AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 171
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....on 69A r.w.s.115BBE of the Income Tax Act, 1961. 3. That the Ld. CIT(A) has erred in dismissing the ground of appeal with regard to addition of Rs. 7,54,923/- as per para 5.4, page 27 of the order and has also erred in confirming the application of provisions of section 115BBE of the Income Tax Act, 1961. 4. That the Ld. CIT(A) has erred in confirming the addition of Rs. 12,25,593/- as per para 5.5.1, page 29 of the order and has also erred in confirming the application of provisions of section 115BBE of the Income Tax Act, 1961. 5. That the Ld. CIT(A) has erred in confirming the addition of Rs. 25 Lacs as unexplained cash loan given to Sh. Modi Ji and alleged consequent interest of Rs. 97,972/- as per page 34 of the order and also erred in applying the provisions of section 115BBE of the Income Tax Act, 1961. 6. That the Ld. CIT(A) has erred in confirming the addition of Rs. 1,85,90,274/- on account of low gross profit rate as per page 38 of the order. 7 That the confirmation of additions by the Ld. CIT(A) are not in order since the books of accounts of the assessee had not rejected u/s 145(3) and, as such, additions as confirmed is aga....
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....and circumstances of the case, the CIT(A) was justify to allow the telescoping benefit on the partly addition confirmed on account of low G.P. with the earlier addition confirmed in this case, whereas earlier addition was made on the basis of seized material, without considering the facts of the case? 4. Briefly the facts of the case are that a search & seizure operation under section 132 was conducted on 24-11-2022 in the case of the Jamna Dass Nikkamal Jain group. The present assessee, a private limited company engaged in gold and jewellery trading, filed its return of income on 04-112022. The case was centralised on 01-02-2023 and assessed u/s 143(3) on 3103-2024 making total additions of Rs. 10.71 crore approximately. 5. The Ld. CIT(A) partly sustained the additions and granted partial relief. Both sides are in appeal-Revenue challenging the relief and the assessee challenging the sustained additions. 6. Additional Grounds No. 3 & 4 - Jurisdictional Issue 6.1 It was submitted by the learned Authorised Representative that the first two additional grounds were not being pressed. With respect to Ground Nos. 3 and 4, it was contended that the assessment framed under sec....
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.... by the Assessing Officer, which strikes at the foundation of the assessment order. Once such foundational and jurisdictional issues are raised, the same deserve to be adjudicated before proceeding to decide the appeal on merits. 9.1 In view of the above legal position and respectfully following the binding decision of the Hon'ble Supreme Court in the case of NTPC Ltd. (supra), we are of the considered view that the additional grounds raised by the assessee merit admission. Accordingly, the additional grounds are admitted for adjudication. 10. The brief sequence of events relevant to this ground was submitted as follows: the return of income had been filed on 04.11.2022; search operations were carried out on 24.11.2022; the PAN was centralized on 01.02.2023; and notice under section 143(2) was subsequently issued on 21.06.2023. It was thus emphasized that the notice u/s 143(2) had been issued after centralization, and therefore, the Assessing Officer was fully equipped with the information and material seized during the search. 11. Ld.AR relied on Explanation 2 to section 148 of the Act, particularly clause (iv), to submit that where search action is conducted, the Assessi....
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....yed that the impugned assessment be quashed. 12. The Ld. CIT-DR Shri Manav Bansal opposed the contention, stating that the return for A.Y. 2022-23 was filed prior to the date of search, and validly selected for scrutiny under CASS. The AO was competent to complete the assessment u/s 143(3). 12.1 He contended that section 148B applies only to "re-assessment" and not to "regular assessments." The AO's approval from Addl. CIT, being in line with the CBDT Instruction No. 7/2022 dated 15.07.2022, fulfils the supervisory requirement. The DR also submitted that Homelife Buildcon is distinguishable, as the AO therein relied on third-party search data, whereas the present case is based on assessee's own seized material. 13. We have carefully considered the rival submissions and perused the record. It is undisputed that search u/s 132 was conducted on 24.11.2022, relevant to A.Y. 2023-24. Thus, A.Y. 2022-23 is one of the three preceding years under Explanation 2(iv) to section 148. The Explanation reads that if a search is initiated, "the Assessing Officer shall be deemed to have information suggesting escapement of income for the three assessment years immediately preceding the ass....
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.... which the return is furnished. In the present case the original return of income was filled on 4/11/2022 for the assessment year 202223 and 143 (2) was issued on 21/6/2023, therefore also the assessment was framed under 143(3) of the Act is not sustainable. In other words the time required for issuing the notice under 143(2) had already expired, and the revnue can not be allowed to issued issue 143(2) on 21.6.2023 after the search was carried out and notice had been issued on 21.6.2023 and assessment was framed under 143(3) of the Act. The relevant portion of section 143(3) reads as under:- 143(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce any evidence on which the assessee may rely in suppor....
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.... the strength from the reasoning given by the Coordinate Bench in Homelife Buildcon Pvt. Ltd. (supra), faced with identical facts (search on 16.11.2021 and assessment u/s 143(3) for A.Y. 2021-22), held that: 22. The core question before the Bench is whether, in the facts and circumstances of the case, the assessment ought to have been framed under section 143(3) or under section 147 of the Income-tax Act, 1961. From the plain reading of the statutory provisions and in light of Explanation 2 to section 148, it becomes abundantly clear that the legislature has widened the scope of reassessment, particularly through the Finance Act, 2021, which introduced significant changes to the reassessment regime. These amendments explicitly include instances involving third-party search material and make it incumbent upon the Assessing Officer (AO) to follow the procedure under section 148, including obtaining prior approval from the Principal Commissioner of Income Tax (PCIT). 23. In the present case, the AO proceeded to frame the assessment under section 143(3) despite relying heavily on material found during searches conducted on third parties. The AO, instead of complying w....
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....loodgates to arbitrary assessments. 26. The relevant extract Memorandum explaining the finance bill is reproduced as under:- '(ii) Assessments or reassessments or in re-computation in cases where search is initiated under section 132 or requisition is made under 132A, after 31st March 2021, shall be under the new procedure. (VI) Further, in search, survey or requisition cases initiated or made or conducted, on or after Ist April, 2021, it shall be deemed that the Assessing officer has information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year, in which, the search is initiated or requisition is made or any material is seized or requisitioned or survey is conducted." 27. The notice issued under section 143(2) was also produced by the AR. Upon perusal of the said notice, it is evident that the assessment under section 143(3) was initiated solely for the purpose of verifying the return of income filed by the assessee. In such circumstances, the importing and reliance upon material seized from thi....
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....son of the requirement of approval under section 153D and section 148B is drawn, from which it is evident that approval under section 153D was earlier required only in cases where assessments were completed under section 153A/153C and also for search year. However, under the amended provisions, approval under section 148B is now required in all cases where proceedings are initiated pursuant to a search, requisition, or survey, or where asset/material/documents found during such search pertain to or relate to another person. In such cases, the Assessing Officer must take the approval under section 148B from the specified higher authority. Aspect Section 153D Section 148B (with Explanation 2 to Section 148) Applicable Period Search initiated between 01.06.2003 to 31.03.2021 Search/survey initiated on or after 01.04.2021 but before 01.09.24 Context Search assessment under Section 153A/153C All cases where assessment/reassessment is based in respect of an assessment year to which clause (i) or clause (ii) or clause (iii) or clause (iv) of Explanation 2 to section 148 Triggering Event Search or requisition on the assessee under Sections 132 /132A or mate....
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....h July 2022, and not under the mandatory provisions of section 148B of the Income-tax Act, 1961. At the outset, it is important to note that the approval so obtained does not mention or consider any of the seized materials sourced from the thirdparty. searches conducted on Sh. Ajay Kumar Prabhakar and Sh. Ravi Kapoor, despite the AO having heavily. relied on those materials in framing the additions. The approval merely states that the appraisal report was considered, without any reference to the original documents seized or to the statutory procedure outlined under section 148B. It is pertinent to refer to the Manual of Office Procedure in February 2003, which lays down a mandatory protocol: that in all search cases, especially where material pertains to persons other than the one searched, such material is to be forwarded in original to the approving authority, and a draft order is required to be submitted for approval at least 30 days in advance. In the present case, the approval letter was issued by the DCIT only on 22nd August 2023, which clearly contravenes this procedural requirement. This procedural lapse is further compounded by the judgment of the Hon'....
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....ITA No. 1001/Del/2025 (Delhi ITAT), wherein similar approval granted mechanically on the same day was held to be invalid, and the assessment was quashed. 16.1 Thus, it was prayed that the assessment be quashed for want of valid approval. 17. Per contra, the Ld. DR submitted that no formal guidelines / formula has been provided for according the approval and therefore the approval granted by the authorities is in accordance with law. 18. We have heard the rival contentions and perused the material available on record. It is an undisputed fact that the request for grant of approval under statutory provisions was sought on 31/03/2024 and it was granted by the Ld. Addl. CIT on the same date on which the draft assessment was forwarded by the Assessing Officer. 18.1 It is also not disputed that the seized material runs into approximately 1,596 pages, besides additional documents seized from the residence of the director. From the record, the Revenue has not demonstrated that the seized materials were actually forwarded to the approving authority, nor has it been shown that the Ld. Addl. CIT made any independent examination thereof. Although, in para 2 of the approval dt. 31/0....
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....there were 15 more assessees whose six years' assessments have been sent to the ld. Addl. CIT simultaneously with the assessments of the assessee. If all those pages are to be counted, then they are more than 1000 pages. Practically, it was impossible for the ld. Addl. CIT to go through all these pages and apply his mind. Therefore, the proposition laid down in all these judgements is fully applicable in the case of the assessee. We find that ITAT Chandigarh in the case of S.P. Construction has made reference to the judgement of ITAT Delhi in ITA No.2503 and 2693/Del/2017 in the case of Seth Realtors Ltd. In this judgement, ITAT Delhi has taken note of the submissions made by the ld. CIT DR before us. In paragraph 8 of this judgement, the Co-ordinate Bench of the ITAT Delhi has duly taken note of the submissions made by the CIT DR that Addl. CIT is associated with the assessment proceedings from very inception. The ITAT has observed that if scheme of the Income Tax Act is being perused, then it would reveal that it provides a leeway to both the ld. AO as well as JCIT to even ignore the conclusion drawn in the Appraisal Report by the Investigation Wing and take a different stand in ....
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.... 3.6 Further, similar handwritten page was also found at the business premise of assessee, as page no 6 of A-1, where no opening balance was mentioned but excess cash of Rs. 64,366 was written is being considered as unexplained in absence of any justification or explanation. Further, assessee could not reconcile total entries amounting to Rs. 1,30,605/- in column no.1 and Rs. 4,71,756/- in column no. 2. 3.7 The assessee was specifically asked to reconcile opening balances both in response to questionnaire issued u/s 142(1) and again in show cause notice. But it has completely failed to provide any justification regarding the same. Assessee has stated that it is unable to reconcile opening balances. Moreover, in each table, two opening balances are written which are again not reconciling with each other. Further, assessee has stated that these pages are not in continuation but rather overlapping. Further, closing of one date does not match with opening of another. The assessee has stated that opening should not be termed as opening as there are a lot of duplicate entries from another table and it appears that accountant is cumulating the figures since long, the reason of....
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.....06.2021 to 05.07.2021 as per Table 9 mentioned above. Hence it is not clear whether opening of all papers are from 01.04.2021 till date or pertain to earlier years. Assessee is also not providing any details despite numerous opportunities. It has opening balance of Nil in column no 1 and Rs. 67,94,892 in the column no. 2. From this page, it can not be established opening balance pertains to this year or carried forward from earlier years. But in absence of any reconciliation or paper explanation provided by assessee, the same is being considered pertaining to the year under consideration. Further, similar pages are also found in subsequent years. Hence, these pages can not be brushed aside by citing mere dumb documents or rough notings. 3.13 Further, assessee has stated that these records were maintained by some accountant, but neither any PAN, name, address of the accountant was provided nor any affidavit by the said person accepting the said pages and purpose of their maintenance was filed. Assessee has not given any justification of the opening balances nor any purpose was established by assessee for maintenance of these records, when assessee is maintaining regular bo....
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....ly supported by documentary evidences, the tax authorities have the right to make deeper inquiries and examine the transaction in light of surrounding circumstances and test of human probability to uncover its real nature. 3.15 Further, to take a considerate and judicious view, I am considering the lower balances out of two opening balances mentioned in each page. Hence, the following opening balances remain unexplained and is being considered as unexplained money u/s 69A of the Act r.w.s 115BBE of the Act. Particulars Opening Balance(Rs. ) Table 1 5,68,78,906 Table 2 5,81,99,126 Table 3 4,15,99,065 Table 4 5,90,85,926 Table 5 6,13,95,026 Table 7 6,48,54,173 Table 8 1,87,18,474 Table 9 67,94,892 Page no 44 of A-3 12,80,679 Page no 45 of A-3 12,13,774 Page no 6 of A1(excess cash) 64,366/- Total 36,75,23,049/- As the addition includes addition made on account of section 69A, hence, penalty proceedings u/s 271AAC are to be initiated, which are being initiated separately. (Addition: Rs. 36,75,23,049-/) 22. Feeling aggrieved with the finding of the Assessing Officer the Assessee p....
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....and table-2 are not matching, although these are in continuation, but there is difference of Rs. 6,14,500/-. Similarly, closing balances of table-2 and table-4 are not matching, although these are in continuation, but there is difference of Rs. 6,00,000/-. Closing balances of table-4 and table-5 are not matching, although these are in continuation, but there is difference of Rs. 2,08,900/-. Therefore, I am of considered view that the appellant has not been able to explain this difference of opening balance of immediately succeeding table and closing balance of immediately preceding table and therefore out of total addition, these additions of Rs. 6,14,500/-, 6,00,000/- and Rs. 2,08,900/- are confirmed. (vi) Therefore, total addition confirmed is worked out as under: Table Addition confirmed (Rs. ) Amount (Rs. ) Basis 9 6794892 8 374374.8 1871874 20% of difference in balances of broken period (1871874 - 0) 45A3 0 44A3 0 3 7832530.8 39162654 20% of difference in balances of broken period (41599065-2436411) 1 1418088.6 7090443 20% of difference in bala....
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....ed before the CIT(A) and the submissions on this issue have been made before the CIT(A) from para-5 to page 12 of the order of the CIT(A) and further, the additional submissions have been reproduced at pages 17 to 18 of the order of CIT(A) and the Ld. CIT(A) has given his decision on this issue starting from page 19 and at page 19, he has given the basis of addition made by the Assessing Officer in respect of scanned copies of tables for different periods of the year and the summary of facts have been highlighted by the CIT(A) from pages 20 to 22 of the order and briefly, the contentions are as under:- i) It is admitted fact that no complete tables of scanned copies for the financial year 2021-22 have been found during the course of search starting from 1st table, starting from 12 June 2021 and, thus, it is incomplete tabulation of the different tables of the year and as per Assessing Officer at page 28, 80% of the total entries in such different tables, tally with the regular books of accounts and further, the closing balances of some of the tables tally with the opening balance of the next table, wherever, there is no gap of the dates and, as such, tables are of continuo....
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....,94,892/- on the basis of incomplete data is not justified and further to that on the sheet of 12.06.2021, it has clearly been mentioned "as opening balance" the figures of Rs. 67,94,892/- and the document as seized has to be read as a whole and the Ld. CIT(A) cannot ignore such noting of opening balances and the amount brought forward from the earlier period and, thus, coupled with the fact that on subsequent dates figures are tallying of opening balances and 80% of the transactions are matching with the books of accounts, the whole basis of confirmation of addition of Rs. 67,94,892/- by the CIT(A) is not justified. viii). Further, the contention of the CIT(A) at page 24 in para (iv) that, no figure of closing balance of any prior period is available, is contrary to the finding to the Assessing Officer and CIT(A) that 80% of the transactions are tallying with the books of accounts and, thus, the said addition of Rs. 67,94,892/- is not maintainable. ix). Further, the finding of CIT(A) that, wherever, there is difference between the opening and closing balance in different tables, and if there is time gap, he has made an addition of 20% difference of amount among t....
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....at the Assessing Officer has not brought any material on record to demonstrate that any asset, money, bullion or valuable article corresponding to such balances was found or remained unrecorded in the regular books. Once the most of entries, nature and purpose of such rough tabulations stand explained and substantially tallied with the audited books, then Ld. CIT(A) was right in sustaining the unexplained entries.in view of the above, we dismiss the ground raised by the assessee and revenue pertaining to these Tables 1, 2, 4 and 5 of the seized material and sustain the additions of Rs. 14,18,088/- Rs. 6,14,500/- Rs. 6,00,000/-, and Rs. 2,08,900/-. 27. Now we shall deal with the additions made in Table no 9 of the seized material. 28. The Ld. CIT(A) had sustained the addition of Rs. 6794892/- as the assessee was unable to explain the opening balance mentioned in Table-9. The submission of the assessee reproduced above has submitted that the opening balance of Rs. 6794892/- was coming forward from the earlier month i.e 01/04/2021 and was appearing on 12/06/2021. It was submitted that the said opening balance appearing as on 12/06/2021 cannot be added to the income of the assess....
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....missions of the assessee and therefore the ground no. 1 raised by the assessee is dismissed. As we have sustaining the order passed by the Ld. CIT(A), the corresponding ground no. 1 raised by the Revenue is dismissed. 33. The next ground raised by the assessee is with respect to the addition of Rs. 1,21,88,930/- (Page 26 & 27 of the order of the CIT(A)). 34. In this regard, the submission of the assessee are as under: 14. The next ground of appeal of the assessee is with regard to confirmation of addition of Rs. 1,21,18,290/- as per para 5.3.3, (iii), at pages 26 & 27 of the order of CIT(A). This addition is also based on the same tables in the sense that certain entries could not be tallied, due to shortage of time during assessment proceedings and one entry of Rs. 15 lacs with regard to HDFC Bank was got tallied and after giving the benefit of the same, the addition of Rs. 1,21,88,930/- i.e. (Rs. 1,35,88,930 minus 15,00,000/-) was confirmed by CIT(A) a against the addition of Rs. 135,88,930/-. 15. It is submitted that these entries are part and parcel of the same tables, which have been discussed above and it amounts to double addition as confirmed by the ....
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.... of Income Tax (Appeals)-5, Ludhiana, dated 20.01.2025, for the assessment year 2022-23, framed pursuant to the assessment order passed under section 143(3) of the Income-tax Act, 1961 on 31.03.2024 by the DCIT, Central Circle-1, Ludhiana. 41. The sole controversy relates to the estimation of gross profit rate applied by the Assessing Officer at 23.85%, reduced by the Ld. CIT(A) to 14.12%, and now contested by both parties before us. 42. The assessee is engaged in the business of trading in gold, kundan, polki and diamond-studded jewellery. During the course of search proceedings conducted on 24.11.2022, certain documents and digital data were impounded, including valuation sheets relating to polki jewellery. On the basis of such data and the statement of the accountant, the Assessing Officer concluded that certain stone-embedded ornaments had been sold at rates applicable to gold jewellery, resulting in an understatement of gross profit. The Assessing Officer, therefore, rejected the books of accounts under section 145(3) and applied the gross profit rate of 20%, being close to the gross profit rate of 23.85% declared in the earlier year, as against 12.16% declared by the as....
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.... 42.2 Based solely on this comparative analysis of the gross profit rates, the Assessing Officer concluded that the fall in profit during the year remained unexplained and accordingly made an addition of Rs. 7,42,53,247/- to the total income of the assessee. 43. The Ld. CIT(A), after a detailed examination of the assessment record and the submissions of the assessee, observed that the Assessing Officer had not brought on record any independent valuation report from a government approved valuer, as mandated under law, to substantiate the conclusion that the assessee had sold stones or non-gold materials at the rate of gold. The so-called valuation referred to during the course of the search was found to be only a rough, on-the-spot estimation, unsupported by any scientific verification or corroborative material. 43.1 Before the Ld. CIT(A), it was contended that the Assessing Officer's conclusions were entirely based on presumption and that no legally admissible valuation report or quantitative discrepancy had been demonstrated. The valuation, if any, carried out during the search was only a preliminary estimate and not based on any weighing or item-wise analysis. It was fur....
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....ation deserved to be restored. 46. We have carefully considered the rival submissions and perused the record. It is evident that the Assessing Officer, while making the addition, mainly relied upon the statement of the accountant and certain valuation remarks that lacked any scientific or evidentiary foundation. No valuation report conforming to the prescribed methodology or rules was ever placed on record. While rejection of books of accounts under section 145(3) empowers the Assessing Officer to make a best-judgment assessment, such estimation must nonetheless be rational, reasonable, and based on objective material. The mere adoption of the gross profit rate of an earlier year, without analysing the turnover composition, market trend, or other commercial circumstances, cannot be sustained. 46.1 The findings of the Ld. CIT(A) reveal that he has made a detailed and balanced appraisal of the facts. He has rightly considered the increase in turnover, the change in product mix, and the absence of any credible valuation evidence. We fully concur with his view that the application of the polki jewellery margin to the entire turnover of the assessee was wholly unjustified, since t....
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....2305600, 6-FH| Fax: 0161 - 2304419 /Email: [email protected] Dated: 31.03.2024 F.No. DCIT/CC-1/Ldh/2023.24/ 1022 सेवा में, अपर आयकर आयà¥à¤•à¥à¤¤, केंदà¥à¤°à¥€à¤¯ रेंज, नà¥à¤§à¤¿à¤¯à¤¾à¤¨à¤¾ । महोदय, Sub: - Request for seeking approval of draft assessment order u/s 143(3) of the Income Tax Act, 1951 - Regarding - Kindly refer to the CBDT, New Delhi's order u/s 119 of the Income Tax Act, 1961 issued vide F. No. 299/36/2021-Dir (Inv. III)/577 dated 15.07.2022. 2. The draft assessment order u/s 143(3) of the Income Tax Act, 1961 is prepared after giving proper opportunity of being heard to the assessee and after taking into account all the issues emanating from the materials available on record which have been examined properly from relevant impounded materials and are incorporated in the draft orders, wherever required. The draft assessment order is being submitted for kind perusal, direction and for seeking necessary approval in v....