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TMI Blog2022 (5) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... convenience. 3.0 The brief facts of the case for Assessment Year (AY) 201617 (ITA 217/Chd/2021) are that the assessee firm derives income from business and income from other sources. The assessee firm belongs to M/s Roop Square Group of companies where a search and seizure operation u/s 132(1) of the Income Tax Act, 1961 (hereinafter called 'the Act') was conducted on 01.11.2017 at various business and residential premises of the group. Subsequently, in response to notice issued u/s 153A of the Act, the return for AY 2016-17 was filed declaring an income of Rs. 7,67,200/-. Thereafter, the assessment was completed in terms of provisions of section 153A r.w.s. 143(3) of the Act at an income of Rs. 1,43,00850/- after making the following additions: (i) Rs. 39,88,288/- on account of alleged unexplained expenditure on salary u/s 69C of the Act (ii) Rs. 82,93,216/- on account of alleged concealed net profit (iii) Rs. 8,29,321/- on account of alleged undisclosed investment for earning the alleged concealed net profit (iv) Rs. 4,22,825/- on account of alleged unexplained investment u/s 69 in construction of property Kothi Tehal Singh. 3.1 Aggrieved, the assessee carried the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the salary paid as per the books of accounts of two sister concerns of the assessee group namely M/s. Shergill Foods & Beverages to the tune of Rs. 7,63,200/- and M/s. M. S. Corp. to the tune of Rs. 3,25,000/- and has failed to appreciate that the said concerns were being controlled from the office of the assessee only by the family, since there are common partners having substantial shareholding in the above two concerns. Hence on account of common management of all the concerns, details were being maintained in a consolidated manner. (c) Notwithstanding, the above said grounds of appeal, no addition on account of the above issue of unrecorded payments to employees could be made, since sufficient funds were available out of the sale of the accounted for stocks,, outside the books of accounts as per submissions made before the CIT(A), which have been ignored without assigning into any proper reason. 4. (a) The Ld. CIT(A) has erred in confirming the addition of Rs. 19,61,029/- against the total addition of Rs. 82,93,216/- on account of alleged concealed profit. (b) That the Ld. CIT(A) has failed to appreciate that the assessee is engaged in the business of trading in retail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d purchases, the Ld.CIT (A) allowed only part relief and upheld the addition to the extent of Rs.7,94,550/-. 4.2 Aggrieved with this order of the Ld First Appellate Authority, both the assessee as well as the Department have now approached this Tribunal and the following grounds have been raised by them in this regard: Assessee's Appeal in ITA 218/Chd/2021: That the Ld. CIT(A) has erred in confirming the action of the Assessing Officer in issuing notice u/s 153A and passing the order u/s 153A/143(3) since there was no search on the partnership concern and neither any Panchnama has been drawn and it was only a survey and, therefore, the assessment as framed by the Assessing Officer and confirmed by the CIT(A) deserves to be quashed as per the judgment of the Mumbai Tribunal in the case of Regency Mahavir Property in ITA No. 682 & 683/Mum/2016. 2. Notwithstanding, the above said ground of appeal, the assessment as framed by the Assessing Officer after obtaining the mandatory approval u/s 153D from the 'Addl. Commissioner of Income Tax', is void-ab-initio, since the Ld. Addl. Commissioner has only accorded 'mechanical approval' of the draft assessment order se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard and disposed off. Department's Appeal in ITA No. 248/Chd/2021: 1. Whether upon facts and circumstances of the case, the Ld. CIT (A) was justified in restricting the addition to the extent of Rs. 28,37,506/- as against Rs. 42,04,640/- made by the AO on account of unexplained expenditure u/s 69C of the l.T. Act, 1961? 2. Whether upon facts and circumstances of the case, the Ld. CIT (A) was justified in restricting the addition to the extent of Rs. 23,03,905/- as against Rs. 1,24,68,780/- made by the AO on account of concealed net profit? 3. Whether upon facts and circumstances of the case, the Ld. CIT (A) was justified in deleting the addition of Rs. 12,46,878/- made by the AO on account of undisclosed investment u/s 69 of the I. T. Act, 1961? 4. Whether upon facts and circumstances of the case, the Ld. CIT (A) was justified in deleting the addition of Rs. 2,82,190/- made by the AO on account of undisclosed investment? 5. The appellant craves leave to add, amend, modify, `vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) which have been ignored without assigning into any proper reason. (d) That the Ld. CIT(A) has erred in confirming the invoking the provision of section 115BBE on the addition of Rs. 22,47,034/- as confirmed above which is also against the facts a circumstances of the case. 2. (a) The Ld. CIT(A) has erred in confirming the addition of Rs. 22,26,999/- against the total addition of Rs. 74,70,037/- on account of alleged concealed profit. (b) That the Ld. CIT(A) has failed to appreciate that the assessee is engaged in the business of trading in retail trade of readymade garments and, as such, the 'net concealed profit' as calculated to the tune of Rs. 22,26,999/- is against the facts a circumstances of the case. 3. (a) That the Ld. CIT(A) has erred in confirming the addition of Rs. 7,82,230/- on account of the shortage in stock. (b) Notwithstanding the above said ground of appeal, it is prayed that if this addition of gross profit on account of sales outside the books of accounts is confirmed then the benefit of the funds available on the account of shortage in stock to the tune of Rs. 65,62,914/- was liable to be set-off against the other additions as made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man.com 444, in which, it has been held that if no Panchanama was drawn in the name of assessee, the condition as stipulated for assumption of jurisdiction u/s 153A cannot be held to be satisfied. He also relied upon some more legal precedents for the same preposition copies of which have been filed in the paper book. It was reiterated by the Ld. Counsel for the assessee that since there was no search at the premises of the assessee, the assumption of jurisdiction by the Assessing Officer u/s 153A was to be held void ab initio in view of the various judgments being relied upon as above. The Ld. Counsel for the assessee also drew our attention to the order of the 'Indore Bench' of the ITAT in the case of 'Rajat Tradecom India Pvt. Ltd. Vs DCIT' reported in 120 ITD 301. The Ld. AR further argued that the Assessing Officer, while passing the assessment orders for Assessment Years (AY) 2016-17 to 2018-19, has stated that survey u/s 133A has been carried out at the premises of assessee, as is borne out from the orders of the AO and is referred to in Para 3.9 of the order for A.Y, 2016-17, 2017-18 and 2018-19. 6.1 It was further submitted by the Ld. AR that the Ld. Addl. CIT had accorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remained unexplained after accounting for salary paid in the other two concerns amounted only to Rs.11,82,418/-. Our attention was drawn to the chart submitted before the Ld. CIT (A) in this regard. The said chart is being reproduced herein under for a ready reference: (a) Total amount of salary as per the seized list:- 38,59,195/- + 1,29,093/- (L.W.W.) 39,88,288/- Less (i) Amount of salary debited M/s Shergill Food and Beverages 7,63,200/- (ii) Amount of salary debited M/s M. S. Corp. 3,25,000/- Amount of salary debited 17,17,670/- M/s Agya Ram Manohar Lal 28,05,870/- 28,05,870/- Difference 11,82,418/- 7.1 The Ld. AR also referred to the Paper Book filed by the assessee wherein the copy of the assessment order for assessment year 2018-19 in the case of M/s M.S. Corp. framed u/s 143(3) of the Act had been placed and also wherein the details of salary as per the books of account for all the three assessment years had been filed. It was argued by the Ld. AR that the difference in salary to the tune of Rs.11,82,418/-, as submitted before the Ld.CIT(A), h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who had been looking after financial matter of the group as a whole. It was further argued by the Ld. AR that when Shri Satpal Sachdeva was confronted with notings in the diary, Shri Satpal Sachdeva had stated that he was under stress and exhausted. He also brought to our notice a crucial fact that no further enquiries had been made from Shri Satpal Sachdeva during the course of assessment proceedings. The Ld. AR reiterated that the Ld. CIT (A) had failed to appreciate the fact that the funds were available with the assessee on account of shortage in his stock and the benefit of the same should have been given to the assessee. It was also argued that the sole reliance on the statement of Shri Manak Sachdeva by the Department was not proper. The Ld. AR submitted that the arguments in respect of this issue would be identical in all the three years under consideration and the same were not being repeated for the sake of brevity. 8.0 With respect to the next ground of appeal pertaining to the confirmation of addition of Rs.19,61,029/- as against total addition of Rs.82,93,216/- on alleged concealed profit in assessment year 201617, the Ld. AR submitted that the AO had made the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016-17 15,02,960 39,88,288 31,25,244 23,86,243 7,39,001 19,61,029 A. Y. 2017-18 12,52,214 42,04,640 37,13,418 29,67,712 7,45,706 25,03,905 A. Y. 2018-19 17,38,196 29,66,795 43,76,572 30,71,810 13,04,762 22,26,999 Total 66,91,933 8.2 The Ld. AR further submitted that in absence of any incriminating material found during the course of search with respect to concealed profit, such addition could not have been made. The Ld. AR further submitted that the issue was also common in all the three years under appeal and that his arguments would also be on the same grounds and that the same were not being repeated for the sake of brevity. 9.0 The Ld. AR further submitted that in assessment year 2017-18 there was another addition of Rs.8,67,550/- made by the AO in respect of alleged unaccounted purchases and the Ld.CIT(A) had restricted this addition of Rs.7,94,550/-. It was submitted that again this addition was based on mere estimate and no such material, as alleged by the lower authorities, had been purchased. Referring to the document at page 29, it was argued that this was only a rough estimate which was evident from the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to the arguments made in this regard in assessment year 2016-17. 11.0 In response to the arguments made by the Ld. AR, , it was submitted by the Ld. Departmental Representative (DR) that the assessee's challenge to assessments being framed u/s 153A had been dealt in detail by Ld. CIT (A) and reliance was placed on the observations and findings in this regard. 11.1 With respect to the assessee's contention that the approval u/s 153D of the Act was mechanical, the Ld. DR submitted that there is no fixed format for according approval and that this contention of the assessee was just an attempt to grab at straws having no substance as the assessee had a very poor case on merits. 12.0 On merits of the case, the Ld. DR submitted that as far as the appeal of the assessee was concerned, reliance was being placed heavily on the findings recorded by the AO as well as the Ld. CIT (A).The Ld. AR submitted that the assessments had been correctly framed based on loose sheets found at the premises of the assessee and the assessee had not submitted any documentary evidences before the AO and, therefore, the onus on the assessee had not been discharged. The Ld. DR submitted that Annexure A-3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat based on the documents seized from the business and residential premises of the assessee, the AO had calculated the quantum of unrecorded payments made to the employees and based on this calculation, the AO had rightly estimated the concealed net profit in the ratio of salary debited in the Profit & Loss Account vis-à-vis salary as per the seized documents. It was argued that the method adopted by the AO was both the logical as well a reasonable and the Ld.CIT(A) had erred in law in allowing deduction of salary and interest to partners as these concealed profits were over and above the profit shown as per the books of account. 13.2 With regard to the deletion of addition in respect of undisclosed investment for earning the concealed profits, the Ld. DR submitted that it is an undisputed fact that capital is required for any business and it cannot be negated that the assessee would have employed some amount of investment for its parallel turnover from which he had earned the undisclosed profits. It was submitted that the AO had rightly applied a rate of 10% of the net profit so concealed in order to make out of book sales. The Ld. DR argued that the Ld. CIT (A) had ignor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swer of Shri Satpal Sachdeva was that he was under stress and totally exhausted and that he would explain the entries in the office of the AO. However, as per records, no enquiry was further made from Shri Satpal Sachdeva and the AO proceeded to calculate the addition on this account without recording any explanation from Shri Satpal Sachdeva. During the course of proceedings before the Ld First Appellate Authority, the assessee sought to explain that the seized ledgers contained payments made in respect of three family concerns, viz. M/s Agya Ram Manohar Lal, i.e. the assessee in the present appeal, M/s M.S. Corp. and M/s Shergil Food & Beverage. It was further submitted before the Ld. CIT (A) that since all the financial matters were being looked after by Shri Satpal Sachdeva, he had made a consolidated entry of the salaries paid to the employees of all the three family concerns. The assessee sought benefit of the salaries as debited in the regular books of account of all the three concerns as per the Chart submitted by the assessee and worked out the differences in the three years at Rs.11,82,418/- for assessment year 2016-17, Rs.10,71,106/- for assessment year 2017-18 and Rs.9, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laries debited in all the three family concerns' books of account should be given to the assessee firm prior to making an addition on this account. Therefore, accepting the contention of the assessee in this regard, we modify the order of the Ld. CIT (A) to the extent that unrecorded payments to employees, as per the working submitted by the assessee are now to be calculated at Rs.11,82,418/- for assessment year 2016-17, Rs.10,71,106/- for assessment year 2017-18 and Rs.9,73,447/- for assessment year 201819. The total undisclosed payments to employees thus comes to Rs.32,26,971/-. 14.1.2 Coming to the second limb of the arguments of the Ld. AR in this regard, it is again an accepted fact that the negative stocks to the tune of Rs.65,62,914/- had been found during the survey on 01.11.2017 and on which the AO had made an addition of Rs.7,82,230/-. This amount, although disputed and challenged in ground of appeal No.3 in ITA No.219/Chd/2021 for assessment year 2018-19, has not been pressed and has been dismissed as such. The negative stock of Rs.65,62,914/- would imply that the assessee had sold stock worth this amount out of the books of account and thus, there were funds available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and added the same to the income of the assessee as indicated above. Before the Ld. CIT (A), the assessee had submitted that the net profit was adopted by the AO as per the books of account and that the AO had ignored the figures pertaining to salary and interest to the partners. The assessee also furnished a table before the Ld. CIT (A) and submitted that if the concealed net profit is to be worked out on the basis of alleged salarysheet, then the figures mentioned in such chart ought to have been adopted. As per the chart submitted by the assessee before the Ld. CIT (A) and duly reproduced by the Ld. CIT (A) in the impugned order indicates that the concealed net profit after adjustment of salary and interest would come to Rs.19,61,029/- for assessment year 201617, Rs.25,03,905/- for assessment year 2017-18 and Rs.22,26,999/- for assessment year 2018-19. The Ld. CIT (A) accepted this contention of the assessee and restricted the additions on account of concealed profits to the extent as indicated in the chart submitted by the assessee. 14.2.1 However, before us, the Ld. AR has vehemently argued that the assessee firm carries on retail business of trading in ladies and gents dre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her relief to the assessee in respect of unrecorded payments to employees. Accordingly, in view of our adjudication as aforementioned, on the same logic and reasoning, we dismiss the ground raised by the Department. 15.1 Similarly, ground No.2 challenges the action of the Ld. CIT (A) in restricting the addition of Rs.23,03,905/- in respect of concealed net profit. This ground is related to identical grounds raised in assessee's appeals for all the three years under appeal and we have already deleted this addition on account of alleged concealed profits in all the three years and have decided the issue in favour of the assessee in preceding paragraph 14.2.2 of this order and in view of our such adjudication in favour of the assessee, the ground raised by the Department stands dismissed. 15.2 Ground No.3 of the Department's appeal challenges the action of the Ld. CIT (A) in deleting the addition of Rs.12,46,878/- being estimated undisclosed investment for earning the concealed net profit. This figure had been arrived at by applying a rate of 10% on the figure of alleged concealed net profit as computed by the AO. In this regard, it is seen that the Ld. CIT (A) had deleted this addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year under consideration". Therefore, on the same logic and reasoning, we deem it appropriate to dismiss this ground of appeal of the Department. 16.0 Thus, in effect, all the grounds raised by the Department stand dismissed. 17.0 Now, the only ground remaining for adjudication in assessee's appeal is ground no. 5 in assessee's appeal for 2017-18 wherein the assessee has challenged the action of the Ld. CIT (A) in confirming the addition of Rs. 7,94,550/- against the addition of Rs. 8,67,550/- on account of alleged unaccounted purchases. The Ld. AR has argued at length on the issue and the main thrust of his arguments have been that the alleged unrecorded purchases were recorded on a paper which carried the title "Estimate" and were, therefore, not purchases but were only goods received on approval. However, on perusal of the impugned order, it is seen that the Ld. CIT (A) has negated this contention of the assessee by noting that this contention of the assessee cannot be accepted as a perusal of the account shows that the account of the party has been credited by the bills' amount, meaning thereby that it was the purchase by the assessee. The detailed findings of the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inuously slip number and not a rough pad and the narration ROUGH ESTIMATES was printed just to mislead. The number of pieces along with rate and description of item and total amount are duly reflected along with packing charges on the above items. It was for the assessee to show that it is accounted for in the books but it failed to do so even during the appellate proceedings. Therefore, the same has to be considered as unaccounted purchases and the AO was right in making the addition on this account. On the slip for Rs. 73,000/- the date is mentioned 17.07.2017 which pertains to the assessment year 2018-19 and no addition can be made for the year under consideration. To sum-up, the addition to the extent of Rs. 7,94,550/- is upheld and appellant gets relief of the balance amount. Accordingly, this ground of appeal is partly allowed." 17.1 We find the above conclusion arrived at by the Ld. CIT (A) to be correct on the factual matrix of the issue. The arguments of the Ld. AR on the issue do not have feet to stand on in the face of the categorical finding recorded by the Ld. CIT (A) and we uphold the same. The ground stands dismissed. 18.0 Coming to the legal grounds raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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