TaxTMI 
TaxTMI 
2024 (3) TMI 422
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....ed on oath during search and seizure operation carried out of the company. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred and on facts in deleting the addition of Rs. 2,24,50,000/- ignoring the fact that the director of the company Sh. Gaurav Agarwal has accepted in his statement recorded during search operation that it is merely an accommodation entry and the cash was given to Sunmoon Vision Infra Developers Pvt. Ltd in lieu of RTGS." 3. Briefly stated the assessee is a private limited company engaged in the import and sale of marble and other natural stone from various countries. The assessee filed its return of income under Section 139(1) of the Act on 24.09.2013 declaring return income at Rs. 2,91,61,280/-. The return so filed was subjected to regular assessment under Section 143(3) of the Act vide order dated 26.03.2015. Thereafter, search and seizure operation was carried out under Section 132 of the Act on 19.12.2019 in Stonex Group of cases including assessee. Consequently, the assessment proceedings were initiated under the provisions of Section 153A r.w. Section 142(1) r.w. Section 143(3) of the Act. In the course of the....
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....der pressure coercion and duress at the time of search while treating such loan to be an accommodation entry despite no incriminating evidence gathered in search to suggest payment of cash as quid pro quo against corresponding receipt of loan record through banking channel. The AO drew adverse inference from page no.47 of Annexure A-1 seized in the course of search. 5.2 The CIT(A) obtained remand report dated 10.06.2022 and observed that identity of the lender cannot be doubted in the facts of the case. The CIT(A) observed that the loans were obtained from banking channel and supported by Loan Agreement which depicts that loan was granted on commercial considerations at an annual interest of 9% per annum. The CIT(A) on perusal of the remand report also observed that lender has responded to notice under Section 133(6) and filed Audited Financial Statement and its ITR. The AO in the aforesaid remand report has also accepted the net worth of the company which shows the creditworthiness of the lender company also. The CIT(A) was thus satisfied with the identity and creditworthiness of the lender and genuineness of the transaction carried out. 5.3 The relevant operative paragraph ....
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....ant has challenged the said addition on the ground that the said addition is ad-hoc in nature and is not based on any material found or seized during the course of search but rather estimates which doesn't corroborate the contention of AO that the appellant was involved in making undisclosed sales in any manner. 8.2 The search was conducted in the case of the appellant on 19/12/2019. As per the submissions of the appellant, the original return of income was filed on 24/09/2013 wherein income of Rs. 2,91,61,280/- was declared. The said return got processed u/s 143(1) of the Act on 28/04/2014. Thereafter, vide an order dated 26/03/2015, an assessment was framed under section 143(3) of the Act with respect to the year under consideration wherein the returned income was accepted. 8.3 During the assessment proceedings, the appellant filed a return of income u/s 153A of the Act on 20/02/2021 declaring income of Rs. 2,91,61,280/- i.e. same as declared in the return filed u/s 139 of the Act. Further, as can be seen from the present assessment order, the addition have not been made on the basis of any material found during the search proceedings, but only on the basis ....
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....g customers. According to me now in last two three years this percentage of unaccounted cash sales would be around 0.5% to 1% of total monthly sales. 0.11 What is the utilization of cash received from your uncounted cash sales? Ans: Almost all this cash is being utilized to pay incentives to the professionals facilitating these sales and other sales also in the company as none of them raise invoice for such services and we are bound to pay incentive in cash." 8.6 A perusal of the said statement reflects that the total unaccounted cash sales was in the range of 0.5% to 1% which as per the above statement was stated two to three years back for the purpose of giving incentive to contractors. Further in the said statement it has been stated that the said unaccounted sale was utilized for the purpose of payment of incentives to professionals facilitating such sales. 8.7 Further, as apparent from the assessment order, the AO while relying on above said submission as quoted in Para 49 of the Assessment Order, did not give any adverse finding or decision based on the images as reproduced in the assessment order and concluded as below in para 57 of the As....
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....ct. The Hon'ble ITAT Delhi has enunciated that there is no scope of extrapolation without any material found during the search. The order parts of the Judgments are reproduced as under: (a) The ITAT Delhi in the case of M/S Gupta & Co, Put. Ltd, vide judgment dated 14 February, 2019/ ITA Nos. 729 & 730/DEL/2016/A.Yrs 2008-09 & 2009-10 held as under: "5. We have heard both the parties and perused the records, especially the impugned order of the Ld. CIT(A). We note that the judicial position on this issue is quite clear. It is the seized material which gives rise to quantification of unaccounted sales and consequently unaccounted income. The seized material in the instant case contains notings in respect to certain unaccounted sales, namely with respect to 59 parties. The assessment order does not bring on record any such seized material which shows sales out of the books corresponding to each and every sale. Since section 153A of the Act gets invoked only with respect to the incriminating material found during the course of the search, clearly extrapolation without any incriminating material would be contrary to the spirit of the section. There are a large num....
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.... to interfere with the findings of the Ld. CIT (Appeals) on this issue and we, accordingly, dismiss ground No. 2 of the Department's appeal." 8.10 Reliance also placed on the following judicial following recent pronouncements, wherein it has been held that in the absence of any material suggesting the undisclosed income, the question of extrapolation of addition in the previous year or subsequent year does not arise: (i) ACIT, Central Circle-4 Vs JKG Construction Put. Lt. - ITAT Delhi as reported in 2021 (6) TMI 653. (ії) A.C.IT., Central Circle 2 (2) Nagpur Vs Shri Narendra Maganmal Kothari - ITAT Nagpur as reported in 2021 (12) TMI 1206 (iii) THE DCIT Central Circle -Ill, Ludhiana Vs Shri Inderjit Singh Brar and (Vice-Versa) ITAT CHANDIGARH as reported in 2021 (11) TMI 673 (iv) JT. CIT (OSD) Central Circle -5 (4), Mumbai Vs M/S. Gandhar Oil Refinery (1) Ltd. and (vice-versa) ITAT Mumbai as reported in 2021 (9) TMI 1120 (v) Ms Priya Happykumar Surya Vs ACIT, 29 (2) ITAT Mumbai as reported in 2021 (9) TMI 70 (vi) DCIT, Central Circle 2(2), Pune Vs Shikshana Prasaraka Mandali Sharda Sabhagruha- ITAT Pune ....
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....arthed during the course of search. Thus, there is neither any basis nor justification for the additions made by the AO of Rs. 66,80,471/- and there is nothing to support the action of AO of increasing the income of appellant by 1% of sales pertaining to the respective year as well. The addition made by AO is thus ad-hoc and arbitrary in nature. Accordingly, the addition of Rs. 66,80,471/- by the AO is hereby deleted. As such Ground no. 3 is allowed." 7. Aggrieved by the relief granted by the CIT(A) on both counts, the Revenue has preferred appeal before the Tribunal. 8. While the ld. DR for the Revenue has relied upon the assessment order, the ld. counsel for the assessee has strongly defended the first appellate order and took us through the relevant factual matrix in length and case laws as applicable in the factual matrix. 9. We have carefully considered the rival submissions and perused the first appellate order, assessment order, material referred to and relied upon in the course of hearing and case laws cited. 10. The dominant issue as per Ground No.2 concerns addition of Rs. 2,24,50,000/- under Section 68 of the Act attributable to lender Sunmoon. 10.1 On per....
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....nd bonafide except the one that relates to a Sunmoon. 10.3 As regards the loan obtained from Sunmoon, the AO observed that onus which lay upon the assessee under Section 68 of the Act towards identity and creditworthiness of the lender and genuineness of transaction could not be established. Hence, addition towards amount received from Sunmoon appearing in the loose sheet under the head 'Entry' was made under Section 68 of the Act. In the first appellate proceedings, the CIT(A) called for the remand report from the Assessing Officer. The remand report has been extracted in the first appellate order. The CIT(A), based on the remand report, observed that notice under Section 133(6) was issued by the AO to the lender in the remand proceedings. In compliance to such notice, the lender has furnished copy of loan agreement, confirmation, bank statement and balance-sheet from F.Y. 2012-13 till date. The CIT(A) also observed that the loan was granted at an annual interest of 9%. Besides, the loan has been partly repaid. In the light of these facts, the CIT(A) found force in the plea of the assessee towards existence of satisfactory explanation contemplated under Section 68 of the Act. ....
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....er Section 133(6) in the original assessment proceedings, by itself, could not taint the bona fides of such loan obtained in the ordinary course of business. 10.6 The assessee thus contends that the CIT(A) has concluded the issue in favour of the assessee on the strength of the exhaustive documentary evidences, payment of interest, part repayment of loan coupled with the fact that the AO himself has discarded the possibilities of parties recorded under the head 'Entry' in the loose paper to be lacking in bona fides but has proceeded against the assessee qua solitary party 'Sunmoon' on the strength of lack of response to notice issued under Section 133(6) of the Act. 10.7 The ld. counsel also contends that there are plethora of judgments to underscore that statement recorded under Section 132(4) does not constitute incriminating material per se for the purposes of making addition within the scope of Section 153A of the Act in respect of completed assessment viz. Pr.CIT vs. Best Infrastructure Pvt. Ltd., 397 ITR 82 (Del) and CIT vs. Harjeev Aggarwal (2016) 290 CTR 263 (Del) and so on. 10.8 The ld. counsel thus relied upon the judgment rendered by the Hon'ble Supreme Court in....