TaxTMI 
TaxTMI 
2026 (9) TMI 759
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....,29,51,450/- under normal provisions of the Act and book profit of Rs. 124,32,14,535/- u/s 115JB of the Act. 3. A search and seizure u/s 132 of the Act conducted in the premises of Chettinad Group on 09.12.2020 and several documents were seized, pursuant to which assessment proceedings u/s 153C was initiated in the case of appellant company for seven assessment years from AYs 2015-16 to AY 2021-22. The AO, in the course of assessment, referred the case of the assessee for transfer pricing scrutiny to determine the arm's length price in respect of specified domestic transactions reported in Form No.3CEB. It is noted that, the TPO passed the order dated 10.03.2023 u/s 92CA(3) making downward adjustment of Rs. 57,06,468/- in windmill unit. Subsequently, the AO completed the assessment and passed the draft Assessment order u/s 144C r.w.s 92CA(3) of the Act on 30.09.2023 making the following other addition(s) / disallowance(s) and determined the total income at Rs. 93,51,49,841/- under normal provisions and book profit of Rs. 124,33,03,819/- u/s 115JB of the Act. Aggrieved by the draft assessment order of the AO, the assessee filed objections before the Ld. DRP, who allowed partial r....
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....her, the appellant company has placed its reliance on the CBDT Instruction vide Instruction No. 1/2023 in F.No.279/Misc./M-54/2023-ITJ dated 23.08.2023. 8. The AO/Panel ought to have considered the following judicial pronouncements which supports the appellant's contention as mentioned in the paragraphs supra: a. DCIT vs. U.K.Paints (Overseas) Limited [2023] 294 Taxman 72 (SC)/454 ITR 441 b. PCIT vs King Buildcon P Ltd 456 ITR 770 (SC) c. CIT vs Smt Jayalakshmi Ammal [242 Taxmann 449] [Madras HC] Alleged unaccounted cash sales of molasses 9. The AO/Panel has erred in upholding the additions to the tune of Rs. 55,00,000/- as unaccounted cash sales of molasses made to SKM Animal Feeds and Foods India Pvt Ltd ('SKMAFF") without considering the fact that Appellant Company has entered into all transactions of sale only through proper banking channels and has duly accounted all the sale in its books of accounts. 10. The AO/Panel erred in upholding the addition on account of the same ground to the tune of Rs. 55,00,000 merely based on excel sheets without any corroborative evidence is not tenable. The AO/Panel has ough....
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....stments between opening and closing balance are only on account of fair value change in accordance with Indian Accounting Standards. 18. The Assessing Officer has failed to take into account the recent decisions of Kolkata Tribunal in the case of DCIT vs Century Plyboards (1) Limited [2021] 123 taxmann.com 256, wherein it is held that the interest-free funds of its own available with the assessee in the form of share capital and free reserves were substantially more than the corresponding investments made to earn the interest free income. 19. The Assessing officer has failed to consider that the Appellant Company had not incurred any direct or indirect expenditure in connection with earning exempt income and had not considered the judicial pronouncement of The Hon'ble High Court of Madras in the case of Roca Bathroom Products (P) Ltd PCIT in [2019] 101 taxmann.com 395. 20. The Assessing Officer had erred in not considering the judicial pronouncement in the case of DY CIT vs Subramanya Constructions & Development Co Ltd., [TS-100-ITAT-2015 (BANG) -0] wherein it has been held that disallowance u/s 14A shall not be warranted if the assessee has not incur....
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....e its order dated 21.03.2021. 29. For these and such other grounds that will be adduced at the time of hearing." 5. Ground Nos. 1 is general, doesn't require any adjudication, 6. Ground No. 2 to 8 of the appeal relates to the AO's action of making the addition of Rs. 1,14,70,661/- made on account of cash returned against the rebate of 7.5% allowed in construction bills. The facts relating to this issue are that, the assessee is in the business of manufacturing in the sale of sugar, industrial alcoholic products, granites and cogeneration of power. A search and seizure action u/s 132 of the Act was conducted in the Chettinad Group of cases on 09.12.2020. During the course of search upon Chettinad Group, three diaries vide ANN/CTSPL/SB/B&D/S (1 to 3) and one loose sheet folder vide ANN/CLTSP/SB/LS/S were seized, which according to the Investigation officers, contained evidence for receipt of cash by Chettinad Builders Private Limited (in short 'CBPL') from the assessee. According to the AO of the searched person therefore, the seized material contained information which pertained to the assessee and had a bearing on their total income. After recording his satisfaction,....
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....g to him, the impugned notings which totaled to Rs. 9.06 crores, purportedly received in a single year, could not have been paid by BAET alone, and therefore he inferred that these notings ought to relate to all the projects undertaken by CBPL for the Bannari Group, more particularly the assessee. The AO was of the view that, if the employee(s) had admitted that the rebate given to BAET was not genuine and it was received back in cash, then same modus operandi would have been followed in the construction bills of the assessee as well. The AO referred to an email communication found from the seized electronic data wherein CBPL was requesting for the release of mobilization advances for the work wherein the schedule of quantities of work was provided, in which there was a mention of 7.5% rebate. This email communication, according to the AO, disproved the averment of Smt. V. Valliammai that the rebate of 7.5% was negotiated prior to finalization of construction contract. He thus inferred that the assessee must have also paid back the rebate of 7.5% in cash to CBPL. The AO also discussed the contents of some of the notings found in the impugned seized material, which according to him,....
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....d the order of this Tribunal in assessee's own case for AY 2019-20 & AY 2021-22 (ITA Nos. 3360 & 3361/Chny/2024 order dated 04.12.2025, wherein Tribunal has deleted similar addition based on very same seized material, and hence prayed for deletion of similar additions. 11. Per Contra, the Ld. DR supporting the action of the AO/DRP, submitted that though the employees of Chettinad Group had denied having received any cash payments from the assessee, but in his view, the notings/jottings on the seized material did suggest the receipt of cash from the assessee and not BAET. According to him, once Shri Jayashankar and Smt. Valliammai had admitted to have received cash in lieu of 15% rebate allowed on bills of BAET, then understandably same modus operandi would have been followed in the construction contract of the assessee as well. According to him, the AO had rightly estimated the unaccounted cash payments made by the assessee in light of the impugned seized material and that he should be allowed reasonable degree of latitude for doing so. The Ld. DR thus urged us to not disturb the order of the AO. 12. We have heard both the parties and perused the material placed before us. It....
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....see, was simply based on suspicion and guess work, and such inference was not discernible from these notings. Moreover, the fact that even the Revenue was not able to make up their mind as to whether these notings related to the assessee or BAET and had added the same notings in both their hands, further evidences the ambiguous nature of these impugned notings. Overall therefore, in our considered view, such vague and ambiguous jottings/notings seized from the premises of third party [M/s Chettinad Group] doesn't inspire confidence to justify the impugned addition made in the present case. Therefore, the Ld. CIT(A) after analyzing threadbare the relevant oral/documentary evidences held that the impugned addition made by the AO was without any credible material evidence. And as noted the Ld. CIT(A) had also analyzed the statement(s) of the employees of Chettinad Group who had made these notings or were aware regarding their contents, and found that, none of their answers were clear as to whether the cash notings were in lieu of rebate allowed and whether it was on behalf of the assessee or BAET. The Ld. CIT(A) particularly noted that, none of them had averred that any cash was recei....
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....he business negotiation itself. These statements provide the clarity that the rebate @ 15% was given only with respect to the projects executed by CBPL to BAET/ BITS, which was subsequently received as cash from the FY 2016-17 onwards, whereas the agreed rate of 7.5% of rebate to BASL is given prior to entering into the contract and no cash is received against that rebate as it was not raised in the invoice itself. 5.8 In order to further verify the claim made by Ms. Valliammai, a verification was also carried out on the seized materials which the AO had relied upon in the assessment order. One among them is Sr. No. 7 to 13 of ANN/CLTSPL/SB/B&D/S. I had requested the AO to produce these seized materials and I have personally examined the contents therein. On examination, it was found that Sr. No. 7, 8, 9, 12 & 13 of ANN/CLTSPL/SB/B&D/S are the box files which contain the invoices raised by CBPL in the name of BAET/BITS only. These invoices pertain to the period from 2018 to 2020 and all the invoices invariably have 15% rebate of the total bill value. However, the Sr. No. 10 & 11 contain the invoices raised by CBPL in the name of BASL and none of the invoices has rebate, ei....
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....construction contract with the assessee as well viz., the rebate of 7.5% allowed in the bills was paid back in cash. According to us, such a whimsical assumption made by the AO cannot be countenanced, particularly when in the given facts, the notings/jottings were not forthcoming or corroborated; and even the searched person had denied having any unaccounted cash transactions with the assessee. There is merit in the Ld. AR's contention that, the AO's action of applying theory of extrapolation was based simply on assumption, without bringing on record any corroborative evidence to justify the same. We gainfully refer to the decision of the Hon'ble Bombay High Court in the case of C.J. Shah & Co. (246 ITR 671) wherein it was held that, where material is detected after search and seizure operations are carried out, the AO is required to determine the undisclosed income and in such cases, additions may be based on estimates but in matter of estimation, some amount of latitude is required to be shown to the AO particularly when relevant documents are not forthcoming. However, Hon'ble High Court observed that it does not mean that the AO can arrive at any figure without any b....
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....O for making the impugned addition is verbatim same as in AY 2019-20 (supra). Following our conclusions drawn while deciding ground No.1 to 6 of Revenue's appeal for AY 2019-20, we order deletion of the impugned addition and accordingly allow these grounds of the assessee (Ground No.2 to 8) of assessee's appeal is allowed. 14. Ground Nos. 9 to 15 relates to the addition made by way of unaccounted cash sales of molasses to M/s SKM Animal Feeds and Foods India Pvt Ltd (hereinafter referred to as 'SKMAFF") amounting to Rs. 55,00,000/-. 15. The facts relating to this issue are that, during the course of search conducted at the premises of SKMAFF on 27.10.2021, certain excel sheets ID marked ANN/KK/SFMK/LS/S, Pages 3, 11 & 13 were found which contained notings containing details of purchase orders of molasses from the assessee during FYs 2019-20 to 2021-22 amounting to Rs. 4.80 crores. According to the AO of the searched person ('SKMAFF'), these purchases were made in cash and not accounted in the books of accounts by SKMAFF as well as the appellant. The said amount of Rs. 4.80 crores was spread across several years and the amount relating to the relevant AY 2020-21 was Rs. 2.....
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....-sheet was prepared by a third party and found from the possession of third party, which was neither signed nor acknowledged by the assessee. The appellant had thus challenged the evidentiary value of the disputed loose sheet / excel sheet especially in the absence of any direct corroborative evidence. The Ld. DRP however did not agree with the contentions of the assessee and confirmed the addition made by the AO. Aggrieved by which, the assessee is in appeal before us. 17. Assailing the findings of the lower authorities, the assessee strongly objected to the conclusions drawn by AO on the ground that the editable excel sheet found by the search team from premises of any third party without any signature or acknowledgment of the assessee, does not provide any concrete proof for making the impugned addition. He showed that, the veracity of the entries found in the excel file was never tested by the AO independently before concluding the assessment proceedings and that the additions were solely based on suspicion and thus unjustified. He pointed out that all the transactions made by the assessee with SKMAFF are all accounted; and backed by Purchase Orders, GST invoices, buyer'....
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....king document in as much as it didn't contain any intelligible narration in support of the inference drawn by the Assessing Officer that it reflected unaccounted transactions carried out by that assessee outside the regular books of account. It was held that, when a dumb document, is to be made the basis to fasten tax liability on an assessee, the burden is on the AO to establish with corroborative evidence, that the nature of entries contained therein reflect undisclosed income. The Hon'ble High Court thus held that, in the absence of any material to support the nature and ownership of the entries found in the seized document, no addition is permissible as undisclosed income, by merely arithmetically totalling various figures jotted down on such document. 19. The Co-Ordinate Bench of this Tribunal, [Hyderabad] in the case of Sri Y. Siddaiah Naidu Vs ACIT 2015 (2) TMI 403 -ITAT held that, where from the loose notings, it cannot be deduced whether they are receipt or payments nor it can be concluded whether they are in relation to any particular part transaction, then in such circumstances, no addition can be made on the basis of such document. 20. Similar view is noted to....
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....to believe that these two entries related to the assessee as it also does not contain any attestation from the assessee's side, neither sign nor any seal of the assessee. Also, no other incriminating evidence was found in the course of search conducted upon SKMAFF which would correlate or justify these notings. According to us, the burden lay on the Revenue to provide the details, rebut the claim of the appellant, and link these entries with any unexplained transactions of the appellant along with corroborative evidence, as because these entries were found from third party premises and not that of the assessee. We however observe that the lower authorities failed to do so. On these given facts therefore, we are unable to give any credence to these notings. The contents of this excel sheet, particularly, these two line items are found to be dumb, obscure and non-speaking. Being so, the unreliable seized material relied by the AO for making the impugned addition without out any corroborative material or evidence on record and finding that such document has not materialized into any sales transactions between SKMAFF and the appellant which had not been disclosed in the regular boo....
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....he assessee to make the impugned additions. 7. On the basis of given facts, it could be seen that the whole case of Ld. AO rest on single excel sheet and unsigned receipts as found during the course of search action. However, there is no independent investigation or enquiries carried out by Ld. AO from any of the parties or so-called suppliers. There is nothing on record which establish that Ld. AO issued any notices to any of the suppliers to corroborate the alleged incriminating material. In the absence of any such an exercise, it could not be assumed that the assessee made alleged cash payment to various suppliers. It is trite law that no addition could be made merely on the basis of presumption, conjectures and surmises. 8. Upon perusal of loose sheets as extracted in the assessment order, we find that these papers do not bear signature of any of the parties and the same are merely in the shape of dumb documents only. These documents, on standalone basis, could not establish the factum of alleged cash payment. The assessee, all along, denied having made any cash payments and therefore, the onus was on revenue to controvert the stand taken by the assessee and b....
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....lish that there was a case for passing on the extra consideration, the consideration recorded in the sale deeds could not be ignored and it was for AO to establish that the recorded consideration was not correct. In the absence of signature of the purchaser, the agreement could not be held to be a valid agreement. There should be an offer and acceptance for a valid agreement. While rendering the decision, the bench relied on the decision of Hon'ble A.P. High Court in the case of R. Nalini Devi vs. CIT (ITA No.232 of 2013 dated 10.07.2013). Similar is the decision of Indore Tribunal in DCIT vs. M/s Signature Colonisers, Bhopal (ITA No.218/Ind/2020 & ors. dated 21.12.2021) wherein it was held that the unsigned draft agreement could not be used against the assessee in the absence of any independent cogent evidence. The bench referred to various case laws on the issue and held that additions made on the basis of dumb unsigned documents could not be sustained. The other decision as placed on record lay down similar proposition and support the case of the assessee. ... 14. Finally, on the given facts and circumstances, we are of the considered opinion that the impug....
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....hat, there was no authenticity of the impugned screenshot / excel sheet which does not bear any signature and that there was investigation made by the AO to corroborate the same. It was further observed that the noting did not specifically refer to the assessee and the impugned property. Hence, it was held that the addition was based more on conjectures and surmises instead of concrete evidences. 26. Similarly, we find that the the Co-Ordinate Bench of this Tribunal, [Jaipur] in the case of Anshul Sahai HUF (180 taxmann.com 477) deleted additions made under section 68 attributing unaccounted cash receipts to assessee HUF solely on basis of uncorroborated excel sheets found with third party, without any supporting agreements, acknowledgements or receipts and without evidence linking assessee. The relevant findings, taken note of by us, is as follows:- "12.2-12.3 Vide ground no. 3 the assessee - appellant challenges that Id. CIT(A) has erred in upholding the addition amounting to Rs. 16,21,91,214/- (albeit as part of capital gains) based on the set of facts and circumstances available on record and thereby the same is required to be deleted. The brief facts as emerges fro....
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....he assessee in appeal and that too after the 19 month of the last transaction and in a piece meal. Not only that it is also hard to believe that 4 parties making separate payment on the same day to the assessee on various occasion and observed by the bench on this issue that the same instances are reported at page 4 onward and serially number at 5, 8 19 & 29. This instances itself suggest that preponderance of probability goes in favour of the assessee and the plea of the revenue has no supporting or corroborative found. Be that it may so it is a matter of common sense that the seller would have no right, least the legal right to recover the on-money. This glaring anomaly in the approach of the revenue is without any support of the any alleged agreement or any record of having agreed to such terms and condition as alleged by the revenue. The recipient of the on-money were not confronted to this issue at the time of search or post search proceeding. Before deriving such conclusion neither at the time of search nor in the post search proceeding revenue confronted to the assessee on such allegation. The bench also considered the factual argument of the ld. AR of the assessee that the ....
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....Thus, when the loose sheet is relied upon without any specific evidence suggesting the contention raised the addition does not survive. Record further reveals that there is no satisfaction of the ld. AO that all the requisite steps were taken by him to ensure that the data output of the PEN Drives/Computer records, seized during the search on Gokul Kripa Group were analysed on "as is" basis and there is no risk of it being tempered by anyone. The request of the assessee to cross examine the person who made statement were asked but were also not provided therefore, this action also violates the principles of natural justice as held by the Apex Court in the case of Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC) wherein the court held that ""...not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected". When the assessee taken up all these issues before the ld. CI....
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....ee the same would not constitute adequate evidence to draw any adverse inference against the assessee in the absence of any corroborative evidence as held by Hon'ble Delhi High Court in the case of CIT v. Sant Lal [2020] 118 taxmann.com 432 / 273 Taxman 551 / 423 ITR 1 (Delhi) ). Even the Hon'ble Bombay High Court in the case of Lavanya Land (P) Ltd.(supra), taken a view that that where entire decision is based on huge amounts revealed from seized documents but not supported by any evidence of actual cash passing hands, no addition can be made. Thus, the prime question ultimately remained unanswered that whether the payments noted in the seized material had actually materialized and transfer of money had actually taken place between the concerned parties without any corroborative evidence placed on record and that when the assessee has already executed the sell deed and thereafter the receipt of the money of the property sold cannot be believed without any express evidence placed on record and therefore, we in the absence of evidence merely based on that stand alone excel sheet unable to support the view of the revenue that the assessee Appellant has received any c....
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....hough, Ms. Sandhya Ramachandran denied that Dhaka performance did not materialise, it did happen in February, 2011. Therefore, he held that the facts stated in the incriminating material found during the survey are correlated. Accordingly, he added back 80% of the cash payments mentioned in the loose paper amounting to Rs. 60,00,000 to the income of the assessee. The assessee challenged the addition before the CIT(A). ... 73. We have heard rival submissions and perused the material on record. From the assessment order it is very much clear that during survey on Matrix a loose paper was found containing details of certain transactions both in cheque and in cash. However, when the loose paper was confronted to the Director of M/s. Matrix India Entertainment P. Ltd. during survey, he had categorically stated that it was only in the nature of an offer received from some party but it has not been accepted. Similarly, when such evidence was confronted to Ms. Sandhya Ramachandran she also denied of knowing any such cash transaction and also stated that the event in Dhaka did not materialize through them. Though it may be a fact that the Dhaka event did take place in Febr....
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....lly requested. It was brought to our notice that, the AO had fixed the date for cross-examination on 18.08.2023, which the assessee had attended, but the same was denied by the AO citing 'technical reasons'. Having regard to the foregoing, we thus find force in the Ld. AR's argument that the retracted statement of Mr. K S Gopalakrishnan lacked credence. Also, by not providing the opportunity of cross-examination, in our considered view, the impugned addition stood vitiated in law. For this finding of ours, we rely on the ratio of the decision of the Hon'ble Supreme Court in Andaman Timber Industries v. CCE (62 taxmann.com 3). In the decided case, the addition was made against the assessee (Andaman Timber Industries) by the AO by relying on the statement of two witnesses namely Sri Sreeram Tekriwal and Sri Laxmidas Panchmati. Even though the assessee pleaded for cross-examination cross examination of these two witnesses, the AO did not give opportunity to the assessee and when the action of the AO was confirmed by the appellate authorities, the Hon'ble Supreme Court examined the omission on the part of the AO not providing opportunity to assessee to cross-examine of two witn....
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....action we don't countenance, instead, we find that the issue is squarely covered by the decision of the Special Bench of the Tribunal in the case of ACIT Vs. Vireet Investments (165 ITD 27), wherein the Special Bench has categorically held that provisions of section 14A read with Rule 8D will not apply while computing the book profit u/s. 115JB of the Act, which decision has been upheld by the Hon'ble Bombay High Court. Our view is also endorsed by the decision of Hon'ble Delhi High Court in the case of PCIT vs Bhushan Steel Ltd (ITA No. 593, 594 of 2015) and Hon'ble Karnataka High Court in the case of PCCIT v. JJ Glastronics P Ltd (139 taxmann.com 375), wherein also it was held that disallowance u/s. 14A in terms of Rule 8D shall not be extended to the provision of section 115JB of the Act. Following the decisions (supra), we direct that no adjustment u/s 14A r.w. Rule 8D is to be made u/s. 115JB of the Act and the AO is accordingly, directed to delete this addition made to the book profit. Hence, we allow the issue in favour of the assessee. 32. Ground Nos. 24-28 is against the disallowance of excess depreciation claimed for cogeneration plant amounting to Rs. 31,91,97....
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....higher rate of depreciation of 80% (now 40%, in the relevant AY 2019-20) as claimed by the assessee, by observing as under:- "8.3 The Ld. CIT(A), after considering the manual/literature of all the equipment came to a conclusion that the assets were part and parcel of power generation unit. Each item would not have any function by itself except when it forms part of the whole system. The relevant findings with respect to each of the asset was as under: -- a. Chimney - In a cogeneration plant, the gases produced are first cooled and then excavated through the chimney. This chimney forms an inseparable accessory of a cogeneration plant and hence it is eligible for 80% depreciation. b. Bagasse handling system Bagasse, being the combustible product is used in the cogeneration plant. A bagasse handling system carries the bagasse from the bagasse yard to the furnace by using conveyor belts. It is also a part of the cogeneration system as the core raw material (bagasse) used for the generation of power is carried through this system. Without this system cogeneration system will not operate. Hence this is attributable to 80% depreciation. c. Distribution ....