TaxTMI 
TaxTMI 
2026 (5) TMI 743
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....e case of M/s. Tegh Cables Private Limited, the learned CIT(A) passed a consolidated order dated 30.10.2025 covering Assessment Years 2020-21 to 2022-23. It is pertinent to note that the assessments in both cases emanate from common facts and material gathered during the course of a search and seizure operation conducted by the Investigation Wing of the Income Tax Department under Section 132 of the Income-tax Act, 1961 (in short the Act) on 22.12.2023. Since the issues arising in these appeals are interconnected and stem from the same search proceedings, all the appeals were heard together and are being disposed off by way of this consolidated order for the sake of convenience and to avoid repetition. 3. Before we proceed to adjudicate the appeals on merits, it would be appropriate, and indeed necessary, to briefly advert to the factual background leading to the search action and the consequent assessments framed. 4. A search and seizure operation under Section 132 of the Act was carried out on 22.12.2023 in the case of M/s Polycab India Limited, its distributors, inter-alia, comprising entities of the Sunrise Group, namely M/s Sunrise Enterprises (subsequently renamed as S ....
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....pt of cash from beneficiary parties, which was thereafter routed back through banking channels to the said entities. Through this mechanism, an amount of Rs. 569.21 crores (initially quantified at Rs. 572.09 crores and subsequently revised) was introduced into the books in the guise of legitimate sales. 8. The Assessing Officer further observed that, based on the seized Tally data, certain non-genuine sales transactions of the Sunrise Group were facilitated by the present assessee, Shri Banpreet Suriendersingh Atal, through two distinct modes. Under the first mode (Mode-1), the assessee is stated to have directly arranged beneficiaries for bogus sales of the Sunrise Group entities, for which he allegedly earned commission at the rate of 2% of such transactions. Under the second mode (Mode-2), the assessee is alleged to have operated through his own company, M/s Tegh Cables Private Limited, by issuing accommodation sale invoices to various beneficiaries, while simultaneously obtaining corresponding accommodation entries from the Sunrise Group entities. In respect of such transactions, the assessee is stated to have earned commission at the rate of 1%. 9. On the basis of the af....
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....the Id. CIT(A) erred in confirming the action of the Id. AO in alleging that appellant has facilitated non-genuine sales made by various entities of Sunrise Group to M/s Tegh Cables Pvt. Ltd. on commission basis, for the reasons stated in the impugned order or otherwise. 8. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of the Id. A.O in making an addition of Rs. 7,04,188/-, being commission 1% of corresponding sales by M/s. Tegh Cables Pvt. Ltd., for the reasons stated in the impugned order or otherwise. The appellant submits that the aforesaid commission rate as computed by the ld. AO being excessive on the facts and prays that the same be suitably reduced." 11. In the grounds raised, the assessee has assailed reassessment proceeding as well as addition on merit. Firstly, we take up the addition on merit raised in ground nos. 5 to 8 of the appeal. 12. The relevant facts, in brief, are that the assessee filed his regular return of income on 26.07.2018 declaring a total income of Rs. 24,94,050/- under Section 139(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). Subsequently, p....
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....t Assistant of the Sunrise Group, recorded under Section 132(4) of the Act during the course of search proceedings. In his statement, Shri Mahajani stated that he used to receive purchase orders from Shri Vijay Pahuja through WhatsApp and, based on the particulars contained therein, would pass corresponding entries in the accounting system. The Assessing Officer, referring to the said statement, observed that certain alleged accommodation entries were recorded in the Tally system under specific code names or identifiers such as 'Rupesh Bhai', 'Neel' and '='. It was further stated by Shri Mahajani that no actual movement of goods took place in respect of such transactions and that these entries were recorded using coded nomenclature, as per instructions of Shri Vijay Pahuja, for the purpose of tracking non-genuine sales purportedly effected against cash. The statement further indicates that, in cases of such alleged non-genuine transactions, goods were sold in cash to one party while corresponding sale invoices were issued in the name of another party, and that code words were employed in the books of account to distinguish such transactions from genuine sales. It was also stated th....
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....NA SUB TOTAL 1311280837.00 280825750.00 39075218.00 Grand total of sales with code word 'neel' Rs. 1,60,23,62,064.00 Amount in (Rs.) 'n' NO F.Y. SUNRISE LN HANS 1 2013-14 145223440 2 2014-15 304790513 3 2015-16 352926001 Grand total of sales with code word '= Rs. 80,29,39,954 Grand Total 5,69,21,10,273.00 12.6 Based on the particulars so provided, the Assessing Officer noted that the aggregate value of such alleged transactions amounted to Rs. 5,69,21,10,273/-. The break-up of these transactions, as reproduced above, reflects year-wise and entitywise figures attributed to the aforesaid code names. It is the case of the Assessing Officer that the said coded entries represented non-genuine sales recorded in the books of the Sunrise Group entities and were part of a larger arrangement involving accommodation entries. The tabulated details, as extracted from the statement of Shri Mohanlal Pahuja, have been relied upon by the Assessing Officer to draw an inference regarding the scale and nature of such transactions. Th....
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....nd attributed the resultant amount to the assessee for the relevant assessment year. Company Name F.Y. Purchase Amount of Purchase Entries In Rs. Corresponding F.Y. Sales Amount of Corresponding Sale entries as submitted by assessee in its reply in Rs. Commission Income of Banpreet Atal in Rs. @1% of sales Tegh Cables Pvt. Ltd. 2017-18 78,113,644 2017-18 70,418,760 704,188 2018-19 10,383,896 103,839 2018-19 33,704,507 2018-19 20,893,648 208,936 2019-20 13,655,751 136,558 2019-20 69,742,426 2019-20 73,811,486 738,115 2020-21 84,857,333 2020-21 86,547,083 865,471 2021-22 71,592,875 2021-22 63,027,568 630,276 2022-23 10,234,037 102,340 2023-24 407,104 4,071 Grand Total 338,010,785 349,379,333 3,493,793 12.11 In furtherance thereof, the assessee was confronted with a show cause notice as to why the aforesaid arrangement, allegedly carried out through M/s Tegh Cables Private Limited, should not be treated as yielding commission income taxable in his hands at the rate of 1% of the corre....
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....the absence of any independent evidence establishing a direct nexus with the assessee. The assessee also placed reliance on the CBDT Circular No. F. No. 286/98/2013-IT (Inv. II), wherein the field authorities have been cautioned against obtaining and relying upon confessional statements without corroborative material evidence. On the strength of the aforesaid submissions, it was contended that the impugned addition, being founded solely on uncorroborated statements and third-party material, is unsustainable in law. 12.13 The Assessing Officer, however, did not accept the explanation furnished by the assessee. According to him, the material unearthed during the course of search indicated that the assessee, Shri Banpreet Suriendersingh Atal, had facilitated accommodation entry transactions through entities such as M/s Tegh Cables Private Limited and Tegh Cables (India) Private Limited, and had earned commission in cash at the rate of 1% on such transactions. The Assessing Officer further recorded that, according to him, the said conclusion stood supported by statements recorded during the search proceedings from Shri Banpreet Atal, Shri Kalpesh Kumbhar and Shri Vijay Pahuja, as we....
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....ated such alleged accommodation entry transactions and had earned commission income therefrom. The learned CIT(A) further observed that the assessee had, in his statement recorded during the course of search, admitted to having earned commission income at varying rates depending upon the nature of the arrangement. 13.4 As regards the contention of the assessee that the statements relied upon by the Assessing Officer had been subsequently retracted, the learned CIT(A) held that such retraction could not be accepted in isolation and was required to be examined in the light of surrounding circumstances and the material found during the search. According to the learned CIT(A), the statements stood corroborated by the seized material, including the Tally data and other documents, and therefore retained evidentiary value. 13.5 The learned CIT(A) also rejected the contention that no incriminating material was found at the premises of the assessee, holding that once material found during search at a third-party premises establishes a nexus with the assessee, the same can be validly relied upon for making additions. The existence of such nexus, according to the learned CIT(A), stood e....
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.... the statement of the employees of the Sunrise Group, the assessee was engaged in facilitating the accommodation entries sales against commission in cash received which was duly admitted by the assessee himself and therefore, there is no iota of doubt that assessee had received cash commission in respect of the accommodation entries sales book through Tegh Cables Private Limited, Mumbai. 15. We have heard the rival submissions of the parties, carefully perused the orders of the authorities below, and meticulously evaluated the relevant material placed on record. The core issue for our consideration is whether the addition made in the hands of the assessee on account of alleged commission income can be legally sustained solely on the basis of bedrock of retracted confessional statements of the assessee and third parties during the course of search proceedings and the material seized from third parties, in the absence of any independent corroborative evidence to substantiate the actual exchange of such commission. 15.1 The Assessing Officer has proceeded on the premise that the assessee facilitated accommodation entries and earned commission therefrom at specified rates. Upon a....
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....rden shifts heavily onto the Revenue to independently corroborate the contents of the retracted confession with cogent, unimpeachable documentary evidence. In the present case, not only have such statements been subsequently retracted, but the Revenue has also failed to bring on record any substantive material to corroborate the contents of such statements. 15.5 We must also advert to the binding administrative guidelines issued by the Central Board of Direct Taxes (CBDT). The Board, taking serious cognizance of the arbitrary practice of extracting confessions during search and survey operations, has issued categorical instructions-including Circular F.No. 286/98/2013-IT (Inv. II)-deprecating the practice of obtaining confessional statements without unearthing independent corroborative material. The administrative mandate aligns seamlessly with the judicial consensus: a confession, standing alone and unsupported by corroborative documentary evidence, cannot form the sole legal basis for an addition, more so when such confession has been validly retracted. The assessing authorities are legally obligated to base their conclusions on tangible evidence gathered during the search, no....
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....ribed under Section 149(1)(b) must be strictly satisfied, namely, that the Assessing Officer must be in possession of books of account or other material evidencing escapement of income represented in the form of an asset, expenditure or entry in the books of account, amounting to or likely to amount to Rs. 50 lakhs or more. 16.1 The learned counsel further submitted that in the present case, the relevant assessment year is 2018-19, and the notice under Section 148 of the Act was issued on 21.11.2024, which is clearly beyond a period of three years from the end of the relevant assessment year. It was contended that the monetary threshold of Rs. 50 lakhs, as mandated under Section 149(1)(b), is not satisfied in the present case, inasmuch as the Assessing Officer has proposed and ultimately made an addition of only Rs. 7,04,188/- towards alleged commission income. Accordingly, it was urged that the assumption of jurisdiction under Section 147 is vitiated in law and the reassessment proceedings deserve to be quashed. 16.2 We have heard the rival submissions and perused the material available on record. It is not in dispute that the reassessment proceedings in the present case hav....
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....unds raised by the assessee challenging the validity of the reassessment proceedings are rendered academic and do not require adjudication. A.Y. 2019-20 17 Now, we take up the appeal for A.Y. 2019-20. The ground raised by the assessee are reproduced as under: "Reopening of the assessment u/s. 147- 1. On the facts and circumstances of the Appellant's case and in law, the Ld. CIT(A) erred in confirming the action of the Id. A.O in reopening the case of the appellant which is bad in law, without jurisdiction and deserves to be quashed. 2. On the facts and circumstances of the Appellant's case and in law, the Ld. CTT(A) erred in confirming the action of the Id. A.O in reopening the assessment which is in violation to the clause (b) of sub section (1) to section 149 of the Income Tax Act, 1961. 3. On the facts and circumstances of the Appellant's case and in law, the Ld. CIT(A) erred in confirming the action of the Id. A.O in issuing notice u/s. 148 on the basis of a mechanical approval u/s. 151 of the Income Tax Act, 1961. 4. On the facts and circumstances of the Appellant's case and in law, the Ld. CIT(A) erred in conf....
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.... is concerned, The learned CIT(A) observed that, insofar as the addition of commission income at the rate of 1% on transactions routed through M/s Tegh Cables Pvt. Ltd. (Mode-2) is concerned, the issue has already been adjudicated in the assessee's case for Assessment Year 2018-19. Accordingly, the findings recorded therein were held to apply mutatis mutandis to the year under consideration, and the addition of Rs. 3,12,775/-, being 1% of the relevant transaction value, was confirmed. As noted by the ld CIT(A), facts and circumstances are identical to the issue discussed in A.Y. 2018-19 and therefore, following our finding in A.Y. 2018-19, the grounds relevant to the addition for commission income @1% are decided mutatis mutandis. 20. Insofar as the addition on account of alleged commission income under "Modus-1", pertaining to facilitation of accommodation entries to various beneficiary entities, is concerned, the Assessing Officer observed that certain material, including WhatsApp communications and parallel Tally data seized during the course of search from the premises of the Sunrise Group, M/s Tegh Cables Private Limited and Tegh Cables (India) Private Limited, purportedly ....
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....corresponded to cash payments made against RTGS receipts from entities including M/s Sterling and Wilson Pvt. Ltd. 20.6 The Assessing Officer also referred to instances wherein M/s V.S. Enterprises (ABEFM5573D) was stated to have issued invoices to M/s Sterling and Wilson Pvt. Ltd., against which payments were made through banking channels, followed by alleged return of equivalent amounts in cash. It was thus inferred that such transactions were in the nature of accommodation entries without any actual movement of goods. VS Enterprises (ABEFM5573D) (whose partner is Prakash Gurbani aka Piku) is one such entity through which non genuine sales was provided by Shri Vijay Pahuja to parties of Shri Banpreet Atal . It was further observed that such entries were recorded in the parallel Tally system under specific ledger heads, including 'Piku cash1', maintained in the entity identified as 'Ka'. 20.7 In this backdrop, the Assessing Officer referred to the statement of the assessee recorded under Section 132(4) of the Act on 24.12.2023, wherein, in response to Question No. 38, the assessee is stated to have admitted that the quotations/proforma invoices and purchase orders issued in ....
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.... allegation of accommodation entry transactions. 20.11 With regard to the beneficiary entity, M/s Airtech Systems India Private Limited, the Assessing Officer has referred to WhatsApp communications between Shri Vijay Pahuja and the assessee to infer that S P Electro Solutions Pvt. Ltd. had issued non-genuine sales invoices to the said entity, against which payments were received through banking channels and equivalent amounts were allegedly returned in cash. The Assessing Officer has also relied upon the statement of the assessee recorded under Section 132(4) of the Act on 23.12.2023, wherein the assessee is stated to have acknowledged such transactions. Further, it was noted that another entity, namely Tushar Trading Co. (a proprietary concern of Shri Mehul Rasiklal Sanghvi), was also involved in issuing alleged accommodation entry invoices to M/s Airtech Systems India Private Limited. Reference was made to WhatsApp communications wherein invoices raised by the said entity were shared with the assessee, and the assessee is stated to have admitted these facts in response to Question No. 44 of his statement recorded during the search proceedings on 23.12.2023. 20.12 In respec....
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....ember 2021, and that the aggregate value of such transactions was approximately Rs. 10 crores, against which he had allegedly earned commission of about Rs. 20 lakhs, being approximately 2% thereof. The statement also enumerates certain entities alleged to have been involved in such transactions, along with the respective persons with whom coordination was carried out. Relevant part of his statement is reproduced as under: "Q. 22 With respect to your explanation about source of cash as ted in the answer of question No. 21 above, please explain in detail from when you are involved in such cash transactions and the quantum of cash you have generated through these transactions till date and also explain the entities involved in such transactions and how you are associated with these entities. Ans. Sir. I am involved in the said cash transactions since December. 2021 and the total cash transaction is approx. 10 crores till date and I have got approx. 20 lakhs (2% of total cash transactions of Rs. 10 crores) as commission from the cash giving parties. The following entities are involved in the above stated transactions: Sr. No. Name of the Entities involved in th....
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....terprise Pyramid Technologies (AAFFP8216L) 3356124 2389891 4746018 5 SP Electrosolutions Pvt Ltd Viswaat Chemicals Ltd (AAACV41848) 12380461 22740930 36121391 20.16 Accordingly, the Assessing Officer show caused the assessee as why the cash commission @2% as per modus 1, he made in the case of the assessee as under: F.Y. Amount of Sales in Rs. Commission income of Banpreet Atal in Rs. @2% 2018-19 2513025 50260.5 2019-20 11108856 2221771 2020-21 50724897 1014498 2021-22 93102555 1862051 2022-23 79874195 1597484 2023-24 60725211 1214504 Total 298048739 5960974.6 20.17 In response to the show cause notice, the assessee categorically denied the allegations of having facilitated nongenuine transactions or having earned any commission therefrom. It was submitted that the assessee has been engaged in the business for over two to three decades and has had longstanding commercial dealings with various entities, including M/s Sterling and Wilson Pvt. Ltd., M/s Nitco Limited, M/s Pyramid Technologies, M/s Laqshya Media Ltd., M/....
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.... also by certain material, including WhatsApp communications, found during the course of the search. It was further observed that the assessee had failed to satisfactorily rebut the findings emerging from the search and subsequent assessment proceedings. The Assessing Officer also took note of the retraction affidavit filed by the assessee; however, he held that the contents thereof were not acceptable and stood duly examined and rejected by the Department through communication issued via ITBA dated 22.01.2025. On the basis of the aforesaid reasoning, the AssessingOfficer concluded that commission income amounting to Rs. 50,261/-, being 2% of the alleged transaction value of Rs. 25,13,025/-, had escaped assessment in the hands of the assessee for Assessment Year 2019-20. Accordingly, the said amount was brought to tax. 21 On further appeal, the learned Commissioner of Income Tax (Appeals), upon consideration of the facts of the case, the findings of the Assessing Officer, and the submissions advanced by the assessee, proceeded to uphold the addition made on account of alleged commission income. 21.1 The learned CIT(A) noted that, apart from the transactions routed ....
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....submissions and perused the material placed on record. The grievance of the assessee pertains to the addition of Rs. 50,261/- made on account of alleged commission income computed at the rate of 2% under what the Revenue terms as "Modus-1". 22.1 The genesis of the impugned addition lies in the Assessing Officer's conclusion that the assessee functioned as an entry provider, facilitating non-genuine sales/accommodation entries from the Sunrise Group entities to various corporate beneficiaries, including M/s Sterling & Wilson Pvt. Ltd., M/s Nitco Ltd., Pyramid Technologies, Laqshya Media Ltd., Airtech Systems India Pvt. Ltd., and Viswaat Chemicals Ltd. The Assessing Officer observed that against the RTGS payments made by these beneficiaries to the Sunrise Group, equivalent cash was routed back to the beneficiaries. This conclusion is primarily founded upon selective reliance on statements and certain extracts of WhatsApp chats, coupled with entries found in third-party data. 22.2 For allegedly orchestrating this mechanism, the Assessing Officer concluded that the assessee earned a cash commission of 2%. To buttress this addition, the Assessing Officer heavily relied upon certai....
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....f cash for RTGS payments between the Sunrise Group and the beneficiary companies, they are absolutely silent on the issue of commission. There is not a shred of documentary evidence, neither in the WhatsApp chats nor in the 'KM' Tally ledgers, indicating that a 2% commission was ever quantified, charged, or paid to the assessee. The Revenue has failed to unearth any parallel ledger, cash trail, or notation that corroborates the actual receipt of the alleged commission by the assessee. 22.6 We also find merit in the contention of the assessee that no independent inquiry has been conducted with the alleged beneficiary parties to establish the flow of funds or to corroborate the allegation of commission payment. In the absence of such verification, the conclusion drawn by the Assessing Officer remains based on presumption rather than proof. 22.7 We reiterate that the fundamental mandate of law, as reinforced by the binding circulars of the Central Board of Direct Taxes (CBDT), is that assessing authorities must not predicate additions solely on uncorroborated confessional statements obtained during search and seizure operations. In the absence of any substantive, tangibl....
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....w cause notice as well as in the final assessment order, has proposed and made addition only to the extent of Rs. 3,63,036/- towards alleged commission income, which is substantially below the statutory threshold of Rs. 50 lakhs. It was thus contended that the mandatory jurisdictional condition prescribed under Section 149(1)(b) of the Act remains unfulfilled. 23.2 Having regard to the aforesaid undisputed factual position, we find merit in the contention advanced on behalf of the assessee. The issuance of notice under Section 148 beyond the period of three years, in the absence of satisfaction of the threshold requirement prescribed under Section 149(1)(b), is without jurisdiction and vitiates the entire reassessment proceedings. 23.3 Accordingly, the notice issued under Section 148 of the Act and the consequent reassessment proceedings are held to be invalid and void ab initio. The grounds raised by the assessee challenging the validity of reassessment are, therefore, allowed. A.Ys. 2020-21 to 2022-23 22 Grounds on merit raised are identical to grounds raised in A.Y. 2019-20 and therefore, all relevant grounds in the appeals for A.Y. 2020-21 to 2022-23 are decided mut....
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.... 7. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of the ld. A.O in holding that the appellant has made unaccounted cash sales of Rs. 1.96 Crs. in the absence of any incriminating material found during the course of search, for reasons stated in the impugned order or otherwise. 8. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of the ld. A.O in making an addition of gross profit @9.04% amounting to Rs. 17,71,840/- on the alleged unaccounted cash sales recorded in the tally data, for the reasons stated in the impugned order or otherwise. 9. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of the ld. A.O in making an addition of gross profit @9.04% on the alleged unaccounted cash sales made by the appellant, for the reasons stated in the impugned order or otherwise. The Appellant submits that the aforesaid gross profit rate as computed by the ld. AO being excessive on facts and prays that the same be suitably reduced. Action of AO in holding that appellant....
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....conclusion was stated to be founded upon the statement recorded from Shri Banpreet Atal. The Assessing Officer held that the entries contained in the said ledgers represented unaccounted cash sales effected by the assessee. It was also noted that the ledgers captioned "Bunny Seth" and "Tegh Cable SB2" had allegedly been admitted and owned up by Shri Banpreet Atal, Director of the assessee-company, during the course of search and post-search proceedings. 24.3 In response thereto, before the ld AO, the assessee contended that the entire edifice of the addition rested upon Tally data recovered from the premises of a third party, namely the Sunrise Group, and, therefore, no adverse inference could validly be drawn against the assessee solely on the basis of such thirdparty material. It was further submitted that the burden to explain the contents of the said Tally data could not be fastened upon the assessee. The assessee also urged that no addition could legally be sustained merely on the strength of material recovered from a third party, particularly in the absence of any independent corroborative evidence discovered during the search conducted upon the assessee. According to the ....
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....ntained ledger accounts styled as "Bunny Seth", "Bobby Cash 1" and "Tegh Cable SB2", which, according to the Revenue, pertained to cash transactions relating to Shri Banpreet Atal, Tegh Cables Pvt. Ltd. and Tegh Cables India Pvt. Ltd. It was further noted that Shri Banpreet Atal, in the statement recorded during the course of search proceedings, had acknowledged the transactions reflected in the said ledger accounts. Upon perusal of the statement of Shri Banpreet Atal, the learned CIT(A) concluded that the transactions recorded in the aforesaid ledgers had indeed been admitted by him at the relevant point of time, notwithstanding the subsequent retraction thereof. According to the learned CIT(A), such retraction did not, by itself, efface the evidentiary value of the original statement, particularly when viewed in the backdrop of the corroborative material recovered during the search. 24.9 The learned CIT(A), therefore, rejected the contention of the assessee that the addition could not survive merely because the statements relied upon by the Revenue had been retracted. It was held that the statements stood sufficiently corroborated by the incriminating material discovered durin....
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....that no ledger account reflecting cash sales in the name of the assessee was found in the said parallel Tally records. According to the learned counsel, the Assessing Officer proceeded merely on the basis of an alleged confessional statement of Shri Banpreet Atal, wherein he is stated to have admitted that the ledger accounts captioned "Bunny Seth", "Bobby Cash 1" and "Tegh Cable SB2" pertained to Shri Banpreet Atal, Tegh Cable Pvt. Ltd. and Tegh Cables India Pvt. Ltd. respectively. 24.12 The learned counsel further submitted that, solely on the basis of the aforesaid statement, the Assessing Officer treated the transactions reflected in the ledger account "Bobby Cash 1" as belonging to the assessee and consequently estimated the gross profit thereon at the rate of 9.04% for the purpose of making the impugned addition. It was argued that, apart from the statement of Shri Banpreet Atal, no independent documentary evidence whatsoever had been brought on record to establish that the said ledger account pertained to the assessee. It was further submitted that Shri Banpreet Atal had subsequently retracted the statement relied upon by the Revenue. Reliance was also placed upon the dec....
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....d addition has principally been founded upon the statement of Shri Banpreet Atal, wherein he is stated to have admitted that the ledger account "Bobby Cash 1" pertained to the assessee. However, in his subsequent statement dated 23/09/2024 recorded before the Investigation Wing (PB:113-115), Shri Banpreet Atal expressed lack of recollection and uncertainty regarding the transactions reflected in the said ledger account. For ready reference, relevant part of his statement is reproduced as under: "Q.7 I am showing you the ledger accounts in the name of Bobby-Cash-1, Bunny Seth and Tegh Cable - SB2 in the tally named Ka (page no 1 to 18) which has been found during the course of search proceedings u/s. 132 of Income-tax Act, 1961 in the case of S P Electrosolutions and others at Choksi Mills Compound, Narayan Nagar, Ghatkopar (West), Mumbai - 400086 on 22.12.2023. Please confirm and offer your comments. ANs: Madam, I confirm I have seen the ledgers. These are very old transactions so I can't recollect the exact nature of such transaction. Further I have already described most of the transactions during the course of search proceedings itself. However, I can't comment....
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.... such electronic records. Section 11 is reproduced as under: 11. Attribution of electronic records. - An electronic record shall be attributed to the originator- (a) if it was sent by the originator himself; (b) by a person who had the authority to act on behalf of the originator in respect of that electronic record; or (c) by an information system programmed by or on behalf of the originator to operate automatically. 9.1. In the present case, before us, additions have been made on the basis of electronic images / sheets found and seized from the mobiles of concerned persons/third parties which are electronic records. Section 132(4A) r.w.s. 292C contains presumption as to evidence which is admissible against the person in whose possession or control such evidence is found and such a presumption is a rebuttable presumption. Section 11 of the Information Technology Act also attributes the electronic record to its originator when it was sent by the originator himself or any person authorised on his behalf or by a system programmed by or on behalf of the originator. Keeping the provisions of the Act and of Information Technology Act discusse....
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....sApp messages sent from assessee's mobile phone to Mr. Somu and had given his own meaning to those messages. In the process, the AO neither tested the admissibility of WhatsApp messages as evidence u/s. 69B of Evidence Act, nor examined Mr. Somu the recipient of messages sent by the assessee. The AO without carrying out necessary enquiries and also examining those persons, simply concluded that those messages are meant for distribution of cash and the assessee has spent such a huge amount for election expenses. In our considered view, the findings recorded by the AO is purely on suspicion and surmises manner without any evidences to justify his findings." 9.5. Keeping the context of material found and seized from third parties, we also refer to decision in the case of ACIT vs. Lata Mangeshkar [1974] 97 ITR 696 (Bom) wherein Hon'ble Court has extensively discussed the importance and meaning of primary evidence. In this case, Income-tax authorities came across a sort of a ledger maintained by a firm known as Vasu Films of Madras which was seized by them. Department relied on the entries in the ledger which allegedly reflected payments to Ms. Lata Mangeshkar in white and ....
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....s in the day-book or the ledger would be a corroborative piece of evidence and once the direct evidence of the person who is said to have made payments in "black" to the assessee is disbelieved, we do not think that any value could be attached to the entries in the ledger or to the entries in the day-book even if one had been produced. In the circumstances, we feel that the questions which are sought to be referred arise out of a finding of fact recorded by the Tribunal on pure appreciation of evidence." 9.6. We also refer to the decision of Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla & Ors. 1998 (3 SCC 410) (SC), where Section 34 of the Evidence Act, 1872 has been explained and held that entries in a file containing loose sheets of papers were not "book" and hence entries therein were not admissible under Section 34 of the Evidence Act. Further, it was also held in this case that entries in books of account shall not alone be sufficient evidence to charge any person with liability. Entries, even if relevant, were only corroborative evidence. Independent evidence as to trustworthiness of those entries was necessary to fasten the liability. In view of these fac....
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....s and incriminating material in form of random sheets and loose papers, computer prints, hard disk, pen drives etc. were found, held that noting on loose sheet/diary does carry any evidentiary value under the provision of section 34 of the Evidence Act. Relevant extract reads as under: "It is apparent from the aforesaid discussion that loose sheets of paper are wholly irrelevant as evidence being not admissible u/s. 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. ................... In case of Sahara, in addition we have the adjudication by the Income-tax Settlement Commission. The order has been placed on record along with I.A. No. 4. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc, do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. It further observed that the department has no ....
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....g Officer in respect of the WhatsApp communications relied upon as corroborative evidence. In the absence of such statutory compliance, the said electronic material cannot be safely relied upon for sustaining the impugned addition. 24.20 Having regard to the totality of the facts and circumstances of the case, we deem it appropriate, in the interest of justice, to restore the issue to the file of the Assessing Officer for the purpose of verifying whether the alleged sales, on the basis of which gross profit addition has been made in the hands of the assessee, have already been brought to tax in the hands of the Sunrise Group entities. Subject to such verification and examination of other issues, the matter shall be decided afresh in accordance with law after affording adequate opportunity of hearing to the assessee. Accordingly, the grounds raised on merits are treated as allowed for statistical purposes. Since the matter is being restored on merits, we refrain from adjudicating the legal grounds urged before us at this stage, and the same are kept open. 25. Insofar as Ground No. 10, relating to the allegation of non-genuine purchases recorded in the books of account, is conc....
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....or making false entries in the books of account. Aggrieved by the same, assessee has raised the present grounds of appeal. Since the penalty proceedings are only initiated and no penalty order has been passed as yet, this ground of appeal of the assessee is premature. The assessee is free to contest any such penalty order, as and when levied, at appropriate level. Accordingly, this ground of appeal of the assessee is DISMISSED, being premature in nature." 25.2 Having considered the rival submissions and the findings recorded by the authorities below, we are of the considered view that the issue raised in the aforesaid ground presently has no bearing on the determination of taxable income or profit for the year under consideration. Admittedly, what has been challenged is only the initiation of penalty proceedings under section 271AAD of the Act, and no final order imposing penalty has yet been passed. In such circumstances, the grievance raised by the assessee is clearly premature and academic in nature at this stage. Accordingly, Ground No. 10 is dismissed as infructuous/premature, with liberty to the assessee to avail such remedy as may be permissible in law if and when any pen....
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.... Ground Nos. 4 and 5 raised by the assessee are also rendered infructuous and are, therefore, dismissed as such. 26.3 However, insofar as the legal grounds challenging the validity of the reassessment proceedings are concerned, the same are kept open and are not being adjudicated upon at this stage. 27. Now, we take up the appeal of the assessee in ITA No. 9211/Mum/2025for Assessment Year 2022-23. The grounds raised by the assessee are reproduced as under: "Reopening of the assessment u/s. 147:- 1. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of the ld. A.O in reopening the case of the appellant which is bad in law, without jurisdiction and deserves to be quashed. 2. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of the ld. A.O in issuing notice u/s. 148 on the basis of a mechanical approval u/s. 151 of the Income Tax Act, 1961. 3. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of the ld. A.O in passing the order u/s. 147 based on m....
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....hinde, which, according to the Revenue, indicated that cash had been received back by the assessee against payments made through banking channels. 27.2 The Assessing Officer further observed that no formal agreements had been executed by the assessee with the parties to whom commission and brokerage payments had allegedly been made. It was also noted that the said commission payments had been effected with the approval of Shri Surinder Singh Atal, Director of the assessee-company, though no satisfactory explanation or basis for the quantification of such commission payments had been furnished. The Assessing Officer additionally observed that no documentary material evidencing the nature of services rendered by the concerned parties was found either at the office premises or at the godown of the assessee during the course of search proceedings. On the basis of the aforesaid observations, the Assessing Officer asked the assessee as why said commission expenditure aggregating to Rs. 26,31,600/- claimed to have been paid to Shri Sujit Wagh and Shri Nitin Jadhav might be disallowed. 27.3 In response thereto, the assessee contended that the impugned commission payments had been inc....
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....ts. On the strength of these submissions, the assessee pleaded that the commission expenditure claimed by it was genuine and allowable under law. But the ld AO rejecting the contention s of the assessee, disallowed the commission expenses. 27.7 On further appeal, the learned CIT(A), after considering the submissions advanced on behalf of the assessee and examining the material available on record, proceeded to uphold the disallowance made by the Assessing Officer. The learned CIT(A) observed that the assessee had failed to substantiate, by cogent and credible evidence, that any actual services had in fact been rendered by the recipients against whom the impugned commission payments had been claimed. 27.8 The learned CIT(A) further observed that, upon perusal of the statement of Shri Rajesh Shinde, it was evident that he had categorically stated that the commission payments claimed by the assessee were non-genuine in nature and that the assessee had allegedly received cash back against the payments made through banking channels. According to the learned CIT(A), the said statement also stood corroborated by the WhatsApp communications forming part of the material referred to....
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....ing Officer had made no meaningful enquiry or independent verification with regard to the services rendered by the commission agents or the genuineness of the transactions in question, and that the disallowance had been made mechanically without undertaking proper investigation of the relevant parties. The learned counsel additionally contended that the statement of the accountant relied upon by the Revenue was not supported by any independent or reliable corroborative material. According to the learned counsel, the accountant was merely entrusted with routine accounting functions and was not fully conversant with the business processes of the assessee-company, particularly the commercial aspects relating to procurement of orders and achievement of sales targets. 27.14 We have heard the rival submissions advanced by the parties and carefully perused the material available on record. Upon a thoughtful consideration of the facts and circumstances of the case, we find that the assessee had furnished before the authorities below various documentary evidences in support of the commission expenditure claimed, including details of corresponding sales transactions effected through the c....