DCIT Central Circle-25, New Delhi V. Neel Metal Products Ltd (Formely Known as Neel Auto Pvt Ltd), New Delhi

ITA 299/DEL/2021

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5867 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-04-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 24-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Depreciation; Business expenditure; Income from undisclosed sources; Search and seizure; Opportunity of cross examination; Earning of tax free income; Fair market value; Retraction; Documents seized; Capital expenditure; Capital Gains
• Section: 143(3); 50C; 153A; 14A; 69B; 80IC; 113; 80IC; 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI G.S. PANNU, HON’BLE VICE PRESIDENT AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.295/Del/2021 (Assessment Year: 2010-11) ITA No.296/Del/2021 (Assessment Year: 2011-12) ITA No.272/Del/2021 (Assessment Year: 2013-14) ITA No.273/Del/2021 (Assessment Year: 2014-15) ITA No.299/Del/2021 (Assessment Year: 2015-16) ITA No.274/Del/2021 (Assessment Year: 2016-17) ITA No.300/Del/2021 (Assessment Year: 2017-18) ITA No.275/Del/2021 (Assessment Year: 2018-19) DCIT, Central Circle-25, New Delhi. Vs Neel Metal Products Ltd. (Formerly known as Neel Auto Pvt. Ltd.), 601, Hemkunt Chamber, 89, Nehru Place, New Delhi – 110 019. PAN: AABCN6304Q ITA No.301/Del/2021 (Assessment Year: 2010-11) ITA No.302/Del/2021 (Assessment Year: 2011-12) ITA No.303/Del/2021 (Assessment Year: 2012-13) ITA No.304/Del/2021 (Assessment Year: 2013-14) ITA No.305/Del/2021 (Assessment Year: 2014-15) ITA No.306/Del/2021 (Assessment Year: 2015-16) ITA No.307/Del/2021 (Assessment Year: 2016-17) ITA No.308/Del/2021 (Assessment Year: 2017-18) ITA No.309/Del/2021 (Assessment Year: 2018-19) DCIT, Central Circle-25, New Delhi Neel Metal Products Ltd. 601, Hemkunt Chamber, 89, Nehru Place, New Delhi – 110 019. PAN: AABCN6304Q ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 2 ITA No.232/Del/2021 (Assessment Year: 2013-14) ITA No.238/Del/2021 (Assessment Year: 2017-18) ITA No.239/Del/2021 (Assessment Year: 2018-19) Neel Metal Products Ltd. (601, Hemkunt Chamber, 89, Nehru Place, New Delhi – 110 019. PAN: AABCN6304Q Vs. ACIT, Circle-14(2), New Delhi ITA No.240/Del/2021 (Assessment Year: 2018-19) Neel Metal Products Ltd. (Formerly known as Neel Auto Pvt. Ltd.), 601, Hemkunt Chamber, 89, Nehru Place, New Delhi – 110 019. PAN: AABCN6304Q Vs. ACIT, Circle-14(2), New Delhi (Appellants) (Respondents) Assessee by : Shri Salil Aggarwal, Sr.Advocate, Shri Shailesh Gupta, Advocate, Shri Madhur Aggarwal, Advocate & Shri Uma Shankar, Advocate Revenue by : Shri Subhra Jyoti Chakraborty, CIT- DR Date of Hearing : 30.04.2024 Date of Pronouncement : 09.07.2024 ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 3 ORDER PER ANUBHAV SHARMA, JM: These are appeals preferred by the Revenue and assessee against the orders of the Commissioner of Income Tax (Appeals) (hereinafter referred to as Ld. First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the orders of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short). Further details of the orders of the lower authorities are as under:- ITA No. CIT(A) who passed the order Appeal No. & Date of order of the CIT(A) AO who passed the assessment order & Date of order Section of the IT Act under which the AO passed the order 295/Del/2021 CIT(A)-29, New Delhi. 363/2019- 20 Date: 13.01.2021 ACIT, Central Cir.25, New Delhi, date: 29.12.2019 153A/143(3) 301/Del/2021 - Do- 396/2019- 20 Date: 08.01.2021 ACIT, Central Cir.25, New Delhi, date: 31.12.2019 - Do - 296/Del/2021 CIT(A)-29, New Delhi 398/2019- 20 date 08.01.2021 ACIT, Central Cir.25, New Delhi, date: 31.12.2019 153A/143(3) ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 4 302/Del/2021 - Do 389/2019- 20 Date: 13.01.2021 ACIT, Central Cir.25, New Delhi, date 29.12.2019 - Do - 303/Del/2021 - Do - 368/2019- 20 Date: 13.01.2021 - Do - - Do - 304/Del/2021 - 392/2019- 20 Date: 08.01.2021 ACIT, Central Cir.25, New Delhi, date 31.12.2019 - 272/Del/2021 - Do - 365/2019- 20 Date: 13.01.2021 - Do - - Do - 305/Del/2021 - Do - 397/2019- 20 date 08.01.2021 ACIT, Central Cir.25, New Delhi, date 31.12.2019 - Do- 273/Del/2021 - 370/2019- 20 date 13.01.2021 ACIT, Central Cir.25, New Delhi, date 29.12.2019 - Do - 306/Del/2021 - Do - 395/2019- 20 date 08.01.2021 ACIT, Central Cir.25, New Delhi, date 31.12.2019 - Do - 299/Del/2021 - Do - 366/2019- ACIT, - Do - ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 5 20 date 13.01.2021 Central Cir.25, New Delhi, date 29.12.2019 300/Del/2021 - Do - 369/2019- 20 date 13.01.2021 ACIT, Central Cir.25, New Delhi, date 29.12.2019 - Do - 275/Del/2021 - Do - 367/2019- 20 date 13.01.2021 ACIT, Central Cir.25, New Delhi, date 29.12.2019 143(3) 307/Del/2021 - Do- 371/2019- 20, dated, 13.01.2021 ACIT, Central Cir.25, New Delhi, date 31.12.2019 - Do - 308/Del/2021 - Do - 394/2019- 20, dated, 08.01.2021 - Do - 153A/143(3) 309/Del/2021 - Do - 390/2019- 20, dated, 08.01.2021 - Do - - 143(3) 274/Del/2021 - - Do - ACIT, Central Cir.25, New Delhi, date 29.12.2019 - 232/Del/2021 - Do - 392/2019- 20 Dated, 08.01.2021 ACIT, Central Cir.25, New Delhi, - Do - ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 6 date 31.12.2019 238/Del/2021 - Do - 394/2019- 20 Date: 08.01.2021 ACIT, Central Cir.25, New Delhi, date 31.12.2019 - Do - 239/Del/2021 - Do - 390/2019- 20 Date: 08.01.2021 ACIT, Central Cir.25, New Delhi, date 31.12.2019 143(3) 240/Del/2021 - Do - 367/2019- 20 Date: 13.01.2021 ACIT, Central Cir.25, New Delhi, date 29.12.2019 - Do - 2. The aforesaid twenty one appeals (seventeen by Revenue and 4 by Assessee) pertains to two assessee’s namely i) M/s Neel Metal Products Ltd. (here in after referred as ‘Assessee No.1’) ii) M/s Neel Metal Products Ltd. (formerly known as Neel Auto Pvt. Ltd and here in after referred as ‘Assessee No.2’). It is pertinent to mention that later one has merged into former. 2.1. In the case of M/s Neel Metal Products Ltd., (Assessee No.1) 9 appeals are filed by Revenue for AY 2010-11 to 2018-19 and 3 appeals are filed by Assessee for AY 2013-14, 2017-18 and 2018-19. ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 7 2.2. Whereas, in the case of M/s Neel Metal Products Ltd. (Assessee No. 2), 8 appeals are by Revenue from AY 2010-11 to 2018-19 (except AY 2012-13) and only 1 by Assessee for AY 2018-19. 3. The brief facts of the case are that, search and seizure operation under section 132(1) of the Income Tax Act 1961 (here in after referred as ‘the Act’) was carried out on JBM group of cases group of cases on 05.10.2017. Both the assessee being part of JBM Group were also subjected to search. As such, notices u/s 153A dated 21.08.2019 of the Act were issued to the assessee’s, after which assessments were made by learned assessing officer vide order dated 31.12.2019. The assessing officer has passed separate and independent orders for both the aforesaid assessee, but the nature of enquiry, evidence and conclusions leading to the additions are identical. Similarly, the order of CIT(A) though are separate and independent but are identical and passed by CIT (Appeals)-29. 3.1 During the course of hearing, the Ld. Representatives of both sides, admitted that appeals involve common issues and based on the facts. That facts in the case of M/s Neel Metal Products Ltd. (Assessee No. 1) for AY 2010-11 bearing ITA No. 301/Del/2021, may be taken as lead matter and accordingly they submitted the arguments. Then assessee has also filed application under Rule 27 and thus, on consideration of the grounds as raised in respective appeals and the application ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 8 under Rule 27 we find that same can be settled in the form of following Eleven issues; Issue no. 1 is with regard to alleged under Invoicing of sales @ 20% and the issue runs common to AY 2010-11 onwards to AY 2018-19. The issue is decided in favour of assessee by the CIT(A) and Revenue has filed appeals in case of both the assessee. Issue no. 2 is with regard to alleged unrecorded Sales @ 12% and the issue runs common to AY 2010-11 onwards to AY 2018-19. The issue is decided in favour of assessee by the CIT(A) and Revenue has filed appeals in case of both the assessee. Issue no. 3 is with regard to validity of invoking and exercising jurisdiction for assessments u/s 153A of the Act, arising out of Rule 27 application of assessee. Issue no. 4. is with regard to Addition u/s 69B of the Act, made in AY 2013-14, ITA 232 for AY 2013-14 (appeal of assessee) Issue no. 5 is with regard to Disallowance u/s 14A of the Act, in AY 2015-16 onwards to AY 2018-19. The issue is decided in favour of assessee by the CIT(A) and Revenue has filed appeals in case of the Assessee No.1. ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 9 Issue no.6 is with regard to Depreciation on Electrical Fittings in AY 2015-16 onwards to AY 2018-19. The issue is decided in favour of assessee by the CIT(A) and Revenue has filed appeals in case of the Assessee No.1. Issue no.7 is with regard to disallowance u/s 80IC on apportionment basis in AY 2015-16 onwards to AY 2018-19. The issue is decided in favour of assessee by the CIT(A) and Revenue has filed appeals in case of the Assessee No.1. Issue no.8 is with regard to capital work in progress in AY 2015- 16 onwards to AY 2018-19. The issue is decided in favour of assessee by the CIT(A) and Revenue has filed appeals in case of the Assessee No.1. Issue no.9 is with regard to disallowance of certain expenses in AY 2017-18. ITA 238 of appeal of Assessee No. 1. Issue no.10 is with regard to addition u/s 56(2)(x) of the Act, in AY 2018-19. ITA 239 of appeal of Assessee No. 1. Issue no. 11 is with regard to Scrap sale addition in AY 2018-19, in case of both the assessee, which is confirmed by the CIT(A), for which both the assessee have come in appeal in AY 2018-19. 4. Accordingly we proceed to decide Issue no. 1 to 3, and they are taken up together as they are connected and based on ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 10 common set of facts and law. Learned AO made addition of a sum of Rs. 4,64,32,705/- on account of alleged under invoicing and Rs. 3,16,58,662/- on account of alleged unrecorded sales for AY 2011-12 (findings at pages 144 to 149 of AO order). Sh. Salil Aggarwal, Ld. Sr. Counsel appearing for the assessee argued that additions in assessments under section 153A proceedings can only be made if the documents seized/ found are incriminating in nature i.e. documents seized during the course of search depict undisclosed income, whereas, in the case of assessee, only statements of some of its employees recorded during the course of search proceedings are the basis to make the additions and beyond these statements, no other incriminating document allegedly seized during search has been referred or relied by the learned assessing officer. The nature of these statements or evidences and its implication/ has been explained by the learned Sr. Counsel of assessee, which is summarized as under: a) Statement recorded during the course of search of Sh. Prashesh Arya, director in various JBM group companies and CGM (Finance) in Jay Bharat Maruti Limited. The said statements were recorded during 05.10.2017 to 08.10.2017 and have been extracted by AO at pages 5 to 32 of AO’s order. From the said statements AO has inferred that Sh. Prashesh Arya was handling cash transactions of JBM group, which was involved in under invoicing and unaccounted sales. Certain images taken out from mobile phone of Sh. Prashesh Arya were also ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 11 relied by AO. However, learned AO had failed to appreciate the basic fact that the said statements were retracted by Sh. Prashesh Arya by filing an affidavit before DDIT, Investigation on 23.10.2017 and had also declared the transactions found in his mobile phone in his personal capacity (pages 104 to 105 of assessment order), as such, the statement of Sh. Prashesh Arya recorded during search (that too retracted subsequently) without there being any incriminating material to corroborate the same found from the premises of assessee company cannot be termed as incriminating material to make additions on account of alleged under invoicing and unaccounted sales. That further, once the said statements were retracted, it was incumbent upon learned AO to have conducted enquiries and investigations by issuing summons to Sh. Prashesh Arya, in order to establish the true state of affairs, which has not been done by learned AO and learned AO has merely relied on statements recorded during the course of search taking it to be gospel truth, without conducting any enquiry or investigation whatsoever. b) A cash flow statement was found from residence of Sh. Suresh Kumar Mishra (employee of JBM group), on the basis of which it was inferred by learned AO that the said excel sheet shows generation of unaccounted cash from ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 12 sale of scrap by JBM group (pages 33 to 35 of AO order). Learned AO has failed to appreciate the fact that the said excel sheet nowhere mentioned the name of the assessee company and also the heading of the said sheet was “budgeting” and majority of the figures therein were estimates and had no data related to scrap. Furthermore, no addition has been made by learned AO on the basis of the said excel sheet, as such, the said document cannot be termed as incriminating material (pages 105 to 106 of AO order). c) Statement of Sh. Anand Swaroop Khandelwal recorded under section 131(1A) dated 09.102017 (pages 36 to 43 of AO order). In the said statement Sh. Khandelwal endorsed the statement given by Sh. Prashesh Arya and also estimated (without any material) that JBM group might have earned Rs. 100 crores from unaccounted sale of scrap. Here again, it is relevant to point out that the said statement has been retracted by Sh. Khandelwal on 16.10.2017, as such the same cannot be termed as incriminating material, as no document or material was found from the premises of assessee company corroborating the said statement (pages 106 to 107 of AO order). ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 13 d) Learned AO has further, compared the rates of scrap sold by JBM group to its customers or with other/ third parties like Maruti Udyog Ltd. and has held that scrap has been sold at a lower rate by JBM group as compared by other parties and Ld. AO has thus, presumed that major cash transactions have been entered by JBM group with its customers (pages 44 to 58 Colossus Trade Links Ltd and 58 to 74 Bansal Iron and Steel Traders of AO order). In this regard, it is submitted that the assessee company had duly furnished a reply before learned AO and had stated that there is no difference in quantity sold by assessee and as shown by the purchaser, and the difference in rates is also due to difference in quality of scarp, as such, there is no difference at all. Referring to case of, Maruti Suzuki Ltd., it was submitted that same is manufacturing outer parts of vehicles, whereas, assessee is engaged in manufacturing inner parts of vehicles, as such, rates of both cannot be compared. Furthermore, none of the parties have ever alleged that they have purchased in cash from Assessee Company. As such, the aforesaid discrepancies so pointed out by learned AO was duly explained by Assessee Company which was not at all rebutted by learned AO in the order of assessment and as such, the same can also not be termed as incriminating material for making the additions (pages 107 to 126 of AO order). ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 14 e) Ld. Sr. Counsel has then pointed out that the Learned AO has compared the rates of scrap of M/s Neel Metal Products Ltd (NMPL, a JBM group company), with rates of scrap of Maruti Suzuki India Ltd. and also alleged that excess stock was found during course of survey conducted subsequent to search. Learned AO further, recorded that there is variation of approx 19-20% with regards to selling rates of scrap recorded in diary found during survey and as noted in books of accounts (pages 74 to 100 of AO order). The aforesaid discrepancies pointed out by learned AO were duly rebutted by assessee as all the quantitative differences were matched and it was also explained that difference in rates of 19-20% was due to taxes, which was not accounted for by learned AO (pages 126 to 143 of AO order), wherein, party wise explanation was given to AO duly explaining the quantity, quality and rates of scrap, which was not rebutted by learned AO in entire assessment order. f) It was stressed before us that Learned AO while working out additions has not relied on any of the documents referred at (a) to (e) above, rather based its additions on the basis of extrapolation and estimate and worked out 20% of actual invoiced value as alleged under invoicing and 12% of actual invoicing as alleged unrecorded sales ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 15 and worked out additions from AY 2008-09 to 2018-19 (pages 100 to 103 of AO order). 5. As with regard to contention that additions in case of unabated assessment can be only on the basis of incriminating material found during the search, the learned Sr. counsel has placed reliance on following judgments: a) PCIT vs Abhisar Buildwell (P) Ltd. (SC) reported in 454 ITR 212 b) Judgment of Hon’ble High Court of Delhi in the case of PCIT vs Best Infrastructure India (P) Ltd. reported in 397 ITR 82 c) Judgment of the High Court of Delhi in the case of CIT vs. Kabul Chawla reported in 380 ITR 573. d) Judgment of High Court of Delhi in the case of PCIT vs Jaypee Financial Services Ltd. reported in 280 Taxman 147. e) Judgment of the High Court of Delhi in the case of PCIT Meeta Gutgutia reported in 395 ITR 526. f) Judgment of the Supreme Court of India in the case of CIT vs Singhad Technical Education Society reported in 397 ITR 344. g) Order of ITAT Delhi in the case of DCIT vs Sundaram IT Parks Pvt. Ltd. in ITA No. 5166/Del/2018. h) Order of ITAT Delhi in the case of ACIT vs M/s Five Vision Planners Pvt. Ltd. in ITA No. 4460/Del/2014. ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 16 i) Judgment of High Court of Delhi in the case of PCIT vs M/s Dreamcity Buildwell Pvt. Ltd. in ITA No. 1152/2017. j) Order of ITAT Delhi M/s TDI Infrastructure Ltd. vs DCIT in ITA No. 5580, 4409, 4410 and 5072/Del/2012. k) Order of ITAT Delhi ACIT vs Realtech Construction Pvt. Ltd. (ITAT Delhi) in ITA No. 6569/Del/2016. 5.1. The learned senior counsel for the assessee has submitted that that the aforesaid legal arguments were specifically taken before learned CIT (A), wherein, judgment of Hon’ble Delhi High Court in the case of CIT Vs. Kabul Chawla reported in 380 ITR 573, were cited before learned CIT (A), which even finds mention at pages 121 of learned CIT (A) order. 5.2 Now going through the material before us we find that the learned CIT (A) vide order dated 08.01.2021 has even allowed the said ground so raised by the assessee company at pages 83 to 123 of CIT (A) order, wherein, while allowing the said appeal, the learned CIT (A) has recorded a finding in para 9.9 page 122 of his order that; “In the present case no evidence or material indicating any suppressed sales in the relevant assessment year was found during search. Therefore, the AO was not justified to assume and extrapolate suppressed sale of scrap for earlier assessment years. Addition on account of suppressed sales are to be made only for the year for which evidence or ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 17 documents have been found/ seized for a part of the accounting period and not for the period for which no information is available on the basis of seized record. In the case of assessment u/e 153A additions is required to be made on the basis of tangible evidence and not solely on basis of estimations and extrapolation theory. Additions could not be sustained merely on the basis of rough noting made on a few loose sheets of papers unless the AO brought on record some independent and corroborative materials to prove irrefutably that the noting revealed either unaccounted income or unaccounted investment or unaccounted expenditure of the assessee”. 6. On the other hand CIT DR Sh. Subhrajyoti Chakraborty, placed heavy reliance on the order of AO and argued that the additions were made by learned AO on the statements of Sh. Prashesh Arya and also from the images found from the mobile phone of Sh. Prashesh Arya, wherein, information was found for a period of three to four months prior to the date of search and on the said basis, the AO extrapolated the same for preceding assessment years also. The learned CIT DR further, argued that on the basis of the documents seized, inference has been drawn by learned AO and that is how additions have been made in the order of assessment. The Ld. CIT DR further argued that even the statement of Sh. Prashesh Arya was corroborated by another employee of JBM group Sh. Anand Swaroop Khandelwal, which clearly proves that the assessee company has been involved in unaccounted sale of scrap and also in under invoicing of scrap. It ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 18 was vehemently contended that retraction were after thought and without justifying circumstance to retract. 7. That the learned Senior Counsel for the assessee in rejoinder submitted that the arguments so made by learned CIT DR are contradictory to the law laid down by Hon’ble jurisdictional high court in the case of Kabul Chawla (supre) as, approved by Hon’ble Apex Court in the case of PCIT vs Abhisar Buildwell (P) Ltd. (supra) and further, the learned CIT DR has not been able to place reliance on any document/ material on record which can be termed as “incriminating” in nature, which was unearthed during the course of search. 8. Now the admitted facts, which has been agreed by both the parties, is that only three set of evidence are relied by Ld.AO. the first being statements of Sh. Prashesh Arya and Sh. Anand Swaroop Khandelwal recorded during the course of search on JBM group. Second, certain images taken out from mobile phone of Sh. Prashesh Arya and thirdly the differences in rates of sales as alleged by learned assessing officer. 8.1 It comes up that the statements were recorded during the course of search of Sh. Prashesh Arya, director in various JBM group companies and CGM (Finance) in Jay Bharat Maruti Limited. The said statements were recorded during 05.10.2017 to 08.10.2017 and it is from the said statements AO has inferred that Sh. Prashesh Arya was handling cash transactions of JBM ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 19 group, which was involved in under invoicing and unaccounted sales. 8.2 However, as matter a fact, the said statements were retracted by Sh. Prashesh Arya by filing an affidavit before DDIT, Investigation on 23.10.2017. The retraction was quite within a reasonable period of time and had also declared the transactions found in his mobile phone in his personal capacity and also the cash found from his premises in his return of income in his individual capacity. It appears Ld. AO then made no effort to corroborate the retracted statements by any general or material circumstances or evidences. Thus leaving the Ld. AO with retracted statements as only incriminating material for making additions on account of alleged under invoicing and unaccounted sales. 8.3 Then the cash of Rs 5.56 crore was found from residential premises of Sh. Prashesh Arya and not from the office premise or business premises of the appellant company or from the premise of directors of the appellant company. Shri Prahsesh Arya filed affidavit dated 17/10/2017 before Investigation wing vide letter dated 18/10/2017, though filed on 23.10.2017 where he deposed that cash of Rs 5,55,46,490/- found during the course of search is not related to JBM group and the source of cash is the income earned by Shri Prahsesh Arya during A Y 2018-19, which was also duly declared by him in his return of income for the AY ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 20 2018-19. Again there was no effort to contradict this on oath deposition of Shri Prahsesh Arya. 8.4 Then with regards to images found from the mobile phones of Sh. Prashesh Arya and his wife Smt. Sukriti Arya, we find that said notings / documents are not related to A Y 2010-11 to AY 2017-18. Rather, these documents are related to July 2017, August 2017, September 2017 and October 2017 and as such these documents are related to only part of financial year 2017- 18 i.e. A Y 2018-19, which have also been disclosed by Sh. Prashesh Arya in his individual return of income. Even in the affidavit so filed before Investigation Wing it has been submitted by Shri Prahsesh Arya that various noting or message in the mobile phone found during the course of search is rough noting and his personal noting and is not related to JBM Group. 8.5 At the same time during the course of search statement of Shri Surender Kumar Arya, Chairman cum Managing Director of JBM Group, was recorded wherein, nothing was extracted about the unaccounted sale of scrap in JBM group. There was no attempt to contradict him with the statements of Shri Prahsesh Arya 8.6 Next examining the statement of Sh. Anand Swaroop Khandelwal recorded under section 131(1A) dated 09.102017, it is noticed that Sh. Khandelwal has endorsed the statement given by Sh. Prashesh Arya and has also estimated/ assumed that ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 21 JBM group might have earned Rs. 100 crores from unaccounted sale of scrap. The said statement has been retracted by Sh. Khandelwal on 16.10.2017. It is noticed that Sh. Khandelwal has submitted before Investigation wing after search that distorted statement of Shri Prahsesh Arya were shown to him and tremendous pressure have been levied by the search team to admit that there is unaccounted sale of scrap. Again there is no attempt of ld. AO to bring any general or material corroboration to this statement. We are of considered view that two retracted statements cannot be used to corroborate each other. 8.7 Coming to the justification of comparison of the rates of scrap sold by JBM group to its customers with other/ third parties like Maruti Udyog Ltd. to hold that scrap has been sold at a lower rate by JBM group, admittedly Learned AO has recorded that there is variation of approx 19-20% with regards to selling rates of scrap but what is material is that when assessee has submitted reasons for variation due to quantity, quality and rates of scrap, the learned AO, did not deal with them and made no attempt to rebut the same on basis of any evidences. At the same time learned CIT (A) at pages 82 to 123 of his order, has extensively examined the explanation so made by the assessee company to conclude that there was no basis for interpolation of figures of sales or invoicing. 8.8 We find no force in the contention of Ld. DR the additions are based on statements of employees of assessee company ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 22 which has live link with the documents seized during the course of search. Infact, statements of employees, unless against their own interest cannot be relied without any material cooroboration of the statement. 8.9 It is now a well settled proposition of law that documents seized as a result of search must be incriminating and must relate to relevant assessment year whose assessments are sought to be reopened u/s 153A of the Act and the assessing officer cannot refer to any post search investigation or any other outside material to tinker with the assessments which are already final. It is also an accepted position now that unless the statements recorded during search are backed by corroborative materials/ documentary evidences, the said statements cannot be relied or made as a basis to make any addition. The aforesaid principle has been settled by the Hon’ble jurisdictional high court in the case of PCIT vs Best Inftastructure India (P) Ltd. reported in 397 ITR 82 and also in Kabul Chawla (supra) and Abhisar Buildwell (P) Ltd. (supra). 8.10 Thus we find nothing erroneous in the following conclusion drawn by learned CIT (A) at page 112 and 113 of his order:- “In view of the above there is no material ground for enhancement of quantity of scrap sale as per books of accounts by 12%. As such, there is no evidence to support the statement of Shri Prashesh Arya that 10% to 12% of scrap quantity have not been recorded in the books of accounts which have been retracted. The above documents found during search are not related to AY 2008-09 to AY 2017-18 and the statements ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 23 recorded are not related to evidence or material found during search. As such, the AO has wrongly enhanced the quantity of scrap by 12% for AY 2008-09 to 2017-18 and enhanced the rate of scrap sale by 20% and made the addition on account of unaccounted scrap sale”. 9. Coming to grounds in applications under Rule 27 of ITAT Rules filed by assessee in appeals of Revenue. We find that Ground No. 2 in Rule 27 Application arises from averment that additions so made in assessments framed under section 153A of the Act are beyond the scope of assessment, as the assessments for AY 2010-11 to 2016-17 were final on date of search and additions are not based on incriminating material. In this context, as was submitted, AY 2010-11, is taken as a lead matter with regards to the aforesaid issue and there is no dispute by Revenue, as also held by the CIT(A) that assessments were already completed u/s 143(3) of the Act for AY 2008-09 to 2013- 14 and there was no addition with regards to under invoicing or unrecorded sales of scrap in those assessments. Further, assessments for AY 2015-16 and 2016-17 were also final on the date of search. 10. As we have examined the issue on merits we concluded that the statement recorded during the course of search of Sh. Prashesh Arya, Director in various JBM group companies and CGM (Finance) in Jay Bharat Maruti Limited, as a key personnel, is relied heavily by the AO. The said statements were recorded during 05.10.2017 to 08.10.2017 and have been extracted by AO ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 24 in the assessment order. Relying these statements AO has inferred that Sh. Prashesh Arya was handling cash transactions of JBM group, which was involved in under invoicing and unaccounted sales. Certain images taken out from mobile phone of Sh. Prashesh Arya were also relied by AO. Next AO has taken into consideration the cash flow statement found from residence of Sh. Suresh Kumar Mishra, an employee of JBM group. AO has relied that same to infer that the said excel sheet shows generation of unaccounted cash from sale of scrap by JBM group. AO has relied the statement of Sh. Anand Swaroop Khandelwal recorded under section 131(1A) dated 09.102017. We have concluded earlier that statements were not sufficient to be relied for reasons of due retraction and non-corroboration by AO. The excel sheet extract of cash flow statement is quite ambiguous considering the name of the assessee company is absent and it is titled as “budgeting” and majority of the figures therein were estimates and had no data related to scrap. Certainly to be called a dumb document. 11. AO has further, compared the rates of scrap sold by JBM group to its customers with other/ third parties like Maruti Udyog Ltd. and has held that scrap has been sold at a lower rate by JBM group as compared by other parties. We have considered the same to concluded the differences may be due to quality of scarp, as such. Then we see that AO while working out additions has not relied on any of the documents referred rather based its additions on the basis of extrapolation and estimate and worked ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 25 out 20% of actual invoiced value as alleged under invoicing and 12% of actual invoicing as alleged unrecorded sales and worked out additions from AY 2008-09 to 2018-19. 12. As with regard to Ground No. 1 in Rule 27 Application, arises from the contention that CIT(A) has erred both in law and on facts in sustaining the initiation of proceedings for AY 2010- 11 and 2011-12, which proceedings were beyond the period of 6 years i.e. AY 2012-13 to 2017-18 as envisaged under section 153A of the Act and have been initiated by AO on mere extrapolation/ estimate without there being any material to reopen the same and the same is also beyond the purview of 4th proviso, Explanation 1 and Explanation 2 of section 153A of the Act. 13. It comes up that before CIT(A), submissions with regards to the aforesaid legal ground was made and even though CIT (A) had recorded a finding that additions made by AO from AY 2010-11 to 2018-19 is not based on any evidences or incriminating material rather on mere extrapolation/ estimates and as such, is not sustainable in law however, while doing so, CIT(A) failed to hold that reopening of assessments for AY 2010-11 and 2011-12 are without jurisdiction, as the same is not based on the 4th proviso, Explanation 1 and Explanation 2 of section 153A of the Act. 14. The third legal issue in the form of additional Ground No. 3 in Rule 27 Application, arises from the contention that CIT(A) has ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 26 erred both in law and on facts in sustaining the orders so passed by learned AO, as the approval accorded under section 153D is a mechanical approval without there being application of mind by superior authority. The ground is relevant for AY 2010-11 to 2018-19. Submissions with regards to the aforesaid legal ground was made before CIT (A) at but the same has been dismissed by CIT (A). 14.1 We are of considered view that when more than 100 cases, the draft assessment order was forwarded by Assistant Commissioner of Income Tax, Central Circle – 25, New Delhi to learned Additional Commissioner of Income Tax, Range – 4, New Delhi on 31.12.2019 and the approval was accorded on the same date and even the final order was also passed on the same date i.e. 31.12.2019, the same gives rise to a very valid apprehension that there was complete non-application of mind and mechanical nature of approval so granted by higher authority, as there is no material to show that prior to the approval, the said authority was otherwise, aware of the case and thus the approval order need not be a speaking one. Reliance is placed on following case laws: a) PCIT vs Sapna Gupta (Allahabad High Court) reported in 147 taxmann.com 288. b) ACIT vs Serajudddin & Co (Orissa HC) reported in 454 ITR 312. c) PCIT vs Anuj Bansal (Delhi HC) in ITA No. 368/2023. ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 27 15. As a sequel to aforesaid discussion we find no substance in the grounds of revenue covered by issue no. 1 and 2, and same are decided against the Revenue and further we sustain the grounds of the application under Rule 27 and accordingly decide the issue no. 3 in favour of appellants. 16. Issue no. 4 is with regard to Addition u/s 69B of the Act, made in AY 2013-14 of Rs. 47, 41, 500/-, as sustained by the CIT(A). The relevant facts are in search and seizure operation at the residence of Shri Suresh Kumar Mishra, employee of JBM group, a hard disk was found and in the hard disk an excel sheet was found. In the excel sheet the details of amount to be given for purchase of land at Hosur is mentioned with details that a DD is to be given to land owners of Rs 47,41,500/- and total portion of “B” to be given to land owners of Rs 47,41,500/- is mentioned. On the basis of said excel sheet it has been alleged by the ld. AO that “B” portion to be given to land owners mentioned in the excel sheet of Rs 47,41,500/- is the cash paid by appellant to land owners for purchase of land. During the course of assessment proceeding the ld. AO asked the assessee to furnish the explanation. In this regard it has been submitted by the appellant as under:- “With reference to show notice dated 15/11/2019 received from your honours office that assessee company purchased land at Hosur and excel sheet in respect of ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 28 certain properties were found from the hard disk of Shri Suresh Kumar Mishra we would like to draw your kind attention that no cash have been paid by the assessee and the allegation that cash have been paid by the assessee is not correct. Further assessee has not purchased the land for the sum of Rs 47,41,500/- as alleged in the notice. But the amount paid to seller for the purchase of the land is Rs 50,09,060 and the sale deed in respect of land purchased is enclosed. During the course of search or post search proceeding no incriminating document have been found from the premise/ possession of the assessee regarding any unaccounted payment for purchase of land. The document found from the possession of Shri Suresh Mishra has not been confronted to assessee and opportunity of cross examination has not been provided. Without prejudice to above we would like to draw your kind attention that assessee purchased land at Hosur and the cost of the land in respect of land purchased by the assessee is Rs 51,35,774/- ( including the incidental expenses). The details of cost incurred on purchase of land at Hosur along with sale deed are enclosed. The assessee was planning for construction on the said land and as such B means Budgeted cost of construction and B does not mean that any unaccounted investment have been made by the assessee. ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 29 In this regard it is also important to note that the price paid by the assessee for purchase of land is not less than the valuation adopted for payment of stamp duty and as such the price paid by the assessee is in accordance with section 50C of the Income Tax Act.” 17. The Ld. Sr Counsel has submitted that in sustaining the addition, the CIT (A) has failed to appreciate the basic fact that no where the alleged document found from residence of employee of assessee company (Sh. Suresh Kumar Mishra), was ever corroborated by the learned assessing officer. Neither any enquiries were made by learned AO to prove that any consideration over and above the agreed purchase price paid through account payee cheque, was paid by the assessee company. The said document was a dumb document having no relevance with regards to purchase of property at a consideration of Rs. 50, 09, 060/-. It is further, submitted that the learned AO has invoked section 69B to make the aforesaid addition, which is legally misconceived, because for making addition under section 69B of the Act, there should be material available to prove that the assessee has invested more than what was recorded in its books of account, which is absent in this case. Burden is on Revenue to establish that the assessee has made undisclosed investment, which is absent in this case. Reliance is placed on various decisions including CIT vs Dinesh Jain HUF (Delhi HC) reported in 352 ITR 629, 254 ITR 261 (Del) CIT vs. Dr. S. Bharti ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 30 and 261 ITR 664 (Del) CIT V. Naresh Khattar (HUF), of Hon’ble Jurisdictional High Court. 17.1 Ld. DR has however, supported the findings of CIT(A). 18. On going through the facts of the instant issue we find that the excel extract of a computer kept at the residence of Shri Suresh Kumar Mishra has been relied without any evidence to show that the computer was property of assessee and used for work of company only. Alleging him to be key person, the extract form Excel sheet has been considered to be sacrosanct document. So much so that even assessee’s claim for cross examination was refused on ground that he is only assessee’s employee. Then, during the course of assessment proceeding the appellant requested the ld AO to confront the document found from the possession of Shri Suresh Kumar Mishra. However the ld AO has not confronted the documents so found. 18.1 Now what is relevant is that no document corroborating this extract has been found from the office premise or business premises of the appellant company or from the premise of directors of the appellant company. No corroborative evidence or documents has been found so as to allege that the appellant paid cash to land owner. No inquiry seems to be made with seller or to show otherwise that seller has admitted of having received cash from the appellant company. It is rightly submitted that the ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 31 learned AO has invoked section 69B to make the aforesaid addition, which is legally misconceived, as for making addition under section 69B of the Act, there should be material available to prove that the assessee has invested more than what was recorded in its books of account, which is absent in this case. There was not even an attempt to show by any enquiry that otherwise the land in the area was more expensive then reflected in books, so as to infer that what is mention in the excel extract as ‘B’ part is. on-money. Thus, in view of our aforesaid discussion, issue no. 3 is allowed in favour of the assessee no. 1. 19. Issue no. 4 is with regard to disallowance u/s 14A of the Act, in AY 2015-16 onwards to AY 2018-19. The issue is decided in favour of assessee by the CIT(A) and Revenue has filed appeals in case of the Assessee No.1. Ld. DR has however, supported the findings of Ld. AO where in Learned AO made a disallowance under section 14A, while learned CIT (A) restricted the disallowance under section 14A relying on the judgment of Hon’ble High Court of Delhi in the case of ACB India Ltd. vs ACIT reported in 235 Taxman 22, as disallowance under section 14A with regards to administrative expenses can only be made with regards to investments on which exempt income has been earned, whereas, learned AO has taken the entire value of investments. Ld. DR could not counter the findings of Ld. CIT(A) on the basis of any fact or law. We find no error in the findings of Ld. CIT(A). The issue is decided against the Revenue.. ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 32 20. Issue no.5 is with regard to Depreciation on Electrical Fittings in AY 2015-16 onwards to AY 2018-19. The issue is decided in favour of assessee by the CIT(A) and Revenue has filed appeals in case of the Assessee No.1. The learned senior counsel of the assessee company submitted that the aforesaid issue is covered in favor of the assessee by the order of Hon’ble ITAT Delhi in the case of Assessee Company for AY 2010-11 in ITA No. 6021/Del/2015 and Ld. DR Could not dispute the same. We consider it relevant to reproduce the findings of Tribunal in 2010- 11, hereinbelow: “5. In ground No. 4, the Revenue has challenged deletion of disallowance on account of excess claim of depreciation of Rs.11,89,519/- on electrical items. According to the assessee, these items were in the nature of electric installation, being part of plant and machinery and eligible for depreciation at the rate of 15%, whereas according to the Assessing Officer these items are part of electrical fittings and eligible for depreciation at lower rate. The Ld. CIT(A) has reproduced the list of the items in the impugned order and held that these are integral part of plant and machinery and, thus, eligible for depreciation at the rate of 15% as electrical installations. 5.1 Before us, the Ld. DR relied on the order of the Assessing Officer whereas the Ld. Counsel of the assessee, relied on the order of the Ld. CIT(A). ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 33 5.2 We have heard the rival submission and perused the relevant material on record. We find that the Ld. CIT(A) in the impugned order has re-produced the list of the electrical items on which depreciation has been claimed at the rate of 15% . It is evident from the items that those are electrical installation and in the nature of essential part of plant and machinery, required for functioning of the machinery. The Ld. DR could not controvert that those items were essential for running of the plant and machinery and thus in the nature of electrical installation. In our opinion, order of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any infirmity in the same, and accordingly, we uphold the same. The ground No. 4 of the appeal is dismissed accordingly” 20.1 As there are no distinguishing facts, the issue no. 5 is decided against the Revenue. 21. Issue no.6 is with regard to disallowance u/s 80IC on apportionment basis in AY 2015-16 onwards to AY 2018-19. The issue is decided in favour of assessee by the CIT(A) and Revenue has filed appeals in case of the Assessee No.1. Ld. DR has however, supported the findings of Ld. AO who has made addition on account of apportionment of expenses not eligible for deduction under section 80 IC of the Act. What we find is that the Ld. AO has apportioned the expenses on account of Director Remuneration, Director Commission, Audit Fees, Director ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 34 Travelling, SAP Expenses and Salary of CFO & CS on profitability basis, whereas, it was submitted by the assessee that the same has already been allocated by assessee on turnover basis, which has even been done by learned AO in preceding assessment years. Learned CIT (A) while giving relief to the assessee company has held that similar issue came up in appeal for earlier assessment year 2011-12, wherein, it has been held that apportionment of expenses made by assessee on turnover basis is correct and justified and that made by learned AO on profit basis is not correct, as such, learned CIT (A) deleted the aforesaid disallowance. In view of the aforesaid facts, since in the preceding assessment years learned AO made a disallowance under section 80IC of the Act by allocating expenses on the basis of turnover, which basis has been suomoto adopted by the assessee company in the impugned assessment year, as such, deviation to profitability method for making the disallowance under section 80IC of the Act was unjustified. The issue no. 6 is decided against the Revenue. 22. Issue no.7 is with regard to capital work in progress in AY 2015-16 onwards to AY 2018-19. The issue is decided in favour of assessee by the CIT(A) and Revenue has filed appeals in case of the Assessee No.1. Ld. DR has however, supported the findings of Ld. AO who has made addition on account of alleged loan used for capital work in progress. Now what we find is that Ld. AO has presumed that the investments made by assessee company in ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 35 Capital work in progress is out of borrowed funds and as such, worked out disallowance @ 10% of average CWIP on account of alleged interest expenses utilized for financing CWIP. Learned CIT (A) has held that the assessee company had sufficient surplus funds of its own to have made the investment in capital work in progress and as such, there was no need to capitalize the interest, since loan funds have not been used for making investments in capital work in progress. We find that CIT (A) has duly analyzed the balance sheet of the assessee company and held that reserves and surplus and the increase in same was proportionately higher than increase investment in CWIP. We are of considered view that learned AO has not been able establish any nexus with interest bearing funds being used to make investment in CWIP. In view of the aforesaid factual findings so recorded by learned CIT (A), which have not been rebutted by learned CIT DR, we decide this ground against the Revenue. Accordingly we decide this issue no. 7 against the Revenue. 23. Issue no.8 is with regard to disallowance of expenses in AY 2017-18. Ld. DR has however, supported the findings of CIT(A). We find that Ld. AO has made a disallowance of expenses of a sum of Rs. 2,21,13,712/- on account of expenses being allegedly incurred for non-business purposes. Learned AO relied on an excel sheet found from residence of employee of assessee company namely, Sh. Suresh Kumar Mishra and presumed that the expenses on meetings and conference claimed by assessee ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 36 company of a sum of Rs. 2,21,13,712/- are for non–business purposes, in doing so, learned AO has held that since the documents so seized from Sh. Mishra, depicts expenses incurred on marriage of Ms. Esha Arya (daughter of director Sh. S.K. Arya), as such, the same being routed through Profit & Loss Account by assessee company, need be disallowed. Learned CIT (A) also sustained the aforesaid disallowance by relying on the findings of learned AO. 23.1 In this regard, Ld. Sr. Counsel has submitted that during the course of search from assessee company no document was found which can support the allegations so drawn up by learned AO neither Sh. S.K. Mishra was allowed to be cross examined by learned AO or CIT (A) and as such, the said excel sheet found from residence of Sh. S.K. Mishra, should not have been relied. Reliance is placed on following case laws: i) 125 ITR 713 dated 16.09.1980 (SC) Kishan Chand Chellaram vs. CIT ii) 62 Taxmann.com 3 dated 02.09.2015 Andaman Timber Industries vs. CCE iii) PCIT vs Best Infrastructure (India) P. Ltd. (Delhi HC) reported in 397 ITR 82 iv) 322 ITR 396 dated 16.02.2010 CIT vs. Ashwani Gupta 23.2 Further, it is submitted that the assessee company is a manufacturing company and as per management’s policy review ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 37 meeting is held quarterly and annually since last many years, documentary evidences to this effect were filed before learned AO and CIT (A), which have not been rebutted at all. It was also prayed before learned AO to make adequate enquiries and investigations from the hotels and vendors as to whether the expenses claimed by assessee is genuine business expense or not, which has never been done by learned AO. Mere fact that the marriage in Arya family coincided with various business conferences does not mean that the assessee has incurred the said expenses of marriage rather, the marriage expenses have been incurred by Sh. S.K. Arya and his family and are part of withdrawals of Sh. S.K. Arya and family. In view of the above, the expenses claimed under the head meetings and conferences are justified as as business expenditure. Reliance is placed on the following judgments on the proposition that, when no investigation has been carried out by the learned A O and as such the burden which lay upon the learned A.O. has not been discharged, as such, the addition so made is unsustainable and deserves to be deleted. a) 149 TTJ 165 ITAT (TM) Vishnu Jaiswal vs CIT b) [2013] 357 ITR 146 (Del) CIT vs. Fair Finvest Ltd. c) [2014] 361 ITR 10 (Del) CIT vs. Gangeshwari Metal (P) Ltd. 23.3 In order to appreciate the facts of the instant issue, it would be relevant to extract the submissions so made by assessee company before learned AO and CIT (A), which is extracted below: ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 38 “These grounds of appeal deals with the disallowance of meeting and conference expenses of Rs 2,21,13,712/- by alleging the same as marriage expenses incurred in connection with the wedding ceremony of Ms Esha Arya. During the course of assessment proceeding it has been submitted by the appellant as under (the submission filed by the appellant during the course of assessment proceeding is enclosed and forms part of paper book:- “In the notice dated 15/11/2019 it has been observed that expenses on wedding of Ms Esha Arya have been claimed by the assessee is no correct. It has been alleged that hard disk from the residence of Shri Suresh Kumar Mishra were seized and in the hard disk so seized excel sheet regarding marriage expenses were found. In this regard we would like to draw your kind attention that during the course of search or post search proceeding no incriminating document have been found from the premise/ possession of the assessee regarding any unaccounted payment regarding marriage expenses. The document found from the possession of Shri Suresh Mishra has not been confronted to assessee and opportunity of cross examination has not been provided." Without prejudice to above we would like to draw your kind attention that the assessee is a manufacturing company engaged in the business of Production of Sheet Metal components which is being used by automobile ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 39 industry. As per the company policy Senior Management review meeting is held quarterly and annually since last so many years. During A Y 2017-18 also meeting and conference were held with the objective to:- i) To define the strategic direction for the Group, consistently monitor Group and business performance, evaluate and evolve the Group’s business portfolio, drive initiatives and take critical decisions that have strategic implications across the Group ii) To consistently monitor business/functional performance, evaluate and evolve the business’s product/customer mix, drive initiatives and take decisions that have strategic implications across the business iii) To review financial performance drivers of respective businesses and highlight achievements and challenges iv) To review performance of a function at Group level against set KPIs, evolve mandates and discuss achievements, challenges and support required –by Chairman v) To review performance of a function at Business level against set KPIs, evolve mandates and discuss achievements, challenges and support required –by the Business Head vi) To review performance of a function at Business level against set KPIs, evolve mandates and discuss ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 40 achievements, challenges and support required –by the Group Function Head vii) To sign off on investments JBM and to take decisions related to spending of combined retained profits while ensuring the achievement of JBM’s financial targets viii) Sign off on irregular or significant (over defined threshold) capital expenditure in the course of business ix) To sign off on annual budgets for all business and functions x) To take go/no go decisions for investment into a new business xi) Determine the degree to which proposed business concepts fits in with the existing business environment from a capability and technical feasibility standpoint xii) To determine the optimal route for inorganic growth for JBM Group for new ventures and highlight and resolve management challenges associated with new JVs and M&A partners The documentary evidence to show that every year meeting is held by the assessee company is enclosed. The meeting and conference held during A Y 2017-18 with the objective listed above is inherent part of the business of the assessee company. Your honour may verify from the hotels and vendors to who payment have been made that bills raised in the name of assessee company is for ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 41 meeting and conference and is not towards marriage. Simply because the meeting and marriage were held in the same month i.e. in the month of May 2016 it cannot be said that expenses incurred by the assessee is part of marriage expenses. The expenses on marriage have been incurred by Shri S K Arya and family and are part of withdrawal of Shri S K Arya and family. In view of the above expenses claimed under the head meeting and conference expenses are not the marriage expenses and as such it is allowable as business expenses.” 23.4 Now what we observe is that the excel sheet on the basis of which disallowance have been made have been found from the residence of Shri Suresh Kumar Mishra and same is not corroborated by any material recovered from any business or office premises of company or from any family member or director. Then document found from the residence of Shri Suresh Mishra has not been confronted to assessee and opportunity of cross examination has not been provided. When liability is being casted on the basis of extracts of Excel Sheet, then assessee needs to be given opportunity to cross examine the person who allegedly prepared the excel sheet. More so as we observe that there was no independent corroboration. The expenses of Rs 2,21,13,712/- incurred on meeting and conference expenses have been paid through bank account and no expenses have been incurred in cash. AO seems to ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 42 have not made any effort to make an enquiry from any hotels and vendors to who payment have been made that bills raised in the name of assessee company is for meeting and conference and is not towards marriage. Given the nature of assessee’s business as a manufacturing company engaged in the business of Production of Sheet Metal components holding of periodic meeting and conference has not been disputed to say there was no need for such meeting or conferences. During A Y 2017-18 also meeting and conference were held and the documentary evidence to show that every year meeting is held by the assessee company have been submitted during assessment proceeding. Then it was claimed that the expenses on marriage have been incurred by Shri S K Arya and family and are part of withdrawal of Shri S K Arya and family. In this regard it is important to note that assessment of Shri S K Arya have also completed u/s 153A / 143(3) of the Income Tax Act and in the assessment so completed details of withdrawal have been submitted in which marriage expenses formed part of the withdrawal of Shri S K Arya and family. There was no attempt to rebut the same by any independent enquiry. AO seems to have drawn inferences out of fact that marriage coincided with conference but that stays to be mere suspicion. No attempt was made to bring an iota of evidence to corroborate the allegation that no conference was held and all the expenses were of marriage. We thus decide this issue no. 8 in favour of assessee no. 1. ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 43 24. Issue no.9 is with regard to addition u/s 56(2)(x) of the Act, in AY 2018-19. Ld. DR has however, supported the findings of CIT(A). However, what we find is that Learned AO has made the aforesaid addition on the basis of one email found during search from possession of Sh. Anand Swaroop Khandelwal (CFO of JBM group), wherein, a letter was found written by M/s ANPS & Associates (a CA firm). Learned AO alleged that the said letter shows the working of fair market value of shares of company M/s JBM Auto Ltd. at Rs. 18.57 per share, whereas, the assessee company has acquired the shares of the said company at Rs. 14.08 per share (from seller company M/s MA SRL Italy). As such, learned AO worked out addition under section 56(2)(x) of the Act at Rs. 13,66,79, 228/- (30449600 shares @ Rs. 18.57 per share). That learned CIT (A) also, relied on the findings of learned AO and upheld the impugned addition. 24.1 In this regard, Ld. Sr. Counsel has submitted that a detailed reply was filed before the learned AO dated 10.12.2019 and the same was also submitted before learned CIT (A). We consider it appropriate to reproduce the same here in below: Observations so made by learned AO is not correct, as the copy of email seized if analyzed would make it amply clear that said letter was only for giving an idea with regards to working of capital gain in the hands of seller of shares i.e. MA SRL, Italy and the same was never for ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 44 working out the fair market value of shares of JBM MA Automotive Pvt. Ltd. 24.2 It is further, submitted that the assessee company provided the actual valuation report obtained under rule 11UA for acquiring shares of JBM MA Automotive Pvt. Ltd., and as per the said valuation, the fair market value of the said company was Rs. 14.08 per share. 24.3 Again the Ld. Sr Counsel relied the fact that since the aforesaid evidence have been found from the possession of Sh. Anand Swaroop Khandelwal, than an opportunity of cross examination be provided to the assessee company, as things would have become clear once the said person would have been brought in witness box, since, the shares were acquired as per the report obtained under rule 11UA from M/s ANSP & Associates at Rs. 14.08 per share. 25. We find that there was no independent valuation of shares by AO and merely relying on the seized letter found, which too, was not for valuation shares but was for estimate working of capital gains in the hands of seller company. The addition was made. It appears that the entire assessment is on basis of observations of the Investigation wing in the appraisal report, without any attempt on AO to rebut the valuation by any evidence independently. Accordingly we decide the issue no. 10 in favour of assessee no. 1. ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 45 26. Issue no. 11 is with regard to Scrap sale addition in AY 2018-19, in case of both the assessee, which is confirmed by the CIT(A), for which both the assessee have come in appeal in AY 2018-19. Ld. DR has however, supported the findings of CIT(A) and what we find is that CIT(A) has sustained addition of a sum of Rs. 6,20,00,000/- incase of assessee no. 1 and of Rs. 1,95,00,000/- in case of assessee no. 2, on account of alleged under invoicing and alleged unrecorded sales. We find that the findings so recorded by learned AO and CIT (A) are identical and verbatim same as recorded in AY 2010-11, wherein, Learned CIT (A) however, while giving relief on similar lines as in AY 2010-11 has sustained these additions. The sole basis of learned CIT (A) to sustain the said addition is the statement of Sh. Prashesh Arya and some images found from mobile of Sh. Prashesh Arya in shape of “kachchi parhci images”. However, learned CIT (A) has failed to appreciate the fact that the said transactions were duly offered by Sh. Prashesh Arya in his personal capacity and also the same was not made as a basis by learned AO to make any addition, as such, the same cannot be inferred or presumed to have belonged to Assessee Company. That further, again learned CIT (A) relied on the statement of Sh. Prashesh Arya recorded during the course of search without there being any material whatsoever, and had relied on a table wherein Sh. Arya, has allegedly declared unaccounted income of assessee during the AY 2018-19. That while doing so, it is noticed that learned CIT (A) has recorded a contradictory finding, as held while deleting the ITA No.301/Del/2021 & 8 other appeals- DCIT vs. Assessee-1 ITA No.295/Del/2021 & 7 other appeals – DCIT vs. Assessee-2 ITA No.232/Del/2021 & 2 Appeals (Ass.1 vs. ACIT) ITA No.240/Del/2021 (Assessee No.2 vs. ACIT) 46 balance additions, which we have extensively discussed in findings of issue no. 1 and 2. There seems to be no attempt to have the facts recorded in these pacrchi verified by any further enquiry. Thus the findings of CIT(A), cannot be sustained and this ground no. 11 is decided in favour of assessee. 27. As a consequences to the sustaining of the grounds raised in application under Rule 27, filed by the assessee, and the determination of issue no. 1 to 11, as above the appeals of Revenue are dismissed and of assessee are allowed, with consequences to follow as per the determination of issues as above. Order pronounced in the open court on 09.07.2024. Sd/- Sd/- (G.S. PANNU) (ANUBHAV SHARMA) VICE PRESIDENT JUDICIAL MEMBER Dated: 09 th July, 2024. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi