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Facts
The assessee challenged the order of the CIT(A) which confirmed an addition of Rs. 14,40,000/-. The addition was based on alleged unaccounted cash purchases from the Yashika Group, which was investigated during a search and seizure operation. The assessee denied making these purchases.
Held
The Tribunal held that the addition was based solely on third-party evidence and statements, without any corroborative evidence or opportunity for cross-examination. The presumption under Section 132(4A) is not applicable to the assessee in this case. Therefore, the addition was deleted.
Key Issues
Whether an addition to income can be sustained solely on the basis of third-party evidence without corroboration and without providing an opportunity for cross-examination to the assessee.
Sections Cited
143(3), 69C, 115BBE, 132(4A)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 1311/JPR/2024
fu/kZkj.k o"kZ@Assessment Years : 2022-23 Akesh Sangemermer (P) Ltd. cuke The ITO, Near RIICO, Madanganj IIIrd Vs. Ward-1, Kishangarh. Phase, Ind. Area, Kishangarh, Ajmer. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCA2321G vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri C. M. Agarwal, C.A. jktLo dh vksj ls@ Revenue by : Shri Gautam Singh Choudhary, JCIT-Sr.DR lquokbZ dh rkjh[k@ Date of Hearing : 19/02/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 07/03/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM By way of present appeal, the assessee challenges the order of National Faceless Appeal Centre, Delhi [for short CIT(A)] dated 30.09.2024. The dispute relates to the assessment year 2022-23. Ld. CIT(A) passed that the order because the assessee challenged the order passed u/s 143(3) of the Income Tax Act, 1961 (for short “Act”) dated 23.03.2024 passed by National Faceless Assessment Unit [ for short AO] before him.
“1. On the facts and circumstances of the case and in law LD CIT(A) has erred in confirming the addition of Rs 14,40,000/ to the income of the appellant as this is against the principles of natural justice, and contrary to the provisions of Income Tax Act.
On the facts and circumstances of the case and in law, the Ld CIT(A) has no justifiable basis in confirming addition of Rs 14, 40,000/to the income of the appellant on account of alleged unaccounted cash purchases made from Yashika group 3. On the facts and circumstances of the case, addition confirmed by Ld CIT(A) is bad in law as no unaccounted purchases in cash have been made from Yashika group, no findings of search action in Yashika group, alleged incriminatory documents found in Yashika group and relied upon confessional sworn statements of Yashika group persons have ever been confronted to the appellant.
4. On the facts and circumstances of the case, the addition confirmed by the Ld CIT (A) is bad in law as material whatsoever found from 3rd party has no corroborative evidence, statement of Sh Rajinder Yadav does not bind the appellant, and various legal submissions made and binding judicial precedents cited before the Ld CIT(A) have not been held to be inapplicable by the Ld CIT(A).
5. On the facts and circumstances of the case, the addition confirmed by the LDCIT(A) under section 69 C r.w.s 115BBE of the Act on account of alleged cash purchases is absolutely bad in law as purchases are only the expense of the business and never an income of the business. The appellant craves leave to add, amend or withdraw any of the grounds of the appeal during the course appellate proceedings.
The brief facts of the case are that the assessee filed his return of income on 26.08.2022 declaring total income of Rs. 3,47,700/- and Book Profit under MAT of Rs. 13,80,587/-. During the A.Y. 2022-23, the assessee was engaged in the business of Akesh Sangemermer (P) Ltd. vs. ITO purchase and sale of Marble and granite Blocks and slabs. The case was selected for scrutiny under CASS as per CRU/VRU information. Accordingly, notice U/s 143(2) was issued to the assessee. As per the information, a search and seizure operation were conducted in the case of Yashika Group on 08.03.2022. The said group was engaged in the business of mining and quarrying of Granite Blocks, Quartz. Felspar etc. at Deogarh, Rajsamand. 3.1 During the course of search and seizure operation, voluminous and highly incriminating soft data was seized which was extracted in the post search proceedings. These data contain various excel sheets and other records. During search laptop and pen drive were also taken and the data stored in these devices was examined. The laptop and pen drive consisted of various kind of excel sheets and other data. These documents contain records of entries indicating huge amount of undisclosed income earned by the group. During the search and seizure operation, the statement of Shri Rajendra Yadav, Shri Kailash Mehta and others of the group members were recorded. 3.2 The ld. AO noted that the evidence gathered during the search and statements of various individuals resulted in detection of highly dubious methodology followed by the group for evasion of Akesh Sangemermer (P) Ltd. vs. ITO taxes. It was unearthed from the evidence gathered that the group was extensively engaged in under billing/under invoicing of sales. It was noticed that part of the sale consideration was received through banking channels and part of the consideration was received in cash, which was not at all recorded in the books of accounts. Such unrecorded sales were entered into various excel sheets and other documents. The sales entered on such excel sheets were not recorded in the regular books of accounts. These facts were accepted by Shri Rajendra Yadav, Shri Kailash Mehta and others of the group member. He categorically accepted the fact that the group was engaged in unaccounted cash sales of granite blocks and explained how they kept record of these unaccounted transactions. The name of the assessee M/s Akesh Sangemarmar (assessee) was also found in the list of unaccounted cash sales. The ld. AO listed transaction for an amount of Rs. 14,40,000/- as tabulated at page 3 of the assessment order wherein the ld. AO noted that the assessee has purchased that amount of material from Yashika Group. Based on that set of facts a show cause notice proposing to add Rs. 14,40,000/- as bogus purchase vide notice dated 21.02.2024 Akesh Sangemermer (P) Ltd. vs. ITO proposing to treat it as unexplained expenditure as per provision of section 69C of the Act. 3.3 The assessee submitted their reply and stated that they have not made any cash purchases to the tune of of Rs. 14,40,000/- during the financial year 2021-22 from Yashika Group. Further, the assessee cited various Hon'ble High Court’s decision in support of his claim. The assessee has cited the decision of Hon'ble Rajasthan High Court in the case of Commissioner of Income Tax-central, Versus Smt. Sunita Dhadda in support of the claim that the addition cannot be made in hands of the assessee based on such information. 3.4 Reply submitted by the assessee was examined by the ld. AO but was not found to be acceptable in view of the documents found during the search operation in Yashik group and statement of Shri Rajendra Yadav, Shri Kailash Mehta and others of the Yashika group taken in which they categorically accepted the fact that the group was engaged in unaccounted cash sales of granite blocks and also explained how they kept record of these unaccounted transactions and the name of the assessee was found in the list of unaccounted cash sales. Further, the assessee cited the decision of Hon'ble High Courts. The decision cited by the Akesh Sangemermer (P) Ltd. vs. ITO assessee is not squarely applicable in the case of the assessee and the facts and circumstances of the case of the assessee is different. In view of the above discussion, Rs. 14,40,000/- was added to the total income of the assessee as unexplained expenditure u/s 69C of the Income Tax Act.
Aggrieved, from the said order of assessment, assessee has filed an appeal before the ld. CIT(A). The ld. CIT(A) after hearing the contention of the assessee dismissed the appeal of the assessee by giving the following findings on the issue:- “4.2. During the course of appellate proceedings, the appellant submitted his written submission which was perused but not found to be acceptable in view of the above the merit of the case. Hence, the case is being adjudicated as per the information available on record.
The issues were considered. The assessment order, written submission and elevant provisions of law were carefully perused. From the assessment order, it is clear that a search and seizure operation was conducted in the case of Yashika Group on 08.03.2022. It was noticed in the books of Yashika Group that part of the sale consideration was received through banking channels and part of the consideration was received in cash, which was found to be not recorded in the books. The said group categorically accepted that it was engaged in unaccounted cash sales of granite blocks. The name of appellant was also found in the list of unaccounted cash sales. During assessment proceedings, the appellant denied the above transaction. The Assessing officer found the explanation of the appellant not satisfactory and made an addition to the total income on the basis of evidence in his possession regarding unexplained expenditure in the form of unaccounted purchases made from Yashika Group. During the appellant proceedings, the appellant could not substantiate its claim through its written submission.
6. It is a trite law that once the appellant fails to discharge the onus cast on it to explain the source of any expenditure incurred Akesh Sangemermer (P) Ltd. vs. ITO to the satisfaction of the Assessing Officer, the amount may be deemed to be the income of the appellant as per the deeming provisions of sections 69C of the Act. The deeming provisions of the law are attracted in the facts and circumstances of the case whereby the AO is justified to make an addition to the total income of the amount of unaccounted purchases made, as the same was not explained by the appellant. The case laws cited by the appellant have not been found applicable to the facts of case of the appellant. Hence, in the absence of satisfactory explanation, the AO had no option but to make the addition as per provisions of law. In view of the facts and circumstances, I do not find any infirmity in the decision of the AO. Accordingly, the addition of Rs.14,40,000/- is hereby confirmed. Above Ground of appeal
are hereby dismissed.
7. Further, the appellant prayed for any alteration, amendment or addition to any ground of appeal before or during the hearing proceedings of the appeal. But, no such option was exercised by the appellant during appellate proceedings. Hence, these grounds of appeal are considered dismissed for statistical purposes
8. In the result, the appeal is dismissed. The order passed under sec 250 read with sec. 251 of the Act.
5. Feeling dissatisfied with the finding so recorded by the ld. CIT(A) the assessee preferred the present appeal on the grounds as stated here in above. In support of the grounds of appeal the ld. AR of the assessee has relied upon the following written submission:- “Written Submissions on behalf of the Appellant; The present appeal has been filed against the order dated 30.09.2024 passed by the Ld CIT(A) NFAC whereby Ld CIT(A) confirmed the order dated 23.03.2024 passed by the Ld Assessing Officer at an income of Rs 17,87,000/ against the returned income of Rs.3,47,700/. The appellant is challenging the order of the Ld CIT (A) on the following grounds;
1. On the facts and circumstances of the case and in law LD CIT(A) has erred in confirming the addition of Rs 14, 40,000/ to the income of the Akesh Sangemermer (P) Ltd. vs. ITO appellant as this is against the principles of natural justice, and contrary to the provisions of Income Tax Act.
2. On the facts and circumstances of the case and in law, the La CIT(A) has no justifiable basis in confirming addition of Rs 14, 40,000/to the income of the appellant on account of alleged unaccounted cash purchases made from Yashika group 3. On the facts and circumstances of the case, addition confirmed by La CIT(A) is bad in law as no unaccounted purchases in cash have been made from Yashika group, no findings of search action in Yashika group, alleged incriminatory documents found in Yashika group and relied upon confessional swon statements of Yashika group persons have ever been confronted to the appellant.
4. On the facts and circumstances of the case, the addition confirmed by the Ld CIT (A) is bad in law as material whatsoever found from 3rd party has no corroborative evidence, statement of Sh Rajinder Yadav does not bind the appellant, and various legal submissions made and oinding judicial precedents cited before the Ld CIT(A) have not been held to be inapplicable by the Ld CIT(A).
5. On the facts and circumstances of the case, the addition confirmed by the LDCIT(A) under section 69 C r.w.s 115BBE of the Act on account of alleged cash purchases is absolutely bad in law as purchases are only the expense of the business and never an income of the business." Since all the grounds are inter related, common submission are hereby made in respect of the all the grounds. Ld CIT(A) dismissed the appeal of the assessee in summary manner which is evident from the following observations of the Ld CIT(A); “4.2. During the course of appellate proceedings, the appellant submitted his written submission which was perused but not found to be acceptable in view of the above the merit of the casc. Hence, the case is being adjudicated as per the information available on record.
5. The issues were considered. The assessment order, written submission and) relevant provisions of law were carefully perused. From the assessment order, it is clear that a search and seizure operation was conducted in the case of Yashika Group on 08.03.2022. It was noticed in the books of Yashika Group that part of the sale consideration was received through banking channels and part of the consideration was received in cash, which was found to be not recorded in the books. The said group categorically accepted that it was engaged in unaccounted cash sales of granite blocks. The name of appellant was also found in the list of unaccounted cash sales. During assessment proceedings, the Akesh Sangemermer (P) Ltd. vs. ITO appellant denied the above transaction. The Assessing officer found the explanation of the appellant not satisfactory and made an addition to the total income on the basis of evicience in his possession regarding unexplained expenditure in the form of unaccounted purchases made from Yashika Group. During the appellant proceedings, the appellant could not substantiate its claim through its written submission.
6. It is a trite law that once the appellant fails to discharge the onus cast on it to explain the source of any expenditure incurred to the satisfaction of the Assessing Officer, the amount may be deemed to be the income of the appellant as per the deeming provisions of sections 69C of the Act. The deeming provisions of the law are attracted in the facts and circumstances of the case whereby the AO is justified to make an addition to the total income of the amount of unaccounted purchases made, as the same was not explained by the appellant. The case laws cited by the appellant have not been found applicable to the facts of case of the appellant. Hence, in the absence of satisfactory explanation, the AO had no option but to make the addition as per provisions of law. In view of the facts and circumstance. I do not find any infirmity in the decision of the AO. Accordingly, the addition of Rs. 14,40,000/- is hereby confirmed. Above Ground of appeal are hereby dismissed" From the perusal of the assessment order as well as order of the Ld CIT(A) it is evident that the entire addition is based on some material found during the course of search at the premises of Yashika Group to which the appellant is not a privy. The alleged incriminating material/statements referred to by the Ld AO and the Ld CIT(A) have never been made available to the appellant. Neither the appellant has been accorded any opportunity to cross examine the Director of Yashika Groups on whose statement, the department has based its action.
Ld CIT(A) has categorically recorded that during the assessment proceeding. the appellant denied having entered into any alleged transaction. Despite that the Ld CIT(A) observed that it is a trite law that once the appellant fails to discharge the onus cast on it to explain the source of any expenditure incurred to the satisfaction of the Assessing Officer, the amount may be deemed to be the income of the appellant as per the deeming provisions of sections 69C of the Act. The observations of the Ld CIT(A) are arbitrary and without any basis. Neither the Ld Assessing Officer or the Ld CIT(A) have brought on record any material to substantiate that the appellant has incurred any expenditure source of which is not recorded in the Books of accounts.
Akesh Sangemermer (P) Ltd. vs. ITO It is humbly submitted that material whatsoever found from the possession of 3rd party has no evidentiary value in the absence of any corroborative evidence. Jaipur Bench of the Tribunal in the case of M/S. Kamakshi Hospitality Pvt. Ltd. v. The DCIT, 2018, ITAT held that "Admission by a person is good evidence in his own case but it is not sufficient and conclusive in case of other person when that person had own interest in giving such statement unless the other person is given cross examination and statement is supported by any other independent evidence. Hon'ble Jurisdictional High Court, in the case of Commissioner of Income Tax-central, Vs Smt. Sunita Dhadda, D.B. Income Tax Appeal No. 197 /2012 in decision dated 31/07/2017held that no addition can be made on the basis of document recovered from third parties Hon'ble ITAT, Delhi in Yash Pal Narender Kumar, New Delhi vs Department Of Income Tax TA Nos. 5340, 5341 & 5342/D/2012 in decision dated 07.12.2013 held as under "8. During the proceedings of appeal filed by present assessee firm, the Id. Commissioner of Income Tax(A) noticed that substantive addition in the hands of Shri Mukesh Garg could not be sustained as per order of the first appellate authority i.e. Commissioner of Income Tax(A). The findings in the appellate order of Shri Mukesh Garg are as under:- "The whole addition hinges on evidence gathered from third party document or statement. Now the issue is can third party statement or entry in absence of any corroborative evidence despite using ultimate weapon of search, can result in jus justified addition. The legal provision relating to presumption u/s 132(4A) is applicable to the person from whose possession or control the incriminating material is found & seized. Based on the incriminating material found from third party search but not belonging to the appellant, this presumption will not be applicable unless corroborated by other evidence. Presumption available under section 132(4A) can be drawn against the person in whose case search is authorized and from whose possession or control books of account, diary or documents are found in the course of search. Presumptions regarding correctness of contents of books of account etc. cannot be raised against the third party. Presumption under section 132(4A) is only against the person in whose possession the search material is found and not against any other person. It is further held that the presumption is rebuttable and not conclusive and it cannot Asstt. Years: 2004-05, 2007-08, 2008-09 be Akesh Sangemermer (P) Ltd. vs. ITO applied in the absence of corroborative evidence. Straptex India P Ltd. v Dy. CIT [2003] 84 ITO 320 (Mum). In the case of Rama traders vs. First ITO [1998] 25 ITO 599 (Pat) (TM) it was held that no addition could be made, on the basis of presumption raised by section 132(4A), in the hands of the assessee where in the books of another firm, certain figures were found showing the purchase made by the assessee. In Asst. CIT v Kishore Lal Balwani Rai [2007] 17 SOT 380 (Chd.), it has been held that though the diary seized enable the revenue to presume that its contents are true, such presumptions is available only against the person to whom it belongs and this is a rebuttable Presumption. (i) Presumption u/s 132(4A) is not available, when the seized papers is recovered from third party and not from the assessce. Sheth Akshay Pushpavadan v Dy. CIT (2010) 130 TTJ 42 (Ahd UO). (ii) The addition is made by the AO based on third party evidence and not on the basis of any sound evidence collected during the search. A bunch of loose papers were seized from the premises of the third party which indicated the alleged unrecorded sales made to that party by the assessee. Variation in month-wise and other allied enterprises did not indicate that the assessee made any sales to H'. Average yield of the assessee was higher than that in comparable cases. The AO relied only on the entries of the said diary and did not bring on record any corroborative material to prove that such sales were made outside the books. It was held that mere entries in the accounts of a third party were not sufficient to prove that the assessee indulged in such transactions. Assitt CIT v Prabhat Oil Mills (1995] 52 TTJ (Ahd) Asstt.Years: 2004-05, 2007-08, 2008-09 (iii) Mere statement of the third party that property was sold to the assensee for a higher amount than shown, no protective assessment could be made in the case of the assessee. The alleged transactions mentioned in the seized diary of a third party were not handwritten by the appellant. The unaccounted purchases has alleged were not corroborated from the search materiai in the appellant own case. The assessing officer while using the statement of third party should have allowed the appellant to cross examine in order to use this as evidence which was not done. It is well settled in law that the loose papers and documents cannot possibly be construed as books of account regularly kept in the course of business. Such evidence would, therefore, be outside the purview of Section 34 of the Evidence Act, 1972. Therefore, the revenue would not be justified in resting its case on the loose papers, diary and documents found from third party if such Akesh Sangemermer (P) Ltd. vs. ITO documents contained narrations of transactions with the assessee as decided by the Hon'ble Supreme Court in the case of Central Bureau of Investigation Vs. V.C. Shukla (1988) 8 SSC 410 and Chuharmal Vs. Commissioner of Income Tax (1988) 172 250 1 38 Taxman 190 (SC). Reliance was also placed on the following decisions rendered by various courts and Tribunals: A. Jai Kumar Jain Vs. Asstt. Commissioner of Income Tax (2007) 11 SOT (Jaipur) (URO). "Addition in the instant case was made on the basis of the papers found from 'A' (Third Party). In search these papers were not confronted to the assessee. From the assessment order it was not borne out whether 'A'(Third Party) had stated these papers as pertaining to the assessee. No presumption could be drawn against the assessee u/s 132(4A) in respect of paper not recovered from him. No addition can be made on the basis of documents found from third party in the absence of corroborative evidence. Therefore, the Assessing Office as Asstt.Years: 2004-05, 2007-08, 2008-09 well as the commissioner of Income Tax (A) erred in making the addition on the basis of said papers in the hands of assessee. Hence, the entire addition made on the basis of papers found from 'A' (Third party) was to be deleted". B. Prarthana Construction (P) Ltd. Vs. Deputy Commissioner Of Income Tax (2001) 118 Taxman 112 (IT AT- Ahmedabad) (Mag) "It has been held that loose papers and documents seized from premises of third parties and statement recorded at back of assessee without it being afforded opportunity to interrogate said documents and without bringing on record any supporting evidence, could not be made basis for adding undiscloses income in hands of assessee". C. Additional Commissioner of Income Tax Vs. Miss Lata Mangeshkar (1974) ITR 696 (Mumbai) "It has been held that on appreciation of evidence on record, that entries in the ledger of a firm (third party) did not represent assessce's income from undisclosed sources, was finding of the fact not giving rise to any referable question of law. D. Amarjit Singh Bakshi (HUF) Vs. Assistant Commissioner of Income Tax (2003) 86 ITD 13 (Delhi) "It has been held that where document in question was not recovered from assessee's possession but was recovered from N's possession, and assessee was not allowed any opportunity of cross-examination and further, N's testimony was not found credible at all, it could not be said that there was any iota of evidence to support revenue's case that a huge figure over and above figure booked in records and accounts changed hands between parties and therefore, no addition could be made based on such document in hands of assessee.
Akesh Sangemermer (P) Ltd. vs. ITO Asstt. Years: 2004-05, 2007-08, 2008-09 Their Lordship in the case of L.K. Advani vs Central Bureau of Investigation on 1 April, 1997 held that I am tempted here to cite a few lines from Murphy on Evidence, page 180 "At common law, an admission made by one party is evidence against the maker of the statement, but not against any other party implicated by it." When the Assessing Officer in the instant case was placing sole reliance on the statement only of Shri Rasik Lal Dhariwal, Shri Prakash Dhariwal, Sohan Raj Mehta for making addition It was therefore, more so necessary to make arrangement for the cross examination of the witness by Shri Mukesh Garg, the appellant. in the interest of natural justice before taking a final view in the matter. However, from the assessment order it is found that such recourse was not taken by the AO. Despite being asked for vide appellant request letter dated 26.12.2011. The Hon'ble Delhi High Court has held as under: i) In the case of CIT vs. SMC Share Broker Ltd. 288 ITR 345, it was held that in absence of witness being made available for cross examination, his statement could not be relied upon to the detriment of the assessee. Tribunal was justified in setting aside block assessment. ii) In the case of CIT Vs. SM Aggarwal 293 ITR 43, it was held that statement made by the assessee's daughter, cannot be said to be relevant or admissible evidence against the assessee, since the assessee was not given any opportunity to cross examine her and even from the statement, no conclusion can be drawn that the entries made on the relevant page belongs to the assessee and represents his undisclosed income. After considering the submissions made above, I am of the considered opinion that addition on the basis of statement of the third party without any corroborative evidence is not tenable. The addition made by the AO for Rs. 1, 47, 30, 0001/- is hereby deleted. The ground raised by the appellant is thus allowed."
9. The above observations have been made in the case of Shri Mukesh Garg by the first appellate authority and on this basis; protective addition in the hands of assessee firm has been deleted by the Commissioner of Income Tax (A) in all assessment years under consideration in these appeals. The Commissioner of Income Tax (A), in the present case, finally held that since the substantive additions made in the cases of Shri Mukesh Garg could not sustain, the protective additions made by the Assessing Officer in the hands of assessee partnership firm cannot survive. With these observations, the Commissioner of income Tax (A) has allowed the appeal of the assessee.
Akesh Sangemermer (P) Ltd. vs. ITO There is nothing before us to take a different view in this regard. We are unable to see any perversity, infirmity and ambiguity in the impugned order as alleged by the Id. DR. It is a well-settled position of law that when substantive addition has been deleted by the competent statutory authority. then the protective addition made there under and related to the substantive addition cannot survive. Accordingly, we decline to interfere with the impugned order and all grounds raised in these appeals are devoid of merits and we dismiss them all." Thus, it is evident that law is well settled in respect of evidentiary value of 3rd party evidences. Documents found from the possession of 3rd party or admission of 3rd party cannot be used to fasten tax liability without any further corroborative evidence. Honourable ITAT Jaipur has observed in the case of Shrikant Singhania v/s Asst. Commissioner of Income Tax, Central Circle-4, Jaipur. On No. 1221 & 1222/JPR/2024 dated 17/01/2025 held that no addition can be made on the basis of statement of third party Honourable Mad HC in N Swamy 241 ITR 363 relied by Chennai ITAT in Omega Estates and Chd ITAT in Dr. R.L.Narang, it was held that The burden of showing that the assessee had undisclosed income is on the revenue. That burden cannot be said to be discharged by merely referring to the statement given by the assessee to a third party in connection with a transaction which was not directly related to the assessment and making that the sole foundation for a finding that the assessee had deliberately suppressed his income In the circumstances, the absolutely illegal action of the Ld Assessing Officer should not be countenanced. It is prayed accordingly.”
6. In addition to the written submission so filed ld. AR of the assessee vehemently argued that in the assessment order as well as order of the Ld CIT(A) it is evident that the entire addition is based on some material found during the course of search at the premises of Yashika Group to which the appellant is not a party. The alleged incriminating material/statements referred to by the Ld AO and the Ld CIT(A) have never been made available to the Akesh Sangemermer (P) Ltd. vs. ITO appellant. Neither the appellant has been accorded any opportunity to cross examine the Director of Yashika Groups on whose statement, the department has made addition nor that exact material and details were placed on record before the assessee. He also stated that ld. CIT(A) has categorically recorded that during the assessment proceeding, the appellant denied having transaction entered but has not considered the plea of the assessee. He also submitted that neither the ld. AO or the ld. CIT(A) brought on record any material to substantiate that the appellant has incurred any expenditure source of which is not recorded in the Books of accounts. The addition is made merely on third party statement which were not shared with the assessee and therefore, considering that aspect of the matter and decision of Hon’ble Jurisdictional High Court in case of CIT vs. Smt. Sunit Dhadda in D.B. Income Tax Appeal No. 197/2012 vide order dated 31.07.2017. The appeal of the assessee required to be allowed.
Per contra, Ld. DR relied upon the findings recording in the order of Ld. CIT(A) vide in para 6 at page 10 of the order of the ld. CIT(A) wherein ld. CIT(A) recorded a finding that the additions were made under the provisions of Section 69C of the Act and the
We have heard the rival contentions and perused material available on record. Ground no. 1 to 4 raised by the assessee challenges the addition of Rs. 14,40,000/- made u/s. 69C of the Act in the hands of the assessee. Since all the four ground though separate effectively it is for the sole addition of Rs. 14,40,000/- and therefore, we take up that as one issue. The brief facts related to the issue are that the assessee is engaged in the business of purchase and sale of Marble and granite Blocks and slabs. The case was selected for scrutiny under CASS as per CRU/VRU information. Accordingly, notice U/s 143(2) was issued to the assessee. As per the information, a search and seizure operation were conducted in the case of Yashika Group on 08.03.2022. The said group was engaged in the business of mining and quarrying of Granite Blocks, Quartz. Felspar etc. at Deogarh, Rajsamand. During the course of search and seizure operation, voluminous and highly incriminating soft data was seized which was extracted in the post search proceedings in that group. These data contain various excel sheets and other records. During search laptop and pen drive were also taken and the data stored in these devices Akesh Sangemermer (P) Ltd. vs. ITO was examined. The laptop and pen drive consisted of various kind of excel sheets and other data. These documents contain records of entries indicating huge amount of undisclosed income earned by the group. During the search and seizure operation, the statement of Shri Rajendra Yadav, Shri Kailash Mehta and others of the group members were recorded. The ld. AO noted that the evidence gathered during the search and statements of various individuals resulted in detection of highly dubious methodology followed by the group for evasion of taxes. It was unearthed from the evidence gathered that the group was extensively engaged in under billing/under invoicing of sales. It was noticed that part of the sale consideration was received through banking channels and part of the consideration was received in cash, which was not at all recorded in the books of accounts. Such unrecorded sales were entered into various excel sheets and other documents. The sales entered on such excel sheets were not recorded in the regular books of accounts. These facts were accepted by Shri Rajendra Yadav, Shri Kailash Mehta and others of the group member. He categorically accepted the fact that the group was engaged in unaccounted cash sales of granite blocks and explained how they kept record of these unaccounted transactions. The name of the Akesh Sangemermer (P) Ltd. vs. ITO assessee M/s Akesh Sangemarmar (assessee) was also found in the list of unaccounted cash sales. The ld. AO listed transaction for an amount of Rs. 14,40,000/- as tabulated at page 3 of the assessment order wherein the ld. AO noted that the assessee has purchased that amount of material from Yashika Group. Based on that set of facts a show cause notice proposing to add Rs. 14,40,000/- as bogus purchase vide notice dated 21.02.2024 proposing to treat it as unexplained expenditure as per provision of section 69C of the Act. The assessee submitted a reply stating that they have not made any cash purchases to the tune of Rs. 14,40,000/- during the financial year 2021-22 from Yashika Group. Reply submitted by the assessee was examined by the ld. AO but was not found acceptable in view of the documents found during the search operation in Yashik group and statement of Shri Rajendra Yadav, Shri Kailash Mehta and others of the Yashika group taken in which they categorically accepted the fact that the group was engaged in unaccounted cash sales of granite blocks and also explained how they kept record of these unaccounted transactions and the name of the assessee was found in the list of unaccounted cash sales and thereby the same was treated as unexplained expenditure u/s 69C of the Income Tax Act.
It is a trite law that once the appellant fails to discharge the onus cast on it to explain the source of any expenditure incurred to the satisfaction of the Assessing Officer, the amount may be deemed to be the income of the appellant as per the deeming provisions of sections 69C of the Act. The deeming provisions of the law are attracted in the facts and circumstances of the case whereby the AO is justified to make an addition to the total income of the amount of unaccounted purchases made, as the same was not explained by the appellant. The case laws cited by the appellant have not been found applicable to the facts of case of the appellant. Hence, in the absence of satisfactory explanation, the AO had no option but to make the addition as per provisions of law. In view of the facts and circumstances, I do not find any infirmity in the decision of the AO. Accordingly, the addition of Rs.14,40,000/- is hereby confirmed. Above Ground of appeal are hereby dismissed.
Since the issue is revolving around the provision of section 69C of the Act it would be proper to refer the provision of the Act which reads as under :
Unexplained expenditure, etc.
69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year : Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.
Akesh Sangemermer (P) Ltd. vs. ITO As is evident from the provision of section 69C of the Act first the ld. AO has to establish that the assessee has incurred any expenditure. Having done so if the assessee does not offer any explanation about the source of such expenditure or part thereof then the said expenditure be considered as unexplained expenditure of the assessee. Here we note that based on the finding so recorded in the order of the lower authority it was not established that the amount of Rs. 14,40,000/- is pertaining to the one purchase which is not recorded or that the purchase made is partly recorded and partly not [ Because in the search statement it was stated so ]. Thus, even at the time of hearing of the appeal it was not made clear as to whether the assessee has made any purchase from the said group if so from which concern and whether the whole purchase is not recorded or part of it was not recorded. Thus, the finding of the lower authority is merely based on the statement and some information recorded in the digital record. The records reveal that even the statement and the information based on which the addition proposed were not shared with the assessee. The bench noted that the whole addition hinges on evidence gathered from third party document or statement. Now the issue is can third party statement or entry in absence of any Akesh Sangemermer (P) Ltd. vs. ITO corroborative evidence despite using ultimate weapon of search, can result in justified addition. The legal provision related to presumption u/s. 132(4A) is applicable to the person from whose possession or control the incriminating material found from third party search but not belonging to the assessee – appellant this presumption cannot be applied to the assessee as there is no search and no incriminating document were placed on record to support the addition so made by the revenue. As is evident form the orders of the lower authority that there was no clarity as to whether the assessee has purchased the goods which were under invoiced or the assessee has purchased the goods which are not recorded. No details were placed on record to justify that the assessee has purchased the goods worth Rs. 14,40,000/- even the details of concern under which the said sale was found recorded was not placed on record and thus it is clear that the addition is made purely relying on the third-party statement which cannot be made. We get support of our from the recent decision of our own Hon'ble Jurisdictional High Court in case of Principal Commissioner of Income-tax v. Esspal International (P) Ltd. (2024) 166 texmann.com 722 (Rajasthan). Wherein the our High Court held that no addition can be made merely based on the statement.
Now it is a matter of record that Shirish Chandrakant Shah had retracted his statements given before the Assessing Officer, Even otherwise, on admission by the assessee cannot be said to be a conclusive piece of evidence The admission of the assessee in absence of any corroborative evidence to strengthen the case of the Revenue cannot be made the basis for any addition Therefore, the substantial questions of law framed by the appellant pertained to an open issue which stands concluded by the decision of the Hon'ble Supreme Court, one such decision was rendered in "M/s Pullangode Rubber Produce Co Ltd. v. State of Kerala And Another" (1973) 19 ITR 18….…..
For the foregoing reasons, D.B. Income Tax Appeal No. 25/2024 is dismissed" Thus, since the addition is purely based on the statement of third party without bringing any details as to the fact that whether the assessee has suppressed the purchase or not recorded purchase. The details were not brought on record the addition merely on the statement cannot be made as held by our High Court in the above case and therefore, we considered the four grounds raised by the assessee and direct the ld. AO delete the addition of Rs. 14,40,000/- made.
Akesh Sangemermer (P) Ltd. vs. ITO Ground no. 5 raised deal with the charge of tax at special rate on the addition so made since we have directed to delete the addition this ground become academic and thus not required to be adjudicated.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 07/03/2025.