TMI Blog2022 (2) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness 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. - IT(SS)A Nos. 114 to 116/Ind/2020 And ITA No.67 to 70/Ind/2021 - - - Dated:- 23-12-2021 - Shri Rajpal Yadav Hon'ble Vice President And Shri Manish Borad, Accountant Member For the Revenue : Shri Rajeeb, Jain CIT-DR For the Respondent : S/ Shri Anil Kamal Garg Arpit Gaur, ARs ORDER PER MANISH BORAD: The above captioned appeals at the instance of Assessee and Cross Appeals by Revenue are directed against the order of Ld. Commissioner of Income Tax(Appeals), (in short CIT(A) ), Indore dated 18.09.2020, which are arising out of the order u/s 153A r.w.s. 143(3) of the Income Tax Act 1961(In short the Act ) dated 28.12.2019, framed by ACIT/DCIT-Central-2 Indore. 2. As the issues raised in these appeals are common and relate to same assessee, at the request of all the parties all the appeals were heard together and are being disposed of by this common order for sake of convenience and brevity. Grounds of appeal raised by the Revenue for AY 2015-16 in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of unaccounted sales and instead, confirming an addition to the extent of ₹ 53,29,050/- despite giving a specific finding that the AO was not justified in invoking the provisions of s.69A of the Act in the instant 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. 2(b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming an addition to the extent of ₹ 53,29,050/- out of the total addition of ₹ 3,55,27,000/- made by the AO in the appellant s income on the allegation of unaccounted sales without first rejecting the books of account by invoking the provisions of section 145(3) of the Act. 2(c). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming an addition to the extent of ₹ 53,29,050/- out of the total addition of ₹ 3,55,27,000/- made by the AO in the appellant s income on the allegation of out of books cash and credit sales effected by the appellant during the relevant previous year withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a specific finding that the AO was not justified in invoking the provisions of s.69A of the Act in the instant 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. 1(b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming an addition to the extent of ₹ 38,47,800/- out of the total addition of ₹ 2,56,52,000/- made by the AO in the appellant s income on the allegation of unaccounted sales without first rejecting the books of account by invoking the provisions of section 145(3) of the Act. 1(c). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming an addition to the extent of ₹ 38,47,800/- out of the total addition of ₹ 2,56,52,000/- made by the AO in the appellant s income on the allegation of out of books cash and credit sales effected by the appellant during the relevant previous year without properly considering and appreciating the explanation of the appellant made during the course of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- made by the AO u/s. 69A of the Act on the allegation of unaccounted cash receipts from syndicates merely by holding that quoting of a wrong section would not make the entire addition as nongenuine. 3(b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming in confirming an addition to the extent of ₹ 4,50,000/- out of the total addition of ₹ 30,00,000/- made by the AO in the appellant s income, merely on the basis of seized imaged digital documents without properly considering and appreciating the explanation made by the appellant along with documentary evidences that it had not carried out any transaction of sales with the so called syndicates and had also not received any sum of cash, as alleged. 4. That, the appellant further craves leave to add, alter or amend the foregoing ground of appeal as and when considered necessary. Grounds of appeal raised by the Revenue for AY 2018-19 in ITA No.70/Ind/2021: 1. On the facts and in the circumstances of the case, the Ld. CIT (A) was not justified in law in deleting the addition of ₹ 82,40,976/- in A.Y. 2018-19 made by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary Public. 2. That, the appellant further craves leave to add, alter or amend the foregoing ground of appeal as and when considered necessary. 3. The brief facts of the case as culled out from the records are that the assessee is a closely held public limited company engaged in the business of manufacturing Indian Made Foreign Liquor, Country Liquor, Extra Neutral Alcohol, Rectified Spirit etc. The assessee belongs to Kedia Group of Indore. Search Seizure Operations u/s. 132 of the Income-Tax Act, 1961 (in short The Act ) were carried out on the Kedia Group on 14.11.2017. In pursuance of the Search, notices u/s. 153A of the Act were issued by the AO for the assessment years 2012-13 to 2017-18 and a notice u/s. 143(2) was issued for the A.Y. 2018-19. In response to the notices issued u/s.153A, the assessee furnished its Returns of Total Income for the assessment years under consideration. During the course of the assessment proceedings, the assessee also furnished copies of the Tax Audit Reports u/s..44AB of the Act along with its audited financial statements for the previous years relevant to the assessment years under consideration. Subsequently, notices under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 68, by invoking the provisions of s.69C of the Act. On the other hand assessee has raised its Ground No. 1 for the A.Y. 2016-17 challenging the action of the ld. CIT(A) in not granting relief on legal ground raised before him to the effect that addition could not have been made without having recourse to any incriminating material. 7. A summary of the year-wise quantum of additions before us on the subject issue along with the respective grounds raised from both sides, as furnished by the assessee, is given as under: ISSUE- I: Unexplained Cash Credits u/s. 68 on account of Unsecured Loans and Disallowance of Interest Paid thereon u/s. 69C Assessment Year Assessee Department TOTAL Ground No. Amount Ground No. Unsecured Loans Ground No. Disallowance of Interest 2015-16 - - 1 6,00,00,000 2 18,07,498 6,18,07,498 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it before the AO.The ld. CIT(A), accepting the contentions of the assessee, the facts and circumstances of the case and as also, the various documentary evidences placed on record by the assessee company, granted full relief to the assessee company and deleted the entire additions so made by the AO on the subject issue. For the A.Ys. 2015-16 2016-17, the assessee had also raised legal grounds before the ld. CIT(A) to the effect that the additions on the subject issue were made by the AO without having recourse to any incriminating material. The ld. CIT(A), while giving his findings for the A.Y. 2015-16, has granted relief to the assessee on the aforesaid legal ground. However, for the A.Y. 2016-17, the ld. CIT(A) has dismissed such ground of the assessee. 10. Against the legal ground confirmed by the Ld. CIT(A), the assessee is in appeal whereas against the relief granted, the Revenue is in appeal before us. 11. Before us, learned Department Representative [In short Ld CIT(DR) ] vehemently argued supporting the observations of the AO on this issue and in particular pointed out that the fact of accepting bogus loans by the assessee is evident from one mobile message, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oose papers are duly recorded in the regular books of account of the assessee company and the same are not in the nature of incriminating documents. It contain details of amount of loan, period of interest, amount of interest, TDS, etc. Further, the Audit Reports cannot be said to be incriminating in the nature. Para (9.3) at page no. 26 opening line referring page no. 47 to 63 of GGL-01 (seized document) Common Additional Paper Book Page No. 771 to 787 The ld. CIT(A) at para (3.3.7) on page no. 87 of his Order has given a categorical finding to this effect that these loose papers cannot be regarded as incriminating in the nature. 3 Statements of third parties cannot be regarded as incriminating material Ruling of the Hon ble Supreme Court In the present case, the AO has placed complete reliance on the statements of Shri Mukesh Jhawar and Mr. H.P. Agrawal for making the additions. First of all, such statements were subsequently retracted and secondly, the reltracted statements cannot be equated with the incriminating material as held by the Hon ble Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All the lender companies were having ample of funds as per their respective Audited Balance Sheets. Further, the AO has also found that investment by such companies are duly getting reflected in their Balance Sheets. The AO has also admitted the sources of making investments by such lender companies. First para at page no. 49 of her Order. Audited Balance Sheets are furnished along with other documentary evidences at page nos. 189 to 540 of the PB for A.Y. 2015-16. The CIT(A) has given a clear finding to this effect at para (3.3.6) page no. 86 of his order for A.Y. 2015-16. 5 Interest paid and TDS made had duly been shown The appellant had paid interest on the subject loans and has also made necessary TDS. The lender companies have duly incorporated such income in their Profit Loss Accounts and as also in their Returns of Income. First para at page no. 49 of her Order. Audited Profit Loss Accounts Income- Tax Returns of lender companies are furnished along with other documentary evidences a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs as held by the Hon ble Apex Court in many cases. 571 to 577 for A.Y. 2015-16 being the Notice u/s. 142(1) dated 17- 05-2019 AND 578 to 606 for A.Y. 2015-16 being the Notice Show Cause Notice dated 15- 11-2019 On a perusal of the Page No. 575 for A.Y. 2015-16 of the Paper Book, it may be gathered that except asking certain details of loans, the AO had not uttered any single word regarding the alleged enquiries and other materials referred to by her in the body of the assessment order. Thus, the question of giving any cross-examination does not arise. The relevant findings of the ld. CIT(A) are at paras (3.3.7) (3.3.8) on page no. 87 to 90 of his Order for A.Y. 201516. 7 Loans completely repaid off Loan Transactions from seven lenders out of total nine lenders have got completely repaid during the succeeding previous years through banking channels. - - - 8 Awards passed by the Arbitrators in respect of two companies . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 552 (by CA. Shri H.P. Agrawal). Depsite making a specific request, the AO did not examine Shri Mukesh Jhawar or Shri H.P. Agrawal. 544 to 547 and 554 to 557 The assessee, vide its letter dated 09-12-2019 [PB Page No. 665 669], requested the AO to make verification from Shri Mukesh Jhanwar and CA. Shri H.P. Agrawal by issuing summons u/s. 131 or notices u/s. 133(6). However, the AO neither made any independent enquiry from Shri Mukesh Jhanwar and CA. Shri H.P. Agrawal subsequent to filing of their Affidavits nor the AO provided opportunity of cross-examination to the assessee. 14 Case of the assessee is distinguishabl e from the case of NRA Iron Steel The case of the assessee is distinguishable from that of the case of PCIT (Central)-1 vs. NRA Iron Steel Pvt. Ltd. (2019) 412 ITR 161 (SC) - Our written submission before CIT(A) at page nos. 55 to 57 for A.Y. 201516 - 15 Interest is allowable on genuine borrowing The AO disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and TDS made thereon which are duly recorded in the regular books of account of the assessee company. The remaining page nos. 48 to 63 contain the details of sources of the funds, obtained through banking channels, by the lender companies before making loans to the assessee company. It was contended that such documents were seized from the premises of the CA of the assessee company who had gathered such information from the lender companies for the purpose of submitting the same to the Income-Tax Department in any probable assessment proceedings in which the sources of funds in the hands of the lenders are required to be established. Thus, according to Learned counsel for the assessee, such papers by any stretch of imagination, cannot be termed to be incriminating in the nature so as to form the basis for making any addition in an assessment made under s.153A of the Act. Even the list of the alleged shell companies, notified by the Department on the basis of the inputs received from various investigation agencies, as given by the AO at para (9.5) of the assessment order, cannot be said to be an incriminating document recovered during the course of the search and Ld.AO has made the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PL 10,00,000 30,576 46,00,000 2,85,615 5,60,001 85,585 5. Galaxy Retails Pvt. Ltd. GRPL 45,00,000 1,45,478 - 4,27,500 4,49,998 - 6. Moonview Infrastucture Pvt. Ltd. MIPL 1,80,00,000 5,29,520 51,00,000 19,18,470 23,10,001 20,79,002 7. Sammedshikhar Commerce Pvt. Ltd. SSCPL 25,00,000 86,056 27,00,000 3,37,828 5,19,998 1,56,896 8. Sanskriti Vintrade Pvt. Ltd. SVPL 50,00,000 1,49,178 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 1,67,213 4,00,004 - 18. Satabdi Realstate Pvt. Ltd. SRPL - - 42,00,000 1,43,771 4,20,000 - 19. Sanskar Commosale Pvt. Ltd. SCPL - - 20,00,000 79,782 1,75,339 - 20. Blackberry Tradecom Pvt. Ltd. BTPL - - - - - 40,96,026 TOTAL 6,00,00,000 18,07,498 6,00,00,000 80,59,865 1,19,75,346 82,40,976 13. The assessee has further submitted that out of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally issued by the AO. Further, the assessee also contended that during the course of the assessment proceedings, Ld. AO had not whispered a single word regarding the so-called enquiries and statements recorded by the Investigation Wing. The assessee company also contended that no opportunity of cross-examination of any of the witnesses of the AO was given which has vitiated the entire proceedings as held by the Hon ble Apex Court in many cases including that of CIT Vs.Andaman Timbers Industries Limited (ITA no.721 of 2008). 13.3 Learned Counsel for the assessee submitted that Ld.AO has relied upon the statements of Mr. Mukesh Jhawar and Mr. H.P. Agrawal for making the impugned additions in the assessee s income but, these statements were subsequently retracted by such persons. Though a specific request was made to Ld.AO to conduct necessary verification from Mr. Mukesh Jhanwar and Mr.H.P. Agrawal by issuing summons u/s. 131 or notices u/s. 133(6) of the Act however, Ld AO neither made any independent enquiry subsequent to their filing of Affidavits retracting the statements nor Ld.AO provided any opportunity of cross-examination to the assessee. 13.4 Learned Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wable under the provisions of s.36(1)(iii) of the Act. It was also contended that in none of the documentary evidences so furnished for establishing the genuineness of the loan transactions, any defect or discrepancy was found by Ld.AO and he did not conduct any independent enquiry from the lender companies and merely on the extraneous considerations, made the impugned additions. 14. We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities, written and oral submissions made from both the sides and the paper books filed under rule 18(6) of the ITAT Rules. We notice that the AO, while making the impugned addition, has made reference of certain loose papers inventorized as Page No. 47 to 63 of GGL-01 seized from the business premises of the assessee at Kolkata and also the Audit Reports of the assessee. On a perusal of these loose papers which have been placed by the assessee at page no. 131 to 147 in its Paper Book for A.Y. 2015-16, we find that such loose papers pertain to the details of the loans obtained by the assessee company from various lender companies such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch. 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 and for this proposition we find support from the decision of the Hon ble High Court of Delhi in the case of Pr. CIT vs. Meeta Gutgutia (2018) 395 ITR 0526 (Del.HC) and the Special Leave Petition filed by the Revenue against this decision has been dismissed by Hon ble Supreme Court in (2018) 102 CCH 0038 (SC). 15.1 Similar view also taken by Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 53 (Del HC) and Hon ble Court after considering various judgments had dealt with this issue as under: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of original assessment. 15.2 The above stated ratio laid down by the Hon ble Delhi High Court again comes from consideration in the case of Pr. CIT vs. Meeta Gutgutia (supra) and this Tribunal has applied this ratio in the the case of Kalani Bros. [IT(SS) No.71/Ind/2015 dated 6.11.15] observing as follows:- We have heard both the sides. We have also gone through the case laws relied upon by both the sides. We have also considered various relevant facts of the case. It is a settled legal position that once a search and seizure action has taken place u/ s 132 of the Act or a requisition has been made u/ s 132A, the provisions of section 153A trigged and Assessing Officer is bound to issue notice u/ s 153A of the Act. Once notices are issued u/ s 153A of, the Act then assessee is legally obliged to file return of income for six years. The assessment and reassessment for six years shall be finalised by the Assessing Officer. It is also held by various Courts that once notice u/ s 153A of the Act issued, then assessment for six years shall be at large both for Assessing Officer and assessee have no warrant of law. It has been also held that in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal to consider the appeal of the department on merits. It is a settled legal position that when two views are possible on a particulars issue then the view favourable to the assessee should be followed as held by the Hon'ble Apex Court in the case of CIT vs. Vegetable Products; 88 ITR 192. Respectively following the decision of the Hon'ble Apex Court, we dismiss the ground of appeals of the Revenue. Departmental appeals are disposed accordingly. 15.3 Similar view also taken in the case of DCIT, Indore vs. Shri Satish Neema (2020) 37 ITJ 308 (Trib. Indore). Relevant extract of the decision is reproduced below: 19. We therefore respectfully following the decision referred above and also considering the latest judgement of Hon'ble High court of Delhi in the case of Pr. CIT Ors. Vs. Meeta Gutgutia (supra) come to the conclusion that since the assessment orders in question were concluded and non-abated assessments no addition can be made in the assessment proceedings u/s 153A of the act unless there is any incriminating material found during the course of search. We find no inconsistency in the finding of Ld. CIT(A) quashing the assessment proceedings u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors, copies of their audited financial statements, copies of the relevant bank statements of the loan creditors and as well as of the assessee. Further, in order to establish the identity of the lender companies and genuineness of the loan transactions, the assessee had also furnished copies of the Awards of the Arbitration, given by the Sole Arbitrators in respect of two of the lender companies. The assessee, by filing its written submission along with documentary evidences, had claimed to have fully discharged its onus of proving, under s. 68, to establish (i) identity of the loan creditors; (ii) genuineness of the loan transactions; and (iii) creditworthiness of the loan creditors. 16.1 We further find that the AO at first para of page no. 49 of her Order has also admitted that the lender companies have duly shown the subject transactions with the assessee in their respective Bank Statements, Balance Sheets and Profit Loss Account and were also having sources of funds. We also find that none of the documentary evidences furnished by the assessee company has been rebutted or contravened or disbelieved by the AO. We note that the assessee, after furnishing the document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheets of the lender companies, as were also furnished before the lower authorities, we observe that all the lender companies were having ample net owned funds and were having sufficient balances in their bank accounts and no cash was deposited prior to the lending of loan to appellant company, which establishes the creditworthiness of the lender companies. We find that two lender companies namely Asha Tradecom Pvt. Ltd. and SHP Financial Services Pvt. Ltd were duly registered as Non Banking Finance Company with the Reserve Bank of India and their registration with the RBI itself proves the identity and creditworthiness of such lender companies. There is no denial to the fact that no independent enquiry was done by the AO. In such circumstances, we find ourselves in agreement to the ld. CIT(A) that the assessee could be able to discharge its primary onus as contemplated under the provisions of s. 68 of the Act. We find that the AO has failed to discharge the onus of bringing any cogent material or evidence on record for disbelieving the explanation as well as the various documentary evidences furnished by the assessee before her, during the course of the assessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. The copy of such Affidavit was also furnished by the assessee before the AO as well as before the ld. CIT(A) and a copy of the same has also been filed before us at page no. 544 to 547 of the Paper Book for A.Y. 2015-16. We also note that the assessee, vide its letter dated 09.12.2019, after filing the affidavit of Shri Mukesh Jhawar, had made a specific request to the AO that if despite retraction, if still she wish to place reliance upon the statement recorded u/s. 132(4), then an opportunity of cross-examination of Shri Mukesh Jhawar be provided. However, the AO neither made any independent inquiry from Mr. Mukesh Jhawar nor, afforded any opportunity of cross-examination to the assessee. 16.5 We further find that the AO, vide para (9.3) of the assessment order, has stated that one Smt. Leela Kalyani, a director of the assessee company and as also, one Mr. H.P. Agrawal, in their statements recorded u/s. 132(4) of the Act, had accepted that the Kolkata based companies were used as conduits for routing the unaccounted cash as unsecured loans to the assessee company through hawala transactions. The AO has reproduced the relevant abstracts of the statement of Smt. Leela Kal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d position of the law, and as held by Hon ble Supreme Court in the case of M/s. Kishanchand Chelaram vs. CIT (1980) 125 ITR 713 (SC) and again in the case of M/s. Andaman Timber Industries vs. Commissioner of Central Excise, Kolkatta-II 2016 (15) SCC 785 (SC), that ,without giving the opportunity of cross examination of the witnesses to the assessee, the statements of such witnesses could not have been utilized against the assessee. 16.6 As regard the mobile message recovered from the personal mobile of Mr. Mukesh Jhawar, which has been reproduced by the AO at page no. 24 of her Order. Although Mr.Mukesh Jhawar had retracted his statement by filing an Affidavit, but, still we could notice that such message merely contains the details of some bank account of some company and does not convey anything else. Further, even if it is presumed that such message conveys some transfer of funds for obtaining accommodation entry, then too, it cannot be alleged that the assessee company had obtained some accommodation entry for the very reason that the message dated 4/5/2017 pertains to the F.Y. 2017-18 and the assessee company has not obtained any fresh unsecured loan of even a single pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 6,00,00,000/- each for A.Y. 2015-16 and A.Y. 2016-17 on account of unsecured loans and the additions of ₹ 18,07,498/-, ₹ 80,59,865/-, ₹ 1,19,75,346/- and ₹ 82,40,976/- respectively for the A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017-18 and A.Y. 2018-19 on account of interest paid thereon. Accordingly, the Ground Nos. 1 2 for the A.Ys. 2015-16 and 2016- 17 and as also, Ground No. 1 for the A.Ys. 2017-18 and 2018-19, so raised by the Revenue before us are Dismissed. 17. Now, we take the Issue No. (ii) which is relating to Out of Books Cash Sales u/s. 69A 17.1 In respect of the Issue No. (ii), the Revenue has raised Ground No. 3 for the A.Y. 2016-17 and Ground No. 2 for the A.Ys. 2017-18 and 2018-19. These grounds are pertaining to the action of the Ld. CIT(A) deleting the substantial additions made by the AO on account of unaccounted sales u/s. 69A of the Act. The assessee has also raised its Ground Nos. 2(a) to 2(d) and 1(a) to 1(d) respectively for the A.Y. 2016-17 and 2017-18 challenging the action of the ld. CIT(A) in confirming the partial additions on the subject issue. A summary of the year-wise quantum of additions before us on the subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made additions in the total income of the assessee for the subject assessment years. 17.3 Being aggrieved with the action of the AO, the assessee preferred separate appeals for the subject assessment years before the ld. CIT(A). During the course of the first appellate proceedings, the assessee company made detailed written submissions along with the documentary evidences which were also furnished by it before the AO.The ld. CIT(A), accepting the contentions of the assessee, the facts and circumstances of the case and as also, the various documentary evidences placed on record by the assessee company, granted substantial relief to the extent of ₹ 3,01,97,950/- and ₹ 2,18,04,200/- out of the total additions of ₹ 3,55,27,000/- and ₹ 2,56,52,000/- respectively for the A.Y. 2016-17 and A.Y. 2017-18, thereby confirming the remaining additions of ₹ 53,29,050/- and ₹ 38,47,800/- in the hands of the assessee company for A.Y. 2016- 17 and A.Y. 2017-18. Further, the ld. CIT(A) also deleted entire addition of ₹ 10,25,000/- for the A.Y. 2018-19. 17.4 Against the additions confirmed by the Ld. CIT(A), the assessee is in appeal whereas against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 No incriminating loose papers or documents found During the search, except finding some imaged datas, in the form of excel sheets, not a single incriminating loose paper, or document or sales invoices or any other evidence regarding the unrecorded removal of goods from the factory premises and the sales thereof, without making recording in the regular books of account, was found - - The assessee had never ever carried out any transaction of credit sales or cash sales, which remained unrecorded in its regular books of accounts. 5 No suppressed sales found by Commercial Tax Authorities The assessee company is also required to maintain its books of account under the Madhya Pradesh Vat Act, 2006 and as also, under the prevailing Goods Services Tax Enactments. The assessee is is also required to maintain necessary records under the Madhya Pradesh Excise Act, 1915. - All the records maintained by the assessee company under the different enactments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle carrying the liquor from the premises of the appellant, one of the Guards from the excise department is compulsorily deputed, so as to ensure that no unauthorized/unrecorded removal of the goods is made from its factory premises. The AO failed to appreciate that without making unauthorized removal of goods, the suppressed sales cannot be presumed. 10 Affidavit by the Managing Director Affidavit, duly sworn before the Notary Public by Shri Sunit Madhok, Managing Director to the effect that the assessee company had never been found indulged into either in transporting or in removing any liquor without first making the entries thereof in the regular books of account and stock register. 1348 to 1350 - 11 Creditability of the Digital Data seized could not be proved. The entire addition has been made by the AO on the sole basis of digital data seized from the computer of Shri Mahesh Chandra Verma. But, the authenticity, credibility and reliability of the subject digital data by themselves w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Digital Data are not reconciling with the books of account of the assessee In such excel sheets, at some places, there is mention of some amount received through cheques, but, the fact remained that these cheques were never received by the assessee company from any such person. - Had the assessee company carried out any transaction, as found noted in the subject excel sheets, atleast the transactions relating to the cheques would have got tallied with the bank transactions recorded in the assessee s books. 16 Retraction of Statement by Shri Mahesh Chandra Verma The statement of Shri Mahesh Chandra Verma recorded under s. 132(4) during the course of the search i.e. 16-112017, as referred to by the ld. AO, was subsequently retracted by him vide an Affidavit on 09-12-2019. Hence, no credence can be attached to his statement recorded by the search party. 1364 to 1367 According to Shri Mahesh Chandra Verma, his statement was not correctly recorded by the search party. The stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If receipts are assumed then, corresponding expenditure has also to be assumed Even if it is presumed that the assessee made any unaccounted sales, then as as natural corollary, the incurrence of expenses towards purchases and related costs cannot be overruled. For the A.Y. 201617, in which the assessee itself has shown a higher amount of Gross Turnover, Gross Profit, GP Margin, Net Profit and NP Margin, there could not have been any presumption that any expenditure relating to the alleged unrecorded sales had already got claimed by the assessee in its regular books of account. - It is not an allegation that the assessee claimed disproportionately higher expenses in comparison to earlier years. For earlier years, as per AO s own Orders, the assessee was not found to be indulged in any out of books transactions. 22 Only net profit can be taxed on suppressed sales Accordingly, in such a situation, only the amount of net profit embedded in such sales, can, at the worst be added to the income of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inventorized as page no. 254, 255 of LPS-1 and Page no. 233 of LPS-13, as reproduced by AO in the Order, were duly recorded in regular books of assessee. Cash vouchers were not found recorded in the books. 176 177 Statement showing details of vouchers seized and corresponding recording thereof on various dates in the regular books of assessee. Thus, there is no case of suppression of sales. 18. Reference was also made to the detailed submission of the assessee on this issue made before the CIT(A) which is placed at page no. 89 to 113 of Paper Book for A.Y. 2016-17, Page No. 6 to 34 of Paper Book for A.Y. 2017-18 and Page No. 6 to 10 of Paper Book for A.Y. 2018-19. 19. According to the assessee, the additions of ₹ 3,55,27,000/- and ₹ 2,56,52,000/- respectively for A.Y. 2016-17 and A.Y. 2017-18 u/s. 69A have been made by the AO without any rational basis. The assessee, in its defence, has denied the veracity of the loose excel sheets, recovered from the computer system of one of its employees namely Mr.Mahesh Chandra Verma. 19.1 The counsel of the assessee also contended that onc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee company, for the reason that the scheme of the Income-Tax Act, 1961, contemplates the taxing of only a Real Income , and not hypothetical income. For such proposition, the assessee relied upon the decision of the Jurisdictional Hon ble High Court of Madhya Pradesh in the case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 (MP). 19.2 After taking into consideration the facts and submissions made by the assessee, the ld. CIT(A) held that since the assessee s unit was under strict vigil of the state excise authorities, it could not be inferred that the assessee effected unaccounted sales of the liquor manufactured by itself. However, the ld. CIT(A) on the basis of date wise digital data found, reached to a conclusion that the seized data pertained to the sale of liquor procured by the assessee from some other dealers of the liquor. Thereafter, the ld. CIT(A), by applying a net profit rate of 15% on the total suppressed sales, as determined by the AO, at ₹ 3,55,27,000/- and ₹ 2,56,52,000/- respectively for the A.Y. 2016-17 and A.Y. 2017-18, confirmed the additions of ₹ 53,29,050/- and ₹ 38,47,800/- in the assessee s income for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby Dismissed. 21. Now, as regard the Ground Nos. 2(b) 1(b) respectively for A.Y. 2016-17 and A.Y. 2017-18 raised by the assessee agitating the action of the AO in making the trading additions in its income without first rejecting the books of account by invoking the provisions of s.145(3) of the Act. Again, in our considered opinion, 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 and we do not find any reason to interfere with the findings of the ld. CIT(A) on this issue. Accordingly, the Ground Nos. 2(b) 1(b) so raised by the assessee for A.Y. 2016-17 and A.Y. 2017-18 respectively have no merit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the ld. CIT(A), while adjudicating the subject issue of suppressed sales, has also referred to the aforesaid decision of the Hon ble MP High Court and has sustained additions of ₹ 53,29,050/- and ₹ 38,47,800/- respectively for A.Y. 2016-17 and A.Y. 2017-18 by upholding the net profit of the assessee company on such suppressed sales at an estimated rate of 15% for every year. 23. Before us, the counsel of the assessee has contended that the net profit @15% so adopted by the ld. CIT(A), by taking simple average of the profits shown by the assessee company for the years under consideration, is excessive and the same deserves to be taken into consideration under a circumstance that the net profit in the trading transactions is lesser than the one in that of a manufacturing business. We find sufficient merit in the contention of the counsel of the assessee company that the net profit so derived from trading of liquor is less than the one from a manufacturing business. This Tribunal in the case of ACIT vs. Avinash Chalana Co. (2013) 36 CCH 0319 (IndTrib) has worked out the net profit in the case of liquor trade @ 1.77%. Thus, keeping in view the totality of facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii), the Revenue has raised Ground No. 3 for the A.Y. 2017-18 which is pertaining to the action of the Ld. CIT(A) in deleting the substantial addition of ₹ 25,50,000/- made by the AO on account of cash receipt from Syndicate. The assessee has also raised its Ground No. 3(a) 3(b) challenging the action of the ld. CIT(A) in giving partial relief on the subject issue. A summary of the quantum of addition before us on the subject issue along with the respective grounds raised from both sides, as furnished by the assessee, is given as under: ISSUE- III: Unaccounted Cash Receipt from Syndicate Assessment Year Assessee Department TOTAL Ground No. Amount Ground No. Amount 2015-16 - - - - - 2016-17 - - - - - 2017-18 3(a) 3(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO. - No money, bullion, jewellery or valuable article found unrecorded in the books. No unaccounted cash or stock was found. 2 Addition by disturbing trading results without rejecting books of account u/s. 145(3) - No defect or discrepancy found in books maintained by assessee. Books 3 During the search, except finding some imaged datas, in the form of excel sheets, not a single incriminating loose paper, or document or sales invoices or any other evidence regarding the unrecorded removal of goods from the factory premises and the sales thereof, without making recording in the regular books of account, was found - The assessee had never ever carried out any transaction of credit sales or cash sales, which remained unrecorded in its regular books of accounts. 4 As regard statement of Shri Sunit Madhok, stating that the assessee company was supplying Country Liquor to retailers in the various districts including the Ali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entire amount cannot be added as sales. Only the amount of net profit embedded in such sales, can, at the worst be added to the income of the assessee. - CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 (MP) 9 When the entire assessment has been framed only on the basis of the so-called electronic record which are said to be copies of Excel Sheet, Excel work note book etc., non-compliance of Section 65(B) of the Indian Evidence Act renders the document inadmissible in the eye of law. - M/s. Vetrivel Minerals and others Vs. ACIT, Madurai (2021) 42 ITJ 55 (MadHC) 10 The estimation of the net profit @15% by the ld. CIT(A) is on a higher side and is not taken correctly on the basis of average net profit of earlier years. - Average Net profit of the five years i.e. from A.Y. 2012-13 to A.Y. 2016-17 arrives at 11.13% which should have been adopted. A.Y. N.P. Rate 2012-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture the liquor by using the brand name of the assessee company, but also of other manufacturers having popular brands. In past too, the assessee company had noticed such malpractice and complaints from time to time, to curb this illegal practice, have been lodged by it before the police authorities. In support of its claim, the assessee has submitted copies of some complaints lodged by it before the Police Authorities. According to the assessee, probably the above kind of criminals might have sold their own manufactured liquor to the syndicates by ostensibly showing them to be belonging to the assessee company and under such circumstances only, although the payments were made to unsocial elements, but shown in the said excel sheet in the name of the assessee only. It was also submitted by the assessee before the lower authorities that the said excel sheet was provided to the assessee by some of its well wishers so as to bring the aforesaid malpractice in the knowledge of the assessee and it was therefore, the same was found in one of the computer systems of the assessee. The assessee further contended that Excel sheets are not the books of account and therefore, no evidentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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. Accordingly, the Ground No. 3(a) for A.Y. 2017-18 so raised by the assessee, having no merit, is hereby Dismissed. 27. Now, coming to the merits of the case and as regard the remaining ground no. 3(b) of the assessee and ground no. 3 raised by the Revenue for A.Y. 2017-18, we find that the AO, while making the impugned addition of ₹ 30,00,000/- for the aforesaid year, has referred to and relied upon some digital documents seized from the premises of the assessee company. From the seized excel sheet, which is reproduced by the AO at page no. 60 of the Assessment Order, it is seen that it contains the date-wise details of transactions undertaken at some point of time during the relevant previous year by the assessee company. Such excel sheet cannot be disbelieved and discarded merely on the grounds that the assessee company is under close vigil of the Excise Authorities or the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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%. Accordingly, the ground no. 3(b) of the Assessee is Partly Allowed and ground no. 3 of the Revenue for A.Y. 2017-18 is hereby Dismissed. 28. Now, we take the Issue No. (iv) which is relating to Hawala Transaction u/s. 69A 28.1 In respect of the Issue No. (iv), the Assessee has raised Ground Nos. 2(a) to 2(d) for A.Y. 2017-18 and Ground Nos. 1(a) to 1(d) for the A.Y. 2018-19. These grounds are pertaining to the action of the Ld. CIT(A) in sustaining the additions made by the AO on account of hawala transactions u/s. 69A of the Act allegedly undertaken by the assessee company. A summary of the year-wise quantum of additions before us on the subject issue along with the respective grounds by the assessee, is given as under: ISSUE- IV: Hawala Transaction u/s. 69A Assessment Year Assessee Department TOTAL Ground No. Amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten synopsis. The relevant portion of such synopsis is being reproduced as under: D. Key Points of Assessee s Submission and Relevant Pages of Paper Book: S. No. Submission in Brief Relevant Pages of Paper Book for A.Y. 201718 Remarks 1 Additions have been made by the AO on the basis of some digital messages found in the mobile of Shri Mukesh Jhanvar, senior accounts manager of the assessee company - - 2 As regard the statement of Shri Mukesh Jhanvar, recorded u/s. 132(4) during the search, it is submitted that upon confronting Shri Mukesh Jhanvar by the assessee, he completely denied of making any statement that unaccounted cash of the company was routed to Kolkata for procuring unsecured loans. 543 to 546 Copy of Affidavit of Shri Mukesh Jhanvar enclosed. 3 As per the AO, the hawala transactions were carried out during two financial years relevant to A.Y. 2017-18 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - It is not the case of the AO that the subject messages were found stored in any of the electronic devices belonging to the chief 292C of the Act. functionaries of the assessee. 8 Absolutely no justification for the AO to level the charge of hawala transactions against the assessee company and particularly, in a circumstance, when Shri Mukesh Jhanvar, on Oath, had admitted that the messages were pertaining to his personal affairs only. - - 9 It will not be open to the revenue to challenge the statements made by the deponent in their affidavits later on, if no cross examination with reference to the statements made in the affidavits is done. - Mehta Parikh Co. v. CIT [1956] 30 ITR 181 (SC) 28.7 Reference was also made to the detailed submission of the assessee on this issue made before the CIT(A) which are placed at page no. 34 to 40 of the Paper Book for A.Y. 2017-18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued to Mr. Mukesh Jhawar to verify the contents of his Affidavitbut, the AO did not provide opportunity to the assessee to produce Shri Mukesh Jhawar. The assessee further contended that the action of the AO in attributing the messages communicated by one of the employees of the assessee company to the financial affairs of the assessee is also against the provisions of s. 292C of the Act. The assessee also submitted that the AO was not justified to level the charge of hawala transactions against the assessee company and particularly, in a circumstance, when Mr. Mukesh Jhanvar, on Oath, had admitted that the messages were pertaining to his personal affairs only. 29.1 We find merit in the contentions of the ld. Counsel of the 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. Further, we also find that Mr. Mukesh Jhawar had categorically retracted his statement given during the course of search and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f tax as per normal rates and not as per the provisions of s.115BBE of the Act in its case. 31.4 The ld. CIT(A), by accepting the contentions of the assessee, made a finding that the additions so sustained by him in the assessee s income were chargeable to tax as per the normal rates of income-tax only and the provisions of s.115BBE of the Act shall not be applicable in the assessee s case for the subject assessment years. 31.5 Against the findings of the Ld. CIT(A), the Revenue is in appeal before us. 31.6 Before us, the Ld. CIT(DR) vehemently argued supporting the observations and findings of the AO on this issue. 31.7 Per Contra Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: D. Key Points of Assessee s Submission and Relevant Pages of Paper Book: S. No. Submission in Brief Relevant Pages of Paper Book Remarks 1 The AO has invoked the provisions of s. 115BBE, in respect of four additions made in the income of the assessee, For A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of interest expenditure, the appropriate section was s. 36(1)(iii) r.w.s. 37 of the Act. - - 5 For alleged unaccounted cash receipts, since no unaccounted - - money, or other assets or any other investment was found, the provisions of s. 69,69A and 69B could not have been invoked. 31.8 Reference was also made to the detailed submission of the assessee on this issue made before the CIT(A) which are placed at page no. 48 to 51 of the Paper Book for A.Y. 2017-18 and Page No. 17 to 20 of Paper Book for A.Y. 2018-19. 32. Before us, the assessee submitted that since the additions so made, by themselves, are not sustainable, the question of applicability of s. 115BBE of the Act, which provides for charging sum specified income at a higher rate does not arise at all. The AO has invoked the provisions of s.69C (for disallowance of interest) and s.69A (for out of books sales, hawala transactions and cash receipt from syndicate) for making the respective addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounted cash receipts. The additions have either been made either on account of disallowance of expenditure or on account of unaccounted cash receipts made by the appellant. However, the provisions of section 115BBE of the Act, can be invoked only if the total income of an assessee includes any income referred to in ss. 68, 69,69A,69B,69C or 69D of the Act. Except the income referred to in the ss. 68, 69,69A,69B,69C or 69D of the Act, in respect of the other income, the provisions of s. 115BBE cannot be invoked. The AO has invoked provisions of s. 69C of the Act in respect of the disallowance of interest on unsecured loans, whereas, for making other three additions on account of unaccounted receipts, the AO has invoked the provisions of s. 69A of the Act. As discussed above, the AO was not legally correct in invoking the provisions of either s. 69A or s. 69C of the Act. Thus, none of the additions made, in the total income of the appellant, for the assessment year under consideration, falls under any of the aforesaid six sections and therefore, the provisions of s. 115BBE of the Act, cannot be invoked in respect of such additions. Accordingly, the AO is directed to recompute the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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