TMI Blog2022 (9) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... for the said year. Thus we concur with the claim of the Ld. AR that now when as on the date of the initiation of search and seizure proceedings under section 132 of the Act as no assessment or reassessment proceedings for the years under consideration were pending in its case for AY 2006-07 to AY 2010-11, therefore, in the absence of any incriminating evidence found during the course of search and seizure proceedings for the said years, no addition/disallowance could have been made in respect of the unabated assessment of the assessee for the said respective years. Unexplained cash credits u/s.68 - When the assessee had discharged the onus that was cast upon it as regards proving the identity and creditworthiness of the share applicant companies, as well as the genuineness of the transactions in question, therefore, no addition of the amounts so received from them could have been made by dubbing the same as unexplained cash credits u/s.68 of the Act, uphold his order to the said extent. The Grounds of appeal of revenue dismissed. Addition on account of initial unrecorded investment for making unrecorded sales - HELD THAT: No infirmity in the view taken by the CIT(A) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined cash credits u/s.68 of the Income Tax Act, 1961. 5. On the facts and in the circumstances of the case the CIT(A) erred in overlooing the facts that the creditworthiness and the genuineness of the transactions has not been established by the appellant. There are evience to the contrary produced by the department which establishes that the investors did not have the income earning apparatus and hence did not have creditworthiness. 6. The CIT(A) has erred in passing the appellate order wherein he has stated in a perverse manner while passing the order which has beenmade in haste without giving reasonable opportunity to the AO to give his submissions on the issues. On the other hand the assessee on certain common grounds which permeates in the years under consideration before us i.e AY 2006-07 to AY 2012-13, has objected to the order of the CIT(Appeals) before us, as under : 1 On the facts and in the circumstances of the case, the Ld. Assessing Officer is quasi-judicial authority who did not acted independently in making the inquiries and in framing the impugned assessment which is a quasi-judicial act; but was greatly influenced and carried away by the directions / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008-09 30.09.08 15,63,190/- 15.10.2013 15,63,190/- NIL 2009-10 30.09.09 1,93,28,480/- 15.10.2013 1,93,28,480/- NIL 2010-11 10.01.10 74,94,110/- 15.10.2013 74,94,110/- NIL 2011-12 31.12.11 94,36,170 15.10.2013 1,39,36,170/- 45,00,000/- Also, the assessee in compliance to the notice issued u/s.142(1) of the Act, dated 01.11.2013 filed its return of income for the A.Y 2012-13 on 17.10.2013, declaring an income of Rs.2,64,99,750/. In its return of income for the aforesaid year i.e. A.Y.2012-13, the assessee had come forth with a disclosure of an undisclosed income of Rs.2,25,67,400/-, as under: A.Y. Head Amount (Rs.) 2011-12 Advance for land 45,00,000/- 2012-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata AAACN9720D 700000 Cheque Upkar Merchants Pvt. Ltd. 9, Rajnisen Road, Ground Floor, Kolkata AAACU7970Q 1250000 Cheque Orchid Consultancy Pvt. Ltd. DBS-212, 2nd Floor, Raheja Chamber, Mumbai AAACO5211E 550000 Cheque Share application money detail for F.Y 2007-08 Name and Address PAN Amount Mode of receipt Anika Tie Up Pvt. Ltd. 52/1, College Street, 1st Floor, Kolkata AACCA5232B 2000000/- Cheque Easter Credit Capital 27, Weston Street, 5th Floor, Kolkata AAACE4526A 500000/- Cheque Kusum Vanijya Private Limited 137/12, NarikelDanga Main Road, Kolkata AADCK1895P 1500000/- Cheque Krishna Dealers Private Limited 137/12, NarikelDangaMain Road, Kolkata AADCK1893M 1500000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii). PAN Nos. of the share applicants.; (iii). audited balance sheets and P Loss accounts of the share applicants; (iv). income-tax returns a/w computation of income of the share applicants; and (v). bank statements of the share applicants. It was stated by the assessee that it had issued shares to the share applicants at Rs.500/- per equity share, which included a premium of Rs.400/- per equity share. Justifying the share premium of Rs.400/- per equity share that was charged, it was the claim of the assessee that considering its present net worth, the value of one equity shares worked out at Rs.2165/- while for the same was issued for Rs.500/- (inclusive of premium of Rs.400/-). Accordingly, it was claim of the assessee that the share premium so charged was duly justified. 6. Alternatively, it was the claim of the assessee that even if the share applicants were to be held as bogus, then, as their complete credentials had been provided, no addition as regards the share application money received from them could be validly made in its hands. In support of its aforesaid contention the assessee had placed reliance on the judgment of the Hon ble Supreme Court in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther observed by the A.O that during the course of search and seizure proceedings at the shop of the assessee company at Sadar Bazar, Raipur, certain pieces of torn papers were retrieved from a dustbin by the search team. It was observed by the A.O that the said pieces of paper were found to be torn parts of a computer printout titled as Product Sales Summery wherein there was a reference of various months of FY 2011-12 till February, 2012. It was observed by the A.O that one of the torn piece of paper stated total sales of Rs.67,98,08,604.90 (rounded to Rs.67,98,08,605/-). It was observed by the A.O that the aforesaid torn pieces of paper were during the course of search proceedings placed in an envelope that was stapled and signatures of the witnesses were obtained on the same. It was also observed by the A.O that the aforesaid envelope was made part of the statement of Shri Kamlesh Burad. It was further observed by the A.O that Shri Kamlesh Burad (supra) had in his statement informed that Shri Pradeep Jain (Accountant) and Shri Chandrakant Rajput occupied the cubicle from where the aforesaid torn pieces of paper were retrieved. It is the claim of the A.O that the aforesaid p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of their sale transactions are not recorded in the books of account fortified his aforesaid conviction. Observing, that the aforesaid facts revealed beyond doubt that the books of account of the assessee company did not reveal the true and correct affairs of its business activities, the A.O called upon the assessee to put forth an explanation as to why the same may not be rejected and its correct turnover a/w. the profit arising therefrom be not estimated on the basis of the contents of the torn papers of the computer printout document, as under: Average turnover for one month= 67,98,08,605/9 =Rs.755,34,290/- Average turnover for 17 days = 75534290*17/30 =Rs.4,28,02,764/- Corrected Turnover till March 17,2012=67,98,08,605+4,28,02,764 =Rs.72,26,11,370/- b. Turnover Reflected in the Trial balance as on 17th March 2012 =Rs.248599411/- c. Difference in actual turnover and the turnover reflected in the Trial balance as on 17thmarch 2012= Rs.47,40,16,959/- The amount of Rs.47,40,16,959/- is considered as the unaccounted turnover of the assessee for the FY 2011-12 till 17th March 2012. This is besides the regular turnover of Rs.24,85,99,411. Also, the A.O called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gross profit % 1 2005-06 21603390.00 693751.00 22297141.00 3119176 13.99 2 2006-07 249772167.00 734265.00 250506432.00 12643478 5.05 3 2007-08 253814302.00 1550741.00 255365043.00 14662936 5.74% 4 2008-09 279721254.00 2210320.00 28193574.00 33701400 11.95% 5 2009-2010 393026025.00 3211896.00 396237921.00 22422749 5.66% 6 2010-2011 267649905.00 3302657.00 270952562.00 25394169 9.37% 7 2011-12 276722956.00 3876438.00 280599394.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the director of the assessee company and two independent witnesses opened the envelope which was stated to have contained the torn pieces of papers that were retrieved from a dustbin in the course of search proceedings conducted at the assessee s premises. On opening of the envelope, it was therein noticed that hundreds of torn pieces of papers were therein lying. Although, the departmental officialsfor six hours tried their level best to put up the torn pieces of papers together to reconstruct the original sheets and pasted on certain portions of a partly constructed sheet a transparent cello tape so that the contents of the same could be read, but the entire exercise was possible only in few cases and that too partly. In other words none of the sheets could be reconstructed in entirety. 9. As observed by the AO, the departmental officials after carrying out the aforesaid exercise till 5 O clock in the evening, having failed to reconstruct the original sheets of which the torn papers were claimed to have formed part of, thus, sealed the said envelope in the presence of the aforesaid persons. For the sake of clarity the contents of the panchnama dated 26.02.2014 in respect of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahu) At this stage, we may herein observe that though it is the claim of the department that the closing of the envelope formed part of the statement of Shri Kamlesh Burad (supra) that was recorded on 25.03.2012, however, the same as observed by us hereinabove had throughout been rebutted by the assessee. 10. As regards the claim of the A.O that Sh. Kamlesh Burad (supra) had in his statement recorded on 25.03.2012 had therein stated that the copy of the torn pieces of the computer printout which were retrieved in the course of the search proceedings from a dustbin lying in the assesee s shop at Sadar Bazar, Raipur, were thereafter kept in an envelope, was rebutted by the assessee on the ground that a perusal of the statement of Shri Kamlesh Burad (supra) nowhere revealed that he had ever so stated. It was the claim of the assessee before the AO that the inventory of the seized documents/loose papers did not bear any reference about the torn papers which were allegedly claimed by the department to have been retrieved in the course of the search proceedings from a dustbin lying in the its premises. 11. On the basis of the aforesaid facts as re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of any incriminating material found during the course of such proceedings no addition in the case of unabated assessment could validly be made u/s.153A of the Act. 13. The A.O not finding favour with the aforesaid objections that were filed by the assessee before him,therein, relying on the aforesaid torn pieces of the computer printout document titled as Product Sales Summary estimated the undisclosed sales of the assessee for the A.Y.2006-07 to A.Y.2012-13, as under: S. No. Financial year Unaccounted sales ( in Rs.) Unaccounted Gross profit @8.85% 1 2005-06 41046441 3632610 2 2006-07 474567117 41999190 3 2007-08 482247174 42678875 4 2008-09 531470383 47035129 5 2009-2010 746749448 66087326 6 2010-2011 508534820 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 Rs.4,29,26,010/- 2008-09 Rs.4,97,42,070/- 2009-10 Rs.6,63,63,610/- 2010-11 Rs.7,35,81,440/- 2011-12 Rs.5,44,41,500/- 2012-13 Rs.5,43,98,150/- 14. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). As regards the addition of Rs.1,66,70,000/- (A.Y2006-07) and Rs.55,00,000/- (A.Y2008-09) that was made by the A.O by treating the share application money received by the assessee from certain companies as an unexplained cash credit u/s. 68 of the Act, it was observed by the CIT(A) that the receipt of amounts by the assessee company towards share application/share capital was duly accepted by the A.O while framing the original assessment its case under Sec. 143(3) for A.Y.2006-07. Observing, that the A.O had neither came forth with any allegation that the assessee was a beneficiary of certain accommodation entry providers nor had placed on record any evidence which would rebut the documents that were submitted by it to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved by the CIT(Appeals) that as stated by the assessee, and rightly so, the torn pieces of paper did not find place in the inventory of seized documents. Also, the CIT(Appeals) concurred with the claim of the assessee that the statement of Shri Kamlesh Burad (supra) did not make any reference to the torn papers. Referring to the Panchnama dated 26.02.2014, it was observed by the CIT(Appeals) that though the department had tried its level best to put hundreds of torn papers together and reconstruct the original sheets, however, even after carrying out such exercise for six hours none of the sheets could be reconstructed and read in entirety. It was further observed by the CIT(Appeals) that the torn pieces of papers were thereafter put back in the envelope and the same was finally sealed, and photocopy of the torn papers were never made available to the assessee company. Considering the aforesaid facts, the CIT(Appeals) after exhaustive deliberations on the issue in hand, was of the view that no credence could be given to such torn papers which could not be reconstructed in its entirety by the department even after exhausting six hours and were not readable. The CIT(Appeals) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, thus, vacated the addition so made by him on the said count. 16. Adverting to the claim of the assessee that as on the date of search i.e. on 21.03.2012 the assessments in its cases for A.Y.2006-07 to A.Y.2011-12 were unabated, therefore, in absence of any incriminating evidence found in respect of the said years no addition could have been made u/s.153A of the Act, the same did not find favor with the CIT(Appeals). Observing, that as pursuant to a search initiated u/s.132 of the Act, the assessment of the assessee for six years stands reopened, the CIT(Appeals) was of the view that the A.O had full power to assess the income which has escaped assessment, whether or not the same was found as a result of search or otherwise. Accordingly, the CIT(Appeals) was of the view that addition made by the A.O for the aforementioned years i.e. A.Y.2006-07 to A.Y.2011-12 were well within the powers which were assigned to him u/s.153A of the Act. On the basis of her aforesaid observations the CIT(Appeals) partly allowed the assessee s appeal. 17. The Revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 18. Also, the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified by the order of the Income Tax Appellate Tribunal in the case of Smt. Sanjana Mittal Vs. DCIT, CC-2, Jalandhar, ITA No.487/ASR/2018, dated 11.03.2019 (to which one of us, the JM was a party). In its aforesaid order, the Tribunal after drawing support from the judgment of the Hon ble High Court Delhi in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del) and that of the Hon ble High Court of Bombay in the cases of CIT vs. Murli Agro Product (ITA No. 36/2009) (Bom) and Commissioner of Income-tax Vs. Continental Warehousing Corporation (2015) 374 ITR 645 (Bom), had observed, that where as on the date of the initiation of search and seizure proceedings under section 132 of the Act, no assessment proceedings for the year under consideration were pending, then, in the absence of any incriminating evidence found during the course of search and seizure proceedings no addition/disallowance could have been made in respect of the unabated assessment of the assessee for the said year. The relevant observations of the Tribunal are culled out as under: 9. We have deliberated at length on the issue under consideration, and find that our indulgence in the present appeal has been so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he absence of any incriminating material having been found in the course of such proceedings no addition could have been validly made in the hands of the assessee. We thus not being able to persuade ourselves to subscribe to the view taken by the CIT(A) who had upheld the order of the A.O, thus set aside his order and vacate the addition of Rs.1,00,000/- that was sustained by him. 11. The appeal of the assessee is allowed in terms of our aforesaid observations. On the basis of our aforesaid observations, we concur with the claim of the Ld. AR that now when as on the date of the initiation of search and seizure proceedings under section 132 of the Act as no assessment or reassessment proceedings for the years under consideration were pending in its case for AY 2006-07 to AY 2010-11, therefore, in the absence of any incriminating evidence found during the course of search and seizure proceedings for the said years, no addition/disallowance could have been made in respect of the unabated assessment of the assessee for the said respective years. We, thus, in terms of our aforesaid observations vacate the additions made by the A.O while framing the respective assessments vide his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again placed on record the supporting documentary evidence, viz. names and addresses of the share applicants, income-tax credentials of the investors, certificates of registration of ROC, bank statements of the investors a/w the audited financial statements and confirmations of the respective investors, and thus, discharged the primary onus that was cast upon it for proving the authenticity of the aforesaid transactions. However, the A.O without disproving the claim of the assessee on the basis of any concrete material had most arbitrarily dubbed the same as unexplained cash credits u/s.68 of the Act. In fact, the CIT(Appeals) after perusing the bank statements a/w. the audited financial statements and confirmations of the investor companies, had observed, that the same duly established the factum of making of the respective investments by the share applicants. Accordingly, the CIT(Appeals) on the basis of exhaustive deliberations in her order had vacated the respective additions of Rs. 1,66,70,000/- for A.Y.2006-07 and Rs.55,00,000/- for A.Y.2008-09 that were made by A.O. For the sake of clarity the relevant observations of the CIT(Appeals) are culled out as under: 13. I have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, howsoever, the appellant has made elaborate submissions distinguishing the facts. I am convinced with the explanation of the appellant that the decisions relied upon by the A.O are not applicable in the facts of the present case, as there is nothing on record which can indicate that the receipt of share application money was by way of accommodation entries only. It is also not the case of the A.O that the investors have accepted by way of statement that the sums paid to the appellant was in fact received from the appellant and investors merely routed the undisclosed income of the appellant through money laundering process in the form of share application money. In the backdrop of these facts and documentary evidences, in my considered opinion, the identity and creditworthiness of the subscribers has been established and cannot be doubted. It is not justified on the part of the A.O to simply reject the documentary evidenceson record and take an adverse view and clothing the case of the appellant with the judicial pronouncements which have been rendered on absolutely different facts and circumstances. 13.4 The appellant has relied upon various judicial pronouncements and corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary evidences adduced by the appellant such as confirmations from the share applicants, their PAN, certificate of incorporation of subscriber companies. The subscription for the shares was received through cheques. The , Investor-companies are duly registered with ROC. Those companies were also having their income tax PAN numbers and have regularly filed the returns of income. No material was brought on record by the A.O independently of the information received, if any, from the investigation wing of the Income Tax Department to show that the monies represented the appellant's undisclosed income. 13.6 The Hon'ble Supreme Court in CIT vs. Lovely Export, 216 ITR 198 SC and the Delhi High Court in Divine Leasing and Finance Limited, (2008) 299 ITR 268 have held that in the instances of money received towards share capital, only the identity of the share holders needs to be proved and once that is established and it is also shown that the money did in fact come from them, it is not for the assessee to prove as to how the share applicants came to be in possession of the money. In the light of the above discussion, I am inclined to agree with the arguments and evidences provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed accommodation entry providers , whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such entry providers . The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre- meditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011] 196 TAXMAN 441(Delhi); (r) Commissioner of Income-tax v. Orbital Communication (P.) Ltd. [2010] 327 ITR 560 (DELHI); (s) Commissioner of Income-tax-I v. HimatsuBimet Ltd. [2011] 12 taxmann.com 87 (t) Commissioner of Income-tax - I, Jaipur v. A.L. Lalpuria Construction (P.) Ltd. [2013] 32 taxmann.com 384 (Rajasthan); (u) Luminant Investments (P.) Ltd. v. Deputy Commissioner of Income-tax, Central Circle 40, Mumbai [2014] 42 taxmann.com 14 (Mumbai - Trib); 13.10 Overall, I am convinced that the appellant has been able to establish the identity and creditworthiness of the subscribers as also the genuineness of the transactions. In my considered opinion, the ratio of the aforesaid judgements of the Hon'ble Supreme Court in Lovely Exports and that of jurisdictional High Court are certainly binding in nature on all the revenue authorities and courts etc. and further, the judgement of the jurisdictional High Court as well as that of the Hon'ble Supreme Court in Lovely Exports has been rendered on identical facts. Hence, it is impermissible to deviate from the ratio laid down therein and against the law of judicial precedents. In view of the above and respectfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of appeal No. 4 5 raised by the revenue in its appeal for AY 2006-07 AND Grounds of appeal No. 3 4 for AY 2008-09 are dismissed. 28. We shall now deal with the grievance of the department that the CIT(A) had grossly erred in law and on the facts of the case in vacating the two fold additions made by the A.O, viz. (i) addition on account of gross profit on unrecorded sales : Rs.36,32,610/-; and (ii) addition on account of initial unrecorded investment for making unrecorded sales : Rs. 34,79,761/-. 29. As observed by us hereinabove, the controversy in hand finds it roots in the adverse inferences that were drawn by the A.O in the hands of the assessee company for the A.Y2006-07 to A.Y2012-13 by relying on the torn pieces of papers which areallegedly stated to be a printout of a document titled as Product Sales Summary that were retrieved in the course of search and seizure proceeding conducted on the assessee from a dustbin lying in his shop located at Sadar Bazar, Raipur. As observed by us hereinabove, the A.O had claimed that the aforesaid torn pieces of paper referred to total sales of Rs.67,98,08,604.90/- (rounded to Rs.67,98,08,605/-) for various months of F.Y.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for supplying the copy of the aforesaid torn pieces of paper that were being relied upon for inferring undisclosed sales, had failed to do so, thus, the same as per the principles of natural justice could not have been acted upon for drawing adverse inferences at the back of the assessee; (iii) that as the aforesaid envelope containing torn pieces of paper did not form part of the seized documents that were inventorized in the course of the search proceedings, therefore, the same did not carry any evidentiary value; (iv) the fact that the copy of the envelope made available by the department to the assessee revealed that the same was stapled more than once, therefore, the fact that the same had been opened at the back of the assessee could not be ruled out; (v) that contrary to the claim of the department in the statement of Shri Kamlesh Burad (supra) it was nowhere stated by him that the torn papers which were retrieved in the course of the search proceedings were kept in an envelope; and (vi). that as the torn pieces of paper were kept in an envelope which was neither sealed by wax nor contained any signature of the authorized official, therefore, the same on the said count too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of the statement of Kamlesh Burad. I have carefully perused the statement of Shri Kamlesh Burad, however, perusal of the said statement of Shri Kamlesh Burad does not in any way lead to an inference that the torn document was part of the statement or was otherwise referred in the said statement. I find that based on the said torn papers, the A.O. had raised query no.5 part B of questionnaire dated 07.10.2013 which has been discussed at para 8.4 to para 8.8 of the assessment order. Thereafter, the A.O has worked out the quantum of unrecorded sales for the period from 01.04.2007 to 17.03.2012 i.e. date of search and also the gross profit and initial investment. 9.2 I have carefully perused the panchnama dated 26.02.2014. It is seen that, even according to the A.O, the torn papers were hundreds in number and it was extremely difficult to put the torn papers together to reconstruct the original sheets. This exercise continued for six hours, but none of the sheets could be reconstructed and read in entirety. Finally, the envelope was sealed. Photocopy of the torn papers also could not be furnished to the appellant. The issue that needs consideration is whether or not any crede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may well be the basis of suspicion, however, these cannot per se constitute the basis of the addition, though it can very well be a starting point for further investigation. In Lalchand Bhagat Ambica Ram vs. CIT: (1959) 37 ITR 288, the Supreme Court disapproved the practice of making additions in the assessment on mere suspicion and surmises or by taking note of the notorious practice prevailing in trade circles. 9.5 The significance tangible evidence h s been emphasized in various judicial pronouncements. I am convinced that there was no meaningful and tangible material before the A.O nor has the A.O brought any such evidence on record to corroborate his suspicion. The case of the appellant finds support from the decision in Income Tax Officer vs. W.D. Estate P. Ltd. (1993) 46 TTJ (Born) 143: 45 ITD 473. Similar ratio was laid down by the Hon'ble High Court of Delhi in Commissioner of Income Tax Vs. Discovery Estates Pvt. Ltd. vide order dated 18th February, 2013 (2013) 356 ITR 159 (Delhi). 9.6 Further, I find that no unrecorded asset or investment was found during the course of search with which undisclosed income of such magnitude worked out by the AO could be cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, A.O. was not justified in multiplying and estimating the sale for the entire year on the basis of these torn bills found only for one month i.e. Mach as there is no evidence or material found at the time of search that the assessee was indulged in making sales out of books of account throughout the year. In the absence of such material found at the time of search the sale cannot be estimated on the basis of torn bills found for a month at the time of search. At the most the unaccounted sales can be taken as Rs.18,49,000/- and applying 2 percent profit rate on which the calculation of profit comes to Rs.36,980/-. The order of CIT(A) was accordingly modified 9.9 If general/casual/routine observations of the AO are to be considered as material evidence for the purpose of framing an assessment, the AO shall have blanket and arbitrary powers to dispose of the scrutiny assessments according to his whims and fancies which is not the spirit of the circulars issued by the Board from time to time on scrutiny assessment. An assessment cannot be made arbitrarily and in order that an assessment can be sustained, it must have nexus to the material on record. (CIT v. Mahesh Chand [1983] 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. It is needless to emphasis that failure to comply with the principles of natural justice renders the action non est as well as the consequences thereof. 9.11 No evidence has been brought on record by the A.O to prove that the appellant did indulge into unaccounted sales to warrant such estimation of profit. Looking to the facts and circumstances of the case as also decisions cited above, the additions made on the basis of torn papers on account of unaccounted gross profit for A.Y. 2006-07 to 2012-13 and addition on account of unexplained initial investment in A.Y. 2006-07 cannot be sustained. Hence, the additions are deleted. The appellant gets relief as tabulated below: A.Y. Profit on suppressed sale Initial investment for suppressed sale 2006-07 36,32,610/- 34,79,761/- 2007-08 4,19,99,190/- --- 2008-09 4,26,78,875/- --- 2009-10 4,70,35,129/- --- 2010-11 6,60,87,326/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grounds of appeal Nos. 1 2 Dismissed 2010-11 ITA No. 335/RPR/2014 Grounds of appeal Nos. 1 2 Dismissed 2011-12 ITA No. 336/RPR/2014 Grounds of appeal Nos. 1 2 Dismissed 2012-13 ITA No. 337/RPR/2014 Grounds of appeal Nos. 1 to 4 Dismissed 34. We shall now deal with the grievance of the revenue that the CIT(Appeals) while disposing off the appeals of the assessee for AY 2006-07 to AY 2012-13 had failed to give a reasonable opportunity to the AO to place his submissions on the issues involved in the respective appeals. 35. We have heard the Ld. Authorized Representatives for both the parties on the aforesaid issue and perused the order of the CIT(Appeal). After giving a thoughtful consideration to the aforesaid grievance of the department we find no substance in the same. On a perusal of Para 2.1 of the order of the CIT(Appeals), it transpires that he had in the course of the proceedings forwarded the written submissions of the assessee to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dismissed 2010-11 ITA No. 335/RPR/2014 Ground of appeal No. 3 Dismissed 2011-12 ITA No. 336/RPR/2014 Ground of appeal No. 3 Dismissed 2012-13 ITA No. 337/RPR/2014 Ground of appeal No. 3 Dismissed 36. We shall now deal with the objection of the assessee that as the A.O while framing the assessment had not acted independently and had framed the impugned assessment as per the directions and instructions issued by the Investigation Wing of the Department, therefore, the same could not be sustained and was liable to be struck down on the said count itself. 37. On a perusal of the assessment order, we find that the same is accompanied with an enclosure, viz. Office Note (not for the assessee) , which reads as under: On a perusal of the contents of the aforesaid Office Note (not for the assessee) , it transpires that the respective assessments have been framed by the A.O subject to the approval /acceptance of the Investigation Wing, Raipur. In fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rieved in the course of the search proceedings from a dustbin lying in the shop of the assessee at Sadar Bazar, Raipur was for the very first time opened by the department on 26.02.2014 in the presence of certain persons, viz. the assessee, two independent witnesses, representative of the investigation wing and the Assessing Officer, Page 18 Para 8.10 of the assessment order, however, very strangely the AO had vide his Notice u/s 142(1), dated 07.10.2013, Page 11 Para 8.8 of the assessment order, after referring to the impugned contents of such torn papers had way back i.e prior to the opening of the aforesaid envelope called upon the assessee to explain as to why its books of account may not be rejected and its undisclosed sales and the consequential unaccounted income be not estimated. On a perusal of the aforesaid facts, it can safely be concluded that the impugned assessments for the AY 2006-07 to AY 2012-13 have been framed by the AO not on the basis of his independent application of mind, but as per the approval/acceptance; or in fact at the instance of the Investigation Wing. 38. Be that as it may, as we have dismissed the appeal filed by the revenue and have upheld t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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