DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-16, DELHI, DELHI V. KOHLI TENT HOUSE, DELHI

ITA 2448/DEL/2023

AI Insights

The case involves Kohli Tent House, a partnership firm engaged in event management services, which faced scrutiny following a search and seizure operation under section 132 of the Income-tax Act, 1961. The operation revealed unaccounted cash receipts and discrepancies in recorded sales. The Assessing Officer (AO) estimated suppressed sales by applying a suppression factor to the sales as per books, leading to significant additions to the assessee's income for the assessment years 2016-17, 2017-18, and 2018-19. The CIT(A) upheld these additions but applied a net profit rate of 10% on the unaccounted receipts, which was contested by the assessee in the Tribunal. The Tribunal's decision affirmed the CIT(A)'s application of the 10% profit rate, dismissing the assessee's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312694 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: misc
• Other Referred Cases: CST Vs H.M.Esufali H.M. Abdulai (1973) 90 ITR 271(SC), PCIT Vs TDI Infrastructure Ltd [2024] 169 taxmann.com 223 (Delhi), Kabul Chawla[2015] 61 taxmann.com 412 (Delhi), Meeta Gutgutia395 ITR 526(Del)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: NEERAJ JAIN
• Keywords: Business income; Income from undisclosed sources; Document seized; Documents seized; Principle of natural justice; Search and seizure; Loose papers
• Section: 132; 153A; 139; 40A(3); 40(a)(ia)

Judgement Text

"ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 1 of 26 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘C’ BENCH, NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 2475/DEL/2023 [A.Y. 2016-17] ITA No. 2476/DEL/2023 [A.Y. 2017-18] ITA No. 2477/DEL/2023 [A.Y. 2018-19] Kohli Tent House Vs. The Dy.C.I.T 27523, Main Patel Nagar Central Circle – 16 Delhi New Delhi PAN – AAAFK 4094 N ITA No. 2447/DEL/2023 [A.Y. 2016-17] ITA No. 2448/DEL/2023 [A.Y. 2017-18] ITA No. 2449/DEL/2023 [A.Y. 2018-19] The Dy.C.I.T Vs. Kohli Tent House Central Circle – 16 27523, Main Patel Nagar New Delhi Delhi PAN – AAAFK 4094 N (Applicant) (Respondent) Assessee By : Shri Neeraj Jain, Adv Shri P.K. Mishra, AR Department By : Shri Dayainder Singh Sidhu, Sr. DR Date of Hearing : 25.02.2025 Date of Pronouncement : 29.04.2025 ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 2 of 26 ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- The above captioned three separate appeals by the assessee and three separate cross appeals by the Revenue are preferred against the order of the ld. CIT(A)–26, Delhi dated 30.06.2023 pertaining to Assessment Years 2016-17, 2017-18 and 2018-19 respectively. 2. Since underlying facts pertain to same assessee and are common in the captioned appeals, they were heard together and are disposed of by this common order for the sake of convenience and brevity. ITA No. 2475/DEL/2023 [A.Y. 2016-17] [Assessee’s Appeal] 3. The grounds raised by the assessee read as under: “1. That the order of learned Commissioner of Income Tax (Appeals) is bad in law as well as on the facts and in the circumstances of the case. 2. That the learned Commissioner of Income Tax (Appeals), in para 5 of the order, has erred in facts and law in holding that 'it is evident from the facts of the case and submissions made by the applicant that several incriminating documents in physical as well as electronic form were found and seized from the different premises during the course of search ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 3 of 26 wherein out of books cash receipts were found to be recorded. These seized/impounded materials which are incriminating in nature have direct bearing on the total income of the appellant and proper satisfaction was recorded before initiating proceedings u/s 153C of the Act' and accordingly rejecting ground nos. 1 to 4 raised before him. 3. That the learned Commissioner of Income Tax (Appeals), in para 6 of the order, has erred in facts and law in holding that 'the appellant was provided sufficient opportunity by way of issuing various notices on different dates starting from 26.02.2021 to 31.08.2021 and a show cause notice dated 28.08.2021 was also served to the assessee' and accordingly rejecting ground no. 5 raised before him. 4. That the learned Commissioner of Income Tax (Appeals), in para 7 of the order, has erred in estimating the unrecorded business receipts of Rs. 6,31,87,606/- on the basis of suppression factor applied by the learned assessing officer on the turnover as per books. 5. That the learned Commissioner of Income Tax (Appeals) has erred in estimating the net profit @ 10% on estimated unaccounted suppressed sales and sustaining the addition to the extent of Rs. 63,18,760/-. 6. The above grounds of appeal are without prejudice to each other.” 3.1. As the Revenue appeal revolves around the same additions made by the AO and certain relief granted by the CIT(A), it will be apposite to deal with the Revenue appeal together with that of the assessee’s. The Revenue has taken the following grounds in its appeal: ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 4 of 26 1. Whether on facts of the case and in law, the Ld. CIT(A) has erred in restricting the addition to Rs. 63,18,760/- (@ 10% of Rs. 6,31,87,606/-), when the assessee has failed to produce any documents to refute suppressed business receipts and unrecorded business receipts. 2. Whether on facts of the case and in law, the Ld. CIT(A) has erred in not upholding the entire addition amounting to Rs. 6,31,87,606/-, as the assessee could not produce any document regarding suppressed business receipt and related expenditures incurred on earning these unrecorded business receipts. 3. Whether on facts of the case and in law, the Ld. CIT(A) is correct in estimating the unaccounted income of the assessee at 10% of total undisclosed receipts whereas no such evidence is available on record that assessee had incurred any expenditures to earn the above receipts. 4. (a) Whether on law and facts of the case the order of the 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. 4. Briefly stated, the facts of the case are that Kohli Tent House (herein referred to as KTH) is a partnership firm having two partners, namely, Shri Kimtilal Kohli and Shri Sanjeev Kohli having 50% share each.KTH is engaged in the business of tent, shamiana, pandal arrangement, decoration, lighting etc. for marriage parties, get- togethers and other ceremonies and other functions. ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 5 of 26 5. The assessee is a regular income tax assessee and had filed an original return of income u/s 139 of the Income-tax Act, 1961 [the Act, for short] on 04.11.2016 at a total income of Rs. 5,06,360/-.A search and seizure operation was carried out at the residence of the partners and the business premises of other concerns in the group on 03.05.2018. The assessee was not covered in the search u/s 132 of the Act whereas certain recordings/details were found inventorised from various premises. Notice u/s 153C of the Act was issued to the assessee on 10.02.2021, in response to which the assessee filed a return of income on 17.02.2021 declaring total income of Rs. 5,06,360/-. 6. During the course of search, an excel file named \"Booking Amount Detail_35890.xlsx\" was retrieved from Laptop impounded as Annexure A-5 from the Pandal - Velvet, Rajouri Garden, New Delhi which contained a sheet named \"Jan to July\" giving the details of total cash receipts including receipts by cheque from functions involving cash component held at the banquets run by the assessee. 7. The assessee received a notice dated 25.02.2021 mentioning Query no. 30 wherein a list of such functions noted in Annexure A-5 was provided ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 6 of 26 in two categories, namely, Category 1 of Rs. 1,84,39,110/- and Category 2 of Rs. 89,16,250/- totaling to Rs. 2,73,55,360/- for AY 2016-17 and 2017-18 out of which Rs. 90,20,100/-related to AY 2016-17 and Rs. 1,83,35,260/- for AY 2017-18. 8. Table 1 in the assessment order shows compilation from many documents/loose papers found and seized from the residences of directors, images found in the mobile, hard disks of desktops or laptops and also from various business premises representingbooking details of various services at different venues asper which the total cash received wasRs. 27,80,000/- relating to various dates for the period relevant to A.Y 2016-17. 9. Likewise, from the residences of the partners of the assessee, images containing details of booking of functions and amount received against functions was retrieved from Toshiba laptop and unaccounted business receipts of Rs. 13,50,560/-were mentioned relating to various dates for the period relevant to A.Y 2016- 17. 10. The Assessing Officer estimated the total unaccounted sales at Rs. 6,31,87,606/- by applying a suppression factor of 2.9217 to the sales as per ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 7 of 26 books Rs. 2,16,27,000/- for the entire year out of which he has reduced the undisclosed sales totaling to Rs. 1,31,50,660/- arrived at on the basis of seized material. 11. Accordingly, following additions were made: SI.No Particulars Amount(Rs.) Remarks a. Addition on the basis ofAnnexure A-5 (Page 21 of theassessment order) 90,20,100 Seized material for the period January 2016 to March 2016 b. Addition on account of unaccounted business receipts on the basis ofKohli Tent Laptop 27,80,000 Seized material relatingto various dates for the entire period c. Addition on the basis of Toshiba laptop 13,50,560 -do- Total additions based on seized material 1,31,50,660 d. Addition on account of suppressed sales estimated on the basis of suppression 5,00,36,946 Balance amount remaining after estimation of un accounted sales on the basis of suppression factor on turnover for the whole year Grand Total 6,31,87,606 12. Aggrieved, the assessee went in appeal before the ld. CIT(A) who upheld the determination of total unaccounted receipts of Rs 6,31,87,606/- but granted relief by holding that 10% of the total receipts will be taxed as ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 8 of 26 unaccounted income of the assessee and accordingly upheld Rs 63,18,760/- as income of the assessee. 13. Now the assessee is in appeal before us. At the outset, the assessee stated that he is only contesting ground no 4 and 5 of the appeal and would not press the ground no 1 to 3 with regard to veracity of Notice u/s 153C, legality of order u/s 153C and violation of principles of natural justice. The ld AR fairly stated that he will only contest the case on merits. 14. Having said so, the ld ARstated that the seized material on the basis of which suppression factor has been determined is Annexure A-5 for the period January 2016 to July 2016 and accepted that for this period, evidence hasbeen found to show that the assessee is receiving cash over and above the cheque payments which is its unaccounted turnover.The ld AR stated that the details of Annexure A-5 are reproduced in the assessment order at page 65 of appeal memo which is in respect of 24 functions. The ld AR stated that the reference to pages 94 to 96 of APB for AY 2016-17 and pages 86 to 89 of APB for AY 2017-18 would show that during the period relevant to the period mentioned in Annexure A-5 i.e., ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 9 of 26 January 2016 to July 2016, the functions held by the assessee are 38 for AY 2016-17 and 28 for AY 2017-18 totaling to 66 functions. 14. The ld. counsel for the assessee further submitted that it would thus be seen that the cash receipts of unaccounted sales are not in respect of each and every function out of 66 functions held between January 2016 to July 2016 only in 38 functions there are cash receipts.The ld AR stated that the Assessing Officer in the assessment order has, across the board, presumed that cash receipts are in respect of all the functions held and has estimated the unaccounted turnover @ Rs. 6,31,87,606/-by applying a suppression factor of 2.9217 on the total sales as per books of Rs. 2,16,27,000/-. After giving the credit for the unaccounted sales as per seized material the AO has estimated the suppressed sales at Rs. 5,00,36,946/- which is erroneous. 15. The ld. counsel for the assessee further continued by saying that at best, if an estimate of unaccounted sales has to be made other than unaccounted sales as per seized material the same ought to be only for and in respect of the functions held between April 2015 to December 2015 for the said year.The sales as per books for this period is totaling to Rs. ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 10 of 26 1,28,32,000/- which is in respect of 46 functions held during the period from April 2015 to December 2015.As is evident from the seized material, the cash receipts are in respect of only 36% (24/66*100) of functions held. Thus 36% of the sales as per books would be Rs. 46,19,520/-(12832000*36%). And by applying the suppression factor of 2.9217 to Rs. 46,19,520/- the unaccounted sales for the said period would be Rs. 1,34,96,852/- instead of Rs. 5,00,36,946/- estimated by the Assessing Officer. There is no requirement for making an estimate of unaccounted sales for the period January 2016 to March 2016 since the same has been found to have been made in the seized material. 16. Thus the unaccounted sales of the assessee would be as under: 1. Unaccounted sales estimated for the period April 2015 to December 2015 Rs. 1,34,96,852/- 2. Unaccounted sales as per seized material A-5 for the period from January 2016 to March 2016. Rs. 90,20,100/- 3. Unaccounted sales as per Kohli Tent laptop Rs. 27,80,000/- 4. Unaccounted sales as per Toshiba laptop Total Rs. 13,50,560/- Total Rs. 2,66,47,512/- ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 11 of 26 17. The ld. counsel for the assessee concluded by saying that the Id. CIT(A) has applied 10% net profit on unaccounted turnover as computed by the AO at Rs. 6,31,87,608/- and has sustained the addition to the tune of Rs. 63,18,760/- as against addition of Rs. 6,31,87,606/- made by the Assessing Officer in the assessment order.10% of net profit on correctly computed/estimated unaccounted turnover of Rs. 2,66,47,512/- would be Rs. 26,64,751/- and thus the assessee claims a further relief of Rs. 36,54,009/- (Rs. 63,18,760/- minus Rs. 26,64,751) which may kindly be allowed. 19. Per contra, the ld. DR strongly supported the order of the AO.The ld DR submitted that the addition and extrapolation made by the AO with regard to the unaccounted receipts from the business activities of the assessee is based on the seized materials and evidences found in the course of search and is very much permissible in law. The ld DR further pointed out that the assessee has not contested the veracity, relevance of the seized documents and has completely accepted the description available in the seized documents. The ld DR forcefully stated that the assessee has further accepted the legality of assumption of jurisdiction and order passed u/s ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 12 of 26 153C. The ld DR further pointed out that the assessee has accepted the suppression factor of 2.9217 as determined by the AO on the basis of seized material. The ld DR submitted that the only objection being raised is on the computation of unaccounted income on the basis of number of functions conducted by the assessee during the year. The Ld DR made a reference to the decision of the hon’ble Supreme Court in the case of CST Vs H.M.Esufali H.M. Abdulai (1973) 90 ITR 271(SC)to buttress his argument that where the basis of suppression factor of 2.9217 adopted by the AO in estimating the turnover has a reasonable nexus with the estimate made, the same should not be disturbed.The ld DR also stressed that the unaccounted receipts as found in the seized materials should be considered as unaccounted income of the assessee in entirety as the assessee has not furnished any evidence of expenditure against the said receipts. 20. Ground number 1 is general and needs no adjudication. Ground No. 2 and 3 are not pressed and hence dismissed as not pressed. The only ground that requires adjudication is ground No. 4 and 5. 21. We have heard the rival submissions and have perused the relevant material on record. We find that the assessee is in the business of providing ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 13 of 26 space to the client and basic catering servicewhich involves a host of facilities as. There was a search and seizure operation under section 132 the IT Act on 3.5.2018 in the case of Kohli tent group of cases including the premises of M/s Kohli Tent House, M/s Fourstar Hospitalities LLP, M/s Tristar Hospitalities, M/s Kohli Tent Pvt. Ltd., M/s Kawatra Tent & Caterers Pvt. Lad. and related individuals were covered. The Revenue found evidences of receipts and expenses not recorded in the books and in a few cases, evidences of only receipts were found during the course of search. The AO has computed suppressed sales considering the suppression factor computed on the basis of evidences found during search. The appellant has submitted that the suppressed sales computed cannot be the total income for the purpose of computation of income tax and the net profit/gross profit must be computed for estimating the total income. 22. We find it pertinent, at this point of time, to mention that the validity of notice u/s 153C; assumption of jurisdiction by the AO; availment of opportunities to represent the case andthe relevance of the seized material and taking them as the basis of additions made, are not under dispute. The dispute lies only on the quantum of additions made. ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 14 of 26 23. We find that in the course of search, materials were seized suchas laptop as Annexure A-5 from Velvet, Rajori Garden (Document set-7) which showed that the assessee had received Rs 1,84,39,110/- as cash which were not accounted for in the books of the assessee. Further, from the images extracted from mobile phone of Sanjeev Kohli and Sunit Kohli (Documents set-21), we find that unaccounted receipts found is Rs 13,50,560/-. On the basis of these data, the assessing officer calculated the suppression factor as 2.9217 as follows: Document set Accounted Sales Unaccounted Sales Document Set 7 63,23,725 1,84,39,110 Document Set 21 4,49,440 13,50,560 67,73,165 1,97,89,670 Ratio 2.9217 24. The assessing officer, on the said basis of suppression factor of 2.9217, has made addition of Rs. 5,00,36,946/- on account of suppressed business receipts as follows: AY Sales as per Books Unaccounted Sales already considered Estimated Unaccounted sales (B*2.9217) Estimated suppressed sales (D-C) A B C D E 2016-17 2,16,27,000 1,31,50,660 6,31,87,606 5,00,36,946 ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 15 of 26 We find that the figure of Rs 2,16,27,000/- at column B is derived from the regular books of account. The figure of Rs 1,31,50,660/- at column C is derived from the seized documents/physical/electronic evidences marked as Annexure-5 seized from Velvet, Rajori Garden, New Delhi of Rs 90,20,100/-; excel sheet titled “Booking amount Detail_35890.xlsx” retrieved from impounded Kohli Tent Laptop Rs 27,80,000/- and Toshiba Laptop of Rs 13,50,560/-. 25. Further, on the basis of these seized documents,at column D the assessing officer applied suppression factor of 2.9217 on the accounted sale receipts of Rs. 2,16,27,000/- to arrive at the total accounted and unaccounted sales receipts of Rs. 6,31,87,606/-. From this total accounted and unaccounted sales receipts, the AO reduced the unaccounted receipts, as found from the seized documents/evidence, of Rs.1,31,50,650/- to arrive at the estimated suppressed income at column E of Rs. 5,00,36,946/- (Rs.6,31,87,606-Rs.1,31,50,650). The AO, finally not only added theestimated suppressed income of Rs. 5,00,36,946/-as unaccounted income but also has made separate additions of Rs. 1,31,50,660/- as unaccounted receipts (90,20,100 + 27,80,00 + 13,50,560) which was based on physical/ electronic evidences found/seized during the course of search. ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 16 of 26 26. The CIT(A), relying on various case laws, has held that the sales suppression computed by the AO is basically turnover and not the total income of the assessee. The CIT(A) further found that the net profit ratio of the total turnover after assessment (Rs 8,48,14,6006/-) as compared with the total income as per assessment order(Rs 6,36,93,970/-) is coming at 75.09 % which was astronomical considering the nature of business. The CIT(A), therefore held that the total income must be based on fair basis to compute the tax payable. The CIT(A) found that since the AO himself has accepted the profit rate of 10% in the case of M/s Fourstar Hospitality LLP, a group concern. The CIT(A) therefore held that only net profit of the out of books sale can be added to the income of the assessee. Accordingly, he considered the total suppressed sales turnover at Rs 6,31,87,606(i.e., the suppressed sales turnover computed by the AO of Rs 5,00,36,946 and the unaccounted sales found from the seized evidence of 1,31,50,660).The CIT (A) took the addition of Rs 1,31,50,660/-,made separately by the AO, as part of suppressed turnover and applied a rate of 10% on it to compute unaccounted income of the assessee. 27. We further find that with regard to the adoption of the profit rate of 10%, the CIT(A) has considered the evidences found and seized during search in respect of one of the group concern, M/s Fourstar Hospitalities ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 17 of 26 LLP found in the excel workbook titled as ‘pendrive- 00641’ marked as annexure A-13 in which there is a worksheet named as ‘sheet-1’ which records the unrecorded transaction of receipts and payment held in respect of M/s APPL (Angel Promoters Private Limited ) for the period from 02-03- 2017 to 10-11-2017 and in respect of M/s. Fourstar Hospitalities for the period from 11.11.2017 to 10.04.2018 and further Annexure A-12 has been found from M/s Fourstar Hospitalities for the period from 11.04.2018 to 2.05.2018. On the basis of the seized data contained in A-13 and A-12, a profit and loss account has been prepared for the period from 11.11.2017 to 31.03.2018 and from 01.04.2018 to 02.05.2018 relating to M/s Fourstar Hospitalities according to which the average net profit comes to about 10% of the receipts outside books. The CIT(A) further found that the AO himself has accepted the gross profit rate of 10% while dealing with the issue of capital contribution (out of books made by the partners of the appellant assessee found to have been made in the case of Fourstar Hospitalities LLP in its seized material (out of profits of Tristar Hospitalities and Kohli Tent House). The CIT(A) referred to the relevant portion of the assessment order of Shri Sanjeev Kohli for AY 2018-19 is reproduced below: \"6.4 The reply of the assessee has been examined. Amounts deployed by these persons have been stated to be sourced from the income of ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 18 of 26 M/s Tristar Hospitalities(Rs.1,41,08,424/-) and M/s Kohli Tent House (Rs.27,35,536/-), the details of estimated income by these two concerns were also furnished. The income of Tristar Hospitalities, a partnership firm in respect of unaccounted receipts amounting to Rs.14,10,83,966/- detected during course of search is estimated at Rs. 1,41,08,424/- applying profit rate of 10% on the unaccounted receipt. Similarly, the income of Kohli Tent House, another partnership firm is estimated at Rs.27,35,536/- on total unaccounted receipts of 2,73,55,360/- detected during course of search in the case of Kohli Tent Group.” Accordingly, the CIT(A) took the10% oftotal suppressed sales turnover at Rs 6,31,87,606, as net profit for the year at ₹ 63,18,760/-. Further the CIT(A) held that the separate addition of ₹ 1,31,50,660 on account of unrecorded business receipt is not warranted as total suppressed income has already been taken into account. He further held that separate disallowance under section 40A(3) and 40(a)(ia) is also not warranted. 28. Before us, the assessee has now come up with the proposition that the unaccounted income of the assessee be calculated on the basis of number of functions conducted by the assessee. The assessee stated that it has ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 19 of 26 conducted 66 functionsbetween January 2016 to July 2016 which was bifurcated as 38 functions in AY 2016-17 and 28 functions in AY 2017-18. The assessee further stated that as the search showed that there were cash receipts in only 38 functionsout of this 66 functions, therefore it was proposed that since cash receipts of unaccounted sales are not in respect of each and every function held, estimate of unaccounted sales should be made on proportionate basis. 29. The assessee stated that for AY 2016-17,if an estimate of unaccounted sales has to be made other than unaccounted sales as per seized material, the same ought to be only for and in respect of the functions held between April 2015 to December 2015 for the said year.The assessee further proposed that as per the Annexure A-5, the assessee has been found to have received unaccounted cash receipts in respect of only 24 functions.The sales as per books for this period is totaling to Rs. 1,28,32,000/- which is in respect of 46 functions held during the period from April 2015 to December 2015.As is evident from the seized material, the cash receipts are in respect of only 36% (24/66*100) of functions held. Thus 36% of the sales as per books would be Rs. 46,19,520/-(12832000*36%). And by applying the suppression factor of 2.9217 to Rs. 46,19,520/- the unaccounted sales for ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 20 of 26 the said period would be Rs. 1,34,96,852/- instead of Rs. 5,00,36,946/- estimated by the Assessing Officer. There is no requirement for making an estimate of unaccounted sales for the period January 2016 to March 2016 since the same has been found to have been made in the seized material. Thus the assessee proposed the unaccounted sales at Rs 2,66,47,512/- which included Rs 1,34,96,852 as calculated above and Rs 1,31,50,660/- found in the seized materials Annexure A-5, Laptop from Kohli Tent and Toshiba Laptop. The assessee finally estimated 10% of Rs 2,66,47,512/- as estimated unaccounted income for AY 2016-17 which works out to Rs 26,64,751/- and claimed a further relief of Rs 36,54,009/- from the amount sustained by the CIT(A). 30. We are of the considered view, from the conspectus of facts of the case, that the above proposed calculation of unaccounted turnover cannot be accepted. We find that the assessee has conducted 84 functions during the assessment year 2016-2017. Evidence of unaccounted receipt was found in 24 functions conducted in assessment year 2016-17.The assessee cannot hide behind the fact that since no evidence has been found in the rest of the 60 functions means no unaccounted receipts were generated on these functions. The preponderance of human probability dictates that what is ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 21 of 26 true for one aspect is applicable in other areas also. We find that preponderance of probability dictates that when assessee has received receipts outside the books in 24 functions in AY 2016-17, in all fairness it can be taken as fact that the assessee has had receipts outside the books for the rest of other functions conducted during the year. The seized materials and evidence are fair indication and have rational nexus with the unaccounted income of the assessee based on estimation of unaccounted sales turnover for the entire year.We find that the assessee has no objection to the unaccounted sales turnover being calculated on the basis of suppression factor that has been arrived at by the AO. In such a situation, the legal jurisprudence would dictate that the estimation of income should have clear nexus with the material on the basis of which estimation is being made. We are of the opinion that it is legally permissible for making the estimate for the whole year on the basis of evidences and material found for a part of the year and we find support from the decision of the Supreme Courtin the case of CST Vs H.M.Esufali H.M. Abdulai (1973) 90 ITR 271(SC) on the subject of estimating income, which had held as follows: “In the case of 'best-judgment' assessments, the courts will have to first see whether the accounts maintained by the assessee were rightly rejected as unreliable. If they come to the conclusion that they were rightly rejected, the next question that arises ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 22 of 26 for consideration is whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made. If the basis adopted is held to be a relevant basis even though the courts may think that it is not the most appropriate basis, the estimate made by the assessing authority cannot be disturbed. In the present case, there is no dispute that the assessee's accounts were rightly discarded. We do not agree with the High Court that it is the duty of the assessing authority to adduce proof in support of its estimate. The basis adopted by the Sales-tax Officer was a relevant one whether it was the most appropriate or not. Hence the High Court was not justified in interfering with the same.” 31. We are therefore of considered view that the CIT(A) has applied a scientific view gathered from the seized materials found in the course of search for arriving at the suppressed unaccounted turnover/receipts of the assessee. We are also inclined to accept that the net profit of 75% from such business is not a probable proposition from the business of renting space and catering. We are of the considered view that adopting the net profit ratio of 10% of turnover is a rational basis as it is based on the seized materials itself. The CIT(A) has referred to the seized documents in the case of M/s Fourstar Hospitalities, a group concern, where the data as contained in Annexure A-12 and A-13 shows a working of profit and loss account for a period of FY 2017-18 and FY 2018-19, that the concern has had an average net profit of about 10% of the receipts outside the books of account. Further, we also find that the CIT(A) has taken cognizance of the fact that the AO himself has accepted the profit rate of 10% on the ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 23 of 26 unaccounted receipts in the case of Tristar Hospitalities and Kohli Tent House. Therefore, under these facts we are inclined to agree with the CIT(A) that the net profit of 10% of unaccounted receipts is based on relevant facts emerging out of the seized materials during the course of search. 32. We therefore are of the opinion that the additions sustained by the CIT(A) are based on seized materials/documents which remains uncontested by the assessee and hence such additions are sustainable. The above conclusions are supported by the decisions of the hon’ble Delhi High Court PCIT Vs TDI Infrastructure Ltd [2024] 169 taxmann.com 223 (Delhi) where, dealing with the assessment made u/s 153C, it held that if no incriminating material was found during the course of the search in respect of an issue, then no addition in respect of such an issue could be made in assessment under sections 153A and 153C that is to say that additions u/s 153C can only be made on the basis of incriminating materials. The Delhi High Court referred to the other decisions in the case of Kabul Chawla[2015] 61 taxmann.com 412 (Delhi)and Meeta Gutgutia395 ITR 526(Del) in the context of assessment u/s section 153A where it has laid down the ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 24 of 26 principles that the additions in the cases of search should be based on the basis of seized materials and it can not be “arbitrary or made without any relevance or nexus with the seized material.” Considering the legal principles as delineated above we find no reason to interfere with the decisions of the CIT(A) and accordingly uphold the addition sustained by him. The grounds of the appeal of the assessee is dismissed. We have upheld the decision of the CIT(A) and consequently, the Revenue appeal is dismissed. ITA No. 2476/DEL/2023 [A.Y. 2017-18](Assesse appeal) ITA No. 2448/DEL/2023 [A.Y. 2017-18](Revenue appeal) 33. We have passed a separate order in respect of the assessment year 2016-17 hereinabove. As the facts and circumstances of the instant appeal are admittedly mutatis mutandis similar to those of the immediately preceding year, respectfully following the same, we uphold the decision of the CIT (A).The grounds of the appeal of the assessee is dismissed. The Revenue appeal is also dismissed. ITA No. 2477/DEL/2023 [A.Y. 2018-19] (Assessee appeal) ITA No. 2449/DEL/2023 [A.Y. 2018-19] (Revenue appeal) 34. We have passed a separate order in respect of the assessment year ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 25 of 26 2016-17 hereinabove. As the facts and circumstances of the instant appeal are admittedly mutatis mutandis similar to those of the immediately preceding year, respectfully following the same, we uphold the decision of the CIT(A). The grounds of the appeal of the assessee is dismissed. The Revenue appeal is also dismissed. 35. To sum up and conclude, Appeals of the Assessee in ITA Nos. 2475, 2476 and 2477/DEL/2023 are dismissed. The appeals of the Revenue in ITA Nos. 2447, 2448 and 2449/DEL/2023 stand dismissed. The order is pronounced in the open court on 29.04.2025. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29th April, 2024. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi ITA No. 2475,2476,2477/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] Kohli Tent House Vs. DCIT ITA No. 2447,2448,2449/DEL/2023 [A.Y. 2016-17;2017-18;2018-19] The Dy. C.I.TVs.Kohli Tent House Page 26 of 26 Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order .04.2025 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member .04.2025 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order "