TaxTMI 
TaxTMI 
2026 (1) TMI 233
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....e Income Tax Act, 1961 ("Act") by the ACIT Central Circle 5, Delhi ("AO") for AY 2012-13 is bad in law. 2. That contrary to settled law, the Ld. CIT(A) erred in sustaining the action of the AO in assuming unreported commission in the hands of the appellant while passing the impugned order u/s. 153A of the Act for AY 2012-13 in the absence of any incriminating material pertaining to the appellant, being a year for which the appellant's assessment stands completed/unabated. 3. That in any case, unreported commission of the group of companies to which the appellant belongs and the seized materials, having been surrendered to tax and adjudicated upon by the Hon'ble ITSC in the case of the group's flagship company, no presumption of unreported commission in the hands of the appellant is sustainable in the absence of any seized material specific to the appellant and/or found not submitted to the ITSC. 4. Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in making an addition of Rs. 9,30,297/- by applying the rate of unreported commission determined in the case of the appellant's group fla....
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....ted and who are liable to file return of income by September 30, 2016. 3. In view of the above factual position and the settled law basis Hon'ble Supreme Court in Pr. CIT Central 3 v. Abhisar Buildwell (P) Ltd. [2023] 149 taxmann.com 399 (SC), that "In respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in absence of any incriminating material found during course of search under section 132 or requisition under section 132A", the additions for the AYs 2012-13 to AY 2016- 17 being unabated assessments, cannot be made in the absence of incriminating material. Backdrop 4. The appellant company is a part of the Adam Smith Group of companies ("ASG"). The flagship company of ASG is M/s. Adam Smith Associates Pvt. Ltd. ("ASAPL"). ASG is involved in discounting of bills of exchange under letters of credit ("LC"). The Group also provides consultancy in trade financing and other services appurtenant to discounting of LCs. 5. Search u/s. 132 of the Income Tax Act, 1961 ("Act") was conducted on all the premises of ASG companies, including the appellant, on 28.11.2017. The offices of ASAPL were at 901 Commerc....
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.... (61 pages) Cheques of various parties (signed & unsigned) lying in custody 8. Para 6 page 3 of the assessment order is reproduced as under for ready reference: 6. Vide notices us 142(1) of the Act dated 16.11.2019, the assessee was asked the following: A perusal of annexure A-14 & A-29 seized from horel Le Meridian. Windsor Place, Janpath, Delhi and annexures A-35,A-36,A-37,A-38 and A-39 seized from basememt, Thapar House, 124, Janpath, Delhi reveals that you have not accounted for part of your receipts from LC discounting in your books of accounts. From Account Setllement Sheets, seized from your premises as mentioned above, it has been found that average gross commission on your domestic LC discounting comes to 1.28% of LC amount which has not been taken into account while preparing your books of accounts. It has also been found that commission on hundi/LC booked in your books has been reported at a lower rate compared to rate arrived at by averaging the commission as reflected in account settlement sheets. From seized data, it has been found that commission on domestic LC discounting @ 1.28% of LC limit comes to Rs. 3,17,54,1341-during the year wher....
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....es 146-163 of the paperbook) accepting the surrendered unbooked transaction details provided by ASAPL for ASG for AY 2012-13 to Ay 2018-19 and determining the net rate of commission on unbooked transactions (0.25% x 30%) as against the arbitrary rate of 1.28%. Section 2451 of the Act provides as under: "Every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force." 14. In view of the above position in facts and law, the issue of unbooked commission of ASG having been addressed by the Hon'ble ITSC/IBS, the issue stands settled conclusively. No Finding of any "under-reported" transactions 15. There is no finding during Search by the Investigation Wing or subsequently in assessment proceedings or the proceedings before the Hon'ble ITSC/IBS of any transaction that has been "under-reported". On the contrary, as stated by the Ld. AO on page 2, there are parallel sets of accounting records for b....
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....tion Annexure -14 are compared with the LC numbers of each transaction in AY 2012-13 to AY 2016-17 as per the audited accounts of the appellant which were submitted to the Ld. AO on 22/23.12.2019. There is no single LC number match between the alleged "incriminating material Annexure A-14" and no single transaction that is "under-reported" on comparison with the LC numbers of reported transactions. Findings and Conclusion of the Ld. CIT(A) 21. In paras 4.4.5 to 4.4.7 at page 33 of his order, the Ld. CIT(A) notes as under: 4.4.5. .... Order also mentions that these materials have been submitted by ASAPL before ITSC 4.4.5 The appellant is engaged in the business of LC Discounting and financial Consultancy Services. It has similar model as it's flagship company, ASAPL. As mentioned in the assessment order, based on materials seized from Le Meridien and Basement Thapar House offices of ASAPL and all Adam Smith Group of companies, the Investigation Wing determined unbooked commission at an average rate of 1.28% over six assessment years, i.e. in AY 2012-13 to AY 2018-19. The order also mentions that these materials have been submitted by ASAPL bef....
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....fy the exact seized material which shows that there was a unbooked commission related to the appellant company. It is also a fact that the appellant company was operating from same premises from where whole incriminating material was found and seized ASAPL as well as appellant company, both were having the same business model and operating from the same business premises 22. Para 4.4.7 continued at page 34 of the order of the Ld. CIT(A) Seized material also do not have any specific reference to any company. ASAPL, being the flagship company, has declared the undisclosed income related to those seized material while submitting the application before ITSC ......... Accordingly, it is necessary to make alitle adjustment in the net profit earning of the appellant company with regard to booked commission as well. Seized material also do not have any specific reference to any company. ASAPL, being the flagship company, has declared the undisclosed income related to those seized material while submitting the application before ITSC. The ITSC order itself proves that the ASAPL group of companies were earning the additional income which was not offered to taxation....
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....es conclusiveness concerning unbooked commission through ASAPL of ASG companies, including the appellant. Further, in any case, the ld. AO/CIT(A) have failed to bring any material on record to establish that the assessee had any "under-reported" transactions concerning commission/incomes by applying an additional rate of commission to the reported turnover and without invoking s. 145(3) of the Act. Accordingly, it is prayed that the sole addition to the returned income on account of alleged under-reported commission may kindly be deleted and assessee be granted such consequential relief as your Honours may deem fit. For this act of kindness, the assessee shall forever be grateful." 3. Per contra, the Ld. CIT, DR has also filed a paper book prepared by the Deputy Commissioner of Income Tax, Central Circle-5, New Delhi. In the paper book the Revenue has filed photo copy of some of the loose papers seized from the premises of the assessee during the search conducted under Section 132. The Ld. DR argued that these papers seems to be related to the business of the assessee, therefore, the assessment order passed under 153A on the basis of such incriminating document....