ASSISTANT COMMISSIONER OF INCOME-TAX, MADURAI vs. ALBA INDUSTRIES LIMITED, CHENNAI

आदेश / O R D E R PER ABY T. VARKEY, JM: These appeals preferred by the Revenue and the cross-objections

by the assessee are arising out of the appellate orders passed by the

Learned Commissioner of Income Tax (Appeals)-19, Chennai [in short

‘CIT(A)’] in relation to the assessment orders all dated 27.08.2021 passed

u/s 143(3)/153A of the Income-tax Act, 1961 [in short ‘the Act’] for the

Assessment Years [in short ‘AY’] 2014-15 to 2018-19 and the assessment

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 2 ::

order dated 02.09.2021 passed u/s 143(3) of the Act for AY 2019 order dated 02.09.2021 passed u/s 143(3) of the Act for AY 2019 order dated 02.09.2021 passed u/s 143(3) of the Act for AY 2019-20.

Since the issues involve Since the issues involved are common, all the appeals have been heard d are common, all the appeals have been heard

together. Both the parties also raised similar arguments on these issues. together. Both the parties also raised similar arguments on these issues. together. Both the parties also raised similar arguments on these issues.

Accordingly, we dispose off all these appeals by this consolidated order for Accordingly, we dispose off all these appeals by this consolidated order for Accordingly, we dispose off all these appeals by this consolidated order for

the sake of convenience. the sake of convenience.

engaged in the business of mining, processing and refining of beach engaged in the business of mining, processing and refining of beach engaged in the business of mining, processing and refining of beach

minerals. A search action u/s 132 of the Act upon the assessee and its minerals. A search action u/s 132 of the Act upon the assessee and its minerals. A search action u/s 132 of the Act upon the assessee and its

group concerns on 25.10.2018. In the course of search, several group concerns on 25.10.2018. In the course of search, several group concerns on 25.10.2018. In the course of search, several

documents & electronic material were found and seized pursuant to which onic material were found and seized pursuant to which onic material were found and seized pursuant to which

the AO inter alia initiated proceedings u/s 153A of the Act for the relevant the AO inter alia initiated proceedings u/s 153A of the Act for the relevant the AO inter alia initiated proceedings u/s 153A of the Act for the relevant

AYs 2013-14 to 2018-19. The case of AY 2019 19. The case of AY 2019-20 being the searched 20 being the searched

year was selected for scrutiny u/s 143(3) of the Act. From year was selected for scrutiny u/s 143(3) of the Act. From year was selected for scrutiny u/s 143(3) of the Act. From the electronic

material seized during the course of search viz., tally data, it was noted material seized during the course of search viz., tally data, it was noted material seized during the course of search viz., tally data, it was noted

that, the assessee was maintaining two sets of accounts, one titled “ori” that, the assessee was maintaining two sets of accounts, one titled “ori” that, the assessee was maintaining two sets of accounts, one titled “ori”

and other titled “IT”. Upon enquiry, the accounts manager of the assessee and other titled “IT”. Upon enquiry, the accounts manager of the assessee and other titled “IT”. Upon enquiry, the accounts manager of the assessee

affirmed in his statement recorded u/s 132(4) of the Act that, the atement recorded u/s 132(4) of the Act that, the atement recorded u/s 132(4) of the Act that, the

assessee was maintaining parallel sets of accounts for banking & financial assessee was maintaining parallel sets of accounts for banking & financial assessee was maintaining parallel sets of accounts for banking & financial

purposes and other for income purposes and other for income-tax purposes. The AO in the course of tax purposes. The AO in the course of

assessment inferred that, the accounts maintained under the titl assessment inferred that, the accounts maintained under the titl assessment inferred that, the accounts maintained under the title “IT”

was in form of suppression of income by inflating expenses in the tally was in form of suppression of income by inflating expenses in the tally was in form of suppression of income by inflating expenses in the tally

data. After calling for explanation from the assessee, the AO observed data. After calling for explanation from the assessee, the AO observed data. After calling for explanation from the assessee, the AO observed

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 3 ::

that, the assessee had inflated the expenses and several expenses were that, the assessee had inflated the expenses and several expenses were that, the assessee had inflated the expenses and several expenses were

not not supported supported by by documentary documentary eviden evidences ces and and therefore therefore made made

disallowances out of several heads of expenses in AYs 2014 disallowances out of several heads of expenses in AYs 2014 disallowances out of several heads of expenses in AYs 2014-15 to 2018-

to 2019-20, which was also added to the total income. The summary of 20, which was also added to the total income. The summary of 20, which was also added to the total income. The summary of

additions impugned befor additions impugned before us are as follows:-

Asst Year Disallowance Disallowance under under Addition on account Addition on account Addition on account of cash expenditure of unaccounted sales several several heads heads of of of unaccounted sales expenses - 2014-15 29,29,72,070 - 29,29,72,070 - 2015-16 19,88,67,560 - 19,88,67,560 - 2016-17 13,33,20,265 - 13,33,20,265 - 2017-18 38,50,96,064 5,91,54,500 38,50,96,064 5,91,54,500 2018-19 - 90,00,000 18,92,22,500 18,92,22,500 2019-20 - - 9,34,67,388 9,34,67,388 3. Being aggrieved by the order of the AO, the assessee preferred Being aggrieved by the order of the AO, the assessee preferred Being aggrieved by the order of the AO, the assessee preferred

appeals before the Ld. CIT( appeals before the Ld. CIT(A). Having considered the contentions of the A). Having considered the contentions of the

assessee in light of the findings of the AO, the Ld. CIT(A) took a view assessee in light of the findings of the AO, the Ld. CIT(A) took a view assessee in light of the findings of the AO, the Ld. CIT(A) took a view

that, the books of accounts of the assessee was not reliable and that the that, the books of accounts of the assessee was not reliable and that the that, the books of accounts of the assessee was not reliable and that the

assessee was unable to support the expenses with proper bills and assessee was unable to support the expenses with proper bills and assessee was unable to support the expenses with proper bills and

vouchers. The Ld. CIT(A) accordingly rejected the books of accounts. At vouchers. The Ld. CIT(A) accordingly rejected the books of accounts. At vouchers. The Ld. CIT(A) accordingly rejected the books of accounts. At

the same time, according to ld. CIT(A), the disallowance of entire the same time, according to ld. CIT(A), the disallowance of entire the same time, according to ld. CIT(A), the disallowance of entire

expenses made by the AO was excessive as it was resulting in abnormally expenses made by the AO was excessive as it was resulting in abnormally expenses made by the AO was excessive as it was resulting in abnormally

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 4 ::

high profits which was held to be not approp high profits which was held to be not appropriate in assessee’s line of riate in assessee’s line of

business. Following the order passed by the coordinate bench of this business. Following the order passed by the coordinate bench of this business. Following the order passed by the coordinate bench of this

Tribunal in the case of assessee’s sister concern M/s Beach Minerals Tribunal in the case of assessee’s sister concern M/s Beach Minerals Tribunal in the case of assessee’s sister concern M/s Beach Minerals

Company for AY 2013- -14, which was also engaged in the same line of 14, which was also engaged in the same line of

business, the Ld. CIT(A business, the Ld. CIT(A) estimated the profits of the assessee for the ) estimated the profits of the assessee for the

relevant AYs at 2.21%. The Ld. CIT(A) further noted that, the AO’s relevant AYs at 2.21%. The Ld. CIT(A) further noted that, the AO’s relevant AYs at 2.21%. The Ld. CIT(A) further noted that, the AO’s

predecessor had made disallowance out of expenses in the original predecessor had made disallowance out of expenses in the original predecessor had made disallowance out of expenses in the original

assessments completed u/s 143(3) of the Act for AYs 2014 assessments completed u/s 143(3) of the Act for AYs 2014 assessments completed u/s 143(3) of the Act for AYs 2014-15 & 2015-16

due to non-verification. He held that, since the income estimated was in verification. He held that, since the income estimated was in verification. He held that, since the income estimated was in

excess of the disallowances made in these years, the disallowances made excess of the disallowances made in these years, the disallowances made excess of the disallowances made in these years, the disallowances made

in the assessments u/s 143(3) of the Act stood subsumed and therefore in the assessments u/s 143(3) of the Act stood subsumed and therefore in the assessments u/s 143(3) of the Act stood subsumed and therefore

directed that the addition made on account of directed that the addition made on account of estimated profits be estimated profits be

reduced to the extent of disallowances already made in the original reduced to the extent of disallowances already made in the original reduced to the extent of disallowances already made in the original

assessments for AYs 2014 assessments for AYs 2014-15 and 2015-16. The Ld. CIT(A) also deleted 16. The Ld. CIT(A) also deleted

the addition made by way of cash payments u/s 69C of the Act. On the the addition made by way of cash payments u/s 69C of the Act. On the the addition made by way of cash payments u/s 69C of the Act. On the

issue of suppressed sales, th issue of suppressed sales, the Ld. CIT(A) directed that the same be added e Ld. CIT(A) directed that the same be added

to the reported turnover of the assessee and that the profits of 2.21% be to the reported turnover of the assessee and that the profits of 2.21% be to the reported turnover of the assessee and that the profits of 2.21% be

computed on such increased turnover. The Ld. CIT(A) accordingly partly computed on such increased turnover. The Ld. CIT(A) accordingly partly computed on such increased turnover. The Ld. CIT(A) accordingly partly

allowed the appeals of the assessee for all the AYs before us. allowed the appeals of the assessee for all the AYs before us. allowed the appeals of the assessee for all the AYs before us. Aggrieved

by the Ld. CIT(A)’s order, both the assessee and Revenue are in now in by the Ld. CIT(A)’s order, both the assessee and Revenue are in now in by the Ld. CIT(A)’s order, both the assessee and Revenue are in now in

appeal before us.

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 5 ::

reiterated the findings of the AO. He submitted that, the search enquiries reiterated the findings of the AO. He submitted that, the search enquiries reiterated the findings of the AO. He submitted that, the search enquiries

had revealed that, the assessee was maintaining parallel sets of accounts, the assessee was maintaining parallel sets of accounts, the assessee was maintaining parallel sets of accounts,

one set of accounts reflecting the actual receipts & expenses and another one set of accounts reflecting the actual receipts & expenses and another one set of accounts reflecting the actual receipts & expenses and another

set of accounts maintained for tax purpose. According to Ld. CIT, DR the set of accounts maintained for tax purpose. According to Ld. CIT, DR the set of accounts maintained for tax purpose. According to Ld. CIT, DR the

expenditure booked in accounts maintained for tax p expenditure booked in accounts maintained for tax purposes was higher urposes was higher

than the original set of accounts resulting in the net profit to be lower. He than the original set of accounts resulting in the net profit to be lower. He than the original set of accounts resulting in the net profit to be lower. He

contended that, by inflating expenses, the assessee was generating contended that, by inflating expenses, the assessee was generating contended that, by inflating expenses, the assessee was generating

unaccounted funds which were used for on unaccounted funds which were used for on-money payments in relation to money payments in relation to

property purchases. He pointed out that, the assessee was unable to e pointed out that, the assessee was unable to e pointed out that, the assessee was unable to

furnish supportings for these expenses and therefore the AO rightly held furnish supportings for these expenses and therefore the AO rightly held furnish supportings for these expenses and therefore the AO rightly held

that these expenses were not genuine. He therefore supported the AO’s that these expenses were not genuine. He therefore supported the AO’s that these expenses were not genuine. He therefore supported the AO’s

action of not rejecting the books of accounts but making separate action of not rejecting the books of accounts but making separate action of not rejecting the books of accounts but making separate

additions based on inflation of expenses, on the basis of seized material. additions based on inflation of expenses, on the basis of seized material. additions based on inflation of expenses, on the basis of seized material.

He further submitted that, if the Ld. CIT(A)’s action of rejecting the books He further submitted that, if the Ld. CIT(A)’s action of rejecting the books He further submitted that, if the Ld. CIT(A)’s action of rejecting the books

of accounts is upheld, then the profits ought to be estimated at 53% viz., of accounts is upheld, then the profits ought to be estimated at 53% viz., of accounts is upheld, then the profits ought to be estimated at 53% viz.,

the profitability of another the profitability of another assessee, M/s Industrial Minerals Company, assessee, M/s Industrial Minerals Company,

which according to AO, was comparable to the assessee. The Ld. CIT, DR which according to AO, was comparable to the assessee. The Ld. CIT, DR which according to AO, was comparable to the assessee. The Ld. CIT, DR

further argued that, the Ld. CIT(A) having rejected the books of accounts, further argued that, the Ld. CIT(A) having rejected the books of accounts, further argued that, the Ld. CIT(A) having rejected the books of accounts,

ought to still have adjudicated the merits of the disallowance of e ought to still have adjudicated the merits of the disallowance of e ought to still have adjudicated the merits of the disallowance of expenses,

which according to him, was made on different footings. Overall therefore which according to him, was made on different footings. Overall therefore which according to him, was made on different footings. Overall therefore,

he prayed that the order of Ld. CIT(A) be reversed and the AO’s order be he prayed that the order of Ld. CIT(A) be reversed and the AO’s order be he prayed that the order of Ld. CIT(A) be reversed and the AO’s order be

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 6 ::

restored. The Ld. CIT, DR also furnished a written synopsis of his restored. The Ld. CIT, DR also furnished a written synopsis of his restored. The Ld. CIT, DR also furnished a written synopsis of his

arguments, which has been taken arguments, which has been taken on record.

CIT(A) and urged that order of the Ld. CIT(A) estimating the profits at urged that order of the Ld. CIT(A) estimating the profits at urged that order of the Ld. CIT(A) estimating the profits at

2.21% be upheld. The Ld. AR also filed a written note rebutting the 2.21% be upheld. The Ld. AR also filed a written note rebutting the 2.21% be upheld. The Ld. AR also filed a written note rebutting the

arguments raised by the Ld. CIT, DR. In this written note, the assessee arguments raised by the Ld. CIT, DR. In this written note, the assessee arguments raised by the Ld. CIT, DR. In this written note, the assessee

has separately objected to the validity of the income has separately objected to the validity of the income-tax assessment tax assessment

framed u/s 153A of the Act on the ground that framed u/s 153A of the Act on the ground that, there was no

incriminating material unearthed in the course of search. incriminating material unearthed in the course of search.

authorities and considered the material placed before authorities and considered the material placed before us. us. The legal plea

raised by the assessee in all the AYs before us was that, in absence of any raised by the assessee in all the AYs before us was that, in absence of any raised by the assessee in all the AYs before us was that, in absence of any

incriminating material found in the course of search, the assumption of incriminating material found in the course of search, the assumption of incriminating material found in the course of search, the assumption of

jurisdiction u/s 153A of the Act by the AO was invalid rendering the jurisdiction u/s 153A of the Act by the AO was invalid rendering the jurisdiction u/s 153A of the Act by the AO was invalid rendering the

impugned orders to be void ab initio. be void ab initio. As noted earlier, search was As noted earlier, search was

conducted u/s 132 of the Act upon the assessee on 25.10.2018, pursuant conducted u/s 132 of the Act upon the assessee on 25.10.2018, pursuant conducted u/s 132 of the Act upon the assessee on 25.10.2018, pursuant

to which the AO had reopened income to which the AO had reopened income-tax assessments for AYs 2013 tax assessments for AYs 2013-14

to 2018-19 u/s 153A of the Act. It is not in dispute that, the assess 19 u/s 153A of the Act. It is not in dispute that, the assess 19 u/s 153A of the Act. It is not in dispute that, the assessee was

maintaining two sets of books of accounts, which was found in the course maintaining two sets of books of accounts, which was found in the course maintaining two sets of books of accounts, which was found in the course

of search and also affirmed by the accounts manager in his statement of search and also affirmed by the accounts manager in his statement of search and also affirmed by the accounts manager in his statement

recorded u/s 132(4) of the Act. According to the Revenue, the receipts recorded u/s 132(4) of the Act. According to the Revenue, the receipts recorded u/s 132(4) of the Act. According to the Revenue, the receipts

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 7 ::

and expenses maintained in tally dat and expenses maintained in tally data titled ‘ori’ was the actual results of a titled ‘ori’ was the actual results of

the assessee and that the accounts maintained under title ‘IT’ was where the assessee and that the accounts maintained under title ‘IT’ was where the assessee and that the accounts maintained under title ‘IT’ was where

expenses were inflated to arrive at suppressed profits for income expenses were inflated to arrive at suppressed profits for income expenses were inflated to arrive at suppressed profits for income-tax

purposes. According to assessee however, the tally data titled ‘ori’ purposes. According to assessee however, the tally data titled ‘ori’ purposes. According to assessee however, the tally data titled ‘ori’

contained unaudited, incomplete data whereas the tally data ‘IT’ was tained unaudited, incomplete data whereas the tally data ‘IT’ was tained unaudited, incomplete data whereas the tally data ‘IT’ was

finalized on the basis of complete audited data gathered from all finalized on the basis of complete audited data gathered from all finalized on the basis of complete audited data gathered from all

locations/sites of the assessee. The fact however remains that, there were locations/sites of the assessee. The fact however remains that, there were locations/sites of the assessee. The fact however remains that, there were

two parallel sets of books of accounts being main two parallel sets of books of accounts being maintained by the assessee tained by the assessee

which was unearthed in course of search and which suggested which was unearthed in course of search and which suggested which was unearthed in course of search and which suggested

discrepancies and also raised prima facie doubt regarding correctness of discrepancies and also raised prima facie doubt regarding correctness of discrepancies and also raised prima facie doubt regarding correctness of

the books of accounts. Further, evidence regarding suppression of sales Further, evidence regarding suppression of sales

was also unearthed from the was also unearthed from the seized electronic material. According to us According to us

therefore, these seized electronic material coupled with the statement therefore, these seized electronic material coupled with the statement therefore, these seized electronic material coupled with the statement

given by the accounts manager u/s 132(4) of the Act given by the accounts manager u/s 132(4) of the Act given by the accounts manager u/s 132(4) of the Act constituted

incriminating material unearthed in the course of search and hence incriminating material unearthed in the course of search and hence incriminating material unearthed in the course of search and hence, the

preliminary plea of the assessee objecting to the validity of jurisdiction minary plea of the assessee objecting to the validity of jurisdiction minary plea of the assessee objecting to the validity of jurisdiction

assumed by the AO u/s 153A of the Act for want of incriminating material assumed by the AO u/s 153A of the Act for want of incriminating material assumed by the AO u/s 153A of the Act for want of incriminating material

in all the AYs before us, is hereby rejected. , is hereby rejected.

the issue regarding the disallowance made out of several heads of the issue regarding the disallowance made out of several heads of the issue regarding the disallowance made out of several heads of

expenses by the AO in the AYs 2014 expenses by the AO in the AYs 2014-15 to 2017-18 before us. It is noted 18 before us. It is noted

that, the assessee is engaged in the business of mining, processing and that, the assessee is engaged in the business of mining, processing and that, the assessee is engaged in the business of mining, processing and

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 8 ::

refining beach minerals. The books of accoun refining beach minerals. The books of accounts in relation to this business ts in relation to this business

is noted to have been maintained in the tally software. The assessee is noted to have been maintained in the tally software. The assessee is noted to have been maintained in the tally software. The assessee

however was found to have been maintaining two sets of books of however was found to have been maintaining two sets of books of however was found to have been maintaining two sets of books of

accounts in tally software viz., ‘ori’ & ‘IT’. Upon analysis of the entries accounts in tally software viz., ‘ori’ & ‘IT’. Upon analysis of the entries accounts in tally software viz., ‘ori’ & ‘IT’. Upon analysis of the entries

found in these parallel books of accounts maintained in the tally software, parallel books of accounts maintained in the tally software, parallel books of accounts maintained in the tally software,

the AO noted that the expenses debited in the tally accounts maintained the AO noted that the expenses debited in the tally accounts maintained the AO noted that the expenses debited in the tally accounts maintained

for income-tax purposes i.e. ‘IT’, was comparatively higher than the tax purposes i.e. ‘IT’, was comparatively higher than the tax purposes i.e. ‘IT’, was comparatively higher than the

books maintained under the title ‘ori’. The AO also no books maintained under the title ‘ori’. The AO also noted that several ted that several

expenses did not have proper narration or payment details, which led him expenses did not have proper narration or payment details, which led him expenses did not have proper narration or payment details, which led him

to believe that they were bogus in nature. Before the Ld. CIT(A), the to believe that they were bogus in nature. Before the Ld. CIT(A), the to believe that they were bogus in nature. Before the Ld. CIT(A), the

assessee is noted to have explained that, the books of accounts titled ‘ori’ assessee is noted to have explained that, the books of accounts titled ‘ori’ assessee is noted to have explained that, the books of accounts titled ‘ori’

were incomplete and unaudited accounts and that the books of accounts unaudited accounts and that the books of accounts unaudited accounts and that the books of accounts

titled ‘IT’ was the complete audited accounts prepared on actual data. The titled ‘IT’ was the complete audited accounts prepared on actual data. The titled ‘IT’ was the complete audited accounts prepared on actual data. The

assessee had explained that, due to shortage of proper accounting staff assessee had explained that, due to shortage of proper accounting staff assessee had explained that, due to shortage of proper accounting staff

and lack of proper knowledge, the accounting staff would n and lack of proper knowledge, the accounting staff would n and lack of proper knowledge, the accounting staff would not pass the

entries on a day to day basis or would make the entries under wrong entries on a day to day basis or would make the entries under wrong entries on a day to day basis or would make the entries under wrong

ledgers and that the Chartered Accountant would assist in updating the ledgers and that the Chartered Accountant would assist in updating the ledgers and that the Chartered Accountant would assist in updating the

books of accounts in the Tally software and pass the finalization entries books of accounts in the Tally software and pass the finalization entries books of accounts in the Tally software and pass the finalization entries

only at the fag-end of the stat end of the statutory time for filing the return of income. utory time for filing the return of income.

The assessee tacitly acknowledged the accounting anomaly in maintaining The assessee tacitly acknowledged the accounting anomaly in maintaining The assessee tacitly acknowledged the accounting anomaly in maintaining

the books of accounts but contended that these accounting anomalies the books of accounts but contended that these accounting anomalies the books of accounts but contended that these accounting anomalies

cannot be treated as inflation of expenses cannot be treated as inflation of expenses. The assessee is also noted t . The assessee is also noted to

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 9 ::

have brought on record several fa have brought on record several factual aspects regarding the ctual aspects regarding the entries

passed in the parallel books of accounts, passed in the parallel books of accounts, which according to it, showed according to it, showed

that there were only accounting anomalies were only accounting anomalies in the books titled ‘ori’, in the books titled ‘ori’, which

were corrected in the final audited bo were corrected in the final audited books of accounts titled ‘IT’. It is noted oks of accounts titled ‘IT’. It is noted

that, the Ld. CIT(A) took cognizance of the explanation furnished by the that, the Ld. CIT(A) took cognizance of the explanation furnished by the that, the Ld. CIT(A) took cognizance of the explanation furnished by the

assessee and found it to be acceptable. At the same time, the Ld. CIT(A) assessee and found it to be acceptable. At the same time, the Ld. CIT(A) assessee and found it to be acceptable. At the same time, the Ld. CIT(A)

however noted that, the assessee was still required to reconcile the however noted that, the assessee was still required to reconcile the however noted that, the assessee was still required to reconcile the

discrepancies between these parallel set of books of accounts and that discrepancies between these parallel set of books of accounts and that discrepancies between these parallel set of books of accounts and that

such exercise could not be avoided due to various constraints and such exercise could not be avoided due to various constraints and such exercise could not be avoided due to various constraints and

practical difficulties being faced by the assessee. The Ld. CIT(A) was practical difficulties being faced by the assessee. The Ld. CIT(A) was practical difficulties being faced by the assessee. The Ld. CIT(A) was

accordingly of the view that the books of accoun accordingly of the view that the books of accounts was unreliable and ts was unreliable and

therefore rejected the same. The relevant findings of Ld. CIT(A) taken therefore rejected the same. The relevant findings of Ld. CIT(A) taken therefore rejected the same. The relevant findings of Ld. CIT(A) taken

note of by us in AY 2014 note of by us in AY 2014-15 (which is verbatim same in AYs 2015 15 (which is verbatim same in AYs 2015-16 to

2017-18), is as under:-

“7.5.8 The undersigned has duly examined the submission made by The undersigned has duly examined the submission made by The undersigned has duly examined the submission made by the AR. There exists no doubt about the maintenance of two sets of AR. There exists no doubt about the maintenance of two sets of AR. There exists no doubt about the maintenance of two sets of books of accounts by the Appellant books of accounts by the Appellant Company. The AO on the basis of the Company. The AO on the basis of the statement recorded during the course of the search from the Accounts recorded during the course of the search from the Accounts recorded during the course of the search from the Accounts Manager has identified that one is titled as “ori” an Manager has identified that one is titled as “ori” and another is “IT” d another is “IT” which denotes that “Original” and “Income Tax”. The AO in the which denotes that “Original” and “Income Tax”. The AO in the which denotes that “Original” and “Income Tax”. The AO in the assessment order has made a finding that in the accounts maintained assessment order has made a finding that in the accounts maintained assessment order has made a finding that in the accounts maintained under the title “ori” is the original books of accounts where all the under the title “ori” is the original books of accounts where all the under the title “ori” is the original books of accounts where all the receipts and expenditures have been du receipts and expenditures have been duly reflected. In the accounts ly reflected. In the accounts under the title “IT” is the accounts where expenditures have been under the title “IT” is the accounts where expenditures have been under the title “IT” is the accounts where expenditures have been inflated and the net income is arrived to disclose the same in the return inflated and the net income is arrived to disclose the same in the return inflated and the net income is arrived to disclose the same in the return of income filed. However, the Appellant during the course of Appellate of income filed. However, the Appellant during the course of Appellate of income filed. However, the Appellant during the course of Appellate proceedings has contended that terming the “original” and “IT” is wrong contended that terming the “original” and “IT” is wrong contended that terming the “original” and “IT” is wrong and the appropriate term is “audited” and “unaudited”. The undersigned and the appropriate term is “audited” and “unaudited”. The undersigned and the appropriate term is “audited” and “unaudited”. The undersigned has considered that the terming is inappropriate to arrive a meaningful has considered that the terming is inappropriate to arrive a meaningful has considered that the terming is inappropriate to arrive a meaningful

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 10 ::

decision in respect of various issues raised by the Appe decision in respect of various issues raised by the Appe decision in respect of various issues raised by the Appellant in the grounds of appeal. grounds of appeal.

7.5.9 The Appellant during the course of Appellate proceedings has The Appellant during the course of Appellate proceedings has The Appellant during the course of Appellate proceedings has submitted a detailed reason for the incomplete and erroneous manner in submitted a detailed reason for the incomplete and erroneous manner in submitted a detailed reason for the incomplete and erroneous manner in which the books of accounts were maintained. The main reason for the which the books of accounts were maintained. The main reason for the which the books of accounts were maintained. The main reason for the poor maintenance of accounts was the capturing of prima poor maintenance of accounts was the capturing of primary accounting ry accounting data in the tally accounts by the operational staff who were not well data in the tally accounts by the operational staff who were not well data in the tally accounts by the operational staff who were not well versed in accounting and the absence of qualified accounting staff at versed in accounting and the absence of qualified accounting staff at versed in accounting and the absence of qualified accounting staff at multiple remote locations where the processing plant and warehouses of multiple remote locations where the processing plant and warehouses of multiple remote locations where the processing plant and warehouses of the Appellant Company is situat Company is situated. The multiple tally accounts found ed. The multiple tally accounts found during the search was due to the fact that making accounting entries at during the search was due to the fact that making accounting entries at during the search was due to the fact that making accounting entries at multiple locations. The non multiple locations. The non-availability of accurate information regarding availability of accurate information regarding the transactions at the time making the entries in the tally accounts a the transactions at the time making the entries in the tally accounts a the transactions at the time making the entries in the tally accounts and omission to make accounting entries contemporaneously led to either omission to make accounting entries contemporaneously led to either omission to make accounting entries contemporaneously led to either absence of narration or incorrect / erroneous narration for the entries absence of narration or incorrect / erroneous narration for the entries absence of narration or incorrect / erroneous narration for the entries made in the books of accounts. The AR also explained that entries were made in the books of accounts. The AR also explained that entries were made in the books of accounts. The AR also explained that entries were wrongly made by crediting the ledger accou wrongly made by crediting the ledger accounts of group companies nts of group companies while debiting the relevant expenditure account in the books of the while debiting the relevant expenditure account in the books of the while debiting the relevant expenditure account in the books of the Appellant Company in cases where the payments were made by the Company in cases where the payments were made by the Company in cases where the payments were made by the Appellant Company itself from the borrowings made from such group Company itself from the borrowings made from such group Company itself from the borrowings made from such group companies. The AR also explained tha companies. The AR also explained that while crediting the ledger t while crediting the ledger account of group companies, mistakes occurred in adopting the name of account of group companies, mistakes occurred in adopting the name of account of group companies, mistakes occurred in adopting the name of the group company due to similarity in the names of various group the group company due to similarity in the names of various group the group company due to similarity in the names of various group companies. The AR also explained that it was unable to reconcile the companies. The AR also explained that it was unable to reconcile the companies. The AR also explained that it was unable to reconcile the discrepancies pointed discrepancies pointed out by the AO during the course of assessment out by the AO during the course of assessment proceedings and also unable to furnish the bills and vouchers in support proceedings and also unable to furnish the bills and vouchers in support proceedings and also unable to furnish the bills and vouchers in support of the expenditure genuinely incurred by it, in view of passage of time, of the expenditure genuinely incurred by it, in view of passage of time, of the expenditure genuinely incurred by it, in view of passage of time, frequent changes in the staff handling accounts and multiplicity frequent changes in the staff handling accounts and multiplicity frequent changes in the staff handling accounts and multiplicity of group companies.

7.5.10 The undersigned has carefully examined the submissions The undersigned has carefully examined the submissions The undersigned has carefully examined the submissions adduced by the AR to substantiate the maintenance of multiple adduced by the AR to substantiate the maintenance of multiple adduced by the AR to substantiate the maintenance of multiple accounts. At the outset there exists no dispute about the turnover accounts. At the outset there exists no dispute about the turnover accounts. At the outset there exists no dispute about the turnover returned by the Appellant by both the AO an returned by the Appellant by both the AO and the Appellant. d the Appellant.

7.5.11 In the instant case of the Appellant Company, the In the instant case of the Appellant Company, the In the instant case of the Appellant Company, the undersigned is of the view that the reasons explained by the AR for the undersigned is of the view that the reasons explained by the AR for the undersigned is of the view that the reasons explained by the AR for the discrepancies that occurred in the books of accounts as identified by the discrepancies that occurred in the books of accounts as identified by the discrepancies that occurred in the books of accounts as identified by the AO in the assessment order are rea AO in the assessment order are reasonable and acceptable having sonable and acceptable having regard to the nature of the business, the remote locations where the regard to the nature of the business, the remote locations where the regard to the nature of the business, the remote locations where the business operations are carried out, non business operations are carried out, non-availability of skilled accounting availability of skilled accounting staff in such remote locations, multiplicity of group companies with staff in such remote locations, multiplicity of group companies with staff in such remote locations, multiplicity of group companies with similar sounding names and frequent intergroup company transactions. ding names and frequent intergroup company transactions. ding names and frequent intergroup company transactions. Notwithstanding the same, once the discrepancies in the books of Notwithstanding the same, once the discrepancies in the books of Notwithstanding the same, once the discrepancies in the books of accounts have been identified by the AO and the Appellant accounts have been identified by the AO and the Appellant accounts have been identified by the AO and the Appellant Company

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 11 ::

was confronted with the same, the Appellant is required to reconcile was confronted with the same, the Appellant is required to reconcile was confronted with the same, the Appellant is required to reconcile the said discrepancies and produce bills and vouchers in support of the said discrepancies and produce bills and vouchers in support of the said discrepancies and produce bills and vouchers in support of the expenditures in respect of such discrepancies were pointed out by the expenditures in respect of such discrepancies were pointed out by the expenditures in respect of such discrepancies were pointed out by the AO. In cases where the discrepancies were explained to be arising from AO. In cases where the discrepancies were explained to be arising from AO. In cases where the discrepancies were explained to be arising from the crediting of ledger accounts of a wron the crediting of ledger accounts of a wrong group entity instead of the g group entity instead of the correct group entity while debiting the expenditure incurred by a group correct group entity while debiting the expenditure incurred by a group correct group entity while debiting the expenditure incurred by a group entity on behalf of the Appellant, it is necessary on the part of the entity on behalf of the Appellant, it is necessary on the part of the entity on behalf of the Appellant, it is necessary on the part of the assessee to identify the name of the correct group entity which incurred assessee to identify the name of the correct group entity which incurred assessee to identify the name of the correct group entity which incurred the expenditure on behalf of the Appellant and adduce evidence to show ture on behalf of the Appellant and adduce evidence to show ture on behalf of the Appellant and adduce evidence to show that the corresponding entry for the same is found in the ledger account that the corresponding entry for the same is found in the ledger account that the corresponding entry for the same is found in the ledger account of the Appellant in the books of such correct group entity. of the Appellant in the books of such correct group entity.

7.5.12 In cases where the discrepancy has been explained to b In cases where the discrepancy has been explained to b In cases where the discrepancy has been explained to be arising from the erroneous crediting of the ledger account of a group arising from the erroneous crediting of the ledger account of a group arising from the erroneous crediting of the ledger account of a group entity while debiting the expenditure account though the expenditure entity while debiting the expenditure account though the expenditure entity while debiting the expenditure account though the expenditure has been met by the Appellant itself out of received on transfer through has been met by the Appellant itself out of received on transfer through has been met by the Appellant itself out of received on transfer through banking channel from the group entity, it banking channel from the group entity, it is necessary on the part of the is necessary on the part of the Appellant to identify the relevant transactions of transfer of funds to identify the relevant transactions of transfer of funds to identify the relevant transactions of transfer of funds through bank from the group entity and incurring of expenditure by the through bank from the group entity and incurring of expenditure by the through bank from the group entity and incurring of expenditure by the Appellant from such funds by withdrawing the same from the bank. Appellant from such funds by withdrawing the same from the bank. Appellant from such funds by withdrawing the same from the bank. Moreover, in both t Moreover, in both the categories of discrepancies, it is necessary for the he categories of discrepancies, it is necessary for the Appellant to produce the bills and vouchers in support of the relevant to produce the bills and vouchers in support of the relevant to produce the bills and vouchers in support of the relevant expenditure in respect of which the corresponding credit entries were expenditure in respect of which the corresponding credit entries were expenditure in respect of which the corresponding credit entries were erroneously made in the books of accounts. erroneously made in the books of accounts.

7.5.13 In this r In this regard, the Appellant has brought out various egard, the Appellant has brought out various constraints being faced by it in carrying out such reconciliation and constraints being faced by it in carrying out such reconciliation and constraints being faced by it in carrying out such reconciliation and furnishing the supporting bills and vouchers in the written submission by furnishing the supporting bills and vouchers in the written submission by furnishing the supporting bills and vouchers in the written submission by stating that it is unable to do so at present in view of the passag stating that it is unable to do so at present in view of the passag stating that it is unable to do so at present in view of the passage of time and frequent changes in the accounting staff working with the time and frequent changes in the accounting staff working with the time and frequent changes in the accounting staff working with the Appellant. It is considered that the said submission of the Appellant Appellant. It is considered that the said submission of the Appellant Appellant. It is considered that the said submission of the Appellant cannot be disregarded in view of the genuineness of the practical cannot be disregarded in view of the genuineness of the practical cannot be disregarded in view of the genuineness of the practical difficulties expressed by the Appellant. At the difficulties expressed by the Appellant. At the same time, it is also not same time, it is also not possible to accept the correctness of the claims in the books of account possible to accept the correctness of the claims in the books of account possible to accept the correctness of the claims in the books of account unless the discrepancies pointed out in the Assessment Order are unless the discrepancies pointed out in the Assessment Order are unless the discrepancies pointed out in the Assessment Order are subjected to necessary reconciliation. subjected to necessary reconciliation.

7.5.14 In this context, it is pertinent to observe th In this context, it is pertinent to observe that this is not a case at this is not a case where the Appellant is attempting to give incorrect reasons for its where the Appellant is attempting to give incorrect reasons for its where the Appellant is attempting to give incorrect reasons for its inability to produce the supporting bills and vouchers. Having regard to inability to produce the supporting bills and vouchers. Having regard to inability to produce the supporting bills and vouchers. Having regard to the discussion made in the preceding paragraphs, it needs to be the discussion made in the preceding paragraphs, it needs to be the discussion made in the preceding paragraphs, it needs to be observed that there is no dis observed that there is no dispute regarding the fact that the books of pute regarding the fact that the books of account of the Appellant for the assessment years under consideration account of the Appellant for the assessment years under consideration account of the Appellant for the assessment years under consideration are erroneous and inaccurate. Though the Appellant is unable to are erroneous and inaccurate. Though the Appellant is unable to are erroneous and inaccurate. Though the Appellant is unable to reconcile the discrepancies / inaccuracies by furnishing the correct reconcile the discrepancies / inaccuracies by furnishing the correct reconcile the discrepancies / inaccuracies by furnishing the correct details of the relevant transactions along with the supporting bills and the relevant transactions along with the supporting bills and the relevant transactions along with the supporting bills and

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 12 ::

vouchers the same cannot be taken as a reason to disallow the vouchers the same cannot be taken as a reason to disallow the vouchers the same cannot be taken as a reason to disallow the expenditure when the turnover is not disputed. expenditure when the turnover is not disputed.

…..

7.5.17 In this background, it is considered that the books of accounts In this background, it is considered that the books of accounts In this background, it is considered that the books of accounts of the Appellant pellant Company, which are inaccurate, do not facilitate Company, which are inaccurate, do not facilitate arriving at true and correct profits of the Appellant arriving at true and correct profits of the Appellant Company and they Company and they are required to be rejected by invoking the provisions of Section 145(3) are required to be rejected by invoking the provisions of Section 145(3) are required to be rejected by invoking the provisions of Section 145(3) of the Act. Accordingly, the books of accounts of the A of the Act. Accordingly, the books of accounts of the Appellant ppellant Company for the FY 2013- -14 are hereby rejected. Thus, having rejected the are hereby rejected. Thus, having rejected the books of accounts, the business income of the Appellant books of accounts, the business income of the Appellant books of accounts, the business income of the Appellant Company is required to be estimated under the said provisions, consequent to required to be estimated under the said provisions, consequent to required to be estimated under the said provisions, consequent to rejection of the books of accounts.” rejection of the books of accounts.

profitability of the assessee and noted that, if the entire disallowance profitability of the assessee and noted that, if the entire disallowance profitability of the assessee and noted that, if the entire disallowance

made by the AO is upheld, then it would give an incongruous picture in as made by the AO is upheld, then it would give an incongruous picture in as made by the AO is upheld, then it would give an incongruous picture in as

much as the profitability from this business much as the profitability from this business would be abnormally high would be abnormally high

which may range from as 32% to 45%, which was not appropriate in the which may range from as 32% to 45%, which was not appropriate in the which may range from as 32% to 45%, which was not appropriate in the

facts and circumstances of the case. He thus he facts and circumstances of the case. He thus held that, although there ld that, although there

would indeed be discrepancies in the books of accounts as highlighted by would indeed be discrepancies in the books of accounts as highlighted by would indeed be discrepancies in the books of accounts as highlighted by

the AO but that cannot result in assessee actually making profit in excess nnot result in assessee actually making profit in excess nnot result in assessee actually making profit in excess

of 32% of the turnover. The Ld. CIT(A) is noted to have accordingly of the turnover. The Ld. CIT(A) is noted to have accordingly of the turnover. The Ld. CIT(A) is noted to have accordingly

estimated the profits at 2.21% of the turnover of the assessee. The estimated the profits at 2.21% of the turnover of the assessee. The estimated the profits at 2.21% of the turnover of the assessee. The

relevant findings taken note of by us is as under: relevant findings taken note of by us is as under:-

“7.5.15 Even though the claims of the Appellant in the books of Even though the claims of the Appellant in the books of Even though the claims of the Appellant in the books of account cannot be accepted in toto in the face of the discrepancies account cannot be accepted in toto in the face of the discrepancies account cannot be accepted in toto in the face of the discrepancies brought out by the AO in the Assessment Order, making disallowance of out by the AO in the Assessment Order, making disallowance of out by the AO in the Assessment Order, making disallowance of the major portion of expenditure in respect of which such disc the major portion of expenditure in respect of which such disc the major portion of expenditure in respect of which such discrepancies were noticed is also not appropriate to the facts of the case. On making were noticed is also not appropriate to the facts of the case. On making were noticed is also not appropriate to the facts of the case. On making disallowance of entire expenditure in respect of which the discrepancies disallowance of entire expenditure in respect of which the discrepancies disallowance of entire expenditure in respect of which the discrepancies were found as sought to be done by the AO in the Assessment Order, were found as sought to be done by the AO in the Assessment Order, were found as sought to be done by the AO in the Assessment Order,

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 13 ::

the total income of the Appellant the total income of the Appellant was assessed at Rs.29,31,66,835/ was assessed at Rs.29,31,66,835/- for the AY 2014-15 as against the turnover Rs.70,41,20,426/ 15 as against the turnover Rs.70,41,20,426/ 15 as against the turnover Rs.70,41,20,426/- for the FY 2013-14 relevant to the AY 2014 14 relevant to the AY 2014-15.

7.5.16 The said assessment has resulted in impliedly considering the The said assessment has resulted in impliedly considering the The said assessment has resulted in impliedly considering the net profit of the Appellant at 41.64%, for net profit of the Appellant at 41.64%, for the FY 2013- -14, which is abnormally high in the line of business of the Appellant Company and abnormally high in the line of business of the Appellant Company and abnormally high in the line of business of the Appellant Company and not appropriate to the facts and circumstances of the case. It may be not appropriate to the facts and circumstances of the case. It may be not appropriate to the facts and circumstances of the case. It may be appreciated that the said abnormality in the profit margin is indicative of appreciated that the said abnormality in the profit margin is indicative of appreciated that the said abnormality in the profit margin is indicative of the fact that the discrepancies in the accounts pointed out by the AO e discrepancies in the accounts pointed out by the AO e discrepancies in the accounts pointed out by the AO cannot be considered to be arising wholly from wrong claims of cannot be considered to be arising wholly from wrong claims of cannot be considered to be arising wholly from wrong claims of expenditure by the Appellant. As per the provisions of section 250 and expenditure by the Appellant. As per the provisions of section 250 and expenditure by the Appellant. As per the provisions of section 250 and 251 of the Act, the Commissioner of Income Tax Appeals, is entitled 251 of the Act, the Commissioner of Income Tax Appeals, is entitled 251 of the Act, the Commissioner of Income Tax Appeals, is entitled to make such enquiry as he thinks fit and may pass such other order in make such enquiry as he thinks fit and may pass such other order in make such enquiry as he thinks fit and may pass such other order in Appeal as he thinks fit. Thus, the undersigned while disposing of the Appeal as he thinks fit. Thus, the undersigned while disposing of the Appeal as he thinks fit. Thus, the undersigned while disposing of the appeal u/s 250 of the Act is entitled to enter into the shoes of the appeal u/s 250 of the Act is entitled to enter into the shoes of the appeal u/s 250 of the Act is entitled to enter into the shoes of the Assessing Officer and decide the issue. Assessing Officer and decide the issue.

…….

7.5.18 Now, the issue before the undersigned is that, what can be Now, the issue before the undersigned is that, what can be Now, the issue before the undersigned is that, what can be the reasonable profit that can be attributable to the Appellant Company the reasonable profit that can be attributable to the Appellant Company the reasonable profit that can be attributable to the Appellant Company in conduct of business. The Appellant Company in the return of income in conduct of business. The Appellant Company in the return of income in conduct of business. The Appellant Company in the return of income filed has admitted an amount of Rs.1,94,766/ filed has admitted an amount of Rs.1,94,766/- for the FY 2013 the FY 2013-14, relevant to the AY 2014 relevant to the AY 2014-15 which is a mere 0.03%.

7.5.19 At this juncture it is significant to bring on record that in such At this juncture it is significant to bring on record that in such At this juncture it is significant to bring on record that in such circumstance, my predecessor in the case of the Appellant’s Sister circumstance, my predecessor in the case of the Appellant’s Sister circumstance, my predecessor in the case of the Appellant’s Sister concern M/s. Beach Mineraals Company vide Appella concern M/s. Beach Mineraals Company vide Appellate Order in ITA No. te Order in ITA No. 669/2021-22 dated 27.02.2023 for the AY 2013 22 dated 27.02.2023 for the AY 2013-14 where the facts and 14 where the facts and circumstances were similar, has held that 30% of the turnover can be circumstances were similar, has held that 30% of the turnover can be circumstances were similar, has held that 30% of the turnover can be the appropriate income of the Appellant Firm. The said order was taken the appropriate income of the Appellant Firm. The said order was taken the appropriate income of the Appellant Firm. The said order was taken up before the Hon’ble ITAT C up before the Hon’ble ITAT Chennai both by the assessee and the hennai both by the assessee and the revenue. The Hon’ble ITAT, Chennai vide its order in ITA No revenue. The Hon’ble ITAT, Chennai vide its order in ITA No revenue. The Hon’ble ITAT, Chennai vide its order in ITA No 366/Chny/2023 dated 09.08.2023 has upheld the decision of my 366/Chny/2023 dated 09.08.2023 has upheld the decision of my 366/Chny/2023 dated 09.08.2023 has upheld the decision of my predecessor in rejecting the books of accounts and restricted the net predecessor in rejecting the books of accounts and restricted the net predecessor in rejecting the books of accounts and restricted the net profit ratio @ 2.21% on sales profit ratio @ 2.21% on sales turnover for estimating the same while turnover for estimating the same while determining the total business income of the sister concern i.e. M/s. determining the total business income of the sister concern i.e. M/s. determining the total business income of the sister concern i.e. M/s. Beach Mineraals Company. Beach Mineraals Company.

…..

7.5.23 The undersigned to have the judicial discipline, by respectfully The undersigned to have the judicial discipline, by respectfully The undersigned to have the judicial discipline, by respectfully following the decision of the Hon’ble ITAT C following the decision of the Hon’ble ITAT Chennai in the case of M/s. in the case of M/s. Beach Minerals Company for the AY 2013 als Company for the AY 2013-14, (which is a sister concern 14, (which is a sister concern of the Appellant’s Company and in same line of business), the net profit of the Appellant’s Company and in same line of business), the net profit of the Appellant’s Company and in same line of business), the net profit

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 14 ::

ratio of the Appellant Firm is taken @ 2.21% on the sales turnover in ratio of the Appellant Firm is taken @ 2.21% on the sales turnover in ratio of the Appellant Firm is taken @ 2.21% on the sales turnover in determining the business income of the Appellant Company for the year business income of the Appellant Company for the year business income of the Appellant Company for the year under consideration. Accordingly, the AO is hereby directed to compute under consideration. Accordingly, the AO is hereby directed to compute under consideration. Accordingly, the AO is hereby directed to compute the business income ( Net Profit ) of the Appellant @ 2.21% of the the business income ( Net Profit ) of the Appellant @ 2.21% of the the business income ( Net Profit ) of the Appellant @ 2.21% of the turnover for assessment year under consideration. turnover for assessment year under consideration.

7.5.24 Further the AO while determining the taxable income of the er the AO while determining the taxable income of the er the AO while determining the taxable income of the Appellant Company is directed to consider the interest receipts and Appellant Company is directed to consider the interest receipts and Appellant Company is directed to consider the interest receipts and commission receipts credited to the P&L account separately for commission receipts credited to the P&L account separately for commission receipts credited to the P&L account separately for assessment year 2014 assessment year 2014-15 respectively. Thus, the various grounds raised 15 respectively. Thus, the various grounds raised upon these issues are treated partly allowed sues are treated partly allowed.”

noted that, identical facts and circumstances were also involved in the noted that, identical facts and circumstances were also involved in the noted that, identical facts and circumstances were also involved in the

case of assessee’s sister concern, M/s Beach Minerals Company, wh case of assessee’s sister concern, M/s Beach Minerals Company, wh case of assessee’s sister concern, M/s Beach Minerals Company, which

was also in the same line of business and was also searched along with was also in the same line of business and was also searched along with was also in the same line of business and was also searched along with

the assessee. Like the assessee, two parallel books of accounts were the assessee. Like the assessee, two parallel books of accounts were the assessee. Like the assessee, two parallel books of accounts were

unearthed from the electronic data viz., tally software titled ‘ori’ and ‘IT’. unearthed from the electronic data viz., tally software titled ‘ori’ and ‘IT’. unearthed from the electronic data viz., tally software titled ‘ori’ and ‘IT’.

Upon comparison, the AO noted tha Upon comparison, the AO noted that, the accounts titled ‘IT’ were the t, the accounts titled ‘IT’ were the

accounts maintained for income accounts maintained for income-tax purposes wherein the expenses tax purposes wherein the expenses

debited were higher than the expenses found debited in the books debited were higher than the expenses found debited in the books debited were higher than the expenses found debited in the books

maintained in ‘ori’ and therefore made disallowance on account of inflated maintained in ‘ori’ and therefore made disallowance on account of inflated maintained in ‘ori’ and therefore made disallowance on account of inflated

expenses. On appeal, the coordinate bench of this Tribunal upheld the Ld. ppeal, the coordinate bench of this Tribunal upheld the Ld. ppeal, the coordinate bench of this Tribunal upheld the Ld.

CIT(A)’s action of rejecting the books of accounts holding it to be CIT(A)’s action of rejecting the books of accounts holding it to be CIT(A)’s action of rejecting the books of accounts holding it to be

unreliable but estimated the profits from this business at 2.21% as estimated the profits from this business at 2.21% as estimated the profits from this business at 2.21% as

opposed to 0.47% returned by the assessee. The relevant find opposed to 0.47% returned by the assessee. The relevant find opposed to 0.47% returned by the assessee. The relevant findings taken

note of by us is as under: note of by us is as under:-

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 15 ::

“14. Having heard the rival contentions, carefully considered the Having heard the rival contentions, carefully considered the Having heard the rival contentions, carefully considered the submissions, and perused the material placed on record. The case of the submissions, and perused the material placed on record. The case of the submissions, and perused the material placed on record. The case of the assessee firm for the Ay 2013 assessee firm for the Ay 2013-14 was assessed by the department u/s 14 was assessed by the department u/s 143(3) vide order dated 08.03.2016, thereafter upon a s 143(3) vide order dated 08.03.2016, thereafter upon a search action u/s earch action u/s 132 of the Act on BMC Group on 25.10.2018 the same was reassessed 132 of the Act on BMC Group on 25.10.2018 the same was reassessed 132 of the Act on BMC Group on 25.10.2018 the same was reassessed u/s 143(3) rws 153A bide order dated 26.08.2021. During the course of u/s 143(3) rws 153A bide order dated 26.08.2021. During the course of u/s 143(3) rws 153A bide order dated 26.08.2021. During the course of search, it was found that the assessee firm was maintaining parallel sets search, it was found that the assessee firm was maintaining parallel sets search, it was found that the assessee firm was maintaining parallel sets of accounts. Evidences were g of accounts. Evidences were gathered by the search team in the form athered by the search team in the form disks, laptops. Loose sheets pertaining to unaccounted receipts/ disks, laptops. Loose sheets pertaining to unaccounted receipts/ disks, laptops. Loose sheets pertaining to unaccounted receipts/ payments, deposition of key persons etc. Statement of Shri P Senthil payments, deposition of key persons etc. Statement of Shri P Senthil payments, deposition of key persons etc. Statement of Shri P Senthil Muthu Kumar, Accounts Manager of the assessee firm were taken, Muthu Kumar, Accounts Manager of the assessee firm were taken, Muthu Kumar, Accounts Manager of the assessee firm were taken, according to the sai according to the said statements Modus Operandi of accounting of the d statements Modus Operandi of accounting of the assessee firm was scripted by the Ld AO. Exhaustive workings a/w assessee firm was scripted by the Ld AO. Exhaustive workings a/w assessee firm was scripted by the Ld AO. Exhaustive workings a/w screen shots of the ledger accounts were produced in the Assessment screen shots of the ledger accounts were produced in the Assessment screen shots of the ledger accounts were produced in the Assessment Order by the Ld AO and disallowances were made. Aggrieved by the Order by the Ld AO and disallowances were made. Aggrieved by the Order by the Ld AO and disallowances were made. Aggrieved by the additions, the assessee agitated on the issues before the Ld CIT(A). Ld , the assessee agitated on the issues before the Ld CIT(A). Ld , the assessee agitated on the issues before the Ld CIT(A). Ld CIT (A), without touching the merits of individual additions, have CIT (A), without touching the merits of individual additions, have CIT (A), without touching the merits of individual additions, have observed that the reasons explained by the appellant for the observed that the reasons explained by the appellant for the observed that the reasons explained by the appellant for the discrepancies that occurred in the books of accounts as identifie discrepancies that occurred in the books of accounts as identifie discrepancies that occurred in the books of accounts as identified by the AO in the assessment order are reasonable and acceptable having AO in the assessment order are reasonable and acceptable having AO in the assessment order are reasonable and acceptable having regard to the nature of business, the remote locations where the regard to the nature of business, the remote locations where the regard to the nature of business, the remote locations where the business operations are carried on, the non business operations are carried on, the non-availability of skilled availability of skilled accounting staff in such remote locations, multipl accounting staff in such remote locations, multiplicity of group icity of group companies with similar sounding names and frequent inter companies with similar sounding names and frequent inter companies with similar sounding names and frequent inter-group company transactions. It is further noticed by the Ld CIT(A) that various company transactions. It is further noticed by the Ld CIT(A) that various company transactions. It is further noticed by the Ld CIT(A) that various discrepancies as have been identified by the AO and the appellant was discrepancies as have been identified by the AO and the appellant was discrepancies as have been identified by the AO and the appellant was confronted with the same, the appe confronted with the same, the appellant is required to reconcile the said llant is required to reconcile the said discrepancies. However, since the appellant has brought out various discrepancies. However, since the appellant has brought out various discrepancies. However, since the appellant has brought out various constraints in carrying out such reconciliation and furnishing the constraints in carrying out such reconciliation and furnishing the constraints in carrying out such reconciliation and furnishing the supporting bills and vouchers in the written submission by stating that it supporting bills and vouchers in the written submission by stating that it supporting bills and vouchers in the written submission by stating that it is unable to do so at present in view of the passage of time and frequent ble to do so at present in view of the passage of time and frequent ble to do so at present in view of the passage of time and frequent changes in the accounting staff working with the appellant. It is changes in the accounting staff working with the appellant. It is changes in the accounting staff working with the appellant. It is considered by the Ld CIT(A) that the said submission of the appellant considered by the Ld CIT(A) that the said submission of the appellant considered by the Ld CIT(A) that the said submission of the appellant cannot be disregarded in view of the genuineness of cannot be disregarded in view of the genuineness of cannot be disregarded in view of the genuineness of the practical difficulties expressed by the appellant. At the same time, it is not difficulties expressed by the appellant. At the same time, it is not difficulties expressed by the appellant. At the same time, it is not possible to accept the correctness of the claims in the books of account possible to accept the correctness of the claims in the books of account possible to accept the correctness of the claims in the books of account unless the discrepancies pointed out in the Assessment Order are unless the discrepancies pointed out in the Assessment Order are unless the discrepancies pointed out in the Assessment Order are subjected to necessary reconciliati subjected to necessary reconciliation. Ld CIT(A) decided the appeal with on. Ld CIT(A) decided the appeal with the following observations: the following observations:

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 16 ::

Order, the AD required the appellant to produce the bil Order, the AD required the appellant to produce the bil Order, the AD required the appellant to produce the bills and vouchers in support of the expenditure debited towards mining vouchers in support of the expenditure debited towards mining vouchers in support of the expenditure debited towards mining production and processing and other expenses during the course of production and processing and other expenses during the course of production and processing and other expenses during the course of the said Assessment proceedings. The appellant produced the the said Assessment proceedings. The appellant produced the the said Assessment proceedings. The appellant produced the supporting bills and vouchers before the AO in response to th supporting bills and vouchers before the AO in response to th supporting bills and vouchers before the AO in response to the same. The AO stated in the Assessment Order that he carried out same. The AO stated in the Assessment Order that he carried out same. The AO stated in the Assessment Order that he carried out the verification of the said bills a vouchers and he found that the the verification of the said bills a vouchers and he found that the the verification of the said bills a vouchers and he found that the vouchers to the extent of Rs.2.80 Crores were beyond proper vouchers to the extent of Rs.2.80 Crores were beyond proper vouchers to the extent of Rs.2.80 Crores were beyond proper verification and that the claim of the appellant to the said e verification and that the claim of the appellant to the said e verification and that the claim of the appellant to the said extent was not fully proved. The AD therefore made disallowance of was not fully proved. The AD therefore made disallowance of was not fully proved. The AD therefore made disallowance of production and processing expenses to the tune of Rs.2.80 Crores production and processing expenses to the tune of Rs.2.80 Crores production and processing expenses to the tune of Rs.2.80 Crores in the original Assessment Order. The facts narrated in the said in the original Assessment Order. The facts narrated in the said in the original Assessment Order. The facts narrated in the said Assessment Order clearly bring out the fact that the appella Assessment Order clearly bring out the fact that the appella Assessment Order clearly bring out the fact that the appellant maintained the bills and vouchers in support of the expenditure maintained the bills and vouchers in support of the expenditure maintained the bills and vouchers in support of the expenditure debited to the P&L Account and that the same were verified by the debited to the P&L Account and that the same were verified by the debited to the P&L Account and that the same were verified by the AO during the original Assessment proceedings. AO during the original Assessment proceedings.

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 17 ::

arriving at tr arriving at true and correct profits of the appellant and they are ue and correct profits of the appellant and they are required to be rejected by invoking the provisions of Section required to be rejected by invoking the provisions of Section required to be rejected by invoking the provisions of Section 145(3) of the Act. It is held that the business income of the 145(3) of the Act. It is held that the business income of the 145(3) of the Act. It is held that the business income of the appellant is required to be estimated under the said provisions, appellant is required to be estimated under the said provisions, appellant is required to be estimated under the said provisions, consequent to consequent to rejection of the books of account.

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 18 ::

the original Assessment Order. It is therefore well established that the nal Assessment Order. It is therefore well established that the nal Assessment Order. It is therefore well established that the appellant had maintained the bills and vouchers in support of the appellant had maintained the bills and vouchers in support of the appellant had maintained the bills and vouchers in support of the expenditure debited to the P & L Account and that the same were expenditure debited to the P & L Account and that the same were expenditure debited to the P & L Account and that the same were verified by the AO during the original Assessment proceedings. verified by the AO during the original Assessment proceedings. verified by the AO during the original Assessment proceedings. It is further observed by the Ld CIT(A) that in spite of the fact that the further observed by the Ld CIT(A) that in spite of the fact that the further observed by the Ld CIT(A) that in spite of the fact that the assessee was unable to reconcile the discrepancies/ inaccuracies by assessee was unable to reconcile the discrepancies/ inaccuracies by assessee was unable to reconcile the discrepancies/ inaccuracies by furnishing the correct details of relevant transactions along with the furnishing the correct details of relevant transactions along with the furnishing the correct details of relevant transactions along with the supporting bills and vouchers, no dispute supporting bills and vouchers, no dispute with regard to books of with regard to books of accounts maintained by the assessee were noticed by the Ld AO. In accounts maintained by the assessee were noticed by the Ld AO. In accounts maintained by the assessee were noticed by the Ld AO. In such a situation, considering the additions made by Ld AO the total such a situation, considering the additions made by Ld AO the total such a situation, considering the additions made by Ld AO the total assessed income of the assessee was computed at Rs. 104.73/ assessed income of the assessee was computed at Rs. 104.73/ assessed income of the assessee was computed at Rs. 104.73/- Crores, whereas the total sales turn whereas the total sales turnover, which was untouched and remain over, which was untouched and remain undisputed was Rs. 183.25 Crores, thus the resultant % of Net Profit undisputed was Rs. 183.25 Crores, thus the resultant % of Net Profit undisputed was Rs. 183.25 Crores, thus the resultant % of Net Profit was arrived at 57.12%, this % was considered as absolutely abnormal was arrived at 57.12%, this % was considered as absolutely abnormal was arrived at 57.12%, this % was considered as absolutely abnormal and high by the Ld CIT(A). Ld CIT(A) has very rightly commented that and high by the Ld CIT(A). Ld CIT(A) has very rightly commented that and high by the Ld CIT(A). Ld CIT(A) has very rightly commented that such a huge profit margin is abnormally high in any line of business and rofit margin is abnormally high in any line of business and rofit margin is abnormally high in any line of business and thus indicative that the discrepancies pointed out in the accounts by the thus indicative that the discrepancies pointed out in the accounts by the thus indicative that the discrepancies pointed out in the accounts by the Ld AO cannot be considered to be arising wholly from the wrong claims Ld AO cannot be considered to be arising wholly from the wrong claims Ld AO cannot be considered to be arising wholly from the wrong claims of expenditure by the assessee/appellant. Ld CIT(A) of expenditure by the assessee/appellant. Ld CIT(A) of expenditure by the assessee/appellant. Ld CIT(A) thus after considering the books of accounts of the assessee firm, as inaccurate considering the books of accounts of the assessee firm, as inaccurate considering the books of accounts of the assessee firm, as inaccurate which do not facilitate to arrive at true and correct profit of the appellant which do not facilitate to arrive at true and correct profit of the appellant which do not facilitate to arrive at true and correct profit of the appellant have rejected the same by invoking the provisions of section 145(3) of have rejected the same by invoking the provisions of section 145(3) of have rejected the same by invoking the provisions of section 145(3) of the Act. Under the facts o the Act. Under the facts of the present case, we approve the observation f the present case, we approve the observation of Ld CIT(A) relating to rejection of the books of assessee and uphold of Ld CIT(A) relating to rejection of the books of assessee and uphold of Ld CIT(A) relating to rejection of the books of assessee and uphold the same. Ld CIT(A) consequently, estimated the profit of the firm the same. Ld CIT(A) consequently, estimated the profit of the firm the same. Ld CIT(A) consequently, estimated the profit of the firm @30% of the sale turnover, the basis for 30% was returned income of @30% of the sale turnover, the basis for 30% was returned income of @30% of the sale turnover, the basis for 30% was returned income of AY 2011-12, wherein the assessee has earned a profit of 29.77% before 12, wherein the assessee has earned a profit of 29.77% before 12, wherein the assessee has earned a profit of 29.77% before claiming exemption u/s 10B of the Act. On perusal of the order of Ld claiming exemption u/s 10B of the Act. On perusal of the order of Ld claiming exemption u/s 10B of the Act. On perusal of the order of Ld CIT(A), it is not transpired that while estimating the profit taking the CIT(A), it is not transpired that while estimating the profit taking the CIT(A), it is not transpired that while estimating the profit taking the base year as AY 2011 base year as AY 2011-12 (FY 2010-11), whether this fact was his fact was confronted to the assessee firm or not to submit their objections or confronted to the assessee firm or not to submit their objections or confronted to the assessee firm or not to submit their objections or confirmation on the same. However, to demonstrate the actual ratio of confirmation on the same. However, to demonstrate the actual ratio of confirmation on the same. However, to demonstrate the actual ratio of profit and its comparability with the year under consideration (FY 2012 profit and its comparability with the year under consideration (FY 2012 profit and its comparability with the year under consideration (FY 2012- 13, AY2013-14), Ld AR of the as 14), Ld AR of the assessee firm had submitted a chart of sessee firm had submitted a chart of production for the financial years 2010 production for the financial years 2010-11 to 2016-17, the same 17, the same extracted as under: extracted as under:-

BEACH MINERALS COMPANY BEACH MINERALS COMPANY June 2023 June 2023

Financial Garnet Ilmenite Total Total Year Qty Value Value Qty Value Qty Value

2010-11 24500 158152677 158152677 0 0 24500 24500 158,152,677

2011-12 57856 408896991 408896991 23184 332034863 81040 81040 740,931,854

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 19 ::

2012-13 84091 837603370 837603370 60190 995980129 144281 144281 1,833,583,499

2013-14 55288 659312080 659312080 40992 514625364 96280 96280 1,173,937,444

2014-15 52550 504126598 504126598 41500 518636498 94050 94050 1,022,763,096

2015-16 43000 374261914 374261914 19800 247445847 62800 62800 621,707,761

2016-17 3312 28831737 28831737 12600 157465539 15912 15912 186,297,276

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 20 ::

Act, thus, we modify the order of Ld CIT(A) by scaling down the Act, thus, we modify the order of Ld CIT(A) by scaling down the Act, thus, we modify the order of Ld CIT(A) by scaling down the percentage of net profit margin to 2.21% on sales turnover for percentage of net profit margin to 2.21% on sales turnover for percentage of net profit margin to 2.21% on sales turnover for estimating the same while determining the total assessable income. Ld mating the same while determining the total assessable income. Ld mating the same while determining the total assessable income. Ld AO is directed to work out the estimated income from business AO is directed to work out the estimated income from business AO is directed to work out the estimated income from business accordingly. In the result appeal of the assessee is partly allowed.” accordingly. In the result appeal of the assessee is partly allowed.” accordingly. In the result appeal of the assessee is partly allowed.”

followed the ratio decidendi laid down in the above decision (supra) for followed the ratio decidendi laid down in the above decision (supra) for followed the ratio decidendi laid down in the above decision (supra) for

rejecting the books of accounts and estimating the profits of the assessee rejecting the books of accounts and estimating the profits of the assessee rejecting the books of accounts and estimating the profits of the assessee

at 2.21%, as the facts involved were similar. Accordingly, we do not see at 2.21%, as the facts involved were similar. Accordingly, we do not see at 2.21%, as the facts involved were similar. Accordingly, we do not see

any reason to take a d any reason to take a different view in the present case before us. ifferent view in the present case before us.

Likewise, the argument of the Ld. CIT, DR urging that the net profit rate Likewise, the argument of the Ld. CIT, DR urging that the net profit rate Likewise, the argument of the Ld. CIT, DR urging that the net profit rate

ought to be adopted at 53% instead of 2.21% as estimated by this ought to be adopted at 53% instead of 2.21% as estimated by this ought to be adopted at 53% instead of 2.21% as estimated by this

Tribunal in assessee’s sister concern (supra) cannot be countenanced. Tribunal in assessee’s sister concern (supra) cannot be countenanced. Tribunal in assessee’s sister concern (supra) cannot be countenanced.

Also, we note that, the entity viz., Industrial Mineral Company urged by so, we note that, the entity viz., Industrial Mineral Company urged by so, we note that, the entity viz., Industrial Mineral Company urged by

the Revenue to be comparable to the assessee, was demonstrated before the Revenue to be comparable to the assessee, was demonstrated before the Revenue to be comparable to the assessee, was demonstrated before

us to be in different line of business and hence, this entity identified by us to be in different line of business and hence, this entity identified by us to be in different line of business and hence, this entity identified by

the Revenue is held to be not comparabl the Revenue is held to be not comparable.

books of accounts are rejected, the disallowance of items of expenses books of accounts are rejected, the disallowance of items of expenses books of accounts are rejected, the disallowance of items of expenses

ought to be separately adjudicated and decided upon as to whether it is ought to be separately adjudicated and decided upon as to whether it is ought to be separately adjudicated and decided upon as to whether it is

to be separately added to the estimated b to be separately added to the estimated business income. According to us usiness income. According to us

however, once the books of account are rejected by invoking the the books of account are rejected by invoking the the books of account are rejected by invoking the

provisions of section 145 of the Act and the income is estimated to the provisions of section 145 of the Act and the income is estimated to the provisions of section 145 of the Act and the income is estimated to the

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 21 ::

best of judgment as per the provisions of section 144 of the Act, the said best of judgment as per the provisions of section 144 of the Act, the said best of judgment as per the provisions of section 144 of the Act, the said

estimate is made in substitution of the business income that is to be ade in substitution of the business income that is to be ade in substitution of the business income that is to be

computed in accordance with the provisions contained in sections 30 to computed in accordance with the provisions contained in sections 30 to computed in accordance with the provisions contained in sections 30 to

43D as laid down in section 29 of the Act. Consequently, all the 43D as laid down in section 29 of the Act. Consequently, all the 43D as laid down in section 29 of the Act. Consequently, all the

deductions which are referred to in sections 30 to 43D of the A deductions which are referred to in sections 30 to 43D of the A deductions which are referred to in sections 30 to 43D of the Act are

deemed to have been taken into account while making such an estimate. deemed to have been taken into account while making such an estimate. deemed to have been taken into account while making such an estimate.

Useful reference in this regard may be made to Useful reference in this regard may be made to the decision of Hon’ble the decision of Hon’ble

Andhra Pradesh High Court in the case of High Court in the case of Indwell Constructions Vs. Indwell Constructions Vs.

CIT (232 ITR 776) and Hon’ble Allahabad H and Hon’ble Allahabad High Court in the case of igh Court in the case of CIT

vs Banwari Lal Banshidhar (229 ITR 229) vs Banwari Lal Banshidhar (229 ITR 229). For these reasons, we do For these reasons, we do

not agree with this plea of the Revenue. not agree with this plea of the Revenue.

estimated upon rejection of books of accounts ought to be a estimated upon rejection of books of accounts ought to be a estimated upon rejection of books of accounts ought to be added over

and above the addition/disallowance already made in the original and above the addition/disallowance already made in the original and above the addition/disallowance already made in the original

assessments which were completed u/s 143(3) of the Act in AYs 2014 assessments which were completed u/s 143(3) of the Act in AYs 2014 assessments which were completed u/s 143(3) of the Act in AYs 2014-15

& 2015-16. From the facts placed before us, it is noted that the AO’s 16. From the facts placed before us, it is noted that the AO’s 16. From the facts placed before us, it is noted that the AO’s

predecessor had made ad predecessor had made ad-hoc disallowance of Rs.90 lacs & Rs.40 lacs out of Rs.90 lacs & Rs.40 lacs out

of expenses for want of verification in AYs 2014 of expenses for want of verification in AYs 2014-15 and 2015 15 and 2015-16

respectively. In the preceding paragraphs, we have already upheld the respectively. In the preceding paragraphs, we have already upheld the respectively. In the preceding paragraphs, we have already upheld the

Ld. CIT(A)’s action of rejecting the books of accounts for being unreliable Ld. CIT(A)’s action of rejecting the books of accounts for being unreliable Ld. CIT(A)’s action of rejecting the books of accounts for being unreliable

and upheld the estimation of the total income with reference to the estimation of the total income with reference to the estimation of the total income with reference to the

turnover of the assessee. Having done so, we find that the Ld. CIT(A) had turnover of the assessee. Having done so, we find that the Ld. CIT(A) had turnover of the assessee. Having done so, we find that the Ld. CIT(A) had

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 22 ::

rightly held that, the total income so estimated ought to subsume the rightly held that, the total income so estimated ought to subsume the rightly held that, the total income so estimated ought to subsume the

disallowances made in the original assessment and if the di disallowances made in the original assessment and if the di disallowances made in the original assessment and if the disallowance

made in original assessment is added to the total income so estimated, made in original assessment is added to the total income so estimated, made in original assessment is added to the total income so estimated,

then it would effectively amount to double addition. In our considered then it would effectively amount to double addition. In our considered then it would effectively amount to double addition. In our considered

view also, the net addition to be made to the income originally assessed is view also, the net addition to be made to the income originally assessed is view also, the net addition to be made to the income originally assessed is

to be quantified in such a to be quantified in such a manner to ensure that the total income so manner to ensure that the total income so

computed upon making such addition shall result in the same figure as computed upon making such addition shall result in the same figure as computed upon making such addition shall result in the same figure as

estimated upon rejection of the books viz., 2.21% of the turnover, in the estimated upon rejection of the books viz., 2.21% of the turnover, in the estimated upon rejection of the books viz., 2.21% of the turnover, in the

facts of the present case. For these reasons, this plea of the Revenue facts of the present case. For these reasons, this plea of the Revenue facts of the present case. For these reasons, this plea of the Revenue is

also rejected.

Ld. CIT(A) in rejecting the books of accounts and estimating the total Ld. CIT(A) in rejecting the books of accounts and estimating the total Ld. CIT(A) in rejecting the books of accounts and estimating the total

income of the assessee. We accordingly uphold the same. Since this issue income of the assessee. We accordingly uphold the same. Since this issue income of the assessee. We accordingly uphold the same. Since this issue

involved in the lead case of AY 2014 ad case of AY 2014-15 is common across AYs 2015 15 is common across AYs 2015-16 to

2017-18, our foregoing findings shall be followed mutatis mutandis in the 18, our foregoing findings shall be followed mutatis mutandis in the 18, our foregoing findings shall be followed mutatis mutandis in the

appeals for AY 2015-16 to 2017 16 to 2017-18 as well.

being addition on acc being addition on account of unaccounted sales and unexplained ount of unaccounted sales and unexplained

expenditure. Since both these issues are inter expenditure. Since both these issues are inter-related, they are being related, they are being

taken up together. The relevant facts as noted by us are that, the AO had taken up together. The relevant facts as noted by us are that, the AO had taken up together. The relevant facts as noted by us are that, the AO had

unearthed details of unaccounted sales in the electronic material sei unearthed details of unaccounted sales in the electronic material sei unearthed details of unaccounted sales in the electronic material seized in

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 23 ::

the course of search. According to the assessee, these sales related to the course of search. According to the assessee, these sales related to the course of search. According to the assessee, these sales related to

their group entity, M/s Blue Metal Company Pvt Ltd, who had accounted their group entity, M/s Blue Metal Company Pvt Ltd, who had accounted their group entity, M/s Blue Metal Company Pvt Ltd, who had accounted

the same in their books of accounts. The AO however recorded a the same in their books of accounts. The AO however recorded a the same in their books of accounts. The AO however recorded a

categorical finding that these sales were no categorical finding that these sales were not found credited in the books t found credited in the books

of M/s Blue Metal Company Pvt Ltd. The AO therefore held that, these of M/s Blue Metal Company Pvt Ltd. The AO therefore held that, these of M/s Blue Metal Company Pvt Ltd. The AO therefore held that, these

amounts represented the unaccounted sales of the assessee which was amounts represented the unaccounted sales of the assessee which was amounts represented the unaccounted sales of the assessee which was

not offered to tax and accordingly added the entire sum to the total not offered to tax and accordingly added the entire sum to the total not offered to tax and accordingly added the entire sum to the total

income of the assessee in the respective AYs 2017 ee in the respective AYs 2017-18 to 2019 18 to 2019-20. The AO

further noted from the seized material that, the assessee had had also further noted from the seized material that, the assessee had had also further noted from the seized material that, the assessee had had also

incurred unaccounted expenses aggregating to Rs.90,00,000/ incurred unaccounted expenses aggregating to Rs.90,00,000/ incurred unaccounted expenses aggregating to Rs.90,00,000/- which was

paid in cash to M/s Tulsyan NEC Ltd towards packing expenditure paid in cash to M/s Tulsyan NEC Ltd towards packing expenditure paid in cash to M/s Tulsyan NEC Ltd towards packing expenditure in AY

2017-18. The aforesaid sum was separately added by way of unaccounted 18. The aforesaid sum was separately added by way of unaccounted 18. The aforesaid sum was separately added by way of unaccounted

expenditure. Aggrieved by these additions, the assessee went in appeal expenditure. Aggrieved by these additions, the assessee went in appeal expenditure. Aggrieved by these additions, the assessee went in appeal

before the Ld. CIT(A) who partly deleted the same. Against such action of before the Ld. CIT(A) who partly deleted the same. Against such action of before the Ld. CIT(A) who partly deleted the same. Against such action of

Ld. CIT(A), both the assessee and Ld. CIT(A), both the assessee and Revenue are in appeal before us. Revenue are in appeal before us.

above narrated facts and found that, the assessee was unable to dislodge above narrated facts and found that, the assessee was unable to dislodge above narrated facts and found that, the assessee was unable to dislodge

the AO’s finding that, the sales in question were neither recorded in the the AO’s finding that, the sales in question were neither recorded in the the AO’s finding that, the sales in question were neither recorded in the

books of assessee or M/s Blue Metals Company Pvt Ltd. Before us also, books of assessee or M/s Blue Metals Company Pvt Ltd. Before us also, books of assessee or M/s Blue Metals Company Pvt Ltd. Before us also,

the assessee was unable to bring any material to record to disprove the able to bring any material to record to disprove the able to bring any material to record to disprove the

AO’s case that, these were unaccounted sales. In light of the foregoing, AO’s case that, these were unaccounted sales. In light of the foregoing, AO’s case that, these were unaccounted sales. In light of the foregoing,

the limited issue in dispute before us whether the the limited issue in dispute before us whether the entire sales valu entire sales value has

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 24 ::

to be considered as income to be considered as income or only the profit element em or only the profit element embedded therein

ought to be taxed. Having already rejected the books of accounts of the ought to be taxed. Having already rejected the books of accounts of the ought to be taxed. Having already rejected the books of accounts of the

assessee, it is noted that the Ld. CIT(A) directed the AO assessee, it is noted that the Ld. CIT(A) directed the AO to increase the

reported turnover by the turnover by the impugned unaccounted sales and and estimate the

profit at the rate of 2.21 profit at the rate of 2.21% on such increased turnover. We find this action . We find this action

of the Ld. CIT(A) to be supported by the decision of the Hon’ of the Ld. CIT(A) to be supported by the decision of the Hon’ of the Ld. CIT(A) to be supported by the decision of the Hon’ble Gujarat

High Court in the case of High Court in the case of CIT Vs President Industries (258 ITR 654) CIT Vs President Industries (258 ITR 654)

wherein it was held that t wherein it was held that the amount of receipts/ sales by itself he amount of receipts/ sales by itself would not

represent the income of the assessee. For this, we gainfully rely on the represent the income of the assessee. For this, we gainfully rely on the represent the income of the assessee. For this, we gainfully rely on the

following findings of the Hon’ble High Court : of the Hon’ble High Court :-

"3. Having perused the assessment order made by the Assessing Officer, "3. Having perused the assessment order made by the Assessing Officer, "3. Having perused the assessment order made by the Assessing Officer, the order made by the Commissioner (Appeals) and the T the order made by the Commissioner (Appeals) and the Tribunal, we are ribunal, we are satisfied that the Tribunal was justified in rejecting the application under satisfied that the Tribunal was justified in rejecting the application under satisfied that the Tribunal was justified in rejecting the application under section 256(1). It cannot be a matter of an argument that the amount of section 256(1). It cannot be a matter of an argument that the amount of section 256(1). It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not sales by itself cannot represent the income of the assessee who has not sales by itself cannot represent the income of the assessee who has not disclosed the sales disclosed the sales. The sales only represent the price received by the . The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred seller of the goods for the acquisition of which it has already incurred seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only the cost. It is the realisation of excess over the cost incurred that only the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration forms part of the profit included in the consideration of sales. Therefore, of sales. Therefore, unless there is a finding to the effect that investment by way of unless there is a finding to the effect that investment by way of unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold has been made incurring cost in acquiring goods which have been sold has been made incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question, by the assessee and that has also not been disclosed, the question, by the assessee and that has also not been disclosed, the question, whether entire sum of undisclose whether entire sum of undisclosed sale proceeds can be treated as d sale proceeds can be treated as income of the relevant assessment year answers by itself in the income of the relevant assessment year answers by itself in the income of the relevant assessment year answers by itself in the negative. The record goes to show that there is no finding nor any negative. The record goes to show that there is no finding nor any negative. The record goes to show that there is no finding nor any material has been referred to about the suppression of investment in material has been referred to about the suppression of investment in material has been referred to about the suppression of investment in acquiring the goods wh acquiring the goods which have been found subject of undisclosed ich have been found subject of undisclosed sales."

Court in the cases of PCIT Vs. Anupam Organiser (2020) (9) TMI PCIT Vs. Anupam Organiser (2020) (9) TMI PCIT Vs. Anupam Organiser (2020) (9) TMI

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 25 ::

973 & CIT Vs. Abhishek Corporation (158 CTR 374) CIT Vs. Abhishek Corporation (158 CTR 374) CIT Vs. Abhishek Corporation (158 CTR 374) and Hon’ble

Bombay High Court in the case of igh Court in the case of CIT Vs Sumer Builders (ITA No. CIT Vs Sumer Builders (ITA No.

1849 of 2011). In all these decisions, it was held that the entire . In all these decisions, it was held that the entire . In all these decisions, it was held that the entire

unaccounted sale proceeds cannot be brought to tax but only the profit unaccounted sale proceeds cannot be brought to tax but only the profit unaccounted sale proceeds cannot be brought to tax but only the profit

element embedded therein. element embedded therein. On this aspect, it is noted that On this aspect, it is noted that the coordinate

Bench of Tribunal in the case of in the case of ITO Vs. Anand Builders ITO Vs. Anand Builders, on similar

circumstances had held that, circumstances had held that, only the profit element of the unaccounted of the unaccounted

sales could be taxed in place of the entire unaccounted receipts since could be taxed in place of the entire unaccounted receipts since could be taxed in place of the entire unaccounted receipts since

there is always the unaccounted p there is always the unaccounted payments. The above decision of this ayments. The above decision of this

Tribunal is noted to have been upheld by the Hon Tribunal is noted to have been upheld by the Hon’ble Gujarat High Court ble Gujarat High Court

and the SLP filed against the judgment before the Supreme was also and the SLP filed against the judgment before the Supreme was also and the SLP filed against the judgment before the Supreme was also

dismissed and reported in 265 ITR 37. The relevant findings of Hon dismissed and reported in 265 ITR 37. The relevant findings of Hon dismissed and reported in 265 ITR 37. The relevant findings of Hon’ble

Apex Court is noted to be as follows: is noted to be as follows:

"Dismissed the special leave petition filed by the Department against the "Dismissed the special leave petition filed by the Department against the "Dismissed the special leave petition filed by the Department against the judgment dated January 21, 2002 of the Gujarat High Court in ITA No. judgment dated January 21, 2002 of the Gujarat High Court in ITA No. judgment dated January 21, 2002 of the Gujarat High Court in ITA No. 52 of 2002 whereby the High Court dismissed the Department's appeal 52 of 2002 whereby the High Court dismissed the Department's appeal 52 of 2002 whereby the High Court dismissed the Department's appeal on the ground tha on the ground that no substantial question of law arose. The question of t no substantial question of law arose. The question of law raised in the appeal before the High Court was whether the law raised in the appeal before the High Court was whether the law raised in the appeal before the High Court was whether the Appellate Tribunal's finding while directing the Assessing Officer to tax Appellate Tribunal's finding while directing the Assessing Officer to tax Appellate Tribunal's finding while directing the Assessing Officer to tax only 8 per cent of the unaccounted on money receipt instead of only 8 per cent of the unaccounted on money receipt instead of only 8 per cent of the unaccounted on money receipt instead of fully taxing it, in the absence of any evidence of expenditure, could not be taxing it, in the absence of any evidence of expenditure, could not be taxing it, in the absence of any evidence of expenditure, could not be stated to be perverse." stated to be perverse."

interfere with the Ld. CIT(A)’s finding directing the AO to assess the profit interfere with the Ld. CIT(A)’s finding directing the AO to assess the profit interfere with the Ld. CIT(A)’s finding directing the AO to assess the profit

element of 2.21% embedded in these unaccounted sales. 2.21% embedded in these unaccounted sales.

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 26 ::

the AO had observed that, the packing expenditure in question was not the AO had observed that, the packing expenditure in question was not the AO had observed that, the packing expenditure in question was not

found debited in the books of accounts. Hence, the inference which found debited in the books of accounts. Hence, the inference which found debited in the books of accounts. Hence, the inference which

emanates is that, the cash payment in question was made outside the tes is that, the cash payment in question was made outside the tes is that, the cash payment in question was made outside the

books of accounts. The Ld. AR of the assessee explained to us that, if it is books of accounts. The Ld. AR of the assessee explained to us that, if it is books of accounts. The Ld. AR of the assessee explained to us that, if it is

held that the payment was made outside the books of accounts, then the held that the payment was made outside the books of accounts, then the held that the payment was made outside the books of accounts, then the

unaccounted sales aggregating to Rs.1892.22 l unaccounted sales aggregating to Rs.1892.22 lacs identified by the AO for acs identified by the AO for

the relevant year ought to have been telescoped by way of source of such the relevant year ought to have been telescoped by way of source of such the relevant year ought to have been telescoped by way of source of such

unaccounted expenditure. Having considered the foregoing, we find unaccounted expenditure. Having considered the foregoing, we find unaccounted expenditure. Having considered the foregoing, we find

ourselves in agreement with the Ld. AR that, the unaccounted sale ourselves in agreement with the Ld. AR that, the unaccounted sale ourselves in agreement with the Ld. AR that, the unaccounted sale

proceeds could be tele proceeds could be telescoped towards the source of such unaccounted scoped towards the source of such unaccounted

expenditure and therefore no separate addition on this account was expenditure and therefore no separate addition on this account was expenditure and therefore no separate addition on this account was

permissible. This view is supported by the decision of permissible. This view is supported by the decision of ITO Vs Anand ITO Vs Anand

Builders (supra) wherein the Hon’ble Apex Court approved the findings wherein the Hon’ble Apex Court approved the findings wherein the Hon’ble Apex Court approved the findings

of the Tribunal that, the assessee would incur unaccounted payments out of the Tribunal that, the assessee would incur unaccounted payments out of the Tribunal that, the assessee would incur unaccounted payments out

of unaccounted receipts and that instead of entire sum being added, it is of unaccounted receipts and that instead of entire sum being added, it is of unaccounted receipts and that instead of entire sum being added, it is

the profit element from this unaccounted business which i the profit element from this unaccounted business which is to be brought s to be brought

to tax. In the facts of the present case, we have already upheld the to tax. In the facts of the present case, we have already upheld the to tax. In the facts of the present case, we have already upheld the

estimation of profits from the unaccounted business above, i.e., net of estimation of profits from the unaccounted business above, i.e., net of estimation of profits from the unaccounted business above, i.e., net of

sales and purchases/expenses, and thus the unexplained expenditure in sales and purchases/expenses, and thus the unexplained expenditure in sales and purchases/expenses, and thus the unexplained expenditure in

question stands subsumed in t question stands subsumed in the estimation exercise. In our considered he estimation exercise. In our considered

view therefore, no separate addition on this count was warranted. For view therefore, no separate addition on this count was warranted. For view therefore, no separate addition on this count was warranted. For

ITA Nos.282 to 287/Chny/2024 (AYs 2014 2014-15 to 2019-20) CO Nos.20 to 25/Chny/2024 (AYs 2014 2014-15 to 2019-20) M/s. Alba Industries Ltd. M/s. Alba Industries Ltd. :: 27 ::

these reasons, we uphold the Ld. CIT(A)’s action of deleting the impugned these reasons, we uphold the Ld. CIT(A)’s action of deleting the impugned these reasons, we uphold the Ld. CIT(A)’s action of deleting the impugned

addition.

cross appeals under various grounds have been dealt with cross appeals under various grounds have been dealt with, in terms of our

observations herein above, observations herein above, contentions, if any, which were not argued or which were not argued or

dealt with became academic and dealt with became academic and is thus not adjudicated separately. thus not adjudicated separately.

the assessee and Revenue stands dismissed. the assessee and Revenue stands dismissed. \

Order pronounced on the 26th day of November, 2024 Order pronounced on the 24, in Chennai.

Sd/- Sd/ Sd/- (जगदीश) (एबी टी. . वक�) (JAGADISH) (ABY T. VARKEY ABY T. VARKEY) लेखा सद�/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER /ACCOUNTANT MEMBER /JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 26th November November, 2024. TLN, Sr.PS आदेश क� �ितिलिप अ�ेिषत/Copy to Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु /CIT, Chennai / Madurai / Salem / Coimbatore. , Chennai / Madurai / Salem / Coimbatore. , Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF