M/S. BANNARI AMMAN SUGARS LTD.,COIMBATORE vs. ACIT, CENTRAL CIRCLE-3(2), CHENNAI

आयकर अपीलीय अिधकरण, ’डी’ �ायपीठ, चे�ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI �ी एबी टी. वक�, �ाियक सद� एवं सु�ी प�ावती. एस., लेखा सद� के सम� BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND MS. PADMAVATHY. S, ACCOUNTANT MEMBER

ITA No. 2305/Chny/2024 �नधा�रणवष�/Assessment Year: 2020-21 M/s. Bannari Amman Sugars v. Assistant Commissioner Limited of Income Tax, 1212, Trichy Road, Central Circle 3(2), Coimbatore - 641018 Chennai. [PAN: AAACB 8933 G] (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� की ओर से/ Appellant by : Mr. Vikaram Vijayaraghavan, Advocate ��थ� की ओर से /Respondent by : Mr. K. Jayaganesh, CIT सुनवाईक�तार�ख/Date of Hearing : 24.06.2026 घोषणाक�तार�ख /Date of : 25.08.2026 Pronouncement आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the assessment order passed on 23.07.2024, pursuant to directions passed by Dispute Resolution Panel (hereinafter referred to as ‘DRP’) on 28.06.2024 u/s.144C(5) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (hereinafter referred to as ‘AY’) 2020-21.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 2 ::

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 3 :: assessment order of the AO, the assessee filed objections before the Ld. DRP, who allowed partial relief to the assessee, pursuant to which final assessment order was passed by the AO after making the following addition(s) / disallowance(s) which are as under:- i. Unexplained investment in fixed assets u/s 69B of the Act - Rs.1,14,70,661/- ii. Unaccounted Cash Sale of Molasses – Rs.55,00,000/- iii. Disallowance u/s 14A – Rs.89,280/- iv. Excess Depreciation in Cogeneration Plant – Rs. 31,91,974/-

The order of the Assessing Officer (AO) in pursuance to the directions the Dispute Resolution Panel/DRP ("the Panel") is opposed to law, facts and circumstances of case. Alleged cash payments in lieu of Rebate of 7.5% on Gross Bills raised by Chettinad Builders Private Limited: 2. The AO/Panel has erred in assuming and concluding that the details of cash receipts mentioned in the diary noting during the course of search action at the premises of Chettinad Builders Private Limited (CBPL) pertaining to the payments made by the Appellant Company and added an amount of Rs. 1,14,70,661/- as investments not fully disclosed in the books of accounts u/s 69B of the Income Tax Act, 1961 ("the Act"). 3. The AO/Panel has erred by not considering the fact that rough noting and scribbling made in the loose sheets and diaries seized during the course of search does not contain any information of the appellant company and the same do not pertain to the appellant company. 4. The satisfactory note has been made merely based on the assumption of the Assessing Officer by extrapolation. The AO/Panel has erroneously

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 4 :: assumed that the unaccounted cash has been paid by the appellant company. 5. The AO/Panel ought to have considered the statement of the CFO of the searched party that the searched party did not receive any cash from the appellant company. 6. The AO/Panel ought to have considered the fact that no addition can be made by Assessing Officer in the absence of any incriminating material found during course of search under section 132 or requisition under section 132 as enumerated by the Apex Court in the judgement of PCIT vs Abhisar Buildwell (P.) Ltd [2023] 454 ITR 212 (SC). 7. Further, the appellant company has placed its reliance on the CBDT Instruction vide Instruction No. 1/2023 in F.No.279/Misc./M-54/2023-ITJ dated 23.08.2023. 8. The AO/Panel ought to have considered the following judicial pronouncements which supports the appellant's contention as mentioned in the paragraphs supra: a. DCIT vs. U.K.Paints (Overseas) Limited [2023] 294 Taxman 72 (SC)/454 ITR 441 b. PCIT vs King Buildcon P Ltd 456 ITR 770 (SC) c. CIT vs Smt Jayalakshmi Ammal [242 Taxmann 449] [Madras HC] Alleged unaccounted cash sales of molasses 9. The AO/Panel has erred in upholding the additions to the tune of Rs. 55,00,000/- as unaccounted cash sales of molasses made to SKM Animal Feeds and Foods India Pvt Ltd ('SKMAFF") without considering the fact that Appellant Company has entered into all transactions of sale only through proper banking channels and has duly accounted all the sale in its books of accounts. 10. The AO/Panel erred in upholding the addition on account of the same ground to the tune of Rs. 55,00,000 merely based on excel sheets without any corroborative evidence is not tenable. The AO/Panel has ought to have considered the fact the mere excel sheets seized during the search proceedings does not tantamount to corroborative evidence to initiate the proceedings u/s 153C of the Act. 11. Further, the Appellant Company's request to cross-examine the sworn statement of Mr. K.S Gopalakrishnan has been denied by the Assessing Officer citing "technical reasons" and such denial of cross-examination is against the principles of natural justice. 12. The AO/Panel ought to have considered the rebuttal statement given by Mr. K.S Gopalakrishnan denying the statement recorded during the course of search proceedings.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 5 :: 13. The AO/Panel ought to have considered the following judicial pronouncements relied upon by the assessee: a) Andaman Timber Industries vs. CICE, [281 CTR 0241(SC)] dated 02.09.2015 b) H.R. Mehta v. ACIT [289 ITR 0561 (Bom)] dated 30.06.2016 c) CIT v. Ashwani Gupta [322 ITR 0396 (DEL)) dated 16.02.2010 d) Commissioner Of Income Tax vs Smc Share Brokers Ltd 288 ITR 386- (Del) Questionability of Evidence relied: 14. The Assessing Officer has relied upon the extracts from the electronic devices in the form of excel sheets, which is secondary evidence and the reliability of the same is questionable and admissibility of the same is uncalled for in the absence of mandatory certificate u/s 65B (4) of the Indian Evidence Act. Anvar P.V vs. P.K.Basheer and others reported in (2014) 10 SCC 473. 15. In support of this, the following decisions have been relied upon viz, "Thilagarathina Match Works and Others vs. CCE" (2013) 2 CTC 369; "Arjan Panditrao Khotkar vs Kailash Kushanrao" (2020) 7 SCCI and "Vetrivel Minerals vs. ACIT" (2021) 129. Disallowance u/s 14A under normal provisions of the Act 16. The assessing officer has erroneously disallowed Rs.89,280 by invoking the provisions of section 14A r.w.r 8D without considering the fact that the investments were being made only out of surplus profits earned in the previous years and not out of borrowed funds and the investments are held in demat form and has not incurred any administration cost. 17. The Assessing Officer has failed to consider the fact that the appellant company has not made any new investments during the year ended 31.03.2020 relevant to the AY 2020-21 and the change in value of investments between opening and closing balance are only on account of fair value change in accordance with Indian Accounting Standards. 18. The Assessing Officer has failed to take into account the recent decisions of Kolkata Tribunal in the case of DCIT vs Century Plyboards (1) Limited [2021] 123 taxmann.com 256, wherein it is held that the interest- free funds of its own available with the assessee in the form of share capital and free reserves were substantially more than the corresponding investments made to earn the interest free income. 19. The Assessing officer has failed to consider that the Appellant Company had not incurred any direct or indirect expenditure in connection with earning exempt income and had not considered the judicial

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 6 :: pronouncement of The Hon'ble High Court of Madras in the case of Roca Bathroom Products (P) Ltd PCIT in [2019] 101 taxmann.com 395. 20. The Assessing Officer had erred in not considering the judicial pronouncement in the case of DY CIT vs Subramanya Constructions & Development Co Ltd., [TS-100-ITAT-2015 (BANG) -0] wherein it has been held that disallowance u/s 14A shall not be warranted if the assessee has not incurred any expenditure for earning exempt income. Disallowance u/s 14A under section 115JB of the Act 21. Further, the assessing officer has erred in considering the disallowance of expenditure under section 14A in computing the book profit without considering the provisions of section 115JB of the Act. 22. It has been decided in the recent Karnataka High Court case of Sobha Developers Ltd Vs Deputy Commissioner of Income tax, LTU, Bangalore [2021] 125 taxmann.com 72 (Karnataka) wherein it held that, "disallowance made undersection 14A is a notional disallowance and; therefore, such amount could not be added to book profits of assessee under section 115JB" 23. The Appellant Company places firm reliance on the supreme court case of Apollo Tyres Ltd Vs Commissioner of Income tax 255 ITR 273 (SC) "which held that: 'the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115JB." Disallowance of claim of Excess Depreciation: 24. The AO/Panel ought to have considered the nature of plant and machinery for which depreciation has been claimed @ 40%. 25. The AO/Panel has erred to consider the fact that the Assessing Officer has erroneously restricted the depreciation claim to 15% instead of 40% for the entire block comprising of Opening WDV and additions during the year ended 31.03.2020 of Rs. 1,17,48,201 and Rs. 19,75,536 respectively. 26. The AO/Panel did not consider the fact that the additions are integral part of power generating co-generation plant and are eligible for 40% depreciation. 27. The AO/Panel has ought to have considered the view taken in the similar grounds of M/s. Sri Sarvarya Sugars Limited chelluru, where it has been specifically stated that the various components form an integral part of a co-generation plant and the components could not be used on standalone basis but part and parcel of co-generation unit. Each item would not have any function by itself except when it forms part of the whole system. 28. The AO/Panel failed to consider the Appellant's own case for AY 2010- 11 in ITA No. 1289/Chny/2019 wherein the Hon'ble Income Tax Appellate

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 7 :: Tribunal, Chennai has confirmed the stand of the assessee company for the same ground vide its order dated 21.03.2021. 29. For these and such other grounds that will be adduced at the time of hearing.”

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 8 :: totaled to Rs.9.26 crores spanning across one-year 2019 to 2020. He further observed that certain box files were also found in the course of search at Chettinad Group containing construction bills which were raised upon the assessee and Bannari Amman Education Trust [in short ‘BAET’] and noted that the bills raised on BAET carried a rebate of 15% on the gross invoice value. The AO further observed that, the persons from whose possession the above mentioned seized diary & loose sheets were seized viz., Shri Yegappan and Shri Muthu had stated in their statements recorded u/s 132(4) of the Act that the impugned notings made by them in the names of ‘Bannari Amman’ or ‘BASL’ etc. was at the instructions and directions of Shri M V Jayashankar, an ex-employee of CBPL.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 9 :: genuine. She also inter alia stated that, the rebate of 7.5% given to the assessee was negotiated prior to execution of the contract and that CBPL didn’t receive any cash in lieu of this rebate (refer Para 10.10 of DRP order). It was also brought to our notice that Smt. Valliammai was also cross-examined before the AO and she had reiterated that CBPL had not received any cash from the assessee in lieu of 7.5% rebate allowed on their construction bills.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 10 :: Smt. V. Valliammai that the rebate of 7.5% was negotiated prior to finalization of construction contract. He thus inferred that the assessee must have also paid back the rebate of 7.5% in cash to CBPL. The AO also discussed the contents of some of the notings found in the impugned seized material, which according to him, suggested the name of the assessee and/or the location of their construction site. This according to AO corroborated his contention that the impugned notings were not vague but specific and it suggested payment of unaccounted cash by the assessee to CBPL. The AO is thus noted to have assumed that these notings found in the diary ought to relate to the rebate of 7.5% allowed to the assessee in their construction bills. He accordingly quantified the rebate mentioned across all the construction bills raised by CBPL upon the assessee in AYs 2015-16 to 2021-22 and added the respective amount(s) by way of unaccounted cash payments made by the assessee u/s 69B of the Act. In the relevant year AY2020-21, the AO passed draft assessment order on 30.09.2023, on this issue to add Rs.1,14,70,661/-. Aggrieved by the draft assessment order of the AO, the assessee preferred its objection before the DRP which was pleased to confirm the impugned addition. Now the assessee is in appeal before us.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 11 :: related or pertained to the assessee. He also pointed out several defects and fallacies in the notings, which, in his view, showed that the said jottings were vague and dumb in nature. He also took us through the sworn statements of the employees and pointed out that, they had not only specifically denied having received any cash from the assessee but also averred that these notings did not pertain to the assessee. According to him, when the searched person itself had denied the contents of the seized diary/loose sheet found from his possession qua the assessee, then the AO could not have validly made any addition in the hands of the assessee. He argued that the assessee cannot be expected to prove a negative. He also brought to our notice that, the AO had blatantly contradicted himself by adding these very same notings in the hands of BAET as well. According to him, this action of the AO clearly showed that he himself was not sure regarding the veracity of the notings as to who did they possibly relate to and was simply shooting arrows in the dark. He thus submitted that such arbitrary addition made by the AO on assumption and surmises should be rightly deleted and cited the order of this Tribunal in assessee’s own case for AY 2019-20 & AY 2021-22 (ITA Nos. 3360 & 3361/Chny/2024 order dated 04.12.2025, wherein Tribunal has deleted similar addition based on very same seized material, and hence prayed for deletion of similar additions.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 12 :: 11. Per Contra, the Ld. DR supporting the action of the AO/DRP, submitted that though the employees of Chettinad Group had denied having received any cash payments from the assessee, but in his view, the notings/jottings on the seized material did suggest the receipt of cash from the assessee and not BAET. According to him, once Shri Jayashankar and Smt. Valliammai had admitted to have received cash in lieu of 15% rebate allowed on bills of BAET, then understandably same modus operandi would have been followed in the construction contract of the assessee as well. According to him, the AO had rightly estimated the unaccounted cash payments made by the assessee in light of the impugned seized material and that he should be allowed reasonable degree of latitude for doing so. The Ld. DR thus urged us to not disturb the order of the AO.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 13 :: Revenue, this cash was received by CBPL from the assessee in lieu of 7.5% rebate allowed in their construction bills and based on the seized material & statement recorded as noted supra, the AO has added Rs.1,14,70,661/- u/s.69B of the Act. At the outset, we note that, this very same seized material and jottings/notings had undergone examination before this Tribunal in the matters of Bannari Amman Education Trust (BAET) in ITA Nos. 3310 to 3314/Chny/2024 wherein the case of the Revenue was that these notings related to BAET and it suggested receipt of cash by CBPL from BAET in lieu of 15% rebate allowed in their construction bills. While deciding the appeals of BAET (supra), this Tribunal by order dated 14.08.2025 on facts and circumstance of the case, held that, the impugned notings/jottings, if considered on stand-alone basis, were vague and unreliable and lacked any evidentiary value. Thereafter, this Tribunal had an occasion to adjudicate the appeal of assessee-Bannari Amman Sugars Ltd for AY2019-20 & AY 2021-22 and vide order dated 04.12.2025 held as under :- “2.1…….. 2.2…….. 2.3……. 2.4…… 2.5…… 2.6. In our view, our decision rendered on this aspect in the case of BAET (supra) would apply with equal force in the present case as well. The Ld. AR has also rightly pointed out that, there was neither any sign nor acknowledgment by the assessee in any of these notings/jottings nor was there any mention of the construction contract, work order, invoice etc. Hence, such vague and dumb notings in a third party premises alone is not sufficient to fasten any tax liability on the assessee. Hence, we

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 14 :: agree with the Ld. AR that, the Revenue’s case that the impugned notings suggested receipt of cash in lieu of 7.5% rebate allowed in the construction bills by CBPL to the assessee, was simply based on suspicion and guess work, and such inference was not discernible from these notings. Moreover, the fact that even the Revenue was not able to make up their mind as to whether these notings related to the assessee or BAET and had added the same notings in both their hands, further evidences the ambiguous nature of these impugned notings. Overall therefore, in our considered view, such vague and ambiguous jottings/notings seized from the premises of third party [M/s Chettinad Group] doesn’t inspire confidence to justify the impugned addition made in the present case. Therefore, the Ld. CIT(A) after analyzing threadbare the relevant oral/documentary evidences held that the impugned addition made by the AO was without any credible material evidence. And as noted the Ld. CIT(A) had also analyzed the statement(s) of the employees of Chettinad Group who had made these notings or were aware regarding their contents, and found that, none of their answers were clear as to whether the cash notings were in lieu of rebate allowed and whether it was on behalf of the assessee or BAET. The Ld. CIT(A) particularly noted that, none of them had averred that any cash was received against rebate of 7.5% allowed by CBPL to assessee on their construction bills. The Ld. CIT(A) is also found to have taken note of the statement of Smt. Valliammai, CFO of Chettinad Group, who had denied having received any cash from the assessee and had specifically averred that the rebate of 7.5% allowed to the assessee in their construction contract was genuine. It is noted that, she had also specifically asserted that the impugned notings did not pertain to the assessee. We find that Smt. Valliammai was also cross-examined in the course of assessment wherein she has affirmed her original statement that the assessee had not made any unaccounted cash payments to CBPL and the 7.5% rebate given in their construction contract was genuine. We find that the Ld. CIT(A) had also analyzed the email communication referred to by the AO in the impugned order to discredit the statement of Smt. Valliammai and found that these emails only contained estimations of cost working and nowhere did it suggest any payment of cash for 7.5% rebate. The Ld. CIT(A) is noted to have therefore held that the impugned addition made by the AO was without any material evidence and hence deleted the same. The relevant findings of the Ld. CIT(A), on this aspect, is noted to be as under:- “5.7 The above statement of Ms. Valliammai also clarifies that the rebate was provided by CBPL to Bannari Amman group of concerns, more specifically to Bannari Amman Institute of Technology. She had clarified that from FY 2014-15 onwards, 15% of the value was offered as rebate in the bills raised against Bannari Amman Institute of Technology. However, when CBPL, requested for increase in the rate, they had offered to pay 15% discount amount in cash from FY 2016-17 onwards. Further, while answering to Q. No. 6, she had clarified that the rebate was given to BITS (Bannari Amman Institute of Technology) subsequent to entering the contract and specified in the invoice raised on them. However, with regard to the other contracts, rebate @ 7.5% is part of the negotiation before entering into the contract and will not appear in

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 15 :: the invoices raised against them. She had again categorically stated in answer to Q. No.7 that with regard to two agreements entered between BASL and CBPL, the rebate @ 7.5% mentioned in the agreement is the reduction of the quoted rate for that specified contract and part of the business negotiation itself. These statements provide the clarity that the rebate @ 15% was given only with respect to the projects executed by CBPL to BAET/ BITS, which was subsequently received as cash from the FY 2016-17 onwards, whereas the agreed rate of 7.5% of rebate to BASL is given prior to entering into the contract and no cash is received against that rebate as it was not raised in the invoice itself. 5.8 In order to further verify the claim made by Ms. Valliammai, a verification was also carried out on the seized materials which the AO had relied upon in the assessment order. One among them is Sr. No. 7 to 13 of ANN/CLTSPL/SB/B&D/S. I had requested the AO to produce these seized materials and I have personally examined the contents therein. On examination, it was found that Sr. No. 7, 8, 9, 12 & 13 of ANN/CLTSPL/SB/B&D/S are the box files which contain the invoices raised by CBPL in the name of BAET/BITS only. These invoices pertain to the period from 2018 to 2020 and all the invoices invariably have 15% rebate of the total bill value. However, the Sr. No. 10 & 11 contain the invoices raised by CBPL in the name of BASL and none of the invoices has rebate, either @ 7.5% or 15%, meaning thereby that there is no rebate mentioned in these invoices raised by CBPL on BASL for the same period. Another seized material which the AO relied on was an email correspondence between BASL and CBPL with respect to construction of Distillery expansion unit at Nanjangud, Karnataka. According to the AO, this email communication contains proof for 7.5% rebate given to BASL which was subsequently received by cash. On perusal of the contents of the email, it is noted that these are all estimations of cost for the said project given by CBPL before entering into the contract. This cost working was examined by BASL through their architects and after the negotiations, the contract was agreed wherein rebate @ 7.5% was given before entering into the agreement itself. This also supports the statement given by Ms. Valliammai, CFO that the 7.5% rebate given to BASL is part of the business negotiation and not in the invoices raised against BASL.” 2.7 The Ld. DR appearing for the Revenue was unable to controvert the above findings of the Ld. CIT(A). We thus are in agreement with the assessee that, when the third party, from whose possession the impugned material was seized, had themselves denied its contents/ notings qua the assessee and also affirmed that they did not have any unaccounted cash transactions with the assessee and their statements remained uncontroverted by the Revenue, then in our view, the assessee cannot be implicated of any wrong doing or be fastened with any tax liability. In our view, the assessee could not have been expected to prove a negative. Rather the onus lay on the Revenue to bring some independent or clinching evidence to corroborate their claim that the impugned notings represented unaccounted cash payments

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 16 :: made by the assessee. As noted earlier, instead of doing so, the AO acted on assumption and guess work. Perusal of the impugned assessment order reveals that the AO had tacitly acknowledged that, the third party’s seized material in light of the sworn statement(s) of their employees did not directly implicate the assessee of any unaccounted cash payments. However according to him, since the searched person i.e. CBPL, had admitted that, it had received cash in lieu of rebate for other project(s) [BAET], he proceeded on an assumption that the same modus operandi would have been followed by CBPL in their construction contract with the assessee as well viz., the rebate of 7.5% allowed in the bills was paid back in cash. According to us, such a whimsical assumption made by the AO cannot be countenanced, particularly when in the given facts, the notings/jottings were not forthcoming or corroborated; and even the searched person had denied having any unaccounted cash transactions with the assessee. There is merit in the Ld. AR's contention that, the AO’s action of applying theory of extrapolation was based simply on assumption, without bringing on record any corroborative evidence to justify the same. We gainfully refer to the decision of the Hon'ble Bombay High Court in the case of C.J. Shah & Co. (246 ITR 671) wherein it was held that, where material is detected after search and seizure operations are carried out, the AO is required to determine the undisclosed income and in such cases, additions may be based on estimates but in matter of estimation, some amount of latitude is required to be shown to the AO particularly when relevant documents are not forthcoming. However, Hon'ble High Court observed that it does not mean that the AO can arrive at any figure without any basis by adopting any arbitrary method of calculation. The relevant findings of the Hon’ble High Court are as under: “3. It is well-settled that in cases where material is detected after search and seizure operations are carried out, the Assessing Officer is required to determine the undisclosed income. In such cases additions are generally based on estimates. In matters of estimation some amount of latitude is required to be shown to the Assessing Officer, particularly when relevant documents are not forthcoming. However, it does not mean that the Assessing Officer can arrive at any figure without any basis by adopting an arbitrary method of calculation. In the present matter, A3, A4 and A6 nowhere records the turnover of the assessee as found by the Tribunal and yet on the wrong basis of the incoming and outgoing cash transactions, the Assessing Officer has arrived at the turnover . Moreover, the peak investment was Rs. 40,14,806 for three months. However, there is no material seized to justify any figure to be included for a period earlier to the said period of three months. In the circumstances, the Tribunal has recorded a finding of fact and has held that the addition of Rs.3.40 crores was totally unjustified. The entire finding of the Tribunal is based on the facts. No substantial question of law arises. Hence, the appeal is dismissed." 2.8 In the given facts of the present case, we find that the AO’s action of estimating unaccounted cash payments in lieu of 7.5% rebate allowed in construction bills was not discernible from the impugned seized material in as much as the third party i.e. the employees of CBPL from whose possession the impugned material was found, had also

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 17 :: denied having any unaccounted cash transactions with the assessee. In our view therefore, the impugned addition fell in the realm of conjunctures and surmises. It is obvious that driven by misplaced suspicion, the AO has presumed the assessee would have paid cash in lieu of 7.5% rebate given by CBPL. The findings of the AO is noted to be a mere ipse dixit which is not objectively justifiable by some cogent evidence. For the aforesaid reasons therefore, we thus hold that the Ld. CIT(A) was justified in deleting the impugned addition. Accordingly these grounds are dismissed.” 13. It is observed that except for the variations in figures, the reasoning adopted by the AO for making the impugned addition is verbatim same as in AY 2019-20 (supra). Following our conclusions drawn while deciding ground No.1 to 6 of Revenue’s appeal for AY 2019-20, we order deletion of the impugned addition and accordingly allow these grounds of the assessee (Ground No.2 to 8) of assessee’s appeal is allowed.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 18 :: by SKMAFF as well as the appellant. The said amount of Rs.4.80 crores was spread across several years and the amount relating to the relevant AY 2020-21 was Rs.2.62 crores. When enquired about the same, the assessee is found to have explained that, the transactions with SKMAFF were regular business transactions and that these purchase orders found noted in the excel sheet were transacted through valid documents and proper banking channel. The assessee sought to substantiate the same by furnishing purchase orders, invoices, goods receipts, stock registers, ledger account, GST returns etc. The AO however rejected and added back the said amount of Rs.2,62,40,000/- as unexplained income of the assessee. Apart from the foregoing, the AO also found two entries aggregating to Rs.55,00,000/- viz., Rs.40,00,000-/ in page 3 and Rs.15,00,000/- in page 11 of the seized material with “Molasses Bhannari Sugars’ written in the corresponding column. The AO relying on the statement of Mr. K S Gopalakrishnan, employee of SKMAFF, held that the entries represented payments made by SKMAFF to the assessee and thus added back the same as well, taking the total addition to Rs.3,17,40,000/- [Rs.2,62,40,000 plus Rs.55,00,000] by way of unexplained receipts from SKMAFF.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 19 :: and reconciled the same with the books of accounts for FY 2020-21 and also showed that this exact amount was received through banking channel. Appreciating these evidences, the Ld. DRP is noted to have called for a remand report from the AO, who vide his report dated 26.06.2024 stated that the appellant had indeed accounted for the sale of molasses and thus submitted that, the claim of the appellant be accepted. Acceding to this remand report, the Ld. DRP is found to have deleted the addition of Rs.2,62,40,000/-. In so far as the entries of Rs.55,00,000/- is concerned, the appellant explained that, Mr. K S Gopalakrishnan had since retracted from his statement by way of an affidavit filed before the Hon’ble Madras High Court, and showed that the Hon’ble High Court had also allowed the writ petition filed by M/s SKMAFF in another related case. It was thus claimed that, the addition made on the basis of this retracted statement was untenable. The assessee also showed that, though they had sought cross-examination of this person, but the same was not allowed by the AO for ‘technical reasons’. It was also submitted that the said excel-sheet was prepared by a third party and found from the possession of third party, which was neither signed nor acknowledged by the assessee. The appellant had thus challenged the evidentiary value of the disputed loose sheet / excel sheet especially in the absence of any direct corroborative evidence. The Ld. DRP however did not agree with

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 20 :: the contentions of the assessee and confirmed the addition made by the AO. Aggrieved by which, the assessee is in appeal before us.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 21 :: the other hand, the Ld. DR appearing for the Revenue, supported the order of the lower authorities.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 22 :: therein, in the absence of corroborative evidence. For this, we usefully refer to the decision of Hon'ble Punjab & Haryana High Courtin in the case of CIT v. Khosla Ice & General Mills (2013 (1) TMI 451). In the decided case, the impugned loose papers were found to be non-speaking document in as much as it didn’t contain any intelligible narration in support of the inference drawn by the Assessing Officer that it reflected unaccounted transactions carried out by that assessee outside the regular books of account. It was held that, when a dumb document, is to be made the basis to fasten tax liability on an assessee, the burden is on the AO to establish with corroborative evidence, that the nature of entries contained therein reflect undisclosed income. The Hon'ble High Court thus held that, in the absence of any material to support the nature and ownership of the entries found in the seized document, no addition is permissible as undisclosed income, by merely arithmetically totalling various figures jotted down on such document.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 23 :: 20. Similar view is noted to have been expressed by the Co-Ordinate Bench of this Tribunal [Mumbai] in the case of ACIT v. Layers Exports P. Ltd (88 taxmann.com 620) wherein it was held that no addition could be simply made on the basis of uncorroborated notings in the loose papers found during the search because addition on account of alleged payment made simply on the basis of uncorroborated noting and scribbling on loose sheets made by some person has no evidentiary value and is unsustainable and bad in law.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 24 :: the entries found from third premises, to enable the assessee to substantiate the same and that the assessee cannot be expected to explain stray notings of third parties. He submitted that, the noting could also possibly pertain to an estimate or payment of any processing or value addition, to be made, in relation to the molasses which were being purchased from the appellant, which as noted earlier, was through proper banking channel. It was pointed out that, there was nothing contained in the line item, which would suggest that they were unaccounted transactions and that too with the assessee. Before us, the Ld. DR appearing for the Revenue was also able to show any corroborative evidence available with them which would provide necessary reliable basis for deciphering the nature and character of the said entries. Having perused the contents of the excel sheet, we agree with the appellant that it is hard to believe that these two entries related to the assessee as it also does not contain any attestation from the assessee's side, neither sign nor any seal of the assessee. Also, no other incriminating evidence was found in the course of search conducted upon SKMAFF which would correlate or justify these notings. According to us, the burden lay on the Revenue to provide the details, rebut the claim of the appellant, and link these entries with any unexplained transactions of the appellant along with corroborative evidence, as because these entries were found from third party premises and not that of the assessee. We however observe

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 25 :: that the lower authorities failed to do so. On these given facts therefore, we are unable to give any credence to these notings. The contents of this excel sheet, particularly, these two line items are found to be dumb, obscure and non-speaking. Being so, the unreliable seized material relied by the AO for making the impugned addition without out any corroborative material or evidence on record and finding that such document has not materialized into any sales transactions between SKMAFF and the appellant which had not been disclosed in the regular books of accounts, it has to be disregarded for the purpose of assessment.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 26 :: upon by Ld. AO was in the shape of editable excel sheets which did not convey anything to show that such payment, in fact, was made by the assessee to various vendors. It was further observed that the laptop from where this excel sheet was extracted did not belong to the assessee. The Tribunal thus held that, the onus lay on the Revenue to controvert the denial of the assessee by bringing on record some corroborative evidence. It was thus held that, additions could not be made simply on the basis of loose unsigned and undated sheets, and was therefore deleted, by observing as under:-

“6. We find that the only other alleged incriminating material in the hands of Ld. AO is loose sheets numbered as page numbers 252 to 258 which are found from "Veda Nilayam" office Block. The same are already extracted in the assessment order. These sheets are in the shape of certain receipts which do not bear signatures of any party at all and the same are merely in the shape of unsigned documents. In fact, there is no space for signatures of the assessee on these documents. In such a case, reliance on these alleged receipts to support the conclusion was clearly fallacious one and Ld. AO, in our opinion, erred in treating the same as actual receipts. These are merely dumb documents and in the absence of any signatures of any of the parties, the same would not carry any evidentiary value. Therefore, these documents are to be discarded as such and without there being any corroborative evidence to support the same, the same could not be used against the assessee to make the impugned additions. 7. On the basis of given facts, it could be seen that the whole case of Ld. AO rest on single excel sheet and unsigned receipts as found during the course of search action. However, there is no independent investigation or enquiries carried out by Ld. AO from any of the parties or so-called suppliers. There is nothing on record which establish that Ld. AO issued any notices to any of the suppliers to corroborate the alleged incriminating material. In the absence of any such an exercise, it could not be assumed that the assessee made alleged cash payment to various suppliers. It is trite law that no addition could be made merely on the basis of presumption, conjectures and surmises.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 27 :: 8. Upon perusal of loose sheets as extracted in the assessment order, we find that these papers do not bear signature of any of the parties and the same are merely in the shape of dumb documents only. These documents, on standalone basis, could not establish the factum of alleged cash payment. The assessee, all along, denied having made any cash payments and therefore, the onus was on revenue to controvert the stand taken by the assessee and bring on record any cogent / concrete material to rebut the same. However, nothing of that sort as done by Ld. AO has been shown to us. In the present case, the assessee has dis-owned this document and thus, the onus was on revenue to establish that this document belonged to the assessee and the contents of the same were duly supported by corroborative evidences. In the absence of such an exercise, no arbitrary addition could be made on the basis of a printed dumb documents or loose papers in the absence of any independent and corroborative material or evidence on record. The Ld. AO was obligated to establish the factum of cash payment beyond doubt. Additions could not be made simply on the basis of loose unsigned and undated sheets. These sheets were to be considered in the nature of 'dumb document' only having no evidentiary value and could not be taken as the sole basis to make impugned additions. This is further evidenced by the fact that the assessee has not made any purchases from 3 suppliers which have been listed in the excel sheet. One of the parties even ceased to exist in 2007. The alleged payment made to Sarvana Group do not match in the excel sheet and loose sheets. The assessee furnished confirmation of accounts from couple of vendors which remain to be controverted by lower authorities. Thus, there are glaring contradictions even in the excel sheet and loose sheets. Therefore, on the given facts, the stand taken by lower authorities could not be endorsed.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 28 :: the extra consideration, the consideration recorded in the sale deeds could not be ignored and it was for AO to establish that the recorded consideration was not correct. In the absence of signature of the purchaser, the agreement could not be held to be a valid agreement. There should be an offer and acceptance for a valid agreement. While rendering the decision, the bench relied on the decision of Hon'ble A.P. High Court in the case of R. Nalini Devi vs. CIT (ITA No.232 of 2013 dated 10.07.2013). Similar is the decision of Indore Tribunal in DCIT vs. M/s Signature Colonisers, Bhopal (ITA No.218/Ind/2020 & ors. dated 21.12.2021) wherein it was held that the unsigned draft agreement could not be used against the assessee in the absence of any independent cogent evidence. The bench referred to various case laws on the issue and held that additions made on the basis of dumb unsigned documents could not be sustained. The other decision as placed on record lay down similar proposition and support the case of the assessee. … 14. Finally, on the given facts and circumstances, we are of the considered opinion that the impugned additions are not sustainable in any of the years. By deleting the same, we allow the appeals of the assessee. The Ld. AO is directed to recompute the income of the assessee in terms of our above order.”

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 29 :: sheet was recovered from the premises of searched person, Shri Girish N. Patel which contained a noting of Rs.10.45 crores against the name "Mahalaxmi". The AO accordingly added the same as unexplained income in the hands of the assessee. On appeal the Tribunal observed that, the only basis for making addition was an unsigned Excel sheet recovered from the premises of a third party, which cannot be the basis for making additions in the hands of the assessee. It was held that any addition cannot alone be made on the basis of unsigned excel sheet, without any further corroborative evidence to substantiate that the assessee had received cash from the third party.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 30 :: which was upheld by the Tribunal by observing that, there was no authenticity of the impugned screenshot / excel sheet which does not bear any signature and that there was investigation made by the AO to corroborate the same. It was further observed that the noting did not specifically refer to the assessee and the impugned property. Hence, it was held that the addition was based more on conjectures and surmises instead of concrete evidences.

“12.2-12.3 Vide ground no. 3 the assessee - appellant challenges that Id. CIT(A) has erred in upholding the addition amounting to Rs. 16,21,91,214/- (albeit as part of capital gains) based on the set of facts and circumstances available on record and thereby the same is required to be deleted. The brief facts as emerges from the record are that a search and seizure action u/s 132 of the Income Tax Act, 1961, was carried out by the Income Tax Department on the Gokul Kripa Group on 19.01.2021. During the course of search, it is alleged, that certain incriminating digital data was found at one of the premises of Gokul Kripa Group. The said digital data, as per allegations, by the ld. AO, contained details of cash payments which allegedly were made, over and above the cheque payments, towards consideration for purchase of the above lands from the Assessee Appellant along with other family members. The details of such alleged cash payments are appearing at pages 4 to 14 of the order of the ld. AO. It is alleged that the total cash

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 31 :: payments, emerging from above digital data, in all, amounted to Rs. 56,31,38,250/- made to all the family members towards all the sale transactions spanning over the following 3 financial years (ld. AO Pages 34). Ld. AO apportioned the alleged on-money paid in cash in proportion to cheque amount received by individual seller and, thereafter, said amount was further bifurcated into three financial years. The said workings are appearing at page 35 of the assessment order.

Record reveals that the alleged on-money payments in cash are spread over a period starting from 15.09.2015 and ending on 18.03.2018. This period extends to 30 months. It is submitted that registered sale deeds were executed on 05.11.2015, 01.01.2016 and 04.08.2016. The last deed thus was executed on 04.08.2016 whereas last of the alleged payments was received as late as on 18.03.2018. The gap is about 19 months. In sale of property transaction, it is hard to believe that the seller of property make the document without receipt of the alleged-on money. The revenue could not demonstrate or provide any corroborative evidence to the contention the assessee was given the on-money even after the sale deed was executed. Except that loose sheet no corroborative evidence was placed on record by the revenue to support the contention. Having noted so revenue has not taken any action against the assessee as per provision of section 269ST this itself shows that the case of revenue without any further evidence that the payment as alleged to have been made to the assessee are related to that impugned property sold by the assessee to the person searched and the payment by that assessee made to the assessee in appeal and that too after the 19 month of the last transaction and in a piece meal. Not only that it is also hard to believe that 4 parties making separate payment on the same day to the assessee on various occasion and observed by the bench on this issue that the same instances are reported at page 4 onward and serially number at 5, 8 19 & 29. This instances itself suggest that preponderance of probability goes in favour of the assessee and the plea of the revenue has no supporting or corroborative found. Be that it may so it is a matter of common sense that the seller would have no right, least the legal right to recover the on-money. This glaring anomaly in the approach of the revenue is without any support of the any alleged agreement or any record of having agreed to such terms and condition as alleged by the revenue. The recipient of the on-money were not confronted to this issue at the time of search or post search proceeding. Before deriving such conclusion neither at the time of search nor in the post search proceeding revenue confronted to the assessee on such allegation. The bench also considered the factual argument of the ld. AR of the assessee that the name of the assessee is appearing only at 3 places i.e. serial number 149, 164 and 166

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 32 :: (assessment order page 12 & 13). Thus, without referring to that specific entry the ld. AO made the addition based on the lump sum and based on the surmises and conjecture without considering the real facts recorded in that loose sheet and that too without getting it confronted to the assessee. The bench thus noted that the alleged Excel Sheet date is absolutely uncorroborated. There is no underlying evidence which could substantiate such entries in the Excel Sheet. It is worthwhile to note that payments have allegedly been made over a period of 30 months and that too by 4 directors namely Sumer Singh Saini, Sangeeta Saini, Phool Chand Saini and Rajesh Kumar. It is beyond comprehension that 4 persons making payments over a period of 30 months would execute that task without maintaining underlying data and also without obtaining signatures of the recipients. This again proves that action of ld. AO is without any basis and beyond human probabilities. It is also out of human probabilities that many payments are in the multiples of hundreds which normally do not look plausible when such huge payment was to be made in cash. Similarly, on various dates, payments are made by more than one directors or even by all the directors which again do not look plausible and this it self raise doubt on the pattern of recording of such entries in the loose excel sheet. That sheet does not contain any reference to voucher or receipt so as to believe the contention of the revenue. Not only that it is also revealed from the record that these excel sheet were neither prepared by the assessee nor was found from the control and possession of the assessee. This said Excel Sheet was said to be maintained by a 3rd person and was also found from the possession of a 3rd person. In view of this, no adverse inference can be drawn against the assessee on the basis of said Excel Sheet. It is further submitted that there is discrepancy / disconnect in the figure appearing in the tables at Page 36 and 37 of the order of the ld. AO as pointed by the ld. AR of the assessee. The record also shows that the entire exercise of ld. AO is based on mere presumptions and assumption without making any efforts to analyze that record and place on record the corroborative evidence to support the view taken by the ld. AO. Thus, when the loose sheet is relied upon without any specific evidence suggesting the contention raised the addition does not survive.

Record further reveals that there is no satisfaction of the ld. AO that all the requisite steps were taken by him to ensure that the data output of the PEN Drives/Computer records, seized during the search on Gokul Kripa Group were analysed on "as is" basis and there is no risk of it being tempered by anyone. The request of the assessee to cross examine the person who made statement were asked but were also not provided therefore, this action also violates the principles of natural justice as held by the Apex Court in the case of Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC) wherein the court held that ""...not allowing the assessee to cross-examine the

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 33 :: witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected".

When the assessee taken up all these issues before the ld. CIT(A) who did not deal with the factual inconsistencies brought to his notice as above. He simply rejected the submissions mentioning that what details and in what manner are kept by the buyer is dependent on the trust he has on the seller. On this of corroborative evidence the ld. CIT(A) rejected that plea. Even the plea of the assessee that the material was in the nature of dumb document which would not possess any stand- alone evidentiary value since it did not contain the complete particulars of the relevant transactions and the persons involved in the said transactions. The addition as made on the basis of such a dumb document would not be sustainable as the same is non-speaking document, without any corroborative material / evidence or without a finding that such document had materialized into transactions giving rise to income of the Assessee. Thus, to establish that the impugned receipt is of the assessee is on the revenue and the same cannot be done reverse by the assessee. On this issue we get support from the decision of the Hon'ble Supreme Court in the case of K.P. Varghese v. ITO [1981] 7 Taxman 13 / 131 ITR 597 (SC) wherein the Apex Court held that the onus of establishing that the conditions of taxability were fulfilled would always be on the revenue and throwing the burden of showing that there was no under-statement of consideration on the assessee would be to cast an almost impossible burden upon him to establish the negative, namely, that he did not receive any consideration beyond what has been declared by him. Thus, the burden would be on revenue to adduce proper evidence to corroborate the contents of the seized material for the purpose of establishing that the assessee was, in fact, in receipt of the payments as noted in the seized material. Discharge of reverse burden is not expected from the assessee. When question raised that whether such entries found in the material seized from a third-party could be used to draw adverse inference against the assessee without there being anything more in record in corroboration of the same, the revenue merely relied upon the finding recorded in the order of the assessment and material whatsoever found at the time of third party search were placed on record. Thus, when the material relied upon were not seized from the premises of the assessee nor the same was found in the handwriting of the assessee the same would not constitute adequate evidence to draw any adverse inference against the assessee in the absence of any corroborative evidence as held by Hon'ble Delhi High Court in the case of CIT v. Sant Lal [2020] 118 taxmann.com 432 / 273 Taxman 551 / 423 ITR 1 (Delhi) ). Even the Hon'ble Bombay High Court

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 34 :: in the case of Lavanya Land (P) Ltd.(supra), taken a view that that where entire decision is based on huge amounts revealed from seized documents but not supported by any evidence of actual cash passing hands, no addition can be made. Thus, the prime question ultimately remained unanswered that whether the payments noted in the seized material had actually materialized and transfer of money had actually taken place between the concerned parties without any corroborative evidence placed on record and that when the assessee has already executed the sell deed and thereafter the receipt of the money of the property sold cannot be believed without any express evidence placed on record and therefore, we in the absence of evidence merely based on that stand alone excel sheet unable to support the view of the revenue that the assessee Appellant has received any cash on sale of land to Gokul Kripa Group and that after the sale deed is executed. Thus, considering the detailed submission made by the assessee supported by the arguments on facts and judicial precedent cited and not repeating the same we hold that the addition made in the hands of the assessee cannot be sustained…”

“71. Briefly the facts are, during the course of survey conducted in the case of M/s. Matrix India Entertainment P. Ltd. on 24.11.2011 a loose

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 35 :: paper was found revealing cash transactions of Rs. 75,00,000 and cheque transactions of Rs. 50,00,000 involving the assessee. When the aforesaid fact was confronted to one of the Directors of M/s. Matrix India Entertainment P. Ltd. he submitted that on some occasions they receive offers from companies wanting to make part payments in cash. He further submitted, though, they make a note of the conversation but they do not accept cash offers. He also submitted that the scribbling in the loose paper is one such offer but it cannot be said that such offer was accepted. The AO found that apart from the loose paper the Blackberry mobile backup of Ms. Sandhya Ramachandran also revealed SMS conversation depicting the aforesaid transactions. He, therefore, held that receipt of cash by the assessee cannot be ruled out. Accordingly, he called upon the assessee to submit her reply. As alleged by the AO, the assessee failed to respond to the query raised. Therefore a statement was recorded from Ms. Sandhya Ramachandran wherein she categorically stated of not being aware of any cash transaction involving the assessee. As far as the performance at Dhaka event is concerned, she stated that the said event did not materialise. The AO observed, though, Ms. Sandhya Ramachandran denied that Dhaka performance did not materialise, it did happen in February, 2011. Therefore, he held that the facts stated in the incriminating material found during the survey are correlated. Accordingly, he added back 80% of the cash payments mentioned in the loose paper amounting to Rs. 60,00,000 to the income of the assessee. The assessee challenged the addition before the CIT(A).

…

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 36 :: however, she has received her fees fully in cheque and has offered it as income in the relevant assessment year. As no material has been brought before us by the Revenue to controvert the aforesaid facts we are inclined to affirm the order of the CIT(A) on this issue by dismissing the ground raised by the Revenue.” 28. On overall conspectus of facts of the case in hand, it appears that, even the AO of the searched person was ordinarily unable to make out any incriminating sense from these notings, and had assumed the same to denote payments made to the assessee, by relying on the admission of Mr. K S Gopalakrishnan recorded at the time of search. It has been brought to our notice that Mr. K S Gopalakrishnan had since retracted his statement by filing an affidavit before the Hon’ble Madras High Court dated 16.11.2022. The Ld. AR showed us that, Mr. K S Gopalakrishnan in his original statement had admitted to unaccounted transactions of SKMAFF for period going back to 10 years, whereas the undisputed fact was that he wasn’t even employed with SKMAFF at that material time. Considering this material discrepancy, the retraction furnished by Mr. K S Gopalakrishnan stating that his statement was obtained under duress, was taken on record by the Hon’ble Madras High Court. It is observed from the retraction affidavit that, Mr. K S Gopalakrishnan had also categorically denied that there is no such cash purchase made by SKMAFF from the appellant and he also denied that the excel sheet entries were made by him. The assessee is found to have brought this fact to the notice of the AO vide letter dated 18.08.2023 and had accordingly

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 37 :: claimed that his statement was no longer reliable. We observe that, in- spite of the retraction being furnished by the assessee, the AO did not bother to himself examine Mr. K S Gopalakrishnan or afford the assessee the opportunity to cross examine, which it had specifically requested. It was brought to our notice that, the AO had fixed the date for cross- examination on 18.08.2023, which the assessee had attended, but the same was denied by the AO citing ‘technical reasons’. Having regard to the foregoing, we thus find force in the Ld. AR’s argument that the retracted statement of Mr. K S Gopalakrishnan lacked credence. Also, by not providing the opportunity of cross-examination, in our considered view, the impugned addition stood vitiated in law. For this finding of ours, we rely on the ratio of the decision of the Hon'ble Supreme Court in Andaman Timber Industries v. CCE (62 taxmann.com 3). In the decided case, the addition was made against the assessee (Andaman Timber Industries) by the AO by relying on the statement of two witnesses namely Sri Sreeram Tekriwal and Sri Laxmidas Panchmati. Even though the assessee pleaded for cross-examination cross examination of these two witnesses, the AO did not give opportunity to the assessee and when the action of the AO was confirmed by the appellate authorities, the Hon'ble Supreme Court examined the omission on the part of the AO not providing opportunity to assessee to cross- examine of two witnesses and held that it was a serious flaw and since

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 38 :: the statements of those witnesses were made the basis of the impugned order this omission on the part of AO makes the order nullity inasmuch as it amounted to violation of principles of natural justice.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 39 :: Considering the smallness of the disallowance the Ld.AR did not press this ground. Hence, this ground is dismissed.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 40 :: 2015) and Hon'ble Karnataka High Court in the case of PCCIT v. JJ Glastronics P Ltd (139 taxmann.com 375), wherein also it was held that disallowance u/s.14A in terms of Rule 8D shall not be extended to the provision of section 115JB of the Act. Following the decisions (supra), we direct that no adjustment u/s 14A r.w. Rule 8D is to be made u/s.115JB of the Act and the AO is accordingly, directed to delete this addition made to the book profit. Hence, we allow the issue in favour of the assessee.

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 41 :: which according to him, was not eligible to higher rate of depreciation. The AO thus re-computed the depreciation allowable on these assets at 15% instead of 40%, as claimed by the assessee, and disallowed excess depreciation of Rs.31,91,974/-. The Ld. DRP confirmed the action of the AO. Now, the assessee is in appeal before us.

“Heard both the parties. We find that the impugned issue is no longer res integra. It is observed that this Tribunal in assessee's own case for AY 2010-11 reported in 140 taxmann.com 53 has held that, the various components which forms part of cogeneration plant being integral to the cogeneration system is entitled for higher rate of depreciation. Upholding the order of Ld. CIT(A), the Tribunal noted that, the individual components could not be used on standalone basis, except when it forms part of the whole cogeneration system and therefore following the decision of coordinate bench of the Vishakapatnam Bench of this Tribunal in the case of Sri Sarvaraya Sugars Ltd. Vs JCIT (ITA No. 577/Viz/2014) allowed the higher rate of depreciation of 80% (now 40%, in the relevant AY 2019-20) as claimed by the assessee, by observing as under:- "8.3 The Ld. CIT(A), after considering the manual/literature of all the equipment came to a conclusion that the assets were part and parcel of power generation unit. Each item would not have any function by itself except when it forms part of the whole system. The relevant findings with respect to each of the asset was as under: --

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 42 :: a. Chimney - In a cogeneration plant, the gases produced are first cooled and then excavated through the chimney. This chimney forms an inseparable accessory of a cogeneration plant and hence it is eligible for 80% depreciation. b. Bagasse handling system Bagasse, being the combustible product is used in the cogeneration plant. A bagasse handling system carries the bagasse from the bagasse yard to the furnace by using conveyor belts. It is also a part of the cogeneration system as the core raw material (bagasse) used for the generation of power is carried through this system. Without this system cogeneration system will not operate. Hence this is attributable to 80% depreciation. c. Distribution control systems; Distributed control system is a computerized control system used to control the production line in the industry. In a sugar - Co generation plant, the controller elements are not centrally located. DCS helps in routing the control consistently. It is a system used to automate the energy flows within the factories and hence, it is evident that it is falling under the heading "Instrumentation and Monitoring System for monitoring energy flows" in the category "Automatic Electrical Load Monitoring System". The same is eligible for claiming 80% Depreciation. d. Air compressor The air compressor is a device that converts power into kinetic energy, by compressing and pressurizing the air. This pressurized air is used to rotate the turbine and in turn power is produced. This is an integral part of power generation plant and hence falls under the 80% depreciation slab. e. Ash handling systems: The ash produced from combustion of coal and bagasse, is to be disposed off rightly. In order to do that the ash handling system is used. This transports the ash from the furnace to the ash yards. This is one of the strenuous tasks in a cogeneration plant and since this does hand in hand with the power generation, 80% depreciation is claimed. Finally, it was held that the assets mentioned above form part of co- generation plant for which depreciation @ 80% is admissible. Accordingly, Ld. AO was directed to grant depreciation of Rs. 423.29 Lacs. Aggrieved, the revenue is in further appeal before us. 9. We find that this issue is covered in assessee's favor by the decision of Vishakhapatnam Tribunal in Sri Sarvaraya Sugars Ltd. v. Jt. CIT [IT Appeal No. 577 (Viz.) of 2014, dated 20-12-2017] wherein it was held that various components which form integral part of cogeneration plant

ITA No. 2305/Chny/2024 (AY 2020-21) M/s. Bannari Amman Sugars Ltd. :: 43 :: are to be allowed higher rate of depreciation. We find that the facts are similar in the present case whereas the undisputed findings are that the various components form part of integral part of cogeneration plant. These components could not be used on standalone basis but part and parcel of power generation unit. Each item would not have any function by itself except when it forms part of the whole system. Therefore, no infirmity could be found in the impugned order, on this issue. The grounds thus raised stands dismissed." 3.2 Following the above decision (supra), we see no reason to interfere with the order of the Ld. CIT(A) and accordingly dismiss these grounds of the Revenue.” 34. Following the above, we direct the AO to delete the disallowance made by way of excess claim of depreciation of Rs.31,91,974/- and thus, the assessee succeeds on this issue. These grounds are therefore allowed.

Order pronounced on the 25th day of August, 2026, in Chennai.

Sd/- Sd/- (प�ावती. एस) (एबी टी. वक�) (PADMAVATHY. S) (ABY T. VARKEY) लेखा सद�/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai, �दनांक/Dated: 25th August, 2026. YS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF YASHVI Digitally signed by YASHVIR SINGH R SINGH Date: 2026.08.28 16:57:04 -07'00'