through
banking channel, copy of resolution and copies of the balance
sheet. The AO failed to conduct any scrutiny of the document,
the departmental appeal was accordingly dismissed.
Page | 66
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
84. The Hon'ble Delhi High Court in the case of CIT vs. (i) Dwarakadhish
Investment P. Ltd., (ITA.No. 911 of 2010) and (ii) Dwarkadhish Capital P.
Ltd., (ITA.No.913 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was
held as under :
"In any matter, the onus of proof is not a static one. Though
in section 68 of the Income Tax Act, 1961, the initial burden
of proof lies on the assesses yet once he proves the identity of
the creditors/share applicants by either furnishing their PAN
number or income-tax assessment number and shows the
genuineness of transaction by showing money in his books
either by account payee cheque or by draft or by any other
mode, then the onus of proof would shift to the Revenue. Just
because the creditors/share applicants could not be found at
the address given, it would not give the Revenue the right to
invoke section 68. One must not lose sight of the fact that it
is the Revenue which has all the power and wherewithal to
trace any person. Moreover, it is settled law that the assessee
need not to prove the "source of source". The assessee-
company was engaged in the business of financing and
trading of shares. For the assessment year 2001-02 on
scrutiny of accounts, the Assessing Officer found an addition
of Rs.71,75,000 in the share capital of the assessee. The
Assessing Officer sought an explanation of the assessee about
this addition in the share capital. The assessee offered a
detailed explanation. However, according to the Assessing
Officer, the assessee failed to explain the addition of share
application money from five of its subscribers. Accordingly,
the Assessing Officer made an addition of Rs.35,50,000/-
with the aid of section 68 of the Act, 1961 on account of
unexplained cash credits appearing in the books of the
assessee. However, in appeal, the Commissioner of Income-
tax (Appeals) deleted the addition on the ground that the
assessee had proved the existence of the shareholders and
the genuineness of the transaction. The Income-tax Appellate
Tribunal confirmed the order of the Commissioner of Income-
tax (Appeals) as it was also of the opinion that the assessee
had been able to prove the identity of the share applicants
and the share application money had been received by way of
account payee cheques. On appeal to the High Court: Held,
dismissing the appeals, that the deletion of addition was
justified."
Page | 67
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
85. The Hon'ble Delhi High Court in the case of CIT vs. Winstral Petrochemicals
P. Ltd., 330 ITR 603, in which it was held as under :
"Dismissing the appeal, that it had not been disputed that
the share application money was received by the assessee-
company by way of account payee cheques, through
normal banking channels. Admittedly, copies of
application for allotment of shares were also provided to
the Assessing Officer. Since the applicant companies were
duly incorporated, were issued PAN cards and had bank
accounts from which money was transferred to the
assessee by way of account payee cheques, they could not
be said to be non-existent, even if they, after submitting
the share applications had changed their addresses or had
stopped functioning. Therefore, the Commissioner
(Appeals) and the Tribunal were justified in holding that
the genuineness of the transactions had been duly
established by the assessee."
86. Considering the facts of the case in the light of material on record in
voluminous paper books and confirmations of the parties and the summary
of transfer of funds reproduced above, it is clear that assessee produced
sufficient documentary evidences before the A.O. to prove that money
routed from the assessee itself which came back to the assessee in the form
of share capital/premium, therefore, assessee proved identity of the
Investors, their creditworthiness and genuineness of the transaction in the
matter and as such have been able to prove ingredients of Section 68 of the
I.T. Act. The A.O. however did not make any further enquiry on the
documentary evidences filed by the assessee. The A.O. did not verify the
trail of the source of funds received by assessee through various entities as
explained above. We may also note that during the course of hearing of
these appeals, A.O. was present in the Court, but, did not make any adverse
comment upon the documentary evidences filed in the paper book filed by
the assessee. The A.O. thus, failed to conduct scrutiny of the documents at
assessment stage and merely suspected the transaction between the
Investor Companies and the assessee company despite the fact that in the
deviation report the A.O. expressed doubts in making addition into the
matter. It may also be noted here that no cash have been reported to have
Page | 68
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
been deposited in the accounts of the assessee, the Investor Companies and
other related parties. Considering the totality of the facts and circumstances
of the case and material on record, we are of the view that assessee has
been able to prove that it has received genuine amounts which is routed
through various companies. Therefore, there was no justification to make
any addition under section 68 of the I.T. Act. Further, there is no evidence
on record that assessee paid any amount on account of commission for
arranging any transaction because it was a genuine transaction between the
parties. Therefore, there is no justification to make the addition under
section 69C of the I.T. Act as well. In view of the above, we set aside the
Orders of the authorities below and delete the entire additions in all the
assessment years under appeals. In the result, all the grounds of appeals
above in all the six assessment years are allowed. Thus Ground no 3,4
and 5 of A Y 2012-13, Ground no 3 for AY 2013-14, Ground no 3 of AY
2014-15, Ground no 1 for Ay 2015-16 , Ground No 1 of AY 2016-17 and
Ground no 1 of AY 2017-18 are allowed.
87. Consequently, all the consequential ground of commission related to
grounds mentioned in above para also becomes infructous and therefore
they are allowed.
88. Now we come to the 2nd issue of addition on account of the bogus purchases
out of books sales and suppressed profit. The learned assessing officer has
dealt with this issue in para number 4-office assessment order for
assessment year 2012 13. It is noted that during search the managing
director of the assessee company in a statement u/s 132 (4) recorded on
22/3/2017 has admitted that assessee has resorted to bogus sale/purchase
transactions with entities like Rustagi impacts private limited, we shall
traders, Mahalaxmi traders, Shri Balaji trader et cetera. Thereafter the AO
noted amount of sales made to these parties by the assessee and amount of
purchases from these parties in answer to question number 6 the managing
director of the company stated that all these entities books of accounts are
maintained at the premises of the assessee company under the instruction
of the accountant of the assessee. Thus, the assessing officer reached at the
Page | 69
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
conclusion that the assessee has undertaken bogus sale and purchase
transaction with these entities to inflate its expenses, suppressed taxable
profits and bring his unaccounted money in the books in the form of share
capital. The learned AO noted that analysis of telemetry data shows that
during FY 2014 15 the assessee has purchased Inshell Almonds From
M/s Rustagi Impex at an average price of INR 4 41/ per KG while the
average sale price to the same entity is 440/ per KG hence booking a loss
of Rs. one per KG. Thus he noted that the above transaction is suggesting
that the assessee company is involved in bogus sales and purchases, which
is also been observed by the investigation wing. He further noted that
similar trend has also taken place in other years also but with similar or
different parties. He further noted that the above facts have clearly been
strengthened from the stock position as noticed to be short by nearly INR 4
50 crore is against the stock recorded in its books of accounts. Therefore he
reached at a conclusion that the assessee has booked bogus purchases in
its books of accounts to inflate its expenses and to reduce it taxable profit
therefore, taking a reasonable view of the bogus purchases of INR 3
532493127/ from the above said parties were disallowed to the extent of
25%. Therefore the addition of Rs. 883123282/ was made. This addition
was made as suggested in the appraisal report. Similar additions were also
made for assessment year 13 14 to 2017 18.
89. In the deviation report submitted by the assessing officer with the approval
of the additional Commissioner of income tax as per letter dated
20/12/2018 in para number 4 placed at paper book page number 368
onwards, the learned AO stated as under:-
"4. Bogus Purchases
a) with regard to the addition proposed of INR 9,418,600,000 in respect
of bogus purchases, during the course of assessment, the assessee
filed extensive details in respect of its entire purchases as well as its
sales to various parties. On examination of the details filed by the
assessee wherein the details of the total purchase along with the total
sales made to all of these parties which have been alleged to be bogus
Page | 70
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
in the appraisal report, as it was found that not all purchases were
bogus.
b) About 50% of the purchases made by the assessee from different
persons have been verified by issuing notice u/s 133 (6) of the income
tax act and on account of confirmatory letters as well as copies of
ledger accounts presented by the assessee and no any variation has
been found so far.
c) Another important issue that needs to be taken care on this account
is that when all the transactions with the alleged bogus parties as
stated in the appraisal report are cumulatively taken into account,
then it is noticed in most of the case is that the sales booked in their
name is higher than the purchases reflected against them in each
financial year, i.e. implying that the assessee in fact shown profits on
the transactions made with the said parties instead of loss as has
been alleged in the appraisal report.
For instances against the purchase of INR 7,537,500,000 from the
said parties during financial year 2013 14, the sales has been
booked at INR 7,976,800,000 resulting to profit of Rs. 43,93,00,000
from the transactions with the alleged bogus parties.
d) Similarly, in the financial year 2014 15, the profit booked was INR
350,000,000 on the transactions with the said parties instead of the
loss as has been alleged in the appraisal report.
In view of the same, if the transactions with the said parties are
treated as bogus, then the said profit reflected by the assessee in its
profit and loss account shall have to be reduced since it cannot be a
case where purchases were disallowed as being bogus, but the sales
from the same parties are treated genuine and brought to tax.
e) In the appraisal report only transactions of purchases have been
examined and treated as bogus whereas no such examination of sales
to the same parties have been made leading to a suggestion that
purchases be disallowed but the sales against the said purchases to
same parties leading to a profit have been completely ignored.
Page | 71
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
In view of the above situation, it becomes difficult to make an ad hoc
addition of 25% of the purchases being bogus as suggested in the
appaisal report. Under the circumstances, if both the purchases and
the sales in such a situation are to be treated as bogus then it will
lead to a reduction in the returned income of the assessee instead of
an addition which will be detrimental to the interest of revenue.
f) Further keeping in mind the bogus transactions in the case of the
assessee, the transactions relating to financial year 2016 17 with
various parties have been examined in notice the transactions of sales
and purchases have been made in the following manner:-
i. with M/s Agarwal Enterprises - purchases and sales have
been shown at INR 1 34.06 and 134.23 respectively
ii. with M/s Kajuwala - purchases and sales have been shown at
INR 347,700,000 and INR 162,800,000
iii. with M/s ASM Traxim purchases and sales have been shown
at INR 827.33 crores and INR 7 72.01 crores
g) the above transactions are suggesting that the assessee company is
involved in bogus sales and purchases, which has also been observed
by you. The similar trends have also taken place in earlier years also
but with similar or different parties. The above facts have also been
standard from the stock position is noticed to be short by nearly INR
4 50 crores against the stock recorded in its books of account.
In view of the above facts, it is clear that the books of accounts are
not genuine and liable to be rejected u/s 145 (3) of the income tax act
and the profit rate needs to be estimated on a reasonable basis
keeping prevailing market rates in mind."
90. Thereafter the learned assessing officer in para number 5 suggested that the
addition as proposed in the appraisal report in case of the assessee may not
be tenable in the eyes of law. Thereafter, the learned deputy director of
income tax (investigation) New Delhi sent a letter dated 24/12/2018
wherein AO was advised to make the addition on account of bogus
purchases as recommended in the appraisal report. The minutes of the
Page | 72
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
meeting of the deviation committee dated 28/12/2018 was also placed on
record at page number 381 of the paper book. In the above meeting, the
assessing officer along with additional Commissioner of income tax
reiterated the same facts as suggested in the deviation report. Thus, in the
end the learned assessing officer passed an order making addition as
suggested in the April report. This information became known after the
assessee made an application as per the right to information act where
assessee asked for the copy of the deviation later and communication
exchanged as mentioned in the order sheet.
91. The learned assessing officer during the course of hearing before the learned
Commissioner of income tax (appeals) submitted a remand report dated
22/3/2019 through the additional Commissioner of income tax CR 7, New
Delhi which is placed at page number 387 of the paper book. At page
number 390, the learned assessing officer has dealt with the bogus
purchases for which the addition has been made. The learned AO
mentioned that during the assessment proceedings it was found about 50%
of the purchases were made by the assessee from different parties other
than related parties and the same were verified by issuing notices u/s 133
(6) of the income tax act. Further confirm material letters were filed by the
assessee from these parties and no variation found between the reply
received from this parties in response to notice u/s 133 (6) and confirmatory
ledgers filed by the assessee. Therefore, as per the remand report it is clear
that according to the assessing officer the addition made on account of the
bogus purchases is not sustainable as no deviation was found in the
purchases recorded by the assessee and confirmatory letter is as well as
enquiry letters responded u/s 133 (6) of the act. This fact is also confirmed
as per the report of the assessing officer in the deviation meeting. It is also
interesting to note that in the remand report the assessing officer has
dropped the point of stock shortage of 450 crores.
92. Further, due to above divergent views expressed by the assessing officer in
the assessment order, deviation report and remand report, the bench
requested the assessing officer to show the relevant paragraph of the
Page | 73
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
appraisal report from which the above addition has been made. Appraisal
report was produced before the bench and it was found that in para number
4.3.7 the investigation wing has mentioned that the above addition is
required to be made in order to protect the interest of revenue. No
evidences of bogus purchases were found during the course of search except
the statement of the managing director. We have already discussed that the
statement of the managing director did not deal with any of the issues and
further it was retracted immediately after the search to the extent of
correcting the disclosure with respect to deposit in PMGKY scheme.
93. As already stated, that assessee company is a trader and dry fruits and
other grocery items used to purchase and sale these items from and to the
impugned parties on a regular basis. The entire purchase and sale
transactions are duly recorded in the regular books of accounts of all the
parties concerned. The entire transactions were routed through regular
banking channels. The purchases and sales are also duly supported by the
quantitative details. Copies of the bank accounts of all the parties showing
the receipts and payments against the sales and purchases from the
impugned parties were filed before the learned assessing officer no
incriminating documents with respect to the purchases and sales recorded
by the assessee in its books of accounts was found in the course of search.
In the original assessments for the concluded assessment is all these details
were verified and assessments were framed under section 143 (3) of the
income tax act. The books of accounts were duly audited as per the
companies act and as per the income tax act. No defects in such books
were found either by the learned assessing officer or by the learned CIT A.
Based on the information furnished by the assessee the learned assessing
officer proceeded to make an addition at the rate of 25% of such purchases
without conducting any enquiry. In the deviation proceedings, the learned
assessing officer after scrutiny of the books of accounts, appraisal report
and statement of the managin director of the company, which was
retracted, held that no such addition should have been made. In the
Page | 74
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
remand proceedings, also the AO held that on enquiry also made on test
check basis of the 50% of the items got confirmed.
94. In view of above categorical facts coming out of the assessment proceedings,
on perusal of the deviation report and appraisal report that 4 the concluded
assessment is no incriminating evidences were found. In view of this,
additions made by the learned assessing officer for assessment year 2012
13 to 2014 15, respectfully following the decision of the honourable
jurisdictional High Court, the additions deserves to be deleted. So, for these
years same are deleted. Accordingly ground no 6 for AY 2012-13,
Ground no 4 for Ay 2013-14 and Ground no 4 of Ay 2014-15 are allowed.
95. With respect to abated assessment years 9 i.e. AY 2015-16 , 2016-17 and
2017-18 it is also apparent that that assessee has purchased less a sum of
goods then sold to those parties. In the deviation report the assessing
officer has categorically held that if, the purchases are to be removed from
the books of accounts from those parties, then necessarily on the same
allegation the sales is also required to be removed from the regular books of
accounts, which would lead to assessing the assessee at less than the
income returned by it. This fact has also evident from noting the fact that
total sales made by the assessee to these parties for assessment year 2012
13 to 2017 18 is INR 3 6206089783/ and purchases made from this
parties is INR 3 6021417848/, therefore the assessee has shown the profit
from these transactions for all these years of INR 1 84671935/. It is highly
unusual that if the purchases are allegedly bogus then how assessee will
show higher profit from these purchases in its books of accounts. Thus the
allegation of the learned assessing officer as well as the learned CIT A.
That by booking the bogus purchases assessee is reducing its profit by
inflating the expenses contrary to this, from these alleged parties
transactions of purchases and sales, assessee has shown high profit.
96. The learned assessing officer has categorically held that in the appraisal
report, only the purchases from alleged bogus parties were considered and
sales made to these parties were altogether ignored. This action of the
revenue runs contradictory to its own stand of booking of the bogus
Page | 75
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
purchases. Thus, it cannot be said that purchases made from these parties
are bogus however; sales made to these parties are genuine. The revenue
cannot blow hot and cold in same breathe.
97. Further while disallowing 25% of the purchases the learned assessing officer
has not brought on record any material to justify the disallowances with
carrying out any enquiry or investigation or bringing forth any evidence.
98. The shortage of stock by nearly INR 4 50 crores mentioned in the
assessment order by the learned assessing officer which was purely based
on the appraisal report, vanished in the remand report for the reason that
during the course of search it was the stock lying at warehouse at Sonipat.
This was completely ignored. This premise was also not covered during the
search. When the above stock was taken into account, there was no excess
or shortage of the stock compared to the book stock of the assessee. This is
also evident as no addition with respect to any excess or shortage of stock
made in the assessment order for any of the years.
99. When the matter reached before the learned CIT A, he rejected the action
of the learned assessing officer so far as addition with respect to the alleged
bogus purchases are concerned. He applied the provisions of section 145
(3) of the income tax act. He segregated the transactions of purchase and
sales from the alleged bogus parties and applied the gross profit ratio, which
is earned by the assessee from transactions with other parties. He applied
such ratio for making an addition for assessment year 2012-13, 2013 14
2015 16 and 2016 17. For assessment year 2014 15, the gross profit
ratio of the assessee from other parties (other than the alleged parties) was
only 4.13 percentages. However, the learned CIT A did not apply this
percentage but took average gross profit ratio for assessment year 2012 13
and 2013 14 of 16.20 percentage and 9.41 percentage. He applied the
average, which is 12.80 percentages to the sales for that year for making an
addition. For assessment year 2017 18 the gross profit on transactions
other than alleged related parties were found to be 6.02 percentage however
the learned CIT A did not apply that ratio but made an addition of INR 4
87053/ as there was loss. Therefore, wherever it was beneficial to the
Page | 76
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
revenue, the learned CIT A applied higher percentages and made the
addition. Wherever it was against the revenue, he applied average gross
profit of last 2 years or made on ad hoc addition. Thus, it is apparent that
the learned CIT A was not at all consistent in his approach.
100. The next question that has been raised before us by the additional grounds
that the learned CIT A has invoked the provisions of section 145 (3) of the
act. The contention raised was that AO did not find any defects in the books
of accounts or method of accounting employed by the assessee. Thus, the
AO did not reject the books of accounts of the assessee but accepted them
as showing the correct profit. Specifically provisions of section 145 (3) was
red before us again and again by the learned authorised representative
stating that it is the exclusive domain of the learned assessing officer about
his satisfaction about the correctness or completeness of the accounts of the
assessee and the method of accounting followed by the assessee. It was
further stated that in the definition of the assessing officer as per section 2
(7A) there is no mention of the learned CIT A, therefore, he exceeded his
jurisdiction. It was also alternatively argued that, it is not the case of the
revenue that AO did not apply his mind to the provisions of section 145 (3)
of the act. It was submitted that AO did applied his mind to the
applicability of the provisions of section 145 (3) of the income tax act in the
deviation report but it was not done by the assessing officer. It was further
stated that it was at the behest of the deviation committee meeting.
Extensive reference was made to the deviation committing meeting and
deliberations made there under. It was also alternatively argued that the
learned CIT A did not examine the books of account at all, then how can
he reject the same. It was also submitted that the method adopted by the
learned CIT A of applying the gross profit ratio on transactions with
alleged bogus parties of the profit rate on by the assessee from transactions
with other parties, resulted in partial rejection of the books of accounts,
which is not permitted in the law. Even otherwise, it was submitted that
during the course of remand proceedings the assessee as per letter dated
25/3/2019 on the specific requisition of the learned CIT A filed the details
Page | 77
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
of the gross profit ratio in case of 2 of the other companies engaged in
similar line of business having similar size along with their balance sheet
and profit and loss account. There year -wise sales and gross profit
reflected by the 2 companies was also shown to the learned CIT A. It was
contended that the gross profit ratio on by these 2 entities is much lower
than gross profit shown by the assessee. It was also submitted that, before
applying the different method of making an addition, the learned CIT A did
not issue any notice u/s 251 of the income tax act. It was further argued
that the learned CIT A has found a new source of income of gross profit,
which is not permitted as per the law. Therefore, the action of the learned
CIT A was under challenge on all these grounds. We deal with them point
vice hereinafter.
101. Coming to the 1st issue whether the learned CIT A is empowered to reject
the books of accounts, which has not been done so by the learned assessing
officer. The above question is squarely covered against the assessee by the
decision of the honourable Supreme Court in CIT vs Macmillan (1958) 33
ITR 182 (SC). Therefore, according to us, the CIT appeal is empowered to
reject the books of accounts where the AO has failed in performing his duty.
According to section 145 (3) of the income tax act it is the duty of the
assessing officer in each and every case to satisfy himself about the
correctness or completeness of the accounts of the assessee and adoption of
the method of accounting regularly. If AO has failed to do that, there can be
no fetters on the right of the 1st appellate authority to do so. However the
same criteria applies to the 1st appellate authority also which applies to the
assessing officer while rejecting the books of accounts under section 145 (3)
of the act.
102. However, it is required to be noted that in the deviation proceedings the
learned assessing officer has given an alternative option to apply the
provisions of section 145 (3) of the income tax act, before making an
assessment. However, it was rejected in the deviation proceedings and the
learned assessing officer was directed to make the addition to the extent of
25% of the purchases from the allegedly bogus parties. Therefore it cannot
Page | 78
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
be said that the assessing officer did not applied his mind during the course
of assessment proceedings to the provisions of section 145 (3) of the income
tax act.
103. With respect to the argument of the learned authorised representative that
the learned CIT A did not grant any opportunity of hearing to the assessee
with respect to the application of the provisions of section 145 (3) of the
income tax act, we reject the same for the simple reason that provisions of
section 251 (2) of the income tax act applies only where there is an
enhancement of addition or there is a reduction in the refund due to the
assessee. In the present case the learned CIT A has reduced the addition
and therefore, no fault can be found with the action of the learned CIT A.
The learned assessing officer has also filed an appeal against the reduction
of addition by the learned CIT A.
104. However, if the learned CIT A finds that the assessing officer has failed to
apply his mind to the provisions of section 145 (3) of the income tax act
then, he can do so, but he has to examine the books of accounts and reach
at a conclusive finding that the books of accounts of the assessee are either
not correct or are incomplete. He is also required to look in to the method of
accounting regularly employed by the assessee. In the present case, on
careful reading of the order of the learned CIT A, we did not find that the
learned CIT A has even called for the books of accounts. In the remand
report also there is no whisper from the side of the assessing officer that
books of accounts are incorrect or incomplete. The learned CIT DR as well
as the learned assessing officer present during the course of hearing also
could not show us even a single piece of evidence where it was found that
the books of accounts were not correct or incomplete. In the present case,
the purchases and sales with alleged bogus parties are supported by the
bills and vouchers as well as the stock register maintained by the assessee.
Such stock register was maintained in Tally accounting software. The
books of accounts of the assessee are duly audited. Payment of purchase
consideration to the alleged parties and receipt of sale consideration from
the alleged parties are through account payee cheques. There is no
Page | 79
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
allegation from the side of the learned assessing officer or the learned CIT
A that books of accounts of the assessee are either incorrect or incomplete.
The allegation that booking the purchases has resulted into the reduction of
the profits of the assessee has also been negated by the learned assessing
officer himself during the deviation proceedings as well as in remand
proceedings. Before rejecting the book results, the revenue authorities are
duty-bound to find patent, latent and glaring defects in the books of
accounts. In the present case, no such exercise or attmpt has been made
by the revenue authorities but the simply relied on the statement of the
managing director, which was later on retracted and was also not on the
point of booking the bogus expenditure. Thus, we are of the view that the
rejection of the books of accounts by the learned CIT A is not in
accordance with the law.
105. Even otherwise, once the books of accounts of the assessee are rejected,
then profit, has to be estimated on the basis of the proper material
available. The revenue authorities are not factored by technical rules of
evidence and pleadings and they are entitled to act on material, which may
not be accepted, as evidence in court of law. Nevertheless, they are not
entitled to make a pure guess in making assessment with reference to any
evidence or material at all. There must be more than a mere suspicion to
support an assessment u/s 143 (3) of the act. Against this, the assessee
has supported his books of accounts with adequate evidences of his own
business as well as also supported it with the balance sheet and profit and
loss account of comparable 3rd parties. The assessee has demonstrated that
gross profits earned by those parties in the similar line of business are less
than the gross profit declared by the assessee.
106. Further, the quantification of the profit by the learned CIT A, has been
made on in comprehensible assumptions. He applied the gross profit rate of
other parties to the sales of allegedly bogus parties. He has application of
the gross profit rate also changed from the year to year. In 1 of the years,
he adopted the gross profit rate being average of gross profit of 2 preceding
years on by the assessee from other parties and applied the same rate to the
Page | 80
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
sales from allegedly bogus parties. We fail to understand that how the gross
profit ratio of one year can be applied to another year for determining the
profit of some of the transactions of another year.
107. In view of the above discussion, we are of the opinion that the learned
assessing officer has incorrectly disallowed 25% of the purchases from the
alleged bogus parties without finding any evidence and ignoring the sales
paid by them to the assessee. Further, the learned CIT A applied the
provisions of section 145 (3) of the income tax act by rejecting the books of
accounts of the assessee partially, without even looking at the books of
accounts is also incorrect. In view of this the addition made by the learned
assessing officer for all those years on account of bogus purchases deserves
to be deleted for concluded assessment as well as pending assessments.
Accordingly Ground no 2 for Ay 2015-16, ground no 2 for Ay 2016-17
and ground no 3 for Ay 2017-18 are allowed. The two additional Grounds
raised by the assessee for Ay 2-15-16 to 2017-18 are partly allowed. These
additional grounds for AY 2012-13, 13-14 and 14-15 are infructous as we
have deleted the addition relying on decision of Hon. Delhi High court in
those years, hence dismissed. Consequently Ground no 1 for Ay 2012-13,
Ground no 1 for Ay 2013-14, Ground no 1 for Ay 2014-15 , Ground no 1
for Ay 2016-17 are dismissed.
108. Now we come to the 3rd issue pertaining to the assessment year 2017 18 of
addition u/s 68 on account of cash deposited in banks post demonetization.
The brief facts of the issue is that post demonetization, between 9/11/2016
to 30/12/2016, assessee deposited cash in the following bank accounts.
Name of the bank amount in crores
Bank of India 79.99
4
Canara Bank
Central bank of India 4
0.08
Central bank of India
IDBI Bank 2.99
Page | 81
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Indian overseas Bank 14.75
Indian overseas Bank 1.65
Punjab national bank 63.56
109. The explanation of the promoter director of the assessee company with
respect to the cash deposit was taken understatement u/s 132 (4) on
22/3/2017. With response to question number 29 of his statement he was
asked to state the source of the case of deposited. The assessee replied that
the source of most of the case of deposited is sales proceeds. He submitted
that he had experienced high sales in this year during Diwali, on account of
increase in demand of dry fruits. The sale proceeds, which were in cash,
were accumulated during this period. The same are being gradually
deposited in the bank accounts of the company, as the branches did not
accept very high amounts of cash in one go. Further, after 8/11/2016,
there were very huge rush at the bank branches. Thus, this cash was
deposited in installments in company's bank accounts. The above 1 was
reiterated in response to question number 39 wherein the managing director
stated that there is an increase in cassettes the Senior due to increase in
the demand of dry fruits. That is why, the cash receipts in the cash in hand
are on the higher side this year. Further explanation over this would be
submitted after reconciliation. However, he submitted that INR 5 0 crores
which were shown in the cash book of the company actually represents his
unaccounted and undisclosed income, for which he has no explanation
however by 31/03/2017, the appellant had deposited the due taxes and
deposits under PMGKY an amount of INR 30 crores only. The revenue
authorities found that pattern of cash deposits in the bank accounts is
highly erratic and not in line with the normal trend. It was noted that
monthly cash deposit is generally of 90.26 crores in these 2 months viz a viz
INR 4 2.35 crore for the period prior to demonetization and INR 354,000,000
in the last financial year. The explanation of the assessee regarding the
increased sales on account of increased demand for dry fruit was also found
Page | 82
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
baseless and it was noted that the company has manipulated the books of
accounts to reflect higher gross profit margin in the current year to adjust
its own unaccounted cash in the process. The gross profit of the assessee
was also found to have gone up to 7.9% for the period 1/1/2017 to
20/3/2017 compared to 40.8 percent for the period 9/11/2016 to
31/12/2016. The gross profit ratio of the assessee for 1/4/2016 to
8/11/2016 was also found that 25.2 percentage. The earlier year gross
profit for financial year 2016 17 was found to be 6.10%, 2015 16 was
4.19%, 2014 15 was 6.42% et cetera. The stock position of the assessee
was also verified and found that on the date of such there is an over
reporting of the stock compared to the actual stock found at the premises.
Thus, it was found that average monthly cash deposit pre demonetization is
INR 4 2.35 crores whereas the actual cash deposited is Rs. 180.53 Crores.
110. During the course of assessment proceedings, the assessee was asked to
explain the source of the cash deposit of INR 175.57 crores and invite
should not be considered as unexplained money as income of the assessee.
The assessee submitted a detailed letter dated 20/11/2018 wherein it was
submitted that total cache of INR 1 75.28 crore was deposited in the bank
accounts post demonetization between 9/11/2016 to 31st/12/2016 is only
INR 1 75.57 crores. The source of cash deposit was explained to be the
proceeds arising from the cash sales made by the assessee, which is duly
accounted for in the books of the assessee on the credit side of the profit
and loss account. The statement of the assessee was further supported by
the audited books of account of the assessee, bank wise summary of cash
deposits, copies of the bank statement and details of monthly cash sales
and cash deposits for the earlier years. The learned assessing officer treated
a sum of INR 1 50.53 crores after giving credit of INR 3 0 crores as disclosed
under PMGKY. The ld AO noted that pattern of cash deposits was allegedly erratic
and not in line with the normal trend. The monthly trend of cash sales and cash deposit
transactions for F.Y 2014-15 to F.Y. 2016-17 was noted as under:
Month FY- 2014-15 FY- 2015-16 FY-2016-17
Cash sales Deposit Cash sales Deposit Cash sales Deposit
April 27.15 Cr. 25.82 Cr. 42.70 Cr. 42.05 Cr. 58.48 Cr 45.66 Cr
Page | 83
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
May 08.51Cr. 10.71 Cr. 23.55 Cr. 21.72 Cr. 61.92 Cr. 57.49 Cr.
June 12.95 Cr. 04.77 Cr. 12.20 Cr. 14.89 Cr. 73.35 Cr. 37.64 Cr.
July 03.13 Cr. 02.90 Cr. 19.70 Cr. 22.36 Cr. 20.46 Cr. 04.97 Cr.
August 02.01 Cr. 03.46 Cr. - 02.50 Cr. 21.58 Cr. 07.07 Cr.
September 15.21 Cr. 08.20 Cr. 11.71 Cr. 15.63 Cr. 20.10 Cr. 43.76 Cr.
October 14.60 Cr. 25.16 Cr. 29.95 Cr. 32.64 Cr. 99.68 Cr. 77.09 Cr.
November 16.49 Cr. 14.46 Cr. 45.18 Cr. 47.12 Cr. 47.73 Cr. 113.52 Cr.
December 22.26 Cr. 28.08 Cr. 97.35 Cr. 94.36 Cr. 69.83 Cr. 89.75 Cr.
January 54.51 Cr. 57.04 Cr. 80.86 Cr. 76.32 Cr. 64.60 Cr. 63.50 Cr.
February 37.27 Cr. 36.43 Cr. 44.39 Cr. 50.24 Cr. 36.20 Cr. 35.75 Cr.
March 23.35 Cr. 25.62 Cr. 04.93 Cr. 08.36 Cr. 59.33 Cr. 57.54 Cr.
He further alleged that the average cash deposits for two months i.e. Oct to
Nov 2016 was Rs. 90.26 crores vis--vis from April to October 2016 of Rs.
42.35 crores and Rs. 35.40 crores respectively in the past financial year. He
also compared the GP margin of the Appellant was alleged to be as under:
Period G P Margin
FY 2012-13(As per audit report) 4.85
FY 2013-14(As per audit report) 4.88
FY 2014-15(As per audit report) 6.42
FY 2015-16(As per audit report) 4.19
FY 2016-17(As per audit report) 6.10
01.04.16 to 08.11.2016(As per tally data) 25.2
09.11.16 to 31.12.2016(As per tally data) 40.8
01.01.17 to 20.03.2017(As per tally data) 7.9
Thus, he held that Assessee Company had manipulated the books of
account to reflect higher GP margin in the F.Y. 2016-17 to adjust its own
unaccounted cash in the process. It was further alleged that during the
course of search the stock position was found to be short vis--vis the stock
as per books of account. As on 08.11.2018, the Assessee had a cash
balance of Rs. 113.03 crores whereas on the date of demonetization, the
Assessee had deposited cash in bank of Rs. 13.99 crores only. The AO
opined that as on the date of demonetization the Assessee had legitimate
cash balance of Rs. 13.99 crores only. It was further alleged that the
average monthly cash deposits pre-demonetization was Rs. 42,35,05,714/-
whereas the actual cash deposits for two months post demonetization was
Rs. 1,80,53,24,000/-. The AO thus opined that cash of Rs. 180.53 Crore
deposited in the bank accounts during demonetization period allegedly
represented unexplained cash not commensurate with the regular pattern of
Page | 84
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
cash pre-demonetization. Accordingly, after giving credit of Rs. 30 crores
declared under PMGKY, the balance cash of Rs. 1,50,53,24,000/- was
treated as unexplained cash credit u/s 68 of the Act.
111. The assessee agitated this issue in the appeal before the learned CIT A.
The learned CIT A observed that out of total cash deposits during
09.11.2016 to 30.12.2016 (i.e. the demonetization period) of Rs.
1,80,53,24,000/- (actual cash deposits during the said period was Rs.
1,75,28,24,000/-), deposits of Rs. 63,41,26,000/- were in the form of new
currency notes and currencies which had not been demonetized (i.e. Rs. 10/
20/ 50/100). Copies of relevant deposits slips were called for and analyzed.
Verification of cash deposit vouchers were also made from respective banks
by deputing ITI and each of the documents/vouchers of cash deposits
submitted by the Assessee was verified from the original records maintained
by the respective banks and found to be in order. Bank& Currency wise
summary of new currency notes and non-demonetized old currency notes
aggregating to Rs. 63.41 crores deposited in the demonetization period (i.e.
09.11.2016 to 30.12.2016) are placed at pages 149-150 of Paper book -2.
Further copies of all the cash deposit slips for deposit of new and valid
currency for 09.11.2016 to 30.12.2016 aggregating to Rs. 63.41 crores are
enclosed at pages 151 to 183 of Paper book -2. The Ld. C.I.T (A) further
observed that out of Rs. 113.03 crores held by the Assessee on 08.11.2016,
only Rs. 13.99 crores was deposited into the bank account on 08.11.2016
(actually deposited on 10.11.2016 immediately after demonetization) and
the balance Rs. 99.04 crores was not deposited on the said date. This in the
opinion of the Ld. C.I.T (A) implied that on the date of demonetization, the
Assessee had actual legitimate cash of Rs. 13.99 crores only. He alleged that
the Appellant had not explained the necessity for keeping such huge
amount of cash in hand and that the Appellant had created an artificial
picture in its books of account by which unaccounted income was routed
through showing cash sales and the same was shown to have been
deposited into the bank account as per the convenience of the Assessee on
future dates. He opined that Rs. 99.04 crores represented unaccounted
Page | 85
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
income of the appellant, which did not represent cash sales. Further, cash
representing new currency and non-demonetized currency aggregating to
Rs. 63.41 crore in the opinion of the Ld. CIT (A) represented cash sales. He
thus directed the AO to restrict the addition to Rs. 73.13 crores [i.e. (180.53
30) i.e. 150.53 crores 13.99 crores 63.41 crores]. Thus, assessee is in
appeal for as
112. In regard to the above, it is firstly pointed out that both the AO and Ld. CIT
(A) have erred in deeming the total cash deposits between 09.11.2016 to
30.12.2016 (i.e. during the demonetization period) as Rs. 180.53 crores
instead of the actual deposits of Rs. 175.28 crores during the said period.
While arriving at the said figure of Rs. 180.53 crores, the Revenue
Authorities have erroneously considered the total cash deposits between
09.11.2016 to 31.12.2016(i.e. including the cash deposits of Rs. 5.25 crores
on 31.12.2017 in new currency notes) instead of the actual cash deposited
during the demonetization period of Rs. 175.28 crores.
113. It is submitted that since the impugned addition u/s 68 was made by the
AO on account of cash deposited in the bank accounts in the wake of
demonetization, only the demonetized old currency notes deposited into the
bank accounts during the demonetization period were required to be taken
into account even if, for the sake of argument, the allegations of the AO were
deemed relevant. Pursuant to demonetization announced by the
Government of India on 08.11.2016, the RBI stipulated that the
demonetized old currency notes of Rs. 1000 & Rs. 500 could be deposited
into the banks only between 10th November 2016 until the closing of
banking hours on 30th December 2016. The AO has however erroneously
also included the cash deposited in new currency notes of Rs. 5.25 crores
on 31st December 2016 (i.e. beyond the demonetization period when
demonetized notes could no longer be deposited) in the aggregate cash
deposits during 09.11.2016 to 30.12.2016. The error committed by the AO
is clearly verifiable from the following evidences on record :
Page | 86
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
(i) Complete bank wise details of cash deposited in banks for the period
09.11.2016 to 30.12.2016 showing total deposits of Rs. 175.28 crores
during the said period at pgs 112-113 of PB-2
(ii) Copies of bank statements evidencing cash deposited during
09.11.2016 to 30.12.2016 at pgs 114-148 of PB-2
(iii) Cash ledger for F.Y. 2016-17 showing deposit of Rs. 5.25 crores on
31.12.2016 i.e. post demonetization period at pgs 184-191 of PB-2.
114. Further, even out of Rs. 175.28 crores deposited during 09.11.2016 to
30.12.2016, deposits of Rs. 63.41 crores were in new currency notes and
non-demonetized old currency notes (Rs. 10/20/50/100). Thus, the said
amount of Rs. 63.41 crores could not be construed as cash deposited into
the banks as a result of demonetization. The actual deposit of demonetized
currency notes (i.e. old 500 & 1000 currency notes) during the
demonetization period i.e. 09.11.2016 to 30.12.2016 was thus Rs. 111.87
crores(i.e. 175.28 63.41). Further, as per the A.O's own observation at
page 5 of the Assessment Order for A.Y. 2017-18, Rs. 13.99 crores deposited
on the first day subsequent to the demonetization represented actual
legitimate cash held by the Assessee and Rs. 30 crores was declared by the
Assessee under PMGKY. Therefore, even going by the A.O's allegations, the
maximum addition as per the A.O's own logic works out to Rs. 67.88
crores[i.e. (175.28 63.41) i.e. 111.87 - 13.99 30] instead of Rs. 150.53
crores erroneously made by him contrary to his own observations.
115. The Ld. C.I.T(A) while allowing reduction of Rs. 30 crores, Rs 63.41 crores&
Rs. 13.99 crores on account of the disclosure made under PMGKY, the cash
deposited in new & valid currency notes and the cash deposited on the first
day subsequent to demonetization respectively, has erroneously considered
the cash deposited during the demonetization period as Rs. 180.83 crores
instead of the actual deposits during the said period of Rs. 175.28 crores.
Page | 87
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
i. That the Assessee is engaged in the trading of dry fruits and
kirana items. The customers usually pay in cash and as such,
the Assessee normally has sufficient cash balance throughout
the year. The cash received against such cash sales is
subsequently deposited into the banks from time to time as per
the convenience of the Assessee.
ii. Cash sales & corresponding cash deposits into the bank
accounts of the Assessee have been a regular feature of the
Assessee's business since the past several years. The same is
clearly borne out from the details of cash sales and cash
deposits made by the Assessee in the past Financial Years viz.
F.s 2014-15 & 2015-16 filed before the A.O. The same trend
has also continued after the demonetization period i.e. in
January to March 2017. This implies that the business of the
Assessee was normal even after demonetization and there was
no unusual trend in the cash sales or cash deposited in the
banks. The fact that cash sales and cash deposits in banks are
regular features of the Assessee's business (in the pre-
demonetization, demonetization and post demonetization
period) has not been controverted by the Revenue Authorities
and is clearly explicit from the data on record.
iii. The Assessee maintains regular books of account, which are
audited by independent Auditor. The cash sales and the
corresponding cash deposits in banks are duly reflected in
books of the Assessee in the respective years. The books of
account and the entries pertaining to cash sales and cash
deposits have been accepted by the Department in the
assessments framed in the past years. The audited financial
statements form part of the regular returns filed by the
Assessee for the respective years.
Page | 88
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
iv. A search & seizure operation u/s 132 of the Act was conducted
at the premises of the Assessee-Company on 21.03.2017.
Nothing incriminating with respect to the cash sales or the
corresponding cash deposits was found pursuant to the said
search action. In course of the search assessment, the
Assessee was asked to explain the nature and source of cash
deposited into bank accounts during the demonetization period
(i.e. between 09.11.2016 to 30.12.2016). The Assessee
explained that the source of cash deposits in banks was cash
sales. The same trend of cash sales and cash deposits existed
in the past years as well as in the months subsequent to the
demonetization period. The entries pertaining to cash sales and
corresponding cash deposits in banks were duly reflected in
the books of account of the Assessee. The audited books of
account and the tax audit report for the impugned F.Y. 2016-
17 were also filed before the AO in course of the search
assessment proceedings.
v. On the query as to why the cash deposited during the
demonetization period (i.e. 09.11.2016 to 30.12.2016) was
relatively higher than the cash deposited in the pre-
demonetization period, the Assessee explained that the
demonetization on 08.11.2016 was immediately preceded by
Diwali sales on 30th October 2016, which is the main season of
sales in the dry-fruits business. The same trend existed in the
past years as well. The Assessee submitted the following
figures in corroboration:
Table 18:
Financial Diwali Cash Cash Total Cash Total Cash
Year Month Sales in Deposit in Sales in Deposits in
Page | 89
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Diwali Diwali the F.Y the F.Y
Month Month
2014-15 October 14.60 Cr. 25.16 Cr. 237.44 Cr. 242.65 Cr.
2015-16 November 45.18 Cr. 47.12 Cr. 412.52 Cr. 428.19 Cr.
2016-17 October 99.68 Cr. 77.09 Cr. 633.26 Cr. 633.74 Cr.
vi. With regard to the aforesaid contention of the Assessee, the AO
at page 5 of his Deviation Report noted as follows: "f) During
the course of assessment proceedings, the assessee has
submitted that the cash deposited during demonetization also
included the sales made during Diwali which was on 30th
October, 2016 when the sale of dry fruits increases every year
as compared to other months. The version of the assessee on the
above appears to be an acceptable contention since distribution
of dry fruits during Diwali is a normal and acceptable
phenomenon."
vii. It was further explained that pursuant to demonetization
announced by the Hon'ble Prime Minister on 08.11.2016,
persons holding old five hundred rupee currency notes and
thousand rupee currency notes were required to deposit the
same into their bank accounts or post office accounts from 10th
November 2016 until the close of banking hours on 30th
December 2016.
viii. That accordingly, the Assessee was mandatorily required to
deposit its entire cash in hand to the extent it comprised of old
demonetized 500 & 1000 currency notes into the banks
between 10.11.2016 to 30.12.2016.
ix. Apart from the above, the cash deposited during the
demonetization period (i.e. 09.11.2016 to 30.12.2016) also
comprised of proceeds arising from cash sales made
subsequent to the demonetization on 08.11.2016. Admittedly,
Page | 90
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
out of total cash deposits of Rs. 175.28 crores during the
period from 09.11.2016 to 30.12.2016, Rs. 63.41 crores was
deposited in new 2000 rupee currency notes and valid
currency notes of Rs. 100/50/20/10 on account of cash sales
made subsequent to the demonetization. Therefore, clearly
deposits of Rs. 111.87 crores (i.e. 175.28 cr. -63.41 cr.)During
the demonetization period were in the form of old demonetized
1000 & 500-rupee currency notes, which were required to be
deposited in its entirety before 30.12.2016. This also explains
the reason why the cash deposited into the banks between
09.11.2016 to 30.12.2016 was more than the cash deposited in
the earlier months.
x. As regards the A.O's allegation that cash deposited during the
demonetization period was unusual, it was submitted that in
the immediately preceding month pre-demonetization i.e. in
October 2016, the Assessee deposited a sum of Rs. 77.09
crores in banks. Further, in the immediately preceding year i.e.
in the month of December 2015, the Assessee deposited a sum
of Rs. 94.36 crores in banks. Thus, there was no unusual
trend in depositing cash in banks during the demonetization
period. Further, the total cash deposited in banks during F.Y.
2016-17 (i.e. Rs. 633.74 crores) was higher than the cash
deposited in the past years for the simple reason that the cash
sales in the said F.Y. 2016-17 (i.e. Rs. 633.26 crores) was way
higher than the cash sales in the preceding years. Thus, the
cash deposited in the banks was directly proportional to the
cash sales in the respective years.
xi. Apropos the A.O's allegation that average monthly cash
deposits during October to November 2016 was seen at Rs.
90.26 crores vis--vis the average monthly deposits of Rs.
Page | 91
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
42.35 crores during the pre-demonetization period i.e. April to
October 2016, it was submitted that Diwali in the year 2016
was on 30th October and the proceeds arising out of Diwali
Sales were deposited in banks subsequently in the months of
November and December leading to higher deposits during the
said months. It is also a widely accepted fact that in Dry Fruits
business, a surge in sales is normally noted during the winter
months when the consumption of dry fruits is relatively higher
than the summer months. Thus, the cash deposits arising out
of cash sales of summer months are not comparable with the
cash deposits during the winter months. Similar trend is also
noted in the past F.Ys 2014-15 & 2015-16 as evident from
above table.
xii. With regard to the alleged unusual GP ratio as per tally data of
25.2% for 01.04.2016 to 08.11.2016, 40.8% for 09.11.2016 to
31.12.2016& 7.9% for 01.01.2017 to 20.03.2017, it was
explained that the tally data was incomplete and not finalized
until the time of search on 21.03.2017. The accounts were
incomplete and various entries pertaining to expenses etc. were
pending as on the date of search, which were made
subsequently at the time of finalization of accounts. The GP
Margin as per Audited Financial Statements for F.Y. 2016-17 is
6.01%, which is at par with the GP% of the past years.
xiii. Further, with respect to deposits of Rs. 13.99 crores on
10.11.2016 as against total cash in hand of Rs. 113.99 crores
on the date of demonetization, it was explained that banks do
not accept such huge amount of cash on the same day. The
Assessee was advised by the banks to deposit the said amount
in tranches. In consonance with the advice received from the
banks, the Assessee deposited the said amount over the period
of demonetization (i.e. between 10.11.2016 to 30.12.2016) as
permitted by the RBI. Merely because the entire cash of Rs.
Page | 92
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
113.99 crores held by the Assessee as on the date of
demonetization was not deposited on the very first day after
demonetization (which was not permitted by the Banks) but in
tranches does not automatically imply that the balance cash
deposited subsequently did not represent legitimate cash as
alleged by the Revenue Authorities. The source of the entire
cash held as on the date of demonetization and deposited
subsequently into various bank accounts is clearly evident
from the entries in the books of account.
xiv. The Revenue Authorities while making the impugned addition
u/s 68 and rejecting the explanation offered by the Assessee
with respect to the nature and source of the cash deposited in
various bank accounts during the demonetization period (i.e.
09.11.2016 to 30.12.2016) have acted merely on surmises,
conjectures, suspicion, presumptions and assumptions. The
humble submissions of the Assessee highlighting the glaring
internal inconsistencies in the orders of the Revenue
Authorities the repeated violations of the provisions of law by
them are as under:
xv. The AO has treated the cash deposited in the banks during the
demonetization period as unexplained cash credits u/s 68 of
the Act although the nature and source of the cash deposits
being proceeds arising out of cash sales is patently evident
from the entries in the audited books of account of the
Assessee.
xvi. It is not the case of the Department that the cash deposited in
the banks during the demonetization period was in excess of
what was available in the cashbooks. The fact that the cash
deposits in banks were sourced out of cash sales is evident
from the entries in the cashbooks. Nothing incriminating
against or contrary to the entries recorded in the cashbooks
was found in course search in the case of the Assessee on
Page | 93
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
21.03.2017. The cash ledger for F.Y. 2016-17 is enclosed at
pages 184-191 of PB-2.The entries in the cash book for the
demonetization period may be summarized as under:
CASH IN HAND AS ON
09/11/2016 AS PER CASH
BOOK 1130303192
ADD:
CASH SALES FROM
09/11/2016 TO 30/12/2016 680812731
CASH WITHDRAWL FROM
BANK FOR THE SAID PERIOD 310000 681122731
TOTAL AMT. RS 1811425923
LESS :-
CASH DEPOSITED IN BANKS
FROM 09/11/2016 TO
30/12/2016 (see pgs 112-113
of PB-2):
IN OLD DEMONETIZED
CURRENCY NOTES ( 500 &
1000 NOTES) 1118698000
IN NEW CURRENCY NOTES
AND NON-DEMONETIZED
CURRENCY NOTES (see pgs.
149-150 of PB-2) 634126000 1752824000
58601923
LESS :- CASH EXPENSES
FROM 09/11/16 TO 30/12/16 1072227
CLOSING CASH BALANCE AS
ON 30/12/2016 57529696
xvii. The books of account of the Assessee have been audited by an
independent Auditor and have not been rejected by the AO u/s
145(3) of the Act. The stock position depicted in the books of
account has thus been accepted by the Department. The cash
sales were made out of the accounted stock accepted as such
by the Department. It is not the case of the Department that
the physical stock found in the course of search was in excess
of the book stock, which could have probably indicated/hinted
at the possibility of recording of bogus cash sales. In fact, the
Page | 94
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
allegation of the Department is that the physical stock
recorded in course of search was short of the book stock by
around Rs. 450 crores (the reason for the alleged discrepancy
has already been explained in the earlier paras). Thus, the
recording of any bogus cash sales is not borne out from the
facts on record or from the findings of the search action in the
case of the Assessee.
xviii. The cash sales are duly supported by relevant vouchers, which
were produced before the AO in course of the assessment
proceedings, and nothing adverse in connection therewith was
noted by the A.O. The figure of cash sales offered by the
Assessee in its Return of Income for F.Y. 2016-17 was accepted
as such by the Department and considered in arriving at the
assessed income of the Assessee for F.Y. 2016-17. Therefore,
the cash sales recorded in the books of the Assessee having
been accepted as such by the Department, the corresponding
cash deposits made out of such cash sales cannot be rejected
and deemed to have arisen on account of income from
unexplained sources on mere surmises and conjecture of the
AO.
xix. The fact that cash sales and corresponding cash deposits in
banks have been regular feature of the Assessee's business
over the past several years has not been denied by the A.O. In
fact, in the past, the AO after conducting a detailed scrutiny of
books of account of the Assessee and after arriving at complete
satisfaction with respect to the correctness of the entries
recorded therein1accepted the cash sales and corresponding
cash deposits in banks in the assessments framed u/s 143(3)
of the Act for A.Ys 2012-13 to 2014-15. Copies of original
Page | 95
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
assessment orders passed u/s 143(3) for the said years are
enclosed at pages 81 to 124 of PB-1. Thus, there is no reason
why similar modus operandi, which continued in the current
F.Y. 2016-17 (A.Y. 2017-18), should not be accepted by the AO
and rejected on mere surmises and conjecture of the A.O.
xx. The entries in the cash books for the years under appeal may
be summarized as under:
Table 21:
A.Y. A.Y. 2017-
PARTICULARS
A.Y. 2012-13 A.Y. 2013-14 A.Y. 2014-15 A.Y. 2015-16 2016-17 18
OPENING CASH IN
HAND AS ON IST 3,34,11,6 3,88,77,0
APRIL 6,85,08,416 5,35,36,527 5,40,24,002 3,88,25,827 89 76
ADD:
CASH SALES FOR 1,83,46,54,3 2,55,94,26,6 1,52,29,15,4 2,37,49,83,21 4,12,57,0 6,33,33,2
THE YEAR 28 35 23 1 4,347 1,552
CASH WITHDRAWAL
20,96,35, 3,55,85,7
FROM BANK FOR 1,57,00,000 5,45,00,000 9,28,45,000 9,08,00,000
000 70
THE YEAR
1,91,88,62,7 2,66,74,63,1 1,66,97,84,4 2,50,46,09,03 4,36,87,5 6,40,77,8
44 62 25 8 1,036 4,398
LESS :-
TOTAL CASH
DEPOSITED IN 1,84,18,16,3 2,60,71,58,7 1,58,68,73,6 2,42,70,47,20 4,28,25,2 6,33,80,1
BANKS DURING THE 18 00 00 0 0,400 4,000
YEAR
CASH EXPENSES 4,73,53,5 1,57,46,6
2,35,09,899 62,80,460 4,40,84,998 4,41,50,149
FOR THE YEAR 60 13
CLOSING CASH
3,88,77,0 5,40,23,7
BALANCE AS ON 5,35,36,527 5,40,24,002 3,88,25,827 3,34,11,689
76 85
31ST MARCH
xxi. It is pertinent to note that while the A.O. has accepted the cash
deposited in the bank accounts in the following periods to be
sourced out of cash sales recorded in the books of the Assessee
viz:
Cash deposited in the banks in the past Financial Years
2011-12 to 2015-16,
Cash deposited in banks during the impugned F.Y.
2016-17 in the pre-demonetization period viz. April
2016 to 8th November 2016
Cash deposited in banks during the F.Y. 2016-17 in the
post-demonetization period viz. January to March 2017
Page | 96
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
He has refused to accept the same modus operandi with
respect to the cash deposited during the period 09.11.2016 to
30.12.2016 merely on the pretext that the same was deposited
during the demonetization period and hence was suspicious in
nature.
xxii. The Ld. C.I.T(A), in addition to the above, further accepted that
out of the total cash deposited during the demonetization
period of Rs. 180.53 crores (actually Rs. 175.28 crores), the
following deposits were also sourced out of cash sales recorded
in the books:
Cash deposited in new currency notes and non-
demonetized currency notes to the extent of Rs. 63.41
crores.
Cash of Rs. 13.99 crores deposited on 10th November
immediately after demonetization.
xxiii. Thus, while the Ld. C.I.T(A) has accepted the cash deposited in
banks in (i) the past F.Ys 2011-12 to 2015-16, (ii) in the pre-
demonetization period i.e. April 2016 to 8th Nov 2016, (iii)in the
post demonetization period i.e. January 2017 to March 2017,
(iv) on the first day after demonetization i.e. 10th November
20162and (vi) during the demonetization period to the extent of
Rs. 63.41 crores being deposits in new and valid currency
notes - to have arisen out of cash sales, he has refused to
accept the same modus operandi with respect to the balance
cash deposited in old currency notes during the
demonetization period without citing any explicable reason.
xxiv. Thus, the Revenue Authorities have blown hot and cold in the
same breath accepting and rejecting the explanations offered
by the Assessee with respect to the transactions of identical
nature at their sheer convenience merely on the basis of
Page | 97
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
surmises and conjecture without any evidence or material on
record.
xxv. It is submitted that since the entire cash sales recorded in the
books have been accepted by the Revenue Authorities and the
corresponding sales proceeds in cash were not found physically
lying with the Assessee in the course of search operation, as a
natural corollary, the same was deposited into the bank
accounts as claimed in the books of account of the Assessee.
xxvi. No incriminating material was found in course of search to
even remotely suggest that the Assessee had indulged in any
other unaccounted business activity leading to any
unaccounted income as alleged by the Revenue Authorities.
Further, such allegation was not even established by the
Revenue Authorities in the course of the search assessment
proceedings by conducting any inquiry/investigation by
following the procedure laid down u/s 142(2) & 142(3) of the
Act. Thus, bald allegation of the Departmental Authorities that
the cash deposited during the demonetization period had
arisen from some undisclosed source not reflected in the books
of account as against the accounted cash sales claimed in the
audited books of account dehors any credible
evidence/material on record is unsustainable both in law and
on facts. Addition so made by the AO deeming the impugned
cash deposits arising out of accounted cash sales as
unexplained cash credits merely on the basis surmises &
conjectures is fallacious and deserves to be deleted.
xxvii. Reference in this connection is craved to the case of Lalchand
Bhagat Ambica Ram Vs. CIT (1959) 37 ITR 288 (SC) which is
set in somewhat similar back drop in connection with
treatment of the encashment of high denomination notes by
Page | 98
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
the assessee therein on the promulgation of High Denomination
Bank Notes (Demonetization) Ordinance, 1946as unexplained
money on mere conjecture and surmise of the Revenue
Authorities. The relevant facts of the said case are that the ITO
in the course of the assessment noticed that the appellant
therein had encashed high denomination notes of the value of
Rs. 2,91,000. The ITO asked for an explanation, which the
appellant gave stating that these notes formed part of its cash
balances including cash balance in the Almirah account. The
appellant sought to prove the fact that the high denomination
notes encashed by it formed part of its cash balances from
certain entries in its accounts wherein the fact that moneys
were received in high denomination notes had been noted.
Portions of these entries to the effect that moneys had been
received in high denomination notes were found by the ITO to
be subsequent interpolations made by the appellant with a
view to advance its case that the cash balances contained the
high denomination notes encashed by it. The ITO rejected the
appellant's explanation that the high denomination notes
formed part of its cash balances and treated the sum of Rs.
2,91,000 as the appellant's secreted profits from business and
included it in its total income and assessed the appellant.
Before the Tribunal, the appellant stated that the said entries
were made in sheer nervousness after the coming into force of
the High Denomination Bank Notes (Demonetization)
Ordinance, 1946, on 12th Jan., 1946, as the appellant did not
know that it had specific proof in its possession of having the
high denomination notes as part of its cash balances. The
Tribunal held that there was no other reason to suspect the
genuineness of the account books in which these
interpolations were made. If the entire account books were
fabricated to serve its purpose, there would be no need for the
Page | 99
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
appellant to make interpolations between the lines already
written in a different ink and in such an obvious manner as to
catch one's eye on the most cursory perusal. The Tribunal,
however, examined the cash book and taking into
consideration all the circumstances which had been adverted
to by the ITO held that the appellant might be expected to have
possessed as part of its business cash balance of at least Rs.
1,50,000 in the shape of high denomination notes on 12th
Jan., 1946, when the Ordinance above-mentioned was
promulgated. The Tribunal came to the conclusion that the
nature of the source from which the appellant derived the
remaining 141 high denomination notes of Rs. 1,000 each
remained unexplained to its satisfaction. It accordingly ordered
that the addition be reduced from Rs. 2,91,000 to Rs.
1,41,000. On the said facts, the Hon'ble Supreme Court held
thatthe Tribunal having held that books of assessee were
genuine which showed a cash balance of Rs. 3,10,681 on the
relevant date; the Tribunal could not have accepted the cash
balance of Rs. 1,50,000 out of the value of high denomination
notes of the value of Rs. 2,91,000 and treated the balance Rs.
1,41,000 as income from undisclosed sources. It was held that
in doing so, The Tribunal had indulged in conjectures and
surmises and acted without any evidence or upon a view of
facts which could not reasonably be entertained. The relevant
excerpts from the order of the Hon'ble Apex Court are
reproduced hereunder:
If the entries in the books of account in regard to the
balance in Rokar and the balance in Almirah were held to
be genuine, logically enough there was no escape from the
conclusion that the appellant had offered reasonable
explanation as to the source of the 291 high denomination
notes of Rs. 1,000 each which it encashed on 19th Jan.,
1946. It was not open to the Tribunal to accept the
genuineness of these books of account and accept the
Page | 100
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
explanation of the appellant in part as to Rs. 1,50,000 and
reject the same in regard to the sum of Rs.
1,41,000.Consistently enough, the Tribunal ought to have
accepted the explanation of the appellant in regard to the
whole of the sum of Rs. 2,91,000 and held that the
appellant had satisfactorily explained the encashment of
the 291 high denomination notes of Rs. 1,000 each on 19th
Jan., 1946. [para 14]
The Tribunal, however, appears to have been
influenced by the suspicions, conjectures and surmises
which were freely indulged in by the ITO and the AAC and
arrived at its own conclusion, as it were, by a rule of
thumb holding without any proper materials before it that
the appellant might be expected to have possessed as part
of its business, cash balance of at least Rs. 1,50,000 in the
shape of high denomination notes on 12th Jan., 1946,--a
mere conjecture or surmise for which there was no basis in
the materials on record before it. [para 15]
Unless the Tribunal had at the back of its mind the
various probabilities which had been referred to by the ITO
it could not have come to the conclusion it did that the
balance of Rs. 1,41,000 comprising of the remaining 141
high denomination notes of Rs. 1,000 each was not
satisfactorily explained by the appellant. [para 18]
If the entries in the books of account were genuine
and the balance in Rokar and the balance in Almirah on
12th Jan., 1946, aggregated to Rs. 3,10,681-13-9 and if it
was not improbable that a fairly good portion of the very
large sums received by the appellant from time to time, say
in excess of Rs. 10,000 at a time, consisted of high
denomination notes, there was no basis for the conclusion
that the appellant had satisfactorily explained the
possession of Rs. 1,50,000 in the high denomination notes
of Rs. 1,000 each leaving the possession of the balance of
141 high denomination notes of Rs. 1,000 each
unexplained. Either the Tribunal did not apply its mind to
the situation or it arrived at the conclusion it did merely by
applying the rule of thumb in which event the finding of
fact reached by it was such as could not reasonably be
entertained or the facts found were such as no person
acting judicially and properly instructed as to the relevant
law could have found, or the Tribunal in arriving at its
findings was influenced by irrelevant considerations or
indulged in conjectures, surmises or suspicions in which
event also its finding could not be sustained. [para 19]
Page | 101
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
As the conclusion of the ITO was thus either perverse
or vitiated by suspicions, conjectures or surmises, the
finding of the Tribunal was equally perverse or vitiated if
the Tribunal took count of all these probabilities and
without any rhyme or reason and merely by a rule of
thumb came to the conclusion that the possession of 150
high denomination notes of Rs. 1,000 each was
satisfactorily explained by the appellant but not that of the
balance of 141 high denomination notes of Rs. 1,000
each.[para 20]
Therefore, the Tribunal in arriving at the conclusion
in the present case indulged in suspicions, conjectures and
surmises and acted without any evidence or upon a view
of the facts which could not reasonably be entertained or
the facts found were such that no person acting judicially
and properly instructed as to the relevant law could have
found, or the finding was, in other words, perverse and the
Court is entitled to interfere. [para 23]
xxviii. On similar facts, the Hon'ble Supreme Court in the case of
Mehta Parikh & Co. Vs. CIT (1956) 30 ITR 181 held as under:
"The finding of the Tribunal that high denomination
notes of the value of Rs. 30,000 represented the concealed
profits of the appellant is not supported by any evidence,
and is, in consequence, erroneous in point of law and liable
to be set aside. The accounts of the appellant have been
accepted by the Tribunal as genuine, and it is impossible to
say, having regard to the case balance shown therein, that
notes in question could not have been included therein.The
Tribunal observes that it is unlikely that so many high
denomination notes would have been held as part of the
cash on hand for a such a large number of days. That, no
doubt, is highly suspicious; but the decision of the Tribunal
must rest not on suspicion but on legal testimony."
xxix. Further the Hon'ble Allahabad High Court in the case of Sri
Ram Tandon Vs. CIT (1961) 42 ITR 689 ordained as under:
"It appears extremely difficult to appreciate how the
Tribunal thought it necessary or proper to make an
estimate of 35 notes at Rs. 1,000 each to have been
contained in the cash balance. The Tribunal has given no
reason whatever for its finding that the assessee
possessed 35 notes of Rs. 1,000 each on the day the
Ordinance was promulgated. This evidently is an arbitrary
Page | 102
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
expression of its own guess, which cannot be accorded
the status of a finding. Equally arbitrary is the other
finding that the balance of 10 notes was from an
undisclosed source. After having heard counsel for the
Department and after giving best consideration to the
matter one is quite unable to see any reason or basis for
the so called finding recorded by the Tribunal that the
assessee was in possession of 35 notes on the day the
Ordinance was promulgated or that 10 notes were from
some undisclosed source. These cannot be recognised as
finding at all. The assessee's business was not one in
which large amount of petty notes might have been
necessary for the purpose of business, and keeping money
in large notes is evidently more convenient for counting, for
making payments and for other purposes and no material
has been placed to show that the explanation offered by
the assessee was one which was inherently improbable or
one which could not be accepted. The so-called estimate
made by the Tribunal was based on no reason and was a
mere guess. In fact there was no justification in the
circumstances of the case for making an estimate at all.
The assessee had a large cash balance which could very
conveniently include the 45 high denomination notes
encashed by him. The explanation offered by the assessee
was not unreasonable and nothing has been said which
could justify its being rejected as unreasonable. On the
other hand the so-called estimate by the Tribunal is based
on no reason and is purely arbitrary and cannot be upheld
as legal."
xxx. Further, the Hon'ble Allahabad High Court in the case of
Kanpur Steel Co. Ltd. Vs. CIT (1957) 32 ITR 56 (All)opined as
under:
"when the assessee-company had given an explanation
which was reasonable, the IT authorities could have been
entitled to treat the sum of Rs. 32,000 as income from
undisclosed sources only if there was some other material
from which such inference could have been drawn. No
other material has been mentioned by the Tribunal in their
appellate judgment or in the statement of the case. It
further appears that the Tribunal, in holding that seven
high denomination currency notes of the value of Rs. 7,000
only could form part of the cash balance and the remaining
currency notes could not do so, were acting on their
surmises for which there was no basis and which had no
support from any material on the record. In these
Page | 103
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
circumstances, it must be held that there was no material
for holding that the sum of Rs. 25,000 being the value of
high denomination currency notes exchanged in pursuance
of the High Denomination Bank Notes (Demonetisation)
Ordinance, 1946, represented income of the assessee-
company from some undisclosed sources."
xxxi. Similar view was expressed in the following cases:
Madhuri Das Narain Das Vs. CIT (1968) 67 ITR 368 (All)
K.S. KannanKunhi Vs. CIT (1969) 72 ITR 757
xxxii. Drawing inference from the above cited cases, in the instant
case, the Assessee furnished a reasonable explanation with
regard to the nature and source of the cash deposited in banks
during the demonetization period which was not found to be
false by the Department. The explanation offered by the
Assessee was in line with the trend of cash deposits in the past
years which was accepted by the Department in the
assessments framed u/s 143(3) of the Act in the past. No
material was brought on record by the Revenue Authorities to
draw an inference that the explanation offered by the Assessee
was incorrect or unreasonableorthat the impugned sum
represented income of the Assessee from undisclosed sources
as against the entries recorded in the audited books of the
Assessee.Once the books of account of F.Y. 2016-17 were
accepted by the Department and the cash sales recorded
therein were considered in arriving at the assessed income of
the Assessee for the impugned financial year, the cash
deposited in banks against such cash sales could not be
treated as undisclosed income of the Assessee u/s 68 without
bringing on record any credible evidence/materialin support of
such allegation merely on the basis of surmises and conjecture
of the Revenue Authorities.
Page | 104
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
xxxiii. The whole purpose of the Departmental Authorities in singling
out the cash deposited during the demonetization period as
arising out of unexplained sources(as against the accepted
position in the past andthe subsequent periods) is to somehow
trigger the provisions of section 115BBE read with section 68
of the Act to the income already offered for tax by the Assessee
(as cash sales) at a higher rate of tax of 77.25% (i.e. flat rate of
60% plus surcharge @ 25% on such tax and cess as applicable)
on gross basis (without any deduction/allowance). In fact the
treatment of the cash deposits as unexplained cash credits u/s
68 by the A.O has resulted in double taxation of the same
amount, once in the form of cash sales already offered to tax by
the Assessee at the rate of tax applicable to companies and
again by way unexplained cash credit on deposits arising from
such sales u/s 68 at higher rates specified u/s 115BBE.
Section 115BBE of the Act is a machinery provision to levy tax
on income and it should not enlarge the ambit of section 68 of
the Act to create a deeming fiction to tax any sum already
credited/offered to tax as income. Section 68 of the Act
traditionally applies to unexplained `cash credit' like loans,
deposits, advances, share capital, etc. and not to sums already
offered to tax as income by the assessee in its return of income
at the highest slab rate. Such recourse is unwarranted keeping
in mind the objective to introduce section 115BBE of the Act
was only to curb the practice of laundering of unaccounted
money by taking advantage of the basic exemption limit. The
reason and purpose of the provision was explained by the
explanatory memorandum to the Finance Bill 2012 as under:-
1) "Under the existing provisions of the Income-tax Act,
certain unexplained amounts are deemed as income under
section 68, section 69, section 69A, section 69B, section
69C and section 69D of the Act and are subject to tax as
per the tax rate applicable to the assessee. In case of
individuals, HUF, etc., no tax is levied up to the basic
Page | 105
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
exemption limit. Therefore, in these cases, no tax can be
levied on these deemed income if the amount of such
deemed income is less than the amount of basic exemption
limit and even if it is higher, it is levied at the lower slab
rate.
2) In order to curb the practice of laundering of
unaccounted money by taking advantage of basic
exemption limit, it is proposed to tax the unexplained
credits, money, investment, expenditure, etc.,which has
been deemed as income under section 68, section 69,
section 69A, section 69B, section 69C or section 69D, at the
rate of 30% (plus surcharge and cess as applicable). It is
also proposed to provide that no deduction in respect of
any expenditure or allowance shal be allowed to the
assessee under any provision of the Act in computing
deemed income under the said sections. This amendment
will take effect from 1st April, 2013 and will, accordingly,
apply in relation to the assessment year 2013-14 and
subsequent assessment years."
xxxiv. Thus, the intention of the Legislature behind introduction of
section 115BBE was not to bring to tax genuine cash credits
already offered to tax as income by the Assessee at higher tax
rates. Such an interpretation wouldlead to recurring attempts
on the part of the Revenue Authorities to reject genuine
explanations offered by the Assessee with respect to sums
credited/offered as income in its books as unsatisfactory solely
to extort higher rates of taxes thereon u/s 115BBE of the Act.
The A.O in exercising his powers u/s 68 of the Act is not vested
with unfettered powers to reject any explanation as being not
to his satisfaction merely on the basis of surmises and
conjecture. The AO is bound under law to act reasonable and
just while framing any satisfactory opinion surrounding the
explanation offered by the taxpayer. From the facts of the case
at hand, it is clear that the A.O has acted unreasonably and
capriciously in rejecting the genuine explanations offered by
the Assessee in respect of the impugned cash deposits as
Page | 106
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
unsatisfactory solely with the aim of fastening exorbitant tax
liability on the Assessee-Company under the garb of
unexplained cash credit u/s 68 of the Act. Such recourse
primarily hedged on surmises, conjecture, assumptions,
presumptions and whims of the Revenue Authorities is clearly
unwarranted and the additions so made is unsustainable in
the eyes of law and thus deserves to be quashed.
116. In view of the above, it is prayed that the addition made by the A.O (and
partly sustained by the CIT (A)) u/s 68 on account of cash deposited in
banks during the demonetization period may kindly be deleted.
117. The learned CIT DR briefly referred to the announcement of the scheme of
demonetization on 8/11/2016 and stated that the assessee has deposited
huge amount of cash in its bank accounts. He further referred to the
paragraph number 3 of the assessment order and also page number 3 5 of
the order of the learned CIT A. He further submitted that the learned
assessing officer has tried to analyze the figure of month wise cash sales
and cash deposited into the bank account during the financial year 2014
15 to 2016 17. He further stated that the learned assessing officer has
observed that as compared to the average total cash deposits from April to
October 2016 which was only INR 4 2.35 crores and INR 3 5.4 crores in past
2 financial years, the average monthly cash deposit on mud 2 months of the
October 2016 and November, 2016 was abnormally high at INR 90.26
crores. He further referred to page number 2 of the assessment order and
stated that in post demonetization period, between 09/11/2016 and
30/12/2016, appellant has deposited total cash amounting to INR 1 80.53
crores in various bank accounts maintained during this period. He further
submitted that the AO has analyzed and observed that there was a
substantial jump in the gross profit margin during the post-demonetization
period as compared to pre-demonetization period. In addition, he noted that
there are substantial jump in the gross profit of the assessee during this
period. AO further noted that during the course of search the stock as per
Page | 107
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
the books of accounts was also found short and the explanation regarding
increase in sales in this year on account of increased demand for dry fruit
was also found baseless. He further submitted that when assessee was
holding cash in hand of INR 1 13.03 crores on that date via assessee
deposited only INR 1 3.99 crores in the bank account this led the assessing
officer to conclude that the legitimate cash on by the assessee company on
the date of demonetization was only INR 1 3.99 crores. He also referred to
the average monthly cash deposit of the assessee post demonetization
period and pre-demonetization. He therefore submitted that deposit of
substantially higher amount of INR 1 80.53 crores by the assessee has
correctly been added by the learned assessing officer as income of the
assessee. He further referred to the order of the learned CIT A and stated
that the addition has correctly been confirmed by analyzing all the facts
which are material to the addition.
118. With respect to the appeal of the learned assessing officer wherein the
learned CIT A has upheld the addition to the extent of only INR 7 3.13
crores instead of addition made by the learned assessing officer of INR 1
50.53 crores he submitted that the learned CIT A has wrongly granted
relief to the extent of INR 13.99 crores and INR 63.41 crores. He submitted
that whether the amount is deposited in the currency or old currency the
addition is required to be made. The learned CIT A has held that as INR 6
3.41 crores are deposited in the new currency no addition is required to be
made in the hands of the assessee. He further submitted that merely
because the amount is credited to the profit and loss account as sales the
addition thereon couldn't be deleted.
119. We have carefully considered the rival contention and perused the orders of
the lower authorities. Admittedly assessee has deposited INR 1 80.53 crores
during the post-demonetization between 9/11/2016 to 30/12/2016. The
assessee has disclosed INR 3 0 crores under Pradhan Mantri Garib Kalyan
Yojna (PMGKY). Therefore learned AO made an addition of INR 1 50.53
crores as income of the assessee u/s 68 of the income tax act. The main
reason for such addition was that during the course of search proceedings
Page | 108
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
the stock position of the assessee was verified and it was found that the
stock as per books of account was found short. Further it was noted that
on 8/11/2018, assessee was holding cash amounting to INR 1 13.03 crores
whereas on the date of demonetiation the assessee has deposited in bank
cash of INR 1 3.99 crore only and therefore the learned assessing officer
held that assessee had actual legitimate cash of INR 13.99 crores only. The
AO further noted that average monthly cash deposit pre demonetization
period is INR 423,500,000 whereas in the month of November and
December post demonetization assessee has deposited INR 1 80.53 crores
which is disproportionate and not commensurate in with the regular pattern
of cash deposits pre-demonetization period. Such addition was challenged
before the learned CIT A. However prior to that during the course of
assessment proceedings there was a deviation proceedings based on the
appraisal report guidance given by the investigation wing. The learned
assessing officer in his deviation report stated as under:
"1. Cash deposit in bank during the period 9/11/2016 to 31st/12/2016
a) During the course of assessment, proceedings the assessee company
was asked to explain the sources of cash deposited in its bank
account during the period of 9/11/2016 to 31/12/2016. In reply,
assessee furnishes various details and documents.
On examination of details and documents and materials available in
this office, revealed that bank -wise details of cash deposits between
the periods 9/11/2016 to 30/12/2016 works out the total of INR 1
75.57 crores, whereas the addition on account of cash deposits has
been proposed of INR 1 80.53 crores on the basis of total cash
deposits made during the November and December month.
As per details of evidences filed by the assessee during the course of
assessment proceedings, it is found that during the period 9/11/2016
to 30/12/2016 the assessee company had made cash deposits as
under:
Note denomination Number of notes Total amount in Rs.
Page | 109
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
2000 (notes) 284349 568698000/
1000 (old notes) 738556 738556000/
500 (old notes) 760248 380124000/
500 (new notes) 36 18000/
100 622772 62277200/
50 52614 2630700/-
20 5105 102100/-
41800 418000/
10
Total 1752824000/
From the above chart, it is seen that out of total cash deposit of
175.28 crores, a sum of INR 634,100,000 was in respect of new notes
of INR 2000, 500 and changed old notes of Rs. hundred, 50, 20 and
INR 10 and the balance of INR 1,118,700,000 related to old currency.
The trend of cash deposit transaction was compared with immediately
preceding year i.e. financial year 2015 16, the total cash deposits
out of the sails for the same period were 17 4,00,00,000 and the real
position of earlier years is as under:-
financial year 2014-15 Financial year 2015 Financial year 2016
16 17
Cash sales Deposit Cash Deposit Cash Deposit
sales sales
237.50 242.70 412.57 428.25 633.33 634.00
b) The monthly rent of cash sales and cash deposit transactions for the
period of financial year 2014 15, 2015 16 and 2016 17 are as
under:-
Page | 110
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
month financial year Financial year Financial year
2014 15 2015 16 2016 17
Cash Deposit Cash Deposits Cash Deposits
sales sales sales
April 27.15 25.82 42.70 42.05 58.48 45.66
May 8.51 10.71 23,55 21.72 61.92 57.49
June 12.95 4.77 12.20 14.89 73.35 37.64
3.13 2.90 19.70 22.36 20.46 4.97
July
August 2.01 3.46 - 2.50 21.58 7.07
September 15.21
8.20 11.71 15.63 20.10 43.76
14.60 25.16 29.95 32.64 99.68 77.09
October
November 16.49 14.46 45.18 47.12 47.73 113.52
December 22.26 28.08 97.35 94.36 69.83 89.75
January 54.51 57.04 80.86 76.32 64.60 63.50
February 37.27 36.43 44.39 50.24 36.20 35.75
23.35 25.62 4.93 8.36 59.33 57.54
March
From the above letter, it is revealed that during the period of
October/November/December 2016 cash sale and cash deposits are
not in consonance to the preceding years. As per analysis, at the end
of September 2016 cash in hand was INR 70 .78 crores, whereas in
the preceding years such trend of cash holding has not been observed
which was less then INR 10 crores. In view of the above analysis,
there is element of suspicion that the assessee has made introduction
of unaccounted cash in its books of account in the wake of
demonetization.
However, at the same time the cash trail to the certain acceptable
extent as per the business trend of the assessee company may not be
ruled out.
Page | 111
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
c) Further in order to estimate the issue of cash holdings in the hands of
the assessee company in a particular day corresponding to bank
deposits on that day, the cashbook of the assessee for assessment
year 2017 18 was analyzed.
The data extracted from cashbook of the assessee clearly revealed that
huge amount of cash was being retained by the assessee without any
purpose. The peak cash holding was on 31/8/2016. The assessee
was holding cash exceeding INR 8 0 crores since 16/8/2016 to
6/9/2016.
It is worthwhile to mention here the factors which states on a
reasonability of the cash holding which are as under:-
i. huge amount of bank loans as cash credit facility were
outstanding, whereas the assessee was holding huge amount of
cash
ii. as per books of account, the purchases never been made in
cash, therefore, the assessee had no reason for cash holdings
for a long duration
iii. as per balance sheet as at 31/03/2013, 2014, 2015 and 2016
the cash holdings are 5.50 crores, 3.88 crores, 3.34 and INR
3.88 crores respectively
iv. further frm the analysis of cash holdings from 1/11/2016
revealed the following scenario
date opening cash cash deposit closing
balance in bank balance
1/11/2016 88.12 crores - 95.60 crores
102.39 4.45 103.90
3/11/2016
4/11/2016 103.90 4.15 99.75
5/11/2016 99.75 5.50 108.11
7/11/2016 108.05 5.0 109.24
Page | 112
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
8/11/2016 109.24 3.65 113.03
10/11/2016 113.03 13.99 98.52
11/11/2016 98.90 16.88 81.64
From the analysis of the above letter, it can be seen and
concluded that
1) 13/11/2016 cash holding was of INR 1 02.39 crores in
hand out of which only INR 4.45 crore cash has been
deposited in the bank, which suggest that legitimate cash
holding was to the extent of INR 4.45 crore
2) similarly, on 4/11/2016 to 7/11/2016 (before
demonetization) assessee has deposited small amount of
cash (in terms of volume of cash) in bank despite having
huge cash in hand and large amount of bank loans
3) on the demonetization day i.e. on 8/11/2016 closing cash
holding was INR 1 13.03 crores out of which assessee
deposited only INR 1 3.99 crores in bank on 10/11/2016
(9th being a holiday), meaning thereby, the legitimate cash
in hand was only to the extent of INR 13 .99 crores and
INR 9 9.04 crores was unaccounted cash which has been
deposited in the wake of demonetization
4) during the course of assessment proceedings the assessee
was to explain the above facts but the assessee at give
any plausible explanation
In view of the above facts and factors, it can be concluded that
i. the assessee has made introduction of its unaccounted cash to
the extent of INR 9 9.04 crores which is liable to be added to the
total income of the assessee for the assessment year 2017 18
as against proposed addition of INR 1,80.53 cr by the
investigation wing
ii. the introduction of unaccounted cash has taken place in the
garb of cash sales, which cannot be verified.
Page | 113
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
d) As per cash book study, the opening cash in hand as on 8/11/2016
was of INR 1 13.03 crores in the form of old currency
e) at the same time, as per examination of documents, it is also been
observed that during the period of January to March 2017 i.e. post-
demonetization period, total Sales was of INR 1 60 crores and cash
deposit was of INR 1 5 7 crors.
f) During the course of assessment proceedings, the assessee has
submitted that the cash deposited during demonetization also
included the sales made during Diwali, which was on 30/10/2016,
and the sale of dry fruits increases every year as compared to other
months. The version of the assessee on the above appears to be an
acceptable contention since distribution of dry fruits during Diwali is
a normal and accepted phenomena.
In view of all these facts and circumstances, the addition on account
of unaccounted cash, which were introduced in the books of accounts
of the assessee under the garb of the cash sales proceeds and
deposited in the bank account in the wake of demonetization, of INR 9
9.04 crores may be considered to be reasonable as against the
proposal for addition of INR 1 80.53 crores for the assessment year
2017 18 which appears to be exaggerated and which may lead to
high pitch assessment."
120. The Deputy Director of income tax replied as per letter dated 24/12/2018
wherein it was directed that assessee has not provided any evidence to show
that INR 6 3.41 crores was on account of sales accounted for in the books of
account, therefore, the contention that INR 6 3.41 crore deposited in respect
of new notes of INR 2000 500 and old notes of Rs. 100, 50, 20 and 10
represents accounted income of the assessee is not acceptable. Further it
was stated that no evidence was provided by the assessee to show that INR
1 3.99 crores represent legitimate cash in hand. Therefore, benefit of INR 1
3.99 crore cannot be given to the assessee. Therefore, the entire amount of
cash deposits post-demonetization remains unexplained.
Page | 114
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
121. In response to the above in the deviation meeting dated 28/12/2018 the
assessing officer stated as under:-
"a) with regard to cash sales of INR 1 75.28 crores (during 8/11/2016 to
31/12/2016) sum of INR 63 .41 crore was the new currency notes of INR
2000/ and INR 500/ denomination. In this respect, the assessee has
furnished evidence i.e. bank deposit slips to prove this. As per DDIT (INV),
unit 7 (4), Delhi White this letter dated 24/12/2018 "the contention that
INR 6 3.41 crore deposited in respect of new notes of INR 200, 500 and on
change old notes of Rs. hundred, 50, 20 and 10 represents accounted
income of the assessee is not acceptable." It is to be stated that the case
sales even in new currency and on change old notes has been duly recorded
in the books of the assessee but is not verifiable since the details of the
purchaser is not mentioned in the vouchers.
b) The entire cash deposit of 180.53 crores has been recommended in the
appraisal report primarily on of pattern of cash deposits and GP margin over
the years. It is mentioned in the appraisal report that average month cash
deposit is INR 3 5.4 crores for financial year 2015 16, INR 4 2.35 crores
for the period prior to 8/11/2016 and INR 90.26 crores during
demonetization period. Alternatively as mentioned in the deviation note
sent by the ACIT cc 28, the cash deposit on the immediately after
demonetization should be given credit out of closing cash holding on
8/11/2016. This analysis may lead to conclusion that out of 113.03 crores
held on close of 8/11/2016, INR 1 3.99 crores deposited on the working day
on bnk was genuine cash holding of the assessee. Thus INR 9 9.04 crores
was unaccounted cash of the assessee deposited during demonetization
period.
122. In response to this opinion of additional director of income tax
(investigation) unit 7, Delhi said that she would give her comments in
writing. No such comments were received.
123. In the remand report dated 18/3/2019 the learned assessing officer
submitted before the learned CIT A as under:-
Page | 115
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
"Cash deposit of INR 1 80.53 crores
During the year under consideration, the assessee has deposited
huge cache of INR 1 80.53 crores into its different bank account.
During assessment proceedings, the assessee was asked to
furnish details of cash deposits, pattern of cash deposits, and
source of cash deposits and justification of huge cash in hand.
The source of cash deposit was claimed to be cash sales made by
the assessee. Further, on perusal of pattern of cash deposits in
3 assessment years i.e. assessment year 2015 16, 2016 17
and 2017 18, it was noticed that the entire cash sales made by
the assessee, were not deposited by the assessee on the same
day but Cash in hand for its business operations. However, no
proper justification was given for keeping huge cash in hand on
day-to-day basis.
Further, as per evidence furnished by the assessee regarding
deposits of cash during demonetization period, it was found that
cash of INR 6 3.41 crore was made by the assessee in new
currency notes of INR 2000 and INR 500 and old currency notes
of Rs. hundred, INR 5 0, INR 2 0 and INR 10. The assessee has
paid INR 3 0 crores under the PMGKY capital scheme during the
post-search proceedings is declared during the search
proceedings, therefore, the benefit of INR 3 0 crores was allowed
out of INR 1 80.53 crores, accordingly INR 1,505,300,000 was
added to the total income of the assessee.
Further, there was huge difference in cash deposits of current
year and cash deposits in past 2 years."
124. When assessee approached the learned CIT A, he dealt with the whole
issue as per paragraph number 5.4 of his order as under:-
"5.4 I have considered the facts and circumstances of the case, submission
of the appellant and perused the AO's order. I find that it is not understood
as to why the cash of such a huge amount was kept by the appellant at its
premises as on 9/11/2016 as only INR 1 3.99 crore was deposited into the
Page | 116
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
bank account on 8/11/2011 but the balance of Rs. 99.04 crore was not
deposited into the bank account. The appellant has not explained the
necessity for keeping the cash in hand of such a huge amount whereas
huge amount of bank loan as cash credit facilities were outstanding.
Further, the appellant has not shown purchases in cash. It appears that
the appellant has created an artificial picture in its books of account by
which the unaccounted income was rooted through showing cash sales and
the same were shown cash in hand and shown to have deposited into the
bank account as per its convenience on the future dates. Under these
circumstances, it would be reasonable and logical that case deposited on
8/11/2011 of INR 1 3.99 crore is treated to be genuine coming out from the
case sales. On analysis of the details of case sales vis-a-vis cash deposit
into bank account for different years/periods, I am of the considered view
that INR 99.04 crores is nothing but represents the unaccounted income of
the appellant which does not represent the cash else. As far as the case
representing new currency after demonetization is concerned, I am of the
view that being new currency the same represents cash sales of INR
634,100,000. Thereby AO is directed to restrict the addition to INR 7 3.13
crores (150.53 crore - 13.99 crores -63,41,00,000) but the balance addition
is directed to be deleted."
125. We have carefully gone through the various standard operating procedures
laid down by the central board of direct taxes issued from time to time in
case of operation clean. The 1st of such instruction was issued on
21/02/2017 by instruction number 03/2017. The 2nd instruction was
issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was
in the form of a circular dated 15/11/2017 in F.No. 225/363/2017 ITA.II
and the last one dated 09/08/2019 in F.no.225/145/2019 ITA.II. though
some of the instructions/circular are after the passing of the assessment
order but it gives a hint that what kind of investigation, enquiry, evidences
that the assessing officer is required to take into consideration for the
purpose of assessing such cases. In 1 of such instructions dated
Page | 117
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
09/08/2019 speaks about the comparative analysis of cash deposits, cash
sales, month wise cash sales and cash deposits. It also provides that
whether in such cases the books of accounts have been rejected or not
where substantial evidences of wide variation be found between these
statistical analyses. Therefore, it is very important to note that whether the
case of the assessee falls into statistical analysis, which suggests that there
is a booking of sales, which is non-existent and thereby unaccounted money
of the assessee in old currency notes (SBN) have been pumped into as
unaccounted money. The instruction dated 21/02/2017 that the assessing
officer basic relevant information e.g. monthly sales summary, relevant
stock register entries and bank statement to identify cases with preliminary
suspicion of back dating of cash and is or fictitious sales. The instruction is
also suggested some indicators for suspicion of back dating of cash else or
fictitious sales where there is an abnormal jump in the cases during the
period November to December 2016 as compared to earlier year. It also
suggested that abnormal jump in percentage ofcash trails to on identifiable
persons as compared to earlier histories will also give some indication for
suspicion. Non-availability of stock or attempts to inflate stock by
introducing fictitious purchases is also some indication for suspicion of
fictitious sales. Transfer of deposit of cash to another account or entity,
which is not in line with the earlier history. Therefore, it is important to
examine whether the case of the assessee falls into these parameters are
not.
126. We have analyzed the figures of sales and cash deposit for the last two
years as under :-
Month F Y 2014-15 F Y 2015-16 F Y 2016-17
Jump
Cash Cash Cash Jump in % Jump in Cash cash In % Jump
Cash sales Deposit Sales Deposit sales sales sales Deposit sales in sales
April 27.15 25.82 42.70 42.05 15.55 57.27 58.48 45.66 15.78 36.96
May 8.51 10.71 23.55 21.72 15.04 176.73 61.92 57.49 38.37 162.93
June 12.95 4.77 12.20 14.89 -0.75 -5.79 73.35 37.64 61.15 501.23
July 3.13 2.90 19.70 22.36 16.57 529.39 20.46 4.97 0.76 3.86
August 2.01 3.46 0.00 2.50 -2.01 -100.00 21.58 7.07 21.58 0.00
September 15.21 8.20 11.71 15.63 -3.50 -23.01 20.10 43.76 8.39 71.65
Page | 118
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
October 14.60 25.16 29.95 32.64 15.35 105.14 99.68 77.09 69.73 232.82
November 16.49 14.46 45.18 47.12 28.69 173.98 47.73 113.52 2.55 5.64
December 22.26 28.08 97.35 94.36 75.09 337.33 69.83 89.75 -27.52 -28.27
January 54.51 57.04 80.86 76.32 26.35 48.34 64.60 63.50 -16.26 -20.11
February 37.27 36.43 44.39 50.24 7.12 19.10 36.20 35.75 -8.19 -18.45
March 23.35 25.62 4.93 8.36 -18.42 -78.89 59.93 57.54 55.00 1115.62
Total 237.44 242.65 412.52 428.19 175.08 73.74 633.86 633.74 221.34 53.66
Increase in
sales (%) 173.74 153.66
Sales in
November 16.49 45.18 28.69 173.98 47.73 47.73 105.64
sales in
December 22.26 97.35 75.09 337.33 69.83 69.83 71.73
i. On analyses of sales, it is apparent that sales in F Y 2014-15 were
Rs 237.44 Crores, which increased to Rs. 412.52 crores in F Y 2015-
16. The jump in sales is Rs. 175.08 crores, which is 73 %,
compared to earlier years. The sales in F Y 2015-16 of Rs 412.52 Cr
Increased to Rs 633.74 cr in F Y 2016-17, which resulted in to jump
of Rs. 221.34 Cr resulting in to increase by 53.66 %. The % increase
in sales in F Y 2105-16 compared to F Y 2014-15 of 73.74 % and
% increase in sales in FY 2016-17 is only 53.66 %. Thus in the year
of demonetization % increase in sales in less than earlier year.
Growth in sales compared to earlier two years in case of the assessee
shows similar trend. Thus, it cannot be said that assessee has
booked non-existing sales in its books post demonetization.
ii. Sales in November 2014 was Rs 16.49 Crores where as sales in
November 2015 was Rs 45.18 crores, Thus resulting in to jump in
sales of Rs. 28.69 Cr. The Jump In sales of November 2015 from Rs
45.18 crores to sales in November 2016 of Rs. 47.73 crores was
meager sum of Rs. 2.55 crores. Comparative Jump sales in November
2015 was 173 % where as comparative jump in sales of November
2016 of Rs. 47.73 Crores to sales of November 2015 of Rs 45.18
Crore was meager 5.64 %. Thus compared to earlier years there is
no substantial increase in sales of November 2016 (Post
demonetization). There is no higher booking of sales by the assessee
Page | 119
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
compared to earlier years which can justify the stand of the revenue
that assessee has booked non existing sales in November 2016.
iii. Sales in December 2014 was Rs 22.26 Crores where as sales in
December 2015 was Rs 97.35 crores, Thus resulting in to jump in
sales of Rs. 75.09 Cr. The decrease in sales of December 2015 from
Rs 97.35 crores to sales in December 2016 of Rs. 69.83 crores was
decrease of Rs 27.52 crores. Comparative Jump in sales in
December 2015 was 337 % where as comparative Downfall in sales
of December 2016 of Rs. 69.83 Crores to sales of December 2015 of
Rs 97.35 Crore was downfall of 28.26 %. Thus compared to earlier
years there is substantial down fall in sales of December 2016
(Post demonetization). Thus, it cannot be said that trend of sales in
this year post demonetization, assessee has booked higher sales.
iv. On analyses of cash sales to cash deposit ratio it was noted that in
financial year 2014 15 assessee recorded cash sales of INR 237.44
crores against which the assessee deposited INR 242.65 crores.
Therefore the amount of cash deposit in the bank account is
equivalent to the cash is recorded by the assessee for the year subject
to a minor difference. For financial year 2015 16 assessee recorded
cash sales of Rs. 412.52 crores against which the cash deposit is INR
4 28.19 crores. Therefore, for financial year 2015 16 also the cash
deposit is almost equal to the amount of cash sales recorded by the
assessee. For financial year 2016 17 assessee recorded cash sales
of Rs. 633.86 Crores against which assessee deposited cash n bank
account of Rs. 633.74 crores. For this year, in addition, amount of
cash deposit is less than cash is recorded by the assessee. Thus, it is
apparent that whatever cash sales recorded by the assessee for the
year is deposited equal amount of cash in its bank account.
v. On analysis of the month wise sales it is apparent that in the month
of May, June and October there is a substantial jump in the sales
compared to earlier year. However, the revenue has not questioned it.
Page | 120
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
It is also not the case of the revenue that by backdating the entries in
its accounting software it has increased the sales fictitiously.
vi. Further jump in sales in the month of March 2017 compared to same
month in earlier year shows phenomenal jump of more than thousand
percent. It has been accepted by the revenue. Therefore, it clearly
suggests that there is a growth in the business of the assessee beyond
pre demonetization and post demonetization.
vii. It is not the case of the revenue that assessee has not shown the
relevant stock register before the assessing officer. The assessee has
maintained the complete stock tally in its accounting software. Such
books of accounts are audited, quantitative records produced before
the tax auditor, such quantitative records are certified by tax audit
and no questions have been raised by the assessing officer. Thus, it
cannot be said that the figures of sales and purchases are not
supported by the quantity details.
viii. Another ground cited by the A.O in support of the impugned addition is
that the stock position was short by nearly Rs. 450 crores as against
the stock recorded in the books of account. While alleging so, the A.O
has completely overlooked the fact that the godown of the Assessee at
Agson Global Logistics Park, Sonepat, Haryana wherein a part of the
stock of the Assessee was stored was not covered under the search
action. The stock lying at the said premises was not taken into
consideration while arriving at the physical stock as on the date of
search, thus resulting in the alleged difference of Rs. 450 crores.
Though originally at the time of recording of the statement of the
managing director on the date of such there were certain
discrepancies in the stock however later on it is stated by the learned
authorised representative that they were reconciled after inclusion of
the stock at Sonipat and ultimately there was no discrepancy in the
physical stock found during the course of search as well as stock at
Gurgaon at Sonipat with the book stock. There was thus actually no
difference in the stock physically lying with the Assessee vis--vis the
Page | 121
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
stock as per books of accounts as on the date of search. This
submission of the assessee is not controverted by the learned
assessing officer as well as the learned CIT DR. It was not also shown
to us that there was any discrepancy in the physical stock found
during the course of search and stock as per the books of account if
the stock at the Sonipat go down was taken into consideration. There
is no whisper about the alleged shortage of stock during the
assessment proceedings, deviation proceedings and also in remand
proceedings. During assessment proceedings, we also directed AO
to show the shortage of stock of Rs 450 Crore, which is also the
basis of addition along with the panchanama and response to
explanation of assessee about stock lying at godown at Sonipat
as stated by the assessee. There is no reference in any of the
statements recorded by the investigation wing with respect to such
shortage of stock. Even in the appraisal report produced before us
there is no such finding about shortage of stock. Even in the
submissions made by the learned CIT DR there is no reference made
to such shortage of stock during the course of search proceedings.
There is no addition in any of the assessment year including the
search year with respect to any such shortage of stock. No
quantitative details of stock physically verified as well as the book
stock found by the search party were shown to us, which suggested
that there is a shortage of stock after considering stock lying at
Sonipat.
ix. With respect to the variation in the gross profit assessee submitted
before the assessing officer wide letter dated 20/11/2018 in reply to
point number 7 which is placed at page number 325 of the paper
book 1 wherein it is stated that that at the time of search the tally
data was not finalized and therefore various adjustment like
depreciation, interest and provisions for expenses were made after the
close of the financial year. Therefore, it was submitted that gross
Page | 122
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
profit shown by those tally data could not be compared with the data
of audited accounts of earlier years. Assessee also submitted that if
the GP ratio of all the years including financial year 2016 17
(Assessment Year 2017 18) is more or less same and there was no
variation in the gross profit ratio. Therefore, comparison of the gross
profit ratio with unaudited data of the current year with the audited
data of the previous year cannot be made. However, there was a
categorical statement of the assessee that if the audited accounts of
the current year with the audited accounts of the previous year are
compared there is no deviation in the gross profit ratio declared by the
assessee. Subsequent to this submission, there is no further enquiry
by the assessing officer. Assessee submitted that gross profit for
assessment year 2015 16 is 6.41%, for assessment year, 2016 17
is 4.19% and for assessment year, 2017 18 it is 5.85%. The
assessee also compared the net profit ratio, which is 0.72%, 0.81%
and 1.35% comparatively for all these 3 years. Therefore, it was
submitted that there is neither substantial downfall of substantial
increase in the gross profit and net profit compared to earlier years.
x. Further as per letter dated 17/12/2018, for the impugned assessment
year the assessee submitted the details of the closing stock, list of
debtors, details of purchses and sales party wise for the year, list of
creditors, bank statement copies as well as the books of accounts.
Assessee also produced the copy of the sales invoices as well as
purchase invoices, however there are no instances stated before us or
in the assessment order about unidentified buyers. Therefore, it
cannot be said that assessee has purchased goods or sold goods to
unidentified parties.
xi. The assessee has also obtained the proceedings it for assessment year
2017 18 under the right to information act. This shows that on
17/11/2018 where assessee submitted cashbook along with the
statement of bank account before the assessing officer. On
20/11/2018, assessee submitted the details to specific questions
Page | 123
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
raised by the AO. On 26/11/2018 assessee submitted complete
details on cash else on deposits. On 10/12/2018, assessee submitted
books of accounts along with documents and summary of details of
sales and purchases, which were examined with the books of
accounts of the assessee along with the seized material. On
20/12/2018 the AO prepared the detailed deviation not which has
already been discussed herein above. On 24/12/2018, the reply was
received from the investigation wing and on 30/12/2018 the
assessing officer passed the order u/s 153A read with section 143 (3)
of the act. Thus, on reading of these proceedings it, it is amply clear
that the AO did not make any enquiry on the material submitted by
the assessee. He merely proceeded on statistical analysis, which is
also partial as stated by us in earlier paragraph, to make the addition
on account of cash deposits. He neither found any back dating of the
entries, evidence of bogus sales, evidence of bogus purchases, and
non-existing cash in the books of account. In the deviation report the
assessing officer has also stated that there is an unreasonable 80 of
the cash holding, but it was merely a suspicion expressed by the AO
based on which the addition was made. In paragraph number 1 (B) of
the deviation report dated 20/12/2018, the learned AO himself stated
that there is an element of suspicion that the assessee has made
introduction of unaccounted cash in its books of accounts in the wake
of Demonetization. However, he hastened to add that at the same
time the Cash sales to the certain acceptable extent as per the
business trend of the assessee company could not be ruled out. He
neither made any attempt by making independent enquiry is to
strengthen his suspicion into sound fact, nor he accepted the
explanation of the assessee. He simply proceeded to make the
addition. As per our analysis of the cash sales, which is as per the
business trend of the assessee company only.
Page | 124
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
xii. Further, it is not the case of the revenue that sales booked by the
assessee in the newly introduced currency are bogus. It is accepted
by the AO in deviation report that such addition, which is on account
of sale in the new currency, cannot be added.
xiii. With respect to the opening balance of INR 1 3.99 crores the learned
assessing officer himself agreed during the deviation proceeding that
such addition cannot be made. When such holding of cash as per the
books of accounts was found correct, there is no reason to not to
consider the resulting cash balance generated from such cash sales.
xiv. With respect to the deposit of the cash on hand with the various
bank, the explanation of the assessee that no such bank was
accepting such a huge cash at one go and therefore assessee had to
deposit the cash in various banks. The assessee also submitted that
that in the same bank assessee has deposited cash in its 2 different
branches which itself proves that the banks were not accepting such a
huge deposit. Even otherwise, it was submitted correctly that merely
because the cash holding as on 8/11/2016 was not deposited
immediately cannot lead to conclusion that assessee did not have that
cash. It can merely lead to a suspicion but based on this addition
cannot be made without making further enquiry and conclusively
proving that assessee did not have that kind of cash available with it.
Even otherwise, if the assessee had to introduce his unaccounted
money he would have deposited it at the first instance.
xv. Assessee also filed its VAT returns, which are not found to be in
variance with the accounting and tax records. Therefore, it cannot
be substantiated that the assessee has backdated the transactions of
the sale.
xvi. The another claim of the learned assessing officer is that assessee has
huge cash in hand but a large amount of bank loans are outstanding
and therefore, the claim of the assessee that it was having a huge
cash is unacceptable. On careful analysis of the balance sheet of the
assessee company for the year ended on 31st of March 2017 it is
Page | 125
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
apparent that assessee has long-term borrowing in the form of
secured loans, which are Term loan. These loans are payable at
regular installments and have the commitment charges. Therefore, it
could not have been paid by the assessee. The assessee further
referred to note number 6 where short-term borrowings are explained.
It is submitted that the most of the outstanding is bills payable under
letter of undertaking and cash credit, which are backed by the closing
stock of the assessee. Naturally, these funds are available to the
assessee at a lesser rate of interest. Certain funds are also backed by
hundred percent margins of fixed deposit receipts, which has very
small amount of interest payout. The other advances received from
banks in the form of packing credit are with respect to the export of
garments. Therefore it was submitted that the funds available to the
assessee are either repayable on a predefined term and or are having
very small rate of interest. Therefore, it cannot have any relationship
with the holding of cash on hand.
xvii. Now the cardinal issue that requires to be discussed is that the
assessee is maintaining its books of account in Tally software. It also
maintains its stock register in that software. The various pages of the
appraisal report and the printouts found during the course of search
shows that assessee maintains the books of account of the large
number of companies of its group or asociates in the tally software.
At page number 123 of 198 of part a of appraisal report, at the time of
the search the gross profit margin of the assessee was 4 6% only. It
was also stated that since the figures reported in the audited balance
sheet and ITR are not matching with the tally records, the
authenticity of the books of accounts of the assessee company is
doubtful. It also recorded that the debt or in respect of transaction's
voluminous, there are large number of bank accounts, use cases
thereby making it complex. Thus the appraisal report suggested the
assessing officer to consider getting the books of accounts of the
assessee company audited under section 142 (2A) of the act. The
Page | 126
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
issue also arose during the course of assessment that whether the
sales of dry fruits by the assessee are backdated or not. To identify
such backdating of the transaction the AO should have got the
accounts of the assessee audited u/s 142 (2A) of the act as well as the
forensic audit. In absence of these actions, it is impossible for the
assessing officer to note that whether the assessee has backdated the
transaction in the tally software or not. The tally software runs on
ODBC and rarely one finds the audit Trail of the transactions, which
are altered. If the assessee maintains its books of accounts on tally
software and back dates the transactions in that particular software,
it is impossible to trace them and find out whether they are backdated
or not. The only option left with the revenue is to get the accounts of
such assessee is subject to forensic audit to know that whether there
is a back dating of such accounts or manipulation of the accounts or
not. In absence of this, it is impossible to catch hold of an assessee
who can manipulate his accounts to suit his requirement. In many
of the accounting, software there is an absence of any audit Trail and
they can be easily erased, altered, backdated without any evidence or
trace. The time has come to also look into usability of such
accounting software by the regulator for filing the tax and financial
results. Either this software's should be compliant of the audit trail
or they may be regulated to provide such audit trails.
xviii. Even otherwise as per retraction letter dated 24/3/2017 of the
managing director of the company which was submitted on
31/3/2017 where assessee has revised its disclosure from INR 5 0
crores to INR 3 0 crores under PMGKY. There is no whisper of further
recording the statement of the managing director to show how the
original disclosure was incorrect. In fact, revenue accepted the
revised disclosure made by the managing director.
127. In view of above facts the additions sustained by the learned CIT A of INR
73 .13 crores are deleted thus ground number 5 of the appeal of the
Page | 127
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
assessee for assessment year 2017 18 is allowed. Consequently, ground
number 1 of the appeal of the learned assessing officer for the same
assessment year 2017 18 is dismissed.
128. Accordingly, all these appeals are disposed off as 6 appeals of the
assessee are partly allowed and 6 appeals of the ld AO are dismissed.
Order pronounced in the open court on 31 /10/2019.
-Sd/- -Sd/-
Sd/- Sd/-
(BHAVNESH SAINI) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 31 /10/2019
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
Page | 128
Agson Global Pvt. Ltd Vs. ACIT,
ITA No. 3741to 3746/Del/2019 (assessee)
ITA No. 5264 to 5269/Del/2019 (Revenue)
(Assessment Year: 2012-13 to 2017-18)
Date of dictation
Date on which the typed draft is placed before the
dictating member
Date on which the typed draft is placed before the other
member
Date on which the approved draft comes to the Sr. PS/
PS
Date on which the fair order is placed before the
dictating member for pronouncement
Date on which the fair order comes back to the Sr. PS/
PS
Date on which the final order is uploaded on the website
of ITAT
date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant
Registrar for signature on the order
Date of dispatch of the order
Page | 129
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