TaxTMI 
TaxTMI 
2025 (3) TMI 1837
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....t, it is alleged that assessee received unexplained money from Shri Kaushal Khadelia. The issue arises out of search u/s. 132 of the Income-tax Act, 1961, ("the Act") which was carried out at the premises of the Mr. P.V. Sarma Group on 21.10.2020 along with residence of Mr. P.V. Sarma, residence & office/godown premises belonging to Shri Kaushal Khandelia family and their related business, Dhaval Bharat Kumar Shah and other related parties. It was in the course of this search action that Shri. Kaushal Khandelia had agreed that he had paid to assessee Rs. 20,13,000/- in cash towards purchase of marble. Shri Kaushal Khandelia, thereafter, retracted his statement by filing sworn affidavit dated 24.08.2021. Assessee submitted that it had sold marble to Smt. Kusum Khandelia and M/s. Kusum Silicones Private Limited and copy of ledger extract in the books these parties were submitted before ld. Assessing Officer. Both, Smt Kusum Khandelia and M/s Kusum Silicones Private Ltd confirmed the transactions. 2.1. Ld. CIT(A), while giving relief to the essence on this issue, noted from the seized documents in question that amount appearing as discount for alleged cash transaction is Rs. 21,12,....
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....nterprises, Siddhi Vinayak Enterprises and Maruti Associates during the FY 2012-13 to 2018-19 which were found to be non- genuine and bogus entries. The same transactions were added in the total income of the assessee. Now during the year under consideration, ld. Assessing Officer found that labour payments were made to Varun Enterprises to the tune of Rs. 6,18,64,107/-, hence a show cause notice was issued to the assessee to explain why the said amount should not be added in the total income of assessee by treating same transactions as non-genuine and bogus. Assessee submitted its reply before the ld. Assessing Officer, but the same was not accepted by the ld. Assessing Officer, hence he disallowed sum of Rs. 6,18,64,107/- u/s. 37(1) of the Act and added in the total income of the assessee. 4. At the first appellate stage, ld. CIT(A) after considering the submissions and judicial precedents furnished by the assessee as well as other material placed on record, he was of the view that similar issue was decided by him in assessee's own case in Assessment Year 2013-14 to 2019-20 by way of consolidated order, dated 16.01.2024. In this order referred by ld. CIT(A) in para 8.27 and 8.....
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.... before Ld CIT(A) that it did not carry out any unaccounted cash sales. With regard to whats app message, it was submitted that the same was proforma invoice only. A detailed submission with regard to each of the customer referred by the AO was made before Ld CIT(A). Accordingly, the Ld CIT(A) was convinced with the submissions made by the assessee and deleted the above said disallowance. The observations made by Ld CIT(A) in this regard are extracted below:- "35.1 It is noted that AO has mentioned statements of Sh. Alpesh Trivedi and Haresh Kumar Purohit, the salesmen at appellant' s factory premises. They mentioned about cash sales in the company. Further, a WhatsApp message was retrieved from phone of Sh. Haresh Kumar Purohit wherein an invoice and figures in cash and cheques are mentioned. The salesman and one other employee accepted that cash is accepted against sales but for smaller retail sales. Moreover, Sh. Purohit has mentioned that invoice mentioned in Whats App message is proforma invoice. Message also contains the text ' Kindly send revised quote'. This also supports the statement of Sh. Purohit that this is a proforma invoice. 35.2 The st....
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....counts need to be given for the inferior quality material as well as cracked and unshaped material for which discount goes upto 50% and there is no unaccounted cash involved in the sales. Q.49. I am showing you the response to the Q17 and 18 in the statement of Shri Rushin Mehta recorded u/s 132(4) of the Income tax Act, 1961 during the search proceedings. Please comment. Ans: Sir, I am not aware of such kind of transactions of any unaccounted cash. Whatever cash is taken, has been deposited in the bank. Q.51. I am showing you the response to the Q.20 in the statement of Shri Rushin Mehta recorded u/s 132(4) of the Income tax Act, 1961 during the search proceedings. In reply, Shri Rushin Mehta has explained that the cash and the cheque component of any transaction at Silvasa are decided by Shri Jignesh Desai with your confirmation. Please comment. Ans. Sir, wherever any customer wants to take any discount, my team talks to me over phone and I give them the approval over phone only for the same accordingly. There is no unaccounted cash component that is involved. Q54. I am showing you the response to the Q. 39 to 44 in the statement of Sh....
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....5 are in the name of Shri R. Selvaraj. Sr no. 15,16 & 17 are against JD A/c and Sr.no 6,10 & 13 are for Mohan V Patel. It is not clear whether they pertain to same transactions or are different transactions. Further, AO has mentioned amount in fourth column of the table in para 9.7 of assessment order as 'Amount of bill according to bills or sheets', however, as per submission of the appellant even the bill amounts are not matching in 18 out of 21 cases narrated therein. In cases of R. Selvaraj and Mohan V Patel, the second instance of sales are neither confirmed by the purchasers nor recorded by the appellant as sales. The confirmations filed by the appellant are also support the figures reflected by appellant as sales in its books of account. The entire state of affairs gives credence to appellant submission that these are preliminary recordings by sales team and nothing to do with unaccounted cash sales. 35.7 It is also noted that AO has attempted to support his claim through one print out of SAP data wherein price variation has been noted and inferred that such variation can be linked to unaccounted cash acceptance by the appellant. This page was confronted wit....
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....etters requested the A.O. to furnish the copies of the statements recorded in the search and relied upon by him, workings of the alleged unaccounted sales party-wise and the seized material retrieved from the WhatsApp chats these were not furnished to the appellant by the A.O. No opportunity to cross examine the aforesaid witnesses of the A.O. was given to the appellant company in spite of request made by the appellant. The Hon'ble Allahabad High Court in the case of Gargi Din Jwalaprasad v. CIT (96 ITR 97) held that the elementary principle of natural justice is that the assessee should have 'knowledge of the material that is going to be used against him so that he may be able to meet it. The proceedings were vitiated by violation of the principles of natural justice. In the case of Andaman Timber Industries v. Commissioner of Central Excise (Supra) the Supreme Court held that not allowing the assessee to cross examine the witness is a serious flaw which makes the order nullity. The A.O. did not take into consideration the statement of the Managing Director recorded at the time of the search wherein he had stated that there were no unaccounted cash sales. Secondly, the A.O....
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.... noted the detailed examination carried out by ld. CIT(A) based on which genuineness of payment of labour charges were proved. The Coordinate Bench agreed with the reasoning given by ld. CIT(A), holding it as justifiable. Thus, in absence of any material brought on record to contradict the findings of ld. CIT(A), the relief given by ld. CIT(A) was confirmed. Before the Coordinate Bench, this issue pertained to three parties which includes Varun Enterprisers, who is a party in the year under consideration before us for which the payments made to have been alleged as non-genuine. 6.1. Factual observations and findings of ld. CIT(A) noted by the Coordinate Bench in its order, as well as the conclusion drawn by it is reproduced for ready reference. "4. During the course of search/survey operations, it was noticed that the assessee has paid labour charges to the following three concerns: Name of the party Name of the proprietor (S/Shri) a) Varun Enterprises Hitesh V. Patel (HUF) b) Siddi Vinayak Enterprises Mehul kumar Somabhai mevada c) Maruti Associates Amit Dinesh Chandra Joshi The aggregate amount of payments made to these three persons d....
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..... 4.3. In view of the above, the AO issued notice u/s 142(1) of the Act asking the assessee to furnish complete details of labour/sub-contractor payments along with documentary evidences. The assessee also duly replied to the above said notice and furnished the details called for. The AO called for bank account details of two labourers named Shri Dhaval Kumar V Johny Sersingh Amliar by issuing notice u/s 133(6) of the Act. On analysis of those bank accounts, the AO noticed that they were receiving salaries from more than one concern. Further, one of the labourers has made meagre withdrawals. Accordingly, the AO came to the conclusion that they have only lent their names and were not doing actual work. 5. Before the AO, the assessee requested for cross-examination of Shri Hitesh V. Patel. The AO provided the said opportunity to the assessee and cross-examination was done by Shri Bala Krishna Jhaveri, Advocate on behalf of the director of the assessee. The AO also recorded a statement from Shri Hitesh V. Patel on oath on that day. According to the AO, Shri Hitesh Patel could not furnish any document to prove the genuineness of labour supply and further, during cross....
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....as counter signed by the proprietors of the respective concerns. According to the AO, these persons should not have signed those documents, when they had already given power of attorney to Shri Hitesh V Patel. The AO also noticed that both the persons have stated before the AO that they are living now in Rajasthan. In view of their present residence, the AO expressed doubt as to how these two persons were available on the date of visit of Enforcement official of PF department. In view of the above deficiencies/defects, the AO came to the conclusion that these two concerns also have not supplied man power and consequently, the labour charges paid to these two concerns were also not genuine. 7. Accordingly, the AO disallowed the labour charges paid to these three concerns in all the years, as tabulated in the table above. 8. In the appellate proceedings, Ld.CIT(A) deleted these additions in all the years. Hence, the Revenue has filed these appeals. 9. We heard rival contentions and perused the record. From the discussions made by the AO, we notice that the AO has primarily relied upon on surrounding circumstances, preponderance of probabilities and other de....