TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 153
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....- 1. The issuance of the Section 148 notice by the Jurisdictional AO is contrary to the mandate laid down in the notification No.18/2022/F.No.370142/16/2022-TPL (Part 1) dated 29-3-2022. 2. That the assessment order is null and void as no mandatory approval under section 148B has been taken before completion of assessment u/s 143(3) r.w.s. 147 of the Income Tax Act. 3. That the centralization of cases is bad as there was no pending scrutiny on the date of issuance of notices therefore, the transfer of jurisdiction u/s 127 of the Income Tax Act, 1961 is bad in the eyes of law, therefore the assessment order needs to be quashed. 4. The PCIT has given sanction for issuance of notice u/s 143(2) in mechanical manner and from the approval it is clear that it has been given without recording any satisfaction and only on the basis of search warrants only. 5. The AO has taken approval in a mechanical manner as the quantum escaped mentioned in the approval is "0" and on the basis of copy of warrants only. 6.(a) The AO erred in making addition of Rs. 2,91,94,936/- u/s 28 simply on the basis of rough noting and loose & dumb documents namely....
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.... the department has taken the receipt mentioned in the annexure A-1, A-2 & A-3 as business receipt & also make addition by applying GP rate & at the same time the department has taxed the payment under the head undisclosed assets/expenditure/investments out of business receipts taxed by the department & therefore no separate addition can be made on account of unexplained investment/expenditure can be made out of business receipts taxed by the AO. 12. That AO has not digitally signed the assessment order passed under section 143(3) and demand notice U/s 156 of Income Tax act & therefore the assessment order is bad in law and deserves to be quashed. 13. That the Addl. CIT has given approval in mechanical manner & therefore assessment is bad in law and deserves to be quashed. Further CIT(A) has wrongly upheld the action of assessing officer without any cogent reason. 14. The AO erred in not following Circular no. 19/2019 of the CBDT that directs that communication by the Income Tax Authorities after 01.10.2019 shall mandatorily are to be sent through the computer-generated DIN No. 15. That AO has not digitally signed the assessment order passed unde....
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....ssee with respect to sale and purchase of M/s Himgiri Beverages. The statement of the assessee was recorded u/s 132(4). The statements of assessee's customers / suppliers were also recorded which corroborated the entries in these diaries. In this background, following conclusions were drawn by Ld. AO at para 8.2 of the assessment order: - a) M/s Himgiri Beverages is engaged in unaccounted and undisclosed production of country liquor. This is done by using the surplus ENA generated on account of difference in actual wastage and wastage allowed by excise authorities. However, substantial part of such unaccounted production is carried out using raw materials purchases using unaccounted cash from various suppliers, the record of payments to whom has been maintained by Sh. Kapil Gupta in his diaries seized as Annexure A-1, A2 & A3. b) The unaccounted liquor so manufactured is transported by resorting to manual issue of certificates by the State Excise and Taxation officer posted at the factory premises and by manually altering the number of the vehicle in the L-34 generated online. c) The records created to transfer such unaccounted liquor are destroyed after ....
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....2021 Calendar Year 2022 Total (Rs.) 1. Total Amount of cash received 51,07,34,800/- 41,61,47,000/- 28,77,62,000/- 121,46,43,800/- 2. Total Amount of Cash Paid 39,03,83,700/- 20,29,19,000/- 23,10,14,000/- 82,43,16,700/- 3. No. of unaccounted petties 5,10,400 4,11,900 2,03,500 11,25,800 The financial year wise data was as under: - No. Particulars FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Total (Rs.) 1. Total Amount of cash received 9,40,14,000/- 54,26,56,800/- 40,26,31,000/- 17,53,42,000/- 121,46,43,800/- 2. Total Amount of Cash Paid 6,82,58,200/- 37,45,51,500/- 31,31,59,000/- 6,83,48,000/- 82,43,16,700/- On total amount of cash received for Rs. 54.26 Crores for this year, Ld. AO applied average Gross Profit (GP) rate of 5.38% as reflected by the assessee for FYs 2018-19 to 2020-21 and computed additional profit of Rs. 291.94 Lacs which was added as assessee's business income u/s 28. 4.4 During search, cash of Rs. 115.90 Lacs was found. The jewellery and gold bars were also found which was valued at Rs. 357.87 Lacs. The gross and net weight of th....
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....erved that though these were loan transactions, there was no loan agreement or any other evidence. It could be deduced that ledger filed by Shri Sunil Bansal was merely an after-thought to color the transactions reflecting in the bank account in the guise of unsecured loans as no evidence for the corroboration for the said loan was filed by Shri Sunil Bansal in the form of any loan agreement. Considering the whatsapp chats and entries in the diaries, it was to be concluded that the payments made by the assessee were in lieu of unaccounted investments. The assessee denied any cash transactions and stated that all the transactions were carried out through banking channels only. However, rejecting the same, Ld. AO alleged that cash payment of Rs. 220 Lacs pertaining to this year remained unexplained and the same was, accordingly, added u/s 69A. 4.7 The perusal of diaries reflected huge payment by the assessee to one party recorded as 'jia' which was identified by the assessee as Mr. Hukum Goyal who was operating a jewellery store by the name M/s Jia Diamonds, Chandigarh. As per notings, the assessee advanced Rs. 265 Lacs over four financial years. Upon perusal of whatsapp chats, it....
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....nted sales Rs.291.95 Lacs 3. Addition of Gold Bar Rs.48.54 Lacs 4. Addition of cash transaction u/s 69A Rs.220.00 Lacs 5. Addition of cash transaction with Jia Diamonds Rs.82.00 Lacs 6. Addition of unaccounted investment in Land Rs.126.96 Lacs Assessed Income Rs.790.03 Lacs 4.10 In AY 2020-21, the assessment was framed u/s 143(3) r.w.s. 147 of the Act on 12-03-2025 on similar lines wherein Ld. AO made identical addition of business income u/s 28 for Rs. 50.57 Lacs by applying Gross Profit (GP) rate on total cash receipts. The addition was also made for purchase of one gold bar for Rs. 43.25 Lacs. Another addition of Rs. 75 Lacs was made being payment made to M/s Jia Diamonds. Finally, the returned income of Rs. 13.58 Lacs was assessed at Rs. 182.41 Lacs. 4.11 In AY 2022-23, the assessment was framed u/s 143(3) of the Act on 27-09-2024 wherein Ld. AO made similar addition of business income u/s 28 for Rs. 216.61 Lacs by applying Gross Profit (GP) rate on total cash receipts. Another addition of Rs. 38 Lacs was made being payment made to M/s Jia Diamonds. The addition on account of cash transactions with Shri Sunil Bansal w....
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....smissed. The approval of Ld. Addl. CIT, Chandigarh was held to be in accordance with law. The said approval was stated to be administrative in nature and for the same, Ld. CIT(A) referred to the decision of Hon'ble Karnataka High Court in the case of Rishabh Chand Bhansali (267 ITR 577). The action of Ld. AO in making impugned additions was also confirmed on merits. Finally, the appeal was dismissed against which the assessee is in further appeal before us. Similar orders were passed for AYs 2020-21, 2022-23 & 2023-24 and the assessee's respective appeals were rejected by Ld. CIT(A). Aggrieved, the assessee is in further appeal before us in all the years. Our findings and Adjudication 6. From the facts, it emerges that the assessee is exclusively engaged in business activities. Admittedly, the assessee does not have any other source of income except manufacturing and sale of alcoholic liquor under its proprietorship concern namely M/s Himgiri Beverages. The business is operated mainly from village Meerpur Kotla, Kala Amb, District Sirmour of Himachal Pardesh. The assessee group was subjected to search action by the department u/s 132 on 04-11-2022 wherein three diaries were s....
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....l as taken by Ld. AO from Addl. CIT, in our considered opinion, has adequately been dealt with by Ld. CIT(A) in the impugned order and we concur with the same. No argument has been made on other legal grounds. All these grounds stand disposed-off, for all the years, accordingly. 8. On merits of addition, Ld. AR has pleaded for computation of income on commercial principles in accordance with the transactions as found noted in the three diaries. For this, detailed written submissions and computations have been filed by Ld. AR which we have gone through. It has been submitted by Ld. AR that Ld. AO has taxed entire receipts / sales as recorded in these diaries on the assumption that the assessee has maintained complete record of income & payment in his personal diaries as maintained by him and at the same time, Ld. AO has heavily relied upon the fact that that the assessee has not maintained any books of accounts. Further, no regular books have been found during the course of search. It has been presumed by Ld. AO that these are organized records for sales which are accounted for in the excise records and also for sales which are not accounted for in excise records. The Ld. AO has ....
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....ed under codes "800" and "802". The sales mentioned under "800" have duly been accounted for by the assessee in his return of income which has also been accepted by Ld. AO. The major dispute is with regard to sales mentioned under code "802" which are unaccounted sales transactions by the assessee. These sales have not been considered in assessee's return of income. It is admitted fact that the assessee does not have any other source of income and therefore, the receipts and payments, as noted in the seized diaries, would exclusively pertain to assessee's business activity of manufacturing and sale of liquor only. It is also trite law that same income could not be taxed twice since the same is against basic principle of taxation. Once accounted as well as unaccounted sales are considered for addition, the payments / investments made out of the same could not be added in the hands of the assessee again. The jewellery acquired out of said payments could also not be added since the same would amount to same income being taxed thrice. In our considered opinion, once the profit is estimated on unaccounted sales, the same would take care of leakage of revenue in the hands of the assessee....
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....% 3. 2021-22 17.87 Crores 23.67 Lacs 1.32% 4. 2020-21 8.04 Crores 16.67 Lacs 2.07% Total 66.39 Crores 94.99 Lacs 1.43% We are of the considered opinion that the action of Ld. AO in applying Gross Profit (GP) rate is not appropriate on the facts of the case since the assessee, admittedly, has not maintained any regular books of accounts and therefore, GP rate would not yield correct estimation of business income of the assessee. Rather the application of final Net Profit (NP) rate as disclosed by the assessee and accepted by the revenue would be an appropriate yardstick to determine income earned out of unaccounted sales. Considering assessee's profitability trend and to plug leakage of revenue, we would estimate profit margin on unaccounted sales of 11,17,100 number of boxes as sold by the assessee as per seized material. The Ld. AR has quantified the unaccounted sales at Rs. 44.26 Crores by taking certain rates per box and pleaded for estimation of profit margin per box against the same. We primarily concur with the said pleadings of Ld. AR since entire credit of Rs. 121.64 Crores as found noted in the seized material could no....
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....95.48 Lacs The addition of Rs. 30 Lacs in AY 2021-22 with respect to payment to M/s Jai Diamond has been made on the basis of whatsapp chat and the same has nowhere been found noted in the seized diaries. The total payment made to M/s Jia Diamonds thus aggregate to Rs. 295 Lacs and the addition of jewellery has been quantified at Rs. 295.48 Lacs. It could be observed that the payment to M/s Jai Diamond for Rs. 265 Lacs has been found duly recorded in Annexures A-1 to A-3 and these payments have clearly made out of business receipts only which have already been taxed by applying net profit rate. This party, evidently, has supplied gold jewellery and gold bars to the assessee. In other words, the payment has been made towards acquisition of gold jewellery, the ultimately source of which is nothing but business receipts of the assessee. We have already sustained business income addition in the hands of the assessee which far exceeds the value of jewellery as found during search on the assessee. Therefore, separate addition of payment to M/s Jia Diamond as well as addition of gold jewellery and bar, in all the years, stands deleted. The corresponding grounds of assessee's appeal sta....
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....2020-21 & 2021-22 stands partly allowed. 14. The remaining issue in AY 2022-23 is addition of Rs. 10.50 Lacs against purchase of Mercedes Car. The same stem from whatsapp chat from the mobile phone of the assessee wherein cash amount of "10.0" was written along with total value of "22.0". The assessee stated that chat pertained to Mercedes Car purchased in the year 2021. The Ld. AO concluded that out of total value of Rs. 22 Lacs Rs. 10 Lacs was paid in cash. During assessment proceedings, the assessee stated that the car was purchased way back in financial year 2019-20 through banking channels for Rs. 15 Lacs out of current account of M/s Himgiri Beverages. The copy of bank statement highlighting payment of Rs. 15 Lacs on 24-10-2019 was also furnished. It could thus be seen that the version of Ld. AO stood controverted by the assessee. The car was purchased way back during FY 2019-20 and the payment of Rs. 15 Lacs was made through banking channels. Even as per the allegation of Ld. AO, the payment of Rs. 10.50 Lacs could not be made in cash considering the fact that the amount of Rs. 15 Lacs was already paid through cheque. No independent enquiry is shown to have been carried o....