TaxTMI 
TaxTMI 
2025 (1) TMI 1007
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.... the assessment order dated 31.03.2022 passed by the Deputy Commissioner of Income Tax, Central Circle- 2,Trichy ["AO] 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. 7,98,94,213/- made by the Assessing Officer towards unaccounted business income. 5. That the Ld. CIT(A) is not justified in adopting a higher percentage of 18.75% in estimating the business income of the appellant. 6. That the Ld. CIT(A) ought to have held that excess of income returned by the appellant over the income estimated by the Ld. CIT(A) shall be eligible for carry forward and set off against....
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....te bogus expenses of Rs. 3,20,40,973/- in the books of accounts maintained in "Y" server which contained accounted transactions for the purpose of filing return of income. 3.1 The Ld.CIT(A) failed to appreciate that the assessee involved in booking of bogus expenses as payment made to contractors and then receiving back the same in cash. It was seen from "Y" server which contained accounted transactions, the assessee company is making payments through banking channel to certain contractors which are claimed as expenses in the Profit and Loss account. However, in "Z" server which contained unaccounted transactions, there were entries proving that the amount have been received back in cash. In support of the above findings, scanned vouchers for payments and receipts were found uploaded in "Z" server. 3.2 The Ld.CIT(A) failed to appreciate that in the office premises of M/s.SEBCO Property Pvt Ltd and in the residence of Smt.Deepa, Finance Manager of assessee company, various cheque books in the name of different contractors were found and seized. She admitted in her sworn statement that the amounts have been received back in cash and utilized for unaccounted cash exp....
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....inance Manager and Personal Secretary to MD. In addition to certain material, cash of Rs. 919.50 Lacs was seized. During the course of search, unaccounted cash and incriminating books and documents were found and seized. Subsequently, a notice u/s 153A was issued to the assessee on 08-11- 2021 and in response thereof, the assessee admitted income of Rs. 134.15 Lacs on 06-12-2021. 1.6 During search, it transpired that the assessee maintained accounts in Tally in two separate servers i.e., 'Y-server' and 'Z-server'. The 'Y-server' was used for recording and maintaining regular business transactions whereas 'Z-server' contained unaccounted transactions. Both the servers were seized and analyzed. Several scanned vouchers were also found stored in digital format which endorsed the transactions recorded in Tally. These vouchers had information which corroborated the cash transactions as recorded in 'Z-server' as maintained by the assessee. Certain documents and materials were also seized which contained sale deeds, details of payments received through banking channels as well as in cash. During search, sworn statements were recorded from MD and Smt. Deepa. On the basis of all this mat....
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....770 45,09,38,770 Opening Stock 36,42,36,999 Closing Stock 83,11,23,753 (-) OS as per RoI -25,46,72,181 (-) CS as per ROI -22,94,96,311 Exp. for business 10,49,84,073 Sale Receipts 24,74,04,661 Purchases 12,28,02,259 Chit Receipt 1040000 Z&ED Interest Payments 2,95,16,891 Other Income 2,77,66,859 Chit Payment 6,62,525 Non business exp. 2,05,95,235 Revised Profit 50,29,97,590 As per RoI 1,32,84,429 Undisclosed income 48,97,13,161 Computation of Assessed Income For AY 2017-18 Particulars Amt Rs. (1) Total income as per Return filed u/s.139 1,34,15,910 (1a) Additional income offered as per Return filed u/s.153A Nil (2) Total income as per Return filed u/s.153A 1,34,15,910 Add: additions as discussed above (3) ....
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....d advance receipts could not be assessed as sales. The assessee also submitted that the additional income as offered by the assessee consequent to search was adequate enough to take care of the shortfall in income, if any. The assessee assailed the various computations / additions made by Ld. AO. 3.2 The adjudication of Ld. CIT(A) is contained in para 6.4.6 onwards. The Ld. CIT(A) rendered factual finding that Ld. AO reworked the profit from unaccounted portion on the basis of accounting entries made in 'Z-server'. However, the assessee had furnished a copy of its Balance Sheet as on 31.08.2018 to 31.03.2021 from the "Z-server' which was also made available before Ld. AO during the course of assessment proceedings. Upon perusal, it was noticed that in all the years, there was difference in opening balances as under: - No As on Difference in opening balance (Rs.) 1 31.03.2018 7,07,45,819 2 31.03.2019 16,82,66,487 3 31.03.2020 11,60,94,084 4 31.03.2021 77,72,267 The assessee failed to reconcile the above differences at any point of time. It was also noted that the 'Current Liabilities' were reflected on Assets side and 'Current Asset....
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....sion that the valuation of stock as arrived at by Ld. AO was unreliable. However, in the absence of stock records / stock registers and cost sheets, it was not possible to arrive at the correct cost. Since there were deficiencies in the books of accounts as maintained by the assessee in 'Y-server' as well as in 'Z-server', the computations could not be made on the basis of such deficient books of accounts. The books were inaccurate unreliable, incomplete and incapable of reflecting the true and correct picture of assessee's financial affairs. The same could, therefore, be not relied upon to determine the income of the assessee. The assessee failed to reconcile the errors in its books of account. Under these circumstances, the books were to be rejected u/s 145(3) as held by Hon'ble Allahabad High Court in Shri Venkteshwar Sugar Mills (341 ITR 588) upholding the decision of Tribunal in rejecting the books of accounts since the same were not properly maintained. Similarly, Hon'ble Punjab & Haryana High Court in Mahavir Rice Mills v. CIT (153 Taxmann.com 686) upheld the estimation made by rejecting the books of account of the assessee in the absence of details of stock. Similar was the....
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....54,778 3.7 In view of the above, the addition made by the Assessing Officer towards undisclosed income and on account of difference in valuation of stock was deleted. Since the income of the assessee was estimated, the excess income admitted by the assessee u/s 153A over and above the estimated income for the AY(s) 2018-19 and 2020-21 were required to be ignored. The grounds were partly allowed. Aggrieved, the assessee as well as the revenue is in further appeal before us. 3.8 On the issue of proposed disallowances u/s 37(1) and 40A(3) as made by Ld. AO in all the years, Ld. CIT(A) held that once the income was estimated, no separate addition of expenses would be warranted. This was as per the ratio of decision of Hon'ble Madhya Pradesh High Court in CIT v. Purshottam Lal Tamrakar (270 ITR 314) holding that no separate disallowance u/s. 40A(3) is required when income is estimated by adopting Net Profit Rate. Similar ratio was laid down by Hon'ble Punjab & Haryana High Court in the case of CIT (Central) v. Gobind Ram (229 Taxman 491) as well as by Hon'ble Rajasthan High Court in PCIT v. Jadau Jewellers & Manufacturers (P.) Ltd. (409 ITR 85). 3.9 The Hon'ble High Court of Ma....
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....essing Officer, on the basis of the show cause notice, issued under the Central Excise Act cannot be sustained. When the assessable income was arrived at by applying a percentage rate, as held by this Court in S.Mohammad Dhurabudeen's case (supra), the said exercise would take care of everything and there is no need for the Assessing Officer to make scrutiny of the amount incurred on the purchases by the assessee for the purposes of disallowance. Therefore, this Court is of the considered view that the order of the Tribunal in concurring with the CIT (Appeals) on this issue is justified and this Court finds no reason to differ with the same." By placing reliance on all these decisions, it was conclude by Ld. CIT(A) that separate disallowance as made by Ld. AO u/s 37(1) and 40A(3) could not be sustained. Accordingly, the corresponding grounds raised by the assessee were allowed. Aggrieved, the revenue is in further appeal before us. 3.10 The Ld. AO had made addition of cash seized for Rs. 919.50 Lacs u/s 69A for AY 2021-22. It was noted that cash of Rs. 819.50 Lacs was seized from the residence of Smt. R. Deepa, Finance Manager whereas further cash of Rs. 100 Lacs was seiz....
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....ere is in such a case no double taxation. It is not a case where the income sought to be taxed was held to be undisclosed income of a disclosed source, the income of which source had previously been taxed on the basis of an estimate. If it were so, the question of double taxation might have been legitimately raised. That, however, is clearly not the case here as the question as framed itself shows." 3.12 It was noted that the assessee filed return of income in response to notice issued u/s 153A and offered additional income of 26.92 Crores from AYs 2018-19 to 2020-21. As against this, the cash was found only to the extent of Rs. 919.50 Lacs. Therefore, the assessee would be entitled for telescoping benefit of additional income. Since additional income as offered by the assessee was much more than the physical cash found, separate addition of physical cash as made by Ld. AO was deleted. Aggrieved, the revenue is in further appeal before us. Our findings and Adjudication 4. The basic facts are not in dispute. The assessee is engaged in real estate development and construction activities. Pursuant to search action on the assessee, it transpired that besides regular books of a....
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....7,66,859 Chit Payment 6,62,525 Non business exp. 2,05,95,235 Revised Profit 50,29,97,590 As per RoI 1,32,84,429 Undisclosed income 48,97,13,161 Computation of Assessed Income For AY 2017-18 Particulars Amt Rs. (1) Total income as per Return filed u/s.139 1,34,15,910 (1a) Additional income offered as per Return filed u/s.153A Nil (2) Total income as per Return filed u/s.153A 1,34,15,910 Add: additions as discussed above (3) Undisclosed income (as per para 7.1) 48,97,13,161 (4) Disallowance of expenses u/s 37 & 40A(3) (as per para 7.29 and 7.3.8) 5,26,36,208 (5) Disallowance of expenses u/s.40A(3) (as per para 7.7.7.) 9,28,03,149 (6) (4) + (5) 14,54,39,357 (7) (3) + (6) Total additions proposed 63,51,52,518 (8) Total income assessed (2) + (7) 64,85,68,428 It could be se....
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....heets for various years as prepared on the basis of 'Z-server'. Therefore, the valuation of stock on the basis of excel sheet has rightly been discarded by Ld. CIT(A). The valuation as reflected therein has no basis and therefore, the same are to be ignored completely. 6. We further find that there were gross discrepancies in the financial statements as extracted from 'Z-server'. The Ld. CIT(A) has noted that the 'Current Liabilities' were reflected on Assets side whereas 'Current Assets' were reflected on Liabilities side of the Balance Sheet. All these factors would prove that the accounts as maintained in 'Z-server' were incomplete and could not be relied upon to assess the income of the assessee. In view of so many defects, there exists every possibility that receipts which are not in the form of income would have been credited to the Profit & Loss Account. At the same time, receipts which are income would have been taken to 'Current Liabilities'. In such a scenario, there would be no option but to reject the books of accounts. The action of Ld. CIT(A) in rejecting the books of accounts is backed up by working of Net profit Rates for various years. If the working of Ld. AO w....
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....ion and iron out the differences that may be arising in various financial years. Therefore, this methodology of estimating the income of the assessee also found our concurrence. The methodology could not be faulted with. We concur with the working made by Ld. CIT(A). 9. Having confirmed the aforesaid action of Ld. CIT(A), it would be quite logical that separate additions as made by Ld. AO u/s 37(1) or u/s 40A(3) would have no legs to stand. It is quite logical that once the books have been rejected and the income has been estimated on gross receipts, no separate addition / disallowances would be warranted. This view is duly supported the cited decision of Hon'ble High Court of Madras in CIT v. Amman Steel & Allied Industries (supra), the substantive portion of which has already been extracted in preceding paragraphs. The other decisions of Hon'ble High Courts also lays down similar ratio. Therefore, the separate disallowance as made by Ld. AO u/s 37(1) and 40A(3) has rightly been deleted by Ld. CIT(A). We order so. The Ld. CIT-DR has referred to the decision of Hon'ble Punjab & Haryana High Court in the case of CIT vs. Sai Metal Works (11 Taxmann.com 61) for the submission that ....