TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 155
X X X X Extracts X X X X
X X X X Extracts X X X X
....New of the appellant at Rs. 36,16,45,640/- as against declared income of Rs. 35,67,35,640/- by the appellant in an order of assessment dated 30.12.2022 u/s 143(3) of the Act. 2. That notice dated 28.6.2022 u/s 143(2) of the Act issued by the learned Assistant Commissioner of Income Tax, Central, Circle-I, Gurgaon was without jurisdiction since the jurisdiction was only transferred to him on 16.9.2022 in pursuance to order dated 16.9.2022 u/s 127 of the Act by the learned Pro Commissioner of Income Tax, Delhi-7, New Delhi and therefore the assumption of jurisdiction was illegal and void-ab-initio and consequently the order of assessment dated 30.12.2022 u/s 143(3) of the Act deserves to be quashed as such. 3. That since no valid approval has been obtained u/s 153D of the Act, order of assessment made u/s 143(3) of the Act is invalid and not in accordance with law. 4. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in sustaining a disallowance of Rs. 44,10,000/- representing salary paid by the appellant company to its director Smt. PritiSingla by invoking section 40A(2)(b) of the Act. 4.1 That the learn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sued and served through ITBA Portal. In response, assessee filed relevant information as called for. 5. At the time of hearing, ld. AR of the assessee stressed Ground Nos.4 to 4.3 and Ground No.5 only. All other grounds are not pressed nor made any submissions. 6. The facts relating to the above grounds are, during search proceedings, PritiSingla has admitted that she did not have any knowledge of the business of the entities in which she is appointed as an employee and receiving income in the form of salaries from it. On perusal of both submissions of PritiSingla and financial data year-wise, she has received salary over the years and the same are listed by the AO in his order. The AO also reproduced the statement recorded on oath dated 10.11.2021 u/s 132(4) of the Act at page 2 of the assessment order. The AO observed that the statement given by her on oath is evident that salary received by her is without necessary qualification or experience or any active involvement in the functioning of the entity of which she is an employee. He further observed that it is practice of Singla family to appoint their family members as employees in their group companies just for claiming e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....P. vs Raja Buland Sugar Co.Ltd iv) 404 ITR 738 (SC) Mahaveer Kumar Jain v. CIT v) 258 ITR 717 (Del) ITO v. Vinod Kumar Soni ......... 36. It is further submitted that it is settled law that no addition/disallowance can be made on the basis of surmises, suspicion and conjectures. Reliance for this proposition is placed on 37 ITR 271 (SC) VmaCharan Shaw & Bros. Co. v. CIT. It has been further held in the following cases that suspicion howsoever strong cannot take the place of proof: i) 37 ITR 151 (SC) Omar Salay Mohammad Sait v CIT (extracted at page 266 of Paper Book) ii) 26 ITR 736 (SC) DhirajlalGirdharilal v ClT, Bombay (extracted at page 266 of Paper Book) iii) 26 ITR 775 (SC) Dhakeshwari Cotton Mills ltd. v CIT (extracted at page 266 of Paper Book) iv) 37 ITR 288 (SC) Lal Chand BhagatAmbica Ram v CIT (extracted at page 266 of Paper Book) 37 Even otherwise, it is submitted that the statement recorded u/s 132(4) of the Act in absence of any incriminating material unearthed during search shall have no evidentiary value; Reliance is placed upon following judicial pronouncements: i) 2024 SCC On....
X X X X Extracts X X X X
X X X X Extracts X X X X
....32(4) of the Act. The Tribunal has com mitted an error in ignoring the retraction made by the assessee. [Emphasis supplied] 22. Further, the position with respect to whether a statement recorded under Section 132(4) of the Act could be a standalone basis for making assessment was clarified by this Court in the case of CIT v. Harjeev Aggarwal, wherein, it was held that merely because an admission has been made by the assessee during the search operation, the same could not be used to make additions in the absence of any evidence to corroborate the same. The relevant paragraph of the said decision is extracted herein below:- "20. In our view, a plain reading of section 158BB( I) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search. the same could certainly be used in evidence in any proceedings under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned after access to books of accounts. We, therefore, find merit in the submissions of the Id. counsel for the assessee that the addition made by the Assessing Officer u/s 68 of the LT. Act is not based on any incriminating material and is based on statements recorded during search u/s 132(4) and post-search enquiries." 14. On an overall conspectus of the above the Tribunal has ultimately found that the addition which rested solely on a statement recorded under Section 132(4) would not sustain." iii) 397 ITR 82 (Del) dated 25.05.2017 Pr. CIT v. Best Infrastructure (India) (P) Ltd. (extracted at pages 268-269 of Paper Book) iv) 432 ITR 384 (Del) PC IT vsAnand Kumar Jain (HUF) (extracted at pages 269-271 of Paper Book) v) 451 ITR 364 (Del) dated 28.07.2022 Pr. CIT vs. Ms. Suman Agarwal (extracted at pages 271-272 of Paper Book) vi) 457 ITR 1122 (Del) PCIT dated 28.07.2022 vs. Kavita Agarwal vii) 289 Taxman 278 (Del) dated 28.07.2022 PCIT vs. Shiv Kumar Agarwal viii) ITA o. 358/2022 (Del) dated 26.9.2022 Pr. CIT v. M/s JPM Tools Ltd. (extracted at page 272 of Paper Book) ix) 457 ITR 437 (Del) dated 19.10.2022 Pr. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch cash with documentary evidence and accounting treatment of the same. In response, assessee submitted the reply as under :- "The detail of chat as mentioned in the show cause notice under consideration has been totally misunderstood as the assessee company is not making any cash sales to any of the party including the party named as Sh. Kashif MK Traders and the director of the assessee company in the chat was rather insisting on advance payment and was not interested on credit sales at that very moment which is wrongly understood as cash sales." 13. After considering the submissions of the assessee, AO rejected the same and observed that there is no resemblance with the facts and strong circumstantial evidence gathered through in depth investigation. On the basis of facts available on record, the AO observed that it is assumed that the assessee must have made sales out of books of account profit on it. Hence, normal profit ratio @10% of total sales made in cash which is not recorded in the books of account during the year were added to the income of the assessee i.e. Rs. 5 lakhs. 14. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT(A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at during the course of assessment proceedings, assessee has categorically denied from any cash sales with Sh. Kashif MK Traders, in these circumstances, burden is on revenue to establish by bringing positive evidence on record that there was any cash sales between assessee and Sh. Kashif MK Traders and, such burden has not been discharged by Assessing Officer, therefore addition is not in accordance with law. He further submitted that during the course of assessment proceedings, appellant has furnished following replies in respect of issue under consideration: i) Reply dated 19.11.2022 (page 95 of Paper Book and extracted at page 280 of Paper Book) ii) Reply dated 08.12.2022 (pages 139 -144 of Paper Book and extracted at pages 280-281 of Paper Book) 17. He submitted addition is therefore not in accordance with law in view of following contentions in brief:- Sr.No. Contentions in Brief Paras of this submission Paras of Paper Book Pages of order of learned CIT (A) i) That burden is on revenue to establish that there is unaccounted sales, which has not been discharged by learned Assessing Officer, therefore addition made is not in accordance ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....raders by issuing notice u/s 133(6) or 131 of the Act to establish that claim of the assessee since from the beginning i.e. during investigation proceedings and during the course of assessment proceedings that there is unaccounted cash. Reliance is placed upon the following judgments: i) 361 ITR 10 (Del) CIT v. Gangeshwari Metal (P) Ltd. ii) 357 ITR 146 (Del) CIT vs. Fair Finvest Ltd iii) ITA No. 212/2012 dated 11.4.2012 (Del) CIT v. Goel Sons Golden Estate (P) Ltd. iv) 342 ITR 169 (Del) Nova Promoters &Finlease (P) Ltd v) ITA No. 645/2012 dated 13.1.2015 (Del) Funnay Time Finvest Ltd vi) 361 ITR 220 (Del) CIT vs. MisKamdhenu Steel and Alloys Ltd. vii) ITA No. 71/2015 dated 12.8.2015 (Del) CIT v. Vrindavan Farms (P) Ltd. viii) ITA No. 3342/D/20 13 ITO v. XO Infotech Ltd. 21. He further submitted that even otherwise in Whatsapp Chat, there is nothing adverse stated by assessee to even assume that there is unaccounted cash sales as is evident from Chat extracted at para 40 above, therefore could not be relied against assessee. It is apart thereof there is no adverse material gathered and brought on record in a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns under Section 65-8(2). Following are the specified conditions under Section 65-8(2) of the Evidence Act: (i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer; (ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity; (iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and (iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity." 24. Further, ld. AR submitted that the Hon'ble Apex Court in the case of Arjun PandiraoKhotkar reported in 2020] 7 SCC 1 has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....do I own anything regarding functioning of the company nor have I ever participated in the operation. The salary received from the company is for my expenses." We further observe that ld. AR submitted that since there was no material found during the search, the statement recorded u/s 132(4) has no relevance and the same cannot be applied to make addition in search proceedings. After considering the findings of the lower authorities and detailed submissions of the assessee, we observe that the proceedings initiated u/s 148A and subsequently drop of the proceedings u/s 148A cannot be said to be irrelevant but where law requires principles of consistency to be maintained in tax matters then such conclusions drawn in quasi judicial proceedings after due application of mind, in previous years, then same cannot be disturbed on the basis of any statement recorded u/s 132(4) of the Act, being uncorroborated by any substantive evidences.At the same time we find that retracting her statement PritiSingla she has filed an affidavit subsequently on 23.11.2022 that she is a Director, is a graduate in commerce, she is graduate in computer application and was involved in various activities of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence, there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has com mitted an error in ignoring the retraction made by the assessee. [Emphasis supplied] 22. Further, the position with respect to whether a statement recorded under Section 132(4) of the Act could be a standalone basis for making assessment was clarified by this Court in the case of CIT v. Harjeev Aggarwal, wherein, it was held that merely because an admission has been made by the assessee during the search operation, the same could not be used to make additions in the absence of any evidence to corroborate the same. The relevant paragraph of the said decision is extracted herein below:- "20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....und that but for the statement, no other material had been borne in consideration to sustain the additions which were made. This becomes further apparent from a reading of the following observations which appear in para 37 of the order impugned herein: "37. We further find from the order of the ld. CIT(A) that there was no surrender of income for the impugned assessment year and the surrender was only for the assessment year 2008-09 which too was retracted within two months. He has also observed that the statement was non descriptive and vague and subject to cross checking of fact to be explained after access to books of accounts. We, therefore, find merit in the submissions of the ld. counsel for the assessee that the addition made by the Assessing Officer u/s 68 of the I.T. Act is not based on any incriminating material and is based on statements recorded during search u/s 132( 4) and post-search enquiries." 14. On an overall conspectus of the above, the Tribunal has ultimately found that the addition which rested solely on a statement recorded under Section 132(4) would not sustain." 27. Then, we find that once Smt. PritiSingla has included the director's re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntral Board of Direct Taxesmakes specific and extensive provisions for collection, extractivion and validation of electronic evidences. The relevant para 9.1 and 9.6 of the Manual provide as follows:- "9.1 Reporting of Analysis of Digital Evidence in the Assessment Order should be done in a simple lucid manner, so that any person can understand. The report should give description of the items, process adapted for analysis, chain of custody on the movement of digital evidence, hard and soft copies of the findings, glossary of terms etc. The presentation and use of digital evidence in assessment order and presentation of the same in court of the law in matters of appeal involves stating the credibility of the processes employed during analysis for testing the authenticity of the data. Some guidelines that assessing officer need to follow when using the Digital Evidence Analysis in the assessment order etc, are as follows: * Brief description of the case, details/description of the objects, date and time of collection of the objects, Status of the objects when collected (On or Off), Seized from - person, organization, location etc should be included in the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Manual do have strong persuasive value on the authorities to show that digital evidence is duly collected and relied in assessment order. Same is not the case here as nothing comes up from the assessment order in that regard. Hon'ble Supreme Court decision in Addl. Director General Adjudication vs. Suresh Kumar and Co. Impex Pvt. Ltd. &Ors. In Civil Appeal Nos.11339-11342 of 2018 dated 20th August, 2025 very recently, has dealt with the case of relevancy and admissibility of electronic evidences in the proceedings under the Customs Act, 1962 wherein the provisions of section 138C of the Customs Act, 1962 regarding admissibility of electronic evidences has been accepted subject to availability of certificate to be obtained in accordance with the sub-section (4) of section 138C of this Act of 1962. The Hon'ble Supreme Court observed that section 65B(4) of Indian Evidence Act is parimateria to section 138C(4) of the Act of 1962 and, further relied the decision of the Hon'ble Supreme Court in ArjunPanditraoKhotkar v. KailashKushanraoGorantyal and Others (2020) 7 SSC 1,and observed that in the said decision the Hon'ble Supreme Court, while explaining the mandatory nature of section 65B....