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ITA Nos.1505 to 1507/PUN/2015 Bhagyalaxmi Dairy Farms Pvt. Ltd

5. Briefly, in the facts of the case, search action under section 132 of the Act was conducted in the Parag Group of cases on 04.02.2011. The assessee was issued notice under section 153A of the Act and in response thereto, the assessee furnished the return of income declaring loss of Rs.58,28,628/- as against Nil return of income originally filed. Parag Group was engaged in trading and manufacturing of milk products, wherein M/s. Parag Milk Foods Pvt. Ltd. was flagship concern. The assessee was sister concern of M/s. Parag Milk Foods Pvt. Ltd. Some of the group concerns of Parag group as well as business associates were also covered under Survey action under section 133A of the Act. During the course of Survey, various loose papers, computer printouts, hand written chits, computer data, etc. supporting the practices adopted by the concern of undisclosed and unaccounted income were seized from the business as well as residential premises. All these documents were confronted to Shri Devendra Prakash Shah, Smt. Priti Shah, Smt. Netra Pritam Shah and the employees and concerned officials during the course of search as well as post search enquiries. At different places, cash was also found and part of which was seized. Parag group during the course of search, made total disclosure of Rs.20.87 crores, out of which Rs.11.91 crores was disclosed on account of inflated purchases from the assessee booked by M/s. Parag Milk Foods Pvt. Ltd. in the respective years. However, while filing the return of income in response to notice issued under section 153A of the Act, sum of Rs.11.91 crores disclosed on account of inflated purchases, was not offered as undisclosed income in the respective years. Subsequently, Parag group preferred petition before the Settlement Commission for settlement of the case. The Assessing Officer notes that during completion of assessment proceedings, the same was pending till the date of passing the assessment order. The ITA Nos.1505 to 1507/PUN/2015 Bhagyalaxmi Dairy Farms Pvt. Ltd Assessing Officer also noted that the assessee though, was one of the cases of Parag group but during search action, no disclosure was made on account of incriminating documents seized/impounded. The first part which was made was on account of cash credits under section 68 of the Act at Rs.1.5 crores which is not an issue raised before us.

6. The second addition which was made in the hands of assessee was on account of unexplained expenditure under section 69C of the Act at Rs.10 lakhs. The bundle 2 was seized and page 128 of the said bundle contained expenditure incurred by the assessee at Rs.10 lakhs towards election expenses, not recorded in regular books of account. Accordingly, the assessee was asked to give explanation as to why the same should not be treated as its deemed income. The assessee pointed out that this issue was taken up by Parag Milk Foods Pvt. Ltd. in the Settlement Petition before the Settlement Commission. Hence, the same was not to be added in its hands, but since the decision of the Settlement Commission was still pending and hence, the same was added as income of the assessee on account of unexplained expenditure under section 69C of the Act.

2. The learned CIT(A) failed to consider that similar issue was also raised in the hands of holding company M/s. Parag Milk and Milk Products Pvt.

Ltd. in the A.Y. 2008-09 and the depreciation @ 80% on the ETP Plant was allowed in assessment u/s.143(3) of the Act.

3. The learned CIT(A) while confirming the addition made by the AO, erred in not appreciating the fact that no evidences or incriminating material were found during the course of search that the appellant has made excess claim of depreciation on ETP Plant.