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TMI Blog2022 (2) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015-16 in ITA No.67/Ind/2021: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 6,00,00,000/- made by the Assessing officer on account of cash credits u/s 68 of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 18,07,498/- made by the Assessing officer on account of disallowing interest expenses u/s 69C of the Income Tax Act, 1961." Grounds of appeal raised by the Revenue for AY 2016-17 in ITA No.68/Ind/2021: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 6,00,00,000/- made by the Assessing officer on account of cash credits u/s 68 of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 80,59,865/- made by the Assessing officer on account of the disallowing interest expenses u/s 69C of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 3,01,97,950/- made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment proceedings along with ample of documentary evidences establishing that it had not made any transaction of sales without first recording the same in its regular books of account and stock register. 2(d). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming an addition to the extent of Rs. 53,29,050/- firstly, by presuming that the appellant had effected out of books sales in respect of traded goods of a sum of Rs. 3,55,27,000/- and secondly, by applying a very excessive rate of net profit of 15% thereon. 3. That, the appellant further craves leave to add, alter or amend the foregoing ground of appeal as and when considered necessary." Grounds of appeal raised by the Revenue for AY 2017-18 in ITA No.69/Ind/2021: 1. On the facts and in the circumstances of the case, the Ld. CIT(A )was not justified in law in deleting the addition of Rs. 1,19,75,346/- made by the Assessing officer on account of disallowing interest expenses u/s 69C. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in law in deleting the addition of Rs. 2,18,04,200/- made by the Assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egister. 1(d). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming an addition to the extent of Rs. 38,47,800/- firstly, by presuming that the appellant had effected out of books sales in respect of traded goods of a sum of Rs. 2,56,52,000/- and secondly, by applying a very excessive rate of net profit of 15% thereon. 2(a). That, on the facts and in the circumstances of the case, the learned CIT(A) grossly erred in not quashing the addition of Rs. 36,50,000/- made by the AO u/s. 69A of the Act on the allegation of hawala transactions merely by holding that quoting of a wrong section would not make the entire addition as non-genuine. 2(b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 36,50,000/- made by the AO in the appellant's income, without properly considering and appreciating the explanation made by the appellant along with documentary evidences that it had not carried out any Hawala transactions. 2(c). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in law in allowing the assessee's appeal on the chargeability of tax as per normal rates instead of the amended provisions of section 115BBE of the Act applicable w.e.f. 1.04.2017 relevant to A.Y. 2017-18 which are clearly attracted in the case of the assessee. " Grounds of appeal raised by the Assessee for AY 2018-19 in IT(SS)A No.116/Ind/2020: 1(a). That, on the facts and in the circumstances of the case, the learned CIT(A) grossly erred in not quashing the addition of Rs. 10,00,000/- made by the AO u/s. 69A of the Act on the allegation of hawala transactions merely by holding that quoting of a wrong section would not make the entire addition as non-genuine. 1(b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 10,00,000/- made by the AO in the appellant's income, without properly considering and appreciating the explanation made by the appellant along with documentary evidences that it had not carried out any Hawala transactions. 1(c). That, without prejudice to the above, the learned CIT(A) gros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y verification. After considering the submissions made by the assessee, Ld. AO framed the assessment for the various assessment years, by passing a common assessment order dated 28.12.2019, by assessing the total income of the assessee company for every year and making certain additions to the returned income of the assessee. 4. Aggrieved assessee preferred separate appeals before Ld. CIT(A) and partly succeeded and now both assessee and revenue are in appeal before this Tribunal.The cross appeals of the assessee and the Revenue involve common issues in different assessment years which can be broadly classified into following five categories: a) Unexplained Cash Credits u/s. 68 on account of Unsecured Loans and Disallowance of Interest Paid thereon u/s. 69C b) Out of Books Cash Sales u/s. 69A c) Unaccounted Cash Receipt from Syndicate d) Hawala Transaction u/s. 69A e) Applicability of Section 115BBE in respect of additions made in A.Y. 2017-18 and A.Y. 2018-19 5. Since the common issues are involved in various assessment years, it would be appropriate to adjudicate the various grounds taken by the assessee and the revenue in their cross-appeals for the subject assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018-19. Ld.AO required the assessee company to furnish its explanation on the aforesaid issue and also required the assessee to establish the identity and creditworthiness of the loan creditor companies and as also genuineness of the loan transactions. According to the assessee, in response, it had furnished all the necessary details of the unsecured loan creditors along with the complete supporting documentary evidences for establishing the identity & creditworthiness of loan creditors and genuineness of loan transactions as contemplated under the provisions of s.68 of the Act. However, the ld. AO, by discarding the submissions made by the assessee, made additions in the total income of the assessee for the subject assessment years by holding the lender companies as mere shell companies or paper companies. 9. Being aggrieved with the action of the AO, the assessee preferred separate appeals for the subject assessment years before the ld. CIT(A). During the course of the first appellate proceedings, the assessee company made detailed written submissions along with the documentary evidences which were also furnished by it before the AO.The ld. CIT(A), accepting the contentions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidences were found during the course of search. At para (3.3.7) of page no. 105 of the CIT(A)'s order for A.Y. 2016-17, again a finding has been given that loose papers, referred to by the AO in her order, cannot be said to be incriminating. 2 Documents referred to by the AO are not incriminating in the nature The AO, while making the impugned addition, has made reference of loose papers inventorized as Page No. 47 to 63 of GGL01 seized from the business premises of the assessee at Kolkata and as also, the Audit Reports of the assessee. The loose papers pertain to the details of the loans obtained by the assessee company from various lender companies and as also, the corresponding details of sources of funds in the hands of the lender companies. The entire loan transactions noted in such loose papers are duly recorded in the regular books of account of the assessee company and the same are not in the nature of incriminating documents. It contain details of amount of loan, period of interest, amount of interest, TDS, etc. Further, the Audit Reports cannot be said to be incriminating in the nature. Para (9.3) at page no. 26 - opening line referring page no. 47 to 63 of GG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 16 are given at Page no. 148 of Paper Book for A.Y. 2015- 16 & at page no. 211-212 of Paper Book for A.Y. 201617 (i) All the documents were also furnished before the CIT(A) and the CIT(A) has made a reference to this effect at para (3.3.6) at page no. 85 to 87 of his Order for A.Y. 2015-16. (ii) None of the documentary evidences has been rebutted or contravented or disbelieved by the ld. AO. 4 Creditworthiness of the lender companies not doubted All the lender companies were having ample of funds as per their respective Audited Balance Sheets. Further, the AO has also found that investment by such companies are duly getting reflected in their Balance Sheets. The AO has also admitted the sources of making investments by such lender companies. First para at page no. 49 of her Order. Audited Balance Sheets are furnished along with other documentary evidences at page nos. 189 to 540 of the PB for A.Y. 2015-16. The CIT(A) has given a clear finding to this effect at para (3.3.6) page no. 86 of his order for A.Y. 2015-16. 5 Interest paid and TDS made had duly been shown The appellant had paid interest on the subject loans and has also made necessary TDS. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Apex Court in many cases. 571 to 577 for A.Y. 2015-16 being the Notice u/s. 142(1) dated 17- 05-2019 AND 578 to 606 for A.Y. 2015-16 being the Notice Show Cause Notice dated 15- 11-2019 On a perusal of the Page No. 575 for A.Y. 2015-16 of the Paper Book, it may be gathered that except asking certain details of loans, the AO had not uttered any single word regarding the alleged enquiries and other materials referred to by her in the body of the assessment order. Thus, the question of giving any cross-examination does not arise. The relevant findings of the ld. CIT(A) are at paras (3.3.7) & (3.3.8) on page no. 87 to 90 of his Order for A.Y. 201516. 7 Loans completely repaid off Loan Transactions from seven lenders out of total nine lenders have got completely repaid during the succeeding previous years through banking channels. - - - 8 Awards passed by the Arbitrators in respect of two companies . In respect of two lenders namely M/s. Arrowlink Stockists Pvt. Ltd. and M/s. Moonview Infrastructure Pvt. Ltd., due to non-repayment of loan within stipulated time, matters were referred to Arbitration and Awards have been passed by the Sole Arbitrators ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee is distinguishabl e from the case of NRA Iron & Steel The case of the assessee is distinguishable from that of the case of PCIT (Central)-1 vs. NRA Iron & Steel Pvt. Ltd. (2019) 412 ITR 161 (SC) - Our written submission before CIT(A) at page nos. 55 to 57 for A.Y. 201516 - 15 Interest is allowable on genuine borrowing The AO disallowed the claim of the assessee for interest only on the ground that the unsecured loans on which the interest have been paid are not genuine. Once, such loans are considered as genuine, then the entire interest would be allowable u/s. 36(1)(iii). 12.1 Reference was also made by Learned counsel for the assessee to its detailed submission on this issue made before the CIT(A) which is placed at page no. 12 to 69 of the Paper Book for A.Y. 2015-16, Page No. 11 to 89 of Paper Book for A.Y. 2016-17, Page No. 3 to 6 of Paper Book for A.Y. 2017-18 and Page No. 3 to 5 of Paper Book for A.Y. 2018-19. 12.2 Before us, Learned counsel for the assessee contended that the impugned additions u/s. 68 on account of unsecured loans and additions u/s. 69C on account of interest paid thereon have been made by the AO, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged shell companies, notified by the Department on the basis of the inputs received from various investigation agencies, as given by the AO at para (9.5) of the assessment order, cannot be said to be an incriminating document recovered during the course of the search and Ld.AO has made the aforesaid additions without having recourse to any material seized during the course of the search. Learned counsel for the assessee further placing reliance on various judicial pronouncements submitted that the additions so made are liable to be deleted on the legal ground, as the assessment years under consideration were non abated assessment years. 12.3 Learned counsel for the assessee on merits of the case, submitted that Ld. AO has made additions of Rs. 6,00,00,000/- each in respect of the fresh unsecured loans obtained by it during the two previous years relevant to the assessment years 2015-16 and 2017- 18. The assessee, in its Synopsis, furnished the details of such unsecured loans and has also furnished the details of the interest expenses disallowed by the AO u/s. 69C of the Act, which for a ready reference, are reproduced as under:- "E. Details of the unsecured loans obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;42,00,000 1,43,771 4,20,000 - 19. Sanskar Commosale Pvt. Ltd. SCPL - - 20,00,000 79,782 1,75,339 - 20. Blackberry Tradecom Pvt. Ltd. BTPL - - - - - 40,96,026 TOTAL 6,00,00,000 18,07,498 6,00,00,000 80,59,865 1,19,75,346 82,40,976 13. The assessee has further submitted that out of the aforesaid twenty companies, in respect of two companies, namely, Asha Tradecom Pvt. Ltd. and SHP Financial Services Pvt. Ltd., the assessee had also accepted substantial amount of loan in the immediately preceding previous year relevant to A.Y. 2011-12. 13.1 Before the ld. CIT(A), the assessee vide its written submission had dealt with the transactions of unsecured loans accepted by it from the above named companies and had furnished its explanation on the identity of the lender companies, genuineness of the loan transactions and creditworthiness of the lender companies. Learned counsel for the assessee contended that all the lender companies were duly registered under the Companies Act, 1956 and shown as "active" companies on the official portal of the Ministry of Corporate Affairs and all are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic request was made to Ld.AO to conduct necessary verification from Mr. Mukesh Jhanwar and Mr.H.P. Agrawal by issuing summons u/s. 131 or notices u/s. 133(6) of the Act however, Ld AO neither made any independent enquiry subsequent to their filing of Affidavits retracting the statements nor Ld.AO provided any opportunity of cross-examination to the assessee. 13.4 Learned Counsel for the assessee further submitted that during the course of the assessment proceedings, it was submitted before the AO that in respect of two companies namely Arrowlink Stockists Pvt. Ltd. and Moonview Infrastructure Pvt. Ltd., due to nonrepayment of loan by it within the stipulated period of time, matter was referred before the sole Arbitrators, and the sole Arbitrators have passed awards against the assessee company. According to the assessee, the passing of the Arbitration Award, which is quasi to passing of an Order by a competent Court, speaks in volume regarding the genuineness of the loan transactions carried out by the assessee company. The assessee further contended that two of the aforesaid companies namely Asha Tradecom Pvt. Ltd. and SHP Financial Services Pvt. Ltd. were duly registered as Non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f GGL-01 seized from the business premises of the assessee at Kolkata and also the Audit Reports of the assessee. On a perusal of these loose papers which have been placed by the assessee at page no. 131 to 147 in its Paper Book for A.Y. 2015-16, we find that such loose papers pertain to the details of the loans obtained by the assessee company from various lender companies such as name of the lender company, amount of loan, period of interest, amount of interest, TDS, etc. and also contain the corresponding details of sources of funds in the hands of the lender companies. The entire loan transactions noted in such loose papers are duly recorded in the regular books of account of the assessee company and therefore the same cannot be regarded as incriminating documents. Ld. CIT(A), vide para (3.3.7) on page no. 87 of his Order for A.Y. 2015-16, has allowed the legal ground no. 2 of the assessee by giving a categorical finding that these loose papers cannot be regarded as incriminating in the nature and accordingly deleted the entire addition so made by the AO on this count in a completed year of assessment without having recourse to any incriminating material. We also notice that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 380 ITR 53 (Del HC) and Hon'ble Court after considering various judgments had dealt with this issue as under: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and reassessment for six years shall be finalised by the Assessing Officer. It is also held by various Courts that once notice u/ s 153A of the Act issued, then assessment for six years shall be at large both for Assessing Officer and assessee have no warrant of law. It has been also held that in the assessment years where assessments have been abated in terms of second proviso to section 153A then Assessing Officer acts under original jurisdiction and one assessment is made for total income including the addition made on the basis of seized material. But where there is no abatement of assessments and assessments were completed on the date of search then addition can be made only on the basis of incriminating documents or undisclosed assets, etc. In these cases there was no incriminating document found and seized. No assessment proceedings were abated in these assessees. Thus assessments for these assessment years were completed on the date of search. The assessments were completed u/ s 143(3} of the Act read with section 153A/ 153C of the Act after the search. There was no abatement of any proceedings in these cases for these assessment years in terms of second proviso to sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers in question were concluded and non-abated assessments no addition can be made in the assessment proceedings u/s 153A of the act unless there is any incriminating material found during the course of search. We find no inconsistency in the finding of Ld. CIT(A) quashing the assessment proceedings u/s 153A of the Act since the additions were not made on the basis of any incriminating material found during the course of search. Thus revenue's appeal for Assessment Years 2005-06, 2006- 07 and 2009-10 stands dismissed." 15.4 Thus respectfully following the settled judicial precedence which are squarely applicable on the instant issue we are of the view that no addition could have been made by the AO in the assessee's income without having recourse to any incriminating material. Accordingly, we are inclined to delete the additions of Rs. 6,00,00,000/- and Rs. 80,59,865/- so made by the AO for the A.Y. 2016-17 and allow this legal ground raised by the assessee in its appeal for A.Y. 2016-17. Thus, the Ground No. 1 of the assessee for A.Y. 2016-17 is Allowed. 16. Now, coming to the merits of the case, we find that during the course of the assessment proceedings, the AO had require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance Sheets and Profit & Loss Account and were also having sources of funds. We also find that none of the documentary evidences furnished by the assessee company has been rebutted or contravened or disbelieved by the AO. We note that the assessee, after furnishing the documentary evidences, had specifically requested the AO for either giving the opportunity to produce the creditors or to issue summons u/s. 131(1) or letters u/s. 133(6) to the lender companies. Before us, the ld. Counsel of the assessee stated that the AO, at para (9.11) on page no. 37 of her Order, has given an incorrect finding that she had issued notices to the lender companies u/s. 133(6) which were either not replied or remained unserved. Such averment of the counsel of the assessee has not been rebutted by the ld. CIT(DR). In such circumstances, the documentary evidences so furnished by the assessee company for establishing the genuineness of the unsecured loans so obtained by it cannot be brushed aside without any cogent adverse material on record. 16.2 In our considered opinion, by furnishing the copies of the certificates of incorporation of the lender companies, their copies of memorandum and articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. We find that the AO has failed to discharge the onus of bringing any cogent material or evidence on record for disbelieving the explanation as well as the various documentary evidences furnished by the assessee before her, during the course of the assessment proceedings. 16.3 We find that the Ld AO, at para (9.3) of her Order, has placed reliance upon some loose papers inventoried as 'Page no. 47 -63 of GGL-01' seized during the course of the search carried out in the one of the business premises of the assessee company, situated at Kolkata. On a perusal of the seized loose papers which were filed by the assessee company at page no. 131 to 147 in its Paper Book for A.Y. 2015-16, no adverse inference could be drawn for the very reason that such loose papers do not convey any adverse information against the assessee company. Before us, the ld. Counsel of the assessee company demonstrated that the entire transactions mentioned on these loose papers were fully recorded in the regular books of account of the assessee company. In such circumstances, the loose papers so relied upon by the AO are nothing but the duly recorded loan transactions undertaken by the assessee company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, had accepted that the Kolkata based companies were used as conduits for routing the unaccounted cash as unsecured loans to the assessee company through hawala transactions. The AO has reproduced the relevant abstracts of the statement of Smt. Leela Kalyani, at para (9.6) of the order, whereas, the relevant abstract of the statement of Mr. H.P. Agrawal has been reproduced at para (9.7) of the order. On a perusal of the relevant abstract of the statement of Smt. Leela Kalyani, we observe that Smt. Leela Kalyani never stated that Kolkata based shell companies were used as conduit for arranging unsecured loans for the assessee company. Thus, the statement given by Smt. Leela Kalyani, was a neutral statement from which no adverse inference could have been drawn against the assessee company. Further, as regards the statement of Mr. H.P. Agrawal, we find that he has also retracted his statement by way of filing an Affidavit which was duly submitted by him along with a letter of retraction on 08.06.2019 stating that his statement was recorded till 3AM in the night and at the time of giving the statement, he was quite tired and under a confused state of mind. In the Affidavit , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n too, it cannot be alleged that the assessee company had obtained some accommodation entry for the very reason that the message dated 4/5/2017 pertains to the F.Y. 2017-18 and the assessee company has not obtained any fresh unsecured loan of even a single penny during the financial year 2017-18 relevant to A.Y. 2018-19. In such circumstances, no adverse inference could have been drawn against the assessee company merely on the basis of such mobile message extracted from the personal mobile of Mr. Mukesh Jhawar. 16.7 We also find that the AO has made reference of some list of shell companies which have been notified by the Department and as per the AO's own version, the list was issued by the Department on the basis of the inputs received from the various investigative agencies. In our considered view, such cannot be viewed against the assessee company. First of all, the AO has not mentioned as to what was the source of the list containing the names of the shell companies. Secondly, again, as per the AO's own version, the list is not based upon any concrete evidence but, merely on the basis of inputs received from various investigation agencies. The AO has not brought on record sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1(d) respectively for the A.Y. 2016-17 and 2017-18 challenging the action of the ld. CIT(A) in confirming the partial additions on the subject issue. A summary of the year-wise quantum of additions before us on the subject issue along with the respective grounds raised from both sides, as furnished by the assessee, is given as under: ISSUE- II: Out of Books Cash Sales u/s. 69A Assessment Year Assessee Department TOTAL Ground No. Amount Ground No. Amount 2015-16 - - - - - 2016-17 2(a) to 2(d) 53,29,050 3 3,01,97,950 3,55,27,000 2017-18 1(a) to 1(d) 38,47,800 2 2,18,04,200 2,56,52,000 2018-19 - - 2 10,25,000 10,25,000 TOTAL 91,76,850 5,30,27,150 6,22,04,000 17.2 The brief facts relating to the issue are that during the course of the assessment proceedings, the AO, on the basis of some digital data seized from the computer system of Mr. Mahesh Chandra Verma, Manager of the assessee company, noted that during the previous year relevant to the assessment years 2016-17 and 2017- 18, the assessee had made sales aggregating to Rs. 3,55,27,000/- and Rs. 2,56,52,000/- which were not recorded by it in its regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not have been invoked by the AO. It applies only to the unexplained money and not any alleged unaccounted receipts. AO invoked provisions of s. 69A r.w.s. 115BBE at para (6.5) at page no. 17 - No money, bullion, jewellery or valuable article found unrecorded in the books. No unaccounted cash or stock was found during the course of the search 2 No rejection of books of accounts Addition by disturbing trading results without rejecting books of account u/s. 145(3) is not legally permissible. - - No defect or discrepancy found in books maintained by assessee. Even during the course of the search, the books of account of the assessee were found correct and complete. 3 Book results accepted in earlier years Regular Assessments u/s. 143(3) framed in the case of the assessee for earlier years viz. A.Y. 2012-13 to A.Y. 2014-15 where the AO duly examined the books of account and such books were found correct and complete. - 1006 to 1015 for A.Y. 201617 The AO herself while framing the assessment of the assessee u/s. 153A, has not given any finding in the body of the assessment order that even for the earlier assessment years viz. A.Y. 2012-13 to A.Y. 2015-16, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that there is no evasion of any state excise duty, a 24X7 close vigilance is kept by the excise authorities in the business premises of the assessee. A copy of Certificate duly issued by DEO, Department of Excise, Government of Madhya Pradesh, dated 06-12-2019, was duly submitted before the AO to the effect that the appellant unit is completely under their control and supervision and in the last ten years, no case of any unauthorized/ unrecorded removal or sale of goods was noticed by them. 1347 Copy of Certificate issued by DEO A team of the state excise authorities, headed by the District Excise Officer, (DEO) remains posted at the gates of the assessee's factory premises. Furthermore, for every vehicle carrying the liquor from the premises of the appellant, one of the Guards from the excise department is compulsorily deputed, so as to ensure that no unauthorized/unrecorded removal of the goods is made from its factory premises. The AO failed to appreciate that without making unauthorized removal of goods, the suppressed sales cannot be presumed. 10 Affidavit by the Managing Director Affidavit, duly sworn before the Notary Public by Shri Sunit Madhok, Managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny of the persons, as mentioned in the seized datas was found by the ld. AO. 15 Cheques mentioned in the Digital Data are not reconciling with the books of account of the assessee In such excel sheets, at some places, there is mention of some amount received through cheques, but, the fact remained that these cheques were never received by the assessee company from any such person. - Had the assessee company carried out any transaction, as found noted in the subject excel sheets, atleast the transactions relating to the cheques would have got tallied with the bank transactions recorded in the assessee's books. 16 Retraction of Statement by Shri Mahesh Chandra Verma The statement of Shri Mahesh Chandra Verma recorded under s. 132(4) during the course of the search i.e. 16-112017, as referred to by the ld. AO, was subsequently retracted by him vide an Affidavit on 09-12-2019. Hence, no credence can be attached to his statement recorded by the search party. 1364 to 1367 According to Shri Mahesh Chandra Verma, his statement was not correctly recorded by the search party. The statement was not given by Shri Verma under a healthy state of mind. 17 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts regular books of account. - It is not an allegation that the assessee claimed disproportionately higher expenses in comparison to earlier years. For earlier years, as per AO's own Orders, the assessee was not found to be indulged in any out of books transactions. 22 Only net profit can be taxed on suppressed sales Accordingly, in such a situation, only the amount of net profit embedded in such sales, can, at the worst be added to the income of the assessee. - CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 (MP) 23 Excel sheets are not books of account Merely on the basis of any loose paper, which is not in the form of a book, without finding any other corroborative evidence, no addition can be made. - i) Central Bureau of Investigation vs. V.C. Shukla and Others (1998) 3 SCC 410 ii) Common Cause (A Registered Society) v. Union of India (2017) 30 ITJ 197 (SC) 24 Digital datas are not admissible as evidence When the entire assessment has been framed only on the basis of the so-called electronic record which are said to be copies of Excel Sheet, Excel work note book etc., non- compliance of Section 65(B) of the Indian Evidence Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uor,then as a natural corollary, one has to accept that against the sales found noted in the seized data, some purchases of the liquor were also would have been made by the assessee, which also remained unrecorded in the regular books of account. If the presumption of unaccounted sales is made merely on the basis of intangible material, being the data found stored in one computer of one of the many employees of the assessee, then, on the same theory, it would also have to be necessarily presumed that the record of corresponding purchases were either destroyed or maintained in some different computer system, which could not be accessible to the search party. As per the assessee, it is not the allegation of the AO that the assessee claimed disproportionately higher manufacturing and other expenditure in comparison to earlier years, by making a comparison of the sales shown in the books for various years. The assessee submitted that in the earlier years, as per the AOs own assessment order, the assessee was not found to be indulged in any out of books activities and therefore, even for the assessment year under consideration, in which the assessee itself has shown a higher amount of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO, for the A.Y. 2018-19, has also made an addition of Rs. 10,25,000/- on account of cash sales to retailers on the basis of some cash vouchers found during the course of search. According to the assessee, the cash sale vouchers aggregating to a sum of Rs. 10,25,000/-, inventorized as page no. 254, 255 of LPS-1 and Page no. 233 of LPS-13, as reproduced by AO in the Order, were duly recorded in regular books of assessee. The assessee, in support of its contention, has also furnished a Statement showing details of vouchers seized and corresponding recording thereof on various dates in the regular books of assessee. Thus, according to the assessee, there is no case of suppression of sales in its case. Considering the submissions of the assessee and documentary evidences placed on record, the ld. CIT(A) has deleted the entire addition made by the AO on this count. 20. We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides. We find that the assessee has raised the Ground Nos. 2(a) & 1(a) respectively for A.Y. 2016- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the Revenue for A.Y. 2016-17 & A.Y. 2017-18, we find that the AO, while making the impugned additions of Rs. 3,55,27,000/- and Rs. 2,56,52,000/- for the aforesaid years, has referred to and relied upon some digital data seized from the computer system of Mr. Mahesh Chandra Verma, Manager of the assessee company. From the seized digital data, which has been recovered from the computer system of the assessee company and is reproduced by the AO at page no. 3 to 5 of the Assessment Order, it is seen that it contains the date-wise details of transactions systematically undertaken at some point of time by the assessee company. Such digital data cannot be disbelieved and discarded merely on the grounds that the assessee company is under close vigilance of the Excise Authorities or the assessee company has maintained regular books of account and no discrepancy was found therein at the time of search or Shri Mahesh Chandra Verma has subsequently retracted his statement. We find ourselves in agreement with the findings of the ld. CIT(A) that the suppressed sales so found noted in the seized digital data was not effected by the assessee company out of the production of liquor from its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27,000/- and Rs. 2,56,52,000/- respectively for A.Y. 2016-17 and A.Y. 2017-18, by applying a net profit rate of 3.5% instead of the net profit rate estimated by the ld. CIT(A) at 15%. Accordingly, the ground no. 2(c) & 1(c) of the Assessee and ground nos. 3 & 2 of the Revenue for A.Y. 2016-17 and A.Y. 2017-18 respectively are hereby Dismissed and ground Nos. 2(d) & 1(d) of the assessee for A.Y. 2016- 17 and A.Y. 2017-18 respectively are Partly Allowed. 24. Now, as regard the ground No. 2 of the Revenue for A.Y. 2018- 19 pertaining to an addition of Rs. 10,25,000/- made by the AO on account of cash sales to retailers, we find that such addition has been made by the AO on the basis of some cash vouchers inventorized as page no. 254, 255 of LPS-1 and page no. 233 of LPS- 13 seized during the course of search from the business premises of the assessee company. We find that the AO, during the course of the assessment proceedings, had required the assessee company to furnish its explanation on such seized cash vouchers and in respose the assessee company furnished a statement before the AO containing the details of vouchers seized and corresponding recording thereof on various dates in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the assessee for the assessment year 2017-18. 25.3 Being aggrieved with the action of the AO, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee company made detailed written submissions. 25.4 The ld. CIT(A), accepting the contentions of the assessee, the facts and circumstances of the case and as also, the various documentary evidences placed on record by the assessee company, granted substantial relief to the assessee company and deleted a substantial addition of Rs. 25,50,000/- out of the total addition of Rs. 30,00,000/- so made by the AO on the subject issue, thereby confirming the remaining addition of Rs. 4,50,000/- in the assessee's income. 25.5 Against the addition confirmed by the Ld. CIT(A), the assessee is in appeal whereas against the relief granted, the Revenue is in appeal. 25.6 Before us, the Ld. CIT(DR) vehemently argued supporting the observations of the AO on this issue. 25.7 Per Contra Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: "D. Key Points of Assessee's Submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own in the said excel sheet in the name of the assessee only. - It was also submitted before the AO that the said excel sheet was provided to the assessee by some of its well wishers so as to bring the aforesaid malpractice in the knowledge of the assessee and it was therefore, the same was found in one of the computer systems of the assessee. 7 Excel sheets are not the books of account and therefore, no evidential value can be attached to such excel sheets. Merely on the basis of some notings made in some excel sheets, no addition can be made in the income of an assessee without having any other corroborative or cogent material on record. - i) Central Bureau of Investigation vs. V.C. Shukla and Others (1998) 3 SCC 410 ii) Common Cause (A Registered Society) v. Union of India (2017) 30 ITJ 197 (SC) 8 Entire amount cannot be added as sales. Only the amount of net profit embedded in such sales, can, at the worst be added to the income of the assessee. - CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 (MP) 9 When the entire assessment has been framed only on the basis of the so-called electronic record which are said to be copies of Excel Sheet, Excel work note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, had brought to the notice of the AO that some unsocial elements with the criminal mind used to represent their spurious liquor, as manufactured by the assessee company, where as in fact, such liquors were not so actually manufactured by it. These type of criminals do not only manufacture the liquor by using the brand name of the assessee company, but also of other manufacturers having popular brands. In past too, the assessee company had noticed such malpractice and complaints from time to time, to curb this illegal practice, have been lodged by it before the police authorities. In support of its claim, the assessee has submitted copies of some complaints lodged by it before the Police Authorities. According to the assessee, probably the above kind of criminals might have sold their own manufactured liquor to the syndicates by ostensibly showing them to be belonging to the assessee company and under such circumstances only, although the payments were made to unsocial elements, but shown in the said excel sheet in the name of the assessee only. It was also submitted by the assessee before the lower authorities that the said excel sheet was provided to the assessee by some of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that quoting of wrong section would not make the entire addition as non-genuine. We do not find merit in this contention of the assessee and instead, we are in full agreement with the finding given by the ld. CIT(A) in his Order that mere mentioning of a wrong section by the AO would not ipso facto render the entire addition as illegal especially in a circumstance that such an addition has been made by the AO on the basis of some incriminating material. In such circumstances, we are not inclined to allow this ground of the assessee. Accordingly, the Ground No. 3(a) for A.Y. 2017-18 so raised by the assessee, having no merit, is hereby Dismissed. 27. Now, coming to the merits of the case and as regard the remaining ground no. 3(b) of the assessee and ground no. 3 raised by the Revenue for A.Y. 2017-18, we find that the AO, while making the impugned addition of Rs. 30,00,000/- for the aforesaid year, has referred to and relied upon some digital documents seized from the premises of the assessee company. From the seized excel sheet, which is reproduced by the AO at page no. 60 of the Assessment Order, it is seen that it contains the date-wise details of transactions undertaken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (2013) 36 CCH 0319 (IndTrib) has worked out the net profit in the case of liquor trade @ 1.77%. Thus, keeping in view the totality of facts and circumstances of the case, we modify the orders of both the lower authorities and direct the Assessing Officer to work out profit of undisclosed sales transactions aggregating to Rs. 30,00,000/- by applying a net profit rate of 3.5% instead of the net profit rate estimated by the ld. CIT(A) at 15%. Accordingly, the ground no. 3(b) of the Assessee is Partly Allowed and ground no. 3 of the Revenue for A.Y. 2017-18 is hereby Dismissed. 28. Now, we take the Issue No. (iv) which is relating to Hawala Transaction u/s. 69A 28.1 In respect of the Issue No. (iv), the Assessee has raised Ground Nos. 2(a) to 2(d) for A.Y. 2017-18 and Ground Nos. 1(a) to 1(d) for the A.Y. 2018-19. These grounds are pertaining to the action of the Ld. CIT(A) in sustaining the additions made by the AO on account of hawala transactions u/s. 69A of the Act allegedly undertaken by the assessee company. A summary of the year-wise quantum of additions before us on the subject issue along with the respective grounds by the assessee, is given as under: ISSUE- IV: Hawala Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e search, it is submitted that upon confronting Shri Mukesh Jhanvar by the assessee, he completely denied of making any statement that unaccounted cash of the company was routed to Kolkata for procuring unsecured loans. 543 to 546 Copy of Affidavit of Shri Mukesh Jhanvar enclosed. 3 As per the AO, the hawala transactions were carried out during two financial years relevant to A.Y. 2017-18 and A.Y. 2018-19 to obtain unsecured loans. However, the fact remained that during these two years, the assessee has not obtained any fresh unsecured loan of even a single penny. - The very foundation of the AO that the subject messages are in relation to the unsecured loans procured by the assessee, through hawala, in such two assessment years is patently wrong and far from truth apparent on record. 4 The messages found from cell phone of Shri Mukesh Jhanvar were never sent or received on the direction or instruction of any of the functionaries of the assessee company. - Shri Mukesh Jhawar was not a key functionary but, only one of many accounts managers of the assessee company and the assessee company cannot be supposed to have any say or vigil on the messages sent/received b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 29. We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides. We find that the additions have been made by the AO on the basis of some digital messages found in the mobile of Shri Mukesh Jhanvar, senior accounts manager of the assessee company. It was contended by the ld. Counsel that upon confronting Shri Mukesh Jhanvar by the assessee, he completely denied of making any statement that unaccounted cash of the company was routed to Kolkata for procuring unsecured loans. We find that the assessee had submitted an Affidavit of Shri Mukesh Jhanvar before the AO retracting the statement given by him before the Search Party. We noted that as per the AO, the hawala transactions were carried out during two financial years relevant to A.Y. 2017-18 and A.Y. 2018-19 to obtain unsecured loans. However, upon perusing the audited financial statements of the assessee company for the aforesaid two years, we note that during these two years, the assessee had not obtained any fresh unsecured loan of even a single penny. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates), in anticipation of receipt of some commission. Furthermore, against such alleged hawala transactions, no fresh unsecured loans have been found credited in the books of account of the assessee company for the subject assessment years. We also find that no such document or material was found or seized during the course of the search pertaining to the earlier years from which it could have been inferred that the assessee company was involved in such scrupulous activities. We also note that the AO has not conducted any independent enquiry to unearth and correlate the contents of the mobile messages with the financial affairs of the assessee company. In such circumstances, no adverse inference could have been drawn by the lower authorities against the assessee company. We are, therefore, of the view that the entire additions of Rs. 36,50,000/- and Rs. 10,00,000/- made by the AO for the A.Y. 2017-18 and A.Y. 2018-19 respectively deserve to be deleted and accordingly, the Ground Nos. 2(a) to 2(d) for A.Y. 2017-18 and Ground Nos. 1(a) to 1(d) for A.Y. 2018-19 raised by the assessee are hereby Allowed. 30. Lastly, we take the Issue No. (v) which is relating to the applicability of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82,40,976/-; (ii) income from alleged out of book cash sales of country liquor through vouchers at Rs. 10,25,000/- ; and (iii) income from alleged Hawala transactions at Rs. 10,00,000/- - As discussed in the preceding paras, since the additions so made, by themselves, are not sustainable, the question of applicability of s. 115BBE of the Act, which provides for charging sum specified income at a higher rate does not arise at all. 2 The AO has invoked the provisions of s.69C (for disallowance of interest) and s.69A (for out of books sales, hawala transactions and cash receipt from syndicate) for making the respective additions. - For disallowance of interest, Provisions of s.69C could not have been invoked. Sec. 69C can be invoked only if an assessee is found to have incurred any expenditure which is not found recorded in the regular books of account. In the instant case, the entire interest was duly recorded in the regular books of account of the assessee. Further, sec. 69A can be invoked when an assessee is found to be in possession of any unaccounted money or other asset, but, the same cannot be invoked qua the alleged undisclosed receipts or income. During the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its case. The assessee further stated that deriving of a special category income is sine-qua-non for invocation of the provisions of s.115BBE of the Act and in the absence of such income in its case, the provisions cannot be made applicable. The assessee also submitted that for disallowance of interest expenditure, the appropriate section was s. 36(1)(iii) r.w.s. 37 of the Act. The assessee also contended that for alleged unaccounted cash receipts, since no unaccounted money, or other assets or any other investment was found, the provisions of s. 69,69A and 69B could not have been invoked. 32.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides. We find that the ld. CIT(A) has adjudicated this issue of non-applicability of the provisions of s.115BBE of the Act in the assessee's case. The relevant findings of the ld. CIT(A) for the A.Y. 2017-18 are being reproduced as under: "3.6.1 I have carefully gone through the assessment order and as also the written submission made before me. The AO has invoked the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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