TaxTMI 
TaxTMI 
TaxTMI 
2024 (11) TMI 562
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....Income Tax (Appeals) - 19, Chennai ["Ld. CIT(A)"] failed to appreciate that the assessment order dated 18.02.2021 passed by the Assistant Commissioner of Income Tax, Central Circle - 2, Madurai ["Assessing Officer"] u/s.153A r.w.s 143(3) Of the Income-tax Act ,1961 ["Act"] is without jurisdiction, bad in law, barred by limitation and consequently erred in upholding the assessment. 2. That the Ld. CIT(A) ought to have appreciated that the approval accorded by the Range Head u/s.153D of the Act was mechanical and consequently the impugned assessment order is invalid and void ab initio. 3. That the Ld. CIT(A) erred in not quashing the assessment order since the same lacks DIN as mandated by the CBDT Circular No.19/2019 dated 14.08.2019 w.e.f 01.10.2019. 4. That the Ld. CIT(A) is not justified in sustaining the addition to the extent of Rs. 94,69,529/- made by the Assessing Officer towards unaccounted cash sale of scarp and rutile. 1.3 The revenue's grounds of appeal read as under: - 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2 The Ld.CIT(A) erred in restricting the addition made towards unaccounted sales to....
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....ord. For reference purposes and for the purpose of adjudication, the said order is taken to be the lead order and the findings rendered by Ld. AO therein have been considered while adjudicating these appeals. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. 1.5 The assessee entity is stated to have been established in the year 1994. It is stated to be engaged in manufacturing & sale of anatase grade Titanium dioxide. Pursuant to search action on assessee group on 25-10-2018, notices u/s 153 were issued for AYs 2013-14 to 2018-19 on 16-07-2019. In response, the assessee filed returns of income which were subjected to scrutiny by Ld. AO. Assessment Proceedings 2. Based on search findings, Ld. AO proposed addition of- (i) Sales Suppression; (ii) Unexplained investments; (iii) Income by way of unaccounted scrap sales; (iv) Bogus expenses; (v) Unaccounted cash receipts; & (vi) other additions. The brief facts leading to addition in each head are as under. 3. Sales Suppression This addition is based on scanned image of print out of whatsapp chat between Shri J. Thangadurai (GM, Finance & Accounts) and Shri V.P. Menon (Vice Presiden....
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.... 2015-16 to 2019-20 and added as unaccounted income in the hands of the assessee. Since the receipts were brought to tax, no separate addition was made for the cash payments / expenditure. 6. Bogus Expenses 6.1 This addition is based on the allegation of Ld. AO that the assessee generated unaccounted cash by booking bogus expenses in the books by raising bills in the name of bogus parties. The same was based on whatsapp conversion between Shri Thangadurai and Shri Subramaniam (MD). In this regard, a statement was also recorded from Shri K. Ramesh (Deputy Manager, indirect taxes) as well as from Shri S. Vasudevan (Sr. Executive, purchase) u/s 132(4) which is extracted in the assessment order. The Ld. AO quantified the same at Rs. 32.30 Crores for FYs 2015-16 to 2017-18 which are tabulated in para 53 of assessment order for AY 2013-14. 6.2 The Ld. AO noted another payment of Rs. 25 Lacs to M/s Sree Chandra Auto Components Pvt. Ltd. The same was based on an email sent on 04-10-2018 by Shri Adhi Maran (MD) of that concern to Smt. Chitra Raghuram (Finance Manager of M/s V.V. Minerals, the flagship concern of assessee group) attaching an invoice. The same was corroborated by whatsapp ....
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....oceedings 11. The assessee assailed the impugned assessments on legal grounds as well as on merits by way of elaborate written submissions which have already been extracted in the impugned order for AY 2015- 16. This order is being considered by us for the purpose of adjudication. 12. The Ld. CIT(A), in para 7.2, confirmed addition of sales suppression of Rs. 55.25 Lacs for AYs 2018-19 & 2019-20 on the ground that the cash generated by the assessee was proved with corroborative evidences. The Ld. AR has not pressed for this ground of appeal. Accordingly, the corresponding grounds raised in these years stand dismissed. The addition of unexplained investment of Rs. 25 Lacs for AY 2016-17 as allegedly paid to Shri SDR Vijayaseelan was deleted on the observation that there was no material to corroborate the fact that the land was ultimately registered in the name of the assessee company. When there was no registration in the name of the assessee company, the question of making this addition would not arise. Further, noting made in Page No.13 was an extract of noting made in Page No.138 and therefore, this noting was duplication which could not be added again since the receipts as me....
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....te considering the unaccounted expenditure incurred by the assessee out of these receipts. 13.3 The Ld. CIT(A) concurred that there were circular transactions between M/s V.V. Minerals and the assessee. The Ld. AO did not give deduction of corresponding expenditure incurred by the assessee for its business purposes. Considering this fact, only estimated profit embedded in these transactions was to be taxed. 13.4 The Ld. CIT(A) considered the declared Gross Profit Rate for AYs 2015-16 to 2019-20 and applied these rates to the balance addition. The same was computed as under: - AY 2015-16 2016-17 2017-18 2018-19 2019-20 Total addition made by A.O in assessment order 4,06,94,150 4,32,55,900 2,11,45,000 6,62,03,000 3,28,87,000 Less: Double addition / totaling mistake as discussed above - 30,55,400 66,00,000 3,62,000 2,00,000 Balance upon which profit element is to be estimated 4,06,94,150 4,02,00,500 1,45,45,000 6,58,41,000 3,26,87,000 Gross Profit ratio to be adopted 23.27 19.61 17.40 17.55 10.96 Total addition to be sustained in the hands of appellant company as unaccounted business income 94,69,529 78,83,318 25,30,830 1,15,55,095 32,82,495 ....
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....16 & 2016-17 could not be held to be part of unaccounted sales receipts and therefore, the same are to be excluded while estimating the profit on these transactions. Therefore, Ld. AO is directed to exclude the same while making the computations for respective years. The assessee is directed to furnish the year-wise working thereof. The corresponding ground raised by the revenue stand dismissed whereas the corresponding grounds of assessee stand partly allowed. 15. Bogus Expenditure 15.1 On the issue of booking of bogus expenses for AYs 2016-17 to 2019-20, the assessee pleaded that no enquiries were conducted by Ld. AO with respective vendors and therefore, the additions could not be sustained. The assessee also demonstrated that substantial expenses as disallowed by Ld. AO were never booked in its books of accounts. The detailed objections of the assessee, in this regard, has been tabulated in para 7.6.10 of the impugned order. 15.2 The Ld. CIT(A), upon perusal of ledger of M/s Sree Chandra Auto Components Pvt. Ltd., concurred that the said sum was not claimed as an expenditure by the assessee. Accordingly, the addition so made by Ld. AO was deleted. 15.3 The addition of 32.55....
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....of expenses was not sustainable. 15.5 At the same time, the Ld. CIT(A) opined that inflation of expenditure by the assessee could not be ruled out. Therefore, by considering various judicial decisions, Ld. CIT(A) estimated the addition @ 12.5% of alleged bogus expenses. These decisions include the decision of Hon'ble Bombay High Court in the case of PCIT vs. Suraj Infrastructures P. Ltd. (295 Taxman 758) as well as the decision of Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (356 ITR 451) and various other decisions as enumerated in the impugned order. The addition thus sustained by Ld. CIT(A) for AYs 2015-16 to 2017-18 was Rs. 403.81 Lacs as computed in para 7.6.23 of the impugned order. The same was as under: - No. AY Amt. of Addition Addition sustained @12.5% Addition to be deleted 1. 2016-17 11,60,05,873 1,45,00,734 10,15,05,139 2. 2017-18 13,08,80,531 1,63,60,066 11,45,20,465 3. 2018-19 7,61,69,210 95,21,151 6,66,48,059 Total 32,30,55,614 4,03,81,951 28,26,73663 Aggrieved, the assessee as well as revenue is in further appeal before us. Our findings on this issue 16. So far as the addition of Rs. 25 Lacs for AY 2019....
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.... by Shri S. Raja, Manager of M/s V.V. Minerals. The assessee assailed the same on the ground the entries in the excel sheet did not pertain to the assessee and no such sales receipts were received by the assessee. It was also pointed out that Shri S. Raja was not the employee of the assessee company and the presumption u/s 132(4A) would not arise. The assessee also submitted that the sheet was an unsigned sheet and it would thus, have no evidentiary value. The Ld. AO did not make any enquiries to corroborate the notings in the excel sheet. On the issue of entries in the notebooks, it was submitted by the assessee that Shri Raja was not employee of the assessee company. He handled cash on behalf of promoters of M/s V.V. Minerals. During the course of search, six notebooks maintained by Shri Raja were seized from the residential premises of Shri Subramanian (Director of assessee company). The notebooks, as seized and identified by Shri Raja in his sworn statement, were as follows: - No. Annexure of seized note book Note book maintained & identified by Shri S. Raja 1 ANN/KS/PK/B&D/S-1 Maintained for Shri Velmurugan and Shri Jayapaul 2 ANN/KS/PK/B&D/S-2 Maintained for Shri Jeg....
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....und from the premises of the assessee nor was it in the handwriting of the assessee since the third person may write the name of any person at his sweet will and the revenue did not make any effort to gather corroborative evidences in this relation. 18.3 It was further held by Ld. CIT(A) that in the present case, Ld. AO failed to link any cash transactions recorded in excel sheet with any other corroborative evidences. The entries in the excel sheets did not contain complete information with regard to date, amount of cash payment / receipt and the name of recipient and payer. There was absolutely no reference in the seized material regarding the nature of the said transactions of cash payments / receipts and the purpose of said payments / receipts. Therefore, no addition could be made on the basis of said document. To support the same, Ld. CIT(A) referred to the decision of Jabalpur Bench of Tribunal in the case of ACIT vs Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] and also various other decisions which have been enumerated in paras 7.7.15 of the impugned order. On these facts, the additions made for AY 2014-15 and 2015-16 was deleted. 18.4 Similar observations were made by....
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....spective Assessment Year on the unreconciled items of income. After analyzing the entries in note-book, the Ld. CIT(A), in para 7.8.7, noted that the receipts to the extent of Rs. 140.35 Lacs for AYs 2018-19 & 2019-20 did not pertain to the assessee company. Further, there was double addition of Rs. 204.40 Lacs for AYs 2018-19 & 2019-20. Therefore, no estimation was to be made to that extent. Finally, the unreconciled receipts were quantified as Rs. 178.87 Lacs, Rs. 24.73 Lacs & Rs. 3.20 Lacs for AYs 2017-18 to 2019-20 against which Gross Profit rate was applied to arrive at quantum of additions that were required to be sustained. This working has been given in para 7.8.8 of impugned order as under: - Particulars AY 2017-18 AY 2018-19 AY 2019-20 Total addition made by the A.O. on the basis of receipts in the note book 1,82,80,064 3,20,24,342 1,07,70,000 Less: Exclusion of the following items as per the above discussion: (i) Return of payments 3,92,564 (ii) Addition of sales suppression by under invoicing 39,25,000 16,00,000 (iii) Receipts not relating to the Appellant Company as evident from the seized material ....
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....rying no evidentiary value. At the time of seizure, the excel sheets were not authenticated either by the assessee company nor by the witnesses or by an authorized officer. This was an unsigned document and as such loses its evidentiary value for want of authentication. The evidences relied upon by the AO in the form of excel sheets does not constitute adequate evidence to draw adverse inference against the assessee, in the absence of any other corroborative evidences. We concur with all these findings of Ld. CIT(A) and also confirm reliance on the decision of Hon'ble Delhi High Court in the case of CIT vs. Sant Lal (supra) holding that the assessee could not be put to any liability on the action of a third-person where the material was not found from the premises of the assessee nor was it in the handwriting of the assessee since the third person may write the name of any person at his sweet will and the revenue did not make any effort to gather corroborative evidences in this relation. We also concur with the findings of Ld. CIT(A) as enumerated by us in preceding para 18.3. Accordingly, the adjudication for AY 2015-16 do not call for any interference on our part. The corresp....