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TMI Blog2024 (3) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... ied out of the company. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred and on facts in deleting the addition of Rs. 2,24,50,000/- ignoring the fact that the director of the company Sh. Gaurav Agarwal has accepted in his statement recorded during search operation that it is merely an accommodation entry and the cash was given to Sunmoon Vision Infra Developers Pvt. Ltd in lieu of RTGS." 3. Briefly stated the assessee is a private limited company engaged in the import and sale of marble and other natural stone from various countries. The assessee filed its return of income under Section 139(1) of the Act on 24.09.2013 declaring return income at Rs. 2,91,61,280/-. The return so filed was subjected to regular assessment under Section 143(3) of the Act vide order dated 26.03.2015. Thereafter, search and seizure operation was carried out under Section 132 of the Act on 19.12.2019 in Stonex Group of cases including assessee. Consequently, the assessment proceedings were initiated under the provisions of Section 153A r.w. Section 142(1) r.w. Section 143(3) of the Act. In the course of the assessment proceedings, the AO on the basis of page no.47 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing such loan to be an accommodation entry despite no incriminating evidence gathered in search to suggest payment of cash as quid pro quo against corresponding receipt of loan record through banking channel. The AO drew adverse inference from page no.47 of Annexure A-1 seized in the course of search. 5.2 The CIT(A) obtained remand report dated 10.06.2022 and observed that identity of the lender cannot be doubted in the facts of the case. The CIT(A) observed that the loans were obtained from banking channel and supported by Loan Agreement which depicts that loan was granted on commercial considerations at an annual interest of 9% per annum. The CIT(A) on perusal of the remand report also observed that lender has responded to notice under Section 133(6) and filed Audited Financial Statement and its ITR. The AO in the aforesaid remand report has also accepted the net worth of the company which shows the creditworthiness of the lender company also. The CIT(A) was thus satisfied with the identity and creditworthiness of the lender and genuineness of the transaction carried out. 5.3 The relevant operative paragraph of the order of the CIT(A) granting relief to the assessee is reproduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not based on any material found or seized during the course of search but rather estimates which doesn't corroborate the contention of AO that the appellant was involved in making undisclosed sales in any manner. 8.2 The search was conducted in the case of the appellant on 19/12/2019. As per the submissions of the appellant, the original return of income was filed on 24/09/2013 wherein income of Rs. 2,91,61,280/- was declared. The said return got processed u/s 143(1) of the Act on 28/04/2014. Thereafter, vide an order dated 26/03/2015, an assessment was framed under section 143(3) of the Act with respect to the year under consideration wherein the returned income was accepted. 8.3 During the assessment proceedings, the appellant filed a return of income u/s 153A of the Act on 20/02/2021 declaring income of Rs. 2,91,61,280/- i.e. same as declared in the return filed u/s 139 of the Act. Further, as can be seen from the present assessment order, the addition have not been made on the basis of any material found during the search proceedings, but only on the basis of estimation and by taking leverage of theory of extrapolation. This fact is evident from the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hly sales. 0.11 What is the utilization of cash received from your uncounted cash sales? Ans: Almost all this cash is being utilized to pay incentives to the professionals facilitating these sales and other sales also in the company as none of them raise invoice for such services and we are bound to pay incentive in cash." 8.6 A perusal of the said statement reflects that the total unaccounted cash sales was in the range of 0.5% to 1% which as per the above statement was stated two to three years back for the purpose of giving incentive to contractors. Further in the said statement it has been stated that the said unaccounted sale was utilized for the purpose of payment of incentives to professionals facilitating such sales. 8.7 Further, as apparent from the assessment order, the AO while relying on above said submission as quoted in Para 49 of the Assessment Order, did not give any adverse finding or decision based on the images as reproduced in the assessment order and concluded as below in para 57 of the Assessment Order: "57. In view of the submissions of the assessee, judicial precedents relied upon and statement of Sh. Gaurav Agarwal that the unaccounted cash sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT Delhi in the case of M/S Gupta & Co, Put. Ltd, vide judgment dated 14 February, 2019/ ITA Nos. 729 & 730/DEL/2016/A.Yrs 2008-09 & 2009-10 held as under: "5. We have heard both the parties and perused the records, especially the impugned order of the Ld. CIT(A). We note that the judicial position on this issue is quite clear. It is the seized material which gives rise to quantification of unaccounted sales and consequently unaccounted income. The seized material in the instant case contains notings in respect to certain unaccounted sales, namely with respect to 59 parties. The assessment order does not bring on record any such seized material which shows sales out of the books corresponding to each and every sale. Since section 153A of the Act gets invoked only with respect to the incriminating material found during the course of the search, clearly extrapolation without any incriminating material would be contrary to the spirit of the section. There are a large number of judicial decision on the issue, including the ones quoted by the Ld. CIT(A) which support this view. Hence in the facts and circumstances of the case, we do not find any infirmity in the order of the Ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absence of any material suggesting the undisclosed income, the question of extrapolation of addition in the previous year or subsequent year does not arise: (i) ACIT, Central Circle-4 Vs JKG Construction Put. Lt. - ITAT Delhi as reported in 2021 (6) TMI 653. (ії) A.C.IT., Central Circle 2 (2) Nagpur Vs Shri Narendra Maganmal Kothari - ITAT Nagpur as reported in 2021 (12) TMI 1206 (iii) THE DCIT Central Circle -Ill, Ludhiana Vs Shri Inderjit Singh Brar and (Vice-Versa) ITAT CHANDIGARH as reported in 2021 (11) TMI 673 (iv) JT. CIT (OSD) Central Circle -5 (4), Mumbai Vs M/S. Gandhar Oil Refinery (1) Ltd. and (vice-versa) ITAT Mumbai as reported in 2021 (9) TMI 1120 (v) Ms Priya Happykumar Surya Vs ACIT, 29 (2) ITAT Mumbai as reported in 2021 (9) TMI 70 (vi) DCIT, Central Circle 2(2), Pune Vs Shikshana Prasaraka Mandali Sharda Sabhagruha- ITAT Pune as reported in 2021 (6) TMI 903 M/ s. (vii) Mani Square Ltd Vs ACIT Central Circle -3 (2), Kolkata ITAT Kolkata as reported in 2020 (9) TMI 1094 8.11 The legal position is clear that no addition can be made for a particular assessment year without there being an evidence/material qua that assessment year whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. Accordingly, the addition of Rs. 66,80,471/- by the AO is hereby deleted. As such Ground no. 3 is allowed." 7. Aggrieved by the relief granted by the CIT(A) on both counts, the Revenue has preferred appeal before the Tribunal. 8. While the ld. DR for the Revenue has relied upon the assessment order, the ld. counsel for the assessee has strongly defended the first appellate order and took us through the relevant factual matrix in length and case laws as applicable in the factual matrix. 9. We have carefully considered the rival submissions and perused the first appellate order, assessment order, material referred to and relied upon in the course of hearing and case laws cited. 10. The dominant issue as per Ground No.2 concerns addition of Rs. 2,24,50,000/- under Section 68 of the Act attributable to lender Sunmoon. 10.1 On perusal of the record, it emerges that in the course of search under Section 132 of the Act carried on 19.12.2019, a loose sheet as per Annexure A-1 was found that resulted in the impugned addition. The relevant loose paper is reproduced hereunder: Rajiv Bangar Khanda Chawla Trading Co. Pvt. Ltd. - Rajiv 21,500,000.00 15% p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report has been extracted in the first appellate order. The CIT(A), based on the remand report, observed that notice under Section 133(6) was issued by the AO to the lender in the remand proceedings. In compliance to such notice, the lender has furnished copy of loan agreement, confirmation, bank statement and balance-sheet from F.Y. 2012-13 till date. The CIT(A) also observed that the loan was granted at an annual interest of 9%. Besides, the loan has been partly repaid. In the light of these facts, the CIT(A) found force in the plea of the assessee towards existence of satisfactory explanation contemplated under Section 68 of the Act. 10.4 The Revenue before us pointed out that the loose paper clearly categorizes loan from 'Sunmoon' to be 'Entry' which would mean accommodation entry and the Director, Mr. Gaurav Agarwal in his statement has accepted the factum of underlying cash transaction against such accommodation entry. 10.5 The assessee, on the other hand, contends that on a nuanced examination of the assessment order, it will be evident that the AO has not attached any significance to the expression 'Entry' in the loose paper per se. The AO has made independent inquiries i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee qua solitary party 'Sunmoon' on the strength of lack of response to notice issued under Section 133(6) of the Act. 10.7 The ld. counsel also contends that there are plethora of judgments to underscore that statement recorded under Section 132(4) does not constitute incriminating material per se for the purposes of making addition within the scope of Section 153A of the Act in respect of completed assessment viz. Pr.CIT vs. Best Infrastructure Pvt. Ltd., 397 ITR 82 (Del) and CIT vs. Harjeev Aggarwal (2016) 290 CTR 263 (Del) and so on. 10.8 The ld. counsel thus relied upon the judgment rendered by the Hon'ble Supreme Court in the case of Pr.CIT vs. Abhisar Buildwell (P.) Ltd., (2023) 293 Taxman 141 (SC) for the proposition that addition in the instant case under Section 68 is not permissible in law under the Scheme of search assessment envisaged under Section 153A of the Act in respect of completed assessment. 11. As pointed out on behalf of the assessee, we note that both assessee as well as lender have produced tell-tale evidences to support the propriety of loan transaction albeit in the remand proceedings. The loan from Sunmoon has not only carried charge of interest but ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings. The CIT(A), in first appeal, recorded the findings of fact that the AO has referred to various rough sheets which pertained to later years relevant to AY 2017-18 to AY 202021. The CIT(A) has further referred to the statement recorded by the Director in the course of search and observed that the action of the AO is governed by the assumption that where the assessee has indulged in cash sales in later years, similar additions are warranted in AY 2013-14 regardless the fact that no adverse evidence or proof is available on record to corroborate such assumption. The CIT(A) has referred to several decisions to hold that there is no scope of extrapolation in the search assessment based solely on assumptions and surmises in the absence of any tangible material qua the relevant assessment year. 14. We have perused the process of reasoning adopted by the CIT(A) carefully and see no reason to depart therefrom. As observed in several judicial precedents, the additions based on extrapolation of material relating to different other years is not permissible in a search assessment. We thus see no error in the conclusion drawn by CIT(A). The action of the CIT(A) reversing the adhoc additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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