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2022 (2) TMI 584 - AT - Income Tax
Assessment us 153A - Addition of cash credits u/s 68 - Unsecured Loans and Disallowance of Interest Paid thereon u/s. 69C - assessment pursuant to search operations carried out u/s. 132 - HELD THAT:- As in response to the return of income furnished by the assessee u/s. 139(1) of the Act, no notice u/s. 143(2) of the Act was issued in the case of the appellant and therefore, the income so shown in the return u/s. 139(1) had attained finality prior to the date of the search. Thus, we find that the impugned addition on account of unsecured loans and interest payments thereon have been made by the AO in a completed assessment year i.e. A.Y. 2016-17 in respect whereof the time limit for issuance of notice under s.143(2) of the Act had already got expired and as such, no assessment proceedings were pending on the date of search. In such eventuality, the A.Y. 2016-17 cannot be considered as an abated assessment year. We also note that Ld.AO, while making the impugned additions, has also referred to some statements of Mr Mukesh Jhanwar and Mr. H.P. Agrawal recorded during the course of search but same were subsequently retracted during the course of the assessment proceedings and thus the same cannot be equated to incriminating material
No addition could have been made by the AO in the assessee’s income without having recourse to any incriminating material. Accordingly, we are inclined to delete the additions.
Addition u/s 68 - We are of the considered opinion that the assessee could successfully establish the identity of all the loan creditor companies, the genuineness of the loan transactions carried out with such companies, and as also, the creditworthiness of such loan creditor companies beyond all doubts, by furnishing all the necessary documentary evidences. Further, it is also an undisputed fact that the AO, except relying upon the retracted statements and some list of so-called shell companies, has not brought any positive material on record to discredit the explanation and various documentary evidences furnished by the assessee. In such eventuality, in our view, the ld. CIT(A) was fully justified in deleting the additions
Out of Books Cash Sales u/s. 69A - HELD THAT:- We find that the assessee has raised the Ground against the action of the ld. CIT(A) in not deleting the addition made by the AO u/s. 69A of the Act despite giving a specific finding that the AO was not justified in invoking the provisions of s.69A of the Act in its case as the addition was related to the finding of some suppressed sales in books of account and not related to any unaccounted money, bullion, jewellery or valuable article or thing. We do not find merit in this contention of the assessee and instead, we are in full agreement with the finding given by the ld. CIT(A) in his Order that mere mentioning of a wrong section by the AO would not ipso facto render the entire addition as illegal especially in a circumstance that such an addition has been made by the AO on the basis of some incriminating material. In such circumstances, we are not inclined to allow this ground of the assessee.
Trading additions in its income without first rejecting the books of account by invoking the provisions of s.145(3) - HELD THAT:- These grounds of the assessee have no merit for the reason that the AO before making the impugned additions, had issued a specific show-cause notice to the assessee requiring it to make its explanation on the subject issue. The AO, after taking due consideration of the reply of the assessee, has made the impugned additions on the subject issue. Thus, in such circumstances, merely because the AO has not quoted the specific section for making the subject additions in the assessee’s income, the entire addition cannot be regarded as illegal. Thus, in our opinion, the ld. CIT(A) has rightly dismissed this ground of the assessee.
Net profit estimation - trading additions in its income without first rejecting the books of account by invoking the provisions of s.145(3) - HELD THAT:- We modify the orders of both the lower authorities and direct the Assessing Officer to work out profit of undisclosed sales transactions from trading business, aggregating to ₹ 3,55,27,000/- and ₹ 2,56,52,000/- respectively for A.Y. 2016-17 and A.Y. 2017-18, by applying a net profit rate of 3.5% instead of the net profit rate estimated by the ld. CIT(A) at 15%.
Cash sales to retailers - HELD THAT:- We find that the AO, during the course of the assessment proceedings, had required the assessee company to furnish its explanation on such seized cash vouchers and in respose the assessee company furnished a statement before the AO containing the details of vouchers seized and corresponding recording thereof on various dates in the regular books of account of the assessee. Before the ld. CIT(A) as well as before us, the assessee company has demonstrated that the entire seized cash vouchers were duly recorded in the regular books of account of the assessee for the year under consideration and therefore, there was no case of suppression of sales on this count. In our view, merely because the sales were made in cash, no adverse cognizance can be made if such sales have been found duly recorded in the regular books of account of an assessee. In such circumstances, we do not find any reason to interfere with the action of the ld. CIT(A) in deleting the entire addition
Unaccounted Cash Receipt from Syndicate - AO, while making the subject addition, has invoked the provisions of s. 69A - HELD THAT:- We find that the assessee has raised the Ground for A.Y. 2017-18 against the action of the ld. CIT(A) in not quashing the addition made by the AO u/s. 69A of the Act merely by holding that quoting of wrong section would not make the entire addition as non-genuine. We do not find merit in this contention of the assessee and instead, we are in full agreement with the finding given by the ld. CIT(A) in his Order that mere mentioning of a wrong section by the AO would not ipso facto render the entire addition as illegal especially in a circumstance that such an addition has been made by the AO on the basis of some incriminating material. In such circumstances, we are not inclined to allow this ground of the assessee.
Profit of undisclosed sales transactions - Keeping in view the totality of facts and circumstances of the case, we modify the orders of both the lower authorities and direct the Assessing Officer to work out profit of undisclosed sales transactions aggregating to ₹ 30,00,000/- by applying a net profit rate of 3.5% instead of the net profit rate estimated by the ld. CIT(A) at 15%.
Hawala Transaction u/s. 69A - HELD THAT:- We find merit in the contentions of assessee that mere finding of the messages in the personal mobile of an employee of the company regarding some alleged hawala transactions without bringing on record any corroborative material to establish such transactions cannot lead to any concrete conclusion against the assessee that it had carried out such hawala transactions - As against such alleged hawala transactions, no fresh unsecured loans have been found credited in the books of account of the assessee company for the subject assessment years. We also find that no such document or material was found or seized during the course of the search pertaining to the earlier years from which it could have been inferred that the assessee company was involved in such scrupulous activities. We also note that the AO has not conducted any independent enquiry to unearth and correlate the contents of the mobile messages with the financial affairs of the assessee company. In such circumstances, no adverse inference could have been drawn by the lower authorities against the assessee company. We are, therefore, of the view that the entire additions deserve to be deleted
Applicability of Section 115BBE in respect of additions made in A.Y. 2017-18 and A.Y. 2018-19 - HELD THAT:- In view of the above categorical findings of the ld. CIT(A) and our examination of the fact that additions confirmed by us in the hands of assessee are arising out of the business carried out and do not fall under any of the provisions of as referred in section 115BBE of the act .Thus we do not find any merit in the grounds raised by the Revenue.