TMI Blog2024 (3) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... e transactions with different parties appearing under the head Entry in the loose paper by accepting the bonafides of transactions qua different entities. The transaction with Sunmoon was disputed in isolation on the grounds of non-compliance by the lender. As loose paper found in the course of search do not constitute incriminating material belonging to the assessee per se. As noted, the AO himself has found the other transactions mentioned in the loose paper to be correct and worthy of acceptance. The only transaction qua Sunmoon has been questioned, that too, owing to non responsive lender in the course of original proceedings. As a corollary, the provision of Section 68 has been applied dehors any incriminating material found in the course of search. Such course of action is not permissible in law in the light of Abhisar Buildwell ( 2023 (4) TMI 1056 - SUPREME COURT] The statement made by the Director of the assessee is required to be read down owing to its retraction. In such circumstances existing the present case, it is difficult to accept the stand of the Revenue that loan from Sunmoon is a mere accommodation entry where it has been demonstrated that the assessee has incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of Annexure A-1 found and seized from the premises of the assessee considered that loan taken by the assessee from lender M/s. Sunmoon Vision Infra Developers Pvt. Ltd. ( Sunmoon in short) to be an accommodation entry. The assessee submitted before the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 reproduced hereunder: 9.6 I have carefully considered the facts of the case, the assessment order, the remand report from the AO and the written submissions of the Appellant in respect of Ground no 5.3. It is seen that the loan was obtained from banking channel, which was g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 where, there's neither any reference to any seized material nor any statement recorded during search on this issue indicating undisclosed sales pertaining to the year under consideration. 8.4 On perusal of the impugned assessment order that the AO has reproduced various sheets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 vary from 0.5 % to 1% of total sales, 1% of the total sales (being highest of unaccounted cash sales admitted by Gaurav Agarwal) which comes to around 15.26 crores ( 1% of the Net Revenue) for 11 years i.e. AY 2010-11 to AY 2020-21 against the declared additional business income @ 0.5% of its net sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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) on this issue, therefore, we uphold the order of the Ld. CIT(A) and confirm the relief granted by him. Accordingly, the appeal filed by the Revenue for the assessment year 200809 stands dismissed . (b) The ITAT Delhi in the case of M/S. Minda Industries Ltd., vide judgment dated 27 April 2018/ ITA No. 4297 to 4300/D/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 which would justify such an addition specially on the basis of estimates and assumptions. Irrefutably, presence of evidence for each assessment year is a sine qua non for framing an assessment under section 153A of the Act. Therefore, the addition merely based on suspicion that the appellant must have made out of the books cash sales in each assessment years b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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.a. Stonex Lashkery Jewellers Pvt. Ltd. Rajiv 1,200,000.00 14.40% p.a. Stonex Nice Finance Leasing Pvt. Ltd.- Rajiv 7,500,000.00 14.40% p.a. Stonex Professional Softec Pvt. Ltd. Rajiv 2,500,00.00 14.40% p.a. Stonex Shree Modi Cement Rajiv 5,000,000.00 15% pa Stonex Uma Enterprises Pvt. Ltd. - Rajiv 1500,000.00 14.40% pa Stonex 39,200,000.00 Mahvir Ji Jaipur Eyesore Tradecom Mahavir (Jaipur) Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in respect of the parties listed under the head Entry in the purported loose paper seized in the course of search and based on outcome such verification, found no reason to doubt the propriety of transactions appearing against names of various parties except Sunmoon . The sole basis for doubting the bona fides of Sunmoon transaction was lack of response from the lender party in the course of search assessment. The assessee thus submits that the additions have been made on the premise that the lender has not responded. No incriminating material was found in the course of search indicating any cash payments against the loans received. The statement was obtained from Director in the course of search which cannot be treated as voluntary statement adverse to the assessee. All the transactions with different parties appearing under the head Entry have been entered in the regular course of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted 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 has also been partly repaid prior to search. Such traversing facts requires to be given due weightage. The lender has confirmed the loan. The capacity of loan has not been doubted by the Revenue Authorities. Thus, when seen on standalone basis, one cannot say that identity, creditworthiness of lender and genuineness of transaction is lacking in any manner to a reasonable person instructed in law. Thus, statutory discretion vested with the AO under Section 68 is fairly required to be exercised in favour of the assessee as rightly held by the CIT(A). 12. We also simultaneously note that the AO himself has legitimized the transactions with different parties appearing under the head Entry in the loose paper by accepting the bonafides of transactions qua different entities. The transaction with Sunmoon was disputed in isolation on the grounds of non-compliance by the lender. Thus, the loose paper found i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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