TaxTMI 
TaxTMI 
2026 (5) TMI 1005
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1961 (hereinafter referred to as 'the Act') by ACIT, Central Circle-3, Delhi (hereinafter referred to as 'ld. AO'). Identical issues are involved in all these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience. Identical issues are involved in all these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience. ITA No. 4828/Del/2025 - Asst Year 2016-17 - Revenue Appeal ITA No. 4485/Del/2025 - Asst Year 2016-17 - Assessee Appeal 2. At the outset, the ld AR made an argument in support of challenging the assumption of jurisdiction u/s 148 of the Act by stating that the assessment year 2016-17 under consideration fall outside the prescribed block period and accordingly no assessment could be validly framed thereon. This is a preliminary issue going to the root of the matter and hence, we proceed to take up the same first for adjudication. 3. We have heard the rival submissions and perused the material available on record. The search in the case of the assessee was carried out u/s 132 of the Act on 21.01.2023. Pursuant to the search, notice u/s 148 of the Act stood....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2018-19 Deemed information under Explanation 2 to Section 148 of the Act 7 2017-18 Deemed information under Explanation 2 to Section 148 of the Act 5. In respect of AYs 2016-17, 2015-16 and 2014-15, being the 8th, 9th and 10th year, they could be reopened only if income represented in the form of asset which had escaped assessment amounts to or is likely to amount to Rs 50 lakhs or more as per the 4th proviso to section 153A of the Act. 6. We find that there is no allegation of income escaping assessment represented in the form of asset and therefore the proceedings u/s 148 of the Act for the AY 2016-17 would be bad in law and hence the very assumption of jurisdiction of the ld AO becomes flawed. We find that the ld AR rightly placed reliance on the decision of the Hon'ble Jurisdictional Delhi High Court in the case of Smart Chip P Ltd vs ACIT reported in 476 ITR 389 (Del) wherein the relevant operative portion is reproduced hereunder:- "16. It is apparent from the above that the AO believed that the petitioner's income had escaped assessment for AY 2016-17 on essentially three grounds. First, that the petitioner had deducted expenses relating to a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as well as the proceedings initiated pursuant thereto are set aside. The petition is allowed in the aforesaid terms. Pending applications also stand disposed of. " 7. Respectfully following the same, we have no hesitation to hold that the assumption of jurisdiction for AY 2016-17 by the Learned AO is invalid and not in accordance with law. Since the entire assessment is quashed on invalid assumption of jurisdiction, the other grounds raised by the assessee and the revenue need not be adjudicated and they are left open. 8. In the result, the appeal of the assessee in ITA No. 4485 /Del/2025 is allowed and appeal of the revenue in ITA No. 4828/Del/2025 is dismissed. ITA No. 4486/Del/2025 - Asst Year 2017-18 - Assessee Appeal 9. At the outset, the ld AR made an argument in support of challenging the assumption of jurisdiction u/s 148 of the Act by stating that the assessment year 2017-18 under consideration fall outside the prescribed block period and accordingly no assessment could be validly framed thereon. This is a preliminary issue going to the root of the matter and hence, we proceed to take up the same first for adjudication. 10. We have heard the rival submissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f search and seizure action carried out in the premises of the assessee on 21-01-2023, the following incriminating items were found and seized:- a) Seized documents in Annexure A-1 to A-45 found in the premises of B-30, Lawrence Road, Industrial Area, Delhi containing freight register, vehicle in details, Dharam Kantha receipts, general voucher registers, purchase details etc b) Seized document in Annexure A-46 seized from B-30, Lawrence Road, Industrial Area, Delhi containing tally data of Rajdhani flour mills limited. Further at the time of lifting of prohibitory order on 3-3-2023, seized documents in Annexures A-1 to A-121 seized from B-30, Lawrence Road, Industrial Area, Delhi containing freight register, vehicle in details, Dharam Kantha receipts, general voucher registers, purchase bills etc were also found and seized. The Learned AO observed that on perusal and analysis of the above seized documents during search action, it was gathered that as a usual practice, when the truck enters the plant, the security guard enters the truck details in a register, then the weight of the truck is measured at Dharam Kantha and a digital weighing slip is generated. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cordingly made addition of this 1.15% of the related purchases directly from the farmers on which payment of Mandi Tax was saved. The learned AO discussed the issue of inflated purchases in para 5.1 to 5.42 of his order. In para 5.33 to 5.36 the learned AO calculated the extent of over invoicing and explained the methodology to work out the extent of over invoicing. 18.1. It was submitted that the learned AO erred in making the addition without correct appreciation of the facts. The assessee company is engaged in the manufacturing of Besan. The assessee purchases chana from various sources such as NAFED, Imports, Licensed Arhatiyas and brokers. In respect of purchases from/ through brokers, the brokers give commitment (Sauda) to deliver agreed quantity of chana at mutually decided price. The said mutually decided price is inclusive of mandi tax. The price quoted by the broker is not dependent on the source from which the broker procures the chana. The brokers procure the goods from various sources such as Authorized agents (Arhatiyas) or mandis of various states and also directly from the farmers. It was submitted that when the purchases are from authorized agents or Mandis of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ources such as NAFED, Imports, Licensed Arhatiyas and brokers. There is also no dispute with regard to the fact that in respect of the purchases directly made from the farmers, there is saving of Mandi Tax. The question for consideration here is whether because of saving of Mandi Tax, there is any invoicing of purchases for which the AO has made the addition?. In my opinion, the AO has not appreciated the position correctly. In respect of goods purchased from the farmers, since the broker has issued bills to the assessee at lower price after factoring in the savings of Mandi Tax, there is no case of any over invoicing. It is not the case that bill was raised by the broker at higher amount but the assessee paid the lower amount. The assessee has claimed the expenditure of purchase which has been actually paid and incurred by it. The savings of Mandi Tax already stands factored in the bill issued by broker and thus the purchases which are recorded by the assessee is at lower amount i.e. after considering the saving of Mandi Tax. There is no case of any excess expenditure claimed by the assessee. The saving of Mandi Tax has been treated by the AO as inflated purchase whereas the appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has deleted the addition by holding as under: - "4.2. I have carefully considered the observations of the assessing officer made in the assessment order and also the submission of the appellant. It is seen that the AO has not pointed out any discrepancy in the quantitative details of opening stock, purchases, raw material consumption, production of finished goods and sales of products. There is substance in the submission of the appellant that there cannot be any production/ sales of finished goods without corresponding purchases. When the production and sales of finished goods is undisputed, there cannot be any justification for doubting the purchases. The AO has accepted the books of accounts of the appellant and has not rejected the books of accounts. The AO has also accepted the purchases except that an adhoc addition of 1.60% has been made. I find no justification in such adhoc addition. With regard to issue of saving of mandi tax, the same has been dealt with by me in Ground No. 5. In view of the above factual position, the addition of Rs. 1,23,46,666 /- made by the AO cannot be held to be justified. Accordingly, the addition made by the AO is directed to be deleted.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 to section 37(1) of the Act are very clear that expenditure incurred on CSR activities cannot be held to be wholly and exclusively meant for the purpose of business of the assessee and accordingly liable for disallowance. However, the Learned AR before us submitted that the said expenditure would be alternatively eligible for deduction under section 80G of the Act as CSR expenditures represent only donations given to various eligible institutions. But from the records, we find that the details of CSR activities are not available from the orders of the lower authorities. Hence, we deem it fit and appropriate to restore this issue to the file of Learned AO for de novo adjudication in accordance with law and to consider the claim of deduction under section 80G of the Act if it is found that assessee had indeed made contributions to eligible institutions. The law is well settled that assessee would be entitled for deduction under section 80G of the Act in respect of contributions made to eligible institutions that were categorized as CSR expenditure. We direct the Learned AO accordingly. Hence, the Ground No. 5 raised by the assessee is allowed for statistical purposes. 24. In the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Bar and accordingly, the Ground Nos. 1,2,3,4 and 5 raised by the assessee are hereby dismissed as not pressed. 34. In the result, the appeal of the assessee in ITA No. 4489/Del/2025 is dismissed. ITA No. 4832/Del/2025 - Asst Year 2020-21 - Revenue Appeal 35. The grounds raised by the revenue for Assessment Year 2020-21 are exactly identical to those raised in Assessment Year 2017-18. Hence the decision rendered by us hereinabove for Assessment Year 2017-18 in revenue's appeal shall apply mutatis mutandis for this assessment year also, except with variance in figures. 36. In the result, the appeal of the assessee in ITA No. 4489/Del/2025 is dismissed and appeal of the revenue in ITA No. 4832/Del/2025 is dismissed. ITA No. 4490/Del/2025 - Asst Year 2021-22 - Assessee Appeal 37. The Ground Nos. 1,2,3, 4,5 and 6 raised by the assessee were stated to be not pressed by the learned AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly, the Ground Nos. 1,2,3,4,5 and 6 raised by the assessee are hereby dismissed as not pressed. 38. In the result, the appeal of the assessee in ITA No. 4490/Del/2025 is dismissed. ITA No. 4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dicating the very issue against the department as under: "11.4 In conclusion, it was submitted that since the year under appeal formed part of the three assessment years immediately preceding the year in which search was conducted, the assessment ought to have been framed under section 148 with approval u/s 148B. The framing of the assessment u/s 143(3) and approval taken only for the purposes of section 143(3) was thus asserted to be fundamentally defective, non-compliant with statutory mandate, and consequently void ab initio. On these grounds, following the ratio in Homelife Buildcon Pvt. Ltd, it was prayed that the impugned assessment be quashed. 12. The Ld. CIT-DR Shri Manav Bansal opposed the contention, stating that the return for A.Y. 2022-23 was filed prior to the date of search, and validly selected for scrutiny under CASS. The AO was competent to complete the assessment u/ s 143(3). 12.1 He contended that section 148B applies only to "re-assessment" and not to "regular assessments." The AO's approval from Addl. CIT, being in line with the CBDT Instruction No. 7/2022 dated 15.07.2022, fulfils the supervisory requirement. The DR also submitted th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....f 01.04.2021) does not begin with a non-obstante clause similar to the erstwhile section 153A, its context and Explanation 2 make it clear that where a search is initiated, the jurisdiction thereafter must flow through this special channel, subject to prior satisfaction and approval of the Principal Commissioner or Commissioner. The legislative intent is to ensure that when a search is carried out, the assessment is framed under the specific provisions meant for such cases and not under the general provision of section 143(3). Further we may mention that no notice under section 143(2) could have been issued after 3 months from the from the end of the financial year in which the return is furnished. In the present case the original return of income was filled on 4/11/2022 for the assessment year 202223 and 143 (2) was issued on 21/6/2023, therefore also the assessment was framed under 143(3) of the Act is not sustainable. In other words the time required for issuing the notice under 143(2) had already expired, and the revenue can not be allowed to issued issue 143(2) on 21.6.2023 after the search was carried out and notice had been issued on 21.6.2023 and assessment was framed unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar scrutiny). Allowing the Assessing Officer to continue and conclude proceedings under section 143(3) after a search would defeat this legislative scheme and render the safeguards, such as prior approval of the Principal Commissioner, redundant. 13.9 Accordingly, we hold that once a search is initiated under section 132 and material is found relating to the assessee, the pending assessment under section 143(3) cannot validly continue, as the time for issuing the 143(2) in response to original return of income had already expired, therefore the Assessing Officer must necessarily proceed in accordance with the special provisions contained in section 148 of the Act." 4. Learned CIT(DR) representing the Revenue vehemently supports the impugned assessment that the Assessing Officer had rightly finalized the same under the normal provision once the entire issue was pending before him as on the date of search. 5. We have given our thoughtful consideration to the assessee's and the Revenue's foregoing vehement submissions. We find merit in the assessee's legal ground herein once the impugned search had taken place in its case, no normal assessment under section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of the same by considering the chana rate as Rs 46 per kg and besan rate at Rs 65 per kg are as under: Premise Difference (in Rs. ) Remarks RM FG RFML 830 -1,42,22,510 75,06,200 Unaccounted sales of Rs. 1,42,22,510/- and unexplained investment of Rs. 75,06,200/- RFML C34 -30,360 - Unaccounted sales of Rs. 30,360/- RFML Rai 2248 1,25,94,892 -82,420 Unexplained investment of Rs. 1,25,94,892/- and unaccounted sates of Rs. 82,420/- 45.2. The assessee was asked to provide the sales ledger, stock ledger and purchase ledger for the year under consideration and explain the difference as mentioned above. The assessee submitted its reply on 31-05-2024. In its reply, the assessee pointed out some calculation mismatch at serial number 10 and 11 of the Exhibit-1 of the statement of Shri Krishnakumar Sharma i.e. for chana 2060 Quintals = 2060 kg and chana Dal-1205 Quintals = 1205 kg. The said discrepancy was found to be correct by the Learned AO. 45.3. Further, the assessee claimed with respect to serial number 9 of Exhibit-1 of the statement of Shri Krishnakumar Sharma i.e. Dust that no such packaging of 450 kgs is done in their busines....
X X X X Extracts X X X X
X X X X Extracts X X X X
....60 - Unaccounted sales of Rs. 30,360/- RFML Rai 2248 1,25,94,892 -82,420 Unexplained investment of Bs. 1,25,94,892/- and unaccounted sales of Rs. 82,420/- 45.8. A show cause notice was issued to the assessee to add Rs 1,12,780 (30360 + 82420) as unaccounted sales and Rs 2,07,47,392 (8152500 + 12594892) as unexplained investment. The assessee submitted its reply on 17.06.2024 clearly objecting to the addition by pointing out that there were no discrepancies at all in the physical stock and the book stocks. The assessee also duly brought on record the calculation mistakes done in the revised computation as under:- a) With respect to rejection, it was inadvertently calculated as 60*50 kgs= 300 kgs instead of 60*50 kg =3000 kgs. b) The rate for calculation of Dust was adopted at Rs 46 per kgs whereas the assessee buys the same at 0.50 paisa per kg. The assessee also submitted the bill of Dust purchase. The rate in the bills of Dust varies from 0.40 paisa per kg to 0.60 paisa per kgs. This claim of the assessee was found to be correct by the learned AO. c) With respect to the difference of 115480 kgs found in the finished goods at premises....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s arrived by the Learned AO merely on estimation and without actual verification of the stocks. An Affidavit in this regard was also submitted by the assessee in support of its contentions. Further, the assessee submitted that the only source of income of the assessee is business of manufacturing of Besan and allied products and there cannot be any undisclosed sources of income warranting any addition under section 69 read with section 115BBE of the Act. It was vehemently submitted that the only source of income is emanating out of the business of the assessee. The assessee further submitted that the alleged excess stock could be brought to tax only as business income under section 28 of the Act and not under section 69 of the Act and in support of this proposition, it placed reliance on the decision of Hon'ble Rajasthan High Court in the case of PCIT vs Bajargan Traders in ITA 258 / 2017 dated 12-09-2017. The Learned CITA however in principle agreed to the additions made by the Learned AO, but held that the excess stock addition would only have to be treated as business income under section 28 of the Act as the only source of income for the assessee is income from business and not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....supervisor would be in great tension and would be only praying for the search team to exit as early as possible from the premises. Hence the addition made based on the behaviour of the plant supervisor and the employees at the time of search would not be sustainable in the eyes of law, when the assessee was able to prove with cogent evidences, stock registers, purchase ledger and sales ledger that there were no discrepancies in the stocks found physically and the stocks recorded in the books of accounts. Further the contention of the assessee that the standard rate of Rs 46 per kg for chana and Rs 65 per kg for besan cannot be adopted. This may be relevant to work out the approximate value of stock at the time of search, but when the same is sought to be compared with the stock ledger, then the values already reported in the stock ledger would be more authentic when no defects were pointed out by the revenue or the search party in the maintenance of stock ledgers of the assessee. In these circumstances, the contention of the assessee that the stocks were considered by the search party and thereafter by the lower authorities on estimation need to be accepted. Hence we have no hesita....