TaxTMI 
TaxTMI 
2022 (4) TMI 1592
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....he parties and are being disposed off by 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 ....
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....essing Officer on account of undisclosed income" 3.1 The brief facts of the case as culled out from the records are 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....
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....relate to the same assessee and the issues raised are common, they were heard together and are being disposed off by this common order for sake of convenience and brevity. 8. Ground 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 Cont....
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....first notices u/s. 153A were issued on 13/02/2017 and after receiving the notices, the assessee made request for providing copies of the documents seized during the course of the search which had taken quite a long time. Eventually, the assessee had furnished 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(....
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....s consideration. Thus, in our view, there was absolutely no violation of the provisions of Rule 46A of the Income Tax Rules, 1962 in the present case and therefore, the Ground No.1 of the Revenue for A.Y. 2011-12, A.Y. 2012-13 and A.Y. 2014-15, being devoid 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. 2....
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....espect of the freight expenses, the ld. CIT(A) observed that the assessee company had reimbursed a consolidated payment to its transport manager and transport manager had incurred the expenditure on various occasions below the limit prescribed u/s. 40A(3) of the 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....
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.... vs. ITO 298 ITR 349 has held that list of exceptions provided under rule 6DD is not exhaustive. Meaning thereby that more could be read into it, if the same does not violate the reason for which section 40A (3) was introduced. The court held that:- "......Apparently, this provision was directly 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 vari....
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....A of the Act. Thus, provisions of section 40A(3) have not been violated by the appellant. Therefore, addition made by the AO amounting to Rs. 3,75,000/- is deleted. (c) Assessment Year 2012-13:- On perusal of written submissions filed by the appellant, it has been observed that the appellant has made cash payment of (i) Rs.43,807/- 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....
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....es and are fully recorded under head 'Freight Outward' and 'Loading & Hammali' expenses. On perusal of copy of statement showing details of expenses incurred against imprest payment to Shri R S Bhaduria the payments have been made toward freight charges in multiple of Rs. 7,500/- and that to on different dates and to different vehicle driver/owner. Thus, from above it is very clear that 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, f....
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....0/- is deleted. (vi) Payments made to M/s Yash Enterprises:- The appellant during the course of appellate proceedings submitted that none of the payment was made over Rs. 20,000/-. On perusal of copy of ledger account scanned by AO on page nos 130 & 131 in the body of assessment order it is abundantly clear that none of the payment was made in violation to provisions of section 40A(3) of the Act. Hon'ble ITAT 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 A....
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....lanation of the assessee company in respect of the payments of Rs.6,25,000/- made by the assessee to two parties, as per the details given below : (Amount in Rs.) S. No. Particulars Date of Payment Amount (i) Payment made to Baba Shree Bottling Co. 17-01-2011 2,50,000 (ii) Payment made to Shri Anilesh Tomar 05-01-2011 3,75,000 TOTAL 6,25,000 3.00 Your Honours, now as regard the addition of Rs. 2,50,000/- made in respect of alleged 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....
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....onours, the Special Auditors as well as the learned AO, both failed to appreciate that in respect of the aforesaid payment of Rs.3,75,000/-, the assessee company has not made any claim for expenditure either for the assessment year under consideration or any other assessment year. It is submitted that the aforesaid payment of Rs.3,75,000/- has been made by the assessee company against an equivalent sum of Rs.3,75,000/- received against the sale of car by the assessee company on 30-11-2010. Such fact is evident from the copy of 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 fi....
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....called in view of the facts and circumstances of the case as discussed in the ensuing paras. 3.00 Your Honours, it is submitted that subject additions of Rs.43,807/- and Rs.6,83,760/-, appears to have been made by the ld. AO on the basis of findings given by the special auditors in his report submitted under s. 142(2A) of the Act. During the course of the special audit, the special auditor went through the tally ledger account 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. Accordingly, the ld. AO, partially, accepted the explanation of the assessee company, thereby rejecting the explanation of the assessee company i....
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....134 of the impugned assessment order, the entire payment has been made in the small trenches of Rs.20,000/- only. It is submitted that the learned AO, merely on guess work, surmises and conjectures, leveled the actual tally account found during the course of search as a manipulated account of the assessee. It is submitted that the learned AO could not assign any single basis for her such assumption or allegation. She could not bring on record, either by way of conducting necessary enquiry from the payee or by any other means, any material to disprove the claim of the assessee that it had made payment to the extent of a sum of Rs.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. 6.00 Your Honours, it is furthe....
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.... no addition could have been made on the allegation of some discrepancies found in the books of account of the assessee. 2.00 Your Honours, without prejudice to the above, it is submitted that impugned additions of Rs.8,98,830/- (sic.Rs.8,68,830/-) and Rs.10,60,043/- were not called in view of the facts and circumstances of the case as discussed in the ensuing paras. 3.00 Your Honours, it is submitted that subject additions of Rs.8,98,830/- and Rs.10,60,043/-, appears to have been made by the ld. AO on the basis of findings given by the special auditors in their report submitted under s. 142(2A) of the Act. During the course of the special audit, the special auditor went through the tally ledger account 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 prov....
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....e threshold limit of Rs.35,000/-, as prescribed under s. 40A(3) for goods plying services. In evidence of our aforesaid assertion, we have furnished copies of statements showing details of expenses incurred against the Imprest payment of Rs.6,07,460/- as submitted by Shri R.S. Bhadoriya, which are placed at PB Page No. 82 to 85. 3.02 Your Honours, as regard the two cash payments of Rs.55,000/- made to Shri Ritesh Raghuvanshi and Shri Rakesh Goswami, each, serialized at S. No. 2 & 3 of the table, it is submitted that aforesaid persons are marketing managers of the assessee company and the subject payments of Rs.55,000/- are in nature of imprest money payment to such marketing employees to bear their tour travelling expenses in respect of lodging, boarding and stay. 3.02.1 Your Honours, as against the imprest payments, 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 in....
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....ng towards expenditure incurred by the assessee company in earlier years. Thus, the learned AO was not justified in making the subject addition under the provisions of s.40A(3) of the Act and thus the addition so made is illegal and bad-in-law and deserves to deleted on this count only. 4.02 Your Honours, without prejudice to the above, it is submitted that the learned AO, merely on guess work, surmises and conjectures, leveled the actual tally account found during the course of search as a manipulated account of the assessee. It is submitted that the learned AO could not assign any single basis for her such assumption or allegation. She could not bring on record, either by way of conducting necessary enquiry from the payees or by any other means, any material to disprove the claim of the assessee that it had made payment to the extent of a sum of Rs.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 A....
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....is Hon'ble Bench. In view of the facts and circumstances of the case, it is submitted that the additions of Rs.8,98,830/- and Rs.10,60,043/- made by the AO by invoking the provisions of s.40A(3) of the Act were rightly 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 on which the assessee wish to place reliance: S. No. Description of the document Paper Book Page Reference Page No. A.Y. 1 Copy of Abstract of Special Auditor's report giving the details of alleged cash payments exceeding a sum of Rs.20,000/- 219 A.Y. 2011-12 2 Copy of ledger account of Shree Balaji Bottling Co. in the books of account of the assessee company for the F.Y. 2010-11 220 A.Y. 2011-12 3 Copy of labour payment statement evidencing payment of wages to various workers 221-223 A.Y. 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 mad....
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....ted books of account. Thus, according to the counsel of the assessee, such additions being not based upon any incriminating material or evidence found during the course of the search, the same were liable to be deleted in view of the decisions of the various Courts, especially the cases of CIT vs Kabul Chawla 380 ITR 573 (Del.), Jai Steel (India) vs. CIT (2013) 259 CTR 281 (Raj.), Income Tax v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 Taxmann.Com 78 (Bom), Pr. CIT vs. Saumya Construction Pvt. Ltd. (2016) 387 ITR 529 (Guj.) and Kalani Brothers in IT(SS)A No. 71/Ind/2014 (ITAT Indore). 11.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of the authorities below, Special Auditors Report, 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. 11.2 We find that the AO, while making the impugned additions 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 m....
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....criminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 11.4 The above stated ratio laid down by the Hon'ble Delhi High Court has been applied by this Tribunal in the case of Kalani Bros. [IT(SS) No.71/Ind/201....
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.... in the course of original assessment. In. all these cases no assessments were pending on the date of search for these assessment years. No assessments were abated in terms of second proviso to section 153A of the Act. Hon'ble Delhi High / Court in the case of CIT vs. Kabul Chawla (supra) has considered various High Court decisions relied upon by the learned DR. The Hon'ble Delhi High Court has considered the cases of Canara Housing Development Co. vs. DCfT; Madugula vs. DCIT; CIT vs. Chetandas Laxmandas and CIT vs. Anil Kumar Bhatia (supra). The only decision of the Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar Arora; 367 ITR 517 relied on by the learned DR was not considered by Hon'ble Delhi High Court while deciding the issue in the case of Kabul Chawla. The Hon'ble Allahabad High Court has reversed the order of the Tribunal and remanded the issue to the Tribunal 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 IT....
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...., therefore, respectfully following the above referred decisions allow the legal ground raised by the assessee and delete the impugned addition." 11.7 Thus, respectfully following the settled judicial precedence which are squarely applicable on the instant issue, we are of the view that no addition could have been made by the AO in the assessee's income in a completed year of assessment without having recourse to any incriminating material. We find full substance in the legal plea taken by the assessee that all the assessment years under appeal are those in respect of which no assessment proceedings could be said to be pending on the date of initiation of the search in the case of the assessee on 07/01/2016 and therefore, merely on the basis of entries found recorded in the regular audited books of account of the assessee, no addition could have been made for making disallowance u/s. 40A(3)/40A(3A) of the Act. We are also of the view that in respect of unaccounted transactions, since the assessee itself is not claiming any deduction or allowance, the provisions of ss. 40A(3) & 40A(3A) cannot be invoked. Even on the merits of disallowances, we find that the ld. CIT(A) has given s....
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....ior to 31/03/2009 as is evident from the seized document itself. The AO made inquiry in respect of the investing companies and found that these companies were only operating for name sake without any fixed asset and business premises. Finally, vide para (20.4) of the Order, the AO made an addition of Rs. 4,17,36,813/- in the assessee's income on account of unexplained expenditure of the assessee in capital. 12.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences which were also furnished by it before the AO. The ld. CIT(A), while giving his findings at para (4.5.2) of his Order, noted that the subject seized loose paper pertains to period from 01.04.2006 to 31.03.2009 and are carried forward till 31.03.2011. The ld. CIT(A) further observed that the share capital was introduced between F.Y. 2006-07 (A.Y. 2007-08) to F.Y. 2008-09 (A.Y. 2009-10) which is also verifiable from the audited balance sheet of the assessee company on record. Thus, the ld. CIT(A) observed that s....
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....regarding capital employed and interest have been given. Madam, on a careful examination of such excel sheet, we have noted that the excel sheet was prepared to have an analysis of the estimated return on proposed investment in the company. As regard, allegation made by your good self regarding undisclosed income in the form share capital introduced through shell company of Rs.8,59,82,700/-, it is submitted that the entire share capital from four companies namely, Premier Forests India Pvt. Ltd. [1,28,35,000], Calcutta Developers Pvt. Ltd. [55,00,000], Royal Highland Distilleries Ltd. [5,12,54,974] and Lord Krishna [1,63,92,726] were genuinely taken by our company before 31-03-2009. In other words, these share capital were not taken during the periods under assessment viz. A.Y. 2010- 11 to A.Y. 2016-17. Our such assertion is evident from the copy of your Annexure G-1 itself in which there is mention of two periods i.e. one from 01-04-2006 to 31- 03-2009 and another from 01-04-2009 to 31-03-2011. Further, against the name of every shareholder/share applicant, the position of his share capital/share application as of 31-03-2009 and 31-03-2011 has been stated. It sha....
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....thout first going through the books of account of the assessee. Even otherwise, it is submitted that a negative aspect i.e. non-incurrence of certain expenditure could not have been established by the assessee from its books of account. It is submitted that only if the assessee would have actually incurred such expenditure and claimed the same then only, he could have prove such claim with the assistance of books of account, which is not a case here. 4.01 Your Honours, as regard the second basis taken by the learned AO for making the impugned addition i.e. the assessee could not produce any positive evidence to establish that interest expenses were not actually incurred, again, it is submitted that the law does not pre-suppose an assessee to establish a nonexisting or a negative fact. The assessee by making its written explanation as aforesaid had denied to have made any payment of interest expenditure as alleged and by its denial it had discharged its initial onus. Thereafter, the onus had got shifted to the learned AO and it was the learned AO who was required to establish with any positive evidence that the assessee, in fact had incurred any interest expenditure. Howeve....
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....o attract the provisions of section 69C or any other deeming provisions of the Act. It is submitted that by any stretch of imagination, the actual payment of interest computed up till 31-03-2011 could not have been supposed to be made during the financial year 2010-11 itself. So, even on this count, no addition on the allegation of unexplained expenditure could have been made for the assessment year under consideration i.e. A.Y. 2011-12. 7.00 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 facts and circumstances of the case, the impugned addition of Rs.4,17,36,813/- on the allegation of unexplained interest expenditure, was rightly 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. 2011-12)....
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....were produced and therefore, whether or not such expenses have been claimed by the assessee in its books of accounts could not be verified at her end. According to the AO, the assessee has claimed such interest expenditure which are not allowable in the nature. However, we find merit in the contention of the assessee that first of all, the entire books of account in the soft copy were seized by the search party. Secondly, such books of account were duly produced before the Special Auditors and such production of books of account before the Special Auditors is evident from the various findings as regard to the cash payments etc. given by the Special Auditors which have been referred to by the AO in the body of the assessment order itself. Further, we find that without making a reference to the regular books of account, the same could not have been referred to the Special Auditors u/s. 142(2A) of the Act. Thus, the findings given by the AO that the assessee had not produced books of account, in our view, are not factually correct. We also find that during the course of the assessment proceedings, the assessee vide its submission letter dated 15/11/2017, as placed at page no. 95 to 98....
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....tive picture of both books of account, which is as under: Particulars As per Audited Accounts As per Incriminating Seized Data of ABC Ltd. Difference (Undisclosed profit) Sales 33,33,91,023.90 46,26,08,901.00 12,92,17,877.07 Purchase 24,74,04,599.90 30,88,90,859.60 6,14,86,259.64 Net Figure 6,77,31,617.43 During the course of the assessment proceedings, the AO required the assessee to explain the transactions and reconcile the same with audited books of account. The assessee, in response, furnished its explanation, which has been reproduced by the ld. CIT(A) at page no. 86 of his Order. The assessee's explanation was not found acceptable to the AO and the AO made an addition of Rs.6,77,31,617/- in the assessee's income on account of suppression of profit. 14.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences. The ld. CIT(A) while upholding that the assessee used to maintain two sets of books of a....
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....mitted that the learned AO has not found any defect or discrepancy in the books of account so maintained by the assessee company. Since no defect or discrepancy was found, the learned AO has not rejected the books of account of the assessee by invoking the provisions of s.145(3) of the Act. Now, it is submitted that once the books of account of the assessee were accepted, the learned AO was duty bound to determine the business income of the assessee only as per the transactions shown in its regular books of account, in accordance with the provisions of sub-section (1) to section 145 of the Act. Consequently, without rejecting the books of account, the learned AO could not have made any addition in the assessee's income on this count. 2.00 For the aforesaid proposition, reliance is placed on the following judicial pronouncements: i) Pyarelal Mittal vs. ACIT (2007) 291 ITR 214 (Gau) ii) The ACIT vs. M/s. Narendra Industries (2008) 10 ITJ 88 (Ind) (Trib) iii) CIT vs. Maharaja Shree Umed Mills Ltd. (1991) 192 ITR 565(Raj) iv) ITO vs. Skyjet Aviation (P) Ltd. (2006) 66 TTJ (Ahd) (TM) 21. 3.01 Without prejudice to the above, it is sub....
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....account at Rs.1,98,37,220/-. In other words, even if the authenticity of the trial balance of ABC Ltd. is taken to be true, there would result difference of Rs.3,09,39,676/- only and not that of Rs.6,77,31,617/- as proposed at your end. We are submitting herewith a comparative statement showing variance between trial balance of ABC Ltd. vis-à-vis audited balance sheet of our company as of 31-03- 2012, as Annexure D-3.00." 5.00 Your Honours, at the outset, it is submitted that the subject trial balance on the basis of which the impugned addition has been made does not pertain to the assessee company. 6.00 That, without prejudice to the above, it is submitted that the assessee company is engaged in the business of manufacturing of beers, wines and other alcoholic products for human consumption. It is submitted that in any state, such business of the manufacturing in liquor can be carried out only in accordance with the relevant laws of Excise legislated by the concerning state and as also, in accordance with the rules, regulations and policies framed under such legislations from time to time. Accordingly, in the state of Madhya Pradesh, such business of manuf....
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....red trial balance, it was demonstrated before the learned AO that there was not variance only between the figures of sales and purchases shown in such trial balance vis-à-vis audited financial statements but there was also variance in the datas relating to the other items of profit and loss account. It was demonstrated that if the figures of the trial balance are taken to be correct then the net profit before depreciation and tax of the ABC Ltd. (presumingly of the assessee company), would work out at Rs.5,07,76,896/- only as against the same shown in the audited financial statements at Rs.1,98,37,220/-. It was thus submitted before the learned AO that even if, the authenticity of the seized trial balance is taken to be fully correct, for the relevant previous year there could have been a case of suppression of profit to the extent of Rs.3,09,39,676/- only and not that of Rs.6,77,31,617/- as wrongly determined by the learned AO. 8.00 Your Honour, it is a settled law that for the undisclosed income of an assessee should be determined on the real income theory and for determining such income all the expenditure which have been found incurred by an assessee to earn suc....
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.... the addition to the extent of Rs. 19,38,268/- out of the total additions of Rs. 6,77,31,670/- made by the AO. We find that while reaching to such finding, the ld. CIT(A) has followed the judgments of the jurisdictional High Court of Madhya Pradesh in the case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 and again in the case of Manmohan Sadhani vs. CIT, (2008) 304 ITR 52. The ld. CIT(A) has also placed reliance on the decision of the Cordinate Bench of Jabalpur in the case of M/s. Ramesh Chandra Ravindra Kumar Rai vs. ITO (2010) 14 ITJ 34, Hon'ble ITAT Agra Bench in the case of ITO vs. Sh. Satyendra Singh Parmar (ITA No. 127/Agra/2017) and ITAT Jabalpur Bench in the case of Yadav Brothers Construction Company (ITA No. 109 & 110/JAB/2012). We are in agreement with the contention of the assessee that the unaccounted set of books of account maintained by the assessee in the name of M/s. ABC Ltd. are not correct and complete and there were many expenditure which although, apparently incurred by the assessee were not found recorded. In such circumstances, respectfully following the decisions of the Hon'ble High Court of Madhya Pradesh, in the case of CIT vs. Balchand Ajit Kumar (....
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....iled written submissions along with the documentary evidences. The ld. CIT(A) while upholding that the assessee used to maintain two sets of books of account, observed that the differences in the figures of capital and loans were either due to the mis-recording/ mis-classification of transactions or non-recording thereof. The ld. CIT(A), after perusing the comparison furnished by the assessee in a tabular form, observed that the books of account of M/s. ABC Ltd. were not complete. The ld. CIT(A) also held that the AO has not made any independent enquiry to unearth the true facts. Accordingly, the ld. CIT(A) reached to a conclusion that the AO has made the addition merely on assumption, presumption and surmises. Finally, the ld. CIT(A) vide his findings given at para (4.11.3) to (4.11.5) of his Order, deleted the entire addition of Rs.8,44,86,020/- made by the AO on this count. 16.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us. 16.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 16.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synops....
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....he assessee's income, summarily rejected the explanation of the assessee on the sole basis that the assessee could not justify the existence of M/s. ABC Ltd. and also could not explain as to why the amount was not disclosed in its books of accounts. However, again, the ld. AO miserably failed to pin point any particular amount which was not so found recorded by her in the audited books of account of the assessee company. It shall thus be appreciated by Your Honour that such a huge addition has been made by the ld. AO without passing any speaking order and without giving any specific finding in this regard. 1.02 Your Honours, without commenting upon the working of the so called variation as alleged by the ld. AO and without commenting upon the merits of the addition, it is submitted that mere variation found on comparison of one unaudited trial balance of some ABC Ltd. with that of audited financial statements of the assessee could not have by itself given rise to any addition in the income of the assessee company. It is submitted that in such circumstances, it was incumbent upon the ld. AO to first compare each and every item of the unaudited trial balance with the audited....
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....ge no. 39 to 41 of the impugned order and the audited financial statements of the assessee company for the relevant previous year, as placed at page no. 62 to 81 of our Paper Book. 2.01 On a perusal of the trial balance of ABC Ltd. it shall be observed that in such trial balance the balance of Equity Share Capital has been shown to be at Rs. 20,00,00,000/- which gets fully tallied with the same shown in the audited financial statements (refer PB Page No. 70). However, undisputedly, there is a difference in the figures of Net Share Application Money shown in the trial balance at Rs. 82,04,974/- and that shown in the audited financial statements at Rs.3,67,04,974/-, thereby resulting in a difference of Rs. 2,85,00,000/-. In respect of such variation, it is submitted that while drawing the trial balance of ABC Ltd., certain sum amounting to Rs. 3,65,00,000/-, which were received by the assessee company as share application money have wrongly been classified as unsecured loans. Further, in the books of ABC Ltd., share application money account has been credited with the sum aggregating to Rs. 80,00,000/-, which was received from two persons through post dated cheques. However,....
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....he assessee. However, in the instant case, the position is just reverse inasmuch the assessee in its audited books of accounts is showing lesser amount of liability i.e. at Rs.18,29,70,285/- than that shown in the seized trial balance at Rs.20,82,04,974/-. It is submitted that, our above said argument is only aimed to demonstrate the impact of the variation in the income of the assessee, however, factually, there exists no actual difference. It is reiterated that in the books of ABC Ltd., certain sum factually received as share application money, appears to have got wrongly classified as unsecured loans and further, some money, which actually could not be realized have also been shown in the books of ABC Ltd., as mentioned in the preceeding paras. It is submitted that during the course of the assessment proceedings, the assessee vide its reply dated 04-08-2018, had duly explained the reason for such variation in the figures of two trial balances. The reply of the assessee has also been reproduced by the ld. AO in her body of assessment order at para (13.2) from page no. 42 to 44. 3.00 Your Honours, the ld. AO has given the finding that as per the seized trial balance of AB....
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....nks 1 ICICI Bank Ltd. (Eicher) 12,75,061 12,75,061 - 2 ICICI Bank Ltd. (Tata Truck) 50,98,457 51,00,843 (2,386) Bank Charges not debited in ABC Ltd. 3 OBC Bank Term Loan 3,94,32,349 3,94,32,349 - 4 Punjab National Bank 31,29,527 31,29,527 - TOTAL (B) 4,89,35,394 4,89,37,780 (2,386) C. Unsecured Loans 1 Shri Harmindar Singh Bhatia (PAN:ACFPB4293H) 1,11,50,106 20,00,000 91,50,106 Factually, only a sum of Rs.20,00,000/- was received by the assessee as shown in its regular books of account. 1 Goldstar Pet Pvt. Ltd. 80,00,000 30,93,188 49,06,812 Principal amount of loan was repaid in its entirety at Rs.80,00,000/- but not recorded in the books of ABC Ltd.. Further, the entry regarding interest payable on the loan at Rs.30,93,188/- although made in regular books not recorded in the ABC Ltd's books 3 Shri Ramswaroop Shivhare (PAN: AGHPS8985R) 95,70,000 - 95,70,000 Factually, only a sum of Rs.70,00,000/- was recei....
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....arranted. 5.00 Your Honours, as regard the allegation of the learned AO to the effect that the unrecorded addition in capital and loan had either got invested in undisclosed fixed assets or the assessee company had incurred undisclosed expenditure, is again factually not correct. First of all, it is submitted that from the differences, pointed out by the learned AO, actual inflow of any fund in the hands of the assessee is not at all discernible so as to make any undisclosed fund available in the hands of the assessee for making or incurring any undisclosed investment or expenditure. Secondly, the learned AO except leveling a barred allegation as regard to making of such undisclosed investment/ expenditure could not pin point any single asset or expenditure towards which such alleged inflow of fund got utilized. 5.01 Your Honours, it is submitted that the assessee company has duly recorded and disclosed all the fixed assets held by it in its audited financial statements drawn for the relevant previous year. Your Honour, it appears that such an allegation has been made by the learned AO on the basis of comparison of the balances of fixed assets as appearing in the ....
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....lace reliance: S. No. Description of the document Page No. Remarks 1 Copy of trial balance of the assessee company for the relevant previous year 95-101 - 2 Audited financial statements of the assessee company for the relevant previous year 62-81 - 17.1 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 find that although the AO has made a huge addition of Rs. 8,44,86,020/- in the assessment order on account of difference between two financial datas, but, nowhere in the Order, the AO has provided the basis or working for arriving at such a difference. We find that the AO has made a summary finding on the issue. However, we find that at para (13.2) at page no. 42 to 44 of the assessment order, the AO has reproduced the written submission of the assessee before him, on the subject issue, during the course of the assessment proceedings. We find that in the written submissio....
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....re addition of Rs. 8,44,86,020/-. Resultantly, Ground No. 4 of the Revenue for A.Y. 2014-15 is Dismissed. 18. Ground No. 5 of the Revenue for A.Y. 2014-15 18.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the addition to the extent of Rs.38,63,950/- out of the total addition of Rs.51,57,732/- made by the AO on account of undisclosed transactions found recorded in the books of M/s. ABC Ltd.. 18.2 Briefly stated facts of the issue, as emanated from the records, are that during the course of the assessment proceedings, the AO on a perusal of the audited financial statements provided by Special Auditors, found that various cash transactions pertaining to F.Y. 2014-15 & F.Y. 2015-16 could not be verified from audited books of account of the assessee. The AO further noted that the assessee failed to collect TCS on sale of scrap. The brief details of these documents are scanned on page no. 109 to 111 of the assessment order. During the course of the assessment proceedings, the AO required the assessee to furnish its explanation. The assessee, in response, furnished its explanation, which has been reproduced by the ld. CIT(A) a....
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....es of the Paper Book: In this context it is submitted as under : 1.00 Your Honours, it is submitted that an addition of Rs.51,57,732/- was made by the learned AO merely on the basis of transactions found to have been recorded in the books of ABC Ltd.. 2.01 Your Honours, the learned AO during the course of assessment proceedings vide her show-cause notice dated 23-07-2018, required the assessee to furnish its explanation on the subject transactions by proposing an total addition of Rs.1,48,02,940/- for the year under consideration. 2.02 Your Honours, in response to the aforesaid query, the assessee vide its letter dated 04-08-2018, furnished its explanation on the subject matter. For a ready reference, the relevant abstract of the assessee reply is being reproduced as under: "12. EXPLANATION ON THE ISSUE OF PROPOSED ADDITIONS OF Rs.2,38,97,374/- IN RESPECT OF VARIOUS CASH TRANSACTIONS Madam, through the captioned Query, at the first instance, it has been alleged that our company has made various cash transactions aggregating to Rs.2,38,97,374/- which have been alleged to be undisclosed as per the annexure marked as Annexure F-7 which have....
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....ook of ABC Ltd. reflecting amount received from Piyush Vijayvargiya against Scrap Glass sales It appears that our mischievous staff made unaccounted sales and embezzled the same as discussed in reply to query No.7 (supra) 09-01- 2015 44,400/- --do-- --do-- --do-- 29-07- 2013 1,00,00,000/- Document in form of application form dated 29-07-2013 of PNB for RTGS made in favour of M/s. Pacific Alcobev Pvt. Ltd. (i) Factually, we have not received but made the payment to such M/s. Pacific Alcobev Pvt. Ltd. through RTGS (ii)Duly recorded in books of account of our company. Copy of account of Pacific Alcobev Pvt. Ltd. in our regular books of account as Annexure D-8.04 & Copy of relevant bank statement, as Annexure D-8.05 & D-8.06 Mar-14 9,38,990/- Copy of sale of Scarp Glass sales account in ABC Ltd. for the F.Y. 2015-16 It appears that our mischievous staff made unaccounted sales and embezzled the same as discussed in reply to query No.7 (supra) 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 Ja....
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....unting to Rs.5,94,997/- in its books of accounts. In evidence of the same we have furnished a copy of the ledger account of Scrap sales for the relevant previous year, which is placed at PB Page no.105. It submitted that on sale of such scrap material the assessee company had duly collected tax at source in accordance with the provisions of s.206C of the Income Tax Act, 1961 at Rs.5,951/- and had duly deposited the same to the credit of Central Government. In evidence of the same, we had submitted the challans as paid by the assessee , which are placed at PB Page no. 105 to 109. 3.03 Your Honours, now as regard the transaction of Rs.38,63,950/-, it is submitted that such addition has been made by the ld. AO on the basis of one computerized excel sheet seized and inventorized as LPS 10 Page nos.3 & 4. A copy of such computerized excel sheet has been provided by the learned AO in form of Annexure F-7.33 & F-7.34 along with show cause notice dated 23-07- 2018. A copy of the same is placed at PB Page No. 110 & 111. 3.03.1 Your Honours, it is submitted that the aforesaid excel sheet is extracted from the laptop of Shri Harminder Singh Bhatia, neither belongs to the ass....