Porwal Auto Components Ltd.

AY 2017-18

Income and Loss Determination Proposal (ILDP)

1. Reasons for selection of the Case and Type of Case and background facts:-

Relevant Order u/s. 148A(d) of the Income Tax Act, 1961 (to be read as the Act) is reproduced:

There was credible information in the case of the assessee received from DCIT(Central-25), Delhi. As per
the information available, search and seizure action u/s 132 of the I.T. Act was conducted in JBM Group
of Companies, its directors and related parties. During the search action, evidences indicating under
invoicing of scrap sales as well as suppression of the quantity of scrap sales by JBM Group of Companies
were found and seized. The unaccounted cash generated as a result of under invoicing and suppression
of scrap sales was being received by Sri Prasahesh Arya, Chief General Manager of the Group. On
perusal of the documents, it was found that various scrap dealers purchased scrap from JBM Group of
Companies. The scrap dealers made unaccounted cash payments against purchases of scrap from
different JBM Group Companies. The evidences of collection of on money in cash from various scrap
dealers was gathered and established. There is further information available that the assessee also
made unrecorded purchase of scrap of Rs.2,05,23,616/- through cash payments not disclosed in books
during the period relevant to A.Y.2017-18.

2. In view of the above, the then Assessing Officer formed reason to believe that the income to the
tune of Rs.2,05,23,616/- escaped assessment. Therefore, notice under section 148 of the Income Tax
Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2017-18 was issued on
29/06/2021 in this case and served upon the assessee.

3. In compliance to the directions contained in the judgment dated 04/05/2022 of the Hon’ble
Supreme Court in Civil Appeal No. 3005/2022 in the case of Union of India Vs. Ashish Agarwal (with
various other civil appeals) (2022 SCC Online SC 543), the information and material based on which the
aforesaid notice u/s 148 of the Act was issued, was provided to the assessee through the letter dated
23/05/2022 via email, requesting the assessee to submit its reply within the stipulated time of two
weeks. The email was duly delivered.

4. Finally, the assessee submitted reply on 07/06/2022 which is reproduced here in under:
5. The assessee’s reply has carefully been considered. The assessee has contended that its name or
its director’s, manager’s or any employee’s name is not appearing in the statement of Shri Prashesh
Arya. In this regard, it is stated that in the said statement, modus operandi of JBM Group and broad
facts of the case have been discussed. It is not necessary that each and every beneficiary should find
place in the said statement. The assessee has further contended that in the various documents provided
to it, the assessee’s name is not appearing. In this regard, it is stated that in the course of the search, on
JBM Group of companies, huge amount of soft and hard documents was found and seized. While
making analysis of the same, list of beneficiaries along with details of benefits advance has been
prepared. Out of the same, the details pertaining to the assessee has already been provided to it. Again,
it is not necessary that the assessee’s name should find place on each and every document. The
assessee has also contended that whatever scrap it had purchased is in agreement with its books of
accounts. However, the assessee could furnish no documentary evidence in support of its contention. In
complete absence of any support, this contention remains unsubstantiated. The affidavit of its CFO, as
furnished by the assessee, is a self-serving document and has no independent evidentiary value.
6. From the discussions supra, it is clear that the assessee’s entire defense fails. Therefore, I am
satisfied that the income to the tune of Rs.2,05,23,616/- escaped assessment in the instant case. In view
of the detailed discussion made in above paras, on the basis of the information/data/material available
on record, I have reason to believe that it is a fit case to issue notice u/s 148 of the Act.

7. This order is being passed with the prior approval of the Pr. Chief Commissioner of Income Tax -
1, Indore.

2. Details of opportunities given:

Type of Date of Date of Response Date of Response Remarks if

notice/commu notice/com compliance of the response if type any.
nication munication given assessee received (Full/part/adj
received/ ournment)
not
received
148 20.07.2022 30 days Received 10/08/2022 full ROI filed on
10/08/2022
142(1) 16.01.2023 31.01.2023 Received 13.02.2023
143(2) 17.01.2023 01.02.2023
142(1) 11.04.2023 17.04.2023 Received 17.04.2023 Adjournment
request
Letter to the 17.04.2023 21.04.2023 Received 20.04.2023 Adjournment
asessee request
Letter to the 20.04.2023 26.04.2023 Received 25.04.2023 Full
assessee
SCN 13.05.2023 18.05.2023 Received 17.05.2023 Full Requested for
VC
SCN for VC 19.05.2023 22.05.2023 VC 25.05.2023 full
attended

3. Variation proposed -

3.1 Complete description of issues involved (issue wise)

A search and seizure action in the case of JBM Group companies was conducted. During the course of the above
proceedings, incriminating documents were found and seized. The Investigation Wing has made extensive
investigation of the case and it was found that JBM group has indulged in under invoicing of their sales and also
suppression of scrap sales. In this connection, the statement was recorded during the course of Search Action u/s
132(1) of the Income Tax Act, 1961 of Shri Prasahesh Arya, the Chief General Manager of JBM Group, who has
confirmed the under invoicing of sales and unrecorded quantity of sales. He has further confirmed that these
under invoicing and unrecorded transactions were taken in cash only, which were not accounted for in the regular
books of accounts of JBM Auto Ltd. Further, assessments were completed under section 153A of the Act in the
case of JBM Group of companies, wherein the percentage of under billing is established and determined at 20%
and the unreported scrap sale is established and determined at 12%. During the course of assessment proceedings
under section 153A of the Act, the Asstt. Commissioner of Income-tax Central Circle-25, New Delhi, has quantified
the unrecorded sales and under invoiced sales in the case of JBM Auto Ltd. and have passed on the information,
vide letter dated 03.06.2020 enclosing the list of various scrap vendors with whom JBM group has made such
transactions. Verification of the list shows the name of M/s. Porwal Auto Components Limited also. From the list it
was evident that assessee have purchased steel scrap from JBM Auto Limited. Relevant list for FY 2016-17 is
reproduced here in under (Table-1):

88% QTY Invoiced            

Under
Unrecorde Under Invoicing TOTAL
Invoiced d qnty. @ billing @ Actual Value Unrecorded ADDITION
QTY Sale value Rate 12% Actual Qty 20% Rate (Rate) Sales(Qty) Rate + Qty
₹
2,24,420.00 40,95,665 18.25 30,602.73 2,55,022.73 4.56 22.81 10,23,916 6,98,125 17,22,041

₹
2,90,530.00 52,31,485 18.01 39,617.73 3,30,147.73 4.50 22.51 13,07,871 8,91,730 21,99,602

₹
2,59,550.00 45,04,560 17.36 35,393.18 2,94,943.18 4.34 21.69 11,26,140 7,67,823 18,93,963

₹
2,32,530.00 40,11,143 17.25 31,708.64 2,64,238.64 4.31 21.56 10,02,786 6,83,717 16,86,503

₹
2,35,120.00 39,46,476 16.78 32,061.82 2,67,181.82 4.20 20.98 9,86,619 6,72,695 16,59,314

₹
2,50,230.00 41,91,353 16.75 34,122.27 2,84,352.27 4.19 20.94 10,47,838 7,14,435 17,62,273

₹
2,23,970.00 40,31,460 18.00 30,541.36 2,54,511.36 4.50 22.50 10,07,865 6,87,181 16,95,046

₹
3,02,720.00 52,55,050 17.36 41,280.00 3,44,000.00 4.34 21.70 13,13,763 8,95,747 22,09,510

₹
1,40,520.00 23,88,840 17.00 19,161.82 1,59,681.82 4.25 21.25 5,97,210 4,07,189 10,04,399

₹
1,80,020.00 32,40,360 18.00 24,548.18 2,04,568.18 4.50 22.50 8,10,090 5,52,334 13,62,424

₹
2,28,870.00 41,08,810 17.95 31,209.55 2,60,079.55 4.49 22.44 10,27,203 7,00,365 17,27,568

₹
2,11,540.00 38,07,720 18.00 28,846.36 2,40,386.36 4.50 22.50 9,51,930 6,49,043 16,00,973
               12203230 8320384 20523615

A speaking Order under section 148A(d) of the Act has been passed by the concerned Jurisdictional
Assessing Officer on 19.07.2022, after providing an opportunity under section 148A(b) of the Act. After
reopening the assessment, case was referred to National Faceless Assessment Centre to conduct the
faceless assessment.

3.2 Synopsis of all submissions of the assessee relating to the issue and indicating the dates of
submission.

In response to the notice u/s. 148 of the Act, the assessee filed the return of income on 10.08.2022.
Subsequently, assessee has submitted details and documents in compliance to the notices u/s. 142(1) issued
time to time.
3.3 Summary of information/evidence collected which proposed to be used against it (attach
documents if required).
During the assessment proceedings, in response to the notice u/s. 142(1) of the Act dated
20.04.2023, the assessee submitted details of scrap purchased from various vendors, classifying the
variety/type of scrap.

3.4 Variations proposed on the basis of inference drawn (specify the basis of inference and quantify the
variation proposed, if possible).
On the basis of the above credible information and party-wise scrap purchase list, especially
item - M.S.Scrap, submitted during the assessment proceedings u/s. 147 of the Act has been
analyzed. It is observed from the list that you have executed purchase transactions with M/s
JBM Auto Ltd, total amounting to Rs.5,76,60,263.48. In view of the above information, the
corresponding sales in the books of JBM Auto Ltd in your case are tabulated as under: (Table-2)

  In the books of M/s JBM Auto Ltd In the books of M/s. Porwal Auto Components Ltd Remark

Month Invoiced Qty Rate Sale Value Invoiced Qty Rate Sale Value difference
1 2 3 4 5 6 7 8

Apr-16 2,24,420.00 ₹ 18.25 40,95,665.00 2,24,420.00 ₹ 21.56 48,38,004.33 742339

May-16 2,90,530.00 ₹ 18.01 52,31,485.00 2,90,530.00 ₹ 21.27 61,79,691.69 948207

Jun-16 2,59,550.00 ₹ 17.36 45,04,560.00 2,59,550.00 ₹ 20.50 53,21,011.49 816451

Jul-16 2,32,530.00 ₹ 17.25 40,11,142.50 2,32,530.00 ₹ 20.38 47,38,162.06 727019

Aug-16 2,35,120.00 ₹ 16.78 39,46,476.25 2,35,120.00 ₹ 19.83 46,61,775.06 715299

Sep-16 2,50,230.00 ₹ 16.75 41,91,352.50 2,50,230.00 ₹ 19.79 49,51,035.15 759682

Oct-16 2,23,970.00 ₹ 18.00 40,31,460.00 2,23,970.00 ₹ 21.26 47,62,162.14 730702

 Nov-16 3,02,720.00 ₹ 17.36 52,55,050.00 3,02,720.00 ₹ 20.51 62,07,527.84 952478

Dec-16 1,40,520.00 ₹ 17.00 23,88,840.00 1,40,520.00 ₹ 20.08 28,21,817.26 432977

Jan-17 1,80,020.00 ₹ 18.00 32,40,360.00 1,80,020.00 ₹ 21.26 38,27,675.24 587315

Feb-17 2,28,870.00 ₹ 17.95 41,08,810.00 2,28,870.00 ₹ 21.21 48,53,531.79 744722

Mar-17 2,11,540.00 ₹ 18.00 38,07,720.00 2,11,540.00 ₹ 21.26 44,97,869.33 690149.33

Total 27,80,020.00 ₹ 17.56 4,88,12,921.00 27,80,020.00 ₹ 20.74 5,76,60,263.48 8847340.33

From the above, it is apparent that the company M/s. JBM Auto Ltd has suppressed sales. Your contention is not
tenable as the amounts are calculated scientifically and on factual basis. The working prepared by the department
is found to be on credible information of merit of the facts discovered. Further, under invoicing and unrecorded
purchases have been found and established in the assessment order for assessment year 2018-19 and accordingly
assessment in your case has also been completed making addition in this regard.
Accordingly, the assessee was show cause to explain as to why the under invoiced purchases and
unrecorded purchases made from M/s. JBM Auto Ltd as worked out in the above Table-2 amounting to Rs.
2,05,23,616/- should not be treated as unaccounted and unexplained purchases for the year under consideration
by invoking section 69C of the Income Tax Act, 1961.

3.5 Synopsis of the reply of the assessee to SCN and additional SCN(if any)
Vide the above show cause notice, assessee was given an opportunity to accept the proposed variation;
or to file written reply objecting to the proposed variation; or If required, in addition to filing written
reply may request for personal hearing so as to make oral submissions or present its case. In response
the assessee objected to the proposed variation and filed written submission and requested for personal
hearing through video conference. As requested, video conference was conducted on 22.05.2023
discussing the issues involved and assessee was asked to submit further documents as claimed.

3.6 Summary of information evidence collected after SCN (if any).

As discussed during the video conference, the assessee vide letter dated 23.05.2023 submitted gist of
submission of arguments in compliance to the proposed variation with copy of invoices raised by each
vendor for sale of MS scrap to the assessee company and party wise break up of purchases of scrap if
different variety viz. MS Scrap, H R Trimming, SG Pipe scrap , Boaring scrap and M S Scrap punching, PIG
Iron .

4. Point-wise rebuttal of reply of the assessee including analysis of any case law relied upon.

4.1 In response to the notice u/s. 148, the assessee filed return of income on
10.08.2022 declaring total income at Rs.1,50,06,480/- as against nil income declared
u/s. 139(1) of the Act and revised return. Book profit u/s. 115JB is claimed at
Rs.44912926/-.

4.2 The assessee is a Public Limited Company engaged in manufacturing of

Automobile and Auto parts. During the assessment proceedings the assessee
submitted the details and documents in response to the notices u/s. 142(1) and show
cause notice. The reply submitted by the assessee is considered in details.

4.3 In its reply the assessee has objected to the order passed u/s. 148A(d) of the
Act and notice issued u/s. 148 of the Act. As per the provisions of section 144B(3) of
the Act, the Faceless Assessing Officer has only the power to perform the function of
making assessment. Once the assessment is reopened by issuance of notice under
section 148 of the Act, the Faceless Assessing Officer has no jurisdiction to re-visit the
reasons for reopening proceedings.

4.4 As explained earlier, there was search and seizure action u/s. 132 of the
Income Tax Act, 1961 carried out in the case of JBM group of companies, its directors
and related parties on 05.10.2017. Incriminating documents were found and seized
during the course of the search, which has been analyzed and investigated by the
Investigation Wing of the department. Subsequently, the outcome of the investigation
was conveyed to the concerned Assessing Officer who completed the assessment u/s.
153A of the Act in this Group in the month of December 2019. While completing the
assessment, the AO of JBM Group observed certain transactions with various scrap
vendors, which had financial transactions with JBM Group of concerns. It was found
that the scrap sale by JBM group was under invoiced and also sold scrap unrecorded
in its books, consideration for which was taken in cash. Accordingly, a list giving
details regarding scrap sales made by different JBM Group companies to different
scrap vendors viz. name, address, PAN and jurisdictional AO of the scrap vendor ,
month and year of sale of scrap, invoiced quantity and value, extent and amount of
under invoicing and suppression of the quantity of scrap sale etc. was prepared. It
was seen that the assessee is one of the scrap vendors and therefore the ACIT, Central
Circle 25 has passed on the information relating to the assessee conveying that there
are transactions between M/s. JBM Auto Ltd. and the assessee, whereby unrecorded
and under invoiced sales took place and payment of such transactions are in cash and
involves tax implications as the same were out of the books and the transactions were
not recorded in their regular books of account. On the basis of such credible
information, the case was reopened after following the procedure under section 148A
of the Income-tax Act and notice was issued under section under section 148 of the
Income-tax Act.
4.5 Subsequently, Notices under section 142(1) were issued on various dates as
tabulated above. After analyzing the submissions of the assessee and the information
available with the department, Show Cause Notice was issued to the assessee on
13.05.2023 seeking compliance by 18.05.2023 and asking as to why variation
proposed should not be made to the total income as discussed in detail in the Show
Cause Notice, particularly in view of the fact that similar issue was analysed and
additions made during the assessment proceedings for AY 2018-19.

4.6 In response to the above notices, the assessee furnished written submission
dated 17.05.2023 and 24.05.2023 and also attended the video conference by the AR,
Shri Prakash Jain on behalf of the assessee and explained the case of the assessee.
The main contention of the assessee was that there was no mentioning of the
assessee’s name in the documents which were seized. Even during the video
conference, the representative of the assessee stated and raised the issue of not having
the name of the assessee company in the seized materials and on the documents on
which statement of Shri Prasahesh Arya was recorded, and not discussed much on the
on the issue related to the unrecorded purchase and under billing raised by the
department.
4.7 The submission filed by the assessee is perused and considered, but cannot be
accepted in view of the following discussions:
During the course of search proceedings and thereafter during the course of
assessment proceedings also, extensive investigation was carried out in the case of the
JBM Group concerns by the Investigation Wing of the department and also the
concerned Assessing Officer as discussed above. Investigation by these authorities,
distinctly and conspicuously brought out the modus operandi adopted thereby large
scale cash transactions were being carried out by way of under invoicing and un-
recording of the sales by the JBM Group concerns. As explained in the foregoing
paragraphs, the JBM group collects cash by under invoicing its sales at the rate of
20% and also by un-recording its sales quantity at the rate of 12%. This information
has been passed on by the Assessing Officer enclosing therewith the list of persons
and their transactions, the relevant part of which is as follows:
“During the course of search, evidences indicating under invoicing of scrap sale sas well as
suppression of the quantity of scrap sales by JBM Group companies have been found and seized.
The unaccounted cash generated as a result of under invoicing and suppression of scrap sales
was being received by Sh. Prasahesh Arya, Chief General Manager of the Group. As per the
details available with this office, various scrap dealers assessed in different jurisdictions, have
purchased scrap from different JBM Group companies during the period from FY 2007-08 to FY
2017-18. According to the modus operandi discussed in detail by Shri Prasahesh Arya in his
statements under section 132(4) of the I T Act, the scrap dealers had made unaccounted cash
payments against purchases of scrap from different JBM Group companies during the impugned
period. The evidences of collection of ‘on money’ in cash by Shri Prasahesh Arya have been
scanned, pasted, confronted and discussed in his statements recorded under section 132(4) of
the I T Act. Soft copy of the statement of Shri Prasahesh Arya is attached herewith

The details regarding scrap sales made by different JBM Group companies to different scrap
vendors viz. name, address, PAN and jurisdictional AO of the scrap Vendor, month and year of
sale of scrap, invoiced quantity and value, extent and amount of under invoicing and suppression
of the quantity of scrap sale etc. have been given in a separate excel sheet attached herewith.”

4.8 From the above, it is evident and established that the JBM Group is involved in
cash generating off the book transactions during their business by way of un-
recording of quantity at the rate of 12% and under invoicing of their bills at the rate of
20% as recorded in the excel sheet annexed to the information.
4.9 In this regard the assessee’s contention was that the name of the assessee or
the unrecorded sale of scrap and under invoicing of scrap in respect of assessee is not
stated in the statement recorded. It was submitted during the Video Conference also
that there is no name or amount or details in respect of assessee in the documents
provided to the assessee and the excel sheet provided is not signed.

4.10 It may be clarified here that the statement recorded on 05.12.2017 of Shri
Prashesh Arya, Chief General Manager (Finance), during the course of Search
proceedings has brought out the modus operandi of the group companies with regard
to scrap sale and generation of cash by under reporting /under invoicing of scrap sale
and cash generation on such activities. It is clearly mentioned by him as how the cash
is generated out of sale of scrap and how the same is disbursed or passed on the
hands in the group companies. Question No.8 of the statement recorded of Shri
Prashesh Arya, Chief General Manager of the group, is relevant in this regard.

It was asked as follows:

“Please explain the business profile and work of Shri Surendera Kumar Arya,
who is your owner/employer and in which way do you help him in running of his
business.”

In reply thereto, Shri Prashesh Arya stated that he is the Chairman and control
all companies…. There are sales of scrap by all the 35-40 manufacturing plants
of the group. It was further explained thereafter the procedure of getting cash
sale of scrap is that the cost of scrap is reduced from market value and the
difference is taken in cash.
4.11 The above statement is general in nature. He has further narrated the modus
operandi of selling scrap and how the cash is generated on scrap sale by not showing
all the transactions. In this regard Investigation was carried out by the Search team
from the Investigation Wing and subsequently by the Central unit also, to whom the
case has been transferred pursuant to search action. After carrying out further
investigation on the basis of material collected and extracted, the Central Unit has
passed on the information to all the Assessing Officers of the concerned venders. It
came to know from the list that the assessee is one of the party with whom the JBM
has carried out transactions of sale of scrap. These details in relation to the assessee
were given to the assessee. The assessee has not denied the transactions of the
assessee with JBM. The scrap sale details extracted and forwarded to this office also
matches with the purchase details given by the assessee. Thus, it cannot be denied
that the information passed on to this office is without any base or without any link or
without appearing the assessee’s name in the statement. As stated above, the
statement given by Shri Prashesh Arya contains general as well as specific
information. Since the assessee details were extracted from the data collected and
gathered during the investigation proceedings, the annexure containing only the
assessee relevant part, which was forwarded as annexure. The letter forwarding the
said information in the annexure was duly signed by the authority forwarding the
information, which has been forwarded to the assessee. Therefore, the contention of
the assessee that there was no name or data of the assessee or no signature on the
document etc. cannot be accepted.

4.12 Further, during the course of assessment proceedings in the case of JBM Auto
Ltd., extensive investigation was carried out by the Assessing Officer and it has
brought out the following, vide Para 14.1 of the assessment order dated 29.12.2019
u/s. 153A rws 143(3) of the Act as follows :
“14.1 Keeping in view the facts and evidences as discussed above, Sh. Surendra
Kumar Arya through the JBM Group of companies is found to be indulged in
making unaccounted sale of scrap in cash by adopting following methodology:
i) About 20% (on recorded sales) unaccounted sale of scrap buy resorting
to under-invoicing against which cash is received from the concerned
vendors.
ii) Sale of huge quantity of scrap in cash which has not been recorded in
the books of account which arrives to 12% of the total quantity sold by
JBM group companies.”
4.13 As stated above, the assessee has not denied having business transactions with
JBM Auto Ltd. The modus operandi of the JBM group distinctly shows that they are
indulged in such transactions in cash. Therefore the involvement of the assessee
cannot be ruled out. This office therefore attempted to find out the veracity of the
information from the JBM Auto Limited by sending notice under section 133(6) of the
Income-tax Act, vide Notice dated 11.04.2023. M/s. JBM Auto Limited however did
not reply to the notice under section 133(6) of the Act. In the circumstances, this office
has no option but to act on the information available with the department and proceed
with the assessment.

4.14 During the course of search statement of Shri Prashesh Arya, Chief General
Manager of the JBM Group of Companies, were recorded on oath under section 132(4)
of the Act wherein in response to Q.No.21, he admitted that he looks after
unaccounted sale of scrap made in cash by all JBM Group companies. On the basis
of the above facts of the case and findings, the case of the assessee is discussed as
follows:

4.15 As discussed above, there was no denial either from the assessee or from the
seller in response to notice under section 133(6) that the assessee has made
transactions with the JBM Auto Ltd. The list provided reflects year wise transactions
and name of the assessee. In this view of the matter, the contention of the assessee
that the assessee’s name is not appearing cannot be accepted, particularly when the
information passed on says about ‘scrap vendors’ in general term, which includes the
assessee also. This issue is discussed in detail at the time of 148A proceedings and
the Assessing Officer in his order under section 148A(d) dated 19.07.2022, vide Para
5, has concluded the issue observing that it is not necessary that each and every
beneficiary should find place in the said statement, but the scrap purchased is in
agreement with the books of account and further the assessee could not substantiate
the contention of the assessee with documentary evidences. During the course of the
assessment proceedings also, the assessee could not submit any documentary
evidence to prove otherwise.
4.16 Subsequently also the assessee has not find any infirmity in the section 148A of
the Act proceedings. It is also observed that the assessee has given more thrust to the
technical issues and not given much explanation or clarification on the merits of the
issues raised by department. The assessee has quoted various case laws which are
not in consonance with the facts of this case and can be distinguished from the facts
of the case of the assessee.
4.17 The assessee has further requested Cross Examination of the persons whose
statement was recorded during the course of survey proceedings. In this regard it is
seen that there was specific information, gathered and passed on to this office
pursuant to Search proceedings and thereafter investigation by the Central Unit, in
this case. It was not deniable that the assessee had business transactions with the
assessee during the periods. The assessee itself has stated in point No.3 of letter
dated 16.05.2023 that the quantity of purchases from JBM and the quantity
appearing in assessee’s books are in agreement. The modus operandi of the parties
concerned were brought out during the course of the Search proceedings and
subsequent investigation carried out. All these facts and material conspicuously
reveal that there was under invoicing and non-reporting of scraps by the party.

4.18 The circumstances and facts thereafter has not changed or no new
documentary evidences in this respect has been brought on record. In the
circumstances it is considered not necessary for cross examination. In this regard it
was held that the right for cross examination is not an absolute right and depends not
only on the circumstances of the case but also on the statute concerned. The
following case laws are relevant on the issue of Cross-examiantion.
i) The Hon’ble Supreme Court in the case of State of J&K vs. Bakshi Gulam
MOhd. AIR 1967 (SC) 122 and
ii) Nath International Sales vs. UOI AIR 1992 Del 295
iii) Kanungo and Co. vs. Collector of Customs (1983) ELT 1486 (SC)
iv) T. Devasahaya Nadar V. CIT (1964) 51 ITR 20 (Mad)

In view of the above, considering the facts of the case, it is felt that it is not necessary
to allow cross examination in this case.

4.19 The decision of the Hon’ble Supreme Court in the case of Sumati Dayal Vs. CIT
(1995) 214 ITR 801 is appropriate to the facts of the case, wherein it was held that
apparent must be considered real and that the taxing authorities are entitled to look
into the surrounding circumstances to find out the reality and the matter has to be
considered by applying the test of human probabilities.

4.20 Therefore, in view of the above facts and circumstances of the case, purchase
details filed by the assessee in response to notice under section 142(1) of the Act has
been analyzed.

During the year under consideration the assessee has purchased 7970260 kg of MS
Scrap total valuing to Rs.17,33,10,753/-.
a) There are variations in the rates when compared with purchases made from
other parties however, both the parties ie assessee and the purchase parties are
located in the same locality of business of the assessee ie. at Pithampur , Dist. Dhar,
MP. As tabulated below:

Name of the purchase party Address of purchase party Average

Rate per
KG

Caparo Engineering India Ltd 9B, Sector II, AKVN Industrial Area, 22.99
Pithampur, Dhar, MP

Larsen & Toubro Ltd. ECC Division 158-B, Sector-3, Pithampur, MP 22.37

Shakti Pumps India Ltd (U-III) Plot no. 401, 402, 413, Sector III, 21.63
Industrial area, Pithampur , MP

Rajshree Engineering Pvt Ltd Plot no. 72, Sector I, Pithampur, MP 21.26

Belmaks Metal (India) Ltd Unit 2 Plot no 6, Sector II, Pithampur , Dist. 21.01
Dhar, M.P.

Belmaks Metal (India) Ltd Plot no 6, Sector II, Pithampur , Dist. 20.99
Dhar, M.P.
 JBM Auto Ltd Plot no. 157-E, Sector 3, Industrial 20.74
Area, Pithampur, MP

As the place of business is from the same locality, there cannot be so much variation
in the rates as claimed by the assessee. There is no reason why so much variation in
the rates are claimed by the assessee . From the above finding, it is not acceptable
that the assessee has purchased scrap at such low rates from M/s. JBM Auto Ltd and
hence the allegations against the assessee found substantiated.

b) The variation in rates when compared to the following parties – month wise
shows that the assessee has purchased scrap at low rate from M/s. JBM Auto Ltd as
tabulated below:

MONTH JBM AUTO LTD Larsen & Toubro Ltd. ECC

Division

April 2016 21.56 23.51

MONTH JBM AUTO LTD Caparo Engineering India Ltd

May 2016 21.27 22.09

MONTH JBM AUTO LTD Shakti Pumps India Ltd (U-III)

June 2016 20.50 21.38

MONTH JBM AUTO LTD Caparo Engineering India Ltd

July2016 20.38 21.68

MONTH JBM AUTO LTD Caparo Engineering India Ltd

August 2016 19.83 21.26

MONTH JBM AUTO LTD Caparo Engineering India Ltd

September 19.79 21.26

2016

MONTH JBM AUTO LTD Caparo Engineering India Ltd

October 2016 21.26 22.74

MONTH JBM AUTO LTD Caparo Engineering India Ltd

 November 20.51 22.03
2016

MONTH JBM AUTO LTD Caparo Engineering India Ltd

December 20.08 22.44

2016

MONTH JBM AUTO LTD Caparo Engineering India Ltd

January 2017 21.26 25.04

MONTH JBM AUTO LTD Isha Enterprises (Bundle)

February 2017 21.21 26.89

MONTH JBM AUTO LTD Isha Enterprises (Bundle)

March 2017 21.26 26.37

The above month-wise average rate indicates that the purchases from M/s. JBM Auto
Limited ranges from Rs.19.79 per kg to Rs. 21.27 per kg and from other Vendors the
purchases ranges from Rs. 21.26 per kg to Rs. 26.89 per kg. This clearly indicates
and co-relates with the statement given on oath by Shri Prashesh Arya during search
action in the case of JBM Group of companies. The trend followed by the assessee and
M/s. JBM Auto Ltd cannot be a coincidence but a deliberate attempt to generate
unaccounted cash. Thus, the modus operandi followed by JBM Group is found to be
relevant on the facts and circumstances of this case, and it further indicates and
establishes that the assessee has made unaccounted cash payments against the
purchases of scrap from M/s. JBM Auto Ltd.

c) Even from the date wise purchases details given by the assessee it is seen that
there are vast variation which proves the above contention. The list of date wise
purchases submitted during the assessment proceedings by the assessee shows daily
purchases made with details of quantity bought, rate per kg and amount of total Bill.
It is observed from the said list that on a particular date the purchases made by the
assessee from M/s JBM Auto Ltd is at a lower rate as compared to the other vendor.
For purpose of explaining the modus operandi, few of those instances are as under:-
 Date of Name of Qty In
Invoice No. Purchase Purchase Party PAN kg Rate per kg Total Amt
JBM AUTO
1620001759 19-04-2016 LIMITED AAACJ9630N 6040.00 21.56 130209.19
LARSEN &
TOUBRO
179 19-04-2016 LTD.ECC AAACL0140P 23120.00 23.51 543479.00

Invoice No. Date of Name of Purchase PAN Qty In kg Rate per Total Amt
Purchase Party kg
20 29-04-2016 ISHA ENTERPRISES AAAEI8673D 29860.00 24.64 735731.74
(BUNDLE)

1620002953 29-04-2016 JBM AUTO LIMITED AAACJ9630N 6070.00 21.56 130855.92

Invoice No. Date of Name of Purchase Party PAN Qty In Rate per Total
Purchase kg kg Amt

170001283 04-05- CAPARO AABCC7862N 6370.00 22.09 140709.32

2016 ENGINEERING INDIA
LTD.
1620003427 04-05- JBM AUTO LIMITED AAACJ9630N 10530.00 21.26 223894.12
2016

Invoice No. Date of Name of Purchase Party PAN Qty In Rate per Total
Purchase kg kg Amt
170001883 21-05- CAPARO AABCC7862N 7335.00 22.09 162025.56
2016 ENGINEERING INDIA
LTD.
1620005174 21-05- JBM AUTO LIMITED AAACJ9630N 8510.00 21.26 180943.88
2016

Invoice No. Date of Name of Purchase PAN Qty In Rate per Total Amt
Purchase Party kg kg
170003980 23-07- CAPARO AAACL0140P 6640.00 21.68 143928.22
2016 ENGINEERING
INDIA LIMITED
1620012439 23-07- JBM AUTO LIMITED AAACJ9630N 8220.00 20.38 167495.35
2016

Invoice No. Date of Name of Purchase PAN Qty In Rate per Total Amt
Purchase Party kg kg
170004209 29-07- CAPARO AABCC7862 7095.00 21.68 153790.78
2016 ENGINEERING N
INDIA LTD.
1620012859 29-07- JBM AUTO AAACJ9630 8980.00 20.38 182981.53
2016 LIMITED N
1703 29-07- LARSEN & AAACL014P 18600.0 21.03 391088.00
2016 TOUBRO LTD. ECC 0

Invoice No. Date of Name of Purchase PAN Qty In kg Rate Total Amt
Purchase Party per kg
170004622 10-08- CAPARO AABCC7862N 8135.00 21.26 172970.44
2016 ENGINEERING
INDIA LTD.
1620014028 10-08- JBM AUTO AAACJ9630N 8640.00 19.79 170950.50
2016 LIMITED
2465 10-08- SHAKTI PUMPS AAECS5027L 10610.00 20.55 218075.55
2016 INDIA LTD. (UNIT-
III)

From the above table it is once again established that the assessee is facilitating under
invoicing of its purchases so as to generate cash for JBM Auto Ltd. All the above
instances prove that the assessee along with M/s. JBM Auto Ltd is adopting the
modus operandi explained in the statement of Shri Parshesh Arya recorded by the
investigation wing.

4.21 In view of the above facts and circumstances of the case, it is considered that
the information shared to the assessee showing the under invoiced and unrecorded
quantity of sales made by M/s JBM Auto Ltd are transactions on which the assessee
has paid cash out of books.b The total cash paid by the assessee accordingly worked
out to Rs.2,05,23,616/- as per the TABLE A given in the Show Cause Notice
mentioned above. Such unexplained expenditure is income taxable in the hands of the
assessee under the provisions of section 69C of the Income-tax Act. Accordingly, the
sum of Rs.2,05,23,616/- is added to the total income of the assessee under section
69C of the Act as unexplained expenditure.
Penalty proceedings under section 271AAC are attracted on the above addition made
and therefore penalty proceedings under section 271AAC are separately initiated.

5. Conclusion drawn
As discussed, various opportunities were given to the assessee as given in the table
above. After analyzing the submission and the information available with the
department, Show Cause Notices were issued and after considering the reply, addition
on account of unrecorded quantity of purchases and under invoiced purchases are
made at Rs.2,05,23,616/-
6. Table of variations :

Sl No Description Amount (in INR)

1 Income as per Return of Income filed 1,50,06,480
2 Income as computed u/s143(1)(a) -
3 Variation in respect of addition u/s.69C as 2,05,23,616
discussed above
5 Total Income/Loss determined as per the above 3,55,30,096
proposal

The Book profit u/s. 115JB is assessed as follows: Rs.4,49,12,926

Add: as discussed above u/s.69C Rs.2,05,23,616
--------------------
Rs.6,54,36,542