TaxTMI 
TaxTMI 
2025 (11) TMI 885
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....the assessee has filed an appeal bearing ITA No. 788/Chd/2023. Since the common issues are involved, the same were heard together and with the consent of both the parties, the lead case was taken up bearing ITA No. 18/Chd/2024 (D) and cross appeal by the assessee bearing ITA No. 788/Chd/2023. 2. In the appeal of the Department bearing ITA No. 18/Chd/2024, the following grounds of appeal have been taken: "1. Whether on facts and circumstances of the case and in law, Ld. CIT(A) was justified in disregarding the statement of Sh. Rajesh Kumar recorded u/s 132(4) during search on 12.02.2020 in contravention to the judgment of Supreme Court in the case of Roshan Lal Sanchiti Vs. PCIT (2023) 150 taxmann.com 228 (SC) wherein SLP was dismissed against Rajasthan High Court judgment (2023] 150 taxmann.com 227 (Rajasthan) wherein it is held that retraction is required to be made as soon as possible or immediately after the statement of assessee was recorded? 2. Whether on facts and circumstances of the case and in law, Id. CIT(A) was justified in justifying retraction of statement of Sh. Rajesh Kumar recorded u/s 132(4) recorded during search, without assigning any evidenc....
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.... 8. Whether on facts and circumstances of the case and in law, Ld. CITIA) was justified in deleting the calculation of undisclosed sale of Rs. 7,96,53,033/- on the basis of evidence found during search of residence of Sh. Rajesh Kumar, employee of assessee company executing the warrant issued in the case of M/s DSG Paper Mills Pvt. Ltd.? 9. Whether on facts and circumstances of the case the Ld. CIT(A) was justified in restricting the addition on account of under invoicing of sales to 11,52,036/- on account of sale to one party only i.e. M/s Raj Paper Corporation as against Rs. 23,70,66,005/- made by AO by extrapolating the evidence of systematic under invoicing found during search and should have allowed relief on sales made to government entities? 10. Whether on facts and circumstances of the case the Ld. CIT(A) was justified in estimating average rate under invoicing @ Rs. 5/- per Kg instead of average rate under invoicing @ Rs 7.465/- per Kg calculated by AO based on evidence found during search? 11. Whether on facts and circumstances of the case the Ld. CITA) was justified in deleting addition of Rs. 3,61,77,800/- made by the AO on account of ....
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....there was no 'under invoicing' in respect of goods supplied to M/s Raj Paper Corporation and the said addition have been confirmed without considering the quality of material supplied to M/s Raj Paper Corporation as per regular books of accounts and, further, the CIT(A) has wrongly relied upon the third party evidence, which is against the facts and circumstances of the case. c). Notwithstanding the above said ground of appeal, the Ld. CIT(A) has erred in not restricting the addition to the extent of evidence, if at all found of alleged 'under invoicing' to the tune of Rs. 157.9 tons only of the paper supplied to M/s. Raj Paper Corporation. d). Notwithstanding the above said ground of appeal, if at all, there is under invoicing, then the same should have been calculated @ Rs. 2.419 per kg instead of Rs. 5 per kg as adopted by the Ld. CIT(A) in respect of alleged under invoicing. e). That without prejudice to above, even if, certain addition on account of under invoicing was called for, then, only addition of net profit on such alleged under invoicing was called for, rather than entire addition of under invoicing. 2. That the Ld. CIT(A) has erred ....
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....ices u/s 142(1) for the first time was issued by the AO on 17.09.2021, 18.09.2021 and 19.09.2021 and a time of only two to three days was given to file the reply and, to which, the assessee responded, that it was difficult to file the voluminous details, within the shortest possible time as per letter placed in the paper book-I page 206 to 208 and, thereafter, the AO framed the assessment on 24.09.2021 for all the years under consideration. The assessee filed appeals before the Ld. CIT(A) and made detailed submissions along with the additional evidences, which were admitted by the Ld. CIT(A) and forwarded to the Assessing Officer for his comments and, then, before the AO, the assessee appeared and filed various submissions, details and, thereafter, the remand report was sent by the Assessing Officer after 9 months and, thereafter, the assessee again appeared before the Ld. CIT(A) and filed the rejoinder to the remand report and, then, the Ld. CIT(A) decided the appeal on 19.10.2023. 6. The Ld. Counsel of the assessee sought the permission to argue first, on the basis of the grounds of appeal taken by the Department and argued that the first four grounds of appeal relate to the r....
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....at Sh. Rajesh Kumar had worked with DSG Papers Pvt. Ltd. upto October, 2016 and, though, he visited the premises of the assessee company, at times, for clarifying certain old matters and meeting old associates and also argued that certain 'provident fund' dues were pending to him and he used to visit the company for such dues. It was also stated that on the basis of the statement recorded by the DDIT, certain clarification was sought by the DDIT and which was furnished by Sh. Rajesh Kumar, as per the letter dated 06.10.2020, copy placed at Paper Book-I pages 233 to 234, and again, he confirmed that the documents as found during the course of search belonged to him only. The Ld. Counsel also referred to the statement of Sh. Manoj Kumar, Director of the company on 13.02.2020 at his premises, in which, in Answer to Question No. 15, he stated that Sh. Rajesh Kumar is not on the payroll of the company, but still visits for clarification of old matters and sometimes to meet his old colleagues at the office of the company and he also confirmed that Sh. Rajesh Kumar only worked upto 2016. 8. The Ld. Counsel argued that immediately after the search on 12.02.2020, there was a COVID-19 Pan....
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....a 6.3.17 at page 123 & 124, of the order of the Ld. CIT(A). 10. Ground No. 7 is again about the one CCTV footage captured, where it is seen that Sh. Rajesh Kumar is seen entering the premises of the assessee company on 11.02.2020 and to which the Ld. Counsel argued that both Sh. Manoj Kumar, Director and Sh. Rajesh Kumar had categorically stated that for certain old matter clarification or for work of Regional Provident Commissioner, Sh. Rajesh Kumar had gone there and, as such, there was nothing incriminating regarding such visits of Sh. Rajesh Kumar, which have adequately been explained in the statement of Sh. Manoj Kumar, Director of the company as well. 11. By way of Ground No. 8 in the appeal of the Department, where the Ld. CIT(A) has deleted the undisclosed sales amounting to Rs. 7,96,53,033/- on the basis of evidence found during the course of search from the residence of Sh. Rajesh Kumar. It was brought to our notice that the said document as seized from the premises of Sh. Rajesh Kumar have been reproduced at page 13 of the order of the Ld. AO and working of the same have been given at page 22 to 23 of the assessment order and a clear copy of the same have been plac....
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....he assessee and then even on merits, it was argued that certain rates have been taken into consideration without taking into consideration the grade of the paper and read out the para 6.2.2 of the order of the Ld. CIT(A) at page 109. For reference, the same is reproduced below: 6.2.2 Further on merits, the AR enclosed copies of invoice number 2437 dated 02.11.2019 and invoice number 3094 dated 27.12.2019 of Raj Paper Corporation, showing the products sold as Grade-II Material and not fresh material whose rates have been wrongly compared by the. AO. Copies of the said bills issued to M/s. Raj Paper Corporation have been enclosed at pages 200 to 203 of the paper book. Further, the AR filed copy of the invoice at page 204 of the paper book, which is an invoice issued to KT Commercial showing rate of material sold at Rs. 50/- per kg, which matches with the rate in the seized document which proves that the AO has wrongly attributed under invoicing with respect to the seized page no. 56. Further, during appellate proceedings, the AR filed copy of invoice number 536 dated 27.05.2019 which shows that the rate of material sold at Rs. 54/- per kg, which matches with the rate in the ....
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....e before the Ld. CIT(A) which have been reproduced at pages 64 to 65 of the order of the Ld. CIT(A) and it was vehemently argued that in the seized document, the names mentioned therein, has no link or connection with the case of the assessee and the name mentioned in the seized document is VIKAS, which have no link or connection with the business of the assessee and such submissions were made before the Ld. CIT(A) and also during the course of remand proceedings, before the Ld. AO and the Assessing Officer has failed to link the said document with the assessee company and further no corroborative evidence have been found during the course of search from the assessee's business premises and thus, the Ld. Counsel of the assessee relied upon the submissions made before the Ld. CIT(A) at page 104, para 5 and findings of the ld. CIT(A) in para 6.7 page 126 to 127 of the order. 16. With regard to the Ground No. 12, it was argued that certain documents were found from the premises of Sh. Rajesh Kumar and which have been taken as unexplained expenditure and the AO has discussed this issue at Page No. 37 of the order of the Ld. CIT(A) and without making any enquiries or linking of any n....
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....e i.e. from 14.98% in the AY 2014- 15, it has arisento 22.48% in the year under consideration. It was further argued that the finding of the Ld. CIT(A) applying a ad-hoc rate of 24% and enhancing the GP rate by 1.52% from 22.48% and sustaining an addition of Rs. 2,37,64,019/- is highly unjustified and the assessee is equally aggrieved and reference was drawn to Ground No. 2 of assessee's appeal. It was vehemently argued that since the confirmation of the part addition by the Ld. CIT(A) is not on sound footing as explained above, the part confirmation of the addition is also not in order. 19. It was further argued that the Ld. CIT(A) has failed to observe that there was numerous quality of paper and failed to appreciate the evidence furnished during the course of proceedings before him and the remand proceedings and, as such, sought the deletion of the addition for which the assessee is in cross appeal by way of Ground No. 2 & 3. It was further argued by Ground No. 3 that the rejection of the books of accounts by the AO and confirmed by the Ld. CIT(A) is against the facts & circumstances of the case. 20. With regard to the Ground No. 15, relates to the deletion of addition on ....
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....024 and that Ground of Appeal read as under: "Notwithstanding the original ground of appeal, it is submitted that no adverse view could be drawn on account of the "digital evidences" in the shape of pendrive and computer printouts, as found from the premises of Sh. Rajesh Kumar, without complying to the guidelines laid by the Hon'ble CBDT in "Digital Evidence Investigation Manual" and without complying to the Section 65B of the Indian Evidence Act, 1872." 25. It was argued before us that this ground being legal ground and the same was also before the Ld. CIT(A) was filed, for which, the detailed submissions was filed at para 14 page 47, of his order and then further, submissions were also made, at page 94 to 97 of the order of the Ld. CIT(A) but those have not been considered. Further argued that this being a legal ground, the said ground may be admitted as per the judgment of the Hon'ble Apex Court in the case of National thermal reported at 229 ITR 383. The Ld. Counsel of the assessee made detailed submissions on this issue that only on the basis of pendrive and certain computer printouts from the premises of Sh. Rajesh Kumar additions have been made and further argue....
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....f Sh. Rajesh Kumar belong to the assessee only on account of the parallel invoicing and unexplained expenditure. It was further argued that Sh. Rajesh Kumar has access to the residence of the Director and, thus, he was a very close person associated with the assessee company. Thus in light of the judgment of the Hon'ble Apex Court as stated above, it was argued that the judgment as cited by the Ld. Counsel in the case of "Atop Fastners and Sh. Jagdish Kumar" placed at page 1 to 84 and 85 to 99 of the "Judgment set" are not applicable. Regarding, the access of the Sh. Rajesh Kumar to the house of the Director of the company, it was explained that there is a separate office block in the residential premises of Director, where the office staff is working and the factory is about 15 kms away from the residential premises. 27. Regarding the electronic data in the shape of pendrive and computer print as found from the premises of Sh. Rajesh Kumar, it was argued that such data belongs to the assessee and also, sought the sustenance of addition so deleted by the Ld. CIT(A) on account of under invoicing, parallel invoicing, unexplained expenditure. The Ld. CIT DR also relied upon the ord....
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....und and recovered. It was further stressed that the remand proceedings continued before the AO well over 9 months and in the remand report, the Assessing Officer could not contradict the evidences/submissions furnished before the Ld. CIT(A) or before the Assessing Officer. Regarding the alleged under invoicing, for which, the Ld. CIT(A) has applied a rate of Rs. 5 per kg, it was argued that without taking into consideration any grade of the paper, the comparison of the rates was totally improper and even there was calculation mistakes in the working of the Assessing Officer and further, there was no justification of applying alleged rate of under invoicing to the total turnover by the Assessing Officer and further the part addition as sustained by the Ld. CIT(A) was not proper. It was further argued that the Ld. CIT(A) has rightly held that no extrapolation could be made on the basis of some evidences found during the course of search as held in the case of Gurdeep Cycle Industries of Chandigarh Bench of ITAT reported at 705/Chd/2023 and on the basis of the judgment of the Hon'ble Punjab & Haryana High Court in the case of VM Spinning Mills reported at 16 taxmann.com 199. Similarly....
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....ound of Appeal Nos. 1 to 7 as per the Department appeal and the same are thus allowed. 31 Ground of Appeal No. 8 is with regard to the deletion of undisclosed sales on the basis of the certain documents, which have been reproduced by the AO at Page No. 13, 14 of his order and working of the same have been made on the basis of such documents at page no. 22 & 23 of the assessment order. There are names of some other entities/concerns on Page No. 22 & 23 for calculation of undisclosed sales. In the said document, the name of the one party mentioned is "GAJROLA" and on top, "Delhi" is mentioned and the assessee had categorically denied any linking with all such parties and, though, the assessee has made detailed submissions before the Ld. CIT(A) against the ex-parte order made by the Assessing Officer and it is also a fact that hardly any time was given to the assessee during assessment proceedings and all such submissions and evidences as furnished before the Ld. CIT(A) were forwarded to the AO for conducting enquiries/comments. It is also borne out from the record that remand report was received after 9 months and during this intervening period, the assessee appeared before the AO....
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....ouch. This fact has also been admitted by them as Sh Rajesh was assisting in ESI/PF work. However, this itself does not prove that entire documents/material found and seized from his premises pertain to the appellant company. This is more so as sh Rajesh Kumar in his statement on oath has admitted that he was doing work for some other parties as well. 6.3.16 The AO has compared bill mentioned in document seized from the premises of Sh. Rajesh Kumar to bill of same date or same number from the books of the appellant. However, he has not brought anything on record to prove that the parties are same or there are transactions of the parties mentioned in seized document at premises of Sh. Rajesh Kumar with the appellant company. Sh Rajesh has admitted on oath that he is doing work of other persons as well and the data therefore pertains to those persons. Obviously when bills of transaction of one person would be compared with the same bill number of other person, there would be mismatch. But this can not be basis of treating transaction of second person as on genuine or undisclosed. E.g. Bill no 100 of entity 'X' would contain transaction of the entity 'X'' with say entity &Yac....
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....o parallel invoicing. 6.3.18 In view of these facts and discussion above, it is held the there was no such justification in working out parallel invoicing resulting into the undisclosed sales and subsequent application of 25% GP on such alleged undisclosed sales resulting into addition of Rs. 7,96,53,033. Therefore, this addition is deleted. Accordingly, these grounds of appeal are allowed." 32. We are in agreement with the findings of the Ld. CIT(A) and since nothing adverse have been established against the assessee with regard to the documents as found from the premises of Sh. Rajesh Kumar and, thus, we hold that the Ld. CIT(A) has rightly deleted the addition of Rs. 7,96,53,033/-. 33. The Ground of Appeal No. 9& 10, the department is in appeal against the restricting the addition on account of under invoicing of sales at Rs. 11,52,036/- against the addition of Rs. 7,91,79,760/- made by the AO by extrapolating the negligible evidence of under invoicing found during search. The facts are not disputed and the AO has calculated the addition at Page No. 23 to 25, Para 5 of his order. It was argued that there was no under invoicing with regard to the sales made to "Raj....
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.... the Ld. CIT(A) and worked out the under invoicing at Rs. 2.419 per kg for the sake of argument and it was argued by the assessee, that these calculations have been given only as directed by the Ld. CIT(A) and these are without taking into consideration of grade and quality, which rates vary. The said working has been reproduced by the Ld. CIT(A) at page 111 of his order. The Ld. CIT(A) has applied a average rate of Rs. 4.942 [Rs. 7.465 + Rs. 2.419/2] and adopted ad-hoc rate of Rs. 5 per kg on account of under invoicing only on the basis of the evidence found and deleted the extrapolation of the entire turnover as declared in the books of accounts. The assessee's contentions that the grade of paper has not been established clearly and, therefore, we hold that the Ld. CIT(A) was justified in not extrapolating such under invoicing to the entire declared sales in the books of accounts as per the finding given by him in para 6.2.14 of his order, but at the same time, his adoption of Rs. 5 per kg is also not in order, considering the fact that without considering the grade of the paper where the rates are variable and on the basis of the method adopted by the AO, the rate of under invoi....
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....sessee that there are independent transactions between the GAJROLA and one VIKAS. These are the purchase & sale transactions between these two parties. There is neither name of the appellant company mentioned in these transactions nor there is any link or connection with the appellant. Therefore, the said addition is hereby is deleted. Accordingly, this ground of appeal is allowed. Accordingly, the ground of appeal of the department is therefore dismissed. 36. Ground No. 12 is with regard to the addition of Rs. 7,36,09,500/- as deleted by the Ld. CIT(A) on account of unexplained expenditure u/s 69C. This addition was made by the AO on the basis of certain loose papers, which have been reproduced at Page No. 37 & 38 of the order of the CIT(A) and such documents were found from the premises of Sh. Rajesh Kumar. The assessee has denied any link or connection with regard to such computer printouts as found from the premises of Sh. Rajesh Kumar and neither any corroborative evidence linking the said document with the books of accounts of the assessee was found or established by the Assessing Officer and no corroborative evidence or any adverse observation have been given ....
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.....9 Ground of Appeal No. 25: In this ground, the AR has contested the addition of Rs. 31,18,740/- on account of cash found from the premise of Sh. Rajesh Kumar. The AR during the course of appellate proceedings has submitted that the cash was found from the premises of Sh. Rajesh Kumar and the assessee has no link or connection with the same and the same cash have been owned by Sh. Rajesh Kumar and during the course of assessment proceedings in the case of Sh. Rajesh Kumar, the AO has made an addition of Rs. 31,18,740/- on substantive basis in the hands of Sh. Rajesh Kumar and hence it has pleaded that no addition could be made in the hands of the assessee. Decision 6.9.1 The submissions of the assessee, submitted by the AR during the course of appellate proceedings and the remand report submitted by the AO have also been considered. It is a fact that the cash have been owned by Sh. Rajesh Kumar before the DDIT (Inv.) and the said cash was also found from his premises and thus the addition on protective basis cannot be made in the hands of the assessee as it would amount to double addition and thus, the same is deleted. Accordingly, this ground of appeal i....
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....xt and thus, it was argued that such addition deserves to be deleted. Decision 6.5.1 The submissions of the assessee, submitted by the AR during the course of appellate proceedings and the remand report submitted by the AO have also been considered. I have already deleted the addition on account of unaccounted sales due to parallel invoicing as per above grounds of appeal nos. 8-10. There is no incriminating material found during the course of search regarding the alleged capital employed outside the books of accounts. Further, this addition has been made as consequent to the addition made by the AO on account of undisclosed sales due to parallel invoicing. Since that addition on account of undisclosed sales due to parallel invoicing have been deleted, the addition on account of capital employed for undisclosed sale is also deleted. Accordingly, these grounds of appeal are allowed. Thus, on the above facts, the ground of appeal of the department is dismissed. 40. Ground No. 16 By way of this ground, the Department has challenged the deduction u/s 80IA and under similar facts & circumstances, the Ld. CIT(A) for AY 2017-18 u/s 143(3) vide order dated ....
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....ng the ratio of expenditure to the net income. The AR during the course of appellate proceedings has argued that there is no basis of making the addition which has been made on the basis of average ratio of expenditure to the net income and considering the cash expenditure of Rs. 7,36,09,509/- incurred by the assessee, the net income earned proportionate to these expenses comes to Rs. 70,23,807/-. It has been argued that once the addition of cash expenditure is not sustainable because the said documents have not been found from the premises of the assessee, the whole basis of making the addition is on surmises and conjecture and the same therefore, may please be deleted. Decision 6.16.1 The submissions of the assessee, submitted by the AR during the course of appellate proceedings and the remand report submitted by the AO have also been considered. I have considered the arguments of the assessee and the reason for making the addition by the AO. I have already adjudicated the grounds of appeal with regard to the addition made on the basis of documents found from the premises of Sh. Rajesh Kumar. Even otherwise, net impact of all these transactions would result into....
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....the case the Ld. CIT(A) erred in not taking cognizance of the fact that additions were made on the basis of incriminating evidences found during the course of search at the premise of Sh. Rajesh Kumar executing the warrant issued in the case of DSG Paper Mills Pvt. Ltd. 3. Whether on facts and circumstances of the case the Ld.CIT(A) erred in holding that assessment made by the AO on the basis of incriminating documents, not found pertaining to current year, is not found sustainable and deleted whereas the incriminating material was found at the premise of Sh. Rajesh Kumar, Accountant where the warrant was executed in the case of assessee and this data showed that under invoicing was being carried out over the sustained period and hence relevant to current AY. 4. Whether on facts and circumstances of the case the Ld. CIT(A) erred in not considering the pendrive containing data w.r.t. the assessee found from residence of Sh. Rajesh Kumar, Accountant where the warrant was executed in the case of DSG Paper Mills Pvt. Ltd. as incriminating material pertaining to assessee company. 5. Whether, the Ld. CIT(A) justified in deleting the addition, based on cognizabl....
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....gment of Hon'ble Apex Court in the case of ACIT Circle 1 (2) Vs Serajuddin and Co. in ITA No. 43/2022, dated 28.11.2023. 4. That the Ld. CIT(A) has failed to adjudicate the additional grounds of appeal read reads as under: "That the CPC, Bangalore has erred in disallowing depreciation on the power plant without assigning any reason in the order u/s 143(1)." 5. That the cross objector creates leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 47. There was search and seizure operation at the residential and business premises on 12.02.2020 and later on the assessment were framed by the AO in an ex-parte order starting from AY 2014-15 to 2020-21. Certain additions were made in the AY 2020-21 and on the basis of such additions similar additions were made in all the preceding assessment years i.e. AY 2014-15 to AY 2019-20 and these additions related to under invoicing, parallel invoicing, addition by applying Gross Profit rate of 25% on disclosed sales against the gross profit declared by the assessee in various years, alleged capital employed on such parallel invoicing, salary paid to Sh. Rajesh Kumar. The f....