Case Law Details
DCIT Vs Brahmaputra Infrastructure Limited (ITAT Gauhati)
ITAT have heard the rival contentions and perused the material placed before us. Revenue is aggrieved with the deletion of addition of unexplained expenditure u/s 69C of the Act at Rs.4,71,13,264/-. We, on perusal of the finding of the lower authorities notice that Mr. P.D. Deoarah is the director in M/s. Sati Oil Udyog Limited and M/s Assam Vegetable Oil Products Limited. As per the audited books of accounts for FY 2017-18, the closing balance of M/s. Sati Oil Udyog Limited as on 31/03/2018 is stated at Rs.4,09,27,220/- cannot be doubted. These audited financial statements were part of the income tax return filed by the assessee much prior to the date of search. Therefore, genuineness of the closing balance of M/s. Sati Oil Udyog Limited at Rs. Rs.4,09,27,220/- is established.
The remaining amount i.e., Rs.4,71,13,264/- (-) Rs.4,09,27,220/- is the sum at Rs.61,86,004/-. Before us, two fold contentions have been made by the ld. A/R. Firstly, that there is a payment of Rs.62,00,000/-during financial year 2018-19 but it has been wrongly considered by the accountant preparing ledger appearing in the seized documents MB/HD/01 in FY 2017-18, then the alleged balance of Rs.4,71,13,264/-will be reconciled. Second fold of contentions is that the assessee had already offered additional income of Rs.2,46,27,154/- and against this additional income, the assessee has urged for telescoping benefit of Rs.61,86,044/-. We find merit in the second fold of contention and agree with the finding of the ld. CIT(A) that the assessee deserves telescoping benefit of Rs.61,86,044/- against the additional income offered to tax. Accordingly, Ground No. 1 raised by the revenue is hereby dismissed.
FULL TEXT OF THE ORDER OF ITAT GUWAHATI
The present appeals are filed at the instance of the revenue against the separate orders of the Learned Commissioner of Income Tax (Appeals) – Central, North-East Region, Guwahati, passed u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) evenly dt. 15/09/2022, for Assessment Years 2017-18, 2018-19, 2020-21 & 2021-22. The assessee has filed cross-objections for Assessment Years 2017-18, 2018-19 & 2020-21.
2. As the issues raised in all these appeals are identical, they were heard together and are being disposed off by way of this common order.
3. Facts in brief are that, a search and seizure operation was carried out in the case of assessee which is a limited company on 29/01/2021 and was part of the search carried out at “Brahmaputra Group”. Notice u/s. 153A of the Act were issued to carry out the assessment proceedings followed by validly issuing notices u/s 143(2) and 142(1) of the Act. Thereafter, the submissions made by the assessee were considered and assessments were completed making various additions which were challenged by the assessee before the ld. CIT(A) getting partial/complete relief.
4. Aggrieved, the revenue is now in appeal before this Tribunal against the finding of the ld. CIT(A) for Assessment Years 2017-18, 2018-19, 2020-21 & 2021-22 and assessee had filed cross objections for Assessment Years 2017-18, 2018-19 & 2020-21.
5. We first take up the revenue’s appeal in ITA No. 5/GTY/2023 & C.O. No. 27/Kol/2023 for Assessment Year 2017-18.
5.1. The revenue has filed the following grounds of appeal for Assessment Year 2017-18:-
“1. That on the facts of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.2,41,28,500/- made by AO under the head of unexplained cash receipt u/s 69A of the IT Act, 1961 by not taking into consideration the fact that said cash received from Shri M. L. Kayal were found recorded in incriminating material (MB/HD/01) seized during the course of search action.
2. The appellant craves the leave to add/modify/alter any or all the grounds during the course of hearing/pendency of appeal.”
6. The ld. D/R vehemently argued supporting the orders of the ld. Assessing Officer and the ld. Counsel for the assessee relied on the finding of the ld. CIT(A).
7. We have heard rival contentions and perused the record placed before us. We notice that during the course of search, a digital evidence under ID marked MB/HD/01, was seized which is the mobile data backup of Shri Hari Sharma, who in one of the employees of the assessee concern. In the alleged digital evidence, there is a ledger relating to sale of 5 bigha plot in Sila Industrial Park to one Shri M.L. Kayal. An agreement has been entered into and cash amounting to Rs.2,41,28,500/-, is alleged to have been received by the assessee company from Shri M.L. Kayal. Undisputedly, this transaction has not materialized as there is no evidence put forth by the revenue authorities to prove that the assessee has actually sold 5 bigha land at Sila Industrial Park. Now, the issue is confined to the cash sum of Rs.2,41,28,500/-, which the Assessing Officer has treated as unexplained income of the assessee. We notice that the ld. CIT(A) on considering the fact that the ld. Assessing Officer failed to conduct any enquiry with the corresponding land revenue authority about the aforesaid land transactions, deleted the impugned addition observing as follows:-
“Thus, in the peculiar facts of the case, firstly, during the course of assessment proceedings, the Assessing Officer did not conduct any independent third- party enquiry, further the AO tad not brought on record any material which would even remotely prove that the Appellant did ever enter into any transaction with Sin M L KayaL
Presuming and as admitted by the AO that the Appellant did receive cash from Sh. M L Kayal, there is m finding or observation of the AO that the aforesaid alleged cash received by the Appellant from Sh. M L Kayal was utilized, spend or exhausted by the Appellant In the absence of any such finding or observation that the aforesaid alleged cash received by the Appellant from Sh. M L Kayal was utilized, spend or exhausted by the Appellant, it would be only logical to hold that the alleged cash (even if presumed to be received) was available with the Appellant for being repaid to Sh. M L Kayal at the time-of cancellation of my purported land deal.
Further, it is unfathomable and beyond comprehension as to why the AO did not conduct any enquiry with the corresponding land revenue authority under whose jurisdiction the aforesaid land of the Appellant, subjected to the impugned alleged transaction,, fall. It is also unfathomable that even after the Appellant bad furnished details of lands sold by the Appellant to the AO, as to why the AO was still surmising that the Appellant had entered into any alleged sale of land with Sh. M L Kayal.
In any case, peculiar facts of the case, it is noted that the impugned addition has been made based on conjectures and surmises than on any tangible / credible material.
In view of the above reasons, in the absence of any specific enquiry conducted or any specific findings and respectfully following the rationes of above judgments, it is held that the AO had acted on conjectures and surmises by adding a sum of Rs. 2,41,28,500/- on account of amount received by the Appellant from Sh. M L Kayal. Accordingly, the addition of Rs. 2,41,28,500/- made by the Assessing Officer on this account is, hereby, deleted and the instant grounds of appeal raised by the Appellant are, hereby, allowed.”
8. The above finding of the ld. CIT(A) stands uncontroverted by the ld. D/R and it remains admitted facts that the ld. Assessing Officer did not make any independent third party enquiry. It prima facie seems to be a transaction for which the assessee may have received advances but finally transaction did not materialize and the accounts may have been settled. However, there is no evidence to show that the alleged sum is in the nature of unexplained income or unexplained sales of the assessee. Therefore, the finding of the ld. CIT(A) that the impugned addition has been based on conjectures and surmises and not having any reference to tangible/credible material, needs no interference at our end. Accordingly, the sole grievance raised by the revenue is dismissed.
9. Now, we take up C.O. No. 27/GTY/2023. The assessee has raised the following grounds of appeal in the cross-objection:-
1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the assumption of jurisdiction u/s 153A of the Act and, framing of assessment u/s 153 A of the Act both of which deserve to be quashed as such.
2. That the addition made is without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 580 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526.
3. That since approval obtained u/s 153D of the Act was mechanical, illegal and invalid approval, order of assessment made u/s 153A/143(3) is invalid and without jurisdiction.
Prayer: It is therefore, prayed that it be held that notice issued u/s 153 A of the Act and also assessment framed u/s 153A of the Act are without jurisdiction.”
10. Perusal of the above grounds shows that the assessee has challenged the assumption of jurisdiction u/s 153A of the Act on the ground that it is not based on any incriminating material found as a result of search on the assessee. We fail to find any merit in the grounds of appeal raised in the cross-objection since there was a material, incriminating in nature in the form of digital evidence under ID marked MB/HD/01, which gave jurisdiction to the Assessing Officer to carry out the assessment proceedings. Thus, all the grounds raised in the cross-objections are dismissed. In the result, appeal by the revenue and cross-objection filed by the assessee for Assessment Year 2017-18 are dismissed.
11. Now, we take up the revenue’s appeal in ITA No. 06/GTY/2023 for Assessment Year 2018-19. The revenue has raised the following revised grounds of appeal:-
“1. That on the facts of the case and in law, the Ld. CIT(A) has erred by deleting the addition to the tune of Rs.4,09,27,220/- out of total addition of Rs.4,71,13,264/- under the head of unexplained expenditure u/s. 69C of the Income Tax Act, 1961 by not considering the fact that during the assessment proceedings the assesses has failed to explain the transactions mentioned in the incriminating material (MB/HD/01) seized from the assessee’s premises during the course of search.
2. The Ld. CJT(A) has erred by allowing setoff of unexplained expenditure to the tune of Rs,l,ll,56,044/- (i.e. Rs.49,70,000/- + Rs.61,86,044/-) with the undisclosed Income of Rs,2,46,27,154/- offered in the Income Tax return filed by the Appellant under section 153A of the Act by stating that the Appellant is duly entitled to claim telescoping of the Unexplained Expenditure out of the Additional Undisclosed income. However, the Ld. CIT(A) has not taken into consideration the actual findings, that during the assessment proceedings the assessee company has failed to discharge the onus cast upon it to explain the transactions mentioned in the incriminating material seized during the course of search in the assessee’s premises with plausible explanation with corroborative documentary proof.
3. The appellant craves the leave to add/modify/alter any or all the grounds during the course of hearing/pendency of appeal.”
12. Facts in brief are that digital evidence under ID marked MB/HD/01 were seized during the course of search, which contained a ledger account of Mr. P.D. Deorah and Smt. Anju Deorah, promoters of M/s. Assam Vegetables & Oil Products Limited and Sati Oil Udyog Limited. Both these persons are also owner of the land on which the shopping mall at Guwahati City Centre has been constructed by the assessee company. In the seized record, there is a ledger account for period from 01/04/2018 to 22/11/2018 in the name of Mr. P.D. Deorah, wherein opening balance of ledger is stated to be Rs.4,71,132.64/-. The ld. Assessing Officer has alleged that there is a suppression of two decimals and actual balance is Rs.4,71,13,264/-. During the course of assessment proceedings, the ld. Assessing Officer asked the assessee to explain the transactions. The submissions were made stating that these transactions are duly recorded in the books of accounts and one of the transactions for Rs.62,00,000/- which was actually entered in the subsequent years has wrongly been posted in the year under consideration. It was also submitted that the assessee has made a disclosure at Rs.2,46,27,154/- as an additional income for the instant Assessment Year. However, the ld. Assessing Officer was not satisfied and made addition at Rs.4,71,13,264/- being the entry, not explained by the assessee. In the proceedings before the ld. First Appellate Authority, assessee filed the details and satisfied the ld. CIT(A) and impugned addition was deleted.
13. The ld. D/R, vehemently argued supporting the order of the ld. Assessing Officer whereas the ld. Counsel for the assessee referred to the written submissions and, also relied on the finding of the ld. CIT(A) appearing at page 58 to 88 of the impugned order.
14. We have heard the rival contentions and perused the material placed before us. Revenue is aggrieved with the deletion of addition of unexplained expenditure u/s 69C of the Act at Rs.4,71,13,264/-. We, on perusal of the finding of the lower authorities notice that Mr. P.D. Deoarah is the director in M/s. Sati Oil Udyog Limited and M/s Assam Vegetable Oil Products Limited. As per the audited books of accounts for FY 2017-18, the closing balance of M/s. Sati Oil Udyog Limited as on 31/03/2018 is stated at Rs.4,09,27,220/- cannot be doubted. These audited financial statements were part of the income tax return filed by the assessee much prior to the date of search. Therefore, genuineness of the closing balance of M/s. Sati Oil Udyog Limited at Rs. Rs.4,09,27,220/- is established.
14.1. The remaining amount i.e., Rs.4,71,13,264/- (-) Rs.4,09,27,220/- is the sum at Rs.61,86,004/-. Before us, two fold contentions have been made by the ld. A/R. Firstly, that there is a payment of Rs.62,00,000/-during financial year 2018-19 but it has been wrongly considered by the accountant preparing ledger appearing in the seized documents MB/HD/01 in FY 2017-18, then the alleged balance of Rs.4,71,13,264/-will be reconciled. Second fold of contentions is that the assessee had already offered additional income of Rs.2,46,27,154/- and against this additional income, the assessee has urged for telescoping benefit of Rs.61,86,044/-. We find merit in the second fold of contention and agree with the finding of the ld. CIT(A) that the assessee deserves telescoping benefit of Rs.61,86,044/- against the additional income offered to tax. Accordingly, Ground No. 1 raised by the revenue is hereby dismissed.
15. As far as Ground No. 2 is concerned the same is against the finding of the ld. CIT(A) giving set off of unexplained expenditure to the tune of Rs.1,11,56,044/- against the additional income of Rs.2,46,27,154/- offered in the Income tax return. We have already dealt with the set off of Rs.61,86,044/- while dealing with Ground No. 1 raised by the revenue and have held the finding of the ld. CIT(A) as justified. So far as the addition of Rs.49,70,000/- is concerned, in the seized document there is a description “Shoppers Stop at the time of agreement of Rs.49,70,000/-“ which has been made to the credit of Shri P.D. Deora and Smt. Anju Deora at the time of signing of lease agreement between Assam Vegetables & Oil Products Ltd., Sati Oil Udyog Ltd., Brahmapatra Infrastructure Limited and Shoppers Stop Limited dated 08/04/2017.
15.1. The assessee has requested for giving the set off of Rs.49,70,000/-against the additional income offered in the income tax return. We fail to find any inconsistency in the finding of the ld. CIT(A) in holding that since the additional income offered was not specific and it was open for the assessee to claim telescoping benefit for unexplained expenditure and, therefore, the ld. CIT(A) has rightly given the set off of Rs.49,70,000/- against the additional income disclosed in the additional income. Accordingly, Ground No. 2 raised by the revenue is dismissed.
16. Ground No. 3 is general in nature.
17. Now, we take up C.O. No. 28/GTY/2023. We find that grounds raised in this cross-objection are verbatim identical for Assessment Year 2017-18. Therefore, consistent with the view taken by us therein, that there is a material, incriminating in nature in the form of digital evidence under ID marked MB/HD/01, which gave jurisdiction to the Assessing Officer to carry out the assessment proceedings. Thus, all the grounds raised in the cross-objections are dismissed. In the result, appeal of the revenue and cross-objection for Assessment Year 2018-19 are dismissed.
18. Now, we take up the revenue’s appeal in ITA No. 07/GTY/2023 for Assessment Year 2020-21. The revenue has raised the following revised grounds of appeal:-
“1. That on the facts of the case and in law, the Ld. CIT(A) has reed by deleting the addition to the tune of Rs.25,00,000/- under the head of unexplained expenditure u/s. 69C of the I T Act, 1961 by not taking considering the fact that the amount of Rs.25,00,000/- has been adjusted by the assessee company against the amount payable by Shri P D Deora and Smt Anju Deora, Promoters of M/s. Assam Vegetables & Oil Products Ltd and M/s, Sati Oil Udyog Ltd for the flat purchased by them in the Spanish Garden residential complex and the same adjustment was not recorded in the books of accounts.
2. That on the facts of the case and in law, the Ld. CIT(A) has erred by deleting the addition to the tune of Rs.90,748/- under the head of unexplained cash back received by not taking considering the fact that the entries of cash received back from M/s. Krishna Udyog were found in the accounting system i.e., tally of the assessee.
3. That on the facts of the case and in law, the Ld. CIT(A) has erred by deleting the addition to the tune of Rs.2,34,36,359/- under the head of undisclosed profit by not taking considering the fact that the undetected income of Rs.2,34,36,359/- i.e., difference of Rs. 15,78,63,456/- (total disclosure) and Rs.13,44,27,097/- (disclosure made in ITRs), which is not disclosed by the assessee as part of voluntary disclosure made in the AY 2020-21 or earlier.
4. That on the facts of the case and in law, the Ld. CIT(A) has erred by deleting the addition to the Time of Rs.7,85,09,268/- @95% of total bogus purchase billing of Rs.8,26,41,334/- under the head of bogus purchase by not taking considering the fact that the total sale turnover of the assessee is about Rs.165 crores and the bogus purchase of Rs.8,26,41,334/-was taken to reduce the income but not to increase the sales. Ld. CIT(A) has also not denied the findings of the AO regarding bogus purchase.
5. The appellant craves the leave to add/modify/ alter any or all the grounds during the course of hearing/ pendency of appeal.”
19. At the outset, the ld. D/R, vehemently argued on all the grounds placing reliance on the finding of the ld. Assessing Officer and, on the other hand, the ld. Counsel for the assessee placed detailed written submission on record and also took us through the relevant finding of the ld. CIT(A) decided in favour of the assessee.
20. We have heard rival contentions and perused the material placed before us. Ground No. 1 is raised against the deletion of addition of Rs.25,00,000/- made by the Assessing Officer for unexplained expenditure u/s 69C of the Act. We observe that in the seized material MB-02, at page 5, there were certain entries found in the form of summary of payments. One of the entries was Rs.25,00,000/- mentioned against the Spanish Garden. We notice that the promoters, namely, Shri P.D. Deorah and Smt. Anju Deorah have acquired a flat in Spanish Garden Residential Complex. The payments appearing in page 5 of MB-02 were made through proper banking channels and it appeared to the Assessing Officer that amount of Rs.25,00,000/- has been adjusted by the Assessing Officer against the amount payable by Deorahs for the flat purchased by them. Since these documents did not bear any date/s, it was presumed to be unexplained expenditure during the financial year 2020-21. We observe that no specific date is appearing in the incriminating material for the alleged transactions. There is no reference of any date which could remotely link the impugned payment to impugned Assessment Year. The presumption of the Assessing Officer that the alleged sum is adjusted against the sale consideration itself shows that it is part of the sale consideration duly accounted for in the books. Thus, the ld. CIT(A) rightly referring to these facts has come to the conclusion that the ld. Assessing Officer erred in making this impugned addition which has been made without any basis and without considering the facts that the alleged sum has been paid through banking channel duly accounted for in the regular books of accounts. Ground No. 1 raised by the revenue is dismissed.
21. Ground No. 2 is against the deletion of addition of Rs.90,748/-made by the Assessing Officer has unexplained cash received back. We on perusal of the finding of the ld. CIT(A) and submissions of the assessee take note of the fact that the alleged sum of Rs.90,748/-received from M/s. Krishna Udyog were found entered in the regular books of accounts in Tally software. It was just a matter of reconciliation of statements between M/s. Krishna Udyog and ld. CIT(A) for which the ld. CIT(A) had already directed the Assessing Officer to carry out the necessary verification. Thus, no interference is called for in the finding of the ld. CIT(A). Accordingly, Ground No. 2 raised by the revenue is dismissed.
22. Ground No. 3 is against the deletion of addition of Rs.2,34,36,359/-made by the Assessing Officer under the head “undisclosed profit”. The ld. Assessing Officer on examining the seized data MB/HD/04 which consists of tally data of the group and on analyzing the tally accounts for FY 2019-20 came to the conclusion that assessee has suppressed two digits while making the accounting. The alleged addition was made by the Assessing Officer observing as follows:-
“The submission of the A/R is duly considered. However, the claim of the A/R that the tally data is not the regular books of account of the assessee and hence cannot be used to derive the actual profit figure of the assessee is not tenable. Since the assessee has admitted and voluntarily disclosed an additional income of Rs. 15,00,27,097/- on the basis of the seized material under discussion, it is nothing but an acknowledgement of the fact that the tally accounts reflected undisclosed profit earned by the assessee. It appears from the submission of the assessee that the disclosure of Rs. 15,00,27,097 made by the assessee was to cover up the undisclosed profit detected from the tally data found in MB/HD/04. In view of this, it was pointed out to the A/R that the disclosure was made as tabulated below:
| Assessment Year | Turnover | Estimated Business Income |
| 2015-16 | 2,762,214,918.00 | 27,622,149.00 |
| 2016-17 | 2,228,931,207.00 | 22,289,312.00 |
| 2017-18 | 2,128,693,584.00 | 21,286,935.00 |
| 2018-19 | 2,462,715,464.00 | 24,627,154.00 |
| 2019-20 | 2,374,300,600.00 | 23,743,006.00 |
| 2020-21 | 1,485,853,903.00 | 14,858,539.00 |
| 2021-22 | 1,450,000,000.00(estimated business turnover) | 14,500,000.00 |
| 2021-22 | Sale of Scrap | 11,00,000.00 |
| TOTAL | 15,00,27,097.00 |
Thus, the explanation of the A/R that the disclosure of Rs. 15,00,27,097 made by the assessee was to cover up the undisclosed profit detected from the tally data found in MB/HD/04 is acceptable only to the extent that the disclosure has been made in the financial year 2019-20 (i.e., AY 2020-21) or before. It is seen from the table above that disclosure amounting to Rs. 1,56,00,000/- (sum of Rs. 1,45,00,000 and Rs. 11,00,000) has been made in FY 2020-21 corresponding to AY 2021-22. Thus, the disclosure of Rs. 1,56,00,000/-made in the AY 2021-22 cannot be said to have been made out of the undisclosed income detected from the seized tally-data found in MB/HD/04, which contains transactions only upto FY 2019-20, i.e., AY 2020-21. Thus, only the remaining sum of Rs. 13,44,27,097 (i.e., Rs. 15,00,27,097 – Rs. 1,56,00,000) is the disclosure made out of the undisclosed income of Rs. 15,78,63,456/- detected from the seized tally data found in MB/HD/04.
Thus, the remaining amount of undetected income (Rs. 2,34,36,359 , i.e., difference of Rs. 15,78,63,456 and Rs. 13,44,27,097), which is not disclosed by the assessee as part of voluntary disclosure made in the AY 2020-21 or earlier, is liable to be added to the business income of the assessee during the AY 2020-21.”
23. We further notice that before the ld. CIT(A), the assessee stated that the net profit for the year under consideration is only Rs.1,18,16,826/- and the assessee has offered income of Rs.2,18,78,790/- which is much more than the income in the seized tally data. We further find that the ld. CIT(A) after examining the facts and giving a detailed finding, deleted the impugned addition observing as follows:-
5.3. The learned Commissioner of Income Tax (Appeals)”though has rejected the contention of the assessee that the balance sheet as per seized data cannot be relied upon; however has deleted the addition by relying upon the same balance sheet by holding at pages 148-154 at pages 152-154 as under:
“1. That, as per the balance sheet (extracted from the seized tally data) the accumulated /balance of Profit and loss account as on 31.03.2020 is Rs. 15,78,63,456/-. Vide its appellate submissions, the Appellant has provided breakup of the credit balance of profit and loss account as per aforesaid Balance Sheet (as per the seized data whose image has been referred per supra) which is as under:
| Nomenclature | Amount | Remarks |
| Opening | (-) | This amount represents accumulative |
| Balance | 3,63,41,845 | balance of profit accrued to the company at the starting of the period under consideration i.e. 01.04.2019 and reduced by the amount already transferred to reserve and surplus account or any other similar account. |
| Current Period | 1,80,16,826 | This amount represents the profit accrued to the assesses in the year under consideration i.e. AY 2020-21. |
| Less: Transferred | 17,61,88,475 | This amount represents the amount of profit/loss transferred to reserve and surplus account or any other similar account out of opening balance of profit. |
Further for a ready reference an image of the relevant heading of the aforesaid Balance Sheet (as per the seized data whose image has been referred per supra) pertaining to “Profit & Loss A/c” is also reproduced hereunder;
2. That, the Assessing officer had given any finding that as to why and how the profit of Rs. 15,78,63,456/- appearing in the balance sheet extracted from the seized tally data Is attributable only to the Impugned assessment year & other assessment years covered under Section 153A of the Act (i.e. AY 2015-16 to AY 2019-20). The Impugned order is bereft of any observation or findings that the aforesaid Balance Sheet (as per the seized data whose image has been referred per supra) pertained ONLY to AY 2Q1S-16 to AY2020-21.
3. That, there is nothing on record which can negate that the profit appearing in the aforesaid Balance Sheet (as per the seized data whose image has been referred per supra) did not pertained to any assessment year(s) prior to the AY 2015-16.
4. That, it is a settled law that income can be taxed in the year in which it has been earned by an assesses & not in the year in which the income has come to the knowledge of the department. The cardinal Principle of Taxation provides that correct income must be taxed in correct year and in correct hands.
5. That, as per the aforesaid Balance Sheet (as per the seized data whose image has been referred per supra] the profit earned by the Appellant for the impugned assessment year was clearly, Rs. 1,80,16,8267/- only. Therefore, addition in the present case in any circumstances cannot be more than Rs. 1,80,16,826/-. Further, the AO had not assigned any reasons as to why the AO had not considered the “Current Period” Profit of Rs. 1,80,16,826/- and what prompted the AO to make a comparison between/ amongst in-comparables.
It is pertained to note here that in Para 8 of the impugned Assessment Order, the Assessing Officer had averred that in respect of the impugned assessment year, the Appellant had made a disclosure of Rs. 1,48,58,539/-. It is also noted from records that the Profit before Taxes but after Exceptional Items, earned by the Appellant for the FY 201920 (i.e. AY 2020-21) as per the audited annual accounts of the Appellant amounted to Rs. 70,20,251/. In this regard, an image of the Audited Statement of Profit and Loss Account of the Appellant for the FY 2019- 20 (relevant to AY 2020-21) is being reproduced hereunder:
Therefore, the aggregate of income declared by the Appellant in its Audited Statement of Profit and Loss
Account for the impugned assessment year (i.e. Rs. 70,20,251/-) AND that of the Undisclosed Income admitted by the Appellant for the impugned assessment year (i.e. Rs. 1.48.58.539/-1 is well in EXCESS of the income appearing in the aforesaid Balance Sheet (as per the seized data whose image has been referred per supra). In this regard, a reconciliation of these amounts is being tabulated hereunder:
| Particulars | Para | Amount |
| Profit before taxes but after exceptional items for the FY2019- 20 (i.e. AY 2020-21) as per the audited balance sheet. | (A) | 70,20,251 |
| Estimated undisclosed Income offered to tax for the AY 2020-21 | (B) | 1,48,58,539 |
| Total income offered for the AY 2020-21 | (C=A+B) | 2,18,78,790 |
| Income as per seized tally data | (D) | 1,80,16,826 |
| Excess Income Declared by the appellant for the year under consideration | (C-D) | 38,61,964 |
From a perusal of the impugned assessment order, it is noted that in the aforesaid Balance Sheet (as per the seized data whose image has been referred per supra), the AO had himself averred that the Appellant had recorded the transactions entered into bv the Appellant through the regular bank accounts of the Appellant as well.
Thus, it is evident that the aforesaid Balance Sheet (as per the seized data whose image has been referred per supra) of the Appellant did not pertain solely to the cash incoming or cash outgoings but it is palpable that even the regular banking transactions of the Appellant are duly recorded In the aforesaid balance sheet. Thus, it would be reasonable to presume that the profit appearing in the aforesaid Balance Sheet (as per the seized data whose image has been referred per supra) includes profit / income earned by the Appellant In respect of its regular banking transactions which are also recorded in the impugned tally data.
Therefore, it is dear that the profit appearing in the impugned profit and loss account of the aforesaid Balance Sheet (as per the seized data whose image has been referred per supra) includes profit of the Appellant from regular banking transactions as well as from outside books transactions OR in other words the profit as appearing the aforesaid balance sheet (As per seized tally data) is the composite profit of the Appellant on account of the Appellant regular transactions as well as on account of outside books transactions.
In view of the above stated facts, I hold that the addition made on account of Undisclosed Profit amounting to Rs. 2,34,36,359/- made by the Assessing Officer is not correct. Hence, the addition made by the Assessing Officer on this account is, hereby/deleted and the instant ground of appeal raised by the Appellant is, hereby, allowed.”
24. On going through the above finding and also observing that the assessee had offered income more than the income as per the seized tally data, there was no room available to estimate higher profit without placing any evidence of suppressed sales or inflated expenditure. We thus, fail to find any infirmity the finding of the ld. CIT(A) and accordingly dismiss Ground No. 3.
25. Ground No. 4, relates to deletion of addition made on account of bogus purchases. Facts in brief are that the ld. Assessing Officer during the course of assessment proceedings came to a conclusion that the assessee had made bogus purchases billing of Rs.8,26,41,334/-under the head of bogus purchase and adding the total amount to the income. The ld. CIT(A) on considering the fact that sales of the assessee are not in dispute, work contracts have been executed and even if the purchases are bogus billings, there is actual purchase during the year for effectively completing contract work and only disallowed 5% of the total purchases. Before us, the ld. D/R asserted that the total bogus purchases needs to be added and ld. Counsel for the assessee relied on the finding of the ld. CIT(A).
25.1. We have heard rival contentions and perused the material placed before us. We notice that based on the tally data seized as part of the hard disk ID marked MB/HD/04, purchased from following parties were treated as bogus purchases:-
| Name of the supplier as found in tally data n MB/HD/04 | “Amount (hi Rs.) of bogus bills obtained in FY 2019-20 (AY 202021) |
| M/s Vinit Distributors | 68,34,720 |
| East India Associates | 1,05,17,400 |
| Eastern Trade and Trans | — |
| Ravi Steel Pvt. Ltd. | — |
| Shyam Sunder Mukesh Kumar | — |
| Jalan Steel & Cement | 37,10,240 |
| Kedia Tiber (Diphu) | 1,00,000 |
| M/s SD Construction | 79,262 |
| M/s. Shree Ganesh Enterprises | 3,22,37,371 |
| M/s. Tirupati Steel | 2,91,62,341 |
| Total | 8,26,41,334 |
26. We further observe that the ld. CIT(A) on considering the net profit percentage of the preceding years and the subsequent years, sustained the disallowance only to the extent of 5% of the alleged bogus purchases. We observe that the assessee is consistently engaged in the business of work contracts for past many years and the chart of total turnover, expenditure, net profit and NPP of preceding and subsequent Assessment Years is reproduced below:-
| Sr. No. | Particulars | AY 2018-19 | AY 2019-20 | AY 2020-21 | AY 2021-22 |
| 1 | Total Income | 2,48,30,49,330 | 2,44,07,1,952 | 1,64,97,66,143 | 1,62,88,84,875 |
| 2 | Total Expenditure | 2,52,24,24,173 | 2,53,31,53,227 | 1,68,64,35,066 | 1,57,90,31,947 |
| 3 | Profit before tax | (-)3,93,74,843 | (-)9,24,41,275 | (-)3,66,68,923 | 4,98,52,928 |
| 4 | Exceptional items (exp.) | (-)5,42,75,771 | (-)9,33,46,056 | t-)4,36,89,176 | (-)4,11,84,733 |
| 5 | Net profit | 1,49,00,928 | 9,04,781 | 70,20,253 | 86,68,195 |
| 6 | Net profit ratio | 0.60% | 0.04% | 0.43% | 0.53% |
26.1. On provision of the above chart we notice that the NPR (Net Profit Rate) of 0.430% declared for Assessment Year 2020-21, is higher than the preceding year. The turnover of this company is mainly on account of work contracts of turnkey projects. There is no evidence on record to prove that the assessee has shown bogus sales bills or bogus works contracts as the transactions are carried out through proper banking channels and registered vendors. Turnover declared by the assessee has been accepted by the ld. Assessing Officer. Once it is admitted that the figure of turnover is correct and the works contract/sales have been achieved by supplying material or completing the construction work it has to be accepted that for achieving the sales contract/work contract, expenditure has to be incurred. Thus, the ld. CIT(A) has taken a fair approach and after considering the past profit trend and the books of accounts being regularly maintained and duly audited, has rightly disallowed the purchases @5% sustaining the disallowance at Rs.41,32,066/- and giving part relief to the assessee. Thus, no interference is called for in the finding of the ld. CIT(A) and Ground No. 4 raised by the revenue is dismissed.
27. Now, we take up C.O. No. 29/GTY/2023. Firstly we notice that there seized material pertaining to the year under consideration bearing ID MB-02 and MB/HD/04 and, therefore, since there is an incriminating material, the grounds raised in the cross objection deserves to be dismissed. Even otherwise, a search was conducted on 29/01/2021 and assessment year 2020-21 did not fall in the category of completed/unlimited assessment year and it merges with the regular assessment proceedings. On this ground also, the assessee fails to succeed in the cross objection.
28. In the result, ITA No. 7/GTY/2023 & C.O. No. 29/GTY/2023 are dismissed.
29. Now we take up ITA No. 8/GTY/2023 for Assessment Year 2021-22. The revenue has raised the following grounds of appeal:-
“1. That on the facts of the case and in law, the Ld. CIT(A) has erred in deleting the addition to the tune of Rs.7,96,000/– out of total amounting of Rs. 8,00,000/- under the head of unexplained money by not taking considering the fact that the documents found during the search in which totalling of Rs. 8,00,000/- paid to different persons and the same were not recorded in the books of accounts.
2. That on the facts of the case and in law, the Ld. CIT(A) has erred by deleting the addition to the tune of Rs.76,55,931/- under the head of unexplained cash back received by not taking considering the fact that the entries of cash received back from M/s. Krishna Udyog were found in the accounting system i.e., tally of the assessee.
3. That on the facts of the case and in law, the Ld. CIT(A) has erred by deleting the addition to the tune of Rs.5,24,61,589/- @95% of total bogus purchase billing of Rs.5,52,22,725/- under the head of bogus purchase by not taking considering the fact that the total sale turnover of the assessee is about Rs.163 crores and the bogus purchase of Rs.5,52,22,725/-were taken to reduce the income but not to increase the sales. Ld. CIT(A) has also not denied the findings of the AO regarding bogus purchase.
4. The appellant craves the leave to add/modify/ alter any or all the grounds during the course of hearing/ pendency of appeal.”
30. We have heard rival contentions and perused the material placed before us. The first ground is against the deletion of addition of Rs.7,96,000/- out of the total amount of Rs.8,00,000/- under the head unexplained money. We notice that the ld. Assessing Officer based on the seized document MB-06 having reference “Commission Jorhat to Guwahati”, inferred that there is a cash transfer of Rs.8,00,000/-against fixed commission of Rs.500/- per lakh. However, this finding of the Assessing Officer was not having any basis. As per the assessee, this can be entry of discount/commission of Rs.500/- per tonne of iron and steel from some person or firm. Neither any staff has confirmed the analogy drawn by the ld. Assessing Officer nor any document was seized or any reference has been made through regular books. In absence of any plausible explanation given by the Assessing Officer for decoding the entries appearing in page 13 of MB-06, we fail to find any infirmity in the finding of the ld. CIT(A) deleting the addition observing that in absence of any finding of suppression of double-digit in respect of any amount, the impugned amounts have to be taken on the face value. Accordingly, Ground No. 1 raised by the revenue is dismissed.
31. Ground No. 2 is against the deletion of addition of Rs.76,55,931/- under the head unexplained cash back received the arguments of the assessee before the lower authorities were twofold. Firstly that this transaction is appearing in the tally data seized by the Department and, therefore, is part and parcel of the books of accounts. Second contention was that the alleged sum is liable to be set off against the additional undisclosed income of Rs.1.56 Crores, offered by the assessee. We find that the ld. CIT(A) after considering the second fold contention has deleted the impugned addition observing as follows:-
“3.2. However the addition made by the learned Assessing Officer has been deleted by the teamed Commissioner of Income Tax (Appeals) on the basis that the said addition is included in addition undisclosed income amounting to Rs. 1,56.00.000/- offered by the assessee for the year under consideration by holding at page 177 asunder:
“However, as discussed herein earlier, the Appellant had admitted additional undisclosed income in respect of the impugned assessment year and palpably the AO had not even enquired from the Appellant, the basis for admission of the undisclosed income, leave apart the details of specific incriminating / seized material to which the aforesaid additional undisclosed income can be ascribed to. In view of the facts and reasons stated by the Appellant in the letter relating to admissions of Additional Undisclosed income, it is palpable that the Appellant had admitted the income to cover up omissions on account of unexplained expense, undisclosed investments, undisclosed income, etc. Further, the AO had not enquired from the Appellant as to how the aforesaid additional undisclosed income was utt&esf by the Appellant Thus, there is nothing on record which would even remotely suggest either the computation or determination of the aforesaid additional undisclosed income or the manner of application/utilization of the aforesaid additional undisclosed income. In the absence of any enquiry by the AO as to the mode and manner of earning and computation of aforesaid additional undisclosed income as well as in the absence of any further material pointing to the application/utilization of the aforesaid additional undisclosed income, the alternative contention of the Appellant that the impugned amount on account of alleged transaction with M/s Krishna Udyog and M/s Tirupati Steel be engulfed/ subsumed m additional undisclosed income admitted by the Appellant in respect of the impugned assessment year appears to be reasonable. Thus, it is held that the aforesaid additional undisclosed income offered to tax by the Appellant in respect of the impugned assessment year also included the amount received by the Appellant m the form of cash from M/s Krishna Udyog and M/s Tirupati SteeL
In view of the above discussion, even though the impugned transaction between the Appellant and M/s Krishna Udyog are held to be mere book entries, yet on account of the Striker discussion in the immediately preceding para (per supra), I hold that the addition made on account of cash received back by the Appellant amounting to Rs. 76,55,931/-added under section 69A of the Act is included in the additional undisclosed income amounting to Rs. 1,56,00,000/- offered by the Appellant (as aforesaid). Since it has been held that the corresponding income to the extent of impugned transaction is included in the additional undisclosed income offered to tax by the Appellant, it would be -preposterous to again add the impugned amount since such an action (i.e., addition) would result in double taxation. Hence, even though the impugned transaction perse; is held to be a mere book entry, for fee detailed reasons the addition made by the Assessing Officer is, hereby, deleted. The instant ground of appeal raised by the Appellant is, hereby, allowed.
32. Since the assessee deserves telescoping benefit of the alleged sum against the additional undisclosed income offered in the return of income, we find no infirmity in the finding of the ld. CIT(A). Accordingly Ground No.2 raised by the revenue is dismissed.
33. Ground No. 3 is against the deletion of addition of Rs.5,24,61,589/- @ 95% of total bogus purchases. We find that similar ground is raised by the revenue for Assessment Year 2020-21 in Ground No. 4 and has been dealt by us in the preceding para no. 20 of this order and after taking into consideration the consistent carrying on of the same business of works contract, turnover not disputed by the revenue authorities, better net profit percentage and the fact that for achieving turnover, purchases are required to be made, we confirm the view taken by the ld. CIT(A) sustaining the disallowance @ 5% of the total bogus purchases. Taking consistent view, we fail to find any infirmity in the finding of the ld. CIT(A) and dismiss Ground No. 3 raised by the revenue.
34. Ground No. 4 is general in nature.
35. Thus, revenue’s appeal for Assessment Year 2021-22 is also dismissed.
36. In the result, all the appeals filed by the revenue for Assessment Year 2017-18 to 2021-22 and the cross-objections filed by the assessee for 2017-18 to 2020-21 are dismissed.
Order pronounced in the Court on 9th April, 2024.
Author Bio
