TaxTMI 
TaxTMI 
2025 (2) TMI 1356
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.... admittedly identical in all these years. For the purpose of adjudication, AY 2011-12 has been taken to be the lead year. 1.2 The grounds raised by the revenue for AY 2011-12 read as under: - 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The Ld.CIT(A) erred in restricting the disallowance of quarry expenses of Rs. 1,12,04,385/- made in the assessment to 30% of such expenses. 2.1 The Ld.CIT(A) failed to appreciate that though the quarry licences were in the name of S.A. Subbiah and Shri. B. Kubendran, it was established that they were persons of no means. The assessee had also not produced any evidence substantiating expenses for quarrying. 2.2 The Ld.CIT(A) failed to appreciate that the assessee submitted that the rough stones were received from the quarry license holders by M/s Rasi blue metals, to the extent of value of expenditure incurred including for provision of facilities to the license holders. In such a scenario, there must be a clear bifurcation of quarry excavation expenses and the valuation of rough stone to justify the incurring of the quarry expenses, but the as....
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....ts. 4.1. The Id CIT(A) failed to appreciate that only on the basis of search, it was established by the assessing officer that the quarry license holders were mere name lenders having no means and the entire quarrying operations were controlled by assessee's Proprietary concern M/s. Rasi Blue metals and quarrying expenses were claimed in the books of accounts of M/s. Rasi Blue Metals. 4.2 The Id CIT(A) failed to appreciate that only on the basis of search, the reference was made to the valuation cell to ascertain the quantity of materials excavated over the years. Further, even in the Revenue Divisional officer (State Govt)'s order itself the excess volume of minerals quarried and taken without permission was quantified at stones 1,02,241.39 cu. m and gravel of 71,912.62 cu.m. This excess excavation from quarry representing the unaccounted closing stock found during the search can be considered as incriminating evidence in nature. 5. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Office....
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....ssessment framed on 27.12.2019 was set aside and Ld. AO was directed to pass fresh assessment order after providing copies of seized material to the assessee and after providing him the opportunity to cross-examine the witnesses. Subsequently, the assessee preferred another application before Interim Board for Settlement-2, New Delhi on 27.09.2021 for AYs 2011-12 and 2015-16 to 2018-19. Pending disposal of the same, the assessee preferred Writ Petition before Hon'ble High Court of Madras on 20.10.2022 praying for quashing of notices relating to recovery of tax demand. However, the assessee sought leave to withdraw the writ petitions and stated that he would not prosecute the settlement applications. The Hon'ble Court disposed off Writ Petition vide order dated 22.12.2022 and directed Ld. CIT(A) to dispose-off the pending appeals for AYs 2011-12 to 2018-19 expeditiously and in any event on or before 31.03.2023. The Hon'ble Court also held that the grounds raised in the appeals that the assessment Orders were passed during the pendency of settlement application would not be available to the assessee. Pursuant to the same, hearing notices were issued to the assessee during appellate p....
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.... Disallowance of quarry expenses 3.1 It transpired that M/s Rasi Blue Metal ('RBM' in short) was engaged in production of blue metals of various sizes. The rough stones for production thereof were stated to be supplied from rough stone quarries which were held in the names of two persons i.e., Shri SA Subbaiah and Shri B. Kubendran. The assessee owned 4.92 Hectares of land at Melur Village Kulathur Taluk, Pudukottai which was given on lease to Shri B. Kubendran for the purpose of quarrying by said person. Similarly, the assessee and Shri B. Kubendran owned 3.84 Hectares and 1.06 Hectares of quarry land at Thrivengalaivasal which was given on lease to Shri SA Subbaiah for quarrying by said person. However, Ld. AO, based on recorded statements, concluded that though Shri SA Subbaiah and Shri B. Kubendran were having licenses to carry out quarrying operations, however, they assisted the assessee in quarry business by being mere lessees of the quarries. The operational control of the quarries was with Shri V. Palanisamy (GM of RBM) who was a key person to look after all the business affairs of the assessee and his family members. This inference was on the basis of statements made by....
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....n respect of material excavated from the quarries. Both the persons filed return of income for AY 2015-16 u/s 139 before the date of search disclosing income from business in respect of the said quarrying activities being carried out by them. They also filed return of income disclosing such business income in the return of income filed in response to notices issued u/s 153C issued to them after search. Therefore, it could not be said that both the persons were not carrying out quarrying activities. At the same time, the business arrangement entered into by the assessee with the quarry license holders was evidenced by their respective statements. The same was also evident by the fact that the assessee did not debit any expenditure towards cost of purchase of rough stones in the Profit & Loss Account. The quarry expenses were incurred by the assessee during the course of business of production of blue metal only in order to procure the raw material for the said business from the quarries. Therefore, the quarry expenses as incurred by the assessee under the said business arrangement with the quarry license holders represent the cost of purchase of rough stones which is used as raw mat....
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.... this expenditure could not be substantiated fully by the assessee. Therefore, the disallowance of 30% is good enough to take care of the revenue leakage. It is another fact that if quarry expenses are disallowed in toto, the same would result into abnormal profits for the assessee which is not possible in this line of business. Accordingly, the adjudication of Ld. CIT(A) could not be faulted with. We concur with the same. The grounds raised by the revenue, for all the years, stand dismissed accordingly. 5. Undisclosed Sale of Blue Metal 5.1 The Ld. AO alleged that the assessee made unaccounted sales of blue metal. The same stem from the allegation that excess excavation was done from the mines. It was inferred by Ld. AO that rough stones as excavated from the quarries were captively taken and utilized by M/s RBM for production of blue metal. Therefore, any excess undisclosed excavation of rough stone and associated gravel (malaimann) from the said quarries could be considered to have been taken by M/s RBM and corresponding sales of blue metal was to be treated as undisclosed sales of M/s RBM. 5.2 In order to ascertain the quantum of excess quarrying of rough stone and mal....
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....e for Shri SA Subbaiah was thus quantified as Rs. 63.16 Crores (Rs. 58.40 Crores + Rs. 4.75 Crores) for FYs 2008-09 to 2016-17. Similar estimation was made for quarries under the license of Shri B. Kubendran. The value of excess stone in the hands of Shri B. Kubendran was quantified at Rs. 3.85 Crores. 5.3 Armed with these computations, Ld. AO proceeded to determine the value of undisclosed sales of blue metal in the hands of the assessee since excess stone so excavated would be captively utilized by the assessee in production of blue metal. The blue metal would be produced in different sizes. As per assessee' statement, the percentage breakup of rough stone which is crushed into blue metals of various sizes would be as under: - Size of Blue Metal 40 mm 20 mm 12 mm 6 mm Dust Break-up percentage 40% 25% 10% 5% 20% The year-wise selling price of each of the category of stone was ascertained by Ld. AO. Finally, the sales value of blue metal produced out of alleged 22,76,300 cubic meters of rough stones was computed by Ld. AO for each of the category with respect to quarry under the license of Shri SA Subbaiah. Similar sales value was computed ....
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.... in the control and at the disposal of the assessee. The Ld. AO further held that no stock-book was maintained by the assessee for quarrying operations. The computation made was on scientific basis. Shri Iftikhar Ahmed, qualified mining planner, in statement u/s 131, stated that the quarry sites in Puddukottai District region where the quarries were located was almost similar and landscape was free of undulation. He also stated that there was least possibility of gravel formation below the fractured and fissure zone. The assessee was afforded cross-examination of Shri Iftikhar Ahmed on 24.11.2020. It was stated by Shri Iftikhar Ahmed that though he is not an expert in photogrammetric methodology, he could state with his knowledge and experience that the quantity of material excavated could not be ascertained unless a Geochemistry investigation was carried out at the mining site. As regard the quantity of excavation, he stated that the quality assessment of digital elevation modeling may be somewhere appropriate only when all the excavated portions were uniform in size and similar in composition. He stated that since the rough stones had varied sizes of 2 mm to 2m with irregular sha....
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....dran. For the said purpose, the DVO engaged the services of M/s Gridline Surveys and Geospatial Pvt. Ltd for ascertaining the volume of excavation made from the quarries using the Ariel Photogrammetric Methodology using drones. Based on the said methodology, the DVO furnished separate inspection reports in respect of the quarries licensed to Shri SA Subbaiah and Shri B Kubendran wherein the DVO made quantification of the volume of excavation of rough stone and malaimann from the said quarries from the date of commencement of the quarrying by the said persons to the date of inspection on 29.05.2017. Since the entire quantity of rough stone excavated from the said quarries was supplied to M/s RBM, the quantum of production of blue metal of various sizes by crushing the said quantity of rough stone received from the quarries was determined by Ld. AO on the basis of the standard yield from production as stated by the assessee in his sworn statement recorded on 03.08.2017. The actual sales of blue metal by the assessee for various assessment years was worked out by Ld. AO by taking into consideration the quantum of blue metal production so computed and the market value prevailing in the....
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....hich is suitable for production of blue metal was obtained on excavation of the quarries. The AO adopted the volume of rough stone as determined in the DVO's report for the purpose of working out the excess quantity of excavation of rough stone and corresponding excess quantity of production of blue metal by the assessee, leading to computation of unaccounted sales of blue metal in the hands of the assessee. The AO made reference to the answer given by Shri Ifthikar Ahmed, a Geologist and a qualified Mining Planner, to Q.No.15 of his statement u/s 131 dated 19.06.2017 to infer that there was little possibility of formation of hollow rock at the relevant quarry sites and to conclude that the computation of volume of rough stone excavated from the quarries made by the DVO in the inspection reports was scientific and accurate. However, as rightly contended by the assessee, the inspection reports of the DVO suffer from the erroneous presumption that the entire volume of material excavated from the quarries (other than malaimann) was that of 'rough stone' only which would be suitable for production of blue metal. The fact that the said presumption made by the DVO was erroneo....
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....t the excavated material could not be considered to be similar in composition and uniform in size. It was also evident that the reliance placed by the AO on the answer to Q. No.15 of his statement dated 19.06.2017 to derive support regarding the scientific nature and correctness of the methodology adopted in the inspection report of the DVO for ascertaining the quantum of rough stone excavated from the quarries was erroneous. 6.4 It was further noted that DVO engaged the services of a private agency M/s Gridline Surveys and Geospatial Pvt. Ltd for the purpose of making survey of the quarry sites using Aerial Photogrammetric Methodology. Shri P Manikandan, Director of the said company, was cross-examined by the representatives of the assessee on 24.12.2019. During cross-examination, in his answer to Q.No.12, he clarified that the methodology adopted by them could only reasonably determine the extent of volume of material excavated in cubic meters and that it could not determine whether the entire material excavated barring the overburden was rough stone. He clarified that the exercise carried out by his company was restricted only to making a fair estimate of the excavated volume....
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....omprised of 'rough stone' (suitable for production of blue metal) only. The inspection reports of the DVO wherein the entire volume of material excavated from the quarries, excluding the volume of malaimann, had been treated as the volume of rough stone were clearly erroneous for the said reasons. The minerals excavated from the quarries other than "rough stone" was not suitable for production of blue metal and consequently, the volume of such minerals (other than rough stone) comprised in the total volume of minerals excavated could not be taken into consideration for the purpose of working out the actual production and sale of blue metal by the assessee. Therefore, it was held that the working of actual production and sales of blue metal as made by Ld. AO was based on the erroneous determination of the volume of rough stone excavated from the quarries in the inspection reports of the DVO. Therefore, the determination of unaccounted sales of blue metal by comparing the actual sales so worked out with the sales disclosed in the returns of income of the assessee was erroneous and unsustainable on facts. 6.7 The Ld. CIT(A) then referred to the order of the RDO, Iluppur dat....
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....nished his report dated 05.07.2019. After taking into consideration the reports of the Assistant Director (Land Survey) and Assistant Director (Geology & Mines), the RDO arrived at the finding that 20,63,965 cubic meter of stones and 2,03,649 cubic meter of gravel was found stacked / dumped at the quarry site or nearby areas. The RDO compared the availability of the said material at the quarry site with the total volume of excavation of minerals from the quarries as per the report of the Income Tax Department and worked out the excess volume of minerals (Stone and gravel) quarried and taken out without permission, the details of which are as follows: - Particulars Stones (Cubic Meter) Gravel (Cubic Meter) Volume of minerals removed without permission as per the report of income tax department 21,66,206.00 2,75,562.00 Volume of minerals dumped on the leased / licensed spot /nearby it according to the report of Asst. Director (LSD) Pudukottai, / Tahsildar Illupur and Asst. Director (G&M) Pudukottai 20,63,964.61 2,03,649.38 Volume of minerals quarried and taken out without permission 1,02,241.39 71,912.62 Accordingly, RDO held that the excess qua....
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....ken out from the quarry site without permission and without payment of seigniorage fee. Since the stone excavated from the quarries comprised-off not only 'rough stone' which could be used for production of blue metal but also other varieties of stones such as weathered rock, fractured and fissured rocks, soft rocks, etc. which would not be suitable for production of blue metal, it could reasonably be inferred that the quantity of stones excavated from the quarry but found dumped / stacked at the quarry site and nearby places of 20,63,965 cubic meters represents such stone which was not suitable for production of blue metal. The Inspection report of the DVO was based on erroneous presumption that the entire quantity of stone excavated from the quarry was represented by 'rough stone' which would be suitable for production of blue metal. Based on the said erroneous presumption, the DVO determined the total quantity of hard rough stone excavated from the quarry of Shri SA Subbaiah at 22,76,300 cubic meters. The excess / undisclosed quantity of hard rough stone excavated from the said quarry was worked out by the AO at 22,66,200 cubic meters, after deducting the quantit....
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....the assessment order. 6.10 With regard to quarry of Shri B Kubendran, it was seen that no order had been passed by RDO. However, the above conclusion in respect of quarries held by Shri SA Subbaiah was equally applicable to the quarry of Sri B. Kubendran also. The DVO determined the quantum of excavation of rough stone from the said quarry at 52,528 cubic meters in his inspection report. However, the said quantum of excavation pertains to various types of stones including rough stone, as discussed supra and it was wrong to consider the entire excavated quantity as the quantity of rough stone alone. Notwithstanding the same, keeping in view the smallness of the quantity involved and the absence of RDO's determination with regard to the said quarry, it was considered that no modification would be required with regard to the working made by Ld. AO in relation to the quarry of Sri. B. Kubendran. 6.11 Finally, Ld. AO was directed to adopt total quantity of rough stone excavated and supplied to the assessee from the quarry of Shri SA Subbaiah at 2,12,341 cubic meters (by aggregating the disclosed quantity of 1,10,100 cubic meters and undisclosed quantity of 1,02,241 cubic meter....
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....es for M/s RBM. To support the same, Ld. AO referred to the Valuation Report of DVO who carried out inspection by using Aerial Photogrammetric Method using unmanned Aerial Vehicles (drones). On the basis of same, Ld. AO quantified the undisclosed sales in the hands of the assessee. The methodology so adopted by Ld. AO to work out the same has already been enumerated in the preceding paragraphs. It could be seen that the working of Ld. AO yielded negative figures for FYs 2012-13, 2013-14 and 2015-16 which were ignored and no such addition was made in these years. However, the working yielded positive figures for FYs 2010-11, 2011-12, 2014-15 and 2016-17 and accordingly, the additions were made in these years. To support its working, Ld. AO referred to the statements of various persons which were also cross- examined by the assessee. Though the assessee maintained that there was no unaccounted sale, Ld. AO rejected the same and made impugned additions in the hands of the assessee. 8. The Ld. CIT(A) noted that DVO engaged the services M/s Gridline Surveys and Geospatial Pvt. Ltd for ascertaining the volume of excavation made from the quarries using the Ariel Photogrammetric Methodo....
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....izes of 2mm to 2m with irregular shapes, there was possibility of presence of more voids inside the heaps which may not match with the surface relief taken from unmanned Aerial photography and accordingly, errors of estimation were bound to occur in the said methodology. The same clearly weakens the conclusion of Ld. AO. 10. The DVO engaged the services of a private agency M/s Gridline Surveys and Geospatial Pvt. Ltd for the purpose of making survey of the quarry sites using Aerial Photogrammetric Methodology. Shri P Manikandan, Director of the said company, was cross-examined wherein he clarified that the said methodology could only reasonably determine the extent of volume of material excavated in cubic meters but it could not determine whether the entire material excavated was rough stone only. It was not possible to ascertain the quantum and quality of the excavated materials from an already excavated quarry. This further weakens the conclusion of Ld. AO. 11. Shri Gopalakrishnan, DVO clearly admitted that though the assessment of the total volume of material excavated from the quarries made in his report based on the Aerial Photogrammetric Method could be said to be near ....
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....d. AO to re-work the undisclosed sales in the hands of the assessee. No order was passed in the case of Shri B Kubendran and accordingly, the stand of Ld. AO was confirmed. The Ld. CIT(A) also considered the gross profit reflected by the assessee in these years and directed Ld. AO to apply average gross profit rate to undisclosed sales on the ground that entire sales could not be considered to be the income of the assessee. In our considered opinion, Ld. CIT(A) has clinched this issue in correct perspective. The findings of Ld. CIT(A) have duly considered the statements made by various persons during cross- examination and re-examination. The adjudication is based on available facts and evidences on record. We concur with the adjudication of Ld. CIT(A) and see no reason to interfere in the same. The grounds raised by revenue, for all the years, stand dismissed accordingly. 13. Unaccounted Closing Stock 13.1 This addition was made only for AY 2017-18. The same stem from the observation of Ld. AO that during search u/s 132 at the premises of M/s RBM (proprietory concern of the assessee) and M/s V. Infrastructure (proprietory concern of wife of the assessee), the raw material an....
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....te written submissions wherein the assessee reiterated its earlier stand. The adjudication of Ld. CIT(A) is contained in para 87 onwards. The Ld. CIT(A) noted that the impugned addition was based on the valuation of the closing stock as per the report of the DVO and the closing stock disclosed by the assessee in the return of income for AY 2017-18. The impugned addition had three components i.e., Addition of Rs. 38.86 Lacs which was difference between the value of the closing stock of the items listed at Sl. Nos.1 to 8 and 11 to 12 of the valuation report of the DVO amounting to Rs. 474.40 Lacs as against stock of Rs. 435.54 Lacs as reflected by the assessee in return of income. The second component of Rs. 22.34 Lacs was the value of items listed at Sl.Nos.9 to 10 and 13 to 14 of the valuation report whose value was not worked out in the report but the same was determined by Ld. AO based on the market prices of the said items. The third component was the value of malaimann which was held to be the closing stock of the assessee though the assessee contended that the same belonged to the quarry license-holders only. 13.5 On the first addition, the assessee argued that DVO report v....
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....ng stock belonging to the assessee on the reasoning that though the quarry licenses were held in the names of Shri SA Subbaiah and Shri B Kubendran, the said persons were mere name-lenders and the actual quarrying operations were carried out by the assessee. While adjudicating the issue of deduction of quarry expenses, it was held that it could not be considered that the assessee was actually carrying out the quarry operations having regard to the facts and circumstances of the case. Applying the said finding in the context of the closing stock of malaimann also, it was to be considered that the said closing stock belonged to the quarry license holders only. Though the said material was found on the quarry lands owned by the assessee, the said lands were given on lease to Shri SA Subbaiah and Shri B Kubendran, who obtained quarry licenses in respect of the said quarry lands. Therefore, the stock of malaimann could not be considered to part of the closing stock of the assessee and it could not be treated as unaccounted closing stock of the assessee. Accordingly, the impugned addition of Rs. 882.88 Lacs was deleted against which the revenue is in further appeal before us. Our Adju....
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....RS Mining i.e., DCIT Central Circle- 24, Chennai that seized loose sheets from page Nos. 111 to 124 of ANN/KGAR/MPKSSR/LS/S-1 and seized loose sheets from page Nos. 84 to 104 of ANN/KGA/SRS-YS/LS/S contained the details of payment of 20% of net monthly proceeds of sand mining business to the assessee by M/s SRS Mining. Reference was made to the sworn statement of Shri K Srinivasulu dated 10.12.2016 which was also received from the AO of M/s SRS Mining. In the said statement, Shri K Srinivasulu (an associate of Shri J. Sekar Reddy, partner of M/s SRS Mining) stated in response to Q. No.6 that the profit of M/s SRS Mining was shared in the ratio of 30:30:20:20 amongst Shri J Sekar Reddy, Shri S Ramachandran, Shri K Rathinam and Shri C. Vijayabaskar respectively. Based on the details of month-wise share of profits received by the assessee during the period from June, 2014 to October, 2016 available in the said seized material, the amounts allegedly received by the assessee from M/s SRS Mining was quantified at Rs. 49.40 Crores Rs. 4.20 Crores and Rs. 31.85 Crores for AYs 2015-16, 2016-17 and 2017-18 respectively. Based on the said information and copies of the seized material as recei....
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....ed additions towards undisclosed receipts from M/s SRS Mining. The impugned additions were made accordingly which were subjected to assessee's further appeal before Ld. CIT(A). 16.3 The Ld. CIT(A) observed that the impugned addition was based on entries found in loose sheets as found during search on M/s SRS Mining and on the basis of statement of Sri. K. Srinivasulu u/s 132(4) on 10.12.2016. The assessee contended that the seized material as referred to by Ld. AO did not contain any mention of the name of the assessee. It was pointed out that the alleged profit-sharing ratio of 30:30:20:20 with the assessee being the recipient of 20% share of profits from M/s SRS Mining as stated by Sri. K. Srinivasulu in his statement u/s 132(4) dated 10.12.2016 was nowhere found in the seized material. The assessee also pointed out that the seized material did not contain any indication that the assessee was the fourth partner of M/s SRS Mining as alleged in the statement of Shri. K Srinivasulu. Reference was made to the joint affidavit of three partners of M/s SRS Mining (Shri J Sekar Reddy, Shri S Ramachandran and Shri K Rathinam) dated 24.12.2019 wherein they have affirmed that they are th....
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....ment order would show that the profit sharing ratio amongst the partners of M/s SRS Mining was 60:20:20. Wherever the profit sharing ratio was found noted in the seized loose sheets, it was mentioned as either 60:20:20 or 40:30:30. The said profit-sharing ratios clearly indicate that there were only 3 partners in M/s SRS Mining and there was no fourth silent partner (Vijayabaskar) as stated by Shri K Srinivasulu. It was thus unambiguously evident that the seized material neither reveals that the assessee was a silent partner in M/s SRS Mining nor reveals payment of 20% share of profit to the assessee by the said firm. The Ld. AO merely relied on the statement of Shri. K. Srinivasulu to arrive at such a conclusion. However, it was evident that the aforesaid statement of Shri K Srinivasulu was contrary to the contents of the seized material and consequently, the same could not be considered as a reliable statement. There was no other material available on record to support the conclusion of Ld. AO. On the contrary, M/s SRS Mining had three partners as per the returns of income filed by it which do not include the assessee. Further, the three partners namely Shri S Ramachandran, Shri ....
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....to have been made to the said person, unless there was corroborative evidence to establish the actual making of payments to the said person. There was no reference to such corroborative evidence in the assessment order. Reliance was also placed on the decision of Jabalpur Tribunal in the case of ACIT Vs Satyapal Wassan [TS-5104-ITAT-2007(Jabalpur)-O] stressing the importance of gathering corroborative evidences in support of the contents of a seized document particularly when the document was bereft of necessary details and it was not complete in all respects. Reference was also made to the decision of Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. (ITA No.250/Mum/2013) holding that AO was required to bring on record further evidence to show that the money had actually exchanged between the parties in case where there was no other evidence on record to prove that on-money was paid except the loose sheet found in the premises. The Hon'ble Supreme Court in Common Cause Vs. Union of India (2017) 77 Taxmann.com 245 (SC) stressed the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found in loose sh....
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....ore than 3 days without a break and he not being allowed to sleep or take rest. He stated that he was not allowed to read the typed statement and his signature was obtained by force on the statement. He stated that he never paid any money to various persons as recorded in the typed statement. He also stated that he signed the statement in order to end the prolonged ordeal of intimidation, harassment and mental torture. Further, Shri K. Srinivasulu reiterated his retraction in the course of the cross-examination by the representatives of the assessee and re-examination made by the AO during the course of the assessment proceedings on 26.12.2019. The Ld. AO rejected the retraction on the ground that the same was without any basis and no other credible explanation was offered by him with regard to the entries in the seized loose sheets supported by credible evidence. The stand of Ld. AO was unsustainable in the light of the fact that the seized material itself did not mention the name of the assessee and there was no noting regarding the receipt of 20% share of profit by the assessee. Since the statement of Shri K Srinivasulu u/s 132(4) was contrary to the contents of seized material ....
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....resaid statement of Shri K Srinivasulu has been found to be contrary to the contents of the seized material. There is no other material on record to support the conclusion of Ld. AO. As per returns of income, that entity is having three partners only. In fact, the three partners namely Shri S Ramachandran, Shri J Sekar Reddy and Shri K Rathinam has executed a joint sworn affidavit on 24.12.2019 solemnly affirming the fact that the firm had only three partners and there was no other partner in the firm. It is also evident that no evidence or material has been found in this regard during search on assessee. Even otherwise, the so-called incriminating material has been found from a third-party premises and unless there are corroborative evidences to support the same, no such addition could be made in the hands of the assessee. The case laws being cited by Ld. CIT(A) in the impugned order duly supports the case of the assessee. The statement of Shri K. Srinivasulu has been found to be contrary to the contents of the seized material. As clearly brought out by Ld. CIT(A), he had no first-hand knowledge of the payments noted in the seized material and he had merely noted whatever was told....
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....g Vs UOI (141 Taxmann.com 272), at para 9, observed that the statement of Shri K Srinivasulu could not be relied upon as he turned hostile by giving specific retraction statement and there was no need to accord permission to cross-examine him in view of the said reason. Considering these observations, it was to be held that the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. In the present case also, Ld. AO did not rely on any other corroborative evidences except for relying on the statement of Shri K. Srinivasulu since in the sworn statements of three other partners recorded on 08-12-2016, no questions were posed to them at all regarding the seized material allegedly containing the details of incidental charges paid to various persons. It was thus evident that no other corroborative evidence was available on record in respect of notings in the seized material. Therefore, the impugned addition could not be sustained merely by relying on this statement only. Considering all these facts, the adjudication of Ld. CIT(A) could not be faulted with. By concurring with the same, we r....
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....2 The Ld. CIT(A) noted that in answer to Q. No.23, Shri V. Srinivasa Rao Polisetty explained that Page No.87 was a ledger extract of general expenses which show expenditure on monthly basis in respect to cash paid to Health Minister of Tamil Nadu which as paid through Shri Rajendran. He stated that the description therein "GE(HM/R)" indicates general expenses, Health Minister and Rajendran. However, the assessee contended that he had no acquaintance with Shri V. Srinivasa Rao Polisetty and he never met him and never received any amount from him. 18.3 The Ld. CIT(A), upon perusal of seized material, concurred that the name of the assessee did not appear in any of the entries as considered by Ld. AO to be pertaining to the assessee. All the entries contain only the abbreviation / acronym 'HM'. The Ld. AO relied on the statement of Shri V. Srinivasa Rao Polisetty to conclude that 'HM' denotes Health Minister and the assessee was the recipient of the payment as noted in the seized material with the said abbreviation of the assessee's official position in the material seized from a third-party. This material was seized from third-party premises. The said material was neither seized f....
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.... Tribunal in the case of ACIT vs Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O], the decision of Mumbai Tribunal in the case of Riveria Properties Pvt. Ltd. Vs ITO (ITA No.250/Mum/2013) as well as the decision of Hon'ble Supreme Court in the case of Common Cause vs. UOI (77 Taxmann.com 245). 18.4 The Ld. AO relied on the retracted statement of Shri V. Srinivasa Rao Polisetty. The witness of the revenue turned hostile and therefore, the statement of said person would lose its evidentiary value and the same could not be held against the assessee unless independent evidence was brought on record to corroborate the said statements. No such corroborative evidence was placed on record. In the decision of Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla (AIR SC 410), it was held that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon'ble Supreme Court is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case. 18.5 Finally, ....
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....apacity as Minister of Health and family welfare. His residence was also searched on 07.04.2017 wherein two files with the names "Remo 21.10.2016 accounts sheets.docx" and "Petty cash expenses November, 2016.docx" was found in the email account of JS. The same were downloaded, printed and seized vide ANN/RR/JS/LS/S dated 07-04-2017 (Page No.20 to 38). The said document allegedly contained date-wise details of funds received and expanded during the period from 23.07.2016 to 09.11.2016. The cash received from various sources during that period aggregated to Rs. 20.75 Crores. A statement was recorded from JS on 07.04.2017. In reply to Q. No.5, he stated that his role was to manage visitors and look after transfers and postings of officials pertaining to the Health Department. He further stated that he also carried out instructions given by Health Minister's family and other works assigned by the Minister. In reply to Q. No.18 with regard to contents of Page No.37 of the seized material as seized vide ANN/RR/JS/LS/S, he explained that first column represent date on which transaction took place, the second column represent the particulars of transactions, the third column represent paym....
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....im was never carried out by him as the Minister had many PAs. He further stated that he was under stress and pressure and he succumbed to the same and signed the statement as typed by the officials. He stated that he did not receive or paid any money under the directions of the assessee or on the directions of Shri A. Saravanan. On the basis of the same, the assessee opposed any addition on this account. 20.4 Shri JS was re-examined by Ld. AO immediately. The Ld. AO held that vague and unproved allegations of threats, coercion etc. were made by him to justify retraction. Therefore, the retraction was to be ignored. The statement given during the search alone would give the correct picture as the deponent would be free to depose the actual facts known to him without being under compulsive influence of his masters. The retraction was purely an afterthought. The relevant evidences regarding unaccounted receipts were found in the email account. The said email account was used and operated by JS, the printouts of which were seized during the course of the search at his residence. The entries in the seized material represented statement of account of receipts and payments and the same....
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....ame was not complied with. Reference was made to manual of CBDT as issued in the year 2014. The manual stressed the need to maintain the integrity of electronic record as evidence. In the present case, the procedure laid out in Sec. 65B was not complied with as regard to authentication and certification of said seized material and therefore, the same could not be relied upon. The source of the two attachments in the email of JS was not known. To support the same, reference was made to the decision of Hon'ble High Court of Madras in M/s Vetrivel Minerals vs. ACIT (129 Taxmann.com 126) as well as the decision of Mumbai Tribunal in the case of Shri Anand Jaikumar Jain (ITA Nos. 3820, 3821, 3822 & 3823/Mum/2019). The assessee thus submitted that impugned addition as based on loose sheets were drawn from the digital evidence and not supported by the authentication and certification as required u/s 65B of the Indian Evidence Act and therefore, the addition was to be deleted. 20.6 The Ld. CIT(A) noted that the addition was based on seized material which was represented by the seized loose sheets at page nos.72 to 90 of ANN/RR/JS/LS/S. The same was printed from two excel sheets bearing ....
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.... Evidence Investigation Manual 2014 of CBDT which was in conformity with the Indian Evidence Act. The assessee also contended that computer output in the form of printouts could be considered as a "document" under the Indian Evidence Act with the pre-requisite that the conditions as prescribed u/s 65B(2) are mandatorily fulfilled. The assessee contended that where a statement in evidence is sought to be given by virtue of Sec.65B, the provisions of Sec.65B(4) require that such statement in evidence is accompanied by a certificate regarding the satisfaction of the conditions laid down in Sec.65B(2). Reliance was placed on the decision of Hon'ble Supreme Court in the case of Arjun Panditrao Khotkar Vs Kailash Kushanrao Gorantyal and Others 2020 SCC Online SC 571 wherein it was held that certificate u/s 65B(4) is mandatory and a condition precedent to the admissibility of evidence by way of electronic record. This decision is stated to be relied upon by Hon'ble Jurisdictional High Court in the case of Vetrivel Minerals (129 Taxmann.com 126). The assessee contended that in the light of these decisions as well as in the light of CBDT Digital Evidence Investigation Manual, the se....
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.... referred to the deposition made by Shri JS on the contents of the documents in his sworn statement dated 07.04.2017 wherein he acknowledged that the email contents were prepared by him. The said deposition constitutes complete evidence for the transactions recorded therein. The email extract constitutes 'document' as per Section 3 of the Indian Evidence Act, 1872 and hence admissible as evidence without reference to Section 65B of the Indian Evidence Act, 1872. The legal presumption under Section 132(4A) of the Income Tax Act, 1961 would also apply. 20.9 The remand report was confronted to the assessee who vehemently opposed the stand of Ld. AO and continued to press its legal ground on admissibility of legal grounds. The adjudication of Ld. CIT(A) is contained in para-160 onwards. The Ld. CIT(A) held that the provisions of Sec.65B specifically deals with provisions relating to admissibility of electronic records. These provisions have overriding effect over other provisions of the Indian Evidence Act in view of non- obstante clause embedded therein. The provisions of Sec.65B(1) clearly provide that information contained in the electronic records which is printed on pap....
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....rovided in Sec.62 or 65 of the Evidence Act. 20.10 The contention of Ld. AO that the loose sheets would constitute primary / original evidence was not tenable. The same were printouts of excel file attachments as found in the email account of JS after downloading the said attachment during the course of search. The loose sheets were mere printouts of an electronic record found in the email account of JS. The print outs did not have independent existence. In such a case, the provisions of Sec.65B would apply for determining the admissibility of such evidence. 20.11 Even the excel file attachments to the email found in the email account of JS could not be regarded as primary electronic evidence since the same could not be produced as a part of the process of preparation / generation of email in the email account but they could only have been uploaded as attachments either from the internal hard disk of the same computer device or from external memory devices such as hard disk, pen drive etc. where the original excel files may have been stored. It is only such original excel file that could be treated as primary electronic records. The said excel sheets found as an attachment th....
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....ays down the conditions to be satisfied and procedure to be followed for determining the admissibility of electronic records as evidence in any proceedings. On the other hand, Sec. 132(4) deals with different aspect of presuming the ownership and the veracity of documents as seized during the course of search. These provisions would become relevant and applicable only after the secondary evidence of an electronic record seized during the course of search has been found to be admissible as evidence as per the requirements of Sec.65B. Finally, considering the fact that such certificate u/s 65B(4) was not available in relation to seized loose sheets, the same could not be regarded as admissible evidence and the impugned additions were to be deleted. The grounds, on merits, were held to redundant. Aggrieved, the revenue is in further appeal before us. Our findings on this issue 21. From the facts, it emerges that the impugned addition stem from certain loose sheets which are nothing but print out of two excel sheets which was found as attachments in the email account of Shri J Srinivasan. The email was sent to himself by the same person. Based on the contents of these loose sheet....
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....urnishing of a prescribed certificate which is absent in the present case. Even during hearing before us, till date, no certificate has been shown to us. In our considered opinion, this certificate was a mandatory requirement for treating the computer output / secondary evidence of an electronic record as evidence to prove the contents of a primary electronic record. The Hon'ble CBDT has also considered this position and instructed field authorities to comply with this special procedure to handle such computer output in Digital Evidence Investigation manual. The case law of Hon'ble Supreme Court in the case of Anvar P.V. vs. P.K. Basheer AIR 2015 SC 180 support the conclusion of Ld. CIT(A). In this decision, it was held that the safeguards as provided in Sec.65A and 65B of the Indian evidence Act were meant to ensure the source and authenticity of an electronic record sought to be used as evidence since source and authenticity are two hallmarks of an electronic record. It was noted that the electronic records would be more susceptible to tampering, alteration, transposition, exclusion etc. In the decision of Arjun Panditrao Khotkar Vs Kailash Kushanrao Gorantyal and Others 2020 SCC....
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....eized excel sheets are not supported by any corroborative evidences. The only basis of addition is the statement of Shri J. Srinivasan which stood retracted within a short span of time. The retraction was reiterated by JS during cross- examination and re-examination. In such a case, the whole case of the revenue would fall apart. Accordingly, the corresponding grounds as raised by the revenue stand dismissed. 24. Addition of Unexplained Expenditure As per material seized from D. Ajay Kumar 24.1 This addition was made for AY 2017-18. This addition stem from search at the residence of Shri D. Ajay Kumar. The official role assigned to that person was to receive and dispatch tapals and maintenance of files. During search on him, two spiral notebooks were seized vide Annexures ANN/MS/DA/B&D/S-1 and S-2. The outer page of the spiral notebook no. 2 contained printed State Government Emblem and the name of Health and family welfare department and 'Ajay' written on it. The inner side of the said page contained the name and designation of the assessee at the bottom. The said spiral notebook allegedly contained notings with regard to expenses incurred towards food items, liquor and acco....
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....Ajay Kumar in the course of his various depositions. The AO observed that since the said sworn statements were short, specific to the details and simple to understand, the averment of Shri D Ajay Kumar that he was not aware of the contents of the statements, until he was provided the copies of the same by the assessee, was false and misleading. As regards the role of Shri A Saravanan, the AO observed that several other persons such as Shri J Srinivasan, Shri Nainar Mohammed and Shri J Sadiq Batcha independently confirmed the role of Shri A Saravanan in their respective sworn statements recorded during the course of the search at different premises by different Authorised Officers. The AO pointed out that Shri A Saravanan himself admitted the receipt of money for transfers and posting and regarding the allocation of work to various PAs to the assessee as per the instructions of the assessee in his sworn statement dated 07.04.2017. Considering all these facts, Ld. AO concluded that the said material pointed to the assessee only. The availability of incriminating evidence reflecting the expenditure pertaining to the meeting of the MLAs at Koovathur during February 2017 with one of his....
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....examination and re-examination also, the retraction was reiterated. On the corroborative statement of Shri A. Saravanan, it was also stated that the said person had also retracted his statement by sworn affidavits dated 20.04.2017 and 01.12.2018 and reiterated the retraction during the course of his cross-examination and re-examination on 11.11.2019. He clarified therein that he was not the PA of the assessee. It was further stated that the spiral note book was not seized from the premises of the assessee. There was no mention of assessee's name in the notebook. Shri D Ajay Kumar did not state anywhere in his statement that the assessee was the source of the expenditure as noted in the spiral note book. The assessee maintained that since he was not an office bearer of the political party or in-charge of its administration or accounts, he had no connection with the expenditure incurred for Koovathur MLA camp. Further, in view of the retractions of Shri D Ajay Kumar and Shri A Saravanan, the oral evidences as relied upon by Ld. AO was unreliable and inconclusive. There was no evidence at all to show that the assessee had funded the said expenditure. In the background of all these fac....
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....n alternative and credible explanation with regard to the contents of the seized material. A retraction could be considered to be legally valid only when it was established through evidence that the same was obtained through force, coercion, threat etc. which is supported by cogent reasons and evidences. In the present case, the requirement of a valid retraction was not made and therefore, the retraction so made by them could not be accepted. 24.6 Proceeding further, it was held by Ld. CIT(A) that Shri D Ajay Kumar could not be regarded as a third-party in relation to the assessee since he was working in the office of the assessee and his residence was searched u/s 132 on the strength of warrant issued in the name of the assessee. The material thus seized from his residence was, therefore, to be construed as the material seized during the course of the search conducted in the case of the assessee only. The said material could not be treated as the material found and seized in the course of search conducted in the case of a third-party. However, the contention that there was no mention of assessee's name in the seized material was factually correct. Shri D Ajay Kumar denied havin....
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....ed by the assessee at the time of recording of statement. During assessment proceedings, the assessee reiterated that the cash was duly accounted for in the books of accounts of RBM in its return of income filed for AY 2018-19. In the subsequent reply dated 06.06.2019, the assessee stated that he had drawn Rs. 3 lakhs in cash from RBM and kept the same at his residence. The attention was drawn to the financial statements of RBM for AY 2018-19. In support, a copy of day book of M/s RBM was furnished for the period from 01.04.2017 to 07.04.2017. The balance cash of Rs. 0.59 Lacs was stated to be belonging to other family members. However, Ld. AO rejected the same for want of evidences and treated the same as undisclosed income of the assessee. 26.2 Another cash of Rs. 21.49 Lacs was found during search at the residence of the assessee at Illupur, Pudukottai District. The cash to the extent of Rs. 12.69 Lacs was found in brown covers with the names of the candidates for jobs in Nutrition Meal program written on the covers. The Ld. AO stated that the interview call letters for the said candidates were also found in some cases which were also seized. The statement of Shri R Chinnatha....
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....ting material indicates that the amount of Rs. 12.96 Lacs was received from various candidates for getting jobs in the Nutrition Meal program of the State Government. The Page Nos. 1- 28 of seized loose sheets vide Annexure ANN/VB-CT/DN/LS/S contained brown covers in which the cash was found with names and addresses of the candidates mentioned on the covers and copies of the interview letters in some of the cases. The AO also stated that page Nos.318-322 of the said seizure annexure contained the names, addresses, mobile numbers and the amount received in respect of various candidates. The AO, therefore, concluded that the cash of Rs. 12.96 Lacs as found in the brown covers during the search was to be treated as income earned by the assessee since the said requests for jobs in the Nutrition Meal Program were received in view of his political and official position. Regarding balance cash of Rs. 8.53 Lacs, Ld. AO stated that Shri Chinnathambi could not furnish the details of sources of the said cash during the search though he claimed that cash to the extent of Rs. 6 to 7 Lacs belonged to outside persons. Moreover, Ld. AO observed that the said cash was also attempted to be explained....
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....t the said statement dated 07.04.2017 had already been retracted by Shri Chinnathambi vide his letter dated 06.07.2018. It was stated that the letter dated 03.09.2018 filed by Shri Chinnathambi before Ld. AO clarified that the cash and brown covers were found separately and that the said cash of Rs. 12.96 Lacs consisted of cash of Rs. 1 Lacs belonging to him, cash of Rs. 3 Lacs belonged to Mother Theresa Educational Charitable Trust (of which he was the chairman) and the cash of Rs. 9 Lacs was given to him for safe custody by five persons whose names were mentioned in the said letter. 26.6 The Ld. CIT(A) observed that the fact that the residence at Illupur belonged to assessee's father was correct. In reply to Q.No.4 of statement u/s 132(4), Shri R Chinnathambi confirmed this fact. Therefore, the assessee could not be considered to be the owner of cash found therein unless evidence in that regard was found. On perusal of the seized material, it was noticed that there was no such evidence. Moreover, Shri R Chinnathambi did not state that cash found belonged to the assessee. Further, the cash so found was treated as unexplained cash in the hands of assessee's father in assessment ....
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....contained details of distribution of cash to the voters of RK Nagar State Assembly Constituency during the Bye-election which was scheduled to be held on 12.04.2017. The Page No.5 of the loose sheet bundle as seized vide annexure ANN/TS/LS/S from the room allotted to the assessee in MLA hostel contained a chart with columns having particulars of the name of the incharge, number of booths under the incharge, total no. of voters in the said booths, 85% of the said voters and the amount for distribution to the said 85% voters. The aggregate amount in respect of all the booths was shown to be Rs. 89.65 Crores. The AO observed that the names mentioned therein as incharge persons included the names of several ministers of the State Government. The AO stated that the particulars similar to the particulars available in the said seized loose sheet were also found in some loose sheets seized at the official residence of the assessee vide ANN/MS/CV/LS/S. The Ld. AO also stated that Page No.6 of the bundle as seized from the room allotted to the assessee in MLA Hostel was titled as "Expenses" and it contained 2 sets of entries under two names "Sadique" and "Nainar". 29.2 Shri J Sadique Batc....
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.... seized from the business premises of Shri Nainar Mohammed vide annexure ANN/MKM/NM/LS/S contained entries which matched with the entries found with his name in the loose sheet No.6 seized from the room allotted to the assessee in MLA hostel. The Ld. AO also stated that some of the entries appearing with the name "Nainar" in the loose sheet (page No.6) seized from the room allotted to the assessee in MLA hostel were also found matching with the entries available in the pocket size notebook found and seized at the residence of Shri J Srinivasan (PA of the assessee) vide annexure ANN/RR/JS/B&D/S-2. The AO observed that the said entries have further corroborated that Shri Nainar Mohammed had received the amounts from Shri Saravanan, as mentioned in the loose sheet seized from the room allotted to the assessee in the MLA hostel. The Ld. AO further observed that the loose sheet No.62 seized vide annexure ANN/MS/CV/LS/F&S on 07.04.2017 from the official residence of the assessee also contained details of amounts aggregating to Rs. 25 Lacs along with the name "Nainar" and date 01.04.2017 written therein and that the said date and amount matched with the corresponding entry in the loose sh....
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....n his answer to Q.No.8 that the money that was collected by him was given to Shri Sadique Batcha and Shri Nainar Mohammed for temporary custody and the cash was kept in covers by them as per the requirements and was handed over at the residence of the assessee. Subsequently, the covers were handed over to the responsible persons who were assigned as incharge of cash distribution in RK Nagar constituency. As regards the role played by Shri A Saravanan as a PA to the assessee, AO referred to the replies given by Shri Saravanan to Q. Nos. 3 to 5 of his statement dated 07.04.2017. In his reply to Q.No.3 of the statement, Shri Saravanan stated that he came into contact with the assessee when he studied at Annamalai University during the years 1995-1999. He stated that he was doing the jobs assigned to him by the assessee from November 2013 onwards. In his reply to Q.No.4, he stated that he was a private PA to the Health Minister (assessee) and he was looking after the transfer and posting of all the cadres in the Department of Health of Tamil Nadu and processing of tenders with the help of other PAs to the assessee i.e., Shri Ramachandran, Shri Ajay, Shri Arul, Shri Srinivasan and Shri ....
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....r a candidate in the said election nor he was holding any office in the conduct of elections. The assessee sought cross-examination of various witnesses such as Shri A Saravanan, Shri J Srinivasan, Shri Sadique Batcha and Shri Nainar Mohammed which was granted to the assessee. In crossexamination made by the representatives of the assessee on 11.11.2019, Shri A Saravanan stated that his sworn statement recorded on 07.04.2017 was against the true facts as he was forced to sign on a typed statement. He also stated that he was threatened and coerced to sign a typed statement. Since he was mentally stressed and exhausted, he was compelled to sign the typed statement. This statement was wrong, false and invalid and same could not be treated as his testimony. He clarified that he was not the PA of the Health Minister (assessee) and he did not have any authority to act as the PA to the assessee. In other words, the statement made by him on 07.04.2017 stood retracted. The Ld. AO re-examined him wherein he reiterated the stand taken during cross-examination. However, Ld. AO rejected the retraction on the ground that he could not produce any material evidence which warranted retraction of hi....
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.... the amount of expenditure to be incurred with regard to the voters pertaining to the said booths were shown against the names of said persons along with the names of voters. Having regard to the contents of the loose sheets, it was evident that the expenditure for the bye-election was being incurred by several persons including the assessee. Another argument was that the aforesaid material was not seized from the premises or possession of the assessee. The assessee also questioned the origin and authenticity of material seized from the room allotted at MLA Hostel on the ground that the said room was used by many persons. However, Ld. CIT(A) noted that the material was seized from four premises including the official residence of the assessee. The two out of the four premises from where the material was seized represented the premises of the assessee himself. The residential premises of Shri J. Srinivasan would also not represent third-party premises since that person was working in the camp officer of the assessee and the said premises was searched on the strength of warrant issued in the name of the assessee. Similarly, the business premises of Shri Nainar Mohammed could also not....
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....f Rs. 294.88 Lacs. Shri Nainar Mohammed stated that the said cash was given to him by Shri A. Saravanan, however, the said amount was not found mentioned in the material seized form the premises of the room allotted to the assessee in MLA Hostel vide Page Nos.1 to 9 of Annexure ANN/TS/LS/S wherein the other amounts given to Shri Sadiq Batcha and Shri Nainar Mohammed was found mentioned. The said amount was also not found noted in the material seized in any of the other premises. Thus, there was no seized material which contains any reference to the said cash of Rs. 294.88 Lacs found with Shri Nainar Mohammed during the search. The same was also corroborated by the statement of Shri A. Saravanan who denied to have given the said cash to Shri Nainar Mohammed in his statement recorded during search on 07.04.2017 though he confirmed the other payments. Shri Nainar Mohammed also stated during cross-examination that the said cash pertained to his business only. Therefore, the addition to that extent was deleted whereas the remaining addition was confirmed. Aggrieved, the assessee as well as revenue is in further appeal before us. Our findings on this issue 30. From the facts, it em....
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....oss-examination of all these persons which was provided to the assessee. During crossexamination, all these persons retracted from their earlier statements. If these retractions are considered, the whole case of Ld. AO would fall since there is no other corroborative evidence on record to support the allegation of Ld. AO. Under such circumstances, the statements of these persons would lose veracity and the same, on standalone basis, could not be relied upon unless there were other concrete evidences to support the same. 31. It could also be seen that Ld. AO made this addition in the hands of the assessee subject to the outcome and finality of the investigation by the appropriate anti-corruption agencies. The Ld. AR stated that the department wrote a letter to Director, DVAC after the search. The DVAC conducted detailed enquiry and finally found no merits in the request of the department. It was specifically found that there was no element of criminality in any manner whatsoever on the part of the assessee and the assessee was not linked to the seized loose sheets in any manner. The copy of the letter was placed before lower authorities and the same has been placed before us. Thi....
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....earch. Therefore, all these years represent unabated assessment years. It was noted that disallowance of quarry expenses for AYs 2011-12 to 2015-16 and the addition of unaccounted sale of blue metal as made by Ld. AO for AYs 2011-12, 2012-13 and 2015-16 did not emanate from any incriminating material as seized during the course of search. No such material was referred to by Ld. AO while making these additions / disallowances. The additions made for AY 2015-16 towards undisclosed receipts from M/s SRS Mining and M/s V Srinivasa Rao Polisetty & Ors. were based on material seized during the course of search in the case of third-party and the said additions emanated from seized material only. The Ld. CIT(A) relied on the decision of Hon'ble High Court of Bombay in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (374 ITR 645) to conclude that in the case of unabated assessment, the assessment u/s 153A could be made only on the basis of incriminating material found during the course of search. Therefore, the disallowance of quarry expenses for AYs 2011-12 to 2015-16 and addition of unaccounted sale of blue metal for AYs 2011-12, 2012-13 and 2015-16 were held to....
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....sments, 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 accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs. Approving the ....
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....-12 only. Therefore, this ground was rejected for AYs 2012-13 to 2018-19. 36.2 For AY 2011-12, Ld. CIT(A), after considering the statutory provisions of Sec.153A, observed that the power to issue notice u/s 153A was automatically vested with Ld. AO in the six assessment years immediately preceding the assessment years relevant to previous year in which search was conducted and there was no other condition for issue of notice. However, to travel beyond six years, the conditions as laid down in fourth proviso to Sec. 153A(1) was to be fulfilled. The same was inserted in the Act w.e.f. 01.04.2017 by Finance Act, 2017. One of the conditions was that AO should have been in possession of books of account or other documents / evidence which reveal that the income represented in the form of asset has escaped assessment and such escaped assessment amounts to Rs. 50 Lacs or more. The same was also clear from CBDT Circular No.2/2018 dated 15.02.2018. The Ld. CIT(A) then perused the satisfaction note of Ld. AO for AY 2011-12 and noted that this satisfaction was duly arrived at by Ld. AO. Based on information available with Ld. AO at the time of recording of satisfaction note including the i....
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....rmed the stand of Ld. CIT(A) on merits. The enhancement has been made as per assessee's pleadings only. The grounds thus urged in respective appeals stand disposed-off accordingly. 38. Additional Legal Grounds as raised by the assessee 38.1 For 2018-19, the assessee has raised additional grounds which read as under: - 1. The files of assessee were centralized to DCIT, Central Circle, Chennai vide order dated 16.10.2019, which has been passed u/s.127 of the Act does not give any reasons as to why files were centralized. The non-furnishing of reasons for the order passed u/s.127(1) is serious infirmity and therefore, order passed by the AO is liable to be quashed. 2. The assessee submitted that approval order u/s. 153D has been passed without computer generated DlN. In this regard, CBDT circular number 19 of 2019 clearly casts and obligation on the every income tax authority to allot a computer generation number (DIN) in respect of every communication by way of notice, order or any correspondence issued by him and such number must be quoted thereon. Since there is no DIN in approval order, consequently there is a clear violation of CBDT Circular No.19 of 2019.....
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....on'ble Gujarat High Court in the case of PCIT v. Sunrise Finlease Pvt Ltd (2018) 252 Taxman 407 holding that lack of approval u/s 153D would invalidate the assessment order and the same is not a curable defect. Similarly, in the case of PCIT v. Sapna Gupta (2023) 147 Taxmann.com 288, Hon'ble High Court of Allahabad held that the approval could be said to have been granted only after due application of mind on the subject matter and on satisfaction of legal and procedural requirements. It was further stated that approval could not be a mere formality and the approving authority has to act in a judicious manner. The Hon'ble High Court has also held that specific application of mind has to be there with the approving authority for granting approval for each assessment year. In the decision by Hon'ble Orissa High Court in the case of ACIT v. Sirajudieen SLP (CIVIL) Diary Nos. 46858 of 2023, the department filed an SLP before the Hon'ble Supreme Court of India and the same came to be dismissed. The Hon'ble High Court relied upon the manual of office procedure issued by CBDT in exercise of provision u/s 109 of the Act, wherein it is provided that a draft order must be submitt....
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....onsidered opinion, the approval has to be given by the authority after having prima-facie satisfaction only. It was not necessary that detailed findings were to be given on each of the documents as submitted by Ld. AO along with the proposal. Once the approval has been given following due procedure of law, the same has to be considered as a valid approval only. Therefore, this legal ground could not be accepted. 41. On the issue of DIN, the undisputed position that emerges is that this matter is already sub-judice before Hon'ble Supreme Court and it has been directed therein that the relevant case laws of Hon'ble High Courts holding the field would not be cited as precedent. Therefore, at this stage of proceedings, we refrain from delving into the same. The legal grounds thus raised by the assessee are kept open for appropriate adjudication in the light of final adjudication by Hon'ble Apex Court. Conclusion 42. In AYs 2011-12 & 2012-13, the revenue has raised the issue of quarry expenses and unaccounted sales. In AYs 2013-14 & 2014-15, the only issue in revenue's appeal is quarry expenses. In AY 2015-16, the revenue has raised the issue of quarry expenses, unaccounted sal....