DY . CIT CENTRAL CIRCLE-2(2), NAGPUR vs. SHRI RAJESH R SARDA , NAGPUR

PER PAWAN SINGH, JUDICIAL MEMBER:

dated 29.03.2019 for A.Y. 2016-17. The revenue has raised following grounds

of appeal;

i. On the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,17,52,539/ made by the AO on account of suppression of sales. ii. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,17,52,539/- made by the AO on account of suppression of sales., without appreciating the fact that cash collection agents and Mr. Rajesh Maheshwari, the cashier of Ramsons groups of industries had admitted in his statement recorded u/s 132(4) that they indulged in out of the books cash sales. iii. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,17,52,539/ made by the AO without appreciating the fact that the discrepancy found in the physical stock which was excess stock as per books clearly indicates that the assessee indulged in making sales out of books. iv. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that search in this case precluded the date of filing of return of income of A.Y. 2016-17, and since no assessments was made, the AO at the time of making current assessment was bound to consider entire material and evidences while finalizing the assessment. v. On the facts and circumstance of the case and in law, the Ld CIT(A) failed to appreciate that the excess stock is an incriminating material or corroborative evidence on records as it was found during search and which depicted that the assessee indulged in making sales out of books. vi. On the facts and circumstances of the case and in law, the Ld CIT(A) failed to appreciate that non rejection of books of accounts cannot vitiate the assessment, as it was based on evidence gathered during search. vii. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the evidences/documents/material unearthed at the time of search has to be seen as consolidated whole purporting to the period of assessment enunciated u/s 153A of the Act. viii. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in limiting the scope of section 153A only to undisclosed income when as per the section, the AO has to assess or re-assess the total income of the six assessment years? ix. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the scope of section 153A is limited to assessing only search related income, thereby denying Revenue the opportunity of taxing other escaped income that comes to the notice of the AO? x. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that assessing officer while computing income u/s 153A is well within his powers to compute taxable income on the basis of material on record even though such material was not found during the course of search operation in view of section 158BE w.e.f.01/06/2003. xi. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in relying on retraction of statement recorded u/s 132(4) of Shri Rajesh R Sarda where he surrendered amount of Rs.3,89,26,425/-failing to appreciate the direct and circumstantial evidence is available on record. xii. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the surrender made at the time of search precluded the officers to probe the issue further. xiii. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that assessee had not provided any evidence to prove that the surrender of additional income of Rs. 3,89,26,425/- was made under pressure or coercion. xiv. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the ratio of decision of jurisdictional Hon'ble High Court in the case of Rameshchandra & Co. 168 ITR 375(Bom) which says that if assessee makes an statement of fact he can have no grievance if the taxing authorities taxes him accordance with that statement? xv. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the circumstantial evidence of the mobile messages. xvi. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the word 'evidence' as used in section 143(3) is comprehensive enough to cover circumstantial evidence also, and it is not confined to direct evidence. xvii. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that under the tax jurisprudence, the word 'evidence' had much wider connotations and the use of word 'material' in section 143(3) shows that the assessing officer, not being a court could rely upon material, which might not strictly be evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. xviii. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the plain reading of section 142 and 143 clearly suggests that the assessing officer may also act on the material gathered by him and the word 'material' clearly shows that the assessing officer is not fettered by the technical rules of evidence and the like, and that he may act on material which may not strictly speaking be accepted. evidence in court of law.

xix. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the decision of the Hon'ble ITAT Bombay Bench "B' (ITA No. 614/Bom/87 A.Y. 1983-84) in the case of M/s Mont Blanc Properties and industries Pvt Ltd which was upheld by the Hon'ble Supreme Court where what constitute evidence under tax jurisprudence is clearly explained. xx. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that strict principles of Indian Evidence Act are not applicable in Income tax Act and denial of opportunity of cross examination does not render the decision void ipso jure as held by Hon'ble Supreme Court in State Bank of Patiala Vs S.K. Sharma.? xxi. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on technical grounds while failing to appreciate that CIT(A)'s power is coterminous with AO and she could have corrected the impugned error of AO clearly propounded in the decision of Hon'ble Supreme Court in Kanpur Coal Syndicate 53 ITR 225. 2. Brief facts of the case are that the assessee is proprietor of “Lakshay

Enterprises” and engaged in the trading in iron and steel. A search and

seizure action under Section 132 was carried out at Ramsons Group, Nagpur

on 17.11.2015. The assessee is a part of Ramsons Group, thus, the assessee

was also covered in the search action. Consequent upon search action,

notice under Section 153A dated 01.06.2015 was served on assessee for

filing revise return of income A.Y. 2010-11 to 2015-16. The assessee filed

its return of income for various assessment year including for the

assessment year under consideration on 17.10.2016 declaring income of Rs.

43,06,650/-. During the assessment, the assessee was asked to explain his

business affairs. The Assessing Officer (in short ‘AO’) recorded that in the

search action, mobile phone of Madanlal Faikirchand Kapur and Badriprasad

Ramsukh Tiwari who were working as a collection agent in Ramsons Group were seized. The messages in the mobile phones contained various

massages related to out of books sales in cash. During the search action,

mobile phone of Rajesh Maheshwari, Cashier of Ramsons Group was also

found and seized. Rajesh Maheshwari was also cashier of assessee. On

analysis of message in the mobile phone of Madanlal Faikirchand Kapur,

Badriprasad Tiwari and Maheshwari, reveals that the assessee has shown

out of book sales in cash aggregating of Rs. 1.17 Crore. The assessee was

asked to explain messages in the mobile phone and detail of cash sales,

which were not reflected in the books of account vide show cause notice

dated 08.12.2017. The assessee filed his reply dated 21.12.2017. In the

reply, the assessee stated that he has not entered into any unrecorded sales

of purchase transaction. All sale and purchase transaction are duly recorded

in the regular books of account. The AO recorded that during assessment,

the statement of assessee under Section 131 was recorded and in response

to a question with regard to message in the mobile phones of such person’s

cash sales, it was answered that there was no cash sales and the messages

in the mobile phones of such persons could be pertaining to other persons

as they were working for others as well. The reply of assessee was not

accepted by AO. The AO reiterated that messages in the phones of all three

persons pertain to cash collected from various parties in lieu of cash sales.

One of the cash collection agent Madanlal Fakirchand Kapur has accepted

and explained in his statement recorded under Section 132(4) dated

17.11.2015 about modus operandi of cash collection which is out of the book

sales. The part of the statement of Madanlal Fakirchand Kapur is recorded on page 3 of assessment order. The AO on the basis of messages in the

outbox and inbox and other details took his view that Madanlal Fakirchand

Kapur in his statement admitted that Sharda Group is involved in out of

books cash sales. Similarly, Badriprasad Ramsukh Tiwari has also accepted in

his statement recorded during search action about modus operandi of cash

collection. The AO further recorded that at the time of search action, there

was discrepancy in the physical stock and stock as per books. Such facts

clearly indicate that the assessee was indulging in making sales out of books.

The reply of assessee is not acceptable that such persons were also working

for other persons when they have admitted on oath that cash was handed

over to Rajesh Maheshwari, who was cashier of assessee and he used to

handover cash to the assessee. The AO made addition of Rs. 1.17 Crore.

The AO further noted that during search action, statement of the assessee

was recorded on 19.11.2015. In response to question No. 42, the assessee

replied which is extracted on page No. 11-12 of assessment order. From the

reply, the AO recorded that in response to earlier question and on account of

excess stock found at his factory premises Ramsons Casting P Ltd., Rajaram

Steel Industries P Ltd. and Ramsons Industries P Ltd., the assessee had

offered additional income of Rs. 3.89 Crore. The discrepancies include loose

documents, cash jewellery and books of accounts. The discloser of additional

income of Rs. 10.00 Crore was made as the assessee was not been able to

explain the documents to the satisfaction of department. The AO on the

basis of reply of such question noted that assessee has not offered

additional amount of Rs. 3.89 Crore as his income for the year under consideration. The assessee was given opportunity to explain the retraction

of Rs. 3.89 Crore. The AO noted that the statement was given after

availability of facts and total inquiries made by the department. Retraction

by assessee is nothing but a well planned device to frustrate the efforts of

department to unearth unaccounted income. The AO, accordingly, made

further addition of Rs. 3.89 Crore on account of income from undisclosed

source. Thus, the AO made addition of Rs. 1.17 Crore on account of sales

out of books and Rs. 3.89 Crore as income from undisclosed source in the

assessment order dated 28.12.2017 passed under Section 143(3).

Before Ld. CIT(A), the assessee filed detailed written submission. The

submission of assessee are restricted by Ld. CIT(A) on page No. 3 to 15 of

his order. Addition of undisclosed sales, the assessee submitted that he is

proprietor of Lakshay Enterprises. His firm is in the business of trading of

Iron and Steel. Regular books of account of the firm as well as personal

balance-sheet are maintained by the assessee. Books of account are audited.

A search action was carried out at his premises on 17.11.2015, during the

course of search proceeding, mobile phones of Madanlal Fakirchand Kapur,

Badriprasad Ramsukh Tiwari, who were providing services to the assessee as

a cashier and cheque collection agent, were seized. Certain messages were

found in their mobile phones which were reproduced by AO in the

assessment order. Mobile phone of Rajesh Maheshwari, cashier of Ramsons

Group was also seized. On the basis of messages, the AO interpreted that

the cash collected was handed over to Rajesh Maheshwari and in turn to assessee. As per the mobile phone seized from three persons, the AO made

addition of Rs. 1.17 Crore as out of book sales. There are no messages

between the collecting agent and Rajesh Maheshwari or assessee in respect

of any transaction to accept or to pay on behalf of assessee. Message

reproduced by AO in respect of two cash/cheque collecting agents, nowhere

contain the name of assessee or his cashier. The assessee in his statement

explained that message may be pertain to some other person and not to

him. In respect of finding during the search period about the statement of

assessee and the statement of all three persons and about their statement,

the assessee submitted that he clearly denied the allegation of department

that all these persons were collecting cash from the bank as withdrawal for

expenses delivering it to cashier Rajesh Maheshwari or Rajesh Maheshwari in

turn was handing over the daily closing balance of cash to assessee. Such

persons are not related to the assessee. The assessee in response to

question No. 10-17 that cash is received by him during the statement

recorded is, daily cash balance remains after the closure and the assessee or

group is not involved for any transaction, which is not recorded in the books

of account. The AO not accepted the explanation of assessee and just on the

basis of messages which is not pertaining to assessee made addition against

the assessee. There is no single paper seized to support the stand of AO.

The books of assessee are duly audited. Books of assessee are not rejected.

All transaction of sale and purchase are reflected in the books of accounts.

The messages in the phone of employee or collecting agents does not reveals the nature of transaction, hence, the presumption of AO about

unrecorded sale is not tenable. The addition is without any justification.

was made under pressure. The AO while making addition, simply mentioned

that there is no evidence which states that there was any force of coercing

made by such party. Assessee has disclosed the circumstances and how the

pressure was mounted by such party, when nothing was found as

incriminating or unexplained during the search. The AO failed to gather

corroborative evidence instead of relying on statement recorded, which has

been retracted. Retracted statement has no evidential value. To support

such view, the assessee relied on a number of decision which is recorded by

Ld. CIT(A) in his order.

assessee recorded that AO made two addition i.e. addition of Rs. 1.17 Crore

as unrecorded cash sales and addition of Rs. 3.89 Crore on account of

undisclosed income. On the first addition, the Ld. CIT(A) noted that AO

made such addition on the basis of SMS texts found in the two mobile phone

of unrelated party and one of the employee of assessee and its group. On

the basis of messages in the mobile phone of three persons, the AO was of

the view that assessee made out of books sales of Rs. 1.17 Crore. The AO

while making addition recorded his finding “I am, prima facie view that plain

reading of message does not reveal true content of message, nature of

transaction or amounts involved. Even after going through all the messages

reproduced in the assessment order, nature of transaction is not revealed as to whether transaction pertain to receipts or payment, and whether these

were in any way connected to Shri Rajesh Sharda”. The Ld. CIT(A) held that

on perusal of statement of all three persons, he find that none of the person

had ever stated that the messages are related to cash sales, which is

unrecorded in the books of account. The AO merely on the basis of

statement recorded of such persons, which are general in nature, tried to

link the same as receipts against unrecorded sales without single evidence.

No incriminating material was found during such proceeding nor

corroborative evidence was brought on record AO. The theory propounded

by AO is purely fictional and based on presumption. There is no evidence to

make such addition. The Ld. CIT(A) also relied upon decision of Tribunal that

text messages relied by AO is not supported by any corroborative evidence

and suffer from lack of rationale as to how the contents of message

represents unrecorded transaction of sales and deleted the addition of

unrecorded sales.

Ld. CIT(A) recorded that case of assessee is that no incriminating documents

or material during first two days of search was found, still the search

continued for two days, assessee was not in a proper state of mind to view

explanation to the officers without verifying facts and figure. The assessee

was under pressure. The confession was obtained and search was

concluded. The search team obtained surrender of Rs. 10.00 Crore in the

hands of entire group, which includes 6.10 Crore in the hands of three group

companies on account of excess stock Rs. 3.89 Crore in the hands of assessee group. The surrender of excess stock in the hands of three

companies were immediately retracted by assessee, being a director. The

retraction was made within 90 days. Similar addition in cases of other group

has been held in favour of respective assesses. The Ld. CIT(A) further by

referring the statement of assessee in response to question NO. 42 that

assessee agreed to surrender of Rs. 3.89 Crore, specifically recorded that

assessee made such statement to cover up discrepancies that may arise

during course of search, post search proceeding, for earlier years and

current financial year, in respect of assessee group, individual, firms and

companies. On perusal of such statement, the Ld. /cit(A) recorded that it

was not admission of guilt, admission of undisclosed/unaccounted income.

The assessee in his statement specifically pointed out about “any

discrepancies that may be found” by the department. There is no supporting

document about any further unaccounted income in the books of assessee.

Once the statement was retracted, the AO should have disprove the

retraction and to initiate independent inquiries in order to arrive at actual

concealed income or to gather corroborative evidence. The Ld. CIT(A)

recorded that usually admission bind the person who made such statement

in absence of any denial. In the case in hand, there is no clear admission,

rather it was for any discrepancies, if found. No discrepancies were found

ultimately. The Ld. CIT(A) also referred the CBDT Circular dated 10.03.2003

and deleted the addition of 3.89 Crore. Aggrieved by the order of CIT(A),

revenue has filed present appeal before Tribunal.

of the assessee. The Ld. CIT DR for the revenue submits that during search

action, mobile phones of three persons were seized. The communication

retracted from the mobile phones clearly shows the unaccounted sales. The

AO made addition on the basis of such evidence in the mobile phones of

three persons. Similarly, during search action, the assessee made disclosure

of 3.89 Crore which was not offered for taxation while filing return of

income. Both the additions were made by AO on the basis of various

evidences in the statement assessee and his employee. The Ld. CIT (A)

deleted both the addition without appreciating the evidence on record.

Statements were recorded under Section 132(4) wherein all two persons

accepted the transaction and handing over the amounted employee of

assessee about unrecorded transaction. There is no evidence about coercion

of assessee at the time of making his statement before search team. The

assessee has not filed any evidence about any pressure or undue influence.

The statement was made voluntarily and is sufficient to make addition

against the assessee.

Addition has been made by A.O. by referring to whatsApp messages as

noted at page 4 to 11 of assessment order. Messages relied by A.O. are

dumb as they are vague in nature and neither reveals the nature of

transaction nor reveal to whom they relate. No corroborative evidence

found in search or brought on record by A.O. before making addition on

basis of dumb documents. In statement recorded on date of search assessee had explained the statement of Shri Madanlal Kapur, Shri Rajesh

Maheshwari and Shri Badriprasad Tiwari on 20/11/2015 at Answer to

Question No.10 to 17. Assessment for past assessment years are

completed pursuance to action u/s 132(1) of I.T. Act 1961 for block

period. In none of the assessment framed there is any

allegation/addition for unrecorded sales at the hands of assessee except

in Asstt. Year 2016-17 in the absence of any evidence on record. CIT(A)

has correctly deleted the addition made in the assessment framed.

Reliance is made on the following decisions.  Rucha Consultancy LLP vs. DCIT(2025) 174 taxmann.com 221 (Mum. – Trib.)  ACIT vs. Prashant Prakash Nilawar in ITA No.5689/Mum/2025 vide order dated 12/02/2025  M/s. Nandini Delux vs. ACIT. In ITA No.446 to 448/Bang/2013 vide order dated 05/12/2014 9. We have considered the rival submissions of both the parties and have gone

through the orders of lower authorities carefully. We have also deliberated

on various case laws relied by ld. AR of the assessee. We find that assessing

officer / revenue has raised as many as 21 grounds of appeal. The grounds

of appeal is not accompanying with the authorization memo of Principal

Commissioner of Income Tax which is mandatory. However, in our view, the

substantial grounds of appeal are only two. First, relates to deleting addition

of Rs. 1.17 crore on account of suppression of sale. And second relates to

deleting addition of Rs. 3.89 crore surrender during search action. Rest of

the grounds of appeal are argumentative or narration of fact which is not in

accordance with Rule 8 of Income Tax (Appellate Tribunal) Rules, 1963.

sale. We find that assessing officer while making such addition relied upon

the various communications in the mobile phone of Madanlal Falkirchand

Kapur (Madanlal) and Badriprasad Ramsukh Tiwari (Badriprasad). As per

assessing officer, message in the mobile phone contend various message

relating to out of books sales in cash. The assessing officer arrived at a

figure of Rs. 1.17 crore without referring any specific figure or working in his

order. On perusal of assessment order, we could not find as to how such

figure was worked out. There is no reference in the messages referred by

AO about collection of amount if it was against the cash sales or other

business transaction. We find that before ld. CIT(A) the assessee objected

against such addition on factual and legal basis. We find that ld. CIT(A)

while deleting the addition recorded that assessing officer himself has

recorded that “I am, prima facie view that plain reading of message does not

reveal true content of message, nature of transaction or amounts involved.

Even after going through all the messages reproduced in the assessment

order, nature of transaction is not revealed as to whether transaction pertain

to receipts or payment, and whether these were in any way connected to

Shri Rajesh Sharda”. On perusal of statement of all three persons, the ld.

CIT(A) recorded that none of the person had ever stated that the messages

are related to cash sales, which is unrecorded in the books of account. The

AO merely on the basis of statement recorded of such persons, which are

general in nature, tried to link the same as receipts against unrecorded sales

without single evidence. We find that ld. CIT(A) also gave specific finding that no incriminating material was found during such proceeding nor

corroborative evidence was brought on record AO. The theory propounded

by AO is purely fictional and based on presumption. There is no evidence to

make such addition.

messages relied by AO is not supported by any corroborative evidence and

suffer from lack of rationale as to how the contents of message represents

unrecorded transaction of sales and deleted the addition of unrecorded

sales. The addition is made only on presumption and without any support of

evidence. Hence, we do not find any justification for making such addition.

Therefore, we affirmed the order of ld. CIT(A) with our additional

observation. In the result, substantial ground of appeal is dismissed.

We find that assessing officer made addition by taking view that during

search action, the assessee made a disclosure of additional income of Rs.

3.89 crore on account of discrepancies which includes loose documents,

cash, jewellery and out of books entry. The assessing officer also noted that

assessee made disclosure on the basis of facts available before him. We find

that before ld. CIT(A), the assessee explained that disclosure made during

the search action was retracted within reasonable time. Moreover, while

making disclosure the assessee merely agreed to surrender 3.89 crore only

to cover up discrepancies which may arise during course of search action,

post search proceeding for earlier and current financial year. No such

discrepancies were found nor any incriminating or corroborative evidence showing unrecorded income was found. We find that ld. CIT(A) after

considering the material before him held that there was no clear admission

by assessee rather it was made for any discrepancies, if found during search

action or in post search proceeding. No discrepancies were ultimately found.

The disclosure statement was retracted. The ld. CIT(A) also relied upon the

CBDT circular of 2003 wherein it was directed that search team should

gather evidence during search action instead of obtaining disclosure or

confession.

nowhere mentioned in the assessment order that any corroborative evidence

was found to substantiate the disclosure by assessee. We also found that

alleged disclosure was made by assessee in respect of all the group firms

companies and individuals and not in his hand alone. Thus, we affirm the

order of Ld. CIT(A) with our additional observations. In the result,

substantial ground NO. 2 of the appeal is also dismissed. In the result, all

the grounds of appeal are rejected.

Order was pronounced on 27/04/2026 as per Rule 34 of Income Tax

(Appellate Tribunal) Rules, 1963.

Sd/- Sd/- KHETTRA MOHAN ROY PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, Dated: 27/04/2026 Zu, P.S Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order

Assistant Registrar ITAT, Mumbai

Page 17 of 18