TaxTMI 
TaxTMI 
2026 (2) TMI 1410
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....on the facts and in the circumstances of the case and in law, the id. CIT(A) erred in deleting the addition of Rs. 3,45,00,000/- in respect of seven entries as per loose sheets seized Annexure-A1 wherein the names were found and matched in Tally data which was not rebutted by the assessee as detailed in the Remand Report furnished by the assessing officer? 2. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the addition of Rs. 12,86,73,000/- in respect of eight entries as per loose sheets seized Anneure-A1 pertaining to the related part of the assessee and not owned up by the assessee as detailed in the Remand Report furnished by the assessing officer? 3. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) in holding that AO's invocation of the provisions of section 69A is incorrect in the absence of clear cut finding by CIT(A) as to disallowance of expenditure in respect of entries in loose sheets in seized annexure u/s 37(1) of the Act by the Id. CIT(A)? The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary." Al....
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....21 on 07/01/2021, declaring an income of Rs. 9,97,04,080/- (after claiming deduction under section 80IA of the Act of Rs. 15,18,20,494/-). The assessee company had disclosed its "book profit" under section 115JB of the Act at Rs. 24,69,59,809/-. Subsequently, the case was selected for scrutiny assessment and notice under section 143(2) of the Act, dated 11/06/2021 was issued to the assessee company. 5. During the course of the assessment proceedings, the AO observed that the assessee company had received Rs. 58,40,75,961/- and Rs. 53,18,86,949/- from M/s. Megha Engineering & Infrastructure Limited (for short, "MEIL"), during the Financial Years (F.Ys.) 2018-19 and 2019-20, respectively, for executing works contracts for Kaleswarama project and Purushottapatnam project. The AO observed that the assessee company had sub-contracted the aforesaid works to several entities on a back-to-back basis. The AO, based on the material available before him, recorded his observations with respect to the parties to whom the assessee company had sub-contracted the aforesaid work, as under: A). M/s. Equus Infra Projects Private Limited: 6. The AO observed that the aforementioned sub-contrac....
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....o whom the payments were made by M/s. EIPPL had filed their returns of income under section 44AD of the Act, and there were no supporting documents to substantiate the fact that they had rendered their services as sub- contractors; and (iv) that no supporting documents evidencing that any work was actually done were found in the possession of M/s. EIPPL in the course of search proceedings, and it seemed that the same was in the nature of accommodation entries provided by M/s. EIPPL. B.) M/s. Sri Satya Gangamma Infrastructures: 8. The AO, on a perusal of the record before him, observed that the assessee company had provided sub-contract work of Rs. 8,22,48,188/- and Rs. 3,28,19,932/- to Sri Satya Gangamma Infrastructures (for short, "M/s. SSGI") during the F.Y 2018-19 and F.Y 2019-20, respectively. However, the AO observed that M/s. SSGI had not provided any details regarding the aforesaid sub-contract work. In fact, it was observed by him that M/s. SSGI had not shown the aforementioned amounts as part of its contract service receipts in its return of income for the subject year, but had shown the same as a part of its total turnover of Rs. 24,13,21,802/-, i.e., sale of goods.....
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....me based on supporting documentary evidence. Accordingly, the AO, based on his aforesaid deliberations, concluded that the amount of Rs. 13,65,22,222/- received by the assessee company from M/s. Megha Engineering and Infrastructure Limited (for short "M/s. MEIL"), which was further transferred to the aforementioned parties, viz., (i) M/s. EIPPL: Rs. 5,28,38,603/-; (ii) M/s. SSGI: Rs. 3,28,19,932/-; and (iii) M/s. APPL: Rs. 5,08,63,687/- during the year was nothing but accommodation entries that were provided by the assessee company to the main contractor, viz., M/s. MEIL. Thus, the AO, based on his aforesaid conviction, worked out commission income @ 1% of the total of the aforementioned amounts transferred by the assessee company to the sub-contractors aggregating to Rs. 13,65,22,222/- and made an addition of Rs. 13,65,222/- as the income of the assessee company from other sources. 11. Apart from that, we find that the AO in the course of the assessment proceedings relied upon the contents of certain loose sheets that were seized during the course of the search proceedings from the residential premises of Sri R. Srinivas Reddy, Director of the assessee company, at Plot No.110, ....
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....2019. The AO pressed into service the statement of Sri R. Srinivasa Reddy, Director of the assessee company, recorded under section 132(4) of the Act on 08/02/2020, wherein he had failed to explain the aforesaid noting in the seized document. (iii) Entry of "RRR-2700000-Venkat Rama Ref-Fertilr", date 09/04/2019: 14. The AO, referring to the aforesaid noting mentioned in the seized document, viz., Annexure A-1/Pages 01-02, observed that the assessee company, as per its Tally Data for the F.Y. 2019-20, had made total payments of Rs. 26,73,528/- to M/s. Vinayaka Fertilisers. The AO, after correlating the aforesaid entry recorded in the tally data with the contents of the aforesaid seized document, observed that the assessee company, against the payment of Rs. 26.73 lakhs made to M/s. Vinayaka Fertilisers had received back from the said concern cash of Rs. 27 lakhs. 15. The AO, based on his aforesaid observations, called upon the assessee company to explain the entries mentioned in the aforesaid seized documents, viz., Annexure A-1/Pages 01-02. It was submitted by the assessee company that the notings in the seized loose slips were nothing but unsigned scribblings, wherein som....
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.... by the assessee company from various vendors and sub-contractors. The CIT(A) observed that the AO had treated the entire amount mentioned in the seized loose sheets as the unexplained money of the assessee company, and concluded that the assessee company had inflated its expenses and received cash back from the concerned parties. The CIT(A), considering the facts involved in the case before him, called for two remand reports, undertook entry-wise examination and partly confirmed the additions made by the AO to the tune of Rs. 77 lacs, pertaining to three entries viz. (i). Entry of "Basheer Khan Pump Direct RRR": Rs. 20,00,000/-, dated 09/04/2019; (ii). Entry of "RRR-2700000- Venkat Rama Ref-Fertilr", dated 09/04/2019: Rs. 27,00,000/-; and (iii). Entry of "Cement Shop - Dwaraka RRR", dated 07/04/2019: Rs. 30,00,000/- 20. Both the assessee and the revenue aggrieved with the CIT(A) order has carried the matter by way of their respective appeals before us. 21. We have heard the Ld. Authorised Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements that have been pressed i....
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....at Rama Ref-Fertilr", dated 09/04/2019: Rs. 27,00,000/-; and (iii). Entry of "Cement Shop - Dwaraka RRR", dated 07/04/2019: Rs. 30,00,000/- aggregating to Rs. 77 lacs, but vacated the balance additions. Before proceeding further, we deem it apposite to observe that it is the claim of the assessee company before us that though the total of the 24 entries along with the further 4 entries aggregates to Rs. 13,38,27,000/-but the AO had taken the same at an amount of Rs. 20,35,50,000/-. Accordingly, it is the claim of the Ld. AR that the addition of Rs. 6,97,23,000/- is excessive in nature on bare reading of seized Annexure A-1/Pages 01- 02. The Ld. AR's claim, for the sake of clarity, as has been projected before us in his written submissions, is culled out as under: Sr. No Amount as per seized material As per CIT(A) Order Sr. No of Seized material 1 7,900,000 7,900,000 3,19 & 23 2 11,677,000 11,677,000 5,9,13 & 15 3 34,500,000 34,500,000 4,6,7,11,12,14 & 17 4 20,800,000 20,800,000 1 & 10 5 46,350,000 128,673,000 2,8, 16, 18,20,21,22 & 24 (....
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....ka Constructions" vis-à-vis the name mentioned in the loose sheet seized in the course of the search proceedings, i.e., "Dwaraka-RRR". The CIT(A) based on his aforesaid conviction, viz., (i) there was a similarity in the names mentioned in the seized loose sheet and the transaction accounted for in the Tally Data by the assessee company; and (ii) that both the transactions were carried out during the subject year, i.e., AY 2020-21, upheld the addition made by the AO. 28. We have given thoughtful consideration to the observations of the authorities below. At the threshold, we may herein observe that the AO in his second "remand report" filed before the CIT(A) had observed that the amount of Rs. 30 lakhs "could have been received from M/s. Dwaraka Constructions by the assessee company". Accordingly, the very observation of the AO itself evidences that he was himself not confident that the transaction gathered from the contents of the said loose sheet seized, i.e., Annexure A1/Pages 01-02, pertained to the payment that was made by the assessee company to M/s. Dwaraka Constructions of Rs. 1.50 crores on 12/04/2019. Apart from that, as the alleged cash receipt of Rs. 30 lakhs ....
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....try recorded in the tally data with the contents of the aforesaid seized document, observed that the assessee company against the payment of Rs. 26.73 lakhs made to M/s. Vinayaka Fertilisers had received back from the said concern cash of Rs. 27 lakhs. 30. We have given thoughtful consideration to the contentions advanced by the Ld. AR's of both parties as regards the issue in hand, i.e., the addition of Rs. 27 lacs made by the AO, which, thereafter, had been upheld by the CIT(A). 31. At the threshold, we may observe that as the name mentioned in the seized loose sheet is "Venkat Rama Ref-Fertilr", while for that considered by the AO as recorded in the tally data of the assessee company is "Vinayak Fertilizers", therefore, the AO, before drawing any inferences in context of the noting recorded in the seized loose sheet was statutorily obligated to have proved that both the above two entities were same. However, we find that the AO had failed to discharge the onus cast upon him and had summarily presumed without any basis that both the said entities were the same. In fact, we find that though the CIT(A) had taken cognisance of the said material fact that the names of the s....
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....(Registered Society) Vs. Union of India(2017) 394 ITR 220 (SC), wherein it is held that loose sheets and random notings without corroborative evidence lack evidentiary value. In fact, we find that though the CIT(A) had in his order taken cognizance of the aforesaid discrepancies in the contents of the seized loose sheet vis-à-vis the entry recorded in the tally data, but had thereafter upheld the addition for the standalone reason that the booking of the expenses and the entry of the cash receipt are in the same financial year. We, thus, not being able to concur with the unsubstantiated view taken by the CIT(A), set aside his order and vacate the addition of Rs. 27 lac made by the AO. The Ground of appeal No. 3 raised by the assessee company is allowed. (C). Entry in the name of "Basheer Khan Pump Direct RRR" Rs. 20 lacs: 32. The AO observed that the assessee company had made a payment of Rs. 25 lacs to "Basheer Khan fuel station" on 02/04/2019 from its SBI bank account. The AO, referring to the aforesaid entry mentioned in the seized Annexure A-1/Pages 01-02, held a conviction that the assessee company after making a payment of Rs. 25 lakhs to Basheer Khan fuel statio....
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....ip read in the backdrop of the payment made by the assessee company to the aforesaid party might have raised some doubt in the mind of the AO regarding the genuineness of its claim of expenditure of Rs. 25 lac paid through banking channel to the said party, but we are afraid that doubts and suspicion, however strong, cannot take the place of evidence. Our aforesaid view is supported by the judgments of the Hon'ble Supreme Court in Lalchand Bhagat Ambica Ram Vs. CIT (1959) 37 ITR 288 (SC) and Umacharan Shaw & Bros. Vs. CIT (1959) 37 ITR 271 (SC). We thus, in the backdrop of our aforesaid observations, are of a firm conviction that as both the lower authorities had merely acted upon the noting/scribbling in the seized loose sheet, and had failed to bring any material on record which would conclusively reveal that the assessee company had booked bogus expenses towards the purchase of fuel from the aforesaid party and had received the amount as mentioned in the noting/scribbling in the seized loose sheet, therefore, are unable to concur with the CIT(A) who had upheld the impugned unsubstantiated addition made by the AO only for the reason that there was a similarity in the names of....
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.... said parties no disallowance was called for in the hands of the assessee company; and (iii) that though the names of the individuals/parties were appearing in the Tally Data, but there was no mention of the details of the transactions and amounts. Accordingly, the assessee company, based on the aforesaid facts, had claimed that in the absence of the aforesaid crucial details, no adverse inference could be drawn in the hands of the assessee company. 37. On appeal, the CIT(A) after considering the "remand reports" of the AO in the backdrop of the rejoinder filed by the assessee company found favour with the claim of the assessee company by observing, viz., (i) that as the names in the Tally Data and the seized documents were not identical, therefore, it could not be conclusively said that they were the same individuals; (ii) that though the AO had drawn some semblance with the names appearing in the Tally Data, however, in absence of the details of transactions and amounts no adverse inferences could have been drawn in the hands of the assessee company; and (iii) that as the AO has not pointed out that the assessee company had booked any expenditure against the names of the subje....
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....zed loose sheets, viz., Annexure A-1/Pages 01-02 could have been made in the hands of the assessee company. Accordingly, finding no infirmity in the view taken by the CIT(A), who, in our view, had based on his reasoned observations vacated the unsubstantiated addition of Rs. 3.45 crores (supra) made by the AO with respect to the aforementioned 7 entries, uphold his order. The Ground of appeal No. 1 raised by the revenue is dismissed. 40. We shall now deal with the balance of 8 entries (out of 10 entries) in the seized documents, viz., Annexure A-1/Pages 01-02. As is discernible from the record, the seized document, viz. Annexure A- 1/Pages 01-02, inter alia, comprises of 10 entries viz., (i) 8 entries stated to be mentioned in the nick name of the Director of the assessee company and his brother in the seized material but not found in the books of accounts; and (ii) two entries, i.e., (a) dated 01/04/2019; Rs.73,00,000/-; and (b) dated: 07/04/2019: Rs.1,35,00,000/- that could not be correlated with the books of accounts. On a perusal of the CIT(A) order, we find that the assessee company had at no stage owned the entries bearing the nicknames of its Director or his brother. In f....
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....e by the AO in respect of 8 parties (out of 10 parties) aggregating to Rs. 12,86,73,000/-, therefore, we are restricting our adjudication only to the said extent. 43. The CIT(A), based on his aforementioned observations regarding the abovementioned 8 entries mentioning the nick names of the Director of the assessee company and his brother, which could not be correlated with the books of accounts: Rs. 1286.23 lakhs, had vacated the same. 44. We have given thoughtful consideration to the observations of the CIT(A) based on which he had vacated the addition of Rs. 1286.23 lakhs (supra) relating to the aforementioned 8 entries. In our view, as the AO had in his second "remand report" admitted that the 8 entries mentioning the nick name of the Director of the assessee company and his brother could not be found in the Tally Data and the books of accounts of the assessee company, therefore, as observed by the CIT(A), and rightly so, there could not have been any justification for the AO after conceding to the aforesaid factual position to have sustained the addition with respect to the aforementioned 8 entries. Also, we concur with the CIT(A) that as the AO had conceded in his "rema....
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....d into service only in a case where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article; or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, then 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. Accordingly, the conditions that are required to be cumulatively satisfied for triggering the provisions of section 69A of the Act can be safely dissected, viz., (i) that the assessee is found to be the owner of money, bullion, jewellery or any other valuable article; (ii) that such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by the assessee for any source of income; and (iii) that the assessee offers no explanation about the nature and source of acquisition of....
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....ound in the course of he search proceedings from the assessee the addition was made under Section 69A of the Act. The Hon'ble High Court observed that the assessee before them was found in possession of loose slips and not of any valuable article or thing. Also, it was further observed that neither the possession nor the ownership of any jewellery mentioned in the slips could be proved. The High Court, based on the aforesaid facts, upheld the view taken by the Tribunal that the provisions of Section 69A of the Act could not have been applied. Also, we find that a similar view had earlier been taken by the Hon'ble High Court of Calcutta in the case of Kantilal Chandulal & Co. Vs. CIT (1982) 136 ITR 889 (Cal). 50. Alternatively, the CIT(A) has rightly observed that now, when the AO, while framing the assessment, had himself tried to relate the entries in the seized loose sheets with the duly recorded entries in the books of accounts of the assessee company, i.e., as cash received by the assessee company from its vendors/sub-contractors on account of bogus or inflated expenses that it had booked in its books of account for either the year under consideration or the immediat....