TaxTMI 
TaxTMI 
2026 (6) TMI 1124
X X X X Extracts X X X X
X X X X Extracts X X X X
....als have also been filed by the assessee and the Revenue against the order dated 17.09.2025 passed by the Ld. CIT(A) u/s 250 of the Act for AY 2019-10. 2. Since the issues involved in the appeals filed by both the parties as well as the objections raised by the assessee in the COs arise out of the common search action conducted by the Department on 24.10.2018, all these appeals and COs were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. We shall first take up ITA No. 2311/Ahd/2025 for AY 2019-20 as the lead case for the purpose of narrating the facts. AY 2019-20 - Grounds of appeal raised by the assessee :- "1. In law and on the facts and in the circumstances in the case of the appellant, the order u/s 250 of the Act passed by the Ld. CIT (A) is arbitrary, erroneous, contrary to the provisions of law and on facts. 2. In law and on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the addition of Rs. 1,33,70,910/- on account of the alleged stock difference, without appreciating that the stock verification conducted during search was without any standard norms and procedur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rinciples of natural justice. 6. In law and on the facts and in the circumstances of the case, the learned CIT(A) has erred in denying telescoping benefit, by not adjusting the alleged unaccounted sales against the alleged investment in stock, resulting in double taxation of the same amount." The Revenue has taken following grounds of appeal in AY 2019-20:- "1) In the facts and on the circumstances of the case and in law, the Learned CIT(A) has restricting the addition made of Rs. 25,57,80,000/- to Rs. 1,09,62,000/- being 10% unaccounted production of Rs 10,96.20,000/- stating that the addition cannot be n extrapolation of one month's unaccounted production to the whole financial year. 2) "In the facts and on the circumstances of the case and in law, the Learned CIT(A) has deleting the addition of Rs. 2,76,48,100/- made on account of cessation of liability u/s. 41(1) of the Act stating that the mere fact that the creditors are outstanding for several years does not es the cessation." 4. The brief facts of the case are that a search and seizure action u/s 132 of the Act was carried out in the KAKA Group cases on 24.10.2018. The assessee firm, M/s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....during search and selectively relied upon isolated answers. The Ld. AR accordingly submitted that the addition made on estimated stock difference deserved to be deleted. 8. The Ld. DR relied upon the assessment order and submitted that excess stock of 86.36 tons was found during the course of search. The Ld. DR submitted that the assessee failed to maintain updated stock records and therefore the Assessing Officer was justified in treating the excess stock as unexplained investment. The Ld. DR submitted that the reconciliation furnished subsequently was an afterthought and the Assessing Officer rightly made the addition on the basis of stock discrepancy found during search proceedings. 9. We have considered the rival submissions and perused the material available on record. We find that the addition has been made entirely on the basis of estimated physical stock verification conducted during search proceedings. From the statements recorded during search, it is evident that the stock was not physically weighed item-wise and estimation method based on sample weighment was adopted by the department. We further note that Shri Sanjay Sodavadiya, ex-accountant of the assessee, h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd submitted that the WhatsApp chats clearly reflected actual production figures. 15. We have considered rival submissions and perused the material available on record. We find that the WhatsApp chats recovered during the course of search, coupled with statements recorded u/s 132(4) of the Act, indicate that there was suppression of production to some extent. Therefore, the contention of the assessee that no addition at all could be made cannot be accepted. However, we also find merit in the contention of the assessee that extrapolation of one month's data to the entire financial year is not justified in absence of corroborative material for the remaining period. The Ld. CIT(A), after considering judicial precedents and factual matrix, restricted the extrapolation only to a period of three months since the employee himself stated that such WhatsApp reporting was being done for the preceding three months only. We further find that the Ld. CIT(A) has taxed only the profit element embedded in such alleged unaccounted sales by estimating profit @10%, which, in our view, is fair and reasonable considering the peculiar facts of the case. 16. The Revenue has not brought any material....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial pertaining to the relevant years was found during the course of search and the additions were based merely on extrapolation and assumptions. 24. We have carefully considered rival submissions and perused the material available on record. We find that the additions made in these years are entirely based on extrapolation of WhatsApp data relating to a limited period falling in FY 2018-19 relevant to AY 2019-20. No incriminating material pertaining to AYs 2015-16 to 2018- 19 was found during the course of search demonstrating suppression of production in those years. It is now well settled by various judicial precedents including the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. that in case of completed/unabated assessments, additions u/s 153A can be made only on the basis of incriminating material found during search. 25. Even otherwise, extrapolation without any corroborative material cannot form sole basis for addition. The Ld. CIT(A) has rightly relied upon various judicial precedents while deleting the additions. Accordingly, we find no infirmity in the orders of the Ld. CIT(A) deleting additions for AYs 2015-16 to 2018-19. The ground....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ployee and his family members and added the same to the income of the assessee u/s 68 r.w.s. 115BBE of the Act. 29. The Ld. AR submitted that no incriminating material whatsoever pertaining to the said loans was found and seized during the course of the search at the premises of the assessee. The very source of the AO's information about the loans was, by his own admission, the balance sheet of the assessee firm i.e., the regularly maintained and audited books of account, which were on record of the Department long before the search. It was further submitted that the assessee had, at the assessment stage, furnished qua each of the three lenders (i) loan confirmation, (ii) PAN, (iii) Aadhaar, (iv) ITRs of the lenders, (v) bank statements evidencing the receipt of the loan through banking channels, and (vi) ledger accounts; that interest was credited at the agreed rate, TDS was duly deducted and deposited and the interest was actually paid through banking channels in F.Y. 2018-19; that the loans stood repaid through account-payee cheques in subsequent assessment years; and that the statement under Section 132(4) of Shri Kalpesh J. Sangani himself confirmed giving of the loan a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ect of the principal lender Shri Kalpesh J. Sangani, his statement recorded under Section 132(4) (Question Nos. 23 and 24) on record itself confirms the advancing of the loan and the source thereof out of his business income and savings. Interest at the agreed rate stood credited to the lenders accounts, TDS was deducted and deposited in the Government account, and interest payments were actually made through banking channels in F.Y. 2018-19. In our considered view, the assessee has, by furnishing the said evidence, discharged the primary onus cast upon it by Section 68 of the Act. Once the primary onus stood discharged, it was incumbent upon the AO to bring on record independent corroborative material to disprove the same. The Assessing Officer has not pointed out any flaw in the loan confirmations, PAN, ITR, ledger or bank statements of the lenders; and he has not brought on record any document demonstrating that the funds remitted by the lenders represented the assessee's own unaccounted income routed back. It is common ground on the record that the loans of Rs. 38,00,000/- in question stand repaid by the assessee to the very same lenders through account-payee cheques in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and that, on the said premise, the AO treated the said amount as the assessee's unexplained investment in the hands of the assessee firm "M/s. Shreenathji Extrusion" under Section 69 of the Act. 39. The Ld. AR submitted that (i) the said Tally back-up was admittedly not found from the premises of the assessee; it was extracted from a digital back-up impounded at the premises of M/s. Shreeji Enterprise during a survey under Section 133A and therefore could not constitute incriminating material qua the assessee for the purpose of Section 153A; (ii) the ledger image as per the show cause notice itself bore the name "SHREE NATHA EXTRUSION" and not "Shreenathji Extrusion" i.e., it was not even a ledger in the name of the assessee firm; (iii) the entries reflected in the said ledger image have no corroboration whatsoever in the regular books of the assessee, the books of the said M/s. Balkrishana Metal as filed before the Department, or in the bank statements; (iv) the actual entry of Rs. 10,50,000/- on 26.12.2016 in the books of the assessee with M/s. Balkrishana Metal is, in fact, an inward receipt through banking channel/RTGS being an advance against subsequent sales effected ....