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TaxTMI 
TaxTMI 
TaxTMI 
2024 (11) TMI 562
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....der: - 1. That the Learned Commissioner of 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. ....
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....y been discussed by Ld. AO while framing an assessment for AY 2013-14 on 18-02-2021. The copy of the same has been placed on record. 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 ba....
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....nditure in cash. The notings in that respect were found in the notebooks. The unaccounted sales receipts were quantified at Rs. 20.41 Crores for AYs 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. C....
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....,28,87,000 25,00,000 1,07,70,000 56,368 TOTAL 55,25,000 56,73,000 20,41,85,050 32,55,55,614 19,76,16,386 19,30,92,368 Aggrieved as aforesaid, the assessee assailed the assessment so made before Ld. first appellate authority. Appellate Proceedings 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 reg....
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....ents on their behalf. It was also submitted that the aforesaid payments were returned back to the Head Office due to non-payment. Accordingly, the assessee pleaded for deletion to that extent. For the remaining unaccounted sales, the assessee pleaded for adoption of Gross-Profit (GP) Rate 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 whic....
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..... Minerals and these receipts have been returned back to the group entity. Such circular transactions form part of above receipts. The fact of circular transaction has also been accepted by Ld. CIT(A) in the impugned order. In our considered opinion, circular transactions within group entities would not partake the character of income in the hands of the assessee. Accordingly, the receipts for Rs. 732.30 Lacs for AYs 2015-16 & 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 disa....
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....the same in cash. In the absence of corroborative evidences, the addition lacks merits. The Ld. AO did not conduct any enquiries from the vendors to ascertain the genuineness of the expenditure. Without corroborative and incriminating material, no addition could be made as per the decision of Hon'ble Apex Court in the case of Pr. CIT vs. Abhisar Buildwell (P.) Ltd. (149 Taxmann.com 399). Finally, it was to be held that disallowance 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 Am....
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....sed. Unaccounted Cash Receipts 18.1 The issue of cash receipts aggregating to Rs. 19.76 Crores arose in AYs 2014-15, 2015-16, 2017-18 to 2019-20. The addition for AYs 2014-15 & 2015-16 for Rs. 13.65 Crores was based on certain excel sheet as exchanged in e-mail between Shri Jegatheesan (Partner of M/s V.V. Minerals) and Smt. Jeyanthi (an employee of M/s V.V. Minerals). The addition for AYs 2017-18 to 2019-20 for Rs. 6.10 Crores was based on seized notebooks and dairies as maintained 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 ....
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.... 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 evidence. Reliance was placed on the decision of Hon'ble Delhi High Court in the case of CIT vs Sant Lal (118 Taxman.com 432) 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. 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....
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....s narrated by Shri S. Raja in his note book was actually an unaccounted sale of the assessee company. Therefore, no such addition could be made on the basis of noting in the seized note-books by Shri S. Raja. 18.6 However, considering the inconsistencies in generation and accounting of unaccounted sales by the assessee company, Ld. CIT(A) held that it would be fair to estimate probable income of the assessee company as embedded in the cash receipts recorded by Shri S. Raja. The same could be made by adopting Gross Profit Ratio of the respective 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....
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....e notebooks as seized from Shri J. Thangadurai (GM Finance & Accounts). Further, there was no corroborative evidences to prove that the noting in the excel sheet were actual cash receipts of the assessee company. In such circumstances, this sheet could not be relied upon. This sheet was neither recovered from the office of the assessee company nor from its employees and therefore, the presumption laid u/s 132(4A) of the Act could not be invoked. The author of the excel sheet was not conclusively established. There was no corroboration from any of the party and the evidence being relied upon by Ld. AO was merely hearsay evidence carrying 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 decisi....