9911796707
TMI Blog2023 (5) TMI 1428X X X X Extracts X X X X X X X X Extracts X X X X ..... cern of assessee namely M/s G-Ninemodular p Ltd. [2023 (4) TMI 1402 - ITAT MUMBAI] and others held it to be non-incriminating, relying on the decision of Best Infrastructure Pvt. Ltd .[2017 (8) TMI 250 - DELHI HIGH COURT] Thus, we hold that there is no incriminating material qua the addition of unsecured loans u/s. 68 of the Act and related additions of interest and commission expenses thereon for obtaining those unsecured loans. Unverified labour job work expenses - We are of the opinion that the Assessing Officer has neither made any reference of incriminating material found during the course of search not Ld. DR brought to our notice any incriminating material qua these additions and therefore, we do not find any error in the order of the Ld. CIT (A) in concluding that additions are not justified any case of non-abated assessment otherwise then the aid of the incriminating material has held in the case of Continental Warehousing Corporation [2015 (5) TMI 656 - BOMBAY HIGH COURT] Addition of unaccounted business income assessed based on diaries found from Sh Kumarpal Banda - We do not find any error in the order of the Ld. CIT (A) in applying net profit rate for computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dular Pvt. Ltd. for assessment year 2014-15 to 2019-2020. 2. Briefly stated, facts of the case are that the assessee was engaged in business of manufacturing of electrical switches and accessories. A search action u/s. 132 of the Income-tax Act, 1961 (in short 'the Act') was carried out in the case of the assessee along with residences of the Director and other group concern on 13/11/2019. Consequently, notices u/s. 153A of the Act were issued for the assessment years relevant to the search period and those were completed by the Assessing Officer assessments u/s. 153A of the Act after making various additions inter alia(i) addition on account of undisclosed business income by applying Gross profit ratio on unaccounted turnover ;(ii) Addition on account of accommodation entry of unsecured loan u/s. 68 of IT. Act ;(iii) Addition on account of unexplained expenditure u/s. 69C of the I.T. Act- ;(iv) Interest on accommodation entry of unsecured loan ;(v) Commission for arranging accommodation entry of unsecured loan ; (vi) Addition on account of disallowance of unverified labour services ;(vii) Addition on account of personal expenditure of etc. 3. We find that in view of the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was submitted by the learned departmental representative (DR). 3.2 In first set of appeals i.e. for AY 2014-15 to AY 2018-19, the assessee filed appeals before the ld CIT (A) against the assessment order passed u/s. 153A of the Act and challenged validity of reassessment u/s. 153A of the Act on the ground that no incriminating material was found during the course of search. The Ld. CIT (A) accordingly deleted the additions made by the Assessing Officer except for the assessment year 2015-16 wherein, the assessee also declared/offered undisclosed income in respect of transactions as reflected in Annexure A-2 to A-4 found from the residence of one of the directors, which were not recorded in regular books of accounts. 4. Before us, the Revenue has challenged the relief granted to the assessee by the Ld. CIT (A) for AY 2014-15 to AY 2018-19 holding that no incriminating material was found during the course of search qua the additions deleted. 4.1 Before us, the assessee has also challenged the validity of the reassessment passed u/s. 153A of the Act, utilizing material found during the course of the search at third party i.e. Director of the assessee company, by way of an appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same can be raised at any point of time, including in application under rule 27 of the ITAT Rules and in support of above proposition, he relied on the decision of the Hon'ble Jurisdictional Bombay High Court in the case of Mr. Peter Vaz and Mr. Edgar Braz Afonso v. ACIT (2021 (4) TMI 605). 5.2 We have heard rival submission of the parties on the issue of admissibility of application under Rule 27 of the ITAT Rules. We may note that against the order of the Ld. First Appellate Authority, only Revenue has preferred these appeals and assessee has not preferred any appeals or cross-objections. The assessee has filed only application under Rule 27 of the ITAT Rules. Regarding the admissibility of the application of the assessee, it is relevant to reproduce said Rule as under: "The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him." (emphasis supplied externally) 5.3 Before us, the Ld. Departmental Representative (DR) referred to Rule 27 and submitted that said rule can be invoked by the respondent assessee in respect of any of the grounds decided against the assessee and not on the issues which are not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the court, there appears to be no reason why a respondent in support of the decree in his favour passed by the lower court should not be entitled to agitated a new ground and subject to the same limitation. A Division Bench of the Allahabad High Court has taken a similar view in Kanpur Industrial Works v. Commissioner of Income-tax. That judgment has considered the position of an appeal under section 33 of the Income-tax Act along with the relevant Rules and that of an appeal under the Code of Civil Procedure and the provisions of Order XLI, rule 22. The judgment holds that when the department files an appeal for an increase in the assessed income, the subject-matter of the appeal is the increase claimed by the department and the assessee can urge any ground of defence even though it might have been rejected by the Appellate Assistant Commissioner for showing that there should be no increase. It has further held that that the assessee is not liable to be assessed at all is a ground for showing that there should be no further assessment and the department's appeal can therefore be resisted on that ground and that there is no incongruity in maintaining the assessment order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent. The Tribunal refused to allow the assessee to take up allowed to be urged and succeeded, the Tribunal would have not only to dismiss the appeal, but also to set aside the entire assessment. The point would have served as a weapon of defence against the appeal, but it could not be made into a weapon of attack against the order in so far as it was against the assessee." 5.4 The Ld. DR also referred to the decision of the ITAT, Ahmedabad in the case of DCIT v. Sandip M Patel ITA Nos. 866 to 871 and 1016 and 1339 (Ahd.) of 2008 to support that the Rule 27 sanction defendant only to support order of the Ld. CIT (A) and not permitting to attack the judgment of the LD CIT(A). The Ld. DR submitted that respondent may support the verdict of the First Appellate Authority and side by side can argue against any of the ground held against him, but not on any of the ground which has not been adjudicated by the Ld. CIT(A). The relevant finding of the Tribunal(supra) is reproduced as under: "3.5 From the above reproduction few important points of law emerges, to be highlighted so as to resolve the controversy. (1) An appeal lies from operative part of the judgment and not from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejecting any of the argument or the grounds of defence taken. (9) Lastly, how a respondent can support "any of the grounds decided against him as worded in Rule 27?. But the Hon'ble Courts have removed this confusion by explicitly mentioning that the judgment being favourable but could have an adverse finding or reasoning and that ground though against the respondent can be defended in Rule 27, nevertheless by supporting the final verdict. The interpretation of the word "grounds" is in wider sense because the same is not at par with the "ground" of appeal. 3.6 On this issue, there is one more decision pronounced by the Hon'ble Bombay High Court in the case of B.R. Bamasi (supra), wherein the assessee wanted to raise a new point as a ground of defence in the appeal but stopped to raise due to the reason that such new point may affect the validity of the entire assessment proceedings. The Court has said that the point would have served as a weapon of defence against the appeal, but it could not be made a weapon of attack against the order insofar as it was against the assessee. Relevant portion of this judgment is reproduced below:- "It has further held that the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to urge in opposition to the appeal of the plaintiff a contention which if accepted by the trial Court would have necessitated the total dismissal of the suit, but the decree insofar as it was against him would stand. The judgment of the Tribunal in our case clearly shows that, although the assessee wanted to raise a new point as a ground of defence in the appeal, he specifically stated that he wanted to rely upon it only for the purpose of having the appeal by the Department for enhancement in income-tax dismissed. But even if the assessee had not made such a statement, the above judgment shows that the assessee would be entitled to raise a new ground, provided it is a ground of law and does not necessitate any other evidence to be recorded the nature of which would not only be a defence to the appeal itself but may also affect the validity of the entire assessment proceedings. If the ground succeeds, the only result would be that the appeal would fail. The acceptance of the ground would show that the entire assessment proceedings were invalid, but yet the Tribunal which hears that appeal would have no power to disturb or to set aside the order in favour of the appellant against w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which are to be supported but w/s. 27 of Appellate Tribunal Rules. The applicability as also the operation of Sec. 253(4) of IT. Act (i.e. the procedure of filing of cross-objection) is distinct than the area of operation of Rule 27. In any case, provisions of Rule 27 and the provisions of Sec. 253(4) do not over-lap each other; rather operate in two different situations. Admittedly, right now, we are not on the adjudication of a cross-objection but on the question of granting permission to argue an independent legal ground under the shelter of Rule 27 of the Tribunal Rules." 5.5 The Ld. DR also referred to the decision CIT, New Delhi (Central) v. ADward Keventer (Successor) Pvt. Ltd. (1980) 123 ITR 200 (Del) and submitted that while the appellant should not be made to suffer and be deprived of the benefit given to him by the lower authorities, where the other side has not appealed, equally the procedural Rules should not be interpreted or applied so as to confer on the appellant a relief to which he cannot be entitled if the points decided in his favour on the same matter by the lower court are also considered as requested by the respondent. The Ld. DR further referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision in the case of CIT v. Infracon Pvt. Ltd., 2015 64 taxmann.com 472 (Delhi) wherein it is held that Rule 27 of the ITAT Rules would not extend to permitting the respondent to expand the scope of an appeal and assail the decision on issues, which are not subject matter of the appeal. 5.8 However before us, the Ld. Counsel of the assessee has referred to the decision of the Hon'ble Jurisdictional High Court in the cases of Peter Vaz v. CIT, [2021] 436 ITR 616 (Bom.) wherein following substantial question of law was raised before the Hon'ble High Court : "Whether in the facts and circumstances of the present case, it was open to the appellant/assessee to have supported the orders of the Commissioner (Appeals), based on the ground that the jurisdictional parameters prescribed under section 153C of the I.T. Act were not fulfilled, even without the necessity of filing any cross objections?" 5.9 The Hon'ble Jurisdictional High Court after analyzing the provisions of Rule 27 of the ITAT Rules held that the issue which was not raised before the Ld. CIT (A) and which goes root of the jurisdiction of the Assessing Officer to initiate the proceedings, can be raised by way of a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been found, as a precondition for any action under section 153C of the IT Act. For this purpose, he compared the provisions of Section 153C as amended up to 2020, in which, there is a significant departure. Amended provisions, which did not apply to the present case, provided that the action under section 153C was competent even if the books of accounts "pertaining to" and belonging to the assessee were found during the search under section 132 upon a person not referred to in Section 153A of IT Act. He submitted that this was an issue of law and therefore, the ITAT should have permitted the assessees to raise this issue even without the necessity of filing any cross-objections. He referred to Rule 27 of the Appellate Tribunal Rules, 1963 to contend that this Rule gives a right to the Respondent Page | 11 Shri Shaunak Jitendra Parikh, A.Y. 1999-2000 Shri Jay Ketan Parikh, A.Y. 1999-2000 Shri Raj Hiten Parikh, A.Y. 1999-2000 Shri Milan Kavin Parikh, A.Y. 1997-1998 & Shri Milan Kavin Parikh, A.Y. 1999-2000 in an appeal before the ITAT to support the order appealed against on any of the grounds decided against him, even though he may not have appealed against the order. 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount to an appeal and the cross objector would have the same rights which an appellant has before the Tribunal. Since the assessee did not have to appeal, the ITAT could not have insisted upon the filing of cross- objections as a precondition for permitting the assessee to assail the finding of concealment. 35. The Division Bench referred to the provisions of section 253 of the IT Act and after analyzing the scheme held that on a plain reading of the provision, it transpires that the party had been granted an option or a discretion to file cross objections. In case a party having succeeded before the CIT (Appeals) opts not to file cross-objection even when an appeal is preferred by the other Page | 12 Shri Shaunak Jitendra Parikh, A.Y. 1999-2000 Shri Jay Ketan Parikh, A.Y. 19992000 Shri Raj Hiten Parikh, A.Y. 1999-2000 Shri Milan Kavin Parikh, A.Y. 1997-1998 & Shri Milan Kavin Parikh, A.Y. 19992000 party, from that, it is not possible to infer that the said party had accepted the order or the part thereof which was against the respondent. Since the ITAT drew such an inference that was not supported by the plain language of Section 253, the High Court held that the ITAT was clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Supreme Court, therefore, held that the respondent in the appeal had every right to canvas the correctness of the finding on the bar of Order II Rule 2 rendered by the trial Court. 38. In the present case, it is not as if the issue of nonfulfillment of jurisdictional parameters of Section 153C was raised but rejected by the CIT (Appeals). Such an issue was not raised before the CIT (Appeals). Having regard to the provisions of Rule 27 of the Appellate Tribunal Rules, 1963 is also the provisions of section 260A(7) read with Order XLI Rule 22 of CPC as interpreted by the Hon'ble Supreme Court in S. Nazeer Ahmed (supra) we think that the ITAT should not have precluded the assessees from raising the issue in the appeals instituted by the Revenue, even without the necessity of filing any cross-objections. Accordingly, the additional substantial question of law is required to be answered in favor of the Appellants/assessees and against the Revenue." 5.10 We find that the issue in dispute raised in the application under Rule 27 of the ITAT Rules of the assessee is identical to the facts in the case of Peter Vaz (supra) decided by the Hon'ble Jurisdictional High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed person belonged to third or other person, then the Section 153C of the Act could be invoked in the hand of third or other person for making assessments. 6.3 W.e.f. 1/6/2015 the proceedings u/s. 153C can be invoked in the hands of third or other person, if the Assessing officer of searched person is satisfied that: (a) any money, bullion, jewellery or other valuable article or things seized or requisitioned, belongs to or (b), any books of account or documents, seized or requisitioned pertains or pertain to, or any information contained therein, relates to the third person or other person. 6.4 The assessing officer of searched person is required to be hand over the said assets or material or documents to the Assessing Officer having jurisdiction over such other person, in accordance with the provision of section 153C of the Act. Thus, for invoking section 153C of the Act the Assessing Officer of the searched person has to first satisfied that the material or assets seized during the course of the searched person belongs to third person. In the case before us, the issue in dispute is whether the three diaries (labeled as A-2 to A-4) seized from the residence of Shri Kumarpal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inating material qua the addition of undisclosed income based on suppression of the sales, whereas for AYs 2014-15 and 2016-17 to 2018-19, held that no incriminating material exist qua the addition of suppression of sales. Appeal: ITA No. 3034/Mum/2022 for AY 2015-16 7.2 Therefore, now, we take up the appeal of assessment year 2015-16 for adjudication. The grounds of appeal raised by the Revenue for assessment year 2015-16 are accordingly reproduced as under: 1. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) -48, Mumbai is right in holding that no incriminating material was found to sustain the addition. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) -48, Mumbai is right in deleting the entire additions of Rs. 45,38.03,980/- made in the assessment order only on the ground that no incriminating material was found to sustain the addition without appreciating the facts that the assessment order was passed after carefully analysing the seized material and evidences found during the course of search and survey proceedings and seized.. 3. "Whether on the facts and circumstances of the case and in law, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry of unsecured loan of ₹ 60,000/- (iv) disallowance of unverified labour services of ₹ 78, 27, 700/- (v) personal expenditure of Rs. 63, 496/- 8.0 Regarding the additions of accommodation entry of unsecured loan [ items no. (ii) and (iii) above], the Assessing Officer recorded the information in respect of unsecured loan parties and observed as under: (i) EssarIndia Ltd: Kolkata Investigation Directorate in its Investigation report (Ref:F.NO 75A/2015-16/257-273 dated 27.04.2015 of Pr.DIT (Inv.), Kolkata) had given the finding that the company M/s Esaar(India) Ltd is a penny scrip and it is being used to provide accommodation entries to various beneficiaries through rigging of shares. The name of the company also features in the list of confirmed shell companies as circulated by FIU IND. The Entry operators and Exit providers recorded during 133A of the Income tax Act, have accepted that the scrip of Esaar(India) Ltd has been used for providing accommodation entries. Mr. Kumarpal Banda, the director of the company M/s GM Modular Pvt Ltd in his statement recorded us 132(4) of the Income-tax Act, 1961 on 14.11.2019, has accepted that the loans taken fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019. Mr. Mayank Singh in his statement has accepted that Mr. Goutam Bose is now the Managing Director of the company. Statement of Mr. Goutam Bose was recorded by DDIT (Inv) Kolkata on 27.05.2015. Mr. Goutam Bose in his statement has accepted that he is a dummy director in the company and has no idea about the affairs of the company. An opportunity was given to the assessee i.e. Mr. Jayantilal Jain, Promoter of GM Group on 12.01.2020, to produce the party to verify its claim that the unsecured loan is genuine. But the assessee failed to produce the party and thus failed to discharge its onus to explain the source of credit. (iv) Tanaya Vincom P Ltd : A survey action us 133A of the Income-tax Act, 1961 was carried out in the premises of the company M/s TanayaVincomPt Ltd on 13.11.2019. The survey authorization could not be served as the company was not found at the premises. Efforts were also made to record the statement of Mr. Sandip Kumar Jain and Mr. Om PrakashSaraswat, Directors of the company but the same were not traceable at the address provided in the IT. An opportunity was given to the assessee i.e. Mr. Jayantilal Jain, Promoter of GM Group on 12.01.2020, to produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch proceedings. (v) in the case of completed/un-abetted assessments, where no incriminating material is found during the course of search, the assessment w/s 1534 of the Act is to be made on originally assessed/returned income and no addition or disallowance can be made de hors the incriminating evidence for the relevant year are recovered during the course of search. (vi) Any admission or confession needs corroboration with evidence. In order to make a genuine and legally sustainable addition on the basis of admission or confession during search action, it is necessary that some incriminating material must have been found to correlate the undisclosed income with such statement. (vii) Any statement recorded under section 132(4) cannot be considered as incriminating material found in the course of search as these are recorded to elicit more information/explanation of the search person on the incriminating documents/gold/jewellery found during search. 6.20 After carefully going through the remand report & assessment order, written submission & rejoinder filed by the appellant, it is observed that the remaining five additions i.e., on account of accommodation entry of un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeding and not part of search proceeding. Regarding surveys under section 133A of the Act also he submitted that same were conducted independently and cannot be said as part of the search proceeding in the case of the assessee. 8.3 On perusal of the observation of the Assessing Officer reproduced above, we find that he has referred mainly to the information gathered in respect of unsecured loan parties in proceedings carried out prior to the search the case of the assessee. For example, in the case of 'Essar India Ltd', the Assessing Officer has referred to the letter of Principal director of Income-tax (Investigation) alleging the Essar India Ltd as accommodation entry provider, which is dated 27/04/2015, i.e. much prior to the date of the search in the case of the assessee. Similarly in the case of 'NCL Research and financial services Ltd', the Assessing Officer has referred to the statement of 'Mr Gautam Bose' recorded on 27/05/2015 by the Deputy director of Income-tax (Inv), Kolkatta. The relevant information being not found or seized during the course of the search in the case of the assessee, therefore cannot be invoked for making addition in the assessment year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was any incriminating material found during the course of the search qua the additions made. In the year under consideration the Assessing Officer has made three additions, firstly of ₹1,75,00,000/- on account of accommodation entry of unsecured loan under section 68 of the act, secondly for the interest of ₹14,45,626/- in respect of said accommodation entry of unsecured loan, thirdly, on account of commission paid of ₹75,000/-for arranging accommodation entry of unsecured loan. All the three additions are related to the single issue of unsecured loans held as unexplained cash credit under section 68 of the Act. Therefore, the issue-in-dispute before us is whether any incriminating material qua the addition of unsecured loan made by the Assessing Officer, was found during the course of search action. The arguments of ld DR are not acceptable due to following reasons: 8.1 Firstly, the Ld. DR has referred to the statement of Shri Kumar Pal Banda recorded on 14.11.2019, in which he stated that part of the unsecured loan was not genuine and settled in cash. The Ld. Counsel has submitted that the said statement has already been withdrawn. No other corroborative e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch, which is reproduced as under: Sworn statement of Shri Kishore Kumar dt. 29.8.2006: 'Qn. 11: I am showing you the three print-out of amounts totaling to Rs. 52,73,920 (Rs.3,31,336 + Rs. 15,05,158 + Rs. 34,37,427). Please explain this? Ans: These are the details of loans given by me to various parties as mentioned in the printouts. This is a separate business carried out by me which was not included in the income-tax returns filed by me. Qn. 12: Please explain the source for the total outstanding amounts which are given by you? Ans: The loans totaling to Rs. 52,73,920 given to various parties as per the list were from my undisclosed income. I agree to pay the relevant income-tax dues for the above declared undisclosed income.' Sworn statement of Shri Kishore Kumar dt. 10.10.2006 (in Tamil) : 'Qn. 1: I am showing you Ann/BL/B&D/S-3 and sl. No.5, which are telephone index books wherein amounts given in cash to various persons were found recorded. Whom do they belong to? In whose handwriting it is write? What do these amounts represent? Ans: They belong to me. Signature is mine and the notings relate to loans given by me on vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the range of Rs. 25 Lakhs to 30 Lakhs. We find no error in the procedure followed by the Assessing Officer on admitted facts. The entire exercise by the department to bring to tax undisclosed income, we find has been generous and simple. There appears to be no confusion in the quantification of the tax liability and we uphold the order of the Tribunal. 8.1.2 The decision in the case of B Kishore Kumar (supra) is therefore distinguishable on facts. In view of decision of the Hon'ble Delhi High Court in the case of Best Infrastructure p Ltd (supra), it is undisputed that merely on the basis of the confession u/s. 132(4) of the Act, without any other corroborative material found, no addition could be made treating the statement u/s. 132(4) of the Act as incriminating material. 8.2 Secondly, the learned DR has referred to the statement of Sri Jayantilal Otmal jain dated 30/11/2019 to support that same constitute incriminating material. On perusal of the copy of said statement, which is produced before us by the learned departmental representative, we find that he was questioned to comment on the confession of Sri Kumarpal Banda of unsecured loan parties being not genuine, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed loan party located was a well-known hub of shell companies. In our opinion, certain information regarding the unsecured loan party gathered by the investigation wing pre search period and thereafter confronted the same to the key person of the assessee company during the course of search, cannot be said that incriminating material was found during the course of the search qua the addition. Similar observations have been made in respect of the other unsecured loan parties. Further, independent survey was carried out in the case of 'Ella Fintex Co Pvt Ltd' and 'KathakaliVincom P Ltd' on 13/11/2019 and those parties were not found at the registered address, however this fact of nonavailability of those parties at the registered address was only communicated to sh Jayantilal Jain in post-search proceeding on 12/01/2020 and therefore also it cannot be said that said information was confronted to the assessee during the course of search proceeding. Regarding, the unsecured loan party namely 'NCL Research and Financial Services ltd', the Assessing Officer observed that in the information gathered by the Kolkata investigation report dated 27/04/2015, said party has been referred. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s GM Modular Pt Ltd and Mis Goldmedal Electricals Pvt Ltd are among the leading manufacturers of the switches, cables and other electrical accessories in India. The main persons of the company M/s GM Modular Pvt Ltd and M/s Goldmedal Electricals Pt Ltd are Shri JayantilalOtmal Jain and Shri JugrajOtmal Jain respectively. The both of the concerns are runned by family members. During the course of Search action us 132 of the Income-fax Act, 1961 in the office premises of Ms Goldmedal Electricals Pvt Ltd and subsequent verification of documents, it is clearly established that certain purchases from the following parties remained unexplained:- Sl. No. Name of Supplier 1. Walambia Plastics Pvt Ltd 2. Arihant Polymer 3. Bijal Polymer 4. Aashirwad Polymer 5. Hirasons 6. Satyam Plast 7. Shreenath Enterprises 8. Innovative Turnomatics 9. Bhavna Electrical Industries 10. JMK Petrochem 11. Shyam Enterprise 12. Arihant Industries 13. Shivam Enterprises 1. During course of further verification, It was found that there are 3 common parties who features in the list of vendors of the company M/s GM Modular Pvt Ltd. The same are M/s Hirasons, M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that original bills were maintained at head office at Andheri. During the course of search action, the statement of Sri Rahul Dinesh was confronted to sh Jayantilal Jain, promoter of the company, but he took time for responding. Thus, the statement of shri Rahul Dinesh and Jayantilal are not incriminating information qua the addition. Therefore, same cannot be basis for making addition in the year under consideration being year of unabated assessment. 10.0 The Assessing Officer has also made disallowance under section 36(1) (va) of the Act amounting to Rs. 4,63,496/- for payment deposited to employees contribution to provident fund (PF) and employees State insurance (ESI) on the basis of the information under tax audit report(TAR). The Ld. CIT (A) has deleted the addition holding it not to be based on the incriminating material. There is no reference of incriminating materials in relation to disallowance qua section 36(1) (va) of the Act. 11.0 In the facts and circumstances of the case, we are of the opinion that the Assessing Officer has neither made any reference of incriminating material found during the course of search not Ld. DR brought to our notice any incriminati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicial precedents, restricted the addition to the extent of the net profit on unaccounted sales, which was offered by the assessee in return of income and therefore, the addition made by the Assessing Officer was deleted observing as under: "5.4 In my considered view, the only question to be decided here is whether on the unaccounted turnover (as reflected from the seized documents for F.Y 2014-15 related to AY 2015-16), net profit percentage or gross profit percentage will be applied. This question is no more res integra and already settled with the plethora of judicial decisions. The decisions are reproduced as below- Hon'ble Jurisdictional High Court in the case of CIT Vs. Shri Hariram Bhambhani [2015 (2) TMI 907 Bombay High Court], wherein net profit rate was applied to unaccounted sales. The relevant head notes of the decision are in-below: reproduced here Income from undisclosed sale - Tribunal upholding the order of the CIT (A) directing AO to tax 4% net profit on unaccounted sales of 7 35 lakhs - entire sales which are unaccounted cannot be undisclosed income of the assessee, particularly as the purchase had been accounted for held by tribunal - Held that:- Grie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count for the said Assessment Year on recorded sales. In the result, this ground of the assessee is allowed in part. 5.5 Respectfully following the binding decision of the Hon'ble Jurisdictional High Court and other judicial pronouncements, I do not have any option but to held that under the existing circumstances, addition, if any, is required to be made on the basis of net profit ratio instead of gross profit ratio, as shown in the regular books of accounts. Accordingly, the AO is directed to apply the net profit ratio on the unaccounted sales of Rs. 275,73,049.69/-, which is relevant to AY2015-16 and not Gross profit ratio. If after applying net profit ratio, the computed amount exceeds the disclosed unaccounted income of Rs. 10,14,21,500/-, the excess will only be the net addition. This ground is decided accordingly. The ground no. 3 is treated as Allowed for statistical purposes." 12.3 The Revenue is aggrieved with the addition deleted. Since, the Ld. CIT (A) has not deleted the addition on the ground of no incriminating material and therefore, issue before us in respect of this addition is whether for determination of the undisclosed income, 'gross profit r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellers v. ITO in ITA No. 1302 & 1303/Kol/2017. 12.5 We have heard rival submission of the parties on the issue in dispute and peruse the relevant material on record. As far as the issue of the existence of incriminating material qua the addition is concerned, same is not in dispute before us. The only dispute is in respect of the application of gross profit rate adopted by the Assessing Officer on the unaccounted business turnover as against the net profit rate adopted by the assessee. We find that in the instant case in the seized diaries, evidence of indirect expenses incurred for salary, transport et cetera are recorded, which shows that for carrying out this unaccounted business, the assessee separately incurred indirect expenses. The Assessing Officer while working out the profit based on the transactions in the seized diaries has applied gross profit rate, which means only purchases and direct expenses have been reduced from the unaccounted sales for working out unaccounted profit and no deduction has been given for expenses incurred for salary and other indirect expenses. In the case of the assessee the unaccounted business being similar to the accounted business, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, in respect whereof, no complaint had been lodged by the assessee. On facts, the Commissioner (Appeals) found no grounds to interfere with the quantum of excess stocks discovered by the assessing officer in course of the survey. The Commissioner also agreed with the assessing officer as to the quantum of income which had escaped assessment." There are two aspects to the order impugned dated June 30, 2015 passed by the Appellate Tribunal: the factual findings of the Commissioner (Appeals) as appear to have been interfered with by the Appellate Tribunal; and, the direction given for taking sales of rice and bran into account before arriving at the additional income which could be said to have escaped assessment. Before the Commissioner (Appeals), the assessee had relied on a document signed by an official of the Food Corporation of India that evidenced the stock figures at the relevant point of time. The Commissioner (Appeals) dealt with such aspect of the matter in great detail and by referring to the admitted statements of the representatives of the assessee, which were not sought to be controverted at any point of time on behalf of the assessee, concluded that it was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be added to the income of the assessee." In the circumstances and particularly since the factual findings rendered by the Commissioner (Appeals) as to the quantum of additional stocks have now been restored, the order impugned on the methodology for the ascertainment of the income which escaped assessment would pass muster. I.T.A. No. 1290/Kol/2017 Assessment Year: 2007-08 I.T.A. No. 1291/Kol/2017 Assessment Year: 2009-10 Barh Jewellers The Appellate Tribunal merely directed the gross profit that the additional purchase was capable of generating to be regarded as the additional income for tax to be assessed on such basis. Such view of the Appellate Tribunal does not call for any interference. Accordingly, ITAT NO.196 of 2015 and GA NO- 4047 of 2015 are disposed of by modifying the judgment and order of the Appellate Tribunal dated June 30, 2015 as indicated. There will be no order as to costs." 16. The coordinate Bench of this Tribunal held as follows :- "5. Now comes the equally Important question as to whether the- entire discrepancy in stock addition or only the profit element embedded therein is to be considered for the impugned addition. We find thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed sales which is price received by the seller of the goods for the acquisition of which the assessee has already incurred the cost. So, in the given circumstances, the only way out is to adopt the net profit by the Revenue authorities, but the same has to be adopted judiciously in the facts and circumstances of the case. In the instant case, there is not an iota of evidence on file as to how the net profit is estimated at exorbitant rate of 22%. Assessee cannot be compared broadly with M/s. Bhaskar Traders which has shown gross profit @ 22%. So, keeping in view the net profit shown by the assessee in the earlier year @ 16%, we do not find any evidence on record to reach at the conclusion that in the next year, net profit is increased by 6%. So, in these circumstances, we find it appropriate to estimate the net profit @ 16% on the undisclosed sales of Rs. 1,58,75,339/-." 12.7 In view of above discussion, we do not find any error in the order of the Ld. CIT (A) in applying net profit rate for computation of unaccounted profit from the unaccounted business transactions recorded in the seized diaries qua the year under consideration. Accordingly, we uphold the finding of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore Ld. CIT (A) that on the basis of incriminating material found during the course of search which were labeled as Annexure A-2, A-3 and A-4 the assessee had offered a sum of Rs. 10, 14.21.500/- on the gross transactions in the return of income filed us. 153A for AY 2015-16". 5. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) -48, Mumbai is right in allowing the appeal filed by the assessee by relying on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation(2015 374 IT 645] ignoring the fact that appeal is pending before the Hon'ble Supreme Court of India on this issue of 'power conferred by section 153A of the Act which was not adjudicated upon'. 14.1 In the year under consideration, the Ld. CIT (A) held that there was no incriminating material qua the any of the additions made and therefore being unabated assessment year, no addition could have been made without the aid of an incriminating material. The relevant finding of the Ld. CIT (A) is reproduced as under: "6.19 Conclusion-The aforesaid detailed discussion with respect to various judicial decisions clearly laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f search proceedings. (iii) Disallowance of interest expenses of Rs. 10,02,740/- paid to lender by treating the same as unexplained expenditure us. 69C of the Act: Regarding this addition, it is observed that during the year under consideration, the appellant had claimed interest expense to the tune of Rs. 10,02,740/- paid on the outstanding unsecured loans to two lenders M/s Gromo Trade &Consultancy Services Ltd. and M/ NCL Research and Financial Services Ltd. The interest expenses have been disallowed by the AO us 69C of the Act. Clearly this addition is also not linked with any incriminating material found during the search pertaining to AY 2014-15. 6.21 Hence, only conclusion that can be drawn is that the figures related to these additions are either extrapolation or germinate from regular books of accounts and not forming part of any incriminating material found and seized during the search action which can be relevant to AY 2014-15. Considering the totality of the facts and circumstances, I am of the considered view that these additions cannot survive de hors the incriminating evidences held in the above binding judicial decisions. The AO is accordingly dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons, M/s Satyam Plast and M/s Shivam Enterprise also featured in the list of the vendors of the assessee company. During the course of the search in the case of the assessee statement of Sh Rahul Dinesh Jha, an employee of the assessee was recorded, wherein he stated that bills of purchases from aforesaid entities were directly entered into accounting system used by the godown staff. This statement of sh Rahul Dinesh was confronted to Sh Jayantilal Jain, promoter of the assessee company, but he failed to substantiate the purchases from those parties. During the course of the assessment proceeding, the Assessing Officer issued a detailed show cause notice as why the purchases from said parties during the period from assessment year 2014-15 to AY 2020-21, might not be disallowed. The assessee substantiated the purchase with purchase invoice, copies of stock register, delivery challan from supplier, bank statement of assessee company, ledger confirmation from those parties. After considering the submission of the assessee, the Assessing Officer bifurcated the purchases from those parties for the period prior to introduction of e-way bill under the GST and post the period the introdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a contemporary document it is generated for transport of goods and thus cannot be generated post facto. The same vehicle is verified form the Transport Ministry website of Vahan and the vehicle was found to be Goods vehicle. The same was done on test check basis. Further for these purchases transporter invoices were produced by the assessee. Thus there exists a third party evidence in the nature of E way bill for delivery of goods and therefore the purchase of an amount Rs. 60.74 crores is taken as verified." 16.3 But regarding the balance purchases of Rs. 68, 61,32,923/-, the Assessing Officer rejected the same as unverified due to absence of watchmen inward register, absence of e-way bill and certain minor discrepancies in the stock register. The Assessing Officer accordingly rejected the purchases relevant to the assessment year under consideration amounting to ₹9,47,53,780/- holding the same is unverified. The relevant finding of the Assessing Officer is reproduced as under: "b) Purchases for which no E way Bill is available for an amount Rs. 68,61,32,923/- - i) Goods purchased from M/s Hirasons for an amount of Rs. 34,22,36,756/-: Pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55,30,494/- to these 3 parties in the case of GM Modular Pvt Ltd. No supporting documents have been submitted for these. Hence the amount of Rs. 7,55,30,494/- is considered unexplained in the case of M/s GM Modular Pvt Ltd. * СОМЕ ТА Y DEPARTMENT (xi) The assessee vide its submission dated 11.03.2021 has tried to explain the genuiness of the transactions, however it has failed in subbstanting the claim of purchases/labour work as the assessee could not make rebuttal of discrepancies pointed above in respect of documentation and records of the purchases. The assessee failed in producing third party evidences in respect of claim of purchases. Statements of concerned persons clearly establish the deviation/discrepancies in respect of recording of purchases in the books of the assessee. The assessee failed in submitting watchman inward register and E-way bills. None of the satisfactory documents were produced by assessee in respect of labour services/job work. All the relevant extract/documents requested by the assessee were supplied to the assessee, however it has failed in proving the genuineness of purchases held to be bogus in above pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp;B, Plot No. 93, Survey No. 66, His No. 1/1, Waliv Village, Vasai (E) -401208." Comment on the Observation of the A0: The AO has heavily relied on the statement of Shri Rahul Dinesh Jha, which is also quoted in the order. On carefully going through the statement of Shri Rahul Dinesh Jha, I find that he has stated that the bills of M/s Hirasons, M/s Satyam Plast and M/s Shivam Enterprise are directly entered into the accounting system used by the godown. No where in the statement, Shri Rahul Dinesh Tha has admitted that the bills pertaining to these three parties are non-genuine. The AO has not made clear as to how this method of entering into the accounting software one can draw conclusion that the purchases are nongenuine. 5.9 Thereafter, in page no. 42, the AO, while concluding the issue has submitted that "b) Purchases for which no E way Bill is available for an amount Rs. 68,61,32,923/- i) Goods purchased from M/s Hirasons for an amount of Rs. 34,22,36,756/-: Purchases from Hirasons are like vibro ding dong bell, PXSF 12 00 7 white with a narration CASAVIVA Glossy White, JS 04 103 with narration Slim Surface box, Round plate, Fan junct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of (i) One instance of discrepancy in the stock register (ii) Absence of Watchman inward register and E waybill for these purchases 5.9.2 Regarding inconsistencies in the stock register, the appellant has submitted a detailed explanation and documents before the AO, to substantiate reasons for difference. According to the appellant, the appellant had received an order on 22.10.2016 from M/s. Imperial Shah Stores which was inadvertently booked in the stock register based on delivery order generated, however the actual delivery and invoicing against the same was done in the month of Nov' 2016 on 07.11.2016. Due to this error, the issue quantity for one item was more than receipt quantity. Before the undersigned too, the appellant has submitted the documents to substantiate the difference. In this regard, I agree with the appellant that a stray inconsistency in the stock register cannot form the basis to arrive at a conclusion that the entire purchase is non-genuine. Moreover, a plausible explanation has been given by the appellant which is just rejected by the AO without giving reasons for the same. Moreover, the discrepancy is with respect to just 750 units which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.2018, for transport of goods and all purchase sales transactions entered the business didn't have the requirement of preparing the E-ways bills. I find merit in these arguments of the appellant. 5.9.6 It is also strange that for the period prior to e-way bills' requirement, all purchases from these three parties are treated by the AO, as non-genuine. However, after the scheme of -way bills was introduced during the relevant F.Y. itself, the purchases from the same three parties have been treated as genuine. Can it be said that before a cut off date, all purchases from a party is bogus & non-genuine and after the cut off date, the same party becomes genuine just because the scheme of e-way bills was introduced by the Central Govt. In my considered view, such a stand of the AO cannot be approved. 5.10 The final conclusion of the AO is in page 44 of the assessment order, wherein he states as under- "(xi) The assessee vide its submission dated 11.03.2021 has tried to explain the genuineness of the transactions, however it has failed in substantiating the claim of purchases/labour work as the assessee could not make rebuttal of discrepancies pointed above in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kes the payment to the vendors. v. Ledger Confirmation from the three parties: The copies of the duly signed ledger confirmations from the three parties reflecting and confirming the transactions. According to the appellant, the after producing the above documents, the appellant company has discharged its onus to prove the genuineness of the transaction. 5.10.2 In my considered view, after submitting the above documents, the onus is on the AO to point out the defects in these documentary evidences, which the AO has failed to do so. Only citing a solitary instance of discrepancy, will not establish any thing, once the reason for such difference has been successfully explained before the AO. In this regard, the reliance of the appellant in the judicial decisions viz., Hon'ble Supreme Court in the case of CIT vs. Odeon Builders (P.) Ltd.(20191 110 taxmann.com 64 (SC), Innovators Façade Systems Pvt. Ltd. VS. ACIT [ITA No. 5450, 3451 & 5452/Mum/20151, M/s. Adeshwer Enterprise Versus DCIT, Central Circle-01 Thane, ITA Nos. 4335 to 4338/Mum/2017, are in order, 5.11 Conclusion- Considering the totality of the facts and circumstances of the issues involved, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT v. Spectrum Consultants India (P.) Ltd. [2014] 49 taxmann.com 29 (Karnataka). These decisions are already quoted in the submission of the he appellant, which is not produced for the sake of brevity. Hence, the A.O is directed to allow Rs. 26,72,885/- as contribution received from employees towards ESI and EPF and ground of appeal no. 3 is Allowed." 17.1 We have heard rival submissions of the parties on the issue in dispute and perused the relevant material on record. In view of the decision of the Hon'ble Supreme Court in the case of Checkmte services p ltd in Civil Appeal No. 2833 of 2016, an assessee is not eligible for deduction under section 36(1) (va) of the Act in respect of the employee's contribution to PF/ESI deposited after the due date prescribed under the relevant Acts. Therefore, respectfully following the decision of the Hon'ble Supreme Court (supra), the finding of the Ld. CIT (A) on the issue in dispute is set aside and the disallowance made by the Assessing Officer is sustained. The ground No. 3 of the appeal of the Revenue is accordingly allowed. ITA No. 3211/Mum/2022 for AY 2014-15 M/s G Trade and capital venture ltd: 18.0 Now we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure u/s. 69C on account of interest on accommodation entry of unsecured loan of Rs. 18,30,674/-. 3. Addition on account of unexplained expenditure u/s. 69C on account of commission for arranging accommodation entry of unsecured loan of Rs. 62,500/-. 4. Addition u/s. 43B of I.T. Act of Rs. 3,70,800/-. Against these additions/disallowances, the appellant is in the present appeal". 20.0 the Ld. CIT (A) has deleted the additions mainly on the ground that the year under consideration being unabated assessment, no addition could have been made without the aid of the incriminating material. The Ld. CIT (A) has summarised the submission of the assessee and the finding of the Assessing Officer as under: "6.1 I have carefully considered the facts of the case, submissions of the Appellant, the observations of the A contained in the assessment order and the other materials on record on this issue. In this Ground, the appellant has contended that the assessment order passed u/s. 153A r.w. 143(3) of the Act for the impugned assessment year is bad in law as - (i) there were no assessment proceedings pending as on the date of search action us 132 of the Act which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of search proceedings, do not abate. (ii) for this purpose, intimation us 143(1) would constitute an assessment, relying on the decision of Hon'ble Bombay High Court in CIT V/s Gurinder Singh Bawa (79 taxmann.com 398) (iii) the proceedings us 153A of the Act do not empower the Assessing officer to re-adjudicate the settled issues again, unless fresh incriminating material for the relevant year is found during the course of search proceedings. (iv) the Assessing officer does not have jurisdiction to make additions/disallowances which are not based on relevant incriminating material found during the course of search proceedings. (v) in the case of completed/un-abetted assessments, where no incriminating material is found during the course of search, the assessment us 153A of the Act is to be made on originally assessed/returned income and no addition or disallowance can be made de hors the incriminating evidences for the relevant year are recovered during the course of search. (vi) Any admission or confession needs corroboration with evidences. In order to make a genuine and legally sustainable addition on the basis of admission or confession during search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh rigging of shares. The name of the company also features in the list of confirmed shell companies as circulated by FIU IND. The Entry operators and Exit providers recorded during 133A of the Income tax Act, have accepted that the scrip of Esaar(India) Ltd has been used for providing accommodation entries. Mr.Kumarpal Banda, the director of the company M/s GM Modular Pt Ltd in his statement recorded u/s. 132(4) of the Income-tax Act, 1961 on 14.11.2019, in reply to Q.30 and Q.31 has accepted that the loans taken from Ms Esaar(India) Ltd are not genuine. Further an opportunity was given to the assessee i.e. Mr.Jayantilal Jain, Promoter of GM Group on 12.01.2020, Mr. Jugraj Jain, Promoter of Goldmedal Group on 27.11.2019 and Mr. Kapil Jain, Director of M/s Goldmedal Electricals Pt Ltd on 11.01.2020 to produce the party to verify its claim that the unsecured loan is genuine. But the assessee failed to produce the party and thus has failed to discharge its onus to explain the source of credit. 1. Kamalakshi Finance Corporation/ Gromo Trade and Consultancy Ltd: The SEBI has passed order u/s. 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 on 20th Februa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to said party. In respect of similar observations in the case of GM Modular private Limited for AY 2015-6 in ITA No. 3034/Mum/2022, we have held that said information do not constitute incriminating material. In respect of the other party namely M/s Erudite Shares and Securities p Ltd, an independent survey was carried out u/s. 133A of the Act, and therefore cannot be considered for the purpose of incriminating material found during the course of the search. In the case of the assessee, the Ld DR also referred the statement of sh Kumar pal Band and Jayantila Jain as constituting incriminating material. We have already given the detailed finding in respect of the unsecured loan parties in the case of GM Modular private Limited for AY 2015-6 in ITA No. 3034/Mum/2022 as why the statement of Sh Kumarpal Banda and Jayantilal Jain do not constitute incriminating material found in the course of the search in the case of the assessee. To have consistency in our finding on the issue in dispute, in the instant appeal also, we uphold the finding of the Ld. CIT (A) that there existed no incriminating material qua the additions and hence no addition could have been made wit ..... 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