DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, PATIALA, PATIALA vs. DSG PAPERS PVT. LTD., PATIALA

िनधा�रती की ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राज� की ओर से/ Revenue by : Shri Rohit Sharma, CIT DR (Virtual) सुनवाई की तारीख/Date of Hearing : 04/12/2024 उदघोषणा की तारीख/Date of Pronouncement : 27/02/2025 आदेश/Order PER BENCH:

These are the group of appeals, belonging to the subject assessee, in which, the department has filed the appeals pertaining to AY 2014-15 to 2020-21 and the cross-objections have been filed by the assessee for AY 2014- 15 to 2019-20 and whereas, for Assessment year 2020-21, the assessee has filed an appeal bearing ITA No. 788/Chd/2023. Since the common issues are involved, the same were heard together and with the consent of both the parties, the lead case was taken up bearing (D) and cross appeal by the assessee bearing ITA No. 788/Chd/2023.

“ 1. Whether on facts and circumstances of the case and in law, Ld. CIT(A) was justified in disregarding the statement of Sh. Rajesh Kumar recorded u/s 132(4) during search on 12.02.2020 in contravention to the judgment of Supreme Court in the case of Roshan Lal Sanchiti Vs. PCIT (2023) 150 taxmann.com 228 (SC) wherein SLP was dismissed against Rajasthan High Court judgment (2023] 150 taxmann.com 227 (Rajasthan) wherein it is held that retraction is required to be made as soon as possible or immediately after the statement of assessee was recorded? 2. Whether on facts and circumstances of the case and in law, Id. CIT(A) was justified in justifying retraction of statement of Sh. Rajesh Kumar recorded u/s 132(4) recorded during search, without assigning any evidence of forcible recording of statement and is contravention to the judgment of Hon'ble Supreme Court in the case of Bannalal Jat Constructions (P) Ltd. Vs. ACIT (2019) 106 taxmann.com 128 (SC) wherein it was held that burden lay on assesse to show that admission made by him in the statement at earlier time was wrong? 3. Whether on facts and circumstances of the case and in law, Ld. CITIA) was justified in disregarding the statement of Sh. Rajesh Kumar recorded of 132(4) during search where he accepted that he is working as accountant as well as purchase head of waste paper material with M/s DSG Paper P Lid, i.e. the assessee company and drawing salary of Rs. 70,000/- per month in cash since 01.04.2019, thereby disregarding the fact that he was key person in the assesse company? 4. Whether on facts and circumstances of the case and in law, Ld. CITIA) was justified in disregarding the statement of Sh. Rajesh Kumar recorded of 132(4) during search where he accepted that he received salary from the assessee company and accepted that he received salary partly in cash and party by cheque during the FY 2013-14 to FY 2015-16 and completely in cash during the FY 2016-17 to FY 2018-19, thereby disregarding the fact that he was key person in the assessee company? 5. Whether on facts and circumstances of the case and in law Ld. CIT(A) was justified in rejecting the AO's findings that the documents found and seized from the residence of Sh. Rajesh Kumar, belonged to assessee company and not to Sh. Rajesh Kumar ? 6. Whether, on facts and circumstances of the case and in law, Id. CITIA) was justified in disregarding the statement of Sh. Rajesh Kumar that he has no other source of income and accepting in its appeal order that Sh. Rajesh Kumar was running own independent business not connected to assessee company? 7. Whether on facts and circumstances of the case and in law Ld. CIT(A) was justified in disregarding the findings of the AO in the assessment order that Sh. Rajesh Kumar was employee of assessee company based on CCTV footage and letter dated 05.03.2018 found from residence of Sh. Rajesh Kumar written to Regional provident Fund Commissioner signed by Sh. Manoj Kumar, director of assessee company wherein Sh. Rajesh Kumar was designated as authorized signatory of assessee Company for PF and or ESI related matters.

8. Whether on facts and circumstances of the case and in law, Ld. CITIA) was justified in deleting the calculation of undisclosed sale of Rs. 7,96,53,033/- on the basis of evidence found during search of residence of Sh. Rajesh Kumar, employee of assessee company executing the warrant issued in the case of M/s DSG Paper Mills Pvt. Ltd.? 9. Whether on facts and circumstances of the case the Ld. CIT(A) was justified in restricting the addition on account of under invoicing of sales to 11,52,036/- on account of sale to one party only i.e. M/s Raj Paper Corporation as against Rs. 23,70,66,005/- made by AO by extrapolating the evidence of systematic under invoicing found during search and should have allowed relief on sales made to government entities? 10. Whether on facts and circumstances of the case the Ld. CIT(A) was justified in estimating average rate under invoicing @ Rs.5/- per Kg instead of average rate under invoicing @ Rs 7.465/- per Kg calculated by AO based on evidence found during search? 11. Whether on facts and circumstances of the case the Ld. CITA) was justified in deleting addition of Rs.3,61,77,800/- made by the AO on account of unexplained money u/s 69A of the Act based on documents seized from the residence of Sh. Rajesh Kumar? 12. Whether on facts and circumstances of the case the Ld. CIT(A) was justified in deleting addition of Rs.7,36,09 500/- made by the AO on account of unexplained expenditure u/s 69C of the Act based on documents seized from the residence of Sh. Rajesh Kumar? 13. Whether on facts and circumstances of the case the Ld. CIT(A) was justified in deleting protective addition of Rs. 31,18,740/- made by the AO on account of cash found from the premise of Sh. Rajesh Kumar when the appeal of Rajesh Kumar is still pending before CIT(A) on substantive addition made on same issue? 14. Whether on facts and circumstances of the case the Ld.CIT(A) was justified in allowing relief of 1% on G.P. rate and calculating, GP rate @ 24% without any basis as against GP rate @ 25% calculated by AO?

15. Whether on facts and circumstances of the case the Ld. CIT(A) was justified in deleting addition of Rs.7,06,96,207/- made by the AO on account of unexplained capital employed? 16. Whether on facts and circumstances of the case the Ld. CIT(A) was justified in deleting addition of Rs.1,96,56,449/- made by the AO on account of disallowance of deduction u/s 80IA of the Act? 17. Whether on facts and circumstances of the case the Ld. CIT(A) was justified in deleting addition of Rs.70,23,807/- made by the AO on account of income generated pertaining to the unaccounted sales for which cash expenditure of Rs.7.36.09,509/- has been incurred? 18. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal

at any time before or at the time of hearing of the appeal,”

3. The assessee has also filed a cross appeal for which the grounds of appeal heard as under:

“1.a) That the Ld.CIT(A) has erred in giving finding in para 6.2.14, at page 113 of the order that there is under invoicing in respect of quantity of papers supplied to ‘M/s Raj Papers Corporation’ during the year under consideration and applying the differential rate of Rs. 5 per kg.,and confirming the addition of Rs. 11,52,036/- in respect of goods supplied to M/s Raj Papers Corporation. b). That the Ld. CIT(A) while upholding the part addition of alleged under invoicing has failed to appreciate that there was no ‘under invoicing’ in respect of goods supplied to M/s Raj Paper Corporation and the said addition have been confirmed without considering the quality of material supplied to M/s Raj Paper Corporation as per regular books of accounts and, further, the CIT(A) has wrongly relied upon the third party evidence, which is against the facts and circumstances of the case. c). Notwithstanding the above said ground of appeal

, the Ld. CIT(A) has erred in not restricting the addition to the extent of evidence, if at all found of alleged ‘under invoicing’ to the tune of Rs. 157.9 tons only of the paper supplied to M/s. Raj Paper Corporation. d). Notwithstanding the above said ground of appeal, if at all, there is under invoicing, then the same should have been calculated @ Rs. 2.419 per kg instead of Rs. 5 per kg as adopted by the Ld. CIT(A) in respect of alleged under invoicing. e). That without prejudice to above, even if, certain addition on account of under invoicing was called for, then, only addition of net profit on such alleged under invoicing was called for, rather than entire addition of under invoicing.

2. That the Ld. CIT(A) has erred in upholding the action of the Assessing Officer in rejecting the books of accounts u/s 145(3) and, thereby, applying the gross profit rate of 24% on the sales declared by the assessee as per audited books of accounts and has erred in confirming the addition of Rs. 2,37,64,019/- against the addition of Rs. 3,93,98,243/- as made by the Assessing Officer as per para 6.4.2 of his order.

3. That the Ld. CIT(A) has failed to appreciate that the books of accounts of the assessee duly maintained, audited and supported by complete purchase and sale vouchers and, thus, the rejection of books of accounts is against the facts and circumstances of the case.

4.a). That the Ld. CIT(A) has erred in dismissing the ground of appeal of the assessee in a summary manner regarding the ‘mechanical approval’ accorded by the Range Head u/s 153D of the Income Tax Act. b). That the Ld. CIT(A) has failed to consider the various case laws on this issue as cited before him and also recently on the same facts and circumstances, the Hon’ble Apex Court have confirmed the judgment of Hon’ble Orissa High Court, and held that wherever, there is a mechanical approval given by the Range Head u/s 153D, the assessment as framed by the Assessing Officer, deserves to be quashed. c). That the Ld. CIT(A) has failed to appreciate that the documentary evidence as furnished before him regarding the ‘mechanical approval’ by the Range Head.

5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”

4. Briefly, the facts are that the assessee is into the business of manufacturing of different qualities of paper having different rates depending upon the qualities/ grammage /brightness of the paper and the assessee had been filing the returns of income on the basis of audited books of accounts. The sequence leading to the various additions made by the department is that, there was a search & seizure operations, on the business premises of the assessee and residential premises on 12.02.2020 and also the search was carried out at the residential premises of one Sh. Rajesh Kumar, who had been working as Accountant, with the assessee and, thereafter, notices u/s 153A were issued to the assessee on 25.02.2021 and the returns have been filed in response to notices u/s 153A on 18/01/2021.

5. The notices u/s 142(1) for the first time was issued by the AO on 17.09.2021, 18.09.2021 and 19.09.2021 and a time of only two to three days was given to file the reply and, to which, the assessee responded, that it was difficult to file the voluminous details, within the shortest possible time as per letter placed in the paper book-I page 206 to 208 and, thereafter, the AO framed the assessment on 24.09.2021 for all the years under consideration. The assessee filed appeals before the Ld. CIT(A) and made detailed submissions along with the additional evidences, which were admitted by the Ld. CIT(A) and forwarded to the Assessing Officer for his comments and, then, before the AO, the assessee appeared and filed various submissions, details and, thereafter, the remand report was sent by the Assessing Officer after 9 months and, thereafter, the assessee again appeared before the Ld. CIT(A) and filed the rejoinder to the remand report and, then, the Ld. CIT(A) decided the appeal on 19.10.2023.

taken by the Department and argued that the first four grounds of appeal relate to the retraction of the statement of one Sh. Rajesh Kumar as recorded u/s 132(4) during search. It was argued by referring to the statement of Sh. Rajesh Kumar that, though, initially on 12.02.2020, Sh. Rajesh Kumar had said that he had no relation with the DSG Papers Pvt. Ltd. as per question no. 8 of the said statement, since, he had left the job in the above company in 2016, but then, later on, during the course of search on 13.02.2020, he had stated that he had been working as an accountant with the said firm and was drawing salary initially upto 2016 by cheque and later on, from Financial Year 2016-17, he has been receiving cash salary and also stated that the documents, which were found from his premises belonged to the DSG Papers Pvt. Ltd. It was further argued that, thereafter, there was a COVID

19. Pandemic and everything came to stand still and later on, vide letter dated 03.10.2020, which have been placed in the paper book-I page 222, Sh. Rajesh Kumar retracted from his earlier statement and confirmed that all the documents, which were found from his premises belonged to him only. It was further brought to our notice that consequent to this, the DDIT summoned him and recorded his statement on 27.10.2020, which have been placed in paper book pages 223 to 232 and his earlier statement was confronted to Sh. Rajesh Kumar about the cash, salary and the documents as found from his premises and the Ld. Counsel, referred particularly to Question No. 9 of the said statement and the answer given by Sh. Rajesh Kumar and the same reads as under: "Q.No.9On page No.4 of your statement recorded u/s 132(4) of the Act on 13/02/2020, you had given detail in tabular form of your year-wise salary received from DSG from F.Y 2013-14 onwards alongwith mode of payment of salary in view of your today’s statement, please explain those details given by your on page No.4 of your statement dated 13/02/2020." Ans. During the search proceedings, cash of Rs. 31.18.740/- was found at my residential premises. I had given those details of my salary on page No.4 of my statement, dated 13/02/2020 in order to explain the cash found at my house. However, in F.Y. 2013-14, 2014-15 & 2015-16, I was receiving salary of around Rs. 23,000/- per month from which statutory deductions were made and the balance was received by me through cheque."

No. 16 with regard to disallowance of deduction u/s 80IA which have been deleted by the Ld. CIT(A). It was argued that on account of the ex-parte order before the Ld. AO, the said deduction was disallowed and further, argued that the detailed submissions were filed before the Ld. CIT(A) and the same is reproduced at page no. 57 of his order and all conditions of the deduction u/s 80IA has been fulfilled and relied upon the order for AY 2017-18 of the Ld. CIT(A), which has been referred to by the Ld. CIT(A) at page 56 to 58 of his order and further, argued that for AY 2017-18, the order of the Ld. CIT(A) dated 31.12.2021 has attained finality and no appeal has been filed by the Department against such order and relied upon the findings of the order of the Ld. CIT(A) at page 126 of his order.

22. The last ground of appeal no. 17 in the appeal of the department is deletion of addition of Rs. 70,23,807/- and this deletion of addition by the Ld. CIT(A) is on account of the deletion of alleged unexplained expenditure and in this regard, the Ld. Counsel relied upon the findings of the Ld. CIT(A) in para 6.6 and para 6.6.1 at page 128 to 129 of his order.

23. As regard to the appeal of the assessee, it was argued that the Ground No. 1 & 2 of the assessee appeal are linked to the Grounds of Appeal of the Department and with regard to the Ground No. 4, which is on account of mechanical approval having been accorded by the Range Head u/s 153D, certain correspondence between the Range Head and the AO have been placed in the paper book-III to demonstrate that, there was no application of mind by the Range Head and relied upon the judgment of Orrisa High Court and further argued that,in one go, it was not possible for the Addl. CIT to discuss the facts of the case and thus, argued that since it was a case of mechanical approval, the assessment deserves to be quashed.

24. The Assessee has also taken an additional Ground of Appeal which was filed before the Bench on 24.06.2024 and that Ground of Appeal read as under: “Notwithstanding the original ground of appeal, it is submitted that no adverse view could be drawn on account of the “digital evidences” in the shape of pendrive and computer printouts, as found from the premises of Sh. Rajesh Kumar, without complying to the guidelines laid by the Hon’ble CBDT in “Digital Evidence Investigation Manual” and without complying to the Section 65B of the Indian Evidence Act, 1872.”

25. It was argued before us that this ground being legal ground and the same was also before the Ld. CIT(A) was filed, for which, the detailed submissions was filed at para 14 page 47, of his order and then further, submissions were also made, at page 94 to 97 of the order of the Ld. CIT(A) but those have not been considered. Further argued that this being a legal ground, the said ground may be admitted as per the judgment of the Hon’ble Apex Court in the case of National thermal reported at 229 ITR 383. The Ld. Counsel of the assessee made detailed submissions on this issue that only on the basis of pendrive and certain computer printouts from the premises of Sh. Rajesh Kumar additions have been made and further argued, that these pendrive and computer printout have not been found to be connected with the computer, installed at the business premises of the assessee and, as such, they have no link or connection with the business of the assessee and nothing adverse have been found in this regard. Further, the reliance was placed on the guidelines of the CBDT in Digital Evidence Investigation Manual and the same appears to have not been followed and submitted a copy of the “Digital Evidence Investigation Manual” issued by the CBDT in this context and argued that the various additions as made by the Ld. AO deserves to be deleted since, it appears that the said guidelines have not been followed.

, on account of digital evidence as seized from the premises of pendrive and computer printouts, it was vehemently argued that no particular violation have been pointed out by the Ld. Counsel and only reference to the digital evidence Investigation Manual was not appropriate.

29. In rejoinder, the Ld. Counsel of the assessee argued, that on account of the COVID-19 Pandemic which came from Second Week of March, 2020, it was not possible to intimate the department particularly, when all the offices and other facilities were closed and further, reliance as placed by Ld. CIT DR on the judgment of Bannalal Jat Construction Pvt. Ltd. was concurred, it was argued that the facts are different in as much as, during the search in that case, the assessee had offered the cash as found during the search and further, admitted that he has inflated various expenditure and again reconfirmed the admission after three months and thereafter, the retraction was made. It was also argued that initially,in that case, the assessee had explained the mode and manner of earning the unaccounted income and further, that the statement was also witnessed. In the present case, Sh. Rajesh Kumar has initially stated that the documents belonged to him and later on, under duress, he has stated otherwise and then has retracted, after the situation of COVID 19 Pandemic improved. It was also argued that no corroborative evidence of the unaccounted transactions have been found from the premises of the assessee, linking to the data as found from the premises, of Sh. Rajesh Kumar have been found and recovered. It was further stressed that the remand proceedings continued before the AO well over 9 months and in the remand report, the Assessing Officer could not contradict the evidences/submissions furnished before the Ld. CIT(A) or before the Assessing Officer. Regarding the alleged under invoicing, for which, the Ld. CIT(A) has applied a rate of Rs. 5 per kg, it was argued that without taking into consideration any grade of the paper, the comparison of the rates was totally improper and even there was calculation mistakes in the working of the Assessing Officer and further, there was no justification of applying alleged rate of under invoicing to the total turnover by the Assessing Officer and further the part addition as sustained by the Ld. CIT(A) was not proper. It was further argued that the Ld. CIT(A) has rightly held that no extrapolation could be made on the basis of some evidences found during the course of search as held in the case of Gurdeep Cycle Industries of Chandigarh Bench of ITAT reported at 705/Chd/2023 and on the basis of the judgment of the Hon’ble Punjab & Haryana High Court in the case of VM Spinning Mills reported at 16 taxmann.com 199. Similarly, for the parallel invoicing and unexplained expenditure, there was no link or connection with the data found from the premises of Sh. Rajesh Kumar, who has admitted to have been working for some parties at Delhi and Ludhiana. 30 We have heard the rival contentions, perused the material available on record and gone through the order of the AO, Ld. CIT(A), remand report and reply to the remand report by the assessee and various submissions/paper books furnished by Ld. Counsel and the Ld. CIT DR. The assessee company is engaged in the business of manufacturing of different grades of paper and the return have been filed on the basis of audited books of accounts and it is also a fact that Sh. Rajesh Kumar,who was also searched had admitted on the second day of search i.e. on 13.02.2020 that the document as found during the course of search from his residential premises belonged to the assessee company and which he retracted by way of letter furnished to the DDIT Investigation on 03.10.2020 and, later on, in his statement before the DDIT Investigation, he again retracted from his statement recorded on 13.02.2020. (His basis of retraction had been the said statement has been recorded under duress). We have also gone through the judgments cited by both the sides on the retraction of the statement and the onus is entirely upon the person concerned to establish that there was a coercion and duress. No evidence has been led before us that the statement of Sh. Rajesh Kumar was recorded under duress on 13.02.2020 and we have also gone through the judgment of the Hon’ble Apex Court in the case of “Bannalal Jat Construction Pvt. Ltd.” in which, it has been clearly held that the burden lay on the assessee to show that the admission made by the Director in his statement was wrong and such retraction had to be supported by strong evidences showing that the earlier statements was recorded under duress and coercion. In the present case, Sh. Rajesh Kumar retracted after 7 months and, though, there was a COVID Pandemic, but he could have written a letter to the Department retracting his statement and thus, in light of the above said facts and in view of the judgment of the Hon’ble Apex Court, the finding of the Ld. CIT(A) that no adverse conclusion can be drawn of the statement of Sh. Rajesh Kumar recorded on 13.02.2020 is not a correct finding. This will take care of the Ground of Appeal

Nos. 1 to 7 as per the Department appeal and the same are thus allowed.

31. Ground of Appeal No. 8 is with regard to the deletion of undisclosed sales on the basis of the certain documents, which have been reproduced by the AO at Page No. 13, 14 of his order and working of the same have been made on the basis of such documents at page no. 22 & 23 of the assessment order. There are names of some other entities/concerns on Page No. 22 & 23 for calculation of undisclosed sales. In the said document, the name of the one party mentioned is “GAJROLA” and on top, “Delhi” is mentioned and the assessee had categorically denied any linking with all such parties and, though,the assessee has made detailed submissions before the Ld. CIT(A) against the ex-parte order made by the Assessing Officer and it is also a fact that hardly any time was given to the assessee during assessment proceedings and all such submissions and evidences as furnished before the Ld. CIT(A) were forwarded to the AO for conducting enquiries/comments. It is also borne out from the record that remand report was received after 9 months and during this intervening period, the assessee appeared before the AO and filed various evidences/documents to demonstrate, there was no linking of said parties with the business of the assessee at all, and as such, the addition on account of the parallel invoicing, was not called for. It is also a fact that the Assessing Officer had not brought any adverse material against such submissions of the assessee and neither any corroborative evidence have been found from the premises of the assessee concerned, linking to the document found from the premises of Sh. Rajesh Kumar. Though, we have allowed the ground of appeal of the department on the issue of the retraction, but the Assessing officer was duty bound to make necessary enquiries and to establish the linking of the document as found, from the premises of Sh. Rajesh Kumar, with the business of the assessee. One of the excel sheet found from the premises of Sh. Rajesh Kumar in a pendrive, contained the transactions relating to “Mineraux Trading Co.” which provides transportation services to the assessee for lifting of “Petcoke” from Indian Oil Corporation, Panipat and it was established by the assessee that the entries as contained in the said “excel sheet”tallied entirely with the invoices of “Mineraux Trading Co.” and payments made against them by the assessee company. Nothing adverse has been pointed out by the Assessing Officer during remand proceedings in this regard. The findings of the Ld. CIT(A) in para 6.3.15 and 6.3.16, 6.3.17& 6.3.18 as relied by the Ld. Counsel is quite apt and for the sake of repetition, the same is reproduced as under:

“6.3.15 As regard the finding of the AO that as per the CCTV installed at the premises of Sh. Manoj Kumar, Sh. Rajesh Kumar is seen entering the premises on 11.02.2020, It was mentioned by Sh. Rajesh Kumar that he had gone to the premises of Sh. Manoj Kumar, only to clarify certain issues with regard to the ESI & Provident Fund and these issues pertain to the time when he was working with the assessee company. It is my considered view that the aspect that Sh Rajesh Kumar has visited the key person of the appellant company is not under dispute. On the basis of CCTV footage as well as on the basis of the fact that certain entries pertaining to the appellant company (e.g. Raj Paper Corporation w.r.t. sale, Mineraux Trading w.r.t. freight), it is a logical conclusion that the appellant company/its key person was in regular touch. This fact has also been admitted by them as Sh Rajesh was assisting in ESI/PF work. However, this itself does not prove that entire documents/material found and seized from his premises pertain to the appellant company. This is more so as sh Rajesh Kumar in his statement on oath has admitted that he was doing work for some other parties as well. 6.3.16 The AO has compared bill mentioned in document seized from the premises of Sh. Rajesh Kumar to bill of same date or same number from the books of the appellant. However, he has not brought anything on record to prove that the parties are same or there are transactions of the parties mentioned in seized document at premises of Sh. Rajesh Kumar with the appellant company. Sh Rajesh has admitted on oath that he is doing work of other persons as well and the data therefore pertains to those persons. Obviously when bills of transaction of one person would be compared with the same bill number of other person, there would be mismatch. But this can not be basis of treating transaction of second person as on genuine or undisclosed. E.g. Bill no 100 of entity ‘X’ would contain transaction of the entity ‘X’’ with say entity Ý’. And Bill no 100 of entity ‘A’ would contain transaction of the entity ‘A’’ with say entity ‘B’. If search at another entity ‘P’ is conducted and bill no 100 of entity ‘X’ is found from his premises, it would refer to transaction of ‘X’’ with ’Ý’. If we compare this bill no 100 with books of entity ’A’’, it would refer to entity ’B’’ and not entity Ý’. It is not correct to hold since bill no 100 in the books of entity Á’ does not correspond to entity ’Y’’, it is bogus. 6.3.17 To summarize: (a) The said documents have been found from the premises of Sh. Rajesh Kumar. Thus, presumptions u/s 132(4) shall be applicable on him. (b) There was no linking of such documents viz a viz the assessee company w.r.t. parallel invoicing. (c) Sh. Rajesh Kumar had owned up all such documents during the post search proceeding.

(d) Further, it has also been observed that the series of the invoices as per the assessee’s books of accounts and the seized document is totally different as pointed out above (e) In table 5 on page 18 of the assessment order, current year’s invoice have been mentioned, which has dated 01.05.2019 to 01.01.2020. This has been compared with the invoices on page no 19 having dates 01.04.2019 to 08.04.2019. Thus, even the dates are different. Further, as discussed in para 6.3.13 and 6.3.14 some of these entries pertain to freight and duly accounted for. (f) In page 18 to 21 of the assessment order, there is no name of the party and none of the item mentioned tallies with the books of accounts of the assessee. Besides, the appellant has no dealing with the parties who name are appearing in document seized for the premises of Sh Rajesh Kumar. (g) As per page 16 & 17 of the assessment order, the period mentioned is FY 2018-19 whereas, the assessment under consideration is AY 2020-21 (i.e. FY 19-20) (h) It is a settled law that any statement alone, itself is not sufficient evidence unless corroborated with documentary evidence. (i) The AO has mentioned that GST authorities also conducted search and held that there was under-invoicing. However that pertained to the period prior to FY 16-17. During appellate proceeding AR has submitted that this matter has become final and it has been held by GST authorities that there was no undisclosed sale due to parallel invoicing. 6.3.18 In view of these facts and discussion above, it is held the there was no such justification in working out parallel invoicing resulting into the undisclosed sales and subsequent application of 25% GP on such alleged undisclosed sales resulting into addition of Rs. 7,96,53,033. Therefore, this addition is deleted. Accordingly, these grounds of appeal are allowed.”

32. We are in agreement with the findings of the Ld. CIT(A) and since nothing adverse have been established against the assessee with regard to the documents as found from the premises of Sh. Rajesh Kumar and, thus, we hold that the Ld. CIT(A) has rightly deleted the addition of Rs. 7,96,53,033/-.

6.3.12 Thus, from the above statement, it is very clear that Sh. Rajesh Kumar explained categorically that he had been carrying on the independent job after he left DSG Papers Pvt. Ltd. in October 2016 and he had not earned any salary from M/s. DSG Papers Pvt. Ltd. and whatever he stated was under coercion. 6.3.12.1 Although there is time gap between the initial statement recorded in Feb 2020 and retraction letter dated 03.10.2020 and subsequent statement before the DDIT(Inv.) 27.10.2020, no adverse inference can be drawn on account of this delay. This is due to the facts that it was the period of first Covid-19 wave and nation was under lockdown since 24.03.2020 till almost at the end of Sept 2020. Thus, to meet the end of justice, no adverse inference can be drawn on account of this extra-ordinary situation. This couple with the fact, that there is no corresponding document in the books of account of the appellant except in few cases ( e.g Raj Paper Corporation) 6.3.13 In pages 18 to 23 of the assessment order , there is mention of excel sheet ‘Book1’. Entry at S. No. 30 in table 5 at pager 18 of assessment order is bill no 3 dated 01.05.2019 amounting to Rs.468630/-. This table pertain to documents seized form the premises of Sh Rajesh Kumar. On page 19 of the assessment order, AO has mentioned that these entries have been compared the books of account of appellant company with respect to sale and there was discrepancy. Thus, the AO has concluded that these sales are not part of disclosed sale and is parallel invoicing.

35. Ground No. 11 is with regard to the addition as deleted by the Ld. CIT(A) on account of unexplained money u/s 69A. This addition is linked to the issue of cash generation due to parallel invoicing and we have already deleted the addition on account of parallel invoicing as above, and we are in the agreement with the findings of the Ld. CIT(A) in Page No. 126 & 127, para 6.7 and for the sake of brevity, the same is reproduced below:

6.7 Ground of Appeal No. 21: In this ground, the AR has contested the addition of Rs. 3,61,77,800/-. During the course of appellate proceedings, the AR has contested that this addition has been made separately over and above the addition of unaccounted sales from the documents found from the premises of Sh. Rajesh Kumar. It has been argued that the assessee after repeated requests was given the copies of the documents found from the premises of Sh. Rajesh Kumar and those documents establish beyond any iota of doubt that there are certain transactions which relates to GAJROLA and VIKAS and these are sales & purchase transactions between these two parties and the cash collections with these respective parties have been treated by the AO as unaccounted cash generation. The assessee had argued that the whole basis of making the addition is uncalled for because the dealing is between the two unknown parties for which the documents were found from the premises of Sh. Rajesh Kumar and assessee has no link or connection with such parties and thus the whole basis of making the uncalled-for addition of alleged cash generation is without any basis. Decision 6.7.1 The submissions of the assessee, submitted by the AR during the course of appellate proceedings and the remand report submitted by the AO have also been considered. These documents have no link or connection with the assessee company and further as brought out by the assessee that there are independent transactions between the GAJROLA and one VIKAS. These are the purchase & sale transactions between these two parties. There is neither name of the appellant company mentioned in these transactions nor there is any link or connection with the appellant. Therefore, the said addition is hereby is deleted. Accordingly, this ground of appeal is allowed.

Accordingly, the ground of appeal of the department is therefore dismissed.

36. Ground No. 12 is with regard to the addition of Rs. 7,36,09,500/- as deleted by the Ld. CIT(A) on account of unexplained expenditure u/s 69C. This addition was made by the AO on the basis of certain loose papers, which have been reproduced at Page No. 37 & 38 of the order of the CIT(A) and such documents were found from the premises of Sh. Rajesh Kumar. The assessee has denied any link or connection with regard to such computer printouts as found from the premises of Sh. Rajesh Kumar and neither any corroborative evidence linking the said document with the books of accounts of the assessee was found or established by the Assessing Officer and no corroborative evidence or any adverse observation have been given by the AO linking the seized document with the assessee company. We find that the Ld. CIT(A) has given his findings on this issue at Page No. 127 para 6.8 & 6.8.1 which for reference, is reproduced below:

6.8 Grounds of Appeal Nos. 22 to 24: In these grounds, the AR contested the addition of Rs. 7,36,09,500/-.During the course of appellate proceedings, the AR has submitted that this addition is also linked with the certain printouts recovered from the premises of Sh. Rajesh Kumar and it has been argued that the said addition is again based on the documents found from the premises of Sh. Rajesh Kumar and there is no linking of the documents with the assessee at all and the documents pertain to payment to some contractors and salary given to employees. It has been argued that there is no basis of making the addition as no linkage has been established with the assessee company and neither the documents have been found from the premises of the assessee company. Decision 6.8.1 The submissions of the assessee, submitted by the AR during the course of appellate proceedings and the remand report submitted by the AO have also been considered. I have already held that the documents as found from the premises of Sh. Rajesh Kumar cannot be held to be belonging to the assessee since there is no link or connection with the same. The said payment of the salary or to the contractor as per the seized documents found from the premises of Sh. Rajesh Kumar with the assessee company and as per my findings given above, the said addition deserves to be deleted as no incriminating evidence have been found against the assessee. Accordingly, these grounds of appeal are allowed. Thus, the Ld. CIT(A) has rightly deleted the addition and therefore, this ground of appeal of the department is dismissed.

37. Ground No. 13 relates to the addition of Rs. 31,18,740/- as found from the premise of Sh. Rajesh Kumar and during the search, Sh. Rajesh Kumar had owned the cash and explained the sources thereof and, though, such sources were not accepted in the case of Sh. Rajesh Kumar and substantive addition was made in the case of Sh. Rajesh Kumar, while framing the assessment for AY 2020-21 and the findings of the Ld. CIT(A) in this regard is there in para 6.9 & 6.9.1 Page No. 127 & 128 of his order and we concur with the said finding as under:

6.9 Ground of Appeal No. 25: In this ground, the AR has contested the addition of Rs. 31,18,740/- on account of cash found from the premise of Sh. Rajesh Kumar. The AR during the course of appellate proceedings has submitted that the cash was found from the premises of Sh. Rajesh Kumar and the assessee has no link or connection with the same and the same cash have been owned by Sh. Rajesh Kumar and during the course of assessment proceedings in the case of Sh. Rajesh Kumar, the AO has made an addition of Rs. 31,18,740/- on substantive basis in the hands of Sh. Rajesh Kumar and hence it has pleaded that no addition could be made in the hands of the assessee. Decision 6.9.1 The submissions of the assessee, submitted by the AR during the course of appellate proceedings and the remand report submitted by the AO have also been considered. It is a fact that the cash have been owned by Sh. Rajesh Kumar before the DDIT (Inv.) and the said cash was also found from his premises and thus the addition on protective basis cannot be made in the hands of the assessee as it would amount to double addition and thus, the same is deleted. Accordingly, this ground of appeal is allowed for statistical purposes. Thus, this ground of appeal of the department is dismissed.

39. Regarding the Ground No. 15, we have considered the submission of both the parties and order of the AO and findings of the Ld. CIT(A) and the submissions before the Ld. CIT(A) are there at pages 55 & 56 of his order and since we have already deleted the additions as made by the Assessing Officer, there is no justification for sustaining this addition and we concur with the findings of the Ld. CIT(A) in para 6.5 & 6.5.1 as given below:

6.5 Grounds of Appeal Nos. 14 to 17: In these grounds, the AR contested the addition on account of unexplained capital employed. The AR during the course of appellate proceedings has submitted that there were no basis of making the addition and firstly there is no evidence found of the unaccounted sales found during the course of search and also making the addition of the alleged capital employed on the basis of stock turnover ratio is wholly out of context and thus, it was argued that such addition deserves to be deleted. Decision 6.5.1 The submissions of the assessee, submitted by the AR during the course of appellate proceedings and the remand report submitted by the AO have also been considered. I have already deleted the addition on account of unaccounted sales due to parallel invoicing as per above grounds of appeal nos. 8-10. There is no incriminating material found during the course of search regarding the alleged capital employed outside the books of accounts. Further, this addition has been made as consequent to the addition made by the AO on account of undisclosed sales due to parallel invoicing. Since that addition on account of undisclosed sales due to parallel invoicing have been deleted, the addition on account of capital employed for undisclosed sale is also deleted. Accordingly, these grounds of appeal are allowed. Thus, on the above facts, the ground of appeal of the department is dismissed.

40. Ground No. 16 By way of this ground, the Department has challenged the deduction u/s 80IA and under similar facts & circumstances, the Ld. CIT(A) for AY 2017-18 u/s 143(3) vide order dated 31.12.2021 had allowed the appeal of the assessee on this issue,since, all the conditions of the deduction u/s 80IA has been fulfilled. There are no change of facts & circumstances and the finding of the Ld. CIT(A) in para 6.6 of his order is accordingly upheld. For the sake of brevity, the same is reproduced as under:

6.6 Grounds of Appeal Nos. 18 to 20: In these grounds, the AR contested the addition on account of power generation u/s 80IA.This issue is already decided by the CIT(A) in the case of the assessee itself in favor of the assessee vide appeal number 10616/ROT/CIT(A)-

5/Ldh/2019-20 u/s 143(3) dated 31.12.2021. For reference, the same is reproduced as under: “Also, similar views were held by the Kolkata Bench of the ITAT in the case of M/s. ITC Limited for the assessment year 2009-10 vide its order dated 28.11.2018 in & 685/Kol/2014 on the issue of allow-ability of deduction u/s 80IA on generation of steam for captive consumption. Under the facts & circumstances of the case, the arguments of the AR found acceptable in view of various case laws relied upon by the AR/ as discussed above. Therefore, the disallowance of Rs. 94,92,615/- made by the AO is not found sustainable and hence deleted.” The facts of the year under consideration are identical to the facts for assessment year 2017-18 u/s 143(3) in Appeal Number 10616/ROT/CIT(A)-5/Ldh/2019-20 decided by the CIT(A)-5, Ludhiana vide order dated 31.12.2021. Therefore, respectfully following the above mentioned order and for the reasons given by the CIT(A)-5, Ludhiana and hence, the addition/disallowance made by the AO amounting to Rs. 1,96,56,449/- is thereby deleted. Thus, on the above facts, the ground of appeal of the department is dismissed.

6.16 Additional Ground of Appeal No. 4: In this ground, the AR has challenged the estimating the income of Rs. 70,23,807/-, pertaining to the alleged unaccounted sales, for which, cash expenditure of Rs. 7,36,09,509/- was alleged to be incurred by applying the ratio of expenditure to the net income. The AR during the course of appellate proceedings has argued that there is no basis of making the addition which has been made on the basis of average ratio of expenditure to the net income and considering the cash expenditure of Rs. 7,36,09,509/- incurred by the assessee, the net income earned proportionate to these expenses comes to Rs. 70,23,807/-. It has been argued that once the addition of cash expenditure is not sustainable because the said documents have not been found from the premises of the assessee, the whole basis of making the addition is on surmises and conjecture and the same therefore, may please be deleted. Decision 6.16.1 The submissions of the assessee, submitted by the AR during the course of appellate proceedings and the remand report submitted by the AO have also been considered. I have considered the arguments of the assessee and the reason for making the addition by the AO. I have already adjudicated the grounds of appeal with regard to the addition made on the basis of documents found from the premises of Sh. Rajesh Kumar. Even otherwise, net impact of all these transactions would result into enhancement of GP. Since addition on account of enhancement of GP rate has already been confirmed partly, this addition would amount to double addition. Thus, addition is not sustainable and therefore, deleted. Accordingly, the additional ground of appeal is allowed. Thus, on the above facts, the ground of appeal of the department is dismissed.

A.Y 2015-16 (Departmental) CO NO.02/CHD/2024A.Y 2015-16 (Assessee) A.Y 2016-17 (Departmental) CO NO.03/CHD/2024 A.Y 2016-17 (Assessee) ITA NO.765/CHD/2023 A.Y 2017-18 (Departmental) CO NO. 04/CHD/2024 A.Y 2017-18 (Assessee) ITA NO. 760/CHD/2023 A.Y 2018-19 (Departmental) CO.No. 05/CHD/2024 A.Y. 2018-19(Assessee) ITA NO. 761/CHD/2023 A.Y 2019-20 (Departmental) CO No. 06/CHD/2024 A.Y. 2019-20 (Assessee)

are the same in all the years, for the sake of convenience, they are being adjudicated together. The grounds of appeal for AY 2014

15. (department) are as under (which are common for all the years):

“1. Whether on facts and circumstances of the case the Ld.CIT(A) erred in law, in allowing the assessee's appeal and deleting all the additions made by the Assessing Officer, by relying upon the decision of Hon'ble Apex Court in the case of Abhisar Buildwell Pvt. Ltd(Civil Appeal No. 6580 of 2021) dated 24.04.2023 and further CBDT's instruction No. 1 dated 23.08.2023 since the facts in the case of the assessee are different and distinguishable.

2. Whether on facts and circumstances of the case the Ld. CIT(A) erred in not taking cognizance of the fact that additions were made on the basis of incriminating evidences found during the course of search at the premise of Sh. Rajesh Kumar executing the warrant issued in the case of DSG Paper Mills Pvt. Ltd.

3. Whether on facts and circumstances of the case the Ld.CIT(A) erred in holding that assessment made by the AO on the basis of incriminating documents, not found pertaining to current year, is not found sustainable and deleted whereas the incriminating material was found at the premise of Sh. Rajesh Kumar, Accountant where the warrant was executed in the case of assessee and this data showed that under invoicing was being carried out over the sustained period and hence relevant to current AY.

5. Whether, the Ld. CIT(A) justified in deleting the addition, based on cognizable evidence related to assessee? 6. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal

at any time before or at the time of hearing of the appeal.”

45. The cross objections filed by the assessee for AY 2014-15 to AY 2017-18 are common and the same is reproduced as under:

“ 1. That the Ld. CIT(A)-5, Ludhiana has very rightly deleted the additions as made by the Assessing Officer by relying on the judgment of Hon'ble Apex Court in the case of Abhisar Buildwell Pvt. Ltd. reported in 150 taxmann.com 257 (SC) 2023. 2.That the Ld. CIT(A)-5, Ludhiana has duly taken cognizance of the various additions and given a finding about the alleged incriminating evidence as pointed out by the Assessing Officer.

3. That the addition was deleted on legal grounds, other grounds of appeal

and additional grounds of appeal were not adjudicated by the Ld. CIT (Appeals). The cross-objector Assessee Company reserves the right in agitate these grounds already raised before the CIT(Appeals) and particularly, the additional ground regarding according of approval in a mechanical manner u/s 153D as per judgment of Hon'ble Apex Court in the case of ACIT Circle

1. (2) Vs Serajuddin and Co. in dated 28.11.2013. 4. That the cross objector creates leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”

46. The cross objections filed by the assessee for AY 2018-19 & 2019-20 are as under:

“1. That the Ld. CIT(A)-5, Ludhiana has very rightly deleted the additions as made by the Assessing Officer by relying on the judgment of Hon'ble Apex Court in the case of Abhisar Buildwell Pvt. Ltd. reported in 150 taxmann.com 257 (SC) 2023.

2. That the Ld. CIT(A)-5, Ludhiana has duly taken cognizance of the various additions and given a finding about the alleged incriminating evidence as pointed out by the Assessing Officer.

and additional grounds of appeal were not adjudicated by the Ld. CIT (Appeals). The cross- objector Assessee Company reserves the right in agitate these grounds already raised before the CIT(Appeals) and particularly, the additional ground regarding according of approval in a mechanical manner u/s 153D as per judgment of Hon'ble Apex Court in the case of ACIT Circle

1. (2) Vs Serajuddin and Co. in dated 28.11.2023. 4. That the Ld. CIT(A) has failed to adjudicate the additional grounds of appeal read reads as under: "That the CPC, Bangalore has erred in disallowing depreciation on the power plant without assigning any reason in the order u/s 143(1)."

before the appeal is finally heard or disposed off.

47. There was search and seizure operation at the residential and business premises on 12.02.2020 and later on the assessment were framed by the AO in an ex-parte order starting from AY 2014-15 to 2020-21. Certain additions were made in the AY 2020-21 and on the basis of such additions similar additions were made in all the preceding assessment years i.e. AY 2014-15 to AY 2019-20 and these additions related to under invoicing, parallel invoicing, addition by applying Gross Profit rate of 25% on disclosed sales against the gross profit declared by the assesse in various years, alleged capital employed on such parallel invoicing, salary paid to Sh. Rajesh Kumar. The facts of the case have been discussed in the main appeal of the department and the assessee for AY 2020-21 which have been adjudicated by us and on the similar issues, the additions have been made and the matter was carried to the Ld. CIT(A). The Ld. CIT(A) considered the detailed submissions as filed by the Ld. Counsel of the assessee before him which were remanded to the Assessing Officer and during such remand proceedings, the assessee appeared before the AO and after the receipt of the remand report, the rejoinder was filed by the assessee and in the remand report, nothing fresh have been brought on record by the AO.

48. In the cross objections, the assessee has raised the ground of appeal with regard to the fact that no incriminating material has been found during the course of search and relied upon the judgment of Hon’ble Apex Court in the case of Abhisar Buildwell Pvt. Ltd. reported at 150 taxmann.com 257 and the Ld. CIT(A) has given his finding starting from Page No. 86 of the order and after relying upon the judgment of the Hon’ble Apex Court in the case of Abhisar Buildwell and Others, given his findings from para 6.4 to para 6.9 of his order.

49. The Ld. CIT DR relied upon the order of the AO.

50. We have gone through the order of the AO, order of the Ld. CIT(A), remand report of the AO and its rejoinder and find that all the additions have been made not on the basis of any incriminating material pertaining to each year under consideration and, thus, the judgment of the Hon’ble Apex Court in the case of the Abhisar Buildwell Pvt. Ltd. is clearly applicable to the facts of the case. The findings of the Ld. CIT(A) is reproduced as per para 6.9 is as under: “6.9 This decision of Hon’ble Apex Court in the case of Abhisar Buildwell Pvt Ltd has been followed by the Apex Court in the case of ‘King Buildcon Pvt. Ltd.’ in Civil Appeal No. 4326/2023 and latest judgment of Apex Court in the case of PCIT Vs. S.S. Con. Build Ltd. reported in 445 ITR 506. Therefore, this issue has now been settled. Also, Hon’ble CBDT has issued Instruction vide Instruction No. 1 dated 23.08.2023 [F No. 279/MISC./M- 54/2023-ITJ] in which certain directions have been issued by the Hon’ble CBDT that how the effect to such judgment is to be given. In view of this decision in the Abhisar Buildwell case and in view the Instruction of the Hon’ble CBDT, AO is free to examine the possibility of taking action u/s. 147/148 of the Act subject to fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act.” Thus, the Ld. CIT(A) having decided the appeal on legal ground, the other grounds of appeal are not being adjudicated and thus, the appeals of the department are dismissed and the cross objections of the assessee is allowed on legal ground. Since, the facts are common in all the years, the appeals of the department for all the Assessment years are dismissed on legal grounds and the cross objection of the assessee on legal grounds is allowed.

“4. That the Ld. CIT(A) has failed to adjudicate the additional grounds of appeal read reads as under: "That the CPC, Bangalore has erred in disallowing depreciation on the power plant without assigning any reason in the order u/s 143(1)."

52. The facts are that the depreciation was disallowed on power plant u/s 143(1) by CPC without assigning any reason. It was argued that power plant was existing in earlier year and in this year also, it was used for generation of electricity for consumption and the AO following the order u/s 143(1) has disallowed the depreciation on power plant. It was argued by the assessee by placing reliance on the Delhi Tribunal Bench ‘G’ in the case of South India Group reported at [2024] 163 taxmann.com 479 that order u/s 143(1) having merged with the regular assessment and the same can be argued in appeal u/s 143(3). It was also argued that no incriminating material was found for not allowing the claim. The Ld. CIT DR relied upon the order of the AO.

Order pronounced in the open Court on 27/02/2025