ANCA INTERNATIONAL LLP,NEW FRIENDS COLONY V. ASSISTANT COMMISSIONER OF INCOME TAX, DELHI

ITA 3779/DEL/2023

AI Insights

The case involves ANCA International LLP, which appealed against the order of the CIT(A)-27, New Delhi, concerning additions made to their income for the assessment years 2020-21, 2021-22, and 2022-23. The primary contention was regarding the non-consideration of unaccounted expenditures found during a search and seizure operation under section 132 of the Income Tax Act, 1961. The Assessing Officer (AO) had included unaccounted sales in the income but did not allow deductions for related unaccounted expenses. The CIT(A) reduced the additions but did not fully address the issue of unaccounted expenses. The Tribunal found merit in the assessee's arguments and remanded the matter back to the AO for a fresh assessment, ensuring that both unaccounted sales and expenses are considered appropriately.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360949 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2021-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMISHA S. GUPTA
• Assessee Lawyers: GAURAV JAIN
• Keywords: Opportunity of being heard; Unexplained expenditure; Search and seizure
• Section: 147; 132; 28

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 3778/Del/2023 (Asstt. Year : 2020-21) ITA No. 3779/Del/2023 (Asstt. Year : 2021-22) ITA No. 3780/Del/2023 (Asstt. Year : 2022-23) ANCA INTERNATIONAL LLP, VS. ACIT, CC-20, A-89, NEW FRIENDS COLONY, NEW DELHI NEW DELHI – 6 5 (PAN: ABLFA0652L) (Appellant) (Respondent) Appellant by : Sh. Gaurav Jain, Adv. Respondent by : Ms. Amisha S. Gupta, CIT(DR) Date of Hearing 22.05.2025 Date of Pronouncement 22.05.2025 ORDER PER BENCH : These 03 appeals have been filed by the Assessee against the common order dated 02.11.2023 passed by the Ld. CIT(A)-27, New Delhi relating to assessment years 2020-21, 2021-22 & 2022-23 respectively. Since these appeals are inter-connected, hence, these appeals were heard together and disposed of by this common order for the sake of convenience, by dealing with the facts of 2 | P a g e the case relating to assessment year 2020-21, being the lead case. The grounds for relating to assessment year 2020-21 read as under:- 1. That the Ld. CIT(A) erred on facts and in law, in not deleting the entire addition of Rs. 5,37,056/- made by the AO in the assessment order passed u/s. 147 of the Act, and in restricting the addition of Rs. 3,46,892/-. 2. That the Ld. CIT(A) erred on facts and in law, in confirming the addition qua undisclosed sales found on the basis of seized material in the course of search by applying the estimated net profit ratio on such unaccounted sales, instead of computing the taxable income after reducing the expenses found recorded in strictly on the basis of the same set of seized material. 3. That ld. CIT(A) erred on facts and in law, in not accepting the returned income, which already included the profit / loss from unaccounted sales and was determined after taking into consideration related expenses found recorded in the seized material. 4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that addition cannot be made on the basis of estimate when means to calculate the income are available / emerging out of the same set of seized material out of which undisclosed sales are picked for the purpose of assessment. 2. Brief facts of the case are that a search and seizure operation u/s. 132 of the Act was conducted on the assessee on 09.02.2022 by the Investigation Wing, Delhi. During the course of search proceedings, loose sheets were found 3 | P a g e which contained undisclosed cash sales and undisclosed cash transaction which were for expenses. AO considered the cash sales of Rs. 5,98,000/-, but he did not give any credit to the expenses found from the loose sheets during the search. He adopted the gross profit from the sales and accordingly, made the addition in dispute. 3. Upon assessee’s Ld. CIT(A) noted that assessee has pleaded that assesee has also incurred expenses which were found in loose sheets. However, Ld. CIT(A) did not give credit to the expenses. However he reduced the addition by applying the net profit rate on the undisclosed sales found. Ld. CIT(A) made the final addition vide para no. 5.2 of his order, which reads as under:- “5.2 In view of the above discussion, the addition on account tof income from undisclosed cash sales u/s. 28 of the I.T. Act is restricted for each AY as under:- Sl.No. AY Addition as per assessment order Addition restricted to as per para 5.1 (viii) 1 2020-21 2,25,326 35,162 2 2021-22 42,30,710 14,58,116 3 2022-23 81,91,599 43,17,815 3.1 Against the above action, Assessee is in appeal before us. 4. We have heard both the parties and perused the records. Ld. Counsel for the assessee pleaded that during the search unaccounted receipts and unaccounted expenses have been found. But AO did not give any credit for the expenses which has been found from the loose sheets. He has considered the 4 | P a g e sales figures and not taken into account the expenditure figure. He further submitted that cost of goods sold outside the books for the assessment year 2020-21 amounting to Rs. 3,95,000/- which the assessee has reduced from the next year opening stock and he submitted that this credit should also be given. Per contra, Ld. DR relied upon the orders of the authorities below. 5. Upon careful consideration, we find that in this case in the search unaccounted sales and unaccounted expenditure were found and revenue authorities have taken into account the sales by applying the GP and NP rate respectively. However, they have not considered the expenses. In this regard, we find that it is settled law from the ‘maxim of approbate and reprobate’ that the document has to be accepted or rejected as a whole. So when the sales have been accepted outside the books, unaccounted expenditure also found in the same search should be considered. The authorities below can either accept the findings in the search in full or reject the same in full. Hence, we find it appropriate in the interest of justice to remit back the issues to the file of the Assessing Officer to consider the same afresh, keeping in mind our observations regarding ‘maxim of approbate and reprobate’ as above. If the unaccounted sales have been accepted, unaccounted expenditure should also be considered for deduction. As regards the cost of goods sold, AO should make the verification, if the assessee has reduced the same from the opening stock of AY 2021-22 and credit for the same for Assessment year 2020-21 should also be 5 | P a g e given. Needless to add that the assessee should be given adequate opportunity of being heard. 6. In the result, the appeal for the assessment year 2020-21 stand allowed for statistical purposes. 7. As regards appeals relating to assessment years 2021-22 and 2022-23 are concerned, our aforesaid decision for the assessment year 2020-21 will apply mutatis mutandis to the assessment years 2021-22 and 2022-23 as well. Accordingly, the appeals relevant to assessment years 2021-22 and 2022-23 also stand allowed for statistical purposes on the similar lines as that of assessment year 2020-21, as aforesaid. 8. In the result, all the 03 appeals filed by the assessee are allowed for statistical purposes. Order pronounced in the Open Court on 22nd May, 2025. SD/- (VIMAL KUMAR) SD/- (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER SRBHATNAGAR Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT Assistant Registrar "