2024 (4) TMI 797 - AT - Income Tax

Unexplained cash receipt u/s 69A - Unexplained income found in search - during the course of search, a digital evidence under ID marked was seized which is the mobile data backup of one of the employees of the assessee concern - HELD THAT - It remains admitted facts that the ld. AO 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. 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. Assessment u/s 153A - incriminating material found as a result of search or not? - HELD THAT - 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 AO to carry out the assessment proceedings. Thus, all the grounds raised in the cross-objections are dismissed. Unexplained expenditure u/s. 69C - 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 - HELD THAT - 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 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 is established. The remaining amount, two fold contentions have been made by the ld. A/R. Firstly, that there is a payment 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 will be reconciled. Second fold of contentions is that the assessee had already offered additional income and against this additional income, the assessee has urged for telescoping benefit - 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 against the additional income offered to tax. Accordingly, Ground No. 1 raised by the revenue is hereby dismissed. Set off of unexplained expenditure against the additional income offered in the Income tax return - HELD THAT - 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, CIT(A) has rightly given the set off against the additional income disclosed in the additional income. Accordingly, Ground No. 2 raised by the revenue is dismissed. Unexplained expenditure u/s 69C - seized material there were certain entries found in the form of summary of payments - HELD THAT - 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 AO 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, 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. Unexplained cash received back - HELD THAT - 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 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. Addition under the head undisclosed profit - AO 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 - HELD THAT - 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. Estimation of income - Bogus purchases - 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 - HELD THAT - 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 and giving part relief to the assessee. Unexplained money - AO based on the seized document MB-06 having reference Commission Jorhat to Guwahati , inferred that there is a cash transfer against fixed commission - 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 - HELD THAT - 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. Addition unexplained cash back received - CIT(A) deleted addition - HELD THAT - 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). Estimation of income - bogus purchases - HELD THAT - 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.

Summary

Issues Involved:
1. Deletion of addition under unexplained cash receipt u/s 69A.
2. Assumption of jurisdiction u/s 153A.
3. Deletion of addition under unexplained expenditure u/s 69C.
4. Setoff of unexplained expenditure with undisclosed income.
5. Deletion of addition under undisclosed profit.
6. Deletion of addition under bogus purchase billing.

Summary:

Issue 1: Deletion of addition under unexplained cash receipt u/s 69A

The revenue contested the deletion of Rs. 2,41,28,500/- added as unexplained cash receipt. The ITAT upheld the CIT(A)'s decision, noting the AO's failure to conduct any independent third-party enquiry or provide evidence of the actual sale of land. The addition was deemed based on conjectures and surmises rather than tangible material.

Issue 2: Assumption of jurisdiction u/s 153A

The assessee challenged the jurisdiction u/s 153A, arguing it was not based on incriminating material. The ITAT dismissed this ground, citing the presence of incriminating digital evidence (MB/HD/01) justifying the AO's jurisdiction.

Issue 3: Deletion of addition under unexplained expenditure u/s 69C

The revenue appealed against the deletion of Rs. 4,09,27,220/- out of Rs. 4,71,13,264/- added as unexplained expenditure. The ITAT upheld the CIT(A)'s decision, noting the audited financial statements and the assessee's disclosure of additional income. The ITAT agreed with the CIT(A) on providing telescoping benefit for unexplained expenditure against additional undisclosed income.

Issue 4: Setoff of unexplained expenditure with undisclosed income

The ITAT upheld the CIT(A)'s decision to allow setoff of Rs. 1,11,56,044/- (Rs. 49,70,000/- + Rs. 61,86,044/-) against the additional undisclosed income, noting the absence of any specific findings by the AO to the contrary.

Issue 5: Deletion of addition under undisclosed profit

The revenue contested the deletion of Rs. 2,34,36,359/- added as undisclosed profit. The ITAT upheld the CIT(A)'s decision, noting that the assessee had offered income more than the income as per the seized tally data, and there was no evidence of suppressed sales or inflated expenditure.

Issue 6: Deletion of addition under bogus purchase billing

The revenue appealed against the deletion of Rs. 7,85,09,268/- added as bogus purchase billing. The ITAT upheld the CIT(A)'s decision to disallow only 5% of the total purchases, noting the consistent business operations, turnover, and profit trends of the assessee.

Conclusion:

The ITAT dismissed all appeals filed by the revenue for Assessment Years 2017-18 to 2021-22 and the cross-objections filed by the assessee for Assessment Years 2017-18 to 2020-21, upholding the CIT(A)'s decisions on all issues.