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Facts
A search and seizure operation under Section 132 of the Income Tax Act was conducted on a group of cases, including Tristar Hospitalities. The Assessing Officer (AO) recorded satisfaction regarding information contained in seized material pertaining to Tristar Hospitalities. Assessment proceedings were initiated under Section 153C read with Section 153A of the Act, leading to an addition for suppressed business receipts.
Held
The Tribunal upheld the decision of the CIT(A) to restrict the addition to 10% of the total addition on account of suppressed business receipts. This decision was based on the findings of a Coordinate Bench in similar cases, which found the 10% net profit ratio to be a rational basis derived from seized materials.
Key Issues
Whether additions made under Section 153C of the Act based on seized material are sustainable when the assessee claims no incriminating material was found for the relevant assessment year. The correctness of the net profit ratio applied to suppressed receipts.
Sections Cited
132, 153C, 153A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “E” BENCH, DELHI
Before: MS. MADHUMITA ROY & SHRI NAVEEN CHANDRA
The instant appeal filed by the Revenue is directed against the order dated 30.06.2023 passed by the Ld. CIT(A)-26, Delhi, arising out of the Assessment Order dated 08.10.2021 passed by the ACIT, CC-16, Delhi, under Section 153C of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for Assessment Year 2016-17.
The matter relates to initiation of proceeding against the assessee under Section 153C of the Act. In fact, a search and seizure operation under Section 132 of the Act was carried out in the case of Kohli Tent Group of cases by Investigation Wing, New Delhi on 03.05.2018 wherein Shri Sanjeev Kohli, M/s SSG Hospitalities Pvt. Ltd., Shri Sunit Goel and Shri Abhishek Jain were also covered. The Ld. AO recorded satisfaction of certain information contained on the material seized in the cases of searched person pertain to M/s Tristar Hospitality, the person other than the searched person. Satisfaction was recorded by the AO on 09.02.2021 of the searched person and handed over the seized material to the AO of the assessee, the other person; satisfaction recorded that seized document belonged to the assessee firm and have a bearing on the determination of the total income of the assessee. Assessment proceeding was initiated in the case of the assessee before us under Section 153C r.w.s 153A of the Act which was culminated in making addition to the tune of Rs.1,98,01,688/- on account of suppressed business receipt.
The Ld. CIT(A) in turn restricted the addition at 10% of the total addition on account of suppressed business receipts. Hence, the instant appeal before us.
Heard the parties and perused the material on record. It is the case of the assessee that during the course of search no incriminating material/document has been found relating to the order for Assessment Year 2016-17 and thus, no addition can be made in the absence of any incriminating material during the course of search as held by the Hon’ble Apex Court in the case of Pr.CIT(Central)-3 Vs. Abhisar Buildwell Pvt. Ltd. reported in 454 ITR 212 (SC).
At the time of hearing of the instant appeal, the Ld. Counsel appearing for the assessee submitted before us that the case of the assessee in other years has also been decided in favour of the assessee on the identical fact by the Co-ordinate Bench particularly for Assessment Year 2017-18 & 2018-19 copy whereof have also been furnished before us.
Such submissions made by the Ld. AR has not been able to be controverted by the Ld. DR.
Having heard the Ld. Counsels appearing for the parties and having regard to the facts and circumstances of the matter we have perused the order passed by the Coordinate Bench on the identical issue arising out of the search and seizure conducted on Kohli Tent Group on 03.05.2018; the relevant observations whereof is as follows:
“9. The order of the Ld. CIT(A) in restricting the addition @ 10% of unaccounted turnover is in consonance with the order of the Coordinate Bench in the case of Kohli Tent House (supra). No distinction on facts has been pointed out by the Ld. DR so as to take a different view in the matter. Under this facts and circumstances of the matter we have considered the order passed by the Coordinate Bench in to 2477/Del/2023 & to 2449/Del/2023 wherein the Coordinate Bench with the following observations upheld the order passed by the Ld. CIT(A): “31. We are therefore of considered view that the CIT(A) has applied a scientific view gathered from the seized materials found in the course of search for arriving at the suppressed unaccounted turnover/receipts of the assessee. We are also inclined to accept that the net profit of 75% from such business is not a probable proposition from the business of renting space and catering. We are of the considered view that adopting the net profit ratio of 10% of turnover is a rational basis as it is based on the seized materials itself. The CIT(A) has referred to the seized documents in the case of M/s Fourstar Hospitalities, a group concern, where the data as contained in Annexure A-12 and A-13 shows a working of profit and loss account for a period of FY 2017-18 and FY 2018-19, that the concern has had an average net profit of about 10% of the receipts outside the books of account. Further, we also find that the CIT(A) has taken cognizance of the fact that the AO himself has accepted the profit rate of 10% on the unaccounted receipts in the case of Tristar Hospitalities and Kohli Tent House. Therefore, under these facts we are inclined to agree with the CIT(A) that the net profit of 10% of unaccounted receipts is based on relevant facts emerging out of the seized materials during the course of search.”
Considering the order passed by the Coordinate Bench, we do not find any reason to deviate from the same and accordingly, order of Ld. CIT(A) is affirmed. Consequently, appeals for A.Y. 2017-18 preferred by the assessee as well as the Revenue are dismissed.
Having regard to the issue identical in nature involved in the other appeals preferred by the Revenue & assessee, our this observation will apply mutatis mutandis.
In the result, Assessee’s appeals in & 2496/Del/2023 as well as Revenue’s appeals in & 2465/Del/2023 for A.Y. 201718 & 2018-19 respectively are dismissed.”
The deletion of addition made by the Ld. CIT(A) has been upheld by the Coordinate Bench. We don’t find any reason to deviate from the stand taken by the Coordinate Bench having regard to the reason assigned therein and therefore, respectfully relying upon the same we find that the appeal preferred by the Revenue is devoid of any merit and thus, dismissed.
The appeal preferred by the Revenue is dismissed.
Order pronounced in the open court on 31.07.2025