TaxTMI 
TaxTMI 
2025 (11) TMI 1658
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....thed in the course of search proceedings are contrary to the material already produced before the AO in the course of regular assessment. 3. The Hon'ble CIT(A) ought to have appreciated the fact that there are no additional evidences found during the course of search, except the books of account that were already produced before the Assessing Officer during the course of regular assessment, based on which an amount of Rs. 31,10,332/- was already disallowed u/s 40A(3) while finalizing the assessment u/s 143(3) on 18.12.2019, and increasing the amount of disallowance u/s 40A(3) to Rs. 7,50,10,000/- in the search assessment (subject to verification) lead to review of the already concluded issue of disallowance u/s 40A(3). 4. The Hon'ble CIT(A) erred in not considering our submission that most of the entries made in the said seized material A/CIPL/01 - Excel Sheet jmmr 25.11.2016.xlxs were lumpsum entries for control of the Accountant, whereas the actual payments made were well below the threshold limit of Rs. 20,000/- per day to a single person and that some of the payments were covered under exceptional clause of section 40A(3) read with Rule 6DD, which were....
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.... some excel sheets named working.xlsx, jmmr25.11.2016.xlsx containing the names and amounts written against them were found from the email of one Shri B. Veeranjaneyulu, Sr. Accountant, of the assessee company i.e. CIPL and the same were seized. The statement of Shri B. Veeranjaneyulu, Sr. Accountant was also recorded in order to get the explanations of the entries in the excel sheets. Accordingly, a notice u/s 153A of the Act was issued by the Assessing Officer in response to which the assessee filed its return of income on 27/11/2021 declaring the total income of Rs. 5,21,66,910/-. The Assessing Officer completed the assessment u/s 153A on 28/03/2022 whereby the additions towards unexplained cash expenses of Rs. 16.61 crores were made. 4. The assessee challenged the action of the Assessing Officer before the learned CIT(A) and also filed the additional evidence to explain the details of the entries in the excel sheets as the said cash expenditure was duly recorded in the books of account. The learned CIT(A) called for a remand report and then passed the impugned order whereby the additions made by the Assessing Officer is confirmed to the extent of Rs. 10,36,03,435/- and there....
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....h Court in the case of Rakesh Babbar vs. ACIT reported in 476 ITR 439. Thus, the learned AR has submitted that when the alleged cash expenditure found in the excel sheet was duly recorded in the books of account of the assessee, then no addition can be made for the A.Y under consideration which was not pending as on the date of search and therefore, the additions made by the Assessing Officer and confirmed by the learned CIT(A) are liable to be deleted. 6. On the other hand, the learned DR has submitted that the assessee has not disputed the correctness of the excel sheets and therefore, the claim of the assessee that all the entries in the excel sheets are also duly recorded in the books of account cannot be accepted until and unless it is reconciled. The assessee has failed to establish that the entries in the excel sheets showing the cash expenditure are duly recorded in the books of account and therefore, it is an incriminating material for the purpose of assessment u/s 153A of the Act. The learned CIT(A) has called for the remand report from the Assessing Officer and then given the findings of the fact. Thus, the learned CIT(A) has sustained the addition to the extent of th....
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....out of Rs. 1.70 crores, only Rs. 60 lakhs, which is an RTGS transaction pertaining to it and the cash payment amounting to Rs. 1.10 crore pertains to the assessee. During the scrutiny assessment, the assessee has confirmed the said payment of Rs. 1.10 crores towards fuel charges. However, the Assessing Officer has made the addition of the total amount of the entries contained in the excel sheets as well as Rs. 1.10 crores towards the cash payment to M/s Krishna Filling Station while framing the assessment u/s 153A of the Act. The Assessing Officer has made the additions based on the excel sheets as well as on account of payment to M/s Krishna Filling Station in para 5 to 6.2 as under: 5. Cash Expenditure of Rs. 15,51,77,796 5.1. During the course of search proceedings, excel sheets named working.xlsx, jmmr25.11.2016.xlsx containing names and amounts written against them were found from the email of Sri B Veeranjaneyulu, Senior accountant, CIPL. The same were seized vide the Annexure- A/CIPL/01. Sri B Veeranjaneyulu was asked to explain the details of the entries. The relevant extract is reproduced below: 8. On appeal, the learned CIT(A) has deleted certain addi....
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.... Excel sheet jmmr25.11.2016.xlsx is tabulated as below: 25.11.2016 Date Particulars Cash/Bank Site Amount 11-Jul-116 Kishan Reddy R & B Office Cash Adilabad 50000 11-Jul-116 Ravi (Purchase) Cash Account 20000 12-Jul-16 Jai Hanuman Drilling & Blasting Cash Mancherial 700000 12-Jul-16 obc deposit Cash Poolmi 250000 12-Jul-16 Pcbmisc Cash Adilabad 100000 12-Jul-16 miscSuryanarayana Cash Adilabad 1500000 12-Jul-16 Kiranlal Cash Dharmaram 200000 20-Jul-16 Jai Hanuman Drilling & Blasting Cash Mancherial 200000 26-Jul-16 Jai Hanuman Drilling & Blasting Cash Adilabad 200000 27-Jul-16 Generator hire Cash Pedomi 75000 27-Jul-16 obc deposit Cash Mancherial 50000 27-Jul-16 krishan filling station Cash Adilabad 2000000 27-Jul-16 Sri Venkateshwara Filling station Cash Chsrao 2000000 30-Jul-16 Ch. SudhakarRao Cash Mancherial 100000 30-Jul-16 B J Rao Salary Cash Adilabad 100000 04-Aug-16 Sri Venkateshwara Filli....
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....12-11-2016 R.K Mining Services 1000000 14-11-2016 R.K Mining Services 750000 14-11-2016 SonaVijender 200000 12-11-2016 A. Hanumanth Rao 100000 14-11-2016 A. Hanumanth Rao 100000 12-11-2016 MatramSavitri (Land) 700000 12-11-2016 Madhav Patel (Land) 600000 12-11-2016 Hotel Sai Pancharathi 160000 12-11-2016 Yadav Goud 460000 12-11-2016 S R Raheem (Umni President) 50000 24-11-2016 Dhananjai Das 420000 01-11-2016 A Rajeshwar 50000 01-11-2016 D Shanker 50000 18-11-2016 N. Vankata Ramana Reddy (MRO) 50000 18-11-2016 Rice Bill 75000 18-11-2016 Devidas Dhuma Rathod 100000 01-11-2016 Laxman Mestri 120000 01-11-2016 Salaries Payable 471700 01-11-2016 Salaries Payable 2978661 18-11-2016 Salaries Payable 3532000 18-11-2016 N. Sathish Tavera Hire 120000 15-11-2016 D. Subhash (Kerameri Boulders Quty Pur) 200000 18-11-2016 Mallesh Mansion 150000 18-11-2016 Sri Sai Baba Kiranam 226000 18-11-2016 G. Vivekananda Reddy (Misc) 50000 11-11-2016 Bhooma Reddy 53200 11-11-2016....
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....The AO may also consider any other payments outside the purview of section 40A(3), subject to the proper evidences submitted by the appellant. Subject to the above directions, out of the said sum out of Rs. 7,50,00,000/- has to be disallowed u/s 40A(3) of the Act and the addition of Rs. 7,50,10,000/- on the identical sum as unexplained expenditure is deleted." 10. Thereafter, the learned CIT(A) also considered another excel sheet entries as well as the remand report of the Assessing Officer and then given finding that some of the entries in the excel sheets are inter related and common entries in both the excel sheets and consequently, deleted the additions made by the Assessing Officer to the extent of the amount which are common and duplicate entries in the excel sheets and sustained an addition of Rs. 1,98,93,435/- out of the total amount in the first excel sheet of Rs. 5,11,01,235/-. The rest of the additions made by the Assessing Officer based on the excel sheets were deleted by the learned CIT(A). 11. As regards the addition towards cash payment to M/s. Krishna Filling Station, the learned CIT(A) has upheld the disallowance made by the Assessing Officer to the extent of....
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....nation to the addition made in Part -2 of Addition 2 Date Particulars Amount Payments towards Page No 12/08/16 Salaries 25,00,000 Salaries Book4-21 12/08/16 Salaries 3,00,000 Salaries Book4-21 12/08/16 Salaries 15,00,000 Salaries Book4-21 01/11/16 Salaries 4,71,700 Salaries Book4-21 01/11/16 Salaries 29,78,676 Salaries Book4-22 18/11/16 Salaries 35,31,797 Salaries Book4-22 Total Amount 1,12,82,173 Date Particulars Amount Payments towards Page No 12/07/ 16 Kiran Tal 2,00,000 NMR Labour Charges Book 4-22 19/11/ 16 Site Payments 10,00,000 NMR Labour Charges Book 4-22 01/09/ 16 Ananda Rao 78,20,000 NMR Labour Charges Book 4-22 90,20,000 Details of Payments made on a bank holiday Date Particulars Amount Payments towards Page No 12/11/16 Sri Venkata Narasimha Filling Station 50,00,000 Fuel Purchase Payments Book 4 - 16 12/11/16 Mohd Ashraf 10,00,000 Contractor payment Book 4 -....
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....k 4 - 19 04/08/16 Karunakar Rao 25,00,000 Daily Wages Book 4 - 19 12/08/16 CH.Sudhakar Rao 4,00,000 Daily Wages Book 4 - 19 12/08/16 Gayathri Enterprises 5,00,000 Daily Wages Book 4 - 19 12/08/16 Secreteriat Misc 50,000 Documentation, Travel & Misc Book 4 - 19 12/08/16 CH.Nishant 5,00,000 Daily Wages Book 4 - 20 12/08/16 Ravi (Purchase) 50,000 Puchase of Misc Items Book 4 - 20 12/08/16 Generator Hire 75,000 Generator rental payments Book 4 - 20 12/08/16 Jai Hanuman Drilling & Blasting 3,00,000 Drilling & Blasting Payments Book 4 - 20 12/08/16 NH Office 1,50,000 Documentation, Travel & Misc Book 4 - 20 12/08/16 Generator Hire 4,50,000 Generator rental payments Book 4 - 20 12/08/16 NH Office 80,000 Documentation, Travel & Misc Book 4 - 20 01/09/16 Ananda Rao 25,80,000 Daily Wages Book 4 - 20 01/09/16 B J Rao Salary 1,00,000 Daily Wages Book 4 - 20 01/09/16 CH.Sudhakar Rao 50,00,000 Daily Wages Book 4 - 20 11/09/16 Account Canara Bank 10,000 Amount deposited into ban....
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....and abated; (iii) in case any incriminating material is found/ unearthed, even, in case of unabated/ completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/ unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/ 148 of the Act, subject to fulfilment of the conditions as envisaged/ mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered ....
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....ating material. However, it is not necessary to address this issue for the reason that even if the statement of Mr. Rakesh Jain is taken into account, we find that the AO did not have any incriminating material for issuance of the impugned notice for AY 2018-19. This is for the reason that the statement of Mr. Rakesh Jain had explained that the document in question (the excel sheet) was the latest balance sheet of CCPL as on 17.03.2017. Thus, any amount reflected in the said document pertains to FY 2016-17, which relevant to the AY 2017-18. Since the AO had proceeded on accepting the explanation of Mr. Rakesh Jain in respect of the excel sheet, the same could not in any event be considered as incriminating material having a bearing on the assessment of the Assessee's income for the previous year relevant to AY 2018-19. 12. In Commissioner of Income-tax (Central)-III v. Kabul Chawla : 2015 SCC OnLine Del 11555/[2015] 61 taxmann.com 412/234 Taxman 300/[2016] 380 ITR 573 (Delhi), the Divison Bench of this court (to which One of us - Vibhu Bakhru, J. is a member) had considered the question whether proceedings under Section 153A of the Act could be instituted in absence of....
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.... brought on the record of the AO. (vii) Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 13. In Principal Commissioner of Income-tax-4 v. Saumya Construction (P.) Ltd. [2017] 81 taxmann.com 292/[2016] 387 ITR 529 (Gujarat), a Division Bench of the Gujarat High Court had referred to the decision of this court in Kabul Chawla (supra) and concurred with the said view. 14. In Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. : (2024) 2 SCC 433/[2023] 149 taxmann.com 399/293 Taxman 141/454 ITR 212 (SC), the Supreme Court had considered the following question: "Whether the jurisdiction of the AO to make assessment is confined to incriminating material found during the course of search under Section 132 or requisition under Section 132A or not i.e. whether any addition can be made by the AO i....
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....ing material is found with respect to assessment year concerned falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the 1961 Act, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the "total income" taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under Sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in Sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under Section 153A and in case of unabated/completed assessment and in case no incriminating material is found du....
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....and 36.4 In case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the 1961 Act. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under Sections 147/148 of the Act and those powers are saved. 37. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs." 16. The aforesaid decision was rendered in the context of Section 153A of the Act. However, the said decision would be equally applicable to initiation of assessment / reassessment under Section 153C of the Act. In Commissioner of Incometax- III, Pune ....
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....ersy." 17. It is also relevant to refer the recent decision of this court in Saksham Commodities Ltd. v. Income Tax Officer [2024] 161 taxmann.com 485/464 ITR 1 (Delhi) wherein this court had observed as under: "49. That takes us to the principal question and which pertains to the nature of the incriminating material that may be obtained and the years forming part of the block which would merit being thrown open. Regard must be had to the fact that while section 153C enables and empowers the jurisdictional Assessing Officer to commence assessment or reassessment for a block of six assessment years or the "relevant assessment year", that action is founded on satisfaction being reached that the books of account, documents or assets seized "have a bearing on the determination of the total income of such other person". We in this regard bear in mind the well settled distinction which the law recognizes between the existence of power and the exercise thereof. Section 153C enables and empowers the jurisdictional Assessing Officer to assess or reassess the six assessment years or the "relevant assessment year". The Act thus sanctions and confers an authority upon the Ass....
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....e incriminating material were unearthed. This aspect came to be reiterated in RRJ Securities when the court held that it would be impermissible to either reopen or reassess a completed assessment which may not be impacted by the material gathered in the course of the search and which may have no plausible nexus. The aforesaid position also comes to the fore when one reads para 17 of ARN Infrastructure and which annulled an action aimed at reopening assessments for years to which the incriminating document which was found did not relate. *** *** *** 54. In any case, Abhisar Buildwell, in our considered opinion, is a decision which conclusively lays to rest any doubt that could have been possibly harboured. The Supreme Court in unequivocal terms held that in the absence of incriminating material, the Assessing Officer would not be justified in seeking to assess or reassess completed assessments. Though the aforesaid observations were rendered in the context of completed assessments, the same position would prevail when it comes to assessments which abate pursuant to the issuance of a notice under section 153C. Here too, the Assessing Officer would have to firstly id....
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....as the search has not yielded any incriminating material, which could confer jurisdiction to the AO to issue a notice under Section 153C of the Act in respect of AY 2018-19." 14. Thus, in the facts and circumstances of the case, when the excel sheets found during the search do not reveal any undisclosed income of the assessee for the A.Y under consideration which is unabated and completed assessment, then in the absence of any incriminating material, the additions confirmed by the learned CIT(A) are not sustainable in law and liable to be deleted. We order accordingly. 15. In the result, appeal filed by the assessee is allowed. Order pronounced in the Open Court on 25th July, 2025. ============= Document 1 30. I am showing you excel sheet taken from your Google drive linked to gmail account [email protected]. The excel sheet named working.xlsx contains the cash expenditure towards miscellaneous heads of amounting to Rs.5,11,01,235/ -. Please confirm and offer your comments(annexure-01 page No.53 & 54] 25.00,000 13.00.000 22.00 500 60,00,000 Chce Saures 4.00.450 Ofice Soares 1.07.150 Warp Server Suites 5.00.000 5.50 915 $ 50 000 ....
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...., I confirm that the above image shown to me has been taken out from Google drive linked to the gmail account [email protected] dated 07.12.2016. Presently, I am not able to recollect about these transactions. I will explain them afterwards by looking into the cash book and bank book 75010000 Total Document 3 32. I am showing you excel sheet taken from your Google drive linked to gmail account [email protected] dated 07.12.2016. The excel sheet named cash book working xlsx contains the cash expenditure towards miscellaneous heads amounting to Rs.2,90,66,561/ -. Please confirm and offer your comments. (Annexure-A/CIPL/01 Page No.35 & 36) :2 1: 2556 S-Venez Wrapping fang De ------ 14 :::: ***** Service :20000 12-11-2016 St Weeee (mr fees dede 422000 18: 15 2006 \ venkat Ramạng le55/MACI 15:11 2216 Devidas Douma Rozchod 0: 1: 2015 Saures Payat es 220000 153000 :8 : 29:5 5- Sa Bata Grana 12-1: 2056 Sn Ba a: Bedrca work Amount 4300000 29800000 29094541 A. Yes, I confirm that the above image shown to me has been taken out from Google drive linked to the gmail account [email protected]. Presently, I am not....
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....laim by way of any evidences/documents. Further. Document 5 the claim of the assessee is not in accordance with the Section 44AD of the Income Tax Act, 1961. An assessee can estimate its income only when its gross turnover is less than Rs.1,00,00,000/ -. Further, once the turnover exceeds Rs.1,00,00,000/-, the provisions of Section 44AB applies, wherein the assessee has to get its books of accounts audited and the resultant income will be as per books and not as per estimation. The assessee by way of issuance of notice u/s 153A is required to prepare true and correct return of total income in the prescribed form and manner as per Rule 12 of Income Tax Rules, 1962. However, the assessee instead of preparing ROI in accordance with provisions contained in Income Tax Act, 1961, it filed ROI on estimation basis, which is bad in law and not correct. Therefore, due to aforementioned reasons, the said cash expenditure amounting Rs.15,51,77,796/-is treated as unexplained expenditure u/s 69 and is added to the assessee's income for the year under consideration. Penalty proceedings u/s 271AAC are initiated separately on this issue. (Addition: Rs.15,51,77,796/-) 6. Cash payments made....