TaxTMI 
TaxTMI 
2024 (7) TMI 502
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....fore, for the sake of convenience and brevity, all the aforesaid matter are taken up for adjudication under this common order. 3. At the outset, Ld. Authorized Representative, Shri Mayank Patawari of the assessee (in short "Ld. AR"), has made a request seeking permission for not pressing the grounds of cross objection and additional grounds raised therein. To this effect, written applications have been submitted by the Ld. AR for our consideration, which are extracted as under: 4. Apropos, aforesaid requests of the assessee refraining themselves from pressing of grounds of cross objection and additional ground thereto, when confronted to Ld. CIT DR, he did not raise any objection. Considering the request of the assessee and no resistance by the department, the permission was granted as requested. Accordingly, the grounds of cross objection and additional ground thereto are dismissed as not pressed. Resultantly, CO Nos. 5, 6 & 7/RPR/2023 filed by the aforesaid assessee's, are dismissed as not pressed. 5. Adverting to the adjudication of appeals of the revenue, which are observed to be assailed for common, identical and interconnected controversies involved, therefore, to de....
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.... 60 crore actually was made out of sales recorded in books of accounts. He further stated that out of total amount of Rs. 60 crores, sum of Rs. 33 crores had been paid by M/s RK Associates & Hoteliers Pvt Ltd (In short M/S RKAAHPL), Rs. 7 crores had been paid by the appellant (M/s BFP) and Rs. 20 crores by himself. He further explained that the appellant was having cash in hand balance of Rs. 8.72 crores as on date of search 10.10.2019 without deducting payments of Rs. 7 crores made to SBIL during the month of August and September, 2019. Likewise, M/s RKAAHPL have cash in hand balance of Rs. 35.01 as on 10.10.2019 without deducting payments of Rs. 33 crores made to SBIL during the month of August and September, 2019. Further, he claimed that he is managing partner in the appellant firm and the remaining amount of Rs. 20 crores paid to SBIL by him as he is a person of high networth and regular filer of return of income. Total income of Rs. 12 crores has been shown in the return of income filed for A.Y. and as a person of resources and in order to meet the obligation, he made cash payment of Rs. 20 crore to M/s .SBIL. He further submitted that after reconciliation of records, he woul....
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....l Chawala, [2016/ 380 ITR 573 (Delhi) and PCIT vs Meeta Gutgutia, [2017/ 395 ITR 526 (Delhi) claiming that no incriminating material was found during the course of search suggesting suppression of sales and in absence of incriminating material, addition cannot be made. 2.5 The AO after considering entire facts and submission of the appellant, did not find the same acceptable for the following reasons (para 10 of the assessment order):- "10. Conclusion The submission made by the assessee cannot be accepted on the following grounds: - (1) As per tally data of the group companies which was seized during the course of search proceedings at the office premises of RK Associates Group shows that the cash balance as on 10.10.2019 in the two group entities as under: Brandavan Food Products Rs. 7,79,31,476/- RK Associates and Hoteliers Pvt Ltd Rs. 30,88,71,831/- In the tally data the amount of cash balance is shown as above. In the tally data or in the books of accounts the payments of Rs. 60 crore has not been entered. That the payment of Rs. 60 crore was not entered in the books of accounts and also the availability of the cash balan....
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....xure-A/RK/O1. I am showing you page no 17 of a file containing loose papers of your term sheet in which proposed transaction and sale consideration for the proposed transaction has been shown at Rs. 198.25 crores (exclusive of taxes). Please explain? Ans. Sir, Rs. 198.25 crores was the consideration quoted by SBTIL for a fully completed hotel project, however, since the buyer RK Associates group had doubts about the capability of SBTIL for a complete hotel project and RK Associates group agreed to SBTIL construction the project for Rs. 140 crores and the agreed deal was thus for Rs. 140 crores. It was decided the entire interiors will be done by RK Associates group after bringing in a suitable brand. Because of this only the sale deed was forecasted to be registered today and cash amount of Rs. 60 crores was paid upfront by RK Associates group. These transactions have been recorded by me in the page no 17 shown by you. I have been made aware of entire negotiation and the transaction and I am also aware of the amount and mode of payment of the agreed consideration, an amount of Rs. 60 crores was agreed to be paid in cash and has been paid by RK Associates group in cash. I came to....
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....ts till the date of search i.e. 10.10.2019 which clearly shows that the amount of Rs. 60 crore was paid out of undisclosed sources. (3) It is also clear from the sale deed of the property that the total sale consideration of the property was registered for an amount of Rs. 50 crore. If the amount of Rs. 60 crore was paid out of regular books of accounts the same would have been included in the sale consideration. The fact that the sale consideration was Kept at Rs. 50 crore in the sale deed clearly shows the intention of both the buyer and seller to keep the amount of on money of Rs. 60 crores out of the books. (4) Shri Rahul Agrawal stated during statement that he directed to suppress the sales & the cash so generated has to be kept aside, later he retracted from statement with the explanation that he misunderstood the meaning of these terms. In fact, he stated that it was surplus cash and not the suppressed sales. Ans: Sir, I have approximately 400 Crores turnover combined in bath M/s Brandavan Food Products and RK Associates and Hoteliers Pvt Ltd. Out of the total turnover approximately 50 to 55% of my receipts are in cash and the remaining is through bankin....
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.... period. The alibi, resorted to by the purchaser group the RK Associates Group that their group entities had cash balances in their books of accounts which was utilized to pay off the cash consideration for the resort project cannot be accepted since had it been the actual case the cash consideration would have been included in the sale dead because that would have also increased the book value of the resort project which hitherto remains at Rs. 50 Crores only. (5) The assessee relied upon the judicial pronouncement of Delhi High Court in the case of CIT vs. Kabul Chawla ITA No. 707, 709 & 713 of 2014. The decisions of honorable court as mentioned in the submission of the assessee are distinguishable as the facts in those cases. are completely different from the case of the assessee. In the case of the assessee there are incriminating documents seized during the course of search which shows that the amount of Rs .60 crore was paid in cash out of unaccounted business income. That the amount of Rs. 60 crore was paid in cash was also confirm by the statement of Shri Saurabh Gupta. Further the tally data seized during the course of search shows that the payment made in cash ha....
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....f source of cash payments to M/S Sir Bio Tech Limited totalling to Rs. 60 crore as under:- (a) M/s RK Associate & Hotliers Private Limited-Rs.33 Crore (b) M/s Brandavan Food Products - Rs. 7 Crore (c) M/s Rahul Agrawal - Rs. 20 Crore From all the facts as narrated above, it is crystal clear that it is an afterthought arrangement to avoid the tax. Considering all the facts, the amount of Rs. 60 crore shall be treated as unaccounted business income in the hands of M/s R K Associate & Hotliers Private Limited, M/s Brandavan Food Products and Shri Rahul Agrawal in the same ratio as submitted by the assessee. Accordingly, an amount of Rs. 7,00,00,000/- shall be treated as unaccounted business income of the assessee for A. Y. 2020-21 and charged to tax accordingly. 7. Aggrieved by aforesaid order of Ld. AO making addition on account of unaccounted business income, the assessee preferred an appeal before the Ld. CIT(A), wherein various issues raised were discussed at length. The legal contentions raised by the assessee before the first appellate authority, objecting to the validity of assessment order passed u/s 143(3) has been deli....
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.... appellant never objected the validity of the notice u/s 143(2) of the Act and also complied with the various notices issued u/s 142(1) of the Act on 06.02.2021, 08.02.2021, 08.07.2021 etc. Therefore, the order passed u/s 143(3) cannot be said to be bad in law. The appellant had made compliances. Proper opportunity of being heard was made available to the appellant. Accordingly, principles of natural justice have also been followed by the AO. There is no dispute that the notice u/s. 143(2) of the Act was issued beyond time limit prescribed in the Act and order u/s.143(3) was barred by limitation. In such circumstances, the order u/s 143(3) of the Act cannot be held as bad in law. Accordingly, the contentions of the appellant are rejected. b. Regarding contention that no reasonable opportunity of being heard was provided and order was passed without issuing show cause notice, the appellant has submitted that the AO had sought explanation regarding source of payment of Rs. 7 crores which was duly explained with the support of documentary evidences submitted vide submission dated 26.08.2021. However, the AO did not ask for further explanation rejecting the contents of the sub....
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....ing the addition made without any incriminating material and only on the basis of statement recorded u/s 132(4), the appellant has submitted that the AO has made addition on the basis of statement of Shri Rahul Agrawal taken u/s 132(4) on 10.10.2019, wherein, he had stated that the investment in Goa Hotel Project was made out of suppressed sales. This statement has been made the basis of addition of Rs. 7 crores in the hands of appellant. The appellant has further submitted that statement was recorded under the strenuous conditions wherein Shri Rahul Agrawal stated 'suppression of sales' instead of 'surplus of sales'. Further, no evidence during search and seizure proceedings was found which could support the suppression of sales by the appellant. Accordingly, the appellant submitted that statement recorded without any supporting concrete evidence cannot termed to be incriminating material in view of various judicial pronouncements. The appellant has placed reliance upon various judgments such as Anand Kumar Jain (2021) SCC Online (Del) 3174, Harjeev Aggarwal ITA No 8/2004 (Del HC), Best Infrastructure Pvt Ltd 397 ITR 182 (Del HC) and Mantri Share Brokers ITA No 502....
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....18) 168 DTR 356, wherein, it has been held that voluminous evidences filed by the assessee during the course of assessment proceedings has been completely ignored on the ground that the same were not produced when the seizure was made, no requirement in law that evidence in support must be produced only at the time when, the seizure has been made and not during the assessment proceedings. In view of the above, the appellant submitted that statement of Shri Rahu Agrawal is not based upon any evidence found during the course of search and seizure proceedings and therefore, the statement cannot be categorized as incriminating material. Accordingly, this cannot be sole basis for the purpose of making addition. I have found that search and seizure operation was conducted in the cases of two business groups viz. M/s Sir Biotech India Ltd (SBIL) represented by Shri Jai Prakash Agrawal and RKA Group represented by Shri Rahul Agrawal on 10.10.2019. During the course of search and seizure proceedings, at room no 412 of Hotel Fortune Miramar, Goa, occupied by Shri Sourabh Gupta, certain records were found maintained in laptop in form of excel sheet titled 'payment' in the fol....
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....enied by Shri Rahul Agrawal. The year under consideration in which the search was conducted had been selected for scrutiny u/s 143(3). This year does not fall under the category of abated abated year, therefore, it will n-or non ot be correct to say that in the year under consideration, addition was to be made on the basis of incriminating material only. However, the AO has made the statement of Shri Rahul Agarwal recorded u/s 132(4) basis for making the addition which may not be correct without disproving subsequent correction made in the said statement. However, Shri Rahul Agrawal has subsequently explained the source of cash payment of Rs. 60 crores, which includes the amount of cash payment of Rs. 7 crores made by the appellant, by placing cogent evidences with support of books of account completed after the search on the basis of valid piece of evidences, giving valid reasons for incompleteness of books of account. But the AO has not found same convincing for which no cogent reason has been given. On other hand the appellant by placing various evidences successfully proved that the cash payments were made out of surplus cash generated from sales and not from suppression of sal....
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....uncements. The appellant has the decisions in the cases of Laxmipat Singhania (1969) 72 ITR 291 (SC), Jain Brothers and Others (1970) 77 ITR 107 (SC), Nagarjuna Fertilizers and Chemicals Limited ITTA No 100/2003 (AP) and Mahaveer Kumar Jain CA No 4166/2006(SC). I find that the AO has mentioned in the assessment order that there was cash as on 10.10.2019 i.e. date of search and no cash-balance of Rs. 7,79,31,476/ payments were found entered in the books of accounts. On this basis, AO concluded that the payment of Rs. 7 crores was made out of unaccounted business income of the appellant. Though the AO has not rejected the books of account of the appellant u/s 145(3) but the above defect has been pointed out pointing out abovewhich caused the addition to the total income. While defect, the AO has placed reliance upon the statement of Shri Rahul Agrawal taken u/s 132(4) wherein, he had explained the modus operandi of suppression of sales of the appellant and explained the source of cash payment of Rs. 60 crores to SBIL out of suppressed sales. Since, no entry was passed in respect of cash payment to SBIL, the AO did not accept the contentions of the appellant that the cash lan....
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....ed before him by the appellant. Hence, the contentions of the appellant that the additions without rejection of books of account u/s 145(3) is not justified, are found acceptable. The decision relied upon by the appellant are also squarely applicable to it. In view of the above discussion the AO was not justified in making addition without pointing out any defect/rejecting books of account of the appellant. 3.1.3 In view of the discussion made herein above, the appeal on these grounds is partly allowed. 9. Further, before the Ld. CIT(A), the assessee has raised certain grounds, seeking adjudication of the same on merits, which are culled out as under: 2. That on the facts and the circumstances of the case and in law, the learned Assessing Officer (hereinafter referred to as 'the ld. AO") has erred in making an addition of Rs. 7,00,00,000/- (Rupees Seven Crores) to the income of the appellant by alleging the same as unaccounted business income for AY 2020-21. 2.1 That the ld. AO has grossly erred in making the addition of Rs. 7,00,00,000/- by alleging it as unaccounted business income by ignoring the fact that the same was already forming part of the sa....
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.... (iii) Shri Rahul Agrawal in his statement u/s. 132(4) dated 10.10.2019, stated that the amount of cash of Rs. 60 crores was generated by suppression of sales of the appellant and M/s RKAAHPL and also stated that the above amount was assessable in the hands of the appellant and RKAAHPL, though the hotel project was purchased in the name of M/s Pacifica. (iv) As per seized books of account following cash balances as on 10.10.2019 was found: BFP - Rs. 7,79,31,476/- RKAAHPL (appellant) - Rs. 30,88,71,831/- However, entries regarding cash payments were not available in the books of account of both the concerns. Thus, it has been concluded by the AO that no payment was made from the regular books of account. Subsequently, the appellant stated that the cash paid to SBIL was out of cash balance reflected in the books of account which was treated as an afterthought by the AO. (v) After perusal of transaction recorded in the laptop, Shri Saurabh Gupta also confirmed the payment of Rs. 60 crores in cash. (vi) The resort property was purchased for Rs. 50 crores which is evident from the sale deed executed after the search. Therefore, there was n....
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....held that when the books of account were incomplete during the course of search and completed later on, the same cannot be the basis of addition of undisclosed income, if no inconsistency in the completed books of account was found. The appellant further submitted that the server of the group concerns was under recovery and up gradation process for 2-3 times during July 2019 onwards due to virus and updating requirements which led to delay in making some entries in the tally data and even led to not being recovered or completely reflected. On this account also, the completed books of account should have been considered by the AO. It has been submitted that the major movement of cash balance is reported by the top management to the account department and thereafter entries are being made in tally data. Since, this was a high value transaction, the top management, for maintaining secrecy, may not have wanted to disclose the nature of payment and other details to the staff of account department. Since, registry of property was pending as on the date of search, the cash available in the books was utilized for making payment which may not have been sent to account depa....
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....d the source of payment of cash of Rs. 60 crores, therefore, there was no occasion to review the statement given by Shri Rahul Agrawal before the 05.02.2020. The appellant has submitted that it is a fundamental right of an assessee to correct any mistake in his statement subsequently. In support the appellant has placed reliance upon the decision of Hon'ble ITAT Pune bench in the case of Jyotichand Bhaichand Saraf & Sons Pvt Ltd (2012) 139 ITD 10 (Pune) and submitted that factual retraction should not be brushed aside without verifying facts and circumstances. Regarding MOU executed between M/S. SCPL, M/S. BFP, M/S. RKAAHPL and M/S. Pacifica, the appellant has submitted that the entities who had paid cash to SBIL entered into a MOU to invest their money on revenue sharing basis. The MOU is a written document and it contains all the elements of a valid contract. This MOU has been signed by the competent persons and has also been notarized. There are no explicit or implied provisions under the Act either in Indian Contract Act or Income Tax Act which state that only registered agreement / contract are inforceable or valid. The authenticity of the MOU cannot be suspected ....
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....es involved in the above grounds of appeal are being adjudicated as under:- (i) During the course of search and seizure proceedings on the appellant group, the books of account maintained in tally software were seized. In the case of appellant there was cash balance of Rs. 7,79,31,476/- as on 10.10.2019. The appellant has made claim that cash of Rs. 7,00,00,000/- was paid to SBIL on various dates out of regular sales proceeds of the business. But the AO has not accepted this claim as no entry in this regard was made in the books of account till the date of search. However, the appellant has submitted that the books of account were incomplete on the date of search for various reasons such as time lag between cash received and actual reporting and making entries into tally software, the software was under up- gradation and various data was under recovery, for the sake of secrecy top management had not intimated the high value of cash investment with SBIL to the account staff etc. I find that the various entries including sales/deposits in the bank account/cash investment with SBIL were not made in the books of account till the date of search and seizure proceedings. After se....
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....es (NDLS-Kathgodam 12040) 25.07.2019 7488205 05.10.2019 12210233 4722028 Catering services (NDLS-Lucknow 12004) 25.07.2019 12016410 05.10.2019 18722417 6706007 Catering services (NDLS- Ludhiyana 12037) 25.07.2019 2335010 05.10.2019 3441617 1106607 It is important to mention that the appellant receives the sales proceeds of Rajdhani Express from IRCTC through banking channel which was remained to be entered in the books of account. This error of the appellant cannot be treated as malafide or intentional. The above sales have also been included in GST returns, but many other sales instances were also not recorded in the books of account and subsequently, the entries have been made to complete the books of account. I further find that various transactions like sales to IRCTC, sales in ordinary/express trains, bank deposits, bank and cash collection and various expenses etc were executed before the date of search but entries in the books of account could not be made due to various reasons as narrated earlier. The sales of the appellant are also matching with the GST returns which were filed prior to search and seizure proceedi....
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....Regarding sales difference for the month of September 2019, it has been explained that train sales amounting to Rs. 10,29,13,720/-, sales amounting to Rs. 7,71,560/- of Bhilai Restaurant not available in seized data and train sales of Rs. 20,29,201/- were short booked and food plaza sales amounting to Rs. 77,08,469/- were not booked. Sales as per GST return and as per books is matching. On being asked the appellant also furnished month wise chart of sales during FY 2018-19 and FY 2019-20 which is being presented below:- Month Sales FY 2019-20 Sales FY 2018-19 April 105165454 73696837 May 149428650 138620294 June 194824990 141772349 July 101067524 140768092 August 1265631 1 125309982 September 1 17019384 126202681 October 139885044 119846742 November 155902476 135663940 December 171263880 132816485 January 157803170 140925487 February 141513979 134503823 March 132066854 177996142 Total 1692504516 1588122854 On perusal of above month wise sales data, it has been found that there is no abnormal increase/decrease in total sales and therefore, s....
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....umstances under which it is made. It can be shown to be erroneous or untrue". (iii) Awad Kishore Dass AIR 1979 SC 861: It has been held that "it is true that the evidentiary admissions are not conclusive proof of the facts admitted and may be explained or shown to be wrong. Similar view has been expressed by Hon'ble Madras High Court in the case of CIT vs S Kader Khan Sons (2008) 300 ITR 157 (Mad). It is important to mention that Shri Rahul Agrawal never denied cash payment of Rs. 60 crores but he lateron stated that the said payment was made by the three group concerns including appellant in compliance to MOU dated 12.07.2019 and out of cash available in their books of account. On verification, all cash payments are found to be made out of cash balances in the books of account. As narrated above, I have found that the appellant has paid Rs. 7 crores in cash out of opening cash balance of Rs. 63.94 Lakhs and cash generated through regular business sales. Therefore, the retraction from the statement by Shri Rahul Agrawal is found justifiable and acceptable as backed by audited books of account and genuine reasons. (iii) The appellant, subseque....
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.... received Rs. 44.27 lakhs as its share of revenue which shows that the terms and conditions of the MOU have been followed. Therefore, the contents of the MOU cannot be doubted. It is a valid piece of evidence and admissible in the income tax proceedings. Therefore, it cannot be said that the MOU was an afterthought arrangement to avoid taxes. (iv) During course of search and seizure proceedings, entries reflecting cash payment of Rs. 60 crores in the laptop of Shri Saurabh Gupta were recovered. Statement of Shri Rahul Agrawal, Shri Saurabh Gupta, Shri Vishal Saxena and Shri Sameer Biyani were recorded who confirmed the cash payment of Rs. 60 crores by the group concerns for acquiring hotel project in Goa. In the statement u/s 132(4) dated 10.10.2019, Shri Rahul Agrawal stated that amount of Rs. 60 crores in cash was generated by suppression of sales of appellant and Ws. RKAAHPL. However, lateron vide letter dated 20.02.2020 and 20.03.2020 filed before the DDIT(Inv)-2, Goa, Shri Rahul Agrawal stated that the said cash was not out of suppressed sales, but it was out of surplus cash generated through sales of the appellant. During assessment proceedings, the appellant reitera....
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....67512 4 21.09.2019 4000000 10334086 5 30.09.2019 36000000 10129703 In addition to opening balance, the appellant also received cash of 2,80,00,000/- account of branch transfer and small amount of cash sales. Total 70000000 Conclusion on the basis of incomplete books of account may give wrong picture of affairs of any assessee which is apparent from the conclusion drawn by the AO in the instant case. Hon'ble ITAT Jaipur in the case of Jewel Emporium (supra) has held that when the books of account are incomplete during the search and seizure proceedings and later on the same completed, the AO should have pointed out discrepancies in the completed books of account for making additions. Relevant para of the said decision is reproduced hereunder:- 11. We also found that both the AO as well as Id. to appreciate the fact that sales to the extent of Rs. 33,57,()()0/- was duly incorporated and recorded in the books of accounts while completing the same after search and thus there remained no difference in the cash physically found and as per books of accounts as on the date of search, th....
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....The books of account of the appellant have not been rejected and no deficiency has also been pointed out by the AO. The results of audited books of account have been accepted by the AO. The amount of cash of Rs. 7 crores invested with SBIL is found to be out of cash available in the books of the appellant. In lieu of such investment, the appellant has received share in revenue of M/S. Pacifica as per the terms and conditions of MOU. Therefore, addition of Rs. 7 crore on account of unaccounted business income in the hands of the appellant is not found sustainable. In view of the above discussion, addition of Rs. 7,00,00,000/- is hereby deleted. Therefore, appeal on these grounds is allowed. 11. In terms of aforesaid observations of the Ld. CIT(A), the appeal of the assessee was partly allowed on legal grounds, whereas the contentions of the assessee on merits are allowed in sum and substance, consequently, the addition made by Ld. Assessing Officer was vacated in entirety. 12. Dissatisfied with the aforesaid decision of the Ld. CIT(A), aggrieved revenue has carried this matter before us, assailing the following grounds of appeals in ITA No. 82/RPR/2023: (1) W....
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....er the Ld. CIT(A) erred in accepting the assessee's version as well as part retraction of statement and thereby agreeing that the cash payment was made not out of "suppressed" sales but out of "surplus" cash available, ignoring the following significant specifics in the statement recorded u/s 132(4), as quoted on page 5 of the assessment order of Shri Rahul Agrawal: (i) Admission of "suppression" of sales in the statement was not only categorical but was also made twice in the statement? (ii) Admission of "suppression" in the statement was not a bland or bald one but it vividly distinguished between cash receipts as against bank receipts and even described how suppression of bank receipts is not possible? (iii) Admission in the statement even specified who (Mr. S. K. Roongta) in accounts department was instructed to "suppress" the cash sales? 5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 7 crores made by the AO on account of unaccounted business income by accepting the plea of the assessee ignoring the fact that incriminating materials available on record could not b....
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....d. AO, much less the books of accounts of the assessee have not been rejected u/s 145(3) of the Act, Ld. AO accepted the book results of the assessee, the sales recorded in the books of assessee and proceeds from such sales were used for payment / investment by the assessee i.e., M/s Brandavan Food Products (in short "BFP") to M/s Pacifica Hotels (Ahmedabad) Project Pvt. Ltd. (in short "PHAPPL") as contribution of "BFP" in terms of Memorandum of Understanding (in short "MOU"), entered into for investment for acquiring of Hotel Project with the terms of sharing of revenue after it become operational. Ld. AR further submitted that though the Ld. AO had not believed the MOU, stating that it was not revealed at the time of search, which was brought on record during the post search proceedings and since it was not even registered, with such allegations, the MOU has been termed as afterthought arrangement to avoid tax and the addition of Rs. 7.00 crores was made in the hands of the assessee M/s BFP, but simultaneously, Ld. AO, contradicting his own stand had relied on the MOU, while adopting the ratio and amount of investment, as specified therein for making the additions in the hands of....
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....er 2019 itself, then how the cash balance of such a huge amount shown in the books is justified, and why the entries regarding cash payment to M/s Sir Biotech India Ltd. (in short "SBIL") were not recorded in the impounded books. Ld. AO also had placed his objection against the MOU, stating that the said document was not registered, it was not revealed during the search, whereas it was emerged and brought on record by the assessee in the post search proceedings, therefore, it is just an afterthought arrangement to avoid the taxes. Ld. AO further observed that the transactions are recorded in the books of accounts, but the same are unaccounted business income of the assessee. 14.4 While deliberating on this issue Ld. CIT(A) has categorically and rightly observed, taking support from the order of Hon'ble Bombay High Court in the case of Rakesh Ramani (2018) 168 DTR 356 that there is no requirement in law that evidence in support must be produce only at the time when, the seizure has been made and not during the assessment proceedings. Further Ld. CIT(A) have elaborately made his observations qua the transactions under consideration in the present case, placing his reliance on Pull....
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....ment made to SBIL were not recorded in the books of accounts which are incomplete at the time of search for genuine and practical reasons. Ld. CIT(A) also analysed the comparative data of sales from GST returns and sales recorded in the completed / audited books and found that the same are matching with very paltry and insignificant variation. Ld. CIT(A) also after perusal of month wise sales figures of the assessee for the FY 2019-20 in comparison to previous FY 2018-19 have observed that there is no abnormal increase / decrease in total sales of the assessee, therefore, the sales figures shown for the year under consideration cannot be doubted. It is the observation of Ld. CIT(A) supported by the order of ITAT, Jaipur in the case of Jewel Emporium (supra) that conclusion on the basis of incomplete books of accounts may give wrong picture of affairs of any assessee, the completion of the books cannot be denied without pointing out discrepancies. It is the observation of Ld. CIT(A) that the retraction from the statement by Shri Rahul Agrawal is found justifiable and acceptable as the same was backed by audited books of accounts and genuine reasons. 14.6 In backdrop of aforesaid ....
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....mission of Ld. CIT DR that all the aforesaid glaring facts were ignored by the Ld. CIT(A) and has decided the issues in favour of the assessee, which thus, are liable to be struck down and the addition made by Ld. AO merits to be restored in the interest of substantial justice. 15.2 Ld. AR on the other hand placed his reliance on the order of Ld. CIT(A) and have vehemently submitted that the cash paid by the assessee (BEF) to SBIL was out of surplus sales of the assessee, this fact was duly declared by Shri Rahul Agrawal in his statement during the search stating that such cash was out of sales, irrespective of the facts whether they were 'suppressed' or 'disclosed'. It is also submitted that the R.K. Group does not have any other source across all verticals to generate such huge cash apart from business operations. Ld. AR further explained that the cash sales of all the entities from R.K. Group are duly supported by GST returns and such returns were filed with the competent government authorities before the date of search (copies of such monthly GST returns for FY 2019-20 are enclosed in the assessee PB placed before us). Adverting further on the issue Ld. AR submitted that the....
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....es Group, which subsequently was retracted and explained that under misunderstanding he mentioned 'supressed sales' instead of 'surplus cash sales'. Ld AO was not convinced with the explanations of the assessee; thus, he concluded the assessment with addition of Rs. 7.00 crore in the AY 2020-21 with specific observations that the assessee was unable to explain about the cash payment of Rs. 60.00 Crore which was not entered in the books of respective entities, although the same was paid in the month of September 2019 i.e., prior to the date of search on 10.10.2019, this shows that the amount was paid from undisclosed sources. It was the belief of Ld. AO that, the intention of both the buyer and seller was to keep the cash payment transaction out of books. The explanation of the assessee was an afterthought. The books of assessee are showing a cash balance of Rs. 7.79 Crores on 10.10.2019, whereas, cash payment to SBIL of Rs. 7.00 Crore in September 2019 was not recorded in the said books proves that it is just an afterthought justification. Ld AO further, discussed about the MOU between Pacifica Hotels (Ahmedabad Projects) Private Limited, R K Associates & Hoteliers Pvt. Ltd., Brand....
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....ne cannot, on a standalone basis, constitute 'incriminating material' to empower the Assessing Officer (AO) to frame an assessment under Section 153A. Under such facts and circumstances, we are unable to persuade ourselves to subscribe to the findings of the Ld AO, wherein he attempted to contradict with the explanations and facts furnished by the assessee, but unable to dislodge the same with any reasonable and convincing observation, in absence of any valid or plausible interpretation, while making the addition on account of unaccounted business income. 15.6 Adverting to the contentions raised by the revenue under their grounds of appeal which are duly deliberated, dealt and discussed by the Ld. CIT(A) in his order. The relevant observations / conclusions from the detailed observations extracted (supra), are culled out as under: (a) The statement cannot be categorized as incriminating material. Accordingly, this cannot be the sole basis for the purpose of making addition reliance placed on judgment by Hon'ble Bombay High Court in the case of Rakesh Ramani, (2018) 168 DTR 356. (b) Making addition ignoring the retracted statement of Shri Rahul Agrawal and w....
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....erial placed by assessee before the Ld. AO. (i) Ld. CIT(A) observed that " I find that the AO was not correct in his approach in not considering the material placed before him by the appellant. Hence, the contentions of the appellant that the additions without rejection of books of account u/s 145(3) is not justified, are found acceptable. The decision relied upon by the appellant are also squarely applicable to it. In view of the above discussion the AO was not justified in making addition without pointing out any defect/rejecting books of account of the appellant. " (j) Ld. CIT(A) had duly analysed the pending entries in the books of accounts and found that sales receipts including cash and through banking channels for various dates had not been entered in the books of accounts. Few instances are also reproduced in his order. (k) The sales of appellant are matching with GST returns which are filed prior to search and seizure proceedings. Requisite evidence regarding pending entries like bank statement, GST returns etc. are produced before Ld. CIT(A), therefore, he find substance in the submission of the assessee that the cash payments made to SBIL were ....
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.... the considered view that there was no infirmity in the decision of Ld. CIT(A) in deleting the addition made by Ld. AO, on account of unaccounted business income, thus, we uphold the same. Consequently, ground no. 2 to 7 of the department, dehors proving / establishing any error in the order of Ld CIT(A) are rejected in terms of our aforesaid observations. 15.9 In the result, appeal in ITA No. 82/RPR/2023 by the revenue, stands dismissed. 16. As, we have approved the decision of Ld CIT(A) in vacating the addition made by Ld. AO in the case of M/s Brandavan Food Products in ITA No. 82/RPR/2023 in terms of our aforesaid observations, by dismissing the appeal of the department, therefore, our aforesaid decision shall equally apply on the remaining two cases in ITA No. 83 & 84/RPR/2023, having similar facts, issues and circumstances except quantum of addition, accordingly, the same are also rendered as dismissed. 17. In combined result ITA Nos. 82, 83 & 84/RPR/2023 filed by the revenue are dismissed and CO Nos. 05, 06 & 07/RPR/2023 of the assessee are dismissed as withdrawn, in terms of our aforesaid observations. Order pronounced in the open court on 04/07/2024. =======....
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....ss objections, bearing CO No. 6/Rpr/2023, were preferred against the appeal filed by the Department, bearing ITA No. 83/Rpr/2023. The grounds raised in the said Cross objections were as follows: "1. The Ld CIT(A) has erred both on facts and in law in disregarding the fact that that the impugned assessment order was passed without affording reasonable opportunity of being heard to the assesse/respondent in as much as the fact that the same has been passed without issuing a final show cause notice. 2. The Ld CIT(A) has erred both on facts and in law in partly accepting the ground of the appellant that the impugned assessment order was passed by the ld. AO on the basis of whims and fancies and without having any incriminating material that was found and seized during the course of search and only on the basis of statement recorded w/s 132(4). 3. The appellant craves leave to add, delete, modify / amend the above grounds of cross objection with the permission of the Hon'ble appellate authority." The additional grounds, filed on 30.10.2023, in pursuance of the said cross objections are also reproduced below: "1 That having regard to the la....
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....D SUBMISSIONS A. AUTHORITY TO REPRESENT PHAPPL 1. RKAH, BFP, SCPL and PHAPPL (now PHPL) are all part of the RK group of companies and Sh. Rahul Agarwal was authorised by all the entities to represent them in the deal for purchase of the under-construction hotel from SBTIL, represented by Sh. Jai Prakash Agarwal. The same fact has also been confirmed by Sh. Jai Prakash Agarwal in his statement recorded under section 132(4) of the Act. In his statement, he also accepted receipt of cash of Rs.60 Crores from the RK Group, which has not been denied by the RK group. 2. The board resolution by PHAPPL, in this regard, dated 04.07.2019 authorising Mr. Rahul Agarwal to execute the transaction and finalise all other terms and conditions thereto was duly submitted before the lower authorities. (Copy of the board resolution is enclosed at Page 32 of the RKAH Paperbook Part-I) B. CASH PAID WAS OUT OF SURPLUS SALES 3. The source of cash paid by the RK Group is as follows: a. Cash sales of RKAH, BFP and SCPL supported by GST returns filed before date of search. (Monthy GST returns for FY 2019-20 enclosed at Page no. 76-79 of RKAH Paperbook Part-I ....
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....operations started, honouring the MOU. (Note No. 19 disclosing other income at Page No. 526 of RKAH Paperbook Part-II) D. RELIANCE SOLELY ON SECTION 132(4) STATEMENT WITHOUT FACTUAL APPRECIATION 5. Statement of Sh. Rahul Agarwal recorded u/s 132(4) of the Act dated 10.10.2019 to 12.10.2019, during the course of search, cannot be relied upon due to following reasons: a. The said statement was modified vide letter dated 20.02.2020 filed before the Investigation wing within 15 days of receipt of copy of such statement. The phrase 'suppression of sales' was rectified as 'surplus of sales'. (Copy of the letter enclosed at Page No. 34 to 36 of RKAH Paperbook Part-I) b. In response to question no. 45 of the statement, Sh. Rahul Agarwal has accepted a sum of Rs.62.62 crores as unaccounted income for F.Y. 2019-20, including Rs.60 Crores of cash paid for purchase of hotel, Rs.1.84 Crores worth of jewellery and cash of Rs.78.45 Lakhs seized from his residence. However, the AO in the assessment proceeding accepts the cash and jewellery seized from the Document 7 residence and accepts the submissions of the assessee which are not in line with the s....