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TMI Blog2025 (3) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... enue has filed cross appeals against the order of ld. Commissioner of Income-tax (Appeals)-XXVI, New Delhi (hereinafter referred to 'Ld. CIT (A)') dated 25.03.2019 for AYs 2010-11 to 2012-13. The assessee, Rama Hygienic Products Pvt. Ltd. as well as Revenue has filed cross appeals against the order of ld. Commissioner of Income-tax (Appeals)-XXVI, New Delhi (hereinafter referred to 'Ld. CIT (A)') dated 25.03.2019 for AYs 2009-10 to 2012-13. The assessee, Rama Pashu Aahar Pvt. Ltd. as well as Revenue has filed cross appeals against the order of ld. Commissioner of Income-tax (Appeals)-XXVI, New Delhi (hereinafter referred to 'Ld. CIT (A)') dated 25.03.2019 for AYs 2009-10 to 2011-12. 2. Since the issues are common and the appeals are connected, therefore, the same are heard together and being disposed off by this common order. First we take up ITA No.5028/Del/2019 for AY 2010-12 in the case of Rama Allied Products Marketing Pvt. Ltd. as lead case. 3. Brief facts of the case involved in AY 2010-11 are, a search and seizure action was carried out on the Param and Rama group on 28.02.2014 and various residential and business premises of the assessee were also covered. The case was ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses were made by the Rama group of companies and they raised bogus sales vouchers only as per the directions of Sanjeev Kumar who was looking after the affairs of Rama Pashu Aahar Private Ltd., Rama Allied Products Marketing Pvt. Ltd. and Rama Hygienic Products Private Ltd.. Based on the above said statement and correlating transport vouchers and bills, AO came to the conclusion that the purchases made by the assessee amounting to Rs. 2,38,00,000/- during the year are bogus purchases and accordingly he proceeded to make the addition. Further he observed that as per Annexure A-35 seized from party RU-1 wherein at serial no.15 the tally data contained the transaction relating to Rama Rusk Unit Store wherein turnover was recorded at Rs. 4,45,112/- for FY 2009-10. Since the data entries are absurd data entries and the tally data are in educational mode and during post search enquiries rejecting the explanations submitted by the assessee, he proceeded to make the addition of Rs. 4,45,112/-. 4. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A) and filed detailed submissions. After considering the detailed submissions of the assessee, ld. CIT (A) dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of assessee by Rs. 5,33,120/- (i.e. Rs. 2,38,00,000/- * 0.0224) on the alleged ground that assessee has suppressed the profit, is bad in law and against the facts and circumstances of the case. 7. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs. 4,45,112/- on account of seized digital data on the basis of material allegedly found during the course of search and further erred in treating the same as unaccounted sales of assessee and that too by recording incorrect facts and findings and in violation of principles of natural justice. 8. That in any case and in any view of the matter, addition made in the impugned assessment order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search. 9. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A & 234B of Income Tax Act, 1961. REVENUE'S APPEAL 1. That the Ld. CIT(A) has erred in facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed its return of income for the present assessment year on 25.08.2010. Therefore, he submitted that in the case of assessment years involving AYs 2009-10, 2010-11, 2011-12 & 2012-13 are unabated assessment years and he submitted that the time period to issue notices u/s 143(2) has been already over on the date of search and he submitted that these assessment years are unabated assessment years. Further he brought to our notice pages 6 to 17 of the assessment order and submitted that certain statements were recorded before search and also post search proceedings and the AO has heavily relied on the statements recorded before search. He submitted that it clearly shows that there is no incriminating material found during the course of search in respect of purchase of Maida from T.R. Traders. Further he submitted that the statement of Mohan Lal Gupta was recorded on 16.04.2012 and the same was reproduced at page 28 of the ld. CIT (A)'s order. He further submitted that statement of Devender Kumar was recorded on 26.07.2013 and brought to our notice page 24 of the ld. CIT (A)'s order. He further submitted Devender Kumar statement dated 26.07.2013 (refer page 17 of the assessment order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to initiate the proceedings u/s 153A and he observed that the issue of existence of incriminating material has to be considered in totality and he further observed that the issue has to be construed with the trade practices and the expected action of the independent entity in normal circumstances. Ld. CIT (A) justified with the argument that it had to construe the incriminating material in harmonious fashion with the general and vague observation so relied from the decision of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (2015) 61 taxman.com 412 (Delhi). Accordingly, he rejected the submissions of the assessee and dismissed the grounds in this regard. Ld. AR submitted that since there is no incriminating material found as a result of search which could have shown the alleged bogusness of the purchases from T.R. Traders and in this regard, he heavily relied on the following decisions :- (i) CIT vs. Kabul Chawla - (2016) 380 ITR 0573 (Delhi); (ii) Pr. CIT vs. Meeta Gutgutia Prop. Ferns 'N' Petals & Ors. 395 ITR 526 (Delhi); (iii) PCIT vs. Kurele Paper Mills P. Ltd. 380 ITR 571 (Delhi); and (iv) CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an agent of the assessee who sources raw material and utilizes the transporters. His statements are very much relevant and the informations contained in the statements of Mohan Lal Gupta and Sanjay Mudgal, Accounts Head are relevant and particularly Mohan Lal Gupta has confirmed the method of transactions of purchases made by the Rama group which were corroborated during the course of search and further he brought to our notice page 25 of the appellate order wherein ld. CIT (A) has observed that the Assessing Officer is in possession of specific information flowing consequent to the search proceedings. It is undisputed fact that department found information in form of various documents and statements of people on the modus operandi during the course of search operations that upon collating with the information received lead to specific inputs in respect of genuineness of the equity infused in the companies of the group. The material gathered prima facie incriminating in nature and substance to attract the provisions of section 153A of the Act. Further he relied on the decision of E.N. Gopa Kumar vs. CIT (2016) 75 taxman.com 215 (Kerala) and N.K. Industries 72 taxman.com 289 (Gujar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements which were recorded from Mohan Lal Gupta were not supplied to the assessee for any cross objection. Based on the statements recorded prior to search, assessee was asked to submit stock statements and other purchase details along with transport vouchers etc. We observed that the AO has heavily relied on the statements recorded prior to search and also statements recorded from Mohan Lal Gupta subsequent to search and not shared those statements with the assessee and proceeded to complete the assessment merely on the basis of statements without bringing any corroborative evidence relating to transactions carried on by the assessee in particular unabated assessment years. Further we observed that even ld. CIT (A) has not brought on record any incriminating material. Further he proceeded to reject the plea of the assessee on the basis of circumstantial evidence and presumed that assessee group must have carried on its transaction based on the statements recorded prior to search. We observed that it is fact on record that no corroborative evidences were found during the search and further the AO has proceeded to make the addition only and only on the basis of statements recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut reference to any other material discovered during search and seizure operations, empower the AO to frame the block assessment. This court in Principal Commissioner of Income Tax, Delhi v. Best Infrastructure (India) P. Ltd., has inter-alia held that: "38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal." 9. In Commissioner of Income Tax v. Harjeev Aggarwal,4 this Court had held as follows: "23. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 24. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. 28. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessee's to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessee's clearly stated that they did not know, could not have been shifted to the Assessee's. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross examination is sufficient to discard his statement. 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessee's themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessee's were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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