TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1280
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....he Revenue : Smt. Kusum Bansal, CIT, DR & Shri K. Mehboob Ali Khan, CIT DR ORDER PER BENCH: All these captioned appeals have been directed against the separate orders of the Ld. CIT(A) and pertained to the assessments carried out under Section 153A of the Income Tax Act, 1961 (hereinafter referred to as the "Act") pursuant to the search action carried out under Section 132 of the Act in Scott Edil Group of cases on 15.11.2017. Since the facts involved in all these captioned appeals are identical and there are common issues, hence the same were heard together and the same are being disposed of by this common order. 2. The grounds/issues raised in all the appeals are summarized as under : ITA No. 489/Chandi/2023 (Sanjeev Aggarwal, AY 2017-18) (Assessee's Appeal) 1. Ground No. 1 - General in nature. 2. Ground no. 2 - Deemed dividend on account of credits exceeding remuneration/payments received from SEPL. 3. Ground no. 3 - Deemed dividend on account of credits exceeding remuneration/payments received from SEARLE. 4. Ground no. 4 - approval u/s 153D 5. Ground no. 5 - transfer order u/s 127 dated. 30.03.2018 was without sanction of law, hence bad in law. 6. Ground no. 6....
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....o. 9 - Reasonable opportunity of being heard not provided. ITA No. 591/Chandi/2023 (Maxport India Pvt Ltd, AY 2018-19) (Appeal by Assessee) 1. Ground No. 1 - General in nature. 2. Ground No. 2 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law, hence bad in law. 3. Ground No. 3 - Order deserves to be quashed in absence of incriminating material. 4. Ground No. 4 - Deemed dividend on account of credits exceeding remuneration/payments received from SEPL 5. Ground No. 5 - Approval u/s 153D. 6. Ground No. 6 - General in nature. ITA No. 579/Chandi/2023 (Maxport India Pvt Ltd, AY 2017-18)(Appeal by Assessee) 1. Ground No. 1 - General in nature. 2. Ground No. 2 - Transfer order u/s 127 dated 30.03.2018 was without sanction of law, hence bad in law. 3. Ground No. 3 - Order deserves to be quashed in absence of incriminating material. 4. Ground No. 4 - Commission on sales and purchase transactions carries out allegedly outside books. 5. Ground No. 5 - Approval u/s 153D. 6. Ground No. 6 - General in nature. ITA No. 584/Chandi/2023 (Maxport India Pvt Ltd, AY 2016-17) (Appeal by Assessee) 1. Ground No. 1 - General in nature. 2. Ground No. 2 - Tran....
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....neral in nature. 2. Ground No. 2 - Transfer order u/s 127 dated 30.03.2018 was without sanction of law, hence bad in law. 3. Ground No. 3 - Order deserves to be quashed in absence of incriminating material. 4. Ground No. 4 - Payment by SEPL for construction of house and holding the same as deemed dividend. 5. Ground No. 5 Purchases treated as bogus purchase. 6. Ground No. 6 - Approval u/s 153D. 7. Ground No. 7 - Reasonable opportunity of being heard not given. 8. Ground No. 8- General in nature. ITA No. 730/Chandi/2023 (Balram Krishan Aggarwal, AY 2016-17) (Appeal by Assessee) 1. Ground No. 1 - General in nature. 2. Ground No. 2 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law, hence bad in law. 3. Ground No. 3 - Order deserves to be quashed in absence of incriminating material. 4. Ground No. 4 - Transaction with Maxport held as bogus transactions. 5. Ground No. 5 - Approval u/s 153D. 6. Ground No. 6 - Reasonable opportunity of being heard not given. 7. Ground No. 7- General in nature. ITA No. 729/Chandi/2023 (Balram Krishan Aggarwal, AY 2015-16) (Appeal by Assessee) 1. Ground No. 1 - General in nature. 2. Ground No. 2 - Transfe....
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....und No. 5 - Carry forward of MAT credit against the demand raised consequent to impugned addition made in assessment. 6. Ground No. 6 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law, hence bad in law. 7. Ground No. 7 - Reasonable opportunity of being heard not given. 8. Ground No. 8- General in nature. ITA No. 833/Chandi/2023 (Scott Edil Pharmacia Ltd, AY 2017-18) (Assessee's appeal) 1. Ground No. 1 - General in nature. 2. Ground No. 2 - Order deserves to be quashed in absence of incriminating material. 3. Ground No. 3 - Approval u/s 153D. 4. Ground No. 4 - Addition made u/s 69C due to non-response by parties confirming the purchases made. 5. Ground No. 5 - Sales from Maxport treated bogus. 6. Ground No. 6 - Provision for doubtful debts disallowed- Dealt separately 7. Ground No. 7 - Enhancement u/s 251(1)- Dealt separately. 8. Ground No. 8 and 9 - Carry forward of MAT credit against the demand raised consequent to impugned addition made in assessment. 9. Ground No. 10 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law, hence bad in law. 10. Ground No. 11 - Reasonable opportunity of being heard not given. 11. Ground....
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....127 dtd. 30.03.2018 was without sanction of law, hence bad in law. 8. Ground No. 9- Reasonable opportunity of being heard not given. 9. Ground No. 10 - General in nature. ITA No. 829/Chandi/2023 (Scoot Edil Pharmacia Ltd, AY 2013-14) (Appeal by Assessee) 1. Ground No. 1 - General in nature. 2. Ground No. 2 - Order deserves to be quashed in absence of incriminating material. 3. Ground No. 3 - Approval u/s 153D. 4. Ground No. 4 - Addition u/s 68 on account of amount received from Jai Ambe Pharmaceutical (JAAPL) holding the company as a shell company. 5. Ground No. 5 - Disallowance of 80IC on sales made to JAAPL 6. Ground No. 6 - Addition made u/s 69C due to non-response by parties confirming the purchases made. 7. Ground No. 7 - Enhancement u/s 251(1)- Dealt separately in ITA No. 833/Chandi/2023, SEPL for AY 2017-18. 8. Ground No. 8- Direction to Ld. AO u/s 150 to take appropriate action u/s 148. Dealt separately in ITA No. 823/Chandi/2023, SEPL for AY 2013-14. 9. Ground No. 9 and 10- Carry forward of MAT credit against the demand raised consequent to impugned addition made in assessment. 10. Ground No. 11 - Transfer order u/s 127 dtd. 30.03.2018 was without ....
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....nd No. 9- Reasonable opportunity of being heard not given. 9. Ground No. 10 - General in nature. ITA No. 855/Chandi/2023 (Scott Edil Advanced Research Laboratories and Education Ltd, AY 2014-15) (Appeal by Assessee) 1. Ground No. 1 - General in nature. 2. Ground No. 2 - Order deserves to be quashed in absence of incriminating material. 3. Ground No. 3 - Approval u/s 153D. 4. Ground No. 4 - Difference in valuation as per DVO report and books of accounts. 5. Ground No. 5- Addition made u/s 69C due to non-response by parties confirming the purchases made. 6. Ground No. 6 - Addition u/s 68 on account of amount received from Jai Ambe Pharmaceutical (JAAPL) holding the company as a shell company. 7. Ground No. 7 - Purchase transactions carried out allegedly outside books. 8. Ground No. 8 and 9 -Carry forward of MAT credit against the demand raised consequent to impugned addition made in assessment. 9. Ground No. 10 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law, hence bad in law 10. Ground No. 11- Reasonable opportunity of being heard not given. 11. Ground No. 12 - General in nature. ITA No. 856/Chandi/2023 (Scoot Edil Advanced Research Lab....
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....ing the purchases made. 6. Ground No. 6 - Disallowance of 80IC on sales made to Maxport. 7. Ground No. 7 and 8- Carry forward of MAT credit against the demand raised consequent to impugned addition made in assessment. 8. Ground No. 9 - Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law, hence bad in law. 9. Ground No. 10- Reasonable opportunity of being heard not given. 10. Ground No. 11 - General in nature ITA No. 93/Chandi/2023 (Scoot Edil Advanced Research Laboratories and Education Ltd, AY 2017-18) (Appeal by Department) 1. Ground No. 1, 2, 3, 4 and 5 - Relief by CIT(A) on revised valuation report submitted by DVO. 2. Ground No. 6 - General in nature. ITA No. 846/Chandi/2023 (Scoot Edil Advanced Research Laboratories and Education Ltd, AY 2018-19) (Appeal by Assessee) 1. Ground No. 1 - General in nature. 2. Ground No. 2 - Order deserves to be quashed in absence of incriminating material. 3. Ground No. 3 - Approval u/s 153D. 4. Ground No. 4 - Difference in valuation as per DVO report and books of accounts. 5. Ground No. 5- Shortage of stock found during search. 6. Ground No. 6 and 7 - Carry forward of MAT credit against the demand rais....
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....od of Limitation. Issue 15: Transfer order u/s 127 dtd. 30.03.2018 was without sanction of law, hence bad in law. Issue 16: Carry forward of MAT credit against the demand raised consequent to impugned addition made in assessment. Issue 17: Disallowance of 80IC on subsidy claimed in ITR. Issue 18 : Jewellery found at House no 2273, Sector 21C, Chandigarh & Locker no 64, Bank of India, Sector 35, Chandigarh during the search. Issue 19: Approval u/s 153D. 4. Since common and identical issues are involved in most of the captioned appeals, hence we deem it appropriate to adjudicate the matter issue wise for the sake of brevity and clarity. Issue 1: No incriminating Material found during the course of search action, hence no addition can be made in the cases in which assessment on the date of search stood completed and not abated. This issue has been raised in the following appeals: S. No. Name of the assessee AY Appeal by Appeal No. 1 Maxport India Pvt. Ltd. 2014-15 Assessee 582/Chandi/2023 2 Maxport India Pvt. Ltd. 2015-16 Assessee 583/Chandi/2023 3 Maxport India Pvt. Ltd. 2016-17 Assessee 584/Chandi/2023 4 Scott Edil Advance Research Laboratories and....
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....h action. The Ld. CIT(A), however, held that there was statement recorded of one of the directors namely, Mrs. Puja Pandita of the group company M/s. Maxport India Pvt. Ltd., wherein she has stated that she was not the director of the company and could not explain the sale purchase transactions carried out by the assessee company with M/s. Jai Ambey Pharmaceuticals Pvt. Ltd. The Ld. CIT(A) has also referred statement of employees/directors of the third party recorded during a separate search action in the case of Jai Ambey pharmaceuticals Pvt. Ltd. wherein also they stated that they could not provide information related to the transaction of maxport India Ltd. with their company. The Ld. CIT(A) held that the aforesaid statements were incriminating in nature, therefore, the Assessing Officer had jurisdiction to scrutinize the entire transaction/activities of the assessee and make impugned additions. 8. We have heard rival contentions and gone through the records. So far as the reliance of the Ld. CIT(A) on the statement of Mrs. Puja Pandita, Director of the M/s. Maxport India Pvt. Ltd. Is concerned, the relevant extract of her statement is reproduced as under: "Question No.5:- Pl....
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....d that where, in the absence of any incriminating material etc. found from the premises of the assessee during the course of search, statement of assessee recorded under section 132(4) would not have any evidentiary value. Similar view has been adopted by the Jaipur bench of the Tribunal in the case of "Shree Chand Soni vs. DCIT" (2006) 101 TTJ 1028 (Jodhpur). The Hon'ble Delhi High Court in the case of "CIT vs. Harjeev Agarwal" in ITA No.8/2004 vide order dated 10.03.16 has observed that a statement made under section 132(4) of the Act on a stand-alone basis, without reference to any other material discovered during search and seizure operation, would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. 11. In the case of "Commissioner of Income Tax vs. Sunil Agarwal" (2015) 64 taxman.com 107 (Delhi-HC), the assessee therein, during the course of search, made a categorical admission under section 132(4) that the cash amount seized belonged to him and it represented undisclosed income not recorded in the books of accounts. The assessee did not immediately retract from the above admission but only during the as....
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....addition as undisclosed income. The co-ordinate bench of the Tribunal while relying upon various case laws of the higher authorities observed that it is well settled legal position that merely on the basis of a statement which is not supported by the department with cogent corroborative material cannot be a valid basis for sustaining such ad-hoc addition. The co-ordinate bench of the Tribunal (supra) while holding so, apart from relying upon various decisions of the higher courts has also relied upon the decision of the Tribunal in the case of "Dy CIT vs. Pramukh Builders" (2008) 112 ITD 179 (Ahd.) wherein it has been held that even in the absence of proof of coercion or pressure, the statement by itself cannot be taken as conclusive. Therefore, merely in the absence of proof of pressure, threat, coercion or inducement the statement cannot be held as conclusive and additions cannot be made by solely relying on a statement or a letter. The facts of the appeals under consideration are on better footing. As observed, even in the statement of Pooja Pandita, there is no admission or confession of any unexplained income. The said statement therefore is of no help to the revenue to make t....
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....of section 132(4) of the Act, hence, as per the relevant provisions of the Act, the search party even was not to supposed to record her statement, hence, even otherwise also, no reliance can be placed on her statement. At this stage, it would be relevant to reproduce the relevant provisions of section 132 of the Act, as were in force, for the assessment years under consideration: "Search and seizure. 132. (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. Explanation.-For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the ....
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.... books of account. But, in this case, it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value." 8.5.1. Hon'ble Delhi High Court in the case of " CIT vs Harjeev Aggarwal" reported in 241 Taxman 199(Delhi) has held in para 21 of the judgement as follows: "21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possessi....
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....hat,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of ....
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....ivali Mahajan ITA No.5585/Del/2015 dated 19.03.2019; Trilok Chand Choudhry vs ACIT (ITA NO.5870/Del/2017) dated 20.08.2019; and of the Hon'ble Delhi High Court in the case of PCIT (Central) vs. Anand Kumar Jain ITA 23/2021 vide order dated 12.02.2021. 20. Even there is no reference either in the assessment order or in the impugned order of the CIT(A) of any incriminating unearthed relating to the assessee in the said separate search action carried out in the case of a third party. Even the alleged statements did not constitute incriminating material against the assessee. In view of the above discussion, the assessment orders passed u/s 153A in the 14 appeals as listed in the chart above are not sustainable, hence the same are hereby quashed. In the result, all the 14 appeals as mentioned in the chart above stand allowed. Issue 2: Deemed Dividend u/s 2(22)(e) of the Act: 21. The issue of deemed dividend has been raised by the assessee as well as by the department in the following appeals: Sl. No. Name of the assessee AY Appeal by Appeal No. Ground No. 1. Sanjeev Kumar Aggarwal 2018-19 Assessee 480/Chandi/2023 3 2. Sanjeev Kumar Aggarwal 2017-18 Assessee 489/Chan....
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....t these were not loans or advances as contemplated u/s 2(22)(e). (ii) It was further and the companies had also raised loans from banks of much higher value against personal guarantees and properties of assessee. Thus this was quid pro quo arrangement for mutual benefits carried out in the regular course of business. 25. The AO, however, rejected these contentions of assessee by holding that assessee's case did not fall under any of the exception of sec. 2(22)(e) as the assessee held substantial shares in SEPL (over 10%). He observed that all the ingredients of the provisions of section 2(22) (e) were present in the transactions made by the assessee with SPEL and that the deeming fiction of the said section was duly attracted in the case of the assessee. He therefore, treated the entire credits received by the assessee from SPEL as deemed dividend u/s 2(22) (e) of the Act and added the same into the income of the assessee. Being aggrieved by the said order of the AO, the assessee preferred appeal before the CIT(A). 26. In appeal before the CIT(A), the assessee reiterated the submissions as were made before the Assessing Officer. The Assessee further contended that the ld. Asses....
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....nning ledger account. There is nothing on record to substantiate that such transactions between the appellant and M/s SEPL/SEARLE were in the nature of business transactions. The onus was upon the appellant to substantiate that such transaction carried out by the appellant with M/s SEPL/SEARLE were in the nature of commercial transactions. The appellant has failed to discharge onus in this respect. Accordingly the ratio of decision of Hon'ble ITAT Delhi in the case of Futurez Next Services Ltd (supra) is not applicable to the facts of the present case. Moreover even if the argument of the appellant that he has given his asset as personal guarantee to the financial institutions in favour of M/s SEPL in excess of loans received by her from M/s SEPL is considered, there is nothing on record to substantiate that when the appellant was in urgent need of funds whether he has requested M/s SEPL either to get the property or to purchase the same so that he could access the funds as per his requirements. There is nothing on record to substantiate that M/s SEPL was under obligation to extend such loans to the appellant against furnishing of personal guarantee. Therefore on such facts rat....
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.... that that the ledger account of assessee in books of SEPL was a current and running ledger account, wherein payments were being exchanged in very frequently and contain both type of entries i.e. giving and taking of the amount on frequent basis. He in this respect has relied upon the pages 87-98 of the paper book, which is the copy of the ledger account, relevant excerpt from which is reproduced as under: 30. The Ld. AR of the assessee placing reliance upon the above excerpts of the ledger account has demonstrated that it was evident from the above ledger account of assessee in books of SEPL that the above account was a running current account, wherein, payments were being exchanged in the form of current & inter banking transactions very frequently and contain both type of entries i.e. receipts and payments. The Ld. Counsel has contended that this nature of current account transactions could not be said to be "loan" or "advance" as contemplated u/s 2(22)(e). The Ld. AR of the assessee has further contended that these were not gratuitous advances, but a reflection of ongoing business transactions, thus falling outside the scope of deemed dividends as per the statutory provision. ....
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....34. The Ld. Counsel, however, in his alternate contentions, has submitted that while calculating the addition for deemed dividend, the ld. AO included all amounts received and ignored the payments that assessee had made to the company earlier. The amount received by assessee was not a new loan or deposit, but simply a return of the funds previously given to the company. He, therefore, has submitted that that even if, the said transaction are taken in the ambit of s. 2(22)(e), addition at maximum can be made of peak credit of these transactions. He, in this respect, has relied upon the following judicial precedents: i). CIT vs. Madhur Housing Development & Co., 93 laxmann.com 502, Supreme Court. ii). DCIT vs. Entrack Organic Haus Pvt. Ltd., ITA No. 182 of 2016, Rajasthan ITAT. 35. It was further contended alternatively, that a credit entry once added as income in the hands of the assesse u/s 2(22)(e) should not be considered again while calculating peak for subsequent periods otherwise the same would lead to double addition of the same entry in the hands of the assessee. 36. The ld. DR, however, has placed reliance on the orders of the lower authorities and submitted that all ....
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....nced amount to subsidiary company and ultimately balance is squared-up at end of year-Assessee company has also filed copy of ledger account of subsidiary company for preceding A.Y. 20122013 which revealed that there was a substantial opening balance and subsidiary company has paid amount to assessee company and later on amounts have been returned by assessee company to subsidiary company-It is assessee company who have given amount mostly to subsidiary company which have been returned to subsidiary company by assessee company-Therefore, on such facts when Revenue did not dispute transactions in current account between assessee company and subsidiary company in earlier as well as in subsequent year and assessee company on most of occasions have made payment to subsidiary company, which have been returned by assessee company for business purposes, there was no reason to apply provisions of Section 2(22)(e)-When current account is maintained between parties, provisions of Section 2(22)(e) would not apply-Thus, issue is covered by aforesaid decisions of Tribunal in favour of assessee as well as various decisions considered by jurisdictional Delhi High Court-Assessee's appeal allowed."....
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....sessee. Now coming to the amount of advance taken by assessee, we note that assessee has not only taken loan/advance from SVPL, but also it has sometime given advance to SVPL. Thus, there was change in the balance shown by assessee. Thus, it cannot be termed as advance taken by assessee as it was fluctuating during the year. In holding so, we find support and guidance from the order of co-ordinate Bench of this Tribunal in the case of Bombay Oil Industries Ltd. vs. DCIT reported in [2009] 28 SOT 383 (Bom), wherein it was held as under:- "From the above it is clear there is distinction between deposits viz-a-vis loans/advances. Section 2(22)(e) enacts a deeming fiction whereby the scope and ambit of the word dividend has been enlarged to bring within its sweep certain payments made by a company as per the situations enumerated in the section. Such a deeming fiction would not be given a wider meaning than hat it purports to do. The provisions would necessarily be accorded strict interpretation and the ambit of the fiction would not be pressed beyond its true limits. The requisite condition for invoking Section 2(22)(e) of the Act is that payment must be by way of loan or advances. ....
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.... guarantees by the assessee for loans raised by the company by following the above decision of Hon'ble Calcutta High Court in "Pradip Kumar Malhotra vs CIT" (supra). Copy of the said order of CIT(A) dtd. 15.12.2015 is placed at page of the paper Book. The appeal of the revenue against the said order of the Ld. CIT(A) was dismissed by the this Tribunal in ITA No. 169/Chd/2016 dated 23.05.2016, hence the issue has attained finality. The issue is thus, even otherwise squarely covered in favour of the assessee in his own case for the earlier assessment year. Considering the above facts and settled legal position, we hold that the additions made/confirmed by the lower authorities on this issue are not sustainable. Accordingly, the impugned additions on this issue are ordered to be deleted. 40. Since the facts and issue involved are identical in all the appeal given in the chart above, hence, in view of the discussion made above, the addition on account of deemed dividend u/s 2(22)(e) in all the 11 appeals as mentioned in the chart above is ordered to be deleted. These grounds taken by the assessee stand allowed, whereas the grounds taken by the Revenue on the issue of deemed dividend s....
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....see. The Ld. DDIT referred the matter of valuation of construction of above referred property to the DVO u/s 132(9D). The DVO, thereafter framed his report and forwarded it to the Ld. DDIT. The DDIT further forwarded the copy of the report of the DVO to the Assessing Officer. The DVO vide his valuation report valued the property at Rs. 58.67 crores as against Rs. 44. 51 crores declared by the assessee in its books. The differential amount of the year in question was computed in the same ratio in which the construction expenses were recorded by assessee in different years in its books and based on that, difference for the year was computed at Rs. 1.98 cr. The AO issued notices to the assessee show-causing it as to why the difference of the valuation may not be added to the income of the assessee, to which the assessee responded disputing the DVO's valuation and submitted an independent valuation report from M/s Sharma & Associates, a registered valuer, empanelled with the Income Tax Department, valuing the property at Rs. 46.07 crores. The assessee also provided an analysis highlighting computational errors in the DVO's valuation methodology. The ld. AO, however, rejected the conten....
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....s valuation was higher than the State PWD based valuation. He, however, further observed that on the basis of documents furnished, it was evident that no contractor was engaged and therefore, benefit on account of self-supervision/Self-procurement was to be allowed. He, however, held that the said income/addition was not eligible for deduction u/s 80IC as it was not derived from eligible business. The Ld. CIT(A), thus gave part relief to the assessee. Accordingly, the remaining addition of Rs. 28,41,258/- made by the AO was upheld. The relevant part of the order of the Ld. CIT(A) on this issue is reproduced as under: "On going through the facts of the case, and submission of the Ld. AR on the above issue, it is found that there is merit in the argument that PWD rates should have been adopted for the purpose of valuation by the DVO. However, the appellant has not provided any material to show that the revised valuation made by the DVO was higher than the valuation on the basis of PWD rates. Therefore no merit is found in such submission of the appellant. Such income is not eligible for deduction u/s 80IC of the Act as the same has not been derived from the eligible business. Furth....
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.... was mentioned in the report of DVO. That the DVO had presumed that the assessee was under-recording the construction cost in the same proportion in which he was recording the construction at every point of time throughout the period of construction spanning more than 10 years. That these estimates were pure guess works without having any evidence in hand. It was further submitted by the Ld. counsel that the valuation report filed by the Ld. DVO was full of errors. He has made a wrong computation of area as well as the rate. That the assessee has declared the expenses on construction of relevant property in its books of accounts and that no discrepancy, defect or incriminating material regarding the same was found during the course of search action. That even the said books have neither been doubted nor rejected by AO or the Ld. CIT(A). The ld. Counsel for the assessee contended that the construction on the said property was carried out primarily during FYs 2009-10 to 2011-12, though some activity was done almost every year. That the expenses incurred on the subject property were duly recorded in the books. That the expenditure incurred on the construction in the books of accounts ....
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....book construction expenses. Therefore, the addition made solely on the basis of the DVO report without any evidence was incorrect. 51. The ld. Counsel for the assessee has further, alternately, contended that undisputedly, the assessee's only source of income was profit from manufacturing operation which was eligible for deduction u/s 80IC. That when there was no other source of income of the assessee, even if there was any undisclosed investment in construction of property, the same would have come from the same profit from manufacturing operations. Therefore, the deduction u/s 80IC should have been allowed on that component of income invested in alleged construction. 52. The Ld. CIT (DR), on the other hand, has contended that the ld. AO was justified in making the impugned addition on the basis of valuation report of the DVO on account of difference calculated proportionately, based on the expenses incurred by the assessee over different years. She has placed reliance on the orders of ld. AO and ld. CIT(A) and stated the assessee's reliance on an alternate valuation report by M/s Sharma and Associates, was not tenable as the DVO was an independent authority, and the valuati....
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....ld that in respect of completed/unabated assessments, no addition can be made by the AO in an assessment carried out u/s 153A of the Income Tax Act in the absence of any incriminating material found during the search action. He has further relied upon various case laws to contend that the report of the DVO cannot be construed as an incriminating material found during the course of search action and further that addition cannot be made on account of unexplained investment in a property solely on the basis of DVO report without any other corroborating evidence or incriminating evidence found in support of such addition. The Hon'ble Supreme Court in Sargam Cinema v. CIT (328 ITR 513) has held that a DVO's report cannot be relied upon unless the books of accounts are found to be incorrect. The Income Tax Act does not mandate blind reliance on a DVO's report unless corroborated by substantive proof of undisclosed investment. Valuation reports are opinion-based and susceptible to variations due to differing methodologies, assumptions, and regional price fluctuations. The reliance in this respect can be placed on the following decisions: "(i) [Assistant Commissioner of Income Tax, Centr....
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....Ld. CIT(A) in assessment year 2016-17, which, in our opinion, is both sound as well as logical, we have no hesitation in upholding the same. Accordingly, the ground raised by the Department on this issue also stands dismissed.[Para 8.3] (v) Commissioner Of Income Tax Versus Abhinav Kumar Mittal 2013 (1) Tmi 629 - (Delhi High Court: (2013] 351 Itr 20 Additions u/s 69 - search conducted u/s 132 - notice u/s 153C - valuation of properties referred to District Valuation Officer (DVO) - ITAT deleted the addition - Held that:- No reason to differ from the view taken by the Tribunal as no material was found in the search and seizure operations, which would justify the A0's action in referring the matter to the DVO for his opinion on valuation of the said properties. If that be the case, then the valuation arrived at by the DVO would be of no consequence. In any event, the Tribunal has also, on facts, held that the DVO's valuation was based on incomparable sales, which is not permissible in law - in favour of assessee. [Para 5] (vi) Smt. Jatinder Kaur, Smt. Harbhajan Kaur Versus The Dcit Cc-1, Ludhiana2021 (10) Tmi 1150 - Itat Chandigarh Assessment u/s 153A - Undisclosed in....
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....etermined the value of the property at Rs.63,74,700/- as against Rs. 33,00,000/- shown by the assessee. Hence, there was difference of Rs. 30,74,700/-. This was added to the income of the assessee. CIT(A) deleted the addition as there was no evidence of adverse material regarding payment of under hand consideration - Held that:- As no other incriminating material was found during the course of search CIT(A) is correct in this regard. Addition in this case has been made pursuant to search on the basis of Valuation Report of the DVO. It has been settled that in case of search in the absence of any incriminating material found during search, no addition can be made on the basis of Report of the DVO. See K.P. Varghese vs. ITO, Ernakulam&Anr. [1981 (9) TMI 1-SUPREME Court],C.I.T. vs. Abhinav Kumar Mittal [2013 (1) TMI 629 - DELHI HIGH COURT], C.I.T. Vs. Mahesh Kumar [2010 (8) TMI 64 - DELHI HIGH COURT]. Thus in the absence of any evidence that the assessee has invested more than value declared in the registered sale deed of property purchased, the addition in this regard on the basis of Valuation Report by the DVO is not sustainable. [Para 50] (ix) 2015 (3) TMI 156 - DELHI HIGH COURTC....
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....ection 158BB of the income-tax Act, 1961 - Block assessment in search cases - Undisclosed income, computation of (DVO report) - Block period 1-4-1989 to 28-1-2000 - Assessee-firm was engaged in business of construction of building and development of properties - During search, certain documents like bills of materials purchased, labour charges paid, cheques relating to assessee-firm were found and seized - Notice was issued under section 158BD calling upon assessee to file return of undisclosed income for block period 1-4-1989 to 28-1-2000 - Thereafter, valuation of cost of construction of buildings constructed by assessee-firm was referred to DVO, for valuation under section 133(6) - Assessing Officer added difference in valuation of cost of construction adopted by assessee-firm and DVO as undisclosed income - Whether since no material was found during search to indicate that assessee had not recorded expenses incurred on construction in books of account, in absence of any seized materials and solely on basis of DVO's report addition of undisclosed income under section 158BB could not be made - Held, yes [Para 10] [In favour of assessee] 11.1 It has further been held by Hon&....
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....arned counsel for the revenue that the Tribunal had erred in deleting the addition. On the other hand the learned counsel for the respondent referred to a Division Bench decision of this Court in the case of CIT v. Puneet Sabharwal [2011] 338 ITR 485. In that decision a specific question had been raised as to whether the Income Tax Appellate Tribunal was right in holding that notwithstanding the report of the DVO the revenue had to prove that the assessee had received extra consideration over and above the declared value of the same. That question was answered by this Court in favour of the assessee and against the revenue. The Division Bench in the case of Puneet Sabharwal (supra) had also placed reliance on the decision of Supreme Court in K. P. Varghese (supra) as also on another decision of a Division Bench of this Court in CIT v. Smt. Suraj Devi [2010] 328 ITR 604 wherein this Court held that the primary burden of proof with regard to concealment of income was on the revenue and it was only when the said burden was discharged that reliance could be placed on the valuation report of the DVO. There are several other decisions of this Court in the same vein. One such case being t....
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....ree years. Even if this be so, we fail to see how the total of these three years of expenditure could exceed Rs. 1.22 lakhs which was the difference between the DVO's valuation and that of the valuation of the assessee's valuer, on the basis of which he filed the return. 9. Coming to the question of addition towards purchase of land, the Commission of Income-Tax (Appeals) as well as the Tribunal both have examined the issue on the basis of the material available on record. It is noted that the assessee had made no disclosure towards the purchase of land in his statement during the search proceedings. The addition was made merely on the basis of the DVO's report without there being any other material. Moreover, the DVO had also substantially relied on jantri rates and had made other reference's for arriving at the valuation." 10. Both the issues are based primarily on factual aspects. No question of law, therefore, these appeals are dismissed." 10. Similarly, in the case of CIT Vs. Berry Plastics P. Ltd., (2013) 35 taxmann.com 296 (Guj), the Hon'ble Gujarat High Court has made following observations: "9. We are of the opinion that CIT(Appeals) as well as the Trib....
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....epartment (CPWD) rates, whereas, the property in question is situated in the State of Himachal Pradesh and the DVO, otherwise was supposed to take the State Public Works Department (PWD) rates and that the State PWD rates were about 20% lesser than the CPWD rates. The Independent registered valuer M/s Sharma & Associates, has valued the property as per the State PWD rates. He has also given the comparison between CPWD rates and State PWD rates. Therefore, the observations of the Ld. CIT(A) that the assessee has failed to demonstrate the difference between the State PWD rates and CPWD rates is factually incorrect. Even, as pointed out by the Ld. Counsel for the assessee, there was no evidence that the assessee has ever given any contract of the construction of the property to any builder. That even as per the DVO, the properties in question were improved/renovated during different assessment years. Under the circumstances, the A.O should have given the deduction of 10% to 15% on the value estimated by the DVO on account of selfsupervision and self-purchasing of material. The ld. Counsel has submitted that the difference of amount of investment in the said property even as per the DV....
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..../s 69B by erroneously making enhancement u/s 251(1) regarding alleged understatement of investment in property at 28/6, Industrial Area, Phase - 2, Chandigarh. 62. The issue raised by the assessee in the above appeals relates to enhancement u/s 251(1) regarding alleged understatement of investment in property at 28/6, Industrial Area, Phase-2, Chandigarh. During assessment proceedings u/s 153A for AY 2012-13 to 2018-19, the ld. AO noted that Sanjeev Aggarwal held a General Power of Attorney (GPA) for a property transferred to Vaishali Aggarwal in 2015. This property was leased to group concerns SEARLE and SEPL. The tenants had incurred expenditure for construction/improvement of the said property. The DDIT referred the valuation of the property to the DVO. The value of the construction cost as per DVO's report was more than that was shown in the books of accounts of tenants SEARLE & SEPL. The AO added the difference of valuation in the hands of individuals/Landlords treating the said difference in valuation as an expenditure incurred from undisclosed sources. 69. The Ld. CIT(A), however, held that the addition on account of difference in DVO's report and books of the company-tena....
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....T(A) to AO to reopen assessment u/s 147/148 for AY 2010-11 and 2012-13 66. Following is the list of cases involving this issue :- Sr. No. Name of the assessee AY Appeal by Appeal No. Ground No. 1 Scott Edil Pharmacia Limited 201314 Assessee 829/Chandi/2023 8 2 Scott Edil Advance Research Laboratories and Education Limited 2010-11 Assessee 842/Chandi/2023 4 3 Scott Edil Advance Research Laboratories and Education Limited 2010-11 Assessee 842/Chandi/2023 4 67. The issue raised by the assessee in the above appeals relates to the directions given by the ld. CIT(A) to ld. AO to initiate 147/148 taking shelter of s. 150(1)(2) for AY 2010-11 and 2012-13 68. In view of our findings given, above, the direction of the Ld. CIT(A) to reopen the assessment on account of difference in valuation the basis of DVO's report for AY. AY 2010-11 & 2012-13 is also set aside/quashed This issue is accordingly decided in favour of the assessee. Issue 6: Shortage of stock found during search held as undisclosed sale. 69. Following is the list of cases involving this issue :- Sr. No. Name of the assessee AY Appeal by Appeal No. Ground No. 1 Scott Edil Advance Research Lab....
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.... Balram Krishan Aggarwal, who accepted its correctness in their statements recorded u/s 132(4). That the assessee failed to maintain a proper stock register, as reflected in Clause 35 of Form 3CD. That the assessee had not properly maintained the quantitative and qualitative details of raw materials, finished goods, and work-in-progress. The Ld. CIT(A), therefore, held that the ld. AO rightly determined the book stock by applying the average GP rate of the preceding three years, which was reasonable and accepted method. He held that the claim of the assessee that the physical inventory was incorrectly recorded was an afterthought. He, therefore, upheld the addition, so made by the AO. 74. We have heard the rival contentions and gone through the record. The ld. Counsel of the assessee contended that the assessee is a renowned pharmaceutical manufacturer, and like any other manufacturing company, it always has a substantial component of Work in Progress (WIP) at any given time. The nature of the pharmaceutical industry necessitates continuous production cycles, meaning that raw materials undergo multiple stages of transformation before reaching the finished goods stage. However, dur....
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....,90,000.00 WIP 6 C-one 250mg 1,96,250.00 4.00 7,85,000.00 WIP TOTAL 9,60,45,000.00 SCOTT-EDIL ADVANCE RESEARCH LAB.& EDU.LTD. FY 2012-13 Sr. Particulars Qty. Rate(Rs) Amount Group 1 Ceftriaxone Sodium Sterile 5,330.00 6,800.00 3,62,44,000.00 RM/PM 2 Cefotaxime Sodium Sterile 2,549.00 7,000.00 1,78,43,000.00 RM/PM 3 Ceforoxim Axetile 3,351.00 7,865.00 2,63,55,615.00 RM/PM 4 Cefixime Trihydrate 2,430.00 8,750.00 2,12,62,500.00 RM/PM 5 Cefpodoxime Proxetile 2,550.00 12,300.00 3,13,65,000.00 RM/PM 6 Cephalexin 1,905.00 3,500.00 66,67,500.00 RM/PM 7 Paracetamol 19,120.00 275.00 52,58,000.00 RM/PM 8 10ml Clear vials 9,05,100.00 0.83 7,46,707.50 RM/PM 9 10ml WFI 1,74,225.00 1.00 1,74,225.00 RM/PM 10 20mm Gray Butyl Rubber 18,75,300.00 0.38 7,12,614.00 RM/PM 11 20mm Seals green 19,25,600.00 0.18 3,46,608.00 RM/PM 12 20mm Seals blue 4,27,630.00 0.08 34,210.40 RM/PM 13 Steaker Label C-One 14,36,250.00 0.37 5,32,848.75 RM/PM 14 Ptd. Foil Alum 925.00 385.00 3,56,125.00 RM/PM 15 Shipper 4,535.00 1.65 7,482.75 RM/PM 16 DISP. SYNG. 51,543.00 3.20 1,64,....
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....C 1,430.00 126.50 1,80,895.00 RM/PM 10 10ml Clear vials 12,58,415.00 0.83 10,38,192.38 RM/PM 11 20 ml vials 2,56,486.00 1.00 2,56,486.00 RM/PM 12 7.5 ml vials 3,54,821.00 0.38 1,34,831.98 RM/PM 13 10ml WFI 5,12,261.00 1.20 6,14,713.20 RM/PM 14 20mm Gray Butyl Rubber 7,51,542.00 0.08 60,123.36 RM/PM 15 20mm Seals green 5,42,562.00 0.37 2,01,290.50 RM/PM 16 20mm Seals blue 8,56,412.00 0.50 4,28,206.00 RM/PM 17 Sticker Label 25,54,621.00 1.65 42,15,124.65 RM/PM 18 Ptd. Foil 1,050.00 390.00 4,09,500.00 RM/PM 19 Shipper 35,241.00 35.20 12,40,483.20 RM/PM 20 Shipper 1,690.00 65.20 1,10,188.00 RM/PM 21 DISP. SYNG. 28,640.00 3.70 1,05,968.00 RM/PM 22 Carton 30,12,456.00 1.25 37,65,570.00 RM/PM 23 fotaz o dry sup. Bottle 1,58,410.00 1.60 2,53,456.00 RM/PM 24 Alu. Alu. Foil 1,945.00 345.00 6,71,025.00 RM/PM 25 Fotaz D/s 1,92,000.00 9.50 18,24,000.00 FG 26 C-one 1.0 5,75,412.00 13.50 77,68,062.00 FG 27 Vegacef 3,98,750.00 13.50 53,83,125.00 FG 28 Abixim 200 1,85,280.00 24.80 45,94,944.00 FG 29 C-one 1.5 SB 2,99,000.00 19.20 57,40,800.00 FG 30 C-one 250mg 1,99,500.00 ....
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....argin from previous years. That this approach was inappropriate for a large-scale manufacturing company engaged in pharmaceutical production with a turnover exceeding Rs. 200 crores. He has contended that the GP method is typically used for retail businesses, where stock turnover is quick and product margins are relatively stable. However, in a pharmaceutical manufacturing setup, the cost structure is vastly different, with variations in raw material costs, production expenses, and regulatory requirements affecting profitability each year. That the correct approach would have been to reconcile the book stock with actual stock as recorded in the books of accounts and verified by the independent bank auditors. He, therefore, has contended that the ld. AO as well as the ld., CIT(A) ignored the industry-specific nature of stock valuation and wrongly reconstructed the trading account using an arbitrary GP rate, which resulted in a misleading computation of book stock. The Ld. Counsel has further pointed out the following discrepancies in the stock taking by the Department: a. Certain storage locations and godowns were entirely missed, leading to an incomplete stock count. b. Quantit....
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.... unexplained investments or expenditures. That, if the short stock was considered as sales outside the books, then the cash generated from such sales should have been available to explain other alleged unexplained investments. That, instead, the ld. AO made multiple additions, resulting in double taxation which was wrong and against the principles of natural justice. For this proposition the ld. Counsel of the assessee relied on the judgment of Hon'ble Apex Court in the case of CIT vs. S. Nelliappan (1967) 66 ITR 722 (SC) and hon'ble Allahabad HC in the case of CIT vs. Saraf Trading Co. (2015) 376 ITR 534, wherein the principle of telescoping for adjusting unexplained income was confirmed and it was also held that income cannot be added twice. 79. The ld. DR, on the other hand has relied upon the findings of the lower authorities as discussed above. Her main contention has been that both the lower authorities have observed that the assessee had not maintained proper stock register reflecting quantitative and qualitative details of raw material, finished goods, and work-in-progress. She, therefore has contended that in the absence of proper books and stock registers, the only viabl....
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....t has been held that estimation-based methods should not replace actual recorded transactions unless books of accounts are rejected u/s 145(3), which was not done in this case. The said decision, in our view, is squarely applicable in this case. 81. Further, the allegation that the assessee did not maintain properly the stock register, has been also proved wrong by the Ld. AR by referring to the year-wise stock records, which included WIP details, and these were also submitted before the lower authorities but, the same have not been dealt with by any of the lower authorities. The Ld. DR has also failed to rebut the above facts. Moreover, the stock was duly vouched by the Banks also, with whom the same was hypothecated. Periodical stock audit reports were submitted by the assessee to the banks and stock was also physically verified by the external auditors appointed by banks at regular intervals and stock audit reports issued by them, but no shortage ever pointed out by them. Even no incriminating material, what so ever, such as any unrecorded invoices, or any cash receipts were found during the search action. Even the Ld. AO has not mentioned with whom the assessee entered into un....
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....ssee 579/Chandi/2023 4 Page 3-10 Para 8.13 Page 75-85 Para 6.8 & 3 Scott Edil Advance Research Laboratories and Education Limited 2017-18 Assessee 845/Chandi/2023 6 Page 11-16 Para 9.9 Page 78-97 Para 9.17 4 Scott Edil Pharmacia Limited 2018-19 Assessee 834/Chandi/2023 5 Page 7-12 Para 7.8 Page 208-243 Para 8.17 84. The lead case taken up is Maxport India Pvt. Ltd. for AY 2018-19, having ITA No. 591/Chandi/2023. The assesse in this appeal has taken the following ground of appeal: Ground no. 4: That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the addition made by Ld. AO amounting to Rs. 5,17,697/- on account of alleged commission/profit earned at estimated rate of 1% on sales and purchase transactions carried out allegedly outside books. 85. The brief facts relating to the issue under consideration are that during the course of search proceedings, certain loose sheets/evidence were found which showed that the assessee was engaged in sales and purchases with its group companies, however, no physical stock was found during the search action. The ld. AO observed that the assessee was a shell entity with no real b....
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....ompany. Further, sometimes even the imports of material were made by assessee, which were subsequently sold to other companies in the group. The Ld counsel, therefore, has contended that the assessee company is an existent and identified group company which has only been used by the assessee's group as a trading company for routing Intergroup Sale/Purchase and hence it has been wrongly held as a shell or a paper company. The counsel for the assessee has further submitted that the assessee has duly disclosed the profits earned from its trading activities. Further, the ld. counsel for the assessee contended that a detailed party-wise list of sales and purchases was provided to the AO, along with relevant VAT returns, invoices, ledgers, and confirmations from all parties involved, yet, no defect or discrepancy was pointed out by the ld. AO. It was, therefore, contended that estimation of commission/profit was not justified. 88. The ld. Counsel for the assessee has further contended that the ld. CIT(A) in his order, though reduced the rate of commission from 6.5% to 1%, but wrongly contended that the additions for the relevant years were based on incriminating material. The ld. Counse....
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....can be attributed on the part of the assessee. The Ld. Counsel, therefore, has submitted that the estimation of commission income by the lower authorities was not justified in this case. The Ld. Counsel in this respect has also relied upon the ratio of judgement in the case of " DCIT vs M/S Himachal Futuristic (ITA No. 5741/Del/2013) (Del Trb.); Jt. CIT (Osd), Circle-3(1)(1) vs M/S. Pradip Overseas Ltd. (ITA No. 790/Ahd/2018) (Ahemdabad Trb.) and M/s. Arman Fashion Pvt. Ltd. vs. ITO (ITA 2400 and 2407/Ahd/2012) (Ahemdabad Trib.), wherein it was held that : "Heard both the sides and perused the material on record. During the course of assessment, the assessee has admitted that it was engaged in circular trading wherein the bills/invoices changed hands without movement of physical goods. The Assessing Officer has treated such purchase of Rs. 2,83,77,87,618/- as not reliable and disallowed 5% of such purchases which worked out to Rs. 14,18,89,380/- and added to the total income of the assessee. During the course of assessment and appellate proceedings the assessee explained the complete modus operandi of circular trading transaction which was carried out to show better turnover. Wit....
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....EPL/SEARLE. Further as regards the reduction of deduction u/s 80IC by the Ld. AO to the extent of GP Rate on sales made by SEPL/SEARLE to the assessee, this action has resulted in making addition in the hands of the group several times as explained below: a. GP Rate on sale was applied and addition thereof was made in the hands of SEPL/SEARLE. For the same amount, deduction claimed u/s 80IC has been reduced. b. Addition was made assessing the higher Profit Rate in case of Maxport. Another addition was made by reducing the deduction u/s 80IC. c. That similar type of addition was ordered to be deleted by the ITAT in ITA No. 284/Chd/2015 dtd. 28.12.2015 in the case of assessee's group entity namely Scott Edil Pharmacia Ltd. vs Addl. CIT. 92. The ld. DR, on the other hand has relied upon the findings and observations of the ld. AO as well as of the ld. CIT(A) and submitted that company's transactions were not genuine and were sham. With regard to the statement of Ms. Pooja Pandita, the Ld. DR submitted that the assessee wrongly relied on the retraction of Mrs. Pooja Pandita's statement. However, the AO correctly treated the initial statement as incriminating evidence, as it was ....
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....ugh assessee company. However, when specifically asked by the Bench about the object and purpose of such circular transactions within the group companies, the Ld. Counsel has fairly admitted that this was done to artificially inflate the turnover so s to convince the banks to grant higher loan/credit limits. This is also in case of the Ld. DR that the assessee has artificially inflated the turnover, however, the contention of the ld. DR is that the said exercise has been done to claim bogus 80IC deductions. Considering that it is the case of the assessee as well as the department that the circular transactions were done through artificially inflate the turnover, therefore, the estimation of any commission income in this case cannot be held to be justified and the same is ordered to be deleted. However, the assessee will not be entitled to claim 80IC deduction in respect of profits shown on these bogus sales made to group companies. However, this finding of us will be appliable only for the assessment years in which the assessment for the relevant year stood abated and not completed. However, in respect of appeals/cases in which the assessment stood completed and not abated on the d....
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....as been reduced from total allowable deduction u/s 80IC to which the assessee was undisputedly eligible. 97. We considered the rival contentions. Since the transactions were intra group/circular transactions. Since these purchase/sales were made within the group companies and in view of our discussion made above, the aforesaid transactions were done to inflate the turnover of the company, therefore, the profits shown in such intra group sales/ purchases would not be eligible for deduction u/s 80IC of the Act. However, we find force in the contention of the Ld. Counsel, that these transactions were both ways i.e. sales by SPEL to Maxport and vice versa. The AO is directed to calculate the net profits/ expenditure taking into consideration all such transactions for the year under consideration. If both the captioned assessee's have shown any net profits in relation to such transactions, the same will be added as income from other sources and will not be eligible for deduction under section 80IC of the Act. Subject to above observations, this issue is decided in favour of the revenue. Issue 9 : Credits received from JAAPL and Disallowance u/s 80IC - GP earned on sale made to JAPPL o....
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....: That on facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in confirming the addition of Rs. 15,12,958 made by Ld. AO u/s 2(22)(e) of the Act on account of payment made by SEPL for construction of House No. 323, Sector 9, Chandigarh. Ground No. 5: That on facts, circumstances and legal position of the case, Ld. AO has erred in making addition of Rs. 7,77,384/ - u/s 2(22)(e) of the Act on account of payment made by SEPL for construction of House No. 3100, Sector 21, Chandigarh. Ground No. 6: That on facts, circumstances and legal position of the case, Ld. AO has erred in making addition of Rs. 4,60,077/- u/s 69C r.w.s 115BBE of the Act on account of difference in valuation of H.no. 3100, Sector-21, Chandigarh as per DVO's report and as per books of the appellant." 103. The brief facts relating to the issue are that during the assessment proceedings, the Ld. AO treated the construction expenses incurred by SEPL on two houses owned by its directors/substantial share holders as deemed dividend u/s 2(22)(e) of the Act. The Ld. AO further made addition u/s 69C on account of difference between the assessee's declared construction cost and the valua....
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....ion as per State PWD rates should have been taken by the DVO instead of CPWD rates. Identical contentions have been raised as were made regarding the discrepancy in the valuation of factory building as discussed in earlier paras of this order. The ld. Counsel of the assessee, therefore has contended that the addition made the ld. AO and upheld by CIT(A) amounting to Rs. Rs. 15,12,958/- on account of payment made by SEPL for construction of House No. 323, Sector 9, Chandigarh and of Rs. 7,77,384/- u/s 2(22)(e) of the Act on account of payment made by SEPL on for construction of House No. 3100, Sector 21, Chandigarh and Rs. 4,60,077/- u/s 69C r.w.s 115BBE of the Act on account of difference in valuation of H.no.3100, Sector-21, Chandigarh should be deleted. 106. The ld. DR, relied on the findings and observations of the ld. AO and ld. CIT(A) and argued that the lower authorities have rightly made the impugned additions. 107. We have heard the rival contentions and gone through the record. The Ld. Counsel for the assessee has not been able to substantiate the claim that the said properties were being used as office premises by the company. No lease agreement, rent receipts, or board....
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.... consideration. The assessee vide reply 23.12.2019 submitted before the Ld. AO that this amount pertained to receivables outstanding for over 3 years, which were previously included in its income. The assessee claimed that these debts had become bad during the relevant year. But due to a clerical error, these amounts were not written off in the books for that year and were instead written off in subsequent years. 111. During the assessment proceedings, the AO disallowed this claim of bad debt, holding that such provisions were not allowable as deductions under Section 37(1) or Section 36(1)(vii) of the Income Tax Act, 1961, since such debts were not actually written off in the books of accounts in the year under consideration but in subsequent years. The Ld. CIT(A) confirmed the additions so made by the AO. 112. We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record. The ld. Counsel for the assessee contended that the debt was originally created on account of goods sold and said sales were credited to P&L A/c and that it satisfies the first condition for claim of bad debt u/s 36. Further, from the ledger account, it was also show....
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....Book keeping entries were not decisive or determinative of true nature of entries- Court had to see true nature of receipts and not go only by entry in books of account-Assessee's appeal allowed" 113. The ld. DR relied on the order and findings of the ld. AO and ld. CIT(A) and contended that the ld. CIT(A) rightly upheld the AO's findings. 114. We have considered the rival contentions of Ld. Representatives of both the parties and perused the material on record. So far as legality of making a new claim of deduction in the return filed in response to notice u/s 153A, when, the same was not claimed in the original return of income is concerned, it is to be noted that the assessment for the year under consideration stood abated on the date of search action. In such circumstances, the original return loses its validity and is required to be replaced with a new return unless the assessee categorically declares that his original return be treated as his return filed u/s 153A of the Act. In an assessment carried out u/s 153A in such a case, all the issues get open. The assessee can make a new claim and the AO also gets opportunity to examine each of the claim a fresh and pass assessment....
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....ott Edil Advance Research Laboratories and Education Limited for AY 2017-18, having ITA No. 845/Chandi/2023.The assessee in this appeal has taken the following grounds of appeal Ground No. 5: That on facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in confirming the addition made by the ld. AO of Rs. 4,92,44,300/- made u/s 69C by erroneously holding that the purchases made from some parties are bogus merely due to non-service/non response of enquiry letters u/s 133(6)/131 by the parties even when the purchases made from these parties were genuine and fully vouched. 117. The brief facts relating to the issue are that that the assessee Company is involved in manufacturing of Pharmaceutical Products. The assessee purchases the raw material and sells the manufactured products in India and is also exporting the same. During assessment proceedings, Ld. AO called for confirmations from entire list of 37 suppliers. Most of those suppliers responded directly to the Ld. AO and confirmed of having made supplies to the assessee and also confirmed their balance. However, 10 suppliers did not file confirmations and based on non filing of confirmation, the Ld. A....
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.... their authenticity. The purchases in question were subject to TDS and GST, wherever required, and they were duly deposited with the government. Merely because only a small number of suppliers did not file response to the notices issued u/s 133(6) of the Act, that, in our view, can be the sole basis to hold the purchases made from those parties as bogus. The AO could not point out any defect or infirmity in the reply and details furnished by the parties who affirmed the purchases. The assessee has huge turnover. It imports the material as well as export its products. The suppliers in question have not been listed as suspicious in any of the investigation report. No verification of the existence of the said suppliers was made by the AO. Even during the course of search, no evidence of making unrecorded purchases and making payment in cash for the same was found. Under the circumstances, the addition made by the AO on the basis of mere suspicion, without any corroborative material are not sustainable and the same are accordingly ordered to be deleted. Issue 14: Extended period of Limitation 120. Following is the list of cases involving this issue :- Sr. No. Name of the assessee ....
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....acia Limited 2018-19 Assessee 834/Chandi/2023 3 14 Balram Krishan Aggarwal 2012-13 Assessee 726/Chandi/2023 5 15 Balram Krishan Aggarwal 2013-14 Assessee 727/Chandi/2023 5 16 Balram Krishan Aggarwal 2014-15 Assessee 728/Chandi/2023 5 17 Balram Krishan Aggarwal 2015-16 Assessee 729/Chandi/2023 5 18 Balram Krishan Aggarwal 2016-17 Assessee 730/Chandi/2023 5 19 Balram Krishan Aggarwal 2017-18 Assessee 731/Chandi/2023 6 20 Balram Krishan Aggarwal 2018-19 Assessee 732/Chandi/2023 9 21 Maxport India Pvt Ltd 2014-15 Assessee 582/Chandi/2023 5 22 Maxport India Pvt Ltd 2015-16 Assessee 583/Chandi/2023 5 23 Maxport India Pvt Ltd 2016-17 Assessee 584/Chandi/2023 5 24 Maxport India Pvt Ltd 2017-18 Assessee 579/Chandi/2023 5 25 Maxport India Pvt Ltd 2018-19 Assessee 591/Chandi/2023 5 26 Vaishali Aggarwal 2018-19 Assessee 483/Chandi/2023 8 27 Vaishali Aggarwal 2017-18 Assessee 482/Chandi/2023 3 28 Sanjeev Aggarwal 2018-19 Assessee 480/Chandi/2023 7 29 Sanjeev Aggarwal 2017-18 Assessee 489/Chandi/2023 4 124. The lead case taken up is Scott Edil Advance Research Laboratories and Education Limited f....
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....und No. 5: That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in not the ground in right manner regarding wrong computation made by the Ld. AO about carry forward/ set-off of available MAT credit against tax demand raised consequent to impugned addition made in the assessment. 128. This issue is not pressed by the Ld. Counsel for the assessee. The same is therefore, dismissed as not pressed. Issue 17: Disallowance of 80IC on subsidy claimed in ITR 129. Following is the list of cases involving this issue :- Sr. No. Name of the assessee AY Appeal by Appeal No. Ground No. 1 Scott Edil Pharmacia Limited 2015-16 Assessee 831/Chandi/2023 7 & 8 130. The assessee in this appeal has taken the following ground of appeal: Ground No. 7: That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the addition made by Ld. AO of Rs. 4,86,458/- by disallowing the deduction u/s 80-IC even when the appellant had itself not claimed deduction on such items in the ITR filed. Ground No. 8: That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO by d....
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.... explained and reasonably possessed by the assessee's and treated the remaining part of the jewellery of the value of Rs. 76,00,017/- as acquired from undisclosed sources of income. The AO made addition of Rs. 24,55,324/- in the hands of Sanjeev Aggarwal and of Rs. 5144693/- in the hands of Vaishali Aggarwal. The ld. CIT(A) confirmed the additions so made by the AO. 136. Before us, the Ld. Counsel for the assessee has submitted that the jewellery found at the premises belonged to the assessee's family members, spanning multiple generations. That the assessee's family has consistently declared an annual income of more than Rs. 1.25 crore, and they have been in a thriving pharmaceutical industry for over 25 years. The group's yearly turnover has continuously exceeded Rs. 150 crores, with an average profit of Rs. 15 crores per year over the relevant block period. That given the family's status and substantial earnings, maintaining jewellery worth Rs. 1,40,19,917/- was reasonable, and no addition should be made on this account. The Ld. Counsel has relied upon details of past income details showing that it had sufficient owned funds wherefrom jewellery had been bought. The Ld. Coun....
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....eated as acquired from undisclosed sources. The case laws cited by the Ld. Counsel for the assessee are squarely applicable to the facts and circumstances of the present case wherein it has been time and again held that Keeping status of assessee's family in mind as well as customs and practices of community to which family belonged, the value of the jewellery which the family would reasonably and in the ordinary circumstance is to be taken. In view of the above discussion, the addition made under Section 69A is unsustainable and the same is accordingly ordered to be deleted. Issue 19: Approval u/s 153D 140. Following is the list of cases involving this issue :- Sr. No. Name of the assessee AY Appeal by Appeal No. Ground No. 1 Scott Edil Advance Research Laboratories and Education Limited 2018-19 Assessee 846/Chandi/2023 3 2 Scott Edil Advance Research Laboratories and Education Limited 2017-18 Assessee 845/Chandi/2023 3 3 Scott Edil Advance Research Laboratories and Education Limited 2016-17 Assessee 857/Chandi/2023 3 4 Scott Edil Advance Research Laboratories and Education Limited 2015-16 Assessee 856/Chandi/2023 3 5 Scott Edil Advance Research L....
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....tire assessment. 142. The contention of the Ld. Counsel for the assessee in respect of the above issue are that in all this Scott Edil group of cases, Ld. AO forwarded draft assessment order to the Addl. CIT on 29.12.2019 along with assessment records only, but without any seized record folders. The Addl. CIT had sent back the file with his cryptic approval note on 30.12.2019. In the approval note, he has simply written "the approval u/s 153D of the Act, 1961, is accorded for the AY 2014-15." 150. The Ld. Counsel has contended that the said approval has been granted by the Ld. Addl. CIT without application of mind. He in this respect has stressed on the following points of arguments : a) That there is no discussion on the file by the Ld. AO during assessment proceedings with the Addl. CIT. That the approval u/s 153D given in this case is mechanical and ritualistic only and without any application of mind. b) That the Ld. Addl. CIT even did not mention that he has looked into the records or the draft assessment order. That he has just signed the dotted lines. c) That the approval was sought by the AO on 29.12.2019. In this large search group containing more than 50 assessmen....
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....al side. 144. We have considered the rival contentions and gone through the record. It is a matter of record that about 50 assessment orders have been passed by the AO u/s 153A of the Act in the group cases of the assessee. The AO was required to get approval of the Addl. CIT/CIT u/s 153D of the Act before passing the impugned assessment orders. It is also a matter of record that the AO had forwarded the draft assessment orders to the Addl. CIT 29.12.2019. We take a sample copy of the letter forwarding the draft order in the case of SEPL vide letter no 886 along with assessment record to seek the approval u/s 153D of the Act which was accorded on 30.12.2019. The copy of the letter sent by the AO to the Addl. CIT is reproduced as under (for reference only the letter for AY 2018-19 has been reproduced as under. However the AO has sent separate letter for different assessment years):- 145. A perusal of the above letter reveals that the AO had sent the draft Assessment Order on 29.12.2019 to the Addl. CIT along with assessment records. However, the AO did not send the seized material along with the assessment records. The Ld. Addl. CIT sent the approval in all the cases the next day ....
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....anner. It is pertinent to mention here that these appeals along with other appeals pertaining to the same search action were earlier heard by this Tribunal on 20.08.2024 and the hearing continued for the next day also and concluded on 21.08.2024. The matter was again fixed for clarifications for 27.11.2024. This time the Ld. CIT (DR) Mr. K. MehboobAli Khan was also joined in arguments by another CIT(DR) Smt. Kusum Bansal. At their request, the matter was adjourned to 5.12.2024. On 5. 12. 2024, the matter was again heard at length, and both the Ld. CITs (DRs) and the counsel for the assessee addressed the arguments and hearing was concluded to their satisfaction. Thereafter, it took considerable time to us also to go through each of the issue and adjudicate upon the same. What we want to convey is that the above facts and circumstances show that the draft assessment orders were sent by the AO in approximately 50 cases, which required due application of mind, but the Ld. Addl CIT sent the approval on the very next working day in a casual and mechanical manner vide one line order saying that approval is accorded without even minimum deliberations. Under the circumstances, the case law....
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....r by the AO to the Addl.CIT which is enclosed in assessee's Paper Book at page No.1 and which reads as under: Government of India Office of the Asst. Commissioner of Income Tax, Central Circle-II, Opp. B.V.M. School Kitchlu Nagar, Ludhiana. No.ACIT/C-II/Ldh/2017-18/446 Dated:29.06.2017 To The Additional Commissioner of Income Tax, Central Range, Ludhiana. Madam, Sub: Approval under section 153D of the Income Tax Act,1961- in the case of M/s Inder International(PAN AABFI7996J) and Sh.Abhay Jain (PAN AHEPJ7203M) - matter regarding- ********* Kindly refer to the subject cited above. Keeping in view the orders of Hon'ble Punjab & Haryana High Court Chandigarh (whereby directing the assessment order to complete the assessment proceedings by 30.06.2017), draft assessment orders of the following cases have been prepared: S. No. Name & address of the assessee PAN Assessment Years 1. M/s Inder International, 594, Nirankari Mohalla No.1, Overlock Road, Ludhiana AABF17996J 2011-12 to 2016-17 (six Years U/s 153A) 2. S.Abhay Ja....
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....rded approval u/s 153D of the Act that very day i.e. 29.06.2017 as is clear from the above approval reproduced. The Addl.CIT simply recorded that: "Necessary statutory approval u/s 153D is given to pass the above assessment order as such. Assessment record in this case is returned herewith." 12. We have gone through the decision of Hon'ble Bombay High Court cited by the Ld.Counsel for the assessee in the case of Shreelekha Damani (supra) wherein almost identical approval was considered by the Hon'ble Bombay High Court and the relevant findings are as under: "6. Having heard the learned Counsel for the both sides and having perused the documents on record, we have no hesitation in upholding the decision of the Tribunal. The Additional CIT while granting an approval for passing the order of assessment, had made following remarks :- "To, The DCIT(OSD)-1 Mumbai Subject : Approval u/s 153D of draft order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08 reg. Ref : No. DCIT (OSD)-1/CR-7/Appr/2010-11 dt. 31.12.2010 As per this office letter dated 20.12.2010, the Assessing Officers were asked to submit the draft orders for approval u....
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....nts u/s. 153D of the Act). The approving authority is necessarily required to objectively evaluate such draft assessment order with due application of mind on various issues contained in such order so as to derive his/ her conclusive satisfaction that the proposed action of AO is in conformity with subsisting law. The AO is obligated to pass the assessment order exactly, as per approval/ directions of the designated authority. Inevitably, this evaluation is to be made on basis of material gathered at time of search as well as obtained in the course of the assessment proceeding. The requirement of law is to grant approval not merely as a formality or a symbolic act but a mandatory requirement. 11.2 In the backdrop of facts narrated in the preceding paras, it is the contention on behalf of the asssessee that approval granted under S. 153D does not meet the requirement of law and hence assessment orders passed in consequence of such non-est approval is a nullity in law. The assessment orders thus passed is vitiated in law which illegality cannot be cured. In support of charge of nonest approval, several contentions have been raised viz (i) the approval accorded under section 153D is w....
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....in a consolidated manner for all assessment years for which voluminous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality. It is also alleged on behalf of assessee that the draft assessment orders are not available on record which allegation has not been rebutted. The draft assessment orders showing some marking/initials etc. could have given a valuable input on the applicability of mind and could throw light on objectivity applied owing to total silence on any delineation on these aspects in the approval memo. The records before us are totally muted. 11.4 Based on solitary communication placed before us, it is ostensible that draft assessment orders were placed before the Addl. CIT on 29.12.2010 for the first time. It is axiomatic from the plain reading of approval memo that various assessment orders and the issues incorporated in the assessment orders, were never subjected to any discussion with the authority granting approval prior to 29.12.2010. It is evident from the CBDT Circular No. 3 of 2008 dated 12.03.2008 that the legislature in its highest wisdom made it obligatory t....
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....hat AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination/investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his/ her statutory functions and delightfully relegated his/her statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Approval to be a mere formality and can not be countenanced in law. 11.6 There are several decisions, which supports the view that approval granted by the superior authority in mechanical manner defeats the very purpose of obta....
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....such. Assessment record in this case is returned herewith..."which clearly proves that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis of contents mentioned in the draft assessment order without any application of mind and seized materials were not looked at because that was not available before him at the time of granting of approval to the draft assessment order and other enquiry and examination was never carried out. From the said approval, it can be easily inferred that the said order was approved, solely relying upon the implied undertaking obtained from the Assessing Officer in the form of draft assessment order that AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination/investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his statutory functions and delightfully relegated his statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to hav....