TaxTMI 
TaxTMI 
2026 (3) TMI 483
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....quest was adjourned to 03/06/2024. Subsequently the Ld. AR sought adjournment to appear physical and as the matter thought fit so, adjournment granted to 26/11/2024, however registry suo-motu adjourned the case to 18/12/2024 wherein the Ld. AR appeared on behalf of assessee but since queries raised remained unanswered therefore sought time to seek instruction from the respondent, the matter accordingly was again stand adjourned to 05/02/2025. The respondent did neither attend the hearing on 05/02/2025 nor on next hearing 08/04/2025. The appeal thereafter posted for hearing respectively on 03/06/2025, 05/06/2025, 19/06/2025, 21/07/2025 & 12/08/2025. The respondent was indifferent in its behaviour on these dates as well. The bench for administrative reason did not function on scheduled hearing dt. Viz; 17/09/2025 & 22/10/2025. We also note thereafter case was scheduled for hearing on 24/11/2025 in the absence of respondent at the scheduled date and after noting conduct showcased for entire calendar year 2025 the case following principle of natural justice again adjourned to 12/01/2026. When the assessee continued to remain absent, the bench thought fit to grant last opportunity adjou....
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....& submission on thereaccount were called for and taken on record. 3.5 On the basis of such impounded material & statements recorded in the course of survey proceedings etc., the Ld. AO vide order dt. 25/08/2021 framed assessment u/s 147 wherein twin additions were made viz; (i) Rs.2,53,73,433/- being difference of profit computed @ 12% of total turnover of Rs.60,88,36,488/- as against Rs.3,11,00,552 being profit computed @8% of reported turnover by the assessee company and (ii) Rs.11,81,03,855/- being amount of cash generated from business activities which was kept outside the books including the additional income of Rs.1,18,49,855/- declared by the managing director of the assessee company. 3.6 Aggrieved by former twin additions and the assessment as such, assessee company preferred an appeal u/s 246A r.w.s. 249 of the Act before the Ld. CIT(A) on 24/09/2021 which was allowed by the Ld. CIT(A) by an order dt. 29/05/2023. 3.7 Aggrieved by the first appellate order passed u/s 250 of the Act ['impugned order'], the appellant Revenue came in present appeal on the following grounds thus seeking reversal of twin deletions; i) On the facts and in the circumstances of th....
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....ok containing 100 pages, both were referred/adverted in the course of hearing by the Ld. DR. In the absence of respondent assessee u/r 25 (supra) we have heard the appellant and subject to rule 18 of ITAT-Rules, 1963 perused aforestated material placed on records and considered the facts of the case in the light of settled position of law and which are forewarned to the party present. After the conclusion of hearing but before finalisation of dictation/draft order, the registry brought to our notice that, the respondent furnished written submission on 09/02/2026, in the larger interest of justice & completeness of adjudication same was perused, thoughtfully considered, and dealt therewith in accordance with law. Ground No. 01 & Ground No. 2; 5. By this ground the Revenue alleges that the Ld. CIT(A) action in deleting the addition of Rs.2,53,73,433/- made by the Ld. AO on account of difference of profit computed @ 12% of total turnover of Rs.60,88,36,488/- as against the profit declared by the respondent assessee. The case of the Revenue is that; while directing the deletion of impugned addition the Ld. CIT(A) turn blind eye to the IMs impounded and supplementary confirmation ....
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....ation, one can be asked to do something against nothing. Therefore, for the purpose of impugned addition the substantive foundation & plea of the respondent assessee that, the books were never rejected by the Ld. AO rendered fallacious & cannot be entertained because such books were intentionally destroyed. Thus, act of the assessee and its employee impeded the Ld. AO and had no choice but to proceed to estimate the income on the basis of IMs and statements without rejection of books specifically u/s 145(3) of the Act. 9. In view of forestated facts, the action of the Ld. AO in not accepting the audited financial results and thus the income from business returned by the respondent assessee finds merits without any error. In such situation, the Ld. AO had to no choice but to proceed to estimate to the best of judgement and determine the business income/profit to be taxed u/s 28 of the Act. This approach of the Ld. AO had no striking error in view of the decision rendered in the case of 'PCIT Vs Janson Investment (P) Ltd.' [2021, 112 CCH 319 (Kar)] and 'CIT Vs Gowri Gopal Textile Processing (P) Ltd.' [2011, 15 Taxmann.com 394 (Kar)], wherein their hon'ble lordship approved the ass....
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....s was never a subject matter of scrutiny in proceedings u/s 143(3) of the Act, initiation of reassessment proceedings in such a situation was justified. 13. In view of the totally of facts, our observation and in the light of judicial precedent cited above, we find no error in Ld. AO's action but in the action of Ld. CIT(A) in vacating the addition, therefore set-aside. 14. Now coming to rationale applied in estimating the business profit/income @12% as against @8% of turnover of the assessee; 14.1 During the course of survey on the basis of IMs statement of Mr Arjunan a salaried employee and site supervisor ['E2'] was recorded who was responsible for hiring labour for site & making wage payment to them. The assessee granted a sub-contracting work to E1 and payment of Rs.45Lakhs was made through cheque by debiting 'sub-contracting expenses. The said cheque was deposited by assessee in E1's saving bank a/c 01642041001548 maintained with OBC Bank. The said amount as soon credited in E1's bank a/c was withdrawn in cash and returned to assessee company as per the direction of director. The sub-contracting expenses so debited/claimed in arriving the book result thus explained t....
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....company or to the director Mr Bagkiya. 14.5 When IMs viz; A/BCPL/01 to A/BCPL/05 along-with statements of employees/relative were confronted to Mr Bagkiya, who confirmed that for the business exigencies & liaising payment cash was needed hence the assessee used two methods (i) direct cash withdrawal and (ii) by bogus sub-contracting where cash withdrawals reached the assessee. In addition to bogus sub-contracting the assessee company also confirmed to have booked inflated fuel expenses whereby differential cash was returned to assessee for out of books spending. Since these transactions were very large in volume and in the absence of books the director could not quantify, nor the Ld. AO could undertake to compute actual dot figures for addition. It the director best-known person who estimated around 4% to 5% of total turnover spent towards liaisoning expenses which were out of books for securing business contracts. Eventually, the Ld. AO conservatively adopted margin @12% i.e., 4% above declared 8% margin for making impugned addition which was unfoundedly and without basis entirely stuck down by Ld. CIT(A). 14.6 As we note that, the rationale behind coming to conclusion in co....
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....4 to Rs.85Lakhs (Rs.45Lakhs + Rs.40Lakhs) to meet the end of justice. In view thereof, the ground no 1 stands party allowed. Since the former adjudication rendered the ground no 2 as infructuous, therefore stands dismissed. Ground No. 03 15. Next comes to ground no. 3 whereby the Revenue alleges that the Ld. CIT(A) has erred in deleting the addition of Rs.10,62,54,000/- made by the Ld. AO on account of unexplained cash entries without appreciating the facts. The Ld. CIT(A) has failed to appreciate that the AO has made this addition on the basis of the incriminating material found at the survey premises and as per section 292C of the Act, such incriminating material is presumed to belong to the person in whose possession or control the same was found, moreover, when the same was supplemented by admission. And to drive home the reversal of impugned deletion the Revenue relied heavily on the decision in the case of 'Seasons Catering Services (P) Ltd. Vs DCIT' [2010, 117 ITD 50 (Del-ITAT)] and 'Bannalal Jat Construction (P) Ltd. Vs ACIT' [2019, 106 Taxmann.com 128 (SC)]. 16. Per contra the respondent assessee vide its written submission dt. 09/02/2026 reiterated its contention....
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....ver to him in connection with business activities by the E2. These statements of these employees remained unretracted anytime until now. 19. Even statement of Mr Bagkiya was also recorded who first confirmed the transaction from Pg-28 of IM marked as 'A/BCPL/01 relating cash of Rs.563.04Lakhs received from one single party (anonymous) which was maintained prior to demonetisation. These cash confirmed to have been utilized for business purpose which inter-alia (i) securing government contracts, (ii) clearing bills from such govt departments (iii) liaisoning expenses, (iv) for creation of new assets and (v) other expenditure in connection therewith etc. and relating to cash confirmed the aforestated transaction being done for the business in his statement. In addition to above further from the notings of Pg 31 the director also confirmed to have received a sum of Rs.499.50Lakhs received from one more anonymous party which was kept before demonetisation and the said cash was also used for the aforestated purpose. 20. As we note that, the admission (& retraction ) of the director is not mere simpliciter but supplement to the IMs found & impounded in the course of survey. The furt....
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....siness exigencies confirmed by employees do not match with that admitted by the director originally. The possibilities of double noting of figures and their confirmation by the director could not totally be disbelieved or rejected. Therefore, the impugned addition of Rs.1062.54Lakhs in view of the first stage confirmation by the employees would amount to double addition. In view thereof, giving the benefit of doubt to the assessee the impugned addition to meet the end of justice necessarily be restricted to the figures confirmed by the employees to Rs.395.50Lakhs. The balance impugned reversal of addition is thus vacated. The ground no 3 thus stands partly allowed. Ground No. 04 23. We note that, during survey proceedings the survey party called upon the director of assessee company to explain the quantum of labour payments made in cash and the reasons thereof. The appellant submitted before them and the Ld. AO, owing to peculiar feature of construction industry the labour turnover is more and predominately operates on day-2-day basis thus on cash payment. Therefore, such labour expenses so incurred are mostly paid in cash beside engaging contractors/employees to whom cheque ....