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Income Tax Appellate Tribunal, A BENCH, CHENNAI
Before: SHRI S.S. VISWANETHRA RAVI, HONBLE & SHRI S. R. RAGHUNATHA, HONBLE
आयकर अपीलीय अिधकरण, ‘ए’ �यायपीठ, चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI �ी एस एस िव�ने� रिव, �याियक सद�य एवं �ी एस. आर. रघुनाथा, लेखा सद�य के सम� BEFORE SHRI S.S. VISWANETHRA RAVI, HON’BLE JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.: 2259, 2260 & 2261/Chny/2024 िनधा�रण वष� / Assessment Years: 2014-15, 2015-16 & 2016-17 Valikaramuthu Subramanian Assistant Commissioner of Natarajan, v. Income-tax, No. 104-B, 3rd Street, Central Circle -3(2), Mangalapuram, Medical College Chennai. Road, VOC Nagar, Thanjavur – 613 007. [PAN: ACYPN-0616-R] (अपीलाथ�/Appellant) (��यथ�/Respondent) : Shri. Y. Sridhar, FCA अपीलाथ� क� ओर से/Appellant by ��यथ� क� ओर से/Respondent by : Shri. Nilay Baran Som, CIT सुनवाई की तारीख/Date of Hearing : 12.12.2024 घोषणा की तारीख/Date of Pronouncement : 18.02.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, AM:
These three appeals by the assessee are filed against the separate orders of the Commissioner of Income Tax (Appeals), Chennai-20, for the assessment years 2014-15 to 2016-17 vide order dated 29.06.2024. Since, facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are being disposed off, by this consolidated order. Ld. AR requested us to take up the appeal for AY 2014-15 as a lead case, thus we proceed to take 2259 to 2261/Chny/2024 up the case. First, we shall take up for AY 2014-15.
The assessee has raised the following grounds of appeal:
1. The order of the Ld. PCIT is contrary to law, facts and opposed to the principles of natural justice and fair procedure.
2. The ld. PCIT has failed to appreciate the fact that as per Explanation 2 (a) to Section 263, "...an order passed by the A0 shall be deemed to be erroneous, if the order is passed without making inquiries or verification which should have been made". In the instant case, a thorough scrutiny has been carried out by the Ld.AO, being a search assessment, after giving enough opportunities to the appellant to appear and explain the case during the assessment proceedings. Hence, invoking Section 263 is not justified.
3. The Ld. PCIT has erred in passing the order without considering the detailed submissions filed by the appellant in response to notice u/s 142(1) dated 09/07/2021.
4. Where AO has carried out adequate enquiries in original assessment proceedings after considering the seized materials unearthed from the premises of M/s.Pechis Castle LLP and accepted the contentions of the assessee by accepting the additional income, and passed a well-reasoned order, revision proceedings u/s.263 merely based on audit objection on similar subject, could not be invoked.
5. If two views are legally possible and the AO adopts one of the plausible views assessment orders can't be said to be erroneous for the CIT to invoke jurisdiction u/s.263 of the IT Act.
6. If the AO has not provided detailed reasons with respect to each and every item of transaction in the order, that by itself would not reflect a non-application of mind by the AO.
7. The Ld. PCIT has erred in passing the order without considering the detailed Submissions filed by the appeal ant in response to notice u/s 263 along with Supporting documents filed at the stage of investigation itself and deposed in the Sworn statements in the search proceedings with respect to the issues that are presently considered in the notice u/s 263.
8. Even assuming without accepting that there is inadequate enquiry, still that Would not confer the power of revision u/s 263 of the act on the Commissioner.
2259 to 2261/Chny/2024
For the above grounds and such other grounds that may be adduced at the time of hearing, the appellant prays that the appeal be allowed by quashing the order of the ld. PCIT and to meet justice.
The appellant craves leave to amend alter or delete any of the above grounds of appeal.” The only issue arises from the above grounds of assessee is an addition made by AO in the order u/s.153C r.w.s. 143(3) of the Act on account of alleged undisclosed interest income based on the noting of ‘Madras Interest’ found recorded in the materials seized from M/s.Kals Group of Concerns and statement made by one Mr.S.Nadesan. Since, the facts are identical in all the three appeals, we will take up the appeal of the assessee for the Asst. year 2014-15 as a lead case and adjudicate thereon;
3. Briefly stated facts are that the assessee is an individual engaged in the business of buying and selling of bottles in the name and style of M/s. Devi Enterprises. For the A.Y. 2014-15, the assessee filed his return of income on 20/12/2014 declaring total income of Rs.17,02,090/-. Subsequently, the assessment order u/s.143(3) of the Act was passed on 22.12.2016 by making an addition of Rs.1,95,595/- towards difference in sundry creditors and assessed a total income of 2259 to 2261/Chny/2024 Rs.18,97,685/-. The assessee is the founder of Devi Bottles group of concern functioning from #169A, Sundaram Nagar, Medical college road, Tanjavur – 613 004. The assessee was searched u/s.132 of the Act, on 06.08.2019 in connection with the search in the case SNJ Distillery Pvt Ltd group of cases. During the course of search, from the evidence found seized, it was seen that they were supplying empty old bottles mainly to Kals Distilleries pvt. Ltd. group of cases which was also searched u/s.132 of the Act on 09.08.2019 and resorting to issue of inflated purchase invoices and thereby earning commission income which was unaccounted. During the course of search in the residential premises of Shri S.Nadesan, JMD of M/s.Kals group, an Apple Mac Laptop seized vide ANN/MS/SM/ED/S, Excel sheets – titled, spent new.xlxs, spent new-2.xlsx etc. were found containing details of cash sales of spent malt to various vendors out of which cash sales of spent malt made to M/s.NTN Agro Products, one of the concerns run by Shri.V.Muthukumar, who is the brother in law of Shri V.S.Natarajan of M/s.Devi Group during the F.Ys. from 2016- 17 to 2017-18 were found.
2259 to 2261/Chny/2024 4. Consequent to search, notice u/s.153C was issued on 14.02.2021 in case of assessee. In response to the same the assessee has filed Return of Income on 15.07.2021 declaring a total income of Rs.57,47,685/-. During the course of search proceedings conducted in the residential premise of Shri S.Rajasekaran at Old No.16, New No.21, Annavasal Salai, Nedungadu, Karaikal District, Loose sheets and electronic devises were found from the front office of the residential premise and same were seized vide ANN/SRN/SR/LS/S dated 10.08.2019 and ANN/DSG/VSN/ED/S dated 22.09.2019 which contain the details of interest payments made in cash under the heads ‘Madras Interest’ amounting to Rs.1,50,00,000/- and ‘TNJ Mr.Nadarajan Interest’ amounting to Rs.1,21,25,000/-. When the appellant was questioned about the same, in the sworn statement u/s.131 of the Act, dated 25.01.2020, in his answer to question No.12 therein, the appellant stated that the interest income received through banking channels have been admitted in the ITRs for the respective financial years and the appellant also agreed that portion of interest was received in cash. Further, the appellant stated that interest mentioned under the head ‘TNJ Mr.Nadarajan Interest’ amounting to Rs.1,21,25,000/- was 2259 to 2261/Chny/2024 received by him and the interest amounts mentioned under the head “Madras Interest’ amounting to Rs.1,50,00,000/- in the seized materials does not belong to him.
5. On perusal of the documents and submissions of the assessee the AO passed an order by holding as under: 5.4 The FYs wise of interest under ‘TN Mr. Natarajan interest’ is as under: FY Undisclosed interest income (Rs.) 2013-14 38,50,000/- 2014-15 34,75,000/- 2015-16 23,00,000/- 2016-17 15,00,000/- 2017-18 10,00,000/- Total 1,21,25,000/- The FYs wise of interest under ‘Madras Interest’ is as under: FY Interest paid in cash (Rs.) 2013-14 66,50,000/- 2014-15 72,25,000/- 2015-16 11,25,000/- Total 1,50,00,000/- 5.4.1 However, the assessee has not accepted the interest receipts in cash under the head ‘Madras Interest’ amounting to Rs.1,50,00,000/- as above. 5.5 Since the appellant has not provided the details of such actual parties/persons whom the interest income relates, the Assessing Officer added interest income for the AY 2015-16 amounting to Rs.72,25,000/- 5.6 Assessment u/s. 153C r.w.s. 143(3) completed as under. Returned Income u/s. 153C Rs.1,50,02,854 Addition made: i) Interest under Madras interest Rs.72,25,000 ii) Interest disallowed in the computation of business income Rs.28,77,640 Assessed income Rs.2,51,05,494/-“ 2259 to 2261/Chny/2024 Aggrieved by the order of the AO u/s.153C r.w.s. 143(3) dated 29.09.2021, the assessee preferred an appeal before the ld.CIT(A), Chennai – 20.
The Assessee filed a detailed submission before the ld.CIT(A) and prayed for deleting the impugned additions. However, the ld.CIT(A) after considering the written submissions of the assessee was not convinced and pleased to confirm the additions made by the AO by passing an order dated 29.06.2024 by holding as under: “7.2.3 During the course of assessment proceedings, the AO asked appellant to furnish details of parties from whom he has arranged loans to Kals Group and collected interest on their behalf. Since appellant failed to furnish any details, the AO has added interest income pertaining to the year grouped under the head 'Madras Interest' of Rs.72,25,000/- in the hands of appellant. 7.2.4 During appeal proceedings, Submissions made appellant by against above addition can be summarized as under. 1. The AO made addition based on incorrect interpretation of statement given by appellant. 2. Statement of Shri Nadesan makes it clear that the interest payment does not only refer to interest payment on loans taken at Chennai but also interest paid on outstanding dues to vendors. 3. Shri Nadesan never stated that appellant has arranged loans, he only stated that interest payments are made through appellant. 4. The AO should have collected details of loans taken at Chennai wrt which interest is paid. Similarly, AO should have collected details of vendors to whom interest is paid 2259 to 2261/Chny/2024 on outstanding dues from sri Nadesan being AO of him too.
Further narration in loose sheet 23 which pertain to head 'TNJ Natarajan Interest' and loose sheet 22 pertaining to head ' Madras interest' shows that since interest payments in loose sheet 23 pertaining to appellant his name is clearly mentioned there. In loose sheet 22, name appellant is not mentioned since it does not pertain to appellant. It is generally named as 'Madras interest'. 7.2.5 I have examined contentions raised by appellant in the background of facts of case. It is noticed that entire addition is based on statement of Sri Nadesan wrt loose sheet no 23 containing details of payment of interest.
7.2.6 It is noticed that Sri Nadesan was asked to explain contents of both loose sheet 22 and 23 together by way of single question while recording his sworn statement. It is noticed that While Explaining contents of loose sheet no 23 pertaining to 'TNJ Mr.Nadarajan Interest', Sri Nadesan stated that it pertains to interest payments made to Sri Natarajan wrt loans taken through banking channel. 7.2.7 In case of loose sheet 22 named 'Madras interest', he stated that it contains interest paid at Chennai wrt loans taken through banking channel. However·, he has not specified name of 2259 to 2261/Chny/2024 person from whom such loans are taken through banking channel wrt loose sheet 22. The very fact that he omitted to specify name of person from whom loans are taken indicates that he is referring to Sri Natarajan. Had it been different person, he would have specified name/s or person/s. Since he just specifically taken name of Sri Natarajan in preceding para of statement while explaining contents of loose sheet 23(TNJ Mr.Nadarajan Interest), he has not again mentioned Sri Natarajan's name while explaining contents of loose sheet 22 (Madras Interest). It can be concluded that loose sheet 23 represents interest paid to Sri Natarajan at Tanjore on loans taken from him and loose sheet 22 represents interest paid to Sri Natarajan at Chennai on loans taken from him through banking channel. 7.2.8 Sr Nadesan stated that loose sheet 22 (Madras Interest) also contains details of interest paid on account of outstanding dues. He stated that such interest payments are usually made through Sri Natarajan. The Fact that appellant makes payments to third parties (Customers/suppliers of Kais group) on instructions of Sri Nadesan out of cash returnable to Kals Group is not denied (Modus operandi of Devi Bottles Group i.e. over invoicing of sales of bottles to Kals Group, Returning of Cash attributable to over invoiced sale price out of bank payments received from Kais Group towards purchase of bottles has been accepted by appellant). But loose sheet 22 (Madras Interest') contains details of persons who handed over interest amount at Madras. If loose sheet contains details of interest paid through Sri Natarajan, his name would have been mentioned. Relevant loose sheet is reproduced as under: 7.2.9 But loose sheet 22 mentioned names of different persons who made interest payment at Madras on behalf of Sri Nadesan like Balu, SR, SV, Moorthy etc. Name of appellant is conspicuously absent from above loose sheet. Since name of appellant is not appearing, it can't be concluded that above interest payments are made by appellant on behalf of Sri Nadesan. But since interest payment is wrt loans received by Sri Nadesan through banking channel which as per discussion made above are concluded to have been received from Sri Natarajan, it can be inferred that it is appellant that has received interest amount of Rs.72,25,000/- for assessment year. The fact that appellant failed to furnish details parties to whom abo e interest payments are made 6n behalf of Kals Group in spite of arguing the sales shows that he received the interest mentioned in seized material under the head 'Madras Interest'. In fact, if part of above amounts are paid by appellant 2259 to 2261/Chny/2024 to third parties or behalf of Kals Group as stated by him, first of all in loose sheet it would have been mentioned as 'payment through Natarajan' and secondly there should not be any problem for appellant in providing such details because he would keep track of amounts paid on behalf of Sri Nadesan and to that extent cash need not be returned by him. But Appellant failed to furnish any details, not provided any explanation for such failure. Therefore, it can be concluded basing on statement of Sri Nadesan who stated that Madras Interest represents interest paid on loans received through banking channel at Chennai and in view of fact that the appellant has not denied advancing loans to Sri Nadesan through banking channel, receipts of interest in cash, it is concluded that the AO has rightly held that interest mentioned under the head 'Madras Interest' in seized material represents unaccounted interest received by appellant during the year. Consequently, grounds relating to the issues are dismissed.” Aggrieved, the assessee preferred an appeal before us.
The Ld.AR for the assessee assailing the action of the ld.CIT(A) stated the AO and that of ld.CIT(A) have erred in understanding the facts and the sworn in statements made before them and hence passed the impugned order by making an addition of interest. In support of the issue the Ld.AR filed a consolidated paper book consisting of 189 pages for the A.Ys 2014-15, 2015-16 and 2016-17 detailed below: Sl. Particulars Page No. reference 1 Notice u/s 153C dated 14.02.2021 for AY 2014-15 1 1 2 Acknowledgement for Return of Income filed u/s 153C 2 2 dated 15.07.2021 for AY 2014-15 3 Computation of Statement of Total Income for the AY 3 3 2014-1 5 4 Submission to 142(1) dated 09.09.2021 4 12 5 Assessment order u/s 143(3) r.w.s 153C of the Act 13 18 dated 29.09.2021 6 Form 35 filed along with Grounds of appeal
and 19 30 2259 to 2261/Chny/2024 statement of facts
7. Common written submission dated 18.06.2024 for AYs 31 47 2014-15 / 2015-16 and 2016-17 filed before CIT(A) – 20.
8. Relevant extracts of Q.No.13 and answer of the sworn 48 51 statement recorded u/s 132(4) from S. Nadesan on 21.09.2019 along with relevant copy of Seized material
9. Relevant extracts of Q.No.12 and answer of the sworn 52 52 statement recorded us 131 of the Act from V S Natarajan on 25.01.2020
10. Extract of submission made before the DDIT(Inv), Unit 53 53 2(2), Chennai dated 31.01.2020
11. Order u/s 250 of the Income Tax Act, 1961 dated 54 72 29.06.2024 12. Form 36 filed along with grounds of appeal and 73 78 statement of facts 13. Notice u/s 153C dated 14.02.202 1 for AY 2015-16 79 79
14. Acknowledgement for Return of Income filed u/s 153C 80 80 dated 15.07.2021 for AY 2015-1 6 15. Computation of Statement of Total Income for the AY 81 81 2015-16 16. Assessment order u/s 143(3) r.w.s 153C of the Act 82 91 dated 29.09.2021 17. Form 35 filed along with Grounds of appeal and 92 103 statement of facts
18. Order u/s 250 of the Income Tax Act, 1961 dated 104 122 29.06.2024 19. Form 36 filed along with grounds of appeal and 123 128 statement of facts 20. Notice u/s 153C dated 14.02.2021 for the AY 2016-17 129 129
21. Acknowledgement for Return of Income filed u/s 153C 130 130 dated 15.07.2021 for the AY 2016-17
22. Computation of Statement of Total Income for the AY 131 131 2016-17
23. Assessment order u/s 143(3) r.w.s 153C of the Act 132 142 dated 29.09.2021
24. Acknowledgement of Form 35 filed along with Grounds 143 157 of appeal and statement of facts
25. Order u/s 250 of the Income Tax Act,1961 dated 158 183 29.06.2024
26. Form 36 filed along with grounds of appeal and 184 189 statement of facts 7.1 The ld.AR stated that the major finding of the search was that your assessee group was involved in invoicing the old and new bottles with agreed additional rates to M/s. Kals Group of 2259 to 2261/Chny/2024 Companies. After receipt of sale consideration through banking channel from them, the assessee group paid cash to M/s.Kals group for the additional rates by withdrawing cash from bank and after adjusting its commission. The said fact has been accepted by the assessee during the course of search. Accordingly, the assessee group admitted the unaccounted commission income earned in the Return of income filed u/s.153C of the Act, without any deviation from the quantification and deposition at time of search. As per the search findings, the cash are handed over to Kals group directly or to persons as per their instruction.
7.2 The ld.AR further stated that simultaneously an independent search u/s.132 was carried on by the department in the case of M/s.Kals group companies on 09.08.2019, to whom the assessee group supplies empty liquor bottles. During the search in the case of M/s.Kals Group of Companies, certain excel sheets containing details of Interest paid on loans captured under the head "TNJ Mr Nadarajan Interest" and "Madras Interest" and "Pooja expenses" etc., were found and seized. (Pg. No. 49 and 50 of paper book). Deposition of Shri S.Nadessan, JMD of Kals group in the statement recorded 2259 to 2261/Chny/2024 u/s.132(4) on 21.09.2019 about the contents of the excel sheets found as above in their premises: "Q.13. I am showing you the loose sheet numbers 18-23 seized vide ANN/SRN/SR/S/LS/S dated 09.08.2019 from your office which is situated in a front room at the residence of Shri S Rajasekaran at Old No.16, New No.21, Annavasal Salai, Nedungadu, Karaikal district during the course of search proceedings. Please go through the loose sheets and explain the following contents. a) Oduthurai place registration amount of Rs.12,77,650/- mentioned as 'cash' & oduthurai place registration of Rs.3,50,000/- under the head registration expenses mentioned in page no. 19 b) ‘Madras Interest' mentioned in page number 22 c) Contents under the head ‘TNJ Mr.Natarajan Interest' in page 23.
Ans: Sir, I have gone through the above mentioned loose sheets. “………….. The contents under the head ‘TNJ Mr. Natarjan Interest' in page number 23 refers to the interest payments made to Shri V S Natarajan of Thanjavur for the loans taken from V S Natarajan through banking channels, which are same as mentioned in loose sheet numbers 8, 9 and 17 explained in earlier questions. The contents under the head ‘Madras Interest' in page number 22 refers to the interest payments made in Chennai to the loans taken through banking channels or pending outstanding due payment to the vendors. Generally, I have been paid the interest payment through Shri V.S.Natarajan of M/s.Devi Bottle group. However, the complete details will be submitted within a week time.” 7.3 The ld.AR further stated that from the above, it can be seen that he had clearly stated that "TNJ Mr.Nadarajan Interest" relates to Interest paid to the assessee and the head "Madras Interest" is not to the assessee. Deposition of Shri V.S.Natarajan in the statement recorded u/s.131 on 25.01.2020 2259 to 2261/Chny/2024 about the contents of the excel sheets found in the search of Kals Group: (Pg. No 52 of Paper Book).
”Q.No.12: I am showing you the loose sheets seized from the residential premise of Old No.16, New No.21, Annavasal Salai, Nedungadu, Karaikal district vide ANN/SRN/SR/LS/S dated 10.08.2019 and the electronic devices seized vide ANN/DSG/VSN/ED/S dated 22.09.2019 600004 in the case of M/s.Kals Distilleries Pvt Ltd, M/s.Kals Breweries Pvt Ltd, M/s.Kals Beverages Pvt Ltd, Shri S.Nadesan and Shri S.Vasudevan, which contains interest payments made in cash to you. When confronted Shri S.Nadessan in his sworn statement u/s.132(4) of the Income- tax Act, 1961 dated 21.09.2019 stated that a portion of interest was paid to Natarajan in cash and the part was paid through ‘RTGS’ for the loans taken from you through banking channels. The cash portion of interest paid in the name of “TNJ Interest’ amounting to Rs.1,21,25,000/- for FYs 2013-14 to 2017-18 and in the name of ‘Madras Interest’ amounting to Rs.1,50,00,000/- for the FYs 2013-14 to 2015-16. Please go through the relevant loose sheets and extracts of the electronic devices and please explain whether you have admitted the interest payments received in cash from the directors of M/s.Kals group for the loans given by you in your books of accounts? Ans: Sir, I have gone through the loose sheets and extracts of the electronic devices shown to me. Sir, I state that we have given loans to persons of Kals group through banking channel which are also reflected in our books of accounts. The interest income received through banking channel has already been offered in respective ITRs. We have also received portion of interest in cash which we will verify and offer to income. The interest paid and written as ‘Madras Interest’ in the seized materials shown to me does not belong to me.”
7.4 Subsequently, the assessee made a detailed submission dated 31.01.2020 by quantifying additional income based on the various findings of the search before the office of DDIT(Inv), Unit 2(2), in which he had agreed to offer additional interest income received on account of "TNJ Interest" (Pg. No. 53 of Paper Book).
2259 to 2261/Chny/2024 7.5 The assessee as per deposition on 25.01.2020, submission made on 31.01.2020, admitted additional interest income of Rs.38,50,000/-; Rs.34,75,000/- and Rs.23,00,000/- on account of TNJ Interest" in the Return of income filed for the A.Y.s 2014-15, 2015-16 and 2016-17 respectively. (Pg. No.3, 81, 131 in Paper Book). During the assessment, reply filed for notice u/s 142(1) by the assessee on the above issue of "TNJ Interest" and "Madras Interest" is available in page 7 and in page 10 of Paper Book respectively, which covers the amounts for all the A.Ys.
7.6 The ld.AR stated that when the clear facts are as above, the AO had just added the interest income on account of "Madras Interest" which does not belong to the assessee. This was without any corroborative material or evidence and against the facts. The AO ought to have obtained the details of loans received by M/s.Kals group from S.Nadesan and taxed the same in the hands of correct persons and not your appellant.
7.7 The ld.AR stated that in the order u/s.250, the ld.CIT(A) without any corroborative evidences upheld the addition by the 2259 to 2261/Chny/2024 AO only based on assumptions and hence the additions to be deleted. (Para 7.2.6, 7.2.7 and 7.2.9). Para Ref Page Gist of observations and assumptions in Order No in u/s.250 Paper book 7.2.6 70 It is noticed that while explaining contents of loose sheet no 23 pertaining to ‘TNJ Mr.Nadarajan Interest’, Shri Nadesan stated that it pertains to interest payments made to Shri Natarjan with respect to loans taken through banking channel. 7.2.7 70 In the loose sheet 22 named “Madras Interest”, he stated that it contains interest paid at Chennai w.r.t. loans taken through banking channel. However, he has not specified name of person from whom such loans are taken through banking channel wrt loose sheet 22. The very fact that he omitted to specify name of person from whom loans are taken indicates that he is referring to Shri Natarajan. Had it been different person, he would have specified name/s or person/s. 7.2.9 71 But loose sheet 22 mentioned names of different persons who made interest payment at Madras on behalf of Shri Nadesan like Balu, SR, SV, Moorthy, etc., Name of the appellant is conspicuously absent from the above loose sheet. Note: The above excel being seized materials was maintained with facts prior to search by Kals group and hence there is no question of any conspicuous omission.
7.8 In light of the above arguments, the Ld.AR prayed for setting aside the order of the ld.CIT(A) and delete the impugned additions.
Per contra, the Ld.DR relied on the order of the ld.CIT(A) and that of the AO and prayed for upholding the same by dismissing the appeal of the assessee.
2259 to 2261/Chny/2024 9. We have heard the rival contentions and gone through the orders of the lower authorities and perused the materials available on record. It is admitted fact that the assessee group during the search has accepted the fact that they had involved in invoicing the old and new bottles with agreed additional rates to M/s. Kals Group of Companies. After receipt of sale consideration through banking channel from them, the assessee group paid cash to M/s.Kals group for the additional rates by withdrawing cash from bank and after adjusting its commission. Accordingly, the assessee admitted the unaccounted commission income earned and declared in the Return of income filed u/s.153C of the Act, without any deviation from the quantification and deposition at time of search.
9.1 We note that during the search in the case of M/s.Kals Group of Companies, certain excel sheets containing details of Interest paid on loans captured under the head "TNJ Mr Nadarajan Interest" and "Madras Interest" and "Pooja expenses" etc., were found and seized. (Pg. No. 49 and 50 of paper book). At the time of deposition of Shri S.Nadessan, JMD of Kals group in the statement recorded u/s.132(4) on 21.09.2019 about the contents of the excel sheets with regard 2259 to 2261/Chny/2024 to the ‘Madras Interest’, (Paper book Page No.51) he has clearly stated that these amounts are paid towards loans taken through the banking channels and has been recorded in the books of accounts as detailed below: "Q.13. I am showing you the loose sheet numbers 18-23 seized vide ANN/SRN/SR/S/LS/S dated 09.08.2019 from your office which is situated in a front room at the residence of Shri S Rajasekaran at Old No.16, New No.21, Annavasal Salai, Nedungadu, Karaikal district during the course of search proceedings. Please go through the loose sheets and explain the following contents. a) Oduthurai place registration amount of Rs.12,77,650/- mentioned as 'cash' & oduthurai place registration of Rs.3,50,000/- under the head registration expenses mentioned in page no. 19 b) ‘Madras Interest' mentioned in page number 22 c) Contents under the head ‘TNJ Mr.Natarajan Interest' in page 23.
Ans: Sir, I have gone through the above mentioned loose sheets. “………….. The contents under the head ‘TNJ Mr. Natarjan Interest' in page number 23 refers to the interest payments made to Shri V S Natarajan of Thanjavur for the loans taken from V S Natarajan through banking channels, which are same as mentioned in loose sheet numbers 8, 9 and 17 explained in earlier questions. The contents under the head ‘Madras Interest' in page number 22 refers to the interest payments made in Chennai to the loans taken through banking channels or pending outstanding due payment to the vendors. Generally, I have been paid the interest payment through Shri V.S.Natarajan of M/s.Devi Bottle group. However, the complete details will be submitted within a week time.” 9.2 Further, we have observed that the assessee in his sworn statement made on 25.01.2020 recorded u/s.131 of the Act (Paper book Page No.52) has clearly stated that the actual interest received have already been recorded in the 2259 to 2261/Chny/2024 books and offered to tax in the respective assessment years and the “Madras Interest” referred in the seized material does not belong to him as detailed below: ”Q.No.12: I am showing you the loose sheets seized from the residential premise of Old No.16, New No.21, Annavasal Salai, Nedungadu, Karaikal district vide ANN/SRN/SR/LS/S dated 10.08.2019 and the electronic devices seized vide ANN/DSG/VSN/ED/S dated 22.09.2019 600004 in the case of M/s.Kals Distilleries Pvt Ltd, M/s.Kals Breweries Pvt Ltd, M/s.Kals Beverages Pvt Ltd, Shri S.Nadesan and Shri S.Vasudevan, which contains interest payments made in cash to you. When confronted Shri S.Nadessan in his sworn statement u/s.132(4) of the Income- tax Act, 1961 dated 21.09.2019 stated that a portion of interest was paid to Natarajan in cash and the part was paid through ‘RTGS’ for the loans taken from you through banking channels. The cash portion of interest paid in the name of “TNJ Interest’ amounting to Rs.1,21,25,000/- for FYs 2013-14 to 2017-18 and in the name of ‘Madras Interest’ amounting to Rs.1,50,00,000/- for the FYs 2013-14 to 2015-16. Please go through the relevant loose sheets and extracts of the electronic devices and please explain whether you have admitted the interest payments received in cash from the directors of M/s.Kals group for the loans given by you in your books of accounts? Ans: Sir, I have gone through the loose sheets and extracts of the electronic devices shown to me. Sir, I state that we have given loans to persons of Kals group through banking channel which are also reflected in our books of accounts. The interest income received through banking channel has already been offered in respective ITRs. We have also received portion of interest in cash which we will verify and offer to income. The interest paid and written as ‘Madras Interest’ in the seized materials shown to me does not belong to me.”
9.3 The assessee has also filed the details of interest income collected for the A.Y. 2014-15 – Rs.45,50,000/-; 2015-16 – Rs.34,25,000/- and 2016-17 – Rs.17,25,000/- from the Kals group and offered to tax for the respective assessment years on 31.01.2020 (Paper book Page No.53).
2259 to 2261/Chny/2024 Therefore, on perusal of these documents we are of the view that the “madras interest” mentioned in the loose sheet does not belong to the assessee. In this respect to bring into tax the same in the hands of the assessee, the AO has not found any other evidence / documents to prove that these payments made by the Kals group to the assessee, which has not been offered to tax.
9.4 Further, we also taken note of the returns filed by the assessee u/s.153C of the Act, wherein the assessee has already offered the amounts which has been accepted during the search operations.
9.5 In the present facts and circumstances of the case, we are of the considered view that the AO has erred in making the addition of ‘Madras interest’ in the hands of the assessee without any evidence and hence we are inclined set aside the order of the ld.CIT(A) and direct the AO to delete the additions made of Rs.66,50,000/- by allowing the grounds of appeal filed by the assessee.
2259 to 2261/Chny/2024 10. In the result the appeal of the assessee is allowed.
2260 & 2261/Chny/2024 for the A.Y.2015-16 & 2016-17:
Since, the facts and issues raised in A.Y.2015-16 and 2016-17 are identical to the facts and issues raised in A.Y.2014-15 vide Appeal the reasons given by us in AY 2014-15 in the above mentioned paras are equally applicable to the issues raised in these two appeals of the assessee. Thus, grounds raised in AYs 2015-16 & 2016-17 are allowed.
In the result, all the three appeals of the assessee for the A.Y. 2014-15, 2015-16 and 2016-17 are allowed.