TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1057
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.... 57/JPR/2025 2015-16 Shri Ambica Garments 19-11-2024 153A dated 20/07/2021 58/JPR/2025 2016-17 Shri Ambica Garments 19-11-2024 153A dated 20/07/2021 59/JPR/2025 2017-18 Shri Ambica Garments 19-11-2024 153A dated 20/07/2021 60/JPR/2025 2018-19 Shri Ambica Garments 19-11-2024 153A dated 20/07/2021 61/JPR/2025 2019-20 Shri Ambica Garments 19-11-2024 143(3) dated 20/07/2021 671/JPR/2025 2014-15 Sanjay Kumar Karnani 26-02-2025 153A dated 16/07/2021 672/JPR/2025 2015-16 Sanjay Kumar Karnani 26-02-2025 153A dated 16/07/2021 673/JPR/2025 2016-17 Sanjay Kumar Karnani 26-02-2025 153A dated 16/07/2021 674/JPR/2025 2017-18 Sanjay Kumar Karnani 26-02-2025 153A dated 16/07/2021 675/JPR/2025 2018-19 Sanjay Kumar Karnani 26-02-2025 153A dated 16/07/2021 676/JPR/2025 2019-20 Sanjay Kumar Karnani 26-02-2025 153A dated 16/07/2021 2. These appeals were heard together with the consent of the parties and are disposed off with this common order as the grounds raised by the assessee in all the appeals are common except with variance in figur....
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.... and in law, Ld.CIT(A) erred in confirming the action of Ld. AO in assessing the total income at Rs. 2,12,56,630/- as against the returned income of Rs. 6,01,040/- shown by the assessee. The additions made and confirmed by CIT(A) unjustified, illegal or excessive, without considering the submissions in right perspective and deserves to be deleted in full. 5. That the appellant craves your indulgence to add, amend, modify, delete or alter all or any grounds of appeal before or at the time of hearing. 3.3 The assessee M/s. Shri Amica Garments has raised the following grounds of appeal vide ITA No. 58/JPR/2025 for assessment year 2016-17; 1. Impugned assessment order dated 20.07.2021, passed U/s 153A is bad in law and on facts for want of jurisdiction and for many more other statutory reasons. 2. Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO in estimating the Gross Profit and Further erred by making addition of Rs. 2,72,92,499/-. The action is unjustified, illegal or excessive and deserves to be deleted in full. 3. Under the facts and circumstances, Ld.CIT(A) erred in confirmin....
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....rcumstances, Ld.CIT(A) erred in confirming the action of Ld. A.O. in making addition on account of alleged opening unexplained loan of Rs. 1,17,440/-. The addition is unjustified, illegal or excessive and deserves to be deleted in full. 5. Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO in assessing the total income at Rs. 3,31,14,520/- as against the returned income of Rs. 6,00,460/- shown by the assessee. The additions made and confirmed by CIT(A) unjustified, illegal or excessive, without considering the submissions in right perspective and deserves to be deleted in full. 6. That the appellant craves your indulgence to add, amend, modify, delete or alter all or any grounds of appeal before or at the time of hearing. 3.5 The assessee M/s. Shri Amica Garments has raised the following grounds of appeal vide ITA No. 60/JPR/2025 for assessment year 2018-19:- 1. Impugned assessment order dated 20.07.2021, passed U/s 153A is bad in law and on facts for want of jurisdiction and for many more other statutory reasons. 2. Under the facts and in the circumstances of the case and in law....
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....g grounds of appeal vide ITA No. 671/JPR/2025 for assessment year 2014-15; 1. Impugned assessment order dated 16.07.2021, passed U/s 153A is bad in law and on facts for want of jurisdiction and for many more other statutory reasons. 2. Under the facts and circumstances, Ld. A.O. has erred in making addition on account of alleged opening unexplained capital of Rs. 1,08,36,565/-. The addition is unjustified, illegal or excessive and deserves to be deleted in full. 3. Under the facts and circumstances, Ld. A.O. has erred in making addition on account of alleged opening unexplained loan of Rs. 1,34,53,241/-. The addition is unjustified, illegal or excessive and deserves to be deleted in full. 4. Under the facts and circumstances, Ld. A.O. has erred in making addition on account of alleged unexplained loan of Rs. 61,000/-. The addition is unjustified, illegal or excessive and deserves to be deleted in full. 5. Under the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in confirming the action of Ld. AO in making total addition of Rs. 3,17,63,818/- u/s 68 of the Act. 6. That the appellant craves your indulgence ....
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.... erred by making addition of Rs. 2,31,98,914/-. The action is unjustified, illegal or excessive and deserves to be deleted in full. 3. Under the facts and circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO in making addition on account gross profit. The addition is unjustified, illegal or excessive, without considering the submissions in right perspective and deserves to be deleted in full. 4. Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO in assessing the total income at Rs. 2,42,25,650/- as against the returned income of Rs. 10,26,740/- shown by the assessee. The additions made and confirmed by CIT(A) unjustified, illegal or excessive, without considering the submissions in right perspective and deserves to be deleted in full. 5. That the appellant craves your indulgence to add, amend, modify, delete or alter all or any grounds of appeal before or at the time of hearing. 4.4. The assessee Sanjay Kumar Karnani has raised the following grounds of appeal vide ITA No. 674/JPR/2025 for assessment year 2017-18; 1. Impugned assessment order da....
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....explained loan of Rs. 3,00,000/-. The addition is unjustified, illegal or excessive, without considering the submissions in right perspective and deserves to be deleted in full. 5. Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO in assessing the total income at Rs. 3,04,53,690/- as against the returned income of Rs. 14,85,340/- shown by the assessee. The additions made and confirmed by CIT(A) unjustified, illegal or excessive, without considering the submissions in right perspective and deserves to be deleted in full. 6. That the appellant craves your indulgence to add, amend, modify, delete or alter all or any grounds of appeal before or at the time of hearing. 4.6 The assessee Sanjay Kumar Karnani has raised the following grounds of appeal vide ITA No. 676/JPR/2025 for assessment year 2019-20; 1. Impugned assessment order dated 16.07.2021, passed U/s 153A/143(3) is bad in law and on facts for want of jurisdiction and for many more other statutory reasons. 2. Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO in....
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....the assessee to explain the nature / source / genuineness of opening capital, unsecured loan, sundry creditors, loan & advances, opening stock and gross profit. In response to such notice, the assessee filed reply which is reproduced hereunder: "Without prejudice to the above, as submitted during post search proceedings and in light of factual submissions made hereinbefore, at most it can be said that "Jai Shree Ram" is consolidated affairs including transactions of Shri Ambica Garments. Further, data of "Jai Shree Ram" appears to prepared by some staff to calculate the incentive to be distributed to the various staff through leading staff members. The various entries have not been properly posted to derive the correct profit. Similarly, various entries have directly posted in concerned person's account, instead of passing through Profit and Loss Account. Various entries have been treated as appropriation of profits and directly been posted to proprietor's account. Various accounts of family members have been created as shadow account and interest and transfer entries were made therein for some family reasons. There are various outstanding balances coming continuou....
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....ee, it was found that the tally data seized, which was maintained in the name of Jai Shree Ram represents real business picture of M/s Shri Ambica Garments. Ld. AO noted that Jai Shree Ram tally data cannot be straight away relied upon for determination of profit due to following reasons: (i) Jai Shree Ram data has been maintained Calendar Year Wise whereas the assessment has to be made assessment year wise (for which financial year wise books of accounts are needed). The definition of assessment year given u/s 2(9) of the Act clearly provides that assessment year means the period of 12 Months commencing on 1st of April. As per the Income Tax Act, assessment is to be made assessment year wise, therefore these books suffers from the established mercantile system convention wherein closing entries are to be made for the period ending on 31st March instead of 31st December. (ii) The assessee is not maintaining any stock records. The stock is taken once in a year as on 31st December, therefore to break these books financial year wise, stock as on 31st March has been taken on presumption only. (iii) The assessee himself has admitted that these books are not....
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....es of unsecured loans appearing in Jai Shree Ram and Shri Ambica Garments are the same. In view of this, ld. AO noted that amount shown as unsecured loan in Jai Shree Ram was nothing but assessee's own money shown in the garb of unsecured loans, source of which remains unexplained. As per seized tally data of M/s Jai Shree Ram as on 31.12.2014, unsecured loans is of Rs. 48,12,635/- whereas opening unsecured loans as on 01.01.2014 is of Rs. 52,16,133/-. Therefore, unexplained capital of Rs. 3.28.27.585/-, opening unexplained capital in form of unsecured loan Rs. 52,16,133/- remain unexplained, hence, the amount of Rs. 3,80,43,718/- (32827585-5216133) was added to the total income of the assessee for A.Y. 2014-15. 7. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: 5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed a....
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....cord created by th staff primarily for calculating staff incentives. The date chosen for the tally dat starting 01.01.2014, indicates that arbitrary figures were used, without a valid basis The appellant has also contended that opening Balance cannot be added u/s 68. Since the amounts of Rs. 3,28,27,585/- (opening capital) and Rs. 52,16,133/- (unsecured loans) represent balances from earlier financial years. The addition of these amounts u/s 68 is therefore not permissible. The appellant has also contended at the one hand, books of accounts have been rejected and on the other hand falling on the very same set of books to make the addition u/s 68. Appellant has contended that the AO observed that all bank transactions related to purchases and sales were recorded both in the books of Shri Ambica Garments and Jai Shree Ram, including instrument numbers. Despite this, the AO relied on the tally data seized during the search proceedings to conclude that the assessee was involved in unaccounted sales and purchases. Consequently, the AO deemed the regular books of account maintained under the trade name Shri Ambica Garments to be unreliable and not reflective of....
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....statements of the partners of the firm show and prove that these seized documents were accepted by the appellant during the search action. (2) However it is important to note that even though the appellant has claimed that there are errors in the seized Tally data however the appellant has not placed on record specific details and list of such errors. The appellant has also not placed on record any comprehensive comparison of the transactions recorded in the audited books of accounts and the transactions recorded in the 'Jai Shree Ram'. The seized material was not placed on record. In the hearing dated 06.11.2024, last opportunity was provided to the appellant/Ld. AR to submit the ledger accounts and matching between books of the appellant in Tally in 'Jai Shree Ram' and audited books as per the time was sought by the Ld. AR. However the required details were not submitted. Adverse inference in this regard id drawn against the appellant. A party who relies on a recital has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recita....
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....ase of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (2) Where any books of account, other documents or assets have been delivered to the requisitioning officer in accordance with the provisions of section 132A, then, the provisions of sub-section (1) shall apply as if such books of account, other documents or assets which had been taken into custody from the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub- section (1) of section 132A, had been found in the possession or control of that person in the course of a search under section Section 132(4A) of the Act (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (1) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and that ....
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....lant. The contention of the appellant that tally data was not containing any inventory details is factually incorrect as in the profit and loss accounts of the seized parallel books of accounts 'Jai Shree Ram', amounts of opening stock and closing stock are duly mentioned. There is significant and large and material difference in the turnover and profit as shown in the audited books and as shown in the 'Jai Shree Ram'. The appellant has not challenged the accuracy of turnover figures as shown in 'Jai Shree Ram'. Another important point to be considered is that for the assessment year 2014-15, the learned AO has made the addition on account of profit in a similar manner however the appellant has not challenged the same in the appeal. Thus for one year the appellant has accepted the accuracy and reliability of the books of accounts as per its own conduct and submissions and only for the other years the appellant challenging the same books of accounts to be inaccurate and non- reliable. Shows not bona fide approach of the appellant and this also shows that the seized books of accounts 'Jai Shree Ram' are reliable for the purpose of com....
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....ed income for this year. (iii) ............ In the above case the assessment for the AY 2001-02 was done however which was quashed by the honourable Tribunal. Even then, in the very subsequent AY 2002-03, the credit of opening figure from the AY 2001-02 was not allowed by the honourable Tribunal in the peak working. Referring to the judgement of Hon'ble Hon'ble Madras High Court in the case of Commissioner of Income-tax v. K. Palaniappan [2000] 242 ITR 719 (Madras), it is observed by the Hon'ble Allahabad High Court in the case of CIT v. Sharraf Trading Co. [2016] 67 taxmann.com 176/[2015] 376 ITR 534 (All.) as under:- "26. The Court noticed that various courts have taken a view, where certain additions were made in the earlier years, that would constitute source for the credit entry in subsequent years. But, having said so, found that in the case which was up for consideration before Madras High Court, there was a concealed income which was neither disclosed in the assessment proceedings nor in any other ancillary proceedings for any earlier year and therefore, there can be no occasion to constitute it a source for subsequent credit ....
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....d in the books as "market outstanding" and was for "the payment was outstanding against the labour and goods supplied". "Market Outstanding" itself connotes outstanding w.r.t. the regular transactions with parties in market, and further the same was expressly found to be thus the outstanding against the labour and goods supplied and thus the same was in the nature of regular business sale/purchase transactions. From the judgement there is no reference to the fact or dispute that the outstanding balance did not represent the actual business transactions. In the judgement, in the conclusion, in para 7, there is specific reference and which shows the linkage between "market outstanding" and " AO having estimated the higher profit rate on total contract receipts". Whereas the facts of the case in present appeal are entirely and significantly different from the facts of the case of above judgement. Present case is of claimed capital contribution by partners and unsecured loans. It is held by the Hon'ble ITAT in the case of Smt. Lizy George v. Assistant Commissioner of Income-tax [2022] 144 taxmann.com 52 (Bangalore - Trib.) [26-10-2022] as under:- ....
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.... provisions is required to be done for the transactions which are disclosed in the audited books of accounts, the same way for the transactions which are only recorded in the parallel books of accounts the compliance of the technical disallowance provisions is to be made. There is no premium to the dishonesty or in other words for the transactions which are secret and/or which are only recorded in the parallel books of accounts and/or which have been used to evade the taxes, the appellant cannot claim exemption from the technical disallowance provisions. Further as far as incomes under the other heads of income is concerned or in other words as far as incomes other than the income under the head of 'Income from Business and Profession' is concerned, the same is not determined while calculating the business income after the rejection of the books of accounts. (9) AS PER SCHEME OF ACT THE UNEXPLAINED CREDITS TAXABLE U/S 68 DO NOT FALL UNDER THE SECTION 28 OR UNDER CHAPTER OF 'INCOME FROM BUSINESS AND PROFESSION' AND THERE IS NO ONUS ON THE ASSESSING AUTHORITY TO LOCATE THE EXACT SOURCE:- There is no presumption in favor of business income. O....
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....ounting - System of accounting Assessment year 1946-47 Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessee and no further burden lies on ITO to show that income is from any particular source - Held, yes". As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed. In the case of Ro....
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.... for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income-tax Officer is entitled to treat it as taxable income: see A. Govindarajulu Mudaliar v. Commissioner of Income-tax [1958] 34 ITR 807 (SC)". As per judgements of Hon'ble Supreme Court in the case of CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assesse, it is not necessary for the department to locate its exact source. (10) INCOMES U/S 68, 69 ETC. ARE SEPARATE AND DISTINCT FROM INCOMES UNDER THE HEADS BUSINESS INCOME, CAPITAL GAINS ETC. Section 28 is not an inclusive definition as the opening sentence of the section 28 reads as under:- "The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession"," Accordingly, in case the appellant claims that the income is chargea....
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.... will not have application. However if the asset/credit/expenditure is treated as income because of the applicability of section 68/69/69A etc. in that case section 115BBE will have application. The incomes mentioned under these sections are not specific to any head of income. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. Section 14 of the Income-tax Act, 1961 Heads of income - Assessment year 1984-85 Whether opening words of section 14, 'save as otherwise provided by this Act,' clearly leave scope for 'deemed income' of nature covered under scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from ....
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.... form of unexplained credit/unexplained investment etc. is to be taxed in the year in which the application of such income is found. Once sections 68/69/69A etc. are applicable, there is no dispute regarding the applicability of section 115BBE of the Act. Complete code:- The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not ....
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....efit regarding exemption from not complying with legal requirements and taxability under section 68, 69 and 69D etc. of the Act. It is a settled law that no premium can be awarded to the dishonesty. If the claim of the appellant is allowed that will tantamount to giving reward and premium to the money laundering practices. (12) EXISTENCE OF UNEXPLAINED FUNDS AND UNEXPLAINED CREDITS ITSELF IS EVIDENCE AND THESE ARE THE INCOME OF THE ASSESSEE:- In the case of Kailash Swaroop Agarwal vs Commissioner of Income Tax, Ajmer in D.B. Income Tax Appeal No. 175/2012 in order dated 03/10/2017 the addition on account of unexplained cash deposits was upheld by the Hon'ble Rajasthan High Court. As noted in the order of Hon'ble Tribunal as referred in the order of Hon'ble High Court, the explanation of the assessee was rejected by the Hon'ble Tribunal in the following paras:- "5.7 The law in the matter is trite, and for which we may refer to case laws by the hon'ble apex court, which has time and again explained that the receipt of money of which the assessee is a beneficiary is itself a prima facie evidence against him, who has to satisfactorily expl....
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....cceed. That is not, in our judgment, the correct legal position. Where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed (Emphasis supplied) As per the headnotes "Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income tax Act, 1922] Method of accounting System of accounting Assessment year 1946-47 Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessee and no further burden lies on ITO to show that income is from any particular source - Held, yes". As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble Supreme Cour....
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....ss, the source of which was not disclosed by the assessee. Where certain unexplained sundry creditors are found in the account books of the assessee, whose business income is determined on estimate basis and not on the basis of his returned income, the AO is not prevented from treating the unexplained sundry creditors standing in the books of account as income from undisclosed sources. 11. In the instant case, the consistent plea of the assessee was that the sundry creditors are genuine but at any point of time the assessee take the stand that the sundry creditors are referable to the income of the business which has been determined on estimate basis. Hence, the assessee must be held to have failed to establish that the unexplained sundry creditors were referable to the business income. The addition of the unexplained sundry creditors as income from other sources by the AO, therefore, was held valid. 12. Further, the Hon'ble Apex Court in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 observed that where there is an unexplained credit, it is open to the AO to hold that it is income of the assessee, and no further burden lies on the AO to sh....
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....ere maintained by the appellant for the year under appeal. Some of the transactions were recorded and shown in the audited books of accounts and appellant maintained and another set of books of accounts 'Jai Shree Ram' in which the transactions shown in the audited books of accounts are so recorded and transactions not recorded in audited books are also recorded. The crucial fact is that the financials / Books of accounts of 'Jai Shree Ram' have not been rejected. In the earlier paras, the issue of reliability of books 'Jai Shree Ram' has been discussed in detail and the same is hereby referred to and not repeated for the sake of brevity. Only the audited books of accounts have been rejected. The addition challenged in present ground of appeal has not been made from such audited books of accounts and has been made from the financials/books 'Jai Shree Ram' which have not been rejected. Thus the legal ground raised by the appellant is infructuous. (16) The Id. AR also argued that the capital from partner is not taxable in the hands argued that the capital from parti of the firm and the same can only be taxed in the hands of partners. This cont....
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....artners, could not be assessed in the hands of the firm. On reference, in this judgement, it is held by the Hon'ble Rajasthan High Court as under:- "In A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807, it was observed by the Supreme Court that there is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amounts of cash received during the accounting year, the Income tax Officer is entitled to draw the inference that the receipts are of an assessable nature. In P.V. Raghdva Reddi v. CIT [1956] 29 ITR 942, it was observed by the Andhra Pradesh High Court that the burden of proof is not dependent upon the fact of a credit entry in the name of the assessee or in the name of a third party. In either case, the burden lies upon the assessee to explain the credit entry, though the onus might shift to the Income-tax Officer under certain circumstances. Otherwise a clever assessee can always throw the burden of proof on the income-tax authorities by making a credit entry in the name of a third party either real or pseudonymous. The same High Court in M.M.A.K. Mohindeen Thamby and Co. v. CIT [1....
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....matter was not considered by the Tribunal on the merits, the Tribunal would be free to hear the arguments of both the parties and decide afresh in view of the observations made above. Accordingly, the reference is answered in favour of the Revenue and against the assessee. In the case of Kailash Chand Agarwal v. Income Tax Officer, Ward-3, Bharatpur [2017] 88 taxmann.com 540 (Rajasthan)/[2017] 394 ITR 771 (Rajasthan) [17-01 2017] it has been held that regard to the sources of the capital contributions by the partners, the assessee firm had given enough evidences in the shape of (i) entries in the books of account of the firm as well as the partners for those capital contributions, (ii) confirmations from the creditors who had given the money to the partners and (iii) returns of income/statements of computation of income/capital accounts of all such creditors; and that there was no ground to reject the findings adopted by the CIT(A) and no reasons were adopted by the Tribunal while reversing the finding of the CIT(A). In this judgement also, judgement of Commissioner of Income-tax v. Kishorilal Santoshilal (supra) has been referred and the addition was deleted only....
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....The appellant has also filed an entry wise comparison and matching of the ledger account of capital and loan accounts in submission dated 11.11.2024. The appellant has specifically highlighted that the bank transaction entries are matching. A few minor mismatch have been identified by appellant and from a cursory perusal the conclusion to be drawn is that these can very easily be rectified by the appellant. However the conclusion in substance and materiality to be arrived at is that the opening balance as on 01.01.14 as per audited books is already part of the opening balance as on 01.01.14. In view of the above discussion addition made in the assessment order on the issue (capital balance as on 01.01.2014) is reduced by the opening balance of partners' capital on the same date in the audited books of accounts. Accordingly, this contention of the appellant is allowed. (18) The appellant has raised similar contention w.r.t. the loan balances as on 01.01.14 in the books 'Jai Shree Ram' and the audited books. This contention of the appellant was rejected in the assessment order on the ground that there was absence of evidence to prove th....
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....appeal raised by the appellant on this issue is treated as disposed off. 7. Ground of Appeal No. 5 is as under: Ground No. 5: Under the facts and circumstances, Ld.AO has erred by initiating the levying penalty U/s 271(1)(c), the penalty. The action is unjustified, illegal or excessive and deserves to be deleted in full. 7.1 The ground is general in nature. The grounds are pre-mature as these are against mere initiation of penalty proceedings. Penalty proceedings are independent proceedings and the appellant is required to make his submissions before the appropriate authority during the penalty proceedings. Accordingly, the ground of appeal raised by the appellant on this issue is treated as disposed off. 8. Ground of Appeal No. 6 is as under: Ground No. 6: That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. 8.1 The appellant has not added and altered any of the above mentioned ground of appeal. Accordingly such mention by the appellant in its ground is treated as general in nature, not needing any specific adjudication and is accordingly treated as disp....
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....statement that "the draft assessment order in the following cases submitted by you are hereby approved u/s 153D of Income Tax Act, 1961", followed by a tabular list containing basic particulars of the assessee. There is complete silence as to the consideration of issues involved or the basis on which such approval was accorded. Even the minimum requirement-of recording a brief indication of thought process or satisfaction after due examination of the draft order-is conspicuously absent. 2.3 While it is not expected that the approving authority should furnish elaborate reasoning, some indication must exist to demonstrate that the draft assessment orders were examined and found to be in accordance with law. A mere reproduction of the language of the statute or a perfunctory endorsement such as "seen" or "approved" amounts only to rubber-stamping and does not meet the statutory mandate under Section 153D. 2.4 It is further submitted that the provisions of Section 153D cannot be construed as a mere procedural or empty formality. The legislative intent behind its enactment is twofold: * Firstly, to safeguard the interests of the assessee by ensuring that no ar....
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....ion and required significant corrections. Despite this explanation duly supported by the evidence and instances, the AO disregarded the assessee's contention and the tally data found in the name of "Hari Om" were considered as the real books of account of the assessee by observing as under: 5.2 The reply filed by the assessee has been examined. The assessee submitted a routine reply that Hari Om tally was prepared by some staff member to calculate the incentive to be distributed to the various staff member through leading staff person. The aforesaid contention of the assessee is not found acceptable as the same is routine in nature and without any basis. Therefore, the contention that these are not books of accounts and merely prepared by some staff members to calculate the incentive is just an afterthought to escape from the rigor of income tax. Moreover, the volume of transactions are huge, therefore the contention that this extensive, detailed and laborious exercise is not representing the real affairs and just prepared by some staff member only to calculate incentive is clearly unimaginable. Although the tally data so found in the name of "Hari Om" was con....
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....ured loan in Hari Om is nothing but assessee's own money shown in the garb of unsecured loans, source of which remains unexplained. As per seized tally data of M/s Hari Om as on 31.12.2014, unsecured loans is of Rs. 1,20,13,344/- whereas opening unsecured loans as on 01.01.2014 is of Rs. 1,34,53,241/-. 6.7 The balances escalated through cash not available out of withdrawals are surely unexplained. Examination of material seized during the search proceedings clearly reveals that in Assessment Year 2014-15, the total cash withdrawals were Rs. 7,50,000/- as against the cash introduction of Rs. 8,11,000/- leaving with unexplained increase in balance by Rs. 61,000/-. Therefore, the same is added to the total income of the assessee for A.Y. 2014-15. 6.8 Therefore, unexplained capital of Rs. 1,08,36,565/- (48622375- 7524239-24618559-5643011), opening unexplained capital in form of unsecured loan Rs. 1,34,53,241/- and Rs. 61,000/- cash received in excess of withdrawal remain unexplained, hence, the amount of Rs. 2,43,50,806/- (10836565+13453241+61000) is added to the total income of the assessee for A.Y. 2014-15. Penalty proceedings u/s 271(1)(c) of the Act is hereby ....
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....alance as of 31.12.2014, purportedly included profits for the entire period from 01.01.2014, to 31.12.2014. The data from "Hari Om" was fraught with errors and inconsistencies. The date chosen for the tally data, starting 01.01.2014, indicates that arbitrary figures were used, without a valid basis. 2. 1 Kindly refer CIT vs. H. S. Rathi (2015) 374 ITR 164 (Delhi): In this case, the court held that the addition made on the basis of inaccurate and incomplete data could not be sustained. The data used for the addition must be accurate and reliable for it to be considered valid. 2. 2 CIT vs. Smt. S. V. P. S. A. K. & Co. (2001) 251 ITR 646 (Kar): The court observed that the AO must apply his mind to the accounts and should not rely solely on discrepancies in incomplete data. The correctness of entries in the books of accounts needs to be verified in light of the entire evidence. 2.3 CIT vs. Calcutta Discount Co. Ltd. (1961) 41 ITR 191 (SC): The Supreme Court emphasized that any addition to income should be based on clear and cogent evidence and not on hypothetical or incomplete data. 2.4 CIT vs. M/s. D. S. S. Industries (2017) 400 ITR 568 (Cal): The c....
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....stricted to credits during the financial year under review. * CIT vs. Orient Trading Co. (2001) 248 ITR 258 (Cal): This judgment emphasized that S.68 deals with the unexplained credit entries for the current assessment year. It cannot be used to add amounts that were part of opening balances or carried forward from previous years. * We further rely the decision of Hon'ble Jurisdictional Jaipur Bench of ITAT in the case of DCIT Vs Alok Malpani in ITA No.334/JP/2022 vide order dated 08.12.2022. 3.3 In the present case, since the amounts of Rs.1,08,36,565/- (opening capital) and Rs. 1,34,53,241/- (unsecured loans) represent balances from earlier financial years. The addition of these amounts u/s 68 is therefore not permissible. Sec. 68 cannot be applied to opening balances, as it is intended to address unexplained credits appearing during the financial year under assessment. 3.4 Furthermore, the AO did not raise any issues regarding new unsecured loans taken during the year under consideration, and these were deemed genuine. Therefore, if there were any discrepancies or issues, they should have been addressed with respect to fresh credits introd....
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....jecting assessee's books of account by invoking the provisions of section 145(3), no separate addition can be made on account of cash credit u/s.68, even though the assessee has failed to discharge its onus of proof in explaining the amount shown in the books of account" 4.5 In Dulla Ram vs. CIT (2014) 42 taxmann.com 349 (P&H High Court): The court reaffirmed the principle that when the AO resorts to estimating profit after rejecting books of account, it encompasses all potential discrepancies, including unexplained credits. The estimation should be deemed sufficient to address the income and no additional separate addition under Section 68 is warranted unless clear evidence of unexplained credits is presented. 4.6 Once the AO has rejected the books of account u/s 145(3) and estimated the profit, such estimation should account for all discrepancies, including those related to unexplained credits. No separate addition u/s 68 is appropriate in this context unless specific and concrete evidence of unexplained cash credits is provided. The principles established in the cases of G. K. Contractor and Dulla Ram reinforce that the comprehensive estimation of profit pr....
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....e find no reason to differ from the opinion recorded by the Tribunal and, therefore, answer the questions of law against the revenue and in favour of the assessee. The appeal is, consequently, dismissed." 4.10 The Hon'ble ITAT, Delhi, in the case of Shri Deepak Mittal Vs. Asst. Commissioner of Income Tax, Circle-60 (1), New Delhi in ITA No. 4709/Del/2017 vide order dated 23.03.2018 held that: " The A.O. accordingly, rejected the books of account of the assessee under section 145(3) of the I.T. Act and after recasting the Trading & P & L A/c, made the addition of Rs. 4.14 crores on account of additional profit. The Ld. CIT(A), correctly noted that entire sales could not be profit of the assessee and that re-casting of the Trading & P & L A/c by the A.O. is not proper as per law. The Ld. CIT(A) has taken the purchases and sales in the appellate order and the difference of the same was taken as undisclosed profit of the assessee in a sum of Rs. 62,91,150/- which is almost same as offered by assessee @ 8% of undisclosed turnover. The assessee did not challenge the rejection of the books of account under section 145(3) and the addition made by Ld. CIT(A) above to t....
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.... already made under section 40A(3) of the I.T. Act. The Ld. CIT(A) did not give any specific notice to assessee for enhancement of income under section 68 of the I.T. Act because he has merely recorded entry of 8th June, 2017 without confronting the facts for making addition of peak credit. The Ld. CIT(A) forgot to consider that if he wanted to make addition on account of peak credit on account of M/s. Hanuman Traders, whether theory of peak credit would apply in the case of the assessee? For considering the issue of peak credit, the authorities below have to laid-out the foundation that it was unaccounted money of the assessee having both debit and credit which assessee did not agree. It could not be taken into consideration for making such addition under section 68 of the I.T. Act in the hands of the assessee for making any alleged transaction with M/s. Hanuman Traders, which, according to the authorities below, did not exist and that no such entries appear in the books of account of the assessee. Even if, some entries appeared in the books of account of the assessee regarding M/s. Hanuman Traders, according to the findings of the authorities below, such books of account of the a....
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.... flow of funds. This clearly indicates that the account is merely a notional record and does not reflect any real transfer of money or funds by the assessee to constitute any alleged unexplained capital. The nature of entries posted in the said account clearly highlights that opening balance is nothing but the amount lying accumulated in the account due to certain book entries passed without involving any actual flow of the funds, therefore, it cannot be construed as a basis for any addition under section 68 of the Income Tax Act. 9. Even otherwise, the opening amount punched in the tally were not indicating any actual balances or financial positions of the assessee. As the tally so maintained was full of errors are omissions, some of those instances are placed hereunder: (a) The accurate and correct quantification of closing stock is crucial in the preparation of the books of accounts, as it plays a direct role in the calculation of the overall profitability of a business. The value of closing stock impacts on the profit and loss statement, which, in turn, affects the balances in the capital account. Any discrepancies or errors in determining the closing stock ca....
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....under capital were not strictly capital accounts in the nature because the assessee being a proprietorship concern, only one capital account can be there and the same was Sanjay Karnani Person account maintained in the very same tally (enclosed in paper book at Page-10), thus finding of Ld.AO that Raghaw Karani account is capital account of assessee is unreasonable and contrary to the correct facts of the case. 10. As far as alleged opening loan of Rs. 1,34,53,241/- is concerned, the same consists of opening balance of alleged loan punched in the following names: 11. As submitted above, the data of Hari Om was full of error/omission and inconsistency and these arbitrary figures punched as at 01.01.2014 does not indicate any actual loan from the parties. The names listed above shows that these were accounts created in the name of family members and amounts have been shown therein by way of book entries. Certain accounts are towards expense payable to advocate, which is in fact in the nature of creditor. Similarly, Jain Vastralay is a supplier of clothes thus in the nature of sundry creditor. Similarly, Mahesh Mundhra account is also towards purchases made, thus not....
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....he rigor of income tax. Moreover, the volume of transactions are huge, therefore the contention that this extensive, detailed and laborious exercise is not representing the real affairs and just prepared by some staff member only to calculate incentive is clearly unimaginable. 5.4 A detailed perusal of tally data as well as submissions of the assessee, it is found that the tally data seized, which was maintained in the name of Jai Shree Ram represents real business picture of M/s Shri Ambica Garments. Although the tally data so found in the name of "Jai Shree Ram" was considered as the real books of accounts of the assessee but pointing out certain defects in the same, the alleged books of accounts were rejected u/s 145(3) and profits were estimated based by holding as under: 5.7 In view of aforesaid specific defects in the books of accounts, these books are not reliable or otherwise not capable of deducing the correct profitability of M/s Shri Ambica Garments, therefore, provisions of Section 145(3) are invoked and the books of assessee are hereby rejected. Since the books have been rejected, profits are to be estimated u/s 144 on the basis of best judgm....
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.... A.Y. 2014-15. Penalty proceedings u/s 271(1)(c) of the Act is hereby initiated for concealed the particulars of income. The assessee accepted loan of Rs. 52,16,133/- in cash is clear violation of provisions of section 269SS of the Act. Therefore, proposal of initiating of penalty proceedings u/s 271D for violation of provisions of section 269SS of the Act is being sent to the Joint Commissioner of Income Tax, Central Range- Jaipur. (Addition of Rs. 3,80,43,718/-) Submission: 1.1 Addition u/s 68 based on Tally Data with Various Discrepancies is Arbitrary: At the outset, it is contended that the addition of Rs. 3,28,27,585/- to the opening capital was made by the AO based on hypothetical and erroneous entries found in the tally data. The assessee has consistently explained that the tally data was a consolidated record created by the staff primarily for calculating staff incentives. This data was not intended to represent the true financial position of the business and contained numerous errors and inconsistencies. Specifically, entries had been inaccurately posted, some directly to the proprietor's account, and several outstanding balances were either un-pos....
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....he court ruled that if the data relied upon for making an addition is inconsistent and flawed, such additions cannot be sustained. 3. Opening Balance cannot be added u/s 68: 3.1 It is submitted that the AO made an addition of Rs. 3,28,27,585/- which is the opening balance of the capital and Rs. 52,16,133/- which is also an opening balance of unsecured loans. Ld.AO at Page-9, Para 6.1, Ld.AO has categorically held that opening balance of capital as on 01.04.2013, carried to 01.01.2014 was Rs. 3,28,27,585/- by holding as under: 6.1 The reply of the assessee has been examined. The assessee claimed balance of opening capital as on 01.01.2014 is Rs. 2,01,55,625/ -. On perusal of tally data it is clear that opening balance is Rs. 3,28,27,585/-, therefore, contention is factual incorrect and found not to be satisfactory. 3.2 The finding so rendered by the Ld.AO makes it evident that the said amount was opening balance of the alleged capital. Similarly at Page-9, Para 6.3 the opening balance of alleged unsecured loan has been taken by recording a similar finding reproduced hereunder: appearing in Jai Shree Ram and Shri Ambica Garments are the sa....
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....ressed with respect to fresh credits introduced during the current year, not with opening balances. 4. No addition u/s 68 when books of account are rejected: 4.1 Another crucial aspect to consider in this case is the principle that at the one hand, books of accounts have been rejected and on the other hand falling on the very same set of books to make the addition u/s 68. As submitted above, at Page- 4, Para-5.5 Ld. AO has pointed out the several defects in the books of accounts viz. not maintained financial year wise, not maintaining any stock records thus taking the stock value at the end of year on presumption only and any other deficiencies pointed out by the assessee and admitted by the Ld.AO and on the basis of these defects and deficiencies, the books of accounts were rejected u/s 145(3). 4.2 In the present case, the AO observed that all bank transactions related to purchases and sales were recorded both in the books of Shri Ambica Garments and Jai Shree Ram, including instrument numbers. Despite this, the AO relied on the tally data seized during the search proceedings to conclude that the assessee was involved in unaccounted sales and purchases. ....
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....ce that the comprehensive estimation of profit precludes additional, independent additions u/s 68. 4.7 A Similar view has been taken in the case of Malpani House of Stones Vs CIT (2003) 131 Taxman 470 (Raj HC). 4.8 A similar view has been taken by Hon'ble Punjab and Haryana High Court in the case of CIT Vs Aggarwal Engg. Co. (2008) 302 ITR 0246 wherein it was held that: "No separate addition on account of cash credit and on account of unexplained payments for purchases made outside the books can be made once the net profit rate is applied on contract receipts of an assessee for estimating his income from contract work". 4.9 The Hon'ble High Court, Punjab & Haryana in the case of CIT, Patiala Vs. Dulla Ram, Labour Contractor, Kotakpura vide order dated 22.10.2013 (Case-7) held that: "We have heard counsel for the parties, perused the impugned orders and are of the firm opinion that there is no illegality or infirmity in the findings recorded by the Tribunal. An Assessing Officer may, while considering a return of income, inspect the account books and, if satisfied, that account books do not reflect the true income of an a....
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....) and the addition made by Ld. CIT(A) above to the profit of the assessee. There is no challenge to these findings of the Ld. CIT(A) by the Department in the Departmental appeal because filing of Departmental Appeal not reported by Ld. CIT- D.R. Learned Counsel for the Assessee relied upon several decisions of different High Courts in which it was held that "when A.O. rejected the books of account of the assessee and applied gross profit rate on suppressed sales, A.O. cannot make separate addition on account of unexplained investment, undisclosed income and even the provisions of Section 40A(3) could not be invoked." 2.1 One of the decision of Hon'ble Allahabad High Court in the case of CIT vs. Banwari Lal Banshidhar (1998) 229 ITR 229 (Alld.) (HC) as reproduced above along with Judgments of Hon'ble Gujrat High Court in the case of President Industries and CIT vs. Samir Synthetics Mill (supra), the authorities below have also not found any material to indicate that assessee made investments outside the books of account to make the sales. The entire sales could not represent income of the assessee, on which, Ld. CIT(A), has already given a finding to add th....
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.... authorities below, such books of account of the assessee are not reliable. Therefore, the authorities below cannot rely upon the same entries in books of account for the purpose of making the addition of the nature of peak against the assessee. Thus, there is no justification for the authorities below to make addition of Rs. 6,92,25,000/- under section 40A(3) of the I.T. Act and addition of Rs. 7,12,15,150/- under section 68 of the I.T. Act. In view of the above discussion, we set aside the orders of the authorities below and delete both these additions. Ground Nos. 3 to 6 of the appeal of assessee are allowed." 5. Onus Discharged: Ld.AO has made the addition of Rs. 3,28,27,585/- shown as the opening balance of partner's capital u/s 68 of the Act considering the same as unexplained capital. Section 68 of the act casts a duty upon the assessee to explain the source of any sum found credited in the books of accounts. In the instant case, the assessee duly explained that the sum so found credited is the opening balance of partner's capital account, which is carried forwarded balance of earlier years, thus, although not admitting, the said amount denotes the amounts i....
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....nd in favour of the assessee. " (b) ACIT Vs Ambika Enterprises in ITA No.31/Del/2020 vide order dated 21.07.2023 (Delhi Trib) "6. We have carefully considered on both sides and perused the materials available on record. We find that in this case there is no ambiguity about the identity of the partner and capital introduced from him. In such circumstances if he AO was of the opinion that the amount is not proved in the hands of the partner, he should have considered it in his individual hands and not in the hands of the firm. This view is duly supported by Hon'ble Madhya Pradesh High court in the case of CIT vs. Metachem Industries 245 ITR 160. Hence, following the aforesaid precedents, we do not see any infirmity in the well reasoned order of the Ld. CIT(A), same is thereby upheld. " (c) We further rely upon the decision of India Rice Mills v. CIT 218 ITR 508, 511 (All. HC) wherein it was held that where the capital contributions are made by the partners, it is for the partners to explain the source of such capital contributions and if they fail to discharge such onus then such capital contributions, although entered in the books of accounts of the as....
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....placed at CIT Page 41-49 of Paper Book. (b) To substantiate the fact a chart was placed at CIT Page-52 to 60 of Paper Book wherein each entry of the partners capital account recorded in regular books of accounts of Shri Ambica Garments vis a vis respective entry in Jai Shree Ram is explained, duly evidencing the fact that Jai Shree Ram includes the entire books of Shri Ambica Garments. For an instance, in the ledger account of Shri Mahesh Kumar Mundra, on 30.07.2014 (CIT PBP-52) cash withdrawal of Rs. 26000/- is shown and on the very same date in the books of Jai Shree Ram, withdrawal of Rs. 2,00,000/- is shown which includes Rs. 26000/- also. (c) Moreover, in the books of M/s Shri Ambica Garments, a payment of Rs. 3,50,000/- has been made to M/s RM Hosery Jaipur on 05.03.2014 (CIT PBP- 61) through Kotak Mahindra Bank. In Jai Shree Ram, this payment has been wrongly debited in the ledger account of Shri Mahesh Kumar Mundhra (CIT PBP- 1). Similarly, Ambica Garments purchased a scooty of Rs. 60,000/- on 04.02.2015 for which payment was made through Kotak Bank account (CIT PBP-62). In the book of Jai Shree Ram, the same was wrongly debited in capital account of Shri ....
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....BP-36) (j) A donation payment of Rs. 1,00,000/- was made by the assessee firm on 15.01.2016 (CIT PBP-63), from Kotak Bank, however, in Jai Shree Ram, the same was wrongy debited to partners capital account of Ramesh Kumar Mundhra (CIT PBP-36). The aforesaid instances further goes on to show that Jai Shree Ram were full of error and not maintained systematically. 10. As far as alleged opening loan of Rs. 52,16,133/- is concerned, the same consists of opening balance of alleged loan punched in the following names: ANJU DEVI MUNDHRA 325562.00 ASHOK KUMAR KOTHARI 2162000.00 BHANWAR LAL KOTHARI 540500.00 Kiran Devi Kothari 23708.00 Kotak Bank Loan 256996.00 Ramanarayan Ji Kothari Surat 26443.00 SHARMILA DEVI MUNDHRA 92282.00 SHYAM SUNDER JAWAR 1527000.00 SURJA DEVI MUNDHRA 261642.00 11. As submitted above, the data of Jai Shree Ram was full of error/omission and inconsistency and these arbitrary figures punched as at 01.01.2014 does not indicate any actual loan from the parties. The same is evident from the fact that loan taken from Kotak Bank Loan is also included in the same at Rs. 2,56,996/- .Na....
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....ening capital, unsecured loans, creditors, and profit & loss statements. In response, the assessee submitted a reply on 12.04.2021, indicating that during the search, Shri Ramesh Kumar Mundhra was confronted with these loose papers. He stated in response to Q. 33 from his statement recorded on 02.10.2018, that M/s. Race Kids Wear, Delhi, and Gopala Garments do not belong to him. He claimed these businesses belong to his relatives, who were new to business and only offered assistance without expecting anything in return. Shri Mundhra's statements were accepted during the search without objections or follow-up questions. Additionally, no other evidence was found during the search to link these firms to the assessee or its partners. Importantly, no digital data or other materials related to Gopala Garments and Race Kids Wear were found, apart from the contested profit and loss statements. However, the AO reviewed the response and rejected the assessee's claim, stating that since the documents were found in the assessee's possession, it did not prove they did not belong to him. The AO also argued that the affairs of Gopala Garments and Race Kids Wear were ....
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....iness does not automatically confer ownership or accountability for its financial outcomes. 3.2 The aforesaid contention is further evident from the fact that the seized documents were not found at the business premises of assessee rather it was found at the residential premises of a partner. Moreover, the name of entity/business shown in the seized document also shows the address of Delhi and not of Jodhpur or any other place related to assessee or its partners. It is further important to peruse the nature of expenses shown in the seized alleged profit and loss account. A bare perusal thereof clearly shows that most of the expenses are ni 3.3 More importantly, a perusal of the seized alleged profit and loss accounts shows that most of the expenses are in the nature of manufacturing expenses such as factory rent, master salary, kajubutton etc, whereas during the course of search, no such business was found to indicate that assessee was engaged in any such activity. This further bind force to the contention of the assessee that these papers does not belong to the assessee, therefore, no adverse view may kindly be taken in the hands of the asseseee on the basis of t....
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....ased on loose or unverified documents are insufficient for tax purposes. 5. Absence of Corroborative Evidence: The assertion that M/s Gopala Garments and M/s Race Kids Wear are related to the assessee lacks any corroborative evidence beyond the loose papers that were seized. This absence of reliable documentation is a critical factor in assessing the legitimacy of the claims made by the tax authorities. The loose papers in question do not constitute credible evidence that can be used to link the firms to the assessee. Relying solely on these documents undermines the integrity of the assessment process. Tax assessments must be supported by concrete evidence, which has been established in several judicial precedents. In the landmark case of CIT vs. Ashoka Iron Works (2021) 121 taxmann.com 159 (Raj.), the court emphasized that any additional assessments must be grounded in credible and substantiated evidence rather than conjecture or assumptions. The Hon`ble Court made it clear that mere presumption, without solid proof, cannot justify the addition of income. This ruling underscores the principle that the burden of proof lies with the tax authorities to demonstrate a....
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....s could already be accounted for in the consolidated accounts of Jai Shri Ram. 7.2 The ITAT, in M/s Ambica Textiles vs. ITO (2023) ITA No. 1234/JP/2023, reinforced the principle that consolidated financial records must reflect the entirety of business operations. The tribunal held that any transactions related to subsidiary brands should be included within the parent company's financial statements. This aligns with standard accounting practices and tax regulations, which require clear and comprehensive reporting of all financial activities. 7.3 The absence of supporting digital data or additional documentation raises doubts about the connection between the assessee and the alleged income from Gopala Garments and Race Kids Wear. Without concrete evidence linking these firms to the assessee, any assumptions made regarding their relationship to M/s Ambica Garments should be approached with caution. 8. Double addition: The AO asserts that Gopala Garments and Race Kids Wear are not independent entities but rather operational units of M/s Ambica Garments. This characterization carries significant implications for the assessment of income and taxation. Given....
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....books of account for the current financial year, and not for balances carried forward from previous years. * Kindly refer CIT vs. H.S. Rathi (2015) 374 ITR 164 (Delhi): The Delhi High Court held that additions u/s 68 must be made for credits appearing during the year under consideration. The court clarified that opening balance, which are carried forward from previous years, cannot be subject to additions u/s 68. * CIT vs. G. K. K. Enterprises (2002) 257 ITR 371 (Guj): The Gujarat High Court ruled that S.68 pertains only to unexplained credits introduced during the year and not to opening balances. The addition u/s 68 should be restricted to credits during the financial year under review. * CIT vs. Orient Trading Co. (2001) 248 ITR 258 (Cal): This judgment emphasized that S.68 deals with the unexplained credit entries for the current assessment year. It cannot be used to add amounts that were part of opening balances or carried forward from previous years. * We further rely the decision of Hon'ble Jurisdictional Jaipur Bench of ITAT in the case of DCIT Vs Alok Malpani in ITA No.334/JP/2022 vide order dated 08.12.2022. Hence the addit....
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....g. Works, (2022) 431 ITR 53 (Raj), the Rajasthan High Court held that reliance on preliminary or rough data for assessment purposes is not justifiable unless it is supported by concrete evidence. The court emphasized that such data must be treated with caution and corrected to reflect the true financial status. 1.3 The assessee's contention that the data was intended for incentive calculation rather than accurate profit determination is supported by the fact that various entries were either incorrectly posted or not posted at all. The Tally data, including numerous journal entries that do not accurately reflect income, receipts, or payments, further corroborates the claim that this data is not suitable for income determination. Kindly refer CIT vs. M/s. Star International, (2023) 438 ITR 88 (Raj), the Rajasthan High Court similarly highlighted that data prepared for internal purposes and not subjected to rigorous checks cannot be used as a definitive record for income assessment. 2.1 The AO's reliance on incomplete and rough data for making substantial additions, without providing corroborative evidence of undisclosed sales or transactions, is legally flaw....
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....s and contravenes established legal standards. Kindly refer CIT vs. J.D. Pharmaceuticals (2004) 271 ITR 84 (Bom) held that suspicion alone cannot replace reality in the assessment process. The AO must provide substantial and factual evidence to justify any additions or adjustments. The reliance on mere suspicion or conjecture is insufficient for making valid adjustments to a taxpayer's income. 3.2 In CIT vs. Smt. Kalpana S. Bansal (2016) 381 ITR 451 (Raj) held that the AO's reliance on suspicion without concrete evidence did not justify the income additions. The Court emphasized that fair assessment requires substantiation with credible evidence rather than relying on mere suspicion. 4.1 In the present case, the AO's reliance on Tally data, which was preliminary and not a complete reflection of the financial position, exemplifies a reliance on suspicion rather than factual evidence. The data was intended for internal purposes, such as calculating staff incentives, and contained numerous inaccuracies and incomplete entries. 4.2 The AO failed to consider the detailed and audited accounts maintained by the assessee, which were complete and reflec....
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....legations of income suppression. The AO's failure to provide substantial and direct evidence of suppressed sales undermines the validity of the additions made. 5.6 The legal precedents established by the Rajasthan High Court and ITAT emphasize that any claim of suppressed sales or income must be supported by direct and cogent evidence. The reliance on incomplete or preliminary data, such as Tally data, without verifying the authenticity of transactions and without substantial evidence, is inadequate for making valid income additions. The assessment order in this case, based on such incomplete data and lacking direct evidence, should be reconsidered, and the additions made should be quashed. On Merit: Alternately on Merits 6. Fair Estimation Required - Legal Position: 6.1 It is further submitted that once the AO rejects the accounts and invokes S.145(3), the subsequent task is to estimate the income fairly. However, this does not give the AO unfettered discretion to make arbitrary or unjustified income estimates based on the deficiencies identified in the books of accounts. 6.2 The rejection of books of accounts u/s 145(3) necessitate....
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....estimation process. 7.3 It is further important to note that Ld.AO has not pointed out any defect in the regular books of accounts of the assessee, still an exorbitant GP rate of 12.15% has been applied, thus the action of Ld.AO has resulted into estimating the already GP shown at 12.15% as well as estimating the GP on the basis ofseized material at the same rate. The said action and approach are contrary and deserves to be quashed. 7.4 Alternatively and without prejudice to the above and without admitting contrary, it is further submitted that even otherwise, the profit which is to be brought to tax shall be Net Profit instead of Gross Profit. Once it is an admitted fact that Jai Shree Ram is the consolidated affairs of the assessee, the addition should be of net profit and not the gross profit. The net profit rate as per the "Jai Shree Ram" is as under: AY 2015-16 AY 2016-17 AY 2017-18 AY 2018-19 AY 2019-20 NP % AS PER JAI SHREE RAM 7.80 7.14 5.79 6.30 4.72 7.5 Given the above facts, circumstances and the relevant case laws, the AO's estimation of income lacks legal and factual support. It is based on arbit....
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....mportance of considering historical data in assessments. 9.4 In the current scenario, the assessee declared sales amounting to Rs 6,98 Crores, which marks a substantial increase compared to Rs-6.47 Crores in the FY 2014-15 and Rs. 4.74 Crores in FY 2013-14. Despite this growth, the gross profit rate was reported at 10%, slightly lower than the previous year's GP of 10.40%. It is widely acknowledged that in order to increase sales, businesses may have to adjust their pricing strategies, which can affect the GP percentage. The following table illustrates the GP performance over the past five years: SHRI AMBIKA GARMENTS FY- 2011-12 FY- 2012-13 FY- 2013-14 FY- 2014-15 FY- 2015-16 GROSS PROFIT 37,59,981 46,17,942 54,74,247 67,36,284 69,79,710 PROFIT BEFORE INTEREST AND REMUNERATION TO PARTNERS 16,80,920 20,46,793 23,13,069 25,97,565 19,64,218 SALES 3,86,53,312 4,19,05,087 4,74,26,465 6,47,90,957 6,98,02,791 GP % 9.73 11.02 11.54 10.40 10.00 A review of this data indicates that while the GP percentage in FY 2013-14 was 11.54% on sales of Rs 4.74 Crores, the substantial....
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....be the cornerstone for any assessment of income. 11.5 The choice of an arbitrary gross profit rate of 12.15% lacks justification when compared to the actual gross profit rates declared by the appellant in previous years. As demonstrated in the provided financial performance table, the gross profit rates for prior years show a consistent trend that is more reflective of the appellant's actual business operations. The significant jump to a 12.15% estimate appears to be a deviation without any supporting rationale or evidentiary backing. Sanjay Kumar Karnani: Facts: During the course of search, some data was found, including tally records and loose papers, showing transactions in the name of a concern M/s Hari Om. The assessee explained that the tally data for Hari Om was a consolidated record that included transactions from Shri Ram Enterprises. This data was prepared by staff mainly to calculate staff incentives, wherein a random date of 01.01.2014 was picked and entries were made. The assessee claimed that many entries were recorded incorrectly, which led to inaccurate profit calculations. Specifically, some entries were made directly to the ....
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....urt similarly highlighted that data prepared for internal purposes and not subjected to rigorous checks cannot be used as a definitive record for income assessment. 2.1 The AO's reliance on incomplete and rough data for making substantial additions, without providing corroborative evidence of undisclosed sales or transactions, is legally flawed. The AO's view that the data is a mere afterthought to evade tax obligations does not hold, as it lacks substantial evidence. The claim that all bank transactions were accurately recorded in both Shri Ram Enterprises and Hari Om accounts does not negate the need for complete and verified data. Kindly refer CIT vs. Jindal Steel & Power Ltd. (2023) 436 ITR 112 (Raj), the accuracy of data must be established through proper verification and not merely assumed based on volume or matching bank transactions. 2.2 The presence of numerous family member accounts and the rough nature of the Tally data highlight that the data was not subject to proper scrutiny or validation. More importantly, the tally data was not containing any inventory details. The stock at the end of each financial year was not present. The Rajasthan High ....
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....l position, exemplifies a reliance on suspicion rather than factual evidence. The data was intended for internal purposes, such as calculating staff incentives, and contained numerous inaccuracies and incomplete entries. 4.2 The AO failed to consider the detailed and audited accounts maintained by the assessee, which were complete and reflected actual transactions. The reliance on incomplete and inaccurate Tally data, without corroborative evidence, exemplifies an approach based on suspicion rather than reality. 4.3 The principles established by the aforementioned case laws underscore that suspicion alone cannot replace reality in tax assessments. The AO must base any additions or adjustments on substantial and factual evidence. Given the reliance on incomplete and preliminary data in the present case, the assessment lacks the necessary evidential support and should be deemed invalid. 5. No Evidence of suppressed sales except Tally Data: 5.1 It is further submitted that in tax assessments, the burden of proof lies with the AO to demonstrate that there has been income suppression or understatement of sales. Mere reliance on incomplete or prelimina....
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....e AO rejects the accounts and invokes S.145(3), the subsequent task is to estimate the income fairly. However, this does not give the AO unfettered discretion to make arbitrary or unjustified income estimates based on the deficiencies identified in the books of accounts. 6.2 The rejection of books of accounts u/s 145(3) necessitates that the AO make a fair and reasonable estimation of income. This process requires the AO must make an honest estimation of income based on material available on record, including the past history of the case and any local knowledge relevant to the assessee. The AO is also expected to gather and consider necessary material to support the estimation if required. 6.3 The powers u/s 145(3) do not grant the AO the liberty to arrive at any figure they deem fit. The estimation must be fair and justifiable, taking into account the evidence and facts of the case. Kindly refer Jotram Shershing vs. CIT (1930) 2 ITR 119 (All): This case emphasizes that once the accounts are rejected, the AO must make a fair and reasonable estimate of income. Arbitrary and capricious estimations are not permissible. The estimation must be based on credible materia....
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....rcumstances and the relevant case laws, the AO's estimation of income lacks legal and factual support. It is based on arbitrary assumptions rather than a fair and reasonable assessment of the actual income. Therefore, the estimation made by the AO should be considered invalid, and the additions made on this basis should be quashed. 8. Legal Position: It is respectfully submitted that the invocation of S.145 does not grant unfettered discretion to the AO to arbitrarily assess income. The AO is required to conduct a fair and honest estimation based on the available materials, the past history of the case, local business practices, and the reputation of the taxpayer. In this regard, the AO must collect and analyze relevant data as necessary. The law is clear that any estimation that is arbitrary, capricious, or wild is impermissible. The provisions u/s 144 which deals with the best judgment assessment align closely with those u/s 145. Judicial precedent reinforces that the AO is expected to engage in a careful evaluation of all direct and indirect evidence when estimating income. Notably, in the present case, it is apparent that the AO has failed to adhere to the....
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....while potentially subject to scrutiny, is part of an internal accounting process and not intended for external assessment. The complete, audited accounts accurately reflect actual transactions and should be respected in the assessment process. 11.1 In the present scenario, the AO estimation of Rs 1,72,39,251/- based on an average gross profit rate of 10.09% appears not only arbitrary but also unsupported by cogent material. This estimation lacks a solid foundation in the facts of the case and the applicable legal standards. 11.2 The AO's decision predominantly hinges on incomplete Tally data, which should not be considered a reliable basis for estimating gross profit. Tally software often serves as an internal accounting tool, designed for preliminary record- keeping and operational management rather than final reporting. The reliance on such incomplete data raises significant concerns regarding the accuracy and reliability of the figures derived from it. In many cases, such preliminary data is not intended for external review and can lead to misleading conclusions. 11.3 Furthermore, the AO has seemingly disregarded the detailed and audited accounts m....
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....x Audit Report in Form 3CB for AY 2017-18 70-89 11. Copy of Financial Statements for AY 2017-18 90-96 12. Copy of ITR along with Computation for AY 2018-19 97-98 13. Copy of Tax Audit Report in Form 3CB for AY 2018-19 99-111 14. Copy of Financial Statements for AY 2018-19 112-120 15. Copy of ITR along with Computation for AY 2019-20 121-121 16. Copy of Tax Audit Report in Form 3CB for AY 2019-20 122-134 17. Reply filed before AO on 12-04-2021 135-163 18. Reply filed before AO on 15-07-2021 164-165 19. Additional Written Submissions filed before CIT(A) for AY 2014-15 on 11-11-2024 166-169 20. Written Submissions filed before CIT(A) for AY 2014-15 170-185 21. Written Submissions filed before CIT(A) for AY 2015-16 on 10-10-2024 1861 95 22. Written Submissions filed before CIT(A) for AY 2016-17 on 10-10-2024 196-221 23. Written Submissions filed before CIT(A) for AY 2017-18 on 15-10-2024 222-243 24. Written Submissions filed before CIT(A) for AY 2018-19 on 15-10-2024 244-260 25. Written Submissions filed before CIT(A) for AY 2019-20 on 15-10-2024 261....
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.... 15.05.2024 71-78 5. Delhi ITAT in ACIT Vs Ms Ambika Enterprises in ITA No.31/De1/2020 vide order dated 21.07.2023 79-85 6. Delhi ITAT in Deepak Mittal Vs ACIT, Circle-60(1) Delhi in ITA No. 4709/Del/2017 vide order dated 23.03.2018 87-109 7. Punjab and Haryana High Court in CIT Vs Dulia Ram (2024) 223 Taxmann 24 110-113 8. CIT Vs GK Contractor (2009) 19 DTR 305 (Raj HC) 114-116 9. India Rice Mills Vs (1996) 218 ITR 508 (Allah. HC) 117-119 28. Delhi ITAT in ITO Vs Zexus Air Services P Ltd in ITA No. 2608/De1/2018 vide order dated 23.04.2021 120-143 29. Malpani House of Stones Vs CIT (2017) 395 ITR 385 (Raj HC) 144-149 . 12. CIT Vs Metachem Industries (2000) 245 ITR 160 (MP) 150-153 13. ITAT Mumbai in Nickunj Eximp Enterprises P Ltd in ITA No. 1822/Mum/2021 vide order dated 23.11.2022 154-189 10. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the addition made in assessment order was challenged on the legal argument as well as on the merits of the case. Relying on the various High Court Judgement and page 269 of the paper book that the approv....
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....ision of Apex Court in the case of 150 taxmann.com 263 in the case of Tirupati Buildings and Offices P. Ltd on the legal ground taken by the assessee. She also submitted that approvals accorded by JCIT, Central Range, Jaipur are in accordance with law, there is no merit in the contention raised by Ld.AR for the appellant. She further argued that assessment proceeding is a continuous process and is completed under the active guidance and monitoring/supervision of JCIT. It is not a matter of application of mind in few days. 12. In the rejoinder to the ld. DR submission the ld. AR of the assessee submitted that the assessee once it is clear on the part of the revenue that the capital is treated as opening capital the same cannot be added in the year under consideration. As regards the decision relied upon by the ld. DR are on different facts and the view he has advanced were confirmed as much as seven High Courts as referred in the judgment paper book filed. On the arguments of the ld. DR about the process of approval no evidence were placed on record in this case and his case is covered on the various High Court Judgment and even by the Apex Court in the case of CIT vs. Serajuddin....
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....), that approval must be granted separately for each assessment year. Hon'ble Delhi High Court in PCIT vs. MDLR Hotels (P) Ltd [2024] 166 taxmann.com 327 (Del HC) and in PCIT vs. Shiv Kumar Nayyar [2024] 163 taxmann.com 9 (Del HC) quashed approvals granted in bulk for multiple assessments without application of mind. These judgments reinforce the principle that approval under Section 153D is not a mere administrative ritual but a substantive safeguard, which must be exercised judiciously for each assessment year independently. That view was also consistently followed by the various benches of the ITAT for which reference was made to the decision of ITAT Delhi Benches in Harish Bajaj vs. DCIT, ITA No. 2218 to 2223/Del/2023 and Wave Industries Pvt. Ltd. vs. DCIT ITA 5241/Del/2015, ITAT Pune in Santosh Subhashappa Mukta vs. DCIT, ITA 18,19 & 20/PUN/2021, where assessments framed on the basis of mechanical approvals u/s 153D were held to be invalid and quashed. The bench noted that as regards the contention of non-application of mind by the approving authority, at the outset, we note that the Hon'ble Orissa High Court in its judgment in the case of ACIT vs. Serajuddin& Co. (202....
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....he Hon'ble High Court. The same is reproduced herein below : " Delay condoned. Having regard to facts and circumstances of the case, we are not inclined to interfere in the matter. The Special Leave Petition is dismissed. Pending application(s) shall stand disposed of." During the course of hearing, ld. AR of the assessee further brought a decision of Hon'ble Delhi Tribunal in the case of Shri Dheeraj Choudhary VS ACIT in ITA No. 6158-6160/Del/2018 vide order dated 12.09.2025, wherein this issue was referred to the consideration of Hon'ble Third Member and outcome has been given in the favour of assessee. Since the facts of the case on hand and the facts of the case laws as cited herein above on being consistent with the legal precedent of the case laws of the Hon'ble Supreme Court, the Hon'ble High Courts, and consistently applied by the coordinate benches of the Tribunal, we hold that the approval granted u/s 153D in the present case was accorded in a mechanical and consolidated manner, without due application of mind and without separate consideration of each assessment year. Such approval being invalid, the consequential assessment orders fram....
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....d tally data as real affairs of the assessee, however, looking into the fact that said data is not maintained financial year wise and stock records are not maintained coupled with various errors and inconsistencies, assessee himself admitted, the tally data can be considered as not reliable and liable to be rejected u/s 145(3) of the Act. On the basis of these tally data figures, trading results have been estimated by way of making addition on account of unrecorded Gross profits along with additions of capital and unsecured loans as appearing on 01.01.2014. While appeal before CIT(A), Ld.CIT(A) given the partial relief for the amounts already recorded in regularly maintained books of accounts and confirmed the remaining addition for which appellants are before us. 17. While hearing of the appeal the assessee filed a detailed submission which is extracted here in above. From that we note that the following written submissions in ITA No. 671/JP/2025: "Facts: The AO observed that during the search proceedings, the first balance sheet for the period from 01.01.2014, to 31.12.2014, of the firm M/s Hari Om, which was seized, indicated a Prop. capital of 1,08,36,565/- and unse....
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....funds, disguised as unsecured loans, with no satisfactory explanation of their source. The seized tally data showed unsecured loans of Rs. 1,20,13,344/- as of 31.12.2014, compared to an opening balance of Rs. 1,34,53,241/- as of 01.01.2014. As a result, the AO made an addition of Rs. 2,43,50,806/- to the assessment on account of unexplained opening capital and unsecured loans by holding as under: 6.3 The assessee contented that the capital balance appearing in the regular books of accounts of Shri Ram Enterprises should be reduced from the opening capital balance as per 'Hari Om'. The same is not found acceptable as capital appearing in regular books of accounts of Shree Ram Enterprises is not having the similar balance as appearing in 'Hari Om' and also entries in the account are not matching. 6.4 Vide Notice u/s 142(1) dated 05.01.2021, the assessee was asked to give explanation with respect to Unsecured Loans of Rs. 1,20,13,344/- appearing as on 01.01.2014, in response to which assessee made the submission reproduced as above. The submission made by the assessee is not acceptable because the assessee is to prove the identity, creditworthiness an....
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....ect in all respects. On the issue of addition of Rs. 1,08,36,565/- to the opening capital made by the AO based on the tally data, the assessee has consistently explained that the tally data was a consolidated record created by the staff primarily for calculating staff incentives. This data was not intended to represent the true financial position of the business and contained numerous errors and inconsistencies and this fact is accepted by the ld. AO. Specifically, entries had been inaccurately posted, some directly to the proprietor's account, and several outstanding balances were either un-posted or not properly written off. Therefore, the tally data was essentially a rough draft and lacked reliability for accurately determining income. As is evident that the assessee maintains comprehensive books of accounts, including a cash book, ledger, sales journal, purchase journal etc. All transactions, including purchases, sales, and expenses, are fully vouched and verifiable. These accounts were subjected to a tax audit, which confirms their accuracy. The AO, however, did not point out any defects in these regular accounts, nor were there any additions based on the regular accounts.....
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....e reduced is unacceptable in the absence of evidence to prove that the parties of unsecured loans appearing in Hari Om and Shree Ram Enterprises are the same. In view of this, it is clear that amount shown as unsecured loan in Hari Om is nothing but assessee's own money shown in the garb of unsecured loans, source of which remains unexplained. As per seized tally data of M/s Hari Om as on 31.12.2014, unsecured loans is of Rs. 1,20,13,344/- whereas opening unsecured loans as on 01.01.2014 is of Rs. 1.34.53.241/-. 21. It is a well-established principle of law that opening balances cannot be added to income u/s 68 of the Act. This provision is specifically designed to address the issue of unexplained credits in the books of account for the current financial year, and not for balances carried forward from previous years. This issue is decided in the case of CIT vs. H.S. Rathi (2015) 374 ITR 164 (Delhi): The Delhi High Court held that additions u/s 68 must be made for credits appearing during the year under consideration. The court clarified that opening balance, which are carried forward from previous years, cannot be subject to additions u/s 68. Similarly, in the case of CIT vs....
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....roof concerning amounts shown in the books of account. This principle is established in several judicial precedents as held by our Rajasthan High Court in the case of CIT Vs. G.K. Contractor 19 DTR 305 (Raj) wherein the Hon'ble Jurisdictional High Court held that when net profit is estimated by the AO by rejecting the book result u/s 145(3) of the Act, no separate addition can be made on account of cash creditor the finding reads as under: "AO having estimated the profit by applying a higher net profit rate to total contract receipts after rejecting assessee's books of account by invoking the provisions of section 145(3), no separate addition can be made on account of cash credit u/s.68, even though the assessee has failed to discharge its onus of proof in explaining the amount shown in the books of account" From the decision compilation as serviced by the assessee by relying in the case of Dulla Ram vs. CIT (2014) 42 taxmann.com 349 (P&H High Court) we note that Hon'ble High court reaffirmed the principle that when the AO resorts to estimating profit after rejecting books of account, it encompasses all potential discrepancies, including unexplained credits.....
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....2017. Over the span of these four years, the account solely consists of book entries, with no evidence of any actual flow of funds. This clearly indicates that the account is merely a notional record and does not reflect any real transfer of money or funds by the assessee to constitute any alleged unexplained capital. The nature of entries posted in the said account clearly highlights that opening balance is nothing but the amount lying accumulated in the account due to certain book entries passed without involving any actual flow of the funds, therefore, it cannot be construed as a basis for any addition under section 68 of the Income Tax Act. The bench also noted the opening amount punched in the tally were not indicating any actual balances or financial positions of the assessee. As the tally so maintained was full of errors are omissions, some of those instances as pointed out in the written submission which was not controverted are as under : (a) The accurate and correct quantification of closing stock is crucial in the preparation of the books of accounts, as it plays a direct role in the calculation of the overall profitability of a business. The value of closing st....
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....n in the Hari Om (f) The aforesaid instances further go on to show that Hari Om data was full of error and not maintained systematically and accounts classified under capital were not strictly capital accounts in the nature because the assessee being a proprietorship concern, only one capital account can be there and the same was Sanjay Karnani Person account maintained in the very same tally (enclosed in paper book at Page-10), thus finding of Ld.AO that Raghaw Karani account is capital account of assessee is unreasonable and contrary to the correct facts of the case. So far as alleged opening loan of Rs. 1,34,53,241/- is concerned, the same consists of opening balance of alleged loan punched in the following names: Closing Balance Credit Ajit Ji Advocate 967832.00 Jain Vastralaya 3628051.51 MAHESH JI MUNDHRA 5643011.00 Milan Rathi 413020.00 Narayani Bhuva Ji 50855.00 RENU KARNANI 1043552.38 RITIKA KARNANI 272819.18 Sapna Karnani 1185157.55 Sharda Devi Karnani 157305.00 SUMAN BAJAJ 40054.00 SURESH JI SWAMI 51583.00 Grand Total 1,34,53,240.62/- From the submission made we no....
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....n no separate addition for these is required as Jai Shree Ram is the consolidated data and no such incriminating and corroborative evidence was found to suggest that these documents have any standalone existence. On this issue the ld. AR of the assessee submitted that while search proceedings, several loose papers were discovered at the residential premises of Shri Ramesh Kumar Mudhra, located at H/3 - Mahamandir, Nathji Ka Asan, Outside Second Pole, Jodhpur. Among these documents was a page titled "M/s. Gopala Garments," covering the period from 01.01.2016 to 31.12.2017. This document was seized and is recorded as Exhibit-17 of Annexure-AS (Party No. A-1) whose image reads as under : Similarly, during the course of search several loose papers were discovered at the residential premises of Shri Ramesh Kumar Mudhra, located at H/3 - Mahamandir, Nathji Ka Asan, Outside Second Pole, Jodhpur. Among these documents were pages titled "M/s. Race Kids Wear, Delhi," which pertained to the financial activities and transactions for the period from 01.01.2016 to 31.12.2017. These documents were seized and are officially recorded as Exhibit-17 of Annexure-AS (Party No. A-1). For reference....
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....cannot be relied upon as a standalone source for assessing the financial performance of the business. Therefore, these points, it is clear that the seized Tally data cannot serve as a reliable basis for any financial conclusions regarding the assessee's income. Proper documentation and verifiable records are essential for ensuring fair and accurate tax assessments. Revenue also not proved that the assessee or that of the family members really operates the firm M/s Race Kids Wear, Delhi, or Gopala Garments. Instead, these businesses are owned by his relatives, who are relatively new to the business. The assessee contended that these relatives sought his assistance in their ventures, but did so without any expectation of compensation or ownership interest. The principle of actual ownership is critical in tax assessments, particularly when attributing income or liabilities to an individual. The law requires clear evidence of ownership and control over a business entity to hold someone accountable for its income or obligations. In the case of CIT vs. Suman Gupta (2022), the Rajasthan High Court underscored the necessity for tax authorities to establish a direct connection between a....
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....the existence of these credit entries during the relevant assessment year. The absence of supporting documentation raises significant doubts about the validity of the alleged unsecured loans. During the search, no additional evidence was discovered that could confirm the entries in the loose papers. According to established tax principles, any assertion of income or liabilities must be backed by credible and corroborative evidence. As highlighted in the decision of the co-ordinate bench Jaipur's decision M/s Hari Om Enterprises vs. ITO (ITA No. 1234/JP/2023), the tribunal clearly stated that findings based on unverified documents cannot form the basis for tax assessments. The bench further noted that such uncorroborated evidence fails to meet the necessary standards for establishing financial transactions. Even the Delhi High Court in the case of CIT vs. S. K. Sinha (2020) 115 taxmann.com 470 (Delhi), held that the Income Tax Department cannot rely solely on loose papers without any corroborative evidence to justify additions to an assessee's income. The court emphasized that the integrity of financial records is crucial and that any assertions made based on loose or unveri....
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....cient or corroborative evidence. We also note that no digital data or supporting materials were discovered during the search that could substantiate this claim. As argued by the ld. AR of the assessee that the contention of the ld. AO was that M/s. Gopala Garments and M/s. Race Kids Wear are not independent entities but rather operational units of M/s Ambica Garments. This characterization carries significant implications for the assessment of income and taxation. Given this relationship, the consolidated financial affairs of Ambica Garments are already reflected in the financial statements of Jai Shri Ram. Since any profits generated by Gopala Garments and Race Kids Wear are included within the overall profits reported by Jai Shri Ram, it follows that any attempt to add these profits to the assessee's income would constitute double taxation as held in the case of CIT vs. S. K. Gupta (2019) 106 taxmann.com 268 (Delhi High Court). In this case, the High court emphasized that duplicative assessments, which result in double taxation of the same income, are not permissible under tax law. The Delhi High Court highlighted the importance of preventing the imposition of additional tax ....
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.... 29,44,801.00 Discount Recevd 3.031.00 Dying 1.16.854.00 Elastic 54,370.00 Closing Stock 23,95,000.00 Embordary & Print 1.75.231.00 Kajbution 1,25,100.00 Labour Payment 15,80.733.00 Master 1,50.298.00 Material 4,47.509.00 Overlock 43,372.00 Press Man 2,14,324.00 Teen Silai. 37,000.00 Gross Profit c/o 22,09,391.00 1,35,90,389.00 1,35,90,389.00 Indirect Expenses 11,96,621.00 Gross Profit b/f 22.09.391.00 Depreciation 16.696.00 Factory Elecirycity 1.44,000:00 Factory Rent 2.16,000.00 Indirect Expenses 18,949.00 Interest on Capital 2.78,472.00 Janerater & Desile 11,260.00 Machine Repair 31.090.00 Other Expenses 70,835.00 Staff Salary 4,09,319.00 Nett Profit 10,12,770.00 Total 22.09,391.00 Total 22.09.391.00 Document 5 Gopala Garments(1-1-2015/31-12-2015) Delhi Balance 1-Jan-2017 to Sheet 31-Dec-2017 55 Liabilities as at 31-Dec-2017 Assets as at 31-Dec-2017 Capital Account 51,99,951.00 Fixed Assets 1.44,708.00 Dev Gattani 25.41.912.00 Machinery 1,44,708.00 Maheshji Mundnra 13.29.020.00 Ramoshj Mundhra 13.29,019.00 Current Assets 68,50,665.....
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....en Selai Machine Exp 10,235.00 Gross Profit clo 52,02,971.00 4.01.40,148.00 4,01,40,148.00 Indirect Expenses 28,98,897.00 Gross Profit bif 52.02.971.00 27,620.00 Depreciation Factory Electricity 1.40,230.00 Factory Rent 3,77,000.00 Indirect Expenses 71,230.00 Interest on Capital 7.63.301.00 Interest on Loan 2.23,584.00 Janarater & Diesel 22,720.00 Machine Repair 45.653.00 Other Expenses 69.279.00 Other Staff Salary 7,85.550.00 Packing Charges 2.27,980.00 Traveling Exp 1,44,750.00 Nett Profit 23,04,074.00 Total 52,02,971.00 52.02.971.00 Total Document 8 RACE KIDS WEAR DELHI Profit & Loss A/c 1-Jan-2016 to 31-Dec-2016 34 Particulars 1-Jan-2016 to 31-Dec-2016 Particulars 1-Jan-2016 to 31-Dec-2015 Opening Stock 45,90,000.00 Sales Accounts 3,44,46,193.00 Closing Stock 45.90.000.00 Clothes Sales 20,83,136.00 Cutting 32.55.959.00. Purchase Accounts 2,25,95,056.00 Purchase Retum (-)1.62,570.00 Goods Purchas 50.62.419.00 Sales 3.16,19,175.00 Label & Boxes 8. 44.634.00 Trade Discount (-)23,49,507.00 Purchase 1.59.84,734.00 Sales Retum (-)2.96,731.00....
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....0.00 Indirect Expenses 56,750.00 Interest on Capital 7,68,155.00 Interest on Loan 1.58.231.00 Intrest on Commati 38.560.00 Janarater & Diesel 10,092.00 35.870.00 Machine Repair Other Expenses 1.17,914.00 Other Staff Salary 8,19.380.00 Packing Charges 4.68.334.00 3,500.00 Stationery 1.82.125.00 Traveling Exp. Nett Profit 28,20,642.00 Total 61,43,952.00 Total Document 10 HRE HOR / Government of India कारà¥à¤¯à¤¾à¤²à¤¯ /Office of the संयà¥à¤•à¥à¤¤ आयकर आयà¥à¤•à¥à¤¤, केनà¥à¤¦à¥à¤°à¥€à¤¯ खणà¥à¤¡ Joint Commissioner of Income-tax, Central Range, कमरा नं. 403 चतà¥à¤°à¥à¤¥ तल, जीवन निधि दà¥à¤µà¤¿à¤¤à¥€à¤¯, à¤à¤².आई.सी. बिलà¥à¤¡à¤¿à¤‚ग, अमà¥à¤¬à¥‡à¤¡à¤•à¤° सरà¥à¤•à¤¿à¤², जयपà¥à¤....
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....1 F.No. Jt.CIT(C)/Approval. u/s 153D/2021-22/857 To The Deputy Commissioner of Income-tax, Central Circle-3, Jaipur. Sub :- Approval u/s 153D of the I.T. Act, 1961 in the case of M/s Shri Ambica Garments (PAN-AATFS6984Q) for the AYs 2016-17 to 2019-20 (Karnani Group) -regarding- Ref :- Draft Asst. orders DCIT, Central Circle-3, Jaipur in F. No.342 dated 16.07.2021 The draft assessment orders in the following cases submitted by you are hereby approved u/s 153D of the Income-tax Act, 1961. 5. No. Name of the assessee PAN A.Y. Returned income Assessed income 1 M/s Shri Ambica Garments AATFS6984Q 2016-17 4,57,870/- 3,16,30,330/- 2 -do -- -do -- 2017-18 6,00,460/- 3,31,14,520/- 3 -do -- 2018-19 7,07,870/- 3,51,87,710/ 4 -- do- -do- 2019-20 6,44,490/- 58,89,080/- The approval reference shall duly be mentioned in the assessment orders and it should be ensured that the above orders are passed on ITBA well within time as per the Income Tax Act, 1961 and a compliance report may be sent within a period of 10 days along with copies of the assessment orders to this office for records. Encis: Asstt. records in 4 Vol. ( Anuradha') Joint Commissioner of Inco....
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....¤¯à¤¾à¤²à¤¯ / Office of the संयà¥à¤•à¥à¤¤ आयकर आयà¥à¤•à¥à¤¤, केनà¥à¤¦à¥à¤°à¥€à¤¯ खणà¥à¤¡ Joint Commissioner of Income-tax, Central Range, कमरा नं. 403 चतà¥à¤°à¥à¤¥ तल, जीवन निधि दà¥à¤µà¤¿à¤¤à¥€à¤¯, à¤à¤².आई.सी. बिलà¥à¤¡à¤¿à¤‚ग, अमà¥à¤¬à¥‡à¤¡à¤•à¤° सरà¥à¤•à¤¿à¤², जयपà¥à¤°-302005 Room No. 403, 4th Floor, Jeevan Nidhi-II, LIC Building, Ambedkar Circle, Jaipur -302005 फोन/फैकà¥à¤¸: 0141-2941988 F.No. Jt.CIT(C)/Approval. u/s 153D/2021-22/ 838 Dated:16.07.2021 To, The Deputy Commissioner of Income-tax, Central Circle-3, Jaipur. Sub :- Approval u/s 153D of the I.T. Act, 1961 in the case of Sh. Sanjay Kumar Karnani (PAN-AGZPK3972A) for the AYs 2015-16 to 2018-19 (Karnani Group) - regarding- Ref :- Draft Asst. orders DCIT, C....
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.... 42 Particulars 1-Jan-2016 to 31-Dec-2016 Particulars 1-Jan-2016 to 31-Dec-2016 Opening Stock 20,35,000.00 Sales Accounts 1,11,92,358.00 Purchase Retum 1 .- (-)12,305.00, Purchase Accounts 64,01,197.00 Sales 1,13,41,474.00 Label Boxes 3.55.658.00 Trade Discount (-)1,36,720.00 Purchases 60.45,539.00 Direct Incomes 3,031.00 Direct Expenses 29,44,801.00 Discount Recevd 3.031.00 Dying 1.16.854.00 Elastic 54,370.00 Closing Stock 23,95,000.00 Embordary & Print 1.75.231.00 Kajbution 1,25,100.00 Labour Payment 15,80.733.00 Master 1,50.298.00 Material 4,47.509.00 Overlock 43,372.00 Press Man 2,14,324.00 Teen Silai. 37,000.00 Gross Profit c/o 22,09,391.00 1,35,90,389.00 1,35,90,389.00 Indirect Expenses 11,96,621.00 Gross Profit b/f 22.09.391.00 Depreciation 16.696.00 Factory Elecirycity 1.44,000:00 Factory Rent 2.16,000.00 Indirect Expenses 18,949.00 Interest on Capital 2.78,472.00 Janerater & Desile 11,260.00 Machine Repair 31.090.00 Other Expenses 70,835.00 Staff Salary 4,09,319.00 Nett Profit 10,12,770.00 Total 22.09,391.00 Total 22.09.....
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....irect Incomes 1,18,955.00 Discount Received 1.18.955.00 Direct Expenses 77,52,121.00 Dying 2.54,622.00 Closing Stock 55,75,000.00 Elastic 62.440.00 Closing Stock 55.75.000.00 Embordary & Prints 8 31.538.00 Fabricater 7.52.680.00 Kajbuton 4.07.200.00 Labour Payment 30.74.354.00 Master 3.09.158.00 Material 14. 43.954.00 Overlock 93.040.00 Pressman 5. 12.900.00 Teen Selai Machine Exp 10.235.00 Gross Profit c/o 52,02,971.00 4,01,40,148.00 4,01,40,148.00 Indirect Expenses 28,98,897.00 Gross Profit b/f 52.02.971.00 Depreciation 27,620.00 Factory Electricity 1.40,230.00 Factory Rent 3,77,000.00 Indirect Expenses 71,230.00 Interest on Capital 7.63.301.00 Interest on Loan 2.23,584.00 Janarater & Diesel 22,720.00 Machine Repair 45,653.00 Other Expenses 69,279.00 Other Staff Salary 7.85.550.00 Packing Charges 2.27,980.00 Traveling Exp. 1,44,750.00 Nett Profit 23,04,074.00 Total 52.02.971.00 Total 52.02,971.00 Document 20 RACE KIDS WEAR DELHI 34 Profit & Loss A/c 1-Jan-2016 to 31-Dec-2016 Particulars 1-Jan-2016 to 31-Dec-2016 Particulars 1-Jan-2016 to 31-Dec-2016 Openi....