TaxTMI 
TaxTMI 
2025 (2) TMI 122
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....8.2011, declaring a total income of Rs. 6,48,57,662/-, which was processed under Section 143(1) of the Act. Subsequently, based on information received from the Director General of Central Excise Intelligence (DGCEI) regarding unaccounted cash transactions, the case was reopened under Section 147 of the Act, and an assessment order was passed making an addition of Rs. 7,51,35,438/- under Section 69A of the Act, treating the alleged unaccounted cash receipts as undisclosed income. 3. The assessee filed an appeal before CIT(A) against the order of AO, who partly allowed the assessee's appeal by deleting a substantial portion of the addition but confirmed an addition of Rs. 45,08,126/-. 4. Aggrieved by the order of CIT(A), both the Assessee and the Revenue have filed cross-appeals with following respective grounds: Grounds of Assessee's appeal in ITA No.1852/AHD/2019 1. The learned CIT-(A) has erred in law and on facts in not quashing the proceedings u/s. 147 of the Act as invalid and in not annulling the reassessment made in pursuance of invalid proceedings u/s. 147 of the Act. 2. The learned CIT-(A) has also erred in law and on facts in not deleting the en....
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....Foils Ltd. had regular business dealings with M/s. Paras Bhavani Steel Pvt. Ltd. since 2008. Although the seized diary (A/8) showed cash payments, Kartikbhai Shah denied receiving any cash amounts from Bhavani Steel Pvt. Ltd. However, the DGCEI investigation revealed that the cash payments were linked to unaccounted sales of SS Strips. The DGCEI cross-examined records such as Panchanama dated 20.01.2011 at M/s. Paras Bhavani Steel Pvt. Ltd. premises and statements of various officials from M/s. Paras Bhavani Steel Pvt. Ltd., confirming cash payments. 5.2. A statement of Shri Jayeshbhai Anilbhai Khandhar (who was a commission agent/sales agent of M/s. Paras Bhavani Steel Pvt. Ltd., and was allegedly involved in making unaccounted cash payments to M/s. Shah Foils Ltd. for the clandestine purchase of SS Strips) was also recorded during the DGCEI investigation on 09.03.2011. Jayeshbhai Khandhar admitted that cash payments were made by M/s. Paras Bhavani Steel Pvt. Ltd. for purchasing SS Strips without bills from M/s. Shah Foils Ltd. He confirmed the details of cash transactions recorded in the seized diary (A/8). He stated that wherever the term "Jayeshbhai, Mumbai" appeared in the ....
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....pon without corroboration. 6. The AO carefully considered but did not accept the assessee statements and relied on the search proceedings conducted by DGCEI, where seized diaries (A/8) from M/s. Paras Bhavani Steel Pvt. Ltd. contained details of cash payments to Shah Foils Ltd. The AO issued a letter to the assessee on 15-12-2017 seeking evidence that sales of Rs. 7,51,35,438/- has been accounted for or show cause why the same should not be added to the income of the assessee. 6.1. In response to the AO's findings, the assessee reiterated its argument that no unaccounted sales were made, and the alleged cash payments recorded in the seized diary did not belong to it. The assessee stated that it had recorded total sales of Rs. 13,06,56,313/-, and all sales were properly accounted for in books of account. The assessee also stated that no additional sales were made beyond the accounted figures, and no cash was received outside the banking channels. The assessee again reiterated that there was no direct evidence proving unaccounted sales, and the entire addition was based on third-party documents, which were not reliable evidence. 6.2. The AO rejected the assessee's statements....
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....O acted on specific, credible information of unaccounted transactions. Further, we note that the assessee did not press earlier objections before us, focusing instead on the merits of the addition. Under these circumstances, we find no reason to interfere with the well-reasoned findings of the CIT(A) in upholding the validity of the reassessment proceedings. 11. In light of the foregoing, the ground challenging the reassessment proceedings under Section 147 stands dismissed. On the Grounds relating to addition of Rs. 7,51,35,438/- u/s 69A of the Act: 12. Both the assessee and the revenue have contested the addition made under Section 69A. The assessee argues that the entire addition of Rs. 7,51,35,438/- is unjustified, as it is based solely on third-party statements and seized documents from M/s. Paras Bhavani Steel Pvt. Ltd., without any direct evidence of unaccounted cash receipts. It contends that all transactions were duly recorded in audited books, as it is a registered excise unit maintaining proper stock and sales records. On the other hand, the revenue challenges the partial relief granted by CIT(A), asserting that the seized diary (A/8) and corroborative statement....
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.... on judicial precedents, such as, President Industries (258 ITR 654) and Panna Corporation (2012) 82 CCH 0266 (Guj.), the CIT(A) held that the entire amount of unaccounted sales could not be taxed as income. Instead, only the profit component embedded in those unaccounted sales should be brought to tax. The assessee's declared profit rate was approximately 3%. Observing that unaccounted transactions typically involve reduced expenses, the CIT(A) deemed it reasonable to apply a higher rate of 6% to the unaccounted sales figure. Consequently, the CIT(A) restricted the addition to 6% of Rs. 7,51,35,438/-, i.e. Rs. 45,08,126/-. 15. The AR reiterated the submission made before lower authorities and stated that the AO has not carried out any independent inquiry. The AR also stated that the accounts of the assessee are not doubted by the AO. The AR placed reliance on decision of Hon'ble High Court of Delhi in case of CIT Vs. Vimal Moulders (india) Ltd. IT Appeal No. 1418 of 2009 and decision of Hon'ble High Court of Madras in case of CIT Vs. Vignesh Kumar Jewellers Tax Case (Appeal) No. 374 of 2008, where it was held that the AO must conduct an independent inquiry and bring corroborati....
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....ntended to remain outside the purview of taxation, generally lack formal documentation. The AO rightly observed that the absence of such documentation is intrinsic to unaccounted transactions and that the assessee's argument of maintaining proper excise and stock records does not negate the possibility of clandestine sales. The absence of a transaction in official records does not imply its non-existence, especially when corroborative evidence exists in the form of seized materials and thirdparty admissions. 17.4. The AO's rejection of the assessee's contention is supported by judicial precedents where unaccounted transactions are inferred from circumstantial evidence and cash trail analysis. The acceptance of such indirect evidence, particularly in cases involving tax evasion, is consistent with the principle laid down by the Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT (214 ITR 801) and Collector of Customs vs. Bhoormull (1974 AIR 859), which emphasize that the test of human probabilities must be applied in determining the nature of unexplained income. 17.5. The Revenue has contended that since the entire transaction was unaccounted, the assessee should not be ....