2021 (11) TMI 969 - AT - Income Tax

Suppressed turnover - DR submitted that the assessee s authorised person had duly admitted the impugned suppressed turnover in the search statement - HELD THAT - No such admission from the assessee s side since all its authorised persons had done was to estimate the corresponding power sector consumption trends than anything else. Be that as it may, the CBDT s twin circulars dt.10-03- 2003 and 18-12-2014 have made it clear that such admissions or confessional statements made during the course of a search or survey; as the case may be, do not hold any significance in absence of contemporaneous supportive evidence. We conclude in all these facts that both the lower authorities have erred in law and on facts in making the impugned identical addition of suppressed turnover in lead AY.2010-11 and varying sums in all remaining assessment years. The same stands deleted in all appeals. Disallowance u/s 40A(3) - HELD THAT - We notice that the assessee appears to have made trip-wise payments only than those involving the transport invoices on whole-sum basis. This is also not the Revenue s case that all of these invoices are well beyond the specified limit of the cash payment in the relevant previous year. We therefore hold that the impugned addition based on mere search statement which goes against the record, is not sustainable. The same is directed to the deleted in all the appeals. Addition u/s 68 - addition of commission income as un-explained cash credits - HELD THAT - There is hardly any dispute that the assessee had claimed to have received the impugned sum(s) from Mumbai based company M/s.Benzo Chem Industries Pvt. Ltd., through banking channels along with corresponding TDS deduction as well. Learned lower authorities hold that the same is in the nature of accommodation entry only since the corresponding entity(ies) had not supported its explanation of having arranged the marketing and sales for the payer entity. Learned departmental representative sought to clarify that the assessee s authorised person s statement could not throw light on the place(s) of these entity(ies) as well. We decline the Revenue s instant last adjustment as well since not only all the impugned commission payments have been subjected to TDS by the concerned payer M/s.Benzo Chem Industries Pvt. Ltd. but also it has come on record that latter; on its own, had very well confirmed before the Assessing Officer qua sales marketing arrangement with the taxpayer vide letter dt.24-11-2015. We further make it clear that the Assessing Officer herein did not undertake any further confirmation from the payer s side since he has adopted the above stated technical reasoning to treat the assessee s commission income as un-explained cash credits . We therefore hold that the same deserves to be deleted.

Summary

Issues involved:
Challenging legality of Section 143(3) r.w.s.153A assessments, suppressed income on out-of-books production/turnover, Section 40A(3) disallowance, Section 68 unexplained cash credits addition.

Analysis:

1. Section 143(3) r.w.s.153A Assessments:
The primary issue is whether the lower authorities correctly framed Section 153A assessment proceedings and made corresponding disallowances/additions. Citing judicial precedents, it was held that without incriminating material, such assessments are not sustainable. The department argued for the validity of Section 153A assessments, but the court found no substance in their argument. The assessment was deemed invalid due to lack of incriminating material found during the search.

2. Suppressed Income and Disallowances:
The department's reliance on electricity consumption bill as incriminating material was dismissed. The court found no evidence contradicting the assessee's books of account. The additions based on sectoral power consumption trends were deemed unsustainable, as they lacked specific evidence of concealed turnover. The court referred to various case laws to support this conclusion.

3. Section 40A(3) Disallowance:
The addition of &8377; 8,32,282 under Section 40A(3) was challenged. The court noted that the addition was based on a search statement that did not align with the records. It was held that the addition was not sustainable and directed to be deleted in all appeals.

4. Section 68 Unexplained Cash Credits:
The addition of &8377; 3,75,75,971 as unexplained cash credits was disputed. The court found that the commission income received was supported by banking channels and TDS deductions. The department's argument of accommodation entry was rejected, as the payer entity confirmed the sales and marketing arrangement with the taxpayer. The addition was deemed unjustified and ordered to be deleted.

In conclusion, all the assessee's appeals were allowed, and the impugned additions were deleted across all assessment years. The court emphasized the importance of incriminating material in assessments and upheld the assessee's contentions regarding suppressed income, disallowances, and unexplained cash credits.