2019 (11) TMI 1003 - AT - Income Tax

Assessment u/s 153A - Addition of milk purchase tanki - facts were disclosed in the P L A/c - assessee submitted that the additions made in the impugned assessment orders are not at all based on any incriminating material/documents found during the course of search conducted. - HELD THAT - In the Schedule the Profit and Loss Account under the head Purchases a detailed bifurcation of milk purchases under different heads have been mentioned and milk purchase tanki is specifically found in the details. Purchases have been shown at ₹ 17,27,01,506.74. It is the same amount which has been added by the Assessing Officer while framing assessment order u/s 143(3) r.w.s 153A When the entries have been duly made in the books of account, which have been subjected to audit and the audited financial statements of account were part of the return of income filed much before the date of search, which have been used by the Assessing Officer while framing the assessment order dated 28.07.2010 as mentioned hereinabove, such additions and such assessment orders cannot be accepted as the same are devoid of any incriminating material/documents found at the time of search. Addition on account of commission paid - HELD THAT - A perusal of the audited report in Form No. 3CD, which is placed at page 31 of the paper book shows that under the details Books of account maintained , it is mentioned Cash Book, ledger, stock register, bank book , etc. Books are maintained on tally accounting software. It seems that this tally accounting software was seized during the search and the same has been treated as incriminating material. In our considered opinion, regular books of account of the assessee, by any stretch of imagination, cannot be treated as incriminating material forming basis of framing assessment u/s 153A r.w.s 143(3) Unexplained expenditure u/s 69C - Unexplained salary expenditure - HELD THAT - We find that no independent material or evidence had been brought on record by the Assessing Officer to establish that the notings/jottings recorded on the loose sheet of paper represented unaccounted transaction. Initial onus is upon the assessee as the said document was found from his possession but at the same time, some logical inference has to be drawn from the seized document which, in the present case we are unable to draw. In our humble view, the said document can only be considered as a dumb document as the said document does not contain full details about the dates of payments and the recipient of the payments nor there is mention of any name of the employee. For want of details, the impugned document can only be considered as a dumb document. Considering the nature of document and jotting/notings made thereon, we are of the view that no addition can be made on the basis of such dumb document and addition is, accordingly directed to be deleted.

Issues Involved:
1. Validity of assessment order framed under Section 143(3) read with Section 153A of the Income-tax Act, 1961.
2. Addition on account of treating the purchase of milk in cash under the head 'Milk Purchases Tanki'.
3. Disallowance made under Section 37 of the Income-tax Act towards payment of commission.
4. Disallowance on account of alleged unexplained balances of sundry creditors.
5. Addition on account of recharacterizing agricultural income as income from other sources.
6. Addition on account of alleged unexplained salary expenditure.

Issue-wise Detailed Analysis:

1. Validity of Assessment Order:
The primary challenge was regarding the validity of the assessment order framed under Section 143(3) read with Section 153A of the Income-tax Act, 1961. The assessee argued that the assessment orders were void ab initio, bad in law, and without jurisdiction as the additions were not based on any incriminating material found during the search. The assessee relied on the decisions of the Hon'ble High Court of Delhi in the case of Kabul Chawla (380 ITR 573) and the Hon'ble Supreme Court in the case of Singhad Technical Educational Society (397 ITR 344). The tribunal noted that the assessments for the years 2008-09 and 2009-10 were completed under Section 143(3) before the search, and the additions were based on entries already present in the audited financial statements, which were not incriminating materials found during the search. The tribunal held that the assessment orders were bad in law and quashed them.

2. Addition on Account of Milk Purchases Tanki:
The Assessing Officer added the amount under the head 'Milk Purchases Tanki' based on the details extracted from the ledger heads. The tribunal found that these entries were already part of the audited financial statements and were scrutinized during the original assessment. Since these entries were not based on any incriminating material found during the search, the tribunal held that such additions could not be accepted.

3. Disallowance under Section 37 Towards Payment of Commission:
The Assessing Officer disallowed the commission expenses of ?11,72,488/-. The tribunal observed that the commission expenses were part of the administrative expenses in the audited financial statements. As these details were already examined during the original assessment and were not based on any incriminating material found during the search, the tribunal held that the disallowance was not justified.

4. Disallowance on Account of Alleged Unexplained Balances of Sundry Creditors:
The tribunal noted that the details of sundry creditors were already part of the audited financial statements. Since these details were not based on any incriminating material found during the search, the tribunal held that the disallowance was not justified.

5. Addition on Account of Recharacterizing Agricultural Income as Income from Other Sources:
The tribunal observed that the details regarding agricultural income were already part of the audited financial statements. As these details were not based on any incriminating material found during the search, the tribunal held that the addition was not justified.

6. Addition on Account of Alleged Unexplained Salary Expenditure:
The Assessing Officer made an addition of ?6,66,916/- based on a seized document. The tribunal found that the document was a "dumb document" as it did not contain full details about the dates of payments, the recipient of the payments, or the name of the employee. The tribunal held that no addition could be made on the basis of such a document and directed the deletion of the addition.

Conclusion:
The tribunal quashed the assessment orders framed under Section 143(3) read with Section 153A of the Income-tax Act, 1961, as they were not based on any incriminating material found during the search. All appeals of the assessee were allowed, and those of the revenue were dismissed. The order was pronounced in the open court on 19.11.2019.

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