TaxTMI 
TaxTMI 
2026 (7) TMI 1471
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee is a company, engaged in the business of manufacturing and sale of flexible packaging products. The return of income for the year under appeal was e-filed on 27.12.2023, declaring total income of INR 1,12,12,40,187/- after claiming set off of loss of INR 14,02,69,507/ -. A search and seizure action u/s. 132 was carried out on 21.02.2023 at Uflex-Montage Group of which assessee is one of the member and its business premises as well as manufacturing units spread all over the country were also covered. The AO in its order has discussed in details about the various manufacturing plants situated at Noida, Malanpur, Haridwar, Jammu etc. The AO further discussed the product profile of the assessee and the entire manufacturing process. Thereafter, the AO discussed about the major customers and major suppliers of the assessee and then material found as a result of search comprising of some dairy marked as D-19 to D-28 wherein various details of payments received and made were noted. The AO alleged the same as unrecorded transactions of sales. The relevant extract of pages of such diaries are reproduced in para 14 at pages 37 to 55 of the assessment order and the AO has computed the tot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urnover as well as on undisclosed turnover. Further, though the allegation of the AO that the assessee has paid the commission for obtaining the accommodation entries of sales was confirmed however, by allowing the benefit of telescoping out of the profit estimated separate addition made on account of alleged commission of INR 47.52 crores was deleted and also the addition made towards cash found during the course of search of INR 43.68 Lakhs was deleted by accepting the contention of the assessee. 5. Aggrieved by the said order of Ld.CIT(A), both parties are in appeal before the Tribunal. The assessee has raised following grounds of appeal: 1. "That the Ld. CIT(A) has erred in law and on facts in partly sustaining the addition of Rs. 127,08,44,242/- by applying a gross profit rate of 9.463% as against 3.53% declared by the appellant in its duly maintained books of accounts. 2. That the Ld. CIT(A) has erred in law and on facts in arbitrarily applying a Gross Profit rate of 9.463%, [i.e. [(11.75% (past history) +7.176% (industry average))/2] without considering significant cost inflation, stagnant sale prices, and other relevant business factors, due to which th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roborative material being brought on record. 9. That the Ld. CIT(A) has erred in law and on facts in sustaining the addition by relying upon the alleged modus operandi deposed by Shri Manoj Khandpal, while ignoring the discrepancies in the statement of the authorized officer recorded during the course of search and further denying the appellant the right to cross-examine, thereby violating principles of natural justice and rendering the assessment liable to annulment. 10. That the Ld. CIT(A) has erred in law and on facts in sustaining the addition made on the basis of documents seized during the search is illegal and void ab initio, as the panchnama suffers from serious infirmities - the witnesses thereto were not local inhabitants, no neighbours were made witnesses, and the Authorised Officer failed to issue an order in writing to the persons selected to attend and witness the search - all in clear violation of the CBDT Search and Seizure Manual, 2025; hence, the entire search and consequential assessment stand vitiated. 11. That without prejudice to above grounds of appeal the Ld. CIT(A) has erred in law and on facts in sustaining the addition based upo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an increase in profit margins during the post COVID period relevant to the year under consideration. 6. Whether on the facts and circumstances of the case and in law, the Ld. CIT A has erred in estimating the gross profit of the assessee by mechanically adopting an alleged industry average of 7.167 percent, without appreciating the specific facts of the assessee's case, without independent verification, analysis, OR application of mind and while ignoring the post COVID recovery that benefited the entire sector and the anomalous decline in the assessee's gross profit during the year under consideration. 7. Whether on the facts and circumstances of the case and in law, the Ld. CIT A has erred in deleting the addition of Rs. 47.52 crores, made on account of commission allegedly paid on sales through dummy traders OR entities, despite having rejected the assessee's explanation regarding such expenditure, thereby clearly attracting the provisions of section 69C of the Income tax Act, 1961, which were rightly invoked by the Assessing Officer. 8. Whether on the facts and circumstances of the case and in law, the Ld. CIT A has erred in deleting the addition of Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Ld. AR submits that Ld. CIT(A) has ignored the fact that during the year under appeal, cost of raw material was increased by 38.62%. Further the turnover has already been increased and in support of this contention ld. AR drew our attention to the chart reproduced at page 18 of the order of Ld. CIT(A) according to which main reasons for fall in the G.P. rate to 3.536% was explained. Ld. AR submits that application of he G.P. rate of 9.463 % on declared turnover is very high and submits that in the immediately preceding year, the Co-ordinate Bench of the Tribunal in assessee's own case has applied G.P. rate @ 6% by taking industrial average of the said year as the basis. Ld. AR further submits that during the year under appeal, there was no discrepancy noted by the survey team in respect to the inventory records maintained. AS per ld. AR the ld. CIT(A) has wrongly computed the industrial average GP at 7.176%. For this, Ld. AR drew our attention to page 73 of the appellate order wherein assessee has computed the average Industrial G.P. by taking average of Seven companies engaged in the similar line of trade. However, Ld.CIT(A) has excluded Three companies having substantially ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TAT applied the industry average GP rate of 6.96% for the relevant AY 2022-23. Therefore, it is respectfully submitted that the same industry standard GP rate should be applied in the present case, as the facts are identical. iii. No discrepancy in Inventory noticed by search team Furthermore, the CIT(A) erred in failing to appreciate that no discrepancies were found in the inventory during the search concerning the stock inventoried by the Investigation Wing. Both the AO and CIT(A) failed to recognize that each assessment year is independent, and therefore, the average GP rate of prior years cannot be applied to the year under consideration, as demonstrated by the appellant. Additionally, this is not a case where the decline in GP is limited to the appellant; the industry itself has also experienced a fall in GP, which has been duly demonstrated. Therefore, at most, the GP of the industry should be applied. The reasons for fall in GP rates as compared to last years has duly been explained before CIT(A) and the summary of the same is as under: a. Increase in foreign currency rate ((Refer Pg 72 of CIT(A) order) b. Increase in cost of raw material ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... finding unsustainable in law. iii. The CIT(A) has failed to appreciate that even if these three companies were taken into account, there was no impact on the assessment for the year 2022-23. Furthermore, the CIT(A) did not identify any discrepancies in the three companies' samples that the assessee relied upon, particularly in terms of their alignment with the same line of business. Given that all the sample companies i.e. 7 are in the same line of business, there was no valid reason for the CIT(A) to reject them. No plausible explanation was provided for not accepting the sample, especially when it is common practice to consider the sample as a whole when the companies are engaged in the same line of business. iv. The CIT(A) erred in selectively choosing the sample without considering the broader implications. It is not permissible to restrict the sample for determining market trends to only five companies, while excluding others that are equally relevant. This approach fails to provide a fair and comprehensive analysis of the market trends. c) Reply to Ground no. 3 and 6 raised by department that no independent inquiry conducted by CIT(A). ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a) HIGH COURT OF PUNJAB AND HARYANA Commissioner of Income-tax v. Sandeep Bus Service (P.) Ltd.* (Refer Page No. 54-55 OF Case law PB) vi. [2023] 149 taxmann.com 224 (Gujarat) HIGH COURT OF GUJARAT Principal Commissioner of Income-tax v. Kandla Steel (P.) Ltd.* (Refer Page No. 47-49 OF Case law PB) vii. [2015] 59 taxmann.com 293 (Rajasthan) HIGH COURT OF RAJASTHAN Commissioner of Income-tax v. Gupta, K. N. Construction Co.* (Refer Page No. 73-77 OF Case law PB) viii. [2014] 41 taxmann.com 300 (Allahabad) HIGH COURT OF ALLAHABAD Commissioner of Income-tax (Central), Kanpur v. Carpet Palace*(Refer Page No. 56-58 OF Case law PB) ix. ([2015] 56 taxmann.com 193 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'C' Deputy Commissioner of Income-tax, C.C. XIII, Kolkata v. Anubhav Infrastructure Ltd. (Refer Page No. 64-68 OF Case law PB) x. [2015] 58 taxmann.com 322 (Raipur-Trib) IN THE ITAT RAIPUR BENCH Amit Agarwal v. Income-tax Officer (Refer Page No. 69-72 OF Case law PB) xi. [2014] 43 taxmann.com 246 (Madras) HIGH COURT OF MADRAS G.V.D.I. & Co. v. Deputy Commissioner of Income-tax, Special Range, Coimbatore*(Refer Page No. 59-63 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for AY 2023- 24 is due to these factors and cannot be attributed to post- Covid effects 9. On the other hand, Ld.CIT DR for the Revenue submits that AO has applied profit rate @ 18% after considering the fact that in immediately preceding year, the assessee has declared G.P. rate @ 16.26%. Ld. CIT DR further submits that assessee has provided industrial G.P. rate where the companies taken are not comparable and therefore, as per Ld. CIT DR, if major companies manufacturing these products are taken into consideration the average G.P. rate comes to 25.53% as against 18% applied by the AO and 9.463 % by Ld. CIT(A). He thus prayed for restoration of application of GP rate of 18%. Ld. CIT DR further filed a detailed written submission which reads as under :- Factual Report in the matter of departmental appeal in the case of Montage Enterprises Pvt. Ltd., (PAN: AACCM8173H) in ITA No. 1820/Del/2026 for the AY 2023-24 In compliance with the directions issued for furnishing a self-contained factual report in the above-mentioned case, the following submissions are made based on the records available and findings during the course of assessment proceedings: 1. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h and prevailing industry conditions. 4. However, in the appellate order, the Ld. CIT(A) restricted the addition significantly by accepting the contention of the assessee that a larger portion of sales amounting to Rs. 1,827 crores had been routed through intermediary entities. It is observed that such acceptance has been made without conducting any independent enquiry or verification. No such claim was made by the assessee during the assessment proceedings, nor is there any corroboration from the seized material or findings of the Investigation Wing. The seized notepads clearly indicate routing of only Rs. 1,128 crores through traders. The excess amount claimed by the assessee is not supported by any documentary evidence on record. Further, the appellate order relies on the sales ledger maintained by the assessee for such determination, despite the fact that the books of account have been rejected and held to be unreliable. In contrast, the assessment order is based on independent evidence in the form of bank and RTGS entries. The appellate order also does not reflect proper consideration of the indicators identified during investigation for recognizing dummy entities, su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and Industrial Application 5 Sati Poyplast Ltd 6.37% Rs. 190.92 Flexible Packaging Material Average 7.176% In order to demonstrate this aspect, an illustration is set out hereunder: SI. No. Name of the entities Turnover GP ratio Nature of Business 1. M/s Uflex Ltd. 5717.7| crores 25.83% Flexible packaging 2. M/s Jindal Poly Films 5942 crores 29.9% Flexible packaging 3. M/s Cosmo Films 3,038 crores 18.8% Flexible packaging 4. M/s TCPL. Packaging 1077.28 crores 33.26% Flexible packaging 5. M/s Amcor Flexibles India Pvt. Ltd. 1138.36 crores 19.87% Flexible packaging Average 25.53% 10. In the re-joinder, Ld.AR filed a submission wherein it is stated that fresh companies selected by the AO for computing the average G.P. rate @ 25.53% is incorrect as all these entities are multi-national and listed entities. Moreover, they are directly importing the raw material whereas the assessee has purchased the raw material the raw material locally from 06 parties. Therefore, the results cannot be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w materials, predominantly from Uflex Limited. Consequently, a substantial portion of the profit margins stands absorbed at the level of Uflex Limited itself, rendering any comparison with such entities inappropriate and untenable. At the outset, it is further submitted that M/s Cosmo Films Limited, as relied upon by the Ld. AO, is not even engaged in the same line of business as that of the appellant. Even otherwise, the remaining entities are also not comparable for the reasons elaborated in the subsequent paragraphs. Therefore, comparison with such entities is fundamentally flawed. 2. Multinational and Listed Entities - Not Comparable It is respectfully submitted that the entities relied upon by the Ld. AO are large, multinational and listed companies having extensive global operations, diversified revenue streams and significant economies of scale. In contrast, the appellant is a purely domestic entity, operating solely within India and having no subsidiaries or business presence outside India. Accordingly, such entities cannot be regarded as valid comparables. It is further submitted that all the companies selected by the Ld. AO have substantial presence outs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dependence on external suppliers for raw materials. Accordingly, there exists a fundamental and material difference in business segments, operational structure and margin drivers, and therefore, the GP margins of such entities cannot be considered as representative industry standards for the appellant. 4. Incorrect Reliance on GP Figures Without prejudice, it is submitted that even the GP rates adopted in the report are not reliable, as the same suffer from apparent computational errors. The Ld. AO has failed to consider the correct turnover and relevant expenses while determining the GP, resulting in an incorrect computation. That the Ld. AO has erred both on facts and in law in inadvertently considering the turnover and corresponding expenses pertaining to the preceding year instead of the year under consideration, and has further erred in not reducing the employee expenses while computing the Gross Profit. Such erroneous calculation itself renders the GP rates adopted by the Ld. AO unreliable and unsustainable. Particulars UFLEX JINDAL POLY TCPL PACK COSMO FILMS AMCOR Revenue from sales 6,77,889 2,48,132 1,43,185 2,74,173 1,3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lly classified based on thickness into thin films (below 50 microns) and thick films (50-350 microns), depending on their end-use applications. In recent years, intermediate thickness films (8-150 microns) have also emerged. b. Nature of Business - Entities Relied Upon by AO Company Name Nature Products Manufactured M/s Uflex Limited Integrated Manufacturer Polyester films (BOPET, BOPP, CPP, Alox, PCR-grade, Metalize); Flexible packaging (pouches, tubes, bags); Chemicals (inks, adhesives, coatings); Aseptic packaging (Tetra pack); Holograms; Printing cylinders; Packaging & allied machinery M/s Cosmo Films Limited Not involved in flexi packaging business Polyester films (BOPET, BOPP, CPP, Metalize); Rigid & medicine sheets; Injection moulded& thermoformed containers; Chemicals; Synthetic paper; PET-G M/s TCPL Packaging Limited Integrated Manufacturer Folding cartons; Specialty/ gift packaging; Food & pharma packaging; Flexible packaging (laminates, shrink sleeves, pouches); Rigid boxes M/s Jindal Poly Films Limited Not involved in flexi packaging business BOPET & BOPP films; Metallized & coated films; CPP films; Thermal films; No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....chemicals, machinery, and other ancillary activities, which significantly distort the GP margins and make comparison inappropriate. (vi) Geographic and Risk Differences The comparable entities have global operations and exposure to international markets, currency fluctuations, and diversified risks, whereas the appellant operates solely in the domestic market. The same has been discussed earlier. 7. Conclusion In view of the above, it is evident that the entities relied upon by the Ld. AO are functionally, structurally, and economically incomparable to the appellant. The adoption of their GP rates as industry benchmarks is therefore arbitrary, unjustified, and contrary to settled principles of comparability. Accordingly, the GP rates derived from such entities cannot be applied to the appellant's case, and the comparison so made deserves to be rejected in toto." 11. With regard to the computation of undisclosed sales as found noted in the seized diaries, ld. AR submits that based on the diaries found and seized marked as Annexure D-19 to D-39, total receipts of INR 1827.00 crores were found noted out of which the AO has reduced the RTGS en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....28 crores has not been reduced by the Ld.CIT(A). Ld.AR submits that credit of the same should also be allowed and after reducing all the three claims, the net figure comes to INR 27.90 crores which can be taken as undisclosed sales on which Industry GP rate should be applied. 15. Ld.AR filed a detailed written submission which reads as under :- a) It was noticed that, according to the seized records D-19 to D-39, there was a sale of Rs. 1,827 crores, out of which Rs. 1,499 crores sales were made to the alleged traders as per CIT(A). Consequently, the CIT(A) calculated the undisclosed sales at approximately Rs. 328 crores i.e. (1827 cr.- 1499 cr.). In providing this benefit, the CIT(A) observed that the AO had only allowed the benefit of the RTGS amount, whereas what should have been allowed was the sales amount. Therefore, the CIT(A), instead of granting the benefit of Rs. 1,188 crores, increased it to Rs. 1499 crores. The calculation made by the CIT(A) is incorrect for several reasons. As per AO Sales as per Annexures D-19 to D-39 RTGS received from the traders Undisclosed sales as per AO GP rate as per AO Addition made 1827 cr. 1188 cr. 639 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt the claim. (Refer page 66 of CIT(A) order). These observations of the CIT(A) are entirely erroneous and misconceived, especially considering the fact that the material clearly explains these as contra entries. This has been demonstrated through a table disclosure at page no. 27, 37, 40 and 42 to 45 of PB accompanied with the seized annexure alongside. Therefore, there was no need to provide additional documentary evidence. When relying on this material, it should be considered as a whole, where for every credit entry, there is a corresponding debit entry. The CIT(A) should have given the benefit of these contra entries. iii. In this regard reliance is being placed upon following case laws :- • [2012] 26 taxmann.com 244 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. Indeo Airways (P.) Ltd. (Refer page no. 612-619 of the case law PB). • Rashmi Mohan Kirpalani v. Commissioner of Income Tax (Appeal) [NFAC], Ward 42(1)(4), Mumbai, ITA No. 5364/Mum/2024, Assessment Year: 2017-18 (Refer page no. 286-292 of the case law PB). • Shri Shiv Shankar Sharma v. Deputy Commissioner of Income Tax, Central Circle 4(3), Mumbai, ITA Nos. 26....
X X X X Extracts X X X X
X X X X Extracts X X X X
....errors cannot serve as a valid basis for making an addition. e) Explanation regarding consideration of sales for whole FY and not upto search date i. The CIT(A) reduced the sales made to traders in the regular books of accounts up to the date of the search, i.e., Rs. 1,499 crores. The AO alleged that certain entries were recorded in the seized notepad, and amounts were received in cash. Additionally, it was pointed out that the appellant used to book sales in the regular books under the name of traders by receiving payments through RTGS. While there is no dispute that the sales to traders, as per the department, were considered bogus, the only difference lies in the appellant's position that sales to traders should be considered up to 31.03.23, instead of up to the search date of 21.02.23. It is a matter of record that once the books of accounts are rejected and it is alleged that the sales to these traders are questionable, the entire sales made to those traders should be considered while calculating the undisclosed sales. ii. Considering the facts and circumstances of the case, it is evident that the AO, and subsequently the CIT(A), should have give....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 1188 cr. recorded RTGS) after which the GP rate of 18% should be applied, resulting in an addition of Rs. 115 crores. We have already demonstrated and explained above that the CIT(A) correctly provided the benefit of sales made to traders and not just RTGS. As per the CIT (A), the sales made to these traders amounted to Rs. 1,499 crores, and we have submitted that this should be considered as Rs. 1,627 crores. Therefore, according to the CIT(A), the undisclosed sales should be restricted to Rs. 328 crores, as opposed to Rs. 639 crores computed by the AO. We have already provided the detailed workings above and now summarize that, after considering all effects, the undisclosed sales amount to Rs. 27.90 crores, on which the industry GP rate of 3.85% should be applied. The summary of the same is as under :- Particulars Notation Amount Total cash receipts during the year as per notepads A 1827,44,58,759 Less :- Sales to traders up to 31.3.23 B 1627,75,44,215 Less :- Contra Entries C 84,00,95,900 Less :- Totaling errors D 87,77,47,030 Net E=A-B-Q-D 27,90,71,614 Considering the facts and circumstances of the case, it is hum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(pages 122-123) in the lower appellate discussion to arrive at the "mean" profit rate of 9.40% i.e. 11.84% + 6.96%+ 2, which is challenged by both the parties. That being the case, the assessee takes us to case law CIT Vs. K.Y. Pilliah & Sons (1967) 63 ITR 411 (SC), CIT Vs. Surjeet Singh Mahesh Kumar (1994) 210 ITR 83 (Del.), Bimal Kumar Anant Kumar Vs. CIT (2007) 159 TAXMAN 402 (All.), Salem Steel Co. Vs. CIT (2010) 322 ITR 349 (Mad.), Telelinks & Ors. Vs. CIT (2015) 377 ITR 158 (P&H), quoted in the lower appellate discussion at page 125 onwards that even such an estimation is not to be an unbridled and unguided one but to be based on the very sector's book results ITA Nos. 5458/Del/2025 & 5906/Del/2025 8 | P a g e at this relevant point of time. We thus reject the Revenue's vehement contentions seeking to assess the assessee @ 18% and direct the learned Assessing Officer to estimate it's GP @ 6.96% going by the segmental trends only. Ordered accordingly. All other remaining issues between the parties stand rendered academic in forgoing terms." 19. It is observed that in preceding year, Ld. CIT(A) has applied 9.40 mean profit rate of average 10 years G.P. o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the year and one other company was taken which was included by the ld. CIT(A) in the present year by excluding three new companies taken by the assessee. As per assessee, the average industrial G.P. rate comes to 3.536% as against the average rate of 7.176% computed by ld. CIT(A). Looking to the overall facts and further looking to the fact that both the assessee and ld. CIT(A) has not provided any valid basis for excluding the companies. Therefore, in the fitness of things and it would be fair and reasonable to take all the Eight companies taken by the assessee and ld. CIT(A) for computing the Industrial average GP of the year under appeal. Accordingly, by taking the results of all the eight companies into consideration, the average industrial G.P. rate comes to 4.315%. Thus, by following the order of Co-ordinate bench of Tribunal in assessee's own case as stated above in immediately preceding year, the industrial G.P. rate @ 4.315% is directed to be applied as against the G.P. rate of 18% applied by AO and 9.463% applied by Ld.CIT(A). Accordingly, the AO is directed to re-compute the income of the assessee on the declared turnover of INR 2362.02 crores by applying G.P. rat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tra-entries as claimed by the assessee of INR 84 crores from the gross amount of cash receipts. 27. Second issue with respect to the totaling errors for which the assessee has drew our attention to pages 154 to 166 of the Paper Book and filed certain copies of the diaries. On careful consideration of the facts, the claim of the assessee appears to be correct however, since complete set of diaries containing the totaling error were not placed before us, we are unable to verify the same. Thus, the AO is directed to verify the totaling errors as claimed by the assessee from the chart placed at pages 154 to 156 of PB and allowed the deduction for the totaling errors after verification. 28. Third issue is regarding the claim of the assessee of allowing further deduction of sale of INR 128.00 crores made to traders for the remaining period from 22.02.2023 to 31.03.2023. We observed that the diaries contained the transaction upto date of search i.e. 22.02.2023 and ld. CIT(A) has already allowed the deduction of the sales made to traders upto date of INR 1499.00 crores which in our opinion is correct. Therefore, we are of the view that no further deduction could be allowed to the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed between 2% to 4%, and therefore, in the absence of any corroborative material evidence, the higher rate of 4% cannot be sustained. As per AR, the basis of the addition rests solely on the oral statement of Shri Manoj Kandpal, which remains unsubstantiated by any documentary evidence. The contentions of the appellant are not acceptable as the payment of commission has been acknowledged by Sh. Manoj Kandpal on the basis of seized documents, wherein, the cash was routed through dummy operators to provide RTGS entries. From the perusal of the assessment order, it is seen that the AO has himself stated in the order that the sales shown to the so-called shell entities were bogus and that the actual sales were made to other undisclosed entities. Also, as per AR, it is also pertinent to note that the assessee has already been subjected to an addition on account of GP which inherently absorbs any unaccounted expenditure. Therefore, as per AR, the funds allegedly used for commission payments were in fact available with the assessee, and hence, there remains no basis for a separate addition of Rs. 47.52 crores towards commission. It is observed that after application of enhanced G....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the same income twice - once on earning and then on utilizing/ expending it. The assessee is also entitled to raise an alternative plea of non-taxability of certain income on the ground of telescoping for the first time even before the First Appellate Authority. In the case of Addl. CIT v. Dharamdas Agarwal (1983) 144 ITR 143 (MP)], it was held that "when cash credits were treated as income from undisclosed sources, the assessee can take an alternative contention before the Appellate Assistant Commissioner that the cash credits were out of undisclosed income taxed in earlier years and the assessee is entitled to raise such alternative plea before the Appellate Assistant Commissioner for the first time". On the issue of telescoping, the Hon'ble Supreme Court of India in the case of Anantharam Veerasinghaiah & Co. vs. Commissioner of Income-tax reported at [1980] 123 ITR 457 (SC) has held as under: "The taxing authority in each case must consider whether unexplained cash deficits and cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that ve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rved that based on the statement of Shri Manoj Kandpal, Manager of the assessee company, without any corroborative material brought on record by making independent inquiry from any of the trader with respect to such payment, the AO alleged that the sales to traders were made to obtain the accommodation entry and no actual transfer of goods has taken place. It is further observed that the addition has been made relying upon the statement of an employee and those statements were never re-affirmed by the Directors or principal officer of the assessee company. It is further observed that the AO has applied 4% rate of commission on the entire RTGS payment however, the said RTGS payments have been replaced by Ld.CIT(A) as the sales made to the traders as recorded in the books of accounts. It is also a fact that the action of Ld. CIT(A) in substituting the gross sale is uphold by us in this order herein above. Once we hold that the undisclosed sales are to be reduced by the amount of sales to traders which were recorded in the books of accounts, the allegation of obtaining accommodated entries in the shape of RTGS has no legs to stand. In view of these facts, we are of the opinion that no....