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TMI Blog2024 (7) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... d under invoicing in respect of three parties namely M/s Dhanawat Enterprises, M/s Ashoka Trading Co. and M/s A.K. Sales India. 2. a) That the Ld. CIT (A) has also erred in calculating the alleged under invoicing as per above ground no.1 in respect of above parties by adopting the basis of 30% of the disclosed sales on account of alleged under invoicing, which is against the facts and circumstances of the case. b) Notwithstanding the above said ground'* of appeal and for the sake of argument, at best the notings on the "Whatsapp Messages' in respect of above there parties could at best be treated as sales outside the books of account relating to year under consideration and only 'gross profit' on the amount as mentioned in the 'Whatsapp Messages', could be a subject matter of addition. 3. That the Ld. CIT(A) has erred in relying upon the statement of Sh. Satya Parkash Tiwari and Others by sustaining the addition on account of 30% of alleged under invoicing in respect three parties as stated above. 4. a) That the Ld. CIT(A) has erred in making a total addition of Rs. 26,58,600/- on account of sales outside the books of accounts. b) Notwithstanding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer further prepared a list comprising of rates at which cycles parts were sold to various parties and finally concluded that since the rates at which the goods had been sold to other parties were the same as per the rates under items supplied to M/s Dhanawat Enterprises and accordingly concluded that since there was suppression of sale rate in respect of M/s Dhanawat Enterprises, therefore, the entire turnover of the Assessee was extrapolated and an addition of Rs. 27,01,59,518/- was made in the assessment order. The Assessing Officer further made an addition of Rs. 26,58,600/- claiming sales outside the books of account to various parties and thus the total addition of Rs. 28,29,70,480/- was made by the A.O. in the assessment order. 4.2 Aggrieved with the order of the Assessing Officer, the Assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) in his order has considered the findings of the A.O. as well as written submissions filed by the Counsel of the Assessee. The main argument of the Assessee before the ld. CIT(A) was that on the basis of Whatsapp Chat of M/s Dhanawat Enterprises, it was not a case of under invoicing rather, it was only that some quantity of cycle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r invoicing at best could be in respect of sales as per books of account made to these three parties only and accordingly he concluded that 30% of the disclosed sales as per the books of account in respect of these three parties could be added and confirmed the addition of Rs. 22,77,606/- in this respect. He further gave his finding relying upon the various case laws that no extrapolation can be made in respect of entire turn over since no such evidence had either been found during the search nor brought on record in post-search investigation. Thus, the ld. CIT(A) concluded that the addition had to be restricted up to the evidence as unearthed during the course of search and, therefore, he rejected the addition on the basis of extrapolation done on presumption by the Assessing Officer. The Assessee also filed affidavits of Shri Gurjit Singh, Partner and Shri Satya Parkash Tiwari, Accountant regarding retraction of statement given during the search operation. The ld. CIT(A) gave his finding on this issue that since the retraction was made after a long time, therefore, it could at best be taken an afterthought and, therefore, rejected the retraction. 7. Aggrieved with the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprises, M/s Ashok Trading Company and A.K. Sales India and calculated 30% of sales made to them as sales made outside the books of account and confirmed the addition of Rs. 22,77,606/-. Finally, the ld. Counsel of the Assessee concluded that even sales made out to M/s Ashoka Trading Company and M/s A K Sales India were not made out the books on the basis of Whatsapp Chat and he vehemently argued that there was no case of under invoicing of three parties as tabulated by the ld. CIT(A) in his order and accordingly he requested the Bench to delete the addition of Rs. 22,77,606/- confirmed by the ld. CIT(A) on the basis of extrapolating of sale made outside the books to three parties namely M/s Dhanawat Enterprises, Ashoka Trading Company and M/s A.K. Sales India. 9. Ground No.2: Appeal on Ground Nos 2 is against the addition of Rs. 26,58,600/- and its confirmation by the ld. CIT(A) taking 30% of the total sales to three parties M/s Dhanawat Enterprises, Ashoka Trading Company and A.K Sales India. The ld. Counsel for the Assessee argued that though, the assessee in order to avoid the litigation has accepted Rs. 26,58,600/- as the sales outside the books of accounts and argued that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tya Parkash Tiwari, wherein he stated that Rs. 5 lacs was to be collected in cash from one Sh. Pardeep. Similarly, there is a 'WhatsApp chat' of Ashoka Trading Company, wherein certain advance paid in cash have been mentioned and all these facts were highlighted by the Ld. CIT (DR) to substantiate, that there has been regular transactions in cash outside the books of accounts. 11. Further, ld. DR referred to 'WhatsApp chat', which is dated 04.01.2020 and 09.01.2020 wherein, there is certain details of sale outside the books of accounts. Finally, ld. DR read out the statement of Sh. Satya Parkash Tiwari, where he had agreed that unaccounted cash component of 30% of actual sales was made over and above the sales as per books of accounts for Financial Years 2016-17 to 2021-22. Similarly, ld. DR referred to statement of Sh. Amarjit Singh, wherein, he has in answer to question No. 8, acknowledged the statement of Sh. Satya Parkash Tiwari. It was further read out from the statement of Sh. Amarjit Singh, where he had agreed that they have received approximately 25 to 30% of cash of total bill from the party and given 5% discount to compensate the losses incurred of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rma Marbles Palace Pvt. Ltd.,' reported in 110 taxmann.com 436, wherein, there was a under invoicing of the sale bills and it was held that the Assessing Officer was fully justified to make estimation for the block period. Regarding the retraction made by the Sh. Satya Parkash Tiwari and Sh. Gurjit Singh by filing affidavits before the CIT(A), the ld. DR argued that, since the retraction was made after the assessment order was passed by the Assessing Officer, the same was an afterthought and no reliance could be placed on such retraction. Thus, in the nutshell, the ld. DR concluded his argument by stating that the A.O. had rightly rejected the books of accounts and confirmed by the CIT(A) and also stated that since there were regular transactions of sales outside the books of accounts, the Assessing Officer has rightly extrapolated the sales by 30% of the turnover disclosed in the regular books of accounts and also making the total addition of Rs. 26,58,600/- on account of sales made outside the books of account. 15. In Rejoinder, to the arguments to the ld. DR, the ld. Counsel of the assessee argued vehemently that even from the same 'Whatsapp chat' as relied upon by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled law that no evidentiary value could be attached to the statement recorded during search as per the judgment of the Apex Court, Chandigarh Bench of the ITAT and other coordinate benches of the Tribunal and reliance was placed in the judgment of 'Sh. Jagbir Singh Nehra' in ITA No. 687/Chd/2023 in this respect. 17. Finally, the Ld. Counsel argued that no cash, jewellery or other unaccounted investment have been found during search and no case of excessive or negative stock have been made out by the Assessing Officer and, if it all, the contention of the ld. DR, is to be taken into consideration, that all the expenses have been debited in the trading account, then there would have been very substantial shortage of stock, as per physical verification at the time of search, which is apparently not and, thus, only gross profit element embedded in the sales outside the books of accounts to the tune of Rs. 26,58,600/- @ 8.60% was to be considered and relied upon the judgments of various High Court and different benches of the coordinate benches as cited 'supra'. 18. Regarding the judgments cited by the ld. DR in the case of 'Chetan Das Laxman Dass', (supra) , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stification to infer that the assessee would have undertaken sales outside the books of account during the rest of the financial year also, therefore, the assessment of unrecorded sales was limited to Rs. 1,11,99,427/- representing 17 unrecorded sale bills alone." 21. Our attention was also drawn to the Judgment of Hon'ble Delhi High Court in the case of 'Saksham Commodities Ltd.' reported in 161 taxmann.com 485, in which by referring to the judgment of 'Abhisar Buildwell Pvt. Ltd.' of the 'Apex Court' wherein, it was held that there is a requirement of incriminating material for the purpose of estimation of income of the block period and, as such, no extrapolation was possible and it was held in that case, the assessment of total income for a particular assessment year is not intended to set-off a chain reaction or have a water fall effect on all the assessment year. The relevant para of the judgement is being reproduced as under:- "The decision in the case of Commissioner of Income Tax v. Sinhgad Technical Education Society (2018) 11 SCC 490 also constitutes a binding precedent in respect of the aforesaid proposition as would be evident from the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pune Bench 'Third Member' case in 'Samrat Bear Bar vs. ACIT' reported in 251 ITR (AT) 1 Pune. Similar reliance was placed by the Ld. Counsel on the other case laws and regarding the argument of the ld. DR about total addition of the sales outside the books of accounts, it was stated by the ld. Counsel that for making the sales outside the books of accounts, purchases were made separately in small lots not accounted for in the books of accounts on credit basis as the assessee has goodwill in the market and then out of sales realization, the amount was rotated over a period of time and, as such, appropriate gross profit only could be applied on that and the various judgements of the High Court, and the different benches of the Tribunal, clearly laid down that the total receipts cannot be profit. 24. We have considered the findings of the ld. CIT(A) in his order, arguments put forward by the ld. Counsel of the Assessee and the written submissions filed by him during the proceedings before us. We have also considered the different case laws brought on record by the ld. Counsel of the Assessee. Similarly, we have heard the ld. DR and considered his arguments also. After consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icting the addition made on the basis of sales made during the year under consideration outside the books of account to parties which figures in the Whatsapp chat only are justified and therefore, Assessee's appeal on this Ground of appeal is allowed. 25. Assessee's appeal on Ground No. 2 is against the addition of Rs. 26,58,600/- made on the basis of sales outside the books of account. Here again, we have considered the written submissions filed by the ld. Counsel of the Assessee and the arguments made by him during the proceedings before us. We have also considered the arguments made by the ld. DR on this point. The ld. DR argued vehemently for confirmation of addition by the CIT(A) and the entire sale proceeds made to the parties outside the books of account, 26. On the other hand, the ld. Counsel of the Assessee argued in favour of the adoption of GP ratio of such sales. We have taken into consideration Whatsapp chat and statement recorded of Mr. Satya Parkash Tiwari as well as the partners of the firm and we have also considered all other documents and evidences brought on record by the Assessing Officer as well as discussed by the ld. CIT(A) in their respective orders. We f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was indulging in under invoicing to the extent of 30% from overall sales? 3. Whether on facts and circumstances of the case the Ld. CIT(A) was correct in deleting the addition of Rs. 26,78,81,912/- by ignoring the fact that during the course of assessment proceedings the whatsapp chat and statement of Sh. Satya Parkash Tiwari and Sh. Amarjit Singh Arneja was also confronted to Sh. Gurjit Singh partner of M/s Gurdip Cycle Industries who had also agreed with the statement of Sh. Satya Parkash Tiwari and Sh. Amarjit Singh recorded during the search proceedings who has accepted the practice of under invoicing of bills in overall sales? 4. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. 30. Revenue has filed the appeal on three grounds and the gist of which are in challenging the action of the ld. CIT(A) to restrict the addition of Rs. 27,01,59,118/- to the extent of Rs. 22,77,606/- and deleting the addition of Rs. 26,78,81,912/- . The ld. CIT(A) in his order has discussed this issue as under: - "5.2.6 I have carefully considered the facts of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.K. Sales India was not justified. He also emphasized on the fact that the extrapolation made by the Assessing Officer on the entire turnover of the Assessee company during the year should be accepted and the addition made thereon should be confirmed. 32. On the other hand, ld. Counsel for the Assessee relied heavily on the finding given by the ld. CIT(A) in the appellate order and pointed out that Whatsapp messages which are the basis for addition contain that sales which was made to only three parties pertain to the year under consideration or sales made outside the books of account. He also brought on record the finding given by the ld. CIT(A) in his order on this issue, which is as under: - "I have carefully examined the Whatsapp Chat and the statements recorded during Search and relied upon by the AO and it has been observed that in the case of following three companies, there are evidences of under invoicing: * Dhanawat Enterprises * Ashoka Trading Co. * AK Sales India In case of other parties, either the transactions pertain to different years or the nature of transaction is different. In some cases these are simple message having no bearing on income. 5.2.10 I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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