AI OCR 
TaxTMI 
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2026 (5) TMI 97
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....19-20 -Do- 31.03.2025 -Do- 4. 5643/Del/2025 -Do- 2020-21 -Do- 31.03.2025 -Do- 5. 5644/Del/2025 -Do- 2021-22 -Do- -Do- -Do- 6. 5645/Del/2025 -Do- 2022-23 -Do- -Do- -Do- 7. 5646/Del/2025 -Do- 2023-24 -Do- -Do- -Do- 8. 6825/Del/2025 Revenue 2017-18 -Do- 22.11.2024 -Do- 9. 6826/Del/2025 -Do- 2018-19 -Do- 23.09.2024 -Do- 10. 6827/ Del/2025 -Do- 2019-20 -Do- 31.03.2025 -Do- 11. 6828/Del/2025 -Do- 2020-21 -Do- -Do- -Do- 12. 6829/Del/2025 -Do- 2021-22 -Do- -Do- -Do- 13. 6920/Del/2025 -Do- 2022-23 -Do- 23.09.2024 -Do- 14. 6921/Del/2025 -Do- 2023-24 -Do- 31.03.2025 -Do- 2. Since all the appeals filed by the assessee and the Revenue are having common issues, therefore, all these appeals are decided by a common order. 3. First we take appeal of the assessee in ITA No. 5640/Del/2025 [Assessment Year 2017-18]. ITA No. 5640/Del/2025 [Assessment Year 2017-18] [Assessee's appeal] 4. Brief facts of the case are that assessee is a Private Limited....
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....tal income of the assessee was assessed at INR 16,55,86,072/ -. However, no additions were made on the issues for which satisfaction of escapement of income was recorded. 5. Against the said order, he assessee filed appeal before Ld. CIT(A) who vide impugned order dated 25.07.2025, partly allowed the appeal of the assessee wherein addition made towards alleged cash sales made to dummy parties of INR 83,37,000/- and further for estimation of profit of INR 12,13,53,672/- were deleted and the addition made u/s. 69C of the Act for alleged commission paid at INR 2,50,110/- as unexplained expenditure, is sustained. 6. Aggrieved by the said order, both the parties are in appeal before the Tribunal by filing their respective appeals. 7. In Ground of appeal Nos. 1 & 2, assessee has challenged the re-opening of assessment u/s. 148 of the Act without following proper procedure of section 147 to section 151 of the Act. 8. Before us, Ld.AR for the assessee submits that notice u/s. 148 was issued on 29.07.2022 after the order passed u/s. 148AD of the Act. Ld. AR drew our attention to page 1 & 2 which is the copy of the notice issued u/s. 148 of the Act and stated that the said notice....
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....roval from the authority prescribed u/s. 151 of the Act. The provisions as contained in section 151 regarding approval (as was applicable at the relevant point of time) is reproduced as under: 151. Sanction for issue of notice :- Specified authority for the purposes of Section 148 and Section 148A shall be,- (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year: Provided that the period of three years for the purposes of clause (i) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of Section 149. 12. It is thus clear that notice u/s. 148 after the expiry of three years from the end of the relevant assessment year could be issued only after getting approval from the Principal Chief Commissioner or Principal Director....
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.... vide such in valid notice is hereby quashed. Accordingly, grounds of appeal No. 1 & 2 raised by the assessee are allowed. 14. Since we have already allowed Ground of appeal Nos. 1 & 2 raised by the assessee and quash the re-assessment order passed on the invalid approval given by Ld. PCIT therefore, the other Grounds of appeal taken by the assessee on the merits of the addition became academic. 15. In the result, appeal of the assessee in 5640/Del/2025 for Ay 2017-18 is allowed. 16. Now we take appeal of the Revenue in ITA No. 6825/Del/2025 [Assessment Year 2017-18]. ITA No. 6825/Del/2025 [Assessment Year 2017-18] [Revenue's appeal] 17. In Revenue's appeal, the Revenue has challenged the addition of Rs. 8,33,700/- deleted by the Ld. CIT(A) on account of profit on alleged sales to dummy buyers and further challenged the deletion of the addition of Rs. 12,13,53,672/- made by estimating the income on alleged suppression of sales and profits thereon u/s. 28 of the Act. While deciding the appeal of the assessee in ITA No. 5640/Del/2025 for AY 2017-18 i.e. the assessment years in present appeal of the revenue, we have already quashed the re-assessment order by ....
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.... Assessee and the Revenue are in appeal before the Tribunal. 23. Ground of appeal No.1 taken by the Revenue is with respect to the deletion of the additions of INR 4,29,88,081/- made towards the cash profit earned from the cash sales routed through dummy buyers, INR 11,60,70,929/- on account of suppressed undisclosed cash profits and INR 1,27,49,124/- on account of unaccounted cash paid as commission. 24. In Ground of appeal Nos. 2 to 9, the Revenue has challenged the deletion of these additions on various counts since all the 03 issues have been taken by the Revenue in Ground of appeal No. 1 and subsequently, the other Grounds of appeal are in support of the ground appeal No.1, therefore, all the grounds of revenue's appeal are taken together. 25. Heard the contentions of both the parties at length and perused the material available on record. AS observed above, the AO in its order has made three types of additions which are : 1. The AO alleged that the assessee has made cash sales to customers and with the help of key staff arranged other dummy buyer who made the payment through RTGS/NEFT/other banking channel for such purchases and thus in the guise of sale....
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....now examined by me as under: RTGS TAKEN THROUGH ENTRY OPERATORS SUCH AS PRAMOD SAHU, RAJU MALIK ETC: Rs. 49,10,000/- (a) Sales made to entities related to Sh. Pramod Sahu 5.6. In the Para 5.1 of the assessment order, the AO has stated that during the search proceedings, premises of Shri Pramod Sahu at 37, Aditya Nagar, A. B. Road, Indore, MP- 452001 was covered and it was found that he was indulged in the business of providing accommodation entries to various entities including the assessee company. Sh. Pramod Sahu in his statement mentioned the names of bogus entities controlled by him. He also stated that he receives only sale invoices from KWC and other entities without any supply of watches and make RTGS payments in lieu of cash received from KWC. Accordingly, on the basis of statement of Sh. Pramod Sahu, the AO inferred that the appellant had obtained sale consideration without supply of actual watches from following entities controlled by Sh. Pramod Sahu in the FY 2018-19: S. No Name of entities/ individuals Sale Amount 1 Supertrans Prop, Rishikant Sahu 22,00.000/- 2 Vipra Exim. Prop. Nilam Gulabchand Sahu 8,00,000/- 3 ....
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....the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." 5.12. In the above section, it can be noted that that the addition under section 69A of the Act can be made only if the following precedent conditions exist: (i) Ownership: The assessee must be found to be the owner of the money, bullion, jewellery, or other valuable article during the relevant financial year. Ownership here is not about mere possession; it means having full rights over the asset, such as the right to possess, enjoy, transfer, or use the asset for one's own benefit. The Supreme Court has clarified that mere possession does not amount to ownership if the person does not have legal rights over the asset. For example, a thief or a carrier of goods is not considered the owner under this section; (ii) Not Recorded in Books: The asset must not be recorded in the books of account maintained by the assessee. If the asset is already accounted for, Section 69A cannot be applied; (iii) Unsatisfactory Explanation: The assessee must either o....
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....e assessee is the owner of the unexplained money, bullion, or valuable article. The burden of proof lies squarely on the AO to demonstrate ownership with credible evidence, not on the assessee to disprove mere allegations or conjectures. 5.17.I rely upon the decision of Supreme Court in the case of D.N. Singh vs. CIT: [2023] 150 taxmann.com 301. The Hon'ble Apex Court reiterated that the provisions of section 69A of the Act are applicable only if the assessee is found to be the owner of the money, bullion, jewelry or other valuable articles. The Court held that where the assessee was mere carrier supplying goods/ Bitumen from consignor i.e. oil marketing companies to consignee i.e. road construction department, he could not be said to be owner for purpose of section 69A of the Act. 5.18. Further, the Apex Court, in Para 26 and 27, while interpreting the provisions of section 69A, observed that 'Section 69 and Section69A, apart from being close neighbours, do bear resemblance with one another. Section 69 deals with unexplained investment. Section69A deals with unexplained money, bullion, jewellery or other valuable articles. Section69A was inserted....
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.... or other valuable articles that section 69A can be invoked for raising presumption. This basic link is missing through the proceedings resulting the Tribunal affirming the orders of the CIT(A) and the Assessing Officer cannot be sustained ............... " (emphasis supplied) 5.21. The Delhi Bench of the Tribunal (Third Member) in the case of Ms. Reena H. Mirchandani vs. ACIT: [2000] 66 TTJ 91 also held that in order to invoke section 69A of the IT Act, it is necessary to prove that the assessee must be shown to be the owner of the asset. The section contemplates an acquisition of the asset by the assessee and the same being owned by him, before that asset is taken into account as income of the assessee from undisclosed sources. 5.22. Hence, I find that the assessee cannot on suspicion and surmises be deemed to be the owner of the unexplained moneys, bullion, etc. The addition under section 69A of the Act can be made only on the basis of concrete evidences found. 5.23. The apparent is the real unless the contrary is proved and the onus to prove the contrary is on the person who alleges so [refer CIT vs. Daulat Ram Rawatmull: [1973] 87 ITR 349 (SC)]. The ....
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....improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court." 5.28. The additions made on mere presumptions could not be sustained and there must be something more than mere suspicion to support the addition as per decision of the five judges of the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills v. CIT: 26 ITR 775. In that case, the Supreme Court held that the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. The Court held that on the facts of the case, the ITO and the Appellate Tribunal erred in estimating the gross profit rate on sales of the assessee without any material and on pure guess and suspicion. 5.29. In this regard, I also draw support from the judgement of Hon'ble Punjab and Haryana High Court in the case of CIT vs. Jawaharlal Oswal and Ors. 382 ITR 453 (P&H) which in Para 30 held as under: "30 .. .One cannot be oblivious to the fact that such a large gift ....
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....was rightly deleted by the CIT(A)/ITAT since there was no corroborative evidence to show that there was in fact transfer of money, The Court held the even if there was something wrong with some other transactions entered into, that would not give rise to an adverse inference insofar as the subject MoUs were concerned and dismissed the appeal preferred by the Revenue. The relevant observations of the Court are as under: "10. Section 132(4A) of the Act uses the expression 'it may be presumed'. It is not obligatory on the assessing authority to make a presumption. Even if a presumption is required to be made, then, as held in CIT v. S.M.S. Investment Corpn. (P.) Ltd. [1994] 207 ITR 364 (Raj.), the presumption is a rebuttable one and relates to a question of fact. While coming to this conclusion, the Rajasthan High Court relied upon an earlier decision rendered by it in CIT v. S.M.S. Investment Corpn. [1988] 173 ITR 393. ................... 12. Insofar as the present case is concerned, the Assessee had stated that in fact there was no transfer of money between him and Ravi Talwar and Madhu Talwar. On the other hand, Ravi Talwar and Madhu Talwar had de....
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....ntrovert the findings of Ld. CIT(A) and further failed to bring on record any contrary material or evidence found as a result of search or collected during the course of post-search proceedings to support the allegation that assessee has made cash sales to the person other than whose name the sales bills were made and payment was received from banking channel and had received 10% in extra profit in cash on such sales over and above the sales recorded in the books of accounts. Therefore, no addition could be made dehorse the incriminating material found/seized as a result of search on mere assumptions and presumptions. 29. Now coming to Second category where sales made by availing RTGS entries in the garb of advance payment from various individual/entities of INR 1,88,28,475/ -. The AO while making the addition on this account has relied upon certain statements of alleged entry providers. Ld. CIT(A) has discussed the sales made to each individual party in its order in para 5.40 to 5.52 of the order and in para 5.51, Ld. CIT(A) observed that no evidence or statement has been brought on record which could satisfy the receipt of cash @ 10% on such sales. The relevant observations wi....
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....hus, in view of the above discussion, in respect of sales aggregating to Rs. 16,22,000, I have held as under: S. No Name of the buyer Sale Amount Findings w.r.t. undisclosed cash profits Findings w.r.t. undisclosed cash commission 1 Supertrans Prop, Rishikant Sahu 22,00,000/- Addition is deleted in the absence of any evidence Action of AO that commission expenditure was paid in cash is upheld. However, discussion regarding % of commission in later part of order 2 Vipra Exim. Prop. Nilam Gulabchand Sahu 8,00,000/- Addition is deleted in the absence of any evidence Action of AO that commission expenditure was paid in cash is upheld. However, discussion regarding % of commission in later part of order 3 Universal Export (Prop.) Amod Sahu 19,10,000/- Addition is deleted in the absence of any evidence Action of AO that commission expenditure was paid in cash is upheld. However, discussion regarding % of commission in later part of order Total 49,10,000 AVAILING CREDIT ENTRIES THROUGH BANKING CHANNELS IN THE GARB OF ADVANCE PAYMENTS FROM VARIOUS INDIVIDUALS/ENTITIES AMOUNTING TO Rs. 1....
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....es that there is a lag between advance payment received and generation of invoice issued to the person which is tabulated as under: - 24.07.2020 Rajesh Uttamchandani 5,00,000 21.12.2020 G. Shiv Prasad 108,000 04.06.2022 Nimpa Global Private Limited. 75,00,000 7:2019 & 27.08.2019 Naveen Arya 735,000 12,00,000 12.10.2021 Deep Overseas 11,00,000 19.08.2021 Uplift Marketing & advertising 444,928 22.09.2021 Hemant Singh Bhutan 681,000 18.10.2021 Rajaraman Santhanam 135,00,000 22.12.2021 Vishal Chitkara 25,00,000 08.12.2021 Gautam Khanna/ Anuj Khanna 585,000 30-12-2021 Tarun Narula 292,000 5.49. In this regard before me, the appellant has submitted that most of the instances on which AO has placed his reliance do not pertain to the year under appeal and the appellant company has not received any advances from such party during the year. The submission given by the appellant were at Pages 4.14(B) of its written submissions . On perusal of the submission given by the appellant, it has been found that the advances were received from various parties in the normal course of the business....
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....was received on the phone of the key persons of the assessee company via WhatsApp communication dated 12.02.2021 wherein details of funds received from entities M/s Mahalaxmi Enterprises, M/s D.S. Traders, M/s Supertex International and M/s PFT Services. During post search proceedings, analysis of the transactions made by the assessee with the above said entities namely M/s Mahalaxmi Enterprises, M/s DS Traders, M/s Supertex International and M/s PFT Services was carried out. Summons were issued to these entities through speed post as well as through registered email. However, all the summons returned undelivered with postal remark as <no such persons reside in this address=,<left without address=etc. 5.54. Further AO stated, Exercise of physical verification was also carried out at the available addresses of the above said entities but no such entities were found at the available addresses. It is pertinent to mention here that, on perusal of ITR details, it was gathered that three of the entities were not filing ITRs and the income declared in the ITR of M/s Mahalaxmi Enterprises was also nominal. ITR profile of the entities are given below: Name of the Entity AY ....
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....tary evidence to establish that the appellant made cash sales and then routed a part of the consideration through banking channels in form of entry through the above discussed parties. Therefore, no evidence to establish the same has been brought on record by the AO except mere presumptions and assumptions that CBI Inquiry is going on . Even the documentary evidences produced by the appellant such as KYC of buyers, tax invoices etc. have not been doubted by the AO. There has been no evidence of any cash involvement or routing of cash sale consideration found in this respect. 5.58.I find force in the submission of the appellant that once it has submitted the entire documentary trail in respect of parties, non-receipt of summons issued u/s. 131 of the Act by such parties cannot be made a basis to make addition in the hands of assessee. I find that in the watch business, hundreds of customers visit the showrooms of the appellant and the appellant cannot be practically expected to verify the physical premises of its customers. 5.59. Further, the appellant cannot verify whether buyers are filing ITR and their creditworthiness. The appellant cannot run its business, if ....
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....lysis of the transactions made by the assessee with the above said entities namely M/s Mahalaxmi Enterprises, M/s DS Traders, M/s Supertex International and M/s PFT Services was carried out. Summons were issued to these entities through speed post as well as through registered email. However, all the summons returned undelivered with postal remark as <no such persons reside in this address = <left without address = etc. 5.54. Further AO stated, Exercise of physical verification was also carried out at the available addresses of the above said entities but no such entities were found at the available addresses. It is pertinent to mention here that, on perusal of ITR details, it was gathered that three of the entities were not filing ITRs and the income declared in the ITR of M/s Mahalaxmi Enterprises was also nominal. ITR profile of the entities are given below: Name of the Entity AY Total receipt Salary HP PGBP CG Other source GTI MAHALAXMI ENTERPRISES (ABJFM3207H) 2019- 0 0 0 97,238 0 0 97,238 2020- 21 0 0 0 65,176 0 0 65,176 D S TRADERS (AAOFD4287G) Non-filer SUPERTEX INTERNATIONAL (AD....
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....ptions and assumptions that CBI Inquiry is going on . Even the documentary evidences produced by the appellant such as KYC of buyers, tax invoices etc. have not been doubted by the AO. There has been no evidence of any cash involvement or routing of cash sale consideration found in this respect. 5.58.I find force in the submission of the appellant that once it has submitted the entire documentary trail in respect of parties, non-receipt of summons issued u/s 131 of the Act by such parties cannot be made a basis to make addition in the hands of assessee. I find that in the watch business, hundreds of customers visit the showrooms of the appellant and the appellant cannot be practically expected to verify the physical premises of its customers. 5.59. Further, the appellant cannot verify whether buyers are filing ITR and their creditworthiness. The appellant cannot run its business, if the appellant asked to every customer to furnish ITR/prove creditworthiness before purchasing the watch. This would result in impossible situation to carry out the business by the appellant. Without prejudice to above discussion, it is pertinent to mention here that seller cannot be pe....
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....return of income/non-filers. Ld. CIT(A) has discussed this category of transactions in para 5.64 to 5.91 of its order and observed that no evidence/statement was brought on record in support of the allegation that the assessee has received 10% cash on such sales. 34. Thereafter, Ld. CIT(A) in para 5.92 to 5.100 has observed that AO has failed to consider the fact that the assessee has filed all the documentary evidences in the form of ledger, PAN, GST certificate/tax invoices alongwith stock inventory and payment proofs. Ld. CIT(A) further observed that assessee has submitted KYC of the buyers and the sales made have been done in the normal course of business. The relevant observations of ld. CIT(A) as contained in para 5.64 to 5.100 are reproduced herein below for sake of convenience: TRANSACTION WITH NON-FILERS/ FILERS WITH NIL/ LOW RETURNED INCOME WITH DUMMY EMAIL ID OR FAKE CONTACT NUMBER: Rs. 6.99.22.145/- 5.64. In the assessment order, the AO had stated that certain non-filer entities or entities having NIL/low returned income were identified to whom sae invoices were issued by the appellant using e-mail identity details i.e., [email protected] and dummy cont....
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....eded in the software, it will not make the genuine sales as non-genuine. 5.68. After consideration of the AO order and submissions of the appellant, I find that in the assessment order, the AO has merely alleged that the certain parties were non-filers or entities with low creditworthiness and these parties have phone number i.e. 9999999999 and email id i.e. [email protected]. Merely on this ground, the AO has doubted the genuineness of the sales made by the appellant-company to these parties and treated these as non-genuine transactions. I find force in the argument of the appellant that merely because the parties have not provided their phone numbers and email-IDs cannot be the ground to doubt the genuineness of sales. Further, it could nowhere be established/ found that the appellant made cash sales and then routed a part of the consideration through banking channels in form of entry through these parties. No evidence to establish the same has been brought on record by the AO except mere presumptions and assumptions. Even the documentary evidences produced by the appellant such as KYC of buyers, tax invoices etc. have not been doubted by the AO. There has been no evidence o....
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....,99,22,145/- made by the appellant. 5.74. Further, as regard the commission expenditure paid in cash, no evidence has been found regarding any commission paid by the appellant to these parties. In the absence of any evidence that any cash has been paid by the appellant to these parties and the same has been received back in form of entry, no addition of commission expenditure paid in cash could be made in the hands of the appellant merely on the basis of assumptions and presumptions. TRANSACTION WITH NON-FILERS/FILERS WITH NIL/LOW RETURNED INCOME AMOUNTING TO Rs. 26,70,95,206/- 5.75. In the assessment order, the AO had stated that certain non-filer entities or entities having NIL/low returned income were identified to whom sale invoices were issued by the appellant. Further, the AO has also relied upon Inspectors' Report confirming non- existence of some of the few entities. The AO treated the transactions with these parties as non-genuine and proceeded to add 10% of the total sales made to such parties as undisclosed cash profits. 5.76. The quantification of sales made to non-filers and entities with low credit worthiness, as made by the AO,....
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....t once it has submitted the entire documentary trail in respect of parties, non-compliance of summons issued u/s. 131 of the Act by such parties cannot be made a basis to make addition in the hands of assessee. I find that in the watch business, hundreds of customers visit the showrooms of the appellant and the appellant cannot be practically expected to verify the physical premises of its customers. 5.81. Also, in respect of the Inspector's Reports relied by AO, I observe that in case of retail watch business operated by shops and showroom, the appellant cannot be practically expected to verify the physical premises of its customers. It is the customers who visit the showrooms of the appellant and purchase watches. Hence, adverse inference cannot be drawn merely on the basis of Inspector's Report without any evidence found. 5.82. Further, the appellant has contended that for seller, there is no statutory requirement under the Income Tax Law to verify the ITR and creditworthiness of the buyer. The appellant cannot run its business, if the appellant asked to every customer to furnish ITR/prove creditworthiness before purchasing the watch. This would result ....
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....ich it could be inferred that the appellant retained portion of undisclosed cash profit being 10% of the cash amount and the non-genuine sales are shown to have been made at lower values. It has merely been presumed by the AO without any evidence (much less authentic) that 10% of the cash amount representing undisclosed cash profits were retained by the appellant in cash. 5.89. I have already discussed above the provisions of section 69A of the Act, the legal position that there can be no presumption that the assessee was owner of the money, bullion, etc. which was not recorded in the books of accounts- the same has to be established as a matter of fact. The assessee cannot on suspicion and surmises be deemed to be the owner of the unexplained moneys, bullion, etc. In respect of parties to whom sales aggregating to Rs. 26,70,95,206/-, no evidence has been brought on record by the AO on the basis of which it could be seen or inferred that 10% of the cash amount representing undisclosed cash profits were retained by the appellant in cash. 5.90. In view of the above discussion, I find that with respect to sales made by the appellant- company to certain parties aggreg....
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....e sale value varied from 9% to 11% when compared for genuine and non-genuine sales, the AO has not made any comparison for the watches sold in the AY 2019-20. Hence, drawing inference for the AY 2019-20 based on the instances of AY 2020-21 to AY 2023-24 was not the correct methodology and approach adopted by the AO. This appears that the rate of suppression of 10% adopted by AO was arbitrary, ad-hoc, presumptive and not based on any reasonable basis. Hence, the addition made by AO by adopting arbitrary rate of suppression of 10% fails on this account as well. Further, the comparison of G.P. percentage on non-genuine sales vis-à-vis the total sales was made which is tabulated below: AY Total sales Corrected sales with non-genuine parties % of GP non- genuine sales % of GP on total sales % of non- genuine sales to total sales Difference in GP Difference in GP on weighted average basis for last 4 years 2020- 21 2,42,39,92,968 46,66,00,251 14.65% 18% 19.25% 3.35% 0.65 2021- 22 2,24,37,98,477 35,00,65,751 13.29% 17.57% 15.60% 4.28% 0.76 2022- 23 3,38,19,28,032 32,97,14,603 21.85% 22.78% 9.75....
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....lion, jewellery, or other valuables not recorded in the books, and for which no satisfactory explanation is provided regarding their source. It is not designed to cover business receipts or turnover that have simply not been disclosed as sales. Suppressed sales represent business receipts that have not been recorded. The correct approach is to bring such receipts to tax as business income after allowing for related business expenses, rather than as unexplained money under Section 69A of the Act. 5.99. Further, I observe that in the assessment order, the AO has relied upon certain WhatsApp chats and statements, however, most of these chats or statements do not pertain to sales made by the appellant in the AY 2020-21. It has also been stated by the AO that the sale price of the same product and same model was at variance when genuine sales were compared with non-genuine sales made by the appellant. In this regard, I find force in the submissions of the appellant that it is possible that the same watch is sold at different prices to different customers. It may be on account of various reasons such as in the festival season, discount is given to the customers, when the model o....
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....oresaid discussion and after perusing the order of ld. CIT(A) on all the four categories of transactions doubted by the AO, it is observed that the assessee in the normal course of business has sold the goods to the customers who physically visited the showrooms and purchased the goods and made payment. Once sales have been made and payment is received; the assessee is not under any obligation to examine whether the person who is making the payment is the same person who has purchased the goods or someone else. As a prudent businessman, assessee is concerned with the sales and payment thereof received through banking channel. The AO has not alleged that payments has been received in cash. In some cases where the buyer has not desired to disclose his identity, in the larger interest of the business since the assessee has got the payment through banking channel, their mobile no. or email ID was stated however when the goods were delivered and payment was received through banking channel they cannot be held as dummy or as non-existent. 36. The assessee has discharged the burden casted upon it to prove the purchases by filing all the relevant details such as purchase and sales bill,....
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....ng addition is deleted for which Revenue is in appeal before us. 40. As observed above, while deciding the issue of undisclosed cash profit from the sale alleged as made through dummy buyer, we have observed that the Revenue has failed to bring on record any contrary material found as a result of search from which it could be established that assessee has obtained any such accommodation entry or received any such cash profit thus the question of payment of commission in cash @ 3% does not arise. It is also relevant to state that once we have hold that assessee has never received any amount in cash as has been alleged by the AO that it has received 10% cash over and above the sales recorded from the books of accounts from dummy buyers, it could not be alleged that the assessee has paid commission for such alleged accommodation entries of sales. It is also a matter of fact that the goods sold by the assessee are part of the goods imported from outside India and availability of the stock with the assessee is never in dispute. The sales have been made and the payments have been received through banking channels therefore. We find no infirmity in the order of Ld. CIT(A) who has delet....
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....s contended that in the instant case, there is no specific finding recorded that, books of accounts were not correct or complete or Assessing Officer is not satisfied about the method of accounting regularly followed by the assessee company and hence, the invocation of provisions contained in section 145 of the Act is unsustainable. It was also submitted that all the necessary details as called for by the AO had also been placed on record before him. The appellant also relied upon various judicial decisions to support the case. 4.3. It is observed that no satisfaction has been recorded by the Ld. AO in terms of Section 145 to reject the book of account of the appellant-company under section 145(3) of the Act. I find that the appellant has submitted all the necessary details before the AO such as details of directors, GST returns, all relevant ledger accounts as called by AO, copy of bank statement, TDS Challans, Sale and purchase invoices as called by AO, and inventory details etc. All such details and evidences have been accepted by the AO and no fault in the books of accounts have been found by the AO. 4.4. Hence, it is relevant to note that there had been no ad....
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....ts have been filed by the appellant and no defect, per se, the documents have been found by the AO. Thus, in the absence of any specific defect being pointed in the books of accounts maintained by the appellant, the learned Assessing Officer was not justified to reject the books of accounts of appellant under section 145(3) of the Act. 4.10. Therefore, after careful consideration of the above narrated facts, circumstances of the case and the submissions of the Appellant and Assessment Order, respectfully following the ratio of the judgments of the Hon'ble High Courts, I hold that the AO was not justified in rejecting the books of accounts of the appellant. Therefore, the ground of appeal is allowed. 45. The AO in para 12.7 of the order observed that the assessee has suppressed its results both quantity-wise and value-wise and retained undisclosed cash profits. Thus, the assessee has prepared its books of accounts based on bogus sales bills affected the correctness and completeness of the accounts. Accordingly, AO concluded that the accounts of the assessee cannot be considered to be correct and the income reduced therefore is not reliable The AO further placed relia....
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....ning for low GP and as regard the specific instances raised by the AO, it was submitted that most of the comparable were not sold in the same FY. He also relied upon some judicial precedents to argue that it is the prerogative of the businessman at what profit he decides to sale his goods. 7.3. I have considered the submissions of the appellant and examined the facts of the case in light of the prevailing commercial realities of the business segment in which the appellant operates. I find force in the submissions of the appellant that assessee is engaged in the business of retail trade of luxury watches which constitutes a niche and highly specialized segment of the retail industry. Upon a comprehensive evaluation, I find substantial merit and force in the submissions of the appellant, particularly with respect to the unique pricing mechanisms, product-specific margins, and general operational dynamics that govern this segment. The retail sale of luxury watches is fundamentally distinct from conventional retail trading activities due to the nature of the products, the clientele, and the manner in which transactions are executed. 7.4. The appellant has contended th....
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....ce coverage, buyback guarantees, and complimentary accessories are bundled into the sale, which also affect the final realized GP. 7.6. Further, the appellant has contended that it is also relevant to mention that the luxury watch business is heavily reliant on brand positioning and customer relationships. Retailers may at times consciously reduce margins on certain sales in order to maintain long-term relationships with premium customers or to enhance their brand presence in a competitive market. For instance, in order to acquire clientele who are known collectors or influencers, a retailer may choose to sell select pieces at lower margins or even at breakeven, with a view to upselling in future transactions or to gain referrals and visibility. Such strategic pricing decisions, though not immediately profitable, are a standard commercial practice in luxury segments and have to be factored in while evaluating the overall profitability and margin trends of the assessee. 7.7. Further, it must be emphasized that luxury watch retailers also face a range of inventory management challenges. Certain models may remain unsold for extended periods, leading to capital blocka....
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....uch sales. 2. Bulk Order or Corporate Discounts When orders are placed in bulk-such as by corporates for gifting to employees or clients- retailers offer substantial volume-based discounts, resulting in thinner margins. 3. Stock Clearance Sales Watches from older collections or discontinued lines are sold at markdowns, often at or below cost price. The intent here is not to make profit but to rotate stock, free up working capital, and minimize the risk of further depreciation. 4. Friends and Family or Referral Discounts Retailers frequently offer preferred pricing to loyal customers, family references, or walk-ins referred by influencers. These sales, though strategic in nature (building goodwill and customer loyalty), are done at reduced margins or nil profit. 5. Defective or Display Pieces Watches that have minor cosmetic flaws, were used as display pieces, or were returned after trial may not be eligible to be sold as "brand new." These are often sold at a deep discount and are typically booked at nil GP or even at a loss to recover some value. 6. Sale of Dead Stock or Obsolete Items Certai....
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....VID-19 pandemic. 7.14. It was also submitted by the appellant that before the COVID-19 pandemic, the luxury watch market in India witnessed an era of unregulated expansion. Luxury watches such as Rolex, Audemars Piguet, Omega, TAG Heuer, and others were widely distributed through an extensive network of authorized and unauthorized dealers. Many of these brands were available at multi-brand outlets, grey market platforms, and through parallel importers. Further, the brands also had little oversight over pricing and positioning of their products in India. This resulted excessive supply relative to demand as the volume of watches available in the retail market exceeded actual consumer demand leading to price war among dealers (including the appellant) to clear their inventory, often resulting in discounted sales. Thus, earlier, the appellant faced a range of inventory management challenges. Certain models which remained unsold for extended periods, leading to capital blockage, insurance and storage costs, and the risk of obsolescence were sold at cost or at loss to clear the stock and free the working capital to purchase new watches in trend. In the support of the above conte....
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....titiveness. On careful consideration of above factual submissions, I am of the considered opinion that the contention of the appellant carry substantial force and the appellant has been able to reasonably justify low GP sale in the year under consideration. 7.16. It is also submitted by the appellant that it is the prerogative of the businessman at what profit he decides to sale his goods including whether he chooses to sell a particular product at a higher or lower margin, or even at a loss, based on prevailing market Appeal No- CIT (A), Delhi-27/10978/2018-19 conditions, inventory strategy, customer relationship management, or other factors relevant to the unique commercial setting of his enterprise. It is possible that the same watch is sold at different prices to different customers. It may be on account of various reasons such as in the festival season, discount Is given to the customers, when the model of the watch becomes old, the same is sold at discount, when any watch model loses its popularity, it is sold at discount, sometimes, defective watches are received and the same are also sold at discount. I find that the Courts have consistently held that an AO cannot ....
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.... • J.J. Enterprises v. CIT: 254 ITR 216 (SC) • CIT vs. Padmani Packaging (P) Ltd .: 155 Taxmann 268 (Del) • CIT V. Bharti Televentures Ltd: 331 ITR 502 (Del) 7.23. Thus, in view of the above decisions I find that it is the prerogative of the appellant that at what prices it wants to sell it watches, whether any watch is required to be sold at lower GP or at higher GP as it depends upon various factors such as customer relation, defective watches, seasonal discounts etc. 7.24. Further, I also find that out of total turnover of the appellant which is Rs. 218.44 crores, only sales of Rs. 55,96,16,330 were made by the appellant where the G.P. was less than 10%. Such sales constitute merely 25% of the total sales of the appellant and the appellant had to be given the benefit of doubt as the % of such sales is miniscule as compared to total turnover of the appellant and also considering that the fashion trend of luxury watches changes very fast and the customers generally do not purchase old model watches. I find strength in submission of the appellant that lower GP is charged in respect of sale of slow-moving items, or discounts of....
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....w that suspicion, howsoever, strong cannot take place of proof and that assessment under the Act has to be made on the basis of material/evidence and not on the basis of assumptions/presumptions: • J.J. Enterprises v. CIT 254 ITR 216 (SC). • Uma Charan Shaw & Bros. Co. v. CIT: 37 ITR 271 (SC) • Omar Salay Mohammad Sait vs. CIT: 37 ITR 151(SC) • Dhirajlal Girdharilal v CIT: 26 ITR 736 (SC) • Dhakeshwari Cotton Mills Ltd. v CIT: 26 ITR 775 (SC) • Assam Tea Co. V. ITO: 92 ITD 85 (Asr.) (SB) • Faqir Chand Chaman Lal v. ACIT: (2004) 1 SOT 914 (Asr.) (Appeal dismissed by P&H High Court in 262 ITR 295 and SLP dismissed by SC in 268 ITR) • CIT V. Paras Cotton Co .: 288 ITR 211 (Raj.) 7.28. The Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT: 37 ITR 288 held that no addition could be made on the basis of conjectures, suspicion and surmises. In this case, since the circumstances relied upon by the assessing officer were found to be matters of pure conjecture, suspicion and surmises, the addition made in such circumstances was held to be unsustainable. 7.29....
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....profit that he can out of his trading transactions. Income which accrues to a trader is taxable in his hands; income which he could have, but has not earned, is not made taxable as income accrued to him. 7.35. The Hon'ble Supreme Court in the case of Calcutta Discount Co .: 91 ITR 8 held that when one trader transfers his goods to another trader at a price less than the market price, the taxing authority cannot take into consideration the market price of those goods, ignoring the real price fetched. The relevant extracts of the order are reproduced as under: "But, in the present case we are called upon to consider the question whether, when one trader transfers his goods to another trader at a price less than the market price, the taxing authority can take into consideration the market price of those goods, ignoring the real price fetched. As mentioned earlier, the latter question is no more res integra, It is concluded by the decision of this court in A. Raman & Co.'s case (Supra). 7.36.Further, the Gujarat High Court in the case of CIT vs. Keshavlal Chandulal reported in 1966(LIX) ITR 120 has observed that "where a person disposes of his goods a....
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....grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf." 18. The Tribunal cannot be said to have taken into account irrelevant material or ignored relevant material in arriving at its decision. It seems to have applied the right principles in support of its decision. Its order cannot therefore be termed as perverse. 19. For the aforesaid reasons we answer the second substantial question of law in the affirmative, in favour of the assessee and against the revenue. The third substantial question of law is answered in the negative, in favour of the assessee and against the revenue. 7.38. I am relying upon the decision of Delhi Bench of the Tribunal in the case of ACIT vs. Harish Kumar Luthra: ITA No. 890 of 2014 which also held that unless and until, the AO gathers any material on record that the assesses have paid anything....
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....simply make addition on hypothetical basis by presuming a higher sale price by simply rejecting the assessee's explanation without cogent reasons. If this procedure is resorted, then it would amount to taxing hypothetical income instead of real income, which is obviously impermissible unless an express provision is enshrined in this regard. 15. Coming back to the facts of the instant case, we find that the assessee tendered explanation in support of charging lower price in respect of some of the flats sold by it. The AO not only simply refused to accept such explanation without any convincing reason but also did not bring any material on record to show that the assessee in fact received higher price than declared. Under such circumstances, we are of the considered opinion that the action of the authorities below in this regard cannot be justified. At the cost of repetition, we mention that the provisions of section 43CA have been inserted with effect from 2014-2015 in respect of transfer of land or building or both which is not a capital asset. It is only during the prevalence of this provision that the Revenue has been discharged from the burden of proving that the sa....
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....43. Further strength is drawn from the decision in CIT v. Calcutta Discount Co. Ltd. [(1973) 91 ITR 8 (SC)], wherein the Hon'ble Apex Court observed that when goods are sold at a price lower than market price, the actual price realized and not the notional market value must be taken into account. This position was also echoed in CIT v. Keshavlal Chandulal [(1966) 59 ITR 120 (Guj.)]. Thus, unless the Revenue establishes with cogent evidence that the sale consideration was suppressed and that higher consideration was actually received or accrued to the assessee, no addition can be made by substituting the real price with a notional value. 7.44. In the present case, the AO has doubted the gross profit earned by the appellant alleging that the same watches were sold at high G.P. as well as low G.P. and proceeded to make an addition on the premise that the appellant has suppressed income. However, as demonstrated by the appellant, the differential pricing in sale transactions was on account of legitimate business considerations, including but not limited to ageing of stock or model obsolescence, seasonal or promotional discounts, sale of defective or items, discounts extend....
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....as a result of search with the assessee which could support the allegation of the AO of receipt in cash over and above the sales recorded in the books of accounts. The assessee as a prudent businessman has always tried to get every possible detail that could be taken from the customer and cannot forced them to verify whether the details provided are correct or more particularly, when the customers has purchased the luxury watches having substantial value and payments were made through banking channels. The assessee filed a chart before the ld. CIT(A), containing the sales of different models having GP rate of less than 10% which is reproduced at pages 80-211 of the order and total of such sales was of Rs. 55,16,96,330/ -. It is observed that overall GP on sales for the year under consideration was approx. 19%. It is matter of common knowledge that in regular course of business, sales of slow moving items at a lower rate or discounts offered at the time of festivals, sales, corporate discounts bulk order discount or even on account of stock clearance sales or sales or account of references from friends and family cannot be ruled out. Many cases where the goods were defective and in ....
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.... 2019-20. Since, there is no change in the facts and circumstances of the case thus, by following the observations made and conclusion drawn by us in AY 2019-20 while deciding the assessee's appeal in ITA No.5642/Del/2025 and dismissing the appeal of the Revenue in ITA No. 6827/Del/2025 which are Mutatis Mutandis applicable to the facts of the present case. Accordingly, all the three appeals of the assessee are partly allowed and of the revenue are dismissed. 54. In the result, appeals of the assessee in ITA Nos. 5641, 5643 and 5644/Del/2025 for AY 2017-18, 2020-21 and 2021-22 respectively, are partly allowed and cross appeals of the Revenue in ITA Nos. 6826, 6828, 6829/Del/2025 for AY 2017-18, 2020-21 and 2021-22 respectively, are dismissed. 55. Now we take appeal of the assessee in ITA No.5645/Del/2025 and appeal of the Revenue in ITA No. 6920/Del/2025 [Assessment Year 2022-23]. ITA No. 5645/Del/2025[Assessee's appeal] ITA No.6920/Del/2025 [Revenue's appeal] [Assessment Year 2022-23] 56. As admitted by both the parties during the course of hearing, the issues raised by the assessee and some of issues in revenue's appeal are iden....
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....submits that the AO has relied upon the Excel Sheet found from the possession of Directors of the Contractor company wherein entries of payment in cash were found recorded. It is submitted by Ld. CIT DR that Ld. CIT(A) has deleted the addition by accepting the contention of the assessee that no payment whatsoever, was made during the year under appeal and the Excel Sheet do not contain any dates etc. Ld. CIT DR submits that the additions are based on the admission of one of the employee of Contractor as well as statement of the accountant of the assessee and therefore, requested for the restoration of the AO's order. 60. On the other hand, Ld.AR for the assessee vehemently supported the order of Ld. CIT(A) and submits that Excel Sheet does not contain any date/mode of payment/particulars of the parties or the material for which alleged payments were made. It is further submitted by Ld.AR that the total work was awarded in INR 2 crores in terms of agreement dated 27.11.2018 and no payment whatsoever, was made during the year under appeal. He further submits that none of the paper contained any date and all the figure are in round figures which further suggests that they were ....
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....that no expenditure on construction of premises C-2604, Sushant Lok-I, Gurgaon was incurred during the period under consideration. Further, as regard the excel sheet, it was submitted that the aforesaid excel sheet does not reflect the date of payment, mode of payment, and much less particulars of party / material in respect of which alleged payment may have been made by M/s Enn V Enn Designs Pvt Ltd on account of construction carried on at the premises of assessee. It was submitted that neither the amounts recorded in the excel sheet are further supported by any documentary evidence. 8.3. I have considered the submissions of the appellant. I find that the AO has made the addition on the basis of excel sheet found from the residential and office premises of M/s Enn V Enn Designs Pvt Ltd. On perusal of the excel sheet, I find that there is no noting in the said excel sheet that the assessee-company has made any cash payment in the FY 2021-22. The excel sheet does not have any dates, no name of the person and appears to be a estimate. The excel sheet does not contain the prices for many works to be performed and at some places the term "discussion" was mentioned, for instanc....
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.... of Hyderabad Bench of the Tribunal in the case of Sri Tarun Kumar Goyal vs. ACIT: ITA No. 456/Hyd/20. In that case, the Tribunal held that no addition could be made merely on the basis of dumb excel sheets containing rough notings and jottings. Extracts of the decision of the Hon'ble Tribunal are reproduced as under: 13. Lastly comes the crucial issue as to (not mentioning the assessees' names) forms whether the impugned seized material / "Excel' sheet a dumb document or not. We make it clear that the department has failed to corroborate the impugned seized document indicating assessee's alleged on money payment over and above the sale price itself. All it has done is to rely on their father's name only. It is nowhere clear as to whether it is an alleged document forming part of the books of account maintained in the regular course of business either by the vendor or vendee side. All it contains therefore is rough notings and jottings only. This tribunal co-ordinate bench's decision Nishan Constructions Vs. ACIT ITA No.1502/Ahd/2015; after considering the hon'ble apex court's landmark decision in Common Cause, Vs. Union of India (2017) 77 t....
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....Sheets wherein amounts stated to have been recorded on estimated basis without bringing on record any corroborative material to hold that these amounts are actually incurred by the Contractor as well as paid in cash by the assessee. Further, no inquiry was made from the Contractor with respect to the receipt of such cash from the assessee. Further, if the AO has any doubts about the cost of construction declared by the assessee of the subject property, he could have referred the matter for valuation before the District Valuation Officer which has not been done in the instant case. In view of these facts, we are of the view that without having any corroborative evidences in support of the so-called estimation, solely for the figures found noted in the Excel Sheet, no addition could be made and therefore, we uphold the observations of Ld. CIT(A). Accordingly, Revenue appeal fails on this issue. 63. The other issue is with respect to the addition of INR 51,80,000/- made u/s. 50C of the Act on the sales of 5,00,000 equity shares and 7,50,000 preference shares of M/s. Luxerati Retail Pvt. Ltd. by the assessee at a price of INR 10/- per share during the year under appeal. 64. The A....
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.... Sale Price i) Equity Share 500000 4 20,00,000/- ii) Preference Share 750000 4 30,00,000/- Total 12,50,000 4 50,00,000/- 9.3. However, the AO taking sale value @ 8.144/- per share following the NAV method, made addition of Rs. 51,80,000 (i.e. 125000*4.144=51,80,000/-) to the income of the appellant. 9.4. In this regard, the appellant has contended that the appellant has followed Income approach, and it was due to continuous losses and rift with the Ms Anita Kataria and effect of COVID-19 pandemic that the appellant was compelled to take the decision of selling shares at value to another promoter and family at price of Rs. 4/- per share. 9.5. I have considered the submissions of the appellant. I note that due to the COVID-19 pandemic, the businesses have incurred huge losses and many have to shut down the operations. The Company namely M/s.Luxerati Retail Private Limited was operating a retail -store of leather shoes and other related items at Emporio Mall, Vasant Kunj, New Delhi. Over the years, the company had been incurring continuous and increasing losses, which were further aggravated by the outbreak of the CO....
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....he Report are reproduced as under: 7. VALUATION APPROACH 7.1 There are three broad approaches used for business valuation: 1. Asset Approach 2. Market Approach 3. Income Approach Asset approach The Asset approach methods seek to determine the business value based on the value of it's assets. The aim is to determine the business value based on the fair market value of its assets less its liabilities. The asset approach is based on the economic principle of substitution which adopts the approach of cost to create another business similar to one under consideration that will produce the same economic benefits for its owners. I have not considered this approach since value of assets and liqbilities doesn't represent fair value of the company. Market Approach The market approach relies on signs from the real market place to determine what a business is worth. The market approach based valuation methods establish the business value in comparison to similar businesses. The methods rely on the pricing multiples which determine a relationship between the business economic performance, such as i....
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....2. SOURCES OF INFORMATION The Management has provided the following details/ documents and I have relied upon the same: • Audited financial statements for the year FY 2020-21 • Provisional Financial statements as on December 31, 2021 • Present Status of the Company • I have also relied upon information, including prospective information, provided to me by LRPL's management; a review of financial statements, and other relevant documents; and through outside research 9.10. Hence, in view of the above, I find that the AO was not justified in rejecting the DCD valuation made by the Registered Valuer. Further, having regard to the circumstances prevailing at the time, particularly the uncertainty due to COVID-19, I also find that the sale of shares by the appellant was actually a distressed sale. The transaction cannot be said to have been undertaken at a value which would ordinarily reflect "Fair Market Value" in a normal business environment. I further rely upon the decision of the Hon'ble Orissa High Court in the case of DN Homes Pvt. Ltd. vs. Union of India reported in [2021] 459 ITR 211 (Orissa), wherein ....
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....ies, partial allowance of in some specific activity and even restraints on number of employees coming to perform those allowable activities. The Real Estate Sector heavily faced the wrath of Pandemic COVID-19 situation when even there were serious labour migrations, stoppage of all forms of construction activities as well as buying and selling of real estate projects which are all undeniable facts. Considering the economy wide impact, the Government of India announced several packages, protecting cheap credit to small and medium business, relaxing the payment of loan dues by extending the period of repayment, exempting payments of certain taxes and fees in many areas and sectors and extending the submission of tax returns from time to time waiver of interest and/or restructuring of loan account. Similarly, various State Governments also declared all such relaxations in various Revenue related matters. The press release dated 30-12-2020 of the Ministry of Finance Department of Revenue, Government of India and the circular dated 11th January, 2022 state all these reliefs etc., keeping in view the challenges faced by taxpayers in meeting the statutory and regulatory compliances due to....
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....ous factors. We cannot lose sight of the fact that the valuer makes forecast or approximation, based on potential value of business. However, the underline facts and assumptions can undergo change over a period of time. The Courts have repeatedly held that valuation is not an exact science, and therefore cannot be done with arithmetic precision. It is a technical and complex problem which can be appropriately left to the consideration and wisdom of experts in the field of accountancy, having regard to the imponderables which enter the process of valuation of shares. The Appellant-Revenue is unable to demonstrate that the methodology adopted by the Respondent- Assessee is not correct. The AO has simply rejected the valuation of the Respondent-Assessee and failed to provide any alternate fair value of shares. Furthermore, as noted in the impugned order and as also pointed out by Mr. Vohra, the shares in the present scenario have not been subscribed to by any sister concern or closely related person, but by outside investors. Indeed, if they have seen certain potential and accepted this valuation, then Appellant-Revenue cannot question their wisdom. The valuation is a question of fact....
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....eal fails and is dismissed." 9.14. Similar view is expressed by the Hon'ble Madras High Court in the case VVA Hotels Pvt. Ltd. reported in 122 taxmann.com 106 (Madras) and by ITAT Delhi in the case of DCIT Vs. Hometrail Buildtech Pvt. Ltd. Dated 15.09.2023 reported in 155 taxmann.com 178 and in the case of Intelligrape Software Pvt. Ltd. Vs. ITO in ITA No. 3925/Del./2018. 9.15. Thus, in view of the above, I find that in the present case, the action of AO in substituting the method of valuation from DCF to NAV method and recompute the value of share at Rs. 8.144/- share is not correct and bad in law. 9.16. Therefore, after careful consideration of the above narrated facts, circumstances of the case and the submissions of the Appellant and Assessment Order, I find that AO was not correct in making addition of Rs. 51,80,000/ -. Accordingly, the addition of Rs. 51,80,000/-made by the AO is deleted. Therefore, the ground of appeal no. 9 is allowed. 67. For the purpose of determination of the fair market value, the assessee has followed the DCF method and obtained the report of an accountant as provided in rule 11UA(2) of the Income Tax Rules, 1962 who h....
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....g regard to the imponderables which enter the process of valuation of shares. The Appellant-Revenue is unable to demonstrate that the methodology adopted by the Respondent- Assessee is not correct. The AO has simply rejected the valuation of the Respondent-Assessee and failed to provide any alternate fair value of shares. Furthermore, as noted in the impugned order and as also pointed out by Mr. Vohra, the shares in the present scenario have not been subscribed to by any sister concern or closely related person, but by outside investors. Indeed, if they have seen certain potential and accepted this valuation, then Appellant-Revenue cannot question their wisdom. The valuation is a question of fact which would depend upon appreciation of material or evidence. The methodology adopted by the Respondent-Assessee, accepted by the learned ITAT, is a conclusion of fact drawn on the basis of material and facts available. The test laid down by the Courts for interfering with the findings of a valuer is not satisfied in the present case, as the Respondent-Assessee adopted a recognized method of valuation and Appellant-Revenue is unable to show that the assessee adopted a demonstrably wrong ap....
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....O by discarding the method adopted by assessee and applied NAV method to determine the value of per equity share. 72. In view of these facts, we uphold the order of ld. CIT(A) wherein the ld. CIT(A) has followed the judgement of jurisdictional high court in the case of Cinestaan Entertainment Pvt. Ltd. (supra) and the orders of the coordinate Delhi benches of Tribunal on the issue in hand. Accordingly, appeal of the revenue fails on this issue also. 73. In the result, appeal of the assessee is partly allowed and appeal of the Revenue is dismissed. 74. Now we take appeal of the assessee in ITA No.5646/Del/2025 and appeal of the Revenue in ITA No. 6921/Del/2025 [Assessment Year 2023-24]. ITA No. 5646/Del/2025[Assessee's appeal] ITA No.6921/Del/2025 [Revenue's appeal] [Assessment Year 2023-24] 75. As admitted by both the parties during the course of hearing, the issues raised by the assessee in ground of appeal No.3 and all the issues raised by in revenue's appeal are identical to the issues in AY 2019-20. Further the Ld. CIT(A) has also made similar observations while deleting the additions made on such issues and there is no change in the facts and c....
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.... Kataria. The assessee was not provided opportunity to cross-examine Shri Sanjay Kataria who is an independent person and Director of M/s. La Arc Plan Pvt. Ltd. and the source of the said cash should have been explained by him. The presumption u/s. 132(4) cannot be drawn against the assessee for the cash found from the possession of third party. It is therefore, requested that no addition should be made on this account. He prayed accordingly. 80. On the other hand, Ld. CIT DR for the Revenue vehemently supported the orders of the lower authorities and submits that the claim of the assessee of cash sales as well as advances received in cash from customers, cannot be accepted since the same was not recorded in the books of accounts as on the date of search and is an afterthought and should not be entertained. Regarding cash of INR 20 Lakhs, Ld. CIT DR submits that during the course of search in the statements recorded u/s. 132(4), Shri Sanjay Kataria has categorically admitted that the cash was given by the assessee company and therefore, the assessee company cannot claim that Shri Sanjay Kataria is the owner of the said cash. Ld. CIT DR prayed that the AO has rightly made the add....