AI Structured Summary
Not yet generated for this judgment
Judgment
PER YOGESH KUMAR, U.S. JM:
The captioned Appeal in ITA No. 5758/Del/2025 is filed by the Assessee and ITA No. 6916/Del/2025 filed by the Revenue against the order of Ld. Commissioner of Income Tax (Appeals)-27, New Delhi (‘Ld. CIT(A)’ for short), dated 08/07/2025 pertaining to Assessment Year 2023-24.
Brief facts of the case are that, the Assessee filed return of income declaring total income of Rs. 9,97,96,740/-. A search and seizure operation was initiated u/s 132 of the Income Tax Act, 1961 ('Act' for short) against the Assessee on 03/08/2022. An assessment order came to be passed on 22/03/2024 by making several additions against the Assessee. As against the assessment order, Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 08/07/2025, partly allowed the Appeal. Aggrieved by the order of the Ld. CIT(A) dated 08/07/2025, both the Assessee as well as the Revenue have preferred the respective Appeals on following grounds:
ITA No. 5758/Del/2025 (A.Y. 2023-24) (Assessee)
“1.On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is bad-in-law without jurisdiction and barred in limitation and CIT(A) erred in not holding so.
2.On the facts and circumstances of the case and in law, the notice u/s 143(2) issued in this case is bad-in-law and without jurisdiction and, therefore, the said notice alongwith assessment order passed on the foundation of such notice are liable to be squashed.
3.On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 11,61,307/- on account of alleged unaccounted sales.
4.On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer of Rs. 3,68,203/- on account of alleged unaccounted sales
5.On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer of Rs. 66,126/- on account of alleged unaccounted sales.
6.On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer of Rs. 10,69,318/- on account of alleged unaccounted sales.
7.On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer of Rs. 28,23,512/- on account of alleged unexplained expenditure u/s 69C of the Act.
8.On the facts and circumstances of the case and in law, the approval taken by the assessing officer from Addl. CIT before passing the assessment order is contrary to the provisions of the Act.”
ITA No. 6916/Del/2025 (A.Y. 2023-24) (Revenue)
“1.Whether on the facts and circumstances of the case, Ld. CIT(A) erred in deleting/partly deleting the additions made by the Assessing Officer without properly appreciating the facts of the case. evidentiary value of seized materials and also not appreciating that statement recorded u/s 132(4) hold evidentiary value and can be the sole basis of addition, especially when not retracted or rebutted with documentary evidence?
2.Whether on the facts and circumstances of the case, Ld. CIT(A) erred in restricting the addition from Rs.36.81.480/- to Rs.11,61.307/- by restricting the application of seized material to only 95 days in FY 2022-23. Ld. CIT (A) is also erred in not appreciating the fact that the quantity of goods was wrongly stated on slips, as admitted by production supervisor in sworn statement?
3.Whether on the facts and circumstances of the ease. Id. CIT(A) erred in holding that the addition was based merely on extrapolation without full relevant year-specific seized material, ignoring judicial precedents that permit reliance on post-search evidence and statements to establish a consistent practice of evasion justifying estimation of income?
4.Whether on the facts and circumstances of the case. Ld. CIT(A) erred in reducing the addition the addition from Rs.33.53,400/- to Rs.3.68,203/- on incorrect appreciation of evidences and by applying GP rate instead of treating the entire undisclosed cash transaction as income, especially in light of corroborative statements and seized materials.
5.Whether on the facts and circumstances of the ease. Ld. CIT(A) wrongly applied the GP rate of 10.98% in this issue without establishing the legitimacy of purchases or stock movement to support such sales.
6.Whether on the facts and circumstances of the case, Ld. CIT(A) erred in restricting the addition of Rs. 6.03,060/- to Rs. 66.216/- by applying GP rate without rebutting the admission of the production supervisor recorded under oath and without verifying inventory movement related to unaccounted sales.
7.Whether on the facts and circumstances of the case. Ld. CIT(A) failed to appreciate that unrecorded cash was admitted by assessee to be used for unaccounted expenditure, thereby validating the full sale value as assessable income.
8.Whether on the facts and circumstances of the case. L.d. CIT(A) erred in restricting the addition of Rs. 97.38.775/- to Rs. 10,69,318/-by applying GP ratio, ignoring the fact that the assessee failed to reconcile these transactions with books or substantiate corresponding purchase records.
9.Whether on the facts and circumstances of the case, L.d. CIT(A) ignored the pattern of unaccounted transactions by the assessee as evidenced from seized material and statements record during search
10.Whether on the facts and circumstances of the case, Ld. CIT(A) erred in deleting the entire addition of Rs. 18,51,888/-on unaccounted scrap sales, despite a clear admission under oath by Mr. Ankur Bansal that cash scrap sales were made and not recorded in the books of accounts.
11.Whether on the facts and circumstances of the case, Ld. CTT(A) erred in discarding the valid basis of estimation adopted by AO (@Rs. 22/kg) and failed to appreciate that the assessee did not provide any credible breakup or rate-wise reconciliation for different scrap types.
12.Whether on the facts and circumstances of the case, Ld. CIT(A) erred in granting relief of Rs. 26,65,044/- from the combined addition of Rs. 54,88,556/- (Rs. 23,39,506/- Rs. 31,49,050/-) on account of unexplained cash expenditures, without establishing any direct nexus between earlier additions of unaccounted income and the source of cash payments made towards machinery installation and renovation expenses.
13.Whether on the facts and circumstances of the case. L.d. CII(A) erred in treating unaccounted business receipts (from sales/scrap) as the source of capital expenditure without evidence, and hence wrongly invoked the principle of "no double addition", which is inapplicable under Section 69C.
14.Whether on the facts and circumstances of the case, Ld. CTT(A) failed to appreciate that Section 69C operates independently and once unexplained expenditure is proved through seized documents, the entire addition is warranted irrespective of other additions.
15.Whether on the facts and circumstances of the case, Lal. CIT(A) has erred in deleting the observation of made by the AO that the assessee has incurred Rs. 1,13,72,604/- towards cash salary/wages expenses, despite the overlooking the facts that clear admissions by both HR Head and Managing Director under oath that salaries were paid in cash out of unaccounted sales proceeds?
16.Whether on the facts and circumstances of the case, Ld. CIT(A) erred in holding that extrapolation was invalid for lack of material for FY 2022-23, disregarding that the statements recorded, together with analysis of seized documents, constituted sufficient evidence to support the AO's reasonable estimation?
17.(a) The order of Ld. CIT (A) is erroneous and not tenable in law and on facts.
(b)The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
The Ld. Counsel for the Assessee submitted that the Assessee wishes not to press Ground No. 1 & 2.Recording the submission of Ld. Ld. Assessee's Representative, the Ground No. 1 & 2 of the Assessee are dismissed as not pressed.
In Ground No. 3 of the Assessee and Ground No. 2 & 3 of the Revenue are regarding action of the Ld. CIT(A) in deleting partial additions and confirming the addition made by the A.O. to an extent of 11,61,307/- on account of unaccounted sales. The Ld. Counsel for the Assessee submitted that the Ld. CIT(A) should have deleted the entire addition and the Ld. CIT(A) committed error in sustaining the addition to an extent of Rs. 11,61,307/-.
Per contra the Ld. Departmental Representative canvassing on Ground No. 2 & 3 of the Revenue’s Appeal, submitted that the Ld. CIT(A) should have upheld the addition made by the A.O. who has rightly applied the GP rate of 10.98%, thus, sought for allowing Ground No. 2 & 3 of the Revenue.
We have heard both the parties and perused the material available on record. The Ld. CIT(A) while sustaining the addition of Rs. 11,61,307/-, relied upon various case laws and held that no extrapolation can be done and actual sales figure based upon the data found. Further the Ld. CIT(A) adopted the actual sales figure of Rs. 1,05,76,566/- and on the same applied GP rate @ 10.98% and restricted the addition of Rs. 11,61,307/-. We find no error or infirmity in the approach of the Ld. CIT(A) in sustaining the partial addition. Thus, we find no merits in the Ground No. 3 of the Assessee and Ground No. 2 & 3 of the Revenue. Accordingly, Ground No.3 of the Assessee and Ground No. 2 & 3 of the Revenue are dismissed.
The Ground No. 4 of the Assessee and Ground 4 & 5 of the Revenue are regarding action of the Ld. CIT(A) in confirming the addition made by the A.O. of Rs. 3,68,203/- on account of unaccounted sales.
The Ld. A.O. made addition of Rs. 33,53,400/- on account of unaccounted sales of foils based on Kachiparchis and made addition of entire sales of Rs. 33,53,400/-. However, Ld. CIT(A) after details discussion and relying on various case laws, held that only profit embedded in the sales can be taxed and not the entire gross sales, therefore, restricted the addition to GP rate @10.98% and confirmed the addition of Rs.3,68,203. We find no error or infirmity in the said approach of the Ld. CIT(A). Accordingly, Ground No. 4 of the Assessee and Ground No. 4 & 5 of the Revenue are dismissed.
Ground No. 5 of the Assessee and Ground No. 6 & 7 of the Revenue are regarding action of the Ld. CIT(A) in confirming the addition made by the A.O. to an extent of Rs. 67,126/- on account of unaccounted sales.
The Ld. A.O. madeaddition of certain unaccountedsalesof Rs. 6,03,060/-, the Ld. CIT(A) relying upon various case laws held that the entire amount of sales cannot be treated as income and profit embedded in the sales can be treated as income. Accordingly, the Ld. CIT(A) restricted the addition of GP rate @ 10.98% of Rs. 66,216/-. We find no error or infirmity in the approach of the Ld. CIT(A). Accordingly, Ground No. 5 of the Assessee and Ground No. 6 & 7 of the Revenue are dismissed.
Ground No. 6 of the Assessee and Ground No. 8 & 9 of the Revenue are regarding action of the Ld. CIT(A) confirming the addition made by the A.O. of Rs. 10,69,318/- on account of unaccounted sales.
The A.O. made addition of unaccounted sales of laminatesbased upon certain seized material of Rs. 97,38,775/- which being entire sale. The Ld. CIT(A) after detailed discussion and relying on the various case laws, held that entire amount of sales cannot be treated as income and profit embedded in the sales can be treated as income and hence restricted the GP rate @ 10.98% at Rs. 10,69,318/-. We find no error or infirmity in the approach of the Ld. CIT(A) in confirming the said addition. Accordingly, the Ground No. 6 of the Assessee and Ground No. 8 and 9 of the Revenue are dismissed.
Ground No. 7 of the Assessee and Ground 12 to 14 of the Revenue are against the action of the Ld. CIT(A) in confirming the addition made by the A.O. ofRs. 28,23,512/- on account of alleged unexplained expenditure u/s 69C of the Act.
The Ld. Counsel for the Assessee submitted that the addition made by the A.O. on account of unexplained business income u/s 69C of the Act has been restricted by the Ld. CIT(A) by giving credit for GP addition and sustained the partial amount. The Ld. Counsel for the Assessee further submitted that the expenditure being business expenses and source of the same were out of unaccounted sales and once the Ld. CIT(A) made the GP addition, no separate addition of expenses can be made, thus submitted that the said addition amount to double addition, therefore, sought for deletion of the addition.
Per contra, the Ld. Departmental Representative addressing on Ground No. 12 to 14 of the Revenue submitted that the Ld. CIT(A) committed error in deleting the addition of Rs. 54,88,556/- made on account of unexplained cash expenditure, without establishing any direct nexus between earlier additions of unaccounted income and the source of cash payments made towards machinery installation and renovation expenses. Thus, Ld. Ld. Departmental Representative sought for allowing Ground No. 12 to 14 of the Revenue and prayed for dismissal of Ground No. 7 of the Assessee.
We have heard both the parties and perused the material available on record. The Ld. A.O. made the addition on account of unexplained business expenses u/s 69C of the Act of Rs. 23,39,506/- and Rs. 31,49,050/-. The Ld. CIT(A) restricted the same to Rs. 28,23,512/- by giving credit for GP addition sustained by him. The expenses claimed by the Assessee are business expenses and the source of the same were out of unaccounted sales. It is settled principal of law that once GP addition is made, no separate addition of expenses can be made and the same would amounts to double addition, first as expenses and secondly as estimated profits from sales. In view of the above, we find merits in Ground No. 7 of the Assessee and the addition sustained by the Ld. CIT(A) is hereby deleted by allowing Ground No. 7 of the Assessee. Accordingly, we allow Ground No. 7 of the Assessee and dismiss the Ground No. 12 to 14 of the Revenue.
Ground No. 10 and 11 of the Revenue are directed against the action of Ld. CIT(A) in deleting the addition of Rs. 18,51,888/- made on account of unaccounted scrap sales.
The Ld. Departmental Representative submitted that the Ld. CIT(A) committed error in deleting the addition despite there being a clear admission by one Mr. Ankur Bansal that cash scrap sales were made and not recorded in the books of account. Thus, sought for allowing Ground 10 & 11 of the Revenue.
Per contra, the Ld. Assessee's Representative submitted that all the scrap sales were already recorded in the books of account and there was no unaccounted sale of scrap, therefore, sought for dismissal of Ground No. 10 7 11 of the Revenue.
We have heard both the parties and perused the material available on record. The A.O. made addition of Rs. 18,51,488/- on account of alleged unaccounted scrap sales. The Ld. CIT(A) after verifying the material on record, gave a factual finding that, all the scrap sales were already recorded in the books of account and there was no unaccounted sale of scrap. Before us, the revenue could not bring any material contrary to the said factual finding of the Ld. CIT(A). In view of the same, we find no merits in Ground No. 10 & 11 of the Revenue. Accordingly Ground No. 10 & 11 of the Revenue are dismissed.
Ground No. 15 and 16 of the Revenue are directed against the order of the Ld. CIT(A) in deleting the addition of Rs. 1,13,72,604/-. The Ld. Departmental Representative submitted that, said expenditure has been admitted to be paid in cash, however, the said fact has been ignored by the Ld. CIT(A) and deleted the addition. Thus, sought for allowing Ground No. 15 & 16.
Per contra, the Ld. Assessee's Representative submitted that, the observation of the A.O.arebased on extrapolation and no salary expenses were paid during the year and there was no addition in the assessment order on the said issue. Thussought for dismissal of ground No. 15 & 16 of the Revenue.
We have heard both the parties and perused the material available on record. In the assessment order, the A.O. stated that the Assessee has incurred unaccounted salary expenses of Rs. 1,13,72,904/-, however, A.O. has not made any addition on the ground that the same were incurred out of unaccounted sales, therefore, held that no addition was called for. Since, there is no addition made by the A.O. in the assessment order itself, the Ground No. 15 and 16 of the Revenue are misconceived, accordingly, Ground No. 15 & 16 of the Revenue are dismissed.
In the result, Appeal of the Assessee in ITA No. 5758/Del/2025 is partly allowed and the Appeal of the Revenue in ITA No. 6919/Del/2025 is dismissed.