TaxTMI 
TaxTMI 
2025 (2) TMI 490
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....as the lead appeal since the Ld. CIT(A) has considered assessment year 2018-2019 as the "lead" appeal before him. 3. Facts of the case, in brief, are that the assessee is a Public Limited Company and provides solutions in aquaculture cage nets, fishing nets, sports nets, safety nets, agricultural nets, coated fabrics, polymer ropes and geo-synthetics etc. The key products manufactured by the assessee viz., Garware Technical Fibres Ltd [in short "GTFL"] include ropes, trawling nets, gill nets, doe nets, nursery cages, predator cages, fitness ropes, reinforced soil structures, gabion gravity retaining walls and others etc. It has filed its original return of income under section 139 of the Income-tax Act, 1961 [in short "the Act"] on 31.10.2018 declaring total income of Rs. 124,08,48,810/- for the impugned assessment year. 4. A search and seizure action u/s. 132 of the Act was conducted in the assessee's case on 14.11.2019. In response to notice u/sec.153A of the Act issued on 04.01.2021, the assessee filed the return of income on 18.01.2021 declaring total income of Rs. 124,08,48,810/-, which was the income originally returned. Statutory notice u/s. 143(2) and 142(1) of th....
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....he assessee to explain as to whether the unrecorded cash receipts, details of which have been found during the course of search and admitted in the statement given by Shri Shrikant S. Dalvi, have been offered for tax in the return of income. 8. The assessee in response to the same filed a detailed written submission stating that there was neither any seizure of cash nor any unaccounted cash found at the office or factory premises of the assessee company or with Mr. Dalvi. Other than the excel sheets working as contained in the pen drive, no other documents such as invoices, bills, vouchers, etc. were found/seized which supported the excel sheets. It was submitted that there is no corroborative evidence found to support the excel sheets having some figures alleged to be cash receipts and payments. Therefore, there is no "relatable" material or information having any direct relation or nexus with the excel sheets. 9. It was submitted that noting in the excel sheets saved in the pen drive represent items of estimated receipts/expenses in the nature of brief noting and they indicate some expenses of GTFL. It was submitted that noting was made by the Cashier for his information an....
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....nts. 7. The plain analysis of the contents of Bundle No.2 to Bundle No.9 which was also submitted to Investigation Unit-II, Pune dated 27 Jan 2020 is attached as Annexure-1. 8. Your honour will appreciate that expenditure is clearly marked and narrated as expenditure for business purpose, considering the genuineness appropriate ratio/percentage can be applied and allowed. 11. It was accordingly argued that the entire alleged cash receipts cannot be held to be the income of the assessee and at best the net profit ratio prevailing in the respective financial years can be applied vis-à-vis the receipts so recorded. The assessee also filed the year-wise details of net profit earned which is as under: F.Y. Unaccounted Cash Receipts - in lakhs Unaccounted Cash Payments - in lakhs % PBT Rs. Lakhs 2012-13 695.93 663.73 5.5% 38.54 2013-14 609.81 588.68 5.7% 34.60 2014-15 452.85 518.48 7.7% 34.84 2015-16 314.14 325.8 10.6% 33.30 2016-17 456.38 505.79 14.5% 66.18 2017-18 420.44 386.42 17.3% 72.74 2018-19 106.39 112.05 17.9% 19.04 2019-20 109....
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....y value when the transactions have been admitted by the person in his sworn statement. The case laws relied upon by the assessee are very old decisions and have been nullified by inserting the provisions of 292C by the Finance Act 2007 w..e.f. 01.10.1975. Hence the contention of the assessee is not found acceptable and is rejected. It is not a case of conjectures and surmises of AO. There is adequate material or details about the nature and ownership of the documents. Hence in the light of Section 292C and the nature of the transaction mentioned, the documents found cannot be considered as "Dumb Documents". 3.10. The next argument taken by the assessee is that if the receipts are taken for taxation, it cannot be said that the entire cash receipts is income of the respective assessment year. The assessee has further submitted that in the said excel sheet the details of expenditure incurred in cash is also given and considering the same, appropriate net profit ratio may be applied. The submission of the assessee has been carefully considered. During the course of search, a chart containing details of head wise cash receipts and expenditure was found and seized as per page no....
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....ital and revenue expenditure incurred for R&D purposes along with the report given by the DSIR in form No.3CL as required under Rule 6(7A) of the IT Rules. The assessee submitted necessary documents such as approval granted by the DSIR in Form 3CL, copies of annual report in Form 3CLA, details of capital and revenue expenditure incurred and supporting bills and invoices. However, the Assessing Officer noted that the assessee failed to submit the report given by the DSIR in Form-3CL quantifying the admissible revenue and capital expenditure. Therefore, the Assessing Officer vide letter dated 23.09.2021 asked the assessee to furnish copy of Form 3CL. It was mentioned there in that in the absence of report of the competent Authority in Form-3CL, the claim of deduction u/s 35(2AB) will not be allowed. Since the assessee failed to satisfy this condition, the Assessing Officer disallowed the claim of deduction u/s 35(2AB) amounting to Rs. 13,81,70,841/- and added the same to the total income of the assessee. 15. The Assessing Officer accordingly, determined the total income of the assessee at Rs. 142,10,63,651/- as against the returned income of Rs. 124,08,48,810/-. 16. Before the ....
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....ring the year under consideration, whole of this amount cannot be considered as income since the said seized pen drive and the excel sheet prepared contain expenditure for business purposes which were also stated by Shri S S Dalvi in his statement recorded u/s 131 of the Act. It was argued that the aggregate of cash expenditure is exceeding the total cash receipts. Since the cash expenses incurred for the entire period is 3227.74 lakh as against cash receipts of Rs. 3165.75 lakh, therefore, there is no question of escapement of any income. It was further argued that such expenditure was also not in violation of section 40A(3) since such expenses have not been claimed / debited in the books of account. It was further submitted that a plain reading of the seized documents reveal that multiple expenses have been aggregated and recorded in a single entry and thus each expense is below Rs. 10,000/- although clubbed together and recorded periodically in larger amounts. Relying on various decisions it was submitted that only a percentage of profit of such unrecorded sales should be taken and not the entire cash receipts can be added to the total income of the assessee. 19. So far as th....
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....5/- being 50% of revenue expenses not found eligible for 35(2AB) deduction by the DSIR. 21. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following concise grounds of appeal : 1. On the facts in the circumstances of the appellant's case and in law, the Ld Commissioner of home Tax (Appeal) erred in not deleting in entirety, the addition of Rs. 4,20,44,000/- which was entirely based on digital evidence, in the form of excel sheets contained in a pen drive, which is an inadmissible evidence, as per section 65B of the Indian Evidence Act, 1872. 2. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of become Tax (Appeals) erred in not deleting in entirety, the addition of Rs. 4,20,44,000/- as the mandatory conditions specified in section 65B of Indian Evidence Act, 1872 are not satisfied. The purported certificate under section 65B(4) is neither signed by the Authorized Officer, nor signed by the Forensic expert nor by any of the Witnesses, therefore constituting inadmissible evidence 3. On the facts and in the circumstances of the appellant's....
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....support of Department's allegations of transactions not recorded in books. 7. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) and the Assessing Officer both did not find any discrepancy in the audited books of account, which have been accepted. For any addition of unaccounted cash receipts and/or cash payments and any addition to be made on estimation basis, rejection of books is a sine qua non. Thus, addition sustained by Ld. Commissioner of Income Tax (Appeals) deserves to be deleted. 8. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in sustaining the additions despite the fact that no corroborative evidence in the form of invoices, bills, vouchers, etc which supported the excel sheets was found during the course of extensive search & seizure proceedings. In the absence of any corroborative evidences and a finding that notings on such documents had materialized into transactions giving rise to income of the appellant which had not been disclosed in regular books of account, these documents are nothing bu....
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....certificate u/sec.65B(4) of the Indian Evidence Act. 24. The Learned DR on the other hand, submitted that the Ld. CIT(A) had asked the Assessing Officer to forward the copy of the certificate drawn u/sec.65B(4) of the Indian Evidence Act for the pen-drive seized from the cabin of Shri Shrikant S Dalvi which had been relied upon while making the additions. In response to the same, the Assessing Officer forwarded copy of the said certificate which was forwarded to the assessee for it's comments. However, the assessee could not give any comment on the certificate drawn u/sec.65B(4) of the Act. Since the Ld. CIT(A) had held that certificate u/sec.65B(4) of the Act was duly drawn at the time of search operation, therefore, the contention of the assessee that in the absence of said certificate, the digital evidence cannot be relied upon does not have any force. He accordingly submitted that the order of the Ld. CIT(A) is in accordance with law and therefore the same should be upheld and the grounds raised by the assessee on this issue should be dismissed. 25. We have heard the rival arguments made by both the sides and perused the material available on record. We find although the ....
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....d that its earlier submissions submitted on 19/12/2023, 11/01/2024 and 14/03/2024 may be considered and the appeal may be decided at the earliest This submission of the appellant suggests that it does not have any comments on the certificate drawn u/s 65B(4) of Indian Evidence Act. Since the certificates u/s 65B of the Indian Evidence Act were duly drawn at the time of search operation, therefore, the contention of the appellant that in the absence of Certificate u/s 65B(4) of Indian Evidence Act, the digital evidence cannot be relied upon, does not have any force." 26. Since in the instant case there was a certificate drawn u/sec.65B(4) of the Indian Evidence Act for the pen-drive seized from the cabin of Shri Shrikant S. Dalvi which was relied upon by the Assessing Officer while making the impugned addition and since such a copy of the certificate was provided to the assessee for its comments and the assessee could not make any counter-comments to the certificate so issued by the Assessing Officer u/sec.65B(4) of the Indian Evidence Act, therefore, in absence of any contrary material brought to our notice, in our opinion the Ld. CIT(A) is justified in rejecting the above groun....
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....n the excel sheets prepared from the pen drive so seized contain the details of receipts as well as expenditure, the expenditure cannot be ignored and only the profit element embedded in such cash receipts should be brought to tax. For the above proposition, the Ld. Counsel for the assessee apart from relying on the decisions cited before the Ld. CIT(A) relied on the following decisions: i) Answar PV v. B.K. Basheer (2014) 10 SCC 473 ii) KP Varghese vs. ITO (1981) 7 Taxman 13 iii) P.R. Metrani vs. CIT (2006) 157 taxman 325 iv) Vetrivel Minerals vs. ACIT (2021) 129 taxmann.com 126 (Mad) v) SKM Animal Feeds and Foods (India) (P.) Ltd. vs. ACIT (2023) 156 taxmann.com 385 vi) CIT vs. D.K. Gupta (2008) 174 Taxman 476 (Del) vii) ACIT vs. Shri Anand Jaikumar Jain vide ITA Nos.3820 to 3823/MUM/2019, dated 22.04.2022 viii) M/s. Simtools Pvt. Ltd. vs. DCIT vide ITA No.1574/Mum/2020, dated 09.02.2022 ix) ITO vs. Kranti Impex Pvt. Ltd. vide ITA No.1229/Mum/2013, dated 28.02.2018 x) S.P. Goyal vs. DCIT (2002) 82 ITD 85 (TM) xi) D.A. Patel vs. DCIT [(1999) (3) Tmi 639 - ITAT Mumbai] 31. Referrin....
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....d sales for the purpose of collecting tax. 37. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Hariram Bhambhani vide Income Tax Appeal No.313 of 2013, she submitted that the Hon'ble High Court has upheld the decision of the Tribunal that the entire unaccounted sales cannot be brought to tax but only the profit attributable on that total unrecorded sales consideration which alone can be subject to income tax. 38. Referring to the decision of Hon'ble Madhya Pradesh High Court in the case of CIT vs. Sharda Real Estate (P) Ltd. 99 DTR 100 (MP) she submitted that the Hon'ble High Court in the said decision has directed the Assessing Officer to take a specific percentage of sale proceeds received in cash as income rather than making addition of entire amount of sale proceeds received in cash. 39. Referring to various other decisions, copies of which are placed in the paper book, she submitted that the entire amount of cash receipts on account of sale of scrap cannot be added to the total income either without allowing the credit for expenses so recorded in the seized documents or a specific percentage of the total cash receipts on account of sa....
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....the entire expenditure cannot be allowed since it contains illegal payments to the officers, however, it cannot be entirely rejected as not being relatable to the unrecorded sales. It is the submission of the Ld. Counsel for the assessee that the seized documents i.e. excel sheets retrieved from the pen drive seized from the head cashier Shri S S Dalvi contain both receipts as well as expenditure and therefore such seized documents should be considered as a whole. It is also her submission that no discrepancy of any cash or stock was found at the time of search between the physical cash / stock and cash/stock as per the books of account. It is also her submission that either the addition can be restricted only to the net income i.e. after excluding the expenditure from the receipts or alternatively, a percentage of such unaccounted cash receipts at best can be brought to tax in the light of the various decisions cited by her. 43. We find some force in the above arguments of the Ld. Counsel for the assessee. It is an admitted fact that during the course of search, excel sheets which were retrieved from the pen drive seized from the cabin of head cashier Shri S S Dalvi, contain bo....
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....0 12 Various entries on different dates regarding Hel. Flying charges / pilot payment, etc. Page-30 & 31 1,61,000 13 Various entries regarding advocate expense, adjudication expense, Court matter payments, etc. Page 31 1,99,140 14 Advance Refund recd. for scrap Page - 24 5,00,000 Total 50,16,991 45. We find even after giving the finding as above, the Ld. CIT(A) gave part relief to the assessee by restricting the income to 85% of such unaccounted cash receipts. In our opinion, when the Revenue seized certain documents which contain both the receipts as well as expenditure, the natural thing that should have been done is taxing the net receipt i.e. gross receipts less expenditure and by making further addition of certain illegal payments which were not otherwise admissible as per Explanation to section 37(1) of the Act i.e. on account of illegal payments, etc. However, in the instant case, this exercise has not been done either by the Assessing Officer or the CIT(A). It is also not know as to whether the "officers monthly payment" and Excise Officers payment" mentioned by the Assessing Officer as per the extracts of the....
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.... (P.) Ltd. (2012) 349 ITR 85 (Del) has held that where receipts recorded in searched documents are believed to be income, entries of expenditure recorded therein are also to be believed without asking for more evidence for such expenditure. The relevant observations of the Hon'ble High Court are as under: "9. The above discussion reveals that consequent to the search, a sum in excess of Rs. 3 crores was determined as the undisclosed receipts of the assessee; it was sought to be brought to tax. The assessee contended, inter alia, that if that were correct, the other amounts shown as expenditure should be allowed as business expenses. This was not upheld by the AO, who disallowed the entire amount. The CIT (A) accepted the assessee's contentions, and directed deletion of a major portion of the disallowance. The revenue's appeal was rejected by the Tribunal, which, by the impugned order, accepted the assessee's cross objection. The threshold point which this court has to decide is whether the assessee is right in contending that since the revenue has suffered concurrent findings on questions of fact, no substantive question of law arises for consideration by the court. There ....
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....es that if the (business or commercial) activity is „an offence or which is prohibited by law" deduction, which might otherwise be eligible to the benefit of Section 37 (1) would not be granted. 14. In the present case, the AO and, to a certain extent, the CIT (A) appear to have proceeded inter alia, to disallow heads of expenditure towards commission payments, sundry expenses (termed „R‟) and green box expenses. As far as the "green box" expenses are concerned, the assessee had relied on the books relied on by the revenue to assess the income, to urge that these constituted expenses entitled to deduction. The AO held these expenses to be excessive. The assessee argues that once the revenue seeks to draw a presumption, by relying on Section 132 (4A) of the Act that presumption has to be given full effect. In other words, if the correctness of the contents of books and other materials is to be presumed, such a deemed state of affairs would have to be assumed in respect of all entries in the books, and not merely the entries of income (or receipts). 15. Section 132 (4A) reads as follows: "(4A) Where any books of account, other documents, m....
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....longed to that person was on the Income Tax Department. Sub-section (4A) enables an assessing authority to raise a rebuttable presumption that such books of account, ITA-1620 & 1622/2010 Page 13 money, bullion etc. belonged to such person; that the contents of such books of account and other documents are true, and, that the signatures and every other part of such books of account and other documents are signed by such person or are in the handwriting of that particular person. Raising of such presumption has been enacted by the Legislature to enable the assessing authority to make a provisional adjudication within the time frame prescribed under Section 132. Otherwise it may not be possible to do so. The object of introduction of Section 132 is to prevent the evasion of tax, i.e., to unearth the hidden or undisclosed income or property and bring it to assessment. It is not merely an information of undisclosed income but also to seize money, bullion etc. representing the undisclosed income and to retain them for the purposes of realization of taxes, penalties etc. Search and seizure is a serious invasion in the privacy of the person. Section 132 which is a complete code by itself p....
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....on provided under Section 132 which is a self contained code for search and seizure and retention of books etc. can be raised for the purposes of framing of the regular assessment as well." If the revenue was of the opinion that the expenses claimed towards "green boxes" was inadmissible or was excessive, or not genuine, in order to reject the entries in the books of account and other documents of the assessee, seized during the search, it ought to have relied on other materials. Having once drawn the presumption that the contents of the documents (of the assessee) taken into possession during the search were true, the revenue could not have, consistently with that presumption, proceeded to require the assessee to produce materials in support of the expenditure entries. Such an inconsistent approach in respect of the contents of the same book appears to have been founded only on suspicion that they were not genuine. However, suspicion ITA-1620 & 1622/2010 Page 15 cannot replace proof. Moreover, the full effect of the presumption should be given effect to, whenever the statute directs a particular non- existent state of affairs to be assumed. (Ref State of Bombay v. Pandurang Vinaya....
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....n declared by the assessee and accepted by the Revenue for the respective assessment years. We, therefore, direct the Assessing Officer to adopt the net profit ratio as mentioned below for the respective assessment years: A.Y. Unaccounted cash receipts Net Profit Percentage 2012-13 695.93 6% 2013-14 609.81 6% 2014-15 452.85 8% 2015-16 314.14 11% 2016-17 456.38 15% 2017-18 420.44 18% 2018-19 106.39 18% 2019-20 109.81 23% 54. The order of the Ld. CIT(A) is accordingly modified and the Assessing Officer is directed to re-compute the income from unaccounted cash receipts in the above percentage and make necessary additions. Thus, the grounds of appeal No.4 to 9 raised by the assessee are accordingly partly allowed. 55. Identical grounds have been raised by the assessee for the other years. Therefore, following similar reasonings and in the light of the above discussion, the grounds raised by the assessee in other appeals are also partly allowed. 56. Ground No.10 relates to the order of the Ld. CIT(A) in giving part relief on account of deduction claimed u/s 35(2AB) of the Act. 57. After hearing....
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....ssessee for its comments. After considering the remand report of the Assessing Officer and rejoinder of the assessee to such remand report, the Ld. CIT(A) allowed the claim of deduction u/s 35(2AB) on whole of the capital expenditure as claimed by the assessee. He, however, restricted the deduction u/s 35(2AB) on the revenue expenditure to the extent of Rs. 7,17,38,000/- as determined by the DSIR in Form No.3CL as against Rs. 7,98,20,669/- claimed by the assessee. According to the Ld. CIT(A), the difference between the amount claimed by the assessee and the amount certified by the DSIR is not eligible for deduction u/s 35(2AB). He however, held that since the Assessing Officer has not doubted the genuineness of the revenue expenditure and has allowed 100% of the expenses amounting to Rs. 7,98,20,669/-, therefore, he directed the Assessing Officer to restrict the disallowance to Rs. 40,41,335/- being 50% of the revenue expenses not found eligible for 35(2AB) deduction by the DSIR. Against the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal. Identical grounds have been raised by the assessee for assessment years 2016-17, 2017-18 and 2019-20. 60. We have hear....
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.... not there. The only requirement was to submit the report in relation to the approval of in-house R&D facility. Any amount of expenditure incurred in respect of in-house R&D facility is qualified for the deduction - whether or not approved by the prescribed authority. Only the existence of approval and incurring of the expenditure were relevant considerations in the pre-amended period and not the amount quantified by the prescribed authority. The new stipulations came to be introduced w.e.f. 01-07-2016. As the assessment year under consideration is 2018-19, the amended sub-clause (b) of Rule 6 (7A) is applicable. We, therefore, hold that the ld. CIT(A) was justified in restricting the amount of weighted deduction to the quantification done by the prescribed authority. We, therefore, hold that the assessee is not eligible for deduction of the entire revenue expenditure claimed by it u/s 35(2AB) for the assessment years 2017-18, 2018-19 and 2019-20 but only to the extent quantified by the DSIR. However, as held above, since the stipulation came to be introduced w.e.f. 01.07.2016 the section of quantification by the DSIR is not applicable for assessment year 2016-17 and therefore, the....
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....e rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both the sides. So far as the first issue i.e. restriction of addition to 85% of undisclosed cash receipts is concerned, we have already decided the issue in the preceding paragraphs and have given a direction to the Assessing Officer to adopt 18% net profit of the unaccounted cash receipts for the impugned assessment year. In view of our findings given therein, the ground of appeal No.1 raised by the Revenue is dismissed. 66. So far as the second issue is concerned, we find the Assessing Officer made addition of Rs. 49,41,000/- on the ground that the cash expenditure during the year exceeds the unaccounted cash receipts. We find the Ld. CIT(A) deleted the addition by recording as under: "87. The ground no. 3 raised by the appellant is regarding the addition of Rs. 49,41,000/- made u/s 69C of the Act on account of shortfall in cash required for cash expenses. I have discussed this issue in detail while deciding the appeal for AY 2015-16 and re-drafted the ....