DCIT CENTRAL CIRCLE 7 4 MUMBAI, MUMBAI vs. INDO COUNT INDUSTRIES LTD, DELHI

The issues in all the above appeals being common, interlinked and related to the same assessee for Assessment Years 2012-13 to 2018-19 therefore, all

3 Indo Count Industrial Ltd, Mumbai. these appeals and cross objection filed by the revenue/Assessee respectively have been heard together and accordingly, adjudicated by a common order.

Subsequently, the AO completed the assessments for A.Ys. 2012-13 to 2015-16 & 2017-18 u/s. 143(3) r.w.s. 153A of the Act; for A.Y. 2016-17 u/s. 143(3) thereby making additions.

4 Indo Count Industrial Ltd, Mumbai. 6. Since the issues raised in these appeals filed by the revenue and cross objections by the assessee are discussed and decided herein below. In order to understand the implications, the facts for A.Y. 2016-17 are considered for primary discussions as a lead case. The conclusive decision would, accordingly, be applicable equally to the appeals for the other years under consideration.

Accordingly, the grounds of appeal raised by the revenue / cross objections by the assessee in the appeals for the years under consideration are taken up for adjudication year-wise.

1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the addition made by AO of Rs. 5,65,54,200/- without remanding the matter back to the file of AO while taking decision solely on the basis of a content pendrive and ignoring other documents obtained during the search operation?

2. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the addition made by the AO of Rs. 40,82,91,134/- without appreciating the fact that the Assessee has merely taken accommodation entry in order to inflate expenses?

3. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the addition made by the AO of Rs. 2,03,64,556/- without appreciating the fact that the Assessee has merely taken accommodation entry and paid commission in cash out of its unaccounted money”?

4. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the addition made by the AO of 5 Indo Count Industrial Ltd, Mumbai. Rs. 5,00,000/- without remanding the matter back to the file of AO while taking decision solely on the basis of submissions made by the Assessee?”

5. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the addition made by the AO of Rs. 25,000/- without appreciating the fact that Assessee has availed bogus bills on the pretext of job work and paid commission in cash out its unaccounted money?”

Ground No. 1

6 Indo Count Industrial Ltd, Mumbai.

Wherein it is clearly visible that apart from AY 2012-13, the sales in fabric waste is gradually similar in amount and during the search operation the employee of Assessee company namely Shri Baburaw Sambhaji Hadkar and Sh.

Naishdhkumar C Vyas has admitted that the sales under-invoiced and 50 % of the total sales value was received in cash. Furthermore, the aforesaid entities are under the control of Sh. Zhahid during the entire block period. Furthermore, SH.

Hadhkar has admitted that NC Vyas collects the cash from the parties and the same cash was handed over to Sh. Anil Jain and Sh. Mohit Jain.

Hadhkar to delete the excel sheet. The relevant statement corroborating the same can be seen from page 52 of the assessment order at Answer to Question 20 in the statement made under section 132 (4) of the Act. It may also be seen from the Answer to Question 22 of the statement at similar page of assessment order, that the unaccounted cash portion of FRC sales was admitted to tune of 50 :50 whereas the same also stated to be reduced to 40:60 from last 1.5 years i.e., mid of year 2017. In the present facts it is submitted that the ld.AO has rightly added the unaccounted cash to the returned income for the period apart from 01.11.2011 to 03.04.2013. The Ld. DR also highlighted that the AO has served the notices to the parties in question and none of the parties has responded to the notice. It was contended by the Ld. DR that ratio of cash component to cheque component in the FRC sales, the cash to billed amount ratio is admitted to be 50:50 in F.Y.2015-16 and this practice of assessee is continued in future years as well. The Ld. DR also relied on Hon. Apex Court in the cases of CIT v. Durga Prasad More [1971) 82 ITR 540 and Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC).

In this regard Ld. AR also submitted that during the entire search proceedings, neither cash nor any document was seized or found which could corroborate that the Assessee was ever been in the custody of such cash, even otherwise the AO had also not whispered any averment which could justify that the allegation that the sales of fabric waste was under-reported and half of the total sales were received in cash. It was submitted that the retraction of statements and there was no iota of evidence, which could prove that the Assessee was ever been into the custody of such cash. It was also submitted that the revenue authorities have incorrectly held that the retraction was after-thought. The Ld. AR further submitted that the impugned excel file, on the basis of which statements were 9 Indo Count Industrial Ltd, Mumbai. recorded does not pertain to the year under consideration. Whereas it is an undisputed fact that each year of the assessment is independent and material found relating to preceding years cannot have an adverse impact on the assessment of the Assessee for A.Y.2016-17. It was also submitted that there was no dispute that the pen drive found from the possession of Mr. Hadkar, contained transactions from 01.11.2011 to 03.04.2013 and there is no transaction in the said pen drive, which pertains to the year under consideration.

Apart from above, the AO had merely relied upon the retracted statements of Mr. Hadkar and Mr. Vyas (retracted in less than a month’s time), which in itself is wrong, vague, ambiguous and against the provision of law. Reliance in this regard was placed upon the following decisions: a. Commissioner of Income Tax vs. B. Nagendra Baliga (Hon’ble High court of Karnataka, in IT Appeal No.335 of 2007, dated 04.02.2014), wherein it was held that the Assessing Officer is not entitled to extrapolate undisclosed income detected in course of search for a particular period to entire block period on estimate basis. The Hon’ble Karnataka High Court has relied upon the judgment of Hon'ble Supreme Court in Asst. CIT vs. Hotel Blue Moon [2010] 321 ITR 362/188 Taxman 113, wherein, the Hon’ble Supreme Court had clearly held that the assessment for the block period can only be done on the basis of the evidence found as a result of search or requisition of books of account or documents and such other materials or information as available with the Assessing Officer. b. PCIT vs. Anand Kumar Jain, 2021 SCC Online Del 3174, Hon’ble High Court of Delhi, decided on 12.02.2021. c. Commissioner of Income Tax-1 vs. Mantri Share Brokers P. Ltd, in IT Appeal No. 502 of 2011, Hon’ble High Court of Rajasthan (SLP dismissed)

10 Indo Count Industrial Ltd, Mumbai. including the year under consideration. Thus, this action of the AO has been rightly questioned by the Ld. CIT(A) while deleting the additions in the year under consideration by holding that in view of the settled law that no extrapolation can be done on estimation basis, in the absence of any incriminating material related to the relevant period. Furthermore, during the year under consideration, the assessee had sold FRC to M/s Prime Enterprises, proprietorship concern of Shri Mohammad Umer Shabbirahmed Shaikh for Rs.5,65,54,200/-. A survey u/s 133A of the Act, was also carried out in the premises of Shri Mohammad Umer Shabbirahmed Shaikh, to whom the alleged cash sales of FRC was made. It was submitted that the AO alleged that no books of accounts were found to have been maintained by these entities, in this regard it was submitted that the books of accounts were not required to be maintained as they were disclosing income u/s 44AD of the Act. It is also submitted that statement of Shri Mohammad Umer Shabbirahmed Shaikh was recorded on oath, wherein it was clearly stated that the purchases from the Assessee had been made through cheques only and no cash component was ever involved. It was further submitted that since this was external confirmation from the party therefore, the same can be treated as most reliable source of information that the Assessee was not involved in any cash sales of FRC.

11 Indo Count Industrial Ltd, Mumbai. or managed by Mr. Zhahid Ali Shaikh and his family. No material evidence had been brought on record that could prove that the assessee had accepted cash against the sale of FRC, during the year under consideration. Our attention was also drawn to the fact that the AO made similar additions in the hands of purchasers as well by extrapolating the contents of the impugned seized excel sheets found with Mr. Hadkar. Whereas the ld. CIT(A) had deleted the additions on the ground that the material did not contain any entries pertaining to the year under consideration. Therefore, the Ld. CIT(A) in the present case also affirmed the view taken by his predecessor in the case of the purchasers, thus in this way, it was submitted that the additions were rightly deleted by the Ld. CIT-(A).

12 Indo Count Industrial Ltd, Mumbai. material was recovered during the search. We notice that the sole reliance of the Revenue is on a statement that was subsequently retracted. Even assuming for the sake of arguments, that the statement had not been retracted then in that eventuality the additions would still not be sustainable, as no corroborative evidence was brought on record to establish that the Assessee was ever in receipt of such cash. Reliance in this regard is being placed on the decision in the case of Commissioner of Income Tax v. Harjeev Agarwal 241 IT Appeal No. 8 of 2004 (Delhi), Principal Commissioner of Income Tax v. Best Infrastructure (India) Pvt. Ltd., 397 ITR 182 (Delhi) and PCIT v. Anand Kumar Jain, 2021 SCC OnLine Del 3174

“20. In the above judgment the Hon'ble Court has come to the. conclusion that the addition was not made merely on the statement made but after looking into the explanation, books of account and other material placed before him and then made the certain addition. The case in hand, the addition have only been made on the basis of statement given on 6.10.2005.

21. Therefore, the case law relied upon by the Appellant is of no help. The case in hand the assessee-respondent has given documents, material and explained threadbare with regard to amount of Rs. 24 crores but the assessing authority has mechanically made the addition of Rs. 7 crores and added back the same amount only on the basis of statement having been made by the assessee which is not permitted.”

13 Indo Count Industrial Ltd, Mumbai. 17. Thus, n the light of the aforesaid, where the statement was of an employee and the retraction was immediately made, then in that case, we are inclined to hold that the very basis of making addition not being one that could be considered legally admissible evidence, the addition deserves to be deleted.

Further, the Ld. CIT-(A) had rightly held that in identical cases that extrapolation cannot be done to assume income of any taxpayer without any cogent material by relying on the findings of Hon’ble High court of Karnataka in the matter of Commissioner of Income Tax vs. B. Nagendra Baliga, (47 taxmann.com 331) and Hon’ble Gujrat High Court in case of Standard Tea Processing Co. Ltd(34 Taxmann.com 31). Therefore, considering the above circumstances and the legal prepositions, we do not find any infirmity in the order of Ld. CIT-(A) as the sole basis for making additions by the AO is the statements of Sh. Hadkar and Sh. Vyas and no material has been brought on record to show that such transactions had ever undertaken beyond what was actually found in the excel sheets. Thus, no additions could have been made in the absence of incriminating material by using the extrapolation technique.

14 Indo Count Industrial Ltd, Mumbai.

Ground no. 2

21. In this regard ld. DR while relying upon the order of assessment submitted that ld. CIT-(A) has erred in deleting the disallowance of purchases to the tune of INR 40,72,91,135/- made from the parties namely M/s Citoc Ventures Private Limited for the purchase of INR 17,48,75,212/- and from M/s Maskara Textiles Private Limited for the purchases of INR 23,24,15,923/- and 15 Indo Count Industrial Ltd, Mumbai. further commission @ 5 % of INR 2,03,64,556/- of the total purchases. The Ld. DR relied upon the findings of the AO and contended that the.AO had rightly made addition for the bogus purchases made from the aforesaid parties and further submitted that it is settled position in the industry that in order to receive the bogus entries, the parties are required to pay the commission which lies within the range of 5 % to 7 %, therefore the addition towards the commission of 5 % was rightly made to the returned income. It was further submitted that the Ld. CIT-(A) had incorrectly affirmed the afterthought of Assessee, wherein it was incorrectly submitted that the purchases made from the aforesaid parties was further resold to them, through various entries, and only addition towards GP margin was required to be made to the returned income. The Ld. DR submitted that the Assessee had not placed on record any correlation with the stock sold and stock purchases, therefore the additions were deleted.

a) It was submitted that that assessee had first sold the goods and after two stages, same goods were purchased back by the assessee. Hence, in this way, the assessee had neither made any delivery of goods nor taken any delivery of goods. This transaction was only circular in nature and such trading was carried out in three

16 Indo Count Industrial Ltd, Mumbai. stages as follows in which assessee was the starting point as well as the end point of the circular transaction:

Particulars Transaction First Stage Assessee company sells goods to M/s Maharashtra Corporation Limited, M/s Osijaee Texfab Limited and M/s Visagar Polytex Limited Second M/s Maharashtra Corporation Limited, M/s Osijaee Texfab Limited Stage and M/s Visagar Polytex Limited sells goods to M/s Maskara Textiles Private Limited and M/s Citoc Ventures Private Limited Third Stage M/s Maskara Textiles Private Limited and M/s Citoc Ventures

Private Limited sell back to assessee company. b) It was submitted that only book entries were passed in books of accounts of various entities relating to sale and purchases of grey fabrics, however there was no physical movement of goods in any of the stages. In order to further explain in detail, it was submitted that in the first stage, assessee company had recorded sales of grey fabric to M/s Maharashtra Corporation, M/s Osiajee Texfab Limited and M/s Visagar Polytex Limited. c) The details of amount booked in the sales register along with quantity sold (in meters) to the respective parties is as under: Buyer Amount Quantity (in mtrs)

Maharashtra Corporation Rs. 5,49,38,069/- 2,84,324 Limited Osijaee Texfab Limited Rs. 5,67,71,328/- 2,82,634 17 Indo Count Industrial Ltd, Mumbai. Visagar Polytex Limited Rs. 29,03,64,005/- 12,37,738 Total Rs. 40,20,73,402/- 18,04,696

a) The details of amount booked in the sales register along with quantity sold (in meters) to the respective parties is as under:

Seller Buyer Amount Quantity (in mtrs) Visagar Polytex Limited MTPL 23,05,78,051 9,51,009 Maharashtra Corporation Ltd CVPL 5,50,23,364 2,84,324 Osijaee Texfab Limited CVPL 5,68,56,120 2,82,633 Visagar Polytex Limited CVPL 6,01,57,626 2,86,730 Total Rs.40,26,15,161 18,04,696

18 Indo Count Industrial Ltd, Mumbai. Limited and Citoc Ventures Private Limited to complete the circular transaction. a) The detail of amount booked as sales along with the quantity sold (in meters) to assessee company is as under:

Seller Amount Quantity (in mtrs) Maskara Textiles Private Rs. 23,34,15,922/- 9,48,311 Limited CITOC Ventures Private Rs. 17,48,75,212/- 8,56,289 Limited

Total Rs. 40,82,91,134/- 18,04,600

20 Indo Count Industrial Ltd, Mumbai. delivery of goods. Even no cash was found or seized by the revenue authorities during the course of search at the premises of M/s CVPL and M/s MTPL.

“Further, Notices were also issued to M/s Maharashtra Corporation Limited, M/s Osijaee Texfab Limited and M/s Visagar Polytex Limited. The submission was received on 20.12.2019. In the submission filed all the three parties have categorially stated that they have sold the material in transit. They have neither taken nor given any delivery of goods. On perusal of submission and thus viewed the contention of the assessee that the sale and purchase is a circular transaction has been bolstered by the submission of the above mentioned parties. It is also seen that the sale and purchases in the books of respective entities are made through banking channels.” “Further, the assessee has itself accepted that the transaction with M/s Indo Count Industries Limited is circular in nature. From the submissions filed by the assessee and evidence gathered during the assessment proceedings, it is seen that there was no physical movement of goods and the assessee had provided accommodation entries during the said year.

21 Indo Count Industrial Ltd, Mumbai. These facts were also confirmed by the parties M/s Maharasthra Corporation Limited, Osaijee Texfab Limited and M/s Visagar Polytex Limited.”

The entire three stages of transactions were recorded in the books of account and payment for the transactions in question were duly made through banking channels, as the same were never been under the dispute. Apart from the above, the parties in questions had also filed the response to the notice issued under section 133(6) of the Act, and the averments made by the Assessee were in consonance to each other. It was also contended that the directors and key

22 Indo Count Industrial Ltd, Mumbai. managerial personnel have also placed similar contentions in the statements on oath. And the transaction in questions were duly recorded in the books of accounts and to verify the same the Assessee had placed on record the sales invoices, bank statements and ledgers of all the above stated parties along with stock register. Both the lower authorities had not drawn any negative inference towards the evidences placed on record. Rather the Ld. CIT-(A) had rightly contended that the entire transactions in questions related to grey fabrics is nothing but just an accommodation entries and only the profit element involved in the entire transactions shall form part of returned income. Further while filing the return of income under section 153A of the Act, rather the Assessee had made suo moto disallowance of INR 68,06,133/- towards loss incurred on circular trading of transactions along with freight expenses which also upheld that the transactions stated above are nothing, but just paper entries/accommodation entries. Furthermore excess expenditure reported during the year under consideration of INR 62,17,732/- shall also be excluded from the expenditure claimed during the year, as rightly held by Ld. CIT-(A). No new facts or circumstances have been brought on record to controvert or rebut the findings so recorded by ld. CIT(A), therefore, we have no other reason just to dismiss the ground raised by the revenue. Therefore ground no.2 raised by the revenue stands dismissed.

Ground No. 3

23 Indo Count Industrial Ltd, Mumbai. 36. This ground raised by the revenue relates to challenging the order of CIT(A) in deleting the addition made by AO of Rs. 2,03,64,556/-.

Furthermore, the entries in circular trading are not accommodation entries:

24 Indo Count Industrial Ltd, Mumbai. 40. In the final stage, MTPL and CVPL sold back the goods to the assessee for Rs. 40,82,91,134, generating earnings of Rs. 56,75,973/- for MTPL and CVPL. As per assessee, all these transactions were conducted exclusively through banking channels, without any cash involvement. Hence, no question of payment of any commission arises.

25 Indo Count Industrial Ltd, Mumbai. deleted. Accordingly, we uphold the order passed by the ld. CIT(A)) and dismiss this ground raised by revenue.

Ground No. 4 and 5

26 Indo Count Industrial Ltd, Mumbai.

ITA/3850/MUM/2024 AND CO 186/MUM/2024 for AY 2015-16.

“Whether on the facts and circumstances of the case and in law, the Ld. CIT- (A) was correct and justified in deleting the addition made by the AO of Rs. 5,65,54,200/- without remanding the matter back to the file of AO while taking solely on the bais of a content of pendrive and ignoring other documents obtained during the search operation?” 48. Further the Assessee has raised the below mentioned ground in the cross objection filed for AY 2015-16.

27 Indo Count Industrial Ltd, Mumbai.

1. The Ld. CIT(A) has erred in confirming the disallowance of Rs. 58,99,493/- being commission paid to Citoc Ventures Pvt. Ltd on pretext that the said payment is made without delivery of services to the appellant company.

2. The Ld. CIT(A) erred in solely relying on the statement of the employees of the company.

3. That the Ld.CIT(A) has erred in law and on facts by partially upholding the additions thourgh no incriminating material was found during the course of search, which is against the ratio laid down by the Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. a. That the Ld.CIT(A) has erred in law and on facts in considering the excel sheets in possession of Mr. Baburao Hadkar as incriminating material in the hands of the assessee company.

28 Indo Count Industrial Ltd, Mumbai.

ITA/3854/MUM/2024 AND CO 187/MUM/2024 for AY 2017-18.

29 Indo Count Industrial Ltd, Mumbai. 52. Ground no. 1, 2 & 3 of revenue appeal for A.Y. 2017-18 are identical with that of Grounds No.1 to 3 of AY 2016-17. Therefore our findings in regard to Ground No.1 to 3 for AY 2016-17 are applicable while deciding these grounds for AY 2017-18 as the same are applied mutatis mutandis. Therefore, these grounds raised by the revenue stands dismissed.

ITA/3853/MUM/2024 AND CO 188/MUM/2024 for AY 2018-19

30 Indo Count Industrial Ltd, Mumbai.

31 Indo Count Industrial Ltd, Mumbai.

ITA/3826/Mum/2024 and CO 183/MUM/2024 for AY 2012-13.

1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in sustaining only Rs.81,25,000/- and deleting the addition of Rs. 7,43,797/- out of total addition made by the AO of Rs. 88,68,797/- without remanding the matter back to the file of AO while 32 Indo Count Industrial Ltd, Mumbai. taking decision solely on the basis of a content of pendrive and ignoring other documents obtained during the search operations? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the disallowance of Rs. 3,41,53,377/- on account of commission paid to foreign agent without remanding the matter back to the file of AO while admitting the evidence which is not available on the file of the AO?”

1. That the Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.81,25,000/- on account of alleged receipt of cash on account of under- invoicing of fabric waste sales under section 69 of the Act 2. That the Ld.CIT(A) has erred in relying solely on the statement of Mr. Baburao Sambhaji Hadkar and ignoring the explanation given by Mr. Mohit Kumar Jain vis-à-vis the excel sheets found with Mr. Hadkar.

14. The Counsel of Ld.AR also contended that the alleged excel sheet shall not be considered as incriminating as the same was retrieved from the pendrive of Sh. Hadkar and the revenue has made the impugned addition by contending that the contents of excel sheet was wrongly explained by Sh. Hadkar during the search proceedings, and ld. AO made the addition based on the impugned presumption/estimation. He also highlighted that the statement of Sh. Hadkar and Shri Naishadhkumar C Vyas were the sole basis of addition as the alleged excel sheet was found with Sh. Hadkar and both the persons had retracted the statements on 26th February 2018(Statements at pages 1816-1830 of PB for AY 2016-17).The retraction was made on the stamp paper of Rs. 100 and duly notarized by the notary. In such facts, the Ld. Counsel for Respondent submitted that the sole basis for making the impugned addition were statements of the two employees, which was retracted. Furthermore, it was also contended that the allegation of Ld.AO was that the assessee company was engaged in the under-invoicing of fabric waste and the sales were recorded at the 1/2th value of the total sales made in the block years. The Ld. Counsel of the Assessee company also submitted that during the entire search proceedings, neither cash nor any document was seized or found which could corroborate that the Assessee company was ever been in the custody of such cash, even otherwise the Ld.AO has also whisper any averment which could justify that the allegation that the sales of fabric waste was under-reported and half of the total sales were received in cash. The retraction of statements and no iota of evidence which 34 Indo Count Industrial Ltd, Mumbai. could verify the Assessee company was ever been into the custody of such cash, was not been disputed, whereas both the lower authorities have incorrectly held that the retraction was the after-thought.

Sr. Column AO Assessee Company CIT(A) No Heading [Pages 52-59, Para (corroborated by [Pages 32-52, Para as per 7.17 to 7.18] statement of Mr. 11 to 11.16] seized Mohit Jain) (complete reliance

35 Indo Count Industrial Ltd, Mumbai. excel on the retracted statement of Mr. Hadkar) 1 S. No It is nothing but Serial no. No dispute serial number. 2 Received Cash amount Promised amount by Cash receipts from Amount received. the purchaser sales (#) 3 Date Date of receiving Promised date of Date of receiving such cash. payment cash (#) 4 Bill No. Bill No. of the Bill No. No dispute invoice for the sale of FRC to respective party. 5 Date Bill date. Date of Bill No. No dispute 6 Amount Received in cheque. Actual Amount No dispute ‘A’ received 7 Amount Unaccounted cash Actual Bill Amount Bill amount ($) ‘B’ amount which is received in addition to billed amount. 8 Site This is stitching unit Stitching unit where No dispute from where FRC is FRC is being being generated. generated. 9 Party Name of the party to Name of the No dispute whom FRC is being purchase party sold. 10 Cheque Contains the cheque Cheque received No dispute Status amount followed by details cheque no./date (name of bank)

# The version of Mr. Hadkar (retracted later) about “RECEIVED AMOUNT” has been accepted as cash receipts from sale of FRC by the Ld. CIT(A) whereas the version of Mr. Jain has been disregarded. However, at the same time the Ld. CIT(A) states that the total of columns “AMOUNT A” and “RECEIVED AMOUNT” do not match. As a result, Ld.CIT(A) restricted the addition to the excel sheets and deleted the extrapolated additions made in the block period.

36 Indo Count Industrial Ltd, Mumbai. $ The version of Mr. Hadkar (retracted later) about “AMOUNT B” being cash received has been rejected whereas the version of Mr. Jain being actual bill amount has been accepted. [Retractions filed by Mr. Hadkar and Mr.Vyas are at pages 1831-1838 of PB for AY 2016-17]

37 Indo Count Industrial Ltd, Mumbai. neither at any of the premises of the Assessee company nor it’s directors, nor at the premises of the purchasers of FRC, therefore the addition towards the alleged cash received must be deleted. Further, there was no material found or seized that could show that amount revealed from pen drive/statements were actually transferred from one hand to another.

39 Indo Count Industrial Ltd, Mumbai. or evidence in the books of assessee company were placed on record by the Revenue. In regard to relevance and admissibility of retracted statements, recorded during search or survey proceedings under the Act, the findings of Hon’ble High Court of Delhi in the matter of CIT vs Sunil Aggarwal, [2015] 64 taxmann.com 107 (Delhi) helps the case of assessee where Hon’ble high Court has held as follows:-

14. Therefore, although the counsel for the Revenue may be right in his submission that a statement under Section 132(4) of the Act carries much greater weight than the statement made under Section 133A of the Act, a retracted statement under Section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such statement. Of course, where the retraction is not for any convincing reason, or where it is not shown by the Assessee that he was under some coercion to make the statement in the first place, or where the retraction is not followed by the Assessee producing material to substantiate his defence, the AO might be justified in make additions on the basis of the retracted statement.

i. The Hon’ble Allahabad High Court, in the case of Commissioner of Income Tax v. Dilbagh Rai Arora in of 2009 (Allahabad), held as under: “20. In the above judgment the Hon'ble Court has come to the. conclusion that the addition was not made merely on the statement made but after looking into the explanation, books of account and other material placed before him and then made the certain addition. The case in hand, the addition have only been made on the basis of statement given on 6.10.2005.

42 Indo Count Industrial Ltd, Mumbai. Marutu International Ltd by stating that the same is required to be remanded back to the file of AO to examine the claim.

i. Non-furnishing of correspondences related to procurement, pricing, delivery and nature of services. ii. Documents filed only demonstrate payment of commission and not genuineness and actual delivery. iii. Name of the agent does not appear in Shipping Bill. iv. Debit note and agency agreements are self-serving.

43 Indo Count Industrial Ltd, Mumbai.

(i) The appellant has been dealing the agent since the year 2006. (ii) Copy of agency agreement with the agent. [PB page 43, 81-84 for AY 2012- 13] (iii) Details of commission paid vis-à-vis the sales made to Walmart, USA [PB page 44-56 for AY 2012-13] (iv) CDX Statements [PB page 44-56 for AY 2012-13] (v) Letter dated 05.06.2014 from the agent directing the appellant to assign their receivables to M/s Regal Traders, UAE after its acquisition by M/s Regal Traders. [PB page 57 for AY 2012-13] (vi) Agency commission paid to M/s Regal Traders, UAE has been accepted by the AO as genuine. (vii) The signatory to the agency agreement and the letter dated 05.06.2014 as referred above is Ms. Lisa Lim, the authorized signatory for the agent. (viii) Details of transactions undertaken with M/s Marutu International Limited, now taken over by M/s Regal Traders between A.Y.s 2012-13 to 2018-19. (ix) Email correspondence between Marutu and the Assessee company furnished by reply dated 22.06.2021 [PB page 58-80 for AY 2012-13]

44 Indo Count Industrial Ltd, Mumbai. 75. Accordingly, the counsel for the Assessee relied upon the findings of Ld.CIT-(A). [Pages 79-80, Para 17 to 17.2 of CIT(A) order]

From the facts of the case, it is clearly coming out from the order of both lower authorities, that the Assessee company has supplied the requisite documents to verify the claim pertains to the commission paid to M/s Marutu International Ltd, further the Assessing officer in the assessment order itself stated that the assessee has paid the commission to the M/s Marutu International Ltd. and form 15CA were duly filed and entire payments were through proper banking channels and other documents to verify the claims. The Assessing officer was unable to drawn any negative inference on the evidence placed on record and rejected the claim in an arbitrary manner. Further Ld. CIT-(A) also verified the claims of Assessee company and does not find any infirmity in the documents placed on record and accordingly allowed the claim of Assessee company. The ld CIT(A) also noted that the payments were made through regular banking channels. Hence, we hold that the disallowances made by the Ld. AO with regard to the commission paid to M/s Marutu International Ltd have been allowed as deduction by the Ld. CIT(A).

45 Indo Count Industrial Ltd, Mumbai.

Revenue Appeal bearing ITA/3824/Mum/2024 and Assessee companies CO 184/MUM/2024 for AY 2013-14

1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in sustaining only Rs.3,01,25,000/- and deleting the addition of Rs. 22,55,797/- out of total addition made by the AO of Rs. 323,80,797/- without remanding the matter back to the file of AO while taking decision solely on the basis of a content of pendrive and ignoring other documents obtained during the search operations? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the disallowance of Rs. 4,51,43,778/- on account of commission paid to foreign agent without remanding the matter back to the file of AO while admitting the evidence which is not available on the file of the AO?”

1. That the Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.3,01,25,000/- on account of alleged receipt of cash on account of under-invoicing of fabric waste sales under section 69 of the Act.

46 Indo Count Industrial Ltd, Mumbai. 2. That the Ld.CIT(A) has erred in relying solely on the statement of Mr. Baburao Sambhaji Hadkar and ignoring the explanation given by Mr. Mohit Kumar Jain vis-à-vis the excel sheets found with Mr. Hadkar.

47 Indo Count Industrial Ltd, Mumbai. 85. Further the Assessee has challenged the order of Ld. CIT-(A) on the grounds mentioned below: -

1. That the Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.17,00,000/- on account of alleged receipt of cash on account of under- invoicing of fabric waste sales under section 69 of the Act.

2. That the Ld.CIT(A) has erred in relying solely on the statement of Mr. Baburao Sambhaji Hadkar and ignoring the explanation given by Mr. Mohit Kumar Jain vis-à-vis the excel sheets found with Mr. Hadkar.

Order pronounced in the open court on 30/10/2025