TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 615
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.... the assessee, which is corroborated by the incriminating material found during the course of search. 2. Whether on facts and circumstances of the case and in law, Ld. CIT(A)-IV. Kanpur has erred in deleting the addition. without appreciating the facts that the Assessing Officer has passed the assessment order after thoroughly examining and analysing the seized material and proper appreciation of facts of unexplained expenditure u/s 69C of the Act." 2. This is an appeal filed by the revenue and as per the grounds of appeal, the issue raised by the revenue are, the assessee has made unexplained expenditure in construction of its factory at Mewat, Haryana for Rs. 43,71,37,934/- during the year under consideration, based on certain loose papers found during the search proceedings. 3. The facts leading to such addition have been discussed by the Assessing Officer at para 7.1/page 1 to 9 of the order. The main thrust of the Ld. AO for making addition in the case of the assessee was loose slips found from the searched premises of HMA Agro Industries. It was submitted before AO that the loose slips found during the search were unsigned, undated, without any description of t....
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....e same slips are also not related to the year consideration being assessment year 2022-23 relevant to financial year 2021-22. In third excel sheet which has been reproduced in the assessment order, there the "Entity Name" is clearly mentioned as "HMA Agro", which is for two financial years 2021-22 and 2022-23. Since this sheet clearly relates to HMA Agro, however, name of United Farm Product Private Limited is being mentioned for payment made to Surya Construction in different months, which are related to A Y 2023-24 and not to the year under construction. The AO has arrived at the figure of Rs. 2,17,48,976/- pertaining to AY 2022-23 by including top 3 entries of the sheet. From careful perusal, it is noted that the first and third entry pertain to MIs. HMA Agro and the second entry relates to payment of Rs. 1.5 cr. with respect to HMA Agro and United Farm Product. Since all the above documents produced in the assessment order, either don't pertain to the appellant or don't pertain to the year under consideration being A Y 2022-23 (barring one entry), hence it is not understood as to why the AO has quoted these documents in the assessment order to make a case for u....
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....ed by the AO. Hence it is evident that in the said loose paper none of the figures are matching even with the figures of the independent party, namely the Yes Bank who have sanctioned the term loan to the company for the construction of the said plant, nor even the ledger balances of HMA is matching. In the sanction letter submitted of Yes Bank, it is clearly mentioned that they are the sole provider of credit facility to the company for the construction of their plant and the bank balance has been duly authenticated from the bank statement of the said term loans granted to the appellant company, where the balance Outstanding as on 31st March 2022 is Rs. 61,91,02,337/- and this figure is not matching with the amount mentioned in the loose paper as bank loan of Rs. 59,73,27,807/-. It would be worthwhile to mention here that even the disbursement for the month of March 22 as per the bank statement is Rs. 5,80,48,427/- and not Rs. 3,62,63,899/- as mentioned in the paper. This paper is undated and unsigned, and by whom it has been prepared is not mentioned or brought on record by the AO, neither the purpose of this paper has been brought on record in any manner by the AO. On the other ....
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....006-IT (Inv. II) dated 22-12-2006, wherein at para 2.4 it is stated as follows: "2.4 The attempt at this stage should be on marshalling of the facts and putting them in chronological sequence with the primary focus on establishing the preponderance of probability. The Assessing Officer should make diligent efforts to detect the modus operandi and the manner in which the undisclosed income was generated by the assessee. In case it is found that the seized papers, corroborating the fact of generation of undisclosed income, pertain to the period immediately preceding the search action, then logical conclusion of such activity being carried out by an assessee in the balance period of time, for which no documentary evidence is available, should be reached through investigation and not on presumption or muitiplicetion formula. For this purpose, independent enquiries from banks, other financial institutions, independent parties, Govt. Departments etc. should also be carried out simultaneously." As per the Boards above referred instruction, it is clear that the AO while framing the assessment should do so by thorough investigation and not on presumptions or applying multi....
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.... 7.8 The appellant has taken an alternative plea, that since the appellants business was not commenced during the year under consideration, hence the same cannot be treated as appellant income which has been utilized for making cash expenditure in construction of the said plant at Mewat. The plant started its commercial production in December 2022 and the APEDA certificate is from 10.02.2023, which proves that no busienss activity was done during the year, hence no business revenue was earned by the appellant company. Reliance has been placed on the case laws : - Hon'ble Supreme Court in the case of CIT vs. Bharat Engineering & Construction Company 83 ITR 187 - Hon'ble Allahabad High Court in the case of CIT vs. Lal Mohar & Others (2018) 252 Taxman 401 (All). - Hon'ble Agra ITAT in case of DCIT vs. M/s. Surajmal Cold Storage Pvt. Ltd. in ITA No.345/Agr/2009 - In Sugandhi Cold Storeage (P) Ltd. vs. Dept of Income Tax in ITA No.368/Agra/ 2010 dated 20.04.2012 - Same view was also endorsed in b) ITAT Agra in Shastri Construction Co., vs Department Of Income Tax on 27 April,2012 c) Mitesh Rolling Mills P. Ltd. vIs CI....
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....ss there is corroboration by corresponding entry in regular accounts of both the parties to the transaction. The above view further gathers reinforcement from the judgement of the Hon'ble Supreme Court in case of Common Cause v. UOI, [2017] 77 taxmann.com 245 popularly known Sahara dairies and Aditya Birla diaries case. In this case, the Hon'ble Supreme Court, following the judgment rendered in case of V.C. Shukla (supra), laid down the following principles:- (i) Entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act. It is only where the entries are in the books of account regularly kept. depending on the nature of occupation, that those are admissible; (ii) As to the value of entries in the books of account. such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. Even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability; (iii) The meaning of account book would be spiral note book/pad but not loose ....
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....w, it would be arbitrary to sustain the addition to the income of the appellant based on the above referred dumb document, containing scribbling, rough/vague notings in the absence of any corroborative material, evidence on record and finding that such dumb documents had materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of account by the assessee. 7.11 In view of the above discussion and findings, it is evident that the AO has made the addition solely on the basis of loose paper, which is undated and unsigned and it does not mention as to whom this loose paper belongs to and the purpose of the loose paper. The appellant has been able to substantiate with cogent 3rd party evidence that the figures mentioned in the said loose paper are not tallying with the figures of 3rd party namely Yes Bank, which is independent of the appellant. When the figures in the loose paper are not tallying with the loan disbursements and the appellants contention that it is rough working I jottings for estimate purpose, having no evidentiary value, since they are not corroborated with the facts and figures, it seems to be a genuine ....
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.... regard our submission may please be considered as under:-. i. A search and seized operation u/s 132(1) of the Act were carried out on 05.11.2022 at residential and business premises of 'HMA Group of Agra'. ii. During the course of search, certain loose papers were found, which were alleged as related to establishment of new plant at United Farm Product Pvt. Ltd. at Mewat. iii. Later on, during the course of assessment proceedings, on the basis of these so called loose papers, the Ld. AO issued SCN, that expenditure to the tune of Rs. 129,15,55,494/- was made up to 31.03.2022 out of which amount of Rs. 39,22,83,3,07/- was received from banking channel and balance expenditure of Rs. 89,92,72,187/- has been spent in cash being unexplained expenditure. iv. Thereafter, allowing benefit of funds of Rs 85,44,17,560/- (Balance of 44,03,81,860 in the audited Balance Sheet of HMA + 41,40,35,700 surrendered by HMA on account of construction in Mewat) as received from its holding company namely HMA Agro Industries Limited, balance investment of Rs. 43,71,37,934/- has been added as unexplained expenditure of the assessee u/s 69C of the Act. A summary of orde....
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....essee pertain to A.Y. 2023-24 as per Page 4-5 of the assessment order. * Para 7.1 page 23: Since the chat with Miswa, Bhulu Unnao are either not clearly linked to the appellate company or are not related to the year under consideration, hence, are of no evidentiary value, and cannot be said to be evidence in the eyes of law. * Para 7.1 page 23: The appellate company is in the initial stages of setting of plant and since, no business revenue earned by the appellate company before start of any of its business activities, hence the amount would not have been spent by the appellate company. * Para 7.2, 7.3 page 24 to 25: It is evident that in the said loose paper none of the figures are matching, even with the figures of the independent party namely YES Bank who have sectioned the term loan to the company for the construction of the said plant, nor even the ledger balances of HMA is matching, therefore, it is dumb documents and reliance placed by the AO on the said piece of paper is completely unwarranted. * Para 7.2, page 24: This paper is undated, unsigned, by whom it has been prepared and the purpose of this paper is not mentioned or brought on re....
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.... AO were not matching with the bank statements and books of HMA Agro. * The assessee has not yet started its business operations and therefore, there is no revenue and accordingly the question of incurring any unaccounted/unexplained expenditure is not possible. Reliance in this regard is placed on the following judgments: M/S KHANNA INFRABUILD PVT. LTD. vs. DCIT in ITA No. 133, 134 & 135/Chandi/2023 "Even otherwise, since the assessee company's business has not commenced and that the construction of the building was done out of the capital invested by the shareholders and hence, there was no case of earning of any income, what to say of any income from undisclosed sources, therefore, the substantive addition in the hands of the assessee company was not justified. The issue is squarely covered by the various decisions including the decision of the Hon'ble Apex Court in the case of "CIT vs. Bharat Engineering & Construction Co." (supra) as referred to above by the ld. Counsel for the assessee in the written submissions. The action of the CIT(A) in reversing the view point of the Assessing Officer on this issue, therefore, cannot be held to be justified. In....
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.... within a few days after the commencement of its business. Hence, it was reasonable to assume that the cash credit entries represented capital receipts though for one reason or another the assessee had not come out with the true story as regards the source of the receipts." CIT vs. BURMA ELECTRO CORPN. As reported in [2003] 126 TAXMAN 533 (P & H HC) "Section 68, read with section 260A, of the Income-tax Act, 1961 - Cash credits - Assessment year 1989-90 - Assessing Officer made additions to returned income of assessee-firm on account of unexplained cash credits in capital accounts of some partners - Tribunal deleted additions on ground that though there was no evidence on record to show availability of funds with partners at time of investment with assessee-firm, concerned partners admitted to have made those investments and revenue also failed to bring on record any material to indicate that those investments were profits of assessee-firm - Tribunal held that it could not be assessed as income of assessee in terms of section 68 but might be assessed in individual hands of partners, if it is permissible under section 69 - Whether reasons assigned by Tribunal for d....
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....22 is Rs. 61,91,02,337/-. Further, the above figures do not match with the loose paper found. It is also fact that the information found in the loose sheet did not match the information available with the assessee. Since the paper found does not have any signature and is undated, for what purpose the same was prepared also not clear. Ld CIT(A) had listed the chart comparing the figures mentioned in the loose sheet, contention of the AO and assessee's contention as under: Amount in Loose Sheet AO's Contention Appellants contention 12,47,19,850 from HMA Investment by HMA in said plant for the month of March 2022 Amount recd. from HMA for March 2022 is Rs. 6,80,00,000/- 3,62,63,899 from Bank Loan Disbursement from bank loan for the month of March 2022 Yes bank disbursement for month of March 22 is Rs. 5,80,48,427/- 129,15,55,494 from HMA Total investment by HMA upto 31.3.22 Investment by HMA upto 31-3-22 as per their ledger is Rs. 44,03,81,860/- 59,73,27,808 from Loan Total Loan amount taken from Yes bank upto 31.3.2022 Loan outstanding as per Yes Bank statement as on 31.3.22 is Rs. 61,91,02,337/- 10. Based on the above comparison, L....