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TMI Blog2022 (11) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 59,37,13,167/- on account of unexplained purchases while holding that the books of accounts of the assessee were defective. 2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition on account of unexplained purchases of Rs. 59,37,13,167/- and substituting the same with GP addition of 0.20% amounting to Rs. 12,53,273/- only, which was without any basis. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in not upholding the action of the AO in disallowance of Rs.36,67,44,756/- u/s 40A(3) of the Act and in holding that no addition was made by the AO u/s 40A(3) whereas the AO had categorically mention this addition in the order and also initiated penalty u/s 271(1)(c); though no separate addition was made considering the disallowance of higher amount on account of bogus purchases. 4. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in adjudicating the addition made under section 40A(3) of the Act when the assessee had not taken any ground in this respect. 5. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of Rs. 2,27,000/- being 20% of transportation expenses made by the AO without there being any incriminating material on record. (b) ad-hoc estimated disallowance of Rs 90,000/- being 10% of certain administrative expenses made by the AO without there being any incriminating material on record. (c) ad-hoc estimated disallowance of Rs 8,53,084/- being 15% of paddy husk expenses made by the AO without there being any incriminating material on record." 4. A search and seizure operation u/s 132(1) of the Income Tax Act, 1961 ('Act' for short) was conducted on 17/09/2010 in the case of Sanya Group. The assessee being one of the group case of M/s Nagar Dairy and the case was also covered u/s 133A of the Act. During the course of search and seizure operation at the business premises of M/s AIMS Promoters Pvt. Ltd. certain documents relating to the assessee company were found and seized which have been impact on income of the assessee. As per the A.O., the case of the assessee has been covered u/s 153C of the Act. Accordingly, notice u/s 153C was issued on 26/09/2011 and the assessment was completed on 28.03.2013 u/s 153C. 5. Aggrieved by the additions made in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee on 26/09/2012. A copy of the satisfaction note for issuing notice 153C of the I.T Act for the Assessment Years 2007-08 to 2009-10 along with the covering letter of the Deputy Commissioner of Income Tax has been made available in Paper Book Page No. 58 to 59 which are reproduced hereunder:- Notice u/s 153C: Satisfaction Note 11. The Ld. CIT(A) while dealing with the appeal and on analyzing the above facts based on the material on record found that " there was nothing on record to suggest that A.O. of the searched party did not prepare the satisfaction note u/s 153C in the case of the assessee as alleged by it." 12. The Hon'ble Delhi High Court in the case of Pr. Commissioner of Income Tax, Delhi Vs. N. S. Software (Firm) [2018] 93 taxman.com 21 (Delhi) in an identical situation the Jurisdictional High Court held that even if the Assessing Officer of the searched person is the same as Assessing Officer person to whom document belonged, separate satisfaction notes must be recorded and since Assessing Officer failed to record specific satisfaction as to how recovered material belonged to assessee, assessment u/s 153C was unjustified. The relevant portion is repro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153C: Compliance with the requirements of s. 153C is mandatory. * If the AO of the searched person is different from the AO of the other person, the AO of the searched person is required to transmit the satisfaction note & seized documents to the AO of the other person. * He is also required to make a note in the file of the searched person that he has done so. However, the same is for administrative convenience and the failure by the AO of the searched person to make a note in the file of the searched person, will not vitiate the proceedings u/s 153C. * If the AO of the searched person and the other person is the same, it is sufficient for the AO to note in the satisfaction note that the documents seized from the searched person belonged to the other person. Once the note says so, the requirement of s. 153C is fulfilled. * In such case, there can be one satisfaction note prepared by the AO, as he himself is the AO of the searched person and also the AO of the other person. However, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person. In such a situation, the satisfaction note would be qua the other pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e says so, then the requirement of Section 153C of the Act is fulfilled. In case, where the Assessing Officer of the searched person and the other person is the same, there can be one satisfaction note prepared by the Assessing Officer, as he himself is the Assessing Officer of the searched person and also the Assessing Officer of the other person. However, as observed hereinabove, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person. In such a situation, the satisfaction note would be qua the other person. The second requirement of transmitting the documents so seized from the searched person would not be there as he himself will be the Assessing Officer of the searched person and the other person and therefore there is no question of transmitting such seized documents to himself." 17. Hence, in keeping in view the facts of the case and the judgment of the Hon'ble Apex Court and the satisfaction recorded by the ACIT, Central Circle- 21 who is the common AO of the searched person and the other person, the ground raised by the assessee are liable to be dismissed. Ground No. 2 & 3 18. The Ld. Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to 13th September 2010 (for ISRPL) and 1st April to 4th September 2010 (for VSIPL). Both sets of documents were seized not from the respective 5 ITA-6576/D/2013 & C.O. No.300/D/2016 Assessees but from the searched person i.e. Jagat Agro Commodities (P) Ltd. In other words, although the said documents might 'pertain' to the Assessees, they did not belong to them. Therefore, one essential jurisdictional requirement to justify the assumption of jurisdiction under Section 153 C of the Act was not met in the case of the two Assessees. 31. As regards the second jurisdictional requirement viz., that the seized documents must be incriminating and must relate to the AYs whose assessments are sought to be reopened, the decision of the Supreme Court in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society (supra) settles the issue and holds this to be an essential requirement. The decisions of this Court in CIT-7 v. RRJ Securities (2016) 380 ITR 612 (Del) and ARN Infrastructure India Limited v. ACIT [2017] 394 ITR 569 (Del) also hold that in order to justify the assumption of jurisdiction under Section 153 C of the Act the documents seized must be incriminat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, the alleged documents were seized during the search are not pertaining to the assessment year 2007-08 to 2009-10 and the same is belongs to Assessment years 2010-11 & 2011-12, therefore, the addition made by the A.O. for the years under consideration i.e. 2007-08 to 2009-10 cannot be sustained by applying the ratio laid down in the case of ACIT, Vs. Anush Finlease & Construction (P.) Ltd. [2019] 104 taxmann.com 295 (Delhi-Trib.), PCIT Vs. Index Securities (P.) Ltd. [2017] 86 taxmann.com 84, CIT Vs. Kabul Chawla (380 ITR 573). Thus, it is clear that the satisfaction though recorded was not based on the material relevant to the year in question and also the additions made were not based on the incriminating material found and seized during the course of search u/s 132. 24. Accordingly, Ground No. 2 & 3 of the C.O. No. 26, 27 & 28/Del/2016 filed by the assessee are allowed. 25. In the result, the assessment order passed for the AY 2007-08, 2008-09 & 2009-10 are liable to be quashed. 26. For the sake of completeness, we have gone through the additions made by the AO and the merits of the issues. The AO has treated the purchases u/s 40A(3) but no addition has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made applying a flat gross profit rate, no disallowance possible invoking 40A(3). Thus when books of account of the appellant have been rejected and GP rate is applied, no addition under section 40A(3) of the Act could be survived. - CIT vs. Banwari Lal Banhidhar (1998) 229 ITR 232 (HC - All.). 30. Thus, the ld. CIT(A) has cogently brought on record about the fact of genuineness of the payment and applicability of Rule 6DD along with the relevant case laws. Under the above mentioned facts and circumstances, the CIT(A) at page no. 285 held that action of AO u/s 40A(3) is not upheld. Since, no addition has been made by the AO under this section holding that the addition has been made on account of unexplained purchases, any adjudication by the Tribunal would be only academic in nature. Addition on account of unexplained purchases: 31. The ld. CIT(A) has recorded the detailed statement of all the purchase parties on oath and came to a conclusion that the identity, genuineness and creditworthiness of the parties has been proved beyond doubt. The relevant part of the order of the ld. CIT(A) dated 12.06.2015 page no. 264 & 265 para (xvii) and (xviii) pertaining to this issue are as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the addition on account of purchases of milk made by the AO, the assessee filed appeal before the ld. CIT(A). 35. We find that the issue is pertaining to purchases u/s 40A(3), addition on account of unexplained purchases are on the similar lines of the A.Y. 2007-08. The ld. CIT(A) has also dealt the issues in the similar manner after examination of the parties u/s 131 in the presence of the Assessing Officer concerned. Hence, we decline to interfere with the order of the ld. CIT(A) on this issue. 36. With regard to ad-hoc estimation of GP of 0.81% of the sales for the A.Y. 2008-09 and 0.50% on the sales for the A.Y. 2009-10 we hold that the adjudication and the ratio held for the A.Y. 2007-08 is applicable mutatis mutandis. ITA No. 5472/Del/2015 : A.Y. 2008-09 - Deemed dividend u/s 2(22)(e) 37. On this issue, we find that the assessee did not hold any shares in M/s AIMS Promoters Pvt. Ltd., therefore, the assessee is neither the registered nor beneficial shareholder of M/s AIMS Promoters Pvt. Ltd. 38. Further, the ld. CIT(A) has observed on page 324 & 325 of the appellate order that ".......the AO was totally unwarranted in adding the unsecured loan, treating it as deem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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