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2022 (4) TMI 1592
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.... this common order. 2.1 Grounds of appeal raised by the Revenue for AY 2011-12 in IT(SS)A No.19/Ind/2020: "1. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in not appreciating the facts mentioned in the remand report and in accepting the additional evidence submitted by the assessee during the appeal proceedings, without furnishing any proper justification or identifying the circumstances which have hindered the assessee to comply during assessment proceedings, as laid down in rule 46A of the Income Tax Rules, 1962. 2. On the fact and in the Circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs. 6,25,000/- made by the Assessing Officer on account of disallowance of expenses u/s. 40A(3) of the Income-Tax Act, 1961. 3. On the fact and in the Circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs. 4,17,36,813/- made by the Assessing Officer on account of unexplained expenditure" 2.2 Grounds of appeal raised by the Revenue for AY 2012-13 in IT(SS)A No.20/Ind/2020: "1. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in not appreciating the facts mentioned in the remand....
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....e that the assessee is company carrying out the business of manufacturing of liquor. The assessee furnished its original returns of income for the various years u/s. 139 of the I.T. Act, 1961. Search and seizure operations u/s. 132 were carried out at various premises of Shivhare group and the assessee on 07/01/2016. Consequently, notices u/s. 153A were issued to the assessee for A.Y. 2010-11 to A.Y. 2015-16 on 13.02.2017. In response to the above notices, the assessee filed returns of income for A.Ys. 2010-11 to 2015-16 on 07/07/2017. The details of returns of income for A.Y. 2011-12, A.Y. 2012-13 and A.Y. 2014-15, the assessment years under appeal, are as under: A.Y. Date of filing of Return u/s. 139 Returned income (in Rs.) Date of filing of Return in response to the notice u/s. 153A Income declared in Return u/s. 153A (in Rs.) Additional Income offered, if any (in Rs.) 2011-12 06.12.2011 (-)86,97,541 07.07.2017 (-)86,97,541 Nil 2012-13 30.09.2012 (-)2,53,19,737 04.04.2018 (-)2,53,19,737 Nil 2014-15 29.11.2014 (-)68,21,711 04.04.2018 (-)68,21,711 Nil 3.2 In case of the assessee, during the course of the assessment proceedings, a reference was made for sp....
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....round No. 1 of the Revenue for A.Ys. 2011-12, 2012-13 & 2014-15 8.1 Through the Ground No. 1, common for all the assessment years under consideration, the revenue has challenged the action of the ld. CIT(A) in not appreciating the facts mentioned in the remand report and in accepting the additional evidences submitted by the assessee during the appeal proceedings, without furnishing any proper justification or identifying the circumstances which have hindered the assessee to comply during the assessment proceedings, as laid down in Rule 46A of the Income-Tax Rules, 1962. 8.2 Before us, learned CIT(DR) vehemently argued that the ld. CIT(A), while passing the subject Order, has not appreciated the facts mentioned in the Remand Report by the AO. The ld. CIT(DR) further contended that during the course of the appeal proceedings, the assessee could not justify the circumstances which prevented it to make compliance before the AO as contemplated under Rule 46A of the Income-Tax Rules, 1962. 8.3 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 Relev....
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....rnished its returns u/s. 153A on 07/01/2017 and thereafter, in its case, a reference was made for the special audit u/s. 142(2A) on 22/12/2017 and Special Auditors had submitted their Report on 18/06/2018. After receiving the Report from the Special Auditors, the AO issued notice to the assessee on 23/07/2018 and finally, within 20 days, he framed the assessment orders on 13/08/2018 and due to paucity of the time, the assessee was prevented from furnishing the various evidences before the AO and therefore, the same were furnished before the ld. CIT(A) with a prayer for admission of such evidences under Rule 46A of the Income-Tax Rules, 1962. It was further contended that a copy of the additional evidences furnished by the assessee were duly provided by the ld. CIT(A) to the assessing officer and in response, the assessing officer had duly submitted his remand report on 26/06/2019. Such fact is evident from the para (3) of the ld. CIT(A)'s Order at page no. 21. A copy of the Remand Report dated 25/06/2019 as submitted by the AO to the Office of the ld. CIT(A) is placed at page no. 73 to 78 of the Paper Book for A.Y. 2012-13. According to the assessee, in response to such Remand Repo....
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....oid of any merit, is Dismissed. 10. Ground No. 2 of the Revenue for A.Ys. 2011-12, 2012-13 & 2014-15 and Ground No. 3 for A.Ys. 2012-13 & 2014-15 10.1 Through the Ground No. 2, common for all the assessment years under consideration, the revenue has challenged the action of the ld. CIT(A) in deleting the additions made by the AO on account of disallowance of expenses u/s. 40A(3) of the Act. Further, through the Ground No. 3 for A.Y. 2012-13 & A.Y. 2014-15, the revenue has challenged the action of the ld. CIT(A) in deleting the additions made by the AO on account of disallowance of expenses u/s. 40A(3A) of the Act. 10.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of the assessment proceedings, the books of account of the assessee were audited by the Special Auditors and from such books of accounts, it was ascertained by the Special Auditors that the assessee during the A.Y. 2010-11 to A.Y. 2014-15, made cash expenditure in violation to the provisions of sections 40A(3)/40A(3A) of the Act. The AO vide para (16.7) at page no. 100 of her Order, has given a finding that the assessee could only provide the details of the botteling fee....
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....e Act. For the sake of ready reference, the relevant findings given by the ld. CIT(A) at paras (4.3.2)(b), (4.3.2)(c) and (4.3.2)(e) of his order are reproduced as under: "(b) Assessment Year 2011-12:- On perusal of written submissions filed by the appellant, it has been observed that the appellant has made cash payment of (i) Rs. 2,50,000/- on 17.01.2011 to M/s Baba Shree Bottling Co. and (ii) Rs. 3,75,000/- on 05.01.2011 to Mr Anilesh Tomar. (i) Payments made to M/s Baba Shree Botteling Co. The appellant during the course of appellate proceedings submitted that appellant was in contract with M/s Baba Shree Bottling Co for proving labour for cleaning, filling and packaging of beer bottles and the payments were made after completion of the month to contractor and the contractor shall pay the same to the workers. However, due to liquidity crunch the payments to contractor got delayed and the payments to worker subsequently got delayed. Therefore, all the workers on 17.01.2011 went on a strike demanding their pending dues. Due to strike by all the workers the production work came to halt and appellant in order to maintain smooth production of goods made partial payment to ....
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.... related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequences, which were to befall on account of non-observation of sub-section (3) of section 40A must have nexus to the failure of such object. Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax is relevant consideration which has been overlooked by the Tribunal" The Jaipur Bench of the ITAT in its recent judgment in the case of M/s A Daga Royal arts v ITO (ITA 1065/JP/2016) delivered on 15.05.2018 have considered various decisions of various courts and tribunals and concluded that "In the entirety of facts and circumstances of the case and respectfully following the legal proposition laid down by the various Courts and Coordinate Benches referred supra, we are of the view that the identity of the persons from whom the various plots of land have been purchased and source of cash payments as withdrawals from the assessee's bank account has been established. The genuineness of the transaction has been established as evidenced by the registered sale deeds and lastly, the test of business expediency has been met in the instant case. Furth....
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....,807/- towards vehicle running and maintenance expenses and (ii) Rs. 6,83,760/- on 05.01.2011 to Mr Yogesh Bottlewala. (i) Payments made towards Vehicle running and maintenance:-The appellant during the course of appellate proceedings has taken a plea that a sum of Rs. 43,807/- has been spent on running and maintenance of vehicle which include following payments:- Payment made to Rajpal car Décor for Vehicle repairing Rs. 23,164/- Payment made to Bharmal Glass House for Glass purchase Rs. 5,250/- Payment made to tyre Tune UP for Vehicle repairing (labour) Rs. 250/- Payment made to RR Tyrage Pvt Ltd for purchase of tyre 14,800/- Payment made towards toll charges Rs. 84/- Payment made to Virendra Tyre Service Rs. 80 Misc vehicle and running maintenance expenses R. 179/- Appellant has also filed copy of invoice of payment made to Rajpal Car Décor. On perusal of copy of the said invoice it was observed that no payment is made towards expenses not relating to the vehicle repair and maintenance also none of the expense is excessive. The payment made by the appellant under consideration except one i.e. payment made to M/s Rajpal Car Decor is over threshol....
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....t payment have been made towards freight charges and are also under threshold limit of Rs. 35,000/-. Therefore, addition made by the AO amounting to Rs. 6,07,460/- is deleted. (ii) Payment made to Shri Ritesh Raghuvanshi:- Appellant through its written submissions has stated that Shri Ritesh Raghuvanshi is a marketing manager and sum of Rs. 55,000/- was given as an imprest money. The imprest money is given to meet travelling, lodging, boarding and other expenses of marketing team. The actual expenditure made by Shri Ritesh Raghuvanshi was Rs. 45,634/- and residual imprest money has been adjusted with their salary. In support appellant has also filed copies of tour bills of Shri Ritesh Raghuvanshi. On perusal of the copies of tour bills it is observed that the bills include expenses of stay, food, transportation and mobile bills and are below the threshold limit of Rs. 20,000/-. Thus, addition made by the AO amounting to Rs. 55,000/- is deleted. (iii) Payment made to Shri Rakesh Goswami:- Appellant through its written submissions has stated that Shri Rakesh Goswami is a marketing manager and sum of Rs. 55,000/- was given as an imprest money. The imprest money is given to meet ....
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....TAT Delhi Bench in the case of S R C Aviation P Ltd vs DCIT (2012) 13 ITR 600 (Del Trib) has held that where in any case the payments made in cash were less than the limit prescribed u/40A(3) and the same facts has been accepted/confirmed by the other party accepting such payment, then no disallowance can be made under the provision of section 40A(3) of the Act. Therefore, addition made by the AO amounting o Rs. 10,60,043/- is deleted. In view of the above discussion, the addition made by the AO amounting to Rs. 14,45,478/- & 3,96,635/- in AY 2010-11, Rs. 6,25,000/- in AY 2011-12, Rs. 43,807/- & 6,83,760/- in AY 2012-13, Rs. 3,41,086/- & 6,95,276/- in AY 2013- 14 and Rs. 8,98,830/- & Rs. 10,60,043/- in AY 2014-15 are Deleted. Therefore, appeal on this ground is Allowed. 10.4 Aggrieved with the additions deleted by the ld. CIT(A), the revenue is in appeal before us. 10.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 10.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant part of the assessee's submission is being reproduced as under: "D. Key Points of Assessee's Submission and Relevan....
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....payments made to M/s. Baba Shree Bottling Co., it is submitted that the special auditors, have extracted the details from the ledger accounts maintained by the assessee in its tally system. A copy of the relevant ledger account, in the books of account of the assessee for the relevant previous year, is placed at PB Page No. 220. 3.01 Your Honours, it submitted that the assessee company had entered into a contract outsourcing of labour with the aforesaid concern i.e. Baba Shree Bottling Co. and under such contract, Baba Shree Bottling Co. supplied labourer to the assessee company for washing, filling and packing of Beer bottles. On a perusal of the ledger account submitted above it shall be observed by Your Honour that the assessee company first used to avail services from Baba Shree Bottling Co. and then at the month end makes payment through account payee cheques or online banking services. However, during the year there was only instance where the assessee company was required to make payment exceeding Rs.20,000/- in cash. 3.02 Your Honours, during the relevant previous year only once i.e. on 17-01- 2011, the assessee company made payment to the aforesaid contractor through....
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.... the ledger account of Shri Anilesh Tomar in the books of account of the assessee for the relevant previous year which is placed at PB Page no. 224. 4.03 Your Honours, since in respect of the subject payment of Rs.3,75,000/- the assessee company has not made any claim either under section 37 or under any other provision of the law. The question of any disallowance under s. 40A(3) does not arise. 5.00 Your Honours, it is further submitted that the assessee had maintained regular books of account in its ordinary course of business and such books of account were subject to audit under the provisions of s.44AB of the Income Tax Act, 1961, by a firm of qualified chartered accountants, who after scrutinizing such books comprising of bills, vouchers and ledgers, in depth, as per the requirements of Income Tax Law has duly issued an unqualified Tax-Audit report to the assessee company. A copy of such Tax Audit Report is placed at page no. 99 to 113 of our paper book. Your Honour, the Tax-auditor's at clause no. 17(h) of the tax audit report has issued a clean report for compliance of the provisions of s.40A(3) by the assessee company [Refer PB Page No. 102]. Such fact speaks in volum....
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....ing a sum of Rs.20,000/- which were liable for disallowance under s. 40A(3). 3.01 Your Honours, during the course of assessment proceedings, the learned AO had required the assessee to show-cause as to why the proposed addition in respect of cash payments exceeding a sum of Rs.20,000/- be not disallowed under the provisions of s.40A(3). In response to the aforesaid query, the assessee made its necessary detailed explanation with relevant documentary evidences. Accordingly, the ld. AO, partially, accepted the explanation of the assessee company, thereby rejecting the explanation of the assessee company in respect of the payments of Rs.43,807/- and Rs.6,83,760/-. 4.01 Your Honours, as regard the addition of Rs.43,807/- on the allegation cash payment in excess of Rs.20,000/-, it is submitted that the aforesaid expenses pertains to payment made towards Vehicle Running & Maintenance expenses incurred by the assessee company. 4.01.1 Your Honours, it is submitted that the assessee company on 21-12-2011 had payment of Rs.43,807/- towards various vehicle running & maintenance expenses and the same had been recorded in the books of account by passing only one consolidated single ent....
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.... It is submitted that since the payee was not inclined to accept the payment through banking channel, the assessee, instead of making the lump-sum payment, made the payment to the extent of the sum permissible as per law, in accordance with the provisions of section 40A(3) of the Act. It is submitted that the law does not prohibit any person to make payment of any sum to the extent of Rs.20,000/- in cash to a person on different dates instead of making a lump-sum payment. 6.00 Your Honours, it is further submitted that the assessee had maintained regular books of account in its ordinary course of business and such books of account were subject to audit under the provisions of s.44AB of the Income Tax Act, 1961, by a firm of qualified chartered accountants, who after scrutinizing such books comprising of bills, vouchers and ledgers, in depth, as per the requirements of Income Tax Law has duly issued an unqualified Tax-Audit report to the assessee company. A copy of such Tax Audit Report is placed at page no. 25 to 38 of our paper book. Your Honour, the Tax-auditor's at clause no. 17(h) of the tax audit report has issued a clean report for compliance of the provisions of s.40A(3) ....
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....count of the assessee company and from such tally ledger account only, the special auditors noticed that the assessee had made cash payments exceeding a sum of Rs.20,000/- which were liable for disallowance under s. 40A(3). 3.01 Your Honours, during the course of assessment proceedings, the learned AO had required the assessee to show-cause as to why the proposed addition in respect of cash payments exceeding a sum of Rs.20,000/- be not disallowed under the provisions of s.40A(3). In response to the aforesaid query, the assessee made its necessary detailed explanation with relevant documentary evidences. However, the ld. AO, only partially accepted the explanation of the assessee company, thereby rejecting the explanation of the assessee company in respect of the payments of Rs.8,98,830/- and Rs.10,60,043/- made by the assessee to different persons, as per the details given below : (Amount in Rs.) S. No. Particulars Date of Payment Amount I. Payment made for expenses 1. Payment made to Shri R.S. Bhadoriya 01-04-2013 1,30,660 31-05-2013 3,55,000 01-06-2013 1,21,800 Sub-Total (1) 6,07,460 2. Payment made to Shri Ritesh Raghuvanshi for salary 25-10-2013 55,000 ....
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....as aforesaid, the employees Shri Ritesh Raghuvanshi and Shri Rakesh Goswami had actually incurred expenses amounting to Rs.45,634/- and Rs.43,474/- respectively. Further, the residual imprest money of Rs.9,366/- and Rs.11,526/- respectively had been adjusted towards their salary for the respective period. It is submitted that the actual expenses as incurred by them on tour were below the threshold limit of Rs.20,000/-. In evidence of the same we have furnished a statement as prepared by the aforesaid employees mentioning the details of the expenses, which is placed at PB Page no. 86 to 91. 3.03 Your Honours, as regard the cash payment of Rs.1,00,800/- serialized at S. No.4 of the table above, it is submitted that the aforesaid payment was made to M/s. Iarl Logistics by the assessee against three different freight invoices for transport of its goods from the factory premises situated at Maksi to Deharadun Excise Depot. It is submitted that the aforesaid payments were actually made on three different dates by the assessee company to the aforesaid entity and that too below the threshold limit of Rs.35,000/- as applicable in the instant case, but only one consolidated entry against ....
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.....20,000/- only to the payee on different dates. It is submitted that since the payee was not inclined to accept the payment through banking channel, the assessee, instead of making the lump-sum payment, made the payment to the extent of the sum permissible as per law, in accordance with the provisions of section 40A(3) of the Act. It is submitted that the law does not prohibit any person to make payment of any sum to the extent of Rs.20,000/- in cash to a person on different dates instead of making a lump-sum payment. 5.00 Your Honours, it is further submitted that the assessee had maintained regular books of account in its ordinary course of business and such books of account were subject to audit under the provisions of s.44AB of the Income Tax Act, 1961, by a firm of qualified chartered accountants, who after scrutinizing such books comprising of bills, vouchers and ledgers, in depth, as per the requirements of Income Tax Law has duly issued an unqualified Tax-Audit report to the assessee company. A copy of such Tax Audit Report is placed at page no.35 to 61 of our paper book. Your Honour, the Tax-auditor's at clause no. 21(d) of the tax audit report has issued a clean report....
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....2011-12 4 Copy of ledger account of Anilesh Tomar in the books of account of the assessee company for the F.Y. 2010- 11 224 A.Y. 2011-12 5 Xerox copies of invoices aggregating to a sum of Rs.43,807/- in respect of payments made against vehicle running & maintenance expenses 59-65 A.Y. 2012-13 6 Copies of statements showing details of expenses incurred against the Imprest payment of Rs.6,07,460/- as submitted by Shri R.S. Bhadoriya 82-85 A.Y. 2014-15 7 Copies of statements showing details of expenses incurred against the Imprest payments of Rs.55,000/-, as submitted by the marketing personnels 86-91 A.Y. 2014-15 8 Xerox copies of freight invoices raised by M/s. Iarl Logistics 92-94 A.Y. 2014-15 9 Remand Report of the AO dated 25-06-2019 for the A.Y. 2011-12 & A.Y. 2012-13 73-78 A.Y. 2012-13 10 Rejoinder of the assessee dated 16-07-2019 for the A.Y. 2011-12 & A.Y. 2012-13 79-84 A.Y. 2012-13 11 Remand Report of the AO dated 27-06-2019 for the A.Y. 2014-15 115-120 A.Y. 2014-15 12 Rejoinder of the assessee dated 16-07-2019 for the A.Y. 2014-15 121-127 A.Y. 2014-15 10.7 Besides filing the written submission, as extracted hereinabove, before us, the co....
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....tions on account of disallowance u/s. 40A(3)/ 40A(3A) of the Act in the assessment years under consideration, has not made any single reference to any incriminating material found during the course of the search. Before us, the ld. CIT (DR) has also not brought on record any single incriminating material on the basis whereof the additions have been made by the AO in the assessment order for the years under consideration. We find that the years under appeals are non-abated assessment years. It is a settled proposition of law that addition in non-abated assessment years can be made only on the basis of incriminating material found during the course of search. 11.3 We find support from the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 53 (Del HC) wherein the 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, notice under Section 153 A (1) will h....
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....y the Hon'ble Delhi High Court has been applied by this Tribunal in 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 where assessments have been abated in terms of second proviso to section 153A then Assessing Officer acts under original jurisdiction and one assessment is made for total inc....
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....e 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." 11.5 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 153A of the Act since the additions were not made on the basis of any incriminating material found during the course of search. Thus revenue's appeal for Assessment Years 2005-06, 2006- 07....
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....nvoked. Even on the merits of disallowances, we find that the ld. CIT(A) has given separate specific findings in respect of each and every item of the disallowances made by the AO and we find that the ld. CIT(A) has rightly analyzed the fact & circumstances prevailing at the time of making each of the payments. Thus, in our considered view, there is absolutely no infirmity in the findings given by the CIT(A) and accordingly, the Ground No. 2 for A.Ys. 2011-12, 2012-13 & 2014-15 and Ground No. 3 for A.Ys. 2012-13 & 2014-15 of the Revenue are hereby Dismissed. 12. Ground No. 3 of the Revenue for A.Y. 2011-12 12.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the addition of Rs.4,17,36,813/- in A.Y. 2011-12 on account of unexplained expenditure. 12.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of the search and seizure action u/s. 132 of the Act carried out in the premises of Shri Ramesh Chandra Rai, at Q-8, Ras Bahar, Jhansi (U.P.), one loose paper inventorized at page no. 23 of UPS-1 A-4 was found and seized. The AO, from the subject loose papers, noted that the seized doc....
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....heet of the assessee company on record. Thus, the ld. CIT(A) observed that since no fresh share capital was introduced during the relevant previous year, no addition u/s. 68 could have been made on this count. Accordingly, the ld. CIT(A) deleted the entire addition of Rs.4,17,36,813/- thereby giving full relief to the assessee. 12.4 Aggrieved with the relief granted by the ld. CIT(A), the revenue is in appeal before us. 12.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 12.6 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 the Paper Book: In this context it is submitted as under : 1.00 Your Honours, the impugned addition of Rs.4,17,36,813/- has been made by the learned AO on the basis of a loose paper seized from the premises of Shri Ramesh Chand Rai, one of the directors of the assessee company, inventorized as UPS-1, A-4, Page 23. Such loose paper appears to be in the form of a computerized excel sheet, containing summary of some rough working of capital & interest o....
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.... stated. It shall be observed that against the names of all the above said four companies, the amount of share capital/share application, under the period of 01-04-2006 to 31- 03-2009, has duly been stated which clearly proves that such amount was taken by our company prior to 31-03-2009. Madam, as regard alleged payment of interest, it is submitted that first of all under the provisions of Companies Act, 1956, no interest on any equity share capital can be paid by any company to any shareholder and we were not an exception to it. Even otherwise it is submitted that the said excel sheet appears to be in the nature of some analysis for the purpose of computing return on investment made in the company. In view of the above facts and circumstances, it is submitted that no additions, as proposed at Rs.8,59,82,700/- and 4,17,36,813/- deserves to be made on these counts." 3.00 Your Honours, despite making the explanation as mentioned above, the ld. AO made the addition of Rs.4,17,36,813/- in the assessee's income on the allegation of unexplained interest expenditure incurred by the assessee company. According to the learned AO, the assessee could not produce its books of account....
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....nt case, the learned AO miserably failed to discharge his onus. 4.02 Your Honours, in the instant case, except relying upon the subject excel sheet, the learned AO did not conduct any independent enquiry from the companies/ persons whose names were found mentioned on the subject excel sheet. The learned AO grossly erred in not accepting and considering the explanation of the assessee that under the Companies Act, 1956, then prevailing, it was prevented from making payment of interest on its share capital. The learned AO, without assigning any reason, did not consider the explanation of the assessee that the calculation of the interest might have been merely a computation of notional interest on the funds introduced by various entities, in the assessee company by way of share capital. It is submitted that many a times merely for working out the opportunity cost, such notional interest is computed without there being any actual payment of interest. It is submitted that from the excel sheet no way it appears that the interest payment, as computed in the said sheet, was actually made by the assessee company. 5.00 Your Honours, without prejudice to the above, it is submitted that ....
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.... No. Description of the document Page No. Remarks 1 Copy of the loose paper seized and inventoried as UPS-1, A-4, Page No.23, provided to the assessee in form of 'Annexure G-1' to the show cause notice dated 23-07-2018. 225 - 13.1 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 and also gone through the judgments and decisions referred to and relied upon by both the sides. We have carefully gone through the seized document inventorised as as UPS-1, A-4, Page No.23, a copy whereof has been filed by the asessee in his Paper Book for A.Y. 2011- 12 at page no. 225. The same has also been scanned by the AO at page no. 116 of her Assessment Order. On a perusal of such seized document, we find that it is in the form of some computerized excel sheet with the heading 'Summary of Capital and Interest Workings as on 31.03.2011'. We find that in such excel sheet, in the first column, name of various persons/entities have been mentioned whereas, at column no. 2 & 3, details of capital and interest against suc....
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....all the large expenses. We also find from the copy of the audited financial statements of the assessee company for A.Y. 2011-12 as placed at page no. 99 to 130 of the Paper Book for A.Y. 2011-12, that in such audited financial statements, the assessee as per Schedule 15 has claimed Interest to Bank to the extent of Rs. 1,43,66,439/- and interest to others with a meager sum of Rs. 1,63,923/-. Thus, from such financial statements, we did not find claiming of any expenditure by way of interest on share capital as presumed by the AO on the basis of the seized document. We find merit in the contention of the assessee that merely for the purpose of computing the opportunity cost of investment in the assessee company, computation of interest was made on notional basis and from such computation itself, it cannot be conclusively held that such interest expenditure were actually incurred or paid by the assessee company to various shareholders. In view of such finding, we find absolutely no justification in the action of the ld. AO in making the addition of Rs. 4,17,36,813/- in the assessee's income on account of interest on capital and accordingly no interference is called for in the finding....
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.... net profit embedded in such unrecorded sales could have been subjected to tax. For such a finding, the ld. CIT(A) relied upon the decision of the Hon'ble High Court of Madhya Pradesh in the case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 610 (MP). Further, the ld. CIT(A) also took a note of various other judicial authorities, where the net profit for the business of liquor was estimated at 1.5%. Accordingly, the ld. CIT(A) estimated the net profit of the assessee @1.5% of total unrecorded sales turnover of Rs.12,92,17,877/- thereby deleting the addition to the extent of Rs.6,57,93,349/- on this count. 14.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us. 14.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 14.6 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 the Paper Book: In this context it is submitted as under : 1.00 In the instant case, the impugned addition has been made by the learned AO on the allegation of undisclosed profit e....
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....h was found and seized from the residence of Shri Ramesh Chand Rai, one of the directors of the assessee company. The copy of the trial balance was so seized has been scanned by the learned AO herself at page no. 22 to 37 of the impugned assessment order. 3.02 Your Honours, during the course of the assessment proceedings, the learned AO reached to the conclusion that the trial balance so found actually pertains to the assessee company. After reaching to such conclusion, the learned AO at para (13.1.a) of the order, made a comparison between the sales and purchases that got shown in such trial balance and those shown by the assessee company in its audited books of account. By making a comparison, the learned AO finally reached to a conclusion that the assessee had suppressed profit to the extent of Rs.6,77,31,617/- in its audited books of account and accordingly made the addition. 4.01 Your Honours, on the subject issue, the learned AO, during the course of assessment proceedings, vide her show-cause notice dated 23-07-2018 had required the assessee to furnish its explanation. 4.02 Your Honours, in response to the aforesaid query, the assessee vide its letter dated 04-08-20....
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....rities, who in turn store the same at their registered warehouses, and forward the respective sale proceeds to the liquor company after sales realization. 6.01 That, it shall thus be appreciated that in such a scenario where each and every transaction of sale is being directly made and controlled under the supervision of State Excise Authorities there cannot be any room for unauthorized receipt or removal of the goods from the factory premises without properly recording the same in the regular books of account. 7.00 Your Honours, without prejudice to the above and without admitting the authenticity of the trial balance of so-called ABC Ltd. as of 31-03-2012, it is submitted that the aforesaid addition so made by the learned AO is factually incorrect. It is submitted that it is a settled law that any document seized during the course of the search, if relied upon, has to be relied upon in its entirety and it is not opened to the Income-Tax Authorities to rely upon only a part of the document by disregarding its remaining part. Thus, if the trial balance so seized was purported to be relied upon by the learned AO for the purpose of estimating undisclosed income then such trial ....
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....,76,896/- as shown in the statement of reconciliation [kindly refer PB page no. ...]. For the above proposition, reliance is placed on the following judicial pronouncements: i) Commissioner of Income Tax vs. D. D. Gears Ltd. (2012) 82 CCH 0093 DelHC ii) CIT (Central) Cochin vs. P.D. Abraham @ Appachan (2012) 252 CTR (Ker) 407 9.00 Your Honours, the ld. CIT(A) after considering the facts and circumstances of the case as well as written and oral submissions made by the assessee on the subject issue, Remand Report of the AO and Rejoinder of the assessee, has deleted the entire addition made by the AO on the subject issue. As against the relief so granted by the ld. CIT(A), the Revenue is in appeal before this Hon'ble Bench. In view of the above facts and circumstances of the case, the addition made by the ld. AO on the ground of undisclosed business income has rightly been deleted by the ld. CIT(A) and therefore the action of the ld. CIT(A) deserves to be upheld by this Hon'ble Bench. E. Key Papers filed in the Paper Book (A.Y. 2012-13) on which the assessee wish to place reliance: S. No. Description of the document Page No. Remarks 1 Comparative statement of rec....
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.... the total addition of Rs.6,77,31,617/- made by the AO. Accordingly, the Ground No. 4 of the Revenue for A.Y. 2012-13 is Dismissed. 16. Ground No. 4 of the Revenue for A.Y. 2014-15 16.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the addition of Rs.8,44,86,020/- made by the AO on account of undisclosed income being the difference in figures of capital and loans as per Tally data of ABC Ltd. and the audited accounts of the assessee. 16.2 Briefly stated facts of the issue, as emanated from the records, are that during the course of the search and seizure action u/s. 132 of the Act, two sets of books of account were found and seized. The AO on perusal of these books of account, observed that the assessee maintained day-to-day transaction in tally in the name of M/s. ABC Ltd. and after finalization for statutory purposes, the books are renamed as M/s. Regent Beers and Wines Ltd.. It was further observed that similar fact was also stated by Smt. Sunita Rathore, Accountant of the assessee. Further, the AO, on perusal of LPS-7 Page no. 262, observed that there is an unrecorded addition in capital of Rs.2,52,34,689/- and loan of Rs.....
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....paper seized from GF-1,2, Shekhar Residency, Indore, inventorised as LPS-7 PG 262, she observed that there was an unrecorded addition in capital of Rs. 2,52,34,689/- and loan of Rs. 5,92,51,331/- which apparently, appears to have been invested by the assessee in Fixed Assets. She also averted that the assessee had also incurred unexplained expenditure which were not disclosed in the assessee's audited books of account. While giving such findings, the copy of the seized paper, which is in the form of a Trial Balance of some ABC Limited for the period from 1-04- 2013 to 31-03-2014 have also been scanned and reproduced by the ld. AO at Page No. 39 to 41 of the impugned assessment order. Although, the ld. AO averted that there was a difference in the capital account, loan account and fixed assets as shown in such seized trial balance vis-à-vis the audited financial statements of the assessee for the relevant period but, the working of the alleged differences has not been given by the ld. AO, anywhere, in the body of the assessment order. Even in the show cause notice dated 23-07-2018, the ld. AO, although made the similar allegation, did not furnish any basis for working out the....
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....erely reproduced the copy of the seized trial balance and as also, the reply of the assessee and after production of the both, in a very cryptic and summary manner, made the impugned addition. It is submitted that the ld. AO has not invoked any specific provision of the Act for making the subject addition. The ld. AO has not specified whether the subject addition is purported to be made under s. 68 or s. 69 or s. 69A or s. 69B or s. 69C or s. 69D or any other deeming provision of the Act. It is submitted that mere variation between a tentative unaudited trial balance, which is prepared by a semi-qualified accountant; and an audited financial statement, which is prepared with the assistance of a qualified chartered accountant, who in his turn, follows the various accounting standards and rectifies all principal errors of accounting; cannot be a reason for making any addition. 1.03 Your Honours, our assertion as regard to the claim that the trial balance of ABC Ltd. was merely a rough trial balance drawn by a semi-qualified clerical staff can be verified from the fact that in such trial balance, there are many items such as balance of the deferred tax liability, balance of the res....
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....C Ltd, as averted by the ld. AO herself in the body of the assessment order. 2.02 Your Honours, although, the ld. AO in the body of the assessment order, has not specifically mentioned, but, it appears that the alleged difference of Rs. 2,52,34,689/- has been worked out by the ld. AO not by way of comparison of the trial balance of ABC Ltd. with the audited financial statements of the assessee company but such comparison appears to have been made by the learned AO between the trial balance of ABC Ltd. with the trial balance extracted from the tally accounts of the assessee as on 31-03-2014. For a ready reference, we have extracted a copy of the trial balance from the tally accounts of the assessee company for the relevant previous year and a copy of such trial balance is placed at PB Page No. 95 to 101. On a perusal of such trial balance, it shall be observed that the balance in the capital account is getting appeared at Rs.18,29,70,285/- only as against the same appearing to be at Rs. 20,82,04,974/- (Rs. 21,32,04, 974 (-) Rs.50,00,000) in the seized trial balance of ABC Ltd. thereby giving a difference of exactly the same amount of Rs. 2,52,34,689/- as averted by the ld. AO. ....
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....omparison of the trail balance of ABC Ltd. vis-à-vis trial balance extracted from financial data of assessee company, as aforesaid. A summary of such differences is being given as under: S. No. Particulars Amount [Credit] [in Rs.] As per seized trial balance of ABC Ltd. [ A ] As per trial balance extracted from financial data of the Assessee Company [ B ] Unrecorded [ A-B ] - Bank OD (OBC Bank) - Secured Loans from Banks - Unsecured Loans - Deferred Tax Liablity 11,07,02,215 4,89,35,394 6,42,91,900 - 10,74,03,370 4,89,37,780 50,93,188 32,43,840 32,98,845 (2,386) 5,91,98,712 (32,43,840) TOTAL 22,39,29,509 16,46,78,178 5,92,51,331 3.01 Your Honours, the aforesaid difference of Rs.5,92,51,331/- has basically got crept in for the following counts: (i) non-recording of certain transactions in the financial data of ABC Ltd.; (ii) non-passing of journal entry as regard to bank charges in the books of ABC Ltd.; (iii) wrong classification of share application money as unsecured loans in the trial balance of ABC Ltd. and finally (iv) nonmaking of entries regarding deferred tax in the books of ABC Ltd.. In order to summarize an....
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.... Shri Akash Shivhare (PAN:BBZPS9891L) 71,794 - 71,794 No such amount was factually received by the assessee company 6 Malwa Institute of Technology [MIT] (PAN:AAAAI0965M) 1,00,00,000 - 1,00,00,000 Wrong postings appear to have been made in the books of ABC Ltd. in the account of MIT. First of all, only a sum of Rs.45,00,000/- has been received from the MIT, and that too was received on account of share application money. Secondly, the posting of Rs.55,00,000/- wrongly made in the account of MIT in the books of ABC Ltd. whereas such sum was received from one M/s. Encords Enterprises Ltd. from which the assessee was owing a sum of Rs.55,00,000/- since opening. 7 Encord Commosales P. Ltd. [Share Application Money Account] (PAN: AACCE1193M) 1,95,00,000 - 1,95,00,000 Wrong classification made in the books of ABC Ltd.. The entire amount of Rs.1,95,00,000/- was received towards share application money only. TOTAL (C) 6,42,91,900 50,93,188 5,91,98,712 D Deferred Tax Liability - 32,43,840 (32,43,840) No effect of deferred tax liability, which is notional in the nature, has been given in the books of ABC Ltd. &nb....
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....of the assessee, the fixed assets are recorded net of depreciation. It is submitted that because of this unique feature only, even a difference is getting reflected in the opening balances of fixed assets in both the books. It is submitted that alike, the closing balance, due to non-charging of depreciation in the books, the opening balance is also getting at a very substantial higher amount in the books of ABC Ltd.. It would be appreciated that in the trial balance of ABC Ltd., the depreciation for the relevant previous year is not getting appeared whereas the same is getting clearly reflected at Rs.1,98,43,486/- in the trial balance extracted from the regular tally account. It clearly proves our assertion that the entire difference in the balance of fixed assets is attributable to the non-making of entries in the books of ABC Ltd. on account of depreciation. 6.00 Your Honours, the ld. CIT(A) after considering the facts and circumstances of the case as well as written and oral submissions made by the assessee on the subject issue, Remand Report of the AO and Rejoinder of the assessee, has deleted the entire addition made by the AO on the subject issue. As against the relief so ....
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....sessee was found to have made any unaccounted investment in assets or had incurred any undisclosed expenditure, no material has been brought on record by the AO. From the comparative data, we find that total liabilities of the assessee as on 31/03/2014 as per its audited balance sheet and parallel books data were to the extent of Rs. 34,76,48,463/- and Rs. 43,21,34,483/-, thereby resulting into the subject difference of Rs. 8,44,86,020/-. From such comparative data, there can be drawn only one inference that the assessee had incurred certain liabilities up till 31/03/2014 which although recorded in the parallel books of account of the assessee were not so recorded in the regular audited books of account. Thus, in other words, the present case is a case of suppression of liabilities in audited books of account vis-à-vis the parallel set of books of account. In our considered view, under the scheme of the law, any undisclosed investment or undisclosed expenditure can be subject matter of addition either u/s. 69 or s. 69A or s. 69B or s. 69C of the Act but in the present case the issue is with regard to unexplained liability. We find that the addition of Rs. 8,44,86,020/- was m....
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....tune of Rs.9,38,990/- on account of sale of scrap which are not recorded in regular books of account and the assessee could not furnish the details of receipt from scrap sale, TCS deducted etc. but, it was found that the scrap sales were duly recorded in books of account of M/s. ABC Ltd. The ld. CIT(A) also noted that another addition of Rs.3,54,792/- was on account of legal & professional expenses but the assessee could not file any details with supporting evidence. Accordingly, the ld. CIT(A) confirmed an addition to the tune of Rs.12,93,782/- out of the total addition of Rs.51,57,732/- made by the AO on this count. However, as regard the addition of Rs.38,63,950/- made by the AO on account of an excel sheet found from the PC of Shri Harminder Singh Bhatia, the ld. CIT(A) noted that the AO could not bring any cogent material on record to substantiate that any investment was made by the assessee in the farm house. Thus, the ld. CIT(A), by relying upon the decisions of Hon'ble Supreme Court in the cases of Dhakeshwari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC) and Umacharan Saha & Bros. vs. CIT 37 ITR 21 (SC), deleted the addition to the tune of Rs.38,63,950/- so made by the ....
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.... Scrap Glass sales in our regular books for the F.Y.2015-16, as Annexure D-8.01. Apr - 15 21,36,019/- Copy of ledger account of Scarp Glass sales in ABC Ltd. for the F.Y. 2014-15 The actual sales realization from scrap glass sales was of a higher sum i.e. of Rs.32,91,434/- and not of Rs.21,36,019/- as alleged. A copy the ledger account of Scrap Glass sales in our regular books for the F.Y.2014-15, as Annexure D-8.02. 11-04- 2014 10,00,000/- Copy of abstract of Cash book of ABC Ltd. reflecting amount received from Rishi, New Delhi It appears that our mischievous staff made unaccounted sales and embezzled the same as discussed in reply to query No.7 (supra) -- 02-01- 2014 7,56,248/- Copy of abstract of Expenses account of ABC Ltd. reflecting amount of Rs.7,56,248 on account of MPAKVN Lease rent for the year 2012-13 The expenditure relates to payment of lease rent to MPAKVN. The entire payment was made through demand draft. A higher sum of Rs.17,49,636/- was paid and recorded in our regular books. A copy of the ledger account of lease rent payable to MPAKVN in our books of account is enclosed, as Annexure D-8.03. 30-04- 2013 3,54,792/- Copy of abstract of Expenses ac....
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....r Honours, it is submitted that the impugned addition of Rs.51,57,732/- comprises of three transactions found in the books of account of ABC Ltd., the details of which are as under: Date Amount Nature of account Description of the document seized 30-04-2013 3,54,792 Expense [legal and professional charges] Copy of abstract of Expenses account of ABC Ltd. under the head Legal and professional expenses for the year 2013-14 April-13 to March 2014 9,38,990/- Sales [scrap material sales account] Copy of sale of Scarp Glass sales account in ABC Ltd. for the F.Y. 2013-14 01-04-2013 to 07-11- 2013 38,63,950 -- Excel Sheet abstracted from the PC of Shri Harminder Singh Bhatia containing details of some cash payment to Viaks Jaiswal regarding Gokul Krishi Farm House, Barwah TOTAL 51,57,732 3.01 Your Honours, as regard the transaction of Rs.3,54,792/-, it is submitted that it is in the nature of mere journal entry passed in the books of ABC Ltd. for transferring a portion of legal expenses incurred to the prior period expenses. It is submitted that in the books of the assessee, such entry was already passed in the relevant year. 3.02 Your Honours, as re....