NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED,HYDERABAD vs. ACIT, CIRCLE-16(1), HYDERABAD

The grounds raised by the assessee company read as under :

The Ld. CIT(A) has erred in upholding the addition made of Rs. 11,00,00,000/- by AO towards short term capital gain basing on information available in laptop of a third person, without taking into consideration of the appellant's rebuttal.

The Ld. CIT(A) ought to have appreciated the fact that the AO has wrongfully made an addition of short-term Capital gains which is based on excel data found in the laptop of Mrs. V.K. Sasikala which cannot take character of incriminating material as per the provisions of Section 153C of the Income Tax Act.

The Ld. CIT(A) ought to have appreciated the fact that the AO erred in invoking the provisions of Sec 153C without there being any incriminating material found during the search proceedings belonging to the appellant for the AY under consideration.

The Ld. CIT(A) erred in not considering the fact that the AO has failed to produce the concerned persons for cross examination by the assessee to judge the veracity of the information.

The assessee may add, alter, or modify or substitute any other points to the grounds of appeal at any time before or at the time of hearing of the appeal.”

Thereafter, the assessee company had raised the following additional grounds :

The brief facts of the case are that the assessee company, M/s. Nagarjuna Fertilizers and Chemicals Limited, is engaged in the business of manufacturing and trading of fertilizers/fertilizer products and micro-irrigation systems, filed its return of income for the A.Y. 2017-18 on 27.11.2017, admitting a loss of Rs.84,96,50,247/- under the normal provisions of the Income Tax Act, 1961 and book loss of Rs.461,21,07,593/- under section 115JB of the Income Tax Act, 1961. The case was selected for scrutiny and the assessment was completed under section 143(3) of the Act, on 19.12.2019 and determined the total loss at Rs.68,44,79,266/- by making various additions, including addition towards disallowance under section 14A r.w.r. 8D of the I.T. Rules, 1962, addition towards disallowance of forex loss of Rs.4,89,66,989/- and addition of Rs.11,00,00,000/- under the head "Short Term Capital Gains". The A.O. had also recomputed the book profit/loss under section 115JB of the Act, by making an adjustment of Rs.37,92,420/- towards disallowance under section 14A r.w.r. 8D of the I.T. Rules, 1962. 5

Aggrieved by the assessment order, the assessee company preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee company challenged the validity of the assessment order passed by the A.O. under section 143(3) of the Act, in light of material considered for the assessment of income under the head "Short Term Capital Gains", inspite of search proceedings in the case of a third party and the information received from the DDIT (Investigation), Unit 3(2), Chennai, and argued that the A.O. ought to have assessed the assessee company under the provisions of section 153C of the Act, but not under section 143(3) of the Act. The assessee company also challenged the additions made towards disallowance under section 14A r.w.r. 8D of the I.T. Rules, 1962, addition towards disallowance of forex loss and addition towards short-term capital gains derived from the sale of windmills to M/s. Array Land

The learned ADDL/JCIT, after considering the submissions of the assessee company and also taking note of the relevant reasons given by the A.O. to make additions, rejected the explanation of the assessee company and sustained the additions made towards disallowance under section 14A r.w.r. 8D of the I.T. Rules, 1962, addition towards disallowance of forex loss of Rs.4,89,66,989/- and addition towards short-term capital gains arising on sale of windmills to M/s. Array Land Developers Pvt. Ltd. However, the learned ADDL/JCIT has not adjudicated Ground No.13 raised by the assessee company challenging the validity of the assessment order passed by the A.O. under section 143(3) of the Income Tax Act, 1961. 7. Aggrieved by the order of the learned ADDL/JCIT, the assessee company is now in appeal before the Tribunal.

The first issue that came up for our consideration from Ground No.8 of the assessee company's appeal is the validity of the assessment order passed by the A.O. under section 143(3) of the Act, dated 19.12.2019. 9. The learned counsel for the assessee company, Shri P. Murali Mohan Rao, C.A. referring to the assessment order passed by the A.O. and the consequent addition made towards short-term capital gains of Rs.11,00,00,000/- submitted that the A.O. has passed the assessment order u/s 143(3) of the Act, and made addition towards short-term capital gains on the basis of information received from the DDIT (Investigation), Unit-3(2), Chennai and as per which, a search and seizure operation under section 132 of the Act, was initiated on 09.11.2017 in the residential premises of Mrs. D. Sasikala, wife of Rajarajan (a close relative of Mrs. V.K. Sasikala) and during the course of search, the laptop used by Mrs. V.K. Sasikala was seized. The A.O. further noted that, as per the information received from the DDIT (Investigation), the laptop contained certain details relating to the purchase of windmills from various parties, including the assessee company, by M/s. Array Land Developers Pvt. Ltd., and as per specific information, M/s. Array Land Developers Pvt. Ltd. had purchased a 2,100 KW windmill from the assessee company, M/s. Nagarjuna Fertilizers and Chemicals Limited, for a consideration of Rs.62,00,00,000/-, whereas, as per the books of account and agreement, the purchase price was shown at Rs. 51,08,94,000/-. If we go by the basis for the assessment, the learned A.O. had considered information received from a third-party source in connection with the search proceedings under section 132 of the Act and, in the ordinary course, the A.O. ought to have recorded satisfaction under section 153C and proceeded to assess the assessee company in terms of section 143(3) r.w.s. 153C of the Act. However, the A.O. has considered the information received from the third-party search proceedings and used the same in the assessment proceedings under section 143(3) of the Act, contrary to the scheme of assessment of a searched person and other person. Therefore, he submitted that the assessment order passed by the A.O. under section 143(3) of the Act, dated 19.12.2019, is invalid and cannot be sustained. In this regard, he relied upon the decision of the ITAT, Delhi Bench in the case of Seema Jain Vs. DCIT in ITA No.1206/Del/2024. 10. The learned CIT-DR for the Revenue, Mrs. Seema Meena, on the other hand, submitted that the assessee company has not taken any specific ground on this issue either before the learned Addl./JCIT or the Tribunal. The assessee company has not filed any specific additional ground challenging the validity of the assessment proceedings before the Tribunal. Therefore, the arguments of the assessee company challenging the validity of the assessment proceedings cannot be entertained. The learned CIT- DR for the Revenue further submitted that, assuming for a moment that the issue raised by the learned counsel for the assessee company is covered under Ground No.2 taken by the assessee company, but the fact remains that the A.O. has rightly considered the information received from the DDIT (Investigation) for the purpose of assessment, because the assessment proceedings in the case of the assessee company were already in progress. Therefore, the A.O. has rightly considered the said information and assessed the income in accordance with law. Therefore, she submitted that the legal ground taken by the assessee company and the consequent arguments advanced by the learned counsel for the assessee company should be rejected.

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the A.O. had considered the information received from the DDIT (Investigation), Unit-3(2), Chennai, for the purpose of assessment of short-term capital gains of Rs.11,00,00,000/- derived from the sale of windmills to M/s. Array Land Developers Pvt. Ltd. As per para 6.1 of the assessment order, the A.O. has specifically referred to the information received from the DDIT (Investigation), Unit- 3(2), Chennai and the consequent material found during the course of search under section 132 of the Act, in the case of Mrs. D. Sasikala, wife of Rajarajan. According to the A.O., a search under section 132 of the Act, was initiated on 09.11.2017 in the premises of Mrs. D. Shakila, wife of Rajarajan, and during the course of search, a laptop used by Ms. V.K. Sasikala was seized, which contained the details relating to the sale of windmills by the assessee company to M/s. Array Land Developers Pvt. Ltd., wherein the actual sale consideration was recorded at Rs.62,00,00,000/-, whereas the assessee company had considered the transaction at Rs. 51,08,94,000/-. Therefore, the A.O. assessed the difference of consideration under the head "Short Term Capital Gains". From the details and information considered by the A.O. for the purpose of assessment and, in particular, the addition made towards short-term capital gains, there is no dispute that the A.O. had considered the information received from the DDIT (Investigation) in connection with the search proceedings conducted on 09.11.2017 in the case of Mrs. D. No.1334/Del/2024 dated 15.10.2024 held as under :

Therefore, in view of the above decision, the date of recording of the satisfaction will be the deemed date for the possession of the seized documents, which is 30.06.2022 in the present case and the date of search and six years period would be reckoned from this date 1.0.30.06.2022. Therefore, there is merit in the submission of the assessee that the assessment year relevant for previous year in which search was conducted in the case of the assessee will be AY 2023-24 and the six assessment years immediately preceding the assessment year relevant for the previous year in which search was conducted for initiating proceeding u/s 153C of the Act will be AY 2018-19 to 2022-23. Therefore, respectfully following the decision of the cited case, it is held that in the present case, the assessment for AY 2021-22 should have been carried out by issuing notice u/s 153C of the Act and not u/s 143(2) of the Act as done by the AO in this case. No other contrary facts or decision was brought on record by the Ld. DR Therefore, it is held that the assessment order dated 29.12.2022 passed u/s 143(3) of the Act by the issuance of notice u/s 143(2) of the Act dated 30.06.2022 is bad in law and hence the notice u/s 143(2) of the Act, dated 30.06.2022 and the consequent assessment order dated 29.12.2022 passed u/s 143(3) of the Act are hereby quashed. The additional grounds filed by the assessee are allowed."

The Ld AR further submitted that the notice u/s 143(2) of the Act for A.Y. 2021-22 was issued on 21-12-2022. He has further submitted that it is settled position in law that in respect of assessment proceedings u/s 153C of the Act, blocked period of six assessment years has to be reckoned from the date of receipt of the documents by the AO. In this regard, reliance has placed on the following judgments; 8 1. M/s. Spendor Landbase Limited Vs. Asstt. Commissioner of Income Tax 2014 (11) TMI 1012 2. Jagjit Singh Vs. ACIT, Central Circle-11, New Delhi 2015 (8) TMI 982

Commissioner of Income Tax -14 Vs. Shree Jasjit Singh 2023 (1) TMI 572

Commissioner of Income Tax 14 Vs. Jasjit Singh 2024 (4) TMI 268

The Pr. Commissioner of Income Tax Central-1 Vs. Ojjus Medicare Pvt. Ltd. & Others. 2019 (10) TMI 350 6. Shr. Jagjit Singh C/o. M/s. Satish Aggarwal & Associates Vs. ACIT, Central Circle -21, New Delhi 2019 (10) TMI 350

Shalimar Town Panners Pvt. Ltd. Vs. ACIT Central Circle – 23 New Delhi 2020 (7) TMI 47

The Ld AR has submitted that for the assessment proceedings u/s 153C of the Act, the period of six years immediately preceding the assessment year relevant for the previous year, in which search was conducted has to be reckoned from the date of receipt of the documents by the AO of the assessee which is 10-05-2022 and accordingly assessment years relevant for the previous year in which search was conducted is AY.2023-2024 and the six assessment years immediately preceding the assessment year, relevant for the previous year in which search was conducted will be AY 2018-20 to 2022-23. He has also submitted that in the present case assessment proceedings for AY 2021- 22 should have been framed u/s 153 C of the Act after issuance of notice u/s 153C of the Act. The Ld AR has further submitted that in the present case assessment year i.e.2021-22, it was wrongly framed u/s 143(3) of the Act by issuing the notice u/s 143(3) of the Act on 30-06- 2022 along with notice u/s 153C of the Act for Assessment years 2015-16 to 2021- 2022.”

In this view of the matter and considering the facts and circumstances of the case, we are of the considered view, that the assessment order passed by the A.O. under section 143(3) of the Act, dated 19.12.2019 is invalid, because the A.O. has considered the information received from search proceedings under section 132 of the Act, in the case of a third person and, therefore, the A.O. ought to have passed the assessment order under section 153C of the Act. Since the A.O. has passed the assessment order under section 143(3) of the Act, dated 19.12.2019, in our considered view, the assessment order passed by the A.O. is liable to be quashed.

The next issue that came up for our consideration from Ground Nos.2 and 3 of the assessee company's appeal is the addition of Rs. 37,92,420/- made under section 14A r.w.r. 8D of the I.T. Rules, 1962. The A.O. has made the addition under section 14A on the ground that, although the assessee company has not earned any exempt income for the year under consideration, but the investments in shares and securities are capable of earning exempt income and, as per the provisions of section 14A, expenditure relatable to exempt income is liable to be disallowed, if any income under the Act, is includable in the total income of the assessee company. Therefore, the A.O., taking into account the opening balance and closing balance of investments, worked out the average value of investments at Rs.37,92,42,000/- and disallowed 1% thereof amounting to Rs.37,92,420/- under section 14A of the Income Tax Act, 1961 and made addition of Rs.37,92,420/-.

The learned counsel for the assessee company submitted that this issue is squarely covered in favour of the assessee company by the decision of the Hon'ble Supreme Court in the case of CIT Vs. Chettinad Logistics Pvt. Ltd., reported in (2018) 95 taxmann.com 250, wherein it has been clearly held that, in the absence of exempt income, disallowance contemplated under section 14A r.w.r. 8D of the I.T. Rules, 1962 cannot be made. Therefore, he submitted that the addition made by the A.O. should be deleted.

The learned CIT-DR for the Revenue, on the other hand, supporting the orders of the A.O. and the learned ADDL/JCIT, submitted that the provisions of section 14A is very clear inasmuch as it provide that, if income exempt under the Act, is includable in the total income, the expenditure relatable thereto has to be disallowed, but the section does not speak about actual exempt income earned during the year under consideration. The investments made by the assessee company are capable of earning exempt income and the assessee company has not made any suo motu disallowance of expenditure relatable to exempt income. Further, the CBDT, vide Circular No. 5/2014 dated 11.02.2014, has also clarified that disallowance can be made of the expenditure even if the taxpayer, in a particular year, has not earned any exempt income. Therefore, the A.O. and the learned ADDL/JCIT, after considering the relevant facts, have rightly disallowed the expenditure relatable to exempt income under section 14A r.w.r. 8D of the I.T. Rules, 1962 and, therefore, the order of the learned ADDL/JCIT should be upheld.

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee company has not earned any exempt income for the year under consideration. In fact, the A.O. has not disputed the fact that the assessee company has not earned any exempt income during the relevant previous year. The A.O. disallowed a sum of Rs.37,92,420/- under section 14A r.w.r. 8D of the I.T. Rules, 1962, @ 1% of the average value of investments, on the ground that even, if the assessee company has not earned any exempt income, the disallowance contemplated under section 14A should be made because, as per the provisions of section 14A, if income under this Act, is includable in the total income, then expenditure relatable to such exempt income should be disallowed. The A.O. has also referred to the Circular issued by the CBDT and held that even in cases where no exempt income has been earned, disallowance under section 14A should be made.

We find that, the issue involved in the present appeal is no longer a res integra. The Hon'ble Supreme Court in the case of CIT Vs. Chettinad Logistics Pvt. Ltd. (supra) has considered an identical issue and held that section 14A cannot be invoked where no exempt income has been earned by the assessee in the relevant assessment year. A similar view has also been taken by the Hon'ble Supreme Court in the case of PCIT Vs. Oil Industry Development Board, reported in (2019) 103 Taxmann.com 326 (SC). The sum and substance of the ratios laid down by various Courts is that, in the absence of exempt income, the disallowance contemplated under section 14A r.w.r. 8D of the I.T. Rules, 1962 cannot be made. Since the A.O. has disallowed a sum of Rs.37,92,420/- under section 14A r.w.r. 8D of the I.T. Rules, 1962, even though the assessee company has not earned any exempt income, in our considered view, the addition made by the A.O. under section 14A r.w.r. 8D of the I.T. Rules, 1962 cannot be upheld. Thus, we direct the A.O. to delete the addition of Rs.37,92,420/- made under section 14A r.w.r. 8D of the I.T. Rules, 1962. 21. Insofar as the re-computation of book profit u/s 115JB of the Act, by considering the disallowance u/s 14A r.w.r. 8D of the I.T. Rules, 1962 for Rs. 37,92,420/-, it is well settled principle of law by the decision of ITAT, Special Bench in the case of ACIT Vs. Vireet Investments Pvt. Ltd., in ITA No.502/Del/2012 dated 16.06.2017, where it has been clearly held that the disallowance computed u/s 14A cannot be incorporated into clause (f) of Explanation 1 to Section 115JB of the Act, while computing book profit u/s 115JB of the Act. Therefore, we direct the A.O. to delete the adjustment made towards disallowance u/s 14A r.w.r. 8D of I.T. Rules, 1962 while computing the book profit under section 115JB of the Act.

The next issue that came up for our consideration from Ground Nos.4 to 4.2 of the assessee company's appeal is the addition of Rs.4,89,66,989/- towards disallowance of forex loss. The A.O. disallowed forex loss of Rs.4,89,66,989/- on the ground that the loss incurred by the assessee company mostly consists of restatement loss, loss on forward contracts, derivative liabilities and is in the nature of capital and speculative loss.

The learned counsel for the assessee company, referring to the details of loss incurred by the assessee company, submitted that the assessee company had incurred revenue loss on account of exchange fluctuation arising on supply of raw materials, restatement of liabilities on account of loans and interest payments and also exchange fluctuation loss on amortization of premium on forward contracts. The loss incurred by the assessee company is revenue loss on account of hedging foreign currency for possible fluctuations and the forward contracts entered into by the assessee company with bankers are supported by underlying assets being receivables and payables in respect of imports and exports of goods. The learned counsel for the assessee company further submitted that the assessee company is following the Accounting Standards issued by the ICAI and, as per AS-11, any gain or loss on account of fluctuation in foreign currency should be accounted for in the books of account as on the balance sheet date, including the loss arising on restatement of liabilities, should be treated as capital or revenue depending upon the nature of the loss. Since the assessee company is following Accounting Standard-11, the loss incurred by the assessee company on account of restatement of existing liabilities on forward contracts is in the nature of revenue loss and same has been rightly claimed by the assessee company. In this regard, he relied upon the decision of the Hon'ble Supreme Court in the case of CIT Vs. Woodward Governor India (P.) Ltd. reported in (2009) 312 ITR 254 (SC).

The learned CIT-DR for the Revenue, on the other hand, supporting the orders of the A.O. and the learned ADDL/JCIT, submitted that the forex loss is capital and speculative in nature, because the assessee company has booked loss by restating existing liabilities, including loans, and has not furnished any details with regard to the forward contracts to prove that the value of the forward contracts is less than the value of the underlying assets. Therefore, she submitted that the disallowance made by the A.O. should be upheld.

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. The A.O. disallowed the forex loss on the ground that it is capital and speculative in nature and that the assessee company has only booked the loss by restating the existing liabilities as on the balance sheet date, without furnishing the relevant details of forward contracts to prove that the forward contracts were entered into for hedging the risk of fluctuation in foreign currency on account of trading liabilities. The assessee company has furnished the relevant details of the loss, which are reproduced by the learned ADDL/JCIT in para 5.4 of his order. Upon perusal of the relevant details, we find that, the assessee company has incurred forex loss on account of exchange fluctuation in respect of suppliers on account of restatement of liabilities and also loss on account of advances and interest receivables, which are purely revenue in nature. Further, as per Accounting Standards-11 issued by the ICAI, any loss on account of fluctuation in foreign currency should be accounted for in the books of account as on the balance sheet date, either on settlement or restatement of liabilities, by taking into account the value of currency in which such liability is denominated and any loss or gain arising therefrom should be accounted for as income or expenditure, as the case may be. This principle is further supported by the decision of the Hon'ble Supreme Court in the case of Woodward Governor India Pvt. Ltd., (supra) wherein the Hon'ble Supreme Court has dealt with the issue in detail and, by considering the relevant Accounting Standards issued by the ICAI, has held that if the forex loss is on revenue account, the same should be treated as expenditure and, if the forex loss is on capital account, the same should be treated as capital in nature and adjusted against the relevant assets or liabilities. Since the loss incurred by the assessee company is on revenue account, the A.O. ought not to have disallowed the forex loss of Rs.4,89,66,989/-. The learned ADDL/JCIT, without considering the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of the learned ADDL/JCIT and direct the A.O. to delete the addition of Rs.4,89,66,989/-.

The next issue that came up for our consideration from Ground Nos.5 and 6 of the assessee company's appeal is the addition of Rs.11,00,00,000/- under the head "Short Term Capital Gains".

The facts with regard to the impugned dispute are that, as per the information received from the DDIT (Investigation), a search and seizure operation u/s 132 of the Income-tax Act, 1961 was initiated on 09.11.2017 in the residential premises of one Mrs. D. Sasikala, wife of Rajarajan, and during the course of search, a laptop used by Ms. V.K. Sasikala was seized. The A.O. further noted that, on examination of the said laptop, an Excel sheet containing the details in respect of purchase of windmills from various parties, including the assessee company, was found and as per the said information, the assessee company had sold a 2,100 KW windmill to M/s. Array Land Developers Pvt. Ltd., wherein it was noted that, as per the books of account, the purchase cost was Rs.51,08,94,000/-, whereas, as per the Excel sheet, the consideration was shown at Rs.62,00,00,000/-. Therefore, the A.O. made an addition of Rs.11,00,00,000/- towards the difference between the actual sale consideration received by the assessee company and the consideration recorded in the Excel sheet found in the laptop of Ms. V.K. Sasikala.

The learned counsel for the assessee company submitted that the learned ADDL/JCIT erred in sustaining the addition of Rs.11,00,00,000/- towards short-term capital gains without appreciating the fact that the A.O. had made the addition solely on the basis of third-party information without taking into consideration the rebuttal of the assessee company. The learned counsel for the assessee company further submitted that the A.O. neither furnished the material received from the DDIT (Investigation) nor afforded an opportunity to the assessee company to cross-examine the person from whom the said information had been recovered. The assessee company had sold the windmills for a consideration of Rs.51,08,94,000/-, which is further supported by the relevant agreements entered into between the parties. The assessee company had also computed the resultant capital gains separately for land and sale of the windmills. Therefore, the addition made by the A.O. solely on the basis of third-party information is incorrect and cannot be upheld.

The learned CIT-DR for the Revenue, on the other hand, supporting the order of the learned ADDL/JCIT, submitted that, the information received from the DDIT (Investigation) clearly shows a difference between the actual consideration for the sale of windmills and the consideration accounted for by the assessee company in its books of account. The assessee company has not explained the said difference. Therefore, the A.O. has rightly made the addition of Rs.11,00,00,000/- under the head "Short Term Capital Gains". The learned ADDL/JCIT, after considering the relevant facts, has rightly sustained the addition made by the A.O. Therefore, she submitted that the order of the learned ADDL/JCIT should be upheld.

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the reasons given by the A.O. and the learned ADDL/JCIT for making the addition of Rs.11,00,00,000/- under the head "Short Term Capital Gains" towards the difference between the purported consideration received on sale of windmills as per the Excel sheet found from the laptop of Ms. V.K. Sasikala and the consideration accounted for by the assessee company in its books of account. The A.O. made the addition on the basis of information received from the DDIT (Investigation) and observed that, as per the Excel sheet found in the laptop of Ms. V.K. Sasikala, it was stated that the actual consideration for purchase of the windmills was Rs.62,00,00,000/- and the consideration as per the books of account was Rs.51,08,94,000/-. Therefore, the A.O. made an addition towards the difference amount of consideration alleged to have been received by the assessee company for sale of windmills under the head "Short Term Capital Gains".

We find that, the A.O. has solely relied upon the information received from the DDIT (Investigation) in consequent to the search proceedings under section 132 of the Act, in the case of Mrs. D. Sasikala, wife of Rajarajan, and claimed that the information found during the course of search in the laptop used by Ms. V.K. Sasikala shows the actual consideration at Rs.62,00,00,000/-, whereas the assessee company has declared the consideration at Rs.51,08,94,000/-. The A.O. has sought an explanation from the assessee company with reference to the information received from the DDIT (Investigation). However, the A.O. has neither furnished the relevant material received from the DDIT (Investigation) nor allowed the assessee company to cross-examine the person from whose possession the said information was claimed to have been recovered. It is a well-settled principle of law by the decision of the Hon'ble Supreme Court in the case of Andaman Timber 62 taxmann.com 3 (SC), wherein it has been clearly held that, in the absence of providing an opportunity of cross-examination, the addition made on the basis of a third-party statement is invalid and cannot be upheld. In the present case, it is undisputedly clear that the A.O. made the addition solely on the basis of third-party information without providing those evidence for the assessee company for its rebuttal and cross-examination. Therefore, the addition made by the A.O. towards the difference amount under the head "Short Term Capital Gains" cannot be sustained.

Coming back to the second leg of the arguments of the learned counsel for the assessee company. Admittedly, the assessee company had sold a 2,100 KW windmill to M/s. Array Land Developers Pvt. Ltd. for a consideration of Rs.51,08,94,000/- and the same has been recorded in the books of account and also the resultant capital gains has also been offered to tax for the assessment year under consideration. The assessee company has furnished the relevant tax invoices along with the deed of absolute sale for sale of land on which the windmill was installed and also the corresponding payment details, which clearly show that the windmills had been sold for a consideration of Rs.51,08,94,000/- and the same has been duly accounted for in the books of account. Since the documents submitted by the assessee company clearly show the actual consideration of Rs.51,08,94,000/-, in our considered view, the addition made by the A.O. on the basis of third-party information, being the Excel sheet found in the laptop of Ms. V.K. Sasikala, cannot be upheld. Further, the assessee company is not required to explain the document found in the third party premises, because the presumption contained under section 132(4A) r.w.s. 292C of the Act, is not applicable to third-party information and, therefore, the assessee company is not required to offer any explanation with regard to the said information. Therefore, in our considered view, the addition made by the A.O. on the basis of third-party information, that too without providing the relevant details to the assessee company and also without allowing cross-examination of the person, suffers from violation of the principles of natural justice and, thus, cannot be sustained. The learned ADDL/JCIT, without appreciating the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of the learned ADDL/JCIT and direct the A.O. to delete the addition of Rs.11,00,00,000/- made under the head "Short Term Capital Gains", claimed to have been arising out of the sale of windmills to M/s. Array Land Developers Pvt. Ltd.

In the result, the appeal of the assessee is allowed.

The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file