TaxTMI 
TaxTMI 
2022 (4) TMI 1180
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.... are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal A.Y. 2016-17 as the lead year, the relevant Cross appeals are ITA 1056/Mum/2021 and 1697/Mum/2021. 3. Brief facts of the case are, the assessee filed its original return of income on 29.11.2016 declaring total income at Rs..50,58,20,580/-. The return was processed u/s 143(1) of the Income Tax Act, 1963 (in short Act). Subsequently, a search action was carried out in the case of D'Décor Group on 6.3.2018. Consequent to the search action, the case of the assessee, being one of the entities of D'décor Group, was centralized vide charge order u/s 127(2) dated 29.05.2018. 4. Consequently, notice u/s 153A dated 11.01.2019 were issued and served on the assessee. In response, the assessee filed its return of income on 09.02.2019, declaring the total income as declared in the original return of income. Notices u/s 143(2) and 142(1) were issued and served on the assessee. In response, AR of the assessee attended and filed the relevant information as called for. 5. During assessment proceedings, the Assessing Officer ....
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....e particulars of expenses incurred through credit cards. Since, AR has not submitted satisfactory explanation to establish the said expenses are incurred wholly and exclusively for the purpose of business, he disallowed 10% of the declared expenses to the extent of Rs..3,87,67,310/- u/s 37 of the Act. 8. Further, Assessing Officer observed that the Investigation Wing found that the group entities received the sale proceeds on sale of old machinery/looms includes cash part of 28% and the rest is recorded in the books of account. Accordingly, he observed that the assessee had sold loom amount to Rs..45 lakhs. Therefore, he made addition of 28% of the above sales value as undisclosed income. (4500000/72*28) Rs..17.50 lakhs. Alongwith with the above addition, he also calculated unexplained brokerage @2% on the above sale of machinery to the extent of Rs..125,000/-. 9. Aggrieved, the assessee preferred an appeal before CIT(A)-54, Mumbai and raised a legal issue that the disallowance was made without any incriminating material found during the search proceedings also filed the detailed submissions relating to the disallowances and additions made by the Assessing Officer. After cons....
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.... the respected parties to prove the genuineness of the transactions. The undisputed facts are that the assessee is in the business of manufacturing and processing of fabrics and dealing in all kinds of furbishing and related items. Maintaining the garden at the factory site and engaging labour to do the mending work in embroidery are a part of the business activity of the assessee for which the assessee had taken the services of the aforementioned four parties. All the four parties have confirmed receiving payments from the assessee and have filed their returns of income. As alleged by the AO, there are certain cash withdrawals from the bank accounts of these parties but there is nothing suspicious about this as the assessee had to make payments to the labour by cash. The AO appears to have made the addition merely on the basis of presumptions and surmises without any concrete evidence against the assessee. The objections of the AO are that there is no written contract agreement between the assessee and these parties but that itself will not convert the contract into a bogus one. Similarly, the fact that these ladies has not visited the factory premises of the assessee should not b....
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.... Securities Pvt. Ltd. v DCIT (ITA No: 5174/Mum/2007). The facts of the case are that a search action was carried out on 06.03.2018 u/s 132 of the Act at the premises of M/s D'décor Export group and M/s. D'decor Home Fabrics group. The appellant belongs to D'décor Export group. The D'eccor Export group is managed and operated by Shri Sanjay Arora whereas M/s. D'decor Home Fabrics group is managed and operated by Shri Ajay Arora, Both these groups are managed and operated by two different individual. The offices of these two groups are located at different floors of same building. Employees of these two groups are different and there is no common employee working for both group. The nature of products manufactured by both the group are different in their quality, style and design. In the case of M/s. D'décor Home Fabrics group, a document containing receipt of cash on sale of old loom machinery was found and seized from premises of M/s. D'décor Home Fabrics group. The statement of Shri Sandeep Galagali, an employee of D'décor Home Fabrics group was recorded during the search, in which he admitted having received cash over an....
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....of law arises in these appeals; they are dismissed." (ii) CIT vs Cordial Company [308 CTR 159 Ker] "Search and seizure-Assessment under s.153C-Computation of undisclosed income-Addition made under s. 69 in the names of assessee-firms on the basis of document seized in search of third party was invalid in the absence of any corroborative evidence-Presumption under s. 292C is applicable only against the person searched-Reliance by AO on the handwritten notes of one of the partners of assessee-firms was invalid in the absence of admitted handwriting-AO did not brother to verify fair price of the property while submitting remand report called for the CIT(A)}-Specific bank transactions referred to by the AO have not been cross verified with the exact amounts shown as investments in the documents seized from A Group-Addition rightly deleted by Tribunal" (iii) CIT vs Concorde Capital Management Co Ltd [334 ITR 346] "Search and Seizure-Block assessment in search cases-No incriminating material found during search-Addition towards undisclosed income on the basis of statement of a third party not sustainable" (iv) DCIT vs Mahendra Ambalal Patel [4....
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.... facts & circumstances without appreciating that: a. The transactions of the assessee with the four labour contractors are accommodation entries since the labour contractors in their Statements recorded on oath had admitted that they had no knowledge for which payments were made to them, and that they only had superticial knowledge of the business run in their names and that they failed to substantiate services rendered by such labour contractures. b. The deposit of cheques in the names followed by immediate withdrawal of cash. c. The onus lies on the assessee to prove the expenses incurred by it on labour contract payments were genuine and the services were genuinely used but the assessee had failed in proving its genuineness. d. There existed no contractual agreement between the assessee and the labour contractor parties, in absence of which huge expenses incurred which is also against the normal commercial practices. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in reducing the additions made on account of credit card expenses being personal in nature from 10% to 5% hence, given relief of Rs. 23,....
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....3(2) of the Act was till 30/09/2017; however, no notice has been issued. Search u/s 132 of the Act took place at the premises of the assessee on 06/03/2018. Thus, on the date of search no assessment proceeding was pending in the case of the assessee; hence, this was an unabated year. In our respectful submission considering the fact that subjected year is an unabated year, the notice issued u/s 153A of the Act must state as to what is the incriminating material found during the course of search action which justifies the additions/disallowances in a completed assessment year. In absence of such jurisdictional requirement, the assessment order passed u/s 143(3) r.w.s. 153A of the Act does not sustain; hence, the assessment order passed by the AO shall be quashed. In support of this proposition, Your Honours attention is drawn to recent judgment of Hon'ble Bombay High Court in the case of Underwater Services Company Limited vs ACIT 1(2021) 5 NYPCTR 898 (Bom) - Bombavl wherein the Hon'ble High Court has held that "2. We have considered the notice dt. 29th Nov., 2018 which is impugned in this petition. The notice is very brief and is bereft of any particulars. The same....
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....tep which is required to be undertaken. The purpose of show-cause notice is to enable a party lo effectively deal with the case made out by respondent [Om Shri Jigar Association vs. Union of India (1995) 123 CTR (Guj)105 : 1994 SCC Online Guj. 77]. ... 6. Because s. 153A provides that an assessment has to be made under the said section only on the basis of seized material, the notice dt. 29th Nov., 2018, which is impugned in this petition should have mentioned whether the seized material was under s. 132 or books of account, other documents or any assets are requisitioned under s. 132A. The notice is absolutely silent as could be seen from above. The notice says "you are required to prepare true and correct return of income" and "setting forth such other particulars". Petitioner had filed their returns for the assessment year in question, which they thought was the true and correct return of income and that it contained ail other particulars prescribed. If respondent felt that was not enough and petitioner should file a fresh true and correct return of income because of the search, then respondent should certainly indicate in its notice what were the seized material under ....
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....se of search action which constitute incriminating material to justify the additions/disallowance. Copies of these bills have been produced before Your Honour during the course of hearing and the said bills have been shown to learned CIT(DR) also. In our respectful submission, bills found during the course of search action was of Shri Krishna Enterprises; however, no disallowance / addition has been made of any transaction with Shree Krishna Enterprises. It is submitted that reliance of CIT(DR) on these bills does not have any impact on the above jurisdictional ground of the assessee. In view of the above facts and principles laid down by the jurisdictional High Court, we prays that the order passed u/s 143(3) r.w.s. I53A of the Act making disallowance / addition therein shall be quashed. Departments appeal [ITA 1697/Mum/2021] Ground 1: Disallowance of Rs. 5.58 Crores being payments made to four contractors namely Anita Agarwal (Prop of Shreeji Enterprises), Sampa Balaram Das (Prop of Tanushree Arts), Sheela Singh (Prop Shiv Shakti Enterprises) and Manjuladevi Jha (Prop of Jay Ambe enterprises). The order of CIT(A) is challenged by the department....
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....er 22, Shri Durgesh Agarwal said that he is rendering services since 1985. The affidavit of husband of Shri Durgesh Harswaroop Agarwal is filed at page 539-542 of paper book wherein he has confirmed that the business activities are looked after by him and he regularly visits to the factory premises of the assessee. Above facts proves beyond all reasonable doubts that the Appellant has availed the services of Shreejee Enterprises and paid the consideration for the same. (ii) Sampa Balaram Das The services rendered by M/s. Tanushree Arts is of mending on schifli embroidered fabrics. Statement of Smt. Sampa Balaram Das was recorded u/s131 of the Act. Copy is filed at page 176 to 179 of paper book. The operative part of the statement recorded are stated as under: "Q9. Please state the detail of your business activities and the address of your business office " Ans. Sir, I have a proprietary business in the name of M/s. Tanushree Arts. As per my knowledge, M/s. Tanushree Arts is in the business of contract work of embroidery work which is of mending of embroidered fabrics and address of the business office is my residence itself. And Sir, all the busi....
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....stated in reply to question number 10 that he has supplied labour to Appellant. Operative part of question and answers reads as under: Q. 10 Please state the name of all the companies to which you have supplied labour during last 6 years. Ans. I have supplied labour to D'decor HOME Fabrics Private Limited and D'decor Export Private Limited and Agatpal Industries Private limited. All these 3 companies are situated at Boisar, MIDC" (iv) Manjula Devi Jha: The services rendered by M/s Jai Ambe Enterprises is mending of Multi Embroidered fabrics Statement Smt. Manjula Devi has been recorded u/s 131 of the Act is filed at page 186 to 188 of paper book wherein she has admitted that she provides laborers to the assessee. The question and answer reads as under: "Q.5 Please give details of your sources of income. Ans. My source of income sis business income from proprietorship business namely M/s. Jay Ambe Enterprises. Q.6 Please state the nature of business being run by you in name of M/s. Jay Ambe Enterprises. Ans. The business in the name of M/s.Jay Ambe Enterprises is being run by my son Sachin Jha. I am not ....
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.... legal requirement to have agreement for the such arrangement. Ground 2 refers to adhoc disallowance of expenses @ 5%. In our respectful submission, there was no evidence found that credit card expenses are personal in nature. Assessee being a company, there cannot be personal expenses. Thus, this ground of department shall be dismissed. Ground 3 and 4 pertains to addition of consideration on loom sale received partly in cash and commission paid thereon. This addition has been made on the basis of statement recorded of Shri Sandeep Galagali. In our respectful submission, Shri Sandeep Galagali is not the employees of assessee company. The assessee company is owned and operated by Shri Sanjay Arora whereas Shri Sandeep Galagali is employee of M/s. D'decor Home Fabrics Private Limited which is owned and managed by Shri Ajay Arora (brother of Shri Sanjay Arora). Statement of Shri Sandeep Galagali has been filed during the course of hearing. In his statement, in response to question no 11. he has stated that he only knows D'decor Home Fabrics Pvt Ltd which is not the assessee company but a company owned and managed by Shri Ajay Arora. Therefore, in our....
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....ls of incriminating material found during the search. In absence of such crucial details, whether the assessment made under section 143(3) r.w.s 153A is bad in law. As indicated earlier the notice issued u/s 153A does not contain any details of incriminating material or any reasons for which the assessment is reassessed u/s 153A of the Act, we observe that in the similar situation, the Hon'ble Bombay High Court in the case of Underwater Services Company Limited (supra) held that issuance of notice is the preliminary step which enables the assessee to effectively deal with the case made out by the revenue. Further, the section 153A provides that an assessment has to be made under the said section only on the basis of seized material u/s 132 or 132A, in the absence of such details in the notice issued under the said section, the assessee is not in a position to appreciate which return of income should be filed in response to the notice issued u/s 153A, whether the original return of income filed or revised return of income. As held that the Hon'ble Court held that nothing prevented the revenue from mentioning in the notice the basis for issuing the notice u/s 153A so that the assesse....
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....nclined to allow the ground raised by the assessee. The assessee has also made other propositions and we already deliberated two propositions i.e., additional ground and first proposition decided in favour of the assessee, the deliberation on the other propositions will lead to academic interest hence not adjudicated. 20. The assessee has not pressed the ground no 2, accordingly it is dismissed as not pressed. 21. In the result, appeal filed by the assessee is partly allowed. 22. Coming to the revenue appeal, we already adjudicated that the reassessment is bad in law, still we prefer to address the grounds raised by the revenue for the completeness. 23. With regard to Labour contract expenses, we observe that the Assessing Officer made the addition on the basis of the statement recorded from the four labour contractors, who are proprietors of the concerns. The Investigation Wing found in the above statements which was recorded during search that the concerns were registered in the name of spouses but the actual activities were carried by their spouses, further they found that most of the records and labour activities were controlled by the assessee itself. Based on the ....
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....r that the absence of the written contracts will not make the transactions bogus and the ladies did not visit the factories because their spouses/son were carrying out the business and the respective spouse/son have already confirmed the same by filing proper affidavits. By considering the findings of the Ld.CIT(A) and facts on record, we have no hesitation to confirm the decision reached by the Ld.CIT(A). Therefore, we do not see any reason to interfere with the above findings and accordingly ground raised by the revenue is dismissed. 25. With regard to credit card payments, we observe that Assessing Officer has made the disallowance on the basis of adhoc without their being any basis, merely because the assessee incurred such huge expenses, it does not mean that it is not for the business. The Assessing Officer should have verified the same in detail before making any such disallowances. The courts have held that the adhoc disallowances cannot be made without their being any basis. The credit cards facilities are given to the Directors and other employees only facilitating payments of expenses to be made on behalf of the company. Similar view was also expressed by ITAT Delhi b....