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Judgment
PER S. RIFAUR RAHMAN, AM :
These cross appeals are filed by the assessee and Revenue against the order of the Ld. Commissioner of Income-tax (Appeals)-26, New Delhi [hereinafter referred to as ‘ld. CIT(A)]dated 23.08.2023for the Assessment Year 2017-18 raising the following grounds of appeal :-
Brief facts of the case are, assessee filed its original return of income on 11.11.2017 declared income of Rs.15,64,470/-, which was processed under section 143 (1) of the Income-tax Act, 1961 (for short ‘the Act’).
A search and seizure operation was carried out by the Investigation Wing on Mohit Garg group of cases on 25.11.2016. During the post survey enquiry, a statement of Prateek Bansal was recorded on 04.09.2017 wherein he admitted that after demonetization, he had received cash of Rs.12,37,50,000/- (Rs.7,48,000/- from Anirudh Aggarwal, Rs.47,50,000/-from Ravi Aggarwal and Rs.4,42,00,000/- from Vinod Deshmukh). The AO extracted the above statement at page 2 of the assessment order as per which he confirmed that he had given cash of Rs.10,39,50,000/- to Nitin Gupta to purchase gold and diamond. In return, Nitin Gupta gave him 11 kgs. Gold worth Rs.5,37,50,000/- and 5 pieces of diamond worth Rs.2,64,00,000/-. Therefore, its total purchase from Nitin Gupta was Rs.8,01,50,000/-. The gold and diamond were thus sold to the parties who had given him cash of Rs.8,34,50,000/- and accordingly he had earned profit of Rs.33,00,000/- in this whole transaction and Rs.2,38,00,000/- is due from Nitin Gupta. He had given details of the transactions of purchase, which are given at page 2 of the assessment order. He further stated that Rs.1,98,00,000/- given to the assessee to purchase 4 kgs. of Gold. He gave this 4 kgs. Gold to Vinod Deshmukh in lieu of Rs.2,02,00,000/- that he had given him in cash thereby earned a profit of Rs.4,00,000/-.
Based on the above statement, the AO observed that during the post-search investigation by Investigation Wing wherein Nitin Gupta had admitted that he gave cash of Rs.26,54,50,000- to Mohit Garg including Rs.9,00,00,000/-which he had received from the assessee (Shashank Jain). Based on the above statement, the case of the assessee was reopened u/s 147 of the Income-tax Act, 1961 (for short ‘the Act’) after recording the reason for reopening and obtained prior approval from the competent authority. Notice u/s 148 of the Act was issued and served on the assessee requiring the assessee to file his return of income. In response, assessee filed his return of income declaring the original income declared in his original return of income. Notice u/s 143(2) was issued and served on the assessee. In response, assessee referred to the statement of Mohit Garg recorded under oath on 17.01.2017 where he had admitted that he has received Rs.40.98 crores from Nitin Gupta, Anirudh Aggarwal and Ankush Jain for deposit in the bank accounts of Rajiv Singh Kushwaha. Therefore, the case of the AO that cash of Rs.9,00,00,000/- was escaped income of the assessee based on mere hypothesis and probabilities and there is no corroborative evidence which indicate that equivalent cash/income has escaped from the coffers of the assessee. However, AO rejected the same and observed that no cogent material was brought on record by the assessee till date even after giving ample opportunities. After observing statement of Nitin Gupta, AO was of the view that as per facts and circumstances, he was of the opinion that protective addition of Rs.10,98,00,000/- is being made in the hands of the assessee to safeguard the interest of the Revenue. Accordingly, he made the addition in the hands of the assessee on protected basis.
Aggrieved with the above order, assessee preferred an appeal before the ld. CIT(A) and filed detailed submissions. Ld. CIT (A) partly allowed the grounds raised by the assessee on merits by observing as under :-
“6.2I have considered the fact of the case and submission filed by the appellant. The case was reopened U/S 147 of the IT Act, 1961 after received information from the Investigation wing. Statement of Mr. Mohit Garg and Mr. Prateek Bansal was recorded u/s 131(1)(A) of the IT Act, 1961 wherein it was gathered that Rs.9,00,00,000/- had escaped assessment. Based on the statement of Mr. Mohit Garg and Mr. Prateek Bansal, assessing officer has made protective addition of Rs.9,00,00,000/- being amount paid to Mr. Nitin Gupta and of Rs.1,98,00,000/- being amount received from Mr. Prateek Bansal for purchasing 4 KG Gold, on protective basis. During the assessment proceedings of Mr. Nitin Gupta, the AO himself stated and agreed that Mr. Nitin Gupta had created a story to explain the unaccounted cash of Rs. 9 crore which he admitted to give to Mr. Mohit Garg and therefore Mr. Nitin Gupta had failed to prove that Rs. 9 Cr. was given to Mr. Nitin Gupta by Mr. Shashank Jain. Relevant extract of Mr. Nitin Gupta's statement, is reproduced as under:
Thus the statement given by Shri Nitin Gupta proved completely falsed that he received the money of Rs. 9 cr. from Shashank Jain. Further. Shri Nitin Gupta was issued n detailed showcause notice and asked again why the amount of Rs. 9 cr. (out of which Rs. 26.54.00,000/-) received from Shri Shashank Jain should not be treated as his unexplained money. In his reply to his show cause notice Mr. Nitin Gupta is referred to the statement recorded of Shri Shashank under PMLA which basically refers to a point that before the Enforcement Directorate, Mr. Shashank Jain admitted to have received Rs. 9 cr. from various persons but he had paid Rs.9 cr. Directly to Mr. Nitin Gupta. Also both in the statement recorded under oath by the investigation unit and by assessment units Shri Shashank Jain had clearly denied giving Rs.9 cr. to Mr. Nitin Gupta. Mr. Nitin Gupta allowed to cross examine Mr. Shashank Jain and even in the cross examination Mr. Shashank Jain had denied making payment to Mr. Nitin Gupta. Thus, in view of the above it appears that Mr. Nitin Gupta had created a story to explain the unaccounted cash of Rs. 9 cr. which he admitted to give to Mr. Mohit Garg. Thus, Mr. Nitin Gupta had failed to prove that Rs. 9 Cr. was given to him by Mr. Shashank Jain. Accordingly, the same is added as unexplained money in the hands of Mr. Nitin Gupta on substantive basis also protective as proposed to be made in the hands of Mr. Shashank Jain.
In view of the above, Rs.9,00,00.000/- is added back to the income of assessee as unexplained money u/s 69A r.w.s. 115BBE the Act.
6.2.1The additions made by the assessing officer in the hands of the appellant are on protective basis. With respect to the addition of Rs.l,98,00,000/- in the assessment order it has been mentioned that during the course of post search investigation by Income Tax Inv., statement of Sh. Prateek Bansal was recorded u/s 131 on 04.09.2017 wherein he had admitted that he had given Rs.1,98,00,000/- to the appellant for purchase of 4 kg of Gold for one Mr. Vinod Deshmukh and for the same act he had earned commission of Rs.4,00,000/-. The appellant was also engaged in the business of bullion trading and jewellery. It is also a well-known fact that they were knowing each other. Thus, considering the facts above, it has been concluded that the appellant has supplied gold to Sh. Prateek Bansal in lieu of cash and by doing so he also must have earned certain amount of commission. Accordingly, I find it appropriate to consider an amount of Rs.4,00,0000/- as commission on supply of Gold in cash which is equal to the commission income disclosed by Sh. Prateek Bansal.
6.2.2Further, with respect to addition of Rs.9,00,00,000/-, as per the statement of the appellant u/s 50 of PMLA recorded on 02.12.201,6, the appellant has given vivid details about his involvement in the impugned transactions, including the fact that Sh. Kanav Gupta, who was son of his friend, wanted to convert demonetized currency and for this purpose Sh. Jain has sent his staff Sh. Anil Verma alongwith Sh. Kanav Gupta to the residence of Sh. Mohit Garg for delivering the said amount. He also stated that he had a booking of purchase of 20 KG gold. with the assessee, out of which he sold 9 Kg to Sh. Kagav Gupta and balance to various persons and eventual balance of 2 Kg gold was retained by him as his commission. It is further observed that this 2 Kg gold was seized by ED during search at the premises of the appellant and the same corroborates the fact that the appellant has acted as middlemen for converting cash of various acquaintances and earning commission in the process. It is further seen that ED had also recorded the statement of his staff Sh. Anil Verma, which corroborates the facts admitted by the appellant before ED, particularly regarding the admission of the source of Rs. 9 crores paid by him to procure 20 Kg of gold. From the statements of Sh. Shashank Jain and others, ED has established that out of 20 Kg of gold, 9 Kgs were supplied to Sh. Kanav Gupta, 4 Kgs to Sh. Prateek Bansal, 4 Kgs to Sh. Parashwami, 1 Kg to Travel Agent and balance 2 Kgs was retained by Sh. Shashank Jain, which was seized by ED. In his statement, U/S 131 (1 A) of the IT Act, Sh. Prateek Bansal has confirmed that he had purchased 4 Kg gold from the appellant. Further, Sh. Mohit Garg also corroborated the statement of Sh. Shashank Jain that Sh. Kanav Gupta had given Rs.4.5 crores to Sh. Mohit Garg. Based on the aforesaid statements of the appellant recorded before Income Tax Authorities as well as Enforcement Directorate, and corroborative statements of Sh. Anil Verma and Sh. Mohit Garg, it is clear that the amount of Rs.9 crores do not belong to the appellant. It is further observed that neither Rs. 9 crores in cash, nor in gold, nor in any other form has been recovered from the assessee during the search proceedings. The appellant admitted that he had sent some people who were seeking bullion in lieu of demonetized currency to meet Mr. Nitin Gupta. Nevertheless, it is clear that the amount of Rs.9 crores was not the own funds of the appellant as these were received from persons referred by him to Mr. Nitin Gupta. Therefore, considering the entire set of facts and evidences, as well as the findings of the ED based on statements of various persons involved in the process of conversion of demonetized currency, it is clear that the impugned cash of Rs.9 crores was not owned by the appellant and the appellant was involved only in conversion of such funds of other persons into gold and from such act for earning commission thereon. From the enquiry conducted and statements of the appellant and other persons it is obvious that, during this process, the appellant has earned commission of 2 Kg gold, which was seized by ED. The valuation of 2 kg gold as reported by the registered valuer in his valuation report was Rs.57,20,000/-. Therefore, in view of the above, it has been held that the appellant has earned unaccounted commission income of Rs.57,20,000/- for getting conversion of cash into bullion. Hence, the additions made by the assessing officer is restricted to the tune of Rs.61,20,000/- (Rs. 4,00,000 + Rs. 57,20,000). Accordingly, the grounds raised by the appellant are partly allowed.”
Aggrieved with the above order, both assessee and Revenue are in appeal before us raising following grounds of appeal :-
“Assessee’s Grounds
1.On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad, both in the eye of law and on the facts.
2.On the facts and circumstances of the case, the initiation of the proceedings under Section 147, read with Section 148, made by AO. is bad and liable to be quashed as the condition and procedure prescribed under the statute have not been satisfied and complied with.
3.(i) On the fact and circumstances of the case, the order passed by the AO. is bad in the eye of law and on facts, as the same is made on the basis of reasons recorded without there being any independent application of mind.
(ii)That the reassessment order passed by the AO. is bad and liable to be quashed as the same has been reopened on the basis of the reasons which are vague and against the facts on record.
4.On the fact and circumstances of the case, Ld. AO has erred in reopening u/s 147 of the income tax Act, 1961 without obtaining valid approval from the prescribed authority as required u/s 151 of the Income Tax Act, 1961.
5.On the fact and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the addition to the extent of RS.61,20,OOOI-made by the AO. invoking the provisions of Section 68 of the Act.
6.(i) On the fact and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in making addition of Rs.4,00,000/- on account of commission on supply of gold in cash.
(ii)The Ld. CIT(A) has erred in making the above addition estimating the commission without there being any basis for the same.
7.(i) On the fact and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the addition to the extent of RS.57,20,000/- on account of valuation of 2 Kg. Gold.
(ii)That the above addition has been confirmed by the Ld. CIT(A) misinterpreting the statement of the assessee recorded.
8.On the fact and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the addition ignoring the explanation of the assessee that the said gold relates to another entity and has been duly recorded in the books of account of that assessee.
9.On the fact and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the addition made by the A.O. invoking the provisions of Section 68 of the Act ignoring the fact that no amount having been received by the assessee in its books of account no addition under Section 68 of the Act is called for.
10.(i) On the fact and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the addition to be taxed under Section 115BBE of the Act ignoring the fact that the addition having not been called for under Section 68 of the Act the provisions of Section 115BBE are not applicable in the present case.
(ii)That otherwise also, the provisions of section115BBE as amended during the year, not applicable in the year under consideration.”
Revenue’s Grounds
1.Whether on facts of the case and in law, the ld. CIT (A) was right in deleting the addition of Rs.1,98,00,000/- (on protective basis) and substituting the same with commission income or Rs.4,00.000/- even though the assessee could not substantiate his claim with evidence.
2.Whether on facts or the case and in law, the ld. CIT (A) was right in deleting the addition of Rs.9,00,00,000/- (on protective basis) and substituting the same with unaccounted commission income or Rs.57,20,000/-, even when the assessee could not substantiate his claim with evidence.”
At the time of hearing, ld. AR submitted as under :-
“The Assessing Officer made the following two additions under section 68, both on Protective basis.
1.Rs. 1,98,00,000/- on the basis of statement of Sh. Prateek Bansal recorded at the time of post search investigation after the search having been carried out in the case of Mohit Garg group.
2.Rs.9,00,00,000/- on the basis of statement of Sh. Nitin Gupta recorded during post search investigation search in Mohit Garg group.
With respect to addition of Rs.9,00,00,000/- the CIT(A) referring to certain sequence of events on the basis of statement of assessee recorded under section 50 of the PMLA as on 02.12.2016 held that assessee had earned income to the extent of 2 Kg. gold. On the basis of valuation report an addition of Rs. 57,20,0001- was sustained by him. The findings of CIT(A) are at Pg. 49 Para 6.2.2 onwards.
CIT(A) after referring to the Assessment order held that the impugned money of Rs.1,98,00,000/- , alleged to have been received from Sh. Prateek Bansal, does not belong to the assessee. At most the assessee had earned commission income, which was computed at Rs. 4,00,000/-. The findings of CIT(A) are at Pg. 49, Para 6.2.1 of his order.
The assessee is in appeal against the remaining addition, while department is against the deletion of addition by the CIT(A).
(i)With respect to the addition of Rs.1,98,00,000/- made on the alleged receipt of said amount from Sh. Prateek Bansal, made by the A.O. on protective basis, it is not clear in whose hands the substantive addition is made. From the facts narrated in the order the substantive addition was supposed to be made in the hands of Sh. Prateek Bansal. However on perusal of the assessment order of Prateek Bansal, no such addition has been made. A.O.'s order in the case of Prateek at Pg. 2, Para 2 details of money received by Sh. Prateek Bansal amounting to Rs.12,37,50,000/- has been given, bifurcation of which is given as follows:
Anirudh Aggarwal 7,48,00,000/-
Ravi Aggarwal 47,50,000/-
Vinod Deshmukh 4,42,00,000/- 12,37,50,000/-
The addition of Rs.12,00,50,000/- has been made after giving him the benefit of Rs.37,00,000/- being income declared by him in his return of income.
In this manner no addition on account of any money given to the assessee has been made in the hands of Sh. Prateek Bansal on substantive basis. In any case the case of Sh. Prateek Bansal has been set aside to the file of NFAC by the Hon'ble ITAT vide order dated 04.06.2024.
Otherwise also the date of A.O.'s order in the case of Sh. Prateek Bansal is 20.03.2022, while the A.O.'s order in the case of assessee is dated 16.03.2022.
Cases relied on:
a)ACIT Vs. Roshni Enterprises ITA 4470/MUM/2024, dated 25.04.2025
b)ACIT Vs. Rajni Sales (P) Ltd., ITA No. 4049/0e1/2017, dated 09.07.2021
c)Navdeep Educational Trust Vs. ACIT, ITA No. 324/Coch/2024, dt. 24.04.2025
(ii)With respect to the addition of Rs. 9,00,00,000/- allegedly given by the assessee to Sh. Nitin Gupta, it can be seen that in the A.O.'s order dated 30.12.2018 in the case of Sh. Nitin Gupta, at Pg. 14 despite giving finding totally against Sh. Nitin Gupta, a protective addition is proposed in the hands of assessee.
Copy of reasons recorded are placed in PB. Pg. 9 onwards, for which approval was granted by the authorities as on 26.02.2021 (PB Pg. 18). It is clear from the above that the case of the assessee was reopened only for the purpose of making protective assessment, which is not as per law.
The reopening under section 148 is bad in law as the same was based on reasons for making addition on protective basis:
From the copy of reasons recorded (PB Pg 9), the only reasons recorded are first four Paragraphs, the remaining 6 pages are repeated copy of the said four paragraphs.
Forth Paragraph clearly states that reopening is initiated on the basis of statement of Nitin Gupta recorded post search in Mohit Garg group. It has been stated that Nitin Gupta had stated giving Rs. 9 Crores to the assessee and this was confirmed during Nitin Gupta's assessment also.
A copy of Nitin Gupta's assessment order is placed in PB Pg. 63, The relevant would be to read PB Pg. 76 (Internal page 14 of the order), whereby it has been clearly stated that 'Niiin Gupta has failed to prove that Rs. 9 cr. Was given to him by Shashank Jain." Further, it has been stated in the same Paragraph:
"Accordingly, the same is added as unexplained money in the hands of Mr. Nitin Gupta on substantive basis also protective as proposed to be made in the hands of Mr. Shashank Jain. "
The point to be noted is that the Assessment of Sh. Nitin Bansal was finalised as on 31.12.2018, when it was decided to make protective addition in the hands of the assessee. The reasons for reopening in the case of assessee were recorded as on 26.02.2021. Chronology of events clearly prove that the reopening has been initiated to make protective addition, I.e. with an apprehensive mind, department is not sure of any income escaping assessment in the case of the assessee.
In such circumstances no reopening under section 148 can be made. Reliance is placed on:
a)DHFL Venture Capital Fund vs. ITO, (2013) 358 ITR 471 (Bom)
b)Mr. Jagdishprasad Joshi Vs. ACIT, WP No. 1227 of 2006, dated 01.10.2014 (Bom)
c)Pavan Morarka vs ACIT, WP No. 602 Of 2014, dt. 17.02.2022 (Bom)
(iii)The orders in which substantive additions had been made, not surviving as on date, the order making protective addition also does not survive.
Cases relied on:
a)DCIT Vs. Sh. Vikram Kumar Bajaj PNB House, ITA 1737/0e1/2023, dated 30.12.2025
b)Kanav Metal Vs. ITO, ITA 7778/0e1/2019, dated 19.09.2023
c)ACIT vs. Ramesh Chand Sini, (2003) 5 TMI 225.
(iv)With respect to addition of Rs.1,98,00,000/- the CIT(A) has rightly held that the money did not belong to the assessee. However the addition sustained to the extent of Rs. 4,00,000/- equivalent to what has been added in the hands of Prateek Bansal is too high. In such deals at most commission of 1 % is earned.
With respect to confirming the addition to the extent of 2Kg. gold, firstly it has been held so on the basis of statement recorded under PMLA. It is hereby submitted that the statement was recorded under pressure, which the assessee intends to retract. Secondly even the gold to the tune of 2 Kg. does not belong to the assessee, it belongs to the company M/s Basant Rai Hukam Chand Jain Private Limited, in which the assessee is a director. These averments were made by the assessee before the CIT(A), which have been duly quoted by him in his order at Pg. 48 Para 6.1.5.
The fact of gold belonging to the company can be verified from the Tax Audit Report
Placed in PB P. 231, relevant Pg. 239.
The case of the company M/s Basant Rai Hukam Chand was finalised under section 143(3), based on the said Audit Report without giving any adverse finding in this regard.”
On the other hand, ld. DR of the Revenue objected to the detailed submissions of the ld. AR of the assessee and he brought to our notice page 91 of the paper book which is the assessment order in the case of Prateek Bansal and he brought to our notice that assessee has received Rs.1.98 crores to purchase 4 kgs. Gold and further he brought to our notice assessment order in the case of assessee and the assessment order passed in the case of Nitin Gupta in whose hands substantive addition was made and protective addition was made in the hands of the assessee. Further, he brought to our notice decision of ITAT in the case of Nitin Gupta wherein the addition was deleted on jurisdictional issue of section 153D. He submitted that the assessee has been involved in the above transactions and taken money from Nitin Gupta and has not explained the transactions. In this regard, he heavily relied on the detailed findings of the AO.
Considered the rival submissions and material placed on record. We observed from the assessment order where the AO himself heavily relied on the statement recorded by Prateek Bansal where he has admitted that subsequent to demonetization, Prateek Bansal has received cash of Rs.12,37,50,000/- and in the statement recorded under oath, he has explained the transactions in detail as per which he gave cash to Nitin Gupta to purchase gold and diamond. He sold the same to the parties and earned profit of Rs.33,00,000/-. In the statement of Nitin Gupta which was also recorded post-search investigation wherein Nitin Gupta has admitted that he gave cash of Rs.26,54,50,000/- to Mohit Garg including Rs.9 crores which he had received from the assessee. As per the statement, Nitin Gupta has clearly indicated that he had received cash from Mohit Garg. The break-up was clearly explained that the cash was received from Mohit Garg which includes certain cash of Rs.9 crores from the assessee. In substance, the whole cash was received by Nitin Gupta from Mohit Garg. Therefore, the whole transaction was owned up by Mohit Gupta. Therefore, the assessee has no role except transfer of funds from Mohit Gupta to Nitin Gupta. Therefore, ld. CIT (A) has rightly appreciated the facts on record and deleted the protective addition made by the AO. We do not see any reason to disturb the above findings of ld. CIT (A). Accordingly, the grounds raised by the Revenue are dismissed.
With regard to addition of Rs.1,98,00,000/-, we observed that Prateek Bansal in his statement recorded under oath on 04.09.2017 has stated that he had given Rs.1.98 crores to the assessee to purchase 4 kgs. gold and the same gold he had sold to Vinod Deshmukh for a consideration of Rs.2.02 crores in cash. Therefore, it is clear that Prateek Bansal has earned the net profit of Rs.4,00,000/- from the above transaction, assessee has received cash from Prateek Bansal and involved in purchase of 4 kgs. gold. It clearly establishes that source of cash is from Prateek Bansal and as per the same transaction, assessee has bought the gold for him and out of the above transaction, Prateek Bansal has earned the profit. There is no discussion on the aspect of profit earned by the assessee nowhere in the statement or no material found by the Investigation Wing. Since the assessee has involved only receiving the cash and purchasing 4 kgs. gold on behalf of Prateek Bansal, we observed that ld. CIT (A) has acknowledged the above transaction and presumed that assessee has supplied gold to Prateek Bansal in lieu of cash and by doing so, he must have earned certain amount of commission, accordingly he proceeded to add Rs.4 lakhs as commission income as disclosed by Prateek Bansal in the hands of the assessee. We observed that the whole transaction and assessment of the assessee was reopened mainly on the basis of statement of Prateek Bansal and he himself accepted that he had earned the profit of Rs.4,00,000/- in the whole transaction. The ld. CIT (A) presumed that whole profit earned by Prateek Bansal includes the commission income of assessee also. In our view, the Prateek Bansal had already owned up the transaction and confirmed that he had made profit of Rs. 4 lakhs, the same should be added in the hands of Prateek Bansal, not in the hands of the assessee. As discussed in the above, the cash relevant to purchase of gold belongs to Prateek Bansal and as the same was owned up by him, the same cannot be added in the hands of the assessee. In the result, ground raised by the revenue is dismissed and the ground raised by the assessee on the issue of addition of Rs. 4 lakhs in the hands of the assessee as commission, we already held that it cannot be added in the hands of the assessee, therefore, the relevant ground is allowed in favour of the assessee.
With regard to enhancement made by the Ld CIT(A), we observed that ld. CIT (A) relied on the statement given by the assessee before ED in PMLA proceedings, based on the above statement, he observed that ED has seized 2 kgs. of gold at the premises of the assessee and the same corroborates the fact that assessee has acted middleman for converting of cash of various acquaintances and earned commission in the process. He further observed that ED also recorded the statement of assessee’s staff, Anil Verma which corroborates the admitted facts before ED that the source of Rs.9 crores paid by him to procure 20 kgs. of gold. From the statement of assessee and others, ED had established that out of Rs.20 kgs. of gold, 9 kgs. were supplied to Kanav Gupta, 4 kgs. to Prateek Bansal, 4 kgs. to Parashwami, 1 kg. to travel agent and balance 2 kgs. were retained by the assessee which was seized by the ED. As per the statement of Prateek Bansal, it was confirmed that he had purchased 4 kgs. gold from the assessee. Further Mohit Garg also corroborated the statement of assessee that Kagav Gupta had given Rs.4.5 crores to Mohit Garg. Based on the above statement recorded by the Income-tax authorities and ED, it corroborates the statement of Anil Verma and Mohit Garg. ld. CIT (A) observed that the amount of Rs.9 crores do not belong to the assessee. He further observed that neither Rs.9 crores in cash nor in gold nor in any other form was recovered from the assessee during search proceedings. He concluded that the amount of Rs.9 crores was not the own funds of the assessee as these were received from persons referred by him to Nitin Garg. Ld. CIT (A) after considering the entire facts on record came to the conclusion that 2 kgs. gold retained by the assessee which was seized by the ED is nothing but commission income earned by the assessee. The same was directed to be added in the hands of the assessee. On careful consideration of the above facts, we observed that assessee was involved in procuring of 20 kgs. of gold and the funds utilized by the assessee to procure the gold was came from the interest of persons who intended to buy the abovesaid gold. Since 2 kgs. of gold was seized by the ED based on the information available on record, it is not clearly established that the above said 2 kgs. of gold was belonged to the assessee only. Therefore, the question arises, whether the above said gold retained by the assessee after the assisting the interested person, is the commission income of the assessee or it belongs to the company, where the assessee is one of the director. It is submitted that it belongs to the Basant Rai Hukum Chand Jain Private Limited (BRHCJPL).
After careful consideration of the information available on record, we observed that ED had found 2 kgs of Gold from the residence of the assessee, further noticed that the assessee recorded the statement in connection with the case of Nitin Gupta and issue of cash involvement in purchase the Gold. In the statement given by the assessee before ED, based on the above statement, the gold was recovered from the assessee. Now, the assessee before us and before FAA, claimed that the gold found and seized by the ED belongs to the Company BRHCJPL. We observed that the assessee had not kept any record of showing that he has kept the above gold at his residence which belongs to the company. He merely claims before us by referring to the Form 3CD that it belongs to the company. Nothing was mentioned in the ED report.
It is fact on record that 2 kgs of Gold were found at the premises of the assessee by the ED and it is not clear who had owned up the above gold. For the sake of justice, in our considered view, the issue requires certain verification, therefore, we direct the AO to verify with the ED office, who has owned up the above gold. In case the same is claimed by the assessee or not claimed by the assessee also, the same may be added in the hands of the assessee as commission, as the same was residual stock kept by the assessee. In case it is claimed by the company, BRHCJPL, the same may be directed to be added in the hands of company (may refer the same to the AO of the company) as the commission and delete the same in the hands of the assessee. In the result, the ground no. 7 raised by the assessee is allowed for statistical purposes.
In the result, appeal filed by the revenue is dismissed and appeal filed by the assessee is partly allowed in the above terms.