TaxTMI 
TaxTMI 
2023 (7) TMI 1640
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....2019-20. Therefore, for the sake of brevity, grounds of appeal filed in ITA No. 872/Chny/2022 for the Asst. Year 2012-13 are reproduced as under: "1. The order of the learned CIT(A) in so far as it is against the Appellant is contrary to law, erroneous and unsustainable on the facts and in the circumstances of the case. 2. The learned CIT(A) is erred in not appreciating the warrant of authorization issued against the Appellant as the same is bad in law thereby the assessment order passed u/s 153A of Income Tax Act, 1961 is required to be quashed as initiated on any and each of the following grounds; a. the joint warrant of authorization has been issued without reason to believe for issuance of such warrant of authorization b. the joint warrant of authorization does not conform to the requirements of clauses (b) and (c) of section 132(1) though the said clauses were invoked while issuing the warrant. c. Authorizing more than one official for issuing a warrant of authorization is against law. d. Authorizing same officials for more than one authorization at the same time for search and seizure proceedings at different premises is a....
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....f Income Tax, 1961 and subsequent assessment proceedings are without authority and without jurisdiction on any and each of the following grounds; a. The transfer of file from jurisdiction Namakkal to Central Circle, Chennai is not in accordance with law as laid down u/s 127 of income Tax, 1961. b. As per section 132(1) r/w 132(9A) of Income Tax, 1961 the materials handed over to the Assistant Commissioner of Income Tax, Central Circle 2(1) is without jurisdiction. In such a scenario, the materials become nonexistence in the eyes of law for issuing notice u/s 153A of Income Tax, 1961. c. without prejudice to the legal position taken by the appellant as stated above the material has been handed over to the Assistant Commissioner Income Tax central circle 2(1) beyond the mandatory period of 60 days contemplated u/s 132(9A), thereby the materials are non-existence as per law. d. Without prejudice to the above said position taken by Appellant the notice has been issued u/s 153A of Income Tax Act, 1961 without any physical possession of material in hand, thereby the issuance of notice and subsequent proceedings are illegal. e. Clause 1.3 of th....
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....e Assessing Officer also failed to consider independently the illegalities agitated by the Appellant in the draft assessment order while according the approval, thereby the approval and assessment proceedings fails. d. While giving the approval, the Addi. Commissioner failed to apply his mind that in the draft assessment order, the Assessing Officer has indicted the Appellant based on certain evidence which have not been raised in the Show Cause Notice. This apparent flaw on the part of Addi. Commissioner makes the approval and assessment order illegal. e. While giving approval the Addi. Commissioner failed to apply his mind that the disclosed amount of Rs 3 9 Crs belonging to the assessment year 2018-19 have been treated as undisclosed income and apportioned to all search assessment years by the Assessing officer. The approval has been given without application of mind, thereby the approval and assessment order fails. f. Instead of giving approval u/s 153D of Income Tax Act, 1961, after examining the draft assessment order submitted by the Assessing Officer, as against law, the Addi. Commissioner directed to incorporate certain alleged findings on suo mo....
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.... alleged incriminating materials to the Appellant, the Assessing Officer directed to file the return of income, thereby the approval fails. n. While giving the approval, the Addl. Commissioner failed to apply his mind that the Assessing Officer has rejected the Special audit report without approval of the sanctioning authority who has ordered the Special audit and failed to appreciate the reasons for rejection is untenable, thereby the approval and the assessment order fails. o. While giving the approval, the Addl. Commissioner failed to apply his mind that the Assessing Officer has not examined and given any appropriate finding in the draft assessment order (final assessment order) as to who have maintained or made entries in the "Erandaam Thall", which is instrumental for imposing undisclosed income, in a situation where there are contradicting statements recorded u/s 132(4) of Income Tax Act, 1961, in this regard, as detailed above, thereby the approval fails. p. While giving the approval, the Addl. Commissioner failed to apply his mind that the electronic devices namely "Erandaam Thaal" which have been the instrumental for arriving undisclosed income ....
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....d independently and without prejudice to each other. 14. The Appellant craves leave to add to, alter, amend or vary the aforesaid grounds of appeal at or before the time of hearing. 15. That the appellant prays leave to adduce such further evidence to substantiate its case as the occasion demands." 3. The revenue, has more or less raised common grounds of appeal for the Asst. Year 2009-10 to 2019-20. Therefore, for the sake of brevity, grounds of appeal filed in ITA No. 895/Chny/2022 for Asst. Year 2009-10 are reproduced 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 holding that the retraction of statement made by the assessee, his employees and other associated persons as valid and acceptable, though the retractions were filed after reasonable time of 90 days. The CIT(A) ought to have appreciated that the statements recorded during July 2018 were retracted in January 2019, which proves that the retraction was merely an afterthought. 2.1 The Ld.CIT(A) erred in failing to appreciate that the assessee has not proved that the statements w....
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....holding that the seized tally accounts are incomplete and inaccurate. 4.1 The Ld.CIT(A) erred in failing to appreciate that Smt. R.Anandhi, in her sworn statement u/s.132(4) dated 07/07/2018 admitted that the difference between the income as per tally accounts and income reported in ITRs was the unaccounted income generated. 4.2 The Ld.CIT(A) failed to appreciate that Shri. M.Vannakkannan, DGM(Finance), in his sworn statement dated 07/07/2018 has also confirmed the statement given by R.Anandhi and admitted the working of unaccounted income made by her. 4.3 The Ld.CIT(A) failed to appreciate that Shri. T.S.Kumarasamy, Chair person of this group has also admitted the discrepancies with regard to the income arrived as per seized tally accounts and income reported in ITRs in his sworn statement dated 09/07/2018. 4.4 The CIT(A) erred in failing to appreciate that the statements were recorded without any coercion or undue influence. The retractions of statements are merely after thought and without any basis. 5. The Ld.CIT(A) erred in deleting the addition of Rs. 39,21,03,525/- being the difference of undisclosed income of Rs. 751,05,65,605/- ....
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....ment 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 Officer be restored." 4. The brief facts of the case are that, the assessee Mr. T.S. Kumarasamy, Prop: M/s Christy Fried Gram Industry (in short CFI) is engaged in the business of production and supply of weaning food/nutrient supplements to government schemes and mainly to ICDS program of Government of India and Civil Supplies Department of Government of Tamil Nadu, besides, supplying edible oil, dal, rice, eggs to the Midday meal Scheme of the Government of Tamil Nadu. The assessee procures raw materials required for production of nutritional foods, weaning food, blend, pulses and other items, etc., for supply to ICDS, Government of Tamil Nadu, Civil Supplies Corporation, as per the Suppliers Contract. Further, the assessee is also engaged in the business of trading of agro commodities. The assessee procures the raw materials from various sources, including from farmers, traders, commission agents, agricultural produce marketing committing (APMC), local market purchases through executives/staff/agents, as well as through g....
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....4) of the Act etc. However, subsequently the assessee has withdrawn writ application filed before the Hon'ble High Court of Madras, challenging validity of search proceedings and consequent assessment proceedings. 6. During the course of assessment proceedings, the Assessing Officer, considering the voluminous data found during the course of search and complexity involved in the accounts of the assessee, directed the assessee to get his accounts audited as required u/s. 142(2A) of the Act. The special auditor appointed in terms of section 142(2A) of the Act, has submitted their audit report for all assessment years vide their audit report dated 0312-2020. A further reference was made to special auditor to look into voluminous data found during the course of search including Erandam Thall. The special auditor vide their audit report dated 15-04-2021 has submitted supplementary audit report and commented upon the correctness and authenticity of documents found during the course of search and has also verified entries recorded in Erandam Thall and quantified unidentified entries. The Assessing Officer, has rejected special audit report submitted by the auditor in terms of section 1....
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....ccounts found during the course of search which vitiates the entire assessment proceedings. The assessee had also challenged additions made by the AO towards under reporting of income as per seized tally data and ITR filed for relevant assessment years, additions towards difference between bought notes purchases and bought note sales, for assessment years 2015-16 & 2016-17, additions of unaccounted income arising from bogus purchases through dummy entities and sales for assessment years 2017-18 & 2018-19 and also additions towards unexplained expenditure u/s. 69C of the Act, towards unaccounted expenses quantified as per seized Erandam Thall, etc. 8. The ld. CIT(A), after considering relevant submissions of the assessee and also taken note of various reasons given by the AO to make various additions in the assessment order, partly allowed appeal filed by the assessee, where in respect of assessments for assessment years 2009-10 to 2012-13, the CIT(A) held assessment order passed by the AO for these assessment years is invalid, void, ab-initio and liable to be quashed, because in order to assess the income for a period beyond six years, there should be an undisclosed income of sp....
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....d availability of closing cash balance as on the date of search, in the name of various group entities. The CIT(A) had also deleted additions made by the AO towards on money paid for purchase of property at Muthukadu by holding that the property has been purchased in the name of M/s. Handhold Ventures Pvt. Ltd, a separate legal entity and additions if any to be made, then it can be made in the hands of the entity which purchased the property but not in the hands of the assessee. The CIT(A), had also deleted additions made towards unaccounted gold coins and bullion amounting to Rs. 48,04,600/-, by holding that the assessee has explained source for purchase of gold coin and bullion and has also accounted in their books of accounts. The CIT(A) had also deleted addition made towards disallowance of interest u/s 36(1)(iii) of the Act. Aggrieved by the CIT (A) order, the assessee and, as well as the revenue are in appeal before the Tribunal. 10. The first issue that came up for consideration from appeals filed by the assessee for the assessment year 2012-13 to 2019-20 is legality of search and consequent assessment proceedings completed u/s. 153A of the Act. The ld. Counsel for the as....
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....learly established that three sets of officials, who were not authorized in the said warrant of authorization dated 02.07.2018, have participated in the search proceedings illegally, leading to harassment of the Appellant and the employees in obtaining coercive statements. On this ground itself the entire search and seizure proceedings are liable to be declared as illegal and void. Further, as per the Panchanama Proceedings drawn on 09.07.2018 the officials - Shri. Krishna Prasad and Shri. Dayanand Prasad - who are shown as assisting officials have participated in the proceedings on 29.08.2018 as authorized officers. At the time of authorization, the above said two officials had not been authorized except to assist. Subsequently, these two officials have participated in the proceedings as authorized officers without any further warrant of authorization. Hence the entire search and seizure proceedings are liable to be declared as illegal and void. 12. The ld. Counsel for the assessee further submits that the warrant of authorization is against T.S. Kumarasamy /Nalinasundari, whereas search has been conducted against 4 entities namely M/s. Rasi Nutri Foods, M/s. Natural Food Produ....
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....culpatory oath statements at 2.00 a.m on 09/07/2018. In response to this, the search team themselves admitted in their counter filed in WP No: 28986, 28991, 29001, 29016 & 29033 of 2018 before the Hon'ble High Court of Madras, that "Merely following the Appellant in his predetermined travel to Bengaluru and then to Tiruchengode is not illegal". The counsel further submits that the authorized officers conducted illegal search other than the place mentioned in the warrant and brought all the material to the place mentioned in the warrant, as if all the materials were seized at the place mentioned in the warrant, and such allegation has been proved by the Appellant from the affidavits of Mr. K. Shanmugasundaram, V.P. Balakrishnan, K. Yogananthan and N. Shanmugam, albeit the same, the AO did not give any specific reason and justification in the assessment order but simply cited the counter filed by the search team in the writ petitions, which itself proves that the AO did not take any steps to find the veracity of such allegation. The said affidavits of Mr. K. Shanmugasundaram, V.P. Balakrishnan, K. Yogananthan and N. Shanmugam are annexed in paper book Page No: 15 - 25. The Counse....
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....e Electronic Devices has not been duly recorded in the panchanama. b. The Hash value of each Electronic Devices have not been recorded in the panchanama. c. No photograph along with respective reference like cubicle number or name room surrounding etc., has been taken as per the seizure guidelines of the above said manual. d. The Serial number of the collected electronic evidence mentioned in the inventory list is different from the serial number mentioned in the Digital Evidence Collection Form and Chain of Custody Form. e. Similarly, the MD5 [Message Digest Algorithm] hash value is also different among log entry, digital evidence collection form and certificate 65B; f. Similarly, the SHA [Secure Hash Algorithm] hash value is also different among log entry, digital evidence collection form and certificate 65B g. The chain of custody form is completely silent about proper custody of the said electronic device, which creates doubt on the integrity of the said device. On repeated request also no copy of the imaged data has been provided to the Appellant. h. The AO, vide mahazar dated 09/09/2020 gave this electronic device....
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....07.2018 for imaging and verification of data that the seals placed on the electronic devices seized on 05.07.2018 at the time of their seizure were removed in the presence of Shri. Harihara Krishnan and opened on 06.07.2018, for the purpose imaging the said devices. It is noticed that the same was not independent witnesses carried out in the presence of Shri P.Karthikeyan, which is inviolation of the provisions of the said rule. Thus, it is noticed that certain procedural irregularities have taken place in the process of seizure and imaging of the said electronic devices, which contained electronic evidence in the form Erandam Thall. 17. In so far as, transfer of cases u/s 127 of the Income Tax act, 1961, the impugned order dated 29.01.2019 is bad in law, since the requirements of Section127(2) of the Act have not been complied with as much as the agreement envisaged under Section 127(2) between DGIT (Inv.) Chennai and the CCIT, Trichy has not been arrived at. Further, the condition precedent for showcause notice, as well as, the order under Section 127(2) of the Act mandates that there has to be an agreement between DGIT (Inv.) Chennai and the CCIT Trichy and without there bein....
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....a mechanical manner and without any documents on the date of issuing the notice u/s 153A. However, the Assessing Officer made the observation in para 15.6.8 of the order that "Notices u/s 153A of the Income Tax Act, 1961 were issued on the basis of initiation of search u/s 132 of the Act and are not dependent on seized documents or materials as per section 153A(1) of the Act. The assessing officer automatically acquires jurisdiction to issue notices u/s 153A of the Act on the basis of initiation of search and is independent of the provisions of sections 139, 147, 148, 149, 152 and 153 of the Act". From the above observation, the AO admitted that he has issued notice u/s 153A to the Appellant without any incriminating materials in hand, which is further evidenced from the letters dated 05/02/2019 and 17/05/2019 in the file of the AO. Though, the Appellant has established and demonstrated the above said violations done by the search team and which were also admitted by the search team before the Hon'ble High Court, such vital evidence and documents were intentionally ignored by the Assessing Officer while passing the Assessment order. In addition to that Assessing Officer blatant....
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....he Act are required to be issued". From the reply of the Assessing Officer, it is evident that the Assessing Officer did not possess any seized materials in hand at the time of issuance of notice u/s 153A of the Act., which is evidenced from the Assessing Officer's communication dated 05.02.2019. In such a case, it is impossible for the Assessing Officer to imagine in which case the warrant was issued and, in whose name, and accordingly issue the notice either u/s. 153A/153C of the Act. In view of the intention of the legislature, non-receipt of seized materials in hand of the AO on 18.03.2019 and non-examination of seized materials proves that the decision of the Assessing Officer is illegal, untenable and hence, the issuance of notice u/s.153A of the Act dt 18.03.2019 needs to be quashed. 20. The ld. Counsel for the assessee further submits that on repeated occasions, the Appellant sought for the copies of seized materials and especially at the time of receipt of notice u/s. 153A of the Act. But, the Assessing Officer has not provided any copies of seized materials till 20.02.2020. The counsel further submits that Board circular dated 22.12.2006, it is noted that the Asses....
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....id and consequent assessment proceedings are null and void. The CIT-DR, further referring to provisions of section 153A of the Act, submitted that the Assessing Officer acquires jurisdiction to issue notice u/s 153A/153C of the Act, in pursuant to search action conducted u/s. 132(2) or requisition u/s. 132A of the Act, but issuance of notice is not at all dependent on availability of incriminating material, if any found during the course of search. Therefore, the arguments for the counsel for the assessee that the Assessing Officer has issued notice u/s. 153A/153C of the Act without any application of mind and in absence of incriminating material and appraisal report is devoid of merit. The CIT-DR, further submits that in so far as the arguments of the assessee on the issue of jurisdiction of the Assessing Officer and transfer of case from one Assessing Officer to another Assessing Officer, the Department has followed due procedure provided u/s. 124 and 127 of the Act, which is evident from the fact that the appellant case has been transferred from PCIT, Trichy to DGIT, Central, Chennai by passing a valid order in terms of section 127 of the Act. Therefore, he submits that the argu....
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....contentions. The assessee and their employees filed detailed affidavits before the Hon'ble High Court of Madras and explained how and why search proceedings conducted in the case of the appellant is illegal. According to the appellant, unless the Department make out a case, that there is enough material to allege that two persons have colluded with each other and thereby the acts of both persons jointly fall under sub section (a),(b) or (c) of section 132(1) of the Act, joint warrant of authorization cannot be issued. The revenue has filed counter affidavit before the Hon'ble High Court of Madras and explained how the contentions raised by the assessee in the Writ petition is contrary to facts on record. 24. We have examined the affidavits and counter affidavits filed by the assessee and revenue and after considering relevant averments, we find that there is no illegalities with respect to initiation and conducting of search, including issuance of warrant of authorization under the provisions of the Income Tax Act read with applicable Income Tax Rules as well as relevant CBDT Circulars, manuals, Information Technology Act, 2000 and Indian Evidence Act, 1872. We further noted tha....
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....n at best be considered as technical mistakes, and for those technical reasons or typographical error, whole search proceedings cannot be held illegal. In this case, the warrant of authorization has been issued in the joint name of the appellant and his wife on the basis of appraisal of relevant material and thus, we are of the considered view that there is no merit in arguments of the assessee on this issue. Accordingly, grounds of appeal of the assessee are dismissed. 25. In so far as, authorizing more than one officer, we find that the assessee is having business at multiple locations and it is impossible for one officer to carry out simultaneous search in all places of business and residence of the assessee. Therefore, considering the size and magnitude of operations of the assessee, the Department has engaged number of officials, who had been authorized to enter and conduct searches in various places of the business, and also drawn panchanama at the time of search. Although, in one or two places the Department has engaged officers who have not been authorized, but those officers are assisting the authorized officers in carrying out search operations. Therefore, we are of th....
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....at the department has kept illegal detention of the assessee. Therefore, we reject the arguments of the assessee. Likewise, the appellant has made various arguments with regard to using coercion and manhandling their staff during the course of investigation and said contention was raised before the Hon'ble High Court in Writ Petition. However, later it was noticed that the appellant himself had withdrawn Writ Application filed before the Hon'ble High Court with a liberty to put forth his contentions on merits or otherwise before the Assessing Authority in the course of assessment proceedings. The Hon'ble High Court allowed the withdrawal of writ petition vide order dated 10.02.2020. From the above, it is very clear that, although the appellant made various contentions with regard to procedural and technical lapses in search conducted by the department, but because the appellant did not peruse the matter before the Hon'ble High Court, we are of the considered view that there is no merit in contentions raised by the assessee on legality of the search proceedings. Thus, grounds of appeal filed by the assessee on these issues are dismissed for all assessment years. 27. The appellant....
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....on No. 286/161/2006-IT(Inv-2), dated 24.07.2007 and argued that the Assessing Officer may issue notices u/s. 153A of the Act, immediately after receiving the appraisal report and seized materials, and ascertaining the cases where notices u/s. 153A of the Act are required to be issued. However, in the present case from the reply of the Assessing Officer, it is evident that the Assessing Officer did not possess any seized material in hand at the time of issue of notice u/s. 153A of the Act and thus, the notice issued u/s. 153A of the Act, can be said to be issued without any application of mind on appraisal report and seized material. We have gone through the contentions of the assessee in light of relevant provisions of section 153A of the Act, and we ourselves do not subscribe to the arguments of the counsel for the assessee for the simple reason that, as per the provision of section 153A of the Act, in the case of the person where a search is initiated u/s. 132 of the Act, the Assessing Officer shall issue notice to such person requiring him to furnish within such period the return of income in respect of each assessment year falling within six assessment years to be filed and als....
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....hough the retractions were filed after reasonable time of 90 days. The DR further submitted that the CIT(A) ought to have appreciated that the assessee has failed to prove that the statements were recorded under duress, coercion and other adverse circumstances. The ld. DR further referring to counter affidavit filed by the revenue before the Hon'ble High Court of Madras in response to writ petition filed by the assessee, submits that the retractions made by the assessee and other associated persons are without basis and not backed by any credible evidences because admission of undisclosed income in the statements is with regard to incriminating material found during the course of search. The ld. DR referring to the decision of Hon'ble High Court of Madras in the case of T.S. Kumarasamy vs ACIT [98] 65 ITD 188 (mad) submitted that, when assessee fails to prove coercion or Durres or any ground for the involuntary statement, then subsequent retraction without any evidence cannot be considered and in this regard relied upon the decision of Hon'ble Supreme Court in the case of Shri. Surjeet Singh Chhabra vs UOI [1997] 1 SCC 508. 31. We have given our thoughtful consideration to the a....
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....n those statements needs to be considered on face of it, because the assessee may have given admission after analyzing the material found during the course of search. In a case, where the statement recorded u/s. 132(4) of the Act is not supported by corroborative evidences like incriminating material found during the course of search, then the contents of those statements needs to be considered in light of retraction, if any filed by the assessee and reasons given for filing said retractions. At the same time, it has to be kept in mind that merely because a statement is retracted, it cannot become a statement which is involuntarily or unlawfully obtained. For any retraction to be successful in the eyes of law, the assessee needs to show as to how the statement recorded earlier does not states the true facts or that there was coercion, inducement or threat while recording the statements. Therefore, from the above, it is very clear that retraction of a statement should not be rejected merely because the assessee has given admission during the course of search. In our considered view, although admission is an important piece of evidence, but it is not conclusive and it is open to the ....
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.... of section 124 deals with jurisdiction of Assessing Officer in terms of any direction or order issued under sub-section (1) or sub-section (2) of section 120 of the Act. As per subsection (2) of section 124 of the Act, where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Principal DGIT, or Principal Chief Commissioner of Income-tax, as the case may be, notified by the Board in the official gazette. In this case, the grievance of the assessee was that objection filed in this regard, in terms of sub-section (3) has been decided by the Assessing Officer himself without referring the matter to the DGIT or PCCIT. We have considered the arguments of the counsel for the assessee, in light of reasons given by the CIT(A) to decide the issue and after considering relevant facts, we do not subscribe to the arguments of the counsel for the assessee for the simple reason that, the jurisdiction was assigned to the DCIT, Central Circle-2(1), Chennai vide order u/s. 127 of the Act dated 29.01.2019 and in view of the said order there is no scope for having any doubt or ambiguity with regard to t....
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....findings given in the Appraisal Report. Whenever the assessing officer is not in agreement with the findings given in the Appraisal Report, the Office Procedure Manual has laid down procedure. It is pertinent to note that the observations made in the Appraisal Report relating to examination/investigation as also issues identified in the course of examination of seized material were carefully considered by Addl. CIT, Central Range-2 before endorsing it to the Addl.DIT, Unit-3, Chennai. The counsel for the assessee further submits that even after endorsing and forwarding the deviation note, the Addl. CIT, Central Range-2, as the sanctioning authority, took an altogether different stand by discarding her own judgment in giving directions to the draft assessment orders. Under Sec. 153D, it is the duty of the Addl. CIT to act in accordance with law, to apply mind while granting approval. The duty cast is to examine the record during searches, and, thereafter accord the statutory approval. Therefore, the manner and the material on the basis of which the approval was granted was mechanical and without application of mind. 36. The counsel for the assessee further submits that the primar....
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...., is not enough to establish the non- genuineness of the transactions. On the other hand, where the appellant presented the suppliers, which are treated as dummy entities, the same have been treated as non-genuine by placing reliance on the Appraisal Report. The short-cut and self-serving method adopted to rely on the Appraisal Report in the proceeding under Sec.153D by first agreeing to the deviation note cannot be taken lightly. Regarding seizure of cash from the individual lockers standing in the names of the employees, the same have been held to be under the control of the appellant, without invoking provision of Sec.153C. The appellant contention that the opening and closing stock for AY 2009-10 to 2011-12 matches with the seized tally has been disposed of by arguing that the same are not reflected in the return filed under Sec.153A and by saying that the appellant is not willing to give a true and correct picture of his accounts. Moreover, all these contentions are taken care of in the Special Audit Report and the findings therein were never objected. Therefore, it appears that the Addl. CIT, Central Range-2 is only going by the Appraisal Report and not drawing attention of t....
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....per approval as required u/s. 153D of the Act and such argument has been placed on the basis of correspondence between the Assessing Officer and the Addl. CIT, Range Head. From the arguments of the assessee, it appears that there was lot of deliberations on draft assessment order passed by the Assessing Officer, in light of various incriminating material found during the course of search and appraisal report submitted by the DDIT-(Inv.) on the various issues including additions to be made towards undisclosed income on account of difference in net profit as per seized tally and net profit as per ITR filed for relevant assessment year and also additions towards unexplained expenditure u/s. 69C of the Act on the basis of seized Erandam Thall. In the note submitted to the Assessing Officer, the Addl. CIT categorically observed that on verification of seized material with ITR filed by the assessee there is a difference in income reported for various assessment years. Likewise, the Addl. CIT had also discussed other issues and gave directions to the Assessing Officer. Therefore, it cannot be said that approval granted u/s. 153D of the Act is mechanical and without any application of mind....
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....ed that deviation note being extended part of the appraisal report, is confidential in nature and thus, same cannot be shared with the assessee or any appellate authority. The CIT(A), after considering relevant facts and also taken note of provisions of section 153D of the Act, came to the conclusions that in absence of availability of any documentary evidence, in respect of claim of the appellant with regard to deviation note, the arguments of the assessee can be said to be unsubstantiated. In our considered view, the findings of the facts recorded by the Ld. CIT(A) on appraisal of relevant facts is in accordance with law, because from the materials available on record, and also on the basis of arguments of the assessee, it is abundantly clear that there is enough proof to conclude that the Addl. CIT has given approval u/s. 153D of the Act after great deliberations with draft assessment order passed by the Assessing Officer in light of seized material and appraisal report submitted by DDIT(Inv) and thus, in our considered view the arguments of the assessee on this issue for all assessment years is fails. Thus, we reject grounds of appeal of the assessee on this issue for all the a....
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.... was conducted, the AO issued notices u/s 153A for 4 AYs which are beyond the said 6 AYs i.e AYs 2009-10 to 2012-13 and completed the assessments for AYs 2009-10 to 2012-13 u/s 153A r.w.s 143(3) and made addition towards underreporting of income without there being any evidence with the Assessing Officer to prove that the income represented in the form asset is escaped assessment for those assessment years. The legality of assumption of jurisdiction and issue of notices u/s 153A for AYs 2009-10 to 2012-13 was challenged by the appellant before the CIT(A) as the satisfaction of the conditions prescribed in the 4th proviso to sec 153A (1) is the sine qua non for such assumption of jurisdiction for "relevant assessment year or years" (AYs falling beyond the period of 6 AYs). The CIT(A) after considering relevant facts and also on appraisal of provisions of fourth proviso to section 153A(1) of the Act, held that issuance of notice in the case of the appellant for AY 2009-10 to 2012-13, in violation of the provisions the fourth proviso to section 153A (1) are bad in law and legally unsustainable. Accordingly, the CIT(A) held that the assessments made u/s 153A r.w.s 143(3) for the said a....
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....note and dummy entities. The unaccounted cash has been kept in the business of the assessee, which is a going concern and its group as working capital which is an investment/ asset. Therefore, the Assessing Officer opined that the threshold limit of Rs 50 lakhs is met for the assessment year or in the assessment years. 46. As regards the reference made to the "Erandam Thall" which was seized during the search, it is noticed that the same contained details of unexplained expenditure as per the assessing officer's own remarks and admittedly, there is no information/ details in "Erandam Thall" regarding undisclosed investment in any asset. Though, the assessing officer stated that the unaccounted cash has been kept in the business of the assessee as working capital, which is an investment/ asset, it is noticed that the assessing officer failed to specify the entries in the seized "Erandam Thall" which go to demonstrate that unaccounted cash has been retained in the business as working capital. The unexplained expenditure cannot be equated with the holding of unaccounted cash as working capital. Such inference drawn by the assessing officer defies logic. As regards reference to ....
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....n made under PMGKY is not in relation to any specific assessment year or years and there was no such requirement also under PMGKY. As regards the declaration made under IDS, it is noticed that the same was made for AY 2015-16 alone. Moreover, it has been clearly laid down in section 199-1 of Chapter IX-A of The Taxation Law (Second Amendment) Act, 2016 dealing with the tax and investment regime under PMGKY that the amount of undisclosed income declared under PMGKY shall not be included in the total income of the declarant for any assessment year under the Income Tax Act, 1961. In view of the said specific statutory prohibition, the action of the assessing officer in relying on the declaration made by the appellant under PMGKY to draw inference regarding income escaping assessment for assessment year 2009-10 to 2012-13 is in violation of the specific provisions of PMGKY and the same is not legally sustainable. 48. We further noted that in the satisfaction note recorded by the assessing officer prior to issue notice u/s 153A for AY 2009-10 to 2012-13, he does not bring out the fulfillment of the conditions laid down in the fourth proviso to section 153A(1) of the Act. The mandator....
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....fit as per seized electronic device to ITR filed for relevant assessment years and computed difference between income as per ITR and income as per seized electronic device for assessment year 2009-10 to 2014-15. The details are as under: AY Income as per ITR Income as per seized electronic devices vide Annexure VP/ED/S2 Unaccounted Income 2009-10 14,50,43,115 35,43,06,579 20,92,63,464 2010-11 34,25,24,801 38,38,75,986 4,13,51,185 2011-12 70,47,97,814 99,42,84,653 28,94,89,839 2012-13 67,73,13,951 1,86,73,46,489 119,0,32,538 2013-14 15,96,86,627 37,79,55,760 21,82,66,133 2014-15 21,56,01,358 1,32,93,72,383 111,37,71,025 TOTAL 306,21,74,184 50. It was further observed that, during the course of search sworn statement of Mrs. Anandhi, Consultant of M/s. Christy Friedgram Industry was recorded on 07.07.2018 and in response to specific questions, she had admitted that there is difference between net profit as per books of accounts seized during the course of search and net profit as per the Income-tax returns filed for relevant assessment years. The statement of Smt. R. Anand....
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....by Shri. M. Vannakanna, DGM (Accounts) in his sworn statement dated 07.07.2018 and the same has been confirmed by the assessee Shri. T.S.Kuamarasamy, in his sworn statement dated 09.07.2018. But, the CIT(A) deleted additions made by the Assessing Officer, on the basis of explanation submitted by the assessee, ignoring sworn statement of employees and assessee. 53. The ld. Counsel for the assessee, Shri. D Anand, Advocate, supporting order of the CIT(A) submits that sole basis for the Assessing Officer to make additions towards under reporting of income for Asst. Year 2009-10 to 2014-15 is seized electronic devise found in the possession of Smt. Anandhi, Consultant and sworn statement recorded from her during search. Further, the Assessing Officer had taken quantification of undisclosed income on the basis of Smt. Anandhi, sworn statement and confirmation from Shri. Vanakkanna, DGM (Accounts) without verifying the veracity of their statements, because Smt. Anandhi and Shri Vanakkannan have retracted their statements by sworn affidavits and no reliance can be placed on the seized tally accounts which represented incomplete and inaccurate accounts and that the audited P&L account a....
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....n of Smt. Anandhi are incomplete accounts before providing year end provisions like, depreciation, interest on loan and other provisions for various expenses. The assessee has filed a chart explaining difference in income with item wised debits and credits and ongoing through said reconciliation, we find that in the seized tally accounts, the assessee does not made provisions for depreciation, interest and other journal entries to rectify various mistakes in accounting income and expenditure. From the above, it is undoubtedly clear that the arguments of the assessee that tally accounts found in the premises of Smt. Anandhi is incomplete and same cannot be relied upon is backed by evidence. 55. Let us come back to year wise under reporting income computed by the Assessing Officer. For AY 2009-10, the AO quantified the under reported income at Rs 20,92,63,464/- by considering the difference between the net profit as per seized electronic device (Seized Tally Account) of Rs 35,43,06,579/- and the income admitted in the ITR at Rs 14,50,43,115/-. During the course of the assessment proceedings, the appellant furnished a reconciliation between the net profit as per seized tally accoun....
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....f the seized accounts (Paper book Vol-I Page 1, 35 and 57). Moreover, the non-furnishing of the acknowledgement has no bearing on the verification of the correctness of the reconciliation. Therefore, we are of the considered view that rejection of the reconciliation by the AO on the basis of irrelevant and incorrect grounds is not sustainable. The rejection of reconciliation furnished by the appellant for AYs 2010-11 & 2011-12 also for the same reasons is not sustainable. 56. In the reconciliation furnished by the appellant during the assessment proceedings for AY 2009-10, it was explained that a major portion of the difference between the profit as per the P&L account in the seized tally and the income as per ITR of Rs. 20,92,63,464/- (Paper book Vol-I Page 493-495) is on account of difference in the opening stock. We find that the value of the closing stock as on 31.03.2008 as per the return of income filed for assessment year 2008-09 and the statement of affairs furnished during the course of scrutiny assessment proceedings for the said assessment year amounted to Rs. 24,53,18,327/- (Paper book Vol-I Page 493-495), whereas the opening stock as on 01.04.2008 reflected in the s....
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....2011-12 also. 57. We further noted that, apart from the issue of wrong adoption of the value of opening stock in the seized tally account, the appellant also brought to the notice of the AO in the reconciliation furnished during the assessment proceedings that part of the difference between the net profit as per seized tally and the income as per the ITR is on account of depreciation claimed in the ITR (Paper book Vol-I Page 493-495). We find force in the arguments of the assessee, because the depreciation has not been provided in the seized tally except for the Oats division, whereas depreciation as per the provisions of the Act has been claimed in the ITR in respect of all divisions including Oats division. The fact that the appellant had not been providing for depreciation in the books of account (except for the Oats division) has been confirmed by the special auditor in his report (Paper book Vol-I Page 493-495), after making necessary verification of the seized tally account. The appellant has not provided for depreciation in respect of its divisions other than oats division in the seized tally accounts, whereas he has claimed depreciation with regard to the said divisions ....
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....nd with Smt. Anandhi cannot be treated as forming part of the tally data found with vannakannan and that both the accounts cannot be corelated is factually incorrect and not sustainable. 59. We further noted from the reconciliation statements for AYs 2009-10 to 2014-15, that the appellant highlighted the submissions made during the assessment proceedings regarding the incompleteness, inaccuracies and unreliability of the seized tally data. The appellant explained that the seized tally accounts represented the accounts prior to finalisation and audit and the same cannot be taken into consideration. The appellant stated that the finalised and audited accounts are available in the same seized electronic device and that the same were not taken into consideration by the AO. On careful examination, the explanation furnished by the appellant is considered to be in tune with the normal accounting and auditing process in any commercial organisation. The initial entries made in the accounts do not always represent the true nature of the transaction. Some of the instances of such nature are transactions on revenue account being entered as transactions on capital account or vice versa, inco....
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....s as well as non-understanding the nature of transactions, mis-grouping, treating the asset as revenue and vice versa, making consolidated entry as a single entry leading to negative cash balance, making the group of persons expenses under a single entry, non-entry of inward of stock leading to a negative stock, values being mistakenly entered for the consumed stocks, etc. The Special auditor, further observed with regard to the balance sheet items that expenses made are shown as advances, assets are shown as liabilities, opening balances of the general ledgers not carried forward to the closing balance, payments made to suppliers were not accounted etc,. The special auditor also made observations regarding the integrity of the seized tally data in the backdrop of availability of multiple backups at multiple times in multiple storage devices and availability of such backups at multiple locations and stated that the same constitutes clear evidences of improper maintenance of data. From the above, it is very clear that the AO is completely erred in considering seized tally accounts of Smt. Anandhi, because said accounts are incomplete and does not give correct financial position. ....
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....net profit in the relevant columns of the return of income. Further, the appellant furnished the details of sundry creditors, sundry debtors, closing stock and cash balance in the relevant columns of the return, which are required to be furnished in a No Accounts case. While filing the return of income in response to notice u/s 153A, the appellant filed the details in the same manner. The appearance of "0" entries in P&L account, as observed by the AO in the assessment order, were due to this reason. The citing of occurrence of "0" entries in the P&L account by the AO as one of the reasons for rejecting the special auditor's report is therefore found to be irrelevant and untenable. Hence, the final accounts prepared by the special auditor for the assessment year under consideration are required to be taken into consideration, instead of the seized tally accounts, which are incomplete and inaccurate. 62. From the discussion in preceding paragraphs, it is undoubtedly clear that the audited P&L accounts available in the seized material itself and the audited P&L accounts prepared by the special auditor for AYs 2009-10 to 2011-12 which are in agreement with each other are required t....
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.... fell during the period prior to her association with the appellant's organisation. It is also pertinent to mention that the relevant seized tally accounts were available in multiple backup files with dates of back up shown as 05.05.2014, 24.05.2014, 24.07.2014, 22.11.2014 etc., and that all such back up dates are prior to her engagement with the appellant's organisation from December 2015 onwards. Therefore, we are of the considered view that she was not conversant with the correct status of the seized tally accounts pertaining to the earlier period and the statement given by her that the said tally accounts represent true accounts of the appellant has to be regarded as a statement given under mistaken belief of fact. 64. As regards, the confirmation of the admission of Mrs. Anandhi with regard to under reported income for AY 2009-10 to 2014-15 based on seized tally data by Shri Vannakannan, it is noticed that he has merely stated that the working of the under reported income shown to him as per the statement of Mrs. Anandhi is correct. It is evident from the statement that the seized tally account was not made available to him to go through and furnish his comments regarding t....
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....elief of facts for the reasons discussed in detail at para 151 & 152 of the CIT(A) order. The revenue has not specifically rebutted the said findings of the CIT(A). Therefore, we are of the considered view that there is no error in the reasons given by the ld. CIT(A) to delete addition made towards under reporting of income being difference between net profit as per profit and loss account in seized tally data and income reported in ITR filed for the relevant assessment year. Thus, we are inclined to uphold the findings of the ld. CIT(A) and reject grounds taken by the revenue for AYs 2009-10 to 2014-15. 66. The next issue that came up for our consideration from Ground No. 4 to 4.3 of Revenue appeal for Asst. years 2015-16 and 2016-17 is additions towards unaccounted income arising from difference between bought note purchase and sales. 67. The facts with regard to impugned dispute are that, during the course of search huge cash purchases and cash sale by way of bought notes were noticed vide seized material ANN/VP/ED/S1 to S7.It was observed during the course of search that the assessee was resorted to under reporting of income by inflating bought note purchases. Bought note....
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....ice. The Assessing Officer on the basis of various incrimination material found during the course of search, coupled with statement recorded from various persons, observed that bogus purchases were booked in lakhs of metric tons, whereas the actual consumption is only 11,000 metric tons for financial year 2015-16. In order to verify and understand the veracity of bought note seized, a random set of bought notes were selected and compared with tally accounts seized in the case of M/s. CFI for the financial year 2014-15 and it was found that the assessee has booked bought notes purchases under the head exempted purchase category. The Assessing Officer further observed that bought notes purchases were not supported by necessary evidences including GRN, weighment slip etc. Further, there is a huge variation in purchase quantity and quantity consumed in production process. Therefore, opined that the assessee is indulged in booking bogus bought purchases and bogus bought notes sales to reduce profit. Therefore, by taking into bought note purchases and sale for the assessment year 2015-16 & 2016-17, computed unaccounted income arising out of bought note purchases and sales and details of ....
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....ogus bought note purchases and corresponding bogus sales to suppress his income is unsustainable on facts. The CIT(A) directed the deletion of the additions made for AYs 2015-16 and 2016-17 towards the unaccounted income arising from bogus bought note purchases and corresponding sales by holding that the observation of the Assessing Officer with regard to weighment slip, GRN and lorry receipt is hypothetical, because if you go through the process employed by the assessee for purchase of raw materials, it was very clear that bought note purchases are directly procured from farmers on 'as is where is' condition which are not supported by documents like weighment slips, GRN and lorry receipts like purchases from traders. The CIT(A) further observed that the observation of the Assessing Officer with regard to bought note purchases from APMC is completely contrary to facts on record, because it is impossible to imagine bogus purchases can be made from APMC which are regulated bodies from various state governments. The CIT(A) had also negated observation of the Assessing Officer with regard to variation in quantities of purchases and consumption and countered the findings of the Assessin....
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....the sales made through agents in the market without understanding the business model of the assessee. Further, the Assessing Officer has made additions towards unaccounted income from the books of accounts maintained by the assessee for these two assessment years without appreciating fact that bought note purchases and sales are accounted in regular books of accounts and purchases and sale has been accepted by the Sales Tax Department. The ld. Counsel for the assessee further submitted that the main business of the assessee is to supply nutrition food and other food supplements to various government departments. The Assessing Officer failed to appreciate that but for these purchases, the appellant could not have sold its products to the government and other customers. The Counsel for the assessee further submitted that the assessee has explained modus operandi employed for procuring major raw materials and one of the method employed by the assessee is to directly purchase from farmers. The purchases from farmers had been made through bought note purchases, because farmers does not have any formal system like any other traders. Therefore, bought note purchases does not have necessar....
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....Assessing Officer to rest his observations on deficiencies in documentation is statement recorded from Shri. RajaRamMohan u/s. 132(4) of the Act, where he has explained, the different colour slip used for sending materials for production and taking material for quality check. In so far as, purchase from farmers through bought notes, as per the general trade practices, purchases are made from place of farmers and in this case, there is no question of availability of purchase orders, sale invoice like in purchases from registered dealers. Therefore, from the above it is very clear that purchases from farmers are made with selfmade bought notes by the buyer organization which does not contain other details like weighment slip etc. Therefore, we are of the considered view that simply because certain documents are missing in support of bought note purchases, it cannot be held that purchases from farmers and AMPC are bogus purchases. 76. In so far observation of the Assessing Officer with regard to different colour of slips, we find that the Assessing Officer has placed reliance on the different types of test certificates prepared by the Quality Control Department in respect of purcha....
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....icked up the material from the addresses of each of the farmers without regard to the trade practice of picking up the material by the buyer from the agent's storage area after the material is moved by the agent from the farm gate to his storage area. Moreover, such analysis for a single day was also held to be inadequate to draw a general conclusion for the entire year. As regards, the finding of the AO regarding the non-availability of delivery vehicle number on the bought notes was held to be factually untenable as it was noticed that the same is invariably mentioned in the unloading slip available with each bought note in the seized material. Since, the bought note has no space earmarked for mentioning the vehicle number, the Assessing Officer appears to have erroneously concluded that delivery vehicle number is not available in the bought note. However, as is bought note is accompanied by three other documents including the unloading slip, as observed by the Assessing Officer himself, and the delivery vehicle number is found mentioned in unloading slip, in our considered view the findings of the Assessing Officer regarding non-availability of vehicle number in bought note is f....
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....deterioration in the quality of stock during the course of storage. The loss incurred due to sale of maize, which was not required for production, was found to be due to the deterioration in the quality during the course of storage and such loss was found to be inevitable on account of the business exigencies which compel the appellant to procure and stock higher quantities of maize than the quantity required for production. In view of this, the sale of maize at a loss cannot be construed adversely to conclude that the concerned bought note purchases and sales are bogus in nature. 79. The Assessing Officer had also considered Channa purchases as bogus only on the ground that there is no sales against purchases. But, the assessee explained with necessary evidences that entire purchase of Channa has been used as input for production of blend and weaning food supplied to the government. The loss computed on account of bogus purchases and sales in respect of Channa for AY 2015-16 has been held to be factually incorrect since the appellant did not make any sale of the said commodity and the entire quantity of purchases has been utilised for conversion into Bengal gram dhal which was ....
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....ken belief of facts, as the discussion made in the appellate order with regard to various aspects having a bearing on the genuineness of the bought note purchases has clearly brought out that none of the admission of facts made by them are borne out by the facts available in the seized material. Hence, the retractions filed by them are considered as valid and it is held that the reliance placed on such statements is unsustainable. Similar findings has been given by the ld. CIT(A) with respect to each item of goods purchased for the assessment year 2016-17 and negated the observation of the Assessing Officer to arrive at a conclusion that the assessee has indulged in booking loss to reduce profit through bogus bought note purchases and corresponding sales. 81. In this view of the matter and considering facts and circumstances of the case, we are of the considered view that finding of the AO that the appellant indulged in bogus bought note purchases and corresponding bogus sales to suppress his income is unsustainable on facts. Therefore, we are of the considered view that the ld. CIT(A) right in deleting the additions of Rs 73,03,20,624 and Rs 41,76,44,181 made for AY 2015-16 and....
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....nt of goods. The Assessing Officer on the basis of information gathered during the course of search, coupled with post search enquiries opined that the assessee has created various dummy entities to book bogus purchase and sales in order to reduce profits. The Assessing Officer had discussed the issue in light of examination of more than 1,300 dummy suppliers and their deposition given during the course of assessment proceedings, seizure of free signed cheque books of all dummy entities including images of ATM cards and also on analysis of various bank accounts, came to the conclusion that the assessee has generated unaccounted income being difference between bogus purchases and bogus sales through dummy entities and accordingly, made additions towards undisclosed income arising on account of purchases and sales through dummy entities for assessment year 2017-18 & 2018-19 and relevant details are as follows: AY Bogus Purchase through dummy entities (in Rs. ) Bogus Sales through dummy entities (in Rs. ) Unaccounted Income (in Rs. ) 2017-18 407,42,41,878 285,55,32,973 121,87,08,905 2018-19 373,93,17,103 204,97,02,917 168,96,14,186 84. Being aggr....
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....by the assessee to book bogus purchases and to reduce profit. The statement of N. Vijayanathan is confirmed by Shri Vannakkannan, DGM (Accounts) and further strengthened by statement of Mrs. Anandhi, recorded on 07.07.2018. The Assessing Officer has brought out clear facts to the effect that purchases through dummy entities and corresponding sales is bogus in nature and thus, rightly made additions toward unaccounted income being difference between purchases through dummy entities and corresponding sales. The CIT(A) without appreciating relevant facts simply deleted additions made by the Assessing Officer. 86. The ld. Counsel for the assessee, Shri. D. Anand, Advocate, supporting the order of the CIT(A) submitted that the assessee has filed various evidences to negate the observations of the Assessing Officer in respect of unaccounted income arising out of bogus purchases and sales through dummy entities and the same has been appraised by the CIT(A) to delete additions made by the Assessing Officer. The Ld. Counsel for the assessee further submitted that the Assessing Officer has completely erred in making additions towards unaccounted income for two assessment years solely on t....
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....ration to the reasons given by the Assessing Officer, in light of arguments of the assessee and we ourselves do not subscribe to the reasons given by the Assessing Officer for simple reason that except statements from Smt. Anandhi and other employees of the appellant there is details with the Assessing Officer with regard to commodity wise breakup of the quantum of bogus purchases and sales through dummy entities. The statements of employees were recorded during the course of search in a hurried manner and no details as to how and where the purchase and sales figure has been culled out. Therefore, we are of the considered view that in absence of any supporting evidences with regard to computation of unaccounted income out of bogus purchases through dummy entities, the additions made by the Assessing Officer solely on the basis of statement cannot be sustained, because the statements relied upon by the Assessing Officer recorded from various employees does not have any evidentiary value as the persons who gave the statement has filed their retraction along with affidavit and thus, we are of the considered view that there is no evidence with the Assessing Officer to justify additions....
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....d goods as per the quantitative details available in the seized tally accounts. Further, the entire requirement of Channa for conversion into Bengal Gram dhal for utilisation in the production of finished goods and the entire requirement of Ragi required for conversion into Ragi malt for utilisation in the production of finished goods have been procured only from entities among the alleged 28 dummy entities. Therefore, it cannot be considered that the said entities are merely dummy entities as alleged by Assessing Officer. The loss computed on account of bogus purchases and sales in respect of Toor/Toor dhal for AY 2017-18 and 2018-19 (Paper Book Vol-1 page - 746) is factually untenable as the AO erroneously compared the purchases of toor with sales of toor dhal and the quantitative details available in the seized tally accounts have revealed the conversion of toor into toor dhal and absence of any sales of toor as such. The inclusion of Urid dhal (Paper Book Vol-1 page - 746) in the commodities considered for working out bogus purchases and sales for AY 2017-18 is factually erroneous since the appellant has shown profit from the sale of said commodity. The loss computed on account....
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.... bring evidence on record at their end in support of the inference of bogus sales. The AO failed to establish the factum of bogus sales with relevant details and evidences. The AO has included even the credit sales made by the appellant in the alleged bogus sales, though the sales proceeds in respect of the same are received through the banking channel. The said feature is visible from the information available in the annexure to the statement of Smt. Anandhi (Paper Book Vol-1 page 710 723), which was the basis for the figures of bogus purchases and sales adopted in the assessment order. The finding of the AO that the purchases shown from 28 dummy entities were not taken into stock in view of non-genuine nature of such purchases is opposed to the facts available in the seized material, as the said purchases have been taken into the stock registers containing quantitative details of the raw materials found in the seized tally accounts or Excel sheet in the seized hard disk as the case may be. The finding of the AO that bogus sales have been booked in order to match the quantity of bogus purchases is untenable on facts as the AO did not advert to the relevant facts and did not furnis....
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....h could reveal that the purchases made from them are bogus as opposed to the purchases made from other registered dealers. The premise of the AO that the dummy entities were created by the appellant with view to book bogus purchases in their name and suppress the profits of the appellant has been held to untenable on the basis of the finding that the purchases of some commodities made from the alleged dummy entities have been treated as genuine purchases by the assessing officer while treating purchases of some other commodities from the said entities as bogus purchases, which is evident from the analysis of details of purchases available in the seized tally accounts. 92. The AO solely relied on the statements of employees of finance department with regard to the modus operandi of withdrawal of cash by using pre-signed cheques from the bank accounts of the 1317 individual suppliers of the alleged 28 dummy entities, without bringing any corroborative evidence on record by making necessary enquiries with the bank authorities regarding identity of the persons who encashed the bearer cheques. It is also pertinent to point out that the search did not result in unearthing of any docum....
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....transactions during the year are reflected as creditors in the balance sheet of the appellant as on 31.03.2018 (Paper Book Vol-1 page - 491). The supplier entities have given preference to procurement from friends and relatives of the partners or the employees of the appellant having agricultural operations as it would allow them to avail credit facility from such persons due to their personal acquaintance. We therefore are of the opinion that it is not correct to draw any adverse conclusion regarding the genuineness of the purchases made from the 28 entities based on the fact that former employees of the appellant are the partners of the said entities and those entities are in turn making purchases from 1317 individual suppliers who are either employees or former employees of the appellant or their relatives or friends. Having regard to the detailed discussion made in respect of certain critical aspects which have a significant bearing on the integrity and reliability of the seized material comprising pre-signed cheque books and ATM cards of the 1307 individual suppliers and the statements of the said suppliers, it has been held that the said evidences cannot be taken into cogniza....
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....has suppressed income by creating bogus purchases and sales through dummy entities. In this regard, it is noted that all the 3 persons had retracted their statements and it was accepted retractions of statements of various persons as valid on the ground that the statements were rendered under mistaken belief of facts, wherever we found based on the evidences available in the seized material that the contents of the statements are factually erroneous/contrary to the seized material. The revenue has not specifically rebutted the said findings of the CIT(A).The revenue has also contended in the grounds of appeal that the CIT(A) failed to appreciate that partners of 28 dummy entities and 1317 individual suppliers are the employees/ex-employees/ their relatives/friends and erred in accepting the explanation of the assessee that they were encouraged to start their own business ventures which is beneficial to them as well as the assessee though it is only an afterthought to cover up the bogus transactions. In this regard, it is noted that the CIT(A) has given detailed reasons backed by relevant facts from the financial statements (Paper Book Vol-1 page 490-492) for accepting the explanati....
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....indulged in bogus purchases through dummy entities and corresponding bogus sales to suppress his income is unsustainable on facts. Thus, we are inclined to uphold the findings of the ld. CIT(A) and direct the assessing officer to delete the additions of Rs 121,87,08,905 and Rs 168,96,14,186 made for AY 2017-18 and AY 2018-19 respectively towards the unaccounted income arising from bogus purchases and sales through dummy entities. 98. The next issue that came up for our consideration from ground No. 5 & 5.1 of revenue appeal for assessment year 200910 to 2019-20 and ground No. 8 to 12 of assessee appeal for assessment year 2012-13 to 2018-19 is additions and apportionment of unexplained expenditure u/s. 69C of the Act. In the assessment order, the AO made additions towards apportionment of unexplained expenditure aggregating to Rs. 687.25 crores u/s 69C for AYs 2012-13 to 2018-19. The apportioned amount of unexplained expenditure Rs. 687.25 crores was worked out by the AO by subtracting a sum of Rs. 1369.50 crores (being the sources available by way of identified undisclosed incomes of the appellant and 3 other associate concerns represented by under reporting of income in ITR, b....
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....Valeeswaran is reproduced in para 14.18 of assessment order. The details of the same are as follows: F.Y. Unaccounted expenses in Tiruchengodu (Rs.) Unaccounted expenses in Chennai (Rs.) Total (Rs.) 2011-12 1,911,025,080 NIL 1,911,025,080 2012-13 1,769,567,056 NIL 1,769,567,056 2013-14 1,885,241,868 NIL 1,885,241,868 2014-15 2,657,669,699 448,050,000 3,10,57,19,699 2015-16 3,895,516,120 297,500,000 4,19,30,16,120 2016-17 3,529,120,323 147,450,000 3,67,65,70,323 2017-18 3,498,720,445 NIL 3,498,720,445 2018-19 527,760,285 NIL 527,760,285 Total 19,674,620,876 893,000,000 20,56,76,20,876 100. The Assessing Officer further noted that the assessee has incurred unaccounted cash expenses from financial year 2010-11 to 2017-18 at Rs. 2056,76,20,876/- and as against this, the unaccounted income generated for the above period in the case of the appellant and other three associate concerns was at Rs. 1351,84,23,278/- which includes under reporting of income for assessment year 2009-10 to 2014-15 at Rs. 306,21,74,184/-, unaccounted income arising out of bogus purchases thro....
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....ee alone and thus, the same has been apportioned to assessment year 2012-13 to 2018-19. 102. The appellant challenged the said additions in the appeal filed before the CIT(A). In the appellate order, the CIT(A) held that the quantification of unaccounted expenditure as per Erandumthall at Rs. 2056.76 crores is not sustainable on facts and consequently, the amount of unexplained expenditure of Rs. 687.25 crores quantified in the hands of the appellant, which is derived from the same, is also unsustainable. However, the CIT(A) accepted the findings of the second special audit report and quantified the aggregate unexplained expenditure of the appellant and 3 other associate concerns at Rs. 211.37 cores and apportioned a sum of Rs. 111.76 crores out of the same to the appellant. The said sum was further apportioned to assessment year wise for AYs 2012-13 to 2018-19 and the same was directed to be treated as the addition towards unexplained expenditure u/s 69C in substitution of the additions made u/s 69C in the assessment orders for the said assessment years. Being aggrieved by the CIT(A) order, the assessee as well as the revenue are in appeal before us. 103. The ld. CIT-DR, Shr....
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....an evidence for making additions. 104. The Counsel for the assessee, Shri. D. Anand, Advocate supporting the order of the CIT(A) in so far as the deletion of additions made by the Assessing Officer towards unexplained expenditure u/s. 69C of the Act, in the hands of the assessee on the basis of Erandam Thall, further submits that the CIT(A) is completely erred in considering second audit report of the special auditor and sustained additions towards unexplained expenditure of Rs. 211.37 crores and further apportioned to appellant and other three group concerns. The Counsel for the assessee further submitted that the ld. CIT(A) erred in directing the Assessing Officer to make additions towards unexplained expenditure u/s. 69C of the Act on the basis of special audit report even though the special auditor very categorically observed that the Erandam Thall is dump document and it is inadmissible as evidence in view of non-compliance to the mandatory requirement of section 65B of the Evidence Act, 1872. 105. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The basis for the AO to make additions towards unexplai....
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....in Erandam Thall are almost identified with regular book of accounts maintained by the assessee and other group concerns also goes to prove that reason given by the AO to make addition toward unexplained expenditure is wrong. Therefore, in order to decide the issue of addition made towards unexplained expenditure, it is necessary to analysis reason given by the AO in light of provisions of section 69C of the Act, statement recorded from assessee and their employees and also the special audit report submitted by the auditor u/s 142(2A) of the Act. 106. The provisions of section 69C of the Act, deals with unaccounted expenditure. As per said provision, in any financial year, if an assessee incurs any expenditure and he, offers no explanation about the source of such expenditure, or the explanation, if any offered by him is not in the opinion of the AO, satisfactory, then, said expenditure may be deemed to be income of the assessee for such assessment year. In order to invoke provisions of section 69C of the Act, two important points to be considered. The first and foremost point is an assessee should incurs any expenditure in any financial year. Secondly, the source of expenditure....
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....of the original seized record of Erandam Thall and not the information relating to the working of Rs. 2056.76 crores. We further noted that the assessing officer did not furnish the working of Rs. 2056.76 crores despite repeated requests made during the assessment proceedings and the appellant was unable to explain proposed addition u/s 69C, in the absence of availability of such working of the unaccounted expenditure adopted by the assessing officer. Since, the assessing officer failed to provide the list of entries, out of more than 30,000 entries in Erandam Thall, which were considered for arriving at the unaccounted expenditure of Rs. 2056.76 crores, the addition made u/s 69C is unlawful and arbitrary. 108. We further noted that, during the course of appellate proceedings, the CIT(A) called for remand report from the AO and also furnish necessary workings of unexplained expenditure of Rs. 2056.76 crores and the details of the duplicate entries, the transfer entries, etc in the Erandam Thall which were excluded while computing the said unaccounted expenditure. The AO furnished the remand report vide letter dt 07.07.2022 (Paper book Vol-IV, Page 641 to 660), wherein she reiter....
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....ies in the excel sheets in the seized material include many duplicate entries, transfer entries etc. The appellant stated that the assertion of the AO that the details of quantification of alleged unaccounted cash expenditure of Rs. 2056.76 crores is available in the said annexures is completely false, since the details of the entries out of the total entries found in the Erandam Thall, which were considered for the purpose of said quantification are not available in the said annexures. The appellant stated that it is obvious from the response of the AO that the department is not willing to part with the documents detailing the quantification of the unaccounted cash transactions of Rs 2056.76 cr. Since, the said cash expenditure has been adopted as the main basis for making addition in the hands of the appellant in the assessment orders for various assessment years, non-furnishing of the details of arriving at the said quantum to the appellant by the AO constitutes gross violation of the principles of natural justice. The appellant stated that he has an inherent right to know the details of the working of such amount, so that he can make proper verification of the correctness of th....
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....is for removal of some entries while making the said working. The appellant stated that the AO is bound to provide the working of the unaccounted expenditure worked out as per Erandam Thall as per the principles of natural justice. The appellant contended that the nonfurnishing of the relevant working of the sum of Rs. 2056.76 crores during assessment as well as appellate proceedings goes to prove that the AO made the addition u/s 69C without having the relevant working of the amount and has merely followed the quantification stated in the appraisal report without application of his own mind and without independently ascertaining the same from the seized material. The appellant contended that the addition so made is arbitrary and cannot be sustained. 110. Having heard both sides, we find that there is no working with the AO to substantiate his claim that the assessee and their employees have furnished working of unaccounted expenditure of Rs. 2056.76 crores which is clear from remand report submitted by AO, where the AO shifting onus to the assessee to prove how working arrived at during search is wrong. In our considered view, the primary onus is on the AO to prove the addition....
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....ransfer entries regarding placement of cash in the locker, etc in the Erandam Thall, which are required to be excluded for the purpose of working out total of the cash outflow entries for arriving at the unaccounted expenditure. It is the claim of the AO that the duplicate entries and transfer entries were identified and excluded by the employees of the appellant and the unaccounted expenditure was worked out by them accordingly at Rs. 2056.76 crores. The assessing officer has relied on the statement of Shri. Harihara Krishnan, AGM Finance, recorded on 08.07.2018 in support of such assertion. On the other hand, the appellant stated that the said amount was first quantified in the statement of Shri. Valeeshwaran, (GM Finance) on 06.07.2018 after the working copy of the image of the electronic devices seized from Shri. P.Karthikeyan was made available at 8.30 Pm (Paper book Vol-I, Page 653 to 668 ) on the said date and that it is humanly not possible to go through more than 30000 entries in Erandam Thall in a short time of 3 hours remaining on the said day and correctly identify all the entries which are required to be excluded, before computing the unaccounted expenditure based on t....
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....7.2018 itself, which is evident from the fact that the time available for the entire exercise was not more than 3 hours. It is implausible that the mammoth exercise of going through more than 30000 entries, identifying and excluding the duplicate entries, transfer entries, etc and working out the unaccounted cash expenditure based on the remaining entries can be done within such a short span of time of about 3 hours. However, since such an exercise is shown to have been completed and a statement of Shri. Valeeswaran is shown to have been recorded within such a short span of time, the only conclusion that can reasonably be drawn is that the working was done in a hurried and adhoc manner without proper examination and verification of the entries in Erandam Thall. It is also reasonable to infer that the hurried manner of working was due to the insistence by the search team to complete it immediately without affording the opportunity to go through Erandam Thall systematically and comprehensively to Shri. Valeeswaran. The working so made is bound to be incomplete and inaccurate, which is also evidenced by the details available in Annexures A to H of the statement of Shri Valeeswaran, wh....
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....ee during the course of the assessment proceedings. Since, the AO failed to provide necessary details of working of unaccounted expenditure, the only inference that can be made is that the addition has been made on the basis of statement of employees without there being any evidence to support the addition. 112. Having said so, let us come back to comments of special auditor on Erandam Thall. It is important to consider the observation of the special auditor with regard to correctness of entries recorded in Erandam Thall. As per special auditor, the Erandam Thall and contents recorded therein is a dumb document and thus, it should be discarded on face of it. It was further observed that said document even fail to qualify as a books of accounts, because it cannot be identifiable to any person or entity. This special auditor further observed that 90% entries recorded in Erandam Thall are identified/matched with regular books of account of four entities. Form the above, it is very clear that it is a parallel day book maintained for all entities together to have a complete track on various transaction of the assessee. The fact that more than 90% entries are identified with regular b....
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.... absence of any finding as to nature of expenditure and person to whom such expenditure belongs to, no addition can be made u/s 69C of the Act, on suspicious and surmise manner. In our considered view, the AO is completely erred in making addition towards unexplained expenditure on the basis of Erandam Thall. Therefore, we are of the considered view that the additions aggregating to Rs. 687.25 crores made u/s 69C in the assessment orders for AYs 2012-13 to 2018-19 based on the quantification of the unaccounted expenditure as per Erandam Thall at Rs. 2056.76 crores cannot be sustained. The CIT(A), for the detailed reason rightly directed the AO to delete addition made u/s 69C of the Act, for AY 2012-13 to 2018-19. Thus, we are inclined to uphold findings of the CIT(A) and reject grounds raised by the revenue for all assessment years. 113. Coming back to enhancement of assessment made by the CIT(A) towards unexplained expenditure u/s 69C of the Act, on the basis of second audit report of the special auditor. During the course of assessment proceedings, the AO referred the matter of examination of the contents of Erandam Thall for drawing appropriate conclusions with regard to the ....
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....that the examination of 'Erandam Thall' was carried out in tune with the scope of work specified in the AO's reference. The Auditor further stated that though the entries in the Erandam Thall make it fit enough to be treated as a dumb document when examined in the light of accounting principles and widely accepted accounting concepts, he made certain assumptions in order to carry out the scope of work as entrusted by the AO to compare and match the entries of Erandam Thall with the books of accounts of the appellant and 3 other group entities. The special auditor stated that the following methodology has been adopted for identification and matching of entries in Erandam Thall with the books of accounts of the appellant and 3 other group entities as per the scope of the work: i. In order to compare the entries of Erandam Thall with the seized books of accounts of the 4 entities, the cash book from the seized tally was extracted in the case of all the 4 entities and the contra entries therein have been removed. The same have been furnished in annexure 1(a) to 1(d) of the report. ii. Since the entries in 3 different excel sheet are interlinked, the same were compiled....
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.... the consolidated file shown in Annexure 4. x. On sample basis, it was observed that the inflow entries of Erandam Thall such as "Salem Foods", "Elayaperumal", "Waste Sales", "Green Trading & Co", etc are found matching to the nearest approximation with the cash sales reflected in the books of account. Such entries have been marked as "cash sales" under the column "nature of entry" in the consolidated file shown in Annexure 4. xi. With respect to the entry in Erandam Thall with the narration "cash withdrawn: Syn+KVB+IBNallur+IB+SBI" on 28.03.2017 with the figure Rs. 65675, it is observed that the same matches with the sale receipts received through the bank account. Further, the consolidated receipts of such sales of these entities (shown in Annexure 6) and the consolidated entries of the above said nature of narration in Erandam Thall were cross verified and were found matching. Such entries have been marked as "cash sales" under the column "nature of entry" in the consolidated file shown in Annexure 4. xii. After removal of the contra entries, the entries with narration "blend supply exps", "Jaggery", "Kavundapadi market" were identified and found match....
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....xtracted from the seized tally data for the respective years is provided in Annexure 7. It is observed that the value of the tally extract is higher than the value arrived in Erandam Thall for both the cash inflow and cash outflow, which establishes that the entries in Erandam Thall are subsumed in the seized tally data. iii. It is observed that there is no separate sources of fund for the Erandam Thall, other than the sources available in the books of account of the 4 entities. iv. It is observed that the identified bank accounts and sources of the inflow are disclosed in the seized tally books of account of the respective entities. The identified bank accounts cited in Annexure 5 and other sources of inflow such as cash sales, are reflected in the seized tally books of accounts and the cash sales have been reported in the sales tax returns as well. On verification of income tax returns, it is observed that the sources of inflow as per seized tally accounts and identified bank accounts are reported. v. With regard to the assessee wise sources for the inflow of funds in Erandam Thall, it is observed that the entries do not comply with the fundamental acco....
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....estimated in the said manner only for the period after the demonetisation in November 2016 as the said entities have made disclosures under PMGKY for the earlier period. v. Due to unreliability of Erandam Thall, the undisclosed income arrived at in the first special audit report dt 03.12.2020 may be accepted. However, if the revenue accepts the Erandam Thall, the undisclosed income arrived at and enhanced in this report can be relied for assessing the income of the 4 entities for various financial years. 118. On careful perusal of the said report of the special auditor dt 15.04.2021, we find that there is no separate source of funds for Erandam Thall, other than the sources available in the books of the account of the 4 entities. It was further noted that except for the entries marked as "unidentified", all other entries of cash inflow and cash outflow in the Erandam Thall were matching with the entries in the seized tally books of accounts of the 4 entities. The special auditor stated that the unidentified entries shown in a separate Annexure-8 to the report represented the entries which were found to be not matching with the seized tally books of account of the 4 enti....
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....nexplicable and the said action of the AO only adds strength to the appellant's contention regarding the mechanical manner of adopting the quantification of unaccounted expenditure made during the course of search, without addressing various objections and contentions of the appellant. The report of the special auditor obtained by invoking the provisions of the Act could not have been ignored and disregarded by the AO, without specifying the reasons for doing so in the assessment orders. Although, the AO given his own reasons for rejecting special audit report, but in our considered view, the AO rejected special audit report on vague reasons just to substantiate addition made u/s 69C of the Act. In our considered view, the report has been prepared after making a very detailed, thorough, in-depth and scientific examination of the entries in Erandam Thall and comparison of the same with the books of account of the appellant and the other three group entities as per the scope of work assigned to him by the AO. The contra entries and transfer entries were identified using well defined parameters in conformity with accounting principles for such identification and the same were excluded....
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.... the transparent manner in which the said exercise was carried out. On making such meticulous and painstaking exercise as per the scope of work, the special auditor has identified and matched a large number of cash inflows into Erandam Thall with the corresponding withdrawals from the bank accounts of the 4 entities, the cash sales of the said entities and other sources in the books of account of the said entities. The special auditor has also identified and matched a large number of cash outflows from Erandam Thall with the corresponding business expenses recorded in the books of account by way of purchases, direct expenses and indirect expenses. The special auditor has furnished the identified and matched nature of each entry of cash inflow and cash outflow in Annexure 4 to the special audit report. The special auditor has also cross checked the sources of inflow into Erandam Thall including the withdrawals from the bank accounts with the returns of income of the four entities and has given his finding that the same are reported in the said returns, except the unidentified entries. The entries of cash inflow and cash outflow which could not be identified and matched with the seiz....
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....ble expenses made in the report is not acceptable as the same is based on assumptions stated in the report. Further, the appellant objected to the adoption of the unaccounted expenditure of the 4 entities including the appellant at Rs. 211.37 crores based on the report of the special auditor on the ground that it was only an estimate made by the special auditor. We have carefully gone through arguments of the assessee in light of observations of the special auditor, and we find that although, various assumptions made by the special auditor are logical, reasonable and in tune with normal characteristics associated with cash transactions, but when it comes to treating unidentified entries in Erandam thall as unexplained expenditure, we do not agree with suggestion made by the special auditor for simple reason that, in search assessment, addition can be made only on the basis of incriminating materials found during the course of search. Further, there is no scope for estimation of undisclosed income on adhac basis and to by extrapolating to various assessment years. In order to make additions, incriminating materials qua each assessment year is must. Further, it is also relevant to re....
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....rs 220 SCC Online SC 571. In the case of the appellant, though certificate u/s 65B(4) was prepared during the search, the same does not represent a valid certificate since it is signed by a person other than Sri.P. Karthikeyan though it is prepared in the name of Sri.P. Karthikeyan and it is claimed to be signed by him (Paper book Vol-I, Page 563-570 -panchanama & image proceedings pages 651-652). The signature found therein is completely different from the signature of Sri.P. Karthikeyan found in the panchnama dated 06.07.2018 and seizure annexures dated 05.07.2018 pertaining to the search at his residence. Therefore, the assessee contested that invalid certificate should not be taken into consideration and consequently, the electronic record represented by Erandam Thall is inadmissible as evidence due to non-compliance with the mandatory requirements of section 65B of Indian Evidence Act (Paper book Vol-IV, Page 597636. Therefore, the appellant submits that the unmatched expenditure of Rs. 211.37 crores computed in the special audit report on the basis of such inadmissible evidence in the hands of the appellant and three group entities is unlawful and the reliance placed by the C....
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....arguments of the assessee and we ourselves do not subscribe to the reason given by the CIT(A) to direct the AO to sustain additions of Rs. 211.37 crores u/s 69C of the Act, on the basis second audit report of special auditor for the simple reason that even though the special auditor made all effort to reconcile books of the assessee with Erandam Thall and where ever possible identified the entries in Erandam Thall with books of accounts, but for remaining entries in Erandam Thall, the special auditor observed that those entries are not identifiable to any individual assessee or entity. The source of debit or receipt entry is not identified, whether it is received in cash or bank. Further, there is no detail with regard to nature of debit/receipt whether it is a capital, loan or income. Further, there is no detail as to from whom and for what purpose the amount is received. Similarly in respect of credit or payment entries no details available with regard to nature of payment whether it is for repayment of loan, payment for purchase of any assets or expenditure incurred in the ordinary course of business. Further, there are no details, as to whom and for what purpose the amount is p....
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....unexplained expenditure. In our considered view when the Assessing Officer or CIT(A) is making additions u/s. 69C of the Act, the burden of proof is on the revenue, because if you go by the provisions of section 68 to 69C of the Act, where addition is made u/s. 68 of the Act, the burden is on the assessee to explain the source of the credit. But, in cases falling u/s. 69, 69A, 69B and 69C of the Act, the words used therein goes to show that before any of these sections can be invoked, the conditions precedent as to the existence of any investment or expenditure must be conclusively established by evidence and/or material on record by the Assessing Officer. If the revenue cannot, or fails to prove, there cannot be any addition. The primary onus is thus, on the revenue. In the present case, if you go through the findings of the special auditor in their audit report issued u/s. 142(2A) of the Act coupled with reasons given by the CIT(A) to enhance the assessment and direct the Assessing Officer to make additions u/s. 69C of the Act towards unidentified entries in ErandamThall, we find that there is no conclusive evidence with the department/revenue to allege that the assessee has incu....
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.... the relevant amount of Rs. 39,21,03,525/- represents estimated income for assessment year 2018-19 as per the tally accounts and the assessee has paid advance tax on such estimated income. The assessee had also filed return of income for assessment year 2018-19 u/s. 139(1) of the Act, which is after the date of search. Since, the said amount has been included in the return of income subsequently filed for assessment year 2018-19, the same cannot be taxed once again by including it in the undisclosed income. The CIT(A) directed the deletion of the said addition for AYs 2009-10 to 2018-19 by stating that the said amount was included in the admission made by the appellant during the search as it represents net profit as per unaudited accounts of FY 2017-18(AY 2018-19) and the income pertaining to the said year after auditing of the accounts was declared by the appellant in the return of income filed for AY 2018-19 subsequent to the date of search. 129. The ld. CIT-DR, Shri. M. Rajan, submits that the ld. CIT(A) erred in deleting the addition made by the Assessing Officer towards declaration of undisclosed income of Rs. 39,21,03,525/- over and above the unaccounted income quantified....
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....0 quantified by the AO, the difference amount in the disclosure made by the appellant of Rs 39,21,03,525 was apportioned by the AO to the AYs 200910 to 2018-19 in proportion to the unaccounted income quantified for the said Assessment Years. 132. We have given our thoughtful consideration to the reasons given by the Assessing Officer to make additions towards apportionment of undisclosed income of Rs 39,21,03,525/- in light of various arguments advanced by the ld. Counsel for the assessee, and we ourselves do not subscribe to the reasons given by the Assessing Officer for simple reason that, the sum of Rs 39,21,03,525 is the net profit as per the seized tally account for FY 2017-18 relevant to AY 2018-19 in annexure ANN/VP/ED/S13. We further noted that the Assessing Officer made additions towards difference between the disclosure of Rs 751,05,65,605 in the statement of the appellant dated 13.07.2018 and the unaccounted income for AYs 2009-10 to 2018-19 quantified in the statement dated 08.07.2018 of Shri. Vannakannan of Rs 711,84,62,080/- amounted to Rs 39,21,03,525/-, which represents the regular income of AY 2018-19 as per the seized tally account. Since, the return of income ....
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....e included in the unexplained expenditure u/s 69C added in the assessment orders. The revenue contended that since the addition of unexplained expenditure was computed by adjusting the unaccounted income computed in the hands of the appellant and 3 associate concerns against the unaccounted expenditure of Rs. 2056.76 crores, the unexplained expenditure has to be increased when the unaccounted income of the appellant is reduced by the said regular income of Rs. 39,21,03,525. In our considered view, the grounds of appeal raised by the revenue is without any basis because what was added by the Assessing Officer is total income of the appellant for the assessment year 2018-19 which is the year of search and thus, at any stretch of imagination, said income cannot be included in undisclosed income and assessed once again in the assessment. Since, the assessee had already declared net profit as per tally accounts for assessment year 2018-19 in subsequently filed return u/s. 139(1) on 28.02.2019, the additions made by the Assessing Officer on very same amount, amounts to double addition which is not permissible under the law. The CIT(A), after considering relevant facts has rightly deleted....
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....tatement recorded during the course of post search investigation that the cash portion was paid out of unaccounted income generated by his proprietary concern. The DR further submitted that the findings of the CIT(A) that additions made towards on money for purchase of property in the hands of assessee amounts to double taxation without appreciating that the additions made in the hands of M/s. Handhold Ventures Pvt Ltd is pending before the CIT(A) and has not attained finality. 136. The ld. Counsel for the assessee Shri. D. Anand, Advocate, supporting order of the CIT(A) submitted that M/s. Handhold Ventures Pvt Ltd, is a separate legal entity and the transactions of the said company cannot be considered for taxation in the hands of the appellant, unless it is proved that money has been paid by the assessee. In this case, the so called sale agreement between M/s, Agni Estates and Foundations Pvt Ltd (Seller ) and M/s. Handhold Ventures Pvt Ltd (buyer) cannot be treated as the transaction of the assessee because the appellant is not a party to the said agreement. Further, the Assessing Officer made additions towards on money paid for purchase of property on the basis of statement....
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....nsideration has been met out of the unaccounted income of his proprietary concern is not justified, having regard to the fact that he denied the payment of any excess consideration for the purchase of the relevant property in his earlier statements u/s 132(4) dated 09.07.2018 and 13.07.2018. Moreover, the facts stated by him in the statement u/s 131 are in contradiction to the facts available in the agreement of sale and registered sale deed. The appellant stated therein that the actual consideration was Rs. 5 crores per acre as against Rs. 3.10 crores per acre as per the registered sale deed, whereas the agreed sale consideration was shown at Rs. 7.14 crores per acre in the agreement of sale. This apparent discrepancy in the quantum of actual sale consideration discredits the contents of the appellant's statement u/s 131 and weakens the evidentiary value of the said statement. Moreover, there is no evidence to corroborate the contents of the agreement of sale by way of any statement of the seller. 138. Further, regardless of whether the factum of payment of consideration over and above the consideration stated in the registered sale deed is considered to have been established w....
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....t that the property was purchased by the company which is a separate legal entity and unexplained investment if any is required to be examined in the hands of the company only. In view of the above, we are of the considered view that there is no merit in grounds taken by the revenue on this issue and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject grounds taken by the revenue. 140. The next issue that came up for consideration from ground No. 7 to 7.1 of appeal filed by the revenue for assessment year 2016-17 to 2019-20 is additions on account of disallowance of working capital loan interest for AY 2016-17 to 2019-20. The fact with regard to impugned dispute are that during the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed interest expenditure in respect of working capital loan borrowed from banks and financial institutions. The Assessing Officer further noticed that the assessee has diverted the working capital loan funds for non-business purpose by advancing interest free loans to various group/associated concerns. The Assessing Officer, after analyzing the bank accounts of the appellant worked out diver....
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....nt of loans and advances given to group companies, opined that the Assessing Officer is completely erred in making additions toward disallowance of interest expenses u/s. 36(1)(iii) of the Act without appreciating fact that OCC limits sanctioned by the banks is against security of stock and debtors and the assessee is having investments in stock and debtor at each year end more than the amount of loan given by the banks and thus, the question of diversions of interest bearing funds for non-business purpose does not arise and consequently, interest expenditures cannot be disallowed u/s. 36(1)(iii) of the Act. The CIT(A) had also discussed the issue in light of the decision of Hon'ble Supreme Court in the case of CIT vs Reliance Industries Ltd [2019] 410 ITR 466 (SC) and also the decision of Hon'ble Madras High Court in the case of Karur Vysya Bank Ltd vs CIT [TCA No. 509 to 511 of 2010] and observed that where the own funds and non-interest bearing funds are adequate to cover the investments/loans, it needs to be presumed that such investments have been made from own funds and non-interest bearing funds only. Therefore, directed the Assessing Officer to delete disallowance of intere....
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.... free loans or investments in them is based on his observation that the relevant cheques were issued from the working capital loan account. In this regard, the appellant pointed out that all the business and other transactions are done through the OCC loan account (working capital loan account) only and the issue of cheques to the associate concerns through the said account cannot be treated as diversion of working capital loan funds. The appellant stated that all the sale receipts and other funds available with the appellant are routed through the said working capital loan account and the investments made/loans advanced to associates concerns are made out of such funds. The appellant pointed out that this is evidenced by the fact that the own capital of the appellant in the balance sheet is much higher than the amounts advanced to or invested in the associate concerns in each of the relevant assessment years. The appellant, accordingly contended that there is no diversion of working capital loan funds and the disallowance of interest made in the assessment order is not justified. 146. We have given our thoughtful consideration to the reasons given by the Assessing Officer to di....
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....hown in the assessment orders) as seen from the examination of the balance sheet relevant to the four assessment years. Therefore, we are of the considered view that there is no diversion of interest bearing funds for nonbusiness purpose to give loans and advances to group concerns as alleged by the Assessing Officer. 148. At this stage, it is relevant to discuss few judicial pronouncements on this issue. The Hon'ble Supreme Court in the case of CIT v. Reliance Industries Ltd. [2019] 410 ITR 466 (SC)held that where the own funds and non-interest bearing funds are adequate to cover the investments, it needs to presumed that such investments have been made from own funds and non-interest bearing funds only. The Hon'ble Madras High Court, being the jurisdictional High Court, rendered similar decision dated 08.02.2022 in the case of The Karur vysya bank ltd vs CIT (TCA No. 509 to 511 of 2010) by following the above mentioned decision of the Hon'ble Supreme Court. The said decisions of the Hon'ble Supreme Court and Hon'ble Madras High Court are squarely applicable to the facts of the appellant's case. Therefore, by following the ratio of the said decisions, we are of the considered v....
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....nds and non-interest bearing funds only. From details filed by the appellant, net cash flows from operating activities are higher than the loans advanced/investments made in associates concerns and it cannot be said that working capital loan funds were diverted for nonbusiness purpose. Therefore, we are of the considered view that the ground of appeal filed by the revenue is devoid of merits and thus, we are inclined to uphold the findings of the ld. CIT(A) and direct the Assessing Officer to delete additions made towards disallowance of proportionate interest expenditure u/s. 36(1)(iii) of the Act for assessment year 2016-17 to 2019-20. 150. The next issue that came up for our consideration from appeal filed by the assessee and, as well as the Revenue for assessment year 2019-20 is addition on account of unexplained cash u/s. 69A of the Act amounting to Rs. 16,26,67,400/- found during the course of search at various premises of the appellant and their group companies. The Assessing Officer has made additions toward cash found during the course of search on the basis of statement of Shri Valeeswaran, GM (Finance) recorded u/s. 132(4) of the Act on 06.07.2018. In response to ques....
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....balance in the hands of M/s Pack Easy for Rs. 15 lakhs aggregating to Rs. 40 lakhs. However, the balance amount of cash found and seized during the course of search has been deleted by holding that the appellant had explained cash found and seized during the course of search with known source of income and as per which the cash balance available as on 05.07.2018 in the name of various group companies of appellant is sufficient or more than the amount of cash found during the course of search. 153. The ld. CIT-DR, Shri. M. Rajan, submits that the ld. CIT(A) erred in deleting the addition of Rs. 15,86,67,400/- made u/s. 69A of the Act towards cash found and seized during the course of search without appreciating fact that Shri Valeeswaran, GM (Finance) in his sworn statement recorded u/s. 132(4) on 06.07.2018 admitted the unaccounted cash kept in the bank lockers maintained in the name of employees and also furnished the details of locker in the name of Shri. Yuvraj, Shri. Murugan, Shri. Sathish Kumar and Shri. K.R. Baskar. The CIT-DR further submitted that the department has found cash balance of Rs. 5.5 crores in the locker of Shri K.R. Baskar at Punjab National Bank, Erode. The....
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....submissions has rightly deleted additions made u/s. 69A of the Act towards cash found during the course of search and their order should be upheld. 155. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. There is no dispute with regard to the fact that a sum of Rs. 16,26,67,400/- was found and seized during the course of search from various premises either belongs to the assessee or his associated concerns, including bank lockers in the name of various persons. It is also an admitted fact that Shri Valeeswaran, GM (Finance) in his statement recorded u/s. 132(4) of the Act admitted that the appellant has kept unaccounted cash in bank lockers of various employees and also gave list of employees and bank locker account numbers. The Assessing Officer has made additions towards cash found during the course of search u/s. 69A of the Act on the basis of statement recorded from employees and the appellant. It was the contention of the assessee before the Assessing Officer that enough cash balance was available as per books of accounts of various firms and companies which is sufficient to explain source for cash foun....
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....annexure ANN/VP/ED/S-13. The appellant stated that the books of account of M/s Rasi Nutri Foods were separately seized from the premises of the said entity. The appellant furnished copies of relevant ledger extracts from the seized tally accounts of the appellant concern and the said entities to show that the cash found during the search is covered by the cash balance available in the books of accounts. 157. As regards, the cash of Rs. 5.50 crores found in the locker of Shri. K.R.Baskar, the appellant explained that the said person is the director of M/s Arogya Enterprises Ltd and its sister concern M/s Hermit Enterprises LLP and that the cash found in his locker belongs to the said entities. The appellant furnished the copies of the cash ledger extract of the said entities to show that the cash found in the locker is covered by the cash balance available in the books of account of the said entities. As regards the cash of Rs. 7,50,000 found at Villa 16, Natchatra Classic, Kalapatti, Coimbatore (appearing at Sl.No 10 of the list furnished in the assessment order), the appellant stated that the same does not belong to him or any of his entities. The appellant further pointed out ....
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....copies of cash ledger in the books of M/s Arogya Enterprises Ltd and M/s Hermit Enterprises LLP as on the date of the search, which were stated to have been furnished in the paper book filed along with the writ petition before the Hon'ble High court of Madras. This information was already available with the assessing officer at the time of passing the assessment order, since the copies of writ petition and the paper book filed with the writ petition were furnished by the appellant to the Investigation wing and the same were later on handed over to the assessing officer. On perusal of the said cash ledgers, it is noticed that the cash balance available in the books of account of M/s Arogya Enterprises Ltd and M/s Hermit Enterprises LLP as on the date of search amounted to Rs 3,54,69,065 and Rs 3,43,20,137 respectively, which is cumulatively more than the cash of Rs. 5.50 crores found in the locker of Shri. K.R.Baskar. Further, the appellant stated that the tally accounts of the said two entities have been seized by the department during the course of the search from the office premises of the auditor Shri. K.Ramachandran on 05.07.2018 and that the availability of the said cash balan....
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....e list of various entities of the group along with the cash balance as per their books as on the date of the search in the paper book furnished to the Hon'ble High Court, a copy of which is available with the AO. It is noticed that the appellant furnished copies of the cash ledger extracts of the said entities in the paper book furnished to the Hon'ble High Court in support of the claim of cash balances available with them. The said cash ledger extracts have been furnished along with the written submission also during the appellate proceedings. It is also noticed that the appellant furnished the list of group entities to whom the cash found during the search belonged to, in the letter dated 27.08.2019 furnished to the Assessing Officer. On examination, it is seen that out of the 27 entities shown in the table, two entities shown at Sl.No. 26 and 27 are not appearing in the list furnished by the appellant in the paper book filed along with the writ petition before the Hon'ble High court. Further, it is seen that the books of account of the said two entities were not found and seized from the corporate office premises of the appellant. Further, it is seen that the said two entities d....
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....appellant and other group entities as on the date of the search. 162. We further noted that, the AO merely relied on the statement of Shri. Valeeshwaran dated 06.07.2018 to draw the conclusion that the cash found during the search represents unaccounted cash of the appellant. As already mentioned earlier, some of the factual details furnished by Shri. Valeeshwaran regarding bank lockers of the employees where the unaccounted cash is kept are found to be erroneous. Though Shri. Valeeshwaran stated that the cash available over and above the book cash balances is placed in the lockers of the employees, the AO did not make any effort to ascertain the cash balances as per the books of account, before reaching his conclusion that the entire cash found represents unexplained cash. Moreover, it is noticed that the AO wrongly treated the cash found during the search, other than the cash found in the lockers, also as unaccounted cash based on the said statement of Shri. Valeeshwaran, though his statement has no relevance to such cash which is not found in the lockers. Such action of the AO is considered to be arbitrary and without any basis. The statement of Shri. Valeeshwaran cited in su....
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....he course of search to the extent of Rs. 15,86,67,400/- out of total cash found and seized at Rs. 16,26,67,400/- and reject grounds of appeal filed by the revenue. 164. In so far as, the arguments of the assessee on cash balance in the name of M/s. Balaji Constructions and M/s. Pack Easy to the extent of Rs. 40 lakhs, sustained by the CIT(A), we find that even before us the appellant could not file any evidences to prove availability of cash balance as on the date of search. Therefore, we are of the considered view that there is no error in the reasons given by the CIT(A) to sustain additions to the extent of Rs. 40 lakhs u/s. 69A of the Act, and thus, we reject grounds taken by the assessee on this issue. 165. The next issue that came up for our consideration from appeal of the revenue for assessment year 2017-18 is enhancement proposed u/s 56(2)(vii)(a) and held to be not warranted with regard to the amount alleged to be received from Smt. V.K.Sasikala for AY 2017-18. 166. During the course of appellant proceedings, a notice of enhancement dated 10/06/2022 was issued by the CIT(A) proposing to bring the amount of Rs. 237 crs held to have been given to the appellant by Sm....
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....ash of Rs. 237 crores from Smt. Sasikala during the demonetization period for conversion of the OHDs/SBNs into new currencies and held, the provisions of section 56(2)(vii)(a) are not attracted to the facts of the appellant's case. The CIT(A), therefore held that the enhancement proposed during the course of appellate proceedings in this respect is not warranted. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 168. The ld. CIT-DR, Shri. M. Rajan, submits that the ld. CIT(A) erred in issuing suomoto enhancement notice, even though the issue of cash received by the assessee of Rs. 237 crores in specified bank notes from Smt. V.K. Sasikala is neither emanating from assessment order, nor the issue has been contested by the assessee during appellate proceedings. The ld. CIT-DR further submits that the ld. CIT(A) erred in holding that enhancement of assessment to the extent of Rs. 237 crores u/s. 56(2)(vii)(a) is not warranted without appreciating fact that the chain of events and evidences collected during the course of search action established the fact that Shri. T.S. Kumarasamy received demonetized currency from Smt. V.K. Sasikala and deposited cash to his bank ....
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....of the said statements have conclusively established that a sum of Rs. 237 crores was received by the appellant from Smt. Sasikala. It is noticed that the loose sheet seized during the course of search in the case of Smt. Sasikala from the premises of M/s Namadhu MGR bearing page No. 98 of ANN/VSU/NMN/LS-1/S contained an entry "Tirupati-7.40" and it was with reference to the said entry that Shri. Siva kumar stated that it represents commission of Rs. 7.40 crores which is to be received from Shri Tirupati for facilitating the transfer of OHDs/SBNs of Rs. 237 crores to the appellant on the instructions of Smt. Sasikala, for the purpose of exchanging the same with new currency. However, it is noticed that the said loose sheet does not contain any noting with regard to the alleged amount of Rs 237 crores. It is also noticed that the name of the appellant is not found noted anywhere in the said loose sheet. Moreover, as contended by the appellant, the statement of Shri. Siva Kumar that he was promised commission of Rs. 7.40 crores for facilitating the transfer of amount of Rs 237 crores to the appellant does not stand to any reason as the commission, if any, is to be paid by the person ....
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.....2016, which resulted in increase in the cash balance from Rs. 3,36,19,000 to Rs. 249,52,83,000. In response to the said question, Shri. Valeeshwaran stated that the cash introduction was made by the appellant and that the source for the same was the unaccounted cash received from Smt. Sasikala. He stated that the same was later on deposited in the bank accounts of M/s. Christy Friedgram Industry and Suvarnabhoomi Enterprises Pvt Ltd under PMGKY scheme. As pointed out by the appellant, Shri. Valeeshwaran had earlier stated in his statement on 06.07.2018 that the cash balances noted in the said diary represents the unaccounted cash generated by booking bogus purchases. In view of the said contradiction in the explanation given by Shri. Valeeshwaran regarding the sources of cash balances noted in the seized diary between the two statements recorded on 06.07.2018 and 08.07.2018, it is considered that the statements of Shri. Valeeshwaran cannot be assigned any evidentiary value for making any inference against the appellant. 173. It is also significant to observe that there is a complete contradiction between the dates on which the cash introduction was noted in the diary seized fro....
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....ction by issuing enhancement notice to the assessee on the issue of cash receipt of Rs. 237 crs in demonetised currency since the issue is neither reflected in the return of income nor the AO has examined its taxability in the assessment order. In support of this contention, the revenue placed reliance on the decisions of Hon'ble Supreme Court in the cases of CIT vs Rai Bahadhur Motilal Chamaria reported in (1967) 66 ITR 443 and CIT vs Shapoorji Pallonji Mistry (1962) 44 ITR 891 wherein it was held that appellate assistant commissioner has no jurisdiction to enhance assessment by discovering new sources of income not mentioned in the return of income or not considered by the AO in the assessment order. The revenue contended that the enhancement notice issued by the CIT(A) is ab initio void in the absence of jurisdiction to enhance the assessment and the subsequent conclusion in favour of the assessee is not valid in the eye of law. With regard to the said additional grounds, we find that the contention of the revenue is not justified since the same is founded on wrong facts. It is noted that the averment of the revenue in the additional ground that the issue of cash receipt of 237 ....
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....application to the case of the appellant as the facts are distinguishable as pointed out above. Further, as per the provisions of section 251 of the Act and Explanation provided therein, it is very clear that in appellate proceedings, the Commissioner (Appeal) may consider and decide any matter arising out of the proceedings, in which the order appealed against was passed, notwithstanding such matter was not raised by the appellant. If we examine the facts of the present case in light of provisions of section 251 of the Act, on powers of the Commissioner (Appeals), there is no dispute of whatsoever on the powers of the Commissioner in disposing of an appeal including enhancement of assessment, if such enhancement is necessary in the given facts and circumstances of the case, he may suomoto initiate enhancement proceedings to consider and decide the issue. In this case, on perusal of enhancement notice issued by the CIT(A) and subsequent finding on the issue, it is very clear that there is enough material in the appeal folders including statement recorded from various employees during search which were part of assessment proceedings. Further, the CIT(A) had taken note of the issue f....
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.... who also happens to be the range head of the AO of the appellant. The said letter was uploaded in ITBA portal on 20.06.2022 as evidenced by the receipt of said letter by the appellant through e-filing portal. Since the letter is uploaded on ITBA portal, the same is available for view by the AO of the appellant and the AO was very much aware of the enhancement proceedings due to this reason. The Range head of the AO of the appellant is also aware of the enhancement proceedings since the letter was marked to him as stated above. The notice of hearing under section 250 of the Income Tax Act dated 30.06.2022 which was issued after the issue of enhancement notice was also uploaded in ITBA portal as evidenced by the receipt of said notice by the appellant through e-filing portal. Since the AO was informed through the ITBA portal regarding issue of enhancement notice and subsequent hearing notice, the contention of the revenue in the additional ground that no opportunity was given to the AO to present evidence on the issue is factually incorrect and false. Since, the AO had already been put on notice, it is for the AO to exercise his right to be heard at the hearing of the appeal in acco....
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.... the Assessing Officer rejected special audit report submitted by the auditor and financial statement prepared for the relevant assessment years by stating that the Assessing Officer is not binding on the special audit report. Further, the AO has totally ignored and not even discussed the second audit report submitted by the auditor on Erandum Thall found and seized during the course of search. On appeal, the CIT(A) accepted the special audit report and financial statement prepared for relevant assessment year on the ground that the financial statements prepared by the special auditor and reports submitted on correctness of financial statement by the special auditor is based on systematic and scientific method followed for preparation of financial statements and further the assumptions employed by the special auditor is in accordance with Auditing Standards issued by the Institute of Chartered Accountants of India. Being aggrieved by the CIT(A), the revenue is in appeal before us. 179. The ld. CIT-DR, Shri. M. Rajan, submits that the ld. CIT(A) erred in holding that the rejection of the first special audit report u/s. 142(2A) of the Act, and complete disregarding of the second s....
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....cial audit report is incorrect, because when the department has directed the assessee to get his accounts audited in terms of section 142(2A) of the Act, the Assessing Officer is bound to consider the special audit report submitted by the auditor and financial statement prepared for the relevant assessment years. Just because, the audit report is not in conformity with the opinion of the Assessing Officer or not in accordance with appraisal report, it cannot be said that special audit report is not prepared in accordance with relevant accounting and auditing standards. The CIT(A), after considering relevant facts has rightly accepted the special audit report submitted by the auditor and thus, the grounds raised by the revenue on this issue should be rejected. 181. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We have also carefully considered reasons given by the CIT(A) for accepting special audit report submitted u/s 142(2A) of the Act, in light of grounds of appeal filed by the Revenue challenging findings of the CIT(A). In the grounds of appeal, the revenue raised various contentions with regard to the ....
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.... by making AY 200910 as the base year and by adopting the closing stock AY 2008-09 as opening stock of AY 2009-10 and proceeding to build the accounts for the remaining years on the accounts of said base year. The AO stated that the accounts so prepared for the base year are not acceptable since the appellant himself has reported "0" in opening and closing stock figures in the return of income filed u/s 153A for AY 2009-10. However, the said reason cited by the AO is factually untenable. It is an undisputed fact that the original return of income for AY 2009-10 filed u/s 139 was filed under the category of "No account case". As a result, the original return of income does not contain any details of profit and loss account. As per the details relating to P&L account required to be furnished in a return filed under category of No Accounts case, the appellant separately furnished the details of gross receipts, gross profit, expenses and net profit in the relevant columns of the return of income. Further, the appellant furnished the details of sundry creditors, sundry debtors, closing stock and cash balance in the relevant columns of the return, which are required to be furnished in a ....
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....or for the purpose of working out the quantum of raw materials consumed in production, we find that the said observation of the AO in the assessment order does not contain any references to evidences in the seized material which reveal manipulation of quantum of production of finished goods. Similarly, the observation of the AO that the quantum of production as per the records of the appellant is not reliable in view of finding of evidences of bribing of public servants during the search which indicates manipulation of the sale quantity of finished goods by the appellant for the Govt. welfare schemes is seen to be mere surmise and speculation. The search did not reveal any evidence regarding supply of less quantity than the invoiced quantity or raising of invoice without actual supply of goods to the Govt. by the appellant. Based on the evidences found regarding bribing of public servants, the AO appears to have made a presumption that such bribing was for the purpose of manipulating the quantum of supplies made to the Govt. without any basis. In our considered view, the AO did not bring any evidence on record in respect of alleged manipulation of supply quantities by making necess....
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...., that a correct picture regarding the real undisclosed income would be arrived at once the examination of the contents of Erandam thall is made by the special auditor. These facts leave no doubts in our mind that both the AO and the Pr.CIT were of the unanimous opinion that the quantification of unaccounted expenditure made during the course of the search based on seized Erandam thall cannot be adopted mechanically on account of the objections of the appellant with regard to the same and that the same needs to be worked out afresh by the special auditor, who is an expert in financial and accounting matters. However, having proposed examination of contents of Erandam thall by the special auditor, the AO completely ignored the special auditor's report dated 15.04.2021 while completing the assessments. The AO did not even mention the fact that a report was called for from the special auditor on this issue in the assessment orders. The AO remained completely silent with regard to the said report and its contents. This is surprising since the AO himself referred the matter for special audit u/s 142(2A) and obtained the report in pursuance thereof. The AO has not made any discussion in ....