INDO COUNT INDUSTRIES LTD,DELHI V. DCIT, CENTRAL CIRCLE - 7(4), MUMBAI, MUMBAI

CO 183/MUM/2024

AI Insights

The case involves multiple appeals and cross objections by the revenue and the assessee, Indo Count Industries Ltd., against the common order passed by the CIT(A) for the assessment years 2012-13 to 2018-19. The primary issues revolved around the additions made by the AO based on allegations of under-invoicing and accommodation entries, which were contested by the assessee. The Tribunal examined the validity of the additions, the reliance on retracted statements, and the lack of incriminating evidence to support the revenue's claims. The Tribunal's decision emphasized the need for corroborative evidence in cases of retracted statements and the principle that additions cannot be made on mere estimates or presumptions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783100 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 05-09-2024
• Other Referred Cases: CIT vs. Durga Prasad More, Sumati Dayal vs. CIT, Asst. CIT vs. Hotel Blue Moon, Commissioner of Income Tax vs. B. Nagendra Baliga, PCIT vs. Anand Kumar Jain, Commissioner of Income Tax-1 vs. Mantri Share Brokers P. Ltd, Commissioner of Income Tax vs. Harjeev Agarwal, Principal Commissioner of Income Tax vs. Best Infrastructure (India) Pvt. Ltd., Commissioner of Income Tax vs. Dilbagh Rai Arora
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RESPONDENT; R.A DHYANI
• Assessee Lawyers: MAYANK PATWARI; MASKARA TEXTILES PRIVATE; UNDERINVOICING OF
• Keywords: Business income; Reassessment proceedings; Income from undisclosed sources; Bogus purchase; Retraction; Accommodation entries; Bogus
• Section: 143(3); 132; 153A; 69; 133(6); 44AD; 133A

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER Assessee by Shri Mayank Patwari Revenue by Shri R.A Dhyani, CIT DR Date of Hearing 27.10.2025 Date of Pronouncement 30.10.2025 ORDER Per Bench The captioned appeals and cross objections are filed by the revenue and Assessee against the common order passed by Ld. CIT-(A) under section 250 of the Income Tax Act, 1961 (‘the Act’) arising out of different assessment orders for AY 2012-13 to AY 2018-19, the details of which are tabulated below: - S.N AY ITA No.s /Cross CIT-(A) Order dated Assessment Assessmen ITA No. AY Assessee/ Appellant Respondent 3822/Mum/2024 2014-15 DCIT, CC-7(4) Room No. 655, 6th Floor, Aayakar Bhavan, MK Road, Mumbai – 400020. Indo Count Industries Ltd., 15/76, 2nd Floor, Rajender Nagar, Central Delhi Delhi - 110060 3850/Mum/2024 2015-16 3820/Mum/2024 2016-17 3854/Mum/2024 2017-18 3853/Mum/2024 3824/Mum/2024 2018-19 2013-14 3826/Mum/2024 2012-13 CO. No. AY Assessee/ Appellant Respondent 184/Mum/2024 2013-14 Indo Count Industries Ltd., 15/76, 2nd Floor, Rajender Nagar, Central Delhi Delhi - 110060 DCIT, CC-7(4) Room No. 655, 6t h Floor, Aayakar Bhavan, MK Road, Mumbai – 400020. 185/Mum/2024 2014-15 186/Mum/2024 2015-16 187/Mum/2024 2017-18 188/Mum/2024 183/Mum/2024 2018-19 2012-13 Printed from counselvise.com 2 Indo Count Industrial Ltd, Mumbai. objections order under section t order dated 1 2012- 13 ITA/3826/Mum/2024 and CO 183/MUM/2024 CIT (A) 49, Mumbai/10075/2011-12, dated 24.05.2024 143(3) r.w.s. 153A 22/06/2021 2 2013- 14 ITA/3824/Mum/2024 and CO 184/MUM/2024 CIT (A) 49, Mumbai/10157/2012-13, dated 24.05.2024 143(3) r.w.s. 153A 24/06/2021 3 2014- 15 ITA/3822/Mum/2024 and CO 185/MUM/2024 CIT (A) 49, Mumbai/10408/2013-14, dated 24.05.2024 143(3) r.w.s. 153A 24/06/2021 4 2015- 16 ITA/3850/Mum/2024 and CO 186/MUM/2024 CIT (A) 49, Mumbai/10526/2014-15, dated 24.05.2024 143(3) r.w.s. 153A 24/06/2021 5 2016- 17 ITA/3820/Mum/2024 CIT (A) 49, Mumbai/10853/2015-16, dated 24.05.2024 143(3) r.w.ss. 144C(3) & 153A 26/07/2021 6 2017- 18 ITA/3854/Mum/2024 and CO 187/MUM/2024 CIT (A) 49, Mumbai/10806/2016-17, dated 24.05.2024 143(3) r.w.s. 153A 28/06/2021 7. 2018- 19 ITA/3853/Mum/2024 and CO 188/MUM/2024 CIT (A) 49, Mumbai/10583/2017-18, dated 24.05.2024 143(3) 28/06/2021 2. The issues in all the above appeals being common, interlinked and related to the same assessee for Assessment Years 2012-13 to 2018-19 therefore, all Printed from counselvise.com 3 Indo Count Industrial Ltd, Mumbai. these appeals and cross objection filed by the revenue/Assessee respectively have been heard together and accordingly, adjudicated by a common order. 3. The brief facts of the case are that the Assessee is a listed company engaged in the business of manufacturing and export of cotton yarn, knitted fabrics and home textiles; trading in cotton. A search action u/s. 132 of the Act was carried out in the case of the Assessee and its group concerns on 01/02/2018. Pursuant to the said search, notices u/s. 153A of the Act were issued to the Assessee by the AO for the A.Ys. 2012-13 to 2017-18 on 21/02/2019, and in response to the same, the Assessee filed its returns of income for all these years on 18/03/2019. Further, the case of the Assessee for A.Y. 2018-19, being the year of search and, hence, falling under the category of compulsory scrutiny, was selected for scrutiny and consequently a notice u/s. 143(2) of the Act was issued to the assessee by the AO on 09/08/2019. Subsequently, the AO completed the assessments for A.Ys. 2012-13 to 2015-16 & 2017-18 u/s. 143(3) r.w.s. 153A of the Act; for A.Y. 2016-17 u/s. 143(3) thereby making additions. 4. Aggrieved by the order of the assessment, assessee preferred appeal and consequently the ld. CIT(A) partly allowed the appeal. 5. Against the order of the CIT(A), both revenue as well as the assessee filed their appeals / cross objections respectively. Printed from counselvise.com 4 Indo Count Industrial Ltd, Mumbai. 6. Since the issues raised in these appeals filed by the revenue and cross objections by the assessee are discussed and decided herein below. In order to understand the implications, the facts for A.Y. 2016-17 are considered for primary discussions as a lead case. The conclusive decision would, accordingly, be applicable equally to the appeals for the other years under consideration. Accordingly, the grounds of appeal raised by the revenue / cross objections by the assessee in the appeals for the years under consideration are taken up for adjudication year-wise. 7. First of all we take up appeal filed by the revenue bearing ITA No. 3820/Mum/2024 for A.Y. 2016-17. The grounds of appeal raised by the revenue are mentioned herein below:- 1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the addition made by AO of Rs. 5,65,54,200/- without remanding the matter back to the file of AO while taking decision solely on the basis of a content pendrive and ignoring other documents obtained during the search operation? 2. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the addition made by the AO of Rs. 40,82,91,134/- without appreciating the fact that the Assessee has merely taken accommodation entry in order to inflate expenses? 3. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the addition made by the AO of Rs. 2,03,64,556/- without appreciating the fact that the Assessee has merely taken accommodation entry and paid commission in cash out of its unaccounted money”? 4. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the addition made by the AO of Printed from counselvise.com 5 Indo Count Industrial Ltd, Mumbai. Rs. 5,00,000/- without remanding the matter back to the file of AO while taking decision solely on the basis of submissions made by the Assessee?” 5. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the addition made by the AO of Rs. 25,000/- without appreciating the fact that Assessee has availed bogus bills on the pretext of job work and paid commission in cash out its unaccounted money?” Ground No. 1 8. This ground raised by the revenue relates to challenging the order of Ld. CIT(A) in deleting the additions of Rs. 5,65,54,200/-. 9. In this regard Ld. DR appearing on behalf of the revenue placed reliance upon the order passed by the AO and submitted that Ld. CIT(A) erred in deleting the additions of Rs. 5,65,54,200/- without remanding the matter back to the file of AO, while taking decision solely on the basis of a content pendrive and ignoring other documents obtained during the search operation. It was further argued that the Assessee company has not made any change in the business operation nor the pattern of dealing with the transactions pertaining to sale of waste fabric reflects any change during the block period. The parties to whom the Assessee company has made the sales are as under: - Printed from counselvise.com 6 Indo Count Industrial Ltd, Mumbai. Wherein it is clearly visible that apart from AY 2012-13, the sales in fabric waste is gradually similar in amount and during the search operation the employee of Assessee company namely Shri Baburaw Sambhaji Hadkar and Sh. Naishdhkumar C Vyas has admitted that the sales under-invoiced and 50 % of the total sales value was received in cash. Furthermore, the aforesaid entities are under the control of Sh. Zhahid during the entire block period. Furthermore, SH. Hadhkar has admitted that NC Vyas collects the cash from the parties and the same cash was handed over to Sh. Anil Jain and Sh. Mohit Jain. 10. The Ld. DR also submitted that the Ld. CIT-(A) has erred in law in deleting the addition in the AY 2015-16, 2016-17, 2017-18 and 2018-19 by merely contending the seized material in the form of excel sheet contains the Printed from counselvise.com 7 Indo Count Industrial Ltd, Mumbai. transactions from 01.11.2011 to 03.04.2013, whereas during the search operation it was admitted that the excel sheet was deleted due to the reason that the president of Textile division Sh. Jaigopal Arora has forcefully directed Sh. Hadhkar to delete the excel sheet. The relevant statement corroborating the same can be seen from page 52 of the assessment order at Answer to Question 20 in the statement made under section 132 (4) of the Act. It may also be seen from the Answer to Question 22 of the statement at similar page of assessment order, that the unaccounted cash portion of FRC sales was admitted to tune of 50 :50 whereas the same also stated to be reduced to 40:60 from last 1.5 years i.e., mid of year 2017. In the present facts it is submitted that the ld.AO has rightly added the unaccounted cash to the returned income for the period apart from 01.11.2011 to 03.04.2013. The Ld. DR also highlighted that the AO has served the notices to the parties in question and none of the parties has responded to the notice. It was contended by the Ld. DR that ratio of cash component to cheque component in the FRC sales, the cash to billed amount ratio is admitted to be 50:50 in F.Y.2015-16 and this practice of assessee is continued in future years as well. The Ld. DR also relied on Hon. Apex Court in the cases of CIT v. Durga Prasad More [1971) 82 ITR 540 and Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC). 11. On the contrary Ld. AR while relying upon the order of Ld. CIT(A) submitted that the alleged excel sheet cannot be considered as incriminating as Printed from counselvise.com 8 Indo Count Industrial Ltd, Mumbai. the same was retrieved from the pen drive of Sh. Hadkar however the revenue had made the addition by contending that the contents of excel sheet was confirmed by Sh. Hadkar during the search proceedings. Thus AO made the addition based on the presumption/estimation. Ld. AR further highlighted that the statement of Sh. Hadkar and Shri Naishadhkumar C Vyas were the sole basis of addition as the said excel sheet was found with Sh. Hadkar and both the persons have retracted the statements on 26th February 2018 (which is at paper book pages 1816-1830 of PB for AY 2016-17). In such facts, the Ld. AR submitted that the sole basis of impugned additions was statements, which were retracted, furthermore it was also contended that the allegation of the AO was that the assessee was engaged in the under-invoicing of fabric waste and the sales were recorded at the 1/2th value of the total sales made in the block years. In this regard Ld. AR also submitted that during the entire search proceedings, neither cash nor any document was seized or found which could corroborate that the Assessee was ever been in the custody of such cash, even otherwise the AO had also not whispered any averment which could justify that the allegation that the sales of fabric waste was under-reported and half of the total sales were received in cash. It was submitted that the retraction of statements and there was no iota of evidence, which could prove that the Assessee was ever been into the custody of such cash. It was also submitted that the revenue authorities have incorrectly held that the retraction was after-thought. The Ld. AR further submitted that the impugned excel file, on the basis of which statements were Printed from counselvise.com 9 Indo Count Industrial Ltd, Mumbai. recorded does not pertain to the year under consideration. Whereas it is an undisputed fact that each year of the assessment is independent and material found relating to preceding years cannot have an adverse impact on the assessment of the Assessee for A.Y.2016-17. It was also submitted that there was no dispute that the pen drive found from the possession of Mr. Hadkar, contained transactions from 01.11.2011 to 03.04.2013 and there is no transaction in the said pen drive, which pertains to the year under consideration. Apart from above, the AO had merely relied upon the retracted statements of Mr. Hadkar and Mr. Vyas (retracted in less than a month’s time), which in itself is wrong, vague, ambiguous and against the provision of law. Reliance in this regard was placed upon the following decisions: a. Commissioner of Income Tax vs. B. Nagendra Baliga (Hon’ble High court of Karnataka, in IT Appeal No.335 of 2007, dated 04.02.2014), wherein it was held that the Assessing Officer is not entitled to extrapolate undisclosed income detected in course of search for a particular period to entire block period on estimate basis. The Hon’ble Karnataka High Court has relied upon the judgment of Hon'ble Supreme Court in Asst. CIT vs. Hotel Blue Moon [2010] 321 ITR 362/188 Taxman 113, wherein, the Hon’ble Supreme Court had clearly held that the assessment for the block period can only be done on the basis of the evidence found as a result of search or requisition of books of account or documents and such other materials or information as available with the Assessing Officer. b. PCIT vs. Anand Kumar Jain, 2021 SCC Online Del 3174, Hon’ble High Court of Delhi, decided on 12.02.2021. c. Commissioner of Income Tax-1 vs. Mantri Share Brokers P. Ltd, in IT Appeal No. 502 of 2011, Hon’ble High Court of Rajasthan (SLP dismissed) 12. Ld. AR for Assessee also submitted that the AO had extrapolated the contents of the excel (under his own interpretation) to the block period Printed from counselvise.com 10 Indo Count Industrial Ltd, Mumbai. including the year under consideration. Thus, this action of the AO has been rightly questioned by the Ld. CIT(A) while deleting the additions in the year under consideration by holding that in view of the settled law that no extrapolation can be done on estimation basis, in the absence of any incriminating material related to the relevant period. Furthermore, during the year under consideration, the assessee had sold FRC to M/s Prime Enterprises, proprietorship concern of Shri Mohammad Umer Shabbirahmed Shaikh for Rs.5,65,54,200/-. A survey u/s 133A of the Act, was also carried out in the premises of Shri Mohammad Umer Shabbirahmed Shaikh, to whom the alleged cash sales of FRC was made. It was submitted that the AO alleged that no books of accounts were found to have been maintained by these entities, in this regard it was submitted that the books of accounts were not required to be maintained as they were disclosing income u/s 44AD of the Act. It is also submitted that statement of Shri Mohammad Umer Shabbirahmed Shaikh was recorded on oath, wherein it was clearly stated that the purchases from the Assessee had been made through cheques only and no cash component was ever involved. It was further submitted that since this was external confirmation from the party therefore, the same can be treated as most reliable source of information that the Assessee was not involved in any cash sales of FRC. 13. Apart from above, no evidence was found by the Investigation Wing with respect to the alleged cash payment being made by concerns or firms, controlled Printed from counselvise.com 11 Indo Count Industrial Ltd, Mumbai. or managed by Mr. Zhahid Ali Shaikh and his family. No material evidence had been brought on record that could prove that the assessee had accepted cash against the sale of FRC, during the year under consideration. Our attention was also drawn to the fact that the AO made similar additions in the hands of purchasers as well by extrapolating the contents of the impugned seized excel sheets found with Mr. Hadkar. Whereas the ld. CIT(A) had deleted the additions on the ground that the material did not contain any entries pertaining to the year under consideration. Therefore, the Ld. CIT(A) in the present case also affirmed the view taken by his predecessor in the case of the purchasers, thus in this way, it was submitted that the additions were rightly deleted by the Ld. CIT-(A). 14. We have heard the Counsels for both the parties, perused the material on record, judgments cited before us and also the orders passed by the revenue authorities. From the records we noticed that as per the facts of the present case, it is undisputed that the additions on account of undisclosed cash and under- invoicing of fabric waste sales were made by relying upon the excel sheet which was retrieved from the pendrive of the employee namely Sh. Hadkar. 15. Even otherwise, the Revenue has failed to place on record any evidence to show that, assuming the alleged cash was indeed received by the Assessee, the corresponding impact of such alleged cash should have been highlighted during the investigation or assessment proceedings during the years under consideration. However, in the present case, it is evident that no incriminating Printed from counselvise.com 12 Indo Count Industrial Ltd, Mumbai. material was recovered during the search. We notice that the sole reliance of the Revenue is on a statement that was subsequently retracted. Even assuming for the sake of arguments, that the statement had not been retracted then in that eventuality the additions would still not be sustainable, as no corroborative evidence was brought on record to establish that the Assessee was ever in receipt of such cash. Reliance in this regard is being placed on the decision in the case of Commissioner of Income Tax v. Harjeev Agarwal 241 IT Appeal No. 8 of 2004 (Delhi), Principal Commissioner of Income Tax v. Best Infrastructure (India) Pvt. Ltd., 397 ITR 182 (Delhi) and PCIT v. Anand Kumar Jain, 2021 SCC OnLine Del 3174 16. Even the Hon’ble Allahabad High Court, in the case of Commissioner of Income Tax v. Dilbagh Rai Arora in ITA No. 304 of 2009 (Allahabad), has held as under: “20. In the above judgment the Hon'ble Court has come to the. conclusion that the addition was not made merely on the statement made but after looking into the explanation, books of account and other material placed before him and then made the certain addition. The case in hand, the addition have only been made on the basis of statement given on 6.10.2005. 21. Therefore, the case law relied upon by the Appellant is of no help. The case in hand the assessee-respondent has given documents, material and explained threadbare with regard to amount of Rs. 24 crores but the assessing authority has mechanically made the addition of Rs. 7 crores and added back the same amount only on the basis of statement having been made by the assessee which is not permitted.” Printed from counselvise.com 13 Indo Count Industrial Ltd, Mumbai. 17. Thus, n the light of the aforesaid, where the statement was of an employee and the retraction was immediately made, then in that case, we are inclined to hold that the very basis of making addition not being one that could be considered legally admissible evidence, the addition deserves to be deleted. Further, the Ld. CIT-(A) had rightly held that in identical cases that extrapolation cannot be done to assume income of any taxpayer without any cogent material by relying on the findings of Hon’ble High court of Karnataka in the matter of Commissioner of Income Tax vs. B. Nagendra Baliga, (47 taxmann.com 331) and Hon’ble Gujrat High Court in case of Standard Tea Processing Co. Ltd(34 Taxmann.com 31). Therefore, considering the above circumstances and the legal prepositions, we do not find any infirmity in the order of Ld. CIT-(A) as the sole basis for making additions by the AO is the statements of Sh. Hadkar and Sh. Vyas and no material has been brought on record to show that such transactions had ever undertaken beyond what was actually found in the excel sheets. Thus, no additions could have been made in the absence of incriminating material by using the extrapolation technique. 18. Insofar as the issue of restriction of income to the extent of seized excel is concerned, the same has been raised by the Assessee in his Cross Objections in the relevant year, therefore, the same shall be dealt with in the subsequent paragraphs while deciding the appeals of the concerned assessment years. Printed from counselvise.com 14 Indo Count Industrial Ltd, Mumbai. 19. Furthermore, the contentions of Ld. DR for remanding back the matter to the Assessing officer shall not be sustained as it is a settled principle that the remand of proceedings should not be carried out arbitrarily or as a matter of routine, but must be based on a clear necessity arising from the facts and in the interest of justice. Furthermore, it is a settled position of law that reassessment proceedings in the case of unabated assessment years can be initiated only on the basis of incriminating material seized during the course of the search operation. In such a scenario, the grievance regarding the remand of proceedings merely for verification of seized material is unjustified, particularly when no such incriminating material exists on record to support the reassessment. Therefore, ground no. 1 of the appeal raised by the revenue stands dismissed. Ground no. 2 20. This ground raised by the revenue relates to challenging the order of the CIT(A) in deleting the addition of Rs. 40,82,91,134/- which was made by AO on account accommodation entry received by the assessee. 21. In this regard ld. DR while relying upon the order of assessment submitted that ld. CIT-(A) has erred in deleting the disallowance of purchases to the tune of INR 40,72,91,135/- made from the parties namely M/s Citoc Ventures Private Limited for the purchase of INR 17,48,75,212/- and from M/s Maskara Textiles Private Limited for the purchases of INR 23,24,15,923/- and Printed from counselvise.com 15 Indo Count Industrial Ltd, Mumbai. further commission @ 5 % of INR 2,03,64,556/- of the total purchases. The Ld. DR relied upon the findings of the AO and contended that the.AO had rightly made addition for the bogus purchases made from the aforesaid parties and further submitted that it is settled position in the industry that in order to receive the bogus entries, the parties are required to pay the commission which lies within the range of 5 % to 7 %, therefore the addition towards the commission of 5 % was rightly made to the returned income. It was further submitted that the Ld. CIT-(A) had incorrectly affirmed the afterthought of Assessee, wherein it was incorrectly submitted that the purchases made from the aforesaid parties was further resold to them, through various entries, and only addition towards GP margin was required to be made to the returned income. The Ld. DR submitted that the Assessee had not placed on record any correlation with the stock sold and stock purchases, therefore the additions were deleted. 22. Whereas on the contrary, the Ld. AR submitted that the purchase transactions are not accommodation entries, but just first step of circular trading, which is explained as under: a) It was submitted that that assessee had first sold the goods and after two stages, same goods were purchased back by the assessee. Hence, in this way, the assessee had neither made any delivery of goods nor taken any delivery of goods. This transaction was only circular in nature and such trading was carried out in three Printed from counselvise.com 16 Indo Count Industrial Ltd, Mumbai. stages as follows in which assessee was the starting point as well as the end point of the circular transaction: Particulars Transaction First Stage Assessee company sells goods to M/s Maharashtra Corporation Limited, M/s Osijaee Texfab Limited and M/s Visagar Polytex Limited Second Stage M/s Maharashtra Corporation Limited, M/s Osijaee Texfab Limited and M/s Visagar Polytex Limited sells goods to M/s Maskara Textiles Private Limited and M/s Citoc Ventures Private Limited Third Stage M/s Maskara Textiles Private Limited and M/s Citoc Ventures Private Limited sell back to assessee company. b) It was submitted that only book entries were passed in books of accounts of various entities relating to sale and purchases of grey fabrics, however there was no physical movement of goods in any of the stages. In order to further explain in detail, it was submitted that in the first stage, assessee company had recorded sales of grey fabric to M/s Maharashtra Corporation, M/s Osiajee Texfab Limited and M/s Visagar Polytex Limited. c) The details of amount booked in the sales register along with quantity sold (in meters) to the respective parties is as under: Buyer Amount Quantity (in mtrs) Maharashtra Corporation Limited Rs. 5,49,38,069/- 2,84,324 Osijaee Texfab Limited Rs. 5,67,71,328/- 2,82,634 Printed from counselvise.com 17 Indo Count Industrial Ltd, Mumbai. Visagar Polytex Limited Rs. 29,03,64,005/- 12,37,738 Total Rs. 40,20,73,402/- 18,04,696 23. To substantiate the said transactions, the assessee vide letter dated 15.11.2019, submitted the Ledger account, bank statement highlighting the receipt of the sales recorded in the books of accounts and copy of sale invoices. 24. In order to explain the second stage of transaction, it was submitted that in the second stage, M/s Maharasthra Corporation, M/s Osiajee Texfab Limited and M/s Visagar Polytex Limited recorded the sale of grey fabric to Maskara Textiles Private Limited and Citoc Ventures Private Limited. a) The details of amount booked in the sales register along with quantity sold (in meters) to the respective parties is as under: Seller Buyer Amount Quantity (in mtrs) Visagar Polytex Limited MTPL 23,05,78,051 9,51,009 Maharashtra Corporation Ltd CVPL 5,50,23,364 2,84,324 Osijaee Texfab Limited CVPL 5,68,56,120 2,82,633 Visagar Polytex Limited CVPL 6,01,57,626 2,86,730 Total Rs.40,26,15,161 18,04,696 25. In order to explain the third stage of transaction, it was submitted that the same grey fabric was recorded as sales to assessee by Maskara Textiles Private Printed from counselvise.com 18 Indo Count Industrial Ltd, Mumbai. Limited and Citoc Ventures Private Limited to complete the circular transaction. a) The detail of amount booked as sales along with the quantity sold (in meters) to assessee company is as under: Seller Amount Quantity (in mtrs) Maskara Textiles Private Limited Rs. 23,34,15,922/- 9,48,311 CITOC Ventures Private Limited Rs. 17,48,75,212/- 8,56,289 Total Rs. 40,82,91,134/- 18,04,600 26. In order to substantiate the above transactions, the assessee submitted the Ledger account, bank statement highlighting the payment and purchase invoices issued by MTPL and CVPL. 27. It was also submitted that no element of cash in circular trading of goods was involved and even no record of any cash transaction was found during the course of search and survey proceedings. Even the revenue had never disputed the fact that there was no actual movement of goods and rather duly accepts that these were mere accounting entries of sale and purchase. 28. Ld. AR further submitted that that the disallowance based on one stage of the transaction is flawed as the AO himself accepted that as per the Printed from counselvise.com 19 Indo Count Industrial Ltd, Mumbai. investigations conducted, sale and purchase transactions are not genuine transaction. However, while concluding the show case notice, Ld. AO only considered the purchases as non-genuine and completely ignored the corresponding sale as the whole transaction was circular in nature. It was therefore submitted that the impact of the said purchase and sale of grey fabrics shall be considered in its entirety as purchases and its corresponding sales are part of one circular transaction. 29. Even it was submitted that there was no revenue loss due to the circular transaction because the relevant freight and loss of Rs.68,06,133/- incurred on this circular trading of goods had been voluntarily disallowed. Moreover, M/s CVPL and M/s MTPL had duly offered for tax the gross profit earned on circular transaction amounting to Rs.28,38,102/- and Rs.28,37,871/-, respectively in A.Y. 2016-17. 30. Now let us analyze the Assessment proceedings in the case of M/s CVPL and M/s MTPL and their outcome. In this regard it has been argued that consequent to the search action of the assessee, assessment proceedings u/s 153A was also carried out in the case of both the parties i.e. M/s Citoc Ventures Private Limited and M/s Maskara Textiles Private Limited. 31. That during assessment proceedings, M/s CVPPL and M/s MTPL explained that transactions were solely circular in nature, involving no physical Printed from counselvise.com 20 Indo Count Industrial Ltd, Mumbai. delivery of goods. Even no cash was found or seized by the revenue authorities during the course of search at the premises of M/s CVPL and M/s MTPL. 32. Thus, in case of M/s CVPL and M/s MTPL, it was accepted during assessment proceedings that transaction made with assessee company were circular in nature. Hence, no addition was made on account of bogus sales in their case. 33. The relevant extract of para 7.12 from the assessment order of M/s CVPL and M/s MTPL (PB pages 1777-1778) is reproduced here below: “Further, Notices were also issued to M/s Maharashtra Corporation Limited, M/s Osijaee Texfab Limited and M/s Visagar Polytex Limited. The submission was received on 20.12.2019. In the submission filed all the three parties have categorially stated that they have sold the material in transit. They have neither taken nor given any delivery of goods. On perusal of submission and thus viewed the contention of the assessee that the sale and purchase is a circular transaction has been bolstered by the submission of the above mentioned parties. It is also seen that the sale and purchases in the books of respective entities are made through banking channels.” “Further, the assessee has itself accepted that the transaction with M/s Indo Count Industries Limited is circular in nature. From the submissions filed by the assessee and evidence gathered during the assessment proceedings, it is seen that there was no physical movement of goods and the assessee had provided accommodation entries during the said year. Printed from counselvise.com 21 Indo Count Industrial Ltd, Mumbai. These facts were also confirmed by the parties M/s Maharasthra Corporation Limited, Osaijee Texfab Limited and M/s Visagar Polytex Limited.” 34. Therefore, under these circumstances it was argued that Ld.CIT(A) had rightly given cognizance to the above arguments and the view taken by the AO in the related cases and deleted the impugned addition on account of purchases. 35. We have heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records we notice that where the assessee itself had contended that the purchases and sales, both are part of a circular transaction and assessment proceedings in the case of purchasers also resulted in the similar findings. Therefore, the averments of Ld. DR that the purchases and sales are not accommodation entries, rather both are separate transactions lacks factual sanctity. Furthermore, the quantity of material and in question is matched with the initial sales to final purchases from the parties in question. The entire three stages of transactions were recorded in the books of account and payment for the transactions in question were duly made through banking channels, as the same were never been under the dispute. Apart from the above, the parties in questions had also filed the response to the notice issued under section 133(6) of the Act, and the averments made by the Assessee were in consonance to each other. It was also contended that the directors and key Printed from counselvise.com 22 Indo Count Industrial Ltd, Mumbai. managerial personnel have also placed similar contentions in the statements on oath. And the transaction in questions were duly recorded in the books of accounts and to verify the same the Assessee had placed on record the sales invoices, bank statements and ledgers of all the above stated parties along with stock register. Both the lower authorities had not drawn any negative inference towards the evidences placed on record. Rather the Ld. CIT-(A) had rightly contended that the entire transactions in questions related to grey fabrics is nothing but just an accommodation entries and only the profit element involved in the entire transactions shall form part of returned income. Further while filing the return of income under section 153A of the Act, rather the Assessee had made suo moto disallowance of INR 68,06,133/- towards loss incurred on circular trading of transactions along with freight expenses which also upheld that the transactions stated above are nothing, but just paper entries/accommodation entries. Furthermore excess expenditure reported during the year under consideration of INR 62,17,732/- shall also be excluded from the expenditure claimed during the year, as rightly held by Ld. CIT-(A). No new facts or circumstances have been brought on record to controvert or rebut the findings so recorded by ld. CIT(A), therefore, we have no other reason just to dismiss the ground raised by the revenue. Therefore ground no.2 raised by the revenue stands dismissed. Ground No. 3 Printed from counselvise.com 23 Indo Count Industrial Ltd, Mumbai. 36. This ground raised by the revenue relates to challenging the order of CIT(A) in deleting the addition made by AO of Rs. 2,03,64,556/-. 37. In this regard ld. DR while relying upon the order of assessment, submitted that ld. CIT(A) erred in deleting the additions made by AO of Rs. 2,03,64,556/- without appreciating the fact that the assessee has merely taken accommodation entry and paid commission in cash out of its unaccounted money. It was further argued that Assessee had accepted that the accommodation entries were used during the block period, hence as the settled industry practice the addition on account of commission paid in order to receive the accommodation entry should be added to the returned income, 38. On the contrary, the ld. AR while relying upon the order passed by ld. CIT)(A) submitted that no cash was seized either from the premises of the assessee nor from the premises of other parties involved in circular transactions. Furthermore, the entries in circular trading are not accommodation entries: 39. However, in the current scenario, as already explained by the assessee, the circular transaction ware carried out in three stages. Initially, the assesee sold goods to MCL, OTL, and VPL for Rs. 40,20,73,402/- which were subsequently sold to MTPL and CVPL for Rs. 40,26,15,16/- in the second stage, resulting in earnings of Rs. 5,41,759/- for MCL, OTL, and VPL. Printed from counselvise.com 24 Indo Count Industrial Ltd, Mumbai. 40. In the final stage, MTPL and CVPL sold back the goods to the assessee for Rs. 40,82,91,134, generating earnings of Rs. 56,75,973/- for MTPL and CVPL. As per assessee, all these transactions were conducted exclusively through banking channels, without any cash involvement. Hence, no question of payment of any commission arises. 41. It was also submitted that even in the statements recorded during the course of search proceedings each and every person had emphasized that no element of cash was involved at any stage of the transaction. Further, there was no evidence on record to show that payment of commission was made by the assessee. 42. We have heard the counsel for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. After considering the facts, we do not find any infirmity in the Ld. CIT-A order as in the above grounds we have already held that the circular transaction, and the parties involved in the different stages have earned the profit whereas the Assessee had incurred the losses which was also reversed in the profit and loss statement. Considering the overall facts and circumstances of the present case, it is held that Ld. CIT-A had rightly held that no further disallowance is required in the present case, accordingly the disallowance made u/s 69 of the Act towards the commission expenditure of 5 % was rightly Printed from counselvise.com 25 Indo Count Industrial Ltd, Mumbai. deleted. Accordingly, we uphold the order passed by the ld. CIT(A)) and dismiss this ground raised by revenue. Ground No. 4 and 5 43. These grounds raised by the revenue relates to challenging the order of CIT(A) in deleting the additions of Rs. 5,000/- and 25,000/- respectively made by the AO on account of bogus bills. 44. In this regard, the Ld. DR while relying upon the order of assessment had contended that the Assessee was involved in the booking of bogus JOB work charges and against the same the commission was also paid on such bogus job work charges. Further the disallowance of INR 5,00,000/- was made by the AO on the basis of voucher found in the search operation of Sh. Shitole. Hence it was submitted that the disallowance may be sustained as the same was made on the basis of material seized during the search operation. On the contrary, ld. AR submitted that during the year under consideration, the Assessee had not made or claimed any job work expenditure to the tune of INR 5,00,000/-, hence the Ld. CIT-(A) had rightly deleted the addition towards the job work charges and further commission computed was also consequential in nature, hence the addition of INR 5,25,000 was rightly deleted from the returned income. Printed from counselvise.com 26 Indo Count Industrial Ltd, Mumbai. 45. We have heard the counsels of both the parties, perused the material placed on record, judgments cited before and also the order passed by the revenue authority. After considering the facts of the present case, we are of the view that no disallowance can be made towards the expenditure which was not been claimed in the returned income, hence in the present facts the addition and consequential commission expenditure were rightly deleted from the returned income. Thus, we uphold the order of CIT(A) and dismiss these grounds raised by the revenue. 46. In the result, the appeal filed by the revenue stands dismissed. ITA/3850/MUM/2024 AND CO 186/MUM/2024 for AY 2015-16. 47. Now we proceed to decide the above appeal filed by the revenue and CO filed by the assessee. The revenue in the present appeal has raised the below mentioned ground of appeal. “Whether on the facts and circumstances of the case and in law, the Ld. CIT- (A) was correct and justified in deleting the addition made by the AO of Rs. 5,65,54,200/- without remanding the matter back to the file of AO while taking solely on the bais of a content of pendrive and ignoring other documents obtained during the search operation?” 48. Further the Assessee has raised the below mentioned ground in the cross objection filed for AY 2015-16. Printed from counselvise.com 27 Indo Count Industrial Ltd, Mumbai. 1. The Ld. CIT(A) has erred in confirming the disallowance of Rs. 58,99,493/- being commission paid to Citoc Ventures Pvt. Ltd on pretext that the said payment is made without delivery of services to the appellant company. 2. The Ld. CIT(A) erred in solely relying on the statement of the employees of the company. 3. That the Ld.CIT(A) has erred in law and on facts by partially upholding the additions thourgh no incriminating material was found during the course of search, which is against the ratio laid down by the Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. a. That the Ld.CIT(A) has erred in law and on facts in considering the excel sheets in possession of Mr. Baburao Hadkar as incriminating material in the hands of the assessee company. 49. As far as the appeal filed by the revenue is concerned in this regard, we have already recorded detailed finding in AY 2016-17 in the appeal filed by the revenue. 50. Ground no. 1, 2 & 3 of revenue appeal for A.Y. 2017-18 are identical with that of Grounds No.1 to 3 of AY 2016-17. Therefore our findings in regard to Ground No.1 to 3 for AY 2016-17 are applicable while deciding these grounds for AY 2017-18 as the same are applied mutatis mutandis. Therefore, these grounds raised by the revenue stands dismissed. Printed from counselvise.com 28 Indo Count Industrial Ltd, Mumbai. 51. As far as the CO filed by the assessee is concerned in this regard, we notice that as per the facts of the present case, no additions have been sustained on the seized excel, even if it is presumed that it is incriminating in nature, then the jurisdiction to re-assess the year under consideration shall not lie in case of an unbated assessment year. Therefore, in the present facts and based on the findings of Hon’ble Apex Court in the case of Pr. Commissioner of Income Tax Central-3 v. Abhisar Buildwell Pvt. Ltd., Civil Appeal No. 6580 of 2021, Supreme Court of India, judgment delivered on 24 April 2023 clarifies that under Section 153A of the Income-Tax Act, search-triggered assessments apply to pending or abated assessments, not completed/unabated assessments—unless incriminating material is found during the search. If no incriminating material is unearthed, the Assessing Officer cannot make additions to completed assessments. However, reassessment under Sections 147/148 remains available for such cases, but only if statutory conditions are met. This ensures the special search-based assessment regime does not serve as a backdoor for arbitrary reopenings. Therefore, the present reassessment proceedings initiated under section 153A of the Act must be considered as nonest as nothing corroborative was seized during the search operation. Therefore, in the absence of fresh or tangible incriminating material, reassessment proceedings shall be treated as non-est. Since the reassessment proceedings itself is erroneous, therefore, the other grounds raised in the present CO by the Assessee or revenue becomes infructuous. Accordingly, the ITA/3850/Mum/2024 filed by the Revenue stands dismissed and CO 186/MUM/2024 filed by the Assessee stands allowed. ITA/3854/MUM/2024 AND CO 187/MUM/2024 for AY 2017-18. Printed from counselvise.com 29 Indo Count Industrial Ltd, Mumbai. 52. Ground no. 1, 2 & 3 of revenue appeal for A.Y. 2017-18 are identical with that of Grounds No.1 to 3 of AY 2016-17. Therefore our findings in regard to Ground No.1 to 3 for AY 2016-17 are applicable while deciding these grounds for AY 2017-18 as the same are applied mutatis mutandis. Therefore, these grounds raised by the revenue stands dismissed. 53. Further, the Assessee had filed the cross objection and raised ground no. 1, 2 and ground no 3 wherein the disallowance of deduction of Job work charges and consequential commission charges were added to returned income by the Ld.AO which was further upheld by the ld. CIT-(A). The assessee has raised the issue of disallowance of deduction of job work. While considering the issue, it had been found that the disallowance made by the A.O. and further confirmed by the Ld. CIT-(A) on account of bogus expenses (jobwork charges) of Rs.22,74,108/- for A.Y 2017-18 is based on the statements ofShri Sanjay Satgonda Patil and Shri Pradeep Ingale and supported by documentary evidences found during search. Further, the statements specifically demarcate the bogus invoices from the genuine ones and the list of bogus of invoices have been surrender by them. In light of such specific statements referring to each and every invoice, the addition is hereby, sustained. Hence, the grounds raised in cross objection for A.Y. 2017-18, for the disallowance of Rs.22,74,108/- for this year is upheld and the cross objection of Assessee stands DISMISSED. ITA/3853/MUM/2024 AND CO 188/MUM/2024 for AY 2018-19 Printed from counselvise.com 30 Indo Count Industrial Ltd, Mumbai. 54. Ground no 1 of revenue appeal for A.Y. 2018-19 is related to the addition of Rs.5,43,50,205/- made by the AO which was further deleted by Ld. CIT-(A) as unaccounted income received in cash by the Assessee by under-invoicing of fabric waste sales held to be chargeable to tax u/s.69 of the Act. 55. The material facts and the submissions remain the same as discussed above in respect of Ground No.1 for A.Y. 2016-17, as far as Ground No.1 taken by the revenue in the appeals for A.Y. 2018-19 is concerned. While deciding Ground No. 1 for A.Y. 2016-17, it was held that addition cannot be made by extrapolating undisclosed income detected during the course of search on estimated basis in all the years covered by the search assessments. It has also been held by me that addition can be made only on the basis of documentary evidence/ incriminating material showing unaccounted/undisclosed income unearthed during the course of the search. Thus, it is already held while deciding Ground No.1 for A.Y. 2016-17 that no incriminating material evidencing unaccounted/undisclosed income on account of under-invoicing of fabric waste sales pertaining to the year under consideration (A.Y. 2018-19) had been found during the course of the search. In view of the same, the addition of Rs.5,43,50,205/- made as unaccounted income received in cash by the appellant by under-invoicing of fabric waste sales for the year under consideration stands deleted. Accordingly, Ground No.1 taken by the Revenue for A.Y. 2018-19 stands dismissed. Printed from counselvise.com 31 Indo Count Industrial Ltd, Mumbai. 56. Further, the Assessee has filed the cross objection and raised ground no 1, 2 and ground no 3 wherein the disallowance of deduction of Job work charges and consequential commission charges were added to returned income by the Ld.AO which was further upheld by the ld. CIT-(A). The assessee has raised the issue of disallowance of deduction of job work. While considering the issue, it had been found that the disallowance made by the A.O. and further confirmed by the Ld. CIT-(A) on account of bogus expenses (job work charges) of Rs.43,64,860/- for A.Y 2018-19 is based on the statements of Shri Sanjay Satgonda Patil and Shri Pradeep Ingale and supported by documentary evidences found during search. Identical issue with the same parties has already been decided in favour of Revenue above. Following the decision in A.Y. 2017- 18, the grounds raised in cross objection for A.Y. 2018-19, stand DISMISSED. ITA/3826/Mum/2024 and CO 183/MUM/2024 for AY 2012-13. 57. The revenue has challenged the order of Ld. CIT-(A) on the grounds mentioned below: - 1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in sustaining only Rs.81,25,000/- and deleting the addition of Rs. 7,43,797/- out of total addition made by the AO of Rs. 88,68,797/- without remanding the matter back to the file of AO while Printed from counselvise.com 32 Indo Count Industrial Ltd, Mumbai. taking decision solely on the basis of a content of pendrive and ignoring other documents obtained during the search operations? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the disallowance of Rs. 3,41,53,377/- on account of commission paid to foreign agent without remanding the matter back to the file of AO while admitting the evidence which is not available on the file of the AO?” 58. Further the Assessee has challenged the order of Ld. CIT-(A) on the grounds mentioned below: - 1. That the Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.81,25,000/- on account of alleged receipt of cash on account of under- invoicing of fabric waste sales under section 69 of the Act 2. That the Ld.CIT(A) has erred in relying solely on the statement of Mr. Baburao Sambhaji Hadkar and ignoring the explanation given by Mr. Mohit Kumar Jain vis-à-vis the excel sheets found with Mr. Hadkar. 59. Ground no. 1 of the Revenue’s appeal has already been decided in appeal for A.Y. 2016-17 above and hence such ground is DISMISSED. 60. Now we proceed to decide CO filed by the assessee. While arguing the Cross Objections raised by the Respondent Assessee, the Counsel of Ld.AR highlighted that based on the impugned excel sheet which was not incriminating, the Ld. CIT-(A) has restricted the addition of INR 81,25,000/- in AY 2012-13, INR 301,25,000/- in AY 2013-14 and INR 17,00,000 in AY 2013- Printed from counselvise.com 33 Indo Count Industrial Ltd, Mumbai. 14. The Counsel of Ld.AR also contended that the alleged excel sheet shall not be considered as incriminating as the same was retrieved from the pendrive of Sh. Hadkar and the revenue has made the impugned addition by contending that the contents of excel sheet was wrongly explained by Sh. Hadkar during the search proceedings, and ld. AO made the addition based on the impugned presumption/estimation. He also highlighted that the statement of Sh. Hadkar and Shri Naishadhkumar C Vyas were the sole basis of addition as the alleged excel sheet was found with Sh. Hadkar and both the persons had retracted the statements on 26th February 2018(Statements at pages 1816-1830 of PB for AY 2016-17).The retraction was made on the stamp paper of Rs. 100 and duly notarized by the notary. In such facts, the Ld. Counsel for Respondent submitted that the sole basis for making the impugned addition were statements of the two employees, which was retracted. Furthermore, it was also contended that the allegation of Ld.AO was that the assessee company was engaged in the under-invoicing of fabric waste and the sales were recorded at the 1/2th value of the total sales made in the block years. The Ld. Counsel of the Assessee company also submitted that during the entire search proceedings, neither cash nor any document was seized or found which could corroborate that the Assessee company was ever been in the custody of such cash, even otherwise the Ld.AO has also whisper any averment which could justify that the allegation that the sales of fabric waste was under-reported and half of the total sales were received in cash. The retraction of statements and no iota of evidence which Printed from counselvise.com 34 Indo Count Industrial Ltd, Mumbai. could verify the Assessee company was ever been into the custody of such cash, was not been disputed, whereas both the lower authorities have incorrectly held that the retraction was the after-thought. 61. The Ld. Counsel for the Assessee company has also contended that the Ld.AO has only considered the statements which initially confirmed the alleged transaction (though later retracted) and conveniently ignored the statements of other related persons which required to be given cognizance as the statements made by Shri Anil Kumar Jain (director), Shri Mohit Jain (director) [Statement at pages 123-175 of PB for AY 2015-16], Shri Zahid Ahmed Shaikh (FRC buyer), Shri Shabbir Ahmed Azmat Ali Shaikh (FRC buyer), Shri Mohammed Umer Shabbirahmed Shaikh (FRC buyer) and Sh. Jaigopal Arora (President, Home Textile division – Purchase and sales, ex-boss of Mr. Hadkar), wherein they expressly denied the involvement of cash component in the sale of FRC and denial was blatantly ignored by the Ld. AO. Further, it was also contended that the Ld. AO has resorted to cherry picking and refers only to the statements which suit his liking. 62. The Ld. Counsel for the Assessee also submitted that the interpretation alleged excel sheets and the same is tabulated below: - Sr. No Column Heading as per seized AO [Pages 52-59, Para 7.17 to 7.18] (complete reliance Assessee Company (corroborated by statement of Mr. Mohit Jain) CIT(A) [Pages 32-52, Para 11 to 11.16] Printed from counselvise.com 35 Indo Count Industrial Ltd, Mumbai. excel on the retracted statement of Mr. Hadkar) 1 S. No It is nothing but serial number. Serial no. No dispute 2 Received Amount Cash amount received. Promised amount by the purchaser Cash receipts from sales (#) 3 Date Date of receiving such cash. Promised date of payment Date of receiving cash (#) 4 Bill No. Bill No. of the invoice for the sale of FRC to respective party. Bill No. No dispute 5 Date Bill date. Date of Bill No. No dispute 6 Amount ‘A’ Received in cheque. Actual Amount received No dispute 7 Amount ‘B’ Unaccounted cash amount which is received in addition to billed amount. Actual Bill Amount Bill amount ($) 8 Site This is stitching unit from where FRC is being generated. Stitching unit where FRC is being generated. No dispute 9 Party Name of the party to whom FRC is being sold. Name of the purchase party No dispute 10 Cheque Status Contains the cheque amount followed by cheque no./date (name of bank) Cheque received details No dispute # The version of Mr. Hadkar (retracted later) about “RECEIVED AMOUNT” has been accepted as cash receipts from sale of FRC by the Ld. CIT(A) whereas the version of Mr. Jain has been disregarded. However, at the same time the Ld. CIT(A) states that the total of columns “AMOUNT A” and “RECEIVED AMOUNT” do not match. As a result, Ld.CIT(A) restricted the addition to the excel sheets and deleted the extrapolated additions made in the block period. Printed from counselvise.com 36 Indo Count Industrial Ltd, Mumbai. $ The version of Mr. Hadkar (retracted later) about “AMOUNT B” being cash received has been rejected whereas the version of Mr. Jain being actual bill amount has been accepted. [Retractions filed by Mr. Hadkar and Mr.Vyas are at pages 1831-1838 of PB for AY 2016-17] 63. The Ld. Counsel for the Assessee has point out the grave mistakes which was rightly pointed out by the ld. CIT-(A) in the statement of Mr. Hadkar at para 11.14.2 of CIT-(A)order at page 50, duly implies that his statement cannot be relied upon and shall not be admissible. He also contended that the digital evidence in the form of excel sheets found in the pendrive with Mr. Hadkar does not suggest any involvement of cash in the transactions involving sale of FRC. The seized excel does not even contain the word ‘cash’ to imply that there have been any cash receipts. 64. He has also pointed out that if the averments made in the statements which were later retracted are considered for the sake of argument, even then it is strange to consider that the alleged cash is being collected and handled by Mr. Vyas, whereas the details are maintained by Mr. Hadkar.Mr. Hadkar stated in his statement that he has never received the cash in hands, but he has able to keep such detailed track of the alleged payments whereas he was reporting in the purchase domain and not in accounts, therefore the credibility, authenticity and genuineness of excel sheet is highly disputable. Furthermore, when it has not been under the dispute that no unaccounted/undisclosed cash was found Printed from counselvise.com 37 Indo Count Industrial Ltd, Mumbai. neither at any of the premises of the Assessee company nor it’s directors, nor at the premises of the purchasers of FRC, therefore the addition towards the alleged cash received must be deleted. Further, there was no material found or seized that could show that amount revealed from pen drive/statements were actually transferred from one hand to another. 65. Further in facts of the case, the assessee had sold FRC to M/s Prime Enterprises, proprietorship concern of Shri Mohammad Umer Shabbirahmed Shaikh for Rs.79,81,901/-(AY 2012-13) and Rs.2,99,05,729/- (AY 2013-14) and to M/s Reliable Textile (sister concern of Prime Enterprises) for Rs.2,43,98,896/- (AY 2012-13). A survey u/s 133A of the Act, was also carried out in the premises of Shri Mohammad Umer Shabbirahmed Shaikh, to whom the alleged cash sales of FRC was made. The Ld. AO alleged that no books of accounts were found to have been maintained by these entities, the response to which was that they were not required to as they were disclosing income u/s 44AD of the Act. It was submitted that statement of Shri Mohammad Umer Shabbirahmed Shaikh was recorded on oath. It was also submitted that they he clearly stated in their statements that purchases from the Assessee has been made through cheque only and no cash component was involved. This is external confirmation from the party which can be treated as most reliable source of information that the Assessee is not involved in cash sales of FRC and no evidence has been found by the Investigation Wing with respect to the Printed from counselvise.com 38 Indo Count Industrial Ltd, Mumbai. alleged cash payment being made by concerns or firms, controlled or managed by Mr. Zhahid Ali Shaikh and his family. Also, no material evidence has been brought on record that could prove that the company has accepted cash against the sale of FRC, during the year under consideration. 66. We have heard the counsels for both the parties and perused the material placed on record, judgments cited before us, and also the order passed by the revenue authorities. In the present facts, it is undisputed that the additions on account of undisclosed cash and under-invoicing of fabric waste sales was made by relying on the excel sheet which was retrieved from the pendrive of employee namely Sh. Hadkar. Further, contents of the excel sheet retrieved from such pendrive were explained in the statement, but the same further been retracted with the shortest possible time by filing the affidavit on the stamp paper and notarizing the same. Even otherwise, there are discrepancies in the statement of Mr. Hadkar which have also be pointed out by the Ld.CIT(A). A perusal of the statement of Mr. Vyas also shows that he has merely confirmed what Mr. Hadkar has stated and can be said to be more of an objective statement. Thus, the statements relied upon by the Revenue cannot be treated as admissible as valid evidence in light of the above findings. Also, the impugned excel sheet is also not self-explanatory to suggest that there was any involvement of cash in such transactions, for us to hold it as incriminating in the hands of the Respondent Assessee. Further, no finding towards any discrepancy Printed from counselvise.com 39 Indo Count Industrial Ltd, Mumbai. or evidence in the books of assessee company were placed on record by the Revenue. In regard to relevance and admissibility of retracted statements, recorded during search or survey proceedings under the Act, the findings of Hon’ble High Court of Delhi in the matter of CIT vs Sunil Aggarwal, [2015] 64 taxmann.com 107 (Delhi) helps the case of assessee where Hon’ble high Court has held as follows:- “14. Therefore, although the counsel for the Revenue may be right in his submission that a statement under Section 132(4) of the Act carries much greater weight than the statement made under Section 133A of the Act, a retracted statement under Section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such statement. Of course, where the retraction is not for any convincing reason, or where it is not shown by the Assessee that he was under some coercion to make the statement in the first place, or where the retraction is not followed by the Assessee producing material to substantiate his defence, the AO might be justified in make additions on the basis of the retracted statement.” 67. In the light of aforesaid, where the statement was of an employee (Purchase Manager), working at a low level in the organizational hierarchy and the retraction was made within 20 days, the statement recorded during search, has flaws which are identified by the Ld. CIT-(A) and therefore the same shall not have evidentiary value, which too needs corroboration, we are inclined to hold that the very basis of making addition not being one that could be Printed from counselvise.com 40 Indo Count Industrial Ltd, Mumbai. considered legally admissible evidence. Further, it is also an admitted fact that no cash was seized or found during the search or post proceedings. Even otherwise, the Revenue has failed to place on record any evidence to show that, assuming the alleged cash was indeed received by the Assessee company, the corresponding impact of such alleged cash should have been highlighted during the investigation or assessment proceedings during the years under consideration. In the present case, it is evident that no incriminating material was recovered during the search. The sole reliance of the Revenue is on a statement that was subsequently retracted. Even assuming, for argument’s sake, that the statement had not been retracted, the addition would still not be sustainable, as no corroborative evidence has been placed on record to establish that the Assessee company was ever in receipt of such cash. 68. Reliance is being placed upon the decision in the case of Commissioner of Income Tax v. Harjeev Agarwal 241 IT Appeal No. 8 of 2004 (Delhi), Principal Commissioner of Income Tax v. Best Infrastructure (India) Pvt. Ltd., 397 ITR 182 (Delhi), PCIT v. Anand Kumar Jain, 2021 SCC OnLine Del 3174 i. The Hon’ble Allahabad High Court, in the case of Commissioner of Income Tax v. Dilbagh Rai Arora in ITA No. 304 of 2009 (Allahabad), held as under: “20. In the above judgment the Hon'ble Court has come to the. conclusion that the addition was not made merely on the statement made but after looking into the explanation, books of account and other material placed before him and then made the certain addition. The case in hand, the addition have only been made on the basis of statement given on 6.10.2005. 21. Therefore, the case law relied upon by the Appellant is of no help. The case in hand the assessee-respondent has given documents, material and Printed from counselvise.com 41 Indo Count Industrial Ltd, Mumbai. explained threadbare with regard to amount of Rs. 24 crores but the assessing authority has mechanically made the addition of Rs. 7 crores and added back the same amount only on the basis of statement having been made by the assessee which is not permitted.” 69. Thus, we are inclined to hold that the very basis of making addition is not legally admissible evidence hence the addition of INR 81,25,000/- deserves to be deleted. Furthermore, the contentions of Ld. DR for remanding back the matter to the Assessing officer shall not be sustained as it is a settled principle that the remand of proceedings should not be carried out arbitrarily or as a matter of routine, but must be based on a clear necessity arising from the facts and in the interest of justice. Furthermore, it is a settled position of law that reassessment proceedings in the case of unabated assessment years can be initiated only on the basis of incriminating material seized during the course of the search operation. In such a scenario, the grievance regarding the remand of proceedings merely for verification of seized material is unjustified, particularly when no such incriminating material exists on record to support the reassessment. 70. Hence, Ground Nos. 1 and 2 raised in cross objection of the Assessee are thus allowed. 71. Ground no 2 of revenue’s appeal for AY 2012-13. The revenue has also challenged the deletion of disallowance made to the tune of INR 3,41,53,377 on account of commission paid to overseas agent namely M/s Printed from counselvise.com 42 Indo Count Industrial Ltd, Mumbai. Marutu International Ltd by stating that the same is required to be remanded back to the file of AO to examine the claim. 72. The contentions of Ld. DR for remanding back the matter to the Assessing officer is not sustainable as it is a settled principle that the remand of proceedings should not be carried out arbitrarily or as a matter of routine, but must be based on a clear necessity arising from the facts and in the interest of justice. Furthermore, it is a settled position of law that reassessment proceedings in the case of unabated assessment years can be initiated only on the basis of incriminating material seized during the course of the search operation. In such a scenario, the grievance regarding the remand of proceedings merely for verification of seized material is unjustified, particularly when no such incriminating material exists on record to support the reassessment. 73. Further, Ld. Counsel for the Assessee relied on the findings of Ld. CIT- (A) has stated that the AO has treated the payment of commission to the said agent as non-genuine for the following reasons: i. Non-furnishing of correspondences related to procurement, pricing, delivery and nature of services. ii. Documents filed only demonstrate payment of commission and not genuineness and actual delivery. iii. Name of the agent does not appear in Shipping Bill. iv. Debit note and agency agreements are self-serving. Printed from counselvise.com 43 Indo Count Industrial Ltd, Mumbai. 74. On contrary to the impugned findings, the Ld. Counsel for the Assessee pointed out that during the assessment proceedings the Assessee company furnished the following pieces of evidence and facts to justify the claim of commission paid to overseas agent.: (i) The appellant has been dealing the agent since the year 2006. (ii) Copy of agency agreement with the agent. [PB page 43, 81-84 for AY 2012- 13] (iii) Details of commission paid vis-à-vis the sales made to Walmart, USA [PB page 44-56 for AY 2012-13] (iv) CDX Statements [PB page 44-56 for AY 2012-13] (v) Letter dated 05.06.2014 from the agent directing the appellant to assign their receivables to M/s Regal Traders, UAE after its acquisition by M/s Regal Traders. [PB page 57 for AY 2012-13] (vi) Agency commission paid to M/s Regal Traders, UAE has been accepted by the AO as genuine. (vii) The signatory to the agency agreement and the letter dated 05.06.2014 as referred above is Ms. Lisa Lim, the authorized signatory for the agent. (viii) Details of transactions undertaken with M/s Marutu International Limited, now taken over by M/s Regal Traders between A.Y.s 2012-13 to 2018-19. (ix) Email correspondence between Marutu and the Assessee company furnished by reply dated 22.06.2021 [PB page 58-80 for AY 2012-13] Printed from counselvise.com 44 Indo Count Industrial Ltd, Mumbai. 75. Accordingly, the counsel for the Assessee relied upon the findings of Ld.CIT-(A). [Pages 79-80, Para 17 to 17.2 of CIT(A) order] 76. We heard the counsels of both the parties, perused the material on record, Judgments cited before us and also the order passed by the revenue authorities. From the facts of the case, it is clearly coming out from the order of both lower authorities, that the Assessee company has supplied the requisite documents to verify the claim pertains to the commission paid to M/s Marutu International Ltd, further the Assessing officer in the assessment order itself stated that the assessee has paid the commission to the M/s Marutu International Ltd. and form 15CA were duly filed and entire payments were through proper banking channels and other documents to verify the claims. The Assessing officer was unable to drawn any negative inference on the evidence placed on record and rejected the claim in an arbitrary manner. Further Ld. CIT-(A) also verified the claims of Assessee company and does not find any infirmity in the documents placed on record and accordingly allowed the claim of Assessee company. The ld CIT(A) also noted that the payments were made through regular banking channels. Hence, we hold that the disallowances made by the Ld. AO with regard to the commission paid to M/s Marutu International Ltd have been allowed as deduction by the Ld. CIT(A). 77. Accordingly, Ground Nos. 2 raised by the revenue is hereby dismissed. Printed from counselvise.com 45 Indo Count Industrial Ltd, Mumbai. 78. Hence the revenue appeal bearing ITA/3826/Mum/2024 stands dismissed and CO 183/MUM/2024 filed by the Assessee stands allowed. Revenue Appeal bearing ITA/3824/Mum/2024 and Assessee companies CO 184/MUM/2024 for AY 2013-14 79. The revenue has challenged the order of Ld. CIT-(A) on the grounds mentioned below: - 1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in sustaining only Rs.3,01,25,000/- and deleting the addition of Rs. 22,55,797/- out of total addition made by the AO of Rs. 323,80,797/- without remanding the matter back to the file of AO while taking decision solely on the basis of a content of pendrive and ignoring other documents obtained during the search operations? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in deleting the disallowance of Rs. 4,51,43,778/- on account of commission paid to foreign agent without remanding the matter back to the file of AO while admitting the evidence which is not available on the file of the AO?” 80. Further the Assessee has challenged the order of Ld. CIT-(A) on the grounds mentioned below: - 1. That the Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.3,01,25,000/- on account of alleged receipt of cash on account of under-invoicing of fabric waste sales under section 69 of the Act. Printed from counselvise.com 46 Indo Count Industrial Ltd, Mumbai. 2. That the Ld.CIT(A) has erred in relying solely on the statement of Mr. Baburao Sambhaji Hadkar and ignoring the explanation given by Mr. Mohit Kumar Jain vis-à-vis the excel sheets found with Mr. Hadkar. 82. That the material facts the submissions of the revenue in appeal and cross objections of Assessee remains the same as discussed in respect of grounds of appeal raised in AY 2012-13 and cross Objections. We have already held that the addition made to the returned income is not sustainable, as there is no incriminating material which could corroborate the addition, hence the cross objection filed by the Assessee stands allowed and the grounds raised in the revenue’s appeal stands dismissed. Accordingly, Revenue Appeal bearing ITA/3824/Mum/2024 stands dismissed and Assessee companies CO 184/MUM/2024 for AY 2013-14 shall be allowed. 83. Revenue Appeal bearing ITA/3822/Mum/2024 and Assessee companies CO 185/MUM/2024for AY 2014-15 84. The revenue has challenged the order of Ld. CIT-(A) on the grounds mentioned below: - 1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT-(A) was correct and justified in sustaining only Rs.17,00,000/- and deleting the addition of Rs. 282,05,729/- out of total addition made by the AO of Rs. 299,05,729/- without remanding the matter back to the file of AO while taking decision solely on the basis of a content of pendrive and ignoring other documents obtained during the search operations? Printed from counselvise.com 47 Indo Count Industrial Ltd, Mumbai. 85. Further the Assessee has challenged the order of Ld. CIT-(A) on the grounds mentioned below: - 1. That the Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.17,00,000/- on account of alleged receipt of cash on account of under- invoicing of fabric waste sales under section 69 of the Act. 2. That the Ld.CIT(A) has erred in relying solely on the statement of Mr. Baburao Sambhaji Hadkar and ignoring the explanation given by Mr. Mohit Kumar Jain vis-à-vis the excel sheets found with Mr. Hadkar. 86. That the material facts the submissions of the revenue in appeal and cross objections of Assessee remains the same as discussed in respect of grounds of appeal raised in AY 2012-13 and cross Objections. We have already held that the addition made to the returned income shall not be sustained, as there is no incriminating material which could corroborate the addition, hence the cross objection filed by the Assessee shall be allowed and the grounds raised in the revenue’s appeal stands dismissed. Accordingly, Revenue Appeal bearing ITA/3822/Mum/2024 stands dismissed and Assessee’s CO No. 185/MUM/2024 for AY 2014-15 stands allowed. Order pronounced in the open court on 30/10/2025 Sd/-d Sd/- (OMKARESHWAR CHIDARA) (SANDEEP GOSAIN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Mumbai: Printed from counselvise.com 48 Indo Count Industrial Ltd, Mumbai. Dated: 30/10/2025 KRK, Sr. PS. Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "