TaxTMI 
TaxTMI 
2022 (2) TMI 584
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....rounds of appeal raised by the Revenue for AY 2015-16 in ITA No.67/Ind/2021: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 6,00,00,000/- made by the Assessing officer on account of cash credits u/s 68 of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 18,07,498/- made by the Assessing officer on account of disallowing interest expenses u/s 69C of the Income Tax Act, 1961." Grounds of appeal raised by the Revenue for AY 2016-17 in ITA No.68/Ind/2021: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 6,00,00,000/- made by the Assessing officer on account of cash credits u/s 68 of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 80,59,865/- made by the Assessing officer on account of the disallowing interest expenses u/s 69C of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case, the Ld....
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....evious year without properly considering and appreciating the explanation of the appellant made during the course of the assessment proceedings along with ample of documentary evidences establishing that it had not made any transaction of sales without first recording the same in its regular books of account and stock register. 2(d). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming an addition to the extent of Rs. 53,29,050/- firstly, by presuming that the appellant had effected out of books sales in respect of traded goods of a sum of Rs. 3,55,27,000/- and secondly, by applying a very excessive rate of net profit of 15% thereon. 3. That, the appellant further craves leave to add, alter or amend the foregoing ground of appeal as and when considered necessary." Grounds of appeal raised by the Revenue for AY 2017-18 in ITA No.69/Ind/2021: 1. On the facts and in the circumstances of the case, the Ld. CIT(A )was not justified in law in deleting the addition of Rs. 1,19,75,346/- made by the Assessing officer on account of disallowing interest expenses u/s 69C. 2. On the facts and in the....
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....gs along with ample of documentary evidences establishing that it had not made any transaction of sales without first recording the same in its regular books of account and stock register. 1(d). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming an addition to the extent of Rs. 38,47,800/- firstly, by presuming that the appellant had effected out of books sales in respect of traded goods of a sum of Rs. 2,56,52,000/- and secondly, by applying a very excessive rate of net profit of 15% thereon. 2(a). That, on the facts and in the circumstances of the case, the learned CIT(A) grossly erred in not quashing the addition of Rs. 36,50,000/- made by the AO u/s. 69A of the Act on the allegation of hawala transactions merely by holding that quoting of a wrong section would not make the entire addition as non-genuine. 2(b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 36,50,000/- made by the AO in the appellant's income, without properly considering and appreciating the explanation made by the appellant along with docum....
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....terest expenses u/s 69C. 2. On the facts and in the circumstances of the case, the Ld. CIT (A) was not justified in law in deleting the addition of Rs. 10,25,000/- in A.Y. 2018-19 made by the Assessing officer on account of out of books cash sales. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in law in allowing the assessee's appeal on the chargeability of tax as per normal rates instead of the amended provisions of section 115BBE of the Act applicable w.e.f. 1.04.2017 relevant to A.Y. 2017-18 which are clearly attracted in the case of the assessee. " Grounds of appeal raised by the Assessee for AY 2018-19 in IT(SS)A No.116/Ind/2020: 1(a). That, on the facts and in the circumstances of the case, the learned CIT(A) grossly erred in not quashing the addition of Rs. 10,00,000/- made by the AO u/s. 69A of the Act on the allegation of hawala transactions merely by holding that quoting of a wrong section would not make the entire addition as non-genuine. 1(b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 10,00,000/- made b....
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.... Learned Assessing Officer (In short "Ld.AO") In response to the notices assessee vide its various letters furnished its written replies along with the documentary evidences. As per the assessee, books of account along with the bills, vouchers etc. were also produced before the AO for the necessary verification. After considering the submissions made by the assessee, Ld. AO framed the assessment for the various assessment years, by passing a common assessment order dated 28.12.2019, by assessing the total income of the assessee company for every year and making certain additions to the returned income of the assessee. 4. Aggrieved assessee preferred separate appeals before Ld. CIT(A) and partly succeeded and now both assessee and revenue are in appeal before this Tribunal.The cross appeals of the assessee and the Revenue involve common issues in different assessment years which can be broadly classified into following five categories: a) Unexplained Cash Credits u/s. 68 on account of Unsecured Loans and Disallowance of Interest Paid thereon u/s. 69C b) Out of Books Cash Sales u/s. 69A c) Unaccounted Cash Receipt from Syndicate d) Hawala Transa....
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....s of some loose papers seized as page no. 47 to 63 of GGL-01 and the audit report submitted by the assessee, noted that the assessee had obtained some unsecured loans aggregating to a sum of Rs. 6,00,00,000/- in each of the two previous years relevant to the assessment years 2015-16 and 2016-17, from some Kolkata based shell companies and had also paid interest on such unsecured loans during the previous years relevant to A.Ys. 2015-16 to 2018-19. Ld.AO required the assessee company to furnish its explanation on the aforesaid issue and also required the assessee to establish the identity and creditworthiness of the loan creditor companies and as also genuineness of the loan transactions. According to the assessee, in response, it had furnished all the necessary details of the unsecured loan creditors along with the complete supporting documentary evidences for establishing the identity & creditworthiness of loan creditors and genuineness of loan transactions as contemplated under the provisions of s.68 of the Act. However, the ld. AO, by discarding the submissions made by the assessee, made additions in the total income of the assessee for the subject assessment years by holding th....
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.... entire addition of unsecured loans and interest payment thereon on this legal issue. Relevant findings of the CIT(A) at para (3.2.2) at page no. 15 of his Order for A.Y. 2015-16. For A.Y. 2016-17, the ld. CIT(A), at para (3.3.2) on page no. 16 & 17 of his Order, has, given a categorical finding that the material referred to by the AO was not related to the unsecured loans/interest. However, on other issues, the ld. CIT(A) upheld that for other additions some evidences were found during the course of search. At para (3.3.7) of page no. 105 of the CIT(A)'s order for A.Y. 2016-17, again a finding has been given that loose papers, referred to by the AO in her order, cannot be said to be incriminating. 2 Documents referred to by the AO are not incriminating in the nature The AO, while making the impugned addition, has made reference of loose papers inventorized as Page No. 47 to 63 of GGL01 seized from the business premises of the assessee at Kolkata and as also, the Audit Reports of the assessee. The loose papers pertain to the details of the loans obtained by the assessee company from various lender companies and as also, the corresponding details of sources of funds in t....
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....Account and were also having sources of funds. The AO has admitted furnishing of necessary documentary evidences by giving a finding at first para at page no. 49 of her order. Furnishing of the documents is also evident from Page No. 40 of the AO's Order. Written submission before AO dated 09.12.2019 is placed at PB Page No. 618 to 621 for A.Y. 2015- 16 and documentary evidences are placed at page nos. 189 to 540 for A.Y. 2015-16 The details of the loans taken for A.Y. 2015- 16 are given at Page no. 148 of Paper Book for A.Y. 2015- 16 & at page no. 211-212 of Paper Book for A.Y. 201617 (i) All the documents were also furnished before the CIT(A) and the CIT(A) has made a reference to this effect at para (3.3.6) at page no. 85 to 87 of his Order for A.Y. 2015-16. (ii) None of the documentary evidences has been rebutted or contravented or disbelieved by the ld. AO. 4 Creditworthiness of the lender companies not doubted All the lender companies were having ample of funds as per their respective Audited Balance Sheets. Further, the AO has also found that investment by such companies are duly getting reflected in their Balance Sheets. The AO has also admitted t....
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....O to the assessee that which notices remained uncomplied and which notices returned unserved. 6 Opportunity of Cross- Examination not offered to the assessee During the course of the assessment proceedings, the AO had not whispered a single word regarding the so-called enquiries and statements recorded by the Investigation Wing. The opportunity of cross-examination of any of the witnesses of the AO was not given. Non- giving of the opportunity has vitiated the entire proceedings as held by the Hon'ble Apex Court in many cases. 571 to 577 for A.Y. 2015-16 being the Notice u/s. 142(1) dated 17- 05-2019 AND 578 to 606 for A.Y. 2015-16 being the Notice Show Cause Notice dated 15- 11-2019 On a perusal of the Page No. 575 for A.Y. 2015-16 of the Paper Book, it may be gathered that except asking certain details of loans, the AO had not uttered any single word regarding the alleged enquiries and other materials referred to by her in the body of the assessment order. Thus, the question of giving any cross-examination does not arise. The relevant findings of the ld. CIT(A) are at paras (3.3.7) & (3.3.8) on page no. 87 to 90 of his Order for A.Y. 201516....
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....fic request, the AO did not examine Shri Mukesh Jhawar or Shri H.P. Agrawal. 544 to 547 and 554 to 557 The assessee, vide its letter dated 09-12-2019 [PB Page No. 665 & 669], requested the AO to make verification from Shri Mukesh Jhanwar and CA. Shri H.P. Agrawal by issuing summons u/s. 131 or notices u/s. 133(6). However, the AO neither made any independent enquiry from Shri Mukesh Jhanwar and CA. Shri H.P. Agrawal subsequent to filing of their Affidavits nor the AO provided opportunity of cross-examination to the assessee. 14 Case of the assessee is distinguishabl e from the case of NRA Iron & Steel The case of the assessee is distinguishable from that of the case of PCIT (Central)-1 vs. NRA Iron & Steel Pvt. Ltd. (2019) 412 ITR 161 (SC) - Our written submission before CIT(A) at page nos. 55 to 57 for A.Y. 201516 - 15 Interest is allowable on genuine borrowing The AO disallowed the claim of the assessee for interest only on the ground that the unsecured loans on which the interest have been paid are not genuine. Once, such loans are considered as genuine, then the entire interest would be allowable u/s. 36(1)(iii). ....
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....ere seized from the premises of the CA of the assessee company who had gathered such information from the lender companies for the purpose of submitting the same to the Income-Tax Department in any probable assessment proceedings in which the sources of funds in the hands of the lenders are required to be established. Thus, according to Learned counsel for the assessee, such papers by any stretch of imagination, cannot be termed to be incriminating in the nature so as to form the basis for making any addition in an assessment made under s.153A of the Act. Even the list of the alleged shell companies, notified by the Department on the basis of the inputs received from various investigation agencies, as given by the AO at para (9.5) of the assessment order, cannot be said to be an incriminating document recovered during the course of the search and Ld.AO has made the aforesaid additions without having recourse to any material seized during the course of the search. Learned counsel for the assessee further placing reliance on various judicial pronouncements submitted that the additions so made are liable to be deleted on the legal ground, as the assessment years under consideration we....
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....PL - - 10,00,000 32,787 99,998 89,999 13. Bandana Vyapar Pvt. Ltd. BVPL - - 26,00,000 94,481 2,59,999 19,233 14. Mercury Deal Trade Pvt. Ltd. MDTPL - - 40,00,000 1,63,388 4,00,004 - 15. Mohini Dealing Pvt. Ltd. MDPL - - 79,00,000 2,87,787 7,90,003 - 16. Monalisa Agency Pvt. Ltd. MAPL - - 30,00,000 1,26,776 2,99,999 24,822 17. Rajgharana Trading Pvt. Ltd. RTPL - - 40,00,000 1,67,213 4,00,004 - 18. Satabdi Realstate Pvt. Ltd. SRPL - - 42,00,000 1,43,771 4,20,000 - 19. Sanskar Commosale Pvt. Ltd. SCPL - - 20,00,000 79,782 1,75,339 - 20. Blackberry Tradecom Pvt. Ltd. BTPL - - - - - 40,96,026 TOTAL 6,00,00,000 18,07,498 6,00,00,000 80,59,865 1,19,75,346 82,40,976 13. The assessee has further submitted that out of the aforesai....
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....y issued by the AO. Further, the assessee also contended that during the course of the assessment proceedings, Ld. AO had not whispered a single word regarding the so-called enquiries and statements recorded by the Investigation Wing. The assessee company also contended that no opportunity of cross-examination of any of the witnesses of the AO was given which has vitiated the entire proceedings as held by the Hon'ble Apex Court in many cases including that of CIT Vs.Andaman Timbers Industries Limited (ITA no.721 of 2008). 13.3 Learned Counsel for the assessee submitted that Ld.AO has relied upon the statements of Mr. Mukesh Jhawar and Mr. H.P. Agrawal for making the impugned additions in the assessee's income but, these statements were subsequently retracted by such persons. Though a specific request was made to Ld.AO to conduct necessary verification from Mr. Mukesh Jhanwar and Mr.H.P. Agrawal by issuing summons u/s. 131 or notices u/s. 133(6) of the Act however, Ld AO neither made any independent enquiry subsequent to their filing of Affidavits retracting the statements nor Ld.AO provided any opportunity of cross-examination to the assessee. 13.4 Learned Counsel for the ass....
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....nder the provisions of s.36(1)(iii) of the Act. It was also contended that in none of the documentary evidences so furnished for establishing the genuineness of the loan transactions, any defect or discrepancy was found by Ld.AO and he did not conduct any independent enquiry from the lender companies and merely on the extraneous considerations, made the impugned additions. 14. We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities, written and oral submissions made from both the sides and the paper books filed under rule 18(6) of the ITAT Rules. We notice that the AO, while making the impugned addition, has made reference of certain loose papers inventorized as Page No. 47 to 63 of GGL-01 seized from the business premises of the assessee at Kolkata and also the Audit Reports of the assessee. On a perusal of these loose papers which have been placed by the assessee at page no. 131 to 147 in its Paper Book for A.Y. 2015-16, we find that such loose papers pertain to the details of the loans obtained by the assessee company from various lender companies such as name of....
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....ty, the A.Y. 2016-17 cannot be considered as an abated assessment year. We also note that Ld.AO, while making the impugned additions, has also referred to some statements of Mr Mukesh Jhanwar and Mr. H.P. Agrawal recorded during the course of search but same were subsequently retracted during the course of the assessment proceedings and thus the same cannot be equated to incriminating material and for this proposition we find support from the decision of the Hon'ble High Court of Delhi in the case of Pr. CIT vs. Meeta Gutgutia (2018) 395 ITR 0526 (Del.HC) and the Special Leave Petition filed by the Revenue against this decision has been dismissed by Hon'ble Supreme Court in (2018) 102 CCH 0038 (SC). 15.1 Similar view also taken by Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 53 (Del HC) and Hon'ble Court after considering various judgments had dealt with this issue as under: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, n....
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....ourse of original assessment." 15.2 The above stated ratio laid down by the Hon'ble Delhi High Court again comes from consideration in the case of Pr. CIT vs. Meeta Gutgutia (supra) and this Tribunal has applied this ratio in the the case of Kalani Bros. [IT(SS) No.71/Ind/2015 dated 6.11.15] observing as follows:- "We have heard both the sides. We have also gone through the case laws relied upon by both the sides. We have also considered various relevant facts of the case. It is a settled legal position that once a search and seizure action has taken place u/ s 132 of the Act or a requisition has been made u/ s 132A, the provisions of section 153A trigged and Assessing Officer is bound to issue notice u/ s 153A of the Act. Once notices are issued u/ s 153A of, the Act then assessee is legally obliged to file return of income for six years. The assessment and reassessment for six years shall be finalised by the Assessing Officer. It is also held by various Courts that once notice u/ s 153A of the Act issued, then assessment for six years shall be at large both for Assessing Officer and assessee have no warrant of law. It has been also held that in the assessment years wh....
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....al to consider the appeal of the department on merits. It is a settled legal position that when two views are possible on a particulars issue then the view favourable to the assessee should be followed as held by the Hon'ble Apex Court in the case of CIT vs. Vegetable Products; 88 ITR 192. Respectively following the decision of the Hon'ble Apex Court, we dismiss the ground of appeals of the Revenue. Departmental appeals are disposed accordingly." 15.3 Similar view also taken in the case of DCIT, Indore vs. Shri Satish Neema (2020) 37 ITJ 308 (Trib. Indore). Relevant extract of the decision is reproduced below: "19. We therefore respectfully following the decision referred above and also considering the latest judgement of Hon'ble High court of Delhi in the case of Pr. CIT & Ors. Vs. Meeta Gutgutia (supra) come to the conclusion that since the assessment orders in question were concluded and non-abated assessments no addition can be made in the assessment proceedings u/s 153A of the act unless there is any incriminating material found during the course of search. We find no inconsistency in the finding of Ld. CIT(A) quashing the assessment proceedings u/s 153....
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.... their audited financial statements, copies of the relevant bank statements of the loan creditors and as well as of the assessee. Further, in order to establish the identity of the lender companies and genuineness of the loan transactions, the assessee had also furnished copies of the Awards of the Arbitration, given by the Sole Arbitrators in respect of two of the lender companies. The assessee, by filing its written submission along with documentary evidences, had claimed to have fully discharged its onus of proving, under s. 68, to establish (i) identity of the loan creditors; (ii) genuineness of the loan transactions; and (iii) creditworthiness of the loan creditors. 16.1 We further find that the AO at first para of page no. 49 of her Order has also admitted that the lender companies have duly shown the subject transactions with the assessee in their respective Bank Statements, Balance Sheets and Profit & Loss Account and were also having sources of funds. We also find that none of the documentary evidences furnished by the assessee company has been rebutted or contravened or disbelieved by the AO. We note that the assessee, after furnishing the documentary evidences, had sp....
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....ender companies, as were also furnished before the lower authorities, we observe that all the lender companies were having ample net owned funds and were having sufficient balances in their bank accounts and no cash was deposited prior to the lending of loan to appellant company, which establishes the creditworthiness of the lender companies. We find that two lender companies namely Asha Tradecom Pvt. Ltd. and SHP Financial Services Pvt. Ltd were duly registered as Non Banking Finance Company with the Reserve Bank of India and their registration with the RBI itself proves the identity and creditworthiness of such lender companies. There is no denial to the fact that no independent enquiry was done by the AO. In such circumstances, we find ourselves in agreement to the ld. CIT(A) that the assessee could be able to discharge its primary onus as contemplated under the provisions of s. 68 of the Act. We find that the AO has failed to discharge the onus of bringing any cogent material or evidence on record for disbelieving the explanation as well as the various documentary evidences furnished by the assessee before her, during the course of the assessment proceedings. 16.3 We find th....
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....avit was also furnished by the assessee before the AO as well as before the ld. CIT(A) and a copy of the same has also been filed before us at page no. 544 to 547 of the Paper Book for A.Y. 2015-16. We also note that the assessee, vide its letter dated 09.12.2019, after filing the affidavit of Shri Mukesh Jhawar, had made a specific request to the AO that if despite retraction, if still she wish to place reliance upon the statement recorded u/s. 132(4), then an opportunity of cross-examination of Shri Mukesh Jhawar be provided. However, the AO neither made any independent inquiry from Mr. Mukesh Jhawar nor, afforded any opportunity of cross-examination to the assessee. 16.5 We further find that the AO, vide para (9.3) of the assessment order, has stated that one Smt. Leela Kalyani, a director of the assessee company and as also, one Mr. H.P. Agrawal, in their statements recorded u/s. 132(4) of the Act, had accepted that the Kolkata based companies were used as conduits for routing the unaccounted cash as unsecured loans to the assessee company through hawala transactions. The AO has reproduced the relevant abstracts of the statement of Smt. Leela Kalyani, at para (9.6) of the or....
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.... held by Hon'ble Supreme Court in the case of M/s. Kishanchand Chelaram vs. CIT (1980) 125 ITR 713 (SC) and again in the case of M/s. Andaman Timber Industries vs. Commissioner of Central Excise, Kolkatta-II 2016 (15) SCC 785 (SC), that ,without giving the opportunity of cross examination of the witnesses to the assessee, the statements of such witnesses could not have been utilized against the assessee. 16.6 As regard the mobile message recovered from the personal mobile of Mr. Mukesh Jhawar, which has been reproduced by the AO at page no. 24 of her Order. Although Mr.Mukesh Jhawar had retracted his statement by filing an Affidavit, but, still we could notice that such message merely contains the details of some bank account of some company and does not convey anything else. Further, even if it is presumed that such message conveys some transfer of funds for obtaining accommodation entry, then too, it cannot be alleged that the assessee company had obtained some accommodation entry for the very reason that the message dated 4/5/2017 pertains to the F.Y. 2017-18 and the assessee company has not obtained any fresh unsecured loan of even a single penny during the financial year 20....
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....15-16 and A.Y. 2016-17 on account of unsecured loans and the additions of Rs. 18,07,498/-, Rs. 80,59,865/-, Rs. 1,19,75,346/- and Rs. 82,40,976/- respectively for the A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017-18 and A.Y. 2018-19 on account of interest paid thereon. Accordingly, the Ground Nos. 1 & 2 for the A.Ys. 2015-16 and 2016- 17 and as also, Ground No. 1 for the A.Ys. 2017-18 and 2018-19, so raised by the Revenue before us are Dismissed. 17. Now, we take the Issue No. (ii) which is relating to Out of Books Cash Sales u/s. 69A 17.1 In respect of the Issue No. (ii), the Revenue has raised Ground No. 3 for the A.Y. 2016-17 and Ground No. 2 for the A.Ys. 2017-18 and 2018-19. These grounds are pertaining to the action of the Ld. CIT(A) deleting the substantial additions made by the AO on account of unaccounted sales u/s. 69A of the Act. The assessee has also raised its Ground Nos. 2(a) to 2(d) and 1(a) to 1(d) respectively for the A.Y. 2016-17 and 2017-18 challenging the action of the ld. CIT(A) in confirming the partial additions on the subject issue. A summary of the year-wise quantum of additions before us on the subject issue along with the respective grounds raised from both....
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....f Rs. 3,55,27,000/- and Rs. 2,56,52,000/- respectively for the A.Y. 2016-17 and A.Y. 2017-18, thereby confirming the remaining additions of Rs. 53,29,050/- and Rs. 38,47,800/- in the hands of the assessee company for A.Y. 2016- 17 and A.Y. 2017-18. Further, the ld. CIT(A) also deleted entire addition of Rs. 10,25,000/- for the A.Y. 2018-19. 17.4 Against the additions confirmed by the Ld. CIT(A), the assessee is in appeal whereas against the relief granted, the Revenue is in appeal. 17.5 Before us, the Ld. CIT(DR) vehemently argued supporting the observations of the AO on this issue. 17.6 Per Contra Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: "D. Key Points of Assessee's Submission and Relevant Pages of Paper Book: S. No. Marginal Notes Submission in Brief AO's Comments Relevant Pages of Paper Book Remarks 1 Section 69A is not applicable on Sales Sec.69A could not have been invoked by the AO. It applies only to the unexplained money and not any alleged unaccounted receipts. AO invoked provisions of s. 69A r.w.s. 115BBE at para (6.5) at page no. 17 -....
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....uch excise authorities. 1016 to 1346 - 7 No defect in the books found by the search party During the search, up-to-date maintenance of books of account and other records was also found by the search party and no defect or discrepancy in the maintenance of any books of account or record was pointed by the search party. - - 8 Books of accounts are duly audited Books of account of the assessee company are duly audited under the Companies Act, 1956 as well as under s.44AB of the Act. 126 to 176 The auditors have issued unqualified reports 9 Excise Authorities issued a Certificate of no discrepancy in last ten years. The assessee is under the strict vigilance and supervision of the state excise authorities and under the Madhya Pradesh Excise Act, 1915, the appellant company is required to maintain the minutest details of each and every receipt of raw materials, packing materials & incidental goods and as also of each and every issue of the sales made by it. For ensuring that there is no evasion of any state excise duty, a 24X7 close vigilance is kept by the excise authorities in the business premises of the asses....
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....ed that such excel sheets were prepared by himself or by anyone on his instructions. The assessee company or any of its functionaries, till the date of the search, were not aware of existence of any such excel sheet in the computer system of any of its employees. - - 13 Dumb Documents Subject excel sheets are dumb documents. In such excel sheets, the datas have been written in the form of two digits with decimals figures such as '19.54' , '33.63', '17.22', '34.08' etc. From such noting, it cannot be interpreted that whether the figures are written in their full denominations or in the coded form. - - 14 Names of strangers mentioned in the Digital Data In excel sheets, names of various persons have been mentioned. But, the assessee never carried out any financial transaction with such persons. - All the books of the assessee for all the years under appeal were duly produced before the ld. AO for the purpose of making necessary examination and verification, but, upon such verification, not even at one place, the name of any of the persons, as mentioned in the seized datas was found by the ld. AO. 15 Cheques menti....
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.... 1370 & 1371 Shri Madhok, in reply to Q. Nos. 5,6,7 & 8, categorically denied of any nexus of the assessee company with such sheets. 20 No variation in the stock or cash found during the search No case of suppression of production was found during the search. Further, no excess cash or shortage of stock was found. Power charges shown in the audited financial statements fully commensurate with the production shown in such statements. - Without there being any collateral evidence, it was highly unjustified to presume any unaccounted sales. 21 If receipts are assumed then, corresponding expenditure has also to be assumed Even if it is presumed that the assessee made any unaccounted sales, then as as natural corollary, the incurrence of expenses towards purchases and related costs cannot be overruled. For the A.Y. 201617, in which the assessee itself has shown a higher amount of Gross Turnover, Gross Profit, GP Margin, Net Profit and NP Margin, there could not have been any presumption that any expenditure relating to the alleged unrecorded sales had already got claimed by the assessee in its regular books of account. - It ....
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....no. 233 of LPS-13, as reproduced by AO in the Order, were duly recorded in regular books of assessee. Cash vouchers were not found recorded in the books. 176 & 177 Statement showing details of vouchers seized and corresponding recording thereof on various dates in the regular books of assessee. Thus, there is no case of suppression of sales. 18. Reference was also made to the detailed submission of the assessee on this issue made before the CIT(A) which is placed at page no. 89 to 113 of Paper Book for A.Y. 2016-17, Page No. 6 to 34 of Paper Book for A.Y. 2017-18 and Page No. 6 to 10 of Paper Book for A.Y. 2018-19. 19. According to the assessee, the additions of Rs. 3,55,27,000/- and Rs. 2,56,52,000/- respectively for A.Y. 2016-17 and A.Y. 2017-18 u/s. 69A have been made by the AO without any rational basis. The assessee, in its defence, has denied the veracity of the loose excel sheets, recovered from the computer system of one of its employees namely Mr.Mahesh Chandra Verma. 19.1 The counsel of the assessee also contended that once, one reach to a logical conclusion that the assessee was indulged into out of books trading transactions of sales and purchases of l....
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....ncome', and not hypothetical income. For such proposition, the assessee relied upon the decision of the Jurisdictional Hon'ble High Court of Madhya Pradesh in the case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 (MP). 19.2 After taking into consideration the facts and submissions made by the assessee, the ld. CIT(A) held that since the assessee's unit was under strict vigil of the state excise authorities, it could not be inferred that the assessee effected unaccounted sales of the liquor manufactured by itself. However, the ld. CIT(A) on the basis of date wise digital data found, reached to a conclusion that the seized data pertained to the sale of liquor procured by the assessee from some other dealers of the liquor. Thereafter, the ld. CIT(A), by applying a net profit rate of 15% on the total suppressed sales, as determined by the AO, at Rs. 3,55,27,000/- and Rs. 2,56,52,000/- respectively for the A.Y. 2016-17 and A.Y. 2017-18, confirmed the additions of Rs. 53,29,050/- and Rs. 38,47,800/- in the assessee's income for the A.Y. 2016-17 and A.Y. 2017-18 thereby deleting the remaining additions of Rs. 3,01,97,950/- and Rs. 2,18,04,200/- for the aforesaid two years. 19.....
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....ing the trading additions in its income without first rejecting the books of account by invoking the provisions of s.145(3) of the Act. Again, in our considered opinion, these grounds of the assessee have no merit for the reason that the AO before making the impugned additions, had issued a specific show-cause notice to the assessee requiring it to make its explanation on the subject issue. The AO, after taking due consideration of the reply of the assessee, has made the impugned additions on the subject issue. Thus, in such circumstances, merely because the AO has not quoted the specific section for making the subject additions in the assessee's income, the entire addition cannot be regarded as illegal. Thus, in our opinion, the ld. CIT(A) has rightly dismissed this ground of the assessee and we do not find any reason to interfere with the findings of the ld. CIT(A) on this issue. Accordingly, the Ground Nos. 2(b) & 1(b) so raised by the assessee for A.Y. 2016-17 and A.Y. 2017-18 respectively have no merit and are hereby Dismissed. 22. Now, coming to the remaining ground nos. 2(c), 2(d) and 1(c), 1(d) raised by the assessee for A.Y. 2016-17 & A.Y. 2017-18 and also, the ground n....
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....9,050/- and Rs. 38,47,800/- respectively for A.Y. 2016-17 and A.Y. 2017-18 by upholding the net profit of the assessee company on such suppressed sales at an estimated rate of 15% for every year. 23. Before us, the counsel of the assessee has contended that the net profit @15% so adopted by the ld. CIT(A), by taking simple average of the profits shown by the assessee company for the years under consideration, is excessive and the same deserves to be taken into consideration under a circumstance that the net profit in the trading transactions is lesser than the one in that of a manufacturing business. We find sufficient merit in the contention of the counsel of the assessee company that the net profit so derived from trading of liquor is less than the one from a manufacturing business. This Tribunal in the case of ACIT vs. Avinash Chalana & Co. (2013) 36 CCH 0319 (IndTrib) has worked out the net profit in the case of liquor trade @ 1.77%. Thus, keeping in view the totality of facts and circumstances of the case, we modify the orders of both the lower authorities and direct the Assessing Officer to work out profit of undisclosed sales transactions from trading business, aggregatin....
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....e assessee has also raised its Ground No. 3(a) & 3(b) challenging the action of the ld. CIT(A) in giving partial relief on the subject issue. A summary of the quantum of addition before us on the subject issue along with the respective grounds raised from both sides, as furnished by the assessee, is given as under: ISSUE- III: Unaccounted Cash Receipt from Syndicate Assessment Year Assessee Department TOTAL Ground No. Amount Ground No. Amount 2015-16 - - - - - 2016-17 - - - - - 2017-18 3(a) & 3(b) 4,50,000 3 25,50,000 30,00,000 TOTAL 4,50,000 25,50,000 30,00,000 25.2 During the course of the assessment proceedings, the AO, on the basis of some digital documents seized, noted that during the previous year relevant to the assessment year 2017-18, the assessee had received a sum of Rs. 30,00,000/- in cash on account of its share in some Syndicate. Accordingly, the AO required the assessee company to furnish its explanation on the aforesaid issue. In response, the assessee company furnished its detailed explanation. However, the ld. AO, by discarding the submissions made ....
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....e various districts including the Alirajpur District, all the supplies and sales of the liquor made by the assessee company, to the various retailers of different Districts including the Alirajpur District, are duly recorded in the regular books of account of the company. - - 5 The assessee, vide its letter dated 09-12-2019, had brought to the notice of the AO that some unsocial elements with the criminal mind used to represent their spurious liquor, as manufactured by the assessee company, where as in fact, such liquors were not so actually manufactured by it. These type of criminals do not only manufacture the liquor by using the brand name of the assessee company, but also of other manufacturers having popular brands. In past too, the assessee company had noticed such malpractice and complaints from time to time, to curb this illegal practice, have been lodged by it before the police authorities. 547 to 598 Copies of some complaints lodged by the assessee company before the Police Authorities are enclosed. 6 Probably the above kind of criminals might have sold their own manufactured liquor to the syndicates by ostensibly showing them to be belonging to th....
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....orded in the books and no unaccounted cash or stock was found and therefore, as per the assessee, the provisions of s.69A of the Act could not have been invoked by the AO. Further, as per the assessee, the impugned addition has been made by disturbing trading results without rejecting books of account u/s. 145(3) when no defect or discrepancy was found in books maintained by assessee. According to the assessee, during the course of search, except finding some imaged datas, in the form of excel sheets, not a single incriminating loose paper, or document or sales invoices or any other evidence regarding the unrecorded removal of goods from the factory premises and the sales thereof, without making recording in the regular books of account, was found. The assessee submitted that it had never ever carried out any transaction of credit sales or cash sales, which remained unrecorded in its regular books of accounts. As regard statement of Mr.Sunit Madhok, stating that the assessee company was supplying Country Liquor to retailers in the various districts including the Alirajpur District, all the supplies and sales of the liquor made by the assessee company, to the various retailers of di....
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....lectronic record which are said to be copies of Excel Sheet, Excel work note book etc., non-compliance of Section 65(B) of the Indian Evidence Act renders the document inadmissible in the eye of law. For such proposition, the assessee placed its reliance on the decision of the Hon'ble Madras High Court in the case of M/s. Vetrivel Minerals and others Vs. ACIT, Madurai (2021) 42 ITJ 55 (MadHC). 26.2 The ld. CIT(A), after taking into consideration the facts and submissions made by the assessee, applied a net profit rate of 15% on the total suppressed sales of Rs. 30,00,000/-, confirmed an addition of Rs. 4,50,000/- in the assessee's income for the A.Y. 2017- 18 thereby deleting the remaining addition of Rs. 25,50,000/-. The assessee, in its appeals before us, has also taken an alternate plea challenging the action of the ld. CIT(A) in taking an estimated rate of net profit of 15% for computing the income from unaccounted sales. 26.3 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides. We find that the as....
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....of unaccounted purchases and expenses made/incurred by it for effecting such suppressed sales. In such an eventuality, only the net profit embedded in such sales transactions could have been added to the total income of the assessee company as held by the Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 (MP). We find that the ld. CIT(A), while adjudicating the subject issue of suppressed sales, has also referred to the aforesaid decision of the Hon'ble MP High Court and has sustained additions of Rs. 4,50,000/- for A.Y. 2017-18 by upholding the net profit of the assessee company on such suppressed sales at an estimated rate of 15% for every year. 27.1 Before us, the counsel of the assessee has contended that the net profit @15% so adopted by the ld. CIT(A), by taking simple average of the profits shown by the assessee company for the years under consideration, is excessive and the same deserves to be taken into consideration under a circumstance that the net profit in the trading transactions is lesser than the one in manufacturing business. We find sufficient merit in the contention of the counsel of the assessee....
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....xplanation denying all the allegations leveled by the AO on the basis of the messages found in the personal mobile of Shri Mukesh Jhanwar. However, the ld. AO, by discarding the submissions made by the assessee, made additions of Rs. 36,50,000/- and Rs. 10,00,000/- in the total income of the assessee for the assessment years 2017-18 and 2018-19. 28.3 Being aggrieved with the action of the AO, the assessee preferred separate appeals for the subject assessment years before the ld. CIT(A). During the course of the first appellate proceedings, the assessee company made detailed written submissions.But ld. CIT(A), rejected the submissions made by the assessee and confirmed the entire additions so made by the AO on the subject issue for the aforesaid assessment years. 28.5 Against the additions confirmed by the Ld. CIT(A), the assessee is now in appeal before us. 28.6 Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: "D. Key Points of Assessee's Submission and Relevant Pages of Paper Book: S. No. Submission in Brief Relevant Pages of Paper Book for A.Y. 201718 Remarks 1 Addi....
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....sted that the assessee can produce Shri Mukesh Jhawar for the examination, but, the AO did not provide opportunity to the assessee to produce Shri Mukesh Jhawar. 7 The action of the AO in attributing the messages communicated by one of the employees of the assessee company to the financial affairs of the assessee is also against the provisions of s. - It is not the case of the AO that the subject messages were found stored in any of the electronic devices belonging to the chief 292C of the Act. functionaries of the assessee. 8 Absolutely no justification for the AO to level the charge of hawala transactions against the assessee company and particularly, in a circumstance, when Shri Mukesh Jhanvar, on Oath, had admitted that the messages were pertaining to his personal affairs only. - - 9 It will not be open to the revenue to challenge the statements made by the deponent in their affidavits later on, if no cross examination with reference to the statements made in the affidavits is done. - Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 (SC) 28.7 Reference was also made to the detailed submission of the assessee on this is....
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....xamine Shri Mukesh Jhawar be given and further, summons u/s. 131 or notice u/s. 133(6) may be issued to Mr. Mukesh Jhawar to verify the contents of his Affidavitbut, the AO did not provide opportunity to the assessee to produce Shri Mukesh Jhawar. The assessee further contended that the action of the AO in attributing the messages communicated by one of the employees of the assessee company to the financial affairs of the assessee is also against the provisions of s. 292C of the Act. The assessee also submitted that the AO was not justified to level the charge of hawala transactions against the assessee company and particularly, in a circumstance, when Mr. Mukesh Jhanvar, on Oath, had admitted that the messages were pertaining to his personal affairs only. 29.1 We find merit in the contentions of the ld. Counsel of the assessee that mere finding of the messages in the personal mobile of an employee of the company regarding some alleged hawala transactions without bringing on record any corroborative material to establish such transactions cannot lead to any concrete conclusion against the assessee that it had carried out such hawala transactions. Further, we also find that Mr. M....
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....ee company made detailed written submissions in respect of the chargeability of tax as per normal rates and not as per the provisions of s.115BBE of the Act in its case. 31.4 The ld. CIT(A), by accepting the contentions of the assessee, made a finding that the additions so sustained by him in the assessee's income were chargeable to tax as per the normal rates of income-tax only and the provisions of s.115BBE of the Act shall not be applicable in the assessee's case for the subject assessment years. 31.5 Against the findings of the Ld. CIT(A), the Revenue is in appeal before us. 31.6 Before us, the Ld. CIT(DR) vehemently argued supporting the observations and findings of the AO on this issue. 31.7 Per Contra Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: "D. Key Points of Assessee's Submission and Relevant Pages of Paper Book: S. No. Submission in Brief Relevant Pages of Paper Book Remarks 1 The AO has invoked the provisions of s. 115BBE, in respect of four additions made in the income of the assessee, For A.Y. 2017-18 on the grounds of: (i) disallowance of ce....
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.... 31.8 Reference was also made to the detailed submission of the assessee on this issue made before the CIT(A) which are placed at page no. 48 to 51 of the Paper Book for A.Y. 2017-18 and Page No. 17 to 20 of Paper Book for A.Y. 2018-19. 32. Before us, the assessee submitted that since the additions so made, by themselves, are not sustainable, the question of applicability of s. 115BBE of the Act, which provides for charging sum specified income at a higher rate does not arise at all. The AO has invoked the provisions of s.69C (for disallowance of interest) and s.69A (for out of books sales, hawala transactions and cash receipt from syndicate) for making the respective additions. The assessee contended that for disallowance of interest, the provisions of s.69C could not have been invoked and Sec. 69C can be invoked only if an assessee is found to have incurred any expenditure which is not found recorded in the regular books of account. As per the assessee, in its case, the entire interest was duly recorded in the regular books of account of the assessee. Further, according to the assessee, sec. 69A can be invoked when an assessee is found to be in possession of any u....